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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the Transition period from  to

Commission File No. 333-76055

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

DELAWARE(State or other jurisdiction of
incorporation or organization)

43-1025604(I.R.S. Employer Identification No.)


8825 Page Boulevard
St. Louis, Missouri 63114(Address of principal executive office, including zip code)
(314) 427-0780
(Registrant's telephone number, including area code)

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

As
of March 31, 2002, the Registrant had 27,721,000 Class A voting and 27,721,000 Class B non-voting shares of common stock outstanding and 37,600
non-voting shares of Class A preferred stock outstanding.

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PART 1  FINANCIAL INFORMATION    Item 1. Financial Statements

UNITED INDUSTRIES CORPORATION        BALANCE SHEETS        MARCH 31, 2002 AND 2001, AND DECEMBER 31, 2001        (Dollars in thousands)        (Unaudited)

|                                          |                                                                                                                                            | March 31,
2002                              |         | March 31,
2001 |          | December 31,
2001 |         
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------- | ------- | -------------- | -------- | ----------------- | --------
|ASSETS                                    |                                                                                                                                            |                                             |         |                |          |                   |         
|Current assets:                           |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          | Cash and cash equivalents                                                                                                                  |                                             | $       |               |          | $                 |        
|                                          | Accounts receivable (less allowance for doubtful accounts of $2,845 and $1,164 at March 31, 2002 and 2001 and $1,147 at December 31, 2001) |                                             |         | 106,083        |          |                   | 70,769  
|                                          | Inventories                                                                                                                                |                                             |         | 61,472         |          |                   | 48,618  
|                                          | Prepaid expenses                                                                                                                           |                                             |         | 5,763          |          |                   | 5,204   
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total current assets                        |         |                | 173,318  |                   |         
|Equipment and leasehold improvements, net |                                                                                                                                            |                                             | 26,642  |                |          | 24,068            |         
|Deferred income tax                       |                                                                                                                                            |                                             | 112,505 |                |          | 116,763           |         
|Intangible assets, net                    |                                                                                                                                            |                                             | 42,833  |                |          | 5,764             |         
|Other assets                              |                                                                                                                                            |                                             | 11,953  |                |          | 13,594            |         
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total assets                                |         | $              | 367,251  |                   | $       
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|LIABILITIES AND STOCKHOLDERS' DEFICIT     |                                                                                                                                            |                                             |         |                |          |                   |         
|Current liabilities:                      |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          | Current maturities of long-term debt and capital lease obligation                                                                          |                                             | $       | 5,852          |          | $                 | 5,684   
|                                          | Accounts payable                                                                                                                           |                                             |         | 40,177         |          |                   | 31,114  
|                                          | Accrued expenses                                                                                                                           |                                             |         | 39,209         |          |                   | 27,177  
|                                          | Short-term borrowings                                                                                                                      |                                             |         | 58,377         |          |                   | 47,500  
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total current liabilities                   |         |                | 143,615  |                   |         
|Long-term debt                            |                                                                                                                                            |                                             | 345,507 |                |          | 326,346           |         
|Capital lease obligation                  |                                                                                                                                            |                                             | 4,133   |                |          | 4,528             |         
|Other liabilities                         |                                                                                                                                            |                                             | 9,765   |                |          | 9,532             |         
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total liabilities                           |         |                | 503,020  |                   |         
|Stockholders' deficit:                    |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          | Common Stock (27.7 million shares of $0.01 par value Class A and 27.7 million $0.01 par value Class B)                                     |                                             |         | 556            |          |                   | 554     
|                                          | Preferred Stock (37,600 shares of $0.01 par value Class A)                                                                                 |                                             |         |               |          |                   |        
|                                          | Warrants and options                                                                                                                       |                                             |         | 11,745         |          |                   | 2,784   
|                                          | Additional paid-in capital                                                                                                                 |                                             |         | 152,543        |          |                   | 139,081 
|                                          | Accumulated deficit                                                                                                                        |                                             |         | (297,719       | )        |                   | (306,820
|                                          | Accumulated other comprehensive loss                                                                                                       |                                             |         | (194           | )        |                   |        
|                                          | Common stock held in grantor trust                                                                                                         |                                             |         | (2,700         | )        |                   | (2,700  
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total stockholders' deficit                 |         |                | (135,769 | )                 |         
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         
|                                          |                                                                                                                                            | Total liabilities and stockholders' deficit |         | $              | 367,251  |                   | $       
|                                          |                                                                                                                                            |                                             |         |                |          |                   |         

See
accompanying notes to financial statements.

2

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UNITED INDUSTRIES CORPORATION        STATEMENTS OF OPERATIONS        FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001        (Dollars in thousands)        (Unaudited)

|                                         |                                              | Three months ended March 31,
|---------------------------------------- | -------------------------------------------- | ----------------------------
|
|Sales before promotion expense           |                                              | $                           
|Promotion expense                        |                                              |                             
|                                         |                                              |                             
|Net sales                                |                                              |                             
|                                         |                                              |                             
|Operating costs and expenses:            |                                              |                             
|                                         | Cost of goods sold                           |                             
|                                         | Selling, general and administrative expenses |                             
|                                         |                                              |                             
|                                         | Total operating costs and expenses           |                             
|                                         |                                              |                             
|Operating income                         |                                              |                             
|Interest expense                         |                                              |                             
|                                         |                                              |                             
|Income before provision for income taxes |                                              |                             
|Income tax expense                       |                                              |                             
|                                         |                                              |                             
|Net income                               |                                              | $                           
|                                         |                                              |                             
|Preferred stock dividends                |                                              | $                           
|                                         |                                              |                             
|Income available to common stockholders  |                                              | $                           
|                                         |                                              |                             

See
accompanying notes to financial statements.

3

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UNITED INDUSTRIES CORPORATION        STATEMENTS OF CASH FLOWS        FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001        (Dollars in thousands)        (Unaudited)

|                                                     |                                                                               | Three months ended March 31,              |                                                  
|---------------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------------------------- | -------------------------------------------------
|
|Cash flows from operating activities:                |                                                                               |                                           |                                                  
|                                                     | Net income                                                                    |                                           | $                                                
|                                                     | Adjustments to reconcile net income to net cash used by operating activities: |                                           |                                                  
|                                                     |                                                                               | Depreciation and amortization             |                                                  
|                                                     |                                                                               | Amortization of deferred financing fees   |                                                  
|                                                     |                                                                               | Provision for deferred income tax expense |                                                  
|                                                     |                                                                               | Changes in assets and liabilities:        |                                                  
|                                                     |                                                                               |                                           | Increase in accounts receivable                  
|                                                     |                                                                               |                                           | Increase in inventories                          
|                                                     |                                                                               |                                           | Decrease in prepaid expenses                     
|                                                     |                                                                               |                                           | Increase in accounts payable and accrued expenses
|                                                     |                                                                               |                                           | Decrease in Dursban related expenses             
|                                                     |                                                                               |                                           | Other, net                                       
|                                                     |                                                                               |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  
|Investing activities:                                |                                                                               |                                           |                                                  
|                                                     | Purchases of equipment and leasehold improvements                             |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  
|Financing activities:                                |                                                                               |                                           |                                                  
|                                                     | Debt issuance costs                                                           |                                           |                                                  
|                                                     | Proceeds from additional term debt                                            |                                           |                                                  
|                                                     | Proceeds from borrowing on revolver                                           |                                           |                                                  
|                                                     | Repayment of borrowing on revolver and other debt                             |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  
|Net increase (decrease) in cash and cash equivalents |                                                                               |                                           |                                                 
|Cash and cash equivalentsbeginning of period        |                                                                               |                                           |                                                 
|                                                     |                                                                               |                                           |                                                  
|Cash and cash equivalentsend of period              |                                                                               | $                                         |                                                 
|                                                     |                                                                               |                                           |                                                  
|                                                     | Noncash financing activity:                                                   |                                           |                                                  
|                                                     |                                                                               |                                           |                                                  

See
accompanying notes to financial statements.

4

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UNITED INDUSTRIES CORPORATION        NOTES TO FINANCIAL STATEMENTS        (Dollars in thousands)        (Unaudited)

Note 1Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of
the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all material adjustments considered necessary
for a fair presentation have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read
in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K of United Industries Corporation (the "Company") for the year ended
December 31, 2001.

Note 2Inventories

Inventories are as follows:

|                                                 |  | March 31,
2002 |        | March 31,
2001 |   | December 31,
2001 |  
|------------------------------------------------ |  | -------------- | ------ | -------------- | - | ----------------- | -
|Raw materials                                    |  | $              | 20,948 |                | $ | 9,633             |  
|Finished goods                                   |  |                | 44,580 |                |   | 40,602            |  
|Allowance for obsolete and slow-moving inventory |  |                | (4,056 | )              |   | (1,617            | )
|                                                 |  |                |        |                |   |                   |  
|Total inventories                                |  | $              | 61,472 |                | $ | 48,618            |  
|                                                 |  |                |        |                |   |                   |  

Note 3Equipment and leasehold improvements, net

Equipment and leasehold improvements are as follows:

|                                 |  | March 31,
2002 |        | March 31,
2001 |   | December 31,
2001
|-------------------------------- |  | -------------- | ------ | -------------- | - | -----------------
|Machinery and equipment          |  | $              | 30,746 |                | $ | 27,663           
|Office furniture and equipment   |  |                | 15,608 |                |   | 10,808           
|Automobiles, trucks and aircraft |  |                | 6,156  |                |   | 6,062            
|Leasehold improvements           |  |                | 7,405  |                |   | 7,062            
|                                 |  |                |        |                |   |                  
|                                 |  |                | 59,915 |                |   | 51,595           
|Less: accumulated depreciation   |  |                | 33,273 |                |   | 27,527           
|                                 |  |                |        |                |   |                  
|                                 |  | $              | 26,642 |                | $ | 24,068           
|                                 |  |                |        |                |   |                  

Note 4Intangible assets, net

Intangible assets are as follows:

March 31,
2002

March 31,
2001

December 31,
2001Intangibles

$
44,675

$
7,175

$
44,675Accumulated amortization


(1,842
)

(1,411
)

(1,559
)$
42,833

$
5,764

$
43,116


5

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On
January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations" and 142, "Goodwill and Other Intangible Assets". SFAS 141 requires
business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and broadens the criteria for recording intangible assets separate from goodwill.
SFAS 142 eliminates the amortization of goodwill and instead requires goodwill to be tested for impairment annually. Under SFAS 142, if the intangible asset has an indefinite useful life, it is not
amortized until its life is determined to be finite. SFAS No. 142 provides a staggered timeline for completing transitional impairment testing of goodwill and indefinite-lived intangible assets. The
Company will complete its transitional impairment analysis in the second quarter of 2002. The Company does not expect to record an impairment charge related to this analysis.

As
required by SFAS 142, the results for prior periods were not restated in the accompanying statements of operations. A reconciliation between income available to common stockholders as
reported by the Company and income available to common stockholders to reflect the impact of SFAS 142 is as follows:

Quarter Ended
March 31, 2001Income available to common stockholders:As reported

$
3,663Amortization of goodwill


49Adjusted income available to common stockholders

$
3,712


On
December 17, 2001 the Company acquired Vigoro®, Sta-Green® and Bandini®, as well as acquiring licensing rights to the
Best® line of fertilizer products for $37,500. The acquired brands are amortized over 40 years.

Note 5Other assets

Other assets are as follows:

March 31,
2002

March 31,
2001

December 31,
2001Deferred financing fees

$
19,138

$
18,067

$
18,067Accumulated amortization


(7,797
)

(5,084
)

(7,102
)11,341


12,983


10,965Other


612


611


872Total other assets

$
11,953

$
13,594

$
11,837


6

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Note 6Accrued expenses

Accrued expenses are as follows:

March 31,
2002

March 31,
2001

December 31,
2001Advertising and promotional

$
16,007

$
8,502

$
12,125Facilities rationalization


3,445





3,500Dursban related expenses





1,716


82Interest


7,771


9,433


3,763Cash overdraft





2,336


7,126Preferred dividend payable


4,445


893


2,612Severence charges


1,458


734


1,679Other


6,083


3,563


3,119Total accrued expenses

$
39,209

$
27,177

$
34,006


Note 7Long-term debt and credit facilities

Long-term debt is comprised of the following:

March 31, 2002

March 31, 2001

December 31, 2001Senior Credit Facility:Term Loan A

$
36,899

$
46,124

$
39,205Term Loan B


164,064


135,530


134,488Revolving Credit Facility


58,377


47,500


23,45097/8% Series B Registered Senior Subordinated Notes


150,000


150,000


150,000409,340


379,154


347,143Less portion due within one year


(63,833
)

(52,808
)

(28,757
)Total long-term debt net of current portion

$
345,507

$
326,346

$
318,386


The
Senior Credit Facility was provided by NationsBank, N.A., Morgan Stanley Senior Funding, Inc. and CIBC Inc. and consists of (i) a $90,000 revolving credit
facility (the "Revolving Credit Facility"); (ii) a $75,000 term loan facility ("Term Loan A"); and (iii) a $215,000 term loan facility ("Term Loan B"). The Revolving Credit Facility and
Term Loan A matures on January 20, 2005, and Term Loan B matures on January 20, 2006. The Revolving Credit Facility is subject to a clean-down period during which the
aggregate amount outstanding under the Revolving Credit Facility shall not exceed $10.0 million for 30 consecutive days occurring during the period between August 1 and
November 30 in each calendar year. On March 31, 2002, $58,377 was outstanding under the Revolving Credit Facility. There were no compensating balance requirements for the Revolving
Credit Facility at March 31, 2002.

On
February 13, 2002 the Company received approval from its banking syndicate for an amendment to its Senior Credit Facility. The newly amended Senior Credit Facility increased
the Term Loan B from $150,000 to $180,000 as well as provide additional capital expenditure flexibility. The

7

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amendment and add-on provide additional liquidity for the Company given its recently completed acquisition of the fertilizer brands from Pursell Industries, Inc. The Senior Credit
Facility retains Banc of America Securities, L.L.C. as sole Lead Arranger and Lead Agent.

On
May 9, 2002 the Company merged with Schultz Company. In conjunction with the Schultz Company acquisition the Company received approval from its banking syndicate for an
amendment to its Senior Credit Facility. The newly amended Senior Credit Facility increased the Term Loan B from $180,000 to $215,000, increased the revolving credit facility from $80,000 to $90,000
and provided additional capital expenditure flexibility. The Senior Credit Facility retains Banc of America Securities, L.L.C. as sole Lead Arranger and Lead Agent.

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

The
Senior Credit Facility agreement contains restrictive affirmative, negative and financial covenants. Affirmative and negative covenants put restrictions on levels of investments,
indebtedness, insurance and capital expenditures. Financial covenants require the maintenance of certain financial ratios at defined levels. At March 31, 2002, the Company was in compliance
with all financial covenants. While
the Company does not anticipate an event of non-compliance with financial covenants in the future, the effect of non-compliance with financial covenants would cause the Company
to request an amendment to the Senior Credit Facility.

Under
the covenants, interest on the Revolving Credit Facility, Term Loan A and Term Loan B ranges from 250 to 400 basis points above LIBOR depending on certain financial ratios. Unused
commitments under the Revolving Credit Facility are subject to a 50 basis point annual commitment fee. LIBOR was 1.91% at March 31, 2002.

The
Senior Credit Facility may be prepaid at any time in whole or in part without premium or penalty. During fiscal 2001, principal payments on Term Loans A and B of $9.2 million
and $1.4 million, respectively, were paid, which included optional principal prepayments of $4.1 million and $0.7 on Term Loan A and Term Loan B, respectively. During the three month
period ended March 31, 2002, optional principal prepayments of $2.3 million and $.4 million on Term Loan A and Term Loan B, respectively, were paid. The optional payments were
made in order for the Company to remain two quarterly payments ahead of the regular payment schedule. According to the Senior Credit Facility agreement, each prepayment on Term Loan A and Term Loan B
can be applied to the next principal repayment installments. Management intends to pay a full year of principal installments in 2002 in accordance with the Senior Credit Facility agreement.

In
November 1999, the Company issued 97/8% Senior Subordinated Notes for $150 million that are due April 1, 2009.

Interest
accrues at the rate of 97/8% per annum, payable semi-annually on each April 1 and October 1.

8

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Substantially
all of the properties and assets of the Company and substantially all of the properties and assets of the Company's future domestic subsidiaries secure obligations under
the Senior Credit Facility.

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

Aggregate
maturities under the Senior Credit Facility (excluding the Revolving Credit Facility) and the Senior Subordinated Notes, subsequent to the May 9, 2002 Senior Credit
Facility Amendment, are as follows:

2002 Remainder of year

$
2,8192003


16,4642004


18,1942005


150,0022006


48,485Thereafter


150,000$
385,964


Note 8Commitments

The Company leases the majority of its operating facilities from a company owned by a significant shareholder of the Company under various operating leases
expiring December 31, 2010. The Company has options to terminate the leases on a year-to-year basis by giving advance notice of at least twelve months. The Company
leases a portion of its operating facilities from the same company under a sublease agreement expiring on December 31, 2005. The Company has two five-year options to renew this
lease, beginning January 1, 2006. Management believes that the terms and expenses associated with the related party leases described above are similar to those negotiated by unrelated parties
at arm's length.

The
Company is obligated under other operating leases for use of warehouse space. The leases expire at various dates through December 31, 2012. Five of the leases provide as many
as five five-year options to renew.

Note 9Contingencies

The Company is involved in litigation and arbitration proceedings in the normal course of business that assert product liability and other claims. The Company is
contesting all such claims. When it appears probable in management's judgment that the Company will incur monetary damages or other costs in connection with such claims and proceedings, and such costs
can be reasonably estimated, appropriate liabilities are recorded in the financial statements and charges are made against earnings.

Management
believes the possibility of a material adverse effect on the Company's consolidated financial position, results of operations and cash flows from the claims and proceedings
described above are remote.

9

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Note 10Shipping and handling costs

Shipping and handling costs are included in the selling, general and administrative expenses line item on the Company's Statements of Operations. The amount is
$3,784 and $3,676 for the three months ended March 31, 2002 and 2001, respectively, and represents in-bound freight and distribution cost. The remaining shipping and handling cost,
which includes out-bound freight and product cost, are included in the cost of goods sold line item.

Note 11Derivatives and Hedging Activities

The Company is exposed to market risks relating to changes in interest rates. The Company does not enter into derivatives or other financial instruments for
trading or speculative purposes. The Company enters into financial instruments to manage and reduce the impact of changes in interest rates.

Effective
April 1, 2001, the Company entered into two interest rate swaps that have fixed the interest rate as of April 30, 2001 for $75.0 million variable rate debt
under the Senior Credit Facility. The interest rate swaps are for $50.0 and $25.0 million of the Senior Credit Facility and will terminate on April 30, 2002. The fixed LIBOR interest
rates are 4.74% and 4.66% for the $50.0 and $25.0 million interest rate swaps respectively. The Company's objective is to manage the cash flow risks associated with its variable rate debt and
not to trade such instruments for profit or loss. The Company's interest rate hedges are classified as cash flow hedges. For an effective cash flow hedge, the unrealized portion is deferred in
accumulated other comprehensive income on the balance sheet until the transaction is realized, at which time any deferred hedging gains or losses are recorded in earnings. The fair value of
the interest rate swaps is reported as a liability and as a component of comprehensive loss in Stockholders' deficit at March 31, 2002. The March 31, 2002 fair value reflects a loss of
$0.2 million.

Note 12Comprehensive Income

Comprehensive income differs from net income due to the cash flow hedges. Comprehensive income for the three months ended March 2002 and 2001, was $9,968
and $4,236, respectively.

Note 13Facilities and organization rationalization

During the fourth quarter of 2001 the Company recorded a $5.6 million charge related to facilities and organizational rationalization. The following is a
rollforward of the charge for the three months ended March 31, 2002.

March 31,
2002Balance at beginning of year

$
5,158Provision charged to expense


Reversal credited to expense


Charges to accrual


(255
)Balance at March 31, 2002

$
4,903


10

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Note 14Subsequent event

On May 9, 2002 the Company merged with Schultz Company. Also based in St. Louis, MO, Schultz Company is well respected as an innovative and rapidly growing
consumer lawn and garden company. The Schultz® brand portfoliowhich currently focuses on consumer garden fertilizers, organic growing media and outdoor
livingincludes Schultz® plant foods and potting soils, Expert Gardener® fertilizers and
controls, Multi Cote® plant foods and a new line of natural plant care products under the Garden Safe® brand. Schultz also holds exclusive agreements to manufacture or supply
gardening and outdoor living products for certain of the largest retailers in the mass merchandise and home center channels.

11

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Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report regarding the Company's financial position,
business strategy, budgets and plans and objectives of management for future operations are forward-looking statements. Although the management of the Company believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from those contemplated or projected,
forecasted, estimated or budgeted in or expressed or implied by such forward-looking statements. Such factors include, among others, the risks and other factors set forth under Item 7A in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 as well as the following: general economic and business conditions; governmental regulations;
industry trends; the loss of major customers or suppliers; cost and availability of raw materials; changes in business strategy or development plans including acquisition or disposition of assets;
availability and quality of management; and availability, terms and deployment of capital. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise.

Overview

The Company is the leading manufacturer and marketer of value-oriented branded products for the consumer lawn and garden pesticide and household insecticide
markets in the United States. The Company manufactures and markets one of the broadest lines of pesticides in the industry, including herbicides and indoor and outdoor insecticides, as well as insect
repellents and fertilizers, under a variety of brand names. The Company believes that the key drivers of growth for the $2.8 billion consumer lawn and garden pesticide and household insecticide
retail markets include: (a) the aging of the United State population; (b) growth in the home improvement center and mass merchandiser channels; and (c) shifting consumers'
preferences toward value-oriented branded products.

The
following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the historical financial information included in
the unaudited quarterly financial statements and the related notes to the unaudited quarterly financial statements.

Critical Accounting Policies

The Company's significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 14 of the Company's Annual
Report on Form 10-K for the year ended December 31, 2001. Note that the preparation of this Quarterly Report on Form 10-Q requires the Company to make
estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts
of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The Company believes that it's most critical accounting
policies include revenue recognition, inventories, promotion expense and income taxes.

Revenue recognition

Net sales are gross sales of products sold to customers in accordance with the shipping terms applicable to each sale less any customer discounts from list price,
customer returns and less promotion

12

---

expense of products through cooperative programs with retailers. The Company's provision for customer returns is based on historical sales returns, analysis of credit memo data and other known
factors. If the historical data the Company uses to calculate these estimates does not properly reflect future returns, revenue could be overstated.

Inventories

Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out method. Cost includes raw
materials, direct labor and overhead. Provision for potentially obsolete or slow-moving finished goods and raw materials are made based on management's analysis of inventory levels and
future sales forecasts. In the event that our estimates of future usage and sales differ from actual results, we may need to establish an additional provision for obsolete or slow-moving
finished goods and raw materials.

Promotion expense

The Company advertises and promotes its products through national and regional media. Products are also advertised and promoted through cooperative programs with
retailers. The Company expenses advertising and promotion costs as incurred, although costs incurred during interim periods are generally expensed ratably in relation to revenues. Significant
management judgment is required to estimate the amount of costs under our cooperative programs that has been incurred by the retailers. Actual costs incurred by the Company may differ significantly
from our estimates if factors such as the level of participation and success of the retailers' programs or other conditions differ from our expectations.

Income taxes

In conjunction with the Recapitalization consummated on January 20, 1999 (The "Recapitalization"), the Company converted from an "S" corporation to a "C"
corporation. As a "C" corporation, the Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts
are recovered or settled. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. We have recorded a valuation allowance of $112.5 million as of March 31, 2002, due to uncertainties related to our ability to utilize some of our
deferred tax assets, primarily consisting of certain net operating losses carried forward and deductible goodwill created in conjunction with the Recapitalization. The valuation allowance is based on
our estimates of taxable income by jurisdiction in which our deferred tax assets will be recoverable. In the event that actual results differ from those estimates or we adjust these estimates in
future periods we may need to establish an additional valuation allowance or reduce our current valuation allowance, which could materially impact our financial position and results of operations.

Results of Operations

The following discussion regarding results of operations refers to net sales, cost of goods sold and selling and general and administrative expenses, which the
Company defines as follows:



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The
following table sets forth the percentage relationship of certain items in the Company's Statements of Operations to net sales for the three months ended March 31, 2002 and
March 31, 2001:

Three Months Ended
March 31,2002

2001Net sales:Value brands

80.7
%
83.4
%Opening price point brands

19.3

16.6Total net sales

100.0

100.0Operating costs and expenses:Cost of goods sold

63.9

55.0Selling, general and administrative expenses

20.0

25.1Total operating costs and expenses

83.9

80.1Operating income

16.1

19.9Interest expense

6.2

12.5Income before provision for income taxes

9.9

7.4Income tax expense

2.4

2.1Net income

7.5
%
5.3
%


Three Months Ended March 31, 2002 compared to Three Months Ended March 31, 2001

Net Sales.Net sales increased 70.7% to $136.4 million for the three months ended March 31, 2002 from
$79.9 million for the three months ended March 31, 2001. The increase was driven by a combination of offsetting factors including:



Net
sales of the Company's value brands increased 65.2% to $110.1 million for the three months ended March 31, 2002 from $66.7 million for the three months ended
March 31, 2001. The Company advanced its strategic plan for growth in the consumer lawn and garden category by acquiring leading consumer fertilizer brands Vigoro®,
Sta-Green® and Bandini®, as well as acquiring licensing rights to the Best® line of fertilizer products on December 17, 2001. Net sales from
fertilizer brands were substantially all of the increase in net sales for the three months ended March 31, 2002. The increase in promotion expense was primarily driven by sales of the
fertilizer brands acquired.

Net
sales of opening price point brands increased 98.4% to $26.3 million for the three months ended March 31, 2002 from $13.2 million for the three months ended
March 31, 2001. Net sales from fertilizer brands were substantially all of the increase in net sales for the three months ended March 31, 2002.

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Gross Profit.Gross profit increased 36.9% to $49.2 million for the three months ended March 31, 2002 compared
to $36.0 million for the three months ended March 31, 2001. The increase in gross profit was primarily driven by the fertilizer brands recently acquired. As a percentage of sales, gross
profit decreased to 36.1% for the three months ended March 31, 2002 as compared to 45.0% for the three months ended March 31, 2001. The decrease in gross profit as a percentage of sales
was primarily due to the fertilizer brands acquired, which have margins that are lower than the margins of the Company's other mix of products.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased 35.8% to
$27.2 million for the three months ended March 31, 2002 from $20.1 million for the three months ended March 31, 2001. The majority of the increase is related to supporting
the fertilizer brands acquired. As a percentage of net sales, selling, general and administrative expenses decreased to 20.0% for the three months ended March 31, 2002 from 25.1% for the three
months ended March 31, 2001. The overall decrease was due to additional sales related to the recently acquired fertilizer brands that do not require a direct percent increase in selling,
general and administrative expenses of the Company.

Operating Income.Operating income increased 38.3% to $22.0 million for the three months ended March 31, 2002
from $15.9 million for the three months ended March 31, 2001. As a percentage of net sales, operating income decreased to 16.1% for the three months ended March 31, 2002 from
19.9% for the three months ended March 31, 2001. The decrease was primarily driven by the lower margins of the fertilizer brands as compared to the Company's other products.

Income tax expense.For the three months ended March 31, 2002, the Company's effective income tax rate is 24.6%, which
reflects the estimated utilization of the goodwill deduction in fiscal year 2002. The goodwill deduction is related to the step up in tax basis that occurred in conjunction with the Recapitalization.

Liquidity and Capital Resources

Historically, the Company has utilized internally generated funds and borrowings under credit facilities to meet ongoing working capital and capital expenditure
requirements. As a result of the Recapitalization, the Company has significantly increased cash requirements for debt service relating to the Company's Senior Subordinated Notes and Senior Credit
Facility. As of December 31, 2001, the Company had total debt outstanding of $351.8 million. As of March 31, 2002, the Company had total debt outstanding of $413.9 million.
The Company will rely on internally generated funds and, to the extent necessary, borrowings under the Company's Revolving Credit Facility to meet liquidity needs.

The
Company's Senior Credit Facility consists of:



The
Company's Revolving Credit Facility and Term Loan A mature in January 2005, and Term Loan B matures in January 2006. The Revolving Credit Facility is subject to a
clean-down period during which the aggregate amount outstanding under the Revolving Credit Facility shall not exceed $10.0 million for 30 consecutive days occurring during the
period August 1 and November 30 in each calendar year. The Company was in compliance with financial covenants at March 31, 2002. While the

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Company does not anticipate an event of non-compliance with financial covenants in the future, the effect of non-compliance with financial covenants would cause the Company to
request an amendment to the Senior Credit Facility.

The
Company's principal liquidity requirements are for working capital, capital expenditures and debt service under the Senior Credit Facility and the notes. Cash flow used by operating
activities was approximately $60.1 million and $29.3 million for the three months ended March 31, 2002 and 2001, respectively. Net cash used by operating activities fluctuates
during the year as the seasonal nature of the Company's sales results in a significant increase in working capital (primarily accounts receivable and inventory) during the first half of the year, with
the second and third quarters being significant cash collection periods. The acquisition of the fertilizer brands does not change the seasonal nature of the Company's working capital.

The
Company is the sole customer of Pursell Industries, Inc. and currently sources all of its fertilizer products from Pursell Industries, Inc. under a
long-term supply agreement. The Company does not believe that the ability to source the fertilizer brands will be a concern in the future.

On
May 9, 2002 the Company merged with Schultz Company. In conjunction with the Schultz Company acquisition the Company received approval from its banking syndicate for an
amendment to its Senior Credit Facility. The newly amended Senior Credit Facility increased the Term Loan B from $180,000 to $215,000, increased the revolving credit facility from $80,000 to $90,000
and provided additional capital expenditure flexibility. The Senior Credit Facility retains Banc of America Securities, L.L.C. as sole Lead Arranger and Lead Agent.

In
November 1999, the Company issued 97/8% Senior Subordinated Notes for $150 million that are due April 1, 2009.

Interest
accrues at the rate of 97/8% per annum, payable semi-annually on each April 1 and October 1.

Capital
expenditures are related to the enhancement of the Company's existing facilities and the construction of additional productions and distribution capacity. Cash used by investing
activities was $0.9 million and $0.5 million for the three months ended March 31, 2002 and 2001, respectively. Cash used for capital expenditures for the remainder of fiscal 2002
is expected to be less than $5.0 million.

Principal
on Term Loan A is to be repaid in twenty-three consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2005. The
principal amount of Term Loan B is to be repaid in twenty-seven consecutive quarterly installments commencing June 30, 1999 with a final balloon installment due January 20, 2006.

The
Company believes that cash flow from operations, together with available borrowings under the Revolving Credit Facility, will be adequate to meet the anticipated requirements for
working capital, capital expenditures and scheduled principal and interest payments for at least the next two years. However, the Company cannot ensure that sufficient cash flow will be generated from
operations to repay the notes and amounts outstanding under the Senior Credit Facility at maturity without requiring additional financing. The Company's ability to meet debt service and
clean-down obligations and reduce debt will be dependent on the Company's future performance, which in turn, will be subject to general economic conditions and to financial, business and
other factors, including factors beyond the Company's control. Because a portion of the Company's debt bears interest at floating rates, the Company's financial condition is and will continue to be
affected by changes in prevailing interest rates.

The
Company has not entered into any off-balance sheet arrangements.

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Seasonality

The Company's business is highly seasonal because the Company's products are used primarily in the spring and summer. For the past two years, approximately 75% of
the Company's net sales have occurred in the first and second quarters. The Company's working capital needs, and correspondingly the Company's borrowings, peak near the end of the Company's first
quarter.

Recently Issued Accounting Pronouncements

On April 30, the Financial Accounting Standards Board (FASB or the "Board") issued FASB Statement No. 145 (FAS 145), Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. FAS 145 rescinds both FASB Statement No. 4 (FAS 4), Reporting Gains and Losses
from Extinguishment of Debt, and the amendment to FAS 4, FASB Statement No. 64 (FAS 64), Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. Through this rescission,
FAS 145 eliminates the requirement (in both FAS 4 and FAS 64) that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item,
net of the related income tax effect. However, an entity is not be prohibited from classifying such gains and losses as extraordinary items, so long as they meet the criteria in paragraph 20 of
Accounting Principles Board Opinion No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions.

FAS 145
also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers, which was originally issued to establish accounting standards for the
effects of the transition to the provisions of the Motor Carrier Act of 1980. That transition is complete.

Further,
FAS 145 amends paragraph 14(a) of FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the accounting for
sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The amendment requires that a lease
modification (1) results in recognition of the gain or loss in the financial statements, (2) is subject to FASB Statement No. 66, Accounting for Sales of Real Estate, if the
leased asset is real estate (including integral equipment), and (3) is subject (in its entirety) to the sale-leaseback rules of FASB Statement No. 98, Accounting for Leases:
Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases.

FAS 145
also makes several other technical corrections to existing pronouncements that may change accounting practice. Generally, FAS 145 is effective for transactions
occurring after May 15, 2002. There is no impact of FAS 145 on the Company's financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate

The Company is exposed to market risks relating to changes in interest rates. The Company does not enter into derivatives or other financial instruments for
trading or speculative purposes. The Company enters into financial instruments to manage and reduce the impact of changes in interest rates.

Effective
April 1, 2001, the Company entered into two interest rate swaps that have fixed the interest rate as of April 30, 2001 for $75.0 million variable rate debt
under the Senior Credit Facility. The interest rate swaps are for $50.0 and $25.0 million of the Senior Credit Facility and will terminate on April 30, 2002. The fixed LIBOR interest
rates are 4.74% and 4.66% for the $50.0 and $25.0 million interest rate swaps respectively. The Company's objective is to manage the cash flow risks associated with its variable rate debt and
not to trade such instruments for profit or loss. The Company's interest

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rate hedges are classified as cash flow hedges. For a cash flow hedge, the unrealized portion is deferred in accumulated other comprehensive income on the balance sheet until the transaction is
realized, at which time any deferred hedging gains or losses are recorded in earnings. The fair value of the interest rate swaps is reported as a liability and as a component of comprehensive loss in
Stockholders' deficit at March 31, 2002. The March 31, 2002 fair value is a loss of $0.2 million.

Interest
ranges from 250 to 400 basis points above LIBOR depending on certain financial ratios. LIBOR was 1.91% on March 31, 2002.

Exchange Rate

The Company does not use derivative instruments to hedge against foreign currency exposures related to transactions denominated in other than the Company's
functional currency. Substantially all foreign currency transactions are denominated in United States dollars.

Commodity Price

The Company does not use derivative instruments to hedge its exposures to changes in commodity prices. The Company utilizes various commodity and specialty
chemicals in its production process. Purchasing procedures and arrangements with major customers serve to mitigate its exposure to price changes in commodity and specialty chemicals.

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Part II

OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company has no reportable legal proceedings in the current period.

Item 2.  Changes in Securities.

None.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

No matters were submitted.

Item 5.  Other Information.

On May 9, 2002 the Company merged with Schultz Company. In conjunction with the Schultz Company acquisition the Company received approval from its banking
syndicate for an amendment to its Senior Credit Facility. The newly amended Senior Credit Facility increased the Term Loan B from $180,000 to $215,000, increased the revolving credit facility from
$80,000 to $90,000 and provided additional capital expenditure flexibility. The Senior Credit Facility retains Banc of America Securities, L.L.C. as sole Lead Arranger and Lead Agent.

Item 6.  Exhibits and Reports on Form 8-K





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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                    |  | UNITED INDUSTRIES CORPORATION
|------------------- |  | -----------------------------
|Dated: May 15, 2002 |  | By:                          

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