DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2012

DISCONTINUED OPERATIONS [Abstract]

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

DISCONTINUED OPERATIONS

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

On May 4, 2012, pursuant to the terms of the Asset Purchase Agreement, the Company received approximately $158.8 million at closing, including the value of inventories on hand attributable to the operations subject to the Pharmacy Services Asset Sale. Based on events related directly or indirectly to the Buyers' retention of certain business after the closing, the Company has also received approximately $740,000 and may receive up to an additional $15.0 million in additional purchase price, within the 24 month period following the closing, or be required to refund up to approximately $6.4 million of cash received to the Buyers, within the 14 month period following the closing. Gain associated with contingent consideration in both cases has not been recorded in the results of discontinued operations as of September 30, 2012. The purchase price excluded all accounts receivable and working capital liabilities relating to the operations subject to the Pharmacy Services Asset Sale, which were retained by the Company. Approximately $18.6 million of these net assets remained at September 30, 2012, and the Company anticipates the collection of these balances during the remainder of the year.

As a result of the Pharmacy Services Asset Sale, the Company recognized a pretax gain of $100.0 million, net of transaction costs of $5.6 million, during the three months ended June 30, 2012.  The Company also recognized approximately $0.3 million and $13.4 million of impairment costs, employee severance and other benefit-related costs, facility-related costs, and other one-time charges as a result of the transaction in the three and nine months ended September 30, 2012, resulting in a net effect of approximately $86.7 million. See Note 7 - Property and Equipment, for further information on the impairment. The impairment costs, employee severance and other benefit-related costs, facility-related costs, and other one-time charges are included in income (loss) from discontinued operations, net of income taxes on the Unaudited Consolidated Statements of Operations. As of September 30, 2012, there are accruals of $2.5 million related to these costs in accrued expenses and other current liabilities and other non-current liabilities on the Unaudited Consolidated Balance Sheets. The accrual activity consisted of the following (in thousands):

	Impairment Costs			Employee Severance and Other Benefits			Facility-Related Costs		Other Costs			Total
Liability balance as of December 31, 2011	$	—		$	—		$	—	$	—		$	—
Expenses	5,839			5,349			1,071		1,110			13,369
Cash payments	—			(3,885		)	—		(3,134		)	(7,019		)
Non-cash charges	$	(5,839	)	$	—		$	—	$	2,024		$	(3,815	)
Liability balance as of September 30, 2012	$	—		$	1,464		$	1,071	$	—		$	2,535

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

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

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

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

The operating results of the traditional and specialty pharmacy mail operations and community pharmacies for the three and nine months ended September 30, 2012 and 2011 are summarized below. These results include costs directly attributable to the components of the businesses which were divested. Operating expense includes bad debt expense of $4.6 million and $8.0 million for the three and nine months ended September 30, 2012 associated with receivables retained from the divested business. This compares with $0.6 million and $5.0 million bad debt expense for the three and nine months ended September 30, 2011. It also includes $2.2 million and $3.3 million for the three and nine months ended September 30, 2012 associated with the cost of collecting the retained receivables. Income tax expense of $2.1 million and $2.2 million for the three months ended September 30, 2012 and 2011, respectively, and income tax expense of $7.2 million and $2.6 million for the nine months ended September 30, 2012 and 2011, respectively, has also been allocated to discontinued operations. These adjustments have been made for all periods presented. Depreciation expense was no longer incurred on fixed assets included in the disposal group as of February 1, 2012, the date the Company entered into the Asset Purchase Agreement.

Discontinued Operations Results
(in thousands)
	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011
Revenue	$	289		$	320,191	$	466,828	$	938,480
Gross profit	$	315		$	23,429	$	30,353	$	73,726
Operating expense	$	9,163		$	19,834	$	57,800	$	64,829
Gain on sale, before income taxes	$	—		$	—	$	100,012	$	—
(Loss) income from discontinued operations, net of income taxes	$	(10,931	)	$	882	$	64,448	$	4,152