United Industries 10-K/A 2002 FY Annual report (amended)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2002
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                            to

Commission File Number: 333-76055

UNITED INDUSTRIES CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	43-1025604 (I.R.S. Employer Identification Number)
2150 Schuetz Road St. Louis, Missouri 63146 (Address of principal executive office, including zip code)
(314) 427-0780 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:None

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Not Applicable.

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes o    No ý

        The aggregate market value of common stock held by non-affiliates is not determinable because there is no established public market for the registrant's common stock.

        As of February 28, 2003, the registrant had 33,188,000 Class A voting and 33,188,000 Class B nonvoting shares of common stock outstanding and 37,600 nonvoting shares of Class A preferred stock outstanding.

        Documents incorporated by reference: None

EXPLANATORY NOTE

        We are filing this Amendment No. 2 on Form 10-K/A to our 2002 Annual Report on Form 10-K, which we filed on March 20, 2003 (the "Original Filing"), to revise the financial statements to include the information set forth in Note 25 that is required by Rule 3-10 of Securities and Exchange Commission Regulation S-X regarding the guarantee of our Senior Subordinated Notes by our subsidiaries which was not included in the Original Filing. Any item in the Original Filing not expressly changed hereby shall be as set forth in the Original Filing.

PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The financial statements and supplementary data included in this Annual Report are listed in the Index to Financial Statements and Financial Statement Schedule on page F-1.

2

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, United Industries Corporation has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNITED INDUSTRIES CORPORATION, Registrant
Dated: April 30, 2003	By:	/s/  ROBERT L. CAULK      Robert L. Caulk Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

3

CERTIFICATIONS

I, Robert L. Caulk, certify that:

1.

I have reviewed this annual report on Form 10-K/A of United Industries Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

(c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

(a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: April 30, 2003 By: /s/  ROBERT L. CAULK      Robert L. Caulk
President and Chief Executive Officer

4

I, Daniel J. Johnston, certify that:

1.

I have reviewed this annual report on Form 10-K/A of United Industries Corporation;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

(c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

(a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Dated: April 30, 2003 By: /s/  DANIEL J. JOHNSTON      Daniel J. Johnston
Executive Vice President and
Chief Financial Officer

5

INDEX TO FINANCIAL STATEMENTS

		Page
Consolidated Financial Statements of United Industries Corporation
	Report of Independent Accountants	F-2
	Consolidated Balance Sheets as of December 31, 2002 and 2001	F-3
	Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2002, 2001 and 2000	F-4
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000	F-5
	Consolidated Statements of Changes in Stockholders' Deficit for the Years Ended December 31, 2002, 2001 and 2000	F-6
	Notes to Consolidated Financial Statements	F-7
	Report of Independent Accountants on Financial Statement Schedule	F-43
	Schedule II—Valuation and Qualifying Accounts	F-44
Financial Statements of Schultz Company
	Report of Independent Accountants	F-45
	Balance Sheets	F-46
	Statements of Operations	F-47
	Statements of Cash Flows	F-48
	Statement of Changes in Stockholders' Equity	F-49
	Notes to Financial Statements	F-50

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders of
United Industries Corporation and Subsidiaries:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of cash flows, and of changes in stockholders' deficit present fairly, in all material respects, the financial position of United Industries Corporation and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        The Company has revised its financial statements to include the information set forth in Note 25 that is required by Rule 3-10 of Securities and Exchange Commission Regulation S-X regarding the guarantee of the Company's Senior Subordinated Notes by the Company's subsidiaries.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri
February 12, 2003, except for Note 25 which is as of April 29, 2003

F-2

UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

			December 31,
			2002			2001
ASSETS
Current assets:
	Cash and cash equivalents		$	10,318		$	—
	Accounts receivable, less allowance for doubtful accounts of $3,171 and $1,147, respectively			23,321			21,585
	Inventories			87,762			49,092
	Prepaid expenses and other current assets			11,350			6,491
		Total current assets		132,751			77,168
Equipment and leasehold improvements, net				34,218			27,930
Deferred tax asset				105,141			112,505
Goodwill and intangible assets, net				100,868			43,116
Other assets, net				13,025			11,837
		Total assets	$	386,003		$	272,556
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Current maturities of long-term debt and capital lease obligation		$	9,665		$	5,711
	Accounts payable			27,063			23,459
	Accrued expenses			45,221			34,006
	Short-term borrowings			—			23,450
		Total current liabilities		81,949			86,626
Long-term debt, net of current maturities				391,493			318,386
Capital lease obligation, net of current maturities				3,778			4,221
Other liabilities				5,019			7,740
		Total liabilities		482,239			416,973
Commitments and contingencies
Stockholders' deficit:
	Preferred stock (37,600 shares of $0.01 par value Class A issued and outstanding, 40,000 shares authorized)			—			—
	Common stock (33.1 million shares each of $0.01 par value Class A and Class B issued and outstanding, 43.6 million shares of each authorized at December 31, 2002; 27.7 million shares of each issued and outstanding and 37.6 million shares of each authorized at December 31, 2001)			664			556
	Warrants and options			11,745			11,745
	Additional paid-in capital			210,480			152,943
	Accumulated deficit			(287,592	)		(306,048	)
	Common stock subscription receivable			(25,761	)		—
	Common stock repurchase option			(2,636	)		—
	Common stock held in grantor trust			(2,700	)		(2,700	)
	Loans to executive officer			(404	)		(400	)
	Accumulated other comprehensive loss			(32	)		(513	)
		Total stockholders' deficit		(96,236	)		(144,417	)
		Total liabilities and stockholders' deficit	$	386,003		$	272,556

See accompanying notes to consolidated financial statements.

F-3

UNITED INDUSTRIES CORPORATION AND SUBISIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in thousands)

		Years Ended December 31,
		2002			2001			2000
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales before promotion expense		$	521,286		$	297,776		$	288,618
Promotion expense			41,296			24,432			22,824
Net sales			479,990			273,344			265,794
Operating costs and expenses:
	Cost of goods sold		305,644			148,371			146,229
	Selling, general and administrative expenses		113,162			74,689			69,099
	Facilities and organizational rationalization		—			5,550			—
	Dursban related expenses		—			—			8,000
	Total operating costs and expenses		418,806			228,610			223,328
Operating income			61,184			44,734			42,466
Interest expense, net			32,410			35,841			40,973
Income before income tax expense			28,774			8,893			1,493
Income tax expense			3,438			2,167			134
Net income		$	25,336		$	6,726		$	1,359
Preferred stock dividends		$	6,880		$	2,292		$	320
Net income available to common stockholders		$	18,456		$	4,434		$	1,039
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME:
Net income		$	25,336		$	6,726		$	1,359
Other comprehensive income, net of tax:
	Income (loss) on interest rate swap		513			(513	)		—
	Loss on derivative hedging instruments		(32	)		—			—
Comprehensive income		$	25,817		$	6,213		$	1,359

See accompanying notes to consolidated financial statements.

F-4

UNITED INDUSTRIES CORPORATION AND SUBISIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

					Years Ended December 31,
					2002			2001			2000
Cash flows from operating activities:
	Net income				$	25,336		$	6,726		$	1,359
	Adjustments to reconcile net income to net cash flows from operating activities:
		Depreciation and amortization				10,240			4,918			5,261
		Amortization of deferred financing fees				3,280			2,691			2,420
		Deferred income tax expense				3,438			2,167			134
		Noncash reduction of capital lease obligation				—			—			(1,182	)
		Changes in operating assets and liabilities, net of effects from acquisitions:
			Accounts receivable			26,579			(1,641	)		(779	)
			Inventories			(19,894	)		(2,085	)		6,236
			Prepaid expenses and other current assets			(3,283	)		(134	)		(716	)
			Other assets			5,995			9			(137	)
			Accounts payable and accrued expenses			(6,162	)		11,126			(7,869	)
			Facilities and organizational rationalization charge			(3,216	)		5,158			—
			Dursban related expenses			(82	)		(5,984	)		6,066
			Other operating activities, net			(4,373	)		2,084			—
				Net cash flows from operating activities		37,858			25,035			10,793
Cash flows from investing activities:
	Purchases of equipment and leasehold improvements					(6,450	)		(7,916	)		(3,950	)
	Purchase of facilities and equipment from Pursell					(4,000	)		—			—
	Payments for purchase of fertilizer brands					—			(37,500	)		—
	Payments for Schultz merger, net of cash acquired					(38,300	)		—			—
	Payments for WPC Brands acquisition, net of cash acquired					(19,500	)		—			—
				Net cash flows used for investing activities		(68,250	)		(45,416	)		(3,950	)
Cash flows from financing activities:
	Proceeds from additional term debt					90,000			8,450			15,000
	Repayment (borrowings) on cash overdraft					(5,620	)		945			4,103
	Repayment of debt assumed in Schultz merger					(20,577	)		—			—
	Repayment of borrowings on term debt					(14,943	)		(10,983	)		(26,888	)
	Repayments of short-term borrowings					(23,450	)		—			—
	Payments for debt issuance costs					(4,700	)		—			(1,883	)
	Proceeds from issuance of common stock					17,500			—			—
	Payments received for common stock subscription receivable					2,500			—			—
	Payments for treasury stock redemption costs					—			—			(12,175	)
	Proceeds from issuance of preferred stock					—			21,969			15,000
				Net cash flows from (used for) financing activities		40,710			20,381			(6,843	)
Net increase in cash and cash equivalents						10,318			—			—
Cash and cash equivalents, beginning of period						—			—			—
Cash and cash equivalents, end of period					$	10,318		$	—		$	—
Noncash financing activities:
	Common stock issued related to Schultz merger				$	6,000		$	—		$	—
	Common stock issued related to Bayer agreements				$	30,720		$	—		$	—
	Debt assumed in Schultz merger				$	20,577		$	—		$	—
	Preferred stock dividends accrued				$	6,880		$	2,292		$	320
	Execution of capital lease				$	—		$	—		$	5,344

See accompanying notes to consolidated financial statements.

F-5

UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(Dollars in thousands)

	Class A Nonvoting Preferred Stock			Class A Voting Common Stock			Class B Nonvoting Common Stock
										Warrants and Options									Common Stock Subscription Receivable			Common Stock Repurchasing Option			Common Stock Held Grantor Trust						Accumulated Other Comprehensive Loss
													Additional Paid-in Capital			Accumulated Deficit												Loans to Executive Officer						Total Stockholders' Deficit
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at January 1, 2000	—	$	—	27,650,000	$	277	27,650,000	$	277	—	$	—	$	126,865		$	(311,521	)	$	—		$	—		$	(2,700	)	$	—		$	—		$	(186,802	)
Net income	—		—	—		—	—		—	—		—		—			1,359			—			—			—			—			—			1,359
Issuance of preferred stock and common stock warrants	15,000		—	—		—	—		—	3,200		2,784		12,216			—			—			—			—			—			—			15,000
Preferred stock dividends	—		—	—		—	—		—	—		—		—			(320	)		—			—			—			—			—			(320	)
Balance at December 31, 2000	15,000		—	27,650,000		277	27,650,000		277	3,200		2,784		139,081			(310,482	)		—			—			(2,700	)		—			—			(170,763	)
Net income	—		—	—		—	—		—	—		—		—			6,726			—			—			—			—			—			6,726
Issuance of common stock	—		—	71,000		1	71,000		1	—		—		(2	)		—			—			—			—			—			—			—
Issuance of common stock options	—		—	—		—	—		—	600		456		—			—			—			—			—			—			—			456
Issuance of preferred stock and common stock warrants	22,600		—	—		—	—		—	6,300		8,505		13,464			—			—			—			—			—			—			21,969
Preferred stock dividends	—		—	—		—	—		—	—		—		—			(2,292	)		—			—			—			—			—			(2,292	)
Loan to executive officer	—		—	—		—	—		—	—		—		400			—			—			—			—			(400	)		—			—
Unrealized loss on interest rate swap, net of taxes	—		—	—		—	—		—	—		—		—			—			—			—			—			—			(513	)		(513	)
Balance at December 31, 2001	37,600		—	27,721,000		278	27,721,000		278	10,100		11,745		152,943			(306,048	)		—			—			(2,700	)		(400	)		(513	)		(144,417	)
Net income	—		—	—		—	—		—	—		—		—			25,336			—			—			—			—			—			25,336
Issuance of common stock for Schultz acquisition and related financing	—		—	2,290,000		24	2,290,000		24	—		—		22,866			—			—			—			—			—			—			22,914
Issuance of common stock	—		—	60,000		—	60,000		—	—		—		600			—			—			—			—			—			—			600
Issuance of common stock to Bayer	—		—	3,072,000		30	3,072,000		30	—		—		30,430			—			(27,321	)		(2,636	)		—			—			—			533
Amendment to Bayer agreement	—		—	—		—	—		—	—		—		3,641			—			—			—			—			—			—			3,641
Proceeds for subscription receivable, net of interest	—		—	—		—	—		—	—		—		—			—			1,560			—			—			—			—			1,560
Preferred stock dividends	—		—	—		—	—		—	—		—		—			(6,880	)		—			—			—			—			—			(6,880	)
Loan to executive officer	—		—	—		—	—		—	—		—		—			—			—			—			—			(52	)		—			(52	)
Payment on loan to executive officer	—		—	—		—	—		—	—		—		—			—			—			—			—			48			—			48
Realized loss on interest rate swap, net of taxes	—		—	—		—	—		—	—		—		—			—			—			—			—			—			513			513
Changes in fair value of derivative hedging instruments	—		—	—		—	—		—	—		—		—			—			—			—			—			—			(32	)		(32	)
Balance at December 31, 2002	37,600	$	—	33,143,000	$	332	33,143,000	$	332	10,100	$	11,745	$	210,480		$	(287,592	)	$	(25,761	)	$	(2,636	)	$	(2,700	)	$	(404	)	$	(32	)	$	(96,236	)

See accompanying notes to consolidated financial statements.

F-6

UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

Note 1—Description of Business

        Under a variety of brand names, the Company manufactures and markets one of the broadest lines of pesticides in the industry, including herbicides and indoor and outdoor insecticides, as well as insect repellents, fertilizer, growing media and soils. Our value brands are targeted toward consumers who want products and packaging that are comparable or superior to, and at lower prices than, premium price brands, while our opening price point brands are designed for conscious consumers who want quality products. Our products are marketed to mass merchandisers, home improvement centers, hardware chains, nurseries and garden centers.

        As described further in Note 18, the Company's operations are divided into three business segments: Lawn and Garden, Household and Contract. The Company's lawn and garden brands include, among others, Spectracide®, Garden Safe®, Real-Kill® and No-Pest® in the controls category, as well as Sta-Green®, Vigoro®, Schultz® and Bandini® brands in the lawn and garden fertilizer and growing media categories. The Company's household brands include, among others, Hot Shot®, Cutter® and Repel®. The Contract segment represents non-core products and includes various compounds and chemicals such as, among others, charcoal, water purification tablets, first-aid kits, barbeque sauce, fish attractant, cleaning solutions and automotive products.

Note 2—Summary of Significant Accounting Policies

Basis of Consolidation

        The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated during consolidation.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These investments are recorded at cost which approximates market value.

Inventories

        Inventories are reported at the lower of cost or market. Cost is determined using a standard costing system that approximates the first-in, first-out method and includes raw materials, direct labor and overhead. An allowance for potentially obsolete or slow-moving inventory is recorded based on the Company's analysis of inventory levels and future sales forecasts. In the event that estimates of future usage and sales differ from actual results, the allowance for obsolete or slow-moving inventory may be adjusted. For the years ended December 31, 2002, 2001 and 2000, amounts recorded for potentially obsolete or slow-moving inventory were $5.4 million, $2.7 million and $0.3 million, respectively. As of

F-7

December 31, 2002 and 2001, the allowance for potentially obsolete or slow-moving inventory was $5.8 million and $2.7 million, respectively.

Capitalized Software Costs

        Capitalized software costs are included in equipment and leasehold improvements in the accompanying consolidated balance sheets. Once the underlying assets are placed into service, costs are amortized using the straight-line method over periods of related benefit ranging from three to five years. As of December 31, 2002 and 2001, the Company had $4.4 million and $3.5 million, respectively, in unamortized capitalized software costs related primarily to the Company's enterprise resource planning (ERP) implementation, including capitalized internal costs in 2002 of $0.4 million. No internal costs were capitalized in 2001. The Company expects to place certain modules of the ERP system into service and begin recognizing amortization expense thereon in the fourth quarter of 2003 and finalize the implementation in 2004. Related amortization expense was $0.1 million during each of the years ended December 31, 2002, 2001 and 2000.

Equipment and Leasehold Improvements

        Expenditures for equipment and leasehold improvements and those that substantially increase the useful lives of assets are capitalized and recorded at cost. Maintenance, repairs and minor renewals are expensed as incurred. When equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any related gains or losses are reflected in earnings. Depreciation is recorded using the straight-line method over management's estimate of the useful lives of the related assets. Machinery and equipment are depreciated over periods ranging from three to twelve years. Office furniture and equipment are depreciated over periods ranging from five to ten years. Automobiles and trucks are depreciated over periods ranging from three to seven years. Leasehold improvements are amortized over the shorter of the lease term or the useful life of the related asset which generally ranges from five to thirty-nine years. Property held under capital lease is amortized over the term of the lease.

Goodwill and Intangible Assets

        The Company has acquired intangible assets or made acquisitions in the past that resulted in the recording of goodwill or intangible assets. Under generally accepted accounting principles previously in effect, these assets were amortized over their estimated useful lives, and were tested periodically to determine if they were recoverable from operating earnings on an undiscounted basis over their useful lives. Beginning in 2002, the Company ceased to amortize goodwill but evaluates it annually for impairment as part of its annual planning process, or if events or changes in circumstances indicate the carrying amount may not be recoverable. If recovery is not reasonably assured, an appropriate adjustment using current market values, estimates of discounted future cash flows and other methods is made. Prior to 2002, goodwill was amortized using the straight-line method over 40 years and recorded in selling, general and administrative expenses (see Note 7).

Long-Lived Assets

        On January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and for long lived assets to be disposed of and supersedes SFAS

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No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In accordance with SFAS No. 144, the Company periodically evaluates the recoverability of long-lived assets, including equipment and leasehold improvements for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If a review indicates that the carrying value of such asset is not recoverable based on its undiscounted future cash flows, a loss is recognized for the difference between the fair value of the asset and its carrying value. Adoption of SFAS No. 144 did not have a material impact on the Company's consolidated financial statements.

Derivative Instruments and Hedging Activities

        The Company periodically uses interest rate and commodity price derivative hedging instruments to reduce fluctuations in cash flows. Using these agreements, the Company agrees to exchange, at specified intervals, the difference between fixed and variable amounts calculated by reference to an agreed-upon notional amount or index. Derivative hedging instruments are recorded in the consolidated balance sheets as assets or liabilities, as applicable, measured at fair value. The Company does not enter into derivatives or other hedging arrangements for trading or speculative purposes.

Revenue Recognition

        Net sales represent gross sales less any applicable customer discounts from list price, customer returns and promotion expense through cooperative programs with retailers. The provision for customer returns is based on historical sales returns and analysis of credit memo and other relevant information. If the historical or other data used to develop these estimates do not properly reflect future returns, net sales may need to be adjusted. Sales reductions related to returns were $7.4 million, $6.5 million and $7.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. Amounts included in the allowance for doubtful accounts for product returns were $2.0 million and $0.4 million as of December 31, 2002 and 2001, respectively.

Promotion Expense

        The Company advertises and promotes its products through national and regional media. Products are also advertised and promoted through cooperative programs with retailers. Advertising and promotion costs are expensed as incurred, although costs incurred during interim periods are generally expensed ratably in relation to revenues. Management develops an estimate of the amount of costs that have been incurred by the retailers under cooperative programs based on an analysis of specific programs offered to retailers and historical information. Actual costs incurred may differ significantly from estimates if factors such as the level of participation and success of the retailers' programs or other conditions differ from expectations. Promotion expense, including cooperative programs with customers, is recorded as a reduction of sales and was $41.3 million, $24.4 million and $22.8 million for the years ended December 31, 2002, 2001 and 2000, respectively. Accrued advertising and promotion expense was $16.4 million and $12.1 million as of December 31, 2002 and 2001, respectively. In addition, advertising costs are incurred irrespective of promotions. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and were $3.3 million, $1.3 million and $2.4 million for the years ended December 31, 2002, 2001 and 2000, respectively.

F-9

Research and Development

        Research and development costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2002, 2001 and 2000, research and development costs were $1.3 million, $2.4 million and $1.0 million, respectively.

Shipping and Handling Costs

        Certain shipping and handling costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. These costs primarily comprise personnel and other general and administrative costs associated with the Company's distribution facilities, and to a lesser extent, some costs related to goods shipped between the Company's facilities. For the years ended December 31, 2002, 2001 and 2000, these costs were $15.7 million, $13.4 million and $12.9 million, respectively. The remaining shipping and handling costs comprise those costs associated with goods shipped to customers and supplies received from vendors and are included in cost of goods sold in the accompanying consolidated statements of operations.

Stock-Based Compensation

        The Company accounts for stock options issued to employees in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" and applies the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123." Under APB No. 25 and related interpretations, compensation expense is recognized using the intrinsic value method for the difference between the exercise price of the options and the estimated fair value of the Company's common stock on the date of grant. See Note 19 for information regarding stock option activity during the years ended December 31, 2002, 2001 and 2000.

        The following table presents net income, as reported, using the intrinsic value method and stock-based compensation included therein, stock-based compensation expense that would have been recorded using the fair value method and pro forma net income that would have been reported had the fair value method been applied:

	Years Ended December 31,
	2002		2001		2000
Net income, as reported	$	25,336	$	6,726	$	1,359
Stock-based compensation expense includedin net income, as reported, net of tax		—		—		—
Stock-based compensation expense using the fair method, net of tax		2,709		251		492
Pro forma net income		22,627		6,475		867

Income Taxes

        Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences

F-10

between the financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such amounts are recovered or settled. Management judgment is required to determine income tax expense, deferred tax assets and any related valuation allowance and deferred tax liabilities. The Company has recorded a valuation allowance of $104.1 million as of December 31, 2002 due to uncertainties related to the ability to utilize some of the deferred tax assets, primarily consisting of certain net operating loss carryforwards generated in 1999 through 2002 and deductible goodwill recorded in connection with the Company's recapitalization in 1999. The valuation allowance is based on management's estimates of future taxable income by jurisdiction in which the deferred tax assets will be recoverable. In the event that actual results differ from those estimates, or the estimates are adjusted in future periods, the valuation allowance may need to be adjusted, which could materially impact the Company's consolidated financial position and results of operations.

Earnings Per Share

        Earnings per share information is not required for presentation as the Company does not have publicly traded stock.

Concentration of Credit Risk

        Financial instruments that potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial conditions. The Company is dependent on three customers for the majority of its sales, as presented in the following table:

		Years Ended December 31,
		2002		2001		2000
The Home Depot		33	%	25	%	24	%
Lowe's		23	%	22	%	19	%
Wal-Mart		18	%	17	%	16	%
	Total	74	%	64	%	59	%

        As of December 31, 2002 and 2001, these three customers were responsible for 62% and 60% of accounts receivable, respectively.

Supplemental Cash Flow Information

        During the years ended December 31, 2002, 2001 and 2000, the Company paid interest of $32.4 million, $36.0 million and $40.9 million, respectively, and recognized interest income (which is included in interest expense, net in the consolidated statements of operations) of $1.4 million, $0.1 million and $0.2 million, respectively. During the years ended December 31, 2002, 2001 and 2000, the Company paid income taxes of $0.6 million, $0.1 million and $0.2 million, respectively.

Reclassifications

        Certain reclassifications have been made to the prior years' amounts to conform to the current year presentation. In addition, the Company has reclassified its borrowing on cash overdrafts to financing activities from operating activities.

F-11

Note 3—Acquisitions

Schultz Company

        On May 9, 2002, a wholly owned subsidiary of the Company completed a merger with and into Schultz Company (Schultz), a manufacturer of horticultural products and specialty items and a distributor of potting soil, soil conditioners and charcoal. Schultz products are distributed primarily to retail outlets throughout the United States and Canada. The merger was executed to achieve economies of scale and synergistic efficiencies. As a result of the merger, Schultz became a wholly owned subsidiary of the Company. The total purchase price included cash payments of $38.3 million, including related acquisition costs of $5.0 million, issuance of 600,000 shares of Class A voting common stock valued at $3.0 million and issuance of 600,000 shares of Class B nonvoting common stock valued at $3.0 million and the assumption of $20.6 million of outstanding debt, which was immediately repaid by the Company at closing. In exchange for cash, common stock and the assumption of debt, the Company received all of the outstanding shares of Schultz. The Company has preliminarily allocated 50% of the purchase price in excess of the fair value of net assets acquired to intangible assets ($19.7 million) and 50% to goodwill ($19.7 million), which is not deductible for tax purposes. The acquired intangible assets consist of trade names and other intellectual property which are being amortized over 25 to 40 years. In addition, the Company was required to write-up the value of inventory acquired from Schultz by $1.5 million to properly reflect its fair value.

        This transaction was accounted for using the purchase method of accounting and, accordingly, the results of operations of the assets acquired and liabilities assumed have been included in the consolidated financial statements from the date of acquisition. The purchase price was allocated to assets acquired and liabilities assumed based on estimated fair values. The purchase price allocation is based on preliminary information, which is subject to adjustment upon obtaining complete valuation information. While the final purchase price allocation may differ significantly from the preliminary allocation included in this report, management believes that finalization of the allocation will not have a material impact on the consolidated results of operations or financial position of the Company. Completion of the purchase price allocation is expected by the second quarter of 2003.

        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition:

Description		Amount
Current assets		$	40,856
Equipment and leasehold improvements			3,901
Intangible assets			20,632
Goodwill			19,744
Other assets			811
	Total assets acquired		85,944
Current liabilities			19,857
Long-term debt			20,662
Other liabilities			1,125
	Total liabilities assumed		41,644
	Net assets acquired	$	44,300

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        The Company's funding sources for the Schultz merger included an additional $35.0 million add-on to Term Loan B of the Company's Senior Credit Facility (see Note 12), an additional $10.0 million add-on to the Company's Revolving Credit Facility, the issuance of 1,690,000 shares of Class A voting common stock to UIC Holdings, L.L.C. for $8.5 million and the issuance of 1,690,000 shares of Class B nonvoting common stock to UIC Holdings, L.L.C. for $8.5 million. The issuance of shares to UIC Holdings, L.L.C. was a condition precedent to the amendment of the Senior Credit Facility. The value of the shares issued was determined using $5 per share, the fair value of the Company's common stock ascribed by an independent third party valuation.

WPC Brands, Inc.

        On December 6, 2002, a wholly owned subsidiary of the Company completed the acquisition of WPC Brands, Inc. (WPC Brands), a manufacturer and distributor of various leisure-time consumer products, including a full line of insect repellents, institutional healthcare products and other proprietary and private label products. The acquisition was executed to enhance the Company's insect repellent product lines and to strengthen its presence at major customers. The total purchase price was $19.5 million in cash in exchange for all of the outstanding shares of WPC Brands. The Company has preliminarily allocated 75% of the purchase price in excess of the fair value of net assets acquired to intangible assets ($9.7 million) and 25% to goodwill ($3.2 million), which is not deductible for tax purposes. The acquired intangible assets consist of trade names and other intellectual property which are being amortized over 25 to 40 years. In addition, the Company was required to write-up the value of inventory acquired from WPC Brands by $2.0 million to properly reflect its fair value.

        This transaction was accounted for using the purchase method of accounting and, accordingly, the results of operations of the assets acquired and liabilities assumed have been included in the consolidated financial statements from the date of acquisition. The purchase price was allocated to assets acquired and liabilities assumed based on estimated fair values. The purchase price allocation is based on preliminary information, which is subject to adjustment upon obtaining complete valuation information. While the final purchase price allocation may differ significantly from the preliminary allocation included in this report, management believes that finalization of the allocation will not have a material impact on the consolidated results of operations or financial position of the Company. Completion of the purchase price allocation is expected by the third quarter of 2003.

F-13

        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition:

Description		Amount
Current assets		$	7,987
Equipment and leasehold improvements			844
Intangible assets			11,294
Goodwill			3,222
Other assets			455
	Total assets acquired		23,802
Current liabilities			3,286
Other liabilities			1,016
	Total liabilities assumed		4,302
	Net assets acquired	$	19,500

        The Company's funding source for the WPC Brands acquisition was a portion of the proceeds received from an additional $25.0 million add-on to Term Loan B of the Company's Senior Credit Facility.

        In addition, the Company is currently considering selling certain or all of the non-core product lines received in the acquisition of WPC Brands. Total assets represented by these product lines are approximately $1.6 million with annual net sales in 2002 of approximately $6.2 million.

        The Company's unaudited consolidated results of operations on a pro forma basis, as if these transactions had occurred on January 1, 2001, include net sales of $556.5 million and $388.3 million for the years ended December 31, 2002 and 2001, respectively, and net income of $28.4 million and $6.8 million for the years ended December 31, 2002 and 2001, respectively. This unaudited pro forma financial information does not purport to be indicative of the consolidated results of operations that would have been achieved had this transaction been completed as of the assumed dates or which may be obtained in the future.

Note 4—Strategic Transactions

        On June 14, 2002, the Company and Bayer Corporation and Bayer Advanced, L.L.C. (together referred to herein as Bayer) consummated a strategic transaction. The strategic transaction allows the Company to gain access to certain Bayer active ingredient technologies through a Supply Agreement and to perform certain merchandising services for Bayer through an In-Store Service Agreement. In connection with the strategic transaction, Bayer acquired a minority ownership interest, approximately 9.3% of the issued and outstanding shares of the Company's common stock, under the terms of an Exchange Agreement in exchange for promissory notes due to Bayer from Pursell Industries, Inc. (Pursell) and the execution of the Supply and In-Store Service Agreements.

        The Company has the right to terminate the In-Store Service Agreement at any time without cause upon 60 days advance notice to Bayer. Following any such termination, the Company would have 365 days to exercise an option to repurchase all of its stock issued to Bayer and could repurchase the stock at a price based on equations contained in the Exchange Agreement designed in part to represent

F-14

the fair market value of the shares at the time such repurchase option is exercised and in part to represent the original cost. In the event the Company exercises this repurchase option, Bayer would have the right to terminate the Supply Agreement. Because Bayer is both a competitor and a supplier, the Company is constantly reevaluating its relationship with Bayer and the value of this relationship to it, and may decide to terminate the In-Store Service Agreement and exercise its repurchase option at any time.

        In consideration for the Supply and In-Store Service Agreements, and in exchange for the promissory notes of Pursell, the Company issued to Bayer 3,072,000 shares of Class A voting common stock valued at $15.4 million and 3,072,000 shares of Class B nonvoting common stock valued at $15.4 million and recorded $0.4 million of related issuance costs. The Company reserved for the entire face value of the promissory notes due to Bayer from Pursell as the Company did not believe they were collectible and an independent third party valuation did not ascribe any significant value to them.

        Based on the independent third party valuation, the Company assigned a fair value of $30.7 million on June 14, 2002 to the transaction components recorded relative to the common stock issued to Bayer as follows:

Description	Amount
Common stock subscription receivable	$	27,321
Supply Agreement		5,694
Repurchase option		2,636
In-Store Services Agreement		(4,931	)
	$	30,720

        Under the requirements of the agreements, Bayer will make payments to the Company which total $5.0 million annually through June 15, 2009, the present value of which equals the value assigned to the common stock subscription receivable, which is reflected in the equity section in the Company's accompanying consolidated balance sheet as of December 31, 2002. The common stock subscription receivable will be repaid in 28 quarterly installments of $1.25 million, the first of which was received at closing on June 17, 2002. The difference between the value ascribed to the common stock subscription receivable and the installment payments will be reflected as interest income in the Company's consolidated statements of operations through June 15, 2009.

        Bayer has the right to put the shares received back to the Company under the terms of the Exchange Agreement. Bayer can terminate the Exchange Agreement within the first 36 months if the Company fails to meet certain performance guidelines as established in the In-Store Service Agreement. In conjunction with the termination, Bayer can put the shares received back to the Company within 30 days of the termination of the Exchange Agreement at a price provided for in the Exchange Agreement. The Company believes that the put price per share would represent in part the fair market value of the shares at the time such put option is exercised and in part the original cost.

        The value of the Supply Agreement and the liability associated with the In-Store Service Agreement are being amortized over the period in which economic benefits under the Supply Agreement are utilized and the obligations under the In-Store Service Agreement are fulfilled. The Company is amortizing the asset associated with the Supply Agreement to cost of goods sold and currently anticipates the benefit will be recognized over a three to five-year period. The Company is amortizing the obligation associated with the In-Store Service Agreement to revenues over the

F-15

seven-year life of the agreement. In December 2002, the Company and Bayer amended the In-Store Service Agreement to reduce the scope of services provided by approximately 80%. As a result, the Company reduced its obligation under the agreement accordingly and reclassified $3.6 million to additional paid-in capital to reflect the increase in value of the original agreement.

        The independent third party valuation obtained by the Company also indicated that value should be ascribed to the repurchase option it has under the agreements. The repurchase option is reflected as a reduction of equity in the accompanying consolidated balance sheet as of December 31, 2002. This amount will be recorded as a component of additional paid-in capital upon exercise or expiration of the option.

Fertilizer Brands

        On December 17, 2001, the Company advanced its strategic plan for growth in the consumer lawn and garden category by acquiring leading consumer fertilizer brands Vigoro, Sta-Green and Bandini, as well as acquiring licensing rights to the Best® line of fertilizer products, for a cash purchase price of $37.5 million. The brands, which were formerly owned by or licensed to Pursell, complement the Company's consumer lawn, garden and insect control products. Pursell continues to manufacture, warehouse and distribute certain fertilizer products for the Company under a long-term agreement. In connection with financing this transaction, the Company issued 22,600 shares of preferred stock for $1,000 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method, and warrants to purchase 6,300,000 shares of common stock initially to UIC Holdings, L.L.C. for net cash proceeds of $22.0 million.

Fertilizer Assets

        On October 3, 2002, the Company purchased certain assets from Pursell, which renamed itself U.S. Fertilizer subsequent to the agreement, for a cash purchase price of $12.1 million and forgiveness of the Pursell promissory notes previously obtained from Bayer, as described above in the discussion of the strategic transaction with Bayer. The assets acquired included certain inventory, equipment at two of Pursell's facilities and real estate at one of the two facilities.

        Also on October 3, 2002, the Company executed a tolling agreement with Pursell, whereby Pursell supplies the Company with fertilizer. The tolling agreement requires the Company to be responsible for certain raw materials, capital expenditures and other related costs for Pursell to manufacture and supply the Company with fertilizer products. The agreement does not require a minimum volume purchase from Pursell, but provides for a fixed monthly payment of $0.7 million through the term of the tolling agreement, which expires on September 30, 2007. The fixed monthly payment is included in the standard costs of our inventories and is not expensed monthly as a period cost. In addition, beginning on March 1, 2004 and on each anniversary thereafter, the fixed payment is subject to certain increases for labor, materials, inflation and other reasonable costs as outlined in the tolling agreement. The agreement provides the Company with certain termination rights without penalty upon a breach of the agreement by Pursell or upon the Company's payment of certain amounts as set forth therein.

F-16

Note 5—Inventories

        Inventories consist of the following:

		December 31,
		2002			2001
Raw materials		$	27,853		$	11,104
Finished goods			65,750			40,688
Allowance for obsolete and slow-moving inventory			(5,841	)		(2,700	)
	Total inventories	$	87,762		$	49,092

Note 6—Equipment and Leasehold Improvements

        Equipment and leasehold improvements consist of the following:

		December 31,
		2002			2001
Machinery and equipment		$	39,609		$	30,279
Office furniture, equipment, and capitalized software			26,299			15,181
Automobiles, trucks and aircraft			6,313			6,157
Leasehold improvements			9,512			7,405
Land and buildings			1,099			—
			82,832			59,022
Accumulated depreciation and amortization			(48,614	)		(31,092	)
	Total equipment and leasehold improvements, net	$	34,218		$	27,930

        For the years ended December 31, 2002, 2001 and 2000, depreciation expense was $7.3 million, $4.7 million and $5.1 million, respectively. As of December 31, 2002 and 2001, the cost of the aircraft held under capital lease was $5.3 million and related accumulated amortization was $3.2 million and $2.0 million, respectively.

F-17

Note 7—Goodwill and Intangible Assets

        Goodwill and intangible assets consist of the following:

				December 31, 2002							December 31, 2001
			Amortization Period	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible assets:
	Trade names		25-40	$	64,025	$	(1,918	)	$	62,107	$	37,500	$	—	$	37,500
	Supply agreement		4		5,694		(894	)		4,800		—		—		—
	Other intangible assets		25		5,401		(52	)		5,349		—		—		—
		Total intangible assets		$	75,120	$	(2,864	)		72,256	$	37,500	$	—		37,500
Goodwill										28,612						5,616
		Total goodwill and intangible assets, net							$	100,868					$	43,116

        On January 1, 2002, the Company adopted SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and broadens the criteria for recording intangible assets separately from goodwill. SFAS No. 142, among other things, eliminates the amortization of goodwill and indefinite-lived intangible assets and requires them to be tested for impairment at least annually. During 2002, both at adoption and at the end of the year, the Company performed an impairment analysis of its goodwill. No impairment charges resulted from these analyses. Prospectively, the Company will test goodwill for impairment annually, or more frequently as warranted by events or changes in circumstances.

        For the year ended December 31, 2002, goodwill recorded in connection with acquisitions was $23.0 million. No amounts were recorded during 2001 or 2000. Changes in the carrying value of goodwill, allocated by segment, for the year ended December 31, 2002 are as follows:

	Lawn and Garden		Household		Contract		Total
Balance at January 1, 2002	$	3,478	$	2,079	$	59	$	5,616
Goodwill acquired during the year		17,668		4,417		911		22,996
Balance at December 31, 2002	$	21,146	$	6,496	$	970	$	28,612

F-18

        As prescribed by SFAS No. 142, prior period operating results were not restated. However, a reconciliation follows which reflects net income as reported by the Company and adjusted to reflect the impact of SFAS No. 142, as if it had been effective for the periods presented:

	Years Ended December 31,
	2001		2000
Net income, as reported	$	6,726	$	1,359
Amortization of goodwill, net of tax		46		46
Net income, as adjusted	$	6,772	$	1,405

        Intangible assets include patents, trade names and other intangible assets, which are valued at acquisition through independent appraisals where material, or using other valuation methods. Patents, trade names and other intangible assets are amortized using the straight-line method over periods ranging from 25 to 40 years. The useful lives of intangible assets were not revised as a result of the adoption of SFAS No. 142.

        As described in Note 3, on May 9, 2002, a wholly owned subsidiary of the Company completed a merger with and into Schultz. The purchase price included cash payments of $38.3 million, including related acquisition costs of $5.0 million, issuance of 600,000 shares of Class A voting common stock valued at $3.0 million and issuance of 600,000 shares of Class B nonvoting common stock valued at $3.0 million and the assumption of $20.6 million of outstanding debt. The Company has preliminarily allocated 50% of the purchase price in excess of the fair value of net assets acquired to intangible assets and 50% to goodwill. The acquired intangible assets are being amortized over 25 to 40 years.

        Also as described in Note 3, on December 6, 2002, a wholly owned subsidiary of the Company completed the acquisition of WPC Brands. The purchase price was $19.5 million in cash. The Company has preliminarily allocated 75% of the purchase price in excess of the fair value of net assets acquired to intangible assets and 25% to goodwill. The acquired intangible assets are being amortized over 25 to 40 years.

        As described in Note 4, on December 17, 2001, the Company acquired the Vigoro, Sta-Green and Bandini brand names, as well as licensing rights to the Best line of fertilizer products from Pursell for $37.5 million. The acquired brand names and licensing rights are being amortized over 40 years.

        For the years ended December 31, 2002, 2001 and 2000, aggregate amortization expense related to intangible assets was $2.9 million, $0.2 million and $0.2 million, respectively. The following table presents estimated amortization expense for intangible assets during each of the next five years:

Years Ended December 31,	Amount
2003	$	3,175
2004		3,175
2005		3,175
2006		3,175
2007		1,850

F-19

Note 8—Other Assets

        Other assets consist of the following:

		December 31,
		2002			2001
Deferred financing fees		$	22,432		$	18,067
Accumulated amortization			(10,382	)		(7,102	)
	Deferred financing fees, net		12,050			10,965
Other			975			872
	Total other assets, net	$	13,025		$	11,837

Note 9—Accrued Expenses

        Accrued expenses consist of the following:

		December 31,
		2002		2001
Advertising and promotions		$	16,401	$	12,125
Facilities rationalization			1,563		3,500
Dursban related expenses			—		82
Interest			3,777		3,763
Cash overdraft			1,506		7,126
Noncompete agreement			1,770		1,060
Preferred stock dividends			9,492		2,612
Salaries and benefits			4,357		1,983
Severance costs			869		1,679
Other			5,486		76
	Total accrued expenses	$	45,221	$	34,006

Note 10—Charge for Facilities and Organizational Rationalization

        During the fourth quarter of 2001, the Company recorded a charge of $8.5 million which included $5.6 million related to facilities and organizational rationalization which primarily affected the Company's Lawn and Garden segment results $2.7 million of inventory obsolescense recorded as cost of goods sold and $0.2 million of miscellaneous costs recorded as selling, general and administrative expense. In connection therewith, 85 employees were terminated and provided severance benefits. Approximately $3.5 million of costs associated with the facilities and organizational rationalization, which related primarily to facility exit costs and resultant duplicate rent payments in 2002, were incurred by December 31, 2002. Amounts remaining in the facilities and organizational rationalization accrual as of December 31, 2002 represent duplicate rent payments expected through May 2003 and costs associated with the restoration of leased facilities to their original condition. Such amounts are expected to be incurred by second quarter of 2003.

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        The following table presents amounts charged against the facilities and organizational rationalization accrual:

		Facilities Rationalization			Severance Costs			Total Costs
Balance at January 1, 2001		$	—		$	—		$	—
	Provision charged to accrual		3,500			2,050			5,550
	Charges against the accrual		—			(392	)		(392	)
Balance at December 31, 2001			3,500			1,658			5,158
	Charges against the accrual		(1,937	)		(1,279	)		(3,216	)
Balance at December 31, 2002		$	1,563		$	379		$	1,942

Note 11—Dursban Related Expenses

        During the year ended December 31, 2000, the U.S. Environmental Protection Agency (EPA) and manufacturers of the active ingredient chlorpyrifos, including Dow AgroSciences L.L.C. which sold chlorphyrifos to the Company under the trademark "Dursban™," entered into a voluntary agreement that provided for withdrawal of virtually all residential uses of chlorpyrifos. Formulation of chlorpyrifos products intended for residential use ceased by December 1, 2000 and formulators discontinued the sale of such products to retailers after February 1, 2001. Retailers were not allowed to sell chlorpyrifos products after December 31, 2001. Accordingly, a charge of $8.0 million was recorded in September 2000 for costs associated with this agreement, including customer markdowns, inventory write-offs and related disposal costs, which primarily affected the Company's Lawn and Garden segment results. All of the Company's accrued costs associated with this agreement and additional amounts totaling under $0.1 million were incurred by December 31, 2002.

        The following table presents amounts charged against the Dursban accrual:

		2002			2001			2000
Balance at beginning of year		$	82		$	6,066		$	—
	Provision charged to accrual		—			—			8,000
	Charges against the accrual		(82	)		(5,984	)		(1,934	)
Balance at end of year		$	—		$	82		$	6,066

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Note 12—Long-Term Debt

        Long-term debt, excluding capital lease obligations, consists of the following:

				December 31,
				2002			2001
Senior Credit Facility:
	Term Loan A			$	28,250		$	39,205
	Term Loan B				222,465			134,488
	Revolving Credit Facility				—			23,450
97/8% Series B Senior Subordinated Notes					150,000			150,000
					400,715			347,143
		Less current maturities and short-term borrowings			(9,222	)		(28,757	)
			Total long-term debt, net of current maturities	$	391,493		$	318,386

Senior Credit Facility

        The Senior Credit Facility, as amended as of December 6, 2002, was provided by Bank of America, N.A. (formerly known as NationsBank, N.A.), Morgan Stanley Senior Funding, Inc. and Canadian Imperial Bank of Commerce and consists of (1) a $90.0 million revolving credit facility (the Revolving Credit Facility); (2) a $75.0 million term loan facility (Term Loan A); and (3) a $240.0 million term loan facility (Term Loan B). The Revolving Credit Facility and Term Loan A mature on January 20, 2005 and Term Loan B matures on January 20, 2006. The Revolving Credit Facility is subject to a clean-down period during which the aggregate amount outstanding under the Revolving Credit Facility shall not exceed $10.0 million for 30 consecutive days during the period between August 1 and November 30 in each calendar year. As of December 31, 2002, the clean-down period had been completed and no amounts were outstanding under the Revolving Credit Facility, nor were there any compensating balance requirements.

        On February 13, 2002, the Senior Credit Facility was amended to increase Term Loan B from $150.0 million to $180.0 million and provide additional liquidity and flexibility for capital expenditures subsequent to the acquisition of various fertilizer brands in December 2001. The Company incurred $1.1 million in fees related to the amendment which were recorded as deferred financing fees and are being amortized over the remaining term of the Senior Credit Facility. The amendment did not change any other existing covenants of the Senior Credit Facility.

        On May 8, 2002, in connection with the Company's merger with Schultz, the Senior Credit Facility was amended to increase Term Loan B from $180.0 million to $215.0 million, increase the Revolving Credit Facility from $80.0 million to $90.0 million and provide additional flexibility for capital expenditures. The Company incurred $2.2 million in fees related to the amendment which were recorded as deferred financing fees and are being amortized over the remaining term of the Senior Credit Facility. The amendment did not change any other existing covenants of the Senior Credit Facility.

        On December 6, 2002, in connection with the Company's acquisition of WPC Brands, the Senior Credit Facility was amended to increase Term Loan B from $215.0 million to $240.0 million and provide additional flexibility for capital expenditures. The Company incurred $1.1 million in fees related

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to the amendment which were recorded as deferred financing fees and are being amortized over the remaining term of the Senior Credit Facility. The amendment did not change any other existing covenants of the Senior Credit Facility.

        The principal amount of Term Loan A is to be repaid in 24 consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2005. The principal amount of Term Loan B is to be repaid in 28 consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2006.

        The Senior Credit Facility agreement contains restrictive affirmative, negative and financial covenants. Affirmative and negative covenants place restrictions on, among other things, levels of investments, indebtedness, insurance, capital expenditures and dividend payments. The financial covenants require the maintenance of certain financial ratios at defined levels. As of and during the years ended December 31, 2002 and 2001, the Company was in compliance with all covenants. While the Company does not anticipate an event of non-compliance in the foreseeable future, the effect of non-compliance would require the Company to request a waiver or an amendment to the Senior Credit Facility. Amending the Senior Credit Facility could result in changes to the Company's borrowing capacity or its effective interest rates. Under the agreements, interest rates on the Revolving Credit Facility, Term Loan A and Term Loan B range from 1.50% to 4.00% above LIBOR, depending on certain financial ratios. LIBOR was 1.38% as of December 31, 2002 and 1.88% as of December 31, 2001. Unused commitments under the revolving credit facility are subject to a 0.5% annual commitment fee. The interest rate of Term Loan A was 4.67% and 5.43% as of December 31, 2002 and 2001, respectively. The interest rate of Term Loan B was 5.42% and 5.93% as of December 31, 2002 and 2001, respectively.

        The Senior Credit Facility may be prepaid in whole or in part at any time without premium or penalty. During the year ended December 31, 2002, the Company made principal payments of $11.0 million on Term Loan A and $2.0 million on Term Loan B, which included optional principal prepayments of $6.3 million on Term Loan A and $1.1 million on Term Loan B. During the year ended December 31, 2001, the Company made principal payments of $9.2 million on Term Loan A and $1.4 million on Term Loan B, which included optional principal prepayments of $4.1 million on Term Loan A and $0.7 million on Term Loan B. The optional payments were made to remain two quarterly payments ahead of the regular payment schedule. According to the Senior Credit Facility agreement, each prepayment on Term Loan A and Term Loan B can be applied to the next principal repayment installments. Management intends to pay a full year of principal installments in 2003 in accordance with the terms of the Senior Credit Facility.

        The Senior Credit Facility is secured by substantially all of the properties and assets of the Company and its current and future domestic subsidiaries. The borrowings under the Senior Credit Facility are fully and unconditionally guaranteed on a joint and several basis by each of the Company's current subsidiaries and future subsidiaries that may be formed by the Company.

        The carrying amount of the Company's obligation under the Senior Credit Facility approximates fair value because the interest rates are based on floating interest rates identified by reference to market rates.

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Senior Subordinated Notes

        In November 1999, the Company issued $150.0 million in aggregate principal amount of 9⁷/8% Series B senior subordinated notes (the Senior Subordinated Notes) due April 1, 2009. Interest accrues at a rate of 9⁷/8% per annum, payable semi-annually on April 1 and October 1.

        The Company's indenture governing the Senior Subordinated Notes contain a number of significant covenants that could adversely impact the Company's business. In particular, the indenture of the Senior Subordinated Notes limit the Company's ability to:

•

pay dividends or make other distributions;



•

make certain investments or acquisitions;



•

dispose of assets or merge;



•

incur additional debt;



•

issue equity; and



•

pledge assets.

        Furthermore, in accordance with the indenture governing the Senior Subordinated Notes, the Company is required to maintain specified financial ratios and meet financial tests. The ability to comply with these provisions may be affected by events beyond the Company's control. The breach of any of these covenants will result in a default under the applicable debt agreement or instrument and could trigger acceleration of the debt under the applicable agreement. Any default under the Company's indenture governing the Senior Subordinated Notes might adversely affect the Company's growth, financial condition and results of operations and the ability to make payments on the Senior Subordinated Notes.

        The fair value of the Senior Subordinated Notes was $151.5 million and $141.0 million as of December 31, 2002 and 2001, respectively, based on their quoted market price on such dates.

        Aggregate future principal payments of long-term debt, excluding capital lease obligation, as of December 31, 2002 are as follows:

Years Ended December 31,	Amount
2003	$	9,222
2004		18,444
2005		168,439
2006		54,610
2007		—
Thereafter		150,000
	$	400,715

Note 13—Commitments

        The Company leases several of its operating facilities from Rex Realty, Inc., a company owned by stockholders and operated by a former executive and past member of the Board of Directors of the

F-24

Company. The operating leases expire at various dates through December 31, 2010. The Company has options to terminate the leases on an annual basis by giving advance notice of at least one year. As of December 31, 2002, notice had been given on one such lease. The Company leases a portion of its operating facilities from the same company under a sublease agreement expiring on December 31, 2005 with minimum annual rentals of $0.7 million. The Company has two five-year options to renew this lease, beginning January 1, 2006. During the years ended December 31, 2002, 2001 and 2000, rent expense under these leases was $2.3 million, $2.3 million and $2.2 million, respectively.

        The Company is obligated under additional operating leases for other operations and the use of warehouse space. The leases expire at various dates through December 31, 2015. Five of the leases provide for as many as five options to renew for five years each. During the years ended December 31, 2002, 2001 and 2000, aggregate rent expense under these leases was $3.8 million, $5.1 million and $5.0 million, respectively.

        In March 2000, the Company entered into a capital lease agreement for $5.3 million for its aircraft. The Company is obligated to make monthly payments of $0.1 million, with a balloon payment of $3.2 million in February 2005. The Company has the option of purchasing the aircraft following the expiration of the lease agreement for a nominal amount.

        The following table presents future minimum payments due under operating and capital leases as of December 31, 2002:

			Operating Leases
Years Ended December 31,							Capital Lease
			Affiliate		Other					Total
2003			$	1,726	$	7,146	$	818		$	9,690
2004				1,766		6,348		818			8,932
2005				1,806		5,492		3,343			10,641
2006				1,847		4,307		—			6,154
2007				1,887		3,525		—			5,412
Thereafter				10,241		16,899		—			27,140
	Total minimum lease payments		$	19,273	$	43,717		4,979		$	67,969
	Less amount representing interest							(758	)
		Present value of net minimum lease payments, including current portion of $443					$	4,221

Note 14—Contingencies

        In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as standby letters of credit and indemnifications, which are not reflected in the accompanying consolidated balance sheets. At December 31, 2002, the Company had $1.9 million in standby letters of credit pledged as collateral to support the lease of its primary distribution facility in St. Louis, a United States customs bond, certain product purchases and various workers' compensation obligations. These agreements mature at varying dates through October 2003 and may be renewed as circumstances warrant. Such financial instruments are valued based on the amount of exposure under the instruments and the likelihood of performance being required. In the

F-25

Company's past experience, no claims have been made against these financial instruments nor does management expect any losses to result from them.

        The Company is the lessee under a number of equipment and property leases, as described above. It is common in such commercial lease transactions for the Company to agree to indemnify the lessor for the value of the property or equipment leased should it be damaged during the course of the Company's operations. The Company expects that any losses that may occur with respect to the leased property would be covered by insurance, subject to deductible amounts.

        The Company has entered into certain derivative hedging instruments and other purchase commitments to purchase granular urea during its peak production season in 2003. See Note 16 for information regarding these commitments.

        The Company is involved from time to time in routine legal matters and other claims incidental to its business. When it appears probable in management's judgment that the Company will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonably estimated, liabilities are recorded in the consolidated financial statements and charges are recorded against earnings. Management believes that it is remote the resolution of such routine matters and other incidental claims, taking into account established reserves and insurance, will have a material adverse impact on the Company's consolidated financial position, results of operations or liquidity.

Note 15—Stockholders' Equity

        In connection with its merger with Schultz in May 2002, the Board of Directors adopted resolutions, which were approved by the Company's stockholders, to amend the Company's Certificate of Incorporation to increase the Company's total authorized Class A voting common stock from 37,600,000 shares to 43,600,000 shares and increase the Company's total authorized Class B nonvoting common stock from 37,600,000 shares to 43,600,000 shares. In addition, as part of the purchase price, the Company issued 600,000 shares of Class A voting common stock valued at $3.0 million and 600,000 shares of Class B nonvoting common stock valued at $3.0 million. In addition, to raise equity to partially fund the merger, the Company issued 1,690,000 shares of Class A voting common stock to UIC Holdings, L.L.C. for $8.5 million and 1,690,000 shares of Class B nonvoting common stock to UIC Holdings, L.L.C. for $8.5 million.

        In connection with its transaction with Bayer in June 2002, the Company issued 3,072,000 shares of Class A voting common stock valued at $15.4 million and 3,072,000 shares of Class B nonvoting common stock valued at $15.4 million and recorded $0.4 million of related issuance costs.

        In connection with the Company's December 2001 transaction with Pursell, the Board of Directors adopted resolutions, which were approved by the Company's stockholders, to amend the Company's Certificate of Incorporation to:

•

Authorize issuance of 22,600 shares of $0.01 par value Class A nonvoting preferred stock to UIC Holdings, L.L.C. for $1,000 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method, for net cash proceeds of $22.0 million. Dividends accrue at 15% of liquidation value which equals $1,000 per share. Dividends, to the extent not paid on December 31 of each year, are cumulative. As of December 31, 2002 and 2001, 37,600 shares of preferred stock were outstanding and accrued dividends were $9.5 million and $2.6 million, respectively.

F-26

•

Increase the Company's total authorized Class A voting common stock from 34,100,000 to 37,600,000 shares to accommodate the granting of stock purchase warrants to UIC Holdings, L.L.C., which received a 10-year warrant to purchase up to 3,150,000 shares of Class A voting common stock for $3.25 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method. These stock purchase warrants were issued in conjunction with the preferred stock.



•

Increase the Company's total authorized Class B nonvoting common stock from 34,100,000 to 37,600,000 shares to accommodate the granting of stock purchase warrants to UIC Holdings, L.L.C., which received a 10-year warrant to purchase up to 3,150,000 shares of Class B nonvoting common stock for $3.25 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method. These stock purchase warrants were issued in conjunction with the preferred stock.

        The Company valued the 6,300,000 warrants issued above at $1.35 per warrant using the Black-Sholes option pricing model at the date of grant. Accordingly, $8.5 million of the proceeds received from the preferred stock offering were allocated to the warrants.

        In November 2000, the Board of Directors adopted resolutions, which were approved by the Company's stockholders, to amend the Company's Certificate of Incorporation to:

•

Authorize issuance of 15,000 shares of $0.01 par value Class A nonvoting preferred stock to UIC Holdings, L.L.C. for $1,000 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method, for net cash proceeds of $15.0 million. Dividends accrue at 15% of liquidation value which equals $1,000 per share. Dividends, to the extent not paid on December 31 of each year, are cumulative.



•

Increase the Company's total authorized Class A voting common stock from 32,500,000 to 34,100,000 shares to accommodate the granting of stock purchase warrants to UIC Holdings, L.L.C., which received a 10-year warrant to purchase up to 1,600,000 shares of Class A voting common stock for $2.00 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method. These stock purchase warrants were issued in conjunction with the preferred stock.



•

Increase the Company's total authorized Class B nonvoting common stock from 32,500,000 to 34,100,000 shares to accommodate the granting of stock purchase warrants to UIC Holdings, L.L.C., which received a 10-year warrant to purchase up to 1,600,000 shares of Class B nonvoting common stock for $2.00 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method. These stock purchase warrants were issued in conjunction with the preferred stock.

        The Company valued the 3,200,000 warrants issued at $0.87 per warrant using the Black-Sholes option pricing model at the date of grant. Accordingly, $2.8 million of the proceeds received from the preferred stock offering were allocated to the warrants.

Note 16—Accounting for Derivative Instruments and Hedging Activities

        In the normal course of business, the Company is exposed to fluctuations in interest rates and raw materials prices. The Company has established policies and procedures that govern the management of these exposures through the use of derivative hedging instruments, including swap agreements. The

F-27

Company's objective in managing its exposure to such fluctuations is to decrease the volatility of earnings and cash flows associated with changes in interest rates and certain raw materials prices. To achieve this objective, the Company periodically enters into swap agreements with values that change in the opposite direction of anticipated cash flows. Derivative instruments related to forecasted transactions are considered to hedge future cash flows, and the effective portion of any gains or losses is included in accumulated other comprehensive income until earnings are affected by the variability of cash flows. Any remaining gain or loss is recognized currently in earnings.

        During the first half of each year, the price of granular urea, a critical raw material component used in the production of fertilizer, tends to increase significantly in correlation with natural gas prices. The costs of granular urea have generally, but not always, declined during the second half of the year. As of December 31, 2002, the Company had hedged nearly 50%, and had purchase agreements to effectively fix an additional 23%, of its 2003 urea purchases. The average contract price of the Company's derivative hedging instruments as of December 31, 2002, intended to fix the price of forecasted urea prices through April 2003, was approximately $135 per ton. The average purchase price of the Company's purchase agreements as of December 31, 2002 was approximately $130 per ton. While management expects these instruments and agreements to manage the Company's exposure to such price fluctuations, no assurance can be provided that the instruments will be effective in fully mitigating exposure to these risks, nor can assurance be provided that the Company will be successful in passing pricing increases on to its customers.

        The Company has formally documented, designated and assessed the effectiveness of transactions that receive hedge accounting treatment. The cash flows of the derivative instruments are expected to be highly effective in achieving offsetting cash flows attributable to fluctuations in the cash flows of the hedged risk. Changes in the fair value of agreements designated as derivative hedging instruments are reported as either an asset or liability in the accompanying consolidated balance sheets with the associated unrealized gains or losses reflected in accumulated other comprehensive income. As of December 31, 2002 and 2001, unrealized losses of less than $0.1 million and $0.5 million, respectively, related to derivative instruments designated as cash flow hedges were recorded in accumulated other comprehensive income. Such instruments at December 31, 2002 represent hedges on forecasted purchases of raw materials during the first half of 2003 and are scheduled to mature by May 2003. The amounts are subsequently reclassified into cost of goods sold in the same period in which the underlying hedged transactions affect earnings.

        If it becomes probable that a forecasted transaction will no longer occur, any gains or losses in accumulated other comprehensive income will be recognized in earnings. The Company has not incurred any gains or losses for hedge ineffectiveness or due to excluding a portion of the value from measuring effectiveness. The Company does not enter into derivatives or other hedging arrangements for trading or speculative purposes.

F-28

        The following table summarizes information about the Company's derivative hedging instruments and related gains (losses) as of December 31, 2002 (amounts not in thousands):

Number of Contracts	Maturity Date	Notional Amount in Tons	Weighted Average Contract Price		Contract Value Upon Effective Contract Date		Contract Value at December 31, 2002		Gain (Loss) at December 31, 2002
3	January 30, 2003	14,500	$	133.00	$	1,928,500	$	1,916,465	$	(12,035	)
3	February 28, 2003	15,000		135.00		2,025,000		2,010,000		(15,000	)
2	March 28, 2003	10,000		135.50		1,355,000		1,353,300		(1,700	)
1	April 24, 2003	5,000		137.00		685,000		681,650		(3,350	)
9		44,500			$	5,993,500	$	5,961,415	$	(32,085	)

        The following table summarizes information about the Company's purchase commitments of granular urea as of December 31, 2002 (amounts not in thousands):

Number of Commitments	Expected Purchase Month	Commitment Amount in Tons	Weighted Average Purchase Price		Value of Purchase Commitment on Commitment Date
3	January 2003	18,750	$	126.93	$	2,380,000
2	February 2003	18,500		128.20		2,472,550
5		37,250			$	4,852,550

        In April 2001, the Company entered into two interest rate swaps that fixed the interest rate as of April 30, 2001 for $75.0 million in variable rate debt under the Senior Credit Facility. The interest rate swaps settled on April 30, 2002 and a derivative hedging loss of $0.5 million was reclassified from accumulated other comprehensive income into interest expense.

Note 17—Fair Value of Financial Instruments

        The Company has estimated the fair value of its financial instruments as of December 31, 2002 and 2001 using available market information or other appropriate valuation methods. Considerable judgment, however, is required in interpreting data to develop estimates of fair value. Accordingly, the estimates presented in the accompanying consolidated financial statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.

        The carrying amounts of cash, accounts receivable, accounts payable and other current assets and liabilities approximate fair value because of the short maturity of those instruments. The Company's Senior Credit Facility bears interest at current market rates and, thus, carrying value approximates fair value as of December 31, 2002 and 2001. The Company is exposed to interest rate volatility with respect to the variable interest rates of this instrument. The estimated fair values of the Company's Senior Subordinated Notes as of December 31, 2002 and 2001 of $151.5 million and $141.0 million, respectively, are based on quoted market prices.

F-29

Note 18—Segment Information

        During the third quarter of 2002, the Company began reporting its operating results using three reportable segments: Lawn and Garden, Household and Contract. Segments were established primarily by product type which represents the basis upon which management, including the CEO who is the chief operating decision maker of the Company, reviews and assesses the Company's financial performance. The Lawn and Garden segment primarily consists of dry, granular slow-release lawn fertilizers, lawn fertilizer combination and lawn control products, herbicides, water-soluble and controlled-release garden and indoor plant foods, plant care products, potting soils and other growing media products and insecticide products. Products are marketed to mass merchandisers, home improvement centers, hardware chains, nurseries and garden centers. This segment includes, among others, the Company's Spectracide, Garden Safe, Schultz, Vigoro, Sta-Green, Bandini, Real-Kill, and No-Pest brands.

        The Household segment represents household insecticides and insect repellents that allow consumers to achieve and maintain a pest-free household and repel insects. The Household segment includes the Company's Hot Shot, Cutter and Repel brands, as well as a number of private label and other products.

        The Contract segment represents mainly non-core products, some of which are private label, and includes various compounds and chemicals such as, among others, charcoal water purification tablets, first-aid kits, barbeque sauce, fish attractant, cleaning solutions and automotive products.

        The following tables present selected quarterly financial segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," for the years ended December 31, 2002, 2001 and 2000. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 2, as applicable. The

F-30

segment financial information presented includes comparative periods prepared on a basis consistent with the current year presentation.

			Year Ended December 31,
			2002			2001			2000
Net sales:
	Lawn and Garden		$	352,269		$	169,267		$	177,981
	Household			108,752			101,186			82,018
	Contract			18,969			2,891			5,795
		Total net sales	$	479,990		$	273,344		$	265,794
Operating income (loss):
	Lawn and Garden		$	38,064		$	24,637		$	24,309
	Household			23,159			20,280			17,814
	Contract			(39	)		(183	)		343
		Total operating income	$	61,184		$	44,734		$	42,466
Operating margin:
	Lawn and Garden			10.8%			14.6%			13.7%
	Household			21.3%			20.0%			21.7%
	Contract			-0.2%			-6.3%			5.9%
		Total operating margin		12.7%			16.4%			16.0%

        Operating income represents earnings before net interest expense and income tax expense. Operating income is the measure of profitability used by management to assess the Company's financial performance. Operating margin represents operating income as a percentage of net sales.

        The majority of the Company's sales are conducted with customers in the United States. The Company's international sales comprise less than 1% of total net sales. In addition, no single item comprises more than 10% of the Company's net sales. For the years ended December 31, 2002, 2001 and 2000, the Company's three largest customers were responsible for 74%, 64% and 59% of net sales, respectively. As of December 31, 2002 and 2001, these three customers were responsible for 62% and 60% of accounts receivable, respectively.

        As the Company's assets support production across all segments, they are managed on an entity-wide basis at the corporate level and are not recorded or analyzed by segment. Substantially all of the Company's assets are located in the United States.

Note 19—Stock-Based Compensation

        The Company grants stock options to eligible employees, officers and directors pursuant to the 2001 Stock Option Plan, which is administered by the Compensation Committee of the Company's Board of Directors. The 2001 Stock Option Plan superseded the 1999 Stock Option Plan which was terminated during 2001. Upon termination, all 3,096,000 issued and outstanding options under the 1999 Stock Option Plan were forfeited. The following table presents a summary of activity for options of the

F-31

1999 Stock Option Plan prior to and including the forfeiture of all outstanding options (amounts not in thousands):

	Years Ended December 31,
	2001				2000
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Options outstanding, beginning of year	3,096,500		$	5.00	2,955,000		$	5.00
Granted	—			—	527,500			5.00
Exercised	—			—	—			—
Forfeited	(3,096,500	)		5.00	(386,000	)		5.00
Options outstanding, end of year	—		$	—	3,096,500		$	5.00

        The 2001 Stock Option Plan provides for an aggregate of 5,800,000 shares of the Company's common stock that may be issued in the form of Class A voting common stock, Class B nonvoting common stock or a combination thereof. The options to purchase shares of common stock vest over a period no longer than 10 years. If certain performance targets are met, the vesting period could be shortened to four years. Options are generally granted with an exercise price equal to or greater than the estimated fair value of the Company's common stock on the grant date and expire ten years thereafter. After termination of employment, unvested options are forfeited immediately, within thirty days or within one year, as provided under the 2001 Stock Option Plan.

        The following table presents a summary of activity for options of the 2001 Stock Option Plan (amounts not in thousands):

	Years Ended December 31,
	2002					2001
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Options outstanding, beginning of year		5,036,000		$	2.39		—		$	—
Granted		939,000			4.56		5,157,000			2.38
Exercised		—			—		—			—
Forfeited		(215,000	)		2.09		(121,000	)		2.00
Options outstanding, end of year		5,760,000		$	2.75		5,036,000		$	2.39
Weighted average remaining contractual life (years)		8.35					9.15
Options exercisable, end of year		1,556,032		$	2.54		278,710		$	2.00
Weighted average fair value of options granted	$	1.40				$	0.72

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        The following table presents information about stock options outstanding and exercisable under the 2001 Stock Option Plan as of December 31, 2002 (amounts not in thousands):

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
$2.00 to $3.25	4,657,500	8.20	$	2.26	1,363,949	8.17	$	2.21
$4.00 to $5.00	1,102,500	8.99		4.82	192,083	9.02		4.83
	5,760,000	8.35		2.75	1,556,032	8.27		2.54

        As of December 31, 2002, 40,000 shares were available for future grants and 1,566,032 shares were vested and exercisable under the 2001 Stock Option Plan.

        SFAS No. 123 requires pro forma disclosure of the impact on earnings as if the Company determined stock-based compensation expense using the fair value method. The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions for the years ended December 31, 2002 and 2001: expected volatility of zero, risk-free interest rate of 4.61% and 5.35%, respectively, dividend yield of zero and an expected life of ten years. The Company's employee stock options have characteristics different than those of traded options and changes in the input assumptions can materially affect the estimate of fair value. In addition, pro forma amounts are for disclosure purposes only and may not be representative of pro forma net income in the future. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the related vesting periods.

Note 20—Employee Benefit Plans

        The Company has a 401(k) savings plan for substantially all of its employees with six months or more of continuous service. The 401(k) plan allows participants to defer a portion of eligible compensation on a tax-deferred basis. Under provisions of the plan, the Company matches 50% of each employee's contributions up to 6% of gross earnings. The matching amount generally increases to 75% of such employee's contributions up to 6% of gross earnings after ten years of service. For the years ended December 31, 2002, 2001 and 2000, the matching contribution amounted to $0.7 million, $0.6 million and $0.6 million, respectively.

        The Company also sponsors two deferred compensation plans for certain members of its senior management team. The plans are administered by the Compensation Committee of the Board of Directors. The plans provide for the establishment of grantor trusts for the purpose of accumulating funds to purchase shares of the Company's common stock for the benefit of the plan participants. One plan allows participants to contribute an unlimited amount of earnings to the plan while the other provides for contributions of up to 20% of a participant's annual bonus. The Company does not provide matching contributions to these plans and has the right, under certain circumstances, to repurchase shares held in the grantor trusts. As of December 31, 2002 and 2001, the common stock held in the grantor trusts was valued at $2.7 million.

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Note 21—Income Taxes

        Income tax expense consists of the following:

			Years Ended December 31,
			2002			2001			2000
Current:
	Federal		$	—		$	—		$	—
	State and local			—			—			—
		Total current		—			—			—
Deferred:
	Federal			9,252			3,426			1,078
	State and local			2,321			390			293
	Valuation allowance reduction			(8,135	)		(1,649	)		(1,237	)
	Total deferred			3,438			2,167			134
	Total income tax expense		$	3,438		$	2,167		$	134

        The following table presents a reconciliation of income tax expense computed using the federal statutory rate of 35% and income tax expense:

			Years Ended December 31,
			2002			2001			2000
Computed "expected" tax expense			$	10,071		$	3,113		$	523
Tax effect of:
	Nondeductible charitable contributions			57			—			—
	Nondeductible meals and entertainment expenses			84			62			62
	Valuation allowance reduction			(8,135	)		(1,649	)		(1,237	)
	State and local taxes, net of federal tax benefit			845			641			786
	Other, net			516			—			—
		Total income tax expense	$	3,438		$	2,167		$	134

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        The following table presents the components of the net deferred tax asset:

		December 31,
		2002			2001
Deferred tax assets:
	Goodwill	$	172,355		$	188,294
	NOL carryforward		35,920			35,489
	Co-op advertising		3,566			2,713
	Inventories		1,547			—
	Deferred compensation		1,026			1,027
	Facilities and organizational rationalization		511			3,081
	Other, net		2,675			799
	Gross deferred tax assets		217,600			231,403
	Valuation allowance		(104,137	)		(112,272	)
Total deferred tax assets			113,463			119,131
Deferred tax liabilities:
	Equipment and leasehold improvements		(3,013	)		(3,369	)
	Other, net		—			(1,982	)
	Net deferred tax asset	$	110,450		$	113,780

        The temporary difference for goodwill represents the step-up in tax basis due to the Company's recapitalization in 1999 while maintaining historical basis for financial reporting purposes. This benefit is available to be utilized through 2014.

        Based on historical levels of income and the length of time required to utilize its deferred tax assets, the Company originally established a 50% valuation allowance against the tax deductible goodwill deduction that was created in 1999 in connection with the recapitalization of the Company. While the Company experienced an increase in taxable income during 2002 for financial reporting purposes, it continued to experience losses for income tax purposes as it did not generate enough taxable income to utilize the deduction for goodwill. Therefore, despite the increase in taxable income for financial reporting purposes, sufficient evidence does not yet exist for management to conclude it more likely than not that the entire gross amount of the deferred tax assets will be realized in the foreseeable future.

        The valuation allowance was $104.1 million as of December 31, 2002. For the years ended December 31, 2002, 2001 and 2000, the valuation allowance was reduced by $8.1 million, $1.6 million and $1.2 million, respectively.

        In addition, as of December 31, 2002, the Company had a net operating loss carryforwards of $94.5 million. If not utilized, the net operating loss carryforwards will begin to expire in 2019.

F-35

        The following table presents the current and non-current components of the net deferred tax asset:

	December 31,
	2002		2001
Current (prepaid assets and other)	$	5,309	$	1,275
Non-current		105,141		112,505
	$	110,450	$	113,780

Note 22—Unaudited Quarterly Financial Information

        The following table presents selected historical quarterly financial information for the Company. This information is derived from unaudited quarterly financial statements of the Company and includes, in the opinion of management, only normal and recurring adjustments that the Company considers necessary for a fair presentation of the results for such periods.

	Year Ended December 31, 2002
	First		Second		Third		Fourth			Total
Net sales	$	136,391	$	195,136	$	100,677	$	47,786		$	479,990
Gross profit		49,228		72,825		35,468		16,825			174,346
Operating income (loss)		21,989		40,488		7,901		(9,194	)		61,184
Net income (loss)		10,162		26,420		417		(11,663	)		25,336

	Year Ended December 31, 2001
	First		Second		Third		Fourth			Total
Net sales	$	79,919	$	114,647	$	55,793	$	22,985		$	273,344
Gross profit		35,960		53,899		25,689		9,425			124,973
Operating income (loss)		15,896		31,778		8,719		(11,659	)		44,734
Net income (loss)		4,236		15,753		221		(13,484	)		6,726

        Due to the seasonal nature of the Company's business, net sales in the first and second quarters typically exceed net sales in the third and fourth quarters. In addition, during the fourth quarter of 2001, the Company recorded a $8.5 million charge as discussed in Note 10.

Note 23—Related Party Transactions

Professional Services Agreement

        The Company has a professional services agreement with THL Equity Advisors IV, L.L.C. and Thomas H. Lee Capital, L.L.C., both affiliates of the Thomas H. Lee Partners, LP, which owns UIC Holdings, L.L.C., the majority owner of the Company. The professional services agreement has a term of three years, beginning January 20, 1999, and automatically extends for successive one-year periods thereafter, unless either party gives thirty days notice prior to the end of the term. Under the terms of the agreement, THL Equity Advisors IV, L.L.C. receives $62.5 thousand per month for management and other consulting services provided to the Company and reimbursement of any related out-of-pocket expenses. During each of the years ended December 31, 2002, 2001 and 2000, the Company paid $0.75 million under this agreement, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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Stockholders Agreement

        The Company has entered into a stockholders agreement with UIC Holdings, L.L.C. and certain other stockholders. Under the agreement, the Class A common stockholders are required to vote their shares of common stock for any sale or reorganization that has been approved by the Board of Directors or a majority of the stockholders. The stockholders agreement also grants the stockholders the right to effect the registration of their common stock for sale to the public, subject to certain conditions and limitations. If the Company elects to register any of its securities under the Securities Act of 1933, as amended, the stockholders are entitled to notice of such registration, subject to certain conditions and limitations. Under the stockholders agreement, the Company is responsible to pay costs of the registration effected on behalf of the stockholders, other than underwriting discounts and commissions.

Recapitalization Agreement

        The recapitalization agreement with UIC Holdings, L.L.C., which the Company entered into in connection with its recapitaization in 1999, contains customary provisions, including representations and warranties with respect to the condition and operations of the business, covenants with respect to the conduct of the business prior to the recapitalization closing date and various closing conditions, including the continued accuracy of the representations and warranties. In general, these representations and warranties expired by April 15, 2000. However, representations and warranties with respect to tax matters will survive until thirty days after the expiration of the applicable statute of limitations; representations with respect to environmental matters expired December 31, 2002. Representations and warranties regarding ownership of stock do not expire. The total consideration paid to redeem common stock is subject to adjustments based on the excess taxes of previous stockholders arising from the Company's Section 338(h)(10) election under the IRS tax code.

        Pursuant to the recapitalization agreement, and in consideration of payments received thereunder, certain former executives agreed that for a period ending on the fourth anniversary of the recapitalization closing date not to own, control, participate or engage in any line of business in which the Company is actively engaged or any line of business competitive with it anywhere in the United States and any other country in which it conducts business at the date of recapitalization closing. In addition, each of these former executives has agreed that for a period ending on the fourth anniversary of the recapitalization closing date not to contact, approach or solicit for the purpose of offering employment to or hiring any person employed by the Company during the four year period.

        Pursuant to the recapitalization, the Company redeemed a portion of its common stock held by certain stockholders and UIC Holdings, L.L.C. which were purchased by certain members of senior management. In the recapitalization, certain executives collectively received an aggregate of $4.0 million in cash and an additional $2.7 million with which the officers purchased common stock through grantor trusts, which is reflected as a reduction of equity in the accompanying consolidated balance sheets.

Loans to Chief Executive Officer

        On September 28, 2001, the Company entered into a loan agreement with Robert L. Caulk, the President, Chief Executive Officer and Chairman of the Board of Directors of the Company, for $0.4 million which matures on September 28, 2006 (the 2001 Loan). On March 8, 2002, the Company entered into a loan agreement with Mr. Caulk for $51.7 thousand which matures on March 8, 2007 (the 2002 Loan). The purpose for both loans was to allow Mr. Caulk to purchase shares of the Company's common and preferred stock. Each loan bears interest at LIBOR on its effective date which is

F-37

subsequently adjusted on each loan's respective anniversary date. The interest rate in effect for the 2002 Loan was 1.96% as of December 31, 2002. The interest rate in effect for the 2001 Loan was 1.81% and 2.59% as of December 31, 2002 and 2001, respectively. Interest on both loans is payable annually, based on outstanding accrued amounts on December 31 of each year. Principal payments on both loans are based on 25% of the gross amount of each annual bonus awarded to Mr. Caulk and are immediately payable, except that principal payments on the 2002 Loan are immediately payable only if all amounts due under the 2001 Loan are fully paid. Any unpaid principal and interest on both loans is due upon maturity. The outstanding principal balance for the 2001 Loan was $0.35 million and $0.4 million as of December 31, 2002 and 2001, respectively. The outstanding principal balance of the 2002 Loan was $51.7 thousand as of December 31, 2002. The loans are reflected as a reduction of equity in the accompanying consolidated balance sheets.

Leases with Stockholder and Former Executive and Member of the Board of Directors

        As further described in Note 13, the Company leases several of its operating facilities from Rex Realty, Inc., a company that is owned by stockholders who own, in the aggregate, approximately 5% of the Company's common stock and is operated by a former executive and past member of the Board of Directors.

Equity Transactions with UIC Holdings, L.L.C.

        As further described in Note 15, during the years ended December 31, 2002, 2001 and 2000, the Company issued common and preferred stock and stock purchase warrants to UIC Holdings, L.L.C. as follows:

•

In connection with the Schultz merger in May 2002, the Company issued 1,690,000 shares each of Class A voting and Class B nonvoting common stock to UIC Holdings, L.L.C. for $16.9 million.



•

In connection with the Pursell transaction in December 2001, the Company issued 22,600 shares of $0.01 par value Class A nonvoting preferred stock to UIC Holdings, L.L.C. for $1,000 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method, for net cash proceeds of $22.0 million and a 10-year warrant to purchase up to 3,150,000 shares each of the Company's Class A voting and Class B nonvoting common stock for $3.25 per share, the fair value of the Company's common stock at the time the warrants were issued as determined by the Board of Directors using a multiple of cash flows method.



•

In November 2000, the Company issued 15,000 shares of $0.01 par value Class A nonvoting preferred stock to UIC Holdings, L.L.C. for $1,000 per share, the fair value as determined by the Board of Directors using a multiple of cash flows method, for net cash proceeds of $15.0 million and a 10-year warrant to purchase up to 1,600,000 shares each of the Company's Class A voting and Class B nonvoting common stock for $2.00 per share, the fair value of the Company's common stock at the time the warrants were issued as determined by the Board of Directors using a multiple of cash flows method.

Note 24—Recently Issued Accounting Standards

        The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections." SFAS No. 145 updates, clarifies and simplifies existing

F-38

accounting pronouncements. The Company is required to adopt SFAS No. 145 during the first quarter of 2003. Adoption will not have a material impact on the consolidated financial statements of the Company. However, SFAS No. 145 could affect how the Company records certain expenses after December 31, 2002.

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred rather than when a company commits to such an activity and also establishes fair value as the objective for initial measurement of the liability. SFAS No. 146 will be adopted by the Company for exit or disposal activities that are initiated after December 31, 2002. Adoption will not have a material impact on the consolidated financial statements of the Company. However, SFAS No. 146 will affect how the Company recognizes exit costs after December 31, 2002.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Certain provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and other provisions are effective for fiscal years beginning after December 15, 2002. Unless the Company elects in the future to change from the intrinsic value method to the fair value method of accounting for stock-based employee compensation, SFAS No. 148 will not have a material impact on its consolidated financial statements.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN 45). The disclosure requirements of FIN 45 are effective for the Company's consolidated financial statements for the year ended December 31, 2002. For applicable guarantees issued after January 1, 2003, FIN 45 requires that a guarantor recognize a liability for the fair value of obligations undertaken in issuing guarantees. See Note 13 for disclosures regarding guarantees of the Company.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46), which requires the consolidation of variable interest entities, as defined. FIN 46 is applicable to financial statements to be issued after 2002; however, disclosures are required currently if any variable interest entities are expected to be consolidated. The adoption of FIN 46 will not have a material effect on the Company's consolidated financial statements as the Company does not have any variable interest entities that will be consolidated as a result of FIN 46.

F-39

NOTE 25—FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS

        The Company's Senior Subordinated Notes are unconditionally and jointly and severally guaranteed by all of the Company's existing subsidiaries. The Company's existing subsidiaries are 100% owned by the Company. The condensed consolidating financial information below is presented as of and for the year ended December 31, 2002 and has been prepared in accordance with the requirements for presentation of such information. The Company did not have any subsidiaries as of or during the years ended December 31, 2001 or 2000. The information is presented in place of complete financial statements for each of the guarantor subsidiaries and is intended to provide sufficient detail to determine the nature of the aggregate financial position, results of operations and cash flows of the subsidiary guarantors.

BALANCE SHEET

			Parent		Subsidiary Guarantors		Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	10,191	$	127	$	—		$	10,318
	Accounts receivable, net			18,492		4,829		—			23,321
	Inventories			47,678		40,084		—			87,762
	Prepaid expenses and other current assets			9,544		1,806		—			11,350
		Total current assets		85,905		46,846		—			132,751
Equipment and leasehold improvements, net				26,510		7,708		—			34,218
Investment in subsidiaries				22,777		—		(22,777	)		—
Intercompany assets				63,643		—		(63,643	)		—
Deferred tax asset				104,357		784		—			105,141
Goodwill and intangible assets, net				47,678		53,190		—			100,868
Other assets, net				11,830		1,195		—			13,025
		Total assets	$	362,700	$	109,723	$	(86,420	)	$	386,003
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Current maturities of long-term debt and capital lease obligation		$	9,665	$	—	$	—		$	9,665
	Accounts payable			11,330		15,733		—			27,063
	Accrued expenses			39,345		5,876		—			45,221
		Total current liabilities		60,340		21,609		—			81,949
Long-term debt, net of current maturities				391,493		—		—			391,493
Capital lease obligation, net of current maturities				3,778		—		—			3,778
Other liabilities				3,325		1,694		—			5,019
Intercompany liabilities				—		63,643		(63,643	)		—
		Total liabilities		458,936		86,946		(63,643	)		482,239
Commitments and contingencies

F-40

Stockholders' equity (deficit):
	Preferred stock			—			—			—			—
	Common stock			664			—			—			664
	Warrants and options			11,745			—			—			11,745
	Investment from parent			—			24,317			(24,317	)		—
	Additional paid-in capital			210,480			—			—			210,480
	Accumulated deficit			(287,592	)		(1,540	)		1,540			(287,592	)
	Common stock subscription receivable			(25,761	)		—			—			(25,761	)
	Common stock repurchase option			(2,636	)		—			—			(2,636	)
	Common stock held in grantor trust			(2,700	)		—			—			(2,700	)
	Loans to executive officer			(404	)		—			—			(404	)
	Accumulated other comprehensive income			(32	)		—			—			(32	)
		Total stockholders' equity (deficit)		(96,236	)		22,777			(22,777	)		(96,236	)
		Total liabilities and stockholders' equity (deficit)	$	362,700		$	109,723		$	(86,420	)	$	386,003

STATEMENT OF OPERATIONS

		Parent		Subsidiary Guarantors			Eliminations			Consolidated
Net sales before promotion expense		$	476,297	$	54,716		$	(9,727	)	$	521,286
Promotion expense			41,296		—			—			41,296
Net sales			435,001		54,716			(9,727	)		479,990
Operating costs and expenses:
	Cost of goods sold		265,928		46,514			(6,798	)		305,644
	Selling, general and administrative expenses		105,964		10,127			(2,929	)		113,162
	Equity (income) loss in subsidiaries		1,540		—			(1,540	)		—
	Total operating costs and expenses		373,432		56,641			(11,267	)		418,806
Operating income (loss)			61,569		(1,925	)		1,540			61,184
Interest expense, net			32,403		7			—			32,410
Income (loss) before income tax expense			29,166		(1,932	)		1,540			28,774
Income tax expense (benefit)			3,830		(392	)		—			3,438
Net income (loss)		$	25,336	$	(1,540	)	$	1,540		$	25,336

F-41

STATEMENT OF CASH FLOWS

					Parent			Subsidiary Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
	Net income (loss)				$	25,336		$	(1,540	)	$	1,540		$	25,336
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
		Depreciation and amortization				7,991			2,249			—			10,240
		Amortization of deferred financing fees				3,280			—			—			3,280
		Deferred income tax expense				3,438			—			—			3,438
		Equity (income) loss in subsidiaries				1,540			—			(1,540	)		—
Changes in operating assets and liabilities, net of effects from acquisitions:
			Accounts receivable			12,726			23,580			(9,727	)		26,579
			Inventories			(5,383	)		(21,309	)		6,798			(19,894	)
			Prepaid expenses and other current assets			(3,054	)		(229	)		—			(3,283	)
			Other assets			5,995			—			—			5,995
			Accounts payable and accrued expenses			(4,156	)		(2,006	)		—			(6,162	)
			Facilities and organizational rationalization charge			(3,216	)		—			—			(3,216	)
			Other operating activities, net			(7,384	)		—			2,929			(4,455	)
				Net cash flows from operating activities		37,113			745			—			37,858
Cash flows from investing activities:
		Purchases of equipment and leasehold improvements				(4,965	)		(5,485	)		—			(10,450	)
		Payments for Schultz merger, net of cash acquired				(38,300	)		—			—			(38,300	)
		Payments for WPC Brands acquisition, net of cash acquired				(19,500	)		—			—			(19,500	)
				Net cash flows used for investing activities		(62,765	)		(5,485	)		—			(68,250	)
Cash flows from financing activities:
		Proceeds from additional debt				90,000			—			—			90,000
		Repayment of debt				(43,929	)		(20,661	)		—			(64,590	)
		Proceeds from issuance of common stock				17,500			—			—			17,500
		Other financing and intercompany activities				(27,728	)		25,528			—			(2,200	)
				Net cash flows from financing activities		35,843			4,867			—			40,710
Net increase in cash and cash equivalents						10,191			127			—			10,318
Cash and cash equivalents, beginning of year						—			—			—			—
Cash and cash equivalents, end of year					$	10,191		$	127		$	—		$	10,318

F-42

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

Board of Directors and Stockholders of
United Industries Corporation and Subsidiaries:

        Our audits of the consolidated financial statements referred to in our report dated February 12, 2003, except for Note 25, which is as of April 29, 2003, and listed in the index appearing on page F-1 of this 10-K/A also included an audit of the financial statement schedule listed in the index appearing on page F-1 of this 10-K/A. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri
February 12, 2003, except for Note 25,
which is as of April 29, 2003

F-43

UNITED INDUSTRIES CORPORATION

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(Dollars in thousands)

Column A		Column B		Column C		Column D			Column E
Description		Balance at Beginning of Period		Additions		Deductions			Balance at End of Period
Year ended December 31, 2002:
	Allowance for doubtful accounts	$	1,147	$	2,055	$	(31	)	$	3,171
	Allowance for obsolete and slow-moving inventory		2,700		5,424		(2,283	)		5,841
	Valuation allowance for deferred tax assets		112,272		—		(8,135	)		104,137
	Accrued advertising and promotion expense		12,125		41,296		(37,020	)		16,401
Year ended December 31, 2001:
	Allowance for doubtful accounts	$	777	$	568	$	(198	)	$	1,147
	Allowance for obsolete and slow-moving inventory		999		2,700		(999	)		2,700
	Valuation allowance for deferred tax assets		113,921		—		(1,649	)		112,272
	Accrued advertising and promotion expense		5,520		24,432		(17,827	)		12,125
Year ended December 31, 2000:
	Allowance for doubtful accounts	$	60	$	848	$	(131	)	$	777
	Allowance for obsolete and slow-moving inventory		822		298		(121	)		999
	Valuation allowance for deferred tax assets		115,158		—		(1,237	)		113,921
	Accrued advertising and promotion expense		4,324		22,824		(21,628	)		5,520

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EXPLANATORY NOTE
PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

SIGNATURES
CERTIFICATIONS
INDEX TO FINANCIAL STATEMENTS
UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
UNITED INDUSTRIES CORPORATION AND SUBISIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Dollars in thousands)
UNITED INDUSTRIES CORPORATION AND SUBISIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data)
STATEMENT OF CASH FLOWS
UNITED INDUSTRIES CORPORATION SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands)