What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-11-04 · 127 added, 212 removed, 329 unchanged (51% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

CURRENT ASSETS:

8 unchanged sentences

Intangible assets, net 20,669 21,433

Referral sources 337,882 344,587

Goodwill 1,478,500 1,477,564

Deferred income taxes 14,037 27,033

Other noncurrent assets 37,748 23,733

12 unchanged sentences

Operating lease liability, net of current portion 75,479 74,492

Deferred income taxes 4,519 3,339

Other noncurrent liabilities 13,445 20,945

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$ 0.0001 par value;

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

12,500,000 shares authorized, no shares outstanding as of March 31, 2022 and December 31, 2021, respectively

Common stock;

$ 0.0001 par value:

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

250,000,000 shares authorized, 180,429,758 shares issued and 180,046,036 shares outstanding as of March 31, 2022;

180,309,637 shares issued and 179,925,915 shares outstanding as of December 31, 2021

Treasury stock;

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

383,722 shares outstanding, at cost, as of March 31, 2022 and December 31, 2021, respectively

( 2,403 ) ( 2,403 )

Paid-in capital 1,143,388 1,138,855

Accumulated deficit ( 35,600 ) ( 100,031 )

Accumulated other comprehensive loss — ( 11,172 )

Retained earnings 70,142 39,867

Accumulated other comprehensive income (loss) 10,619 ( 451 )

Total stockholders’ equity 1,221,764 1,175,886

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

NET REVENUE $ 915,784 $ 759,237

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NET INCOME (LOSS) $ 30,275 $ ( 2,861 )

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

Change in unrealized gains (losses) on cash flow hedges, net of income tax expense (benefit) of $ 0 , $ 0 , $ 0 and $ 0 , respectively

2,892 4,022 11,172 ( 8,034 )

OTHER COMPREHENSIVE INCOME (LOSS) 2,892 4,022 11,172 ( 8,034 )

NET COMPREHENSIVE INCOME (LOSS) $ 38,368 $ 5,685 $ 75,603 $ ( 33,949 )

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Change in unrealized gains on cash flow hedges, net of income tax expense of $ 3,763 and $ 0 , respectively

OTHER COMPREHENSIVE INCOME 11,070 4,081

NET COMPREHENSIVE INCOME $ 41,345 $ 1,220

EARNINGS (LOSS) PER COMMON SHARE:

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(IN THOUSANDS)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Non-cash operating lease costs 3,884 3,810

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

Deferred income taxes - net 12,996 634

1 unchanged sentence

Amortization of deferred financing costs 1,049 1,253

Loss on interest rate swaps upon discontinuing hedge accounting — 3,746

Equity in earnings of joint ventures ( 1,267 ) ( 1,205 )

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Acquisition of property and equipment ( 5,359 ) ( 3,123 )

Other investing cash flows — 541

Business acquisitions, net of cash acquired ( 18,852 ) —

Net cash used in investing activities ( 5,359 ) ( 3,123 )

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Deferred financing costs — ( 2,880 )

Net proceeds from issuance of common stock — 118,934

Debt prepayment fees — ( 2,458 )

Other financing cash flows — ( 2,500 )

Net cash (used in) provided by financing activities ( 11,072 ) ( 16,407 )

Net cash used in financing activities ( 1,145 ) ( 5,160 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 26,177 10,097

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(IN THOUSANDS)

Preferred Stock Common Stock Treasury Stock Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss)

Preferred Stock Common Stock Treasury Stock Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive (Loss)

Income Total Stockholders’ Equity

3 unchanged sentences

Net loss — — — — ( 2,861 ) — ( 2,861 )

Other comprehensive loss — — — — — ( 16,632 ) ( 16,632 )

Balance - March 31, 2020 $ — $ 18 $ ( 2,403 ) $ 1,008,570 $ ( 111,865 ) $ ( 23,827 ) $ 870,493

Exercise of stock options, vesting of restricted stock and related tax withholdings — — — ( 96 ) — — ( 96 )

Stock-based incentive compensation — — — 661 — — 661

Net loss — — — — ( 7,668 ) — ( 7,668 )

Other comprehensive income — — — — — 4,081 4,081

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

Exercise of stock options, vesting of restricted stock, and related tax withholdings — — — ( 69 ) — — ( 69 )

Stock-based incentive compensation — — — 1,205 — — 1,205

Net loss — — — — ( 2,861 ) — ( 2,861 )

Other comprehensive income — — — — — 4,081 4,081

Balance - March 31, 2021 $ — $ 18 $ ( 2,403 ) $ 1,130,448 $ ( 102,892 ) $ ( 7,091 ) $ 1,018,080

Exercise of stock options, vesting of restricted stock, and related tax withholdings — — — ( 9 ) — — ( 9 )

Stock-based incentive compensation — — — 2,525 — — 2,525

Net income — — — — 31,816 — 31,816

Other comprehensive income — — — — — 4,199 4,199

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

Balance - December 31, 2021 $ — $ 18 $ ( 2,403 ) $ 1,138,855 $ 39,867 $ ( 451 ) $ 1,175,886

Exercise of stock options, vesting of restricted stock, and related tax withholdings — — — 355 — — 355

2 unchanged sentences

Other comprehensive income — — — — — 11,070 11,070

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

Balance - March 31, 2022 — 18 ( 2,403 ) 1,143,388 70,142 10,619 1,221,764

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 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.

The combined Company’s stock is listed on the Nasdaq Global Select Market as of March 31, 2022.

HC I holds approximately 20.7 % of the common stock of the Company.

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 97 full service pharmacies and 57 stand-alone infusion suites.

The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings.

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The results of operations for the interim periods presented are not necessarily indicative of the results of operations for the entire year.

These unaudited condensed consolidated financial statements do not include all of the information and notes to the financial statements required by GAAP for complete financial statements and should be read in conjunction with the 2020 audited consolidated financial statements, including the notes thereto, as presented in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2021.

These unaudited condensed consolidated financial statements do not include all of the information and notes to the financial statements required by GAAP for complete financial statements and should be read in conjunction with the 2021 audited consolidated financial statements, including the notes thereto, as presented in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2022.

Principles of Consolidation — The Company’s unaudited condensed consolidated financial statements include the accounts of Option Care Health, Inc.

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Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

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, 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.

Prepaid expenses and other current assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $ 47.6 million and $ 43.0 million as of March 31, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

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

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

As of March 31, 2022 and December 31, 2021, the balance of the investments were $ 21.4 million and $ 20.1 million, respectively.

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

1 unchanged sentence

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 $ 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.

The Company’s proportionate share of earnings was $ 1.3 million and $ 1.2 million for the three months March 31, 2022.

and 2021, respectively.

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 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.

During the three months March 31, 2022 and 2021, the Company did not receive a distribution from the investees.

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

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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 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.

The contract renewal was effective in February 2020 for a two-year term and auto-renews annually thereafter unless notice is provided.

Revenue related to the Company’s largest payer was approximately 15 % and 16 % for the three months March 31, 2022 and 2021.

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

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.

For the three months March 31, 2022 and 2021, approximately 13 % and 13 %, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid.

As of March 31, 2022 and December 31, 2021, approximately 11 % and 11 %, 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 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.

For the three months March 31, 2022, approximately 75 % of the Company’s pharmaceutical and medical supply purchases were from four vendors.

For the three months March 31, 2021, approximately 67 % 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 September 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 March 31, 2022 the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.

BUSINESS COMBINATIONS AND ASSET ACQUISITIONS

BioCure Asset Acquisition — In April 2021, pursuant to the Asset Purchase Agreement dated April 7, 2021, the Company completed the acquisition of certain assets of BioCure, LLC (“BioCure”) for a purchase price of $ 18.9 million.

The allocation of the purchase price of BioCure was accounted for as an asset acquisition in accordance with ASC Topic 805, Business Combinations , with the total purchase price being allocated to the assets acquired based on the relative fair value of each asset.

The purchase price was allocated to the assets acquired as follows:

Infinity Infusion Nursing LLC — In October 2021, pursuant to the equity purchase agreement dated October 1, 2021, the Company completed the 100 % acquisition of the equity interest in Infinity Infusion LLC (“Infinity”) for a purchase price, net of cash acquired of $ 59.6 million.

As of March 31, 2022, the Company has finalized the purchase price allocation of the acquisition and no purchase accounting adjustments were made.

Wasatch Infusion LLC Acquisition — In December 2021, pursuant to the executed asset purchase agreement on December 29, 2021, the Company completed the acquisition of Wasatch Infusion LLC (“Wasatch”) for a purchase price of $ 19.5 million.

As of March 31, 2022, the Company has finalized the purchase price allocation of the acquisition.

Certain adjustments were made to preliminary valuation amounts related to accounts receivable, other assets and other assumed liabilities.

The following is a final allocation of the consideration transferred to acquired identifiable assets and assumed liabilities (in thousands):

Accounts receivable $ 2,688

Inventories 2,038

Intangible assets, net 18,251

Total consideration transferred $ 18,852

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

Intangible assets 4,245

Other assets 769

Accounts payable ( 6,686 )

Other assumed liabilities ( 965 )

Fair value Identifiable assets and liabilities 2,089

Goodwill (1) 17,366

Purchase Price 19,455

(1) Goodwill is attributable to cost synergies from procurement and operational efficiencies and elimination of duplicative administrative costs.

The following table sets forth the net revenue earned by category of payer for the three months March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Commercial payers $ 786,278 $ 648,507

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Net revenue $ 915,784 $ 759,237

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.

federal and state deferred tax assets with the exception of $ 0.3 million of estimated state net operating losses (“NOL”).

During the three months ended March 31, 2022 and 2021, the Company recorded tax expense of $ 11.0 million and $ 1.3 million, respectively, which represents an effective tax rate of 26.6 % and negative 80.7 %, respectively.

The variance in the Company’s effective tax rate of 26.6 % for the three months ended March 31, 2022 compared to the Company’s Federal statutory rate of 21% is primarily attributable to current and deferred state taxes as well as various non-deductible expenses.

The variance in the Company’s effective tax rate of negative 80.7 % for the three months ended March 31, 2021 compared to the Company’s Federal statutory rate of 21% is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company’s tax valuation allowance in effect during that period.

The Company maintains a valuation allowance of $ 13.2 million against certain state net operating losses (“NOL”).

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized.

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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 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’s tax expense for the three months ended March 31, 2022 of $ 11.0 million consists of quarterly tax liabilities attributable to specific state taxing authorities as well as recognized deferred federal and state tax expense.

The company’s tax expense for the three months ended March 31, 2021 of $ 1.3 million consists of quarterly tax liabilities attributed 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 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 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 computation of diluted shares for the three months March 31, 2022 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 months ended March 31, 2021 excludes the effect of these common stock equivalents as their inclusion would be anti-dilutive to the loss per share recorded in the period.

As of March 31, 2022 there were 457,752 warrants, 770,303 stock option awards, and 269,670 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

As of March 31, 2021 , there were 2,285,784 warrants, 789,586 stock options and 1,080,334 restricted stock awards outstanding that were excluded from the calculation of earnings 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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income (loss) $ 30,275 $ ( 2,861 )

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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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income (loss) $ 30,275 $ ( 2,861 )

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Earnings (loss) per common share, diluted $ 0.17 $ ( 0.02 )

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 %.

During the three months March 31, 2022 and 2021, the Company incurred operating lease expenses of $ 7.3 million and $ 7.5 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).

As of March 31, 2022, the weighted-average remaining lease term was 6.9 years and the weighted-average discount rate was 5.09 %.

Operating leases mature as follows (in thousands):

Fiscal Year Ending December 31, Minimum Payments

Fiscal Year Ended December 31, Minimum Payments

2022 $ 19,872

Thereafter 34,371

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Present value of lease liabilities $ 94,168

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.

During the three months March 31, 2022, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the unaudited condensed consolidated statements of cash flow o f $ 3.8 million re lated to increases in the operating lease right-of-use asset and operating lease liabilities, respectively.

As of March 31, 2022, 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 September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Property and equipment was as follows as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Infusion pumps $ 36,995 $ 34,547

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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 nine months ended September 30, 2021 and 2020 (in thousands):

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

2021 2020 2021 2020

The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses for the three months March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Depreciation expense in cost of revenue $ 1,257 $ 1,377

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GOODWILL AND OTHER INTANGIBLE ASSETS

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):

Changes in the carrying amount of goodwill consists of the following activity for the three months ended March 31, 2022 (in thousands):

Balance at December 31, 2021 $ 1,477,564

Merger purchase accounting adjustments 2,341

Purchase accounting adjustments 936

Balance at March 31, 2022 $ 1,478,500

Merger purchase accounting adjustments 727

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

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

There were no changes in the carrying amount of goodwill for the three months March 31, 2021.

The carrying amount and accumulated amortization of intangible assets consists of the following as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Gross intangible assets:

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Total intangible assets, net $ 358,551 $ 366,020

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):

Amortization expense for intangible assets was $ 7.5 million and $ 8.7 million for the three months ended March 31, 2022 and 2021, respectively.

Long-term debt consisted of the following as of March 31, 2022 (in thousands):

Principal Amount Discount Debt Issuance Costs Net Balance

1 unchanged sentence

First Lien Term Loan 598,500 ( 9,288 ) ( 12,892 ) 576,320

Second lien notes — — — —

Senior Notes 500,000 — ( 10,871 ) 489,129

$ 1,098,500 $ ( 9,288 ) $ ( 23,763 ) 1,065,449

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First Lien Term Loan 600,000 ( 9,605 ) ( 13,331 ) 577,064

Second lien notes 245,781 ( 6,102 ) ( 4,113 ) 235,566

Senior Notes 500,000 — ( 11,164 ) 488,836

$ 1,100,000 $ ( 9,605 ) $ ( 24,495 ) 1,065,900

1 unchanged sentence

Total long-term debt $ 1,059,900

In January 2021, the Company entered into an amendment on the First Lien Term Loan (the “First Lien Credit Agreement Amendment”).

The First Lien Credit Agreement Amendment resulted in an additional $ 250.0 million of incremental First Lien Term Loan indebtedness being issued and reduced the interest rate on all outstanding First Lien Term Loan indebtedness from LIBOR plus 4.25 % to LIBOR plus 3.75 %.

The proceeds of the $ 250.0 million incremental First Lien Term Loan indebtedness were used to prepay the remaining $ 245.8 million outstanding balance of the Second Lien Notes.

Following the First Lien Credit Agreement Amendment, the First Lien Term Loan is repayable in quarterly installments of $ 2.9 million plus interest, with a final payment of all remaining outstanding principal due on August 6, 2026.

The Company assessed whether the repayment of the Second Lien Notes by issuing incremental First Lien Term Loan indebtedness resulted in an insubstantial modification or an extinguishment of the existing debt for each loan in the syndication by grouping lenders as follows:

(i) Lenders participating in both the First Lien Term Loan and Second Lien Notes;

(ii) previous lenders that exited;

and (iii) new lenders.

The Company determined that $ 161.2 million of the First Lien Term Loan was extinguished and $ 122.9 million of the Second Lien Term Loan was extinguished, which is disclosed as an outflow from financing activities in the condensed consolidated statements of cash flows.

The First Lien Term Loan and Second Lien Notes had insubstantial modifications for lenders that participated in both debt instruments, which resulted in a cash outflow from financing activities of $ 352.0 million in the condensed consolidated statements of cash flows.

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 nine months ended September 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 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 interest rate on the First Lien Term Loa n was 3.25 % as of March 31, 2022 and December 31, 2021, respectively.

The weighted average interest rate incurred on the First Lien Term Loan was 3.25 % and 3.97 % for the three months March 31, 2022 and 2021, respectively.

The interest rate on the Senior Notes was 4.375 % as of March 31, 2022 and December 31, 2021.

The weighted average interest rate incurred on the Senior Secured Notes was 4.375 % for the three months March 31, 2022.

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 9.51 % and 10.17 % for the three and nine months ended September 30, 2020.

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

Year Ending December 31, Minimum Payments

Fiscal Year Ended December 31, Minimum Payments

Thereafter 1,070,000

Total $ 1,098,500

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.

During the three months March 31, 2022 and 2021, 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 September 30, 2021 (in thousands):

Financial Instrument Carrying Value as of September 30, 2021

The following table presents the estimated fair values of the Company’s debt obligations as of March 31, 2022 (in thousands):

Financial Instrument Carrying Value as of March 31, 2022

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

First Lien Term Loan $ 576,320 $ — $ 592,515 $ —

Second lien notes — — — —

Senior Notes 489,129 — 472,500 —

Total debt instruments $ 1,065,449 $ — $ 1,065,015 $ —

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 thereafter.

Level 3 Measurements

Second lien notes fair value as of January 1, 2021 $ 266,438

Principal prepayment ( 245,781 )

Change in fair value ( 20,657 )

Second lien notes fair value as of March 31, 2021 $ —

See Note 12, Fair Value Measurements , for further discussion.

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Credit risk is monitored through established approval procedures, including reviewing credit ratings when appropriate.

In August 2019, the Company entered into interest rate swap agreements that reduce the variability in the interest rates on the newly-issued debt obligations following the Merger with BioScrip.

The first interest rate swap for $ 925.0 million notional was effective in August 2019 with $ 911.1 million designated as a cash flow hedge against the underlying interest rate on the first lien term loan interest payments indexed to one-month London Interbank Offered Rate (“LIBOR”) through August 2021.

In accordance with ASU 2017-12, Targeted Improvements to Accounting for Hedges, the Company has determined that the $ 911.1 million designated cash flow hedge is perfectly effective.

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 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.

As a result, the Company reclassified accumulated comprehensive loss of $ 3.7 million to interest expense, net in the unaudited condensed consolidated statements of comprehensive income (loss).

The gains and losses associated with the $ 400.0 million notional swap were recognized in net income (loss) through interest expense until the swap expired in November 2020.

In October 2021, the Company 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 First Lien Term Loan Facility’s variable interest rate.

The interest rate cap instrument perfectly offsets the terms of the interest rates associated with the variable interest rate of the First Lien Term Loan.

The following table summarizes the amount and location of the Company’s derivative instruments in the condensed consolidated balance sheets (in thousands):

Fair value - Derivatives in asset position

Derivative Balance Sheet Caption March 31, 2022 December 31, 2021

Interest rate cap designated as cash flow hedge Prepaid expenses and other current assets $ 1,408 $ —

Interest rate cap designated as cash flow hedge Other noncurrent assets 12,824 —

Fair value - Derivatives in liability position

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

Interest rate swaps not designated as cash flow hedges Accrued expenses and other current liabilities — 170

Total derivatives $ — $ 11,342

Derivative Balance Sheet Caption March 31, 2022 December 31, 2021

Interest rate cap designated as cash flow hedge Accrued expenses and other current liabilities $ — $ 601

The gain and loss associated with the changes in the fair value of the effective portion of the hedging instrument are recorded into other comprehensive (loss) income.

The gain and loss associated with the changes in the fair value of the $ 13.9 million notional amount not designated as a hedging instrument is recognized in net income (loss) through interest expense.

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Derivative 2022 2021

Interest rate cap designated as cash flow hedge $ 14,833 $ —

Interest rate swaps designated as cash flow hedges — 4,081

Interest rate swaps that discontinued hedge accounting — — — 3,746

$ 14,833 $ 4,081

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Derivative Income Statement Caption 2022 2021

Interest rate cap designated as cash flow hedge Interest expense $ 694 $ —

Interest rate swaps designated as cash flow hedges Interest expense — ( 4,149 )

Interest rate swaps not designated as hedges Interest expense — ( 1 )

Interest rate swaps that discontinued hedge accounting Interest expense — — — ( 3,746 )

$ 694 $ ( 4,150 )

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See Note 10, Indebtedness , for further discussion of the carrying amount and fair value of the first lien term loan.

Second lien notes :

Prior to the January 2021 debt refinancing, the fair value of the second lien notes was derived from a cash flow model that discounted the cash flows based on market interest rates (Level 3 inputs).

See Note 10, Indebtedness , for further discussion of the carrying amount and fair value of the second lien notes.

Interest rate swaps :

The fair values of interest rate swaps are derived from the interest rates prevalent in the market and future expectations of those interest rates (Level 2 inputs).

Senior Notes:

The fair value of the Senior Notes is derived from a broker quote (Level 2 inputs).

See Note 10, Indebtedness , for further discussion of the carrying amount and fair value of the Senior Notes.

Interest rate cap:

The fair value of the interest rate cap is derived from the interest rates prevalent in the market and future expectations of those interest rates (Level 2 inputs).

The Company determines the fair value of the investments based on quoted prices from third-party brokers.

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 September 30, 2021 and December 31, 2020.

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

There were no other assets or liabilities measured at fair value at March 31, 2022 and December 31, 2021.

COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

STOCK-BASED INCENTIVE COMPENSATION

Equity Incentive Plans — Under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”), approved at the annual meeting by the BioScrip stockholders on May 3, 2018, the Company may issue, among other things, incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock grants, and performance units to key employees and directors.

Equity Incentive Plans — Under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”), approved at the annual meeting by the BioScrip stockholders on May 3, 2018 and amended and restated on May 19, 2021, the Company may issue, among other things, incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock grants, and performance units to key employees and directors, resulting in a total of 9,101,734 shares of common stock are authorized for issuance.

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

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.

The Company had stock options, restricted stock and performance stock units outstanding related to the 2018 Plan as of March 31, 2022.

As of March 31, 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 months March 31, 2022 and 2021 total stock-based incentive compensation expense recognized by the Company related to these plans was $ 4.2 million and $ 1.2 million, respectively .

STOCKHOLDERS’ EQUITY

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 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.

2017 Warrants — During the three months March 31, 2022 and 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock..

As of March 31, 2022 and December 31, 2021, the remaining warrant holders are entitled to purchase 1.4 million shares of common stock, respectively.

2015 Warrants — Warrant holders exercised an immaterial number of warrants to purchase shares of common stock during the three months March 31, 2022.

Warrant holders did not elect to exercise any warrants to purchase shares of common stock during the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, 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 $ 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.

The Company recorded management fee income of $ 0.9 million and $ 0.8 million for the three months March 31, 2022 and 2021, respectively.

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

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.

These receivables were included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

The Company had amounts due from its joint ventures of $ 1.1 million and amounts due to its joint ventures of $ 0.5 million as of March 31, 2022.

Receivables were included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

Payables were included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

The Company also had amounts due to its joint ventures of $ 1.4 million as of December 31, 2021.

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.

The Company has evaluated whether any subsequent events occurred since March 31, 2022, and noted the following subsequent event:

On April 11, 2022, the Company closed the transaction to acquire Specialty Pharmacy Nursing Network, Inc.

(“SPNN”) for $ 60 million in an all-cash transaction.

SPNN is a national leader in providing highly skilled specialty nursing resources across a broad portfolio of healthcare providers with over 400 nurses across the country.

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