BioScrip, Inc. (Nasdaq: BIOS) today announced fourth quarter revenues of $341.6 million and net income of $40.7 million, or $0.99 per diluted share, which includes the reversal of the Company’s deferred tax valuation allowance of $41.1 million, expenses of $1.8 million associated with BioScrip’s pending acquisition of Critical Homecare Solutions, Inc. (“CHS”) and $4.3 million of incentive compensation expense relating to the Company’s employee compensation program. These results compare to revenues of $366.6 million and a net loss of $76.6 million, or $1.98 per diluted share, for the fourth quarter of 2008, which includes a goodwill impairment charge and intangible asset write off of $93.9 million. EBITDAO in the fourth quarter of 2009 was $1.8 million compared to $6.6 million in the prior year. Excluding the CHS expenses and incentive compensation discussed above, adjusted EBITDAO in the fourth quarter of 2009 would have been $7.8 million.
For the year ended December 31, 2009, the Company reported revenues of $1.3 billion and net income of $54.1 million, or $1.36 per diluted share, which includes the reversal of the Company’s deferred tax valuation allowance. This compares to revenues of $1.4 billion and a net loss of $74.0 million, or $1.93 diluted per share, and includes the $93.9 million impairment charge. EBITDAO for 2009 was $23.9 million compared to $20.5 million in 2008. Excluding the CHS acquisition expenses discussed above, adjusted EBITDAO would have been $25.7 million for 2009, an increase of 25%.
The deferred tax valuation allowance reversal was the result of BioScrip’s continued operational improvement over the last three years and the Company’s belief that it will realize the benefit of the deferred tax assets through taxable income in future periods.
Richard H. Friedman, BioScrip’s Chairman and Chief Executive Officer, stated, "Our 2009 results reflect the continued success of our strategy -- to be the industry’s clinical leader in infusion, oral and injectable technologies and care management programs. The pending acquisition of CHS will enhance our position as the largest independent specialty pharmacy and leading provider of home health care services. Our expanded platform will broaden our national reach and depth of service at a local level. We remain confident in our strategy.”
Results of Operations
Revenues for the fourth quarter of 2009 totaled $341.6 million, compared to $366.6 million for the same period a year ago. Revenue declines in lower margin business were expected due to the previously announced elimination of the Medicare Competitive Acquisition Program (“CAP”) and the termination of the United Health Group (“UHG”) organ transplant and HIV/AIDS contracts, the impact of the industry-wide AWP settlement, partially offset by increased sales of higher margin infusion therapies and other specialty sales. Excluding the effect of the CAP and UHG contracts, 2009 fourth quarter revenues were 7.9% higher than the 2008 comparable period.
Gross profit for the fourth quarter of 2009 was $41.9 million, or 12.3%, compared to $38.0 million, or 10.4%, for the fourth quarter of 2008. Excluding CAP and UHG, gross margins for the fourth quarter of 2008 would have been 11.4%. This increase was primarily the result of improved product mix due to the continued focus on higher margin therapies as well as improved supply chain programs, partially offset by the impact of the AWP settlement. Adjusted EBITDAO for the fourth quarter of 2009 was $7.8 million compared to $6.6 million in the prior year.
Revenues decreased to $1.3 billion for the year ended December 31, 2009 from $1.4 billion in 2008 as expected, due to revenue declines in lower margin business resulting from the previously announced elimination of the CAP and UHG contracts, partially offset by revenue generated under new contracts and drug inflation. Excluding CAP and UHG, revenues for 2009 would have increased $91.7 million or 7.6%.
Gross profit for 2009 was $157.8 million, or 11.9%, compared to $142.1 million, or 10.1%, for 2008. Excluding CAP and UHG, gross margins for 2008 would have been 11.2%. The increase was primarily the result of improved product mix due to the continued focus on higher margin therapies as well as improved supply chain programs. Adjusted EBITDAO for 2009 would have been $25.7 million compared to $21.3 million in the prior year.
Liquidity
In 2009, BioScrip generated $22.7 million of cash flow from operations. Cash was primarily generated by increases in net income and improved working capital management. Cash generated from operations was primarily used to pay down the Company’s revolving credit facility. Outstanding borrowings under the Company’s credit facility were $30.4 million at the end of 2009 as compared to $50.4 million at the end of 2008. Average borrowings during the fourth quarter were approximately $24.5 million, an improvement of more than $4.5 million over the third quarter of 2009 and $16.5 million compared to the fourth quarter of 2008.
Critical Homecare Solutions Acquisition Update
On January 25, 2010, the Company announced the signing of a definitive agreement to acquire CHS for an aggregate purchase price of $343.2 million in cash and stock. The acquisition is expected to close on or before April 1, 2010.
Rick Smith, BioScrip’s President and Chief Operating Officer, stated, “We continue to work diligently to close this exciting deal. CHS is a leading provider of home infusion and home health services to patients suffering from chronic and acute medical conditions. Together with BioScrip’s specialty pharmacy and home infusion platform, we will be a formidable industry leader with the capabilities to support local, regional and national health insurers and their members in all 50 states through our more than 120 points of service, a dedicated sales force of over 140 representatives and 1,000 managed care relationships.”
Financial Guidance
We are reaffirming our 2010 guidance. Assuming a closing date of March 31, BioScrip’s 2010 financial results would include 9 months of CHS’s operations. The combined companies are expected to generate revenues in 2010 of approximately $1.67 to $1.73 billion, gross profit of $267.0 to $277.0 million, or approximately 16% of sales, and adjusted EBITDAO of $67.0 to $71.0 million. The increased volume, access to high margin therapies and operating synergies available to the combined companies are expected to provide significant increases in revenue, an estimated 600 basis point improvement in gross margins and an estimated 200 basis point improvements in EBITDAO. The transaction is expected to be modestly accretive to earnings per share on a cash basis and slightly dilutive on a GAAP basis in 2010. Cash and GAAP earnings per share accretion is expected in 2011 and beyond.
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