BioScrip Reports Second Quarter 2014 Financial Results

ELMSFORD, N.Y., Aug. 6, 2014 /PRNewswire/ -- BioScrip, Inc. (NASDAQ: BIOS) today announced its financial results for the second quarter of 2014. Second quarter revenue from continuing operations was $247.1 million, and the net loss from continuing operations, net of income taxes, was $18.6 million, or $0.27 per basic and diluted share. Non-GAAP adjusted loss from continuing operations per basic and diluted share was $0.07.

Second Quarter Highlights

  • Total revenue increased by $74.8 million, or 43.4%, as compared to the prior year period. Revenue from the Infusion Services segment increased by $74.6 million, or 47.8%, as compared to the prior year period. Organic revenue growth for the Infusion Services segment remained in the double digits year-over-year.
  • Gross profit from continuing operations was $65.4 million, or 26.4% of revenue, as compared to $57.8 million, or 33.5% of revenue, in the prior year period. The decline in gross profit margin percentage was driven primarily by the decline in the higher margin PBM Services segment.
  • Adjusted EBITDA from continuing operations was $11.0 million, an increase of $0.2 million over the prior year period. Adjusted EBITDA from the Infusion Services segment increased by $2.2 million, or 15.7%, as compared to the prior year, offset by a $3.1 million, or 62.6%, decrease in the PBM Services segment. Adjusted EBITDA also included $4.6 million of income related to the decrease of the fair value of contingent consideration relating to the Company's Infusion acquisitions, offset by a $5.5 million increase in the bad debt and contractual reserve provisions relating to the integration of our acquisitions. Additionally, Adjusted EBITDA included $0.5 million of increased investment in reimbursement resources in the form of overtime, temporary labor and third-party professional fees.
  • As a result of the continued focus on cash collections, BioScrip has increased monthly average accounts receivable collections from $69.3 million in the first quarter of 2014 to $80.9 million in the second quarter of 2014.

"During the second quarter, we made continued progress in executing our strategic priorities to deliver strong organic growth, improve cash flows and strengthen our balance sheet. Our team members worked tirelessly to deliver strong cash collections throughout the quarter, and we expect to continue this momentum into the third quarter," said Rick Smith, President and Chief Executive Officer of BioScrip.

"We are a leading infusion provider and believe our recent accomplishments position us well for continued improvement in operating performance as we head into the second half of the year. We intend to continue to deliver exceptional clinical care to patients, and strengthen our relationships with physicians, hospital systems and managed care companies to deliver enhanced value for our shareholders," concluded Smith.

Results of Operations

Second Quarter 2014 versus Second Quarter 2013
Total revenue for the second quarter of 2014 was $247.1 million, compared to $172.3 million for the same period a year ago, an increase of $74.8 million, or 43.4%. Infusion Services segment revenue was $230.5 million in the second quarter as compared to $156.0 million for the same period in 2013. The 47.8% increase was driven primarily by continued strong double-digit organic growth and the acquisition of CarePoint Partners. PBM Services segment revenue was stable year-over-year at $16.6 million, versus $16.3 million in the second quarter of last year.

Consolidated gross profit for the second quarter of 2014 was $65.4 million, or 26.4% of revenue, compared to $57.8 million, or 33.5% of revenue, for the second quarter of 2013. The increase in gross profit was the result of organic growth and the acquisition of CarePoint Partners, offset by a decline in the PBM Services segment. The decline in gross profit margin percentage was driven primarily by the decline in the higher-margin PBM Services segment.

During the second quarter of 2014, Infusion Services segment Adjusted EBITDA was $16.2 million, compared to $14.0 million in the prior year quarter. The 15.7% improvement in Adjusted EBITDA in the Infusion Services segment resulted primarily from organic revenue growth and the acquisition of CarePoint Partners. Infusion Services segment Adjusted EBITDA also included $4.6 million of income related to the decrease of the fair value of contingent consideration relating to our infusion acquisitions, offset by a $5.5 million increase in the bad debt and contractual reserve provisions relating to the integration of our acquisitions.

PBM Services segment revenue was $16.6 million for the second quarter of 2014, compared to $16.3 million for the prior year period. The increase was related to the growth in traditional PBM volume, offset by declines in prescription discount card volume. PBM Services segment Adjusted EBITDA was $1.8 million, or 11.1% of segment revenue, for the second quarter of 2014 compared to $4.9 million, or 30.1% of segment revenue, in the prior year quarter.

On a consolidated basis, BioScrip reported $11.0 million of Adjusted EBITDA during the second quarter of 2014, or 4.5% of total revenue, compared to $10.8 million, or 6.3% of total revenue, in the same period last year. Adjusted EBITDA included $0.5 million of increased investment in reimbursement resources in the form of overtime, temporary labor and third-party professional fees.

Interest expense in the second quarter of 2014 was $9.1 million compared to $6.5 million in the prior year period.

Income tax expense for continuing operations in the second quarter of 2014 was $3.1 million compared to an income tax expense of $0.1 million in the prior year period.

The loss from continuing operations, net of taxes, for the second quarter of 2014 was $18.6 million, or a loss of $0.27 per basic and diluted share, compared to a net loss of $9.3 million, or $0.14 per basic and diluted share, in the prior year period.

Liquidity and Capital Resources

For the six months ended June 30, 2014, BioScrip used $26.7 million in net cash from continuing operating activities, compared to cash used of $22.8 million during the six months ended June 30, 2013. Sequentially, net cash from continuing operating activities improved by $22.0 million from the first quarter of 2014. As of June 30, 2014, the Company's cash balance was $1.5 million, and it had $418.7 million of outstanding debt and an undrawn $75 million revolving credit facility. Capital expenditures for the second quarter of 2014 were $3.9 million.

Outlook

The Company projects that its 2014 revenue will be at the high end of its guidance range of $940.0 million to $980.0 million and that its 2014 Adjusted EBITDA will be in a range of $55.0 million to $60.0 million. This reflects the Company's current assessment of the business and assumes:

  • Infusion Services segment is expected to continue to deliver double-digit organic revenue growth;
  • Infusion Services segment Adjusted EBITDA margin percentage is expected to sequentially improve;
  • Momentum to collect older receivables impacted by the integration of the acquisitions continues in the second half of the year. These efforts are on-going, but timing may be uncertain; and
  • Continued stability is expected in our PBM Services segment from an adjusted EBITDA perspective, consistent with its performance in the first half of the year.

Conference Call

BioScrip will host a conference call to discuss its second quarter 2014 financial results on August 7, 2014 at 8:30 a.m. Eastern Time. Interested parties may participate in the conference call by dialing 800-679-2940 (US), or 303-223-2690 (International), 5-10 minutes prior to the start of the call. A replay of the conference call will be available for two weeks after the call's completion by dialing 800-633-8284 (US) or 402-977-9140 (International) and entering conference call ID number 21728610. An audio webcast and archive will also be available for 30 days under the "Investor Relations" section of the BioScrip website at www.bioscrip.com.

About BioScrip, Inc.

BioScrip, Inc. is a leading national provider of infusion and home care management solutions. BioScrip partners with physicians, hospital systems, facilities-based providers, healthcare payors, and pharmaceutical manufacturers to provide patients access to post-acute care services. BioScrip operates with a commitment to bring customer-focused pharmacy and related healthcare infusion therapy services into the home or alternate-site setting. By collaborating with the full spectrum of healthcare professionals and the patient, BioScrip provides cost-effective care that is driven by clinical excellence, customer service, and values that promote positive outcomes and an enhanced quality of life for those it serves. BioScrip provides its infusion and home care services from over 80 locations across 29 states.

Forward-Looking Statements – Safe Harbor This press release includes statements that may constitute "forward-looking statements," including projections of certain measures of the Company's results of operations, projections of certain charges and expenses, and other statements regarding the Company's goals, regulatory approvals and strategy. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. In some cases, forward-looking statements can be identified by words such as "may," "should," "could," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "predict," "potential," "continue" or comparable terms. Because such statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. 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 or contribute to such differences include but are not limited to risks associated with: the Company's ability to integrate the CarePoint business and other acquisitions; the Company's ability to grow its Infusion Services segment organically or through acquisitions and obtain financing in connection therewith; its ability to reduce operating costs while sustaining growth; reductions in federal, state and commercial reimbursement for the Company's products and services; increased government regulation related to the health care and insurance industries; as well as the risks described in the Company's periodic filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended December 31, 2013. The Company does not undertake any duty to update these forward-looking statements after the date hereof, even though the Company's situation may change in the future. All of the forward-looking statements herein are qualified by these cautionary statements.

Reconciliation to Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with generally accepted accounting principles (GAAP), the Company is also reporting EBITDA, Adjusted EBITDA, and Adjusted EPS, which are non-GAAP financial measures. EBITDA, Adjusted EBITDA and Adjusted EPS are not measurements of financial performance under GAAP and should not be used in isolation or as a substitute or alternative to net income, operating income or any other performance measure derived in accordance with GAAP, or as a substitute or alternative to cash flow from operating activities or a measure of our liquidity. In addition, the Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EPS may not be comparable to similarly titled non-GAAP financial measures reported by other companies. EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization. Adjusted EBITDA, as defined by the Company, represents net income before net interest expense, loss on extinguishment of debt, income tax expense, depreciation and amortization, stock-based compensation expense, acquisition and integration expenses, restructuring-related expenses and investments in start-up operations. As part of restructuring, the Company may incur significant charges such as the write down of certain long−lived assets, temporary redundant expenses, retraining expenses, potential cash bonus payments and potential accelerated payments or terminated costs for certain of its contractual obligations. Adjusted EPS, as defined by the Company, represents earnings per basic and diluted share, excluding the same elements in calculating Adjusted EBITDA as well as the impact of acquisition-related intangible amortization. Management believes that these non-GAAP financial measures provide useful supplemental information regarding the performance of our business operations and facilitates comparisons to our historical operating results. For a full reconciliation of EBITDA, Adjusted EBITDA and Adjusted EPS to the most comparable GAAP financial measures, please see the attachments to this earnings release.

(Financial Tables Follow)

 

 

Schedule 1

BIOSCRIP, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)






June 30, 2014


December 31, 2013


(unaudited)



ASSETS




Current assets




Cash and cash equivalents

$               1,547


$             1,001

Receivables, less allowance for doubtful accounts of $26,340 and $17,836 at June 30, 2014 and December 31, 2013, respectively

190,479


172,187

Inventory

34,478


34,341

   Prepaid expenses and other current assets

12,289


14,110

   Current assets of discontinued operations

-


15,316

Total current assets

238,793


236,955

Property and equipment, net

39,861


41,182

Goodwill

572,931


571,337

Intangible assets, net

13,501


16,824

Deferred financing costs

17,418


17,184

Other non-current assets

1,318


3,733

Non-current assets of discontinued operations

-


49,643

Total assets

$           883,822


$          936,858

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Current portion of long-term debt

$                  431


$           60,257

Accounts payable

69,747


63,575

Claims payable

4,022


2,547

Amounts due to plan sponsors

5,642


4,826

Accrued interest

6,937


2,173

Accrued expenses and other current liabilities

38,801


34,352

Current liabilities of discontinued operations

-


6,576

Total current liabilities

125,580


174,306

Long-term debt, net of current portion

418,313


375,322

Deferred taxes

16,328


8,954

Other non-current liabilities

8,579


17,540

Other non-current liabilities of discontinued operations

-


6,153

Total liabilities

568,800


582,275

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: 71,177,319 and 70,711,439, respectively; shares outstanding: 68,594,799 and 68,128,919 as of June 30, 2014 and December 31, 2013, respectively

8


7

Treasury stock, 2,582,520 shares at cost

(10,311)


(10,311)

Additional paid-in capital

525,195


519,625

Accumulated deficit

(199,870)


(154,738)

Total stockholders' equity

315,022


354,583

Total liabilities and stockholders' equity

$        883,822


$       936,858





 

 

Schedule 2

BIOSCRIP, INC. AND SUBSIDIARIES


UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 

(in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,


June 30,


2014


2013


2014


2013

Product revenue

$      225,277


$      150,559


$      441,180


$      300,583

Service revenue

21,848


21,764


45,238


52,760

Total revenue

247,125


172,323


486,418


353,343









Cost of product revenue

161,658


102,725


313,398


208,258

Cost of service revenue

20,111


11,823


42,564


31,323

Total cost of revenue

181,769


114,548


355,962


239,581









Gross profit

65,356


57,775


130,456


113,762

% of revenues

26.4%


33.5%


26.8%


32.2%









Selling, general and administrative expenses

57,244


50,295


116,424


97,217

Change in fair value of contingent consideration

(4,646)


-


(6,855)


-

Bad debt expense

8,360


3,461


14,961


6,641

Acquisition and integration expenses

5,333


3,512


11,832


8,135

Restructuring and other expenses

3,858


1,439


8,450


2,679

Amortization of intangibles

1,620


1,710


3,323


3,792

Loss from continuing operations

(6,413)


(2,642)


(17,679)


(4,702)

Interest expense, net

9,135


6,508


19,634


12,986

Loss from continuing operations,  before income taxes

(15,548)


(9,150)


(37,313)


(17,688)

Income tax (benefit)

3,063


146


6,554


(29)

Loss from continuing operations, net of income taxes

(18,611)


(9,296)


(43,867)


(17,659)

Income (loss) from discontinued operations, net of income taxes

(1,207)


416


(1,265)


651

Net loss

$    (19,818)


$       (8,880)


$    (45,132)


$    (17,008)









Loss per common share:








Loss from continuing operations, basic and diluted

$          (0.27)


$          (0.14)


$          (0.64)


$          (0.29)

Income (loss) from discontinued operations, basic and diluted

(0.02)


-


(0.02)


0.01

Net loss, basic and diluted

$         (0.29)


$         (0.14)


$         (0.66)


$         (0.28)









Weighted average shares outstanding, basic and diluted

68,468


65,025


68,354


61,058

 

 

Schedule 3

BIOSCRIP, INC AND SUBSIDIARIES


UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



Six Months Ended June 30,


2014


2013

Cash flows from operating activities:




Net loss

$             (45,132)


$             (17,008)

Less: Income (loss) from discontinued operations, net of income taxes

(1,265)


651

Loss from continuing operations, net of income taxes

(43,867)


(17,659)

Adjustments to reconcile (loss) from continuing operations, net of income taxes to net cash provided by (used in) operating activities:




Depreciation

7,794


4,945

Amortization of intangibles

3,323


3,792

Amortization of deferred financing costs and debt discount

2,745


722

Change in fair value of contingent consideration

(6,855)


-

Change in deferred income tax

6,358


1,018

Compensation under stock-based compensation plans

4,884


5,833

Loss on disposal of fixed assets

-


(16)

Equity in net loss of unconsolidated affiliate

-


661

Changes in assets and liabilities, net of acquired business:




Receivables, net of bad debt expense

(19,019)


(15,890)

Inventory

(58)


10,097

Prepaid expenses and other assets

3,745


1,281

Accounts payable

6,105


6,320

Claims payable

1,475


(3,564)

Amounts due to plan sponsors

816


(7,836)

Accrued interest

4,764


(38)

Accrued expenses and other liabilities

1,116


(12,468)

Net cash provided by (used in) operating activities from continuing operations

(26,674)


(22,802)

Net cash provided by (used in) operating activities from discontinued operations

(4,304)


745

Net cash provided by (used in) operating activities

(30,978)


(22,057)

Cash flows from investing activities:




Purchases of property and equipment, net

(6,925)


(10,977)

Proceeds from sales of property and equipment

-


234

Cash consideration paid for acquisitions, net of cash acquired

(454)


(72,921)

Net cash proceeds from sale of unconsolidated affiliate

-


8,509

Cash advances to unconsolidated affiliate

-


(2,348)

Net cash provided by (used in) investing activities from continuing operations

(7,379)


(77,503)

Net cash provided by (used in) investing activities from discontinued operations

57,688


(37)

Net cash provided by (used in) investing activities

50,309


(77,540)

Cash flows from financing activities:




Proceeds from public stock offering

-


118,570

Proceeds from new senior notes due 2021, net of fees paid to lenders

193,868


-

Deferred and other financing costs

(1,161)


-

Borrowings on line of credit

85,400


351,859

Repayments on line of credit

(125,403)


(351,859)

Principal payments on long-term debt

(172,243)


-

Repayments of capital leases

(151)


(884)

Net proceeds from exercise of common stock purchase warrants

-


399

Net proceeds from exercise of employee stock compensation plans

905


1,052

Net cash provided by (used in) financing activities from continuing operations

(18,785)


119,137

Net change in cash and cash equivalents

546


19,540

Cash and cash equivalents - beginning of period

1,001


62,101

Cash and cash equivalents - end of period

$               1,547


$             81,641

DISCLOSURE OF CASH FLOW INFORMATION:




Cash paid during the period for interest

$               12,232


$               12,327

Cash paid during the period for income taxes

$                    349


$                    235

 

 

Schedule 4

BIOSCRIP, INC


Reconciliation between GAAP and Non-GAAP Measures

(in thousands)










Three Months Ended


Six Months Ended


June 30,


June 30,


2014


2013


2014


2013

Results of Operations:








Revenue:








Infusion Services - product revenue

$         225,277


$        150,559


$         441,180


$           300,583

Infusion Services - service revenue

5,271


5,424


10,437


9,668

Total Infusion Services revenue

230,548


155,983


451,617


310,251

PBM Services - service revenue

16,577


16,340


34,801


43,092

Total revenue

$      247,125


$      172,323


$      486,418


$        353,343









Adjusted EBITDA by Segment before corporate overhead:








Infusion Services

$           16,194


$          13,995


$           31,155


$             25,992

PBM Services

1,837


4,916


3,512


11,111

Total Segment Adjusted EBITDA

18,031


18,911


34,667


37,103









Corporate overhead

(7,016)


(8,132)


(14,492)


(16,048)









Consolidated Adjusted EBITDA

11,015


10,779


20,175


21,055









Interest expense, net

(9,135)


(6,508)


(19,634)


(12,986)

Income tax (expense) benefit

(3,063)


(146)


(6,554)


29

Depreciation

(3,958)


(2,527)


(7,794)


(4,945)

Amortization of intangibles

(1,620)


(1,710)


(3,323)


(3,792)

Stock-based compensation expense

(1,998)


(3,860)


(4,884)


(5,833)

Acquisition and integration expenses

(5,333)


(3,512)


(11,832)


(8,135)

Restructuring and other expenses and investments (1)

(4,519)


(1,812)


(10,021)


(3,052)

Loss from continuing operations, net of income taxes

$       (18,611)


$         (9,296)


$       (43,867)


$         (17,659)

















Supplemental Operating Data





June 30,


Deecember 31,






2014


2013

Total Assets:








Infusion Services





$         806,127


$           793,475

PBM Services





27,203


25,239

Corporate unallocated





50,485


53,169

Assets from discontinued operations





-


64,959

   Assets associated with discontinued operations, not sold





7


16

Total Assets





$      883,822


$        936,858

















(1) Restructuring and other expenses and investments include costs associated with restructuring such as employee severance, third party consulting costs and facility closure costs; training and transitional costs as well as redundant salaries; and, losses in the short-term investment of the unconsolidated affiliate and investment in start-up branch locations.

 

 

Schedule 5

BIOSCRIP, INC


Reconciliation between GAAP and Non-GAAP Earnings Per Share

(in thousands)
























Three Months Ended 


Six Months Ended 




June 30,


June 30,




2014 1,3


2013 2,3


2014 1,3


2013 2,3

Net income from continuing operations, net of income taxes

$      (18,611)


$        (9,296)


$      (43,867)


$      (17,659)


Non-GAAP adjustments, net of income tax:










Restructuring and other expenses and investments 3

4,519


1,753


10,021


2,966



Acquisition and integration expenses

5,333


3,399


11,832


7,906



Amortization of intangibles

1,620


1,655


3,323


3,685



Compensation under stock-based compensation plans

1,998


3,735


4,884


5,669

Non-GAAP net income from continuing operations

$        (5,141)


$          1,246


$      (13,807)


$          2,567





















Earnings per share from continuing operations, basic and diluted

$          (0.27)


$          (0.14)


$          (0.64)


$          (0.29)


Non-GAAP adjustments, net of income tax:










Restructuring and other expenses and investments3

0.07


0.03


0.15


0.05



Acquisition and integration expenses

0.08


0.05


0.17


0.13



Amortization of intangibles

0.02


0.03


0.05


0.06



Compensation under stock-based compensation plans

0.03


0.06


0.07


0.10

Non-GAAP earnings per share from continuing operations, basic and diluted

$          (0.07)


$            0.03


$          (0.20)


$            0.05











Weighted average shares outstanding, basic and diluted

68,468


65,025


68,354


61,058































1

For the three months and six months ended June 30, 2014, non-GAAP adjustments to net loss from continuing operations are net of tax, calculated using an annual effective tax rate method.  However, the Company has recorded a full valuation allowance on its deferred tax assets and, as a result, no tax benefit is being recognized for the non-GAAP net loss from continuing operations.  The tax expense in continuing operations relates to indefinite-lived intangible assets and an insignificant amount of state tax expense which would not be impacted by the non-GAAP adjustments above.  Accordingly, no tax expense has been allocated to the non-GAAP adjustments.

2

For the three months and six months ended June 30, 2013, non-GAAP net income from continuing operations adjustments are net of tax, calculated using an annual effective tax rate method.  The tax expense netted against restructuring and other expenses and investments, acquisition and integration expenses, amortization of intangibles, and stock-based compensation expense was $59, $113, $55 and $125, respectively, for the three months ended June 30, 2013 and $86, $229, $107 and $164, respectively, for the six months ended June 30, 2013.  The tax effect of these adjustments on a per share basis is not meaningful.

3

Restructuring and other expenses and investments include costs associated with restructuring such as employee severance, third party consulting costs and facility closure costs; training and transitional costs as well as redundant salaries; losses in the short-term investment in the unconsolidated affiliate; and investments in start-up branch locations.

 

Contact:
Hai Tran, Chief Financial Officer
BioScrip
952-979-3768

SOURCE BioScrip, Inc.



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