BioScrip, Inc. (Nasdaq: BIOS) today announced 2011 third quarter financial results. Revenue for the three months ended September 30, 2011 was $454.0 million and net income was $0.5 million, or $0.01 per diluted share, including $5.0 million in restructuring charges, severance and other employee costs. Excluding the after tax effect of these charges, the Company earned $0.10 per diluted share. Adjusted EBITDA for the third quarter was $19.0 million.
Third Quarter Highlights
- Revenue was $454.0 million, an increase of $12.9 million or 2.9% compared to prior year;
- Gross profit was $77.1 million or 17.0% of sales, compared to $75.4 million or 17.1% of sales in the prior year;
- Adjusted EBITDA generated by the operating segments before allocation of corporate expenses was $25.8 million, compared to $25.7 million in the prior year;
- Adjusted EBITDA was $19.0 million, compared to $18.1 million in the prior year;
- Restructuring expense of $3.5 million and acquisition, integration, severance and other employee costs of $1.5 million were recorded as a result of the Company's strategic assessment;
- Net income was $0.5 million, or $0.01 per diluted share, compared to $2.0 million, or $0.04 per diluted share in the prior year;
- Net income, excluding the after tax effect of the restructuring charges, severance and other employee costs, was $5.7 million, or $0.10 per diluted share;
- Current portion of long-term debt decreased from $81.4 million at December 31, 2010 to $52.0 million at September 30, 2011;
- Cash provided by operating activities was $39.5 million for the nine months ended September 30, 2011 compared to $5.9 million for the prior year.
Rick Smith, President and Chief Executive Officer of BioScrip, stated, "In the third quarter, we generated $19.0 million in Adjusted EBITDA and continued to grow patient census through our local referral sources and expanded managed care relationships in both our Pharmacy Services and Infusion/Home Health Services segments. We achieved a 2.9% increase in year-over-year revenue, replaced $19 million of discontinued revenue included in Q3 2010, and maintained our gross margin. Overall growth occurred in spite of a challenging economic environment impacting demand for services, lower acuity levels, shifts in reimbursement rates, and other short term trends impacting companies industry wide. The diversification that we have in our payor mix has enabled us to keep making forward progress."
"While we have more work ahead of us, the current quarter's results reflect progress from our efforts over the last year," concluded Mr. Smith.
Results of Operations
Third Quarter 2011 versus Third Quarter 2010
Revenue for the third quarter of 2011 totaled $454.0 million, compared to $441.2 million for the same period a year ago, an increase of $12.9 million, or 2.9%. Infusion/Home Health Services revenue for the third quarter of 2011 was $109.6 million compared to $111.8 in the prior year, a decrease of $2.3 million, or 2.1%. Pharmacy Services revenue for the third quarter of 2011 was $344.5 million compared to $329.3 million for the prior year period, an increase of $15.2 million, or 4.6%. Consolidated gross profit for the third quarter of 2011 was $77.1 million, or 17.0% of revenue, compared to $75.4 million, or 17.1% of revenue, for the third quarter of 2010. Operating income was $7.9 million, including $5.0 million of restructuring charges, acquisition, integration, severance and other employee costs compared to operating income of $12.2 million for the third quarter of 2010, including $1.0 million of acquisition, integration, severance and other employee costs.
During the third quarter of 2011, BioScrip generated $25.8 million of segment Adjusted EBITDA, or 5.7% of total revenue, compared to $25.7 million, or 5.8% of total revenue in the prior year. The Infusion/Home Health Services segment generated $10.5 million of Adjusted EBITDA, or 9.6% of segment revenue compared to $14.9 million, or 13.4% of segment revenue in the prior year. This is a result of decreased patient volumes in both anti-infective therapies and the IVIG therapy, a decrease in Medicare and Medicaid home health reimbursement rates and an increase in the provision for bad debt. In addition, reimbursement rates on certain managed care contracts which were previously billed as out-of-network provider status contributed to the decrease. The Pharmacy Services segment generated $15.4 million of segment Adjusted EBITDA, or 4.5% of segment revenue. This compares to $10.7 million, or 3.3% of segment revenue in the prior year. Pharmacy Services segment Adjusted EBITDA increased due to growth in discount cash card program volumes, new managed care contracts, growth in oncology, arthritis and multiple sclerosis therapies, and industry-wide drug inflation. In addition, the Pharmacy Services segment experienced a reduction in bad debt expense. In total, consolidated bad debt expense decreased from $5.3 million in 2010 to $3.7 million in 2011.
On a consolidated basis, BioScrip reported $19.0 million of Adjusted EBITDA during the third quarter of 2011, or 4.2% of total revenue, compared to $18.1 million, or 4.1% of total revenue in the prior year.
Interest expense in the third quarter of 2011 was $7.1 million, compared to $8.1 million for the same period in 2010. The decrease is due to a lower average debt balance compared to the prior year and a refinancing in December 2010 that resulted in a lower effective interest rate.
Net income for the third quarter of 2011 was $0.5 million, or $0.01 per diluted share, compared to net income of $2.0 million, or $0.04 per diluted share in the prior year.
Nine Months Ended 2011 versus Nine Months Ended 2010
Revenue for the nine months ended September 30, 2011 was $1.3 billion compared to $1.2 billion for the comparable period a year ago. Infusion/Home Health Services segment revenue for the nine months ended September 30, 2011 was $329.4 million, compared to $264.6 million for the same period a year ago, an increase of $64.7 million, or 24.5%, primarily as a result of the CHS acquisition in March 2010. Pharmacy Services segment revenue for the nine months ended September 30, 2011 was $1.0 billion compared to revenue of $923.6 million for the same period a year ago, an increase of $81.7 million, or 8.8%.
Consolidated gross profit for the nine months ended September 30, 2011 was $230.5 million compared to $187.8 million for the same period a year ago. Gross profit as a percent of revenue for the nine months ended September 30, 2011 was 17.3%, compared to 15.8% for the same period in 2010.
For the nine months ended September 30, 2011, BioScrip generated $76.2 million of segment Adjusted EBITDA, or 5.7% as a percentage of total revenue, compared to $62.8 million, or 5.3% of total revenue for the prior year period. The Infusion/Home Health Services segment reported $33.1 million of segment Adjusted EBITDA, or 10.0% of segment revenue, compared to $31.7 million, or 12.0% of segment revenue, in the prior year. The Pharmacy Services segment generated $43.1 million of segment Adjusted EBITDA, or 4.3% as a percent of segment revenue, compared to $31.1 million, or 3.4% of segment revenue in the prior year.
On a consolidated basis, BioScrip reported $53.7 million of Adjusted EBITDA for the nine months ended September 30, 2011, or 4.0% of total revenue, compared to $39.2 million, or 3.3% of total revenue in the prior year. The increase was primarily related to the acquisition of CHS and growth in discount cash card volumes.
Interest expense for the nine months ended September 30, 2011 was $21.5 million compared to $19.5 million for the same period in 2010. The increase was related to debt issued in connection with the March 2010 acquisition of CHS.
An income tax expense of $0.2 million was recorded for the nine months ended September 30, 2011 on pre-tax net income of $1.4 million. The effective tax rate for the nine-month period is below the statutory rate due to a reduction in our valuation allowance that offsets the expense generated by year-to-date earnings. This compares to an income tax expense of $2.0 million recorded for the nine months ended September 30, 2010.
Net income for the nine months ended September 30, 2011 was $1.2 million, or $0.02 per diluted share. This compares to a net loss of $2.1 million or $0.04 per share for the same period last year.
Liquidity and Capital Resources
For the nine months ended September 30, 2011, BioScrip generated $39.5 million of cash from operating activities compared to $5.9 million in the prior year. Cash from operating activities is expected to be sufficient to fund anticipated working capital requirements, information technology investments, scheduled interest repayments and other cash needs for at least the next twelve months.
As of September 30, 2011, the Company had outstanding borrowings of $49.9 million under its senior secured revolving credit facility compared to $81.2 million as of December 31, 2010.
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