<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 21, 1999
-----------------
THE SCOTTS COMPANY
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 1-11593 31-1414921
-------------------------------- -------------------- ----------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
</TABLE>
14111 SCOTTSLAWN ROAD, MARYSVILLE, OHIO 43041
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (937) 644-0011
--------------
NOT APPLICABLE
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(Former name or former address, if changed since last report.)
Index to Exhibits is on Page 19.
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 21, 1999, the Scotts Company (the "Registrant") acquired
substantially all of the non-Roundup assets of the Solaris Division of Monsanto
Company ("Monsanto") in a privately negotiated transaction for $339.9 million,
of which $39.9 million was based on Monsanto's estimate of the level of
normalized working capital as of the closing date (the "Ortho Acquisition"). The
exact amount of normalized working capital will be determined through a
post-closing audit, and the purchase price is therefor subject to adjustment.
The acquired assets include the Ortho(R), Green Cross(R), White Swan(R) and
Defender(R) product lines, as well as formulation facilities in Fort Madison,
Iowa and Corwen, United Kingdom. Monsanto used the property, plant and equipment
included among the acquired assets for the production of consumer lawn and
garden pesticides, fertilizers and growing media. The Registrant does not have
any present intention to devote any material amount of the acquired assets to
purposes other than the production of consumer lawn and garden pesticides,
fertilizers and growing media. The Ortho Acquisition was financed through the
private placement by the Registrant of $330 million aggregate principle amount
of its 8.625% Senior Subordinated Notes and through revolving credit borrowings
under the Registrant's credit agreement dated as of December 4, 1998, which
provides for aggregate borrowings of up to $1.025 billion (the "New Credit
Facility"). The identity of the financial institutions which are parties to the
New Credit Facility has been omitted as contemplated under Item 2(a) of Form 8-K
and filed separately with the Securities and Exchange Commission.
The Asset Purchase Agreement dated as of November 11, 1998 between the
Registrant and Monsanto includes various customary representations and
warranties of the parties for transactions of this type and contains customary,
limited carve-outs for materiality, knowledge and disclosed information.
However, the indemnification provisions limit the Registrant's total exposure to
assumed liabilities, disputes with the distributor of the product lines
purchased from Monsanto and breaches of representation to $5 million in the
aggregate.
Pursuant to the Ortho Acquisition, the Registrant made offers to all but a
very limited number of Ortho employees who work primarily in the Ortho business.
The Registrant has also agreed to pay severance costs for U.S. employees based
on Monsanto's severance policy. In return, Monsanto has agreed to reimburse the
Registrant for half of the costs of such termination payments, up to a maximum
of $5 million.
In connection with the Ortho Acquisition, the Registrant and Monsanto have
entered into a supply agreement covering the supply of glyphosate to the
Registrant for use in non-Roundup(R) products that contain glyphosate and that
are being sold to the Registrant in the Ortho Acquisition. The agreement
guarantees the Registrant a long-term supply of glyphosate at a price
competitive with that obtainable in the open market both now and after
glyphosate ceases to be patented in the United States.
On September 30, 1998, the Registrant entered into an Exclusive Agency and
Marketing Agreement with Monsanto (as amended and restated on November 11, 1998,
the "Roundup Marketing Agreement"). Pursuant to the Roundup Marketing Agreement,
the Registrant became Monsanto's exclusive agent for the marketing and
distribution of consumer Roundup(R) products in the consumer lawn and garden
market within the United States and other specified countries, including, among
others, Australia, Austria, Canada, France, Germany and the United Kingdom. In
addition, if Monsanto develops new products containing glyphosate, the active
ingredient in Roundup(R), or other non-selective herbicides, the Registrant has
certain rights to market such products as well in the consumer lawn and garden
market.
Under the Roundup Marketing Agreement, the Registrant and Monsanto will
jointly develop global consumer and trade marketing programs for Roundup(R), and
the Registrant has assumed responsibility for sales support, merchandising,
distribution and logistics. Monsanto will continue to own the consumer Roundup
business and will provide significant oversight of its brand. In addition,
Monsanto will continue to own and operate the agricultural Roundup business.
Roundup(R) is a registered trademark of Monsanto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
Please see Index to Financial Statements and Pro Forma Financial
Information at page 3.
(b) Pro Forma Financial Information:
Please see Index to Financial Statements and Pro Forma Financial
Information at page 3.
(c) Exhibits
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2 Asset Purchase Agreement dated as of November 11, 1998, by
and between The Scotts Company and Monsanto Company, a copy
of which is attached to the Registrant's Form 10-K filed
December 21, 1998 and incorporated by reference herein.
99 Press Release issued January 21, 1999
1
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 5, 1999 By: /s/ G. ROBERT LUCAS
-----------------------
G. Robert Lucas
Senior Vice President
2
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
-----------------------------
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<CAPTION>
PAGES
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<S> <C>
Item 7(a) Financial Statements of Business Acquired:
- -----------------------------------------------------
Independent Auditors' Report................................ 4
Ortho and Certain Other Brands of The Solaris Group
Statements of Assets to Be Sold........................ 5
Ortho and Certain Other Brands of The Solaris Group
Statements of Net Sales, Cost of Sales and Direct
Operating Expenses..................................... 6
Notes to Financial Statements............................... 7
Item 7(b) Pro Forma Financial Information:
- -------------------------------------------
The Scotts Company, Unaudited Pro Forma Combined
Statement of Income.................................... 12
The Scotts Company, Unaudited Pro Forma Combined
Balance Sheet.......................................... 16
</TABLE>
3
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Monsanto Company:
We have audited the accompanying statement of net assets to be sold of Ortho and
Certain Other Brands (as described in Note 1) of The Solaris Group (a division
of Monsanto Company) as of December 31, 1997, and the related statement of net
sales, cost of sales and direct operating expenses for the year then ended.
These financial statements are the responsibility of Monsanto Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the net assets,
net sales, cost of sales, and direct operating expenses of the brands of The
Solaris Group to be sold to The Scotts Company pursuant to the Asset Purchase
Agreement described in Note 1. Such financial statements are not intended to be
a complete financial statement presentation of the brands to be sold and may not
be indicative of conditions that would have existed or results that would have
occurred had the Brands operated as an unaffiliated entity.
In our opinion, such financial statements present fairly, in all material
respects, the net assets to be sold of Ortho and Certain Other Brands (pursuant
to the Asset Purchase Agreement described in Note 1) of The Solaris Group (a
division of Monsanto Company) as of December 31, 1997, and the net sales, cost
of sales and direct operating expenses for the year then ended, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Columbus, Ohio
December 8, 1998
4
<PAGE> 6
ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
- ----------------------------------------------------
ORTHO AND CERTAIN OTHER BRANDS OF THE SOLARIS GROUP
STATEMENTS OF ASSETS TO BE SOLD (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS:
Accounts receivable, net of allowances of $3.9 at December
31, 1997 and $1.2 at September 30, 1998................ $ 57.3 $ 42.3
Inventories............................................... 85.6 68.8
Prepaid expenses and other current assets................. 2.1 1.3
Property, plant, and equipment, net....................... 26.7 27.6
Intangible assets......................................... 179.2 166.7
Other assets.............................................. 1.0 5.1
------ ------
Total assets........................................... 351.9 311.8
------ ------
LIABILITIES:
Accounts payable.......................................... 28.1 14.2
Accrued liabilities....................................... 22.2 20.0
------ ------
Total liabilities...................................... 50.3 34.2
------ ------
NET ASSETS TO BE SOLD....................................... $301.6 $277.6
====== ======
</TABLE>
See notes to financial statements.
5
<PAGE> 7
ORTHO AND CERTAIN OTHER BRANDS OF THE SOLARIS GROUP
STATEMENTS OF NET SALES, COST OF SALES
AND DIRECT OPERATING EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
NINE-MONTH
PERIODS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ----------------
1997 1997 1998
------------ ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
NET SALES................................................. $208.3 $182.0 $185.1
COST OF GOODS SOLD........................................ 140.1 118.3 107.0
------ ------ ------
GROSS PROFIT.............................................. 68.2 63.7 78.1
------ ------ ------
DIRECT OPERATING EXPENSES:
Marketing expenses...................................... 41.7 34.8 33.3
Administrative expenses................................. 13.1 9.3 10.8
Technical expenses...................................... 4.3 3.0 2.9
Amortization of intangible assets....................... 13.3 9.3 13.8
Restructuring expenses.................................. 1.8 1.8
------ ------ ------
Total direct operating expenses................. 74.2 58.2 60.8
------ ------ ------
EXCESS (DEFICIENCY) OF NET SALES OVER COST OF SALES AND
DIRECT OPERATING EXPENSES............................... $ (6.0) $ 5.5 $ 17.3
====== ====== ======
</TABLE>
See notes to financial statements.
6
<PAGE> 8
ORTHO AND CERTAIN OTHER BRANDS OF THE SOLARIS GROUP
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
1. BACKGROUND AND BASIS OF PRESENTATION
The Solaris Group ("Solaris"), a division of Monsanto Company and Subsidiaries
("Monsanto"), is a leading manufacturer of brand name consumer products for lawn
and garden care.
The accompanying statements have been prepared for the purpose of presenting the
net assets of the brands of The Solaris Group to be sold pursuant to the Asset
Purchase Agreement (the "Agreement") dated as of November 11, 1998 between
Monsanto and The Scotts Company (the "Buyer") and the net sales, cost of sales
and direct operating expenses as of the dates and for the periods indicated. The
brands and related businesses to be sold are referred to as the "Brands". The
transaction is expected to be consummated on or before March 31, 1999 ("Closing
Date"), subject to certain required consents, approvals and filings as defined
in the Agreement. Pursuant to the Agreement, Monsanto will sell to the Buyer the
assets pertaining to the Brands including inventories and other assets as
specified in the Agreement and the Buyer will assume certain operating
liabilities, in exchange for $300 million, subject to adjustment based on
working capital as of the closing date and as defined in the Agreement.
The net assets of the Brands as defined in the Agreement consist primarily of
the assets and liabilities used to develop, manufacture, sell and market
non-glyphosate weed control products (except for certain glyphosate-containing
weed control products as defined). Insect control products, garden seeds,
decorative garden items, fertilizers and applicators for use by consumers for
lawn and garden care and to participate in a joint venture to market a series of
gardening and home improvements books. The Brands include Ortho, Weed-B-Gon,
Rose Pride, Home Defense, Green Cross, Phostrogen, Defender and certain other
brands. The Brands' operations are in the United States (representing
approximately 90% of operations) and in certain international locations (Canada,
Europe, Asia and Latin America).
The Brands business has been managed as part of the operations of the Solaris
Group and, historically, separate Brands financial statements have not been
prepared. The accompanying statements are derived from the historical accounting
records of Solaris as described herein.
A statement of cash flows is not presented because the Brands essentially have
no cash flow. With respect to cash flows, purchases of inventory, along with
payroll, capital and other expenditures are funded by Monsanto. Sales are
collected by Monsanto, accordingly, the Brands maintain only a minimal petty
cash balance.
Net sales represent sales of the Brands products, less estimated provisions for
discounts and allowances. Expenses include operating expenses directly
attributable to the Brands, plus allocations of operating costs directly
incurred by or otherwise related to Solaris. Such allocations of Solaris' direct
costs are based principally on relative sales or other applicable activity,
which management believes is a reasonable allocation method. Direct operating
costs in 1997 also include $1.8 million of restructuring charges related to
workforce reductions and for the restructuring of the Ortho book line. Costs
excluded in the accompanying financial statements consist of general costs
incurred at Monsanto's corporate headquarters (treasury, corporate governance
and overhead), interest and income taxes, as Monsanto's systems and procedures
do not provide sufficient information to develop a reasonable cost allocation.
Accounts receivable, prepaid expenses, account payable and accrued liabilities
have been allocated to the Brands' statements of net assets to be sold based on
the Brands percentage (specified in the Agreement) of the applicable Solaris
balance. Inventories and intangible assets related to the Brands have been
included on a specific identification basis. Property, plant and equipment to be
sold pursuant to the terms of the Agreement are also included in the Brands'
statement of net assets to be sold. Accordingly, the accompanying financial
statements do not represent a full financial statement presentation of the
Brands, and do not purport to be indicative of the operating results of the
Brands had such business operated on a stand-alone basis. In addition, the
historical operating results may not be indicative of the results after
acquisition by the Buyer.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles 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 that affect revenues and expenses during the periods reported.
Actual results may differ from the estimates. Significant estimates include
amounts due to and from Central Garden and Pet Company (Central Garden -- See
Note 3), allowance for doubtful accounts, inventory reserves, impairment of
assets, payables, and allocations of costs, assets and certain liabilities.
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially subject
the Brands to concentrations of credit risk consist primarily of accounts
receivable. A significant portion of accounts receivable is due from Central
Garden (Note 3). Other accounts receivable are due principally from major
retailers, including mass merchandisers, home centers, warehouse clubs and
national and regional chains. Ongoing credit evaluation of customer financial
condition is performed and the amount of credit is limited when deemed
necessary.
REVENUE RECOGNITION -- For shipments under the Central Garden Alliance Agreement
(Note 3), sales and accounts receivable are recognized when product is shipped
from a manufacturing location or from the safety stock warehouse to either a
direct account, Central Garden branch, agent, or sub-distributor, and inventory
is relieved accordingly. Other sales and accounts receivable are recognized when
product is shipped from a manufacturing location. Related distributor program
costs and expenses are recognized at the time revenue is recognized.
7
<PAGE> 9
PROPERTY, PLANT AND EQUIPMENT -- is recorded at cost. The cost of plant and
equipment is depreciated over average periods of 20 years for buildings and
improvements, 5 to 10 years for machinery and equipment, and 3 to 15 years for
office furnishings, fixtures, vehicles, and land improvements utilizing the
straight-line method.
INVENTORY VALUATION -- Inventories are stated at cost or market, whichever is
less. Standard cost, which approximates actual cost, is used to value finished
goods inventory. Standard cost includes direct labor and raw materials, and
manufacturing overhead based on budgeted capacity. Raw materials are valued at
the lesser of cost or replacement cost. The cost of certain inventories
(primarily inventory maintained in the United States) is determined using the
last-in, first-out ("LIFO") method, which generally reflects the effects of
changing prices on cost of goods sold sooner than other inventory cost methods.
Approximately, 89.5% and 90.3% of the inventory balance is determined using the
LIFO method at December 31, 1997 and September 30, 1998, respectively. The cost
of other inventory generally is determined by using the first-in, first-out
("FIFO") method. Brands inventory cost data is combined with similar data from
other Solaris products for purposes of applying the LIFO method of accounting.
Brands has been allocated a pro rata portion of the LIFO reserve based on the
relative inventory levels of Solaris.
INTANGIBLE ASSETS -- Goodwill, which arose from Monsanto's acquisition of the
Ortho product line in 1993, is included in the accompanying statements and
represents approximately 89% of the Brands' goodwill balance as of September 30,
1998. Such goodwill is being amortized over 20 years. Goodwill arising from
other acquisitions and identifiable intangible assets such as trademarks and
non-competition agreements is amortized over the estimated periods of benefit (3
to 20 years).
LONG-LIVED ASSETS -- Impairment tests of long-lived assets are made when
conditions indicate a possible loss. Such impairment tests are based on a
comparison of undiscounted cash flows to the recorded value of the asset. If an
impairment is indicated, the asset value is written down to its net realizable
value, using an appropriate discount rate. In 1998, management determined
goodwill related to the White Swan acquisition had been impaired. Impairment
losses of $3.6 million have been recorded at September 30, 1998 and are included
in amortization of intangibles.
CURRENCY TRANSLATION -- Assets and liabilities of foreign operations are
translated into U.S. dollars at current exchange rates as of the dates of the
statements of net assets to be sold indicated. Sales, cost of sales, and direct
operating expenses are translated into U.S. dollars at average exchange rates
for the applicable periods as indicated. Transaction gains and losses were not
significant for the applicable periods as indicated.
TECHNICAL EXPENSES -- Technical expenses include product registration fees,
tonnage taxes, direct regulatory costs, personnel and related support and
product development costs. Product development costs totaled $2.2 million, $ 1.5
million, and $1.2 million for the year ended December 31, 1997, and the
nine-month periods ended September 30, 1997 and 1998, respectively.
3. TRANSACTIONS WITH CENTRAL GARDEN
In 1995, Solaris entered into an exclusive agency and distributor agreement with
Central Garden (the "Alliance Agreement") which expires September 30, 1999. On
June 26, 1998, Solaris notified Central Garden of its intention not to extend
the Alliance Agreement beyond that date. Solaris distributed approximately 74,
74 and 70 percent of total sales volume of Brands products through Central
Garden for the year ended December 31, 1997, and the nine-month periods ended
September 30, 1997 and 1998, respectively. Total fees to Central Garden for
distributor program costs and expenses, which include costs for warehousing,
sales representatives, merchandising, account management, and other related
costs allocated to Brands were $28.7 million, $24.8 million and $23.5 million
during the year ended December 31, 1997 and the nine-month periods ended
September 30, 1997 and 1998, respectively. Payables to
8
<PAGE> 10
Central Garden associated with the distributor program of $2.9 million and $5.2
million at December 31, 1997 and September 30, 1998, respectively, are included
in accrued liabilities.
Net accounts receivable from Central Garden were $30.9 million at December 31,
1997 and $23.1 million at September 30, 1998.
As of September 30, 1998, Central Garden informed Solaris of approximately $10
million of items under dispute, which generally represent amounts alleged by
Central Garden as due from Solaris or a reduction in amounts claimed by Solaris
as due from Central Garden. The ultimate resolution of such disputed amounts
cannot presently be determined. It is reasonably possible that such resolution
will result in additional material expenses to be recognized in the operating
results of the Brands in the near-term. Under the Agreement, Monsanto has agreed
to indemnify Scotts for any subsequent adverse adjustments in excess of $2
million to the recorded Brand receivable/payable balances with Central Garden as
of the Closing Date.
4. ACQUISITIONS
Solaris acquired the assets of Phostrogen, Limited and Defender Products Garden
PTY, Limited, on January 1, 1997 and April 5, 1997, respectively. The assets and
operations resulting from these acquisitions are included in these financial
statements from their respective dates of acquisition. The acquisitions were
accounted for using the purchase method, and the respective assets and
liabilities have been recorded at their estimated fair values at the dates of
acquisition. The excess of each purchase price over the fair value of
identifiable net assets acquired has been recorded as goodwill and is being
amortized on a straight-line basis over 15 years. The purchase price
allocations, as of the acquisition dates, are summarized as follows (in
millions):
<TABLE>
<CAPTION>
PHOSTROGEN DEFENDER
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<S> <C> <C>
Goodwill............................................. $11
Other assets......................................... 13 $2
--- --
Purchase price..................................... $24 $2
=== ==
</TABLE>
The effects of such acquisitions were not significant for the periods presented
in the accompanying statements.
5. INVENTORY
Inventories consist of (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Finished goods................................. $63.4 $56.8
Packaging supplies............................. 9.5 7.2
Raw materials.................................. 17.9 9.9
----- -----
Inventory, at FIFO cost........................ 90.7 73.9
Excess of FIFO over LIFO....................... (5.1) (5.1)
----- -----
Total................................ $85.6 $68.8
===== =====
</TABLE>
Inventories at FIFO approximate current cost. LIFO costs relating to inventory
acquired from Chevron in 1993 are based upon amounts assigned in accordance with
Accounting Principles Board Opinion No. 16. Brands finished goods inventories of
$12.6 million and $16.0 million at December 31, 1997 and September 30, 1998 are
held by Central Garden in safety stock warehouses under consignment and recorded
as inventory as of such dates.
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6. PROPERTY PLANT AND EQUIPMENT
Property, plant and equipment consist (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Land........................................... $ 1.4 $ 1.5
Buildings and improvements..................... 7.1 8.7
Machinery and equipment........................ 18.5 19.4
Office furnishings, fixtures and equipment..... 8.0 7.1
Construction in process........................ 4.4 4.5
----- -----
Total................................ 39.4 41.2
Less accumulated depreciation.................. 12.7 13.6
----- -----
Net............................................ $26.7 $27.6
===== =====
</TABLE>
Depreciation expense totaled approximately $3.3 million for the year ended
December 31, 1997 of which $1.8 million was included in cost of goods sold and
$1.5 million was included in operating expenses. For the nine-month periods
ended September 30, 1998 and 1997 depreciation expense totaled approximately
$2.6 million and $2.4 million, respectively, of which $1.4 million and $1.3
million was included in cost of goods sold and $1.2 million and $1.1 million was
included in operating expenses, respectively.
7. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Goodwill....................................... $164.6 $161.4
Trademarks and trade names..................... 53.5 53.8
Noncompetition agreement....................... 16.2 16.2
------ ------
Total................................ 234.3 231.4
Less accumulated amortization of intangibles... 55.1 64.7
------ ------
Net............................................ $179.2 $166.7
====== ======
</TABLE>
8. ACCRUED LIABILITIES
Accrued liabilities consist of (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
Distributor Program............................ $11.2 $11.4
Other.......................................... 11.0 8.6
----- -----
Total..................................... $22.2 $20.0
===== =====
</TABLE>
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9. COMMITMENTS AND CONTINGENCIES
Solaris has contractual obligations including supply, manufacturing, and
purchase agreements that require minimum annual payments. Total future annual
commitments under these arrangements to be assumed by the Buyer are as follows
(in millions):
<TABLE>
<S> <C>
1998........................................................ $1.0
1999........................................................ 1.0
----
Total.................................................. $2.0
====
</TABLE>
Solaris is the lessee under several operating leases primarily for office space
and research facilities. Future minimum rental payments under such operating
leases that have non-concellable terms beyond one year and that are to be
assumed by the Buyer are as follows (in millions):
<TABLE>
<S> <C>
1998........................................................ $2.0
1999........................................................ 1.8
2000........................................................ 1.7
2001........................................................ 1.3
2002........................................................ 0.4
Thereafter.................................................. 0.1
----
Total.................................................. $7.3
====
</TABLE>
Monsanto is a party to a number of lawsuits and claims relating to Solaris and
the Brands. Such matters relate to product liability, government regulation,
including environmental issues, and other matters. Although the results of
litigation cannot be predicted with certainty, management's belief, based upon
the advice of Monsanto's legal counsel, is that the final outcome of such
litigation will not have a material adverse effect on the Brands' financial
statements.
In connection with the acquisition of White Swan Ltd. in 1996, Solaris is
required to make additional acquisition payments each year through December 31,
2003, based upon attainment of certain gross margin thresholds. Any additional
acquisition payments would be recorded as additional goodwill. Through September
30, 1998, no additional payments were required.
See Note 3 concerning disputed amounts with Central Garden.
10. MARKETING AGREEMENT
On November 11, 1998, Monsanto and Buyer entered into an Amended and Restated
Exclusive Agency and Marketing Agreement whereby Buyer agreed to serve as
Monsanto's exclusive agent for the Roundup product line. Buyer agreed to provide
certain services, as defined, in connection with the marketing, sales and
distribution of Roundup products within certain defined markets (primarily North
America, Europe and Australia).
11. INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial information as of September 30, 1998 and
for the nine-month periods ended September 30, 1997 and 1998 reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results of the interim periods presented. Such adjustments are
of a normal, recurring nature. Results for interim periods may not be indicative
of results for a full year.
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ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
- -----------------------------------------
The following pro forma statement of income is presented as if the Ortho
Acquisition; the acquisition of Rhone-Poulenc Jardin; the consumer lawn and
garden division of Rhone-Poulenc S.A. and related entities (the "RPJ
Acquisition"); and the marketing agreement with Monsanto with respect to
consumer Roundup(R) products (the "Roundup Marketing Agreement" and, together
with the RPJ Acquisition and the Ortho Acquisition, the "Transactions"); and the
private placement by the Registrant of its 8.625% Senior Subordinated Notes had
occurred and the Registrant's new credit facility which provides for aggregate
borrowings of up to $1.025 billion (the "New Credit Facility") was in place on
October 1, 1997. The following pro forma balance sheet gives effect to the
Transactions, the New Credit Facility and the private placement by the
Registrant of its 8.625% Senior Subordinated Notes and the use of proceeds
therefrom as if they had occurred on September 30, 1998. The accompanying pro
forma information is presented for illustrative purposes and is not necessarily
indicative of the financial position or results of operations which would
actually have been reported had the above transactions been in effect during the
periods presented or which may be reported in the future.
THE SCOTTS COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(dollars in millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1998
-----------------------------------------------------------------------------------
SCOTTS RPJ ORTHO OTHER SCOTTS
HISTORICAL RPJ(1) ADJUSTMENTS ORTHO ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------- ----------- ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales........................... $1,113.0 $ 144.3 $211.4 $ 46.8(2) $1,526.5
11.0(3)
Cost of sales................... 715.0 75.4 128.8 21.2(2) 948.1
6.7(3)
1.0(4)
-------- ------- ------ ------ --------
Gross profit.................... 398.0 68.9 82.6 28.9 578.4
(Income) from Roundup Marketing
Agreement..................... (35.0)(5) (35.0)
SG&A............................ 271.6 55.7 59.0 25.6(2) 413.4
1.5(6)
Amortization of goodwill and
other intangibles............. 12.9 2.3 3.5(7) 17.8 (12.3)(8) 1.6(9) 25.8
Restructuring and other
charges....................... 15.4 1.8 -- -- 17.2
Other expense, net.............. 4.0 0.4 -- -- 4.4
-------- ------- ------ ------ ------ ------ --------
Income from operations........ 94.1 8.7 (3.5) 5.8 14.1 33.4 152.6
Interest expense................ 32.2 0.2 -- -- 53.9(10) 86.3
-------- ------- ------ ------ ------ ------ --------
Income before income taxes...... 61.9 8.5 (3.5) 5.8 14.1 (20.5) 66.3
Provision for income taxes...... 24.9 5.3 -- -- -- (3.5)(11) 26.7
-------- ------- ------ ------ ------ ------ --------
Income before extraordinary
item.......................... $ 37.0 $ 3.2 $ (3.5) $ 5.8 $ 14.1 $(17.0) $ 39.6
======== ======= ====== ====== ====== ====== ========
</TABLE>
- ---------------
(1) The statement of income data for RPJ have been translated from French
Francs to U.S. Dollars using the average exchange rate for the year ended
September 30, 1998.
(2) Represents the reclassification of certain amounts to conform with the
Company's presentation.
(3) Represents adjustment to sales and cost of sales on certain shipments to
distributors. The Company intends to reflect these shipments as inventory
until such inventory is subsequently shipped to retailer locations. The
adjustment is calculated as follows:
<TABLE>
<S> <C>
Estimated increase in revenue..................... $11.0
Cost of sales as a percentage of sales for the
Ortho business for fiscal 1998.................. 60.9%
-----
Estimated increase in cost of sales............... $ 6.7
</TABLE>
(4) Represents estimated increase in cost of sales resulting from change in
basis for Ortho inventory from LIFO to FIFO as described in note 3 to
"-- Unaudited Pro Forma Combined Balance Sheet."
(5) Represents the estimated commission that would have been earned for the
1998 Program Year (the twelve months ended September 30, 1998) under the
applicable provisions of the Roundup Marketing Agreement relating to the
calculation of the Company's commission with respect to the first Program
Year (1999), applying such calculation to the unaudited earnings of the
consumer Roundup business for the twelve months ended September 30, 1998.
Therefore, the Contribution Payment for the 1998 Program Year is assumed to
be the same as the Contribution Payment for the 1999 Program Year. See "The
Transactions -- Roundup Marketing Agreement -- Commission Structure"
included in the Registrant's Form 8-K dated January 7, 1999 and
incorporated by reference herein.
12
<PAGE> 14
(6) Reflects the estimated increase in certain administrative costs (e.g.,
legal, payroll, risk management, tax department, human resources,
information systems, etc.) that are considered necessary to support the
Ortho business.
(7) Reflects adjustment to amortization of goodwill and other intangibles
resulting from an allocation of the estimated purchase price of the RPJ
business as follows:
<TABLE>
<S> <C>
Estimated purchase price (including estimated
transaction costs of $7.3 million)............. $216.3
Less amounts allocated to tangible assets and
liabilities.................................... (13.1)
------
Amount allocated to goodwill and other
intangibles.................................... 203.2
Estimated average useful life (in years)......... 35.0
------
5.8
Less amortization included in historical RPJ
financial statements........................... 2.3
------
$ 3.5
</TABLE>
A valuation of the RPJ business has not been completed as of the date
hereof. Accordingly, the allocation of the anticipated purchase price is
based on management's estimates and assumes that the book value of fixed
assets reasonably approximates their fair value. The excess of the purchase
price over the value of tangible assets generally is assumed to represent
goodwill with an estimated useful life of 40 years, however certain other
intangible assets (e.g., trademarks, patents, etc.) may be identified in
the valuation process which have useful lives of less than 40 years.
Accordingly, the excess purchase price over the value of tangible assets is
being amortized over an average life of 35 years. The Registrant expects
that the final allocation of the purchase price will be completed during
the third quarter of fiscal 1999.
(8) Reflects adjustment to amortization of goodwill and other intangibles
resulting from an allocation of the estimated purchase price of the Ortho
business as follows:
<TABLE>
<S> <C>
Estimated purchase price (including estimated
transaction costs of $10.0 million).......... $310.0
Less amounts allocated to tangible assets and
liabilities.................................. (116.0)
------
Amount allocated to goodwill and other
intangibles.................................. 194.0
Estimated average useful life (in years)....... 35.0
------
5.5
Less amortization included in historical Ortho
financial statements......................... 17.8
------
$(12.3)
</TABLE>
A valuation of the Ortho business has not been completed as of the date
hereof. Accordingly, the allocation of the anticipated purchase price is
based on management's estimates and assumes that the book value of fixed
assets reasonably approximates their fair value. The excess of the
purchase price over the value of tangible assets generally is assumed to
represent goodwill with an estimated useful life of 40 years, however
certain other intangible assets (e.g., trademarks, patents, etc.) may be
identified in the valuation process which have useful lives of less than
40 years. Accordingly, the excess purchase price over the value of
tangible assets is being amortized over an average life of 35 years. The
Registrant expects that the final allocation of the purchase price will
be completed during the third or fourth quarter of fiscal 1999.
In addition, the valuation does not address any adjustment for the level
of normalized working capital as of the closing date of the Ortho
Acquisition. No portion of such adjustment would be amortized. Rather it
will be reflected as an adjustment to working capital. The Registrant has
13
<PAGE> 15
received an estimate of normalized working capital of $125.9 million from
Monsanto, which estimate resulted in an additional payment to Monsanto of
$39.9 million as of the closing of the Ortho Acquisition. The Company and
Monsanto are still in discussion regarding the actual amount of
normalized working capital and expect the issue to be resolved within 60
to 90 days after the closing. See "The Transactions -- Ortho Acquisition"
in the Registrant's Form 8-K dated January 7, 1999 and incorporated by
reference herein.
(9) Represents amortization over a term of 20 years of the $32.0 million
payment paid by the Company to Monsanto in connection with the marketing
rights under the Roundup Marketing Agreement.
(10) Represents the net adjustment to interest expense as a result of the
anticipated bank borrowings under the New Credit Facility and a private
placement of $330 million aggregate principal amount of the Registrant's
8.625% Senior Subordinated Notes calculated as follows:
<TABLE>
<S> <C>
Revolving Credit Facility(a).................... $11.6
Pound Sterling Term Loan(b)..................... 10.9
French Franc Term Loan(c)....................... 4.9
Deutschemark Term Loan(d)....................... 3.3
Tranche B Term Loan(e).......................... 8.2
Tranche C Term Loan(f).......................... 10.5
Notes offered hereby(g)......................... 28.5
RPJ Seller Notes(h)............................. 2.1
Amortization of rate locks(i)................... 1.3
Amortization of deferred financing costs(j)..... 3.3
Interest on remaining indebtedness.............. 1.7
-----
Pro forma interest expense................... 86.3
Less interest on refinanced indebtedness........ 30.7
Less interest on remaining indebtedness......... 1.7
-----
Net adjustment............................... 53.9
</TABLE>
- ---------------
(a) Represents interest on floating rate Revolving Credit Facility using an
assumed average interest rate of 7.69%.
(b) Represents interest on floating rate Pound Sterling Term Loan using an
assumed interest rate of 9.10%.
(c) Represents interest on floating rate French Franc Term Loan using an
assumed interest rate of 6.06%.
(d) Represents interest on floating rate Deutschemark Term Loan using an
assumed interest rate of 5.98%.
(e) Represents interest on floating rate Tranche B Term Loan using an
assumed interest rate of 8.53%.
(f) Represents interest on floating rate Tranche C Term Loan using an
assumed interest rate of 8.78%.
(g) Represents interest on the $330.0 million fixed rate 8.625% Senior
Subordinated Notes.
(h) Represents interest on amounts due the seller of the RPJ business using
an assumed interest rate of 6.00%.
(i) Represents amortization of amounts deferred under treasury rate locks
over a period of 10 years.
(j) Represents amortization of deferred financing costs over a period of
8.1 years.
14
<PAGE> 16
An increase or decrease of 0.125% in the assumed interest rate would change
the pro forma interest expense on floating rate debt as follows:
<TABLE>
<S> <C>
Revolving Credit Facility................... $0.2
Pound Sterling Term Loan.................... 0.1
French Franc Term Loan...................... 0.1
Deutschemark Term Loan...................... 0.1
Tranche B Term Loan......................... 0.1
Tranche C Term Loan......................... 0.2
----
$0.8
====
</TABLE>
(11) Represents an estimated provision for income taxes on a combined pro forma
basis using the effective tax rate for the Registrant on a stand-alone
basis for fiscal 1998 of 40.3%.
15
<PAGE> 17
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
(dollars in millions)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
----------------------------------------------------------------------------------
SCOTTS RPJ ORTHO OTHER SCOTTS
HISTORICAL RPJ(1) ADJUSTMENTS ORTHO ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------ ----------- ----- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash........................... $ 10.6 $ 10.1 $ -- $ 20.7
Accounts receivable............ 146.6 16.9 42.3 (26.0)(2) 179.8
Inventory...................... 177.7 29.6 68.8 5.1(3) 297.0
15.8(2)
Other current assets........... 32.3 10.1 1.3 43.7
-------- ------ ------ --------
Total current assets....... 367.2 66.7 112.4 541.2
Property, plant and equipment,
net.......................... 197.0 4.4 27.6 229.0
Goodwill and other intangibles,
net.......................... 435.1 82.2 121.0(4) 166.7 27.3(5) 832.3
Other assets................... 35.9 2.2 5.1 26.0(6) 82.2
-- -- -- 13.0(7)
-------- ------ ------ ------- --------
Total assets............... 1,035.2 155.5 311.8 1,684.7
======== ====== ====== ========
LIABILITIES AND SHAREHOLDERS
EQUITY:
Current portion of long-term
debt......................... 13.3 2.5 -- 15.8
Accounts payable............... 77.8 22.6 14.2 114.6
Accrued liabilities............ 140.8 12.0 20.0 (4.1)(2) (3.1)(8) 129.1
(4.5)(8)
(32.0)(8)
-------- ------ ------ --------
Total current
liabilities.............. 231.9 37.1 34.2 259.5
Long-term debt, net of current
portion...................... 359.2 -- -- (350.1)(8) 968.6
959.5(8)
Other long-term liabilities.... 40.2 23.1 -- 63.3
-------- ------ ------ --------
Total liabilities.......... 631.3 60.2 34.2 1,291.4
Preferred stock................ 177.3 -- -- 177.3
Common shares.................. 0.2 -- -- 0.2
Capital in excess of par....... 208.7 -- -- 208.7
Retained earnings.............. 76.6 -- -- (6.1)(2) (4.5)(8) 66.0
Divisional equity.............. -- 87.4 (87.4)(9) -- --
Cumulative foreign currency
translation account.......... (3.0) 7.9 (7.9)(9) -- (3.0)
Treasury stock................. (55.9) -- -- (55.9)
Net assets to be sold.......... -- -- 277.6 (277.6)(9) --
-------- ------ ------ --------
Total equity............... 403.9 95.3 277.6 393.3
-------- ------ ------ --------
Total liabilities and
equity................... $1,035.2 $155.5 $311.8 $1,684.7
======== ====== ====== ========
</TABLE>
16
<PAGE> 18
(1) The balance sheet data for RPJ as of September 30, 1998 have been translated
from French Francs to U.S. Dollars. Assets and liabilities were translated
using the exchange rate as of September 30, 1998. Equity accounts have been
translated using historical exchange rates.
(2) Represents adjustment to restate inventory and eliminate accounts receivable
for the estimated impact of the Registrant's anticipated revenue recognition
policy as described in note 3 to "-- Unaudited Selected Pro Forma Combined
Statement of Income."
<TABLE>
<S> <C>
Ortho shipments included in accounts receivable............. $26.0
Gross profit margin as a % of sales for the Ortho business
for fiscal 1998........................................... 39.1%
------
Gross profit on shipments that would not be recognized under
the anticipated revenue recognition policy................ 10.2(a)
------
Amount reinstated to inventory.............................. $15.8
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) The tax effect of the gross profit that would not be recognized under the
Registrant's anticipated revenue recognition policy is reflected as a
reduction of the Registrant's current income tax liability using an assumed
tax rate of 40.3%. The remaining amount, net of the tax effect, is reflected
as a reduction of retained earnings.
</TABLE>
(3) Represents adjustment to convert LIFO basis inventory in historical Ortho
financial statements to the FIFO basis which management anticipates adopting
for Ortho inventory upon acquisition.
(4) Reflects net adjustment to goodwill and other intangibles as a result of the
RPJ Acquisition as follows:
<TABLE>
<S> <C>
Net amount of purchase price allocated to goodwill and other
intangibles (see note 7 to " -- Unaudited Selected Pro
Forma Combined Statement of Income")...................... $203.2
Goodwill and other intangibles included in historical RPJ
balance sheet............................................. 82.2
------
Pro forma adjustment................................... $121.0
</TABLE>
(5) Reflects net adjustment to goodwill and other intangibles as a result of the
Ortho Acquisition as follows:
<TABLE>
<S> <C>
Net amount of purchase price allocated to goodwill and other
intangibles (see note 8 to " -- Unaudited Selected Pro
Forma Combined Statement of Income")...................... $194.0
Goodwill and other intangibles included in historical Ortho
balance sheet............................................. 166.7
------
Pro forma adjustment................................... $ 27.3
</TABLE>
(6) Represents estimated transaction costs related to the anticipated bank
borrowings under the New Credit Facility and this offering.
(7) Represents estimated amounts to settle treasury rate locks entered into in
anticipation of this offering.
17
<PAGE> 19
(8) The following table summarizes the sources and uses of cash in connection
with the Transactions, the New Credit Facility and this offering:
<TABLE>
<S> <C>
Sources:
New Credit Facility:
Revolving Credit Facility.............................. $ 68.9
Pound Sterling Term Loan............................... 130.0
French Franc Term Loan................................. 80.0
Deutschemark Term Loan................................. 55.0
Tranche B Term Loan.................................... 140.0
Tranche C Term Loan.................................... 120.0
RPJ Seller Notes....................................... 35.6
8.625% Senior Subordinated Notes....................... 330.0
--------
Total sources........................................ $ 959.5
Uses:
Ortho Acquisition (a)..................................... $ 300.0
RPJ Acquisition........................................... 209.0
Roundup Marketing Fee..................................... 32.0
Repayment of existing indebtedness:
Old Credit Facility.................................... 253.5
9 7/8% Senior Subordinated Notes (b)................... 108.7
Transaction costs (c)..................................... 56.3
--------
Total uses........................................... $ 959.5
</TABLE>
- ---------------
(a) Excludes any adjustment for the level of normalized working capital as
of the closing date of the Ortho Acquisition. See "The
Transactions -- Ortho Acquisition" in the Registrant's Form 8-K dated
January 7, 1999 and incorporated by reference herein.
(b) Assumes redemption of 97.1% of the currently outstanding 9 7/8% Senior
Subordinated Notes at a redemption premium of 107.258% and accrued
interest of $4.5 million. The difference between the estimated amount
to be paid to retire this portion of these notes and their carrying
value ($96.6 million) represents an extraordinary loss on the
retirement and is reflected as a reduction in retained earnings, net of
tax. The estimated tax effect is reflected as a reduction in the
Company's current income tax liability.
(c) Transaction costs include costs to secure the New Credit Facility ($15
million), costs, including discounts and commissions, in connection
with this offering ($11 million), costs to settle the outstanding
treasury locks ($13.0 million), costs in connection with the Ortho
Acquisition ($10 million) and costs in connection with the RPJ
Acquisition ($7.3 million).
(9) Reflects the elimination of historical equity of the RPJ and Ortho
businesses.
18
<PAGE> 20
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NO.
- -------------- ----------- --------
<S> <C> <C>
2 Asset Purchase Agreement dated as of November 11, 1998, by __
and between The Scotts Company and Monsanto Company, a copy
of which is attached to the Registrant's Form 10-K filed
December 21, 1998 as Exhibit 2(d) and incorporated by
reference herein.
99 Press Release issued January 21, 1999 20
</TABLE>
19
<PAGE> 1
Exhibit 99
----------
SCOTTS COMPLETES ORTHO(R) ACQUISITION
CLOSES $330 MILLION NOTE OFFERING
Marysville, Ohio, January 21, 1999 -- The Scotts Company (NYSE:SMG) today
announced that it has completed the acquisition of the assets of the
non-Roundup(R) consumer lawn and garden business of Monsanto Company
(NYSE:MTC), including its Ortho(R) product line, for approximately
$300 million.
The acquisition of assets also includes the Weed-B-Gon(R), Rose Pride(R),
and Home Defense(R) product lines in the U.S.; Green Cross(R) the leading
consumer pesticides business in Canada; Phostrogen(R) in the U.K.; and
Defender(R) in Australia.
"This acquisition essentially completes our plan to become a global leader
in every major consumer lawn and garden category in virtually all significant
markets in the world," said Charles M. Berger, Scotts' Chairman, President and
Chief Executive Officer. "Our top priority now is to create greater value for
shareholders by extending our proven consumer pull strategies to the new brands
that we have added to our global portfolio and by realizing the potential for
integration synergies from all of our recent acquisitions."
"In the Ortho business, we expect synergies to result in annual cost
savings of $18 million to $27 million by fiscal year 2001," said James Hagedorn,
President, Scotts North America. "The cost savings will come from integrating
selling activities and administrative functions, streamlining distribution,
combining regulatory and research activities, achieving purchasing economies,
rationalizing non-core operations and other initiatives. We plan to reinvest $15
million to $20 million of savings to generate profitable growth for the Ortho
business through increased advertising, new product launches and various
integration activities."
Scotts also said today that is has closed its previously announced offering
of $330 million of 10-year 8-5/8% Senior Subordinated Notes due 2009. The net
proceeds from the offering, together with borrowings under Scotts' bank
facility, were used to fund the payment to Monsanto
<PAGE> 2
Company for the Ortho acquisition and to repurchase approximately 97% of the
Company's $100 million outstanding 9-7/8% Senior Subordinated Notes due August
1, 2004.
Salomon Smith Barney was the lead manager of the offering, and Chase
Securities, Inc., and Credit Lyonnais Securities were the co-managers.
The Scotts Company is the world's leading supplier of consumer products
for lawn and garden care, with a full range of products for professional turf
care and horticulture as well. The company owns what are by far the industry's
most recognized brands. In the U.S., consumer awareness of the company's
Scotts(R), Miracle-Gro(R) and Ortho(R) brands outscores the nearest competitors
in their categories by several times, as does awareness of the consumer
Roundup(R) brand which is owned by Monsanto. Scotts has entered into an
agreement with Monsanto to be the exclusive marketing agent for consumer
Roundup(R) worldwide. In the U.K., Scotts' brands include Weedol(R) and
Pathclear(R), the top-selling consumer herbicides; Evergreen(R), the leading
lawn fertilizer line; the Levington(R) line of lawn and garden products; and
Miracle-Gro(R), the leading plant fertilizer. The Company's leading brands in
continental Europe include KB(R) and Fertiligene(R) in France and NexaLotte(R)
and Celaflor(R) in Germany.
Statement under the Private Securities Litigation Act of 1995: Certain of
the statements contained in this press release, including, but not limited to,
information regarding the future economic performance and financial condition
of the company, the plans and objectives of the company's management, and the
company's assumptions regarding such performance and plans are forward looking
in nature. Actual results could differ from the forward looking information in
this release, due to a variety of factors, including, but not limited to:
- - Continued marketplace acceptance of the Company's "pull" advertising
marketing strategies;
- - The ability to maintain profit margins and to produce products and add
production capacity on a timely basis;
- - Competition in the North American and European consumer and professional
segments;
- - Competition between and the recent consolidation within the retail outlets
selling the Company's products;
- - Public perceptions regarding the safety of the Company's products;
- - Changes in economic conditions, interest rates and currency exchange rates
in the countries in which the company operates;
- - The ability to improve processes and business practices to keep pace with
the economic, competitive and technological environment, including
successful completion of the Company's Enterprise Resource Planning
project;
- - The Company's ability, and that of its third party suppliers and
customers, to address information technology issues related to the year
2000; and
- - The ability to integrate several recent acquisitions.
<PAGE> 3
Additional detailed information concerning a number of the important factors
that could cause actual results to differ materially from the forward looking
information contained in this release is readily available in the company's
publicly filed quarterly, annual, and other reports.
