EXHIBIT 99.3
THE NU-GRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| Unaudited |
| Audited |
| ||
As at |
| Mar. 31 |
| Mar. 31 |
| Sept. 30 |
|
[In Thousands, Cdn $] |
| $ |
| $ |
| $ |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
Cash |
| 3,190 |
| 5,991 |
| 16,974 |
|
Accounts receivable, less reserves of $626 and $337 as at March 31, 2004 and 2003, respectively, and $415 at September 30, 2003 |
| 54,824 |
| 48,539 |
| 22,605 |
|
Inventories [note 3] |
| 55,323 |
| 41,400 |
| 36,308 |
|
Prepaid and other expenses |
| 1,788 |
| 2,219 |
| 1,852 |
|
TOTAL CURRENT ASSETS |
| 115,125 |
| 98,149 |
| 77,739 |
|
Investment in equity accounted investee |
| 1,460 |
| — |
| 879 |
|
Property, plant and equipment [note 4] |
| 39,242 |
| 38,892 |
| 37,517 |
|
Trademarks |
| 6,379 |
| 6,741 |
| 6,320 |
|
Goodwill |
| 9,904 |
| 8,426 |
| 8,278 |
|
TOTAL ASSETS |
| 172,110 |
| 152,208 |
| 130,733 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
Bank indebtedness [note 5] |
| 22,783 |
| 17,203 |
| — |
|
Accounts payable |
| 22,848 |
| 18,382 |
| 12,076 |
|
Accrued liabilities [note 6] |
| 9,029 |
| 11,342 |
| 9,261 |
|
Income taxes payable |
| 816 |
| 1,283 |
| 1,914 |
|
Current portion of long-term debt [note 5] |
| 5,225 |
| 6,008 |
| 5,617 |
|
TOTAL CURRENT LIABILITIES |
| 60,701 |
| 54,218 |
| 28,868 |
|
Long-term debt [note 5] |
| 8,101 |
| 11,389 |
| 9,744 |
|
Deferred income taxes |
| 2,662 |
| 2,208 |
| 2,679 |
|
TOTAL LIABILITIES |
| 71,464 |
| 67,815 |
| 41,291 |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Share capital [note 7] |
|
|
|
|
|
|
|
Common stock, 17,275,042 issued and outstanding, unlimited authorized at March 31, 2004 (16,020,792 issued and outstanding at March 31, 2003)(16,128,692 issued and outstanding at September 30, 2003) |
| 40,063 |
| 29,096 |
| 29,734 |
|
Warrants |
| — |
| 1,288 |
| 1,288 |
|
Retained earnings |
| 63,870 |
| 54,469 |
| 61,146 |
|
Accumulated other comprehensive loss |
| (3,287 | ) | (460 | ) | (2,726 | ) |
TOTAL SHAREHOLDERS’ EQUITY |
| 100,646 |
| 84,393 |
| 89,442 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| 172,110 |
| 152,208 |
| 130,733 |
|
See accompanying notes
1
THE NU-GRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Unaudited
CONSOLIDATED STATEMENTS OF INCOME
|
| Three Months |
| Six Months |
| ||||
For the three and six months ended March 31 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $ except per share data] |
| $ |
| $ |
| $ |
| $ |
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
| 56,313 |
| 54,355 |
| 83,370 |
| 84,897 |
|
Cost of sales, excluding depreciation |
| 42,861 |
| 40,925 |
| 63,832 |
| 64,764 |
|
|
| 13,452 |
| 13,430 |
| 19,538 |
| 20,133 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
Sales, administration and marketing |
| 5,630 |
| 5,120 |
| 10,517 |
| 9,650 |
|
Depreciation and amortization |
| 1,389 |
| 1,320 |
| 2,710 |
| 2,664 |
|
Interest on long-term debt |
| 216 |
| 288 |
| 448 |
| 589 |
|
Interest - other |
| 152 |
| 186 |
| 155 |
| 180 |
|
Other income |
| (62 | ) | — |
| (127 | ) | — |
|
|
| 7,325 |
| 6,914 |
| 13,703 |
| 13,083 |
|
Income before income taxes |
| 6,127 |
| 6,516 |
| 5,835 |
| 7,050 |
|
Income tax expense |
| 2,273 |
| 2,296 |
| 2,143 |
| 2,530 |
|
NET INCOME |
| 3,854 |
| 4,220 |
| 3,692 |
| 4,520 |
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE [note 8] |
|
|
|
|
|
|
|
|
|
Basic |
| 0.23 |
| 0.27 |
| 0.22 |
| 0.28 |
|
Diluted |
| 0.23 |
| 0.26 |
| 0.22 |
| 0.28 |
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
Basic |
| 16,798 |
| 15,917 |
| 16,463 |
| 15,906 |
|
Diluted |
| 17,086 |
| 16,105 |
| 16,814 |
| 16,091 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
| Three Months |
| Six Months |
| ||||
For the three and six months ended March 31 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $] |
| $ |
| $ |
| $ |
| $ |
|
|
|
|
|
|
|
|
|
|
|
Net income |
| 3,854 |
| 4,220 |
| 3,692 |
| 4,520 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
Currency gains/(losses) on U.S. translated subsidiaries |
| 222 |
| (1,853 | ) | (561 | ) | (1,990 | ) |
COMPREHENSIVE INCOME |
| 4,076 |
| 2,367 |
| 3,131 |
| 2,530 |
|
See accompanying notes
2
THE NU-GRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
|
| Six Months |
| ||
For the six months ended March 31 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $] |
| $ |
| $ |
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
Net income |
| 3,692 |
| 4,520 |
|
Adjustments to reconcile net income to net cash flows used in operating activities: |
|
|
|
|
|
Depreciation and amortization |
| 2,710 |
| 2,664 |
|
Gain on sale of property, plant and equipment |
| (65 | ) | — |
|
Changes in non-cash working capital items [note 9] |
| (34,610 | ) | (28,782 | ) |
CASH USED IN OPERATING ACTIVITIES |
| (28,273 | ) | (21,598 | ) |
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
Purchase of property, plant and equipment |
| (6,118 | ) | (1,340 | ) |
Acquisitions [note 10] |
| (8,504 | ) | (1,419 | ) |
Investment in equity accounted investee |
| (580 | ) | — |
|
Proceeds on sales of property, plant and equipment |
| 1,000 |
| — |
|
CASH USED IN INVESTING ACTIVITIES |
| (14,202 | ) | (2,759 | ) |
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
Bank indebtedness |
| 22,783 |
| 17,203 |
|
Issuance of common shares for cash |
| 9,041 |
| 460 |
|
Dividends |
| (968 | ) | — |
|
Repayment of long-term debt |
| (2,035 | ) | (2,227 | ) |
CASH PROVIDED BY FINANCING ACTIVITIES |
| 28,821 |
| 15,436 |
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
| (130 | ) | (769 | ) |
|
|
|
|
|
|
NET DECREASE IN CASH DURING PERIOD |
| (13,784 | ) | (9,690 | ) |
Cash, beginning of period |
| 16,974 |
| 15,681 |
|
CASH, END OF PERIOD |
| 3,190 |
| 5,991 |
|
|
|
|
|
|
|
SUPPLEMENTARY INFORMATION |
|
|
|
|
|
Interest paid |
| 603 |
| 769 |
|
Receipt of mortgage receivable for sale of facility |
| 1,200 |
| — |
|
Issuance of promissory note payable for acquisition |
| — |
| 300 |
|
Income taxes paid |
| 3,271 |
| 3,644 |
|
See accompanying notes
3
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Company (The Nu-Gro Corporation and its subsidiaries) manufactures and sells packaged consumer and commercial lawn and garden products including fertilizers, grass seed, soils, herbicides, rodenticides and insecticides. Nu-Gro’s brand names include CIL®, Wilson®, Vigoro®, Pickseed®, So-Green®, Plant-Prod®, Greenleaf® and Green Earth®. Through its subsidiaries in Canada and the U.S., the Company produces and distributes controlled release nitrogen raw material to the fertilizer industry worldwide.
The accompanying consolidated financial statements include the accounts and balances of the Company and its wholly owned subsidiaries. All material intercompany transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, certain information and footnote disclosures typically included in the Company’s annual consolidated financial statements have been condensed or omitted for this report. As such, this report should be read in conjunction with the consolidated financial statements and accompanying notes in the Company’s annual consolidated financial statements and accompanying notes for the year ended September 30, 2003.
The accompanying consolidated financial statements are unaudited. In the opinion of management, such statements include all adjustments, which consist of only normal recurring adjustments, necessary for fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year. Because our products are used primarily in the spring and summer seasons, our business is highly seasonal. As a result, results for the three and six months ended March 31, 2004 and 2003 are not indicative of annual results. 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.
2. 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. Consideration received by the Company on the exercise of stock options is credited to share capital.
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.
4
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
The following table presents net income, as reported, 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:
|
| Three Months |
| Six Months |
| ||||
For the three and six months ended March 31 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $ except per share data] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported |
| 3,854 |
| 4,220 |
| 3,692 |
| 4,520 |
|
Stock-based compensation expense using the fair value method, net of tax |
| (13 | ) | (25 | ) | (26 | ) | (50 | ) |
Pro forma net income |
| 3,841 |
| 4,195 |
| 3,666 |
| 4,470 |
|
|
|
|
|
|
|
|
|
|
|
As reported – basic EPS |
| 0.23 |
| 0.27 |
| 0.22 |
| 0.28 |
|
As reported –diluted EPS |
| 0.23 |
| 0.26 |
| 0.22 |
| 0.28 |
|
Pro forma basic EPS |
| 0.23 |
| 0.26 |
| 0.22 |
| 0.28 |
|
Pro forma diluted EPS |
| 0.23 |
| 0.26 |
| 0.22 |
| 0.28 |
|
3. INVENTORIES
Inventories consist of the following:
[In Thousands, Cdn $] |
| March 31, |
| March 31, |
| September 30, |
|
Raw materials and packaging |
| 14,420 |
| 14,453 |
| 12,166 |
|
Bulk fertilizer |
| 11,171 |
| 7,360 |
| 11,035 |
|
Packaged goods |
| 32,550 |
| 22,211 |
| 14,855 |
|
Allowance for obsolete and slow-moving inventory |
| (2,818 | ) | (2,624 | ) | (1,748 | ) |
|
| 55,323 |
| 41,400 |
| 36,308 |
|
4. PROPERTY, PLANT AND EQUIPMENT
March 31, 2004 |
| Cost |
| Accumulated |
| Net Book |
|
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
Land |
| 1,861 |
| — |
| 1,861 |
|
Buildings and leasehold improvements |
| 24,846 |
| 6,518 |
| 18,328 |
|
Machinery and equipment |
| 33,471 |
| 15,625 |
| 17,846 |
|
Print plates |
| 1,236 |
| 686 |
| 550 |
|
Computer software/hardware |
| 2,804 |
| 2,147 |
| 657 |
|
|
| 64,218 |
| 24,976 |
| 39,242 |
|
5
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
March 31, 2003 |
| Cost |
| Accumulated |
| Net Book |
|
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
Land |
| 1,350 |
| — |
| 1,350 |
|
Buildings and leasehold improvements |
| 22,356 |
| 5,637 |
| 16,719 |
|
Machinery and equipment |
| 33,114 |
| 13,115 |
| 19,999 |
|
Print plates |
| 1,117 |
| 601 |
| 516 |
|
Computer software/hardware |
| 2,169 |
| 1,861 |
| 308 |
|
|
| 60,106 |
| 21,214 |
| 38,892 |
|
September 30, 2003 |
| Cost |
| Accumulated |
| Net Book |
|
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
Land |
| 1,302 |
| — |
| 1,302 |
|
Buildings and leasehold improvements |
| 20,955 |
| 5,964 |
| 14,991 |
|
Machinery and equipment |
| 32,688 |
| 14,214 |
| 18,474 |
|
Print plates |
| 1,283 |
| 749 |
| 534 |
|
Computer software/hardware |
| 2,293 |
| 2,058 |
| 235 |
|
Assets held for sale |
| 2,334 |
| 353 |
| 1,981 |
|
|
| 60,855 |
| 23,338 |
| 37,517 |
|
For the three months ended March 31, 2004 and 2003 and the year ended September 30, 2003, depreciation and amortization expense on property, plant and equipment was $1,287,000, $1,194,000 and $4,867,000, respectively. Depreciation and amortization expense on property, plant and equipment for the six months ended March 31, 2004 is $2,501,000 [$2,425,000 for the six months ended March 31, 2003].
On November 14, 2003, the Company sold its Tillsonburg facility for $2,200,000 consisting of $1,000,000 in cash and a mortgage receivable for $1,200,000.
On December 18, 2003, the Company purchased the Brantford facility it previously leased. The purchase price was $4,500,000 including land, building and machinery and equipment.
6
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
5. BANK INDEBTEDNESS AND LONG-TERM DEBT
[In Thousands, Cdn $] |
| March 31, |
| March 31, |
| September 30, |
|
Term bank loans payable in monthly principal installments of $274 [$333 in 2003], plus interest at rates ranging from 6.20% to 6.81%. The loans mature at dates ranging from April 2005 to November 2005. A $7.0 million first mortgage of lease and a general security agreement has been provided as collateral. |
| 11,387 |
| 14,673 |
| 13,030 |
|
|
|
|
|
|
|
|
|
Term bank loans payable in monthly principal installments of $65 plus interest at bank prime rate plus 0.25% [0.25% to 0.75% in 2003]. The term loans mature at dates ranging from April 2004 to December 2004. A general security agreement has been provided as collateral. |
| 1,939 |
| 2,724 |
| 2,331 |
|
|
| 13,326 |
| 17,397 |
| 15,361 |
|
Current portion |
| 5,225 |
| 6,008 |
| 5,617 |
|
|
| 8,101 |
| 11,389 |
| 9,744 |
|
The Company has available to it an operating line of $35,500,000 Canadian [or U.S. equivalent] at an interest rate of bank prime [3.75% at March 31, 2004 (4.75% at March 31, 2003; 4.50% at September 30, 2003)] for Canadian dollar borrowings and U.S. base rate [4.00% at March 31, 2004 (4.25% at March 31, 2003; 4.00% at September 30, 2003)] for U.S. dollar borrowings. As at March 31, 2004, $20,170,000 of the operating line was being utilized [$20,619,000 as at March 31, 2003; $0 as at September 30, 2003. The bank indebtedness amounts on the accompanying consolidated balance sheets include certain amounts for outstanding checks, partially offset by positive cash balances at the Canadian subsidiaries. Collateral for the bank revolving operating lines of credit includes a general assignment of all inventories and accounts receivable as presented on the consolidated financial statements less potential prior-ranking claims. The facility is due and payable on demand from the bank and the bank may terminate this facility at any time, without notice or demand.
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
[In Thousands, Cdn $] |
| March 31, |
| March 31, |
| September 30, 2003 |
|
Customer programs |
| 4,520 |
| 5,125 |
| 3,635 |
|
Freight |
| 954 |
| 585 |
| 1,213 |
|
Salaries and benefits |
| 1,207 |
| 1,743 |
| 2,645 |
|
Other |
| 2,348 |
| 3,889 |
| 1,768 |
|
|
| 9,029 |
| 11,342 |
| 9,261 |
|
7
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
7. SHARE CAPITAL
Changes in share capital are as follows:
Six months ended |
| March 31, 2004 |
| March 31, 2003 |
| ||||
|
| Number of |
| Cdn $ |
| Number of |
| Cdn $ |
|
|
|
|
| [000’s] |
|
|
| [000’s] |
|
|
|
|
|
|
|
|
|
|
|
COMMON SHARES |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| 16,128,692 |
| 29,734 |
| 15,893,292 |
| 28,631 |
|
Issued pursuant to existing warrants |
| 1,144,350 |
| 10,323 |
| 100,000 |
| 380 |
|
Issued pursuant to existing stock options |
| 2,000 |
| 6 |
| 27,500 |
| 85 |
|
Balance, end of period |
| 17,275,042 |
| 40,063 |
| 16,020,792 |
| 29,096 |
|
|
|
|
|
|
|
|
|
|
|
WARRANTS |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| 1,180,000 |
| 1,288 |
| 1,280,000 |
| 1,293 |
|
Warrants exercised |
| (1,144,350 | ) | (1,249 | ) | (100,000 | ) | (5 | ) |
Warrants expired |
| (35,650 | ) | (39 | ) | — |
| — |
|
Balance, end of period |
| — |
| — |
| 1,180,000 |
| 1,288 |
|
Total balance, end of period |
|
|
| 40,063 |
|
|
| 30,384 |
|
On or prior to February 21, 2004, 1,144,350 outstanding warrants were exercised for total consideration of $9,035,000. A total of 35,650 warrants were not exercised and expired on February 22, 2004.
The following table presents the maximum number of common shares that would be outstanding if all instruments outstanding at March 31, 2004 were exercised:
Common shares |
| 17,275,042 |
|
Stock options |
| 283,900 |
|
|
| 17,558,942 |
|
8
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
8. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per share:
|
| Three Months |
| Six Months |
| ||||||||
|
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| ||||
Numerator for basic and diluted earnings per share available to common stockholders (000’s Cdn $) |
| $ | 3,854 |
| $ | 4,220 |
| $ | 3,692 |
| $ | 4,520 |
|
Denominator for basic earnings per share - weighted average shares outstanding (000’s) |
| 16,798 |
| 15,917 |
| 16,463 |
| 15,906 |
| ||||
Effect of dilutive securities (000’s): |
|
|
|
|
|
|
|
|
| ||||
Warrants |
| — |
| 1 |
| — |
| — |
| ||||
Employee stock options |
| 288 |
| 187 |
| 352 |
| 184 |
| ||||
Dilutive potential common shares (000’s) |
| 288 |
| 188 |
| 352 |
| 184 |
| ||||
Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversions (000’s) |
| 17,086 |
| 16,105 |
| 16,814 |
| 16,091 |
| ||||
Earnings per share (Cdn $) |
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.23 |
| $ | 0.27 |
| $ | 0.22 |
| $ | 0.28 |
|
Diluted |
| $ | 0.23 |
| $ | 0.26 |
| $ | 0.22 |
| $ | 0.28 |
|
9. CHANGES IN NON-CASH WORKING CAPITAL ITEMS
|
|
|
| Six Months |
| ||||
For the three and six months ended March 31 |
| 2004 |
| 2003 |
| ||||
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
|
|
Increase in accounts receivable |
|
|
|
|
| (29,230 | ) | (27,930 | ) |
Increase in inventories |
|
|
|
|
| (14,041 | ) | (7,000 | ) |
Decrease (increase) in prepaid and other expenses |
|
|
| 103 |
| (324 | ) | ||
Increase in accounts payable |
|
|
|
|
| 9,885 |
| 4,324 |
|
(Decrease) increase in accrued liabilities |
|
|
|
|
| (232 | ) | 3,167 |
|
Decrease in income taxes payable |
|
|
|
|
| (1,095 | ) | (1,019 | ) |
|
|
|
|
|
| (34,610 | ) | (28,782 | ) |
9
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
10. ACQUISITIONS
a) On November 3, 2003, the Company acquired certain assets and liabilities of Greenleaf Products Inc., Later Chemicals Ltd. and Midpoint Products Inc. to complement the portfolio of products and to provide customers with efficiencies in terms of sales contracts, product offering, customer service training, supply chain management and in-store merchandising. Operating results from the acquired businesses were recorded from the date of acquisition. The cash purchase price of $8,504,000 was allocated as follows:
[In Thousands, Cdn $] |
| $ |
|
Accounts receivable |
| 3,194 |
|
Inventories |
| 5,134 |
|
Goodwill |
| 1,675 |
|
Trademarks |
| 500 |
|
Property, plant and equipment |
| 219 |
|
Accounts payable |
| (2,218 | ) |
|
| 8,504 |
|
As a result of these acquisitions, assuming the acquisitions had taken effect at the beginning of the period, a pro forma consolidated statement of income for the six months ended March 31, 2004 would have reported higher sales of $1,185,000 and lower net income of $175,000. Pro forma basic and diluted earnings per share would have decreased by $0.01 to $0.21.
b) On October 10, 2002, the Company acquired the Canadian consumer water-soluble fertilizer business of Plant Products Co. Ltd. The purchase price of $1,719,000 was allocated as follows:
[In Thousands, Cdn $] |
| $ |
|
Inventories |
| 969 |
|
Property, plant and equipment |
| 200 |
|
Trademarks |
| 50 |
|
Goodwill |
| 500 |
|
|
| 1,719 |
|
Funded By:
[In Thousands, Cdn $] |
| $ |
|
Cash |
| 1,419 |
|
Promissory note payable |
| 300 |
|
|
| 1,719 |
|
11. SEGMENT INFORMATION
The Company has three reportable segments: consumer products, professional products and fertilizer raw material.
The consumer products segment comprises a variety of fertilizer, soil and pesticide products primarily for the retail lawn and garden industry in Canada. The professional products segment comprises a variety of fertilizer and pesticide products primarily for the golf and professional industry in Canada. The fertilizer raw material segment represents the manufacture and distribution of controlled release nitrogen raw material to the fertilizer industry worldwide. Segments were established primarily by product type and the customer base which represents the basis upon which management, including the Chief Executive Officer who is the chief operating decision maker of the Company, reviews and assesses the Company’s financial performance. Segment profit is the primary measure of profitability used by management to assess the Company’s financial performance.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company accounts for inter-segment sales as if the sales were to third parties, that is, at current market prices.
10
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
|
| CONSUMER |
| PROFESSIONAL |
| FERTILIZER |
| TOTAL |
| ||||||||
Three months ended March 31 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
| 31,539 |
| 22,505 |
| 3,271 |
| 5,221 |
| 21,503 |
| 26,629 |
| 56,513 |
| 54,355 |
|
Inter-segment sales |
| — |
| — |
| — |
| — |
| 2,826 |
| 952 |
| 2,826 |
| 952 |
|
Segment profit |
| 6,351 |
| 4,881 |
| 839 |
| 1,091 |
| 4,567 |
| 5,664 |
| 11,757 |
| 11,636 |
|
Sales, administration and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,630 |
| 5,120 |
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| 6,127 |
| 6,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components comprising segment profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| 612 |
| 519 |
| 108 |
| 100 |
| 669 |
| 701 |
| 1,389 |
| 1,320 |
|
Interest expense |
| 251 |
| 314 |
| 50 |
| 71 |
| 67 |
| 89 |
| 368 |
| 474 |
|
Other (income) |
| — |
| — |
| — |
| — |
| (62 | ) | — |
| (62 | ) | — |
|
Income tax expense (recovery) |
| 766 |
| 734 |
| (13 | ) | (107 | ) | 1,520 |
| 1,669 |
| 2,273 |
| 2,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| 95,417 |
| 70,564 |
| 28,690 |
| 27,501 |
| 48,003 |
| 54,143 |
| 172,110 |
| 152,208 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding business acquisitions |
| 942 |
| 484 |
| — |
| 226 |
| — |
| — |
| 942 |
| 710 |
|
Business acquisitions |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Additions to trademarks |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Additions to goodwill |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| CONSUMER |
| PROFESSIONAL |
| FERTILIZER |
| TOTAL |
| ||||||||
Six months ended March 31 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
| 2004 |
| 2003 |
|
[In Thousands, Cdn $] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
| 40,186 |
| 28,451 |
| 9,512 |
| 13,987 |
| 33,672 |
| 42,459 |
| 83,370 |
| 84,897 |
|
Inter-segment sales |
| — |
| — |
| — |
| — |
| 3,339 |
| 4,223 |
| 3,339 |
| 4,223 |
|
Segment profit |
| 7,215 |
| 5,496 |
| 2,466 |
| 3,064 |
| 6,671 |
| 8,140 |
| 16,352 |
| 16,700 |
|
Sales, administration and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
| 10,517 |
| 9,650 |
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,835 |
| 7,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components comprising segment profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
| 1,035 |
| 839 |
| 334 |
| 413 |
| 1,341 |
| 1,412 |
| 2,710 |
| 2,664 |
|
Interest expense |
| 349 |
| 415 |
| 118 |
| 189 |
| 136 |
| 165 |
| 603 |
| 769 |
|
Other (income) |
| — |
| — |
| (65 | ) | — |
| (462 | ) | — |
| (527 | ) | — |
|
Income tax expense (recovery) |
| 234 |
| 257 |
| 28 |
| (101 | ) | 1,881 |
| 2,374 |
| 2,143 |
| 2,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
| 95,417 |
| 70,564 |
| 28,690 |
| 27,501 |
| 48,003 |
| 54,143 |
| 172,110 |
| 152,208 |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding business acquisitions |
| 6,118 |
| 959 |
| — |
| 381 |
| — |
| — |
| 6,118 |
| 1,340 |
|
Business acquisitions |
| 219 |
| 200 |
| — |
| — |
| — |
| — |
| 219 |
| 200 |
|
Additions to trademarks |
| 500 |
| 50 |
| — |
| — |
| — |
| — |
| 500 |
| 50 |
|
Additions to goodwill |
| 1,675 |
| 500 |
| — |
| — |
| — |
| — |
| 1,675 |
| 500 |
|
11
THE NU-GRO CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2004 and 2003
12. SUBSEQUENT EVENT
On April 30, 2004, the Company’s publicly held shares (Toronto Stock Exchange listed “NU”) were tendered to a subsidiary of United Industries Corporation of St. Louis, MO (“United”) under the Arrangement Agreement dated March 1, 2004 and amended March 19, 2004 in exchange for $11.00 per share at which time the Company became a 100% owned subsidiary of United. Prior to the exchange of shares for cash, a dividend of $0.12 per share was paid to shareholders of record on April 30, 2004. On the date of tender, all outstanding bank debt was repaid in full and credit facilities described in note 5 were cancelled.
12