##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
    FORM 10-K     [X]
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 2004 OR  [  ]
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________ to ________ . Commission file number 0-26519 SEMINIS, INC. (Exact Name of Registrant as Specified in its Charter)
 Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    36-0769130
(I.R.S. Employer Identification No.)2700 Camino del Sol, Oxnard, California
(Address of Principal Executive Offices)
    
    93030-7967
(Zip Code)
 (805) 647-1572
(Registrants telephone number, including area code) Securities Registered
Pursuant to Section 12(b) of the Act:* Title of each class
    
    Name of each exchange on which registeredNone
    
    None
 Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.01 per share
(Title of Class) * The registrant filed a
registration statement on Form S-4 (Registration
No. 333-110506-04) effective pursuant to the Securities Act of
1993, as amended, on November 11, 2003. Accordingly, the
registrant files this report pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended and Rule 15(d)-1 of the
regulations thereunder. 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. [  ] Indicate, by check mark whether the Registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act). YES [  ] NO [X] The aggregate market value of
voting and non-voting common equity held by non-affiliates of the
registrant as of September 30, 2004, based on the price at which
the common equity was sold, was approximately $58,296,377. As of November 30,
2004, 64,333,205 shares of the registrants common stock,
$.01 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE None




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SEMINIS, INC. Form 10-K Annual Report
For the Fiscal Year Ended September 30, 2004 TABLE OF CONTENTS PagePART IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16Item 4A.
    
    Executive Officers of the Registrant
    
    
    16PART IIItem 5.
    
    Market Price of the
Registrants Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities
    
    
    18Item 6.
    
    Selected Consolidated Financial Data
    
    
    19Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 7A.
    
    Quantitative and
Qualitative Disclosures About Market Risk
    
    
    34Item 8.
    
    Financial Statements and Supplementary Data
    
    
    35Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    35Item 9A.
    
    Controls and
Procedures
    
    
    35Item 9B.
    
    Other Information
    
    
    35PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    36Item 11.
    
    Executive Compensation
    
    
    37Item 12.
    
    Security Ownership
of Certain Beneficial Owners and Management and Related Shareholder
Matters
    
    
    40Item 13.
    
    Certain Relationships and Related Transactions
    
    
    41Item 14.
    
    Principal Accountant
Fees and Services
    
    
    44PART IVItem 15.
    
    Exhibits, Financial Statement Schedules and Reports on Form 8-K
    
    
    45Exhibit Index
    
    
    46Signatures
    
    
    48Certifications
  2




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PART I 
 Item 1.Business OVERVIEW All references in this
Form 10-K to we, us, our,
the Company or Seminis refer to Seminis, Inc. We are the leading worldwide developer, producer and marketer of vegetable and
fruit seeds. We produce more than 60 species of vegetable and fruit seeds and
more than 3,500 vegetable and fruit seed products (which do not include tree
and citrus fruits). We market our seeds through four full-line brands 
Seminis, Asgrow, Petoseed and Royal Sluis  and five specialty and regional
brands. Since our formation in 1994, we have built a global presence through a series
of ten acquisitions. Through these acquisitions, we gained access to or
ownership of key technologies, patents and germplasm that have enabled us to
add developed and proven products to our portfolio and to enter new and
established markets. On September 29, 2003,
Fox Paine & Company, LLC, together with its affiliates and
co-investors (collectively, Fox Paine), consummated a
series of acquisition transactions whereby we became a privately held
company and Fox Paine became our majority shareholder. In connection
therewith, we repaid certain of our then outstanding indebtedness,
entered into a senior secured credit facility and issued senior
subordinated notes and paid in kind preferred stock (this series of
transactions is more fully described in Notes 2 and 3 of our
consolidated financial statements and is referred to throughout this
Annual Report as the acquisition transactions). We use seeds as the delivery vehicle for innovative agricultural technology. We
develop seeds designed to reduce the need for agrochemicals, increase crop
yield, reduce spoilage, offer longer shelf life products, create better tasting
foods and provide vegetables and fruits with better nutritional value for
consumers. We have what we believe is the largest vegetable and fruit germplasm
bank in the world. Our germplasm bank contains the hereditary information that
determines the characteristics of vegetables and fruits grown from our seeds.
This collection of seed characteristics is our key strategic asset and has been
developed through decades of cross-breeding to produce seeds known as hybrids
that yield plants with enhanced characteristics. We are creating the foundation to capture value from all participants in the
vegetable and fruit production and distribution chain, including growers,
distributors, processors, and retailers. Our strategy is to capture value by
marketing premium-priced seeds with quantifiable benefits and superior traits
directly to the parties along the distribution chain that can derive the most
value from these seeds. Participants in the field crop industry have
successfully implemented this strategy with respect to crops such as corn, soy
and cotton. In April 2001, we became the first vegetable and fruit seed
provider to employ the value capture strategy at the grower level by
successfully implementing price increases for our seeds. We have established a worldwide presence and global distribution system. We
market seeds in over 150 countries, have 53 research and development facilities
in 17 countries and territories and production sites in 25 countries. Our
worldwide presence allows us to remain close to local markets around the world,
adapt our products to distinct, local microclimates and meet the preferences of
local consumers. We were incorporated in 1999
as a corporation under Delaware law and we are the successor to
an Illinois corporation, Seminis, Inc. organized in 1994. Our
principal executive offices are located at 2700 Camino del Sol,
Oxnard, CA 93030-7967, and our telephone number is (805) 647-1572.
Our Internet address is www.seminis.com. We make available free of
charge on or through our Internet website our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the
Securities and Exchange Commission. INDUSTRY OVERVIEW Global Demand We believe a fundamental driver of the increase in demand for vegetables and
fruits is global population growth. The United Nations projects that world
population will increase from 6.3 billion people in 2002 to 8.9 billion people
in 2050. In developing countries, which will experience much of the growth,
vegetable and fruit consumption increased 228% from 1980 to 2001. During the
same period, worldwide consumption of vegetables and fruits increased 138%.
According to data provided by the FAO, (i) during the period from 1990 to 2000,
vegetable and fruit production (excluding tree and citrus fruits) grew at
approximately 3.3 times the rate of global population expansion and (ii) the
harvested acreage dedicated to vegetables and fruits (excluding tree and citrus
fruits) has increased approximately 3.2% annually during the period from 1990
to 2000, while overall agricultural harvested acreage has increased less than
0.3% annually during the same period. As the global demand for vegetables and
fruits increases, the demand for seeds to grow these crops is expected to
increase as well. Vegetables and fruits are among the most valuable
agricultural crops. According to USDA data, the average farmgate value per
hectare for vegetables and fruits (excluding tree and citrus fruits) was
approximately 11 times greater than the average farmgate value per hectare for
corn in the United States in 2000. Farmgate value refers to the revenue
generated by farmers selling their crops to distributors and retailers.
Worldwide vegetable seed revenue is projected to grow at a 4.8% compounded
annual growth rate from 2002 through 2006. The health and nutritional benefits that vegetables and fruits offer further
drive the demand for these products. Vegetables and fruits are valuable in
meeting basic nutritional needs and in preventing disease. Vegetables and
fruits have very little fat, are low in calories and contain vitamins and other
nutritional components. It is believed that diets high in vegetables and fruits
can protect against the risk of cardiovascular disease, stroke, diabetes,
iron-deficiency anemia and cataracts and can significantly reduce the risk of
cancer. Vegetable and fruit consumption has grown at a 4.2% compounded annual
growth rate from 1980 to 2001, and we 3




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expect the demand for vegetables and fruits to continue to increase as
consumers become more concerned with their own health and more aware of the
health and nutritional benefits of vegetables and fruits. Hybridization The development of seed crops takes place in several steps. The process begins
with trait selection  choosing plants that have desirable characteristics such
as high yield, nutritional content, flavor, size or natural resistance to a
certain disease. Trait selection requires an extensive pool of germplasm and
significant research and development. Seed companies produce both hybrid and open-pollinated seeds. Open-pollinated
seeds are pollinated by natural means and produce progeny with no significant
variation from their parent lines. These types of seeds maintain traits
indigenous to a specific parent line. In contrast, hybrid seeds are the first
generation progeny of two different parent lines. The progeny of hybrid seeds
possess hereditary characteristics of the parent lines and also contain
enhanced performance characteristics superior to the parent lines. However,
second generation seed produced by a hybrid will not inherit the enhanced
performance characteristics of its hybrid parent. Therefore, hybrid crop
growers generally purchase their seasonal seed requirements from seed companies
in order to maintain the benefits of hybridization. In fiscal year
2004, approximately 74.3% of
our net seed sales were hybrid seeds. Because growers can realize increased yields and enhanced performance from
hybrid seeds and because seed companies are the only source of hybrid seeds,
seed companies can typically demand a premium for the hybrid seeds they
produce. Virtually all vegetable seeds planted in the United States and Europe
are hybrids. Moreover, developing countries are beginning to recognize the
value of hybrids (including high yields and disease resistance) and are
beginning to plant hybrid seeds as opposed to open-pollinated seeds. New Opportunities In addition to an overall increase in the demand for vegetables and fruits, we
believe there will be an increase in demand for hybrid seeds for which growers
will pay a substantially higher price due to the increasing number of benefits
that hybridization can produce. These benefits include:  
    
    higher yields per acre,
    
    greater uniformity,
    
    greater resistance to pests, diseases and environmental conditions, and
    
    improved quality, flavor and nutrition. We believe all participants within the production and distribution chain,
including growers, distributors, processors, and retailers, will drive demand
for hybrid seeds. Growers:As the amount of arable land in the world decreases and the demand
for vegetables and fruits increases, we believe growers will pay a premium for
seeds that increase productivity. The vegetable and fruit growers
input-intensive cost structure makes growers particularly receptive to new
products like hybrid seeds that can reduce input costs such as fertilizer,
pesticides, and labor. Distributors:In the production process, products move from the grower to the
packer/shipper to the distributor and to the retailer, or products move
directly from the grower to the processor. Costs are added at each stage in the
distribution chain, reflecting both profit margin and product shrinkage due
primarily to spoilage. Reducing spoilage presents a clear opportunity for seed
companies to achieve premium pricing. Through traditional breeding and
biotechnology, we have developed new seed varieties with enhanced shelf-life
characteristics. Because these product enhancements can increase profitability
at each step in the distribution chain, all distribution chain participants
drive demand for these products. Processors:Vegetable and fruit processors freeze, dehydrate, make into paste
or can fresh vegetables and fruits into shelf-stable containers. Processors
either produce their own vegetables and fruits or contract for their production
with growers. A large portion of the costs associated with processing fresh
vegetables and fruits is the vegetable and fruit itself and the energy required
to freeze or heat the vegetable or fruit or to evaporate water. In addition,
processing can result in the loss or neutralization of flavor components. Accordingly, developing varieties of vegetable and fruit seeds with higher
yields and reduced processing requirements while maintaining flavor components
are important objectives for seed companies. 4




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Retailers:Direct consumption by the end consumer of vegetables and fruits in
the form that the farmer produces them facilitates premium pricing for higher
quality products. Consequently, retailers continuously seek new vegetable and
fruit products with desirable consumer qualities, including enhanced color,
texture, sweetness, taste and nutritional benefits, which may command a premium
price on the grocery store shelf. Industry Complexities In order to develop products in the seed industry, companies need access to a
broad germplasm bank and adequate capital to develop products over long periods
of time. The development of a broad germplasm bank requires the accumulation of
hereditary materials over a period of years. Germplasm is scarce, expensive and
must be refined to properly serve different markets. Furthermore, development
cycles can last five to 12 years prior to launching a commercially viable
product. Seed companies invest a considerable amount of capital in research and
development to maintain a full product pipeline. Additional complexities in the
seed industry include the need for global distribution, the difficulty of
building established brands and the challenge of achieving economies of scale
in mass production. COMPETITIVE STRENGTHS Leading Market Position We believe that we are the leading provider of vegetable and fruit seeds in key
regions including North America, Europe, Latin America, the Middle East and
South Korea. In 2001 and 2002, we held a leading position in many of the
regional markets for each of a wide variety of vegetable and fruit seeds,
including tomatoes, beans, onions, watermelons, cucumbers, radishes, sweet
peppers, lettuce, cabbage, spinach, cauliflower, squash and peas. Global Presence and Worldwide Distribution We have built a global presence through a series of ten acquisitions occurring
between 1994 and 1998, enabling us to:  
    
    gain access to key technologies, patents and germplasm collections,
    
    add developed and proven products to our portfolio, and
    
    enter new and established markets. We believe that through economies of scale in our global production and
distribution system, we will be able to leverage our brands and product lines
to increase sales and streamline costs. We currently market over 3,500
varieties of vegetable and fruit seeds in over 150 countries with production
sites in 25 countries. By geographically diversifying, we can develop and
produce seed varieties on a year-round basis, maximize yield, reduce inventory
requirements and better ensure adequate supplies of our products. Diverse Revenue Stream We have approximately 16,000 customers in over 150 countries and territories.
No customer accounted for more than 2.6% of our net seed sales in fiscal year
2004. Our ten largest customers accounted for approximately 13.0% of our net
seed sales in fiscal year 2004. Furthermore, our customer base includes
growers, distributors and dealers and is geographically diverse, with North and
Central America representing 35.1% of our net seed sales in fiscal year 2004,
and Europe, the Middle East and Africa representing 45.4% of our net seed sales
during the same period. Our product portfolio is also diverse, with no seed
variety accounting for more than 1.2% of our net seed sales in fiscal year
2004. Strength in Research and Development We are a leading innovator in the global vegetable and fruit seed industry. We
employ a staff of more than 611 full-time people employed in research and
development functions, including 120 individuals with Ph.D. and M.S. degrees,
who conduct a global research effort from 53 locations around the world. Many
of these research professionals are located in the same offices as our
marketing and production staff to facilitate collaboration between our research
teams and our sales, marketing and manufacturing departments and allow us to
tailor our development efforts to meet the unique needs of local markets. Over
the past four fiscal years, we have averaged approximately $49.7 million in
annual research and development spending, which we believe is significantly
higher than the research and development spending of other companies who
compete in the vegetable and fruit seed industry. 5




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Strength of Germplasm Bank We own what we believe is the largest vegetable and fruit germplasm bank in the
world. We view our collection of germplasm as our key strategic asset.
Germplasm is the hereditary information contained in our seeds that determines
the characteristics of vegetables and fruits, including:  
    
    input traits, such as resistance to pests and adverse weather conditions;
    
    system traits, such as long shelf life, reduced spoilage and enhanced processing capability; and
    
    output traits, such as crop yield, color, texture, flavor, ready-to-eat convenience and nutrition. Our germplasm bank includes over 1.5 million breeding lines developed from a
combined 600 years of worldwide breeding activity. We believe that the
combination of our germplasm bank and our research and development capabilities
is a competitive advantage in developing and marketing better products. Brand Strength and Long Operating History We market full lines of seeds under the Asgrow, Petoseed, Royal Sluis and
Seminis brands. The Asgrow, Petoseed and Royal Sluis brands have each been in
existence for over 50 years. We believe that Asgrow, Petoseed and Royal Sluis
are well recognized in the industry and in their markets for consistently
developing and marketing high quality seeds for most major vegetable and fruit
species. We also market seeds through five regional or specialty brands, which
are targeted to respond to the demands of local markets. We believe that our
brands rank among the leading brands worldwide in the vegetable and fruit seed
markets. Growing Demand for Our Products We believe that demand for our products will increase as world population and
health awareness grow. The United Nations projects that world population will
increase by 41.3% to 8.9 billion from 2002 to 2050. In addition, we believe
that increased awareness of the nutritional benefits of vegetables and fruits
will have a positive impact on the demand for our products. Vegetables and
fruits are valuable in meeting basic nutritional needs and in preventing
disease. We expect that the growing worldwide population and increasing health
awareness will drive continued growth in the vegetable and fruit market. BUSINESS STRATEGY Our business strategy is to focus on the following key initiatives: Continue Leadership in Product Development We intend to continue to produce innovative and value-added products to
increase revenue and improve cash flows. We plan to achieve this goal by
leveraging our germplasm bank and our research and development capabilities to
develop products that are profitable and that cater to local tastes and
preferences. We intend to continue to develop products that will meet the
demand for a growing population under the constraints of a declining amount of
arable land. 6




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Increase Revenue and Profitability Through Value Capture We are implementing the following product development and pricing strategies to
capture additional farmgate and retail value: Existing Products  
    
    Comprehensive and detailed market and product analysis to fully
understand existing product differentiation and market position
    
    Price adjustments based on product traits and competitive characteristics New Products  
    
    Focused research and development on differentiated seed products targeting high-value end markets
    
    New product launches at significant price premia to precursor products Consumer-Oriented Products  
    
    Development of new products that emphasize traits such as nutrition,
convenience and taste in response to consumer demand
    
    Marketing directly to vegetable and fruit distributors, processors
and retailers highly differentiated products with consumer-oriented
traits
    
    Pricing model that includes a seed price increase to the farmers
whose demand for the seed is dictated by the distributor, processor or
retailer, and a contractual royalty agreement with the distributor,
processor or retailer Leverage Our Global Production and Distribution System Because we grow and produce seeds all over the world, our portfolio of
production facilities and our network of growers reduce the effects of adverse
conditions in a given geographic region. We have the ability to shift
production to utilize different seasons/climates throughout the world to
accelerate product development. Our global distribution system enables us to
learn about and understand distinct farming communities throughout the world.
This specialized knowledge allows us to monitor and understand the local
markets and to develop products on a global basis for local preferences. We
will continue to gather market information for new product development and
expand our distribution system into new markets. OPERATING IMPROVEMENT INITIATIVES We have instituted a number of initiatives to improve our operating
performance: Optimize Global Research and Development In 2001, we focused on optimizing our global research and development
organization by consolidating our research based on categories of breeding
families. To implement this initiative, we:  
    
    eliminated product redundancies,
    
    aggregated and leveraged our previously decentralized global germplasm bank,
    
    developed a single product pipeline per market,
    
    enhanced regional and global teamwork,
    
    eliminated brand-based internal competition, and
    
    strengthened linkage to market opportunities by enhancing
cross-functional collaboration within our company from the development
of new products to the marketing of these products. These changes have enabled us to better align our research and development
efforts with the needs of customers in our end markets and to implement our
value capture strategy. 7




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Enhance Seed Supply and Inventory Control Management Inventory surplus resulting from competition and market changes, shelf life
expiration and overproduction represents an intrinsic risk in our business. In
1998, we began to design and implement proprietary systems and processes to
minimize surpluses and shortages, including the development of an in-house
forecasting program that we have implemented at the salesperson level. Over the
next several years we continued this design and implementation effort. In 2002,
we initiated a seed supply management program in order to minimize both
stock-outs and inventory surplus, and to optimize the location of world
production based on quality, time, cost and volume. We have also hired
inventory risk managers and a forecast accuracy team to ensure that our sales
and production forces meet their seed supply management objectives. We believe
these new tools and procedures have helped to reduce the forecasting volatility
inherent in our business and will minimize the level of normalized annual
inventory write-offs. PRODUCTS We currently market approximately 3,500 varieties of seeds within 60 species.
In fiscal year 2004, we sold approximately 74.3% of hybrid seed and 25.7% of
open-pollinated seed. The table below summarizes our fiscal years
2004, 2003 and 2002 net seed sales by
product family: Net Seed Sales by Product Family Percentage of

    Percentage of

    Percentage ofFiscal Year 2004

    Fiscal Year 2003

    Fiscal Year 2002Product Family
    
    Net Seed Sales

    Net Seed
Sales

    Net Seed
SalesSolanaceous (tomato, pepper, eggplant)
    
    
    28.6
    %


29.0
    %


30.0
    %Cucurbits (melon, cucumber, pumpkin, squash)
    
    
    22.5
    




23.0
    





23.2Large Seed (beans, peas, sweet corn, okra)
    
    
    15.7
    




16.0
    





15.0Brassica (broccoli, brussels sprouts, cabbage,
cauliflower, bok choy, chinese cabbage, radish)
    
    
    12.7
    



13.0
    




11.8Root and Bulb. (onion, leek, beet, carrot)
    
    
    10.9
    



10.0





10.6Leafy and Other (lettuce, spinach, celery)
    
    
    9.6
    


9.0



9.4Total
    
    
    100.0
    %


100.0    %



100.0    %
 The following are several examples of our strongest performing products:  
    
    Hybrid Sweet Pepper (North and Central America)  Represented 1.2% of
our net seed sales in fiscal year 2004 ($5.9 million). This product
provides to growers high quality fruits with high yields, and resistance
to local bacterial diseases, and adapts well to its environment.  
    
    Hybrid Processing Tomato (Primarily in Southern Europe)  Represented
1.1% of our net seed sales in fiscal year 2004 ($5.8 million). This
product is attractive to growers because of its propensity for higher
yield, adaptability and high processing quality.  
    
    Bean Variety (North America, Europe, and North Africa)  Represented
1.0% of our net seed sales in fiscal year 2004 ($5.1 million). This
product is attractive to growers because of its high yield, adaptability
and quality. 8




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Sales and Marketing We sell our products worldwide using a wide range of distribution strategies
involving direct sales, dealers, distributors and importers. Largely driven by
local market needs, our distribution strategy for each geographic region is
designed to maximize the sales penetration of our products. Our net seed sales for the
fiscal years 2004, 2003 and 2002 were $507.4 million, $461.0 million and $432.3 million,
respectively, and their percentages to net sales were 96.5%, 96.6% and
95.5%, respectively. Our product sales are widely diversified geographically, with Europe
representing the largest percentage of total sales outside of North and Central
America. The table below illustrates the geographic diversification of our
worldwide seed sales during fiscal year 2004, 2003 and 2002. Net Seed Sales by RegionFiscal Year 2004
    
    Percentage of
    
    Fiscal Year 2003
    
    Percentage of
    
    Fiscal Year 2002
    
    Percentage ofNet Seed Sales
    
    Fiscal Year 2004
    
    Net Seed Sales
    
    Fiscal Year 2003
    
    Net Seed Sales
    
    Fiscal Year 2002Geographic Region
    
    (in millions)
    
    Net Seed Sales
    
    (in millions)
    
    Net Seed Sales
    
    (in millions)
    
    Net Seed SalesNorth and Central America
    
    $
    178.0
    
    
    
    35.1
    %
    
    $
    166.0
    
    
    
    36.0
    %
    
    $
    165.7
    
    
    
    38.3
    %Northern, Eastern, and Southern
Europe, Middle East and Africa
    
    
    230.4
    
    
    
    45.4
    
    
    
    200.9
    
    
    
    43.6
    
    
    
    170.0
    
    
    
    39.3South America
    
    
    32.0
    
    
    
    6.3
    
    
    
    30.1
    
    
    
    6.5
    
    
    
    31.7
    
    
    
    7.4Asia Pacific
    
    
    52.9
    
    
    
    10.4
    
    
    
    49.8
    
    
    
    10.8
    
    
    
    54.9
    
    
    
    12.7West Asia
    
    
    14.1
    
    
    
    2.8
    
    
    
    14.2
    
    
    
    3.1
    
    
    
    10.0
    
    
    
    2.3Total
    
    $
    507.4
    
    
    
    100.0
    %
    
    $
    461.0
    
    
    
    100.0
    %
    
    $
    432.3
    
    
    
    100.0
    %
 While approximately 39.0% of our net seed sales in fiscal year 2003 were made
directly to growers, we also foster close relationships with dealers and
distributors. Where there is a market need, we use these dealers and
distributors as an outside direct sales force. Dealers and distributors enable
our products to reach growers in areas where there are geographic or other
constraints on direct sales efforts. We are highly selective in choosing the
dealers and distributors that represent our brands. We select dealers and
distributors based on shared vision, technical expertise, local market
knowledge and financial stability. In addition, we build dealer/distributor
loyalty through an emphasis on service, access to breeders, joint trials,
ongoing training and extensive promotional material support. No single dealer
or distributor accounted for greater than 2.6% of our total sales in fiscal
year 2004. Product Development We rely heavily on plant breeding supplemented with molecular and cellular
technology to create new product innovations. We focus our internal product
development activities on products that are likely to have practical market
applications, create significant market value, command premium pricing and
capture leading local market share. We currently own or co-own 63 patents (issued and allowed) and have 77 patents
pending in such areas as varieties, germplasm, virus resistance, product
quality, breeding technology, gene expression, cell selection and resistance
genes. A total of 7 patents were issued and 13 new patent applications were
filed in fiscal year 2004, with 12 patents issued and 13 new patent applications
filed in fiscal year 2004 and one patent issued and 1 new patent application in
the running fiscal year 2005. In addition, we have protected more than 385
varieties under plant variety protection laws and we have more than
245 applications for plant variety protection pending. Our new product development efforts utilize plant breeding, proprietary
technology, biotechnology, molecular and cell biology and plant pathology to
introduce innovative products to the marketplace in an efficient and
cost-effective manner. We augment our internal product development efforts
through technological alliances with leading companies, research institutions
and universities. We believe that our internal research and development
capability and access to innovative technology, coupled with our extensive
germplasm resources, position us to best meet the changing demands and
preferences of growers and end-consumers and increase our penetration in the
value chain in the vegetable and fruit industry. During fiscal year 2004, our new product sales (products launched commercially
in the last 3 years plus the current year and products in development Phase 1
 adoption and Phase 2  demonstration) represented approximately 20% of
revenue. 9




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Product Development Platform We conduct research and development activities in 53 locations throughout the
world, including 15 in North America, 10 in Europe, 2 in the Middle East, 4 in
South and Central America and 22 in Asia. By diversifying our research and
development geographically, we are able to take advantage of local breeding
resources and many different microclimates. We are also better able to tailor
our products to local tastes and preferences. Each region of the world has particular requirements for the production of
vegetables and fruits. These requirements are driven by local environmental
conditions such as temperature or rainfall as well as local consumer preference
such as very sweet pink tomatoes in Japan or more acidic red tomatoes in Italy.
We maintain an internally developed, proprietary database that contains
information on local production and local consumer needs. We have compiled the
information in this database to enable our plant breeders and marketing and
sales personnel to more effectively design new products to meet the needs of
local markets. We incurred $51.1 million, $48.4 million, $44.3 million, $52.5 million and
$58.4 million of expenses related to research and development during fiscal
years 2004, 2003, 2002, 2001 and 2000, respectively. The research and
development expense in fiscal year 2004 was reduced by $2.5 million of
depreciation expense due to the impact of purchase accounting that was
discussed in the overview and outlook sections. We have an extensive research
and development staff with over 611 full-time people employed in research and
development functions, including over 120 professionals with Ph.D. or M.S.
degrees, including 78 plant breeders, 13 biotechnologists and 18 pathologists.
Our plant breeding staff is structured by groups of related crops (families).
Within each family, breeding is further structured by species to enhance
product development efficiencies and adequately respond to changing consumer
demands and preferences. All plant breeders have access to technology developed
from our biotechnology, biochemistry and pathology laboratories. We provide
incentives to our breeders to ensure that our new products are targeted at
viable markets. Germplasm We own what we believe is the largest vegetable and fruit germplasm bank in the
world. Our germplasm bank is our key strategic asset. Germplasm, our bank of
genetic information, is contained in millions of seeds. These seeds capture the
characteristics of vegetables and fruits grown for our customers in different
regions of the world, including input traits, such as resistance to pests and
adverse weather conditions and output traits, such as crop yield, color,
texture, flavor and ready-to eat convenience. This extensive germplasm resource
is extremely difficult to replicate, having been developed through more than
150 years of intensive research and development efforts. The merger of the Petoseed, Asgrow and Royal Sluis germplasm, plus the
additions of germplasm from Bruinsma, Hungnong, Choong Ang and other acquired
vegetable seed businesses, has created a very diverse germplasm resource. The
strength of our germplasm is the extensive diversity of materials available and
the genetic characteristics it contains. Our breeders utilize our germplasm, as
well as our proprietary technologies, to develop innovative products suitable
to the needs of different markets and conditions. Our extensive germplasm base
is the basis for continued development of innovative products and future
growth. Technology Our product development technology positions us as one of the leaders in
agricultural innovation. The time and capital required for the development of
new products represent the most formidable barriers to entry in the vegetable
and fruit seed industry. On average, it takes five to 12 years for a
proprietary variety to reach commercial viability. We employ biotechnology,
biochemistry, plant-to-plant genomics, tissue culture, dihaploids, cytoplasmic
male sterility and molecular markers to enhance our plant breeding programs and
improve the efficiency of our new product development efforts. Breeding We maintain significant breeding programs for 28 major vegetable and
fruit species that yielded nearly 100 commercial varieties and more than 500
pre-commercial products in fiscal year 2004. Our breeding strategy is to
create vegetable and fruit hybrids and varieties with combinations of traits
that are superior to principal competitor hybrids and varieties that meet or
anticipate the changing demands of the market. These improved traits provide
more economical production, improved yields, superior disease resistance,
environmental tolerance, longer shelf life, superior processing characteristics
and consumer benefits such as improved taste, appearance, nutrition,
ready-to-eat convenience and health benefits. Plant and Genetic Technology Through the use of our proprietary processes, we
enhance the efficiency of our breeding programs by enabling our breeders to
identify and incorporate important plant traits into breeding lines, while
significantly reducing the lead-time necessary to introduce commercially viable
products. These proprietary processes include the use of tissue culture,
dihaploid breeding, cytoplasmic male sterility, molecular markers, genomics and
biotechnology. 10




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Plant Pathology Vegetables and fruits are susceptible to diseases that can
affect yield as well as quality of the final product. In order for our plant
breeders to develop vegetable and fruit varieties resistant to diseases, we
believe we have established the largest plant pathology group in the industry
to identify and understand diseases important in vegetables and fruits. With 18
scientists in a network of laboratories throughout the world, we are currently
working on more than 200 different diseases, targeting those that have the
greatest impact on commercial vegetable and fruit production. As a result of these efforts, we lead the industry by providing what we believe
to be the widest range of disease resistant hybrids that require reduced or no
chemical applications while enhancing growers yield potential. Our plant
pathology resources also enable us to maintain rigorous quality control
standards. All seed-lots are screened for a wide variety of diseases that could
be carried on the seed. Lots that may be contaminated are treated to destroy
the disease organisms or are destroyed. Strategic Relationships We actively develop collaborations to acquire technologies applicable to
vegetables and fruits from private companies, research institutions and leading
universities. Either directly or through Savia, we have approximately 130
technology agreements providing access to germplasm, genes, technology, patents
and proprietary knowledge. We believe that our investment in technology
agreements and collaborations reduces the cost and risk normally associated
with new product development, as we utilize collaborators for most of our basic
research. We typically share the value created as a result of our agreements
and collaborations with our partners once a product reaches commercialization. Production and Operations We typically contract with seed growers to produce 85-90% of our seeds. The
balance is produced on company-owned farms. We provide the producer with male
and female parent lines for hybrid varieties and basic stock seed for open
pollination varieties, which are multiplied into commercial quantities. The
grower returns the seeds to one of our operations facilities for cleaning,
quality control, packaging and climate-controlled storage prior to sale to the
customer. Our seeds are produced both domestically and internationally in 25 countries in
the Northern and Southern Hemispheres to mitigate growing risks associated with
weather or disease in any one region and to replicate local growing conditions.
In the United States, we produce seeds in Arizona, California, Idaho, Oregon
and Washington through contract production with high-quality, dependable
growers. Seeds are produced internationally through subsidiaries in Argentina,
Brazil, Chile, France, Guatemala, Hungary, Italy, Mexico, New Zealand, Peru,
South Africa, South Korea, Thailand and the Netherlands and through exclusive
agents using our proprietary technology in Australia, Bolivia, China, Denmark,
Ecuador, India, Italy, Latvia, New Zealand, South Africa, Tanzania, Turkey and
South Vietnam. By geographically diversifying our production facilities, we can schedule
planting on a year-round basis, maximize yield, reduce inventory requirements
and better ensure adequate supplies. In addition, we manage the availability of
quality products throughout the world by maintaining production capabilities
for each variety in at least two locations in each hemisphere. For example, a
new variety with strong, unanticipated demand in the Northern Hemisphere can be
supplied by using additional production from the Southern Hemisphere. We control contract production globally by providing on-site management and
technical personnel to oversee the production process. We supply producers with
stock seed, specialized hybridizing techniques and specialized sowing and
harvesting equipment to ensure product quality. Production is split among
numerous species, ranging from hand-labor intensive hybrid crops such as
peppers and tomatoes, to machine planted and harvested seed crops such as peas,
beans and sweet corn. Product quantities are determined by long-term sales
forecasts, product safety stock in inventory and the production history for the
region and product. We have main processing facilities in California, Idaho, Washington, Chile,
Italy, Hungary, the Netherlands and South Korea and auxiliary processing
centers in France, South Africa, Thailand, Brazil, New Zealand and India. The location of our seed processing
centers is intended to facilitate the flow of seeds from production areas to
major markets. Our planning department utilizes a specially designed logistics
system, which integrates the planning functions in production, operations and
sales. The implementation of this system has provided real time information
about inventory from crop in ground to finished and available inventory for
sales over a four-year time horizon. 11




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Quality Assurance Quality Assurance (QA) oversees an extensive program that is designed to build
quality into the seed, beginning at the breeder level, continuing through
production, processing and sale of the commercial seed. This group conducts
extensive testing of our seed to confirm genetic purity and identity, both in
the field and through molecular techniques, fieldwork in molecular purity,
hybridity and identity analysis, as well as germination and physical purity
evaluations. We also test the general health of the seed. Our Seed Health labs
in Enkhuizen, Holland and Woodland, USA, have been recently accredited by the
NAKT and National Seed Health System, respectively, confirming the consistent
and industry wide procedures applied in our own testing. Over the last year, two groups were incorporated into the QA group to account
for process technology in both Production and Operations. These two groups
are focused in identifying, developing, implementing and improving technologies
that will contribute to the delivery of a high quality product. QA sets guidelines for the production and operations process, as well as
monitors the correct application of procedures. In addition, this group
interacts with our customers to ensure their satisfaction with our products and
services, gathering analyzing and disseminating quality-related information to
all our internal areas involved in the supply chain. As a result, we capitalize
on the experience and historical information available to us across regions and
functions. Seasonality The seed business is highly
seasonal. Generally, net sales are highest in the second fiscal
quarter due to increased demand from Northern Hemisphere growers who
plant seed in the early spring. We recorded 33.5% of our fiscal year
2004 net sales during our second fiscal quarter. We have historically
operated at a loss during the first and third fiscal quarters due to lower
sales during these quarters. Our results in any particular quarter
should not be considered indicative of the results for a full year.
For these reasons, a sequential quarter to quarter comparison is not
a good indication of our historical performance or of how we will
perform in the future. COMPETITION We face direct competition from technological advances by competitors such as
other seed companies, chemical and pharmaceutical companies and biotechnology
companies, many of which have substantially greater resources than we do. To
remain competitive, we expend approximately 10.0% of our revenue from seed
sales in research and development and strive to maintain technological
alliances. Our principal global competitors are Syngenta Seeds Inc., Sakata Seed Corp. and
Groupe Limagrain. We also face local competition in each region. We believe
that the key competitive drivers in the industry are proven performance,
customer support in the field as well as price and service. We believe that our
global and local presence gives us a leading role in the industry as well as a
competitive advantage. The economies of scale that we have and our ability to
quickly introduce new products to market provide us with a superior advantage
in the marketplace. INTELLECTUAL PROPERTY We use a wide array of technological and proprietary processes to enhance our
germplasm and product development programs. These technologies and proprietary
processes enable us to create novel product concepts and reduce the time to
market by, in many cases, two to five years. Our patents are
important to our business. We file for patents on technology
that is patentable, although we do not file for patents on all potentially
patentable technologies. We currently own or have pending patents in such areas
as virus resistance, product quality, breeding technology, gene expression,
cell selection and resistance genes, including 63 issued or allowed patents in
Australia, Canada, China, the European Union, France, Germany, Great Britain,
Italy, Japan, Mexico, the Netherlands, New Zealand, South Africa, South Korea
and the United States. We currently have 74 patent applications filed or
pending, in Argentina, Australia, Brazil, Canada, Chile, China, the European
Union, Hungary, India, Israel, Japan, Mexico, Morocco, New Zealand, Romania,
South Korea, Spain, Thailand, Turkey, the Ukraine and the United States.
Furthermore, we have 3 Patent Cooperation Treaty (PCT) applications pending
in which we assigned a number of designated countries. Based on the
international preliminary examination reports and considering the seed markets
of these countries, we will decide in which of those countries to enter the
national phase. Intellectual property rights protect our products and technologies from use by
competitors and others. Intellectual property rights of importance for us
include utility patents, plant variety protection (PVP) certificates under
plant variety protection laws, trademarks and trade secrets. The protection of
our germplasm and varieties through patents and PVP certificates is focused on
open-pollinated varieties, parental lines, traits and gene technologies related
to hybrid varieties, novel traits, novel breeding technologies, molecular
markers and disease resistance. In the United States, the European Union, Japan and many other countries, plant
varieties can be protected under laws which grant rights to plant breeders to
protect their seeds, including the right to prevent third parties from
importing or exporting, storing, processing, reproducing or selling protected
varieties within the territory of protection. We have protected 385 plant
varieties under plant variety protection certificates or plant variety right
certificates in the United States, the European Union and other countries, with
a total of more than 441 PVP certificates granted. Additionally, we have more
than 245 applications for plant variety protection pending, mostly in the
United States and the European Union. 12




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Apart from obtaining patent and PVP protection Seminis has developed a
corporate policy to protect its proprietary and confidential information such
as trade secrets. New corporate policies specifically addressed to each
functional area of Seminis and concerning the protection of our intellectual
property are being implemented in each of the different functional areas. The
objectives of the trade secret policy are to prevent disclosure of sensitive
information and to protect the companys legal interests if its trade secrets
are appropriated. We have recently consolidated the registration and maintenance of trademark
functions in our legal department. We own a large portfolio of trademarks,
including 650 registrations and applications in more than 99 countries
throughout the world. We intend to continue developing comprehensive intellectual property and
protection through utility patents including key varieties and parent lines,
PVP certificates and trade secrets. We will also aggressively expand protection
of our varieties and parent lines through plant variety rights. We will
continue to aggressively enforce all our intellectual property rights. REGULATION The developing, testing and commercialization of seed products are subject to
legislation and regulation in various countries. These regulations may govern
genetic exclusivity, environmental concerns, product viability, performance and
labeling. While regulation adds a cost of doing business to the industry, it
also provides protection for research and development investment in new
products, thereby encouraging continued new product development. Registration Process Variety registration varies from country to country, but generally each variety
must be phenotypically unique. That is, the size, color, maturity and quality
must be verifiably different from the varieties that already exist in the
market. Once a variety is registered it cannot be changed. In the United
States, the registration process is voluntary and determination that a variety
is unique is left to the breeder. In Europe and many other countries, the
registration process is regulated and determination of uniqueness is made in
official trials. Phytosanitary Certification The purpose of phytosanitary requirements is to prevent the spread of plant
diseases that can be carried on seeds or other plant tissue. Each seed
producing country has agricultural inspectors that check the seed crops for the
presence of specified diseases. After these crops are harvested, laboratory
tests are also conducted to ensure that the seeds are clean and free of
impurities. Having passed the inspection and lab tests, the department or
ministry of agriculture of the producing country issues a phytosanitary
certificate stating that the seeds are free of specified diseases. Importing
countries then allow the seeds to cross their borders on the basis of these
certificates. Labeling of Genetically Engineered Products There are no worldwide, accepted regulations for genetically engineered
products. Consequently, we are required to seek and obtain regulatory approvals
in each country where such seeds will be sold or where the harvested produce
will be exported. In the European Union and Switzerland, labeling of
genetically engineered products is mandatory, whereas in other countries, such
as Canada and the United States, labeling is required only if there is a
compositional change or a health risk associated with the product. Japan,
Australia and New Zealand now also require labeling. Other regions where we
sell products either have labeling requirements similar to the United States or
have no labeling requirements. We believe we comply with the labeling
requirements of each country in which we conduct business. Environmental Regulation Our worldwide operations are subject to a broad range of environmental, health
and safety laws, regulations and standards. These laws, regulations and

standards are related to, among other things, air emissions, waste water
discharges, the use and handling of hazardous materials, product labeling,
waste disposal practices, cleanup of environmental contamination and the use of
chemicals in our agricultural growing operations. Although we are unable to predict which environmental legal requirements may be
adopted in the future, we have not made and do not anticipate making material
expenditures with respect to environmental protection. The compliance cost
associated with environmental legal requirements, however, could result in
future additional costs to operations. 13




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EMPLOYEES As of September 30, 2004, we had approximately 2,910 employees. We believe we
have good relations with our employees. 
 Item 2.Properties In fiscal year 2000, we relocated to our new worldwide headquarters and
processing facility located in Oxnard, California. This facility is equipped
with some of the highest quality, state-of-the-art, seed processing equipment
and has been specifically designed for optimum storage conditions for vegetable
and fruit seeds, to further ensure high quality seed inventory. Within the
production process, we directly control significant, open-field production
capacity in Chile, Mexico and Peru on land predominantly owned by us. Our main
greenhouse production facilities are located in Mexico, on sites owned by us
and in Chile, the Netherlands and France, on sites owned by us, but contracted
out to third parties that grow seeds exclusively for us. We maintain 19 facilities throughout the world, equipped to handle activities
such as seed harvesting, cleaning, sizing, treating, testing and packaging. In
addition to our worldwide headquarters, we own and operate production and
processing facilities in Idaho, Washington, Chile, France, New Zealand, South
Africa, South Korea, Thailand, the Netherlands, Brazil, Italy, India and
Hungary. We conduct our research primarily at five company-owned research centers in
France, Italy, South Korea, the Netherlands and the United States. 
 Item 3.Legal Proceedings In mid-October 2003, Seminis was notified by the University of California at
Davis (UCD) that 20 grams of tomato seed donated to the university in 1996 by
Petoseed (acquired by Seminis) for research purposes was believed to be
bioengineered seed. UCD had grown a seed crop from this seed and distributed 30
samples (each including about 25 seeds) to researchers and horticulturists in
the United States and abroad over the past seven years. UCD, Seminis and the
recipients of this seed were unaware that these seeds carried a biotech trait.
Seminis and UCD have investigated this matter, and it is unclear when or where
the seeds were mislabeled. The biotech trait involved here, known as the PG-gene, had been cleared for
human consumption by the Food and Drug Administration in 1994, and a different
seed variety with this trait was planted commercially until 1999. Federal
regulators say theres no evidence that the seed in this instance was used for
anything other than research. Seminis and UCD worked with the U.S. Department of Agriculture, as well as
similar local agencies in the countries where seed was sent to determine what
happened and what actions, if any, needed to be taken. The USDA has now closed
its investigation with a minor fine paid by Seminis, and an update to Seminis
seed handling training. In January 2002, melon growers in Costa Rica notified us that our Dorado melon
seeds were infected with Watermelon Fruit Blotch. Growers who purchased the
infected Seminis seeds and growers whose crops were infected by the bacteria
that spread from crops grown with the infected Seminis seeds have claimed
damages against us. The claims related to those growers who purchased Seminis
seeds have been settled for approximately $5.8 million, of which approximately
$2.6 million was recovered under our errors and omissions insurance policy and
the remainder of the settlement was paid by us by July 2002. The claims related
to the growers with infected crops total approximately $4.7 million and these
claims are covered under our general liability insurance policy. We have
finalized settlement of all of these claims, as well as finalizing settlements
with our two general liability insurance carriers. As part of the formation of LSL PlantScience, a joint venture between Seminis
and LSL Biotechnologies, LSL Biotechnologies contributed certain agreements
between LSL Biotechnologies and a third party. These agreements contain
provisions that permanently restrict the third party from engaging in the
development or marketing of open field tomato seeds having long-shelf-life
characteristics in certain areas in the world, including North America. In
September 2000, the Antitrust Division of the U.S. Department of Justice filed
suit in the U.S. District Court for the District of Arizona against LSL
PlantScience, LSL Biotechnologies and Seminis to delete these restrictive
provisions. On March 29, 2002, the U.S. District Court dismissed without
prejudice the action against LSL PlantScience, LSL Biotechnologies and Seminis.
The U.S. Department of Justice appealed this ruling, but their appeal was
denied by a panel of the Ninth Circuit Court of Appeals on August 11, 2004.
The U.S. Department of Justice filed a Petition for Panel Rehearing and
Suggestion for Rehearing En Bank on September 23, 2004, requesting that the
panels decision be vacated, and the district courts order reversed (U.S. v.
LSL Biotechnologies,9th Cir., No. 02-16472, 8/11/04). In early 2000, we filed suit against Dietrich Schmidt, the former president of
Seminis and the current president of United Genetics, a competitor of ours,
United Genetics, and two former Seminis breeders, Ken Owen and Wei Ouyang, for
trade secret 14




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misappropriation and breach of contract. We settled and paid this litigation with Mr. Schmidt
and the other defendants and counterclaimants. On December 17, 2002 and January 4, 2003, four purported class action lawsuits
were filed relating to the acquisition transactions. Three of these actions 
Garry Firth v. Alfonso Romo Garza, et al., Civil Action No. 20085, Boris
Pozniak v. Alfonso Romo Garza, et al., Civil Action No. 20097 and Pablo Herranz
v. Seminis, Inc., et al., Civil Action No. 20105  were filed in the Delaware
Court of Chancery (New Castle County), while the fourth, Mark Rosales v.
Seminis, Inc., Case No. CIV216255, was filed in California Superior Court
(Ventura County). Since that time, a fifth case, Haven Capital Management v.
Alfonso Romo Garza, et al., Civil Action No. 20140 has also been filed in
Delaware. In February 2003, the Firth, Pozniak, Herranzand Haven Capitalcases
were consolidated into one proceeding entitled In re Seminis, Inc.
Shareholders Litigation, Consolidated C.A. No. 20140-NC, and the Haven Capital
complaint was designated as the operative complaint in the consolidated
lawsuit. That complaint names as defendants Savia, Seminis and its Directors.
The Rosales(California) complaint names as defendants Seminis and its
Directors. Both the Delaware consolidated action and the Rosalesaction purport
to be brought on behalf of Seminis common stockholders or their successors.
Both of these actions  which were brought prior to the public announcement of
Seminis entering into the acquisition transactions Agreements  allege that the
acquisition transactions, when consummated, would provide insufficient
consideration to Seminis common stockholders and allege that the defendants
breached their fiduciary duties in connection with the acquisition
transactions. The complaints sought a preliminary and permanent injunction to
enjoin the acquisition transactions and, since the acquisition transactions
have been consummated, rescission and damages. On September 24, 2003, the
parties reached a memorandum of understanding that settled all of the alleged
claims, final settlement papers were prepared, signed, approved by the court,
and entered. All settlement payments were distributed in fiscal year
2004. During the last months of fiscal year 2002, Seminis subsidiary in Spain sold
Boludo tomato seed to growers in the Canary Islands, Almeria, Murcia and
Granada areas of Spain. Subsequently, some plantings with this seed showed
symptoms of the bacteria, Clavibacter michiganses,which can be seed borne,
among other possible sources. Seminis has been conducting an investigation of
the seeds and until July 31, 2003, all Seminis seed used in these plantings
that had been tested, tested negative for the presence of the bacteria. Spanish
authorities requested an analysis of all seed lots sold in the Canary Islands.
On July 31, 2003, Seminis was notified that after analyzing 89 officially
sealed samples of batches of Boludo seed, a single seed batch tested positive
for the presence of the bacteria. Seminis believes that other factors that may
cause the disease were present at the time of the infection, and could be
responsible for, or contributing factors to, the presence of the bacteria and
damage to the crops. These factors include, but are not limited to: poor
sanitary practices in the growers fields (failure to remove debris from prior
harvests); bacteria from sources other than Seminis that remained in the
plantings from prior seasons; the practice of grafting, which can magnify the
effects of minor outbreaks; failure to properly rotate crops from season to
season; and third-party sources (different strains) of the disease that may
have been present. Seminis continues to investigate this matter vigorously, in
particular investigating the single positive test result, which is inconsistent
with the findings of all of the other independent laboratories test results
obtained from testing officially sealed batches samples of Seminis seed. Tomato
growers may initiate legal claims against Seminis alleging that Seminis seeds
were the source of the bacteria and claiming significant damages and Seminis
cannot predict the outcome of any such claim, if initiated. As part of its
customer relations initiatives, Seminis has entered into a
$2.9 million settlement of this
matter with growers in Almeria, and continues to work with its insurance
carriers and counsel to investigate and close out this matter in other
locations in Spain. We are involved from time to time as a defendant in various other lawsuits
arising in the normal course of business. We believe that no current claims,
individually or in the aggregate, will have a material adverse effect on our
business, results of operations or financial condition. 15




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Item 4.Submission of Matters to a Vote of Security Holders Not Applicable 
 Item 4A.Executive Officers of the Registrant The following table sets forth the names, ages and positions for each of
Seminis Directors and executive officers. Name
    
    Age
    
    PositionAlfonso Romo Garza
    
    
    54
    
    
    Chairman of the Board of Directors and Chief Executive OfficerW. Dexter Paine, III
    
    
    44
    
    
    Vice Chairman of the Board of DirectorsBruno Ferrari
    
    
    43
    
    
    Director, and President and Chief Operating OfficerSaul A. Fox
    
    
    51
    
    
    DirectorEugenio Garza Herrera
    
    
    48
    
    
    DirectorBernardo Jimenez
    
    
    51
    
    
    Director, Secretary and Executive Senior Vice President andChief Financial OfficerKevin Schwartz
    
    
    30
    
    
    DirectorCharles Edward Green
    
    
    61
    
    
    Senior Vice President, Research and DevelopmentMateo Mazal
    
    
    53
    
    
    Senior Vice President, Human Resources and InformationTechnologyGaspar Alvarez Martinez
    
    
    49
    
    
    Vice President, Finance and Worldwide Corporate ComptrollerJose Manuel Madero
    
    
    36
    
    
    Vice President, Supply-Delivery ChainJuliet L. Ream
    
    
    41
    
    
    Chief Legal Counsel and Assistant Secretary
 Alfonso Romo Garzais the Chairman of the Board of Directors and Chief
Executive Officer. Mr. Romo has been the Chairman of Seminis Board of
Directors since October 1995, and Chief Executive Officer of Seminis since
January 1, 2000 and President from April 2003 to August 2004. Mr. Romo has been
Chairman of the Board of Directors of Pulsar, a private holding company since
1984. Mr. Romo has also been the Chairman of the Board of Directors and Chief
Executive Officer of Savia, a holding company, since 1988, and the Chairman of
the Board of Directors of Seguros Comercial America, S.A. de C.V. since 1989.
Mr. Romo is also a Director of Cementos Mexicanos, S.A. de C.V., a cement
company, and Gruma S.A. de C.V., a corn flour and tortilla producer. W. Dexter Paine, IIIbecame Vice Chairman of the Board of Directors of
Seminis in September 2003. Mr. Paine was a co-founder of Fox Paine & Company,
LLC and has served as President since its inception in 1997. From 1994 until
founding Fox Paine & Company, Mr. Paine served as a senior partner of Kohlberg
& Company. Prior to joining Kohlberg & Company, Mr. Paine served as a general
partner at Robertson Stephens & Company. Mr. Paine has served as Chairman of
the Board of Directors of WJ Communications, Inc. since January 2000 and as a
Director of Alaska Communications Systems Group, Inc. since May 1999. Bruno Ferraribecame President and Chief Operating Officer in August 2004. Mr.
Ferrari has been a Director of Seminis since September 2003. He served as the
Executive Senior Vice President, Worldwide Commercial from March 2003 until
August 2004, and was Executive Senior Vice President, Europe, Middle East and
Africa of Seminis from November 2000 until March 2003. Mr. Ferrari was Senior
Vice President of Legal and Human Resources of Seminis from January 1997 until
November 2000. Saul Foxbecame a Director of Seminis in September 2003. Mr. Fox was a
co-founder of Fox Paine & Company and has served as Chief Executive Officer
since its inception in 1997. From 1984 until founding Fox Paine & Company, Mr.
Fox was at Kohlberg Kravis Roberts & Co. or KKR. Mr. Fox was a senior general
partner of KKR prior to retiring from the firm to form Fox Paine & Company.
Prior to joining KKR, Mr. Fox was an attorney at Latham & Watkins, a law firm
headquartered in Los Angeles, California. Mr. Fox has served as a Director of
WJ Communications, Inc. since January 2000 and as a Director of Alaska
Communications Systems Group, Inc. since May 1999. Eugenio Garza Herrerahas been a Director of Seminis since August 2002. He is
the Chairman of the Board of Directors and Chief Executive Officer of Xignux, a
private group of companies specializing in manufacturing and distribution of
electrical, automotive, metal works, chemical and food products. Mr. Garza is
also Chairman of the Board of Directors of Xignux Yazaki, Grupo Primex, Qualtia
Alimentos (a joint venture with Sara Lee Corporation), Prolec-GE (a joint
venture with General Electric Company) and Tisamatic Internacional (a joint
venture with Auburn Foundry, Inc.). Mr. Garza also serves on the Board of
Directors of ING Mexico, Grupo Lamosa, Grupo IMSA, the regional board of
directors of Banco Nacional de Mexico (BANAMEX), the Instituto Tecnologico y de
Estudios Superiores de Monterrey and the Universidad de Monterrey. He is also a
member of Consejo Mexicano de Hombres de Negocios (Mexican Businessmen
Council). 16




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Bernardo Jimenezhas been a Director of Seminis since October 1995 and became
our Chief Financial Officer and Secretary in September 2003. Mr. Jimenez has
been a Director of Savia since April 2000 and Chairman of the Board and Chief
Executive Officer of Bionova from October 1996 until November 2002. Kevin Schwartzbecame a Director of Seminis in September 2003. Mr. Schwartz has
been a vice president of Fox Paine & Company since 2002. Prior to joining Fox
Paine & Company, Mr. Schwartz worked at Fremont Partners, a private equity
investment firm, from 2000 until 2002; American Industrial Partners, a private
equity investment firm, from 1999 until 2000 and Goldman Sachs & Co., an
investment-banking firm, from 1997 until 2000. Dr. Charles Edward Greenserves as Senior Vice President, Research and
Development. Dr. Green has been Senior Vice President, Research and Development
since November 1999. He previously directed new technology development at
Seminis from 1996 to 1999. Mateo Mazalserves as our Senior Vice President, Human Resources and
Information Technology. Mr. Mazal has been Senior Vice President, Human
Resources and Information Technology since April 2003. He has been a Director
since January 2002. He was the Corporate Director of Marketing of Pulsar from
1995 to 2001; and was the Corporate Director of Marketing and Human Resources
of Pulsar from 2001 to 2003. Gaspar Alvarez Martinezserves as Vice President, Finance and Worldwide
Corporate Comptroller. Mr. Alvarez has been Vice President, Finance and
Worldwide Corporate Comptroller since December 2000 and was Worldwide Finance
Director of Seminis from January 2000 to November 2000. Prior to joining
Seminis, Mr. Alvarez served as a Director of Controlling and Financial Planning
at Savia from 1997 to 1999 and Finance General Manager at Savia from 1995 to
1997. Jose Manuel Maderoserves as Vice President, Supply-Delivery Chain. Mr. Madero
has been Vice President, Supply-Delivery Chain since April 2003, and was Vice
President of Seminis from August 2002 to April 2003. Mr. Madero was Managing
Director of Pastelerias Monterrey, a food services company, from April 2001 to
August 2002. He has also served in various management and project coordination
positions for Pulsar since January 1997. Mr. Madero is the first cousin of Mr.
Romo, our Chairman and Chief Executive Officer. Juliet L Reamhas served as Assistant Secretary since September 2003 and as
Chief Legal Counsel since November 2002. Ms. Ream was Senior Technology/IP
Counsel for Kinkos, Inc. from October 2000 to April 2002, and was Assistant
General Counsel for Candle Corporation, a software company from July 1997 to
October 2000. 17




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##### Table of Contents



PART II 
 Item 5.Market Price of the Registrants Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities MARKET INFORMATION FOR COMMON STOCK There is no public trading market for the Companys Common Stock. HOLDERS As of December 15, 2004, there were approximately 18 holders of our Common
Stock. DIVIDENDS We did not declare any cash dividends on our Common Stock for fiscal year 2004.
Our senior secured credit facility and the indenture governing our 101⁄4%
senior subordinated notes restrict our ability to declare or make distributions
on our Common Stock. Additionally, our senior secured credit facility and the
indenture governing our 101⁄4% senior subordinated notes restrict the ability
of Seminis Vegetable Seeds, Inc., our principal domestic operating subsidiary,
to pay dividends to us. Subject to contractual restrictions contained in the
indenture and our senior secured credit facility, any future determinations as
to the payment of dividends on our Common Stock will be at the discretion of
our board of directors and will depend on our financial condition, results of
operations and such other factors as the board of directors deems relevant.
See Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources  Senior Secured Credit
Facility and 101⁄4% Senior Secured Notes.
.. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information concerning equity securities of the
Company that are authorized for issuance under all compensation plans (in
thousands, except per share data). Plan Category
    
    Number (a)
    
    Weighted-Average (b)
    
    Number (c)Equity compensation plans
approved by security holders (d)
    
    
    4,538.1
    
    
    $
    3.10
    
    
    
    2,432.7
   (a)
    
    Number of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights.(b)
    
    Weighted-average Exercise Price of Outstanding Options, Warrants and
Rights.(c)
    
    Number of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans excluding Securities Reflected in Column (a).(d)
    
    The Seminis Inc. 1998 Stock Option Plan, as Amended and Restated, was
adopted by the Company in July 1999. RECENT SALES OF UNREGISTERED SECURITIES Not Applicable. 18




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##### Table of Contents



Item 6.Selected Consolidated Financial Data The following selected consolidated financial data should be read in
conjunction with our historical consolidated financial statements and related
notes, and Managements Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere herein. The selected historical consolidated financial data as of and for each of the
fiscal years ended September 30, 2000 through 2004 have been derived from our
audited consolidated financial statements. Historical results are not
necessarily indicative of the results to be expected in the future. As a result of the acquisition transactions (see Notes 2 and 3 to our
consolidated financial statements), which were consummated on September 29,
2003, the financial information below has been presented on a
predecessor/successor basis. The predecessor periods include the 364 days ended
(referred to herein as the twelve months ended) September 29, 2003, and the
fiscal years ended September 30, 2002, 2001 and 2000, while the successor
periods include the fiscal year ended September 30, 2004 and the one day ended
September 30, 2003. The acquisition transactions are accounted for under the purchase method of
accounting. In accordance with applicable accounting guidelines, the purchase
price paid by Fox Paine for Seminis common stock and the related purchase
accounting adjustments are pushed down and recorded in our financial
statements. As a result of these adjustments, financial information presented
for the predecessor and successor periods are not directly comparable. See
Managements Discussion and Analysis of Financial Condition and Results of
Operation  acquisition transactions. In February 2000, we initiated a Global Restructuring and Optimization Plan to
streamline our operations, increase utilization of our facilities and improve
efficiencies in our business. The key elements of this plan involved
reorganizing our ten legacy seed companies into four geographical regions,
selling and consolidating certain operation and production facilities, reducing
headcount, rationalizing our product portfolio, implementing an advanced
logistics management information system and divesting certain non-strategic
assets. In connection with this plan we recorded pre-tax charges to our income
from operations in fiscal year 2001. These charges are noted below and are
described in more detail in Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. Predecessor
    
    
    SuccessorTwelve
    
    
    
    
    
    
    FiscalMonths
    
    
    Day
    
    YearFiscal Year Ended
    
    
    
    
    
    Ended
    
    
    Ended
    
    EndedSeptember 30,
    
    
    
    
    
    Sep. 29,
    
    
    Sep. 30,
    
    Sep. 30,2000
    
    2001
    
    2002
    
    2003
    
    
    2003
    
    2004Income
Statement Data(1):Net sales
    
    $
    474.4
    
    
    $
    449.9
    
    
    $
    452.6
    
    
    $
    472.7
    
    
    
    $
    4.7
    
    
    $
    525.8Cost of goods sold(2)
    
    
    237.1
    
    
    
    232.1
    
    
    
    171.9
    
    
    
    179.7
    
    
    
    
    1.9
    
    
    
    235.7Gross profit
    
    
    237.3
    
    
    
    217.8
    
    
    
    280.7
    
    
    
    293.0
    
    
    
    
    2.8
    
    
    
    290.1Operating expenses:Research and development expenses(3)
    
    
    58.4
    
    
    
    52.5
    
    
    
    44.3
    
    
    
    48.3
    
    
    
    
    10.7
    
    
    
    51.1Selling, general and administrative expenses(4)
    
    
    222.6
    
    
    
    191.1
    
    
    
    174.9
    
    
    
    215.0
    
    
    
    
    0.9
    
    
    
    194.8Amortization of intangible assets(5)
    
    
    30.4
    
    
    
    28.0
    
    
    
    17.0
    
    
    
    16.3
    
    
    
    
    
    
    
    
    8.0Total operating expenses
    
    
    311.4
    
    
    
    271.6
    
    
    
    236.2
    
    
    
    279.6
    
    
    
    
    11.6
    
    
    
    253.9Gain on sale of assets
    
    
    10.0
    
    
    
    0.6
    
    
    
    6.0
    
    
    
    1.9
    
    
    
    
    
    
    
    
    4.3Income (loss) from operations
    
    
    (64.1
    )
    
    
    (53.2
    )
    
    
    50.5
    
    
    
    15.3
    
    
    
    
    (8.8
    )
    
    
    40.5Other income (expense):Interest expense, net
    
    
    (33.4
    )
    
    
    (39.1
    )
    
    
    (27.7
    )
    
    
    (32.8
    )
    
    
    
    1.2
    
    
    
    (38.6
    )Interest expense from preferred shares subject
to mandatory redemption
(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7.1
    )Foreign currency gain (loss)
    
    
    (5.4
    )
    
    
    1.7
    
    
    
    (2.2
    )
    
    
    1.4
    
    
    
    
    
    
    
    
    7.0Minority interest
    
    
    (1.2
    )
    
    
    (1.4
    )
    
    
    (1.2
    )
    
    
    (0.7
    )
    
    
    
    
    
    
    
    (1.3
    )Other income (expense), net
    
    
    (1.3
    )
    
    
    (2.5
    )
    
    
    (0.8
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    
    (4.4
    )Income tax benefit (expense)
    
    
    24.6
    
    
    
    (40.0
    )
    
    
    (2.5
    )
    
    
    (5.8
    )
    
    
    
    
    
    
    
    (12.4
    )Net income (loss)(7)
    
    $
    (80.8
    )
    
    $
    (134.5
    )
    
    $
    16.1
    
    
    $
    (24.1
    )
    
    
    $
    (7.6
    )
    
    $
    (16.3
    )
 19




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##### Table of Contents



Predecessor
    
    
    SuccessorFiscal Year Ended
    
    
    
    
    
    
    Fiscal Year EndedSeptember 30,
    
    
    
    
    
    
    September 30,2000
    
    2001
    
    2002
    
    
    2003
    
    2004Balance Sheet Data (at period end):Cash and cash equivalents
    
    $
    22.5
    
    
    $
    22.3
    
    
    $
    36.8
    
    
    
    $
    36.8
    
    
    $
    116.9Inventory
    
    
    333.3
    
    
    
    279.7
    
    
    
    272.5
    
    
    
    
    351.6
    
    
    
    328.4Total assets
    
    
    998.0
    
    
    
    835.4
    
    
    
    800.0
    
    
    
    
    707.2
    
    
    
    777.7Total long-term debt
    
    
    349.1
    
    
    
    316.4
    
    
    
    250.0
    
    
    
    
    401.3
    
    
    
    450.6Total debt
    
    
    369.3
    
    
    
    336.1
    
    
    
    278.5
    
    
    
    
    421.3
    
    
    
    461.5Mandatory redeemable stock:Preferred stock
    
    
    25.5
    
    
    
    27.5
    
    
    
    29.5
    
    
    
    
    39.3
    
    
    
    41.8Total stockholders equity
    
    
    450.9
    
    
    
    319.7
    
    
    
    337.5
    
    
    
    
    83.9
    
    
    
    72.8
   (1)
    
    The income statement data and the other data are based on financial
information from the income statement, which includes the operating
results for acquisitions and other transactions from the date thereof. As
a result of these transactions, the results of operations and consolidated
financial position thereafter reflect the effects of purchase accounting.(2)
    
    Cost of goods sold in fiscal years 2000 and 2001 included inventory
write-downs related to our Global Restructuring and Optimization Plan that
were in addition to the inventory provisions that we take in the ordinary
course of our business. In fiscal year 2000, we recorded non-cash
inventory write-downs of $18.4 million in connection with the
consolidation of our facilities and additional non-cash, inventory
write-downs of $24.5 million as a result of revised sales forecasts. In
fiscal year 2001, we recorded non-cash inventory write-downs of $58.2
million as a result of the rationalization of our product portfolio from
over 6,000 to just over 4,000 varieties of seed products and the
implementation of more stringent quality standards. In fiscal year 2004,
we recorded $47.4 million of non-cash inventory step-up amortization due
to purchase accounting. See note 3 to our consolidated financial
statements.(3)
    
    Research and development expenses in fiscal year 2000 included special
breeder bonuses in the amounts of $2.1 million, designed to retain the
services of breeder personnel. As a result of the acquisition
transactions and associated purchase accounting treatment, a one-time
$10.6 million in-process research and development charge has been recorded
in the successor period for the day ended September 30, 2003.(4)
    
    Selling, general and administrative expenses included the following
items:  (a)
    
    asset impairment related to an intangible asset resulted in a charge
of $6.4 million in fiscal year 2000;  (b)
    
    restricted stock award plan charges related to a 2001 executive
incentive program established for the specific purpose of incentivizing
senior management to meet performance targets. The plan primarily
awarded compensation in the form of shares of Seminis common stock when
specific targets were met over a period of six quarters commencing
March 31, 2001. The impact of this plan resulted in non-cash charges of $1.8
million and $5.8 million in fiscal years 2001 and 2002, respectively.
The impact of this plan also resulted in cash charges of $0.8 million
and $1.5 million in fiscal years 2001 and 2002, respectively. The
restricted stock award plan was terminated at the end of fiscal year
2002;  (c)
    
    management fees of $4.8 million in fiscal year 2004 were computed on
the basis of 1% of net sales of previous fiscal year, payable to Fox
Paine and Desarrollo Consolidado de Negocios, S.A. de C.V., an
affiliate of Mr. Romo, while $0.1
million of reimbursable expenses for Fox Paine were also recorded;  (d)
    
    severance charges related to our Global Restructuring and
Optimization Plan impacted fiscal years 2000 and 2001 by $14.0 million
and $12.0 million, respectively. A charge of $10.9 million associated
with severance of an executive and other employees was recorded in the
fiscal year ended September 30, 2003, of which $10.4 million was a cash
charge. In fiscal year 2004, a charge of $3.1 million was recorded
for employee severance;  (e)
    
    facility consolidation costs of $3.1 million and $4.3 million
incurred in fiscal years 2000 and 2001, respectively, were associated
with our Global Restructuring and Optimization Plan;  (f)
    
    in fiscal year 2000, we recorded $2.0 million of consulting fees in
connection with the development of a new management information and
product analysis systems and software program that was terminated in
that year as part of our Global Restructuring and Optimization Plan. In
fiscal year 2001, we incurred $3.3 million in advisory and consulting
fees. $2.0 million of these fees were paid to our lenders, their
advisors and legal counsel and our advisors and legal counsel in
connection with the restructuring of our credit facility, and $1.3
million of these fees were paid to several consultants who advised us on
certain aspects of our Global Restructuring and Optimization Plan. In
fiscal year 2002 we incurred $0.8 million of consulting fees related to
our Global Restructuring and Optimization Plan;  (g)
    
    in the twelve months ended September 29, 2003, we recorded $26.9
million of legal and professional fees related to the acquisition
transactions, a portion of which represented payments made by us to the
advisors and legal counsel to the special committee of Seminis Board of
Directors formed to evaluate the acquisition transactions. We also
incurred $4.3 million of expenses related to the buy-out of options
associated with the acquisition transactions. In the fiscal year ended
September 30, 2004, we recorded $0.6 million of legal and professional
fees related to the acquisition transactions,  (h)
    
    in the fiscal year ended September 30, 2004, we recorded a
non-cash charge of $1.1 million related to stock-based compensation to
management, which represented 10% of the restricted stock units
available when certain performance criteria are met; and  (i)
    
    a compensation charge of $0.6 million was recorded in
fiscal year 2004 as a special bonus related to a contractual
agreement of an employee loan.  (5)
    
    We ceased the amortization of goodwill due to our adoption of SFAS
No. 142, Goodwill and Other Intangible Assets in fiscal year 2002.(6)
    
    Reflects a charge related to interest expense from preferred shares
subject to mandatory redemption and accretion of warrants.(7)
    
    Net loss included an increase in income tax expense during fiscal year
2001 primarily related to a provision of a valuation allowance against the
deferred tax assets arising from net operating loss carryforwards. Net
income included a decrease in income tax expense during fiscal year 2002
primarily related to a $5.9 million U.S. tax refund and the utilization of
net operating loss carryforwards. 20




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##### Table of Contents



Item 7.Managements Discussion and Analysis of Financial Condition and Results
of Operations The following discussion and analysis should be read in conjunction with the
Selected Consolidated Financial Data and consolidated financial statements,
including the notes thereto, appearing elsewhere herein. The following
discussion and analysis contains certain forward-looking statements which are
subject to certain risks, uncertainties and contingencies, including, without
limitation, those set forth below, which could cause Seminis actual business,
results of operations or financial condition to differ materially from those
expressed in or implied by, such statements. RISK FACTORS You should carefully consider the following risks, together with all other information included in this annual report.
The realization of any of the risks set forth below could have a material adverse effect on our business, results of operations and future prospects:  
    
    We have experienced losses in the past and we may experience losses
in the future.
    
    The Company continues to invest in research and development in order
to enable us to identify and develop new products to meet consumer
demands. In fiscal year 2004, our investment in research and development
before purchase accounting impact represented 10.2% of net sales.
Despite investments in this area, our research and development may not
result in the discovery or successful development of new products, which
will be accepted by our customers.
    
    The Company may not have the ability to protect its intellectual
property due to the uncertainty of litigation and the ineffectiveness of
the laws in some of the countries that the Company currently has
operations, which could have a material adverse effect on our business,
results of operations or financial condition.
    
    A change in U.S. law protecting plant patents could limit or take
away patent protection for the Companys patented seeds, which could
have a material adverse effect on our business, results of operations or
financial condition.
    
    The Company faces substantial competition due to technological
advances by competitors such as other seed companies, pharmaceutical and
chemical companies and biotechnology companies. Many of these companies
have substantially greater resources than the Company. If a competitor
introduces a competitively successful product, it could take years to
develop a competitive seed variety, which could have a material adverse
effect on our business, results of operations or financial condition.
    
    The Companys failure to accurately forecast and manage inventory
could result in an unexpected shortfall or surplus of seeds, which could
have a material adverse effect on our business, results of operations or
financial condition.
    
    Extreme weather conditions, disease and pests can materially and
adversely affect the quality and quantity of seeds produced. There can
be no assurance that these factors will not affect a substantial portion
of the Companys production in any year and have a material adverse
effect on our business, results of operations or financial condition.
    
    Defective seeds could result in claims and negative publicity, and
the insurance covering claims may become unavailable or be inadequate,
which could have a material adverse effect on our business, results of
operations or financial condition.
    
    The Company owns production and processing facilities in numerous
countries throughout the world and markets its products worldwide.
Accordingly, fluctuations in currency rates may affect the Companys
operating results and net income.
    
    The Companys business is seasonal.
    
    Following the acquisition transactions, the Company has incurred substantially higher levels of debt.
    
    The Companys worldwide operation and products are highly regulated
in the areas of safety and protection of human health and the
environment. Compliance with these health and safety regulations can be
costly. The Company has made in this annual report and from time to time may make written and oral
forward-looking statements. Written forward-looking statements may appear in documents furnished or
filed with the Securities and Exchange Commission and in press releases. The Private Securities
Litigation Reform Act of 1995 contains a safe harbor for forward-looking statements. The Company
relies on this safe harbor in making such disclosures. All statements contained in this annual
report as to future expectations and financial results including, but not limited to, statements
containing the words plans, believes, intends, anticipates, expects, projects,
should, will and similar expressions, should be considered forward-looking statements subject
to the safe harbor. The forward-looking statements are based on managements current beliefs and
assumptions about expectations, estimates, strategies and projections for the Company. These
statements are not guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes or results may differ
materially from what is expressed or forecasted in such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements whether as a result of
future information, future events or otherwise. The risks, uncertainties and assumptions regarding
forward-looking statements include, but are not limited to, product demand and market acceptance
risks; product development risks, such as delays or difficulties in developing, producing and
marketing new products; the impact of competitive products, pricing and advertising; constraints
resulting from the financial condition of the Company, including the degree to which the Company is
leveraged; general economic conditions in the United States and in markets outside of the United
States served by the Company; government regulations; risks of loss of material customers;
environmental matters; and other risks described in the Companys Securities and Exchange
Commission filings. OVERVIEW Acquisition Transactions On September 29, 2003, the Company completed the acquisition transactions,
which have a significant effect on the Companys financial statements (see
Notes 2 and 3 to our consolidated financial statements). The Companys results for the fiscal year and one day ended September 30,
2004 and 2003, respectively, reflect the effects of the acquisition
transactions and are presented on a successor basis, whereas the results for
the twelve months ended September 29, 2003 and the fiscal years ended
September 30, 2002, 2001 and 2000 are presented on a predecessor basis. The
acquisition transactions are accounted for under the purchase method of
accounting. In accordance with applicable accounting guidelines, the purchase
price paid by Fox Paine for Seminis common stock plus related purchase
accounting adjustments are pushed down and recorded in Seminis financial
statements. 21




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##### Table of Contents



The 75.1% of deemed assets acquired and liabilities assumed in connection
with the acquisition transactions were originally recorded at their estimated
fair market values based on an independent appraisal and 24.9% of the
historical bases were carried over, however, these values were in excess of
the proportionate purchase price paid by Fox Paine for 75.1% of Seminis
common stock. Accordingly, the negative goodwill totaling $433.4 million was
allocated against the value of non-current assets on a proportionate basis.
The following summarizes the fair market values, subsequent adjustments and
the adjusted carrying values of the net assets acquired as of September 29,
2003: FMV
    
    24.9%
    
    Negative
    
    Adjusted BasisHistorical
    
    Of 75.1%
    
    Carryover
    
    Goodwill
    
    As ofBasis
    
    Acquired
    
    Basis
    
    Allocation
    
    September 29, 2003Current assets, excluding inventory
    
    $
    185,206
    
    
    $
    139,017
    
    
    $
    46,190
    
    
    $
    
    
    
    $
    185,207Inventory
    
    
    279,680
    
    
    
    283,107
    
    
    
    69,751
    
    
    
    
    
    
    
    352,858Property, plant & equipment
    
    
    166,943
    
    
    
    125,308
    
    
    
    41,635
    
    
    
    (106,589
    )
    
    
    60,354Goodwill
    
    
    106,056
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intangibles
    
    
    51,533
    
    
    
    331,693
    
    
    
    12,852
    
    
    
    (271,536
    )
    
    
    73,009In-process R&D
    
    
    
    
    
    
    58,547
    
    
    
    
    
    
    
    (47,929
    )
    
    
    10,618Other long-term assets
    
    
    18,463
    
    
    
    13,859
    
    
    
    4,605
    
    
    
    (7,338
    )
    
    
    11,126Current liabilities
    
    
    (466,697
    )
    
    
    (354,905
    )
    
    
    (116,392
    )
    
    
    
    
    
    
    (471,297
    )$
    341,184
    
    
    $
    596,626
    
    
    $
    58,641
    
    

    $
    (433,392
    )
    
    $
    221,875
 The $73.2 million increase in inventory value was expected to be expensed as
the inventory is sold over a 16 month period from the date of acquisition,
based on an estimated inventory turn. It was changed to 18 months based on
the actual inventory turn of fiscal year 2004. Intangible assets are
amortized on a straight-line basis over periods between five and forty years. At the consummation date of
the Acquisition Transactions, existing in-process research and
development projects were assessed. Projects were analyzed by stage
of development and assigned success rates based on our historical
experience of the probability that such projects would yield viable
products. The weighted average stage of completion for our in-process
research and development projects was 65%. The time and capital required
for the development of new products represent significant industry
complexities in the vegetable and fruit seed industry. Development
cycles can last five to 12 years for a proprietary variety to reach
commercial viability. In our forecasting model for
each project, cash flows from revenues forecasted in each period were
reduced by related expected expenses, capital expenditures and the
cost of working capital. The discount rates applied to a
projects cash flows were approximately 22%  24%, based on
the level of risk associated with a particular project and the
current return on investment requirements of the market. In-process research and development was immediately expensed in the results
of the successor entity for the one-day period ended September 30, 2003. The acquisition transactions resulted in the incurrence of additional
operating expenses in both the predecessor and successor companies. The main
components of these operating expenses were related to transaction fees for
obtaining an exchange and fairness opinion, and expenses for the buyout of
existing options, severance and restricted stock. OUTLOOK The change in the basis of assets and liabilities, resulting from the
acquisition transactions, will continue to impact the operating results of
the Company. During the first six months of fiscal year 2005, gross margins
will be lower, resulting from the amortization of the increased basis in
inventory. The increase in inventory basis of $73.2 million, resulting from
the purchase accounting adjustments made in connection with the acquisition
transactions, are reflected in the statement of operations through decreased
margins as the related inventory is sold. The balance of the related
inventory is expected to be sold by March 2005. Approximately over the next
eight years, operating expenses will benefit from an annual reduction in
depreciation expense of approximately $7.6 million, which will reduce
research and development, selling, general and administrative
expenses. Our future
results are expected to be adversely impacted by increased interest
expense as a result of higher average debt levels outstanding coupled with
higher interest rates. The Company will continue to execute its Value Capture Strategy and will
focus on opportunities, such as potential acquisitions, to achieve long term
growth targets. 22




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##### Table of Contents



RESULTS OF OPERATIONS The table below sets forth Seminis results of operations data expressed as a
percentage of net sales. Successor
    

    PredecessorFor the
    
    For the
    

    For the
    
    For theYear
    
    Day
    

    Twelve Months
    
    YearEnded Sep.
30,
    
    Ended Sep. 30,
    

    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003
    

    2003
    
    2002Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    

    
    100.0
    %
    
    
    100.0
    %Gross profit
    
    
    55.2
    
    
    
    59.6
    
    

    
    62.0
    
    
    
    62.0Research and development expenses
    
    
    9.7
    
    
    
    2.8
    
    

    
    10.2
    
    
    
    9.8In-process research and development
    
    
    
    
    
    
    225.4
    
    

    
    
    
    
    
    Selling, general and administrative expenses
    
    
    37.1
    
    
    
    18.3
    
    

    
    45.5
    
    
    
    38.6Amortization of intangible assets
    
    
    1.5
    
    
    
    0.9
    
    

    
    3.5
    
    
    
    3.8Total operating expenses
    
    
    48.3
    
    
    

    247.4
    
    

    
    59.2
    
    
    
    52.2Gain on sales of assets
    
    
    0.8
    
    
    
    
    
    

    
    0.4
    
    
    
    1.3Income (loss) from operations
    
    
    7.7
    
    
    
    (187.8
    )
    

    
    3.2
    
    
    
    11.1Interest expense, net
    
    
    (7.4
    )
    
    
    26.9
    
    

    
    (6.9
    )
    
    
    (6.1
    )Interest expense from preferred shares
subject to mandatory
redemption
    
    
    (1.3
    )
    
    
    
    
    

    
    
    
    
    
    Other non-operating income (expense), net
    
    
    0.3
    
    
    
    (0.1
    )
    

    
    (0.2
    )
    
    
    (0.9
    )Income (loss) from continuing operations
before income taxes
    
    
    (0.7
    )
    
    
    (161.0
    )
    

    
    (3.9
    )
    
    
    4.1Income tax expense
    
    
    (2.4
    )
    
    
    (0.4
    )
    

    
    (1.2
    )
    
    
    (0.5
    )Net income (loss)
    
    
    (3.1
    )%
    
    
    (161.4
    )%
    

    
    (5.1
    )%
    
    
    3.6
    %
 Year Ended September 30, 2004 Compared With Year Ended September 30, 2003 The results of operations for the year ended September 30, 2003, reflect the
combined historical results for the twelve months ended September 29, 2003
(predecessor) and the one-day ended September 30, 2003 (successor). Net Sales Net sales increased 10.1% to $525.8 million for the year ended September 30,
2004 from $477.4 million for the year ended September 30, 2003. All regions
reported higher sales this fiscal year compared to the previous fiscal year with

improved sales in tomato, cucumber, beans, and pepper seeds, generally reflecting a
higher level of prices for our products. In particular, North and Central
America, Europe and the Middle East regions experienced the highest increases
in net sales. During fiscal year 2004, our new products sales
(products launched commercially in the last 3 years plus the
current year and products in development
(Phase 1  adoption and
Phase 2  demonstration) represented
approximately 20% of revenue. The increase in net sales was also due to $22.1 million of favorable currency
fluctuations related to the strengthening of the Euro and South Korean Won
versus the U.S. Dollar during fiscal year 2004 compared to the prior fiscal
year. In constant dollars, stated at monthly average exchange rates for fiscal
year 2003, and excluding non-seed sales, net seed sales would have increased
5.3%. Gross Profit Gross profit decreased 1.9% to $290.1 million for the year ended September 30,
2004 from $295.8 million for the year ended September 30, 2003. Gross margin
was 55.2% and 62.0% for the years ended September 30, 2004 and September 30,
2003, respectively. The decrease was primarily due to the amortization of
$47.4 million of inventory step-up, under purchase accounting treatment related
to the acquisition transactions, which had a negative impact of 9.0% on the
Companys gross margin of fiscal year 2004, offset by an
approximate 5% price increase. Our new product sales as described in
net sales also contributed higher margins. The non-cash amortization charge will continue to
have a negative impact on the gross profit through March 2005. In the absence
of inventory step up charge, our gross profit would have improved due to higher
prices supported by higher sales level. Research and Development Expenses Research and development expenses increased 5.7% to $51.1 million for the year
ended September 30, 2004 from $48.4 million for the year ended September 30,
2003. This increase was primarily the result of approximately 5% increase in
cost of living adjustments, $2.2 million of currency fluctuation from research
and development expenses in Europe and South Korea during fiscal year 2004,
offset by a $2.5 million decrease in depreciation expense related to the impact of
the negative goodwill allocation as part of the acquisition transactions. As a
percentage of sales, research and development expenses for the fiscal year
ended September 30, 2004 decreased to 9.7% from 10.1% in the
prior fiscal year.
Investments in research and development are primarily related to plant
breeding, proprietary technology, biotechnology, molecular and cell biology,
and plant pathology in order to introduce innovative products to the
marketplace in an efficient and cost-effective manner. 23




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##### Table of Contents



In-Process Research and Development As a result of the acquisition transactions, a one-time $10.6 million
in-process research and development charge, which was determined by an
independent appraisal service, was expensed in the successor period for the day
ended September 30, 2003. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased 9.8% to $194.8 million
for the year ended September 30, 2004 from $215.9 million for the year ended
September 30, 2003. The $21.2 million decrease was primarily attributable to
expenses related to the acquisition transactions incurred in fiscal year 2003.
The main components of these acquisition expenses were related to $16.2 million
in transaction fees, $7.1 million in fairness opinion fees, $3.7 million in
exchange opinion fees, $4.3 million in expenses for the buyout of options,
$10.9 million in severance, and $3.7 million in stock compensation. Excluding
these acquisition transactions related expenses, selling, general and
administrative expenses in fiscal year 2004 would have increased by $24.8
million from fiscal year 2003. The increase in fiscal year 2004 was primarily
related to an approximate $8.1 million impact of currency fluctuations, $4.9
million of management fees, $3.1 million of severance expenses, $1.8 million of
expenses related to contractual professional services, $1.1 million of
non-cash compensation of restricted stock units, $0.6 million of compensation
charge related to an early retirement of an executive agreement, $0.6 million
of fees related to the acquisition transactions, and general cost of living
increases, offset by $5.1 million of lower depreciation expense related to the
impact of the negative goodwill allocation. As a percentage of sales, selling,
general and administrative expenses for the fiscal year ended September 30,
2004 decreased to 37.0% from 45.2% in the last fiscal year. Amortization of Intangible Assets Amortization of intangible assets decreased 51.1% to $8.0 million for the year
ended September 30, 2004 from $16.4 million for the year ended September 30,
2003. The decrease was primarily due to the purchase accounting impact to the
intangible assets basis and amortization period, resulting in a lower
amortization of $6.3 million in fiscal year 2004. Gain on the Sale of Assets The gain on sale of assets of $4.3 million for the year ended September 30,
2004 was primarily due to the sale of certain South Korean assets, a
company-owned house in California and a property in France. For fiscal year
2003, the gain on sale of assets of $1.9 was primarily due to the sale of
certain South Korean assets, a Salinas property and a company-owned house in
California. Interest Expense, Net Interest expense, net, increased 45.2% to $45.7 million for the year ended
September 30, 2004 from $31.5 million for the year ended September 30, 2003.
The increase was primarily due to higher debt levels with higher interest rates
and interest on the PIK preferred stock. Other Non-Operating Income (Expense), Net We had other non-operating income, including foreign currency gain, net, of
$1.4 million for the year ended September 30, 2004 as compared to other
non-operating expense, net, of $0.8 million for the year ended September 30,
2003. Other non-operating income, net, for the fiscal year ended September 30,
2004 consists primarily of foreign currency gain of $7.0 mainly from a United
States Dollar denominated loan in Europe, offset by $3.8 million write-down of
deferred loan fees resulting from the refinancing of the Companys term loan in
January 2004 and $1.3 million of minority interest expense. Other
non-operating expense, net, for the year ended September 30, 2003 primarily
consists of foreign currency gains of $1.4 million resulting from favorable
currency fluctuations in South America and Europe and a United States Dollar
denominated loan in the Netherlands, offset by $2.2 million of expenses from
the write-off of deferred financing fees related to the early re-payment of our
old syndicated credit facility and $0.7 million of minority
interest expense. 24




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##### Table of Contents



Income Tax Expense Income tax expense was $12.5 million or a 323.3% effective tax rate, for the
year ended September 30, 2004 and $5.8 million or a 22.6% effective tax rate
for the year ended September 30, 2003. The increase in the effective rate
during fiscal year 2004 as compared to the prior year was primarily the result
of non-deductible purchase accounting amortization and PIK preferred stock
interest expense incurred during fiscal year 2004, with no comparable expense
for the prior year. The tax valuation allowance and reserve for the year ended
September 30, 2004 decreased by $9.4 million. The decrease in 2004 was primarily
due to a reclassification of United States tax reserves of $6.6 million to the
income taxes payable account related to tax contingencies for federal and state
tax audits, the write-off of certain foreign tax credits totaling $2.6 million
and the partial utilization of $2.3 million of NOLs in the Netherlands which
had been fully reserved, offset by an increase to the valuation allowance of
$5.6 million for current year losses in the United States for which no benefit
has been recognized. In addition, in 2004, the Company reassessed the need for
a valuation allowance associated with remaining NOLs in the Netherlands. Based
on the trend of recent profits as well as projections of future taxable income,
the Company determined that it was more likely than not that this deferred tax
asset would be realized. Accordingly, the Company released $3.5 million of
previously established valuation allowance. Year Ended September 30, 2003 Compared With Year Ended September 30, 2002 The results of operations for the year ended September 30, 2003, reflect the
combined historical results for the twelve months ended September 29, 2003
(predecessor) and the one-day ended September 30, 2003 (successor). Net Sales Net sales increased 5.5% to $477.4 million for the year ended September 30,
2003 from $452.6 million for the year ended September 30, 2002. The increase
was due to $25.9 million of favorable currency fluctuations related to the
strengthening of the Euro and South Korean Won versus the U.S. Dollar during
fiscal year 2003 compared to the prior fiscal year, partially offset by a $2.0
million decrease reflecting the divestiture of a non-core business in January
2002. In constant dollars, stated at monthly average exchange rates for fiscal
year 2002, and excluding the sales of the divested and phased out non-core
businesses, net sales would have increased 0.3%. Despite a general seed price
increase in all regions in which we compete, net sales were partially affected
by a decrease in sales volume and product mix. This decrease was primarily due
to weaker sales in the Far East that were attributable to a reduction of
acreage for hot pepper varieties and demand for watermelon varieties and the
decrease of certain carrot and hot pepper sales in the NAFTA region. Gross Profit Gross profit increased 5.4% to $295.8 million for the year ended September 30,
2003 from $280.7 million for the year ended September 30, 2002. Gross margin
was 62.0% for the years ended September 30, 2003 and September 30, 2002. The
margin was positively impacted by general seed price increases in all regions
in which we compete, offset by the impact of product mix from the reduction of
certain high margin products in the Far East. Research and Development Expenses Research and development expenses increased 9.2% to $48.4 million for the year
ended September 30, 2003 from $44.3 million for the year ended September 30,
2002. The increase was primarily due to the currency fluctuation impact on
research and development expenses denominated in the Euro and South Korean Won,
and general increases from year to year. In-Process Research and Development As a result of the acquisition transactions, a one-time $10.6 million
in-process research and development charge has been expensed in the successor
period for the day ended September 30, 2003. Selling, General and Administrative Expenses Selling, general and administrative expenses increased 23.5% to $216.0 million
for the year ended September 30, 2003 from $174.9 million for the year ended
September 30, 2002. The $41.1 million increase was primarily attributable to
expenses related to the acquisition transactions. The main components of the
these acquisition expenses were related to transaction fees in obtaining an
exchange and fairness opinion and expenses for the buyout of existing options,
severance and restricted stock. Excluding these transaction related expenses,
selling, general and administrative expenses would have increased to $178.2
million primarily due to additional severance expense of $8.1 million and $12.2
million impact of currency fluctuations, offset by $7.3 million of restricted
stock awards in fiscal year 2002, $3.3 million of expenses related to a
divested business and general cost savings resulting from the Global
Restructuring and Optimization Plan. 25




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##### Table of Contents



Amortization of Intangible Assets Amortization of intangible assets decreased 4.2% to $16.4 million for the year
ended September 30, 2003 from $17.1 million for the year ended September 30,
2002. The decrease was primarily due to the effect of latter stages of
accelerated amortization of intangible assets related to purchase accounting
prior to the acquisition transactions. The decrease was partially offset by
the currency impact from the fluctuation of the South Korean Won on South
Korea-based intangible assets. Gain on the Sale of Assets The gain on sale of assets of $1.9 million for the year ended September 30,
2003 was primarily due to the sale of certain South Korean assets, a Salinas
property and a company-owned house in California. The gain on sale of assets of
$6.0 million for the year ended September 30, 2002 was primarily due to the
sale of a non-core business and asset sales of our South Korean subsidiary. Interest Expense, Net Interest expense, net, increased 13.6% to $31.5 million for the year ended
September 30, 2003 from $27.7 million for the year ended September 30, 2002.
The increase was primarily due to amortization of increased deferred financing
fees and higher interest rates resulting from the amendment of the Companys
old syndicated credit facility in January 2003, partially offset by the effect
of lower average debt balances. Interest expense, net, for the one day ended
September 30, 2003 included $2.0 million of interest income related to the
forgiveness of previously recorded interest payable to Savia, S.A. de C.V., our
former majority shareholder. Other Non-Operating Income (Expense), Net We had other non-operating expense, including foreign currency gain (loss),
net, of $0.8 million for the year ended September 30, 2003 as compared to other
non-operating expense, net, of $4.2 million for the year ended September 30,
2002. Other non-operating expense, net, for the year ended September 30, 2003
primarily consists of foreign currency gains of $1.4 million resulting from
favorable currency fluctuations in South America and Europe and a United States
Dollar denominated loan in the Netherlands, offset by $2.2 million of expenses
from the write-off of deferred financing fees related to the early re-payment
of our old syndicated credit facility. Other non-operating expense, net, for
the year ended September 30, 2002 primarily consists of foreign currency losses
of $2.2 million resulting from currency fluctuations in South America and a
United States Dollar denominated loan in the Netherlands, a minority interest
expense of $1.2 million, and other expenses of $0.8 million from several
other subsidiaries. Income Tax Expense Income tax expense was $5.8 million, or a 22.6% effective tax-rate, for the
year ended September 30, 2003 and $2.5 million, or a 13.3 % effective tax rate,
for the year ended September 30, 2002. The increase in the effective rate
during fiscal year 2003 as compared to the prior year was primarily the result
of the receipt of a $5.9 million tax refund in fiscal year 2002, for which no
benefit was previously recorded, additional losses in the United States during
fiscal year 2003 for which no benefit was recorded, partially offset by
utilization of net operating losses in the Netherlands which had been fully
reserved. 26




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##### Table of Contents



Contractual Obligations and Commercial Commitments The following tables summarize the Companys contractual obligations and
commitments at September 30, 2004: Payments Due by PeriodAfterContractual Obligations
    
    Total
    
    1 year
    
    2-3 years
    
    4-5 years
    
    5 yearsLong-term debt (1)
    
    $
    450,562
    
    
    $
    1,746
    
    
    $
    3,321
    
    
    $
    87,428
    
    
    $
    358,067Operating leases (2)
    
    
    12,699
    
    
    
    5,601
    
    
    
    5,470
    
    
    
    1,207
    
    
    
    421Preferred shares subject to mandatory redemption
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Purchase obligations
    
    
    1,155
    
    
    
    1,155
    
    
    
    
    
    
    
    
    
    
    
    Pension funding
    
    
    1,515
    
    
    
    1,515
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligation
    
    $
    515,931
    
    
    $
    10,017
    
    
    $
    8,791
    
    
    $
    88,635
    
    
    $
    408,488
 Amount of Commitment Expiration Per PeriodTotalAmounts
    
    
    
    
    
    
    
    
    
    AfterCommercial commitments
    
    Committed
    
    1 year
    
    2-3 years
    
    4-5 years
    
    5 yearsGuarantees (Letters of Credit).
    
    $
    2,601
    
    
    $
    2,601
    
    
    $ 
    
    $ 
    
    $ Total commitments.
    
    $
    2,601
    
    
    $
    2,601
    
    
    $ 
    
    $ 
    
    $ 
   (1)
    
    See Note 9 to the Consolidated Financial Statements.(2)
    
    See Note 14 to the Consolidated Financial Statements. The Companys contractual obligations and commercial commitments are discussed
in the Liquidity and Capital Resources section below, and in the footnotes to
the Consolidated Financial Statements. Liquidity and Capital Resources In connection with the acquisition transactions, the Company became a privately
held company, acquired all of its publicly held shares of Class A common stock,
shares of Class B common stock, and shares of Class B and Class C Redeemable
Preferred Stocks, repaid the $216.6 million of principal outstanding under its
senior credit facility, and $11.6 million of a mortgage on its Oxnard real
property. In order to fund these transactions and other related expenses, Fox
Paine purchased shares of the Companys common stock for a purchase price of
$163.2 million, the Company issued $190.0 million of ten year, 10 1⁄4% senior
subordinated notes, established a senior secured credit facility that consisted
of a $190.0 million term loan and a $60.0 million revolving loan (none of which
was outstanding at September 30, 2003), borrowed $17.0 million under a new
mortgage note, and issued paid-in-kind mandatory redeemable preferred stock
(see Note 11 to our consolidated financial statements  PIK Preferred Stock)
along with warrants to purchase 3.9 million shares of common stock for combined
proceeds of $50.0 million. Upon completion of the acquisition transactions,
the Company had total indebtedness of $421.3 million as of September 30, 2003
compared to $252.5 million before the transactions. The results of cash flows for the year ended September 30, 2003, reflect the
combined historical results for the twelve months ended September 29, 2003
(predecessor) and the one-day ended September 30, 2003 (successor). Cash flows from operations Operating activities provided $51.0 million in cash flow during the year ended
September 30, 2004 compared to $19.1 million provided in the prior fiscal year.
Operating cash flow of fiscal year 2004 was impacted by approximately $11.8
million of acquisition related costs, a $4.8 million prepayment
of management fee in accordance with the acquisition transactions purchase
agreement, and approximately $6.7 million in transaction fees associated with
the January 2004 senior subordinated note issuance. Cash flows from investments Capital expenditures decreased to $17.3 million for the year ended September
30, 2004, from $22.7 million in the prior fiscal year. Other investing
activities for the year ended September 30, 2004 included $6.3 million from
proceeds from the sale of assets compared to $10.2 million from
proceeds from the sale of assets in the prior fiscal
year, which was primarily due to higher asset sales by our South Korean
subsidiary. 27




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##### Table of Contents



Cash flows from financings On January 23, 2004, the Company issued an additional $140.0 million of its 10
1⁄4% senior subordinated notes, at a premium of $12.6 million. These notes
have identical terms and conditions as the $190.0 million of senior
subordinated notes issued as part of the acquisition transactions on September
29, 2003. The net proceeds from the additional notes, after deducting
underwriting discounts and other expenses, were approximately $145.6 million.
These net proceeds from the offering were used to repay $100.0 million and
$15.0 million of the borrowings under the term loan portion and revolver
portion, respectively, of the Companys senior secured credit facility and for
general corporate purposes. Concurrently with the offering of the additional notes, the Company amended the
senior secured credit facility. The amended senior secured credit facility
decreased the term loan from $190.0 million to $90.0 million, increased the
revolving credit facility from $60.0 million to $75.0 million, amended pricing
terms on both the term loan and revolver portion of the credit facility, and
amended certain financial covenants. The Companys total indebtedness as of September 30, 2004 was $461.5 million,
of which $88.9 million were borrowings under the Companys term loan, $341.7
million were borrowings under our senior 10 1⁄4% subordinated
notes (which includes $11.7 million of remaining premium balance, which will be amortized
over the life of the loan and reduces interest expense), and
$17.0 million and $1.3 million, and $12.6 million were borrowings by its United States, Spanish, and
South Korean subsidiaries, respectively. The Company also has $41.8 million of
preferred shares subject to mandatory redemption (see Note 11 to our
consolidated financial statements for further description of the preferred
shares). As of September 30, 2004, the Company has cash and cash equivalents of
$116.9 million. Going forward, the Companys principal source of liquidity will be cash flow
generated from operations and borrowings under its senior secured credit facility. The Companys principal uses of cash will be
to meet debt service requirements, finance capital expenditures and provide
working capital. Based on the current level of operations, management believes
that remaining cash on hand, cash flow from operations and available borrowings
under its revolving credit portion of the senior secured credit facility will
enable the Company to meet its working capital, capital expenditure, debt
service and other funding requirements for at least the next 12 months. Our exposure to foreign currency fluctuations is primarily due to foreign
currency gains or losses that occur from intercompany receivables and payables
between Seminis Vegetable Seeds Inc. and its foreign subsidiaries.
Our net sales, revenues and income from continuing operations were
not substantially affected by inflation in 2002, 2003 and 2004. The Company entered into an interest rate swap agreement in September 2003.
The purpose of the swap agreement is to hedge approximately $17.0 million of
variable rate debt associated with the Companys mortgage on its worldwide
headquarter facility in Oxnard, CA. Changes in the fair value of the hedge
instrument are reflected in other comprehensive income (loss) and the
associated interest is reflected in the statement of operations over the term
of the mortgage. Senior Secured Credit Facility On September 29, 2003, the Companys principal domestic operating subsidiary,
Seminis Vegetable Seeds, Inc., entered into a senior secured credit facility
with a group of lenders. The Company and its other wholly-owned domestic
subsidiaries guarantee the obligations under the senior secured credit
facility. The senior secured credit facility originally provided for a $190.0
million term loan and a revolving line of credit for borrowings up to an
aggregate principal amount of $60.0 million. The Company amended the senior
secured credit facility on January 15, 2004 such that it now provides a $90.0
million term loan and a revolving line of credit for borrowings up to an
aggregate principal amount of $75.0 million, and amortizes in quarterly
installments equal to 1.0% per annum or $0.2 million per quarter for the first
five and 1/2 years, and with the balance of the term loan due in a single
payment at the end of the sixth year. The first quarterly payment was paid on
March 31, 2004. The $75.0 million revolving credit facility will mature in
five years from the closing date of the acquisition transactions and does not
amortize (none of which was drawn as of September 30, 2004 and $2.6 million of
which was committed under letters of credit). Both facilities may be
voluntarily prepaid in whole or in part without premium or penalty.
Additionally, based upon formulas stated in the amended senior secured credit
facility and subject to certain exceptions, all or a portion of the proceeds
from the issuance of equity interests or equity rights, debt issuances, asset
sales, proceeds from insurance recoveries and excess cash flow must be used to
pay down the outstanding balance under the term loan facility. In general, borrowings under the amended senior secured credit facility will
bear interest, at the Companys option, on either a London inter-bank offered
rate (LIBOR) or an alternate base rate, in each case plus an applicable rate.
The alternate base rate is equal to the highest of Citicorp North America,
Inc.s base rate, the three month certificate of deposit rate plus 0.5% and the
federal funds effective rate plus 0.5%. The applicable rate for the term loan
is based upon the Companys leverage ratio that ranges from 1.25% to 2.00% per
annum in the case of an alternate rate loan and LIBOR plus 3.00% per annum in
the case of a 28




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##### Table of Contents



LIBOR loan. The applicable rate for the revolving credit facility under the
amended senior secured credit facility is based upon the Companys leverage
ratio and ranges from 1.00% to 1.75% per annum in the case of alternate rate
loans and LIBOR plus 2.00% to LIBOR plus 2.75% per annum in the case of LIBOR
loans, subject, in each case, to adjustments based on the leverage ratio at the
time. Subsequent to an event of default under the amended senior secured
credit facility, borrowings will bear interest at 2.0% over the rate of
interest otherwise applicable and the LIBOR rate will not be available. Obligations under the senior secured credit facility are guaranteed by the
Company and its domestic subsidiaries. Additionally, borrowings are secured by
a perfected lien on all of the capital stock, intercompany notes and all of the
tangible and intangible properties and assets, including intellectual property
subject to exceptions relating to foreign subsidiaries, of the Company. The
Company is subject to certain commitment fees under the facility as well as the
maintenance of certain financial ratios and other restrictive covenants,
including the payment of dividends in cash. On September 30, 2004, the outstanding balance of the term loan under the
senior secured credit facility was $88.9 million with a variable interest rate
of 3.49%, and the Company was in compliance with its financial covenants. 101⁄4% Senior Subordinated Notes On September 29, 2003, the Companys principal domestic operating subsidiary,
Seminis Vegetable Seeds, Inc., issued $190.0 million of senior subordinated
notes. The senior subordinated notes mature on October 1, 2013; interest is
payable semi-annually on April 1 and October 1 of each year. The senior
subordinated notes are unsecured general obligations of the Company and are
subordinated in right of payment to substantially all existing and future
senior indebtedness of the Company, including senior credit facility
indebtedness. Prior to maturity, the Company may redeem all or some of the
senior subordinated notes at defined redemption prices, which may include a
premium. In the event of a change in control, the holders may require the
Company to repurchase the senior subordinated notes for a redemption price that
may also include a premium. The majority of the Companys domestic
subsidiaries have guaranteed the senior subordinating notes. On January 23, 2004, the Company issued an additional $140.0 million of senior
subordinated notes, at a premium of $12.6 million. These notes have identical
terms and conditions as the $190.0 million of senior subordinated notes issued
as part of the acquisition transactions on September 29, 2003. On September 30, 2004, the outstanding balance of the 101⁄4% senior
subordinated notes was $330.0 million and a remaining premium balance of $11.7
million. Mortgage Notes In March 2000, the Company issued a $17.2 million promissory note, which was
secured by the Companys global headquarters facility. The variable rate of
interest on the original note was based on LIBOR plus 2.5%. As of September 29, 2003, principal outstanding on this
note totaling $11.6 million was repaid with proceeds from a new $17.0 million
mortgage. Interest on the new note is based on LIBOR plus 2.0%, adjustable on the first day of each month. Simultaneous
with entering into the new mortgage, the Company entered into an interest rate
swap agreement (extending for a seven year term) to swap the floating interest
rate for a 6.3% fixed interest rate. The loan amortizes in scheduled annual
payments of approximately $0.2 million to $0.4 million, with a payment of the
final remaining balance due on October 1, 2010. On September 30, 2004, the outstanding balance of the mortgage note was $16.7
million with a fixed interest rate of 6.3%, and the market value of the
interest rate swap was a liability to Seminis of $0.4 million. The Company
recorded the change in fair market value of the interest rate swap in other
comprehensive income. South Korean Borrowings The Companys South Korean subsidiary has a number of loan facilities maturing
from the end of fiscal year 2004 to 2013. Borrowings under these facilities
carry interest rates of between 4.0% and 6.0%. Other Borrowings Other borrowings consisted of various domestic and foreign, government and
non-government loans of less than $1.5 million each, bearing interest annually
at average rates of 9.82% through 2013 for fiscal years 2004, and 7.35% through
2013 for fiscal year 2003. 29




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Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements other than $2.6 million of
letter of credits commitments. Minimum annual lease commitments under non-cancelable operating leases at
September 30, 2004 are as follows (in thousands): Year Ending September
30,2005
    
    $
    5,6012006
    
    
    4,0012007
    
    
    1,4692008
    
    
    6882009
    
    
    519Thereafter
    
    
    421
 30




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires us to make significant estimates and
judgments that affect the reported amounts of assets, liabilities, revenue,
expenses and related disclosure of contingent assets and liabilities. We
evaluate our estimates, including those related to bad debts, inventories,
intangible assets, income taxes, restructuring costs and contingencies and
litigation, on an on-going basis. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe that the following critical accounting policies, among others,
involve the more significant judgments and estimates used in the preparation of
our consolidated financial statements. We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. Many of our
customers are located in foreign jurisdictions where payment terms and the
timing of collections can differ from domestic transactions. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. Our inventory is recorded at the lower of cost or market. The value of each
seed variety in inventory is dependent upon various quality characteristics,
which deteriorate over time. Write-downs of inventory to market value are based
upon assumptions about future demand and market conditions, the success of our
sales programs and the shelf life of the seeds. If actual market conditions and
sales results are less favorable than those projected by management, additional
inventory write-downs may be required. We are subject to proceedings, lawsuits, other claims related to seedmens
errors and omissions, environmental, labor and other matters. We assess the
likelihood of adverse judgments or outcomes to these matters as well as the
range of potential losses. A determination of the reserves required, if any, is
made after careful analysis. The required reserves may change in the future due
to new developments. In assessing the recoverability of our intangibles and long-lived assets,
significant assumptions concerning future operating performance and economic
conditions, which may differ from actual in the future were made, regarding the
estimated future cash flows and other factors to determine the fair value of
the respective assets, as well as the related estimated useful lives. If these
estimates or their related assumptions change in the future as a result of
changes in strategy and/or market conditions, we may be required to record
impairment charges not previously recorded for these assets. The carrying value of our deferred tax assets is dependent upon our ability to
generate sufficient future taxable income in certain tax jurisdictions. We
established a valuation allowance against certain of our deferred tax assets
due to uncertainties related to the ability to utilize these assets, primarily
consisting of net operating losses carried forward and foreign tax credits,
before they expire. The valuation allowance is based on our estimates of
taxable income by each jurisdiction in which we operate and the period over
which the assets will be recoverable. In the event that actual results differ
from these estimates, or we adjust these estimates in future periods, the
valuation allowance would change and could materially impact our financial
position and results of operations. The Company has adopted FASB Statement No. 123 under the provisions of SFAS No.
148 on October 1, 2003 that utilized the fair value based method of accounting
for stock-based employee compensation. 31




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RECENT ACCOUNTING PRONOUNCEMENTS In November 2004, FASB Statement No. 151, Inventory Costs, an Amendment of ARB
No. 43, Chapter 4(SFAS No. 151), was issued. The amendments made by SFAS No.
151 clarify that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and require the allocation of fixed production overheads to inventory
based on the normal capacity of the production facilities. SFAS No. 151 will
become effective beginning in fiscal 2006. We are in the process of assessing
the impact SFAS No. 151 will have on our financial position and results of
operations. In March 2004, the FASB issued an exposure draft entitled Share-Based Payment
to amend SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No.
95, Statement of Cash Flows. The proposed standards effective date will
apply to awards that are granted, modified, or settled in cash in interim or
annual periods beginning after June 15, 2005. This proposed standard would
eliminate the ability to account for share-based compensation using the
intrinsic value-based method under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. This exposure draft would require
the Company to calculate equity-based compensation expense for stock options
and employee stock purchase plan rights granted to employees based on the fair
value of the equity instrument at the time of grant. Management will continue
to evaluate the impact that the exposure draft will have on the Companys
financial position and results of operations. In December 2003, the FASB reissued SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits, an amendment of FASB Statements No.
87, 88, and 106. This Statement revises employers disclosures about pension
plans and other postretirement benefit plans. It does not change the
measurement or recognition of those plans required by SFAS No. 87, Employers
Accounting for Pensions, SFAS No. 88, Employers Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits, and SFAS No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions. This Statement retains the disclosure requirements
contained in the original SFAS No. 132, Employers Disclosures about Pensions
and Other Postretirement Benefits. The revised Statement also requires
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The provisions of the original SFAS No. 132 will
remain in effect until the provisions of this Statement are adopted. Certain
new provisions are effective for financial statements with fiscal years ending
after December 15, 2003, while other provisions are effective for fiscal years
ending after June 15, 2004. The interim period disclosures are effective for
interim periods beginning after December 15, 2003. See Note 8 Pensions and
Other Postretirement Benefits, for disclosures required under the revised SFAS
No. 132. In December 2003, FASB reissued
Interpretation No. 46, Consolidation of Variable Interest Entities  an
Interpretation of ARB No. 51. The Interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity risk for the
entity to finance its activities without additional subordinated financial
support. The provisions of this Interpretation are effective for the Company
for interim periods ending after March 15, 2004. The adoption of this
Interpretation has not had a significant impact on the Companys financial
results of operations and financial position. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This Statement requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
The provisions of this Statement are effective for financial instruments
entered into or modified after May 31, 2003, and otherwise are effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company adopted this Statement as of June 27, 2003 and accordingly classified
its newly issued paid-in-kind mandatory redeemable preferred stock (PIK
Preferred Stock) as a liability. 32




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In April 2003, the FASB issued SFAS No. 149, Amendment to Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) used for hedging activities under
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
The provisions of this Statement are effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of this Statement did not have a significant impact
on the Companys financial condition or results of operations. In January 2003, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. It also requires disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. SFAS No. 148 is
effective for annual and interim periods beginning after December 15, 2002. The
Company has adopted FASB Statement No. 123 under the provisions of SFAS No. 148
on October 1, 2003. Recent Tax Legislation The United States Congress passed the American Jobs Creation Act of 2004 (the
Act), which the President signed into law on October 22, 2004. Key provisions
of the Act include a temporary incentive for U.S. multinational corporations to
repatriate foreign earnings, a domestic manufacturing deduction, and
international tax reforms designed to improve the global competitiveness of
U.S. businesses. In accordance with SFAS 109, Accounting for Income Taxes, we
will reflect the effects of the Act, if any, in the first quarter of fiscal
2005 as part of income tax expense for the period. We are still evaluating the
impact of the Act on the Company. Accordingly, we have not yet determined its
impact on our effective tax rate and on our deferred tax assets and
liabilities. 33




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Item 7A.Quantitative and Qualitative Disclosures About Market Risk MARKET RISK DISCLOSURES We do not have any financial instruments held for trading purposes. The Company
entered into an interest rate swap agreement in September 2003. The purpose of
the swap agreement is to hedge approximately $17.0 million of variable rate
debt associated with the Companys mortgage on its worldwide headquarter
facility in Oxnard, CA. Changes in the fair value of the hedge instrument are
reflected in other comprehensive income and are reflected in the statement of
operations over the term of the mortgage. The currencies that experienced significant fluctuations in fiscal year 2004
that impacted the Company were the European Monetary Union Euro and South Korea
Won. Our primary market risk exposure relates to foreign currency fluctuations
in connection with foreign currency gains or losses that occur from
intercompany receivables and payables between us and our foreign subsidiaries.
Seminis Vegetable Seeds has a net intercompany receivable of $123.6 million
with its foreign subsidiaries that report in foreign currencies. The fair value of short-term borrowings approximates cost due to the short
period of time to maturity. The fair value of long-term debt was estimated
based on current interest rates available to Seminis for debt instruments with
similar terms, degrees of risk and remaining maturities. The interest expense
would be impacted by $4.6 million with a fluctuation of 100 basis points.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that Seminis could realize
in a current market exchange. The fair value of Seminis borrowing arrangements and other financial
instruments is as follows (in thousands): At September 30, 2004
    
    At September 30, 2003Asset (Liability)
    
    Asset (Liability)Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueShort-term borrowings
    
    $
    (10,965
    )
    
    
    (10,965
    )
    
    $
    (20,031
    )
    
    $
    (20,031
    )
 Principal
amount by expected maturity as of September 30, 2004: Total
    
    FairThere-
    
    Carrying
    
    Value2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    after
    
    Value
    
    9/30/04Long-term debt
(including current
Maturities)
Asset (liability)
    
    $
    (1,746
    )
    
    $
    (1,747
    )
    
    $
    (1,574
    )
    
    $
    (1,566
    )
    
    $
    (85,862
    )
    
    $
    (358,067
    )
    
    $
    (450,562
    )
    
    $
    (488,512
    )
 Principal amount by expected maturity as of September 30, 2003: Total
    
    FairThere-
    
    Carrying
    
    Value2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    after
    
    Value
    
    9/30/03Long-term debt
(including current
Maturities)
Asset (liability)
    
    $
    (2,722
    )
    
    $
    (2,858
    )
    
    $
    (2,908
    )
    
    $
    (2,786
    )
    
    $
    (2,629
    )
    
    $
    (387,357
    )
    
    $
    (401,260
    )
    
    $
    (401,260
    )
 34




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Item 8.Financial Statements and Supplementary Data The consolidated financial
statements together with the report of registered public
accounting firm are filed as part of this report on pages F-1 through F-25. 
 Item 9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure Not Applicable. Item 9A.Controls and Procedures The
Companys chief executive officer and chief accounting officer have
concluded, based on their evaluation as of the end of the period
covered by this report, that the Companys disclosure controls and
procedures are effective to ensure that information required to be
disclosed in reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, process, summarized and
reported, within the time periods specified in the Securities and
Exchange Commissions rules and forms. There have been no significant
changes in the Company's internal controls over financial reporting
during the fourth quarter of fiscal year 2004 that have materially
affected, or are reasonably likely to materially effect, the
registrants internal control over financial reporting. Item 9B.Other Information Not Applicable. 35




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##### Table of Contents



PART III 
 Item 10.Directors and Executive Officers of the Registrant Directors The terms of all Directors expire in September of each year. Information
regarding directors of the company is located in Part I, Item 4A. Executive Officers Information regarding executive officers of the Company is located in Part I,
Item 4A. Audit Committee Financial Expert Our Audit Committee is comprised of Messers. Kevin Schwartz and Eugenio Garza
Hererra. Mr. Schwartz, who is a Vice President of Fox Paine, LLC, is the
Chairman of the Audit Committee and its financial expert, as defined by the
SEC. Mr. Hererra is an independent director as that term is
used in Rule 10A-3 under the Exchange Act of 1934. Code of Ethics We have adopted a Code of Ethics for our Chief Executive Officer and President,
Chief Financial Officer, and our Vice President Finance and Worldwide
Comptroller. The Company will provide without
charge a copy of the Code of Ethics to any person submitting a
written request for the same to Investor Relations; 2700 Camino del
Sol, Oxnard, CA 93030-7967. 36




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##### Table of Contents



Item 11.Executive Compensation Executive Summary Compensation Table The following table provides a summary of compensation earned by the Companys
Chief Executive Officer and the four other highest-paid executives, for
services rendered in all capacities to the Company and its subsidiaries for
each of the last three fiscal years: Annual Compensation
    
    Long-Term Compensation AwardsOther
    
    Restricted Stock
    
    Securities UnderlyingName And
    
    Fiscal
    
    Salary
    
    Bonus
    
    Compensation(1)
    
    Awards
    
    OptionsPrincipal Position
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    (#)Alfonso Romo Garza
    
    
    2004
    
    
    
    950,313
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    Chairman of the Board
    
    
    2003
    
    
    
    822,292
    
    
    
    786,600
    
    
    
    
    
    
    
    64,000
    
    
    
    And Chief Executive Officer
    
    
    2002
    
    
    
    818,120
    
    
    
    
    
    
    
    358,667
    
    
    
    3,050,998
    
    
    
    460,715Bruno Ferrari
    
    
    2004
    
    
    
    588,426
    
    
    
    375,000
    
    
    
    4,512,616
    
    
    
    
    
    
    
    President and Chief
    
    
    2003
    
    
    
    485,670
    
    
    
    343,200
    
    
    
    412,104
    
    
    
    556,184
    
    
    
    Operating Officer
    
    
    2002
    
    
    
    495,872
    
    
    
    267,568
    
    
    
    758,096
    
    
    
    435,855
    
    
    
    241,875Bernardo Jimenez
    
    
    2004
    
    
    
    518,544
    
    
    
    
    
    
    
    431,885
    
    
    
    
    
    
    
    Exec Sr. VP and CFO
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Mateo Mazal
    
    
    2004
    
    
    
    403,755
    
    
    
    130,000
    
    
    
    121,266
    
    
    
    
    
    
    
    Sr. VP, HR & IT
    
    
    2003
    
    
    
    190,769
    
    
    
    23,333
    
    
    
    207,124
    
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Gaspar Alvarez Martinez
    
    
    2004
    
    
    
    270,823
    
    
    
    169,128
    
    
    
    177,343
    
    
    
    
    
    
    
    Vice President Finance and
    
    
    2003
    
    
    
    259,272
    
    
    
    138,060
    
    
    
    36,922
    
    
    
    16,017
    
    
    
    Worldwide Comptroller
    
    
    2002
    
    
    
    250,469
    
    
    
    94,000
    
    
    
    167,151
    
    
    
    51,057
    
    
    
    141,540
   (1)
    
    Includes housing allowance and other expatriate benefits, and relocation
costs and allowances for Mr. Ferrari and Jimenez. Includes a
stock award of 1,091,577 shares of Seminis common stock for
Mr. Ferrari. Includes a cash payment
of $551,880, made by the Company, related to Mr. Ferraris home loan. Option Grants and Exercises No options to purchase Seminis shares were awarded during the 2004 fiscal year
pursuant to the terms of the Seminis, Inc. 1998 Stock Option Plan. No exercises
of options to purchase common stock were made during fiscal year 2004 by the
Chief Executive Officer or any other named executive officer of Seminis: Fiscal 2004 Year End Option Values The following table sets forth information concerning unexercised options held
by the named executive officers as of September 30, 2004. Number of Securities Underlying Unexercised
    
    Value of Unexercised Options atOptions at Fiscal Year End Fiscal
    
    Year End ($) (1)Name
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableAlfonso Romo Garza
    
    
    716,715
    
    
    
    
    
    
    
    2,436,831
    
    
    
    Bruno Ferrari
    
    
    339,718
    
    
    
    
    
    
    
    1,155,041
    
    
    
    Bernardo Jimenez
    
    
    27,000
    
    
    
    
    
    
    
    91,800
    
    
    
    Gaspar Alvarez Martinez
    
    
    161,740
    
    
    
    
    
    
    
    549,916
    
    
    
    Mateo Mazal
    
    
    15,000
    
    
    
    
    
    
    
    51,000
    
    
    
    
   (1)
    
    Based on a share value of $3.40 37




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##### Table of Contents



Restricted Stock Units In September 2003
Seminis granted restricted stock units to a group of Companys
senior executives. The restricted stock units will, upon the events described
below, be paid in shares of Company common stock on a one-for-one basis and
will vest over a five year period depending on the continued employment of the
executive and on Companys performance and the performance of our executives
relative to specified goals and objectives. Each of the senior executives was granted an aggregate number of restricted
stock units calculated as 2.25 times the initial base salary of the applicable
senior executive divided by $3.40. Each of the other key executives was granted
an aggregate number of restricted stock units calculated as approximately 1.0
times the initial base salary of the applicable executive divided by $3.40. If the specified goals and objectives are achieved and the executive is
actively employed by us at each applicable vesting date, the restricted stock
units will vest with respect to 10.0% of the aggregate award in each of the
first two years, 20.0% of the aggregate award in the third year and 30.0% of
the aggregate award in each of the fourth and fifth years following the time of
grant. To the extent that conditions to vesting are not met and some of the
restricted stock units do not vest, the portion of restricted stock units that
do not vest will be permanently forfeited and will not be reallocated. In the event that Fox Paine achieves a designated internal rate of return on
its initial investment in Company prior to the fifth anniversary of the
completion of the acquisition transactions, all restricted stock units, other
than those permanently forfeited due to a failure to meet specified goals and
objectives, will vest. Directors Compensation Outside directors of Seminis receive an annual fee of $25,000 and additional
fees of $2,500 for each meeting of the Board of Directors attended, and $1,000
for each committee meeting attended. Outside directors who serve as Committee
chairmen, in addition, receive an annual fee of $2,000 and a fee of $250 for
each committee meeting attended. Employment Contracts Mr. Romo has entered into an employment agreement that became effective
September 2003 and has a five-year term with automatic one-year renewals unless
timely notice is provided by either party. Pursuant to the employment
agreement, Mr. Romo will serve as the chief executive officer of Seminis. Mr.
Romo will receive an initial base salary of $1,000,000, which will be reviewed
no less frequently than annually and may be increased, but not decreased,
throughout the term of the agreement. Mr. Romo will be eligible to receive an
annual bonus that will be based on Seminis achieving performance objectives,
with a target bonus set at 100% of base salary and a maximum bonus at 200% of
base salary. Under the terms of his employment agreement, Mr. Romo will be entitled to
participate in Holdings benefit plans and programs, and is entitled to the
perquisites and other fringe benefits generally made available to Holdings
senior executives and commensurate with Mr. Romos position. Specifically, Mr.
Romo is entitled to receive benefits reasonably comparable to those provided to
him prior to the acquisition transactions, including, but not limited to,
membership in a social club, reimbursement of security and non- leisure travel
expenses in an annual amount not to exceed approximately $2.4 million, use of
company automobiles, and certain expatriate and other benefits and allowances. In the event Mr. Romos employment with Seminis  
    
    is terminated during the term of the employment agreement as a result
of Mr. Romos death or permanent disability, or
    
    following a change of control or following Fox Paine obtaining
majority control of the board of directors, is terminated by Mr. Romo
for good reason or by Seminis without cause, Mr. Romo or his estate, as applicable, will receive, within 30 days following
the termination, a cash lump sum payment equal to five times the sum of his
base salary and the average annual bonus paid or payable to Mr. Romo with
respect to the two fiscal years immediately prior to the date of termination
(less any applicable insurance benefits payable during the severance period).
In addition, Mr. Romo or his estate, as applicable, will be entitled to receive
such other payments, if any, to which he is entitled under any applicable plans
or programs, a payment in respect of accrued but unused vacation days, and
continued coverage under any employee medical plans or programs provided to him
and his family until the earlier of the fifth anniversary of his termination of
employment or the date on which he becomes entitled to receive medical coverage
under another employers medical benefits program. Pursuant to his employment agreement, Mr. Romo will be bound by non-competition
and non-solicitation restrictions during the term of the agreement and for a
period of two years after the termination of his employment. 38




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##### Table of Contents



Mr. Mazal, Ferrari and Jimenez have also entered into employment agreements
with Seminis Merger Corp. that became effective in September 2003, which have a
term of three years, and will be renewed automatically unless timely notice is
provided by either party. Mr. Mazal will receive an initial base salary of
$400,000 and will be eligible to receive an annual bonus that will be based on
the achievement of Company and executive performance objectives, with a target
bonus set at 65.0% of his base salary and a maximum bonus set at 81.25% of his
base salary. Mr. Ferrari will receive an initial base salary of $500,000 and
will be eligible to receive an annual bonus based on the achievement of Company
and executive performance objectives, with a target bonus set at 75.0% of his
base salary and a maximum bonus set at 93.75% of his base salary. Mr. Jimenez
will receive an initial base salary of $636,000 and will be eligible to receive
an annual bonus based on the achievement of Company and executive performance
objectives, with a target bonus set at 65.0% of his base salary and a maximum
bonus set at 81.25% of his base salary. Pursuant to the employment agreements,
the foregoing base salaries will be reviewed no less frequently than annually
and may be increased but not decreased. During the employment period, each of Messrs. Mazal, Ferrari and Jimenez is
entitled to other benefits on terms and conditions no less favorable in the
aggregate than those in effect prior to the acquisition transactions,
including, but not limited to, membership in a social club, use of company
automobiles, and certain expatriate and other benefits and allowances. In addition, Mr. Mazal, Ferrari and Jimenez are entitled to receive restricted
stock units that vest over a period of five years and are conditioned on the
satisfaction of Company and executive performance criteria. For a more detailed
description of the restricted stock units, see  Restricted Stock Units. Mr. Ferrari received an award of 1,091,577 shares of Seminis common stock on
the effective date of his employment agreement, subject to all applicable
withholding taxes. The employment agreements for each of Mr. Mazal, Ferrari and Jimenez provide
that if the executives employment is terminated during the employment period
as a result of death or permanent disability, is terminated by Seminis without
cause or terminated by the executive for good reason, the executive or his
estate, as applicable, will receive a cash lump sum payment equal to three
times the sum of the base salary and the average annual bonus paid or payable
to the executive with respect to the two fiscal years immediately prior to the
executives date of termination of employment, less applicable insurance
benefits. In addition, upon any termination of employment described in the
previous sentence, the executive or his estate, as applicable, will receive
such other payments, if any, to which he is entitled under any applicable plans
or programs, a cash lump sum payment in respect of accrued but unused vacation
days, and continued coverage under any employee medical plans or programs
provided to the executive and his family until the earlier of the third
anniversary of the executives termination of employment or the date on which
the executive becomes entitled to receive medical coverage under another
employers medical benefits program. Each of Mr. Mazal, Ferrari and Jimenez will be bound by non-competition and
non-solicitation restrictions during the term of his agreement and for a period
of two years after any termination of his employment. Mr. Green, Alvarez, Madero and Gerard Renou, Vice President of Value Capture,
have also entered into employment agreements with Seminis with terms
substantially similar to the agreements between Seminis and Mr. Mazal, Ferrari,
and Jimenez, except that the base salaries, bonuses and benefits provided to
Mr. Green, Alvarez Madero and Renou differ from those provided to Mr. Mazal,
Ferrari and Jimenez. Under their respective employment agreements, Mr. Green
will receive a base salary of $265,921, Mr. Alvarez will receive a base salary
of $262,051, Mr. Madero will receive a base salary of $200,000, and Mr. Renoue
will receive a base salary of 230,000 Euros, in each case with a target bonus
set at 65.0% of base salary and a maximum bonus set at 81.25% of base salary.
In addition, severance benefits that may become payable to Mr. Green, Alvarez,
Madero or Renou will be based on a multiple of two times the sum of base salary
and bonus instead of three. During the employment period, each of Messrs. Green, Alvarez and Madero is
entitled to participate in the employee benefit plans made available to
similarly situated executives of Holdings, and will be entitled to other
benefits on terms and conditions similar to those in effect prior to the
Acquisition Transactions, including, but not limited to, membership in a social
club, use of company automobiles, and certain expatriate and other benefits and
allowances. Each of Mr. Green, Alvarez, Madero, and Renou are entitled to receive
restricted stock units that vest over a period of five years and are
conditioned on each individuals satisfaction of Company and executive
performance criteria. For a more detailed description of the restricted stock
units, see  Restricted Stock Units. Compensation Committee Interlocks and Insider Participation The members of the Compensation Committee of the Companys Board of Directors
for the 2004 fiscal year are W. Dexter Paine, III, Vice Chairman of
the Board of Directors, and Eugenio Garza Herrera, Director. 39




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Item 12.
    Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters Security Ownership of, Inc. The following table sets forth information regarding the beneficial ownership
of common stock, as of September 30, 2004, by each of Seminis directors, the
Chief Executive Officer, the President and Chief Operating Officer and the
other named executive officers, each person known to Seminis to own
beneficially more than 5% of the outstanding shares of common stock, and all
directors and executive officers of Seminis as a group. The persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as those beneficially owned by
them. Common StockName And Address Of Beneficial Owners
    
    Number
    
    Percent(5)DirectorsAlfonso Romo
Garza
    
    
    
    
    
    
    W. Dexter Paine,
III
    
    
    
    
    
    
    *Bernardo Jimenez
Barrera
    
    
    8,000
    
    
    
    *Bruno
Ferrari
    
    
    1,215,929
    
    
    
    1.5Eugenio Garza
Herrera
    
    
    
    
    
    
    *Kevin M.
Schwartz
    
    
    
    
    
    
    *Saul A.
Fox
    
    
    
    
    
    
    *Named Executive Officers (Not Directors)Gaspar Alvarez
Martinez
    
    
    36,103
    
    
    
    *Mateo
Mazal
    
    
    53,000
    
    
    
    *All directors and named executive officers
of Seminis as a group (12
persons)
    
    
    1,379,862
    
    
    
    1.7Certain Beneficial OwnersFox Paine
(1)
    
    
    48,010,146
    
    
    
    58.2Banca Afirme, S.A
(2)
    
    
    7,450,783
    
    
    
    9.0Emprima,
S.A. de C.V. (3)
    
    
    4,365,257
    
    
    
    5.3Desarrollo Consolidado de Negocios,
S.A. de C.V. (4)
    
    
    14,453,036
    
    
    
    17.5
   *
    
    Represents Less than 1%  (1)
    
    950 Tower Lane, Suite 1150, Foster City, CA 94404(2)
    
    Av. Hidalgo 234 Pte., Centro, Monterrey, Nuevo León, 64000 México(3)
    
    Río Sena 500, Col. Del Valle, San Pedro Garza García, Nuevo León, 66220
México.(4)
    
    C/ San Elias No 29-35, Barcelona 08006, Spain(5)
    
    Total number of shares of common stock outstanding included
in the computation of percentages is 82,512,290 shares, which included shares of
certain beneficial owners who own less than 5% of the outstanding shares of common stock. 40




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Item 13.Certain Relationships and Related Transactions Co-Investment Rights to Purchase Additional Shares of Seminis Common Stock In connection with the acquisition transactions, Desarrollo Consolidado de
Negocios, S.A. de C.V. received immediately exercisable rights to acquire 13.8%
of the outstanding shares of Seminis common stock on a fully-diluted basis. In
addition, Desarrollo Consolidado de Negocios, S.A. de C.V. and Fox Paine
received a second tranche of co-investment rights to acquire up to 15.8% and
1.57%, respectively, of the outstanding shares of Seminis common stock on a
fully-diluted basis. The Fox Paine co-investment rights and the second tranche
of co-investment rights owned by Desarrollo Consolidado de Negocios, S.A. de
C.V. will become exercisable only if Fox Paine achieves a 26.0% internal rate
of return on its investment in Seminis. Each co-investment right entitles the
recipient to acquire one share of Seminis common stock at an exercise price of
$3.40 per share. All of the co-investment rights expire on the tenth
anniversary of the date of the consummation of the acquisition transactions. Arrangements Among Fox Paine, Mr. Romo and Certain Other Stockholders Stockholders Agreement.Seminis Merger, Mr. Romo, Desarrollo Consolidado de
Negocios, S.A. de C.V., Emprima, S.A. de C.V., Fox Paine and certain other stockholders have
entered into a stockholders agreement that sets forth the terms of their
relationship as stockholders of Seminis. Material items covered by the
stockholders agreement include the following:  
    
    Transfer Restrictions. The stockholders agreement contains general
restrictions on the rights of stockholders to transfer equity of
Seminis. The restrictions apply during the first three years following
the completion of the acquisition transactions.  
    
    Sale Initiatives.  
    
    The stockholders agreement establishes procedures, effective
following the three-year anniversary of the completion of the
acquisition transactions, for Fox Paine to offer for sale to Mr. Romo
or to Seminis the shares of Seminis common stock that Fox Paine
controls. In the event that Mr. Romo and Seminis decline the
opportunity to purchase the shares of Seminis common stock that Fox
Paine controls, Fox Paine and Mr. Romo will work together to sell
100% of the equity of Seminis at a price per share equal to the per
share sale price proposed by Fox Paine to Mr. Romo and Seminis.  
    
    The stockholders agreement establishes procedures, effective
following the three-year anniversary of the acquisition transactions,
for Mr. Romo to offer for sale to Fox Paine or to Seminis the shares
of Seminis common stock that Mr. Romo controls at a price per share
satisfying a 26.0% internal rate of return on Fox Paines initial
investment in Seminis. In the event that Fox Paine and Seminis
decline the opportunity to purchase the shares of Seminis common
stock that Mr. Romo controls, Fox Paine and Mr. Romo will work
together to sell 100% of the equity of Seminis at a price per share
equal to the per share sale price proposed by Mr. Romo to Fox Paine
and Seminis.  
    
    If Mr. Romo and Fox Paine agree to sell 100% of the equity of
Seminis, the stockholders agreement contains provisions requiring
all of Seminis equity holders to participate in the sale.  
    
    Fox Paine Drag Sale. If Fox Paine has the right to nominate a
majority of the members of Seminis Board of Directors, Fox Paine may
require a sale of 100% of Seminis equity:  
    
    prior to the three-year anniversary of the acquisition transactions,
if:  
    
    Mr. Romo is no longer Seminis Chief Executive
Officer or is no longer performing for Seminis the customary
functions of a chief executive Officer, and  
    
    Fox Paine agrees to vest all of the performance-based co-investment rights.  
    
    on or after the three-year anniversary of the acquisition transactions, if Fox Paine agrees to vest the
greatest percentage of the performance-based co-investment rights as
would result in Fox Paine achieving a 26.0% internal rate of return
on its initial investment in Seminis. 41




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For a description of the co-investment rights, see Co-Investment Rights to
Purchase Additional Shares of Seminis Common Stock.  
    
    Registration Rights. Following the three-year anniversary of the
acquisition transactions:  
    
    If Seminis proposes to register for sale under the Securities
Act of 1933, as amended, any of its equity securities, Seminis will
use reasonable best efforts to include in the proposed offering shares of Seminis common stock requested by its stockholders.  
    
    Fox Paine will have the right, on six separate occasions, to
require Seminis to register under the Securities Act, shares of its
common stock held by Fox Paine, so long as the aggregate value of the
offering is equal to or greater than $50.0 million (or in the case of
an initial public offering, $100.0 million).  
    
    Mr. Romo will have the right, on four separate occasions, to
require Seminis to register under the Securities Act, shares of its
common stock held by Mr. Romo and his affiliates, so long as the
aggregate value of the offering is equal to or greater than $50.0
million (or in the case of an initial public offering, $100.0
million).  
    
    Stockholder Tag-Along Rights. Subject to exceptions for sales to
affiliates, registered public offerings and the sale initiatives and Fox
Paine drag sale described above, on or after the three-year anniversary
of the acquisition transactions, if Fox Paine sells a majority of the shares of Seminis common stock that it owns on the date of the
acquisition transactions, Seminis other stockholders will generally
have the right to participate in sales of their shares of Seminis common
stock on a pro rata basis.  
    
    Management Put and Call Rights.  
    
    The stockholders agreement entitles Seminis to
repurchase shares of Seminis common stock from its employees upon the
termination of employment.  
    
    The stockholders agreement entitles Seminis employees to
require Seminis to repurchase their shares of Seminis common stock
and options to purchase shares of Seminis common stock upon the
termination of employment.  
    
    Initial Composition of the Board of Directors.  
    
    Subject to specified trigger events, Mr. Romo will generally
have the right to nominate a majority of the members of the Board of
Directors of Seminis for a period of up to five years following the
acquisition transactions.  
    
    So long as Mr. Romo has the right to nominate a majority of the
members of the Board of Directors of Seminis, Fox Paine will have the
right to nominate a number of Directors equal to the number nominated
by Mr. Romo minus one.  
    
    Default Composition of the Board of Directors. If:  
    
    Mr. Romo or Seminis materially breaches the stockholders agreement;  
    
    Seminis fails to satisfy pre-defined financial targets over specified periods of time;  
    
    Mr. Romo is no longer employed as Seminis Chief Executive
Officer or is no longer performing for Seminis the customary
functions of a chief executive officer; or  
    
    the members of Seminis Board of Directors selected by Mr. Romo
or Seminis senior executive management fail to enforce in good faith
Seminis corporate policies and procedures, Fox Paine will thereafter
have the right to appoint a majority of Seminis Board of Directors;
providedthat Mr. Romo will continue to have the right to nominate at
least three members of the Board of Directors of Seminis.  
    
    Fox Paine Veto Rights. At any time that Fox Paine does not have
the right to nominate a majority of the Board of Directors of Seminis,
Fox Paine will possess veto rights with respect to a significant number
of corporate governance matters and business operations matters.  
    
    Romo Veto Rights. During any time that Fox Paine controls a
majority of the Board of Directors of Seminis, Mr. Romo will possess
veto rights with respect to fundamental corporate governance matters. In
addition, if Fox Paine controls a majority of the Board of Directors of
Seminis and Seminis has not failed to satisfy pre-defined financial
targets, Mr. Romo will possess veto rights with respect to additional
corporate governance matters. 42




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Indemnification Agreement.Fox Paine, Desarrollo Consolidado de Negocios,
S.A. de C.V., Desarrollo Empresarial Regiomontano, S.A. de C.V., an affiliate
of Mr. Romo, Savia, Mr. Romo, Seminis Acquisition and certain other
stockholders entered into an indemnification agreement relating to the
transactions contemplated by the contribution agreement and the stock purchase
agreement. Pursuant to the terms of the indemnification agreement, Mr. Romo and
certain of his affiliates have agreed to indemnify Fox Paine for breaches of
their representations, warranties and covenants contained in the contribution
agreement and stock purchase agreement and for any liabilities relating to
restructuring transactions involving Savia and certain of its affiliates. Fox
Paine has agreed to indemnify Seminis Acquisition and its affiliates for
breaches of Fox Paines representations, warranties and covenants contained in
the stock purchase agreement. Management Agreement In connection with the acquisition transactions, Seminis Merger has entered
into a management agreement with Fox Paine & Company, LLC and Desarrollo
Consolidado de Negocios, S.A. de C.V. that became an obligation of Seminis
following the acquisition transactions. Pursuant to the management agreement,
each of Fox Paine and Desarrollo Consolidado de Negocios, S.A. de C.V. will
receive an annual advisory services fee of 0.5% of the net sales of Seminis
during the prior fiscal year, in addition to reimbursement of reasonable,
out-of-pocket expenses incurred in connection with the provision of advisory
services. Fiscal year 2003 net sales of Seminis were approximately $477.4
million, and fiscal year 2004 net sales of Seminis were $525.8 million. Transaction Fees and Expense Reimbursement Upon consummation of the acquisition transactions, we paid Fox Paine a
transaction fee of $14.0 million. We also reimbursed Fox Paines expenses
incurred in connection with the acquisition transactions. In addition, we
reimbursed Savia for certain expenses incurred in connection with the
acquisition transactions. Other Relationships and Related Party Transactions Certain Relationships with Savia and Affiliates.In accordance with the
agreement entered in as part of acquisition transactions, the Company paid
management fees of $2.4 million each to Fox Paine and Desarrollo Consolidado De
Negocios, S.A. De C.V. in October 2003 for services rendered during fiscal year
2004. The annual management fee is equal to 1% of previous fiscal years net
sales and is amortized as services are rendered during the fiscal year. In connection with the additional senior subordinated notes, the Company paid
$1.8 million and $1.5 million for advisory fees to Fox Paine and Geotel S.A. De
C.V., a subsidiary of Desarrollo Consolidado De Negocios, S.A. De C.V, in
January and June 2004, respectively. In fiscal years 2004, 2003, and 2002, we had sales of $263,000, $495,000,
and $793,000, respectively, to Agrobionova, an indirect subsidiary of Savia,
and a receivable of $357,000, $840,000, and $355,000 at September 30, 2004,
2003, and 2002, respectively. Furthermore, we incurred $118,916 of travel and
other expenses from Fox Paine, of which $21,548 was in accounts payable at
September 30, 2004. In August 2002, we entered into a patent and technology license agreement with
DNA Plant Technology Corporation (DNAP), an indirect subsidiary of Savia, that
provides us with a license for the non-exclusive production of DNAP products
worldwide and an exclusive license to commercially distribute certain DNAP
products in Europe and Asia. The agreement is for a term of seven years,
subject to a three year renewal provision. Seminis has the option to terminate
the agreement at any time after the second year. We were required to pay a
royalty advance of $2.0 million to be applied against our obligation to pay an
amount per each one thousand seeds sold or a percentage of net revenue from
seed sales for each quarter, and a percentage of the net royalty that we
collect for the DNAP products (excluding seeds) for each quarter during the
term of the agreement. The royalty advance is secured by the patent rights to
the germplasm in the DNAP products in the event that we terminate the contract
and DNAP is unable to repay a portion of the royalty advance. As of September
30, 2004, we have $16,650 of DNAP royalty applied to the royalty advance and a
promissory note of $1,983,350 from DNAP was issued August 22, 2004, which
guarantees payment of the unapplied portion of the royalty advance before or by
August 22, 2005. Holdings issued 10,830 shares of its Class C preferred stock to Savia for a
total purchase price of $108.3 million. These shares accrue dividends quarterly
at a rate of 10.0% per year. In October and November 2000, Holdings received an
additional $31.9 million and $14.0 million, respectively, of capital
contributions from Savia. Holdings agreed to pay dividends on these
contributions at the same rate as the Holdings Class C preferred stock. Through
July 1, 2002, there were $25.0 million of accrued and unpaid dividends on the
outstanding shares of Holdings Class C preferred stock and additional capital
contributions. Holdings have also paid dividends of $12.7 million in the form
of additional shares of Holdings Class C preferred stock, which are classified
as additional paid in capital. On October 1, 2002, the Board of Directors of
Holdings approved the conversion of the Savia additional capital contribution
and the associated paid in kind dividends that totaled $46.7 million into 4,670
shares of 43




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Holdings Class C preferred stock. Concurrently, the Board also adopted a
resolution authorizing and directing an increase in the number of shares
designated as Holdings Class C Redeemable PIK Preferred Stock from 14,400
shares to 16,688 shares. In connection with the acquisition transactions, Savia
exchanged all of the outstanding shares of Holdings Class C preferred stock
(Savia owned 100% of the outstanding shares of Holdings Class C preferred
stock) and all obligations with respect to those shares for 37,669,480 shares
of Holdings Class A common stock and a cash payment to Savia equal to $15.0
million plus interest at a rate of 10.0% per annum from July 1, 2002, less $3.0
million (Savia ultimately received proceeds of approximately $266.2 million in
respect of the 37,669,480 shares of Holdings Class A common stock that it
received in the exchange and an additional 40,615,619 shares of Holdings Class
B common stock that it owned). Certain Transactions with and Loans to Management.In December 2003, Seminis
Vegetable Seeds sold residential property, originally acquired in October 2000,
to Mr. Bernardo Jimenez, our Director, Executive Senior Vice President and
Chief Financial Officer, for $1.1 million, which was based upon a real estate
appraisal of the market value of the property. In June 2000, a subsidiary of the Company sold residential property, originally
acquired in December 1999 for $862,000, to Mr. Bruno Ferrari, President and
Chief Operating Officer, at the appraised value of $875,000. The purchase price
was evidenced by a promissory note secured by a deed of trust on the property.
The note had an interest rate of 7.75% per annum and was payable in ten equal
annual installments of principal, including interest accrued thereon,
commencing December 15, 2000, and annually thereafter. The loan was repaid in
December 2003. Under a separate agreement, the Company paid bonuses to Mr.
Ferrari that covered the interest payable on the loan and paid Mr. Ferrari the
present value of the interest payments that would have been payable to Mr.
Ferrari had the loan remained outstanding until its scheduled final maturity.
The bonus payments were recognized as compensation expense at the time of the
payments. In April 2000, we loaned $100,000 to Mr. Gaspar Alvarez Martinez, our current
Vice President Finance, World Wide Corporate Comptroller, to assist in the
purchase of a family residence. The loan is evidenced by a promissory note
signed by Mr. Alvarez and was secured by a second deed of trust. The note had
an interest rate of 7.75% per annum and is payable in ten equal annual
installments of principal, including interest accrued thereon, commencing
December 15, 2000, and annually thereafter. Since the beginning of fiscal year
2003, the largest aggregate amount of indebtedness outstanding was $79,083. The
loan was repaid in September 2003. 
 Item 14.Principal Accountant Fees and Services Fees to Independent
Registered Public Accountants for Fiscal 2004 and 2003 The following table presents fees for professional services rendered by
PricewaterhouseCoopers LLP (PWC) for the audit of the Companys annual
financial statements for fiscal 2004 and fiscal 2003 and fees billed for
audit-related services, tax services and all other services rendered by PWC for
fiscal 2004 and fiscal 2003. Fiscal Year 2004
    
    Fiscal Year 2003(in thousands)(1)
    
    Audit fees
    
    $
    1,120
    
    
    $
    1,335(2)
    
    Audit-related fees (a)
    
    
    47
    
    
    
    605(3)
    
    Tax-related fees (b)
    
    
    1,242
    
    
    
    1,050
   (a)
    
    Principally audits of employee benefit plans and other related entities and services with respect to internal controls.(b)
    
    Principally tax compliance services (including U.S. federal and international returns) and tax examination assistance. All audit related services, tax services and other services were pre-approved
by the Audit Committee, which concluded that the provision of such services by
PWC was compatible with the maintenance of that firms independence in the
conduct of its auditing functions. The Audit Committees Outside Auditor
Independence Policy provides for pre-approval of audit, audit-related and tax
services specifically described by the Committee on an annual basis and, in
addition, individual engagements anticipated to exceed pre-established
thresholds must be separately approved. The policy also requires specific
approval by the Committee if total fees for audit-related and tax services
would exceed total fees for audit services in any fiscal year. 44




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PART IV 
 Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Listing of Consolidated Financial Statements Reference is made to the index set forth on Page F-1. (a)(2) Listing of Financial Statement Schedules. Schedule II  Valuation and Qualifying Accounts is filed herewith on
page S-1 All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted. (a)(3)
Listing of Exhibits See Index to Exhibits beginning on
Page 46 of
this report. (b) Reports onForm 8-K  There were no reports on Form 8-K filed during
fiscal year 2004. Seminis furnished reports on Form 8-K on May 13, 2004 and August 13,
2004. (c)
Exhibits See Index to Exhibits beginning on Page 46 of this report. (d) Financial Statement Schedules The following consolidated financial
statement schedule is included herein: Schedule II  Valuation and Qualifying
Accounts on page S-1. 45




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##### Table of Contents



Exhibit Index ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Merger by and among Seminis, Inc., Seminis Acquisition LLC, Seminis Merger Corp., and Fox Paine & Co., LLC,
dated as of May 30, 2003.*2.2
    
    Stock Purchase Agreement by and among Fox Paine Seminis Holdings., LLC Banca Afirme, SA., Instiucion de Banca Multiple, Afirme Grupo
Financiero, as Trustee, Under the Irrevocable Administration and Payment Trust Number 167-5 (Fideicomiso Irrevocable de
Administracion y Pago Numero 167-5), Seminis Acquisition LLC and Seminis Merger Corp., dated as of May 30, 2003.*2.3
    
    Amended and Restated Exchange Agreement by and between Seminis, Inc. and Savia, S.A. de C.V. dated as of May 30, 2003.*2.4
    
    Contribution Agreement by and among Seminis Acquisition LLC, Savia, S.A. de C.V., Banca Afirme, S.A., Institucion de Banca Multiple,
Afirme Grupo Financiero, as Trustee, under the Irrevocable Administration and Payment Trust Number 167-5 (Fideicomiso Irrevocable de
Administracion y Pago Numero 167-5), Conjunto Administrativo Integral, S.A. de C.V., Desarrollo Consolidado de Negocios, S.A. de
C.V., Emprima, S.A. de C.V., Park Financial Group, Ltd (BVI), Alfonso Romo Garza and Certain Members of Seminis and Savia
Management, dated as of May 30, 2003.*2.5
    
    Amendment to Contribution Agreement, dated as of September 29, 2003, by and among Seminis Acquisition LLC, Savia, S.A. de C.V.,
Banca Afirme, S.A., Institucion de Banca Multiple, Afirme Grupo Financiero, as Trustee, Under the Irrevocable Administration and
Payment Trust Number 167-5 (Fideicomiso Irrevocable de Administracion y Pago Numero 167-5), Conjunto Administrativo Integral, S.A.
de C.V., Desarrollo Consolidado de Negocios, S.A. de C.V., Emprima, S.A. de C.V., Park Financial Group, Ltd (BVI), Alfonso Romo
Garza and Certain Members of Seminis and Savia Management.*3.1
    
    Articles of Incorporation of Seminis Vegetable Seeds, Inc.*3.2
    
    By-laws of Seminis Vegetable Seeds, Inc.*3.3
    
    Amended and Restated Certificate of Incorporation of Seminis, Inc.*3.4
    
    By-laws of Seminis, Inc.*3.5
    
    Certificate of Designation of Preferences and Rights of Class C Redeemable Preferred Stock of Seminis, Inc.*3.6
    
    Articles of Incorporation of Petoseed International, Inc.*3.7
    
    By-laws of Petoseed International, Inc.*3.8
    
    Articles of Incorporation of PGI Alfalfa, Inc.*3.9
    
    By-laws of PGI Alfalfa, Inc.*3.10
    
    Articles of Incorporation of Baxter Seed Co., Inc.*3.11
    
    By-laws of Baxter Seed Co., Inc.*4.1
    
    Indenture, dated as of September 29, 2003, by and among Seminis Vegetable Seeds, Inc., Seminis, Inc., Petoseed International, Inc.,
PGI Alfalfa, Inc., and Baxter Seed Co., Inc. and Wells Fargo Bank, National Association for the 10 1/4% Senior Subordinated Notes
due 2013.*4.2
    
    Registration Rights Agreement, dated as of September 29, 2003, by and among Seminis Vegetable Seeds, Inc., Seminis Inc., Petoseed
International, Inc., PGI Alfalfa, Inc., Baxter Seed Co., Inc. and Citigroup Global Markets Inc., CIBC World Markets Corp., Harris
Nesbitt Corp., and Rabo Securities USA, Inc.*4.3
    
    Form of Global Note for 10 1/4% Senior Subordinated Notes due 2013 of Seminis Vegetable Seeds, Inc. (contained as an exhibit to
Exhibit 4.1 hereto).*4.4
    
    Form of Exchange Agent Agreement by and among Seminis Vegetable Seeds, Inc., Seminis, Inc., Petoseed International, Inc., PGI
Alfalfa, Inc., Baxter Seed Co., Inc. and Wells Fargo Bank, National
Association.*4.5
    
    Registration Rights Agreement, dated as of January 23, 2004, by and among Seminis Vegetable Seeds, Inc., Seminis Inc., Petoseed
International, Inc., PGI Alfalfa, Inc., Baxter Seed Co., Inc. and Citigroup Global Markets Inc.*10.1
    
    Amended and Restated Stockholders Agreement, dated as of September 29, 2003, by and among Seminis Vegetable Seeds, Inc., Seminis
Inc., Petoseed International, Inc., PGI Alfalfa, Inc., Baxter Seed Co., Inc., Citigroup Global Markets Inc., CIBC World Markets
Corp., Harris Nesbitt Corp., and Rabo Securities USA, Inc.*10.2
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Alfonso Romo.*10.3
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Bruno Ferrari.*10.4
    
    Amendment, dated August 7, 2003, to the Employment Agreement, made May 30, 2003, between Seminis, Inc. and Bruno Ferrari.*10.5
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Mateo Mazal.*10.6
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Bernardo Jimenez.*10.7
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Gaspar Alvarez.*10.8
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Jose Manuel Madero.*10.9
    
    Employment Agreement, dated as of May 30, 2003, between Seminis, Inc. and Charles Edward Green.*10.10
    
    New Senior Secured Credit Facility by and among Seminis, Vegetables Inc. as the borrower, Seminis, Inc. as the parent guarantor,
Citicorp North America, Inc. as administrative agent, CIBC World Markets Corp. and Rabobank International as co-documentation
agents, Harris Trust and Savings Bank as syndication agent and Citigroup Global Markets Inc. together with Harris Trust and Savings
Bank as joint lead arrangers and joint bookrunners consisting of a $75.0 million revolving loan and a $90.0 million term loan, dated
as of September 29, 2003, as amended by Amendment No. 1 thereto dated as of January 15, 2004.*12.1
    
    Computation of Consolidated Ratios of Earnings to Fixed Charges (set forth on pages 15 and 46 of the prospectus forming part of this
registration statement).14.
    
    Code of Ethics21.1
    
    Subsidiaries of Registrants.*31.1
    
    Certification of Chief Executive
Officer under Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Vice President,
Finance and Worldwide Corporate Comptroller under Section 302 of the
Sarbanes-Oxley Act of 2002.
 46




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##### Table of Contents



ExhibitNumber
    
    Description32.1
    
    Certification of Chief Executive
Officer under Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Vice President,
Finance and Worldwide Corporate Comptroller under Section 906 of the Sarbanes-Oxley Act of 2002.
    *
    
    Previously filed as exhibits to the Registration Statement declared effective
on March 19, 2004 (SEC No. 333-110506). 47




---



##### Table of Contents



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. SEMINIS, INC.By:
    /s/ BRUNO FERRARIName:
    Bruno FerrariTitle:
    President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated. SIGNATURE
    
    TITLE
    
    DATE/s/   ALFONSO ROMO GARZA
Alfonso Romo Garza
    
    Chairman of the Board 
(Chief Executive Officer)
    
    December 17, 2004/s/   BRUNO FERRARI
Bruno Ferrari
    
    Director and President
(Chief Operating Officer)
    
    December 17, 2004/s/   BERNARDO JIMENEZ BARRERA
Bernardo Jimenez Barrera
    
    Director
(Secretary, Executive
Senior Vice President and
Chief Financial Officer)
    
    December 17, 2004/s/   W. DEXTER PAINE, III
W. Dexter Paine, III
    
    Vice Chairman of the Board
    
    December 17, 2004/s/   KEVIN M. SCHWARTZ
Kevin M. Schwartz
    
    Director
    
    December 17, 2004/s/   SAUL A. FOX
Saul A. Fox
    
    Director
    
    December 17, 2004/s/   EUGENIO GARZA HERRERA
Eugenio Garza Herrera
    
    Director
    
    December 17, 2004/s/   GASPAR ALVAREZ MARTINEZ
Gaspar Alvarez Martinez
    
    Vice President, Finance and
Worldwide Corporate
Comptroller
    
    December 17, 2004
 48




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##### Table of Contents



SEMINIS, INC. Index To Consolidated Financial Statements PageReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of September 30, 2004 and 2003
    
    F-3Consolidated Statements of Operations for the Year Ended September 30, 2004,
for the Day Ended September 30, 2003, for the Twelve Months Ended September 29, 2003,
and for the Year Ended September 30, 2002
    
    F-4Consolidated Statements of Stockholders Equity for the Year Ended September 30, 2004,
for the Day Ended September 30, 2003, for the Twelve Months Ended September 29, 2003,
and for the Year Ended September 30, 2002 and 2001
    
    F-5Consolidated Statements of Cash Flows for the Year Ended September 30, 2004,
for the Day Ended September 30, 2003 for the Twelve Months Ended September 29, 2003,
and for the Year Ended September 30, 2002
    
    F-6Notes to Consolidated Financial Statements
    
    F-7
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm To the Board of Directors and
Shareholders of Seminis, Inc. In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of Seminis, Inc. and
its subsidiaries at September 30, 2004 and 2003, and the results of their
operations and their cash flows for the year ended September 30, 2004, the day
ended September 30, 2003, the twelve month period ended September 29, 2003 and
the year ended September 30, 2002 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our
opinion, the accompanying financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion. As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for stock-based compensation as of October 1,
2003. PRICEWATERHOUSECOOPERS LLP Los Angeles, California
December 20, 2004 F-2




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##### Table of Contents



SEMINIS, INC.
Consolidated Balance Sheets
(In thousands, except per share data) As of
    
    As ofSeptember 30,
    
    September 30,2004
    
    2003Assets:Current assetsCash and cash equivalents
    
    $
    116,870
    
    
    $
    36,824Accounts receivable, less allowance for doubtful accounts of $10,072 and $10,439, respectively
    
    
    153,173
    
    
    
    151,578Inventories
    
    
    328,395
    
    
    
    351,637Prepaid expenses and other current assets
    
    
    8,017
    
    
    
    4,450Total current assets
    
    
    606,455
    
    
    
    544,489Property, plant and equipment, net
    
    
    78,608
    
    
    
    69,792Intangible assets, net
    
    
    69,008
    
    
    
    73,009Other assets
    
    
    23,591
    
    
    
    19,957$
    777,662
    
    
    $
    707,247Liabilities and Stockholders Equity:Current liabilitiesShort-term borrowings
    
    $
    10,965
    
    
    $
    20,031Current maturities of long-term debt
    
    
    1,746
    
    
    
    2,722Accounts payable
    
    
    63,339
    
    
    
    50,280Accrued liabilities
    
    
    106,752
    
    
    
    87,414Income tax payable
    
    
    13,582
    
    
    
    2,002Total current liabilities
    
    
    196,384
    
    
    
    162,449Long-term debt
    
    
    448,816
    
    
    
    398,538Deferred income taxes
    
    
    16,291
    
    
    
    21,312Minority interest in subsidiaries
    
    
    1,644
    
    
    
    1,723Preferred shares subject to mandatory redemption
    
    
    41,773
    
    
    
    39,300Total liabilities
    
    
    704,908
    
    
    
    623,322Commitments and contingencies (see Note 14)Stockholders EquityCommon Stock, $.01 par value; 200,000 shares authorized as of September 30, 2004 and 2003;
64,333 and 63,260 shares issued and outstanding as of
September 30, 2004 and 2003, respectively
    
    
    644
    
    
    
    633Additional paid-in capital
    
    
    94,149
    
    
    
    91,034Accumulated deficit
    
    
    (23,911
    )
    
    
    (7,603
    )Accumulated other comprehensive income (loss)
    
    
    1,872
    
    
    
    (139
    )Total stockholders equity
    
    
    72,754
    
    
    
    83,925$
    777,662
    
    
    $
    707,247
 The accompanying notes are an integral part of these consolidated financial statements. F-3




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##### Table of Contents



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

    
    PredecessorFor the
    
    For the

    
    For the
    
    For theYear
    
    Day

    
    Twelve Months Ended
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,

    
    Sep. 29,
    
    Ended Sep. 30,2004
    
    2003

    
    2003
    
    2002Net sales
    
    $
    525,839
    
    
    $
    4,710


    
    $
    472,695
    
    
    $
    452,607Cost of goods sold
    
    
    235,730
    
    
    
    1,901
    

    
    
    179,657
    
    
    
    171,892Gross profit
    
    
    290,109
    
    
    
    2,809
    

    
    
    293,038
    
    
    
    280,715Operating expensesResearch and development expenses
    
    
    51,141
    
    
    
    132
    

    
    
    48,263
    
    
    
    44,316In-process research and development
    
    
    
    
    
    
    10,618
    

    
    
    
    
    
    
    Selling, general and administrative expenses
    
    
    194,756
    
    
    
    861
    

    
    
    215,077
    
    
    
    174,854Amortization of intangible assets
    
    
    7,993
    
    
    
    41
    

    
    
    16,309
    
    
    
    17,065Total operating expenses
    
    
    253,890
    
    
    
    11,652
    

    
    
    279,649
    
    
    
    236,235Gain on sale of assets
    
    
    4,298
    
    
    
    
    

    
    
    1,910
    
    
    
    5,953Income (loss) from operations
    
    
    40,517
    
    
    
    (8,843
    )

    
    
    15,299
    
    
    
    50,433Other income (expense)Interest income
    
    
    1,074
    
    
    
    1,966
    

    
    
    860
    
    
    
    1,270Interest expense
    
    
    (39,723
    )
    
    
    (701
    )

    
    
    (33,616
    )
    
    
    (28,989
    )Interest expense from preferred shares
subject to mandatory redemption
    
    
    (7,089
    )
    
    
    
    

    
    
    
    
    
    
    Foreign currency gain (loss)
    
    
    7,045
    
    
    
    22
    

    
    
    1,375
    
    
    
    (2,177
    )Minority interest
    
    
    (1,289
    )
    
    
    5
    

    
    
    (692
    )
    
    
    (1,187
    )Other, net
    
    
    (4,388
    )
    
    
    (33
    )

    
    
    (1,466
    )
    
    
    (795
    )(44,370
    )
    
    
    1,259
    

    
    
    (33,539
    )
    
    
    (31,878
    )Income (loss) before income taxes
    
    
    (3,853
    )
    
    
    (7,584
    )

    
    
    (18,240
    )
    
    
    18,555Income tax expense
    
    
    (12,455
    )
    
    
    (19
    )

    
    
    (5,827
    )
    
    
    (2,469
    )Net income (loss)
    
    
    (16,308
    )
    
    
    (7,603
    )

    
    
    (24,067
    )
    
    
    16,086Preferred stock dividends
    
    
    
    
    
    
    
    

    
    
    (1,994
    )
    
    
    (11,022
    )Additional capital contribution dividends
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    (3,505
    )Contingent dividends payable
    
    
    
    
    
    
    
    

    
    
    (16,642
    )
    
    
    (4,161
    )Discount on redemption of Class B Redeemable
Preferred Stock
    
    
    
    
    
    
    1,250
    

    
    
    
    
    
    
    Forgiveness of dividends payable to Savia
    
    
    
    
    
    
    1,035
    

    
    
    
    
    
    
    Net loss available for common stockholders
    
    $
    (16,308
    )
    
    $
    (5,318
    )

    
    $
    (42,703
    )
    
    $
    (2,602
    )
 The accompanying notes are an integral part of these consolidated financial statements. F-4




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##### Table of Contents



SEMINIS, INC.
Consolidated Statements of Stockholders Equity
(In thousands) Class C
    
    Class A
    
    Class BPreferred Stock
    
    Common Stock
    
    Common StockNumber
    
    Amount
    
    Number
    
    Amount
    
    Number
    
    AmountPredecessorBalance, September 30, 2001
    
    
    12
    
    
    $
    1
    
    
    
    14,682
    
    
    $
    147
    
    
    
    45,142
    
    
    $
    452Comprehensive IncomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity adjustment for minimum
Pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted share issuance
    
    
    
    
    
    
    
    
    
    
    4,254
    
    
    
    43
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Dividends on additional
Capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends on Class B Redeemable
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends on Class C Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2002
    
    
    12
    
    
    
    1
    
    
    
    18,940
    
    
    
    190
    
    
    
    45,142
    
    
    
    452Comprehensive IncomeNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity adjustment for minimum
Pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity adjustment for interest
rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional Capital Contribution
Conversion to Class C Preferred
Stock
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    502
    
    
    
    4
    
    
    
    
    
    
    
    Dividends on Class B Redeemable
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 29, 2003
    
    
    17
    
    
    
    1
    
    
    
    19,442
    
    
    
    194
    
    
    
    45,142
    
    
    
    452SuccessorCarryover equity
    
    
    
    
    
    
    
    
    
    
    57,112
    
    
    $
    571
    
    
    
    45,142
    
    
    $
    452Comprehensive LossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity adjustment for
Interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Value of warrants issued in
Connection with preferred stock
Offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of public shares
    
    
    
    
    
    
    
    
    
    
    (15,557
    )
    
    
    (156
    )
    
    
    (2,319
    )
    
    
    (23
    )Purchase of
shares held by Savia
    
    
    
    
    
    
    
    
    
    
    (21,118
    )
    
    
    (211
    )
    
    
    
    
    
    
    Conversion of Class B Common
Stock to Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    42,823
    
    
    
    429
    
    
    
    (42,823
    )
    
    
    (429
    )Discount on redemption of Class B
Redeemable Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fox Paine transaction fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalization of dividends
payable to Savia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forgiveness of dividends payable
to Savia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2003
    
    
    
    
    
    
    
    
    
    
    63,260
    
    
    
    633
    
    
    
    
    
    
    
    Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity adjustment for:Interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share issuances for
compensation
    
    
    
    
    
    
    
    
    
    
    1,073
    
    
    
    11
    
    
    
    
    
    
    
    Balance, September 30, 2004
    
    
    
    
    
    $
    
    
    
    $
    64,333
    
    
    $
    644
    
    
    
    
    
    
    $
    
   [Continued from above table, first column(s) repeated] Accumulated
    
    TotalAdditional
    
    
    
    
    
    Other
    
    Stock-Paid-in
    
    Accumulated
    
    Comprehensive
    
    HoldersCapital
    
    Deficit
    
    Income (Loss)
    
    EquityPredecessorBalance, September 30, 2001
    
    $
    707,816
    
    
    $
    (340,644
    )
    
    $
    (48,054
    )
    
    $
    319,718Comprehensive IncomeNet income
    
    
    
    
    
    
    16,086
    
    
    
    
    
    
    
    16,086Translation adjustment
    
    
    
    
    
    
    
    
    
    
    17,395
    
    
    
    17,395Equity adjustment for minimum
Pension liability
    
    
    
    
    
    
    
    
    
    
    (7,176
    )
    
    
    (7,176
    )26,305Restricted share issuance
    
    
    5,966
    
    
    
    
    
    
    
    
    
    
    
    6,009Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends on additional
Capital contribution
    
    
    (3,505
    )
    
    
    
    
    
    
    
    
    
    
    (3,505
    )Dividends on Class B Redeemable
Preferred Stock
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    (2,000
    )Dividends on Class C Preferred
Stock
    
    
    (9,022
    )
    
    
    
    
    
    
    
    
    
    
    (9,022
    )Balance, September 30, 2002
    
    
    699,255
    
    
    
    (324,558
    )
    
    
    (37,835
    )
    
    
    337,505Comprehensive IncomeNet loss
    
    
    
    
    
    
    (24,067
    )
    
    
    
    
    
    
    (24,067
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    30,115
    
    
    
    30,115Equity adjustment for minimum
Pension liability
    
    
    
    
    
    
    
    
    
    
    (373
    )
    
    
    (373
    )Equity adjustment for interest
rate swap
    
    
    
    
    
    
    
    
    
    
    (508
    )
    
    
    (508
    )5,167Additional Capital Contribution
Conversion to Class C Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    502
    
    
    
    
    
    
    
    
    
    
    
    506Dividends on Class B Redeemable
Preferred Stock
    
    
    (1,994
    )
    
    
    
    
    
    
    
    
    
    
    (1,994
    )Balance, September 29, 2003
    
    
    697,763
    
    
    
    (348,625
    )
    
    
    (8,601
    )
    
    
    341,184SuccessorCarryover equity
    
    $
    220,987
    
    
    $
    
    
    
    $
    
    
    
    $
    222,010Comprehensive LossNet loss
    
    
    
    
    
    
    (7,603
    )
    
    
    
    
    
    
    (7,603
    )Equity adjustment for
Interest rate swap
    
    
    
    
    
    
    
    
    
    
    (139
    )
    
    
    (139
    )(7,742
    )Value of warrants issued in
Connection with preferred stock
Offering
    
    
    10,700
    
    
    
    
    
    
    
    
    
    
    
    10,700Purchase of public shares
    
    
    (67,392
    )
    
    
    
    
    
    
    
    
    
    
    (67,571
    )Purchase of
shares held by Savia
    
    
    (71,590
    )
    
    
    
    
    
    
    
    
    
    
    (71,801
    )Conversion of Class B Common
Stock to Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Discount on redemption of Class B
Redeemable Preferred Stock
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Fox Paine transaction fee
    
    
    (13,965
    )
    
    
    
    
    
    
    
    
    
    
    (13,965
    )Capitalization of dividends
payable to Savia
    
    
    10,009
    
    
    
    
    
    
    
    
    
    
    
    10,009Forgiveness of dividends payable
to Savia
    
    
    1,035
    
    
    
    
    
    
    
    
    
    
    
    1,035Balance, September 30, 2003
    
    
    91,034
    
    
    
    (7,603
    )
    
    
    (139
    )
    
    
    83,925Comprehensive lossNet loss
    
    
    
    
    
    
    (16,308
    )
    
    
    
    
    
    
    (16,308
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    846
    
    
    
    846Equity adjustment for:Interest rate swap
    
    
    
    
    
    
    
    
    
    
    243
    
    
    
    243Minimum pension
liability
    
    
    
    
    
    
    
    
    
    
    922
    
    
    
    922(14,297
    )Share issuances for
compensation
    
    
    3,115
    
    
    
    
    
    
    
    
    
    
    
    3,126Balance, September 30, 2004
    
    $
    94,149
    
    
    $
    (23,911
    )
    
    $
    1,872
    
    
    $
    72,754
 The accompanying notes are an integral part of these consolidated financial tatements. F-5




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##### Table of Contents



SEMINIS, INC.
Consolidated Statements of Cash Flows
(In thousands) Successor
    
    PredecessorFor the
    
    For the
    
    For the
    
    For theYear
    
    Day
    
    Twelve Months Ended
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,
    
    Sep. 29,
    
    Ended Sep. 30,2004
    
    2003
    
    2003
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    (16,308
    )
    
    $
    (7,603
    )
    
    $
    (24,067
    )
    
    $
    16,086Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:Depreciation and amortization
    
    
    15,341
    
    
    
    905
    
    
    
    30,993
    
    
    
    32,544Loss /(gain) on sale of fixed assets
    
    
    (4,298
    )
    
    
    
    
    
    
    (1,910
    )
    
    
    (5,953
    )Deferred income tax
    
    
    1,841
    
    
    
    
    
    
    
    3,029
    
    
    
    (266
    )Minority interest in subsidiary
    
    
    1,289
    
    
    
    (5
    )
    
    
    692
    
    
    
    1,187Inventory provision
    
    
    14,679
    
    
    
    
    
    
    
    16,015
    
    
    
    16,937Gain on sale of non-core business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,971
    )Compensation expense for restricted stock units
    
    
    1,100
    
    
    
    
    
    
    
    3,711
    
    
    
    5,866In-process research and development
    
    
    
    
    
    
    10,618
    
    
    
    
    
    
    
    Amortization of inventory step-up
    
    
    47,360
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency (gain) / loss
    
    
    (7,045
    )
    
    
    (22
    )
    
    
    (1,375
    )
    
    
    2,177Write-off of deferred financing fees
    
    
    3,818
    
    
    
    
    
    
    
    2,256
    
    
    
    Other
    
    
    (1,573
    )
    
    
    32
    
    
    
    5,775
    
    
    
    5,291Changes in assets and liabilitiesAccounts receivable
    
    
    2,648
    
    
    
    (4,710
    )
    
    
    4,092
    
    
    
    3,212Inventories
    
    
    (36,406
    )
    
    
    1,220
    
    
    
    (7,101
    )
    
    
    (5,866
    )Prepaid expenses and other assets
    
    
    (10,188
    )
    
    
    (12,839
    )
    
    
    (12,124
    )
    
    
    (8,226
    )Current income taxes
    
    
    4,678
    
    
    
    19
    
    
    
    (2,687
    )
    
    
    487Accounts payable
    
    
    11,744
    
    
    
    802
    
    
    
    8,641
    
    
    
    (7,403
    )Other liabilities
    
    
    22,301
    
    
    
    (362
    )
    
    
    5,133
    
    
    
    (13,029
    )Net cash provided by (used in) operating activities
    
    
    50,981
    
    
    
    (11,945
    )
    
    
    31,073
    
    
    
    38,073Cash flows from investing activities:Purchases of fixed and intangible assets
    
    
    (17,280
    )
    
    
    (6,337
    )
    
    
    (16,377
    )
    
    
    (14,826
    )Proceeds from disposition of assets
    
    
    6,308
    
    
    
    
    
    
    
    10,229
    
    
    
    28,517Proceeds from sale of non-core business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,551Other
    
    
    (1,311
    )
    
    
    
    
    
    
    (539
    )
    
    
    (258
    )Net cash provided by (used in) investing activities
    
    
    (12,283
    )
    
    
    (6,337
    )
    
    
    (6,687
    )
    
    
    30,984Cash flows from financing activities:Proceeds from long-term debt issuances
    
    
    167,687
    
    
    
    207,000
    
    
    
    711
    
    
    
    1,855Proceeds from issuance of senior subordinated notes
    
    
    
    
    
    
    190,000
    
    
    
    
    
    
    
    Proceeds from issuance of mandatory redeemable stock
    
    
    
    
    
    
    39,300
    
    
    
    
    
    
    
    Proceeds from issuance of warrants
    
    
    
    
    
    
    10,700
    
    
    
    
    
    
    
    Repayments of long-term debt
    
    
    (117,591
    )
    
    
    (228,235
    )
    
    
    (18,799
    )
    
    
    (67,869
    )Proceeds from short term borrowings
    
    
    8,155
    
    
    
    
    
    
    
    27,870
    
    
    
    39,374Repayments of short-term borrowings
    
    
    (17,026
    )
    
    
    
    
    
    
    (39,083
    )
    
    
    (31,768
    )Dividends paid
    
    
    
    
    
    
    (20,460
    )
    
    
    
    
    
    
    Redemption of Class B Redeemable Preferred Stock
    
    
    
    
    
    
    (23,750
    )
    
    
    
    
    
    
    Purchase of shares held by Savia
    
    
    
    
    
    
    (71,801
    )
    
    
    
    
    
    
    Purchase of public shares
    
    
    
    
    
    
    (67,571
    )
    
    
    
    
    
    
    Fox Paine transaction fee
    
    
    
    
    
    
    (13,965
    )
    
    
    
    
    
    
    Other
    
    
    (624
    )
    
    
    
    
    
    
    647
    
    
    
    4Net cash provided by (used in) financing activities
    
    
    40,601
    
    
    
    21,218
    
    
    
    (28,654
    )
    
    
    (58,404
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    747
    
    
    
    
    
    
    
    1,351
    
    
    
    3,829Increase (decrease) in cash and cash equivalents
    
    
    80,046
    
    
    
    2,936
    
    
    
    (2,917
    )
    
    
    14,482Cash and cash equivalents, beginning of period
    
    
    36,824
    
    
    
    33,888
    
    
    
    36,805
    
    
    
    22,323Cash and cash equivalents, end of period
    
    $
    116,870
    
    
    $
    36,824
    
    
    $
    33,888
    
    
    $
    36,805
 The accompanying notes are an integral part of these consolidated financial statements. F-6




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##### Table of Contents



SEMINIS, INC.
Notes To Consolidated Financial Statements
(In thousands, except per share data) Note 1  Summary of Significant Accounting Policies Description of Business Seminis, Inc. (the Company) is the leading worldwide developer, producer and
marketer of vegetable and fruit seeds. The Company was a majority-owned
subsidiary of Savia, S.A. de C.V. (Savia) and effectively began operations
when it purchased Asgrow Seed Company (Asgrow) in December 1994. As a result
of the acquisition transactions, which were completed on September 29, 2003
(see Notes 2 and 3 of our consolidated financial statements), Fox Paine &
Company, LLC, together with its affiliates and co-investors (collectively, Fox
Paine), became the Companys majority shareholder. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of the Company and
its majority controlled and owned subsidiaries. Investments in unconsolidated
entities, representing ownership interests between 20% and 50%, are accounted
for using the equity method of accounting. All material intercompany
transactions and balances have been eliminated in consolidation. Certain
reclassifications have been made to prior years financial statements to
conform to the current presentation. As a result of the acquisition transactions described in Note 3, which were
completed on September 29, 2003, the Company has presented its results of
operations, changes in stockholders equity and cash flows on a
predecessor/successor basis. The successor periods include the fiscal year
ended September 30, 2004 and the one day ended September 30, 2003 while the
predecessor periods include the 364 days ended (referred to herein as the
twelve months ended) September 29, 2003, and the fiscal year ended September
30, 2002. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the fiscal period, including estimates and assumptions related to customer
discounts and allowances. Actual results could differ from those estimates. Revenue Recognition Product sales are recognized upon shipment of goods and are reduced by
provisions for discounts and allowances based on the Companys historical and
anticipated experience. Cash and Cash Equivalents The Company classifies as cash equivalents all highly liquid investments
purchased with an original maturity of three months or less. The Company
invests its excess cash in deposits with major international banks, in
government securities and in money market accounts with financial institutions.
Such investments are considered cash equivalents for purposes of reporting
cash flows and bear minimal risk. Accounts Receivable Accounts receivable are valued net of reserves for bad debts, discounts and
allowances. Calculations of reserves are based on historical experience and
anticipated market conditions and are adjusted as management determines
necessary. The Company performs ongoing credit evaluations of its customers
financial condition and generally does not require collateral. The Companys
diversified customer base limits the amount of credit exposure to any one
customer. No customer accounts for more than 10% of accounts receivable or sales. Inventories Inventories are stated at the lower of cost or estimated net realizable value,
adjusted for the acquisition transactions described in Note 3. Costs for
substantially all inventories are determined using the first-in, first-out
(FIFO) method and include the cost of materials, direct labor and the
applicable share of overhead costs. Unharvested crop-growing costs are included
as part of inventory and represent costs incurred to plant and maintain seed
crops which will be harvested during the subsequent fiscal year. Inventories
are periodically reviewed and reserves established for deteriorated, excess and
obsolete items. F-7




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##### Table of Contents



Property, Plant and Equipment Property, plant and equipment are stated at cost, adjusted for the acquisition
transactions as described in Note 3. Provisions for depreciation have been
made using the straight-line and accelerated methods for financial reporting
purposes and accelerated methods for tax purposes. Estimated useful lives
generally range from 5 to 40 years for buildings and improvements and from 3 to
20 years for machinery and equipment. Impairment of Long-Lived Assets We account for impairment of long-lived assets in accordance with SFAS 144
Accounting for the Impairment or Disposal of Long-Lived Assets. In the event
that facts and circumstances indicate that the carrying value of long-lived
assets may be impaired, we perform a recoverability evaluation. If the
evaluation indicates that the carrying amount of the asset is not recoverable
from our undiscounted cash flows, then an impairment loss is measured by
comparing the carrying amount of the asset to its fair value. Goodwill Prior to fiscal year 2002, goodwill was amortized over 15 years on a
straight-line basis. We adopted SFAS No. 142 Goodwill and Other Intangible
Assets in fiscal year 2002. In accordance with SFAS 142, goodwill is tested at
least annually for impairment utilizing a two-step method for determining
goodwill impairment. In the first step, we determine the fair value of the
reporting unit using expected future discounted cash flows. If the net book
value of the reporting unit exceeds the fair value, we would then perform the
second step of the impairment test which requires allocation of the reporting
units fair value of all of its assets and liabilities in a manner similar to a
purchase price allocation, with any residual fair value being allocated to
goodwill. The fair value of the goodwill is then compared to the carrying
amount to determine impairment. An impairment charge will be recognized only
when the implied fair value of a reporting unit, including goodwill, is less
than its carrying amount. There was no goodwill at
September 30, 2004 and 2003, as a
result of the acquisition transactions as described in Note 3. Capitalized Software Costs Costs of computer software developed and obtained for internal use are
capitalized and amortized over respective license periods or expected useful
lives, which range from three to five years. Capitalized computer software
costs include external direct costs for licenses and services and payroll and
payroll-related costs for employees who are directly associated with developing
or installing such software. Such costs were adjusted in fiscal year 2003 as
described in Note 3. Seedmens Errors and Omissions The Company maintains third party seedmens errors and omissions insurance
covering claims by growers for losses incurred as a result of seed quality or
errors arising in fulfilling customer orders. Such policies are subject to
annual renewal and revision and have coverage limits, deductibles and other
terms. Provisions are made for anticipated losses in excess of coverage
amounts provided by insurance based on historical experience, expected
resolution and actuarial analysis. The Company performs ongoing evaluations of
such claims and adjusts reserves as necessary to reflect expected settlements.
In general, the amounts estimated approximate actual settlements. Research and Development Expenses Research and development costs are charged to operations as incurred. Costs
attributable to in-process research and development activities
acquired in purchase transactions were written-off at the date of acquisition. F-8




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##### Table of Contents



Income Taxes Income taxes are determined in accordance with Statement of Financial
Accounting Standards (SFAS) 109, which requires recognition of deferred
income tax liabilities and assets for the expected future tax consequences of
events that have been included in the consolidated financial statements or tax
returns. Under this method, deferred income tax liabilities and assets are
determined based on the difference between the financial statement and tax
basis of liabilities and assets using enacted tax rates in effect for the year
in which the differences are expected to reverse. SFAS 109 also provides for
the recognition of deferred tax assets if it is more likely than not that the
assets will be realized in future years. A valuation allowance has been
established to reduce deferred taxes to the amount that is more likely than not
to be realized. Foreign Currency Translation and Transactions The financial statements of the Companys foreign subsidiaries are generally
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at
the balance sheet date. The resultant translation adjustments are included in
accumulated other comprehensive loss as a separate component of stockholders
equity. Income and expense items are primarily translated at average monthly
rates of exchange prevailing during the fiscal year. Gains and losses from
foreign currency transactions are included in the consolidated statements of
operations. Subsidiaries operating in highly inflationary economies or primarily using the
United States dollar as their functional currency include gains and losses from
foreign currency transactions and balance sheet translation adjustments in the
consolidated statements of operations. Financial Instruments The Companys financial instruments consist primarily of cash, accounts
receivable, notes receivable, accounts payable, accrued liabilities, debt and
preferred shares subject to mandatory redemption. These balances are stated in
the consolidated financial statements at amounts that approximate fair market
value unless separately disclosed in the Notes to Consolidated Financial
Statements. Comprehensive Income Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the Company, comprehensive income primarily
consists of its reported net income or loss, changes in foreign currency
translation adjustments, changes in the minimum pension liability adjustment
and changes in the fair value of derivatives which qualify as effective cash
flow hedges. Stock-Based Compensation The Company has a policy whereby all stock option grants are priced at fair
market value on the date of grant. Under the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, the Company uses the intrinsic value
method of accounting for stock-based compensation in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. Under the intrinsic value method, compensation cost is the excess,
if any, of the quoted market price of the stock at the grant date or other
measurement date over the amount an employee must pay to acquire the stock. Effective October 1, 2003, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards (SFAS) No.
123, Accounting for Stock-Based Compensation (SFAS No. 123), for
stock-based employee compensation. Under the modified prospective method of
adoption selected by the Company under the provisions of SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure,
stock-based employee compensation expense recognized in fiscal year 2004 is the
same as that which would have been recognized had the fair value recognition
provisions of SFAS No. 123 been applied to all awards from its original
effective date. Results of prior years have not been restated. The following
table illustrates the effect on net income (loss) if the fair value method had
been applied in each period (in thousands) with the approach of SFAS No. 123: Successor
    

    PredecessorFor the Day
    

    For the TwelveEnded
    

    Months Ended
    
    For the Year EndedSeptember 30,
    

    September 29,
    
    September 30,2003
    

    2003
    
    2002Net loss available for common stockholders, as reported
    
    $
    (5,318
    )
    

    $
    (42,703
    )
    
    $
    (2,602
    )Add: Employee stock option expense included in
reported net loss, net of related tax effects
    
    
    
    
    

    
    
    
    
    
    Deduct: Total employee stock option expense
determined under fair value method for awards, net of
related tax effects
    
    
    
    
    

    
    (1,887
    )
    
    
    (769
    )Pro forma net loss
    
    $
    (5,318
    )
    

    $
    (44,590
    )
    
    $
    (3,371
    )
 Pro forma information regarding net income is required by SFAS No. 123. This
information is required to be determined as if the Company had accounted for
its employee stock options granted under the fair market value method of that
statement. The weighted average fair
value of options granted in fiscal year 2002 was $0.98 per share using the
Black-Scholes options pricing model, assuming a weighted average risk-free
interest rate of 4.59%, an expected life of five years and no projected
dividend yields. Stock price volatility was 100% for the October 2000, August
2001 and April 2002 grants. F-9




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##### Table of Contents



Derivative Instruments and Hedging Activities The Company accounts for derivative instruments and hedging activities in
accordance with the provisions of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities as amended by SFAS No. 137, No. 138 and No.
149. SFAS No. 133 requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair market value. It also requires that
gains or losses resulting from changes in the values of those derivatives be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. Prior to fiscal year 2003, the Company had no derivative
instruments. In September 2003, the Company purchased an interest rate swap
agreement, which qualifies as a cash flow hedge under SFAS No. 133. Accounting for Shipping and Handling Fees and Costs The Company accounts for shipping and handling fees and costs in accordance
with the provisions of EITF 00-10, Accounting for Shipping and Handling Fees
and Costs. EITF 00-10 requires that all amounts billed to a customer in a sale
transaction related to shipping and handling, if any, represent revenues earned
for the goods provided and should be classified as revenue. It also states that
a company may record shipping and handling costs in cost of sales. If such
costs are significant and are not included in cost of sales (that is, if those
costs are accounted for together or separately on other income statement line
items), a company should disclose both the amount(s) of such costs and the line
item(s) on the income statement that include them. Freight and handling
charges of $4.2 million, $4.4 million and $4.3 million related to customer
shipping were stated on a gross basis in selling expense with a corresponding
$4.2 million, $3.6 million and $3.1 million of revenue stated in net sales in
fiscal years 2004, 2003 and 2002, respectively. Supplementary Cash Flow Information Successor
    

    PredecessorFor the
    
    For the
    

    For the
    
    For theYear
    
    Day
    

    Twelve Months
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,
    

    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003
    

    2003
    
    2002Cash paid for interest
    
    $
    31,710
    
    
    $
    
    
    

    $
    27,874
    
    
    $
    25,407Cash paid for income taxes
    
    
    5,936
    
    
    
    
    
    

    
    5,485
    
    
    
    2,248Supplemental non-cash transactions:Class C Preferred Stock dividends
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    9,022Class B Redeemable Preferred Stock
Dividend
    
    
    
    
    
    
    
    
    

    
    1,994
    
    
    
    2,000Additional capital contribution dividends
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    3,505Discount on redemption of Class BRedeemable Preferred Stock
    
    
    
    
    
    
    1,250
    
    

    
    
    
    
    
    Forgiveness of dividends payable to Savia
    
    
    
    
    
    
    1,035
    
    

    
    
    
    
    
    
 F-10




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##### Table of Contents



Recent Accounting Pronouncements In November 2004, FASB Statement No. 151, Inventory Costs, an Amendment of ARB
No. 43, Chapter 4(SFAS No. 151), was issued. The amendments made by SFAS No.
151 clarify that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and require the allocation of fixed production overheads to inventory
based on the normal capacity of the production facilities. SFAS No. 151 will
become effective beginning in fiscal 2006. We are in the process of assessing
the impact SFAS No. 151 will have on our financial position and results of
operations. In March 2004, the FASB issued an exposure draft entitled Share-Based Payment
to amend SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No.
95, Statement of Cash Flows. The proposed standards effective date will
apply to awards that are granted, modified, or settled in cash in interim or
annual periods beginning after June 15, 2005. This proposed standard would
eliminate the ability to account for share-based compensation using the
intrinsic value-based method under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. This exposure draft would require
the Company to calculate equity-based compensation expense for stock options
and employee stock purchase plan rights granted to employees based on the fair
value of the equity instrument at the time of grant. Management will continue
to evaluate the impact that the exposure draft will have on the Companys
financial position and results of operations. In December 2003, the FASB reissued SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits, an amendment of FASB Statements No.
87, 88, and 106. This Statement revises employers disclosures about pension
plans and other postretirement benefit plans. It does not change the
measurement or recognition of those plans required by SFAS No. 87, Employers
Accounting for Pensions, SFAS No. 88, Employers Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits, and SFAS No. 106, Employers Accounting for Postretirement Benefits
Other Than Pensions. This Statement retains the disclosure requirements
contained in the original SFAS No. 132, Employers Disclosures about Pensions
and Other Postretirement Benefits. The revised Statement also requires
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The provisions of the original SFAS No. 132 will
remain in effect until the provisions of this Statement are adopted. Certain
new provisions are effective for financial statements with fiscal years ending
after December 15, 2003, while other provisions are effective for fiscal years
ending after June 15, 2004. The interim period disclosures are effective for
interim periods beginning after December 15, 2003. See Note 13 Pensions and
Other Postretirement Benefits, for disclosures required under the revised SFAS
No. 132. In December 2003, FASB reissued
Interpretation No. 46, Consolidation of Variable Interest Entities  an
Interpretation of ARB No. 51. The Interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity risk for the
entity to finance its activities without additional subordinated financial
support. The provisions of this Interpretation are effective for the Company
for interim periods ending after March 15, 2004. The adoption of this
Interpretation has not had a significant impact on the Companys financial
results of operations and financial position. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This Statement requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
The provisions of this Statement are effective for financial instruments
entered into or modified after May 31, 2003, and otherwise are effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company adopted this Statement as of June 27, 2003 and accordingly classified
its newly issued paid-in-kind mandatory redeemable preferred stock (PIK
Preferred Stock) as a liability. In April 2003, the FASB issued SFAS No. 149, Amendment to Statement 133 on
Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) used for hedging activities under
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
The provisions of this Statement are effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of this Statement did not have a significant impact
on the Companys financial condition or results of operations. F-11




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In January 2003, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No.
123. SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. It also requires disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. SFAS No. 148 is
effective for annual and interim periods beginning after December 15, 2002. The
Company has adopted FASB Statement No. 123 under the provisions of SFAS No. 148
on October 1, 2003, see Note 13 Benefit Plan (Stock Based Compensation) for
related disclosure under this provision. Recent Tax Legislation The United States Congress passed the American Jobs Creation Act of 2004 (the
Act), which the President signed into law on October 22, 2004. Key provisions
of the Act include a temporary incentive for U.S. multinational corporations to
repatriate foreign earnings, a domestic manufacturing deduction, and
international tax reforms designed to improve the global competitiveness of
U.S. businesses. In accordance with SFAS 109, Accounting for Income Taxes, we
will reflect the effects of the Act, if any, in the first quarter of fiscal
2005 as part of income tax expense for the period. We are still evaluating the
impact of the Act on the Company. Accordingly, we have not yet determined its
impact on our effective tax rate and on our deferred tax assets and
liabilities. Note 2  Acquisition Transactions / Liquidity Under the acquisition transactions, in September 2003, the Company became a
privately held company by acquiring all of its publicly held shares of Class A
common stock, shares of Class B common stock and shares of Class B and Class C
Redeemable Preferred Stocks. The Company also repaid the $216.6 million of
principal outstanding under its senior credit facility, and the $11.6 million
mortgage on its Oxnard real property. In order to fund these transactions and
other related expenses, Fox Paine purchased shares of the Companys common
stock for a purchase price of $163.2 million, and the Company issued $190.0
million of ten year, 10 -1/4% senior subordinated notes, established a senior
secured credit facility that consisted of a $190.0 million term loan and a
$60.0 million revolving loan (none of which was outstanding at September 30,
2003), borrowed $17.0 million under a new mortgage note, and issued PIK
Preferred Stock along with warrants to purchase 3.9 million shares of common
stock for combined proceeds of $50.0 million (see Note 11    PIK Preferred
Stock). Upon completion of the acquisition transactions, the Company had total
indebtedness of $421.3 million as of September 30, 2003 compared to $252.5
million before the transactions. On January 23, 2004, the Company issued an additional $140.0 million of its 10
-1/4% senior subordinated notes, at a premium of $12.6 million. These notes
have identical terms and conditions as the $190.0 million of senior
subordinated notes issued as part of the acquisition transactions on September
29, 2003. The net proceeds from the additional notes, after deducting
underwriting discounts and other expenses, were approximately $145.6 million.
These net proceeds from the offering were used to repay $100.0 million and
$15.0 million of the borrowings under the term loan portion and revolver
portion, respectively, of Companys senior secured credit facility and for
general corporate purposes. Concurrently with the offering of the additional notes, the Company amended the
senior secured credit facility. The amended senior secured credit facility
decreased the term loan from $190.0 million to $90.0 million, increased the
revolving credit facility from $60.0 million to $75.0 million, amended pricing
terms on both the term loan and revolver portion of the credit facility, and
amended certain financial covenants. The Companys total indebtedness as of September 30, 2004 was $461.5 million,
of which $88.9 million were borrowings under Companys term loan, $341.7
million were borrowings under our senior 10 -1/4% subordinated notes (including
$11.7 million of remaining premium balance, which will be amortized over the
life of the notes and reduces interest expense), and $17.0 million, $1.3 million,
and $12.6 million were borrowings by its United States, Spanish, and South
Korean subsidiaries, respectively. The Company also has $41.8 million of
preferred shares subject to mandatory redemption (see Note 11    PIK
Preferred Stock). As of September 30, 2004, the Company has cash and cash
equivalents of $116.9 million. Going forward, the Companys principal source of liquidity will be cash flow
generated from operations, borrowings under its senior secured credit facility
and additional capital infusion. The Companys principal uses of cash will be
to meet debt service requirements, finance capital expenditures and provide
working capital. Based on the current level of operations, management believes
that remaining cash on hand, cash flow from operations and available borrowings
under its revolving credit portion of the senior secured credit facility will
enable the Company to meet its working capital, capital expenditure, debt
service and other funding requirements for at least the next 12 months. F-12




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Note 3  Accounting Effects of the Acquisition Transactions Overview On May 30, 2003, the Company and certain other parties entered into a number of
agreements pursuant to which a newly incorporated entity was formed to effect
the acquisition transactions whereby the Company became a privately held
company and Fox Paine acquired 75.1% of the outstanding common stock of the
Company. On September 29, 2003, the acquisition transactions were completed. The acquisition transactions are accounted for under the purchase method of
accounting. In accordance with applicable accounting guidelines, the purchase
price paid by Fox Paine for Seminis common stock plus related purchase
accounting adjustments are pushed down and recorded in Seminis financial
statements. The acquisition transactions resulted, for purposes of financial
statement presentation of the results of operations and cash flows, in a
predecessor entity and a successor entity. Carrying Value Adjustments The 75.1% of deemed assets acquired and liabilities assumed in connection with
the acquisition transactions were originally recorded at their estimated fair
market values based on an independent appraisal and 24.9% of the historical
bases were carried over, however, these values were in excess of the
proportionate purchase price paid by Fox Paine. Accordingly, the negative
goodwill totaling $433.4 million was allocated against the value of non-current
assets on a proportionate basis. The following summarizes the fair market
values, subsequent adjustments and the adjusted carrying values of the net
assets acquired as of September 29, 2003: FMV
    
    24.9%
    
    Negative
    
    Adjusted BasisHistorical
    
    Of 75.1%
    
    Carryover
    
    Goodwill
    
    As ofBasis
    
    Acquired
    
    Basis
    
    Allocation
    
    September 29, 2003Current assets, excluding inventory
    
    $
    185,206
    
    
    $
    139,017
    
    
    $
    46,190
    
    
    $
    
    
    
    $
    185,207Inventory
    
    
    279,680
    
    
    
    283,107
    
    
    
    69,751
    
    
    
    
    
    
    
    352,858Property, plant & equipment
    
    
    166,943
    
    
    
    125,308
    
    
    
    41,635
    
    
    
    (106,589
    )
    
    
    60,354Goodwill
    
    
    106,056
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intangibles
    
    
    51,533
    
    
    
    331,693
    
    
    
    12,852
    
    
    
    (271,536
    )
    
    
    73,009In-process R&D
    
    
    
    
    
    
    58,547
    
    
    
    
    
    
    
    (47,929
    )
    
    
    10,618Other long-term assets
    
    
    18,463
    
    
    
    13,859
    
    
    
    4,605
    
    
    
    (7,338
    )
    
    
    11,126Current liabilities
    
    
    (466,697
    )
    
    
    (354,905
    )
    
    
    (116,392
    )
    
    
    
    
    
    
    (471,297
    )$
    341,184
    
    
    $
    596,626
    
    
    $
    58,641
    
    
    $
    (433,392
    )
    
    $
    221,875
 Inventories The increase in inventory value of $73.2 million, reflecting the fair market
value adjustment, is being expensed as the inventory is sold, which was
expected to be over a 16 month period from September 29, 2003, the date of
acquisition, based on an estimated inventory turn. The amortization
period was changed to 18 months
based on the actual inventory turn of fiscal year 2004. Depreciation and Amortization The effect of the negative goodwill allocation to the non current assets
resulted from the acquisition transactions was the write-down of the
non-current assets. Therefore, the related depreciation and amortization
expense are lowered. Other Intangible assets are being amortized on a straight-line basis over periods
between five and forty years, and in-process research and development was
immediately expensed in the results of the successor entity for the one-day
period ended September 30, 2003. F-13




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##### Table of Contents



Note 4  Global Restructuring and Optimization Plan In February 2000, the Company announced a cost-saving initiative designed to
streamline operations, increase utilization of facilities and improve
efficiencies that was implemented in phases. Cost relating to the
plan were recognized in fiscal years 2000 and 2001 and cash
expenditures relating to the plan have been charged against previously
established reserves. To date, there has been no material adjustments to amounts accrued under the
plan. The remaining $0.5 million reserve balance is expected to be utilized in
fiscal year 2005. The remaining components of the restructuring accruals are as follows: Severance andrelated expenses(In millions)Predecessor2002Balance Sep. 30, 2001
    
    $
    11.9Additional Charges
    
    
    0.0Amounts Incurred
    
    
    (8.6
    )Balance Sep. 30, 2002
    
    
    3.32003Additional Charges
    
    
    0.0Amounts Incurred
    
    
    (2.6
    )Balance Sept 29, 2003
    
    $
    0.7Successor2003Additional Charges
    
    $
    0.0Amounts Incurred
    
    
    (0.0
    )Balance Sep. 30, 2003
    
    $
    0.72004Additional Charges
    
    $
    0.0Amounts Incurred
    
    
    (0.2
    )Balance Sept. 30, 2004
    
    $
    0.5
 Note 5  Inventories Inventories consist of the following at September 30, 2004 and 2003: As of
    
    As ofSeptember 30,
    
    September 30,2004
    
    2003Seed
    
    $
    296,662
    
    
    $
    324,006Unharvested crop growing costs
    
    
    22,577
    
    
    
    19,488Supplies
    
    
    9,156
    
    
    
    8,143Total net inventories
    
    $
    328,395
    
    
    $
    351,637
 Inventories are presented net of reserves of $72,409 and $79,531 at September
30, 2004 and 2003, respectively. As described in Note 3, as part of the
acquisition transactions, inventories were stepped-up by $73.2 million as of
September 30, 2003. In fiscal year 2004, $47.4 million of the inventory step-up
was amortized and charged to cost of sales. The remaining $25.8 million of
inventory step-up will be expensed as the inventory is sold, which is expected
to occur by March 2005. F-14




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Note 6  Property, Plant and Equipment Property, plant and equipment consist of the following at September 30, 2004
and 2003: As of
    
    As ofSeptember 30,
    
    September 30,2004
    
    2003Land
    
    $
    16,608
    
    
    $
    16,712Buildings and improvements
    
    
    41,454
    
    
    
    40,658Machinery and equipment
    
    
    15,213
    
    
    
    12,088Construction in progress
    
    
    7,547
    
    
    
    1,23980,822
    
    
    
    70,697Less: accumulated depreciation
    
    
    (2,214
    )
    
    
    (905
    )$
    78,608
    
    
    $
    69,792
 As described in Note 3, as part of the acquisition transactions, the cost basis
and related accumulated depreciation of the Companys fixed assets were written
down by $106.6 million as of September 30, 2004. Depreciation expense of $7.3
million, $15.5 million and $15.5 million were recorded for
fiscal year 2004, 2003 and 2002,
respectively. Fiscal year 2004 depreciation expense was reduced by $7.6 million
due to impact of purchase accounting from the acquisition transactions. Note 7  Intangible Assets Intangible assets at September 30, 2004 and 2003 consist of the following: September 30, 2004
    
    September 30, 2003PurchaseGross Carrying
    
    Accumulated
    
    Adjusted
    
    Revalued
    
    Accounting
    
    AdjustedAmount
    
    Amortization
    
    Amount
    
    Amount
    
    Adjustment
    
    AmountAmortizable intangible assets:Germplasm
    
    $
    25,911
    
    
    $
    (1,685
    )
    
    $
    24,226
    
    
    $
    115,544
    
    
    $
    (89,713
    )
    
    $
    25,831Software
    
    
    13,298
    
    
    
    (3,269
    )
    
    
    10,029
    
    
    
    9,984
    
    
    
    (553
    )
    
    
    9,431Trademarks
    
    
    8,749
    
    
    
    (637
    )
    
    
    8,112
    
    
    
    30,232
    
    
    
    (21,507
    )
    
    
    8,725Existing product
technology
    
    
    24,166
    
    
    
    (2,076
    )
    
    
    22,090
    
    
    
    138,431
    
    
    
    (114,292
    )
    
    
    24,139Customer relationships
    
    
    4,877
    
    
    
    (326
    )
    
    
    4,551
    
    
    
    50,354
    
    
    
    (45,471
    )
    
    
    4,883$
    77,001
    
    
    $
    (7,993
    )
    
    $
    69,008
    
    
    $
    344,545
    
    
    $
    (271,536
    )
    
    $
    73,009
 Aggregate amortization expense was $8.0 million, $16.3 million, and $17.1
million for the year ended September 30, 2004, the twelve months ended
September 29, 2003 and the year ended September 30, 2002, respectively.
Amortization periods for Germplasm and Software are 40 years and 5 years,
respectively, and Trademarks, Existing Product Technology, and Customer
Relationships are 15 years. The weighted average of the amortization period
for intangible assets is approximately 14.5 years. Estimated amortization
expense for the next five years is as follows: Year Ending September 302005
    
    $
    7,3962006
    
    
    7,3962007
    
    
    7,3962008
    
    
    6,2372009
    
    
    4,599
 The Company had no goodwill recorded in the year ended September 30, 2004.
Changes in the net carrying amount of goodwill for the year ended September 30,
2003, were as follows: AmountBalance as of September 30, 2002
    
    $
    98,931Goodwill acquired during the period
    
    
    Impairment losses
    
    
    Translation adjustments and others
    
    
    7,125Purchase accounting adjustment
    
    
    (106,056
    )Balance as of September 30, 2003
    
    $
    0
 In accordance with SFAS No. 142, impairment for goodwill was analyzed resulting
in no impairment in fiscal year 2002. As a result of the acquisition
transactions described in Note 3, all goodwill was written off at September
30, 2003. Furthermore, research and development assets totaling $10.6 million,
which was determined by an independent appraisal service (after negative
goodwill adjustments) were written off as part of research and development
expenses during the one-day period ended September 30, 2003. F-15




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Note 8  Accrued Liabilities Accrued liabilities consist of the following at September 30, 2004 and 2003: As of
    
    As ofSeptember 30,
    
    September 30,2004
    
    2003Employee salaries and related benefits
    
    $
    58,572
    
    
    $
    51,632Severance
    
    
    454
    
    
    
    672Seedmens errors and omissions
    
    
    8,823
    
    
    
    7,181Interest
    
    
    17,914
    
    
    
    368Merger & refinancing transactions
    
    
    
    
    
    
    9,115Other
    
    
    20,989
    
    
    
    18,446$
    106,752
    
    
    $
    87,414
 Note 9  Long-Term Debt Long-term debt consists of the following at September 30, 2004 and 2003: As of
    
    As ofSeptember 30,
    
    September 30,2004
    
    2003Senior secured credit facility borrowings
    
    $
    88,850
    
    
    $
    190,000Senior subordinated notes
    
    
    330,000
    
    
    
    190,000Mortgage notes
    
    
    16,735
    
    
    
    17,000South Korean borrowings due in annual
installments through 2013
    
    
    1,612
    
    
    
    1,858Other borrowings
    
    
    13,365
    
    
    
    2,402450,562
    
    
    
    401,260Less current portion
    
    
    (1,746
    )
    
    
    (2,722
    )$
    448,816
    
    
    $
    398,538
 As of September 30, 2004, long-term debt maturities are as follows: Year Ending September 302005
    
    $
    1,7462006
    
    
    1,7472007
    
    
    1,5742008
    
    
    1,5662009
    
    
    85,862Thereafter
    
    
    358.067$
    450,562
 The fair market value of the senior subordinated notes at September 30, 2004
was approximately $488,512. Old Syndicated Credit Facility During fiscal years 2002 and 2003, the Company maintained a credit facility
with a syndicated lending group, which originated in 1999. The Company was
precluded from making any additional borrowings and was required to make
certain principal payments throughout fiscal years 2002 and 2003 with any
remaining amount outstanding due upon the expiration of the facility scheduled
for December 31, 2003. Interest on this facility was determined using a grid
formula based on the greater of the sum of the base rate and 3.5% or an
interest rate that ranged from 9.0% to 10.25%. On September 29, 2003, the
outstanding principal balance of $216.6 million was repaid with proceeds from
the Companys new financing arrangements and unamortized loan fees totaling
$2.2 million were written-off. This charge is reflected in the predecessor
results of operations for the twelve months ended September 29, 2003. F-16




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Senior Secured Credit Facility On September 29, 2003, the Companys principal domestic operating subsidiary,
Seminis Vegetable Seeds, Inc., entered into a senior secured credit facility
with a group of lenders. The Company and its other wholly-owned domestic
subsidiaries guarantee the obligations under the senior secured credit
facility. The senior secured credit facility originally provided for a $190.0
million term loan and a revolving line of credit for borrowings up to an
aggregate principal amount of $60.0 million. The Company amended the senior
secured credit facility on January 15, 2004 such that it now provides a $90.0
million term loan and a revolving line of credit for borrowings up to an
aggregate principal amount of $75.0 million, and amortizes in quarterly
installments equal to 1.0% per annum or $0.2 million per quarter for the first
five and 1/2 years, and with the balance of the term loan due in a single
payment at the end of the sixth year. The first quarterly payment was paid on
March 31, 2004. The $75.0 million revolving credit facility will mature in
five years from the closing date of the acquisition transactions and does not
amortize (none of which was drawn as of September 30, 2004, and $2.6 million of
which was committed under letters of credit). Both facilities may be
voluntarily prepaid in whole or in part without premium or penalty.
Additionally, based upon formulas stated in the amended senior secured credit
facility and subject to certain exceptions, all or a portion of the proceeds
from the issuance of equity interests or equity rights, debt issuances, asset
sales, proceeds from insurance recoveries and excess cash flow must be used to
pay down the outstanding balance under the term loan facility. In general, borrowings under the amended senior secured credit facility will
bear interest, at the Companys option, on either a London inter-bank offered
rate (LIBOR) or an alternate base rate, in each case plus an applicable rate.
The alternate base rate is equal to the highest of Citicorp North America,
Inc.s base rate, the three month certificate of deposit rate plus 0.5% and the
federal funds effective rate plus 0.5%. The applicable rate for the term loan
is based upon the Companys leverage ratio that ranges from 1.25% to 2.00% per
annum in the case of an alternate rate loan and LIBOR plus 3.00% per annum in
the case of a LIBOR loan. The applicable rate for the revolving credit
facility under the amended senior secured credit facility is based upon the
Companys leverage ratio and ranges from 1.00% to 1.75% per annum in the case
of alternate rate loans and LIBOR plus 2.00% to LIBOR plus 2.75% per annum in
the case of LIBOR loans, subject, in each case, to adjustments based on the
leverage ratio at the time. Subsequent to an event of default under the
amended senior secured credit facility, borrowings will bear interest at 2.0%
over the rate of interest otherwise applicable and the LIBOR rate will not be
available. Obligations under the senior secured credit facility are guaranteed by the
Company and its domestic subsidiaries. Additionally, borrowings are secured by
a perfected lien on all of the capital stock, intercompany notes and all of the
tangible and intangible properties and assets, including intellectual property
subject to exceptions relating to foreign subsidiaries, of the Company. The
Company is subject to certain commitment fees under the facility as well as the
maintenance of certain financial ratios and other restrictive covenants,
including the payment of dividends in cash. On September 30, 2004, the outstanding balance of the term loan under the
senior secured credit facility was $88.9 million with a variable interest rate
of 3.49%, and the Company is in compliance with its financial covenants. 101⁄4% Senior Subordinated Notes On September 29, 2003, the Companys principal domestic operating subsidiary,
Seminis Vegetable Seeds, Inc., issued $190.0 million of senior subordinated
notes. The senior subordinated notes mature on October 1, 2013; interest is
payable semi-annually on April 1 and October 1 of each year. The senior
subordinated notes are unsecured general obligations of the Company and are
subordinated in right of payment to substantially all existing and future
senior indebtedness of the Company, including senior credit facility
indebtedness. Prior to maturity, the Company may redeem all or some of the
senior subordinated notes at defined redemption prices, which may include a
premium. In the event of a change in control, the holders may require the
Company to repurchase the senior subordinated notes for a redemption price that
may also include a premium. The majority of the Companys domestic
subsidiaries have guaranteed the senior subordinating notes. On January 23, 2004, the Company issued an additional $140.0 million of senior
subordinated notes, at a premium of $12.6 million. These notes have identical
terms and conditions as the $190.0 million of senior subordinated notes issued
as part of the acquisition transactions on September 29, 2003. On September 30, 2004, the outstanding balance of the 101⁄4% senior
subordinated notes was $330.0 million and a remaining premium balance of $11.7
million. F-17




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##### Table of Contents



Mortgage Notes In March 2000, the Company issued a $17.2 million promissory note, which was
secured by the Companys global headquarters facility. The variable rate of
interest on the original note was based on LIBOR plus 2.5%. As of September
29, 2003, principal outstanding on this note totaling $11.6 million was repaid
with proceeds from a new $17.0 million mortgage. Interest on the new note is
based on LIBOR plus 2.0%, adjustable on the
first day of each month. Simultaneous with entering into the new mortgage, the
Company entered into an interest rate swap agreement (extending for a seven
year term) to swap the floating interest rate for a 6.3% fixed interest rate.
The loan amortizes in scheduled annual payments of approximately $0.2 million
to $0.4 million, with a payment of the final remaining balance due on October
1, 2010. On September 30, 2004, the outstanding balance of the mortgage note was $16.7
million with a fixed interest rate of 6.3%, and the market value of the
interest rate swap was a liability to Seminis of $0.4 million. South Korean Borrowings The Companys South Korean subsidiary has a number of loan facilities maturing
from the end of fiscal year 2004 to 2013. Borrowings under these facilities
carry interest rates of between 4.0% and 6.0%. Other Borrowings Other borrowings consisted of various domestic and foreign, government and
non-government loans of less than $1.5 million each, bearing interest annually
at average rates of 9.82% through 2013 for fiscal years 2004, and 7.35% through
2013 for fiscal year 2003. For the fiscal years ended September 30, 2004, 2003 and 2002, the Company
incurred interest at a weighted-average rate of 8.68%, 7.26% and 8.90% per
annum, respectively. Note 10  Capital Stock and Liabilities Subject to Mandatory Redemption Class A and B Redeemable Preferred Stock On October 1, 1995, the Company acquired Petoseed Co., Inc. (Petoseed)
through a tax-free merger (the Merger) with George J. Ball, Inc. (Ball).
As part of the transaction, Seminis issued 25 shares of Class A Redeemable
Preferred Stock to the stockholders of Ball. Upon the completion of the
Companys initial public offering in July 1999, each share of Class A
Redeemable Preferred Stock automatically converted into one share of Class B
Redeemable Preferred Stock. The Class B Redeemable Preferred Stock had no voting rights. The Company paid
quarterly dividends on all issued shares of Class B Redeemable Preferred Stock
at a rate of 8% per year. Dividends were cumulative if unpaid and were added
to the redemption value of the shares. The liquidation value of the shares was
equal to the redemption value at any point in time. Class B Redeemable
Preferred Stock was not redeemable at the option of the holder. The Company
had to redeem all outstanding shares of the Class B Redeemable Preferred Stock
on October 1, 2005. As part of the acquisition transactions described in Note 3, the Company
redeemed all of its Class B Redeemable Preferred Stock for $30.2 million
including $6.5 million of accrued dividends. At the time when the stock was
redeemed, the carrying value was $25.0 million. The $1.3 million discount on
the redemption of the Class B Redeemable Preferred Stock was credited to
additional paid-in capital. Common Stock The Company is authorized to issue up to 200,000 shares of Common Stock.
Currently, no shares have been reserved for issuance of stock options. Common
Stock is entitled to one vote per share. As of September 30, 2004 and 2003,
the Company had 64,333 and 63,260 shares outstanding. Class B Common Stock Following the Ball Merger, Savia owned all 30,000 outstanding shares of the
Companys Class B Common Stock. During fiscal year 1998, the Company issued
7,386 shares of Class B Common Stock for cash in the amount of $138,200. The
share price of $18.71 was based on the fair market value of the Company at the
time of the transaction. In February 1999, the Company converted its convertible subordinated debt due
Savia of $35,857 into 1,916 shares of Class B Common Stock at $18.71 per share.
As part of the Companys recapitalization in June 1999, 6,772 shares of Old
Class B Redeemable Common Stock were effectively converted into the same number
of shares of Class B Common Stock. Holders of the Class B Common Stock are
entitled to three votes per share. F-18




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##### Table of Contents



In the fourth quarter of fiscal year 2001, 706 shares of Class B Common Stock
were converted to Class A Common Stock and in the second quarter of fiscal year
2000, 226 shares of Class B Common Stock were converted to Class A Common
Stock. As described in Note 3 (Accounting Effects of the acquisition transactions),
2,319 shares of Class B common stock were purchased from the Ball family and
retired. 2,208 shares of Class B common stock were converted into Class A
common stock and remain outstanding. The remaining 40,615 shares of Class B
common stock held by Savia were essentially cashed out as part of the
acquisition transactions. Class C Preferred Stock The Company was authorized to issue up to 14 shares of its Class C Preferred
Stock. In December 1998, Savia made an equity investment in Seminis of $10,000
in exchange for 1 share of Class C Preferred Stock to finance the purchase of
shares of Hungnong, which Seminis was obligated to purchase from the minority
shareholders. In March 1999, Savia made an additional equity investment in
Seminis of $20,000 in exchange for 2 shares of Class C Preferred Stock to
finance working capital requirements. In July 1999, the Company converted
$12,300 of an intercompany advance from Savia into 1.2 shares of Class C
Preferred Stock. In April, May and June 2000, the company converted $22,000,
$14,000 and $6,000, respectively, of intercompany advances from Savia into 2.2
shares, 1.4 shares and .6 shares of Class C Preferred Stock. In August and
September 2000, Savia made additional equity investments of $10,000 and
$14,000, respectively, in exchange for 1.0 shares and 1.4 shares of Class C
Preferred Stock. Shares of Class C Preferred Stock had no voting rights and were redeemable at
the option of the Company. Dividends accrued cumulatively at the rate of 10%
per year and were payable quarterly. Dividends payable through January 2001
were payable by issuing additional fully paid and non-assessable shares of
Class C Preferred Stock. Subsequently, the dividends were part of the accrued
liabilities. The liquidation value of Class C Preferred Stock at September 30, 2002,
included $18,011 of accrued cash dividends classified in accrued liabilities.
All shares of Class C Preferred Stock were subject to the exchange transaction
described below. Additional Capital Contributions In October and November 2000, the Company received additional capital
contributions of $31.9 million and $14.0 million, respectively, from Savia to
finance additional working capital requirements. Dividends were accrued at the
rate of 10% per year. On October 1, 2002 the Board of Directors approved the conversion of the Savia
additional capital contribution and the associated paid-in-kind dividends that
totaled $46.7 million to be converted to 4.67 shares of Class C Preferred
Stock. Concurrently, the Board also adopted a resolution authorizing and
directing an increase in the number of shares designated as Class C Preferred
Stock from 14.4 shares to 16.7 shares. Exchange Transaction The Company entered into an exchange agreement with its majority shareholder,
Savia S.A. de C.V. as of July 1, 2002 to exchange all of its outstanding
Seminis Class C Preferred Stock (including accrued PIK dividends) having a
principal value of $120.2 million, additional paid-in capital (including
accrued PIK dividends) of $46.7 million and accrued and unpaid cash dividends
of $10.0 million into 37.7 million shares of Seminis Class A common stock. The
remaining accrued and unpaid cash dividends on the Class C Preferred Stock of
$15.0 million remained due and payable, and were paid in cash by the Company in
accordance with the terms of the exchange agreement. This unpaid obligation
accrued interest at 10.0% and increased the liability to $17.0 million as of
September 29, 2003. On July 3, 2002, the Company received an opinion from UBS
Warburg that, as of such date, the number of shares of Class A common stock to
be received by Savia in the exchange was fair from a financial point of view to
the holders of the Companys Class A common stock and Class B common stock (in
each case other than Savia and its affiliates and other than holders of the
Companys Class B common stock that also hold shares of the Companys Class B
Redeemable Preferred Stock). The exchange agreement was approved by the
Companys Board of Directors on July 3, 2002 and was approved by stockholders
on September 26, 2002. Although the exchange agreement was approved by the
stockholders at the Annual Meeting, it was subject to customary closing
conditions and approvals by creditors of Savia and the Company. As part of the
acquisition transactions described in Note 3, the exchange transaction was
finalized; however, only cash dividends and interest totaling $14.0 million
were paid to Savia. Accrued interest totaling $2.0 million was reversed in the
statement of operations and accrued dividends of $1.0 million were reversed as
a credit to additional paid-in capital. F-19




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##### Table of Contents



Common Stock Options In connection with the acquisition transactions described in Note 3, the
Company issued two options to Desarrollo Consolidado de Negocios, S.A. de C.V.,
an affiliate of Mr. Romo, which allowed it to acquire a combined 29.6% of the fully diluted shares of the
Companys common stock for $3.40 per share. The first option is immediately
exercisable and permits Desarrollo Consolidado de Negocios, S.A. de C.V. to
acquire 14.5 million shares, or 13.8% percent. The second option allows
Desarrollo Consolidado de Negocios, S.A. de C.V. to acquire an additional 15.8%
of the Companys common stock but is only exercisable if Fox Paine achieves a
26.0% rate of return on its initial investment in 3 years. Options Certain executives of the Company have rolled over their option rights from
pre-acquisition stock option grants, and as of September 30, 2004, there are
approximately 1.7 million options outstanding. Restricted Stock Units Upon completion of the acquisition transactions, we granted restricted stock
units to a group of Companys senior executives. The restricted stock units
will, upon the events described below, be paid in shares of Company common
stock on a one-for-one basis and will vest over a five year period depending on
the continued employment of the executive and on Companys performance and the
performance of our executives relative to specified goals and objectives. Upon completion of the acquisition transactions, each of the senior executives
was granted an aggregate number of restricted stock units calculated as 2.25
times the initial base salary of the applicable senior executive divided by
$3.40. Each of the other key executives was granted an aggregate number of
restricted stock units calculated as 1.0 times the initial base salary of the
applicable executive divided by $3.40. If the specified goals and objectives are achieved and the executive is
actively employed by us at each applicable vesting date, the restricted stock
units will vest with respect to 10.0% of the aggregate award in each of the
first two years, 20.0% of the aggregate award in the third year and 30.0% of
the aggregate award in each of the fourth and fifth years following the time of
grant. To the extent that conditions to vesting are not met and some of the
restricted stock units do not vest, the portion of restricted stock units that
do not vest will be permanently forfeited and will not be reallocated. In the event that Fox Paine achieves a designated internal rate of return on
its initial investment in the Company prior to the fifth anniversary of the
completion of the acquisition transactions, all restricted stock units, other
than those permanently forfeited due to a failure to meet specified goals and
objectives, will vest. For the fiscal year ended September 30, 2004, the Company recorded $1.1 million
of compensation expense for restricted stock units, based on 280 shares at
approximately $3.92 per share. Co-Investment Rights to Purchase Additional Shares of Companys Common Stock In connection with the acquisition transactions, Desarrollo Consolidado de
Negocios, S.A. de C.V. received immediately exercisable rights to acquire 13.8%
of the outstanding shares of the Companys common stock on a fully-diluted
basis. In addition, Desarrollo Consolidado de Negocios, S.A. de C.V. and Fox
Paine received a second tranche of co-investment rights to acquire up to 15.8%
and 1.57%, respectively, of the outstanding shares of the Companys common
stock on a fully-diluted basis. The Fox Paine co-investment rights and the
second tranche of co-investment rights owned by Desarrollo Consolidado de
Negocios, S.A. de C.V. will become exercisable only if Fox Paine achieves a
26.0% internal rate of return on its investment in the Company. Each
co-investment right entitles the recipient to acquire one share of Companys
common stock at an exercise price of $3.40 per share. All of the co-investment
rights expire on the tenth anniversary of the date of the consummation of the
acquisition transactions. Warrants See Note 11  PIK Preferred Stock F-20




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##### Table of Contents



Note 11  PIK Preferred Stock The Company issued shares of PIK Preferred Stock with an aggregate liquidation
preference of $50.0 million as part of the acquisition transactions. In
connection with the sale of PIK Preferred Stock, the Company issued warrants to
purchase shares of Company common stock representing approximately 3.7% of the
shares of Company common stock on a fully diluted basis at an exercise price of
$3.40 per warrant. The warrants were valued at $10.7 million as other equity
at September 30, 2003. The warrants shall expire on the earlier to occur of (a)
the date on which the number of warrant shares is reduced to zero, and (b) the
tenth anniversary of September 29, 2003. The shares of PIK Preferred Stock are
mandatory redeemable at liquidation value on October 1, 2014. Holders of shares of the PIK Preferred Stock are entitled to receive paid in
kind dividends (or at the sole discretion of the Company, cash dividends) at
the annual rate of 12.0% of liquidation preference per share, compounded
quarterly, provided that after the occurrence of, and during the continuance
of, specified events of default such as the occurrence of a default in the
performance of, or compliance with, any term of material indebtedness, which
caused acceleration of debt repayment, holders of shares of the PIK Preferred
Stock are entitled to receive paid in kind dividends (or in the sole discretion
of the Company, cash dividends) at the annual rate of 14.0% of liquidation
preference per share, compounded quarterly. In general, the PIK Preferred Stock is not redeemable at the option of the
Company prior to October 1, 2006. For the period from October 1, 2006 to and
including October 1, 2008, the PIK Preferred Stock is redeemable by the Company
at a per share redemption price payable in cash equal to 102% of the
liquidation preference, plus an amount in cash equal to accrued and unpaid
dividends. After October 1, 2008, the shares of PIK Preferred Stock are
redeemable by the Company at a per share redemption price payable in cash equal
to 100% of the liquidation preference, plus an amount in cash equal to accrued
and unpaid dividends. At any time prior to October 1, 2014, following a change of control or an
initial public offering of the Company, the Company has the right to redeem the
shares of PIK Preferred Stock at a per share redemption price payable in cash
equal to 102% of the liquidation preference, plus an amount in cash equal to
accrued and unpaid dividends. Unless the holders of a majority of the outstanding shares of PIK Preferred
Stock otherwise consent, the Company may not approve a change of control
unless, in connection with the change of control, the Company is permitted to
make and consummate a change of control offer. Upon the occurrence of a change
of control, holders of shares of PIK Preferred Stock would have the right to
require the Company to repurchase their shares of PIK Preferred Stock at a
purchase price equal to 101% of the liquidation preference, plus an amount in
cash equal to accrued and unpaid dividends. Upon the occurrence of certain events of bankruptcy relating to the Company (or
the principal borrower of the material indebtedness of Seminis) and, the
acceleration and satisfaction of certain material indebtedness of Seminis,
holders of shares of the PIK Preferred Stock have the right to require the
Company to repurchase their shares of PIK Preferred Stock at a purchase price
equal to 102% (if the applicable event occurred prior to October 1, 2008) or
100% (if the applicable event occurred following October 1, 2008) of the
liquidation preference, plus an amount in cash equal to accrued and unpaid
dividends, provided, however, that the Companys repurchase obligation would be
subject to the prior satisfaction of any and all obligations pursuant to
Seminis senior secured credit facility (and any replacement financing) and the
notes (and any replacement financing). The ability of the Company to pay cash dividends on the PIK Preferred Stock or
to redeem the PIK Preferred Stock is dependent on the ability of Seminis
Vegetable Seeds, a subsidiary of the Company, to dividend funds to the Company,
whose ability is limited by the terms of our senior secured facility and the
notes. The company paid $4.6 million of PIK preferred stock cash
dividend recorded as interest expense during
the fiscal year 2004, and $1.5 million was payable at September 30, 2004. The preferred shares subject to mandatory redemption were stated at $41.8
million and $39.3 million as of September 30, 2004 and 2003, respectively. The
accretion of the preferred shares subject to mandatory redemption and their
paid-in-kind dividends are recognized as interest expense through the term of
the agreement. For the year ended September 30, 2004, this interest expense
totaled $7.1 million. F-21




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##### Table of Contents



Note 12  Income Taxes Income (loss) from continuing operations before income taxes and extraordinary
items consists of the following: Successor

    
    PredecessorFor the
    
    For the

    
    For the
    
    For theYear
    
    Day

    
    Twelve Months
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,

    
    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003

    
    2003
    
    2002U.S. operations
    
    $
    (26,688
    )
    
    $
    (3,307
    )

    
    $
    (40,448
    )
    
    $
    (9,952
    )Foreign operations
    
    
    22,835
    
    
    
    (4,277
    )

    
    
    22,208
    
    
    
    28,507$
    (3,853
    )
    
    $
    (7,584
    )

    
    $
    (18,240
    )
    
    $
    18,555
 The expense (benefit) for income taxes consists of the following: Successor


    PredecessorFor the
    
    For the


    For the
    
    For theYear
    
    Day


    Twelve Months
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,


    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003


    2003
    
    2002Current:Federal
    
    $
    1,388
    
    
    $
    
    


    $
    97
    
    
    $
    (5,909
    )State
    
    
    337
    
    
    
    
    


    
    72
    
    
    
    (441
    )Foreign
    
    
    8,889
    
    
    
    19
    


    
    2,629
    
    
    
    9,08510,614
    
    
    
    19
    


    
    2,798
    
    
    
    2,735Deferred:Federal
    
    
    1,991
    
    
    
    
    


    
    1,465
    
    
    
    2,065State
    
    
    
    
    
    
    
    


    
    127
    
    
    
    179Foreign
    
    
    (150
    )
    
    
    
    


    
    1,437
    
    
    
    (2,510
    )1,841
    
    
    
    
    


    
    3,029
    
    
    
    (266
    )$
    12,455
    
    
    $
    19
    


    $
    5,827
    
    
    $
    2,469
 Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax assets and liabilities as of September 30, 2004
and 2003 are as follows: As of Sep. 30,
    
    As of Sep. 30,2004
    
    2003Deferred tax assets:Accounts receivable
    
    $
    2,686
    
    
    $
    2,664Inventories
    
    
    12,938
    
    
    
    12,037Other accruals
    
    
    7,897
    
    
    
    9,054Net operating loss carryforwards and other tax credits
    
    
    51,293
    
    
    
    56,788Total deferred tax assets
    
    
    74,814
    
    
    
    80,543Valuation allowances and reserves
    
    
    (48,433
    )
    
    
    (57,832
    )Net deferred tax assets
    
    
    26,381
    
    
    
    22,711Deferred tax liabilities:Fixed and intangible assets
    
    
    (19,020
    )
    
    
    (21,091
    )Accrued taxes on undistributed foreign earnings
    
    
    (23,652
    )
    
    
    (22,932
    )Total deferred tax liabilities
    
    
    (42,672
    )
    
    
    (44,023
    )$
    (16,291
    )
    
    $
    (21,312
    )
 The valuation allowance for deferred tax assets as of September 30, 2004 and
2003 was $48,433 and $57,832, respectively. The net change in the total
valuation allowance and reserves for the years ended September 30, 2004 and
2003 was a decrease of $9,399 and an increase of $772, respectively. The
decrease in 2004 was primarily due to a reclassification of United States tax
reserves of $6,550 to the income taxes payable account related to tax
contingencies for federal and state tax audits, the write-off of certain
foreign tax credits totaling $2,595 and the partial utilization
totaling $2,276 of
NOLs in the Netherlands which had been fully reserved, offset by an increase to
the valuation allowance of $5,567 for current year losses in the United States
for which no benefit has been recognized. In addition, in 2004, the Company
reassessed the need for a valuation allowance associated with remaining NOLs in
the Netherlands. Based on the trend of recent profits as well as projections of
future taxable income, the Company determined that it was more likely than not
that this deferred tax asset would be realized. Accordingly, the Company
released $3,545 of previously established valuation allowance. The increase in
the valuation allowance during 2003 consisted of partial utilization of NOLs
in the Netherlands which had been fully reserved, offset by additional losses
generated in the United States for which no benefit was recorded. The Companys tax asset of $51,293 for net operating loss and foreign tax
credit carryforwards include balances relating to a Netherlands net operating
loss carryforward of $14,266 that has an indefinite life and a United States
net operating loss carryforward of $67,969 which will expire in 2020 and 2024. F-22




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##### Table of Contents



To address cash flow needs in the United States, the repatriation strategy for
earnings in South Korea was changed during fiscal year 2001. Accordingly,
United States tax was recorded for previously undistributed South Korean
earnings. The earnings for certain other foreign subsidiaries will only be
repatriated to the United States to the extent the foreign taxes can be
utilized as foreign tax credits against federal taxes. The expense (benefit) for income taxes varies from income taxes based on the
federal statutory rate as follows: Successor

    
    PredecessorFor the
    
    For the

    
    For the
    
    For theYear
    
    Day

    
    Twelve Months
    
    YearEnded Sep. 30
    
    Ended Sep. 30,

    
    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003

    
    2003
    
    2002Income tax (benefit) at statutory Federal rate
    
    $
    (1,349
    )
    
    $
    (2,654
    )

    
    $
    (6,384
    )
    
    $
    6,494State and local income tax (benefit), net of
federal income tax effect
    
    
    
    
    
    
    
    

    
    
    (92
    )
    
    
    170Research and other tax credits
    
    
    (160
    )
    
    
    (38,944
    )

    
    
    (159
    )
    
    
    (724
    )Repatriated foreign earnings
    
    
    
    
    
    
    34,809
    

    
    
    2,691
    
    
    
    Foreign earnings taxed at different rates
    
    
    (176
    )
    
    
    
    

    
    
    (42
    )
    
    
    2,599Net increase (decrease) in valuation allowance
and reserves
    
    
    (254
    )
    
    
    4,135
    

    
    
    (3,363
    )
    
    
    (5,709
    )NOL utilization and FTC carryback
    
    
    
    
    
    
    
    

    
    
    8,844
    
    
    
    Non-deductible PIK Preferred Stock interest
expense
    
    
    2,490
    
    
    
    
    

    
    
    
    
    
    
    Non-deductible purchase accounting
amortization
    
    
    11,386
    
    
    
    
    

    
    
    
    
    
    
    Non-deductible transaction costs
    
    
    
    
    
    
    
    

    
    
    4,288
    
    
    
    Other permanent items
    
    
    163
    
    
    
    
    

    
    
    
    
    
    
    In-process research and development
    
    
    
    
    
    
    3,716
    

    
    
    
    
    
    
    Other
    
    
    355
    
    
    
    (1,043
    )

    
    
    44
    
    
    
    (361
    )$
    12,455
    
    
    $
    19
    

    
    $
    5,827
    
    
    $
    2,469
 F-23




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##### Table of Contents



Note 13  Employee Benefits Pension and Retirement Plans U.S. Plans.The Company maintains a qualified Company-sponsored defined
contribution savings plan covering eligible employees. Company contributions
are based on a percentage of employee contributions and on employee salaries.
Company contributions totaled $1,239, $1,085 and $1,576 in fiscal years 2004,
2003 and 2002, respectively. The defined contribution savings plan also
contains a profit sharing provision. Annual contributions are based on
employee age and salaries totaled $1,938, $900 and $514 in fiscal years 2004,
2003 and 2002, respectively. Foreign Plans.In accordance with the local statutory requirements, the Company
sponsors retirement and severance plans at several of its foreign locations.
The Company has an accrual of $23,913 at September 30, 2004 and $22,956 at
September 30, 2003 for anticipated payments to be made to foreign employees
upon retirement or termination. The Company provides a defined-benefit pension plan in the Netherlands (the
Netherlands Plan) as required by statute. The following provides a
reconciliation of the benefit obligation, plan assets and funded status of the
Netherlands Plan as of September 30, 2004 and 2003. For the
    
    For the

    
    For theYear
    
    Year

    
    YearEnded Sep. 30,
    
    Ended Sep. 30,

    
    Ended Sep. 30,2004
    
    2003

    
    2002Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    59,196
    
    
    $
    47,388
    

    
    $
    41,679Service cost
    
    
    1,963
    
    
    
    1,160
    

    
    
    2,204Interest cost
    
    
    3,293
    
    
    
    2,848
    

    
    
    2,450Plan participant contributions
    
    
    39
    
    
    
    174
    

    
    
    166Amendments
    
    
    (129
    )
    
    
    
    

    
    
    Actuarial loss
    
    
    (1,637
    )
    
    
    
    

    
    
    315Benefits paid
    
    
    (2,164
    )
    
    
    (1,253
    )

    
    
    (942
    )Curtailment
    
    
    
    
    
    
    
    

    
    
    (1,729
    )Net transfer in/(out) (including the effect
of any business
combination/divestiture)
    
    
    666
    
    
    
    
    

    
    
    Translation difference
    
    
    4,353
    
    
    
    8,879
    

    
    
    3,245Benefit obligation at end of year
    
    
    65,580
    
    
    
    59,196
    

    
    
    47,388Change in plan assets:Fair value of plan assets at beginning of year
    
    
    52,321
    
    
    
    39,318
    

    
    
    34,143Actual return on plan assets
    
    
    3,058
    
    
    
    3,332
    

    
    
    1,903Employer contributions
    
    
    1,344
    
    
    
    3,616
    

    
    
    1,835Plan participants contribution
    
    
    39
    
    
    
    174
    

    
    
    Benefits paid
    
    
    (1,989
    )
    
    
    (1,253
    )

    
    
    (942
    )Translation difference
    
    
    3,778
    
    
    
    7,134
    

    
    
    2,379Fair value of plan assets at end of year
    
    
    58,551
    
    
    
    52,321
    

    
    
    39,318Funded status
    
    
    (7,029
    )
    
    
    (6,875
    )

    
    
    (8,070
    )Unrecognized net actual loss / (gain)
    
    
    14,598
    
    
    
    15,630
    

    
    
    12,345Unrecognized prior service cost (benefit)
    
    
    (2,266
    )
    
    
    (2,146
    )

    
    
    (1,946
    )Other Cost
    
    
    
    
    
    
    (1,197
    )

    
    
    Net amount recognized
    
    $
    5,303
    
    
    $
    5,412
    

    
    $
    2,329
 Amounts recognized in the statement of financial position consist of: For the
    
    For theYear
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,2004
    
    2003Accrued benefit cost
    
    $
    (3,267
    )
    
    $
    (3,441
    )Accumulated other comprehensive income
    
    
    8,570
    
    
    
    8,853Net amount recognized
    
    $
    5,303
    
    
    $
    5,412
   The accumulated benefit obligation for all defined benefit pension plans was
$61,818 and $55,762 for September 30, 2004 and 2003, respectively. F-24




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##### Table of Contents



Information for pension plans with an accumulated benefit obligation in excess
of plan assets. As of
    
    As ofSep. 30,
    
    Sep. 30,2004
    
    2003Projected benefit obligation
    
    $
    65,580
    
    
    $
    59,196Accumulated benefit obligation
    
    
    61,818
    
    
    
    55,762Fair value of plan assets
    
    
    58,551
    
    
    
    52,321
 The components of net pension expense of the Netherlands Plan, based on the
most recent valuation dates, are as follows: For the
    
    For the

    
    For theYear
    
    Year

    
    YearEnded Sep. 30,
    
    Ended Sep. 30,

    
    Ended Sep. 30,2004
    
    2003

    
    2002Service cost
    
    $
    1,963
    
    
    $
    1,160
    

    
    $
    2,204Interest cost
    
    
    3,293
    
    
    
    2,848
    

    
    
    2,450Expected return on plan assets
    
    
    (3,907
    )
    
    
    (3,535
    )

    
    
    (1,781
    )Amortization of prior service cost
    
    
    (161
    )
    
    
    (143
    )

    
    
    Amortization of net (gain) loss
    
    
    788
    
    
    
    1,286
    

    
    
    (2,811
    )Net periodic benefit cost
    
    $
    1,976
    
    
    $
    1,616
    

    
    $
    62
 Additional information: For the
    
    For theYear
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,2004
    
    2003Increase (decrease) in minimum liability
included in other comprehensive income
    
    $
    (922
    )
    
    $
    373
 Assumptions used in the above calculations are as follows: Weighted-average assumptions used to determine benefit obligations at
September 30, 2004, are as follows: As of
    
    As of

    
    As ofSep. 30,
    
    Sep. 30,

    
    Sep. 30,2004
    
    2003

    
    2002Discount rate
    
    
    5.00
    %
    
    
    5.25
    %

    
    
    5.50
    %Rate of compensation increase
    
    
    3.30
    
    
    
    3.30
    

    
    
    4.25
 Weighted-average assumptions used to determine net periodic benefit cost for
years ended September 30, 2004 and 2003, are as follows: As of
    
    As of

    
    As ofSep. 30,
    
    Sep. 30,

    
    Sep. 30,2004
    
    2003

    
    2002Discount rate
    
    
    5.25
    %
    
    
    5.25
    %

    
    
    5.50
    %Expected long-term return on plan assets
    
    
    7.00
    
    
    
    7.00
    

    
    
    8.00Rate of
salary increase
    
    
    2.30
    
    
    
    2.30
    

    
    
    3.25Rate of
social security taxable wage base increase
    
    
    2.00
    
    
    
    2.00
    

    
    
    2.50
 Plan Assets: SVS Hollands pension plan weighted-average asset allocations at September
30, 2004 by asset category are as follows: As of
    
    As ofSep. 30,
    
    Sep. 30,Asset Category
    
    2004
    
    2003Equity securities
    
    
    20.02
    %
    
    
    19.04
    %Debt securities
    
    
    79.17
    
    
    
    75.62Real estate
    
    
    
    
    
    
    Other
    
    
    0.81
    
    
    
    5.34Total
    
    
    100.00
    %
    
    
    100.00
    %
 Equity securities do not include Seminis Inc. or SVS Holland common stock at
September 30, 2004. F-25




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##### Table of Contents



Cash Flows: Contributions SVS Holland expects to contribute $1,515 to its pension plan in fiscal year
2005 and contributed $1,344 to its pension plan in fiscal year 2004. Estimated Future Benefit Payment The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid: PensionBenefits2005
    
    
    1,4062006
    
    
    1,6842007
    
    
    1,8782008
    
    
    2,0232009
    
    
    2,157Years 2010 to 2014
    
    
    14,039
 Stock Option Plan In 1998, the Company adopted the Seminis 1998 Stock Option Plan (the Stock
Option Plan) under which key employees and board of director members may be
granted options to purchase shares of the Companys authorized and issued Class
A Common Stock. The board of directors reserved 3,677 shares for issuance
under the plan. On September 26, 2002, during the annual meeting of
stockholders, the stockholders approved an amendment to the Seminis, Inc. 1998
Stock Option Plan to increase the number of shares that may be granted under
the Plan from 3,677 shares to 4,677 shares. In July 1998, the Board of
Directors awarded options to acquire 267 shares by plan participants. During
October 1999 and August 2000, 520 options and 432 options were issued at $7.63
and $1.56 per share, respectively. During October 2000 and August 2001, 513
options and 950 options were issued at $1.36 and $1.18 per share, respectively.
During April 2002, 2,562 options were issued at $1.28 per share. No options
were granted in fiscal years 2003 and 2004. Under the Stock Option Plan, the
option exercise price is equal to fair market value at the date of grant. Options currently expire no later than ten years from the grant date and
generally vest over four years. Proceeds received by the Company from
exercises will be credited to common stock and additional paid-in capital. At the time of the Fox Paine acquisition, each outstanding option to purchase
shares of Seminis common stock (other than options held by certain members of
management who were permitted to retain their options) were cancelled in
exchange for a cash payment for each share of Seminis common stock subject to
the option equal to the excess of $3.78 over the per share exercise price of
the option. Options with a per share exercise price of $3.78 or greater were
cancelled without any consideration being paid for those options. The expense
related to the purchase of these options totaled $4.3 million, was recorded as
general and administrative expenses. F-26




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##### Table of Contents



Stock option plan activity during the three years ended September 30, 2004 was
as follows: Available
    
    Outstanding
    
    WeightedNumber
    
    Number
    
    AverageOf Shares
    
    Of Shares
    
    Exercise PricePredecessorSeptember 30, 2001
    
    
    1,565
    
    
    
    2,112Additional authorized A shares
    
    
    1,000
    
    
    
    Grants
    
    
    (2,562
    )
    
    
    2,562
    
    
    $
    1.28Exercises
    
    
    
    
    
    
    (4
    )
    
    
    1.33Cancellations
    
    
    248
    
    
    
    (248
    )
    
    
    3.83September 30, 2002
    
    
    251
    
    
    
    4,422Grants
    
    
    
    
    
    
    
    
    
    
    Exercises
    
    
    
    
    
    
    (502
    )
    
    
    1.28Option buyback
    
    
    1,720
    
    
    
    (1,720
    )
    
    
    1.28Cancellations
    
    
    462
    
    
    
    (462
    )
    
    
    5.75September 29, 2003
    
    
    2,433
    
    
    
    1,738SuccessorGrants
    
    
    
    
    
    
    Exercises
    
    
    
    
    
    
    Cancellations
    
    
    
    
    
    
    September 30, 2003
    
    
    2,433
    
    
    
    1,738Grants
    
    
    
    
    
    
    Exercises
    
    
    
    
    
    
    Cancellations
    
    
    
    
    
    
    September 30, 2004
    
    
    2,433
    
    
    
    1,738
 The following table summarizes information concerning currently outstanding and
exercisable stock options: Number
    
    
    
    
    
    NumberOutstanding
    
    
    
    
    
    Exercisableas of
    
    Remaining
    
    as ofExercise Price
    
    9/30/04
    
    Contractual Life
    
    9/30/04$
    1.28
    
    
    
    1,194
    
    
    7.50 years
    
    
    1,1941.18
    
    
    
    203
    
    
    6.90 years
    
    
    2031.36
    
    
    
    131
    
    
    6.04 years
    
    
    1311.56
    
    
    
    68
    
    
    5.92 years
    
    
    687.63
    
    
    
    117
    
    
    5.04 years
    
    
    117$
    18.71
    
    
    
    25
    
    
    3.75 years
    
    
    251,738
    
    
    
    
    
    
    
    1,738
 Pro forma information regarding net income is required by SFAS No. 123. This
information is required to be determined as if the Company had accounted for
its employee stock options granted under the fair market value method of that
statement. The weighted average fair
value of options granted in fiscal year 2002 was $0.98 per share using the
Black-Scholes options pricing model, assuming a weighted average risk-free
interest rate of 4.59%, an expected life of five years and no projected
dividend yields. Stock price volatility was 100% for the October 2000, August
2001 and April 2002 grants. Stock Award Plan During the quarter ended June 29, 2001, the Company adopted a stock award plan
that was approved by the shareholders on September 26, 2002. Certain key
executives were awarded with Company shares that vest after meeting certain
quarterly performance criteria over 18 months. Upon meeting each quarterly
goal, the shares awarded were immediately vested. The total number of shares
eligible to be awarded under this plan was 4.8 million. Performance targets
were met, which resulted in an accrual of approximately $7.3 million recorded
in selling, general and administrative expenses based on current market value
of Common Stock at the date the award was earned in fiscal year 2002. Restricted Stock Units See Note  10 Capital Stock and Liabilities Subject to Mandatory Redemption F-27




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##### Table of Contents



Note 14  Commitments and Contingencies Leases The Company leases land, buildings, machinery and equipment under operating
leases. Rental expenses aggregated approximately $ 7,611, $18, $5,624 and
$7,579 for the fiscal year ended September 30, 2004, the one day ended
September 30, 2003, the twelve months ended September 29, 2003 and the fiscal
year ended 2002, respectively. Minimum annual lease commitments under non-cancelable operating leases at
September 30, 2004 are as follows: Year Ending September
30,2005
    
    $
    5,6012006
    
    
    4,0012007
    
    
    1,4692008
    
    
    6882009
    
    
    519Thereafter
    
    
    421
 Contingencies As part of the formation of LSL PlantScience, a joint venture between Seminis
and LSL Biotechnologies, LSL Biotechnologies contributed certain agreements
between LSL Biotechnologies and a third party. These agreements contain
provisions that permanently restrict the third party from engaging in the
development or marketing of open field tomato seeds having long-shelf-life
characteristics in certain areas in the world, including North America. In
September 2000, the Antitrust Division of the U.S. Department of Justice filed
suit in the U.S. District Court for the District of Arizona against LSL
PlantScience, LSL Biotechnologies and Seminis to delete these restrictive
provisions. On March 29, 2002, the U.S. District Court dismissed without
prejudice the action against LSL PlantScience, LSL Biotechnologies and Seminis.
The U.S. Department of Justice has appealed this ruling and the appeal is
pending in the Ninth Circuit Court of Appeals. In January 2002, melon growers in Costa Rica notified us that our Dorado melon
seeds were infected with Watermelon Fruit Blotch. Growers who purchased the
infected Seminis seeds and growers whose crops were infected by the bacteria
that spread from crops grown with the infected Seminis seeds have claimed
damages against us. The claims related to those growers who purchased Seminis
seeds have been settled for approximately $5.8 million, of which approximately
$2.6 million was recovered under our errors and omissions insurance policy and
the remainder of the settlement was paid by us by July 2002. The claims related
to the growers with infected crops total approximately $4.7 million and these
claims are covered under our general liability insurance policy. We have
finalized settlement of all of these claims, as well as finalizing settlements
with our two general liability insurance carriers. In early 2000, we filed suit against Dietrich Schmidt, the former president of
Seminis and the current president of United Genetics, a competitor of ours,
United Genetics, and two former Seminis breeders, Ken Owen and Wei Ouyang, for
trade secret misappropriation and breach of contract. Mr. Schmidt filed a
counterclaim for defamation against us). We settled and paid this litigation
with Mr. Schmidt and the other defendants and counterclaimants. On December 17, 2002 and January 4, 2003, four purported class action lawsuits
were filed relating to the acquisition transactions. Three of these actions 
Garry Firth v. Alfonso Romo Garza, et al., Civil Action No. 20085, Boris
Pozniak v. Alfonso Romo Garza, et al., Civil Action No. 20097 and Pablo Herranz
v. Seminis, Inc., et al., Civil Action No. 20105  were filed in the Delaware
Court of Chancery (New Castle County), while the fourth, Mark Rosales v.
Seminis, Inc., Case No. CIV216255, was filed in California Superior Court
(Ventura County). Since that time, a fifth case, Haven Capital Management v.
Alfonso Romo Garza, et al., Civil Action No. 20140 has also been filed in
Delaware. In February 2003, the Firth, Pozniak, Herranzand Haven Capitalcases
were consolidated into one proceeding entitled In re Seminis, Inc.
Shareholders Litigation, Consolidated C.A. No. 20140-NC, and the Haven Capital
complaint was designated as the operative complaint in the consolidated
lawsuit. That complaint names as defendants Savia, Seminis and its Directors.
The Rosales(California) complaint names as defendants Seminis and its
Directors. Both the Delaware consolidated action and the Rosalesaction purport
to be brought on behalf of Seminis common stockholders or their successors.
Both of these actions  which were brought prior to the public announcement of
Seminis entering into the acquisition transactions Agreements  allege that the
acquisition transactions, when consummated, would provide insufficient
consideration to Seminis common stockholders and allege that the defendants
breached their fiduciary duties in connection with the acquisition
transactions. The complaints sought a preliminary and permanent injunction to
enjoin the acquisition transactions and, since the acquisition transactions
have been consummated, rescission and damages. On September 24, 2003, the
parties reached a memorandum of understanding that settled all of the alleged
claims, final settlement papers were prepared, signed, approved by the court,
and entered. F-28




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##### Table of Contents



During the last months of fiscal year 2002, Seminis subsidiary in Spain sold
Boludo tomato seed to growers in the Canary Islands, Almeria, Murcia and
Granada areas of Spain. Subsequently, some plantings with this seed showed
symptoms of the bacteria, Clavibacter michiganses,which can be seed borne,
among other possible sources. Seminis has been conducting an investigation of
the seeds and until July 31, 2003, all Seminis seed used in these plantings
that had been tested, tested negative for the presence of the bacteria. Spanish
authorities requested an analysis of all seed lots sold in the Canary Islands.
On July 31, 2003, Seminis was notified that after analyzing 89 officially
sealed samples of batches of Boludo seed, a single seed batch tested positive
for the presence of the bacteria. Seminis believes that other factors that may
cause the disease were present at the time of the infection, and could be
responsible for, or contributing factors to, the presence of the bacteria and
damage to the crops. These factors include, but are not limited to: poor
sanitary practices in the growers fields (failure to remove debris from prior
harvests); bacteria from sources other than Seminis that remained in the
plantings from prior seasons; the practice of grafting, which can magnify the
effects of minor outbreaks; failure to properly rotate crops from season to
season; and third-party sources (different strains) of the disease that may
have been present. Seminis continues to investigate this matter vigorously, in
particular investigating the single positive test result, which is inconsistent
with the findings of all of the other independent laboratories test results
obtained from testing officially sealed batches samples of Seminis seed. Tomato
growers may initiate legal claims against Seminis alleging that Seminis seeds
were the source of the bacteria and claiming significant damages and Seminis
cannot predict the outcome of any such claim, if initiated. As part of its
customer relations initiatives, Seminis has entered into a
$2.9 million settlement of this
matter with growers in Almeria, and continues to work with its insurance
carriers and counsel to investigate and close out this matter in other
locations in Spain. We are involved from time to time as a defendant in various other lawsuits
arising in the normal course of business. We believe that no current claims,
individually or in the aggregate, will have a material adverse effect on our
business, results of operations or financial condition. An accrual for managements estimate of exposure related to such claims has
been recorded in the financial statements and is disclosed in Note 8. It is
the opinion of management that the ultimate resolution of these matters will
not have a material adverse effect on the Companys consolidated financial
position or results of operations. Historically, resolution of asserted claims
has been in line with managements expectations. Note 15  Geographic Information The Company operates principally in one business segment consisting of the
development, production and marketing of vegetable and fruit seeds. Revenues
derived from sales to external customers attributed to the Companys country of
domicile, to individual countries representing more than 10% of the Companys
consolidated net sales and to all other foreign countries in total are
summarized as follows: Successor
    

    PredecessorFor the
    
    For the
    

    For the
    
    For theYear
    
    Day
    

    Twelve Months
    
    YearEnded Sep. 30,
    
    Ended Sep. 30,
    

    Ended Sep. 29,
    
    Ended Sep. 30,2004
    
    2003
    

    2003
    
    2002Net sales:United States
    
    $
    211,971
    
    
    $
    2,300
    

    

    $
    139,681
    
    
    $
    144,295Italy
    
    
    54,804
    
    
    
    73
    

    

    
    46,577
    
    
    
    38,368South Korea
    
    
    40,169
    
    
    
    1
    

    

    
    33,323
    
    
    
    45,383Spain
    
    
    39,216
    
    
    
    21
    

    

    
    32,691
    
    
    
    28,492Mexico
    
    
    30,485
    
    
    
    154
    

    

    
    29,794
    
    
    
    28,245Other foreign
    
    
    149,194
    
    
    
    2,161
    

    

    
    190,629
    
    
    
    167,824Consolidated net sales
    
    $
    525,839
    
    
    $
    4,710
    

    

    $
    472,695
    
    
    $
    452,607
 Long-lived assets other than financial instruments and deferred tax assets
located in the Companys country of domicile, located in individual foreign
countries representing more than 10.3% in fiscal year 2004 and 9.5% in fiscal
year 2003 of the Companys consolidated long-lived assets and located in all
other foreign countries in total in which the Company holds assets are
summarized as follows: As of
    
    As ofSep. 30,
    
    Sep. 30,2004
    
    2003Long-lived assets:United States
    
    $
    50,069
    
    
    $
    45,766The Netherlands
    
    
    15,105
    
    
    
    12,133South Korea
    
    
    14,322
    
    
    
    12,871Other foreign
    
    
    22,703
    
    
    
    18,979Consolidated long-lived assets
    
    $
    102,199
    
    
    $
    89,749
 F-29




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##### Table of Contents



Note 16  Related
Parties (In dollars unless stated otherwise) Balances and transactions with related parties included in the consolidated
financial statements are as follows: In accordance with the agreement entered in as part of acquisition
transactions, the Company paid management fees of $2.4 million each to Fox
Paine and Desarrollo Consolidado De Negocios, S.A. De C.V. in October 2003 for
services rendered during fiscal year 2004. The annual management fee is equal
to 1% of previous fiscal years net sales and is amortized as services are
rendered during the fiscal year. In connection with the additional senior subordinated notes, the Company paid
$1.8 million and $1.5 million for advisory fees to Fox Paine and Geotel S.A. De
C.V., a subsidiary of Desarrollo Consolidado De Negocios, S.A. De C.V, in
January and June 2004, respectively. The payments were recorded as deferred
financing fees in other deferred assets. In August 2002, we also entered into two non-exclusive sales/royalty
agreements with Bionova Produce, Inc., an indirect subsidiary of Savia, that
provide Bionova Produce with the non-exclusive license to grow certain seedless
watermelon and specialty sweet peppers varieties. The agreement for the
watermelon varieties is for a period of three years, with an option to renew.
The agreement for the sweet pepper varieties is for a period of two years, with
an option to renew. The agreements provide us with payments for the sale of the
seeds and royalties from Bionovas fresh produce sales. In fiscal years 2004, 2003,
and 2002, we had sales of $263,000, $496,000 and $793,000,
respectively, to Agrobionova, an indirect subsidiary of Savia, and a receivable
of $357,000, $840,000 and $355,000 at September 30, 2004, 2003, and 2002, respectively.
Furthermore, we incurred $118,916 of travel and other expenses from Fox Paine, of
which $21,548 was in accounts payable at September 30, 2004. In August 2002, we entered into a patent and technology license agreement with
DNA Plant Technology Corporation (DNAP), an affiliate of Savia, that provides
us with a license for the non-exclusive production of DNAP products worldwide
and an exclusive license to commercially distribute certain DNAP products in
Europe and Asia. The agreement is for a term of seven years, subject to a
three-year renewal provision. Seminis has the option to terminate the agreement
at any time after the second year. We were required to pay a royalty advance of
$2.0 million to be applied against our obligation to pay an amount per each one
thousand seeds sold or a percentage of net revenue from seed sales for each
quarter, and a percentage of the net royalty that we collect for the DNAP
products (excluding seeds) for each quarter during the term of the agreement.
The royalty advance is secured by the patent rights to the germplasm in the
DNAP products in the event that we terminate the contract and DNAP is unable to
repay a portion of the royalty advance. As of September 30,
2004, we have $16,650 of DNAP royalty applied to the royalty advance and a promissory note of
$1,983,350 from DNAP was issued on August 22, 2004, which guarantees payment of
the unapplied portion of the royalty advance before or by August 22, 2005. Pursuant to an agreement between our company and Bionova, a biotechnology and
fresh produce company and a majority owned subsidiary of Savia, we paid Bionova
for access to the results of Bionovas biotechnology research. This agreement
was terminated during the third quarter of fiscal year 2002. In fiscal year
2002, research and development expenses included $661,668 of biotechnology research
fees. The Company issued 11 shares of its Class C preferred stock to Savia for a
total purchase price of $108.3 million. These shares accrued dividends
quarterly at a rate of 10.0% per year. In October and November 2000, the
Company received an additional $31.9 million and $14.0 million, respectively,
of capital contributions from Savia. The Company agreed to pay dividends on
these contributions at the same rate as the Class C preferred stock. Through
July 1, 2002, there were $25.0 million of accrued and unpaid dividends on the
outstanding shares of Class C preferred stock and additional capital
contributions. The Company has also paid dividends of $12.7 million in the form
of additional shares of Class C preferred stock, which were classified as
additional paid in capital. On October 1, 2002, the Board of Directors approved
the conversion of the Savia additional capital contribution and the associated
paid-in-kind dividends that totaled $46.7 million into 5 shares of Class C
preferred stock. Concurrently, the Board also adopted a resolution authorizing
and directing an increase in the number of shares designated as Class C
Redeemable PIK Preferred Stock from 14 shares to 17 shares. In connection with
the acquisition transactions, Savia exchanged all of the outstanding shares of
Class C preferred stock (Savia owned 100% of the outstanding shares of Class C
preferred stock) and all obligations with respect to those shares for 37,669
shares of Class A common stock and a cash payment to Savia equal to $15.0
million plus interest at a rate of 10.0% per annum from July 1, 2002, less $3.0
million (Savia ultimately received proceeds of approximately $266.2 million in
respect of the 37,669 shares of Class A common stock that it received in the
exchange and an additional 40,616 shares of Class B common stock that it
owned). As part of the acquisition transactions, the Company paid $17.5 million to
Savia for interest and dividends on the Preferred Class C shares and
transaction related fees. Additionally, the Company paid a $14.0 million
transaction fee to Fox Paine which was deducted from additional paid-in capital
and reimbursed Fox Paine for $7.5 million of transaction related expenses.
This reimbursement was expensed in the Companys statement of operations. F-30




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##### Table of Contents



In December 2003, Seminis Vegetable Seed sold residential property, originally
acquired in October 2000, to Mr. Bernardo Jimenez, our Director, Executive
Senior Vice President and Chief Financial Officer, for $1.1 million, which was
based upon an independent real estate appraisal of the market value of the
property. In June 2000, a subsidiary of the Company sold residential property, originally
acquired in December 1999 for $862,000, to Mr. Bruno Ferrari, President and Chief
Operating Officer, at the appraised value of $875,000. The purchase price was
evidenced by a promissory note secured by a deed of trust on the property. The
note had an interest rate of 7.75% per annum and was payable in ten equal
annual installments of principal, including interest accrued thereon,
commencing December 15, 2000, and annually thereafter. The loan was repaid in
December 2003. Under a separate agreement, the Company paid bonuses to Mr.
Ferrari that covered the interest payable on the loan and paid Mr. Ferrari the
present value of the interest payments that would have been payable to Mr.
Ferrari had the loan remained outstanding until its scheduled final maturity.
The bonus payments were recognized as compensation expense at the time of the
payments. In April 2000, we loaned
$100,000 to Mr. Gaspar Alvarez Martinez, our current Vice
President Finance, World Wide Corporate Comptroller, to assist in the purchase
of a family residence. The loan is evidenced by a promissory note signed by Mr.
Alvarez and is secured by a second deed of trust. The note has an interest rate
of 7.75% per annum and is payable in ten equal annual installments of
principal, including interest accrued thereon, commencing December 15, 2000,
and annually thereafter. Since the beginning of fiscal year 2003, the largest
aggregate amount of indebtedness outstanding was $79,083. The loan was repaid in
September 2003. Employment Contracts Mr. Romo has entered into an employment agreement that became effective
September 2003 and has a five-year term with automatic one-year renewals unless
timely notice is provided by either party. Pursuant to the employment
agreement, Mr. Romo will serve as the chief executive officer of Seminis. Mr.
Romo will receive an initial base salary of $1,000,000, which will be reviewed
no less frequently than annually and may be increased, but not decreased,
throughout the term of the agreement. Mr. Romo will be eligible to receive an
annual bonus that will be based on Seminis achieving performance objectives,
with a target bonus set at 100% of base salary and a maximum bonus at 200% of
base salary. Under the terms of his employment agreement, Mr. Romo will be entitled to
participate in Holdings benefit plans and programs, and is entitled to the
perquisites and other fringe benefits generally made available to Holdings
senior executives and commensurate with Mr. Romos position. Specifically, Mr.
Romo is entitled to receive benefits reasonably comparable to those provided to
him prior to the acquisition transactions, including, but not limited to,
membership in a social club, reimbursement of security and non- leisure travel
expenses in an annual amount not to exceed approximately $2.4 million, use of
company automobiles, and certain expatriate and other benefits and allowances. In the event Mr. Romos employment with Seminis  
    
    is terminated during the term of the employment agreement as a result
of Mr. Romos death or permanent disability, or
    
    following a change of control or following Fox Paine obtaining
majority control of the board of directors, is terminated by Mr. Romo
for good reason or by Seminis without cause, Mr. Romo or his estate, as applicable, will receive, within 30 days following
the termination, a cash lump sum payment equal to five times the sum of his
base salary and the average annual bonus paid or payable to Mr. Romo with
respect to the two fiscal years immediately prior to the date of termination
(less any applicable insurance benefits payable during the severance period).
In addition, Mr. Romo or his estate, as applicable, will be entitled to receive
such other payments, if any, to which he is entitled under any applicable plans
or programs, a payment in respect of accrued but unused vacation days, and
continued coverage under any employee medical plans or programs provided to him
and his family until the earlier of the fifth anniversary of his termination of
employment or the date on which he becomes entitled to receive medical coverage
under another employers medical benefits program. Pursuant to his employment agreement, Mr. Romo will be bound by non-competition
and non-solicitation restrictions during the term of the agreement and for a
period of two years after the termination of his employment. F-31




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##### Table of Contents



Mr. Mazal, Ferrari and Jimenez have also entered into employment agreements
with Seminis Merger Corp. that became effective in September 2003, which have a
term of three years, and will be renewed automatically unless timely notice is
provided by either party. Mr. Mazal will receive an initial base salary of
$400,000 and will be eligible to receive an annual bonus that will be based on
the achievement of Company and executive performance objectives, with a target
bonus set at 65.0% of his base salary and a maximum bonus set at 81.25% of his
base salary. Mr. Ferrari will receive an initial base salary of $500,000 and
will be eligible to receive an annual bonus based on the achievement of Company
and executive performance objectives, with a target bonus set at 75.0% of his
base salary and a maximum bonus set at 93.75% of his base salary. Mr. Jimenez
will receive an initial base salary of $636,000 and will be eligible to receive
an annual bonus based on the achievement of Company and executive performance
objectives, with a target bonus set at 65.0% of his base salary and a maximum
bonus set at 81.25% of his base salary. Pursuant to the employment agreements,
the foregoing base salaries will be reviewed no less frequently than annually
and may be increased but not decreased. During the employment period, each of Messrs. Mazal, Ferrari and Jimenez is
entitled to other benefits on terms and conditions no less favorable in the
aggregate than those in effect prior to the acquisition transactions,
including, but not limited to, membership in a social club, use of company
automobiles, and certain expatriate and other benefits and allowances. In addition, Mr. Mazal, Ferrari and Jimenez are entitled to receive restricted
stock units that vest over a period of five years and are conditioned on the
satisfaction of Company and executive performance criteria. For a more detailed
description of the restricted stock units, see  Restricted Stock Units. Mr. Ferrari received an award of 1,091,577 shares of Seminis common stock on
the effective date of his employment agreement, subject to all applicable
withholding taxes. The employment agreements for each of Mr. Mazal, Ferrari and Jimenez provide
that if the executives employment is terminated during the employment period
as a result of death or permanent disability, is terminated by Seminis without
cause or terminated by the executive for good reason, the executive or his
estate, as applicable, will receive a cash lump sum payment equal to three
times the sum of the base salary and the average annual bonus paid or payable
to the executive with respect to the two fiscal years immediately prior to the
executives date of termination of employment, less applicable insurance
benefits. In addition, upon any termination of employment described in the
previous sentence, the executive or his estate, as applicable, will receive
such other payments, if any, to which he is entitled under any applicable plans
or programs, a cash lump sum payment in respect of accrued but unused vacation
days, and continued coverage under any employee medical plans or programs
provided to the executive and his family until the earlier of the third
anniversary of the executives termination of employment or the date on which
the executive becomes entitled to receive medical coverage under another
employers medical benefits program. Each of Mr. Mazal, Ferrari and Jimenez will be bound by non-competition and
non-solicitation restrictions during the term of his agreement and for a period
of two years after any termination of his employment. Mr. Green, Alvarez, Madero and Gerard Renou, Vice President of Value Capture,
have also entered into employment agreements with Seminis with terms
substantially similar to the agreements between Seminis and Mr. Mazal, Ferrari,
and Jimenez, except that the base salaries, bonuses and benefits provided to
Mr. Green, Alvarez Madero and Renou differ from those provided to Mr. Mazal,
Ferrari and Jimenez. Under their respective employment agreements, Mr. Green
will receive a base salary of $265,921, Mr. Alvarez will receive a base salary
of $262,051, Mr. Madero will receive a base salary of $200,000, and Mr. Renou
will receive a base salary of 230,000 Euros, in each case with a target bonus
set at 65.0% of base salary and a maximum bonus set at 81.25% of base salary.
In addition, severance benefits that may become payable to Mr. Green, Alvarez,
Madero or Renou will be based on a multiple of two times the sum of base salary
and bonus instead of three. During the employment period, each of Messrs. Green, Alvarez and Madero is
entitled to participate in the employee benefit plans made available to
similarly situated executives of Holdings, and will be entitled to other
benefits on terms and conditions similar to those in effect prior to the
Acquisition Transactions, including, but not limited to, membership in a social
club, use of company automobiles, and certain expatriate and other benefits and
allowances. Each of Mr. Green, Alvarez, Madero, and Renou are entitled to receive
restricted stock units that vest over a period of five years and are
conditioned on each individuals satisfaction of Company and executive
performance criteria. For a more detailed description of the restricted stock
units, see  Restricted Stock Units. F-32




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##### Table of Contents



Compensation Committee Interlocks and Insider Participation The members of the Compensation Committee of the Companys Board of Directors
for the 2004 fiscal year are W. Dexter Paine, III and Eugenio Garza. Note 17  Supplemental Guarantor/Non-Guarantor Financial Information In conjunction with the 101⁄4% senior subordinated notes described in Note 9,
the following summarized condensed consolidating financial information is
presented for the Company, segregating the Company, a guarantor of the notes
and the parent of Seminis Vegetable Seeds, Inc. (Seminis Vegetable), Seminis
Vegetable, the issuer of the notes, guarantor subsidiaries and non-guarantor
subsidiaries. The accompanying financial information in the Guarantor
Subsidiaries column reflects the financial position, results of operations and
cash flows for those subsidiaries which guarantee the notes. The guarantor
subsidiaries are wholly owned subsidiaries of the Company and the guarantees
are full, unconditional, and joint and several. Separate financial statements
of the guarantor subsidiaries are not presented because management believes
that such financial statements would not be material to investors. Investments in subsidiaries in the following condensed consolidating financial
information are accounted for under the equity method of accounting.
Consolidating adjustments include the following:  (1)
    
    Elimination of investments in subsidiaries;(2)
    
    Elimination of intercompany accounts;(3)
    
    Elimination of intercompany sales between guarantor and non-guarantor
subsidiaries; and(4)
    
    Elimination of equity in earnings of subsidiaries. F-33




---



##### Table of Contents



Successor
Condensed Consolidating Balance Sheets
As of September 30, 2004 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    101,022
    
    
    $
    635
    
    
    $
    15,213
    
    
    $
    
    
    
    $
    116,870Accounts receivable
    
    
    
    
    
    
    36,684
    
    
    
    4,269
    
    
    
    112,220
    
    
    
    
    
    
    
    153,173Inventories
    
    
    
    
    
    
    168,225
    
    
    
    7,201
    
    
    
    152,969
    
    
    
    
    
    
    
    328,395Prepaid expenses and other
current assets
    
    
    
    
    
    
    5,180
    
    
    
    23
    
    
    
    2,814
    
    
    
    
    
    
    
    8,017Total current assets
    
    
    
    
    
    
    311,111
    
    
    
    12,128
    
    
    
    283,216
    
    
    
    
    
    
    
    606,455Property, plant and equipment, net
    
    
    
    
    
    
    35,187
    
    
    
    76
    
    
    
    43,345
    
    
    
    
    
    
    
    78,608Investment in subsidiaries
    
    
    253,597
    
    
    
    233,740
    
    
    
    
    
    
    
    
    
    
    
    (487,337
    )
    
    
    Goodwill, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intangible assets, net
    
    
    
    
    
    
    44,710
    
    
    
    
    
    
    
    24,298
    
    
    
    
    
    
    
    69,008Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other assets
    
    
    137
    
    
    
    13,886
    
    
    
    
    
    
    
    9,568
    
    
    
    
    
    
    
    23,591$
    253,734
    
    
    $
    638,634
    
    
    $
    12,204
    
    
    $
    360,427
    
    
    $
    (487,337
    )
    
    $
    777,662Current liabilitiesShort-term borrowings
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    10,965
    
    
    $
    
    
    
    $
    10,965Current maturities of
long-term debt
    
    
    
    
    
    
    1,206
    
    
    
    183
    
    
    
    357
    
    
    
    
    
    
    
    1,746Accounts payable
    
    
    
    
    
    
    34,448
    
    
    
    917
    
    
    
    27,974
    
    
    
    
    
    
    
    63,339Accrued liabilities
    
    
    452
    
    
    
    54,018
    
    
    
    124
    
    
    
    65,740
    
    
    
    
    
    
    
    120,334Intercompany payables
    
    
    138,755
    
    
    
    (167,004
    )
    
    
    14,245
    
    
    
    14,004
    
    
    
    
    
    
    
    Total current liabilities
    
    
    139,207
    
    
    
    (77,332
    )
    
    
    15,469
    
    
    
    119,040
    
    
    
    
    
    
    
    196,384Long-term debt
    
    
    
    
    
    
    446,077
    
    
    
    208
    
    
    
    2,531
    
    
    
    
    
    
    
    448,816Deferred income taxes
    
    
    
    
    
    
    16,291
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,291Minority
interest in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644
    
    
    
    
    
    
    
    1,644Preferred shares subject to
mandatory redemption
    
    
    41,773
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,773Total liabilities
    
    
    180,980
    
    
    
    385,036
    
    
    
    15,677
    
    
    
    123,215
    
    
    
    
    
    
    
    704,908Total stockholders equity
    
    
    72,754
    
    
    
    253,598
    
    
    
    (3,473
    )
    
    
    237,212
    
    
    
    (487,337
    )
    
    
    72,754$
    253,734
    
    
    $
    638,634
    
    
    $
    12,204
    
    
    $
    360,427
    
    
    $
    (487,337
    )
    
    $
    777,662
 F-34




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##### Table of Contents



Successor
Condensed Consolidating Balance Sheets
As of September 30, 2003 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    18,669
    
    
    $
    906
    
    
    $
    17,249
    
    
    $
    
    
    
    $
    36,824Accounts receivable
    
    
    
    
    
    
    42,190
    
    
    
    3,430
    
    
    
    105,958
    
    
    
    
    
    
    
    151,578Inventories
    
    
    
    
    
    
    177,627
    
    
    
    8,042
    
    
    
    165,968
    
    
    
    
    
    
    
    351,637Prepaid expenses and other
current assets
    
    
    
    
    
    
    1,997
    
    
    
    
    
    
    
    2,453
    
    
    
    
    
    
    
    4,450Total current assets
    
    
    
    
    
    
    240,483
    
    
    
    12,378
    
    
    
    291,628
    
    
    
    
    
    
    
    544,489Property, plant and equipment, net
    
    
    
    
    
    
    33,307
    
    
    
    88
    
    
    
    36,397
    
    
    
    
    
    
    
    69,792Investment in subsidiaries
    
    
    268,653
    
    
    
    193,083
    
    
    
    
    
    
    
    
    
    
    
    (461,736
    )
    
    
    Goodwill, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Intangible assets, net
    
    
    
    
    
    
    47,372
    
    
    
    
    
    
    
    25,637
    
    
    
    
    
    
    
    73,009Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,006
    
    
    
    (2,006
    )
    
    
    Other assets
    
    
    159
    
    
    
    13,468
    
    
    
    
    
    
    
    6,330
    
    
    
    
    
    
    
    19,957$
    268,812
    
    
    $
    527,713
    
    
    $
    12,466
    
    
    $
    361,998
    
    
    $
    (463,742
    )
    
    $
    707,247Current liabilitiesShort-term borrowings
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    20,031
    
    
    $
    
    
    
    $
    20,031Current maturities of
long-term debt
    
    
    
    
    
    
    2,141
    
    
    
    161
    
    
    
    420
    
    
    
    
    
    
    
    2,722Accounts payable
    
    
    
    
    
    
    26,457
    
    
    
    92
    
    
    
    23,731
    
    
    
    
    
    
    
    50,280Accrued liabilities
    
    
    8,581
    
    
    
    12,842
    
    
    
    89
    
    
    
    67,904
    
    
    
    
    
    
    
    89,416Intercompany payables
    
    
    137,006
    
    
    
    (200,557
    )
    
    
    13,489
    
    
    
    50,062
    
    
    
    
    
    
    
    Total current liabilities
    
    
    145,587
    
    
    
    (159,117
    )
    
    
    13,831
    
    
    
    162,148
    
    
    
    
    
    
    
    162,449Long-term debt
    
    
    
    
    
    
    394,859
    
    
    
    390
    
    
    
    3,289
    
    
    
    
    
    
    
    398,538Deferred income taxes
    
    
    
    
    
    
    23,318
    
    
    
    
    
    
    
    
    
    
    
    (2,006
    )
    
    
    21,312Minority interest in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,723
    
    
    
    
    
    
    
    1,723Preferred shares subject to
mandatory redemption
    
    
    39,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,300Total liabilities
    
    
    184,887
    
    
    
    259,060
    
    
    
    14,221
    
    
    
    167,160
    
    
    
    (2,006
    )
    
    
    623,322Total stockholders equity
    
    
    83,925
    
    
    
    268,653
    
    
    
    (1,755
    )
    
    
    194,838
    
    
    
    (461,736
    )
    
    
    83,925$
    268,812
    
    
    $
    527,713
    
    
    $
    12,466
    
    
    $
    361,998
    
    
    $
    (463,742
    )
    
    $
    707,247
 F-35




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##### Table of Contents



Successor
Condensed Consolidating Statements Of Operations
For The Year Ended September 30, 2004 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    273,019
    
    
    $
    10,160
    
    
    $
    371,821
    
    
    $
    (129,161
    )
    
    $
    525,839Cost of goods sold
    
    
    
    
    
    
    146,839
    
    
    
    9,586
    
    
    
    208,466
    
    
    
    (129,161
    )
    
    
    235,730Gross profit
    
    
    
    
    
    
    126,180
    
    
    
    574
    
    
    
    163,355
    
    
    
    
    
    
    
    290,109Operating expensesResearch and development
expenses
    
    
    
    
    
    
    26,244
    
    
    
    
    
    
    
    24,897
    
    
    
    
    
    
    
    51,141Selling, general and
administrative expenses
    
    
    5
    
    
    
    84,933
    
    
    
    2,257
    
    
    
    107,561
    
    
    
    
    
    
    
    194,756Amortization of intangible assets
    
    
    
    
    
    
    5,628
    
    
    
    
    
    
    
    2,365
    
    
    
    
    
    
    
    7,993Total operating expenses
    
    
    5
    
    
    
    116,805
    
    
    
    2,257
    
    
    
    134,823
    
    
    
    
    
    
    
    253,890Gain on sale of assets
    
    
    
    
    
    
    788
    
    
    
    
    
    
    
    3,510
    
    
    
    
    
    
    
    4,298Income (loss) from operations
    
    
    (5
    )
    
    
    10,163
    
    
    
    (1,683
    )
    
    
    32,042
    
    
    
    
    
    
    
    40,517Other income (expense)Interest income
    
    
    
    
    
    
    576
    
    
    
    
    
    
    
    498
    
    
    
    
    
    
    
    1,074Interest expense
    
    
    (21
    )
    
    
    (37,185
    )
    
    
    (64
    )
    
    
    (2,453
    )
    
    
    
    
    
    
    (39,723
    )Interest expense from preferred
shares subject to mandatory
redemption
    
    
    (7,089
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,089
    )Foreign currency gain (loss)
    
    
    (26
    )
    
    
    157
    
    
    
    
    
    
    
    6,914
    
    
    
    
    
    
    
    7,045Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,289
    )
    
    
    
    
    
    
    (1,289
    )Other, net
    
    
    
    
    
    
    (4,089
    )
    
    
    30
    
    
    
    (329
    )
    
    
    
    
    
    
    (4,388
    )Equity from subsidiary
    
    
    (9,167
    )
    
    
    24,927
    
    
    
    
    
    
    
    
    
    
    
    (15,760
    )
    
    
    (16,303
    )
    
    
    (15,614
    )
    
    
    (34
    )
    
    
    3,341
    
    
    
    (15,760
    )
    
    
    (44,370
    )Income (loss) before income
taxes
    
    
    (16,308
    )
    
    
    (5,451
    )
    
    
    (1,717
    )
    
    
    35,383
    
    
    
    (15,760
    )
    
    
    (3,853
    )Income tax expense
    
    
    
    
    
    
    (3,716
    )
    
    
    
    
    
    
    (8,739
    )
    
    
    
    
    
    
    (12,455
    )Net income (loss) available for
common stockholders
    
    $
    (16,308
    )
    
    $
    (9,167
    )
    
    $
    (1,717
    )
    
    $
    26,644
    
    
    $
    (15,760
    )
    
    $
    (16,308
    )
 F-36




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##### Table of Contents



Successor
Condensed Consolidating Statements Of Operations
For The Day Ended September 30, 2003 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    3,297
    
    
    $

    
    
    
    $
    1,413
    
    
    $
    
    
    
    $
    4,710Cost of goods sold
    
    
    
    
    
    
    1,331
    
    
    
    
    
    
    
    570
    
    
    
    
    
    
    
    1,901Gross profit
    
    
    
    
    
    
    1,966
    
    
    
    
    
    
    
    843
    
    
    
    
    
    
    
    2,809Operating expensesResearch and development
Expenses
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    132In-process research and development
    
    
    
    
    
    
    5,734
    
    
    
    
    
    
    
    4,884
    
    
    
    
    
    
    
    10,618Selling, general and
administrative expenses
    
    
    
    
    
    
    701
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    861Amortization
of intangible assets
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    41Total operating expenses
    
    
    
    
    
    
    6,535
    
    
    
    
    
    
    
    5,117
    
    
    
    
    
    
    
    11,652Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    
    
    
    
    
    (4,569
    )
    
    
    
    
    
    
    (4,274
    )
    
    
    
    
    
    
    (8,843
    )Other income (expense)Interest Income
    
    
    1,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,966Interest expense
    
    
    
    
    
    
    (674
    )
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    (701
    )Foreign currency gain (loss)
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    22Other, net
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (28
    )Equity from subsidiary
    
    
    (9,569
    )
    
    
    (4,321
    )
    
    
    
    
    
    
    
    
    
    
    13,890
    
    
    
    (7,603
    )
    
    
    (5,000
    )
    
    
    
    
    
    
    (28
    )
    
    
    13,890
    
    
    
    1,259Income (loss) before income
Taxes
    
    
    (7,603
    )
    
    
    (9,569
    )
    
    
    
    
    
    
    (4,302
    )
    
    
    13,890
    
    
    
    (7,584
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Net loss
    
    
    (7,603
    )
    
    
    (9,569
    )
    
    
    
    
    
    
    (4,321
    )
    
    
    13,890
    
    

    
    (7,603
    )Forgiveness of dividends payable
to Savia
    
    
    1,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,035Discount on redemption of Class B
redeemable Preferred Stock
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250Net income (loss) available for
common stockholders
    
    $
    (5,318
    )
    
    $
    (9,569
    )
    
    $
    0
    
    
    $
    (4,321
    )
    
    $
    13,890
    
    
    $
    (5,318
    )
 F-37




---



##### Table of Contents



Predecessor
Condensed Consolidating Statements Of Operations
For The Twelve Months Ended September 29, 2003 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    260,186
    
    
    $
    8,582
    
    
    $
    327,252
    
    
    $
    (123,325
    )
    
    $
    472,695Cost of goods sold
    
    
    
    
    
    
    116,330
    
    
    
    7,296
    
    
    
    179,356
    
    
    
    (123,325
    )
    
    
    179,657Gross profit
    
    
    
    
    
    
    143,856
    
    
    
    1,286
    
    
    
    147,896
    
    
    
    
    
    
    
    293,038Operating expensesResearch and development
expenses
    
    
    
    
    
    
    25,943
    
    
    
    
    
    
    
    22,320
    
    
    
    
    
    
    
    48,263Selling, general and
administrative expenses
    
    
    26,241
    
    
    
    86,575
    
    
    
    1,771
    
    
    
    100,490
    
    
    
    
    
    
    
    215,077Amortization of intangible assets
    
    
    
    
    
    
    11,416
    
    
    
    
    
    
    
    4,893
    
    
    
    
    
    
    
    16,309Total operating expenses
    
    
    26,241
    
    
    
    123,934
    
    
    
    1,771
    
    
    
    127,703
    
    
    
    
    
    
    
    279,649Gain on sale of assets
    
    
    
    
    
    
    (82
    )
    
    
    
    
    
    
    1,992
    
    
    
    
    
    
    
    1,910Income (loss) from operations
    
    
    (26,241
    )
    
    
    19,840
    
    
    
    (485
    )
    
    
    22,185
    
    
    
    
    
    
    
    15,299Other income (expense) InterestIncome
    
    
    
    
    
    
    351
    
    
    
    8
    
    
    
    501
    
    
    
    
    
    
    
    860Interest expense
    
    
    (1,965
    )
    
    
    (24,440
    )
    
    
    (79
    )
    
    
    (7,132
    )
    
    
    
    
    
    
    (33,616
    )Foreign currency gain (loss)
    
    
    
    
    
    
    (1,364
    )
    
    
    
    
    
    
    2,739
    
    
    
    
    
    
    
    1,375Other, net
    
    
    
    
    
    
    (2,494
    )
    
    
    730
    
    
    
    (394
    )
    
    
    
    
    
    
    (2,158
    )Equity from subsidiary
    
    
    4,139
    
    
    
    14,007
    
    
    
    
    
    
    
    
    
    
    
    (18,146
    )
    
    
    2,174
    
    
    
    (13,940
    )
    
    
    659
    
    
    
    (4,286
    )
    
    
    (18,146
    )
    
    
    (33,539
    )Income (loss) before income
taxes
    
    
    (24,067
    )
    
    
    5,900
    
    
    
    174
    
    
    
    17,899
    
    
    
    (18,146
    )
    
    
    (18,240
    )Income tax benefit (expense)
    
    
    
    
    
    
    (1,761
    )
    
    
    
    
    
    
    (4,066
    )
    
    
    
    
    
    
    (5,827
    )Net income (loss)
    
    
    (24,067
    )
    
    
    4,139
    
    
    
    174
    
    
    
    13,833
    
    
    
    (18,146
    )
    
    
    (24,067
    )Preferred stock dividends
    
    
    (1,994
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,994
    )Contingent dividends payable
    
    
    (16,642
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,642
    )Net income (loss) available for
common stockholders
    
    $
    (42,703
    )
    
    $
    4,139
    
    
    $
    174
    
    
    $
    13,833
    
    
    $
    (18,146
    )
    
    $
    (42,703
    )
 F-38




---



##### Table of Contents



Predecessor
Condensed Consolidating Statements Of Operations
For The Year Ended September 30, 2002 Seminis
    
    
    
    
    
    SubsidiarySeminis
    
    Vegetable
    
    Subsidiary
    
    Non-(Parent)
    
    (Issuer)
    
    Guarantors
    
    Guarantors
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    235,382
    
    
    $
    8,796
    
    
    $
    301,214
    
    
    $
    (92,785
    )
    
    $
    452,607Cost of goods sold
    
    
    
    
    
    
    108,456
    
    
    
    6,566
    
    
    
    149,655
    
    
    
    (92,785
    )
    
    
    171,892Gross profit
    
    
    
    
    
    
    126,926
    
    
    
    2,230
    
    
    
    151,559
    
    
    
    
    
    
    
    280,715Operating expensesResearch and development
expenses
    
    
    
    
    
    
    26,470
    
    
    
    
    
    
    
    17,846
    
    
    
    
    
    
    
    44,316Selling, general and
administrative expenses
    
    
    
    
    
    
    78,425
    
    
    
    1,544
    
    
    
    94,885
    
    
    
    
    
    
    
    174,854Amortization of intangible assets
    
    
    
    
    
    
    12,043
    
    
    
    
    
    
    
    5,022
    
    
    
    
    
    
    
    17,065Total operating expenses
    
    
    
    
    
    
    116,938
    
    
    
    1,544
    
    
    
    117,753
    
    
    
    
    
    
    
    236,235Gain on sale of assets
    
    
    
    
    
    
    1,405
    
    
    
    
    
    
    
    4,548
    
    
    
    
    
    
    
    5,953Income (loss) from operations
    
    
    
    
    
    
    11,393
    
    
    
    686
    
    
    
    38,354
    
    
    
    
    
    
    
    50,433Other income (expense) InterestIncome
    
    
    
    
    
    
    450
    
    
    
    17
    
    
    
    803
    
    
    
    
    
    
    
    1,270Interest expense
    
    
    
    
    
    
    (23,086
    )
    
    
    (97
    )
    
    
    (5,806
    )
    
    
    
    
    
    
    (28,989
    )Foreign currency gain (loss)
    
    
    
    
    
    
    (389
    )
    
    
    
    
    
    
    (1,788
    )
    
    
    
    
    
    
    (2,177
    )Other, net
    
    
    
    
    
    
    (3,241
    )
    
    
    82
    
    
    
    1,177
    
    
    
    
    
    
    
    (1,982
    )Equity from subsidiary
    
    
    16,086
    
    
    
    25,535
    
    
    
    
    
    
    
    
    
    
    
    (41,621
    )
    
    
    16,086
    
    
    
    (731
    )
    
    
    2
    
    
    
    (5,614
    )
    
    
    (41,621
    )
    
    
    (31,878
    )Income (loss) before income
taxes
    
    
    16,086
    
    
    
    10,662
    
    
    
    688
    
    
    
    32,740
    
    
    
    (41,621
    )
    
    
    18,555Income tax benefit (expense)
    
    
    
    
    
    
    5,424
    
    
    
    (262
    )
    
    
    (7,631
    )
    
    
    
    
    
    
    (2,469
    )Net income (loss)
    
    
    16,086
    
    
    
    16,086
    
    
    
    426
    
    
    
    25,109
    
    
    
    (41,621
    )
    
    
    16,086Preferred stock dividends
    
    
    (11,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,022
    )Additional capital contribution
    
    
    (3,505
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,505
    )Contingent dividends payable
    
    
    (4,161
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,161
    )Net income (loss) available for
common stockholders
    
    $
    (2,602
    )
    
    $
    16,086
    
    
    $
    426
    
    
    $
    25,109
    
    
    $
    (41,621
    )
    
    $
    (2,602
    )
 F-39




---



##### Table of Contents



Successor
Condensed Consolidating Statements Of Cash Flows
For The Year Ended September 30, 2004 SeminisSeminis
    
    Vegetable
    
    Subsidiary
    
    Subsidiary(Parent)
    
    (Issuer)
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    
    
    
    $
    17,387
    
    
    $
    (769
    )
    
    $
    34,363
    
    
    $
    
    
    
    $
    50,981Cash flows from investing activities:Purchases of fixed and intangible
assets
    
    
    
    
    
    
    (6,892
    )
    
    
    (8
    )
    
    
    (10,380
    )
    
    
    
    
    
    
    (17,280
    )Proceeds from disposition of
assets
    
    
    
    
    
    
    1,204
    
    
    
    8
    
    
    
    5,096
    
    
    
    
    
    
    
    6,308Intercompany investments
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    (364
    )
    
    
    
    
    
    
    (947
    )
    
    
    
    
    
    
    (1,311
    )Net cash provided by (used in)
investing activities
    
    
    
    
    
    
    (6,172
    )
    
    
    
    
    
    
    (6,111
    )
    
    
    
    
    
    
    (12,283
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    167,600
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    167,687Repayment of long-term debt
    
    
    
    
    
    
    (116,415
    )
    
    
    (161
    )
    
    
    (1,015
    )
    
    
    
    
    
    
    (117,591
    )Increase in Short Term Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,155
    
    
    
    
    
    
    
    8,155Net short-term borrowings
(repayments)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,026
    )
    
    
    
    
    
    
    (17,026
    )Net change in intercompany
account
    
    
    
    
    
    
    20,577
    
    
    
    659
    
    
    
    (21,236
    )
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    (624
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (624
    )Net cash provided by (used in)
financing activities
    
    
    
    
    
    
    71,138
    
    
    
    498
    
    
    
    (31,035
    )
    
    
    
    
    
    
    40,601Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    747
    
    
    
    
    
    
    
    747Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    82,353
    
    
    
    (271
    )
    
    
    (2,036
    )
    
    
    
    
    
    
    80,046Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    18,669
    
    
    
    906
    
    
    
    17,249
    
    
    
    
    
    
    
    36,824Cash and cash equivalents, end of
period
    
    $
    
    
    
    $
    101,022
    
    
    $
    635
    
    
    $
    15,213
    
    
    $
    
    
    
    $
    116,870
 F-40




---



##### Table of Contents



Successor
Condensed Consolidating Statements Of Cash Flows
For The Day Ended September 30, 2003 SeminisSeminis
    
    Vegetable
    
    Subsidiary
    
    Subsidiary(Parent)
    
    (Issuer)
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    1,613
    
    
    $
    (13,537
    )
    
    $
    
    
    
    $
    (21
    )
    
    $
    
    
    
    $
    (11,945
    )Cash flows from investing activities:Purchases of fixed and intangible
assets
    
    
    
    
    
    
    (6,337
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,337
    )Proceeds from disposition of
assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from sale of business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in)
investing activities
    
    
    
    
    
    
    (6,337
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,337
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    397,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    397,000Repayment of long-term debt
    
    
    
    
    
    
    (228,236
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228,236
    )Net short-term borrowings
(repayments)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in intercompany
account
    
    
    131,968
    
    
    
    (131,988
    )
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    Capital contributions/ dividends
received (paid) / other
    
    
    (133,581
    )
    
    
    (13,966
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (147,546
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in)
financing activities
    
    
    (1,613
    )
    
    
    22,810
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21,218Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    2,936
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,936Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    15,733
    
    
    
    906
    
    
    
    17,249
    
    
    
    
    
    
    
    33,888Cash and cash equivalents, end of
period
    
    $
    
    
    
    $
    18,669
    
    
    $
    906
    
    
    $
    17,249
    
    
    $
    
    
    
    $
    36,824
 F-41




---



##### Table of Contents



Predecessor
Condensed Consolidating Statements Of Cash Flows
For The Twelve Months Ended September 29, 2003 SeminisSeminis
    
    Vegetable
    
    Subsidiary
    
    Subsidiary(Parent)
    
    (Issuer)
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (23,450
    )
    
    $
    36,104
    
    
    $
    383
    
    
    $
    18,036
    
    
    $
    
    
    
    $
    31,073Cash flows from investing activities:Purchases of fixed and intangible
assets
    
    
    
    
    
    
    (6,314
    )
    
    
    (45
    )
    
    
    (10,018
    )
    
    
    
    
    
    
    (16,377
    )Proceeds from disposition of
assets
    
    
    
    
    
    
    1,472
    
    
    
    1,851
    
    
    
    6,906
    
    
    
    
    
    
    
    10,229Proceeds from sale of business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    750
    
    
    
    (725
    )
    
    
    (564
    )
    
    
    
    
    
    
    (539
    )Net cash provided by (used in)
investing activities
    
    
    
    
    
    
    (4,092
    )
    
    
    1,081
    
    
    
    (3,676
    )
    
    
    
    
    
    
    (6,687
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    711
    
    
    
    
    
    
    
    711Repayment of long-term debt
    
    
    
    
    
    
    (12,797
    )
    
    
    (141
    )
    
    
    (5,861
    )
    
    
    
    
    
    
    (18,799
    )Net short-term borrowings
(repayments)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,213
    )
    
    
    
    
    
    
    (11,213
    )Net change in intercompany
account
    
    
    155,988
    
    
    
    (160,729
    )
    
    
    (935
    )
    
    
    5,676
    
    
    
    
    
    
    
    Capital contributions/dividends
received (paid) / other
    
    
    (132,538
    )
    
    
    133,186
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    647Net cash provided by (used in)
financing activities
    
    
    23,450
    
    
    
    (40,340
    )
    
    
    (1,076
    )
    
    
    (10,688
    )
    
    
    
    
    
    
    (28,654
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    1,352
    
    
    
    
    
    
    
    1,351Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (8,329
    )
    
    
    388
    
    
    
    5,024
    
    
    
    
    
    
    
    (2,917
    )Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    24,062
    
    
    
    518
    
    
    
    12,225
    
    
    
    
    
    
    
    36,805Cash and cash equivalents, end of
period
    
    $
    
    
    
    $
    15,733
    
    
    $
    906
    
    
    $
    17,249
    
    
    $
    
    
    
    $
    33,888
 F-42




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##### Table of Contents



Predecessor
Condensed Consolidating Statements Of Cash Flows
For The Year Ended September 30, 2002 SeminisSeminis
    
    Vegetable
    
    Subsidiary
    
    Subsidiary(Parent)
    
    (Issuer)
    
    Guarantors
    
    Non-Guarantors
    
    Eliminations
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    
    
    
    $
    11,343
    
    
    $
    1,585
    
    
    $
    25,145
    
    
    $
    
    
    
    $
    38,073Cash flows from investing activities:Purchases of fixed and intangible
assets
    
    
    
    
    
    
    (2,947
    )
    
    
    
    
    
    
    (11,879
    )
    
    
    
    
    
    
    (14,826
    )Proceeds from disposition of
assets
    
    
    
    
    
    
    1,388
    
    
    
    
    
    
    
    27,129
    
    
    
    
    
    
    
    28,517Proceeds from sale of business
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,551
    
    
    
    
    
    
    
    17,551Other
    
    
    
    
    
    
    700
    
    
    
    
    
    
    
    (958
    )
    
    
    
    
    
    
    (258
    )Net cash provided by (used in)
investing activities
    
    
    
    
    
    
    (859
    )
    
    
    
    
    
    
    31,843
    
    
    
    
    
    
    
    30,984Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,855
    
    
    
    
    
    
    
    1,855Repayment of long-term debt
    
    
    
    
    
    
    (50,594
    )
    
    
    (124
    )
    
    
    (17,151
    )
    
    
    
    
    
    
    (67,869
    )Net short-term borrowings
(repayments)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,606
    
    
    
    
    
    
    
    7,606Net change in intercompany
account
    
    
    (4
    )
    
    
    18,850
    
    
    
    (1,423
    )
    
    
    (17,423
    )
    
    
    
    
    
    
    Capital contributions/dividends
received (paid)
    
    
    
    
    
    
    36,008
    
    
    
    
    
    
    
    (36,008
    )
    
    
    
    
    
    
    Other
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Net cash provided by (used in)
financing activities
    
    
    
    
    
    
    4,264
    
    
    
    (1,547
    )
    
    
    (61,121
    )
    
    
    
    
    
    
    (58,404
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,829
    
    
    
    
    
    
    
    3,829Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    14,748
    
    
    
    38
    
    
    
    (304
    )
    
    
    
    
    
    
    14,482Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    9,315
    
    
    
    480
    
    
    
    12,528
    
    
    
    
    
    
    
    22,323Cash and cash equivalents, end of
period
    
    $
    
    
    
    $
    24,063
    
    
    $
    518
    
    
    $
    12,224
    
    
    $
    
    
    
    $
    36,805
 F-43




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##### Table of Contents



Note 18  Quarterly Financial Data (Unaudited) The seed business is highly seasonal. Generally, net sales are highest in the
second fiscal quarter due to increased demand from Northern Hemisphere growers
who plant seed in the early spring. Seminis recorded 33.5% and 33.3% of its
fiscal year 2004 and 2003 net sales, during its second fiscal quarter. Seminis
results in any particular quarter should not be considered indicative of those
to be expected for a full year. The following table sets forth results of operations data for the last eight
fiscal quarters. Quarter EndedFiscal Year 2004
    
    Fiscal Year 2003Dec. 26,
    
    Mar. 26,
    
    Jun. 25,
    
    Sep. 30,
    
    Dec. 27,
    
    Mar. 28,
    
    Jun. 27,
    
    Sep. 30,(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    
    
    
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)Net sales
    
    $
    101,892
    
    
    $
    176,377
    
    
    $
    116,516
    
    
    $
    131,054
    
    
    $
    80,616
    
    
    $
    159,001
    
    
    $
    113,088
    
    
    $
    124,700Gross profit
    
    
    49,417
    
    
    
    95,642
    
    
    
    59,141
    
    
    
    85,909
    
    
    
    50,383
    
    
    
    100,993
    
    
    
    70,975
    
    
    
    73,496Net income (loss) from
continuing operations
Before extraordinary items
    
    
    (9,129
    )
    
    
    4,825
    
    
    
    (17,825
    )
    
    
    5,821
    
    
    
    (11,780
    )
    
    
    24,040
    
    
    
    (3,344
    )
    
    
    (40,586
    )Income (loss) from
continuing operations
before extraordinary items
available for common
stockholders
    
    $
    (9,129
    )
    
    $
    4,825
    
    
    $
    (17,825
    )
    
    $
    5,821
    
    
    $
    (16,303
    )
    
    $
    19,379
    
    
    $
    (8,004
    )
    
    $
    (43,093
    )
 In the quarter ended September 30, 2004 the inventory step-up amortization,
under purchase accounting treatment related to the acquisition transactions,
was adjusted by approximately $9.1 million due to a revision of an estimated 16
month inventory turn to an actual 18-month inventory turn. In the quarter
ended September 30, 2003, the result was impacted by purchase accounting as
disclosed in Note 3  Accounting Effects of the Acquisition Transactions. F-44




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS Balance at
    
    Additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign CurrencyBeginning of
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    
    
    
    Translation
    
    Balance atYear
    
    Operations
    
    Deductions
    
    Acquisitions
    
    Reclassification
    
    Adjustments
    
    End of YearAllowance for Doubtful AccountsYear Ending September 30, 2002
    
    
    12,094,000
    
    
    
    2,401,000
    
    
    
    (2,348,000
    )
    
    
    
    
    
    
    
    
    
    
    197,000
    
    
    
    12,344,000Year Ending September 30, 2003
    
    
    12,344,000
    
    
    
    2,547,000
    
    
    
    (5,560,000
    )
    
    
    
    
    
    
    90,000
    
    
    
    1,018,000
    
    
    
    10,439,000Year Ending September 30, 2004
    
    
    10,439,000
    
    
    
    2,361,000
    
    
    
    (3,149,000
    )
    
    
    
    
    
    
    143,000
    
    
    
    278,000
    
    
    
    10,072,000Inventory ReserveYear Ending September 30, 2002
    
    
    114,316,000
    
    
    
    16,937,000
    
    
    
    (47,344,000
    )
    
    
    
    
    
    
    1,113,000
    
    
    
    1,935,000
    
    
    
    86,957,000Year Ending September 30, 2003
    
    
    86,957,000
    
    
    
    16,015,000
    
    
    
    (27,330,000
    )
    
    
    
    
    
    
    
    
    
    
    3,889,000
    
    
    
    79,531,000Year Ending September 30, 2004
    
    
    79,531,000
    
    
    
    14,679,000
    
    
    
    (23,265,000
    )
    
    
    
    
    
    
    
    
    
    
    1,464,000
    
    
    
    72,409,000Tax Valuation AllowanceYear Ending September 30, 2002
    
    
    62,769,000
    
    
    
    698,000
    
    
    
    (6,407,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,060,000Year Ending September 30, 2003
    
    
    57,060,000
    
    
    
    5,670,000
    
    
    
    (4,898,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,832,000Year Ending September 30, 2004
    
    
    57,832,000
    
    
    
    5,567,000
    
    
    
    (8,416,000
    )
    
    
    
    
    
    
    (6,550,000
    )
    
    
    
    
    
    
    48,433,000
 S-1




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##### Table of Contents



Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. Date: December 17, 2004
    SEMINIS, INC./s/ Alfonso Romo GarzaAlfonso Romo GarzaChief Executive Officer
(Principal Executive Officer) /s/ Gaspar Alvarez MartinezGaspar Alvarez MartinezVP Finance & Worldwide Corporate Comptroller
(Principal Accounting Officer)