SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 1994
GROW GROUP, INC.
_________________________________________________________________
(Exact name of registrant as specified in its charter)
NEW YORK
_________________________________________________________________
(State or other jurisdiction of incorporation)
1-4596 11-1665588
_________________________ ___________________________________
(Commission File Number) (IRS Employer Identification No.)
200 Park Avenue, New York, New York 10166
_________________________________________________________________
(Address of principal executive offices) (Zip Code)
(212) 599-4400
_________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
_________________________________________________________________
(Former name or former address, if changed since last report)
Exhibit Index is on page __
Page 1 of __ pages
<PAGE>
Item 2. Acquisition or Disposition of Assets.
____________________________________
On August 3, 1994, Grow Group, Inc. (the "Company"),
through its wholly-owned subsidiary, Sinclair Acquisition Corp.
(the "Buyer"), completed the acquisition of substantially all of
the assets of Sinclair Paint Company ("Sinclair"), a division of
Insilco Corporation ("Insilco"). The acquisition was effectuated
pursuant to an Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated May 7, 1994 (a copy of which was attached as
Exhibit 10.1 to the Company's Current Report on Form 8-K, date of
earliest event reported: May 7, 1994), as amended by a First
Amendment to Asset Purchase Agreement, dated as of August 1, 1994
(a copy of which is attached hereto as Exhibit 2.1(b)). The
discussion of the Asset Purchase Agreement contained herein is
qualified in its entirety by reference to the Asset Purchase
Agreement, as amended.
Sinclair is engaged in the manufacture and sale of
architectural paints through 49 company-operated stores in four
Western states. Sinclair generated over $95 million in revenue
in calendar 1993. The Sinclair operation will augment the
Company's other architectural paint operations.
The purchase price, which was negotiated between the
parties, was $51 million (subject to post-closing adjustments).
In addition, the Buyer assumed certain obligations of Sinclair.
The purchase price was paid in full at the closing and was funded
through a combination of cash and borrowings.
To the best of the Company's knowledge, there were no
material relationships between Insilco and its affiliates and the
Company or any of the Company's affiliates, directors or officers
or any associate of any director or officer of the Company.
Item 5. Other Events.
____________
In connection with the acquisition of the Sinclair
assets, the amount of the Company's credit facilities with
Chemical Bank New Jersey, N.A., Fleet Bank and PNC Bank,
Kentucky, Inc., (collectively, the "Banks") was increased from
$40 million to $60 million. The Credit Agreement (the "Credit
Agreement"), dated as of March 31, 1993, as amended on August 6,
1993, by and among the Company, Grow Group Insurance, Ltd., the
Banks and Chemical Bank, was further amended on August 3, 1994
to, among other things, waive certain provisions of the Credit
Agreement to the extent they would restrict the Buyer's
performance under the Asset Purchase Agreement and amend the
defined levels of leverage and capital expenditures.
2
<PAGE>
The Company's obligations under the Credit Agreement
are secured by the accounts receivable of the Company and Cello
Corp., Sinclair Acquisition Corp. and Zynolyte Products Company,
wholly-owned subsidiaries of the Company. Such subsidiaries also
guaranteed the Company's obligations under the Credit Agreement.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
______________________________________________________
(a) Financial statements of business acquired:
The financial statements of Sinclair included herein
are prepared on a historical basis and include breakdowns between
a predecessor company and the current entity and "Fresh Start"
accounting adjustments due to the bankruptcy proceedings
described in Note (2) to the Sinclair financial statements. As a
result of these and other factors, the Sinclair financial
statements are not comparable nor are these financial statements
necessarily indicative of future results of operations or
financial position. The Company's acquisition decision was
affected by extensive reviews and examinations of detailed
financial and other information, both current and forecasted.
The following financial statements of Sinclair are
presented herein:
Independent Auditors' Report.
Statements of Assets and Liabilities - Years Ended
December 31, 1993 and 1992.
Statements of Operations - Nine Months Ended December
31, 1993, Three Months Ended March 31, 1993, Year Ended
December 31, 1992.
Statements of Cash Flows - Nine Months Ended December
31, 1993, Three Months Ended March 31, 1993, Year Ended
December 31, 1992.
Notes to Financial Statements.
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Insilco Corporation:
We have audited the accompanying statements of assets and
liabilities of Sinclair Paint Company (a division of Insilco
Corporation) as of December 31, 1993 and 1992 and the related
statements of operations and cash flows for the nine months ended
December 31, 1993 (successor period), three months ended March
31, 1993 and year ended December 31, 1992 (predecessor periods).
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Sinclair Paint Company as of December 31, 1993 and 1992 and
the results of its operations and its cash flows the nine-month
period ended December 31, 1993, the three-month period ended
March 31, 1993 and the year ended December 31, 1992 in conformity
with generally accepted accounting principles.
As discussed in notes 2 and 4 to the financial statements,
effective March 31, 1993, the Company emerged from bankruptcy and
applied fresh start accounting. As a result, the statement of
assets and liabilities at December 31, 1993 and the related
statements of operations and cash flows for the nine-month period
ended December 31, 1993 are presented on a different basis than
that for the periods before fresh start and, therefore, are not
comparable.
Los Angeles, California
June 17, 1994 KPMG Peat Marwick, LLP
4
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Statements of Assets and Liabilities
December 31, 1993 and 1992
(In thousands)
Predecessor
___________
Assets 1993 1992
____ ____
Current assets:
Cash $ 333
Accounts receivable, net of allowance
for doubtful accounts of $475 and $533,
respectively 7,093 6,936
Inventories, net 14,233 17,292
Prepaid expenses 958 1,538
______ ______
Total current assets 22,617 25,766
Property, plant and equipment, at cost,
net of accumulated depreciation of
$1,357 and $12,095, respectively 17,219 34,313
______ ______
Total assets $39,836 60,079
______ ______
______ ______
Liabilities
Current liabilities:
Accounts payable $ 5,633 3,164
Accrued expenses (note 4) 3,109 3,813
______ ______
Total current liabilities 8,742 6,977
Divisional investment 31,094 53,102
Commitments and contingencies
(notes 6 and 8)
______ ______
Total liabilities including
divisional investment $39,836 60,079
______ ______
______ ______
See accompanying notes to financial statements.
5
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Statements of Operations
(In thousands)
Predecessor
___________________________
Nine months
ended Three months Year ended
December 31, ended December 31,
1993 March 31, 1993 1992
___________ ______________ ___________
Net sales $ 77,565 20,651 96,837
Costs of goods
sold 42,471 12,141 56,769
______ ______ ______
Gross profit 35,094 8,510 40,068
______ ______ ______
Selling expenses 27,022 7,642 30,987
General and
administrative
expenses 7,063 1,933 9,137
Corporate charges 996 324 1,296
______ ______ ______
Operating
expenses 35,081 9,899 41,420
______ ______ ______
Operating
income (loss) 13 (1,389) (1,352)
Other income - - 210
Loss on sale of
assets (148) - (128)
Reorganization
expenses - (18,667) -
______ ______ ______
Divisional
loss $ (135) (20,056) (1,270)
______ ______ ______
______ ______ ______
See accompanying notes to financial statements.
6
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Statements of Cash Flows
(In thousands)
Predecessor
___________________________
Nine months
ended Three months Year ended
December 31, ended December 31,
1993 March 31, 1993 1992
___________ ______________ ___________
Cash flows from
operating
activities:
Divisional loss $ (135) (20,056) (1,270)
Adjustments to
reconcile change
in divisional loss
to net cash provided
by (used in)
operating activities:
Depreciation 1,366 784 3,127
Loss on sale of
fixed assets 148 - 128
Fresh Start Valuation
Adjustment - 18,667 -
Change in assets and
liabilities:
(Increase) decrease
in:
Accounts
receivable 647 (804) (71)
Inventories (1,268) 2,314 2,373
Prepaid
expenses 771 (513) (1,396)
Increase (decrease)
in:
Accounts
payable 1,623 846 (878)
Accrued
expenses (290) (414) (4,363)
_____ _____ _____
Net cash
provided
by (used
in)
operating
activities 2,862 824 (2,350)
_____ _____ _____
7
<PAGE>
Predecessor
___________________________
Nine months
ended Three months Year ended
December 31, ended December 31,
1993 March 31, 1993 1992
___________ ______________ ___________
Cash flows from
investing activities:
Capital expenditures (1,304) (440) (1,984)
Proceeds from sale
of fixed assets 208 - 46
_____ _____ _____
Net cash used in
investing activities
(1,096) (440) (1,938)
_____ _____ _____
Cash flows from financing
activities - divisional
investment (outflow) (1,433) (384) 4,180
_____ _____ _____
Net increase
(decrease) in cash 333 - (108)
Cash at beginning of
period - - 108
_____ _____ _____
Cash at end of
period $ 333 - -
_____ _____ _____
_____ _____ _____
See accompanying notes to financial statements.
8
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements
December 31, 1993 and 1992
(1) Nature of Business
__________________
The Sinclair Paint Company (the Company) is a division of
Insilco Corporation (Parent) which manufactures paints and
sells a variety of paints and related products (ladders,
tape, spray equipment, and the like) through approximately
50 retail stores in California, Hawaii and Arizona.
The financial statements of Sinclair Paint have been
prepared from the historical books and records of the
Company and Parent, except that certain reserves established
and maintained at the Parent level have been excluded from
the financial statements. The Company has applied the
principles of fresh start accounting as a result of the
reorganization described in notes 2 and 4.
The divisional balances in the statements of assets and
liabilities represent the Parent's investment and advances
to the Company on a historical-cost basis adjusted for
equity in operations and intercompany transactions.
Expenses allocated to the Company not settled with the
Parent become a permanent component of the divisional
investment. The Parent believes that such expense
allocations are reasonable and proper. Cash generated by
the Company is transferred to the Parent on a daily basis
for cash management purposes. The cumulative amount of cash
transferred since the Company's acquisition represents a
reduction to the divisional investment account balance.
(2) Plan of Reorganization
______________________
On April 1, 1993, the Parent and certain of its subsidiaries
(collectively with the Parent, the Debtors) emerged from
Chapter 11 of the United States Bankruptcy Code (the Chapter
11 cases) pursuant to a plan of reorganization (the Plan of
Reorganization) which was confirmed by the United States
Bankruptcy Court (the Bankruptcy Court). For financial
reporting purposes, the effective date of the Plan of
Reorganization was March 31, 1993 (the Plan Effective Date).
For periods prior to the Plan Effective Date, the Company is
sometimes referred to herein as the Predecessor. The
Chapter 11 cases were commenced on January 13, 1991 (the
Petition Date) when the Debtors filed separate voluntary
petitions for reorganization.
9
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
(3) Asset Purchase Agreement
________________________
On May 7, 1994, Insilco entered into an Asset Purchase
Agreement (Agreement) with Grow Group Inc. (Grow). Under
the terms of the Agreement, Grow will acquire the majority
of the Company's assets and assume certain liabilities, as
defined in the Agreement.
(4) Summary of Significant Accounting Policies
Basis for Presentation - Fresh Start Accounting
_______________________________________________
The accompanying financial statements have been prepared in
accordance with the Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code" (the Reorganization SOP), issued by the American
Institute of Certified Public Accountants. As of the Plan
Effective Date, the Company adopted the "fresh start"
accounting principles prescribed by the Reorganization SOP.
As a result of the application of the Reorganization SOP,
including the application of fresh start accounting as of
March 31, 1993, financial information for periods subsequent
to the Plan Effective Date is not comparable with financial
information for prior periods.
The following summarizes the Reorganization SOP's
significant fresh start accounting principles and the
significant assumptions utilized in the application thereof.
Valuation of Assets and Liabilities
___________________________________
Using a valuation of the Company performed by the Parent's
financial advisor as well as fair values of the Company's
identifiable intangible assets, inventories and fixed and
other tangible assets based on management's estimates, the
Parent determined the total reorganization value of all of
its assets to be approximately $40 million as of the Plan
Effective Date, or approximately $18 million less than the
historical carrying value of its tangible assets.
10
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
In preparing the valuation of the Company, the Parent's
financial advisor conducted extensive due diligence and
updated its due diligence examinations as it deemed
appropriate. The activities included, but were not
restricted to the following: (i) a review and analysis of
the historical financial and operating performance of the
Predecessor based on data and reports provided by the
Company, (ii) extensive discussions concerning the business,
operations, assets, present condition and future prospects
of the Company conducted with the Parent's senior management
and with selected operating management as deemed necessary,
(iii) a comparison of the Company's financial and operating
information with similar data available from public sources
for selected comparable companies and (iv) a review and
analysis of the Company's projected operating performance
based on business plans, which are revised periodically to
reflect actual and anticipated results of economic
developments.
11
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
As a result of the valuation of assets described above, the
Company adjusted assets by approximately $18 million to the
estimated reorganization value in the three months ended
March 31, 1993. The effect of the Plan of Reorganization
and fresh start accounting principles on the Company's March
31, 1993 statement of assets and liabilities follows:
Fresh Start Statement of Assets and Liabilities
March 31, 1993
(Unaudited)
(In thousands)
Adjustments
to record
consummation
of the Plan of
Reorganization Reorganized
Assets Predecessor Fresh Start Company
___________ ______________ ___________
Current assets:
Cash and cash
equivalents $ - - -
Accounts receivable,
net 7,740 - 7,740
Inventories 14,978 (2,013) (1) 12,965
Prepaid expenses 2,051 (322) (1) 1,729
______ ______ ______
Total current assets 24,769 (2,335) 22,434
Property, plant and
equipment, net 33,969 (16,332) (1) 17,637
______ ______ ______
Total assets $ 58,738 (18,667) 40,071
______ ______ ______
______ ______ ______
Liabilities
Current liabilities:
Accounts payable $ 4,010 - 4,010
Accrued expenses
and other 3,399 - 3,399
______ ______ ______
Total current
liabilities 7,409 - 7,409
12
<PAGE>
Adjustments
to record
consummation
of the Plan of
Reorganization Reorganized
Predecessor Fresh Start Company
___________ ______________ ___________
Divisional investment 51,329 (18,667) (1) 32,662
______ ______ ______
Total liabilities
including
divisional
investment $ 58,738 (18,667) 40,071
______ ______ ______
______ ______ ______
The notes to the unaudited balance sheet at March 31, 1993
presenting the effect of fresh start accounting as follows:
(1) To record the effects of fresh start accounting whereby the
Company's assets and liabilities are stated in accordance
with the Reorganization SOP.
13
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
Inventories
___________
Inventories consisted of the following at December 31, 1993 and
1992 (in thousands):
Predecessor
___________
1993 1992
___________ ___________
Raw materials and supplies $ 2,975 2,386
Work in process 260 445
Finished goods 10,998 14,461
________ ________
$ 14,233 17,292
_______ ________
_______ ________
Inventories are valued at the lower of cost (principally
determined utilizing the first-in, first-out) or market.
Property, Plant and Equipment
_____________________________
Predecessor
___________
1993 1992
__________ ___________
Land $ 4,954 9,642
Buildings 6,645 20,380
Machinery and equipment 6,977 16,386
_______ ______
Total property and equipment $ 18,576 46,408
Accumulated depreciation (1,357) (12,095)
______ ______
Total property and equipment $ 17,219 34,313
______ ______
______ ______
Property, plant and equipment are carried at cost and are
depreciated over the estimated useful lives of the property
utilizing the straight-line method. The estimated useful lives
of the property range from 3 to 20 years. Expenditures for
maintenance and repairs are expensed as incurred, and
depreciation expense was $1,366, $784 and $3,127 for the periods
ended December 31, 1993, March 31, 1993 and the year ended
December 31, 1992, respectively.
14
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
Accrued Expenses
________________
Accrued expenses consisted of the following as of December 31,
1993 and 1992 (in thousands):
Predecessor
___________
1993 1992
___________ ___________
Salaries, wages and related expenses $ 2,668 2,425
Other 441 1,388
___________ ___________
$ 3,109 3,813
___________ ___________
___________ ___________
Income Taxes
____________
The Company has been included in the Parent's consolidated
Federal income tax return for the periods ended December 31,
1993, March 31, 1993 and the year ended December 31, 1992. The
Company was not party to any formal tax sharing agreement, and
accordingly, no provision or benefit for income taxes has been
reflected in the accompanying statements of income. In addition,
no deferred income taxes have been reflected for temporary
differences in the recognition of revenues and expenses for tax
and financial reporting purposes.
(5) Transactions with Parent
________________________
The Parent provides various treasury functions for the Company
and maintains a cash management system under which excess cash
generated by the Company is transferred to the Parent and working
capital requirements of the company are paid by the Parent.
Incident to this system, the Parent pays for certain expenses,
such as insurance, payroll taxes, and 401(k) contributions
specifically related to the Company. The Parent also provides
certain services to the group such as operations management,
treasury, insurance and benefits management, legal, accounting
and tax, among others. Costs charged to the Company for these
services are allocated based on management's estimates of the
Company's proportionate share of the total group's expenses.
Management believes that these expenses are reasonably allocated.
Expenses allocated to the Company by the Parent for these
services totaled approximately $1 million, $300 thousand and $1.3
million for the periods ended December 31, 1993, March 31, 1993
and the year ended December 31, 1992, respectively. The Company
is also allocated pension costs by the Parent. See note 7 for a
discussion of the Company's retirement plans.
15
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
If net expenses charged to the Company for services provided by
the Parent are not settled with the Parent, they become a
permanent component of the divisional investment reflected in the
accompanying balance sheets. To the extent that expenses paid by
the Parent for the Company have not been settled by the Parent at
December 31, 1993, March 31, 1993 or December 31, 1992,
respectively, the corresponding liability allocated to the
Company is included on the statements of assets and liabilities
within divisional investment.
(6) Lease Commitments
_________________
The Company leases certain property, plant and equipment under
various leasing arrangements, most of which provide that the
Company pay taxes, maintenance, insurance and certain other
operating expenses associated with the asset. These leases are
being accounted for as operating leases. Minimum future rental
payments under all operating leases are as follows (in
thousands):
1994 $ 4,652
1995 3,802
1996 2,989
1997 2,367
1998 2,181
Thereafter 10,050
__________
Total minimum lease payments $26,041
__________
__________
Rental expense for the periods ended December 31, 1993, March 31,
1993 and the year ended December 31, 1992 was approximately $2.3
million, $.8 million and $2.8 million, respectively.
(7) Pension Plans
_____________
Substantially all employees of the Company were covered under
various pension plans of the Parent during 1993 and 1992. The
benefits under these plans are based primarily on years of
service and employees' compensation near retirement. Plan assets
consist principally of equity investments, government obligations
and noncallable corporate debt securities. The Parent also
contributes to various multiemployer plans sponsored by
bargaining units for its union employees. The various plans'
assets and obligations remain with the Parent company after the
closing date of the agreement described in note 3.
16
<PAGE>
SINCLAIR PAINT COMPANY
(A Division of Insilco Corporation)
Notes to Financial Statements, Continued
The Parent allocated pension expense to the Company based on
its estimated share of the Parent's pension expense.
Pension expense allocated to the Company was $318, $91 and
$78 for the periods ended December 31, 1993, March 31, 1993
and the year ended December 31, 1992, respectively.
(8) Contingencies
_____________
There are various lawsuits and claims pending against the
Parent relative to the division, including those related to
commercial transactions and environmental matters. Such
matters have not been reserved for at the division level but
are instead reflected on the Parent's financial statements
as the related contingent liabilities, if any, will remain
with the Parent company subsequent to the closing of the
Asset Purchase Agreement described in note 3.
17
<PAGE>
(b) Pro forma financial information:
The following pro forma financial statements are
presented herein:
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1994.
Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet.
Unaudited Pro Forma Condensed Consolidated Statements
of Operations for the Year Ended June 30, 1994.
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations.
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
________________________________________________________________
The following unaudited pro forma condensed consolidated
balance sheet and statements of operations give effect to the
acquisition by the Company of Sinclair Paint Company, a Division
of Insilco Corp. ("Sinclair"), assuming that the acquisition was
consummated as of June 30, 1993 and that the acquisition was
accounted for as a purchase for accounting purposes. The pro
forma data reflect the acquisition of substantially all of the
assets, and the assumption of certain liabilities of Sinclair,
for cash which was partially financed through the Company's
revolving line of credit. The unaudited pro forma condensed
consolidated balance sheet and statements of operations
consolidate the historical balance sheets and statements of
operations of the Company and Sinclair as of June 30, 1994 and
for the year then ended. The pro forma condensed balance sheet
and statements of operations should be read in conjunction with
the pro forma adjustments described in the accompanying notes and
with the Company's consolidated financial statements and notes
thereto which are contained in the Company's Annual Report on
Form 10-K for the year ended June 30, 1994. The following pro
forma condensed consolidated balance sheet and statements of
operations are presented for illustrative purposes only and are
not necessarily indicative of the financial position and actual
results of operations that would have been reported had the
purchase been consummated on June 30, 1993 or of the future
financial position and results of operations of the Company which
will result from the consummation of the transaction.
Management intends to restructure the operations of Sinclair
and the Company's Ameritone Paint Company, which it believes will
result in significant reductions in material costs and
administrative expenses as well as factory labor and
manufacturing overhead. These savings will come from negotiated
volume discounts from vendors, staff reductions and efficiencies,
reduced plant overhead and other efficiencies of scale. In
addition, restructuring charges estimated to range from
$1,000,000 to $2,000,000, relating to Ameritone Paint Company
operations are expected to be incurred. These savings and
restructuring charges have not been reflected in the pro forma
financial statements because a formal plan has not yet been
finalized.
19
<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1994
(In thousands except per share amounts)
Sinclair Paint
Company
Grow Division of
Group, Insilco Pro Forma Pro
Inc. Corp. Adjustments Forma
________________________________________
Assets
Current Assets
Cash and cash equivalents $ 38,816 $0 ($25,245)(1) $ 13,571
Accounts receivable 69,622 8,456 78,078
Inventories 62,903 16,562 545 (2) 80,010
Prepaid expenses and
other current assets 16,052 975 (1)(3) 17,026
______________________________ ________
Total Current Assets 187,393 25,993 (24,701) 188,685
Property, plant and
equipment - net 50,807 16,734 15,773 (2) 83,314
15,000 (1)
Other assets 9,721 1 (1)(3) 24,721
______________________________ ________
Total Assets $247,921 $42,728 $6,071 $296,720
______________________________ ________
______________________________ ________
Liabilities and
Stockholders' Equity
Current Liabilities
Accounts payable $ 37,532 $ 7,776 $ 45,308
($ 2,500)(4)
2,500 (1)
(7,700)(4)
9,600 (1)
Accrued expenses 39,216 3,248 (325)(3) 44,039
Dividend payable 1,128 1,128
Current installments
on long-term debt 2,270 2,270
______________________________ ________
Total Current Liabilities 80,146 11,024 1,575 92,745
Deferred Income Taxes and
Other Liabilities 28,178 28,178
26,000 (1)
Long-term Debt 914 10,200 (4) 37,114
16,318 (2)
Stockholders' Equity/ 323 (3)
Divisional Investment 138,683 31,704 (48,345)(1) 138,683
______________________________ ________
Total Liabilities and
Stockholders' Equity $247,921 $42,728 $6,071 $296,720
______________________________ ________
______________________________ ________
See notes to pro forma condensed consolidated balance sheet
20
<PAGE>
Grow Group, Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
The following adjustments have been made to reflect the pro forma
effect of the transaction as if the transaction had been consummated on
June 30, 1993:
1. To reflect the cash payments and other costs and expenses related to
the transaction and the resulting goodwill. Goodwill is the excess of
the cash and other transaction costs and expenses over the sum of the
fair market value of the tangible assets acquired less liabilities
assumed, calculated as follows:
Cash paid at closing from current cash balances $25,245,000
Cash paid at closing from revolving line of
credit borrowings 26,000,000
Estimated cash to be paid as post closing adjustment 2,500,000
Transaction related costs and expenses 9,600,000
Less: Book amount of Sinclair net assets (31,704,000)
Retained assets and liabilities (323,000)
Inventory and property, plant and equipment
step up to fair market value (16,318,000)
____________
$15,000,000
____________
____________
2. To reflect Sinclair's inventory and property, plant and equipment at
fair market value under purchase accounting.
3. To reflect Sinclair's assets and liabilities retained by Insilco.
4. To reflect estimated borrowings under the Company's revolving
line of credit to fund the payments of post closing adjustment
and transaction related costs and expenses through the end of the
first year.
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Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Year Ended June 30, 1994
(In thousands except per share amounts)
Sinclair
Paint
Company
Grow Division of
Group, Insilco Pro Forma Pro
Inc. Corp. Adjustments Forma
________________________________________
Revenues $401,818 $101,441 $503,259
Costs and expenses:
Cost of products sold 255,875 62,554 318,429
Selling, general and
administrative expense 112,934 35,024 375 (1) 148,333
Corporate expense 8,904 1,230 (1,230)(2) 8,904
Interest expense 897 2,500 (3) 3,397
Interest expense allocated
from corporate 3,760 (3,760)(4) 0
Corporate interest income (1,027) 760 (5) (267)
___________________________ _________
Total costs and expenses 377,583 102,568 (1,355) 478,796
Income (loss) before ____________________________ _________
income taxes 24,235 (1,127) 1,355 24,463
Income taxes (10,179) (89)(6) (10,268)
___________________________ _________
Net income (loss) $ 14,056 ($1,127) $1,266 $ 14,195
___________________________ _________
___________________________ _________
Net income per common and
common equivalent share $0.87 $0.88
__________________________________________
__________________________________________
See notes to pro forma condensed consolidated statement of operations.
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Grow Group, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations
The following adjustments have been made to reflect the pro
forma recurring effect of the transaction as if the transaction
had been consummated on June 30, 1993:
1. To reflect amortization of goodwill over 40 years.
2. To reflect elimination of corporate charge from Insilco.
3. To reflect interest expense on pro forma amounts borrowed at
a rate of approximately 7% which is the current rate being
paid. Each 1/8% change in the rate will effect income
before income taxes by approximately $42,000.
4. To reflect elimination of interest charge from Insilco.
5. To reflect reduction in corporate interest income related to
use of current cash balances for purchase price at an
assumed rate of approximately 3%.
6. To reflect income taxes on Sinclair's results of operations
and the above adjustments.
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(c) Exhibits:
The following Exhibits are filed with this Current
Report on Form 8-K:
Exhibit
Number Description
_______ ___________
2.1(a) Asset Purchase Agreement, dated as of May 7,
1994, between Insilco Corporation and the
Company (Incorporated herein by reference to
Exhibit 10.1 to the Company's Current Report
on Form 8-K, date of earliest event reported:
May 7, 1994, File No. 1-4596).
2.1(b) First Amendment to Asset Purchase Agreement,
dated as of August 1, 1994, between Insilco
Corporation and the Company.
4.1(a) Credit Agreement (the "Credit Agreement"),
dated as of March 31, 1993, by and among the
Company, Grow Group Insurance, Ltd., Chemical
Bank New Jersey, N.A., Fleet Bank, PNC Bank,
Kentucky, Inc. and Chemical Bank.
(Incorporated herein by reference to Exhibit
4.1 to the Company's Current Report on Form
8-K, date of earliest event reported: March
31, 1993, File No. 1-4596).
4.1(b) Amendment No. 1, dated August 6, 1993, to the
Credit Agreement, by and among the Company,
Cello Corp., Ameritone Paint Corporation,
Zynolyte Products Company, Chemical Bank New
Jersey, N.A., Fleet Bank and PNC Bank,
Kentucky, Inc.
4.1(c) Waiver, Consent and Amendment No. 2, dated
August 3, 1994, to the Credit Agreement, by
and among the Company, Grow Group Insurance,
Ltd., Cello Corp., Sinclair Acquisition Corp.
(formerly known as Ameritone Paint
Corporation), Zynolyte Products Company,
Chemical Bank New Jersey, N.A., Fleet Bank
and PNC Bank, Kentucky, Inc.
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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.
GROW GROUP, INC.
Date: October 12, 1994 By: /s/ Frank V. Esser
__________________
Frank V. Esser
Treasurer and Chief
Financial Officer
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Exhibit Index
______________
Exhibit
Number Description Page
________ ___________ ____
2.1(a) Asset Purchase Agreement, dated as of May 7, 1994,
between Insilco Corporation and the Company
(Incorporated herein by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K, date of
earliest event reported: May 7, 1994, File No. 1-
4596).
2.1(b) First Amendment to Asset Purchase Agreement, dated as
of August 1, 1994, between Insilco Corporation and the
Company.
4.1(a) Credit Agreement (the "Credit Agreement"), dated as of
March 31, 1993, by and among the Company, Grow Group
Insurance, Ltd., Chemical Bank New Jersey, N.A., Fleet
Bank, PNC Bank, Kentucky, Inc. and Chemical Bank.
(Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K, date of earliest
event reported: March 31, 1993, File No. 1-4596).
4.1(b) Amendment No. 1, dated August 6, 1993, to the Credit
Agreement, by and among the Company, Cello Corp.,
Ameritone Paint Corporation, Zynolyte Products Company,
Chemical Bank New Jersey, N.A., Fleet Bank and PNC
Bank, Kentucky, Inc.
4.1(c) Waiver, Consent and Amendment No. 2, dated August 3,
1994, to the Credit Agreement, by and among the
Company, Grow Group Insurance, Ltd., Cello Corp.,
Sinclair Acquisition Corp. (formerly known as Ameritone
Paint Corporation), Zynolyte Products Company, Chemical
Bank New Jersey, N.A., Fleet Bank and PNC Bank,
Kentucky, Inc.
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