What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-03 · 133 added, 93 removed, 408 unchanged (36% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

CURRENT ASSETS:

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$ 0.0001 par value;

12,500,000 shares authorized, no shares outstanding as of June 30, 2021 and December 31, 2020, respectively

12,500,000 shares authorized, no shares outstanding as of September 30, 2021 and December 31, 2020, respectively

Common stock;

$ 0.0001 par value:

250,000,000 shares authorized, 180,251,351 shares issued and 179,867,629 shares outstanding as of June 30, 2021;

250,000,000 shares authorized, 180,258,555 shares issued and 179,874,833 shares outstanding as of September 30, 2021;

180,178,308 shares issued and 179,794,586 shares outstanding as of December 31, 2020

Treasury stock;

383,722 shares outstanding, at cost, as of June 30, 2021 and December 31, 2020, respectively

383,722 shares outstanding, at cost, as of September 30, 2021 and December 31, 2020, respectively

( 2,403 ) ( 2,403 )

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

29 unchanged sentences

(IN THOUSANDS)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Non-cash operating lease costs 11,137 13,020

Paid-in-kind interest capitalized as principal — 7,525

Deferred income taxes - net 1,180 897

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Deferred financing costs ( 2,880 ) —

Net proceeds from issuance of common stock — 118,934

Debt prepayment fees ( 2,458 ) —

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Balance - June 30, 2020 $ — $ 18 $ ( 2,403 ) $ 1,009,135 $ ( 119,533 ) $ ( 19,251 ) $ 867,966

Exercise of stock options, vesting of restricted stock and related tax withholdings — — — ( 259 ) — — ( 259 )

Stock-based incentive compensation — — — 1,170 — — 1,170

Net proceeds from the issuance of common stock — 1 — 118,933 — — 118,934

Net income — — — — 1,663 — 1,663

Other comprehensive income — — — — — 4,022 4,022

Balance - September 30, 2020 — 19 ( 2,403 ) 1,128,979 ( 117,870 ) ( 15,229 ) 993,496

Balance - December 31, 2020 $ — $ 18 $ ( 2,403 ) $ 1,129,312 $ ( 100,031 ) $ ( 11,172 ) $ 1,015,724

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Balance - June 30, 2021 $ — $ 18 $ ( 2,403 ) $ 1,132,964 $ ( 71,076 ) $ ( 2,892 ) $ 1,056,611

Exercise of stock options, vesting of restricted stock, and related tax withholdings — — — ( 15 ) — — ( 15 )

Stock-based incentive compensation — — — 2,516 — — 2,516

Net income — — — — 35,476 — 35,476

Other comprehensive income — — — — — 2,892 2,892

Balance - September 30, 2021 — 18 ( 2,403 ) 1,135,465 ( 35,600 ) — 1,097,480

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.

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(“Option Care Health”, or the “Company”).

The combined Company’s stock is listed on the Nasdaq Global Select Market as of June 30, 2021.

See Note 15, Stockholders’ Equity , for further discussion of HC I’s ownership as of June 30, 2021.

The combined Company’s stock is listed on the Nasdaq Global Select Market as of September 30, 2021.

See Note 15, Stockholders’ Equity , for further discussion of HC I’s ownership as of September 30, 2021.

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 98 full service pharmacies.

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In April 2020, the Company received $ 11.7 million in Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) grant funds from the federal government, which was reflected in the second quarter 2020 as a cash inflow from financing activities within other financing cash flows in the unaudited condensed consolidated statements of cash flows.

During the third quarter 2020, the Company returned the funds as unused to the federal government.

Prepaid expenses and other current assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $ 39.9 million and $ 35.2 million as of June 30, 2021 and December 31, 2020, respectively.

During the third quarter 2020, the Company returned the funds as unused to the federal government, which was reflected as a cash outflow from financing activities within other financing cash flows in the unaudited condensed consolidated statements of cash flows.

Prepaid expenses and other current assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $ 36.9 million and $ 35.2 million as of September 30, 2021 and December 31, 2020, respectively.

There were no other items included in prepaid expenses and other current assets that comprised 5% or more of total current assets.

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The balance of these investments is included in other noncurrent assets in the accompanying condensed consolidated balance sheets.

As of June 30, 2021 and December 31, 2020, the balance of the investments were $ 19.9 million and $ 17.0 million, respectively.

As of September 30, 2021 and December 31, 2020, the balance of the investments were $ 20.3 million and $ 17.0 million, respectively.

The investments are increased to reflect the Company’s capital contributions and equity in earnings of the investees.

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The Company’s proportionate share of earnings or losses of the investees are recorded in equity in earnings of joint ventures in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).

The Company’s proportionate share of earnings was $ 1.7 million and $ 2.9 million for the three and six months ended June 30, 2021.

The Company’s proportionate share of earnings was $ 1.0 million and $ 1.6 million for the three and six months ended June 30, 2020.

The Company’s proportionate share of earnings was $ 1.7 million and $ 4.6 million for the three and nine months ended September 30, 2021.

The Company’s proportionate share of earnings was $ 0.8 million and $ 2.4 million for the three and nine months ended September 30, 2020.

Distributions from the investees are treated as cash inflows from operating activities within other adjustments in the unaudited condensed consolidated statements of cash flows.

During the three and six months ended June 30, 2021, the Company did not received any distributions from the investees.

During the three and six months ended June 30, 2020, the Company received distributions from the investees of $ 0 and $ 0.5 million, respectively.

During the three and nine months ended September 30, 2021, the Company received distributions from the investees of $ 1.3 million and $ 1.3 million, respectively.

During the three and nine months ended September 30, 2020, the Company received distributions from the investees of $ 2.3 million and $ 2.8 million, respectively.

See Footnote 16, Related-Party Transactions , for discussion of related-party transactions with these investees.

Immaterial Error Correction — During the three months ended June 30, 2021, the Company identified prior period misstatements related to the net revenue earned by category of payer for the periods ended September 30, 2020, December 31, 2020, and March 31, 2021.

Certain individual payers were improperly classified as direct government and instead should have been classified as commercial payers.

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The Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined the correction of these errors to be immaterial to the prior consolidated financial statements taken as a whole.

As a result, the Company has corrected the misstatements as disclosed in the following table:

Three Months ended September 30, 2020 Nine Months ended September 30, 2020 Three Months ended December 31, 2020 Twelve Months ended December 31, 2020 Three Months ended March 31, 2021

Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

As a result, the Company has corrected the misstatements as disclosed in the following tables:

Three Months ended September 30, 2020 Nine Months ended September 30, 2020 Three Months ended December 31, 2020 Twelve Months ended December 31, 2020

Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

As Previously

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As Revised 93,114 11.9 % 274,509 12.4 % 100,431 12.5 % 374,940 12.3 %

Three Months ended March 31, 2021 Three Months ended June 30, 2021 Six Months ended June 30, 2021

Amount % of Revenue Amount % of Revenue Amount % of Revenue

As Previously Reported $ 611,434 80.5 % $ 703,429 81.8 % $ 1,314,862 81.2 %

Adjustment 37,073 4.9 % 43,218 5.0 % 80,292 4.9 %

As Revised 648,507 85.4 % 746,647 86.8 % 1,395,154 86.1 %

As Previously Reported 134,914 17.8 % 145,799 16.9 % 280,714 17.3 %

Adjustment ( 37,073 ) ( 4.9 ) % ( 43,218 ) ( 5.0 ) % ( 80,292 ) ( 4.9 ) %

As Revised 97,841 12.9 % 102,581 11.9 % 200,422 12.4 %

There was no impact to the Company’s consolidated balance sheets, consolidated statements of comprehensive income (loss) or the consolidated statements of cash flows for any of these periods.

Concentrations of Business Risk — The Company generates revenue from managed care contracts and other agreements with commercial third-party payers.

Revenue related to the Company’s largest payer was approximately 16 % and 16 % for the three and six months ended June 30, 2021.

Revenue related to the Company’s largest payer was approximately 16 % and 15 % for the three and six months ended June 30, 2020, respectively.

Revenue related to the Company’s largest payer was approximately 16 % and 16 % for the three and nine months ended September 30, 2021.

Revenue related to the Company’s largest payer was approxima tely 16 % and 15 % for the three and nine months ended September 30, 2020, respectively.

In December 2019, the Company renewed and expanded its multi-year contract with this payer.

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There were no other managed care contracts that represent greater than 10% of revenue for the periods presented.

For the three and six months ended June 30, 2021, approximately 12 % and 12 %, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid.

For the three and six months ended June 30, 2020, approximately 12 % and 12 %, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid.

As of June 30, 2021 and December 31, 2020, respectively, approximately 13 % and 15 %, respectively, of the Company’s accounts receivable was related to these programs.

For the three and nine months ended September 30, 2021, approximately 12 % and 12 %, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid.

For the three and nine months ended September 30, 2020, approximately 12 % and 12 %, respectively, of the Company’s revenue was reimbursable through direct government health care programs, such as Medicare and Medicaid.

As of September 30, 2021 and December 31, 2020, respectively, approximately 11 % and 15 %, respectively, of the Company’s accounts receivable was related to these programs.

Governmental programs pay for services based on fee schedules and rates that are determined by the related governmental agency.

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Further, the Company generally does not provide charity care, however, Option Care Health offers a financial assistance program for patients that meet certain defined hardship criteria.

For the three and six months ended June 30, 2021, approximately 64 % and 65 %, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors.

For the three and six months ended June 30, 2020, approximately 72 % and 72 %, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors.

For the three and nine months ended September 30, 2021, approximately 65 % and 65 %, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors.

For the three and nine months ended September 30, 2020, approximately 71 % and 72 %, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors.

Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms.

However, a change in suppliers could cause delays in service delivery and possible losses in revenue, which could adversely affect the Company’s financial condition or operating results.

Although there remains some uncertainty regarding the COVID-19 pandemic, as of June 30, 2021 the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.

Although there remains some uncertainty regarding the COVID-19 pandemic, as of September 30, 2021 the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.

BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

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Total consideration transferred $ 18,852

Intangibles assets, net consists of referral sources which were assigned a useful life of 15 years.

The following table sets forth the net revenue earned by category of payer for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Intangibles assets, net consists of referral sources which were assigned a useful life of 15 years, amortized on a straight-line basis.

The following table sets forth the net revenue earned by category of payer for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Net revenue $ 891,937 $ 781,609 $ 2,511,446 $ 2,227,897

During the three and six months ended June 30, 2021, the Company recorded tax expense of $ 0.7 million and $ 2.0 million, respectively, which represents an effective tax rate of 2.2 % and 6.5 %, respectively.

During the three and six months ended June 30, 2020 the Company recorded a tax expense of $ 0.5 million and $ 1.5 million, respectively, which represents an effective tax rate of ( 6.5 )% and ( 5.8 )%, respectively.

During the three and nine months ended September 30, 2021, the Company recorded tax expense of $ 3.1 million and $ 5.1 million, respectively, which represents an effective tax rate of 8.0 % and 7.3 %, respectively.

During the three and nine months ended September 30, 2020 the Company recorded a tax expense of $ 0.8 million and $ 2.3 million, respectively, which represents an effective tax rate of 31.3 % and ( 9.6 )%, respectively .

The Company maintains a full valuation allowance of $ 97.3 million against all of its net U.S.

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On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.

Based on the Company’s full valuation allowance, as noted above, the Company’s tax expense for the three and six months ended June 30, 2021 of $ 0.7 million and $ 2.0 million consists of quarterly tax liabilities attributable to specific state taxing authorities as well as recognized deferred tax expense.

Based on the Company’s full valuation allowance, as noted above, the Company’s tax expense for the three and nine months ended September 30, 2021 of $ 3.1 million and $ 5.1 million consists of quarterly tax liabilities attributable to specific state taxing authorities as well as recognized deferred tax expense.

The Company has accumulated U.S.

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federal net operating losses.

The Company recorded no income tax expense or benefit for the three or six months ended June 30, 2020 associated with the tax provisions of the CARES Act.

The Company recorded no income tax expense or benefit for the three or nine months ended September 30, 2021 and 2020 associated with the tax provisions of the CARES Act.

EARNINGS (LOSS) PER SHARE

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The earnings (loss) is used as the basis of determining whether the inclusion of common stock equivalents would be anti-dilutive.

The computation of diluted shares for the three and six months ended June 30, 2021 includes the effect of shares that would be issued in connection with warrants, stock options and restricted stock awards, as these common stock equivalents are dilutive to the earnings per share recorded in those periods.

The computation of diluted shares for the three and six months ended June 30, 2020 excludes the effect of these common stock equivalents as their inclusion would be anti-dilutive to the loss per share recorded in those periods.

For the three months ended June 30, 2021 there were 915,507 warrants and 547,310 stock option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

For the six months ended June 30, 2021 there were 915,507 warrants and 433,440 stock option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

For the three and six months ended June 30, 2020, there were 2,328,120 warrants, 497,517 stock options and 562,575 restricted stock awards outstanding that were excluded from the calculation of loss per share as they would be anti-dilutive.

The computation of diluted shares for the three and nine months ended September 30, 2021 includes the effect of shares that would be issued in connection with warrants, stock options and restricted stock awards, as these common stock equivalents are dilutive to the earnings per share recorded in those periods.

The computation of diluted shares for the nine months ended September 30, 2020 excludes the effect of these common stock equivalents as their inclusion would be anti-dilutive to the loss per share recorded in the period.

For the three months ended September 30, 2021 there were 457,754 warrants, 496,929 stock option awards, and 38,536 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

For the nine months ended September 30, 2021 there were 915,507 warrants, 387,656 stock option awards, and 272,540 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

For the three months ended September 30, 2020, there were 915,507 warrants, 296,876 stock options and 312,984 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

Fo r the nine months ended September 30, 2020, there were 2,328,120 warrants, 424,878 stock options and 600,483 restricted stock awards outstanding that were excluded from the calculation of loss per share as they would be anti-dilutive.

The following table presents the Company’s basic earnings (loss) per share and shares outstanding (in thousands, except per share data):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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The following table presents the Company’s diluted earnings (loss) per share and shares outstanding (in thousands, except per share data):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Earnings (loss) per common share, diluted $ 0.20 $ 0.01 $ 0.36 $ ( 0.14 )

During the three and six months ended June 30, 2021, the Company incurred operating lease expenses of $ 6.9 million and $ 14.5 million, respectively, including short-term lease expense, which were included as a component of selling, general and administrative expense in the unaudited condensed consolidated statements of comprehensive income (loss).

During the three and six months ended June 30, 2020, the Company incurred operating lease expense of $ 7.6 million and $ 15.3 million, respectively, including short-term lease expenses, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income (loss).

As of June 30, 2021, the weighted-average remaining lease term was 6.5 years and the weighted-average discount rate was 5.24 %.

During the three and nine months ended September 30, 2021, the Company incurred operating lease expenses of $ 7.8 million and $ 22.3 million, respectively, including short-term lease expense, which were included as a component of selling, general and administrative expense in the unaudited condensed consolidated statements of comprehensive income (loss).

During the three and nine months ended September 30, 2020, the Company incurred operating lease expense of $ 7.6 million and $ 23.0 million, respectively, including short-term lease expenses, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income (loss).

As of September 30, 2021, the weighted-average remaining lease term was 6.44 and the weighted-average discount rate was 5.09 %.

Operating leases mature as follows (in thousands):

Fiscal Year Ending December 31, Minimum Payments

2021 $ 13,669

Thereafter 32,682

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Present value of lease liabilities $ 90,577

During the three and six months ended June 30, 2020, the Company did not enter into any significant new operating or financing leases.

During the three and six months ended June 30, 2021, the Company commenced new leases, extensions and amendments, resulting in non-cash investing and financing activities in the unaudited condensed consolidated statements of cash flow of $ 5.7 million related to increases in the operating lease right-of-use asset and operating lease liabilities, respectively.

As of June 30, 2021, the Company did not have any significant operating or financing leases that had not yet commenced.

During the three and nine months ended September 30, 2021, the Company commenced new leases, extensions and amendments, resulting in non-cash investing and financing activities in the unaudited condensed consolidated statements of cash flow o f $ 14.5 million re lated to increases in the operating lease right-of-use asset and operating lease liabilities, respectively.

During the three and nine months ended September 30, 2020, the Company commenced new leases, extensions and amendments, resulting in non-cash investing and financing activities in the unaudited condensed consolidated statements of cash flow of $ 20.1 million related to increases in the operating lease right-of-use asset and operating lease liabilities, respectively.

As of September 30, 2021, the Company did not have any significant operating or financing leases that had not yet commenced.

PROPERTY AND EQUIPMENT

Property and equipment was as follows as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Property and equipment was as follows as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Infusion pumps $ 34,249 $ 31,678

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The depreciation expense included in operating expenses is related to infrastructure items, such as furniture, computer and office equipment, and leasehold improvements.

The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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GOODWILL AND OTHER INTANGIBLE ASSETS

There was no change in the carrying amount of goodwill for the three or six months ended June 30, 2021.

Changes in the carrying amount of goodwill consists of the following activity for the three and six months ended June 30, 2020 (in thousands):

There was no change in the carrying amount of goodwill for the three or nine months ended September 30, 2021.

Changes in the carrying amount of goodwill consists of the following activity for the three and nine months ended September 30, 2020 (in thousands):

Balance at December 31, 2019 $ 1,425,542

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Balance at June 30, 2020 $ 1,428,610

The carrying amount and accumulated amortization of intangible assets consists of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Balance at September 30, 2020 $ 1,428,610

The carrying amount and accumulated amortization of intangible assets consists of the following as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Gross intangible assets:

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Total intangible assets, net $ 343,764 $ 351,052

Amortization expense for intangible assets was $ 9.0 million and $ 17.6 million for the three and six months ended June 30, 2021, respectively.

Amortization expense for intangible assets was $ 8.8 million and $ 17.6 million for the three and six months ended June 30, 2020, respectively.

Long-term debt consisted of the following as of June 30, 2021 (in thousands):

Amortization expense for intangible assets was $ 7.9 million and $ 25.5 million for the three and nine months ended September 30, 2021, respectively.

Amortization expense for intangible assets was $ 8.8 million and $ 26.3 million for the three and nine months ended September 30, 2020, respectively.

Long-term debt consisted of the following as of September 30, 2021 (in thousands):

Principal Amount Discount Debt Issuance Costs Net Balance

ABL facility $ — $ — $ — $ —

Asset-based-lending (“ABL”) facility $ — $ — $ — $ —

First lien term loan 1,156,919 ( 8,731 ) ( 18,590 ) 1,129,598

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The Company determined that $ 356.2 million of new debt was issued related to the First Lien Term Loan, which is disclosed as an inflow from financing activities in the condensed consolidated statements of cash flows.

In connection with the prepayment of the Second Lien Notes and incremental First Lien Term Loan indebtedness, the Company incurred $ 7.2 million in debt issuance costs and third-party fees, of which $ 3.7 million was capitalized, $ 0.9 million was expensed as a component of other expense and $ 2.6 million was expensed as a loss on extinguishment as a component of other expense in the condensed consolidated statements of comprehensive income (loss) for the six months ended June 30, 2021.

Further, $ 1.0 million of the total fees incurred of $ 7.2 million was netted against the $ 356.2 million of proceeds from debt as a component of the cash flows from financing activities, $ 2.9 million was presented as deferred financing costs as a component of cash flows from financing activities, $ 2.4 million was presented as debt prepayment fees as a component of cash flows from financing activities, and the remaining $ 0.9 million was included in cash flows from operating activities in the condensed consolidated statements of cash flows.

The Company recognized a loss on extinguishment of debt of $ 12.4 million included in the line entitled “Other, net” in the unaudited condensed consolidated statements of comprehensive income (loss) for the six months ended June 31, 2021, of which $ 2.6 million related to debt issue costs incurred with the incremental First Lien Term Loan indebtedness and prepayment of the Second Lien Notes, as discussed above, and $ 9.8 million related to existing deferred financing fees that were written off upon extinguishment.

All remaining deferred financing fees that existed prior to the First Lien Credit Agreement Amendment were attributed to modified loans, and were capitalized and amortized over the remaining term of the First Lien Term Loan.

The interest rate on the First Lien Term loan was 3.85 % and 4.40 % as of June 30, 2021 and December 31, 2020, respectively.

The weighted average interest rate incurred on the First Lien Term Loan was 3.85 % and 3.91 % for the three and six months ended June 30, 2021.

The weighted average interest rate incurred on the previous First Lien Term Loan was 5.02 % and 5.60 % for the three and six months ended June 30, 2020, respectively.

The Company recognized a loss on extinguishment of debt of $ 12.4 million included in the line entitled “Other, net” in the unaudited condensed consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2021, of which $ 2.6 million related to debt issue costs incurred with the incremental First Lien Term Loan indebtedness and prepayment of the Second Lien Notes, as discussed above, and $ 9.8 million related to existing deferred financing fees that were written off upon extinguishment.

All remaining deferred financing fees that existed prior to the First Lien Credit Agreement

Amendment were attributed to modified loans, and were capitalized and amortized over the remaining term of the First Lien Term Loan.

The interest rate on the First Lien Term Loa n was 3.83 % and 4.40 % as of September 30, 2021 and December 31, 2020, respectively.

The weighted average interest rate incurred on the First Lien Term Loan was 3.84 % and 5.87 % for the three and nine months ended September 30, 2021.

The weighted average interest rate incurred on the previous First Lien T erm Loan was 4.67 % and 5.29 % for the three and nine months ended September 30, 2020, respectively.

The interest rate on the Second Lien Notes was 8.98 % as of December 31, 2020.

The weighted average interest rate incurred on the Second Lien Notes was 8.98 % for the period January 1, 2021 through January 20, 2021, prior to the repayment of the outstanding balance.

The weighted average interest rate incurred on the Second Lien Notes was 10.33 % and 10.44 % for the three and six months ended June 30, 2020.

The weighted average interest rate incurred on the Second Lien Notes was 9.51 % and 10.17 % for the three and nine months ended September 30, 2020.

Long-term debt matures as follows (in thousands):

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Total $ 1,156,919

During the three and six months ended June 30, 2021 and 2020, the Company engaged in hedging activities to limit its exposure to changes in interest rates.

In October 2021, the Company entered into an amendment on the First Lien Term Loan, to provide $ 600 million of refinanced borrowings.

In October 2021, the Company also issued $ 500 million in aggregate principal amount of senior notes.

See Note 17, Subsequent Events , for further discussion.

During the three and nine months ended September 30, 2021 and 2020, the Company engaged in hedging activities to limit its exposure to changes in interest rates.

See Note 11, Derivative Instruments , for further discussion.

The following table presents the estimated fair values of the Company’s debt obligations as of June 30, 2021 (in thousands):

Financial Instrument Carrying Value as of June 30, 2021 Markets for Identical Item (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

The following table presents the estimated fair values of the Company’s debt obligations as of September 30, 2021 (in thousands):

Financial Instrument Carrying Value as of September 30, 2021

Markets for Identical Item (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

First lien term loan $ 1,129,598 $ — $ 1,156,919 $ —

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The following table sets forth the changes in Level 3 measurements for the three months ended March 31, 2021 (in thousands).

As the Second Lien Notes were prepaid in Q1, there was no change in the fair value for the three months ended June 30, 2021.

As the Second Lien Notes were prepaid in Q1, there was no change in the fair value thereafter.

Level 3 Measurements

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The remaining $ 13.9 million notional amount of the interest rate swap is not designated as a hedging instrument.

The first interest rate swap expired in August 2021.

The second interest rate swap of $ 400.0 million notional was effective in November 2019 and was designated as a cash flow hedge against the underlying interest rate on the second lien notes interest payments indexed to three-month LIBOR through November 2020.

In May 2020, the Company elected to PIK the second lien note’s quarterly interest payment due in August 2020.

In May 2020, the Company elected to pay-in-kind (“PIK”) the second lien note’s quarterly interest payment due in August 2020.

Upon making the PIK election, the Company determined that the hedged interest payment would no longer occur, resulting in an ineffective hedge, so the Company discontinued hedge accounting on its $ 400.0 million notional interest rate swap.

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Fair value - Derivatives in liability position

Derivative Balance Sheet Caption June 30, 2021 December 31, 2020

Derivative Balance Sheet Caption September 30, 2021 December 31, 2020

Interest rate swaps designated as cash flow hedges Accrued expenses and other current liabilities $ — $ 11,172

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The following table presents the pre-tax gains (losses) from derivative instruments recognized in other comprehensive (loss) income in the Company’s unaudited condensed consolidated statements of comprehensive income (loss) (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Derivative 2021 2020 2021 2020

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The following table presents the amount and location of pre-tax income (loss) recognized in the Company’s unaudited condensed consolidated statement of comprehensive income (loss) related to the Company’s derivative instruments (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Derivative Income Statement Caption 2021 2020 2021 2020

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$ ( 2,903 ) $ ( 4,193 ) $ ( 11,300 ) $ ( 12,382 )

The Company expects to reclassify $ 2.9 million of total interest rate costs from accumulated other comprehensive loss against interest expense during the next 12 months.

FAIR VALUE MEASUREMENTS

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See Note 11, Derivative Instruments , for further discussion of the fair value of interest rate swaps.

There were no other assets or liabilities measured at fair value at June 30, 2021 and December 31, 2020.

There were no other assets or liabilities measured at fair value at September 30, 2021 and December 31, 2020.

COMMITMENTS AND CONTINGENCIES

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The 2018 plan is administered by the Company’s Compensation Committee, a standing committee of the Board of Directors.

A total of 4,101,735 shares of common stock were initially authorized for issuance under the 2018 Plan.

In May 2021, an additional 4,999,999 shares were authorized for issuance under the 2018 Plan, resulting in a total of 9,101,734 shares of common stock authorized for issuance.

The Company had stock options, restricted stock and performance stock units outstanding related to the 2018 Plan as of June 30, 2021.

As of June 30, 2021, the Company also had incentive units outstanding related to the HC I equity incentive plan, which was implemented in October 2015, for certain officers and employees of the Company.

During the three and six months ended June 30, 2021, total stock-based incentive compensation expense recognized by the Company related to these plans was $ 2.5 million and $ 3.7 million, respectively.

During the three and six months ended June 30, 2020, total stock-based incentive compensation expense recognized by the Company related to these plans was $ 0.7 million and $ 1.4 million, respectively.

A total of 9,101,734 shares of common stock are authorized for issuance.

The Company had stock options, restricted stock and performance stock units outstanding related to the 2018 Plan as of September 30, 2021.

As of September 30, 2021, the Company also had incentive units outstanding related to the HC I equity incentive plan, which was implemented in October 2015, for certain officers and employees of the Company.

During the three and nine months ended September 30, 2021, total stock-based incentive compensation expense recognized by the Company related to these plans was $ 2.5 million and $ 6.2 million, respectively.

During the three and nine months ended September 30, 2020, total stock-based incentive compensation expense recognized by the Company related to these plans was $ 1.2 million and $ 2.6 million, respectively.

STOCKHOLDERS’ EQUITY

During the three and six months ended June 30, 2021, HC I completed secondary offerings of 17,250,000 and 46,500,000 shares of common stock, respectively.

During the three and nine months ended September 30, 2021, HC I completed secondary offerings of 29,900,000 and 76,400,000 shares of common stock, respectively.

Following these offerings, HC I holds approximately 21.1 % of the common stock of the Company.

2017 Warrants — During the three and six months ended June 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

During the three and six months ended June 30, 2020, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

As of June 30, 2021 and December 31, 2020, the remaining warrant holders are entitled to purchase 1.4 million shares of common stock, respectively.

2015 Warrants — During the three and six months ended June 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

During the three and six months ended June 30, 2020, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

As of June 30, 2021 and December 31, 2020, warrant holders are entitled to purchase 0.9 million shares of common stock, respectively.

2017 Warrants — During the three and nine months ended September 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

During the three and nine months ended September 30, 2020, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

As of September 30, 2021 and December 31, 2020, the remaining warrant holders are entitled to purchase 1.4 million shares of common stock, respectively.

2015 Warrants — During the three and nine months ended September 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

During the three and nine months ended September 30, 2020, warrant holders did not elect to exercise any warrants to purchase shares of common stock.

As of September 30, 2021 and December 31, 2020, warrant holders are entitled to purchase 0.9 million shares of common stock, respectively.

RELATED-PARTY TRANSACTIONS

Transactions with Equity-Method Investees — The Company provides management services to its joint ventures such as accounting, invoicing and collections in addition to day-to-day managerial support of the operations of the businesses.

The Company recorded management fee income of $ 0.9 million and $ 1.7 million for the three and six months ended June 30, 2021, respectively.

The Company recorded management fee income of $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2020, respectively.

The Company recorded management fee income of $ 0.9 million and $ 2.6 million for the three and nine months ended September 30, 2021, respectively.

The Company recorded management fee income of $ 0.8 million and $ 2.1 million for the three and nine months ended September 30, 2020, respectively.

Management fees are recorded in net revenues in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).

The Company had amounts due from its joint ventures of $ 0.4 million and amounts due to its joint ventures of $ 1.5 million as of June 30, 2021.

The Company had amounts due to its joint ventures of $ 2.9 million as of September 30, 2021.

This payable was included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

The Company also had amounts due from its joint ventures of $ 2.4 million as of December 31, 2020.

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These balances primarily relate to cash collections received by the Company on behalf of the joint ventures, offset by certain pharmaceutical inventories and other expenses paid for by the Company on behalf of the joint ventures.

SUBSEQUENT EVENTS

The Company has evaluated whether any subsequent events occurred since September 30, 2021, and noted the following subsequent events:

On October 1, 2021 the Company acquired Infinity Infusion Nursing, LLC (“Infinity”) for $ 50 million in an all-cash transaction.

Infinity is a leader in home infusion services that provide therapy management for patients with acute, chronic and rare disorders through a national network of highly-skilled, specialty nurses.

In October 2021, the Company refinanced its $ 1,157 million outstanding existing loan due 2026.

The Company amended the existing First Lien Term Loan, to provide $ 600 million of refinanced borrowings (the “New First Lien Term Loan Facility”) which modified certain terms and extended its maturity to 2028.

In conjunction with the refinancing, the Company also issued $ 500 million in aggregate principal of unsecured senior notes due 2029 (collectively, the “Transactions”).

In connection with

the Transactions, the Company incurred third party fees of $ 9.4 million and original issue discount of $ 1.5 million.

The Company also utilized $ 69.9 million of cash on hand for the Transactions.

In conjunction with the Transactions, the Company also entered into an interest rate cap hedge with a notional amount of $ 300 million for a 5-year term beginning November 30, 2021.

The hedge partially offsets risk associated with the New First Lien Term Loan Facility’s variable interest rate.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements