Seminis Inc., the world's largest developer, producer and marketer of vegetable and fruit seeds, today reported financial results for the first half and second quarter ended March 26, 2004.

HALF-YEAR FINANCIAL SUMMARY ($ IN MILLIONS)
 

Six Months FY2003 Six Months FY2004 % Change SALES $239.6 $278.3 16.1% GROSS PROFIT* $151.4 $145.1 (4.2)% INCOME FROM OPERATIONS** $30.9 $23.3 (24.5)% NET INCOME** $12.3 $(4.3) (135.1)%

* Negatively impacted by $28.5 million non-cash purchase accounting charge in FY2004
** Negatively impacted by $21.8 million non-cash purchase accounting charge in FY2004

In September 2003, in connection with the acquisition transactions, Seminis became a privately held company. As a result, its financial statements have been materially impacted with non-cash charges due to the application of the purchase accounting method, which includes amortization of inventory write-up that negatively impacts the gross profit for a period of approximately 16 months, and amortization and depreciation of intangible and fixed assets that positively impact the operating expenses. Net income of the company is affected as well by the purchase accounting method.

"We are very pleased with the results for the first half of the fiscal year. Our consolidated sales have significantly outpaced the growth of the vegetable seed industry and we experienced double-digit revenue increases at most of our subsidiaries, including important growth countries in Asia," said Mr. Alfonso Romo, Seminis Chairman and Chief Executive Officer. "New products now account for 20% of sales, and have supported ongoing improvements to our gross margins, which were negatively impacted by the $28.5 million of non-cash inventory amortization. During this time, the company has also maintained a strong cash position."

Mr. Romo also indicated that the company is becoming more vertically aligned with members of the produce delivery chain in North America, Europe and AustralAsia. This could lead to a new revenue source for the company.

FIRST SIX-MONTHS OF FY2004 PERFORMANCE

Total sales for the first half of fiscal year 2004 increased 16.1% to $278.3 million from $239.6 million during the same period last year, driven primarily by increases in our more mature markets of NAFTA and EMEA (Europe, Middle East, Africa) where we saw increases of 13.6% and 21.2% respectively. At constant exchange rates (CER), total sales increased 9.3% to $261.9 million from $239.6 million the previous year. At CER, NAFTA sales increased 13.6% and EMEA sales were up 7.4% for the period.

Gross margin percentage decreased to 52.1% for the six months ended March 26, 2004 from 63.2% for the six months ended March 28, 2003. The decrease was mainly due to the non-cash amortization of $28.5 million of inventory step-up under purchase accounting treatment, which had a negative impact of 10.2 percentage points on the company's gross margin.

As a percentage of sales, total operating expenses for the first half of 2004 decreased to 44.7% from 50.8% of sales. Total operating expenses increased 2.3% to $124.4 million from $121.6 million for the same period last year. The increase was primarily the result of cost of living adjustments, variable expenses associated with sales and management fee expense, but offset by $6.7 million of lower depreciation and amortization expenses, a result of purchase accounting application.

Income from operations for the first half of 2004 decreased to $23.3 million compared with $30.9 million for the previous year. This number was negatively impacted by the above-mentioned purchase accounting net effect of $21.8 million.

Net loss for the first half of 2004 was $4.3 million compared with a net income of $12.3 million the previous year. This number was negatively impacted as well by the above-mentioned purchase accounting net effect of $21.8 million.

SECOND QUARTER 2004 FINANCIAL SUMMARY ($ IN MILLIONS)
 

2Q FY2003 2Q FY2004 % Change SALES $159.0 $176.4 10.9% GROSS PROFIT* $101.0 $95.6 (5.3)% INCOME FROM OPERATIONS** $39.0 $30.7 (21.2)% NET INCOME** $24.0 $4.8 (79.9)%

* Negatively impacted by $17.0 million non-cash purchase accounting charge in FY2004
** Negatively impacted by $13.6 million non-cash purchase accounting charge in FY2004

For the quarter ended March 26, 2004, total sales increased by 10.9% reaching $176.4 million from $159.0 million the previous year. At CER, sales were up 4.4 % to $165.9 million from $159.0 million the previous year.

Gross margin percentage decreased to 54.2% for the three months ended March 26, 2004 from 63.5% for the three months ended March 28, 2003. The decrease was due to the non-cash amortization of $17.0 million of inventory step-up under purchase accounting treatment, which had a negative impact of 9.6 percentage points on the company's gross margin.

As a percentage of sales, operating expenses decreased to 37.0% of sales compared with 40.0% of sales for the previous year. Total operating expenses for the second quarter increased by 2.3% to $65.0 million from $63.6 million during the same period last year. The increase was primarily the result of cost of living adjustments and variable expenses associated with sales and management fee expense, but offset by $3.4 million of lower depreciation and amortization expenses related to purchase accounting.

Income from operations for the second quarter decreased to $30.7 million compared to $39.0 million for the prior year. This number was negatively impacted by the above-mentioned purchase accounting net effect of $13.6 million.

For the second quarter of 2004, net income was $4.8 million compared with $24.0 million the previous year. This number was also negatively impacted by the above-mentioned purchase accounting net effect of $13.6 million.

Seminis Inc. is the largest developer, producer and marketer of vegetable seeds in the world. The company uses seeds as the delivery vehicle for innovative agricultural technology. Its products are designed to reduce the need for agricultural chemicals, increase crop yield, reduce spoilage, offer longer shelf life, create better tasting foods and foods with better nutritional content. Seminis has established a worldwide presence and global distribution network that spans 150 countries and territories.
 

Consolidated Balance Sheets (In thousands)                 As of As of       March 26, September 30,       2004 2003           ASSETS:     Current assets       Cash and cash equivalents  $                 78,228  $               36,824   Accounts receivable, net                   196,795                 151,578   Other receivable-Korean asset sale                              -                            -   Inventories                   310,207                 351,637   Prepaid expenses and other current assets                       8,803                     4,450               Total current assets                   594,033                 544,489                     Property, plant and equipment, net                     73,591                   69,792 Goodwill, net                              -                            - Intangible assets, net                     70,683                   73,009 Other assets                     22,294                   19,957                  $               760,601  $             707,247                     LIABILITIES, MANDATORILY REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:   Current liabilities       Short-term borrowings  $                 25,203  $               20,031   Current maturities of long-term debt                       1,784                     2,722   Accounts payable                     28,495                   50,280   Accrued liabilities                   105,019                   89,416               Total liabilities                   160,501                 162,449           Long-term debt                   450,913                 398,538 Deferred income tax                     22,527                   21,312 Minority interest in subsidiaries                          980                     1,723 Preferred shares subject to mandatory redemption                     42,849                   39,300               Total liabilities                   677,770                 623,322                         Total stockholders' equity 82,831 83,925                  $               760,601  $             707,247

Income statement                         Total operating expenses                  65,010              63,556                124,381                121,608 Gain on sale of fixed assets                         90                1,537                    2,615                    1,091 Income from operations                  30,722              38,974                  23,293                  30,859 Other expense             Interest expense, net                 (11,869)              (8,445)                 (21,553)                 (14,935)   Other, net                     (8,214)                   529                       853                       476     Total non-operating expense                 (20,083)              (7,916)                 (20,700)                 (14,459) Income from continuing operations before income taxes                  10,639              31,058                    2,593                  16,400 Income tax expense                   (5,814)              (7,018)                   (6,897)                   (4,140) Net income (loss)                    4,825              24,040                   (4,304)                  12,260 Preferred stock dividends                (4,661)                     (9,184) Net income (loss) available for common stockholders $4,825  $19,379 $(4,304) $3,076

Net Seed Sales   Currency stated at FY 2003 Exchange rates   (In US Million $)                           Three Months Ended March   Six Months Ended March   FY 2004   FY 2003   % Change   FY 2004   FY 2003 % Change North America  $        56.6    $       53.0   6.8%    $    96.5    $    84.9 13.7% Europe & Middle East            76.4             74.3   2.9%        114.5        106.5 7.4% Far East              8.4               8.3   1.1%          13.9          12.6 10.8% South America            18.2             17.7   3.1%          27.2          26.8 1.7%                       Total Seed Sales  $      159.6    $      153.3   4.1%    $   252.1    $   230.8 9.3%