##### Table of Contents

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2003

---



SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D.C. 20549



---



FORM 10-Q



(Mark
One)



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



For the quarterly period ended September 30, 2003



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 333-81235



ROYSTER-CLARK, INC.

(Exact name of registrant as specified in its charter)



|DELAWARE                                                       |  | 76-0329525                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



1251 AVENUE OF THE
AMERICASSUITE 900

NEW YORK, NEW YORK 10020

(212) 332-2965

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



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 whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the  Act). ̈



APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuers classes of common stock as of the last
practical date: Not Applicable



---



---

##### Table of Contents

ROYSTER-CLARK, INC.



FORM 10-Q



TABLE OF CONTENTS



|                                |  |                                                                                       |  | Page
|------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART 1.  FINANCIAL INFORMATION: |  |                                                                                      
|                                |  |                                                                                      
|Item 1.                         |  | Financial Statements                                                                  |  |     
|                                |  | Condensed Consolidated Balance Sheets                                                 |  | 2   
|                                |  | Condensed Consolidated Statements of Operations                                       |  | 3   
|                                |  | Condensed Consolidated Statements of Cash Flows                                       |  | 4   
|                                |  | Notes to Condensed Consolidated Financial Statements                                  |  | 5   
|                                |  |                                                                                      
|Item 2.                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13  
|                                |  |                                                                                      
|Item 3.                         |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 21  
|                                |  |                                                                                      
|Item 4.                         |  | Controls and Procedures                                                               |  | 22  
|                                | 
|PART 2.  OTHER INFORMATION:     |  |                                                                                      
|                                |  |                                                                                      
|Item 6.                         |  | Exhibits and Reports on Form 8-K                                                      |  | 23  
|                                | 
|Signatures                      |  | 25                                                                                   



FORWARD-LOOKING
STATEMENTS





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



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



1



---

##### Table of Contents

PART 1.    FINANCIAL INFORMATION



ITEM 1.Financial Statements



ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

(Dollars in thousands)

|                                                                                                                                                 |  | September 30, |         |   | December 31, |        
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ------------ | -------
|Assets                                                                                                                                           |  | 2003          |         |   | 2002         |        
|Current assets:                                                                                                                                  |  |               |         |   |              |        
|Cash                                                                                                                                             |  | $             | 462     |   |              | 982    
|Trade accounts receivable, net of allowance for doubtful accounts of $5,524 and $6,118 at September 30, 2003 and December 31,
2002, respectively |  |               | 106,028 |   |              | 96,177 
|Other receivables                                                                                                                                |  |               | 38,684  |   |              | 36,653 
|Inventories                                                                                                                                      |  |               | 180,098 |   |              | 252,435
|Prepaid expenses and other current assets                                                                                                        |  |               | 2,898   |   |              | 2,326  
|Deferred income taxes                                                                                                                            |  |               |        |   |              | 9,206  
|                                                                                                                                                 |  |               |         |   |              |        
|Total current assets                                                                                                                             |  |               | 328,170 |   |              | 397,779
|Property, plant and equipment, net                                                                                                               |  |               | 171,365 |   |              | 182,267
|Goodwill                                                                                                                                         |  |               | 16,540  |   |              | 16,540 
|Deferred income taxes                                                                                                                            |  |               |        |   |              | 7,373  
|Deferred financing costs, net                                                                                                                    |  |               | 6,916   |   |              | 8,400  
|Other assets, net                                                                                                                                |  |               | 4,871   |   |              | 5,653  
|                                                                                                                                                 |  |               |         |   |              |        
|                                                                                                                                                 |  | $             | 527,862 |   |              | 618,012
|                                                                                                                                                 |  |               |         |   |              |        
|Liabilities and Stockholder's Equity                                                                                                             |  |               |         |   |              |        
|Current liabilities:                                                                                                                             |  |               |         |   |              |        
|Senior secured credit facility                                                                                                                   |  | $             | 152,470 |   |              |       
|Current installments of long-term debt                                                                                                           |  |               | 165     |   |              | 172    
|Note payable                                                                                                                                     |  |               |        |   |              | 21,740 
|Customer deposits                                                                                                                                |  |               | 27,149  |   |              | 57,200 
|Accounts payable                                                                                                                                 |  |               | 45,340  |   |              | 82,303 
|Accrued expenses and other current liabilities                                                                                                   |  |               | 28,041  |   |              | 27,535 
|                                                                                                                                                 |  |               |         |   |              |        
|Total current liabilities                                                                                                                        |  |               | 253,165 |   |              | 188,950
|Senior secured credit facility                                                                                                                   |  |               |        |   |              | 143,121
|101/4% First Mortgage Notes due 2009                                                                                                             |  |               | 200,000 |   |              | 200,000
|Long-term debt, excluding current installments                                                                                                   |  |               | 188     |   |              | 201    
|Other long-term liabilities                                                                                                                      |  |               | 9,021   |   |              | 9,463  
|                                                                                                                                                 |  |               |         |   |              |        
|Total liabilities                                                                                                                                |  |               | 462,374 |   |              | 541,735
|                                                                                                                                                 |  |               |         |   |              |        
|Stockholder's equity:                                                                                                                            |  |               |         |   |              |        
|Common stock, no par value. Authorized 350,000 shares; 1 share issued and outstanding                                                            |  |               |        |   |              |       
|Additional paid-in capital                                                                                                                       |  |               | 88,599  |   |              | 88,599 
|Accumulated deficit                                                                                                                              |  |               | (22,467 | ) |              | (11,678
|Accumulated other comprehensive loss                                                                                                             |  |               | (644    | ) |              | (644   
|                                                                                                                                                 |  |               |         |   |              |        
|Total stockholder's equity                                                                                                                       |  |               | 65,488  |   |              | 76,277 
|                                                                                                                                                 |  |               |         |   |              |        
|                                                                                                                                                 |  | $             | 527,862 |   |              | 618,012
|                                                                                                                                                 |  |               |         |   |              |        



See accompanying notes
to condensed consolidated financial statements.





2



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(Dollars in thousands)



|                                                              |  | Three Months ended |         |   | Nine Months ended |        
|------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | -------
|                                                              |  | September 30,      |         |   | September 30,     |        
|                                                              |  | 2003               |         |   | 2002              |        
|Net sales                                                     |  | $                  | 145,133 |   |                   | 125,382
|Cost of sales                                                 |  |                    | 117,261 |   |                   | 100,014
|                                                              |  |                    |         |   |                   |        
|Gross profit                                                  |  |                    | 27,872  |   |                   | 25,368 
|Selling, general and administrative expenses                  |  |                    | 36,983  |   |                   | 37,707 
|Loss (gain) on disposal of property, plant and equipment, net |  |                    | 148     |   |                   | (75    
|                                                              |  |                    |         |   |                   |        
|Operating income (loss)                                       |  |                    | (9,259  | ) |                   | (12,264
|Interest expense                                              |  |                    | (7,332  | ) |                   | (7,307 
|Gain on sales of natural gas contracts                        |  |                    |        |   |                   | 1,893  
|                                                              |  |                    |         |   |                   |        
|Income (loss) before income taxes                             |  |                    | (16,591 | ) |                   | (17,678
|Income tax expense (benefit)                                  |  |                    |        |   |                   | (6,652 
|                                                              |  |                    |         |   |                   |        
|Net income (loss)                                             |  | $                  | (16,591 | ) |                   | (11,026
|                                                              |  |                    |         |   |                   |        











See accompanying notes to condensed consolidated financial statements.





3



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(Dollars in thousands)



|                                                                                         |  | Nine Months ended |         
|---------------------------------------------------------------------------------------- |  | ----------------- | --------
|                                                                                         |  | September 30,     |         
|                                                                                         |  | 2003              |         
|Cash flows from operating activities:                                                    |  |                   |         
|Net income (loss)                                                                        |  | $                 | (10,647 
|                                                                                         |  |                   |         
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                   |         
|Provision for doubtful accounts                                                          |  |                   | 2,508   
|Depreciation and amortization                                                            |  |                   | 20,665  
|Loss on disposal of property, plant and equipment                                        |  |                   | 694     
|Write-off of deferred financing costs                                                    |  |                   | 227     
|Amortization of imputed interest                                                         |  |                   | 487     
|Gain on sale of natural gas contracts                                                    |  |                   |        
|Deferred income tax expense                                                              |  |                   | 16,579  
|Changes in operating assets and liabilities increasing (decreasing) cash:                |  |                   |         
|Trade accounts receivable                                                                |  |                   | (12,359 
|Other receivables                                                                        |  |                   | (2,031  
|Inventories                                                                              |  |                   | 72,337  
|Prepaid expenses and other current assets                                                |  |                   | (572    
|Other assets                                                                             |  |                   | (98     
|Accounts payable                                                                         |  |                   | (36,963 
|Accrued expenses and other current liabilities                                           |  |                   | 506     
|Other long-term liabilities                                                              |  |                   | (442    
|                                                                                         |  |                   |         
|Total adjustments                                                                        |  |                   | 61,538  
|                                                                                         |  |                   |         
|Net cash provided by operating activities                                                |  |                   | 50,891  
|                                                                                         |  |                   |         
|                                                                                         |  |                  
|Cash flows from investing activities:                                                    |  |                   |         
|Proceeds from sale of property, plant and equipment                                      |  |                   | 1,832   
|Purchases of property, plant and equipment                                               |  |                   | (9,639  
|                                                                                         |  |                   |         
|Net cash used in investing activities                                                    |  |                   | (7,807  
|                                                                                         |  |                   |         
|                                                                                         |  |                  
|Cash flows from financing activities:                                                    |  |                   |         
|Proceeds from senior secured credit facility                                             |  |                   | 279,741 
|Payments on senior secured credit facility                                               |  |                   | (270,392
|Principal payments on long-term debt                                                     |  |                   | (20     
|Payments on vendor financing note                                                        |  |                   | (22,227 
|Dividend paid to Royster-Clark Group, Inc.                                               |  |                   | (142    
|Net decrease in customer deposits                                                        |  |                   | (30,051 
|Payment of deferred financing costs                                                      |  |                   | (513    
|                                                                                         |  |                   |         
|Net cash used in financing activities                                                    |  |                   | (43,604 
|                                                                                         |  |                   |         
|Net decrease in cash                                                                     |  |                   | (520    
|Cash at beginning of period                                                              |  |                   | 982     
|                                                                                         |  |                   |         
|Cash at end of period                                                                    |  | $                 | 462     
|                                                                                         |  |                   |         
|                                                                                         |  |                  
|Supplemental disclosure of cash flow information:                                        |  |                   |         
|Cash paid during the period for interest                                                 |  | $                 | 16,252  
|                                                                                         |  |                   |         
|Cash paid during the period for income taxes                                             |  | $                 | 1,195   
|                                                                                         |  |                   |         





See accompanying notes to condensed consolidated financial statements.



4



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS)

SEPTEMBER 30, 2003

(Dollars in thousands)



|(1) |  | Description of Business and Basis of Presentation
|--- |  | -------------------------------------------------



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



The information presented as of September 30, 2003 and for the three and nine
month periods ended September 30, 2003 and 2002 is unaudited, and reflects all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the Companys financial position as
of September 30, 2003 and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2003 and 2002. The December 31, 2002 balance sheet information was derived from the audited Consolidated Financial
Statements for the year ended December 31, 2002.



The condensed
consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the Companys audited consolidated financial statements for the year ended December 31, 2002, which are included as part of the Companys Annual Report on Form 10-K.



The Companys business is highly seasonal with approximately 70% of
sales generated between March and July. Results for the interim periods presented are not necessarily indicative of results that may be expected for the entire year.



|(2) |  | Inventories
|--- |  | -----------



Inventories at September 30, 2003 and December 31, 2002 consist of the following:



|                         |  | September 30, |         | December 31,
|------------------------ |  | ------------- | ------- | ------------
|                         |  | 2003          |         | 2002        
|Crop protection products |  | $             | 67,332  |             
|Fertilizers              |  |               | 18,334  |             
|Raw materials            |  |               | 70,114  |             
|Seeds                    |  |               | 9,445   |             
|Sundries and other       |  |               | 14,873  |             
|                         |  |               |         |             
|                         |  | $             | 180,098 |             
|                         |  |               |         |             



|(3) |  | Goodwill and Other Assets
|--- |  | -------------------------



There were no changes in the carrying amount of goodwill for the three months and nine months ended September 30, 2003.



5



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



The gross carrying value and accumulated amortization of major classes of intangible assets as of
September 30, 2003 and December 31, 2002 are as follows:



|                              |  | September 30, 2003
|----------------------------- |  | ------------------
|                              |  | Gross             
|                              |  | carrying          
|                              |  | amount            
|Amortizing intangible assets: |  |                   
|Technology and patent license |  | $                 
|Noncompete agreements         |  |                   
|Other                         |  |                   
|                              |  |                   
|Total                         |  | $                 
|                              |  |                   
|                              | 
|                              |  | December 31, 2002 
|                              |  | Gross             
|                              |  | carrying          
|                              |  | amount            
|Amortizing intangible assets: |  |                   
|Technology and patent license |  | $                 
|Noncompete agreements         |  |                   
|Other                         |  |                   
|                              |  |                   
|Total                         |  | $                 
|                              |  |                   



Amortization expense
of intangible assets amounted to $292 and $127 for the three months ended September 30, 2003 and 2002, respectively and $881 and $369 for the nine months ended September 30, 2003 and 2002, respectively. During the nine months ended September 30,
2003, fully amortized intangible assets of $222 were written off.



These intangible assets are included in other assets in the accompanying condensed consolidated balance sheets. Estimated annual amortization expense for the next five years follows: 2003$1.2 million; 2004$0.9
million; 2005$0.7 million; 2006$0.6 million, 2007$0.6 million and $0.7 million thereafter.



|(4) |  | Environmental Matters
|--- |  | ---------------------



The Company is subject to a wide variety of federal, state and local environmental laws and regulations. The Company has been identified as a potentially
responsible party concerning the release of certain hazardous substances at five locations. While the current law potentially imposes joint and several liability upon each party named as a potentially responsible party, the Companys
contribution to clean up these sites is expected to be limited, given the number of other companies which have also been named as potentially responsible parties and the nature and amount of cleanup involved. A number of the Companys
facilities have been evaluated as having excess nitrates, phosphorous or pesticides in the surrounding soil or groundwater. In addition, several underground storage tanks have been removed or closed at some facilities and these sites have been
evaluated for possible contamination. Actions performed with respect to these situations followed the guidance provided by the responsible environmental authorities. In total, environmental cleanup activities have been planned or are being performed
at approximately 44 sites.



6



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



In connection with the acquisitions of AgriBusiness and Royster-Clark (Predecessor Company), the
Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness are subject to a $4,500 deductible, an overall cap on all indemnities of
approximately $27,000, and certain time limitations. The indemnities related to Royster Clark, Inc. (Predecessor Company) are subject to a deductible of $2,000, certain time limitations and an overall cap of $5,000 on all indemnities. In addition,
Royster-Clark, Inc. (Predecessor Company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites acquired from LCC in December 1998. The Company also obtained
indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of acquisition.



The Company has recorded environmental liabilities at September 30, 2003 and December 31, 2002 for the estimated cost of cleanup efforts of identified
contamination or site characterization, which total $3,119 and $3,260, respectively, and are included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Actual cash expenditures during the three months ended
September 30, 2003 and 2002 were $5 and $107, respectively and $141 and $153 for the nine months ended September 30, 2003 and 2002, respectively. These liabilities do not take into account any claims for recoveries from insurance or third parties
and are not discounted. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainty in evaluating environmental exposures.



|(5) |  | Senior Secured Credit Facility
|--- |  | ------------------------------



The Company maintains a senior secured credit facility (credit facility) that expires in April 2004. Accordingly, the entire outstanding
balance of the credit facility totaling $152,470 at September 30, 2003 has been classified as a current liability in the accompanying condensed consolidated balance sheets. Under terms of the Third Amendment to the Revolving Credit Agreement, the
Company was required to obtain a firm commitment for a new credit facility by September 30, 2003. The Company has obtained a firm commitment from a consortium of three banks for a new senior secured credit facility. The Company intends to repay
amounts outstanding under the current credit facility when the new credit agreement is closed.



The credit facility is subject to certain covenants, including limitations on additional indebtedness, limitations on liens, limitations on capital expenditures and maintenance of certain required financial ratios. As
a result of the valuation allowance for deferred income tax assets established at June 30, 2003 (see note 6 below), the Company was not in compliance with the net worth covenant required under the credit facility as of September 30, 2003. In
November 2003, the consortium of lenders waived their rights with respect to this specific event of default. In consideration for the waiver, the Company will be required to pay a small work fee in the fourth quarter.



|(6) |  | Income Taxes
|--- |  | ------------



At June 30, 2003, the Company had net deferred income tax assets of $7,548 prior to any valuation allowance. As a result of the Companys cumulative
losses incurred in recent years, the Company has concluded that, in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, that a valuation allowance for the full amount of the deferred income
tax assets should be recorded. As a result, the Company recorded a valuation allowance of $7,548 during the three months ended June 30, 2003. Beginning July 1, 2003, the Company ceased recognizing net deferred tax benefits associated with net
operating losses due to the Companys cumulative losses incurred in recent years in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.



7



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



|(7) |  | Condensed Financial Data of Guarantor Subsidiaries
|--- |  | --------------------------------------------------



The Company issued $200,000 of 101/4% First Mortgage Notes due April 2009 (herein referred to as the First Mortgage Notes) on April 22, 1999 to partially finance an acquisition. The First Mortgage Notes mature on April 22, 2009 and bear interest at 101/4% payable semi-annually in arrears. The First Mortgage Notes are secured by 17 principal properties, related
fixtures and equipment and other related assets and a pledge of equity of certain subsidiaries. The First Mortgage Notes are guaranteed on a full, unconditional and joint and several basis, by each of the following subsidiaries of Royster-Clark:





|Royster-Clark Realty LLC              |  | Royster-Clark Nitrogen, Inc.        
|------------------------------------- |  | ------------------------------------
|Royster-Clark Resources LLC           |  | Alliance Fertilizer of Suffolk, Inc.
|Royster-Clark AgriBusiness, Inc.      |  | Seaboard Liquid Plant Food, Inc.    
|Royster-Clark AgriBusiness Realty LLC |  |                                     





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



The following tables present the condensed financial data of
Royster-Clark and its guarantor subsidiaries as of September 30, 2003 and December 31, 2002 and for the three and nine month periods ended September 30, 2003 and 2002.



8



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



Balance Sheet Data as of September 30, 2003:



|                                               |  | Royster-    |         |   | Guarantor    |         |   |              |          |   |              |        
|---------------------------------------------- |  | ----------- | ------- | - | ------------ | ------- | - | ------------ | -------- | - | ------------ | -------
|                                               |  | Clark, Inc. |         |   | Subsidiaries |         |   | Eliminations |          |   | Consolidated |        
|Current assets:                                |  |             |         |   |              |         |   |              |          |   |              |        
|Cash                                           |  | $           | 42      |   |              | 420     |   |              |         |   |              | 462    
|Trade accounts receivable, net                 |  |             |        |   |              | 107,312 |   |              | (1,284   | ) |              | 106,028
|Other receivables                              |  |             | 2,748   |   |              | 49,900  |   |              | (13,964  | ) |              | 38,684 
|Inventories                                    |  |             |        |   |              | 180,098 |   |              |         |   |              | 180,098
|Prepaid expenses and other current assets      |  |             |        |   |              | 2,898   |   |              |         |   |              | 2,898  
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total current assets                           |  |             | 2,790   |   |              | 340,628 |   |              | (15,248  | ) |              | 328,170
|Property, plant and equipment, net             |  |             | 9,823   |   |              | 161,542 |   |              |         |   |              | 171,365
|Goodwill                                       |  |             | 12,012  |   |              | 4,528   |   |              |         |   |              | 16,540 
|Deferred financing costs, net                  |  |             | 6,916   |   |              |        |   |              |         |   |              | 6,916  
|Other assets, net                              |  |             | 15      |   |              | 4,856   |   |              |         |   |              | 4,871  
|Investment in subsidiaries                     |  |             | 411,420 |   |              |        |   |              | (411,420 | ) |              |       
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total assets                                   |  | $           | 442,976 |   |              | 511,554 |   |              | (426,668 | ) |              | 527,862
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|                                               |  |             |         |  
|Current liabilities:                           |  |             |         |   |              |         |   |              |          |   |              |        
|Senior secured credit facility                 |  | $           | 152,470 |   |              |        |   |              |         |   |              | 152,470
|Current installments of long-term debt         |  |             |        |   |              | 165     |   |              |         |   |              | 165    
|Customer deposits                              |  |             |        |   |              | 27,149  |   |              |         |   |              | 27,149 
|Accounts payable                               |  |             |        |   |              | 60,588  |   |              | (15,248  | ) |              | 45,340 
|Accrued expenses and other current liabilities |  |             | 11,568  |   |              | 16,473  |   |              |         |   |              | 28,041 
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total current liabilities                      |  |             | 164,038 |   |              | 104,375 |   |              | (15,248  | ) |              | 253,165
|101/4% First Mortgage Notes                    |  |             | 200,000 |   |              |        |   |              |         |   |              | 200,000
|Long-term debt, excluding current installments |  |             |        |   |              | 188     |   |              |         |   |              | 188    
|Other long-term liabilities                    |  |             | 426     |   |              | 8,595   |   |              |         |   |              | 9,021  
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total liabilities                              |  |             | 364,464 |   |              | 113,158 |   |              | (15,248  | ) |              | 462,374
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|                                               |  |             |         |  
|Stockholder's equity:                          |  |             |         |   |              |         |   |              |          |   |              |        
|Common stock                                   |  |             |        |   |              |        |   |              |         |   |              |       
|Additional paid-in capital                     |  |             | 78,599  |   |              | 421,420 |   |              | (411,420 | ) |              | 88,599 
|Accumulated deficit                            |  |             | (87     | ) |              | (22,380 | ) |              |         |   |              | (22,467
|Accumulated other comprehensive loss           |  |             |        |   |              | (644    | ) |              |         |   |              | (644   
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total stockholder's equity                     |  |             | 78,512  |   |              | 398,396 |   |              | (411,420 | ) |              | 65,488 
|                                               |  |             |         |   |              |         |   |              |          |   |              |        
|Total liabilities and stockholder's equity     |  | $           | 442,976 |   |              | 511,554 |   |              | (426,668 | ) |              | 527,862
|                                               |  |             |         |   |              |         |   |              |          |   |              |        



9



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



Balance Sheet Data as of December 31, 2002:



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



10



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



Statement of Operations Data for the three and nine months ended September 30, 2003 and 2002:



|                                                              |  | Royster-    |        |   | Guarantor    |         |   |              |         |   |              |        
|------------------------------------------------------------- |  | ----------- | ------ | - | ------------ | ------- | - | ------------ | ------- | - | ------------ | -------
|Three Months ended September 30, 2003                         |  | Clark, Inc. |        |   | Subsidiaries |         |   | Eliminations |         |   | Consolidated |        
|Net sales                                                     |  | $           | 875    |   |              | 162,912 |   |              | (18,654 | ) |              | 145,133
|Cost of sales                                                 |  |             | 104    |   |              | 131,176 |   |              | (14,019 | ) |              | 117,261
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Gross profit                                                  |  |             | 771    |   |              | 31,736  |   |              | (4,635  | ) |              | 27,872 
|Selling, general and administrative expenses                  |  |             | 240    |   |              | 41,378  |   |              | (4,635  | ) |              | 36,983 
|Loss on disposal of property, plant and equipment, net        |  |             | 21     |   |              | 127     |   |              |        |   |              | 148    
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Operating income (loss)                                       |  |             | 510    |   |              | (9,769  | ) |              |        |   |              | (9,259 
|Interest expense                                              |  |             | (509   | ) |              | (6,823  | ) |              |        |   |              | (7,332 
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Income (loss) before income taxes                             |  |             | 1      |   |              | (16,592 | ) |              |        |   |              | (16,591
|Income tax expense (benefit)                                  |  |             |       |   |              |        |   |              |        |   |              |       
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Net income (loss)                                             |  | $           | 1      |   |              | (16,592 | ) |              |        |   |              | (16,591
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|                                                              |  |             |        |  
|Three Months ended September 30, 2002                         |  |             |        |   |              |         |   |              |         |   |              |        
|Net sales                                                     |  | $           | 943    |   |              | 140,623 |   |              | (16,184 | ) |              | 125,382
|Cost of sales                                                 |  |             | 104    |   |              | 111,619 |   |              | (11,709 | ) |              | 100,014
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Gross profit                                                  |  |             | 839    |   |              | 29,004  |   |              | (4,475  | ) |              | 25,368 
|Selling, general and administrative expenses                  |  |             | 296    |   |              | 41,886  |   |              | (4,475  | ) |              | 37,707 
|Loss (gain) on disposal of property, plant and equipment, net |  |             | 40     |   |              | (115    | ) |              |        |   |              | (75    
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Operating income (loss)                                       |  |             | 503    |   |              | (12,767 | ) |              |        |   |              | (12,264
|Interest expense                                              |  |             | (502   | ) |              | (6,805  | ) |              |        |   |              | (7,307 
|Gain on sales of natural gas contracts                        |  |             |       |   |              | 1,893   |   |              |        |   |              | 1,893  
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Income (loss) before income taxes                             |  |             | 1      |   |              | (17,679 | ) |              |        |   |              | (17,678
|Income tax benefit                                            |  |             |       |   |              | (6,652  | ) |              |        |   |              | (6,652 
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Net income (loss)                                             |  | $           | 1      |   |              | (11,027 | ) |              |        |   |              | (11,026
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|                                                              |  |             |        |  
|Nine Months ended September 30, 2003                          |  |             |        |   |              |         |   |              |         |   |              |        
|Net sales                                                     |  | $           | 2,748  |   |              | 849,766 |   |              | (54,122 | ) |              | 798,392
|Cost of sales                                                 |  |             | 312    |   |              | 692,066 |   |              | (40,158 | ) |              | 652,220
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Gross profit                                                  |  |             | 2,436  |   |              | 157,700 |   |              | (13,964 | ) |              | 146,172
|Selling, general and administrative expenses                  |  |             | 746    |   |              | 131,467 |   |              | (13,964 | ) |              | 118,249
|Loss on disposal of property, plant and equipment, net        |  |             | 182    |   |              | 512     |   |              |        |   |              | 694    
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Operating income                                              |  |             | 1,508  |   |              | 25,721  |   |              |        |   |              | 27,229 
|Interest expense                                              |  |             | (1,503 | ) |              | (20,242 | ) |              |        |   |              | (21,745
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Income before income taxes                                    |  |             | 5      |   |              | 5,479   |   |              |        |   |              | 5,484  
|Income tax expense                                            |  |             | 2      |   |              | 16,129  |   |              |        |   |              | 16,131 
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Net income (loss)                                             |  | $           | 3      |   |              | (10,650 | ) |              |        |   |              | (10,647
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|                                                              |  |             |        |  
|Nine Months ended September 30, 2002                          |  |             |        |   |              |         |   |              |         |   |              |        
|Net sales                                                     |  | $           | 2,744  |   |              | 804,038 |   |              | (52,942 | ) |              | 753,840
|Cost of sales                                                 |  |             | 315    |   |              | 645,812 |   |              | (39,076 | ) |              | 607,051
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Gross profit                                                  |  |             | 2,429  |   |              | 158,226 |   |              | (13,866 | ) |              | 146,789
|Selling, general and administrative expenses                  |  |             | 887    |   |              | 132,679 |   |              | (13,905 | ) |              | 119,661
|Loss on disposal of property, plant and equipment, net        |  |             | 52     |   |              | 36      |   |              |        |   |              | 88     
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Operating income                                              |  |             | 1,490  |   |              | 25,511  |   |              | 39      |   |              | 27,040 
|Interest expense                                              |  |             | (1,485 | ) |              | (20,241 | ) |              |        |   |              | (21,726
|Gain on sales of natural gas contracts                        |  |             |       |   |              | 1,893   |   |              |        |   |              | 1,893  
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Income before income taxes                                    |  |             | 5      |   |              | 7,163   |   |              | 39      |   |              | 7,207  
|Income tax expense                                            |  |             | 2      |   |              | 2,859   |   |              |        |   |              | 2,861  
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        
|Net income                                                    |  | $           | 3      |   |              | 4,304   |   |              | 39      |   |              | 4,346  
|                                                              |  |             |        |   |              |         |   |              |         |   |              |        



11



---

##### Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

SEPTEMBER 30, 2003

(Dollars in thousands)



Statement of Cash Flow Data for the nine months ended September 30, 2003 and 2002:



|                                                    |  | Royster-    |          |   | Guarantor    |         |   |              |   |              |         
|--------------------------------------------------- |  | ----------- | -------- | - | ------------ | ------- | - | ------------ | - | ------------ | --------
|Nine Months ended September 30, 2003                |  | Clark, Inc. |          |   | Subsidiaries |         |   | Eliminations |   | Consolidated |         
|Net cash provided by (used in) operating activities |  | $           | (8,764   | ) |              | 59,655  |   |              |  |              | 50,891  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash flows from investing activities:               |  |             |          |   |              |         |   |              |   |              |         
|Proceeds from sale of property, plant and equipment |  |             | 70       |   |              | 1,762   |   |              |  |              | 1,832   
|Purchases of property, plant and equipment          |  |             |         |   |              | (9,639  | ) |              |  |              | (9,639  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net cash provided by (used in) investing activities |  |             | 70       |   |              | (7,877  | ) |              |  |              | (7,807  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash flows from financing activities:               |  |             |          |   |              |         |   |              |   |              |         
|Proceeds from senior secured credit facility        |  |             | 279,741  |   |              |        |   |              |  |              | 279,741 
|Payments on senior secured credit facility          |  |             | (270,392 | ) |              |        |   |              |  |              | (270,392
|Principal payments on long-term debt                |  |             |         |   |              | (20     | ) |              |  |              | (20     
|Payments on vendor financing note                   |  |             |         |   |              | (22,227 | ) |              |  |              | (22,227 
|Dividend to Royster-Clark Group, Inc.               |  |             | (142     | ) |              |        |   |              |  |              | (142    
|Net decrease in customer deposits                   |  |             |         |   |              | (30,051 | ) |              |  |              | (30,051 
|Payment of deferred financing costs                 |  |             | (513     | ) |              |        |   |              |  |              | (513    
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net cash provided by (used in) financing activities |  |             | 8,694    |   |              | (52,298 | ) |              |  |              | (43,604 
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net decrease in cash                                |  |             |         |   |              | (520    | ) |              |  |              | (520    
|Cash at beginning of period                         |  |             | 42       |   |              | 940     |   |              |  |              | 982     
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash at end of period                               |  | $           | 42       |   |              | 420     |   |              |  |              | 462     
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|                                                    |  |             |          |  
|Nine Months ended September 30, 2002                |  |             |          |   |              |         |   |              |   |              |         
|Net cash provided by (used in) operating activities |  | $           | (42,623  | ) |              | 51,075  |   |              |  |              | 8,452   
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash flows from investing activities:               |  |             |          |   |              |         |   |              |   |              |         
|Proceeds from sale of property, plant and equipment |  |             | 67       |   |              | 1,522   |   |              |  |              | 1,589   
|Purchases of property, plant and equipment          |  |             |         |   |              | (5,522  | ) |              |  |              | (5,522  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net cash provided by (used in) investing activities |  |             | 67       |   |              | (4,000  | ) |              |  |              | (3,933  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash flows from financing activities:               |  |             |          |   |              |         |   |              |   |              |         
|Proceeds from senior secured credit facility        |  |             | 275,767  |   |              |        |   |              |  |              | 275,767 
|Payments on senior secured credit facility          |  |             | (233,207 | ) |              |        |   |              |  |              | (233,207
|Principal payments on long-term debt                |  |             | (4       | ) |              | (5,058  | ) |              |  |              | (5,062  
|Net decrease in customer deposits                   |  |             |         |   |              | (42,602 | ) |              |  |              | (42,602 
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net cash provided by (used in) financing activities |  |             | 42,556   |   |              | (47,660 | ) |              |  |              | (5,104  
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Net decrease in cash                                |  |             |         |   |              | (585    | ) |              |  |              | (585    
|Cash at beginning of period                         |  |             | 42       |   |              | 955     |   |              |  |              | 997     
|                                                    |  |             |          |   |              |         |   |              |   |              |         
|Cash at end of period                               |  | $           | 42       |   |              | 370     |   |              |  |              | 412     
|                                                    |  |             |          |   |              |         |   |              |   |              |         



12



---

##### Table of Contents

ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations



THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS. SEE FORWARD-LOOKING STATEMENTS ABOVE.



General



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



Weather conditions can significantly affect our results of operations, both for quarterly reporting and on an annual basis. Adverse weather conditions during the planting season may force farmers to either delay or
abandon their planting, or change to another crop, which may lead to lower use of fertilizer, seed and crop protection products. During the first and second quarters, several of the Companys market areas in the Southeast and Midwest regions
have experienced lengthy periods of rainfall compared to the comparable period in 2002. This rainfall has curtailed the farmers ability to complete planting and typical fertilizing activities and in some cases has influenced farmers to switch
crops and or curtail intended planting. The rainfall has also delayed or curtailed the application of various crop protection products on several different crops that would normally take place during the typical planting season. As a result of the
weather during the planting season and cooler weather in some of our market areas during the third quarter, the harvest of crops has been delayed. Fertilization that typically takes place during the third quarter may have been delayed. Subject to
more normal weather patterns during the fourth quarter, such delayed fertilization may be recovered, or the activity could be delayed until next spring. Prior to this years spring season, the reversal of drought conditions in the Southeast was
viewed as a multiyear event requiring several years of above average rains. Drought conditions have been reversed and ground water levels replenished in less than one year. According to the United States Department of Agriculture (USDA)
maps, crop moisture levels through many of the Companys market areas were considered abnormally moist or excessively wet through the end of the third quarter.



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



Another factor affecting our business is the price for fertilizers. We purchase nitrogen materials, phosphates, and potash and resell these nutrients in
either their original form or in the form of multi-nutrient fertilizers. Prices for phosphates have recently experienced some volatility while potash has been relatively stable over the past several years. Prices for nitrogen materials continue to
exhibit year over year and quarterly volatility. Using ammonia quotes, as indicated by Mid Cornbelt per ton price quote listing published by Green Markets (a publication reporting on fertilizer industry developments), price quotes were approximately
50% higher in 2003 compared to 2002 as of September 30. Year-to-date average ammonia quotes were approximately 60% higher in 2003 compared to 2002. Average quotes for the third quarter, however, have decreased approximately 12% in 2003 compared to a
decrease of less than 2% in 2002. Ammonia prices at September 30, 2003 were quoted at $280 per ton compared to $185 per ton as of September 30, 2002 (Mid Cornbelt low quote).



13



---

##### Table of Contents

The major raw material in the manufacture of nitrogen-based products is natural gas. We purchase most of
our natural gas requirements on the open market for use in our nitrogen-production plant in East Dubuque, IL. Currently, the Company has entered into fixed-price short-term purchase contracts for natural gas through April 2004 for a portion of the
daily natural gas requirements of the East Dubuque plant. These purchase contracts were initiated to fulfill current sales commitments at profitable levels in case severe price escalations in natural gas prices were to occur as in recent years.
Natural gas pricing quoted at the Henry Hub was $4.75 per MMBTU at December 31, 2002. During the first quarter, natural gas prices increased to a peak of $19.07 per MMBTU. Natural gas prices moderated during the second quarter and continued in a
declining trend during the third quarter. The average and median prices for the quarter ended September 30, 2003 were approximately $4.88 and $4.87 per MMBTU, respectively. Natural gas pricing was $4.66 at September 30, 2003 compared to $4.09 at
September 30, 2002. The level of natural gas prices directly affects profitability of our nitrogen-based products. Management monitors natural gas prices closely and makes production decisions for the East Dubuque nitrogen-production facility in
light of current market conditions and their perception of the future movement of both natural gas prices and prices for nitrogen-based products produced by the facility.



Results of Operations



Three months ended September 30, 2003 compared to three months ended September 30, 2002



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



|                                                              |  | Three Months ended |   
|------------------------------------------------------------- |  | ------------------ | --
|                                                              |  | September 30,      |   
|                                                              |  | 2003               |   
|Net sales                                                     |  | 100.0              | % 
|Cost of sales                                                 |  | 80.8               |   
|                                                              |  |                    |   
|Gross profit                                                  |  | 19.2               |   
|Selling, general and administrative expenses                  |  | 25.5               |   
|Loss (gain) on disposal of property, plant and equipment, net |  | 0.1                |   
|                                                              |  |                    |   
|Operating loss                                                |  | (6.4               | ) 
|Interest expense                                              |  | (5.0               | ) 
|Gain on sales of natural gas contracts                        |  |                   |   
|                                                              |  |                    |   
|Loss before income taxes                                      |  | (11.4              | ) 
|Income tax benefit                                            |  |                   |   
|                                                              |  |                    |   
|Net loss                                                      |  | (11.4              | )%
|                                                              |  |                    |   



Net
sales.Royster-Clarks net sales were $145.1 million for the third quarter of 2003 compared to $125.4 million for the same period in 2002, an increase of $19.7 million, or 15.7%. The increase in net sales resulted
from approximately $10.8 million in market related price increases and $8.9 million in sales volume increases. Higher natural gas cost was the prime driver in the price appreciation. The change in sales resulted from the following factors:



| |  |  | Market related sales price appreciation of nitrogen products accounted for approximately $8.9 million of the $10.8 million total price appreciation. Nitrogen products are used in
both liquid and dry blended fertilizers. Sales prices also increased in granulated and blended fertilizers and various fertilizer materials.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net sales volume increases of $8.9 million resulted from moderating weather conditions through areas of the Southeast market area. Sales volumes increased $4.0
million of granulated and blended fertilizer, $3.6 million of nitrogen based products, $1.4 million of seed products and $1.1 million of potash and other fertilizer materials. Partially offsetting the sales increase were decreased sales of $0.9
million of
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

##### Table of Contents

| | crop protection products and $0.3 million of carbon dioxide industrial gas. Decreases in sales of crop protection products resulted from the lateness of the
soybean crop in the Midwest and declining crop acreages in the Southeast due to the excessively wet conditions. Decreases in carbon dioxide industrial gas sales resulted from lower production during the quarter in response to market conditions of
ammonia prices and/or costs of natural gas.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gross profit.Gross profit was $27.9 million for the third quarter of 2003 compared to $25.4 million for the same period in 2002, an increase of $2.5 million, or 9.8%. The increase in gross profit resulted from
lower costs of crop protection and seed products for the quarter and from pricing factors and the various sales volume changes discussed above. Higher cost of raw materials for the Companys nitrogen-manufacturing facilities partially offset
the gross profit increases discussed above. Gross margin was 19.2% for the third quarter of 2003 compared to 20.2% for the same period in 2002. The decrease in gross margin of 1.0% was predominantly due to the sales price and cost changes discussed
above.



Selling, general and administrative
expenses.Selling, general and administrative expenses were $37.0 million for the third quarter of 2003 compared to $37.7 million for the same period in 2002, a decrease of $0.7 million, or 1.9%. The decrease in
selling, general and administrative expenses resulted from the following major factors:



| |  |  | Expenses were approximately $1.3 million lower compared to 2002 due to cost savings measures, increased capitalization of production and logistic costs to inventory and other
expenses supporting sales.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Liability and medical insurance costs were $1.1 million lower compared to 2002. Liability insurance costs were lower due to better negotiated rates on the Companys new policy
year beginning July 1, 2003. Medical insurance costs decreased due to a decrease in the number of large claims from the comparable period in 2002.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The decrease in selling, general and administrative expenses was partially offset by the following major factors:



| |  |  | Volume related expenses including seasonal labor, overtime, repairs, supplies, doubtful account provision and other expenses were approximately $1.1 million higher than the
comparable period last year.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amortization expense was approximately $0.3 million higher due primarily to amortization of various other intangible assets acquired during the fourth quarter of 2002.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Quarterly selling, general and administrative
expenses as a percent of net sales fluctuate widely within the fiscal year due to the seasonal nature of sales volumes with selling, general and administrative expenses exhibiting less seasonal fluctuations.



Operating loss.Operating loss was $9.3 million
for the third quarter of 2003 compared to $12.3 million for the same period in 2002, a decrease of $3.0 million, or 24.4%. Operating loss as a percentage of net sales was 6.4% for the third quarter in 2003 compared to 9.8% for the same period in
2002 due to sales price and cost increases and selling, general and administrative expense changes described above.



Interest expense.Interest expense was $7.3 million for the third quarter in 2003 and 2002. Decreased interest rates lowered
interest expense by $0.2 million. Interest increased by $0.2 million due to higher average borrowings on the credit facility of $9.1 million during the third quarter of 2003 compared to the comparable period in 2002. Higher average daily borrowings
were used to finance higher cost inventory resulting predominantly from higher natural gas prices.



15



---

##### Table of Contents

Gain on sales of natural gas contracts.    During the third quarter of 2002,
the Company recognized gains of $1.9 million on the sales of natural gas contracts. As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain
natural gas leases in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1.3 million. In September 2002, the Company sold all its rights, title,
and interests in several fixed-priced natural gas contracts resulting in a gain of $0.6 million. The Company did not have any sales of natural gas contracts during the third quarter of 2003.



Income tax benefit.The Company recognized no
income tax benefit for the third quarter of 2003 compared to an income tax benefit of $6.7 million for the same period in 2002. The effective tax rate for the third quarter of 2002 was 37.6%. At the end of the second quarter of 2003, the Company
established a valuation allowance for the full amount of net deferred tax assets in accordance with provisions of SFAS No. 109, Accounting for Income Taxes.Beginning July 1, 2003 and for future quarters, the Company will not
record a net income tax expense or benefit until GAAP requirements for unrestricted recognition of deferred tax assets have been satisfied.



Net loss.Net loss was $16.6 million for the third quarter of 2003 compared to $11.0 million for the same period in 2002, an
increase of $5.6 million, resulting from the fluctuations noted above.



Nine months ended September 30, 2003 compared to nine months ended September 30, 2002



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



|                                                       |  | Nine Months ended |   
|------------------------------------------------------ |  | ----------------- | --
|                                                       |  | September 30,     |   
|                                                       |  | 2003              |   
|Net sales                                              |  | 100.0             | % 
|Cost of sales                                          |  | 81.7              |   
|                                                       |  |                   |   
|Gross profit                                           |  | 18.3              |   
|Selling, general and administrative expenses           |  | 14.8              |   
|Loss on disposal of property, plant and equipment, net |  | 0.1               |   
|                                                       |  |                   |   
|Operating income                                       |  | 3.4               |   
|Interest expense                                       |  | (2.7              | ) 
|Gain on sales of natural gas contracts                 |  |                  |   
|                                                       |  |                   |   
|Income before income taxes                             |  | 0.7               |   
|Income tax expense                                     |  | 2.0               |   
|                                                       |  |                   |   
|Net income                                             |  | (1.3              | )%
|                                                       |  |                   |   



Net
sales.Royster-Clarks net sales were $798.4 million for the first nine months of 2003 compared to $753.8 million for the same period in 2002, an increase of $44.6 million, or 5.9%. The increase in net sales resulted
predominantly from approximately $57.6 million in market related price increases. Increased natural gas cost was the prime driver in this price appreciation. Net sales decreased by $13.0 million due to lower sales volume of various product groups
that partially offset the sales price increases. The change in sales resulted from the following factors:



| |  |  | Market related sales price appreciation of nitrogen products accounted for approximately $43.8 million of the $57.6 million total price appreciation. Nitrogen products are used in
both liquid and dry blended fertilizers. Sales prices also increased in granulated and blended fertilizers and various fertilizer materials and to a lesser extent, seed products. Included in the sales price appreciation described above was $0.6
million in lower sales price of crop protection products.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

| |  |  | Net sales volume decreases of a net of $13.0 million resulted from wet field conditions through much of the Southeast and Midwest market areas during the first six months of 2003.
Decreased sales were encountered over most product groups in these market areas. Sales volume decreases of $11.0 million in crop protection products and $3.6 million and $2.7 million of various phosphate and lime products, respectively, accounted
for approximately $17.3 million of the total sales volume decreases of $22.7 million. The balance of the net volume decreases was spread over several product groups. Decreases in sales of crop protection products resulted from the lateness of the
soybean crop in the Midwest, declines in crop acreages in the Southeast and some limited shifting of crops from corn to soybeans, all due to lengthy periods of rains and excessively wet conditions. These conditions limited or curtailed planting,
fertilizing and the application of crop protection products on various crops in many of the Companys market areas during the spring planting season. Increases in sales volume of phosphate and lime products during the third quarter have not
offset decreases experienced from wet field conditions during the second quarter. Delays in harvest during the third quarter may allow for some sales volume recovery, depending on weather conditions during the fourth quarter. Sales volume increases
of $9.7 million of nitrogen, potash, and seed products partially offset the decreased sales from other product groups. Last year, our Southeast and Midwest market areas experienced more favorable weather conditions allowing earlier planting and
fieldwork, contrasted with this years above average rains in portions of these regions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gross profit.Gross profit was $146.2 million for the first nine months of 2003 compared to $146.8 million for the same
period in 2002, a decrease of $0.6 million, or 0.4%. The decrease in gross profit resulted from higher costs of crop protection products and natural gas for the Companys nitrogen-manufacturing facility at East Dubuque, IL for the first nine
months, higher costs were incurred due to the earlier than planned maintenance turnaround during the first quarter at the East Dubuque manufacturing plant and from various sales volume changes discussed above. Pricing factors discussed above
partially offset lower sales volume and the impact of higher natural gas and crop protection product costs. Gross margin was 18.3% for the first nine months of 2003 compared to 19.5% for the same period in 2002. The decrease in gross margin of 1.2%
was predominantly due to the sales price and cost changes discussed above.



Selling, general and administrative expenses.Selling, general and administrative expenses were $118.2 million for the first nine months of 2003 compared to $119.7 million for the same
period in 2002, a decrease of $1.5 million, or 1.3%. The decrease in selling, general and administrative expenses resulted from the following major factors:



| |  |  | Expenses were approximately $2.8 million lower compared to 2002 due to cost savings measures initiated in 2002, volume related expenses including repairs, supplies, services,
telephone, seasonal labor and overtime, increased capitalization of production and logistic costs to inventory and other expenses supporting sales.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Rent expense was approximately $0.5 million lower than the comparable period last year due to improved utilization of equipment and lengthened use of equipment.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Depreciation expense was approximately $0.3 million lower due to depreciation from capital spending compared to lower depreciation from fully depreciated assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



The decrease in selling, general and
administrative expenses was partially offset by the following major factors:



| |  |  | Medical insurance costs were $0.9 million higher than last year due to increased medical industry costs and higher utilization of healthcare benefits by employees.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Amortization expense was approximately $0.9 million higher due primarily to amortization of various other intangible assets acquired during the fourth quarter of 2002 and the
write-off of deferred financing costs associated with the amendment to the senior secured credit facility in the first quarter of 2003.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



---

##### Table of Contents

| |  |  | General liability and property insurance expenses were approximately $0.3 million higher in 2003 compared to 2002 due to rising costs of insurance coverage in the market place.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Operating
income.Operating income was $27.2 million for the first nine months of 2003 compared to $27.0 million for the same period in 2002, an increase of $0.2 million, or 0.7%. Operating income as a percentage of net sales was
3.4% for the first nine months in 2003 compared to 3.6% for the same period in 2002 due to reasons discussed above.



Interest expense.Interest expense was $21.7 million for the first nine months of 2003 and 2002. Interest expense decreased
by $0.9 million for the first nine months of 2003 compared to 2002 due to lower average interest rates on the senior secured credit facility of approximately 0.45% and lower interest rates on interest bearing customer deposits. Offsetting the
decrease in interest expense was $0.5 million in non-cash interest expense on vendor notes payable and $0.4 million increased interest expense due to higher average borrowings on the credit facility of $8.7 million for the first nine months of 2003
compared to the comparable period in 2002. Higher average daily borrowings were used to finance higher cost inventory resulting predominantly for higher natural gas prices.



Gain on sales of natural gas contracts.    During the third quarter of 2002, the Company
recognized gains of $1.9 million on the sales of natural gas contracts. As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain natural gas leases
in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1.3 million. In September 2002, the Company sold all its rights, title, and interests in
several fixed-priced natural gas contracts resulting in a gain of $0.6 million. The Company did not have any sales of natural gas contracts during the first nine months of 2003.



Income tax expense.Income tax expense was $16.1 million for the first nine months of 2003
compared to $2.9 million for the same period in 2002, an increase of $13.2 million. The effective tax rate was 294% for the first nine months of 2003 compared to 39.7% for the same period in 2002. The increase in income tax expense and the effective
tax rate was due to establishing a valuation allowance against deferred tax assets as required by SFAS No. 109, Accounting for Income Taxesat the end of the second quarter of 2003.Beginning July 1, 2003 and for future
quarters, the Company will not record a net income tax expense or benefit until GAAP requirements for unrestricted recognition of deferred tax assets have been satisfied.



Net income (loss).Net loss was ($10.6) million for the first nine months of 2003 compared to
net income of $4.3 million for the same period in 2002, a decrease in net income of $14.9 million, resulting from the fluctuations noted above.



Liquidity and Capital Resources



Our primary capital requirements are for working capital, debt service, capital expenditures and possible acquisitions. For day-to-day liquidity
requirements, we operate with a $205 million senior secured credit facility (credit facility) with a consortium of banks. At September 30, 2003, the borrowing base provisions under the facility supported a borrowing availability of
$168.4 million, from which we had drawn $152.5 million. This facility includes up to $10.0 million for letters of credit. This facility contains financial and operational covenants and other restrictions with which we must comply, including a
requirement to maintain certain financial ratios and limitations on our ability to incur additional indebtedness. As a result of the valuation allowance for deferred income tax assets established at June 30, 2003 (see note 6 of the Condensed
Consolidated Financial Statements), the Company was not in compliance with the net worth covenant required under the credit facility as of September 30, 2003. In November 2003, the consortium of lenders waived their rights with respect to this
specific event of default. In consideration for the waiver, the Company will be required to pay a small work fee in the fourth quarter.



18



---

##### Table of Contents

Since the credit facility expires in April 2004, the entire outstanding balance of the credit facility
totaling $152,470 at September 30, 2003 has been classified as a current liability in the accompanying condensed consolidated balance sheets. Under terms of the Third Amendment to the Revolving Credit Agreement, the Company was required to
obtain a firm commitment for a new credit facility by September 30, 2003. The Company has obtained a firm commitment from a consortium of three banks for a new $225 million senior secured credit facility. The consortium of banks has
completed their due diligence and is currently drafting definitive documents with terms and conditions that management anticipates will be customary for arrangements of this size. The Company intends to repay amounts outstanding under the current
credit facility when the new credit agreement is closed.



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



Net cash provided by operating activities for the nine months
ended September 30, 2003 was $50.9 million compared to $8.5 million for the comparable period in 2002, an increase in net cash provided of $42.4 million. The most significant component of higher cash flows used in operating activities was movement
in operating assets and liabilities of $39.3 million. Trade accounts receivable, other receivables, accounts payables and inventory were the largest components totaling $38.7 million of cash provided with changes in accrued expenses, prepaid
expenses and other working capital items making up the balance of the change. Decreased cash provided from lower net income of $15.0 million was partially offset by changes in deferred income taxes of $14.5 million.



Net cash used in investing activities amounted to $7.8 million in 2003
compared to $3.9 million in 2002, an increase of $3.9 million. The increase in net cash used in investing activities resulted from increased capital expenditures of $4.1 million in 2003. This increase was partially offset by increased proceeds from
the sale of property, plant and equipment of $0.2 million in 2003 compared to 2002.



Capital expenditures were $9.6 million for the nine months ended September 30, 2003 compared with $5.5 million for the nine months ended September 30, 2002. These capital expenditures were primarily for facility
improvements and machinery and equipment replacement projects. We estimate total capital expenditures, excluding potential acquisitions, for 2003 will range from $10.0 to $13.0 million.



Net cash used in financing activities totaled $43.6 million compared to $5.1 million in 2002, an increase of $38.5 million.
Increased cash used in financing activities in 2003 compared to 2002 resulted primarily from net higher payments to the credit facility of $33.2 million and payments of $22.2 million on vendor financing note compared to 2002. These increases in cash
used were partially offset by lower principal payments on long-term debt of $5.0 million and $12.6 million less cash from customer deposits in 2003 compared to 2002.



Net working capital, excluding current installments of long-term debt at September 30, 2003 totaled $75.2 million versus
$209.0 million at December 31, 2002, a decrease of $133.8 million. This decrease resulted primarily from the classification of the credit facility as a current liability. The Company anticipates repaying the entire balance before its expiration in
April 2004 with proceeds from our new credit facility. Other working capital items fluctuated in normal seasonal movement of operating assets and liabilities with decreases in inventory, accounts payable and customer deposits and increases in trade
accounts receivable. Fluctuations in



19



---

##### Table of Contents

deferred tax assets resulted primarily from a valuation allowance established as required by SFAS No. 109, Accounting for Income Taxes.
Working capital changes are summarized in the table below.



|Working capital decreases:      |  |   |      
|------------------------------- |  | - | -----
|Senior secured credit facility  |  | $ | 152.5
|Inventories                     |  |   | 72.3 
|Deferred income taxes           |  |   | 9.2  
|Other working capital decreases |  |   | 0.5  
|                                |  |   |      
|Total decreases                 |  |   | 234.5
|                                |  |   |      
|Working capital increases:      |  |   |      
|Accounts payable                |  |   | 37.0 
|Customer deposits               |  |   | 30.1 
|Note payable                    |  |   | 21.7 
|Trade accounts receivable       |  |   | 9.9  
|Other receivables               |  |   | 2.0  
|                                |  |   |      
|Total increases                 |  |   | 100.7
|                                |  |   |      
|Net decrease                    |  | $ | 133.8
|                                |  |   |      



Recently Issued Accounting
Standards



Statement of Financial Accounting Standards
(SFAS) No. 149 Amendment of Statement 133 on Derivative Instruments and Hedging Activities.



On April 30, 2003, the Financial Accounting Standards Board issued SFAS No. 149. This statement amends SFAS No. 133 for decisions made: (1) as part of the
Derivatives Implementation Group process that effectively required amendments to Statement 133, (2) in connection with other Board projects dealing with financial instruments, and (3) in connection with implementation issues raised in relation to
the application of the definition of a derivative. Management does not believe that the adoption of SFAS No. 149 will have any impact on its financial position or results of operations.



Emerging Issues Task Force Issue No. 02-16



In January 2003, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue 02-16, Accounting by a
Customer (including a Reseller) for Certain Consideration Received from a Vendor. This EITF provides guidance on the income statement classification of amounts received by a customer, including a reseller and limited guidance regarding
timing of recognition for volume rebates. This consensus is effective and should be applied to fiscal periods beginning after December 15, 2002 for binding arrangements entered into after November 21, 2002. Based upon current arrangements with
vendors and evaluations of those arrangements, management does not believe that implementing the guidance from EITF Issue 02-16 will have a material effect on the Companys financial condition or quarterly or annual results of operations for
this year; however, we can not determine how future arrangements may affect the Company in subsequent years. Changes to vendor programs in the future could materially affect quarterly results of operations, although we believe such changes would be
less likely to affect annual results of operations.



20



---

##### Table of Contents

ITEM 3.Quantitative and Qualitative Disclosures about Market Risk



The Company is exposed to market risk due to changes in natural gas prices. Natural gas is a raw material used in the production of various nitrogen-based
products that the Company either manufactures at its East Dubuque plant or purchases from vendors. Market prices of nitrogen-based products are affected by changes in natural gas prices as well as supply and demand and other factors. As a normal
course of business, the Company purchases nitrogen-based products during the winter and early spring to supply its needs during the high sales volume spring season. Nitrogen-based inventory remaining at the end of the spring season will be subject
to market risk due to changes in natural gas prices and supply and demand. Changes in levels of natural gas prices and market prices of nitrogen-based products can materially affect the Companys financial position and results of operations.
The Company has experienced no difficulties in securing supplies of natural gas, however, most of the Companys natural gas requirements are purchased at market prices and such purchases are subject to price volatility. The Company does not
currently engage in any commodity hedging activities with respect to its natural gas purchases. The Company has entered into fixed-price short-term purchase contracts for natural gas through April 2004 for a portion of its daily natural gas
requirements. We do not hold or issue derivative financial instruments for trading purposes for natural gas.



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



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



At September 30,
2003, the Companys exposure to market risk factors had not materially changed from December 31, 2002.



21



---

##### Table of Contents

ITEM 4.Controls and Procedures



(a) Evaluation of disclosure controls and procedures.



We maintain a system of controls and procedures designed to provide reasonable assurance on the reliability of our financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or
disposition. The system is supported by formal policies and procedures. Appropriate actions are taken to address significant control deficiencies and other opportunities for improving the system as they are identified. However, no cost-effective
internal control system will preclude all errors and irregularities, and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



Based on their evaluation as of the end of the period covered by this Quarterly Report on
Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms.



(b) Changes in internal controls.



There were no significant changes in the Companys internal controls or in other
factors over financial reporting or in other factors during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



22



---

##### Table of Contents

PART 2.    OTHER INFORMATION



ITEM 6.Exhibits and Reports on Form 8-K



(a)(1)    Financial Statements:



The following condensed consolidated financial statements are included in Part 1, Item 1, of this Form 10-Q:



Condensed Consolidated Balance Sheets as of September 30, 2003 and December
31, 2002



Condensed Consolidated Statements of Operations for
the Three and Nine months ended September 30, 2003 and 2002



Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2003 and 2002



(2)    Financial Statement Schedules: None.

(3)    Exhibits:



|      | 
|----- | 
|3.01  | 
|      | 
|3.02  | 
|      | 
|3.03  | 
|      | 
|4.01  | 
|      | 
|4.02  | 
|      | 
|10.01 | 
|      | 
|10.03 | 
|      | 
|10.04 | 
|      | 
|10.05 | 
|      | 
|10.06 | 
|      | 
|10.14 | 
|      | 
|10.15 | 
|      | 
|10.16 | 
|      | 
|10.18 | 

---

| |  | Incorporated by reference to Registration Statement on Form S-4 (Reg. No.: 333-81235) where it has been filed as an Exhibit.
|- |  | ----------------------------------------------------------------------------------------------------------------------------

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

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

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

| |  | Incorporated by reference to Exhibit No 10.18 to Form 10Q for the quarterly period ended September 30, 2002 (Reg. No.: 333-81235) filed on May 14, 2002.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------





23



---

##### Table of Contents

|      | 
|----- | 
|10.19 | 
|      | 
|10.20 | 
|      | 
|10.21 | 
|      | 
|31.01 | 
|      | 
|31.02 | 
|      | 
|32.01 | 



(b) Reports on Form 8-K



On August 14, 2003 we filed a report on Form 8-K which
reported under Item 9, the issuance of a press release which reported operating and financial results for the second quarter ended June 30, 2003 and furnished a copy of the earnings release to the Commission.



On October 6, 2003 we filed a report on Form 8-K which reported under Item
9, the issuance of a press release which announced a formal commitment to replace its senior secured credit facility and furnished a copy of the release to the Commission.



---

| |  | Incorporated by reference to identically numbered exhibit to Form 10K for the annual period ended December 31, 2002 (Reg. No.: 333-81235) filed on March 28, 2003.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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





24



---

##### 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.



ROYSTER-CLARK, INC./s/    JOEL F. DUNBARJoel F. DunbarVice President, Assistant Secretary and Controller(on behalf of the Registrant andas Chief Accounting Officer)




DATE:    November 14, 2003



25