UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 29, 2003
U.S. HOME & GARDEN INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 001-14015 77-0262908
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
655 Montgomery Street, San Francisco, California 94111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 616-8111
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On October 29, 2003 U.S. Home & Garden Inc. (the "Company") consummated
the sale of substantially all of the operations and assets of its primary
operating subsidiaries, Easy Gardener, Inc. ("Easy Gardener") and its
subsidiaries and Ampro Industries, Inc. ("Ampro") to Easy Gardener Products,
Ltd. ("Easy Gardener Products"), an entity formed by current and former members
of management of those subsidiaries, including Richard Grandy, the Company's
former Chief Operating Officer. Richard Kurz, the Company's Chief Financial
Officer became an equity owner of Easy Gardener Products after the consummation
of the asset sale and is expected to become a member of management of Easy
Gardener Products and leave the employ of the Company. At the time of the sale
these operations comprised approximately 99% of the Company's consolidated sales
and 98% of the Company's consolidated assets. The assets acquired by Easy
Gardener Products consisted of:
o substantially all of the assets of Easy Gardener and Ampro,
including:
o all of their business operations and assets,
o the capital stock and operations of Easy Gardener's
wholly-owned subsidiaries, Easy Gardener UK Ltd. and
Weatherly Consumer Products Group, Inc., and
o indirectly, the capital stock and operations of
Weatherly Consumer Products, Inc., a wholly-owned
subsidiary of Weatherly Consumer Products Group, Inc;
and
o from the Company, all of the common securities of its
subsidiary, U.S. Home & Garden Trust I (the "Trust"), as well
as the 251,981 trust preferred securities previously issued by
the Trust and owned by the Company at the time of the sale.
In addition, Easy Gardener Products assumed substantially all of the
selling subsidiaries' liabilities as well as the Company's obligations relating
to the Trust. These liabilities comprised approximately 99% of the Company's
consolidated liabilities at the time of the sale.
2
Easy Gardener Products paid the Company a total purchase price of
$11,950,000, less certain expenses related to the transaction, for the assets it
acquired resulting in the Company's receipt of net proceeds of approximately
$11,494,000. Of this amount, $9,894,000 was paid to the Company in cash at the
closing and $1,600,000 was paid to the Company in the form of a subordinated
promissory note. The note matures in 2009 subject to certain prepayments from
excess cash flow. Interest on the principal amount outstanding from time to time
will accrue at the rate of 9% per annum and will be capitalized by increasing
the principal amount of the note. The note is subordinated to the indebtedness
of Easy Gardener Products under its senior credit facility and under its note
issued to Central Garden & Pet Company in connection with the transaction. The
note is senior to the debentures underlying the trust preferred securities
issued by the Trust.
In addition, Easy Gardener Products:
o paid the Company's obligations under the Company's then
existing term loan and assumed all borrowings outstanding
under the revolving credit facility as of the closing and the
Company was discharged from any future obligations under the
facility;
o assumed the Company's obligations under the Trust-related
documents and the Company was discharged from any further
obligations under the Trust-related documents;
o assumed the Company's obligations to sell up to 94,875 trust
preferred securities under an option previously granted by the
Company in November 2001 to its prior subordinated lenders;
and
o assumed substantially all of the selling subsidiaries'
operational (non-debt) liabilities;
The Company retained the capital stock and assets of its Golden West
Agri-Products, Inc. subsidiary, which accounted for less than 1% of the
Company's consolidated net sales for each of the last three fiscal years. In
addition, in connection with the transaction, Easy Gardener Products paid Robert
Kassel, the Company's Chairman, Chief Executive Officer and President,
$1,250,000 for entering into a non-compete agreement. The sales price of the
assets sold was determined by negotiations among the parties to the Asset
Purchase Agreement relating to the sale.
3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Pro Forma Financial Information
Page No.
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Introduction PF-1
Pro forma condensed consolidated balance sheet as of June 30, 2003 PF-2-3
Pro forma condensed consolidated statement of operations for the
year ended PF-4
June 30, 2003 Notes to pro forma condensed consolidated financial
statements PF-5-6
(c) Exhibits
2.1 Asset Purchase Agreement, dated December 11, 2002, as amended
July 31, 2003, by and between Easy Gardener Products, Ltd.,
EYAS International, Inc., U.S. Home & Garden Inc., Easy
Gardener, Inc., Ampro Industries, Inc., and Weed Wizard
Acquisition Corp.(incorporated by reference to Exhibit 2.1 and
Annex A to Post-Effective Amendment No. 1 to the Registration
Statement on Form S-4 of Easy Gardener Products, Ltd. and U.S.
Home & Garden Trust I (SEC File nos. 333-102296 and
333-102296-01).
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
U.S. HOME & GARDEN INC.
(Registrant)
By: /s/ Robert Kassel
------------------------------------
Robert Kassel
President and Chief Executive Officer
Date: November 13, 2003
5
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Unaudited Balance Sheets
June 30, 2003
(In thousands)
On October 29, 2003 the Company consummated the sale of substantially all of the
operations and assets of the Company's primary operating subsidiaries, Easy
Gardener, Inc. ("Easy Gardener") and its subsidiaries and Ampro Industries, Inc.
("Ampro") to Easy Gardener Products, Ltd. ("Easy Gardener Products"), an entity
formed by current and former members of management of those subsidiaries. At the
time of the sale these operations comprised approximately 99% of the Company's
consolidated sales and 98% of the Company's consolidated assets. The following
unaudited pro forma condensed consolidated financial statements give effect to
the asset sale as reflected on the Company's consolidated financial statements.
This will result in a substantial reduction of the Company's operations. The pro
forma financial information reflects these matters and has been prepared
utilizing the historical financial statements of the Company included in its
Annual Report on Form 10-K for the year ended June 30, 2003.
The Pro Forma consolidated financial statements of the Company (Pro Forma for
the transaction), as of and for the year ended June 30, 2003 assume, for balance
sheet purposes, that the sale had taken place at June 30, 2003 and, for purposes
of the statement of operations, that the sale had taken place at the beginning
of the fiscal year presented using the same terms for the proposed sale.
The asset sale resulted in the elimination of the Company's historical lawn and
garden operations with a corresponding elimination in substantially all of the
Company's operating revenue and related expenses. The Company's only operations
currently consist of those of its Golden West Agri-Products, Inc. subsidiary,
which account for less than 1% of the Company's consolidated net sales.
The unaudited pro forma consolidated financial statements are presented for
illustrative purposes only and are not necessarily indicative of the results of
operations or financial position that would have been achieved had the
transaction reflected therein been consummated as of the dates indicated, or of
the results of operations or financial position for any future periods.
PF-1
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Unaudited Balance Sheets
June 30, 2003
(In thousands)
Operations Operations to be
to be sold Adjustments for sold (after
USH&G (historical) excluded assets exclusions)
(historical) (A) and liabilities (A)
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Assets
Current:
Cash and short term investments $ 822 $ 593 $ $ 593
Accounts receivable 24,467 24,275 24,275
Inventories 9,138 9,103 9,103
Prepaid expenses and
other current assets 721 597 597
Refundable income taxes 137 137 137
Deferred tax asset 385 299 (299)(C) -
Current assets of discontinued
operations 62 - -
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Total Current Assets 35,732 35,004 (299) 34,705
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Property and Equipment, net 4,018 3,994 3,994
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Intangible Assets:
Goodwill 49,878 49,206 49,206
Deferred financing costs 3,975 3,975 3,975
Non-compete 744 744 744
Package design 1,204 1,204 1,204
Product rights 467 467 467
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Total Intangible Assets 56,268 55,596 55,596
Officer Receivables 512 - -
Parent Company Receivable - 29,858 (29,858)(E) -
Note Receivable - - -
Other Assets 29 7 7
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$ 96,559 $ 124,459 $ (30,157) $ 94,302
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Operations to
remain with Adjustments for
USH&G (after the proposed USH&G
exclusions) transaction (pro forma for
(B) (B) the transaction)
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Assets
Current:
Cash and short term investments $ 229 $ 9,894 (F) $ 10,123
Accounts receivable 192 192
Inventories 35 35
Prepaid expenses and
other current assets 124 124
Refundable income taxes - -
Deferred tax asset 385 (385)(G) -
Current assets of discontinued
operations 62 62
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Total Current Assets 1,027 9,509 10,536
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Property and Equipment, net 24 24
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Intangible Assets:
Goodwill 672 672
Deferred financing costs - -
Non-compete - -
Package design - -
Product rights - -
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Total Intangible Assets 672 672
Officer Receivables 512 512
Parent Company Receivable - -
Note Receivable - 1,600 (H) 1,600
Other Assets 22 22
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$ 2,257 $ 11,109 $ 13,366
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PF-2
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Unaudited Balance Sheets
June 30, 2003
(In thousands)
Operations to
Operations to be Adjustments for be sold (after
sold (historical) excluded assets exclusions)
USH&G (historical) (A) and liabilities (A)
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Liabilities and Stockholders'
Equity
Current:
Bank debt $ 27,227 $ 27,227 $ $ 27,227
Accounts payable 8,954 8,483 8,483
Accrued expenses 5,067 4,713 4,713
Current liabilities of
Discontinued operations 16 - -
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Total Current Liabilities 41,264 40,423 40,423
Bank debt - - -
Deferred tax liability 239 3,004 (3,004)(D) -
Trust Preferred
Securities 57,092 57,092 57,092
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Total Liabilities 98,595 100,519 (3,004) 97,515
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Stockholders' Equity (Deficit):
Common stock 22 - -
Additional paid-in capital 52,470 - -
Sold operations capital - 23,940 (299)(C) (3,213)
3,004 (D)
(29,858)(E)
Retained earnings
(deficit) (41,700) - -
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10,792 23,940 (27,153) (3,213)
Less treasury stock (12,828) - - -
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Total Stockholders' Equity (2,036) 23,940 (27,153) (3,213)
(Deficit)
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$ 96,559 $ 124,459 $ (30,157) $ 94,302
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Operations to
remain with Adjustments for
USH&G (after the proposed USH&G
exclusions) transaction (pro forma for the
(B) (B) transaction)
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Liabilities and Stockholders'
Equity
Current:
Bank debt $ - $ $ -
Accounts payable 471 (471) (I) -
Accrued expenses 354 354
Current liabilities of
Discontinued operations 16 16
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Total Current Liabilities 841 (471) 370
Bank debt - -
Deferred tax liability 239 (239)(J) -
Trust Preferred
Securities - -
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Total Liabilities 1,080 (710) 370
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Stockholders' Equity (Deficit):
Common stock 22 22
Additional paid-in capital 52,470 150 (K) 52,620
Sold operations capital 3,213 (3,213)(L)
Retained earnings
(deficit) (41,700) 3,213 (L) -
9,894 (F)
(385)(G)
1,600 (H)
471 (I)
239 (J)
(150)(K) (26,818)
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14,005 11,819 25,824
Less treasury stock (12,828) - (12,828)
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Total Stockholders' Equity 1,177 11,819 12,996
(Deficit)
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$ 2,257 $ 11,109 $ 13,366
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PF-3
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Unaudited Consolidated Statement of Operations
Year ended June 30, 2003
(In thousands except per share)
Operations to be Operations to
sold Adjustments for be sold (after
USH&G (historical) excluded assets exclusions)
(historical) (A) and liabilities (A)
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Net Sales $ 76,244 $ 75,698 $ - $ 75,698
Cost of Sales 43,453 43,279 - 43,279
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Gross Profit 32,791 32,419 - 32,419
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Operating Expenses:
Selling and shipping 18,640 18,216 - 18,216
General and administrative 7,637 4,916 - 4,916
Depreciation 711 691 - 691
Other amortization 1,037 917 - 917
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Total Operating Expenses 28,025 24,740 - 24,740
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Income (Loss) from Operations 4,766 7,679 - 7,679
Other Expenses:
Refinancing and
transaction costs (4,291) (3,928) - (3,928)
-
Interest expense, net (7,994) (7,994) (7,994)
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Loss From Continuing
Operations Before Income
Tax (7,519) (4,243) - (4,243)
Income Tax Expense (133) 2,009 - 2,009
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Net Loss From Continuing
Operations $ (7,652) $ (2,234) $ - $ (2,234)
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Weighted Average Common
Shares Outstanding -
Basic and Fully Diluted 17,868
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Basic and Fully Diluted Loss
per Share ($.43)
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Operations to Adjustments
remain with for the
USH&G (after proposed USH&G
exclusions) transaction (pro forma for
(B) (B) the transaction)
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Net Sales $ 546 $ - $ 546
Cost of Sales 174 - 174
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Gross Profit 372 - 372
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Operating Expenses:
Selling and shipping 424 - 424
General and administrative 2,721 - 2,721
Depreciation 20 - 20
Other amortization 120 - 120
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Total Operating Expenses 3,285 - 3,285
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Income (Loss) from Operations (2,913) - (2,913)
Other Expenses:
Refinancing and
transaction costs (363) 363 (M) --
Interest expense, net 144 (H) 144
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Loss From Continuing
Operations Before Income
Tax (3,276) 507 (2,769)
Income Tax Expense (2,142) - (2,142)
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Net Loss From Continuing
Operations $ (5,418) $ 507 $ (4,911)
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Weighted Average Common
Shares Outstanding -
Basic and Fully Diluted 18,168
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Basic and Fully Diluted Loss
per Share ($.27)
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See accompanying notes to unaudited pro forma consolidated financial statements.
PF-4
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
================================================================================
A. The financial statements related to the Operations to be sold
(historical) are derived from the previously reported
consolidated financial statements of U.S. Home & Garden Inc.
The Operations to be sold (historical) are adjusted to exclude
intercompany assets and liabilities which as stated in the
Asset Purchase Agreement are not being acquired. The
elimination of such intercompany balances are included in the
column entitled "Adjustments for excluded assets and
liabilities." The operations being acquired are Ampro and Easy
Gardener, including its wholly-owned subsidiaries, other than
the operations of Weed Wizard Acquisition Corp., which are not
being acquired pursuant to the asset purchase agreement. In
accordance with the Asset Purchase Agreement, Easy Gardener
Products, Ltd. is acquiring either the outstanding assets and
liabilities of the operations or, in the case of Weatherly
Consumer Products Group, Inc., Weatherly Consumer Products,
Inc., and Easy Gardener UK, Ltd., the stock ownership of those
operations.
The historical financial data of each individual entity
included in the consolidated financial statements of U.S. Home
& Garden Inc. includes allocations and transfers through
intercompany accounts between the various entities over time.
Such allocations include the allocation of income taxes.
B. Operations to remain with the Company (after exclusions) are
those operations not included in the sale and the intercompany
balances of the operations being sold which are excluded from
the sale as noted above.
The unaudited pro forma adjustments described below assist in
the analysis of the future prospects of U.S. Home & Garden
Inc. after giving effect to the pro forma adjustments. The
unaudited pro forma consolidated financial statements of
operations do not include the impact of nonrecurring charges
or credits directly attributable to the transaction and do not
include a gain in the Pro Forma Unaudited Consolidated
Statement of Operations from the transaction. In the opinion
of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
C. Deferred tax assets of the operations to be sold have been
excluded from the operations to be sold in accordance with the
terms of the Asset Purchase Agreement.
D. Deferred tax liabilities of the operations to be sold have
been excluded from the operations to be sold in accordance
with the terms of the Asset Purchase Agreement.
E. Intercompany balances between U.S. Home & Garden Inc. and the
operations to be sold have been excluded from the operations
to be sold in accordance with the Asset Purchase Agreement.
F. Cash and short term investments increase by $9,894,000 as the
result of the cash proceeds received at the date of the sale,
and are net of estimated cash expenses related to the sale.
PF-5
Unaudited Pro Forma Consolidated Financial Statements of
U.S. Home & Garden Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
================================================================================
G. The deferred tax asset of $385,000 is eliminated as a result
of the gain to be recognized on the proposed sale transaction.
H. A note receivable is created for $1,600,000 as a result of
that portion of the purchase price taken in the form of a
note. Interest income on the note is 9% per year, which is
added to the note amount. Interest income for the first year
amounts to $144,000.
I. Accounts payable decreased to reflect parent company payables
assumed by the buyer.
J. The deferred tax liability of $239,000 is eliminated as a
result of the gain on the proposed sale transaction.
K. Equity is increased by $150,000 to record the transaction
costs paid by the issuance of 300,000 shares of common stock
of U.S. Home & Garden Inc.
L. The net deficit of $ (3,213,000) in the Operations to be sold
(after intercompany exclusions) is eliminated as a result of
the sale. The sum of the pro forma adjustments F through K
result in a gain on the proposed transaction of $14,882,000.
M. Cost of refinancing would not be part of our ongoing business.
PF-6