Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Option Care Health, Inc. | Financial_Report.xls |
| EX-32.1 - 906 CERTIFICATION OF CEO - Option Care Health, Inc. | ceo906cert.htm |
| EX-31.1 - 302 CERTIFICATION OF CEO - Option Care Health, Inc. | ceo302cert.htm |
| EX-32.2 - 906 CERTIFICATION OF CFO - Option Care Health, Inc. | cfo906cert.htm |
| EX-10.1 - PRIME VENDOR AGREEMENT WITH AMERISOURCEBERGEN DRUG CORPORATION DATED JULY 1, 2009 - Option Care Health, Inc. | abdcvendoragreement.htm |
| EX-31.2 - 302 CERTIFICATION OF CFO - Option Care Health, Inc. | cfo302cert.htm |
United
States
|
|
Securities
and Exchange Commission
|
|
|
Washington,
D.C. 20549
|
________________
Form 10-Q
________________
(Mark
One)
|
R
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
|
For
the quarterly period ended September 30, 2009
|
|
|
OR
|
|
|
£
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For the transition period from
________ to _______
|
Commission
file number: 0-28740
________________
BioScrip,
Inc.
(Exact
name of registrant as specified in its charter)
________________
|
Delaware
|
05-0489664
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer Identification No.)
|
|
of
Incorporation or Organization)
|
|
|
100
Clearbrook Road, Elmsford, NY
|
10523
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(914)
460-1600
(Registrant’s
telephone number, including area code)
________________
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes R No
£
Indicate
by check mark whether the registrant has submitted electronically and posted to
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes £ No £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer: £
|
Accelerated
filer: R
|
Non-accelerated
filer: £
|
Smaller
reporting company: £
|
|
(Do
not check if a smaller reporting
company)
|
|||
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No R
On
October 30, 2009, there were 39,316,399 outstanding shares of the registrant’s
common stock, $.0001 par value per share.
BIOSCRIP,
INC. AND SUBSIDIARIES
(in
thousands, except for share and per share amounts)
|
September
30,
|
December
31,
|
|||||
|
2009
|
2008
|
|||||
|
ASSETS
|
(unaudited)
|
|||||
|
Current
assets
|
||||||
|
Cash
and cash equivalents
|
$ | - | $ | - | ||
|
Receivables,
less allowance for doubtful accounts of $9,828 and $11,629
|
||||||
|
at
September 30, 2009 and December 31, 2008, respectively
|
147,326 | 158,649 | ||||
|
Inventory
|
47,833 | 45,227 | ||||
|
Prepaid
expenses and other current assets
|
3,866 | 2,766 | ||||
|
Total
current assets
|
199,025 | 206,642 | ||||
|
Property
and equipment, net
|
15,674 | 14,748 | ||||
|
Other
assets
|
983 | 1,069 | ||||
|
Goodwill
|
24,498 | 24,498 | ||||
|
Total
assets
|
$ | 240,180 | $ | 246,957 | ||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||
|
Current
liabilities
|
||||||
|
Line
of credit
|
$ | 39,584 | $ | 50,411 | ||
|
Accounts
payable
|
62,909 | 76,936 | ||||
|
Claims
payable
|
4,228 | 5,230 | ||||
|
Amounts
due to plan sponsors
|
5,951 | 5,646 | ||||
|
Accrued
expenses and other current liabilities
|
10,200 | 9,575 | ||||
|
Total
current liabilities
|
122,872 | 147,798 | ||||
|
Deferred
taxes
|
1,095 | 533 | ||||
|
Income
taxes payable
|
3,512 | 3,089 | ||||
|
Total
liabilities
|
127,479 | 151,420 | ||||
|
Stockholders'
equity
|
||||||
|
Preferred
stock, $.0001 par value; 5,000,000 shares authorized;
|
||||||
|
no
shares issued or outstanding
|
- | - | ||||
|
Common
stock, $.0001 par value; 75,000,000 shares authorized; shares
issued:
|
||||||
|
42,349,728,
and 41,622,629, respectively; shares outstanding; 39,272,399
and
|
||||||
|
38,691,356,
respectively
|
4 | 4 | ||||
|
Treasury
stock, shares at cost: 2,653,007 and 2,624,186,
respectively
|
(10,366 | ) | (10,288 | ) | ||
|
Additional
paid-in capital
|
252,274 | 248,441 | ||||
|
Accumulated
deficit
|
(129,211 | ) | (142,620 | ) | ||
|
Total
stockholders' equity
|
112,701 | 95,537 | ||||
|
Total
liabilities and stockholders' equity
|
$ | 240,180 | $ | 246,957 | ||
See
accompanying Notes to the Unaudited Consolidated Financial
Statements.
BIOSCRIP,
INC. AND SUBSIDIARIES
(in
thousands, except per share amounts)
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2009
|
2008
|
2009
|
2008
|
||||||||||
|
Revenue
|
$ | 333,476 | $ | 359,427 | $ | 987,974 | $ | 1,035,338 | |||||
|
Cost
of revenue
|
291,980 | 323,346 | 872,100 | 931,159 | |||||||||
|
Gross
profit
|
41,496 | 36,081 | 115,874 | 104,179 | |||||||||
|
Selling,
general and administrative expenses
|
32,402 | 31,859 | 94,335 | 95,031 | |||||||||
|
Bad
debt expense
|
2,433 | 1,413 | 5,410 | 2,786 | |||||||||
|
Income
from operations
|
6,661 | 2,809 | 16,129 | 6,362 | |||||||||
|
Interest
expense, net
|
447 | 669 | 1,471 | 1,931 | |||||||||
|
Income
before income taxes
|
6,214 | 2,140 | 14,658 | 4,431 | |||||||||
|
Tax
provision
|
467 | 730 | 1,249 | 1,879 | |||||||||
|
Net
income
|
$ | 5,747 | $ | 1,410 | $ | 13,409 | $ | 2,552 | |||||
|
Income
per common share
|
|||||||||||||
|
Basic
|
$ | 0.15 | $ | 0.04 | $ | 0.35 | $ | 0.07 | |||||
|
Diluted
|
$ | 0.14 | $ | 0.04 | $ | 0.34 | $ | 0.07 | |||||
|
Weighted
average common shares outstanding
|
|||||||||||||
|
Basic
|
38,961 | 38,403 | 38,807 | 38,359 | |||||||||
|
Diluted
|
40,184 | 38,934 | 39,345 | 39,187 | |||||||||
See
accompanying Notes to the Unaudited Consolidated Financial
Statements.
BIOSCRIP,
INC. AND SUBSIDIARIES
(in
thousands)
|
Nine
Months Ended
|
||||||
|
September
30,
|
||||||
|
2009
|
2008
|
|||||
|
Cash
flows from operating activities:
|
||||||
|
Net
income
|
$ | 13,409 | $ | 2,552 | ||
|
Adjustments
to reconcile net income to net cash provided by
|
||||||
|
(used
in) operating activities:
|
||||||
|
Depreciation
and amortization
|
3,596 | 4,685 | ||||
|
Change
in deferred income tax
|
562 | 1,440 | ||||
|
Compensation
under stock-based compensation plans
|
2,385 | 2,859 | ||||
|
Bad
debt expense
|
5,410 | 2,786 | ||||
|
Changes
in assets and liabilities
|
||||||
|
Receivables,
net
|
5,913 | (37,351 | ) | |||
|
Inventory
|
(2,606 | ) | (2,557 | ) | ||
|
Prepaid
expenses and other assets
|
(1,014 | ) | (2,116 | ) | ||
|
Accounts
payable
|
(14,027 | ) | 13,829 | |||
|
Claims
payable
|
(1,002 | ) | 879 | |||
|
Amounts
due to plan sponsors
|
305 | 1,237 | ||||
|
Accrued
expenses and other liabilities
|
1,048 | (3,629 | ) | |||
|
Net
cash provided by (used in) operating activities
|
13,979 | (15,386 | ) | |||
|
Cash
flows from investing activities:
|
||||||
|
Purchases
of property and equipment, net of disposals
|
(4,522 | ) | (5,873 | ) | ||
|
Net
cash used in investing activities
|
(4,522 | ) | (5,873 | ) | ||
|
Cash
flows from financing activities:
|
||||||
|
Borrowings
on line of credit
|
997,920 | 1,042,246 | ||||
|
Repayments
on line of credit
|
(1,008,747 | ) | (1,021,001 | ) | ||
|
Surrender
of stock to satisfy minimum tax withholding
|
(78 | ) | (262 | ) | ||
|
Net
proceeds from exercise of employee stock compensation
plans
|
1,448 | 276 | ||||
|
Net
cash (used in) provided by financing activities
|
(9,457 | ) | 21,259 | |||
|
Net
change in cash and cash equivalents
|
- | - | ||||
|
Cash
and cash equivalents - beginning of period
|
- | - | ||||
|
Cash
and cash equivalents - end of period
|
$ | - | $ | - | ||
|
DISCLOSURE
OF CASH FLOW INFORMATION:
|
||||||
|
Cash
paid during the period for interest
|
$ | 1,432 | $ | 3,092 | ||
|
Cash
paid during the period for income taxes
|
$ | 741 | $ | 236 | ||
See
accompanying Notes to the Unaudited Consolidated Financial
Statements.
BIOSCRIP,
INC. AND SUBSIDIARIES
NOTE
1 – BASIS OF PRESENTATION
These
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements, including the notes thereto, and
other information included in the Annual Report on Form 10-K of BioScrip, Inc.
and subsidiaries (the “Company”) for the year ended December 31, 2008 (the “Form
10-K”) filed with the U.S. Securities and Exchange Commission on March 5, 2009.
These unaudited consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) for
interim financial information, and the instructions to Form 10-Q and Article 10
of Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements.
The
information furnished in these unaudited consolidated financial statements
includes normal recurring adjustments and reflects all adjustments which are, in
the opinion of management, necessary for a fair presentation of the results for
the interim periods presented. Operating results for the three and nine months
ended September 30, 2009 are not necessarily indicative of the results that may
be expected for the full year ending December 31, 2009. The accounting policies
followed for interim financial reporting are similar to those disclosed in Note
2 of Notes to Consolidated Financial Statements included in the Form
10-K.
Certain
prior period amounts have been reclassified to conform to the current year
presentation. Such reclassifications have no material effect on the Company’s
previously reported consolidated financial position, results of operations or
cash flows.
The
Company has evaluated events that occurred during the period subsequent to the
balance sheet date through November 2, 2009, which represents the filing date of
this Form 10-Q. As of November 2, 2009, there were no subsequent
events that require recognition or disclosure in the financial
statements.
NOTE
2 – RECENT ACCOUNTING PRONOUNCEMENTS
In June
2009, FASB issued Accounting Standards Update No. 2009-01, Generally Accepted Accounting
Principles (“ASC Topic 105”) which established the FASB ASC as the
official single source of authoritative U.S. generally accepted accounting
principles (“GAAP”). All previously existing accounting standards
were superseded at that date. All other accounting guidance not
included in the Codification will be considered
non-authoritative. The Codification also includes relevant SEC
guidance organized using the same topical structure in separate sections within
the Codification.
Following
the Codification, the Board has stated that it will not issue new standards in
the form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates
(“ASU”) that will serve to update the Codification, provide background
information about the guidance and provide the basis for conclusions on the
changes to the Codification.
The
Codification is not intended to change GAAP, but will change the way GAAP is
organized and presented. The Codification is effective for the
Company’s third quarter 2009 financial statements and the principal impact is
limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification. In
order to ease the transition to the Codification, the Company is providing the
Codification cross-reference alongside the references to the standards issued
and adopted prior to the adoption of the Codification.
NOTE
3 – EARNINGS PER SHARE
The
following table sets forth the computation of basic and diluted income per
common share (in thousands, except for per share amounts):
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2009
|
2008
|
2009
|
2008
|
||||||||||
|
Numerator:
|
|||||||||||||
|
Net
income
|
$ | 5,747 | $ | 1,410 | $ | 13,409 | $ | 2,552 | |||||
|
Denominator
- Basic:
|
|||||||||||||
|
Weighted
average number of common shares outstanding
|
38,961 | 38,403 | 38,807 | 38,359 | |||||||||
|
Basic
income per common share
|
$ | 0.15 | $ | 0.04 | $ | 0.35 | $ | 0.07 | |||||
|
Denominator
- Diluted:
|
|||||||||||||
|
Weighted
average number of common shares outstanding
|
38,961 | 38,403 | 38,807 | 38,359 | |||||||||
|
Common
share equivalents of outstanding stock options and restricted
awards
|
1,223 | 531 | 538 | 828 | |||||||||
|
Total
diluted shares outstanding
|
40,184 | 38,934 | 39,345 | 39,187 | |||||||||
|
Diluted
income per common share
|
$ | 0.14 | $ | 0.04 | $ | 0.34 | $ | 0.07 | |||||
Excluded
from the computation of diluted earnings per share for the three and nine months
ended September 30, 2009 were 2,995,497 and 4,530,529 shares, respectively, and
for the three and nine months ended September 30, 2008 were 4,716,212 and
3,839,179 shares, respectively, all of which are issuable upon the exercise of
outstanding stock options. The inclusion of those shares would have
been anti-dilutive as the exercise price of these shares exceeded market
value.
NOTE
4 – STOCK-BASED COMPENSATION PLANS
Under the
Company’s 2008 Equity Incentive Plan (the “2008 Plan”) the Company may issue,
among other things, incentive stock options (“ISOs”), non-qualified stock
options (“NQSOs”), stock appreciation rights, restricted stock, and performance
units to employees and directors. Under the 2008 Plan, 3,580,000
shares were authorized for issuance (subject to adjustment for grants made under
the Company’s 2001 Incentive Stock Plan (the “2001 Plan”) after January 1, 2008,
as well as for forfeitures, expirations or awards that under the 2001 Plan
otherwise settled in cash after the adoption thereof). As of
September 30, 2009, 200,670 shares remained available for grant under the 2008
Plan. Upon effectiveness of the 2008 Plan in April 2008, the Company
ceased making grants under the 2001 Plan. The 2008 Plan and the 2001
Plan are administered by the Company’s Management Development and Compensation
Committee (the “Compensation Committee”), a standing committee of the Board of
Directors (the “Board”).
Under the
terms of the 2008 Plan and the 2001 Plan, plan participants may use shares to
cover tax withholding on income earned as a result of appreciation of
equity-based instruments upon exercise, vesting and/or lapsing of restrictions
thereon. Upon the exercise of stock options and the vesting of other
equity awards granted under the Plans, participants will generally have taxable
income subject to statutory withholding requirements. The number of
shares that may be issued to participants upon the exercise of stock options and
the vesting of equity awards may be reduced by the number of shares having a
market value equal to the amount of tax required to be withheld by the Company
to satisfy Federal, state and local tax obligations as a result of such exercise
or vesting.
Stock
Options
Options
granted under the Plan: (a) typically vest over a three-year period and, in
certain instances, fully vest upon a change in control of the Company, (b) have
an exercise price that may not be less than 100% of its fair market value on the
date of grant (110% for ISOs granted to a stockholder who holds more than 10% of
the outstanding stock of the Company), and (c) are generally exercisable for ten
years (five years for ISOs granted to a stockholder holding more than 10% of the
outstanding stock of the Company) after the date of grant, subject to earlier
termination in certain circumstances.
The
Company recognized compensation expense related to stock options of $0.6 million
and $0.4 million for the three months ended September 30, 2009 and 2008,
respectively, and $1.5 million and $1.7 million for the nine months ended
September 30, 2009 and 2008, respectively.
The fair
value of each stock option award on the date of the grant was calculated using a
binomial option-pricing model. Option expense is amortized on a
straight-line basis over the requisite service period and was calculated with
the following weighted average assumptions:
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
|
September
30,
|
September
30,
|
||||||||||||
|
2009
|
2008
|
2009
|
2008
|
||||||||||
|
Expected
volatility
|
66.0 | % | - | 66.5 | % | 51.2 | % | ||||||
|
Risk-free
interest rate
|
3.55 | % | - | 2.97 | % | 3.86 | % | ||||||
|
Expected
life of options
|
5.1
years
|
- |
5.6
years
|
5.7
years
|
|||||||||
|
Dividend
rate
|
- | - | - | - | |||||||||
|
Fair
value of options
|
$ | 3.37 | - | $ | 1.60 | $ | 3.50 | ||||||
No stock
options or other equity-based incentive grants were made during the three months
ended September 30, 2008 and as such, no binomial pricing model assumptions for
new grants were established.
At
September 30, 2009, there was $3.5 million of unrecognized compensation expense
related to unvested option grants. That expense is expected to be recognized
over a weighted-average period of 2.0 years.
Restricted
Stock
Under the
2008 Plan, stock grants subject solely to an employee’s or director’s continued
service with the Company will not become fully vested less than (a) three years
from the date of grant to employees and, in certain instances, may fully vest
upon a change in control of the Company, and (b) one year from the date of grant
for directors. Stock grants subject to the achievement of performance
conditions will not vest less than one year from the date of grant where the
vesting of stock grants is subject to performance measures. Such
performance shares may vest after one year from grant. No such time
restrictions applied to stock grants made under the Company’s prior equity
compensation plans.
The
Company recognized compensation expense related to restricted stock awards of
$0.3 million and $0.5 million for the three months ended September 30, 2009 and
2008, respectively, and $0.9 million and $1.2 million for the nine months ended
September 30, 2009 and 2008, respectively.
As of
September 30, 2009, there was $1.0 million of unrecognized compensation expense
related to unvested restricted stock awards. That expense is expected to be
recognized over a weighted-average period of 1.4 years.
Since the
Company records compensation expense for restricted stock awards based on the
vesting requirements, which generally includes time elapsed, market conditions
and/or performance conditions, the weighted average period over which the
expense is recognized may vary from quarter to quarter. Also, future
equity-based compensation expense may be greater if additional restricted stock
awards are made.
Performance
Units
Under the
2008 Plan, the Compensation Committee may grant performance units to key
employees. The Compensation Committee will establish the terms and conditions of
any performance units granted, including the performance goals, the performance
period and the value for each performance unit. If the performance goals are
satisfied, the Company would pay the key employee an amount in cash equal to the
value of each performance unit at the time of payment. In no event may a key
employee receive an amount in excess of $1.0 million with respect to performance
units for any given year. To date, no performance units have been granted under
the 2008 Plan.
NOTE
5 – OPERATING SEGMENTS
In
accordance with ASC 280 Segment Reporting, (“ASC
280”), (formerly SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information (“SFAS 131”)), and based on the nature
of the Company’s services, the Company has two reportable segments: Specialty
Pharmacy Services and Traditional Pharmacy Services. ASC 280 requires
an enterprise to report segment information in the same way that management
internally organizes its business for assessing performance and making decisions
regarding allocation of resources. The Company evaluates the
performance of operating segments and allocates resources based on income from
operations.
Revenues
from Specialty Pharmacy Services and Traditional Pharmacy Services are derived
from the Company’s relationships with healthcare payors, including managed care
organizations, government funded and/or operated programs, third
party administrators (“TPAs”) and self-funded employer groups (collectively,
“Plan Sponsors”) as well as from our relationship with pharmaceutical
manufacturers, patients and physicians.
The
Specialty Pharmacy Services segment consists of the Company’s specialty pharmacy
distribution and therapy management services. Specialty Pharmacy
Services distribution occurs locally through community pharmacies, centrally
through mail order facilities and through our infusion pharmacies for patients
requiring infused medications in the home or infused at a variety of sites
including the Company’s ambulatory infusion sites. All Specialty
Pharmacy Services target certain specialty medications that are used to treat
patients living with chronic and other complex healthcare
conditions.
The
Traditional Pharmacy Services segment consists mainly of traditional mail order
pharmacy fulfillment, and to a lesser extent, prescription discount card
programs and integrated pharmacy benefit management services. These
Traditional Pharmacy Services are designed to offer Plan Sponsors cost-effective
delivery of pharmacy benefit plans including the low cost distribution of mail
services for plan members who receive traditional maintenance
medications.
In the
quarter ended September 30, 2009, the Company renamed the reportable segment
formerly known as “PBM Services” to “Traditional Pharmacy
Services”. The new title reflects a shift in the nature of the
business included in this segment which has become substantially more weighted
towards services other than fully funded pharmacy benefit management including
traditional mail service pharmacy fulfillment and prescription discount card
programs.
Segment
Reporting Information
(in
thousands)
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Results
of Operations:
|
||||||||||||||||
|
Revenue:
|
||||||||||||||||
|
Specialty
Pharmacy Services
|
$ | 279,006 | $ | 307,135 | $ | 828,790 | $ | 882,590 | ||||||||
|
Traditional
Pharmacy Services
|
54,470 | 52,292 | 159,184 | 152,748 | ||||||||||||
|
Total
|
$ | 333,476 | $ | 359,427 | $ | 987,974 | $ | 1,035,338 | ||||||||
|
Income
(loss) from operations:
|
||||||||||||||||
|
Specialty
Pharmacy Services
|
$ | 2,007 | $ | 153 | $ | 5,265 | $ | (1,728 | ) | |||||||
|
Traditional
Pharmacy Services
|
4,654 | 2,656 | 10,864 | 8,090 | ||||||||||||
|
Total
|
6,661 | 2,809 | 16,129 | 6,362 | ||||||||||||
|
Interest
expense, net
|
447 | 669 | 1,471 | 1,931 | ||||||||||||
|
Tax
provision
|
467 | 730 | 1,249 | 1,879 | ||||||||||||
|
Net
income:
|
$ | 5,747 | $ | 1,410 | $ | 13,409 | $ | 2,552 | ||||||||
|
Capital
expenditures:
|
||||||||||||||||
|
Specialty
Pharmacy Services
|
$ | 456 | $ | 1,844 | $ | 4,018 | $ | 4,820 | ||||||||
|
Traditional
Pharmacy Services
|
137 | 327 | 504 | 1,053 | ||||||||||||
|
Total
|
$ | 593 | $ | 2,171 | $ | 4,522 | $ | 5,873 | ||||||||
|
Depreciation
Expense:
|
||||||||||||||||
|
Specialty
Pharmacy Services
|
$ | 1,136 | $ | 1,008 | $ | 3,003 | $ | 2,870 | ||||||||
|
Traditional
Pharmacy Services
|
220 | 128 | 593 | 364 | ||||||||||||
|
Total
|
$ | 1,356 | $ | 1,136 | $ | 3,596 | $ | 3,234 | ||||||||
|
Total
Assets
|
||||||||||||||||
|
Specialty
Pharmacy Services
|
$ | 172,726 | $ | 269,201 | ||||||||||||
|
Traditional
Pharmacy Services
|
67,454 | 67,762 | ||||||||||||||
|
Total
|
$ | 240,180 | $ | 336,963 | ||||||||||||
Certain
prior period segment data has been reclassified to conform to the current year’s
presentation. These reclassifications had no material impact on
previously reported segment data.
NOTE
6 – LINE OF CREDIT
At
September 30, 2009, there was $39.6 million in outstanding borrowings under the
Company’s revolving credit facility (the “Facility”) with an affiliate of
Healthcare Finance Group, Inc. (“HFG”), as compared to $50.4 million at December
31, 2008. The Facility provides for borrowings of up to $85.0
million, at the London Inter-Bank Offered Rate (“LIBOR”) or a pre-determined
minimum rate plus the applicable margin and other associated fees, provided that
a sufficient level of receivable assets are available as
collateral. The term of the Facility runs through November 1,
2010. Under the terms of the Facility, the Company may request to
increase the amount available for borrowing up to $100.0 million and convert a
portion of any outstanding borrowings from a Revolving Loan into a Term
Loan. The borrowing base utilizes receivable balances and proceeds
thereof as security under the Facility. At September 30, 2009, the
Company had $45.4 million of credit available under the Facility on a borrowing
basis of $85.0 million. The weighted average interest rate on the
Facility during the quarter ended September 30, 2009 was 4.4% compared to 5.4%
for the quarter ended December 31, 2008.
The
Facility contains various covenants that, among other things, require the
Company to maintain certain financial ratios as defined in the agreements
governing the Facility. The Company was in compliance with all the
covenants contained in the agreements as of September 30, 2009.
NOTE
7 – INCOME TAXES
The
Company uses an estimated annual effective tax rate in determining its quarterly
provision for income taxes. The methodology employed is based on the
Company’s expected annual income, statutory tax rates and tax strategies
utilized in the various jurisdictions in which it operates.
Since
December 31, 2006, the Company has fully reserved its deferred tax assets as it
has concluded that it was more likely than not that its deferred tax assets
would not be utilized. The Company continually assesses the necessity
of maintaining a valuation allowance for its deferred tax assets. If
the Company determines in a future period that it is more likely than not that
the deferred tax assets will be utilized based upon application of the criteria
required per the accounting literature, the Company will reverse all or part of
the valuation allowance for its deferred tax assets.
For the
quarter ended September 30, 2009, the Company’s provision for income taxes was
$0.5 million with an effective tax rate of 7.5%. For the quarter
ended September 30, 2008, the Company’s provision for income taxes was $0.7
million with an effective rate of 34.1%. The lower effective tax rate
of 7.5% for the current quarter compared to the statutory rate is primarily a
result of a reduction in the valuation allowance due to the expected utilization
of a portion of the Company’s net operating losses in 2009. The
effective tax rate for the quarter ended September 30, 2008 differs from the
statutory rate primarily due to amortization of indefinite lived
assets.
For the
nine months ended September 30, 2009, the Company’s provision for income taxes
was $1.2 million with an effective tax rate of 8.5%. For the nine
months ended September 30, 2008, the Company’s provision for income taxes was
$1.9 million with an effective tax rate of 42.4%. The lower effective
tax rate of 8.5% for the nine months ended September 30, 2009 compared to the
statutory rate is primarily a result of a reduction in the valuation allowance
due to the expected utilization of a portion of the net operating losses in
2009. The effective tax rate for the nine months ended September 30,
2008 differs from the statutory rate primarily due to amortization of indefinite
lived assets.
The
Company files income tax returns with Federal, state and local
jurisdictions. The Company’s uncertain tax positions are related to
tax years that remain subject to examination. As of September 30,
2009, U.S. tax returns for the years 2005 through 2008 remain subject to
examination by Federal tax authorities. Tax returns for the years
2004 through 2008 remain subject to examination by state and local tax
authorities for a majority of the Company’s state and local
filings.
NOTE
8 – SECURITY INTEREST AND LETTERS OF CREDIT
Under the
terms of the prime vendor agreement with AmerisourceBergen Drug Company
(“ABDC”), the Company granted ABDC a secured, first priority lien in all of its
inventory as well as the proceeds thereof. In the ordinary course of
business, the Company obtained certain letters of credit (“LC”) from commercial
banks in favor of various parties. At September 30, 2009, there was
$1.1 million on deposit as collateral for these LCs.
The
following discussion should be read in conjunction with the audited consolidated
financial statements, including the notes thereto, and Management’s Discussion
and Analysis of Financial Condition and Results of Operations included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the
“Form 10-K”) filed with the U.S. Securities and Exchange Commission, as well as
our unaudited consolidated interim financial statements and the related notes
thereto included elsewhere in this Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2009 (this “Report”).
This
Report contains statements not purely historical and which may be considered
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), including statements regarding our
expectations, hopes, beliefs, intentions or strategies regarding the future.
These forward looking statements may include, but are not limited
to:
|
·
|
Statements
relating to our business development
activities;
|
|
·
|
Sales
and marketing efforts;
|
|
·
|
Status
of material contractual arrangements, including the negotiation or
re-negotiation of such
arrangements;
|
|
·
|
Future
capital expenditures;
|
|
·
|
Effects
of regulation and competition in our business;
and
|
|
·
|
Future
operation performance.
|
Investors
are cautioned that any such forward-looking statements are not guarantees of
future performance, involve risks and uncertainties and that actual results may
differ materially from those possible results discussed in the forward-looking
statements as a result of various factors. These factors include, among other
things:
|
·
|
Risks
associated with increased government regulation related to the health care
and insurance industries in general, and more specifically, pharmacy
benefit management and specialty pharmaceutical distribution
organizations;
|
|
·
|
Unfavorable
economic and market conditions, including governmental budget
constraints;
|
|
·
|
Reductions
in Federal and state reimbursement
rates;
|
|
·
|
Delays
or suspensions of Federal and state payments for services
provided;
|
|
·
|
Existence
of complex laws and regulations relating to our
business;
|
|
·
|
Compliance
with financial covenants required under our revolving credit
facility;
|
|
·
|
Availability
of financing sources;
|
|
·
|
Declines
and other changes in revenue due to expiration of short-term
contracts;
|
|
·
|
Network
lock-outs and decisions to in-source by health
insurers;
|
|
·
|
Unforeseen
problems arising from contract
terminations;
|
|
·
|
Increases
or other changes in our acquisition cost for our products;
and
|
|
·
|
Changes
in industry pricing benchmarks such as average wholesale price (“AWP”),
wholesale acquisition cost (“WAC”) and average manufacturer price (“AMP”),
including the impact of the AWP Class Action Litigation Settlement and/or
state Medicaid Agencies failure to adjust reimbursement
rates;
|
|
·
|
Increased
competition from our competitors, including competitors with greater
financial, technical, marketing and other resources, could have the effect
of reducing prices and margins.
|
You
should not place undue reliance on such forward-looking statements as they speak
only as of the date they are made. Except as required by law, we assume no
obligation to publicly update or revise any forward-looking statement even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
Business
Overview
We are a
specialty pharmaceutical healthcare organization that partners with patients,
physicians, healthcare payors and pharmaceutical manufacturers to provide access
to medications and management solutions to optimize outcomes for chronic and
other complex healthcare conditions.
Our
business is reported under two operating segments: (i) Specialty Pharmacy
Services, and (ii) Traditional Pharmacy Services. Our Specialty
Pharmacy Services segment includes comprehensive support, dispensing and
distribution, patient care management, data reporting, as well as a range of
other complex therapy management services for certain chronic health
conditions. The medications we dispense include oral, injectable and
infusible medications used to treat patients living with chronic and other
complex health conditions and are provided to patients and
physicians. Our Traditional Pharmacy Services segment consists mainly
of traditional mail service pharmacy fulfillment, and to a lesser extent,
prescription discount card programs and fully funded pharmacy benefit management
services.
In the
quarter ended September 30, 2009, we renamed the reportable segment formerly
known as “PBM Services” to “Traditional Pharmacy Services”. The new
title reflects a shift in the nature of the business included in this segment
which has become substantially more weighted towards services other than fully
funded pharmacy benefit management including traditional mail service pharmacy
fulfillment and prescription discount card programs.
Revenues
from Specialty Pharmacy Services and Traditional Pharmacy Services are derived
from our relationships with healthcare payors including managed care
organizations, government-funded and/or operated programs, third party
administrators (“TPAs”) and self-funded employer groups (collectively, “Plan
Sponsors”), as well as from our relationship with pharmaceutical manufacturers,
patients and physicians.
Our
Specialty Pharmacy Services are marketed and/or sold to Plan Sponsors,
pharmaceutical manufacturers, physicians, and patients, and target certain
specialty medications that are used to treat patients living with chronic and
other complex health conditions. These services include the distribution of
biotech and other high cost injectable, oral and infusible prescription
medications and the provision of therapy management services.
We
experienced a reduction in revenue in 2009 due to the termination of the Centers
for Medicare and Medicaid Services’ (“CMS”) Competitive Acquisition Program
(“CAP”), and certain United HealthCare (“UHC”) contracts. As
expected, our gross profit as a percentage of revenue increased as a result of
these contract terminations, as they operated at margin rates below the average
for Specialty Pharmacy Services.
On
September 26, 2009, First DataBank and Medi-Span reduced the markup factor
applied to WAC to determine the AWP for over 20,000 drug codes as a result of
the settlement of a class action lawsuit involving First DataBank and
Medi-Span. A majority of our Third Party Payor customers agreed to
adjust reimbursement rates payable to us following the implementation of the AWP
change and our net reimbursement remained the same. However, certain
state governmental agencies have declined to make any adjustment to their
reimbursement following the implementation of the AWP change and accordingly our
reimbursement, as well as those of our peers, for services provided to
government funded and/or operated programs will be reduced. The
impact of the AWP settlement will be to reduce our gross margins beginning in
the fourth quarter of 2009. We estimate the annual impact will be
approximately $5.0 million. In 2010, we expect the margin impact will be offset
by overall organic growth as well as an emphasis on higher margin business
mix.
Our
Traditional Pharmacy Services are marketed to Plan Sponsors and are designed to
promote a broad range of cost-effective, clinically appropriate pharmacy
services through our own mail service distribution facility and national
pharmacy retail network. We also administer prescription discount card programs
on behalf of commercial Plan Sponsors, most typically TPAs. Under such programs
we derive revenue on a per claim basis from the dispensing network
pharmacy.
Critical
Accounting Estimates
Our
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”). In preparing our financial
statements, we are required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. We evaluate our estimates
and judgments on an ongoing basis. We base those estimates and judgments on
historical experience and on various other factors that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results may differ from
these estimates, and different assumptions or conditions may yield different
estimates. There have been no changes to critical accounting estimates in the
quarter ended September 30, 2009.
For a
full description of our accounting policies please refer to Note 2 of Notes to
Consolidated Financial Statements included in the Form 10-K.
Results
of Operations
In the
following Management’s Discussion and Analysis we provide a discussion of
reported results for the three and nine month periods ended September 30, 2009
as compared to the same periods a year earlier.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||||
|
Revenue
|
$ | 333,476 | 100.0 | % | $ | 359,427 | 100.0 | % | $ | 987,974 | 100.0 | % | $ | 1,035,338 | 100.0 | % | ||||||||
|
Gross
profit
|
$ | 41,496 | 12.4 | % | $ | 36,081 | 10.0 | % | $ | 115,874 | 11.7 | % | $ | 104,179 | 10.1 | % | ||||||||
|
Income
from operations
|
$ | 6,661 | 2.0 | % | $ | 2,809 | 0.8 | % | $ | 16,129 | 1.6 | % | $ | 6,362 | 0.6 | % | ||||||||
|
Interest
expense, net
|
$ | 447 | 0.1 | % | $ | 669 | 0.2 | % | $ | 1,471 | 0.1 | % | $ | 1,931 | 0.2 | % | ||||||||
|
Income
before income taxes
|
$ | 6,214 | 1.9 | % | $ | 2,140 | 0.6 | % | $ | 14,658 | 1.5 | % | $ | 4,431 | 0.4 | % | ||||||||
|
Net
income
|
$ | 5,747 | 1.7 | % | $ | 1,410 | 0.4 | % | $ | 13,409 | 1.4 | % | $ | 2,552 | 0.2 | % | ||||||||
Revenue. Revenue for the
third quarter of 2009 was $333.5 million as compared to revenue of $359.4
million in the third quarter of 2008, a decrease of $25.9 million, or
7.2%. Specialty Pharmacy Services revenue for the third quarter of
2009 was $279.0 million as compared to revenue of $307.1 million for the same
period a year ago, a decrease of $28.1 million, or 9.2%. The decrease was
primarily due to the termination of the CAP and certain UHC contracts offset by
revenue generated under new contracts and drug inflation. Traditional Pharmacy
Services revenue for the third quarter of 2009 was $54.5 million, as compared to
revenue of $52.3 million for the same period a year ago, an increase of $2.2
million, or 4.2%. The increase was primarily attributable to growth in our
discount cash card programs.
Revenue
for the nine months ended September 30, 2009 was $988.0 million as compared to
revenue of $1,035.3 million for the nine months ended September 30, 2008, a
decrease of $47.3 million, or 4.6%. Specialty Pharmacy Services
revenue for the nine months ended September 30, 2009 was $828.8 million as
compared to revenue of $882.6 million for the same period a year ago, a decrease
of $53.8 million, or 6.1%. The decrease was primarily due to the termination of
the CAP and certain UHC contracts offset by revenue generated under new
contracts and drug inflation. Traditional Pharmacy Services revenue for the nine
months ended September 30, 2009 was $159.2 million, as compared to revenue of
$152.7 million for the same period a year ago, an increase of $6.5 million, or
4.3%. The increase was primarily attributable to growth in our discount cash
card programs.
Cost of Revenue and Gross
Profit. Cost of revenue for the third quarter of 2009 was
$292.0 million as compared to $323.3 million for the same period in
2008. Gross margin dollars were $41.5 million for the third quarter
of 2009 as compared to $36.1 million for the same period a year ago, an increase
of $5.4 million, or 15.0%. Gross margin as a percentage of revenue increased to
12.4% in the third quarter of 2009 from 10.0% in the third quarter of
2008. The increase in gross margin percentage from 2008 to 2009 was
primarily the result of the termination of the CAP and certain UHC contracts
which, as expected, reduced volume and increased Specialty Pharmacy Services’
overall margin percentage. In addition to a more favorable business
mix, supply chain programs and reduced shipping costs also contributed to the
increase of the gross margin percentage and dollars.
Cost of
revenue for the nine months ended September 30, 2009 was $872.1 million as
compared to $931.2 million for the same period in 2008. Gross margin
dollars were $115.9 million for the nine months ended September 30, 2009 as
compared to $104.2 million for the same period a year ago, an increase of $11.7
million, or 11.2%. Gross margin as a percentage of revenue increased to 11.7% in
the nine months ended September 30, 2009 from 10.1% in the nine months ended
September 30, 2008. The increase in gross margin percentage from 2008 to 2009
was primarily the result of the termination of the CAP and certain UHC contracts
which, as expected, reduced volumes and increased Specialty Pharmacy Services’
overall margin percentage. In addition to a more favorable business
mix, supply chain programs and reduced shipping costs also contributed to the
increase of the gross margin percentage and dollars. We also
experienced an increase in gross margin dollars in 2009 due to action taken to
purchase drugs during the fourth quarter of 2008 in anticipation of drug cost
increases to take effect during the first quarter of 2009. In early
2008, there was a longer than usual delay in updating the industry price lists
used by us and our peers to charge customers for reimbursement, which caused a
reduction in gross margin in the three months ended March 31, 2008.
Selling, General and Administrative
Expenses. Selling, general and administrative expenses (“SG&A”) for
the three months ended September 30, 2009 were $32.4 million, or 9.7% of total
revenue, as compared to $31.9 million, or 8.9% of total revenue, for the quarter
ended September 30, 2008. SG&A expenses were up slightly due to
several offsetting factors. First, variable broker costs to market discount card
programs increased $0.7 million due to revenue growth. Offsetting
this volume-based growth in SG&A was the $0.8 million reduction in cost due
to the absence of the one-time settlement with the Office of the Inspector
General (“OIG”) in the third quarter of 2008. In addition,
investments in our sales force and information technology increased salaries and
consulting costs. These costs were partially offset by continued cost control
measures in our operating units and reduction in Corporate overhead costs such
as employee benefits. Legal and Compliance costs also increased due to
refreshing our compliance programs.
SG&A
for the nine months ended September 30, 2009 was $94.3 million, or 9.5% of total
revenue, as compared to $95.0 million, or 9.2% of total revenue, for the same
period in 2008. SG&A expenses were down slightly due to several
offsetting factors. First, variable broker costs to market discount card
programs increased $2.3 million due to revenue growth. These costs
and costs to strengthen our sales force and information technology were more
than offset by continued cost control measures which reduced certain salaries
and benefits and by the absence of the one-time settlement with the Office of
the Inspector General (“OIG”) in the third quarter of 2008.
Bad Debt Expense. For the
third quarter of 2009, bad debt expense was $2.4 million, or 0.7% of revenue, as
compared to $1.4 million, or 0.4% of revenue, in the third quarter of
2008. Prior year results include recoveries on previously reserved
amounts. Our overall methodology used for determining our provision
for bad debt remains essentially unchanged.
For the
nine months ended September 30, 2009, bad debt expense was $5.4 million, or 0.5%
of revenue, as compared to $2.8 million, or 0.3% of revenue, in the nine months
ended September 30, 2008. Prior year results include recoveries on previously
reserved amounts. Our overall methodology used for determining our
provision for bad debt remains essentially unchanged.
Net Interest Expense. Net
interest expense was $0.4 million for the third quarter of 2009 as compared to
$0.7 million for the same period a year ago, due to reduced borrowing
levels.
Net
interest expense was $1.5 million for the nine months ended 2009 as compared to
$1.9 million for the same period a year ago, due to reduced borrowing levels as
well as a reduced borrowing rate.
Provision for Income Taxes.
For the quarter ended September 30, 2009, our provision for income taxes
was $0.5 million with an effective tax rate of 7.5%. For the quarter
ended September 30, 2008, our provision for income taxes was $0.7 million with
an effective rate of 34.1%. The lower effective tax rate of 7.5% for
the current quarter compared to the statutory rate is primarily a result of a
reduction in the valuation allowance due to the expected utilization of a
portion of the net operating losses in 2009. The effective tax rate
for the quarter ended September 30, 2008 differs from the statutory rate
primarily due to amortization of indefinite lived assets.
For the
nine months ended September 30, 2009, our provision for income taxes was $1.2
million with an effective tax rate of 8.5%. For the nine months ended
September 30, 2008, our provision for income taxes was $1.9 million with an
effective tax rate of 42.4%. The lower effective tax rate of 8.5% for
the nine months ended September 30, 2009 compared to the statutory rate is
primarily a result of a reduction in the valuation allowance due to the expected
utilization of a portion of the net operating losses in 2009. The
effective tax rate for the nine months ended September 30, 2008 differs from the
statutory rate primarily due to amortization of indefinite lived
assets.
Net Income and Income Per Share.
Net income for the third quarter of 2009 was $5.7 million, or $0.14 per
diluted share, as compared to net income of $1.4 million, or $0.04 per diluted
share, for the same period last year.
Net
income for the nine months ended September 30, 2009 was $13.4 million, or $0.34
per diluted share, as compared to net income of $2.6 million, or $0.07 per
diluted share, for the same period last year.
Liquidity
and Capital Resources
We
utilize both funds generated from operations and available credit under our
Facility (as defined below) for general working capital needs, capital
expenditures and acquisitions.
Net cash
provided by operating activities totaled $14.0 million during the first nine
months of 2009, as compared to $15.4 million of cash used in operating
activities during the first nine months of 2008. The increase in cash
provided by operating activities was primarily the result of net income of $13.4
million, as well as a decrease in accounts receivable, which was offset by an
increase in inventory and by a reduction in accounts payable. The
$11.3 million reduction in accounts receivable was due to termination of the CAP
and certain UHC contracts. The increase of $2.6 million in inventory
was a result of supply chain programs. The decrease of $14.0 million
in accounts payable is primarily related to the timing of strategic inventory
purchases.
Net cash
used in investing activities during the first nine months of 2009 was $4.5
million compared to $5.9 million for the same period in 2008. The
cash used was driven primarily by the investment in our information technology
infrastructure during the first nine months of 2009 and 2008.
Net cash
used in financing activities during the first nine months of 2009 was $9.5
million compared to $21.3 million of cash provided by financing activities for
the same period a year ago. The cash used in financing activities to
pay down the line of credit was generated from higher net income and lower
working capital requirements. We also received $1.4 million from the
exercise of employee stock compensation plans in 2009.
At
September 30, 2009, there was $39.6 million in outstanding borrowings under our
revolving credit facility (the “Facility”) with an affiliate of Healthcare
Finance Group, Inc. (“HFG”), as compared to $50.4 million at December 31,
2008. The Facility provides for borrowing up to $85.0 million at the
London Inter-Bank Offered Rate (“LIBOR”) or a pre-determined minimum rate plus
the applicable margin and other associated fees, provided a sufficient level of
receivable assets are available as collateral. The term of the
Facility runs through November 1, 2010. Under the terms of the
Facility, we may request to increase the amount available for borrowing up to
$100.0 million, and convert a portion of any outstanding borrowings from a
Revolving Loan into a Term Loan. The borrowing base utilizes
receivable balances and proceeds thereof as security under the
Facility. At September 30, 2009 we had $45.4 million of credit
available on a borrowing basis of $85.0 million under the Facility.
The
Facility contains various covenants that, among other things, require us to
maintain certain financial ratios as defined in the agreements governing the
Facility. We were in compliance with all the covenants contained in
the agreements as of September 30, 2009
At
September 30, 2009, we had working capital of $76.2 million compared to $58.8
million at December 31, 2008. We made substantial information
technology (“IT”) systems investments during 2008 and will continue to invest in
2009 to improve efficiencies, internals controls, and data reporting and
management. We believe that our cash on hand, together with funds
available under the Facility and cash expected to be generated from operating
activities, will be sufficient to fund our anticipated working capital, IT
systems investments and other cash needs for at least the next twelve
months.
We may
also pursue joint venture arrangements, business acquisitions and other
transactions designed to expand our business, which we would expect to fund from
borrowings under the Facility, other future indebtedness or, if appropriate, the
private and/or public sale or exchange of our debt or equity
securities.
At
September 30, 2009, we had Federal net operating loss carryforwards available to
us of approximately $29.0 million, of which $5.9 million is subject to an annual
limitation, all of which will begin expiring in 2017 and later. We
have state net operating loss carryforwards remaining of approximately $15.3
million, the majority of which will begin expiring in 2017 and
later.
In the
ordinary course of business, we also obtained certain letters of credit (“LC”)
from commercial banks in favor of various parties. At September 30,
2009, there was $1.1 million on deposit as collateral for these
LCs.
Exposure
to market risk for changes in interest rates relates to our outstanding debt. At
September 30, 2009 we did not have any long-term debt. We are exposed to
interest rate risk primarily through our borrowing activities under our line of
credit discussed in Item 2 of this Report. Based on our line of credit balance
at September 30, 2009, a 1% increase in current market interest rates would have
an impact of approximately $0.4 million, pre-tax, on an annual basis. We do not
use financial instruments for trading or other speculative purposes and are not
a party to any derivative financial instruments.
At
September 30, 2009, the carrying values of cash and cash equivalents, accounts
receivable, accounts payable, claims payable, payables to Plan Sponsors and
others, debt and line of credit approximate fair value due to their short-term
nature.
Because
management does not believe that our exposure to interest rate market risk is
material at this time, we have not developed or implemented a strategy to manage
this market risk through the use of derivative financial instruments or
otherwise. We will assess the significance of interest rate market risk from
time to time and will develop and implement strategies to manage that market
risk as appropriate.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to reasonably
assure that information required to be disclosed by us in reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported on
a timely basis and that such information is accumulated and communicated to
management, including the Chief Executive Officer (“CEO”) and the Chief
Financial Officer (“CFO”) as appropriate, to allow for timely decisions
regarding required disclosures.
Based on
their evaluation as of September 30, 2009, pursuant to Exchange Act Rule
13a-15(b), the Company’s management, including its CEO and CFO, believe that our
disclosure controls and procedures are effective.
Changes
in Internal Controls
Throughout
2009 we have been implementing a new pharmacy dispensing, clinical management
and accounts receivable management system. The implementation of this
system resulted in changes to our system of internal control over financial
reporting that we believe enhance our system of internal controls and was not
made in response to any material deficiency in internal control.
Other
than the implementation of this new system, there have been no changes in our
internal control over financial reporting that occurred during our most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Without
admitting liability for any matters alleged in the complaint, on August 6, 2009,
the Company agreed to settle all claims in the Eufaula action without any
admission of liability. This settlement was preliminarily approved by the
court on August 27, 2009, and the final court approval is scheduled to be heard
on November 4, 2009. If approved by the court at the hearing scheduled for
November 4, 2009, members of a settlement class of pharmacies would receive
$0.065 for each branded prescription filled during the class period properly
presented to the administrator, a fee for their attorneys and incentive fee for
the named plaintiff, and costs of administration. In exchange, the Company
would be released from all class members' claims. The settlement is fully
covered by insurance and will not ahve any adverse impact on the Company's
business, financial position or results of operations.
(a) Exhibits.
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Exhibit
3.1
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Second
Amended and Restated Certificate of Incorporation of BioScrip, Inc.
(Incorporated by reference to Exhibit 3.2 to the Company’s Registration
Statement on Form S-4 (File No. 333-119098), as amended, which became
effective on January 26, 2005)
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Exhibit
3.2
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Amended
and Restated By-Laws of BioScrip, Inc. (Incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC
on July 30, 2009, accession No. 0001014739-09-000029)
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Exhibit
10.1
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Prime
Vendor Agreement dates as of July 1, 2009 between AmerisourceBergen Drug
Corporation and the Company.*
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Exhibit
31.1
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Certification
of Richard H. Friedman pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Exhibit
31.2
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Certification
of Stanley G. Rosenbaum pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Exhibit
32.1
|
Certification
of Richard H. Friedman pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
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Exhibit
32.2
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Certification
of Stanley G. Rosenbaum pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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____________________
*The
Registrant has requested confidential treatment with respect to certain
information contained in this exhibit. In the event that the
Commission should deny such request in whole or in part, the Company shall file
the exhibit by amendment to this Quarterly Report on Form 10-Q (which shall
include those portions of the exhibit not deemed Confidential by the
Commissions).
Pursuant
to the requirements 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.
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BIOSCRIP,
INC
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Date:
November 2, 2009
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/s/ Stanley G. Rosenbaum
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Stanley
G. Rosenbaum, Chief Financial Officer,
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Treasurer
and Principal Accounting Officer
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