Exhibit 99.3

 

The following unaudited pro forma combined financial information has been prepared to assist you in your analysis of the financial effects of BioScrip Inc.’s proposed acquisition of CHS and related transactions. The unaudited pro forma combined financial information was prepared using the historical consolidated financial statements of BioScrip and CHS. This information should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and accompanying notes of BioScrip and CHS included in the BioScrip Proxy Statement, BioScrip’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 2, 2010, and the consolidated financial statements and accompanying notes of CHS included as Exhibit 99.1 to this Current Report on Form 8-K.

 

The accompanying unaudited pro forma combined financial information gives effect to the merger with CHS, assuming a purchase price of $242 million in cash, which will be used to retire approximately $132 million of CHS debt, and the issuance of BioScrip common stock and warrants. The assumed preliminary fair value of the common stock is $108 million, based on a price per share of $8.3441, and the assumed fair value of the warrants is $15 million, for total merger consideration of $365 million. The pro forma adjustments related to the merger with CHS are preliminary and do not reflect the final purchase price, final debt components or final allocation of the excess of the purchase price over the fair value of the assets and liabilities of CHS, as the process to assign a fair value to the various tangible and intangible assets acquired and liabilities assumed has only just commenced. BioScrip has not had sufficient time to completely evaluate the significant identifiable assets and liabilities assumed of CHS, and in particular CHS’s unique identifiable intangible assets. Accordingly, the pro forma adjustments, including the allocations of purchase price, are preliminary and have been made solely for the purpose of providing unaudited pro forma consolidated financial information. Final adjustments will result in modifications to the final purchase price, debt components and allocation of the purchase price, which will affect the fair value assigned to the tangible or intangible assets and amount of interest expense, depreciation and amortization expense, and other recorded in the statement of operations. The effect of the changes to the pro forma statement of operations could be material. The unaudited pro forma financial information is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position that may occur in the future.

 

The historical consolidated financial information has been adjusted in the unaudited pro forma combined financial information to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The pro forma information does not reflect revenue opportunities and cost savings that we expect to realize after the merger with CHS. The pro forma financial information also does not reflect expenses related to integration activity or exit costs that may be incurred by BioScrip or CHS in connection with this merger.

 

The unaudited pro forma combined balance sheet assumes that the merger with CHS took place on December 31, 2009 and combines BioScrip’s audited consolidated balance sheet as of December 31, 2009 with CHS’s audited consolidated balance sheet as of December 31, 2009. The unaudited pro forma combined statement of operations for 2009 assumes that the merger with CHS took place on January 1, 2009 and combines BioScrip’s audited consolidated statement of operations for the fiscal year ended December 31, 2009 with CHS’s audited consolidated statement of operations for the fiscal year ended December 31, 2009.

		BioScrip				CHS
		Historical				Historical				Preliminary
		December 31,				December 31,				Pro Forma				Pro Forma
		2009				2009				Adjustments*				Combined
ASSETS
Current assets
Cash and cash equivalents		$	—			$	10,103			$	23,331	(A)		$	33,434
Receivables, net			151,113				42,146				—				193,259
Inventory			51,256				3,938				—				55,194
Prepaid expenses and other current assets			3,999				2,250				—				6,249
Short term deferred taxes			12,913				2,140				—				15,053
Total current assets			219,281				60,577				23,331				303,189
Property and equipment, net			15,454				7,044				—				22,498
Goodwill			24,498				220,371				91,432	(B)			336,301
Intangible assets			—				21,517				—				21,517
Deferred financing fees			—				1,441				10,559	(C)			12,000
Other assets			1,194				1,908				—				3,102
Long term deferred taxes			26,793				—				—				26,793
Total assets		$	287,220			$	312,858			$	125,322			$	725,400
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Line of credit		$	30,389			$	—			$	(30,389	)(A)		$	—
Current portion of long term debt			—				10,917				(8,417	)(D)			2,500
Current portion of capital lease obligations			—				134				—				134
Accounts payable			74,535				1,651				—				76,186
Claims payable			4,068				—				—				4,068
Amounts due to plan sponsors			4,938				—				—				4,938
Accrued expenses and other current liabilities			14,273				19,834				—				34,107
Total current liabilities			128,203				32,536				(38,806	)			121,933
Deferred taxes			—				5,907				—				5,907
Income taxes payable—long term			2,437				—				—				2,437
Capital lease obligations			—				220				—				220
Long term debt			—				129,540				192,960	(E)			322,500
Other long term liabilities			787				—				—				787
Total liabilities			131,427				168,203				154,154				453,784
CHS Preferred stock			—				25,036				(25,036	)(F)			—
Stockholders’ equity
Common stock, par value			4				91				(91	)(G)			4
Treasury stock, shares at cost			(10,367	)			—				—				(10,367	)
Additional paid-in capital			254,677				96,934				26,889	(H)			378,500
Accumulated (deficit) earnings			(88,521	)			22,594				(30,594	)(I)			(96,521	)
Total stockholders’ equity			155,793				119,619				(3,796	)			271,616
Total liabilities and stockholders’ equity		$	287,220			$	312,858			$	125,322			$	725,400
(In thousands)

*		See Note 6 for an explanation of the preliminary pro forma adjustments.

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		BioScrip				CHS
		Historical				Historical				Preliminary
		Fiscal Year Ended				Fiscal Year Ended				Pro Forma				Pro Forma
		December 31, 2009				December 31, 2009				Adjustments*				Combined
Revenue		$	1,329,525			$	254,067				—			$	1,583,592
Cost of revenue			1,171,703				124,763				—				1,296,466
Gross profit			157,822				129,304				—				287,126
Selling, general and administrative expenses			128,687				88,392				—				217,079
Bad debt expense			8,636				5,790				—				14,426
Depreciation and amortization			5,033				3,904				—				8,937
Income from operations			15,466				31,218				—				46,684
Interest expense, net			1,920				7,280				22,295	(A)			31,495
Income before income taxes			13,546				23,938				(22,295	)			15,189
Tax (benefit) provision			(40,553	)			9,208				(8,918	)(B)			(40,263	)
Net income			54,099				14,730				(13,377	)			55,452
Cumulative preferred stock dividends			—				(1,918	)			1,918	(C)			—
Income available to common stockholders		$	54,099			$	12,812			$	(11,459	)		$	55,452
Net income available to common stockholder per share
Basic		$	1.39			$	0.14							$	1.07
Diluted		$	1.36			$	0.12							$	1.05
Weighted average common shares outstanding:
Basic			38,985				90,898								51,641
Diluted			39,737				105,132								52,703
(In thousands, except per share amounts)

*		See Note 7 for an explanation of the preliminary pro forma adjustments.

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1.	Description of Transaction

	•	repay the indebtedness of CHS, which was approximately $130.4 million (net of CHS’s cash) at December 31, 2009, and enter into a new credit facility that will provide for a $100.0 million senior secured term loan facility, or Term Loan, and a $50.0 million senior secured revolving credit facility, which are referred to collectively as the New Credit Facility;
	•	pay cash consideration of $110.8 million, subject to adjustment as described below;
	•	issue up to approximately 12.9 million shares of BioScrip common stock, subject to adjustment as described below, of which approximately 2.7 million shares initially will be held in escrow to fund indemnification payments, if any; and
	•	issue warrants to acquire approximately 3.4 million shares of BioScrip common stock, exercisable at $10.00 per share and having a five-year term.

	•	a number of shares of BioScrip’s common stock;
	•	cash; and
	•	following the closing of the merger, its pro rata share of any dividends or distributions of BioScrip’s common stock made from the escrow fund, in each case calculated in accordance with the terms of the Merger Agreement.

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2.	Basis of Presentation

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3.	Accounting Policies

4.	Estimate of Consideration Expected to be Transferred and Purchase Price to be Allocated

Cash payable as merger consideration(a)		$	110,823
Assumption and refinance of CHS debt(a)			130,354
Value of BioScrip common stock issued as merger consideration(b)			108,823
Value of BioScrip warrants issued as merger consideration(b)			15,000
Estimate of merger consideration to acquire the shares of CHS		$	365,000
(In thousands)

(a)		BioScrip expects to fund the cash payments, repay existing indebtedness of CHS and refinance indebtedness of BioScrip with newly borrowed funds under the Term Loan and the issuance of the notes.
(b)		The estimated value of BioScrip shares issuable as merger consideration is based upon the 10-day weighted average of the closing common stock price as of January 22, 2010 of $8.3441 per share. Accordingly, the unaudited pro forma combined financial information assumes that BioScrip will issue 12,754,281 shares and roll over stock options with a combined value of approximately $108 million in connection with the merger. Warrants are valued at $15 million based on 3,400,945 issued, exercisable at $10 per share over a five year period. If the common stock value of BioScrip falls below 62.5% of the weighted

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		average stock value of $8.3441 used to value the common stock for the 10 trading days immediately preceding the scheduled date of closing, or $5.2151 per share, a condition of CHS closing the merger agreement would not be satisfied.

5.	Estimate of Assets to be Acquired and Liabilities to be Assumed

Book value of CHS net assets acquired as of December 31, 2009		$	144,655
Write off of CHS deferred financing costs			(1,441	)
Record goodwill adjustment			91,432
CHS debt (net of CHS’s cash) to be repaid at closing			130,354
Purchase price allocated		$	365,000
(In thousands)

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6.	Adjustments to Unaudited Pro Forma Combined Balance Sheet:

Sources:
Debt expected to be issued in connection with the merger (See Note 4(a))		$	325,000
Uses:
Cash consideration to stockholders of CHS			(110,823	)
Assumption and refinance of CHS debt			(140,457	)
Repay BioScrip line of credit			(30,389	)
Estimated merger-related expenses			(20,000	)
Net adjustment of cash and cash equivalents		$	23,331
(In thousands)

Eliminate CHS’s historical goodwill		$	(220,371	)
Record transaction goodwill			311,803
Goodwill adjustment		$	91,432
(In thousands)

Debt financing fees		$	12,000
Write-off of existing CHS deferred financing costs			(1,441	)
Deferred financing fees adjustment		$	10,559
(In thousands)

Elimination of CHS short term debt		$	(10,917	)
Reclassification of short term portion of newly issued debt			2,500
Short term debt adjustment		$	(8,417	)
(In thousands)

Debt expected to be issued by BioScrip in connection with the merger (See Note 4(a))		$	325,000
Elimination of existing CHS long term debt			(129,540	)
Reclassification of short term portion of newly issued debt			(2,500	)
Long term debt adjustment		$	192,960
(In thousands)

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Eliminate CHS existing paid-in capital		$	(96,934	)
Issuance of BioScrip common stock			108,823
Issuance of BioScrip warrants			15,000
Additional paid-in capital adjustment		$	26,889
(In thousands)

Eliminate CHS retained earnings		$	(22,594	)
Impact of transaction closing costs expensed at time of closing			(8,000	)
Retained earnings adjustment		$	(30,594	)
(In thousands)

7.	Adjustments to Unaudited Pro Forma Combined Statement of Earnings:

		Twelve Months Ended
		December 31, 2009
Estimated interest on new debt		$	29,313
Amortization of deferred financing costs			2,182
Eliminate interest cost on existing BioScrip line of credit			(1,920	)
Eliminate interest cost on existing CHS debt			(7,280	)
Total interest adjustments		$	22,295
(In thousands)

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