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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
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 11, 1997
HORIZON PHARMACIES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-22403 75-2441557
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
275 W. PRINCETON DRIVE
PRINCETON, TEXAS 75407
(Address of Principal Executive Offices) (Zip Code)
(972) 736-2424
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Filed herewith as a part of this report are the following financial
statements for Kenn's Pharmacy, Inc.: (i) audited Balance Sheets at
December 31, 1996 and December 31, 1995 and audited Statements of
Income, Statements of Shareholders' Equity and Statements of Cash
Flows each for the years ended December 31, 1996 and December 31,
1995, and the report of Howard & Waltrip, P.C., certified public
accountants, thereon, together with the notes thereto; and (ii)
unaudited Balance Sheet at September 30, 1997, and unaudited
Statements of Income, unaudited Statements of Shareholders' Equity,
and unaudited Statements of Cash Flows each for the nine months ended
September 30, 1996 and September 30, 1997. These financial statements
are being filed in accordance with and within the time provided for in
Item 7(a)(4).
(b) PRO FORMA FINANCIAL INFORMATION.
Filed herewith as a part of this report are HORIZON Pharmacies, Inc.'s
(the "Registrant") Pro Forma Combined Condensed Balance Sheet at
September 30, 1997 and Pro Forma Combined Condensed Statements of
Income for the nine months ending September 30, 1997 and the year
ended December 31, 1996, and the notes thereto. These pro forma
financial statements are being filed in accordance with and within the
time provided for in Item 7(a)(4).
(c) EXHIBITS.
The following exhibits are filed with this report:
Exhibit No. Name of Exhibit
----------- ---------------
23 Consent of Howard & Waltrip, P.C., Independent Auditors
(filed electronically herewith).
-2-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS OF KENN'S PHARMACY, INC.
Report of Independent Auditors........................................ F-3
Balance Sheets at December 31, 1996 and December 31, 1995, and
September 30, 1997 (unaudited)....................................... F-4
Statements of Income for the years ended December 31, 1996 and
December 31, 1995, and for the nine months ended
September 30, 1996 (unaudited) and September 30, 1997 (unaudited).... F-5
Statements of Shareholders' Equity for the years ended
December 31, 1996 and December 31, 1995, and for the nine months
ended September 30, 1996 (unaudited) and September 30,
1997 (unaudited)..................................................... F-6
Statement of Cash Flows for the years ended December 31, 1996
and December 31, 1995, and for the nine months
ended September 30, 1996 (unaudited) and September 30, 1997
(unaudited)........................................................... F-7
Notes to Financial Statements.......................................... F-8
PRO FORMA COMBINED FINANCIAL DATA OF HORIZON PHARMACIES, INC.
Pro Forma Combined Condensed Balance Sheet at September 30, 1997....... F-10
Pro Forma Combined Condensed Statement of Income for the nine months
ended September 30, 1997.............................................. F-11
Pro Forma Combined Condensed Statement of Income for the year
ended December 31, 1996............................................... F-12
Adjustments to Pro Forma Financial Statements.......................... F-13
F-1
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KENN'S PHARMACY, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS
F-2
<PAGE>
[LETTERHEAD]
The Board of Directors and Shareholders December 18, 1997
Kenn's Pharmacy, Inc.
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying balance sheets of Kenn's Pharmacy, Inc. as of
December 31, 1996 and 1995, and the related statements of income, shareholders'
equity and cash flows for the years then ended. 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 audit.
We conducted our audit 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 audit provides 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 Kenn's Pharmacy, Inc. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Howard & Waltrip, P.C.
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Howard & Waltrip, P.C.
Certified Public Accountants
Dallas, Texas
F-3
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KENN'S PHARMACY, INC.
BALANCE SHEETS
December 31, December 31, September 30,
ASSETS 1996 1995 1997
------------ ------------ -------------
(Unaudited)
Current assets:
Cash $ 378,652 $ 341,879 $ 415,098
Accounts receivable-trade 78,244 80,709 77,272
Accrued interest receivable 235 347 235
Inventories, lower of cost or market 214,219 198,484 240,000
Investments 847,592 808,157 860,686
Notes receivable 5,000 7,500 2,500
---------- ---------- ----------
Total current assets 1,523,942 1,437,076 1,595,791
Fixed assets:
Furniture, fixtures & equipment 23,201 21,734 23,701
Computer equipment 44,260 44,613 44,260
Automobiles 22,042 22,309 22,042
Leasehold improvements 2,000 2,000 2,000
Accumulated depreciation (63,973) (70,076) (68,198)
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Total net fixed assets 27,530 20,580 23,805
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TOTAL ASSETS $1,551,472 $1,457,656 $1,619,596
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable-trade $ 66,326 $ 79,268 $ 66,451
Accrued expenses 69,824 65,047 45,336
---------- ---------- ----------
Total liabilities 136,150 144,315 111,787
Shareholders' equity
Capital stock 97,397 97,397 97,397
Retained earnings 1,317,925 1,215,944 1,410,412
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Total shareholders' equity 1,415,322 1,313,341 1,507,809
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,551,472 $1,457,656 $1,619,596
---------- ---------- ----------
---------- ---------- ----------
See accompanying notes.
F-4
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KENN'S PHARMACY, INC.
STATEMENTS OF INCOME
<TABLE>
Nine Months Ended
Year Ended Year Ended September 30,
December 31, December 31, -----------------------
1996 1995 1996 1997
------------ ------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $2,581,535 $2,654,005 $1,936,150 $2,042,810
Cost of sales 1,935,413 1,961,348 1,451,560 1,586,760
---------- ---------- ---------- ----------
Gross profit 646,122 692,657 484,590 456,050
---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative 574,436 587,407 430,827 320,057
Depreciation 7,804 8,498 5,778 4,225
---------- ---------- ---------- ----------
Total operating expenses 582,240 595,905 436,605 324,282
Income from operations 63,882 96,752 47,985 131,768
Other income:
Investment income 66,786 61,127 51,483 51,079
---------- ---------- ---------- ----------
Net income $ 130,668 $ 157,879 $ 99,468 $ 182,847
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
KENN'S PHARMACY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
Nine Months Ended
Year Ended Year Ended September 30,
December 31, December 31, -------------------------
1996 1995 1996 1997
------------ ------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Balance, Beginning of period $1,215,944 $1,235,370 $1,215,944 $1,317,925
Net income 130,668 157,879 99,468 182,847
Dividends distributed (28,687) (177,305) (21,515) (90,360)
---------- ---------- ---------- ----------
Balance, End of Period $1,317,925 $1,215,944 $1,293,897 $1,410,412
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
KENN'S PHARMACY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
Nine Months Ended
Year Ended Year Ended September 30,
December 31, December 31, -------------------------
1996 1995 1996 1997
------------ ------------ ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities:
Net income $130,668 $ 157,879 $ 99,468 $ 182,847
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7,804 8,498 5,778 4,225
Change in operating assets and liabilities:
Accounts receivable-trade 2,465 3,836 1,849 972
Accrued interest receivable 112 236 112 (0)
Inventories, lower of cost or market (15,735) (529) (11,801) (25,781)
Accounts payable-trade (12,942) 21,260 (9,706) 125
Accrued expenses 4,777 (24,110) 3,582 (24,488)
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Net cash provided by operating activities 117,149 167,070 89,282 137,900
Investing activities:
Purchase of fixed assets (16,473) 0 (16,473) (500)
Basis of disposed fixed assets 1,719 0 1,719 0
Purchase of investments (39,435) (111,474) (29,576) (13,094)
Change in notes receivable 2,500 2,500 2,500 2,500
Dividends distributed (28,687) (177,306) (21,515) (90,360)
-------- --------- -------- --------
Net cash (used) by investing activities (80,376) (286,280) (63,345) (101,454)
Net increase (decrease) in cash 36,773 (119,210) 25,937 36,446
Cash at beginning of period 341,879 461,089 341,879 378,652
-------- --------- -------- --------
Cash at end of period $378,652 $ 341,879 $367,816 $415,098
-------- --------- -------- --------
-------- --------- -------- --------
</TABLE>
See accompanying notes.
F-7
<PAGE>
KENN'S PHARMACY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. Summary of significant accounting policies
Organization
KENN'S PHARMACY, INC., A New Mexico corporation (the "Company"), owns and
operates a retail pharmacy in Raton, New Mexico.
Basis of accounting
The accompanying financial statements are prepared on the accrual basis of
accounting and accordingly reflect revenues at the time products are sold or
services rendered. Expenses are recognized when the products are received or
the services are performed.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimates, and such differences may be
material to the financial statements.
Depreciation
Depreciation of fixed assets is provided on a straight-line basis over the
estimated useful lives of the assets.
Unaudited financial statements
The accompanying unaudited financial statements include all adjustments,
consisting of normal, recurring accruals, which the Company considers necessary
for a fair presentation of the financial position and the results of operations
for the indicated periods.
2. Leases
The Company leases the retail store facilities on a month to month basis from a
related party. Rent expense for 1996 and 1995 was $18,000 for each year.
3. Subsequent events
On October 11, 1997 the Company sold a majority of its assets to HORIZON
Pharmacies, Inc. and ceased operations.
F-8
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PRO FORMA COMBINED FINANCIAL DATA
The following unaudited Pro Forma Combined Condensed Statements of Income
for the year ended December 31, 1996 and the nine months ended September 30,
1997 reflect the historical results of operations of the Company, adjusted to
give effect to the acquisition of the Raton, New Mexico store (the "Raton
Store") in October 1997 as though such store was acquired January 1, 1996.
The Pro Forma Combined Condensed Balance Sheet as of September 30, 1997
reflects the historical financial position of the Company as of that date,
adjusted to give pro forma effect to the acquisition of the Raton Store as if
it had occurred as of September 30, 1997.
The pro forma adjustments are based upon available information and
assumptions that management of the Company believes are reasonable and fairly
reflect all expenses associated with the acquired business. The Pro Forma
Combined Financial Data do not purport to represent the financial position or
results of operations which would have occurred had such transactions been
consummated on the dates indicated or the Company's fina ncial position or
results of operations for any future date or period. These Pro Forma Combinded
Condensed Financial Statements and notes thereto should be read in conjunction
with the historical financial statements and notes of the Company and the
financial statements of the Raton Store.
F-9
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HORIZON PHARMACIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
ASSETS
Company Raton
Historical Store (Note) Pro Forma
-----------------------------------
Current assets:
Cash $ 1,272 $ 1,272
Accounts receivable 3,087 $ 50 3,137
Inventories 6,435 247 6,682
Prepaid expenses 93 0 93
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Total current assets 10,887 297 11,184
Property and equipment, net 1,069 20 1,089
Intangibles, net 1,782 180 1,962
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Total assets $13,738 $497 $14,235
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank Overdraft $ 0 $150 $ 150
Accounts payable 2,132 2,132
Accrued liabilities 549 549
Notes payable 347 347
Current portion of long-term obligations 575 $33 608
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Total current liabilities 3,603 183 3,786
Long-term obligations 2,764 214 2,978
Deferred income taxes 149 149
Shareholders' equity:
Common stock 25 25
Additional paid-in capital 7,061 100 7,161
Retained earnings 136 136
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Total shareholders' equity 7,222 7,322
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Total liabilities and shareholders' equity $13,738 $497 $14,235
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Note: The Raton Store was acquired in October 1997 for a total consideration of
$497 financed by a note payable of $247, stock of $100 and cash of $150
and is included herein at the values allocated to assets acquired.
F-10
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HORIZON PHARMACIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
Historical
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Raton Pro Forma
Company Store Adjustments Pro Forma
------- ------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales $17,940 $2,043 $ 19,983
Cost and expenses:
Cost of sales 12,177 1,587 13,764
Depreciation and amortization 205 4 $ (4)(1) 219
14 (1)
Selling, general and administrative 4,869 269 (60)(3) 5,087
(28)(4)
37 (5)
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Total costs and expenses 17,251 1,860 (41) 19,070
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Income from operations 689 183 41 913
Interest expense and other, net 176 15 (2) 191
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Income before income taxes 513 183 26 722
Provision for income taxes:
Current 59 59
Deferred 149 149
Pro forma provision for income taxes 111 0 73 (6) 184
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Net income $ 194 $ 183 $(47) $ 330
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Net income per share $ 0.14
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Shares used in computation (A) 2,321,265
----------
----------
</TABLE>
(A) Weighted average shares outstanding have been adjusted to show the 3 for 2
stock split which occurred on November 24, 1997.
F-11
<PAGE>
HORIZON PHARMACIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
Historical
------------------
Raton Pro Forma
Company Store Adjustments Pro Forma
------- ------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales $13,136 $2,581 $ 15,717
Cost and expenses:
Cost of sales 8,942 1,935 10,877
Depreciation and amortization 172 8 $ (8)(1) 190
18 (1)
Selling, general and administrative 3,471 505 (200)(3) 3,775
(52)(4)
51 (5)
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Total costs and expenses 12,585 2,448 (191) 14,842
---------------------------------- -------------
Income from operations 551 133 191 875
Interest expense and other, net 249 0 20 (2) 269
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Income before income taxes 302 133 171 606
Pro forma provision for income taxes 106 0 106 (6) 212
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Pro forma net income $ 196 $ 133 $ 65 $ 394
--------------------------------------------------
--------------------------------------------------
Pro forma net income per share $ 0.24
----------
----------
Shares used in computation (A) 1,611,369
----------
----------
</TABLE>
(A) Weighted average shares outstanding have been adjusted to show the 3 for 2
stock split which occurred on November 24, 1997.
F-12
<PAGE>
Adjustments to Pro Forma Financial Statements
<TABLE>
(1) Adjust depreciation and amortization of acquired equipment and
intangibles to reflect new basis in the acquired store:
<S> <C>
Eliminate historical depreciation:
Twelve months ended December 31, 1996: $ 8,000
Nine months ended September 30, 1997: 4,000
Provide depreciation and amortization on acquired bases in equipment
and intangibles:
Equipment - 7 year life - purchase price allocated 20,000
Intangibles - 5 to 20 year life - purchase price allocated 180,000
Twelve months ended December 31, 1996:
Depreciation of equipment 4,000
Amortization of intangibles 14,000
--------
Total 18,000
Nine months ended September 30, 1997:
Depreciation of equipment 3,000
Amortization of intangibles 11,000
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Total 14,000
(2) Adjust interest expense:
Eliminate historical interest expense:
Twelve months ended December 31, 1996: 0
Nine months ended September 30, 1997: 0
Provide for interest expense on debt issued in acquisition:
Debt 247,000
Interest Rate 8.50%
Twelve months ended December 31, 1996: 20,000
Nine months ended September 30, 1997: 15,000
(3) Decrease previous Officer Salary to new contract with Horizon:
Twelve months ended December 31, 1996: 200,000
Nine months ended September 30, 1997: 60,000
(4) Eliminate retirement expense:
Twelve months ended December 31, 1996: 52,000
Nine months ended September 30, 1997: 28,000
(5) Eliminate investment income:
Twelve months ended December 31, 1996: 51,000
Nine months ended September 30, 1997: 37,000
(6) Adjust pro forma income taxes (at a rate of 35%) for acquistion adjustments and
historical income:
Twelve months ended December 31, 1996: 106,000
Nine months ended September 30, 1997: 73,000
</TABLE>
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT:
HORIZON PHARMACIES, INC.
Date: December 23, 1997 By: /s/ Ricky D. McCord
-----------------------------
Ricky D. McCord, President
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
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23 Consent of Howard & Waltrip, P.C.,
Independent Auditors (filed electronically
herewith).
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the use of our report on the financial statements for the years
ended December 31, 1996 and December 31, 1995 of Kenn's Pharmacy, Inc., dated
December 18, 1997 in the Form 8-K/A of HORIZON Pharmacies, Inc.
Herold, Howard & Madsen, P.C.
Certified Public Accountants
Dallas, Texas
December 23, 1997
