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2005 2004
Net sales
Reported net sales $2,359,447 $1,417,186
United pro forma adjustments 217,551 937,543
Tetra pro forma adjustments 137,003 231,804
Microlite pro forma adjustments – 37,618
Pro forma net sales $2,714,001 $2,624,151
Income from continuing operations
Reported income from
continuing operations $ 46,832(A) $ 56,160
United pro forma adjustments (23,773)(B) 111,812(C)
Tetra pro forma adjustments 6,460 12,024
Microlite pro forma adjustments – (10,687)(D)
Pro forma income from
continuing operations $ 29,519 $ 169,309
Pro forma basic earnings per share
Income from continuing operations $ 0.96 $ 1.19
United pro forma adjustments (0.48) 2.37
Tetra pro forma adjustments 0.13 0.25
Microlite pro forma adjustments – (0.23)
Pro forma income from
continuing operations $ 0.61 $ 3.58
Pro forma diluted earnings per share
Income from continuing operations $ 0.93 $ 1.16
United pro forma adjustments (0.48) 2.31
Tetra pro forma adjustments 0.13 0.25
Microlite pro forma adjustments – (0.22)
Pro forma income from
continuing operations $ 0.58 $ 3.50
(A) Reported income from continuing operations includes certain charges and other items
related to the Tetra and United acquisitions that are not expected to recur. For 2005,
these charges include approximately $38,000 charged to Cost of goods sold related to
the fair value adjustment applied to acquired inventory for United and Tetra and the
write-off of approximately $12,000 of debt issuance costs charged to interest expense
related to the debt refi nancing that occurred in connection with the acquisition.
(B) United pro forma adjustments in 2005 represent United’s loss from continuing opera-
tions in fi scal 2005 in the period prior to the Company’s ownership, from October 1, 2004
through February 6, 2005. Also included in this amount are certain charges and other
items related to the United acquisition that are not expected to recur. For 2005, these
charges include approximately $12,000 of transaction related costs incurred by United
in connection with its acquisition by Spectrum, approximately $3,000 incurred by United
related to its acquisition of United Pet Group and approximately $2,000 of amortization
expense associated with intangible assets. Lastly, consolidated interest expense is expected
to be reduced due to the Company’s retirement of United debt at the date of acquisition.
(C) United pro forma adjustments in 2004 represent United’s income from continuing oper-
ations in fi scal 2004 in the comparable period prior to the Company’s ownership, from
October 1, 2003 through September 30, 2004. These amounts include certain charges
and other items related to the United acquisition that are not expected to recur. For 2004,
these charges include a reduction of income tax expense of approximately $104,000,
refl ecting a full reversal of United’s valuation allowance originally established against the
tax deductible goodwill deduction and certain net operating loss carryforwards that were
generated in 1999 through 2003. Lastly, consolidated interest expense is expected to
be reduced due to the Company’s retirement of United debt at the date of acquisition.
(D) Microlite’s pro forma adjustments in 2004 represent Microlite’s income from continuing
operations in the comparable periods prior to the Company’s ownership. These amounts
include certain charges incurred by Microlite that are not expected to recur. These
charges include interest expense which will be reduced as a result of the Company’s
recapitalization of assumed debt, and lowered interest rates and hedging costs as a
result of the recapitalized debt and access to more effi cient capital markets. In addition,
the pro forma results include charges related to the establishment of valuation allow-
ances for certain deferred tax assets prior to acquisition.
(17) Subsequent Events
On November 9, 2005, the Company received a
request for information from the U.S. Attorney’s
Offi ce for the Northern District of Georgia. On
December 12, 2005, the Company received a
request for the same information from the Atlanta
District Offi ce of the SEC. The U.S. Attorney’s Offi ce
and the SEC are investigating the Company’s July 28,
2005 disclosure regarding its results for the third
quarter ended July 3, 2005 and the Company’s
revised guidance issued September 7, 2005 as to
earnings for the fourth quarter of fi scal year 2005
and fi scal year 2006. The U.S. Attorney’s Offi ce and
the SEC are also investigating the extent to which
the Company’s senior management sold shares in
the thirty-day period preceding the July 28, 2005 and
September 7, 2005 disclosures. The Company is
cooperating fully with the investigations. The Com-
pany is unable to predict the outcome of the investi-
gations or the timing of their resolution at this time.
On October 3, 2005 and October 31, 2005, addi-
tional purported class action lawsuits were brought
against the Company and its Chairman and Chief
Executive Offi cer and Executive Vice President and
Chief Financial Offi cer. These actions were purport-
edly brought on behalf of all purchasers of the Com-
pany’s publicly-traded securities between January 4,
2005 and September 6, 2005. In addition, a further
action was fi led on November 14, 2005, naming the
aforementioned parties, purportedly brought on
behalf of all purchasers of the Company’s publicly-
traded securities between January 4, 2005 and
November 11, 2005. The Company believes these
actions are without merit and intends to contest
them vigorously. At this stage of the litigation, the
Company is unable to make any estimate of poten-
tial loss or range of loss.
On November 23, 2005, the Company announced
the sale of its fertilizer technology and Canadian
professional fertilizer products business to Agrium
Inc., a leading agricultural retailer and wholesale
producer and marketer of agricultural nutrients and
industrial products, for $86,000. The sale includes
two divisions of Spectrum Brands’ Nu-Gro subsidiary,
representing fi scal 2005 revenue of approximately
$80,000 from sales of high-end specialty controlled-
release nitrogen fertilizer and other products to
professional turf markets and specialty wholesale
fertilizer customers.
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
SPECTRUM BRANDS, INC.98