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.
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
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, | | |
| 2023 | | 2022 | | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | $ | 343,849 | | | $ | 294,186 | | | |
Accounts receivable, net | 377,658 | | | 377,542 | | | |
Inventories | 274,004 | | | 224,281 | | | |
Prepaid expenses and other current assets | 98,744 | | | 98,330 | | | |
Total current assets | 1,094,255 | | | 994,339 | | | |
| | | | | |
NONCURRENT ASSETS: | | | | | |
Property and equipment, net | 120,630 | | | 108,321 | | | |
Operating lease right-of-use asset | 84,159 | | | 72,424 | | | |
Intangible assets, net | 20,092 | | | 22,371 | | | |
Referral sources, net | 315,304 | | | 341,744 | | | |
Goodwill | 1,540,246 | | | 1,533,424 | | | |
Other noncurrent assets | 42,349 | | | 40,313 | | | |
Total noncurrent assets | 2,122,780 | | | 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 benefits | 92,508 | | | 76,906 | | | |
Accrued expenses and other current liabilities | 75,010 | | | 84,302 | | | |
Current portion of operating lease liability | 18,278 | | | 19,380 | | | |
Current portion of long-term debt | 6,000 | | | 6,000 | | | |
Total current liabilities | 618,309 | | | 565,351 | | | |
| | | | | |
NONCURRENT LIABILITIES: | | | | | |
Long-term debt, net of discount, deferred financing costs and current portion | 1,056,650 | | | 1,058,204 | | | |
Operating lease liability, net of current portion | 85,484 | | | 71,441 | | | |
Deferred income taxes | 34,920 | | | 22,154 | | | |
Other noncurrent liabilities | — | | | 9,683 | | | |
Total noncurrent liabilities | 1,177,054 | | | 1,161,482 | | | |
Total liabilities | 1,795,363 | | | 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 capital | 1,204,270 | | | 1,176,906 | | | |
Retained earnings | 457,513 | | | 190,423 | | | |
Accumulated other comprehensive income | 14,978 | | | 21,159 | | | |
Total stockholders’ equity | 1,421,672 | | | 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.
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 39,457 |
| | $ | 9,569 |
|
Restricted cash | 4,950 |
| | — |
|
Receivables, less allowance for doubtful accounts of $37,912 and $44,730 at December 31, 2017 and 2016, respectively | 85,522 |
| | 109,086 |
|
Inventory | 38,044 |
| | 36,165 |
|
Deferred taxes | 1,098 |
| | — |
|
Prepaid expenses and other current assets | 18,620 |
| | 18,507 |
|
Total current assets | 187,691 |
| | 173,327 |
|
Property and equipment, net | 26,973 |
| | 32,678 |
|
Goodwill | 367,198 |
| | 365,947 |
|
Intangible assets, net | 19,114 |
| | 31,043 |
|
Other non-current assets | 2,116 |
| | 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 payable | 65,963 |
| | 64,420 |
|
Amounts due to plan sponsors | 4,621 |
| | 3,679 |
|
Accrued interest | 6,706 |
| | 6,705 |
|
Accrued expenses and other current liabilities | 26,118 |
| | 36,822 |
|
Total current liabilities | 105,130 |
| | 130,147 |
|
Long-term debt, net of current portion | 478,866 |
| | 433,413 |
|
Deferred taxes | — |
| | 2,281 |
|
Other non-current liabilities | 21,769 |
| | 763 |
|
Total liabilities | 605,765 |
| | 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, respectively | 2,827 |
| | 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, respectively | 13 |
| | 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 capital | 624,762 |
| | 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, | | |
| 2023 | | 2022 | | 2021 | | | | |
NET REVENUE | $ | 4,302,324 | | | $ | 3,944,735 | | | $ | 3,438,640 | | | | | |
COST OF REVENUE | 3,321,101 | | | 3,077,817 | | | 2,659,034 | | | | | |
GROSS PROFIT | 981,223 | | | 866,918 | | | 779,606 | | | | | |
| | | | | | | | | |
OPERATING COSTS AND EXPENSES: | | | | | | | | | |
Selling, general and administrative expenses | 607,427 | | | 566,122 | | | 525,707 | | | | | |
Depreciation and amortization expense | 59,201 | | | 60,565 | | | 63,058 | | | | | |
Total operating expenses | 666,628 | | | 626,687 | | | 588,765 | | | | | |
OPERATING INCOME | 314,595 | | | 240,231 | | | 190,841 | | | | | |
| | | | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | |
Interest expense, net | (51,248) | | | (53,806) | | | (67,003) | | | | | |
Equity in earnings of joint ventures | 5,530 | | | 5,125 | | | 6,030 | | | | | |
Other, net | 89,865 | | | 14,218 | | | (13,374) | | | | | |
Total other income (expense) | 44,147 | | | (34,463) | | | (74,347) | | | | | |
| | | | | | | | | |
INCOME BEFORE INCOME TAXES | 358,742 | | | 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, basic | 178,973 | | | 181,105 | | | 179,855 | | | | | |
Weighted average common shares outstanding, diluted | 180,375 | | | 182,075 | | | 181,205 | | | | | |
The accompanying notes to consolidated financial statements are an integral part of these statements.
|
| | | | | | | | | | | |
| 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 profit | 269,242 |
| | 262,082 |
| | 259,952 |
|
| | | | | |
Other operating expenses | 163,273 |
| | 169,781 |
| | 165,328 |
|
Bad debt expense | 23,697 |
| | 26,608 |
| | 42,444 |
|
General and administrative expenses | 39,625 |
| | 38,798 |
| | 42,474 |
|
Change in fair value of equity linked liabilities | 3,587 |
| | (10,450 | ) | | — |
|
Impairment of goodwill | — |
| | — |
| | 251,850 |
|
Restructuring, acquisition, integration, and other expenses, net | 12,662 |
| | 15,859 |
| | 24,405 |
|
Depreciation and amortization expense | 27,725 |
| | 22,025 |
| | 22,864 |
|
Interest expense | 52,072 |
| | 37,572 |
| | 36,938 |
|
Loss on extinguishment of debt | 13,453 |
| | — |
| | — |
|
Loss (gain) on dispositions | 581 |
| | (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 diluted | 123,791 |
| | 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, |
| 2023 | | 2022 | | 2021 |
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 expense | 62,200 | | | 65,434 | | | 68,804 | |
Non-cash operating lease costs | 18,533 | | | 19,713 | | | 15,168 | |
Deferred income taxes - net | 12,766 | | | 49,187 | | | (30,372) | |
(Gain)/loss on sale of assets | — | | | (9,403) | | | 767 | |
Loss on extinguishment of debt | — | | | — | | | 13,387 | |
Amortization of deferred financing costs | 4,446 | | | 4,304 | | | 4,998 | |
Equity in earnings of joint ventures | (5,530) | | | (5,125) | | | (6,030) | |
Stock-based incentive compensation expense | 30,479 | | | 16,783 | | | 9,575 | |
Capital distribution from equity method investments | 4,000 | | | 5,875 | | | 2,900 | |
Other adjustments | (1,244) | | | — | | | 844 | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable, net | 224 | | | (36,889) | | | (4,273) | |
Inventories | (51,000) | | | (41,010) | | | (22,700) | |
Prepaid expenses and other current assets | (6,290) | | | (16,798) | | | 1,420 | |
Accounts payable | 47,703 | | | 98,885 | | | (10,381) | |
Accrued compensation and employee benefits | 15,546 | | | (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 activities | 371,295 | | | 267,547 | | | 208,569 | |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
Acquisition of property and equipment | (41,866) | | | (35,358) | | | (25,632) | |
Proceeds from sale of assets | 3,743 | | | 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 EQUIVALENTS | 49,663 | | | 174,763 | | | 20,158 | |
Cash and cash equivalents - beginning of the period | 294,186 | | | 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.
|
| | | | | | | | | | | |
| 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 amortization | 27,725 |
| | 22,025 |
| | 22,864 |
|
Impairment of goodwill | — |
| | — |
| | 251,850 |
|
Amortization of deferred financing costs and debt discount | 6,998 |
| | 4,042 |
| | 3,440 |
|
Change in fair value of contingent consideration | — |
| | (4,597 | ) | | (30 | ) |
Change in fair value of equity linked liabilities | 3,587 |
| | (10,450 | ) | | — |
|
Change in deferred income tax | (3,379 | ) | | 2,045 |
| | (20,089 | ) |
Compensation under stock-based compensation plans | 2,360 |
| | 1,801 |
| | 4,513 |
|
Loss (gain) on dispositions | 581 |
| | (3,954 | ) | | — |
|
Loss on extinguishment of debt | 13,453 |
| | — |
| | — |
|
Changes in assets and liabilities, net of acquired businesses: | | | |
| | |
|
Receivables, net of bad debt expense | 23,564 |
| | (2,219 | ) | | 18,760 |
|
Inventory | (2,544 | ) | | 10,016 |
| | (5,769 | ) |
Prepaid expenses and other assets | (239 | ) | | (893 | ) | | (734 | ) |
Accounts payable | 689 |
| | (15,977 | ) | | (23,381 | ) |
Amounts due to plan sponsors | 942 |
| | 308 |
| | (1,377 | ) |
Accrued interest | 1 |
| | (192 | ) | | 45 |
|
Accrued expenses and other liabilities | (4,805 | ) | | (1,305 | ) | | (8,020 | ) |
Net cash provided by (used in) operating activities from continuing operations | 5,630 |
| | (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, net | 20,777 |
| | 83,267 |
| | — |
|
Proceeds from issuance of convertible preferred stock and warrants, net of issuance costs | — |
| | — |
| | 59,691 |
|
Proceeds from priming credit agreement, net | 23,060 |
| |
|
| | — |
|
Deferred and other financing costs | (980 | ) | | — |
| | (2,630 | ) |
Borrowings on revolving credit facility | 563 |
| | 104,300 |
| | 203,663 |
|
Repayments on revolving credit facility | (55,863 | ) | | (64,000 | ) | | (193,663 | ) |
Borrowing of long-term debt | 294,446 |
| | — |
| | — |
|
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 plans | 120 |
| | (202 | ) | | (108 | ) |
Net cash provided by financing activities | 44,281 |
| | 109,742 |
| | 66,558 |
|
Net change in cash and cash equivalents | 29,888 |
| | (6,008 | ) | | 14,837 |
|
Cash and cash equivalents - beginning of period | 9,569 |
| | 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 Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained 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.
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 profit | 265,631 |
| | (3,549 | ) | | 262,082 |
| | 260,915 |
| | (963 | ) | | 259,952 |
|
Total Operating Expenses | 263,702 |
| | (1,081 | ) | | 262,621 |
| | 548,562 |
| | 803 |
| | 549,365 |
|
Interest expense | 38,235 |
| | (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 Reported | Corrections | As Revised |
Total assets | $ | 607,740 |
| $ | (2,755 | ) | $ | 604,985 |
|
Total liabilities | 567,301 |
| (697 | ) | 566,604 |
|
Additional paid-in capital | 611,844 |
| (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.
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.
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.
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.
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.
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.
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 assets | 5,449 | |
Other assets | 394 | |
Accounts payable and other liabilities | (434) | |
Fair value identifiable assets and liabilities | 6,095 | |
Goodwill (1) | 21,323 | |
Cash acquired | 201 | |
Purchase price | 27,619 | |
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 assets | 25,580 | |
Other assets | 600 | |
Accrued compensation | (1,115) | |
Accounts payable and other liabilities | (1,168) | |
Fair value identifiable assets and liabilities | 26,200 | |
Goodwill (1) | 33,746 | |
Cash acquired | 661 | |
Purchase price | 60,607 | |
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.
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 assets | 25,400 | |
Accounts payable and other assumed liabilities | (539) | |
Fair value identifiable assets and liabilities | 27,080 | |
Goodwill (1) | 32,524 | |
Cash acquired | 1,426 | |
Purchase price | 61,030 | |
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, |
| 2023 | | 2022 | | 2021 |
Commercial payers | $ | 3,747,568 | | | $ | 3,421,888 | | | $ | 2,971,900 | |
Government payers | 500,891 | | | 477,818 | | | 417,088 | |
Patients | 53,865 | | | 45,029 | | | 49,652 | |
Net revenue | $ | 4,302,324 | | | $ | 3,944,735 | | | $ | 3,438,640 | |
5. EMPLOYEE BENEFIT PLANS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
| | |
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.
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, |
| 2023 | | 2022 | | 2021 |
U.S. federal income tax expense (benefit): | | | | | |
Current | $ | 56,474 | | | $ | 4,103 | | | $ | — | |
Deferred | 18,739 | | | 38,810 | | | (30,411) | |
| 75,213 | | | 42,913 | | | (30,411) | |
State income tax expense: | | | | | |
Current | 20,253 | | | 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, |
| 2023 | | 2022 | | 2021 |
U.S. federal statutory tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
State and local income taxes net of federal tax benefit | 4.8 | % | | 5.0 | % | | 4.9 | % |
Non-deductible expenses | 0.1 | % | | 0.2 | % | | 0.3 | % |
Valuation allowance | (1.5) | % | | 0.0 | % | | (46.2) | % |
Non-deductible and stock-based compensation | 0.7 | % | | 0.4 | % | | 0.0 | % |
Other, net | 0.4 | % | | 0.2 | % | | (0.1) | % |
Effective income tax rate | 25.5 | % | | 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.
The components of deferred income tax assets and liabilities were as follows as of December 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
Deferred tax assets: | | | |
Price concessions | $ | 5,365 | | | $ | 6,169 | |
Compensation and benefits | 7,609 | | | 5,517 | |
Interest limitation carryforward | 13,802 | | | 29,453 | |
Operating lease liability | 26,378 | | | 22,765 | |
Net operating losses | 56,980 | | | 62,027 | |
Other | 7,556 | | | 6,576 | |
Deferred tax assets before valuation allowance | 117,690 | | | 132,507 | |
Valuation allowance | (6,371) | | | (13,056) | |
Deferred tax assets net of valuation allowance | 111,319 | | | 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 | | 3 | years | - | 5 | years |
Office equipment | |
| | | 5 | years |
Vehicles | | 4 | years | - | 5 | years |
Medical equipment | | 13 | months | - | 5 | years |
Furniture and fixtures | |
| | | 5 | years |
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.
The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2023, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Additions | | |
Description | | Balance at Beginning of Period | | Charged (Benefit) to Costs and Expenses | | Charged (Benefit) to Other Accounts | | Balance 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 outstanding | 123,791 |
| | 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, |
| 2023 | | 2022 | | 2021 |
Warrants | — | | — | | 457,753 |
Stock option awards | 1,214,560 | | 629,690 | | 490,968 |
Restricted stock awards | 340,331 | | 205,652 | | 316,454 |
Performance stock unit awards | — | | — | | — |
The following table presents the Company’s basic earnings per share and shares outstanding (in thousands, except per share data):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
Numerator: | | | | | |
Net income (1) (2) (3) | $ | 267,090 | | | $ | 150,556 | | | $ | 139,898 | |
Denominator: | | | | | |
Weighted average number of common shares outstanding | 178,973 | | | 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 costs | 40 |
|
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 costs | 53 |
|
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, |
| 2023 | | 2022 | | 2021 |
Numerator: | | | | | |
Net income (1) (2) (3) | $ | 267,090 | | | $ | 150,556 | | | $ | 139,898 | |
Denominator: | | | | | |
Weighted average number of common shares outstanding | 178,973 | | | 181,105 | | | 179,855 | |
Effect of dilutive securities | 1,402 | | | 970 | | | 1,350 | |
Weighted average number of common shares outstanding, diluted | 180,375 | | | 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 C | 60,776 |
|
Accretion of discount related to issuance costs | 652 |
|
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 costs | 648 |
|
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.
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 | |
2025 | | 22,447 | |
2026 | | 19,567 | |
2027 | | 16,281 | |
2028 | | 10,980 | |
2029 and beyond | | 34,528 | |
Total lease payments | | 128,413 | |
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 closing | 9,938 |
|
Capital lease obligation assumed | 301 |
|
Fair value of contingent consideration | 15,400 |
|
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 |
|
Inventories | 3,199 |
|
Prepaids and other assets | 852 |
|
Total current assets | $ | 16,007 |
|
Property and equipment | 4,350 |
|
Goodwill | 58,468 |
|
Managed care contracts | 24,600 |
|
Licenses | 5,400 |
|
Trade name | 1,800 |
|
Non-compete agreements | 200 |
|
Other long-term assets | 891 |
|
Total assets | $ | 111,716 |
|
Accounts payable | 14,575 |
|
Accrued liabilities | 3,986 |
|
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.
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, 2023 | | December 31, 2022 |
Infusion pumps | $ | 36,943 | | | $ | 34,942 | |
Equipment, furniture and other | 23,593 | | | 31,929 | |
Leasehold improvements | 99,725 | | | 99,085 | |
Computer software, purchased and internally developed | 50,572 | | | 34,922 | |
Assets under development | 33,668 | | | 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, |
| 2023 | | 2022 | | 2021 |
Depreciation expense in cost of revenue | $ | 2,999 | | | $ | 4,869 | | | $ | 5,746 | |
Depreciation expense in operating expenses | 24,820 | | | 27,374 | | | 29,865 | |
Total depreciation expense | $ | 27,819 | | | $ | 32,243 | | | $ | 35,611 | |
|
| | | | | | | | | | | |
| 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 ASSETSGoodwill 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 | |
Acquisitions | | 48,954 | |
Balance at December 31, 2021 | | $ | 1,477,564 | |
Acquisitions | | 54,543 | |
Purchase accounting adjustments | | 1,317 | |
Balance at December 31, 2022 | | $ | 1,533,424 | |
Acquisitions | | 6,998 | |
Purchase accounting adjustments | | (176) | |
Balance at December 31, 2023 | | $ | 1,540,246 | |
|
| | | | | | | | | | | |
| 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, 2023 | | December 31, 2022 |
Gross intangible assets: | | | |
Referral sources | $ | 514,388 | | | $ | 509,646 | |
Trademarks/names | 39,136 | | | 38,508 | |
Other amortizable intangible assets | 995 | | | 912 | |
Total gross intangible assets | 554,519 | | | 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 | |
2025 | 34,176 | |
2026 | 34,071 | |
2027 | 33,931 | |
2028 | 33,881 | |
2029 and beyond | 164,951 | |
Total | $ | 335,396 | |
|
| | | | | | | | | | | |
| 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 Solutions | 57,218 |
|
Balance at December 31, 2016 | 365,947 |
|
Adjustments associated with the acquisition of Home Solutions | 1,251 |
|
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 Amount | | Discount | | Debt Issuance Costs | | Net Balance |
Revolver Facility | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
First Lien Term Loan | | 588,000 | | | (6,974) | | | (9,678) | | | 571,348 | |
Senior Notes | | 500,000 | | | — | | | (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 contracts | 25,000 |
| | (8,403 | ) | | 16,597 |
| | 24,700 |
| | (1,898 | ) | | 22,802 |
|
Licenses | 5,400 |
| | (3,681 | ) | | 1,719 |
| | 5,400 |
| | (906 | ) | | 4,494 |
|
Trade name | 1,800 |
| | (1,181 | ) | | 619 |
| | 1,800 |
| | (281 | ) | | 1,519 |
|
Non-compete agreements | 1,700 |
| | (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 | | 5 | months | - | 4 | years |
Managed care contracts | | | | | | 4 | years |
Licenses | | | | | | 2 | years |
Trade name | | | | | | 2 | years |
Non-compete agreements | | | 1 | year | - | 5 | years |
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 |
|
2019 | 6,218 |
|
2020 | 4,252 |
|
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 expenses | 528 |
| | 10,122 |
| | 1,740 |
|
Change in fair value of contingent consideration | — |
| | (4,597 | ) | | 30 |
|
Total restructuring, acquisition, integration, and other expenses, net | 12,662 |
| | 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 use | 17,470 |
| | 16,481 |
|
Vehicles | 2,379 |
| | 2,552 |
|
Medical equipment | 36,230 |
| | 32,086 |
|
Work in progress | 2,478 |
| | 4,370 |
|
Furniture and fixtures | 5,534 |
| | 5,319 |
|
Leasehold improvements | 19,809 |
| | 17,496 |
|
Property and equipment, gross | 115,271 |
| | 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 discount | 85,694 |
| | — |
|
2021 Notes, net of unamortized discount | 197,363 |
| | 196,670 |
|
Revolving Credit Facility | — |
| | 55,300 |
|
Term Loan Facilities | — |
| | 210,207 |
|
Capital leases | 2,863 |
| | 2,209 |
|
Less: Deferred financing costs | (3,656 | ) | | (12,452 | ) |
Total Debt | 480,588 |
| | 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 Amount | | Discount | | Debt Issuance Costs | | Net Balance |
ABL Facility | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
First Lien Term Loan | | 594,000 | | | (8,307) | | | (11,529) | | | 574,164 | |
Senior Notes | | 500,000 | | | — | | | (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 Level | | Total Net Leverage Ratio | | Applicable Rate for Term SOFR Loans | | Applicable Rate for Base Rate Loans |
I | | Greater than or equal to 3.00x | | 2.25% | | 1.25% |
II | | Less than 3.00x, but greater than or equal to 2.25x | | 2.00% | | 1.00% |
III | | Less than 2.25x, but greater than or equal to 1.50x | | 1.75% | | 0.75% |
IV | | Less than 1.50x, but greater than or equal to 1.00x | | 1.50% | | 0.50% |
V | | Less than 1.00x | | 1.25% | | 0.25% |
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.
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 | |
2025 | | 6,000 | |
2026 | | 6,000 | |
2027 | | 6,000 | |
2028 | | 564,000 | |
2029 and beyond | | 500,000 | |
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 Instrument | | Carrying Value as of December 31, 2023 | | Markets 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 Notes | | 491,302 | | | — | | | 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.
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 |
Derivative | | Balance Sheet Caption | | December 31, 2023 | | December 31, 2022 |
Interest rate cap designated as cash flows hedge | | Prepaid expenses and other current assets | | $ | 9,746 | | | $ | 10,926 | |
Interest rate cap designated as cash flows hedge | | Other noncurrent assets | | 10,183 | | | 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, |
Derivative | | 2023 | | 2022 | | 2021 |
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 Instrument | Carrying Value as of December 31, 2017 | Markets 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 Facility | 85,694 |
| — |
| — |
| 100,850 |
|
2017 Warrants | 20,495 |
| — |
| 20,495 |
| — |
|
2021 Notes | 197,363 |
| — |
| 183,561 |
| — |
|
Total | $ | 501,876 |
| $ | — |
| $ | 204,056 |
| $ | 301,428 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, |
Derivative | | Income Statement Caption | | 2023 | | 2022 | | 2021 |
Interest rate cap designated as cash flows hedge | | Interest expense | | $ | 10,974 | | | $ | 1,090 | | | $ | (239) | |
Interest rate swap designated as cash flows hedge | | Interest expense | | — | | | — | | | (11,298) | |
Interest rate swap not designated as hedge | | Interest 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.
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 |
|
2019 | 5,010 |
| | 754 |
| | 5,764 |
|
2020 | 3,688 |
| | 387 |
| | 4,075 |
|
2021 | 2,559 |
| | — |
| | 2,559 |
|
2022 | 1,829 |
| | — |
| | 1,829 |
|
2023 and Thereafter | 4,891 |
| | — |
| | 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 current | 751 |
| | 30 |
| | 76 |
|
Deferred | |
| | |
| | |
|
Federal | 1,951 |
| | (1,744 | ) | | 18,293 |
|
State | 1,428 |
| | (301 | ) | | 3,163 |
|
Total deferred | 3,379 |
| | (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 carryforwards | 110,773 |
| | 122,420 |
|
Goodwill and intangibles (tax deductible) | 12,757 |
| | 25,268 |
|
Accrued expenses | 95 |
| | 467 |
|
Property basis differences | 2,813 |
| | 2,578 |
|
Stock based compensation | 2,371 |
| | 6,887 |
|
Other | — |
| | 638 |
|
Total deferred tax assets | 139,516 |
| | 177,507 |
|
Deferred tax liabilities: | |
| | |
|
Other | (180 | ) | | — |
|
Less: valuation allowance | (138,238 | ) | | (179,788 | ) |
Net deferred tax asset | 1,098 |
| | (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 taxes | 4,587 |
| | 1,398 |
| | 8,414 |
|
Change in valuation allowance | 41,550 |
| | (14,725 | ) | | (57,567 | ) |
Change in tax contingencies | 10 |
| | 66 |
| | 37 |
|
Alternative minimum tax receivable | 925 |
| | — |
| | — |
|
Corporate tax rate changes | (67,707 | ) | | — |
| | — |
|
Goodwill impairment | — |
| | — |
| | (43,362 | ) |
Other | 1,111 |
| | (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.
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 volatility | 73.2 | % | | 68.1 | % | | 62.3 | % |
Risk-free interest rate | 2.04 | % | | 1.98 | % | | 2.20 | % |
Risk-free interest rate | |
Risk-free interest rate | |
Expected life of options | |
Expected life of options | |
Expected life of options | 5.7 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:
| | | | | | | | | | | | | | | | | | | | | | | |
| Options | | Weighted Average Exercise Price | | Aggregate Intrinsic Value (thousands) | | Weighted Average Remaining Contractual Life |
Balance at December 31, 2022 | 1,021,370 | | | $ | 21.63 | | | $ | 8,816 | | | |
Granted | 872,264 | | | $ | 28.87 | | | $ | 4,208 | | | |
Exercised | (60,106) | | | $ | 18.56 | | | $ | 827 | | | |
Forfeited and expired | (87,256) | | | $ | 28.13 | | | $ | 561 | | | |
Balance at December 31, 2023 | 1,746,272 | | | $ | 25.08 | | | $ | 15,028 | | | 8.19 years |
Exercisable at December 31, 2023 | 283,571 | | | $ | 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, 2016 | 5,265,370 |
| | $ | 5.78 |
| | $ | — |
| | 4.4 years |
Granted | 1,618,092 |
| | $ | 1.93 |
| | $ | 1,499 |
| | |
Exercised | (146,667 | ) | | $ | 2.37 |
| | $ | 36 |
| | |
Forfeited and expired | (2,338,595 | ) | | $ | 6.77 |
| | $ | 325 |
| | |
Balance at December 31, 2017 | 4,398,200 |
| | $ | 3.98 |
| | $ | 2,639 |
| | 5.5 years |
Outstanding options less expected forfeitures at December 31, 2017 | 4,210,163 |
| | $ | 4.07 |
| | $ | 2,465 |
| | 5.4 years |
Exercisable at December 31, 2017 | 2,497,766 |
| | $ | 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.
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 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 - $8.24 | | 9,901 | | | $ | 6.52 | | | 3.1 years | | 9,901 | | | $ | 6.52 | |
$8.24 - $16.52 | | 132,752 | | | $ | 12.44 | | | 5.4 years | | 108,767 | | | $ | 12.24 | |
$16.52 - $24.76 | | 460,969 | | | $ | 21.41 | | | 7.6 years | | 159,439 | | | $ | 20.59 | |
$24.76 - $33.00 | | 1,142,650 | | | $ | 28.19 | | | 8.8 years | | 5,464 | | | $ | 29.51 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
All options | | 1,746,272 | | | | | | | 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 Stock | | Weighted Average Grant Date Fair Value |
Balance at December 31, 2022 | 1,668,847 | | | $ | 22.45 | |
Granted | 945,589 | | | $ | 29.02 | |
Vested and issued | (504,597) | | | $ | 19.54 | |
Forfeited and expired | (226,723) | | | $ | 24.86 | |
Balance at December 31, 2023 | 1,883,116 | | | $ | 26.28 | |
|
| | | | | | | | |
| Restricted Stock | | Weighted Average Grant Date Fair Value | | Weighted Average Remaining Recognition Period |
Balance at December 31, 2016 | 547,356 |
| | $ | 2.43 |
| | 2.2 years |
Granted | 1,563,922 |
| | $ | 1.80 |
| | |
Awards Vested | (145,402 | ) | | $ | 3.71 |
| | |
Canceled | (83,513 | ) | | $ | 1.83 |
| | |
Balance at December 31, 2017 | 1,882,363 |
| | $ | 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.
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
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, 2016 | 300,000 |
| | $ | 6.48 |
| | 0.0 years |
Granted | — |
| |
| |
|
Exercised | — |
| |
| |
|
Canceled | (200,000 | ) | | $ | 5.70 |
| |
|
Balance at December 31, 2017 | 100,000 |
| | $ | 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.
|
| | | | | | | | | | | | | | | |
| First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
Year ended December 31, 2017 | | | | | | | |
Revenue | $ | 217,810 |
| | $ | 218,106 |
| | $ | 198,692 |
| | $ | 182,582 |
|
Gross profit | 64,874 |
| | 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 profit | 63,302 |
| | 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 taxes | 504 |
| | 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.
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
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.
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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.
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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.
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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.
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: | |
| |
| |
| |
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2017, 2016, and 2015 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016,2023, 2022 and 20152021 | |
Notes to | |
2. Financial Statement Schedule: | |
Valuation and Qualifying Accounts of Stockholders’ Equity for the years ended December 31, 2017, 2016,2023, 2022 and 20152021 | |
| |
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+ | | Agreement and Plan of Merger, dated as of March 14, 2019, by and among BioScrip, Inc., Beta Sub, Inc., Beta Sub, LLC, HC Group Holdings I, LLC, HC Group Holdings II, Inc. and HC Group Holdings III, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 15, 2019). |
2.2 | | |
2.3 | | |
3.1 | | |
3.2 | | |
3.3 | | |
3.4 | | |
4.1 | | Registration Rights Agreement, dated as of March 9, 2015, by and among BioScrip, Inc, 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 Current Report on Form 8-K filed on March 10, 2015). |
4.2 | | |
4.3 | | |
4.4 | | |
4.5 | | |
4.6 | | |
4.7 | | |
4.8 | | |
All other schedules not listed above have been omitted since they are not applicable or are not required.
Item 16. Summary
None
| | | | | | | | |
4.9 | | |
4.10 | | |
3.4.11 | | | among 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 | | ABL Credit Agreement, dated as of Exhibits.August 6, 2019, among HC Group Holdings II, LLC, as the Initial Borrower, BioScrip, Inc., as the Parent Borrower, and Bank of America N.A., as the Administrative Agent, Issuing Bank and Swing Line Lender, the other lenders party thereto from time to time and Bank of America, N.A. and ACF Finco I LP as Joint Lead Arrangers and Joint Lead Bookrunners (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 7, 2019). |
10.2† | | |
10.3 | | First Amendment to ABL Credit Agreement, dated as of October 5, 2020, among Option Care Health, Inc. (f/k/a BioScrip, Inc.), each Guarantor party hereto, each lender party hereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on October 6, 2020). |
10.4 | | |
10.5† | | |
10.6 | | |
10.7 | | |
10.8 | | |
10.9 | | |
10.10 | | Fourth Amendment to ABL Credit Agreement, dated as of January 13, 2023, among Option Care Health, Inc. (f/k/a BioScrip, Inc.), a Delaware corporation, each guarantor party thereto, each lender party thereto and Bank of America, N.A., as administrative agent. |
10.11 | | |
10.12† | | |
10.13 | | |
10.14† | | |
10.15† | | |
10.16† | | |
21.1 | | |
23.1 | | |
31.1 | | |
31.2 | | |
32.1 | | |
| | | | | | | | |
32.2 | | |
97 | | |
101 | | The 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.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | XBRL 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.
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.
| | |
OPTION CARE HEALTH, INC. |
|
BIOSCRIP, INC. |
|
/s/ Alex Schott /s/ Michael Shapiro
|
Alex SchottMichael Shapiro |
SeniorChief 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.
| | | | | | | | |
Signature | Title(s) | |
Signature | Title(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 | Director | February 22, 2024 |
| | |
/s/ Elizabeth Q. Betten Elizabeth Q. Betten | Director | February 22, 2024 |
| | |
/s/ Elizabeth D. Bierbower Elizabeth D. Bierbower | Director | February 22, 2024 |
| | |
/s/ Barbara W. Bodem Barbara W. Bodem | Director | February 22, 2024 |
| | |
/s/ Natasha Deckmann Natasha Deckmann | Director | February 22, 2024 |
| | |
/s/ David W. Golding David W. Golding | Director | February 22, 2024 |
| | |
/s/ R. Carter Pate R. Carter Pate | Non-Executive Chairman of the BoardDirector | March 26, 2018February 22, 2024 |
| | |
/s/ David GoldingTimothy P. Sullivan David GoldingTimothy P. Sullivan
| Director | March 26, 2018February 22, 2024 |
| | |
/s/ Michael GoldsteinNorman L. Wright Michael GoldsteinNorman L. Wright
| Director | March 26, 2018 |
| | |
/s/ Tricia Huong Thi Nguyen
Tricia Huong Thi Nguyen
| Director | March 26, 2018 |
| | |
/s/ Christopher Shackelton
Christopher Shackelton
| Director | March 26, 2018 |
| | |
/s/ Michael G. Bronfein
Michael G. Bronfein
| Director | March 26, 2018 |
| | |
/s/ Steven Neumann
Steven Neumann
| Director | March 26, 2018February 22, 2024 |
Bioscrip, Inc. and Subsidiaries
Schedule II-- Valuation and Qualifying Accounts
(in thousands)
|
| | | | | | | | | | | | | | | |
| 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 Number | Description |
2.1** | |
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** | |
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** | |
2.6 | |
2.7 | |
2.8 | |
2.9 | |
2.10 | |
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
3.7 | |
|
| |
3.8 | |
4.1 | |
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 | |
4.4 | |
4.5 | |
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 | |
4.8 | |
4.9 | |
4.10 | |
4.11 | |
4.12 | |
4.13 | |
4.14 | |
4.15 | |
4.16 | |
10.1† | |
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† | |
10.17† | |
10.18† | |
10.19† | |
10.20† | |
10.21† | |
10.22† | |
10.23† | |
10.24† | |
10.25 | |
|
| |
10.26 | |
10.27 | |
10.28 | |
10.29 | |
10.30 | |
10.31 | |
10.32 | |
10.33 | |
10.34 | |
10.35# | |
10.36 | |
10.37# | |
10.38# | |
10.39# | |
10.40# | |
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 | |
10.43 | |
10.44 | |
10.45 | |
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 | |
10.48 | |
10.49 | |
10.50 | |
10.51 | |
10.52 | |
10.53 | |
10.54 | |
10.55 | |
10.56 | |
10.57 | |
10.58 | |
|
| |
10.59 | |
10.60 | |
10.61 | |
10.62 | |
21.1 * | |
23.1 * | |
31.1 * | |
31.2 * | |
32.1 * | |
32.2 * | |
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. |