BioScrip fourth quarter revenue increases 31.9% to $450.4 million

BioScrip, Inc. (Nasdaq: BIOS) today announced 2010 fourth quarter and year-end financial results. Fourth quarter revenue was $450.4 million with a net loss of $67.1 million, or $1.25 per share, which included a deferred-tax asset valuation allowance expense of $54.0 million and $9.2 million of litigation, restructuring, integration, acquisition, severance and CAP bad debt expense. Adjusted EBITDA for the fourth quarter was $10.0 million. For the year ended December 31, 2010, revenue was $1.6 billion with a net loss of $69.1 million, or $1.37 per share. Adjusted EBITDA for the full year was $49.2 million.

“2010 was a challenging year for BioScrip”

Fourth Quarter Highlights

• Revenue was $450.4 million, an increase of $108.8 million or 31.9% compared to prior year;
• Gross profit was $72.6 million or 16.1% of sales, compared to $41.9 million or 12.3% of sales in the prior year;
• Adjusted EBITDA generated by the segments before allocation of corporate expenses was $21.4 million, as compared to $14.5 million last year;
• Adjusted EBITDA of $10.0 million, compared to $3.6 million in the prior year;
• Net loss of $67.1 million or $1.25 per share, compared to prior year net income of $40.7 million or $0.99 per diluted share;
• Amended credit facility to extinguish term debt in favor of a $150.0 million revolver; and
• Reduced debt by $12.1 million in the fourth quarter and in compliance with all debt covenants.

"2010 was a challenging year for BioScrip," said Rick Smith, President and Chief Executive Officer of BioScrip. "During the year, revenue and margins were impacted by pricing concessions on various specialty drugs, reimbursement pressures, the new industry-wide AWP standard and the overall impact of the weak economic environment. As a result, we commenced a strategic assessment of our business lines and overhead structure to position BioScrip for the future.

"At the beginning of the year, we acquired CHS, which has been seamlessly integrated. Through this acquisition, we enhanced our competitive position in Infusion and Home Health Services, giving us a foundation to expand our national footprint by increasing the number of our direct managed care relationships and solidifying those that already existed. As a result, BioScrip has greater access to a larger patient population from which to grow. We are entering 2011 with an enhanced strategic focus and have recently implemented initiatives to materially lower our corporate cost structure. We believe there are significant opportunities for BioScrip to improve operating performance and cash flow generation."

Results of Operations

Fourth Quarter 2010 versus Fourth Quarter 2009

Revenue for the fourth quarter of 2010 totaled $450.4 million, compared to $341.6 million for the same period a year ago, an increase of $108.8 million or 31.9%, primarily as a result of the CHS acquisition. Pharmacy Services revenue for the fourth quarter of 2010 was $337.8 million, compared to $300.9 million for the prior year period, an increase of $36.8 million or 12.2%. Infusion/Home Health Services revenue for the fourth quarter of 2010 was $112.6 million compared to $40.6 million in the prior year, an increase of $72.0 million or 177.3%. CHS revenue contributed $69.4 million during the fourth quarter of 2010. Excluding the CHS revenue, Infusion/Home Health Services revenue increased 6.3% or $2.6 million.

Consolidated gross profit for the fourth quarter of 2010 was $72.6 million, or 16.1% of revenue, compared to $41.9 million, or 12.3% of revenue, for the fourth quarter of 2009. The increase in gross profit percentage from 2009 to 2010 was primarily the result of the CHS acquisition. Sequentially, consolidated gross profit margins declined 1.0% primarily as a result of the timing of certain vendor rebates and new managed care contracts that reduced gross margin, but are expected to further drive patient volume.

Fourth quarter 2010 operating loss was $3.6 million, compared to an operating loss of $0.7 million for the fourth quarter of 2009. Operating loss in the fourth quarter of 2010 included legal settlement expense of $3.9 million; restructuring expense of $3.5 million; CAP bad debt expense of $1.3 million; and acquisition, integration and severance expenses of $0.5 million, which on a combined basis totaled $9.2 million of the fourth quarter 2010 operating loss.

During the fourth quarter of 2010, BioScrip generated $21.4 million of segment Adjusted EBITDA, or 4.7% of total revenue, compared to $14.5 million, or 4.2% of total revenue in the prior year. The Pharmacy Services segment generated $9.6 million of segment Adjusted EBITDA, or 2.8% of segment revenue. This compares to $11.2 million, or 3.7% of segment revenue in the prior year. The Infusion/Home Health segment generated $11.8 million of Adjusted EBITDA, or 10.4% of segment revenue. This compares to $3.2 million, or 7.9% of segment revenue in the prior year.

On a consolidated basis, BioScrip reported $10.0 million of Adjusted EBITDA during the fourth quarter of 2010, or 2.2% of total revenue, compared to $3.6 million, or 1.0% of total revenue, in the prior year. Consolidated Adjusted EBITDA excludes the impact of the $9.2 million of charges noted above.

Interest expense in the fourth quarter of 2010 was $8.1 million. The Company also incurred a $9.6 million loss on extinguishment of debt related to the refinancing of the Company's credit facility in December 2010.

Additionally, the Company took a $54.0 million non-cash charge to establish a full reserve against its deferred tax assets.

Net loss for the fourth quarter of 2010 was $67.1 million, or $1.25 per share, compared to net income of $40.7 million, or $0.99 per diluted share, in the prior year.

Full Year 2010 versus Full Year 2009

Revenue for the year ended December 31, 2010, was $1.6 billion compared to $1.3 billion for the comparable period a year ago, for the reasons stated above. Pharmacy Services segment revenue for the year ended December 31, 2010, was $1.3 billion compared to revenue of $1.2 billion for the same period a year ago, an increase of $80.1 million, or 6.8%. Infusion/Home Health Services segment revenue for the year ended December 31, 2010, was $377.2 million, as compared to $148.2 million for the same period a year ago, an increase of $229.0 million, or 154.5%. CHS revenue contributed $207.2 million for the year ended December 31, 2010. Excluding the CHS revenue, Infusion/Home Health Services segment revenue increased $21.8 million, or 14.7% over the prior year.

Consolidated gross profit for the year ended December 31, 2010, was $260.4 million compared to $157.8 million for the same period a year ago, an increase of $102.6 million, or 65.0%. Consolidated gross profit as a percentage of revenue for the year ended December 31, 2010 increased to 15.9%, compared to 11.9% for the same period of 2009. The increase in gross profit percentage from 2009 to 2010 was primarily the result of the acquisition of CHS and purchasing synergies generated post-acquisition.

Consolidated operating profit for the year-ended December 31, 2010, was $15.8 million, or 1.0% of total revenue, compared to $15.5 million, or 1.2% of revenue, for the same period a year ago. Operating profit for the year ended December 31, 2010, reflects $10.6 million of 2009 price concessions granted to a major customer and $17.7 million of charges related to acquisition, integration and severance expenses, legal settlement expense, restructuring expense and CAP bad debt expense.

For the year ended December 31, 2010, BioScrip generated $84.2 million of segment Adjusted EBITDA, or 5.1% of total revenue, compared to $56.4 million, or 4.2% of total revenue, for the prior year period. The Pharmacy Services segment generated $40.7 million of segment Adjusted EBITDA, or 3.2% of segment revenue, compared to $45.8 million, or 3.9% of segment revenue, in the prior period. The Infusion/Home Health segment reported $43.5 million of segment Adjusted EBITDA, or 11.5% of segment revenue, compared to $10.6 million, or 7.2% of segment revenue, in the prior year.

On a consolidated basis, BioScrip reported $49.2 million of Adjusted EBITDA for the year ended December 31, 2010, or 3.0% of total revenue, compared to $25.7 million, or 1.9% of total revenue, in the prior year.

Interest expense for the year ended December 31, 2010, was $27.6 million. The Company also incurred a $9.6 million loss on extinguishment of debt related to the refinancing of the Company's credit facility in December 2010.

Income tax expense was $47.7 million for the year ended December 31, 2010, on a pre-tax net loss of $21.4 million. Income tax expense for the year included the establishment of a $54.0 million valuation allowance recorded on deferred tax assets. The income tax benefit for the year ended December 31, 2009, was $40.6 million, which included the reversal of the valuation allowance on deferred tax assets.

Net loss for the year ended December 31, 2010, was $69.1 million, or $1.37 per diluted share. This compares to net income of $54.1 million, or $1.36 per diluted share for the same period last year.

Liquidity

On March 25, 2010, after paying off the balance of its previous revolving credit facility, the Company entered into a credit agreement consisting of a $100.0 million senior secured term loan facility and a $50.0 million senior secured revolving credit facility. On December 28, 2010, the credit agreement was amended and restated, which resulted in a $150 million senior secured revolving credit facility.