8-K 1 form8k.txt 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. -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 001-14015 77-0262908 ----------- --------- ---------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 655 Montgomery Street, San Francisco, California 94111 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 616-8111 --------------------------- -------------------------------------------------------------------------------- (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. -------- 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) --------------------------------------------------------------------------------------------------------------------------------- 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 - - --------------------------------------------------------------------------------------------------------------------------------- Total Current Assets 35,732 35,004 (299) 34,705 --------------------------------------------------------------------------------------------------------------------------------- Property and Equipment, net 4,018 3,994 3,994 --------------------------------------------------------------------------------------------------------------------------------- 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 --------------------------------------------------------------------------------------------------------------------------------- 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 --------------------------------------------------------------------------------------------------------------------------------- $ 96,559 $ 124,459 $ (30,157) $ 94,302 --------------------------------------------------------------------------------------------------------------------------------- Operations to remain with Adjustments for USH&G (after the proposed USH&G exclusions) transaction (pro forma for (B) (B) the transaction) -------------------------------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------------------------------- Total Current Assets 1,027 9,509 10,536 -------------------------------------------------------------------------------------------------------- Property and Equipment, net 24 24 -------------------------------------------------------------------------------------------------------- Intangible Assets: Goodwill 672 672 Deferred financing costs - - Non-compete - - Package design - - Product rights - - -------------------------------------------------------------------------------------------------------- Total Intangible Assets 672 672 Officer Receivables 512 512 Parent Company Receivable - - Note Receivable - 1,600 (H) 1,600 Other Assets 22 22 -------------------------------------------------------------------------------------------------------- $ 2,257 $ 11,109 $ 13,366 --------------------------------------------------------------------------------------------------------
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) --------------------------------------------------------------------------------------------------------------------------- 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 - - --------------------------------------------------------------------------------------------------------------------------- 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 --------------------------------------------------------------------------------------------------------------------------- Total Liabilities 98,595 100,519 (3,004) 97,515 --------------------------------------------------------------------------------------------------------------------------- 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) - - --------------------------------------------------------------------------------------------------------------------------- 10,792 23,940 (27,153) (3,213) Less treasury stock (12,828) - - - --------------------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity (2,036) 23,940 (27,153) (3,213) (Deficit) --------------------------------------------------------------------------------------------------------------------------- $ 96,559 $ 124,459 $ (30,157) $ 94,302 --------------------------------------------------------------------------------------------------------------------------- Operations to remain with Adjustments for USH&G (after the proposed USH&G exclusions) transaction (pro forma for the (B) (B) transaction) ---------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current: Bank debt $ - $ $ - Accounts payable 471 (471) (I) - Accrued expenses 354 354 Current liabilities of Discontinued operations 16 16 ---------------------------------------------------------------------------------------------------------- Total Current Liabilities 841 (471) 370 Bank debt - - Deferred tax liability 239 (239)(J) - Trust Preferred Securities - - ---------------------------------------------------------------------------------------------------------- Total Liabilities 1,080 (710) 370 ---------------------------------------------------------------------------------------------------------- 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) ---------------------------------------------------------------------------------------------------------- 14,005 11,819 25,824 Less treasury stock (12,828) - (12,828) ---------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 1,177 11,819 12,996 (Deficit) ---------------------------------------------------------------------------------------------------------- $ 2,257 $ 11,109 $ 13,366 ----------------------------------------------------------------------------------------------------------
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) ------------------------------------------------------------------------------------------------------------------- Net Sales $ 76,244 $ 75,698 $ - $ 75,698 Cost of Sales 43,453 43,279 - 43,279 ------------------------------------------------------------------------------------------------------------------- Gross Profit 32,791 32,419 - 32,419 ------------------------------------------------------------------------------------------------------------------- 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 ------------------------------------------------------------------------------------------------------------------- Total Operating Expenses 28,025 24,740 - 24,740 ------------------------------------------------------------------------------------------------------------------- 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) ------------------------------------------------------------------------------------------------------------------- Loss From Continuing Operations Before Income Tax (7,519) (4,243) - (4,243) Income Tax Expense (133) 2,009 - 2,009 ------------------------------------------------------------------------------------------------------------------- Net Loss From Continuing Operations $ (7,652) $ (2,234) $ - $ (2,234) ------------------------------------------------------------------------------------------------------------------- Weighted Average Common Shares Outstanding - Basic and Fully Diluted 17,868 ------------------------------------------------------------------------------------------------------------------- Basic and Fully Diluted Loss per Share ($.43) ------------------------------------------------------------------------------------------------------------------- Operations to Adjustments remain with for the USH&G (after proposed USH&G exclusions) transaction (pro forma for (B) (B) the transaction) -------------------------------------------------------------------------------------------------- Net Sales $ 546 $ - $ 546 Cost of Sales 174 - 174 -------------------------------------------------------------------------------------------------- Gross Profit 372 - 372 -------------------------------------------------------------------------------------------------- Operating Expenses: Selling and shipping 424 - 424 General and administrative 2,721 - 2,721 Depreciation 20 - 20 Other amortization 120 - 120 -------------------------------------------------------------------------------------------------- Total Operating Expenses 3,285 - 3,285 -------------------------------------------------------------------------------------------------- Income (Loss) from Operations (2,913) - (2,913) Other Expenses: Refinancing and transaction costs (363) 363 (M) -- Interest expense, net 144 (H) 144 -------------------------------------------------------------------------------------------------- Loss From Continuing Operations Before Income Tax (3,276) 507 (2,769) Income Tax Expense (2,142) - (2,142) -------------------------------------------------------------------------------------------------- Net Loss From Continuing Operations $ (5,418) $ 507 $ (4,911) -------------------------------------------------------------------------------------------------- Weighted Average Common Shares Outstanding - Basic and Fully Diluted 18,168 -------------------------------------------------------------------------------------------------- Basic and Fully Diluted Loss per Share ($.27) --------------------------------------------------------------------------------------------------
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