OREANDA-NEWS. BioScrip, Inc. (NASDAQ:BIOS) (“BioScrip” or the “Company”) today announced financial results for the second quarter 2016. For the second quarter, the Company reported revenue from continuing operations of $232.5 million, net loss from continuing operations of ($8.3) million and diluted EPS of ($0.14) loss per share.

                               
Second Quarter Highlights

  • Net revenue for the second quarter 2016 was $232.5 million, a decrease year over year as anticipated in connection with the ongoing shift in revenue mix to a greater percentage of core infusion revenue and less lower margin chronic infusion revenue;
     
  • Consolidated Loss from continuing operations, net of income taxes of $8.3 Million, an improvement of $236.6 million compared to Loss from continuing operations, net of income taxes of $244.9 million in the prior year second quarter. The year over year improvement was due to the improved operating performance of the Company in 2016 combined with the fact that prior year second quarter 2015 included a significant non-cash cost associated with the impairment of goodwill, which did not recur in 2016;
  • Consolidated Adjusted EBITDA was $10.4 million for the second quarter 2016, up $14.7 million compared to consolidated Adjusted EBITDA of a negative ($4.4) million in the prior year second quarter. The year over year increase was due to the success of the Company’s operating improvement initiatives to further reduce costs and focus more directly on its core infusion business; and,
     
  • Infusion Services Adjusted EBITDA (which excludes corporate overhead costs) was $19.3 million, or 8.3% of revenues, for the 2016 second quarter, representing an increase of $12.9 million over the second quarter of 2015.

Rick Smith, President and Chief Executive Officer stated, “We are pleased with our second quarter results, during which BioScrip delivered its lowest loss from continuing operations and its strongest Adjusted EBITDA since 2013.  Our solid quarter demonstrates the significant progress we have made since beginning to implement our operational improvement initiatives.”

Smith added, “BioScrip is poised to enter into its next phase following the completion of our acquisition of Home Solutions, which we anticipate will add double-digit organic core revenue growth to our platform and support stronger patient census levels.  We are on track to close the Home Solutions transaction in September and expect a smooth and successful integration.”

Results of Operations

Second Quarter 2016 versus Prior Year Second Quarter 2015

Revenue from continuing operations for the second quarter of 2016 was $232.5 million, compared to $246.9 million in the second quarter of 2015, a decrease of $14.4 million or 5.8%. This revenue decrease resulted from the Company’s previously announced shift in revenue mix to a greater percentage of core infusion revenue and less lower margin chronic revenue.

Consolidated gross profit for the second quarter of 2016 was $64.2 million, or 27.6% of revenue, up 130 basis points as a percentage of revenue, compared to second quarter 2015 gross profit of $64.8 million, or 26.3% of revenue.

Consolidated Loss from continuing operations, net of income taxes for the second quarter of 2016 was $8.3 million representing an improvement  of $236.6 million versus the same period prior year Consolidated Loss from continuing operations, net of income taxes of $244.9 million.  The improvement in Consolidated Loss from continuing operations, net of income taxes resulted from the improved operating performance of the Company in 2016 combined with the fact that prior year second quarter 2015 included a significant non-cash cost associated with the impairment of goodwill, which did not recur in 2016 .

Consolidated Adjusted EBITDA from continuing operations for the second quarter of 2016 was $10.4 million representing an increase of $14.7 million versus the same period prior year Consolidated Adjusted EBITDA of a negative ($4.4) million.  The increase in Consolidated Adjusted EBITDA resulted from the continued operating improvement initiatives employed by the Company to further reduce operating costs, including reducing bad debt costs as a result of significantly improved cash collection experience on accounts receivable.

Liquidity and Capital Resources

As of June 30, 2016, the Company had $121.8 million of liquidity, which consists of $51.4 million of cash and $70.4 of undrawn capacity available on its revolving credit facility.  The Company intends to use $67.5 million of its liquidity in September 2016 to finance and complete the pending acquisition of the business of HS Infusion Holdings, Inc. (known as “Home Solutions”).

The Company’s net Days Sales Outstanding (“DSO”) improved to 39 days at June 30, 2016, four days less than the prior year second quarter 2015 DSO of 43 days. 

Through the first six months of 2016, the Company’s cash flows from operations represent a net use of cash from operations totaling $15.7 million, significantly lower than the $44.2 million net use of cash during the same period last year.  The $15.7 million use of cash from operations during the first six months of 2016 includes the impact of over $6.0 million in cash used for acquisition and restructuring matters. BioScrip expects to produce positive cash flow from operating activities over the second half of 2016, excluding the use of cash expected from integration and transaction costs from closing the Home Solutions acquisition.

As of June 30, 2016 the Company is in full compliance with its bank covenants under the terms of the Amended Credit Facility.

Update on Home Solutions Acquisition

As announced in June 2016, BioScrip entered into an agreement to acquire the business of Home Solutions. The acquisition is expected to generate $14 million to $17 million of annual operating cost reduction synergies within 12 to 18 months following the closing.  The transformational transaction is expected to be accretive to BioScrip stockholders and drive significant benefits for all stakeholders.  Furthermore, we expect the acquisition to strengthen the Company’s balance sheet and its leverage profile, thereby improving BioScrip’s strategic flexibility and competitive positioning, and realigning the Company as a growth platform in the attractive post-acute care segment.

The Home Solutions acquisition is expected to be completed in September 2016; the Company expects to hold a Special Meeting of Stockholders in early September 2016 to approve the transaction and amend the Company’s Certificate of Incorporation to permit an increase in the amount of common stock the Company is authorized to issue.

FY 2016 Guidance Update

BioScrip is updating its financial guidance for full year 2016 as disclosed in the chart below.  BioScrip’s updated guidance includes the expected revenue and Adjusted EBITDA contribution of Home Solutions following closing of the transaction and reflects a nominal amount of the $14 million to $17 million of annual operating cost reduction synergies anticipated to be achieved within 12 to 18 months following completion of the acquisition.  BioScrip expects to deliver annual run rate Adjusted EBITDA in the mid-$60 million range by the conclusion of 2016, which reflects only a small portion of the anticipated $14 million to $17 million of synergies.

The updated guidance range also reflects temporary timing delays on the realization of ongoing operating cost reductions and revenue mix improvement initiatives, primarily as a result of a shift in corporate resources used to focus on transaction diligence and planning for the successful integration of the Home Solutions acquisition. 

   
   Full Year 2016 
(dollars in millions, except EPS)  Low     High 
       
Revenues $ 940.0     $ 960.0  
       
Adjusted EBITDA      45.0         50.0  
adjusted ebitda margin    4.8 %     5.2 %
               
Stock Compensation   5.2       4.8  
Depreciation & Amortization   18.0       17.0  
Interest Expense, net   39.0       37.0  
Acquisition, Integration, and Restructuring Costs   18.5       17.0  
Income Tax (Benefit)   0.5       (0.5 )
Preferred Stock Dividends   9.2       9.1  
Net Loss - Continuing Ops $ (45.4 )   $ (34.4 )
 weighted average diluted shares      95.0         91.0  
Diluted Loss Per Common Share $ (0.48 )   $ (0.38 )
       

Conference Call and Presentation

BioScrip will host a conference call and live webcast today, August 8, 2016, at 9:00 a.m. Eastern Daylight Time, to discuss its second quarter 2016 financial results. Interested parties may participate by dialing 888-372-9592 (US) or 918-559-5628 (International) or by accessing a link on the Company's website at www.bioscrip.com.

A replay of the conference call will be available for two weeks after the call's completion by dialing 855-859-2056 (US) or 404-537-3406 (International) and entering conference call ID number 51653511. An audio webcast and archive will also be available for 30 days under the "Investor Relations" section of the Company's website.

About BioScrip, Inc.

BioScrip, Inc. is a leading national provider of infusion and home care management solutions. BioScrip partners with physicians, hospital systems, skilled nursing facilities, 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.

Forward-Looking Statements – Safe Harbor
This press release includes statements that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including projections of certain measures of the Company's results of operations, projections of future levels of certain charges and expenses, and other statements regarding the Company's financial improvement plan and strategy. 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 actual results to differ materially from those in the forward-looking statement include but are not limited to risks associated with: the Company's ability to continue to execute its financial improvement plan to reduce operating costs and focus its business on its Infusion Services segment; 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. 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 Adjusted EBITDA which is a non-GAAP financial measure. Adjusted EBITDA is not a measurement 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 the Company’s liquidity. In addition, the Company's definition of Adjusted EBITDA may not be comparable to similarly titled non-GAAP financial measures reported by other companies. Adjusted EBITDA, as defined by the Company, represents net income before net interest expense, income tax expense, depreciation and amortization, impairment of goodwill, stock-based compensation expense, and restructuring, integration and other expenses. As part of restructuring, the Company may incur significant charges such as the write down of certain long?lived assets, temporary redundant expenses, retraining expenses, potential cash bonus payments and potential accelerated payments or terminated costs for certain of its contractual obligations. Management believes that Adjusted EBITDA provides useful supplemental information regarding the performance of BioScrip’s business operations and facilitates comparisons to the Company’s historical operating results. For a full reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, please see the attachment to this earnings release.

 
Schedule 1
BIOSCRIP, INC. AND SUBSIDIARIES
       
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)
       
  June 30, 2016   December 31, 2015
       
ASSETS      
Current assets      
Cash and cash equivalents $ 51,425     $ 15,577  
Receivables, less allowance for doubtful accounts of $51,314 and $59,689 at June 30, 2016 and December 31, 2015, respectively   98,634       97,353  
Inventory   32,446       42,983  
Prepaid expenses and other current assets   16,509       27,772  
Total current assets     199,014       183,685  
Property and equipment, net   30,789       31,939  
Goodwill   308,729       308,729  
Intangible assets, net   3,512       5,128  
Other non-current assets   1,203       1,161  
Total assets $   543,247     $  530,642  
LIABILITIES AND STOCKHOLDERS' DEFICIT      
Current liabilities      
Current portion of long-term debt $ 9,357     $ 24,380  
Accounts payable   48,887       65,077  
Amounts due to plan sponsors   3,553       3,491  
Accrued interest   6,706       6,898  
Accrued expenses and other current liabilities   33,158       52,918  
Total current liabilities     101,661       152,764  
Long-term debt, net of current portion   390,102       393,741  
Deferred taxes   589       236  
Other non-current liabilities   1,655       1,861  
Total liabilities     494,007         548,602  
Series A convertible preferred stock, $.0001 par value; 825,000 shares authorized; 21,645 and 635,822 shares issued and outstanding; and, $2,459 and $69,702 liquidation preference as of June 30, 2016 and December 31, 2015, respectively   2,292       62,918  
Series C convertible preferred stock, $.0001 par value; 625,000 shares authorized; 614,177 shares issued and outstanding; and $71,298 liquidation preference as of June 30, 2016   65,025       -  
Stockholders' equity      
Preferred stock, $.0001 par value; 4,175,000 shares authorized; no shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively   -       -  
Common stock, $.0001 par value; 125,000,000 shares authorized; 116,641,664 and 71,421,664 shares issued and 113,880,241 and 68,767,613 shares outstanding as of June 30, 2016 and December 31, 2015, respectively   12       8  
Treasury stock, 2,761,423 and 2,654,051 shares, at cost, as of June 30, 2016 and December 31, 2015, respectively   (11,009 )     (10,737 )
Additional paid-in capital   612,603       531,764  
Accumulated deficit   (619,683 )     (601,913 )
Total stockholders' deficit     (18,077 )       (80,878 )
Total liabilities and stockholders' deficit $  543,247     $  530,642  
           
Schedule 2
BIOSCRIP, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(in thousands, except per share amounts)
                   
    Three Months Ended June 30,   Six Months Ended June 30,
        2016       2015       2016       2015  
                   
Net revenue     $    232,462     $    246,897     $    470,924     $    491,254  
Cost of revenue (excluding depreciation expense)       168,298       182,079       342,528       361,481  
Gross profit       64,164       64,818       128,396       129,773  
% of revenues       27.6 %     26.3 %     27.3 %     26.4 %
                   
Other operating expenses       40,619       43,314       80,277       84,929  
Bad debt expense       4,279       15,165       11,870       23,511  
General and administrative expenses       9,414       11,866       20,465       23,565  
Impairment of goodwill       -       238,000       -       238,000  
Restructuring, acquisition, integration, and other expenses, net       4,291       5,969       6,958       9,673  
Depreciation and amortization expense       4,252       6,247       8,790       12,041  
Interest expense, net       9,469       9,080       18,881       18,243  
Gain on disposition of property and equipment       -       -       (939 )     -  
Loss from continuing operations,  before income taxes         (8,160 )       (264,823 )       (17,906 )       (280,189 )
Income tax expense (benefit)       149       (19,921 )     172       (17,993 )
Loss from continuing operations, net of income taxes         (8,309 )       (244,902 )       (18,078 )       (262,196 )
Income (loss) from discontinued operations, net of income taxes       75       94       308       (2,285 )
Net loss     $    (8,234 )   $ (244,808 )   $ (17,770 )   $ (264,481 )
Accrued dividends on preferred stock       (2,056 )     (1,805 )     (4,054 )     (2,258 )
Deemed dividend on preferred stock       (173 )     (2,186 )     (345 )     (3,350 )
Loss attributable to common stockholders     $    (10,463 )   $    (248,799 )   $    (22,169 )   $    (270,089 )
                   
Denominator - Basic and Diluted:                   
Weighted average number of common shares outstanding       73,186       68,698       70,978       68,668  
                   
Loss from continuing operations, basic and diluted     $ (0.14 )   $ (3.62 )   $ (0.32 )   $ (3.90 )
Income from discontinued operations, basic and diluted       -       -       -       (0.03 )
Net loss, basic and diluted     $ (0.14 )   $ (3.62 )   $ (0.32 )   $ (3.93 )
                   
                      Schedule 3
BIOSCRIP, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOWS
(in thousands)
     
  Three Months Ended   Six Months Ended   Three Months Ended   Six Months Ended
  3/31/2015   6/30/2015   6/30/2015   3/31/2016   6/30/2016   6/30/2016
Cash flows from operating activities:                      
Net loss from continuing operations $ (17,294 )   $ (244,902 )   $ (262,196 )   $ (9,769 )   $ (8,309 )   $ (18,078 )
Receivables, net of bad debt expense   799       7,134       7,933       (4,417 )     3,136       (1,281 )
Inventory   (4,666 )     (483 )     (5,149 )     13,867       (3,330 )     10,537  
Prepaid expenses and other assets   (854 )     163       (691 )     7,897       (7,575 )     322  
Accounts payable   995       (13,723 )     (12,728 )     (11,995 )     (4,195 )     (16,190 )
Accrued interest   (4,585 )     4,437       (148 )     (4,630 )     4,438       (192 )
Accrued expenses and other liabilities   (11,200 )     1,267       (9,933 )     (2,227 )     (851 )     (3,078 )
Non-Cash Adjustments:                                              
Depreciation and amortization   5,794       6,247       12,041       4,538       4,252       8,790  
Impairment of goodwill   -        238,000       238,000       -        -        -   
Deferred Taxes   1,927       (17,761 )     (15,834 )     174       178       352  
Other Non-Cash   2,457       2,082       4,539       1,590       1,552       3,142  
Operating Cash Flow (Use)   (26,627 )     (17,539 )     (44,166 )     (4,972 )     (10,704 )     (15,676 )
Discontinued operations   (1,421 )     (573 )     (1,994 )     (5,989 )     76       (5,913 )
Capital expenditures   (2,063 )     (3,734 )     (5,797 )     (2,429 )     (3,037 )     (5,466 )
Pittsburgh sale proceeds     -        -        -        1,105       27       1,132  
Preferred stock and warrants   58,951       -        58,951       -        -        -   
Common stock raise, net   -        -        -        -        83,267       83,267  
Term note (repayments)   -        -        -        (3,137 )     (3,137 )     (6,274 )
Revolver borrowing (repayments)   (5,000 )     -        (5,000 )     8,000       (23,000 )     (15,000 )
Deferred financing costs and other   (1,332 )     (229 )     (1,561 )     (104 )     (118 )     (222 )
Total All Cash Flow (Use) $  22,508     $  (22,075 )   $ 433     $ (7,526 )   $ 43,374     $ 35,848