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

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 June 30, 2003

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 Number: 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.)2150 Schuetz Road
St. Louis, Missouri 63146(Address of principal executive office, including zip code)(314) 427-0780(Registrant's telephone number, including area code)


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.

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes o    No ý.

As
of August 1, 2003, the registrant had 33,202,731 Class A voting and 33,202,731 Class B nonvoting shares of common stock outstanding and 37,600 Class A
nonvoting shares of preferred stock outstanding.

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UNITED INDUSTRIES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
PERIOD ENDED JUNE 30, 2003

TABLE OF CONTENTS



|                                                                                              |                                                                                                                          | Page
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                                          |     
|Item 1. Financial Statements (Unaudited)                                                      |                                                                                                                          |     
|                                                                                              | Consolidated Balance Sheets as of June 30, 2003 and 2002 and December 31, 2002                                           |     
|                                                                                              | Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2003 and 2002 |     
|                                                                                              | Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2003 and 2002                          |     
|                                                                                              | Notes to Consolidated Financial Statements                                                                               |     
|Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                          | 28  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                          | 41  
|Item 4. Controls and Procedures                                                               |                                                                                                                          | 43  
|PART II. OTHER INFORMATION                                                                    |                                                                                                                          |     
|Item 1. Legal Proceedings                                                                     |                                                                                                                          | 44  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                          | 44  
|Signatures                                                                                    |                                                                                                                          | 45  
|Exhibit Index                                                                                 |                                                                                                                          | 46  

2

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements. These statements are subject to a number of risks and uncertainties, many of which are beyond our
control. All statements other than statements of historical facts included in this Quarterly Report, including statements regarding our strategy, future operations, financial position, estimated
revenues, projected costs, projections, plans and objectives of management, are forward-looking statements. As may be used in this Quarterly Report, the words "will," "believe," "plan," "may,"
"strategies," "goals," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements
contain such identifying words. All forward-looking statements speak only as of the date they were made. We do not undertake any obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. Although we believe that our plans, intentions and expectations reflected in or suggested by any forward-looking statements we make
in this Quarterly Report are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved.

Our
actual results could differ significantly from the results discussed in any forward-looking statements contained in this Quarterly Report. Factors that could cause or contribute to
such differences include, without limitation, the following:



Spectracide®,
Spectracide Triazicide, Spectracide Terminate®, Hot Shot®, Garden Safe, Schultz®, Expert
Gardener®, Rid-a-Bug®, Bag-a-Bug®, Real-Kill®, No-Pest®,
Repel®, Gro Best®, Vigoro®, Sta-Green® and Bandini® are our trademarks and trade names. We also license certain
Cutter® trademarks from Bayer A.G. and certain Peters® and Peters Professional® trademarks from The Scotts Company. Other trademarks and trade names used in this
Quarterly Report are the property of their respective owners.

3

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PART I. FINANCIAL INFORMATION    Item 1. Financial Statements

UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands, except share data)        (Unaudited)

|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | June 30,                                    |         |          |        
|--------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | -------- | -------
|
|
|ASSETS                                              |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    | Current assets:                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                          |                                             | $       | 10,823   |        
|                                                    | Accounts receivable, less reserves of $4,941 and $4,999 at June 30, 2003 and 2002, respectively, and $3,171 at December 31, 2002                                                                                                                                                                                                                                                                   |                                             |         | 126,026  |        
|                                                    | Inventories                                                                                                                                                                                                                                                                                                                                                                                        |                                             |         | 77,703   |        
|                                                    | Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                                                                          |                                             |         | 8,470    |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total current assets                        |         |          | 223,022
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|Equipment and leasehold improvements, net           |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 32,878  |          |        
|Deferred tax asset                                  |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 84,953  |          |        
|Goodwill and intangible assets, net                 |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 98,277  |          |        
|Other assets, net                                   |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 11,863  |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total assets                                |         | $        | 450,993
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|LIABILITIES AND STOCKHOLDERS' DEFICIT               |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|Current liabilities:                                |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    | Current maturities of long-term debt and capital lease obligation                                                                                                                                                                                                                                                                                                                                  |                                             | $       | 1,434    |        
|                                                    | Accounts payable                                                                                                                                                                                                                                                                                                                                                                                   |                                             |         | 41,092   |        
|                                                    | Accrued expenses                                                                                                                                                                                                                                                                                                                                                                                   |                                             |         | 56,984   |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total current liabilities                   |         |          | 99,510 
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|Long-term debt, net of current maturities           |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 408,071 |          |        
|Capital lease obligation, net of current maturities |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 3,483   |          |        
|Other liabilities                                   |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             | 3,231   |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total liabilities                           |         |          | 514,295
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|Commitments and contingencies                       |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|Stockholders' deficit:                              |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    | Preferred stock (37,600 shares of $0.01 par value Class A issued and outstanding, 40,000 shares authorized)                                                                                                                                                                                                                                                                                        |                                             |         |         |        
|                                                    | Common stock (33.2 million shares each of $0.01 par value Class A and Class B issued and outstanding, 43.6 million shares of each authorized at June 30, 2003; 33.1 million shares of each issued and outstanding and 37.6
million shares of each authorized at June 30, 2002; 33.1 million shares of each issued and outstanding and 43.6 million shares of each authorized at December 31, 2002) |                                             |         | 665      |        
|                                                    | Treasury stock                                                                                                                                                                                                                                                                                                                                                                                     |                                             |         | (96      | )      
|                                                    | Warrants and options                                                                                                                                                                                                                                                                                                                                                                               |                                             |         | 11,745   |        
|                                                    | Additional paid-in capital                                                                                                                                                                                                                                                                                                                                                                         |                                             |         | 210,806  |        
|                                                    | Accumulated deficit                                                                                                                                                                                                                                                                                                                                                                                |                                             |         | (256,448 | )      
|                                                    | Common stock subscription receivable                                                                                                                                                                                                                                                                                                                                                               |                                             |         | (24,177  | )      
|                                                    | Common stock repurchase option                                                                                                                                                                                                                                                                                                                                                                     |                                             |         | (2,636   | )      
|                                                    | Common stock held in grantor trust                                                                                                                                                                                                                                                                                                                                                                 |                                             |         | (2,847   | )      
|                                                    | Loans to executive officer                                                                                                                                                                                                                                                                                                                                                                         |                                             |         | (324     | )      
|                                                    | Accumulated other comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                      |                                             |         | 10       |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total stockholders' deficit                 |         |          | (63,302
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    | Total liabilities and stockholders' deficit |         | $        | 450,993
|                                                    |                                                                                                                                                                                                                                                                                                                                                                                                    |                                             |         |          |        

See accompanying notes to consolidated financial statements.

4

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UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME        (Dollars in thousands)        (Unaudited)

|                                                 |                                               | Three Months Ended
June 30, |         | Six Months Ended
June 30,
|------------------------------------------------ | --------------------------------------------- | --------------------------- | ------- | -------------------------
|
|CONSOLIDATED STATEMENTS OF OPERATIONS:           |                                               |                             |         |                          
|Net sales before promotion expense               |                                               | $                           | 222,228 |                          
|Promotion expense                                |                                               |                             | 16,225  |                          
|                                                 |                                               |                             |         |                          
|Net sales                                        |                                               |                             | 206,003 |                          
|                                                 |                                               |                             |         |                          
|Operating costs and expenses:                    |                                               |                             |         |                          
|                                                 | Cost of goods sold                            |                             |         | 123,797                  
|                                                 | Selling, general and administrative expenses  |                             |         | 37,905                   
|                                                 |                                               |                             |         |                          
|                                                 | Total operating costs and expenses            |                             |         | 161,702                  
|                                                 |                                               |                             |         |                          
|Operating income                                 |                                               |                             | 44,301  |                          
|Interest expense, net                            |                                               |                             | 9,817   |                          
|                                                 |                                               |                             |         |                          
|Income before income tax expense                 |                                               |                             | 34,484  |                          
|Income tax expense                               |                                               |                             | 13,123  |                          
|                                                 |                                               |                             |         |                          
|Net income                                       |                                               | $                           | 21,361  |                          
|                                                 |                                               |                             |         |                          
|Preferred stock dividends                        |                                               |                             | 1,863   |                          
|                                                 |                                               |                             |         |                          
|Net income available to common stockholders      |                                               | $                           | 19,498  |                          
|                                                 |                                               |                             |         |                          
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME: |                                               |                             |         |                          
|Net income                                       |                                               | $                           | 21,361  |                          
|Other comprehensive income, net of tax:          |                                               |                             |         |                          
|                                                 | Gain on interest rate swaps                   |                             |         |                         
|                                                 | Gain (loss) on derivative hedging instruments |                             |         | (18                      
|                                                 |                                               |                             |         |                          
|Comprehensive income                             |                                               | $                           | 21,343  |                          
|                                                 |                                               |                             |         |                          

See
accompanying notes to consolidated financial statements.

5

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UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Dollars in thousands)        (Unaudited)

|                                               |                                                                                            | Six Months Ended June 30,                             |                                                     
|---------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------------------- | ----------------------------------------------------
|
|Cash flows from operating activities:          |                                                                                            |                                                       |                                                     
|                                               | Net income                                                                                 |                                                       | $                                                   
|                                               | Adjustments to reconcile net income to net cash flows from (used in) operating activities: |                                                       |                                                     
|                                               |                                                                                            | Depreciation and amortization                         |                                                     
|                                               |                                                                                            | Amortization and write-off of deferred financing fees |                                                     
|                                               |                                                                                            | Deferred income tax expense                           |                                                     
|                                               |                                                                                            | Changes in operating assets and liabilities:          |                                                     
|                                               |                                                                                            |                                                       | Accounts receivable                                 
|                                               |                                                                                            |                                                       | Inventories                                         
|                                               |                                                                                            |                                                       | Prepaid expenses and other current assets           
|                                               |                                                                                            |                                                       | Other assets                                        
|                                               |                                                                                            |                                                       | Accounts payable                                    
|                                               |                                                                                            |                                                       | Accrued expenses                                    
|                                               |                                                                                            |                                                       | Facilities and organizational rationalization charge
|                                               |                                                                                            |                                                       | Other operating activities, net                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|Cash flows from investing activities:          |                                                                                            |                                                       |                                                     
|                                               | Purchases of equipment and leasehold improvements                                          |                                                       |                                                     
|                                               | Payments for Schultz merger, net of cash acquired                                          |                                                       |                                                     
|                                               | Proceeds from sale of WPC product lines                                                    |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|Cash flows from financing activities:          |                                                                                            |                                                       |                                                     
|                                               | Proceeds from issuance of senior subordinated notes                                        |                                                       |                                                     
|                                               | Proceeds from additional term debt                                                         |                                                       |                                                     
|                                               | Proceeds from borrowings on revolver                                                       |                                                       |                                                     
|                                               | Proceeds from issuance of common stock                                                     |                                                       |                                                     
|                                               | Payments received for common stock subscription receivable                                 |                                                       |                                                     
|                                               | Payments received on loans to executive officer                                            |                                                       |                                                     
|                                               | Repayment of borrowings on revolver and other debt                                         |                                                       |                                                     
|                                               | Payments for debt issuance costs                                                           |                                                       |                                                     
|                                               | Change in cash overdrafts                                                                  |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|                                               |                                                                                            |                                                       |                                                     
|Net increase in cash and cash equivalents      |                                                                                            |                                                       | 505                                                 
|Cash and cash equivalents, beginning of period |                                                                                            |                                                       | 10,318                                              
|                                               |                                                                                            |                                                       |                                                     
|Cash and cash equivalents, end of period       |                                                                                            | $                                                     | 10,823                                              
|                                               |                                                                                            |                                                       |                                                     
|Noncash financing activities:                  |                                                                                            |                                                       |                                                     
|                                               | Preferred stock dividends accrued                                                          |                                                       | $                                                   
|                                               |                                                                                            |                                                       |                                                     
|                                               | Common stock issued related to Schultz merger                                              |                                                       | $                                                   
|                                               |                                                                                            |                                                       |                                                     
|                                               | Common stock issued related to Bayer agreements                                            |                                                       | $                                                   
|                                               |                                                                                            |                                                       |                                                     
|                                               | Debt assumed in Schultz merger                                                             |                                                       | $                                                   
|                                               |                                                                                            |                                                       |                                                     

See accompanying notes to consolidated financial statements.

6

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UNITED INDUSTRIES CORPORATION AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (Dollars in thousands, except where indicated)        (Unaudited)

Note 1Description of Business and Basis of Presentation

Operating as Spectrum Brands, United Industries Corporation (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, fertilizers, growing media and soils under a variety of brand names. The Company's value brands are targeted
toward consumers who want products and packaging that are comparable or superior to, and at lower prices than, premium price brands, while its opening price point brands are designed for cost
conscious consumers who want quality products. The Company's products are marketed to mass merchandisers, home improvement centers, hardware chains, nurseries and garden centers.

As
described further in Note 12, the Company's operations are divided into three business segments: Lawn and Garden, Household and Contract. The Company's lawn and garden brands
include, among others, Spectracide®, Garden Safe®, Real-Kill® and No-Pest® in the controls category, as well as
Sta-Green®, Vigoro®, Schultz® and Bandini® brands in the lawn and garden fertilizer and growing media categories. The Company's household
brands include, among others, Hot Shot®, Cutter® and Repel®. The Contract segment represents non-core products and includes various compounds and
chemicals such as, among others, cleaning solutions and automotive products.

The
accompanying consolidated financial statements include the accounts and balances of the Company and its wholly owned subsidiaries. All material intercompany transactions have been
eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim
financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures typically included in the Company's Annual
Report on Form 10-K have been condensed or omitted for this report. As such, this report should be read in conjunction with the consolidated financial statements and accompanying
notes in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2002. Certain amounts in the 2002 consolidated financial statements included herein have
been reclassified to conform with the 2003 presentation, including the reclassification of cash overdrafts from operating activities to financing activities in the accompanying consolidated statements
of cash flows for the six months ended June 30, 2002.

The
accompanying consolidated financial statements are unaudited. In the opinion of management, such statements include all adjustments, which consist of only normal recurring
adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year. The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

7

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Note 2Stock-Based Compensation

The Company accounts for stock options issued to employees using the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees" and applies the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting
for Stock-Based CompensationTransition and Disclosure, an amendment of FASB Statement No. 123." Under APB No. 25 and related interpretations, compensation expense is
recognized using the intrinsic value method for the difference between the exercise price of the options and the estimated fair value of the Company's common stock on the date of grant.

SFAS
No. 123 requires pro forma disclosure of the impact on earnings as if the Company determined stock-based compensation expense using the fair value method. The following table
presents net income, as reported, stock-based compensation included therein, stock-based compensation expense
that would have been recorded using the fair value method and pro forma net income that would have been reported had the fair value method been applied:

Three Months Ended June 30,

Six Months Ended June 30,2003

2002

2003

2002Net income, as reported

$
21,361

$
26,420

$
34,814

$
36,582Stock-based compensation expense included in net income, as reported, net of tax











Stock-based compensation expense using the fair value method, net of tax


368


369


720


738Pro forma net income


20,993


26,051


34,094


35,844


During
the six months ended June 30, 2003, 90,000 stock options were exercised at a price of $2.00 per share (not in thousands). In connection with this transaction, the related
stockholder surrendered 9,569 shares each of Class A and Class B common stock to the Company, valued at $0.1 million in the aggregate, to satisfy income tax withholding
requirements. The Company recorded the transaction as treasury stock which is presented as a reduction of stockholders' equity in the accompanying consolidated balance sheet as of June 30,
2003.

Note 3Inventories

Inventories consist of the following:

June 30,December 31,
20022003

2002Raw materials

$
29,554

$
17,538

$
27,853Finished goods


54,546


36,661


65,750Allowance for obsolete and slow-moving inventory


(6,397
)

(4,563
)

(5,841
)Total inventories, net

$
77,703

$
49,636

$
87,762


8

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Note 4Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of the following:

June 30,December 31,
20022003

2002Machinery and equipment

$
37,886

$
36,853

$
39,609Office furniture, equipment and capitalized software


24,015


18,847


26,299Transportation equipment


5,998


6,284


6,313Leasehold improvements


2,815


7,521


9,512Land and buildings








1,09970,714


69,505


82,832Accumulated depreciation and amortization


(37,836
)

(40,354
)

(48,614
)Total equipment and leasehold improvements, net

$
32,878

$
29,151

$
34,218


During
the first quarter of 2003, the Company recorded a write-off of leasehold improvements related to leased office space exited in 2003 and disposed of certain equipment
related to a manufacturing facility previously closed during 2002 with an aggregate gross historical cost of $10.3 million. No gain or loss was recognized in connection with the
write-off and disposal as the assets were fully depreciated.

For
the three months ended June 30, 2003 and 2002 and the year ended December 31, 2002, depreciation expense was $1.6 million, $2.2 million and
$7.3 million, respectively. For the six months ended June 30, 2003 and 2002, depreciation expense was $3.4 million and $4.4 million, respectively. As of June 30,
2003 and 2002 and December 31, 2002, the cost of the aircraft held under capital lease was
$5.3 million and related accumulated amortization was $3.8 million, $2.5 million, and $3.2 million, respectively.

Note 5Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:

|                   |                         |                                           |    | June 30, 2003 |   | June 30, 2002 |        | December 31, 2002
|------------------ | ----------------------- | ----------------------------------------- | -- | ------------- | - | ------------- | ------ | -----------------
|
|Intangible assets: |                         |                                           |    |               |   |               |        |                  
|                   | Trade names             |                                           | 40 |               | $ | 64,351        |        | $                
|                   | Customer relationships  |                                           | 5  |               |   | 24,897        |        |                  
|                   | Supply agreement        |                                           | 4  |               |   | 5,694         |        |                  
|                   | Other intangible assets |                                           | 25 |               |   | 601           |        |                  
|                   |                         |                                           |    |               |   |               |        |                  
|                   |                         | Total intangible assets                   |    |               |   | $             | 95,543 |                  
|                   |                         |                                           |    |               |   |               |        |                  
|Goodwill           |                         |                                           |    |               |   |               |        |                  
|                   |                         |                                           |    |               |   |               |        |                  
|                   |                         | Total goodwill and intangible assets, net |    |               |   |               |        |                  
|                   |                         |                                           |    |               |   |               |        |                  

9

---

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 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 separately from goodwill. SFAS No. 142, among other things, eliminates the amortization of goodwill and indefinite-lived
intangible assets and requires them to be tested for impairment at least annually. During 2002, both at adoption and at the end of the year, the Company performed an impairment analysis of its
goodwill. No impairment charges resulted from these analyses. Prospectively, the Company tests goodwill for impairment annually, or more frequently as warranted by events or changes in circumstances.
During the year ended December 31, 2002, after giving effect to the purchase price reallocation described below, goodwill in the amount of $3.3 million was recorded in connection with
acquisitions. No amounts were recorded for goodwill during the three or six months ended June 30, 2003.

Intangible
assets include trade names, customer relationships and other intangible assets, which are valued at acquisition through independent appraisals, where material, or using other
valuation methods. Intangible assets are amortized using the straight-line method over periods ranging from 4 to 40 years. The useful lives of intangible assets were not revised as
a result of the adoption of SFAS No. 142.

During
the first quarter of 2003, the Company obtained the final report of an independent third party valuation firm of the assets acquired and liabilities assumed in its merger with
Schultz Company (Schultz) in May 2002. The valuation report indicated the full value of the purchase price should be allocated to trade names, customer relationships and other identifiable
intangible assets obtained in the merger with no value ascribed to goodwill. As a result, the Company reclassified $19.8 million from goodwill and $4.8 million from other intangible
assets to customer relationships and is amortizing the customer relationships intangible asset using the straight-line method over the remaining useful life, four years. In addition,
during the second quarter of 2003, the Company recorded a write-off of $0.7 million for inventory acquired in the merger with Schultz that has since been determined to be excessive. The
write-off was recorded as an adjustment to the allocation of purchase price to intangible assets. The following table presents the reclassification and reallocation described:

|                                                     |                                                  |   |        |        |   |        |        |   |       | Goodwill by Segment |   |       |       
|---------------------------------------------------- | ------------------------------------------------ | - | ------ | ------ | - | ------ | ------ | - | ----- | ------------------- | - | ----- | ------
|
|Goodwill and intangible assets at December 31, 2002  |                                                  | $ | 64,025 |        | $ |       |        | $ | 5,694 |                     | $ | 5,401 |       
|                                                     | Purchase price reclassification and reallocation |   |        | 326    |   |        | 24,897 |   |       |                    |   |       | (4,800
|                                                     |                                                  |   |        |        |   |        |        |   |       |                     |   |       |       
|Goodwill and intangible assets at June 30, 2003      |                                                  |   | 64,351 |        |   | 24,897 |        |   | 5,694 |                     |   | 601   |       
|                                                     |                                                  |   |        |        |   |        |        |   |       |                     |   |       |       
|                                                     | Accumulated amortization                         |   |        | (2,494 | ) |        | (2,495 | ) |       | (1,033              | ) |       | (83   
|                                                     |                                                  |   |        |        |   |        |        |   |       |                     |   |       |       
|Goodwill and intangible assets, net at June 30, 2003 |                                                  | $ | 61,857 |        | $ | 22,402 |        | $ | 4,661 |                     | $ | 518   |       
|                                                     |                                                  |   |        |        |   |        |        |   |       |                     |   |       |       

10

---

During May 2003, the Company consummated the sale of all of the non-core product lines acquired in its acquisition of WPC
Brands, Inc. (WPC Brands) in December 2002. The product lines sold include, among others, water purification tablets, first-aid kits and fish attractant products. Total
assets and operating results associated with the product lines sold were not significant to the Company's consolidated financial position or results of operations. No gain or loss was recorded as the
sale price was approximately equal to the net book value of the assets and liabilities sold. In addition, the Company is currently in the process of obtaining an independent third party valuation of
the assets acquired and liabilities assumed in the acquisition, taking into account the subsequent sale of the non-core product lines, and expects to have the final valuation report in
August 2003.

For
the three months ended June 30, 2003 and 2002 and the year ended December 31, 2002, aggregate amortization expense related to intangible assets was $2.1 million,
$0.5 million and $2.9 million, respectively. For the six months ended June 30, 2003 and 2002, aggregate amortization expense related to intangible assets was $2.5 million
and $0.6 million, respectively.

Note 6Other Assets

Other assets consist of the following:

June 30,December 31,
20022003

2002Deferred financing fees

$
23,542

$
21,306

$
22,432Accumulated amortization


(13,063
)

(8,587
)

(10,382
)Deferred financing fees, net


10,479


12,719


12,050Other


1,384


942


975Total other assets, net

$
11,863

$
13,661

$
13,025


In
connection with its issuance of 97/8% Series C senior subordinated notes in March 2003 (see Note 9), the Company recorded $2.2 million of
deferred financing fees which are being amortized over the term of the notes through April 1, 2009. In connection with the repayment of a portion of its outstanding obligations under the Senior
Credit Facility in March 2003, using proceeds from the issuance of such notes, the Company recorded a write-off of $1.3 million of previously deferred financing fees. In
connection with the prepayment of $23.3 million on Term Loan B in June 2003, the Company recorded a write-off of $0.3 million of previously deferred financing fees.
Both of these charges are reflected in interest expense in the accompanying consolidated statement of operations for the six months ended June 30, 2003.

11

---

Note 7Accrued Expenses

Accrued expenses consist of the following:

June 30,December 31,
20022003

2002Advertising and promotions

$
26,023

$
24,930

$
16,401Facilities rationalization


513


3,153


1,563Interest


6,897


3,986


3,777Cash overdrafts








1,506Noncompete agreement


350


1,625


1,770Preferred stock dividends


13,128


5,760


9,492Salaries and benefits


4,491


3,188


4,357Severance costs


545


892


869Freight


1,874


1,958


441Other


3,163


4,232


5,045Total accrued expenses

$
56,984

$
49,724

$
45,221


Note 8Charge for Facilities and Organization Rationalization

During the fourth quarter of 2001, the Company recorded a charge of $8.5 million, which included $5.6 million related to facilities and
organizational rationalization which primarily affected the Company's Lawn and Garden segment results, $2.7 million of inventory obsolescence recorded in cost of goods sold and
$0.2 million of various costs recorded in selling, general and administrative expenses. In connection therewith, 85 employees were terminated and provided severance benefits. Approximately
$3.5 million of costs associated with the facilities and organizational rationalization, which related primarily to facility exit costs and resultant duplicate rent payments in 2002, were
incurred by December 31, 2002. Amounts remaining in the facilities and organizational rationalization accrual as of June 30, 2003 and charged against the accrual during the six months
ended June 30, 2003 primarily represent costs associated with the restoration of leased facilities to their original condition, duplicate rent payments and severance costs which will be
incurred by the end of 2003.

The
following table presents amounts charged against the facilities and organizational rationalization accrual:

Facilities
Rationalization

Severance
Costs

Total
CostsBalance at December 31, 2002

$
1,563

$
379

$
1,942Charges against the accrual


(1,050
)

(202
)

(1,252
)Balance at June 30, 2003

$
513

$
177

$
690


12

---

Note 9Long-term Debt

Long-term debt, excluding capital lease obligation, consists of the following:

June 30, 2003December 31,
20022003

2002Senior Credit Facility:Term Loan A

$


$
34,593

$
28,250Term Loan B


172,767


198,553


222,465Revolving Credit Facility








97/8% Series B Senior Subordinated Notes


150,000


150,000


150,00097/8% Series C Senior Subordinated Notes, including unamortized premium of $1.2 million


86,202





408,969


383,146


400,715Less current maturities and short-term borrowings


(898
)

(7,368
)

(9,222
)Total long-term debt, net of current maturities

$
408,071

$
375,778

$
391,493


Senior Credit Facility

The Senior Credit Facility, as amended as of March 14, 2003, is provided by Bank of America, N.A., Morgan Stanley Senior Funding, Inc. and Canadian
Imperial Bank of Commerce and consists of (1) a $90.0 million revolving credit facility (the Revolving Credit Facility); (2) a $75.0 million term loan facility (Term Loan
A); and (3) a $240.0 million term loan facility (Term Loan B). The Revolving Credit Facility and Term Loan A mature 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 during the period between August 1 and November 30 in each calendar year. As of June 30, 2003 and 2002, there were no amounts
outstanding under the Revolving Credit Facility. As of December 31, 2002, the clean-down period had been completed and no amounts were outstanding under the Revolving Credit
Facility. There were no compensating balance requirements during each of the periods presented.

The
amendment to the Senior Credit Facility dated March 14, 2003 permits the issuance of 97/8% Series C senior subordinated notes due 2009 (the
Series C Notes) and 97/8% Series D senior subordinated notes due 2009 (the Series D Notes). The Company issued the Series C Notes in March 2003 and
offered the Series D Notes in June and July 2003 in exchange for outstanding Series B Notes and Series C Notes. This amendment did not change any other existing covenants
of the Senior Credit Facility.

The
principal amount of Term Loan A was to be repaid in 24 consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2005.
However, in connection with the issuance of the Series C Notes, as described below, the Company used a portion of the proceeds to repay the outstanding balance under Term Loan A. The principal
amount of Term Loan B is to be repaid in 28 consecutive quarterly installments commencing June 30, 1999 with a final installment due

13

---

January 20,
2006. The Company used a portion of the proceeds from the issuance of the Series C Notes to repay $25.9 million of the balance under Term Loan B.

The
Senior Credit Facility agreement contains restrictive affirmative, negative and financial covenants. Affirmative and negative covenants place restrictions on, among other things,
levels of investments, indebtedness, insurance, capital expenditures and dividend payments. The financial covenants require the maintenance of certain financial ratios at defined levels. As of and
during the six months ended June 30, 2003 and 2002 and the year ended December 31, 2002, the Company was in compliance with all covenants. While the Company does not anticipate an event
of non-compliance in the foreseeable future, the effect of non-compliance would require the Company to request a waiver or an amendment to the Senior Credit Facility. Amending
the Senior Credit Facility could result in changes to the Company's borrowing capacity or its effective interest rates. Under the agreements, interest rates on the Revolving Credit Facility, Term Loan
A and Term Loan B range from 1.50% to 4.00% above LIBOR, depending on certain financial ratios. LIBOR was 1.12% as of June 30, 2003, 1.86% as of June 30, 2002 and 1.38% as of
December 31, 2002. Unused commitments under the Revolving Credit Facility are subject to a 0.5% annual commitment fee. The interest rate of Term Loan A was 4.67% as of December 31, 2002.
The interest rate of Term Loan B was 5.32% and 5.86% as of June 30, 2003 and 2002, respectively, and 5.42% as of December 31, 2002.

The
Senior Credit Facility may be prepaid in whole or in part at any time without premium or penalty. During the six months ended June 30, 2003, the Company made principal
payments of $28.3 million to fully repay Term Loan A and $49.2 million on Term Loan B, which represent optional principal prepayments. In connection with these prepayments, the Company
recorded write-offs totaling $1.6 million in previously deferred financing fees which are reflected in interest expense in the accompanying consolidated statement of operations for
the six months ended June 30, 2003. For the year ended December 31, 2002, the Company made principal payments of $11.0 million on Term Loan A and $2.0 million on Term Loan
B, which included optional principal prepayments of $6.3 million on Term Loan A and $1.1 million on Term Loan B. The optional prepayments in the six months ended June 30, 2002
were made to remain several quarterly payments ahead of the regular payment schedule. Under the Senior Credit Facility, each prepayment may be applied to the next principal repayment installments. The
Company remains several principal payments ahead of schedule on Term Loan B and intends to pay a full year of principal installments in 2003 in accordance with the terms of the Senior Credit Facility.

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

Senior Subordinated Notes

In November 1999, the Company issued $150.0 million in aggregate principal amount of 97/8% Series B senior subordinated notes
(the Series B Notes) due April 1, 2009. Interest accrues at a rate of 97/8% per annum, payable semi-annually on April 1 and October 1.

14

---

In
March 2003, the Company issued $85.0 million in aggregate principal amount of 97/8% Series C senior subordinated notes due April 1, 2009
(the Series C Notes) in a private placement. Gross proceeds from the issuance were $86.3 million and included a premium of $1.275 million which is being amortized over the term of
the Series C Notes using the effective interest method. Interest on the Series C Notes accrues at a rate of 97/8% per annum, payable semi-annually on
April 1 and October 1. Net proceeds of $84.1 million were used to repay $30.0 million of the Revolving Credit Facility, fully repay $28.3 million outstanding under
Term Loan A and repay $25.9 million outstanding under Term Loan B. The Series C Notes were issued with terms substantially similar to the Series B Notes. In connection with its
issuance of the Series C Notes, the Company recorded $2.2 million of deferred financing fees which are being amortized over the term of the Series C Notes. As of June 30,
2003, $85.0 million of the Series C Notes were outstanding.

In
May 2003, the Company registered the Series D Notes (collectively with the Series B Notes and Series C Notes, the Senior Subordinated Notes), with terms
substantially similar to the Series B Notes and the Series C Notes, with the U.S. Securities Exchange Commission and offered to exchange the Series D Notes for up to 100% of the
Series B Notes and Series C Notes. As of June 30, 2003, the exchange offering had not closed and, therefore, no Series D Notes were outstanding. The exchange offering
closed in July 2003, resulting in $85.0 million, or 100%, of the Series C Notes being exchanged and $146.9 million, or 98%, of the Series B Notes being exchanged,
with $3.1 million of the Series B Notes still outstanding.

The
Company's indentures governing the Senior Subordinated Notes contain a number of significant covenants that could adversely impact the Company's business. In particular, the
indentures limit the Company's ability to:



15

---





The
ability to comply with these provisions may be affected by events beyond the Company's control. The breach of any of these covenants will result in a default under the applicable
debt agreement or instrument and could trigger acceleration of repayment under the applicable agreements. Any default under the Company's indentures governing the Senior Subordinated Notes might
adversely affect the Company's growth, financial condition and results of operations and the ability to make payments on the Senior Subordinated Notes or meet other obligations.

The
fair value of the Senior Subordinated Notes was $246.8 million and $149.3 million as of June 30, 2003 and 2002, respectively, and $151.5 million as of
December 31, 2002, based on their quoted market price on such dates. In accordance with the indentures governing the Senior Subordinated Notes, the Senior Subordinated Notes are unconditionally
and jointly and severally guaranteed by the Company's wholly-owned subsidiaries (see Note 14).

Aggregate
future principal payments of long-term debt, excluding capital lease obligation, as of June 30, 2003 are as follows:

Year

AmountRemainder of 2003

$
2004


1,7972005


128,3402006


42,6302007


Thereafter


236,202$
408,969


Note 10Contingencies

In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as standby
letters of credit and indemnifications, which are not reflected in the accompanying consolidated balance sheets. As of June 30, 2003 and 2002 and December 31, 2002, the Company had
$1.7 million, $1.3 million and $1.9 million, respectively, in standby letters of credit pledged as collateral to support the lease of its primary distribution facility in St.
Louis, a United States customs bond, certain product purchases, various workers' compensation obligations and the aircraft. These agreements mature at various dates through May 2004 and may be
renewed as circumstances warrant. Such financial instruments are valued based on the amount of exposure under the instruments and the likelihood of performance being required. In the Company's past
experience, no claims have been made against these financial instruments nor does management expect any losses to result from them.

The
Company is the lessee under a number of equipment and property leases, as described above. It is common in such commercial lease transactions for the Company to agree to indemnify
the lessor for the value of the property or equipment leased should it be damaged during the course of the

16

---

Company's
operations. The Company expects that any losses that may occur with respect to the leased property would be covered by insurance, subject to deductible amounts.

The
Company has entered into certain derivative hedging instruments and other commitments to purchase granular urea during 2003. See Note 11 for information regarding these
commitments.

The
Company is involved from time to time in routine legal matters and other claims incidental to its business. 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, liabilities are recorded in the consolidated financial statements and
charges are recorded against earnings. Management believes that it is remote the resolution of such routine matters
and other incidental claims, taking into account established reserves and insurance, will have a material adverse impact on the Company's consolidated financial position, results of operations or
liquidity.

Note 11Accounting for Derivative Instruments and Hedging Activities

In the normal course of business, the Company is exposed to fluctuations in interest rates and raw materials prices. The Company has established policies and
procedures that govern the management of these exposures through the use of derivative hedging instruments, including swap agreements. The Company's objective in managing its exposure to such
fluctuations is to decrease the volatility of earnings and cash flows associated with changes in interest rates and certain raw materials prices. To achieve this objective, the Company periodically
enters into swap agreements with values that change in the opposite direction of anticipated cash flows. The Company considers the financial stability and credit standing of its counterparties for
such agreements. Derivative instruments related to forecasted raw materials purchases are considered to hedge future cash flows, and the effective portion of any gain or loss is included in
accumulated other comprehensive income until earnings are affected by the variability of cash flows. Any remaining gain or loss is recognized currently in earnings.

While
management expects these instruments and agreements to manage the Company's exposure to such price fluctuations, no assurance can be provided that the instruments will be effective
in fully mitigating exposure to these risks, nor can assurance be provided that the Company will be successful in passing on pricing increases to its customers.

The
Company has formally documented, designated and assessed the effectiveness of transactions that receive hedge accounting treatment. The cash flows of the derivative instruments are
expected to be highly effective in achieving offsetting cash flows attributable to fluctuations in the cash flows of the hedged risk. Changes in the fair value of agreements designated as derivative
hedging instruments are reported as either an asset or liability in the accompanying consolidated balance sheets with the associated unrealized gain or loss reflected in accumulated other
comprehensive income. As of June 30, 2003 and December 31, 2002, an unrealized gain of less than $0.1 million and an unrealized loss of less than $0.1 million,
respectively, related to derivative instruments designated as cash flow hedges were recorded in accumulated other comprehensive income. One such instrument was outstanding at June 30, 2003
which represents a hedging agreement of forecasted purchases of raw materials during 2003 that is scheduled to mature in July 2003. The amounts included in accumulated other

17

---

comprehensive
income are subsequently reclassified into cost of goods sold in the same period in which the underlying hedged transactions affect earnings.

If
it becomes probable that a forecasted transaction will no longer occur, any gain or loss in accumulated other comprehensive income will be recognized in earnings. The Company has not
incurred any gains or losses for hedge ineffectiveness or due to excluding a portion of the value from
measuring effectiveness. The Company does not enter into derivatives or other hedging arrangements for trading or speculative purposes.

For
the six months ended June 30, 2003, the Company reclassified $1.4 million from accumulated other comprehensive income into cost of goods sold representing a gain on raw
materials derivative hedging instruments. No such amounts were recorded during the six months ended June 30, 2002 or year ended December 31, 2002.

Note 12Segment Information

During the third quarter of 2002, the Company began reporting its operating results using three reportable segments: Lawn and Garden, Household and Contract.
Segments were established primarily by product type which represents the basis upon which management, including the CEO who is the chief operating decision maker of the Company, reviews and assesses
the Company's financial performance. The Lawn and Garden segment primarily consists of dry, granular slow-release lawn fertilizers, lawn fertilizer combination and lawn control products,
herbicides, water-soluble and controlled-release garden and indoor plant foods, plant care products, potting soils and other growing media products and insecticide products. Products are marketed to
mass merchandisers, home improvement centers, hardware chains, nurseries and garden centers. This segment includes, among others, the Company's Spectracide, Garden Safe, Schultz, Vigoro,
Sta-Green, Bandini, Real-Kill and No-Pest brands.

The
Household segment represents household insecticides and insect repellents that allow consumers to achieve and maintain a pest-free household and repel insects. The
Household segment includes the Company's Hot Shot, Cutter and Repel brands, as well as a number of private label and other products.

The
Contract segment represents mainly non-core products, some of which are private label, and includes various compounds and chemicals such as, among others, cleaning
solutions and automotive products.

The
following table presents certain financial segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," for the
three and six months ended June 30, 2003 and 2002. The accounting policies of the reportable segments are the same as those described in the summary of significant polices in Note 1 to
the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31,

18

---

2002,
as applicable. The segment financial information presented includes comparative periods prepared on a basis consistent with the current year presentation.

Three Months Ended
June 30,

Six Months Ended
June 30,2003

2002

2003

2002Net sales:Lawn and Garden

$
142,256

$
144,195

$
287,870

$
254,580Household


61,021


43,372


88,588


68,650Contract


2,726


7,569


8,357


8,297Total net sales

$
206,003

$
195,136

$
384,815

$
331,527Operating income:Lawn and Garden

$
26,119

$
26,077

$
50,592

$
41,010Household


17,795


13,805


24,421


20,849Contract


387


606


346


618Total operating income

$
44,301

$
40,488

$
75,359

$
62,477Operating margin:Lawn and Garden


18.4
%

18.1
%

17.6
%

16.1
%Household


29.2
%

31.8
%

27.6
%

30.4
%Contract


14.2
%

8.0
%

4.1
%

7.4
%Total operating margin


21.5
%

20.7
%

19.6
%

18.8
%


Operating
income represents earnings before net interest expense and income tax expense. Operating income is the measure of profitability used by management to assess the Company's
financial performance. Operating margin represents operating income as a percentage of net sales.

The
majority of the Company's sales are conducted with customers in the United States. The Company's international sales comprise less than 1% of total net sales. In addition, no single
item comprises more than 10% of the Company's net sales. For the three months ended June 30, 2003 and 2002, the Company's three largest customers were responsible for 65% and 77% of net sales,
respectively. For the six months ended June 30, 2003 and 2002, the Company's three largest customers were responsible for 71% and 74% of net sales, respectively.

As
the Company's assets support production across all segments, they are managed on an entity-wide basis at the corporate level and are not recorded or analyzed by segment.
However, goodwill has been allocated by segment based on the percentage of sales represented by product lines acquired in the Company's merger with Schultz and acquisition of WPC Brands in 2002.
Substantially all of the Company's assets are located in the United States.

Note 13Shipping and Handling Costs

Certain shipping and handling costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. These
costs primarily consist of personnel and

19

---

other
general and administrative costs associated with the Company's distribution facilities, and to a lesser extent, some costs related to the shipment of goods between the Company's facilities. For
the three months ended June 30, 2003 and 2002 and the year ended December 31, 2002, these costs were $6.1 million, $3.3 million and $15.7 million, respectively. For
the six months ended June 30, 2003 and 2002, these costs were $12.2 million and $7.1 million, respectively. The remaining shipping and handling costs comprise those costs
associated with shipping goods to customers and receiving supplies from vendors and are included in cost of goods sold in the accompanying consolidated statements of operations.

Note 14Financial Information for Subsidiary Guarantors

The Company's Senior Subordinated Notes are unconditionally and jointly and severally guaranteed by all of the Company's existing subsidiaries. The Company's
subsidiaries are 100% owned by the Company. The consolidating financial information below is presented as of and for the three and six months ended June 30, 2003 and 2002 and has been prepared
in accordance with the requirements for presentation of such information. The Company believes that separate financial statements concerning the guarantor subsidiaries would not be material to
investors and that the information presented herein provides sufficient detail to determine the nature of the aggregate financial position, results of operations and cash flows of the guarantor
subsidiaries.

The
Company's investment in subsidiaries is accounted for using the equity method of accounting. Earnings of the subsidiaries are reflected in the respective investment accounts of the
parent company accordingly. The investments in subsidiaries and all intercompany balances and transactions have been eliminated. Various assumptions and estimates were used to establish the financial
statements of such subsidiaries for the information presented herein.

20

---



UNITED INDUSTRIES CORPORATION
BALANCE SHEET
AS OF JUNE 30, 2003
(unaudited)

|                                                    |                                                                   | Parent                                               |         | Subsidiary
Guarantors |         | Eliminations |        | Consolidated |        
|--------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------- | ------- | --------------------- | ------- | ------------ | ------ | ------------ | -------
|ASSETS                                              |                                                                   |                                                      |         |                       |         |              |        |              |        
|Current assets:                                     |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    | Cash and cash equivalents                                         |                                                      | $       | 10,509                |         | $            | 314    |              | $      
|                                                    | Accounts receivable, net                                          |                                                      |         | 118,643               |         |              | 7,383  |              |        
|                                                    | Inventories                                                       |                                                      |         | 48,444                |         |              | 29,259 |              |        
|                                                    | Prepaid expenses and other current assets                         |                                                      |         | 8,071                 |         |              | 399    |              |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total current assets                                 |         |                       | 185,667 |              |        | 37,355       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|Equipment and leasehold improvements, net           |                                                                   |                                                      | 27,750  |                       |         | 5,128        |        |              |       
|Investment in subsidiaries                          |                                                                   |                                                      | 26,891  |                       |         |             |        |              | (26,891
|Intercompany assets                                 |                                                                   |                                                      | 56,473  |                       |         |             |        |              | (56,473
|Deferred tax asset                                  |                                                                   |                                                      | 84,527  |                       |         | 426          |        |              |       
|Goodwill and intangible assets, net                 |                                                                   |                                                      | 46,789  |                       |         | 51,488       |        |              |       
|Other assets, net                                   |                                                                   |                                                      | 10,596  |                       |         | 1,267        |        |              |       
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total assets                                         |         | $                     | 438,693 |              | $      | 95,664       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      |                                                                   |                                                      |         |                       |         |              |        |              |        
|Current liabilities:                                |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    | Current maturities of long-term debt and capital lease obligation |                                                      | $       | 1,434                 |         | $            |       |              | $      
|                                                    | Accounts payable                                                  |                                                      |         | 30,276                |         |              | 10,816 |              |        
|                                                    | Accrued expenses                                                  |                                                      |         | 55,500                |         |              | 1,484  |              |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total current liabilities                            |         |                       | 87,210  |              |        | 12,300       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|Long-term debt, net of current maturities           |                                                                   |                                                      | 408,071 |                       |         |             |        |              |       
|Capital lease obligation, net of current maturities |                                                                   |                                                      | 3,483   |                       |         |             |        |              |       
|Other liabilities                                   |                                                                   |                                                      | 3,231   |                       |         |             |        |              |       
|Intercompany liabilities                            |                                                                   |                                                      |        |                       |         | 56,473       |        |              | (56,473
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total liabilities                                    |         |                       | 501,995 |              |        | 68,773       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|Commitments and contingencies                       |                                                                   |                                                      |         |                       |         |              |        |              |        
|Stockholders' equity (deficit):                     |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    | Preferred stock                                                   |                                                      |         |                      |         |              |       |              |        
|                                                    | Common stock                                                      |                                                      |         | 665                   |         |              |       |              |        
|                                                    | Treasury stock                                                    |                                                      |         | (96                   | )       |              |       |              |        
|                                                    | Warrants and options                                              |                                                      |         | 11,745                |         |              |       |              |        
|                                                    | Investment from parent                                            |                                                      |         |                      |         |              | 23,708 |              |        
|                                                    | Additional paid-in capital                                        |                                                      |         | 210,806               |         |              |       |              |        
|                                                    | Accumulated deficit                                               |                                                      |         | (256,448              | )       |              | 3,183  |              |        
|                                                    | Common stock subscription receivable                              |                                                      |         | (24,177               | )       |              |       |              |        
|                                                    | Common stock repurchase option                                    |                                                      |         | (2,636                | )       |              |       |              |        
|                                                    | Common stock held in grantor trust                                |                                                      |         | (2,847                | )       |              |       |              |        
|                                                    | Loans to executive officer                                        |                                                      |         | (324                  | )       |              |       |              |        
|                                                    | Accumulated other comprehensive income                            |                                                      |         | 10                    |         |              |       |              |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total stockholders' equity (deficit)                 |         |                       | (63,302 | )            |        | 26,891       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        
|                                                    |                                                                   | Total liabilities and stockholders' equity (deficit) |         | $                     | 438,693 |              | $      | 95,664       |        
|                                                    |                                                                   |                                                      |         |                       |         |              |        |              |        

21

---



UNITED INDUSTRIES CORPORATION
BALANCE SHEET
AS OF JUNE 30, 2002
(unaudited)

|                                                    |                                                                   | Parent                                               |         | Subsidiary
Guarantor |         | Eliminations |        | Consolidated |        
|--------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------- | ------- | -------------------- | ------- | ------------ | ------ | ------------ | -------
|ASSETS                                              |                                                                   |                                                      |         |                      |         |              |        |              |        
|Current assets:                                     |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    | Cash and cash equivalents                                         |                                                      | $       | 717                  |         | $            |       |              | $      
|                                                    | Accounts receivable, net                                          |                                                      |         | 95,000               |         |              | 20,851 |              |        
|                                                    | Inventories                                                       |                                                      |         | 38,974               |         |              | 10,662 |              |        
|                                                    | Prepaid expenses and other current assets                         |                                                      |         | 5,989                |         |              | 679    |              |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total current assets                                 |         |                      | 140,680 |              |        | 32,192       |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|Equipment and leasehold improvements, net           |                                                                   |                                                      | 25,420  |                      |         | 3,731        |        |              |       
|Investment in subsidiaries                          |                                                                   |                                                      | 4,917   |                      |         |             |        |              | (4,917 
|Intercompany assets                                 |                                                                   |                                                      | 53,507  |                      |         |             |        |              | (53,507
|Deferred tax asset                                  |                                                                   |                                                      | 99,153  |                      |         | 357          |        |              |       
|Goodwill and intangible assets, net                 |                                                                   |                                                      | 42,708  |                      |         | 39,410       |        |              |       
|Other assets, net                                   |                                                                   |                                                      | 13,326  |                      |         | 335          |        |              |       
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total assets                                         |         | $                    | 379,711 |              | $      | 76,025       |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      |                                                                   |                                                      |         |                      |         |              |        |              |        
|Current liabilities:                                |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    | Current maturities of long-term debt and capital lease obligation |                                                      | $       | 7,790                |         | $            |       |              | $      
|                                                    | Accounts payable                                                  |                                                      |         | 30,874               |         |              | 12,202 |              |        
|                                                    | Accrued expenses                                                  |                                                      |         | 45,073               |         |              | 4,651  |              |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total current liabilities                            |         |                      | 83,737  |              |        | 16,853       |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|Long-term debt, net of current maturities           |                                                                   |                                                      | 375,778 |                      |         |             |        |              |       
|Capital lease obligation, net of current maturities |                                                                   |                                                      | 4,004   |                      |         |             |        |              |       
|Other liabilities                                   |                                                                   |                                                      | 1,440   |                      |         | 748          |        |              |       
|Intercompany liabilities                            |                                                                   |                                                      |        |                      |         | 53,507       |        |              | (53,507
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total liabilities                                    |         |                      | 464,959 |              |        | 71,108       |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|Commitments and contingencies                       |                                                                   |                                                      |         |                      |         |              |        |              |        
|Stockholders' equity (deficit):                     |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    | Preferred stock                                                   |                                                      |         |                     |         |              |       |              |        
|                                                    | Common stock                                                      |                                                      |         | 664                  |         |              |       |              |        
|                                                    | Warrants and options                                              |                                                      |         | 11,745               |         |              |       |              |        
|                                                    | Investment from parent                                            |                                                      |         |                     |         |              | 981    |              |        
|                                                    | Additional paid-in capital                                        |                                                      |         | 207,088              |         |              |       |              |        
|                                                    | Accumulated deficit                                               |                                                      |         | (272,934             | )       |              | 3,936  |              |        
|                                                    | Common stock subscription receivable                              |                                                      |         | (26,071              | )       |              |       |              |        
|                                                    | Common stock repurchase option                                    |                                                      |         | (2,636               | )       |              |       |              |        
|                                                    | Common stock held in grantor trust                                |                                                      |         | (2,700               | )       |              |       |              |        
|                                                    | Loans to executive officer                                        |                                                      |         | (404                 | )       |              |       |              |        
|                                                    | Accumulated other comprehensive income                            |                                                      |         |                     |         |              |       |              |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total stockholders' equity (deficit)                 |         |                      | (85,248 | )            |        | 4,917        |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        
|                                                    |                                                                   | Total liabilities and stockholders' equity (deficit) |         | $                    | 379,711 |              | $      | 76,025       |        
|                                                    |                                                                   |                                                      |         |                      |         |              |        |              |        

22

---



UNITED INDUSTRIES CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2003
(unaudited)

|                                        |                                              | Parent |         | Subsidiary
Guarantors |   | Eliminations |        | Consolidated
|--------------------------------------- | -------------------------------------------- | ------ | ------- | --------------------- | - | ------------ | ------ | ------------
|Net sales before promotion expense      |                                              | $      | 180,572 |                       | $ | 68,272       |        | $           
|Promotion expense                       |                                              |        | 13,388  |                       |   | 2,837        |        |             
|                                        |                                              |        |         |                       |   |              |        |             
|Net sales                               |                                              |        | 167,184 |                       |   | 65,435       |        |             
|                                        |                                              |        |         |                       |   |              |        |             
|Operating costs and expenses:           |                                              |        |         |                       |   |              |        |             
|                                        | Cost of goods sold                           |        |         | 96,922                |   |              | 52,784 |             
|                                        | Selling, general and administrative expenses |        |         | 34,682                |   |              | 3,930  |             
|                                        | Equity (income) loss in subsidiaries         |        |         | (5,325                | ) |              |       |             
|                                        |                                              |        |         |                       |   |              |        |             
|                                        | Total operating costs and expenses           |        |         | 126,279               |   |              | 56,714 |             
|                                        |                                              |        |         |                       |   |              |        |             
|Operating income (loss)                 |                                              |        | 40,905  |                       |   | 8,721        |        |             
|Interest expense, net                   |                                              |        | 9,666   |                       |   | 151          |        |             
|                                        |                                              |        |         |                       |   |              |        |             
|Income (loss) before income tax expense |                                              |        | 31,239  |                       |   | 8,570        |        |             
|Income tax expense                      |                                              |        | 9,878   |                       |   | 3,245        |        |             
|                                        |                                              |        |         |                       |   |              |        |             
|Net income (loss)                       |                                              | $      | 21,361  |                       | $ | 5,325        |        | $           
|                                        |                                              |        |         |                       |   |              |        |             

UNITED INDUSTRIES CORPORATION
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002
(unaudited)

|                                        |                                              | Parent |         | Subsidiary
Guarantor |   | Eliminations |        | Consolidated
|--------------------------------------- | -------------------------------------------- | ------ | ------- | -------------------- | - | ------------ | ------ | ------------
|Net sales before promotion expense      |                                              | $      | 189,931 |                      | $ | 20,898       |        | $           
|Promotion expense                       |                                              |        | 15,027  |                      |   | 666          |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Net sales                               |                                              |        | 174,904 |                      |   | 20,232       |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Operating costs and expenses:           |                                              |        |         |                      |   |              |        |             
|                                        | Cost of goods sold                           |        |         | 105,901              |   |              | 16,410 |             
|                                        | Selling, general and administrative expenses |        |         | 29,406               |   |              | 2,931  |             
|                                        | Equity (income) loss in subsidiaries         |        |         | (688                 | ) |              |       |             
|                                        |                                              |        |         |                      |   |              |        |             
|                                        | Total operating costs and expenses           |        |         | 134,619              |   |              | 19,341 |             
|                                        |                                              |        |         |                      |   |              |        |             
|Operating income (loss)                 |                                              |        | 40,285  |                      |   | 891          |        |             
|Interest expense, net                   |                                              |        | 8,684   |                      |   | 9            |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Income (loss) before income tax expense |                                              |        | 31,601  |                      |   | 882          |        |             
|Income tax expense                      |                                              |        | 5,181   |                      |   | 194          |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Net income (loss)                       |                                              | $      | 26,420  |                      | $ | 688          |        | $           
|                                        |                                              |        |         |                      |   |              |        |             

23

---



UNITED INDUSTRIES CORPORATION
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(unaudited)

|                                        |                                              | Parent |         | Subsidiary
Guarantors |   | Eliminations |         | Consolidated
|--------------------------------------- | -------------------------------------------- | ------ | ------- | --------------------- | - | ------------ | ------- | ------------
|Net sales before promotion expense      |                                              | $      | 338,522 |                       | $ | 152,271      |         | $           
|Promotion expense                       |                                              |        | 28,309  |                       |   | 2,837        |         |             
|                                        |                                              |        |         |                       |   |              |         |             
|Net sales                               |                                              |        | 310,213 |                       |   | 149,434      |         |             
|                                        |                                              |        |         |                       |   |              |         |             
|Operating costs and expenses:           |                                              |        |         |                       |   |              |         |             
|                                        | Cost of goods sold                           |        |         | 175,274               |   |              | 127,763 |             
|                                        | Selling, general and administrative expenses |        |         | 67,942                |   |              | 13,309  |             
|                                        | Equity (income) loss in subsidiaries         |        |         | (5,008                | ) |              |        |             
|                                        |                                              |        |         |                       |   |              |         |             
|                                        | Total operating costs and expenses           |        |         | 238,208               |   |              | 141,072 |             
|                                        |                                              |        |         |                       |   |              |         |             
|Operating income (loss)                 |                                              |        | 72,005  |                       |   | 8,362        |         |             
|Interest expense, net                   |                                              |        | 18,732  |                       |   | 288          |         |             
|                                        |                                              |        |         |                       |   |              |         |             
|Income (loss) before income tax expense |                                              |        | 53,273  |                       |   | 8,074        |         |             
|Income tax expense                      |                                              |        | 18,459  |                       |   | 3,066        |         |             
|                                        |                                              |        |         |                       |   |              |         |             
|Net income (loss)                       |                                              | $      | 34,814  |                       | $ | 5,008        |         | $           
|                                        |                                              |        |         |                       |   |              |         |             

UNITED INDUSTRIES CORPORATION
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(unaudited)

|                                        |                                              | Parent |         | Subsidiary
Guarantor |   | Eliminations |        | Consolidated
|--------------------------------------- | -------------------------------------------- | ------ | ------- | -------------------- | - | ------------ | ------ | ------------
|Net sales before promotion expense      |                                              | $      | 339,122 |                      | $ | 20,898       |        | $           
|Promotion expense                       |                                              |        | 27,827  |                      |   | 666          |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Net sales                               |                                              |        | 311,295 |                      |   | 20,232       |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Operating costs and expenses:           |                                              |        |         |                      |   |              |        |             
|                                        | Cost of goods sold                           |        |         | 193,064              |   |              | 16,410 |             
|                                        | Selling, general and administrative expenses |        |         | 56,645               |   |              | 2,931  |             
|                                        | Equity (income) loss in subsidiaries         |        |         | (688                 | ) |              |       |             
|                                        |                                              |        |         |                      |   |              |        |             
|                                        | Total operating costs and expenses           |        |         | 249,021              |   |              | 19,341 |             
|                                        |                                              |        |         |                      |   |              |        |             
|Operating income (loss)                 |                                              |        | 62,274  |                      |   | 891          |        |             
|Interest expense, net                   |                                              |        | 17,196  |                      |   | 9            |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Income (loss) before income tax expense |                                              |        | 45,078  |                      |   | 882          |        |             
|Income tax expense                      |                                              |        | 8,496   |                      |   | 194          |        |             
|                                        |                                              |        |         |                      |   |              |        |             
|Net income (loss)                       |                                              | $      | 36,582  |                      | $ | 688          |        | $           
|                                        |                                              |        |         |                      |   |              |        |             

24

---



UNITED INDUSTRIES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(unaudited)

|                                                     |                                                                                                   | Parent                                                                        |                                                      | Subsidiary
Guarantor                               |        | Eliminations |         | Consolidated |       
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---------------------------------------------------- | -------------------------------------------------- | ------ | ------------ | ------- | ------------ | ------
|Cash flows from operating activities:                |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     | Net income (loss)                                                                                 |                                                                               | $                                                    | 34,814                                             |        | $            | 5,008   |              | $     
|                                                     | Adjustments to reconcile net income (loss) to net cash flows from (used in) operating activities: |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     |                                                                                                   | Depreciation and amortization                                                 |                                                      |                                                    | 2,474  |              |         | 3,462        |       
|                                                     |                                                                                                   | Amortization of deferred financing fees                                       |                                                      |                                                    | 3,663  |              |         |             |       
|                                                     |                                                                                                   | Deferred income tax expense                                                   |                                                      |                                                    | 19,831 |              |         | 357          |       
|                                                     |                                                                                                   | Equity (income) loss in subsidiaries                                          |                                                      |                                                    | (5,008 | )            |         |             |       
|                                                     |                                                                                                   | Changes in operating assets and liabilities, net of effects from acquisition: |                                                      |                                                    |        |              |         |              |       
|                                                     |                                                                                                   |                                                                               | Accounts receivable                                  |                                                    |        | (26,910      | )       |              | (2,554
|                                                     |                                                                                                   |                                                                               | Inventories                                          |                                                    |        | (73,822      | )       |              | 10,825
|                                                     |                                                                                                   |                                                                               | Prepaid expenses and other current assets            |                                                    |        | 1,472        |         |              | 1,406 
|                                                     |                                                                                                   |                                                                               | Other assets                                         |                                                    |        | (4,984       | )       |              | 1,631 
|                                                     |                                                                                                   |                                                                               | Accounts payable and accrued expenses                |                                                    |        | 26,992       |         |              | (9,309
|                                                     |                                                                                                   |                                                                               | Facilities and organizational rationalization charge |                                                    |        | (596         | )       |              |      
|                                                     |                                                                                                   |                                                                               | Other operating activities, net                      |                                                    |        | (975         | )       |              | (1,694
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows from (used in) operating activities |        |              | (23,049 | )            |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|Cash flows from investing activities:                |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     | Purchases of equipment and leasehold improvements                                                 |                                                                               |                                                      | (3,425                                             | )      |              |        |              |       
|                                                     | Payments for Schultz acquisition, net of cash acquired                                            |                                                                               |                                                      |                                                   |        |              |        |              |       
|                                                     | Proceeds from sale of WPC product lines                                                           |                                                                               |                                                      | 4,204                                              |        |              |        |              |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows used in investing activities        |        |              | 779     |              |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|Cash flows from financing activities:                |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     | Proceeds from additional debt                                                                     |                                                                               |                                                      | 126,275                                            |        |              |        |              |       
|                                                     | Proceeds from issuance of common stock                                                            |                                                                               |                                                      | 84                                                 |        |              |        |              |       
|                                                     | Payments received for common stock subscription receivable                                        |                                                                               |                                                      | 2,049                                              |        |              |        |              |       
|                                                     | Repayment of borrowings on revolver and other debt                                                |                                                                               |                                                      | (118,354                                           | )      |              |        |              |       
|                                                     | Payments for debt issuance costs                                                                  |                                                                               |                                                      | (2,924                                             | )      |              |        |              |       
|                                                     | Change in cash overdrafts                                                                         |                                                                               |                                                      | 6,433                                              |        |              |        |              |       
|                                                     | Other financing and intercompany activities                                                       |                                                                               |                                                      | 7,250                                              |        |              | (7,170  | )            |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows from (used in) financing activities |        |              | 20,813  |              |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|Net increase (decrease) in cash and cash equivalents |                                                                                                   |                                                                               | (1,457                                               | )                                                  |        | 1,962        |         |              |      
|Cash and cash equivalents, beginning of period       |                                                                                                   |                                                                               | 10,191                                               |                                                    |        | 127          |         |              |      
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       
|Cash and cash equivalents, end of period             |                                                                                                   | $                                                                             | 8,734                                                |                                                    | $      | 2,089        |         | $            |      
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |        |              |         |              |       

25

---



UNITED INDUSTRIES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(unaudited)

|                                                     |                                                                                                   | Parent                                                                        |                                                      | Subsidiary
Guarantor                               |       | Eliminations |         | Consolidated |        
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---------------------------------------------------- | -------------------------------------------------- | ----- | ------------ | ------- | ------------ | -------
|Cash flows from operating activities:                |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     | Net income (loss)                                                                                 |                                                                               | $                                                    | 36,582                                             |       | $            | 688     |              | $      
|                                                     | Adjustments to reconcile net income (loss) to net cash flows from (used in) operating activities: |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     |                                                                                                   | Depreciation and amortization                                                 |                                                      |                                                    | 4,919 |              |         | 181          |        
|                                                     |                                                                                                   | Amortization of deferred financing fees                                       |                                                      |                                                    | 1,485 |              |         |             |        
|                                                     |                                                                                                   | Deferred income tax expense                                                   |                                                      |                                                    | 8,690 |              |         |             |        
|                                                     |                                                                                                   | Equity (income) loss in subsidiaries                                          |                                                      |                                                    | (688  | )            |         |             |        
|                                                     |                                                                                                   | Changes in operating assets and liabilities, net of effects from acquisition: |                                                      |                                                    |       |              |         |              |        
|                                                     |                                                                                                   |                                                                               | Accounts receivable                                  |                                                    |       | (73,415      | )       |              | 5,778  
|                                                     |                                                                                                   |                                                                               | Inventories                                          |                                                    |       | 10,118       |         |              | 2,359  
|                                                     |                                                                                                   |                                                                               | Prepaid expenses and other current assets            |                                                    |       | 502          |         |              | 351    
|                                                     |                                                                                                   |                                                                               | Other assets                                         |                                                    |       | 35,925       |         |              | (35,410
|                                                     |                                                                                                   |                                                                               | Accounts payable and accrued expenses                |                                                    |       | 42,791       |         |              | (23,610
|                                                     |                                                                                                   |                                                                               | Facilities and organizational rationalization charge |                                                    |       |             |         |              |       
|                                                     |                                                                                                   |                                                                               | Other operating activities, net                      |                                                    |       | (647         | )       |              |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows from (used in) operating activities |       |              | 66,262  |              |        
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|Cash flows from investing activities:                |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     | Purchases of equipment and leasehold improvements                                                 |                                                                               |                                                      | (1,349                                             | )     |              | (510    | )            |        
|                                                     | Payments for Schultz acquisition, net of cash acquired                                            |                                                                               |                                                      | (37,550                                            | )     |              |        |              |        
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows used in investing activities        |       |              | (38,899 | )            |        
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|Cash flows from financing activities:                |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     | Proceeds from additional debt                                                                     |                                                                               |                                                      | 65,000                                             |       |              |        |              |        
|                                                     | Proceeds from issuance of common stock                                                            |                                                                               |                                                      | 18,750                                             |       |              |        |              |        
|                                                     | Repayment of borrowings on revolver and other debt                                                |                                                                               |                                                      | (49,858                                            | )     |              |        |              |        
|                                                     | Payments for debt issuance costs                                                                  |                                                                               |                                                      | (3,239                                             | )     |              |        |              |        
|                                                     | Change in cash overdrafts                                                                         |                                                                               |                                                      | (7,126                                             | )     |              |        |              |        
|                                                     | Other financing and intercompany activities                                                       |                                                                               |                                                      | (53,507                                            | )     |              | 53,507  |              |        
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|                                                     |                                                                                                   |                                                                               |                                                      | Net cash flows from (used in) financing activities |       |              | (29,980 | )            |        
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|Net increase (decrease) in cash and cash equivalents |                                                                                                   |                                                                               | (2,617                                               | )                                                  |       | 3,334        |         |              |       
|Cash and cash equivalents, beginning of period       |                                                                                                   |                                                                               |                                                     |                                                    |       |             |         |              |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        
|Cash and cash equivalents, end of period             |                                                                                                   | $                                                                             | (2,617                                               | )                                                  | $     | 3,334        |         | $            |       
|                                                     |                                                                                                   |                                                                               |                                                      |                                                    |       |              |         |              |        

26

---

Note 15Recently Issued Accounting Standards

In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies financial reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The provisions of this Statement that relate to Statement 133
implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. The
adoption of SFAS No. 149 will not have a material impact on the Company's consolidated financial statements.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes
standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity and requires the classification of such financial instruments as a
liability (or an asset in certain circumstances). Many of those instruments were previously permitted to be classified as equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. The adoption of SFAS No. 150 will not have a material impact on the Company's consolidated financial statements.

27

---



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

The discussion and analysis of our consolidated financial condition and results of operations included herein should be read in conjunction with our historical
financial information included in the consolidated financial statements and the related notes thereto elsewhere in this Quarterly Report. Future results could differ materially from those discussed
below for many reasons, including the risks discussed elsewhere in this Quarterly Report and in our Annual Report filed on Form 10-K/A for the year ended December 31, 2002.

Overview

Operating as Spectrum Brands, we are majority owned by UIC Holdings, L.L.C. and are the leading manufacturer and marketer of value-oriented products for the
consumer lawn and garden care and insect control markets in the United States. Under a variety of brand names, we manufacture and market one of the broadest lines of pesticides in the industry,
including herbicides and indoor and outdoor insecticides, as well as insect repellents, fertilizers, growing media and soils. Our operations are divided into three business segments: Lawn and Garden,
Household and Contract. We believe that the key growth factors for the $2.8 billion consumer lawn and garden and pesticide retail markets include:



We
do not believe that our historical financial condition and results of operations are accurate indicators of future results because of certain significant past events. Those events
include merger and acquisition activities, strategic transactions and equity and debt financing transactions over the last several years. Furthermore, our sales are seasonal in nature and are
susceptible to weather conditions that vary from year to year.

Critical Accounting Policies

While all of the significant accounting policies are important to our consolidated financial statements, some of these policies may be viewed as being critical.
Such policies are those that are both most important to the portrayal of our financial condition and require our most difficult, subjective or complex estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. We base our estimates and assumptions on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could
differ from these estimates and assumptions. We believe our most critical accounting policies are as follows:

Revenue Recognition.Net sales represent gross sales less any applicable customer discounts from list
price and customer and promotion expense through cooperative programs with retailers. The provision for customer returns is based on historical sales returns and analysis of credit memos and other
relevant information. If the historical or other data used to develop these estimates do not properly reflect future returns, net sales may require adjustment. Sales reductions related to returns were
$3.2 million for the three months ended June 30, 2003, $1.7 million for the three months ended June 30, 2002, $7.1 million for the six months ended June 30,
2003 and $2.2 million for the six months ended June 30, 2002. Amounts included in accounts receivable reserves for sales returns were $2.9 million as of June 30, 2003,
$3.2 million as of June 30, 2002 and $2.0 million as of December 31, 2002.

28

---

Inventories.Inventories are reported at the lower of cost or market. Cost is determined using a
standard costing system that approximates the first-in, first-out method and includes raw materials, direct labor and overhead. An allowance for potentially obsolete or
slow-moving inventory is recorded based on our analysis of inventory levels and future sales forecasts. In the event that our estimates of future usage and sales differ from actual
results, the allowance for obsolete or slow-moving inventory may be adjusted. Amounts recorded for potentially obsolete or slow-moving inventory were increased by
$1.4 million for the three months ended June 30, 2003, reduced by $0.3 million for the three months ended June 30, 2002, increased by $1.2 million for the six months
ended June 30, 2003 and increased by $0.2 million for the six months ended June 30, 2002. The allowance for potentially obsolete or slow-moving inventory was
$6.4 million as of June 30, 2003, $4.6 million as of June 30, 2002 and $5.8 million as of December 31, 2002.

Promotion Expense.We advertise and promote our products through national and regional media.
Products are also advertised and promoted through cooperative programs with our customers. Advertising and promotion costs are expensed as incurred, although costs incurred during interim periods are
generally expensed ratably in relation to revenues. Management develops an estimate of the amount of costs that have been incurred by the retailers under our cooperative programs based on an analysis
of specific programs offered to retailers and historical information. Actual costs incurred 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. Promotion expense, including cooperative programs with customers, is recorded as a reduction of sales and was $16.2 million
for the three months ended June 30, 2003, $15.7 million for the three months ended June 30, 2002, $31.1 million for the six months ended June 30, 2003 and
$28.5 million for the six months ended June 30, 2002. Accrued advertising and promotion expense was $26.0 million as of June 30, 2003, $24.9 million as of
June 30, 2002 and $16.4 million as of December 31, 2002. In addition, advertising costs are incurred irrespective of promotions with customers. These costs are included in
selling, general and administrative expenses in our consolidated statements of operations and were $4.2 million for the three months ended June 30, 2003, $2.1 million for the
three months ended June 30, 2002, $7.9 million for the six months ended June 30, 2003 and $2.6 million for the six months ended June 30, 2002.

Income Taxes.Income taxes are accounted for 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 assets and liabilities at
enacted tax rates expected to be in effect when such amounts are recovered or settled. The judgment of management is required to determine income tax expense, deferred tax assets and any related
valuation allowance and deferred tax liabilities. We have recorded a valuation allowance of $104.1 million as of June 30, 2003 due to uncertainties related to the ability to utilize some
of the deferred tax assets, primarily consisting of certain net operating loss carryforwards that were generated in 1999 through 2002 and deductible goodwill recorded in connection with our
recapitalization in 1999. The valuation allowance is based on our estimates of future taxable income by jurisdiction in which the deferred tax assets will be recoverable.

We
generated net operating losses for tax purposes for each of the years 1999 through 2002. Our current estimates indicate that we will generate taxable income for 2003. If we achieve
such results, 2003 would be the first year that taxable income would be generated since our recapitalization in 1999. In conjunction with the development of our budget for 2004 and beyond, which will
occur during the fourth quarter of 2003, it is possible we will determine the valuation allowance will need to be reduced. Any adjustment to the valuation allowance could materially impact our
consolidated financial position and results of operations. In addition, beginning in 2003 our effective tax rate is 38%, absent any reduction of the valuation allowance that may occur, as previously
described. Despite the increase in

29

---

our
effective tax rate from 19% in 2002, approximately 95% of our income tax expense is deferred, requiring no cash payments for the foreseeable future.

Goodwill and Other Intangible Assets.We have acquired intangible assets or made acquisitions in the
past that resulted in the recording of goodwill or intangible assets, including our merger with Schultz Company in May 2002 and our acquisition of WPC Brands, Inc. in
December 2002.

Effective
in 2002, goodwill is no longer amortized and is subject to impairment testing at least annually. We evaluate the recoverability of long-lived assets, including
goodwill and intangible assets, for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or changes in circumstances
could include such factors as changes in technological advances, fluctuations in the fair value of such assets or adverse changes in relationships or vendors. If a review indicates that the carrying
value of goodwill and other intangible assets are not recoverable, the carrying value of such asset is reduced to its estimated fair value, thereby resulting in the recognition of an impairment loss.

Results of Operations

During the third quarter of 2002, we began reporting operating results using three reportable segments, as follows:



All
prior year results and discussion included below reflect the above segments for commentary purposes.

30

---

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

The following table presents amounts and the percentages of net sales that items in the accompanying consolidated statements of operations constitute for the
periods presented:

Three Months Ended June 30,2003

2002Net sales by segment:Lawn and Garden

$
142,256

69.1
%
$
144,195

73.9
%Household


61,021

29.6
%

43,372

22.2
%Contract


2,726

1.3
%

7,569

3.9
%Total net sales


206,003

100.0
%

195,136

100.0
%Operating costs and expenses:Cost of goods sold


123,797

60.1
%

122,311

62.7
%Selling, general and administrative expenses


37,905

18.4
%

32,337

16.5
%Total operating costs and expenses


161,702

78.5
%

154,648

79.2
%Operating income by segment:Lawn and Garden


26,119

12.7
%

26,077

13.4
%Household


17,795

8.6
%

13,805

7.1
%Contract


387

0.2
%

606

0.3
%Total operating income


44,301

21.5
%

40,488

20.8
%Interest expense, net


9,817

4.8
%

8,693

4.5
%Income before income tax expense


34,484

16.7
%

31,795

16.3
%Income tax expense, net


13,123

6.4
%

5,375

2.8
%Net income

$
21,361

10.4
%
$
26,420

13.5
%


Net Sales.Net sales represent gross sales less any applicable customer discounts from list price,
customer returns and promotion expense through cooperative programs with our customers. Net sales increased $10.9 million, or 5.6%, to $206.0 million for the three months ended
June 30, 2003 from $195.1 million for the three months ended June 30, 2002. The increase, primarily in our Household segment, as well as the change in our sales mix by segment,
were primarily due to our expanded product lines resulting from our merger with Schultz in May 2002, which contributed $19.1 million to the increase in total net sales, our acquisition
of WPC Brands in December 2002, which contributed $9.0 million to the increase in total net sales, and an increase in net sales of specific product lines described further below. This
increase was partially offset by a decline in charcoal sales in the Contract segment of $6.6 million due to our cessation of charcoal distribution and a decline in sales of certain existing
products during the three months ended June 30, 2003.

Net
sales in the Lawn and Garden segment decreased $1.9 million, or 1.3%, to $142.3 million for the three months ended June 30, 2003 from $144.2 million for
the three months ended June 30, 2002. Net sales of this segment decreased primarily due to retailers maintaining lower inventory levels and lower sales of certain other products in the Lawn and
Garden segment resulting from cooler and wetter weather conditions compared to 2002. Net sales in the Household segment increased $17.6 million, or 40.6%, to $61.0 million for the three
months ended June 30, 2003 from $43.4 million for the three months ended June 30, 2002. Net sales of this segment increased primarily due to higher repellent sales resulting from
our acquisition of WPC Brands and higher volume of existing and certain new Cutter products. Net sales in the Contract segment decreased $4.9 million, or 64.5%, to $2.7 million for the
three months ended June 30, 2003 from $7.6 million for the three months ended June 30, 2002. Net sales of this segment decreased primarily due to a decline in charcoal sales.

31

---

Gross Profit.Gross profit increased $9.4 million, or 12.9%, to $82.2 million for the
three months ended June 30, 2003 from $72.8 million for the three months ended June 30, 2002. The increase in gross profit was primarily due to increased sales volume, coupled
with improved margins resulting from favorable fertilizer manufacturing costs related to our purchase of certain fertilizer production assets from U.S. Fertilizer, Inc. (formerly known as
Pursell Industries, Inc.) in October 2002, partially offset by unfavorable costs of granular urea used to produce fertilizer. The increase in gross profit was partially offset by
$0.5 million in amortization of the purchase accounting inventory write-up related to the WPC Brands acquisition. As a percentage of net sales, gross profit increased to 40.0% for
the three months ended June 30, 2003 from 37.3% for the three months ended June 30, 2002. The increase in gross profit as a percentage of net sales was primarily due to improved margins
on fertilizer products, as described above, increased sales of higher margin products and our ability to achieve operational efficiencies from the strategic transactions consummated in 2002.

Selling, General and Administrative Expenses.Selling, general and administrative expenses include
all costs associated with the selling and distribution of products, product registrations and administrative
functions such as finance, information systems and human resources. Selling, general and administrative expenses increased $5.6 million, or 17.3%, to $37.9 million for the three months
ended June 30, 2003 from $32.3 million for the three months ended June 30, 2002. The increase was primarily due to increased media and advertising spending, incremental operating
expenses resulting from our merger with Schultz and acquisition of WPC Brands and additional non-manufacturing costs associated with fertilizer being produced internally rather than being
purchased. The non-manufacturing fertilizer production costs represent a shift from cost of goods sold in 2002, when fertilizer was purchased from a third party provider, to selling,
general and administrative expenses in 2003 since we acquired equipment and facilities to produce fertilizer internally. As a percentage of net sales, selling, general and administrative expenses
increased to 18.4% for the three months ended June 30, 2003 from 16.6% for the three months ended June 30, 2002. The increase was primarily due to the shifting of expenses previously
described.

Operating Income.As a result of the factors described above, operating income increased
$3.8 million, or 9.4%, to $44.3 million for the three months ended June 30, 2003 from $40.5 million for the three months ended June 30, 2002. As a percentage of net
sales, operating income increased to 21.5% for the three months ended June 30, 2003 from 20.8% for the three months ended June 30, 2002. The increase was primarily in our Household
segment due to increased sales of higher margin products in 2003.

Operating
income in the Lawn and Garden segment remained relatively flat at $26.1 million for the three months ended June 30, 2003 compared to the three months ended
June 30, 2002. Operating income of this segment increased primarily due to the addition of sales resulting from the Schultz merger and strong sales growth of our Spectracide products, offset by
lower sales volume and margins of certain other products in the Lawn and Garden segment. Operating income in the Household segment increased $4.0 million, or 29.0%, to $17.8 million for
the three months ended June 30, 2003 from $13.8 million for the three months ended June 30, 2002. Operating income of this segment increased primarily due to higher than expected
sales of repellent products, offset partially by the amortization of the purchase accounting inventory write-up related to the WPC Brands acquisition of $0.5 million. Operating
income in the Contract segment decreased $0.2 million, or 33.3%, to $0.4 million for the three months ended June 30, 2003 from $0.6 million for the three months ended
June 30, 2002. Operating income of this segment decreased primarily due to increased operating costs, coupled with increased sales of certain lower margin products.

Interest Expense, Net.Interest expense, net, increased $1.1 million to $9.8 million
for the three months ended June 30, 2003 from $8.7 million for the three months ended June 30, 2002. The increase in net interest expense was due to a write-off of
deferred financing fees totaling $0.3 million recorded

32

---

in
connection with our repayment of a portion of the obligations outstanding under Term Loan B of our senior credit facility during the three months ended June 30, 2003, an increase in our
average debt outstanding during 2003 and the last half of 2002, which resulted from additional borrowings under our senior credit facility to finance our merger with Schultz and the acquisition of WPC
Brands. The increase was partially offset by a decline in our average variable borrowing rate of 0.35 percentage points to 7.92% for the three months ended June 30, 2003 from 8.27% for
the three months ended June 30, 2002. The decline in our average variable borrowing rate resulted primarily from the effects of two unfavorable interest rate swaps terminated in 2002, a
decrease of interest rates under the terms of our senior credit facility, a general decline in variable borrowing rates and $0.5 million of interest income recognized for payments received on
the common stock subscription receivable from Bayer Corporation. However, this increase was partially offset by the higher interest rate on the 97/8% Series C senior subordinated
notes which were issued in March 2003, the proceeds of which were used to pay down a portion of the amounts then outstanding under our senior credit facility which bears interest at rates lower
than the senior subordinated notes.

Income Tax Expense.Our effective income tax rate was 38% for the three months ended June 30,
2003 and 19% for the three months ended June 30, 2002. This increase is primarily the result of no adjustment being recorded to the valuation allowance during the three months ended
June 30, 2003 compared to the three months ended June 30, 2002.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

The following table presents amounts and the percentages of net sales that items in the accompanying consolidated statements of operations constitute for the
periods presented:

Six Months Ended June 30,2003

2002Net sales by segment:Lawn and Garden

$
287,870

74.8
%
$
254,580

76.8
%Household


88,588

23.0
%

68,650

20.7
%Contract


8,357

2.2
%

8,297

2.5
%Total net sales


384,815

100.0
%

331,527

100.0
%Operating costs and expenses:Cost of goods sold


232,552

60.4
%

209,474

63.2
%Selling, general and administrative expenses


76,904

19.9
%

59,576

18.0
%Total operating costs and expenses


309,456

80.4
%

269,050

81.2
%Operating income by segment:Lawn and Garden


50,592

13.1
%

41,010

12.4
%Household


24,421

6.3
%

20,849

6.2
%Contract


346

0.2
%

618

0.2
%Total operating income


75,359

19.6
%

62,477

18.8
%Interest expense, net


19,020

4.9
%

17,205

5.2
%Income before income tax expense


56,339

14.6
%

45,272

13.6
%Income tax expense, net


21,525

5.6
%

8,690

2.6
%Net income

$
34,814

9.0
%
$
36,582

11.0
%


Net Sales.Net sales represent gross sales less any applicable customer discounts from list price,
customer returns and promotion expense through cooperative programs with our customers. Net sales increased $53.3 million, or 16.1%, to $384.8 million for the six months ended
June 30, 2003 from

33

---

$331.5 million
for the six months ended June 30, 2002. The increase, primarily in our Lawn and Garden and Household segments, as well as the change in our sales mix by segment, were
primarily due to our expanded product lines resulting from our merger with Schultz in May 2002, which contributed $34.1 million to the increase in total net sales, our acquisition of WPC
Brands in December 2002, which contributed $12.0 million to the increase in total net sales, and an increase in net sales of specific product lines described further below. This increase
was partially offset by a decline in charcoal sales in the Contract segment of $3.3 million due to our cessation of charcoal distribution, a decline in sales of certain existing products and an
increase in promotion expense during the six months ended June 30, 2003.

Net
sales in the Lawn and Garden segment increased $33.3 million, or 13.1%, to $287.9 million for the six months ended June 30, 2003 from $254.6 million for
the six months ended June 30, 2002. Net sales of this segment increased primarily due to our merger with Schultz and increased sales of our Spectracide products, partially offset by retailers
maintaining lower inventory levels and lower sales of certain other products in the Lawn and Garden segment resulting from cooler and wetter weather conditions compared to 2002. Net sales in the
Household segment increased $19.9 million, or 29.0%, to $88.6 million for the six months ended June 30, 2003 from $68.7 million for the six months ended June 30,
2002. Net sales of this segment increased primarily due to higher repellent sales resulting from our
acquisition of WPC Brands and higher volume of existing and certain new Cutter products. Net sales in the Contract segment increased $0.1 million, or 1.2%, to $8.4 million for the six
months ended June 30, 2003 from $8.3 million for the six months ended June 30, 2002. Net sales of this segment increased primarily due to our merger with Schultz and acquisition
of WPC Brands, which were offset by a decline in charcoal sales.

Gross Profit.Gross profit increased $30.3 million, or 24.8%, to $152.3 million for the
six months ended June 30, 2003 from $122.0 million for the six months ended June 30, 2002. The increase in gross profit was primarily due to increased sales volume, coupled with
improved margins resulting from favorable fertilizer manufacturing costs related to our purchase of certain fertilizer production assets from U.S. Fertilizer in October 2002, partially offset
by unfavorable costs of granular urea used to produce fertilizer. The increase in gross profit was partially offset by $1.2 million in amortization of the purchase accounting inventory
write-up related to the WPC Brands acquisition. As a percentage of net sales, gross profit increased to 39.6% for the six months ended June 30, 2003 from 36.8% for the six months
ended June 30, 2002. The increase in gross profit as a percentage of net sales was primarily due to improved margins on fertilizer products, as described above, increased sales of higher margin
products and our ability to achieve operational efficiencies from the strategic transactions consummated in 2002.

Selling, General and Administrative Expenses.Selling, general and administrative expenses include
all costs associated with the selling and distribution of products, product registrations and administrative functions such as finance, information systems and human resources. Selling, general and
administrative expenses increased $17.3 million, or 29.0%, to $76.9 million for the six months ended June 30, 2003 from $59.6 million for the six months ended
June 30, 2002. The increase was primarily due to increased media and advertising spending, incremental operating expenses resulting from our merger with Schultz and acquisition of WPC Brands
and additional non-manufacturing costs associated with fertilizer being produced internally rather than being purchased. The non-manufacturing fertilizer production costs
represent a shift from cost of goods sold in 2002, when fertilizer was purchased from a third party provider, to selling, general and administrative expenses in 2003 since we acquired equipment and
facilities to produce fertilizer internally. As a percentage of net sales, selling, general and administrative expenses increased to 19.9% for the six months ended June 30, 2003 from 18.0% for
the six months ended June 30, 2002. The increase was primarily due to the shifting of expenses previously described.

34

---

Operating Income.As a result of the factors described above, operating income increased
$12.9 million, or 20.6%, to $75.4 million for the six months ended June 30, 2003 from $62.5 million for the six months ended June 30, 2002. As a percentage of net
sales, operating income increased to 19.6% for the six months ended June 30, 2003 from 18.8% for the six months ended June 30, 2002. The increase was primarily in our Lawn and Garden
segment due to additional sales of our fertilizer brands and our merger with Schultz, with a lesser corresponding increase in operating costs and expenses, and in our Household segment due to
increased sales of higher margin products in 2003.

Operating
income in the Lawn and Garden segment increased $9.6 million, or 23.4%, to $50.6 million for the six months ended June 30, 2003 from $41.0 million
for the six months ended June 30, 2002. Operating income of this segment increased primarily due to the addition of sales resulting from the Schultz merger and strong sales growth of our
Spectracide products, partially offset by lower sales volume and margins of certain other products in the Lawn and Garden segment. Operating income in the Household segment increased
$3.6 million, or 17.3%, to $24.4 million for the six months ended June 30, 2003 from $20.8 million for the six months ended June 30, 2002. Operating income of this
segment increased primarily due to higher than expected sales of repellent products, offset partially by the amortization of the purchase accounting inventory write-up related to the WPC
Brands acquisition of $1.2 million. Operating income in the Contract segment decreased $0.3 million, or 50.0%, to $0.3 million for the six months ended June 30, 2003 from
$0.6 million for the six months ended June 30, 2002. Operating income of this segment decreased primarily due to increased operating costs, coupled with increased sales of certain lower
margin products.

Interest Expense, Net.Interest expense, net, increased $1.8 million to $19.0 million
for the six months ended June 30, 2003 from $17.2 million for the six months ended June 30, 2002. The increase in net interest expense was due to write-offs of
deferred financing fees totaling $1.6 million recorded in connection with our repayment of a portion of the obligations outstanding under our senior credit facility during the six months ended
June 30, 2003, an increase in our average debt outstanding during 2003 and the last half of 2002, which resulted from additional borrowings under our senior credit facility to finance our
merger with Schultz and the acquisition of WPC Brands. The increase was partially offset by a decline in our average variable borrowing rate of 1.37 percentage points to 7.19% for the six
months ended June 30, 2003 from 8.56% for the six months ended June 30, 2002. The decline in our average variable borrowing rate resulted primarily from the effects of two unfavorable
interest rate swaps terminated in 2002, a decrease of interest rates under the terms of our senior credit facility, a general decline in variable borrowing rates and $1.0 million of interest
income recognized for payments received on the common stock subscription receivable from Bayer. However, this increase was partially offset by the higher interest rate on the 97/8%
Series C senior subordinated notes which were issued in March 2003, the proceeds of which were used to pay down a portion of the amounts then outstanding under our senior credit facility
which bears interest at rates lower than the senior subordinated notes.

Income Tax Expense.Our effective income tax rate was 38% for the six months ended June 30,
2003 and 19% for the six months ended June 30, 2002. This increase is primarily the result of no adjustment being recorded to the valuation allowance during the six months ended June 30,
2003 compared to the six months ended June 30, 2002.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital, capital expenditures and debt service under the senior credit facility and the senior subordinated
notes.

Operating Activities.Operating activities used cash of $13.9 million for the six months ended
June 30, 2003 compared to providing cash of $16.6 million for the six months ended June 30, 2002. The increase in cash used in operations was primarily due to an increase in the
change in accounts

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receivable
of $36.7 million. The seasonal nature of our operations generally requires cash to fund significant increases in working capital, primarily accounts receivable and inventories,
during the first half of the year. These assets build substantially in the first half of the year as the season begins, in line with increasing sales, and decline throughout the last half of the year
as the lawn and garden season comes to a close. The increase in cash used in operations is also due to a decline in the change of inventories of $5.0 million for the six months ended
June 30, 2003 compared to the six months ended June 30, 2002. Despite this decline in the change in inventories, our inventory levels were higher as of June 30, 2003 compared to
June 30, 2002 as a result of our merger with Schultz, our acquisition of WPC Brands and pressure by retailers to manage and reduce their own inventory levels.

Investing Activities.Investing activities provided cash of $0.8 million for the six months
ended June 30, 2003 compared to cash used of $39.4 million for the six months ended June 30, 2002. The decrease in cash used in investing activities was due to
$37.6 million in payments for our merger with Schultz occurring in 2002 and $4.2 million in proceeds from the sale of certain non-core product lines in 2003, partially offset
by a $1.6 million increase in purchases of equipment and leasehold improvements for the six months ended June 30, 2003 compared to the six months ended June 30, 2002.

Financing Activities.Financing activities provided cash of $13.6 million for the six months
ended June 30, 2003 compared to $23.5 million for the six months ended June 30, 2002. The decrease in cash from financing activities was primarily due to a decline in borrowings
under our senior credit facility of $25.0 million and increased repayments on borrowings of $68.5 million, exclusive of the impact of any cash overdrafts, partially offset by proceeds
from the issuance of 97/8% Series C senior subordinated notes of $86.3 million. As a result, as of June 30, 2003, we had cash on hand of $10.8 million and no
borrowings outstanding under our revolving credit facility. As we have nearly completed our peak production season, we do not expect the need to use our revolving credit facility to fund operations
for the remainder of the year, absent any acquisition related activities.

Historically,
we have utilized internally generated funds, borrowings, and the issuance of equity to meet ongoing working capital and capital expenditure requirements. As a result of our
recapitalization in 1999 and increased borrowings, we have significantly increased cash requirements for debt service relating to our senior subordinated notes and senior credit facility. We will rely
on internally generated funds and, to the extent necessary, borrowings under our revolving credit facility to meet liquidity needs. Long-term debt, excluding current maturities and
short-term borrowings, totaled $408.1 million as of June 30, 2003, $375.8 million as of June 30, 2002 and $391.5 million as of December 31, 2002.
This debt was comprised of senior subordinated notes of $236.2 million as of June 30, 2003 and $150.0 million as of June 30, 2002 and December 31, 2002, and
borrowings under our senior credit facility of $171.9 million as of June 30, 2003, $225.8 million as of June 30, 2002 and $241.5 million as of December 31,
2002. The weighted average rate on borrowings under our senior credit facility was 5.32% as of June 30, 2003, 5.75% as of June 30, 2002 and 5.34% as of December 31, 2002. The
weighted average rate on the senior subordinated notes was 9.875% as of
the end of each of these periods, resulting in a blended weighted average rate of 7.95% as of June 30, 2003, 7.36% as of June 30, 2002 and 7.03% as of December 31, 2002. The fair
value of our total fixed-rate debt was $246.8 million as of June 30, 2003, $149.3 million as of June 30, 2002 and $151.5 million as of
December 31, 2002. The fair value of variable-rate debt approximated the carrying value of $172.8 million as of June 30, 2003, $233.1 million as of
June 30, 2002 and $250.7 million as of December 31, 2002. The fair values of fixed-rate debt and variable-rate debt are based on quoted market prices. As
of June 30, 2003, we had unused availability of $88.3 million under our revolving credit facility.

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We believe that cash flows from operations, together with available borrowings under our revolving credit facility, will be adequate to meet the anticipated requirements for working
capital, capital expenditures and scheduled principal and interest payments for the foreseeable future. We are regularly engaged in acquisition discussions with a number of companies, although we have
no definitive agreements at this time and we cannot guarantee that any acquisitions will be consummated. If we do consummate any acquisitions, it could be material to our business and require us to
incur additional debt under our revolving credit facility or otherwise.

We
cannot ensure that sufficient cash flows will be generated from operations to repay the senior subordinated notes and amounts outstanding under the senior credit facility at maturity
without requiring additional financing. Our ability to meet debt service and clean-down obligations and reduce debt will be dependent on our future performance, which in turn, will be
subject to general economic and weather conditions and to financial, business and other factors, including factors beyond our control. Because a portion of our debt bears interest at floating rates,
our financial condition is and will continue to be affected by changes in prevailing interest rates.

Investing Activities

Sale of Non-Core Product Lines.During May 2003, we consummated the sale of all of
the non-core product lines acquired in our acquisition of WPC Brands in December 2002. The product lines sold include, among others, water purification tablets,
first-aid kits and fish attractant products. Total assets and operating results associated with the product lines sold were not significant to our consolidated financial position or
results of operations. No gain or loss was recorded as the sale price was approximately equal to the net book value of the assets and liabilities sold.

Capital Expenditures.Capital expenditures relate primarily to the enhancement of our existing
facilities, the construction of additional capacity for production and distribution and the development and implementation of our enterprise resource planning, or ERP, system. Cash used for capital
expenditures was $3.4 million for the six months ended June 30, 2003 and $1.9 million for the six months ended June 30, 2002. The increase in capital expenditures in 2003
from 2002 is primarily related to additional costs recorded for the development of our ERP system.

Financing Activities

Senior Credit Facility.Our senior credit facility, as amended as of March 14, 2003, was
provided by Bank of America, N.A., Morgan Stanley Senior Funding, Inc. and Canadian Imperial Bank of Commerce and consists of (1) a $90.0 million revolving credit facility;
(2) a $75.0 million term loan facility (Term Loan A); and (3) a $240.0 million term loan facility (Term Loan B). The revolving credit facility and Term Loan A mature 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 during the period between August 1 and November 30 in each calendar year. There were no
amounts outstanding under the revolving credit facility as of June 30, 2003 or as of June 30, 2002. As of December 31, 2002, the clean-down period had been completed
and no amounts were outstanding under the revolving credit facility. There were no compensating balance requirements during each of the periods presented.

The
amendment to the senior credit facility dated March 14, 2003 permits the offering of 97/8% Series C senior subordinated notes due 2009 (the
Series C Notes) and 97/8% Series D senior subordinated notes due 2009 (the Series D Notes). We issued the Series C Notes in March 2003 and offered the
Series D Notes in June and July 2003 in exchange for outstanding Series B Notes and Series C Notes. This amendment did not change any other existing covenants of the senior
credit facility.

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The
principal amount of Term Loan A was to be repaid in 24 consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2005.
However, in connection with the issuance of the Series C Notes, as described below, we used a portion of the proceeds to repay the outstanding balance under Term Loan A. The principal amount of
Term Loan B is to be repaid in 28 consecutive quarterly installments commencing June 30, 1999 with a final installment due January 20, 2006. We used a portion of the proceeds from the
issuance of the Series C Notes to repay $25.9 million of the outstanding balance under Term Loan B.

The
senior credit facility agreement contains restrictive affirmative, negative and financial covenants. Affirmative and negative covenants place restrictions on, among other things,
levels of investments, indebtedness, insurance, capital expenditures and dividend payments. The financial covenants require the maintenance of certain financial ratios at defined levels. As of and
during the six months ended June 30, 2003 and 2002 and the year ended December 31, 2002, we were in compliance with all covenants. While we do not anticipate an event of
non-compliance in the foreseeable future, the effect of non-compliance would require us to request a waiver or an amendment to the senior credit facility. Amending the senior
credit facility could result in changes to our borrowing capacity or its effective interest rates. Under the agreements, interest rates on the
revolving credit facility, Term Loan A and Term Loan B range from 1.50% to 4.00% above LIBOR, depending on certain financial ratios. LIBOR was 1.12% as of June 30, 2003, 1.86% as of
June 30, 2002 and 1.38% as of December 31, 2002. Unused commitments under the revolving credit facility are subject to a 0.5% annual commitment fee. The interest rate of Term Loan A was
4.67% as of December 31, 2002. The interest rate of Term Loan B was 5.32% as of June 30, 2003, 5.86% as of June 30, 2002 and 5.42% as of December 31, 2002.

The
senior credit facility may be prepaid in whole or in part at any time without premium or penalty. During the six months ended June 30, 2003, we made principal payments of
$28.3 million to fully repay Term Loan A and $49.2 million on Term Loan B, which represent optional principal prepayments. In connection with these prepayments, we recorded
write-offs totaling $1.6 million in previously deferred financing fees which are reflected in interest expense in the accompanying consolidated statements of operations for the six
months ended June 30, 2003. For the year ended December 31, 2002, we made principal payments of $11.0 million on Term Loan A and $2.0 million on Term Loan B, which included
optional principal prepayments of $6.3 million on Term Loan A and $1.1 million on Term Loan B. The optional prepayments in the six months ended June 30, 2002 were made to remain
several quarterly payments ahead of the regular payment schedule. Under the senior credit facility, each prepayment may be applied to the next principal repayment installments. We remain several
principal payments ahead of schedule on Term Loan B and intend to pay a full year of principal installments in 2003 in accordance with the terms of the senior credit facility.

The
carrying amount of our obligations under the senior credit facility approximates fair value because the interest rates are based on floating interest rates identified by reference to
market rates.

97/8% Series B Senior Subordinated Notes.In November 1999, we issued
$150.0 million in aggregate principal amount of 97/8% Series B senior subordinated notes due April 1, 2009 (the Series B Notes). Interest accrues on the
Series B Notes at a rate of 97/8% per annum, payable semi-annually on April 1 and October 1.

97/8% Series C Senior Subordinated Notes.In March 2003, we issued
$85.0 million in aggregate principal amount of 97/8% Series C senior subordinated notes due April 1, 2009 (the Series C Notes) in a private placement. Gross
proceeds from the issuance were $86.3 million and included a premium of $1.275 million which is being amortized over the term of the Series C Notes using the effective interest
method. Interest on the Series C Notes accrues at a rate of 97/8% per annum, payable semi-annually on April 1 and October 1. Net proceeds of
$84.1 million were used to repay $30.0 million of the revolving credit facility, fully repay $28.3 million outstanding under Term Loan A and repay $25.9 million

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outstanding
under Term Loan B. The Series C Notes were issued with terms substantially similar to the Series B Notes. In connection with the issuance of the Series C Notes, we
recorded $2.2 million of deferred financing fees which are being amortized over the term of the Series C Notes. As of June 30, 2003, $85.0 million of the Series C
Notes were outstanding.

97/8% Series D Senior Subordinated Notes.In May 2003, we registered the
Series D Notes (collectively with the Series B Notes and Series C Notes, the senior subordinated notes), with terms substantially similar to the Series B Notes and the
Series C Notes, with the U.S. Securities Exchange Commission and have offered to exchange the Series D Notes for up to 100% of the Series B Notes and Series C Notes. As of
June 30, 2003, the exchange offering had not closed and, therefore, no Series D Notes were outstanding. The exchange offering closed in July 2003, resulting in
$85.0 million, or 100%, of the Series C Notes being exchanged and $146.9 million, or 98%, of the Series B Notes being exchanged, with $3.1 million of the
Series B Notes outstanding still.

Our
indentures governing the senior subordinated notes contain a number of significant covenants that could adversely impact our business. In particular, the indentures limit our ability
to:



The
ability to comply with these provisions may be affected by events beyond our control. The breach of any of these covenants will result in a default under the applicable debt
agreement or instrument and could trigger acceleration of repayment under the applicable agreements. Any default under our indentures governing the senior subordinated notes might adversely affect our
growth, financial condition and results of operations and the ability to make payments on the senior subordinated notes or meet other obligations.

The
fair value of the Series C Notes was $90.1 million June 30, 2003, based on their quoted market price on such date. The fair value of the Series B Notes
was $156.7 million as of June 30, 2003, $149.3 million as of June 30, 2002 and $151.5 million as of December 31, 2002, based on their quoted market price on
such dates. In accordance with the indentures governing the senior subordinated notes, the senior subordinated notes are unconditionally and jointly and severally guaranteed by our wholly-owned
subsidiaries.

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Contractual Cash Obligations.The following table presents the aggregate amount of future cash
outflows of our contractual cash obligations as of June 30, 2003, excluding amounts due for interest on outstanding indebtedness (dollars in thousands):

|                                          |                                    | Obligations due in:
|----------------------------------------- | ---------------------------------- | -------------------
|
|Senior credit facility                    |                                    | $                  
|Senior subordinated notes                 |                                    |                    
|Capital lease                             |                                    |                    
|Operating leases                          |                                    |                    
|Tolling agreement with U.S. Fertilizer(2) |                                    |                    
|Urea hedging agreements(3)                |                                    |                    
|Services agreements(4)                    |                                    |                    
|                                          |                                    |                    
|                                          | Total contractual cash obligations |                    
|                                          |                                    |                    

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We
lease several of our operating facilities from Rex Realty, Inc., a company owned by certain stockholders of our company and operated by a former executive and past member of
our Board of Directors. The operating leases expire at various dates through December 31, 2010. We have options to terminate the leases on an annual basis by giving advance notice of at least
one year. We lease a portion of our operating facilities from the same company under a sublease agreement expiring on December 31, 2005 with minimum annual rentals of $0.7 million. We
have two five-year options to renew this lease, beginning January 1, 2006.

We
are obligated under additional operating leases for other operations and the use of warehouse space. The leases expire at various dates through December 31, 2015. Five of the
leases provide for as many as five options to renew for five years each.

In
March 2000, we entered into a capital lease agreement for $5.3 million for our aircraft. We are obligated to make monthly payments of $0.1 million, with a balloon
payment of $3.2 million due in February 2005. We have the option of purchasing the aircraft following the expiration of the lease agreement for a nominal amount.

Guarantees and Off-Balance Sheet Risk.In the normal course of business, we are a party
to certain guarantees and financial instruments with off-balance sheet risk, such as standby letters of credit and indemnifications, which are not reflected in the accompanying
consolidated balance sheets. We had $1.7 million at June 30, 2003, $1.3 million at June 30, 2002 and $1.9 million at December 31, 2002, in standby letters of
credit pledged as collateral to support the lease of our primary distribution facility in

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St.
Louis, a United States customs bond, certain product purchases, various workers' compensation obligations and the aircraft. These agreements mature at various dates through May 2004 and may
be renewed as circumstances warrant. Such financial instruments are valued based on the amount of exposure under the instruments and the likelihood of performance being required. In our past
experience, no claims have been made against these financial instruments nor do we expect any losses to result from them. As a result, we determined the fair value of such instruments to be zero and
have not recorded any related amounts in our consolidated financial statements.

We
are the lessee under a number of equipment and property leases. It is common in such commercial lease transactions for us to agree to indemnify the lessor for the value of the
property or equipment leased should it be damaged during the course of our operations. We expect that any losses that may occur with respect to the leased property would be covered by insurance,
subject to deductible amounts. As a result, we determined the fair value of such instruments to be zero and have not recorded any related amounts in our consolidated financial statements.

Recently Issued Accounting Standards.In April 2003, the Financial Accounting Standards Board
(FASB) issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The provisions of this Statement that relate to Statement 133 implementation issues that have been effective for fiscal quarters that began prior to June 15, 2003, should
continue to be applied in accordance with their respective effective dates. The adoption of SFAS No. 149 will not have a material impact on our consolidated financial statements.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes
standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity and requires the classification of such financial instruments as a
liability (or an asset in certain circumstances). Many of those instruments were previously permitted to be classified as equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. The adoption of SFAS No. 150 will not have a material impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Raw Material Prices

In the normal course of business, we are exposed to fluctuations in raw materials prices. We have established policies and procedures that govern the management
of this exposure through the use of derivative hedging instruments, including swap agreements. Our objective in managing our exposure to such fluctuations is to decrease the volatility of earnings and
cash flows associated with changes in certain raw materials prices. To achieve this objective, we periodically enter into swap agreements with values that change in the opposite direction of
anticipated cash flows. We consider the financial stability and credit standing of our counterparties for such agreements. Nonperformance by the counterparties is not anticipated nor would it be
likely to have a material adverse effect on our consolidated financial position or results of operations. Derivative instruments related to forecasted raw materials purchases are considered to hedge
future cash flows, and the effective portion of any gain or loss is included in accumulated other comprehensive income until earnings are affected by the variability of cash flows. Any remaining gain
or loss is recognized currently in earnings.

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While
we expect these instruments and agreements to manage our exposure to such price fluctuations, no assurance can be provided that the instruments will be effective in fully
mitigating exposure to these risks, nor can assurance be provided that in passing on pricing increases to our customers.

We
have formally documented, designated and assessed the effectiveness of transactions that receive hedge accounting treatment. The cash flows of the derivative instruments are expected
to be highly effective in achieving offsetting cash flows attributable to fluctuations in the cash flows of the hedged
risk. Changes in the fair value of agreements designated as derivative hedging instruments are reported as either an asset or liability in the accompanying consolidated balance sheets with the
associated unrealized gain or loss reflected in accumulated other comprehensive income. As of June 30, 2003 and December 31, 2002, an unrealized gain of less than $0.1 million and
an unrealized loss of less than $0.1 million, respectively, related to derivative instruments designated as cash flow hedges were recorded in accumulated other comprehensive income. One such
instrument was outstanding at June 30, 2003 which represents a hedging agreement of forecasted purchases of raw materials during 2003 that is scheduled to mature in July 2003. The
amounts included in accumulated other comprehensive income are subsequently reclassified into cost of goods sold in the same period in which the underlying hedged transactions affect earnings.

If
it becomes probable that a forecasted transaction will no longer occur, any gain or loss in accumulated other comprehensive income will be recognized in earnings. We have not incurred
any gains or losses for hedge ineffectiveness or due to excluding a portion of the value from measuring effectiveness. We do not enter into derivatives or other hedging arrangements for trading or
speculative purposes.

For
the six months ended June 30, 2003, we reclassified $1.4 million from accumulated other comprehensive income into cost of goods sold representing a gain on raw
materials derivative hedging instruments. No such amounts were recorded during the six months ended June 30, 2002 or year ended December 31, 2002.

Interest Rates

We are exposed to various market risks, including fluctuations in interest rates. As such, our policy is to manage interest costs using a mix of fixed and
variable rate debt. To achieve this objective, we may periodically enter into swap agreements with values that change in the opposite direction of anticipated cash flows. As of June 30, 2003,
we did not have any interest rate agreements.

Long-term
debt, excluding current maturities and short-term borrowings, totaled $408.1 million as of June 30, 2003, $375.8 million as of
June 30, 2002 and $391.5 million as of December 31, 2002. This debt was comprised of senior subordinated notes of $236.2 million as of June 30, 2003 and
$150.0 million as of June 30, 2002 and December 31, 2002, and borrowings under our senior credit facility of $171.9 million as of June 30, 2003,
$225.8 million as of June 30, 2002 and $241.5 million as of December 31, 2002. The weighted average rate on borrowings under our senior credit facility was 5.32% as of
June 30, 2003, 5.75% as of June 30, 2002 and 5.34% as of December 31, 2002. The weighted average rate on the senior subordinated notes was 9.875% as of the end of each of these
periods, resulting in a blended weighted average rate of 7.95% as of June 30, 2003, 7.36% as of June 30, 2002 and 7.03% as of December 31, 2002. The fair value of our total
fixed-rate debt was $246.8 million as of June 30, 2003, $149.3 million as of June 30, 2002 and $151.5 million as of December 31, 2002. The fair
value of variable-rate debt approximated the carrying value of $172.8 million as of June 30, 2003, $233.1 million as of June 30, 2002 and $250.7 million
as of December 31, 2002. The fair values of fixed-rate debt and variable-rate debt are based on quoted market prices.

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The
following table summarizes information about our debt instruments that are sensitive to changes in interest rates as of June 30, 2003. The table presents future principal cash
flows and related weighted-average interest rates by expected maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve at June 30, 2003 (dollars in
thousands):

|Description           |  | Remainder
of 2003 |      | 2004 |   | 2005  |   | 2006 |         | 2007 |   | There-
After |   | Total |   | Fair
Value
|--------------------- |  | ----------------- | ---- | ---- | - | ----- | - | ---- | ------- | ---- | - | ------------ | - | ----- | - | ----------
|Fixed rate debt       |  | $                 |     |      | $ |      |   | $    |        |      | $ |             |   | $     |  |           
|Average interest rate |  |                   |     |      |   |      |   |      |        |      |   |             |   |       |  |           
|Variable rate debt    |  | $                 |     |      | $ | 1,797 |   | $    | 128,340 |      | $ | 42,630       |   | $     |  |           
|Average interest rate |  |                   | 4.98 | %    |   | 5.09  | % |      | 5.32    | %    |   | 5.66         | % |       |  |           

Exchange Rates

International sales during the three and six months ended June 30, 2003 and 2002 and the year ended December 31, 2002 comprised less than 1% of
total net sales. We do not use derivative instruments to hedge foreign currency exposures as substantially all of our foreign currency transactions are denominated in U.S. dollars.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this report, have concluded that as of the such date, our disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to us and our
consolidated subsidiaries required to be included in our periodic filings under the Exchange Act.

Internal Control Over Financial Reporting

Since 2001, we have been in the process of developing an enterprise resource planning, or ERP, system on a company wide basis. As we believe is the case in most
system changes, the development and eventual implementation of these systems will likely necessitate changes in operating policies and procedures and the related internal controls and their method of
application. However, throughout this process, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our
internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved from time to time in routine legal matters and other claims incidental to the business. When it appears probable in management's judgment that we
will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonably estimated, liabilities are recorded in the consolidated financial statements
and charges are recorded against earnings. We believe that the resolution of such routine matters and other incidental claims, taking into account established reserves and insurance, will not have a
material adverse impact on our consolidated financial position or results of operations.

Item 6. Exhibits and Reports on Form 8-K

The
exhibit index is on page 46.

On
May 12, 2003, we furnished a Current Report on Form 8-K under Item 9 to announce our earnings for the three months ended March 31, 2003.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, United Industries Corporation has duly caused this
Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                       |  | UNITED INDUSTRIES CORPORATION,
Registrant
|---------------------- |  | -----------------------------------------
|Dated: August 12, 2003 |  | By:                                      
|                       |  | Name:                                    
|                       |  | Title:                                   

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EXHIBIT INDEX

|Exhibit
Number |  | Exhibit Description                                              
|-------------- |  | -----------------------------------------------------------------
|31.1           |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|31.2           |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|32.1           |  | Section 1350 Certifications                                      

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