BioScrip Reports Third Quarter 2014 Financial Results

ELMSFORD, N.Y., Nov. 5, 2014 /PRNewswire/ -- BioScrip^®, Inc. (NASDAQ: BIOS) (the "Company") today announced its financial results for the third quarter of 2014.  Third quarter revenue from continuing operations was $244.0 million and the net loss from continuing operations, net of income taxes, was $37.6 million or a loss of $0.55 per basic and diluted share. Non-GAAP adjusted loss from continuing operations per basic and diluted share was $0.42.

The Company has substantially completed the integration of its acquired businesses.  As part of that process, the Company has accelerated its cash collection to achieve break even cash flow from continuing operations in the quarter and expects to continue to improve cash collection processes and systems. While cash collections on current reimbursement claims for the Company's services were strong in the third quarter of 2014 and exceeding historical rates, the Company established additional reserves for receivables that aged during the HomeChoice and CarePoint acquisitions integration period.  As a result, the Company incurred a charge in the third quarter of $23.1 million in the Infusion segment for bad debt and contractual reserves that represents the amount above the segment's historical experience prior to the disruption from the acquisition of the HomeChoice and CarePoint businesses.  The Company is therefore reporting both adjusted and pro-forma results for EBITDA to exclude the impact of this adjustment.

Third Quarter Highlights

• Total revenue increased by $53.3 million, or 28.0%, as compared to the prior year period. Revenue from the Infusion Services segment increased to $231.5 million, reflecting 32.6% growth year-over-year. Organic revenue growth for the Infusion Services segment remained in the double digits year-over-year.
• Gross profit from continuing operations was $65.0 million, or 26.6% of revenue, as compared to $61.7 million, or 32.3% of revenue, in the prior year period. The increase in gross profit was primarily driven by growth in the Infusion segment.  The decline in gross profit margin percentage was driven by the decline in the higher margin PBM Services segment.
• On a pro-forma basis, Infusion Services segment Adjusted EBITDA, adding back the $23.1 million charge in bad debt and contractual reserves, was $16.8 million, compared to $14.6 million, in the prior year period, a 14.8% increase. Consolidated Adjusted EBITDA from continuing operations declined by $24.0 million to a loss of $12.6 million, primarily reflecting the bad debt and contractual reserves charge noted above.  Adjusted EBITDA was impacted by $0.9 million in increased investment in operations leadership and reimbursement resources which included the addition of our new Chief Operating Officer.  These costs include recruiting fees, overtime, temporary labor and third party professional fees.  Corporate overhead also included $0.7 million in non-recurring legal fees relating to legacy litigation matters.
• The Company has implemented a cost savings plan to be completed by year end that is expected to yield approximately $4.0 million in annual cost reductions.
• Cash flow from continuing operations increased $2.4 million sequentially compared to the second quarter of 2014 and has reached breakeven.
• As a result of the continued focus on cash collections, the Company has increased monthly average accounts receivable collections from $80.9 million in the second quarter of 2014 to $83.5 million in the third quarter of 2014.

"The infusion business, once again, delivered double-digit organic revenue growth, underscoring our progress to be a leading provider of infusion services," said Rick Smith, President and Chief Executive Officer of BioScrip. "Our operating metrics are strong and continue to improve in key areas that are leading to sequential increases in operating cash flow. Our acquisitions over the last two years are integrated and we have created a national platform that is clinically respected and we believe it is strategically positioned to continue to grow and build on the foundation that has been established.  We are focused on delivering value for shareholders."  

Results of Operations

Third Quarter 2014 versus Third Quarter 2013

Total revenue for the third quarter of 2014 was $244.0 million, compared to $190.6 million for the same period a year ago, an increase of $53.3 million, or 28.0%. Infusion Services segment revenue was $231.5 million in the third quarter, as compared to $174.6 million for the same period in 2013. The 32.6% increase was driven primarily by double-digit organic growth and the acquisition of CarePoint.

Gross profit from continuing operations for the third quarter of 2014 was $65.0 million, or 26.6% of revenue, as compared to $61.7 million, or 32.3% of revenue, in the prior year period. The increase in gross profit was the result of organic growth and the acquisition of CarePoint, offset by a decline in the PBM Services segment. The decline in gross profit margin percentage was driven primarily by the decline in the higher-margin PBM Services segment.

During the third quarter of 2014, on a consolidated basis, adjusted EBITDA from continuing operations declined by $24.0 million to a loss of $12.6 million, compared to $11.4 million in the prior year period. On a pro-forma basis, adding back the $23.1 million charge in bad debt and contractual reserves, adjusted EBITDA from continuing operations was $10.5 million. Infusion Services segment Adjusted EBITDA was negative $6.3 million in the third quarter of 2014. On a pro-forma basis, Infusion Services segment Adjusted EBITDA was $16.8 million, compared to $14.6 million, in the prior year period, a 14.8% increase.  Adjusted EBITDA was impacted by $0.9 million in increased investment in operations leadership and reimbursement resources which included the addition of our new COO.  These costs include recruiting fees, overtime, temporary labor and third party professional fees.  Corporate overhead also included $0.7 million in non-recurring legal fees relating to legacy litigation matters.

PBM Services segment revenue was $12.4 million for the third quarter of 2014, compared to $16.0 million for the prior year period. The decrease was related to the decline in its prescription discount card business and expected decline in the traditional PBM volume for the second half of 2014. PBM Services segment adjusted EBITDA was $1.6 million, or 12.9% of segment revenue, for the third quarter of 2014 compared to $4.3 million, or 26.9% of segment revenue, in the prior year period.

Interest expense in the third quarter of 2014 was $9.6 million compared to $7.2 million in the prior year period.

Income tax expense from continuing operations in the third quarter was $1.9 million compared to $0.0 million in the prior year period.

Net loss from continuing operations for the third quarter of 2014 was $37.6 million, or a loss of $0.55 per basic and diluted share, compared to a net loss from continuing operations of $23.8 million, or $0.37 per basic and diluted share, in the prior year period.

Liquidity and Capital Resources

For the nine months ended September 30, 2014, BioScrip used $26.7 million in net cash from continuing operating activities, compared to cash used of $28.9 million during the nine months ended September 30, 2013. Sequentially, net cash from continuing operating activities improved by $2.4 million from the second quarter of 2014 and reached breakeven.

As of September 30, 2014, the Company's cash balance was $0.0 million, and it had $423.3 million of outstanding debt including a revolver balance of $4.5 million.

Outlook

The Company projects the following:

• Revenue for 2014 is forecasted to be at the high end of the Company's guidance range of $940.0 million to $980.0 million. Infusion Services segment is expected to continue to deliver double-digit organic revenue growth;
• Infusion Services segment Adjusted EBITDA and margin percentage is expected to sequentially improve;
• Seasonality is expected in the Infusion Services segment, whereby the fourth quarter typically generates the highest Adjusted EBITDA of the year and the first quarter typically generates the lowest Adjusted EBITDA of the year;
• Initiatives to collect older receivables impacted by the integration of the acquisitions continue in the fourth quarter of the year. These efforts are on-going, but timing may be uncertain; and
• Continued stability is expected in our PBM Services segment from an adjusted EBITDA perspective.

Conference Call

BioScrip will host a conference call to discuss its third quarter 2014 financial results on November 6, 2014 at 8:30 a.m. Eastern Time. Interested parties may participate in the conference call by dialing 800-404-5245 (US), or 303-223-2681 (International), 5-10 minutes prior to the start of the call. A replay of the conference call will be available for two weeks after the call's completion by dialing 800-633-8284 (US) or 402-977-9140 (International) and entering conference call ID number 21737716. An audio webcast and archive will also be available for 30 days under the "Investor Relations" section of the BioScrip website at www.bioscrip.com.      

About BioScrip, Inc.

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

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

Reconciliation to Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with generally accepted accounting principles (GAAP), the Company is also reporting EBITDA, Adjusted EBITDA (including pro-forma Adjusted EBITDA), and Adjusted EPS, which are non-GAAP financial measures. EBITDA, Adjusted EBITDA and Adjusted EPS are not measurements of financial performance under GAAP and should not be used in isolation or as a substitute or alternative to net income, operating income or any other performance measure derived in accordance with GAAP, or as a substitute or alternative to cash flow from operating activities or a measure of our liquidity. In addition, the Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EPS may not be comparable to similarly titled non-GAAP financial measures reported by other companies.

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