EXHIBIT 99.1
NEWS
FOR IMMEDIATE RELEASE
UNITED INDUSTRIES ANNOUNCES RECORD YEAR-TO-DATE REVENUES AND OPERATING INCOME
ST. LOUIS, November 12, 2003 – Conducting business as Spectrum Brands, United Industries Corporation (United or the Company), the leading manufacturer and marketer of value-oriented products for the consumer lawn and garden care and insect control markets in the United States, today announced record revenues and operating income for the nine months ended September 30, 2003. Net sales increased over 13% year-to-date, from the nine months ended September 30, 2002, while operating income improved by 17% for the same period, a clear indication of the Company’s growing strength and profitability.
Bob Caulk, United’s Chairman and CEO, stated, “Naturally, we continue to be pleased with our year-to-date financial results, which reflect the significant growth we have enjoyed during the past two years. This year we have focused on absorbing our recent acquisitions while managing through a difficult sales season driven by poor spring weather and retailer de-stocking. While the season has clearly been difficult from a shipments perspective, consumer takeaway, as measured by retail point-of-sale information, indicates that we have come through the year well positioned from a competitive perspective. Our national brands, including Cutter®, Spectracide® and Garden SafeTM, have shown continued strength while our opening price point exclusive brands have been relatively weaker. At the time of our second quarter earnings release, we indicated that we had received both positive and negative news with regard to certain elements of our 2004 line reviews. Since that time, much more is known with regard to next year’s listing decisions and while some retailer decisions have yet to be made, we have strong programs with our larger customers, which should drive top and bottom line growth.”
Dan Johnston, United’s CFO, added, “Due to the seasonal nature of our business, the second half of the year has historically generated net losses. The third quarter, on a stand-alone basis, is generally near break-even with some years enjoying modest net income and others possessing a small net loss. However, from an EBITDA perspective, the third quarter generates positive cash flow and is an important time for the business as we are winding down the current season and preparing for the following year. We also indicated in our last earnings release that we were in the process of refining our 2003 full year guidance due to the difficult season and the potential for costs associated with the changes in our 2004 listings. We have completed our analysis and have developed programs to control our costs in this regard. As such, we currently expect a mid-single-digit percentage increase in EBITDA for 2003 over last year’s pro forma results. While this growth is less than what we had planned, we are pleased that we have been able to manage the business to the current level of profitability. In conjunction with this higher level of profitability, we have recognized a higher percentage of income tax expense in 2003. This, combined with our anticipated growth for 2004, has us currently evaluating the need for the valuation allowance associated with certain of our deferred tax assets. If we determine that it is no longer necessary to carry any reserve against this asset, the release of the allowance could be substantial and could fully offset our current year federal income tax expense and increase both our total assets and full year net income. It is important to note that any change in this regard is a financial reporting change and does not impact the amount of tax currently payable.”
Comparing actual results for the three months ended September 30, 2003 with actual results for the three months ended September 30, 2002, United’s results were as follows: net sales before promotion expense increased 0.9% to $112.4 million from $111.4 million, net sales increased 3.3% to $104.0 million from $100.7 million, operating income decreased 10.1% to $7.1 million from $7.9 million and net income decreased to a net loss of $0.8 million from net income of $0.4 million, respectively. Comparing actual results for the nine months ended September 30, 2003 with actual results for the nine months ended September 30, 2002, United’s results were as follows: net sales before promotion expense increased 12.1% to $528.4 million from $471.4 million, net sales increased 13.1% to $488.8 million from $432.2 million, operating income increased 17.0% to $82.4 million from $70.4 million and net income decreased 8.1% to $34.0 million from $37.0 million, respectively.
(continued)
The decrease in net income reflects an increase in United’s effective tax rate from 19% in 2002 to 38% in 2003. In 2002, the Company maintained a 50% valuation allowance against certain of its deferred tax assets. Maintaining the valuation allowance at that level required the Company to release some of the valuation allowance through the income tax provision. In 2003, the Company has determined that the valuation allowance no longer needs to be maintained at exactly 50% and accordingly, through the nine months ended September 30, 2003, has not released any of the valuation allowance.
From a liquidity perspective, third quarter 2003 earnings before interest, income taxes, depreciation and amortization, or EBITDA, remained stable at $10.9 million for the third quarter of 2003 compared to the third quarter of 2002. For the nine months ended September 30, 2003, EBITDA increased 17.5% to $92.2 million from $78.5 million for the nine months ended September 30, 2002. EBITDA information presented herein cannot be directly compared to that presented in the Company’s press releases issued during 2002, as new financial reporting rules prohibit the inclusion of certain non-cash expenses in the calculation of EBITDA. Furthermore, EBITDA is not defined by generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measures reported by other companies. A reconciliation of EBITDA to GAAP measures and other information is included in the attached addendum.
Detailed financial information is included in the attached addendum. The unaudited pro forma consolidated results of operations contained therein are presented to illustrate the potential operating results that might possibly have been achieved had the merger with Schultz Company and acquisition of WPC Brands been completed as of January 1, 2002, but do not purport to be indicative of the operating results that would definitely have been achieved had those transactions been completed as of such date or which may be achieved in the future.
About United
United Industries Corporation, dba Spectrum Brands, is the leading manufacturer and marketer of value-oriented products for the consumer lawn and garden care and insect control markets in the United States and offers one of the broadest lines in the Industry under a variety of brand names. The company’s household brands include Hot Shot®, Cutter® and Repel®. The company’s lawn and garden brands include Spectracide®, Spectracide® Triazicide®, Spectracide Terminate®, Garden Safe™, Real-Kill® and No-Pest® in the controls category as well as Sta-Green®, Vigoro®, Schultz™, Peters®, Bandini® and Best® brands in the lawn and garden fertilizer and organic growing media categories.
Certain statements in this press release regarding our business, with the exception of historical facts, may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21G of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties, many of which are beyond our control. When, and if, used herein, the words “will,” “believe,” “plan,” “may,” “strategies,” “goals,” “anticipate,” “indicate,” “intend,” “estimate,” “expect,” “project,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date they were made. These forward-looking statements are based on our current expectations. Actual results may differ materially from these statements as a result of weather conditions, our retailer line item reviews, the loss of customers or product listings, changes in external competitive market factors, unanticipated changes in the financial performance of us, our customers, our industry or the economy in general, public perception regarding the safety of our products, as well as various other factors described in our filings with the Securities Exchange Commission. We do not undertake any obligation to update or revise forward-looking statements made by us or on our behalf, whether as a result of new information, future events or otherwise. Although we believe that our plans, intentions and expectations reflected in or suggested by any forward-looking statements we make herein are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved.
(Bloomberg Symbol: 14496Z)
Contact: |
| Daniel J. Johnston |
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| United Industries Corporation |
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| (314) 427-0780 |
# # #
United Industries Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales before promotion expense |
| $ | 112,439 |
| $ | 111,372 |
| $ | 528,400 |
| $ | 471,392 |
|
Promotion expense |
| 8,420 |
| 10,695 |
| 39,566 |
| 39,188 |
| ||||
Net sales |
| 104,019 |
| 100,677 |
| 488,834 |
| 432,204 |
| ||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Cost of goods sold |
| 64,750 |
| 65,209 |
| 297,302 |
| 274,683 |
| ||||
Selling, general and administrative expenses |
| 32,195 |
| 27,567 |
| 109,099 |
| 87,143 |
| ||||
Total operating costs and expenses |
| 96,945 |
| 92,776 |
| 406,401 |
| 361,826 |
| ||||
Operating income |
| 7,074 |
| 7,901 |
| 82,433 |
| 70,378 |
| ||||
Interest expense, net |
| 8,605 |
| 7,386 |
| 27,625 |
| 24,591 |
| ||||
Income (loss) before income tax expense (benefit) |
| (1,531 | ) | 515 |
| 54,808 |
| 45,787 |
| ||||
Income tax expense (benefit)(1) |
| (698 | ) | 98 |
| 20,827 |
| 8,788 |
| ||||
Net income (loss) |
| $ | (833 | ) | $ | 417 |
| $ | 33,981 |
| $ | 36,999 |
|
(1) The effective income tax rate was 46% and 38% during the three and nine months ended September 30, 2003, respectively, and 19% during the three and nine months ended September 30, 2002. The increase in the effective income tax rate is a result of the Company's determination that a 50% variation allowance against certain of its deferred tax assets is no longer required. This determination is based upon the Company's improved results, primarily from increased profitability in 2003 compared with 2002. However, we do not expect the change in the effective income tax rate to result in a significant increase in cash paid for income taxes for the foreseeable future, due to our deferred tax assets resulting from certain net operating loss carryforwards that were generated in 1999 through 2002 and deductible goodwill recorded in connection with our recapitalization in 1999.
Addendum to United Industries Corporation Earnings Release
Periods Ended September 30, 2003
Page 1 of 5
United Industries Corporation and Subsidiaries
Other Consolidated Financial Data
(Dollars in thousands)
(Unaudited)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
EBITDA: |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | (833 | ) | $ | 417 |
| $ | 33,981 |
| $ | 36,999 |
|
Interest expense, net |
| 8,605 |
| 7,386 |
| 27,625 |
| 24,591 |
| ||||
Income tax expense (benefit) |
| (698 | ) | 98 |
| 20,827 |
| 8,788 |
| ||||
Depreciation and amortization |
| 3,799 |
| 3,031 |
| 9,735 |
| 8,131 |
| ||||
EBITDA(1) |
| $ | 10,873 |
| $ | 10,932 |
| $ | 92,168 |
| $ | 78,509 |
|
|
|
|
|
|
|
|
|
|
| ||||
Reconciliation of EBITDA to net cash |
|
|
|
|
|
|
|
|
| ||||
EBITDA(1) |
| $ | 10,873 |
| $ | 10,932 |
| $ | 92,168 |
| $ | 78,509 |
|
Interest expense less amortization |
| (6,184 | ) | (6,894 | ) | (22,878 | ) | (22,614 | ) | ||||
Net change in operating assets and liabilities |
| 56,240 |
| 47,420 |
| (22,278 | ) | 12,162 |
| ||||
Net cash flows from operating activities |
| $ | 60,929 |
| $ | 51,458 |
| $ | 47,012 |
| $ | 68,057 |
|
(1) EBITDA represents income before net interest expense, income tax expense, depreciation and amortization. We have included information concerning EBITDA as we believe certain investors use it as one measure of our historical ability to fund operations and meet our financial obligations. However, EBITDA is not presented to represent cash flows from operating activities as defined by accounting principles generally accepted in the United States (GAAP), nor does management recommend that it be used as an alternative to, or superior measure of, operating income as an indicator of our operating performance or cash flow as a measure of liquidity or our ability to meet our financial obligations. We have provided a reconciliation of EBITDA to cash flows from operating activities since we believe it to be the most directly comparable measure under GAAP. In addition, our definition of EBITDA may not be comparable to that reported by other companies.
(2) This information is presented to reconcile EBITDA, a non-GAAP measure, to net cash flows from operating activities, the most directly comparable GAAP measure, in accordance with Regulation G issued by the U.S. Securities and Exchange Commission.
Addendum to United Industries Corporation Earnings Release
Periods Ended September 30, 2003
Page 2 of 5
United Industries Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
|
| September 30, |
| ||||
|
| 2003 |
| 2002 |
| ||
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 44,122 |
| $ | 47,174 |
|
Accounts receivable, net |
| 56,464 |
| 56,112 |
| ||
Inventories |
| 67,570 |
| 44,000 |
| ||
Prepaid expenses and other current assets |
| 10,058 |
| 6,307 |
| ||
Total current assets |
| 178,214 |
| 153,593 |
| ||
|
|
|
|
|
| ||
Equipment and leasehold improvements, net |
| 34,360 |
| 27,785 |
| ||
Deferred tax asset |
| 86,266 |
| 101,045 |
| ||
Goodwill and intangible assets, net |
| 96,918 |
| 82,724 |
| ||
Other assets, net |
| 10,243 |
| 12,815 |
| ||
Total assets |
| $ | 406,001 |
| $ | 377,962 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Current maturities of long-term debt and capital lease obligation |
| $ | 1,341 |
| $ | 9,530 |
|
Accounts payable |
| 15,861 |
| 21,878 |
| ||
Accrued expenses |
| 59,454 |
| 52,842 |
| ||
Total current liabilities |
| 76,656 |
| 84,250 |
| ||
|
|
|
|
|
| ||
Long-term debt, net of current maturities |
| 388,096 |
| 371,230 |
| ||
Capital lease obligation, net of current maturities |
| 3,333 |
| 3,892 |
| ||
Other liabilities |
| 3,199 |
| 4,644 |
| ||
Total liabilities |
| 471,284 |
| 464,016 |
| ||
|
|
|
|
|
| ||
Stockholders’ deficit |
| (65,283 | ) | (86,054 | ) | ||
Total liabilities and stockholders’ deficit |
| $ | 406,001 |
| $ | 377,962 |
|
Addendum to United Industries Corporation Earnings Release
Periods Ended September 30, 2003
Page 3 of 5
United Industries Corporation and Subsidiaries
Historical and Pro Forma Consolidated Statements of Operations (1)
(Dollars in thousands)
(Unaudited)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
|
| Historical |
| Pro Forma |
| Historical |
| Pro Forma |
| ||||
Net sales before promotion expense |
| $ | 112,439 |
| $ | 118,606 |
| $ | 528,400 |
| $ | 547,812 |
|
Promotion expense |
| 8,420 |
| 10,832 |
| 39,566 |
| 40,423 |
| ||||
Net sales |
| 104,019 |
| 107,774 |
| 488,834 |
| 507,389 |
| ||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
Cost of goods sold |
| 64,750 |
| 69,485 |
| 297,302 |
| 326,758 |
| ||||
Selling, general and administrative expenses |
| 32,195 |
| 28,825 |
| 109,099 |
| 102,729 |
| ||||
Total operating costs and expenses |
| 96,945 |
| 98,310 |
| 406,401 |
| 429,487 |
| ||||
Operating income |
| 7,074 |
| 9,464 |
| 82,433 |
| 77,902 |
| ||||
Interest expense, net |
| 8,605 |
| 7,792 |
| 27,625 |
| 26,670 |
| ||||
Income (loss) before income tax expense (benefit) |
| (1,531 | ) | 1,672 |
| 54,808 |
| 51,232 |
| ||||
Income tax expense (benefit) |
| (698 | ) | 637 |
| 20,827 |
| 11,978 |
| ||||
Net income (loss) |
| $ | (833 | ) | $ | 1,035 |
| $ | 33,981 |
| $ | 39,254 |
|
(1) Pro forma results for the three and nine months ended September 30, 2002 reflect the merger with Schultz Company and the acquisition of WPC Brands, Inc. as if the transactions had closed on January 1, 2002. In addition, the pro forma results include adjustments for additional interest, amortization and income tax expense that would have been recorded if the transactions had closed on January 1, 2002. For comparative purposes, for the three months ended September 30, 2002, pro forma net sales exceeded actual net sales and pro forma net income exceeded actual net income by $7.1 million and $0.6 million, respectively. For the nine months ended September 30, 2002, pro forma net sales exceeded actual net sales and pro forma net income exceeded actual net income by $75.2 million and $2.3 million, respectively.
The unaudited pro forma financial information has been presented for informational purposes only and does not purport to be indicative of the consolidated results of operations that would have actually been achieved had these transactions, in fact, been completed as of January 1, 2002 or which may be obtained in the future. See page 1 of this addendum to earnings release for actual operating results. No similar transactions occurred during the three and nine months ended September 30, 2003, thus the results presented for such periods reflect actual results and do not include any pro forma adjustments. However, the results for the nine months ended September 30, 2003 include a one-time charge to cost of goods sold related to the write-up of inventory to fair value in the acquisition of WPC Brands in December 2002 of $1.3 million.
Addendum to United Industries Corporation Earnings Release
Periods Ended September 30, 2003
Page 4 of 5
United Industries Corporation and Subsidiaries
Historical and Pro Forma Other Consolidated Financial Data
(Dollars in thousands)
(Unaudited)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
|
| Historical |
| Pro Forma |
| Historical |
| Pro Forma |
| ||||
Pro Forma EBITDA(1): |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | (833 | ) | $ | 1,035 |
| $ | 33,981 |
| $ | 39,254 |
|
Interest expense, net |
| 8,605 |
| 7,792 |
| 27,625 |
| 26,670 |
| ||||
Income tax expense (benefit) |
| (698 | ) | 637 |
| 20,827 |
| 11,978 |
| ||||
Depreciation and amortization |
| 3,799 |
| 3,218 |
| 9,735 |
| 12,706 |
| ||||
Pro Forma EBITDA(1) |
| $ | 10,873 |
| $ | 12,682 |
| $ | 92,168 |
| $ | 90,608 |
|
(1) Refer to footnote (1) on page 4 and footnotes (1) and (2) on page 2 of this addendum to earnings release for a description of the nature of the pro forma and EBITDA information presented. In connection therewith, had the $1.3 million one-time charge to cost of goods sold related to the write-up of inventory to fair value been included as a pro forma adjustment for the nine months ended September 30, 2003, pro forma EBITDA would have been $93.5 million.
Addendum to United Industries Corporation Earnings Release
Periods Ended September 30, 2003
Page 5 of 5