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An Aug. 31 closing date is set for the sale of Ozark-based Family Pharmacy, which filed for bankruptcy April 30. The winning bid was awarded to Smith Management Services LLC, an affiliate of South Carolina-based J.M. Smith Corp.
SBJ photo by Wes Hamilton
An Aug. 31 closing date is set for the sale of Ozark-based Family Pharmacy, which filed for bankruptcy April 30. The winning bid was awarded to Smith Management Services LLC, an affiliate of South Carolina-based J.M. Smith Corp.

Largest bankruptcy creditor wins $16M bid for Family Pharmacy

Posted online

Pending a final order of sale, the bankruptcy proceedings for Family Pharmacy Inc. have concluded, with Smith Management Services LLC, an affiliate of J.M. Smith Corp., providing the winning acquisition bid for just shy of $16 million.

During a sale hearing Aug. 7 in a federal bankruptcy courthouse in Kansas City, Smith Corp.’s court-approved bid was nearly $14 million in cash and $2 million in credit to obtain Family Pharmacy’s assets, said Jim MacLaughlin, the chief restructuring officer hired in the Ozark-based pharmacy’s Chapter 11 bankruptcy reorganization case.

South Carolina-based Smith Corp. subsidiary Smith Drug Co. is Family Pharmacy’s primary wholesale pharmaceutical distributor and its largest creditor, according to bankruptcy court documents.

MacLaughlin, co-owner of Kansas City-based advisement firm Lloyd & MacLaughlin LLC, said Smith Corp. beat out several other bidders in the process, which included an Aug. 3 auction.

“In the end, we had what we determined to be six qualified bidders that met the requirements of the bid procedures,” MacLaughlin said.

He said the other bidders were The Bank of Missouri, Walgreens, Hy-Vee Inc., Benzer Pharmacy, and a group of operators of southwest Missouri pharmacies comprising Koby Prater, Ryan Summers and Mike Stuart, who submitted a joint bid.

Chief Bankruptcy Judge Cynthia Norton approved a transaction closing date of Aug. 31. MacLaughlin said a backup bidder selected was a separate joint offer by Prater, Summers and Stuart, who teamed up with Walgreens at the Aug. 7 sale hearing.

According to bankruptcy court documents, Bank of Missouri and Cardinal Health are Family Pharmacy’s two other primary secured creditors, owed $11 million and $1 million, respectively. MacLaughlin said creditors will be paid off in priority, but he acknowledged with the conclusion of the bankruptcy case, some of the balance will remain unpaid. He declined to estimate a total.

“Business will continue as usual,” MacLaughlin said, adding he expects the Family Pharmacy brand to remain. “The company’s team of employees have largely remained intact, and the scale and scope of the operations continues as it did before the bankruptcy.”

Family Pharmacy currently employs 172 at its 20 retail pharmacies and two long-term care pharmacies, he said.

“I know of no plans to close any stores,” MacLaughlin added. “I think this is the best opportunity for the employee base and stores of Family Pharmacy to remain intact and operating and serving customers in an uninterrupted fashion.”

In the bankruptcy proceedings, Family Pharmacy cited two years of net losses totaling $7.5 million. The company posted net losses of $3.5 million in 2017 and $4 million in 2016, following profits of $686,000 in 2015. In 2017, gross revenue dropped to $60.3 million from $66.8 million in 2016 and $68.3 million in 2015.

Family Pharmacy officials cited a drop in the number of prescriptions filled to 1 million in 2017 from 1.4 million three years earlier.

“This drop in prescriptions was mostly reflected in the reduced retail prescription revenue,” the court records read. “Nationally, the numbers of prescriptions being filled are down year over year.”

Officials also cited increased competition from national pharmacy chains, downward pricing pressure from insurance providers and carriers, cash-flow issues, and “the debtors’ failure to adapt and adjust their business model, overhead and expenses quickly enough to remain profitable,” according to court documents.

Smith Corp. representatives referred questions about the sale to Carrie Tennis, director of operations for Family Pharmacy. Tennis released a statement that read, in part, “Family Pharmacy has been a trusted health care partner in southwest Missouri since 1977 and will continue to take care of patients in the region, offering the great customer service, medications and products that families have relied on for generations.”

Additional questions to Tennis regarding future plans with Smith Corp. were not answered by press time.

Family Pharmacy was operated by founders Lynn and Janet Morris. The couple indicated they had retired from the business in May, following the bankruptcy filing, according to past Springfield Business Journal reporting.

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