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

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K



FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

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



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



For the Fiscal Year Ended December 31, 2002

or

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



For the Transition period from
 to



Commission File Number: 333-81235



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ROYSTER-CLARK, INC.

(Exact name of registrant as specified in its charter)



|DELAWARE                          |  | 2875                         |  | 76-0329525         
|--------------------------------- |  | ---------------------------- |  | -------------------
|(State or other jurisdiction      |  | (Primary Standard Industrial |  | (I.R.S. Employer   
|of incorporation or organization) |  | Classification Code Number)  |  | Identification No.)



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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)



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SEE TABLE OF ADDITIONAL REGISTRANTS BELOW

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FRANCIS
P. JENKINS, JR.

CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

ROYSTER-CLARK, INC.

1251 AVENUE OF THE AMERICAS  SUITE 900

NEW YORK, NEW YORK 10020

(212) 332-2965

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



With Copies to:

PETER A. BASILEVSKY, ESQ.

SATTERLEE STEPHENS BURKE & BURKE LLP

230 PARK AVENUE, SUITE 1130

NEW YORK, NEW YORK 10169-0079

(212) 818-9200

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TITLE OF EACH CLASS

10 1/4% First Mortgage Notes Due 2009

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

None

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

None



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



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



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



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



DOCUMENTS INCORPORATED BY REFERENCE: NONE



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ROYSTER-CLARK, INC.



TABLE OF ADDITIONAL REGISTRANTS



|                                      |  | STATE OF INCORPORATION OR ORGANIZATION |                           | PRIMARY STANDARD |  | IRS EMPLOYER IDENTIFICATION NO.
|------------------------------------- |  | -------------------------------------- | ------------------------- | ---------------- |  | -------------------------------
|                                      |  |                                        | INDUSTRIAL CLASSIFICATION |                 
|NAME                                  |  |                                        | CODE NUMBER               |                 
|Royster-Clark Group, Inc.             |  | Delaware                               |                           | 2875             |  | 13-4055347                     
|Royster-Clark Agribusiness, Inc.      |  | Delaware                               |                           | 5191             |  | 58-1599501                     
|Royster-Clark Nitrogen, Inc.          |  | Delaware                               |                           | 2873             |  | 36-3536929                     
|Royster-Clark Resources LLC           |  | Delaware                               |                           | 5191             |  | 22-3652274                     
|Royster-Clark Realty LLC              |  | Delaware                               |                           | 6512             |  | 22-3648552                     
|Royster-Clark AgriBusiness Realty LLC |  | Delaware                               |                           | 6512             |  | 22-3648546                     



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



|               |  |                                                                                               |  | Page
|-------------- |  | --------------------------------------------------------------------------------------------- |  | ----
|PART I.        |  |                                                                                               |  |     
|              
|Item 1.        |  | Business                                                                                      |  | 1   
|Item 2.        |  | Properties                                                                                    |  | 9   
|Item 3.        |  | Legal Proceedings                                                                             |  | 10  
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                           |  | 10  
|              
|Part II.       |  |                                                                                               |  |     
|              
|Item 5.        |  | Market for Registrants Common Equity and Related Stockholder Matters                         |  | 11  
|Item 6.        |  | Selected Financial Data                                                                       |  | 11  
|Item 7.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations         |  |     
|               |  | General                                                                                       |  | 13  
|               |  | Results of Operations                                                                         |  | 14  
|               |  | Environmental Matters                                                                         |  | 18  
|               |  | Liquidity                                                                                     |  | 19  
|               |  | Contractual Obligations and Commitments                                                       |  | 20  
|               |  | Critical Accounting Policies and Estimates                                                    |  | 22  
|               |  | Recently Issued Accounting Standards                                                          |  | 24  
|Item 7a.       |  | Quantitative and Qualitative Disclosures about Market Risk                                    |  | 26  
|Item 8.        |  | Financial Statements and Supplementary Data                                                   |  | 27  
|Item 9.        |  | Changes In and Disagreements with Accountants on Accounting and Disclosure                    |  | 62  
|              
|Part III.      |  |                                                                                               |  |     
|              
|Item 10.       |  | Directors and Executive Officers of the Registrant                                            |  | 63  
|Item 11.       |  | Executive Compensation                                                                        |  | 67  
|Item 12.       |  | Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters |  | 70  
|Item 13.       |  | Certain Relationships and Related Transactions                                                |  | 72  
|Item 14.       |  | Controls and Procedures                                                                       |  | 72  
|              
|Part IV.       |  |                                                                                               |  |     
|              
|Item 15.       |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              |  | 73  
|              
|Signatures     |  | 75                                                                                           
|              
|Certifications |  | 76                                                                                           







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FORWARD-LOOKING STATEMENTS



This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this
Report, the words estimate, project, anticipate, expect, intend, believe, hope, may and similar expressions, as well as will,
shall and other indications of future tense, are intended to identify forward-looking statements. Similarly, statements that describe the Companys future plans, objectives, targets or goals are also forward-looking statements. The
forward-looking statements are based on our current expectations and speak only as of the date made. These forward-looking statements involve known and unknown risks, uncertainties and other factors that in some cases have affected our historical
results and could cause actual results in the future to differ significantly from the results anticipated in forward-looking statements made in this Report. Important factors that could cause a material difference include, but are not limited to,
(i) changes in matters which affect the global supply and demand of fertilizer products, (ii) the volatility of the natural gas markets, (iii) a variety of conditions in the agricultural industry such as grain prices, planted acreage, projected
grain stocks, U.S. government policies, weather and changes in agricultural production methods, (iv) possible unscheduled plant outages and other operating difficulties, (v) price competition and capacity expansions and reductions from both domestic
and international producers, (vi) the relative unpredictability of national and local economic conditions within the markets we serve, specifically in light of the September 11, 2001 terrorist attacks and their related aftermath, (vii) environmental
regulations, (viii) other important factors affecting the fertilizer industry, (ix) fluctuations in interest rates and (x) other factors referenced in the Companys Reports and registration statements filed with the Securities and Exchange
Commission. You are cautioned not to place undue reliance on the forward-looking statements.



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



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PART I



ITEM 1.BUSINESS.



General



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



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



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



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



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



Risk Factors



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



| |  |  | Poor weather conditions can lead to a decline in our revenues.
| | - |  | --------------------------------------------------------------



| |  |  | Price volatility of materials we purchase for resale could affect our profitability.
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Increases in the price of natural gas could affect the profitability of our sales of manufactured nitrogen products.
| | - |  | --------------------------------------------------------------------------------------------------------------------



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| |  |  | Downturns in the nitrogen industry or changes in end user market demands could reduce the revenues and profitability of our business.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest rates could change substantially, materially impacting our profitability.
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Our industry is very competitive and the actions of our competitors could reduce the value of an investment in our company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Our success depends on a limited number of key executives who we may not be able to adequately replace in the event they leave the company.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our operations have risks that may result in liability for environmental conditions and other damage not covered by insurance or which exceed our insurance coverage.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have a long-term supply contract with IMC Global and their failure to perform under this contract could disrupt our operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Government regulations and agricultural policy may affect our customers and markets.
| | - |  | ------------------------------------------------------------------------------------



| |  |  | We may have claims and liabilities under environmental health and safety laws and regulations.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Our indebtedness could adversely affect our financial health and limit our ability to grow and compete.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | We may not be able to generate the necessary amount of cash to service our existing debt, which may require us to refinance our debt or default on our scheduled debt
payments.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The current Middle East conflict and terrorism could affect both the supply and price of various fertilizer materials that we market due to uncertainties surrounding
the situation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fiscal problems currently anticipated by the United States Government could affect programs that currently provide financial support to our customers.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



Business Operations



Agricultural Infrastructure



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



| |  |  | We are located to supply some of the countrys largest buyers of crop production inputs,
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | We have the opportunity to distribute product for some of the major, leading farm input producers who are seeking broad distribution of their products; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have market diversity that helps to insulate the overall business from difficult farming conditions as a result of poor weather in any one particular market or
adverse market conditions for a specific crop.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



Retail Distribution



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



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



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



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



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



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



Wholesale Distribution



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



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



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



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



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



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



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



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Nitrogen
Fertilizer Production



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



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





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



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



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



Seasonality



Our business is seasonal with approximately 68% of sales occurring between March and July. This seasonality results from the planting, growing and harvesting cycles. Inventories must be accumulated to be available for
seasonal sales, requiring significant storage capacity. The accumulation of inventory is financed by suppliers or by the Company through its senior secured credit facility.



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



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Products



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



|                     |  | Year Ended December 31,
|-------------------- |  | -----------------------
|($000)               |  | 2002                   
|Fertilizer           |  | $                      
|Fertilizer Materials |  |                        
|Crop Protection      |  |                        
|Seed                 |  |                        
|Other                |  |                        
|                     |  |                        
|                     |  | $                      
|                     |  |                        



Competition



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



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



Raw Materials and Supplies



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



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



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



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



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



Employees and Labor Relations



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



Environmental Matters



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



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



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



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



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



7



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In connection
with the acquisitions of AgriBusiness and Royster-Clark, the Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness have $4.5 million
deductible, certain time limitations and an overall cap on all indemnities of approximately $27.0 million. The indemnities related to Royster-Clark, Inc. (Predecessor Company) are subject to a deductible of $2.0 million, certain time limitations and
an overall cap of $5.0 million on all indemnities. In addition, Royster-Clark, Inc. (Predecessor Company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites
acquired from LCC in December 1998. This indemnity has deductibles, caps, cost sharing and time limitations depending on the subject matter of the environmental claim. As part of their indemnity obligation, Lebanon is required to respond to
environmental conditions at five of our facilities. The Company also obtained indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of the acquisition.



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



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ITEM 2.PROPERTIES.



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



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



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



|                                  |  |                                                                            |  | Tons Capacity (in 000s) |  |                 
|--------------------------------- |  | -------------------------------------------------------------------------- |  | ------------------------ |  | ----------------
|                                  |  |                                                                            |  | Production               |  |                 
|Location                          |  | Type of Facility                                                           |  | Nitrogen Production      |  | Super- phosphate
|East Dubuque, Illinois (1)        |  | Nitrogen plant (ammonia, urea, ammonium nitrate and nitric acid plant)     |  | 1,173                    |  |                 
|Cincinnati, Ohio (1)              |  | Nitrogen plant (nitric acid, ammonium nitrate and nitrogen solution plant) |  | 120                      |  |                 
|Madison, Wisconsin (1)            |  | Granulation plant                                                          |  |                          |  | N/A             
|Norfolk, Virginia (1)             |  | Granulation plant                                                          |  |                          |  | 30              
|Americus, Georgia (1)             |  | Granulation plant                                                          |  |                          |  | 70              
|Florence, Alabama (1)             |  | Granulation plant                                                          |  |                          |  | 30              
|Hartsville, South Carolina (1)    |  | Granulation plant                                                          |  |                          |  | 50              
|Winston-Salem, North Carolina (1) |  | Granulation plant                                                          |  |                          |  | N/A             
|Washington, North Carolina (1)    |  | Seed production and processing facility                                    |  |                          |  |                 
|Union City, Tennessee             |  | Seed production and processing facility                                    |  |                          |  |                 
|Mulberry, Florida (1)             |  | Blend plant                                                                |  |                          |  |                 
|Washington Court House, Ohio (1)  |  | Blend plant                                                                |  |                          |  |                 
|Mt. Sterling, Ohio (1)            |  | Blend plant (Liquid)                                                       |  |                          |  |                 
|Tifton, Georgia (1)               |  | Blend plant (Liquid)                                                       |  |                          |  |                 
|Marseilles, Illinois (1)          |  | Large storage terminal                                                     |  |                          |  |                 
|Murray, Kentucky (1)              |  | Large storage terminal                                                     |  |                          |  |                 
|Wilmington, North Carolina (1)    |  | Large storage terminal                                                     |  |                          |  |                 
|Petersburg, Virginia              |  | Large storage terminal                                                     |  |                          |  |                 
|Columbus, Ohio (1)                |  | Large storage terminal                                                     |  |                          |  |                 

---

|(1) |  | The First Mortgage Notes are secured by mortgages of these properties.
|--- |  | ----------------------------------------------------------------------



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



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



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



9



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ITEM 3.LEGAL PROCEEDINGS.



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



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



None.



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PART II



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



Not applicable.



ITEM 6.SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS)



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



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



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



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



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



|                                                    |  | Successor               |   |  | Predecessor                         |  
|--------------------------------------------------- |  | ----------------------- | - |  | ----------------------------------- | -
|($000)                                              |  | Year Ended December 31, |   |  | Nine Months Ended December 31, 1999 |  
|                                                    |  | 2002                    |   |  | 2001                                |  
|EBITDA reconciliation:                              |  |                         |   |  |                                     |  
|Net income (loss)                                   |  | (4,600                  | ) |  | (8,879                              | )
|Add back:                                           |  |                         |   |  |                                     |  
|Interest expense                                    |  | 29,303                  |   |  | 34,895                              |  
|Income tax expense (benefit)                        |  | (2,643                  | ) |  | (4,523                              | )
|Depreciation & amortization                         |  | 27,749                  |   |  | 27,356                              |  
|                                                    |  |                         |   |  |                                     |  
|EBITDA                                              |  | 49,809                  |   |  | 48,849                              |  
|                                                   
|                                                   
|                                                    |  | Successor               |   |  | Predecessor                         |  
|($000)                                              |  | Year Ended December 31, |   |  | Nine Months Ended December 31, 1999 |  
|                                                    |  | 2002                    |   |  | 2001                                |  
|INCOME STATEMENT DATA:                              |  |                         |   |  |                                     |  
|Net sales                                           |  | 898,089                 |   |  | 953,790                             |  
|Gross profit                                        |  | 181,592                 |   |  | 197,880                             |  
|Operating income                                    |  | 20,167                  |   |  | 19,637                              |  
|Net earnings (loss)                                 |  | (4,600                  | ) |  | (8,879                              | )
|                                                   
|OTHER DATA:                                         |  |                         |   |  |                                     |  
|EBITDA                                              |  | 49,809                  |   |  | 48,849                              |  
|Ratio of earnings to fixed charges                  |  | 0.79                    |   |  | 0.66                                |  
|Depreciation and amortization                       |  | 27,749                  |   |  | 27,356                              |  
|Capital expenditures                                |  | 6,930                   |   |  | 13,812                              |  
|Acquisitions                                        |  |                        |   |  |                                    |  
|Net cash provided by (used in) operating activities |  | (37,707                 | ) |  | 66,214                              |  
|Net cash used in investing activities               |  | (5,252                  | ) |  | (11,770                             | )
|Net cash provided by (used in) financing activities |  | 42,944                  |   |  | (53,860                             | )
|                                                   
|                                                   
|                                                    |  | At December 31,         |   |  | At December 31,                     |  
|BALANCE SHEET DATA:                                 |  | 2002                    |   |  | 2001                                |  
|Working capital                                     |  | 208,829                 |   |  | 137,553                             |  
|Total assets                                        |  | 618,012                 |   |  | 558,251                             |  
|Long-term debt less current installments            |  | 343,322                 |   |  | 289,607                             |  
|Redeemable preferred stock                          |  |                        |   |  |                                    |  
|                                                   



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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.



General



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



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



The crop production inputs distribution business is seasonal.
Typically, approximately 70% of sales occur between March and July based upon planting, growing and harvesting cycles. In 2002, approximately 68% of sales occurred between March and July. This seasonality results from the planting, growing and
harvesting cycles of our customers. Inventories must be accumulated to be available for seasonal sales, requiring significant storage capacity. The accumulation of inventory is financed by suppliers or by the Company through its credit facility.
Depending on weather and field conditions in the Companys widely diverse geographic marketing areas, the period of heavy product shipments to customers can vary several weeks, which may impact in which quarter sales are recorded.



Another factor affecting our business is the price for
fertilizers. We purchase nitrogen materials, phosphates, and potash and resell these nutrients in either their original form or in the form of multi-nutrient fertilizers. Prices for phosphates have recently experienced some volatility while potash
has been relatively stable over the past several years. During 2002, the price of anhydrous ammonia as measured by the high of Green Market Mid-Cornbelt prices traded within a $10 per ton range ($185  $195) for the first three quarters of 2002
before steadily increasing to $245 per ton by the end of 2002. In contrast, during 2001, prices peaked in February 2001 at $375 per ton and steadily decreased to a low of $180 per ton by the end of 2001. While the level of nitrogen prices affects
the profitability of our entire business, the level of nitrogen prices affects the profitability of our two nitrogen-manufacturing plants more dramatically.



The major raw material in the manufacture of nitrogen-based products is natural gas. We purchase natural gas through market-priced
contracts and on the open market for use in our nitrogen-production plant in East Dubuque, IL. Over a period of years, natural gas exhibited a low degree of volatility until 2000 when natural gas prices increased dramatically from approximately
$2.60 per MMBTU to approximately $9.98 per MMBTU. Natural gas pricing quoted at the Henry Hub was $4.75 per MMBTU at December 31, 2002 compared to $2.55 per MMBTU at December 31, 2001. The price for natural gas has ranged from approximately $1.97 to
$5.14 per MMBTU during 2002. The average and median price for the year ended December 31, 2002 were approximately $3.52 and $3.35, respectively. Since December 31, 2002, natural gas prices have increased sharply to a peak of $19.07 per MMBTU before
dropping to below $6.00 per MMBTU in mid-March 2003. As a result of the sharp rise in natural gas prices, we elected to take down our nitrogen-production plant at East Dubuque, IL at the beginning of March 2003 for an early maintenance turnaround.
This maintenance turnaround had been scheduled later in the year. We completed the turnaround and resumed production at the plant by the end of March 2003.



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##### Table of Contents



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



Results of Operations



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



|                                                       |  | Year ended December 31, |   
|------------------------------------------------------ |  | ----------------------- | --
|                                                       |  | 2002                    |   
|Net sales                                              |  | 100.0                   | % 
|Cost of sales                                          |  | 79.8                    |   
|                                                       |  |                         |   
|Gross profit                                           |  | 20.2                    |   
|Selling general and administrative expense             |  | 17.8                    |   
|Loss on disposal of property, plant and equipment, net |  | 0.1                     |   
|Expenses related to Agro acquisition                   |  |                        |   
|                                                       |  |                         |   
|Operating income                                       |  | 2.3                     |   
|Interest expense                                       |  | (3.3                    | ) 
|Gain on insurance                                      |  |                        |   
|Gain on sales of gas contracts                         |  | 0.2                     |   
|                                                       |  |                         |   
|Loss before income taxes                               |  | (0.8                    | ) 
|Income tax benefit                                     |  | (0.3                    | ) 
|                                                       |  |                         |   
|Net loss                                               |  | (0.5                    | )%
|                                                       |  |                         |   



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:



| |  |  | The impact of deflation of all products was approximately $91.4 million for the year. Lower sales from price depreciation of ammonia, nitrogen solution and other
nitrogen-based products (collectively referred to as nitrogen products) was approximately $75.0 million of the $91.4 million. Nitrogen products are used in both liquid and dry blended fertilizers and these were also affected by nitrogen
price depreciation resulting in approximately $8.7 million in decreased revenues. Price depreciation related to other fertilizer materials was approximately $4.6 million. Crop protection product price depreciation of approximately $3.1 million was
driven by reduced demand due to lower acres of corn planted and competition from generic products.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales volume and other increases of approximately $35.7 million resulted from the following factors:
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Volume increases in nitrogen products added approximately $47.4 million in additional revenues. Volume declines in blended and granulated fertilizer products of
approximately $20.2 million partially offset the increases described above. The volume increase in nitrogen products resulted primarily from regaining market share from 2001 through more aggressive marketing efforts during heavy second quarter
movement and early movement of product for fall season sales during the third quarter and increased production at our East Dubuque facility which had been idle during most of the first quarter of 2001.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Decreases in blended and granulated fertilizer sales volumes were the result of several factors affecting our markets. Among these were dry conditions in the
Southeast, production problems on certain fertilizer grades, higher margin standards that we required of our sales force, and an increase in customers failing to meet our credit standards.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | New revenues generated by specialty seed and related technology sales of $9.0 million.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Sales of grain products were higher by approximately $3.1 million due to increased volumes shipped through the Companys grain operations and increased sales of
seed to elevators.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of seed were higher by approximately $2.2 million due to Company efforts to promote seed products.
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Sales of crop protection products decreased approximately $2.2 million due to lower sales volumes due to reduced corn acres planted during the second quarter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of other fertilizer material products and other revenues were $3.6 million lower compared to 2001 relate to numerous items resulting from reduced corn acres
planted and other factors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | Expenses were approximately $4.9 million lower compared to 2001 due to cost savings measures in the areas of seasonal labor, overtime, auto, fuel, power services,
telephone, travel, entertainment and supplies.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Employee compensation costs were approximately $3.2 million lower due to personnel reductions, hour reductions of staff initiated to reduce costs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Incentive program expenses were $2.0 million lower in 2002 compared to 2001 due primarily to lower administrative and wholesale salesman incentives.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increased capitalization of production and logistics costs to inventory of $1.8 million.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Medical health insurance expense and other benefits and taxes were $1.4 million lower than last year due to fewer employees, favorable experience and an increase in
employee sharing of healthcare costs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Rent expense was approximately $0.8 million lower than the comparable period last year due to improved utilization of equipment.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amortization of goodwill and other assets was approximately $0.6 million lower compared to 2001, predominantly due to adoption of provisions of Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. During 2001, selling, general and administrative expenses included charges for the amortization of goodwill, which is no
longer amortized in the current year with the adoption of SFAS No. 142. For the twelve months ended December 30, 2001, amortization of goodwill totaled $1.3 million. Lower goodwill amortization was partially offset by increased amortization of
patent and technology licenses during the fourth quarter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other decreases of $1.2 million spread through various categories.
| | - |  | ------------------------------------------------------------------



These decreases were partially offset by the following:



| |  |  | General liability, property and workmans compensation insurance expenses were $2.0 million higher in 2002 compared to 2001 due to rising costs of insurance
coverage in the market place.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Depreciation expense was $0.5 million higher in 2002 compared to 2001 due to capital spending.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Commission expense for third party agents was $0.4 million higher.
| | - |  | ------------------------------------------------------------------



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



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



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



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



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



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



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



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



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



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



| |  |  | Sales of ammonia, nitrogen solution and other nitrogen based products were higher by approximately $17.7 million, primarily due to market related price
appreciation during the first and second quarters of
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 2001 compared to 2000. The sales increase was partially offset by lower wholesale sales in the Midwest during the first quarter of 2001,
market related price depreciation and volume declines due to dealer customers delaying purchases.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of other fertilizer materials were higher by approximately $10.0 million due to volume increases throughout the retail and wholesale distribution system.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of grain products were higher by approximately $8.2 million due to expansion through acquisitions of the Companys grain operations in 2000. While grain
sales typically are at low gross margin rates, selling the grain for the farmer extends the Companys contact with the farmer and encourages continued patronage.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of seed were higher by approximately $6.2 million due to Company efforts to promote seed products. We believe that farmers align the purchase of other
crop-input requirements with their seed supplier.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of application and other services were higher by approximately $2.1 million due to strong fertilizer movement during the fall season and crop protection
product application during the late summer.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of crop protection product sales were higher by approximately $0.7 million despite price depreciation of major crop protection products and minimal insect
pressures throughout most of the market areas.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



| |  |  | Expenses related to Farmarkets that the Company acquired during first quarter of 2000 were $3.2 million higher in the first quarter of 2001 compared to 2000.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lower capitalized cost to inventory of $2.9 million due predominantly to sales volume decreases at terminal locations during the first quarter whose volumes were not
recovered in subsequent quarters.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Health insurance expenses were $2.8 million higher in 2001 compared to 2000 due to increased costs of health care coverage.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | General liability and property insurance expenses were $1.4 million higher in 2001 compared to 2000 due to rising costs of insurance coverage in the market place.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Incentive program expenses were $1.8 million higher in 2001 compared to 2000 due to the retail Farmarket program that rewarded return on asset performance in
leveraging the combination of improved EBITDA at the local Farmarket level and lower average assets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Depreciation, workmans compensation and all other increases were approximately $2.1 million due to capital spending, industry wide increasing costs of
workmans compensation and other general increases.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These increases were partially offset by the following:



| |  |  | Seasonal and overtime cost were $1.0 million lower due to management attempts to lower cost of seasonal personnel by converting seasonal labor to company hourly
payroll and handling payroll
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | internally versus using agency staffing. Spring season weather allowed for a longer spring season window allowing reductions in overtime.
| | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Computer software and development cost were $1.1 million lower due to the resolution of major issues concerning the integration of the Royster-Clark and AgriBusiness
computer systems being resolved during 2000 allowing the reduction of use of consultants.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Repairs and supplies were $0.8 million lower due to cost containment efforts.
| | - |  | -----------------------------------------------------------------------------



| |  |  | Travel and entertainment were $0.7 million lower due to cost containment efforts.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Postage and freight were $0.4 million lower due to improvements in the use of communication technology to lower cost in supplies, postage, and communication costs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



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



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



Environmental Matters



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



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Liquidity and Capital Resources



Our primary capital requirements are for working capital, debt service, capital expenditures and possible acquisitions. For day-to-day liquidity requirements, we operate with a senior secured credit facility (credit
facility) with a consortium of banks, with a $245 million borrowing limit at December 31, 2002. The credit facility expires in April 2004. At December 31, 2002, the borrowing base provisions under the facility supported a borrowing
availability of $157.4 million, from which we had drawn $143.1 million. This facility includes up to $10.0 million for letters of credit. This facility contains financial and operational covenants and other restrictions with which we must comply,
including a requirement to maintain financial ratios and limitations on our ability to incur additional indebtedness. We believe that cash generated from operations and borrowings available under the credit facility will be sufficient to meet our
operating and capital needs in the foreseeable future.



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



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



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



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



|Working capital increases:                     |  |   |     
|---------------------------------------------- |  | - | ----
|Trade account receivable                       |  | $ | 22.4
|Other receivables                              |  |   | 12.3
|Inventory                                      |  |   | 41.2
|Deferred taxes                                 |  |   | 3.2 
|Accounts payable                               |  |   | 4.0 
|Customer deposits                              |  |   | 3.7 
|                                               |  |   |     
|Total increases                                |  |   | 86.8
|                                               |  |   |     
|                                              
|Working capital decreases:                     |  |   |     
|Note payable                                   |  |   | 21.7
|Accrued expenses and other current liabilities |  |   | 0.8 
|                                               |  |   |     
|Total decreases                                |  |   | 22.5
|                                               |  |   |     
|Net increase                                   |  | $ | 64.3
|                                               |  |   |     



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



Contractual Obligations and Commitments



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



|Contractual Obligations:        |  | Total |       | 2003 |      | 2004 |       | 2005 |     | 2006 |     | 2007 |     | Thereafter
|------------------------------- |  | ----- | ----- | ---- | ---- | ---- | ----- | ---- | --- | ---- | --- | ---- | --- | ----------
|Operating leases                |  | $     | 31.7  |      | 11.9 |      | 9.0   |      | 5.4 |      | 3.4 |      | 1.2 |           
|Customer deposits               |  |       | 57.2  |      | 57.2 |      |      |      |    |      |    |      |    |           
|Patent and technology agreement |  |       | 3.4   |      | 0.7  |      | 0.8   |      | 0.9 |      | 1.0 |      |    |           
|Severed employee contracts      |  |       | 0.8   |      | 0.6  |      | 0.2   |      |    |      |    |      |    |           
|Borrowings:                     |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|First Mortgage Notes            |  |       | 200.0 |      |     |      |      |      |    |      |    |      |    |           
|Senior secured credit facility  |  |       | 143.1 |      |     |      | 143.1 |      |    |      |    |      |    |           
|Vendor notes payable            |  |       | 21.7  |      | 21.7 |      |      |      |    |      |    |      |    |           
|Other notes payable             |  |       | 0.3   |      | 0.2  |      |      |      |    |      |    |      |    |           
|                                |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|Total obligations               |  | $     | 458.2 |      | 92.3 |      | 153.1 |      | 6.3 |      | 4.4 |      | 1.2 |           
|                                |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|Commitments:                    |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|Supply agreement                |  | $     |      |      |     |      |      |      |    |      |    |      |    |           
|Employment contracts            |  |       |      |      |     |      |      |      |    |      |    |      |    |           
|Letters of credit               |  |       |      |      |     |      |      |      |    |      |    |      |    |           
|Purchase commitments:           |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|Fertilizer                      |  |       | 10.1  |      | 10.1 |      |      |      |    |      |    |      |    |           
|                                |  |       |       |      |      |      |       |      |     |      |     |      |     |           
|Total commitments               |  | $     | 10.1  |      | 10.1 |      |      |      |    |      |    |      |    |           
|                                |  |       |       |      |      |      |       |      |     |      |     |      |     |           





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Contractual obligations



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



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



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



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



Borrowings



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



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



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



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



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



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



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



Commitments



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



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



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



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



Critical Accounting Policies and Estimates



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



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



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



Inventory Valuation



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



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



Allowance for Doubtful Accounts



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



Rebate
Receivables



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



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Impairment
of long-lived assets



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



| |  |  | Significant under-performance relative to expected historical or projected future operating results
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Significant changes in the manner of our use of the acquired assets or the strategy for our overall business
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | Significant negative industry or economic trends
| | - |  | ------------------------------------------------



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



Goodwill



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



Deferred Income Tax Assets



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



Recently Issued Accounting Standards



Emerging Issues Task Force Issue No. 01-06



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



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Financial
Accounting Standard Board Interpretation No. 46



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



Statement of Financial Accounting Standards No. 148



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



Financial Accounting Standard Board Interpretation No. 45



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



Statement of Financial Accounting Standards No. 146



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



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Statement
of Financial Accounting Standards No. 145



In April 2002, the FASB issued SFAS No. 145, Recission of FAS No. 4, 44 and 64, Amendment of FAS No. 13, and Technical corrections. This Statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, SFAS No. 64,Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds SFAS No. 44, Accounting for
Intangible Assets of Motor Carriers. This Statement amends SFAS No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. This statement has a variety of effective dates due to the various standards affected, but generally is effective for years beginning or transactions after May 15, 2002, with early application
encouraged. We do not believe the implementation of this standard will have a material effect on the Companys financial condition or results of operations.



Statement of Financial Accounting Standards No. 143



In June 2001, the Financial Accounting Standards Board issued
SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.
The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. We do not believe the implementation of this standard will have a material effect on the Companys financial condition or results of operations.



ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The Company is exposed to market risk due to changes in natural gas prices. Natural gas is a raw material used in the production of
various nitrogen-based products that the Company either manufactures at its East Dubuque plant or purchases from vendors. Market prices of nitrogen-based products are affected by changes in natural gas prices as well as supply and demand and other
factors. As a normal course of business, the Company purchases nitrogen-based products during the winter and early spring to supply its needs during the high sales volume spring season. Nitrogen-based inventory remaining at the end of the spring
season will be subject to market risk due to changes in natural gas prices and supply and demand. Currently, the Company purchases natural gas for use in its East Dubuque facility on the spot market and therefore is exposed to significant market
risk. Changes in levels of natural gas prices and market prices of nitrogen-based products can materially affect the Companys financial position and results of operations. The Company has experienced no difficulties in securing supplies of
natural gas, however, natural gas is purchased at market prices and such purchases are subject to price volatility.



The Company is also exposed to changes in interest rates. The interest rates that we pay for borrowings under our credit facility are
based primarily on the LIBOR rate of interest charged by the agent bank under our credit facility. Our operating results will be impacted by changes in interest rates. We estimate that based on an estimated annual average balance on our credit
facility that each 1% change in market interest rate will impact before tax earnings by approximately $1.2 million. Our First Mortgage Notes bear interest at a fixed rate of 101/4%. Some of our customer deposits also bear interest at a fixed rate, which is established on an annual basis at the beginning of each farming season based on prevailing market
rates for similar programs in each of the regions in which we operate.



The Company engages in limited commodity hedging activities with respect to its grain and seed purchases. Given the current economic climate, we believe that the rates in force approximate market
rates. We do not hold or issue derivative financial instruments for trading purposes.





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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



Index to Consolidated Financial Statements



|                                                |  | Page
|----------------------------------------------- |  | ----
|Independent Auditors Report                    |  | 28  
|Consolidated Balance Sheets                     |  | 29  
|Consolidated Statements of Operations           |  | 30  
|Consolidated Statements of Stockholders Equity |  | 31  
|Consolidated Statements of Cash Flows           |  | 32  
|Notes to Consolidated Financial Statements      |  | 34  









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INDEPENDENT AUDITORS REPORT



The Board of Directors and Stockholder

Royster-Clark, Inc.:



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



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



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



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





March 5, 2003



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(Dollars in thousands)



|Assets (Note 11)                                                                                                                   |  | 2002 |         |   | 2001 |        
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -------
|Current assets:                                                                                                                    |  |      |         |   |      |        
|Cash                                                                                                                               |  | $    | 982     |   |      | 997    
|Trade accounts receivable, net of allowance for doubtful accounts of $6,118 and $5,350
at December 31, 2002 and 2001, respectively |  |      | 96,177  |   |      | 73,754 
|Other receivables                                                                                                                  |  |      | 36,653  |   |      | 24,381 
|Inventories (note 5)                                                                                                               |  |      | 252,435 |   |      | 211,218
|Prepaid expenses and other current assets                                                                                          |  |      | 2,326   |   |      | 2,246  
|Deferred income taxes (note 10)                                                                                                    |  |      | 9,206   |   |      | 6,000  
|                                                                                                                                   |  |      |         |   |      |        
|Total current assets                                                                                                               |  |      | 397,779 |   |      | 318,596
|                                                                                                                                  
|Property, plant and equipment, net (notes 6 and 12)                                                                                |  |      | 182,267 |   |      | 203,445
|Goodwill, net of accumulated amortization of $3,395 at December 31, 2002and 2001
(notes 4 and 7)                                   |  |      | 16,540  |   |      | 16,540 
|Deferred income taxes (note 10)                                                                                                    |  |      | 7,373   |   |      | 7,161  
|Deferred financing costs, net of accumulated amortization of $7,542 and $5,430 at
December 31, 2002 and 2001, respectively         |  |      | 8,400   |   |      | 10,512 
|Other assets, net (note 7)                                                                                                         |  |      | 5,653   |   |      | 1,997  
|                                                                                                                                   |  |      |         |   |      |        
|                                                                                                                                   |  | $    | 618,012 |   |      | 558,251
|                                                                                                                                   |  |      |         |   |      |        
|Liabilities and Stockholders
Equity                                                                                               |  |      |         |   |      |        
|Current liabilities:                                                                                                               |  |      |         |   |      |        
|Current installments of long-term debt (note 13)                                                                                   |  | $    | 172     |   |      | 7,181  
|Note payable (note 8)                                                                                                              |  |      | 21,740  |   |      |       
|Customer deposits (note 9)                                                                                                         |  |      | 57,200  |   |      | 60,900 
|Accounts payable                                                                                                                   |  |      | 82,303  |   |      | 86,282 
|Accrued expenses and other current liabilities                                                                                     |  |      | 27,535  |   |      | 26,680 
|                                                                                                                                   |  |      |         |   |      |        
|Total current liabilities                                                                                                          |  |      | 188,950 |   |      | 181,043
|                                                                                                                                  
|Senior secured credit facility (note 11)                                                                                           |  |      | 143,121 |   |      | 89,244 
|101/4% First Mortgage Notes due 2009 (note 12)                                                                                     |  |      | 200,000 |   |      | 200,000
|Long-term debt, excluding current installments (note 13)                                                                           |  |      | 201     |   |      | 363    
|Other long-term liabilities (note 16 and 17)                                                                                       |  |      | 9,463   |   |      | 6,018  
|                                                                                                                                   |  |      |         |   |      |        
|Total liabilities                                                                                                                  |  |      | 541,735 |   |      | 476,668
|                                                                                                                                   |  |      |         |   |      |        
|Stockholders equity (note 11):                                                                                                    |  |      |         |   |      |        
|Common stock, no par value. Authorized 350,000 shares; issued and outstanding at
December 31, 2002 and 2001, 1 share               |  |      |        |   |      |       
|Additional paid-in capital                                                                                                         |  |      | 88,599  |   |      | 88,599 
|Accumulated deficit                                                                                                                |  |      | (11,678 | ) |      | (7,016 
|Accumulated other comprehensive loss                                                                                               |  |      | (644    | ) |      |       
|                                                                                                                                   |  |      |         |   |      |        
|Total stockholders equity                                                                                                         |  |      | 76,277  |   |      | 81,583 
|                                                                                                                                   |  |      |         |   |      |        
|Commitments, contingencies and subsequent event (notes 3, 11, 13, 14, 16, 17
and 18)                                               |  | $    | 618,012 |   |      | 558,251
|                                                                                                                                   |  |      |         |   |      |        



See
accompanying notes to consolidated financial statements.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands)



|                                                       |  | 2002 |         |   | 2001 |         |   | 2000 |        
|------------------------------------------------------ |  | ---- | ------- | - | ---- | ------- | - | ---- | -------
|Net sales (note 22)                                    |  | $    | 898,089 |   |      | 953,790 |   |      | 913,852
|Cost of sales                                          |  |      | 716,497 |   |      | 755,910 |   |      | 728,456
|                                                       |  |      |         |   |      |         |   |      |        
|Gross profit                                           |  |      | 181,592 |   |      | 197,880 |   |      | 185,396
|                                                      
|Selling, general and administrative expenses           |  |      | 160,206 |   |      | 173,168 |   |      | 163,228
|Loss on disposal of property, plant and equipment, net |  |      | 1,219   |   |      | 912     |   |      | 616    
|Expenses related to Agro acquisition (note 22)         |  |      |        |   |      | 4,163   |   |      |       
|                                                       |  |      |         |   |      |         |   |      |        
|Operating income                                       |  |      | 20,167  |   |      | 19,637  |   |      | 21,552 
|                                                      
|Interest expense (note 9)                              |  |      | (29,303 | ) |      | (34,895 | ) |      | (38,001
|Gain on sale of natural gas contracts (note 18)        |  |      | 1,893   |   |      |        |   |      | 9,648  
|Gain on insurance settlement                           |  |      |        |   |      | 1,856   |   |      |       
|                                                       |  |      |         |   |      |         |   |      |        
|Loss before income taxes                               |  |      | (7,243  | ) |      | (13,402 | ) |      | (6,801 
|Income tax benefit (note 10)                           |  |      | (2,643  | ) |      | (4,523  | ) |      | (2,041 
|                                                       |  |      |         |   |      |         |   |      |        
|Net loss                                               |  | $    | (4,600  | ) |      | (8,879  | ) |      | (4,760 
|                                                       |  |      |         |   |      |         |   |      |        







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, 2002, 2001 and 2000

(Dollars in thousands)



|                                                     |  | Common stock |  | Additional paid-in capital |   | Retained earnings (deficit) |        |  | Accumulated other comprehensive loss |   |  | Total stockholders equity |  
|---------------------------------------------------- |  | ------------ |  | -------------------------- | - | --------------------------- | ------ |  | ------------------------------------ | - |  | -------------------------- | -
|                                                     |  | Issued       |  |                            |   |                            
|                                                     |  | Shares       |  | Amount                     |   |                             |        | 
|Balance at December 31, 1999                         |  | 1            |  | $                          |  |                             | 88,599 |  | 6,623                                |   |  |                           |  
|Net loss                                             |  |             |  |                            |  |                             |       |  | (4,760                               | ) |  |                           |  
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Balance a December 31, 2000                          |  | 1            |  |                            |  |                             | 88,599 |  | 1,863                                |   |  |                           |  
|Net loss                                             |  |             |  |                            |  |                             |       |  | (8,879                               | ) |  |                           |  
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Balance at December 31, 2001                         |  | 1            |  |                            |  |                             | 88,599 |  | (7,016                               | ) |  |                           |  
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Net loss                                             |  |             |  |                            |  |                             |       |  | (4,600                               | ) |  |                           |  
|Recognition of minimum pension liability, net of tax |  |             |  |                            |  |                             |       |  |                                     |   |  | (644                       | )
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Total other comprehensive loss                       |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Dividend to Royster-Clark Group, Inc. (note 3)       |  |             |  |                            |  |                             |       |  | (62                                  | ) |  |                           |  
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  
|Balance at December 31, 2002                         |  | 1            |  | $                          |  |                             | 88,599 |  | (11,678                              | ) |  | (644                       | )
|                                                     |  |              |  |                            |   |                             |        |  |                                      |   |  |                            |  





See accompanying notes to consolidated financial statements.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands)



|                                                                                          |  | 2002 |          |   | 2001 |          |   | 2000 |         
|----------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -------- | - | ---- | --------
|Cash flows from operating activities:                                                     |  |      |          |   |      |          |   |      |         
|Net loss                                                                                  |  | $    | (4,600   | ) |      | (8,879   | ) |      | (4,760  
|                                                                                          |  |      |          |   |      |          |   |      |         
|Adjustments to reconcile net loss to net cash provided by (used in) operating
activities: |  |      |          |   |      |          |   |      |         
|Provision for doubtful accounts                                                           |  |      | 2,630    |   |      | 2,980    |   |      | 2,800   
|Depreciation and amortization                                                             |  |      | 27,749   |   |      | 27,356   |   |      | 25,725  
|Loss on disposal of property, plant and equipment                                         |  |      | 1,219    |   |      | 912      |   |      | 616     
|Gain on sale of natural gas contracts                                                     |  |      |         |   |      |         |   |      | (9,648  
|Deferred income tax benefit                                                               |  |      | (3,023   | ) |      | (5,018   | ) |      | (2,341  
|Additional minimum pension liability                                                      |  |      | (1,039   | ) |      |         |   |      |        
|Changes in operating assets and liabilities increasing
(decreasing) cash:                 |  |      |          |   |      |          |   |      |         
|Trade accounts receivable                                                                 |  |      | (25,053  | ) |      | 3,691    |   |      | 16,427  
|Other receivables                                                                         |  |      | (12,272  | ) |      | 14,591   |   |      | (11,084 
|Inventories                                                                               |  |      | (41,704  | ) |      | 29,312   |   |      | (67,785 
|Prepaid expenses and other current assets                                                 |  |      | (80      | ) |      | 3,103    |   |      | 380     
|Other assets                                                                              |  |      | (682     | ) |      | (1,151   | ) |      | (779    
|Accounts payable                                                                          |  |      | 18,248   |   |      | (1,355   | ) |      | 34,628  
|Accrued expenses and other current liabilities                                            |  |      | 155      |   |      | 262      |   |      | (156    
|Other long-term liabilities                                                               |  |      | 745      |   |      | 410      |   |      | 889     
|                                                                                          |  |      |          |   |      |          |   |      |         
|Total adjustments                                                                         |  |      | (33,107  | ) |      | 75,093   |   |      | (10,328 
|                                                                                          |  |      |          |   |      |          |   |      |         
|Net cash provided by (used in) operating activities                                       |  |      | (37,707  | ) |      | 66,214   |   |      | (15,088 
|                                                                                          |  |      |          |   |      |          |   |      |         
|Cash flows from investing activities:                                                     |  |      |          |   |      |          |   |      |         
|Proceeds from sale of property, plant and equipment                                       |  |      | 2,380    |   |      | 2,042    |   |      | 509     
|Purchases of property, plant and equipment                                                |  |      | (6,930   | ) |      | (13,812  | ) |      | (18,082 
|Purchase of technology and patent licenses                                                |  |      | (702     | ) |      |         |   |      |        
|Acquisitions, net of cash acquired of $20 in 2000                                         |  |      |         |   |      |         |   |      | (26,600 
|                                                                                          |  |      |          |   |      |          |   |      |         
|Net cash used in investing activities                                                     |  |      | (5,252   | ) |      | (11,770  | ) |      | (44,173 
|                                                                                          |  |      |          |   |      |          |   |      |         
|Cash flows from financing activities:                                                     |  |      |          |   |      |          |   |      |         
|Proceeds from senior secured credit facility                                              |  |      | 356,923  |   |      | 349,264  |   |      | 410,166 
|Payments on senior secured credit facility                                                |  |      | (303,046 | ) |      | (395,976 | ) |      | (366,756
|Principal payments on long-term debt                                                      |  |      | (7,171   | ) |      | (125     | ) |      | (4,218  
|Proceeds from long-term debt                                                              |  |      |         |   |      | 256      |   |      |        
|Dividend to Royster-Clark Group, Inc.                                                     |  |      | (62      | ) |      |         |   |      |        
|Net increase (decrease) in customer deposits                                              |  |      | (3,700   | ) |      | (7,279   | ) |      | 15,812  
|                                                                                          |  |      |          |   |      |          |   |      |         
|Net cash provided by (used in) financing activities                                       |  |      | 42,944   |   |      | (53,860  | ) |      | 55,004  
|                                                                                          |  |      |          |   |      |          |   |      |         
|Net increase (decrease) in cash                                                           |  |      | (15      | ) |      | 584      |   |      | (4,257  
|Cash, beginning of year                                                                   |  |      | 997      |   |      | 413      |   |      | 4,670   
|                                                                                          |  |      |          |   |      |          |   |      |         
|Cash, end of year                                                                         |  | $    | 982      |   |      | 997      |   |      | 413     
|                                                                                          |  |      |          |   |      |          |   |      |         
|Supplemental disclosure of cash flow information:                                         |  |      |          |   |      |          |   |      |         
|Cash paid during the year for interest                                                    |  | $    | 29,438   |   |      | 35,027   |   |      | 38,332  
|                                                                                          |  |      |          |   |      |          |   |      |         
|Cash paid during the year for income taxes                                                |  | $    | 294      |   |      | 429      |   |      | 1,432   
|                                                                                          |  |      |          |   |      |          |   |      |         

(Continued)



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands)



Supplemental disclosure of noncash investing and financing activities:



As discussed in note 8 to the consolidated financial statements, the Company entered into a short-term financing
arrangement with a finance company related to one of the Companys vendors. The financing entailed the exchange of trade accounts payable for the note payable in the amount of $22,227. As the Company is not required to pay interest on this note
for the first six months, interest was imputed and the note was recorded net of $487 that was recorded as a reduction of the cost of inventory purchased with the arrangement.



As discussed in note 7 and 16 to the consolidated financial statements, the Company entered
into an exclusive license to use and market a new technology for approximately $4,100. Approximately $700 was paid in the current year while the remaining amounts will be paid over the next four years. The remaining liability of $3,400 is reflected
as $700 in accrued liabilities and $2,700 in other long-term liabilities.



As discussed in note 4 to the consolidated financial statements, the Company decreased its estimates by $497 and $395 in 2001 and 2000, respectively, for costs to exit certain facilities, severance and
termination obligations and relocation costs. These costs reduced recorded goodwill.



During 2001, the Company recorded a gain of $600 on certain surplus land claimed by a city government by eminent domain.



As discussed in note 4 to the
consolidated financial statements, in 2000, the Company completed several acquisitions. In conjunction with these transactions, the Company assumed liabilities of $14,357, including $4,092 in debt assumed in the Alliance transaction, of which,
$3,957 was repaid immediately after closing.



In conjunction with the 1999 acquisition of IMC Agribusiness, Inc., the Company finalized the purchase accounting related to the acquisition in 2000 resulting in an increase in property, plant and equipment and a decrease in deferred
income taxes of $13,657.





See accompanying notes to consolidated financial statements.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



(1)    Description of Business



Royster-Clark, Inc. (herein referred to as Royster-Clark or
the Company) is a retail and wholesale distributor of mixed fertilizer, fertilizer materials, seed, crop protection products, and agronomic services to farmers, primarily in the East, South and Midwest. The Companys operations consist of
retail farm centers, granulation, blending and seed processing plants, and a network of storage and distribution terminals and warehouses. In addition, the Company operates two nitrogen-manufacturing plants that supply the retail and wholesale
distribution businesses with nitrogen fertilizer products. The Company is a wholly owned subsidiary of Royster-Clark Group, Inc.



(2)    Summary of Significant Accounting Policies



(a)    Principles of Consolidation



The consolidated financial statements include the accounts of
Royster-Clark, Inc. and its subsidiaries, as listed in note 19. All significant intercompany balances and transactions have been eliminated.



(b)    Cash



The Company transmits, on a daily basis, substantially all available cash to pay balances related to the Senior Secured Credit Facility
(note 11). Cash on the consolidated balance sheets represents funds which are deposited in Company accounts that are not associated with the administration of the Senior Secured Credit Facility. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.



(c)    Trade Accounts Receivable



The majority of trade accounts receivable is recorded at the invoiced amount and does not bear interest. The
remainder has extended terms based on the related crop year and bears interest at 18%. The allowance for doubtful accounts is the Companys best estimate of probable credit losses in the Companys existing accounts receivable. The Company
determined the allowance based on a risk-based analysis of historical write-offs, current sales levels, sales terms and age of the receivables. Substantially all of the Companys customers are involved in the agricultural industry, which is
influenced by a variety of factors which are out of the Companys control, including weather conditions, government position and regulation and world economic conditions, among others. The Company does not have any off-balance-sheet credit
exposure related to its customers.



(d)    Concentration of Credit Risk



The Company sells its products and services to farmers and retail dealers primarily in the midwestern and southeastern United States. Approximately 68% of the Companys sales are made between
March and July. No single customer or group of affiliated customers accounted for more than 10% of the Companys net sales.



In addition to the concentration of sales between March and July, the Company is impacted by a number of other factors, including weather
conditions and prevailing prices for fertilizer and other crop production inputs, including natural gas.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





Weather
conditions can significantly impact the results of operations. Adverse weather conditions during the planting season may force farmers to either delay or abandon their planting, which may lead to lower use of fertilizer, seed and crop protection
products.



(e)    Other
Receivables



Other receivables primarily
consist of vendor rebates. Vendor rebates represent amounts due from suppliers on crop protection, seed and fertilizer products and are accrued when earned, which is typically at the time of sale of the related product. Other receivables also
include amounts due from officers or employees of $12 and $64 at December 31, 2002 and 2001, respectively.



(f)    Inventories



Inventories are stated at the lower of cost or market, with cost being determined by the weighted average
cost method. Costs directly associated with warehousing and distribution are capitalized into crop protection and seed inventories. Total warehousing and distribution costs capitalized into inventories amounted to $3,199 and $2,497 at December 31,
2002 and 2001, respectively.



(g)    Derivative Instruments and Hedging Activities



Effective January 1, 2001, the Company adopted provisions of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Certain Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS 133. The implementation of SFAS No. 133 did not have a
material impact on the consolidated financial statements.



The Company enters into certain futures contracts related to its grain and seed purchases in order to minimize the effects of price volatility on the Companys results of operations. In accordance with SFAS No. 133, these
contracts are recognized on the balance sheet at their fair value. Changes in the fair values of these contracts are reported in current period earnings.



(h)    Property, Plant and Equipment



Property, plant and equipment are stated at cost. All assets are depreciated using the straight-line method
using the following estimated useful lives:



|Buildings and land improvements          |  | 7-20 years
|---------------------------------------- |  | ----------
|Machinery and equipment                  |  | 7-10 years
|Furniture, fixtures and office equipment |  | 3-10 years



(i)    Goodwill and Intangible Assets



Goodwill represents the excess purchase price over the estimated fair value at the date of acquisition of the net assets acquired. The Company adopted the provisions of SFAS No. 142, Goodwill
and Other Intangible Assets, as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at
least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





In
connection with SFAS No. 142s transitional goodwill impairment evaluation, the Statement required the Company to perform an assessment of whether there was an indication that goodwill is impaired as of the date of adoption. The Company was
required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit within six months of January 1, 2002. The Company completed the initial evaluation of impairment in 2002 and no impairment
of goodwill was indicated. Additionally, the Company completed the required annual test for impairment of goodwill during the fourth quarter. No goodwill impairment was indicated.



Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line basis over the expected
periods to be benefited, generally 15 years, and assessed for recoverability by determining whether the amortization of the goodwill balance over its remaining life could be recovered through undiscounted future operating cash flows of the acquired
operation. All other intangible assets were amortized on a straight-line basis from one to ten years. The amount of goodwill and other intangible asset impairment, if any, was measured based on projected discounted future operating cash flows using
a discount rate reflecting the Companys average cost of capital.



(j)    Deferred Financing Costs



Deferred financing costs are being amortized using the effective interest method over the term of the related debt facility.



(k)    Other Assets



Other assets are primarily comprised of patent and technology
licensing agreements, non-compete agreements, long-term notes receivable and various security deposits. The cost of patents and technology licensing agreements are being amortized over the greater of the pattern in which economic benefits of the
patent and technology licensing agreements are consumed or otherwise used up, or straight line over the estimated useful lives of the respective assets. The non-compete agreements are being amortized on a straight-line basis over their contract
terms, which range from three to five years.



(l)    Income Taxes



The Company uses the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences by
applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date.



(m)    Stock-Based Employee Compensation



The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations, including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, issued in March
2000, to account for its stock-based employee compensation plans. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123,
Accounting for Stock-Based Compensation, established accounting and disclosure



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the
Company has elected to continue to apply the intrinsic-value- based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. There is no impact on net income in any period presented.



(n)    Impairment of Long-Lived
Assets



SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, provides a single accounting model for long-lived assets to be disposed of. SFAS No. 144 also changes the criteria for classifying an asset as held for sale; and broadens the scope of businesses
to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations. The Company adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 did not affect the
Companys financial statements.



In
accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of
an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell, and are no longer depreciated.



Goodwill and intangible assets not subject to amortization are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An
impairment loss is recognized to the extent that the carrying amount exceeds the assets fair value.



Prior to the adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.



(o)    Accrued Environmental Costs



The Companys activities include the manufacture, blending and sale of crop nutrient products and the resale of crop protection
products. These operations are subject to extensive federal, state and local environmental regulations, including laws related to air and water quality, management of hazardous and solid wastes, management and handling of raw materials, and crop
protection products. Expenditures that relate to an existing condition caused by past operations of the Company or prior owners, and which do not contribute to current or future revenue generation, are charged to operations.



The Company accrues for losses associated with environmental
remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environment remediation obligations are not discounted to their present value.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.
| | ------------------------------------------------------------------------------------------------------------------------------



(p)    Comprehensive Income



Comprehensive income consists of net income and other gains and losses affecting stockholders equity that, under accounting principles generally accepted in the United States of America are
excluded from net income. For the Company, such items consist primarily of losses due to minimum pension liability adjustments for the defined benefit pension related to a small group of employees.



(q)    Revenue Recognition



The Company recognizes revenue when
products are shipped and the customer takes ownership and assumes risk of loss.



(r)    Use of Estimates



Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods to prepare these consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results could differ from those estimates.



(s)    Reclassifications



Certain reclassifications have been made to the consolidated financial statements as of and for the years
ended December 31, 2001 and 2000 in order to conform to the financial statement presentation as of and for the year ended December 31, 2002.



(t)    New Accounting Pronouncements



In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity. SFAS No. 146 generally requires a liability for a cost associated with an exit or disposal activity to be recognized and measured initially at its fair value in the
period in which the liability is incurred. The pronouncement is effective for exit or disposal activities initiated after December 31, 2002. Management does not believe that the adoption of SFAS No. 146 will have any impact on its financial position
or results of operations.



In December 2002, the
FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods for voluntary transition to
SFAS No. 123s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also requires disclosure of the effects of an entitys accounting policy with respect to stock-based employee compensation on reported net
income (loss) and earnings (loss) per share in annual and interim financial statements. The accounting provisions (if elected) and the disclosure provisions (required) of SFAS No. 148 were



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | effective for fiscal years ending after December 15, 2002. The Company has currently elected not to adopt the fair-value based method of
accounting for stock-based employee compensation. It has adopted the disclosure provisions of SFAS No. 148.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



(3)    Capitalization of Royster-Clark Group, Inc.



Royster-Clark Group, Inc. (RCG) was originally formed for the purpose of acquiring all of the outstanding
stock of Royster-Clark and to enable the Company to purchase IMC AgriBusiness, Inc. RCG is a holding company with no operations independent of those of Royster-Clark. Although Royster-Clark is not legally liable for the obligations of RCG, the
ability of RCG to meet its obligations is dependent on Royster-Clarks ability to pay dividends to RCG in an amount sufficient to service these obligations, including dividend payments on RCGs preferred stock, and principal and interest
payments on RCGs junior subordinated notes. The following paragraphs summarize the terms of RCGs outstanding securities.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





RCG issued
$20,000 of junior subordinated notes bearing interest at an annual rate of 12%. Through maturity, RCG may elect to pay interest due in the form of additional junior subordinated notes. The notes, including additional notes issued in lieu of
interest, are due April 2010. Of these notes, $10,000 are exchangeable after three years for unregistered notes with rights similar to those of the Royster-Clark 10-1/4% First Mortgage Notes due 2009 (herein referred to as the First Mortgage Notes),
subject to compliance with the terms of the debt obligations of Royster-Clark. The terms of the indenture and the other debt obligations currently prohibit such exchange and are expected to prohibit this exchange for the foreseeable future.



RCG also issued 607,140 shares of 12% Series A
Senior Cumulative Compounding Preferred Stock (herein referred to as the Senior Preferred Stock), 132,636 of which were issued to former stockholders of Royster-Clark in conjunction with the 1999 acquisition of Royster-Clark, with a $0.01 per share
par value and a liquidation value of $100 per share. Dividends are payable annually at the rate of $12 per share per annum when, as and if declared by the board of directors. As of December 31, 2002, there is approximately $31,800 in accumulated
dividends. Additional dividends accrue on unpaid dividends. In the event that RCG shall be liquidated, dissolved or wound up, whether voluntarily or involuntarily, after all creditors of RCG shall have been paid in full, the holders of the Senior
Preferred Stock shall be entitled to receive an amount equal to $100 in cash per share plus an amount equal to full cumulative dividends accrued and unpaid before any proceeds are paid to the holders of the Series B Junior Preferred Stock (herein
referred to as the Junior Preferred Stock) or the RCG common stock.



RCG issued 74,874 shares of Junior Preferred Stock, all of which were issued to former stockholders of Royster-Clark in conjunction with the 1999 acquisition of Royster-Clark, with a $0.01 per share par value and a
liquidation value of $100 per share. The holders of the Junior Preferred Stock shall not be entitled to receive any dividends until 2004. Thereafter, the holders of the Junior Preferred Stock shall be entitled to receive, when, as and if declared by
the board of directors, cash dividends at the rate of $12 per share. Dividends, when entitled, shall be cumulative. In the event that RCG shall be liquidated, dissolved or wound up, whether voluntarily or involuntarily, after all creditors of RCG
have been paid in full and the holders of any Senior Preferred Stock have been paid, the holders of the Junior Preferred Stock shall be entitled to receive an amount equal to $100 in cash per share plus an amount equal to cumulative dividends
accrued and unpaid before any proceeds are paid to the holders of the RCG common stock.



RCG issued a total of 908,426 shares of Class A $0.01 par common stock and 1,231,600 of Class B no par common stock, of which 368,426 of the Class A common stock was issued to former stockholders of
Royster-Clark in conjunction with the 1999 acquisition of Royster-Clark. The common stock was issued in two series, Class A and Class B, with 2,200,000 and 2,000,000 shares authorized, respectively. The rights and privileges are identical between
the two classes except with regards to voting rights. The holders of Class A common stock have the general right to vote for all purposes while the holders of Class B common stock have no voting rights. Each record holder of Class A common stock
will be entitled to convert any or all of such holders Class A common stock into the same number of shares of Class B common stock and vice versa. So long as any shares of any class of common stock are outstanding, RCG will at all times
reserve and keep available out of its authorized but unissued shares of Class A common stock and Class B common stock (or any shares of Class A common stock or Class B common stock which are held as treasury shares), the number of shares sufficient
for issuance upon conversion.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





During
2002, the Company paid a dividend to RCG of $62 to fund its operating expenses.



(4)    Acquisitions



The paragraphs on the following pages describe acquisitions made during 2000 and restructuring liabilities associated with the 1999 acquisition of Royster-Clark and IMC Agribusiness, Inc. (Agribusiness).



(a)    2000 Acquisitions



During the first and third quarters of
2000, the Company completed a series of small acquisitions consisting of several retail farm supply centers, a seed processing facility, two grain terminals and a fertilizer terminal for $26,620 in cash, including $635 in direct costs of the
acquisition. Debt of $4,092 was assumed in the transactions, of which $3,957 was repaid immediately after closing. Descriptions of the various transactions are presented below.



American Crop Services



On March 7, 2000, the Company acquired substantially all of the property, plant and equipment and inventories
of American Crop Services (herein referred to as ACS) through a plan submitted to a bankruptcy court. The purchase price paid was $16,399. ACS owned and operated fertilizer retail farm supply outlets as well as distribution and storage facilities
and a seed conditioning facility located primarily in Kentucky and Tennessee. The acquisition was accounted for by the purchase method of accounting, and the accompanying consolidated financial statements include the operating results of ACS from
the date of acquisition. Because the fair values of the assets purchased and the liabilities assumed exceeded the purchase price, the fair value of the property and equipment was reduced. Assets purchased included inventory, certain prepaid expenses
and property, plant and equipment.



Alliance



On March 17, 2000, the Company acquired
shares of stock from Alliance Agronomics, Inc., which owned and operated retail outlets in southern Virginia and northern North Carolina. The acquisition price paid was $4,334. The Company purchased, in a separate, but related transaction, the
equity interest in Petersburg Agri-Terminal Associates, a general partnership, for $3,609. These two entities are collectively referred to as Alliance. These acquisitions were accounted for by the purchase method of accounting, and the accompanying
consolidated financial statements include the operating results of Alliance from the date of acquisition. As a result, the assets and liabilities were adjusted to their fair values, with the excess purchase price over the fair value assigned to
goodwill. Assets purchased included cash, receivables, inventory and property, plant and equipment.



Crop Builders, Inc., Armstrong Ag Center, Inc. and Maple Hill Ag, Inc.



The Company purchased substantially all the assets of Crop
Builders, Inc. and Armstrong Ag Center, Inc. in February 2000, and Maple Hill Ag, Inc. in August 2000, consisting of several retail fertilizer outlets in northern Iowa and southern Minnesota, for $2,278. The acquisitions were accounted for by the
purchase method of accounting, and the accompanying consolidated financial statements include the operating results from the acquisition dates. Assets purchased included receivables, inventory and property, plant and equipment. Because the fair
values of the assets purchased and liabilities assumed exceeded the purchase price, the fair value of property and equipment was reduced.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





The
following summarizes the final allocation of the purchase price for all of the 2000 acquisitions described above.



|Assets purchased:                 |  |   |       
|--------------------------------- |  | - | ------
|Cash                              |  | $ | 22    
|Receivables, net                  |  |   | 2,826 
|Inventories                       |  |   | 14,750
|Prepaid expenses and other assets |  |   | 244   
|Deferred income taxes             |  |   | 225   
|Property, plant and equipment     |  |   | 18,413
|Goodwill                          |  |   | 4,497 
|                                  |  |   |       
|Total assets purchased            |  |   | 40,977
|                                  |  |   |       
|Liabilities assumed:              |  |   |       
|Accounts payable                  |  |   | 5,316 
|Customer deposits                 |  |   | 2,487 
|Accrued expenses                  |  |   | 289   
|Long-term debt                    |  |   | 4,092 
|Deferred income taxes             |  |   | 1,728 
|Other liabilities                 |  |   | 445   
|                                  |  |   |       
|Total liabilities assumed         |  |   | 14,357
|                                  |  |   |       
|Purchase price paid               |  | $ | 26,620
|                                  |  |   |       



(b)    Restructuring Liabilities



In connection with the acquisitions of Royster-Clark and AgriBusiness, the Company recorded accruals of $9,461 for future costs to be incurred related to the closure of certain facilities, severance
and termination benefits and relocation costs of employees. These costs represent managements estimates of the ultimate obligations associated with executing its plans for the combined entity. In accordance with managements plans, the
closed locations and the individuals to be terminated were specifically identified.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





The table
on the following page shows the merger-related accruals and the remaining liability as of December 31, 2002.



|                                  |  | Costs to exit certain facilities |      |   | Severance and termination of related |        |   | Relocation costs |      |   | Total merger-related costs |       
|--------------------------------- |  | -------------------------------- | ---- | - | ------------------------------------ | ------ | - | ---------------- | ---- | - | -------------------------- | ------
|Balance as of December 31, 1999   |  | $                                | 883  |   |                                      | 4,131  |   |                  | 100  |   |                            | 5,114 
|Costs incurred for the year ended |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|December 31, 2000                 |  |                                  | (94  | ) |                                      | (2,511 | ) |                  | (314 | ) |                            | (2,919
|Revisions to estimates            |  |                                  | (157 | ) |                                      | (555   | ) |                  | 317  |   |                            | (395  
|                                  |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|Balance as of December 31, 2000   |  |                                  | 632  |   |                                      | 1,065  |   |                  | 103  |   |                            | 1,800 
|Costs incurred for the year ended |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|December 31, 2001                 |  |                                  | (183 | ) |                                      | (840   | ) |                  | (26  | ) |                            | (1,049
|Revisions to estimates            |  |                                  | (289 | ) |                                      | (131   | ) |                  | (77  | ) |                            | (497  
|                                  |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|Balance as of December 31, 2001   |  |                                  | 160  |   |                                      | 94     |   |                  |     |   |                            | 254   
|Costs incurred for the year ended |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|December 31, 2002                 |  |                                  | (15  | ) |                                      | (94    | ) |                  |     |   |                            | (109  
|                                  |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       
|Balance as of December 31, 2002   |  | $                                | 145  |   |                                      |       |   |                  |     |   |                            | 145   
|                                  |  |                                  |      |   |                                      |        |   |                  |      |   |                            |       



The costs to exit certain facilities represent the costs to close an office building, which was redundant with an existing facility, and 10 retail locations that were evaluated to be unprofitable. All facilities identified were
closed as of September 30, 1999. The change in estimate resulted from the review of expected closing costs to be incurred in relation to the disposition of the remaining facilities. Remaining costs to exit certain facilities include estimated rent,
utilities, maintenance, taxes and other costs to maintain the facilities until their disposal date.



A total of 188 employees were identified for termination, as the positions were redundant with existing personnel. The
positions eliminated included positions in sales, administration and production. As of December 31, 2000, 185 had been terminated. The remaining employees have left employment with the Company or have assumed new positions with the Company. The
revision to estimates reflects adjustments to amounts required to be paid for remaining severance obligations. The termination of employees and closure of facilities has not had a material impact on other areas of operations.



The relocation costs paid represent payments
to 22 individuals for expenses incurred while relocating. These expenses included moving, house hunting and travel related costs. The revision to estimates reflects the adjustment to final costs of relocation expenses related to the relocated
individuals.



Amounts related to
revisions to estimates for costs to exit certain facilities, severance and termination obligations and relocations costs reduced recorded goodwill.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





(e)    Pro Forma Results of Operations



The following unaudited pro forma summary presents the consolidated income statement information as if the aforementioned transactions had been consummated on January 1, 2000, and do not purport to be
indicative of what would have occurred had the acquisitions been made at that date or of the results which may occur in the future.



|          |  | Year ended December 31, 2000 |        
|--------- |  | ---------------------------- | -------
|Net sales |  | $                            | 925,502
|          |  |                              |        
|Net loss  |  | $                            | (6,126 
|          |  |                              |        



The
unaudited pro forma information reflects adjustments made to the historical statements of operations of the companies acquired in 2000 for:



The impact on depreciation and amortization of adjusting to the fair values of property, plant and equipment, goodwill and other
intangibles.



The impact on income tax expense,
which represents the tax effect of the pro forma adjustments described above, calculated to yield an estimated composite tax rate of 39%.



(5)    Inventories



Inventories at December 31, 2002 and 2001 consist of the following:



|                         |  | 2002 |         | 2001
|------------------------ |  | ---- | ------- | ----
|Crop protection products |  | $    | 116,116 |     
|Fertilizers              |  |      | 33,890  |     
|Raw materials            |  |      | 64,803  |     
|Seeds                    |  |      | 21,901  |     
|Sundries and other       |  |      | 15,725  |     
|                         |  |      |         |     
|                         |  | $    | 252,435 |     
|                         |  |      |         |     



(6)    Property, Plant and Equipment



Property, plant and equipment at December 31, 2002 and 2001 consist of the following:



|                              |  | 2002 |         | 2001
|----------------------------- |  | ---- | ------- | ----
|Land                          |  | $    | 14,120  |     
|Buildings                     |  |      | 66,131  |     
|Machinery and equipment       |  |      | 179,788 |     
|Construction-in-progress      |  |      | 1,439   |     
|                              |  |      |         |     
|                              |  |      | 261,478 |     
|Less accumulated depreciation |  |      | 79,211  |     
|                              |  |      |         |     
|                              |  | $    | 182,267 |     
|                              |  |      |         |     



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





Included
in land and buildings above are assets held for sale, which are carried at their estimated net realizable value, less estimated costs to sell. The carrying value of these assets was $3,816 and $2,416 at December 31, 2002 and 2001, respectively.



(7)    Goodwill and Other Assets



The following table reconciles previously
reported net income as if the provisions of SFAS No. 142 were in effect in 2001 and 2000:



|                                                  |  | 2001 |        |   | 2000 |       
|------------------------------------------------- |  | ---- | ------ | - | ---- | ------
|Reconciliation of net income:                     |  |      |        |   |      |       
|Net loss                                          |  | $    | (8,879 | ) |      | (4,760
|Add back goodwill amortization, net of tax effect |  |      | 1,344  |   |      | 1,170 
|                                                  |  |      |        |   |      |       
|Adjusted net loss                                 |  | $    | (7,535 | ) |      | (3,590
|                                                  |  |      |        |   |      |       



Acquired Intangible Assets



Intangible assets consisted of the following at December 31, 2002:



|                              |  | Gross carrying amount |       | Weighted average amortization period |     | Accumulated amortization |   | Net  
|----------------------------- |  | --------------------- | ----- | ------------------------------------ | --- | ------------------------ | - | -----
|Amortizing intangible assets: |  |                       |       |                                      |     |                          |   |      
|Technology and patent license |  | $                     | 4,102 |                                      | 7.0 |                          | $ | 605  
|Noncompete agreements         |  |                       | 1,870 |                                      | 3.5 |                          |   | 967  
|Other                         |  |                       | 478   |                                      | 6.4 |                          |   | 205  
|                              |  |                       |       |                                      |     |                          |   |      
|Total                         |  | $                     | 6,450 |                                      | 6.0 |                          | $ | 1,777
|                              |  |                       |       |                                      |     |                          |   |      



Aggregate amortization expense for amortizing intangible assets for the year ended December 31, 2002 was $1,128. Estimated amortization expense for the next five years is: $1,164 in 2003, $930 in 2004, $699 in 2005, $617 in 2006,
$622 in 2007 and $641 for years thereafter.



(8)    Note Payable



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



(9)    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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | on economic conditions and are posted at the locations where the Company accepts customer deposits. The interest rate accruing on customer
deposits was 6.75% to 8.0% during the year ended December 31, 2002, 8.0% to 9.5% during the year ended December 31, 2001, and 8.5% to 9.5% during the year ended December 31, 2000. Interest expense on customer deposits totaled $1,472, $1,417 and
$1,399 for the years ended December 31, 2002, 2001 and 2000, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certain customer deposits are from officers or employees of the Company. At December 31, 2002 and 2001, these deposits from related parties totaled $1,938 and $897, respectively.



(10)    Income Taxes



Total income tax benefit for the years ended December 31,
2002, 2001 and 2000 were allocated as follows:



|                                                                               |  | 2002 |        |   | 2001 |        |   | 2000 |       
|------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | ------ | - | ---- | ------
|Loss from continuing operations                                                |  | $    | (2,643 | ) |      | (4,523 | ) |      | (2,041
|Accumulated other comprehensive loss, recognition of minimum pension
liability |  |      | (395   | ) |      |       |   |      |      
|                                                                               |  |      |        |   |      |        |   |      |       
|                                                                               |  | $    | (3,038 | ) |      | (4,523 | ) |      | (2,041
|                                                                               |  |      |        |   |      |        |   |      |       



Components of income tax expense (benefit) for years ended December 31, 2002, 2001 and 2000 consist of the following:



|                              |  | Current |     | Deferred |        |   | Total |       
|----------------------------- |  | ------- | --- | -------- | ------ | - | ----- | ------
|Year ended December 31, 2002: |  |         |     |          |        |   |       |       
|Federal                       |  | $       | 310 |          | (2,474 | ) |       | (2,164
|State                         |  |         | 70  |          | (549   | ) |       | (479  
|                              |  |         |     |          |        |   |       |       
|                              |  | $       | 380 |          | (3,023 | ) |       | (2,643
|                              |  |         |     |          |        |   |       |       
|Year ended December 31, 2001  |  |         |     |          |        |   |       |       
|Federal                       |  | $       | 295 |          | (4,126 | ) |       | (3,831
|State                         |  |         | 200 |          | (892   | ) |       | (692  
|                              |  |         |     |          |        |   |       |       
|                              |  | $       | 495 |          | (5,018 | ) |       | (4,523
|                              |  |         |     |          |        |   |       |       
|Year ended December 31, 2000: |  |         |     |          |        |   |       |       
|Federal                       |  | $       |    |          | (1,869 | ) |       | (1,869
|State                         |  |         | 300 |          | (472   | ) |       | (172  
|                              |  |         |     |          |        |   |       |       
|                              |  | $       | 300 |          | (2,341 | ) |       | (2,041
|                              |  |         |     |          |        |   |       |       



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





The
effective income tax rate for 2002, 2001 and 2000 of 36.5%, 33.7% and 30.0%, respectively, differs from the expected federal statutory income tax rate of 34% due to the following:



|                                                                                    |  | Year ended December 31, 2002 |        |   | Year ended December 31, 2001 |        |   | Year ended December 31, 2000 |       
|----------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---------------------------- | ------ | - | ---------------------------- | ------
|Expected income tax benefit                                                         |  | $                            | (2,463 | ) |                              | (4,557 | ) |                              | (2,312
|Nondeductible expenses, including goodwill amortization and meals
and entertainment |  |                              | 135    |   |                              | 643    |   |                              | 573   
|State taxes, net of federal tax effect                                              |  |                              | (316   | ) |                              | (457   | ) |                              | (114  
|Other                                                                               |  |                              | 1      |   |                              | (152   | ) |                              | (188  
|                                                                                    |  |                              |        |   |                              |        |   |                              |       
|                                                                                    |  | $                            | (2,643 | ) |                              | (4,523 | ) |                              | (2,041
|                                                                                    |  |                              |        |   |                              |        |   |                              |       



The tax
effects of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the deferred tax assets and liability at December 31, 2002 and 2001, relate to
the following:



|                                                                                                                                        |  | 2002 |         |   | 2001 |        
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | -------
|Deferred tax assets:                                                                                                                    |  |      |         |   |      |        
|Trade accounts receivable, due to allowance for doubtful accounts and
discounts                                                         |  | $    | 2,363   |   |      | 2,033  
|Accrued expenses, due to accrued vacation and certain other accruals for financial
statement purposes                                   |  |      | 8,568   |   |      | 5,615  
|Operating loss and other tax credit carryforwards                                                                                       |  |      | 25,741  |   |      | 25,002 
|Inventories, due to costs capitalized for tax purposes, and obsolescence and shrink
reserves reflected for financial statement purposes |  |      | 807     |   |      | 839    
|                                                                                                                                        |  |      |         |   |      |        
|Total gross deferred tax assets                                                                                                         |  |      | 37,479  |   |      | 33,489 
|Deferred tax liability                                                                                                                 |  |      |         |   |      |        
|Property, plant and equipment due to differences in depreciation and basis differences
resulting from purchase accounting               |  |      | (20,900 | ) |      | (20,328
|                                                                                                                                        |  |      |         |   |      |        
|Net deferred tax asset                                                                                                                  |  | $    | 16,579  |   |      | 13,161 
|                                                                                                                                        |  |      |         |   |      |        



The
Company generated net operating loss carryforwards of $1,680 during 2002 which will expire in 2022, $21,977 during 2001 which will expire in 2021, $33,985 during 2000 which will expire in 2020, and $3,160 during 1999 which will expire in 2019.



Net deferred taxes are included in the
consolidated balance sheets in the following captions:



|                                    |  | 2002 |        | 2001
|----------------------------------- |  | ---- | ------ | ----
|Deferred income tax assetcurrent   |  | $    | 9,206  |     
|Deferred income tax assetlong-term |  |      | 7,373  |     
|                                    |  |      |        |     
|                                    |  | $    | 16,579 |     
|                                    |  |      |        |     



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred taxes will not be realized. Based upon managements projections for future taxable income over
the periods in which the deferred tax assets are deductible, management believes it is more likely than not the existing net deductible temporary differences will reverse during periods in which the Company generates net taxable income. However,
there can be no assurance that the Company will generate any income or any specific level of continuing income in future years.



(11)    Senior Secured Credit Facility



The Company maintains a senior secured credit facility (credit facility) that allows borrowings up to
$245,000, subject to certain borrowing base limitations. The credit facility expires in April 2004 and bears interest at LIBOR plus a spread based on the Companys leverage (weighted average rate of 4.99% at December 31, 2002 and 5.40% at
December 31, 2001). The credit facility is secured by (1) a lien on all accounts receivable, inventory, general intangibles and all other assets of the Company and its subsidiaries (except for the collateral securing the First Mortgage Notes, as
discussed in note 12), (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 facility totaled $143,121 and $89,244 at December 31, 2002 and 2001, respectively.



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 $2,000; (2) amounts necessary to enable RCG to pay income and other taxes; and (3) $1,000 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
payments were made), or such dividend payments would result in noncompliance with any financial covenants



As of December 31, 2002, the Company was in violation of the minimum net worth covenant under the credit facility. In March 2003, the
consortium of lenders agreed to waive the violation of the net worth covenant and amend the financial covenant ratios for quarterly measurement dates through the remaining term of the credit facility. A covenant has been added to the credit facility
agreement requiring that the Company diligently pursue, obtain and accept, not later than September 30, 2003, a written commitment to refinance all of the current credit facility obligations that is feasible and that will provide payment in full of
the credit facility obligations on or before the maturity date in April 2004. Additionally, the Company and the consortium of lenders agreed to lower the available borrowing capacity under the credit facility from the current $245,000 to $205,000.
The interest rate charged under the credit facility was amended to reflect a 25 basis point increase through September 2003, 50 basis point increase in October 2003, 75 basis point increase in November 2003 and 125 basis point increase thereafter.
The Company expects to meet all of the revised covenants and to obtain a replacement credit facility commitment in accordance with the amendment; however, there can be no guarantee that it will be successful.



(12)    Royster-Clark, Inc. 10-1/4% First Mortgage
Notes Due 2009



The Company issued $200,000
of 10-1/4% First Mortgage Notes due April 2009 (herein referred to as the First Mortgage Notes) on April 22, 1999 to partially finance the acquisition of IMC AgriBusiness, Inc. The



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



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 or a public offering in the first three years after the issue date. 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.



(13)    Long-Term Debt



Long-term debt at December 31, 2002 and 2001 consists of the following:



|                                               |  | 2002 |     | 2001
|---------------------------------------------- |  | ---- | --- | ----
|Industrial revenue bond                        |  | $    |    |     
|Note payable to former stockholder of Hutson   |  |      |    |     
|Other notes payable                            |  |      | 373 |     
|                                               |  |      |     |     
|Total long-term debt                           |  |      | 373 |     
|Less current installments                      |  |      | 172 |     
|                                               |  |      |     |     
|Long-term debt, excluding current installments |  | $    | 201 |     
|                                               |  |      |     |     



In
connection with the purchase of a company in 1997, a $5.0 million unsecured note payable was entered into, due in June 2002, bearing interest at an annual rate of 7.25%. During 2000, the interest rate accrued was renegotiated to fluctuate with
prime, but not to drop below 7.25%. Prime rate was 4.75% at December 31, 2001. The note was payable on demand and the holder demanded and received payment in full in January 2002.



The industrial revenue bond was issued by Decatur County, Bainbridge Georgia Industrial Development Authority
Variable Rate Industrial Development Revenue Bonds Series 1985, due December 1, 2002. Interest on the industrial revenue bond was variable and based on short-term rates for tax-exempt securities. The bond was paid in full upon its maturity date. The
letter of credit that was required by the agreement expired upon repayment of the bond.



The Company had total amounts issued under letters of credit of $5,621 at December 31, 2002.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





Other
notes payable include three notes incurred for the purchase of various property, plant and equipment. Interest rates vary from 4.0% to 10.3%. No individual note exceeds $150.



Aggregate annual principal payments due under the terms of the long-term debt for the five fiscal years
subsequent to December 31, 2002 and thereafter are as follows:



|Year ending December 31: |  |  
|------------------------ |  | -
|2003                     |  | $
|2004                     |  |  
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|Thereafter               |  |  
|                         |  |  
|Total                    |  | $
|                         |  |  



(14)    Operating Leases



The Company leases office facilities, rail cars and various types of equipment under operating leases with terms ranging from 3 to 30 years. Future minimum lease payments under noncancelable operating leases as of December
31, 2002 are as follows:



|Year ending December 31: |  |  
|------------------------ |  | -
|2003                     |  | $
|2004                     |  |  
|2005                     |  |  
|2006                     |  |  
|2007                     |  |  
|Thereafter               |  |  
|                         |  |  
|Total                    |  | $
|                         |  |  



Rental
expense for all operating leases was approximately $16,935, $17,707 and $16,883 for the years ended December 31, 2002, 2001 and 2000, respectively.



(15)    Employee Benefit Plans



(a)    Retirement Plans



The Company maintains a defined contribution Employee Savings and Investment Plan (ESIP) covering
substantially all full-time employees of the Company. Participants are allowed to contribute to the ESIP up to 18% of their salary on a pre-tax basis, up to the maximum allowed under Internal Revenue Service regulations. The Company makes
contributions to the ESIP at the discretion of the board of directors. The Company also maintains three other defined contribution plans for union employees under collective bargaining agreements at seven locations. Company contributions are based
on the applicable provisions of each plan. Total contributions of $1,707, $1,609 and $1,320 were made to the ESIP and other defined contribution plans during the years ended December 31, 2002, 2001 and 2000, respectively.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





As a
result of the 1999 acquisition of IMC Agribusiness, Inc., the Company maintains a defined benefit pension plan covering approximately 164 employees, of which 101 were active. The following table sets forth the benefit obligation, fair value of plan
assets, and the funded status of the Companys plans; amounts recognized in the Companys financial statements; and the principal weighted average assumptions used:



|                                                                                    |  | 2002 |       |   | 2001 |      
|----------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | -----
|Change in benefit obligation:                                                       |  |      |       |   |      |      
|Benefit obligation at beginning of year                                             |  | $    | 2,323 |   |      | 2,155
|Service cost                                                                        |  |      | 69    |   |      | 65   
|Interest cost                                                                       |  |      | 162   |   |      | 155  
|Amendments                                                                          |  |      |      |   |      | 8    
|Actuarial loss                                                                      |  |      | 122   |   |      | 31   
|Benefits paid                                                                       |  |      | (90   | ) |      | (91  
|                                                                                    |  |      |       |   |      |      
|Benefit obligation at end of year                                                   |  | $    | 2,586 |   |      | 2,323
|                                                                                    |  |      |       |   |      |      
|Change in plan assets:                                                              |  |      |       |   |      |      
|Fair value of plan assets at beginning of year                                      |  | $    | 2,471 |   |      | 2,651
|Actual return on plan assets                                                        |  |      | (242  | ) |      | (89  
|Benefits paid                                                                       |  |      | (90   | ) |      | (91  
|                                                                                    |  |      |       |   |      |      
|Fair value of plan assets at end of year                                            |  | $    | 2,139 |   |      | 2,471
|                                                                                    |  |      |       |   |      |      
|Funded status                                                                       |  | $    | (447  | ) |      | 148  
|Unrecognized actuarial loss                                                         |  |      | 1,039 |   |      | 418  
|Unrecognized prior service cost                                                     |  |      | 72    |   |      | 79   
|                                                                                    |  |      |       |   |      |      
|Net amount recognized                                                               |  | $    | 664   |   |      | 645  
|                                                                                    |  |      |       |   |      |      
|Amounts recognized in the consolidated statement of financial position consists
of: |  |      |       |   |      |      
|Prepaid benefit cost                                                                |  |      |      |   |      | 645  
|Accrued benefit liability                                                           |  |      | (447  | ) |      |     
|Intangible asset                                                                    |  |      | 72    |   |      |     
|Accumulated other comprehensive income                                              |  |      | 1,039 |   |      |     
|                                                                                    |  |      |       |   |      |      
|Net amount recognized                                                               |  | $    | 664   |   |      | 645  
|                                                                                    |  |      |       |   |      |      



Components of net periodic benefit costs were as follows:



|                                   |  | 2002 |      |   | 2001 |      |   | 2000 |     
|---------------------------------- |  | ---- | ---- | - | ---- | ---- | - | ---- | ----
|Service cost                       |  | $    | 65   |   |      | 69   |   |      | 60  
|Interest cost                      |  |      | 155  |   |      | 162  |   |      | 144 
|Expected return on plan assets     |  |      | (258 | ) |      | (257 | ) |      | (249
|Amortization of prior service cost |  |      | 6    |   |      | 7    |   |      | 1   
|                                   |  |      |      |   |      |      |   |      |     
|Net periodic benefit cost          |  | $    | (32  | ) |      | (19  | ) |      | (44 
|                                   |  |      |      |   |      |      |   |      |     



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





Pension assumptions:



Pension costs are determined based on actuarial valuations that reflect appropriate assumptions as of the measurement date, ordinarily the beginning of each year. The funded status of the plans is determined using appropriate
assumptions as of each year-end. A summary of the major assumptions follows.



|                                                |  | 2002 |   |  | 2001 |  
|----------------------------------------------- |  | ---- | - |  | ---- | -
|Weighted average assumptions as of December 31: |  |      |   |  |      |  
|Discount rate                                   |  | 6.75 | % |  | 7.25 | %
|Expected return of plan assets                  |  | 9.00 | % |  | 9.50 | %



The
provisions of FASB Statement No. 87, Employers Accounting for Pensions, require the Company to record an additional minimum liability of $1,111 at December 31, 2002. This liability represents the amount by which the accumulated benefit
obligation exceeds the sum of the fair market value of plan assets and accrued amounts previously recorded. The additional liability may be offset by an intangible asset to the extent of previously unrecognized prior service cost. The intangible
asset of $72 at December 31, 2002 is included on the line item entitled other assets in the consolidated balance sheets. The remaining amount of $1,039 is recorded as a component of stockholders equity, net of related tax benefits
of $395, on the line item titled accumulated other comprehensive loss in the consolidated balance sheets at December 31, 2002.



(b)    1999 Restricted Stock Purchase and Option Plan



Upon the acquisition of the Company by RCG, RCG created the
1999 Restricted Stock Purchase and Option Plan (herein referred to as the 1999 Plan). Under the terms of the 1999 Plan, 200,000 shares of RCG common stock have been reserved for issuance in the form of restricted share grants to current and future
employees of RCG or Royster-Clark. Shares issued under the 1999 Plan are subject to certain restrictions on transfer of shares. No common stock shares were issued under this plan during the year ended December 31, 2002 or 2001. During the year ended
December 31, 2000, 180,000 common stock shares were issued under this plan at a price equal to the fair value at date of grant. During the year, 17,500 shares were redeemed.



In addition, 35,820 shares of common stock, 13,290 shares of Senior Preferred Stock and 7,470 shares of
Junior Preferred Stock have been reserved for issuance pursuant to the exercise of stock options rolled over from the 1992 Stock Option Plan (herein referred to as the 1992 Plan) previously maintained by Royster-Clark. All options granted under the
1992 Plan were either cashed out at the merger consideration of $285 per share less the exercise price under the 1992 Plan or exchanged for an option to purchase 5.5 shares of common stock, 2.0 shares of Senior Preferred Stock and 1.1 shares of
Junior Preferred Stock at the same exercise price as under the 1992 Plan. At December 31, 2002, the options described above are the only options vested and outstanding under the 1999 Plan. No options were issued or exercised during the years ended
December 31, 2002, 2001 and 2000.



(16)    Technology Licensing Arrangement



During the current year, the Company entered into an exclusive license to use and market a new technology for approximately $4,100 over a 7-year period. Approximately $700 was paid in the current year
with the remaining payments due in annual payments as follows: $700 in 2003, $800 in 2004, $900 in 2005 and $1,000 in 2006. The agreement extends automatically as long as certain minimums are met. As described in



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | note 2, the related asset is being amortized over the greater of the pattern in which economic benefits of the patent and technology
licensing agreements are consumed or otherwise used up, or straight line over the estimated useful life of the agreement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(17)    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 44 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, an overall cap on all indemnities of approximately $27,000, and certain
time limitations. The indemnities related to Royster-Clark, Inc. (predecessor company) are subject to a deductible of $2,000, certain time limitations, and an overall cap of $5,000 on all indemnities. In addition, Royster-Clark, Inc. (predecessor
company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites acquired from LCC in December 1998. The Company also obtained indemnities from the former stockholder
of Alliance for environmental conditions identified as of the date of acquisition.



The Company has recorded environmental liabilities at December 31, 2002 for the estimated cost of cleanup efforts of identified contamination or site characterization, which total $3,260, and are
included in other long-term liabilities in the accompanying consolidated balance sheets. Actual cash expenditures during the years ended December 31, 2002 and 2001 were $222 and $179, respectively. These liabilities do not take into account any
claims for recoveries from insurance or third parties and are not discounted. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainty in evaluating environmental exposures.



(18)    Commitments and Contingencies



(a)    Supply
Agreements



In conjunction with the
acquisition of Agribusiness, the Company has entered into a 10-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 estimated normal business requirements of the former AgriBusiness locations. The purchase prices of the products covered by the agreement
approximate market prices at the time of purchase for the



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December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | majority of the products. 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has commitments
to purchase various other fertilizer materials of approximately $10,086 during the year ending December 31, 2003.



(b)    Gas Contracts



During 2002, the Company entered into natural gas fixed-price and index-priced contracts, which were
short-term in duration. These index-priced contracts committed the Company to quantities of natural gas (daily MMBTUs), which are denominated under a scheduled price associated with a natural gas index.



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 $1,270. 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 $623. The Company has received all amounts due under these sales
agreements in 2002.



Subsequent to the sale of
the fixed-price contracts described above, the Company purchases natural gas on the open market and is not engaged in any purchases using either fixed-price or index-priced contracts.



In December 2000, the Company sold all its rights, title and interests in several fixed-priced and
index-priced natural gas contracts resulting in a gain of $9,648. The contract rights assigned were for periods from mid-December 2000, when the contracts were assigned, through October 31, 2001, with most of the quantities relating to the first
quarter of 2001.



(c)    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 contracts extend through April 2004 with
an automatic one-year extension thereafter unless notice of intent not to renew is given, either by the Company or by the executive. If termination without cause had occurred as of December 31, 2002, the Company would have been required to pay
approximately $2,107 to satisfy its obligations.



(d)    Legal and Regulatory Matters



From time to time, the Company has had claims asserted against it by regulatory agencies or private parties for environmental matters (see note 17) and has incurred obligations for investigation or
remedial actions with respect to certain of such matters. In addition, the Company is subject to various claims and legal matters that have arisen in the ordinary course of its business. Although there can be



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



| | no assurance as to the ultimate disposition of these matters, it is the opinion of the Companys management that any such claims
asserted or obligations incurred to date will not result in a material adverse effect on the results of operations or financial position of the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(19)    Condensed Financial Data of Guarantor Subsidiaries



As discussed further in note 12, the First Mortgage Notes are
guaranteed on a full, unconditional and joint and several basis, by each of the following subsidiaries of Royster-Clark, including:



Royster-Clark Realty LLC

Royster-Clark Resources LLC

Royster-Clark AgriBusiness, Inc.

Royster-Clark AgriBusiness Realty LLC

Royster-Clark Nitrogen, Inc.

Alliance Fertilizer of Suffolk, Inc.

Seaboard Liquid Plant Food, Inc.



There are currently no restrictions on the ability of Royster-Clark to obtain funds from its guarantor subsidiaries through dividends or
loans.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





The
following tables present the condensed financial data of Royster-Clark and its guarantor subsidiaries as of and for the years ended December 31, 2002, 2001 and 2000.



As of and for the year ended December 31, 2002:



|                                               |  | Royster-Clark, Inc. |         | Guarantor subsidiaries |         |   | Eliminations |          |   | Consolidated |        
|---------------------------------------------- |  | ------------------- | ------- | ---------------------- | ------- | - | ------------ | -------- | - | ------------ | -------
|Balance Sheet Data:                            |  |                     |         |                        |         |   |              |          |   |              |        
|Current assets:                                |  |                     |         |                        |         |   |              |          |   |              |        
|Cash                                           |  | $                   | 42      |                        | 940     |   |              |         |   |              | 982    
|Trade accounts receivable, net                 |  |                     |        |                        | 98,575  |   |              | (2,398   | ) |              | 96,177 
|Other receivables                              |  |                     | 4,369   |                        | 51,545  |   |              | (19,261  | ) |              | 36,653 
|Inventories                                    |  |                     |        |                        | 252,435 |   |              |         |   |              | 252,435
|Prepaid expenses and other current assets      |  |                     |        |                        | 2,326   |   |              |         |   |              | 2,326  
|Deferred income taxes                          |  |                     | 9,206   |                        |        |   |              |         |   |              | 9,206  
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total current assets                           |  |                     | 13,617  |                        | 405,821 |   |              | (21,659  | ) |              | 397,779
|                                              
|Property, plant and equipment, net             |  |                     | 11,028  |                        | 171,239 |   |              |         |   |              | 182,267
|Goodwill, net                                  |  |                     | 12,012  |                        | 4,528   |   |              |         |   |              | 16,540 
|Deferred income taxes                          |  |                     | 7,373   |                        |        |   |              |         |   |              | 7,373  
|Deferred financing costs, net                  |  |                     | 8,400   |                        |        |   |              |         |   |              | 8,400  
|Other assets, net                              |  |                     | 35      |                        | 5,618   |   |              |         |   |              | 5,653  
|Investment in subsidiaries                     |  |                     | 377,754 |                        |        |   |              | (377,754 | ) |              |       
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total assets                                   |  | $                   | 430,219 |                        | 587,206 |   |              | (399,413 | ) |              | 618,012
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Current liabilities:                           |  |                     |         |                        |         |   |              |          |   |              |        
|Current installments of long-term debt         |  | $                   |        |                        | 172     |   |              |         |   |              | 172    
|Note payable                                   |  |                     |        |                        | 21,740  |   |              |         |   |              | 21,740 
|Customer deposits                              |  |                     |        |                        | 57,200  |   |              |         |   |              | 57,200 
|Accounts payable                               |  |                     |        |                        | 103,962 |   |              | (21,659  | ) |              | 82,303 
|Accrued expenses and other current liabilities |  |                     | 7,983   |                        | 19,552  |   |              |         |   |              | 27,535 
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total current liabilities                      |  |                     | 7,983   |                        | 202,626 |   |              | (21,659  | ) |              | 188,950
|                                              
|Senior secured credit facility                 |  |                     | 143,121 |                        |        |   |              |         |   |              | 143,121
|101/4% First Mortgage Notes                    |  |                     | 200,000 |                        |        |   |              |         |   |              | 200,000
|Long-term debt, excluding current installments |  |                     |        |                        | 201     |   |              |         |   |              | 201    
|Other long-term liabilities                    |  |                     | 465     |                        | 8,998   |   |              |         |   |              | 9,463  
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total liabilities                              |  |                     | 351,569 |                        | 211,825 |   |              | (21,659  | ) |              | 541,735
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Stockholders equity:                          |  |                     |         |                        |         |   |              |          |   |              |        
|Common stock                                   |  |                     |        |                        |        |   |              |         |   |              |       
|Additional paid-in capital                     |  |                     | 78,599  |                        | 387,754 |   |              | (377,754 | ) |              | 88,599 
|Accumulated other comprehensive loss           |  |                     |        |                        | (644    | ) |              |         |   |              | (644   
|Retained earnings (accumulated deficit)        |  |                     | 51      |                        | (11,729 | ) |              |         |   |              | (11,678
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total stockholders equity                     |  |                     | 78,650  |                        | 375,381 |   |              | (377,754 | ) |              | 76,277 
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total liabilities and stockholders equity     |  | $                   | 430,219 |                        | 587,206 |   |              | (399,413 | ) |              | 618,012
|                                               |  |                     |         |                        |         |   |              |          |   |              |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





|Statement of Operations Data:                          |  | Royster-Clark, Inc. |          |   | Guarantor subsidiaries |         |   | Eliminations |         |   | Consolidated |         
|------------------------------------------------------ |  | ------------------- | -------- | - | ---------------------- | ------- | - | ------------ | ------- | - | ------------ | --------
|Net sales                                              |  | $                   | 4,012    |   |                        | 969,897 |   |              | (75,820 | ) |              | 898,089 
|Cost of sales                                          |  |                     | 421      |   |                        | 772,674 |   |              | (56,598 | ) |              | 716,497 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Gross profit                                           |  |                     | 3,591    |   |                        | 197,223 |   |              | (19,222 | ) |              | 181,592 
|Selling, general and administrative expenses           |  |                     | 1,186    |   |                        | 178,281 |   |              | (19,261 | ) |              | 160,206 
|Loss on disposal of property, plant and equipment, net |  |                     | 391      |   |                        | 828     |   |              |        |   |              | 1,219   
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Operating income                                       |  |                     | 2,014    |   |                        | 18,114  |   |              | 39      |   |              | 20,167  
|Interest expense                                       |  |                     | (2,006   | ) |                        | (27,297 | ) |              |        |   |              | (29,303 
|Gain on sale of natural gas contracts                  |  |                     |         |   |                        | 1,893   |   |              |        |   |              | 1,893   
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Income (loss) before income taxes                      |  |                     | 8        |   |                        | (7,290  | ) |              | 39      |   |              | (7,243  
|Income tax expense (benefit)                           |  |                     | 3        |   |                        | (2,646  | ) |              |        |   |              | (2,643  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net income (loss)                                      |  | $                   | 5        |   |                        | (4,644  | ) |              | 39      |   |              | (4,600  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Statement of Cash Flows Data:                          |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) operating activities    |  | $                   | (53,975  | ) |                        | 16,268  |   |              |        |   |              | (37,707 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash flows from investing activities:                  |  |                     |          |   |                        |         |   |              |         |   |              |         
|Proceeds from sale of property, plant and equipment    |  |                     | 164      |   |                        | 2,216   |   |              |        |   |              | 2,380   
|Purchases of property, plant and equipment             |  |                     |         |   |                        | (6,930  | ) |              |        |   |              | (6,930  
|Purchase of technology and patent licenses             |  |                     |         |   |                        | (702    | ) |              |        |   |              | (702    
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) investing activities    |  |                     | 164      |   |                        | (5,416  | ) |              |        |   |              | (5,252  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash flows from financing activities:                  |  |                     |          |   |                        |         |   |              |         |   |              |         
|Proceeds from senior secured credit facility           |  |                     | 356,923  |   |                        |        |   |              |        |   |              | 356,923 
|Payments on senior secured credit facility             |  |                     | (303,046 | ) |                        |        |   |              |        |   |              | (303,046
|Principal payments on long-term debt                   |  |                     | (4       | ) |                        | (7,167  | ) |              |        |   |              | (7,171  
|Dividend to Royster-Clark Group, Inc.                  |  |                     | (62      | ) |                        |        |   |              |        |   |              | (62     
|Net decrease in customer deposits                      |  |                     |         |   |                        | (3,700  | ) |              |        |   |              | (3,700  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) financing activities    |  |                     | 53,811   |   |                        | (10,867 | ) |              |        |   |              | 42,944  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net decrease in cash                                   |  |                     |         |   |                        | (15     | ) |              |        |   |              | (15     
|Cash, beginning of year                                |  |                     | 42       |   |                        | 955     |   |              |        |   |              | 997     
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash, end of year                                      |  | $                   | 42       |   |                        | 940     |   |              |        |   |              | 982     
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)



As of and for the year ended December 31, 2001:



|Balance Sheet Data:                            |  | Royster-Clark, Inc. |         | Guarantor subsidiaries |         |   | Eliminations |          |   | Consolidated |        
|---------------------------------------------- |  | ------------------- | ------- | ---------------------- | ------- | - | ------------ | -------- | - | ------------ | -------
|Current assets:                                |  |                     |         |                        |         |   |              |          |   |              |        
|Cash                                           |  | $                   | 42      |                        | 955     |   |              |         |   |              | 997    
|Trade accounts receivable, net                 |  |                     |        |                        | 73,754  |   |              |         |   |              | 73,754 
|Other receivables                              |  |                     | 4,204   |                        | 42,306  |   |              | (22,129  | ) |              | 24,381 
|Inventories                                    |  |                     |        |                        | 211,257 |   |              | (39      | ) |              | 211,218
|Prepaid expenses and other current assets      |  |                     | 356     |                        | 1,890   |   |              |         |   |              | 2,246  
|Deferred income taxes                          |  |                     | 6,000   |                        |        |   |              |         |   |              | 6,000  
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total current assets                           |  |                     | 10,602  |                        | 330,162 |   |              | (22,168  | ) |              | 318,596
|Property, plant and equipment, net             |  |                     | 13,354  |                        | 190,091 |   |              |         |   |              | 203,445
|Goodwill, net                                  |  |                     | 12,012  |                        | 4,528   |   |              |         |   |              | 16,540 
|Deferred income taxes                          |  |                     | 7,161   |                        |        |   |              |         |   |              | 7,161  
|Deferred financing costs, net                  |  |                     | 10,512  |                        |        |   |              |         |   |              | 10,512 
|Other assets, net                              |  |                     | 75      |                        | 1,922   |   |              |         |   |              | 1,997  
|Investment in subsidiaries                     |  |                     | 322,845 |                        |        |   |              | (322,845 | ) |              |       
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total assets                                   |  | $                   | 376,561 |                        | 526,703 |   |              | (345,013 | ) |              | 558,251
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Current liabilities:                           |  |                     |         |                        |         |   |              |          |   |              |        
|Current installments of long-term debt         |  | $                   | 4       |                        | 7,177   |   |              |         |   |              | 7,181  
|Customer deposits                              |  |                     |        |                        | 60,900  |   |              |         |   |              | 60,900 
|Accounts payable                               |  |                     |        |                        | 108,411 |   |              | (22,129  | ) |              | 86,282 
|Accrued expenses and other current liabilities |  |                     | 8,116   |                        | 18,564  |   |              |         |   |              | 26,680 
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total current liabilities                      |  |                     | 8,120   |                        | 195,052 |   |              | (22,129  | ) |              | 181,043
|                                              
|Senior secured credit facility                 |  |                     | 89,244  |                        |        |   |              |         |   |              | 89,244 
|101/4% First Mortgage Notes                    |  |                     | 200,000 |                        |        |   |              |         |   |              | 200,000
|Long-term debt, excluding current installments |  |                     |        |                        | 363     |   |              |         |   |              | 363    
|Other long-term liabilities                    |  |                     | 490     |                        | 5,528   |   |              |         |   |              | 6,018  
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total liabilities                              |  |                     | 297,854 |                        | 200,943 |   |              | (22,129  | ) |              | 476,668
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Stockholders equity:                          |  |                     |         |                        |         |   |              |          |   |              |        
|Common stock                                   |  |                     |        |                        |        |   |              |         |   |              |       
|Additional paid-in capital                     |  |                     | 78,599  |                        | 332,845 |   |              | (322,845 | ) |              | 88,599 
|Retained earnings (accumulated deficit)        |  |                     | 108     |                        | (7,085  | ) |              | (39      | ) |              | (7,016 
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total stockholders equity                     |  |                     | 78,707  |                        | 325,760 |   |              | (322,884 | ) |              | 81,583 
|                                               |  |                     |         |                        |         |   |              |          |   |              |        
|Total liabilities and stockholders equity     |  | $                   | 376,561 |                        | 526,703 |   |              | (345,013 | ) |              | 558,251
|                                               |  |                     |         |                        |         |   |              |          |   |              |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





|Statement of Operations Data:                          |  | Royster-Clark, Inc. |          |   | Guarantor subsidiaries |           |   | Eliminations |         |   | Consolidated |         
|------------------------------------------------------ |  | ------------------- | -------- | - | ---------------------- | --------- | - | ------------ | ------- | - | ------------ | --------
|Net sales                                              |  | $                   | 4,204    |   |                        | 1,016,814 |   |              | (67,228 | ) |              | 953,790 
|Cost of sales                                          |  |                     | 423      |   |                        | 802,210   |   |              | (46,723 | ) |              | 755,910 
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Gross profit                                           |  |                     | 3,781    |   |                        | 214,604   |   |              | (20,505 | ) |              | 197,880 
|Selling, general and administrative expenses           |  |                     | 954      |   |                        | 192,912   |   |              | (20,698 | ) |              | 173,168 
|Expenses related to Agro acquisition                   |  |                     |         |   |                        | 4,163     |   |              |        |   |              | 4,163   
|Loss on disposal of property, plant and equipment, net |  |                     | 405      |   |                        | 507       |   |              |        |   |              | 912     
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Operating income                                       |  |                     | 2,422    |   |                        | 17,022    |   |              | 193     |   |              | 19,637  
|Interest expense                                       |  |                     | (2,414   | ) |                        | (32,481   | ) |              |        |   |              | (34,895 
|Gain on insurance settlement                           |  |                     |         |   |                        | 1,856     |   |              |        |   |              | 1,856   
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Income (loss) before income taxes                      |  |                     | 8        |   |                        | (13,603   | ) |              | 193     |   |              | (13,402 
|Income tax expense (benefit)                           |  |                     | 3        |   |                        | (4,526    | ) |              |        |   |              | (4,523  
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Net income (loss)                                      |  | $                   | 5        |   |                        | (9,077    | ) |              | 193     |   |              | (8,879  
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Statement of Cash Flows Data:                          |  |                     |          |   |                        |           |   |              |         |   |              |         
|Net cash provided by operating activities              |  | $                   | 46,620   |   |                        | 19,594    |   |              |        |   |              | 66,214  
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Cash flows from investing activities:                  |  |                     |          |   |                        |           |   |              |         |   |              |         
|Proceeds from sale of property, plant and equipment    |  |                     | 139      |   |                        | 1,903     |   |              |        |   |              | 2,042   
|Purchases of property, plant and equipment             |  |                     |         |   |                        | (13,812   | ) |              |        |   |              | (13,812 
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Net cash provided by (used in) investing activities    |  |                     | 139      |   |                        | (11,909   | ) |              |        |   |              | (11,770 
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Cash flows from financing activities:                  |  |                     |          |   |                        |           |   |              |         |   |              |         
|Proceeds from senior secured credit facility           |  |                     | 349,264  |   |                        |          |   |              |        |   |              | 349,264 
|Payments on senior secured credit facility             |  |                     | (395,976 | ) |                        |          |   |              |        |   |              | (395,976
|Proceeds from long-term debt                           |  |                     |         |   |                        | 256       |   |              |        |   |              | 256     
|Principal payments on long-term debt                   |  |                     | (47      | ) |                        | (78       | ) |              |        |   |              | (125    
|Net decrease in customer deposits                      |  |                     |         |   |                        | (7,279    | ) |              |        |   |              | (7,279  
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Net cash used in financing activities                  |  |                     | (46,759  | ) |                        | (7,101    | ) |              |        |   |              | (53,860 
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Net increase in cash                                   |  |                     |         |   |                        | 584       |   |              |        |   |              | 584     
|Cash, beginning of year                                |  |                     | 42       |   |                        | 371       |   |              |        |   |              | 413     
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         
|Cash, end of year                                      |  | $                   | 42       |   |                        | 955       |   |              |        |   |              | 997     
|                                                       |  |                     |          |   |                        |           |   |              |         |   |              |         





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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





For the year ended
December 31, 2000:



|Statement of Operations Data:                          |  | Royster-Clark, Inc. |          |   | Guarantor subsidiaries |         |   | Eliminations |         |   | Consolidated |         
|------------------------------------------------------ |  | ------------------- | -------- | - | ---------------------- | ------- | - | ------------ | ------- | - | ------------ | --------
|Net sales                                              |  | $                   | 4,106    |   |                        | 985,430 |   |              | (75,684 | ) |              | 913,852 
|Cost of sales                                          |  |                     | 498      |   |                        | 782,151 |   |              | (54,193 | ) |              | 728,456 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Gross profit                                           |  |                     | 3,608    |   |                        | 203,279 |   |              | (21,491 | ) |              | 185,396 
|Selling, general and administrative expenses           |  |                     | 1,288    |   |                        | 183,199 |   |              | (21,259 | ) |              | 163,228 
|Loss on disposal of property, plant and equipment, net |  |                     | 43       |   |                        | 573     |   |              |        |   |              | 616     
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Operating income                                       |  |                     | 2,277    |   |                        | 19,507  |   |              | (232    | ) |              | 21,552  
|Interest expense                                       |  |                     | (2,269   | ) |                        | (35,732 | ) |              |        |   |              | (38,001 
|Gain on sale of natural gas contracts                  |  |                     |         |   |                        | 9,648   |   |              |        |   |              | 9,648   
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Income (loss) before income taxes                      |  |                     | 8        |   |                        | (6,577  | ) |              | (232    | ) |              | (6,801  
|Income tax expense (benefit)                           |  |                     | 2        |   |                        | (2,043  | ) |              |        |   |              | (2,041  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net income (loss)                                      |  | $                   | 6        |   |                        | (4,534  | ) |              | (232    | ) |              | (4,760  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Statement of Cash Flows Data:                          |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) operating activities    |  | $                   | (43,792  | ) |                        | 28,704  |   |              |        |   |              | (15,088 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash flows from investing activities:                  |  |                     |          |   |                        |         |   |              |         |   |              |         
|Proceeds from sale of property, plant and equipment    |  |                     | 159      |   |                        | 350     |   |              |        |   |              | 509     
|Purchases of property, plant and equipment             |  |                     |         |   |                        | (18,082 | ) |              |        |   |              | (18,082 
|Acquisitions, net of cash acquired                     |  |                     |         |   |                        | (26,600 | ) |              |        |   |              | (26,600 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) investing activities    |  |                     | 159      |   |                        | (44,332 | ) |              |        |   |              | (44,173 
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash flows from financing activities:                  |  |                     |          |   |                        |         |   |              |         |   |              |         
|Proceeds from senior secured credit facility           |  |                     | 410,166  |   |                        |        |   |              |        |   |              | 410,166 
|Payments on senior secured credit facility             |  |                     | (366,756 | ) |                        |        |   |              |        |   |              | (366,756
|Principal payments on long-term debt                   |  |                     | (79      | ) |                        | (4,139  | ) |              |        |   |              | (4,218  
|Net increase in customer deposits                      |  |                     |         |   |                        | 15,812  |   |              |        |   |              | 15,812  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net cash provided by (used in) financing activities    |  |                     | 43,331   |   |                        | 11,673  |   |              |        |   |              | 55,004  
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Net decrease in cash                                   |  |                     | (302     | ) |                        | (3,955  | ) |              |        |   |              | (4,257  
|Cash, beginning of year                                |  |                     | 344      |   |                        | 4,326   |   |              |        |   |              | 4,670   
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         
|Cash, end of year                                      |  | $                   | 42       |   |                        | 371     |   |              |        |   |              | 413     
|                                                       |  |                     |          |   |                        |         |   |              |         |   |              |         



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





(20)    Fair Value of Financial Instruments



The following methods and assumptions were used to estimate the fair value of the Companys financial instruments at December 31, 2002 and 2001. FASB Statement No. 107, Disclosures about Fair
Value of Financial Instruments, defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.



Cash, trade accounts receivable, other receivables,
notes receivable, short-term note payable, accounts payable, customer deposits, and accrued expenses: The carrying amounts approximate fair value because of the short maturity of those instruments.



Long-term
debt:    The fair value of the Companys long-term debt is estimated by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of
comparable maturity by the Companys bankers. Based on these criteria, the carrying amounts approximate fair value.



Senior secured credit facility:    The carrying amount of the Companys senior
secured credit facility approximates fair value due to the variable interest rate charged, as well as changes in the rate charged based on the Companys leverage.



First Mortgage Notes:    The fair value of the Companys
first mortgage notes at December 31, 2002 was $154,000 based on publicly available trade information near December 31, 2002.



(21)    Derivative Instruments and Hedging Activities



The Company has commodity derivatives to manage its exposure to commodity price fluctuations related to its
grain operations. Currently, the Company does not enter into derivative instruments for any purpose other than fair value hedging purposes. That is, the Company does not speculate using derivative instruments.



The Company maintains a commodity-price risk management
strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price volatility related to grain operations.



The Company periodically enters into grain option contracts for a portion of its anticipated purchases to
hedge the price risk associated with fluctuations in market prices. The option contracts limit the unfavorable effect that price increases will have on grain purchases.



Changes in the fair value of grain future contracts are reported in cost of sales.



For the years ended December 31, 2002 and 2001, the Company
recognized $193 and $532, respectively, in net gains, which represented the total planned and unplanned ineffectiveness of commodity fair value hedges.



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ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)





(22)    Significant Transactions



(a)    Expenses related to Agro Acquisition



The Company entered into a purchase agreement to acquire certain assets of Agro Distribution, LLC (Agro) on June 14, 2001. The Company and
Agro could not reach agreement on certain key elements of the proposed transaction and terminated the purchase agreement on October 17, 2001. The Company incurred costs associated with the acquisition of $4,163 for legal, accounting and other direct
costs associated with the proposed acquisition. With the termination of the transaction, these costs yield no future benefit and were written off during the fourth quarter of 2001. These expenses are included in expenses related to Agro
acquisition in the accompanying consolidated statements of operations.



(b)    Fourth Quarter Sale



In the fourth quarter of 2002, the Company entered into an agreement for the sale of specialty seed and related technology in the amount
of $9,000.



(23)    Quarterly Financial
InformationUnaudited



The following
table sets forth certain items from our unaudited statements of operations for each quarter of 2002 and 2001. The unaudited information has been prepared on the same basis as the audited consolidated financial statements appearing elsewhere in this
report and includes all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the financial data shown. The operating results for any quarter are not necessarily indicative of
results for any future period.



|                        |  | Quarter ended |        
|----------------------- |  | ------------- | -------
|                        |  | March 31      |        
|2002:                   |  |               |        
|Net sales               |  | $             | 157,947
|Gross profit            |  |               | 22,826 
|Operating income (loss) |  |               | (16,944
|Net income (loss)       |  |               | (14,947



|                        |  | Quarter ended |        
|----------------------- |  | ------------- | -------
|                        |  | March 31      |        
|2001:                   |  |               |        
|Net sales               |  | $             | 166,097
|Gross profit            |  |               | 27,848 
|Operating income (loss) |  |               | (15,846
|Net income (loss)       |  |               | (15,545



ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.



None.





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PART III



ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



The following table provides information about our executive officers and directors.



|Name                    |  | Age |  | Position                                         
|----------------------- |  | --- |  | -------------------------------------------------
|Francis P. Jenkins, Jr. |  | 60  |  | Chairman of the Board and Chief Executive Officer
|G. Kenneth Moshenek     |  | 51  |  | President and Chief Operating Officer            
|Paul M. Murphy          |  | 58  |  | Chief Financial Officer                          
|Randolph G. Abood       |  | 52  |  | Director                                         
|Charles E. Corpening    |  | 37  |  | Director                                         
|Thomas F. McWilliams    |  | 59  |  | Director                                         



FRANCIS P. JENKINS, JR. is the Chairman of the Board and Chief Executive Officer of Royster-Clark, and has been Chairman and Chief Executive Officer of Royster-Clark Group since January 1999. From 1994 to 1999, Mr. Jenkins
served as Chairman of the Board and Chief Executive Officer of Royster-Clark. From 1992 until 1994, Mr. Jenkins served as a director and Chairman of the Audit Committee for Royster-Clark. From 1988 to 1992, he served as Chairman of the Board of
Royster-Clark. From 1979 to 1988, Mr. Jenkins was employed by The First Boston Corporation where he was one of the four members of the Executive Committee, co-managed First Bostons Equity Capital Investments and was the Principal Financial
Officer. Prior to that position, he had responsibility for all security sales, trading and research, as well as holding positions as a Managing Director and a member of the Management Committee. Mr. Jenkins currently serves on the Board of Trustees
of Babson College, as the Chairman of its Alumni and Development Committee and as a member of the Executive Committee of the Board.



G. KENNETH MOSHENEK is the President and Chief Operating Officer of Royster-Clark. Mr. Moshenek has served as President of
Royster-Clark since December 1997, has served as Chief Operating Officer since 1995 and was a director from August 1997 until April 1999. From August 1997 until April 1999 he served as Chief Investment Officer of Royster-Clark. Prior to that he held
several positions during his tenure with Royster-Clark including Senior Vice President of Sales and Marketing, from September 1994 until July 1995, Vice President and Divisional Sales Manager from 1992 until September 1994 and a Division Manager
from 1990 to 1992. Mr. Moshenek joined W.S. Clark & Sons, Inc. in 1981. Mr. Moshenek started his career in the fertilizer industry in 1976 when he joined Smith Douglass, Inc., a division of Borden. Mr. Moshenek currently serves on the Board
of Directors of The Fertilizer Institute and is a member of the Boards Executive Committee. He also serves as a member of the Board of Directors of the Foundation for Agronomic Research and holds board seats with other industry-related
associations.



PAUL M. MURPHY is the
Chief Financial Officer of Royster-Clark. In August 2002 Mr. Murphy was appointed Chief Financial Officer after the resignation of Walter R. Vance as Managing DirectorFinance. Mr. Murphy has eleven years experience with Royster-Clark
serving as Managing DirectorFinancial Planning (1999-2002), Vice PresidentPlanning and Analysis and Secretary (1996-1999) and earlier as a Divisional Controller and in other administrative capacities. Mr. Murphy is a Phi Beta Kappa
graduate of Dartmouth College and holds advanced degrees from Harvard University and from the University of Madrid, Spain. He began his business career in 1969 at General Electric where, after graduation from the Financial Management Program and
service on the corporate audit staff, he rose to become the lead finance and accounting manager for GEs Information Services business in Europe. In 1975 Mr. Murphy was awarded the Certificate in Management Accounting (CMA) by the Institute of
Management Accounting. From 1981 until 1983, Mr. Murphy served as European Controller for Mohawk Data Sciences based in Brussels and from 1983 through 1987 he was CFO at XTEC Computer Systems based at Eindhoven in the Netherlands. From 1987 until he
joined Royster-Clark in 1992, Mr. Murphy worked as a free-lance consultant and software developer and served as the CFO at a start-up specialty food company.



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RANDOLPH
G. ABOOD is a Director of Royster-Clark and has been a Director of Royster-Clark Group since January 1999. Mr. Abood is a self-employed attorney, and from 1994 until 1998, Mr. Abood served as General Counsel for Royster-Clark. From 1976 until
1996, Mr. Abood practiced law with the firm of Satterlee Stephens Burke & Burke LLC and its predecessor firm. He became a partner of the firm in 1983 and head of its tax department. Mr. Abood is also the manager and owner of The Ninigret Group,
L.C., a Utah limited liability company that develops, constructs and co-owns real estate, including Ninigret Park, a 585 acre business park in Salt Lake City. Mr. Abood also serves on the Board of Directors of Equity Oil Company, which stock is
traded through NASDAQ, and is President and Director of the Cliff Club Owners Corporation of Snowbird, Utah.



CHARLES E. CORPENINGis a Director of Royster-Clark and has been a Director of Royster-Clark Group since March 2000. Mr. Corpening
is a Partner with CitiGroup Venture Capital Equity Partners, L. P. since 2001. He has also serves as vice president of Citicorp Venture Capital Ltd. (CVC) since 1994. Prior to joining CVC, Mr. Corpening was with Roundtree Capital
Corporation, a private investment firm, the Rockefeller Group and the investment-banking department of Paine Webber, Inc. Mr. Corpening serves on the board of directors of Fasten Tech Inc., MSX International, Inc. and Pursell Industries, Inc.



THOMAS F. McWILLIAMS is a Director of
Royster-Clark and has been a Director of Royster-Clark Group since January 1999. Mr. McWilliams is a Managing Director of Citicorp Venture Capital Ltd. and has served on its Investment Committee since 1984. He is also a Vice President and a member
of the Investment Committee for 399 Venture Partners, Inc. He serves on the Boards of Ergo Science and MMI Products, Inc., along with various other companies which have no public securities outstanding. Mr. McWilliams served as a director of Rax
Restaurants when it filed for bankruptcy in 1996.



Other key employees include:



|Name                 |  | Age |  | Position                                               
|-------------------- |  | --- |  | -------------------------------------------------------
|Max Baer             |  | 70  |  | Sr. Managing Director, International                   
|Kenneth W. Carter    |  | 57  |  | Managing Director, Human Resources                     
|John Diesch          |  | 45  |  | Managing Director, Nitrogen Division                   
|Joel F. Dunbar       |  | 54  |  | Managing Director, Controller                          
|Gary L. Floyd        |  | 48  |  | Managing Director, Crop Protection and Seed            
|Michael J. Galvin    |  | 39  |  | Managing Director, Credit and Farm Financing           
|Larry D. Graham      |  | 50  |  | Managing Director, Rainbow Manufacturing               
|Greg Hutchison       |  | 45  |  | Managing Director, Logistics                           
|Robert L. Paarlberg  |  | 57  |  | Managing Director, Information Technology              
|R. Macon Parker III  |  | 55  |  | Managing Director, Asset Allocation                    
|J. Billy Pirkle      |  | 41  |  | Managing Director, Environmental, Health and Safety    
|Robert M. Rainey     |  | 43  |  | Managing Director, Sales and Marketing Western Division
|Brad Rivers          |  | 38  |  | Managing Director, Sales and Marketing Central Division
|Randy Springs        |  | 52  |  | Managing Director, Sales and Marketing Eastern Division
|Michelle J. Weathers |  | 47  |  | Managing Director, Materials Purchasing                



MAX
BAER is the Senior Managing Director- International. From July 2001 to the summer of 2002 Mr. Baer served as Senior Managing Director-Materials Purchasing. From 1999 to July 2001 he was served as Managing Director-Materials Purchasing. From
1995 until 1999, Mr. Baer served as Vice President of Materials Purchasing for Royster-Clark and as a director of Royster-Clark from 1997 to 1999. From 1992 until 1995, he served as Chief Purchasing Officer where he assumed leadership of
Royster-Clarks fertilizer materials procurement and conducted its international trading activities. Mr. Baer has worked in the fertilizer industry for 40 years.



KENNETH W. CARTER is the Managing Director of Human Resources. From 1997 to 1999, Mr. Carter served as
the Vice President of Human Resources for AgriBusiness. Prior to joining AgriBusiness, he served as



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Vice President of Human Resources from 1994 until 1997 for Sunbeam Outdoor Products and from 1990 to 1994 served as the Vice President of
Human Resources for Material Handling Systems, Inc. (a division of Litton Industries, Inc.).



JOHN DIESCH is the Managing Director, Nitrogen Division. From 1998 to 1999, Mr. Diesch served as the Vice President and General Manager of Nitrogen Production and Distribution for AgriBusiness.
He also served as the Manager for the Cincinnati, Ohio Nitrogen Plant and Nitrogen Terminals from 1996 until 1998 and joined Vigoro Industries, Inc. in 1991 as the Cincinnati, Ohio Plant Manager. Prior to joining Vigoro Industries, Inc., Mr. Diesch
held several positions in the chemical industry, including Plant Manager, Production Manager and Process Engineer. Mr. Diesch currently serves on the board of directors and treasurer of the Dubuque Area Labor Management Council.



JOEL F. DUNBAR is the Managing Director, Controller.
Mr. Dunbar was promoted to managing director in December 2002. From 1999 to 2002 Mr. Dunbar served as controller for Royster-Clark. Prior to joining Royster-Clark, Mr. Dunbar served as Controller for AgriBusiness from 1992 to 1999. Prior to 1992, he
has held varying management and accounting positions with AgriBusiness and its predecessors. Mr. Dunbar began his career in public accounting with Arthur Andersen.



GARY L. FLOYD is the Managing Director of Crop Protection and Seed. From 1992 to 1999, Mr. Floyd
managed Royster-Clarks Crop Protection business and served as the Vice President of Crop Protection and Seed from 1997 to 1999. He also served as a District Manager from 1990 to 1992 and Manager of Planning and Development, Crop Protection
from 1987 until 1990. Mr. Floyd began his career in the fertilizer and crop protection products industry as a North Carolina Agricultural Extension Agent in 1980 and joined Ciba-Geigys agricultural division in 1984 as a Sales Representative.
Mr. Floyd is Past President of the North Carolina Crop Protection Association and a member of the Southern and Midwest Crop Protection Association.



MICHAEL J. GALVIN is the Managing Director of Credit and Farm Financing. From 1996 until 1999, Mr. Galvin served as Vice
President and General Credit Manager of Royster-Clark. Prior to 1996, Mr. Galvin was a Vice President and Regional Market Manager for Centura Bank. Mr. Galvin began his career in 1985 as a national bank examiner with the Comptroller of the
Currencys office. Mr. Galvin has over 14 years experience in banking and credit. He is currently a member of the National Association of Credit Managers Atlantic Agricultural Conference.



LARRY D. GRAHAM is the Managing Director of Rainbow
Production. From 1996 until 1999, Mr. Graham was employed by AgriBusiness first serving as Senior Vice President with the Rainbow Division and then Senior Vice PresidentSales. From 1994 until 1996, he served as General ManagerRainbow.
Prior to 1994, he has served in various sales and sales management positions of increasing responsibilities with IMC Global, including Vice-President and General Manager, Area Manager, Area Sales Manager and Sales Supervisor. Currently
Mr. Graham is a director of the Fertilizer Industry Round Table.



GREG HUTCHISONis the Managing Director of Logistics. Mr. Hutchison joined Royster-Clark in January 2000. From 1994 to 1999, Mr. Hutchison served as the Manager of Logistics with Hydro-Agri North America in Tampa,
Florida. From 1981 to 1994 Mr. Hutchison worked for Shipyard River Terminal in Charleston, South Carolina.



ROBERT L. PAARLBERG is the Managing Director of Information Technology. From 1997 to 1999, Mr. Paarlberg served as Director of
Information Systems for AgriBusiness. From 1979 to 1997, he held various management and technical positions with AgriBusiness and its predecessors, including Infrastructure Architect, Manager of Financial Systems, Manager of Microcomputer and
Telecommunication Development and Senior Analyst. He has served on advisory boards to a number of technology publications.



R. MACON PARKER III is the Managing Director of Asset Allocation. Mr. Parker was promoted to the newly created position of Managing
Director of Asset Allocation in 2000. Mr. Parker joined the Company in



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1997 as a vice-president of marketing and has served in various roles in marketing, sales and administrative duties from 1999 to 2000. From
1985 to 1997 he held a position of sales representative for Western-Ag Minerals Company. Prior to 1985 he held several positions of increasing responsibility in several fertilizer industry related companies.



J. BILLY PIRKLE is the Managing Director of
Environmental, Health and Safety. From 1996 until 1999, Mr. Pirkle served as the Southeast Environmental Administrator for AgriBusiness. From 1990 to 1996 he served as Quality Control Coordinator and Safety Administrator for the Rainbow Division of
IMC Global. Prior to joining IMC Global, Mr. Pirkle served as Plant Manager for Simplex Nails from 1987 until 1990 and as the Quality Control Manager for Interface Flooring from 1985 until 1987.



ROBERT M. RAINEY is the Managing Director of Sales and
Marketing for the Western Division. From April 1999 to August 2000 Mr. Rainey served as Director of Sales in Illinois and Indiana. He served as Marketing Manager for AgriBusiness from 1996 to 1999. From 19851996 he served with AgriBusiness in
varying management and sales positions ranging from Wholesale Account Executive to Farmarket Manager to EHS Coordinator. Mr. Rainey began his career in 1982 as Agronomy manager with Cargill, Inc. in Northern Indiana. Mr. Rainey also serves on the
Board of Directors for the Agricultural Retailers Association.



BRAD RIVERS is the Managing Director of Sales and Marketing for the Central Division. From April 1999 to August 2000, he served as Director of Sales for the Southern Ohio Region. He served as Marketing Manager for AgriBusiness
from 1994 to 1999. Mr. Rivers began his career in 1982 working in various positions of increasing sales responsibility with Mid Ohio Chemical Company until acquired by AgriBusiness in 1994.



RANDY SPRINGS is the Managing Director Sales and
Marketing, Eastern Division. In 2000, Mr. Springs was promoted from Director of Sales for the state of South Carolina and the southeastern region of North Carolina, to his current position. From 1997 until 1999, he served as Sales Director for South
Carolina. Mr. Springs joined Royster Company (previous to the merger of Royster Company and W.S. Clark, Inc.) in 1979, serving as a retail location manager in Hemingway, South Carolina, until his promotion in 1997 to Sales Director.



MICHELLE J. WEATHERS is the Managing
Director of Materials Purchasing. In July 2001, Ms. Weathers was promoted from BuyerMaterials to her current position where she had served from January of 2000 until July of 2001. Ms. Weathers served as Account Manager for Indiana for
AgriBusiness from 1997 until January 2000. In 1997 when AgriBusiness purchased Hutson Co., Inc. she had served as Sales Supervisor of Northern Region since 1987.



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ITEM 11.EXECUTIVE COMPENSATION.



The directors do not receive any compensation for their services as directors or for expenses incurred attending meetings. Directors are
elected annually to serve until the next annual meeting or until their successors have been elected and qualified. The stockholders have entered into stockholders agreement governing the election of directors. The following table summarizes
the compensation paid or accrued for the fiscal year ended December 31 to our executive officers.



SUMMARY COMPENSATION TABLE



|Name and Principal Position                                   |  | Year           |  | Salary $                |  | Bonus $                 |  | Other Annual Compensation $ (1) |  | All Other Compensation $ (2) |            
|------------------------------------------------------------- |  | -------------- |  | ----------------------- |  | ----------------------- |  | ------------------------------- |  | ---------------------------- | -----------
|Francis P. Jenkins, Jr., Chairman and Chief Executive Officer |  | 2002 2001 2000 |  | 499,990 499,990 499,990 |  | 200,000 200,000 140,000 |  |                              |  | 51,800 51,800 101,800        | (3) (3) (3)
|                                                              |  |                |  |                        
|                                                              |  |                |  |                        
|                                                             
|G. Kenneth Moshenek, President and Chief Operating Officer    |  | 2002 2001 2000 |  | 349,981 349,981 349,981 |  | 75,000 75,000 100,000   |  |                              |  |                           |            
|                                                              |  |                |  |                        
|                                                              |  |                |  |                        
|                                                             
|Paul M. Murphy, Chief Financial Officer                       |  | 2002 2001 2000 |  | 160,577 144,168 115,000 |  | 40,000 40,000 25,000    |  |                              |  |                           |            
|                                                              |  |                |  |                        
|                                                              |  |                |  |                        
|                                                             
|Walter R. Vance, (4)                                          |  | 2002           |  | 113,338                 |  | 40,000                  |  |                                |  | 316,004                      |            
|Managing Director, Finance                                    |  | 2001           |  | 170,007                 |  | 40,000                  |  |                                |  |                             |            
|                                                              |  | 2000           |  | 170,007                 |  | 47,500                  |  |                                |  |                             |            



---

|(1) |  | The aggregate amount of other annual compensation in such fiscal year did not exceed the applicable threshold for disclosure except as note in note 3.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Includes employer provided group term life insurance available to all employees. Mr. Jenkins and Mr. Vance have additional items noted in notes 3 and 4
described below. Except where noted, the aggregate amount of All Other Compensation for the named executives did not exceed the applicable threshold for disclosure.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Includes $50,000 paid in 2002 and 2001 and $100,000 paid in 2000 for a life insurance policy described below. The payment of $100,000 in 2000 represented the life
insurance policy cost for 2000 and 1999. No payment was made in 1999.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Mr. Vance resigned all positions with the Company on August 22, 2002. Salary includes payments through August 31, 2002. All other compensation in 2002 includes
$314,464 in payments prescribed under the severance agreement and group term life insurance.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements



In 1999 Mr. Jenkins entered into an employment agreement with the Companys parent, Royster-Clark Group, and with the Company, to serve as Chief Executive Officer (CEO). The agreement
provides for an annual base salary of $499,990, subject to annual merit increases as determined by the Royster-Clark Group Board of Directors.



In addition to the annual base salary, Mr. Jenkins will be entitled to:



| |  |  | participate in an annual performance bonus plan based on individual criteria and/or executive incentive programs to be determined from time to time by the
Royster-Clark Group Board of Directors and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | receive standard company benefits provided to executive officers from time to time.
| | - |  | -----------------------------------------------------------------------------------



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In addition to
standard company benefits, Royster-Clark Group has agreed to provide up to $50,000 per year to Mr. Jenkins to obtain a life insurance policy for the benefit of his wife and family.



The term of Mr. Jenkinss agreement is five years subject to automatic renewal for successive one-year
terms unless, in each case, either the executive or the Company gives prior notice of non-renewal.



The employment agreement is terminable by Royster-Clark Group with or without cause. In the event that the employment agreement is
terminated without cause and provided that Mr. Jenkins complies with the confidentiality and non-competition covenants, he will be entitled to receive all payments due as base salary during the remainder of his employment contract term. Mr. Jenkins
is subject to a non-competition covenant during the term of his agreement and continues for two years after his agreement expires in April of 2004.



In 2000, Mr. Moshenek finalized an employment agreement with the Company. Mr. Moshenek is to serve as President and Chief Operating
Officer. The agreement for Mr. Moshenek provides for an annual base salary of $350,000, subject to annual merit increases as determined by the CEO of the Company.



In addition to the annual base salary, Mr. Moshenek will be entitled to:



| |  |  | Participate in an annual performance bonus plan based on individual criteria and/or executive incentive programs to be determined from time to time by the Company,
its Board of Directors or Royster-Clark Group Inc. and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Receive standard company benefits provided to executive officers from time to time.
| | - |  | -----------------------------------------------------------------------------------



The term of Mr. Mosheneks agreement expires in April of 2004, subject to automatic renewal for
successive one-year terms unless, in each case, either the executive or the Company gives prior notice of non-renewal.



The employment agreement is terminable by the Board of Directors with or without cause. In the event that the employment agreement is
terminated without cause and provided that Mr. Moshenek complies with the confidentiality and non-competition covenants, he will be entitled to receive all payments due as base salary during the remainder of his employment contract term. He is
subject to a non-competition covenant during the term of the agreement and continues for one year after his agreement expires in April 2004.



Mr. Murphy signed an employment agreement with the Company in December 1999. At the time of the signing of Mr. Murphys agreement, he
was to serve as Managing Director of Financial Planning. The provisions and terms of the agreement mirrors the provisions of Mr. Mosheneks described above except that Mr. Murphys agreement provides for an annual base salary of $115,000
subject to annual merit increases.



On August 22,
2002 the Company and Mr. Vance entered into a separation agreement which terminated his employment agreement which was entered into in 1999. Mr. Vance has ceased to be a Managing Director, chief accounting officer and treasurer of the Company and
Royster-Clark Group, Inc. The separation agreement provides for payments through August 2005 and includes non-interference and noncompetition convenants.



Royster-Clark Group and the Company expect to enter into employment agreements with other key employees in the future as needed.



Employee Benefits



Retirement Plans



The Company maintains a defined contribution Employee Savings
and Investment Plan (ESIP) covering substantially all full-time employees of the Company. Participants are allowed to contribute to the ESIP up to



68



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18% of their salary on a pre-tax basis, up to the maximum allowed under Internal Revenue Service regulations. The Company makes contributions
to the ESIP at the discretion of the Board of Directors. The Company also maintains three other defined contribution plans for union employees under collective bargaining agreements at seven locations covering approximately 215 employees. Company
contributions are based on the applicable provisions of each plan.



1999 Restricted Stock Purchase and Option Plan



Upon the acquisition of the Company by RCG, RCG created the 1999 Restricted Stock Purchase and Option Plan (herein referred to as the 1999 Plan). Under the terms of the 1999 Plan, 200,000 shares of RCG
common stock have been reserved for issuance in the form of restricted share grants to current and future employees of RCG or Royster-Clark. Shares issued under the 1999 Plan are subject to certain restrictions on transfer of shares including the
right of Royster-Clark Group to repurchase shares upon termination of a stockholders employment prior to the fifth anniversary of the closing, at a formula price. During the year ended December 31, 2000, 180,000 common stock shares were issued
under this plan at a price equal to the fair value at date of grant. No common shares were issued under this plan during the years ended December 31, 2002 and 2001. During the year ended December 31, 2002, 17,500 shares were redeemed in connection
to the resignation of Mr. Walter R. Vance, former chief accounting officer.



In addition, 35,820 shares of Common Stock, 13,290 shares of Senior Preferred Stock and 7,470 shares of Junior Preferred Stock have been reserved for issuance pursuant to the exercise of stock options
rolled over from the 1992 Stock Option Plan (herein referred to as the 1992 Plan) previously maintained by Royster-Clark. All options granted under the 1992 Plan were either cashed out at the merger consideration of $285 per share less the exercise
price under the 1992 Plan or exchanged for an option to purchase 5.5 shares of Common Stock, 2.0 shares of Senior Preferred Stock and 1.1 shares of Junior Preferred Stock at the same exercise price as under the 1992 Plan. At December 31, 2002,
the options described above are the only options vested and outstanding under the 1999 Plan. No options were issued or exercised during the years ended December 31, 2002, 2001 and 2000.



Stock Options



The following table lists as of December 31, 2002, the number of shares of common and preferred stock
underlying options held by the named executive officers and the value of unexercised in-the-money options:



|                              |  | Shares Acquired on Exercise |  | Value Realized          |  | Number of Shares of      |  |             |  |              
|----------------------------- |  | --------------------------- |  | ----------------------- |  | ------------------------ |  | ----------- |  | -------------
|                              |  |                             |  | Common Stock Underlying |  | Value of Unexercised    
|                              |  |                             |  | Unexercised Options     |  | In-The-Money Options (1)
|                              |  |                             |  | Exercisable             |  | Unexercisable            |  | Exercisable |  | Unexercisable
|Francis P. Jenkins, Jr.       |  |                            |  |                        |  |                         |  |            |  | $            
|G. Kenneth Moshenek           |  |                             |  |                         |  |                          |  |             |  |              
|Class A Common Stock          |  |                            |  |                        |  | 17,792                   |  |            |  |              
|Series A Preferred Stock      |  |                            |  |                        |  | 6,612                    |  |            |  |              
|Series B Preferred Stock      |  |                            |  |                        |  | 3,715                    |  |            |  |              
|Aggregate value of securities |  |                            |  |                        |  |                         |  |            |  | $            
|Paul M. Murphy                |  |                            |  |                        |  |                         |  |            |  | $            
|Walter Vance                  |  |                             |  |                         |  |                          |  |             |  |              
|Class A Common Stock          |  |                            |  |                        |  | 4,720                    |  |            |  |              
|Series A Preferred Stock      |  |                            |  |                        |  | 1,753                    |  |            |  |              
|Series B Preferred Stock      |  |                            |  |                        |  | 986                      |  |            |  |              
|Aggregate value of securities |  |                            |  |                        |  |                         |  |            |  | $            



---

|(1) |  | Because there is no public market for the Companys stock, management has used the original exercise prices to determine the value of the unexercised
in-the-money options. However, there can be no assurance that this methodology accurately reflects the intrinsic value of such options.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



69



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Board of Directors
Interlocks and Insider Participation



No
director has any direct or indirect material interest in or relationship with the Company other than stockholdings as set forth below in Item 12, Security Ownership of Beneficial Owners and Management and as related to their
position a director. No officer or other employee of the Company served on the board of directors of any other entity, where any officer or director of such entity also served on Companys Board.



Board Committees



The Company has no Audit, Nominating or Compensation
Committees. The Board of Directors (Board) as a whole performs the functions of such Committees.



Report on Executive Compensation



Management presented a proposal for the Board to evaluate concerning executive compensation during 2001. The Board has not made a decision concerning this issue during 2002. In the absence of a
governing policy, the Board determined compensation for the chief executive officer by taking into consideration Mr. Jenkins contribution to the management of the Company and to persons with comparable experience and responsibilities. Mr.
Jenkins, in his capacity as the Chief Executive Officer, was the sole executive officer who participated in the deliberations on executive compensation.



ITEM 12.SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS.



Principal Shareholders



All of the outstanding capital stock of the Company is owned by Royster-Clark Group. The following table provides information about the beneficial ownership of the Royster-Clark Group common and preferred stock as of the December 31,
2002 by (1) each person or entity who owns five percent or more of the common or preferred stock, (2) each of our directors who is a stockholder, (3) our Chief Executive Officer and the other executive officers named in ITEM 11 Executive
Compensation above who are stockholders, and (4) all of our directors and executive officers as a group.



70



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##### Table of Contents



|                                                                                                               |        | Number and Percent of Shares     |    
|-------------------------------------------------------------------------------------------------------------- | ------ | -------------------------------- | ---
|                                                                                                               |        | Royster-Clark Group Common Stock |    
|Name and Address of Beneficial Owners                                                                          |        | Class A (1)                      |    
|                                                                                                               | Number |                                  |    
|399 Venture Partners, Inc (3) 399 Park Avenue New York, New York 10043                                         |        | 299,761                          |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                              
|CCT Partners VI, L.P. (3)                                                                                      |        | 52,899                           |    
|399 Park Avenue                                                                                                |        |                                  |    
|New York, New York 10043                                                                                       |        |                                  |    
|                                                                                                              
|Francis P. Jenkins, Jr. c/o Royster-Clark, Inc. 1251 Avenue of the Americas Suite 900 New York, New York
10020 |        | 355,638                          |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                              
|G. Kenneth Moshenek                                                                                            |        | 59,727                           | (4)
|c/o Royster-Clark, Inc.                                                                                        |        |                                  |    
|999 Waterside Drive Suite 800                                                                                  |        |                                  |    
|Norfolk, Virginia 23510                                                                                        |        |                                  |    
|                                                                                                              
|Paul M. Murphy c/o Royster-Clark, Inc. 999 Waterside Drive Suite 800 Norfolk, Virginia
23510                   |        | 10,000                           |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                              
|Thomas F. McWilliams                                                                                           |        | 355,596                          | (5)
|c/o 399 Venture Partners, Inc.                                                                                 |        |                                  |    
|399 Park Avenue                                                                                                |        |                                  |    
|New York, New York 10043                                                                                       |        |                                  |    
|                                                                                                              
|Charles E. Corpening c/o 399 Venture Partners, Inc. 399 Park Avenue New York, New York 10043                   |        | 352,843                          | (6)
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                               |        |                                  |    
|                                                                                                              
|Randolph G. Abood                                                                                              |        | 35,925                           | (7)
|c/o Royster-Clark, Inc.                                                                                        |        |                                  |    
|1251 Avenue of the Americas Suite 900                                                                          |        |                                  |    
|New York, New York 10020                                                                                       |        |                                  |    
|                                                                                                              
|All directors and executive officers as a group (6 persons)                                                    |        | 817,069                          |    
|                                                                                                               |        |                                  |    



---

|(1) |  | All percentages do not give effect to the shares of Royster-Clark Group Class A issuable upon conversion of Royster-Clark Group Class B Common Stock. See 
Royster-Clark Group Common Stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Does not include shares of Royster-Clark Group Class B Common Stock issuable upon conversion of Royster-Clark Group Class A Common Stock. See 
Royster-Clark Group Common Stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | The general partner of CCT Partners VI, L.P. is the chairman of 399 Venture Partners, Inc.
|--- |  | ------------------------------------------------------------------------------------------

|(4) |  | Includes 17,792 shares of Common Stock, 6,612 shares of Series A and 3,715 shares of Series B Preferred Stock subject to options that are currently exercisable.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes the following: a) shares of Class A and B Common and Series A Preferred stock of Royster-Clark Group owned by 399 Venture Partners, Inc., of which Mr.
McWilliams is a managing director, all of which Mr. McWilliams disclaims beneficiary ownership; b) shares of Class A and B Common and Series A Preferred stock of Royster-Clark Group owned by CCT Partners VI, L.P., of which Mr. McWilliams is a
limited partner without the power to dispose of the securities; c) 2,936 shares of Class A and 10,045 shares of Class B Common stock owned by Alchemy, L.P. of which Mr. McWilliams is the general partner with the power to vote and dispose of the
securities and d) 3,870 shares of Series A Preferred stock owned by the Thomas F. McWilliams Flint Trust, Jeanne Blasberg, Trustee, of which Mr. McWilliams is beneficiary and has the limited ability to dispose of the stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Includes the following: a) shares of Class A and B Common and Series A Preferred stock of Royster-Clark Group owned by 399 Venture Partners, Inc., of which Mr.
Corpening is a vice president, all of which Mr. Corpening disclaims beneficiary ownership and b) shares of Class A and B Common and Series A Preferred stock of Royster-Clark Group owned by CCT Partners VI, L.P., of which Mr. Corpening is a limited
partner without the power to dispose of the securities.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes 13,308 shares of Common Stock, 4,925 shares of Series A and 2,769 shares of Series B Preferred Stock subject to options that are currently exercisable and
232 shares of Series B Preferred Stock owned by Ninigret Foundation, Inc. of which Mr. Abood is a member of its board of directors and has the right to vote these shares.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Royster-Clark Group Common and Preferred Stock



The Certificate of Incorporation of Royster-Clark Group
provides that Royster-Clark Group may issue 4,200,000 shares of common stock, divided into two classes consisting of 2,200,000 shares of Class A Common Stock and 2,000,000 shares of Class B Common Stock and 775,000 shares of series preferred stock.
The holders of Class A Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Except as required by law, the holders of Class B common stock have no voting rights. Under the
Certificate of Incorporation of Royster-Clark Group, a holder of either class of common stock may convert any or all of his shares into an equal number of shares of the other class of common stock; provided that in the case of a conversion from
Class B Common Stock, which is nonvoting, into Class A Common Stock, which is voting, the holder of shares to be converted would be permitted under applicable law to hold the total number of shares of Class A Common Stock which would be held after
giving effect to the conversion.



The Series A
and Series B Preferred stock outstanding does not have voting rights except as provided under Delaware law and except in certain limited circumstances (See note 3 to the consolidated financial statements).



In addition to the common stock and preferred stock, 399
Ventures holds a $10 million subordinated note of Royster-Clark Group that does not require cash interest payments. The total number of shares of Royster-Clark Group preferred stock outstanding as of the recapitalization the Company on April 1, 1999
and as of December 31, 2002 was approximately 682,014 shares.



ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.



None.



ITEM 14.CONTROLS AND PROCEDURES



During the 90-day period prior to the filing date of this report, the Companys management, including its Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Annual Report on Form 10-K has been made known to them in a timely fashion. There have been no significant
changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.





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PART IV



ITEM 15.EXHIBITS AND REPORTS ON FORM 8-K



(a) (1)    Financial statements:



The following consolidated financial statements are included in Part II, Item 8, of this Form 10-K:



| | Independent |  | Auditors Report
| | ----------- |  | ----------------

| | Consolidated |  | Balance Sheets as of December 31, 2002 and 2001
| | ------------ |  | -----------------------------------------------

| | Consolidated |  | Statements of Operations for the Years ended December 31, 2002, 2001 and 2000
| | ------------ |  | -----------------------------------------------------------------------------

| | Consolidated |  | Statements of Stockholders Equity for the Years ended December 31, 2002, 2001 and 2000
| | ------------ |  | ---------------------------------------------------------------------------------------

| | Consolidated |  | Statements of Cash Flows for the Years ended December 31, 2002, 2001 and 2000
| | ------------ |  | -----------------------------------------------------------------------------



(2)    Financial Statement Schedules:



Financial statement schedules required to be included in this
report are shown in Schedule II attached or in the financial statements and notes thereto included in Item 8 of this report or have been omitted because they are not applicable.



(3)    Exhibits:



|3.01  |  | Restated Certificate of Incorporation of the Company.                                                                                                                                                                                                                                                                                                                          
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.02  |  | Certificate of Amendment of Restated Certificate of Incorporation of the Company.                                                                                                                                                                                                                                                                                              
|3.03  |  | Amended and Restated Bylaws of the Company.                                                                                                                                                                                                                                                                                                                                    
|4.01  |  | Indenture dated as of April 22, 1999 by and among the Company, the Guarantors, and the United States Trust Company of
New York, as Trustee.                                                                                                                                                                                                                                    
|4.02  |  | Form of 101/4% First Mortgage Note Due 2009 (Included in Exhibit 4.01)                                                                                                                                                                                                                                                                                                         
|10.01 |  | Credit Agreement dated as of April 22, 1999 by and among the Company, the Guarantors, various lenders, DLJ Capital
Funding, as arranger and syndication agent, J.P. Morgan Securities Inc., as documentation agent and U.S. Bancorp Ag Credit, Inc., as administrative agent.                                                                                                  
|10.02 |  | Purchase Agreement dated April 15, 1999 among the Company, the Guarantors and the Initial Purchasers.
                                                                                                                                                                                                                                                                         
|10.03 |  | Supply Agreement dated as of April 22, 1999 among IMC Kalium Ltd., IMC-Agrico Company and the Company. Portions of
this exhibit have been omitted pursuant to a request for confidential treatment.                                                                                                                                                                            
|10.04 |  | Company Employee Savings and Investment Plan.                                                                                                                                                                                                                                                                                                                                  
|10.05 |  | Royster-Clark Group, Inc. 1999 Restricted Stock Purchase and Option Plan.                                                                                                                                                                                                                                                                                                      
|10.06 |  | Employment Agreement dated as of April 22, 1999 by and among Francis P. Jenkins, Jr., Royster-Clark Group, Inc. and
Royster-Clark, Inc.                                                                                                                                                                                                                                        
|10.07 |  | Master Conveyance Agreement dated as of April 22, 1999 by and among IMC Global Inc., the Vigoro Corporation, the
Company and the United States Trust Company of New York.                                                                                                                                                                                                      
|10.08 |  | Master Conveyance Agreement dated as of April 22, 1999 by and among IMC Global Inc., the Vigoro Corporation, the Company and the United States Trust Company of New York.                                                                                                                                                                                                      
|10.09 |  | Agreement for the Sale and Purchase of Assets among Royster-Clark, Inc. (RCI), American Crop Services,
Inc. (ACS) and Chickasaw Chemical Company, Inc. (CCC) dated as of January 27, 2000, as amended by an amendment to Asset Purchase amended by an Amendment to Asset Purchase Agreement among RCI, Royster-Clark Resources LLC, ACS
and CCC dated February 16, 2000. 
|10.10 |  | Form of Stock Purchase Agreement among Royster-Clark Resources, LLC, as Buyer, and the persons and entities identified
therein as Sellers, for the Shares of Alliance Agronomics, Inc. dated as of March 17, 2000.                                                                                                                                                             



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|10.11 |  | Form of Purchase Agreement between Royster-Clark Resources, LLC and G. Waddy Garrett dated March 17, 2000.
                                                                                                       
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12 |  | Agreement for the Sale and Purchase of Assets between Crop Builders, Inc., as Seller and Royster-Clark, Inc., as
Purchaser dated January 28, 2000.                                                                
|10.13 |  | Agreement for the Sale and Purchase of Assets between Armstrong Ag Center, Inc., as Seller and Royster-Clark, Inc., as
Purchaser dated January 28, 2000.                                                          
|10.14 |  | Amendment Agreement dated August 18, 2000 amending Credit Agreement.                                                                                                                                             
|10.15 |  | Second Amendment to Revolving Credit Agreement among Royster-Clark, Inc., various financial institutions, DLJ Capital
Funding., J.P. Morgan Securities, Inc., and U.S. Bancorp, Ag Credit, Inc.                 
|10.16 |  | Employment Agreement dated as of December 1, 1999 between Royster-Clark, Inc. and G. Kenneth Moshenek.
                                                                                                        
|10.17 |  | Employment Agreement dated as of December 1, 1999 between Royster-Clark, Inc. and Walter Vance.                                                                                                                
|10.18 |  | Form of Waiver and Consent dated May 6, 2002 under the Revolving Credit Agreement by and among Royster-Clark, Inc. and
various financial institutions.                                                            
|10.19 |  | Third Amendment to Revolving Credit Agreement among Royster-Clark, Inc., various financial institutions, DLJ Capital
Funding., J.P. Morgan Securities, Inc., and U.S. Bancorp, Ag Credit, Inc date March x, 2003. *
|10.20 |  | Employment Agreement dated as of December 1, 1999 between Royster-Clark, Inc. and Paul M. Murphy.
*                                                                                                                
|12.01 |  | Statement of Computation of Ratio of Earnings to Fixed Charges. *                                                                                                                                                  
|99.01 |  | Allowance for Doubtful Accounts-Royster-Clark, Inc. *                                                                                                                                                              
|99.02 |  | Certification of Periodic Financial Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section
1350, for the year ended December 31, 2002. *                                                 
|99.03 |  | Certification of Periodic Financial Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section
1350, for the year ended December 31, 2002. *                                                 



|(b) |  | Reports on Form 8-K  None
|--- |  | --------------------------



---

| |  | Incorporated by reference to Exhibit Nos. 3.01 to 3.03, 4.01 to 4.02, and 10.01 to 10.13 to Registration Statement on Form S-4 (Reg. No.: 333-81235) filed on April
19, 2000
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Incorporated by reference to Exhibit No. 10.14 to Form 10Q for the quarterly period ended June 30, 2000 (Reg. No.: 333-81235) filed on August 21, 2000
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Incorporated by reference to Exhibit No 10.15 to Form 10Q for the quarterly period ended September 30, 2000 (Reg. No.: 333-81235) filed on November 14, 2000
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Incorporated by reference to identically numbered exhibit to Form 10K for the annual period ended December 31, 2000 (Reg. No.: 333-81235) filed on April 2, 2001
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Incorporated by reference to Exhibit No 10.18 to Form 10Q for the quarterly period ended March 31, 2002 (Reg. No.: 333-81235) filed on May 14, 2002.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

|* |  | Filed herein.
|- |  | -------------



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SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



|Dated:    March 28, 2003 |  |  |  | ROYSTER-CLARK, INC.
|------------------------ |  |  |  | -------------------
|                        
|                         |  |  |  | By:                
|                         |  |  |  |                    



Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated



|Signature                             |  | Title                 |  | Date          
|------------------------------------- |  | --------------------- |  | --------------
|                                     
|By:    /s/    FRANCIS P.
JENKINS, JR. |  | Chairman of the Board |  | March 28, 2003
|Francis P. Jenkins, Jr.               |  |                       |  |               
|                                     
|By:    /s/    CHARLES E.
CORPENING    |  | Director              |  | March 27, 2003
|Charles E. Corpening                  |  |                       |  |               
|                                     
|By:    /s/    THOMAS F.
MCWILLIAMS    |  | Director              |  | March 26, 2003
|Thomas F. McWilliams                  |  |                       |  |               
|                                     
|By:     /s/    RANDOLPH G.
ABOOD      |  | Director              |  | March 27, 2003
|Randolph G. Abood                     |  |                       |  |               
|                                     
|By:    /s/    PAUL M.
MURPHY          |  | Chief Financial and   |  | March 28, 2003
|Paul M. Murphy                        |  | Accounting Officer    |  |               



SUPPLEMENTAL
INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT.



(a) (i)    No annual report is provided to the Noteholders
other than copies of Registrants Annual Report on Form 10-K



(a)(ii)    No Proxy Statement, form of proxy or other proxy soliciting material has been sent to any Noteholder with respect to any annual or other meeting of Registrants security holders.



75



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ROYSTER-CLARK, INC.



|CERTIFICATION |  | PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------



I, Francis P. Jenkins, Jr., Chief Executive
Officer of Royster-Clark, Inc. certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Royster-Clark, Inc.;
|-- |  | -----------------------------------------------------------------------



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



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



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



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



| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | (b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Dated:    March 28, 2003

By:

/s/    FRANCIS P. JENKINS,
JR.Francis P. Jenkins, Jr. Chief Executive Officer




76



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##### Table of Contents



ROYSTER-CLARK, INC.



CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Paul M. Murphy, Chief Financial Officer of Royster-Clark, Inc. certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Royster-Clark, Inc.;
|-- |  | -----------------------------------------------------------------------



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



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



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



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



| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the Evaluation Date); and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | (b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Dated:    March 28, 2003

By:

/s/    PAUL M. MURPHYPaul M. Murphy Chief Financial Officer






77