EX-99.2 4 a2084735zex-99_2.txt EXHIBIT 99.2 Exhibit 99.2 ITEM 7(b): PRO FORMA FINANCIAL INFORMATION On May 9, 2002, United Industries Corporation (United) completed its merger with Schultz Company (Schultz). United will account for its acquisition of Schultz using the purchase method of accounting, and accordingly, the purchase price will be allocated to the tangible and intangible assets of Schultz acquired, and the liabilities of Schultz assumed, on the basis of their values as of the acquisition date. The fiscal year of United ends on December 31. The fiscal year of Schultz ends on September 30. The United and Schultz balance sheets as of March 31, 2002, have been combined as if the merger had occurred on March 31, 2002. The United statement of operations for the year ended December 31, 2001 has been combined with the unaudited Schultz statement of operations for the twelve months ended December 31, 2001, for the purposes of providing the unaudited combined pro forma results of operations after giving effect to the merger as if it had occurred on January 1, 2001. The results of operations for United and Schultz for the three-months ended March 31, 2002 have been combined for the purposes of providing the unaudited combined pro forma results of operations after giving effect to the merger as if it had occurred on January 1, 2002. The unaudited pro forma financial statements are presented for illustrative purposes only and not necessarily indicative of the financial position or operating results that would have actually occurred had the merger been completed at the beginning of the periods or on the dates indicated, nor are they necessarily indicative of future financial position or operating results. The allocation of the purchase price reflected is the unaudited pro forma combined financial statements is preliminary. The actual purchase price allocation to reflect the fair values of assets acquired and liabilities assumed will be completed when United finishes its valuation of such assets acquired and liabilities assumed will be completed when United finishes its valuation of such assets and liabilities. The valuation will be completed during the third quarter of 2002. The final purchase price allocation may differ significantly from the preliminary allocation included in this report. The unaudited pro forma financial statements should be read in conjunction with United's audited consolidated financial statements and related notes included in United's annual report on Form 10-K for the year ended December 31, 2001 and the audited consolidated financial statements and related notes of Schultz for the year ended September 30, 2001, included in this report on Form 8-K/A. 1 UNITED INDUSTRIES CORPORATION PRO FORMA BALANCE SHEET MARCH 31, 2002 (DOLLARS IN THOUSANDS) (UNAUDITED)
United Pro Forma Pro Forma United Schultz Adjustments Combined ------------- ------------- --------------------------- ASSETS Current assets: Cash and cash equivalents $ - $ 2 $ - $ 2 Accounts receivable (less allowance for doubtful accounts of $2,845 and $573 for United and Schultz respectively) 106,083 23,934 - 130,017 Inventories 61,472 15,519 - 76,991 Deferred income tax - 295 - 295 Prepaid expenses 5,763 896 - 6,659 ------------- ------------- ----------- ------------- Total current assets 173,318 40,646 - 213,964 Equipment and leasehold improvements 26,642 3,494 - 30,136 Deferred income tax 112,505 - - 112,505 Goodwill and intangible assets 42,833 - 39,368 D 82,201 Other assets 11,953 785 2,168 E 14,906 ------------- ------------- ----------- ------------- Total assets $ 367,251 $ 44,925 $ 41,536 $ 453,712 ============= ============= =========== ============= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt and capital lease obligation $ 5,852 $ 297 $ - $ 6,149 Accounts payable 40,177 16,802 - 56,979 Accrued expenses 39,209 5,202 1,185 F 45,596 Short-term borrowings 58,377 - 8,384 G 66,761 ------------- ------------- ----------- ------------- Total current liabilities 143,615 22,301 9,569 175,485 Long-term debt 345,507 14,539 14,434 G 374,480 Capital lease obligation 4,133 92 - 4,225 Other liabilities 9,765 513 - 10,278 ------------- ------------- ----------- ------------- Total liabilities 503,020 37,445 24,003 564,468 Stockholders' earnings (deficit) Common stock 556 4 42 H 602 Preferred stock - - - - Treasury stock - (200) 200 I - Warrants and options 11,745 - - 11,745 Additional paid-in capital 152,543 977 21,877 J 175,397 Accumulated earnings (deficit) (297,768) 6,699 (4,586)K (295,655) Accumulated other comprehensive loss (145) - - (145) Common stock held in grantor trust (2,700) - - (2,700) ------------- ------------- ----------- ------------- Total stockholders' deficit (135,769) 7,480 17,533 (110,756) ------------- ------------- ----------- ------------- Total liabilities and stockholders' deficit $ 367,251 $ 44,925 $ 41,536 $ 453,712 ============= ============= =========== =============
See accompanying notes to pro forma financial statements. 2 UNITED INDUSTRIES CORPORATION PRO FORMA STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 (DOLLARS IN THOUSANDS) (UNAUDITED)
United Pro Forma Pro Forma United Schultz Adjustments Combined ------------------ ----------------- -------------------- -------------------- Sales before promotion expense $ 149,191 $ 35,980 $ - $ 185,171 Promotion expense 12,800 482 - 13,282 ------------------ ----------------- -------------------- -------------------- Net sales 136,391 35,498 - 171,889 ------------------ ----------------- -------------------- -------------------- Operating costs and expenses: Cost of goods sold 87,163 26,213 - 113,376 Selling, general and administrative expenses 27,239 4,275 196 A 31,710 ------------------ ----------------- -------------------- -------------------- Total operating costs and expenses 114,402 30,488 196 145,086 ------------------ ----------------- -------------------- -------------------- Operating income 21,989 5,010 (196) 26,803 Interest expense 8,512 174 493 B 9,179 ------------------ ----------------- -------------------- -------------------- Income before provision for income taxes 13,477 4,836 (689) 17,624 Income tax expense 3,315 1,770 (169)C 4,916 ------------------ ----------------- -------------------- -------------------- Net income $ 10,162 $ 3,066 $ (520) $ 12,708 ================== ================= ==================== ====================
See accompanying notes to pro forma financial statements. 3 UNITED INDUSTRIES CORPORATION PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (DOLLARS IN THOUSANDS) (UNAUDITED)
United Pro Forma Pro Forma United Schultz Adjustments Combined ------------------ ----------------- -------------------- -------------------- Sales before promotion expense $ 297,776 $ 97,356 $ - $ 395,132 Promotion expense 24,432 1,746 - 26,178 ------------------ ----------------- -------------------- -------------------- Net sales 273,344 95,610 - 368,954 ------------------ ----------------- -------------------- -------------------- Operating costs and expenses: Cost of goods sold 148,371 76,134 - 224,505 Selling, general and administrative expenses 74,689 13,909 787 A 89,385 Facilities and organizational rationalization 5,550 - - 5,550 ------------------ ----------------- -------------------- -------------------- Total operating costs and expenses 228,610 90,043 787 319,440 ------------------ ----------------- -------------------- -------------------- Operating income 44,734 5,567 (787) 49,514 Interest expense 35,841 764 1,972 B 38,577 ------------------ ----------------- -------------------- -------------------- Income before provision for income taxes 8,893 4,803 (2,759) 10,937 Income tax expense 2,167 1,940 (672)C 3,435 ------------------ ----------------- -------------------- -------------------- Net income $ 6,726 $ 2,863 $ (2,087) $ 7,502 ================== ================= ==================== ====================
See accompanying notes to pro forma financial statements. 4 UNITED INDUSTRIES CORPORATION NOTES TO PRO FORMA STATEMENTS (DOLLARS IN THOUSANDS) A Represents the amortization expense of acquired intangibles related to the merger. Intangibles are being amortized over 25 years. The Company has preliminarily allocated 50% of the purchase price in excess of the fair value of assets acquired and liabilities assumed to intangibles and 50% to goodwill. B Represents incremental interest expense related to the additional borrowings $35,000 Term B debt incurred related to the merger. Effective interest rate used was 6%. C Represents tax benefit for Pro Forma adjustments. D Represents the allocation of the purchase price in excess of the fair value of assets acquired and liabilities assumed, as follows: Cash consideration ............................. $17,840 United common stock ............................ 22,900 Debt issuance costs ............................ 2,168 Professional fees .............................. 1,827 ------- Purchase price ................................. 44,735 Fair value of assets acquired and liabilities assumed .......................... (5,367) ------- Intangibles and goodwill ....................... $39,368 =======
E Represents debt issuance costs related to the merger. F Represents accrued professional fees incurred related to the merger. G Represents add-on to Term B debt of $35,000 less pay-off of Schultz revolver of $20,566. Short-term borrowing amount represents additional borrowing needed on the Company's revolving credit facility. The incremental borrowing rate of the Company's revolver is 8%. A ten percent change in the Term B and revolver interest rate would cause interest expense to increase or decrease $277. H Represents the issuance of United's and the elimination of Schultz common. The Company issued 4.58 million shares of its $.01 par value common stock with an estimated fair value of $22,900. I Elimination of Schultz treasury stock. J Represents excess of common stock par value. K Elimination of Schultz Accumulated Earnings. 5