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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, 2020
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-20200630_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 31, 2020, there were 186,716,364 shares of the registrant’s Common Stock outstanding.




TABLE OF CONTENTS
  Page
Number
PART I
PART II 
 
 
2

Table of Contents
PART I
FINANCIAL INFORMATION
Item 1.Financial Statements
3

Table of Contents
OPTION CARE HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(unaudited)
June 30, 2020December 31, 2019
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents$118,099  $67,056  
   Accounts receivable, net320,222  324,416  
   Inventories149,115  115,876  
   Prepaid expenses and other current assets50,107  51,306  
Total current assets637,543  558,654  
NONCURRENT ASSETS:
   Property and equipment, net117,629  133,198  
   Operating lease right-of-use asset52,126  63,502  
   Intangible assets, net368,481  385,910  
   Goodwill1,428,610  1,425,542  
   Other noncurrent assets21,876  22,741  
Total noncurrent assets1,988,722  2,030,893  
TOTAL ASSETS $2,626,265  $2,589,547  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$260,120  $221,060  
Accrued compensation and employee benefits47,742  45,765  
Accrued expenses and other current liabilities59,027  33,538  
Current portion of operating lease liability18,472  20,391  
Current portion of long-term debt9,250  9,250  
Total current liabilities394,611  330,004  
NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portion1,275,385  1,277,246  
Operating lease liability, net of current portion50,779  58,242  
Deferred income taxes2,741  2,143  
Other noncurrent liabilities34,783  15,085  
Total noncurrent liabilities1,363,688  1,352,716  
Total liabilities1,758,299  1,682,720  
STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of June 30, 2020 and December 31, 2019, respectively
    
Common stock; $0.0001 par value: 250,000,000 shares authorized, 177,098,513 shares issued and 176,714,791 shares outstanding as of June 30, 2020; 176,975,628 shares issued and 176,591,907 shares outstanding as of December 31, 2019
18  18  
Treasury stock; 383,722 shares outstanding, at cost, as of June 30, 2020 and December 31, 2019, respectively
(2,403) (2,403) 
Paid-in capital1,009,135  1,008,362  
Accumulated deficit(119,533) (91,955) 
Accumulated other comprehensive loss(19,251) (7,195) 
Total stockholders’ equity867,966  906,827  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,626,265  $2,589,547  
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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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,
 2020201920202019
NET REVENUE$740,848  $497,266  $1,446,288  $973,758  
COST OF REVENUE574,528  395,876  1,121,939  774,174  
GROSS PROFIT166,320  101,390  324,349  199,584  
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses124,918  99,245  254,198  182,032  
Depreciation and amortization expense18,194  10,150  38,295  20,119  
      Total operating expenses143,112  109,395  292,493  202,151  
OPERATING INCOME (LOSS)23,208  (8,005) 31,856  (2,567) 
OTHER INCOME (EXPENSE):
Interest expense, net(31,432) (11,563) (59,519) (22,608) 
Equity in earnings of joint ventures1,012  643  1,574  1,192  
Other, net14  (101) 22  (177) 
      Total other expense(30,406) (11,021) (57,923) (21,593) 
LOSS BEFORE INCOME TAXES(7,198) (19,026) (26,067) (24,160) 
INCOME TAX EXPENSE (BENEFIT)470  (5,423) 1,511  (6,845) 
NET LOSS$(7,668) $(13,603) $(27,578) $(17,315) 
OTHER COMPREHENSIVE GAIN ( LOSS), NET OF TAX:
Change in unrealized gains (losses) on cash flow hedges, net of income tax expense (benefit) of $0, $(15), $0 and $227, respectively
4,576  27  (12,056) (478) 
OTHER COMPREHENSIVE GAIN (LOSS)4,576  27  (12,056) (478) 
NET COMPREHENSIVE LOSS$(3,092) $(13,576) $(39,634) $(17,793) 
LOSS PER COMMON SHARE
Net loss per share, basic and diluted$(0.04) $(0.10) $(0.16) $(0.12) 
Weighted average common shares outstanding, basic and diluted176,711  142,614  176,686  142,614  
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended 
 June 30,
 20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(27,578) $(17,315) 
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization expense41,813  21,591  
Non-cash operating lease costs11,240  6,182  
Deferred income taxes - net598  (7,912) 
Amortization of deferred financing costs2,764  1,635  
Loss on interest rate swaps upon discontinuing hedge accounting3,746    
Equity in earnings of joint ventures(1,574) (1,192) 
Stock-based incentive compensation expense1,418  1,153  
Other adjustments(769) 61  
Changes in operating assets and liabilities:
Accounts receivable, net4,194  26,050  
Inventories(33,239) 8,321  
Prepaid expenses and other current assets1,199  6,527  
Accounts payable36,422  (18,692) 
Accrued compensation and employee benefits1,977  (7,338) 
Accrued expenses and other current liabilities13,767  7,609  
Operating lease liabilities(9,382) (5,442) 
Other noncurrent assets and liabilities6,794  1,168  
Net cash provided by operating activities53,390  22,406  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment(9,269) (8,502) 
Other investing cash flows541  636  
Net cash used in investing activities(8,728) (7,866) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions to related parties  (2,000) 
Exercise of stock options, vesting of restricted stock, and related tax withholdings(645)   
Repayments of debt principal(4,625) (2,076) 
Other financing cash flows11,651    
Net cash provided by (used in) financing activities6,381  (4,076) 
NET INCREASE IN CASH AND CASH EQUIVALENTS51,043  10,464  
Cash and cash equivalents - beginning of the period67,056  36,391  
CASH AND CASH EQUIVALENTS - END OF PERIOD$118,099  $46,855  
Supplemental disclosure of cash flow information:
   Cash paid for interest$53,199  $15,156  
   Cash paid for income taxes$1,887  $1,060  
Cash paid for operating leases$13,388  $9,299  
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Preferred StockCommon StockTreasury StockPaid-in CapitalManagement Notes ReceivableAccumulated DeficitAccumulated Other Comprehensive (Loss)
Income
Total Stockholders’ Equity
Balance - December 31, 2018$  $14  $  $619,621  $(1,619) $(16,035) $844  $602,825  
Interest on management notes receivable—  —  —    (21) —  —  (21) 
Stockholders' redemption—  —  —  (2,000) —  —  —  (2,000) 
Stock-based incentive compensation—  —  —  584  —  —  —  584  
Net loss—  —  —  —  —  (3,712) —  (3,712) 
Other comprehensive loss—  —  —  —  —  —  (505) (505) 
Balance - March 31, 2019$  $14  $  $618,205  $(1,640) $(19,747) $339  $597,171  
Interest on management notes receivable—  —  —  —  (18) —  —  (18) 
Stockholders' redemption—  —  —  (371) 371  —  —    
Stock-based incentive compensation—  —  —  569  —  —  —  569  
Net loss—  —  —  —  —  (13,603) —  (13,603) 
Other comprehensive income—  —  —  —  —  —  27  27  
Balance - June 30, 2019$  $14  $  $618,403  $(1,287) $(33,350) $366  $584,146  
Balance - December 31, 2019$  $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  
The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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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.
Under the terms of the Merger Agreement, shares of HC II common stock issued and outstanding immediately prior to the Merger Date were converted into 135,565,392 shares of BioScrip common stock, par value $0.0001 (the “BioScrip common stock”). BioScrip also issued an additional 7,048,357 shares to HC I in respect of certain outstanding unvested contingent restricted stock units of BioScrip, which are held in escrow to prevent dilution related to potential additional vesting on certain share-based instruments. See Note 16, Stockholders’ Equity, for additional discussion of these shares held in escrow. In conjunction with the Merger, holders of BioScrip preferred shares and certain warrants received 864,603 additional shares of BioScrip common stock and preferred shares were repurchased for $125.8 million of cash. In addition, all legacy BioScrip debt was settled for $575.0 million. As a result of the Merger, BioScrip’s stockholders hold approximately 19.3% of the combined company, and HC I holds approximately 80.7% of the combined company. 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, 2020. See Note 3, Business Acquisitions, for further discussion on the Merger.
Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 104 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 2019 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 5, 2020.
Principles of Consolidation — The Company’s unaudited condensed consolidated financial statements include the accounts of Option Care Health, Inc. and its subsidiaries. The BioScrip results have been included in the consolidated financial results since the Merger Date. 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 consolidated statements of comprehensive income (loss). See Note 10, Equity-Method Investments, for further discussion of the Company’s equity-method investments.
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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 are included in cash and cash equivalents in the Company’s unaudited condensed consolidated balance sheet as of June 30, 2020. The $11.7 million is reflected in the second quarter as a cash inflow from financing activities within other financing cash flows in the unaudited condensed consolidated statements of cash flows. The $11.7 million has been recorded as a component of accrued expenses and other current liabilities in the Company’s unaudited condensed consolidated balance sheet as of June 30, 2020 as the Company intends to return these funds as unused to the federal government.
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 15% for the three and six months ended June 30, 2020. Revenue related to the Company’s largest payer was approximately 18% and 21% for the three and six months ended June 30, 2019, 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 at the end of that term. 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, 2020, 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, 2019, approximately 13% and 13%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. As of June 30, 2020 and December 31, 2019, respectively, approximately 13% and 12%, 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.
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. For the three and six months ended June 30, 2019, approximately 73% and 74%, 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 is uncertainty regarding the COVID-19 pandemic, as of June 30, 2020 the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.
Recently-Adopted Accounting Pronouncements — In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The Amendments in ASU 2016-13 eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and is to be applied using a modified retrospective transition method. The Company adopted the standard as of January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
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3. BUSINESS ACQUISITIONS
Merger with BioScrip, Inc. — As discussed in Note 1, Nature of Operations and Presentation of Financial Statements, Option Care merged with BioScrip on August 6, 2019. BioScrip was a national provider of infusion and home care management solutions. The Merger of Option Care and BioScrip into Option Care Health creates an expanded national platform and the opportunity to drive economies of scale through procurement savings, facility rationalization and other operating cost savings.
The fair value of purchase consideration transferred on the closing date includes the value of the number of shares of the combined company owned by BioScrip shareholders at closing of the Merger, the value of common shares issued to certain warrant and preferred shareholders in conjunction with the Merger, the fair value of stock-based instruments that were vested or earned as of the Merger, and cash payments made in conjunction with the Merger. The fair value per share of BioScrip’s common stock was $2.67 per share. This is the closing price of the BioScrip common stock on August 6, 2019.
Under the acquisition method of accounting, the calculation of total consideration exchanged is as follows (in thousands):
Amount
Number of BioScrip common shares outstanding at time of the Merger (1)129,181  
Common shares issued to warrant and preferred stockholders at time of the Merger (1)3,458  
Total shares of BioScrip common stock outstanding at time of the Merger (1)132,639  
BioScrip share price as of August 6, 2019$2.67  
Fair value of common shares$354,146  
Fair value of share-based instruments$32,898  
Cash paid in conjunction with the Merger included in purchase consideration$714,957  
Fair value of total consideration transferred$1,102,001  
Less: cash acquired$14,787  
Fair value of total consideration acquired, net of cash acquired$1,087,214  
(1) These shares were not adjusted for the one share for four share reverse stock split effective on February 3, 2020. See Note 16, Stockholders’ Equity, for further discussion on the one share for four share reverse stock split.
Cash paid in conjunction with the Merger includes payments made for settlement of $575.0 million in legacy BioScrip debt, $125.8 million in existing BioScrip preferred shares, and $14.1 million in legacy BioScrip success-based fees owed to third-party advisors. HC II financed these payments primarily through cash on hand and debt financing.
The Company's allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the Merger is based on estimated fair values as of the Merger Date. As of June 30, 2020 the Company has finalized the valuation of the acquisition. The following is an allocation of the consideration transferred to acquired identifiable assets and assumed liabilities, net of cash acquired, in the Merger as of August 6, 2019 (in thousands):
Amount
Accounts receivable, net (1)$96,532  
Inventories (2)19,683  
Property and equipment, net (3)48,732  
Intangible assets, net (4)193,245  
Deferred tax assets, net of deferred tax liabilities (5)26,731  
Operating lease right-of-use asset (6)22,378  
Operating lease liability (6)(28,897) 
Accounts payable (7)(66,668) 
Other assumed liabilities, net of other acquired assets (7)(20,663) 
Total acquired identifiable assets and liabilities291,073  
Goodwill (8)796,141  
Total consideration transferred$1,087,214  
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(1)Management has valued accounts receivables based on the estimated future collectability of the receivables portfolio.
(2)Inventories are stated at fair value as of the Merger Date.
(3)The fair value of the property and equipment was determined based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison, and income capitalization approaches for each property appraised.
(4)The allocation of consideration exchanged to intangible assets acquired is as follows (in thousands):
Fair ValueWeighted Average Estimated Life (in years)
Trademarks/Names$12,536  2
Patient referral sources180,329  20
Licenses380  1.5
Total intangible assets, net$193,245  18.8
The Company valued trademarks/names utilizing the relief of royalty method and patient referral sources utilizing the multi-period excess earnings method, a form of the income approach.
(5)Net deferred tax assets represented the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. See Note 5, Income Taxes, for additional discussion of the Company’s combined income tax position subsequent to the Merger.
(6)The fair value of the operating lease liability and corresponding right-of-use asset (current and long-term) was based on current market rates available to the Company.
(7)Accounts payable as well as certain other current and non-current assets and liabilities are stated at fair value as of the Merger Date.
(8)The Merger resulted in $796.1 million of goodwill, which is attributable to cost synergies resulting from procurement and operational efficiencies and elimination of duplicative administrative costs. The goodwill created in the Merger is not expected to be deductible for tax purposes.
Assuming BioScrip had been acquired as of January 1, 2018, and the results of BioScrip had been included in operations beginning on January 1, 2018, the unaudited pro forma results of operations for the three and six months ended June 30, 2019 were net revenue of $688.8 million and $1,344.2 million, respectively, and net loss of $13.5 million and $35.5 million, respectively. The pro forma net loss adjusts for the effect of fair value adjustments related to the Merger, transaction costs and other non-recurring costs directly attributable to the Merger and the impact of the additional debt to finance the Merger. Unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the Merger been completed on the date indicated or the future operating results.
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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, 2020 and 2019 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Commercial payers$642,726  $439,747  $1,248,720  $847,554  
Government payers95,124  52,062  181,395  114,595  
Patients2,998  5,457  16,173  11,609  
Net revenue$740,848  $497,266  $1,446,288  $973,758  
5. INCOME TAXES
During the three and six months ended June 30, 2020, the Company recorded tax expense of $0.5 million and $1.5 million, respectively, which represents an effective tax rate of (6.5)% and (5.8)%, respectively. During the three and six months ended June 30, 2019 the Company recorded a tax benefit of $5.4 million and $6.8 million, respectively, which represents an effective tax rate of 28.5% and 28.3%, respectively.
The Company continues to maintain a full valuation allowance against all of its net U.S. federal and state deferred tax assets with the exception of $0.7 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, 2020 of $0.5 million and $1.5 million consists of quarterly tax liabilities attributable to specific state tax returns as well as recognized deferred tax expense.
The Company recorded no income tax expense or benefit for the three or six months ended June 30, 2020 and 2019 associated with the tax provisions of the CARES Act.
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6. (LOSS) EARNINGS PER SHARE
The Company presents basic and diluted (loss) earnings per share for its common stock. Basic (loss) earnings per share is calculated by dividing the net (loss) income of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted (loss) earnings per share is determined by adjusting the profit or loss and the weighted average number of shares of common stock outstanding for the effects of all dilutive potential common shares.
As a result of the Merger, which has been accounted for as a reverse merger, all historical per share data and number of shares and equity awards were retroactively adjusted. The (loss) earnings is used as the basis of determining whether the inclusion of common stock equivalents would be anti-dilutive. Accordingly, the computation of diluted shares for the three and six months ended June 30, 2020 excludes the effect of shares that would be issued in connection with stock options and restricted stock awards, as their inclusion would be anti-dilutive to the loss per share. As of June 30, 2020 there were 2,328,120 warrants, 497,517 stock options and 562,575 restricted stock awards outstanding that were excluded from the calculation as they would be anti-dilutive. There are no dilutive potential common shares for the three and six months ended June 30, 2019.
The following table presents the Company’s basic and diluted (loss) earnings per share and shares outstanding (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Numerator:  
Net loss$(7,668) $(13,603) $(27,578) $(17,315) 
Denominator:  
Weighted average number of common shares outstanding176,711  142,614  176,686  142,614  
Loss per Common Share:
Loss per common share, basic and diluted$(0.04) $(0.10) $(0.16) $(0.12) 
7. LEASES
During the three and six months ended June 30, 2020, the Company incurred operating lease expenses of $7.6 million and $15.3 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, 2019, the Company incurred operating lease expense of $5.6 million and $10.8 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, 2020, the weighted-average remaining lease term was 5.2 years and the weighted-average discount rate was 5.48%.
Operating leases mature as follows (in thousands):
Fiscal Year Ending December 31,Minimum Payments
2020$11,895  
202119,591  
202214,192  
202310,774  
20248,009  
Thereafter18,328  
Total lease payments$82,789  
Less: Interest13,538  
Present value of lease liabilities$69,251  
During the three and six months ended June 30, 2020, the Company did not enter into any significant new operating or financing leases. As of June 30, 2020, the Company has entered into one build-to-suit lease agreement for a term of 15 years that has not yet commenced. The lease will require minimum lease payments over its life of approximately $22.9 million.
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8. PROPERTY AND EQUIPMENT
Property and equipment was as follows as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020December 31, 2019
Infusion pumps$33,546  $30,416  
Equipment, furniture and other48,177  51,454  
Leasehold improvements