Special to CONTRACTOR
ISELIN, N.J. – U.S. Industries Inc., the parent company of Jacuzzi, Zurn, U.S. Brass, Sundance Spas and Eljer, lost hundreds of millions of dollars last year and may not be able to survive as a going concern, according to an auditor’s statement in its own annual report. The annual report includes this note:
“The company’s independent auditors have included a going concern explanatory paragraph in their audit report accompanying the Sept. 30 consolidated financial statements. The paragraph states that the company’s need to generate sufficient funds to make the required cumulative reductions of senior debt of $450 million by June 30 through asset sales or a restructuring or refinancing raises substantial doubt about the company’s ability to continue as a going concern.”
A spokeswoman for USI told CONTRACTOR in late January that after the annual report was published, USI raised sufficient funds to make its bank-required payment. On Jan. 14, USI announced the sale of its Ames True Temper lawn-and-garden tool business to an investment group for $165 million, she said. Subsequent to that transaction, she noted, USI sold strategic notes worth $107 million.
USI’s first-quarter earnings will be released in mid-February.
After selling some operations in 2000, USI is attempting to sell four other businesses that it terms “non-core assets.” Consequently, USI’s financial data includes continuing operations, discontinued operations, goodwill impairment, restructuring costs, assets up for sale and one-time charges. No matter how the numbers are presented, however, the balance sheet is covered with red ink.
The company reported a loss from continuing operations for fiscal 2001 of $3.1 million. Including net non-recurring charges and credits, however, the loss from continuing operations was $179.8 million, compared to income of $38.7 million in fiscal 2000.
When discontinued operations or divisions that are up for sale are included, however, the company reported a net loss, including net non-recurring charges and credits, of $524.6 million for fiscal 2001, compared to net income of $35.6 million in fiscal 2000. Results for fiscal 2001 include the estimated loss on disposal of the non-core assets.
Losses seemed to accelerate in the fourth quarter.
The loss from continuing operations for the fourth quarter was $9.8 million, but including net non-recurring charges, the loss from continuing operations was $60.1 million. The net loss, the company said in its filings, including net non-recurring charges and losses associated with the non-core assets, was $277.6 million. The 2001 loss includes the $232.6 million estimated loss on disposal of the non-core assets.
U.S. Industries is trying to reshape itself from a conglomerate into a company that focuses on kitchen-and-bath products and a vacuum cleaner line, Rainbow Vacuum Cleaners.
In 2000 USI sold its Diversified group, which truly was diversified. Businesses listed included turbines, a tanning business, textiles, plastics and footwear. Also in 2000, the company shed its European HVAC operations and fire-protection business. As part of its restructuring and to raise cash, USI has announced plans to sell off four other non-core businesses - gardening tool maker Spear & Jackson PLC, Lighting Corp. of America, SiTeco Lighting and the Selkirk Group.
Even now, USI is significantly smaller than it had been. The company’s overall sales decreased 36% in 2001 due to the disposals of the Diversified businesses in March 2000, its fire-protection business in January 2000 and its European HVAC business in November 2000, and the company’s decision to exit what it said were certain unprofitable product lines at U.S. Brass during 2000. The remaining sales decrease of 9%, the company reported, was attributable to the weaker economy, inventory reduction programs instituted by major customers, inclement weather and unfavorable fluctuations in currency exchange rates.
USI noted that sales in its Bath & Plumbing segment decreased 15% in 2001 compared to 2000. The decrease was partially attributable to the disposal of the segment’s fire-protection and European HVAC businesses and the discontinuance of unprofitable product lines at U.S. Brass. The European HVAC and fire-protection businesses had provided the company with $63.8 million of sales in 2000 but dwindled to just $4.2 million in sales in 2001 prior to their disposal.
The discontinued product lines at U.S. Brass had generated $45.6 million in sales in 2000 compared to only $9.8 million in 2001 prior to their discontinuance.
Like the company as a whole, USI said part of the downturn in Bath & Plumbing was caused by the economy, reduced customer orders, inclement weather and unfavorable currency fluctuations. In addition, it noted that increased energy costs had softened consumer interest in buying spas. The majority of the sales decline in 2001 for the segment was in the domestic bath and spa businesses, which accounted for $93.2 million of the overall sales decrease in 2001.