Seminis, Inc. (Nasdaq: SMNS - news) today reported results for the quarter ended June 30, 2000. Net sales for the quarter were $114.4 million, 8.3% lower than the $124.7 million recorded during the same period in fiscal 1999. The company reported net loss available for common stockholders of $21.6 million for this quarter, or $0.36 per share, compared to a net loss available for common stockholders of $10.6 million in the same period of 1999, or $0.27 per share. Excluding the $25.9 million effect of restructuring and other non-recurring charges during the period, including inventory
write-offs, net loss available for common shareholders was $0.09 per share.

For the nine months ended June 30, 2000 net sales were $382.2 million, 6.1% lower than the $407.1 million recorded during the same period in fiscal 1999. The company reported net loss available for common stockholders of $24.6 million, or $0.41 per share, compared to a net loss available for common stockholders of $9.4 million in the same period of 1999, or $0.24 per share. Excluding the $34.2 million effect of restructuring and other non-recurring charges, including inventory write-offs during the period, net loss available for common shareholders was $0.06 per share.

"Although the results are below our expectations, the global position of Seminis provided a clear benefit by offsetting the reduced sales in NAFTA with increased sales in the rest of the world. The seed market in North America is undergoing the worst crisis in the last 25-30 years and the weakness in the Euro currency continued to impact Seminis' results during the quarter,'' said Alejandro Rodriguez-Graue, President and Chief Operating Officer. "We are confident that Seminis is well positioned to profit from a recovery in the NAFTA market and to continue growing in the rest of the world''.

Executive Summary

As previously announced, Seminis initiated its Global Restructuring and Optimization Plan during the third quarter and as a result, the company recorded $25.9 million of charges related to inventory write-offs and restructuring costs. Also impacting the comparability of the third quarter results are the strength of the US dollar relative to the Euro and the sale of the assets of MBS, a U.S. subsidiary in the soybean seed business.

Third Quarter:

Consolidated net sales during the third quarter declined 8.3% or $10.4 million to $114.4 million primarily due to a reduction of $2.8 million or 2.6% in net seed sales (as detailed in Exhibit 1), and the negative impact of unfavorable exchange rates totaling $4.5 million. Adjusted sales after eliminating MBS' operations and the weaker Euro effect declined by 4.1% or $5.0 million to $116.9 million during the quarter.

Net seed sales continued to be adversely affected by difficulties in North America, where sales were 24.4% lower than the prior year. Internationally, sales grew 13.0% excluding the effect of foreign exchange as compared to the third quarter in fiscal 1999.

Operating loss of $28.9 million compares to operating income of $4.9 million in the third quarter of fiscal 1999. The adjusted operating loss after eliminating non-recurring charges, unfavorable exchange rate movements and MBS' operations totaled $0.4 million compared to an adjusted operating income of $4.5 million in the same period in 1999.

Nine months ended June 30, 2000

For the nine months, consolidated net sales decreased 6.1% to $382.2 million from $407.1 million for the same period ended June 30, 1999. The decrease is primarily due to the $16.5 million impact of currency fluctuations and the unfavorable situation of the horticultural industry in North America. The Euro weakened during the nine months ended June 30, 2000 and was weaker overall compared to the same period of fiscal year 1999.

Excluding the currency impact, net seed sales for the first nine months ended June 30, 2000 declined 1.9% to $359.1 million from $366.1 in the same period of last year mainly as a result of lower sales in North America.

Analysis of Financial Results for the quarter ended June 30, 2000

Exhibit 1
Net Seed Sales
Dollars in Millions
(Foreign exchange impact is segregated for comparability)

* North America: Difficult grower economics continue to affect sales in the region. The prolonged slump in fresh produce prices at the grower level continues to cause reductions in planted acreage throughout the region, particularly in fresh market tomatoes, onion and lettuce. Demand from Mexico is also down as growers are slow to commit to production plans due to the uncertainty of the markets and their ability to secure financing. Seminis expects the current market trend to continue through the second quarter of fiscal 2001.

* Europe and the Middle East: The growth in the region has been supported by a successful multi-brand strategy, price increases as well as by the introduction of new products, particularly for the fresh market. The sales increase has been achieved in spite of bad weather conditions throughout the region mainly due to the lack of rain. Seminis believes it continues to increase market share based on the fact that its sales are improving, even though planted acreage decreased during the period in several products and regions.

* Far East: Growth has been a result of volume increases as well as successful price increases of 6-8% in some products (watermelon, pepper, spring radish) for the region. The Korean product portfolio has been performing well, particularly watermelon seeds (a high price item) where sales increased by 30%.

* South America: Although vegetable seed markets continue to be strong in Colombia and Venezuela, prices for vegetables in Argentina, Ecuador and Chile are depressed due to reduced consumption.

Gross profit declined 29.1% or $22.4 million to $54.7 million as compared to the third quarter in fiscal 1999. By eliminating MBS' gross profit, the unfavorable exchange rate impact and the inventory write-offs, the adjusted gross profit was $67.5 million, 10.9% or $8.3 million lower than the $75.8 million in the same period of last year. Adjusted gross margin was reduced from 62.2% of net sales in the third quarter of 1999 to 57.8% in fiscal 2000. The margin reduction is due to market demand for less expensive seeds as a result of the poor agricultural economy, particularly in North America, as well as some isolated seed problems which have resulted in compensation to growers.

Adjusted operating expenses after eliminating MBS' expenses and the restructuring charge of $15.2 million declined 4.7% from $71.3 million in the third quarter of 1999 to $67.9 million in the same period of 2000 as a result of the company's effort to reduce costs.

Adjusted operating loss after eliminating non-recurring charges, foreign exchange movements and MBS' operations totaled $0.4 million compared to an adjusted operating income of $4.5 million in the same period in 1999.

Net interest expense decreased 24.5% to $8.5 million for the three months ended June 30, 2000 from $11.2 million for the third quarter of fiscal 1999. Both the 1999 refinancing of Seminis' credit agreements and the repayment of debt following the IPO resulted in a lower average debt balance for the three months ended June 30, 2000 compared to the three months ended June 30, 1999. In 1999, Seminis recorded an after-tax extraordinary charge of $4.0 million related to the refinancing of the credit facility.

Seminis had other non-operating income, net, of $9.5 million for the three months ended June 30, 2000 as compared to other non-operating expense, net, of $0.1 million for the three months ended June 30, 1999. Other non-operating income, net for the third quarter of fiscal year 2000 includes the gain on the sale of MBS' assets of $10.6 million, which was offset by foreign currency losses and minority interest. '

Income tax benefit was $8.6 million for the three months ended June 30, 2000 compared to $1.8 million for the three months ended June 30, 1999 as a result of the pre-tax loss generated by the factors discussed earlier. 

Analysis of Financial Results for the nine months ended June 30, 2000

Exhibit 2
Net Seed Sales
Dollars in Millions
(Foreign exchange impact is segregated for comparability)

* North America: The reduction in volume is a result of the previously mentioned acreage reduction during the third quarter of fiscal 2000, particularly in tomato, onion and lettuce.

* Europe and the Middle East: Growth during the third quarter did not compensate for the 10% loss experienced in the second quarter as a result of bad weather conditions in the region.

* Far East: Growth is a result of volume and successful price increases for the region as mentioned earlier.

* South America: Growth is a result of increased volume during the first half fiscal 2000 and better prices as compared to the same period of 1999.


Gross profit decreased 14.2% to $216.9 million for the nine months ended June 30, 2000 from $252.9 million for the nine months ended June 30, 1999. By eliminating MBS' gross profit, the unfavorable exchange rate impact and the inventory write-offs, the adjusted gross profit was $243.7 million, 2.3% or $5.6 million lower than the $249.4 million in the same period of last year.

Adjusted operating expenses after eliminating the restructuring charge and MBS' expenses declined 1.6% from $214.6 million in the first nine months of 1999 to $211.2 million in the same period of 2000. Adjusted operating income totaled $32.5 million, 2.2% lower than adjusted operating income of $34.6 million in the same period in 1999.

Interest expense, net, decreased 36.3% to $22.2 million for the nine months ended June 30, 2000 from $34.9 million for the nine months ended June 30, 1999. Both the 1999 refinancing of Seminis' credit agreements and the repayment of debt using the proceeds from the Company's initial public offering in June 1999 resulted in a lower average debt balance for the nine months ended June 30, 2000 compared to the same period in fiscal year 1999.

Seminis had other non-operating income, net, of $7.6 million for the nine months ended June 30, 2000 as compared to other non-operating expense, net, of $0.3 million for the nine months ended June 30, 1999. Other non-operating income, net, for the nine months ended June 30, 2000 includes a gain on the sale of MBS' assets of $10.6 million and a foreign currency loss of $3.2 million. The foreign currency loss is primarily due to a loss recorded by SVS Holland on its U.S. dollar denominated loan. Other non-operating expense, net, for the nine months ended June 30, 1999 includes a foreign currency gain of $0.9 million primarily due to the Hungnong intercompany loan and a minority interest provision of $1.1 million related to the 25% minority interest in Hungnong.

Income tax benefit increased 852.2% to $8.1 million for the nine months ended June 30, 2000 from income tax expense of $1.0 million for the nine months ended June 30, 1999. The increase in income tax benefit was the result of lower consolidated pretax income.

Balance Sheet

Seminis' working capital balance of $347.9 million has remained at similar levels as at September 30, 1999. As compared to March 31, 2000, working capital has decreased by approximately $15 million. The company continues to focus on reducing its working capital levels.

Seminis' total indebtedness as of June 30, 2000 was $366.5 million which consists of borrowings of $310.8 million under the current credit facility and $55.7 million in other borrowings. In June 2000, Seminis amended its credit agreement to provide for more relaxed financial ratio covenants as well as to allow for the needed expenses related to the Global Restructuring and Optimization Plan.

As previously announced, Savia injected $42.0 million dollars as a cash advance to Seminis during the second quarter. The total amount was converted to preferred stock with a 10% dividend payment per year payable in kind on a quarterly basis.

Outlook

Seminis has been in the forefront of the seed industry consolidation and has built a very solid platform to grow. Seminis is unique in its business with very strong fundamentals that include a global presence, state of the art technology, multi-brand strategy and ownership of the largest seed germplasm bank in the world for fruits and vegetables.

Seminis understands the cyclical nature of its business and is confident that the prospects for the long term are promising.' The Global Restructuring and Optimization Plan recently announced will strengthen Seminis' operations by becoming more efficient and reducing costs without affecting market share.

Exhibit 3

The following table adjusts income statement items to facilitate financial analysis and better understanding of the performance of the company by eliminating non-recurring charges and the operations of MBS. 

Seminis Inc. Adjusted Income Statement (Dollars in Millions)

About Seminis

Seminis (Nasdaq: SMNS - news) is the largest developer, producer and marketer of vegetable seeds in the world. Seminis produces more than 60 species and 8,000 distinct varieties of vegetable and fruit seeds. 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 120 countries with 70 research stations in 19 countries and production sites in 32 countries. Seminis is a majority owned subsidiary of Savia (NYSE: VAI - news), a Mexico-based conglomerate with leadership positions in financial services, packaging and fresh foods.

All statements in this press release other than statements of historical facts are "forward looking'' statements, including without limitation statements regarding the Company's financial position, business strategy, plans, and objectives of management and industry conditions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The following factors, among others, may affect the Company's actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company: competitive factors, agribusiness risks, governmental and economic risks associated with foreign operations, commercial success of new products, proprietary protection of and advances in technology, possible need for additional financing as well as the ability of the Company to successfully integrate recent acquisitions and its management information systems and controls. Further information on the factors that could affect the Company's financial results is contained in the Company's S-1 registration statement dated June 29, 1999 and filed with the Securities and Exchange Commission.  

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

For the three months ended For the nine months ended
June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Net sales $ 114,360 $ 124,745 $ 382,150 $ 407,056
Cost of goods sold 59,636 47,573 165,227 154,184
Gross profit 54,724 77,172 216,923 252,872

Research and
development 14,517 16,494 43,739 47,719
Selling, general and
administrative
expenses 61,660 49,042 163,082 149,155
Amortization of
intangible assets 7,464 6,760 22,455 20,417

Total Operating
Expenses 83,641 72,296 229,276 217,291
Income (loss) from
operations (28,917) 4,876 (12,353) 35,581

Other income (expense)
Interest expense,
net (8,474) (11,230) (22,248) (34,914)
Other, net 9,544 (100) 7,582 (262)
Total non-operating
income (expense) 1,070 (11,330) (14,666) (35,176)
Income (loss) from
continuing operations
before income taxes (27,847) (6,454) (27,019) 405
Income tax benefit
(expense) 8,600 1,821 8,113 (952)
Loss before
extraordinary items (19,247) (4,633) (18,906) (547)
Extraordinary items,
net of tax of $2,435 -- (3,973) -- (3,973)
Net loss (19,247) (8,606) (18,906) (4,520)
Preferred stock
dividends (2,366) (1,306) (5,660) (2,644)
Accretion of Old
Class B Redeemable
Common Stock -- (699) -- (2,223)
Net loss available
for common
stockholders $ (21,613) $ (10,611) $ (24,566) $ (9,387)

Net loss available for
common stockholders
per common share:
Basic and Diluted
Loss before
extraordinary
items $ (0.32) $ (0.12) $ (0.32) $ (0.01)
Preferred stock
dividends (0.04) (0.03) (0.09) (0.07)
Accretion of
Old Class B
Redeemable Common
Stock -- (0.02) -- (0.06)
Loss available for
common stockholders
before extraordinary
items (0.36) (0.17) (0.41) (0.14)
Extraordinary items -- (0.10) -- (0.10)
Net loss available for
common stockholders $ (0.36) $ (0.27) $ (0.41) $ (0.24)

Weighted average
shares, basic and
diluted 59,824 39,867 59,824 38,639

SEMINIS, INC.
Consolidated Balance Sheets
(In thousands, except per share data)

As of As of
June 30, September 30,
2000 1999
(Unaudited)
ASSETS:
Current assets
Cash and cash equivalents $ 13,421 $ 19,068
Accounts receivable, net 196,393 171,283
Inventories 316,075 301,744
Refundable income taxes -- 4,144
Prepaid expenses and other
current assets 5,511 3,582
Total current assets 531,400 499,821

Property, plant and equipment, net 235,333 226,635
Intangible assets, net 241,192 242,275
Other assets 18,768 24,631

$ 1,026,693 $ 993,362

LIABILITIES, MANDATORILY REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:

Current liabilities
Short-term borrowings $ 25,113 $ 6,591
Current maturities of long-term debt 29,967 20,563
Accounts payable 42,959 54,681
Accrued liabilities 85,489 68,811

Total current liabilities 183,528 150,646

Long-term debt 311,441 315,424
Non-current liabilities 8,780 31,577
Total liabilities 503,749 497,647

Mandatorily Redeemable Stock 25,000 25,000

Total stockholders' equity 497,944 470,715

$ 1,026,693 $ 993,362

SOURCE: Seminis, Inc. 

Company news release
N2871