<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 4, 1998
(September 21, 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
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(Address of principal executive offices) (Zip Code)
706-846-3126
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(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 5, 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 5, 1998 in accordance with Item 7 (a) (4).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 21, 1998 Horizon Medical Products, Inc. ("Horizon")
consummated the acquisition (the "Acquisition") of certain assets used in the
distribution and sale of medical devices (the "Business") by Columbia Vital
Systems, Inc. ("CVS"). CVS is a privately held medical device distribution
company located in Westmont, Illinois. Horizon did not assume any liabilities
of CVS. 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 by Horizon consist of substantially all of the assets
used by CVS in the Business. Included among the assets are inventory, fixtures,
and intangible assets. Horizon intends to use the acquired assets in the manner
previously used by CVS.
As consideration for the Acquisition, Horizon (i) paid CVS $4.0 million in
cash, and (ii) CVS can earn up to an additional $5.225 million subject to the
terms of the purchase agreement, including the successful achievement of future
sales targets. Horizon funded the cash portion of the Acquisition from its
acquisition line of credit with NationsCredit Commercial Corporation. The
purchase price was determined through arm's-length negotiations between the
owners of CVS and management of Horizon. CVS did not have any material
relationship with Horizon prior to the acquisition. In partial response to this
item, Horizon's press release dated September 21, 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 to be acquired by Horizon Medical Products, Inc. as of
December 31, 1997 and the statement of revenue and identified costs
and expenses related to the product line to be acquired by Horizon
Medical Products, Inc. for the year then ended of Columbia Vital
Systems, 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.
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<PAGE> 3
(c) Exhibits.
*2. Asset Purchase Agreement, by and among Horizon Medical Products,
Inc., Columbia Vital Systems, Inc., William C. Huck and R. Gregory Huck dated
September 21, 1998. Exhibit 5.12 to the Asset Purchase Agreement, Transition
Agreement by and among Horizon Medical Products, Inc. and Columbia Vital
Systems, Inc. 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 21, 1998.
*Previously filed in the Form 8-K dated October 5, 1998.
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<PAGE> 4
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
COLUMBIA VITAL SYSTEMS, INC.
Report of Independent Accountants 4-5
Statements of Assets Related to the Product Line to be Acquired by Horizon Medical
Products, Inc. as of December 31, 1997 and June 30, 1998 (Unaudited) 6
Statements of Revenue and Identified Costs and Expenses related to the
Product Line to the Midwest Division to be Acquired by Horizon Medical
Products, Inc. for the year ended December 31, 1997 and six months ended
June 30, 1997 (Unaudited) and June 30, 1998 (Unaudited) 7
Notes to Financial Statements 8-10
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Condensed Consolidated Financial
Statements 11
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended
December 31, 1997 and for the nine months ended September 30, 1998 12-13
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements 14-16
</TABLE>
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<PAGE> 5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
COLUMBIA VITAL SYSTEMS, INC.
We have audited the statement of assets related to the Midwest division to be
acquired by Horizon Medical Products, Inc. of COLUMBIA VITAL SYSTEMS, INC. as
of December 31, 1997, and the related statement of revenue and identified costs
and expenses related to the Midwest division to be acquired by Horizon Medical
Products, Inc. for the year 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 statement. 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.
The Midwest division to be acquired by Horizon Medical Products, Inc., has been
operated as an integral part of COLUMBIA VITAL SYSTEMS, 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 financial statements referred to above present fairly, in
all material respects, the assets related to the Midwest division to be acquired
by Horizon Medical Products, Inc. of COLUMBIA VITAL SYSTEMS, INC. as of December
31, 1997, and the revenue in excess of identified costs and expenses for the
year then ended on the basis of accounting described in the preceding paragraph
and in conformity with generally accepted accounting principles.
We have compiled the accompanying interim statement of assets related to the
Midwest division to be acquired by Horizon Medical Products, Inc. of COLUMBIA
VITAL SYSTEMS, INC. as of June 30, 1998 and the interim statements of revenue
and identified costs and expenses for the six months ended June 30, 1998 and
1997, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
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<PAGE> 6
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
NYKIEL, CARLIN & CO., LTD.
Schaumburg, Illinois
October 16, 1998
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<PAGE> 7
COLUMBIA VITAL SYSTEMS, INC.
STATEMENTS OF ASSETS RELATED TO THE
MIDWEST DIVISION TO BE ACQUIRED BY
HORIZON MEDICAL PRODUCTS, INC.
DECEMBER 31, 1997 AND JUNE 30, 1998
ASSETS
<TABLE>
<CAPTION>
June 30,
December 31, 1998
1997 (UNAUDITED)
------------ -----------
<S> <C> <C>
INVENTORIES $ 1,411,671 $ 1,695,796
----------- -----------
Total Current Assets 1,411,671 1,695,796
MACHINERY AND EQUIPMENT, NET - -
----------- -----------
Total Assets of the Division to be
Acquired $ 1,411,671 $ 1,695,796
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements. See accountants' compilation report.
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<PAGE> 8
COLUMBIA VITAL SYSTEMS, INC.
STATEMENTS OF REVENUE AND IDENTIFIED COSTS AND
EXPENSES RELATED TO THE MIDWEST DIVISION TO BE ACQUIRED BY
HORIZON MEDICAL PRODUCTS, INC.
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1998
<TABLE>
<CAPTION>
December 31, June 30, June 30,
1997 1997 1998
(UNAUDITED) (UNAUDITED)
------------ ----------- -----------
<S> <C> <C> <C>
REVENUE
Sales $12,863,044 $ 6,372,617 $ 6,090,703
Allocated Commission Revenue 126,627 46,125 67,927
Allocated Freight Revenue 266,293 131,752 130,560
----------- ----------- -----------
Total Revenue 13,255,964 6,550,494 6,289,190
----------- ----------- -----------
IDENTIFIED COSTS AND EXPENSES
COSTS OF SALES
Purchases 9,232,519 4,478,600 4,080,914
Allocated freight in 67,327 29,261 36,893
Allocated freight out 139,767 72,427 68,102
----------- ----------- -----------
Total Cost of Sales 9,439,613 4,580,288 4,185,909
----------- ----------- -----------
GROSS PROFIT 3,816,351 1,970,206 2,103,281
----------- ----------- -----------
SELLING EXPENSES
Salaries 1,489,563 768,587 662,477
Allocated selling expenses 192,632 93,837 100,897
----------- ----------- -----------
Total Selling Expenses 1,682,195 862,424 763,374
----------- ----------- -----------
ALLOCATED GENERAL AND ADMINISTRATIVE
EXPENSES 1,611,223 729,432 752,666
----------- ----------- -----------
Total Identified Costs and
Expenses 3,293,418 1,591,856 1,516,040
----------- ----------- -----------
NET REVENUE IN EXCESS OF
IDENTIFIED COSTS AND EXPENSES $ 522,933 $ 378,350 $ 587,241
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements. See accountants' compilation report.
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<PAGE> 9
COLUMBIA VITAL SYSTEMS, INC. (MIDWEST DIVISION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND
PRESENTATION Columbia Vital Systems, Inc. (CVS), which is
located in Westmont, Illinois, distributes
medical devices, primarily to hospitals.
On September 1, 1998, Horizon Medical Products,
Inc. (Horizon) purchased certain assets relating
to the Midwest division of CVS. The Midwest
division primarily distributes medical supplies to
hospitals in the Midwest United States while the
other divisions of CVS distribute surgical and
medical devices throughout the United States. The
total purchase price was $4,225,000. Additionally,
on January 31, 2000 and 2001 payments of up to
$1,000,000 and $3,000,000, respectively, would be
due should the division meet certain sales
criteria in the two years following Horizon's
purchase of the division (See Note 3). The Midwest
division has been operated as an integral part of
CVS and has no separate legal existence. The
assets related to the Midwest division as
presented in the accompanying statement of assets
to be acquired by Horizon represent the historical
balances of those assets.
The statements of revenue and identified costs and
expenses related to the division to be acquired by
Horizon represent the revenues, cost of sales,
selling expenses, and general and administrative
expenses that relate directly to the Midwest
division. Certain commission and freight revenue
as well as selling expenses and general and
administrative expenses are allocated based on
estimates and assumptions as if the Midwest
division had been operated on a stand-alone basis
during the periods presented and reflect an
estimate of activity attributable to selling and
administering the Midwest division relative to the
total selling activity of CVS.
The above allocations are believed by management
to be reasonable under the circumstances. However,
there is no assurance that such allocations will
be indicative of future results of operations.
Further, income taxes and "other" income and
expense accounts have been excluded from the
accompanying financial statements since they have
historically not been allocated to the Midwest
division.
The accompanying financial statements are intended
to present the assets of the Midwest division of
CVS to be acquired by Horizon and the historical
revenue, cost of sales and allocated selling,
general and administrative expenses of this
division and are not intended to be a complete
presentation of the Midwest division's assets and
results of operations as if such division had
been operated as a stand-alone entity.
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<PAGE> 10
COLUMBIA VITAL SYSTEMS, INC. (MIDWEST DIVISION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING
POLICIES
ACCOUNTING 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
of assets and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of revenues
and expenses during the reporting period. Actual
results may differ from those estimates.
INVENTORY The inventory consists of finished goods and is
valued at the lower of cost (determined on a
first-in, first-out method) or market.
REVENUE RECOGNITION Revenue is recognized upon shipment of the
related product, net of any discounts.
UNAUDITED INTERIM
FINANCIAL INFORMATION The accompanying financial statements as of June
30, 1998, and for the six months ended June 30,
1998 and June 30, 1997, are unaudited. In the
opinion of management, these financial statements
include all adjustments consisting of only normal
recurring adjustments, necessary for a fair
presentation of the assets of the Midwest
division to be acquired by Horizon and the
results of operations of this division using the
basis of presentation discussed in Note 1. The
operating results for the interim periods are not
necessarily indicative of the operating results
to be expected for the full year. Management has
elected to omit substantially all of the
disclosures required by generally accepted
accounting principles for these interim periods.
PROPERTY AND EQUIPMENT
AND RELATED
DEPRECIATION Property and equipment (including major renewals
and improvements) are capitalized in the accounts
and valued at cost.
Depreciation is provided for in amounts
sufficient to relate the cost of depreciable
assets to operations over their estimated service
lives. Depreciation on assets is computed using
straight-line and accelerated methods for both
financial statement and income tax purposes based
upon the estimated useful life of the asset. All
of the Midwest division's equipment acquired by
Horizon was fully depreciated at December 31,
1997.
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<PAGE> 11
COLUMBIA VITAL SYSTEMS, INC. (MIDWEST DIVISION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
3. MAJOR SUPPLIER The Midwest division purchased 60% of its inventory
from one supplier in 1997. Effective November 13,
1998, this supplier indicated its intent to
discontinue selling goods to CVS. CVS and the
supplier are currently in negotiations to
reinstate a distributor agreement. The outcome of
such negotiations cannot be determined at this
time.
If the aforementioned supplier agrees to enter into
a distribution agreement with Horizon prior to the
period ending 120 days after the supplier last
delivers all products required under the existing
distribution agreement, the purchase price would
increase from $4,225,000 (See Note 1) to $4,575,000
with additional payments increasing from $1,000,000
and $3,000,000 on January 31, 2000 and 2001,
respectively to $2,325,000 due on January 31, 2000
and 2001. The additional payments would be reduced
should the division not meet certain sales
requirements in the two years subsequent to
closing.
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<PAGE> 12
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The accompanying Unaudited Pro forma Condensed Consolidated Financial
Statements reflect the 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
distribution and sale of medical devices by Columbia Vital Systems, Inc. (the
"CVS Acquisition") (ii) the purchase of the human product line of Norfolk
Medical Products, Inc. (the "Norfolk Acquisition") and (iii) 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 CVS Acquisition, (ii) the Norfolk
Acquisition, (iii) the purchase of the port business of Strato/Infusaid Inc.
(the "Strato Acquisition"), and (iv) the Offering as though they occurred
January 1, 1997. An unaudited condensed consolidated balance sheet has not been
included because the CVS Acquisition, the 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 Columbia Vital Systems, Inc. included elsewhere in
this Form 8-K. 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 CVS Acquisition, the 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.
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<PAGE> 13
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
January 1, 1997 Acquired Acquired
Through Product Product
Horizon July 15,1997 (a) Line (l) Line (n)
--------- ---------------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 15,798 $ 7,020 $ 2,532 $ 15,238
Cost of goods sold 6,273 2,687 1,415 10,713
---------- ------- -------- --------
Gross profit 9,525 4,333 1,117 4,525
Selling, general and administrative expenses 6,476 2,927 380 4,200
---------- ------- -------- --------
Operating income 3,049 1,406 737 325
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
Income tax benefit (expense) (320) (622) -- (35)
---------- ------- -------- --------
Net income (loss) $ (9,172) $ 784 $ 737 $ 338
========== ======= ======== ========
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 $ 40,588 $ 40,588
Cost of goods sold (286) (b) 20,802 20,802
------ ---------- -----------
Gross profit 286 19,786 19,786
Selling, general and administrative expenses 43 (c),(d),(m) 14,026 90 (e) 14,116
------ ---------- ------- -----------
Operating income 243 5,760 (90) 5,670
Interest income (expense) (3,297) (f) (7,252) 6,931 (g) (321)
Non-recurring accretion of value of put
warrant repurchase obligation 8,000 (h) -- --
Other income 102 102
------ ---------- ------- -----------
Income (loss) before and income taxes 4,946 (1,390) 6,841 5,451
Income tax benefit (expense) 416 (i) (561) (1,775) (i) (2,336)
------ ---------- ------- -----------
Net income (loss) $5,362 $ (1,951) $ 5,066 $ 3,115
====== ========== ======= ===========
Earnings (loss) per share - basic and diluted $ (0.20) (j) $ 0.24
========== ===========
Weighted average number of common
shares outstanding - basic and diluted 9,419,458 (k) 12,800,000
========== ===========
</TABLE>
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<PAGE> 14
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
Acquired Acquired
Product Product Pro Forma
Horizon Line (a) Line (k) Adjustments
----------- -------- -------- -----------
<S> <C> <C> <C> <C>
Net sales $ 21,631 $ 1,265 $ 8,433
Cost of goods sold 8,518 547 5,465 6 (b)
----------- -------- -------- -----
Gross profit 13,113 718 2,968 (6)
Selling, general and administrative expenses 8,645 389 2,175 412 (c)(j)
----------- -------- -------- -----
Operating income 4,468 329 793 (418)
Interest income (expense) (2,271) (3) (21) (607) (e)
Other income 33 -- 17
----------- -------- -------- -----
Income (loss) before extraordinary item and income
taxes 2,230 326 789 (1,025)
Income tax benefit (expense) (1,467) (131) -- 89 (g)
----------- -------- -------- -----
Income (loss) before extraordinary item 763 195 789 (936)
Extraordinary item 1,017 -- --
----------- -------- -------- -----
Net income (loss) $ 1,780 $ 195 $ 789 $(936)
=========== ======== ======== =====
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
===========
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Offering As
Pro Forma Adjustments Adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 31,329 $ 31,329
Cost of goods sold 14,536 14,536
----------- -----------
Gross profit 16,793 16,793
Selling, general and administrative expenses 11,621 15 (d) 11,636
----------- ------ -----------
Operating income 5,172 (15) 5,157
Interest income (expense) (2,902) 2,170 (f) (732)
Other income 50 50
----------- ------ -----------
Income (loss) before extraordinary item and income
taxes 2,320 2,155 4,475
Income tax benefit (expense) (1,509) (449) (g) (1,958)
----------- ------ -----------
Income (loss) before extraordinary item 811 1,706 2,517
Extraordinary item 1,017 (1,017) (l) --
----------- ------ -----------
Net income (loss) $ 1,828 $ 689 $ 2,517
=========== ====== ===========
Earnings per share - basic $ 0.16 (h) $ 0.19
=========== ===========
Earnings per share - diluted $ 0.15 $ 0.19
=========== ===========
Weighted average number of common shares
outstanding - basic 11,789,682 (i) 13,400,000
=========== ===========
Weighted average number of common shares
outstanding - diluted 12,089,893 (i) 13,400,000
=========== ===========
</TABLE>
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<PAGE> 15
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 CVS Acquisition, (ii)
the Norfolk Acquisition, (iii) the Strato Acquisition and (iv) the Offering as
though they occurred January 1, 1997. The unaudited pro forma condensed
consolidated statement of operations for the six months ended June 30, 1998
reflects the results of the Company's operations after giving pro forma effect
for (i) the CVS Acquisition, (ii) the Norfolk Acquisition and (iii) the
Offering as though they occurred January 1, 1998.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA 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 net increase in amortization $(124) of the cost over fair
value of net assets acquired of Strato over a period of 30 years.
Further, reflects the net increase in selling, general and
administrative expenses $(535) due to amortization 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, as well as the
amortization $(60) of the cost over fair value of net assets acquired
of Norfolk of $ 1,797 over a period of 30 years. Reflects the net
increase of $(88) due to the amortization of the cost over fair value
of net assets acquired of CVS of $2,628 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.
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.
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<PAGE> 16
f) Reflects the increase in interest expense $(1,994) resulting from the
additional debt of $23,500 with variable interest at rates of 9.8% on
$21,500 during the period and 10.8% on $2,000 during the period
associated with the financing of the Strato Acquisition and
amortization of related debt issue costs. Also reflects the increase
in interest expense $(1,303) from the debt incurred of $9,300 to fund
the Norfolk Acquisition and $4,000 to fund the CVS Acquisitions at the
Company's variable rate 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.
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.
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c) Reflects the net increase in selling, general and administrative
expenses $(223) due to amortization of the 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, as well as the amortization of the
cost over fair value of net assets acquired of Norfolk of $1,797 over a
period of 30 years. Reflects the net increase of $(56) due to the
amortization of the cost over fair value of net assets acquired of CVS
of $2,628 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) Reflects the increase in interest expense $(607) resulting from the
debt incurred of $9,300 to fund the Norfolk Acquisition and $4,000 to
fund the CVS Acquisition.
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.
l) Reflects the removal of the extraordinary gain on the extinguishment of
the past warrant repurchase obligation.
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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 4, 1998 By: /s/ Mark A. Jewett
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Mark A. Jewett, Vice President of Finance
