<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 14, 1998
(September 30, 1998)
HORIZON MEDICAL PRODUCTS, INC.
------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 000-24025 58-1882343
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Horizon Way, Post Office Box 627, Manchester, Georgia 31816
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
706-846-3126
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or address, if changed since last report)
<PAGE> 2
This amendment to the report on Form 8-K of Horizon Medical Products, Inc.,
dated October 14, 1998, is being filed to provide the information required by
Item 7 of Form 8-K (Financial Statements and Pro Forma Financial Information)
which was omitted from the Form 8-K as filed with the Securities and Exchange
Commission on October 14, 1998 in accordance with Item 7 (a)(4).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1998 Horizon Medical Products, Inc. ("Horizon")
consummated the acquisition (the "Acquisition") of certain assets used in the
manufacture and sale of medical devices by Ideas for Medicine, Inc. ("IFM") a
wholly-owned subsidiary of CryoLife, Inc. Horizon did not assume any
liabilities of IFM. The following summary of the transaction is qualified in
its entirety by the more detailed information contained in the copy of the
Asset Purchase Agreement included as Exhibit 2 to this Current Report.
The assets acquired consist of substantially all of the assets used by IFM
to manufacture its product line. Included among the assets are inventory,
manufacturing equipment, certain intellectual property and goodwill. Horizon
intends to use the acquired assets in the manner previously used by IFM.
As consideration for the Acquisition, Horizon paid IFM $15.0 million in
cash. Horizon funded the Acquisition from its acquisition line of credit with
NationsCredit Commercial Corporation. The purchase price was determined through
arm's-length negotiations between the management of IFM and management of
Horizon and was approved by the Board of Directors of each company. IFM did not
have any material relationship with Horizon prior to the acquisition. In
partial response to this item, Horizon's press release dated September 30, 1998
is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
See index on page 3. The audited statement of assets related to the
product line acquired by Horizon Medical Products, Inc. as of December
31, 1997 and the statement of revenues and direct expenses related to
the product line acquired by Horizon Medical Products, Inc. for the
year then ended of Ideas for Medicine, Inc. have been included to
comply with Rule 3-05 of Regulation S-X. Statements of divisional
equity and cash flows are not available to the Registrant without
unreasonable effort and expense and, pursuant to SEC rule 12b-21, are
not included herein. Further, due to the insufficient continuity of the
acquired product line's operations prior to and after the acquisition
by the Registrant, the statements of divisional equity and cash flows
are not considered relevant and are not applicable.
(b) Pro forma financial information.
See index on page 3.
Page 1
<PAGE> 3
(c) Exhibits.
*2. Asset Purchase Agreement, by and between Ideas for Medicine, Inc.
and Horizon Medical Products, Inc., dated September 30, 1998. Pursuant to Item
601(b) of Regulation S-K, the Company has omitted certain Schedules and
Exhibits to the Asset Purchase Agreement (all of which are listed therein) from
this Exhibit 2. The Company hereby agrees to furnish supplementally a copy of
such omitted item to the Securities and Exchange Commission upon its request.
*99. Press release dated September 30, 1998.
*Previously filed in the Form 8-K dated October 14, 1998.
Page 2
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
IDEAS FOR MEDICINE, INC.
Report of Independent Auditors 4
Statements of Assets Related to the Product Line Acquired by Horizon Medical
Products, Inc. as of December 31, 1997 5
Statements of Revenues and Direct Expenses Related to the Product Line
Acquired by Horizon Medical Products, Inc. for the period from inception
(March 5, 1997) to December 31, 1997, the nine months ended September 30,
1998 (unaudited) and the period from inception (March 5, 1997) to
September 30, 1997 (unaudited) 6
Notes to Financial Statements 7-11
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Condensed Consolidated Financial
Statements 12
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1997 and for the nine months ended September 30, 1998 13-14
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements 15
</TABLE>
Page 3
<PAGE> 5
<PAGE> 6
Report of Independent Auditors
To the Board of Directors
CryoLife, Inc.
We have audited the accompanying statement of assets related to the Ideas for
Medicine, Inc. product line acquired by Horizon Medical Products, Inc. as of
December 31, 1997, and the related statement of revenues and direct expenses
related to the Ideas for Medicine, Inc. product line acquired by Horizon Medical
Products, Inc. for the period from inception (March 5, 1997) to December 31,
1997. These statements are the responsibility of the management of CryoLife,
Inc. 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 statement of assets related to the Ideas for
Medicine, Inc. product line acquired by Horizon Medical Products, Inc. as of
December 31, 1997, and the related statement of revenues and direct expenses
related to the Ideas for Medicine, Inc. product line acquired by Horizon Medical
Products, Inc. for the period from inception (March 5, 1997) to December 31,
1997 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
presentation of the financial statements. We believe that our audit provides a
reasonable basis for our opinion.
The product line acquired by Horizon Medical Products, Inc. has been operated as
an integral part of Ideas for Medicine, Inc. and has no separate legal
existence. The basis of presentation of these financial statements is described
in Note 1 to the financial statements.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets related to the Ideas for Medicine, Inc. product line
acquired by Horizon Medical Products, Inc. as of December 31, 1997 and the
revenues and direct expenses for the period from inception (March 5, 1997) to
December 31, 1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
November 16, 1998
Page 4
<PAGE> 7
Ideas for Medicine, Inc.
Statement of Assets Related to the Product Line Acquired by Horizon
Medical Products, Inc.
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Inventories $727,292
--------
Total current assets 727,292
Equipment, less accumulated depreciation of $6,234 18,935
Patents, less accumulated amortization of $213 27,067
--------
Total assets related to the product line acquired $773,294
========
</TABLE>
See accompanying notes.
Page 5
<PAGE> 8
Ideas for Medicine, Inc.
Statements of Revenues and Direct Expenses Related to the Product Line
Acquired by Horizon Medical Products, Inc.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION PERIOD FROM
(MARCH 5, NINE MONTHS INCEPTION
1997) TO ENDED (MARCH 5,
SEPTEMBER 30, SEPTEMBER 30, 1997) TO
1997 1998 DECEMBER
(UNAUDITED) (UNAUDITED) 31, 1997
-------------------------------------------
<S> <C> <C> <C>
Net sales $3,863,416 $4,737,589 $5,555,561
Direct expenses:
Cost of sales 1,873,706 2,564,012 2,571,835
Selling, general and administrative 1,587,570 1,520,456 2,111,306
------------------------------------------
Total direct expenses 3,461,276 4,084,468 4,683,141
------------------------------------------
Net sales in excess of direct expenses $ 402,140 $ 653,121 $ 872,420
==========================================
</TABLE>
See accompanying notes.
Page 6
<PAGE> 9
Ideas for Medicine, Inc.
Notes to Financial Statements
(Information pertaining to the Period from inception (March 5, 1997) to
September 30, 1997 and the Nine months ended September 30, 1998 is unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES
ORGANIZATION AND BASIS OF PRESENTATION
Ideas for Medicine, Inc. ("IFM"), of St. Petersburg, Florida, is a wholly-owned
subsidiary of CryoLife, Inc. ("CryoLife"). CryoLife acquired IFM on March 5,
1997 in a transaction accounted for as a purchase. IFM manufactures and
distributes single-use medical devices for use in vascular surgical procedures.
The devices are marketed primarily to hospitals in the United States and Europe.
IFM is economically dependent on CryoLife.
Pursuant to an Asset Purchase Agreement (the "Agreement") dated September 30,
1998 (the "closing date") by and between IFM and Horizon Medical Products, Inc.
("Horizon"), Horizon purchased certain tangible and intangible assets relating
to the IFM product line (the "IFM Product Line"), and Horizon and IFM
simultaneously entered into a four year agreement under which IFM will
manufacture the IFM Product Line for sale exclusively to Horizon. The total
price of this transaction was $15 million which was paid in cash on the closing
date. The IFM Product Line has been operated as an integral part of IFM and has
no separate legal existence. The assets related to the IFM Product Line as
presented in the accompanying statement of assets related to the product line
acquired by Horizon represent the historical balances of those assets as of
December 31, 1997.
The statement of revenues and direct expenses related to the product line
acquired by Horizon for the period from inception (March 5, 1997) to December
31, 1997 represents the revenues, cost of sales and selling, general and
administrative expenses that relate directly to the IFM Product Line. Selling,
general and administrative expense items include certain allocations based on
estimates and assumptions as if the IFM Product Line had been operated on a
stand-alone basis and reflect estimates of allocable activity attributable to
selling and administering the IFM Product Line using an allocation methodology
relative to the total selling and administrative activities of CryoLife.
The above allocations are believed by CryoLife management to be reasonable
allocations under the circumstances. However, there is no assurance that such
allocations will be indicative of future results of operations.
Page 7
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Ideas for Medicine, Inc.
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
CryoLife has not historically allocated other indirect expenses, such as
corporate overhead (including such functions as accounting, human resources,
financing and treasury), certain selling, general and administrative expenses
and income taxes. Accordingly, these indirect expenses have not been reflected
in the accompanying statements of revenues and direct expenses. Since CryoLife's
treasury function is centralized and IFM's cash, receivables, payables, accrued
liabilities and other balance sheet accounts are commingled with those of
CryoLife via the use of intercompany accounts, it is not practicable to present
a statement of cash flows attributable to IFM's operating, investing and
financing transactions. Expenditures related to equipment and patents included
in the accompanying statement of assets related to the product line acquired by
Horizon are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION PERIOD FROM
(MARCH 5, NINE MONTHS INCEPTION
1997) TO ENDED (MARCH 5,
SEPTEMBER 30, SEPTEMBER 30, 1997) TO
1997 1998 DECEMBER
(UNAUDITED) (UNAUDITED) 31, 1997
----------------------------------------------------
<S> <C> <C> <C>
Equipment $ 2,000 $ 1,900 $ 2,000
Patents 19,200 41,400 26,500
</TABLE>
The accompanying financial statements are intended to present the assets of the
IFM Product Line acquired by Horizon and the historical revenues and direct cost
of sales and selling, general and administrative expenses of this product line
and are not intended to be a complete presentation of the IFM Product Line's
financial position and results of operations as if it had been operated as a
stand-alone entity.
Page 8
<PAGE> 11
Ideas for Medicine, Inc.
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
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 reported amounts in the financial statements and accompanying notes.
Actual results may differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized upon shipment of the related product.
INVENTORIES
Inventories are comprised of single-use medical devices consisting of
work-in-process inventories awaiting sterilization and finished goods and are
valued at the lower of cost (first-in, first-out) or market.
EQUIPMENT
Equipment is stated at cost. Maintenance, repairs, and minor renovations are
charged to expense as incurred. Depreciation is provided over the estimated
useful lives of the equipment, generally 8 to 10 years, on a straight-line
basis.
PATENTS
Patents are amortized over the expected useful lives of the patents (primarily
17 years) using the straight-line method. The Company periodically evaluates the
recoverability of patents and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows, as well as other
factors, such as whether patents have been abandoned or the related technology
deemed obsolete, business trends, prospects and market and economic conditions.
Page 9
<PAGE> 12
Ideas for Medicine, Inc.
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the period from inception (March 5,
1997) through December 31, 1997 and the nine months ended September 30, 1998,
are unaudited. No statement of assets acquired as of September 30, 1998 is
presented as the Agreement was effective September 30, 1998, and all assets
acquired were transferred to Horizon at that date. In the opinion of the
management of CryoLife, these financial statements include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of operations of IFM using the basis of presentation
described above. The operating results for the interim periods are not
necessarily indicative of the operating results to be expected for the full
year.
2. INVENTORIES
Inventories at December 31, 1997 are comprised of work-in-process inventories
awaiting sterilization of approximately $200,000 and finished goods of
approximately $527,000.
3. COMMITMENTS
During 1997 CryoLife leased IFM's manufacturing facilities on a month-to-month
basis and IFM's office facility under a non-cancelable operating lease which
expired on December 31, 1997. The lessors are former (prior to March 5, 1997)
owners of IFM. Rent expense for the periods from inception to September 30, 1997
and December 31, 1997 was $114,000 and $152,000, respectively.
On January 5, 1998 CryoLife entered into a capital lease for $28,500 per month
through January 2008 for new IFM office and manufacturing facilities from a
shareholder of CryoLife who was the former (prior to March 5, 1997) principal
owner of IFM. Amortization expense under this capital lease amounted to $149,000
during the nine months ended September 30, 1998.
Page 10
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Ideas for Medicine, Inc.
Notes to Financial Statements (continued)
4. CERTAIN DIRECT EXPENSES
Depreciation, amortization and research and development expenses directly
associated with IFM are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION PERIOD FROM
(MARCH 5, NINE MONTHS INCEPTION
1997) TO ENDED (MARCH 5,
SEPTEMBER 30, SEPTEMBER 30, 1997) TO
1997 1998 DECEMBER
(UNAUDITED) (UNAUDITED) 31, 1997
------------- ------------- -----------
<S> <C> <C> <C>
Depreciation $ 44,000 $215,000 $ 37,000
Amortization (excluding
capital lease described in 291,000 369,000 350,000
Note 3)
Research and development 175,000 266,000 229,000
</TABLE>
5. EMPLOYEE BENEFIT PLAN
CryoLife has a 401(k) savings plan (the "Plan") providing retirement benefits to
all employees who have completed at least six months of service. CryoLife makes
matching contributions of 50% of each participant's contribution up to 5% of
each participant's salary. Total IFM contributions approximated $42,000, $22,000
and $24,000 for the period from inception to December 31, 1997, the period from
inception to September 30, 1997 and the nine months ended September 30, 1998,
respectively. Additionally, CryoLife may make discretionary contributions to the
Plan that are allocated to each participant's account. No such discretionary
contributions were made in 1998 or 1997.
Page 11
<PAGE> 14
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The accompanying Unaudited Pro Forma Condensed Consolidated Financial
Statements reflect the consolidated results of operations of Horizon Medical
Products, Inc. and subsidiaries (the "Company") for the nine months ended
September 30, 1998 after giving pro forma effect for (i) the purchase of
certain assets used in the manufacture and sale of medical devices by Ideas for
Medicine, Inc. (the "IFM Acquisition"), (ii) the purchase of certain assets
used in the distribution and sale of medical devices by Columbia Vital Systems,
Inc. (the "CVS Acquisition"), (iii) the purchase of the human product line of
Norfolk Medical Products, Inc. (the "Norfolk Acquisition") and (iv) the initial
public offering of Common Stock by the Company (the "Offering") and the
application of the net proceeds thereof as though they occurred January 1, 1998
and reflect the consolidated results of operations of the Company for the year
ended December 31, 1997 after giving effect for (i) the IFM Acquisition, (ii)
the CVS Acquisition, (iii) the Norfolk Acquisition, (iv) the purchase of the
port business of Strato/Infusaid, Inc. (the "Strato Acquisition"), and (v) the
Offering as though they occurred January 1, 1997. An unaudited condensed
consolidated balance sheet has not been included because the IFM Acquisition,
CVS Acquisition, Norfolk Acquisition, and the Offering are already reflected in
the Company's consolidated balance sheet as of September 30, 1998 included in
the Company's quarterly report on Form 10-Q as of September 30, 1998. The
Unaudited Pro Forma Condensed Consolidated Financial Statements are qualified
in their entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the respective historical financial statements of the Company and
Strato/Infusaid, Inc. and related notes thereto included in the Company's
Registration Statement on Form S-1 (Registration No. 333-46349), the historical
financial statements of the Company included in its quarterly report on Form
10-Q for the nine months ended September 30, 1998, and the historical results
of the acquired product line of Ideas for Medicine, Inc. included elsewhere in
this Form 8-K/A. The unaudited pro forma information does not purport to be
indicative of actual results that would have been achieved or the financial
position of the Company had the IFM Acquisition, CVS Acquisition, Norfolk
Acquisition, Strato Acquisition, and the Offering actually been completed as of
the dates indicated in the accompanying notes thereto nor which may be achieved
in the future.
Page 12
<PAGE> 15
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1997
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
Strato Norfolk CVS IFM
January 1, 1997 Acquired Acquired Acquired
Through Product Product Product
Horizon July 15,1997 (a) Line (l) Line (n) Line (o)
-------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 15,798 $ 7,020 $ 2,532 $ 15,238 $ 5,555
Cost of goods sold 6,273 2,687 1,415 10,713 2,572
--------- ---------- -------- -------- --------
Gross profit 9,525 4,333 1,117 4,525 2,983
Selling, general and administrative expenses 6,476 2,927 380 4,200 2,111
--------- ---------- -------- -------- --------
Operating income 3,049 1,406 737 325 872
Interest income (expense) (3,971) -- -- 16 --
Non-recurring accretion of value of put warrant
repurchase obligation (8,000) -- -- -- --
Other income 70 -- -- 32 --
---------- ---------- ------- ------- --------
Income (loss) before income taxes (8,852) 1,406 737 373 872
Income tax benefit (expense) (320) (622) -- (35) --
---------- ---------- ------- ------- --------
Net income (loss) $ (9,172) $ 784 $ 737 $ 338 $ 872
========== ========== ======= ======= ========
Earnings (loss) per share - basic and diluted $ (0.97)
Weighted average number of common shares ==========
outstanding - basic and diluted 9,419,458
==========
<CAPTION>
Pro Forma
Pro Forma Offering As
Adjustments Pro Forma Adjustments Adjusted
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 46,143 $ 46,143
Cost of goods sold (286)(b) 23,374 23,374
------ ---------- ----------
Gross profit 286 22,769 22,769
Selling, general and administrative expenses 533 (c),(d),(m) 16,627 90 (e) 16,717
------ ---------- ------ ----------
Operating income (247) 6,142 (90) 6,052
Interest income (expense) (4,767)(f) (8,722) 6,931 (g) (1,791)
Non-recurring accretion of value of put warrant
repurchase obligation 8,000 (h) -- --
Other income -- 102 -- 102
------ ---------- ------- ----------
Income (loss) before income taxes 2,986 (2,478) 6,841 4,363
Income tax benefit (expense) 851 (i) 126 (1,775) (i) (1,901)
------ --------- ------- ----------
Net income (loss) $ 3,837 $ (2,604) $ 5,066 $ 2,462
======= ========== ======= ==========
Earnings (loss) per share - basic and diluted $ (0.28)(j) $ 0.19 (j)
========== ==========
Weighted average number of common share
outstanding - basic and diluted 9,419,458 (k) 12,800,000 (k)
========== ==========
</TABLE>
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HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the nine months ended September 30, 1998
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
Norfolk CVS IFM
Acquired Acquired Acquired
Product Product Product
Horizon Line (a) Line (k) Line (m)
------------ ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 21,631 $ 1,265 $ 8,433 $ 3,863
Cost of goods sold 8,518 547 5,465 1,873
------------ ------- -------- --------
Gross profit 13,113 718 2,968 1,990
Selling, general and administrative expenses 8,645 389 2,175 1,588
------------ ------- -------- --------
Operating income 4,468 329 793 402
Interest income (expense) (2,271) (3) (21) --
Other income 33 -- 17 --
------------ ------- -------- --------
Income (loss) before extraordinary item and income
taxes 2,230 326 789 402
Income tax benefit (expense) (1,467) (131) -- --
------------ ------- -------- --------
Income (loss) before extraordinary item 763 195 789 402
Extraordinary item 1,017 -- -- --
------------ ------- -------- --------
Net income (loss) $ 1,780 $ 195 $ 789 $ 402
============ ======= ======== ========
Earnings per share - basic and diluted $ 0.15
============
Weighted average number of common shares
outstanding - basic 11,789,682
============
Weighted average number of common shares
outstanding - diluted 12,089,893
============
<CAPTION>
Pro Forma
Pro Forma Offering As
Adjustments Pro Forma Adjustments Adjusted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 35,192 $ 35,192
Cost of goods sold 6 (b) 16,409 16,409
------- ----------- ----------- -----------
Gross profit (6) 18,783 18,783
Selling, general and administrative expenses 968 (c),(j) 13,765 15 (d) 13,780
------- ----------- ----------- -----------
Operating income (974) 5,018 (15) 5,003
Interest income (expense) (1,512)(e) (3,807) 2,170 (f) (1,637)
Other income 50 50
------- ----------- ----------- -----------
Income (loss) before extraordinary item and income
taxes (2,486) 1,261 2,155 3,416
Income tax benefit (expense) 513 (1,085) (449)(g) (1,534)
------- ----------- --------- -----------
Income (loss) before extraordinary item (1,973) 176 1,706 1,882
Extraordinary item 1,017 (1,017)(1) --
------- ----------- --------- -----------
Net income (loss) $(1,973) $ 1,193 $ 689 $ 1,882
======= =========== ========= ===========
Earnings per share - basic and diluted $ 0.10 (h) $ 0.14 (h)
=========== ===========
Eeighted average number of common shares
outstanding - basic 11,789,682 (i) 13,400,000 (i)
=========== ===========
Weighted average number of common shares
outstanding - diluted 12,089,893 (i) 13,400,000 (i)
=========== ===========
</TABLE>
Page 14
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HORIZON MEDICAL PRODUCTS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)
The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1997 reflects the consolidated results of
operations of the Company after giving effect for (i) the IFM Acquisition, (ii)
the CVS Acquisition, (iii) the Norfolk Acquisition, (iv) the Strato Acquisition
and (v) the Offering as though they occurred January 1, 1997. The unaudited pro
forma condensed consolidated statement of operations for the nine months ended
September 30, 1998 reflects the results of the Company's operations after
giving pro forma effect for (i) the IFM Acquisition, (ii) the CVS Acquisition,
(iii) the Norfolk Acquisition and (iv) the Offering as though they occurred
January 1, 1998.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PROFORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 ARE AS FOLLOWS:
a) Represents the historical operating results of the port business of
Strato for the period January 1, 1997 through the acquisition date of
July 15, 1997. The pump business of Strato, which was sold immediately
after the acquisition, is excluded. The pump business had net sales,
gross profit, selling, general and administrative expenses, and loss
before income tax for the period of $2,355, $587, $7,478 and $6,891,
respectively.
b) Cost of goods sold has been reduced to eliminate Strato overhead cost
allocations which have not been incurred on an ongoing basis ($300)
partially offset by the increase in depreciation expense ($14) due to
the allocation of a portion of the excess purchase price of the human
business of Norfolk over the fair value of the net assets acquired to
machinery and equipment depreciated over an estimated useful life of
approximately 7 years.
c) Reflects the increase in selling, general and administrative expenses
due to the following: (i) amortization ($124) of the cost over fair
value of net assets acquired of Strato over a period of 30 years, (ii)
amortization ($475) of the fair value assigned to patents and
non-compete agreements of $6,583 and $250, respectively, obtained in
the Norfolk Acquisition over the useful lives of approximately 15
years and 7 years, respectively, (iii) amortization ($60) of the cost
over fair value of net assets acquired of Norfolk of $1,797 over a
period of 30 years, (iv) amortization ($88) of the cost over fair
value of net assets acquired of CVS of $2,628 over a period of 30
years, and (v) amortization ($490) of the cost over fair value of net
assets acquired of IFM of $14,700 over a period of 30 years.
d) Selling, general and administrative expenses have been reduced to
eliminate salaries and related benefits from sales personnel ($1,100)
and administrative personnel ($406) not retained following the
acquisition of Strato.
page 15
<PAGE> 18
e) The Chief Executive Officer and the President of the Company did not
begin to receive compensation after completion of the Offering. This
reflects the increase in expected compensation over amounts recorded
in the historical financial statements associated with contributed
services.
f) Reflects the increase in interest expense due to the following:
i) interest expense of $1,994 resulting from the additional debt of
$23,500 with variable interest at 9.8% on $21,500 during the period and
10.8% on $2,000 during the period to fund the Strato Acquisition as
well as amortization of the related debt issue costs; and (ii) interest
expense of $2,773 resulting from the additional debt of $9,300, $4,000,
and $15,000 to fund the Norfolk Acquisition, the CVS Acquisition, and
the IFM Acquisition, respectively calculated at the Company's current
rate of interest at December 31, 1997 of 9.8%.
g) Reflects the reduction of interest expense ($6,931) resulting from the
application of the net proceeds of the Offering to repay debt of the
Company.
h) Reflects the removal of the non-recurring accretion of the value of
the put warrant repurchase obligation associated with the Company's
credit facility ($8,000). See Notes 6 and 8 of the Consolidated
Financial Statements of the Company included in its Registration
Statement on Form S-1 (Registration no. 333-46349).
i) Reflects applicable income tax effects of adjustments.
j) Earnings (loss) per common share is calculated by dividing pro forma
and as adjusted net income (loss) by the weighted average number of
common shares outstanding. Such pro forma and as adjusted net income
(loss) reflects the impact of the adjustments above.
k) Weighted average number of common shares outstanding is calculated
based upon the relevant weighted average shares outstanding assuming
anti-dilution features which exist and assuming an offering of
3,120,950 shares by the Company for As Adjusted.
l) Represents the historical revenues, costs of sales, and allocated
selling expenses that relate directly to the human product line of
Norfolk for the year ended December 31, 1997.
m) Reflects an estimate of the historical selling, general and
administrative expenses related to the human product line of Norfolk
($802), in addition to the product line's identified costs and
expenses.
n) Represents the historical revenues, costs of sales, and allocated
selling, general and administrative expenses that relate directly to
the CVS acquired product line for the year ended December 31, 1997.
o) Represents the historical revenues, costs of sales, and allocated
selling, general and administrative expenses that relate directly to
the IFM acquired product line for the year ended December 31, 1997.
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PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 ARE AS
FOLLOWS:
a) Represents the historical operating results of the human product line of
Norfolk for the five months, prior to acquisition, ended May 31, 1998.
b) Cost of goods sold has been increased to reflect the increase in
depreciation expense ($6) due to the allocation of a portion of the
excess purchase price of the human product line of Norfolk over the fair
value of the net assets acquired to machinery and equipment depreciated
over an estimated useful life of approximately 7 years.
c) Reflects the increase in selling, general and administrative expenses due
to the following: (i) amortization ($356) of the fair value assigned to
patents and non-compete agreements of $6,583 and $250, respectively,
obtained in the Norfolk Acquisition over the useful lives of
approximately 15 years and 7 years, respectively, (ii) amortization ($45)
of the cost over fair value of net assets acquired of Norfolk of $1,797
over a period of 30 years, (iii) amortization ($66) of the cost over fair
value of net assets acquired of CVS of $2,628 over a period of 30 years,
and (iv) amortization ($368) of the cost over fair value of net assets
acquired of IFM of $14,700 over a period of 30 years.
d) The Chief Executive Officer and the President of the Company will begin
to receive compensation after completion of the Offering. This reflects
the increase in expected compensation over amounts recorded in the
historical financial statements associated with contributed services.
e) Additional debt of (i) $9,300 to fund the Norfolk Acquisition, (ii)
$4,000 to fund the CVS Acquisition, and (iii) $15,000 to fund the IFM
Acquisition resulted in an increase of interest expense of $1,512
calculated at the Company's current variable rate of approximately 8.5%.
f) Reflects the reduction of interest expense ($2,170) resulting from the
application of the net proceeds of the Offering to repay debt of the
Company.
g) Reflects applicable income tax effects of adjustments.
h) Earnings (loss) per common share is calculated by dividing pro forma and
as adjusted net income (loss) by the weighted average number of common
shares outstanding. Such pro forma and as adjusted net income (loss)
reflects the impact of the adjustments above.
i) Weighted average number of common shares outstanding is calculated based
upon the relevant weighted average shares outstanding assuming
anti-dilution features which exist and assuming an offering of 3,120,950
shares by the Company for As Adjusted.
j) Reflects an estimate of the historical selling, general and
administrative expenses related to the human product line of Norfolk
($133), in addition to the product line's identified costs and expenses.
k) Represents the historical revenues, costs of sales, and allocated
selling, general and administrative expenses that relate directly to the
CVS acquired product line.
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<PAGE> 20
l) Reflects the removal of the extraordinary gain of $1,100 on the
extinguishment of the past warrant repurchase obligation and the
extraordinary loss of ($83) on early extinguishment of debt.
m) Represents the historical revenues, costs of sales and allocated selling,
general and administrative expenses that relate directly to the IFM
acquired product line.
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SIGNATURE
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.
Horizon Medical Products, Inc.
Dated: December 14, 1998 By: /s/ Mark A. Jewett
------------------------------------
Mark A. Jewett, Vice President of Finance
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