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This is another growth-by-acquisition concept company. Management is very strong; trained and experienced under Walmart. The target market: 24,555 independent, free-standing pharmacy stores. Horizon Pharmacies (AMEX: HZP) is a recently IPO'd company (July) that has been buying up independent pharmacies in rural America, in towns of under 50,000 people. There are tens of thousands of these to be had. Their formula allows them to buy pharmacies for virtually no cash (NET) and very little, if any, stock dilution and taking on some debt. Most rural pharmacies over-stock by at least 3 months. With modernization of inventory control, and with this company's purchasing power and a special inventory re-purchase arrangement with Bergen Bruswig (merging with Cardinal Health) they are able to restock for a more sensible inventory at bulk purchase discounted prices. This provides usually a close to net break-even of the purchase price, depending on the debt incurred. They keep on the former owners as managers who are willing to sell due to margin pressure from managed care influences and who want a solid retirement on down the road. Prescription margins are estimated to have leveled for now in the industry. HZP buys the stores at 1.5 times earnings. Independents generate 80%-90% of revenues from prescription drug sales and only 10%-20% for health and beauty items, toys, greeting cards, etc. HZP's goal is to change this mix to 60% prescription and 40% higher margin merchandise. Independents also fill less than 45% of total prescriptions via higher margin and lesss-expensive-to-the-consumer generic drugs which HZP will improve to 55%. HZP also has it's own brand names for health care and beauty products offering much higher margins (True Quality and Good Neighbor). Additionally, HZP is in the home health care market (wheel chairs, oxygen oxidizers, etc.). This is expanding and is expected to be a large part of their growth. I know the firm that IPO'd them at $5 in July (up 75% since then). The president of that firm also recommended BMRQ, RFMI and WAXS at under $10 which have performed beautifully, mostly triples, in less than 9 months. Verbally, he sees this recommendation tripling in a year given the price to sales ratio is ridiculously low at .60, though his print ha$1 a conservative estimate of $10-$12 over 18-24 months and the firm recently put out an upgrade with no timeline for $12-$14. He doesn't hype, hates it. Plays a lot of golf though..:-) Given Horizon Pharmacies' aggressive purchasing power, they will be very profitable in a year and should more than justify their current PE of near 30. Based on old numbers, using a total of 17 stores, before the acquisitions completed since the IPO in July (4 and more coming) they are expected to grow 100% over last year's $0.18---so a double seems reasonable to me. They should outperform the 100% earnings growth since they now have 19 stores and are continuing to ramp up acquisitions. The stock has very few shares outstanding, a thin float (about a million and a half shares if my memory is correct) and trades at a price/sales ratio of about 0.6, as mentioned earlier. Management is very experienced as they came from Walmart under True Quality Pharmacies, Inc. The CEO, Rick McCord R.PH, is a licensed pharmacist. Two other senior executives came from True Quality Pharmacies' management and several members of the board of directors have many years of experience in the chain drug store industry. HZP - HORIZON PHARMACIES INC Exchange: AMEX comp Delay: at least 20 minutes Last Price: 9 3/4 at 15:57 Change: Up 7/8 (+9.86%) High: 10 at 15:51 Low: 8 7/8 at 11:36 Open: 9 Previous Close: 8 7/8 on 9/23 Volume: 39,500 30-Day Avg. Volume: 12,000 Shares Outstanding: 2,462,000 52-Week High: 10 52-Week Low:5 1/4 Beta: Not Available Yield: Nil P/E Ratio: 33.6 EPS: 0.29 Estimates for FY '97 (calendar) are $0.35 and for FY'98 $0.60 As of August 26: Book/Share $2.73 Working Capital/Share $2.42 Debt/Equity 19% Gross Margin 31.9% Operating Margin 4.2% Net Margin 1.5% I see this as another potential FPWR. Recent News: PRINCETON, Texas, Sept. 18 /PRNewswire/ -- HORIZON Pharmacies, Inc. (Amex: HZP) has acquired Marty's Pharmacy, Inc. located in Trinidad, Colorado. Purchase price terms include a combination of cash, debt and $81,250 of HORIZON common stock. It is a complete, full line 6,000 square foot retail pharmacy with approximately 1.5 million dollars in annual sales in 1996. In addition to prescription drugs and services, this pharmacy also offers intravenous ("IV") infusion services and delivery to nursing home patients. A broad range of over-the-counter medications, supplies and equipment, health and beauty care, gifts, greeting cards and other general merchandise are also available. This is the Company's fifth acquisition since the closing of its initial public offering on July 9, 1997, and is the 19th retail pharmacy for HORIZON Pharmacies, Inc. In announcing this acquisition for HORIZON Pharmacies, Inc., Rick McCord, President and CEO, stated, "Our management team is very excited about the opportunities to expand in the state of Colorado. We look forward to operating in this location." HORIZON Pharmacies, Inc. acquires and consolidates high volume, free- standing full service retail pharmacies primarily located in communities having populations of fewer than 50,000 people. HORIZON believes that its success is primarily due to its philosophy of retaining the individual, time- proven customer service characteristics of the stores it acquires, while enabling such stores to offer complete and competitively priced inventories to their small town customers through enhanced technology and consolidation and management of such stores as a chain. For more information, visit HORIZON's Web site at members.aol.com . SOURCE HORIZON Pharmacies, Inc. PRINCETON, Texas, Sept. 3 /PRNewswire/ -- H0RIZON Pharmacies, Inc. (Amex: HZP) has acquired McCosh Drug located in Gering, Nebraska. It is a complete, full line 11,000 square foot retail pharmacy with approximately 2.2 million dollars in annual sales in 1996. Services offered to the customer include a complete photo department with one hour photo processing, camera sales and repair, a custom framing department, and a complete line of gifts including Hallmark and Enesco, prescription department, health and beauty care, cosmetics, greeting cards and other general merchandise. This is the fourth acquisition since the Initial Public Offering on July 9, 1997, and is the eighteenth store for HORIZON Pharmacies, Inc. In announcing the fourth purchase of a retail pharmacy in August for HORIZON, Rick McCord, President and CEO, said "Our management team is dedicated and determined to achieve the goal of consolidation within the retail pharmacy industry." HORIZON Pharmacies, Inc. acquires and consolidates high volume, free-standing full service retail pharmacies primarily located in communities having populations of fewer than 50,000 people. HORIZON believes that its success is primarily due to its philosophy of retaining the individual, time-proven customer service characteristics of the stores it acquires, while enabling such stores to offer complete and competitively priced inventories to their small town customers through enhanced technology and consolidation and management of such stores as a chain. 09/03/97 18:04 EDT prnewswire.com There are no earnings projections on First Call. www. FreeEDGAR.com for the 10-QSB Let me know what you think!!! Anette | ||||||||||||||
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