BioScrip Reports 2011 Second Quarter Financial Results

ELMSFORD, N.Y.--()--BioScrip, Inc. (Nasdaq: BIOS) today announced 2011 second quarter financial results. Second quarter revenue for the period ended June 30, 2011, was $441.4 million with a net loss of $2.3 million, or $0.04 per share, including $8.7 million in restructuring charges and a legal settlement. Excluding the after tax effect of these charges, the Company earned $0.10 per diluted share. Adjusted EBITDA for the second quarter was $18.1 million.

Second Quarter Highlights

  • Revenue was $441.4 million, an increase of $29.4 million or 7.1% compared to prior year;
  • Gross profit was $76.2 million or 17.3% of sales, compared to $73.5 million or 17.8% of sales in the prior year;
  • Adjusted EBITDA generated by the operating segments before allocation of corporate expenses was $25.0 million, compared to $26.3 million in the prior year;
  • Adjusted EBITDA was $18.1 million, compared to $18.4 million in the prior year;
  • Restructuring expense of $3.9 million was recorded as a result of the Company’s continuing strategic assessment;
  • Expense of $4.8 million was recognized in connection with an agreement in principle with the United States Attorney’s Office involving issues related primarily to incomplete reimbursement documentation and delays in resolving overpayments due back to the government;
  • Net loss was $2.3 million, or $0.04 per share, compared to prior year net income of $3.1 million, or $0.06 per diluted share;
  • Net income, excluding the after tax effect of the restructuring and legal settlement charges, was $5.5 million, or $0.10 per diluted share;
  • Current portion of long-term debt decreased from $81.4 million at December 31, 2010 to $48.2 million at March 31, 2011;
  • Cash provided by operating activities was $38.5 million for the six months ended June 30, 2011.

Rick Smith, President and Chief Executive Officer of BioScrip, stated, “In the second quarter, we continued to execute key elements of our strategic assessment and improve our competitive position. We achieved further cost savings, generated operating cash flow of $6.8 million, enabling us to reduce our debt by $4.3 million. With $18.1 million of Adjusted EBITDA and growing patient census achieved in the quarter, we look forward to building on this momentum in the second half of 2011.”

“Overall, we are making positive steps forward in establishing ourselves as a recognized national provider of infusion and pharmacy services, and the initiatives we put in place with managed care payors over the last year are beginning to produce results. While there is still more work to be done, we are pleased to see progress as we look to the second half of the year,” concluded Mr. Smith.

Earnings included a $3.9 million restructuring charge associated with our strategic assessment and a $4.8 million charge relating to an agreement in principle with the United States Attorney’s Office in Minneapolis, Minnesota. As previously disclosed, the Company had been responding to subpoenas and requests for information regarding regulatory compliance matters. The culmination of this process has resulted in the agreement in principle regarding the activities described above relating to BioScrip and its predecessor companies. Under the proposed terms of the agreement in principle, the government, including Medicare and all Medicaid agencies, will release the Company from all further liability relating to the matters at issue.

Results of Operations

Second Quarter 2011 versus Second Quarter 2010

Revenue for the second quarter of 2011 totaled $441.4 million, compared to $412.0 million for the same period a year ago, an increase of $29.4 million or 7.1%. Infusion/Home Health Services revenue for the second quarter of 2011 was $109.3 million compared to $106.7 million in the prior year, an increase of $2.6 million or 2.5%. Pharmacy Services revenue for the second quarter of 2011 was $332.1 million, compared to $305.4 million for the prior year period, an increase of $26.7 million or 8.7%.

Consolidated gross profit for the second quarter of 2011 was $76.2 million, or 17.3% of revenue, compared to $73.5 million, or 17.8% of revenue, for the second quarter of 2010. The decrease in gross profit percentage from 2010 to 2011 was primarily the result of changes in the patient mix and reduced reimbursement rates on certain payor contracts.

Second quarter 2011 operating income was $4.5 million, including $8.7 million of restructuring and legal settlement charges, compared to operating income of $13.5 million for the second quarter of 2010.

During the second quarter of 2011, BioScrip generated $25.0 million of segment Adjusted EBITDA, or 5.7% of total revenue, compared to $26.3 million, or 6.4% of total revenue in the prior year. The Infusion/Home Health segment generated $10.9 million of Adjusted EBITDA, or 10.0% of segment revenue. This compares to $13.9 million, or 13.0% of segment revenue in the prior year and primarily reflects the impact of moving certain out-of-network patients into contracted relationships. In some markets there was also a change in mix due to less acute discharges from hospitals. The Pharmacy Services segment generated $14.1 million of segment Adjusted EBITDA, or 4.2% of segment revenue. This compares to $12.4 million, or 4.1% of segment revenue in the prior year.

On a consolidated basis, BioScrip reported $18.1 million of Adjusted EBITDA during the second quarter of 2011, or 4.1% of total revenue, compared to $18.4 million, or 4.5% of total revenue, in the prior year.

Interest expense in the second quarter of 2011 was $7.2 million, compared to $8.2 million for the same period in 2010. The decrease is due to an amendment executed in December, 2010, that replaced the term loan with a revolving line of credit with a lower effective interest rate.

Net loss for the second quarter of 2011 was $2.3 million, or $0.04 per share, compared to net income of $3.1 million, or $0.06 per diluted share, in the prior year period.

Six Months Ended 2011 versus Six Months Ended 2010

Revenue for the six months ended June 30, 2011 was $880.7 million compared to $747.1 million for the comparable period a year ago. Infusion/Home Health Services segment revenue for the six months ended June 30, 2011 was $219.8 million, compared to $152.8 million for the same period a year ago, an increase of $67.0 million, or 43.9%, primarily as a result of the CHS acquisition in March 2010. Pharmacy Services segment revenue for the six months ended June 30, 2011 was $660.9 million compared to revenue of $594.3 million for the same period a year ago, an increase of $66.6 million, or 11.2%.

Consolidated gross profit for the six months ended June 30, 2011 was $153.5 million compared to $112.4 million for the same period a year ago. Gross profit as a percent of revenue for the six months ended June 30, 2011 was 17.4%, compared to 15.1% for the same period in 2010.

For the six months ended June 30, 2011, BioScrip generated $50.0 million of segment Adjusted EBITDA, or 5.7% as a percentage of total revenue, compared to $37.2 million, or 5.0% of total revenue for the prior year period. The Infusion/Home Health segment reported $22.5 million of segment Adjusted EBITDA, or 10.2% of Infusion/Home Health segment revenue, compared to $16.8 million, or 11.0% of Infusion/Home Health segment revenue, in the prior year period. The Pharmacy Services segment generated $27.6 million of segment Adjusted EBITDA, or 4.2% as a percentage of Pharmacy Services segment revenue, compared to $20.4 million, or 3.4% of that segment's revenue in the prior period.

On a consolidated basis, BioScrip reported $34.7 million of Adjusted EBITDA for the six month period ended June 30, 2011, or 3.9% of total revenue compared to $21.1 million, or 2.8% of total revenue in the prior year period. The increase was primarily related to the acquisition of CHS.

Interest expense for the six months ended June 30, 2011 was $14.4 million, compared to $11.4 million for the same period in 2010. The increase was related to debt issued in connection with the March 2010 acquisition of CHS.

An income tax benefit of $0.1 million was recorded for the six months ended June 30, 2011 on pre-tax net income of $0.5 million. The effective tax rate for the six month period is below the statutory rate due to a reduction in our valuation allowance that offsets the expense generated by year-to-date earnings. This compares to an income tax benefit of $0.1 million recorded for the six months ended June 30, 2010 on a pre-tax net loss of $4.2 million.

Net income for the six months ended June 30, 2011 was $0.6 million, or $0.01 per diluted share. This compares to a net loss of $4.0 million or $0.09 per share for the same period last year.

Liquidity and Capital Resources

As of June 30, 2011, BioScrip had working capital of $55.9 million compared to $50.1 million at December 31, 2010. The increase was primarily due to repayments made on the line of credit facility funded by cash from operating activities. Cash from operating activities is expected to be sufficient to fund anticipated working capital requirements, information technology investments, scheduled interest repayments and other cash needs for at least the next twelve months.

As of June 30, 2011, the Company had outstanding borrowings of $48.2 million under its senior secured revolving credit facility compared to $81.4 million as of December 31, 2010.

Conference Call

BioScrip will host a conference call to discuss its second quarter 2011 financial results on August 8, 2011 at 8:30 a.m. Eastern Time. Interested parties may participate in the conference call by dialing 800-954-0650 (US), or 212-231-2900 (International), 5-10 minutes prior to the start of the call. A replay of the conference call will be available for 48 hours after the call's completion by dialing 800-633-8284 (US) or 402-977-9140 (International) and entering conference call ID number 21533779. An audio web cast and archive of the conference call will also be available under the “Investor Relations” section of the BioScrip website at www.bioscrip.com.

About BioScrip, Inc.

BioScrip, Inc. (www.bioscrip.com) (Nasdaq: BIOS) is a national provider of specialty pharmacy and home health services that partners with patients, physicians, hospitals, healthcare payors and pharmaceutical manufacturers to provide clinical management solutions and delivery of cost-effective access to prescription medications and home health services. Our services are designed to improve clinical outcomes with chronic and acute healthcare conditions while controlling overall healthcare costs.

Forward Looking Statements – Safe Harbor

This press release may contain statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the intent, belief or current expectations of the Company, its directors, or its officers with respect to the future operating performance of the Company, Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. Important factors that could cause such differences are described in the Company's periodic filings with the Securities and Exchange Commission.

Reconciliation to Non-GAAP Financial Measures

EBITDA or earnings before interest, taxes, depreciation and amortization ("EBITDA"), Adjusted EBITDA, which excludes equity-based compensation, acquisition, integration, severance, bad debt relating to CAP contract termination and legal settlement costs, and segment Adjusted EBITDA, which excludes from Adjusted EBITDA certain corporate overhead, are non-GAAP financial measures as defined under U.S. Securities and Exchange Commission Regulation G. As required by Regulation G, BioScrip has provided on Schedule 4 a reconciliation of this measure to the most comparable GAAP financial measure. The non-GAAP measure presented provides important insight into the ongoing operations and a meaningful benchmark to evidence the Company's continuing profitability trend.

               
BIOSCRIP, INC.
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)
 
June 30, December 31,
2011 2010
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ - $ -
Receivables, less allowance for doubtful accounts of $19,192 and $16,421
at June 30, 2011 and December 31, 2010, respectively 201,627 193,722
Inventory 40,502 66,509
Prepaid expenses and other current assets   17,848     16,696  
Total current assets   259,977     276,927  
Property and equipment, net 24,962 23,919
Goodwill 324,141 324,141
Intangible assets, net 27,336 30,096
Deferred financing costs 4,606 5,062
Other non-current assets   3,619     3,841  
Total assets $ 644,641   $ 663,986  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 48,240 $ 81,352
Accounts payable 80,010 80,814
Claims payable 5,198 3,037
Amounts due to plan sponsors 23,843 19,781
Accrued interest 5,770 5,766
Accrued expenses and other current liabilities   40,986     36,040  
Total current liabilities   204,047     226,790  
Long-term debt, net of current portion 225,070 225,117
Deferred taxes 8,973 9,140
Other non-current liabilities   3,083     2,838  
Total liabilities   441,173     463,885  
Stockholders' equity
Preferred stock, $.0001 par value; 5,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $.0001 par value; 125,000,000 shares authorized; shares issued:
57,135,228 and 57,042,803, respectively; shares outstanding: 54,497,227 and
54,118,501, respectively 6 6
Treasury stock, shares at cost: 2,651,336 and 2,642,398, respectively (10,489 ) (10,496 )
Additional paid-in capital 370,999 368,254
Accumulated deficit   (157,048 )   (157,663 )
Total stockholders' equity   203,468     200,101  
Total liabilities and stockholders' equity $ 644,641   $ 663,986  
 
BIOSCRIP, INC.
                         
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
 
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
Product revenue $ 396,512 $ 373,920 $ 793,053 $ 692,426
Service revenue   44,894     38,110     87,649     54,672  
Total revenue 441,406 412,030 880,702 747,098
 
Cost of product revenue 341,673 317,467 680,794 603,219
Cost of service revenue   23,513     21,039     46,424     31,438  
Total cost of revenue   365,186     338,506     727,218     634,657  
Gross profit 76,220 73,524 153,484 112,441
% of revenue 17.3 % 17.8 % 17.4 % 15.1 %
Operating expenses
Selling, general and administrative expenses 57,031 54,674 116,123 91,028
Bad debt expense 4,614 3,578 9,661 7,227
Acquisition and integration expenses - 1,059 - 6,099
Restructuring expense 3,891 - 5,190 -
Amortization of intangibles 1,363 695 2,760 871
Legal settlement   4,800     -     4,800     -  
Total operating expense 71,699 60,006 138,534 105,225
% of revenue 16.2 % 14.6 % 15.7 % 14.1 %
Income from operations 4,521 13,518 14,950 7,216
Interest expense, net   7,190     8,224     14,440     11,393  
(Loss) income before income taxes (2,669 ) 5,294 510 (4,177 )
Income tax (benefit) expense   (343 )   2,166     (105 )   (136 )
Net (loss) income $ (2,326 ) $ 3,128   $ 615   $ (4,041 )
 
Basic weighted average shares   54,298     53,310     54,216     47,101  
Diluted weighted average shares   54,298     54,805     54,939     47,101  
 
Basic net (loss) income per share $ (0.04 ) $ 0.06 $ 0.01 $ (0.09 )
Diluted net (loss) income per share $ (0.04 ) $ 0.06 $ 0.01 $ (0.09 )
 
BIOSCRIP, INC.
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
 
Six Months Ended
June 30,
2011 2010
Cash flows from operating activities:
Net income (loss) $ 615 $ (4,041 )
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 4,735 3,808
Amortization of intangibles 2,760 871
Amortization of deferred financing costs 503 736
Change in deferred income tax (167 ) 3,679
Compensation under stock-based compensation plans 2,252 1,629
Loss on disposal of fixed assets 92 49
Changes in assets and liabilities, net of acquired business:
Receivables, net of bad debt expense (7,905 ) (4,721 )
Inventory 26,007 931
Prepaid expenses and other assets (956 ) (7,863 )
Accounts payable (804 ) (6,162 )
Claims payable 2,161 (1,396 )
Amounts due to plan sponsors 4,062 2,153
Accrued interest 4 6,214
Accrued expenses and other liabilities   5,139     (16,645 )
Net cash provided by (used in) operating activities   38,498     (20,758 )
Cash flows from investing activities:
Purchases of property and equipment, net (5,869 ) (4,343 )
Cash consideration paid to CHS, net of cash acquired   -     (92,464 )
Net cash used in investing activities   (5,869 )   (96,807 )
Cash flows from financing activities:
Proceeds from new credit facility, net of fees paid to issuers - 319,000
Borrowings on line of credit 841,200 300,310
Repayments on line of credit (874,301 ) (330,699 )
Repayments of capital leases (59 ) -
Principal payments on CHS long-term debt, paid at closing - (128,952 )
Principal payments on long-term debt - (625 )
Deferred and other financing costs (22 ) (8,488 )
Net proceeds from exercise of employee stock compensation plans 691 1,703
Surrender of stock to satisfy minimum tax withholding   (138 )   (111 )
Net cash (used in) provided by financing activities   (32,629 )   152,138  
Net change in cash and cash equivalents - 34,573
Cash and cash equivalents - beginning of period   -     -  
Cash and cash equivalents - end of period $ -   $ 34,573  
DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 14,020   $ 2,971  
Cash paid during the period for income taxes, net of refunds $ 509   $ 515  
 
BIOSCRIP, INC.
                         
Reconciliation between GAAP and Non-GAAP Measures
(unaudited and in thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2011       2010 2011       2010
Results of Operations:
Revenue:
Infusion/Home Health Services - product revenue $ 89,521 $ 85,582 $ 180,848 $ 128,841
Infusion/Home Health Services - service revenue   19,811     21,093     38,962     23,935  
Total Infusion/Home Health Services revenue 109,332 106,675 219,810 152,776
 
Pharmacy Services - product revenue 306,991 288,338 612,205 563,585
Pharmacy Services - service revenue   25,083     17,017     48,687     30,737  
Total Pharmacy Services revenue 332,074 305,355 660,892 594,322
                   
Total $ 441,406   $ 412,030   $ 880,702   $ 747,098  
 
Adjusted EBITDA by Segment before corporate overhead:
Infusion and Home Health Services $ 10,933 $ 13,902 $ 22,464 $ 16,762
Pharmacy Services   14,057     12,402     27,566     20,389  
Total Segment Adjusted EBITDA 24,990 26,304 50,030 37,151
 
Corporate overhead   (6,922 )   (7,883 )   (15,343 )   (16,045 )
Consolidated Adjusted EBITDA 18,068 18,421 34,687 21,106
 
Interest expense, net (7,190 ) (8,224 ) (14,440 ) (11,393 )
Income tax benefit (expense) 343 (2,166 ) 105 136
Depreciation (2,373 ) (2,324 ) (4,735 ) (3,808 )
Amortization of intangibles (1,363 ) (695 ) (2,760 ) (871 )
Stock-based compensation expense (1,120 ) (825 ) (2,252 ) (1,629 )
Acquisition, integration and severance expenses - (1,059 ) - (6,099 )
Restructuring expense (3,891 ) - (5,190 ) -
Legal settlement (4,800 ) - (4,800 ) -
Bad debt expense related to contract termination   -     -     -     (1,483 )
Net (loss) income $ (2,326 ) $ 3,128   $ 615   $ (4,041 )
 
 

Supplemental Operating Data

Capital Expenditures:
Infusion and Home Health Services $ 1,148 $ 1,180 $ 1,965 $ 1,252
Pharmacy Services 66 1,401 1,449 1,941
Corporate unallocated   1,863     320     2,455     1,150  
Total $ 3,077   $ 2,901   $ 5,869   $ 4,343  
Depreciation Expense:
Infusion and Home Health Services $ 1,157 $ 1,018 $ 2,347 $ 1,254
Pharmacy Services 897 1,042 1,755 2,065
Corporate unallocated   319     264     633     489  
Total $ 2,373   $ 2,324   $ 4,735   $ 3,808  
Total Assets
Infusion and Home Health Services $ 412,577 $ 411,022
Pharmacy Services 203,829 205,468
Corporate unallocated   28,235     102,216  
Total $ 644,641   $ 718,706  
Goodwill
Infusion and Home Health Services $ 299,643 $ 295,350
Pharmacy Services   24,498     24,498  
Total $ 324,141   $ 319,848  
 

Contacts

In-Site Communications, Inc.
Lisa Wilson, 917-543-9932
or
Joele Frank, Wilkinson Brimmer Katcher
Meaghan Repko or Bryan Darrow, 212-355-4449

Contacts

In-Site Communications, Inc.
Lisa Wilson, 917-543-9932
or
Joele Frank, Wilkinson Brimmer Katcher
Meaghan Repko or Bryan Darrow, 212-355-4449