DISCONTINUED OPERATIONS DISCONTINUED OPERATIONS (Notes)

12 Months Ended

Dec. 31, 2012

DISCONTINUED OPERATIONS [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

DISCONTINUED OPERATIONS

On February 1, 2012, the Company entered into a Community Pharmacy and Mail Business Purchase Agreement (the “Asset Purchase Agreement”) by and among Walgreen Co. and certain subsidiaries (collectively, the "Buyers") and the Company and certain subsidiaries (collectively, the "Sellers") with respect to the sale of certain assets, rights and properties (the “Pharmacy Services Asset Sale”) relating to the Sellers' traditional and specialty pharmacy mail operations and community retail pharmacy stores.

Pursuant to the terms of the Asset Purchase Agreement, the Company received a total purchase price of approximately $173.8 million during 2012, including approximately $158.8 million at closing on May 4, 2012 (which included monies received for the inventories on hand attributable to the operations subject to the Pharmacy Services Asset Sale), and subsequent additional purchase price payments of $15.0 million based on events related to the Buyer's retention of certain business after closing. Similarly, the Company may be required to refund up to approximately $6.4 million of the cash received to the Buyers under certain circumstances. Any gain associated with this contingency will be recorded when the final amount retained or refunded is known. The $173.8 million purchase price excluded all accounts receivable and working capital liabilities relating to the operations subject to the sale, which were retained by the Company. Approximately $50.8 million of these net assets were converted to cash subsequent to the sale. Approximately $4.8 million of these net assets remained at December 31, 2012.

As a result of the Pharmacy Services Asset Sale, the Company recognized a pretax gain of $115.0 million, net of transaction costs of $5.6 million during the year ended December 31, 2012. The Company also recognized approximately $13.4 million of impairment costs, employee severance and other benefit-related costs, and facility-related costs as a result of the transaction in the year ended December 31, 2012, resulting in a net gain of approximately $101.6 million. See Note 7 - Property and Equipment, for further information on the impairment. The impairment costs, employee severance and other benefit-related costs, facility-related costs, and other one-time charges are included in income (loss) from discontinued operations, net of income taxes on the Consolidated Statements of Operations. As of December 31, 2012, there were accruals of $0.1 million related to these costs in accrued expenses and other current liabilities on the Consolidated Balance Sheets. The company allocated tax expense of $6.1 million to discontinued operations' pre-tax income of $79.2 million for the year ended December 31, 2012. The allocated $6.1 million tax expense is less than the statutory rate because the Company used $24.1 million of deferred tax assets that previously had a full valuation allowance. The use of the deferred tax assets significantly reduced the amount of gain that was subject to federal and state income tax.

The accrual activity consisted of the following (in thousands):

	Impairment Costs			Employee Severance and Other Benefits			Facility-Related Costs			Other Costs			Total
Liability balance as of December 31, 2011	$	—		$	—		$	—		$	—		$	—
Expenses	5,839			5,279			1,071			1,198			13,387
Cash payments	—			(5,234		)	(82		)	(3,133		)	(8,449		)
Non-cash charges	(5,839		)	—			(989		)	2,024			(4,804		)
Liability balance as of December 31, 2012	$	—		$	45		$	—		$	89		$	134

In addition, the Company and its subsidiaries and certain subsidiaries of the Buyers entered into an agreement concurrently

with the Asset Purchase Agreement which provided that BioScrip ceased to be the sole fulfillment pharmacy for customers who came through the drugstore.com website. The agreement provided for a cash payment of $3.0 million to the Company and the payment of $2.9 million to the Buyers related to contingent consideration from the Company's 2010 acquisition of the prescription pharmacy business of DS Pharmacy, Inc. both of which occurred during the three months ended March 31, 2012.

The transaction included the sale of 27 community pharmacy locations and certain assets of three community pharmacy locations and three traditional and specialty mail service operations, which constituted all of the Company's operations in the community pharmacy and mail order lines of business. Two mail order locations which were not transferred as part of the Pharmacy Services Asset Sale have been redeployed to provide infusion pharmacy services. The assets of the components of the businesses that were transferred are included in discontinued operations on the accompanying Consolidated Balance Sheets at December 31, 2011. On May 4, 2012, the carrying value of the assets included in the Pharmacy Services Asset Sale was as follows (in thousands):

Inventory	$	30,560
Prepaid expenses and other current assets	299
Total current assets	30,859
Property and equipment, net	1,592
Goodwill	11,754
Intangible assets, net	2,503
Total assets	$	46,708

During the three months ended June 30, 2012, as a result of the divestiture process, the Company's management commenced an assessment of the Company's continuing operations in order to align its corporate structure with its remaining operations. As part of these efforts, the Company has incurred and expects to incur additional charges such as the write down of certain long-lived assets, employee severance, other restructuring type charges, temporary redundant expenses, potential cash bonus payments and potential accelerated payments or terminated costs for certain of its contractual obligations, which may impact the Company's future Consolidated Financial Statements.

The operating results of the traditional and specialty pharmacy mail operations and community pharmacies for the years ended December 31, 2012, 2011 and 2010 are summarized below. These results include costs directly attributable to the components of the businesses which were divested. Operating expense includes bad debt expense of $12.9 million, $7.2 million and $12.1 million for the years ended December 31, 2012, 2011 and 2010, respectively associated with receivables retained from the divested business. Interest expense of $0.8 million, $2.8 million and $4.1 million were allocated to discontinued operations for the years ended December 31, 2012, 2011, and 2010, respectively, based upon the portion of the borrowing base associated with discontinue operations. Income tax expense of $6.1 million, $0.9 million and $1.0 million for the years ended December 31, 2012, 2011 and 2010, respectively have also been allocated to discontinued operations. These adjustments have been made for all periods presented. Depreciation expense was no longer incurred on fixed assets included in the disposal group as of February 1, 2012, the date the Company entered into the Asset Purchase Agreement.

Discontinued Operations Results
(in thousands)
	Years Ended December 31,
	2012		2011		2010
Revenue	$	466,747	$	1,263,520	$	1,207,916
Gross profit	29,844		96,888		99,881
Operating expense	51,543		84,940		91,627
Loss on extinguishment of debt	—		—		6,607
Gain on sale, before income taxes	101,624		—		—
Income from discontinued operations, net of income taxes	$	73,047	$	8,296	$	(1,467	)