EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as of April 3, 2005 is based on the assumption that the acquisition of Tetra had occurred as of that date. The unaudited pro forma condensed consolidated statement of operations for the 12 months ended September 30, 2004 and the unaudited pro forma condensed consolidated statement of operations for the 6 months ended April 3, 2005 are based on the consolidated financial statements of Spectrum Brands and Tetra as if the acquisition of Tetra had occurred at the beginning of the periods presented, after giving effect to the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial data.
The unaudited pro forma condensed consolidated balance sheet as of April 3, 2005 has been derived from Spectrum Brands’ unaudited consolidated balance sheet as of April 3, 2005 and Tetra’s unaudited consolidated balance sheet as of March 31, 2005. The unaudited pro forma condensed consolidated statement of operations for the 12 months ended September 30, 2004 has been derived from Spectrum Brands’ audited consolidated statement of operations for the year ended September 30, 2004, and Tetra’s unaudited consolidated statement of operations for the year ended December 31, 2004. The unaudited pro forma condensed consolidated statement of operations for the 6 months ended April 3, 2005 has been derived from Spectrum Brands’ unaudited consolidated statement of operations for the six months ended April 3, 2005, and Tetra’s unaudited consolidated statement of operations for the six months ended March 31, 2005. The unaudited pro forma condensed consolidated statements of operations exclude non-recurring items directly attributable to the Tetra acquisition.
In addition, the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended September 30, 2004 and for the 6 months ended April 3, 2005 include the effects of certain acquisitions previously consummated by Spectrum Brands. The operating results of United Industries, Inc., acquired by Spectrum on February 7, 2005, United Pet Group, acquired by United on July 30, 2004, Nu-Gro Corporation, acquired by United on April 30, 2004, and Microlite, acquired by Spectrum Brands on May 28, 2004, are included as if each acquisition occurred at the beginning of the periods presented. The unaudited pro forma condensed consolidated statement of operations excludes non-recurring items directly attributable to these transactions.
The unaudited pro forma condensed combined balance sheet as of April 3, 2005, the unaudited pro forma condensed consolidated statement of operations for the 12 months ended September 30, 2004 and the unaudited pro forma condensed consolidated statement of operations for the 6 months ended April 3, 2005 incorporate all adjustments to convert to U.S. GAAP.
The unaudited pro forma condensed consolidated financial data are based on preliminary estimates and assumptions set forth in the notes to such information. Pro forma adjustments are necessary to reflect the estimated purchase price, the new debt structure and to adjust amounts related to Tetra’s assets and liabilities to a preliminary estimate of their fair values. Pro forma adjustments are also necessary to reflect amortization expense, interest expense and the income tax effect related to the pro forma adjustments.
The pro forma adjustments and allocation of purchase price are preliminary and are based on management’s estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. This final valuation will be based on the actual assets and liabilities of Tetra that exist as of the date of the completion of the transactions. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed consolidated financial data. In addition, the impact of integration activities could cause material differences in the information presented.
The unaudited pro forma condensed consolidated financial data are presented for informational purposes only and have been derived from, and should be read in conjunction with the consolidated financial statements of Spectrum Brands and Tetra, including the notes thereto. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed consolidated financial data, are based on currently available information and certain adjustments that we believe are reasonable. They are not necessarily indicative of our consolidated financial position or results of operations that would have occurred had the transactions taken place on the dates indicated, nor are they necessarily indicative of future consolidated financial position or results of operations.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of 4/3/05
(in thousands)
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| | | Spectrum
Brands (1)
| | Tetra (2)
| | Pro Forma
Adjustments (3)
| | | Spectrum
Brands & Tetra
Pro Forma
Combined
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ASSETS | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 44,266 | | $ | 11,894 | | $ | (628 | )(a) | | $ | 55,532 |
Receivables, net | | | 441,169 | | | 38,186 | | | — | | | | 479,355 |
Inventories | | | 481,629 | | | 30,065 | | | 7,216 | (b) | | | 518,910 |
Prepaid expenses, deferred tax asset and other | | | 104,810 | | | 11,515 | | | (2,742 | )(c) | | | 113,583 |
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Total current assets | | | 1,071,874 | | | 91,660 | | | 3,846 | | | | 1,167,380 |
Property, plant and equipment, net | | | 272,483 | | | 31,688 | | | 1,169 | (d) | | | 305,340 |
Goodwill | | | 1,100,684 | | | 198,152 | | | 121,672 | (e) | | | 1,420,508 |
Intangible assets, net | | | 952,294 | | | 12,125 | | | 221,874 | (f) | | | 1,186,293 |
Deferred charges and other | | | 38,077 | | | — | | | — | | | | 38,077 |
Debt issuance costs, net | | | 38,942 | | | — | | | 3,082 | (g) | | | 42,024 |
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Total assets | | $ | 3,474,354 | | $ | 333,625 | | $ | 351,643 | | | $ | 4,159,622 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Current maturities of long-term debt | | $ | 29,337 | | $ | 19,595 | | $ | (19,595 | )(h) | | $ | 29,337 |
Accounts payable | | | 280,741 | | | 10,175 | | | — | | | | 290,916 |
Accrued liabilities | | | 176,271 | | | 18,940 | | | (4,357 | )(h) | | | 190,854 |
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Total current liabilities | | | 486,349 | | | 48,710 | | | (23,952 | ) | | | 511,107 |
Long term debt, net of current maturities | | | 1,911,230 | | | 246,148 | | | 318,052 | (h) | | | 2,475,430 |
Deferred income taxes | | | 138,520 | | | 2,928 | | | 89,364 | (i) | | | 230,812 |
Other non-current liabilities | | | 109,487 | | | 4,018 | | | — | | | | 113,505 |
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Total liabilities | | | 2,645,586 | | | 301,804 | | | 383,464 | | | | 3,330,854 |
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Total shareholders’ equity | | | 828,768 | | | 31,821 | | | (31,821 | )(j) | | | 828,768 |
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Total liabilities and shareholders’ equity | | $ | 3,474,354 | | $ | 333,625 | | $ | 351,643 | | | $ | 4,159,622 |
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Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(1) Unaudited Condensed Consolidated Balance Sheet for Spectrum, as obtained from the Company’s quarterly report on Form 10-Q for the period ended April 3, 2005.
(2) Derived from Tetra’s unaudited balance sheet as of March 31, 2005. Amounts converted at an exchange rate of 1.2916 USD to 1 EURO.
(3) The total estimated consideration as shown in the table below is allocated to the assets and liabilities of Tetra as if the transactions had occurred on April 3, 2005. The allocation set forth below is preliminary. The unaudited pro forma condensed combined financial information assumes that the historical values of Tetra's current assets, current liabilities and property plant and equipment approximate fair value, except as adjusted, pending forthcoming appraisals and other financial information.
The allocation of consideration to acquired intangible assets is subject to the finalization of independent appraisals. The actual amounts recorded when the independent appraisals are completed may differ materially from the pro forma amounts presented below.
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Total purchase price: | | | | |
Cash consideration | | $ | 275,500 | |
Payoff of Tetra Debt, including accrued interest and fees | | | 270,100 | |
Other direct costs of acquisition | | | 16,146 | |
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| | | $ | 561,746 | |
Preliminary allocation of purchase price, reflecting the transactions: | | | | |
Estimated adjustments to reflect assets and liabilities at fair value: | | | | |
Historical value of assets acquired, excluding goodwill, as of April 3, 2005 | | $ | 135,473 | |
Historical value of liabilities assumed | | | (301,804 | ) |
Debt paid at acquisition, including accrued interest and fees | | | 270,100 | |
Property valuation | | | 1,169 | |
Deferred tax liability recognized on property valuation | | | (444 | ) |
Inventory valuation | | | 7,216 | |
Current deferred tax liability recognized on inventory valuation | | | (2,742 | ) |
Incremental identified intangible assets | | | 221,874 | |
Incremental deferred tax liability on identified intangibles | | | (88,920 | ) |
Goodwill acquired (including $198,152 of pre-acquisition goodwill) | | | 319,824 | |
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| | | $ | 561,746 | |
| (a) | Net change in cash after completion of the transactions. |
| (b) | Adjustment to reflect the estimated fair value of inventory. |
| (c) | Estimated deferred tax benefits associated with the purchase accounting fair value adjustments to inventory. |
| (d) | Adjustment to the estimated purchase accounting valuation related to property, plant and equipment. |
| (e) | Estimated value of purchase price in excess of fair values of assets and liabilities acquired. |
| (f) | Estimated fair value of incremental intangible assets acquired in the transactions. |
| (g) | Spectrum debt issue costs incurred in connection with the Tetra acquisition. |
| (h) | Net additional debt after repayment of Tetra debt, $265,743, and accrued interest and fees, $4,357, at April 3, 2005. |
| (i) | Represents deferred taxes recognized at a 38% rate on preliminary net assets acquired. |
| (j) | Historical value of Tetra net assets acquired. |
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Twelve Months Ended September 30, 2004
(in thousands except per share data)
Page 1 of 2 (continued on next page)
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| | | Spectrum
Brands (1)
| | | Microlite
(2)
| | | Pro Forma Adjustments
| | | Spectrum
Brands Combined
| | | United Industries
(6)
| | | United
Pet Group
(7)
| | NuGro
(8)
| | Pro Forma Adjustments
| | | United Industries Combined
| | | Pro Forma Adjustments
| | | Spectrum
Brands
Pro Forma
Combined
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Net sales | | $ | 1,417,186 | | | $ | 37,618 | | | $ | — | | | $ | 1,454,804 | | | $ | 640,890 | | | $ | 206,834 | | $ | 89,819 | | $ | — | | | $ | 937,543 | | | $ | — | | | $ | 2,392,347 | |
Cost of goods sold | | | 811,894 | | | | 28,294 | | | | — | | | | 840,188 | | | | 423,712 | | | | 136,554 | | | 69,853 | | | 7,884 | (9) | | | 638,003 | | | | (55,528 | )(13) | | | 1,422,663 | |
Restructuring and related charges | | | (781 | ) | | | — | | | | — | | | | (781 | ) | | | — | | | | — | | | — | | | — | | | | — | | | | — | | | | (781 | ) |
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Gross profit | | | 606,073 | | | | 9,324 | | | | — | | | | 615,397 | | | | 217,178 | | | | 70,280 | | | 19,966 | | | (7,884 | ) | | | 299,540 | | | | 55,528 | | | | 970,465 | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 437,629 | | | | 15,695 | | | | 3,241 | (3) | | | 456,565 | | | | 165,695 | | | | 55,312 | | | 11,760 | | | 1,148 | (10) | | | 233,915 | | | | 44,970 | (13) | | | 735,450 | |
Restructuring and related charges | | | 12,224 | | | | — | | | | — | | | | 12,224 | | | | — | | | | — | | | — | | | — | | | | — | | | | — | | | | 12,224 | |
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| | | | 449,853 | | | | 15,695 | | | | 3,241 | | | | 468,789 | | | | 165,695 | | | | 55,312 | | | 11,760 | | | 1,148 | | | | 233,915 | | | | 44,970 | | | | 747,674 | |
Operating Income (loss) | | | 156,220 | | | | (6,371 | ) | | | (3,241 | ) | | | 146,608 | | | | 51,483 | | | | 14,968 | | | 8,206 | | | (9,032 | ) | | | 65,625 | | | | 10,558 | | | | 222,791 | |
Interest expense | | | 65,702 | | | | 4,366 | | | | (2,252 | )(4) | | | 67,816 | | | | 42,528 | | | | 7,308 | | | 591 | | | 1,228 | (11) | | | 51,655 | | | | 10,437 | (14) | | | 129,908 | |
Other (income) expense, net | | | 64 | | | | (50 | ) | | | — | | | | 14 | | | | — | | | | — | | | — | | | — | | | | — | | | | (890 | )(15) | | | (876 | ) |
Minority interest | | | (78 | ) | | | — | | | | — | | | | (78 | ) | | | — | | | | — | | | — | | | — | | | | — | | | | — | | | | (78 | ) |
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Income (loss) from continuing operations before income taxes | | | 90,532 | | | | (10,687 | ) | | | (989 | ) | | | 78,856 | | | | 8,955 | | | | 7,660 | | | 7,615 | | | (10,260 | ) | | | 13,970 | | | | 1.011 | | | | 93,837 | |
Income tax expense (benefit) | | | 34,372 | | | | — | | | | — | (5) | | | 34,372 | | | | (96,231 | ) | | | 5,856 | | | 2,793 | | | (3,899 | )(12) | | | (91,481 | ) | | | 384 | (16) | | | (56,725 | ) |
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Net income from continuing operations | | $ | 56,160 | | | $ | (10,687 | ) | | $ | (989 | ) | | $ | 44,484 | | | $ | 105,186 | | | $ | 1,804 | | $ | 4,822 | | $ | $(6,361 | ) | | $ | 105,451 | | | $ | 627 | | | $ | 150,562 | |
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Basic net income per common share | | $ | 1.68 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 3.19 | |
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Weighted average shares of common stock outstanding | | | 33,433 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 47,183 | (17) |
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Diluted net income per common share | | $ | 1.62 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 3.11 | |
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Weighted average shares in common stock outstanding | | | 34,620 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 48,370 | (17) |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
Twelve Months Ended 9/30/04
(in thousands except per share data)
Page 2 of 2 (continued from previous page)
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| | | Spectrum
Brands Pro Forma
Combined
| | | Tetra (18)
| | | Pro Forma
Adjustments
| | | Spectrum Brands
& Tetra Pro Forma
Combined
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Net sales | | $ | 2,392,347 | | | $ | 231,804 | | | $ | — | | | $ | 2,624,151 | |
Cost of goods sold | | | 1,422,663 | | | | 100,917 | | | | — | | | | 1,523,580 | |
Restructuring and related charges | | | (781 | ) | | | — | | | | — | | | | (781 | ) |
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Gross profit | | | 970,465 | | | | 130,887 | | | | — | | | | 1,101,352 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 735,450 | | | | 84,507 | | | | 4,547 | (19) | | | 824,504 | |
Restructuring and related charges | | | 12,224 | | | | — | | | | — | | | | 12,224 | |
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| | | | 747,674 | | | | 84,507 | | | | 4,547 | | | | 836,728 | |
Operating income | | | 222,791 | | | | 46,380 | | | | (4,547 | ) | | | 264,624 | |
Interest expense | | | 129,908 | | | | 25,754 | | | | (954 | )(20) | | | 154,708 | |
Other (income) expense, net | | | (876 | ) | | | (193 | ) | | | — | | | | (1,069 | ) |
Minority interest | | | (78 | ) | | | — | | | | — | | | | (78 | ) |
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Income from continuing operations before income taxes | | | 93,837 | | | | 20,819 | | | | (3,593 | ) | | | 111,063 | |
Income tax expense (benefit) | | | (56,725 | ) | | | 8,795 | | | | (2,249 | )(21) | | | (50,179 | )(22) |
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Net income from continuing operations | | $ | 150,562 | | | $ | 12,024 | | | $ | (1,344 | ) | | $ | 161,242 | |
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Basic net income per common share | | $ | 3.19 | | | | | | | | | | | $ | 3.42 | |
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Weighted average shares of common stock outstanding | | | 47,183 | | | | | | | | | | | | 47,183 | |
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Diluted net income per common share | | $ | 3.11 | | | | | | | | | | | $ | 3.33 | |
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Weighted average shares in common stock outstanding | | | 48,370 | | | | | | | | | | | | 48,370 | |
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Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(1) Consolidated statement of operations for Spectrum Brands, as obtained from the Company’s Annual Report on Form 10-K for the period ended September 30, 2004.
(2) Represents the unaudited historical operating results for Microlite for the period from October 1, 2003 to May 28, 2004.
(3) Reclassification of Microlite expenses from interest expense to selling, general and administrative expenses to conform to the Spectrum Brands presentation.
(4) Reclassification of Microlite expenses to conform to Spectrum Brands’ presentation, net of additional interest expense incurred in connection with the acquisition of Microlite.
(5) No net income tax benefit has been recognized in connection with Microlite’s operating loss for the period from October 1, 2003 to May 28, 2004. Based on historical levels of income and the length of time required to utilize its deferred tax assets, Spectrum Brands determined that it was more likely than not that it would not fully utilize its Microlite deferred tax assets and therefore recorded a valuation allowance against the benefit of such losses.
(6) Represents the historical operating results for United Industries for the twelve-month period 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.
(7) Represents the historical operating results for United Pet Group for the period from October 1, 2003 to July 30, 2004.
(8) Represents the historical operating results for Nu-Gro for the period from October 1, 2003 to April 30, 2004.
(9) Represents 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. The adjustment also includes 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.
(10) Represents an adjustment to record approximately $8.8 million of 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. This adjustment is offset by the reclassification of $7.7 million of freight costs from selling, general and administrative expenses to cost of goods sold to conform with the accounting treatment for such costs by United Industries.
(11) 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.
(12) Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2004 statutory tax rate of 38%.
(13) Represents a reclassification of freight costs from cost of goods sold to selling, general and administrative expenses to conform with the accounting treatment for such costs by Spectrum Brands, net of a reduction of amortization expense (included in selling, general and administrative expenses only) of $10.6 million, reflecting projected amortization of identified intangibles. Intangible assets acquired included trade names, patents and customer relationships. The majority of acquired trade names have been assigned indefinite lives. Customer relationships have been assigned a 12 1/2 year life.
(14) Represents increased interest expense, net of a reclassification of interest income, associated with the debt issued and refinanced in connection with the transactions. The effect of a 0.125 percent change in the expected interest rate on the approximately $739 million of variable rate debt to be refinanced in connection with the transactions is approximately $0.9 million.
(15) Represents a reclassification of interest income from interest expense, net, to conform to Spectrum Brands’ presentation.
(16) Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2004 statutory tax rate of 38%.
(17) Increase to weighted shares outstanding due to the assumed issuance of 13.75 million shares of Spectrum Brands common stock on October 1, 2003.
(18) Consolidated Statement of Operations for Tetra for the 12 month period ended December 31, 2004, as derived from Exhibit 99.2 to this filing. Amounts are shown in US Dollars based on the average conversion rate of 1.2433 USD to 1 EURO.
(19) Estimated incremental amortization of acquired intangibles. Total amortization expense is projected to be approximately $5 million for the full year. Intangible assets acquired included trade names, customer relationships and technology. Acquired trade names have been assigned indefinite lives. Customer relationships have been assigned a 12 ½ year life and technology has been assigned a six year life.
(20) Represents decreased interest expense associated with the debt issued and refinanced in connection with the transactions. The annual effect of a 0.125 percent change in the expected interest rate on the approximately $551 million of variable rate debt to be refinanced in connection with the transactions is approximately $0.7 million.
(21) Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2004 statutory tax rate of 38% as well as an additional amount to adjust Tetra's effective tax rate to 38%.
(22) Includes a reduction of income tax expense of $104,137, reflecting the full reversal of a valuation allowance originally established against a tax deductible goodwill deduction and certain net operating loss carryforwards that were generated in 1999 through 2003. The adjustment was recorded by United Industries, whose historical results are incorporated in Spectrum's Unaudited Pro Forma Condensed Consolidated Statement of Operations included herein. Based on historical levels of income and the length of time required to utilize its deferred tax assets, United determined that it was more likely than not that it would fully utilize its deferred tax assets and that it was no longer necessary to maintain a valuation allowance. The following table excludes this one-time adjustment from income tax expense in arriving at net income (in thousands):
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| | | Spectrum
Brands
and Tetra
Pro Forma
Combined
| | | Tax
Adjustment
| | | Pro Forma
Adjusted
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Income (loss) from continuing operations before income taxes | | $ | 111,063 | | | $ | — | | | $ | 111,063 |
Income tax expense (benefit) | | | (50,179 | ) | | | 104,137 | | | | 53,958 |
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Net income from continuing operations | | $ | 161,242 | | | $ | (104,137 | ) | | $ | 57,105 |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended 4/3/05
(in thousands, except per share amounts)
Page 1 of 2 (continued on next page)
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| | | Spectrum
Brands (1)
| | | United Industries (2)
| | | Pro Forma
Adjustments
| | | Spectrum
Brands Pro Forma
Combined
| |
Net sales | | $ | 1,025,280 | | | $ | 217,551 | | | $ | — | | | $ | 1,242,831 | |
Cost of goods sold | | | 637,420 | | | | 157,620 | | | | (43,690 | ) (3)(4) | | | 751,350 | |
Restructuring and related charges | | | | | | | | | | | | | | | — | |
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Gross profit | | | 387,860 | | | | 59,931 | | | | 43,690 | | | | 491,481 | |
Operating expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 290,759 | | | | 80,928 | | | | 1,620 | (3)(5)(6) | | | 373,307 | |
Restructuring and related charges | | | 157 | | | | | | | | | | | | 157 | |
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| | | | 290,916 | | | | 80,928 | | | | 1,620 | | | | 373,464 | |
Operating Income (loss) | | | 96,944 | | | | (20,997 | ) | | | 42,070 | | | | 118,017 | |
Interest expense | | | 55,922 | | | | 20,629 | | | | (11,597 | ) (7) | | | 64,954 | |
Other (income) expense, net | | | (24 | ) | | | 55 | | | | | | | | 31 | |
Minority interest | | | (143 | ) | | | — | | | | | | | | (143 | ) |
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Income (loss) from continuing operations before income taxes | | | 41,189 | | | | (41,681 | ) | | | 53,667 | | | | 53,175 | |
Income tax expense (benefit) | | | 15,191 | | | | (17,908 | ) | | | 20,393 | (8) | | | 17,676 | |
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Net income from continuing operations | | $ | 25,998 | | | $ | (23,773 | ) | | $ | 33,274 | | | $ | 35,499 | |
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Basic net income per common share | | $ | 0.67 | | | | | | | | | | | $ | 0.73 | |
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Weighted average shares of common stock outstanding | | | 38,709 | | | | | | | | | | | | 48,350 | (9) |
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Diluted net income per common share | | $ | 0.64 | | | | | | | | | | | $ | 0.71 | |
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Weighted average shares of common stock outstanding | | | 40,318 | | | | | | | | | | | | 49,959 | (9) |
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended 4/3/05
(in thousands except per share data)
Page 2 of 2 (continued from previous page)
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| | | Spectrum
Brands
Pro Forma
Combined
| | | Tetra (10)
| | Pro Forma
Adjustments
| | | Spectrum Brands
& Tetra Pro Forma
Combined
| |
Net sales | | $ | 1,242,831 | | | $ | 117,475 | | $ | — | | | $ | 1,360,306 | |
Cost of goods sold | | | 751,350 | | | | 55,252 | | | — | | | | 806,602 | |
Restructuring and related charges | | | — | | | | — | | | — | | | | — | |
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Gross profit | | | 491,481 | | | | 62,223 | | | — | | | | 553,704 | |
Operating expenses: | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 373,307 | | | | 42,604 | | | 2,260 | (11) | | | 418,171 | |
Restructuring and related charges | | | 157 | | | | — | | | — | | | | 157 | |
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| | | | 373,464 | | | | 42,604 | | | 2,260 | | | | 418,328 | |
Operating income (loss) | | | 118,017 | | | | 19,619 | | | (2,260 | ) | | | 135,376 | |
Interest expense | | | 64,954 | | | | 9,767 | | | 2,633 | (12) | | | 77,354 | |
Other (income) expense, net | | | 31 | | | | 48 | | | — | | | | 79 | |
Minority interest | | | (143 | ) | | | — | | | — | | | | (143 | ) |
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Income from continuing operations before income taxes | | | 53,175 | | | | 9,804 | | | (4,893 | ) | | | 58,086 | |
Income tax expense (benefit) | | | 17,676 | | | | 4,270 | | | (2,453 | )(13) | | | 19,493 | |
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Net income from continuing operations | | $ | 35,499 | | | $ | 5,534 | | $ | (2,440 | ) | | $ | 38,593 | |
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Basic net income per common share | | $ | 0.73 | | | | | | | | | | $ | 0.80 | |
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Weighted average shares of common stock outstanding | | | 48,350 | | | | | | | | | | | 48,350 | |
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Diluted net income per common share | | $ | 0.71 | | | | | | | | | | $ | 0.77 | |
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Weighted average shares in common stock outstanding | | | 49,959 | | | | | | | | | | | 49,959 | |
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Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(1) Consolidated statement of operations for Spectrum Brands, as obtained from the Company’s 10-Q report for the six months ended April 3, 2005.
(2) Consolidated statement of operations for United, as derived from United’s Annual report for the period ended December 31, 2004, 10-Q report for the period ended September 30, 2004 and unaudited consolidated statement of operations for the period January 1, 2005 through February 7, 2005.
(3) Includes $15,995 related to a reclassification of freight costs from cost of goods sold to selling, general and administrative expenses to conform with the accounting treatment for such costs by Spectrum Brands.
(4) Includes $27,695 related to the fair value adjustment applied to United’s acquired inventory as the charge was a non-recurring item related to the transaction.
(5) Includes a $2,046 reduction in amortization expense to present projected amortization of identified intangibles. Intangible assets acquired included trade names, patents and customer relationships. The majority of acquired trade names have been assigned indefinite lives. Customer relationships have been assigned a 12 1/2 year life.
(6) Includes $12,329 of non-recurring transaction related costs incurred by United.
(7) Includes $12,033 of debt issuance costs charged to interest expense related to the debt refinancing that occurred in connection with the acquisition, as the charge was a non-recurring item, offset by increased interest expense, net of a reclassification of interest income, associated with the debt issued and refinanced in connection with the transactions. The effect of a 0.125 percent change in the expected interest rate on the approximately $736 million of variable rate debt to be refinanced in connection with the transactions is approximately $0.9 million.
(8) Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma statutory tax rate of 38%.
(9) Weighted average shares of common stock outstanding assumes the 13.75 million shares issued in connection with the United acquisition were issued and outstanding for the entire period presented.
(10) Unaudited Consolidated Statement of Operations for Tetra for the 6 month period ended March 31, 2005. Amounts are shown in US Dollars based on the average conversion rate of 1.3182 USD to 1 EURO.
(11) Estimated incremental amortization of acquired intangibles. Total amortization expense is projected to be approximately $5 million for the full year. Intangible assets acquired included trade names, customer relationships and technology. Acquired trade names have been assigned indefinite lives. Customer relationships have been assigned a 12 ½ year life and technology has been assigned a six year life.
(12) Represents increased interest expense associated with the debt issued and refinanced in connection with the transactions. The annual effect of a 0.125 percent change in the expected interest rate on the approximately $551 million of variable rate debt to be refinanced in connection with the transactions is approximately $0.7 million.
(13) Represents the income tax benefit associated with the adjustments described herein to arrive at an estimated pro forma 2005 statutory tax rate of 37% as well as an additional amount to adjust Tetra's effective tax rate to 37%.
