UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
þ☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172023
OR
o☐PERIODICTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to             

Commission file number: 001-11993
optioncarehealthrgba06.jpg
BioScrip, Inc.OPTION CARE HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware05-0489664
Delaware05-0489664
(State or other jurisdiction of incorporation)incorporation or organization)(I.R.S. Employer Identification No.)
1600 Broadway,3000 Lakeside Dr. Suite 700, Denver, Colorado300N, Bannockburn, IL8020260015
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code:
720-697-5200312-940-2443
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par value per shareOPCHNasdaq Global Select Market

Securities registered pursuant to sectionSection 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o☑     No þ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o☐     No þ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ☑     No o☐

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ☑ No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o☑     Accelerated filer þ☐     Non-accelerated filer o☐      Smaller reporting company o ☐ Emerging growth company o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐     No ☑
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant as of June 30, 2017,2023, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $346,641,944$5,843,997,419 based on the closing price of the registrant’s Common Stock on the Nasdaq Global Select Market on such date.

On March 21, 2018,As of February 19, 2024, there were 127,697,318173,498,090 shares of the registrant’s Common Stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for its 20182024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “SEC”) within 120 days after the close of the registrant’s fiscal year are incorporated by reference into Part III of this Annual Report.Report on Form 10-K.



TABLE OF CONTENTS
Page
Number
PART I
Page
Number
PART I
54
1513
2927
2927
2928
28
3028
PART II
PART II
3129
3231
3431
4942
5043
8374
8374
8876
76
PART III
8876
8876
8876
8876
8876
PART IV
PART IV
8977

8979
9080
SCHEDULE II
Valuation Allowance and Qualifying Accounts
92
EXHIBIT INDEX
93

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Table of Contents

Forward-Looking Statements
This Annual Report on Form 10-K (“Annual Report”) contains statements that are not purely historical and which may be considered “forward-looking statements”forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, future plans and strategies, anticipated events or trends concerning matters that are not historical facts or that necessarily depend upon future events. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential”“potential,” “intend,” and similar expressions. Specifically, thisThis Annual Report contains, among others, forward-looking statements about:

our ability to make principalbased upon current expectations that involve numerous risks and interest payments on our debt and unsecured notes and satisfy the other covenants containeduncertainties, including those described in our Notes Facilities (as defined below);
our high level of indebtedness;
our expectations regarding financial condition or results of operations in future periods;
our future sources of, and needs for, liquidity and capital resources;
our expectations regarding economic and business conditions;
our expectations regarding legislative and regulatory changes impacting the level of reimbursement received from the Medicare and state Medicaid programs;
periodic reviews and billing audits of payments from governmental reimbursement programs and private payors;
our expectations regarding the size and growth of the market for our products and services;
our business strategies and our ability to grow our business;
the implementation or interpretation of current or future regulations and legislation, particularly governmental oversight of our business;
our expectations regarding the outcome of litigation;
our ability to maintain contracts and relationships with our customers;
our ability to avoid delays in payment from our customers;
sales and marketing efforts;
status of material contractual arrangements, including the negotiation or re-negotiation of such arrangements;
future capital expenditures;
our ability to hire and retain key employees;
our ability to execute our strategy;
our ability to successfully integrate businesses we may acquire.

Item 1A. “Risk Factors”.
Investors are cautioned that any such forward-looking statements are not guarantees of future performance, involve risks and uncertainties and that actual results may differ materially from those possible results discussed in the forward-looking statements as a result of various factors. Important factors that could cause such differences include, among other things:

risks associated with increased and complex government regulation related to the health care and insurance industries in general, and more specifically, home infusion providers;
our ability to comply with debt covenants in our Notes Facilities and unsecured notes indenture;
risks associated with our issuance of Preferred Stock and PIPE Warrants to the PIPE Investors and the 2017 Warrants (as defined below);
risks associated with the retention or transition of executive officers and key employees;
our expectation regarding the interim and ultimate outcome of commercial disputes, including litigation;
unfavorable economic and market conditions;
disruptions in supplies and services resulting from force majeure events such as war, strike, riot, crime, or “acts of God” such as hurricanes, flooding, blizzards or earthquakes;
delays or suspensions of Federal and state payments for services provided;
efforts to reduce healthcare costs and alter health care financing, which may involve reductions in reimbursement for our products and services;
•
effects of the 21st Century Act (the “Cures Act”);
the effect of health reform efforts including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together the “Affordable Care Act”), and value-based payment initiatives, including accountable care organizations;
existence of complex laws and regulations relating to our business;
availability of financing sources;
declines and other changes in revenue due to the expiration of short-term contracts;
network lockouts and decisions to in-source by health insurers including lockouts with respect to acquired entities;
unforeseen contract terminations;

difficulties in the implementation and ongoing evolution of our operating systems;
difficulties with the implementation of our growth strategy and integrating businesses we have acquired or will acquire;
increases or other changes in our acquisition cost for our products;
increased competition from competitors having greater financial, technical, reimbursement, marketing and other resources could have the effect of reducing prices and margins;
disruptions in our relationship with our primary supplier of prescription products;
the level of our indebtedness and its effect on our ability to execute our business strategy and increased risk of default under our debt obligations;
introduction of new drugs, which can cause prescribers to adopt therapies for patients that are less profitable to us;
changes in industry pricing benchmarks, which could have the effect of reducing prices and margins; and
other risks and uncertainties described from time to time in our filings with the SEC.

We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. You shouldDo not place undue reliance on such forward-looking statements as they speak only as of the date they are made. Except as required by law, we assumeOption Care Health, Inc. assumes no obligation to publicly update or revise any forward-looking statement even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

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Table of Contents


PART I
Item 1.Business

Item 1.    Business
Overview

BioScrip,Option Care Health, Inc. (“BioScrip”Option Care Health”, “we”, “us”, “our”, or the “Company”) is the largest independent provider of home and alternate site infusion services through its national network of 177 locations in 43 states. Option Care Health draws on over 40 years of clinical care experience to offer patient-centered, cost-effective infusion therapy. Option Care Health’s infusion services include the clinical management of infusion therapy, nursing support and care coordination. Option Care Health’s multidisciplinary team of more than 4,500 clinicians, including pharmacists, pharmacy technicians, nurses and dietitians, are able to provide infusion service coverage for nearly all patients across the United States (“U.S.”) needing treatment for complex and chronic medical conditions.
On April 7, 2015, HC Group Holdings II, Inc. (“HC II”) and its sole shareholder, HC Group Holdings I, LLC. (“HC I”), collectively acquired Walgreens Infusion Services, Inc. and its subsidiaries from Walgreen Co., and the business was rebranded as Option Care, Inc. (“Option Care”).
On March 14, 2019, HC I and HC II entered into a definitive agreement to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”) (the “Merger”), a national provider of infusion solutions. We workand home care management solutions, which was completed on August 6, 2019 (the “Merger Date”). Following the close of the Merger, BioScrip was rebranded as Option Care Health, Inc.
Option Care Health contracts with managed care organizations, third-party payers, hospitals, physicians hospital systems, skilled nursing facilities, and healthcare payorsother referral sources to provide pharmaceuticals and complex compounded solutions to patients access to post-acute care services. We operate with a commitment to bring customer-focused healthcare infusion therapy services intofor intravenous delivery in the homepatients’ homes or alternate-site setting. By collaborating with the full spectrum of healthcare professionals and the patient, we aim to provide 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 whom we serve.

other nonhospital settings. Our platform provides nationwide service capabilities and the ability to deliver clinical management services that offer patients a high-touch, community-based and home-based care environment. Our core services are provided in coordination with, and under the direction of, the patient’s physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to each patient’s specific needs. Whether in theWe provide home physician office, ambulatory infusion center, skilled nursing facility or other alternate sites of care, we provide products, services and condition-specific clinical management programs tailored to improve the care of individuals with complex health conditions such as gastrointestinal abnormalities, infectious diseases, cancer, multiple sclerosis, organ and blood cell transplants, bleeding disorders, immune deficiencies and heart failure.

We were incorporated in Delaware in 1996 as MIM Corporation, with our primary business and operations consisting of pharmacy benefit management services at the time.

Strategic Assessmentanti-infectives, nutrition support, chronic inflammatory disorders, neurological disorders, immunoglobulin therapy, and Transactions

We continually perform strategic assessments of our business and operations. The assessments examine our market strengths and opportunities and compare our position to that of our competitors. As a result of these ongoing assessments, we have focused our growth on investments in the Infusion Services business, which remains the primary driver of our growth strategy. Recent transactions which represent execution of the strategic assessments include:

On August 27, 2015, we completed the sale of substantially all of our pharmacy benefit management services segment (the “PBM Business”) pursuant to an Asset Purchase Agreement dated as of August 9, 2015 (the “PBM Asset Purchase Agreement”), by and among the Company, BioScrip PBM Services, LLC and ProCare Pharmacy Benefit Manager Inc.

On September 9, 2016, we acquired substantially all of the assets and assumed certain liabilities of HS Infusion Holdings, Inc. and its subsidiaries pursuant to an Asset Purchase Agreement dated June 11, 2016, by and among Home Solutions, a Delaware corporation, certain subsidiaries of Home Solutions, the Company and HomeChoice Partners, Inc., a Delaware corporation. Home Solutions, a privately held company, provided home infusion and home nursing products and services to patients suffering fromother therapies for chronic and acute medical conditions. The Company operates in one segment, infusion services.

The Company’s operating model enables it to provide favorable outcomes to its stakeholders as follows:
Business Outlook

As a result•Patients. The Company improves patients’ quality of the strategic assessments discussed above, we have focused on expanding revenue opportunities and reducing corporate overhead as well as strategically redeploying our resources. Restructuring, acquisition, integration and other expenses include non-operating costs associated with restructuring, acquisition and integration initiatives such as employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs relatedlife by allowing them to contract terminations and closed branches/offices. The redeployment of resources following the strategic transactions has better positioned us for growth in our strategic areas of operation; however, the impact of these actions on our future consolidated financial statements cannot be estimated.

Our Strengths

Our company has a number of competitive strengths, including:


Local Competitive Market Position within Our National Platform and Infrastructure

As of December 31, 2017, we had a total of 66 service locations in 27 states. Our model combines local presence with comprehensive clinical programs for multiple therapies and specific delivery technologies (infusible and injectable). We have the capabilities and payor relationships to dispense prescriptions to all 50 states. We have relationships with approximately 1,000 payors, including Managed Care Organizations (“MCOs”), government programs such as Medicare and Medicaid and commercial insurers (“Third Party Payors”). We believe payors generally favor fully integrated vendors that can provide high-touch pharmacy solutions to their patients. We believe we arereceive infusion therapy at home or at one of its ambulatory infusion suites. In addition, the Company helps manage patients’ conditions through counseling and education regarding their treatment and by providing ongoing monitoring to encourage patient compliance with the prescribed therapy. The Company also provides services to help patients receive reimbursement benefits.
•Payers. The Company provides payers with a limited number of pharmacy providers that can offer a truly national, integrated and comprehensive approach to managingmeeting their pharmacy service needs and providing a cost-effective solution. The Company’s provision of infusion pharmacy services in the patient’s chronichome or acute conditions.at one of its local ambulatory infusion suites offers a lower cost alternative to providing these therapies in a hospital setting. The Company also provides payers with utilization and outcome data to evaluate therapy effectiveness.

•Providers. The Company provides providers with timely patient clinical support by providing care management related to their patients’ pharmacy needs and improving compliance with therapy protocols. The Company eliminates the need for providers to carry inventories of high-cost prescriptions by distributing the medications directly to patients’ homes.
Diversified•Pharmaceutical Manufacturers. The Company collaborates with pharmaceutical manufacturers to provide a broad distribution channel for their existing pharmaceuticals and Favorable Payor Basetheir new product launches. The Company implements patient monitoring programs that encourage compliance with the prescribed therapy. The Company also provides valuable clinical information in the form of outcomes and compliance data to manufacturers to aid in their evaluation of the efficacy of their products.

•Health Systems. The Company partners with health systems across the country to provide seamless transitional care within an effective post-acute care network to manage patients across the continuum of care. The Company assists partnered health systems in monitoring key metrics that tie back to what most payers monitor in their value based contracts.
We provide prescription drugs, infusion therapy
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Table of Contents
Quality
Quality is at the core of the Company’s mission as it strives to deliver quality healthcare, leading to favorable outcomes and clinical managementmore cost-effective care. The Company offers comprehensive services forthat align with specific healthcare provider needs and has demonstrated success in improving outcomes across a broad range of commercialtherapies through improved clinical-reported patient adherence rates and governmental payors. Approximately 84%decreased rates of our payor baseunplanned hospital re-admissions.
The Company’s commitment to continuous quality improvement to provide optimal outcomes for its patients is comprisedevidenced by its national accreditations, including accreditations from Accreditation Commission for Health Care (“ACHC”), Pharmacy Compounding Accreditation Board (“PCAB”), American Society of commercial payorsHealth-System Pharmacists (“ASHP”) and Utilization Review Accreditation Commission (“URAC”).
ACHC accreditation is awarded to healthcare organizations that operate at a national, regional or local level. Four national commercial payors accounted for 18%, 9%, 7%,meet regulatory requirements and 6% of consolidated revenue duringaccreditation standards, and PCAB accreditation offers the year ended December 31, 2017. No other commercial payor accounted formost comprehensive compliance solution in the industry based on more than 5%40 sterile compounding standards in the U.S. Pharmacopeia Pharmaceutical Compounding - Sterile Preparations Standards (“USP 797”).
5
Table of consolidated revenue during the year ended December 31, 2017. Government payors, including Medicare, state Medicaid and other government payors, accounted for 16% of consolidated revenue during the year ended December 31, 2017. For the year ended December 31, 2017, Medicare accounted for 7% of our consolidated revenue. No individual state Medicaid program accounted for more than 5% of consolidated revenue during the year ended December 31, 2017.Contents

Services
The costs savings realized by administeringCompany is the largest independent provider of home and alternate site infusion therapies in the home versus hospitals, skilled nursing facilities or other post-acute care facilities positions our business to benefit from healthcare reform initiatives that focus on cost savings. Medicare currently offers limited reimbursement for home infusion therapy products and services. Although the Cures Act significantly reduced the level of reimbursement for certain of the therapies that we provide, we believe that home infusion and other low-cost in-home therapeutic alternatives will be impacted favorably by health reform initiatives focused on cost-reduction. Significant health plan cost savings per infusion can be achieved when therapy is provided at an alternative treatment site compared to other patient settings.

Effective Care Management Clinical Programs that are Designed to Produce Positive Clinical Outcomes and Reduce Readmissions

Our diversified and comprehensive clinical programs, which span numerous therapeutic areas, are designed to improve patient outcomes.Our home infusion business provides traditional infusion therapies for acute conditions with accompanying clinical management and home care. Our infusion product offerings andThe Company’s services are also designed to treat patients with chronic infusion needs. Chronic conditions require long-term treatment, ongoing caregiver and patient counseling and education, and ongoing monitoring and communication with physicians to encourage patients to follow therapies prescribed by their physicians.

Our Centers of Excellence focus on interdisciplinary teams to provide clinical excellence with outstanding personal service. Externally qualified by a panel of leading industry experts, these centers employ evidence-based standards of care, policies and procedures built on industry-recognized best practices. They are led by specialists with advanced certifications and training who are dedicated to developing, improving and sustaining clinical services to achieve optimal patient outcomes and exceed the expectations of patients and referral sources.

Our clinical management programs in multiple disease-state therapy provide us opportunities to cross-sell services. We believe we have earned a positive reputation among patients, physicians, payors and pharmaceutical manufacturers by providing quality service and favorable clinical outcomes. We believe our platform provides the necessary programs and services for better and more efficient clinical outcomes for our patients.

Segment Information

Following the sale of our PBM Business on August 27, 2015, Infusion Services is the only remaining operating segment. On an ongoing basis we will no longer report operating segments unless a change in the business necessitates the need to do so.

Products and Services

We are one of the largest providers of home infusion services in the United States. Home infusion involves the preparation, delivery, administration and clinical monitoring of pharmaceutical treatments that are administered to a patient via intravenous (into the vein), subcutaneous (into the fatty layer under the skin), intramuscular (into the muscle), intra-spinal (into the membranes

around the spinal cord) and enteral (into the gastrointestinal tract) methods. These methods are employed when a physician determines that the best outcome can be achieved through utilization of one or more of the therapies provided through the routes of administration described above.

Our home infusion services primarily involve the intravenous administration of medications to treat a wide range of acute and chronic conditions, such as infections, nutritional deficiencies, various immunologic and neurologic disorders, cancer, pain and palliative care. Our services are usuallymost typically provided in the patient’s home, but may also be provided at outpatient clinics, skilled nursing facilities, physicianphysicians’ offices or at one of our ambulatory infusion centers. We receive payment for oursuites. The Company provides a broad therapy portfolio through its network of 93 full-service pharmacies and 84 stand-alone ambulatory infusion suites. The Company’s home infusion services include medication and medications, pursuantsupplies for administration and use at home or within one of its ambulatory infusion suites, consultation and education regarding the patient’s condition and the prescribed medication nursing support, clinical monitoring and assistance in monitoring potential side effects, and assistance in obtaining reimbursement. The Company administers a wide variety of therapies and services, including the following:
•Anti-Infectives Infusion. The Company provides comprehensive home infusion services to provider agreements with government sources,combat serious infections in patients of all ages. The Company’s anti-infective therapy and services help avoid hospitalizations for many infections that can be safely treated at home.
•Nutrition Support. The Company delivers comprehensive nutrition support across pediatric, adult, and geriatric patients. The Company’s expert team provides home parenteral nutrition and enteral nutrition support for numerous acute and chronic conditions negatively affecting nutritional status, such as Medicarestroke, cancer, and Medicaid programs, MCOsgastrointestinal diseases.
•Immunoglobulin Infusion. The Company offers expertise, access, and Third Party Payors.support in immunoglobulin (“IG”) infusion therapy designed to treat immune deficiencies. Immune deficiencies are disorders that reduce the patient’s ability to identify and destroy substances that do not belong in the human body and are characterized by reduced levels of antibodies. Intravenous IG infusions are concentrated antibodies that have been purified from large numbers of human blood donors.

•Chronic Inflammatory Disorders. The Company treats chronic inflammatory disorders, which include Crohn’s disease, plaque psoriasis, psoriatic arthritis, rheumatoid arthritis, ulcerative colitis, and other chronic inflammatory disorders.
We provide•Neurological Disorders. The Company provides an array of treatments to manage the progression of neurological disorders such as Duchenne Muscular Dystrophy, Multiple Sclerosis, and other neurological disorders.
•Bleeding Disorders Infusion. As a wide arrayprovider of home infusion productstherapy for hemophilia and services to meetvon Willebrand disease, the diverse needs and preferences of physicians, patients and payors. Diseases commonly requiring infusion therapy include infections that are unresponsive to oral antibiotics, cancer and cancer-related pain, dehydration and gastrointestinal diseases or disorders that require IV fluids, parenteral or enteral nutrition. Other conditions that may be treatedCompany streamlines the administrative burdens associated with infusion therapies include chronic diseases such asfor bleeding disorders. The Company works with medical specialists across the country to offer access to all approved factor products, a full range of therapies, and dedicated support services.
•Women’s Health. The Company offers therapies that women need to survive and thrive through high-risk pregnancies. Personalized programs in prematurity, nausea and vomiting hyperemesis, diabetes in pregnancy, and hypertension help meet the needs of each mother.
•Heart Failure. The Company administers home infusion services to treat heart failure, Crohn’s disease, hemophilia, immune deficiencies, multiple sclerosis, rheumatoid arthritis, growth disorderseither in anticipation of cardiac transplant or to provide palliation of heart failure symptoms.
•Other. The Company offers a range of other infusion therapies to treat a variety of conditions, including pain management, chemotherapy and genetic enzyme deficiencies, suchrespiratory medication.
The Company also provides nursing services to support the above therapies, comprised of its nursing team of approximately 2,800 employees, and through its network of sub-contracted nursing agencies.
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Table of Contents
Sales and Marketing
The Company’s sales and marketing efforts focus on three primary objectives: (1) building new relationships and expanding existing contracts with managed care organizations; (2) establishing, maintaining and strengthening relationships with local and regional patient referral sources; and (3) maintaining existing and developing new relationships with pharmaceutical manufacturers to gain distribution access as Gaucher’s or Pompe’s disease. they release new products.
The therapiesCompany’s sales structure is focused on maintaining and products most commonly provided are listed below:

Therapy TypeDescription
Parenteral Nutrition (PN)Provide intravenous nutrition customized to the nutritional needs of the patient.  PN is used in patients that cannot meet their nutritional needs via other means due to disease process or as a complication of a disease process, surgical procedure or congenital anomaly.  PN may be used short term or chronically.
Enteral Nutrition (EN)Provide nutrition directly to the stomach or intestine in patients who cannot chew or swallow nutrients in the usual manner.  EN may be delivered via a naso-gastric tube or a tube placed directly into the stomach or intestine.  EN may be used short term or chronically.
Antimicrobial Therapy (AT)Provide intravenous antimicrobial medications used in the treatment of patients with various infectious processes such as: wound infections, pneumonia, osteomyelitis, cystic fibrosis, Lyme disease and cellulitis.  AT may also be used in patients with disease processes or therapies that may lead to infections when oral antimicrobials are not effective.
ChemotherapyProvide injectable and/or infused medications in the home or the prescriber’s office for the treatment of cancer.  Adjuvant medications may also be provided to minimize the side effects associated with chemotherapy.
Immune Globulin (IG) TherapyProvide immune globulins intravenously or subcutaneously on an as-needed basis in patients with immune deficiencies or auto-immune diseases.  This therapy may be chronic based on the etiology of the immune deficiency.
Pain ManagementProvide analgesic medications intravenously, subcutaneously or epidurally.  This therapy is generally administered as a continuous infusion via an internal or external infusion pump to treat severe pain associated with diseases such as COPD, cancer and severe injury.
Blood Factor TherapiesProvide medications to patients with one of several inherited bleeding disorders in which a patient does not manufacture the clotting factors necessary or use the clotting factors their liver makes appropriately in order to halt an external or internal bleed in response to a physical injury or trauma.
Inotropes TherapyProvide intravenous inotropes in the home for the treatment of heart failure, either in anticipation of cardiac transplant or to provide palliation of heart failure symptoms. Inotropes increase the strength of weak heart muscles to pump blood. The therapy is only started in late phase heart failure when alternative therapies proved inadequate.
Respiratory Therapy/Home Medical EquipmentProvide oxygen systems, continuous or bi-level positive airway pressure devices, nebulizers, home ventilators, respiratory devices, respiratory medications and other medical equipment.

Patients generally are referredexpanding its relationships with drug manufacturers to usestablish its position as a participating provider when they release new products. In addition, the Company’s sales structure allows it to leverage its national managed care relationships to provide sales and contract pull-through by the Company’s local field-based sales personnel. This cross-utility enables the Company to market its services to numerous sources of patient referrals, including physicians, hospital discharge planners, MCOshospital personnel, Health Maintenance Organizations (“HMOs”) and Preferred Provider Organizations (“PPOs”).
Competition
The Company competes in the large and highly fragmented home and alternative site infusion market for contracts with managed care organizations and other referral sources. Our medications are compoundedthird-party payers to receive referrals from physicians, case managers and dispensed under the supervision of a registered pharmacist in a state licensed pharmacy that is

accredited by an independent accrediting organization. We compound pursuant to a patient specific prescription and do so consistently with U.S. Pharmacopeial Convention (“USP”) 797 standards. A national accrediting organization surveys our pharmacies for compliance with the USP 797 standards for sterile drug compounding pharmacies and has confirmed that we operate consistently with those standards. Therapies are typically administeredhospital discharge planners. Competition in the patient’s home by a registered nurse or trained caregiver. Dependinginfusion market is based on quality of care, clinical outcomes, pricing and cost of service, reputation, and reliability of service. The Company’s competitors within the preferenceshome infusion market include Optum Infusion Pharmacy (a unit of the patient or the payor, theseUnited Healthcare Insurance Company), Coram CVS/specialty infusion services may also be provided at one(a division of ourCVS Health), Amerita Specialty Pharmacy (a division of BrightSpring Health), KabaFusion, Soleo Health and many smaller regional and local home infusion companies, ambulatory infusion centers, a physician's office or another alternate sitespecialty pharmacies including Accredo, CVS Caremark, Optum Rx, and Orsini. The Company believes that its reputation for providing quality services, the strength of administration.

We currently have relationships with a large number of MCOsits national presence and other Third Party Payorsits ability to provide home infusion services. These relationships areeffectively market its services at a national, regional orand local level. A key element of our business strategy is to leverage our relationships, geographic coverage, clinical expertiselevels places it in a strong position against existing and reputation in order to gain contracts with payors. Our infusion service contracts typically provide for us to receive a fee for preparing and delivering medications and related equipment to patients in their homes or in Ambulatory Infusion Sites (“AIS”). Pricing for pharmaceutical products is typically negotiated in advance on the basis of Average Wholesale Price (“AWP”) minus some percentage of contractual discount, or Average Sales Price (“ASP”) plus some percentage. In addition, we typically receive a per diem payment for additional services and supplies provided to patients in connection with infusion services. An additional payment is made for nursing services when services are provided.

Sales and Marketing

We have over 264 sales and marketing representatives and approximately 1,000 payor relationships including MCOs, Medicare Part D pharmacy networks, other government programs such as Medicare and Medicaid and other Third Party Payors. Our sales and marketing efforts are focused on payors, healthcare systems and physician prescribers and are driven by dedicated managed care and physician sales teams as well as home health care consultants. Our sales and marketing strategies include the development of strong relationships with key referral sources, such as physicians, hospital discharge planners, case managers, long-term care facilities and other healthcare professionals, primarily through regular contact with the referral sources and by fulfilling the care and service expectations of our many customers. Contracts with Third Party Payors, including MCOs, are an integral component for sales success.

potential competitors.
Intellectual Property

We own and useThe Company owns a variety of trademarks, trade nameslicenses, and service marks, including without limitationbut not limited to: “Option Care Health”, “Option Care”, “Critical Care Systems”, “Clinical Specialties”, “BioScrip”, “BioScrip Infusion Services”, “BioScrip Nursing Services”, “BioScrip Pharmacy Services”, “CarePoint Partners”, “HomeChoice Partners”, “InfuScience”, “InfusionCare”, “Infusion Partners”, “Infusion Solutions”, “New England Home Therapies”, “Option Health”, “Professional Home Care Services”, “Wilcox Home Infusion”, and “Home Solutions”, eachas well as several others.
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Table of which has either been registered at the state or federal level or is being used pursuant to common law rights. We are recognized in local markets by several of these trade names, but we do not consider the marks material to our business.Contents

Competition

Suppliers
The home infusionCompany purchases pharmaceuticals and medical supplies directly through pharmaceutical manufacturers, authorized distributors and group purchasing organizations. As a national pharmacy provider with broad coverage and clinical expertise of its 93 full-service pharmacies, the Company provides pharmaceutical manufacturers with an extensive distribution channel for its existing and prospective pharmaceutical products. Many of the pharmaceuticals that the Company purchases are available from multiple sources and are available in sufficient quantities to meet the needs of the Company and its patients. However, some drugs are only available through sole distribution sources and/or limited distribution models from the manufacturer that may be subject to limits on distribution. In such cases, it is important that the Company establishes and maintains good working relationships with the manufacturer to secure a sufficient supply to meet its patients’ needs. Additionally, certain drugs may become subject to supply shortages. Such shortages can result in cost increases or hamper the Company’s ability to obtain sufficient quantities to meet the needs of its patients. The Company actively manages its relationships with direct manufacturers and distributors to provide differentiated access and service to ensure consistent supply and cost-effective procurement. These relationships provide the Company the opportunity to become a selected partner in the launch of their new products. The Company may also receive fees, which it records as revenue, from certain biotech manufacturers for providing them with bona fide services market is highly competitiveoften focused around clinical outcomes/data. The Company’s continued growth will be dependent on maintaining its existing relationships with manufacturers and includesestablishing new relationships with additional manufacturers as the Company launches new products.
For the year ended December 31, 2023, approximately 72% of the Company’s pharmaceutical and medical supply purchases were from four vendors. Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms. However, a change in suppliers could cause delays in service delivery and possible losses in revenue, which could adversely affect the Company’s financial condition or operating results.
Through the purchasing power of its national providersplatform, the Company is able to negotiate favorable terms and numerous localeconomics, including volume purchase rebates and regional companies. Providers strivevendor administration fees. Such fees are recorded as reductions to differentiate their services based on their responsiveness to patient needs, quality of care, reputation, outcomes, and cost of service. Our Centersrevenue when the pharmaceuticals are delivered to the patient.
Billing & Significant Payers
The Company generates most of Excellence offer a high touch, high service approach toits revenue from contracts with third-party payers, including managed care organizations, insurance companies, self-insured employers, Medicare, and Medicaid programs. Where permissible, the Company bills patients for any amounts not reimbursed by third-party payers. The majority of the Company’s infusion pharmacy revenue consists of reimbursements for both the cost of the pharmaceuticals sold and the cost of services provided. Pharmaceuticals are typically reimbursed on a local basis, which we believe differentiates our service.

Our competitors withinpercentage discount from the home infusion market include Option Care, Coram CVS/specialty infusionpublished average wholesale price (“AWP”) of each drug or on a percentage premium to average sales price (“ASP”). Nursing services (a division of CVS Health), Accredo Health Group, Inc. (a subsidiary of Express Scripts Holding Company), Briova (a subsidiary of OptumRx, which is a unit of the UnitedHealthcare Group) and various regional and local providers of alternate site healthcareare typically billed separately, while other patient support services, such as hospitalspharmacy compounding service, delivery service and physician practices.

Government Regulation

ancillary medical supplies are reimbursed either separately or on a per diem basis, as applicable.
The Company’s largest payer represented approximately 14% of its revenue for the year ended December 31, 2023. No other single payer represented more than 10% of its revenue. The Company also provides services that are directly reimbursable through government healthcare programs such as Medicare and state Medicaid programs. For the year ended December 31, 2023, approximately 12% of the Company’s revenue was reimbursable through direct governmental programs, such as Medicare and Medicaid.
Matters Affecting Drug Prices
Pricing benchmarks in the pharmacy industry are periodically published by third parties such as Red Book, Medi-Span, RJ Health, and the Centers for Medicare & Medicaid Services (“CMS”), and the benchmark reimbursement varies by payer contract. The most commonly used benchmarks are AWP and ASP. AWP is based on self-reported prices charged by wholesalers and manufacturers and reimbursement is generally AWP minus a percentage and may include a per diem fee or a fixed dispensing fee. ASP is based on actual sales transactions reported by wholesalers and is generally lower than AWP; reimbursement is generally ASP plus a percentage. The Company may also receive a fixed dispensing fee or a per diem fee for each day a patient is on service. Changes to these pricing benchmarks may have a significant impact on the profitability of the Company’s business.
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Governmental Regulation
The home infusion industry is subject to extensive regulation by a number of governmental entities at the federal, state and local level.governmental entities. The industry is also subject to frequent regulatory changes. Laws and regulations in the healthcare industry are extremely complex and, in many instances,at times, the industry does not have the benefit offrom significant regulatory or judicial interpretation. Our business is impacted not only by thoseinterpretation that would clarify how these laws and regulations that are directly applicable to us butshould be applied. Moreover, the Company’s business is also impacted by certain laws and regulations that are applicable to our payors, vendorsits managed care and referral sources. While our management believes we are in substantial complianceother clients. If the Company fails to comply with all of the existing laws and regulations directly applicable to us, such lawsits business, the Company could suffer civil and/or criminal penalties, and regulations are subject to rapid change and often are uncertainthe Company could be excluded from participating in their application and enforcement. Further, to the extent we engage in new business initiatives, we must continue to evaluate whether new laws and regulations are applicable to us. There can be no assurance that we will not be subject to scrutiny or challenge under one or more of these laws or that any

enforcement actions would not be successful. Any such challenge, whether or not successful, could have a material adverse effect upon our business and consolidated financial statements.

Among the various federal and state laws and regulations that may govern or impact our current and planned operations are the following:

Medicare and Medicaid Reimbursement

Many of the products and services that we provide are reimbursed by Medicare and state Medicaid programs and are therefore subject to extensive government regulation.

Medicare is a federally funded program that provides health insurance coverage for qualified persons age 65 or older, some disabled persons, and persons with end-stage renal disease and persons with Lou Gehrig’s disease. Medicaid programs are jointly funded by the federal and state governments and are administered by states under approved plans.

Medicaid provides medical benefits to eligible people with limited income and resources and people with disabilities, among others. Although the federal government establishes general guidelines for the Medicaid program, each state sets its own guidelines regarding eligibility and covered services. Some individuals, known as dual eligibles, may be eligible for benefits under both Medicare and a state Medicaid program. Reimbursement under the Medicare and Medicaid programs is contingent on the satisfaction of numerous rules and regulations, including those requiring certification and/or licensure. Congress often enacts legislation that affects the reimbursement rates under government healthcare programs.

Approximately 16% of our revenue for the year ended December 31, 2017 was derived directly from Medicare, Medicaid or other government-sponsored healthcare programs. Also, we indirectly provide services to beneficiaries of Medicare, Medicaid and other government-sponsoredfederal and state healthcare programs, through managed care entities. Should there be material changes to federal or state reimbursement methodologies, regulations or policies, our direct reimbursements from government-sponsoredwhich would have an adverse impact on its business.
Professional Licensure
Nurses, pharmacists and certain other healthcare programs, as well as service fees that relate indirectly to such reimbursements, could be adversely affected.

Medicare

We receive reimbursement for infusion therapy under the Medicare program, which has four parts. Medicare Part A generally covers inpatient hospital, skilled nursing facility, home nursing and hospice services; Medicare Part B covers physicians' services, outpatient services, items and services provided by medical suppliers and a limited number of prescription drugs; Medicare Part C allows beneficiaries to enroll in private healthcare plans (known as Medicare Advantage plans); and Medicare Part D provides for a voluntary prescription drug benefit.

Medicare fee-for-service programs, Part A and Part B, generally cover infusion therapy provided in hospitals and hospital outpatient departments, skilled nursing facilities, and physician offices. Part A covers infusion therapy services under the home health benefit if the services are rendered by a Medicare-certified home health agency and the beneficiary meets criteria for homebound status. Part B generally does not cover the full range of services for infusion therapies in a patient’s home but it covers a limited number of drugs administered using an external infusion pump under the durable medical equipment (“DME”) benefit. Although Medicare Part D covers payment for drugs (including many not covered under Part B) and a retail-based dispensing fee, Part D does not cover infusion-related services, equipment and supplies. For eligible Medicare beneficiaries, the cost of equipment and supplies associated with infused drugs covered under Medicare Part D may be reimbursed on a limited basis under Part A or Part B, and the cost of associated professional services may be reimbursed on a limited basis under Medicare Part A. CMS has attempted to clarify the relationship of Part B and Part D with regard to coverage of infused drugs. CMS has stated that coverage is generally determinedprofessionals employed by the diagnosis and the method of drug delivery.

The U.S. Department of Health and Human Services (“HHS”), Office of the Inspector General (“OIG”) and CMS continue to issue regulations and guidance with regard to the Medicare Part D program and compliance by Medicare Part D sponsors and their subcontractors. The receipt of funds made available through Medicare Part D is subject to compliance with government laws and regulations and provisions in contracts with prescription drug plans. There are many uncertainties about the financial and regulatory risks of participating in the Medicare Part D program, and these risks could negatively impact our business in future periods.

Medicare Part C - Medicare Advantage

Under Medicare Part C, also known as Medicare Advantage, beneficiaries can choose to enroll in a health insurance plan administered by an MCO. Medicare Advantage plansCompany are required to offer the benefits coveredbe individually licensed or certified under Medicare Part A and Part

B, with the exception of hospice care, and may include additional benefits. To serve Part C beneficiaries, a provider must contract with an MCO plan. Reimbursementapplicable state law. The Company performs criminal and other requirements imposedbackground checks on the provider are governed by the agreement with the MCO plan rather than by statute or regulationemployees and as such vary from plan to plan. Medicare Advantage plans are permitted to cover certain services that fee-for-service Medicare does not cover. Home infusion therapy services are covered under many Medicare Advantage plans. We currently have contracts with a number of Medicare Advantage plans.

Legislative Changes to Medicare Reimbursement

In recent years, legislative and regulatory changes have resulted in limitations and reductions in reimbursement under government healthcare programs. For example, the Cures Act, which Congress passed in December of 2016, changed the payment methodology for certain infusion drugs under the Part B DME benefit. Significant reductions to the amount paid by Medicare for many infusion drugs took effect January 1, 2017. In addition, the Cures Act provides for the implementation of a clinical services payment under Part B for “qualified home infusion therapy suppliers.” Under this new payment system, Medicare will reimburse home infusion therapy suppliers based on a single, all-inclusive rate. The services payment provision does not take effect until January 1, 2021. However, the Bipartisan Budget Act of 2018 provides for temporary transitional benefit payments, starting January 1, 2019, for Medicare Part B home infusion services. This temporary benefit will continue until January 1, 2021 when the services payment in the Cures Act takes effect. We have taken steps to mitigateensure that its employees possess all necessary licenses and certifications, and the impact of the Cures Act on our business, but the Act has had aCompany believes that its employees comply in all material negative impact on our revenuesrespects with applicable licensure laws.
Pharmacy Licensing and profitability.

Medicaid

Medicaid coverage of infusion therapy varies by state. We are sensitive to possible changes in state Medicaid programs. Budgetary concerns in many states have resulted in, and may continue to result in, reductions to Medicaid reimbursement and delays in payment of outstanding claims. In addition, many states have implemented or are considering strategies to reduce coverage, restrict eligibility, or enroll Medicaid recipients in managed care programs. As of January 1, 2018, all pharmacies participating in a Medicaid managed care program must be registered with the state Medicaid agency. Any reductions to or delays in collecting amounts reimbursable by state Medicaid programs for our products or services, or changes in regulations governing such reimbursements, could cause our revenue and profitability to decline and increase our working capital requirements. Effective January 1, 2018, CMS limited Medicaid reimbursement for DME to no more than Medicare payment rates. For further discussion on state Medicaid reductions, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7.

In addition, some Medicaid programs only allow for reimbursement to pharmacies residing in the state or in a border state. While we believe we can service our current Medicaid patients through our existing infusion pharmacies, there can be no assurance that additional states will not enact in-state dispensing requirements for their Medicaid programs. To the extent such requirements are enacted, certain therapeutic pharmaceutical reimbursements could be adversely affected.

Registration
State Legislation and Other Matters Affecting Drug Prices

Many states have adopted “most favored nation” legislation, which limits the amount a pharmacy participating in the state Medicaid program is paid based on the pharmacy’s prices applicable to third party plans, or in some instances, self-pay patients. Because of these limitations, we may not receive the full Medicaid fee schedule amounts in some instances. There is wide variation in drafting, interpretation and enforcement of state “most favored nation” legislation. Our management carefully considers these laws and believesrequire that each of our respective companies is in material compliance with them; however, we cannot predict whether the regulators will disagree with our interpretation or change their interpretation of the laws or their enforcement priorities.

Pricing benchmarks in the pharmacy industry are published by third-parties such as First DataBank, Medi-Span, Micromedex, RJ Health, and CMS. The Average Wholesale Price (“AWP”) is one of the most commonly used benchmarks. Although various payors have discussed establishing a new benchmark and First DataBank ceased publication of the AWP, the industry has not yet developed a viable generally accepted alternative to the AWP benchmark. See “Risk Factors - Risks Related to Our Business - Changes in industry pricing benchmarks could adversely affect our financial performance.”

Healthcare Reform

In recent years, federal and state governments have considered and enacted policy changes designed to reform the healthcare industry. The most prominent of these healthcare reform efforts, the Affordable Care Act, has resulted in sweeping changes to the U.S. system for the delivery and financing of health care. As currently structured, the Affordable Care Act increases the number of persons covered under government programs and private insurance; furnishes economic incentives for measurable improvements in health care quality outcomes; promotes a more integrated health care delivery system and the creation of new health care delivery

models; revises payment for health care services under the Medicare and Medicaid programs; and increases government enforcement tools and sanctions for combating fraud and abuse. In addition, the Affordable Care Act reduced cost sharing for Medicare beneficiaries under the Part D prescription drug benefit program and expanded medication therapy management services for individuals with chronic conditions.

However, the future of the Affordable Care Act is uncertain. The presidential administration and certain members of Congress have expressed their intent to repeal or make significant changes to the Affordable Care Act, its implementation or interpretation. In 2017, Congress eliminated the financial penalty associated with the individual mandate, effective January 1, 2019, which may result in fewer individuals electing to purchase health insurance.

Regulation of the Pharmacy Industry

For each physical pharmacy location in a state, laws require maintenance ofbe licensed as an in-state pharmacy license to dispense pharmaceuticals. Pharmacy and controlled substances laws often address the qualifications of personnel, the adequacy of prescription fulfillment and inventory control practices and the adequacy of facilities. We believe ourpharmaceuticals in that state. Certain states also require that pharmacy locations be licensed as out-of-state pharmacies if the Company delivers prescription pharmaceuticals into those states from locations outside of the state. The Company believes that it materially complycomplies with all applicable state licensing laws applicable to their practice.laws. If our pharmacy locations become subject to additional licensure requirements, arethe Company is unable or otherwise fail to maintain their requiredits licenses or if states place overly burdensome restrictions or limitationsregulations on non-resident pharmacies, ourits ability to operate in some states would be limited, which could have an adverse impact on ourits business. We believe the impact of any such requirements would be mitigated by our ability to shift business among our numerous locations.

Many states, as well as the federal government, are considering imposing, or have already begun to impose, more stringent requirements on compounding pharmacies including the Drug Quality and Security Act (“DQSA”) (see Food, Drug, and Cosmetic Act below). We believe that our compounding is done in safe environments with clinically appropriate policies and procedures in place. Those compounding pharmacies adhere to rigorous safety and quality standards for compounded sterile preparations and only fill prescriptions for individually identified patients pursuant to a valid prescription from a prescriber. All compounding is done consistently with USP 797 standards.

Many of the states into which we deliver pharmaceuticals have laws and regulations that require out-of-state pharmacies to register with or be licensed by the boards of pharmacy or similar regulatory bodies in those states. These states generally permit the dispensing pharmacy to follow the laws of the state within which the dispensing pharmacy is located. However, various state pharmacy boards have enacted laws and/or adopted rules or regulations directed at restricting or prohibiting the operation of out-of-state pharmacies by, among other things, requiring compliance with all laws of the states into which the out-of-state pharmacy dispenses medications, whether or not those laws conflict with the laws of the state in which the pharmacy is located, or requiring the pharmacist-in-charge to be licensed in that state. To the extent that such laws or regulations are applicable to our operations, we believe we comply with them. To the extent that the foregoing laws or regulations prohibit or restrict the operation of out-of-state pharmacies and are found to be applicable to us, they could have an adverse effect on our operations.

Laws enforced by the U.S. Drug Enforcement Administration (“DEA”), as well as some similar state agencies, require each of ourits pharmacy locations to individually register with the DEA in order to handle and dispense controlled substances.substances, including prescription pharmaceuticals. A separate registration is required at each principal place of business where we dispensethe Company dispenses controlled substances. Federal and state laws also require us tothat the Company follow specific labeling, reporting and record-keeping requirements for controlled substances. We maintainThe Company maintains federal and state controlled substance registrations for each of ourits facilities that require such registration and followmaterially follows procedures intended to comply with all applicable federal and state requirements regarding controlled substances. These laws can change from time to time. We continuously review these changes to laws and believe we are in material compliance with the applicable federal and state controlled substances laws. If any of our pharmacy locations is deemed to be out of compliance, it could have an adverse impact on our business.

Many states in which we operatethe Company operates also require home infusion companies to be licensed as home health agencies. We believe we materially complyThe Company believes it is in material compliance with these laws. If our infusion locations become subjectlaws, as applicable.
Privacy and Security Requirements
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, regulate the use, disclosure, confidentiality, availability and integrity of individually identifiable health information, known as “protected health information,” and provide for a number of individual rights with respect to new licensuresuch information. The federal privacy regulations are designed to protect health-related information that could be used to identify an individual’s protected health information.
The requirements imposed by HIPAA are unableextensive, and the Company has taken and intends to maintain required licenses or if states place burdensome restrictions or limitations on home health agencies or home nursing agencies, our infusion locations’ abilitycontinue to provide nursing servicestake steps to ensure its policies and procedures are in some states would be limited, which could have an adverse impact on our business.material compliance with the applicable provisions.

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Professional LicensureRegulations

Nurses, pharmacists and certain other professionals employed by us are required to be individually licensed and/or certified under applicable state law. We perform criminal and other background checks on employees to the extent allowed by state law and confirm that our employees possess all licenses and certifications required in order to provide healthcare-related services. We believe our employees comply with applicable licensure laws.

Food, Drug and Cosmetic Act

Pharmacy operations

Act. Certain provisions of the Federal Food, Drug and Cosmetic Act (“FDCA”) govern the preparation, handling storage, marketing and distribution of pharmaceutical products. Many of theThis law exempts certain pharmaceuticals and medical devices we dispense are exempt from certain federal labeling and packaging requirements as long as they are not adulterated or misbranded and are dispensed in accordance with and pursuant to a valid prescription.

The FDA directly regulates outsourcing facilities, but does not directly regulate non-outsourcing facilities or pharmacies. Outsourcing facilities are pharmacies that are engaged in sterile compounding of drugs that are notCompany believes it materially complies with all applicable requirements. The FDCA also governs interstate commerce for an individually identifiable patient. Outsourcing facilities are subject to standards relating to sterilization and the physical facility including the Current Good Manufacturing Practice (“cGMP”) regulations. Because our compounding activities are limited to products compounded pursuant to valid prescriptions for individually identifiable patients, we do not qualify as an outsourcing facility, and therefore, should not be required to comply with the cGMP standards.pharmaceutical products. The FDA has been conducting inspections of pharmacies that engage in compounding, including ours, and has been attempting to apply the cGMP standards even though those pharmacies are not outsourcing facilities. While the FDA has issued reports following their surveys, to date, no enforcement action has been taken against us. We cannot predict what further actions the FDA may take. We believe our operations are in compliance with applicable laws and that the requirements for outsourcing facilities are not applicable to our operations. WeCompany cannot predict the impact of increased scrutinyany future FDCA regulations on or new regulation of compounding pharmacies.

In addition, the FDCA governs pharmaceutical products’ movement in interstate commerce. The FDA has begun scrutinizing more closely compounding pharmacies’ operations and compounded pharmaceuticals’ movement in interstate commerce. Specifically, the FDA has proposed regulations that could have the effect of limiting ourits ability to ship prescriptions outdrugs to different states from its pharmacies.
The Drug Quality and Security Act (“DQSA”) amended the FDCA to grant the Food and Drug Administration (“FDA”) authority to regulate the manufacturing of state by pharmacies that hold valid licenses but do not complycompounded pharmaceutical drugs. The Company materially complies with cGMP standards. We do not know if these regulations, as proposed, will be adopted, but if they are, we will likely need to modify our operations to comply. While we cannot predict changes to the regulatory environment under the DQSA, we believe we complyPCAB Accreditation Standards for Sterile and Non-Sterile Pharmacy Compounding and pursues accreditation from quality associations. The Company believes it complies in all material respects with all applicable requirements of a non-outsourcing-facility pharmacy.

Infusion services

The FDA also regulates certain medical devices, (e.g.,such as infusion pumps) essentialpumps, the Company uses to the Company’s infusionprovide its services. An infusion pump, like any medical device, is subject to failure. Since 2010, due toIn recent years, the relatively large number of adverse events associated with the use of infusion pumps, FDA has increased its oversight of infusion pumps. Changes have included higher levels of scrutiny, intensifying manufacturer engagement and bolstering userpumps, resulting in additional requirements around patient education and adverse event reporting. The shifting regulatory climate around infusion pumps; the requirement to maintain high levels of proficiency in using and training patients in the safe use of infusion pumps; cybersecurity issues, including modification and misuse of infusion pumps, and unauthorized use of information that is stored on or accessed from infusion pumps; and, finally, the need to stay current in infusion pump design and “best practices,” present elements of risk. Nevertheless, we believe we complyCompany believes it complies in all material respects with all applicable requirements and that ourits employees are adequately trained and equippedhave the level of proficiency required to use these devices.devices and provide training to its patients.

Fraud and Abuse Laws

Anti-Kickback Laws

Statute. The federal Anti-Kickback Statute makes it a felony for a person or entity toprohibits individuals and entities from knowingly and willfully offer, pay, solicit,paying, offering, receiving, or receive any remuneration with the intentsoliciting money or anything else of inducingvalue in order to induce the referral of an individualpatients or theto induce a person to purchase, lease, or order, (or the arrangingarrange for, or recommending of the purchase, leaserecommend services or order) ofgoods covered by Medicare, Medicaid, or other government healthcare items or services paid for in whole or in part by a federal healthcare program such as Medicare or Medicaid. Courts have held that there is a violation of the statute even if only one purpose of a payment arrangement is to induce referrals, even if there are other lawful purposes. Violations of the federalprograms. The Anti-Kickback Statute could subject us to criminal and/or civil penalties, including suspension or exclusion from Medicareis broad and Medicaid programs and other government-funded healthcare programs. In addition, submission of a claim for items or services generated in violation of the Anti-Kickback Statute may also be the basis of liability under the federal False Claims Act (“False Claims Act”).

The federal Anti-Kickback Statute has been interpreted broadly by courts, the OIG and other administrative bodies. For example, although the term “remuneration” is not defined in the federal Anti-Kickback Statute, it has been broadly interpreted to include anything of value, including for example, gifts, donations, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing any item, service, or compensation for something other

than fair market value. Because of the broad scope of the statute, there are several statutory exceptions to the law, and federal regulations establish certain safe harbors from liability. For example, there are safe harbors relating to certain discounts received from vendors, investment interests, group purchasing organizations, managed care and waivers of copayment obligations. A practice that does not fall within a safe harbor is not necessarily unlawful, but may be subject to increased scrutiny and challenge by government enforcement authorities.

Governmental entities have investigated pharmacies and their dealings with pharmaceutical manufacturers concerning, among other things, retail distribution, sales and marketing practices and product conversion or product switching programs. Governmental entities have also investigated pharmacies with respect to their relationships with physicians and other referral sources, including marketing practices. There can be no assurance that we will not receive subpoenas or be requested to produce documents in pending investigations or litigation from time to time. In addition, we may be the target or subject of one or more such investigations or named parties in corresponding actions.

In 2003, the OIG released Compliance Program Guidance for Pharmaceutical Manufacturers (the “Guidance”), which provides voluntary, nonbinding guidance in devising effective compliance programs to assist companies that develop, manufacture, market and sell pharmaceutical products or biological products. The Guidance sets forth the fundamental elements of a pharmaceutical manufacturer’s compliance program and principles that should be considered when creating, implementing, and maintaining an effective compliance program. While we are not a manufacturer, we believe thatpotentially covers many aspects of it are useful to ourstandard business and therefore we currently maintain a compliance program that includes the key compliance program elements described in the Guidance. We believe the fundamental elements of our compliance programs are consistent with the principles, policies and intent of the Guidance.

arrangements. A number of states have enacted anti-kickback laws that may apply not only to state-sponsored healthcare programs, but also to items or services that are paid for by private insurance and self-pay patients. State anti-kickback laws can vary considerably in their applicability and scope and sometimes have fewer statutory and regulatory exceptions than does the federal law. Our management carefully considers the importance of such anti-kickback laws when structuring each company’s operations and believes that each of our respective companies is in compliance therewith.

The Stark Laws

The federal physician self-referral law, commonly known as the “Stark Law,” prohibits physicians from referring Medicare and Medicaid patients for “designated health services” to an entity with which the physician, or an immediate family member of the physician, has a direct or indirect financial relationship, unless the financial relationship is structured to meet an applicable exception. Designated health services include outpatient prescription drugs, DME and supplies, parenteral and enteral nutrient, equipment and supplies, and home health services. An entity that bills Medicare or Medicaid for designated health services that result from a prohibited referral is required to refund amounts collected pursuant to the prohibited referral on a timely basis. Penalties for violation of the Stark Law include denial of payment, civil monetary penalties and exclusion from federal healthcare programs. A knowing violation of the Stark Law can also constitute a violation of the federal False Claims Act. Our management carefully considers the Stark Law and its accompanying regulations in structuring our financial relationships with physicians and believes we are in compliance therewith.

We are also subject to state statutes and regulations that prohibit self-referral arrangements.the same general types of conduct as those prohibited by the Anti-Kickback Statute described above. Violations can lead to significant criminal or civil penalties, including imprisonment. The lawsOffice of the Inspector General (“OIG”) could also seek Civil Monetary Penalties (“CMP”) or exclusion against individuals or entities who knowingly and exceptionswillfully: (1) offer or pay remuneration, directly or indirectly, to induce referrals of government healthcare program business; or (2) solicit or receive remuneration, directly or indirectly, in return for referrals of government healthcare program business. The OIG of the U.S. Department of Health and Human Services (“HHS”) has published clarifying regulations that identify a limited number of safe harbors may vary from the federal Stark Law and vary significantly from statecriminal enforcement or civil administrative actions. The Company attempts to state. Some ofstructure its business relationships to materially comply with these state statutes mirror the federal Stark Law while others are broader. For example, some state statutes and regulations apply to services reimbursed by governmentalsatisfy an applicable safe harbor, where applicable. However, in situations where a business relationship does not fully satisfy the elements of a safe harbor, or where no safe harbor exists, the Company attempts to satisfy as wellmany elements of an applicable or equivalent safe harbor as private payors, and some extend to providers other than physicians. Violation of these laws may result in prohibition of payment for services rendered, loss of pharmacy or health provider licenses, fines and criminal penalties. The state laws are often vague and, in many cases, have not been widely interpreted by courts or regulatory agencies. We believe we are in compliance with such laws.possible.

Statutes Prohibiting False Claims Act. The Company is subject to state and Fraudulent Billing Activities

A rangefederal laws that govern the submission of claims for reimbursement. These laws generally prohibit an individual or entity from knowingly and willfully presenting a claim or causing a claim to be presented for payment from a federal healthcare program that is false or fraudulent. The standard for “knowing and willful” may include conduct that amounts to a reckless disregard for the accuracy of information presented to payers. Penalties under these statutes include substantial civil and criminal laws targetfines, exclusion from the submission of false claimsMedicare or Medicaid programs and fraudulent billing activities.imprisonment. One of the most significantprominent of these laws is the federal False Claims Act, which provides for liability of treble damages and civil penalties for knowingly makingmay be enforced by the federal government directly or causing to be made false claims in order to secure reimbursement from government-sponsored programs, such as Medicare and Medicaid. Investigations or actions commenced underby a private plaintiff by filing a qui tam lawsuit on the government’s behalf. Under the False Claims Act, the government and private plaintiffs, if any, may be brought eitherrecover monetary penalties in the amount of $13,946 to $27,894 per false claim, as well as an amount equal to three times the amount of damages sustained by the government or by private individuals on behalfas a result of the government, through a “whistleblower” or “qui tam” action. The False Claims Act authorizes the payment of a portion of any recovery to the individual bringing suit. Such actions are initially required to be filed under seal pending their review by the Department of Justice. If the government intervenes in the lawsuit and prevails, the whistleblower (or plaintiff filing the initial complaint) may share with the federal government in any settlement or judgment.

If the government does not intervene in the lawsuit, the whistleblower plaintiff may pursue the action independently. The False Claims Act may result in substantial financial penalties for small billing errors that are replicated in a largefalse claim. A number of states, including states in which the Company operates, have adopted their own false claims statutes as each individual claim could be deemed to be a separate violation of the False Claims Act. Significantly, the Affordable Care Act amended the False Claims Act to impose liability for knowing failures to return overpayments which, under the Affordable Care Act’s 60-Day Rule, include failures to report and return an overpayment to the government within 60 days after it is identified.

The False Claims Act has been used by the federal government and private whistleblowers to bring enforcement actions under fraud and abuse laws like the federal Anti-Kickback Statute and the Stark Law, increasing potential financial exposure for alleged violations. Such actions are based on the theorywell as statutes that when an entity submits a claim, it either expressly or impliedly certifies that it has provided the underlying services in compliance with material laws, including the Anti-Kickback Statute or Stark Law. Liability may result even if the claims are otherwise billed accurately for appropriate and medically necessary services. These actions are costly and time-consuming to defend.

Some states also have enacted statutes similar to the False Claims Act which may include criminal penalties, substantial fines, and treble damages, and some allow individuals to bring qui tam actions. Federal law provides an incentive to states to enact false claims laws comparable to the federal False Claims Act.

In recent years, federal and state governments have launched several initiatives aimed at uncovering practicesThe Company believes that violate false claims or fraudulent billing laws. We have experienced increasing audit activity by enforcement entities, and we may be the subject of future audits. We believe we haveit has procedures in place to ensure the material accuracy of ourits claims. While we believe we are
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Ethics in compliancePatient Referrals Law (“Stark Law”)
The Stark Law exempts certain business relationships that meet its exception requirements. However, unlike the Anti-Kickback Statute under which an activity may fall outside a safe harbor and still be lawful, a referral for certain Designated Health Services (“DHS”) that does not fall within an exception is strictly prohibited by the Stark Law. In addition to the Stark Law, many of the states in which the Company operates have comparable restrictions on the ability of physicians to refer patients for certain services to entities with Medicaid and Medicare billing rules and requirements, there canwhich the Company has a financial relationship. Certain of these state statutes mirror the Stark Law while others may be no assurance that regulators would agreemore restrictive. The Company attempts to structure all of its business relationships with physicians to comply with the methodology employed by us in billing for our productsStark Law and services. A material disagreement with governmental agencies on the manner in which we provide or bill for products or services could have a material adverse effect on our business and Consolidated Financial Statements.

Civil Monetary Penalties Act

any applicable state self-referral laws.
The Civil Monetary Penaltiesfederal Stark Law authorizesgenerally prohibits a physician from making referrals for certain DHS, reimbursable by Medicare or Medicaid, to entities with which the U.S. Secretary of HHSphysician or an immediate family member has a financial relationship, unless an exception applies. A financial relationship is generally defined as an ownership, investment or compensation relationship. DHS includes outpatient pharmaceuticals, parenteral and enteral nutrition products, home health services, durable medical equipment, physical and occupational therapy services, and inpatient and outpatient hospital services. Among other sanctions, a CMP may be imposed for each bill or claim for a service a person knows or should know is for a service for which payment may not be made due to impose civil money penalties, assessments and program supervisionthe Stark Law. Such persons or entities are also subject to exclusion for various forms of fraud and abuse involvingfrom the Medicare and Medicaid programs. Penalties of upAny person or entity participating in a circumvention scheme to $100,000avoid the referral prohibitions is liable for each violationCMPs, and additional fines may be imposed depending on the specific misconduct involved. These penalties are updated annually based on changes to the consumer price index. In some cases, violations of the Civil Monetary Penalty Law may result in penalties of up to three times the remuneration offered, paid, solicited or received, and may also result in exclusion from government healthcare programs. The availability of the Civil Money Penalties Law to enforce alleged fraud and abuse violations has increased the potential for enforcement actions, as it requires a lower burden of proof than some criminal statutes, and it has increased the potential financial exposure for such actions. These actions are costly and time-consuming to defend.
Other Fraud & Abuse Laws

We are also subject to additional fraud and abuse laws, including federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Federal enforcement authorities may exclude from Medicare and Medicaid any business entities and any investors, officers and managing employees associated with business entities that have committed health care fraud. Officers and managing employees may be excluded even if they had no knowledge of the fraud.

We may also be subject to laws promoting transparency of financial relationships with providers and other potential referral sources. For example, the Physician Payment Sunshine Act requires pharmaceutical, biological, device, and medical supply manufacturers to report payments or other transfers of value to physicians and teaching hospitals, as well as physician ownership and investment interests. These initiatives may result in increased scrutiny by government enforcement authorities or impact our public reputation.

Confidentiality, Privacy and HIPAA

Many of our activities involve the receipt, use and/or disclosure of confidential medical, pharmacy or other health-related information concerning individual patients, including the disclosure of such confidential information to an individual's health plan.

The Health Insurance Portability and Accountability Act of 1996 (“HIPPA”) and its implementing regulations, as amended, give people greater control over the privacy of their medical information. The federal privacy regulations (the “Privacy

Regulations”) are designed to protect health-related information that could be used to identify an individual, also known as protected health information (“PHI”). Among numerous other requirements, the Privacy Regulations: (i) limit permissible uses and disclosures of PHI; (ii) limit most uses and disclosures of PHI to the minimum necessary to accomplish the intended purpose; (iii) require patient authorization for uses and disclosures of PHI unless an exception applies; and (iv) guarantee patients the right to access their medical records and to receive an accounting of certain disclosures. The federal security regulations (the “Security Regulations”) set certain standards regarding the storage, utilization of, access to and transmission of electronic PHI. The federal breach notification regulations (the “Breach Notification Regulations”) require notification to individuals, the federal government and, in some cases, the media in the event of a breach of unsecured PHI.

These regulations apply to “covered entities,” which include most healthcare providers and health plans, and some of these regulations apply to “business associates,” which are persons or entities that perform or assist in performing services or activities for or on behalf of a covered entity, if the performance of those services or activities involves the creation, receipt, maintenance or transmission of PHI. HIPAA also requires that a covered entity and its business associates enter into written contracts whereby the business associate agrees to restrict its use and disclosure of PHI. We provide a varied line of services to patients and other entities. When we are acting as a pharmacy or health care provider, we function as a covered entity. There may also be situations when we act on behalf of another covered entity as a business associate.

The requirements imposed by HIPAA are extensive, and it has required substantial cost and effort to assess and implement measuresfailure to comply with those requirements. We have takenreporting requirements regarding an entity’s ownership, investment and intendcompensation arrangements for each day for which reporting is required to continue to take steps that we believe are reasonably necessary to ensure our policies and procedures are in compliance with the Privacy Regulations, the Security Regulations and the Breach Notification Regulations. The requirements imposed by HIPAA have increased our burden and costs of regulatory compliance (including our health improvement programs and other information-based products), altered our reporting and reduced the amount of information we can use or disclose if patients do not authorize such uses or disclosures.

Some federal and state privacy-related laws are more restrictive than HIPAA and could result in additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches. In addition, most states have enacted privacy and security laws, including laws that protect particularly sensitive medical information (such as HIV status or mental health records) and breach notification laws that may impose an obligation to notify persons if their personal information has or may have been accessedmade under the Stark Law.
Human Capital Resources
The Company’s mission is to transform healthcare by an unauthorized person. Someproviding innovative services that improve outcomes, reduce costs and deliver hope for patients and their families. The values we embody support each of these laws apply to our business and have increased and will continue to increase our burden and costs of privacy and security-related regulatory compliance.

Employees

team members as they deliver life-changing, extraordinary care.
As of December 31, 2017, we had 1,7272023, the Company employed 5,809 persons on a full-time 49basis and 1,993 persons on a part-time and 378 per diem employees. Per diembasis. The majority of its part-time employees are defined as those availableclinicians due to the nature and timing of the services the Company provides.
Attracting and retaining a highly skilled and diverse team to deliver extraordinary care is a top priority. The Company’s strategy includes four distinct areas to empower our people so that they remain focused on an as-needed basis. Noneproviding extraordinary care that changes lives:
•Talent Development. The Company strives to empower our team members by giving them the tools and resources to strengthen and expand their knowledge and skills and advance their careers through training, leadership development programs, continuing functional education and other professional development opportunities. The Company also focuses on performance management, 360 degree feedback, and succession planning through calibration assessments on each team leader’s potential, performance and readiness for advancement.
•Employee Engagement. The Company believes that highly engaged team members deliver a better patient experience. The foundation of our employees are represented by any unionengagement strategy is a culture that connects our team members to our mission and values while promoting a sense of community, while also aligning behind business priorities. Our approach to employee engagement is to cultivate our culture and build relationships across geographically distributed team members. The Company promotes employee engagement with engagement surveys, an internal social media platform, quarterly and annual peer recognition programs, and company newsletters.
•Health and Well being. The Company provides a holistic range of resources and programs to our team members to address each person’s unique needs, including physical, mental and financial health and well-being with programs to support healthy lifestyles, specialized programs to help manage chronic conditions, behavioral health education, coaching, and counseling, and financial wellness resources.
•Diversity, Equity, and Inclusion. The Company believes that diversity, equity and inclusion (“DE&I”) makes us stronger, more innovative and better able to serve our patients. This requires people with different talents, backgrounds and perspectives, reflective of the communities we serve. The Company strives to develop a culture where everyone feels a sense of belonging and empowerment to share their experiences and ideas. The Company leverages meaningful metrics to evaluate the effectiveness of our DE&I initiatives, including our efforts to eliminate bias in decision-making and build a diverse pipeline of leaders.
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The Company relies on its ability to attract and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities. The Company’s ability to attract and retain personnel depends on several factors, including the ability to provide them with engaging assignments and competitive salaries and benefits. The Company is committed to empowering our opinion, relations with our employees are satisfactory.

people through specific initiatives in talent development, employee engagement, health and well-being, and DE&I.
Available Information

We maintainThe Company’s corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015. The Company maintains a website at www.bioscrip.com.www.optioncarehealth.com. The information contained on ourits website is not incorporated by reference into this Annual Report and should not be considered part of this report. We file annual, quarterlyAnnual Report. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and current reports, proxy statements and other information with the SEC. We makeProxy Statements are available through its website at https://investors.optioncarehealth.com, free of charge, through our website, our reports on Forms 10-K, 10-Q, and 8-K, and amendments to those reports, as soon as reasonably practicable after they are filed with or furnished to the SEC.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
We have adopted a Code
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Table of Business Conduct and Ethics policy for our Company, including our directors, officers and employees. Our Code of Business Conduct and Ethics policy and the charters of the Audit Committee, Management Development and Compensation Committee, and Governance, Compliance and Nominating Committee of our board of directors are available on our website at www.bioscrip.com.Contents

Item 1A.Risk Factors

Item 1A.    Risk Factors
Risks RelatedInvestors should carefully consider the following Company-specific and general risk factors.
Company-Specific Risk Factors
Our revenue and profitability will decline if the pharmaceutical industry undergoes certain changes, including limiting or discontinuing research, development, production and marketing of the pharmaceuticals that are compatible with the services we provide.
Our business is highly dependent on the ability of pharmaceutical manufacturers to develop, supply and market pharmaceuticals that are compatible with the services we provide. Our Business

Pressures relatingrevenue and profitability will decline if those companies were to downturnssell pharmaceuticals directly to the public, fail to support existing pharmaceuticals or develop new pharmaceuticals with different administration requirements than our service offerings are currently equipped to handle. Our business could also be harmed if the pharmaceutical industry experiences any supply shortages, pharmaceutical recalls, changes in the economyFDA approval processes, or changes to how pharmaceutical manufacturers finance, promote or sell pharmaceutical products. The Company has experienced drug and supply shortages and has leveraged its relationships with direct manufacturers and distributors to ensure consistent supply and cost-effective procurement. A reduction in the supply of and market for pharmaceuticals that are compatible with the services we provide may have a material adverse effect on our financial condition and results of operations.
If we lose relationships with managed care organizations (“MCOs”) and other non-governmental third-party payers, we could lose access to a significant number of patients and our revenue and profitability could decline.
We are highly dependent on reimbursement from MCOs, government programs such as Medicare and Medicaid and commercial insurers (collectively, “Third-Party Payers”). For the year ended December 31, 2023, 88% of our revenue came from MCOs and other non-governmental payers, including Medicare Advantage plans, Managed Medicaid plans, pharmacy benefit managers (“PBMs”), and self-pay patients. Many payers seek to limit the number of providers that supply pharmaceuticals to their enrollees in order to build volume that justifies their discounted pricing. From time to time, payers with whom we have relationships require that we bid against our competitors to keep their business. As a result of this bidding process, we may not be retained, and even if we are retained, the prices at which we are able to retain the business may be reduced. The loss of a payer relationship could significantly reduce the number of patients we serve and have a material adverse effect on our revenue and net income, and a reduction in pricing could reduce our gross margins and net income.
The healthcare industry is highly competitive.
The healthcare industry is highly competitive. We compete directly with national, regional and local healthcare providers. There are many other companies and individuals currently providing healthcare services that we provide, many of which have been in business longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business. We expect to continue to encounter competition in the future that could limit our ability to grow revenue and/or maintain acceptable pricing levels.
Some of our competitors have vertically integrated business models with commercial payers or are under common control with, or owned by, pharmaceutical wholesalers and distributors, MCOs, PBMs or retail pharmacy chains and may be better positioned with respect to the cost-effective distribution of pharmaceuticals. In addition, some of our competitors may have secured long-term supply or distribution arrangements for prescription pharmaceuticals necessary to treat certain chronic disease states on price terms substantially more favorable than the terms currently available to us. Consequently, we may be less price competitive than some of our competitors with respect to certain pharmaceutical products.
Accountable Care Organizations (“ACOs”) and other clinical integration models may result in lower reimbursement rates. Some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise interfere with the ability of MCOs to contract with us. Increasing consolidation in the payer and supplier industries, including vertical integration efforts among insurers, providers, and suppliers, and cost-reduction strategies by large employer groups and their affiliates may limit our ability to negotiate favorable terms and conditions in our contracts and otherwise intensify competitive pressure. In addition, our competitive position could be adversely affectaffected by any inability to obtain access to new biotech pharmaceutical products.
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If we are unable to maintain relationships with existing patient referral sources, our business and consolidated financial statements.condition, results of operations, and cash flows could be materially adversely affected.

MedicareOur success depends on referrals from physicians, hospitals, and other federalsources in the communities we serve and state payors accounton our ability to maintain good relationships with existing referral sources. Our referral sources are not contractually obligated to refer patients to us and may refer their patients to other providers. Our growth and profitability depends, in part, on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptance of the benefits of home infusion by our referral sources and their patients. Our loss of, or failure to maintain, existing relationships or our failure to develop new referral relationships could have a material adverse effect on our business and consolidated financial condition, results of operations, and cash flows.
Changes in industry pricing benchmarks could adversely affect our financial performance.
Our contracts generally use certain published benchmarks to establish pricing for a significant portionthe reimbursement of prescription medications we dispense. These benchmarks include AWP, wholesale acquisition cost, ASP and average manufacturer price. Many of our revenues. During economic downturnscontracts utilize the AWP benchmark. Publication of the AWP benchmark was expected to cease in 2011 as a result of the settlement of class-action lawsuits brought against First Databank and periodsMedi-Span, third-party publishers of stagnant or slow economic growth, federalvarious pricing benchmarks. However, Medi-Span continues to publish the AWP benchmark and state budgets are typically negatively affected, resulting in reduced

reimbursements or delayed payments by the federal and state government health care coverage programs in which we participate, including Medicare, Medicaid and other federal or state assistance plans. Government programs could also slow or temporarily suspend payments, negatively impacting our cash flow and increasing our working capital needs and interest payments. We have seen, and believe wehas indicated that it will continue to see, Medicare and state Medicaid programs institute measures aimed at controlling spending growth, including reductions in reimbursement rates.

Higher unemployment rates and significant employment layoffs and downsizings may lead to lower numbers of patients enrolled in employer-provided plans. Adverse economic conditions could also cause employers to stop offering, or limit, healthcare coverage, or modify program designs, shifting more costsdo so until a new benchmark is widely accepted. Several industry participants have explored establishing a new benchmark but there is not currently a viable generally accepted alternative to the individual and exposing usAWP benchmark. Without a suitable pricing benchmark in place, many of our contracts may need to greater credit risk from patientsbe modified, which could potentially change the economic structure of our agreements.
Changes in our relationships with pharmaceutical suppliers, including changes in drug availability or the discontinuance of therapy.

Existing and new government legislative and regulatory actionpricing, could adversely affect our business and financial results.

We have contractual relationships with pharmaceutical manufacturers to purchase the pharmaceuticals that we dispense. In order to have access to these pharmaceuticals, and to be able to participate in the launch of new pharmaceuticals, we must maintain a good working relationship with these manufacturers. Most of the manufacturers of the pharmaceuticals we sell have the right to cancel their supply contracts with us without cause and after giving only minimal notice. Any changes to these relationships, including, but not limited to, the loss of a manufacturer relationship, drug shortages or changes in pricing, could have an adverse effect on our business and financial results.
Some pharmaceutical manufacturers attempt to limit the number of preferred distributors that may market certain of their pharmaceutical products. We cannot provide assurance that we will be selected and retained as a preferred distributor or that we can remain a preferred distributor to market these products. Although we believe we can effectively meet our suppliers’ requirements, we cannot provide assurance that we will be able to compete effectively with other providers to retain our position as a distributor of each of our core products. Our failure to retain our position as a distributor of each of our core products could have a material adverse effect on our financial condition and results of operations.
A disruption in pharmaceutical and medical supply could adversely impact our business.
For the year ended December 31, 2023, approximately 72% of our pharmaceutical and medical supply purchases were from four vendors. Most of the pharmaceuticals that we purchase are available from multiple sources, and we believe they are available in sufficient quantities to meet our needs and the needs of our patients. We keep safety stock to ensure continuity of service for reasonable, but limited, periods of time. Should a supply disruption result in our inability to obtain especially high margin drugs and compound components necessary for patient care, our consolidated financial statements could be negatively impacted.
A shortage of qualified registered nursing staff, pharmacists and other professionals could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs.
Our business relies on our ability to attract, train and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities. From time to time, and particularly in recent years, there have been shortages of nursing staff, pharmacists and other professionals in certain local and regional markets. As a result, we are often required to compete for personnel with other healthcare systems and our competitors. Our ability to attract, train and retain personnel depends on several factors, including our ability to provide them with engaging assignments and competitive salaries and benefits. We may not be successful in any of these areas.
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In addition, where labor shortages arise in markets in which we operate, we have faced higher costs to attract personnel and we have had to provide them with more attractive benefit packages than originally anticipated or are being paid in other markets where such shortages do not exist at the time. In either case, such circumstances cause operating costs to increase and our profitability to decline. Finally, if we expand our operations into geographic areas where healthcare providers historically have unionized or unionization occurs in our existing geographic areas, negotiating collective bargaining agreements may have a negative effect on our ability to timely and successfully recruit qualified personnel and on our financial results. If we are unable to attract, train and retain nursing staff, pharmacists and other professionals, the quality of our services may decline and we could lose patients and referral sources, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Introduction of new drugs, accelerated adoption of existing lower margin drugs or withdrawal of existing drugs could adversely affect our revenues and profitability when prescribers prescribe these drugs for their patients or they are mandated by Third-Party Payers.
The pharmaceutical industry pipeline of new drugs includes many drugs that over the long term may replace older, more expensive therapies. As a result of such older drugs losing patent protection and being replaced by generic substitutes, new and less expensive delivery methods (such as when an infusion or injectable drug is replaced with an oral drug) or additional products that are added to a therapeutic class, increase price competition among competing manufacturers’ products in that therapeutic category. We have experienced a decrease in revenue and net income as a result of the withdrawal from the market of a drug related to the treatment of pre-term labor and the introduction of an oral alternative drug related to the treatment of ALS. In such cases, manufacturers have the ability to increase drug acquisition costs or lower the selling price of replaced products. These actions could negatively impact our revenues and/or profitability.
Failure to develop new services or adapt to changes and trends within the healthcare industry may adversely affect our business.
We operate in a highly competitive environment. We develop new services from time to time to assist our clients. If we are unsuccessful in developing innovative services, our ability to attract new clients and retain existing clients may suffer.
Technology, including the ability to capture and report outcomes, is also an important component of our business as we continue to utilize new and better channels to communicate and interact with our clients, members and business partners. If our competitors are more successful than us in employing new technology, our ability to attract new clients, retain existing clients and operate efficiently may suffer. Any significant shifts in the structure of the healthcare products and services industry in general could alter the industry dynamics and adversely affect our ability to attract or retain clients. Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.
Changes in future business conditions could cause business investments and/or recorded goodwill to become impaired, and our financial condition and results of operations could suffer if there is an impairment of goodwill.
Our acquisitions resulted in significant goodwill reported on our financial statements. Goodwill results when the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired. We may not realize the full value of this goodwill. As such, we evaluate on at least an annual basis whether events and circumstances indicate that all or some of the carrying value of goodwill is no longer recoverable, in which case we would recognize the unrecoverable goodwill as a charge against our earnings. The Company completes its goodwill impairment test annually in the fourth quarter on a qualitative basis. If the fair value is more likely than not less than the carrying value, a quantitative assessment would be performed. When evaluating goodwill for potential impairment on a quantitative basis, we compare the fair value of our reporting units to their respective carrying amounts. We estimate the fair value of our reporting units using the income approach. If the carrying amount of a reporting unit exceeds its estimated fair value, a goodwill impairment loss is recognized in an amount equal to the excess to the extent of the goodwill balance. The income approach requires us to estimate a number of factors for our reporting units, including projected future operating results, economic projections, anticipated future cash flows, and discount rates. The fair value determined using the income approach is then compared to marketplace fair value data from within a comparable industry grouping for reasonableness. Because of the significance of our goodwill, any future impairment could result in material non-cash charges to our results of operations, which could have an adverse effect on our financial condition and results of operations.

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A significant change in, or noncompliance with, governmental regulations and other legal requirements could have a material adverse effect on our reputation and profitability.
We operate in complex, highly regulated environments and could be materially and adversely affected by changes to applicable legal requirements including the related interpretations and enforcement practices, new legal requirements and/or any failure to comply with applicable regulations. Our home infusion and alternate site infusion businesses are subject to numerous federal, state and local laws and regulations. See “Business - Government Regulation.” Changes in these regulations may require extensive changes to our systems and operations that may be difficult to implement. Untimely compliance or noncompliance with applicable laws and regulations could adversely affect the continued operation of our business as a result of civil or criminal penalties, including but not limited to: imposition of monetary penalties; suspension of payments from government programs; loss of required government certifications or approvals; suspension or exclusion from participation in government reimbursement programs; or loss of licensure. Reductions in reimbursement by Medicare, Medicaidlicensing and other governmental payors could adversely affect our business as well. requirements for pharmacies and reimbursement arrangements.
The lawfederal and state statutes and regulations to which we are subject include, but are not limited to, laws requiring the registration and regulation of pharmacies; laws governing the dispensing of pharmaceuticals and controlled substances; laws regulating the protection of the environment and health and safety matters, including those governing exposure to, and the management and disposal of, hazardous substances; laws regarding food and drug safety, including those of the FDA and the DEA; applicable governmental payer regulations, including those applicable to Medicare and Medicaid; data privacy and security laws, including HIPAA and its associated regulations; federal and state fraud and abuse laws, including, but not limited to, the Anti-Kickback Statute and Stark Law, and state counter parts; HIPAA; False Claims Act; Civil Monetary Penalties Act;false claims laws; trade regulations, promulgated byincluding those of the FDA, U.S. Federal Trade Commission DEA, HHS(“FTC”), the U.S. Foreign Corrupt Practices Act (the “FCPA”) and CMS,similar anti-corruption laws in connection with the services provided by certain of our contractors; and regulations of individual state regulatory authorities. In that regard, our businessconsumer protection and consolidated financial statements could be affected by one or moresafety laws, including those of the following:Consumer Product Safety Commission.

We are required to hold valid DEA and state-level licenses, meet various security and operating standards and comply with federal and various state lawscontrolled substance acts and related regulations governing the purchase,sale, dispensing, disposal, holding and distribution management, compounding, dispensingof controlled substances. The DEA, the FDA and reimbursementstate regulatory authorities have broad enforcement powers, including the ability to seize or recall products and impose significant criminal, civil and administrative sanctions for violations of prescription drugs and related services, including state and federal controlled substancesthese laws and regulations;regulations.
rulesWe use, disclose and regulations issued pursuantotherwise process personally identifiable information, including health information, making us subject to HIPAA and HITECH; and other federal and state laws affectingprivacy and security regulations, and failure to comply with those regulations or to adequately secure the use, disclosureinformation we hold could result in significant liability or reputational harm and, transmission of health information, such as state security breach notification laws and state laws limiting the use and disclosure of prescriber information;
administration of Medicare and state Medicaid programs, including legislative changes and/or rulemaking and interpretation;
federal and state laws and regulations that require reporting and public dissemination of payments to and between various health care providers and other industry participants;
government regulation of the development, administration, review and updating of formularies and drug lists;
managed care reform and plan design legislation, including state laws regarding out-of-network charges and participation; and
federal or state laws governing our relationships with physicians or others in a position to refer to us.

The Affordable Care Act and other healthcare reform effortsturn, could have a material adverse effect on our business.patient base and revenue.

In recent years, healthcare reform efforts atWe are also governed by federal and state levelslaws of governmentgeneral applicability, including laws regulating matters of working conditions, health and safety and equal employment opportunity and other labor and employment matters as well as employee benefits, competition, antitrust, taxation and escheatment matters. Material violations of any such laws could have resulteda material adverse effect on our patient base and revenue. In addition, we could have significant exposure if we are found to have infringed another party’s intellectual property rights.
Changes in sweeping changes tolaws, regulations and policies and the deliveryrelated interpretations and financingenforcement practices may alter the landscape in which we do business and may significantly affect our cost of health care. The Affordable Care Act is the most prominent of these efforts. However, there is substantial uncertainty regarding its net effect and its future. The presidential administration and certain members of Congress continue to attempt to repeal or make significant changes to the Affordable Care Act, its implementation and its interpretation. It is impossible to predict the full impact of the Affordable Care Act and related regulations ordoing business, the impact of its modification onwhich generally cannot be predicted. Such changes may require extensive system and operational changes, be difficult to implement, increase our operationsoperating costs and require significant capital expenditures. Ultimately, our noncompliance with applicable laws and regulations could result in lightthe imposition of the uncertainty regarding whether, when or how the law will be changedcivil and what alternative reforms, if any, may be enacted. Health reform efforts maycriminal penalties that could adversely affect our customers, which may cause them to reduce or delay usethe continued operation of our productsbusiness, including: suspension of payments from government programs; loss of required government certifications; loss of authorizations to participate in or exclusion from government programs, including the Medicare and services. As such, we cannot predict the impactMedicaid programs; loss of the Affordable Care Actlicenses; and significant fines or monetary penalties. Any failure to comply with applicable regulatory requirements could result in significant legal and financial exposure, damage our reputation, and have a material adverse effect on our business operations, or financial performance.

condition and results of operations.
Federal actions and legislation may reduce reimbursement rates from governmental payorspayers and adversely affect our results of operations.

In recent years, Congress has passed legislation reducing payments to healthcare providers. The Budget Control Act of 2011, as amended, requires automatic spending reductions to reduce the federal deficit, including Medicare spending reductions of up to 2% per fiscal year. CMSyear that extend through 2027. The Center for Medicare & Medicaid Services (“CMS”) began imposing a 2% reduction on Medicare claims on April 1, 2013. These reductions have been extended through 2027.


In addition, theThe Affordable Care Act provides for material reductions in the growth of Medicare program spending. FromThe 21st Century Cures Act (the “Cures Act”) significantly reduced the amount paid by Medicare for drug costs, while delaying the implementation of a clinical services payment, although Congress also passed a temporary transitional service payment that took effect January 1, 2019. In addition, from time to time, CMS revises the reimbursement systems used to reimburse health carehealthcare providers, which may result in reduced Medicare payments.
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For the year ended December 31, 2023, 12% of our revenue was derived from reimbursement by direct federal and state programs such as Medicare and Medicaid. Reimbursement from these and other government programs is subject to statutory and regulatory requirements, administrative rulings, interpretations of policy, implementation of reimbursement procedures, retroactive payment adjustments, governmental funding restrictions and changes to or new legislation, all of which may materially affect the amount and timing of reimbursement payments to us. Changes to the way Medicare pays for our services, including mandatory payment reductions, such as sequestration, may reduce our revenue and profitability on services provided to Medicare patients and increase our working capital requirements. In addition, we are sensitive to possible changes in state Medicaid programs.
Because most states must operate with balanced budgets and because the Medicaid program is often a state’s largest program, some states have enacted or may consider enacting legislation designed to reduce their Medicaid expenditures. Further, many states have taken steps to reduce coverage and/or enroll Medicaid recipients in managed care programs. The current economic environment has increased the budgetary pressures on many states, and these budgetary pressures have resulted, and likely will continue to result, in decreased spending, or decreased spending growth, for Medicaid programs and the Children’s Health Insurance Program in many states. In addition, the Cures Act significantly reduced the amount paid by Medicare for the drug costs, while delaying the implementation of a clinical services payment, though Congress passed a temporary transitional service payment that takes effect January 1, 2019.

In some cases, Third Party PayorsThird-Party Payers rely on all or portions of Medicare payment systems to determine payment rates. Changes to government health carehealthcare programs that reduce payments under these programs may negatively impact payments from Third Party Payors.Third-Party Payers. Current or future health carehealthcare reform and deficit reduction efforts, changes in other laws or regulations affecting government health carehealthcare programs, changes in the administration of government health carehealthcare programs and changes in payment rates by Third Party PayorsThird-Party Payers could have a material, adverse effect on our financial position and results of operations.

Delays in reimbursement may adversely affect our liquidity, cash flows and results of operations.
The reimbursement process for the services we provide is complex, resulting in delays between the time we bill for a service and receipt of payment that can be significant. Reimbursement and procedural issues often require us to resubmit claims multiple times and respond to multiple administrative requests before payment is remitted. The collection of accounts receivable is challenging and requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures. While management believes that our controls and processes are satisfactory, there can be no assurance that collections of accounts receivable will continue at historical rates. The risks associated with Third-Party Payers and the inability to collect outstanding accounts receivable could have a material adverse effect on our liquidity, cash flows and results of operations.
We are subject to pricing pressures and other risks involved with Third-Party Payers.
Competition to provide healthcare services, efforts by traditional Third-Party Payers to contain or reduce healthcare costs, and the increasing influence of managed care payers such as HMOs, has resulted in reduced rates of reimbursement for home infusion and specialty pharmacy services. Changes in reimbursement policies of governmental Third-Party Payers, including policies relating to Medicare, Medicaid and other federal and state funded programs, could reduce the amounts reimbursed to our customers for our products and, in turn, the amount these customers would be willing to pay for our products and services, or could directly reduce the amounts payable to us by such payers. Pricing pressures by Third-Party Payers may continue, and these trends may adversely affect our business.
Also, continued growth in managed care plans has pressured healthcare providers to find ways of becoming more cost competitive. MCOs have grown substantially in terms of the percentage of the population they cover and in terms of the portion of the healthcare economy they control. MCOs have continued to consolidate to enhance their ability to influence the delivery of healthcare services and to exert pressure to control healthcare costs. A rapid concentration of revenue derived from individual managed care payers could harm our business.
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We face periodic reviews and billing audits by governmental and private payors, and these auditspayers, which could haveresult in adverse findings that may negatively impact our business.

business.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental reviews and audits to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various government programs in which third partythird-party firms engaged by CMS conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. Private pay sourcesThird-Party Payers may also conduct audits. Disputes with payorspayers can arise from these reviews. PayorsPayers can claim that payments based on certain billing practices or billing errors were made incorrectly. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed, which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend claims, reviews and audits may be significant and could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Moreover, an adverse claim, review or audit could result in:

•required refunding or retroactive adjustment of amounts we have been paid by governmental payers or private payors;Third-Party Payers;
•state or Federalfederal agencies imposing fines, penalties and other sanctions on us;
•suspension or exclusion from the Medicare program, state programs, or one or more private payorthird-party payer networks; or
•damage to our business and reputation in various markets.

These results could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.

If any of our pharmacies fail to comply with the conditions of participation in the Medicare program, that pharmacy could be terminated from Medicare, which could adversely affect our consolidated financial statements.

Our pharmacies must comply with the extensive conditions of participation in the Medicare program. These conditions vary depending on the type of facility, but, in general, require our facilities to meet specified standards relating to licensure, personnel, patient rights, patient care, patient records, physical site, administrative reporting and legal compliance. If a pharmacy fails to meet any of the Medicare supplier standards, that pharmacy could be terminated from the Medicare program. We respond in the ordinary course to deficiency notices issued by surveyors, and none of our pharmacies has ever been terminated from the Medicare program for failure to comply with the Medicare supplier standards. Any termination of one or more of our pharmacies from the Medicare program for failure to satisfy the Medicare supplier standards could adversely affect our consolidated financial statements.

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We cannot predict the impact of changing requirements on compounding pharmacies.

Compounding pharmacies are closely monitored by federal and state governmental agencies. We believe that our compounding is doneperformed in safe environments, and we have clinically appropriate policies and procedures in place. We only compound pursuant to a patient specificpatient-specific prescription and do so in compliance with USP 797 standards. The DQSA amended the FDCA to grant the FDA additional authority to regulate and monitor the manufacturing of compounded pharmaceutical drugs. In 2013, Congress passed the DQSA, which creates a new category of compounderscompounding facilities called outsourcing facilities whichthat are regulated by the FDA. The Company complies with all federal and state regulations, as well as all PCAB Accreditation Standards for Sterile and Non-Sterile Pharmacy Compounding, and pursues accreditation from quality associations. The Company believes it complies in all material respects with all applicable requirements of a non-outsourcing-facility pharmacy, as outlined in Section 503A of the FDCA. Title II of this measure, known as the Drug Supply Chain Security Act (“DSCSA”), established requirements in November 2013 to facilitate the tracing of prescription drug products through the pharmaceutical supply distribution chain. These requirements included a 10-year timeline culminating in the building of "an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” The law’s track and trace requirements are applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs. The Company is currently materially compliant with the DSCSA provisions currently in effect. The Company also expects to be materially compliant with the additional provisions of DSCSA, which requires the electronic receipt and exchange of transaction information (with specific product identifiers for each package) and transaction statements, by the November 2023 effective date. These regulatory measures, future DSCSA regulatory measures and the potential for increased DSCSA enforcement by the FDA could increase pharmacy costs. Noncompliance with these regulations could have an adverse impact on our reputation and profitability.
We do not believe that our current compounding practices qualify us as an outsourcing facility and, therefore, we continue to operate consistently with USP 797 standards.standards and applicable state pharmacy laws. Should state regulators or the FDA disagree, or should our business practices change to qualify us as an outsourcing facility, there is a risk of regulatory action and/or increased resources required to comply with federal requirements imposed

pursuant to the DQSA on outsourcing facilities that could significantly increase our costs or otherwise affect our results of operations. Furthermore, we cannot predict the overall impact of increased scrutiny on compounding pharmacies.

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Competition in the healthcare industry may adversely affect our business.Risks Relating to Our Indebtedness

The healthcare industry is very competitive. Our competitors include large and well-established companies that may have greater financial, marketing and technological resources than we do. Some of our competitors are under common control with, or owned by, pharmaceutical wholesalers and distributors, managed care organizations, pharmacy benefit managers or retail pharmacy chains and may be better positioned with respect to the cost-effective distribution of pharmaceuticals. In addition, some of our competitors may have secured long-term supply or distribution arrangements for prescription pharmaceuticals necessary to treat certain chronic disease states on price terms substantially more favorable than the terms currently available to us. As a result of such advantageous pricing, we may be less price competitive than some of these competitors with respect to certain pharmaceutical products. ACOs and other clinical integration models may result in lower reimbursement rates. Some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise interfere with the ability of managed care companies to contract with us. Increasing consolidation in the payer and supplier industries, including vertical integration efforts among insurers and providers and suppliers, and cost-reduction strategies by large employer groups and their affiliates may limit our ability to negotiate favorable terms and conditions in our contracts and otherwise intensify competitive pressure. In addition, our competitive position could be adversely affected by any inability to obtain access to new biotech pharmaceutical products.

Changes in the case mix of patients, as well as payment methodologies, payor mix or pricingexisting indebtedness could adversely affect our consolidated financial statements.business and growth prospects.

The sourcesAs of December 31, 2023, we had $1,088.0 million of outstanding borrowings, including (i) $588.0 million under our First Lien Term Loan (as defined herein) and amounts(ii) $500.0 million under our 4.375% Senior Unsecured Notes due 2029 (the “Senior Notes”). All obligations under the First Lien Term Loan are secured by first-priority perfected security interests in substantially all of our patient revenue are determined by a number of factors, including the mix of patientsassets and the ratesassets of reimbursement among payors. Changesour subsidiaries, subject to permitted liens and other exceptions. Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
Our indebtedness, the cash flow needed to satisfy our debt and the covenants contained in our credit agreements and indenture have important consequences, including but not limited to:
•limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt;
•limiting our ability to incur additional indebtedness;
•limiting our ability to capitalize on significant business opportunities;
•making us more vulnerable to rising interest rates; and
•making us more vulnerable in the case mixevent of a downturn in our business.
Our level of indebtedness may place us at a competitive disadvantage to our competitors that are not as highly leveraged. Fluctuations in interest rates can increase borrowing costs. Increases in interest rates may directly impact the patients, payment methodologies, payor mix or pricing among privateamount of interest we are required to pay Medicare and Medicaid may significantly affect our consolidated financial statements.

Changesreduce earnings accordingly. In addition, developments in industry pricing benchmarks could adversely affect our financial performance.

Contracts within our business generally use certain published benchmarks to establish pricingtax policy, such as the disallowance of tax deductions for the reimbursement of prescription medications dispensed by us. These benchmarks include AWP, wholesale acquisition cost and average manufacturer price. Many of our contracts utilize the AWP benchmark. Publication of the AWP benchmark was expected to cease in 2011 as a result of the settlement of class-action lawsuits brought against First DataBank and Medi-Span, third-party publishers of various pricing benchmarks. However, Medi-Span continues to publish the AWP benchmark and has indicated that it will continue to do so until a new benchmark is widely accepted. Several industry participants have explored establishing a new benchmark but there is not currently a viable generally accepted alternative to the AWP benchmark. Without a suitable pricing benchmark in place many of our contracts will have to be modified and could potentially change the economic structure of our agreements.

Contract renewals, or lack thereof, with key revenue sources and key business relationships could result in less favorable pricing, loss of exclusivity and/or reduced distribution and access to customers, whichinterest paid on outstanding indebtedness, could have an adverse effect on our business, financial conditionliquidity and results of operations.

We have contractual and business relationships with key revenue sources, including Third Party Payors. Our future growth and success depends on our ability to maintain these relationships and renew such contracts on acceptable terms. However, we may not be able to continue to maintain these relationships. We may have disputes with Third Party Payors regarding these contractual relationships; these disputes may also disrupt our ongoing contractual relationships with these payors. Any break in these key business relationships could result in lost contracts and reduce our access to certain customers and distribution channels. Further, when these contracts near expiration, we may not be able to successfully renegotiate acceptable terms. Any increase in pricing or loss of exclusivity could result in reduced margins. Accordingly, it is possible that our ongoing efforts to renew contracts and business relationships with such key revenue sources as Third Party Payors could result in less favorable pricing or even reduced access to customers and distribution channels, any of which could have an adverse effect on our business, financial condition and results of operations. In addition, even when such contractsFurther, our credit agreements and indenture contain customary affirmative and negative covenants and certain restrictions on operations that could impose operating and financial limitations and restrictions on us, including restrictions on our ability to enter into particular transactions and to engage in other actions that we may believe are renewed, theyadvisable or necessary for our business. Our First Lien Term Loan is also subject to mandatory prepayments in certain circumstances and requires a prepayment of a certain percentage of our excess cash flow. This excess cash flow payment, and future required prepayments, will reduce our cash available for investment in our business.
We expect to use cash flow from operations to meet current and future financial obligations, including funding our operations, debt service requirements and capital expenditures. The ability to make these payments depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control.
Despite our indebtedness, we may still incur significantly more debt, which could exacerbate the risks associated with our substantial leverage.
We may incur additional indebtedness, including additional secured indebtedness, in the future, in connection with future acquisitions, strategic investments and strategic relationships. Although the financing documents governing our indebtedness contain covenants and restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions, including secured debt, could be substantial. Adding additional debt to current debt levels could exacerbate the leverage-related risks described above.
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We may not be able to generate sufficient cash flow to service all of our indebtedness and may be renewed for onlyforced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.
Our ability to make scheduled payments or to refinance outstanding debt obligations depends on our financial and operating performance, which will be affected by prevailing economic, industry and competitive conditions and by financial, business and other factors beyond our control. We may not be able to maintain a short term or may be terminablesufficient level of cash flow from operating activities to permit us to pay the principal, premium, if any, and interest on relatively short notice.

Weour indebtedness. Any failure to make payments of interest and certainprincipal on our outstanding indebtedness on a timely basis would likely result in a reduction of our former directorscredit rating, which would also harm our ability to incur additional indebtedness.
If our cash flow and executive officers were named as defendants in a derivative complaint andcapital resources are insufficient to fund our debt service obligations, we may be subjectrequired to similarreduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such cash flow and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service obligations. The financing documents governing our First Lien Term Loan, Revolver Facility (as defined herein) and our Senior Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales. We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair and any proceeds that we do receive may not be adequate to meet any debt service obligations then due. If we cannot meet our debt service obligations, the holders of our indebtedness may accelerate such indebtedness and, to the extent such indebtedness is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our indebtedness.
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Risks Relating to Our Common Stock
Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
Our third amended and restated certificate of incorporation contains provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. Among other things, these provisions:
•allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of stockholders;
•provide that directors may be removed with or without cause only by the affirmative vote of holders of at least 66 2∕3% of the voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class;
•prohibit stockholder action by written consent; and
•provide that any amendment, alteration, rescission or repeal of our bylaws or certificate of incorporation by our stockholders will require the affirmative vote of the holders of at least 66 2∕3% of the voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class.
These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for shareholders or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed by our then-current Board, including delay or impede a merger, tender offer or proxy contest involving the Company. The existence of these provisions could negatively affect the price of our common stock and limit opportunities to realize value in a corporate transaction.
Moreover, Section 203 of the Delaware General Corporation Law (“DGCL”) may discourage, delay, or prevent a change of control of the Company. Section 203 of the DGCL imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.
Our third amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our third amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees and stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, our third amended and restated certificate of incorporation or our bylaws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that, for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action”, will not apply to suits to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our third amended and restated certificate of incorporation will further provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our third amended and restated certificate of incorporation described above. The forum selection clause in our third amended and restated certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
We may issue shares of preferred stock in the future.

Certainfuture, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our currentcommon stock, which could depress the price of our common stock.
Our third amended and former directorsrestated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our Board of Directors has the authority to determine the preferences, limitations and executive officers were named as defendants in a derivative complaint (the “Derivative Complaint”) that generally alleged that certain defendants breached their fiduciary dutiesrelative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with respectvoting, liquidation, dividend and other rights superior to the Company’s

public disclosures, oversightrights of Company operations, secondaryour common stock. The potential issuance of preferred stock offerings andmay delay or prevent a change in control, discouraging bids for our common stock sales. The Company was also named asat a nominal defendant in the Derivative Complaint. The Derivative Complaint also contended that certain defendants aided and abetted those alleged breaches. On April 18, 2017, the Court granted the defendants’ motion to dismiss, and on November 27, 2017 the Delaware Supreme Court affirmed the dismissal. Additional demands and lawsuits relatedpremium to the same factsmarket price, and circumstances, however, couldmaterially and adversely affecting the market price and the voting and other rights of the holders of our common stock.
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We cannot guarantee that our stock repurchase program will be pursued infully implemented or that it will enhance long-term stockholder value.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In February 2023, the future.

Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $250 million of our common stock. In that event, there isDecember 2023, the Board of Directors approved an increase to its stock repurchase program authorization from $250 million to $500 million. The repurchase program does not have an expiration date, and we are not obligated to repurchase a specified number or dollar value of shares, on any particular timetable or at all. There can be no assurance that any defenseswe will be successful or that insurance will be available or adequate to fund any settlement, judgment or litigation costs associated with this action. Certain of the defendants may also seek indemnification from the Company pursuant to certain indemnification agreements, for which thererepurchase stock at favorable prices. The repurchase program may be no insurance coverage.suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value.

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Any conclusion in this matter or in any related manner adverse to us would have an adverse effect on our financial condition and business and the Company. We could incur substantial costs not covered by our directors’ and officers’ liability insurance, suffer a significant adverse impact on our reputation and divert management’s attention and resources from other priorities, including the execution of business plans and strategies that are important to our ability to grow our business, any of which could have an adverse effect on our business.

General Risk Factors
Pending and future litigation could subject us to significant monetary damages and/or require us to change our business practices.

We employ pharmacists, dieticians, nurses and other healthcare professionals. We are subject to liability for negligent acts, omissions, or injuries occurring at any of our clinics or caused by any of our employees. We are subject to risks relating to asserted claims, litigation and other proceedings in connection with our operations. We are facing, or may face, claims or become a party to a variety of legal actions that affect our business, including breach of contract actions, employment and employment discrimination-related suits, employee benefit claims, stockholder suits and other securities laws claims, and tort claims. Due to the nature of our business, we, through our employees and caregivers who provide services on our behalf, may be the subject of medical malpractice claims. A court could find these individuals should be considered our agents, and as a result, we could be held liable for their acts or omissions.
We may incur substantial expenses in defending such claims or litigation, regardless of merit, and such claims or litigation could result in a significant diversion of the efforts of our management personnel. Successful claims against us may result in monetary liability or a material disruption in the conduct of our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. See Note 14, Commitments and Contingencies, of the consolidated financial statements included in Item 3-Legal Proceedings8 of this Annual Report for a description of material proceedings pending against us.the Company. We believe that these suitsproceedings are without merit and, to the extent they are not already concluded, we intend to contest them vigorously. However, an adverse outcome in one or more of these suitsproceedings may have a material adverse effect on our consolidated results of operations, consolidated financial position, and/or consolidated cash flow from operations, or may require us to make material changes to our business practices.

We periodically respond to subpoenas and requests for information from governmental agencies. To our knowledge, we are not a target or a potential subject of a criminal investigation. But we cannot predict with certainty whether we may in the future become a target or potential target of an investigation or the subject of further inquiries or ultimately settlements with respect to the subject matter of any subpoenas. In addition to potential monetary liability arising from suits and proceedings, from time to time we incur costs in providing documents to government agencies. Current pending claims and associated costs may be covered by our insurance, but certain other costs are not insured. Such costs may increase and/or continue to be material to our performance in the future.

In addition, as we continue our strategic assessment and cost reduction efforts, there is an increased risk of employment and workers compensation-related litigation and/or administrative claims brought against us. We would defend against any and all such litigation and claims, as appropriate. Such claims could have a material adverse effect on our consolidated financial statements in any particular reporting period.

Our acquisition strategy exposes us to a variety of operational and financial risks.

A principal element of our historic business strategy has been to grow by acquiring other companies and assets in the home infusion and complementary businesses. Growth, especially rapid growth, through acquisitions exposes us to a variety of operational and financial risks. We summarize the most significant of these risks below.

Integration risks. We must integrate our acquisitions with our existing operations. This process includes the integration of the various components of our business (including the following) and of the businesses we have acquired or may acquire in the future:

health care professionals and employees who are not familiar with our policies and procedures;
clients who may terminate their relationships with us;
key employees who may seek employment elsewhere;
patients who may elect to switch to another health care provider;
regulatory compliance programs; and
disparate operating, information and record keeping systems and technology platforms.

Integrating an acquisition could be expensive and time consuming and could disrupt our ongoing business, negatively affect cash flow and distract management and other key personnel from day-to-day operations.

We may not be able to combine successfully the operations of acquired companies with our operations, and, even if such integration is accomplished, we may never realize the potential benefits of the acquisition. The integration of acquisitions requires significant attention from management, may impose substantial demands on our operations or other projects and may impose challenges on the combined business including, but not limited to, consistencies in business standards, procedures, policies and business cultures. If we fail to complete ongoing integration efforts, we may never fully realize the potential benefits of the related acquisitions.

Benefits may not materialize. When evaluating potential acquisition targets, we identify potential synergies and cost savings that we expect to realize upon the successful completion of the acquisition and the integration of the related operations. We may, however, be unable to achieve or may otherwise never realize the expected benefits. Our ability to realize the expected benefits from improvements to companies we acquire are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, such as changes to government regulation governing or otherwise impacting our industry, reductions in reimbursement rates from Third Party Payors, reductions in service levels under our contracts, operating difficulties, client preferences, changes in competition and general economic or industry conditions. If we are unsuccessful in implementing these improvements or if we do not achieve our expected results, it may adversely impact our results of operations.

Assumptions of unknown liabilities. Companies that we acquire may have unknown or contingent liabilities, including, but not limited to, liabilities for failure to comply with healthcare laws and regulations. We may incur material liabilities for the past activities of acquired operations. Such liabilities and related legal or other costs and/or resulting damage to our reputation could negatively impact our business through lower-than-expected operating results, charges for impairment of acquired intangible assets or otherwise.

Competing for acquisitions. We face competition for acquisition candidates primarily from other home infusion and other healthcare companies. Some of our competitors have greater resources than we do. As a result, we may pay more to acquire a target business or may agree to less favorable deal terms than we would have otherwise. Accurately assessing the value of acquisition candidates is often very challenging. Also, suitable acquisitions may not be available due to unfavorable terms.

Further, the cost of an acquisition could result in a dilutive effect on our results of operations, depending on various factors, including employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed branches/offices.

Improving financial results. Some of the operations we have acquired or may acquire in the future may have had significantly lower operating margins than our current operations. If we fail to improve the operating margins of the companies we acquire, operate such companies profitably or effectively integrate the operations of the acquired companies, our results of operations could be negatively impacted.

Acquisitions, strategic investments and strategic relationships involve certain risks.

We may pursue opportunistic acquisitions, strategic investments in, or strategic relationships with businesses and technologies. Acquisitions may entail numerous risks, including difficulties in assessing values for acquired businesses, intangible assets and technologies, difficulties in the assimilation of acquired operations and products, diversion of management’s attention from other business concerns, assumption of unknown material liabilities of acquired companies, amortization of acquired intangible assets which could reduce future reported earnings, and potential loss of clients or key employees of acquired companies. We may not be able to successfully fully integrate the operations, personnel, services or products that we have acquired or may acquire in the future. Strategic investments may also entail some of the risks described above. If these investments are unsuccessful, we may need to incur charges against earnings. We may also pursue a number of strategic relationships. These relationships and others we may enter into in the future may be important to our business and growth prospects. We may not be able to maintain these relationships or develop new strategic alliances.

We may incur significant costs in connection with our evaluation of new business opportunities and suitable acquisition candidates.

Our management intends to identify, analyze and evaluate potential new business opportunities, including possible acquisition and merger candidates. We may incur significant costs, such as due diligence and legal and other professional fees and expenses,

as part of these efforts. Notwithstanding these efforts and expenditures, we may not be able to identify an appropriate new business opportunity, or any acquisition opportunity, in the near term, or at all.

If our remedial measures are insufficient to address material weaknesses and we are unable to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud. 

During fiscal year 2017, management identified a material weakness in our internal control over financial reporting with respect to the continuous risk assessment process and monitoring activities meant to identify possible risks of material misstatement in our financial reporting processes. In connection with management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2017, we concluded there was a material weakness related to internal controls as described in Item 9A - Controls and Procedures. While we have implemented certain measures that we believe will remediate this material weakness, we can provide no assurance that our remediation efforts will be effective. The Company’s remediation plan is also described in Item 9A - Controls and Procedures.

Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, detected or corrected on a timely basis.

If additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, there exists a risk that our consolidated financial statements may contain material misstatements that are unknown to us at that time, and such misstatements could require us to restate our financial results. Our management or our independent registered public accounting firm may identify other material weaknesses in our internal control over financial reporting in the future. The existence of a material weakness in our internal control over financial reporting may result in current and potential stockholders losing confidence in our financial reporting, which could negatively impact the market price of our common stock (“Common Stock”).

In addition, the existence of material weaknesses in our internal control over financial reporting may affect our ability to timely file periodic reports under the Exchange Act and may consequently result in the SEC revoking the registration of our Common Stock, the NASDAQ Global Market delisting our Common Stock or a default or an event of default under our Notes Facilities and our 2021 Notes (each, as defined below). Any of these events could have a material adverse effect on the market price of our Common Stock or on our business, financial condition and results of operations.

We may be subject to liability claims for damages and other expenses that are not covered by insurance.

As a result of operating in the home infusion industry, our business is subject to inherent risk of claims, losses and potential lawsuits alleging incidents involving our employees that are likely to occur in a patient’s home. We maintain professional liability insurance to provide coverage to us and our subsidiaries against these risks. A successful product or professional liability claim in excess of our insurance coverage could harm our consolidated financial statements. Various aspects of our business may subject us to litigation and liability for damages. For example, a prescription drug dispensing error could result in a patient receiving the wrong or incorrect amount of medication, leading to personal injury or death. Our business and consolidated financial statements could suffer if we pay damages or defense costs in connection with a claim that is outside the scope of any applicable contractual indemnity or insurance coverage.

Our insurance coverage also includes property liability, cyber liability, clinical trials liability, crime liability, auto liability, workers’ compensation, employers’ liability, executive liability policies (employment practices liability, fiduciary liability, directors’ and officers’ liability), umbrella/excess liability and general liability with varying limits. We cannot assure that the insurance we maintain will satisfy claims made against us or that insurance coverage will continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms or at all. Claims made against us will be subject to the terms, conditions and exclusions of the insurance policies we maintain. Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business.
ChangesOur insurance coverage also includes fire, property damage and general liability with varying limits. We cannot assure that the insurance we maintain will satisfy claims made against us or that insurance coverage will continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms. Any claims made against us, regardless of their merit or eventual outcome, could damage our relationships with pharmaceutical suppliers, including changesreputation and business.
Pressures relating to downturns in drug availability or pricing,the economy could adversely affect our business and consolidated financial results.statements.

Medicare and other federal and state payers account for a portion of our revenues. During economic downturns and periods of stagnant or slow economic growth, federal and state budgets are typically negatively affected, resulting in reduced reimbursements or delayed payments by the federal and state government healthcare coverage programs in which we participate, including Medicare, Medicaid, and other federal or state assistance plans. Government programs could also slow or temporarily suspend payments, negatively impacting our cash flow and increasing our working capital needs and interest payments. We have seen, and believe we will continue to see, Medicare and state Medicaid programs institute measures aimed at controlling spending growth, including reductions in reimbursement rates.
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Higher unemployment rates and significant employment layoffs and downsizings may lead to lower numbers of patients enrolled in employer-provided plans. Adverse economic conditions could also cause employers to stop offering, or limit, healthcare coverage, or modify program designs, shifting more costs to the individual and exposing us to greater credit risk from patients or the discontinuance of therapy.
The general levels of inflation and specific inflationary pressures that we have experienced in areas such as labor, transportation and medical supplies may continue to persist due to events outside of our control, for example, the COVID-19 pandemic and other potential pandemic events, supply chain disruptions, and the broader macro-economic environment. The sustained or continued rise of inflation may adversely impact our business operations, financial condition and results of operations.
Acquisitions, strategic investments and strategic relationships involve certain risks.
We have contractualmay pursue acquisitions of strategic investments in, or strategic relationships with pharmaceutical manufacturersbusinesses and technologies. Acquisitions may entail numerous risks, including difficulties in assessing values for acquired businesses, intangible assets and technologies, difficulties in the assimilation of acquired operations and products, diversion of management’s attention from other business concerns, assumption of unknown material liabilities of acquired companies, amortization of acquired intangible assets that could reduce future reported earnings, and potential loss of clients or key employees of acquired companies. We may not be able to purchasesuccessfully fully integrate the drugsoperations, personnel, services or products that we dispense. Any changeshave acquired or may acquire in the future. Strategic investments may also entail some of the risks described above. If these investments are unsuccessful, we may need to theseincur charges against earnings.
We may also pursue a number of strategic relationships. These relationships including, but not limited,may be important to loss of a manufacturer relationship, drug shortages or changes in pricing, could have an adverse effect on our business and financial results.

We purchase a majority of our pharmaceutical products from one vendor and a disruption in our purchasing arrangements could adversely impact our business.

We purchase a majority of our prescription products, subject to certain minimum periodic purchase levels and excluding purchases of therapeutic plasma products, from a single wholesaler, AmerisourceBergen Drug Corporation (“ABDC”), pursuant to a prime vendor agreement. The term of this agreement extends until December 2019, subject to extension for up to two additional years. Any significant disruption in our relationship with ABDC, or in ABDC’s supply and timely delivery of products to us, would make it difficult and possibly more costly for us to continue to operate our business until we are able to execute a replacement wholesaler agreement. If that were to occur,growth prospects. However, we may not be able to find a replacement wholesaler on a timely basis. Further, such wholesaler may not be able to fulfill our demands on similar financial terms and service levels. If we are unable to identify a

replacement on substantially similar financial terms and/or service levels, our consolidated financial statements may be materially and adversely affected.

A disruption in supply could adversely impact our business.

We also source pharmaceuticals, medical supplies and equipment from other manufacturers, distributors and wholesalers. Most of the pharmaceuticals that we purchase are available from multiple sources, and we believe they are available in sufficient quantities to meet our needs and the needs of our patients. We keep safety stock to ensure continuity of service for reasonable, but limited, periods of time. Should a supply disruption result in the inability to obtain especially high margin drugs and compound components necessary for patient care, our consolidated financial statements could be negatively impacted.

Prescription volumes may decline, and our net revenues and profitability may be negatively impacted, when products are withdrawn from the market or when increased safety risk profiles of specific drugs result in utilization decreases.

We dispense significant volumes of prescription medications from our pharmacies. Our dispensing volume is the principal driver of revenue and profitability. When products are withdrawn by manufacturers, or when increased safety risk profiles of specific drugs or classes of drugs result in utilization decreases, physicians may cease writing or reduce the numbers of prescriptions written formaintain these higher-risk drugs. Additionally, negative media reports regarding drugs with higher safety risk profiles may result in reduced consumer demand for such drugs. In cases where there are no acceptable prescription drug equivalentsrelationships or alternatives for these prescription drugs, our prescription volumes, net revenues, profitability and cash flows may decline.

Home infusion joint ventures formed with hospitals could adversely affect our financial results.

The home infusion industry is currently seeing renewed activity in the formation of equity-based infusion joint ventures formed with hospitals. This activity stems, in part, from hospitals seeking to position themselves for new paradigms in the delivery of coordinated healthcare and new methods of payment, including an emerging interdisciplinary care model forming that is being labeled as an ACO. These organizations are encouraged by the Affordable Care Act. These entities are designed to save money and improve quality of care by better integrating care, with the healthcare provider possibly sharing in the financial benefits of the new efficiencies.

Participation in equity-based joint ventures offer hospitals and other providers an opportunity to more efficiently transfer patients to less expensive care settings, while keeping the patient within its network. Additionally, it provides many hospitals with a mechanism to invest accumulated profits in a growing sector with attractive margins.

If these home infusion joint ventures continue to expand, then we could lose referrals and our consolidated financial statements could be adversely affected. Also, there are risks and costs associated with joint venture participation. We consider joint ventures with hospitals from time to time.

A shortage of qualified registered nursing staff, pharmacists and other professionals could adversely affect our ability to attract, train and retrain qualified personnel and could increase operating costs.

Our business relies significantly on its ability to attract and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities. From time to time and particularly in recent years, there have been shortages of nursing staff, pharmacists and other professionals in certain local and regional markets. As a result, we are often required to compete for personnel with other healthcare systems and our competitors. Our ability to attract and retain personnel depends on several factors, including our ability to provide them with engaging assignments and competitive salaries and benefits. We may not be successful in any of these areas.

In addition, where labor shortages arise in markets in which we operate, we may face higher costs to attract personnel, and we may have to provide them with more attractive benefit packages than originally anticipated or are being paid in other markets where such shortages don’t exist at the time. In either case, such circumstances could cause our profitability to decline. Finally, if we expand our operations into geographic areas where healthcare providers historically have unionized or unionization occurs in our existing geographic areas, negotiating collective bargaining agreements may have a negative effect on our ability to timely and successfully recruit qualified personnel and on our financial results. If we are unable to attract and retain nursing staff, pharmacists and other professionals, the quality of our services may decline and we could lose patients and referral sources.


Introduction of new drugs or accelerated adoption of existing lower margin drugs could cause us to experience lower revenues and profitability when prescribers prescribe these drugs for their patients or they are mandated by third party payors.

The pharmaceutical industry pipeline of new drugs includes many drugs that over the long term may replace older, more expensive therapies. As a result of such older drugs going off patent and being replaced by generic substitutes, new and less expensive delivery methods (such as when an infusion or injectable drug is replaced with an oral drug) or additional products are added to a therapeutic class, thereby increasing price competition among competing manufacturer’s products in that therapeutic category. In such cases, manufacturers have the ability to increase drug acquisition costs or lower the selling price of replaced products. This could have the effect of lowering our revenues and/or margins.

Acts of God such as major weather disturbances could disrupt our business.

We operate in a network of prescribers, providers, patients and facilities that can be negatively impacted by local weather disturbances and other force majeure events. For example, in anticipation of major weather events, patients with impaired health may be moved to alternate sites. After a major weather event, availability of electricity, clean water and transportation can impact our ability to provide service in the home. In addition, acts of God and other force majeure events may cause a reduction in our business or increased costs, such as increased costs in our operations as we incur overtime charges or redirect services to other locations, delays in our ability to work with payors, hospitals, physicians and other strategic partners on new business initiatives, and disruption to referral patterns as patients are moved out of facilities affected by such events or are unable to return to sites of service in the home.

Failure to develop new services or adapt to changes and trends within the industry may adversely affect our business.

We operate in a highly competitive environment. We develop new services from time to time to assist our clients. If we are unsuccessful in developing innovative services, our ability to attract new clients and retain existing clients may suffer.

Technology, including the ability to capture and report outcomes, is also an important component of our business as we continue to utilize new and better channels to communicate and interact with our clients, members and business partners. If our competitors are more successful than us in employing this technology, our ability to attract new clients, retain existing clients and operate efficiently may suffer. Any significant shifts in the structure of the healthcare products and services industry in general could alter the industry dynamics and adversely affect our ability to attract or retain clients. Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.

strategic alliances.
Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause harm to our business and reputation to suffer.reputation.

Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We relyThe Company relies on ourits information systems to provide security for processing, transmissiontransmitting, and storage ofstoring confidential information about our patients, customers, and personnel, such as names, addresses and other individually identifiable information protected by HIPAA and other privacy laws. Cyber-attacks are increasingly more common, including inthe health care industry.Cyber incidents can result from deliberate attacks or unintentional events. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements.Compliance with changes in privacy and information security laws and with rapidly evolving industry standardsstandards may result in ourthe Company incurring significant expense due to increased investment in technology and the development of new operational processes.

We have not experienced any known attacks on our information technology systems that compromised any confidential information. We maintain our information technology systems with safeguard protectionprotections against cyber-attacks including passive intrusion protection, firewalls and virus detection software. In addition, we provide our employees with extensive training on best ways to protect our patient information, including, among others, avoiding phishing emails and sharing access to sensitive information on a need-only basis. However, these safeguards do not ensure that a significant cyber-attack could not occur. Although we have taken steps to protect the security of our information technology systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personal health information or personally identifiable information such as in the event of cyber-attacks.

Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches can create system disruptions or shutdowns or the unauthorized use or disclosure of confidential information. If personal information or protected health information is improperly accessed, tampered with or disclosed as a result of a security breach, we may incur significant costs to notify, and mitigate potential harm to the affected individuals, and we may be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under HIPAA or other similar federal or state laws protecting confidential personal information. In addition, a security breach of our information technology systems could damage our

reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition, and results of operations.

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The success
Table of our business depends on maintaining a well-secured business and technology infrastructure.Contents

We are dependent on our infrastructure, including our information systems, for many aspects of our business operations. A fundamental requirement for our business is the secure storage and transmission of protected health information and other confidential data. Our business and operations may be harmed if we do not maintain our business processes and information systems in a secure manner, and maintain and continually improve the integrity of our confidential information. Although we have developed systems and processes that are designed to protect information against security breaches, failure to protect our confidential information or mitigate harm caused by such breaches may adversely affect our operating results. Malfunctions in our business processes, breaches of our information systems or the failure to maintain effective and up-to-date information systems could disrupt our business operations, result in customer and member disputes, damage our reputation, expose us to risk of loss or litigation, result in regulatory violations and related costs and penalties, increase administrative expenses or lead to other adverse consequences.

Our business is dependent on the services provided by third partythird-party information technology vendors.

Our information technology infrastructure includes hosting services provided by third parties. While we believe these third parties are high-performing organizations with secure platforms and customary certifications, they could suffer a security breach or business interruption, which in turn could impact our operations negatively. In addition, changes in pricing terms charged by our technology vendors may adversely affect our financial performance.

We use, and may continue to expand our use of, machine learning and artificial intelligence (“AI”) technologies to deliver our services and operate our business.
Our failure to maintain controls and processes over billing and collecting could have a significant negative impact on our consolidated financial statements.

The collection of accounts receivable is a significant challenge, and requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures. If we are unablefail to properly billsuccessfully integrate AI into our platform and collect our accounts receivable, our results could be materiallybusiness processes, or if we fail to keep pace with rapidly evolving AI technological developments, including attracting and adversely affected.

Delaysretaining talented AI developers and programmers, we may face a competitive disadvantage. At the same time, the use or offering of AI technologies may result in paymentnew or expanded risks and liabilities, including enhanced government or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, reputational harm and security risks. It is not possible to predict all of the risks related to the use of AI and changes in laws, rules, directives, and regulations governing the use of AI may adversely affect our working capital.

Our business is characterized by delays from the time we provide services to the time we receive payment for these services. If we have difficulty in obtaining documentation, experience information system problems or experience other issues that arise with Medicare or other payors, we may encounter additional delays in our payment cycle.

In addition, timing delays may cause working capital shortages. Working capital management, including prompt and diligent billing and collection, is an important factor in achieving our financial results and maintaining liquidity. It is possible that documentation support, system problems, Medicare or other provider issues or industry trends may extend our collection period, which may materially adversely affect our working capital, and our working capital management procedures may not successfully mitigate this risk.

Our ability to develop and use net operating loss carryforwards to offset future taxable income for U.S. federal tax purposes isAI or subject to limitation and risk that could further limit our ability to utilize our net operating losses.

Under U.S. federal income tax law, a corporation’s ability to utilize its net operating losses (“NOLs”) to offset future taxable income may be significantly limited if it experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code, as amended. In general, an ownership change will occur if there is a cumulative change in a corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change NOLs equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments). The annual limitation for a taxable year generally is increased by the amount of any “recognized built-in gains” for such year and the amount of any unused annual limitation in a prior year. On December 22, 2017, a law commonly known as the Tax Cuts and Jobs Act (“TCJA”) was enacted in the United States. Certain provisions of the TCJA impact the ability to utilize NOLs generated in 2018 and forward; any limitation to our annual use of NOLs could require us to pay a greater amountlegal liability. The cost of U.S. federal (and in some cases, state) income taxes, which could reduce our after-tax income from operations for future taxable years and adversely impact our financial condition.



Changes to federal and state income taxcomplying with laws and regulations governing AI could be significant and would increase our operating expenses, which could adversely affect our position or income taxes and estimated income liabilities.

We are subject to both state and federal income taxes in the U.S. and our operations, plans and results are affected by tax and other initiatives. The TCJA will impact our financial results beginning in 2018. Among other things, the TCJA reduces the U.S. corporate income tax rate to 21%, this reduction resulted in changes in the valuation of our deferred tax asset and liabilities.

We are also subject to regular reviews, examinations, and audits by the Internal Revenue Service and other taxing authorities with respect to our taxes. There are uncertainties and ambiguities in the application of the TCJA and it is possible that the IRS could issue subsequent guidance or take positions on audit that differ from our interpretations and assumptions. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liability, including interest and penalties. Our effective tax rate could be adversely affected by changes in the mix of earnings in states with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations, changes in our interpretations of tax laws, including the TCJA. Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.

The issuance of shares of our Preferred Stock reduced the percentage interests of our other stockholders, and any future exercise of the Class A and Class B Warrants or the 2017 Warrants will further reduce the percentage interests of our other stockholders.

On March 9, 2015, we entered into a securities purchase agreement (the “Purchase Agreement”) with Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., and Blackwell Partners, LLC, Series A (collectively, the “PIPE Investors”). Pursuant to the terms of the Purchase Agreement, we issued and sold to the PIPE Investors in a private placement an aggregate of (a) 625,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at a purchase price per share of $100.00, (b) 1,800,000 Class A warrants (the “Class A Warrants”), and (c) 1,800,000 Class B warrants (the “Class B Warrants” and, together with the Class A Warrants, the “PIPE Warrants”), for gross proceeds of $62.5 million. We also conducted a Rights Offering (as described below) pursuant to which we sold an additional 10,822 shares of Series A Preferred Stock along with the PIPE Warrants. On June 10, 2016, in order to facilitate the 2016 Equity Offering, the Company and the PIPE Investors agreed to exchange 614,177 shares of the existing Series A Preferred Stock for an identical number of shares of Series B Preferred Stock. On June 14, 2016, in order to facilitate the 2016 Equity Offering, the Company and the PIPE Investors agreed to exchange 614,177 shares of the Series B Preferred Stock for an identical number of shares of Series C Preferred Stock (the Series C Preferred Stock, together with the Series A Preferred Stock, the “Preferred Stock”). As a result of these exchanges, there are currently (a) 21,645 shares of Series A Preferred Stock outstanding, of which 10,823 shares are owned by the PIPE Investors, (b) no shares of Series B Preferred Stock outstanding, and (c) 614,177 shares of Series C Preferred Stock outstanding, all of which are owned by the PIPE Investors.

In addition, in connection with the Second Lien Note Facility, the Company also issued the 2017 Warrants to the purchasers of the Second Lien Notes pursuant to the Warrant Purchase Agreement. The 2017 Warrants entitle the purchasers of the 2017 Warrants to purchase shares of Common Stock, representing at the time of any exercise of the 2017 Warrants an equivalent number of shares equal to 4.99% of the Common Stock of the Company on a fully diluted basis, subject to the terms of the Warrant Agreement.

As of the date of this Annual Report, if all holders of the Preferred Stock converted their shares in full, and exercised the PIPE Warrants and the 2017 Warrants in full, their aggregate beneficial ownership would be approximately 22.9% of our outstanding Common Stock. The issuance of the Preferred Stock to the PIPE Investors reduced the relative voting power and percentage ownership interests of our other current stockholders. The future exercise of the PIPE Warrants by the holders of those securities will cause a further reduction in the relative voting power and percentage ownership interests of our other stockholders.

The PIPE Investors may exercise influence over us, including through their ability to influence matters requiring the approval of holders of our Common Stock or Preferred Stock.

Holders of the Preferred Stock are entitled to vote on an as-converted basis upon all matters upon which holders of our Common Stock have the right to vote. The shares of Preferred Stock owned by the PIPE Investors currently represent approximately 13% of the voting rights in respect of our share capital on an as-converted basis, and accordingly the PIPE Investors may have the ability to significantly influence the outcome of most matters submitted for the vote of our stockholders. The PIPE Investors are

currently the beneficial owners of 625,000 of the 635,822 shares of our Series A and Series C Preferred Stock.

Further, so long as shares of the Series C Preferred Stock represent at least 5% of our outstanding voting stock (on an as converted into Common Stock basis), the holders of our Series C Preferred Stock are entitled to designate one member of the Board by a majority of the voting power of the outstanding shares of Series C Preferred Stock. The PIPE Investors are currently the beneficial owners of all 614,177 issued and outstanding shares of our Series C Preferred Stock.

The PIPE Investors’ majority ownership of our Series A and Series C Preferred Stock will limit the ability of any current or future holders of such series of Preferred Stock to influence corporate matters requiring the approval of the holders of such series of Preferred Stock, including the right, voting as a separate class, to elect one director to our Board, and to approve certain amendments to our certificate of incorporation, or certain other changes, that would adversely affect the holders of the series of Preferred Stock. The PIPE Investors’ voting power of the Preferred Stock may also delay, defer or even prevent an acquisition by a third party or other change of control of our company to the extent that the consideration that would be received by the PIPE Investors and other holders of Preferred Stock in such acquisition or change of control is less than their liquidation preference, and may make some transactions more difficult or impossible without the support of the PIPE Investors, even if such events are in the best interests of our other stockholders. Accordingly, the ownership position and the governance rights of the PIPE Investors could discourage a third party from proposing a change of control or other strategic transaction with us. In any of these matters, the interests of the PIPE Investors may differ from or conflict with the interests of our other stockholders.

In addition, the PIPE Investors are in the business, of making investments in companies and may, from time to time, acquire interests in businesses that directly or indirectly compete with our business, as well as businesses that are significant existing or potential customers.

Changes in future business conditions could cause business investments and/or recorded goodwill to become further impaired, and our financial condition and results of operations could suffer if there is an additional impairmentoperations. Further, market demand and acceptance of goodwill or other intangible assets with indefinite lives.

WeAI technologies are required to test intangible assets with indefinite lives, including goodwill, annuallyuncertain, and on an interim basis if an event occurs or there is a change in circumstance to indicate that the carrying value of goodwill or indefinite-lived intangible assets may no longer be recoverable. When the carrying value of a reporting unit’s goodwill exceeds its implied fair value of goodwill, a charge to operations is recorded. If the carrying amount of an intangible asset with an indefinite life exceeds its fair value, a charge to operations is recognized. Either event would result in incremental expenses for that quarter, which would reduce any earnings or increase any loss for the period in which the impairment was determined to have occurred.

As previously disclosed, in 2015, we determined it was necessary to record a $251.9 million non-cash impairment charge related to goodwill associated with our Infusion Services business. The estimated impairment took into consideration our updated business outlook, pursuant to which we updated our future cash flow assumptions and calculated updated estimates of fair value. The estimated impairment loss was equal to the excess of the assets' carrying amount over its fair value as determined by an analysis of discounted future cash flows. In connection with our annual assessment of possible goodwill impairment during the fourth quarter of 2017, we concluded no further impairment charge was needed (see Note 7 - Goodwill and Intangible Assets).

Our goodwill impairment analysis is sensitive to changes in key assumptions used in our analysis, such as the degree of volatility in equity and debt markets and our stock price. If the assumptions used in our analysis are not realized, it is possible that an additional impairment charge may need to be recorded in the future. We cannot accurately predict the amount and timing of any impairment of goodwill or other intangible assets. Further, as we continue to work towards a turnaround of our business, we will need to continue to evaluate the carrying value of our goodwill. Any additional impairment charges that we may takebe unsuccessful in the future could be materialefforts to further incorporate AI into our results of operations and financial condition.

processes.
Failure to maintain effective internal control over our financial reporting could have an adverse effect on our ability to report our financial results on a timely and accurate basis.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act, of 1934 (the “Exchange Act”), and is required to evaluate the effectiveness of these controls and procedures on a periodic basis and publicly disclose the results of these evaluations and related matters in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Effective internal control over financial reporting is necessary for us to provide reliable financial reports, to help mitigate the risk of fraud and to operate successfully. However, testing and maintaining our internal control over financial reporting can be expensive and divert our management's attention from other business matters. Any failure to implement and maintain effective internal controls could result in material weaknesses or material misstatements in our consolidated financial statements.

If we fail to maintain effective internal control over financial reporting, or our independent registered public accounting firm is unable to provide us with an unqualified attestation report on our internal control, we may be required to take corrective measures or restate the affected historical financial statements. In addition, we may be subjected to investigations and/or sanctions by federal and state securities regulators and/or civil lawsuits by security holders. Any of the foregoing could also cause investors to lose confidence in our reported financial information and in our companyus and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future.

New accounting pronouncements or new interpretationsActs of existing standardsGod, such as major weather disturbances, could require us to make adjustments indisrupt our accounting policies that could affect our financial statements.

business.
We prepare our consolidated financial statementsoperate in accordancea network of prescribers, providers, patients and facilities that can be negatively impacted by local weather disturbances and other force majeure events. For example, in anticipation of major weather events, patients with accounting principles generally accepted in the United Statesimpaired health may be moved to alternate sites. After a major weather event, availability of America (“GAAP”). The Financial Accounting Standards Board, the SEC, or other accounting organizations or governmental entities frequently issue new pronouncements or new interpretations of existing accounting standards. Changes in accounting standards, how the accounting standards are interpreted, or the adoption of new accounting standardselectricity, clean water and transportation can have a significant effect on our reported results, and could even retroactively affect previously reported transactions, and may require that we make significant changes to our systems, processes and controls.

Changes resulting from these new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls. Such changes in accounting standards may have an adverse effect on our business, financial position, and income, which may negatively impact our financial results.

In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842), requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements.
Risks Related to Our Indebtedness

We have incurred substantial indebtedness, which imposes operating and financial restrictions on us that, together with the resulting debt service obligations, may significantly limit our ability to executeprovide service in patients’ homes. Similarly, such events could impact key suppliers or vendors, disrupting the services or materials they provide to us. Climate change, or legal, regulatory or market measures to address climate change, could adversely affect our business strategy and results of operations. In addition, acts of God and other force majeure events may increase the risk of default undercause a reduction in our debt obligations.

On June 29, 2017, the Company entered into (i) a first lien note purchase agreement, among the Company, which is the issuer under the agreement, the financial institutions and note purchasers from timebusiness or increased costs, such as increased costs in our operations as we incur overtime charges or redirect services to time party to the agreement, pursuant to which the Company issued first lien senior secured notesother locations, delays in an aggregate principal amount of $200.0 million; and (ii) a second lien note purchase agreement among the Company, which is the issuer under the agreement, the financial institutions and note purchasers from time to time party to the agreement, pursuant to which the Company (a) issued second lien senior secured notes in an aggregate initial principal amount of $100.0 million and (b) has the ability to draw upon the Second Lien Note Facility and issue second lien delayed draw senior secured notes in an aggregate initial principal amount of $10.0 million for a period of 18 months after the closing date, subject to certain terms and conditions. The Company used the proceeds of the sale of the First Lien Notes and the Initial Second Lien Notes to repay in full all amounts outstanding under the Prior Credit Agreements and extinguished the liability. Each of the Prior Credit Agreements was terminated following such repayment. The Notes accrue interest, payable monthly in arrears, at a floating rate. The First Lien Notes will amortize in equal quarterly installments equal to 0.625% of the aggregate principal amount of the First Lien Note Facility, commencing on September 30, 2019, and on the last day of each third month thereafter, with the balance payable at maturity. The First Lien Notes mature on August 15, 2020, provided that if the Company’s 2021 Notes (defined below) are refinanced prior to August 15, 2020, then the scheduled maturity date of the First Lien Notes shall be June 30, 2022. Our indebtedness includes many covenants and restrictions that may significantly limit the types of strategic relationships and our ability to execute ourwork with payers, hospitals, physicians and other strategic partners on new business strategy.

In addition, we have issued $200.0 million in aggregate principal amountinitiatives, and disruption to referral patterns as patients are moved out of 8.875% senior notes due 2021 (the “2021 Notes”). See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” The 2021 Notes are our senior unsecured obligations and are fully and unconditionally guaranteed by all existing and future subsidiaries of the Company. Interest is payable semi-annually on February 15 and August 15.

The operating and financial restrictions and covenants of our debt instruments, including the Notes Facilities and the indenture governing the 2021 Notes, may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. The terms of the Notes Facilities require us to comply with certain financial covenants.

In addition, subject to a number of important exceptions, the Notes Facilities contain certain covenants and restrictions impacting our ability to, among other things:

incur or guarantee additional indebtedness or issue certain preferred stock;
transfer or sell assets;
make certain investments and loans;
pay dividends or distributions, redeem subordinated indebtedness, or make other restricted payments;
create or incur liens;
incur dividend or other payment restrictions affecting certain subsidiaries;
issue capital stock of our subsidiaries;
enter into hedging transactions or sale and leaseback transactions;
consummate a merger, consolidation or sale of all or substantially all of our assets or the assets of any of our subsidiaries; and
enter into transactions with affiliates.

The indenture governing the 2021 Notes contains similar restrictions. Our ability to comply with these covenants, including the financial covenants, may befacilities affected by such events beyond our control. Therefore, in order to engage in some corporate actions, we may need to seek permission from our lenders or the note holders, whose interests may be different from ours. We cannot guarantee that we will be able to obtain consent from these parties when needed. If we do not comply with the restrictions and covenants in our Notes Facilities, we may not be able to finance our future operations, make acquisitions or pursue business opportunities. The restrictions contained in our Notes Facilities may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted.

A breach of any of these covenants or the inability to comply with the required financial ratio could result in a default under the Notes Facilities. If any such default occurs, the lenders under the respective Notes Facilities may elect to declare all of their respective outstanding debt, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. Under such circumstances, we may not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed on our ability to incur additional debt and to take other corporate actions might significantly impair our ability to obtain other financing.

There can be no assurance that we will be granted future waivers or amendments to the restrictions in the Notes Facilities if for any reason we are unable to comply with such restrictions or that we will be ablereturn to refinance our debt on terms acceptable to us, or at all.sites of service in patients’ homes.

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The lenders under the Notes Facilities also have the right in these circumstances to terminate any commitments they have to provide further borrowings. If we were unable to pay such amounts, the lenders under the Notes Facilities could recover amounts owed to them by foreclosing against the collateral pledged to them. We have pledged a substantial portion
Table of our assets to the lenders under the Notes Facilities, including the equity of all of the Company’s subsidiaries.Contents

In addition, the degree to which we are leveraged could:

make us more vulnerable to general adverse economic, regulatory and industry conditions;
limit our flexibility in planning for, or reacting to, changes and opportunities in the markets in which we compete;
place us at a competitive disadvantage compared to our competitors that have less debt;
require us to dedicate a substantial portion of our cash flow to service our debt, reducing the availability of our cash flow and such proceeds to fund working capital, capital expenditures and other general corporate purposes; or
restrict us from making strategic acquisitions or exploiting other business opportunities.

To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt obligations could harm our business, financial condition and results of operations.

Our ability to make payments on and to refinance our indebtedness, including the First Lien Note Facility, for which principal payments are required beginning in 2019, the Second Lien Note Facility, and the 2021 Notes, and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. A significant reduction in our operating cash flows resulting from changes in economic conditions, changes in government reimbursement rates or methods, increased competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could

have a material adverse effect on our business, consolidated financial statements, prospects and our ability to service our debt and other obligations.

We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under the Note Facilities or otherwise in an amount sufficient to enable us to pay our indebtedness, including our indebtedness under the First Lien Note Facility, the Second Lien Note Facility, and the 2021 Notes, or to fund our other liquidity needs. Our inability to pay our debts would require us to pursue one or more alternative strategies, such as selling assets, refinancing all or a portion of our indebtedness or selling equity capital. However, our alternative strategies may not be feasible at the time or may not provide adequate funds to allow us to pay our debts as they come due and fund our other liquidity needs. In addition, some alternative strategies are likely to require the prior consent of our Notes Facilities lenders, which we may not be able to obtain.

Despite our substantial indebtedness, we may still need to incur significantly more debt. This could exacerbate the risks associated with our substantial leverage.

We may need to incur substantial additional indebtedness, including additional secured indebtedness, in the future, in connection with future acquisitions, strategic investments and strategic relationships. Although the First Lien Note Facility, the Second Lien Note Facility and the indenture governing the 2021 Notes contain covenants and restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions, including secured debt, could be substantial. Adding additional debt to current debt levels could exacerbate the leverage-related risks described above.

Item 1B.Unresolved Staff Comments

Item 1B.    Unresolved Staff Comments
None.
Item 1C.    Cybersecurity
Risk Management and Strategy
We have developed and implemented a cybersecurity framework designed to evaluate, identify and manage risks stemming from threats to the security of our information, systems and network using a risk-based approach. The framework is informed, in part, by the National Institute of Standards and Technology (NIST) Cybersecurity Framework, although this does not necessarily mean that we meet all technical standards, specifications or requirements outlined in the NIST framework. Additionally, we maintain a Systems and Organization Controls (SOC) 2 Type 2 attestation.
Our goal is to maintain an information technology infrastructure that implements physical, administrative, and technical controls. These controls are adjusted based on risk and designed to protect the confidentiality, integrity, and availability of our information systems, including the customer information, personal information and proprietary information stored on our networks.
We have a cybersecurity incident response plan and dedicated teams to respond to cybersecurity incidents. When a cybersecurity incident occurs, we have cross-functional teams that are responsible for leading the initial assessment of priority and severity. Our information security team assists in taking any remedial action in response to an incident, and external experts may also be engaged as appropriate.
Our overarching approach to cybersecurity risk management centers on governance, people, processes, and technology. We provide security awareness training to help employees understand their information protection and cybersecurity responsibilities. This includes mandatory annual cybersecurity training and monthly phishing simulations. We also perform periodic tabletops or simulation exercises involving technical experts and business and functional leaders.
We conduct third party assessments of potential new vendors who process, store or transmit our data, which include a formal security review. This can include the review of documentation related to a vendor’s security attestations, such as SOC 2 Type 2 or HITRUST certifications.
We leverage third party cybersecurity companies to periodically assess our cybersecurity program and procedures and reaffirm our compliance with SOC 2 standards. These assessments aid in continual improvement and help us identify and address risks from cybersecurity threats.
We also consider cybersecurity, along with our other top risks, within our enterprise risk management framework. This framework involves internal reporting at the business and enterprise levels, considering key risk indicators, trends and countermeasures. Our Senior Vice President, Chief Information Security Officer (CISO) serves on the Enterprise Risk Committee that assesses our enterprise-wide risks and oversees risk mitigation activities.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us or our results of operations, cash flow or financial condition. However, the scope and impact of any future incident, or the identification of new information related to prior cybersecurity incidents, cannot be predicted. See “Item 1A. Risk Factors” for more information about our cybersecurity-related risks.
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Governance
The Quality and Compliance Committee of our Board of Directors provides board-level oversight of cybersecurity risk. As part of its oversight role, the Quality and Compliance Committee receives reports about our practices, programs, or notable threats or incidents related to cybersecurity throughout the year, including through periodic updates from our CISO and other leaders. The Quality and Compliance Committee provides regular reports to the full Board about these matters and other areas within its responsibility, and the CISO and other leaders provide updates regarding cybersecurity matters to the full Board as appropriate.
Our CISO reports to our Chief Information Officer and leads our overall cybersecurity function. Our CISO has over 20 years of experience in various security roles, which include managing information security, development cybersecurity strategy, and implementing cybersecurity programs. Our CISO collaborates with senior leaders and other members of our organization to identify and analyze cybersecurity risks and implement controls as appropriate and feasible to mitigate these risks. The CISO also supervises efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents through various means, including by collaborating with internal and external stakeholders. Our CISO is supported by a management-led Security Council, which consists of our Chief Executive Officer, Chief Financial Officer and other senior leaders throughout our organization, and which reviews and discusses our cybersecurity program as well as emerging cyber risks, threats, and industry trends, among other topics.
Item 2.Properties

Item 2.    Properties
We currently lease all of our properties from third parties under various lease terms expiring over periods extending through 2027,2038, in addition to a number of non-material month-to-month leases. Our corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015. Our other properties mainly consist of infusion pharmacies equipped with clean room and compounding capabilities. Some infusion pharmacies are co-located with an ambulatory infusion center where patients receive infusion treatments. As of December 31, 20172023, we have 93 pharmacies and 84 stand-alone ambulatory infusion suites that support our property locations, allinfusion services business in support of our Infusion Services business, were as follows:43 states.

Birmingham, ALAlexandria, LAOmaha, NEKnoxville, TN
Burbank, CABaton Rouge, LABedford, NHMemphis, TN
Irvine, CACovington, LAMorris Plains, NJAustin, TX
Ontario, CAHammond, LASomers Point, NJHouston, TX
Cromwell, CT (two locations)Houma, LAElmsford, NYRichardson, TX
Vernon, CTLafayette, LAForest Hills, NYAnnandale, VA
Coral Springs, FLLake Charles, LALake Success, NYAshland, VA
Jacksonville, FLMetairie, LACanfield, OHChantilly, VA
Melbourne, FLMonroe, LACincinnati, OHNewport News, VA
Tampa, FLShreveport, LAColumbus, OHNorfold, VA
Albany, GASouthborough, MASylvania, OHRoanoke, VA
Augusta, GAAuburn, MEAudubon, PARutland, VT
Norcross, GAEagan, MNDunmore, PACharleston, WV
Savannah, GAChesterfield, MOYork, PAFairmount, WV
Elmhurst, ILPearl, MSSmithfield, RI
Silvis, ILCharlotte, NCDuncan, SC
Lexington, KYFayetteville, NCMount Pleasant, SC

Item 3.Legal Proceedings

Item 3.    Legal Proceedings
The information set forth underFor a summary of material legal proceedings, if any, refer to Note 11, “Commitments14, Commitments and Contingencies” in, of the Notes to the Consolidated Financial Statements under the caption “Legal Proceedings”consolidated financial statements included in Part II, Item 8 of this Annual Report is incorporated herein by reference.Report.
Item 4.Mine Safety Disclosures
Item 4.    Mine Safety Disclosures
Item not applicable.

28
PART II
Item 5.
Market for Registrant’s Common Equity, Related StockholderMatters and Issuer Purchases of Equity Securities

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our Common Stock, par value $0.0001 per share, is traded on the Nasdaq Global Select Market under the symbol “BIOS”“OPCH”. The following table represents the range
Holders of high and low per share sale prices for our Common Stock for the indicated periods:

   High Low
2017 First Quarter$2.27
 $1.26
  Second Quarter$2.99
 $1.40
  Third Quarter$3.25
 $2.35
  Fourth Quarter$2.93
 $1.91
      
2016 First Quarter$2.52
 $1.28
  Second Quarter$3.00
 $2.07
  Third Quarter$2.92
 $2.51
  Fourth Quarter$3.33
 $1.02

Record
As of March 23, 2018,February 19, 2024, there were 18196 stockholders of record of our Common Stock. On March 23, 2018, the closing sale price of our Common Stock on the Nasdaq Global Market was $2.46 per share.

Dividend Policy
We have never paid cash dividends on our Common Stock and do not anticipate doing so in the foreseeable future. Our Notes Facilities contain covenants
Securities Authorized for Issuance under Equity Compensation Plans
See Item 12. “Security Ownership of Certain Beneficial Owners and restrictions impacting our abilityManagement and Related Stockholder Matters” of this Annual Report.
Recent Sale of Unregistered Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On February 20, 2023, the Company’s Board of Directors approved a share repurchase program of up to pay dividends.

Information regarding securities authorized for issuance under our equity compensation plans required by this Item 5 is included in our definitive proxy statementan aggregate $250.0 million of common stock of the Company. On December 6, 2023, the Company’s Board of Directors approved an increase to be filed with the SEC on or before April 30, 2018 in connection with our 2018 Annual Meeting of Stockholders and is hereby incorporated by reference.

its stock repurchase program authorization from $250.0 million to $500 million. This program has no specified expiration date.
The following table provides certain information disclosed in Part II Item 7 underwith respect to the headings “First Quarter 2017 Private Placement,” “2017 Warrants” and “Second Quarter 2017 Private Placement” is hereby incorporated by reference. The Company relied on Section 4(a)(2)Company’s repurchases of the Securities Act for the issuancecommon stock from October 1, 2023 through December 31, 2023:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
October 1, 2023 - October 31, 2023— $— — $75,000,067 
November 1, 2023 - November 30, 20231,620,021 28.78 1,620,021 28,368,824 
December 1, 2023 - December 31, 2023937,594 30.26 937,594 250,000,103 
2,557,615 $29.32 2,557,615 $250,000,103 
29


Stock Performance Graph
The following graph compares ourthe total cumulative return to holdersreturns of our Common StockBioScrip through August 6, 2019 and Option Care Health from August 7, 2019 through December 31, 2023 with the total cumulative returns of the Nasdaq Composite Index and the NasdaqS&P Health Care Services Select Industry Index for the five-year period from December 31, 20122018 through December 31, 2017.2023. The graph shows the performance of a $100 investment in our Common Stock and in each index as of December 31, 2012.2018.
 Year Ended December 31,
 2012 2013 2014 2015 2016 2017
BioScrip, Inc.$100.00
 $135.53
 $128.02
 $32.05
 $19.05
 $23.58
Nasdaq Composite Index$100.00
 $160.32
 $181.80
 $192.21
 $206.63
 $226.78
Nasdaq Health Services Index$100.00
 $199.82
 $256.70
 $274.30
 $227.91
 $215.79

G5Y Chart.jpg
* $100 invested on December 31, 20122018 in stock or index, including reinvestment of dividends.

Year Ended December 31,
201820192020202120222023
Option Care Health, Inc.$100.00 $104.48 $109.52 $199.16 $210.71 $235.92 
Nasdaq Composite Index$100.00 $135.23 $194.24 $235.78 $157.74 $226.24 
S&P Health Care Services Select Industry Index$100.00 $118.40 $157.48 $172.35 $137.77 $144.10 
30
Item 6.    Selected Consolidated Financial DataReserved

The selected consolidated financial data presented below should be read in conjunction with, and is qualified in its entirety by reference to, Item 7.    Management’s Discussion and Analysis of Financial Condition andResults of Operations and our Consolidated Financial Statements and the Notes thereto appearing elsewhere in this Annual Report. Acquisitions during the periods below include HomeChoice beginning February 2013, CarePoint Business beginning August 2013, and Home Solutions beginning September 2016. Divestitures during this period include the sale of the Home Health Business in March 2014, and the sale of the PBM Business in August 2015. All historical amounts have been restated to reclassify amounts directly associated with these divested operations as discontinued operations. The amounts below are not necessarily indicative of what the actual results would have been if the Home Health Business and the PBM Business were divested at the beginning of the period.


 December 31,
Balance Sheet Data2017 2016 2015 2014 2013
 (in thousands)
Working capital (1)
$82,561
 $43,180
 $29,574
 $25,347
 $44,417
Total assets (2)
603,092
 604,985
 528,416
 801,204
 846,660
Total debt480,588
 451,934
 418,121
 423,803
 435,579
Stockholders’ equity (deficit)(84,752) (33,621) (81,515) 216,589
 354,583
Total assets of discontinued operations—
 —
 —
 22,294
 90,198

 Year Ended December 31,
Statement of Operations Data2017 2016 2015 2014 2013
 (in thousands, except per share amounts)
Net revenue$817,190
 $935,589
 $982,223
 $922,654
 $696,473
Gross profit, excluding depreciation expense269,242
 262,082
 259,952
 250,753
 206,650
Other operating expenses163,273
 169,781
 165,328
 165,728
 127,200
Bad debt expense23,697
 26,608
 42,444
 80,587
 19,516
General and administrative expenses39,625
 38,798
 42,474
 49,314
 47,897
Change in fair value of equity linked liabilities3,587
 (10,450) —
 —
 —
Impairment of goodwill—
 —
 251,850
 —
 —
Restructuring, acquisition, integration, and other expenses, net (3)
12,662
 15,859
 24,405
 30,206
 18,062
Depreciation and amortization expense27,725
 22,025
 22,864
 22,943
 20,226
Interest expense (4)
52,072
 37,572
 36,938
 40,918
 44,130
Loss on extinguishment of debt13,453
 —
 —
 —
 —
Loss (gain) on dispositions581
 (3,954) —
 —
 —
Loss from continuing operations, before income taxes(67,433) (34,157) (326,351) (138,943) (70,381)
Income tax benefit (expense)4,130
 (2,015) 21,532
 (11,193) (1,260)
Loss from continuing operations, net of income taxes(63,303) (36,172) (304,819) (150,136) (71,641)
(Loss) income from discontinued operations, net of income taxes(893) (6,593) 4,691
 2,452
 1,987
Net loss$(64,196) $(42,765) $(300,128) $(147,684) $(69,654)
Accrued dividends on preferred stock(9,376) (8,392) (6,120) —
 —
Deemed dividends on preferred stock(701) (692) (3,690) —
 —
Net loss attributable to common stockholders$(74,273) $(51,849) $(309,938) $(147,684) $(69,654)
          
Loss per common share: 
  
  
    
Loss from continuing operations, basic and diluted$(0.59) $(0.48) $(4.58) $(2.19) $(1.11)
(Loss) income from discontinued operations, basic and diluted(0.01) (0.07) 0.07
 0.04
 0.03
Net loss, basic and diluted (5)
$(0.60) $(0.55) $(4.51) $(2.15) $(1.08)
          
Weighted average common shares outstanding, basic and diluted123,791
 93,740
 68,710
 68,476
 64,560

(1)Working capital calculation excludes current assets of discontinued operations and current liabilities of discontinued operations.
(2)Total assets exclude total assets of discontinued operations as of December 31, 2014, and 2013.
(3)Restructuring, acquisition, integration and other expenses include non-operating costs associated with restructuring, acquisition, and integration initiatives such as employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed branches/offices.

(4)Interest expense includes interest income, interest expense, and amortization of deferred financing cost.
(5)Net income (loss) per diluted share excludes the effect of all common stock equivalents for all years as their inclusion would be anti-dilutive to loss per share from continuing operations.
(6)Certain amounts have been revised to reflect immaterial corrections. See Note 1 - Nature of Business.
Item 7.
Management’s Discussion and Analysis of Financial Condition andResults of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to assist the reader in understanding our Consolidated Financial Statements,consolidated financial statements, the changes in certain key items in those financial statements from year-to-year and the primary factors that accounted for those changes as well as how certain accounting principles affect our Consolidated Financial Statements.consolidated financial statements.

Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this Annual Report and specifically under the caption “Cautionary Note Regarding Forward-Looking“Forward-Looking Statements” and under “in Item 1A. Risk“Risk Factors” in this Annual Report. In addition, the following discussion of financial condition and results of operations should be read in conjunction with the Consolidated Financial Statementsconsolidated financial statements and Notesnotes thereto appearing elsewherein Item 8 in this Annual Report.

Business Overview

We areOption Care Health and its wholly-owned subsidiaries provide infusion therapy and other ancillary healthcare services through a national providernetwork of infusion solutions. We work177 locations around the United States. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, hospital systems, skilled nursing facilities, and healthcare payorsother referral sources to provide pharmaceuticals and complex compounded solutions to patients access to post-acute care services. We operate with a commitment to bring customer-focused healthcare infusion therapy services intofor intravenous delivery in the homepatients’ homes or alternate site setting. By collaborating with the full spectrum of healthcare professionals and the patient, we aim to provide 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 whom we serve. As of December 31, 2017, we had a total of 66 service locations in 27 states.

other non-hospital settings. Our platform provides nationwide service capabilities and the ability to deliver clinical management services that offer patients a high-touch, community-based and home-based care environment. Our core services are provided in coordination with, and under the direction of, the patient’s physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to oureach patient’s specific needs. WhetherWe provide home infusion services consisting of anti-infectives, nutrition support, therapies for chronic inflammatory disorders and neurological disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions.

31
Composition of Results of Operations
The following results of operations include the accounts of Option Care Health and our subsidiaries for the years ended December 31, 2023 and 2022.
Gross Profit
Gross profit represents our net revenue less cost of revenue.
Net Revenue. Infusion and related healthcare services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered.
Due to the nature of the healthcare industry and the reimbursement environment in which the home, physician office, ambulatory infusion center, skilled nursing facilityCompany operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded.
Cost of Revenue.Cost of revenue consists of the actual cost of pharmaceuticals and other alternate sitesmedical supplies dispensed to patients. In addition to product costs, cost of care, we provide products, services and condition-specific clinical management programs tailoredrevenue includes warehousing costs, purchasing costs, depreciation expense relating to improve the care of individuals with complex health conditionsrevenue-generating assets, such as gastrointestinal abnormalities, infectious diseases, cancer, multiple sclerosis, organinfusion pumps, shipping and blood cell transplants, bleeding disorders, immune deficiencieshandling costs, and heart failure.wages and related costs for the pharmacists, nurses, and all other employees and contracted workers directly involved in providing service to the patient.

The Company receives volume-based rebates and prompt payment discounts from some of its pharmaceutical and medical supplies vendors. These payments are recorded as a reduction of inventory and are accounted for as a reduction of cost of revenue when the related inventory is sold.
SegmentsOperating Costs and Expenses

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of salaries for administrative employees that directly and indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
FollowingDepreciation and Amortization Expense. Depreciation within this caption includes infrastructure items such as intangibles amortization, computer hardware and software, office equipment and leasehold improvements. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue.
32
Other Income (Expense)
Interest Expense, Net. Interest expense consists principally of interest payments on the Company’s outstanding borrowings under the ABL Facility, First Lien Term Loan, Revolver Facility, Senior Notes, amortization of discount and deferred financing fees, and payments associated with the interest rate cap, and interest income earned on cash and cash equivalents. Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings.
Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems.
Other, Net. On May 3, 2023, the Company entered into a definitive merger agreement (the “Amedisys Merger Agreement”) with Amedisys, Inc. (“Amedisys”), a leading provider of healthcare in home health and hospice settings. On June 26, 2023, the Company entered into an agreement to terminate the Amedisys Merger Agreement (the “Mutual Termination Agreement”). Under the terms of the Mutual Termination Agreement, the Company received a payment of $106.0 million in cash on behalf of Amedisys (the “Termination Fee”). Other income (expense) primarily includes the termination fee, net of merger-related expenses, received on behalf of Amedisys during the year ended December 31, 2023. During the year ended December 31, 2022, other income (expense) primarily includes the gain on the sale of respiratory therapy assets, which closed in December 2022.
Income Tax Benefit Expense. The Company is subject to taxation in the United States and various states. The Company’s income tax expense is reflective of the current federal and state tax rates.
Change in Unrealized Gain (Loss) on Cash Flow Hedge, Net of Income Tax Benefit (Expense). Change in unrealized gain (loss) on cash flow hedge, net of income tax benefit (expense), consists of the gain (loss) associated with the changes in the fair value of hedging instruments related to the interest rate cap, net of income taxes.
33
Results of Operations
The following table presents Option Care Health’s consolidated results of operations for the years ended December 31, 2023 and 2022 (in thousands, except for percentages). For a discussion of Option Care Health’s consolidated results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our PBM Business2022 Annual Report on August 27, 2015 (as further discussed below)Form 10-K filed with the Securities and Exchange Commission on February 23, 2023.
Year Ended December 31,
 20232022
Amount% of RevenueAmount% of Revenue
NET REVENUE$4,302,324 100.0 %$3,944,735 100.0 %
COST OF REVENUE3,321,101 77.2 %3,077,817 78.0 %
GROSS PROFIT981,223 22.8 %866,918 22.0 %
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses607,427 14.1 %566,122 14.4 %
Depreciation and amortization expense59,201 1.4 %60,565 1.5 %
Total operating expenses666,628 15.5 %626,687 15.9 %
OPERATING INCOME314,595 7.3 %240,231 6.1 %
 
OTHER INCOME (EXPENSE):
Interest expense, net(51,248)(1.2)%(53,806)(1.4)%
Equity in earnings of joint ventures5,530 0.1 %5,125 0.1 %
Other, net89,865 2.1 %14,218 0.4 %
Total other income (expense)44,147 1.0 %(34,463)(0.9)%
 
INCOME BEFORE INCOME TAXES358,742 8.3 %205,768 5.2 %
INCOME TAX EXPENSE91,652 2.1 %55,212 1.4 %
NET INCOME$267,090 6.2 %$150,556 3.8 %
 
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense) of $2,158 and $(7,259), respectively(6,181)(0.1)%21,610 0.5 %
OTHER COMPREHENSIVE (LOSS) INCOME(6,181)(0.1)%21,610 0.5 %
NET COMPREHENSIVE INCOME$260,909 6.1 %$172,166 4.4 %

34
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
The following table presents selected consolidated comparative results of operations for the years ended December 31, 2023 and 2022:
Gross Profit
 Year Ended December 31,
 20232022Variance
(in thousands, except for percentages)
Net revenue$4,302,324$3,944,735$357,589 9.1 %
Cost of revenue3,321,1013,077,817243,284 7.9 %
Gross profit$981,223$866,918$114,305 13.2 %
Gross profit margin22.8%22.0%
The increase in net revenue during the year ended December 31, 2023 was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had mid-single-digit growth relative to the prior year while chronic revenue grew in the low-double-digits. The increase in net revenue was partially offset by the divestiture of respiratory therapy assets in December 2022 as well as therapies related to the treatment of ALS and pre-term labor. The increase in cost of revenue and gross profit was primarily driven by the growth in revenue, which outpaced the increase in cost of revenue primarily due to our disciplined procurement strategies, certain temporary favorable therapy pricing dynamics that emerged due to the timing in variances in reference prices that affects our costs relative to reimbursement, and efficient utilization of our clinical workforce and infusion suite network.
Operating Expenses
 Year Ended December 31,
 20232022Variance
(in thousands, except for percentages)
Selling, general and administrative expenses$607,427 $566,122 $41,305 7.3 %
Depreciation and amortization expense59,201 60,565 (1,364)(2.3)%
Total operating expenses$666,628 $626,687 $39,941 6.4 %
The increase in selling, general and administrative expenses during the year ended December 31, 2023 is primarily due to an increase in salaries, benefits, and equity compensation as a result of expansion of team members to adjust to current volumes, however, these expenses have remained relatively consistent as a percentage of revenue at 14.1% and 14.4% for the years ended December 31, 2023 and 2022, respectively, due to the Company’s focus on controlling spending leverage.
Other Income (Expense)
 Year Ended December 31,
20232022Variance
(in thousands, except for percentages)
Interest expense, net$(51,248)$(53,806)$2,558 (4.8)%
Equity in earnings of joint ventures5,530 5,125 405 7.9 %
Other, net89,865 14,218 75,647 532.1 %
Total other income (expense)$44,147 $(34,463)$78,610 (228.1)%
The decrease in interest expense, net during the year ended December 31, 2023 was primarily attributable to an increase in interest income generated from our cash and cash equivalents, partially offset by increases in the First Lien Term Loan’s variable interest rate compared to the year ended December 31, 2022.
The increase in other, net during the year ended December 31, 2023 is primarily attributable to the receipt of the Termination Fee, net of merger-related expenses. During the year ended December 31, 2022, the change in other, net is primarily due to a $10.3 million pre-tax gain from the sale of respiratory therapy assets (“Respiratory Therapy Asset Sale”), Infusion Serviceswhich closed in December 2022.
35
Income Tax Expense
 Year Ended December 31,
 20232022Variance
(in thousands, except for percentages)
Income tax expense$91,652 $55,212 $36,440 66.0 %
The Company recorded income tax expense of $91.7 million and $55.2 million, which represents an effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee received, under the terms of the Mutual Termination Agreement, net of merger-related expenses, and the release of $5.8 million of state valuation allowance in September 2023. The variance in the Company’s effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively, is primarily attributable to the only remaining operating segment. On an ongoing basis we will no longer report operating segments unlessdifference in state taxes, various non-deductible expenses, and a change in state valuation allowance. The variance in the business necessitatesCompany’s effective tax rate of 25.5% for the needyear ended December 31, 2023, compared to do so.the federal statutory rate of 21%, is also primarily attributable to state taxes, various non-deductible expenses, and a change in state valuation allowance.

Net Income and Other Comprehensive (Loss) Income
Strategic Assessment
 Year Ended December 31,
 20232022Variance
(in thousands, except for percentages)
Net income$267,090 $150,556 $116,534 77.4 %
Other comprehensive (loss) income, net of tax:
Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense)(6,181)21,610 (27,791)(128.6)%
Other comprehensive (loss) income(6,181)21,610 (27,791)(128.6)%
Net comprehensive income$260,909 $172,166 $88,743 51.5 %
The change in net income for the year ended December 31, 2023 was attributable to organic growth from additional revenue related to the factors described in the above sections and Transactionsthe Termination Fee received under the terms of the Mutual Termination Agreement, net of merger-related expenses. There was no comparable activity during the year ended December 31, 2022.

For the year ended December 31, 2023, the change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense) was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.
We continually perform strategic assessmentsNet comprehensive income increased to $260.9 million for the year ended December 31, 2023, compared to net comprehensive income of our business and operations. The assessments examine our market strengths and opportunities and compare our position to that of our competitors. As$172.2 million for the year ended December 31, 2022, primarily as a result of these ongoing assessments, wethe changes in net income discussed above, partially offset by the impact of the change in fair market value of the interest rate cap hedge discussed above.

36
Liquidity and Capital Resources
For the years ended December 31, 2023 and 2022, the Company’s primary sources of liquidity were cash on hand of $343.8 million and $294.2 million, respectively. As of December 31, 2023, the Company had $394.7 million of borrowings available under its credit facilities (net of $5.3 million undrawn letters of credit issued and outstanding), described further below. During the years ended December 31, 2023 and 2022, the Company’s positive cash flows from operations have focused our growth onenabled investments in pharmacy, infusion suites, and information technology infrastructure to support growth and create additional capacity in the Infusion Servicesfuture, as well as to pursue acquisitions and share repurchases.
The Company’s primary uses of cash include supporting our ongoing business which remainsactivities, investment in capital expenditures in both facilities and technology, and the primary driverpursuit of acquisitions and share repurchases. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt and cash taxes. Ongoing investing cash flows are primarily associated with capital projects and business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt, along with potential future share repurchases.
Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. Recent transactions which represent executionThe Company historically has funded its acquisitions with cash and cash equivalents with the exception of the Merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.
Short-Term and Long-Term Liquidity Requirements
The Company’s ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash and cash equivalents in the future, which to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations and planned capital expenditures, we believe that our existing cash and cash equivalents balances and expected cash flows generated from operations will be sufficient to meet our operating requirements for at least the next 12 months and beyond. We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic assessments include:plans.

37
Credit Facilities
On August 27, 2015, we completed the sale of substantially all of our pharmacy benefit management services segment (the “PBM Business”) pursuant to an Asset Purchase Agreement dated as of August 9, 2015 (the “PBM Asset Purchase Agreement”), by and amongDecember 7, 2023, the Company BioScrip PBM Services, LLCamended its First Lien Credit Agreement to, among other things, create a Revolver Facility which provides for borrowings up to $400.0 million. The Revolver Facility matures on the date that is the earlier of (i) December 7, 2028 and ProCare Pharmacy Benefit Manager Inc. (the “PBM Buyer”). Under(ii) the PBM Asset Purchase Agreement,date that is 91 days prior to the PBM Buyer agreedstated maturity date applicable to acquire substantially allany Term B Loans. Borrowings under the Revolver Facility will bear interest at a rate equal to, at the option of the assets used solelyCompany, either (i) the Term Secured Overnight Financing Rate (“SOFR”) applicable thereto plus the Applicable Rate or (ii) the then-applicable Base Rate plus the Applicable Rate, which Applicable Rate shall be, subject to certain caveats thereto, as follows (i) until delivery of financial statements and related Compliance Certificate for the first full fiscal quarter ending after the effective date of the Amendment, (A) for Term SOFR Loans, 1.75%, (B) for Base Rate Loans, 0.75% and (ii) thereafter, the following percentages per annum, based upon the Total Net Leverage Ratio as set forth in connection with the PBM Business and to assume certain PBM Business liabilities (the “PBM Sale”). Onmost recent compliance certificate received by the closing date,Administrative Agent pursuant to the terms of the PBM Asset PurchaseCredit Agreement. As of December 31, 2023, the Company had $5.3 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the Revolver Facility of $394.7 million. The table below illustrates the aforementioned interest rate terms:
Pricing LevelTotal Net Leverage RatioApplicable Rate for Term SOFR LoansApplicable Rate for Base Rate Loans
IGreater than or equal to 3.00x2.25%1.25%
IILess than 3.00x, but greater than or equal to 2.25x2.00%1.00%
IIILess than 2.25x, but greater than or equal to 1.50x1.75%0.75%
IVLess than 1.50x, but greater than or equal to 1.00x1.50%0.50%
VLess than 1.00x1.25%0.25%
Concurrently with the creation of the Revolver Facility, the Company terminated the asset-based-lending revolving credit facility, which provided for borrowings up to $225.0 million with a maturity date of October 27, 2026 (the “ABL Facility”). The ABL Facility bore interest at a rate equal to, at the Company’s election, either (i) a base rate determined in accordance with the ABL Credit Agreement we received total cash considerationplus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of approximately $24.6 million, includingthe Line Cap (as such term is defined in the ABL Credit Agreement) and (ii) SOFR (with a floor of 0.00% per annum) plus an adjustment for estimated closing date net working capital.

On October 20, 2015, we finalized working capital adjustment negotiations in relationapplicable margin, which is equal to between 1.25% and 1.75% based on the PBM Sale whereby we agreedhistorical excess availability as a percentage of the Line Cap. As of December 31, 2023, the Company’s ABL Facility was terminated. Effective January 13, 2023, the Company entered into an agreement to repay approximately $1.0amend the ABL Facility and increase the amount of borrowing availability by $50.0 million to the PBM Buyer. We used the net proceeds from the PBM Sale to pay down$225.0 million total borrowing availability. As a portion of our outstanding debt.

On September 9, 2016, we acquired substantially allresult of the assets and assumed certain liabilities of Home Solutions and its subsidiaries (the “Home Solutions Transaction”) pursuant to an Asset Purchase Agreement datedamended agreement, SOFR was established as the new reference rate, replacing LIBOR.
Effective June 11, 2016 (as amended, the “Home Solutions Agreement”), by and among Home Solutions, a Delaware corporation, certain subsidiaries of Home Solutions,30, 2023, the Company entered into an agreement, dated as of June 8, 2023, to amend the First Lien Term Loan to replace LIBOR and HomeChoice Partners, Inc.,related definitions and provisions with SOFR as the new reference rate. The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.5 million plus interest, with a Delaware corporation. Home Solutions,final payment of all remaining outstanding principal due on October 27, 2028. The quarterly principal payments commenced in March 2022. Interest on the First Lien Term Loan is payable monthly on either (i) SOFR (with a privately held company, provides home infusion and home nursing products and services to patients suffering from chronic and acute medical conditions. The aggregate consideration paid by the Companyfloor of 0.50% per annum) plus an applicable margin of 2.75% for Term SOFR Loans (as such term is defined in the Transaction was equal to (i) $67.5First Lien Credit Agreement Amendment); or (ii) a base rate determined in accordance with the new First Lien Credit Agreement Amendment, plus 1.75% for Base Rate Loans (as such term is defined in the First Lien Credit Agreement Amendment).
The Senior Notes bear interest at a rate of 4.375% per annum, which are payable semi-annually in arrears on October 31 and April 30 of each year, and which began on April 30, 2022. The Senior Notes mature on October 31, 2029.
Interest payments over the course of long-term debt obligations total an estimated $359.8 million in cash (the “Cash Consideration); plus (ii) (a) 3,750,000 shares of Company common stock (the “Transaction Closing Equity Consideration”) and (b) the right to receive contingent equity securitiesbased on final maturity dates of the Company, in the formCompany’s credit facilities. Interest payments are calculated based on current rates as of restricted shares of Company common stock (the “RSUs”), issuable in two tranches, Tranche A and Tranche B, with different vesting conditions (collectively, the “Contingent Shares”).

Regulatory Matters Update

Approximately 16% of revenue for the year ended December 31, 2017 was derived directly from Medicare, state Medicaid programs2023. Actual payments are based on changes in SOFR and other government payors. We also provide services to beneficiariesexclude the interest rate cap derivative instrument.
38

Cash Flows
State Medicaid Programs

Over the last several years, increased Medicaid spending, combined with slow state revenue growth, led many states to institute measures aimed at controlling spending growth. Spending cuts have taken many forms including reducing eligibility and benefits, eliminating certain types of services, and provider reimbursement reductions. In addition, some states have been moving beneficiaries to managed care programs in an effort to reduce costs.

Each individual state Medicaid program represents less than 5% of our consolidated revenue for the year endedYear Ended December 31, 2017 and no individual state Medicaid reimbursement reduction is expected2023 Compared to have a material effect on our Consolidated Financial Statements. We are continually assessing the impactYear Ended December 31, 2022
The following table presents selected data from Option Care Health’s consolidated statements of the state Medicaid reimbursement cuts as states propose, finalize and implement various cost-saving measures. These measures may include strategies to reduce coverage, restrict enrollment, or enroll more beneficiaries in managed care programs.

Given the reimbursement pressures, we continue to improve operational efficiencies and reduce costs to mitigate the impact on results of operations where possible. In some cases, reimbursement rate reductions may result in negative operating results, and we would likely exit some or all services where rate reductions result in unacceptable returns to our stockholders.

Medicare

Medicare currently covers home infusion therapy for selected therapies primarily through the durable medical equipment benefit. The Cures Act changed the new payment system for certain home infusion therapy services paid under Medicare Part B. The Cures Act significantly reduced the amount paid by Medicare for the drug costs, and also provides for the implementation of a clinical services payment. Under the Cures Act, the services payment does not take effect until 2021. However, the Bipartisan Budget Act of 2018 provides for a temporary transitional payment, starting January 1, 2019, for Medicare Part B home infusion services. This temporary benefit will continue until January 1, 2021, when the services payment in the Cures Act takes effect. We have taken steps to mitigate the impact of the Cures Act on our business, but the Act has had material negative impact on our revenues and profitability.

Approximately 7% and 8% of revenuecash flows for the years ended December 31, 20172023 and 2016, respectively,2022:
 Year Ended December 31,
 20232022Variance
(in thousands)
Net cash provided by operating activities$371,295 $267,547 $103,748 
Net cash used in investing activities(56,506)(108,052)51,546 
Net cash (used in) provided by financing activities(265,126)15,268 (280,394)
Net increase in cash and cash equivalents49,663 174,763 (125,100)
Cash and cash equivalents - beginning of period294,186 119,423 174,763 
Cash and cash equivalents - end of period$343,849 $294,186 $49,663 
Cash Flows from Operating Activities
The increase in cash provided by operating activities is primarily due to higher net income, the Termination Fee received under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes, stock-based incentive compensation expense, changes in accrued compensation and employee benefits, timing of collections on accounts receivable, partially offset by cash paid for taxes, changes in inventory, and certain accruals and timing of vendor payments during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Cash Flows from Investing Activities
The decrease in cash used in investing activities during the year ended December 31, 2023 is primarily due to a decrease in acquisition activity as compared to the year ended December 31, 2022. See Note 3, Business Acquisitions and Divestitures, of the consolidated financial statements for more information.
Cash Flows from Financing Activities
The cash used in financing activities is primarily related to the Company’s repurchase of common stock during the year ended December 31, 2023, whereas the cash provided by financing activities in the year ended December 31, 2022 was derived from Medicare.primarily related to the proceeds of warrant exercises.

39
Critical Accounting Estimates

Our Consolidated Financial Statements have been preparedThe Company prepares its consolidated financial statements in accordance with United States GAAP. In preparing our financial statements, we are requiredgenerally accepted accounting principles (“GAAP”), which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and

expenses during the reporting period. We evaluate ourassumptions. The Company evaluates its estimates and judgments on an ongoing basis. We base our estimatesEstimates and judgments are based on historical experience and on various other factors that we believeare believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period presented. OurThe Company’s actual results may differ from these estimates, and different assumptions or conditions may yield different estimates. The following discussion highlights what we believe to be the critical accounting estimates and judgments made in the preparation of our Consolidated Financial Statements.

The following discussion is not intended to be a comprehensive list of all the accounting policies, estimates or judgments made in the preparation of our financial statements and in many casesstatements. A discussion of our significant accounting policies, including further discussion of the accounting treatmentpolicies described below, can be found in Note 2, Summary of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment on its application. See our audited Consolidated Financial Statements andSignificant Accounting Policies, within the notes thereto appearing elsewhereto the consolidated financial statements included in Item 8 of this Annual Report, which contain a description of our accounting policies and other disclosures required by GAAP.

Report.
Revenue Recognition and Accounts Receivable

Net revenue is reported at the net realizable value amount that reflects the consideration the Company expects to receive in exchange for providing services. Revenues are from commercial payers, government payers, and patients for goods and services provided and are based on a gross price based on payer contracts, fee schedules, or other arrangements less any implicit price concessions.
We generateDue to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue principally throughand accounts receivable at their net realizable values at the provisiontime goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.
The Company assesses the expected consideration to be received at the time of homepatient acceptance based on the verification of the patient’s insurance coverage, historical information with the patient, similar patients, or the payer. Performance obligations are determined based on the nature of the services provided by the Company. The majority of the Company’s performance obligations are to provide infusion services to provide clinical management services anddeliver medicine, nutrients, or fluids directly into the deliverybody.
The Company provides a variety of cost effective prescription medications.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-25, Revenue Recognition: Multiple-Element Arrangements (“ASC 605-25”), addresses situations ininfusion-related therapies to patients, which there arefrequently include multiple deliverables under one revenue arrangement with a customer and provides guidance in determining whether multiple deliverables should be recognized separately or in combination.

For infusion-related therapies, we frequently provide multiple deliverables of pharmaceutical drugs and related nursing services. After applying the criteria of from Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 605-25, we606”), the Company concluded that separate units of accountingmultiple performance obligations exist in revenue arrangementsits contracts with multiple deliverables. Ifits customers. Revenue is allocated to each performance obligation based on relative standalone price, determined based on reimbursement rates established in the drug is shipped, thethird-party payer contracts. Pharmaceutical drug revenue is recognized at the time of shipment,the pharmaceutical drug is delivered to the patient, and nursing revenue is recognized on the date of service. We allocate revenue consideration based on
The Company’s accounts receivable are reported at the relative fair value as determined by our best estimate of selling price to separate the revenue where there are multiple deliverables under one revenue arrangement. We recognize infusion nursing revenue as the estimated net realizable amountsvalue amount that reflects the consideration the Company expects to receive in exchange for providing services, which is inclusive of adjustments for price concessions. The majority of accounts receivable are due from patientsprivate insurance carriers and payors for services renderedgovernmental healthcare programs, such as Medicare and products provided. This revenue is recognized asMedicaid.
Price concessions may result from patient hardships, patient uncollectible accounts sent to collection agencies, lack of recovery due to not receiving prior authorization, differing interpretations of covered therapies in payer contracts, different pricing methodologies, or various other reasons.
Included in accounts receivable are earned but unbilled gross receivables. Delays ranging from one day up to several weeks between the treatment plan is administereddate of service and billing can occur due to delays in obtaining certain required payer-specific documentation from internal and external sources.
After applying the patient and is recorded at amounts estimated to be received under reimbursement or payment arrangements with payors.

Allowance for Doubtful Accounts

Thecriteria from ASC 606, an allowance for doubtful accounts is based on estimatesestablished only as a result of losses related to receivable balances. The risk of collection varies based uponan adverse change in the service/product, the payor (commercial health insurance and government) and the patient’spayers’ ability to pay outstanding billings. As of December 31, 2023 and 2022, the amounts not reimbursed by the payor. We estimate theCompany had no allowance for doubtful accountsaccounts. The Company recorded an allowance for implicit price concessions based upon several factors including the age of the outstanding receivables, theon its historical experience of collections, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for the ability to pay. Collection agencies are employed and legal action is taken when we determine that taking collection actions is reasonable relative to the probability of receiving payment on amounts owed. Management judgment is used to assess the collectability of accounts and the ability of our customers to pay. Judgment is also used to assess trends in collections and the effects of systems and business process changes on our expected collection rates. We review the estimation process quarterly and make changes to the estimates as necessary. When it is determined that a customer account is uncollectible, that balance isadditional revenue being recorded or revenue being written off againstwhen amounts received are greater than or less than the existing allowance.


originally estimated net realizable value. The following table shows the aging of our net accounts receivable (net of allowance fordetailed assessments included, among other factors, current over/under payments which had not yet been applied to an account, historical contractual adjustments, and prior to allowance for doubtful accounts), aged based on date of service and categorized based on the three primary overall types of accounts receivable characteristics (in thousands):
  December 31, 2017 December 31, 2016
  0 - 180 days Over 180 days Total% of Total 0 - 180 days Over 180 days Total% of Total
Government $20,602
 $10,082
 $30,684
  $19,891
 $8,278
 $28,169
 
Commercial 63,767
 18,779
 82,546
  95,018
 19,849
 114,867
 
Patient 2,577
 7,627
 10,204
  3,955
 6,825
 10,780
 
Gross accounts receivable $86,946
 $36,488
 123,434
  $118,864
 $34,952
 153,816
 
Allowance for doubtful accounts     (37,912)30.7%     (44,730)29.1%
Net accounts receivable     $85,522
      $109,086
 

At December 31, 2017, our allowance for doubtful accounts was $37.9 million, or 30.7% of gross accounts receivable, as compared to $44.7 million, or 29.1% of gross accounts receivable, at December 31, 2016. The allowance for doubtful accounts decreased by approximately $3.0 million during 2017 due to a change in estimate resulting from stabilized collections including more predictable cash receipts from our payors.

Allowance for Contractual Discounts

We are reimbursed by payors for products and services we provide. Payments for medications and services covered by payors average less than billed charges. We monitor revenue and receivables from payors for each of our branches and record an estimated contractual allowance for certain revenue and receivable balances as of the revenue recognition date to properly account for anticipated differences between amounts estimated in our billing system and amounts ultimately reimbursed by payors. Accordingly, the total revenue and receivables reported in our financial statements are recorded at the amounts expected to be received from these payors. For the significant portion of our Infusion Services revenue, the contractual allowance is estimated based on several criteria, including unbilled claims, historical trends based on actual claims paid, current contract and reimbursement terms and changes in customer base and payor/product mix.payments. Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled. We do not believe these changes in estimates are material.
40
Business Acquisitions
The billing functionsCompany accounts for the remaining portion of our revenue are largely computerized, which enables on-line adjudication (i.e., submitting charges to third-party payors electronically, with simultaneous feedback of the amount the primary insurance plan expects to pay) at the time of sale to record net revenue, exposure to estimating contractual allowance adjustments is limited to this portion of the business.

Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not subject to amortization and,business acquisitions in accordance with ASC Topic 350, Intangibles – Goodwill805, Business Combinations (“ASC 805”), with assets and Other, we evaluateliabilities being recorded at their acquisition date fair values and goodwill and indefinite lived intangible assets for impairment on an annual basis and whenever events or circumstances exist that indicate that the carrying value of goodwill or indefinite-lived intangible assets may no longer be recoverable.

Management may choose to undertake a qualitative assessment in order to assess whether a quantitative analysis is required. In determining whether management will utilize the qualitative assessment in any one year, management will consider overall economic factors as wellbeing calculated as the passage of time since last quantitative assessment.

In January 2017, the FASB issued authoritative guidance that simplifies the measurement of goodwill impairment to a single-step test. The guidance eliminates step two of the goodwill impairment test; the measurement of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under the revised guidance, failing step one will result in goodwill impairment. The Company adopted the new guidance on January 1, 2017 on a prospective basis.

2017 Warrants

The 2017 Warrants are reflected as a liability in other non-current liabilities on the balance sheet and are adjusted to fair value at the end of each reporting period through earnings. The 2017 Warrants entitle the purchasers of the Warrants to purchase shares of Common Stock, representing at the time of any exercise an equivalent number of shares equal to 4.99% of the Common Stock of the Company on a fully diluted basis. The exercise price and the number of shares that may be acquired upon exercise of the

2017 Warrants is subject to adjustment in certain situations, including price based anti-dilution protection and standard anti-dilution protections if the Company effects a stock split, subdivision, reclassification or combination of its Common Stock or fixes a record date for the making of a dividend or distribution to stockholders of cash or certain assets.

Off-Balance Sheet Arrangements

As of December 31, 2017, we did not have any material off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Results of Operations

The following consolidated statements have been derived from our audited consolidated financial statements included in this Annual Report on Form 10-K. The discussion set forth below compares our annual results of operations with the results of prior years. Certain amounts below have been revised to reflect immaterial corrections, see Note 1 - Nature of Business.
 Year Ended December 31,
(in thousands)		 As a Percentage of Revenue
 2017 2016 2015 2017 2016 2015
Net revenue$817,190
 $935,589
 $982,223
 100.0 % 100.0 % 100.0 %
Gross profit, excluding depreciation expense269,242
 262,082
 259,952
 32.9 % 28.0 % 26.5 %
Other operating expenses163,273
 169,781
 165,328
 20.0 % 18.1 % 16.8 %
Bad debt expense23,697
 26,608
 42,444
 2.9 % 2.8 % 4.3 %
General and administrative expenses39,625
 38,798
 42,474
 4.8 % 4.1 % 4.3 %
Change in fair value of equity linked liabilities3,587
 (10,450) —
 0.4 % (1.1)% — %
Impairment of goodwill—
 —
 251,850
 — % — % 25.6 %
Restructuring, acquisition, integration, and other expenses, net12,662
 15,859
 24,405
 1.5 % 1.7 % 2.5 %
Depreciation and amortization expense27,725
 22,025
 22,864
 3.4 % 2.4 % 2.3 %
Interest expense52,072
 37,572
 36,938
 6.4 % 4.0 % 3.8 %
Loss on extinguishment of debt13,453
 —
 —
 1.6 % — % — %
Loss (gain) on dispositions581
 (3,954) —
 0.1 % (0.4)% — %
Loss from continuing operations, before income taxes(67,433) (34,157) (326,351) (8.3)% (3.7)% (33.2)%
Income tax benefit (expense)4,130
 (2,015) 21,532
 0.5 % (0.2)% 2.2 %
Loss from continuing operations, net of income taxes(63,303) (36,172) (304,819) (7.7)% (3.9)% (31.0)%
Income (loss) from discontinued operations, net of income taxes(893) (6,593) 4,691
 (0.1)% (0.7)% 0.5 %
Net loss$(64,196) $(42,765) $(300,128) (7.9)% (4.6)% (30.6)%

Revenue. Revenue for the year ended December 31, 2017 decreased approximately $118.4 million, or 13%, to $817.2 million, compared to revenue of $935.6 million for the year ended December 31, 2016. The decrease in net revenue primarily reflects the Company’s shift in strategy to focus on growing its core revenue mix, including the impact of UnitedHealthcare contract transition effective September 30, 2017, the impact of the Cures Act, and the impact of the Company’s exit from the Hepatitis C market in 2016, partially offset by additional revenues resulting from the acquisition of Home Solutions. Revenue for the year ended December 31, 2016 decreased approximately $46.6 million, or 5%, to approximately $935.6 million, compared to revenue of $982.2 million for the year ended December 31, 2015. The decrease in revenue in 2016 as compared to 2015 is the result of decreases in patient service volumes, specifically in our lower margin chronic business, the divestiture of our Hepatitis C business, partially offset by additional revenues resulting from the Home Solutions acquisition, and an increase in patient service volume primarily in our core nutrition therapies and chronic infused therapies.

Gross Profit. Gross profit consists of revenue less cost of revenue (excluding depreciation expense). The cost of revenue primarily includes the costs of prescription medications, supplies, nursing services, shipping and other direct and indirect costs. The increase in gross profit during 2017 as compared to 2016 of $7.2 million, or 3%, to $269.2 million, compared to gross profit

of $262.1 million for the year ended December 31, 2016, was primarily driven by the Home Solutions acquisition, an improved mix of higher margin core therapy revenues versus lower margin non-core therapy revenues, and a decreased cost of prescription medicines and supplies as a result of improved supply chain management, partially offset by the Company’s shift in strategy to focus on growing its core revenue mix, including the UnitedHealthcare contract transition effective September 30, 2017. The increase in gross profit in 2016 of $2.1 million, or 1%, as compared to $260.0 million for the year ended December 31, 2015 was the result of the acquisition of Home Solutions, improved supply chain management, and an increase in patient service volume primarily in our core nutrition therapies and chronic infused therapies, offset partially by the impact of decreases in patient service volumes, specifically in our lower margin chronic business, and the divestiture of our Hepatitis C business

Other Operating Expenses. Other operating expenses consist primarily of wages and benefits, travel expenses, and professional service and field office expenses for our healthcare professionals engaged in providing infusion services to our patients. Other operating expenses for the year ended December 31, 2017 decreased by approximately $6.5 million, or 4%, to $163.3 million, compared to expenses of $169.8 million for the year ended December 31, 2016. The decrease was primarily the result of restructuring and other workforce optimization efforts. Other operating expenses for the year ended December 31, 2016 increased by approximately $4.5 million, or 3%, to $169.8 million, compared to expenses of $165.3 million for the year ended December 31, 2015, reflecting the impact of the Home Solutions acquisition and increased wage, benefit, and other field office costs.

Bad Debt Expenses. Bad debt expense for the year ended December 31, 2017 decreased by approximately $2.9 million, or 11%, to $23.7 million, compared to $26.6 million for the year ended December 31, 2016. Bad debt expense decreased primarily due to a change in estimate resulting from stabilized collections, including more predictable cash receipts from our payors. The decrease in bad debt expense of $15.8 million, or 37%, in 2016 as compared to expense of $42.4 million for the year ended December 31, 2015 was the result of continued focus on improvement of billing and collection efforts to ensure timely cash receipts, as well as a change in estimate associated with the allowance for doubtful accounts. The change in estimate had the effect of lowering the doubtful accounts allowance, overall, due to improved collection experience evidenced by more predictable cash receipts from our payors.

General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2017 increased by approximately $0.8 million, or 2.1%, to $39.6 million, compared to $38.8 million for the year ended December 31, 2016. General and administrative expenses consist of wages and benefits for corporate overhead personnel and certain corporate level professional service fees, including legal, accounting, and IT fees. The increase is primarily due to increased wages and benefits expense. The decrease in general and administrative expenses of $3.7 million, or 9%, in 2016 as compared to expense of $42.5 million during the year ended December 31, 2015 resulted from the reduction in the use and cost of various professional services combined with reductions in the number of corporate personnel and their associated wage and benefits costs.

Change in Fair Value of Equity Linked Liabilities. The increase in fair value of equity linked liabilities of $14.0 million is attributable to a $3.6 million charge during the year ended December 31, 2017 representative of the change in the estimated fair value of the 2017 Warrants issued in connection with the Second Lien Note Facility. The year ended December 31, 2016 saw a $10.5 million gain on the reversal of a liability recorded in connection with contingent equity securities, in the form of restricted shares of Company common stock (the “RSUs”), issuable in connection with the Home Solutions Transaction. We did not incur such charges or benefit from contingent equity linked liabilities during 2015.

Goodwill Impairment. The Company did not record any impairment charges as a result of its goodwill impairment assessments performed during the years ended December 31, 2017 and 2016. During the year ended December 31, 2015 we performed a goodwill impairment assessment due to a significant decline in market capitalization which resulted in a market value significantly lower than the fair value of the business. We recorded a goodwill impairment charge of $251.9 million for the year ended December 31, 2015 related to our Infusion Services business.

Restructuring, Acquisition, Integration, and Other Expenses, net. Restructuring, acquisition, integration, and other expenses include costs associated with restructuring, acquisition and integration initiatives such as employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed branches/offices. Restructuring, acquisition, integration, and other expenses, net decreased by $3.2 million, or 20%, during the year ended December 31, 2017 to $12.7 million from $15.9 million primarily due to lower expenses related to the Home Solutions acquisition and integration, partially offset by restructuring and other workforce optimization efforts during 2017. Restructuring, acquisition, integration, and other expenses decreased by $8.5 million during the year ended December 31, 2016 as compared to the year ended December 31, 2015, as a result of the completion of cost cutting measures associated with the financial improvement plan, partially offset by increases associated with the Home Solutions acquisition.


Depreciation and Amortization Expenses. Depreciation and amortization expenses include the depreciation of property and equipment and the amortization of intangible assets such as customer relationships, managed care contracts, licenses, trademarks, trade names, and non-compete agreements with estimable lives. During the years ended December 31, 2017 and 2016, we recorded depreciation expenses of $15.9 million and $15.8 million, respectively. The decrease in depreciation expense is attributable to a decline in capital expenditures. Amortization expense increased during the year ended December 31, 2017 to $11.8 million, or 91%, from $6.2 million. The increase in amortization expense is attributable to the corresponding increase in intangible assets associated with the acquisition of Home Solutions in the third quarter of 2016. During the years ended December 31, 2016 and 2015, we recorded depreciation expense of $15.8 million and $17.7 million, respectively, and amortization expense of intangibles of $6.2 million and $5.1 million, respectively. The decrease in depreciation expense was driven by a decline in capital expenditures.

Interest Expense. Interest expense consists of interest expense and amortization of deferred financing costs reduced by an immaterial amount of interest income. During the years ended December 31, 2017 and 2016, we recorded interest expense of $52.1 million and $37.6 million, respectively, including $1.3 million and $3.6 million of amortization of deferred financing costs, respectively. The increase in interest expense of $14.5 million, or 39%, in 2017 as compared to 2016 is the result of the changes in debt structure (see Note 10 - Debt), which also resulted in a higher effective interest rate specific to the amortization of the discount associated with the 2017 Warrants. During the years ended December 31, 2016 and 2015, we recorded interest expense of $37.6 million and $36.9 million, respectively, including $3.6 million and $2.9 million of amortization of deferred financing costs, respectively. The increase in interest expense in 2016 as compared to 2015 was primarily attributable to the increase of $0.7 million in amortization of deferred financing costs in 2016 as compared to 2015 associated with changes in debt structure during the year ended December 31, 2015.

Loss on Extinguishment of Debt. The loss on extinguishment of debt of $13.5 million during the year ended December 31, 2017 is attributable to the Company’s entry into the Notes Facilities and the associated extinguishment of the Senior Credit Facilities and the Prior Credit Agreements (see Note 10 - Debt).
Income Tax Benefit (Expense). Our income tax provision for the year ended December 31, 2017 reflects a $4.1 million benefit, compared to a provision of $2.0 million during the year ended December 31, 2016. The primary driver of the change was the reversal of the valuation allowance, which created an income tax benefit in 2017. The reversal of the valuation allowance was the result of new federal NOL carryforward rules enacted under TJCA, which prescribe an indefinite federal NOL carryforward period for NOLs generated in 2018 and beyond (subject to a 20% reduction).The 2017 income tax benefit of $4.1 million includes a federal tax benefit of $23.7 million and a state tax benefit of $4.6 million, a $41.6 million adjustment related to deferred tax asset valuation allowances and other adjustments of $2.0 million, offset by a $67.7 million adjustment associated with the impact of the change in the corporate tax rate brought about by the enactment of the TCJA. The 2016 income tax expense of $2.0 million includes a federal tax benefit of $11.9 million and a state tax benefit of $1.4 million at statutory tax rates, offset by a $14.7 million adjustment related to deferred tax asset valuation allowances and other adjustments of $0.7 million. The 2015 income tax benefit of $21.5 million includes a federal tax benefit of $114.2 million and state tax benefit of $8.4 million at statutory rates, offset by a $57.6 million adjustment to deferred tax asset valuation allowances, a goodwill impairment adjustment of $43.4 million, and other adjustments of $0.2 million.

Non-GAAP Measures

The following table reconciles GAAP loss from continuing operations, net of income taxes to consolidated Adjusted EBITDA. Adjusted EBITDA is net income (loss) adjusted for interest expense, income tax expense (benefit), depreciation and amortization, loss (gain) on dispositions, change in fair value of equity linked liabilities, impairments, loss on extinguishment of debt, and stock-based compensation expense. Adjusted EBITDA also excludes restructuring, acquisition, integration and other expenses including costs associated with restructuring, acquisition, and integration initiatives such as employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed branches/offices.

Consolidated Adjusted EBITDA is a measure of earnings that management monitors as an important indicator of financial performance, particularly future earnings potential and recurring cash flow. Consolidated Adjusted EBITDA is also a primary objective of the management bonus plan. Inclusion of Consolidated Adjusted EBITDA is intended to provide investors insight into the manner in which management views the performance of the Company.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Our calculation of Non-GAAP Adjusted EBITDA, as presented, may differ from similarly titled measures reported by other companies. We encourage investors to review these reconciliations and we qualify our use of non-GAAP financial measures with cautionary statements as to their limitations.

 Year Ended December 31,
 2017 2016 2015
 (in thousands)
Loss from continuing operations, net of income taxes$(63,303) $(36,172) $(304,819)
      
Interest expense(52,072) (37,572) (36,938)
Loss on extinguishment of debt(13,453) —
 —
(Loss) gain on dispositions(581) 3,954
 —
Income tax benefit (expense)4,130
 (2,015) 21,532
Depreciation and amortization expense(27,725) (22,025) (22,864)
Impairment of goodwill—
 —
 (251,850)
Stock-based compensation expense(2,360) (1,801) (4,513)
Change in fair value of equity linked liabilities(3,587) 10,450
 —
Restructuring, acquisition, integration, and other expenses, net(12,662) (15,859) (24,405)
      
Consolidated Adjusted EBITDA$45,007
 $28,696
 $14,219

Adjusted EBITDA increased during the year ended December 31, 2017 compared to the prior year primarily due to increased gross profit resulting from improved gross profit margins driven by increased core revenue mix and supply chain management, as well as restructuring and integration efforts which optimized operations.

Liquidity and Capital Resources

Sources and Uses of Funds

We utilize funds generated from operations for general working capital needs, capital expenditures and acquisitions.

Net cash provided by operating activities from continuing operations was $5.6 million for the year ended December 31, 2017, a $41.1 million improvement, compared to cash used in operating activities from continuing operations of $35.5 million for the year ended December 31, 2016. Cash interest payments increased $10.7 million to $45.4 million in 2017, compared to $34.7 million during 2016. These higher cash interest payments during 2017 were more than offset by the favorable impacts of increased Adjusted EBITDA, lower restructuring, acquisition, integration, and other expenses, net, and working capital management. Net cash used in operating activities from continuing operations was $35.5 million for the year ended December 31, 2016, a $27.2 million improvement, compared to $62.7 million for the year ended December 31, 2015, resulting from the favorable impacts of increased Adjusted EBITDA, lower restructuring, acquisition, integration, and other expenses, net, and working capital management.

Net cash used in investing activities from continuing operations during the year ended December 31, 2017 was $13.6 million compared to $73.2 million of cash used during the same period in 2016. Fluctuations in investing cash flows during the year ended December 31, 2017, as compared to the same period in 2016, were primarily attributable to a year over year decrease in cash consideration paid for acquisitions of $67.5 million associated with the prior year acquisition of Home Solutions, Inc and a year over year decrease in purchases of property and equipment of $1.2 million, offset by year over year decreases of $4.2 million and $5.0 million associated with proceeds received in divestitures and investment in restricted cash balances required to be maintained as collateral in accordance with the Notes Facilities, respectively. During the year ended December 31, 2016 we received proceeds of $4.2 million from dispositions, primarily attributable to the strategic divestiture of the Hepatitis C business. Capital expenditures were $8.7 million and $9.9 million for the years ended December 31, 2017 and 2016, respectively, resulting in $1.2 million decreased use of cash. Net proceeds from the sale of the PBM Business of $24.6 million are included in net cash provided by investing activities from discontinued operations in the year ended December 31, 2015.

Net cash provided by financing activities was $44.3 million and $109.7 million during the years ended December 31, 2017 and 2016, respectively. The cash provided in 2017 includes the net proceeds of approximately $20.8 million from the First Quarter 2017 Private Placement and Second Quarter 2017 Private Placement (each defined below), $23.1 million from the Priming Credit Agreement, and $294.4 million from the Notes Facilities offset by repayments of $55.9 million on our Revolving Credit Facility and by $236.8 million of principal payments made on the Term Loan Facility and the Priming Credit Agreement. Cash provided in 2016 results from $83.3 million from the 2016 Equity Offering (defined below) and by advances of $104.3 million offset by repayments of $64.0 million on our Revolving Credit Facility (defined below) and $12.6 million of principal payments made on the Term Loan Facility.

At December 31, 2017, we had net working capital (excluding current assets and current liability of discontinued operations) of $82.6 million, including $39.5 million of cash on hand, compared to $43.2 million of net working capital at December 31, 2016. The $39.4 million increase in working capital results primarily from the increase in our cash and cash equivalents and restricted cash of $34.8 million. Additional liquidity of $10.0 million is provided by the delayed draw capacity in our Second Lien Note Facility described below. At December 31, 2017, we had outstanding letters of credit totaling $4.8 million, collateralized by restricted cash of $5.0 million.

Debt Facilities
The Company was previously obligated under (i) a senior secured first-lien revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility”), (ii) a senior secured first-lien term loan B in an aggregate principal amount of $250.0 million (the “Term Loan B Facility”) and (iii) a senior secured first-lien delayed draw term loan B in an aggregate principal amount of $150.0 million (the “Delayed Draw Term Loan Facility” and, together with the Revolving Credit Facility and the Term Loan B Facility, the “Senior Credit Facilities”) with SunTrust Bank, Jefferies Finance LLC and Morgan Stanley Senior Funding, Inc., originally entered on July 31, 2013 and amended from time to time.
On January 6, 2017, the Company entered into a credit agreement (the “Priming Credit Agreement” and, together with the Senior Credit Facilities, the “Prior Credit Agreements”) with certain existing lenders under the Senior Credit Facilities and SunTrust, as administrative agent for itself and the lenders. The Priming Credit Agreement provided an aggregate borrowing commitment of $25.0 million, which was fully drawn at closing.
On June 29, 2017, the Company entered into (i) a first lien note purchase agreement (the “First Lien Note Facility”), among the Company, which is the issuer under the agreement, the financial institutions and note purchasers from time to time party to the agreement (the “First Lien Note Purchasers”), and Wells Fargo Bank, National Association, in its capacity as collateral agent for itself and the First Lien Note Purchasers (the “First Lien Collateral Agent”), pursuant to which the Company issued first lien senior secured notes in an aggregate principal amount of $200.0 million (the “First Lien Notes”); and (ii) a second lien note purchase agreement (the “Second Lien Note Facility” and, together with the First Lien Note Facility, the “Notes Facilities”) among the Company, which is the issuer under the agreement, the financial institutions and note purchasers from time to time party to the agreement (the “Second Lien Note Purchasers”), and Wells Fargo Bank, National Association, in its capacity as collateral agent for itself and the Second Lien Note Purchasers (the “Second Lien Collateral Agent” and, together with the First Lien Collateral Agent, the “Collateral Agent”), pursuant to which the Company (a) issued second lien senior secured notes in an aggregate initial principal amount of $100.0 million (the “Initial Second Lien Notes”) and (b) has the ability to draw upon the Second Lien Note Facility and issue second lien delayed draw senior secured notes in an aggregate initial principal amount of $10.0 million for a period of 18 months after the Closing Date, subject to certain terms and conditions (the “Second Lien Delayed Draw Notes” and, together with the Initial Second Lien Notes, the “Second Lien Notes”; the Second Lien Notes, together with the First Lien Notes, the “Notes”). Funds managed by Ares Management L.P. (“Ares”) acted as lead purchasers for the Notes Facilities.
The Company used the proceeds of the sale of the First Lien Notes and the Initial Second Lien Notes pursuant to the Notes Facilities to repay in full all amounts outstanding under the Prior Credit Agreements and extinguished the liability. Each of the Prior Credit Agreements was terminated following such repayment. The Company used the remaining proceeds of $15.9 million of the Notes Facilities, net of $0.2 million in associated costs, and the Second Quarter 2017 Private Placement for working capital and general corporate purposes.
The First Lien Notes accrue interest, payable monthly in arrears, at a floating rate or rates equal to, at the option of the Company, (i) the base rate (defined as the highest of the Federal Funds Rate plus 0.5% per annum, the Prime Rate as published by The Wall Street Journal and the one-month London Interbank Offered Rate (“LIBOR”) (subject to a 1.0% floor) plus 1.0%), or (ii) the one-month LIBOR rate (subject to a 1.0% floor), plus a margin of 6.0% if the base rate is selected or 7.0% if the LIBOR Option is selected. The First Lien Notes mature on August 15, 2020, provided that if the Company’s existing 8.875% Senior Notes due 2021 (the “2021 Notes”) are refinanced prior to August 15, 2020, then the scheduled maturity date of the First Lien Notes shall be June 30, 2022.
The First Lien Notes will amortize in equal quarterly installments equal to 0.625% of the aggregate principal amount of the First Lien Note Facility, commencing on September 30, 2019, and on the last day of each third month thereafter, with the balance payable at maturity. The First Lien Notes are pre-payable at the Company’s option at specified premiums to the principal amount that will decline over the term of the First Lien Note Facility. If the First Lien Notes are prepaid prior to the second anniversary of the Closing Date, the Company will be required to pay a make-whole premium based on the present value (using a discount rate based on the specified treasury rate plus 50 basis points) of all remaining interest payments on the First Lien Notes being prepaid prior to the second anniversary of the Closing Date, plus 4.0% of the principal amount of First Lien Notes being prepaid. On or after the second anniversary of the Closing Date, the prepayment premium is 4.0%, which declines to 2.0% on or after the

third anniversary of the Closing Date, and declines to 0.0% on or after the fourth anniversary of the Closing Date. At any time, the Company may pre-pay up to $50.0 million in aggregate principal amount of the First Lien Notes from internally generated cash without incurring any make-whole or prepayment premium. The occurrence of certain events of default may increase the applicable rate of interest by 2.0% and could result in the acceleration of the Company’s obligations under the First Lien Note Facility prior to stated maturity and an obligation of the Company to pay the full amount of its obligations under the First Lien Note Facility.
The First Lien Note Facility contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material indebtedness and events constituting a change of control. In addition, the obligations under the First Lien Note Facility will be guaranteed by joint and several guarantees from the Company’s subsidiaries.
In connection with the First Lien Note Facility, the Company, its subsidiaries and the First Lien Collateral Agent entered into a First Lien Guaranty and Security Agreement, dated as of June 29, 2017 (the “First Lien Guaranty and Security Agreement”). Pursuant to the First Lien Guaranty and Security Agreement, the obligations under the First Lien Notes will be secured by first priority liens on, and security interests in, substantially all of the assets of the Company and its subsidiaries.
The Second Lien Notes accrue interest, payable monthly in arrears, at a floating rate or rates equal to, at the option of the Company, (i) one-month LIBOR (subject to a 1.25% floor) plus 9.25% per annum in cash, (ii) one-month LIBOR (subject to a 1.25% floor) plus 11.25% per annum, which amount will be capitalized on each interest payment date, or (iii) one-month LIBOR (subject to a 1.25% floor) plus 10.25% per annum, of which one-half LIBOR plus 4.625% per annum will be payable in cash and one-half LIBOR plus 5.625% per annum will be capitalized on each interest payment date, provided that, in each case, if any permitted refinancing indebtedness with which the 2021 Notes are refinanced requires or permits the payment of cash interest, all of the interest on the Second Lien Notes shall be paid in cash. The Second Lien Notes mature on August 15, 2020, provided that if the 2021 Notes are refinanced prior to August 15, 2020, then the scheduled maturity date of the Second Lien Notes shall be June 30, 2022.
The Second Lien Notes are not subject to scheduled amortization installments. The Second Lien Notes are pre-payable at the Company’s option at specified premiums to the principal amount that will decline over the term of the Second Lien Note Facility. If the Second Lien Notes are prepaid prior to the third anniversary of the Closing Date, the Company will need to pay a make-whole premium based on the present value (using a discount rate based on the specified treasury rate plus 50 basis points) of all remaining interest payments on the Second Lien Notes being prepaid prior to the third anniversary of the Closing Date, plus 4.0% of the principal amount of Second Lien Notes being prepaid. On or after the third anniversary of the Closing Date, the prepayment premium is 4.0%, which declines to 2.0% on or after the fourth anniversary of the Closing Date, and declines to 0.0% on or after the fifth anniversary of the Closing Date. The occurrence of certain events of default may increase the applicable rate of interest by 2.0% and could result in the acceleration of the Company’s obligations under the Second Lien Note Facility prior to stated maturity and an obligation of the Company to pay the full amount of its obligations under the Second Lien Note Facility.
The Second Lien Note Facility contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material indebtedness and events constituting a change of control. In addition, the obligations under the Second Lien Note Facility will be guaranteed by joint and several guarantees from the Company’s subsidiaries.
In connection with the Second Lien Note Facility, the Company, its subsidiaries and the Second Lien Collateral Agent entered into a Second Lien Guaranty and Security Agreement, dated as of June 29, 2017 (the “Second Lien Guaranty and Security Agreement”). Pursuant to the Second Lien Guaranty and Security Agreement, the obligations under the Second Lien Notes will be secured by second priority liens on, and security interests in, substantially all of the assets of the Company and its subsidies.
In connection with the First Lien Note Facility and the Second Lien Note Facility, the Company, the First Lien Collateral Agent and the Second Lien Collateral Agent, entered into an intercreditor agreement containing customary provisions to, among other things, subordinate the lien priority of the liens granted under the Second Lien Note Facility to the liens granted under the First Lien Note Facility.

Issuance of 2021 Notes

On February 11, 2014, we issued $200.0 million aggregate principal amount of 8.875% senior notes due in 2021 (the “2021 Notes”) with net proceeds to us of approximately $194.5 million. The 2021 Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed by all existing and future subsidiaries of the Company. As of December 31, 2017, we do not have any independent assets or operations and, as a result, our direct and indirect subsidiaries (other than minor subsidiaries), each being 100% owned by us, are fully and unconditionally, jointly and severally, providing guarantees on a senior unsecured basis to the 2021 Notes.The 2021 Notes were offered in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act pursuant to an Indenture dated February 11, 2014, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee.

Interest on the 2021 Notes accrues at the rate of 8.875% per annum and is payable semi-annually in cash in arrears on February 15 and August 15 of each year, commencing on August 15, 2014. The debt discount of $5.0 million at issuance is being amortized as interest expense through maturity which will result in the accretion over time of the outstanding debt balance to the principal amount. The 2021 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness.

PIPE Transaction

On March 9, 2015, we entered into a securities purchase agreement (the “Purchase Agreement”) with Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., and Blackwell Partners, LLC, Series A, (collectively, the “PIPE Investors”). Pursuant to the terms of the Purchase Agreement, we issued and sold to the PIPE Investors in a private placement (the “PIPE Transaction”) an aggregate of (a) 625,000 shares of Series A Preferred Stock at a purchase price per share of $100.00, (b) 1,800,000 Class A Warrants, and (c) 1,800,000 Class B Warrants (and together with Class A Warrants, the “PIPE Warrants”), for gross proceeds of $62.5 million. The initial conversion price for the Series A Preferred Stock is $5.17. The PIPE Warrants may be exercised to acquire shares of Common Stock. Pursuant to an addendum (the “Warrant Addendum”), dated as of March 23, 2015, to the Warrant Agreement, dated as of March 9, 2015, with the PIPE Investors, the PIPE Investors paid the Company $0.5 million in the aggregate, and the per share exercise price of the Class A Warrants and Class B Warrants was set at $5.17 and $6.45, respectively, reduced from $5.295 to $5.17 and from $6.595 to $6.45, respectively.

We repaid approximately $45.3 million of the Revolving Credit Facility indebtedness and accrued interest, representing 77% of the PIPE Transaction’s net proceeds.

Series A, Series B, and Series C Convertible Preferred Stock

In connection with the PIPE Transaction, the Company authorized 825,000 shares and issued to the PIPE Investors 625,000 shares of Series A Preferred Stock at $100.00 per share. We are required, pursuant to the terms of the Certificate of Designations governing the Series A Preferred Stock and the Warrant Agreement governing the PIPE Warrants, to at all times reserve sufficient shares of common stock to allow for the conversion of the Series A Preferred Stock and exercise of the PIPE Warrants.

The Series A Preferred Stock may, at the option of the holder, be converted into Common Stock and receive a Liquidation Preference upon voluntary or involuntary liquidation, dissolution, or winding up of the Company as described in the Company’s Annual Report. The Company may pay a noncumulative cash dividend on each share of the Series A Preferred Stock. In the event the Company does not declare and pay a cash dividend, the Liquidation Preference of the Series A Preferred Stock will be increased to an amount equal to the Liquidation Preference in effect at the start of the applicable quarterly dividend period, plus an amount equal to such then applicable Liquidation Preference multiplied by 11.5% per annum.

On June 10, 2016, in order to allow the shares of common stock reserved for issuance for the conversion of the Series A Preferred Stock and exercise of the PIPE Warrants to be released from reservation and sold pursuant to the 2016 Equity Offering (see below), we entered into an Exchange Agreement with the PIPE Investors (the “Series B Exchange Agreement”) pursuant to which the PIPE Investors agreed:

i) to exchange 614,177 shares of the existing Series A Preferred Stock for an identical number of shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”), which have the same terms as the Series A Preferred Stock, except that the terms of the Series B Preferred Stock include the authority of the holders of the Series B Preferred Stock to waive the requirement that the Company reserve a sufficient number of shares of common stock reserved at all times to allow for the conversion of the Series B Preferred Stock; and

ii) to waive the requirement under the Warrant Agreement governing the PIPE Warrants to reserve 3,600,000 shares of our common stock for the exercise of the PIPE Warrants.

On June 14, 2016, the Company entered into another Exchange Agreement (the “Series C Exchange Agreement”) with the PIPE Investors, pursuant to which the PIPE Investors agreed to exchange their shares of Series B Preferred Stock issued pursuant to the Series B Exchange Agreement on a one for one basis for shares of a new series of preferred stock of the Company (the “Series C Preferred Stock” and, together with the Series A Preferred Stock and the Series B Preferred Stock, the “Preferred Stock”), designated “Series C Convertible Preferred Stock.”

Under the terms of the Series C Exchange Agreement, the PIPE Investors agreed to exchange 614,177 shares of the Series B Preferred Stock for an identical number of shares of Series C Preferred Stock, which have the same terms as the Series B Preferred Stock, except that the terms of the Series C Preferred Stock provide that the 11.5% per annum rate of non-cash dividends payable on the shares of the Series C Preferred Stock will be reduced based on the achievement by the Company of specified “Consolidated EBITDA” as defined in the Senior Credit Facilities. In addition, pursuant to the Series C Exchange Agreement, the PIPE Investors agreed to waive the requirement under the Warrant Agreement governing the PIPE Warrants held by the PIPE Investors to reserve 3,600,000 shares of our common stock for the exercise of the PIPE Warrants.

The transactions effected pursuant to the Series C Exchange Agreement ensured there were a sufficient number of authorized shares of common stock to undertake the 2016 Equity Offering. In the Series C Exchange Agreement, the Company agreed that within four months of the date of the Series C Exchange Agreement, a special meeting of our stockholders would be called to seek approval to the Charter Amendment so as to allow the Company to reserve sufficient shares for the conversion of the Series C Preferred Stock and the exercise of the PIPE Warrants. This approval was obtained at a special meeting held on November 30, 2016.

As a result of the exchanges discussed above, there are currently (a) 21,645 shares of Series A Preferred Stock outstanding, of which 10,823 shares are owned by the PIPE Investors, (b) no shares of Series B Preferred Stock outstanding, and (c) 614,177 shares of Series C Preferred Stock outstanding, all of which are owned by the PIPE Investors.

Rights Offering

On June 30, 2015, we commenced a rights offering (the “Rights Offering”) pursuant to which we distributed subscription rights to purchase units consisting of (1) Series A Preferred Stock, each share convertible into shares of Common Stock at a conversion price of $5.17 per share, (2) Class A warrants to purchase one share of Common Stock at a price of $5.17 per share (the “Public Class A Warrants”), and (3) Class B warrants to purchase one share of Common Stock at a price of $6.45 per share (the “Public Class B Warrants” and, together with the Public Class A Warrants, the “Public Warrants”). The Rights Offering was completed on July 31, 2015. Our stockholders exercised subscription rights to purchase 10,822 units, consisting of an aggregate of 10,822 shares of the Series A Preferred Stock, 31,025 Public Class A Warrants, and 31,025 Public Class B Warrants, at a subscription price of $100.00 per unit. Pursuant to the Rights Offering, we raised gross proceeds of approximately $1.1 million.

With the exception of the expiration date, the PIPE Class A Warrants issued pursuant to the PIPE Transaction, as amended by the Warrant Addendum, have the same terms as the Public Class A Warrants issued pursuant to the Rights Offering.

Shelf Registration Statement

The Company filed a shelf registration statement on Form S-3 under the Securities Act on April 1, 2016, which was declared effective May 2, 2016 (the “2016 Shelf”). Under the 2016 Shelf at the time of effectiveness, the Company had the ability to raise up to $200.0 million, in one or more transactions, by selling Common Stock, preferred stock, debt securities, warrants, units and rights. Subsequent to the 2016 Equity Offering (defined below) the Company has the ability to raise $109.6 million by selling Common Stock, preferred stock, debt securities, warrants, units and rights.

2016 Equity Offering

On June 22, 2016 the Company completed an underwritten public offering of 45,200,000 shares of Common Stock, including 5,200,000 shares of Common Stock issued upon the underwriters’ full exercise of the over-allotment option, at a public offering price of $2.00 per share, less underwriting discounts and commissions and offering expenses payable by us (the “2016 Equity Offering”). The Company received net proceeds of approximately $83.3 million from the 2016 Equity Offering, after deducting underwriting discounts and commissions and offering expenses.


A portionexcess of the net proceeds fromidentifiable assets. The application of ASC 805 requires management to make estimates and assumptions when determining the 2016 Equity Offering was used to fund the Cash Consideration (as defined below) and pay fees and expenses in connection with the closingacquisition date fair values of the Home Solutions Transaction.

Home Solutions Transaction

On September 9, 2016, the Company acquired substantially all of the assets and assumed certain liabilities of Home Solutionsliabilities. Management’s estimates and its subsidiaries pursuant to the Home Solutions Agreement dated June 11, 2016, by and among Home Solutions, a Delaware corporation, certain subsidiaries of Home Solutions, the Company and HomeChoice Partners, Inc., a Delaware corporation. Home Solutions, a privately held company, provided home infusion and home nursing products and services to patients suffering from chronic and acute medical conditions. On June 16, 2016, the Company, HomeChoice Partners, Inc. and Home Solutions entered into an amendment to the Home Solutions Agreement (the “First Amendment”), which modified the terms of the consideration payable by the Company to Home Solutions thereunder. On September 2, 2016, the same parties entered into a second amendment to the Home Solutions Agreement (the “HS Second Amendment”), which amended the Home Solutions Agreement to eliminate the condition to closing that the Company receive stockholder approval to increase its authorized share capital (the “Charter Amendment”) and facilitated the timely consummation of the Transaction. The HS Second Amendment instead provided that the Company will hold a stockholder meeting after the closing of the Transaction to seek stockholder approval of the Charter Amendment, and if the approval is not obtained at the first special meeting, the Company will submit the proposal on a twice per year basis beginning in 2017, at either the annual meeting or a special meeting of stockholders. This approval was obtained at a special meeting held on November 30, 2016. On September 9, 2016, in connection with the consummation of the Transaction, the parties entered into a third amendment (the “Third Amendment”) to the Home Solutions Agreement, which provided for non-material amendments to the closing mechanics, defined terms, acquired and excluded assets, and covenants of the Home Solutions Agreement.

Under the Home Solutions Agreement, the Company did not purchase, among other things, (a) any accounts receivable associated with governmental payors, (b) cash assets, (c) certain non-transferable assets (e.g., state licenses and Medicare and Medicaid certifications and personnel and employment records), (d) the equity of Home Solutions and its subsidiaries; (e) certain tax assets, (f) causes of actions related to any of the items specified as excluded assets or excluded liabilities in the Home Solutions Agreement, (g) any privileged materials, documents or records of Home Solutions related to such excluded assets or excluded liabilities, or (h) intercompany receivables.

The aggregate consideration paid by the Company in the Transaction was equal to (i) $67.5 million in cash (the “Cash Consideration”); plus (ii) (a) 3,750,000 shares of Company common stock (the “Transaction Closing Equity Consideration”) and (b) the right to receive contingent equity securities of the Company, in the form of restricted shares of Company common stock, issuable in two tranches, Tranche A and Tranche B, with different vesting conditions (collectively, the “Contingent Shares”). The number of shares of Company common stock in Tranche A will be approximately 3.1 million. The number of shares of Company common stock in Tranche B will be approximately 4.0 million. Upon close of the Transaction the RSUs had no intrinsic value,assumptions include, but are reported in our consolidated financial statements at their estimated fair value at the date of issuance. The Home Solutions Agreement provides Home Solutions with certain customary registration rights that required us, within 30 days following the closing of the Transaction, to file a registration statement for the selling stockholder’s resale of the Transaction Closing Equity Consideration and the Contingent Shares pursuantnot limited to, the Securities Act. The Company filed the registration statement on October 7, 2016 and it was declared effective on October 27, 2016.

The Company will issue the shares of our Common Stock issuable to Home Solutions pursuant to the RSUs in Tranche A promptly, and in any event within five business days, following the earlier of (a) the closing price of our Common Stock, as reported by Nasdaq, averaging $4.00 per share or above over 20 consecutive trading days during the period beginning on September 9, 2016 and ending December 31, 2019, or (b) a change of control that occurs on or prior to December 31, 2017 or a change of control thereafter but on or prior to December 31, 2019, pursuant to which the consideration payable per share equals or exceeds $4.00 per share. The Company will issue the shares of our Common Stock issuable to Home Solutions pursuant to the RSUs in Tranche B promptly, and in any event within five business days, following the earlier of (a) the closing price of our Common Stock, as reported by Nasdaq, averaging $5.00 per share or above over 20 consecutive trading days during the period beginning on September 9, 2016 and ending December 31, 2019, or (b) a change of control that occurs on or prior to December 31, 2017, or a change of control thereafter but on or prior to December 31, 2019, pursuant to which the consideration payable per share equals or exceeds $5.00 per share. The Home Solutions Agreement provides for a cash settlement option related to the RSUs, effective June 15, 2021, if, and only if, authorized shares are unavailable when the vesting conditions of Tranche A and Tranche B are met.

The Cash Consideration and the Transaction Closing Equity Consideration were paid at closing and were funded by cash on-hand and borrowings from our Revolving Credit Facility.

First Quarter 2017 Private Placement
On March 1, 2017, the Company entered into a Stock Purchase Agreement (the “First Quarter Stock Purchase Agreement”) with Venor Capital Master Fund Ltd., Map 139 Segregated Portfolio of LMA SPC, Venor Special Situations Fund II LP and Trevithick LP (the “First Quarter Stockholders”). Pursuant to the First Quarter Stock Purchase Agreement, the Company sold an aggregate of 3.3 million shares of its common stock (the “First Quarter Shares”) for aggregate gross proceeds of approximately $5.1 million in a private placement transaction (the “First Quarter 2017 Private Placement”). The purchase price for each Share was $1.5366, which was negotiated between the Company and the Stockholders based on the volume-weighted average price of the Company’s common stock on the Nasdaq Global Market on March 1, 2017. Proceeds from the First Quarter 2017 Private Placement were used for working capital and general corporate purposes.
2017 Warrants
In connection with the Second Lien Note Facility, the Company also issued warrants (the “2017 Warrants”) to the purchasers of the Second Lien Notes pursuant to a Warrant Purchase Agreement dated as of June 29, 2017 (the “2017 Warrant Purchase Agreement”). The 2017 Warrants entitle the purchasers of the 2017 Warrants to purchase shares of Common Stock, representing at the time of any exercise of the 2017 Warrants an equivalent number of shares equal to 4.99% of the Common Stock of the Company on a fully diluted basis, subject to the terms of the Warrant Agreement governing the 2017 Warrants, dated as of June 29, 2017 (the “2017 Warrant Agreement”); provided, however, the 2017 Warrants may not be converted to the extent that, after giving effect to such conversion, the holders of the 2017 Warrants would beneficially own, in the aggregate, in excess of (i) 19.99% of the shares of Common Stock outstanding as of June 29, 2017 (the “Closing Date”) minus (ii) the shares of Common Stock that were sold pursuant to the Second Quarter 2017 Private Placement (as defined below) (the “Conversion Cap”). The Conversion Cap will not apply to the 2017 Warrants if the Company obtains the approval of its stockholders for the removal of the Conversion Cap, which the Company is required to take certain steps to attempt to obtain, subject to the terms of the Warrant Agreement.
The 2017 Warrants have a 10-year term and an initial exercise price of $2.00 per share, and may be exercised by payment of the exercise price in cash or surrender of shares of Common Stock into which the 2017 Warrants are being converted in an aggregate amount sufficient to pay the exercise price.  The exercise price and the number of shares that may be acquired upon exercise of the 2017 Warrants is subject to adjustments in certain situations, including price based anti-dilution protection whereby, subject to certain exceptions, if the Company later issues Common Stock or certain Common Stock Equivalents (as defined in the Warrant Agreement) at a price less than either the then-current market price per share or exercise price of the 2017 Warrant, then the exercise price will be decreased and the percentage of shares of Common Stock issuable upon exercise of the 2017 Warrants will remain the same, giving effect to such issuance. Additionally, the 2017 Warrants have standard anti-dilution protections if the Company effects a stock split, subdivision, reclassification or combination of its Common Stock or fixes a record date for the making of a dividend or distribution to stockholders of cash or certain assets. Upon the occurrence of certain business combinations the 2017 Warrants will be converted into the right to acquire shares of stock or other securities or property (including cash) of the successor entity. The 2017 Warrants are reflected as a liability in other non-current liabilities on the consolidated balance sheet and are adjusted to fair value at the end of each reporting period through an adjustment to earnings. The fair value of the 2017 Warrants, subsequent to a remeasurement adjustment of $3.6 million, is $20.5 million at December 31, 2017.
Second Quarter 2017 Private Placement
On June 29, 2017, the Company entered into a Stock Purchase Agreement (the “Second Quarter Stock Purchase Agreement”) with a fund managed by Ares (the “Second Quarter Stock Purchaser”). Pursuant to the terms of the Second Quarter Stock Purchase Agreement, the Company issued and sold to the Second Quarter Stock Purchaser in a private placement (the “Second Quarter 2017 Private Placement”) 6,359,350 shares of Common Stock (the “Second Quarter Shares”) at a price of $2.50 per share, for proceeds of approximately $15.9 million, net of $0.2 million in associated costs.
Second Quarter Registration Rights Agreement
In connection with the 2017 Warrants and the Second Quarter 2017 Private Placement, the Company entered into a Registration Rights Agreement (the “Second Quarter 2017 Registration Rights Agreement”) with the holders of the 2017 Warrants and the Second Quarter Stock Purchaser. Pursuant to the Second Quarter 2017 Registration Rights Agreement, subject to certain exceptions, the Company is required, upon the request of the Second Quarter Stock Purchaser and holders of the 2017 Warrants, to register the resale of the Second Quarter Shares and the shares of Common Stock issuable upon exercise of the 2017 Warrants. Pursuant to the terms of the Second Quarter 2017 Registration Rights Agreement, these registration rights will not become effective until twelve months after the Closing Date, and the costs incurred in connection with such registrations will be borne by the Company.

Income Taxes

At December 31, 2017, the Company had federal net operating loss (“NOL”) carryforwards of approximately $410.3 million, of which $12.9 million is subject to an annual limitation, which will begin expiring in 2026 and later. The Company has post-apportioned state NOL carryforwards of approximately $450.4 million, the majority of which will begin expiring in 2018 and later.

Future Cash Requirements

Net cash provided by operating activities from continuing operations totaled $5.6 million during the year ended December 31, 2017. Our working capital position as of December 31, 2017 reflects a $39.4 million improvement versus December 31, 2016. As of December 31, 2017, we had $39.5 million of unrestricted cash on hand and, until December 2018, $10.0 million of delayed draw capacity under the Second Lien Notes Facility, maturing on August 15, 2020, to supplement our working capital needs.

If we cannot successfully execute our strategic plans we will likely require additional or alternative sources of liquidity, including additional borrowings.
On June 29, 2017, we entered into the Notes Facilities pursuant to which we issued new senior secured notes and refinanced our existing senior secured credit facilities. Please refer to “Debt Facilities” in this section.
We regularly evaluate market conditions and financing options to improve our current liquidity profile and enhance our financial flexibility. These options may include opportunities to raise additional funds through the issuance of various forms of equity and/or debt securities or other instruments, the sale of assets or refinancing all or a portion of our indebtedness. However, there is no assurance that, if necessary, we would be able to raise capital to provide required liquidity.
Additionally, we may pursue our operational and strategic plan and will also review a range of strategic alternatives, which could include, among other things, transitioning chronic therapies to alliance partners, a potential sale or merger of our company, or continuing to pursue our operational and strategic plan. Additionally, we may pursue joint venture arrangements, additional business acquisitions and other transactions designed to expand our business.
As of the filing of this Annual Report, we expect that our cash on hand, cash from operations, and available borrowings under the Second Lien Delayed Draw Senior Secured Notes will be sufficient to fund our anticipated working capital, scheduled interest repayments and other cash needs for at least the next 12 months. Principal payments on the Notes Facilities are not required until September 30, 2019.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and satisfaction of liabilities in the ordinary course of business. As such, they do not include any adjustments to the recoverability and reclassification of recorded amounts that might be necessary should we be unable to continue as a going concern.
The following table sets forth our contractual obligations affecting future cash flows asan asset is expected to generate and the weighted-average cost of December 31, 2017 (in thousands):capital. See Note 3, Business Acquisitions and Divestitures, for further discussion of business acquisitions.
41
   Payments Due in Year Ending December 31,
Contractual ObligationsTotal 2018 2019 2020 2021 2022 2023 and Beyond
Long-term debt (1)
$633,558
 $45,046
 $47,519
 $332,118
 $208,875
 $—
 $—
Operating lease obligations25,716
 7,739
 5,010
 3,688
 2,559
 1,829
 4,891
Capital lease obligations (1)
2,863
 1,722
 754
 387
 —
 —
 —
Total$662,137
 $54,507
 $53,283
 $336,193
 $211,434
 $1,829
 $4,891
(1)Includes principal and estimated interest.


Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk
We are exposed toInterest Rate Risk
The Company’s primary market risk from changes inexposure is changing SOFR‑based interest rates relatedrates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our outstanding debt.control. At December 31, 2017,2023, we had totaloutstanding debt of $480.6$588.0 million of which $284.0 million is related to the Notes and is subject to floating interest rates. Theunder our First Lien Term Loan with a variable interest rate component. See Note bears interest at a floating rate or rates equal to, at the option11, Indebtedness, of the consolidated financial statements for more information.
To reduce interest rate risk, the Company (i)has utilized an interest rate derivative contract to hedge against fluctuations in SOFR rates on the baseFirst Lien Term Loan. In conjunction with the October 2021 debt refinancing, the Company entered into an interest rate (defined as the highestcap hedge with a notional amount of $300.0 million for a five-year term, effective on November 30, 2021. See Note 12, Derivative Instruments, of the Federal Funds Rate plus 0.5% per annum,consolidated financial statements for more information.
A hypothetical 100-basis point increase or decrease in market interest rates associated with the Prime Rate as published by The Wall Street Journal and the one-month London Interbank Offered Rate (“LIBOR”) (subject tounhedged variable-rate debt over a 1.0% floor) plus 1.0%), or (ii) the one-month LIBOR rate (subject to a 1.0% floor), plus a margin of 6.0% if the base rate is selected or 7.0% if the LIBOR Option is selected. The Second Lien Note bears interest at a floating rate or rates equal to, at the option of the Company, (i) one-month LIBOR (subject to a 1.25% floor) plus 9.25% per annum in cash, (ii) one-month LIBOR (subject to a 1.25% floor) plus 11.25% per annum, which amount will be capitalized on each interest payment date, or (iii) one-month LIBOR (subject to a 1.25% floor) plus 10.25% per annum, of which one-half LIBOR plus 4.625% per annum will be payable in cash and one-half LIBOR plus 5.625% per annum will be capitalized on each interest payment date, provided that, in each case, if any permitted refinancing indebtedness with which the 2021 Notes are refinanced requires or permits the payment of cash interest, all of the interest on the Second Lien Notes shall be paid in cash. As of December 31, 2017, the Eurodollar rate is approximately 1.6%; an increase in the current market rate of 1.00%12-month period would result in an increase in annuala change to interest expense of approximately $3.0$2.9 million.

42
On February 11, 2014, we issued $200.0 million in aggregate principal amount

We regularly assess the significance of interest rate market risk as part of our treasury operations and as circumstances change and enter into instruments to hedge variable rate interest expense as appropriate in accordance with the terms of the Debt Facilities. We do not use financial instruments for trading or other speculative purposes and are not a party to any derivative financial instruments at this time.

At December 31, 2017, financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and capital leases. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities. The fair value of our long-term debt under our Note Facilities subject to variable interest rates and the 2021 Notes is disclosed in Note 10 of the Notes to the Consolidated Financial Statements.

Item 8.Financial Statements and Supplementary Data

Item 8.    Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm



To the stockholdersStockholders and boardBoard of directorsDirectors
BioScrip,Option Care Health, Inc.:

Opinion on the ConsolidatedFinancial Statements
We have audited the accompanying consolidated balance sheets of BioScrip,Option Care Health, Inc. and subsidiaries (the “Company”)Company) as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations,comprehensive income, stockholders’ (deficit) equity, and cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2023, and the related notes and financial statement schedule (collectively, the “consolidatedconsolidated financial statements”)statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission”,Commission, and our report dated March 26, 2018February 22, 2024 expressed an adverseunqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over the evaluation of transaction price adjustments
As discussed in Notes 2 and 4 to the consolidated financial statements, net revenue is reported at the net realizable value amount that reflects the consideration the Company expects to receive in exchange for providing services. Revenues are from commercial payers, government payers, and patients for infusion therapy and other ancillary health care services. The Company estimates the transaction price adjustments based on the verification of the patient’s insurance coverage, historical price concessions, and historical payments.
We identified the sufficiency of audit evidence over the evaluation of transaction price adjustments as a critical audit matter. Complex auditor judgment was required to evaluate the sufficiency of audit evidence obtained due to the large volume of data and the information technology (IT) applications utilized in the transaction price adjustment process to capture and aggregate the data.
43
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s transaction price adjustment process, including general IT controls and IT application controls. We involved IT professionals with specialized skills and knowledge who assisted in the identification and testing of certain IT systems used by the Company for processing and recording of transaction price adjustments. We tested the relevance and reliability of the underlying data that served as the basis for the transaction price adjustments by agreeing a selection of certain data elements to underlying support. We assessed the sufficiency of audit evidence obtained related to transaction price adjustments by evaluating the cumulative results of the audit procedures.
/s/ KPMG LLP


We have served as the Company’s auditor since 2014.2015.

Chicago, Illinois
Denver, ColoradoFebruary 22, 2024
March 26, 2018
44




BIOSCRIP,OPTION CARE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
December 31,
20232022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$343,849 $294,186 
Accounts receivable, net377,658 377,542 
Inventories274,004 224,281 
Prepaid expenses and other current assets98,744 98,330 
Total current assets1,094,255 994,339 
NONCURRENT ASSETS:
Property and equipment, net120,630 108,321 
Operating lease right-of-use asset84,159 72,424 
Intangible assets, net20,092 22,371 
Referral sources, net315,304 341,744 
Goodwill1,540,246 1,533,424 
Other noncurrent assets42,349 40,313 
Total noncurrent assets2,122,780 2,118,597 
TOTAL ASSETS$3,217,035 $3,112,936 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$426,513 $378,763 
Accrued compensation and employee benefits92,508 76,906 
Accrued expenses and other current liabilities75,010 84,302 
Current portion of operating lease liability18,278 19,380 
Current portion of long-term debt6,000 6,000 
Total current liabilities618,309 565,351 
NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portion1,056,650 1,058,204 
Operating lease liability, net of current portion85,484 71,441 
Deferred income taxes34,920 22,154 
Other noncurrent liabilities— 9,683 
Total noncurrent liabilities1,177,054 1,161,482 
Total liabilities1,795,363 1,726,833 
STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of December 31, 2023 and 2022, respectively.— — 
Common stock; $0.0001 par value: 250,000,000 shares authorized, 182,905,559 shares issued and 174,575,537 shares outstanding as of December 31, 2023; 182,341,420 shares issued and 181,957,698 shares outstanding as of December 31, 2022.18 18 
Treasury stock; 8,330,022 and 383,722 shares outstanding, at cost, as of December 31, 2023 and 2022, respectively.(255,107)(2,403)
Paid-in capital1,204,270 1,176,906 
Retained earnings457,513 190,423 
Accumulated other comprehensive income14,978 21,159 
Total stockholders’ equity1,421,672 1,386,103 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,217,035 $3,112,936 
The accompanying notes to consolidated financial statements are an integral part of these statements.
45
 December 31,
 2017 2016
ASSETS   
Current assets   
Cash and cash equivalents$39,457
 $9,569
Restricted cash4,950
 —
Receivables, less allowance for doubtful accounts of $37,912 and $44,730
at December 31, 2017 and 2016, respectively		85,522
 109,086
Inventory38,044
 36,165
Deferred taxes1,098
 —
Prepaid expenses and other current assets18,620
 18,507
Total current assets187,691
 173,327
Property and equipment, net26,973
 32,678
Goodwill367,198
 365,947
Intangible assets, net19,114
 31,043
Other non-current assets2,116
 1,990
Total assets$603,092
 $604,985
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY 
  
Current liabilities 
  
Current portion of long-term debt$1,722
 $18,521
Accounts payable65,963
 64,420
Amounts due to plan sponsors4,621
 3,679
Accrued interest6,706
 6,705
Accrued expenses and other current liabilities26,118
 36,822
Total current liabilities105,130
 130,147
Long-term debt, net of current portion478,866
 433,413
Deferred taxes—
 2,281
Other non-current liabilities21,769
 763
Total liabilities605,765
 566,604
Series A convertible preferred stock, $.0001 par value; 825,000 shares authorized; 21,645 shares issued and outstanding as of December 31, 2017 and 2016; and $2,916 and $2,603 liquidation preference as of December 31, 2017 and 2016, respectively2,827
 2,462
Series C convertible preferred stock, $.0001 par value; 625,000 shares authorized; 614,177 shares issued and outstanding; and, $84,555 and $75,491 liquidation preference as of December 31, 2017 and 2016, respectively.79,252
 69,540
Stockholders’ (deficit) equity 
  
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of December 31, 2017 and 2016, respectively—
 —
Common stock, $.0001 par value; 250,000,000 and 125,000,000 shares authorized; 127,634,012 and 117,682,543 shares issued and outstanding as of December 31, 2017 and 2016, respectively13
 12
Treasury stock, 5,106 shares outstanding, at cost, as of December 31, 2017 and no shares outstanding as of December 31, 2016.(16) —
Additional paid-in capital624,762
 611,682
Accumulated deficit(709,511) (645,315)
Total stockholders’ (deficit) equity(84,752) (33,621)
Total liabilities and stockholders’ (deficit) equity$603,092
 $604,985
See accompanying Notes to the Consolidated Financial Statements.

BIOSCRIP,OPTION CARE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONSCOMPREHENSIVE INCOME
 (in thousands, except per share amounts)(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31,
 202320222021
NET REVENUE$4,302,324 $3,944,735 $3,438,640 
COST OF REVENUE3,321,101 3,077,817 2,659,034 
GROSS PROFIT981,223 866,918 779,606 
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses607,427 566,122 525,707 
Depreciation and amortization expense59,201 60,565 63,058 
Total operating expenses666,628 626,687 588,765 
OPERATING INCOME314,595 240,231 190,841 
 
OTHER INCOME (EXPENSE):
Interest expense, net(51,248)(53,806)(67,003)
Equity in earnings of joint ventures5,530 5,125 6,030 
Other, net89,865 14,218 (13,374)
Total other income (expense)44,147 (34,463)(74,347)
 
INCOME BEFORE INCOME TAXES358,742 205,768 116,494 
INCOME TAX EXPENSE (BENEFIT)91,652 55,212 (23,404)
NET INCOME$267,090 $150,556 $139,898 
 
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Change in unrealized (losses) gains on cash flow hedges, net of income tax benefit (expense) of $2,158, $(7,259) and $0, respectively$(6,181)$21,610 $10,721 
OTHER COMPREHENSIVE (LOSS) INCOME(6,181)21,610 10,721 
NET COMPREHENSIVE INCOME$260,909 $172,166 $150,619 
EARNINGS PER COMMON SHARE:
Earnings per share, basic$1.49 $0.83 $0.78 
Earnings per share, diluted$1.48 $0.83 $0.77 
Weighted average common shares outstanding, basic178,973 181,105 179,855 
Weighted average common shares outstanding, diluted180,375 182,075 181,205 
The accompanying notes to consolidated financial statements are an integral part of these statements.
46
 Years Ended December 31,
 2017 2016 2015
Net revenue$817,190
 $935,589
 $982,223
Cost of revenue (excluding depreciation expense)547,948
 673,507
 722,271
Gross profit269,242
 262,082
 259,952
      
Other operating expenses163,273
 169,781
 165,328
Bad debt expense23,697
 26,608
 42,444
General and administrative expenses39,625
 38,798
 42,474
Change in fair value of equity linked liabilities3,587
 (10,450) —
Impairment of goodwill—
 —
 251,850
Restructuring, acquisition, integration, and other expenses, net12,662
 15,859
 24,405
Depreciation and amortization expense27,725
 22,025
 22,864
Interest expense52,072
 37,572
 36,938
Loss on extinguishment of debt13,453
 —
 —
Loss (gain) on dispositions581
 (3,954) —
Loss from continuing operations, before income taxes(67,433) (34,157) (326,351)
Income tax benefit (expense)4,130
 (2,015) 21,532
Loss from continuing operations, net of income taxes(63,303) (36,172) (304,819)
(Loss) income from discontinued operations, net of income taxes(893) (6,593) 4,691
Net loss(64,196) (42,765) (300,128)
Accrued dividends on preferred stock(9,376) (8,392) (6,120)
Deemed dividends on preferred stock(701) (692) (3,690)
Loss attributable to common stockholders$(74,273) $(51,849) $(309,938)
      
Loss per common share: 
  
  
Loss from continuing operations, basic and diluted$(0.59) $(0.48) $(4.58)
(Loss) Income from discontinued operations, basic and diluted(0.01) (0.07) 0.07
Net loss, basic and diluted$(0.60) $(0.55) $(4.51)
      
Weighted average common shares outstanding, basic and diluted123,791
 93,740
 68,710

See accompanying Notes to the Consolidated Financial Statements.

BIOSCRIP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands)

 Preferred Stock
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Total
Stockholders'
(Deficit)
Equity
Balance at December 31, 2014$—
$8
 $(10,679) $529,682
 $(302,422) $216,589
Exercise of stock options—
—
 —
 2
 —
 2
Surrender of stock to satisfy minimum tax withholding—
—
 (58) —
 —
 (58)
Issuance of Series A convertible preferred stock and warrants—
—
 —
 6,581
 —
 6,581
Accrued dividends on preferred stock—
—
 —
 (6,120) —
 (6,120)
Deemed dividends on preferred stock—
—
 —
 (3,690) —
 (3,690)
Compensation under employee stock compensation plan—
—
 —
 5,309
 —
 5,309
Net loss—
—
 —
 —
 (300,128) (300,128)
Balance at December 31, 2015—
8
 (10,737) 531,764
 (602,550) (81,515)
Net proceeds of public stock offering—
4
 —
 83,263
 —
 83,267
Surrender of stock to satisfy minimum tax withholding—
—
 (33) —
 —
 (33)
Surrender of stock - settlement—
—
 (255) 255
 —
 —
Shares issued in connection with the acquisition of Home Solutions, Inc.—
—
 11,025
 (1,088) —
 9,937
Equity linked liabilities reclassified to equity upon approval of Charter Amendment—
—
 —
 2,847
 —
 2,847
Accrued dividends on preferred stock—
—
 —
 (8,392) —
 (8,392)
Deemed dividends on preferred stock—
—
 —
 (692) —
 (692)
Compensation under employee stock compensation plan—
—
 —
 3,725
 —
 3,725
Net loss—
—
 —
 —
 (42,765) (42,765)
Balance at December 31, 2016—
12
 —
 611,682
 (645,315) (33,621)
Net proceeds from private placements—
1
 —
 20,776
 —
 20,777
Exercise of stock options—
—
 —
 21
 —
 21
Surrender of stock to satisfy minimum tax withholding—
—
 (16) —
 —
 (16)
Accrued dividends on preferred stock—
—
 —
 (9,376) —
 (9,376)
Deemed dividends on preferred stock—
—
 —
 (701) —
 (701)
Compensation under employee stock compensation plans—
—
 —
 2,360
 —
 2,360
Net loss—
—
 —
 —
 (64,196) (64,196)
Balance at December 31, 2017$—
$13
 $(16) $624,762
 $(709,511) $(84,752)

 See accompanying Notes to the Consolidated Financial Statements.

BIOSCRIP,OPTION CARE HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)IN THOUSANDS)
Year Ended December 31,
 202320222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$267,090 $150,556 $139,898 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense62,200 65,434 68,804 
Non-cash operating lease costs18,533 19,713 15,168 
Deferred income taxes - net12,766 49,187 (30,372)
(Gain)/loss on sale of assets— (9,403)767 
Loss on extinguishment of debt— — 13,387 
Amortization of deferred financing costs4,446 4,304 4,998 
Equity in earnings of joint ventures(5,530)(5,125)(6,030)
Stock-based incentive compensation expense30,479 16,783 9,575 
Capital distribution from equity method investments4,000 5,875 2,900 
Other adjustments(1,244)— 844 
Changes in operating assets and liabilities:
Accounts receivable, net224 (36,889)(4,273)
Inventories(51,000)(41,010)(22,700)
Prepaid expenses and other current assets(6,290)(16,798)1,420 
Accounts payable47,703 98,885 (10,381)
Accrued compensation and employee benefits15,546 (7,770)23,977 
Accrued expenses and other current liabilities(1,727)10,535 18,383 
Operating lease liabilities(17,529)(21,395)(18,496)
Other noncurrent assets and liabilities(8,372)(15,335)700 
Net cash provided by operating activities371,295 267,547 208,569 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment(41,866)(35,358)(25,632)
Proceeds from sale of assets3,743 14,670 — 
Business acquisitions, net of cash acquired(12,494)(87,364)(85,909)
Other investing activities(5,889)— — 
Net cash used in investing activities(56,506)(108,052)(111,541)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings(3,115)352 (32)
Purchase of company stock(250,261)— — 
Proceeds from warrant exercises— 20,916 — 
Proceeds from issuance of debt— — 855,136 
Repayments of debt principal(6,000)(6,000)(8,832)
Retirement of debt obligations— — (910,345)
Deferred financing costs— — (10,339)
Debt prepayment fees— — (2,458)
Other financing activities(5,750)— — 
Net cash (used in) provided by financing activities(265,126)15,268 (76,870)
 
NET INCREASE IN CASH AND CASH EQUIVALENTS49,663 174,763 20,158 
Cash and cash equivalents - beginning of the period294,186 119,423 99,265 
CASH AND CASH EQUIVALENTS - END OF PERIOD$343,849 $294,186 $119,423 
Supplemental disclosure of cash flows information:
Cash paid for interest$69,804 $50,372 $60,920 
Cash paid for income taxes$75,241 $13,438 $5,706 
Cash paid for operating leases$27,391 $25,311 $26,174 
The accompanying notes to consolidated financial statements are an integral part of these statements.
47
 Years Ended December 31,
 2017 2016 2015
Cash flows from operating activities:     
Net loss$(64,196) $(42,765) $(300,128)
Less: Income (loss) from discontinued operations, net of income taxes(893) (6,593) 4,691
Loss from continuing operations, net of income taxes(63,303) (36,172) (304,819)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:   
  
Depreciation and amortization27,725
 22,025
 22,864
Impairment of goodwill—
 —
 251,850
Amortization of deferred financing costs and debt discount6,998
 4,042
 3,440
Change in fair value of contingent consideration—
 (4,597) (30)
Change in fair value of equity linked liabilities3,587
 (10,450) —
Change in deferred income tax(3,379) 2,045
 (20,089)
Compensation under stock-based compensation plans2,360
 1,801
 4,513
Loss (gain) on dispositions581
 (3,954) —
Loss on extinguishment of debt13,453
 —
 —
Changes in assets and liabilities, net of acquired businesses:   
  
Receivables, net of bad debt expense23,564
 (2,219) 18,760
Inventory(2,544) 10,016
 (5,769)
Prepaid expenses and other assets(239) (893) (734)
Accounts payable689
 (15,977) (23,381)
Amounts due to plan sponsors942
 308
 (1,377)
Accrued interest1
 (192) 45
Accrued expenses and other liabilities(4,805) (1,305) (8,020)
Net cash provided by (used in) operating activities from continuing operations5,630
 (35,522) (62,747)
Net cash used in operating activities from discontinued operations(6,393) (7,019) (1,483)
Net cash used in operating activities(763) (42,541) (64,230)
Cash flows from investing activities:   
  
Cash consideration paid for acquisitions, net of cash acquired—
 (67,516) —
Purchases of property and equipment, net(8,680) (9,870) (12,056)
Proceeds from dispositions—
 4,177
 —
Investment in restricted cash(4,950) —
 —
Net cash used in investing activities from continuing operations(13,630) (73,209) (12,056)
Net cash provided by investing activities from discontinued operations—
 —
 24,565
Net cash (used in) provided by investing activities(13,630) (73,209) 12,509
Cash flows from financing activities:   
  
Proceeds from private issuances, net20,777
 83,267
 —
Proceeds from issuance of convertible preferred stock and warrants, net of issuance costs—
 —
 59,691
Proceeds from priming credit agreement, net23,060
 

 —
Deferred and other financing costs(980) —
 (2,630)
Borrowings on revolving credit facility563
 104,300
 203,663
Repayments on revolving credit facility(55,863) (64,000) (193,663)
Borrowing of long-term debt294,446
 —
 —
Principal payments of long-term debt(236,770) (12,550) —
Repayments of capital leases(1,072) (1,073) (395)
Net proceeds from exercise of employee stock compensation plans120
 (202) (108)
Net cash provided by financing activities44,281
 109,742
 66,558
Net change in cash and cash equivalents29,888
 (6,008) 14,837
Cash and cash equivalents - beginning of period9,569
 15,577
 740
Cash and cash equivalents - end of period$39,457
 $9,569
 $15,577
DISCLOSURE OF CASH FLOW INFORMATION:   
  
Cash paid during the period for interest$45,376
 $34,696
 $34,302
Cash paid during the period for income taxes, net of refunds$649
 $(372) $114
DISCLOSURE OF NON-CASH TRANSACTIONS:     
   Issuance of 3,750,000 shares in connection with the Home Solutions acquisition$—
 $9,938
 $—
Capital lease obligations incurred to acquire property and equipment$1,825
 $2,314
 $—
SeeOPTION CARE HEALTH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Preferred StockCommon StockTreasury StockPaid-in CapitalRetained Earnings
(Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
Balance - December 31, 2020$— $18 $(2,403)$1,129,312 $(100,031)$(11,172)$1,015,724 
Stock-based incentive compensation— — — 9,575 — — 9,575 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (32)— — (32)
Net income— — — — 139,898 — 139,898 
Other comprehensive income— — — — — 10,721 10,721 
Balance - December 31, 2021$— $18 $(2,403)$1,138,855 $39,867 $(451)$1,175,886 
Stock-based incentive compensation— — — 16,783 — — 16,783 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 352 — — 352 
Exercise of warrants— — — 20,916 — — 20,916 
Net income— — — — 150,556 — 150,556 
Other comprehensive income— — — — — 21,610 21,610 
Balance - December 31, 2022$— $18 $(2,403)$1,176,906 $190,423 $21,159 $1,386,103 
Stock-based incentive compensation— — — 30,479 — — 30,479 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (3,115)— — (3,115)
Purchase of company stock, and related tax effects— — (252,704)— — — (252,704)
Net income— — — — 267,090 — 267,090 
Other comprehensive loss— — — — — (6,181)(6,181)
Balance - December 31, 2023$— $18 $(255,107)$1,204,270 $457,513 $14,978 $1,421,672 
The accompanying Notesnotes to the Consolidated Financial Statements.consolidated financial statements are an integral part of these statements.

48
BIOSCRIP,
OPTION CARE HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 –1. NATURE OF BUSINESSOPERATIONS AND PRESENTATION OF FINANCIAL STATEMENTS

Corporate Organization and Business— The Company’s stock is listed on the Nasdaq Global Select Market as of December 31, 2023. During the year ended December 31, 2023, HC Group Holdings I, LLC. (“HC I”) completed sales of 23,771,926 shares of its Option Care common stock. In addition, the Company repurchased 2,475,166 shares from HC I on March 3, 2023 under the Company’s share repurchase program. See Note 16, Stockholders’ Equity, for further discussion of the Company’s share repurchase program. As of December 31, 2023, HC I no longer holds shares of the Company’s common stock.

BioScrip, Inc.Option Care Health, and its wholly-owned subsidiaries, (the “Company” or “BioScrip”) isprovides infusion therapy and other ancillary healthcare services through a national providernetwork of 93 full service pharmacies and 84 stand-alone ambulatory infusion service that partnerssites. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, hospital systems, skilled nursing facilities and healthcare payorsother referral sources to provide pharmaceuticals and complex compounded solutions to patients access to post-acute care services.for intravenous delivery in the patients’ homes or other nonhospital settings. The Company operates with a commitment to bring customer-focusedin one segment, infusion therapy services into the home or alternate-site setting. By collaborating with the full spectrum of healthcare professionals and the patient, the Company aims to provide 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 whom it serves.services.

The Company’s platform provides nationwide service capabilities and the ability to deliver clinical management services that offer patients a high-touch, community-based and home-based care environment. The Company’s core services are provided in coordination with, and under the direction of, the patient’s physician. The Company's multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to the patient’s specific needs. Whether in the home, physician office, ambulatory infusion center, skilled nursing facility or other alternate sites of care, the Company provides products, services and condition-specific clinical management programs tailored to improve the care of individuals with complex health conditions such as gastrointestinal abnormalities, infectious diseases, cancer, multiple sclerosis, organ and blood cell transplants, bleeding disorders, immune deficiencies and heart failure.

On August 27, 2015, the Company completed the sale of substantially all of the Company’s Pharmacy Benefit Management Services segment (the “PBM Business”) to ProCare Pharmacy Benefit Manager Inc. (see Note 6 - Discontinued Operations). As a result of the sale of the PBM Business, the Company no longer has multiple operating segments. The change reflects how the Company's chief operating decision maker reviews the Company’s results in terms of allocating resources and assessing performance.

Basis of Presentation

— The Company’s Consolidated Financial Statementsaccompanying consolidated financial statements have been prepared in accordanceconformity with U.S. generally accepted accounting principles (“GAAP”).

Reclassifications

Certain prior period financial statement amounts have been reclassified to conform to current period presentation.
Immaterial Error Correction

During the fourth quarter of 2017, the Company determined that certain prior period balances contained errors, predominantly due to a failure to appropriately account for and resolve transactions specific to suspense and clearing accounts. Management evaluated the materiality of the errors quantitatively and qualitatively, and concluded that they were not material to the financial statements of any period presented, but has elected to correct them in the accompanying prior period consolidated financial statements.















The following tables set forth the effect these corrections had on the Company’s December 31, 2016 and 2015 statements of operations:
 Year Ended December 31, 2016 Year Ended December 31, 2015
 Previously Reported Corrections As Revised Previously Reported Corrections As Revised
 Net revenue$935,589
 $—
 $935,589
 $982,223
 $—
 $982,223
 Gross profit265,631
 (3,549) 262,082
 260,915
 (963) 259,952
 Total Operating Expenses263,702
 (1,081) 262,621
 548,562
 803
 549,365
 Interest expense38,235
 (663) 37,572
 37,313
 (375) 36,938
 Loss from continuing operations, net of income taxes(34,367) (1,805) (36,172) (303,428) (1,391) (304,819)
 Loss from discontinued operations, net of income taxes(7,139) 546
 (6,593) 3,721
 970
 4,691
 Net loss$(41,506) $(1,259) $(42,765) $(299,707) $(421) $(300,128)
The following tables set forth the effect these corrections had on the Company’s December 31, 2016 balance sheet.
 Year Ended December 31, 2016
 Previously ReportedCorrectionsAs Revised
Total assets$607,740
$(2,755)$604,985
Total liabilities567,301
(697)566,604
Additional paid-in capital611,844
(162)611,682
Accumulated deficit(643,419)(1,896)(645,315)
Total stockholders' equity(31,563)(2,058)(33,621)
Total liabilities and stockholders' equity$607,740
$(2,755)$604,985

The accumulated deficit correction above includes a $0.4 million adjustment as of January 1, 2015 related to prior periods.

Certain amounts disclosed in the accompanying notes to the financial statements have been revised to reflect the corrections.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity withUnited States. GAAP requires management to make certain estimates and assumptions.assumptions in determining assets, liabilities, revenue, expenses, and related disclosures. Actual amounts could differ materially from those estimates.
Principles of Consolidation — The Company’s consolidated financial statements include the accounts of Option Care Health, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
The Company has investments in companies that are 50% owned and are accounted for as equity-method investments. The Company’s share of earnings from equity-method investments is included in the line entitled “Equity in earnings of joint ventures” in the consolidated statements of comprehensive income. See “Equity-Method Investments” within Note 2, Summary of Significant Accounting Policies, for further discussion of the Company’s equity-method investments.

49
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2023, cash equivalents consisted of money market funds.
Accounts Receivable — The Company’s accounts receivable are reported at the net realizable value amount that reflects the consideration the Company expects to receive in exchange for providing services, which is inclusive of adjustments for price concessions. The majority of accounts receivable are due from private insurance carriers and governmental healthcare programs, such as Medicare and Medicaid.
Price concessions may result from patient hardships, patient uncollectible accounts sent to collection agencies, lack of recovery due to not receiving prior authorization, differing interpretations of covered therapies in payer contracts, different pricing methodologies, or various other reasons. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), an allowance for doubtful accounts is established only as a result of an adverse change in the Company’s payers’ ability to pay outstanding billings. The Company had no allowance for doubtful accounts as of December 31, 2023 and 2022.
Included in accounts receivable are earned but unbilled gross receivables of $89.1 million and $101.5 million as of December 31, 2023 and 2022, respectively. Delays ranging from one day up to several weeks between the date of service and billing can occur due to delays in obtaining certain required payer-specific documentation from internal and external sources.
See Revenue Recognition for a further discussion of the Company’s revenue recognition policy.
Inventories — Inventories, which consists primarily of pharmaceuticals, is stated at the lower of first‑in, first‑out cost or net realizable value basis, which the Company believes is reflective of the physical flow of inventories.
Prepaid Expenses and Other Current Assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $52.0 million and $53.4 million for the years ended December 31, 2023 and 2022, respectively.
Leases — The Company has lease agreements for facilities, warehouses, office space and property and equipment. At the inception of a contract, the Company determines if the contract is a lease or contains an embedded lease arrangement. Operating leases are included in the operating lease right-of-use asset (“ROU asset”) and operating lease liabilities in the consolidated financial statements.
ROU assets, which represent the Company’s right to use the leased assets, and operating lease liabilities, which represent the present value of unpaid lease payments, are both recognized by the Company at the lease commencement date. The Company utilizes its estimated incremental borrowing rate at the lease commencement date to determine the present value of unpaid lease obligations. The rates are estimated primarily using a methodology dependent on the Company’s financial condition, creditworthiness, and availability of certain observable data. In particular, the Company considers its actual cost of borrowing for collateralized loans and its credit rating, along with the corporate bond yield curve in estimating its incremental borrowing rates. ROU assets are recorded as the amount of operating lease liability, adjusted for prepayments, accrued lease payments, initial direct costs, lease incentives, and impairment of the ROU asset. Tenant improvement allowances used to fund leasehold improvements are recognized when earned and reduce the related ROU asset. Tenant improvement allowances are recognized through the ROU asset as a reduction of expense over the term of the lease.
Leases may contain rent escalations, however the Company recognizes the lease expense on a straight-line basis over the expected lease term. The Company reviews the terms of any lease renewal options to determine if it is reasonably certain that the renewal options will be exercised. The Company has determined that the expected lease term is typically the minimum non-cancelable period of the lease.
The Company has lease agreements that contain both lease and non-lease components which the Company has elected to account for as a single lease component for all asset classes. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the term of the lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. See Note 8, Leases, for further discussion of leases.
50
Goodwill, Intangible Assets, Property and Equipment, and Referral Sources — Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. The Company accounts for goodwill under ASC Topic 350, Intangibles-Goodwill and Other. The Company tests goodwill for impairment annually, or more frequently whenever events or circumstances indicate impairment may exist. Goodwill is stated at cost less accumulated impairment losses. The Company completes its goodwill impairment test annually in the fourth quarter on a qualitative basis. See Note 10, Goodwill and Other Intangible Assets, for further discussion of the Company’s goodwill and other intangible assets.
Intangible assets arising from the Company’s acquisitions are amortized on a straight‑line basis over the estimated useful life of each asset. Referral sources have a useful life of fifteen to twenty years. Trademarks/names have a useful life ranging from two to fifteen years. The useful lives for other amortizable intangible assets range from approximately two to nine years. The Company does not have any indefinite‑lived intangible assets.
Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation on owned property and equipment is provided for on a straight‑line basis over the estimated useful lives of owned assets. Leasehold improvements are amortized over the estimated useful life of the property or over the term of the lease, whichever is shorter. Estimated useful lives are seven years for infusion pumps and three to thirteen years for equipment. Major repairs, which extend the useful life of an asset, are capitalized in the property and equipment accounts. Routine maintenance and repairs are expensed as incurred. Computer software is included in property and equipment and consists of purchased software and internally-developed software. The Company capitalizes application-stage development costs for significant internally-developed software projects. Once the software is ready for its intended use, these costs are amortized on a straight‑line basis over the software’s estimated useful life, generally five years. Costs recognized in the preliminary project phase and the post-implementation phase, as well as maintenance and training costs, are expensed as incurred.
The Company assesses long‑lived assets for impairment whenever events or circumstances indicate that a certain asset or asset group may be impaired. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flows basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.
Equity-Method Investments — The Company’s investments in certain unconsolidated entities are accounted for under the equity method. The balance of these investments is included in other noncurrent assets in the accompanying consolidated balance sheets. As of December 31, 2023 and 2022, the balance of the investments was $20.9 million and $19.4 million, respectively. The investments are increased to reflect the Company’s capital contributions and equity in earnings of the investees. The investments are decreased to reflect the Company’s equity in losses of the investees and for distributions received that are not in excess of the carrying amount of the investments. The Company’s proportionate share of earnings or losses of the investees is recorded in equity in earnings of joint ventures in the accompanying consolidated statements of comprehensive income. The Company’s proportionate share of earnings was $5.5 million, $5.1 million and $6.0 million for the years ended December 31, 2023, 2022 and 2021, respectively. Distributions from the investees are treated as cash inflows from operating activities in the consolidated statements of cash flows. During the years ended December 31, 2023, 2022 and 2021, the Company received distributions from the investees of $4.0 million, $5.9 million and $2.9 million, respectively. See Note 17, Related-Party Transactions, for discussion of related-party transactions with these investees.
Hedging Instruments — The Company uses derivative financial instruments to limit its exposure to increases in the interest rate of its variable rate debt instruments. The derivative financial instruments are recognized on the consolidated balance sheets at fair value. See Note 12, Derivative Instruments, for additional information.
At inception of the hedge, the Company designated the derivative instruments as a hedge of the cash flows related to the interest on the variable rate debt. For all instruments designated as hedges, the Company documents the hedging relationships and its risk management objective of the hedging relationship. For all hedging instruments, the terms of the hedge perfectly offset the hedged expected cash flows.
51
Revenue Recognition — Net revenue is reported at the net realizable value amount that reflects the consideration the Company expects to receive in exchange for providing goods and services. Revenues are from government payers, commercial payers, and patients for goods and services provided and are based on a gross price based on payer contracts, fee schedules, or other arrangements less any implicit price concessions.
Due to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.
The Company assesses the expected consideration to be received at the time of patient acceptance, based on the verification of the patient’s insurance coverage, historical information with the patient, similar patients, or the payer. Performance obligations are determined based on the nature of the services provided by the Company. The majority of the Company’s performance obligations are to provide infusion services to deliver medicine, nutrients, or fluids directly into the body.
The Company provides a variety of infusion-related therapies to patients, which frequently include multiple deliverables of pharmaceutical drugs and related nursing services. After applying the criteria from ASC 606, the Company concluded that multiple performance obligations exist in its contracts with its customers. Revenue is allocated to each performance obligation based on relative standalone price, determined based on reimbursement rates established in the third-party payer contracts. Pharmaceutical drug revenue is recognized at the time the pharmaceutical drug is delivered to the patient, and nursing revenue is recognized on the date of service.
The Company's outstanding performance obligations relate to contracts with a duration of less than one year. Therefore, the Company has elected to apply the practical expedient provided by ASC 606 and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. Any unsatisfied or partially unsatisfied performance obligations at the end of a reporting period are generally completed prior to the patient being discharged. See Note 4, Revenue for a further discussion of revenue.
Cost of Revenue — Cost of revenue consists of the actual cost of pharmaceuticals and other medical supplies dispensed to patients, as well as all other costs directly related to the production of revenue. These costs include warehousing costs, purchasing costs, freight costs, cash discounts, wages and related costs for pharmacists and nurses, along with depreciation expense relating to revenue-generating assets, such as infusion pumps.
The Company also receives rebates from pharmaceutical and medical supply manufacturers. Rebates are generally volume-based incentives and are recorded as a reduction of inventory and are accounted for as a reduction of cost of goods sold when the related inventory is sold.
Selling, General and Administrative Expenses — Selling, general and administrative expenses mainly consist of salaries for administrative employees that directly and indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
Stock Based Incentive Compensation — The Company accounts for stock-based incentive compensation expense in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). Stock-based incentive compensation expense is based on the grant date fair value. The Company estimates the fair value of stock option awards using a Black-Scholes option pricing model and assumptions affect the reported amountsfair value of restricted stock unit awards using the closing price of the Company’s common stock on the grant date. For awards with a service-based vesting condition, the Company recognizes expense on a straight-line basis over the service period of the award. For awards with performance-based vesting conditions, the Company will recognize expense when it is probable that the performance-based conditions will be met. When the Company determines that it is probable that the performance-based conditions will be met, a cumulative catch-up of expense will be recorded as if the award had been vesting on a straight-line basis from the award date. The award will continue to be expensed on a straight-line basis through the remainder of the vesting period and will be updated if the Company determines that there has been a change in the probability of achieving the performance-based conditions. The Company records the impact of forfeited awards in the period in which the forfeiture occurs.
Business Acquisitions — The Company accounts for business acquisitions in accordance with ASC Topic 805, Business Combinations, with assets and liabilities being recorded at their acquisition date fair value and disclosuregoodwill being calculated as the purchase price in excess of contingentthe net identifiable assets. See Note 3, Business Acquisitions and Divestitures, for further discussion of the Company’s business acquisitions.
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Income Taxes — The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities atare reported for book-tax basis differences and are measured based on currently enacted tax laws using rates expected to apply to taxable income in the years in which the differences are expected to reverse. The effect of a change in tax rate on deferred taxes is recognized in income tax expense in the period that includes the enactment date of the financial statementschange.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.
The Company recognizes income tax positions that are more likely than not to be sustained on their technical merits. The Company measures recognized income tax positions at the maximum benefit that is more likely than not, based on cumulative probability, realizable upon final settlement of the position. Interest and penalties related to unrecognized tax benefits are reported in income tax expense (benefit).
Concentrations of Business Risk — The Company generates revenue from managed care contracts and other agreements with commercial third-party payers. Revenue related to the reported amountsCompany’s largest payer was approximately 14%, 14% and 16% for the years ended December 31, 2023, 2022 and 2021, respectively. There were no other managed care contracts that represent greater than 10% of revenue for the years presented.
For the years ended December 31, 2023, 2022 and expenses during2021, approximately 12%, 12% and 12%, respectively, of the reporting period. Actual resultsCompany’s revenue was reimbursable through direct government healthcare programs such as Medicare and Medicaid. As of December 31, 2023 and 2022, approximately 12% and 13%, respectively, of the Company’s accounts receivable was related to these programs. Governmental programs pay for services based on fee schedules and rates that are determined by the related governmental agency. Laws and regulations pertaining to government programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change in the near term.
The Company does not require its patients nor other payers to carry collateral for any amounts owed for goods or services provided. Other than as discussed above, concentrations of credit risk relating to trade accounts receivable is limited due to the Company’s diversity of patients and payers. Further, the Company generally does not provide charity care; however, Option Care Health offers a financial assistance program for patients that meet certain defined hardship criteria.
For the years ended December 31, 2023, 2022, and 2021, approximately 72%, 73% and 74%, respectively, of the Company’s pharmaceutical and medical supply purchases were from four vendors. Although there are a limited number of suppliers, the Company believes that other vendors could differ from those estimates.provide similar products on comparable terms. However, a change in suppliers could cause delays in service delivery and possible losses in revenue, which could adversely affect the Company’s financial condition or operating results.

Fair Value Measurements

— The fair value measurement accounting standard, ASC Topic 820, Fair Value Measurement (“ASC 820”), provides a framework for measuring fair value and defines fair value as the price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. The standard establishes a valuation hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed

based on independent market data sources. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available.

The valuation hierarchy is composed of three categories. The categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The categories within the valuation hierarchy are described as follows:

•Level 1 - Inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities.
•Level 2 - Inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
•Level 3 - Inputs to the fair value measurement are unobservable inputs or valuation techniques.

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use ofdifferent methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Cash
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Recently Issued Accounting Pronouncements — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and Cash Equivalentsincome taxes paid information. The ASU improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The ASU allows investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. This ASU also improves the effectiveness and comparability of disclosures by adding disclosures of pretax income (loss) and income tax expense (benefit) to be consistent with U.S. Securities and Exchange Commission (“SEC”) Regulation S-X and removing disclosures that no longer are considered cost beneficial or relevant. The Company is required to adopt this ASU for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its results of operations, cash flows, financial position, and disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves the disclosures about a public entity’s reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses. The ASU improves financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities, including those public entities that have a single reportable segment, to enable investors to develop more decision-useful financial analyses. The Company is required to adopt this ASU for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Once adopted the Company will apply the ASU retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on its results of operations, cash flows, financial position, and disclosures.
Highly liquid investmentsIn October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU is the result of the Board’s decision to incorporate into the Codification 14 disclosures referred by the SEC. The ASU represents changes to clarify or improve disclosure and presentation requirements of a variety of Topics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption permitted. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective. The Company is currently evaluating the impact of this ASU on its results of operations, cash flows, financial position, and disclosures.
3. BUSINESS ACQUISITIONS AND DIVESTITURES
Amedisys, Inc.— On May 3, 2023, the Company entered into a maturitydefinitive merger agreement with Amedisys. Under the terms of three months or less when purchasedthe merger agreement, the Company would issue new shares of its common stock to Amedisys’s stockholders, which would result in the Company’s stockholders holding approximately 64.5% of the combined company.
On June 26, 2023, the Company entered into an agreement to terminate the Amedisys Merger Agreement. Under the terms of the Mutual Termination Agreement, the Company received a payment of $106.0 million in cash on behalf of Amedisys. The Termination Fee is included in Other, net in the consolidated statements of comprehensive income and in Net cash provided by operating activities in the consolidated statements of cash flows.
During the year ended December 31, 2023, the Company incurred $21.1 million in merger-related expenses, which are included in Other, net in the consolidated statements of comprehensive income and in Net cash provided by operating activities in the consolidated statements of cash flows.
Revitalized, LLC— In May 2023, pursuant to the equity purchase agreement dated May 1, 2023, the Company completed the acquisition of 100% of the membership interests in Revitalized, LLC for a purchase price, net of cash acquired, of $12.5 million, which primarily consisted of $6.7 million of goodwill and $5.5 million of intangible assets.
Respiratory Therapy Asset Sale — The Company closed the transaction in December 2022, for a sale price of $18.4 million comprised of $14.7 million in proceeds received at the time of closing and $3.7 million recorded as a current asset was paid in the year ended December 31, 2023. Pursuant to the final transaction terms, $8.8 million of assets were sold, along with $0.7 million of liabilities that were previously classified as cash equivalents. Restricted cash consistsheld for sale at the lower of their carrying amount or fair values less cost to sell. As a result of the transaction, a $10.3 million pre-tax gain on sale was recorded within Other, net in the Company’s consolidated statements of comprehensive income within the year ended December 31, 2022.
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Rochester Home Infusion, Inc. — In August 2022, pursuant to the stock purchase agreement dated June 10, 2022, the Company completed the acquisition of 100% of the equity interests in Rochester Home Infusion, Inc. (“RHI”) for a purchase price, net of cash balances held by financial institutionsacquired, of $27.4 million.
The allocation of the purchase price of RHI was accounted for as collateral for letters of credit. These balances are reclassified to cash and cash equivalents when the underlying obligation is satisfied, ora business combination in accordance with ASC Topic 805, Business Combinations, with the governing agreement. Restrictedtotal purchase price being allocated to the assets and liabilities acquired based on the relative fair value of each asset and liability. The following is a final allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash balances expectedacquired (in thousands):
Amount
Accounts receivable$686 
Intangible assets5,449 
Other assets394 
Accounts payable and other liabilities(434)
Fair value identifiable assets and liabilities6,095 
Goodwill (1)21,323 
Cash acquired201 
Purchase price27,619 
Less: cash acquired(201)
Purchase price, net of cash acquired$27,418 
(1) Goodwill is attributable to become unrestricted duringcost synergies from procurement and operational efficiencies and elimination of duplicative administrative costs.
Specialty Pharmacy Nursing Network, Inc. — In April 2022, pursuant to the next twelve months are recordedequity purchase agreement dated February 7, 2022, the Company completed the acquisition of 100% of the equity interests in Specialty Pharmacy Nursing Network, Inc. (“SPNN”) for a purchase price, net of cash acquired, of $59.9 million.
The allocation of the purchase price of SPNN was accounted for as current assets.a business combination in accordance with ASC Topic 805, Business Combinations, with the total purchase price being allocated to the assets and liabilities acquired based on the relative fair value of each asset and liability. As of December 31, 2017,2022, the Company hadfinalized the purchase price allocation of the acquisition. Certain adjustments were made to preliminary valuation amounts related to accrued compensation. The following is a restrictedfinal allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash balance,acquired, (in thousands):
Amount
Accounts receivable$2,303 
Intangible assets25,580 
Other assets600 
Accrued compensation(1,115)
Accounts payable and other liabilities(1,168)
Fair value identifiable assets and liabilities26,200 
Goodwill (1)33,746 
Cash acquired661 
Purchase price60,607 
Less: cash acquired(661)
Purchase price, net of cash acquired$59,946 
(1) Goodwill is attributable to cost synergies from operational efficiencies and establishing a more comprehensive clinical platform through the Company’s national infrastructure and SPNN’s nursing network.
Wasatch Infusion LLC Acquisition — In December 2021, pursuant to the executed asset purchase agreement on December 29, 2021, the Company completed the acquisition of Wasatch Infusion LLC for a purchase price of $19.5 million, which primarily consisted of $17.4 million of goodwill, $4.2 million of intangible assets, $2.7 million of accounts receivable, $2.0 million in inventories, and $(6.7) million of accounts payable.
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Infinity Infusion Nursing LLC — In October 2021, pursuant to the equity purchase agreement dated October 1, 2021, the Company completed the 100% acquisition of the equity interest in Infinity Infusion LLC (“Infinity”) for a money market account,purchase price, net of approximatelycash acquired of $59.6 million, which is comprised of a $50.0 million cash payment, two contingent $5.0 million payments (included as a non-cash change in other noncurrent assets and liabilities within the consolidated statements of cash flows), and $(0.4) million of other purchase price adjustments.
The allocation of the purchase price of Infinity was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, with the total purchase price being allocated to the assets and liabilities acquired based on the relative fair value of each asset and liability. The Company has finalized the purchase price allocation of the acquisition and no purchase accounting adjustments were made. The following is an allocation of acquired identifiable assets and assumed liabilities, net of cash collateralize outstanding letters of credit.acquired, (in thousands):

Amount
Accounts receivable$2,219 
Intangible assets25,400 
Accounts payable and other assumed liabilities(539)
Fair value identifiable assets and liabilities27,080 
Goodwill (1)32,524 
Cash acquired1,426 
Purchase price61,030 
Less: cash acquired(1,426)
Purchase price, net of cash acquired$59,604 
Receivables(1) Goodwill is attributable to cost synergies from operational efficiencies and establishing a more comprehensive clinical platform through the Company’s national infrastructure and Infinity’s nursing network.

Receivables include amounts due from government sources, such as Medicare and Medicaid programs, Managed Care Organizations and other commercial insurance, amounts due from patient co-payments, and service fees resulting fromBioCure Asset Acquisition — In April 2021, pursuant to the distributionasset purchase agreement dated April 7, 2021, the Company completed the acquisition of certain drugs through retail pharmacies.assets of BioCure, LLC for a purchase price of $18.9 million, which is comprised of $18.3 million of intangible assets, net and $0.6 million of inventories.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on estimates of losses related to receivable balances. The risk of collection varies based upon the product, the payor (commercial health insurance and government) and the patient’s ability to pay the amounts not reimbursed by the payor. We estimate the allowance for doubtful accounts based on several factors including the age of the outstanding receivables, the historical experience of collections, adjusting for current economic conditions, and, in some cases, evaluating specific customer accounts for the ability to pay. We also consider qualitative factors. Collection agencies are employed and legal action is taken when we determine that taking collection actions is reasonable relative to the probability of receiving payment on amounts owed. Management judgment is used to assess the collectability of accounts and the ability of our customers to pay. Judgment is also used to assess trends in collections and the effects of systems and business process changes on our expected collection rates. The Company reviews the estimation process quarterly and makes changes to the estimates as necessary. When it is determined that a customer account is uncollectible, that balance is written off against the existing allowance.

















Collectability of Accounts Receivable


4. REVENUE
The following table sets forth the agingnet revenue earned by category of our net accounts receivable (net of allowancepayer for contractual adjustmentsthe years ended December 31, 2023, 2022 and prior to allowance for doubtful accounts), aged based on date of service and categorized based on the three primary overall types of accounts receivable characteristics2021 (in thousands):
Year Ended December 31,
202320222021
Commercial payers$3,747,568 $3,421,888 $2,971,900 
Government payers500,891 477,818 417,088 
Patients53,865 45,029 49,652 
Net revenue$4,302,324 $3,944,735 $3,438,640 
5. EMPLOYEE BENEFIT PLANS
  December 31, 2017December 31, 2016
  0 - 180 days Over 180 days Total % of Total0 - 180 days Over 180 days Total % of Total
Government $20,602
 $10,082
 $30,684
  $19,891
 $8,278
 $28,169
  
Commercial 63,767
 18,779
 82,546
  95,018
 19,849
 114,867
  
Patient 2,577
 7,627
 10,204
  3,955
 6,825
 10,780
  
Gross accounts receivable $86,946
 $36,488
 123,434
  $118,864
 $34,952
 153,816
  
Allowance for doubtful accounts     (37,912) 30.7%    (44,730) 29.1%
Net accounts receivable     $85,522
      $109,086
  

AtThe Company maintains a 401(k) plan and matches 100% of employee contributions, up to 4% of employee compensation. The Company recorded expense for the defined contribution plan of $13.1 million, $12.2 million and $11.6 million for the years ended December 31, 2017, our allowance for doubtful accounts was $37.9 million, or 30.7% of gross accounts receivable, as compared to $44.7 million, or 29.1% of gross accounts receivable, at2023, 2022 and 2021, respectively. In the years ended December 31, 2016. 2023, 2022 and 2021, Company contributions of $12.4 million, $11.8 million and $10.9 million, respectively, were paid.

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6. INCOME TAXES
The allowanceincome tax expense (benefit) consists of the following for doubtful accounts decreased by approximately $3.0the years ended December 31, 2023, 2022 and 2021 (in thousands):
Year Ended December 31,
202320222021
U.S. federal income tax expense (benefit):
Current$56,474 $4,103 $— 
Deferred18,739 38,810 (30,411)
75,213 42,913 (30,411)
State income tax expense:
Current20,253 9,182 6,817 
Deferred(3,814)3,117 190 
16,439 12,299 7,007 
Total income tax expense (benefit)$91,652 $55,212 $(23,404)
The difference between the statutory federal income tax rate and the effective tax rate is as follows for the years ended December 31, 2023, 2022 and 2021:
Year Ended December 31,
202320222021
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
State and local income taxes net of federal tax benefit4.8 %5.0 %4.9 %
Non-deductible expenses0.1 %0.2 %0.3 %
Valuation allowance(1.5)%0.0 %(46.2)%
Non-deductible and stock-based compensation0.7 %0.4 %0.0 %
Other, net0.4 %0.2 %(0.1)%
Effective income tax rate25.5 %26.8 %(20.1)%
The Company recorded income tax expense of $91.7 million during 2017 dueand $55.2 million, which represents an effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. In September 2023, the Company released $5.8 million of state valuation allowance. The variance in the Company’s effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively, is primarily attributable to the difference in state taxes, various non-deductible expenses, and a change in estimate resulting from stabilized collections including more predictable cash receipts from our payors.

Allowancestate valuation allowance.The variance in the Company’s effective tax rate of 25.5% for Contractual Discounts

the year ended December 31, 2023 compared to the federal statutory rate of 21% is also primarily attributable to state taxes, various non-deductible expenses, and a change in state valuation allowance. The Companyvariance in the Company’s effective tax rate of 26.8% and negative 20.1% for the years ended December 31, 2022 and 2021, respectively, is reimbursed by payors for products and servicesprimarily attributable to the Company provides. Payments for medications and services covered by payors average less than billed charges. The Company monitors revenue and receivables from payors for each of our branches and records an estimated contractual allowance for certain revenue and receivable balances as of the revenue recognition date to properly account for anticipated differences between amounts estimated in our billing system and amounts reimbursed. Accordingly, the total revenue and receivables reported in our financial statements are recorded at the amounts expected to be received from the payor. For the significant portionrelease of the Company’s revenue, the contractualfederal valuation allowance is estimated based on several criteria, including unbilled claims, historical trends based on actual claims paid, current contract and reimbursement terms and changes in customer base and payor/product mix. Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled. We do not believe these changes in estimates are material. The billing functions for the remaining portionyear ended December 31, 2021.
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The components of deferred income tax assets and liabilities were as follows as of December 31, 2023 and 2022 (in thousands):
December 31, 2023December 31, 2022
Deferred tax assets:
Price concessions$5,365 $6,169 
Compensation and benefits7,609 5,517 
Interest limitation carryforward13,802 29,453 
Operating lease liability26,378 22,765 
Net operating losses56,980 62,027 
Other7,556 6,576 
Deferred tax assets before valuation allowance117,690 132,507 
Valuation allowance(6,371)(13,056)
Deferred tax assets net of valuation allowance111,319 119,451 
Deferred tax liabilities:
Accelerated depreciation(8,882)(7,026)
Operating lease right-of-use asset(21,504)(18,076)
Intangible assets(52,502)(57,673)
Goodwill(52,188)(44,949)
Other(11,163)(13,881)
Deferred tax liabilities(146,239)(141,605)
Net deferred tax liabilities$(34,920)$(22,154)
Deferred tax assets are largely computerized, which enables on-line adjudication (i.e., submitting charges to third-party payors electronically with simultaneous feedback of the amount the primary insurance plan expects to pay) at the time of sale to record net revenue, exposure to estimating contractual allowance adjustments is limited on this portion of the business.

Inventory

Inventory is recorded at the lower of cost or market. Cost is determined using specific item or the first-in, first-out method. Inventory consists principally of purchased prescription drugs and related supplies. Included in inventory is a reserve for inventory waste and obsolescence.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of assets as follows:
Asset Useful Life
Computer hardware and software 3years -5years
Office equipment 
  5years
Vehicles 4years -5years
Medical equipment 13months -5years
Furniture and fixtures 
  5years

Leasehold improvements and assets leased under capital leases are depreciated using a straight-line basis over the related lease term or estimated useful life of the assets, whichever is less. The cost and related accumulated depreciation of assets sold

or retired are removed from the accounts with the gain or loss, if applicable, recorded in the statement of operations. Maintenance and repair costs are expensed as incurred.

Costs relating to the development of software for internal purposes are charged to expense until technological feasibility is established. Thereafter, the remaining software production costs up to the date placed into production are capitalized and included in Property and Equipment. Costs of customization and implementation of computer software purchased for internal use are likewise capitalized. Depreciation of the capitalized amounts commences on the date the asset is ready for its intended use and is calculated using the straight-line method over the estimated useful life of the software.

Goodwill

Goodwill is not subject to amortization but is instead tested for impairment annually and whenever events or circumstances exist that indicate that the carrying value of goodwill may no longer be recoverable. Management considers the Company’s business as a wholegenerally required to be its reporting unit for the purpose of testing for impairment as, subsequent to the sale of the PBM Business, the Company no longer has multiple operating segments. Management may choose to undertakereduced by a qualitative assessment in order to assess whether a quantitative analysis is required. In determining whether management will utilize the qualitative assessment in any one year, management will consider overall economic factors as well as the passage of time between the last quantitative assessment.

In January 2017, the FASB issued authoritative guidance that simplifies the measurement of goodwill impairment to a single-step test. The guidance eliminates step two of the goodwill impairment test; the measurement of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under the revised guidance, failing step one will result in goodwill impairment. The Company adopted the new guidance on January 1, 2017 on a prospective basis.

Intangible Assets

The Company evaluates the useful lives of its intangible assets to determine if they are finite or indefinite-lived. Finite-lived intangible assets, primarily acquired customer relationships, trademarks and non-compete agreements, are amortized on a straight-line basis over their estimated useful lives.

Impairment of Long Lived Assets

The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long lived assets, including intangible assets, may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. Impairment losses, if any, are determined based on the fair value of the asset, which are generally calculated as the present value of related cash flows using discount rates that reflect the inherent risk of the underlying business.

Amounts due to Plan Sponsors

Amounts due to Plan Sponsors primarily represent payments received from Plan Sponsors in excess of the contractually required reimbursement. These amounts are further evaluated in order to determine amounts to be refunded to Plan Sponsors.

Revenue Recognition

The Company generates revenue principally through the provision of infusion services to provide clinical management services and the delivery of cost effective prescription medications. Prescription drugs are dispensed either through a pharmacy participating in the Company’s pharmacy network or a pharmacy owned by the Company. Fee-for-service agreements includes pharmacy agreements, where we dispense prescription medications through the Company’s pharmacy facilities.

FASB ASC Subtopic 605-25, Revenue Recognition: Multiple-Element Arrangements (“ASC 605-25”), addresses situations in which there are multiple deliverables under one revenue arrangement with a customer and provides guidance in determining whether multiple deliverables should be recognized separately or in combination. The Company provides a variety of therapies to patients. For infusion-related therapies, the Company frequently provides multiple deliverables of drugs and related nursing services. After applying the criteria from ASC 605-25, the Company concluded that separate units of accounting exist in revenue arrangements with multiple deliverables. Drug revenue is recognized at the time the drug is shipped, and nursing revenue is recognized on the date of service. The Company allocates revenue consideration based on the relative fair value as determined

by the Company’s best estimate of selling price to separate the revenue where there are multiple deliverables under one revenue arrangement.

The Company also recognizes nursing revenue as the estimated net realizable amounts from patients and third party payors for the infusion services rendered and products provided. This revenue is recognized as the treatment plan is administered to the patient and is recorded at amounts estimated to be received under reimbursement or payment arrangements with payors.

Cost of Revenue

Cost of revenue includes the costs of prescription medications, shipping and other direct and indirect costs, and nursing services, offset by volume and prompt pay discounts received from pharmaceutical manufacturers and distributors and total manufacturer rebates.

Rebates

Manufacturers’ rebates are generally volume-based incentives that are earned and recorded upon purchase of the inventory. Rebates are recorded to cost of goods sold.

Lease Accounting

The Company accounts for operating leasing transactions by recording rent expense on a straight-line basis over the expected term of the lease starting on the date it gains possession of leased property. The Company includes tenant improvement allowances and rent holidays received from landlords and the effect of any rent escalation clauses, as adjustments to straight-line rent expense over the expected term of the lease.

Capital lease transactions are reflected as a liability at the inception of the lease based on the present value of the minimum lease payments or, if lower, the fair value of the property. Assets recorded under capital leases are depreciated in the same manner as owned property.

Income Taxes

As part of the process of preparing the Company’s Consolidated Financial Statements, management is required to estimate income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). ASC 740 requires the use of the asset and liability method of accounting for income taxes. Under this method, deferred taxes are determined by calculating the future tax consequences attributable to differences between the financial accounting and tax bases of existing assets and liabilities. A valuation allowance is recorded against deferred tax assets when, in the opinion of management,if it is more likely than not that some portion or all of the Companydeferred tax assets will not be able to realizerealized. For the benefit from itsyear ended December 31, 2023, the Company maintains a valuation allowance of $6.4 million against certain state net operating losses (“NOL”). In assessing the realizability of deferred tax assets.

assets, the Company considers whether it is more likely than not that some or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company filesconsiders the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.
The Company is subject to taxation in the United States and various states. At December 31, 2023, the Company had $39.3 million of tax-effected federal NOL carryforwards all of which are currently available to offset future taxable income in the United States and reflected as a deferred tax returns, including returns for its subsidiaries, as prescribed by Federal tax laws and the tax lawsasset of the company. Tax-effected federal NOL carryforwards of $28.4 million expire beginning in 2028 through 2036, and $10.9 million of tax-effected federal NOLs have an indefinite carryforward period. At December 31, 2022, the Company had $42.3 million of tax-effected federal NOLs. At December 31, 2023 and 2022, the Company had $13.8 million and $29.4 million tax-effected amounts of interest limitation carryforwards which have an indefinite carryforward period. At December 31, 2023 and 2022, the Company also had $17.7 million and $19.5 million tax-effected amounts of cumulative state NOL carryforwards available to offset future taxable income in various states. These state NOL carryforwards will begin to expire beginning in 2024 through 2042, with some having an indefinite carryforward period.
At December 31, 2023 and local jurisdictions in which it operates. The Company’s uncertain tax positions are related to tax years that remain subject to examination and are recognized in the Consolidated Financial Statements when the recognition threshold and measurement attributes of ASC 740 are met. Interest and penalties related to2022, there were no unrecognized tax benefits are recorded asfor uncertain tax positions.
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The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Additions
DescriptionBalance at Beginning of PeriodCharged (Benefit) to Costs and ExpensesCharged (Benefit) to Other AccountsBalance at End of Period
2021: Valuation allowance for deferred tax assets$112,085 $(96,136)$(2,798)$13,151 
2022: Valuation allowance for deferred tax assets$13,151 $(95)$— $13,056 
2023: Valuation allowance for deferred tax assets$13,056 $(6,685)$— $6,371 
Currently, the Company is not subject to any U.S. Federal income tax expense.

Financial Instruments

The Company’s financial instruments consist mainly of cash and cash equivalents, receivables, accounts payable, and accrued interest. The carrying amounts of cash and cash equivalents, receivables, accounts payable, and accrued interest approximate fair value due to their fully liquid or short-term nature.

Accounting for Stock-Based Compensation

audits. The Company accounts for stock-based compensation expense underis subject to various state tax audits and believes that the provisions of ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). At December 31, 2017, the Company has one stock-based compensation plan pursuant to which incentive stock options (“ISOs”), non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock, performance shares and performance units may be granted to employees and non-employee directors. Option and stock awards are typically settled by issuing authorized but unissued shares of the Company.


The Company accounts for its stock-based awards to employees and non-employee directors using the fair value method. The fair value of each option award is based on several criteria including, but not limited to, the valuation model used and associated input factors including principally stock price volatility and, to a lesser extent, expected term, dividend rate, and risk-free interest rate. The input factors used in the valuation model are based on subjective future expectations combined with management judgment. The fair value of each stock award is determined based on the closing price of the underlying common stock on the date of grant. The fair value of the award is amortized to expense on a straight-line basis over the requisite service period. The Company expenses restricted stock awards based on vesting requirements, including time elapsed, market conditions and/or performance conditions. Becauseoutcome of these requirements, the weighted average period for which the expense is recognized varies. The Company expenses SAR awards based on vesting requirements. In addition, because they are settled with cash, the fair value of the SAR awards are revalued on a quarterly basis.

Recent Accounting Pronouncements
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11—Earnings Per Share (Topic 260), Distinguishing Liabilities From Equity (Topic 480), and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 eliminates the requirement that a down round feature precludes equity classification when assessing whether an instrument is indexed to an entity’s own stock. A freestanding equity-linked financial instrument no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The effective date for ASU 2017-11 is for annual or any interim periods beginning after December 15, 2018. Early adoption is permitted. The adoption of this standard isaudits will not expected to have a material impact on the Company’s consolidated financial statements.Company.
In May 2017, the FASB issued ASU 2017-09—Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 modifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after a change to the terms and conditions of the award. The effective date for ASU 2017-09 is for annual or any interim periods beginning after December 15, 2017. The Company will adopt this ASU effective January 1, 2018. The adoption of this standard will not materially impact the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04—Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 modifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date for ASU 2017-04 is for annual or any interim periods beginning after December 15, 2019. The adoption of this standard did not materially impact the Company’s consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18—Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The effective date for ASU 2016-18 is for annual or any interim periods beginning after December 15, 2017. The Company will adopt this ASU effective January 1, 2018. The adoption of this standard will not materially impact the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15—Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for eight specific cash flow issues with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. The effective date for ASU 2016-15 is for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted this ASU effective January 1, 2018. The adoption of this standard did not materially impact the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842), requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard may be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09—Revenue from Contracts with Customers (Topic 606). The guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The FASB delayed the effective date to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company did not elect early adoption and applied the modified retrospective approach upon adoption which results in application of the new guidance only to contracts that are not completed at the adoption date and does not require adjustment of prior reporting periods. Assessment of the new guidance is not anticipated to result in an opening balance sheet adjustment. The Company anticipates the new standard will result in the reclassification of a substantial portion of amounts previously reported as bad debt expense to contra revenue upon implementation during fiscal year 2018.
NOTE 3 – LOSS7. EARNINGS PER SHARE

Loss Per Share

The Company presents basic and diluted lossearnings per share (“LPS”) for its common stock, par value $.0001stock. Basic earnings per share (“Common Stock”). Basic LPS is calculated by dividing the net loss attributable to common stockholdersincome of the Company by the weighted average number of shares of Common Stockcommon stock outstanding during the period. Diluted LPSearnings per share is determined by adjusting the profit or loss attributable to stockholders and the weighted average number of shares of Common Stockcommon stock outstanding adjusted for the effects of all potentially dilutive potential common shares comprised of options granted, unvested restricted stocks, stock appreciation rights, warrants and Series A and Series C Convertible Preferred Stock. Potential Common Stock equivalents that have been issued by the Company related to outstanding stock options, unvested restricted stock and warrants are determined using the treasury stock method, while potential common shares related to Series A and Series C Convertible Preferred Stock are determined using the “if converted” method.

securities.
The Company's Series A and Series C Convertible Preferred Stock, par value $.0001 per share (together, the “Preferred Stock”), is considered a participating security, which means the security may participate in undistributed earnings with Common Stock. The holders of the Preferred Stock would be entitled to share in dividends, on an as-converted basis, if the holders of Common Stock were to receive dividends. The Company is required to use the two-class method when computing LPS when it has a security that qualifies as a participating security. The two-class method is an earnings allocation formula that determines LPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding during the period. Diluted LPS for the Company’s Common Stock is computed using the more dilutive of the two-class method or the if-converted method.

The following table sets forth the computation of basic and diluted loss per common share (in thousands, except for per share amounts):
 Year Ended December 31,
 2017 2016 2015
Numerator:     
Loss from continuing operations, net of income taxes$(63,303) $(36,172) $(304,819)
(Loss) income from discontinued operations, net of income taxes(893) (6,593) 4,691
Net loss(64,196) (42,765) (300,128)
Accrued dividends on Preferred Stock(9,376) (8,392) (6,120)
Deemed dividends on Preferred Stock(701) (692) (3,690)
Loss attributable to common stockholders$(74,273) $(51,849) $(309,938)
      
Denominator - Basic and Diluted:     
Weighted average number of common shares outstanding123,791
 93,740
 68,710
Loss Per Common Share:     
Loss from continuing operations, basic and diluted$(0.59) $(0.48) $(4.58)
(Loss) income from discontinued operations, basic and diluted(0.01) (0.07) 0.07
Loss per common share, basic and diluted$(0.60) $(0.55) $(4.51)


The loss attributable to common stockholders is used as the basis of determining whether the inclusion of common stock equivalents would be anti-dilutive. Accordingly, theThe computation of diluted shares for the years ended December 31, 2017, 20162023, 2022 and 2015 excludes2021 includes the effect of securitiesshares that would be issued in connection with the PIPE Transaction and the Rights Offering (see Note 4 - Stockholders’ Deficit), as well aswarrants, stock options, and restricted stock awards and performance stock unit awards, as their inclusion would be anti-dilutivethese common stock equivalents are dilutive to loss attributable to common stockholders.the earnings per share.

NOTE 4 – STOCKHOLDERS’ DEFICIT

Carrying Value of Series A Preferred Stock

As of December 31, 2017, the following values were accreted and recorded as a reduction of additional paid in capital in Stockholders’ Deficit and a deemed dividend on the consolidated Statement of Operations. In addition, dividends were accrued at 11.5% from the date of issuance to December 31, 2017. The following table sets forthpresents the activity recorded duringCompany’s common stock equivalents that were excluded from the calculation of earnings per share as they would be anti-dilutive:
Year Ended December 31,
202320222021
Warrants——457,753
Stock option awards1,214,560629,690490,968
Restricted stock awards340,331205,652316,454
Performance stock unit awards———
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The following table presents the Company’s basic earnings per share and shares outstanding (in thousands, except per share data):
Year Ended December 31,
 202320222021
Numerator:  
Net income (1) (2) (3)$267,090 $150,556 $139,898 
Denominator:  
Weighted average number of common shares outstanding178,973 181,105 179,855 
Earnings per Common Share:
Earnings per common share, basic$1.49 $0.83 $0.78 
(1) Net income for the year ended December 31, 20172023 includes $63.1 million related to the Series A Preferred Stock (in thousands) issuedtermination payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes. See Note 3, Business Acquisitions and Divestitures, for both the PIPE Transaction and the Rights Offering:
Series A Preferred Stock carrying value at December 31, 2015$62,918
Exchange of Series A for Series C(60,776)
Accretion of discount related to issuance costs40
Dividends recorded through December 31, 2016 1
280
Series A Preferred Stock carrying value at December 31, 2016$2,462
Accretion of discount related to issuance costs53
Dividends recorded through December 31, 2017 1
312
Series A Preferred Stock carrying value at December 31, 2017$2,827

1 Dividends recorded reflect the increase in the Liquidation Preference associated with unpaid dividends.

Carrying Value of Series C Preferred Stock

As of December 31, 2017, the following values were accreted and recorded as a reduction of additional paid in capital in Stockholders’ Deficit and a deemed dividend on the consolidated Statement of Operations.further discussion. In addition, dividends were accrued at 11.5% from the datenet income includes approximately $5.3 million of issuance to December 31, 2017. The following table sets forth the activity recorded duringother non-operating income.
(2) Net income for the year ended December 31, 20172022 includes the impact of the Company’s Respiratory Therapy Asset Sale. See Note 3, Business Acquisitions and Divestitures, for further discussion.
(3) Net income for the year ended December 31, 2021 includes the impact of the Company’s release of its valuation allowance.
The following table presents the Company’s diluted earnings per share and shares outstanding (in thousands, except per share data):
Year Ended December 31,
 202320222021
Numerator:  
Net income (1) (2) (3)$267,090 $150,556 $139,898 
Denominator:  
Weighted average number of common shares outstanding178,973 181,105 179,855 
Effect of dilutive securities1,402 970 1,350 
Weighted average number of common shares outstanding, diluted180,375 182,075 181,205 
Earnings per Common Share:
Earnings per common share, diluted$1.48 $0.83 $0.77 
(1) Net income for the year ended December 31, 2023 includes $63.1 million related to the Series C Preferred Stock (in thousands):
Series C Preferred Stock carrying value at December 31, 2015$—
Exchange of Series A for Series C60,776
Accretion of discount related to issuance costs652
Dividends recorded through December 31, 2016 1
8,112
Series C Preferred Stock Carrying Value at December 31, 2016$69,540
Accretion of discount related to issuance costs648
Dividends recorded through December 31, 2017 1
9,064
Series C Preferred Stock carrying value at December 31, 2017$79,252

1 Dividends recorded reflect the increase in the Liquidation Preference associated with unpaid dividends.

First Quarter 2017 Private Placement
On March 1, 2017, the Company entered into a Stock Purchase Agreement (the “First Quarter Stock Purchase Agreement”) with Venor Capital Master Fund Ltd., Map 139 Segregated Portfoliotermination payment received on behalf of LMA SPC, Venor Special Situations Fund II LP and Trevithick LP (the “First Quarter Stockholders”). Pursuant to the First Quarter Stock Purchase Agreement, the Company sold an aggregate of 3.3 million shares of its common stock (the “First Quarter Shares”) for aggregate gross proceeds of approximately $5.1 million in a private placement transaction (the “First Quarter 2017 Private Placement”). The purchase price for each Share was $1.5366, which was negotiated between the Company and the First Quarter Stockholders based on the volume-weighted average price of the Company's common stock on the Nasdaq Global Market on March 1, 2017.

Proceeds from the First Quarter 2017 Private Placement were used for working capital and general corporate purposes.
2017 Warrants
In connection with the Second Lien Note Facility (as defined below), the Company issued warrants (the “2017 Warrants”) to the purchasers of the Second Lien Notes (as defined below) pursuant to a Warrant Purchase Agreement dated as of June 29, 2017 (the “Warrant Purchase Agreement”). The 2017 Warrants entitle the purchasers of the Warrants to purchase shares of Common Stock, representing at the time of any exercise of the 2017 Warrants an equivalent number of shares equal to 4.99% of the Common Stock of the Company on a fully diluted basis, subject toAmedisys, under the terms of the WarrantMutual Termination Agreement, governingnet of merger-related expenses and taxes. See Note 3, Business Acquisitions and Divestitures, for further discussion. In addition, net income includes approximately $5.3 million of other non-operating income.
(2) Net income for the 2017 Warrants, dated as of June 29, 2017 (the “Warrant Agreement”); provided, however,year ended December 31, 2022 includes the 2017 Warrants may not be converted to the extent that, after giving effect to such conversion, the holdersimpact of the 2017 Warrants would beneficially own,Company’s Respiratory Therapy Asset Sale. See Note 3, Business Acquisitions and Divestitures, for further discussion.
(3) Net income for the year ended December 31, 2021 includes the impact of the Company’s release of its valuation allowance.

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8. LEASES
During the years ended December 31, 2023, 2022 and 2021, the Company incurred operating lease expenses of $30.6 million, $29.1 million, and $29.8 million, respectively, including short-term lease expenses, which were included as a component of selling, general and administrative expenses in the aggregate, in excessconsolidated statements of (i) 19.99%comprehensive income. As of December 31, 2023, the shares of Common Stock outstanding as of June 29, 2017 (the “Closing Date”) minus (ii) the shares of Common Stock that were sold pursuant to the Second Quarter 2017 Private Placement (as defined below) (the “Conversion Cap”). The Conversion Cap will not apply to the 2017 Warrants if the Company obtains the approval of its stockholders for the removal of the Conversion Cap, which the Company is required to take certain steps to attempt to obtain, subject to the terms of the Warrant Agreement.
The 2017 Warrants have a 10 yearweighted-average remaining lease term and an initial exercise price of $2.00 per share, and may be exercised by payment of the exercise price in cash or surrender of shares of Common Stock into which the 2017 Warrants are being converted in an aggregate amount sufficient to pay the exercise price.  The exercise pricewas 6.8 years, and the number of shares that may be acquired upon exercise of the 2017 Warrants are subject to adjustment in certain situations, including price based anti-dilution protection whereby, subject to certain exceptions, if the Company later issues Common Stock or certain Common Stock Equivalents (as defined in the Warrant Agreement) at a price less than either the then-current market price per share or exercise price of the 2017 Warrants, then the exercise price will be decreased and the percentage of shares of Common Stock issuable upon exercise of the 2017 Warrants will remain the same, giving effect to such issuance. Additionally, the 2017 Warrants have standard anti-dilution protections if the Company effects a stock split, subdivision, reclassification or combination of its Common Stock or fixes a record date for the making of a dividend or distribution to stockholders of cash or certain assets. Upon the occurrence of certain business combinations the 2017 Warrants will be converted into the right to acquire shares of stock or other securities or property (including cash) of the successor entity. The 2017 Warrants are reflectedweighted-average discount rate was 6.16%.
Operating leases mature as a liability in other non-current liabilities on the balance sheet and are adjusted to fair value at the end of each reporting period through an adjustment to earnings. The fair value of the 2017 Warrants, subsequent to a remeasurement adjustment of $3.6 million, is $20.5 million at December 31, 2017.follows (in thousands):
Second Quarter 2017 Private Placement
On June 29, 2017, the Company entered into a Stock Purchase Agreement (the “Second Quarter Stock Purchase Agreement”) with a fund managed by Ares Management L.P. (“Ares” or the “Second Quarter Stock Purchaser”). Pursuant to the terms of the Second Quarter Stock Purchase Agreement, the Company issued and sold to the Second Quarter Stock Purchaser in a private placement (the “Second Quarter 2017 Private Placement”) 6,359,350 shares of Common Stock (the “Second Quarter Shares”) at a price of $2.50 per share, for proceeds of approximately $15.9 million, net of $0.2 million in associated costs.
Second Quarter Registration Rights Agreement
In connection with the 2017 Warrants and the Second Quarter 2017 Private Placement, the Company entered into a Registration Rights Agreement (the “Second Quarter 2017 Registration Rights Agreement”) with the holders of the 2017 Warrants and the Second Quarter Stock Purchaser. Pursuant to the Second Quarter 2017 Registration Rights Agreement, subject to certain exceptions, the Company is required, upon the request of the Second Quarter Stock Purchaser and holders of the 2017 Warrants, to register the resale of the Second Quarter Shares and the shares of Common Stock issuable upon exercise of the 2017 Warrants. Pursuant to the terms of the Second Quarter 2017 Registration Rights Agreement, these registration rights will not become effective until twelve months after the Closing Date, and the costs incurred in connection with such registrations will be borne by the Company.
Shelf Registration Statement

The Company filed a shelf registration statement on Form S-3 under the Securities Act on April 1, 2016, which was declared effective May 2, 2016 (the “2016 Shelf”). Under the 2016 Shelf at the time of effectiveness, the Company had the ability to raise up to $200.0 million, in one or more transactions, by selling Common Stock, preferred stock, debt securities, warrants, units and rights.

Authorized Shares


On November 30, 2016, the stockholders of the Company approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to increase the number of shares of Common Stock that the Company is authorized to issue from 125 million shares to 250 million shares (the “Charter Amendment”).

Treasury Stock

Fiscal Year Ended December 31,Minimum Payments
2024$24,610 
202522,447 
202619,567 
202716,281 
202810,980 
2029 and beyond34,528 
Total lease payments128,413 
Less: interest(24,651)
Present value of lease liabilities$103,762 
During the year ended December 31, 2017, 5,106 shares were surrendered2023, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the consolidated statements of cash flows of $30.5 million related to satisfy tax withholding obligations on the vestingincreases in the operating lease ROU asset and operating lease liabilities. As of restricted stock awards. The Company did not hold any shares of treasury stock at December 31, 2016 as the balance was utilized to issue shares, reflected as consideration, in the Home Solutions acquisition.

NOTE 5 – ACQUISITIONS

Home Solutions

On September 9, 2016, the Company acquired substantially all of the assets and assumed certain liabilities of Home Solutions, Inc. (HS Infusion Holdings, Inc. and its subsidiaries pursuant to the Asset Purchase Agreement dated June 11, 2016, by and among Home Solutions, a Delaware corporation, certain subsidiaries of Home Solutions, the Company and HomeChoice Partners, Inc., a Delaware corporation) pursuant to the Home Solutions Agreement. Home Solutions, a privately held company, provides home infusion and home nursing products and services to patients suffering from chronic and acute medical conditions. The aggregate consideration paid by the Company in the Transaction was equal to (i) $67.5 million in cash (the “Cash Consideration); plus (ii) (a) 3,750,000 shares of Company common stock (the “Transaction Closing Equity Consideration”) and (b) the right to receive contingent equity securities of the Company, in the form of restricted shares of Company common stock (the “RSUs”), issuable in two tranches, Tranche A and Tranche B, with different vesting conditions (collectively, the “Contingent Shares”). The number of shares of Company common stock in Tranche A will be approximately 3.1 million. The number of shares of Company common stock in Tranche B will be approximately 4.0 million. Upon close of the Transaction the RSUs had no intrinsic value, but were reported as a liability in our consolidated financial statements at their estimated fair value at the date of issuance. Upon approval of the Charter Amendment, as defined below, on November 30, 2016, the date at which sufficient shares were available should the RSUs vest and become issuable, the liability was remeasured to its then-current fair value and reclassified to equity.
The following table sets forth the consideration transferred in connection with the acquisition of Home Solutions as of September 9, 2016 (in thousands):
Cash$67,516
Equity issued at closing9,938
Capital lease obligation assumed301
Fair value of contingent consideration15,400
Total consideration$93,155

The following table sets forth the estimate of fair value of the assets acquired and liabilities assumed upon acquisition of Home Solutions as of September 9, 2016 (in thousands):
Accounts receivable$11,956
Inventories3,199
Prepaids and other assets852
Total current assets$16,007
Property and equipment4,350
Goodwill58,468
Managed care contracts24,600
Licenses5,400
Trade name1,800
Non-compete agreements200
Other long-term assets891
Total assets$111,716
Accounts payable14,575
Accrued liabilities3,986
Total liabilities$18,561
Net assets acquired$93,155
The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by combining the operations of the companies, including the ability to cross-sell its services on a national basis with an expanded footprint in home infusion and the opportunity to focus on higher margin therapies.
In accordance with ASC Topic 805 Business Combinations (“ASC 805”), the allocation of the purchase price is subject to adjustment during the measurement period after the closing date (September 9, 2016) when additional information on assets and liability valuations becomes available. During the measurement period, the Company recorded adjustments to the fair value of assumed liabilities and goodwill based on revised estimates of the shortfall amount described below. The Company finalized its valuation of certain assets and liabilities recorded pursuant to the acquisition including intangible assets and contingent consideration.
Under the Home Solutions Agreement,2023, the Company did not purchase, among other things,have any accounts receivable associated with governmental payors. However, the Home Solutions Agreement stipulatessignificant operating or financing leases that collectionshad not yet commenced.

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9. PROPERTY AND EQUIPMENT
Property and equipment was as of the first anniversary of the closing date, in an amount less than the amount estimatedfollows as government receivables in the Closing Certificate (such difference, the “Shortfall Amount”), must be paid by the Company to the seller. On October 4, 2017, the Company and Home Solutions agreed to defer the measurement of the Shortfall Amount from the first anniversary of the closing date to December 31, 2017 in exchange for a payment by the Company of $0.5 million, which would be credited toward any amount ultimately owed to Home Solutions. The Company also recognized, as of September 30, 2017, a liability of $0.3 million, reflected in current liabilities and allocated in the purchase price, in anticipation of a shortfall in actual collections. As of December 31, 2017,2023 and 2022 (in thousands):
December 31, 2023December 31, 2022
Infusion pumps$36,943 $34,942 
Equipment, furniture and other23,593 31,929 
Leasehold improvements99,725 99,085 
Computer software, purchased and internally developed50,572 34,922 
Assets under development33,668 29,411 
244,501 230,289 
Less: accumulated depreciation(123,871)(121,968)
Property and equipment, net$120,630 $108,321 
Depreciation expense is recorded within cost of revenue and operating expenses within the Shortfall Amount was $0.4 million, and an additional $0.1 million is reflected in current liabilities and earnings in anticipationconsolidated statements of paymentcomprehensive income, depending on the nature of the shortfallunderlying fixed assets. The depreciation expense included in collectionscost of accounts receivable associated with governmental payors.


Acquisitionrevenue relates to revenue-generating assets, such as infusion pumps. The depreciation expense included in operating expenses is related to infrastructure items, such as furniture, computer and Integration Expense

Acquisitionoffice equipment, and integrationleasehold improvements. The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses in restructuring, acquisition, integration, and other expenses, net in the accompanying Consolidated Statements of Operations for the years ended December 31, 2017, 20162023, 2022 and 2015 include the following costs related to the Home Solutions, CarePoint Business, and the HomeChoice acquisitions2021 (in thousands):
Year ended December 31,
202320222021
Depreciation expense in cost of revenue$2,999 $4,869 $5,746 
Depreciation expense in operating expenses24,820 27,374 29,865 
Total depreciation expense$27,819 $32,243 $35,611 

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 Year Ended December 31,
 2017 2016 2015
Legal and professional fees$528
 $3,059
 $1,033
Financial advisory fees—
 5,087
 —
Facilities consolidation and discontinuation—
 1,323
 488
Other—
 653
 219
Total$528
 $10,122
 $1,740
10. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is not amortized, but is evaluated for impairment annually in the fourth quarter of the fiscal year, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Circumstances that could trigger an interim impairment test include: a significant adverse change in the business climate or legal factors; an adverse action or assessment by a regulator; unanticipated competition; the loss of key personnel; a change in reporting units; the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed of; and the results of testing for recoverability of a significant asset group within a reporting unit.
NOTE 6 – DISCONTINUED OPERATIONS

SaleA qualitative impairment analysis was performed in the fourth quarter of PBM Services

On August 27, 2015,2023, 2022 and 2021, to assess whether it is more likely than not that the Company completed the sale of substantially allfair value of the Company’s PBM Services segment (as defined above,reporting unit is less than its carrying value. The Company assessed relevant events and circumstances including macroeconomic conditions, industry and market considerations, overall financial performance, entity-specific events, and changes in the “PBM Business”) pursuant to an Asset Purchase Agreement dated asCompany’s stock price. The Company determined that there was no goodwill impairment in 2023, 2022 or 2021.
The determination of August 9, 2015 (the “Asset Purchase Agreement”), byfair value for acquisitions and amongthe allocation of that value requires the Company BioScrip PBM Services, LLCto make significant estimates and ProCare Pharmacy Benefit Manager Inc. (the “PBM Buyer”).

Theassumptions. These estimates and assumptions primarily include, but are not limited to, the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures. Actual financial results includedcould differ from those estimates due to the inherent uncertainty involved in discontinued operationsmaking such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the PBM Businessreporting unit, the amount of the goodwill impairment charge, or both. The Company did not recognize any accumulated impairment losses at the beginning of the period.
Changes in the carrying amount of goodwill consist of the following activity for the years ended December 31, 2017, 20162023, 2022 and 2015 are summarized as follows2021 (in thousands):
Balance at December 31, 2020$1,428,610 
Acquisitions48,954 
Balance at December 31, 2021$1,477,564 
Acquisitions54,543 
Purchase accounting adjustments1,317 
Balance at December 31, 2022$1,533,424 
Acquisitions6,998 
Purchase accounting adjustments(176)
Balance at December 31, 2023$1,540,246 
63
 Year Ended December 31,
 2017 2016 2015
Revenue$—
 $—
 $44,375
Gross profit$—
 $—
 $9,763
Other operating expenses—
 1,015
 5,444
Bad debt expense—
 —
 (45)
(Loss) income from operations—
 (1,015) 4,364
Gain on sale before income taxes—
 —
 (11,424)
Financial advisory fee and legal expenses—
 614
 1,731
Other income and (expenses), net(893) 4,922
 928
(Loss) income before income taxes(893) (6,551) 13,129
Income tax expense—
 —
 206
(Loss) income from discontinued operations, net of income taxes$(893) $(6,551) $12,923

SaleThe carrying amount and accumulated amortization of Home Health Business

On March 31, 2014, the Company completed the sale of substantially allintangible assets consist of the Company’s Home Health Services segment (the “Home Health Business”) pursuant to the Stock Purchase Agreement datedfollowing as of February 1, 2014 (the “Stock Purchase Agreement”).December 31, 2023 and 2022 (in thousands):

December 31, 2023December 31, 2022
Gross intangible assets:
Referral sources$514,388 $509,646 
Trademarks/names39,136 38,508 
Other amortizable intangible assets995 912 
Total gross intangible assets554,519 549,066 
Accumulated amortization:
Referral sources(199,084)(167,902)
Trademarks/names(19,698)(16,901)
Other amortizable intangible assets(341)(148)
Total accumulated amortization(219,123)(184,951)
Total intangible assets, net$335,396 $364,115 
The operating results included in discontinued operations of the Home Health BusinessAmortization expense for intangible assets was $34.2 million, $32.9 million and $32.9 million for the years ended December 31, 2017, 20162023, 2022 and 2015 are summarized2021, respectively.
Expected future amortization expense for intangible assets recorded at December 31, 2023, is as follows (in thousands):

Amount
2024$34,386 
202534,176 
202634,071 
202733,931 
202833,881 
2029 and beyond164,951 
Total$335,396 

64
 Year Ended December 31,
 2017 2016 2015
Revenue$—
 $—
 $—
Gross profit$—
 $—
 $—
Other operating expenses—
 —
 417
Loss from operations—
 —
 (417)
Financial advisor fee and legal expenses—
 (44) —
Other costs and expenses—
 (118) 861
Income (loss) before income taxes—
 162
 (1,278)
Income tax expense (benefit)—
 —
 —
Income (loss) from discontinued operations, net of income taxes$—
 $162
 $(1,278)
11. INDEBTEDNESS

Pharmacy Services Asset Sale

On February 1, 2012, the Company entered into a Community Pharmacy and Mail Business Purchase Agreement by and among Walgreen Co. and certain subsidiaries and the Company and certain subsidiaries (collectively, the “Sellers”) with respect to the sale of certain assets, rights and properties relating to the Sellers’ traditional and specialty pharmacy mail operations and community retail pharmacy stores.

The operating results included in discontinued operations of the divested traditional and specialty pharmacy mail operations and community pharmacies for the years ended December 31, 2017, 2016 and 2015 are summarized as follows (in thousands):

 Year Ended December 31,
 2017 2016 2015
Revenue$—
 $—
 $—
 Gross profit$—
 $—
 $—
Other operating expenses—
 185
 4,485
 Legal fees and settlement expense—
 2
 1,312
Other expense, including gain on sale—
 17
 1,157
 Loss from discontinued operations, net of income taxes$—
 $(204) $(6,954)

On December 28, 2016, in response to a lawsuit filed by the Sellers alleging that the Company and certain of its subsidiaries breached certain non-compete provisions contained in the Community Pharmacy and Mail Business Purchase Agreement, an arbitrator awarded Walgreens $5.8 million in damages constituting approximately 3.0% of the total sales Walgreens claimed were made in violation of the agreement. The Company filed a motion to vacate the arbitration award but on July 19, 2017, the Court confirmed the arbitration award. Following that decision, the parties entered into a global settlement of all disputes related to the non-compete provisions and the lawsuit was dismissed. The Company paid the settlement amount in August 2017.


NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill, and the changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016, are as follows (in thousands):
 Infusion Services
Balance at December 31, 2015$308,729
Acquisition of Home Solutions57,218
Balance at December 31, 2016365,947
Adjustments associated with the acquisition of Home Solutions1,251
Balance at December 31, 2017$367,198

The Company evaluates goodwill for impairment on an annual basis and whenever events or circumstances exist that indicates that the carrying value of goodwill may no longer be recoverable. Management may choose to undertake a qualitative assessment (step zero approach) in order to assess whether a quantitative analysis is required. In determining whether management will utilize the qualitative assessment in any one year, management will consider overall economic factors as well as the passage of time between the last quantitative assessment. In January 2017, the FASB issued authoritative guidance that simplifies the measurement of goodwill impairment to a single-step test. The guidance eliminates step two of the goodwill impairment test; the measurement of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under the revised guidance, failing step one will result in goodwill impairment. The Company adopted the new guidance on January 1, 2017 on a prospective basis.

During the third quarter of 2015, the Company recorded a total impairment charge of $251.9 million year to date, all of which related to our Infusion Services reporting unit. The Company evaluated goodwill for possible impairment during the years ending December 31, 2017 and 2016 and concluded no additional impairment charge was needed.


Intangible assetsLong-term debt consisted of the following as of December 31, 2017 and 20162023 (in thousands):

Principal AmountDiscountDebt Issuance CostsNet Balance
Revolver Facility$— $— $— $— 
First Lien Term Loan588,000 (6,974)(9,678)571,348 
Senior Notes500,000 — (8,698)491,302 
$1,088,000 $(6,974)$(18,376)1,062,650 
Less: current portion(6,000)
Total long-term debt$1,056,650 
 December 31, 2017 December 31, 2016
 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Finite Lived Assets           
Infusion customer relationships$25,650
 $(25,650) $—
 $25,650
 $(23,768) $1,882
Managed care contracts25,000
 (8,403) 16,597
 24,700
 (1,898) 22,802
Licenses5,400
 (3,681) 1,719
 5,400
 (906) 4,494
Trade name1,800
 (1,181) 619
 1,800
 (281) 1,519
Non-compete agreements1,700
 (1,521) 179
 1,700
 (1,354) 346
 $59,550
 $(40,436) $19,114
 $59,250
 $(28,207) $31,043

Finite lived intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:
  Estimated Useful Life
Infusion customer relationships 5months-4years
Managed care contracts     4years
Licenses     2years
Trade name     2years
Non-compete agreements  1year-5years


Total amortization expense of intangible assets was $11.8 million, $6.2 million, and $5.1 million for the years ended December 31, 2017, 2016, and 2015, respectively. Amortization expense is expected to be the following (in thousands):

Year ending December 31,Estimated Amortization
2018$8,644
20196,218
20204,252
2021—
2022—
Thereafter—
Total estimated amortization expense$19,114

NOTE 8 – RESTRUCTURING, ACQUISITION, INTEGRATION, AND OTHER EXPENSE, NET

Restructuring, acquisition, integration and other expenses include costs associated with restructuring, acquisition and integration initiatives such as employee severance costs, certain legal and professional fees, training costs, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed branches/offices.

Restructuring, acquisition, integration, and other expenses, net in the Consolidated Statements of Operations for the years ended December 31, 2017, 2016, and 2015 consisted of the following (in thousands):

 Year Ended December 31,
 2017 2016 2015
Restructuring and other expense$12,134
 $10,334
 $22,635
Acquisition and integration expenses528
 10,122
 1,740
Change in fair value of contingent consideration—
 (4,597) 30
Total restructuring, acquisition, integration, and other expenses, net12,662
 15,859
 24,405

NOTE 9 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):
 December 31,
 2017 2016
Computer and office equipment$31,371
 $30,060
Software capitalized for internal use17,470
 16,481
Vehicles2,379
 2,552
Medical equipment36,230
 32,086
Work in progress2,478
 4,370
Furniture and fixtures5,534
 5,319
Leasehold improvements19,809
 17,496
Property and equipment, gross115,271
 108,364
Less: Accumulated depreciation(88,298) (75,686)
Property and equipment, net$26,973
 $32,678

Depreciation expense, including expense related to assets under capital lease, for the years ended December 31, 2017, 2016 and 2015 was $15.9 million, $15.8 million, and $17.7 million, respectively.

Impairment

The Company, which assesses the impairment of its assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable, has determined that no such events or changes have occurred and therefore, no impairment charge in relation to property, plant and equipment was incurred during the year ended December 31, 2017.

NOTE 10 – DEBT

As of December 31, 2017 and 2016, the Company’sLong-term debt consisted of the following as of December 31, 2022 (in thousands):

 December 31,
 2017 2016
First Lien Note Facility, net of unamortized discount$198,324
 $—
Second Lien Note Facility, net of unamortized discount85,694
 —
2021 Notes, net of unamortized discount197,363
 196,670
Revolving Credit Facility—
 55,300
Term Loan Facilities—
 210,207
Capital leases2,863
 2,209
Less: Deferred financing costs(3,656) (12,452)
Total Debt480,588
 451,934
Less: Current portion(1,722) (18,521)
Long-term debt, net of current portion$478,866
 $433,413

Debt Facilities
The Company was previously obligated under (i) a senior secured first-lien revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility”), (ii) a senior secured first-lien term loan B in an aggregate principal amount of $250.0 million (the “Term Loan B Facility”) and (iii) a senior secured first-lien delayed draw term loan B in an aggregate principal amount of $150.0 million (the “Delayed Draw Term Loan Facility” and, together with the Revolving Credit Facility and the Term Loan B Facility, the “Senior Credit Facilities”) with SunTrust Bank (“SunTrust”), Jefferies Finance LLC and Morgan Stanley Senior Funding, Inc., originally entered on July 31, 2013 and amended from time to time.
Principal AmountDiscountDebt Issuance CostsNet Balance
ABL Facility$— $— $— $— 
First Lien Term Loan594,000 (8,307)(11,529)574,164 
Senior Notes500,000 — (9,960)490,040 
$1,094,000 $(8,307)$(21,489)1,064,204 
Less: current portion(6,000)
Total long-term debt$1,058,204 
On January 6, 2017,December 7, 2023, the Company entered into a credit agreementthe second amendment (the “Priming Credit Agreement”“Amendment”) to the amended and together with the Senior Credit Facilities, the “Prior Credit Agreements”) with certain existing lenders under the Senior Credit Facilities and SunTrust, as administrative agent for itself and the lenders. The Primingrestated First Lien Credit Agreement provideddated as of October 27, 2021. The Amendment, among other things, provides for revolving credit commitments by the applicable Revolving Credit Lenders in an aggregate borrowing commitmentamount of $25.0$400.0 million which was fully drawn at closing.
On June 29, 2017 (the “Closing Date”), the Company entered into (i) a first lien note purchase agreement (the “First Lien Note“Revolver Facility”), among the Company, which is the issuer under the agreement, the financial institutions and note purchasers from time to time party to the agreement (the “First Lien Note Purchasers”), and Wells Fargo Bank, National Association, in its capacity as collateral agent for itself and the First Lien Note Purchasers (the “First Lien Collateral Agent”), pursuant to which such lenders have agreed to make Revolving Credit Loans to the Company. As of December 31, 2023, the Company had $5.3 million of undrawn letters of credit issued first lien senior secured notesand outstanding, resulting in an aggregate principal amountnet borrowing availability under the Revolver Facility of $200.0 million (the “First Lien Notes”);$394.7 million. The Revolver Facility matures on the date that is the earlier of (i) December 7, 2028 and (ii) a second lien note purchase agreement (the “Second Lien Note Facility” and, together with the First Lien Note Facility,date that is 91 days prior to the “Notes Facilities”) among the Company, which is the issuerstated maturity date applicable to any Term B Loans. Borrowings under the agreement, the financial institutions and note purchasers from time to time party to the agreement (the “Second Lien Note Purchasers”), and Wells Fargo Bank, National Association, in its capacity as collateral agent for itself and the Second Lien Note Purchasers (the “Second Lien Collateral Agent” and, together with the First Lien Collateral Agent, the “Collateral Agent”), pursuant to which the Company (a) issued second lien senior secured notes in an aggregate initial principal amount of $100.0 million (the “Initial Second Lien Notes”) and (b) has the ability to draw upon the Second Lien NoteRevolver Facility and issue second lien delayed draw senior secured notes in an aggregate initial principal amount of $10.0 million for a period of 18 months after the Closing Date, subject to certain terms and conditions (the “Second Lien Delayed Draw Notes” and, together with the Initial Second Lien Notes, the “Second Lien Notes”; the Second Lien Notes, together with the First Lien Notes, the “Notes”). Funds managed by Ares are acting as lead purchasers for the Notes Facilities.
The Company used the proceeds of the sale of the First Lien Notes and the Initial Second Lien Notes pursuant to the Notes Facilities to repay in full all amounts outstanding under the Prior Credit Agreements and extinguished the liability. Each of the

Prior Credit Agreements was terminated following such repayment. The Company used the remaining proceeds of $15.9 million of the Notes Facilities, net of $0.2 million in issuance costs, from the Notes Facilities and the Second Quarter 2017 Private Placement for working capital and general corporate purposes.
The First Lien Notes accruebear interest payable monthly in arrears, at a floating rate or rates equal to, at the option of the Company, either (i) the base rate (defined asTerm Secured Overnight Financing Rate (“SOFR”) applicable thereto plus the highest of the Federal FundsApplicable Rate plus 0.5% per annum, the Prime Rate as published by The Wall Street Journal and the one-month London Interbank Offered Rate (“LIBOR”) (subject to a 1.0% floor) plus 1.0%), or (ii) the one-month LIBORthen applicable Base Rate plus the Applicable Rate, which Applicable Rate shall be, subject to certain caveats thereto, as follows (i) until delivery of financial statements and related Compliance Certificate for the first full fiscal quarter ending after the effective date of the Amendment, (A) for Term SOFR Loans, 1.75%, (B) for Base Rate Loans, 0.75% and (ii) thereafter, the following percentages per annum, based upon the Total Net Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to the terms of the Credit Agreement. The table below illustrates the aforementioned interest rate terms:
Pricing LevelTotal Net Leverage RatioApplicable Rate for Term SOFR LoansApplicable Rate for Base Rate Loans
IGreater than or equal to 3.00x2.25%1.25%
IILess than 3.00x, but greater than or equal to 2.25x2.00%1.00%
IIILess than 2.25x, but greater than or equal to 1.50x1.75%0.75%
IVLess than 1.50x, but greater than or equal to 1.00x1.50%0.50%
VLess than 1.00x1.25%0.25%

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Concurrently with the creation of the Revolver Facility, the Company terminated the ABL Credit Agreement. Prior to the transition to the Revolver Facility, the ABL Facility had been in effect from August 6, 2019 to December 7, 2023. As of December 31, 2022, the Company’s ABL Facility provided for borrowings up to $175.0 million and had a maturity date of October 27, 2026. Effective January 13, 2023, the Company entered into an agreement to amend the ABL Facility and increase the amount of borrowing availability by $50.0 million to $225.0 million total borrowing availability. As a result of the amended agreement, SOFR was established as the new reference rate, replacing LIBOR. Prior to the termination of the ABL Facility in December 2023, the ABL Facility bore interest at a rate equal to, at the Company’s election, either (i) a base rate determined in accordance with the ABL Credit Agreement plus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of the Line Cap (as such term is defined in the ABL Credit Agreement); and (ii) SOFR plus an applicable margin, which is equal to between 1.25% and 1.75% based on the historical excess availability as a percentage of the Line Cap. The ABL Facility contained commitment fees payable on the unused portion ranging from 0.25% to 0.375%, depending on various factors including the Company’s leverage ratio, type of loan and rate type, and letter of credit fees of 2.50%. Borrowings under the ABL Facility were secured by a first priority security interest in the Company’s and each of its subsidiaries’ inventory, accounts receivable, cash, deposit accounts and certain assets and property related thereto (the “ABL Priority Collateral”), in each case subject to certain exceptions, and a third priority security interest in each of the Company’s subsidiaries’ capital stock (subject to a 1.0% floor)certain exceptions) and substantially all of the Company’s property and assets (other than the ABL Priority Collateral). The Company had $6.7 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL Facility of $168.3 million, as of December 31, 2022.
Effective June 30, 2023, the Company entered into an agreement, dated as of June 8, 2023, to amend the First Lien Term Loan to replace LIBOR and related definitions and provisions with SOFR as the new reference rate. The Company entered into the First Lien Term Loan Agreement (the “First Lien Credit Agreement Amendment”), plus a marginwhich commenced in October 2021 (the “October 2021 Refinancing”) to provide $600.0 million of 6.0% if the base rate is selected or 7.0% if the LIBOR Option is selected.refinanced borrowings. The First Lien Term Loan (the “First Lien Term Loan Facility”) is charged an interest rate equal to, at the Company’s option, either (i) SOFR (with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Term SOFR Loans (as such term is defined in the First Lien Credit Agreement Amendment); and (ii) a base rate determined in accordance with the First Lien Credit Agreement Amendment, plus 1.75% for Base Rate Loans (as such term is defined in the First Lien Credit Agreement Amendment). The First Lien Term Loan Facility is repayable in quarterly installments, which began in March 2022, and matures on October 27, 2028. The interest rate on the First Lien Term Loan was 8.21% and 6.82% as of December 31, 2023 and 2022, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 7.83% and 4.52% for the years ended December 31, 2023 and 2022, respectively.
In conjunction with the October 2021 Refinancing, the Company also issued $500.0 million in aggregate principal of unsecured senior notes (“Senior Notes”). The Senior Notes bear interest at a rate of 4.375% per annum payable semi-annually in arrears on October 31 and April 30 of each year, commencing on April 30, 2022. The Senior Notes mature on August 15, 2020, provided that ifOctober 31, 2029. The interest rate on the Company’s existing 8.875% Senior Notes duewas 4.375% as of both December 31, 2023 and 2022. The weighted average interest rate incurred on the Senior Notes was 4.375% for both years ended December 31, 2023 and 2022.
The Company assessed whether the October 2021 (the “2021 Notes”) are refinanced priorRefinancing resulted in an insubstantial modification or an extinguishment of the existing debt for each loan in the syndication by grouping lenders as follows: (i) Lenders continuing to August 15, 2020, thenparticipate in either the scheduled maturity dateFirst Lien Term Loan Facility and Senior Notes; (ii) previous lenders that exited; and (iii) new lenders. The Company determined that $35.7 million of the First Lien Notes shall be June 30, 2022.
Term Loan was extinguished, which was disclosed as an outflow from financing activities in the condensed consolidated statements of cash flows. The First Lien Notes amortizeTerm Loan had insubstantial modifications for lenders that continued to participate in equal quarterly installments equaleither debt instrument, which resulted in a cash outflow from financing activities of $558.3 million in the consolidated statements of cash flows. The Company determined that $501.4 million of new debt was issued related to 0.625%the First Lien Term Loan, which is disclosed as an inflow from financing activities in the consolidated statements of cash flows. In connection with the aggregate principal amountrefinancing of the First Lien Note Facility, commencingTerm Loan and issuance of the Senior Notes, the Company incurred $10.7 million in debt issuance costs and third-party fees, of which $8.8 million was capitalized, $1.7 million was expensed as a component of other expense and $0.2 million was expensed as a loss on September 30, 2019,extinguishment as a component of other expense in the consolidated statements of comprehensive income. Further, $1.5 million of the total fees incurred of $10.7 million was netted against the $501.4 million of proceeds from debt as a component of the cash flows from financing activities, $7.4 million was presented as deferred financing costs as a component of cash flows from financing activities, and the remaining $1.8 million was included in cash flows from operating activities in the consolidated statements of cash flows.
The Company recognized a loss on extinguishment of debt of $1.0 million included in the line entitled “Other, net” in the consolidated statements of comprehensive income, of which $0.2 million related to debt issuance costs incurred with the First Lien Term Loan refinancing and issuance of the Senior Notes, as discussed above, and $0.8 million related to existing deferred financing fees that were written off upon extinguishment within the consolidated statements of comprehensive income and cash flows during the year ended December 31, 2021.
66
Prior to the October 2021 Refinancing, the Company entered into an amendment on the last day of each third month thereafter, with the balance payable at maturity. The First Lien Notes are pre-payable at the Company’s option at specified premiums to the principal amount that will decline over the termTerm Loan in January 2021 (the “January 2021 Refinancing”) which resulted in additional First Lien Term Loan indebtedness. The proceeds of the First Lien Note Facility. IfTerm Loan indebtedness were used to prepay the First Lien Notes are prepaid prior to the second anniversaryremaining balance of the Closing Date, the Company will be required to pay a make-whole premium based on the present value (using a discountprevious senior secured second lien pay-in-kind toggle floating rate based on the specified treasury rate plus 50 basis points) of all remaining interest payments on the First Lien Notes being prepaid prior to the second anniversary of the Closing Date, plus 4.0% of the principal amount of First Lien Notes being prepaid. On or after the second anniversary of the Closing Date, the prepayment premium is 4.0%, which declines to 2.0% on or after the third anniversary of the Closing Date, and declines to 0.0% on or after the fourth anniversary of the Closing Date. At any time, the Company may pre-pay up to $50.0 million in aggregate principal amount of the First Lien Notes from internally generated cash without incurring any make-whole or prepayment premium. The occurrence of certain events of default may increase the applicable rate of interest by 2.0% and could result in the acceleration of the Company’s obligations under the First Lien Note Facility prior to stated maturity and an obligation of the Company to pay the full amount of its obligations under the First Lien Note Facility.
The First Lien Note Facility contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material indebtedness and events constituting a change of control. In addition, the obligations under the First Lien Note Facility are guaranteed by joint and several guarantees from the Company’s subsidiaries.
In connection with the First Lien Note Facility, the Company, its subsidiaries and the First Lien Collateral Agent entered into a First Lien Guaranty and Security Agreement, dated as of June 29, 2017 (the “First Lien Guaranty and Security Agreement”). Pursuant to the First Lien Guaranty and Security Agreement, the obligations under the First Lien Notes are secured by first priority liens on, and security interests in, substantially all of the assets of the Company and its subsidiaries.
The notes due 2027 (“Second Lien Notes accrue interest, payable monthly in arrears, at a floating rate or rates equal to, atNotes”). The Company assessed whether the option of the Company, (i) one-month LIBOR (subject to a 1.25% floor) plus 9.25% per annum in cash, (ii) one-month LIBOR (subject to a 1.25% floor) plus 11.25% per annum, which amount will be capitalized on each interest payment date, or (iii) one-month LIBOR (subject to a 1.25% floor) plus 10.25% per annum, of which one-half LIBOR plus 4.625% per annum will be payable in cash and one-half LIBOR plus 5.625% per annum will be capitalized on each interest payment date, provided that, in each case, if any permitted refinancing indebtedness with which the 2021 Notes are refinanced requires or permits the payment of cash interest, all of the interest on the Second Lien Notes shall be paid in cash. The Second Lien Notes mature on August 15, 2020, provided that if the 2021 Notes are refinanced prior to August 15, 2020, then the scheduled maturity daterepayment of the Second Lien Notes shall be June 30, 2022.
by issuing incremental First Lien Term Loan indebtedness resulted in an insubstantial modification or an extinguishment of the existing debt for each loan in the syndication by grouping lenders as follows: (i) Lenders participating in both the First Lien Term Loan and Second Lien Notes; (ii) previous lenders that exited; and (iii) new lenders. The Company determined that $161.2 million of the First Lien Term Loan was extinguished and $122.9 million of the $150.0 million second lien term loan (“Second Lien Term Loan”) was extinguished, which is disclosed as an outflow from financing activities in the consolidated statements of cash flows. The First Lien Term Loan and Second Lien Notes had insubstantial modifications for lenders that participated in both debt instruments, which resulted in a cash outflow from financing activities of $352.0 million in the consolidated statements of cash flows. The Company determined that $356.2 million of new debt was issued related to the First Lien Term Loan, which is disclosed as an inflow from financing activities in the consolidated statements of cash flows. In connection with the Second Lien Note Facility, the Company also issued the 2017 Warrants to the purchasersprepayment of the Second Lien Notes pursuant toand incremental First Lien Term Loan indebtedness, the Warrant Purchase Agreement. The 2017 Warrants entitleCompany incurred $7.2 million in debt issuance costs and third-party fees, of which $3.7 million was capitalized, $0.9 million was expensed as a component of other expense and $2.6 million was expensed as a loss on extinguishment as a component of other expense in the purchasersconsolidated statements of comprehensive income. Further, $1.0 million of the 2017 Warrants to purchase sharestotal fees incurred of Common Stock, representing at$7.2 million was netted against the time$356.2 million of any exerciseproceeds from debt as a component of the 2017 Warrants an equivalent numbercash flows from financing activities, $2.9 million was presented as deferred financing costs as a component of shares equalcash flows from financing activities, $2.4 million was presented as debt prepayment fees as a component of cash flows from financing activities, and the remaining $0.9 million was included in cash flows from operating activities in the consolidated statements of cash flows.
The Company recognized a loss on extinguishment of debt of $12.4 million included in the line entitled “Other, net” in the consolidated statements of comprehensive income, of which $2.6 million related to 4.99%debt issuance costs incurred with the incremental First Lien Term Loan indebtedness and prepayment of the Common StockSecond Lien Notes, as discussed above, and $9.8 million related to existing deferred financing fees that were written off upon extinguishment within the consolidated statements of comprehensive income and cash flows during the year ended December 31, 2021.
Long-term debt matures as follows (in thousands):
Fiscal Year Ended December 31,Minimum Payments
2024$6,000 
20256,000 
20266,000 
20276,000 
2028564,000 
2029 and beyond500,000 
Total$1,088,000 
During the year ended December 31, 2023, the Company engaged in hedging activities to limit its exposure to changes in interest rates. See Note 12, Derivative Instruments, for further discussion.
The following table presents the estimated fair values of the Company’s debt obligations as of December 31, 2023 (in thousands):
Financial InstrumentCarrying Value as of December 31, 2023Markets for Identical Item (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
First Lien Term Loan$571,348 $— $590,234 $— 
Senior Notes491,302 — 448,750 — 
Total debt instruments$1,062,650 $— $1,038,984 $— 
The Company onhad no fair value measurements that utilized Level 3 inputs of the fair value hierarchy for the year ended December 31, 2023. See Note 13, Fair Value Measurements, for further discussion.
67
12. DERIVATIVE INSTRUMENTS
The Company utilizes derivative financial instruments for hedging and non-trading purposes to limit the Company’s exposure to its variable interest rate risk. Use of derivative financial instruments in hedging strategies subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative financial instrument will change. Credit risk related to a fully diluted basis, subject toderivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the Warrant Agreement.contract. The 2017 Warrants, considerednotional, or contractual, amount of the Company’s derivative financial instruments is used to measure interest to be paid or received and does not represent the Company’s exposure due to credit risk. Credit risk is monitored through established approval procedures, including reviewing credit ratings when appropriate.
In August 2019, the Company entered into an interest rate swap agreement that reduced the variability in the interest rates on the newly-issued debt obligations following the Merger with BioScrip. The interest rate swap for $925.0 million notional was effective in August 2019 with $911.1 million designated as a cash flows hedge against the underlying interest rate on the First Lien Term Loan interest payments indexed to one-month LIBOR through August 2021. In accordance with ASU 2017-12, Targeted Improvements to Accounting for Hedges, the Company had determined that the $911.1 million designated cash flows hedge is perfectly effective. The remaining $13.9 million notional amount of the interest rate swap is not designated as a hedging instrument. The interest rate swap expired in August 2021.
In October 2021, the Company entered into an interest rate cap hedge with a notional amount of $300.0 million for a five-year term beginning November 30, 2021. The hedge partially offsets risk associated with the First Lien Term Loan’s variable interest rate. The interest rate cap instrument perfectly offsets the terms of the interest rates associated with the variable interest rate of the First Lien Term Loan.
The following table summarizes the amount and location of the Company’s derivative and subject to remeasurement at each reporting period, are reflected in other non-current liabilitiesinstruments in the consolidated balance sheet. sheets (in thousands):
Fair Value - Derivatives in Asset Position
DerivativeBalance Sheet CaptionDecember 31, 2023December 31, 2022
Interest rate cap designated as cash flows hedgePrepaid expenses and other current assets$9,746 $10,926 
Interest rate cap designated as cash flows hedgeOther noncurrent assets10,183 17,342 
Total derivative assets$19,929 $28,268 
The 2017 Warrants, subsequent to a remeasurement adjustment of $3.6 million, are carried at again and loss associated with the changes in the fair value of $20.5 million at December 31, 2017.
the effective portion of hedging instruments are recorded into other comprehensive (loss) income. The Second Lien Notesgain and loss associated with the changes in the fair value of the hedging instruments not designated are not subject to scheduled amortization installments.recognized in net income through interest expense. The Second Lien Notes are pre-payable atfollowing table presents the pre-tax (loss) gain from derivative instruments recognized in other comprehensive (loss) income in the Company’s option at specified premiums to the principal amount that will decline over the termconsolidated statements of the Second Lien Note Facility. If the Second Lien Notes are prepaid prior to the third anniversary of the Closing Date, the Company will need to pay a make-whole premium based on the present value (using a discount rate based on the specified treasury rate plus 50 basis points) of all remaining interest payments on the Second Lien Notes being prepaid prior to the third anniversary of the Closing Date, plus 4.0%comprehensive income (in thousands):

of the principal amount of Second Lien Notes being prepaid. On or after the third anniversary of the Closing Date, the prepayment premium is 4.0%, which declines to 2.0% on or after the fourth anniversary of the Closing Date, and declines to 0.0% on or after the fifth anniversary of the Closing Date. The occurrence of certain events of default may increase the applicable rate of interest by 2.0% and could result in the acceleration of the Company’s obligations under the Second Lien Note Facility prior to stated maturity and an obligation of the Company to pay the full amount of its obligations under the Second Lien Note Facility.
The Second Lien Note Facility contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to material indebtedness and events constituting a change of control. In addition, the obligations under the Second Lien Note Facility are guaranteed by joint and several guarantees from the Company’s subsidiaries.
In connection with the Second Lien Note Facility, the Company, its subsidiaries and the Second Lien Collateral Agent entered into a Second Lien Guaranty and Security Agreement, dated as of June 29, 2017 (the “Second Lien Guaranty and Security Agreement”). Pursuant to the Second Lien Guaranty and Security Agreement, the obligations under the Second Lien Notes are secured by second priority liens on, and security interests in, substantially all of the assets of the Company and its subsidies.
In connection with the First Lien Note Facility and the Second Lien Note Facility, the Company, the First Lien Collateral Agent and the Second Lien Collateral Agent, entered into an intercreditor agreement containing customary provisions to, among other things, subordinate the lien priority of the liens granted under the Second Lien Note Facility to the liens granted under the First Lien Note Facility.
2021 Notes

On February 11, 2014, the Company issued $200.0 million aggregate principal amount of the 2021 Notes. The 2021 Notes are senior unsecured obligations of the Company and are fully and unconditionally guaranteed by all existing and future subsidiaries of the Company. The 2021 Notes were offered in the United States to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act pursuant to an Indenture (the “2021 Notes Indenture”), dated February 11, 2014, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee.

Interest on the 2021 Notes accrues at a fixed rate of 8.875% per annum and is payable in cash semi-annually, in arrears, on February 15 and August 15 of each year, commencing on August 15, 2014. The debt discount of $5.0 million at issuance is being amortized as interest expense through maturity which will result in the accretion over time of the outstanding debt balance to the principal amount. The 2021 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness.

The 2021 Notes are guaranteed on a full, joint and several basis by each of the Company’s existing and future domestic restricted subsidiaries that is a borrower under any of the Company’s credit facilities or that guarantees any of the Company’s debt or that of any of its restricted subsidiaries, in each case incurred under the Company’s credit facilities. As of December 31, 2017, the Company does not have any independent assets or operations, and as a result, its direct and indirect subsidiaries (other than minor subsidiaries), each being 100% owned by the Company, are fully and unconditionally, jointly and severally, providing guarantees on a senior unsecured basis to the 2021 Notes.

The 2021 Notes Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of the Company’s subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) make investments, (viii) sell assets, including capital stock of subsidiaries, (ix) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (x) enter into transactions with affiliates. In addition, the 2021 Notes Indenture requires, among other things, the Company to provide financial and current reports to holders of the 2021 Notes or file such reports electronically with the U.S. Securities and Exchange Commission (the “SEC”). These covenants are subject to a number of exceptions, limitations and qualifications set forth in the 2021 Notes Indenture.

Pursuant to the terms of the Second Amendment to the Senior Credit Facilities, the Company used the net proceeds of the 2021 Notes of approximately $194.5 million to repay $59.3 million of the Revolving Credit Facility and $135.2 million of the Term Loan Facilities.

Fair Value of Financial Instruments

Year Ended December 31,
Derivative202320222021
Interest rate cap designated as cash flows hedge$(8,339)$28,869 $(601)
Interest rate swap designated as cash flows hedge— — 11,172 
Total$(8,339)$28,869 $10,571 
The following details our financialtable presents the amount and location of pre-tax income (loss) recognized in the Company’s consolidated statement of comprehensive income related to the Company’s derivative instruments where the carrying value and the fair value differ:(in thousands):

Financial InstrumentCarrying Value as of December 31, 2017Markets for Identical Item (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
First Lien Note Facility$198,324
$—
$—
$200,578
Second Lien Note Facility85,694
—
—
100,850
2017 Warrants20,495
—
20,495
—
2021 Notes197,363
—
183,561
—
Total$501,876
$—
$204,056
$301,428

Year Ended December 31,
DerivativeIncome Statement Caption202320222021
Interest rate cap designated as cash flows hedgeInterest expense$10,974 $1,090 $(239)
Interest rate swap designated as cash flows hedgeInterest expense— — (11,298)
Interest rate swap not designated as hedgeInterest expense— — (2)
Total$10,974 $1,090 $(11,539)
The fair value hierarchy for disclosureCompany expects to reclassify $2.8 million of fairtotal interest rate costs from accumulated other comprehensive income (loss) against interest expense during the next 12 months.

68
13. FAIR VALUE MEASUREMENTS
Fair value measurements is as follows:
Level 1:  Quotedare determined by maximizing the use of observable inputs and minimizing the use of unobservable inputs. The hierarchy places the highest priority on unadjusted quoted market prices (unadjusted) in active markets for identical assets or liabilities.liabilities (Level 1 measurements) and gives the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs within the fair value hierarchy are defined in Note 2, Summary of Significant Accounting Policies. While the Company believes its valuation methods are appropriate and consistent with other market participants, the use ofdifferent methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Level 2:  Quoted prices, other thanFirst Lien Term Loan: The fair value of the First Lien Term Loan is derived from a broker quote on the loans in the syndication (Level 2 inputs). See Note 11, Indebtedness, for further discussion of the carrying amount and fair value of the First Lien Term Loan.
Senior Notes: The fair value of the Senior Notes is derived from a broker quote (Level 2 inputs). See Note 11, Indebtedness, for further discussion of the carrying amount and fair value of the Senior Notes.
Interest Rate Cap: The fair value of the interest rate cap is derived from the interest rates prevalent in the market and future expectations of those interest rates (Level 2 inputs). The Company determines the fair value of the investments based on quoted prices included in Level 1, which are observablefrom third-party brokers. See Note 12, Derivative Instruments, for further discussion of the assets or liabilities, either directly or indirectly.
Level 3:  Inputs that are unobservable for the assets or liabilities.

Financial assets with carrying values approximating fair value includeof the interest rate cap.
Money Market Funds: The fair value of the money market funds is derived from the closing price reported by the fund sponsor and classified as cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and capital leases. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities.

Deferred Financing Costs

In connection with the Note Facilities and the 2021 Notes, the Company incurred underwriting fees, agent fees, legal fees and other expenses of approximately $4.1 million and $0.5 million, respectively. The deferred financing costs are reflected as additional issuance costs and amortized as a component of interest expense over the remaining term of the Note Facilities using the effective interest method.

Future Maturities

The estimated future maturities of the Company’s long-term debt, inclusive of $3.7 million in deferred financing costs and $2.6 million of unamortized discount on the 2021 notes, as of December 31, 2017, are as follows (in thousands):
Year Ending December 31, Amount
2018 $1,722
2019 3,254
2020 297,887
2021 200,000
2022 —
Thereafter —
Total future maturities $502,863

Interest Expense

The weighted average interest rate on the Company’s short-term borrowings under its Revolving Credit Facility during the years endedconsolidated balance sheets (Level 1 inputs).
There were no other assets or liabilities measured at fair value at December 31, 2017 and 2016 was 10.3%.2023 or 2022.

Liquidity

As of the filing of this Annual Report, we expect that our cash on hand, cash from operations, and available borrowing under the Second Lien Delayed Draw Senior Secured Notes will be sufficient to fund our anticipated working capital, scheduled interest repayments and other cash needs for at least the next 12 months.


NOTE 11 –14. COMMITMENTS AND CONTINGENCIES

Legal Proceedings
The Company is involved in legal proceedings and is subject to investigations, inspections, audits, inquiries, and similar actions by governmental authorities, arising in the normal course of the Company’s business. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. From time to time, the Company may also be involved in legal proceedings as a partyplaintiff involving antitrust, tax, contract, intellectual property, and other matters. Gain contingencies, if any, are recognized when they are realized.
The results of legal proceedings are often uncertain and difficult to various legal, regulatorypredict, and governmental proceedings incidental to its business. Based on current knowledge, managementthe costs incurred in litigation can be substantial, regardless of the outcome. The Company does not believe that loss contingencies arising fromany of these pending legal, regulatorymatters, after consideration of applicable reserves and governmental matters, including the matters described herein,rights to indemnification, will have a material adverse effect on the Company’s consolidated financial position or liquidity of the Company. balance sheets.
However, in light of the inherent uncertainties involved in pending legal, regulatorysubstantial unanticipated verdicts, fines, and governmental matters, some of which are beyond the Company’s control, and the indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period. 
With respect to all legal, regulatory and governmental proceedings,rulings may occur. As a result, the Company considersmay from time to time incur judgments, enter into settlements, or revise expectations regarding the likelihood of a negative outcome. If the Company determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to materialcertain matters, is reasonably possible and the Company is able to determine an estimate of the possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, the Company discloses the estimate of the possible loss or range of loss. However, the Company is unable to estimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the preliminary nature of, certain legal, regulatory and governmental matters.

Breach of Contract Litigation in the Delaware Court of Chancery

On November 3, 2015, Walgreen Co. and various affiliates (“Walgreens”) filed a lawsuit in the Delaware Court of Chancery against the Company and certain of its subsidiaries (collectively, the “Defendants”). The complaint alleges that the Company breached certain non-compete provisions contained in the Community Pharmacy and Mail Business Purchase Agreement dated as of February 1, 2012, by and among Walgreens and certain subsidiaries and the Company and certain subsidiaries. The complaint seeks both money damages and injunctive relief. On December 7, 2015, the Defendants filed a motion to dismiss the case. Walgreens filed an answering brief on January 11, 2016, and the Defendants filed a reply on January 25, 2016. On March 11, 2016, the Court held oral argument on the Company’s motion to dismiss and granted the motion, holding that Walgreens’ breach of contract claims for money damages must be resolved in accordance with the 2012 Purchase Agreement’s alternative dispute resolution procedure. On March 15, 2016, Walgreens informed the Court that it would not be pursuing any claims for injunctive relief in the Court at that time, but instead would engage in the required alternative dispute resolution procedure. Walgreens requested that the Court keep the case open pending the results of that process. On March 16, 2016, the Court stayed the lawsuit and removed the trial from its calendar, but did not grant Walgreens any other relief or enjoin the Company from taking any action. On December 8, 2016, the parties submitted the dispute to an arbitrator. On December 28, 2016, the arbitrator rendered its decision, finding that the Company had not violated the non-compete, except for certain limited sales of oral oncology, HIV and transplant pharmaceuticals, constituting approximately 3 percent of the total sales that Walgreens claimed were made in violation of the agreement. The arbitrator also concluded that Walgreens was not entitled to recover its lost profits or lost revenues as a result of any such sales. Despite that ruling, the arbitrator awarded Walgreens $5.8 million in damages, or approximately 20 percent of the total amount requested. On January 13, 2017, the Company filed a motion to vacate the arbitration award. On February 10, 2017, Walgreens opposed the Company’s motion and filed a motion to confirm the arbitration award and for other relief. On July 19, 2017, the Court confirmed the arbitration award and denied Walgreens’ request for injunctive relief. Following that decision, the parties entered into a global settlement of all disputes related to the non-compete provisions and the lawsuit was dismissed. The Company paid the settlement amount in August 2017.
Derivative Lawsuit in the Delaware Court of Chancery
On May 7, 2015, a derivative complaint was filed in the Delaware Court of Chancery (the “Derivative Complaint”) by the Park Employees’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago (the “Derivative Plaintiff”). The Derivative Complaint names as defendants certain current and former directors of the Company, consisting of Richard M. Smith, Myron Holubiak, Charlotte Collins, Samuel Frieder, David Hubers, Richard Robbins, Stuart Samuels and Gordon Woodward (collectively, the “Director Defendants”), certain current and former officers of the Company, consisting of Kimberlee Seah, Hai Tran and Patricia Bogusz (collectively the “Officer Defendants”), Kohlberg & Co., L.L.C., Kohlberg Management V, L.L.C., Kohlberg Investors V, L.P., Kohlberg Partners V, L.P., Kohlberg TE Investors V, L.P., KOCO Investors V, L.P., and Jefferies LLC. The Company is also named as a nominal defendant in the Derivative Complaint. The Derivative Complaint was filed in the Delaware Court of Chancery as Park Employees and Retirement Board Employees’ Annuity and Benefit Fund of Chicago v. Richard M. Smith, Myron Z. Holubiak, Charlotte W. Collins, Samuel P. Frieder, David R. Huber, Richard L. Robbins, Stuart A. Samuels, Gordon H. Woodward, Kimberlee C. Seah, Hai V.Tran, Patricia Bogusz, Kohlberg & Co., L.L.C., Kohlberg Management V, L.L.C.,

Kohlberg Investors V, L.P., Kohlberg Partners V, L.P., Kohlberg TE Investors V, L.P., KOCO Investors V, L.P., Jefferies LLC and BioScrip, Inc., C.A. No. 11000-VCG (Del. Ch. Ct., May 7, 2015).
The Derivative Complaint alleged generally that certain defendants breached their fiduciary duties with respect to the Company’s public disclosures, oversight of Company operations, secondary stock offerings and stock sales. The Derivative Complaint also contended that certain defendants aided and abetted those alleged breaches. The damages sought were not quantified but included, among other things, claims for money damages, restitution, disgorgement, equitable relief, reasonable attorneys’ fees, costs and expenses, and interest. The Derivative Complaint incorporated the same factual allegations from In re BioScrip, Inc., Securities Litigation. On April 18, 2017, the Court granted the defendants’ motion to dismiss, and on November 27, 2017 the Delaware Supreme Court affirmed the dismissal. Additional demands and lawsuits related to the same facts and circumstances, however,developments could be pursued in the future. In that event, there is no assurance that any defenses will be successful or that insurance will be available or adequate to fund any settlement, judgment or litigation costs associated with this action. Certain of the defendants may also seek indemnification from the Company pursuant to certain indemnification agreements, for which there may be no insurance coverage.
While no assurance can be given as to the ultimate outcome of this matter, the Company believes that the final resolution of this action is not likely to have a material adverse effect on its results of operations financial position, liquidity or capital resources.
On December 18, 2017, a commercial payor of the Company sent a letter that claimed an alleged breach of the Company’s obligation under its provider contracts.  No legal proceeding has been filed. The Company is not able to estimate the amount of any possible loss.  The Company believes this claim is without merit and intends to vigorously defend against this claim if any such legal proceeding is commenced.

Government Regulation

Various federal and state laws and regulations affecting the healthcare industry do or may impact the Company’s current and planned operations, including, without limitation, federal and state laws prohibiting kickbacks in government health programs, federal and state antitrust and drug distribution laws, and a wide variety of consumer protection, insurance and other state laws and regulations. While management believes the Company is in substantial compliance with all existing laws and regulations material to the operation of its business, such laws and regulations are often uncertain in their application to our business practices as they evolve and are subject to rapid change. As controversies continue to arise in the healthcare industry, federal and state regulation and enforcement prioritiesperiod in this area can be expected to increase,which the impact of which cannot be predicted.
From time to time, the Company responds to investigatory subpoenas and requests for information from governmental agencies and private parties. The Company cannot predict with certainty what the outcome of any of the foregoing might be. While the Company believes it is in substantial compliance with all laws, rules and regulations that affectsamounts are accrued and/or its business and operations, there can be no assurance that the Company will not be subject to scrutiny or challenge under one or more existing laws or that any such challenge would not be successful. Any such challenge, whether or not successful, could have a material effect upon the Company’s Consolidated Financial Statements. A violation of the federal Anti-Kickback Statute, for example, may result in substantial criminal penalties, as well as suspension or exclusion from the Medicare and Medicaid programs. Moreover, the costs and expenses associated with defending these actions, even where successful, can be significant.Further, there can be no assurance the Company will be able to obtain or maintain any of the regulatory approvals that may be required to operate its business, and the failure to do so could have a material effect on the Company’s Consolidated Financial Statements.
Leases

The Company leases its facilities and certain equipment under various operating leases with third parties. The majority of these leases contain escalation clauses that increase base rent payments based upon either the Consumer Price Index or an agreed upon schedule.

In addition, the Company utilizes capital leases agreements with third parties to obtain certain assets such as telecommunications equipment and vehicles. Interest rates on capital leases are both fixed and variable and range from 3% to 7%.


As of December 31, 2017, future minimum lease payments under operating and capital leases were as follows (in thousands):
 Operating Leases Capital Leases Total
2018$7,739
 $1,722
 $9,461
20195,010
 754
 5,764
20203,688
 387
 4,075
20212,559
 —
 2,559
20221,829
 —
 1,829
2023 and Thereafter4,891
 —
 4,891
Total Future Minimum Lease Payments$25,716
 $2,863
 $28,579

Rent expense for leased facilities and equipment was approximately $7.7 million, $7.3 million and $7.2 million for the years ended December 31, 2017, 2016 and 2015, respectively

Purchase Commitments

As of December 31, 2017, the Company had no outstanding purchase commitments.

NOTE 12 – CONCENTRATION OF RISK

Customer and Credit Concentration Risk

The Company provides trade credit to its customerscash flows in the normal course of business. One commercial payor, United Healthcare, accounted for approximately 18%, 24% and 26% of revenue during the years ended December 31, 2017, 2016 and 2015, respectively. Medicare accounted for 7%, 8% and 7% of revenue during the years ended December 31, 2017, 2016 and 2015, respectively.
NOTE 13 – INCOME TAXES

The Company’s federal and state income tax benefit (expense) from continuing operations is summarizedperiod in the following table (in thousands):
 Year Ended December 31,
 2017 2016 2015
Current     
Federal$925
 $—
 $—
State(174) 30
 76
Total current751
 30
 76
Deferred 
  
  
Federal1,951
 (1,744) 18,293
State1,428
 (301) 3,163
Total deferred3,379
 (2,045) 21,456
Total tax benefit (expense)$4,130
 $(2,015) $21,532


The effect of temporary differences that give rise to a significant portion of deferred taxes is as follows (in thousands):
 December 31,
 2017 2016
Deferred tax assets:   
Reserves not currently deductible$10,707
 $19,249
Net operating loss carryforwards110,773
 122,420
Goodwill and intangibles (tax deductible)12,757
 25,268
Accrued expenses95
 467
Property basis differences2,813
 2,578
Stock based compensation2,371
 6,887
Other—
 638
Total deferred tax assets139,516
 177,507
Deferred tax liabilities: 
  
Other(180) —
Less: valuation allowance(138,238) (179,788)
Net deferred tax asset1,098
 (2,281)
Deferred taxes$1,098
 $(2,281)

The Company continually assesses the necessity of a valuation allowance. Based on this assessment, the Company concluded that a valuation allowance, in the amount of $138.2 million and $179.8 million, was required as of December 31, 2017 and 2016, respectively. If the Company determines in a future period that it is more likely than not that part or all of the deferred tax assets will be realized, the Company will reverse part or all of the valuation allowance.

At December 31, 2017, the Company had federal net operating loss (“NOL”) carryforwards of approximately $410.3 million, of which $12.9 million is subject to an annual limitation, which will begin expiring in 2026 and later. The Company has post-apportioned state NOL carryforwards of approximately $450.4 million, the majority of which will begin expiring in 2018 and later.

The Company’s reconciliation of the statutory rate to the effective income tax rate from continuing operations is as follows (in thousands):
 Year Ended December 31,
 2017 2016 2015
Tax benefit at statutory rate$23,654
 $11,907
 $114,222
State tax benefit, net of federal taxes4,587
 1,398
 8,414
Change in valuation allowance41,550
 (14,725) (57,567)
Change in tax contingencies10
 66
 37
Alternative minimum tax receivable925
 —
 —
Corporate tax rate changes(67,707) —
 —
Goodwill impairment—
 —
 (43,362)
Other1,111
 (661) (212)
Tax benefit (expense)$4,130
 $(2,015) $21,532

As of December 31, 2017, the Company had $1.0 million of gross unrecognized tax benefits. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
 Year Ended December 31,
 2017 2016 2015
Unrecognized tax benefits balance at January 1,$1,021
 $1,067
 $1,096
Lapse of statute of limitations(7) (46) (29)
Unrecognized tax benefits balance at December 31,$1,014
 $1,021
 $1,067


The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income tax expense in the Consolidated Statements of Operations. As of December 31, 2017 and December 31, 2016, the Company had a nominal amount of accrued interest related to uncertain tax positions.

The Company files income tax returns, including returns for its subsidiaries, with federal, state and local jurisdictions. The Company’s uncertain tax positions are related to tax years that remain subject to examination. As of December 31, 2017, U.S. tax returns for the years 2014 through 2017 remain subject to examination by federal tax authorities. Tax returns for the years 2013 through 2017 remain subject to examination by state and local tax authorities for a majority of the Company's state and local filings.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 or US Federal Tax Reform (the “Reform”). The enactment included broad tax changes that are applicable to Bioscrip, Inc. Most notably, the Reform has established the U.S. corporate tax rate decrease from a high of 35% to a flat 21% income tax rate effective January 1, 2018.
These changes require Bioscrip, Inc. to re-measure deferred tax assets and liabilities. The Company uses the asset and liability approach for accounting for income taxes. Under that method, assets and liabilities are recorded for future tax consequences attributable to the difference between financial statement balances of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates at which the temporary differencesamounts are expected to reverse. As a resultpaid.

69
15. STOCK-BASED INCENTIVE COMPENSATION
NOTE 14 – STOCK-BASED COMPENSATION

BioScrip Equity Incentive Plans

— Under the Company’s Amended and Restated 20082018 Equity Incentive Plan (the “2008“2018 Plan”), approved at the annual meeting by the BioScrip stockholders on May 3, 2018, the Company may issue, among other things, incentive stock options, non-qualified stock options, stock appreciation rights, (“SARs”), restricted stock grants, restricted stock units, performance sharesstock grants, and performance units to key employees and directors. While SARs are authorized under the 2008 Plan, they may also be issued outside of the plan. The 2008 Plan2018 plan is administered by the Company’s Management Development and Compensation Committee, (the “Compensation Committee”), a standing committee of the Board of Directors.
On November 30, 2016, at a special meeting, the stockholders approved (i) an amendment to the Company’s Second Amended and Restated Certificate A total of Incorporation to increase the number of4,101,735 shares of Common Stock that the Company iscommon stock were initially authorized to issue from 125 million shares to 250 million shares (the “Charter Amendment”); and (ii) an amendment to the 2008 Plan to (a) increase the number of shares of Common Stock in the aggregate that may be subject to awards by 5,250,000 shares, from 9,355,000 to 14,605,000 shares and (b) increase the annual grant caps under the Company’s 2008 Plan from 500,000 Options, 500,000 Stock Appreciation Rights and 350,000 Stock Grants and Restricted Stock Units that are intended to comply with the requirements of Section 162(m) of the Code to a cap of no more than a total of 3,000,000 Options, Stock Appreciation Rights, Stock Grants and Restricted Stock Units that are intended to comply with the requirements of Section 162(m) of the Code combined.
As of December 31, 2017, there were 5,245,719 shares that remained available for grant under the 2008 Plan.

Employee Stock Purchase Plan

On May 7, 2013, the Company’s stockholders approved the BioScrip, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP Plan is administered by the Compensation Committee. The ESPP provides all eligible employees, as defined under the ESPP, the opportunity to purchase up to a maximum number of shares of Common Stock of the Company as determined by the Compensation Committee. Participants in the ESPP may acquire the Common Stock at a cost of 85% of the lower of the fair market value on the first or last day of the quarterly offering period. The Company filed a Registration Statement on Form S-8 to register 750,000 shares of Common Stock, par value $0.0001 per share, for issuance under the ESPP.

As of December 31, 2017, there2018 Plan. In May 2021, an additional 4,999,999 shares were 53,462 shares that remained availableauthorized for grantissuance under the ESPP. During the year ended December 31, 2017, the ESPP’s third-party service provider purchased 265,6082018 Plan, resulting in a total 9,101,734 shares on the open market and delivered these shares to the Company’s employees pursuant to the ESPP, and the Company recorded $0.1 million of expense related to the ESPP.common stock authorized for issuance.


BioScrip/CHS Equity Plan

In connection with the May 8, 2014 amendment to the 2008 Plan noted above, the Company determined to cease issuance of awards under the BioScrip/CHS 2006 Equity Incentive Plan. As of December 31, 2017, no shares remained available under the BioScrip/CHS Plan.

Stock Options

— Options granted under the Equity Compensation Plans: (a)2018 Plan typically vest over a three-yearthree- or four-year period and, in certain instances, may fully vest upon a change in control of the Company, (b)Company. The options also typically have an exercise price that may not be less than 100% of its fair market value on the date of grant and (c) are exercisable for seven to ten years after the date of grant, subject to earlier termination in certain circumstances.

OptionCompensation expense from stock options is amortizedrecognized on a straight-line basis over the requisite service period. TheDuring the years ended December 31, 2023, 2022 and 2021, the Company recognized compensation expense related to stock options of $1.0$6.5 million, $3.4$2.5 million and $4.8$1.9 million, in the years ended December 31, 2017, 2016 and 2015, respectively.

The weighted-average,weighted average grant-date fair value of options granted during the years endingended December 31, 2017, 20162023, 2022 and 20152021 was $1.22, $0.72,$15.72, $12.51 and $2.25,$17.79, respectively. The fair value of stock options granted was estimated on the date of grant using a binomial model for grants issued through June 30, 2015 and a Black-Scholes option-pricing model for grants issued beginning July 1, 2015.pricing model. The assumptions used to compute the fair value of options for the years endingended December 31, 2017, 20162023, 2022 and 2015 were:2021 are as follows:
2017 2016 2015
Year Ended December 31,
Year Ended December 31,
Year Ended December 31,
2023
Expected volatility
Expected volatility
Expected volatility73.2% 68.1% 62.3%
Risk-free interest rate2.04% 1.98% 2.20%
Risk-free interest rate
Risk-free interest rate
Expected life of options
Expected life of options
Expected life of options5.7 years
 4.8 years
 8.9 years
Dividend rate—
 —
 —
Dividend rate
Dividend rate
A summary of stock option activity for the Equity Compensation Plans throughyear ended December 31, 2017 was2023 is as follows:
OptionsWeighted Average Exercise PriceAggregate Intrinsic Value (thousands)Weighted Average Remaining Contractual Life
Balance at December 31, 20221,021,370 $21.63 $8,816 
Granted872,264 $28.87 $4,208 
Exercised(60,106)$18.56 $827 
Forfeited and expired(87,256)$28.13 $561 
Balance at December 31, 20231,746,272 $25.08 $15,028 8.19 years
Exercisable at December 31, 2023283,571 $17.07 $4,713 6.36 years
 Options 
Weighted
Average
Exercise Price
 
Aggregate
Intrinsic Value
(thousands)
 
Weighted Average
Remaining
Contractual Life
Balance at December 31, 20165,265,370
 $5.78
 $—
 4.4 years
Granted1,618,092
 $1.93
 $1,499
  
Exercised(146,667) $2.37
 $36
  
Forfeited and expired(2,338,595) $6.77
 $325
  
Balance at December 31, 20174,398,200
 $3.98
 $2,639
 5.5 years
Outstanding options less expected forfeitures at December 31, 20174,210,163
 $4.07
 $2,465
 5.4 years
Exercisable at December 31, 20172,497,766
 $5.59
 $647
 3.6 years

CashDuring the years ended December 31, 2023, 2022 and 2021, shares were surrendered to satisfy tax withholding obligations on the exercise of stock options with a cost basis of $0.3 million, $0.7 million and $0.1 million, respectively. No cash was received from stock option exercises under share-based payment arrangements was $0.4 million for the year ended December 31, 2017 and nominal for the years ended 2016December 31, 2023, 2022 and 2015.2021.

70

The maximum term of stock options under these plans is ten years. Options outstanding as of December 31, 20172023 expire on various dates ranging from January 2018May 2024 through March 2026.July 2033. The following table outlines ourthe outstanding and exercisable stock options as of December 31, 2017:2023:
  Options Outstanding Options Exercisable
Range of Option Exercise Price Outstanding Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Options Exercisable Weighted Average Exercise Price
$0.00 - $2.06 1,253,866
 $1.42
 7.3 years 257,604
 $1.29
$2.06 - $4.13 1,663,258
 $2.49
 6.0 years 759,086
 $2.71
$4.13 - $6.19 210,500
 $5.02
 3.8 years 210,500
 $5.02
$6.19 - $8.25 983,076
 $7.20
 3.5 years 983,076
 $7.20
$10.31 - $12.38 175,000
 $11.04
 2.8 years 175,000
 $11.04
$12.38 - $14.44 104,500
 $13.09
 4.9 years 104,500
 $13.09
$16.50 - $18.57 8,000
 $16.63
 3.6 years 8,000
 $16.63
All options 4,398,200
 

 
 2,497,766
 


Options OutstandingOptions Exercisable
Range of Option Exercise PriceOutstanding OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual LifeOptions ExercisableWeighted Average Exercise Price
$0.00 - $8.249,901 $6.52 3.1 years9,901 $6.52 
$8.24 - $16.52132,752 $12.44 5.4 years108,767 $12.24 
$16.52 - $24.76460,969 $21.41 7.6 years159,439 $20.59 
$24.76 - $33.001,142,650 $28.19 8.8 years5,464 $29.51 
All options1,746,272 283,571 
As of December 31, 20172023, there was $1.6$13.0 million of unrecognized compensation expense related to unvested option grants that is expected to be recognized over a weighted-average period of 2.21.2 years.

As compensation expense for options granted is recorded over the requisite service period of options, future stock-based compensation expense may be greater as additional options are granted.

Restricted Stock

Under the Equity Compensation Plans,— Restricted stock grants subject solely to an employee’s or director’s continued service with the Company generally will not become fully vested less than (a) threewithin one to four years from the date of grant to employeesdate and, in certain instances, may fully vest upon a change in control of the Company. Restricted stock grants subject solely to a Director’s continued service with the Company and (b) one yeargenerally will become fully vested on a pro-rata basis over three years from the date of grant for directors. Stock grants subject togrant.
Compensation expense from restricted stock is recognized on a straight-line basis over the achievement of performance conditions will not vest less than one year fromrequisite service period. During the date of grant. Such performance shares may vest after one year from grant. No such time restrictions applied to stock grants made underyears ended December 31, 2023, 2022 and 2021, the Company’s prior equity compensation plans.

The Company recognized compensation expense related to restricted stock awards of $1.1$16.6 million, $0.5$10.2 million and $0.4$4.9 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

Since the Company records compensation expense forThe grant-date fair value of restricted stock awards basedis valued as the closing price of the Company’s common stock on the vesting requirements, which generally includes time elapsed, market conditions and/or performance conditions,date of the weighted average period over which the expense is recognized varies. Also, future equity-based compensation expense may be greater if additional restricted stock awards are made.

grant.
A summary of restricted stock award activity throughfor the year ended December 31, 2017 was2023 is as follows:
Restricted StockWeighted Average Grant Date Fair Value
Balance at December 31, 20221,668,847 $22.45 
Granted945,589 $29.02 
Vested and issued(504,597)$19.54 
Forfeited and expired(226,723)$24.86 
Balance at December 31, 20231,883,116 $26.28 
 
Restricted
Stock
 
Weighted Average
Grant
Date Fair Value
 
Weighted Average
Remaining
Recognition Period
Balance at December 31, 2016547,356
 $2.43
 2.2 years
Granted1,563,922
 $1.80
  
Awards Vested(145,402) $3.71
  
Canceled(83,513) $1.83
  
Balance at December 31, 20171,882,363
 $1.82
 4.0 years

During the years ended December 31, 2023 and 2022, shares were surrendered to satisfy tax withholding obligations on the vesting of restricted stock awards with a cost basis of $4.4 million and $1.4 million, respectively. During the year ended December 31, 2021, shares were surrendered to satisfy tax withholding obligations on the vesting of restricted stock awards with an immaterial cost basis.
As of December 31, 2017,2023, there was $2.0$31.4 million in unrecognized compensation expense related to unvested restricted stock awards. The total grant date fair valueawards that is expected to be recognized over a weighted average period of awards vested during the years ended December 31, 2017, 2016 and 2015 was $2.8 million, $0.9 million, and $0.2 million, respectively.1.2 years. The total fair value of restricted stock awards vested during the years ended December 31, 2017, 20162023, 2022 and 20152021 was $0.4$9.9 million, $0.2$3.7 million and $0.5$1.2 million, respectively.

71

Performance Stock Units

Under— Performance-based stock units are generally earned based on the 2008 Plan,attainment of specified goals achieved over a designated performance period. During the years ended December 31, 2023, 2022 and 2021, the Company’s Compensation Committee may grant performanceapproved awards of performance-based stock units to key employees.certain senior executives of the Company with grant dates in 2023, 2022 and 2021, respectively. The Compensation Committee will establishperformance-based stock units approved during 2023 (“2023 PSU”), 2022 (“2022 PSU”) and 2021 (“2021 PSU”) each offer a three-year-cliff vesting schedule. Each award reflects a target number of shares (“Target Shares”) that may be issued to the termsaward recipient. The 2023 PSU, 2022 PSU and conditions2021 PSU awards may be earned upon the completion of anythe two-year-average performance periods ending December 31, 2024, 2023 and 2022, respectively.
Whether units granted, includingare earned at the performance goals,end of the performance period andwill be determined based on the value for eachachievement of certain performance unit. Ifobjectives over the performance goalsperiod. The performance objectives include achieving a target growth for adjusted EBITDA and revenue combined in addition to a target growth for cash flows from operations over the performance period. Depending on the results achieved during the performance period, the actual number of shares that a grant recipient receives at the end of the period may range from 0% to 200% of the Target Shares granted. Each period begins with 100% of the Target Shares and true-up or true-down adjustments are satisfied,considered every quarter-end based on the forecasted performance period results.
The fair value of the Target Shares and performance stock unit awards are based on the fair value of the underlying shares as of market close on the grant date. Compensation expense for performance unit stock awards is recognized on a straight-line basis over the requisite service period. During the year ended December 31, 2023, the Company would pay the key employee an amount in cash equalrecognized compensation expense related to the value2023 PSU, 2022 PSU and 2021 PSU awards of each performance unit at$2.2 million, $2.9 million and $2.4 million, respectively. During the timeyear ended December 31, 2022, the Company recognized compensation expense related to the 2022 PSU and 2021 PSU awards of payment. In no event may a key employee receive an amount in excess$2.4 million and $1.7 million, respectively. During the year ended December 31, 2021, the Company recognized compensation expense related to the 2021 PSU awards of $1.0 million with respect to performance units for any given year.$2.7 million. As of December 31, 2017, 1,563,922 performance units have been granted under2023, there were $5.5 million, $3.3 million and $0.3 million in unrecognized compensation expense related to unvested 2023 PSU, 2022 PSU and 2021 PSU awards, respectively, that are expected to be recognized over the 2008 Plan.period of 2.2 years, 1.2 years and 0.2 years, respectively.

Stock Appreciation Rights

72
The Company has outstanding cash-based phantom16. STOCKHOLDERS’ EQUITY
During the years ended December 31, 2023 and 2022, HC I completed secondary offerings of 23,771,926 and 11,000,000 shares of common stock, appreciation rights (“SARs”), which are independentrespectively. As of the Company's 2008 Equity Incentive Plan, with respect to 100,000December 31, 2023, HC I no longer holds shares of the Company'sCompany’s common stock.
2017 Warrants — Prior to the Merger, BioScrip issued warrants to certain debt holders pursuant to a Warrant Purchase Agreement dated as of June 29, 2017. In conjunction with the Merger, the 2017 Warrants were amended to entitle the purchasers of the warrants to purchase 2.1 million shares of common stock. The SARs vest in three equal annual installments2017 Warrants have a 10-year term and will fully vest in connection with a changean exercise price of control (as defined in the grantee’s employment agreement). The SARs$8.00 per share and may be exercised by payment of the exercise price in wholecash or surrender of shares of common stock into which the 2017 Warrants are being converted in part,an aggregate amount sufficient to pay the exercise price. The 2017 Warrants are classified as equity instruments, and the fair value of these warrants of $14.1 million was recorded in paid-in capital as of the Merger Date. During the years ended December 31, 2023 and 2022, warrant holders exercised warrants to purchase 188,350 and 1,130,089 shares of common stock, respectively. No proceeds were received from these exercises as the warrant holders elected to surrender shares to pay the exercise price. At December 31, 2023 and 2022, the remaining warrant holders are entitled to purchase 51,838 and 240,188 shares of common stock, respectively.
2015 Warrants — Prior to the extent each SAR has been vestedMerger, BioScrip issued warrants pursuant to a Common Stock Warrant Agreement dated as of March 9, 2015 which entitle the holders to purchase 0.9 million shares of common stock. The 2015 Warrants have a 10-year term and will receivehave exercise prices in casha range of $20.68 per share to $25.80 per share. The 2015 Warrants were assumed by the amount by whichCompany in conjunction with the closing stock price onMerger and are classified as equity instruments, and the exercise date exceedsfair value of these warrants of $4.6 million was recorded in paid in capital as of the Grant Price, if any. UponMerger Date. During the exerciseyear ended December 31, 2023, warrant holders exercised an immaterial number of any SARs, as soon as practicable under the applicable federal and state securities laws, the grantee may be required to use the net after-tax proceeds of such exercisewarrants to purchase shares of common stock. During the Common Stock from the Company at the closing stock price of the Common Stock on that date and hold suchyear ended December 31, 2022, warrant holders exercised warrants to purchase 900,272 shares of Common Stock for a periodcommon stock. During the year ended December 31, 2023, no cash proceeds were received from warrant exercises. During the year ended December 31, 2022, $20.9 million of not less than one yearcash was received as proceeds from warrant exercises. At December 31, 2023 and 2022, the date of purchase, except that the grantee will not be requiredremaining warrant holders are entitled to purchase any13,888 and 15,231 shares of Common Stock ifcommon stock, respectively.
Share Repurchase Program — On February 20, 2023, the SAR is exercised on or afterCompany’s Board of Directors approved a changeshare repurchase program of controlup to an aggregate $250.0 million of common stock of the Company. On December 6, 2023, the Company’s Board of Directors approved an increase to its share repurchase program authorization from $250.0 million to $500 million. Under the share repurchase program, repurchases may occur in any number of methods depending on timing, market conditions, regulatory requirements, and other corporate considerations. The grantee’s rightshare repurchase program has no specified expiration date.
During the year ended December 31, 2023, the Company purchased 7,946,301 shares of common stock for an average share price of $31.46, totaling $250.0 million. All repurchased shares became treasury stock. As of December 31, 2023, the Company is authorized to exercise the SAR will expire on the earliestrepurchase up to a remaining $250.0 million of (1) the tenth anniversarycommon stock of the grant date,Company.
Treasury Stock — As of December 31, 2023 and 2022, the Company held 8,330,022 and 383,722 shares of treasury stock, respectively.
Preferred Stock — The Company had no preferred stock outstanding as of December 31, 2023 or (2) under certain conditions2022.
17. RELATED-PARTY TRANSACTIONS
Transactions with Equity-Method Investees — The Company provides management services to its joint ventures such as a result of terminationaccounting, invoicing and collections in addition to day-to-day managerial support of the grantee’s employment.

A summaryoperations of SAR activity through December 31, 2017 was as follows:
 Stock Appreciation Rights 
Weighted
Average
Exercise Price
 
Weighted Average
Remaining
Recognition Period
Balance at December 31, 2016300,000
 $6.48
 0.0 years
Granted—
 
 
Exercised—
 
 
Canceled(200,000) $5.70
 
Balance at December 31, 2017100,000
 $8.05
 0.0 years

the businesses. The SARs areCompany recorded as a liability in other non-current liabilities in the Consolidated Balance Sheets. Compensation benefit related to the SARsmanagement fee income of $5.3 million, $4.1 million and $3.5 million for the years ended December 31, 2017, 20162023, 2022 and 2015 was negligible. As2021, respectively. Management fees are recorded in net revenues in the accompanying consolidated statements of comprehensive income.
The Company had amounts due to its joint ventures of $0.5 million and due from its joint ventures of $0.1 million as of December 31, 2017 all outstanding SARs2023. The Company had amounts due to its joint ventures of $1.5 million as of December 31, 2022. These receivables were fully vested. In addition, because they are settled withincluded in prepaid expenses and other current assets in the accompanying balance sheets and these payables were included in accrued expenses and other current liabilities in the accompanying balance sheets. These balances primarily relate to cash collections received by the fair valueCompany on behalf of the SAR awards is revalued on a quarterly basis. During the years ended December 31, 2017, 2016 and 2015,joint ventures, offset by certain pharmaceutical inventories purchased by the Company did not pay cash relatedon behalf of the joint ventures.
Share Repurchase Agreement — On February 28, 2023, we entered into a Share Repurchase Agreement (the “Share Repurchase Agreement”) with HC I, pursuant to which we agreed to repurchase, subject to the exercise of SAR awards.

NOTE 15 – DEFINED CONTRIBUTION PLAN

The Company maintains a deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the Plan, employees may elect to deferterms and conditions contained therein, up to 100%$75.0 million of their salary, subject to Internal Revenue Service limits, andour common stock then held by HC I at the Company may make a discretionary matching contribution. The Company recorded matching contributions within general and administrative expenses in the Consolidated Statements of Operations of $1.3 million during the year ended December 31, 2015. The Company elected to forgo a matching contribution during the years ended December 31, 2017 and 2016.

NOTE 16 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

During the fourth quarter of 2017, the Company determined that certain 2017 and 2016 prior period quarterly balances contained errors, predominately due to a failure to appropriately account for and resolve transactions specific to suspense and clearing accounts. There were also immaterial corrections in the third quarter of 2017 for interest expense and intangible asset amortization expense. Management evaluated the materiality of the errors, quantitatively and qualitatively, and concluded that they were not material, but elected to correct the accompanying table of selected quarterly financial data. See Note 1 - Nature of Business.

A summary of unaudited quarterly financial information for the years ended December 31, 2017 and 2016 is as follows (in thousands exceptsame purchase price per share data).as the underwriter in a
concurrent underwritten public offering of our common stock held by HC I. On March 3, 2023, the transactions contemplated by the Share Repurchase Agreement closed, and we repurchased directly from HC I 2,475,166 shares of our common stock.
73
 First Quarter Second Quarter Third Quarter Fourth Quarter
Year ended December 31, 2017       
Revenue$217,810
 $218,106
 $198,692
 $182,582
Gross profit64,874
 67,611
 66,563
 70,194
Loss from continuing operations, before income taxes(18,801) (28,432) (12,998) (7,202)
Net (loss) income from discontinued operations, net of income taxes(299) (373) 66
 (287)
Net loss$(19,719) $(29,523) $(12,992) $(1,962)
        
Loss per share from continuing operations, basic and diluted$(0.18) $(0.26) $(0.12) $(0.03)
Loss per share from discontinued operations, basic and diluted—
 —
 —
 (0.01)
Loss per share, basic and diluted$(0.18) $(0.26) $(0.12) $(0.04)
        
Year ended December 31, 2016 
  
  
  
Revenue$238,462
 $232,462
 $224,542
 $240,123
Gross profit63,302
 63,266
 61,721
 73,793
Loss from continuing operations, before income taxes(10,311) (8,770) (11,012) (4,064)
Net (loss) income from discontinued operations, net of income taxes504
 169
 107
 (7,373)
Net loss$(9,830) $(8,750) $(11,327) $(12,858)
        
Loss per share from continuing operations, basic and diluted$(0.17) $(0.14) $(0.11) $(0.06)
Income (loss) per share from discontinued operations, basic and diluted—
 —
 —
 (0.07)
Loss per share, basic and diluted$(0.17) $(0.14) $(0.11) $(0.13)

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.Controls and Procedures

Item 9A.    Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures

The Company maintainsBased on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures that are designedas defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act were effective as of December 31, 2023 to ensureprovide reasonable assurance that information required to be disclosed by the Company in the reports we filethat it files or submitsubmits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms and that such information is(ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2017. Based on that evaluation, the Company’s Chief Executive Officer and its Chief Financial Officer concluded that due to material weaknesses in our internal controls over financial reporting described below, the Company’s disclosure controls and procedures (as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act) were not effective as of December 31, 2017.



(b) Management Annual Report on Internal Control overOver Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rules 13a-15(f). and 15d-15(f) of the Exchange Act. Our internal control over financial reportingsystem is a process designed by management, under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with accounting principles generally accepted inU.S. GAAP.
Our management, with the United Statesparticipation of America. Becausethe CEO and CFO, assessed the effectiveness of its inherent limitations,the Company’s internal control over financial reporting. Based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), management concluded that the internal control over financial reporting was effective as of December 31, 2023. The Company’s independent registered public accounting firm, KPMG LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears elsewhere in this Annual Report.
All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. ProjectionsAlso, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.  A deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
Our management, led by our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of internal control over financial reporting as of December 31, 2017, using the criteria set forth in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework).
Management’s evaluation of the effectiveness of our internal control over financial reporting determined that the Company’s internal control over financial reporting was not effective as of December 31, 2017, because of the material weaknesses described below. 
We did not conduct an effective continuous risk assessment process and monitoring activities to identify possible risks of material misstatement in our financial reporting processes and to establish effective internal controls to manage such risks. As a consequence we did not design, implement and operate effective process level controls:
to ensure spreadsheets used to calculate amortization of intangible assets, the valuation of equity-linked liabilities, amortization of discounts and deferred issuance costs of debt, and spreadsheets used to evaluate the going concern premise were reviewed in sufficient detail to identify formulaic and data input errors following a change in personnel responsible for operation of the control. 

to review the timely accurate resolution of transactions posted to accounts receivable, accounts payable, and accrued liability suspense accounts.

to review the timely accurate recognition of physical inventory count differences at all branch locations in our inventory management system.

to review the timely accurate recognition of transfers from CIP to in-use and the completeness and accuracy of fixed asset disposals.  

The control deficiencies described above resulted in immaterial misstatements in the preliminary consolidated financial statements as of and for the year ended December 31, 2017 that were corrected. However, these control deficiencies create a reasonable possibility that a material misstatement in our consolidated financial statements will not be prevented or detected on a timely basis and, therefore, we concluded that the deficiencies represented material weaknesses in our internal control over financial reporting as of December 31, 2017.

The independent registered public accounting firm, KPMG LLP, has expressed an adverse report on the operating effectiveness of our internal control over financial reporting as of December 31, 2017.  KPMG LLP’s report appears on page 86.
Remediation Plans
Management is actively remediating the identified material weakness, and has identified the following remediation steps:

Enhance risk assessment processes and monitoring activities to ensure the Company designs, implements, and operates effective controls that are responsive to identified risks.


Implementation of controls to validate key inputs and calculations used in spreadsheets used to determine financial statement amounts and disclosures.

Implementation of controls to identify and clear unmatched transactions in suspense accounts.

Implementation of monitoring controls to be operated by a centralized resource to ensure periodic counts of inventory and fixed assets are completed and differences are timely processed by our accounting systems.

Enhance controls surrounding the timely and accurate recognition of fixed asset disposals and abandonments.

Changes in Internal Control overOver Financial Reporting

Except for the identification of the material weaknesses described above, there haveThere has been no changes in internal control over financial reportingchange during the fourth quarter of 2017ended December 31, 2023 that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

74



Report of Independent Registered Public Accounting Firm

To the stockholdersStockholders and boardBoard of directorsDirectors
BioScrip,Option Care Health, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited BioScrip,Option Care Health, Inc. and subsidiaries’subsidiaries' (the “Company”)Company) internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the consolidated balance sheets of the Company as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations,comprehensive income, stockholders’ (deficit) equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2023, and the related notes and financial statement schedule (collectively, the consolidated financial statements), and our report dated March 26, 2018February 22, 2024 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to ineffective continuous risk assessment process and monitoring activities; and ineffective process level controls regarding the accuracy of certain spreadsheet formulas and data inputs, the accuracy of certain suspense accounts, the accuracy of physical inventory count differences, the accuracy of fixed asset CIP transfers, and the completeness and accuracy of fixed asset disposals. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2017 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Annual Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ KPMG LLP

Chicago, Illinois

February 22, 2024
Denver, Colorado
75
March 26, 2018






Item 9B.Other Information

Item 9B.    Other Information
None.The Company previously announced the adoption of the Option Care Health, Inc. Executive Severance Plan (the “Severance Plan”), which provides severance benefits to certain key management personnel of the Company, including the Company’s Chief Executive Officer and Chief Financial Officer. As a result of their participation in the Severance Plan, our Chief Executive Officer and Chief Financial Officer entered into letter agreements on February 21, 2024 with the Company agreeing that they would no longer be eligible for the severance benefits in their employment agreements.
Adoption, Modification and Termination of Rule 10b5-1 Plans and Certain Other Trading Arrangements

No director or officer of the Company has adopted, modified or terminated a Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2023.
Item 9C.    Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10.Directors, Executive Officers and Corporate Governance

Item 10.    Directors, Executive Officers and Corporate Governance
We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive, principal financial and principal accounting officers, or persons performing similar functions. Our Code of Ethics is posted on our website located at http:https://www.bioscrip.com/corporate-governance.investors.optioncarehealth.com/corporate-governance/governance-resources. We intend to disclose future amendments to certain provisions of the Code of Ethics,Business Conduct, and waivers of the Code of EthicsBusiness Conduct granted to executive officers and directors.

directors, on our website.
The other information required by this item is incorporated by reference from the information contained in our definitive proxy statement to be filed with the SEC on or before April 30, 2018no later than 120 days after December 31, 2023 in connection with our 20182024 Annual Meeting of Stockholders.
Item 11.Executive Compensation

Item 11.    Executive Compensation
The information required by this item is incorporated by reference from the information contained in our definitive proxy statement to be filed with the SEC on or before April 30, 2018no later than 120 days after December 31, 2023 in connection with our 20182024 Annual Meeting of Stockholders.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference from the information contained in our definitive proxy statement to be filed with the SEC on or before April 30, 2018no later than 120 days after December 31, 2023 in connection with our 20182024 Annual Meeting of Stockholders.
Item 13.Certain Relationships and Related Transactions, and Director Independence

Item 13.    Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the information contained in our definitive proxy statement to be filed with the SEC on or before April 30, 2018no later than 120 days after December 31, 2023 in connection with our 20182024 Annual Meeting of Stockholders.
Item 14.Principal Accountant Fees and Services

Item 14.    Principal Accountant Fees and Services
The information required by this item is incorporated by reference from the information contained in our definitive proxy statement to be filed with the SEC on or before April 30, 2018no later than 120 days after December 31, 2023 in connection with our 20182024 Annual Meeting of Stockholders.

76
PART IV
Item 15.Exhibits, Financial Statement Schedules
(a). The following financial statements appear in Item 8 of this Form 10-K:
15.Exhibits and Financial Statement Schedules
Page
(a)(1) Financial Statements.
The following financial statements appear in Part II, Item 8:Page
1. Financial Statements:
Report of Independent Registered Public Accounting Firm (KPMG LLP, Chicago, IL, Auditor Firm ID: 185)
5043
Consolidated Balance Sheets as of December 31, 20172023 and 20162022
5145
Consolidated Statements of OperationsComprehensive Income for the years ended December 31, 2017, 2016,2023, 2022 and 20152021
5246
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2017, 2016, and 2015
53
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016,2023, 2022 and 20152021
5447
Notes to
Consolidated Financial Statements
55
2. Financial Statement Schedule:
Valuation and Qualifying Accounts of Stockholders’ Equity for the years ended December 31, 2017, 2016,2023, 2022 and 20152021
9248
Notes to Consolidated Financial Statements
49
All other schedules not listed above have been omitted since they are not applicable or are not required.
(a)(3) Exhibits.
Index to Exhibits
Exhibit Number Description
  2.1+
2.2
2.3
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8

77
All other schedules not listed above have been omitted since they are not applicable or are not required.
Table of Contents

Item 16. Summary
None

4.9
4.10
3.4.11among BioScrip, Inc. and HC Group Holdings I, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 7, 2019).
See Index10.1
  10.2†
10.3
10.4
10.5†
10.6
10.7
10.8
10.9
10.10
10.11
10.12†
10.13
10.14†
10.15†
10.16†
21.1
23.1
31.1
31.2
32.1
78
Table of Contents

32.2
97
101The following financial information from the Company’s Form 10-K for the fiscal year ended December 31, 2023, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Comprehensive Income (Loss) for the fiscal years ended December 31, 2023, 2022 and 2021, (ii) Consolidated Balance Sheets as of December 31, 2023 and 2022, (iii) Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 31, 2023, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2023, 2022 and 2021, and (v) Notes to Consolidated Financial Statements.
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104XBRL Formatted Cover Page
†Designates the Company’s management contracts or compensatory plan or arrangement.
+Certain schedules attached to the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of the omitted schedules to the Securities and Exchange Commission upon request by the Commission.
Item 16.    Form 10-K Summary
None.
79
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on March 26, 2018.

February 22, 2024.
                                                          OPTION CARE HEALTH, INC.
                                                          BIOSCRIP, INC.
/s/ Alex Schott /s/ Michael Shapiro
Alex SchottMichael Shapiro
Senior
Chief Financial Officer and Executive Vice President Strategic Operations (Acting
(Principal AccountingFinancial Officer and Duly Authorized Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


SignatureTitle(s)
SignatureTitle(s)Date
/s/ Daniel E. GreenleafJohn C. Rademacher
Daniel E. GreenleafJohn C. Rademacher
Chief Executive Officer, President and Director

 (Principal Executive Officer)
March 26, 2018February 22, 2024
/s/ Stephen Deitsch
Stephen DeitschMichael Shapiro
Michael Shapiro
Chief Financial Officer and Treasurer
(Executive Vice President
 (Principal Financial Officer and Principal FinancialAccounting Officer)
March 26, 2018February 22, 2024
/s/ Alex SchottHarry M. Jansen Kraemer, Jr.
Alex SchottHarry M. Jansen Kraemer, Jr.
Senior Vice President, Strategic Operations
(Acting Principal Accounting Officer)
Non-Executive Chairman of the Board		March 26, 2018February 22, 2024
/s/ John J. Arlotta
John J. Arlotta
DirectorFebruary 22, 2024
/s/ Elizabeth Q. Betten
Elizabeth Q. Betten
DirectorFebruary 22, 2024
/s/ Elizabeth D. Bierbower
Elizabeth D. Bierbower
DirectorFebruary 22, 2024
/s/ Barbara W. Bodem
Barbara W. Bodem
DirectorFebruary 22, 2024
/s/ Natasha Deckmann
Natasha Deckmann
DirectorFebruary 22, 2024
/s/ David W. Golding
David W. Golding
DirectorFebruary 22, 2024
/s/ R. Carter Pate
R. Carter Pate
Non-Executive Chairman of the BoardDirectorMarch 26, 2018February 22, 2024
/s/ David GoldingTimothy P. Sullivan
David GoldingTimothy P. Sullivan
DirectorMarch 26, 2018February 22, 2024
/s/ Michael GoldsteinNorman L. Wright
Michael GoldsteinNorman L. Wright
DirectorMarch 26, 2018
/s/ Tricia Huong Thi Nguyen
Tricia Huong Thi Nguyen
DirectorMarch 26, 2018
/s/ Christopher Shackelton
Christopher Shackelton
DirectorMarch 26, 2018
/s/ Michael G. Bronfein
Michael G. Bronfein
DirectorMarch 26, 2018
/s/ Steven Neumann
Steven Neumann
DirectorMarch 26, 2018February 22, 2024

Bioscrip, Inc. and Subsidiaries
Schedule II-- Valuation and Qualifying Accounts
(in thousands)

80
 
Balance at
Beginning of
Period
 
Write-Off
of
Receivables
 
Charged to
Costs
and Expenses
 
Balance at
End of Period
Year ended December 31, 2015       
Allowance for doubtful accounts$66,405
 $(49,160) $42,444
 $59,689
Year ended December 31, 2016 
  
  
  
Allowance for doubtful accounts$59,689
 $(41,567) $26,608
 $44,730
Year ended December 31, 2017 
  
  
  
Allowance for doubtful accounts$44,730
 $(30,515) $23,697
 $37,912

(Exhibits being filed with this Annual Report on Form 10-K)
Index to Exhibits
Exhibit NumberDescription
2.1**
Agreement and Plan of Merger, dated as of January 24, 2010, by and among BioScrip, Inc. (the “Company”), and the parties set forth on the signature page (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on January 27, 2010)
2.2**
Stock Purchase Agreement, dated as of December 12, 2012, by and among HomeChoice Partners, Inc., DaVita HealthCare Partners Inc., Mary Ann Cope, R.Ph., Kathy F. Puglise, RN, CRNI, Joseph W. Boyd, R.Ph., Barbara J. Exum, PharmD and the Company.  (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on February 4, 2013)
2.3**
Asset Purchase Agreement, dated as of June 16, 2013, among the Company, CarePoint Partners Holdings LLC (“CarePoint”), the direct and indirect subsidiaries of CarePoint, and the members of CarePoint. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on June 18, 2013)
2.4**
Stock Purchase Agreement, dated as of February 1, 2014, by and among Elk Valley Professional Affiliates, Inc., South Mississippi Home Health, Inc., Deaconess Homecare, LLC, and the Buyers identified on the signature pages thereto, the Company and LHC Group, Inc. (the “Stock Purchase Agreement”). (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on February 3, 2014)
2.5**
Amendment, dated as of March 31, 2014, to the Stock Purchase Agreement. (Incorporated by reference to Exhibit 2.2 to the Company's Form 8-K filed on April 1, 2014)
2.6
Asset Purchase Agreement, dated August 9, 2015, by and among the Company, BioScrip PBM Services, LLC and ProCare Pharmacy Benefit Manager Inc. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 10, 2015)
2.7
Asset Purchase Agreement, dated June 11, 2016, by and among HS Infusion Holdings, Inc., the direct and indirect subsidiaries of HS Infusion Holdings, Inc. set forth on the signature pages, the Company and HomeChoice Partners, Inc. (the “Home Solutions Agreement”). (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on June 13, 2016)
2.8
First Amendment, dated June 16, 2016, to the Home Solutions Agreement. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K/A filed on June 20, 2016)
2.9
Second Amendment, dated September 2, 2016, to the Home Solutions Agreement. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on September 7, 2016)
2.10
Third Amendment, dated September 9, 2016, to the Home Solutions Agreement. (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on September 12, 2016)
3.1
Second Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 17, 2005)
3.2
Amendment to the Second Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on June 10, 2010)
3.3
Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of Bioscrip, Inc. dated November 30, 2016. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on December 2, 2016)
3.4
Certificate of Designations for Series A Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on March 10, 2015)
3.5
Amended and Restated By-Laws. (Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on April 28, 2011)
3.6
Certificate of Designations for Series B Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on June 13, 2016)
3.7
Certificate of Designations for Series C Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on June 14, 2016)

3.8
Certificate of Designations, Preferences, and Rights for Series D Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on August 12, 2016)
4.1
Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K filed on March 31, 2006)
4.2
Warrant Agreement, dated as of March 25, 2010, by and among the Company, the Kohlberg Entities, Robert Cucuel, Mary Jane Graves, Nitin Patel, Joey Ryan, Colleen Lederer, the Blackstone Entities and S.A.C. (Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed on March 31, 2010)
4.3
Form of Cash-Only Stock Appreciation Right Agreement. (Incorporated by reference to Exhibit 10.40 to the Company’s Form 10-K filed on March 16, 2011)
4.4
Indenture, dated as of February 11, 2014, by and among the Company, the Guarantors party thereto and U.S. Bank National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on February 11, 2014)
4.5
Specimen of 8.875% Notes due 2021 (included in Exhibit 4.4)
4.6
Registration Rights Agreement, dated as of March 9, 2015, by and among the Company, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P., and Blackwell Partners, LLC, Series A. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 10, 2015)
4.7
Amendment No. 1 to the Registration Rights Agreement dated June 10, 2016, by and among the Company, Coliseum Capital Partners, L.P., Coliseum Capital Partners II, L.P. and Blackwell Partners, LLC Series A. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on June 13, 2016)
4.8
Amendment No. 2 to the Registration Rights Agreement dated June 14, 2016, by and among the Company and the PIPE Investors. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on June 14, 2016)
4.9
Form of Subscription Rights Certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3/A filed on May 29, 2015)
4.10
Form of Certificate Representing Series A Convertible Preferred Stock. (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-3 filed on March 10, 2015)
4.11
Common Stock Warrant Agreement, dated July 28, 2015, by and between the Company and the American Stock Transfer & Trust Company, LLC. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on July 28, 2015)
4.12
Tax Asset Protection Plan dated as of August 11, 2016, by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent, which includes as Exhibit B the Form of Rights Certificate. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on August 12, 2016)
4.13
Form of Certificate Representing Series C Convertible Preferred Stock. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on June 14, 2016)
4.14
Registration Rights Agreement, dated March 1, 2017, by and among the Company and the investors named therein. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 2, 2017)
4.15
Registration Rights Agreement, dated June 29, 2017, by and among the Company and the parties signatory thereto (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
4.16
Warrant Agreement, dated June 29, 2017, by and among the Company and the subscribers signatory thereto (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
10.1†
MIM Corporation Amended and Restated 2001 Incentive Stock Plan. (Incorporated by reference to the definitive proxy statement filed on April 30, 2003)
10.2†
Amendment to BioScrip, Inc. 2001 Incentive Stock Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 10, 2011)
10.3†
Amended and Restated BioScrip, Inc. 2008 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 14, 2014)
10.4†
Amendment to BioScrip, Inc. Amended and Restated 2008 Equity Incentive Plan, dated June 1, 2016. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 2, 2016)

10.5†
Second Amendment to Bioscrip, Inc. 2008 Equity Incentive Plan dated November 28, 2016. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 2, 2016)
10.6†
BIOSCRIP/CHS 2006 Equity Incentive Plan, as Amended and Restated. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on May 2, 2011)
10.7†
Amendment One to the Stock Grant Certificate under the BioScrip/CHS 2006 Equity Incentive Plan from the Company to Brian Stiver, dated September 8, 2016.(Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on September 12, 2016)
10.8†
Employee Stock Purchase Plan. (Incorporated by reference to the definitive proxy statement filed on April 2, 2013)
10.9†
First Amendment to Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on August 10, 2015)
10.10†
Form of Restricted Stock Grant Certificate. (Incorporated by reference to Exhibit 99.3 to the Company's Registration Statement on Form S-8 filed on filed on May 16, 2008)
10.11†
Form of Non-Qualified Stock Option Agreement 2008 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K filed on March 2, 2015)
10.12†
Form of Amendment One to Non-Qualified Stock Option Agreement 2008 Equity Incentive Plan (entered with Messrs. Kreger, Evans and Stiver). (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 12, 2016)
10.13†
Form of Market-Based Cash Award Agreement. (Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed on August 10, 2015)
10.14†
Employment Offer Letter, dated January 30, 2009, by and between the Company and David Evans. (Incorporated by reference to Exhibit 10.23 to the Company’s Form 10-K/A filed on December 16, 2013)
10.15†
Amended and Restated Employment Agreement, dated as of November 25, 2013, by and between the Company and Richard M. Smith. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 27, 2013)
10.16†
First Amendment to Amended and Restated Employment Agreement, dated September 9, 2016, between Richard M. Smith and the Company. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 12, 2016)
10.17†
Employment Offer Letter, dated March 10, 2009, by and between the Company and Brian Stiver. (Incorporated by reference to Exhibit 10.24 to the Company’s Form 10-K/A filed on June 6, 2014)
10.18†
Employment Offer Letter, dated July 30, 2012, by and between the Company and Brian Stiver. (Incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K/A filed on June 6, 2014)
10.19†
Amendment, dated April 2, 2015, to the Employment Offer Letter by and between the Company and Brian Stiver. (Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q filed on May 8, 2015)
10.20†
Employment Offer Letter, dated December 1, 2013, by and between the Company and Karen Cain. (Incorporated by reference to Exhibit 10.17 to the Company’s Form 10-K filed on March 2, 2015)
10.21†
Employment Offer Letter, dated as of April 26, 2015, by and between the Company and Jeffrey M. Kreger. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 28, 2015)
10.22†
Offer Letter, dated as of April 10, 2017, by and between BioScrip, Inc. and Stephen M. Deitsch. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 20, 2017)
10.23†
Offer Letter, dated as of November 21, 2017, by and between BioScrip, Inc. and Harriet Booker. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 28, 2017)
10.24†
Offer Letter, dated as of November 29, 2017, by and between BioScrip, Inc. and Anthony “Tony” Lopez. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed December 1, 2017)
10.25
Form of Indemnification Agreement. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 14, 2013)

10.26
Credit Agreement, dated July 31, 2013, 10.210. and among the Company, the several banks and other financial institutions and lenders from time to time party thereto, and SunTrust Bank, in its capacity as administrative agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 1, 2013)
10.27
First Amendment to Credit Agreement, dated as of December 23, 2013, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed on February 3, 2014)
10.28
Second Amendment to Credit Agreement, dated as of January 31, 2014, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 3, 2014)
10.29
Third Amendment to Credit Agreement, dated as of March 1, 2015, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 2, 2015)
10.30
Fourth Amendment to Credit Agreement, dated as of August 6, 2015, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 10, 2015)
10.31
Fifth Amendment to Credit Agreement, dated as of October 9, 2015, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 15, 2015)
10.32
Sixth Amendment to Credit Agreement, dated as of January 6, 2017, by and among the Company, each of the Subsidiaries of the Company identified on the signature pages thereto, the Lenders party thereto, and the Administrative Agent. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 9, 2017)
10.33
Priming Credit Agreement dated as of January 6, 2017 among the Company as borrower, the Lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 9, 2017)
10.34
Guaranty and Security Agreement, dated July 31, 2013, made by the Company and the Guarantors identified on the signature pages thereto, in favor of the Administrative Agent. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 1, 2013
10.35#
Prime Vendor Agreement dated as of July 1, 2009, between AmerisourceBergen Drug Corporation, the Company and the other parties thereto (the “Prime Vendor Agreement”). (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q/A filed on December 2, 2009)
10.36
First Amendment, dated as of March 25, 2010, to the Prime Vendor Agreement. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on March 31, 2010)
10.37#
Second Amendment, dated as of June 1, 2010 to the Prime Vendor Agreement. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 3, 2010)
10.38#
Third Amendment, dated as of August 1, 2010, to the Prime Vendor Agreement. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 2, 2011)
10.39#
Fourth Amendment, dated as of May 1, 2011, to the Prime Vendor Agreement. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 2, 2011)
10.40#
Fifth Amendment, dated as of January 1, 2012, to the Prime Vendor Agreement. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 26, 2012)
10.41
Stockholders’ Agreement, dated as of January 24, 2010, by and among the Company, the Kohlberg Entities, Robert Cucuel, Mary Jane Graves, Nitin Patel, Joey Ryan, Colleen Lederer, the Blackstone Entities and S.A.C. (the “Stockholders’ Agreement”). (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 27, 2010)

10.42
Amendment No. 1 to the Stockholders’ Agreement, dated as of March 8, 2013, by and between the Company and Kohlberg Investors. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on May 9, 2013)
10.43
Amendment No. 2 to the Stockholders’ Agreement, dated as of March 14, 2013, by and between the Company and Kohlberg Investors. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on May 9, 2013)
10.44
Amendment No. 3 & Waiver to the Stockholders’ Agreement, dated as of August 13, 2013, by and between the Company and Kohlberg Investors. (Incorporated by reference to Exhibit 1.2 to the Company’s Form 8-K filed on August 19, 2013)
10.45
Amendment No. 4 & Waiver to the Stockholders’ Agreement, dated as of March 26, 2014, by and between the Company and Kohlberg Investors. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 1, 2014)
10.46
Indemnification Agreement, dated as of April 3, 2013, by and among the Company and the Kohlberg Entities, Robert Cucuel, Mary Jane Graves, Nitin Patel, Joey Ryan, Colleen Lederer, the Blackstone Entities and S.A.C. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 5, 2013)
10.47
Stipulation and Order of Settlement and Dismissal, effective January 8, 2014, by and among the Company, the United States of America, acting through the U.S. Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, and relator David Kester. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 8, 2014)
10.48
Investor Agreement, dated as of February 6, 2015, by and among the Company, Cloud Gate Capital LLC and DSC Advisors, LLC. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 9, 2015)
10.49
Securities Purchase Agreement, dated as of March 9, 2015, by and among the Company and the PIPE Investors. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 10, 2015)
10.50
Warrant Agreement, dated as of March 9, 2015, by and among the Company and the PIPE Investors. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on March 10, 2015)
10.51
Addendum to the Warrant Agreement, dated as of March 23, 2015, by and among the Company and the PIPE Investors. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K/A filed on March 24, 2015)
10.52
Exchange Agreement, dated as of June 10, 2016, entered into by and among the Company and each of the PIPE Investors signatory thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 13, 2016)
10.53
Exchange Agreement, dated as of June 14, 2016, entered into by and among the Company and each of the PIPE Investors signatory thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 14, 2016)
10.54
Memorandum of Understanding, dated as of April 30, 2015, by and among the Company and the parties to In re Bioscrip, Inc. Stockholder Litigation. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 1, 2015)
10.55
Employment Agreement, dated October 31, 2016, by and between the Company and Daniel E. Greenleaf. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 3, 2016)
10.56
Stock Purchase Agreement, dated March 1, 2017, by and among the Company and the investors named therein. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 2, 2017)
10.57
First Lien Note Purchase Agreement, dated as of June 29, 2017, by and among the Company, the financial institutions and note purchasers from time to time party thereto, and Wells Fargo Bank, National Association, as Collateral Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
10.58
First Lien Guaranty and Security Agreement, dated as of June 29, 2017, by and the Company, the subsidiaries of the Company signatory thereto and Wells Fargo Bank, National Association as Collateral Agent (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 29, 2017)

10.59
Second Lien Note Purchase Agreement, dated as of June 29, 2017, by and among the Company, the financial institutions and note purchasers from time to time party thereto, and Wells Fargo Bank, National Association as Collateral Agent (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
10.60
Second Lien Guaranty and Security Agreement, dated as of June 29, 2017, by and the Company, the subsidiaries of the Company signatory thereto and Wells Fargo Bank, National Association as Collateral Agent (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
10.61
Warrant Purchase Agreement, dated as of June 29, 2017, by and among the Company and the subscribers signatory thereto (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
10.62
Stock Purchase Agreement, dated as of June 29, 2017, by and among the Company and the purchaser signatory thereto (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on June 29, 2017)
21.1 *
List of Subsidiaries of the Company.
23.1 *
Consent of Independent Registered Public Accounting Firm.
31.1 *
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) promulgated under the Exchange Act.
31.2 *
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Exchange Act.
32.1 *
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following financial information from the Company’s Form 10-K for the fiscal year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the fiscal years ended December 31, 2016, 2015 and 2014, (ii) Consolidated Balance Sheets as of December 31, 2016 and 2015, (iii) Consolidated Statements of Stockholders’ Equity for the fiscal years ended December 31, 2016, 2015 and 2014, (iv) Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2016, 2015 and 2014, and (v) Notes to Consolidated Financial Statements.

*Filed herewith.
**Pursuant to Item 601(b)(2) of Regulation S-K, certain schedules and exhibits are omitted from some exhibits. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission (the “SEC”) upon request.
†Designates the Company’s management contracts or compensatory plan or arrangement.
#The SEC has granted confidential treatment of certain provisions of these exhibits. Omitted material for which confidential treatment has been granted has been filed separately with the SEC.








98