EX-99.2 3 a05-1179_1ex99d2.htm EX-99.2

Exhibit 99.2

 

United Industries Corporation

Unaudited Pro Forma Condensed Combined Financial Information

For the Nine Months Ended September 30, 2004 and

For the Year Ended December 31, 2003

(Dollars in thousands, except where indicated)

 

 

The following unaudited pro forma condensed combined financial information related to United Industries Corporation (United Industries or the Company) and its acquisition of The Nu-Gro Corporation (Nu-Gro) and its merger with and into United Pet Group, Inc. (UPG) is included for the nine months ended September 30, 2004 and for the year ended December 31, 2003.

 

The acquisition of Nu-Gro closed on April 30, 2004 and the acquisition of UPG closed on July 30, 2004; the information regarding the transactions, including required financial and pro forma financial information has been previously filed with the U.S. Securities and Exchange Commission.  The respective purchase price allocations ascribed to the Nu-Gro and UPG acquisitions have been presented in the Company’s Form 10-Q for the third quarter of 2004, previously filed with the U.S. Securities and Exchange Commission.  The pro forma information contained herein includes the required pro forma operating results of Nu-Gro and UPG.

 

The unaudited pro forma condensed combined financial information presents how the combined financial statements of (1) United Industries, a manufacturer and marketer of value-oriented products for the consumer lawn and garden care and household insect control markets in the United States, (2) Nu-Gro, a manufacturer and marketer of consumer lawn and garden products and supplier of controlled release nitrogen and other fertilizer technologies in Canada, and (3) UPG, a privately held marketer and manufacturer of premium branded pet supplies, may have appeared had the businesses actually been combined at the beginning of the periods presented herein.  The unaudited pro forma condensed combined financial information shows the impact of the acquisitions of Nu-Gro and UPG on the Company’s historical results of operations under the purchase method of accounting with United Industries treated as the acquirer.  Under this method of accounting, United Industries recorded the assets and liabilities of Nu-Gro and UPG at their estimated fair values as of April 30, 2004 and July 30, 2004, respectively, the respective dates the acquisitions were completed.

 

The unaudited pro forma condensed combined income statements present the historical financial information of United Industries, Nu-Gro, and UPG for the nine months ended September 30, 2004 and the year ended December 31, 2003 and give effect to the acquisitions as if they had been completed at the beginning of the periods presented.

 

The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of United Industries, as filed in its quarterly and annual reports with the U.S. Securities and Exchange Commission, and the historical consolidated financial statements and the related notes of Nu-Gro and UPG. The unaudited pro forma condensed combined financial information includes estimated adjustments to record the assets and liabilities of Nu-Gro and UPG at their respective fair values and represents management’s estimates based on available information.  The final allocation of the purchase price will be determined upon completion of a final valuation, from an independent third-party valuation firm, to determine the fair values of Nu-Gro’s and UPG’s tangible and identifiable intangible assets and liabilities as of the acquisition date.  Increases or decreases in the fair value of the net assets, commitments, executory contracts and other items of Nu-Gro and UPG may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the income statements due to adjustments in yield or amortization of the adjusted assets or liabilities.

 

The unaudited pro forma condensed combined financial information is not necessarily indicative of the results of operations that would have resulted had the acquisitions been completed at the beginning of the periods presented, nor is it indicative of the results of operations in future periods of the combined companies.  In addition, the allocations of the purchase prices which impact the income statements are subject to adjustment and may vary materially from the actual purchase price allocations that will be recorded upon receipt of a final independent third-party valuation report.

 

1


 

United Industries Corporation

Pro Forma Condensed Combined Income Statement

Nine Months Ended September 30, 2004

($ in Thousands)

 

 

 

United
Industries (1)

 

United Pet
Group (2)

 

The Nu-Gro
Corporation (3)

 

Pro Forma
Adjustments

 

United
Industries
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

593,578

 

$

142,333

 

$

67,234

 

$

—

 

$

803,145

 

Cost of goods sold

 

392,776

 

96,366

 

51,443

 

5,904

 (4)

546,489

 

Gross profit

 

200,802

 

45,967

 

15,791

 

(5,904

)

256,656

 

Operating expenses

 

138,152

 

41,992

 

7,375

 

208

 (5)

187,727

 

Income from operations

 

62,650

 

3,975

 

8,416

 

(6,112

)

68,929

 

Interest expense, net

 

33,940

 

5,020

 

413

 

320

 (6)

39,693

 

Income (loss) before income taxes

 

28,710

 

(1,045

)

8,003

 

(6,432

)

29,236

 

Income tax expense (benefit)

 

7,447

 

2,694

 

2,937

 

(2,444

) (7)

10,634

 

Net income (loss)

 

$

21,263

 

$

(3,739

)

$

5,066

 

$

(3,988

)

$

18,602

 

 

United Industries Corporation

Pro Forma Condensed Combined Income Statement

Year Ended December 31, 2003

($ in Thousands)

 

 

 

United
Industries (1)

 

United Pet
Group (2)

 

The Nu-Gro
Corporation (3)

 

Pro Forma
Adjustments

 

United
Industries
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

536,146

 

$

231,974

 

$

164,340

 

$

—

 

$

932,460

 

Cost of goods sold

 

328,238

 

155,748

 

123,850

 

7,918

 (4)

615,754

 

Gross profit

 

207,908

 

76,226

 

40,490

 

(7,918

)

316,706

 

Operating expenses

 

139,042

 

43,351

 

24,178

 

3,760

 (5)

210,331

 

Income from operations

 

68,866

 

32,875

 

16,312

 

(11,678

)

106,375

 

Interest expense, net

 

36,213

 

7,412

 

1,182

 

3,632

 (6)

48,439

 

Income before income taxes

 

32,653

 

25,463

 

15,130

 

(15,310

)

57,936

 

Income tax expense (benefit)

 

(82,851

)

8,752

 

5,586

 

(5,818

) (7)

(74,331

)

Net income (loss)

 

$

115,504

 

$

16,711

 

$

9,544

 

$

(9,492

)

$

132,267

 

 

2


 

United Industries Corporation

Pro Forma Footnotes

 

Nine months ended September 30, 2004:

 

(1)          Represents the historical operating results for United Industries for the nine months ended September 30, 2004, including the results of United Pet Group from July 30, 2004, its date of acquisition, through September 30, 2004, and Nu-Gro from April 30, 2004, its date of acquisition, through September 30, 2004.

(2)          Represents the historical operating results for United Pet Group for the period from January 1, 2004 to July 30, 2004.

(3)          Represents the historical operating results for Nu-Gro for the period from January 1, 2004 to April 30, 2004.

(4)          Represents an adjustment to record incremental depreciation expense related to property and equipment acquired in the United Pet Group acquisition based on estimated fair values.  Such property and equipment is being depreciated using the straight-line method over varying periods, the average of which is approximately 10 years.  The adjustment also includes a reclassification of $5.8 million from selling, general and administrative expenses related to freight costs to conform with the accounting treatment for such costs by United Industries.

(5)          Represents an adjustment to record incremental amortization expense related to intangible assets (other than goodwill) acquired in the United Pet Group and Nu-Gro acquisitions, based on estimated fair values.  Intangible assets acquired included trade names, patents and customer relationships.  The majority of acquired trade names are being amortized using the straight-line method over periods ranging from 5 to 40 years, while several trade names have been determined to have indefinite lives.  Patents acquired and customer relationships are being amortized using the straight-line method over 15 years and 5 years, respectively.

(6)          Represents the change in interest expense related to the new senior credit facility executed by United Industries on April 30, 2004, a portion of the proceeds of which were used to finance the Nu-Gro acquisition, and the amendment of such senior credit facility on July 30, 2004, a portion of the proceeds of which were used to finance the United Pet Group acquisition.

(7)          Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2004 statutory tax rate of 38%.

 

Twelve months ended December 31, 2003:

 

(1)          Represents the historical operating results for United Industries for the twelve-month period ended December 31, 2003.

(2)          Represents the historical operating results for United Pet Group for the twelve-month period ended December 31, 2003.

(3)          Represents the historical operating results for Nu-Gro for the twelve-month period ended December 31, 2003.

(4)          Represents an adjustment to record incremental depreciation expense related to property and equipment acquired in the United Pet Group acquisition based on estimated fair values.  Such property and equipment is being depreciated using the straight-line method over varying periods, the average of which is approximately 10 years.  The adjustment also includes a reclassification of $7.7 million from selling, general and administrative expenses related to freight costs to conform with the accounting treatment for such costs by United Industries.

(5)          Represents an adjustment to record incremental amortization expense related to intangible assets (other than goodwill) acquired in the United Pet Group and Nu-Gro acquisitions, based on estimated fair values.  Intangible assets acquired included trade names, patents and customer relationships.  The majority of acquired trade names are being amortized using the straight-line method over periods ranging from 5 to 40 years, while several trade names have been determined to have indefinite lives.  Patents acquired and customer relationships are being amortized using the straight-line method over 15 years and 5 years, respectively.

 

3


 

(6)          Represents the change in interest expense related to the new senior credit facility executed by United Industries on April 30, 2004, a portion of the proceeds of which were used to finance the Nu-Gro acquisition, and the amendment of such senior credit facility on July 30, 2004, a portion of the proceeds of which were used to finance the United Pet Group acquisition, as if the acquisitions and related financing activities had occurred on January 1, 2003.

(7)          Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2004 statutory tax rate of 38%.

 

4


 

 

 

Rayovac &
United
Pro Forma
Combined

 

Tax
Adjustment

 

Pro Forma
Adjusted

 

Income from continuing operations before income taxes

 

$

91,395

 

$

—

 

$

91,395

 

Income tax (benefit)expense

 

(57,653

)

104,137

 

46,484

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

149,048

 

(104,137

)

44,911

 

Loss from discontinued operations (net of tax)

 

380

 

—

 

380

 

 

 

 

 

 

 

 

 

Net income

 

$

148,668

 

$

(104,137

)

$

44,531

 

 

5