OPERATING AND REPORTABLE SEGMENTS

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements [Abstract]

NOTE 9 – OPERATING AND REPORTABLE SEGMENTS

In accordance with ASC Topic 280, Segment Reporting (“ASC 280”), and based on the nature of the Company’s services, the Company has two operating and reportable segments: Infusion/Home Health Services and Pharmacy Services.

The Infusion/Home Health Services operating and reportable segment provides services consisting of home infusion therapy, respiratory therapy and the provision of durable medical equipment products and services. Infusion services include the dispensing and administering of infusion-based drugs, which typically requires additional nursing and clinical management services, equipment to administer the correct dosage and patient training designed to improve patient outcomes. Home infusion services also include the dispensing of self-injectible therapies. Home health services include the provision of skilled nursing services and therapy visits, private duty nursing services, hospice services, rehabilitation services and medical social services to patients primarily in their home.

The Pharmacy Services operating and reportable segment consists of our traditional and specialty pharmacy mail operations, community pharmacies and integrated pharmacy benefit management (“PBM”) services, which includes discount cash card programs. These segment operations are designed to offer customers and patients cost-effective delivery of traditional and specialty pharmacy products and services. The services also include care management programs customized to each patient’s care plan in coordination with the patient’s physician.

The Company’s chief operating decision maker evaluates segment performance and allocates resources based on Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as net income (loss) adjusted for net interest expense, income tax expense, depreciation, amortization of intangibles and stock-based compensation expense and prior to the allocation of certain corporate expenses. Segment Adjusted EBITDA excludes acquisition, integration, severance and other employee costs; restructuring expense, write-off of receivables related to the CAP contract and legal settlement expense. Segment Adjusted EBITDA is a measure of earnings that management monitors as an important indicator of operating and financial performance. The accounting policies of the operating and reportable segments are consistent with those described in the Company’s summary of significant accounting policies.

Segment Reporting Information

(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Results of Operations:
Revenue:
Infusion/Home Health Services - product revenue	$	89,631		$	90,934		$	270,477		$	219,775
Infusion/Home Health Services - service revenue		19,921			20,915			58,884			44,850
Total Infusion/Home Health Services revenue		109,552			111,849			329,361			264,625

Pharmacy Services - product revenue		317,323			313,233			929,527			876,818
Pharmacy Services - service revenue		27,146			16,071			75,833			46,808
Total Pharmacy Services revenue		344,469			329,304			1,005,360			923,626

Total	$	454,021		$	441,153		$	1,334,721		$	1,188,251

Adjusted EBITDA by Segment before corporate overhead:
Infusion/Home Health Services	$	10,477		$	14,942		$	33,062		$	31,702
Pharmacy Services		15,354			10,731			43,149			31,120
Total Segment Adjusted EBITDA		25,831			25,673			76,211			62,822

Corporate overhead		(6,806	)		(7,602	)		(22,499	)		(23,646	)

Interest expense, net		(7,063	)		(8,122	)		(21,503	)		(19,515	)
Income tax expense		(316	)		(2,117	)		(211	)		(1,981	)
Depreciation		(3,088	)		(2,404	)		(7,824	)		(6,211	)
Amortization of intangibles		(1,244	)		(1,326	)		(4,004	)		(2,196	)
Stock-based compensation expense		(1,731	)		(1,097	)		(3,982	)		(2,726	)
Acquisition, integration, severance and other employee costs (1)		(1,581	)		(1,040	)		(1,581	)		(7,139	)
Restructuring expense		(3,454	)		-			(8,644	)		-
Legal settlement		-			-			(4,800	)		-
Bad debt expense related to contract termination		-			-			-			(1,483	)
Net income (loss)	$	548		$	1,965		$	1,163		$	(2,075	)

(1) Current year costs primarily related to officer severance. Prior year costs primarily related to the acquisitions of CHS and DS Pharmacy.


Supplemental Operating Data
Capital Expenditures:
Infusion/Home Health Services	$	1,049		$	977		$	3,014		$	2,229
Pharmacy Services		291			1,104			2,130			3,044
Corporate unallocated		347			324			1,355			1,474
Total	$	1,687		$	2,405		$	6,499		$	6,747
Depreciation Expense:
Infusion/Home Health Services	$	1,341		$	1,128		$	3,809		$	2,381
Pharmacy Services		1,075			954			3,059			3,019
Corporate unallocated		672			322			956			811
Total	$	3,088		$	2,404		$	7,824		$	6,211
Total Assets
Infusion/Home Health Services							$	410,333		$	415,412
Pharmacy Services								212,479			214,667
Corporate unallocated								28,049			113,802
Total							$	650,861		$	743,881
Goodwill
Infusion/Home Health Services							$	299,643		$	299,300
Pharmacy Services								24,498			24,498
Total							$	324,141		$	323,798