<PAGE> 1
United States
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): August 13, 1998 (June 2, 1998)
HORIZON MEDICAL PRODUCTS, INC.
------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Georgia 000-24025 58-1882343
- -----------------------------------------------------------------------------------------
<S> <C> <C>
(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)
</TABLE>
<PAGE> 2
This amendment to the report on Form 8-K of Horizon Medical Products, Inc.,
dated June 16, 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 June 16, 1998 in accordance with Item 7(a)(4).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 2, 1998, Horizon Medical Products, Inc. ("Horizon") consummated
the acquisition of certain assets used in the human vascular access business of
Norfolk Medical Products, Inc. ("Norfolk"), a privately held company, wholly
owned by its shareholder, Michael J. Dalton (the "Shareholder"). Horizon did
not assume any liabilities of Norfolk. 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 certain assets used by Norfolk in
manufacturing its human port and catheter product line (The Human Product
Line). Included among the assets are inventory, manufacturing equipment,
certain intellectual property and goodwill. Horizon intends to use the
manufacturing equipment in substantially the same manufacturing operation.
As consideration for the assets acquired, Horizon (i) paid Norfolk and the
Shareholder an aggregate of approximately $7.4 million in cash, and (ii) paid
approximately $1.9 million in cash into an escrow account, which amount will be
released upon the completion of certain tasks. The acquisition of these assets
was funded by Horizon from its available cash. The purchase price was determined
through negotiations between the Shareholder and Horizon. Neither Norfolk nor
the Shareholder had any material relationship with Horizon prior to the
acquisition. In partial response to this item, Horizon's press release dated
June 2, 1998 is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
See index on page 1. 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 Norfolk Medical Products, 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 1.
(c) Exhibits.
*2. Asset Purchase Agreement, by and among Horizon Medical
Products, Inc. and Michael J. Dalton dated June 2,
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 June 2, 1998.
* Previously filed in the Form 8-K dated June 16, 1998.
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NORFOLK MEDICAL PRODUCTS, INC.
<S> <C>
Report of Independent Accountants 2
Statements of Assets Related to the Product Line to be Acquired by
Horizon Medical Products, Inc. as of December 31, 1997 and
March 31, 1998 (Unaudited) 3
Statements of Revenue and Identified Costs and Expenses Related to the
Product Line to be Acquired by Horizon Medical Products, Inc. for
the year ended December 31, 1997 and the three months ended
March 31, 1997 (Unaudited) and March 31, 1998 (Unaudited) 4
Notes to Financial Statements 5
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements 7
Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1997 and for the three months ended
March 31, 1998 8
Unaudited Pro Forma Condensed Consolidated Balance Sheet as Adjusted
at March 31, 1998 10
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements 11
</TABLE>
1
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
August 7, 1998
To the Board of Directors
Norfolk Medical Products, Inc.
Skokie, Illinois
We have audited the statement of assets related to the product line to be
acquired by Horizon Medical Products, Inc. of Norfolk Medical Products, Inc. as
of December 31, 1997, and the related 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. 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.
The product line to be acquired by Horizon Medical Products, Inc. has been
operated as an integral part of Norfolk Medical Products, 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 product line of Norfolk Medical
Products, Inc. to be acquired by Horizon Medical Products, 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.
PricewaterhouseCoopers LLP
2
<PAGE> 5
NORFOLK MEDICAL PRODUCTS, INC.
STATEMENTS OF ASSETS RELATED TO THE PRODUCT LINE TO BE ACQUIRED BY
HORIZON MEDICAL PRODUCTS, INC.
December 31, 1997 and March 31, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Inventories $538,232 $568,622
-------- --------
Total current assets 538,232 568,622
Machinery and equipment, net 0 0
-------- --------
Total assets of the product line to be acquired $538,232 $568,622
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
NORFOLK MEDICAL PRODUCTS, INC.
STATEMENTS OF REVENUE AND IDENTIFIED COSTS AND EXPENSES RELATED TO THE PRODUCT
LINE TO BE ACQUIRED BY HORIZON MEDICAL PRODUCTS, INC.
for the year ended December 31, 1997 and the three months ended
March 31, 1997 and March 31, 1998
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1997 1997 1998
----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net sales $2,531,598 $ 572,713 $ 727,807
Identified costs and expenses:
Cost of sales 1,414,636 339,531 318,051
Allocated selling expenses 379,547 93,540 68,506
---------- ---------- ----------
Total identified costs and expenses 1,794,183 433,071 386,557
---------- ---------- ----------
Net sales in excess of identified costs
and expenses $ 737,415 $ 139,642 $ 341,250
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NORFOLK MEDICAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND PRESENTATION
Norfolk Medical Products, Inc. (Norfolk), which is located in Skokic,
Illinois, produces human and veterinary vascular access products such
as ports and catheters. The human products are used primarily in the
areas of chemotherapy and long-term pain management. The veterinary
products are used more in the area of research.
On June 2, 1998, Horizon Medical Products, Inc. (Horizon) purchased
certain assets relating to the human product line (the "Human Product
Line") of Norfolk. Patents related to this product line, which were
owned by the owner of Norfolk and which had an immaterial historical
cost basis, were also purchased. The total purchase price was $9.3
million. The Human Product Line has been operated as an integral part
of Norfolk and has no separate legal existence. The assets related to
the Human Product Line 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 product line to be acquired by Horizon represent the revenues, cost
of sales, and selling expenses that relate directly to the Human
Product Line. Selling expense items are allocated based on estimates
and assumptions as if the Human Product Line had been operated on a
stand-alone basis during the periods presented and reflect an estimate
of activity attributable to selling the Human Product Line relative to
the total selling activity of Norfolk.
The above allocations are believed by management to be reasonable
allocations under the circumstances. However, there is no assurance
that such allocations will be indicative of future results of
operations. In addition, the carrying amount of inventories, as
reflected in the statement of assets to be acquired, does not include
any adjustments which may occur at the date of acquisition. General and
administrative expenses were not incurred individually by the Human
Product Line for the periods presented and because Horizon is not
acquiring any of the general and administrative cost structure of
Norfolk, general and administrative expenses have been excluded from
the accompanying financial statements. Further, income taxes have been
excluded from the accompanying financial statements since they have
historically not been allocated to the Human Product Line.
The accompanying financial statements are intended to present the
assets of the Human Product Line of Norfolk to be acquired by Horizon
and the historical revenue, cost of sales and allocated selling
expenses of this product line and are not intended to be a complete
presentation of the Human Product Line's assets and results of
operations as if it had been operated as a stand-alone entity.
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 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.
5
<PAGE> 8
NORFOLK MEDICAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
REVENUE RECOGNITION - Revenue is recognized upon shipment of the
related product, net of any discounts.
INVENTORIES - Raw materials and finished goods are valued at the lower
of cost or market using moving average methods.
MACHINERY AND EQUIPMENT - Machinery and equipment are carried at cost,
less accumulated depreciation, and include expenditures that
substantially increase the useful lives of existing assets.
Maintenance, repairs, and minor renovations are charged to expense as
incurred. Upon sale, retirement, or other disposition of these assets,
the cost and related accumulated depreciation are removed from the
respective accounts, and any gain or loss on the disposition is
included in operations. Depreciation of machinery and equipment is
calculated using primarily the straight-line method over estimated
useful lives ranging from 5-7 years. All of the Human Product Line
machinery and equipment acquired by Horizon (see Note 1) was fully
depreciated as of December 31, 1997 and March 31, 1998.
UNAUDITED INTERIM FINANCIAL INFORMATION - The accompanying financial
statements as of March 31, 1998, and for the three month periods ended
March 31, 1997 and March 31, 1998, 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 Human Product Line to be acquired by
Horizon and the results of operations of this product line 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.
3. INVENTORIES
A summary of inventories at December 31, 1997 and March 31, 1998 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
---------------- ---------------
<S> <C> <C>
Raw materials $ 168,758 $ 294,476
Finished goods 369,474 274,146
----------- ----------
$ 538,232 $ 568,622
=========== ==========
</TABLE>
6
<PAGE> 9
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The accompanying Unaudited Pro Forma Condensed Consolidated Financial
Statements reflect the consolidated financial position of Horizon Medical
Products, Inc. (the "Company") as of March 31, 1998 and the consolidated results
of its operations for the three months ended March 31, 1998 after giving pro
forma effect for (i) the purchase of the human product line of Norfolk Medical
Products, Inc. (the "Norfolk Acquisition") and (ii) 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 Norfolk Acquisition, (ii) the purchase
of the port business of Strato/Infusaid Inc. (the "Strato/Infusiad
Acquisition"), and (iii) the Offering as though they occurred January 1, 1997.
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 three months ended March 31, 1998, and the historical results of
the acquired product line of Norfolk Medical Products, 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 Norfolk Acquisition, the Strato/Infusaid
Acquisition, and Offering actually been completed as of the dates indicated in
the accompanying notes thereto nor which may be achieved in the future.
7
<PAGE> 10
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
JANUARY 1, 1997 ACQUIRED
THROUGH PRODUCT PRO FORMA
HORIZON JULY 15, 1997(a) LINE (l) ADJUSTMENTS PRO FORMA
----------- ------------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 15,798 $ 7,020 $ 2,532 $ 25,350
Cost of goods sold 6,273 2,687 1,415 $ (286)(b) 10,089
----------- ------- ------- ------- -----------
Gross profit 9,525 4,333 1,117 286 15,261
Selling, general, 802 (m)
and administrative 659 (c)
expenses 6,476 2,927 380 (1,506)(d) 9,738
----------- ------- ------- ------- -----------
Operating income (loss) 3,049 1,406 737 331 5,523
Interest income (expense) (3,971) (2,905)(f) (6,876)
Non-recurring accretion of
value of put warrant
repurchase obligation (8,000) 8,000 (h)
Other income 70 70
----------- ------- ------- ------- -----------
Income (loss) before
income taxes (8,852) 1,406 737 5,426 (1,283)
Income tax benefit
(expense) (320) (622) 433 (i) (509)(i)
----------- ------- ------- ------- -----------
Net income (loss) $ (9,172) $ 784 $ 737 $ 5,859 $ (1,792)
=========== ======= ======= ======= ===========
Earnings (loss) per share -
basic and diluted $ (0.97) $ (0.19)(j)
=========== ===========
Weighted average number
of common shares
outstanding - basic
and diluted 9,419,458 9,419,458 (k)
=========== ===========
<CAPTION>
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
------------ -------------
<S> <C> <C>
Net sales $ 25,350
Cost of goods sold 10,089
-------- -------------
Gross profit 15,261
Selling, general,
and administrative
expenses $ 90 (e) 9,828
-------- -------------
Operating income (loss) (90) 5,433
Interest income (expense) 6,931 (g) 55
Non-recurring accretion of
value of put warrant
repurchase obligation
Other income 70
-------- -------------
Income (loss) before
income taxes 6,841 5,558
Income tax benefit
(expense) (1,632)(i) (2,141)
-------- -------------
Net income (loss) $ 5,209 $ 3,417
======== =============
Earnings (loss) per share
basic and diluted $ 0.26 (j)
=============
Weighted average number
of common shares
outstanding - basic
and diluted 13,320,950 (k)
=============
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
8
<PAGE> 11
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the three months ended March 31, 1998
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
NORFOLK
ACQUIRED
PRODUCT PRO FORMA OFFERING PRO FORMA
HORIZON LINE (a) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
--------- --------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 6,709 $ 728 $ 7,437 $ 7,437
Cost of goods sold 2,534 318 $ 4 (b) 2,856 2,856
---------- ------- --------- ---------- ------- ----------
Gross profit 4,175 410 (4) 4,581 4,581
Selling, general, and 133 (j)
administrative expenses 2,963 69 134 (c) 3,299 $ 15 (d) 3,314
---------- ------- --------- ---------- ------- ----------
Operating income (loss) 1,212 341 (271) 1,282 (15) 1,267
Interest income (expense) (1,942) (228)(e) (2,170) 2,170 (f)
Other income 11 11 11
---------- ------- --------- ---------- ------- ----------
(Loss) income before income
taxes and extraordinary item (719) 341 (499) (877) 2,155 1,278
Income tax benefit (expense) (209) 60 (g) (149) (462)(g) (611)
---------- ------- --------- ---------- ------- ----------
(Loss) income before
extraordinary item (928) 341 (439) (1,026) 1,693 667
Extraordinary item 1,100 1,100 1,100
---------- ------- --------- ---------- ------- ----------
Net income (loss) $ 172 $ 341 $ (439) $ 74 $ 1,693 $ 1,767
---------- ------- --------- ---------- ------- ----------
Income (loss) before
extraordinary item - basic $ (.10) $ (.11)(h) $ .05 (h)
========== ========== ==========
Net income per share -
basic and diluted $ .02 $ .00 (h) $ .13 (h)
========== ========== ==========
Weighted average number
of common shares
outstanding - basic 9,424,950 9,424,990 (i) 13,320,950 (i)
========== ========== ==========
Weighted average number
of common shares
outstanding - diluted 10,205,002 10,205,002 (i) 13,320,950 (i)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
9
<PAGE> 12
HORIZON MEDICAL PRODUCTS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS ADJUSTED
March 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
NORFOLK
ACQUIRED
PRODUCT PRO FORMA OFFERING PRO FORMA
HORIZON LINE (a) ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------- ---------- ------------ ----------- ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,758 $ 1,758 $ 2,442(c) $ 4,200
Accounts receivable - trade, net 4,676 4,676 4,676
Inventories 5,313 $ 569 5,882 5,882
Prepaid expenses and other current
assets 411 411 411
Deferred taxes 569 569 569
-------- -------- -------- -------- -------- --------
Total current assets 12,727 569 13,296 2,442 15,738
Property and equipment, net 2,497 $ 101(b) 2,598 2,598
Intangible assets, net 15,284 8,630(b) 23,914 (204)(d) 23,710
Deferred taxes 255 255 255
Other assets 617 617 617
-------- -------- -------- -------- -------- --------
Total assets $ 31,380 $ 569 $ 8,731 $ 40,680 $ 2,238 $ 42,918
======== ======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable - trade $ 1,421 $ 1,421 $ 1,421
Accrued liabilities 1,388 1,388 1,388
Income taxes payable 108 108 108
Current portion of long-term debt 2,266 2,266 $ (2,067)(c) 199
Current portion of payable under non-
compete and consulting agreements 292 292 (292)(c)
-------- -------- -------- -------- -------- --------
Total current liabilities 5,475 5,475 (2,359) 3,116
Long-term debt, net of current portion 24,596 $ 9,300(b) 33,896 (33,896)(c)
Payable under non-compete and
consulting agreements, net of
current portion 1,463 1,463 (1,463)(c)
Other liabilities 175 175 175
-------- -------- -------- ------- -------- --------
Total liabilities 31,709 9,300 41,009 (37,718) 3,291
-------- -------- -------- ------- -------- --------
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock
Common stock 9 9 4(c) 13
Additional paid-in capital 11,263 11,263 40,156(c) 51,419
Common stock to be issued 657 657 657
Shareholders' notes receivables (399) (399) (399)
Accumulated deficit (11,859) (11,859) (204)(d) (12,063)
Divisional equity $ 569 $ (569)(b)
-------- -------- -------- -------- -------- --------
Total shareholders' equity (deficit) (329) 569 (569) (329) 39,956 39,627
-------- -------- -------- -------- -------- --------
Total liabilities and shareholders'
equity (deficit) $ 31,380 $ 569 $ 8,731 $ 40,680 $ 2,238 $ 42,918
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.
10
<PAGE> 13
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 Norfolk Acquisition,
(ii) the Strato/Infusaid Acquisition and (iii) the Offering as though they
occurred January 1, 1997. The unaudited pro forma condensed consolidated
statement of operations for the three months ended March 31, 1998 reflects the
results of the Company's operations after giving pro forma effect for (i) the
Norfolk Acquisition and (ii) the Offering as though they occurred January 1,
1998. The unaudited condensed balance sheet gives effect to the financial
position of the Company as of March 31, 1998 as if the Norfolk Acquisition and
the Offering occurred at March 31, 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
of the cost over fair value of net assets acquired of Norfolk
of $1,797 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
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.
11
<PAGE> 14
HORIZON MEDICAL PRODUCTS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands, Except Share Data)
f) Reflects the increase in interest expense ($1,994) resulting
from 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/Infusaid Acquisition and amortization of related debt
issue costs. Also reflects the increase in interest expense
($911) from the debt incurred of $9,300 to fund the Norfolk
Acquisition 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 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.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 ARE AS
FOLLOWS:
a) Represents the historical operating results of the human
product line of Norfolk for the three months ended March 31,
1998.
b) Cost of goods sold has been increased to reflect the increase
in depreciation expense ($4) 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 net increase in selling, general and
administrative expenses ($134) 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 of the cost over
fair value of net assets acquired of Norfolk of $1,797 over a
period of 30 years.
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HORIZON MEDICAL PRODUCTS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Thousands, Except Share Data)
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 ($228) resulting
from the debt incurred of $9,300 to fund the Norfolk
Acquisition at the Company's variable rate of 9.8%.
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.
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1998 ARE AS FOLLOWS:
a) Represents the March 31, 1998 historical basis of the net
assets of the human product line of Norfolk to be acquired by
the Company.
b) Gives effect to the Norfolk Acquisition including the
additional debt to be incurred by the Company to fund the
acquisition ($9,300), the elimination of the historical
divisional equity of the human business of Norfolk ($569) and
the allocation of the excess purchase price to machinery and
equipment ($101) and intangible assets ($8,630) including
patents, non-compete agreements and goodwill.
c) Reflects receipt and application of the net proceeds to the
Company of approximately $40,160, including repayment of
indebtedness, from the sale of common stock in the Offering.
d) The use of net proceeds of the Offering to repay outstanding
indebtedness will result in an immediate write-off of $204
representing unamortized debt issue costs existing at March
31, 1998.
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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.
Horizion Medical Products, Inc.
Dated: August 13, 1998 By: /s/ MARK A. JEWETT
-----------------------------------------
Mark A. Jewett, Vice President of Finance
