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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 2021
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: 001-11993
bios-20210630_g1.jpg
OPTION CARE HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware05-0489664
(State of incorporation)(I.R.S. Employer Identification No.)
3000 Lakeside Dr.Suite 300N, Bannockburn, IL60015
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:
312-940-2443
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareOPCHNasdaq Global Select Market
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      Accelerated filer      Non-accelerated filer       Smaller reporting company  Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

On July 30, 2021, there were 179,868,880 shares of the registrant’s Common Stock outstanding.
1



TABLE OF CONTENTS
2

PART I
FINANCIAL INFORMATION
Item 1.Financial Statements
3

OPTION CARE HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(unaudited)
June 30, 2021December 31, 2020
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents$157,526 $99,265 
   Accounts receivable, net338,206 328,340 
   Inventories173,853 158,601 
   Prepaid expenses and other current assets66,179 70,806 
Total current assets735,764 657,012 
NONCURRENT ASSETS:
   Property and equipment, net110,662 121,149 
   Operating lease right-of-use asset68,638 68,795 
   Intangible assets, net351,675 351,052 
   Goodwill1,428,610 1,428,610 
   Other noncurrent assets23,409 20,821 
Total noncurrent assets1,982,994 1,990,427 
TOTAL ASSETS $2,718,758 $2,647,439 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$309,445 $282,913 
Accrued compensation and employee benefits57,992 58,899 
Accrued expenses and other current liabilities62,127 64,075 
Current portion of operating lease liability18,177 18,886 
Current portion of long-term debt11,775 9,250 
Total current liabilities459,516 434,023 
NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portion1,119,458 1,115,103 
Operating lease liability, net of current portion69,953 70,776 
Deferred income taxes4,246 3,339 
Other noncurrent liabilities8,974 8,474 
Total noncurrent liabilities1,202,631 1,197,692 
Total liabilities1,662,147 1,631,715 
STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of June 30, 2021 and December 31, 2020, respectively
  
Common stock; $0.0001 par value: 250,000,000 shares authorized, 180,251,351 shares issued and 179,867,629 shares outstanding as of June 30, 2021; 180,178,308 shares issued and 179,794,586 shares outstanding as of December 31, 2020
18 18 
Treasury stock; 383,722 shares outstanding, at cost, as of June 30, 2021 and December 31, 2020, respectively
(2,403)(2,403)
Paid-in capital1,132,964 1,129,312 
Accumulated deficit(71,076)(100,031)
Accumulated other comprehensive loss(2,892)(11,172)
Total stockholders’ equity1,056,611 1,015,724 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,718,758 $2,647,439 
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
4

OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2021202020212020
NET REVENUE$860,272 $740,848 $1,619,509 $1,446,288 
COST OF REVENUE661,304 574,528 1,255,068 1,121,939 
GROSS PROFIT198,968 166,320 364,441 324,349 
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses134,257 124,918 254,297 254,198 
Depreciation and amortization expense16,619 18,194 32,958 38,295 
      Total operating expenses150,876 143,112 287,255 292,493 
OPERATING INCOME48,092 23,208 77,186 31,856 
OTHER INCOME (EXPENSE):
Interest expense, net(17,236)(31,432)(36,717)(59,519)
Equity in earnings of joint ventures1,686 1,012 2,891 1,574 
Other, net5 14 (12,396)22 
      Total other expense(15,545)(30,406)(46,222)(57,923)
INCOME (LOSS) BEFORE INCOME TAXES32,547 (7,198)30,964 (26,067)
INCOME TAX EXPENSE731 470 2,009 1,511 
NET INCOME (LOSS)$31,816 $(7,668)$28,955 $(27,578)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Change in unrealized gains (losses) on cash flow hedges, net of income tax expense (benefit) of $0, $0, $0 and $0, respectively
4,199 4,576 8,280 (12,056)
OTHER COMPREHENSIVE INCOME (LOSS)4,199 4,576 8,280 (12,056)
NET COMPREHENSIVE INCOME (LOSS)$36,015 $(3,092)$37,235 $(39,634)
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) per share, basic$0.18 $(0.04)$0.16 $(0.16)
Earnings (loss) per share, diluted$0.18 $(0.04)$0.16 $(0.16)
Weighted average common shares outstanding, basic179,843 176,711 179,826 176,686 
Weighted average common shares outstanding, diluted181,037 176,711 180,975 176,686 
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
5

OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended June 30,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$28,955 $(27,578)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization expense35,705 41,813 
Non-cash operating lease costs5,766 11,240 
Deferred income taxes - net907 598 
Loss on extinguishment of debt12,403  
Amortization of deferred financing costs2,512 2,764 
Loss on interest rate swaps upon discontinuing hedge accounting 3,746 
Equity in earnings of joint ventures(2,891)(1,574)
Stock-based incentive compensation expense3,730 1,418 
Other adjustments261 (769)
Changes in operating assets and liabilities:
Accounts receivable, net(9,866)4,194 
Inventories(14,651)(33,239)
Prepaid expenses and other current assets4,627 1,199 
Accounts payable26,532 36,422 
Accrued compensation and employee benefits(907)1,977 
Accrued expenses and other current liabilities6,425 13,767 
Operating lease liabilities(8,277)(9,382)
Other noncurrent assets and liabilities803 6,794 
Net cash provided by operating activities92,034 53,390 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment(6,808)(9,269)
Other investing cash flows 541 
Business acquisitions, net of cash acquired(18,852) 
Net cash used in investing activities(25,660)(8,728)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings(78)(645)
Proceeds from issuance of debt355,200  
Repayments of debt(5,888)(4,625)
Retirement of debt(352,009) 
Deferred financing costs(2,880) 
Debt prepayment fees(2,458) 
Other financing cash flows 11,651 
Net cash (used in) provided by financing activities(8,113)6,381 
NET INCREASE IN CASH AND CASH EQUIVALENTS58,261 51,043 
Cash and cash equivalents - beginning of the period99,265 67,056 
CASH AND CASH EQUIVALENTS - END OF PERIOD$157,526 $118,099 
Supplemental disclosure of cash flow information:
   Cash paid for interest$37,405 $53,199 
   Cash paid for income taxes$1,168 $1,887 
Cash paid for operating leases$12,909 $13,388 
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
6

OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Preferred StockCommon StockTreasury StockPaid-in CapitalAccumulated DeficitAccumulated Other Comprehensive (Loss)
Income
Total Stockholders’ Equity
Balance - December 31, 2019$ $18 $(2,403)$1,008,362 $(91,955)$(7,195)$906,827 
Exercise of stock options, vesting of restricted stock and related tax withholdings— — — (549)— — (549)
Stock-based incentive compensation— — — 757 — — 757 
Net loss— — — — (19,910)— (19,910)
Other comprehensive loss— — — — — (16,632)(16,632)
Balance - March 31, 2020$ $18 $(2,403)$1,008,570 $(111,865)$(23,827)$870,493 
Exercise of stock options, vesting of restricted stock and related tax withholdings— — — (96)— — (96)
Stock-based incentive compensation— — — 661 — — 661 
Net loss— — — — (7,668)— (7,668)
Other comprehensive income— — — — — 4,576 4,576 
Balance - June 30, 2020$ $18 $(2,403)$1,009,135 $(119,533)$(19,251)$867,966 
Balance - December 31, 2020$ $18 $(2,403)$1,129,312 $(100,031)$(11,172)$1,015,724 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (69)— — (69)
Stock-based incentive compensation— — — 1,205 — — 1,205 
Net loss— — — — (2,861)— (2,861)
Other comprehensive income— — — — — 4,081 4,081 
Balance - March 31, 2021$ $18 $(2,403)$1,130,448 $(102,892)$(7,091)$1,018,080 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (9)— — (9)
Stock-based incentive compensation— — — 2,525 — — 2,525 
Net income— — — — 31,816 — 31,816 
Other comprehensive income— — — — — 4,199 4,199 
Balance - June 30, 2021$ $18 $(2,403)$1,132,964 $(71,076)$(2,892)$1,056,611 
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
7

OPTION CARE HEALTH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND PRESENTATION OF FINANCIAL STATEMENTS
Corporate Organization and Business — HC Group Holdings II, Inc. (“HC II”) was incorporated under the laws of the State of Delaware on January 7, 2015, with its sole shareholder being HC Group Holdings I, LLC. (“HC I”). On April 7, 2015, HC I and HC II collectively acquired Walgreens Infusion Services, Inc. and its subsidiaries from Walgreen Co., and the business was rebranded as Option Care (“Option Care”).
On March 14, 2019, HC I and HC II entered into a definitive agreement (the “Merger Agreement”) to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”), a national provider of infusion and home care management solutions, along with certain other subsidiaries of BioScrip and HC II. The merger contemplated by the Merger Agreement (the “Merger”) was completed on August 6, 2019 (the “Merger Date”). The Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations with Option Care being considered the accounting acquirer and BioScrip being considered the legal acquirer. Following the close of the transaction, BioScrip was rebranded as Option Care Health, Inc. (“Option Care Health”, or the “Company”). The combined Company’s stock is listed on the Nasdaq Global Select Market as of June 30, 2021. See Note 15, Stockholders’ Equity, for further discussion of HC I’s ownership as of June 30, 2021.
Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 97 full service pharmacies. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. The Company operates in one segment, infusion services.
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States and contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for interim financial reporting. The results of operations for the interim periods presented are not necessarily indicative of the results of operations for the entire year. These unaudited condensed consolidated financial statements do not include all of the information and notes to the financial statements required by GAAP for complete financial statements and should be read in conjunction with the 2020 audited consolidated financial statements, including the notes thereto, as presented in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2021.
Principles of Consolidation — The Company’s unaudited condensed consolidated financial statements include the accounts of Option Care Health, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
The Company has investments in companies that are 50% owned and are accounted for as equity-method investments. The Company’s share of earnings from equity-method investments is included in the line entitled “Equity in earnings of joint ventures” in the unaudited condensed consolidated statements of comprehensive income (loss). See Equity-Method Investments within Note 2, Summary of Significant Accounting Policies, for further discussion of the Company’s equity-method investments.
8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
In April 2020, the Company received $11.7 million in Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) grant funds from the federal government, which was reflected in the second quarter 2020 as a cash inflow from financing activities within other financing cash flows in the unaudited condensed consolidated statements of cash flows. During the third quarter 2020, the Company returned the funds as unused to the federal government.
Prepaid expenses and other current assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $39.9 million and $35.2 million as of June 30, 2021 and December 31, 2020, respectively. There were no other items included in prepaid expenses and other current assets that comprised 5% or more of total current assets.
Equity Method Investments — The Company’s investments in certain unconsolidated entities are accounted for under the equity method. The balance of these investments is included in other noncurrent assets in the accompanying condensed consolidated balance sheets. As of June 30, 2021 and December 31, 2020, the balance of the investments were $19.9 million and $17.0 million, respectively. The investments are increased to reflect the Company’s capital contributions and equity in earnings of the investees. The investments are decreased to reflect the Company’s equity in losses of the investees and for distributions received that are not in excess of the carrying amount of the investments. The Company’s proportionate share of earnings or losses of the investees are recorded in equity in earnings of joint ventures in the accompanying unaudited condensed consolidated statements of comprehensive income (loss). The Company’s proportionate share of earnings was $1.7 million and $2.9 million for the three and six months ended June 30, 2021. The Company’s proportionate share of earnings was $1.0 million and $1.6 million for the three and six months ended June 30, 2020. Distributions from the investees are treated as cash inflows from operating activities within other adjustments in the unaudited condensed consolidated statements of cash flows. During the three and six months ended June 30, 2021, the Company did not received any distributions from the investees. During the three and six months ended June 30, 2020, the Company received distributions from the investees of $0 and $0.5 million, respectively. See Footnote 16, Related-Party Transactions, for discussion of related-party transactions with these investees.
Immaterial Error Correction — During the three months ended June 30, 2021, the Company identified prior period misstatements related to the net revenue earned by category of payer for the periods ended September 30, 2020, December 31, 2020, and March 31, 2021. Certain individual payers were improperly classified as direct government and instead should have been classified as commercial payers. This error over-stated the Company’s government revenues and under-stated the Company’s commercial revenues in those periods. The Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined the correction of these errors to be immaterial to the prior consolidated financial statements taken as a whole. As a result, the Company has corrected the misstatements as disclosed in the following table:
Three Months ended September 30, 2020Nine Months ended September 30, 2020Three Months ended December 31, 2020Twelve Months ended December 31, 2020Three Months ended March 31, 2021
Amount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of Revenue
Commercial:
As Previously
Reported
$644,385 82.4 %$1,893,105 85.0 %$649,880 80.8 %$2,542,985 83.9 %$611,434 80.5 %
Adjustment34,3214.4 %34,3211.5 %40,8065.1 %75,1272.5 %37,0734.9 %
As Revised678,70686.8 %1,927,42686.5 %690,68685.9 %2,618,11286.4 %648,50785.4 %
Government:
As Previously Reported127,43516.3 %308,83013.9 %141,23717.6 %450,06714.8 %134,91417.8 %
Adjustment(34,321)(4.4)%(34,321)(1.5)%(40,806)(5.1)%(75,127)(2.5)%(37,073)(4.9)%
As Revised93,11411.9 %274,50912.4 %100,43112.5 %374,94012.3 %97,84112.9 %

There was no impact to the Company’s consolidated balance sheets, consolidated statements of comprehensive income (loss) or the consolidated statements of cash flows for any of these periods.
9

Concentrations of Business Risk — The Company generates revenue from managed care contracts and other agreements with commercial third-party payers. Revenue related to the Company’s largest payer was approximately 16% and 16% for the three and six months ended June 30, 2021. Revenue related to the Company’s largest payer was approximately 16% and 15% for the three and six months ended June 30, 2020, respectively. In December 2019, the Company renewed and expanded its multi-year contract with this payer. The contract renewal was effective in February 2020 for a two-year term and auto-renews annually thereafter unless notice is provided. There were no other managed care contracts that represent greater than 10% of revenue for the periods presented.
For the three and six months ended June 30, 2021, approximately 12% and 12%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. For the three and six months ended June 30, 2020, approximately 12% and 12%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. As of June 30, 2021 and December 31, 2020, respectively, approximately 13% and 15%, respectively, of the Company’s accounts receivable was related to these programs. Governmental programs pay for services based on fee schedules and rates that are determined by the related governmental agency. Laws and regulations pertaining to government programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change in the near term.

The Company does not require its patients nor other payers to carry collateral for any amounts owed for goods or services provided. Other than as discussed above, concentration of credit risk relating to trade accounts receivable is limited due to the Company’s diversity of patients and payers. Further, the Company generally does not provide charity care, however, Option Care Health offers a financial assistance program for patients that meet certain defined hardship criteria.
For the three and six months ended June 30, 2021, approximately 64% and 65%, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors. For the three and six months ended June 30, 2020, approximately 72% and 72%, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors. Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms. However, a change in suppliers could cause delays in service delivery and possible losses in revenue, which could adversely affect the Company’s financial condition or operating results. Although there remains some uncertainty regarding the COVID-19 pandemic, as of June 30, 2021 the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.
10


3. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
BioCure Asset Acquisition — In April 2021, pursuant to the Asset Purchase Agreement dated April 7, 2021, the Company completed the acquisition of certain assets of BioCure, LLC (“BioCure”) for a purchase price of $18.9 million.
The allocation of the purchase price of BioCure was accounted for as an asset acquisition in accordance with ASC Topic 805, Business Combinations, with the total purchase price being allocated to the assets acquired based on the relative fair value of each asset. The purchase price was allocated to the assets acquired as follows:
Amount
Inventories$601 
Intangible assets, net18,251
Total consideration transferred$18,852 
Intangibles assets, net consists of referral sources which were assigned a useful life of 15 years.
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4. REVENUE
The following table sets forth the net revenue earned by category of payer for the three and six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Commercial payers$703,429 $642,726 $1,314,862 $1,248,720 
Government payers145,799 95,124 280,714 181,395 
Patients11,044 2,998 23,933 16,173 
Net revenue$860,272 $740,848 $1,619,509 $1,446,288 
5. INCOME TAXES
During the three and six months ended June 30, 2021, the Company recorded tax expense of $0.7 million and $2.0 million, respectively, which represents an effective tax rate of 2.2% and 6.5%, respectively. During the three and six months ended June 30, 2020 the Company recorded a tax expense of $0.5 million and $1.5 million, respectively, which represents an effective tax rate of (6.5)% and (5.8)%, respectively.
The Company maintains a full valuation allowance of $105.4 million against all of its net U.S. federal and state deferred tax assets with the exception of $0.4 million of estimated state net operating losses (“NOL”). In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.
Based on the Company’s full valuation allowance, as noted above, the Company’s tax expense for the three and six months ended June 30, 2021 of $0.7 million and $2.0 million consists of quarterly tax liabilities attributable to specific state taxing authorities as well as recognized deferred tax expense.
The Company has accumulated U.S. federal net operating loss carryovers that are subject to one or more Section 382 limitations. This may limit the Company’s ability to utilize its U.S. federal net operating losses.

The Company recorded no income tax expense or benefit for the three or six months ended June 30, 2020 associated with the tax provisions of the CARES Act.

12

6. EARNINGS (LOSS) PER SHARE
The Company presents basic and diluted earnings (loss) per share for its common stock. Basic earnings (loss) per share is calculated by dividing the net income (loss) of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is determined by adjusting the profit or loss and the weighted average number of shares of common stock outstanding for the effects of all potentially dilutive securities.
The earnings (loss) is used as the basis of determining whether the inclusion of common stock equivalents would be anti-dilutive. The computation of diluted shares for the three and six months ended June 30, 2021 includes the effect of shares that would be issued in connection with warrants, stock options and restricted stock awards, as these common stock equivalents are dilutive to the earnings per share recorded in those periods. The computation of diluted shares for the three and six months ended June 30, 2020 excludes the effect of these common stock equivalents as their inclusion would be anti-dilutive to the loss per share recorded in those periods. For the three months ended June 30, 2021 there were 915,507 warrants and 547,310 stock option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive. For the six months ended June 30, 2021 there were 915,507 warrants and 433,440 stock option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive. For the three and six months ended June 30, 2020, there were 2,328,120 warrants, 497,517 stock options and 562,575 restricted stock awards outstanding that were excluded from the calculation of loss per share as they would be anti-dilutive.
The following table presents the Company’s basic earnings (loss) per share and shares outstanding (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Numerator:
Net income (loss)$31,816 $(7,668)$28,955 $(27,578)
Denominator:
Weighted average number of common shares outstanding179,843 176,711 179,826 176,686 
Earnings (loss) per common share:
Earnings (loss) per common share, basic$0.18 $(0.04)$0.16 $(0.16)
The following table presents the Company’s diluted earnings (loss) per share and shares outstanding (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Numerator:  
Net income (loss)$31,816 $(7,668)$28,955 $(27,578)
Denominator:  
Weighted average number of common shares outstanding179,843 176,711 179,826 176,686 
Effect of dilutive securities1,194  1,149  
Weighted average number of common shares outstanding, diluted181,037 176,711 180,975 176,686 
Earnings (loss) per common share:
Earnings (loss) per common share, diluted$0.18 $(0.04)$0.16 $(0.16)

13

7. LEASES
During the three and six months ended June 30, 2021, the Company incurred operating lease expenses of $6.9 million and $14.5 million, respectively, including short-term lease expense, which were included as a component of selling, general and administrative expense in the unaudited condensed consolidated statements of comprehensive income (loss). During the three and six months ended June 30, 2020, the Company incurred operating lease expense of $7.6 million and $15.3 million, respectively, including short-term lease expenses, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income (loss). As of June 30, 2021, the weighted-average remaining lease term was 6.5 years and the weighted-average discount rate was 5.24%.
Operating leases mature as follows (in thousands):
Fiscal Year Ending December 31,Minimum Payments
2021$13,669 
202220,344 
202316,921 
202411,697 
20259,290 
Thereafter31,886 
Total lease payments$103,807 
Less: Interest15,677 
Present value of lease liabilities$88,130 
During the three and six months ended June 30, 2020, the Company did not enter into any significant new operating or financing leases. During the three and six months ended June 30, 2021, the Company commenced new leases, extensions and amendments, resulting in non-cash investing and financing activities in the unaudited condensed consolidated statements of cash flow of $5.7 million related to increases in the operating lease right-of-use asset and operating lease liabilities, respectively. As of June 30, 2021, the Company did not have any significant operating or financing leases that had not yet commenced.

14

8. PROPERTY AND EQUIPMENT
Property and equipment was as follows as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2021December 31, 2020
Infusion pumps$31,165 $31,678 
Equipment, furniture and other52,605 47,886 
Leasehold improvements91,448 87,483 
Computer software, purchased and internally developed29,086 27,799 
Assets under development8,535 10,793 
212,839 205,639 
Less: accumulated depreciation102,177 84,490 
Property and equipment, net$110,662 $121,149 
Depreciation expense is recorded within cost of revenue and operating expenses within the unaudited condensed consolidated statements of comprehensive income (loss), depending on the nature of the underlying fixed assets. The depreciation expense included in cost of revenue relates to revenue-generating assets, such as infusion pumps. The depreciation expense included in operating expenses is related to infrastructure items, such as furniture, computer and office equipment, and leasehold improvements. The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses for the three and six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Depreciation expense in cost of revenue$1,369 $1,747 $2,747 $3,489 
Depreciation expense in operating expenses7,589 9,412 15,188 20,731 
Total depreciation expense$8,958 $11,159 $17,935 $24,220 

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9. GOODWILL AND OTHER INTANGIBLE ASSETS
There was no change in the carrying amount of goodwill for the three or six months ended June 30, 2021.
Changes in the carrying amount of goodwill consists of the following activity for the three and six months ended June 30, 2020 (in thousands):
Balance at December 31, 2019$1,425,542 
Merger purchase accounting adjustments2,341
Balance at March 31, 2020$1,427,883 
Merger purchase accounting adjustments727
Balance at June 30, 2020$1,428,610 

The carrying amount and accumulated amortization of intangible assets consists of the following as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2021December 31, 2020
Gross intangible assets:
Referral sources$456,372 $438,121 
Trademarks/names44,536 44,536 
Other amortizable intangible assets402 402 
Total gross intangible assets501,310 483,059 
Accumulated amortization:
Referral sources(123,903)(110,498)
Trademarks/names(25,347)(21,146)
Other amortizable intangible assets(385)(363)
Total accumulated amortization(149,635)(132,007)
Total intangible assets, net$351,675 $351,052 
Amortization expense for intangible assets was $9.0 million and $17.6 million for the three and six months ended June 30, 2021, respectively. Amortization expense for intangible assets was $8.8 million and $17.6 million for the three and six months ended June 30, 2020, respectively.


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10. INDEBTEDNESS
Long-term debt consisted of the following as of June 30, 2021 (in thousands):
Principal AmountDiscountDebt Issuance CostsNet Balance
ABL facility$ $ $ $ 
First lien term loan1,159,862 (9,149)(19,480)1,131,233 
Second lien notes    
$1,159,862 $(9,149)$(19,480)1,131,233 
Less: current portion(11,775)
Total long-term debt$1,119,458 
Long-term debt consisted of the following as of December 31, 2020 (in thousands):
Principal AmountDiscountDebt Issuance CostsNet Balance
ABL facility$ $ $ $ 
First lien term loan915,750 (7,253)(19,710)888,787 
Second lien notes245,781 (6,102)(4,113)235,566 
$1,161,531 $(13,355)$(23,823)1,124,353 
Less: current portion(9,250)
Total long-term debt$1,115,103 
In January 2021, the Company entered into an amendment on the First Lien Term Loan (the “First Lien Credit Agreement Amendment”). The First Lien Credit Agreement Amendment resulted in an additional $250.0 million of incremental First Lien Term Loan indebtedness being issued and reduced the interest rate on all outstanding First Lien Term Loan indebtedness from LIBOR plus 4.25% to LIBOR plus 3.75%. The proceeds of the $250.0 million incremental First Lien Term Loan indebtedness were used to prepay the remaining $245.8 million outstanding balance of the Second Lien Notes. Following the First Lien Credit Agreement Amendment, the First Lien Term Loan is repayable in quarterly installments of $2.9 million plus interest, with a final payment of all remaining outstanding principal due on August 6, 2026.
The Company assessed whether the repayment of the Second Lien Notes by issuing incremental First Lien Term Loan indebtedness resulted in an insubstantial modification or an extinguishment of the existing debt for each loan in the syndication by grouping lenders as follows: (i) Lenders participating in both the First Lien Term Loan and Second Lien Notes; (ii) previous lenders that exited; and (iii) new lenders. The Company determined that $161.2 million of the First Lien Term Loan was extinguished and $122.9 million of the Second Lien Term Loan was extinguished, which is disclosed as an outflow from financing activities in the condensed consolidated statements of cash flows. The First Lien Term Loan and Second Lien Notes had insubstantial modifications for lenders that participated in both debt instruments, which resulted in a cash outflow from financing activities of $352.0 million in the condensed consolidated statements of cash flows. The Company determined that $356.2 million of new debt was issued related to the First Lien Term Loan, which is disclosed as an inflow from financing activities in the condensed consolidated statements of cash flows. In connection with the prepayment of the Second Lien Notes and incremental First Lien Term Loan indebtedness, the Company incurred $7.2 million in debt issuance costs and third-party fees, of which $3.7 million was capitalized, $0.9 million was expensed as a component of other expense and $2.6 million was expensed as a loss on extinguishment as a component of other expense in the condensed consolidated statements of comprehensive income (loss) for the six months ended June 30, 2021. Further, $1.0 million of the total fees incurred of $7.2 million was netted against the $356.2 million of proceeds from debt as a component of the cash flows from financing activities, $2.9 million was presented as deferred financing costs as a component of cash flows from financing activities, $2.4 million was presented as debt prepayment fees as a component of cash flows from financing activities, and the remaining $0.9 million was included in cash flows from operating activities in the condensed consolidated statements of cash flows.
The Company recognized a loss on extinguishment of debt of $12.4 million included in the line entitled “Other, net” in the unaudited condensed consolidated statements of comprehensive income (loss) for the six months ended June 31, 2021, of which $2.6 million related to debt issue costs incurred with the incremental First Lien Term Loan indebtedness and prepayment of the Second Lien Notes, as discussed above, and $9.8 million related to existing deferred financing fees that were written off upon extinguishment. All remaining deferred financing fees that existed prior to the First Lien Credit Agreement Amendment were attributed to modified loans, and were capitalized and amortized over the remaining term of the First Lien Term Loan.
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The interest rate on the First Lien Term loan was 3.85% and 4.40% as of June 30, 2021 and December 31, 2020, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 3.85% and 3.91% for the three and six months ended June 30, 2021. The weighted average interest rate incurred on the previous First Lien Term Loan was 5.02% and 5.60% for the three and six months ended June 30, 2020, respectively. The interest rate on the Second Lien Notes was 8.98% as of December 31, 2020. The weighted average interest rate incurred on the Second Lien Notes was 8.98% for the period January 1, 2021 through January 20, 2021, prior to the repayment of the outstanding balance. The weighted average interest rate incurred on the Second Lien Notes was 10.33% and 10.44% for the three and six months ended June 30, 2020.
Long-term debt matures as follows (in thousands):
Year Ending December 31,Minimum Payments
2021$5,888 
202211,775 
202311,775 
202411,775 
202511,775 
Thereafter1,106,874 
Total$1,159,862 

During the three and six months ended June 30, 2021 and 2020, the Company engaged in hedging activities to limit its exposure to changes in interest rates. See Note 11, Derivative Instruments, for further discussion.
The following table presents the estimated fair values of the Company’s debt obligations as of June 30, 2021 (in thousands):
Financial InstrumentCarrying Value as of June 30, 2021Markets for Identical Item (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
First lien term loan$1,131,233 $ $1,159,862 $ 
Second lien notes    
Total debt instruments$1,131,233 $ $1,159,862 $ 
The following table sets forth the changes in Level 3 measurements for the three months ended March 31, 2021 (in thousands). As the Second Lien Notes were prepaid in Q1, there was no change in the fair value for the three months ended June 30, 2021.
Level 3 Measurements
Second lien notes fair value as of January 1, 2021$266,438 
Principal prepayment(245,781)
Change in fair value(20,657)
Second lien notes fair value as of March 31, 2021$ 
See Note 12, Fair Value Measurements, for further discussion.
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11. DERIVATIVE INSTRUMENTS
The Company uses derivative financial instruments for hedging and non-trading purposes to limit the Company’s exposure to increases in interest rates related to its variable interest rate debt. Use of derivative financial instruments in hedging programs subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative financial instrument will change. In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of the Company’s derivative financial instruments is used to measure interest to be paid or received and does not represent the Company’s exposure due to credit risk. Credit risk is monitored through established approval procedures, including reviewing credit ratings when appropriate.
In August 2019, the Company entered into interest rate swap agreements that reduce the variability in the interest rates on the newly-issued debt obligations following the Merger with BioScrip. The first interest rate swap for $925.0 million notional was effective in August 2019 with $911.1 million designated as a cash flow hedge against the underlying interest rate on the first lien term loan interest payments indexed to one-month London Interbank Offered Rate (“LIBOR”) through August 2021. In accordance with ASU 2017-12, Targeted Improvements to Accounting for Hedges, the Company has determined that the $911.1 million designated cash flow hedge is perfectly effective. The remaining $13.9 million notional amount of the interest rate swap is not designated as a hedging instrument. The second interest rate swap of $400.0 million notional was effective in November 2019 and was designated as a cash flow hedge against the underlying interest rate on the second lien notes interest payments indexed to three-month LIBOR through November 2020.
In May 2020, the Company elected to PIK the second lien note’s quarterly interest payment due in August 2020. Upon making the PIK election, the Company determined that the hedged interest payment would no longer occur, resulting in an ineffective hedge, so the Company discontinued hedge accounting on its $400.0 million notional interest rate swap. As a result, the Company reclassified accumulated comprehensive loss of $3.7 million to interest expense, net in the unaudited condensed consolidated statements of comprehensive income (loss). The gains and losses associated with the $400.0 million notional swap were recognized in net income (loss) through interest expense until the swap expired in November 2020.
The following table summarizes the amount and location of the Company’s derivative instruments in the condensed consolidated balance sheets (in thousands):