Hines Horticulture Inc. is trying to prune its way out of a thicket.
The Irvine-based nursery products company has bought a dozen local and regional companies since 1993. But now Hines is seeking to pay down its debt,which as of June 30 was $274 million, equal to 62% of its $441 million in sales for the past 12 months.
And Hines’ sales are off. In the third quarter, the company’s revenue was down 2.5% to $64.7 million vs. the year-ago period. Hines attributed the downturn to a changing product mix, the scrapping of unsold green goods, higher distribution costs and the general economic slowdown.
The company had another setback late last year when a fire destroyed its Seba Beach facility in Alberta. That operation accounted for 14% of Hines’ capacity to produce peat moss, soil and other growing supplies. Hines foresees rebuilding to be complete by mid- to late November. Peak shipping months for so-called growing-media products are November through February.
Company officials are hoping a plan to sell their growing-media unit will give Hines the cash to pay down its debt. A sale also would allow the company to focus on its green-goods divisions,plants, shrubs and flowers,which are growing and account for about half of Hines’ business. Sales in these divisions were up 9%, to $285 million, for the nine months ended Sept. 30.
Hines’ green-goods divisions supply ornamental shrubs, flowers and container-grown plants to stores such as Wal-Mart, Home Depot and Lowe’s, as well as to independent garden centers.
“We’ve seen a lot of growth in green goods, especially in the Southeast and Southwest regions,” said Claudia Pieropan, Hines’ chief financial officer.
The growing-media division, which operates under the name Sun Gro and accounts for the other half of the company’s business, is said to be the largest North American producer of peat moss products. It supplies greenhouse and nursery growers and golf course developers.
“The division operates differently from green goods, and it is more logical to sell a stand-alone division,” Pieropan said.
The company said it also is looking for a payoff from its recent acquisitions.
“We’re focusing on integrating all of the company’s other acquisitions and generating cash flow,” Pieropan said.
Hines’ 1998 public offering generated $56 million. The company then went on buying spree, purchasing a half-dozen nursery operations across the country, such as Lovell Farms in Florida and Arizona-based Willow Creek Greenhouses, both producers of bedding and holiday plants.
Other 1999 acquisitions include South Carolina-based Pro Gro Products and Strong Lite, which has locations in Arkansas and Illinois. Both are producers of composted-bark-based professional growing mixes.
Founded in 1920, Hines was acquired by Weyerhaeuser Co. in 1976 and then sold to a private investment group. Chicago-based private equity investor Madison Dearborn Capital Partners has owned the majority of the company since 1995.
In the past year, Hines’ Orange County employee count grew 7%, to 704. Companywide, the number increased 4% to 7,100. The stock, traded on Nasdaq, recently was at 3.50, having spent most of the year between 3 and 4. As of last week, Hines counted a market value of about $75 million. n
