10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-33380

PHARMERICA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	87-0792558
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1901 Campus Place Louisville, KY	40299
(Address of Principal Executive Offices)	(Zip Code)

(502) 627-7000

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes    ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒	Accelerated filer☐	Non-accelerated filer ☐	Smaller reporting company ☐
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐  Yes    ☒  No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class of Common Stock	Outstanding at May 1, 2015
Common stock, $0.01 par value	30,387,961 shares

PHARMERICA CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Income Statements - For the Three Months Ended March 31, 2014 and 2015	3
	Condensed Consolidated Balance Sheets - As of December 31, 2014 (As Adjusted) and March 31, 2015	4
	Condensed Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2014 and 2015	5
	Condensed Consolidated Statement of Stockholders' Equity - For the Three Months Ended March 31, 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 4.	Mine Safety Disclosures	39
Item 6.	Exhibits	40
SIGNATURES		41
Exhibit Index		42

2

PHARMERICA CORPORATION

CONDENSED CONSOLIDATED INCOME STATEMENTS

For the Three Months Ended March 31, 2014 and 2015

(Unaudited)

(In millions, except share and per share amounts)

	Three Months Ended March 31,
	2014		2015
Revenues	$	452.2	$	511.6
Cost of goods sold		372.2		423.0
Gross profit		80.0		88.6
Selling, general and administrative expenses		57.2		59.0
Amortization expense		4.4		6.6
Merger, acquisition, integration costs and other charges		5.0		3.8
Settlement, litigation and other related charges		1.2		2.3
Restructuring and impairment charges		1.9		0.1
Operating income		10.3		16.8
Interest expense, net		2.5		1.4
Income before income taxes		7.8		15.4
Provision for income taxes		3.0		5.8
Net income	$	4.8	$	9.6
Earnings per common share:
Basic	$	0.16	$	0.32
Diluted	$	0.16	$	0.31
Shares used in computing earnings per common share:
Basic		29,753,024		30,185,230
Diluted		30,354,067		30,733,381

See accompanying Notes to Condensed Consolidated Financial Statements

3

PHARMERICA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2014 and March 31, 2015

(Unaudited)

(In millions, except share and per share amounts)

	(As Adjusted)December 31, 2014			March 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	33.3		$	25.2
Accounts receivable, net		195.8			199.5
Inventory		135.7			122.6
Deferred tax assets, net		42.2			39.9
Income taxes receivable		-			0.5
Prepaids and other assets		90.4			62.0
		497.4			449.7
Equipment and leasehold improvements		196.4			198.6
Accumulated depreciation		(125.0	)		(128.5	)
		71.4			70.1
Goodwill		318.0			336.3
Intangible assets, net		177.6			179.2
Other		4.1			4.1
	$	1,068.5		$	1,039.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	96.0		$	81.6
Salaries, wages and other compensation		35.1			32.7
Current portion of long-term debt		6.4			8.9
Income taxes payable		2.3			-
Other accrued liabilities		36.4			31.6
		176.2			154.8
Long-term debt		344.9			317.1
Other long-term liabilities		57.7			68.6
Deferred tax liabilities		11.6			11.8
Commitments and contingencies (See Note 5)
Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized and no shares issued, December 31, 2014 and March 31, 2015		-			-
Common stock, $0.01 par value per share; 175,000,000 shares authorized; 32,725,786 and 33,137,201 shares issued as of December 31, 2014 and March 31, 2015, respectively		0.3			0.3
Capital in excess of par value		394.1			397.9
Retained earnings		117.0			126.6
Treasury stock at cost, 2,617,305 and 2,760,633 shares at December 31, 2014 and March 31, 2015, respectively		(33.3	)		(37.7	)
		478.1			487.1
	$	1,068.5		$	1,039.4

See accompanying Notes to Condensed Consolidated Financial Statements

4

PHARMERICA CORPORATION

CONDENSED CONSOLIDED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2014 and 2015

(Unaudited)

(In millions)

	Three Months Ended March 31,
	2014			2015
Cash flows provided by (used in) operating activities:
Net income	$	4.8		$	9.6
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		4.8			5.8
Amortization		4.4			6.6
Merger, acquisition, integration costs and other charges		2.5			-
Stock-based compensation and deferred compensation		2.1			2.0
Amortization of deferred financing fees		0.7			0.1
Deferred income taxes		4.0			2.3
(Gain) Loss on disposition of equipment		(0.1	)		0.1
Gain on acquisition/disposition		(0.3	)		-
Other		0.1			-
Change in operating assets and liabilities:
Accounts receivable, net		13.1			(2.3	)
Inventory		2.8			13.2
Prepaids and other assets		(2.1	)		27.4
Accounts payable		(21.8	)		(14.1	)
Salaries, wages and other compensation		(4.7	)		(2.4	)
Other accrued liabilities		(1.9	)		(2.2	)
Change in income taxes payable		(1.3	)		0.1
Excess tax benefit from stock-based compensation		(2.7	)		(1.9	)
Net cash provided by operating activities		4.4			44.3
Cash flows provided by (used in) investing activities:
Purchase of equipment and leasehold improvements		(6.0	)		(4.6	)
Acquisitions, net of cash acquired		(10.7	)		(20.5	)
Cash proceeds from dispositions		0.4			0.1
Net cash used in investing activities		(16.3	)		(25.0	)
Cash flows provided by (used in) financing activities:
Repayments of long-term debt		(3.1	)		-
Net activity of long-term revolving credit facility		2.8			(25.0	)
Issuance of common stock		2.5			0.3
Treasury stock at cost		(4.5	)		(4.4	)
Excess tax benefit from stock-based compensation		2.7			1.9
Repayments of capital lease obligations		-			(0.2	)
Net cash provided by (used in) financing activities		0.4			(27.4	)
Change in cash and cash equivalents		(11.5	)		(8.1	)
Cash and cash equivalents at beginning of period		24.2			33.3
Cash and cash equivalents at end of period	$	12.7		$	25.2
Supplemental information:
Cash paid for interest	$	1.8		$	2.1
Cash paid for taxes	$	0.4		$	4.7

See accompanying Notes to Condensed Consolidated Financial Statements

5

PHARMERICA CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

For the Three Months Ended March 31, 2015

(Unaudited)

(In millions, except share amounts)

	Common Stock					Capital in Excess of		Retained		Treasury
	Shares			Amount		Par Value		Earnings		Stock			Total
Balance at December 31, 2014		30,108,481		$	0.3	$	394.1	$	117.0	$	(33.3	)	$	478.1
Net income									9.6					9.6
Exercise of stock options and tax components of stock-based awards, net		105,314			-		2.1		-		-			2.1
Vested restricted stock units		163,281			-		-		-		-			-
Vested performance stock units		142,820			-		-		-		-			-
Treasury stock at cost		(143,328	)		-		-		-		(4.4	)		(4.4	)
Stock-based compensation - non-vested restricted stock		-			-		1.6		-		-			1.6
Stock-based compensation - stock options		-			-		0.1		-		-			0.1
Balance at March 31, 2015		30,376,568		$	0.3	$	397.9	$	126.6	$	(37.7	)	$	487.1

See accompanying Notes to Condensed Consolidated Financial Statements

6

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

PharMerica Corporation together with its subsidiaries (the "Corporation"), is a leading provider of pharmacy services.  The Corporation serves the long-term care, hospital pharmacy management services, specialty home infusion and specialty oncology pharmacy markets.  The Corporation operates 97 institutional pharmacies, 15 specialty home infusion pharmacies, and 5 specialty oncology pharmacies in 45 states.  The Corporation’s customers are institutional healthcare providers, such as skilled nursing facilities, assisted living facilities, hospitals, individuals receiving in-home care and patients with cancer.

Operating Segments

The Corporation consists of three operating segments: institutional pharmacy, specialty infusion services and specialty oncology pharmacy. Management believes the nature of the products and services are similar, the payers for the products and services are common among the segments and all segments operate in the healthcare regulatory environment. In addition, the segments are economically similar. Accordingly, management has aggregated the three operating segments into one reporting segment.

Principles of Consolidation

All intercompany transactions have been eliminated.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles in the United States ("U.S. GAAP") for complete financial statements. Accordingly, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Corporation and related footnotes for the year ended December 31, 2014, included in the Corporation's Annual Report on Form 10-K. The balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements adjusted for acquisition related measurement period adjustments.

The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the condensed consolidated financial statements for the interim periods have been made and are of a normal recurring nature.

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates are involved in collectability of accounts receivable, revenue recognition, inventory valuation, supplier rebates, the valuation of long-lived assets and goodwill, and accounting for income taxes. Actual amounts may differ from these estimates.

Fair Value of Financial Instruments

  Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Corporation follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

7

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which require the Corporation to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The financial liabilities recorded at fair value at December 31, 2014 and March 31, 2015 are set forth in the tables below (dollars in millions):

As of December 31, 2014	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.0	)	$	-	$	(8.0	)	$	-			A
Contingent Consideration		(1.1	)		-		-			(1.1	)		C
Mandatorily Redeemable Interest		(8.3	)		-		-			(8.3	)		C

As of March 31, 2015	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.1	)	$	-	$	(8.1	)	$	-			A
Contingent Considerations		(9.0	)		-		-			(9.0	)		C
Mandatorily Redeemable Interest		(7.4	)		-		-			(7.4	)		C

The deferred compensation plan liability represents an unfunded obligation associated with the deferred compensation plan offered to eligible employees and members of the Board of Directors of the Corporation. The fair value of the liability associated with the deferred compensation plan is derived using pricing and other relevant information for investments in phantom shares of certain available investment options, primarily mutual funds. This liability is classified as other long-term liabilities in the accompanying condensed consolidated balance sheets.

The contingent consideration represents future earn-outs associated with the Corporation's acquisition of an institutional pharmacy business purchased in 2013 and two infusion businesses purchased in 2014 and 2015. The fair values of the liabilities associated with the contingent consideration were derived using the income approach with unobservable inputs, which included future gross profit forecasts and present value assumptions, and there was little or no market data. The Corporation assessed the fair values of the liabilities as of the acquisition date and will assess quarterly thereafter until settlement. These liabilities are classified as current and other long-term liabilities in the accompanying condensed consolidated balance sheets.

8

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The mandatorily redeemable interest represents a future obligation associated with the Corporation's acquisition of a specialty pharmacy business, OncoMed Specialty, LLC (“Onco”), purchased on December 6, 2013. The mandatorily redeemable interest is classified as a long-term liability and measured at fair value. The fair value was derived using the income approach with unobservable inputs, which included a future gross profit forecast and present value assumptions, and there was little or no market data.  The Corporation assessed and adjusted the mandatorily redeemable interest’s fair value of the liability at March 31, 2015.

For the year ended December 31, 2014 and the quarter ended March 31, 2015, there were no transfers between the valuation hierarchy Levels 1, 2, and 3.  The following table summarizes the change in fair value of the Corporation’s contingent consideration and mandatorily redeemable interest identified as Level 3 for the year ended December 31, 2014 and the three months ended March 31, 2015 (in millions):

	Contingent Consideration			Mandatorily Redeemable Interest
Beginning balance, December 31, 2013	$	0.7		$	8.2
Additions from business acquisitions		1.1			-
Change in fair value		(0.7	)		0.1
Balance, December 31, 2014		1.1			8.3
Additions from business acquisitions		7.9			-
Change in fair value		-			(0.9	)
Balance, March 31, 2015	$	9.0		$	7.4

The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, inventory and accounts payable approximate fair value because of the short-term maturity of these instruments.  The carrying amount of the Corporation’s debt approximates fair value due to the interest being set at variable market interest rates (Level 2).

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from Prescription Drug Plans ("PDPs") under Medicare Part D, institutional healthcare providers, the respective state Medicaid programs, third party insurance companies, and private payers. The Corporation's ability to collect outstanding receivables is critical to its results of operations and cash flows. To provide for accounts receivable that could become uncollectible in the future, the Corporation establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to the extent it is probable that a portion or all of a particular account will not be collected.

The Corporation has an established a process to determine the adequacy of the allowance for doubtful accounts, which relies on analytical tools, specific identification, and benchmarks to arrive at a reasonable allowance. No single statistic or measurement determines the adequacy of the allowance for doubtful accounts. The Corporation monitors and reviews trends by payer classification along with the composition of the Corporation's aging accounts receivable. This review is focused primarily on trends in private and other payers, PDP's, dual eligible co-payments, historic payment patterns of long-term care institutions, and monitoring respective credit risks. In addition, the Corporation analyzes other factors such as revenue days in accounts receivables, denial trends by payer types, payment patterns by payer types, subsequent cash collections, and current events that may impact payment patterns of the Corporation's long-term care institution customers. Accounts receivable are written off after collection efforts have been completed in accordance with the Corporation's policies.

9

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Corporation's accounts receivable and summarized aging categories are as follows (dollars in millions):

	December 31, 2014			March 31, 2015
Institutional healthcare providers	$	153.6		$	157.0
Medicare Part D		30.5			29.8
Private payer and other		30.6			30.3
Insured		24.5			25.9
Medicaid		11.7			12.7
Medicare		3.0			3.5
Allowance for doubtful accounts		(58.1	)		(59.7	)
	$	195.8		$	199.5
0 to 60 days		58.8	%		61.4	%
61 to 120 days		17.2	%		15.8	%
Over 120 days		24.0	%		22.8	%
		100.0	%		100.0	%

The following is a summary of activity in the Corporation's allowance for doubtful accounts (dollars in millions):

	Beginning Balance		Charges to Costs and Expenses		Write-offs			Ending Balance
Allowance for doubtful accounts:
Year ended December 31, 2014	$	56.7	$	23.2	$	(21.8	)	$	58.1
Three months ended March 31, 2015	$	58.1	$	5.0	$	(3.4	)	$	59.7

Goodwill and Other Intangibles

The Corporation’s policy is to perform a quantitative assessment of its institutional pharmacy and specialty infusion reporting units to determine whether it is more likely than not (defined as having a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.  The Corporation performed a quantitative assessment as of December 31, 2014.  The institutional pharmacy and specialty infusion reporting unit’s fair values as calculated for the analysis were approximately 48.2% and 13.1%, respectively, greater than book value as of December 31, 2014. The Corporation also performed a qualitative assessment of its specialty oncology reporting unit as of December 31, 2014 and did not find it necessary to perform the first step of the two-step impairment test based on that analysis.

There were no impairment triggering events during the three months ended March 31, 2015.

The Corporation’s finite-lived intangible assets are comprised primarily of trade names, customer relationship assets, limited distributor relationships, doctor and insurer relationships and non-compete agreements. Finite-lived intangible assets are amortized on a straight-line basis over the course of their lives ranging from 5 to 20 years. For impairment reviews, intangible assets are reviewed on a specific pharmacy basis or as a group of pharmacies depending on the intangible assets under review. The Corporation’s goodwill and intangible assets are further described in Note 3.

10

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restructuring and Impairment Charges

Restructuring and impairment charges in the condensed consolidated financial statements represent amounts expensed for purposes of realigning corporate and pharmacy locations.

Mandatorily Redeemable Interest

The Corporation acquired 37.5% of the membership interests of Onco while also obtaining control of the business. The subsidiary is consolidated in the Corporation's condensed consolidated financial statements and the mandatorily redeemable interest is classified as debt within other long-term liabilities in the condensed consolidated balance sheets.

Measurement Period Adjustments

For the three months ended March 31, 2015, the Corporation has adjusted certain amounts on the condensed consolidated balance sheet as of December 31, 2014 as a result of measurement period adjustments related to acquisitions completed in the prior year (See Note 2).

NOTE 2—ACQUISITIONS

2015 Acquisition

The Corporation through its wholly owned subsidiary, Amerita, acquired Coastal Pharmaceutical Services Corporation (“InfusionRx Acquisition”) on January 28, 2015. The InfusionRx Acquisition had an estimated purchase price of $27.9 million, comprised of a net cash payment of $20.0 million and an estimated fair value of contingent consideration of $7.9 million. The resulting amount of goodwill and identifiable intangibles related to this transaction in the aggregate were $18.3 million and $8.2 million, respectively. The Corporation believes the resulting amount of goodwill reflects its expectation of synergistic benefits of the acquisition.  Tax deductible goodwill associated with the acquisition was $18.3 million as of March 31, 2015.  The net assets and operating results of the acquisition have been included in the Corporation’s condensed consolidated financial statements from the date of acquisition.

Amounts contingently payable related to the InfusionRx Acquisition, representing potential payments originating from an earn-out provision were $7.9 million as of March 31, 2015.

2014 Acquisitions

During the year ended December 31, 2014, the Corporation completed acquisitions of four long-term care businesses and one infusion business (collectively the "2014 Acquisitions"), none of which were individually significant to the Corporation. The 2014 Acquisitions required cash payments of approximately $114.9 million in the aggregate. The resulting amount of goodwill and identifiable intangibles related to these transactions in the aggregate were $35.2 million and $61.4 million, respectively. The Corporation believes the resulting amount of goodwill reflects its expectation of synergistic benefits of the acquisitions.  Tax deductible goodwill associated with the 2014 Acquisitions was $29.8 million as of March 31, 2015.  The net assets and operating results of the 2014 Acquisitions have been included in the Corporation's condensed consolidated financial statements from their respective dates of acquisition.

Amounts contingently payable related to the 2014 Acquisitions, representing payments originating from an earn-out provision of the infusion acquisition, were $1.1 million as of December 31, 2014 and March 31, 2015.

11

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 2—ACQUISITIONS (Continued)

The amounts recognized as of the acquisition dates for the 2014 Acquisitions, on a combined basis, for assets acquired and liabilities assumed are as follows (dollars in millions):

	Amounts Recognized as of Acquisition Date		Measurement Period Adjustments			As Adjusted
Accounts receivable	$	24.7	$	0.1		$	24.8
Inventory		8.8		-			8.8
Deferred tax assets - current		1.8		-			1.8
Other current assets		3.1		-			3.1
Equipment and leasehold improvements		4.8		-			4.8
Deferred tax assets		8.2		-			8.2
Identifiable intangibles		61.4		-			61.4
Goodwill		34.9		0.3			35.2
Total Assets		147.7		0.4			148.1
Current liabilities*		26.4		(0.1	)		26.3
Other long-term liabilities*		6.9		-			6.9
Total Liabilities		33.3		(0.1	)		33.2
Total purchase price, less cash acquired	$	114.4	$	0.5		$	114.9

* Included in current liabilities and other long-term liabilities are $0.8 million and $0.5 million, respectively, of capital lease obligations acquired as a part of the 2014 Acquisitions.

Pro forma financial statements are not presented on the 2014 and 2015 acquisitions as the results are not material to the Corporation’s condensed consolidated financial statements.

Other

For the three months ended March 31, 2014 and March 31, 2015, the Corporation incurred $4.9 million and $3.7 million, respectively, of acquisition-related costs, which have been classified as a component of merger, acquisition, integration costs and other charges.

12

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 3—GOODWILL AND INTANGIBLES

As of December 31, 2014 and March 31, 2015 the carrying amount of goodwill was $318.0 million and $336.3 million, respectively.

The following table presents the components of the Corporation's finite lived intangible assets (dollars in millions):

Finite Lived Intangible Assets	Balance at December 31, 2014			Additions			Balance at March 31, 2015
Customer relationships	$	177.5		$	7.0		$	184.5
Trade name		62.2			0.6			62.8
Non-compete agreements		19.9			0.6			20.5
Sub Total		259.6			8.2			267.8
Accumulated amortization		(82.0	)		(6.6	)		(88.6	)
Net intangible assets	$	177.6		$	1.6		$	179.2

Amortization expense relating to finite-lived intangible assets was $4.4 million and $6.6 million for the three months ended March 31, 2014 and 2015, respectively.

NOTE 4—CREDIT AGREEMENT

On September 17, 2014, the Corporation entered into a credit agreement by and among the Corporation, the lenders named therein (the "Lenders"), Bank of America, N.A., as administrative agent, JP Morgan Chase Bank N.A., as syndication agent, and U.S. Bank, National Association, Citibank, N.A., MUFG Union Bank, N.A., BBVA Compass Bank and SunTrust Bank as co-documentation agents (the "Credit Agreement"). The Credit Agreement consists of a $225.0 million term loan facility and a $310.0 million revolving credit facility. The terms and conditions of the Credit Agreement are customary to facilities of this nature.

As of March 31, 2015, $225.0 million was outstanding under the term loan facility and $100.0 million was outstanding under the revolving credit facility. Indebtedness under the Credit Agreement matures on September 17, 2019, at which time the commitments of the Lenders to make revolving loans also expire.

The table below summarizes the term total outstanding debt of the Corporation (dollars in millions):

	December 31, 2014		March 31, 2015
Term Debt - payable to lenders at LIBOR plus applicable margin (2.17% as of March 31, 2015), matures September 17, 2019	$	225.0	$	225.0
Revolving Credit Facility payable to lenders, interest at LIBOR plus applicable margin (2.14% of March 31, 2015), matures September 17, 2019		125.0		100.0
Capital lease obligations		1.3		1.0
Total debt		351.3		326.0
Less: Current portion of long-term debt		6.4		8.9
Total long-term debt	$	344.9	$	317.1

13

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 4—CREDIT AGREEMENT (Continued)

 The Corporation's indebtedness has the following maturities as of March 31, 2015 (dollars in millions):

Year Ending December 31,	Term Debt		Revolving Credit Facility		Capital Lease Obligations		Total Maturities
2015	$	5.6	$	-	$	0.5	$	6.1
2016		11.3		-		0.1		11.4
2017		11.3		-		0.1		11.4
2018		11.3		-		0.3		11.6
2019		185.5		100.0		-		285.5
	$	225.0	$	100.0	$	1.0	$	326.0

The Credit Agreement provides for the issuance of letters of credit which, when issued, reduce availability under the revolving credit facility. The aggregate amount of letters of credit outstanding as of March 31, 2015 was $2.5 million. After giving effect to the letters of credit, total availability under the revolving credit facility was $207.5 million as of March 31, 2015.

The Corporation was compliant with all debt covenant requirements at March 31, 2015.

NOTE 5—COMMITMENTS AND CONTINGENCIES

Legal Action and Regulatory

  The Corporation maintains liabilities for certain of its outstanding investigations and litigation. In accordance with the provisions of U.S. GAAP for contingencies, the Corporation accrues for a liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Corporation is the subject of certain investigations and is a defendant in a number of cases, including those discussed below.

  On April 15, 2013, the U.S. Department of Justice, through the U.S. Attorney's Office for the Eastern District of Virginia, filed a complaint in the United States District Court for the Eastern District of Virginia against the Corporation's two pharmacies in Virginia Beach, Virginia and Fredericksburg, Virginia alleging that these two pharmacies failed to comply with the Controlled Substances Act ("CSA") by dispensing Schedule II drugs without a proper prescription. The parties reached a settlement in December 2013 and filed a stipulation for dismissal of the case in January 2014. Under the settlement, the Corporation paid a $1.0 million fine and will enter into a Memorandum of Agreement ("MOA") with the DEA through which it will agree to certain CSA compliance obligations. The precise terms of the MOA are currently being negotiated between the parties. In connection with the settlement, the Corporation did not admit liability for the alleged CSA violations.

  On June 10, 2013, the United States District Court for the Eastern District of Wisconsin unsealed two consolidated qui tam complaints filed in 2009 and 2011 by relators who are former employees of the Corporation and a company acquired by the Corporation. The United States, acting through the U.S. Attorney's Office in Wisconsin, intervened in part and declined to intervene in part and filed its complaint in intervention on August 9, 2013, when the matter was formally brought to the Corporation's attention. The Government's complaint seeks statutory fines for the Corporation's alleged dispensing of Schedule II controlled substances without a valid prescription in violation of the CSA. It also seeks monetary damages and equitable relief alleging that this conduct caused false claims to be submitted in violation of the Federal False Claims Act (the "FCA"). The Corporation moved to dismiss the Government's complaint for failure to state a claim upon which relief may be granted but the Court denied the Corporation's motion on September 3, 2014.  With regard to the portion of the relators' complaint on which the Government did not intervene, on November 15, 2013, the relators dismissed their claims against the Corporation alleging that the Corporation submitted false claims to Medicare Part D and to Medicaid for drugs in connection with which the Corporation allegedly received kickbacks from the manufacturer in the form of market share rebates and other remuneration, all in violation of the Federal Anti Kickback Statute. The United States stipulated to the dismissal of those and other non-intervened counts and the Court approved the dismissal without prejudice of those counts on November 20, 2013.  The relators pursued their claim under the retaliatory termination provisions of the FCA. On September 3, 2014, the Court denied the Corporation's motion to dismiss the relators' retaliatory termination claim.  The Corporation intends to vigorously defend itself in both matters.

14

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)

On October 29, 2013, a complaint was filed in the United States District Court for the Southern District of Florida by Pines Nursing Homes (77), Inc. as a putative class action against the Corporation. The complaint alleged that the Corporation sent unsolicited advertisements promoting the Corporation's goods or services by facsimile to individuals or entities, and that such communications did not include an opt-out clause, all in violation of the federal Telephone Consumer Protection Act ("TCPA").  The Complaint did not specify the amount of damages sought, but the TCPA provides a statutory remedy of $500 per facsimile communication sent in violation of the statute, which may be trebled in the event of a willful violation.   On August 18, 2014, the Corporation entered into a Settlement Agreement with the putative class and class counsel resolving all claims raised in the complaint.  The parties moved on September 8, 2014 for, among other things, certification of the putative class for the purposes of effectuating the settlement and preliminary approval of the parties' settlement, and have requested a hearing on that motion.  No hearing has yet been set on that motion and the Corporation awaits a decision on the motion for preliminary approval of the settlement.

On November 20, 2013 a complaint filed by a relator, Robert Gadbois, on behalf of the U.S. Government and various state governments, was unsealed by the United States District for the District of Rhode Island against the Corporation alleging that the Corporation dispensed controlled and non-controlled substances in violation of the CSA and that, as a result, the dispenses were not eligible for payment and that the claims the Corporation submitted to the Government were false within the meaning of the FCA. The U.S. Government and the various state governments declined to intervene in this case. On October 3, 2014, the Corporation's motion to dismiss was granted by the court.  The relator has appealed the court’s decision.  The Corporation intends to continue to defend the case vigorously.

On March 4, 2011, a relator, Mark Silver, on behalf of the U.S. Government and various state governments, filed a complaint in the United States District Court for the District of New Jersey against the Corporation alleging that the Corporation violated the FCA and Federal Anti-Kickback Statute through its agreements to provide prescription drugs to nursing homes under certain Medicare and Medicaid programs. On February 19, 2013, the U.S. Government declined to intervene in the case. The complaint has been amended several times, most recently on November 12, 2013, and thereafter served upon the Corporation. On December 6, 2013, the Corporation moved to dismiss the amended complaint for failure to state a claim upon which relief may be granted and on September 29, 2014, the court declined to dismiss the case, but limited the relevant time period for which claims could be brought against the Corporation. The Corporation intends to vigorously defend itself against these allegations.

On January 31, 2014, a relator, Frank Kurnik, on behalf of the U.S. Government and various state governments served its complaint filed in the United States District for the District of South Carolina alleging that the Corporation solicited and received remuneration in violation of the Federal Anti-Kickback Statute from drug manufacturer Amgen in exchange for preferring and promoting Amgen's drug Aranesp over a competing drug called Procrit. The U.S. Government and the various states declined to intervene in the case.  On April 7, 2014, the Corporation moved to dismiss the complaint and on July 23, 2014, the motion was denied.  On January 13, 2015, the Corporation again moved to dismiss the complaint and on March 23, 2015, the second motion was denied.  On April 2, 2015, the Corporation moved the court to reconsider its denial of the second motion to dismiss.  That motion is pending.  The Corporation intends to vigorously defend itself against these allegations.

The U.S. Department of Justice, through the U.S. Attorney's Office for the Western District of Virginia, is investigating whether the Corporation's activities in connection with the agreements it had with the manufacturer of the pharmaceutical Depakote violated the Anti-Kickback Statute and, hence, that certain claims for Depakote that the Corporation submitted to federal health care programs violated the Federal False Claims Act. The Corporation is cooperating with this investigation and believes it has complied with all applicable laws and regulations. On May 29, 2014, the United States District Court for the Western District of Virginia entered an order (the “May 29 Order”) unsealing two previously partially sealed qui tam complaints, entitled United States, et al., ex rel. Spetter v. Abbott Laboratories. Inc., Omnicare, Inc., and PharMerica Corp., No. 1:07-cv-00006 and United States, et al., ex rel. McCoyd v. Abbott Laboratories, Omnicare, Inc., PharMerica Corp., and Miles White, No. 1:07-cv-0008.  The May 29 Order also unsealed the government’s notice of intervention and granted the Government 120 days to serve its Complaint in Intervention.  That deadline has since been extended to March 23, 2015 as to PharMerica only.  As was indicated during the investigation, the complaints allege that certain agreements that the Corporation had with the manufacturer of Depakote violated the Anti-Kickback Statute and, hence, those certain claims for Depakote that the Corporation submitted to federal health care programs violated the Federal False Claims Act and the analogous statutes of 27 states.  The Corporation intends to vigorously defend itself.

15

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)

On September 10, 2014, the Corporation filed a Complaint in Jefferson Circuit Court in Louisville, Kentucky against AmerisourceBergen Drug Corporation (“ABDC”) for failure of ABDC to comply with certain pricing and rebate provisions of the Amended Prime Vendor Agreement ("Amended PVA").  The Corporation subsequently filed a First Amended Verified Complaint on September 26, 2014 asserting additional breaches of the Amended PVA.

As a result of ABDC’s failure to comply with certain pricing and rebate provisions, the Corporation had recorded a receivable of $40.8 million related to these disputes at December 31, 2014.  Separately, as of December 31, 2014, the Corporation had recorded $12.2 million for additional rebates owing from ABDC which at that time the Corporation believed were not in dispute and had previously been paid by ABDC in all the prior quarters.  All these receivables totaled $53.0 million and were included in prepaids and other assets in the accompanying condensed consolidated balance sheet as of December 31, 2014.  During the period of January 1, 2015 through March 31, 2015, an additional $18.5 million, net of payments received, of certain rebates and guarantees owed by ABDC under the Amended PVA were recognized which brought the total receivable to $71.5 million at March 31, 2015.

On March, 2, 2015, the Corporation notified ABDC of its intent to terminate the Amended PVA effective April 1, 2015.  The Corporation also announced that it had entered into a Prime Vendor Agreement with Cardinal Health (“Cardinal”) effective April 1, 2015.  On March 3, 2015, the Corporation received a letter from ABDC terminating the Amended PVA effective immediately based upon the Corporation’s alleged failure to pay certain disputed miscellaneous charges and the Corporation’s signing of the Cardinal PVA.  The Corporation believes ABDC did not have the right to immediately terminate the contract pursuant to the terms of the Amended PVA. On March 6 and March 13, 2015, the Corporation withheld from ABDC normal recurring payments for drug purchases of approximately $50.0 million.

The following table represents all receivables, whether previously disputed or not, due and owing from ABDC at March 31, 2015 and the related amounts allegedly payable to ABDC, which have been offset resulting in a net receivable at March 31, 2015 of $21.5 million.  This net receivable is included in prepaids and other assets in the accompanying condensed consolidated balance sheet as of March 31, 2015. 

Presented in the condensed consolidated balance sheet, the following amounts are offset as of March 31, 2015 (in millions):

Description	Gross Amount of Recognized Asset		Gross Liability Offset in the Condensed Consolidated Balance Sheet			Net Amount of Asset Presented in the Condensed Consolidated Balance Sheet
Rebates & Other Receivables	$	71.5	$	(50.0	)	$	21.5
Total	$	71.5	$	(50.0	)	$	21.5

The Corporation will have claims for additional damages resulting from ABDC’s breaches of the Amended PVA. The Corporation intends to vigorously pursue its claims.  At this time, the Corporation is unable to determine the ultimate impact of these litigation proceedings on its consolidated financial condition, results of operations, or liquidity.  The litigation with ABDC could continue for an extended period of time, likely longer than 12 months.   The Corporation cannot provide any assurances about the outcome of the litigation.

In addition, the Corporation is involved in certain legal actions and regulatory investigations arising in the ordinary course of business.

16

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)

At March 31, 2015, the Corporation had accrued approximately $45.5 million related to the legal actions and investigations.

California Medicaid

On August 14, 2013, the California Department of Health Care Service ("DHCS") announced its intent to implement a ten (10) percent reimbursement reduction for numerous healthcare providers, including long term care pharmacies.

The DHCS implemented the reduction prospectively beginning in the first quarter of 2014. In addition, the DHCS is expected to begin recouping a percentage of provider payments representing a ten percent (10%) reduction on certain drug reimbursements retroactive to June 1, 2011.  The Corporation has previously recorded a $3.3 million liability and reduction of revenue for the expected amount of recoveries from June 1, 2011 through December 31, 2013.

FUL and AMP Changes

The reimbursement rates for pharmacy services under Medicaid are determined on a state-by-state basis subject to review by Centers for Medicare and Medicaid Services (“CMS”) and applicable federal law. Although Medicaid programs vary from state to state, they generally provide for the payment of certain pharmacy services, up to the established limits, at rates determined in accordance with each state's regulations. Federal regulations and the regulations of certain states establish "upper limits" for reimbursement of certain prescription drugs under Medicaid (these upper limits being the "FUL").

The 2010 Health Care Reform Legislation amended the Deficit Reduction Act of 2005 ("DRA") to change the definition of the FUL by requiring the calculation of the FUL as no less than 175% of the weighted average, based on utilization, of the most recently reported monthly Average Manufacturer's Price ("AMP") for pharmaceutically and therapeutically equivalent multi-source drugs available through retail community pharmacies nationally. In addition, the definition of AMP changed to reflect net sales only to drug wholesalers that distribute to retail community pharmacies and to retail community pharmacies that directly purchase from drug manufacturers. Further, the 2010 Health Care Reform Legislation continues the current statutory exclusion of prompt pay discounts offered to wholesalers and adds three (3) other exclusions to the AMP definition: i) bona fide services fees; ii) reimbursement for unsalable returned goods (recalled, expired, damaged, etc.); and iii) payments from and rebates/discounts to certain entities not conducting business as a wholesaler or retail community pharmacy. In addition to reporting monthly, the manufacturers are required to report the total number of units used to calculate each monthly AMP.  CMS will use this information when it establishes FULs as a result of the new volume-weighted requirements pursuant to the 2010 Health Care Reform Legislation.

In September 2011, CMS issued the first draft FUL reimbursement files for multiple source drugs, including the draft methodology used to calculate the FULs in accordance with the Health Care Legislation. CMS continues to release monthly data and a three-month rolling average and is expected to do so going forward. CMS has not posted monthly AMPs for individual drugs, but only posted the weighted average of monthly AMPs in a FUL group and the calculation methodology.

CMS has stated that AMP-based FULs will be published at or about the same time that CMS publishes the Medicaid Covered Outpatient Drug final rule, which, according to the latest unified agenda, is expected in June 2015. CMS will continue to post draft monthly FULs. The Corporation will continue to analyze the draft monthly FULs, including the relationship of those FULs to the National Average Drug Acquisition pricing.

Medicare Part D Changes

In a May 23, 2014 Final Rule entitled "Medicare Program: Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs," CMS finalized a requirement that effective June 1, 2015 and enforceable December 1, 2015, all prescribers of Part D covered drugs must be enrolled as Medicare providers (or be granted a valid opt-out affidavit on file with a Part A or Part B Medicare Administrative Contractor) in order for a claim to be covered under Medicare Part D.  CMS also finalized several specific requirements to reduce prescriber fraud, waste, and abuse. The Corporation is unable to evaluate the full impact of these changes on its business at this time.

17

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)

In a February 12, 2015 Final Rule entitled "Medicare Program: Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs", CMS finalized a regulation, effective January 1, 2016, prohibiting financial arrangements that penalize more efficient long-term care dispensing techniques (e.g., dispensing a three day supply over a 14 day supply) through pro-rated dispensing fees based on a day's supply or quantity dispensed.  CMS also finalized a requirement that, effective January 1, 2016, any differences in payment methodologies among long-term care pharmacies incentivize more efficient dispensing techniques.  The Corporation is unable to evaluate the full impact of these changes on its business at this time.

Acquisitions

The Corporation has historically acquired the stock or assets of businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, medical and general professional liabilities, workers’ compensation liabilities, previous tax liabilities, and unacceptable business practices. Although the Corporation institutes policies designed to conform practices to its standards following completion of acquisitions, there can be no assurance the Corporation will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. While the Corporation generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines. In the ordinary course of business, the Corporation enters into contracts containing standard indemnification provisions and indemnifications specific to a transaction such as business acquisitions and disposals of an operating facility. These indemnifications may cover claims against employment-related matters, governmental regulations, environmental issues, tax matters, as well as customer, third party payer, supplier, and contractual relationships. Obligations under these indemnities generally would be initiated by a breach of the terms of the contract or by a third party claim or event.

Employment Agreements

The Corporation has entered into employment agreements with certain of its executive officers. During the employment period, certain executive officers will be eligible to (i) participate in any short-term and long-term incentive programs established or maintained by the Corporation, (ii) participate in all incentive, savings and retirement plans and programs of the Corporation, (iii) participate, along with their dependents, in all welfare benefit plans and programs provided by the Corporation, and (iv) receive four weeks of paid vacation per calendar year.

The type of compensation due to each of the executive officers in the event of the termination of their employment period varies depending on the nature of the termination. The employment agreements generally do not entitle the executive officers to any additional payment or benefits solely upon the occurrence of a change in control but do provide additional payments or benefits or both upon a termination of employment in connection with a change in control. Additionally, the vesting of certain equity based grants made to certain executive officers accelerates upon the occurrence of a change in control.

NOTE 6—MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES

Merger, acquisition, integration costs and other charges combined were $5.0 million and $3.8 million for the three months ended March 31, 2014 and 2015, respectively.

Merger, integration costs and other charges for the three months ended March 31, 2014 and 2015 were $0.1 million.

Acquisition related costs for the three months ended March 31, 2014 and 2015 were $4.9 million and $3.7 million, respectively.

18

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 7—RESTRUCTURING COSTS AND OTHER CHARGES

In July 2013, the Corporation commenced the implementation of its restructuring plan as a result of the loss of two of the Corporation's significant customers, Kindred Healthcare ("Kindred") and Golden Living. The plan is a major initiative primarily designed to optimize operational efficiency while ensuring that the Corporation remains well-positioned to serve its clients and achieve sustainable, long-term growth.  The Corporation's restructuring plan includes steps to right size its cost structure by adjusting its workforce and facility plans to reflect anticipated business needs.

The Corporation recorded restructuring costs and other related charges of approximately of $1.9 million and $0.1 million during the three months ended March 31, 2014 and 2015, respectively. The restructuring charges primarily included severance pay, the buy-out of employment agreements, lease terminations, and other exit-related asset disposals, professional fees and facility exit costs.

The following table presents the components of the Corporation's restructuring liability (dollars in millions):

	Balance at December 31, 2014		Accrual		Utilized Amounts			Balance At March 31, 2015
Employee Severance and related costs	$	0.3	$	0.1	$	(0.2	)	$	0.2
Facility costs		1.1		-		(0.2	)		0.9
	$	1.4	$	0.1	$	(0.4	)	$	1.1

The liability at March 31, 2015 represents amounts not yet paid relating to actions taken in connection with the restructuring plan (primarily lease payments and severance costs).

NOTE 8—COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS

Treasury Stock Purchases

In August 2010, the Board of Directors authorized a share repurchase of up to $25.0 million of the Corporation's common stock, of which $10.5 million was used. On July 2, 2012 the Board of Directors authorized an increase to the remaining portion of the existing share repurchase program that allows the Corporation to again repurchase up to a maximum of $25.0 million of the Corporation's common stock. Approximately $19.7 million remained available under the program as of March 31, 2015. Share repurchases under this authorization may be made in the open market through unsolicited or solicited privately negotiated transactions, or in such other appropriate manner, and may be funded from available cash or the revolving credit facility. The amount and timing of the repurchases, if any, would be determined by the Corporation's management and would depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. Common stock acquired through the share repurchase program would be held as treasury shares and may be used for general corporate purposes, including reissuance in connection with acquisitions, employee stock option exercises or other employee stock plans. The share repurchase program does not have an expiration date and may be limited, terminated or extended at any time without prior notice. During the three months ended March 31, 2015, the Corporation repurchased no shares of common stock.

 The Corporation may redeem shares from employees upon the vesting of the Corporation's stock awards for minimum statutory tax withholding purposes and to cover option exercise costs. The Corporation redeemed 143,328 shares from the vesting of certain awards and exercise of certain stock options, for an aggregate price of approximately $4.4 million during the three months ended March 31, 2015. These shares have also been designated by the Corporation as treasury stock.

As of March 31, 2015, the Corporation had a total of 2,760,633 shares held as treasury stock.

19

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 8—COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS (Continued)

Stock Option Activity

Stock options were not granted to officers and employees during 2014 or the three months ended March 31, 2015. The following table summarizes option activity for the periods presented:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding shares at December 31, 2014		913,209		$	14.62	2.1 years	$	5.6
Exercised		(105,314	)		15.34
Canceled		(116,117	)		10.84
Expired		-			-
Outstanding shares at March 31, 2015		691,778		$	14.39	2.04 years	$	9.5
Exercisable shares at March 31, 2015		690,750		$	14.40	2.04 years	$	9.5

Nonvested Shares

The following table summarizes nonvested share activity for the periods presented:

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding shares at December 31, 2014		941,570		$	18.00
Granted - Restricted Stock Units		135,725			27.85
Granted - Performance Share Units		149,777			27.85
Forfeited		(2,163	)		19.84
Vested		(306,101	)		15.50
Outstanding shares at March 31, 2015		918,808		$	21.67

The weighted average remaining term and intrinsic value of non-vested shares as of March 31, 2015 was 2.9 years and $18.2 million, respectively.

20

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 9—INCOME TAXES

The provision for income taxes is based upon the Corporation's estimate of annual taxable income or loss for each respective accounting period. The following table summarizes our provision for income taxes for the periods presented (dollars in millions):

	Three Months Ended March 31,
	2014			2015
Provision for income taxes	$	3.0			$	5.8
Total provision as a percentage of pre-tax income		38.4	%			37.9	%

The decrease in our provision for income taxes as a percentage of pre-tax income for the three months ended March 31, 2015 compared to the comparable 2014 period was due primarily to a decrease in state and local taxes.  The effective tax rates in 2015 and 2014 are higher than the federal statutory rate largely as a result of the combined impact of state and local taxes and various non-deductible expenses.

The Corporation derives a current federal and state income tax benefit from the impact of deductions associated with the amortization of tax deductible goodwill acquired through business combinations. The tax basis of the Corporation's tax deductible goodwill was approximately $145.3 million and $141.6 million at December 31, 2014 and March 31, 2015, respectively.

The Corporation recognizes an asset or liability for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets are recovered or liabilities are settled. The Corporation also recognizes as deferred tax assets the future tax benefits from net operating loss carryforwards. As of March 31, 2015, the Corporation has $5.2 million ($1.8 million tax benefit) of federal net operating loss carryforwards available related to a 2013 acquisition and $31.4 million ($11.0 million deferred tax benefit) related to a 2014 acquisition. These net operating losses are subject to limitations under Internal Revenue Code Section 382; however, the Corporation expects that it will be able to use the recorded amount which takes into account the limitations of the carryforwards.  Accordingly, the Corporation has not recorded any valuation allowance for the associated deferred tax asset. The deferred tax asset for state net operating loss carryforwards is $3.0 million, net of valuation allowances. The net operating losses have carryforward periods ranging from 1 to 20 years depending on the taxing jurisdiction.

A valuation allowance is provided for the Corporation's deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Corporation recognized net deferred tax assets totaling $30.6 million at December 31, 2014 and $28.1 million at March 31, 2015, net of state valuation allowances of $4.1 million.

As of December 31, 2014 and March 31, 2015, the Corporation had no reserves recorded for unrecognized tax benefits for U.S. federal and state tax jurisdictions.

The federal statute of limitations remains open for tax years 2012 through 2014.  The IRS completed its audit of the Corporation’s consolidated U.S. income tax return for the 2011 tax year in February 2014.

State tax jurisdictions generally have statutes of limitation ranging from three to five years. The Corporation is generally no longer subject to state and local income tax examinations by tax authorities for years before 2009. The state income tax impact of federal income tax changes remains subject to examination by various states for a period of up to one year after formal notification of IRS settlement to the states.

21

PHARMERICA CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

NOTE 10—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (dollars in millions, except per share amounts):

	Three Months ended March 31,
	2014		2015
Numerator:
Numerator for basic and earnings per diluted share - net income	$	4.8	$	9.6
Denominator:
Denominator for basic earnings per share - weighted average shares		29,753,024		30,185,230
Effect of dilutive securities (stock options, restricted stock units and performance share units)		601,043		548,151
Denominator for earnings per diluted share - adjusted weighted average shares		30,354,067		30,733,381
Basic earnings per share	$	0.16	$	0.32
Earnings per diluted share	$	0.16	$	0.31
Unexercised employee stock options and unvested restricted shares excluded from the effect of dilutive securities above (a)		1,677		56

(a)These unexercised employee stock options, unvested restricted shares and performance shares that have not yet met performance conditions are not included in the computation of diluted earnings per share because to do so would be anti-dilutive for the periods presented.

Stock options and restricted shares and units granted by the Corporation are treated as potential common shares outstanding in computing earnings per diluted share. Performance share units are treated as potential common shares outstanding in computing earnings per diluted share only when the performance conditions are met.

Common shares repurchased by the Corporation reduce the number of basic shares used in the denominator for basic and diluted earnings per share.

22

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Corporation's current estimates, expectations and projections about the Corporation's future results, performance, prospects and opportunities. Forward looking statements include, among other things, the information concerning the Corporation's possible future results of operations including revenues, costs of goods sold, and gross margin, business and growth strategies, financing plans, the Corporation's competitive position and the effects of competition, the projected growth of the industries in which we operate, and the Corporation's ability to consummate strategic acquisitions. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "plan," "may," "should," "will," "would," "project," and similar expressions. These forward-looking statements are based upon information currently available to the Corporation and are subject to a number of risks, uncertainties and other factors that could cause the Corporation's actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause the Corporation's actual results to differ materially from the results referred to in the forward-looking statements the Corporation makes in this report include:

• the Corporation's access to capital, credit ratings, indebtedness, and ability to raise additional financings and operate under the terms of the Corporation's debt obligations;

• anti-takeover provisions of the Delaware General Corporation Law, which in concert with our certificate of incorporation and our by-laws could delay or deter a change in control;

• the effects of adverse economic trends or intense competition in the markets in which we operate;

• the Corporation's risk of loss of revenues due to a customer or owner of skilled nursing facility entering the institutional pharmacy business;

• the effects of the loss of a large customer and the Corporation's ability to adequately restructure its operations to offset the loss;

• the demand for the Corporation's products and services;

• the risk of retaining existing customers and service contracts and the Corporation's ability to attract new customers for growth of the Corporation's business;

• the effects of renegotiating contract pricing relating to significant customers and suppliers, including the hospital pharmacy business which is substantially dependent on service provided to one customer;

• the impacts of cyber security risks and/or incidents;

• the effects of a failure in the security or stability of our technology infrastructure, or the infrastructure of one or more of our key vendors, or a significant failure or disruption in service;

• the effects of an increase in credit risk, loss or bankruptcy of or default by any significant customer, supplier, or other entity relevant to the Corporation's operations;

• the Corporation's ability to successfully pursue the Corporation's development and acquisition activities and successfully integrate new operations and systems, including the realization of anticipated revenues, economies of scale, cost savings, and productivity gains associated with such operations;

• the Corporation's ability to control costs, particularly labor and employee benefit costs, rising pharmaceutical costs, and regulatory compliance costs;

• the effects of healthcare reform and government regulations, including interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare and institutional pharmacy services industries including the dispensing of antipsychotic prescriptions;

• changes in the reimbursement rates or methods of payment from Medicare and Medicaid and other third party payers to both us and our customers;

• the potential impact of state government budget shortfalls and their ability to pay the Corporation and its customers for services provided;

• the Corporation's ability, and the ability of the Corporation's customers, to comply with Medicare or Medicaid reimbursement regulations or other applicable laws;

• the effects of changes in the interest rate on the Corporation's outstanding floating rate debt instrument and the increases in interest expense, including increases in interest rate terms on any new debt financing;

• further consolidation of managed care organizations and other third party payers;

• political and economic conditions nationally, regionally, and in the markets in which the Corporation operates;

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• natural disasters, war, civil unrest, terrorism, fire, floods, tornadoes, earthquakes, hurricanes, epidemic, pandemic, catastrophic event or other matters beyond the Corporation's control;

• increases in energy costs, including state and federal taxes, and the impact on the costs of delivery expenses and utility expenses;

• elimination of, changes in, or the Corporation's failure to satisfy pharmaceutical manufacturers' rebate programs;

• the Corporation's ability to attract and retain key executives, pharmacists, and other healthcare personnel;

• the Corporation's risk of loss not covered by insurance;

• the outcome of litigation to which the Corporation is a party from time to time, including adverse results in material litigation or governmental inquiries including the possible insufficiency of any accruals established by the Corporation from time to time;

• changes in accounting rules and standards, audits, compliance with the Sarbanes-Oxley Act, and regulatory investigations;

• changes in market conditions that would result in the impairment of goodwill or other assets of the Corporation;

• changes in market conditions in which we operate that would influence the value of the Corporation's stock;

• the uncertainty as to the long-term value of the Corporation's common stock;

• the Corporation's ability to anticipate a shift in demand for generic drug equivalents and the impact on the financial results including the negative impact on brand drug rebates;

• the effect on prescription volumes and the Corporation's net revenues and profitability if the safety risk profiles of drugs increase or if drugs are withdrawn from the market, including as a result of manufacturing issues, or if prescription drugs transition to over-the-counter products;

• the effects on the Corporation's results of operations related to interpretations of accounting principles by the SEC staff that may differ from those of management;

• the potential impact of the litigation proceedings with ABDC regarding the Amended PVA;

• changes in tax laws and regulations;

• the effects of changes to critical accounting estimates; and

• other factors, risks and uncertainties referenced in the Corporation's filings with the Commission, including the "Risk Factors" set forth in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2014.

YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS, ALL OF WHICH SPEAK ONLY AS OF THE DATE OF THIS QUARTERLY REPORT. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT ANY EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS QUARTERLY REPORT OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR ANY PERSON ACTING ON THE CORPORATION'S BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS CONTAINED OR REFERRED TO IN THIS SECTION AND IN OUR RISK FACTORS SET FORTH IN PART I, ITEM 1A OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014 AND IN OTHER REPORTS FILED WITH THE SEC BY THE CORPORATION.

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General

The condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q as of and for the three months ended March 31, 2015, reflect the financial position, results of operations, and cash flows of the Corporation.

Unless the context otherwise requires, all references to "we," "us," "our," and "Corporation" refer to PharMerica Corporation and its subsidiaries.

Institutional Pharmacy Business

Our core business provides pharmacy products and services to residents and patients in skilled nursing facilities, nursing centers, assisted living facilities, hospitals, and other long-term alternative care settings. We purchase, repackage, and dispense prescription and non-prescription pharmaceuticals in accordance with physician orders and deliver such medication to healthcare facilities for administration to individual patients and residents. Depending on the specific location, we service healthcare facilities typically within a radius of 120 miles or less of our pharmacy locations at least once each day. We provide 24-hour, seven-day per week on-call pharmacist services for emergency dispensing, delivery, and/or consultation with the facility's staff or the resident's attending physician. We also provide various supplemental healthcare services that complement our institutional pharmacy services.

We offer prescription and non-prescription pharmaceuticals to our customers through unit dose or modified unit dose packaging, dispensing, and delivery systems, typically in a 14 to 30 day supply. Unit dose medications are packaged for dispensing in individual doses as compared to bulk packaging used by most retail pharmacies. The customers we serve prefer the unit dose delivery system over the bulk delivery system employed by retail pharmacies because it improves control over the storage and ordering of drugs and reduces errors in drug administration in healthcare facilities. Nursing staff in our customers' facilities administer the pharmaceuticals to individual patients and residents. The Corporation also utilizes an on-site dispensing system, with real time data transfer between the system and the Corporation, which provides timely medication administration in emergency and first dose situations. We also offer clinical pharmacy programs that encompass a wide range of drug therapy and disease management protocols, including protocols for anemia treatment, infectious diseases, wound care, nutritional support, renal dosing, and therapeutic substitution.

Our computerized dispensing and delivery systems are designed to improve efficiency and control over distribution of medications to patients and residents. We provide computerized physician orders and medication administration records for patients or residents on a monthly basis as requested. Data from these records are formulated into monthly management reports on patient and resident care and quality assurance. This system improves efficiencies in nursing time, reduces drug waste, and helps to improve patient outcomes.

Hospital Pharmacy Management Services

We also provide hospital pharmacy management services. These services generally entail the overall management of the hospital pharmacy operations, including the ordering, receipt, storage, and dispensing of pharmaceuticals to the hospital's patients pursuant to the clinical guidelines established by the hospital. We offer the hospitals a wide range of regulatory and financial management services, including inventory control, budgetary analysis, staffing optimization, and assistance with obtaining and maintaining applicable regulatory licenses, certifications, and accreditations. We work with the hospitals to develop and implement pharmacy policies and procedures, including drug formulary development and utilization management. We also offer clinical pharmacy programs that encompass a wide range of drug therapy and disease management protocols, including protocols for anemia treatment, infectious diseases, wound care, nutritional support, renal dosing, and therapeutic substitution. The hospital pharmacy management services business is comprised of a few customers, of which, our largest service is to the majority of the Kindred Healthcare (“Kindred”) hospitals.

Consultant Pharmacist Services

Federal and state regulations mandate that long-term care facilities, in addition to providing a source of pharmaceuticals, retain consultant pharmacist services to monitor and report on prescription drug therapy in order to maintain and improve the quality of resident care. On September 30, 2008, the United States Department of Health and Human Services Office of Inspector General ("OIG") published OIG Supplemental Compliance Program Guidance for Nursing Homes. With quality of care being the first risk area identified, the supplemental guidance is part of a series of recent government efforts focused on improving quality of care at skilled nursing and long-term care facilities. The guidance contains compliance recommendations and an expanded discussion of risk areas. The guidance stressed that facilities must provide pharmaceutical services to meet the needs of each resident and should be mindful of potential quality of care problems when implementing policies and procedures on proper medication management. It further stated that facilities can reduce risk by educating staff on medication management and improper pharmacy kickbacks for consultant pharmacists and that facilities should review the total compensation paid to consultant pharmacists to ensure it is not structured in a way that reflects the volume or value of particular drugs prescribed or administered to residents.

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We provide consultant pharmacist services to approximately 65% of our patients serviced. The services offered by our consultant pharmacists include:

· Monthly reviews of each resident's drug regimen to assess the appropriateness and efficiency of drug therapies, including the review of medical records, monitoring drug interactions with other drugs or food, monitoring laboratory test results, and recommending alternative therapies;

· Participation on quality assurance and other committees of our customers, as required or requested by such customers;

· Monitoring and reporting on facility-wide drug utilization;

· Development and maintenance of pharmaceutical policy and procedure manuals; and

· Assistance with federal and state regulatory compliance pertaining to resident care.

Medical Records

The Corporation provides medical records services, which includes the completion and maintenance of medical record information for patients in the Corporation's customers' facilities. The medical records services include:

· Real-time access to medication and treatment administration records, physician order sheets and psychotropic drug monitoring sheets;

· Online ordering to save time and resources;

· A customized database with the medication profiles of each resident's medication safety, efficiency and regulatory compliance;

· Web-based individual patient records detailing each prescribed medicine; and

· Electronic medical records to improve information to make it more legible and instantaneous.

Specialty Infusion Services

The Corporation provides specialty infusion services focused on providing complex pharmaceutical products and clinical services to patients in client facilities, hospice, and outside of hospital or nursing home settings. We offer high-touch clinical services to patients with acute or chronic conditions. The delivery of specialty infusion therapy requires comprehensive planning and monitoring which is provided through our registered nursing staff. Our nursing staff performs an initial patient assessment, provides therapy specific training and education, administers therapy and monitors for potential side effects. We also provide extensive clinical monitoring and patient follow-up to ensure patient therapy adherence and proactively manage patients' conditions. An in-network strategy facilitates easier decision-making for referral sources and provides us with the ability to pre-authorize patients, auto adjudicate, and bill electronically, enabling faster prescription turnaround.

Specialty Oncology Pharmacy

We provide dispensing of oncology drugs, care management and other related services to patients, oncology practices, and hospitals.  These services encompass clinical coordination and review, compliance to appropriate oncology protocols, patient assistance with outside funding, and timely delivery of medication.  We coordinate the administration of medications to the physician’s office or directly to the patient at the appropriate point of treatment.  We work directly with the payers to bill insurance companies for the medication provided, ensuring all prior authorizations and approvals are obtained.  These services offer physicians an alternative to the traditional buy-and-bill distribution model, allowing them to outsource drug procurement, inventory management, and prescription administration.

Suppliers/Inventory

We obtain pharmaceutical and other products from Cardinal Health (“Cardinal”) and other contracts negotiated directly with pharmaceutical manufacturers for discounted prices. The Corporation entered into a Prime Vendor Agreement with Cardinal effective April 1, 2015. The loss of a supplier could adversely affect our business if alternate sources of supply are unavailable.

We seek to maintain an on-site inventory of pharmaceuticals and supplies to ensure prompt delivery to our customers. Cardinal maintains local distribution facilities in most major geographic markets in which we operate.  In addition, beginning in the fourth quarter of 2013, we began supplying many of our pharmacies with select products from a distribution center operated by a third-party logistics company.

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Brand to Generic Conversions

The following table summarizes the material brand-to-generic conversions expected to occur in 2015 through 2018:

2015	2016	2017	2018
Colcrys (Q1)	Nuedexta (Q1)	Seroquel XR (Q4)	Nasonex (Q2)
Abilify (Q2)*	Combivent (Q2)
Renagel (Q2)	Crestor (Q2)
Renvela(Q2)	Cubicin (Q2)
Zyvox (Q2)*	Tamiflu (Q3)
Aggrenox (Q3)	Azilect( Q4)
Copaxone (Q3)	Zetia (Q4)
Gleevec (Q3)
Invega (Q3)
Namenda IR (Q3)*
Avodart (Q4)
Exelon Patch (Q4)*
Patanol (Q4)
* These represent the most significant brand-to-generic conversions
(Number in parentheses refers to the expected quarter of conversion)

When a branded drug shifts to a generic, initial pricing of the generic drug in the market will vary depending on the number of manufacturers launching their generic version of the drug. Historically a shift from brand-to-generic decreased our revenue and improved our gross margin from sales of these classes of drugs during the initial time period a brand drug has a generic alternative. However, recent experience has indicated that the third-party payers may reduce their reimbursements to the Corporation faster than previously experienced. In addition, the number of generic manufacturers entering the market impacts the overall cost and reimbursement of generic drugs. This acceleration in the reimbursement reduction and the number of generic manufacturers have resulted in margin compression much earlier than we have historically experienced. Due to the unique nature of the brand-to-generic conversion, management cannot estimate the future financial impact of the brand-to-generic conversions on the Corporation's results of operations.

Supplier and Manufacturer Rebates

We currently receive rebates from certain manufacturers and distributors of pharmaceutical products for achieving targets of market share or purchase volumes. Rebates are designed to prefer, protect, or maintain a manufacturer's products that are dispensed by the pharmacy under its formulary. Rebates for brand name products are generally based upon achieving a defined market share tier within a therapeutic class and can be based on either purchasing volumes or actual prescriptions dispensed. Rebates for generic products are more likely to be based on achieving purchasing volume requirements.

2010 Health Care Reform Legislation

The Patient Protection and Affordable Care Act and the reconciliation law known as Health Care and Education Affordability Reconciliation Act (combined we refer to both Acts as the “2010 Health Care Reform Legislation”) were enacted in March 2010. State participation in the expansion of Medicaid under the 2010 Health Care Reform Legislation is voluntary. Three key provisions of the 2010 Health Care Reform Legislation that are relevant to the Corporation are: (i) the gradual modification to the calculation of the Federal Upper Limit (“FUL”) for drug prices and the definition of Average Manufacturer’s Price (“AMP”), (ii) the closure, over time, of the Medicare Part D coverage gap, which is otherwise known as the “Donut Hole,” and (iii) short cycle dispensing. Regulations under the 2010 Health Care Reform Legislation are expected to continue being drafted, released, and finalized throughout the next several years.

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FUL and AMP Changes

The 2010 Health Care Reform Legislation amended the Deficit Reduction Act of 2005 (the “DRA”) to change the definition of the FUL by requiring the calculation of the FUL as no less than 175% of the weighted average, based on utilization, of the most recently reported monthly AMP for pharmaceutically and therapeutically equivalent multi-source drugs available through retail community pharmacies nationally.

In addition, the definition of AMP changed to reflect net sales only to drug wholesalers that distribute to retail community pharmacies and to retail community pharmacies that directly purchase from drug manufacturers. Further, the 2010 Health Care Reform Legislation continues the current statutory exclusion of prompt pay discounts offered to wholesalers and adds three other exclusions to the AMP definition: (i) bona fide services fees;(ii) reimbursement for unsalable returned goods (recalled, expired, damaged, etc.); and (iii) payments from and rebates/discounts to certain entities not conducting business as a wholesaler or retail community pharmacy. In addition to reporting monthly, the manufacturers are required to report the total number of units used to calculate each monthly AMP. Centers for Medicare and Medicaid Services (“CMS”) will use this information when it establishes FULs as a result of the new volume-weighted requirements pursuant to the 2010 Health Care Reform Legislation.

In September 2011, CMS issued the first draft FUL reimbursement files for multiple source drugs, including the draft methodology used to calculate the FULs in accordance with the Health Care Legislation. CMS continues to release this monthly data and a three-month rolling average and is expected to do so going forward. CMS has not posted monthly AMPs for individual drugs, but only posted the weighted average of monthly AMPs in a FUL group and the calculation methodology.

The Office of Information and Regulatory Affairs website states that the final AMP was expected June 2014, but to date has not been released. Further, CMS has stated that AMP-based FULs will be published at or about the same time that CMS publishes the Medicaid Covered Outpatient Drug final rule, which, according to the latest unified agenda, is expected in April 2015.  CMS will continue to post draft monthly FULs.  The Corporation will continue to analyze the draft monthly FULs, including the relationship of those FULs to the National Average Drug Acquisition pricing.

Part D Coverage Gap

Starting on January 1, 2011, the Medicare Coverage Gap Discount Program (the "Program") requires drug manufacturers to provide a 50% discount on the negotiated ingredient cost to certain Medicare Part D beneficiaries for certain drugs and biologics purchased during the coverage gap (this is exclusive of the pharmacy dispensing fee). In addition, the 2010 Health Care Reform Legislation requires Medicare to close or eliminate the coverage gap entirely by fiscal year 2020 by gradually reducing the coinsurance percentage for both drugs covered and not covered by the Program for each applicable beneficiary.

At this time, the Corporation is unable to fully evaluate the impact of the changes to the coverage gap to its business.

Short Cycle Dispensing and Dispensing Fees

Pursuant to the 2010 Health Care Reform Legislation, Prescription Drug Plans (“PDPs”) are required, under Medicare Part D and Medicare Advantage prescription drug plans (“Medicare Advantage” or “MAPDs”) to utilize specific, uniform dispensing techniques, such as weekly, daily, or automated dose dispensing, when dispensing covered Medicare Part D drugs to beneficiaries who reside in a long-term care facility to reduce waste associated with 30 to 90 day prescriptions for such beneficiaries. Pursuant to CMS issued regulation, beginning January 1, 2013, pharmacies dispensing to long-term care facilities must dispense no more than 14-day supplies of brand-name oral solid medications covered by Medicare Part D. The Corporation fully implemented short cycle dispensing on January 1, 2013. The impact of short cycle dispensing has not had a material adverse impact on the Corporation’s results of operations.

In a February 12, 2015 Final Rule entitled "Medicare Program: Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs", CMS finalized a regulation, effective January 1, 2016, prohibiting financial arrangements that penalize more efficient long-term care dispensing techniques (e.g., dispensing a three day supply over a 14 day supply) through pro-rated dispensing fees based on a day's supply or quantity dispensed.  CMS also finalized a requirement that, effective January 1, 2016, any differences in payment methodologies among long-term care pharmacies incentivize more efficient dispensing techniques.  The Corporation is unable to evaluate the full impact of these changes on its business at this time.

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Medicare Part D Changes

In a May 23, 2014 Final Rule entitled "Medicare Program: Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs," CMS finalized a requirement that, effective June 1, 2015 and enforceable December 1, 2015, all prescribers of Part D covered drugs must be enrolled as Medicare providers (or be granted a valid opt-out affidavit on file with a Part A or Part B Medicare Administrative Contractor) in order for a claim to be covered under Medicare Part D. CMS also finalized several specific requirements to reduce prescriber fraud, waste, and abuse. The Corporation is unable to evaluate the full impact of these changes on its business at this time.

Critical Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if:

• It requires assumptions to be made that were uncertain at the time the estimate was made; and

• Changes in the estimate or different estimates could have a material impact on our condensed consolidated results of operations or financial condition.

The critical accounting estimates discussed below are not intended to be a comprehensive list of all of the Corporation's accounting policies that require estimates. Management believes that of the significant accounting policies, discussed in Note 1 of the condensed consolidated financial statements included in this report, the estimates discussed below involve a higher degree of judgment and complexity. Management believes the current assumptions and other considerations used to estimate amounts reflected in the condensed consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in the condensed consolidated financial statements, the resulting changes could have a material adverse effect on the condensed consolidated results of operations and financial condition of the Corporation.

Allowance for doubtful accounts and provision for doubtful accounts

Accounts receivable primarily consist of amounts due from PDP's under Medicaid Part D, long-term care institutions, respective state Medicaid programs, private payers and third party insurance companies. Our ability to collect outstanding receivables is critical to our results of operations and cash flows. We establish an allowance for doubtful accounts to reduce the carrying value of our receivables to their estimated net realizable value. In addition, certain drugs dispensed are subject to being returned and the responsible paying parties are due a credit for such returns.

Our quarterly provision for doubtful accounts included in our condensed consolidated statements of operations is as follows (dollars in millions):

	2014						2015
	Amount		% of Revenues				Amount		% of Revenues
First Quarter	$	5.6		1.2	%	First Quarter	$	5.0		1.0	%
Second Quarter		5.7		1.3
Third Quarter		5.3		1.1
Fourth Quarter		6.6		1.3

The following table shows our pharmacy revenue days outstanding reflected in our net accounts receivable as of the quarters indicated:

	2014		2015
First Quarter		37.7		34.0
Second Quarter		37.0
Third Quarter		36.7
Fourth Quarter		34.9

The following table shows our summarized aging categories by quarter:

	2014												2015
	First			Second			Third			Fourth			First
0 to 60 days		56.7	%		53.9	%		57.3	%		58.8	%		61.4	%
61 to 120 days		17.7			17.3			16.9			17.2			15.8
Over 120 days		25.6			28.8			25.8			24.0			22.8

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The following table shows our allowance for doubtful accounts as a percent of gross accounts receivable (dollars in millions):

	2014								2015
	Allowance		Gross Accounts Receivable		% of Gross Accounts Receivable				Allowance		Gross Accounts Receivable		% of Gross Accounts Receivable
First Quarter	$	57.7	$	242.2		23.8	%	First Quarter	$	59.7	$	259.2		23.0	%
Second Quarter		60.3		246.5		24.5
Third Quarter		57.4		272.4		21.1
Fourth Quarter		58.1		253.9		22.9

We recognize revenues at the time services are provided or products are delivered. A significant portion of our revenues are billed to PDPs under Medicare Part D, state Medicaid programs, long-term care institutions, third party insurance companies, and private payers. Some claims are electronically adjudicated through online processing at the point the prescriptions are dispensed such that our operating system is automatically updated with the actual amounts to be reimbursed. As a result, our revenues and the associated receivables are based upon the actual reimbursements to be received. For claims that are adjudicated on-line and are rejected or otherwise denied upon submission, the Corporation provides contractual allowances based upon historical trends, contractual reimbursement terms and other factors which may impact ultimate reimbursement. Amounts are adjusted to actual reimbursed amounts based upon cash receipts.

A summary of revenues by payer type follows (dollars in millions):

	Three Months Ended March 31,
	2014					2015
	Amount		% of Revenues			Amount		% of Revenues
Medicare Part D	$	202.5		44.8	%	$	237.2		46.3	%
Institutional healthcare providers		114.8		25.3			121.9		23.9
Medicaid		42.9		9.5			41.2		8.1
Private and other		20.8		4.6			23.1		4.5
Insured		51.8		11.5			67.6		13.2
Medicare		4.9		1.1			5.1		1.0
Hospital management fees		14.5		3.2			15.5		3.0
Total	$	452.2		100.0	%	$	511.6		100.0	%

Inventory and cost of drugs dispensed

We have inventory located at each of our institutional pharmacy, specialty infusion, and specialty oncology locations as well as our drug distribution center. Our inventory is valued at the lower of first-in, first-out cost or market. The inventory consists of prescription drugs, over the counter products and intravenous solutions. Our inventory relating to controlled substances is maintained on a manually prepared perpetual system to the extent required by the Drug Enforcement Agency and state board of pharmacies. All other inventory is maintained on a periodic system, through the performance of, at a minimum, quarterly physical inventory at the end of each quarter. All inventory counts are reconciled to the balance sheet account and differences are adjusted through cost of goods sold. In addition, we record an amount of potential returns of prescription drugs based on historical rates of returns and record an estimate for rebates associated with inventory remaining at the end of each period.

As of December 31, 2014 and March 31, 2015, our inventories were $135.7 million and $122.6 million, respectively.

  The inventory days on hand were as follows for the periods presented:

	2014		2015
First Quarter		26.0		26.1
Second Quarter		35.1
Third Quarter		31.7
Fourth Quarter		29.1

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Goodwill and other intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies. Our intangible assets are comprised primarily of trade names, customer relationship assets, and non-compete agreements.

Our goodwill as of December 31, 2014 and March 31, 2015 was $318.0 million and $336.3 million, respectively.

The Corporation’s policy is to perform a quantitative assessment of its institutional pharmacy and specialty infusion reporting units to determine whether it is more likely than not (defined as having a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.  The Corporation performed a quantitative assessment as of December 31, 2014.  The institutional pharmacy and specialty infusion reporting unit’s fair value as calculated for the analysis were approximately 48.2% and 13.1%, respectively, greater than book value at December 31, 2014. While the excess on the specialty infusion reporting unit was not significantly in excess of book value, the business was acquired in the fourth quarter 2012 and is performing to our expectations. In addition, if we were to assume a 100 basis point change in the key assumption, a reduction in the long-term growth rate or an increase in the discount rate used, to determine the fair value of the specialty infusion reporting unit as of December 31, 2014, the quantitative assessment of the specialty infusion reporting unit would still result in fair value in excess of the carrying value. The specialty infusion reporting unit has goodwill with a carrying value of $57.7 million. The Corporation also performed a qualitative assessment of its specialty oncology reporting unit as of December 31, 2014 and did not find it necessary to perform the first step of the two-step impairment test based on that analysis.

There were no impairment triggering events during the three months ended March 31, 2015.

Accounting for income taxes

We assess the likelihood that deferred tax assets will be realized from future taxable income.  A valuation allowance is provided for deferred tax assets if it is more-likely-than-not that some portion or all of the net deferred tax assets will not be realized.  Our deferred tax asset balances as of December 31, 2014 and March 31, 2015 were $30.6 million and $28.1 million, respectively.  Our valuation allowances for state deferred tax assets in our condensed consolidated balance sheets as of December 31, 2014 and March 31, 2015 were $4.1 million.

Definitions

Listed below are definitions of terms used by the Corporation in managing the business. The definitions are necessary to the understanding of the Management's Discussion and Analysis section of this document.

Gross profit per prescription dispensed: Represents the gross profit divided by the total prescriptions dispensed.

Gross profit margin: Represents the gross profit per prescription dispensed divided by the revenue per prescription dispensed.

Prescriptions dispensed: Represents a prescription filled for an individual patient. A prescription will usually be for a 14 or 30 day period and will include only one drug type.

Revenue per prescription dispensed: Represents the revenue divided by the total prescriptions dispensed.

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Results of Operations

The following table presents selected consolidated comparative results of operations and statistical information for the periods presented (dollars in millions, except per prescription and per patient amounts, and prescriptions in thousands):

	Quarter Ended
	March 31, 2014						Increase (Decrease)					March 31, 2015
	Amount			% of Revenues								Amount			% of Revenues
Revenues	$	452.2			100.0	%	$	59.4		13.1	%	$	511.6			100.0	%
Cost of goods sold		372.2			82.3			50.8		13.6	%		423.0			82.7
Gross profit	$	80.0			17.7	%	$	8.6		10.8	%	$	88.6			17.3	%
Pharmacy (in whole numbers except where indicated)
Financial data
Prescriptions dispensed (in thousands)		8,608						445		5.2	%		9,053
Revenue per prescription dispensed	$	52.53					$	3.98		7.6	%	$	56.51
Gross profit per prescription dispensed	$	9.29					$	0.50		5.4	%	$	9.79
Gross profit margin		17.7	%					(0.4	)%	(2.3	)%		17.3	%
Generic dispensing rate		84.5	%					0.8	%	0.9	%		85.3	%

Revenues

Revenues increased $59.4 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 due to the 2014 and 2015 acquisitions. The increase of $59.4 million is comprised of a favorable rate variance of approximately $36.0 million or $3.98 increase per prescription dispensed, along with a favorable volume variance of approximately $23.4 million or 445,000 more prescriptions dispensed.  The increase is driven by 2014 acquisitions, growth in both specialty oncology and specialty infusion, and branded drug inflation.  The revenue per prescription dispensed increase is due to the increased volume in both specialty oncology and specialty infusion, which carries higher revenue per script and branded drug inflation.

Gross Profit

Gross profit for the three months ended March 31, 2015 was $88.6 million or $9.79 per prescription dispensed compared to $80.0 million or $9.29 per prescription dispensed for the three months ended March 31, 2014. The increase in gross profit was driven by 2014 acquisitions, growth in both specialty oncology and specialty infusion, and branded drug inflation.  The gross profit per prescription increase is due to the increased volume in both specialty oncology and specialty infusion, which carries higher revenue per script and branded drug inflation.

Gross profit margin for the three months ended March 31, 2015 was 17.3% compared to 17.7% for the three months ended March 31, 2014. The gross profit margin was adversely impacted by the increased volume in both specialty oncology and specialty infusion, which carries lower profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $59.0 million, or 11.5% of revenues, for the three months ended March 31, 2015 compared to $57.2 million, or 12.6% of revenues, for the three months ended March 31, 2014. The increase of $1.8 million is due to the 2014 Acquisitions, primarily labor costs.

Depreciation and Amortization

Depreciation expense was $5.8 million and $4.8 million for the three months ended March 31, 2015 and 2014. Depreciation expense increased $1.0 million due depreciation expense recognized on the assets acquired through the 2014 Acquisitions.

Amortization expense was $6.6 million for the three months ended March 31, 2015 compared to $4.4 million for the three months ended March 31, 2014. The increase of $2.2 million is due primarily to the amortization expense recognized on intangibles acquired through the 2014 Acquisitions.

32

Settlement, Litigation and Other Related Charges

Settlement, litigation and other related charges were $2.3 million for the three months ended March 31, 2015 compared to $1.2 million for the three months ended March 31, 2014. These costs relate to the Corporation's defense and settlement of certain governmental investigations and litigations.

Restructuring and Impairment Charges

Restructuring and impairment charges were $0.1 million for the three months ended March 31, 2015 compared to $1.9 million for the three months ended March 31, 2014.These costs are part of the Corporation’s initiative to realign the organization in connection with the loss of two significant customers, which were primarily recognized in 2014.

Merger, Acquisition, Integration Costs and Other Charges

Merger, acquisition, integration costs and other charges were $3.8 million and $5.0 million for the three months ended March 31, 2015 and 2014, respectively.The decrease is primarily related to post acquisition bonus payments made in 2014, with no such costs in 2015.

Interest Expense

Interest expense was $1.4 million for the three months ended March 31, 2015 compared to $2.5 million for the three months ended March 31, 2014. The decrease was due to lower interest rates as a result of the new credit agreement signed in 2014, along with lower amortization of deferred financing costs.

Tax Provision

The effective tax rate for the three months ended March 31, 2015 was 37.9%, comprised of the 35% federal statutory rate, 3.0% for the state rate, and (0.1)% for permanent differences.  There were no discrete items for the three months ended March 31, 2015 that impacted the effective tax rate. The effective tax rate for the three months ended March 31, 2014 was 38.4% comprised of the 35% federal statutory rate, 4.0% for the state rate, and (0.6)% for permanent differences and other discrete items.  The effective tax rate excluding the impact of the discrete items was 37.4% for the three months ended March 31, 2014.  The increase in the effective tax rate excluding the impact of the discrete items between the two periods was the result of an increase in certain non-deductible employee compensation costs.

Liquidity and Capital Resources

Cash Flows - The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented (dollars in millions):

	Three Months Ended March 31,
	2014			2015
Net cash provided by operating activities	$	4.4		$	44.3
Net cash used in investing activities		(16.3	)		(25.0	)
Net cash provided by (used in) financing activities		0.4			(27.4	)
Net change in cash and cash equivalents		(11.5	)		(8.1	)
Cash and cash equivalents at beginning of period		24.2			33.3
Cash and cash equivalents at end of period	$	12.7		$	25.2

Operating Activities – Cash provided by operating activities aggregated $44.3 million for the three months ended March 31, 2015 compared to cash provided by operating activities of $4.4 million for the three months ended March 31, 2014. The increase in cash from operating activities is due primarily to the $50.0 million in ABDC drug purchase payments withheld, the Corporation’s inventory purchasing strategy, and an increase in net income which were partially offset by an increase in ABDC rebates receivable.

Investing Activities – Cash used in investing activities aggregated $25.0 million for the three months ended March 31, 2015 compared to $16.3 million for the three months ended March 31, 2014. The increase is due to the acquisition completed by the Corporation in the first quarter of 2015.

33

Financing Activities – Cash used in financing activities aggregated $27.4 million for the three months ended March 31, 2015 compared to cash provided by financing activities of $0.4 million for the three months ended March 31, 2014. The increase in cash used in financing activities is due primarily to the increase in revolving credit facility repayments during 2015.

Credit Agreement

On September 17, 2014, the Corporation entered into a Credit Agreement by and among the Corporation, the lenders named therein, Bank of America, N.A., as administrative agent, JP Morgan Chase Bank N.A., as syndication agent, and U.S. Bank, National Association, Citibank, N.A., MUFG Union Bank, N.A., BBVA Compass Bank and SunTrust Bank as co-documentation agents (the "Credit Agreement"). The Credit Agreement consists of a $225.0 million term loan facility and a $310.0 million revolving credit facility. The terms and conditions of the Credit Agreement are customary to facilities of this nature. Unless terminated earlier, the Credit Agreement will mature on September 17, 2019, and the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, if any, will be payable in full on such date.

The Credit Agreement requires term loan principal payments by the Corporation in an amount of $2.8 million on the each quarter beginning September 2015 through September 2019. The final principal repayment installment of term loans shall be repaid on the term maturity date, September 17, 2019. In addition, the term loan is subject to certain prepayment obligations relating to certain asset sales, certain casualty losses and the incurrence of certain indebtedness.

The Corporation had a total of $225.0 million outstanding of term debt under the Credit Agreement and $100.0 million outstanding under the revolving portion of the Credit Agreement as of March 31, 2015. The Credit Agreement provides for the issuance of letters of credit which, when issued, constitute usage and reduce availability on the revolving portion of the Credit Agreement. The amount of letters of credit outstanding as of March 31, 2015 was $2.5 million. After giving effect to the letters of credit and amounts outstanding under the revolving credit agreement, total availability under the revolving credit facility was $207.5 million as of March 31, 2015.

The Corporation was compliant with all debt covenant requirements at March 31, 2015.

Drug Wholesaler Agreement

We obtain pharmaceutical and other products from Cardinal pursuant to a Prime Vendor Agreement with Cardinal effective April 1, 2015.  The Corporation also obtains pharmaceutical and other products for discounted prices directly from pharmaceutical manufacturers. While the loss of a supplier could adversely affect our business if alternate sources of supply are unavailable, numerous sources of supply are generally available to us and we have not experienced any difficulty in obtaining pharmaceuticals or other products and supplies to conduct our business.

The Corporation seeks to maintain an on-site inventory of pharmaceuticals and supplies to ensure prompt delivery to our customers. Cardinal maintains local distribution facilities in most geographic markets in which we operate.

Treasury Stock

In August 2010, the Board of Directors authorized a share repurchase of up to $25.0 million of the Corporation's common stock, of which $10.5 million was used. On July 2, 2012 the Board of Directors authorized an increase to the remaining portion of the existing stock repurchase program that allows the Corporation to again repurchase up to a maximum of $25.0 million of the Corporation's common stock. Approximately $19.7 million remained available under the program as of March 31, 2015. Share repurchases under this authorization may be made in the open market through unsolicited or solicited privately negotiated transactions, or in such other appropriate manner, and may be funded from available cash or the revolving credit facility. The amount and timing of the repurchases, if any, would be determined by the Corporation's management and would depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. Common stock acquired through the share repurchase program would be held as treasury shares and may be used for general corporate purposes, including reissuance in connection with acquisitions, employee stock option exercises or other employee stock plans. The share repurchase program does not have an expiration date and may be limited, terminated or extended at any time without prior notice. During the three months ended March 31, 2015, the Corporation repurchased no shares of common stock.

The Corporation may redeem shares from employees upon the vesting of the Corporation's stock awards for minimum statutory tax withholding purposes and to cover option exercise costs. The Corporation redeemed 143,328 shares from the vesting of certain awards and the exercise of certain stock options, for an aggregate price of approximately $4.4 million during the three months ended March 31, 2015. These shares have also been designated by the Corporation as treasury stock.

As of March 31, 2015, the Corporation had a total of 2,760,633 shares held as treasury stock.

34

Supplemental Quarterly Information

The following tables represent the results of the Corporation's quarterly operations for the year ended December 31, 2014 and for the first quarter of 2015 (in millions, except where indicated):

	2014 Quarters												2015 Quarter
	First			Second			Third			Fourth			First
Revenues	$	452.2		$	448.6		$	470.2		$	523.5		$	511.6
Cost of goods sold		372.2			366.7			387.2			429.1			423.0
Gross profit		80.0			81.9			83.0			94.4			88.6
Selling, general and administrative		57.2			57.9			56.0			65.2			59.0
Amortization expense		4.4			4.3			4.9			6.5			6.6
Merger, acquisition, integration costs, and other charges		5.0			1.5			3.8			3.3			3.8
Settlement, litigation and other related charges		1.2			26.6			1.1			8.4			2.3
Restructuring and impairment charges		1.9			1.2			0.1			0.1			0.1
Hurricane Sandy disaster costs		-			0.1			-			(1.8	)		-
Operating income		10.3			(9.7	)		17.1			12.7			16.8
Interest expense, net		2.5			2.3			2.1			3.0			1.4
Loss on debt extinguishment		-			-			4.3			-			-
Income (loss) before income taxes		7.8			(12.0	)		10.7			9.7			15.4
Provision (benefit) for income taxes		3.0			(2.3	)		2.2			6.5			5.8
Net income (loss)	$	4.8		$	(9.7	)	$	8.5		$	3.2		$	9.6
Earnings (loss) per share (1):
Basic	$	0.16		$	(0.32	)	$	0.28		$	0.11		$	0.32
Diluted	$	0.16		$	(0.32	)	$	0.28		$	0.10		$	0.31
Adjusted diluted earnings per diluted share (1)(2):	$	0.37		$	0.40		$	0.45		$	0.45		$	0.48
Shares used in computing earnings (loss) per share:
Basic		29.8			30.0			30.1			30.1			30.2
Diluted		30.4			30.0			30.6			30.7			30.7
Balance sheet data:
Cash and cash equivalents	$	12.7		$	11.1		$	7.1		$	33.3		$	25.2
Working capital (3)	$	273.4		$	310.3		$	335.1		$	321.2		$	294.9
Goodwill (3)	$	282.7		$	286.9		$	319.5		$	318.0		$	336.3
Intangible assets, net	$	131.9		$	130.4		$	184.1		$	177.6		$	179.2
Total assets (3)	$	868.6		$	922.5		$	1,045.5		$	1,068.5		$	1,039.4
Long-term debt	$	230.9		$	268.9		$	360.9		$	351.3		$	326.0
Total stockholders' equity	$	470.0		$	462.2		$	472.7		$	478.1		$	487.1
Supplemental information:
Adjusted EBITDA(2)	$	29.7		$	30.6		$	33.0		$	37.3		$	37.4
Adjusted EBITDA Margin (2)		6.6	%		6.8	%		7.0	%		7.1	%		7.3	%
Adjusted EBITDA per prescription dispensed (2)	$	3.45		$	3.64		$	3.89		$	3.93		$	4.13
Net cash provided by (used in) operating activities	$	4.4		$	(26.5	)	$	19.7		$	50.8		$	44.3
Net cash used in investing activities	$	(16.3	)	$	(13.6	)	$	(113.4	)	$	(13.7	)	$	(25.0	)
Net cash (used in) provided by financing activities	$	0.4		$	38.5		$	89.7		$	(10.9	)	$	(27.4	)
Statistical information (in whole numbers except where indicated)
Volume information
Prescriptions dispensed (in thousands)		8,608			8,411			8,492			9,491			9,053
Revenue per prescription dispensed	$	52.53		$	53.33		$	55.37		$	55.16		$	56.51
Gross profit per prescription dispensed	$	9.29		$	9.74		$	9.77		$	9.95		$	9.79
Gross profit margin		17.7	%		18.3	%		17.7	%		18.0	%		17.3	%
Generic drug dispensing rate		84.5	%		85.0	%		85.1	%		84.9	%		85.3	%
Inventory days on hand		26.0			35.1			31.7			29.1			26.1
Revenue days outstanding		37.7			37.0			36.7			34.9			34.0

(1) The Corporation has never declared a cash dividend. Earnings (loss) per common share in actual cents.

(2) See "Use of Non-GAAP Measures for Measuring Quarterly Results" for a definition and Reconciliation of Adjusted Earnings Per Diluted Common Share to Earnings (Loss) Per Diluted Common Share, and for Reconciliation of Net Income (Loss) to Adjusted EBITDA and Adjusted EBITDA Margin.

(3) As adjusted, see Note 2—Acquisitions in the Condensed Consolidated Financial Statements.

35

Use of Non-GAAP Measures for Measuring Quarterly Results

The Corporation calculates Adjusted EBITDA as provided in the reconciliation below and calculates Adjusted EBITDA Margin by taking Adjusted EBITDA and dividing it by revenues adjusted for the contractual amount associated with the California Medicaid estimated recoupment. The Corporation calculates and uses Adjusted EBITDA as an indicator of its ability to generate cash from reported operating results. The measurement is used in concert with net income (loss) and cash flows from operating activities, which measure actual cash generated in the period. In addition, the Corporation believes that Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance and the ability to incur and service debt and make capital expenditures. In addition, Adjusted EBITDA, as defined in the Credit Agreement, is used in conjunction with the Corporation's debt leverage ratio and this calculation sets the applicable margin for the quarterly interest charge. Adjusted EBITDA, as defined in the Credit Agreement, is not the same calculation as this Adjusted EBITDA table. Adjusted EBITDA presented herein does not represent funds available for the Corporation's discretionary use and is not intended to represent or to be used as a substitute for net income (loss) or cash flows from (used in) operating activities data as measured under U.S. GAAP. The items excluded from Adjusted EBITDA but included in the calculation of the Corporation's reported net income (loss) and cash flows from (used in) operating activities are significant components of the accompanying condensed consolidated statements of operations and cash flows and must be considered in performing a comprehensive assessment of overall financial performance. The Corporation's calculation of Adjusted EBITDA may not be consistent with calculations of EBITDA used by other companies. The following are reconciliations of Adjusted EBITDA to the Corporation's net income (loss) and net operating cash flows for the periods presented.

The Corporation calculates and uses adjusted diluted earnings per share, which is exclusive of the impact of merger, acquisition, integration costs and other charges, settlement, litigation costs and other charges, Hurricane Sandy disaster costs, restructuring and impairment charges, stock-based compensation and deferred compensation, loss on debt extinguishment, and impact of discrete items on tax provision (“the Excluded Items”) as an indicator of its core operating results. The measurement is used in concert with net income and diluted earnings per share, which measure actual earnings per share generated in the period. The Corporation believes the exclusion of these charges in expressing earnings per share provides management with a useful measure to assess period to period comparability and is useful to investors in evaluating the Corporation’s operating results from period to period. Adjusted diluted earnings per share after giving effect to the Excluded Items does not represent the amount that effectively accrues directly to stockholders (i.e., such costs are a reduction in earnings and stockholders’ equity) and is not intended to represent or to be used as a substitute for diluted earnings per share as measured under U.S. GAAP. The Excluded Items are significant components of the accompanying condensed consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance. The following is a reconciliation of adjusted diluted earnings per share to the Corporation’s U.S. GAAP earnings (loss) per diluted common share for the periods presented.

36

Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA

	2014 Quarters												2015 Quarter
	First			Second			Third			Fourth			First
Net income (loss)	$	4.8		$	(9.7	)	$	8.5		$	3.2		$	9.6
Add:
Interest expense, net		2.5			2.3			2.1			3.0			1.4
Merger, acquisition, integration costs and other charges		5.0			1.5			3.1			3.3			3.8
Settlement, litigation and other related charges		1.2			26.6			1.1			8.4			2.3
Restructuring and impairment charges		1.9			1.2			0.1			0.1			0.1
Loss on extinguishment of debt		-			-			4.3			-			-
Hurricane Sandy disaster costs		-			0.1			-			(1.8	)		-
Stock-based compensation and deferred compensation		2.1			1.8			1.8			2.3			2.0
Provision (benefit) for income taxes		3.0			(2.3	)		2.2			6.5			5.8
Depreciation and amortization expense		9.2			9.1			9.8			12.3			12.4
Adjusted EBITDA	$	29.7		$	30.6		$	33.0		$	37.3		$	37.4
Adjusted EBITDA Margin		6.6	%		6.8	%		7.0	%		7.1	%		7.3	%

Unaudited Reconciliation of Adjusted EBITDA to Net Operating Cash Flows

	2014 Quarters												2015 Quarter
	First			Second			Third			Fourth			First
Adjusted EBITDA	$	29.7		$	30.6		$	33.0		$	37.3		$	37.4
Interest expense, net		(2.5	)		(2.3	)		(2.1	)		(3.0	)		(1.4	)
Merger, acquisition, integration costs and other charges		(5.6	)		(29.4	)		(4.3	)		(11.8	)		(6.2	)
Provision for bad debt		5.6			5.7			5.3			6.6			5.0
Amortization of deferred financing fees		0.7			0.6			0.5			0.1			0.1
Loss (gain) on disposition of equipment		(0.1	)		-			-			-			0.1
Gain on acquisition		(0.3	)		-			0.1			-			-
Provision (benefit) for income taxes		(3.0	)		2.3			(2.2	)		(6.5	)		(5.8	)
Deferred income taxes		4.0			(3.3	)		(4.0	)		1.0			2.3
Changes in federal and state income tax payable (receivable)		(1.3	)		(2.8	)		3.7			7.6			0.1
Excess tax benefit from stock-based compensation		(2.7	)		(0.5	)		(0.2	)		-			(1.9	)
Changes in assets and liabilities		(20.2	)		(27.4	)		(10.1	)		19.1			14.6
Other		0.1			-			-			0.4			-
Net Cash Flows Provided by (Used in) Operating Activities	$	4.4		$	(26.5	)	$	19.7		$	50.8		$	44.3

Unaudited Reconciliation of Diluted Earnings  (Loss) Per Share to Adjusted Diluted Earnings Per Share

	2014 Quarters											2015 Quarter
	First		Second			Third			Fourth			First
Diluted earnings (loss) per share	$	0.16	$	(0.32	)	$	0.28		$	0.10		$	0.31
Add:
Diluted earnings per share impact of:
Merger, acquisition, integration costs and other charges		0.10		0.03			0.06			0.08			0.08
Settlement, litigation and other related charges		0.03		0.61			0.02			0.11			0.05
Restructuring and impairment charges		0.04		0.03			-			-			-
Loss on extinguishment of debt		-		-			0.09			-			-
Hurricane Sandy disaster costs		-		-			-			(0.04	)		-
Stock-based compensation and deferred compensation		0.04		0.04			0.04			0.05			0.04
Impact of discrete items on tax provision		-		0.01			(0.04	)		0.15			-
Adjusted diluted earnings per share	$	0.37	$	0.40		$	0.45		$	0.45		$	0.48

37

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the reporting period, there have been no material changes in the disclosures set forth in Part II, Item 7a in our Form 10-K for the year ended December 31, 2014.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Corporation has carried out an evaluation under the supervision and with the participation of management, including the Corporation's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's "disclosure controls and procedures" as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report. The Corporation's disclosure controls and procedures are designed so that information required to be disclosed in the Corporation's reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. The Corporation's disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to the Corporation's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2015, the Corporation's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that the Corporation files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required and such information is accumulated and communicated as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Corporation's internal control over financial reporting during the quarter ended March 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

With regard to a matter previously reported in the Corporation's Form 10-K filed for the 2014 fiscal year, on January 13, 2015, the Corporation moved to dismiss the complaint by a relator, Frank Kurnik, on behalf of the U.S. Government and various state governments and on March 23, 2015, the second motion was denied.  On April 2, 2015, the Corporation moved the court to reconsider its denial of the second motion to dismiss.  That motion is pending.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014.  We encourage you to read these risk factors in their entirety.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In August 2010, the Board of Directors authorized a share repurchase program of up to $25.0 million of the Corporation's common stock, of which $10.5 million was used. On July 2, 2012, the Board of Directors authorized an increase to the remaining portion of the existing share repurchase program that allows the Corporation to again repurchase up to a maximum of $25.0 million of the Corporation's common stock. The Corporation did not repurchase any common stock shares under this program during the three months ended March 31, 2015.

Additionally, the Corporation may redeem shares from employees upon vesting of the Corporation's stock awards for minimum statutory tax withholding purposes and to cover option exercise costs. The Corporation redeemed 143,328 shares from the vesting of certain awards and the exercise of certain stock options, for an aggregate price of approximately $4.4 million during the three months ended March 31, 2015. These shares have been designated by the Corporation as treasury stock.

The following table summarizes our share repurchase activity by month for the three months ended March 31, 2015:

Period	Total Number of Shares Purchased			Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plans or Programs (2)		Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs
								(in millions)
January 1, 2015 - January 31, 2015		22,750	(1)	$	23.64		-	$	19.7
February 1, 2015 - February 28, 2015		-	(1)		-		-		19.7
March 1, 2015 - March 31, 2015		120,578	(1)		26.98		-		19.7

(1) The Corporation repurchased 143,328 shares of common stock in connection with the vesting of certain stock awards to cover minimum statutory withholding taxes.

(2) On August 24, 2010, the Board of Directors announced a share repurchase program whereby the Corporation is authorized to purchase up to $25.0 million of the Corporation's common stock, of which $10.5 million was used. On July 2, 2012, the Board of Directors authorized an increase to the remaining portion of the existing share repurchase program that allows the Corporation to again repurchase up to a maximum of $25.0 million of the Corporation's common stock. The Corporation did not repurchase any common stock shares under this program during the three months ended March 31, 2015.

Item 4. Mine Safety Disclosures

Not Applicable

39

Item 6. Exhibits

Exhibit No.	Description
10.25*	Prime Vendor Agreement, dated April 1, 2015, between PharMerica Corporation and Cardinal Health#
10.26*	Summary of 2015 CEO Short-Term Incentive Program and 2015 Short-Term Incentive Program±
10.27*	Summary of 2015 Long-Term Incentive Program±
31.1*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

* Furnished herewith.

# Application has been made to the Securities and Exchange Commission to seek confidential treatment of certain provisions.  Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

± Management contract or compensatory plan or arrangement.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PHARMERICA CORPORATION
Date: May 7, 2015	/s/ Gregory S. Weishar
	Gregory S. Weishar
	Chief Executive Officer and Director
Date: May 7, 2015	/s/ David W. Froesel, Jr.
	David W. Froesel, Jr.
	Executive Vice President, Chief Financial Officer and Treasurer
	/s/ Berard E. Tomassetti
Date: May 7, 2015	Berard E. Tomassetti
	Senior Vice President and Chief Accounting Officer

41

Exhibit Index

Exhibit No.	Description
10.25	Prime Vendor Agreement, dated April 1, 2015, between PharMerica Corporation and Cardinal Health#
10.26	Summary of 2015 CEO Short-Term Incentive Program and 2015 Short-Term Incentive Program±
10.27	Summary of 2015 Long-Term Incentive Program±
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

# Application has been made to the Securities and Exchange Commission to seek confidential treatment of certain provisions.  Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

± Management contract or compensatory plan or arrangement.

42

EX-10.25

Exhibit 10.25

[***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

PRIME VENDOR AGREEMENT

This Prime Vendor Agreement(the “Agreement”)is effective April 1, 2015 (the “Effective Date”)  between PharMerica Corporation located at 1901 Campus Place, Louisville, Kentucky 40299 (“you”, “your” or “Customer”)and Cardinal Health 110, LLC and Cardinal Health 411, Inc.,7000 Cardinal Place, Dublin Ohio 43017(collectively, “we“, “us” or “our” or “Cardinal Health”), who agree as follows:

1.Purchase Requirement, Usage and Prices.  You will designate us as your primary wholesale pharmaceutical supplier to all the long term care and home infusion pharmacies that, on the Effective Date, you own, manage or operate (collectively, the “Facilities” and individually, a “Facility”)andyou will buy branded pharmaceuticals and generic pharmaceuticals (together  the “Rx Products”) required for each Facility (the “Primary Requirements”) from us, subject to your purchasing commitment levels herein, if we carry them.  In addition, you may, at your option, purchase certain other inventory we carry (the “Non-Rx Products”) (Rx Products and Non-Rx Products are collectively referred to as the “Merchandise”).  Your obligations related to your purchase of branded and generic Rx Products from us under this Agreement are set forth on Schedule B and Schedule C, respectively.  Any auto-substitution logic to be applied to your Facilities’ orders will be mutually agreed upon by Customer and Cardinal Health prior to implementation.

A current list of the Facilities is attached as Schedule A.  Additional long term care and home infusion facilities that you wholly own or for which you make the purchasing decisions will be added to Schedule A from time to time (via an amendment to this Agreement), unless either party to this Agreement has received notice of material breach under Section 7 of this Agreement. The parties agree that [***]. Additional long term care and home infusion facilities that you do not wholly own or make the purchasing decisions for may be added to Schedule A from time to time (via an amendment to this Agreement) at your sole option.

If you acquire by purchase, merger or other combination, a Facility (or multiple Facilities) that has designated, by written agreement, another pharmaceutical wholesaler as its primary wholesale pharmaceutical supplier (collectively, the "Acquired Facilities" and individually, an "Acquired Facility"), you will cause each such Acquired Facility to designate us as its primary wholesale pharmaceutical supplier pursuant to the terms and conditions of this Agreement at the earlier of: (a) the expiration of the then current term of the agreement with the other wholesaler, or (b) the date that you terminate such agreement without cause, but in no event will you be required to terminate any such agreement by breach, or if you would (i) become obligated to pay any termination penalty or liquidated damages, other than [***], or (ii)  incur a [***].  If you acquire by purchase, merger or other combination, a Facility (or multiple Facilities) that utilizes us as its primary wholesale pharmaceutical supplier, such Facility(ies) will be added to this Agreement as of the effective date of the purchase, merger or other combination and the other agreement shall be terminated without penalty to or liability to or payment by you or the Acquired Facilities, other than (i) payment by the legally responsible party for products ordered and services provided prior to the effective date of the purchase, merger or other combination; and (ii) repayment by the legally responsible party of any unearned upfront discount amounts which are fully set forth and enumerated in the Acquired Facility’s drug wholesale agreement.

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Despite any other provision in this Agreement, you understand that we reserve the absolute right to determine what Merchandise we will carry; provided however that if we carry any Rx Products for another customer of ours, we will also make it available to you.  For any Rx Products subject to allocation, we will provide to you your fair share allocation of such Rx Products based on your average purchase volume in accordance with our standard practices.  You must give us accurate [***] usage figures (including NDC numbers) for all items for each Facility in compatible electronic format at least [***] before buying for that Facility begins under this Agreement, and you will give us updated usage information on an ongoing basis, as requested. Purchase prices for all Merchandise bought under this Agreement will be as set forth in the attached Schedule B and Schedule C.

2.Ordering, Delivery and Returns.  You must electronically transmit all orders (excluding emergency orders) to us via Order Express or such other electronic order entry system as we may approve from time to time.  We will provide you with access to Order Express at no additional charge; provided, however, you must supply all hardware required to access Order Express, all required Internet access and any required interfaces or other network enhancements, all at your own reasonable expense.  For the benefit of Customer, Customer and Cardinal Health will work together to develop and enforce mutually agreed upon Facility ordering protocols, which shall include a toll free number for use of the Facilities and routine reporting on the nature and number of calls at no cost to you.  You may not use Order Express or any other electronic order entry system for any purpose unrelated to this Agreement.  If electronic order entry is temporarily interrupted for reasons beyond your or our control, you may place orders manually and both parties will use reasonable efforts to fix the problem.  All orders for Schedule II controlled substances must be submitted to us via our electronic Controlled Substance Ordering System (“CSOS”).  [***].  Schedule II orders will be delivered with your next scheduled delivery after our receipt of the CSOS order.    Regardless of any other terms of this Agreement, no Schedule II orders will be delivered other than in compliance with DEA regulations.  If we stock inventory under this Agreement at your request (and agreed to by both of us) that we would not otherwise stock (“Custom Inventory”), you agree that, before substituting other inventory in place of such Custom Inventory, and upon termination or expiration of this Agreement for any reason, you will purchase the remaining Custom Inventory under the terms of this Agreement until it is depleted.

Orders placed through Order Express by the applicable servicing division’s cut-off time will be delivered the next scheduled delivery day; provided, however, deliveries of Merchandise to Hawaii that cannot be shipped via air will be delivered via sea carrier for arrival as soon as practicable following the Facility’s order.  Subject to the next sentence, we will deliver the Merchandise [***]  to the Facilities in accordance with our general delivery schedules established from time to time by the applicable Cardinal Health servicing division (exclusive of holidays, etc.) and mutually agreed upon.  Any adjustments to the delivery schedule will be mutually agreed upon.  Excluding Facilities located outside of the contiguous United States or other Facilities mutually agreed upon by the parties from time to time, each Facility set forth on Schedule A will receive [***] delivery per day (“[***]”), [***] days per week ([***]) at no additional charge; provided, however, all deliveries will be subject to the Fuel Surcharge set forth on Schedule B. You will [***] for non-standard or custom deliveries, additional scheduled deliveries to a Facility or deliveries to multiple locations or departments within a Facility (i.e., materials management, dietary department, etc.) that you request. Before we honor custom or non-standard deliveries from your Facilities, we will obtain the prior authorization of a designated representative at your corporate headquarters.

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We will provide a 24-hour, 7-day per week emergency delivery service.  Each Facility will be eligible to receive up to [***] emergency delivery per month at [***].  Any additional emergency delivery shall incur a service charge of [***] plus the applicable courier charge (at Cardinal Health’s cost).  Emergency order procedures will be supplied to each Facility.  On a monthly basis we will report to you a summary of emergency delivery services by Facility.

We will assign a dedicated account manager who will be responsible for managing performance of this Agreement on a day to day basis, including, but not limited to assuring administration of your Manufacturer Contracts as set forth in Section 5 of Schedule B.  We will also appoint an executive who will be vested with the authority for assuring our compliance with the terms of this Agreement.

We will provide you with an aggregate average monthly adjusted service level on Rx Products of at least [***], calculated on a monthly basis by [***].  The following items will be excluded from the service level calculation:  (a) [***]; (b) [***] and/or [***] or [***]; (c) [***] shipped within [***] working days of [***]  (including those [***]), which will instead be counted as [***]; (d) items where a [***]; (e) items where a [***] over the preceding [***] months; and (f) [***] than [***] within [***] days.  Cardinal Health’s failure to maintain an aggregate average monthly adjusted service level on Rx Products of at least [***] for any month will be considered a material breach of this Agreement.

Our obligations under this Agreement will be excused if and to the extent that any delay or failure to perform such obligations is due to product or material shortages or other causes beyond our reasonable control. You may purchase the Primary Requirements for the affected Facilities from others only during the period of any such delay or failure.

The  then-current Returned Goods and, if applicable, Freight Claims Policy of the Cardinal Health business unit(s) servicing you under this Agreement will govern all returns and freight claims; provided they are no less beneficial to you than as set forth in current Returned Goods Policy, a copy of which is attached hereto as Schedule D.  Notwithstanding anything to the contrary that may be set forth in the Returned Goods Policy, we will use reasonable efforts to provide you written notice of any changes to the Returned Goods Policy.

3.Warranty.We warrant to you that any product we manufacture (the term “manufacture”, for purposes of this warranty, does not include product repackaging) is, as of the date of shipment, fit for the purposes and indications described in the product labeling.  Unless the product is used in accordance with its instructions, these warranties are void and of no effect.  Other products we distribute carry only those warranties made for them by their manufacturer.  THERE ARE NO OTHER EXPRESSED OR IMPLIED WARRANTIES, INCLUDING ANY WARRANTY OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. OUR SOLE OBLIGATION AND YOUR EXCLUSIVE REMEDY FOR BREACH OF ANY WARRANTY WILL BE, AT OUR OPTION, TO REPAIR OR REPLACE THE PRODUCT.

4.Limitation of Liability.  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY WILL BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.

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5.Payment Terms.  Your initial payment terms and payment term options will be as set forth on Schedule B to this Agreement. Any past due invoice will be assessed interest at a [***] monthly [***] rate or the highest amount allowed by law, if lower.  Until Merchandise is paid for in full, you grant us and we retain a security interest in the Merchandise.  We will have a security interest in any deposit(s) to secure payment to us (or our affiliates) of all of your obligations, existing and future.  If you default on any payment, we may exercise a right of setoff against any deposit we hold or any amounts we (or our affiliates) owe you. You will give us credit information reasonably necessary that we request not less than [***] days before your initial purchases under this Agreement and, after that, as we may reasonably request on an annual basis.

To induce us to supply Merchandise and provide services to your subsidiaries and affiliates, whether existing now or in the future (collectively, “Borrowers”), you guarantee to us the punctual and full payment (and not merely the ultimate collectability) of all sums now or hereafter due from Borrowers to us under this Agreement and the reasonable costs and expenses we incur in our successful enforcement any indebtedness, liability, or obligation under this Agreement, including, without limitation, reasonable attorney’s fees.

6.Confidentiality.Neither party may disclose the terms and conditions of this Agreement to a third party without advance written consent of the other party, except as required by law or as necessary to perform its obligations under this Agreement.  Neither party will make any press release or other public announcement regarding this Agreement or the other party or its affiliates without the other party's express prior written consent, except as required under applicable law or by any governmental agency. In these cases, the party required to make the press release or public disclosure must use commercially reasonable efforts to obtain the approval of the other party as to the form, nature and extent of the press release or public announcement before issuing it.

7.Term and Termination.  The Initial Term of this Agreement will begin on the Effective Date and continue until June 30, 2018.  At the expiration of the Initial Term, this Agreement will automatically renew for an additional [***], under the then existing terms and conditions, unless either party provides written notice of non-renewal not later than [***], in the case of Customer, and not later than [***], in the case of Cardinal Health, prior to the expiration of the Initial Term (the “First Renewal Term”).  At the expiration of the First Renewal Term this Agreement will automatically renew for an additional [***], under the then existing terms and conditions, unless either party provides written notice of non-renewal not later than [***], in the case of Customer, and not later than [***], in the case of Cardinal Health, prior to the expiration of the First Renewal Term (the “Second Renewal Term”).   References to the “Term” of this Agreement will include the Initial Term, First Renewal Term and Second Renewal Term.

Either party may effect an early termination of this Agreement upon the occurrence of a material breach by the other party.  The non-breaching party must give written notice to the breaching party of the nature and occurrence of such breach.  If the breach is not cured by the expiration of thirty (30) days from the date of such notice, then the non-breaching party may, in addition to any and all other rights or remedies it may have, provide written notice to the breaching party that this Agreement will be terminated immediately following the expiration of such thirty (30) day period.

Upon the expiration or termination of this Agreement, for any reason by either party, we will, upon your written request, for up to a period of sixty (60) days after the date of such expiration or termination (the “Termination Assistance Period”): (1) continue to provide the services under this Agreement to the extent reasonably requested by you; and (2) provide such assistance as you may require to transfer the services to another vendor.  During the Termination Assistance Period, we will continue to provide the services in accordance with the pricing, terms and conditions specified in this Agreement; provided, however, as you transition your purchases of Rx Products to another vendor, such that the purchase volume under this Agreement is significantly reduced and/or affected, we may reasonably adjust the service commitments (i.e., number of deliveries per week) to reflect your actual purchase volume.  Our continued provision of products and services during the Termination Assistance Period is subject to applicable legal and regulatory requirements and our receipt of adequate assurances regarding payment for any services provided or products delivered.

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8.Audit.  We will maintain records pertaining to the Rx Products purchased by you under this Agreement as required by applicable FDA requirements.  Not more than [***] in any [***] month period, and following [***]days’ advance written notice to us, you will have the right to appoint one (1) or more of your employees and third-party auditors (such auditors to be subject to our approval, such approval not to be unreasonably withheld) to review those relevant records applicable to your Rx Product purchases for the sole purpose of verifying compliance with the pricing terms of this Agreement.  Any such review will be limited to [***] months of historical information as of the date such review begins and will be subject to a reasonable  confidentiality agreement prepared by us and signed by you and your employee(s) and third-party auditors who will have access to the information prior to beginning the review. The audit rights of this Section 8 are in addition to other audits rights specifically set forth in this Agreement.

9.Miscellaneous.You and we will comply with all federal and state laws, rules and regulations applicable to our respective obligations under this Agreement. You represent, warrant and certify that you have all required governmental licenses, permits and approvals required to purchase, use and/or store the products you buy from us and that all your purchases from us are for your “own use” in the Facilities, as such term is defined in judicial or legislative interpretation, and not for resale to anyone other than the end user. We may terminate this Agreement immediately if we reasonably determine that you or any Facility have breached this “own use” limitation.  If you receive any “discounts or other reductions in price” under Section 1128B(b)(3)(a) of the Social Security Act (42 U.S.C.1320- 7b(b)(3)(a)) from us, you must disclose the discounts or reductions in price under any state or federal program which provides cost or charge-based reimbursement to you for the products or services you buy from us, or as otherwise requested or required by any governmental agency. You must complete the Compliance Representations and Warranties for Customers attached hereto as Schedule E and return it to the address indicated therein prior to purchasing any Merchandise under this Agreement.  This is the entire agreement between the parties with respect to the subject matter of this Agreement.  This Agreement may not be amended except in a writing signed by both parties. Failure to enforce any provision of this Agreement will not be considered a waiver of any right to enforce such provision.  Neither party may assign its rights or obligations under this Agreement without the written consent of the other, which consent shall not be unreasonably withheld or delayed; provided, however, that we may delegate our rights and obligations to any entity that is controlled by or under common control with Cardinal Health, Inc.  This Agreement does not create any employment, agency, franchise, joint venture, partnership or other similar legal relationship between the parties.

10. Other Agreements.  You represent and warrant that you have the authority to contractually bind the Facilities to the terms and conditions of this Agreement.  Customer warrants and represents that it is not currently bound by any other agreement, contractual or otherwise, which would prevent Customer from entering into this Agreement with Cardinal Health.  Further, Customer must indemnify, defend and hold harmless Cardinal Health and its parent and affiliates and their respective officers, directors, shareholders, affiliates, employees and agents against any and all claims, actions, losses and/or damages of any kind (including without limitation all cost and expenses and reasonable attorneys’ fees) arising out of or relating to any claim that by you entering into this Agreement you violated another agreement or obligation.

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Upon the assertion of any claim, action, loss and/or damage as described in the above paragraph or the commencement of any suit or proceeding against Cardinal Health by any third party as described in the above paragraph, Cardinal Health shall promptly notify Customer thereof, and Customer shall defend and/or settle the claim, action, suit and/or proceeding at its own expense with counsel of its own selection.  Failure to provide such prompt notice shall only reduce Customer’s indemnification obligations to the extent of actual prejudice caused by such delay in notification.  Cardinal Health shall make available to Customer all relevant books and records relating to the claim, and the parties agree to render to each other such assistance as may reasonably be requested in order to ensure a proper and adequate defense.

11.  [***].  Cardinal Health 110, LLC and Cardinal Health 411, Inc. shall [***] for the obligations of [***] under the Agreement.

[SIGNATURE PAGE FOLLOWS]

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PharMerica Corporation		Cardinal Health 110, LLC
By	/s/David W. Froesel, Jr.	By	/s/Jon Giacomin
Title	Executive Vice President, Chief Executive Officer & Treasurer	Title	CEO Pharmaceutical Segment
ADDRESS FOR NOTICES:		Cardinal Health 411, Inc.
PHARMERICA CORPORATION
1901 CAMPUS PLACE
LOUISVILLE, KENTUCKY 40299
ATTENTION: GENERAL COUNSEL		By	/s/Jon Giacomin
		Title	CEO Pharmaceutical Segment
		ADDRESS FOR NOTICES:
		CARDINAL HEALTH 110, LLC
		CARDINAL HEALTH 411, INC.
		7000 CARDINAL PLACE
		DUBLIN, OHIO 43017
		ATTENTION: VP, ALT CARE SALES
		WITH A COPY TO:  GENERAL COUNSEL

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SCHEDULE A

Facilities

[***]

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SCHEDULE B

Pricing and Payment Terms

1.General

Except as otherwise set forth in this Agreement, wewill invoice Merchandise purchased under this Agreement the applicable Invoice Price as set forth below, plus all applicable taxes or other assessments levied by a government upon wholesale purchasers of Merchandise.  The Invoice Price of Merchandise is as follows:

Product Category	Invoice Price
Branded Rx Products (excluding branded Rx Products listed on Schedule B-1 and branded Rx Products that are Drop-Shipped Merchandise (as hereinafter defined))	[***]
Branded Rx Products listed on Schedule B-1	[***]
Generic Rx Products purchased through Manufacturer Contracts (as hereinafter defined)	[***]
All other generic Rx Products (i.e., Generics Source Program products and non- Manufacturer Contract generic Rx Products)	[***]
Drop-Shipped Merchandise	[***]
Net Billed Products (as hereinafter defined)	[***]

“Cost” means the manufacturer’s published wholesale acquisition cost (“WAC”) at the time the Facility’s order is submitted to us, adjusted to reflect your then-applicable Manufacturer Contract price.

“Drop-Shipped Merchandise” means Merchandise that is ordered through us, but required by the supplier to be shipped directly to you from the supplier.

“Net Billed Products” means all other Merchandise (i.e., other than [***] and [***] and [***]) you purchase from us.

“Qualified Purchases”  means all purchases you and/or the Facilities have accepted for delivery  under the terms of this Agreement, net of all returns, credits, rebates, late charges, or other similar items, on an annual, quarterly, or monthly basis, as applicable.

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The Invoice Prices are net of group purchasing organization administrative fees we pay to your designated group purchasing organization. If the applicable administrative fee is increased or if you or any Facility use a different group purchasing organization than used on the Effective Date, we reserve the right to adjust the branded Rx Product discount percentage to account for the differences between the current group purchasing organization administrative fee and the new group purchasing organization administrative fee.

2.Branded Rx Products Purchase Requirement

In any given year of the Initial Term or Renewal Term you are only required to purchase [***] of all branded drug Rx Products required by your Facilities (except as otherwise set forth in this Agreement) from us to be entitled to the discount on Cost for branded Rx Products set forth above.  You will provide us a schedule of branded Rx Products you did not purchase from us within [***] after the [***].

3.Generic Source Program and Generic Source Rebate

Cardinal Health will make available to you through Cardinal Health’s generic Source program (the “Generic Source Program”) all generic Rx Products which we make available to all of our long term care, home infusion, and retail customer segments.

You will receive a rebate off the Invoice Price of your purchases of Generic Source Program products (the “Generic Source Rebate”).  Prior to the Effective Date of this Agreement, the [***] applicable to each [***] will be established, and [***], subject to the applicable terms and conditions of this Agreement.  Within [***] the Generic Source Rebate will be calculated by [***] and paid to you in the form of a check, credit memo or EFT.  The Generic Source Rebate constitutes a "discount or other reduction in price," as such terms are defined under the Medicare/Medicaid Anti‑Kickback Statute (42 U.S.C. § 1320a‑7b(b)(3)(A) and the "safe harbor" regulations regarding discounts or other reductions in price set forth in 42 C.F.R. § 1001.952(h)), on the Generic Source Program products purchased by you or any or your Facilities under the terms of this Agreement.  You and each of your Facilities may have an obligation to accurately report, under any state or federal program which provides cost or charge based reimbursement for the products or services covered by this Agreement, or as otherwise requested or required by any governmental agency, the net cost actually paid by your and/or each of your Facilities.

The “Net Item Price” for Generic Source Program products is the [***].

4.Net Billed Products

We will provide you regular updates to identify Net Billed Products and their Invoice Price.  You may, but will have no obligation under this Agreement to, purchase from us any specified volume or percentage of your requirements of Merchandise from the Net Billed Products.  We will provide to you a monthly report of the Net Billed Products purchased by you during such quarter.

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5.Contract Administration

We will recognize and administer manufacturer pricing contracts for Rx Productsbetween you and any manufacturer and between a manufacturer and your group purchasing organization (collectively, “Manufacturer Contracts”) (i) subject to their continued validity in accordance with applicable laws, (ii) provided such manufacturer is a vendor-in-good-standing with us, and (iii) subject to such credit considerations concerning the applicable manufacturers as we consider appropriate.  We will notify you of any Manufacturer Contracts we will not administer due to the foregoing limitations.  However, if manufacturers’ chargebacks for contract items submitted by us are disallowed, uncollectable, or unreconcilable, then the applicable charge will be billed back to you.  You must notify us of all applicable pricing information included in the Manufacturer Contracts, including renewals, replacements or terminations of Manufacturer Contracts not less than thirty (30) days before the effective date of such Manufacturer Contract, renewal, replacement or termination.

6.Fuel Surcharge

You will pay a fuel surcharge, on a per Stop basis, for each delivery made to each Facility (the “Fuel Surcharge”).  The Fuel Surcharge will be included on our invoice to you, in an amount as set forth below:

Regular Unleaded Fuel Price	Fuel Surcharge Amount
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

FSC# 4082392

The fuel prices in the table above represent the national average retail cost per gallon for regular grade gasoline as published by the U.S. Department of Energy (the “Average Price Per Gallon”), available at:  http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html.  By the last day of each calendar month, we will determine the Average Price Per Gallon for that month, and any required adjustments to the Fuel Surcharge will be applicable as of the first (1^st) day of the immediately following calendar month.

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7.Payment Terms

Your initial payment terms will be: [***] - Payment is due in full by the [***] of each [***] of the amount due for all Merchandise delivered and services provided during the immediately preceding [***] (i.e., [***]).  We agree that this payment schedule will yield a [***] of [***].  You may, not more often than [***], request that your payment terms be changed as to future Merchandise purchases, subject to our advance written consent.  In such event, you acknowledge and agree that your branded Rx Product discount percentage will be adjusted as follows:  We will adjust the [***] discount percentage by [***] for each [***] less than [***].  By example, an [***] will increase the discount percentage from [***].  If you desire longer payment terms, your discount percentage will be adjusted by [***] for each [***] more than [***].

All payments for Merchandise and services provided under this Agreement must be made to the applicable servicing division specified in our invoice (or as we otherwise specify) by electronic funds transfer or other method acceptable to us so as to provide us with good funds by the due date.  Without limiting your rights under law or in equity, you and your affiliates, parent or related entities, collectively or individually, may exercise a right of set-off against (i) any and all amounts due to us or (ii) amounts which you dispute in a commercially reasonable manner in writing to us where such dispute has not been resolved within thirty (30)  days after such written notice.

We may, at our election, either reduce your payment terms or place you on C.O.D. status if (i) we have not received payment in full when due of undisputed amounts for Merchandise delivered or services provided to you; or (ii) there is a material adverse change in your financial condition that is reasonably likely to result in your inability to make payments when due hereunder.  In either instance, the situation would be immediately elevated to an executive team from both parties in an effort to rectify the situation and restore your applicable payment terms.  In the event of such elevation, if the parties are unable to reach a mutually acceptable resolution and any undisputed amounts remain unpaid for more than [***] after the due date, we reserve the right to refuse orders from you.

8.Additional Programs and Services

SureCost.  We will support your request to provide certain information to SureCost (excluding real-time on-hand inventory) via an interface [***], subject to SureCost being able to provide requested information back to us (i.e., a total spend report for your purchases).

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SCHEDULE B-1

Branded Rx Products not subject to the [***]

Branded Rx Product	Discount Percentage
[***]	[***]

If at any time, we apply a [***] (as hereinafter defined) [***] percentage to such [***] of a [***] listed on this Schedule B-1, we will apply your [***] percentage ([***]) to the same [***].

We reserve the right, in our sole discretion, to [***] set forth herein and to [***] to/from this Schedule B-1 only upon [***].  During such [***], representatives from Cardinal Health and Customer will [***] for the applicable [***]. If the parties [***], the matter will be [***].

You [***] under this Agreement to, [***] or [***] of [***].

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SCHEDULE C

[***]

1.[***]

We will have the right to appoint an independent certified public accountant (such accountant to be subject to your approval, such approval not to be unreasonably withheld) to, not more than [***] in any [***] month period, conduct an audit on [***] days’ advance written notice to you, of your records at your principal place of business to verify the actual net price you paid for each generic Rx Product.  The audit will be confined to the aggregate purchases by generic Rx Product and we agree not to require disclosure of unit level prices or other information that would reveal your contract terms with a manufacturer from which you directly purchased generic Rx Products.  Any such review will be limited to [***] months of historical information as of the date such review begins and will be subject to a reasonable confidentiality agreement prepared by you and signed by you and your accounting firm.

[***]

2.[***]

3.[***]

4.[***]

5.[***]

6.[***]

7.[***]

8.[***]

(i)[***]

(ii)[***]

(iii)[***]

(iv)[***]

(v)[***]

(vi)[***]

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SCHEDULE C-1

Excluded Products

The Excluded Products as of the Effective Date of this Agreement are those as set forth in [***].

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SCHEDULE D

Cardinal Health Pharmaceutical Distribution

Returned Goods Policy

Products in “merchantable condition” (as defined below) and originally purchased from Cardinal Health may generally be returned to the customer’s servicing Cardinal Health distribution center in accordance with, and subject to, the terms and conditions of this policy.

Return Made Within:	Normal Credit Amount:
[***]	[***]
[***]	[***]

Returns made greater than [***]from the invoice date will not be accepted.  No credit will be issued, and the product will be returned to customer.

“Merchantable condition”  will be determined by Cardinal Health based upon its ability to return the product to its inventory for resale in the normal course of its business, without special preparation, testing, handling, or expense and will exclude the following:

A. Any product purchased from any supplier other than Cardinal Health.

B. Any product which has been used or opened; is a partial dispensing unit or unit of sale; is without all original  packaging, labeling,  inserts, or operating manuals; or that is stickered, marked, damaged,  defaced, or otherwise cannot readily be resold by Cardinal Health for any reason.

C. Short-dated (less than [***] months expiration dating), outdated, or seasonal products and products purchased on a “special order” basis, including non-stock and drop-shipped products.

D. Any product not intended for return to a wholesaler in accordance with the return policies of the applicable manufacturer.

E. Any product listed by any state or federal regulatory agency as a high-risk pedigree item that is returned without a valid invoice number that cannot otherwise be verified by Cardinal Health.

Unmerchantable Products

Any product not eligible for return in accordance with this policy (i.e., the product is not in “merchantable condition” as set forth above) will require return directly to the manufacturer.  If any such products are returned to Cardinal Health, they will be returned to customer and no credit will be issued. Stickered products will be handled as follows:  Cardinal Health will remove the sticker, retain the product and credit the customer (as applicable pursuant to this policy).  If the product is damaged during the removal of the sticker, no credit will be issued to customer and the product will be returned to customer.

Notwithstanding the foregoing, in any case where Cardinal Health accepts the return of such products and agrees to return such products to the applicable manufacturer on behalf of customer (provided the manufacturer allows the return of such products), any credit issued to customer will be determined by Cardinal Health.

Required Return Documentation

Prior to returning any product to Cardinal Health, customer must execute and deliver to Cardinal Health a Cardinal Health Returned Goods Authorization Ongoing Assurance verifying that all returned products have been kept under proper conditions for storage, handling, and shipping.

All requests for credit must be submitted via EOE, Cardinal.com, CardinalCHOICE®, or approved EDI interface.

A fully completed and signed Merchandise Return Authorization Form (the “MRA Form”) must accompany all products to be returned. Note: An MRA Form cannot be fully completed without a valid invoice number.  The request for an MRA Form will be rejected if a valid invoice number is not provided.

Third Party Return Processors

At the request of customer, Cardinal Health will work with third party return processors for returns of unmerchantable products.  Such arrangement will be subject to mutually agreed upon terms and conditions, to include administrative fees payable to Cardinal Health.

- 16 -

Controlled Substances

Credit for the return of controlled substances requires a separate MRA Form and such returns must comply with all applicable laws, rules and regulations in addition to the terms and conditions of this policy.

Refrigerated, Chemotherapy and Hazardous Products

Refrigerated, chemotherapy and hazardous products must be returned in packaging that complies with applicable regulatory requirements.  All such products that are not returned in packaging that complies with applicable regulatory requirements will be considered damaged and unsaleable.  This product will be destroyed and no credit will be issued to customer.

Shorts and Damaged Products

Claims of order shortages (e.g., products invoiced but not received), filling errors and damage must be reported within [***] from the applicable invoice date, or no credit will be issued.  Returns of damaged products or products shipped in error must be received by the Cardinal Health servicing distribution center within [***] from the applicable invoice date, or no credit will be issued. Controlled substance shortage claims must be reported immediately per DEA requirements. In all instances, credit will not be issued until verification of the claim by Cardinal Health.

No deductions may be taken by customer until a valid credit memo is issued by Cardinal Health.

Shipping of Return Products

Products to be returned must be placed in a proper shipping container and signed for by the driver when picked up.

Signed MRA Forms shall be included in totes with the returned products.  Only one (1) MRA Form shall be included in each tote.

- If the MRA Form is not signed, no credit will be issued, and the products will be returned to the customer.

- If the MRA Form is not inside the tote with the returned products, Cardinal Health will attempt to identify the customer that returned the products.  The tote will then be returned to the customer with a request for a completed MRA Form(s).

- No credit will be issued for products returned but not listed on the accompanying MRA Form.  Such products will be returned to the customer.

All MRA Forms will be reviewed by Cardinal Health for compliance with this policy.  The acceptability and valuation of any return is at the sole discretion of Cardinal Health.

Products must be returned to the customer’s servicing Cardinal Health distribution center within [***] from the date of customer’s request for an MRA Form,or no credit will be issued.

In addition to the requirements set forth in this policy, Customer shall comply with all return procedures required by the Cardinal Health servicing distribution center.

Other Restrictions

Excessive returns may result in higher restocking fees as deemed necessary by Cardinal Health.

This policy is subject to change without notice by Cardinal Health.   This policy is further subject to modification as may be deemed necessary or appropriate by Cardinal Health to comply with applicable federal and/or state regulations, FDA guidelines, state law, and other restrictions applicable to returned products.

- 17 -

SCHEDULE E

Compliance Representations and Warranties for Customers

PharMerica Corporation (“Customer”) represents and warrants that it:

1. will abide by all applicable laws, rules, regulations, ordinances and guidance of the federal Drug Enforcement Administration (“DEA”), the states into which it dispenses or sells controlled substances and/or listed chemicals, and the states in which it is licensed, including, without limitation, all of the foregoing concerning the purchase, sale, dispensation, and distribution of controlled substances; and

2. will not dispense or sell controlled substances and/or listed chemicals if it suspects that a prescription or drug order is not issued for a legitimate medical purpose or the actions conducted on the part of the prescriber or Customer and its employees are not performed in the normal course of professional practice.

In addition, Customer warrants that it understands that Cardinal Health is required by DEA regulations to report to the DEA suspicious orders of controlled substances and listed chemicals, and Customer agrees to act in good faith in assisting Cardinal Health to fulfill its obligations.  To that end, Customer agrees that it will be alert for red flags of suspicious orders and listed chemicals, including, but not limited to:

1. Numerous controlled substance prescriptions written for the same drugs, in the same quantities for the same time period by the same or different prescribers or group of prescribers for the same patient;

2. Numerous controlled substance prescriptions written for the same person or several persons by the same prescriber or group of prescribers; and

3. Numerous prescriptions written for the same patient by prescribers located in different states than the patient.

Customer agrees that if any of the above-noted or other red flags exist, it is prudent to contact the prescriber to validate the legitimacy of the prescription and/or to discontinue filling prescriptions from the prescriber, group of prescribers, or customer in question. In addition, the pharmacist should contact the State Board of Pharmacy or local DEA Diversion Field Office (see Appendix N, DEA Pharmacist’s Manual, 2010 Edition).

Customer acknowledges that Cardinal Health may provide a copy of this document to the DEA or any other state or federal regulatory agency or licensing board.

Customer hereby acknowledges and agrees that, notwithstanding any other provision herein, or any provision in any other agreement between Cardinal Health and the Customer, Cardinal Health may, in its sole discretion, immediately suspend, terminate or limit the distribution of controlled substances, listed chemicals, and other products monitored by Cardinal Health to the Customer at any time if Cardinal Health believes that the continued distribution of  such products to the Customer may pose an unreasonable risk of the diversion of controlled substances based on the totality of the circumstances and such other considerations as may be deemed relevant by Cardinal Health.

The Customer further acknowledges and agrees that it will not file any claims against Cardinal Health, or any related entity, including legal and equitable claims, regarding any decision by Cardinal Health to suspend, limit or terminate its distribution of controlled substances, listed chemicals, and other products monitored by Cardinal Health to the Customer.

Agreed to by a duly authorized officer, partner, or principal of Customer:

Signature:

Full Name (print):

Title:

Date:

Please sign and return to:   Cardinal Health; Attn:  Anti-Diversion Group, Corporate QRA; 7000 Cardinal Place; Dublin; OH 43017 or Fax (614) 652-9631

- 18 -

EX-10.26

Exhibit 10.26

PHARMERICA CORPORATION

SUMMARY OF

2015 SHORT-TERM INCENTIVE PROGRAM – CEO

AND

2015 SHORT-TERM INCENTIVE PROGRAM

2015 Short-Term Incentive Program – CEO

On March 19, 2015, the Board of Directors of PharMerica Corporation (the “Corporation”), upon recommendation of the Compensation Committee, adopted the 2015 Short-Term Incentive Program (the “CEO STIP”) under the PharMerica Corporation 2007 Omnibus Incentive Plan, as amended (the “Omnibus Plan”), for the Corporation’s Chief Executive Officer, Mr. Gregory Weishar. The CEO STIP provides for a performance-based annual cash award to Mr. Weishar.

Performance Cycle. The STIP performance cycle is for the current year, beginning on January 1, 2015 and ending on December 31, 2015.

Maximum Award. If the Corporation’s Adjusted EBITDA (as defined below) is equal to or greater than a target Adjusted EBITDA for the 2015 fiscal year, then Mr. Weishar is eligible to receive a payment under the CEO STIP equal to the lesser of (i) 2.2% of Adjusted EBITDA for the 2015 fiscal year or (ii) $2 million (the “Maximum Award”). The Compensation Committee, in its sole discretion, may decrease the Maximum Award based on its assessment of the Corporation’s performance, the Chief Executive Officer’s individual performance, or any other factors it considers relevant, however in no event may the Compensation Committee reduce the Maximum Award below the annual bonus amount for the Chief Executive Officer (the “Bonus Amount”).

Bonus Amount. The target Bonus Amount for Mr. Weishar is 125% of his 2015 base salary. Fifty percent (50%) of the target Bonus Amount is based on the Corporation’s Adjusted EBITDA (as defined below), twenty percent (20%) of the target Bonus Amount is based on the Corporation’s adjusted diluted earnings per share (“Adjusted Diluted EPS”) and thirty percent (30%) of the target Bonus Amount is based on individual performance goals.

The Corporation’s performance will be measured by comparing the Corporation’s annual earnings before interest, taxes, depreciation and amortization, and other amounts as reported in the Corporation’s disclosures in its Form 10-K as of and for the year ended December 31, 2015, except that there shall not be an add-back for stock based and deferred compensation (“Adjusted EBITDA”), to a target Adjusted EBITDA for the entire 2015 fiscal year set by the Compensation Committee and by comparing the Corporation’s Adjusted Diluted EPS at the end of the performance cycle to a target end-of-performance cycle Adjusted Diluted EPS set by the Compensation Committee.  Individual performance will be measured by comparing certain individual performance metrics to the target individual performance metrics determined by the Compensation Committee.

The actual Bonus Amount is based on the percentage of the performance target achieved.

Generally, the percentage of the Bonus Amount earned at the end of the performance cycle based on the Adjusted EBITDA performance target will be determined according to the following schedule; however the actual Bonus Amount will be interpolated between the percentages set forth in the chart based on actual results:

Adjusted EBITDA Performance Achievement	Payout Level
< 80.0% of Performance Target	0.0% of Award Target
80.0% of Performance Target	40.0% of Award Target
90.0% of Performance Target	70.0% of Award Target
96.0% of Performance Target	88.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
105.0% of Performance Target	118.8% of Award Target
110.0% of Performance Target	137.5% of Award Target
115.0% of Performance Target	156.3% of Award Target
120.0% of Performance Target	175.0% of Award Target
> 120.0% of Performance Target	175.0% of Award Target

Generally, the percentage of the award earned at the end of the performance cycle based on the percentage of the Adjusted Diluted EPS performance target achieved shall be determined according to the following schedule; however, the actual CEO STIP award payout will be interpolated between the percentages set forth in the chart based on actual results:

Adjusted Diluted EPS Performance Achievement	Payout Level
< 85.0% of Performance Target	0.0% of Award Target
85.0% of Performance Target	50.0% of Award Target
94.0% of Performance Target	80.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
109.0% of Performance Target	130.0% of Award Target
115.0% of Performance Target	150.0% of Award Target

Also, the Corporation must at least meet threshold Adjusted EBITDA of 80% of the target Adjusted EBITDA amount in order for any payment to be made under the individual/group performance-based component.

2015 Short-Term Incentive Program

On March 19, 2015, the Board of Directors of the Corporation, upon recommendation of the Compensation Committee, adopted the 2015 Short-Term Incentive Program (the “STIP”) under the Omnibus Plan. The STIP provides for performance-based annual cash awards to the Corporation’s executive officers, and certain other officers and employees of the Corporation. The STIP advances the Corporation’s commitment to performance-based compensation practices by providing participants an opportunity to earn annual cash bonuses upon achievement of certain pre-established short-term performance objectives.

Eligibility. Officers and employees of the Corporation may receive STIP cash awards as determined by the Board of Directors or the Compensation Committee.

Performance Cycle. The STIP performance cycle is for the current year, beginning on January 1, 2015 and ending on December 31, 2015.

Award Targets. The amount of the awards under the STIP are based on individual participant bonus targets. Individual participant bonus targets are established for each participant by the Compensation Committee, in the case of the senior executive officers reporting to the Chief Executive Officer, and by the Chief Executive Officer, for other participants, based upon a determination of the appropriate bonus target amounts which will enable the Corporation to remain competitive, to retain and recruit top employees, and to align such employee’s interests with certain strategic initiatives of the Corporation.  Individual non-executive participant bonus targets range from 5% to 100% of base salary on December 31, 2015, with targets for the Corporation’s executive officers between 25% and 125% of base salary.

The Compensation Committee established the bonus targets under the STIP for the Corporation’s fiscal 2014 named executive officers, other than the Chief Executive Officer, as follows:

Executive	Title	Bonus Target
David Froesel	Executive Vice President, Chief Financial Officer and Treasurer	80% of base salary
Robert McKay	Senior Vice President of Purchasing and Trade Relations	65% of base salary
Thomas Caneris	Senior Vice President, General Counsel, Chief Compliance Officer and Secretary	70% of base salary
Berard Tomassetti	Senior Vice President, Chief Accounting Officer	50% of base salary

Performance Criteria. The performance criteria under the STIP is divided into company performance-based components and individual/group performance-based components for different employees. The breakdown for the Named Executive Officers, other than the Chief Executive Officer, is as set forth in the chart below.

Executive	Title	Company Performance Adjusted EBITDA			Company Performance Adjusted Diluted EPS			Individual/Group Performance
David Froesel	Executive Vice President, Chief Financial Officer and Treasurer		50	%		20	%		30	%
Robert McKay	Senior Vice President of Purchasing and Trade Relations		50	%		0	%		50	%
Thomas Caneris	Senior Vice President, General Counsel, Chief Compliance Officer and Secretary		50	%		0	%		50	%
Berard Tomassetti	Senior Vice President, Chief Accounting Officer		50	%		0	%		50	%

Under the STIP for Executive Vice Presidents, company performance will be measured by comparing the Corporation’s Adjusted EBITDA at the end of the performance cycle to a target end-of-performance cycle Adjusted EBITDA set by the Compensation Committee and by comparing the Corporation’s Adjusted Diluted EPS at the end of the performance cycle to a target end-of-performance cycle Adjusted Diluted EPS set by the Compensation Committee.  Under the STIP for Senior Vice Presidents, company performance will be measured by comparing the Corporation’s Adjusted EBITDA to a target Adjusted EBITDA for the entire 2015 fiscal year set by the Compensation Committee.  Individual/group performance will be measured by comparing certain individual/group performance metrics to target individual/group performance metrics established by the Corporation’s Compensation Committee in consultation with the Chief Executive Officer for the named executive officers other than the Chief Executive Officer.

Award Payouts. Award payout levels are based on the percentage of the performance target achieved. Generally, the percentage of the award earned at the end of the performance cycle based on the Adjusted EBITDA performance target will be determined according to the following schedule; however, the actual award payout will be interpolated between the percentages set forth in the chart based on actual results:

Performance Achievement	Payout Level
< 80.0% of Performance Target	0.0% of Award Target
80.0% of Performance Target	40.0% of Award Target
90.0% of Performance Target	70.0% of Award Target
96.0% of Performance Target	88.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
105.0% of Performance Target	118.8% of Award Target
110.0% of Performance Target	137.5% of Award Target
115.0% of Performance Target	156.3% of Award Target
120.0% of Performance Target	175.0% of Award Target
> 120.0% of Performance Target	175.0% of Award Target

Generally, the percentage of the award earned at the end of the performance cycle based on the percentage of the Adjusted Diluted EPS performance target achieved shall be determined according to the following schedule; however, the actual award payout will be interpolated between the percentages set forth in the chart based on actual results:

Performance Achievement	Payout Level
< 85.0% of Performance Target	0.0% of Award Target
85.0% of Performance Target	50.0% of Award Target
94.0% of Performance Target	80.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
109.0% of Performance Target	130.0% of Award Target
115.0% of Performance Target	150.0% of Award Target

Under the STIP, the Corporation must at least meet threshold Adjusted EBITDA of 80% of Adjusted EBITDA target in order for any payment to be made to a Named Executive Officer under the individual/group performance-based components of the STIP.

 Payment of Awards. Payment of STIP awards will be made in cash. Awards will be paid on a specific date by which the Compensation Committee reasonably expects that the performance target applicable to such award was met. The Corporation will make the payment of the STIP awards to participants as soon as administratively practicable following the date of the award determination.

Vesting and Forfeiture. STIP participants must remain continuously employed full-time by the Corporation until the award payment date in order to be entitled to receive a payout of an STIP award.  Exceptions may be provided for termination of employment by reason of death, disability, without cause, retirement and change in control.

Other Terms & Provisions. STIP participants are not permitted to transfer STIP awards, except by will or the laws of descent and distribution. The Corporation is entitled to withhold from any payments of awards under the STIP any and all amounts required to be withheld for federal, state and local withholding taxes. The Compensation Committee has the discretion to change terms and conditions of STIP awards as it deems necessary to ensure that the STIP awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(c) of the Internal Revenue Code.

EX-10.27

Exhibit 10.27

PHARMERICA CORPORATION

SUMMARY OF

2015 LONG-TERM INCENTIVE PROGRAM

2015 Long-Term Incentive Program

On March 19, 2015, the Board of Directors of the Corporation, upon recommendation of the Compensation Committee, adopted the 2015 Long-Term Incentive Program (the “LTIP”) under the Omnibus Plan to provide restricted stock units and performance share unit awards to the Corporation’s executives and certain other officers and employees based on pre-established performance objectives and goals. The LTIP advances the Corporation’s commitment to performance-based compensation practices by providing participants an opportunity to earn equity-based awards upon the achievement of certain pre-established long-term performance objectives. The LTIP also is designed to drive consistent growth of the Corporation over a multiple-year performance period.

Performance Cycle. LTIP performance cycle begins on January 1, 2015 and ends on December 31, 2017.

Award Targets. The amount of the awards under the LTIP are based on individual participant bonus targets and company performance criteria. Individual participant bonus targets are established by the Compensation Committee for each participant based upon the Compensation Committee’s determination of the appropriate bonus target amounts that will enable the Corporation to remain competitive and retain and recruit top employees.

The Compensation Committee established the bonus targets under the LTIP for the Corporation’s principal executive officer, principal financial officer, and other fiscal 2014 Named Executive Officers as follows:

Executive	Title	Bonus Target
Gregory S. Weishar	Chief Executive Officer	250% of base salary
David Froesel	Executive Vice President, Chief Financial Officer and Treasurer	175% of base salary
Robert McKay	Senior Vice President of Purchasing and Trade Relations	115% of base salary
Thomas Caneris	Senior Vice President, General Counsel, Chief Compliance Officer and Secretary	138% of base salary
Berard Tomassetti	Senior Vice President, Chief Accounting Officer	60% of base salary

The Compensation Committee established the 2015 LTIP awards for the fiscal 2014 Named Executive Officers in the following amounts as a percentage of the bonus target: 50% restricted stock units and 50% performance share units.

On March 19, 2015, the Board of Directors, upon recommendation of the Compensation Committee, awarded restricted stock units under the LTIP for the Corporation’s principal executive officer, principal financial officer, and other fiscal 2014 Named Executive Officers as follows:

Executive	Title	Restricted Stock Units (50% of Bonus Target)
Gregory S. Weishar	Chief Executive Officer		38,600
David Froesel	Executive Vice President, Chief Financial Officer and Treasurer		15,709
Robert McKay	Senior Vice President of Purchasing and Trade Relations		6,225
Thomas Caneris	Senior Vice President, General Counsel, Compliance Officer and Secretary		8,126
Berard Tomassetti	Senior Vice President, Chief Accounting Officer		2,363

Performance Criteria. The LTIP performance criteria for the performance share units are tied to company performance. With respect to all Named Executive Officers other than Berard Tomassetti, company performance will be measured for purposes of the performance share units by comparing the Corporation’s Adjusted EBITDA at the end of the performance cycle to a target end-of-performance cycle Adjusted EBITDA set by the Compensation Committee and by comparing the Corporation’s adjusted diluted earnings per share (“Adjusted Diluted EPS”) at the end of the performance cycle to a target end-of-performance cycle Adjusted Diluted EPS set by the Compensation Committee. With respect to Berard Tomassetti, company performance will be measured for purposes of the performance share units by comparing the Corporation’s Adjusted EBITDA at the end of the performance cycle to a target end-of-performance cycle Adjusted EBITDA set by the Compensation Committee. With respect to all Named Executive Officers other than Berard Tomassetti, the Adjusted EBITDA target accounts for 70% of their respective performance target and the remaining 30% is determined by achievement of a target measure of Adjusted Diluted EPS.  With respect to Berard Tomassetti, the Adjusted EBITDA target accounts for 100% of his performance target.

Award Payouts. Award payouts for the performance share units are based on the percentage of the performance target achieved. Generally, the percentage of the award earned at the end of the performance cycle based on the Adjusted EBITDA performance target shall be determined according to the following schedule; however, the actual LTIP award payout will be interpolated between the percentages set forth in the chart based on actual results:

Performance Level	Payout Level
< 85.0% of Performance Target	0.0% of Award Target
85.0% of Performance Target	50.0% of Award Target
91.0% of Performance Target	70.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
109.0% of Performance Target	130.0% of Award Target
115.0% of Performance Target	150.0% of Award Target
> 115.0% of Performance Target	150.0% of Award Target

Generally, the percentage of the award earned at the end of the performance cycle based on the percentage of the Adjusted Diluted EPS performance target achieved shall be determined according to the following schedule; however, the actual LTIP award payout will be interpolated between the percentages set forth in the chart based on actual results:

Performance Level	Payout Level
< 85.0% of Performance Target	0.0% of Award Target
85.0% of Performance Target	50.0% of Award Target
91.0% of Performance Target	70.0% of Award Target
100.0% of Performance Target	100.0% of Award Target
109.0% of Performance Target	130.0% of Award Target
115.0% of Performance Target	150.0% of Award Target
> 115.0% of Performance Target	150.0% of Award Target

Award Agreements. Awards of restricted stock units and performance share units are made under the LTIP pursuant to award agreements with each recipient on the terms described in this Current Report on Form 8-K.

Payment of Awards. Performance share unit awards shall be made in stock and will be distributed on a specific date by which the Compensation Committee reasonably expects it will be able to determine whether and the extent that the performance target applicable to such award was met. The Corporation will make the distribution of the performance share unit awards to participants as soon as administratively practicable following the date of the award determination.

Vesting and Forfeiture. Recipients of LTIP awards generally must remain continuously employed full-time by the Corporation until the date designated for payout under the applicable award agreement for the LTIP period. Exceptions may be provided for termination of employment by reason of death, disability, without cause, retirement and change in control. The restricted stock units will generally vest in three equal annual installments beginning on the first anniversary of the grant date.

Change in Control. In the event of a change in control (“CIC”), acceleration of vesting of restricted stock units will occur if an employee is terminated by the Company without “cause” or the employee voluntarily terminates employment with “good reason” during the 24 month period following a CIC (“Qualifying Termination”). Vesting of restricted stock units will accelerate immediately regardless of a Qualifying Termination if the acquirer does not assume the restricted stock unit awards. If the acquirer assumes the restricted stock unit awards, restricted stock units will continue to vest according to their original vesting schedules; provided that vesting will subsequently accelerate upon a Qualifying Termination within 24 months after the CIC, and unvested restricted stock units would be forfeited upon any other termination (unless otherwise specified by the terms of an employment agreement). With respect to performance share units, in the event of a Qualifying Termination, performance share units will be converted to time-based restricted stock units at the CIC assuming achievement of 100% the performance targets. Such restricted stock units will have the same terms of the restricted stock units granted pursuant to the 2015 LTIP and shall be deemed to have been granted as of March 19, 2015.

Other Terms & Provisions. Participants are not permitted to transfer LTIP awards, except by will or the laws of descent and distribution. The Corporation is entitled to withhold from any payments of awards under the LTIP or the Omnibus Plan any and all amounts required to be withheld for federal, state and local withholding taxes. The Compensation Committee has the discretion to change terms and conditions of LTIP awards as it deems necessary to ensure that the LTIP awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(c) of the Internal Revenue Code. In addition to the above conditions, payment of any incentive award is contingent upon the participant executing a written agreement to protect company assets.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Gregory S. Weishar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PharMerica Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

DATE: May 7, 2015

/s/ Gregory S. Weishar

Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David W. Froesel, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of PharMerica Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d -15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

DATE: May 7, 2015

/s/ David W. Froesel, Jr.

Executive Vice President,

Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PharMerica Corporation (the "Corporation") on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory S. Weishar, Chief Executive Officer and Director of the Corporation, certify, pursuant to18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Gregory S. Weishar

Gregory S. Weishar

Chief Executive Officer and Director

May 7, 2015

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PharMerica Corporation (the "Corporation") on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David W. Froesel, Jr., Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ David W. Froesel, Jr.

David W. Froesel, Jr.

Executive Vice President,

Chief Financial Officer and Treasurer

May 7, 2015

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CREDIT AGREEMENT, Schedule of Indebtedness Maturities (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
2015	$ 6.1
2016	11.4
2017	11.4
2018	11.6
2019	285.5
Total debt	326.0	351.3
Term Debt [Member] | 2014 Credit Agreement [Member]
Debt Instrument [Line Items]
2015	5.6
2016	11.3
2017	11.3
2018	11.3
2019	185.5
Total debt	225.0	225.0
Revolving Credit Facility [Member] | 2014 Credit Agreement [Member]
Debt Instrument [Line Items]
2015	0
2016	0
2017	0
2018	0
2019	100.0
Total debt	100.0	125.0
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
2015	0.5
2016	0.1
2017	0.1
2018	0.3
2019	0
Total debt	$ 1.0	$ 1.3

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EARNINGS PER SHARE, Schedule of Computation of Basic and Diluted Earnings Per Share (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Numerator: [Abstract]
Numerator for basic and earnings per diluted share - net income	$ 9.6		$ 4.8
Denominator: [Abstract]
Denominator for basic earnings per share - weighted average shares (in shares)	30,185,230		29,753,024
Effective of dilutive securities (stock options, restricted stock units and performance share units) (in shares)	548,151		601,043
Denominator for earnings per diluted share - adjusted weighted average shares (in shares)	30,733,381		30,354,067
Basic earnings per share (in dollars per share)	$ 0.32		$ 0.16
Earnings per diluted share (in dollars per share)	$ 0.31		$ 0.16
Unexercised employee stock options and unvested restricted shares excluded from the effect of dilutive securities above (a) (in shares)	56	[1]	1,677	[1]

[1] These unexercised employee stock options, nonvested restricted shares and performance shares that have not yet met performance conditions are not included in the computation of diluted earnings per share because to do so would be anti-dilutive for the periods presented.

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INCOME TAXES, Schedule of Provision for Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
INCOME TAXES [Abstract]
Provision for income taxes	$ 5.8	$ 3.0
Total provision as a percentage of pre-tax income (in hundredths)	37.90%	38.40%

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ACQUISITIONS, Schedule of Purchase Price Allocation (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Business Acquisition [Line Items]
Goodwill	$ 336.3		$ 318.0
Amounts Recognized As Of Acquisition Date [Member]
Business Acquisition [Line Items]
Accounts receivable	24.8
Inventory	8.8
Deferred tax assets - current	1.8
Other current assets	3.1
Equipment and leasehold improvements	4.8
Deferred tax assets	8.2
Identifiable intangibles	61.4
Goodwill	35.2
Total Assets	148.1
Current liabilities	26.3	[1]
Other long-term liabilities	6.9	[1]
Total Liabilities	33.2
Total purchase price, less cash acquired	114.9
Capital Lease Obligations [Member]
Business Acquisition [Line Items]
Current liabilities			0.8
Other long-term liabilities			0.5
2014 Acquisitions [Member] | Amounts Previously Recognized As Of Acquisition Date [Member]
Business Acquisition [Line Items]
Accounts receivable			24.7
Inventory			8.8
Deferred tax assets - current			1.8
Other current assets			3.1
Equipment and leasehold improvements			4.8
Deferred tax assets			8.2
Identifiable intangibles			61.4
Goodwill			34.9
Total Assets			147.7
Current liabilities			26.4	[1]
Other long-term liabilities			6.9	[1]
Total Liabilities			33.3
Total purchase price, less cash acquired			114.4
2014 Acquisitions [Member] | Measurement Period Adjustments [Member]
Business Acquisition [Line Items]
Accounts receivable	0.1
Inventory	0
Deferred tax assets - current	0
Other current assets	0
Equipment and leasehold improvements	0
Deferred tax assets	0
Identifiable intangibles	0
Goodwill	0.3
Total Assets	0.4
Current liabilities	(0.1)	[1]
Other long-term liabilities	0	[1]
Total Liabilities	(0.1)
Total purchase price, less cash acquired	$ 0.5

[1] Included in current liabilities and other long-term liabilities are $0.8 million and $0.5 million, respectively, of capital lease obligations acquired as a part of the 2014 acquisitions.

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INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2015

INCOME TAXES [Abstract]

Provision for Income Taxes

The provision for income taxes is based upon the Corporation's estimate of annual taxable income or loss for each respective accounting period. The following table summarizes our provision for income taxes for the periods presented (dollars in millions):

	Three Months Ended March 31,
	2014			2015
Provision for income taxes	$	3.0			$	5.8
Total provision as a percentage of pre-tax income		38.4	%			37.9	%

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RESTRUCTURING COSTS AND OTHER CHARGES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Restructuring Cost and Reserve [Line Items]
Restructuring and impairment charges	$ 0.1	$ 1.9
Restructuring Reserve [Roll Forward]
Beginning Balance	1.4
Accrual	0.1
Utilized amounts	(0.4)
Ending Balance	1.1
Employee Severance and Related Costs [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	0.3
Accrual	0.1
Utilized amounts	(0.2)
Ending Balance	0.2
Facility Costs [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	1.1
Accrual	0
Utilized amounts	(0.2)
Ending Balance	$ 0.9

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CREDIT AGREEMENT, Schedule of Term Debt and Revolving Credit Facility (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Line of Credit Facility [Line Items]
Total debt	$ 326.0	$ 351.3
Less: Current portion of long-term debt	8.9	6.4
Total long-term debt	317.1	344.9
Term Debt [Member] | 2014 Credit Agreement [Member]
Line of Credit Facility [Line Items]
Total debt	225.0	225.0
Revolving Credit Facility [Member] | 2014 Credit Agreement [Member]
Line of Credit Facility [Line Items]
Total debt	100.0	125.0
Capital Lease Obligations [Member]
Line of Credit Facility [Line Items]
Total debt	$ 1.0	$ 1.3

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INCOME TAXES, Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Operating Loss Carryforwards [Line Items]
Tax deductible goodwill	141.6	$ 145.3
Deferred tax assets, total	28.1	30.6
Unrecognized tax benefits	0	0
Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforward period	1 year
Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforward period	20 years
Related to 2014 [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	31.4
Tax benefit from net operating loss carryforwards	11.0
U.S. Federal Tax Jurisdictions [Member] | Related to 2013 [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	5.2
Tax benefit from net operating loss carryforwards	1.8
State [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	3.0
Valuation allowances	4.1	$ 4.1
State [Member] | Minimum [Member]
Operating Loss Carryforwards [Line Items]
Statute of limitations for tax examinations	3 years
State [Member] | Maximum [Member]
Operating Loss Carryforwards [Line Items]
Statute of limitations for tax examinations	5 years

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GOODWILL AND INTANGIBLES

3 Months Ended

Mar. 31, 2015

GOODWILL AND INTANGIBLES [Abstract]

GOODWILL AND INTANGIBLES

NOTE 3—GOODWILL AND INTANGIBLES

As of December 31, 2014 and March 31, 2015 the carrying amount of goodwill was $318.0 million and $336.3 million, respectively.

 

The following table presents the components of the Corporation's finite lived intangible assets (dollars in millions):

Finite Lived Intangible Assets	Balance at December 31, 2014			Additions			Balance at March 31, 2015
Customer relationships	$	177.5		$	7.0		$	184.5
Trade name		62.2			0.6			62.8
Non-compete agreements		19.9			0.6			20.5
Sub Total		259.6			8.2			267.8
Accumulated amortization		(82.0	)		(6.6	)		(88.6	)
Net intangible assets	$	177.6		$	1.6		$	179.2

Amortization expense relating to finite-lived intangible assets was $4.4 million and $6.6 million for the three months ended March 31, 2014 and 2015, respectively.

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COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS, Additional Information (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	1 Months Ended
	Mar. 31, 2015	Aug. 31, 2010	Dec. 31, 2014	Jul. 02, 2012
Class of Stock [Line Items]
Weighted average remaining term of nonvested shares	2 years 10 months 24 days
Intrinsic value of nonvested shares	$ 18.2
Treasury stock (in shares)	2,760,633		2,617,305
Treasury Stock [Member]
Class of Stock [Line Items]
Common stock shares repurchase authorized, value				25.0
Common stock shares repurchased		10.5
Common stock shares repurchase authorized, value that remains available	19.7
Aggregate price of shares redeemed	4.4
Vested awards redeemed (in shares)	143,328
Treasury Stock [Member] | Maximum [Member]
Class of Stock [Line Items]
Common stock shares repurchase authorized, value		$ 25.0

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Schedule of Accounts Receivable and Summarized Aging Categories (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for doubtful accounts	$ (59.7)	$ (58.1)	$ (56.7)
Accounts receivable, net	199.5	195.8
0 to 60 days	61.40%	58.80%
61 to 120 days	15.80%	17.20%
Over 120 days	22.80%	24.00%
Total accounts receivable recorded percentage due	100.00%	100.00%
Institutional Health Care Providers [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	157.0	153.6
Medicare Part D [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	29.8	30.5
Private Payor And Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	30.3	30.6
Insured [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	25.9	24.5
Medicaid [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	12.7	11.7
Medicare [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, gross	$ 3.5	$ 3.0

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Schedule of Financial Liability Recorded at Fair Value (Details) (Recurring [Member], USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Market Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Plan	$ (8.1)	$ (8.0)
Income Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration	(9.0)	(1.1)
Mandatorily Redeemable Interest	(7.4)	(8.3)
Level 1 [Member] | Market Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Plan	0	0
Level 1 [Member] | Income Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration	0	0
Mandatorily Redeemable Interest	0	0
Level 2 [Member] | Market Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Plan	(8.1)	(8.0)
Level 2 [Member] | Income Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration	0	0
Mandatorily Redeemable Interest	0	0
Level 3 [Member] | Market Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred Compensation Plan	0	0
Level 3 [Member] | Income Approach [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent Consideration	(9.0)	(1.1)
Mandatorily Redeemable Interest	$ (7.4)	$ (8.3)

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COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS, Schedule of Stock Option Activity (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Number of Shares [Abstract]
Outstanding, Beginning Balance (in shares)	913,209
Exercised (in shares)	(105,314)
Canceled (in shares)	(116,117)
Expired (in shares)	0
Outstanding, Ending Balance (in shares)	691,778	913,209
Exercisable Options at end of year (in shares)	690,750
Weighted Average Exercise Price Per Share [Abstract]
Weighted-Average Exercise Price Per Share, Outstanding, Beginning (in dollars per share)	$ 14.62
Weighted-Average Exercise Price Per Share, Exercised (in dollars per share)	$ 15.34
Weighted-Average Exercise Price Per Share, Canceled (in dollars per share)	$ 10.84
Weighted-Average Exercise Price Per Share, Expired (in dollars per share)	$ 0
Weighted-Average Exercise Price Per Share, Outstanding, Ending (in dollars per share)	$ 14.39	$ 14.62
Weighted-Average Exercise Price Per Share, Exercisable (in dollars per share)	$ 14.40
Weighted Average Remaining Term and Aggregate Intrinsic Value [Abstract]
Weighted-Average Remaining Term, Outstanding, Beginning	2 years 0 months 14 days	2 years 1 month 6 days
Weighted-Average Remaining Term, Outstanding, Ending	2 years 0 months 14 days	2 years 1 month 6 days
Weighted-Average Remaining Term, Exercisable	2 years 0 months 14 days
Aggregate Intrinsic Value, Outstanding, Beginning	$ 5.6
Aggregate Intrinsic Value, Outstanding, Ending	9.5	5.6
Aggregate Intrinsic Value, Exercisable	$ 9.5

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Schedule of Allowance for Doubtful Accounts (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance for doubtful accounts, Beginning Balance	$ 58.1	$ 56.7
Allowance for doubtful accounts, Charges to Costs and Expenses	5.0	23.2
Allowance for doubtful accounts, Write-offs	(3.4)	(21.8)
Allowance for doubtful accounts, Ending Balance	$ 59.7	$ 58.1

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Contingent Consideration [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Beginning balance	$ 1.1	$ 0.7
Additions from business acquisitions	7.9	1.1
Change in fair value	0	(0.7)
Ending balance	9.0	1.1
Mandatorily Redeemable Interest [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Beginning balance	8.3	8.2
Additions from business acquisitions	0	0
Change in fair value	(0.9)	0.1
Ending balance	$ 7.4	$ 8.3

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ACQUISITIONS

3 Months Ended

Mar. 31, 2015

ACQUISITIONS [Abstract]

ACQUISITIONS

NOTE 2—ACQUISITIONS

2015 Acquisition

The Corporation through its wholly owned subsidiary, Amerita, acquired Coastal Pharmaceutical Services Corporation (“InfusionRx Acquisition”) on January 28, 2015. The InfusionRx Acquisition had an estimated purchase price of $27.9 million, comprised of a net cash payment of $20.0 million and an estimated fair value of contingent consideration of $7.9 million. The resulting amount of goodwill and identifiable intangibles related to this transaction in the aggregate were $18.3 million and $8.2 million, respectively. The Corporation believes the resulting amount of goodwill reflects its expectation of synergistic benefits of the acquisition.  Tax deductible goodwill associated with the acquisition was $18.3 million as of March 31, 2015.  The net assets and operating results of the acquisition have been included in the Corporation’s condensed consolidated financial statements from the date of acquisition.

Amounts contingently payable related to the InfusionRx Acquisition, representing potential payments originating from an earn-out provision were $7.9 million as of March 31, 2015.

2014 Acquisitions

During the year ended December 31, 2014, the Corporation completed acquisitions of four long-term care businesses and one infusion business (collectively the "2014 Acquisitions"), none of which were individually significant to the Corporation. The 2014 Acquisitions required cash payments of approximately $114.9 million in the aggregate. The resulting amount of goodwill and identifiable intangibles related to these transactions in the aggregate were $35.2 million and $61.4 million, respectively. The Corporation believes the resulting amount of goodwill reflects its expectation of synergistic benefits of the acquisitions.  Tax deductible goodwill associated with the 2014 Acquisitions was $29.8 million as of March 31, 2015.  The net assets and operating results of the 2014 Acquisitions have been included in the Corporation's condensed consolidated financial statements from their respective dates of acquisition.

Amounts contingently payable related to the 2014 Acquisitions, representing payments originating from an earn-out provision of the infusion acquisition, were $1.1 million as of December 31, 2014 and March 31, 2015.

 

The amounts recognized as of the acquisition dates for the 2014 Acquisitions, on a combined basis, for assets acquired and liabilities assumed are as follows (dollars in millions):

	Amounts Recognized as of Acquisition Date		Measurement Period Adjustments			As Adjusted
Accounts receivable	$	24.7	$	0.1		$	24.8
Inventory		8.8		-			8.8
Deferred tax assets - current		1.8		-			1.8
Other current assets		3.1		-			3.1
Equipment and leasehold improvements		4.8		-			4.8
Deferred tax assets		8.2		-			8.2
Identifiable intangibles		61.4		-			61.4
Goodwill		34.9		0.3			35.2
Total Assets		147.7		0.4			148.1
Current liabilities*		26.4		(0.1	)		26.3
Other long-term liabilities*		6.9		-			6.9
Total Liabilities		33.3		(0.1	)		33.2
Total purchase price, less cash acquired	$	114.4	$	0.5		$	114.9

* Included in current liabilities and other long-term liabilities are $0.8 million and $0.5 million, respectively, of capital lease obligations acquired as a part of the 2014 Acquisitions.

Pro forma financial statements are not presented on the 2014 and 2015 acquisitions as the results are not material to the Corporation’s condensed consolidated financial statements.

Other

For the three months ended March 31, 2014 and March 31, 2015, the Corporation incurred $4.9 million and $3.7 million, respectively, of acquisition-related costs, which have been classified as a component of merger, acquisition, integration costs and other charges.

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ACQUISITIONS, Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014 Acquisition
Business Acquisition [Line Items]
Cash payments for acquisitions	$ 20.5	$ 10.7
Tax deductible goodwill	141.6		145.3
Acquisition costs	3.7	4.9
Measurement period adjustments		0.5
2015 Acquisitions [Member]
Business Acquisition [Line Items]
Cash payments for acquisitions	20.0
Tax deductible goodwill	18.3
Contingent payable originating from earnout provisions of acquisition	7.9
Purchase price of the acquisition	27.9
Recorded goodwill in transaction	18.3
Identifiable intangibles acquired	8.2
2014 Acquisitions [Member]
Business Acquisition [Line Items]
Number of acquisitions of long-term care businesses completed			4
Number of Acquisitions of Infusion Business Completed			1
Cash payments for acquisitions			114.9
Tax deductible goodwill			29.8
Contingent payable originating from earnout provisions of acquisition			1.1
Recorded goodwill in transaction			$ 35.2

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COMMITMENTS AND CONTINGENCIES, Additional Information (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 Week Pharmacy Exclusion Complaint	Dec. 31, 2014
Loss Contingencies [Line Items]
Number of pharmacies	2
DEA settlement	$ 1.0
Number of complaints	2
Statutory Remedy Expenses Per Facsimile	500
Rebate receivable - ABDC litigation	21,500,000	40,800,000
Additional Rebates - ABDC Litigation	18,500,000	12,200,000
Total Receivable - ABDC Litigation	71,500,000	53,000,000
Notice period of complaint in intervention	120 days
Gross Liability offset to the condensed consolidated balance sheet	50,000,000
Exclusions added to AMP definition	3
Accrual Settlement, litigation and other related charges	45,500,000
Weeks of paid vacation per year for executive officers	4
FUL and AMP changes [Member]
Loss Contingencies [Line Items]
Monthly average manufacturers price (in hundredths)	175.00%
California Medicaid [Member]
Loss Contingencies [Line Items]
Reimbursement reduction for healthcare providers (in hundredths)	10.00%
Liability recorded representing best estimate of expected amount of recovery	$ 3,300,000

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CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) [Abstract]
Revenues	$ 511.6	$ 452.2
Cost of goods sold	423.0	372.2
Gross profit	88.6	80.0
Selling, general and administrative expenses	59.0	57.2
Amortization expense	6.6	4.4
Merger, acquisition, integration costs and other charges	3.8	5.0
Settlement, litigation and other related charges	2.3	1.2
Restructuring and impairment charges	0.1	1.9
Operating income	16.8	10.3
Interest expense, net	1.4	2.5
Income before income taxes	15.4	7.8
Provision for income taxes	5.8	3.0
Net income	$ 9.6	$ 4.8
Earnings per common share:
Basic (in dollars per share)	$ 0.32	$ 0.16
Diluted (in dollars per share)	$ 0.31	$ 0.16
Shares used in computing earnings per common share:
Basic (in shares)	30,185,230	29,753,024
Diluted (in shares)	30,733,381	30,354,067

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COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS, Schedule of Nonvested Share Activity (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Number of Shares [Abstract]
Number of Shares, Outstanding, Beginning (in shares)	941,570
Number of Shares, Forfeited (in shares)	(2,163)
Number of Shares, Vested (in shares)	(306,101)
Number of Shares, Outstanding, Ending (in shares)	918,808
Weighted-Average Grant Date Fair Value
Weighted-Average Grant Date Fair Value, Outstanding, Beginning (in dollars per share)	$ 18.00
Weighted-Average Grant Date Fair Value, Forfeited (in dollars per share)	$ 19.84
Weighted-Average Grant Date Fair Value, Vested (in dollars per share)	$ 15.50
Weighted-Average Grant Date Fair Value, Outstanding, Ending (in dollars per share)	$ 21.67
Nonvested Restricted Stock Units [Member]
Number of Shares [Abstract]
Number of Shares, Granted (in shares)	135,725
Weighted-Average Grant Date Fair Value
Weighted-Average Grant Date Fair Value, Granted (in dollars per share)	$ 27.85
Performance Share Units [Member]
Number of Shares [Abstract]
Number of Shares, Granted (in shares)	149,777
Weighted-Average Grant Date Fair Value
Weighted-Average Grant Date Fair Value, Granted (in dollars per share)	$ 27.85

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (USD $) In Millions, except Share data	Common Stock [Member]	Capital in Excess of Par Value [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Beginning Balance at Dec. 31, 2014	$ 0.3	$ 394.1	$ 117.0	$ (33.3)	$ 478.1
Beginning Balance (in shares) at Dec. 31, 2014	30,108,481
Net income (loss)			9.6		9.6
Exercise of stock options and tax components of stock-based awards, net (in shares)	105,314
Exercise of stock options and tax components of stock-based awards, net	0	2.1	0	0	2.1
Vested restricted stock units (in shares)	163,281
Vested restricted stock units	0	0	0	0	0
Vested performance stock units (in shares)	142,820
Vested performance stock units	0	0	0	0	0
Treasury stock at cost (in shares)	(143,328)
Treasury stock at cost, value	0	0	0	(4.4)	(4.4)
Stock-based compensation - non-vested restricted stock	0	1.6	0	0	1.6
Stock-based compensation - stock options	0	0.1	0	0	0.1
Ending Balance at Mar. 31, 2015	$ 0.3	$ 397.9	$ 126.6	$ (37.7)	$ 487.1
Ending Balance (in shares) at Mar. 31, 2015	30,376,568

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GOODWILL AND INTANGIBLES, Schedule of Finite Lived Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross, Beginning Balance	$ 259.6
Finite Lived Intangible Assets Gross, Additions	8.2
Finite Lived Intangible Assets Gross, Ending Balance	267.8
Accumulated amortization, Beginning Balance	(82.0)
Accumulated amortization, Additions	(6.6)
Accumulated amortization, Ending Balance	(88.6)
Net intangible assets, Beginning Balance	177.6
Net intangible assets, Additions	1.6
Net intangible assets, Impairments	179.2
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross, Beginning Balance	177.5
Finite Lived Intangible Assets Gross, Additions	7.0
Finite Lived Intangible Assets Gross, Ending Balance	184.5
Trade Name [Member]
Finite-Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross, Beginning Balance	62.2
Finite Lived Intangible Assets Gross, Additions	0.6
Finite Lived Intangible Assets Gross, Ending Balance	62.8
Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross, Beginning Balance	19.9
Finite Lived Intangible Assets Gross, Additions	0.6
Finite Lived Intangible Assets Gross, Ending Balance	$ 20.5

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2015

COMMITMENTS AND CONTINGENCIES [Abstract]

Summary of offset amounts related to Rebates and Other Receivables

Presented in the condensed consolidated balance sheet, the following amounts are offset as of March 31, 2015 (in millions):

Description	Gross Amount of Recognized Asset		Gross Liability Offset in the Condensed Consolidated Balance Sheet			Net Amount of Asset Presented in the Condensed Consolidated Balance Sheet
Rebates & Other Receivables	$	71.5	$	(50.0	)	$	21.5
Total	$	71.5	$	(50.0	)	$	21.5

XML

CREDIT AGREEMENT, Additional Information (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended
	Sep. 17, 2014	Mar. 31, 2015	Sep. 17, 2014
Line of Credit Facility [Line Items]
Letters of Credit outstanding		$ 2.5
Term Debt [Member]
Line of Credit Facility [Line Items]
Credit agreement maximum borrowing capacity	225.0		225.0
Credit agreement outstanding		225.0
Debt instrument maturity date	Sep. 17, 2019	Sep. 17, 2019
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit agreement maximum borrowing capacity	310.0		310.0
Credit agreement outstanding		100.0
Debt instrument maturity date	Sep. 17, 2019
Total availability under the revolving credit facility		207.5
Total Debt Capacity [Member]
Line of Credit Facility [Line Items]
Credit agreement maximum borrowing capacity	$ 535.0		$ 535.0

XML

COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS (Tables)

3 Months Ended

Mar. 31, 2015

COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS [Abstract]

Stock Option Activity

Stock options were not granted to officers and employees during 2014 or the three months ended March 31, 2015. The following table summarizes option activity for the periods presented:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding shares at December 31, 2014		913,209		$	14.62	2.1 years	$	5.6
Exercised		(105,314	)		15.34
Canceled		(116,117	)		10.84
Expired		-			-
Outstanding shares at March 31, 2015		691,778		$	14.39	2.04 years	$	9.5
Exercisable shares at March 31, 2015		690,750		$	14.40	2.04 years	$	9.5

Nonvested Share Activity

The following table summarizes nonvested share activity for the periods presented:

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding shares at December 31, 2014		941,570		$	18.00
Granted - Restricted Stock Units		135,725			27.85
Granted - Performance Share Units		149,777			27.85
Forfeited		(2,163	)		19.84
Vested		(306,101	)		15.50
Outstanding shares at March 31, 2015		918,808		$	21.67

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2015

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

PharMerica Corporation together with its subsidiaries (the "Corporation"), is a leading provider of pharmacy services.  The Corporation serves the long-term care, hospital pharmacy management services, specialty home infusion and specialty oncology pharmacy markets.  The Corporation operates 97 institutional pharmacies, 15 specialty home infusion pharmacies, and 5 specialty oncology pharmacies in 45 states.  The Corporation’s customers are institutional healthcare providers, such as skilled nursing facilities, assisted living facilities, hospitals, individuals receiving in-home care and patients with cancer.

Operating Segments

The Corporation consists of three operating segments: institutional pharmacy, specialty infusion services and specialty oncology pharmacy. Management believes the nature of the products and services are similar, the payers for the products and services are common among the segments and all segments operate in the healthcare regulatory environment. In addition, the segments are economically similar. Accordingly, management has aggregated the three operating segments into one reporting segment.

Principles of Consolidation

All intercompany transactions have been eliminated.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles in the United States ("U.S. GAAP") for complete financial statements. Accordingly, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Corporation and related footnotes for the year ended December 31, 2014, included in the Corporation's Annual Report on Form 10-K. The balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements adjusted for acquisition related measurement period adjustments.

The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the condensed consolidated financial statements for the interim periods have been made and are of a normal recurring nature.

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates are involved in collectability of accounts receivable, revenue recognition, inventory valuation, supplier rebates, the valuation of long-lived assets and goodwill, and accounting for income taxes. Actual amounts may differ from these estimates.

Fair Value of Financial Instruments

  Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Corporation follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which require the Corporation to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The financial liabilities recorded at fair value at December 31, 2014 and March 31, 2015 are set forth in the tables below (dollars in millions):

As of December 31, 2014	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.0	)	$	-	$	(8.0	)	$	-			A
Contingent Consideration		(1.1	)		-		-			(1.1	)		C
Mandatorily Redeemable Interest		(8.3	)		-		-			(8.3	)		C

As of March 31, 2015	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.1	)	$	-	$	(8.1	)	$	-			A
Contingent Considerations		(9.0	)		-		-			(9.0	)		C
Mandatorily Redeemable Interest		(7.4	)		-		-			(7.4	)		C

The deferred compensation plan liability represents an unfunded obligation associated with the deferred compensation plan offered to eligible employees and members of the Board of Directors of the Corporation. The fair value of the liability associated with the deferred compensation plan is derived using pricing and other relevant information for investments in phantom shares of certain available investment options, primarily mutual funds. This liability is classified as other long-term liabilities in the accompanying condensed consolidated balance sheets.

The contingent consideration represents future earn-outs associated with the Corporation's acquisition of an institutional pharmacy business purchased in 2013 and two infusion businesses purchased in 2014 and 2015. The fair values of the liabilities associated with the contingent consideration were derived using the income approach with unobservable inputs, which included future gross profit forecasts and present value assumptions, and there was little or no market data. The Corporation assessed the fair values of the liabilities as of the acquisition date and will assess quarterly thereafter until settlement. These liabilities are classified as current and other long-term liabilities in the accompanying condensed consolidated balance sheets.

The mandatorily redeemable interest represents a future obligation associated with the Corporation's acquisition of a specialty pharmacy business, OncoMed Specialty, LLC (“Onco”), purchased on December 6, 2013. The mandatorily redeemable interest is classified as a long-term liability and measured at fair value. The fair value was derived using the income approach with unobservable inputs, which included a future gross profit forecast and present value assumptions, and there was little or no market data.  The Corporation assessed and adjusted the mandatorily redeemable interest’s fair value of the liability at March 31, 2015.

For the year ended December 31, 2014 and the quarter ended March 31, 2015, there were no transfers between the valuation hierarchy Levels 1, 2, and 3.  The following table summarizes the change in fair value of the Corporation’s contingent consideration and mandatorily redeemable interest identified as Level 3 for the year ended December 31, 2014 and the three months ended March 31, 2015 (in millions):

	Contingent Consideration			Mandatorily Redeemable Interest
Beginning balance, December 31, 2013	$	0.7		$	8.2
Additions from business acquisitions		1.1			-
Change in fair value		(0.7	)		0.1
Balance, December 31, 2014		1.1			8.3
Additions from business acquisitions		7.9			-
Change in fair value		-			(0.9	)
Balance, March 31, 2015	$	9.0		$	7.4

The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, inventory and accounts payable approximate fair value because of the short-term maturity of these instruments.  The carrying amount of the Corporation’s debt approximates fair value due to the interest being set at variable market interest rates (Level 2).

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from Prescription Drug Plans ("PDPs") under Medicare Part D, institutional healthcare providers, the respective state Medicaid programs, third party insurance companies, and private payers. The Corporation's ability to collect outstanding receivables is critical to its results of operations and cash flows. To provide for accounts receivable that could become uncollectible in the future, the Corporation establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to the extent it is probable that a portion or all of a particular account will not be collected.

The Corporation has an established a process to determine the adequacy of the allowance for doubtful accounts, which relies on analytical tools, specific identification, and benchmarks to arrive at a reasonable allowance. No single statistic or measurement determines the adequacy of the allowance for doubtful accounts. The Corporation monitors and reviews trends by payer classification along with the composition of the Corporation's aging accounts receivable. This review is focused primarily on trends in private and other payers, PDP's, dual eligible co-payments, historic payment patterns of long-term care institutions, and monitoring respective credit risks. In addition, the Corporation analyzes other factors such as revenue days in accounts receivables, denial trends by payer types, payment patterns by payer types, subsequent cash collections, and current events that may impact payment patterns of the Corporation's long-term care institution customers. Accounts receivable are written off after collection efforts have been completed in accordance with the Corporation's policies.

The Corporation's accounts receivable and summarized aging categories are as follows (dollars in millions):

	December 31, 2014			March 31, 2015
Institutional healthcare providers	$	153.6		$	157.0
Medicare Part D		30.5			29.8
Private payer and other		30.6			30.3
Insured		24.5			25.9
Medicaid		11.7			12.7
Medicare		3.0			3.5
Allowance for doubtful accounts		(58.1	)		(59.7	)
	$	195.8		$	199.5
0 to 60 days		58.8	%		61.4	%
61 to 120 days		17.2	%		15.8	%
Over 120 days		24.0	%		22.8	%
		100.0	%		100.0	%

The following is a summary of activity in the Corporation's allowance for doubtful accounts (dollars in millions):

	Beginning Balance		Charges to Costs and Expenses		Write-offs			Ending Balance
Allowance for doubtful accounts:
Year ended December 31, 2014	$	56.7	$	23.2	$	(21.8	)	$	58.1
Three months ended March 31, 2015	$	58.1	$	5.0	$	(3.4	)	$	59.7

Goodwill and Other Intangibles

The Corporation’s policy is to perform a quantitative assessment of its institutional pharmacy and specialty infusion reporting units to determine whether it is more likely than not (defined as having a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.  The Corporation performed a quantitative assessment as of December 31, 2014.  The institutional pharmacy and specialty infusion reporting unit’s fair values as calculated for the analysis were approximately 48.2% and 13.1%, respectively, greater than book value as of December 31, 2014. The Corporation also performed a qualitative assessment of its specialty oncology reporting unit as of December 31, 2014 and did not find it necessary to perform the first step of the two-step impairment test based on that analysis.

There were no impairment triggering events during the three months ended March 31, 2015.

The Corporation’s finite-lived intangible assets are comprised primarily of trade names, customer relationship assets, limited distributor relationships, doctor and insurer relationships and non-compete agreements. Finite-lived intangible assets are amortized on a straight-line basis over the course of their lives ranging from 5 to 20 years. For impairment reviews, intangible assets are reviewed on a specific pharmacy basis or as a group of pharmacies depending on the intangible assets under review. The Corporation’s goodwill and intangible assets are further described in Note 3.

Restructuring and Impairment Charges

Restructuring and impairment charges in the condensed consolidated financial statements represent amounts expensed for purposes of realigning corporate and pharmacy locations.

Mandatorily Redeemable Interest

The Corporation acquired 37.5% of the membership interests of Onco while also obtaining control of the business. The subsidiary is consolidated in the Corporation's condensed consolidated financial statements and the mandatorily redeemable interest is classified as debt within other long-term liabilities in the condensed consolidated balance sheets.

Measurement Period Adjustments

For the three months ended March 31, 2015, the Corporation has adjusted certain amounts on the condensed consolidated balance sheet as of December 31, 2014 as a result of measurement period adjustments related to acquisitions completed in the prior year (See Note 2).

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 25.2	$ 33.3
Accounts receivable, net	199.5	195.8
Inventory	122.6	135.7
Deferred tax assets, net	39.9	42.2
Income tax receivable	0.5	0
Prepaids and other assets	62.0	90.4
Total current assets	449.7	497.4
Equipment and leasehold improvements	198.6	196.4
Accumulated depreciation	(128.5)	(125.0)
Total Equipment and leasehold improvements	70.1	71.4
Goodwill	336.3	318.0
Intangible assets, net	179.2	177.6
Other	4.1	4.1
Total assets	1,039.4	1,068.5
Current liabilities:
Accounts payable	81.6	96.0
Salaries, wages and other compensation	32.7	35.1
Current portion of long-term debt	8.9	6.4
Income taxes payable	0	2.3
Other accrued liabilities	31.6	36.4
Total current liabilities	154.8	176.2
Long-term debt	317.1	344.9
Other long-term liabilities	68.6	57.7
Deferred tax liabilities	11.8	11.6
Commitments and contingencies (See Note 5)
Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized and no shares issued, December 31, 2014 and March 31, 2015	0	0
Common stock, $0.01 par value per share; 175,000,000 shares authorized; 32,725,786 and 33,137,201 shares issued as of December 31, 2014 and March 31, 2015, respectively	0.3	0.3
Capital in excess of par value	397.9	394.1
Retained earnings	126.6	117.0
Treasury stock at cost, 2,617,305 and 2,760,633 shares at December 31, 2014 and March, 31, 2015, respectively	(37.7)	(33.3)
Total stockholders' equity	487.1	478.1
Total liabilities and stockholders' equity	$ 1,039.4	$ 1,068.5

XML

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2015

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Nature of Business

Nature of Business

PharMerica Corporation together with its subsidiaries (the "Corporation"), is a leading provider of pharmacy services.  The Corporation serves the long-term care, hospital pharmacy management services, specialty home infusion and specialty oncology pharmacy markets.  The Corporation operates 97 institutional pharmacies, 15 specialty home infusion pharmacies, and 5 specialty oncology pharmacies in 45 states.  The Corporation’s customers are institutional healthcare providers, such as skilled nursing facilities, assisted living facilities, hospitals, individuals receiving in-home care and patients with cancer.

Operating Segments

Operating Segments

The Corporation consists of three operating segments: institutional pharmacy, specialty infusion services and specialty oncology pharmacy. Management believes the nature of the products and services are similar, the payers for the products and services are common among the segments and all segments operate in the healthcare regulatory environment. In addition, the segments are economically similar. Accordingly, management has aggregated the three operating segments into one reporting segment.

Principles of Consolidation

Principles of Consolidation

All intercompany transactions have been eliminated.

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and disclosures required by generally accepted accounting principles in the United States ("U.S. GAAP") for complete financial statements. Accordingly, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Corporation and related footnotes for the year ended December 31, 2014, included in the Corporation's Annual Report on Form 10-K. The balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements adjusted for acquisition related measurement period adjustments.

The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. It is the opinion of management that all necessary adjustments for a fair presentation of the condensed consolidated financial statements for the interim periods have been made and are of a normal recurring nature.

Use of Estimates

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates are involved in collectability of accounts receivable, revenue recognition, inventory valuation, supplier rebates, the valuation of long-lived assets and goodwill, and accounting for income taxes. Actual amounts may differ from these estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

  Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the Corporation follows a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which require the Corporation to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The financial liabilities recorded at fair value at December 31, 2014 and March 31, 2015 are set forth in the tables below (dollars in millions):

As of December 31, 2014	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.0	)	$	-	$	(8.0	)	$	-			A
Contingent Consideration		(1.1	)		-		-			(1.1	)		C
Mandatorily Redeemable Interest		(8.3	)		-		-			(8.3	)		C

As of March 31, 2015	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.1	)	$	-	$	(8.1	)	$	-			A
Contingent Considerations		(9.0	)		-		-			(9.0	)		C
Mandatorily Redeemable Interest		(7.4	)		-		-			(7.4	)		C

The deferred compensation plan liability represents an unfunded obligation associated with the deferred compensation plan offered to eligible employees and members of the Board of Directors of the Corporation. The fair value of the liability associated with the deferred compensation plan is derived using pricing and other relevant information for investments in phantom shares of certain available investment options, primarily mutual funds. This liability is classified as other long-term liabilities in the accompanying condensed consolidated balance sheets.

The contingent consideration represents future earn-outs associated with the Corporation's acquisition of an institutional pharmacy business purchased in 2013 and two infusion businesses purchased in 2014 and 2015. The fair values of the liabilities associated with the contingent consideration were derived using the income approach with unobservable inputs, which included future gross profit forecasts and present value assumptions, and there was little or no market data. The Corporation assessed the fair values of the liabilities as of the acquisition date and will assess quarterly thereafter until settlement. These liabilities are classified as current and other long-term liabilities in the accompanying condensed consolidated balance sheets.

The mandatorily redeemable interest represents a future obligation associated with the Corporation's acquisition of a specialty pharmacy business, OncoMed Specialty, LLC (“Onco”), purchased on December 6, 2013. The mandatorily redeemable interest is classified as a long-term liability and measured at fair value. The fair value was derived using the income approach with unobservable inputs, which included a future gross profit forecast and present value assumptions, and there was little or no market data.  The Corporation assessed and adjusted the mandatorily redeemable interest’s fair value of the liability at March 31, 2015.

For the year ended December 31, 2014 and the quarter ended March 31, 2015, there were no transfers between the valuation hierarchy Levels 1, 2, and 3.  The following table summarizes the change in fair value of the Corporation’s contingent consideration and mandatorily redeemable interest identified as Level 3 for the year ended December 31, 2014 and the three months ended March 31, 2015 (in millions):

	Contingent Consideration			Mandatorily Redeemable Interest
Beginning balance, December 31, 2013	$	0.7		$	8.2
Additions from business acquisitions		1.1			-
Change in fair value		(0.7	)		0.1
Balance, December 31, 2014		1.1			8.3
Additions from business acquisitions		7.9			-
Change in fair value		-			(0.9	)
Balance, March 31, 2015	$	9.0		$	7.4

The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, inventory and accounts payable approximate fair value because of the short-term maturity of these instruments.  The carrying amount of the Corporation’s debt approximates fair value due to the interest being set at variable market interest rates (Level 2).

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from Prescription Drug Plans ("PDPs") under Medicare Part D, institutional healthcare providers, the respective state Medicaid programs, third party insurance companies, and private payers. The Corporation's ability to collect outstanding receivables is critical to its results of operations and cash flows. To provide for accounts receivable that could become uncollectible in the future, the Corporation establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to the extent it is probable that a portion or all of a particular account will not be collected.

The Corporation has an established a process to determine the adequacy of the allowance for doubtful accounts, which relies on analytical tools, specific identification, and benchmarks to arrive at a reasonable allowance. No single statistic or measurement determines the adequacy of the allowance for doubtful accounts. The Corporation monitors and reviews trends by payer classification along with the composition of the Corporation's aging accounts receivable. This review is focused primarily on trends in private and other payers, PDP's, dual eligible co-payments, historic payment patterns of long-term care institutions, and monitoring respective credit risks. In addition, the Corporation analyzes other factors such as revenue days in accounts receivables, denial trends by payer types, payment patterns by payer types, subsequent cash collections, and current events that may impact payment patterns of the Corporation's long-term care institution customers. Accounts receivable are written off after collection efforts have been completed in accordance with the Corporation's policies.

The Corporation's accounts receivable and summarized aging categories are as follows (dollars in millions):

	December 31, 2014			March 31, 2015
Institutional healthcare providers	$	153.6		$	157.0
Medicare Part D		30.5			29.8
Private payer and other		30.6			30.3
Insured		24.5			25.9
Medicaid		11.7			12.7
Medicare		3.0			3.5
Allowance for doubtful accounts		(58.1	)		(59.7	)
	$	195.8		$	199.5
0 to 60 days		58.8	%		61.4	%
61 to 120 days		17.2	%		15.8	%
Over 120 days		24.0	%		22.8	%
		100.0	%		100.0	%

The following is a summary of activity in the Corporation's allowance for doubtful accounts (dollars in millions):

	Beginning Balance		Charges to Costs and Expenses		Write-offs			Ending Balance
Allowance for doubtful accounts:
Year ended December 31, 2014	$	56.7	$	23.2	$	(21.8	)	$	58.1
Three months ended March 31, 2015	$	58.1	$	5.0	$	(3.4	)	$	59.7

Goodwill and Other Intangibles

Goodwill and Other Intangibles

The Corporation’s policy is to perform a quantitative assessment of its institutional pharmacy and specialty infusion reporting units to determine whether it is more likely than not (defined as having a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.  The Corporation performed a quantitative assessment as of December 31, 2014.  The institutional pharmacy and specialty infusion reporting unit’s fair values as calculated for the analysis were approximately 48.2% and 13.1%, respectively, greater than book value as of December 31, 2014. The Corporation also performed a qualitative assessment of its specialty oncology reporting unit as of December 31, 2014 and did not find it necessary to perform the first step of the two-step impairment test based on that analysis.

There were no impairment triggering events during the three months ended March 31, 2015.

The Corporation’s finite-lived intangible assets are comprised primarily of trade names, customer relationship assets, limited distributor relationships, doctor and insurer relationships and non-compete agreements. Finite-lived intangible assets are amortized on a straight-line basis over the course of their lives ranging from 5 to 20 years. For impairment reviews, intangible assets are reviewed on a specific pharmacy basis or as a group of pharmacies depending on the intangible assets under review. The Corporation’s goodwill and intangible assets are further described in Note 3.

Restructuring and Impairment Charges

Restructuring and Impairment Charges

Restructuring and impairment charges in the condensed consolidated financial statements represent amounts expensed for purposes of realigning corporate and pharmacy locations.

Mandatorily Redeemable Interest

Mandatorily Redeemable Interest

The Corporation acquired 37.5% of the membership interests of Onco while also obtaining control of the business. The subsidiary is consolidated in the Corporation's condensed consolidated financial statements and the mandatorily redeemable interest is classified as debt within other long-term liabilities in the condensed consolidated balance sheets.

Measurement Period Adjustments

Measurement Period Adjustments

For the three months ended March 31, 2015, the Corporation has adjusted certain amounts on the condensed consolidated balance sheet as of December 31, 2014 as a result of measurement period adjustments related to acquisitions completed in the prior year (See Note 2).

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 01, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	PharMerica CORP
Entity Central Index Key	0001388195
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		30,387,961
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015

XML

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2015

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Schedule of Financial Liabilities and Non-Financial Assets Recorded at Fair Value

The financial liabilities recorded at fair value at December 31, 2014 and March 31, 2015 are set forth in the tables below (dollars in millions):

As of December 31, 2014	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.0	)	$	-	$	(8.0	)	$	-			A
Contingent Consideration		(1.1	)		-		-			(1.1	)		C
Mandatorily Redeemable Interest		(8.3	)		-		-			(8.3	)		C

As of March 31, 2015	Asset (Liability)			Level 1		Level 2			Level 3			Valuation Technique
Financial Liability
Deferred Compensation Plan	$	(8.1	)	$	-	$	(8.1	)	$	-			A
Contingent Considerations		(9.0	)		-		-			(9.0	)		C
Mandatorily Redeemable Interest		(7.4	)		-		-			(7.4	)		C

Schedule of Contingent Consideration and Mandatorily Redeemable Interest Identified as Level 3

For the year ended December 31, 2014 and the quarter ended March 31, 2015, there were no transfers between the valuation hierarchy Levels 1, 2, and 3.  The following table summarizes the change in fair value of the Corporation’s contingent consideration and mandatorily redeemable interest identified as Level 3 for the year ended December 31, 2014 and the three months ended March 31, 2015 (in millions):

	Contingent Consideration			Mandatorily Redeemable Interest
Beginning balance, December 31, 2013	$	0.7		$	8.2
Additions from business acquisitions		1.1			-
Change in fair value		(0.7	)		0.1
Balance, December 31, 2014		1.1			8.3
Additions from business acquisitions		7.9			-
Change in fair value		-			(0.9	)
Balance, March 31, 2015	$	9.0		$	7.4

Schedule of Accounts Receivable and Summarized Aging Categories

The Corporation's accounts receivable and summarized aging categories are as follows (dollars in millions):

	December 31, 2014			March 31, 2015
Institutional healthcare providers	$	153.6		$	157.0
Medicare Part D		30.5			29.8
Private payer and other		30.6			30.3
Insured		24.5			25.9
Medicaid		11.7			12.7
Medicare		3.0			3.5
Allowance for doubtful accounts		(58.1	)		(59.7	)
	$	195.8		$	199.5
0 to 60 days		58.8	%		61.4	%
61 to 120 days		17.2	%		15.8	%
Over 120 days		24.0	%		22.8	%
		100.0	%		100.0	%

Allowance for Doubtful Accounts

The following is a summary of activity in the Corporation's allowance for doubtful accounts (dollars in millions):

	Beginning Balance		Charges to Costs and Expenses		Write-offs			Ending Balance
Allowance for doubtful accounts:
Year ended December 31, 2014	$	56.7	$	23.2	$	(21.8	)	$	58.1
Three months ended March 31, 2015	$	58.1	$	5.0	$	(3.4	)	$	59.7

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	175,000,000	175,000,000
Common stock, shares issued (in shares)	33,137,201	32,725,786
Treasury stock at cost, shares (in shares)	2,760,633	2,617,305

XML

MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES

3 Months Ended

Mar. 31, 2015

MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES [Abstract]

MERGER, ACQUISITION, INTEGRATION COST AND OTHER CHARGES

NOTE 6—MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES

Merger, acquisition, integration costs and other charges combined were $5.0 million and $3.8 million for the three months ended March 31, 2014 and 2015, respectively.

Merger, integration costs and other charges for the three months ended March 31, 2014 and 2015 were $0.1 million. Acquisition related costs for the three months ended March 31, 2014 and 2015 were $4.9 million and $3.7 million, respectively.

XML

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2015

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 5—COMMITMENTS AND CONTINGENCIES

Legal Action and Regulatory

  The Corporation maintains liabilities for certain of its outstanding investigations and litigation. In accordance with the provisions of U.S. GAAP for contingencies, the Corporation accrues for a liability when it is probable that such a liability has been incurred and the amount of the loss can be reasonably estimated. The Corporation is the subject of certain investigations and is a defendant in a number of cases, including those discussed below.

  On April 15, 2013, the U.S. Department of Justice, through the U.S. Attorney's Office for the Eastern District of Virginia, filed a complaint in the United States District Court for the Eastern District of Virginia against the Corporation's two pharmacies in Virginia Beach, Virginia and Fredericksburg, Virginia alleging that these two pharmacies failed to comply with the Controlled Substances Act ("CSA") by dispensing Schedule II drugs without a proper prescription. The parties reached a settlement in December 2013 and filed a stipulation for dismissal of the case in January 2014. Under the settlement, the Corporation paid a $1.0 million fine and will enter into a Memorandum of Agreement ("MOA") with the DEA through which it will agree to certain CSA compliance obligations. The precise terms of the MOA are currently being negotiated between the parties. In connection with the settlement, the Corporation did not admit liability for the alleged CSA violations.

  On June 10, 2013, the United States District Court for the Eastern District of Wisconsin unsealed two consolidated qui tam complaints filed in 2009 and 2011 by relators who are former employees of the Corporation and a company acquired by the Corporation. The United States, acting through the U.S. Attorney's Office in Wisconsin, intervened in part and declined to intervene in part and filed its complaint in intervention on August 9, 2013, when the matter was formally brought to the Corporation's attention. The Government's complaint seeks statutory fines for the Corporation's alleged dispensing of Schedule II controlled substances without a valid prescription in violation of the CSA. It also seeks monetary damages and equitable relief alleging that this conduct caused false claims to be submitted in violation of the Federal False Claims Act (the "FCA"). The Corporation moved to dismiss the Government's complaint for failure to state a claim upon which relief may be granted but the Court denied the Corporation's motion on September 3, 2014.  With regard to the portion of the relators' complaint on which the Government did not intervene, on November 15, 2013, the relators dismissed their claims against the Corporation alleging that the Corporation submitted false claims to Medicare Part D and to Medicaid for drugs in connection with which the Corporation allegedly received kickbacks from the manufacturer in the form of market share rebates and other remuneration, all in violation of the Federal Anti Kickback Statute. The United States stipulated to the dismissal of those and other non-intervened counts and the Court approved the dismissal without prejudice of those counts on November 20, 2013.  The relators pursued their claim under the retaliatory termination provisions of the FCA. On September 3, 2014, the Court denied the Corporation's motion to dismiss the relators' retaliatory termination claim.  The Corporation intends to vigorously defend itself in both matters.
 

On October 29, 2013, a complaint was filed in the United States District Court for the Southern District of Florida by Pines Nursing Homes (77), Inc. as a putative class action against the Corporation. The complaint alleged that the Corporation sent unsolicited advertisements promoting the Corporation's goods or services by facsimile to individuals or entities, and that such communications did not include an opt-out clause, all in violation of the federal Telephone Consumer Protection Act ("TCPA").  The Complaint did not specify the amount of damages sought, but the TCPA provides a statutory remedy of $500 per facsimile communication sent in violation of the statute, which may be trebled in the event of a willful violation.   On August 18, 2014, the Corporation entered into a Settlement Agreement with the putative class and class counsel resolving all claims raised in the complaint.  The parties moved on September 8, 2014 for, among other things, certification of the putative class for the purposes of effectuating the settlement and preliminary approval of the parties' settlement, and have requested a hearing on that motion.  No hearing has yet been set on that motion and the Corporation awaits a decision on the motion for preliminary approval of the settlement.

On November 20, 2013 a complaint filed by a relator, Robert Gadbois, on behalf of the U.S. Government and various state governments, was unsealed by the United States District for the District of Rhode Island against the Corporation alleging that the Corporation dispensed controlled and non-controlled substances in violation of the CSA and that, as a result, the dispenses were not eligible for payment and that the claims the Corporation submitted to the Government were false within the meaning of the FCA. The U.S. Government and the various state governments declined to intervene in this case. On October 3, 2014, the Corporation's motion to

dismiss was granted by the court.  The relator has appealed the court’s decision.  The Corporation intends to continue to defend the case vigorously.

On March 4, 2011, a relator, Mark Silver, on behalf of the U.S. Government and various state governments, filed a complaint in the United States District Court for the District of New Jersey against the Corporation alleging that the Corporation violated the FCA and Federal Anti-Kickback Statute through its agreements to provide prescription drugs to nursing homes under certain Medicare and Medicaid programs. On February 19, 2013, the U.S. Government declined to intervene in the case. The complaint has been amended several times, most recently on November 12, 2013, and thereafter served upon the Corporation. On December 6, 2013, the Corporation moved to dismiss the amended complaint for failure to state a claim upon which relief may be granted and on September 29, 2014, the court declined to dismiss the case, but limited the relevant time period for which claims could be brought against the Corporation. The Corporation intends to vigorously defend itself against these allegations.

On January 31, 2014, a relator, Frank Kurnik, on behalf of the U.S. Government and various state governments served its complaint filed in the United States District for the District of South Carolina alleging that the Corporation solicited and received remuneration in violation of the Federal Anti-Kickback Statute from drug manufacturer Amgen in exchange for preferring and promoting Amgen's drug Aranesp over a competing drug called Procrit. The U.S. Government and the various states declined to intervene in the case.  On April 7, 2014, the Corporation moved to dismiss the complaint and on July 23, 2014, the motion was denied.  On January 13, 2015, the Corporation again moved to dismiss the complaint and on March 23, 2015, the second motion was denied.  On April 2, 2015, the Corporation moved the court to reconsider its denial of the second motion to dismiss.  That motion is pending.  The Corporation intends to vigorously defend itself against these allegations.

The U.S. Department of Justice, through the U.S. Attorney's Office for the Western District of Virginia, is investigating whether the Corporation's activities in connection with the agreements it had with the manufacturer of the pharmaceutical Depakote violated the Anti-Kickback Statute and, hence, that certain claims for Depakote that the Corporation submitted to federal health care programs violated the Federal False Claims Act. The Corporation is cooperating with this investigation and believes it has complied with all applicable laws and regulations. On May 29, 2014, the United States District Court for the Western District of Virginia entered an order (the “May 29 Order”) unsealing two previously partially sealed qui tam complaints, entitled United States, et al., ex rel. Spetter v. Abbott Laboratories. Inc., Omnicare, Inc., and PharMerica Corp., No. 1:07-cv-00006 and United States, et al., ex rel. McCoyd v. Abbott Laboratories, Omnicare, Inc., PharMerica Corp., and Miles White, No. 1:07-cv-0008.  The May 29 Order also unsealed the government’s notice of intervention and granted the Government 120 days to serve its Complaint in Intervention.  That deadline has since been extended to March 23, 2015 as to PharMerica only.  As was indicated during the investigation, the complaints allege that certain agreements that the Corporation had with the manufacturer of Depakote violated the Anti-Kickback Statute and, hence, those certain claims for Depakote that the Corporation submitted to federal health care programs violated the Federal False Claims Act and the analogous statutes of 27 states.  The Corporation intends to vigorously defend itself.

On September 10, 2014, the Corporation filed a Complaint in Jefferson Circuit Court in Louisville, Kentucky against AmerisourceBergen Drug Corporation (“ABDC”) for failure of ABDC to comply with certain pricing and rebate provisions of the Amended Prime Vendor Agreement ("Amended PVA").  The Corporation subsequently filed a First Amended Verified Complaint on September 26, 2014 asserting additional breaches of the Amended PVA.

As a result of ABDC’s failure to comply with certain pricing and rebate provisions, the Corporation had recorded a receivable of $40.8 million related to these disputes at December 31, 2014.  Separately, as of December 31, 2014, the Corporation had recorded $12.2 million for additional rebates owing from ABDC which at that time the Corporation believed were not in dispute and had previously been paid by ABDC in all the prior quarters.  All these receivables totaled $53.0 million and were included in prepaids and other assets in the accompanying condensed consolidated balance sheet as of December 31, 2014.  During the period of January 1, 2015 through March 31, 2015, an additional $18.5 million, net of payments received, of certain rebates and guarantees owed by ABDC under the Amended PVA were recognized which brought the total receivable to $71.5 million at March 31, 2015.

On March, 2, 2015, the Corporation notified ABDC of its intent to terminate the Amended PVA effective April 1, 2015.  The Corporation also announced that it had entered into a Prime Vendor Agreement with Cardinal Health (“Cardinal”) effective April 1, 2015.  On March 3, 2015, the Corporation received a letter from ABDC terminating the Amended PVA effective immediately based upon the Corporation’s alleged failure to pay certain disputed miscellaneous charges and the Corporation’s signing of the Cardinal PVA.  The Corporation believes ABDC did not have the right to immediately terminate the contract pursuant to the terms of the Amended PVA. On March 6 and March 13, 2015, the Corporation withheld from ABDC normal recurring payments for drug purchases of approximately $50.0 million.

The following table represents all receivables, whether previously disputed or not, due and owing from ABDC at March 31, 2015 and the related amounts allegedly payable to ABDC, which have been offset resulting in a net receivable at March 31, 2015 of $21.5 million.  This net receivable is included in prepaids and other assets in the accompanying condensed consolidated balance sheet as of March 31, 2015. 

Presented in the condensed consolidated balance sheet, the following amounts are offset as of March 31, 2015 (in millions):

Description	Gross Amount of Recognized Asset		Gross Liability Offset in the Condensed Consolidated Balance Sheet			Net Amount of Asset Presented in the Condensed Consolidated Balance Sheet
Rebates & Other Receivables	$	71.5	$	(50.0	)	$	21.5
Total	$	71.5	$	(50.0	)	$	21.5

The Corporation will have claims for additional damages resulting from ABDC’s breaches of the Amended PVA. The Corporation intends to vigorously pursue its claims.  At this time, the Corporation is unable to determine the ultimate impact of these litigation proceedings on its consolidated financial condition, results of operations, or liquidity.  The litigation with ABDC could continue for an extended period of time, likely longer than 12 months.   The Corporation cannot provide any assurances about the outcome of the litigation.

In addition, the Corporation is involved in certain legal actions and regulatory investigations arising in the ordinary course of business.

At March 31, 2015, the Corporation had accrued approximately $45.5 million related to the legal actions and investigations.

California Medicaid

On August 14, 2013, the California Department of Health Care Service ("DHCS") announced its intent to implement a ten (10) percent reimbursement reduction for numerous healthcare providers, including long term care pharmacies.

The DHCS implemented the reduction prospectively beginning in the first quarter of 2014. In addition, the DHCS is expected to begin recouping a percentage of provider payments representing a ten percent (10%) reduction on certain drug reimbursements retroactive to June 1, 2011.  The Corporation has previously recorded a $3.3 million liability and reduction of revenue for the expected amount of recoveries from June 1, 2011 through December 31, 2013.

FUL and AMP Changes

The reimbursement rates for pharmacy services under Medicaid are determined on a state-by-state basis subject to review by Centers for Medicare and Medicaid Services (“CMS”) and applicable federal law. Although Medicaid programs vary from state to state, they generally provide for the payment of certain pharmacy services, up to the established limits, at rates determined in accordance with each state's regulations. Federal regulations and the regulations of certain states establish "upper limits" for reimbursement of certain prescription drugs under Medicaid (these upper limits being the "FUL").

The 2010 Health Care Reform Legislation amended the Deficit Reduction Act of 2005 ("DRA") to change the definition of the FUL by requiring the calculation of the FUL as no less than 175% of the weighted average, based on utilization, of the most recently reported monthly Average Manufacturer's Price ("AMP") for pharmaceutically and therapeutically equivalent multi-source drugs available through retail community pharmacies nationally. In addition, the definition of AMP changed to reflect net sales only to drug wholesalers that distribute to retail community pharmacies and to retail community pharmacies that directly purchase from drug manufacturers. Further, the 2010 Health Care Reform Legislation continues the current statutory exclusion of prompt pay discounts offered to wholesalers and adds three (3) other exclusions to the AMP definition: i) bona fide services fees; ii) reimbursement for unsalable returned goods (recalled, expired, damaged, etc.); and iii) payments from and rebates/discounts to certain entities not conducting business as a wholesaler or retail community pharmacy. In addition to reporting monthly, the manufacturers are required to report the total number of units used to calculate each monthly AMP.  CMS will use this information when it establishes FULs as a result of the new volume-weighted requirements pursuant to the 2010 Health Care Reform Legislation.

In September 2011, CMS issued the first draft FUL reimbursement files for multiple source drugs, including the draft methodology used to calculate the FULs in accordance with the Health Care Legislation. CMS continues to release monthly data and a three-month rolling average and is expected to do so going forward. CMS has not posted monthly AMPs for individual drugs, but only posted the weighted average of monthly AMPs in a FUL group and the calculation methodology.

CMS has stated that AMP-based FULs will be published at or about the same time that CMS publishes the Medicaid Covered Outpatient Drug final rule, which, according to the latest unified agenda, is expected in June 2015. CMS will continue to post draft monthly FULs. The Corporation will continue to analyze the draft monthly FULs, including the relationship of those FULs to the National Average Drug Acquisition pricing.

Medicare Part D Changes

In a May 23, 2014 Final Rule entitled "Medicare Program: Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs," CMS finalized a requirement that effective June 1, 2015 and enforceable December 1, 2015, all prescribers of Part D covered drugs must be enrolled as Medicare providers (or be granted a valid opt-out affidavit on file with a Part A or Part B Medicare Administrative Contractor) in order for a claim to be covered under Medicare Part D.  CMS also finalized several specific requirements to reduce prescriber fraud, waste, and abuse. The Corporation is unable to evaluate the full impact of these changes on its business at this time.

In a February 12, 2015 Final Rule entitled "Medicare Program: Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs", CMS finalized a regulation, effective January 1, 2016, prohibiting financial arrangements that penalize more efficient long-term care dispensing techniques (e.g., dispensing a three day supply over a 14 day supply) through pro-rated dispensing fees based on a day's supply or quantity dispensed.  CMS also finalized a requirement that, effective January 1, 2016, any differences in payment methodologies among long-term care pharmacies incentivize more efficient dispensing techniques.  The Corporation is unable to evaluate the full impact of these changes on its business at this time.

Acquisitions

The Corporation has historically acquired the stock or assets of businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, medical and general professional liabilities, workers’ compensation liabilities, previous tax liabilities, and unacceptable business practices. Although the Corporation institutes policies designed to conform practices to its standards following completion of acquisitions, there can be no assurance the Corporation will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. While the Corporation generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines. In the ordinary course of business, the Corporation enters into contracts containing standard indemnification provisions and indemnifications specific to a transaction such as business acquisitions and disposals of an operating facility. These indemnifications may cover claims against employment-related matters, governmental regulations, environmental issues, tax matters, as well as customer, third party payer, supplier, and contractual relationships. Obligations under these indemnities generally would be initiated by a breach of the terms of the contract or by a third party claim or event.

Employment Agreements

The Corporation has entered into employment agreements with certain of its executive officers. During the employment period, certain executive officers will be eligible to (i) participate in any short-term and long-term incentive programs established or maintained by the Corporation, (ii) participate in all incentive, savings and retirement plans and programs of the Corporation, (iii) participate, along with their dependents, in all welfare benefit plans and programs provided by the Corporation, and (iv) receive four weeks of paid vacation per calendar year.

The type of compensation due to each of the executive officers in the event of the termination of their employment period varies depending on the nature of the termination. The employment agreements generally do not entitle the executive officers to any additional payment or benefits solely upon the occurrence of a change in control but do provide additional payments or benefits or both upon a termination of employment in connection with a change in control. Additionally, the vesting of certain equity based grants made to certain executive officers accelerates upon the occurrence of a change in control.

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RESTRUCTURING COSTS AND OTHER CHARGES (Tables)

3 Months Ended

Mar. 31, 2015

RESTRUCTURING COSTS AND OTHER CHARGES [Abstract]

Restructuring Liability

The following table presents the components of the Corporation's restructuring liability (dollars in millions):

	Balance at December 31, 2014		Accrual		Utilized Amounts			Balance At March 31, 2015
Employee Severance and related costs	$	0.3	$	0.1	$	(0.2	)	$	0.2
Facility costs		1.1		-		(0.2	)		0.9
	$	1.4	$	0.1	$	(0.4	)	$	1.1

XML

ACQUISITIONS (Tables)

3 Months Ended

Mar. 31, 2015

ACQUISITIONS [Abstract]

Schedule of Purchase Price Allocation

The amounts recognized as of the acquisition dates for the 2014 Acquisitions, on a combined basis, for assets acquired and liabilities assumed are as follows (dollars in millions):

	Amounts Recognized as of Acquisition Date		Measurement Period Adjustments			As Adjusted
Accounts receivable	$	24.7	$	0.1		$	24.8
Inventory		8.8		-			8.8
Deferred tax assets - current		1.8		-			1.8
Other current assets		3.1		-			3.1
Equipment and leasehold improvements		4.8		-			4.8
Deferred tax assets		8.2		-			8.2
Identifiable intangibles		61.4		-			61.4
Goodwill		34.9		0.3			35.2
Total Assets		147.7		0.4			148.1
Current liabilities*		26.4		(0.1	)		26.3
Other long-term liabilities*		6.9		-			6.9
Total Liabilities		33.3		(0.1	)		33.2
Total purchase price, less cash acquired	$	114.4	$	0.5		$	114.9

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INCOME TAXES

3 Months Ended

Mar. 31, 2015

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 9—INCOME TAXES

The provision for income taxes is based upon the Corporation's estimate of annual taxable income or loss for each respective accounting period. The following table summarizes our provision for income taxes for the periods presented (dollars in millions):

	Three Months Ended March 31,
	2014			2015
Provision for income taxes	$	3.0			$	5.8
Total provision as a percentage of pre-tax income		38.4	%			37.9	%

The decrease in our provision for income taxes as a percentage of pre-tax income for the three months ended March 31, 2015 compared to the comparable 2014 period was due primarily to a decrease in state and local taxes.  The effective tax rates in 2015 and 2014 are higher than the federal statutory rate largely as a result of the combined impact of state and local taxes and various non-deductible expenses.

The Corporation derives a current federal and state income tax benefit from the impact of deductions associated with the amortization of tax deductible goodwill acquired through business combinations. The tax basis of the Corporation's tax deductible goodwill was approximately $145.3 million and $141.6 million at December 31, 2014 and March 31, 2015, respectively.

The Corporation recognizes an asset or liability for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets are recovered or liabilities are settled. The Corporation also recognizes as deferred tax assets the future tax benefits from net operating loss carryforwards. As of March 31, 2015, the Corporation has $5.2 million ($1.8 million tax benefit) of federal net operating loss carryforwards available related to a 2013 acquisition and $31.4 million ($11.0 million deferred tax benefit) related to a 2014 acquisition. These net operating losses are subject to limitations under Internal Revenue Code Section 382; however, the Corporation expects that it will be able to use the recorded amount which takes into account the limitations of the carryforwards.  Accordingly, the Corporation has not recorded any valuation allowance for the associated deferred tax asset. The deferred tax asset for state net operating loss carryforwards is $3.0 million, net of valuation allowances. The net operating losses have carryforward periods ranging from 1 to 20 years depending on the taxing jurisdiction.

A valuation allowance is provided for the Corporation's deferred tax assets if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The Corporation recognized net deferred tax assets totaling $30.6 million at December 31, 2014 and $28.1 million at March 31, 2015, net of state valuation allowances of $4.1 million.

As of December 31, 2014 and March 31, 2015, the Corporation had no reserves recorded for unrecognized tax benefits for U.S. federal and state tax jurisdictions.

The federal statute of limitations remains open for tax years 2012 through 2014.  The IRS completed its audit of the Corporation’s consolidated U.S. income tax return for the 2011 tax year in February 2014.

State tax jurisdictions generally have statutes of limitation ranging from three to five years. The Corporation is generally no longer subject to state and local income tax examinations by tax authorities for years before 2009. The state income tax impact of federal income tax changes remains subject to examination by various states for a period of up to one year after formal notification of IRS settlement to the states.

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RESTRUCTURING COSTS AND OTHER CHARGES

3 Months Ended

Mar. 31, 2015

RESTRUCTURING COSTS AND OTHER CHARGES [Abstract]

RESTRUCTURING COSTS AND OTHER CHARGES

NOTE 7—RESTRUCTURING COSTS AND OTHER CHARGES

In July 2013, the Corporation commenced the implementation of its restructuring plan as a result of the loss of two of the Corporation's significant customers, Kindred Healthcare ("Kindred") and Golden Living. The plan is a major initiative primarily designed to optimize operational efficiency while ensuring that the Corporation remains well-positioned to serve its clients and achieve sustainable, long-term growth.  The Corporation's restructuring plan includes steps to right size its cost structure by adjusting its workforce and facility plans to reflect anticipated business needs.

The Corporation recorded restructuring costs and other related charges of approximately of $1.9 million and $0.1 million during the three months ended March 31, 2014 and 2015, respectively. The restructuring charges primarily included severance pay, the buy-out of employment agreements, lease terminations, and other exit-related asset disposals, professional fees and facility exit costs.

The following table presents the components of the Corporation's restructuring liability (dollars in millions):

	Balance at December 31, 2014		Accrual		Utilized Amounts			Balance At March 31, 2015
Employee Severance and related costs	$	0.3	$	0.1	$	(0.2	)	$	0.2
Facility costs		1.1		-		(0.2	)		0.9
	$	1.4	$	0.1	$	(0.4	)	$	1.1

The liability at March 31, 2015 represents amounts not yet paid relating to actions taken in connection with the restructuring plan (primarily lease payments and severance costs).

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COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS

3 Months Ended

Mar. 31, 2015

COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS [Abstract]

COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS

NOTE 8—COMMON STOCK, PREFERRED STOCK, TREASURY STOCK, STOCK-BASED COMPENSATION AND OTHER BENEFITS

Treasury Stock Purchases

In August 2010, the Board of Directors authorized a share repurchase of up to $25.0 million of the Corporation's common stock, of which $10.5 million was used. On July 2, 2012 the Board of Directors authorized an increase to the remaining portion of the existing share repurchase program that allows the Corporation to again repurchase up to a maximum of $25.0 million of the Corporation's common stock. Approximately $19.7 million remained available under the program as of March 31, 2015. Share repurchases under this authorization may be made in the open market through unsolicited or solicited privately negotiated transactions, or in such other appropriate manner, and may be funded from available cash or the revolving credit facility. The amount and timing of the repurchases, if any, would be determined by the Corporation's management and would depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. Common stock acquired through the share repurchase program would be held as treasury shares and may be used for general corporate purposes, including reissuance in connection with acquisitions, employee stock option exercises or other employee stock plans. The share repurchase program does not have an expiration date and may be limited, terminated or extended at any time without prior notice. During the three months ended March 31, 2015, the Corporation repurchased no shares of common stock.

 The Corporation may redeem shares from employees upon the vesting of the Corporation's stock awards for minimum statutory tax withholding purposes and to cover option exercise costs. The Corporation redeemed 143,328 shares from the vesting of certain awards and exercise of certain stock options, for an aggregate price of approximately $4.4 million during the three months ended March 31, 2015. These shares have also been designated by the Corporation as treasury stock.

As of March 31, 2015, the Corporation had a total of 2,760,633 shares held as treasury stock.

Stock Option Activity

Stock options were not granted to officers and employees during 2014 or the three months ended March 31, 2015. The following table summarizes option activity for the periods presented:

	Number of Shares			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding shares at December 31, 2014		913,209		$	14.62	2.1 years	$	5.6
Exercised		(105,314	)		15.34
Canceled		(116,117	)		10.84
Expired		-			-
Outstanding shares at March 31, 2015		691,778		$	14.39	2.04 years	$	9.5
Exercisable shares at March 31, 2015		690,750		$	14.40	2.04 years	$	9.5

Nonvested Shares

The following table summarizes nonvested share activity for the periods presented:

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding shares at December 31, 2014		941,570		$	18.00
Granted - Restricted Stock Units		135,725			27.85
Granted - Performance Share Units		149,777			27.85
Forfeited		(2,163	)		19.84
Vested		(306,101	)		15.50
Outstanding shares at March 31, 2015		918,808		$	21.67

The weighted average remaining term and intrinsic value of non-vested shares as of March 31, 2015 was 2.9 years and $18.2 million, respectively.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 10—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (dollars in millions, except per share amounts):

	Three Months ended March 31,
	2014		2015
Numerator:
Numerator for basic and earnings per diluted share - net income	$	4.8	$	9.6
Denominator:
Denominator for basic earnings per share - weighted average shares		29,753,024		30,185,230
Effect of dilutive securities (stock options, restricted stock units and performance share units)		601,043		548,151
Denominator for earnings per diluted share - adjusted weighted average shares		30,354,067		30,733,381
Basic earnings per share	$	0.16	$	0.32
Earnings per diluted share	$	0.16	$	0.31
Unexercised employee stock options and unvested restricted shares excluded from the effect of dilutive securities above (a)		1,677		56

(a)These unexercised employee stock options, unvested restricted shares and performance shares that have not yet met performance conditions are not included in the computation of diluted earnings per share because to do so would be anti-dilutive for the periods presented.

Stock options and restricted shares and units granted by the Corporation are treated as potential common shares outstanding in computing earnings per diluted share. Performance share units are treated as potential common shares outstanding in computing earnings per diluted share only when the performance conditions are met.

Common shares repurchased by the Corporation reduce the number of basic shares used in the denominator for basic and diluted earnings per share.

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GOODWILL AND INTANGIBLES, Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
GOODWILL AND INTANGIBLES [Abstract]
Carrying amount of goodwill	$ 336.3		$ 318.0
Amortization expense	$ 6.6	$ 4.4

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CREDIT AGREEMENT (Tables)

3 Months Ended

Mar. 31, 2015

CREDIT AGREEMENT [Abstract]

Term Debt and Revolving Credit Facility

The table below summarizes the term total outstanding debt of the Corporation (dollars in millions):

	December 31, 2014		March 31, 2015
Term Debt - payable to lenders at LIBOR plus applicable margin (2.17% as of March 31, 2015), matures September 17, 2019	$	225.0	$	225.0
Revolving Credit Facility payable to lenders, interest at LIBOR plus applicable margin (2.14% of March 31, 2015), matures September 17, 2019		125.0		100.0
Capital lease obligations		1.3		1.0
Total debt		351.3		326.0
Less: Current portion of long-term debt		6.4		8.9
Total long-term debt	$	344.9	$	317.1

Indebtedness Maturities

The Corporation's indebtedness has the following maturities as of March 31, 2015 (dollars in millions):

Year Ending December 31,	Term Debt		Revolving Credit Facility		Capital Lease Obligations		Total Maturities
2015	$	5.6	$	-	$	0.5	$	6.1
2016		11.3		-		0.1		11.4
2017		11.3		-		0.1		11.4
2018		11.3		-		0.3		11.6
2019		185.5		100.0		-		285.5
	$	225.0	$	100.0	$	1.0	$	326.0

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (dollars in millions, except per share amounts):

	Three Months ended March 31,
	2014		2015
Numerator:
Numerator for basic and earnings per diluted share - net income	$	4.8	$	9.6
Denominator:
Denominator for basic earnings per share - weighted average shares		29,753,024		30,185,230
Effect of dilutive securities (stock options, restricted stock units and performance share units)		601,043		548,151
Denominator for earnings per diluted share - adjusted weighted average shares		30,354,067		30,733,381
Basic earnings per share	$	0.16	$	0.32
Earnings per diluted share	$	0.16	$	0.31
Unexercised employee stock options and unvested restricted shares excluded from the effect of dilutive securities above (a)		1,677		56

(a)These unexercised employee stock options, unvested restricted shares and performance shares that have not yet met performance conditions are not included in the computation of diluted earnings per share because to do so would be anti-dilutive for the periods presented.

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MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES, Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
MERGER, ACQUISITION, INTEGRATION COSTS AND OTHER CHARGES [Abstract]
Merger, acquisition, integration costs and other charges	$ 3.8	$ 5.0
Integration costs and other charges	0.1	0.1
Acquisition costs	$ 3.7	$ 4.9

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows provided by (used in) operating activities:
Net income (loss)	$ 9.6	$ 4.8
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	5.8	4.8
Amortization	6.6	4.4
Merger, acquisition, integration costs and other charges	0	2.5
Stock-based compensation and deferred compensation	2.0	2.1
Amortization of deferred financing fees	0.1	0.7
Deferred income taxes	2.3	4.0
Loss (gain) on disposition of equipment	0.1	(0.1)
Loss (gain) on acquisition/disposition	0	(0.3)
Other	0	0.1
Change in operating assets and liabilities:
Accounts receivable, net	(2.3)	13.1
Inventory	13.2	2.8
Prepaids and other assets	27.4	(2.1)
Accounts payable	(14.1)	(21.8)
Salaries, wages and other compensation	(2.4)	(4.7)
Other accrued liabilities	(2.2)	(1.9)
Change in income taxes payable (receivable)	0.1	(1.3)
Excess tax benefit from stock-based compensation	(1.9)	(2.7)
Net cash provided by (used in) operating activities	44.3	4.4
Cash flows provided by (used in) investing activities:
Purchase of equipment and leasehold improvements	(4.6)	(6.0)
Acquisitions, net of cash acquired	(20.5)	(10.7)
Cash proceeds from dispositions	0.1	0.4
Net cash used in investing activities	(25.0)	(16.3)
Cash flows provided by (used in) financing activities:
Repayments of long-term debt	0	(3.1)
Net activity of long-term revolving credit facility	(25.0)	2.8
Issuance of common stock	0.3	2.5
Treasury stock at cost	(4.4)	(4.5)
Excess tax benefit from stock-based compensation	1.9	2.7
Repayments of capital lease obligations	(0.2)	0
Net cash (used in) provided by financing activities	(27.4)	0.4
Change in cash and cash equivalents	(8.1)	(11.5)
Cash and cash equivalents at beginning of period	33.3
Cash and cash equivalents at end of period	25.2	12.7
Supplemental information:
Cash paid for interest	2.1	1.8
Cash paid for taxes	$ 4.7	$ 0.4

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CREDIT AGREEMENT

3 Months Ended

Mar. 31, 2015

CREDIT AGREEMENT [Abstract]

CREDIT AGREEMENT

NOTE 4—CREDIT AGREEMENT

On September 17, 2014, the Corporation entered into a credit agreement by and among the Corporation, the lenders named therein (the "Lenders"), Bank of America, N.A., as administrative agent, JP Morgan Chase Bank N.A., as syndication agent, and U.S. Bank, National Association, Citibank, N.A., MUFG Union Bank, N.A., BBVA Compass Bank and SunTrust Bank as co-documentation agents (the "Credit Agreement"). The Credit Agreement consists of a $225.0 million term loan facility and a $310.0 million revolving credit facility. The terms and conditions of the Credit Agreement are customary to facilities of this nature.

As of March 31, 2015, $225.0 million was outstanding under the term loan facility and $100.0 million was outstanding under the revolving credit facility. Indebtedness under the Credit Agreement matures on September 17, 2019, at which time the commitments of the Lenders to make revolving loans also expire.

The table below summarizes the term total outstanding debt of the Corporation (dollars in millions):

	December 31, 2014		March 31, 2015
Term Debt - payable to lenders at LIBOR plus applicable margin (2.17% as of March 31, 2015), matures September 17, 2019	$	225.0	$	225.0
Revolving Credit Facility payable to lenders, interest at LIBOR plus applicable margin (2.14% of March 31, 2015), matures September 17, 2019		125.0		100.0
Capital lease obligations		1.3		1.0
Total debt		351.3		326.0
Less: Current portion of long-term debt		6.4		8.9
Total long-term debt	$	344.9	$	317.1

 The Corporation's indebtedness has the following maturities as of March 31, 2015 (dollars in millions):

Year Ending December 31,	Term Debt		Revolving Credit Facility		Capital Lease Obligations		Total Maturities
2015	$	5.6	$	-	$	0.5	$	6.1
2016		11.3		-		0.1		11.4
2017		11.3		-		0.1		11.4
2018		11.3		-		0.3		11.6
2019		185.5		100.0		-		285.5
	$	225.0	$	100.0	$	1.0	$	326.0

The Credit Agreement provides for the issuance of letters of credit which, when issued, reduce availability under the revolving credit facility. The aggregate amount of letters of credit outstanding as of March 31, 2015 was $2.5 million. After giving effect to the letters of credit, total availability under the revolving credit facility was $207.5 million as of March 31, 2015.

The Corporation was compliant with all debt covenant requirements at March 31, 2015.

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 Segment Pharmacy Acquisition Hospital	Dec. 31, 2014
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Number of operating institutional pharmacies	97
Number of specialty infusion pharmacies	15
Number of specialty oncology pharmacies	5
Number of states in which there are institutional pharmacies	45
Number of pharmacy management services hospitals	89
Number of operating segments	3
Infusion businesses purchased in 2014 and 2015	2
Impairment triggers of goodwill and other intangible assets	$ 0
OncoMed Speciality, LLC [Member]
Business Acquisition [Line Items]
Percentage of ownership acquired (in hundredths)		37.50%
Minimum [Member]
Segment Reporting Information [Line Items]
Finite-lived intangible assets useful lives	5 years
Maximum [Member]
Segment Reporting Information [Line Items]
Finite-lived intangible assets useful lives	20 years
Institutional Pharmacy [Member]
Segment Reporting Information [Line Items]
Percentage by which discounted cash flows were greater than current book value (in hundredths)		48.20%
Specialty Infusion [Member]
Segment Reporting Information [Line Items]
Percentage by which discounted cash flows were greater than current book value (in hundredths)		13.10%

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CREDIT AGREEMENT, Schedule of Term Debt and Revolving Credit Facility (Parenthetical) (Details)	0 Months Ended	3 Months Ended
	Sep. 17, 2014	Mar. 31, 2015
Term Debt [Member]
Line of Credit Facility [Line Items]
Debt instrument interest rate (in hundredths)		2.17%
Debt instrument maturity date	Sep. 17, 2019	Sep. 17, 2019
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Debt instrument interest rate (in hundredths)		2.14%
Debt instrument maturity date		Sep. 17, 2019

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GOODWILL AND INTANGIBLES (Tables)

3 Months Ended

Mar. 31, 2015

GOODWILL AND INTANGIBLES [Abstract]

Finite Lived Intangible Assets

The following table presents the components of the Corporation's finite lived intangible assets (dollars in millions):

Finite Lived Intangible Assets	Balance at December 31, 2014			Additions			Balance at March 31, 2015
Customer relationships	$	177.5		$	7.0		$	184.5
Trade name		62.2			0.6			62.8
Non-compete agreements		19.9			0.6			20.5
Sub Total		259.6			8.2			267.8
Accumulated amortization		(82.0	)		(6.6	)		(88.6	)
Net intangible assets	$	177.6		$	1.6		$	179.2