ACQUISITIONS

Home Solutions

On September 9, 2016, the Company acquired substantially all of the assets and assumed certain liabilities of Home Solutions and its subsidiaries pursuant to the Home Solutions Agreement. Home Solutions, a privately held company, provides home infusion and home nursing products and services to patients suffering from chronic and acute medical conditions.

The aggregate consideration paid by the Company in the Transaction was equal to (i) $67.5 million in cash (the “Cash Consideration); plus (ii) (a) 3,750,000 shares of Company common stock (the “Transaction Closing Equity Consideration”) and (b) the right to receive contingent equity securities of the Company, in the form of restricted shares of Company common stock (the “RSUs”), issuable in two tranches, Tranche A and Tranche B, with different vesting conditions (collectively, the “Contingent Shares”). The number of shares of Company common stock in Tranche A will be approximately 3.1 million. The number of shares of Company common stock in Tranche B will be approximately 4.0 million. Upon close of the Transaction the RSUs had no intrinsic value, but were reported as a liability in our consolidated financial statements at their estimated fair value at the date of issuance. Upon approval of the Charter Amendment on November 30, 2016, the date at which sufficient shares were available should the RSUs vest and become issuable, the liability was remeasured to its current fair value and reclassified to equity.

The following table sets forth the consideration transferred in connection with the acquisition of Home Solutions as of September 9, 2016 (in thousands):



Cash	$	67,516
Equity issued at closing	9,938
Capital lease obligation assumed	301
Fair value of contingent consideration	15,400
Total consideration	$	93,155

The following table sets forth the preliminary estimate of fair value of the assets acquired and liabilities assumed upon acquisition of Home Solutions as of September 9, 2016 (in thousands):



Accounts receivable	$	11,956
Inventories	3,199
Prepaids and other assets	852
Total current assets	$	16,007
Property and equipment	4,651
Goodwill	57,218
Managed care contracts	24,700
Licenses	5,400
Trade name	1,800
Non-compete agreements	200
Other long-term assets	891
Total assets	$	110,867
Accounts payable	14,576
Accrued liabilities	3,136
Total liabilities	$	17,712
Net assets acquired	$	93,155

The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by combining the operations of the companies, including the ability to cross-sell its services on a national basis with an expanded footprint in home infusion and the opportunity to focus on higher margin therapies.

In accordance with ASC Topic 805 Business Combinations, the allocation of the purchase price is subject to adjustment during the measurement period after the closing date (September 9, 2016) when additional information on assets and liability valuations becomes available. The Company has not finalized its valuation of certain assets and liabilities recorded pursuant to the acquisition including intangible assets and contingent consideration. Thus, the provisional measurements recorded are subject to change. Any changes will be recorded as adjustments to the fair value of the assets and liabilities with residual amounts allocated to goodwill.

Under the Home Solutions Agreement, the Company did not purchase, among other things, any accounts receivable associated with governmental payors. However, the Home Solutions Agreement stipulates that collections of government receivables, as of the first anniversary of the closing date, in an amount less than the amount estimated as government receivables in the Closing Certificate, must be paid to the seller. The Company believes the government receivables will be collected and, as a result, has not recorded a liability for the guarantee.

The Company has consolidated the results of Home Solutions for the period of control within its Consolidated Statements of Operations for the year ended December 31, 2016. Inclusion of Home Solutions’ operating results within the Company’s Consolidated Statements of Operations contributed $26.8 million in revenue, $9.2 million in gross profit, and $3.2 million in net income for the year ended December 31, 2016.

Pro Forma Impact of Acquisition

The following table sets forth the unaudited pro forma combined results of operations as if the acquisition of Home Solutions had occurred at the beginning of the periods presented. Adjustments made to the financial information give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The pro forma financial information does not reflect revenue opportunities and cost savings that the Company expects to realize as a result of the acquisition of Home Solutions. The pro forma financial information includes acquisition related charges incurred prior to December 31, 2016, and does not reflect estimates of charges related to the integration activity or exit costs that may be incurred by BioScrip in connection with the acquisition in future periods.



	Years Ended December 31,
Pro forma impact of acquisition (in millions, except for per share amounts):	2016			2015			2014
Revenues	$	1,019		$	1,091		$	1,028
Gross profit	$	288		$	289		$	277
Gross profit percentage	28.3		%	26.5		%	26.9		%
Loss from continuing operations, net of income taxes	$	(44	)	$	(322	)	$	(178	)
Basic loss per share from continuing operations	$	(0.47	)	$	(4.68	)	$	(2.60	)
Diluted loss per share from continuing operations	$	(0.47	)	$	(4.68	)	$	(2.60	)

The pro forma results for the year ended December 31, 2016 includes $10.1 million of acquisition related expenses.

Acquisition and Integration Expense

Acquisition and integration expenses in restructuring, acquisition, integration, and other expenses, net in the accompanying Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 include the following costs related to the Home Solutions, CarePoint Business, and the HomeChoice acquisitions (in thousands):



	Year Ended December 31,
	2016		2015		2014
Legal and professional fees	$	3,059	$	1,033	$	6,931
Financial advisory fees	5,087		—		—
Employee costs including redundant salaries and benefits and severance	—		—		2,016
Facilities consolidation and discontinuation	1,323		488		1,401
Bad debt expense and contractual adjustments related to acquired accounts receivable	—		—		5,430
Legal settlement	—		—		334
Other	653		219		1,812
Total	$	10,122	$	1,740	$	17,924