Lisa Wilson - Investor Relations Richard M. Smith - President and Chief Executive Officer Jeffrey M. Kreger - Senior Vice President, Chief Financial Officer and Treasurer Thomas F. Pettit - Senior Vice President and Chief Operating Officer

Bill Bonello - Craig-Hallum Brian Tanquilut - Jefferies Brooks O'Neil - Dougherty & Company David MacDonald - SunTrust Kyle Smith - Jefferies Dana Hambly - Stephens Inc. Michael Petusky - Barrington Research

Ladies and gentlemen, thank you for standing by and welcome to the BioScrip First Quarter 2015 Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Friday, May 08, 2015. I would now like to turn the conference over to Lisa Wilson, Investor Relations for BioScrip. Please go ahead, ma’am.

Good morning and thank you for joining us today. By now, you should have received a copy of our press release issued last night after the close of market. If you have not received it, you may access it through the Investor Relations section of our website at bioscrip.com. Rick Smith, President and Chief Executive Officer; Jeff Kreger, Chief Financial Officer; and Tom Pettit, Chief Operating Officer, will host this morning’s call. The call may be accessed through our website at bioscrip.com. We would also like to point out that supplemental slides are available on the company’s website for download. A replay will be available shortly after the call and will remain available for a period of two weeks. Interested parties can access the replay by dialling 800-633-8284 in the U.S. and 402-977-9140 internationally and entering access code 21767966. An audio webcast will also be available for 30 days following the call under the Investor Relations section of the BioScrip website at bioscrip.com. Before we get started, I would like to remind everyone that any forward-looking statements made during the call are protected under the Safe Harbour of the Private Securities Litigation and Reform Act. Such forward-looking statements are based upon current expectations and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual and quarterly reports filed with the SEC. These forward-looking statements are based on information available to BioScrip today and the company assumes no obligation to update statements as circumstances change. During this presentation, we will refer to non-GAAP financial measures such as adjusted EBITDA, segment adjusted EBITDA, and diluted earnings per share. A reconciliation of such increases to the most comparable financial measures, GAAP financial measure is contained in our press release issued yesterday after the close of market, which can be obtained from our website at bioscrip.com. And now, I would like to turn the call over to Rick Smith. Rick? Richard M. Smith: Thank you, Lisa. Good morning, everyone, and thank you for joining us to discuss our results of the first quarter of 2015. During the quarter, we focused on delivering our 2015 strategic priorities. We are disappointed that our first quarter results were not stronger, impacted chiefly by core mix, severe weather and incremental $1 million bad debt. However, we are committed to strengthening our operations and our results through 2015. We began the year reporting double-digit organic growth in our Infusion business, including strong patient census growth. We remained focused and on track on building on the cost savings and productivity initiatives that we have previously outlined to improve operating performance. We had a slow start to the beginning of the year due to seasonality and severe weather in many of our markets causing an approximate $4 million impact in product gross profit and a related $1 million in adjusted EBITDA, due principally to core revenue disruption coupled with higher delivery costs and employee overtime to service patients in the affected markets. However, March revenue and patient census growth were strong, including in our targeted therapies and we’re seeing those March trends continue into the second quarter. Based on the strategic position of our platform, our referral and customer relationships and our clinical programs, we believe that our double-digit organic growth will continue. As outlined in our fourth quarter call, we are making progress on the implementation of our cost saving initiatives while concurrently investing in the business. Reflected in the first quarter are a number of these investments that are front loaded for 2015 such as sales, clinical and reimbursement positions. In addition, Infusion segment results in Q1 of 2015 reflect an increase in employee benefit costs of over $1 million from Q1 of 2014. As Tom, will discuss in more detail in his prepared remarks, we are on track with our saving initiatives. During the first quarter, we continue to make progress in turning around the markets we discussed on the year end call. We expect the locations to contribute incrementally to our performance in the second quarter. One of these locations reported positive adjusted EBITDA in Q1. The new general managers we placed into these markets are having a solid impact and we anticipate that continuing to build. Page five of the supplemental deck posted on our website reflects the impact of the closed and turnaround locations on reported results. During the quarter, we experienced additional aging in the over 180-day category, which resulted in a 40 basis point increase in bad debt expense versus our expectations. As we had previously stated, we expect to collect dollars from our older accounts receivable. Due to the age of these accounts, it takes time to work through the process with our payers. We also initiated patient-specific collection programs targeted at collecting our over 180-day aged patient pay accounts. Simultaneously, we continue to improve collection performance on the new bills as demonstrated by our 180-day aging analysis. As a result of our focused collection efforts, we have seen collections trend up each week in the patient and third-party payer areas. Adjusting for the additional bad debt expense and the weather impact, we are starting the year at a level consistent with our internal plan. I will now turn the call over to Tom to review our cost savings and cash collection initiatives. Thomas F. Pettit: Thanks, Rick. On our fourth quarter earnings call, we outlined our 2015 plan to continue improving cash collection and deliver $24 million in gross savings. We are on track to do both, having made progress in the first quarter. We began the year with $15 million in annualized savings already implemented and we identified an incremental $9 million that we are systematically executing. Approximately, $8 million of the $24 million will come from the reduction in force and site closures that we implemented at the end of 2014. In addition, we have initiated turnaround plans for several underperforming locations, including strengthening leadership. These measures are aimed at improving the margin profile of these branches and we expect they will contribute to overall margin expansion in the coming quarters. Our supply chain programs primarily driven by improvement in product pricing and performance-related vendor programs are well under way. In 2015, our primary areas of focus are material cost reductions, including brand and generic pharmaceutical pricing, medical supply standardization and price reduction, and an indirect spend initiative, as well as improvements in performance rebates, data fees and purchase discounts. During Q1 we also made significant progress reducing our controllable expenses. We implemented various cost controls focused on travel expenses, professional services, office supplies and communications expenses. The team continues to find ways to lower costs and improve efficiency. The balance of the 24 million will come from productivity and delivery, nursing and pharmacy. We are making progress on our plan in each of these areas. Nursing productivity opportunities include preferred agency pricing, increased staffing utilization, and improved scheduling. Likewise, pharmacy staffing productivity driven by working ahead on recurring patient orders and improving supplies utilization has resulted in sequential improvement and we continue to work the plan to reduce delivery costs through utilization of the most cost effective modes of delivery. In summary, we made good progress in the first quarter and are on track against our 2015 full-year cost reduction target of $24 million. Turning now to cash collections. In the first quarter, our cash collections continued to increase despite the headwinds from the reset of patient deductibles at the beginning of the year. The team maintained sequential quarterly collection improvements. On a year-over-year basis, our Q1 cash collections were $250 million, up 19% from $210 million in the year ago quarter. Our cash collections for receivables less than 180 days are improving as evidenced by a sequential $7 million reduction in receivables while revenue increased $8 million over the same period. Our collection improvements have continued into Q2. While we have improved collections from receivables less than 180 days old, we have more work to do with aged accounts over 365 days. In addition to adding staffing, we have implemented specific payer and patient pay projects to improve collections. We signed resources from sales, operations and reimbursement to specific aged payer accounts and projects. At the same time, we implemented a multifaceted approach to improving patient pay collection results, including partnering the third-party agencies who specialize in patients pay collections. Lastly, we are focusing on improving the quality and speed of our clean intake and reimbursement processes through standardized performance metrics, layered audits and better training. We expect these efforts to yield improvements in collections throughout the year. We are making steady progress in creating a leaner organization with stronger execution capabilities. I'd like to now turn the call over to Jeff to review our financial results. Jeffrey M. Kreger: Thank you, Tom, and good morning, everyone. As a reminder, before we review our first quarter financial performance, we have changed the operating and reportable segments of the company to Infusion Services and PBM Services. As a result of the sale of the company's Home Health business last year on March 31, 2014, the company's financial statements are presented with the Home Health business as discontinued operations on the consolidated statements of income for the three months ended March 31, 2014 and 2015, and are excluded from the results of continuing operations of the business. In addition to new segment reporting, the financial statements reflect continuing versus discontinued operations, classifications for all periods presented. With that, for the first quarter of 2015, we reported revenue from continuing operations of $261.7 million compared to $239.3 million in the prior year period. That’s an increase of $22.4 million or 9.4% in the year-over-year quarters. The Infusion Services segment revenue increased to $244.4 million, up 10.6% year-over-year, primarily driven by continued double-digit organic revenue growth. Revenue in the PBM Services segment was $17.2 million versus $18.2 million in the prior year period. The PBM business remains a stable contributor to our overall performance; however, our core focus for continued growth remains the Infusion segment. Gross profit for continuing operations was $66.5 million compared to $65.1 million for the same period in 2014, an increase of $1.4 million or 2.1%. The increase in gross profit dollars was primarily due to the Infusion segment revenue growth, partially offset by a decline in PBM segment gross profit. Gross profit as a percentage of revenue decreased to 25.4% from 27.2% during the first quarter of 2014. The decrease in gross margin percentage was impacted by a therapy mix shift in our Infusion segment to more chronic and other therapies. SG&A for the first quarter was $57.8 million, representing a $1.4 million decrease over the prior year quarter. SG&A for the first quarter as a percentage of total revenue was 22.1%, down from 24.7% in the prior year period. The decrease in SG&A expense is primarily due to lower wages and benefits costs. The decrease in SG&A as a percentage of revenue was due to restructuring plans executed last year in 2014, operating leverage obtained in the Infusion segment growth and a reduction in the PBM segment cash card business, which incurs high selling costs as a percentage of revenue. Bad debt expense totaled $8.3 million in the quarter, an increase of $1.7 million from the first quarter of 2014. $700,000 of this increase was attributable to the revenue growth in the year-over-year period, while the remaining $1 million of the increase resulted principally from growth in our accounts receivables aged over 365 days. Interest expense in the first quarter of 2015 was $9.2 million, down from the $10.5 million in the prior year quarter. Loss from continuing operations net of income taxes was $15.9 million for the quarter or $0.20 loss per diluted share as compared to a net loss of $25.3 million a year ago, or a $0.37 loss per diluted share in the prior year. BioScrip reported consolidated adjusted EBITDA from continuing operations of $6.3 million, as compared to $9.2 million in the prior year quarter. Adjusted EBITDA from the Infusion segment was $12.7 million for the first quarter of 2015. Infusion segment adjusted EBITDA decreased year-over-year principally as a result of the prior year $2.2 million contingent consideration gains. PBM segment adjusted EBITDA decreased to $1.4 million during the first quarter of 2015 versus $1.7 million in the same period last year, mainly due to decreases in discount cash card volumes. Regarding cash flows for the three months ended March 31, 2015, the company used $24.3 million in net cash from continuing operating activities as compared to cash used of $24.3 million in the year ago quarter as well. Regarding liquidity and leverage, as of March 31, 2015, the company's cash balance was $23.2 million and we had approximately $69.8 million of our revolving credit facility available for working capital needs after considering outstanding letters of credit totaling $5.2 million. At March 31, 2015, we had $418.8 million outstanding in long-term debt. I'll now turn the call back over to Rick. Richard M. Smith: Thank you, Jeff. Today BioScrip is the largest independent Infusion Services provider in the country. We are committed to driving the continued organic growth of our Infusion business and delivering high quality service to our patients. Revenue in the targeted areas is being generated through our clinical programs, our payer and hospital relationships and our strategic positioning. We have added a CFO in Jeff Kreger, who is focused on cost reduction, EBITDA margin expansion and cash flow generation and I look forward to working with him as we look to strengthen the operations and the balance sheet of the company. We believe the steps we took during the first quarter to execute our operational plan solidified our financial foundation, and strengthened our leadership team are prudent and necessary to increase shareholder value. As part of that, we continued to strengthen our Board of Directors, including the addition of Chris Shackelton and our proposed candidates of Carter Pate, Michael Goldstein and David Golding. Together we will continue to build shareholder value and update you on our progress in the months ahead. Operator, we will now take questions.

Thank you. [Operator Instructions] The first question is coming from the line of Bill Bonello with Craig-Hallum. Please proceed with your question.

Hey, good morning, guys. Thanks a lot for a lot of the color. I just want to understand a couple of the comments a little bit more clearly. So in terms of the timing of the incremental expenses, you talked about them being a little bit more front-end loaded. So just so that I understand then, are we saying that the impact of the incremental expenditures was probably more than $2.5 million in the first quarter and might be less than $2.5 million in additional quarters or just that, it began at the beginning of the year? How do I think about that? Richard M. Smith: It primarily began at the beginning of the year. These investments, especially in the sales area, will produce a revenue growth that is expected in the plan, which is why we made the investments and we're starting to see their contributions in Q2. So that will essentially have a self-funding ROI attached to it, but I think the cost levels will be there. But the employee benefits will be consistent in the Infusion segment for the rest of the year depending on staff. And that's primarily where the investments have primarily been. And then essentially, we'll expect to see throughout the year additional improvements in the cost savings initiatives that Tom outlined. We expect our supply chain to also continue to improve in terms of its contributions relative to our operating performance. Jeffrey M. Kreger: Okay. So it's not that there were some essentially non-recurring expenses in the quarter. It's just that we'll see the return on those as we progress. And then just to be crystal clear on your follow-up point on the cost savings, so on the cost savings side presumably we did not see $6 million of gross cost savings this quarter that will be more back-end loaded. Richard M. Smith: Well, we saw, I mean on the $9 million incrementally we are essentially on track to plan, as Tom had laid out. I think that what with the revenue miss we actually had, it kind of hides the cost savings that did occur because we had some positive cost savings relative to plan in Q1. And so, I think that relative to the rest of the year we’ll continue to see contributions from that incremental $9 million this year that we expect to before fully included in 2015 earnings.

Okay. And then just lastly if we’re building a 2014 to 2015 EBITDA bridge, I just want to make sure that we’re thinking about this clearly, the starting point is still the $39.3 million of pro forma EBITDA? Richard M. Smith: Correct.

Okay, and to that we would add the $50 million of net cost savings? Richard M. Smith: Correct.

And you would expect incremental EBITDA contribution from organic growth? Richard M. Smith: We would expect to offset by the cost to service, correct.

Okay. And what, wait, wait, say that again, I guess, I’m not quite understanding that answer? Richard M. Smith: Well, I mean, the revenue growth would essentially be offset by cost. So, yes, we would expect minimally our plan this year is to execute on $55 million of EBITDA.

Got it, at least and then potentially more, because, I mean, presumably your organic growth isn’t coming with no EBITDA contribution is that right? Richard M. Smith: Correct. That is correct.

Okay. Perfect. That is, and then, I guess, just the last thing just that I understand, on the turnaround markets, are you factoring that into the $24 million of gross cost savings, or is the sort of $5 million loss going to breakeven or positive incremental to that $24 million? Richard M. Smith: Those turnaround markets are not in the $24 million. The turnaround markets are in as we've stated before, we expect to have Infusion segment produce an 8% EBITDA margin. So, the turnaround of those markets would contribute to a positive margin expansion.

Perfect. Thank you. Richard M. Smith: Yep.

Thank you. Our next question is coming from the line of Brian Tanquilut with Jefferies Please proceed with your question.

Hey, good morning. Richard M. Smith: Good morning.

I just want to following up on, good morning, Rick on Bill's question on the sales force. So, if I recall correctly, around two years ago, you guys invested in the sales force and we saw the results of that with organic growth really picking up over the last two years. So, I guess, the question is, why was there a need to invest more money this time around considering that you are putting up pretty good organic growth rates, so why incur the expense? Richard M. Smith: Well, I think that there's no, I think, limit. I think what we're seeing is that as the market shifts and the market expands some of these territories get too large for some of our current sales force to cover. And so in order to ensure that same level of productivity and high touch and service levels, we've also invested in additional clinical liaison. So we've gotten invited into more hospitals, and so that level of coverage is necessary in order to essentially service the patients and transition those patients home.

Okay. And then, Rick, you just mentioned $55 million in your view as at least $55 million is what the EBITDA or earnings as far as we're looking at for this year. How should we think about your ability to manage mix and margin because, obviously, that's a big component of your ability to hit that guidance number? Richard M. Smith: Yes, I think what we saw clearly and, in fact, as we talked about before in our largest competitor, in a lot of cases is the physician, I think that what we saw in March, which gives us confidence, is the fact that, with the investment sales force, the team hitting it and also expanding call points, we were able to see a resurgence in our anti-infective referrals. That resurgence continued to grow into April, as well as the core programs around nutrition and cardiac care, are areas where we're very strong clinically. Those are areas that we believe that we'll see some strong census growth this year. So, and then with a number of the payer side of service initiatives, we are I think on the preferred panel with a number of those payer plans and so, we believe that as those programs start to kick in with a little bit more force the rest of this year, we’ll see some increased census growth.

Yes and so Rick, to that point, you’re coming up against some pretty tough comps, beginning the second quarter. So how do you think about seasonality in your ability to drive double-digit organic growth against tough comps? One and then, if you don’t mind just giving us a little commentary on the competitive market given that we’ve seen Diplomat get into the Infusion space and PharMerica is still being acquisitive in your markets? Richard M. Smith: Yes, I think we’re, I think a couple of things. We think that the plan we have and the investments we’ve made and the focus of our sales team based on the trends we’re seeing, we believe that we have a good opportunity to continue to step up in terms of our organic growth and the contribution of our higher margin therapies dropping down to the bottom line. We believe that our clinical reputation is well respected in all of our markets and I think that the opportunities for us in terms of our payer relationships and positioning in our hospital positioning gives us a strong opportunity to compete and continue to take share. We've seen in a number of markets where hospitals are limiting and reducing the panel of providers to one to three. We have been selected in many large hospital situations as one of the preferred panel participants, and we believe that there is going to be more opportunities for us for that strategic positioning that we believe will enable us to continue to drive the double-digit organic growth that we expect.

Last question from me for Jeff. Jeff, how should do we think about these dividends going forward? How should that line look in future quarters? Thanks. Jeffrey M. Kreger: We'll have to get back to you on that one, Brian.

Okay. Got it, thank you. Jeffrey M. Kreger: Okay. All right, sure.

Our next question is coming from the line of Brooks O'Neil with Dougherty & Company. Please proceed with your question. Brooks O'Neil: Good morning, a lot of new people on the call this morning, so I want to welcome Jeff and welcome Bill to BioScrip. I was hoping to first start and thinking about the Infusion business, obviously, even with the adjustments related to the closed and sort of restructured units, the Infusion margin was a lot lower than I was looking for in the quarter. Can you in anyway provide us with a sense for how much impact weather had on the Infusion business in Q1 and maybe help us to understand just a little bit more specifically how weather impacts that business? Jeffrey M. Kreger: Yes. Well, I think this is, as I mentioned in my remarks, it was about $4 million of product gross profit, which was primarily core and anti-infective. So essentially what we saw was referral activities of those core therapies being disrupted in the first couple of months and so that clearly has a higher gross margin percentage relative to the chronic business. And so the drop through rate that we estimated was about $1 million, so about 25% incremental relative to that mix. And so that is primarily where we saw the impact. When the weather is severe, the road shutdown, hospitals hold on to those patients a little bit longer, primarily because of ensuring that there's electricity in the home and other capabilities to continue the care. We also saw, as a result of that, with the branches being shut down for a day, day and a half at a time, the need to get stat orders out for the resale patients that needed their next level of drug. So that is ahead of, double effect relative to the weather impact. Brooks O'Neil: Okay, good. Second area of focus is the expense reductions. I appreciate Tom's commentary about the efforts to reduce costs. I had a hard time seeing any real benefit from expense reductions in Q1. So you commented you were on track. Does that mean we're going to see $15 million of cost saving benefit in next three quarters or how should I be thinking about that? Thomas F. Pettit: Well, we have our expense savings offset by the investments and then we talked about the mix and seasonality effect and the $1 million of incremental bad debt. So that's some of the items which were drags on the gross savings reading outs in the EBITDA line. As I indicated, we're tracking for the supply chain, nursing delivery pharmacy and controllable expenses and expect those to continue to build as we progress throughout the year. Brooks O'Neil: So, Tom, I'm not trying to be a jerk here, but I mean you can't really see any net impact in Q1 and if I'm understanding the way the commentary went properly, we could see that full benefit that you're calling out in the slides in the balance of the year? Is that right or am I missing something? Thomas F. Pettit: We should expect to see incremental margin expansion as we build throughout the year. Rick mentioned obviously, the investment is front-loaded, those will, obviously, continue throughout the year. And we will continue to work on our margin expansion, which will make more of that drop through. Brooks O'Neil: Okay. And then, were there any other unusual expenses in Q1 that sort of masked the benefits from the cost savings you’ve called out? I'm thinking there must have been some expense related to the financing, maybe recruitment expense for Jeff, all those things that we should just be thinking about and is there any way to quantify what those would be? Richard M. Smith: Yes, there was about $800,000 in corporate that would not repeat again related to recruiting expenses for Jeff for the, essentially the three new Board Directors that we had, that we've added in Q1. So that, from a corporate perspective we would expect corporate to step down from Q1 to Q2. Brooks O'Neil: Okay. And then just lastly, I know there's been a lot of focus on you guys getting to free cash flow positive over the last few quarters. I might have been distracted, but I'm not sure I heard any commentary on that this morning. Did you just give us a sense for where you're at and what your expectations are over the next year so…? Richard M. Smith: Yes. So this is, so our, clearly we used $24 million that we brought in the pipe to clean up some of the payable lag from 2014 merger, restructuring and integration activities. Our plan had forecasted about $9 million working capital utilization during the quarter, primarily due to seasonality. Essentially the increase in patient service and also essentially the new start what Tom mentioned in terms of patient deductibles and the new start of the insurance years. We expect that based on cash collections that we would expect us to start moving towards positive operating cash flow generation. I can tell you that, we've talked before about reducing DSO by five to 10 days this year. The management team, both corporate and field has a bonus incentive based on cash collections, north of 103% of revenue that we report. And so that anticipates continue to get a faster collection on our new bills. And it also anticipates that the aged accounts that we put in place essentially are collected that reduces our bad debt provision down essentially to the second half of the year we talked about closer to the 2.5%. So, we believe that the entire field organization and corporate organization is focused on cash flow generation and taking excess cash and looking to delever our balance sheet and essentially strengthen the organization. Brooks O'Neil: Great, just one last one, any update on sort of non-strategic assets that you have in the business and whether we might see some action on those during the year? Richard M. Smith: Yes. We’ve mentioned that the PBM is a non-core asset that we view 100% of our focus is the Infusion business and all of our efforts in the Infusion business. The PBM, we mentioned has been stable and has booked some additional traditional PBM customers. They have also signed up some new cash card customers. We continue to evaluate the opportunities to review that asset to look at as a source of deleveraging our balance sheet. And so we've essentially talked about this last year that a lot of people that may have an interest in that are looking for market stability. We believe that stability is there. We believe that the Catamaran transaction with Optum United is something that provides additional interest potentially in that asset to evaluate additional opportunities. Brooks O'Neil: All right. Thank you very much.

Thank you. Our next question is coming from the line of David MacDonald with SunTrust. Please proceed with your question.

Good morning, guys. A couple of questions. Can you quantify what the real cash flow was in the quarter? I mean if you look at the 24, how much of that is tied to historical cleanup and what did the core business do in terms of cash flow in the quarter? Richard M. Smith: Yes. I would say that, about 15 to 16 of that was related to the cleanup and the others was related to essentially the working capital. Now, on top of that, we had the interest expense and the legal settlement that was done relative to those non-operating areas in terms of the Exjade settlement that was paid in January. So, I would estimate that we were on target with our cash collections. We are tight on our expenses. As we talked about, we had some investments, but our cash performance was good. And then, the pipe was used to clean up some of the legacy accounts.

And just to follow up, Rick, I know Brooks kind of poked at this, but do you guys expect to be cash flow positive in the second quarter? Richard M. Smith: Yes. We planned calls for that. I think that we would expect to, we have a level of older collections that are anticipated as well and so we're focused on driving to a level of direction of cash flow positive contribution.

Okay. Secondly, just on mix and I realized the dynamic sequentially looks a little funky because of Synagis, but can you give us a sense of what the same-store mix did year-over-year first quarter on first quarter, so it's an apples-to-apples comparison? Did your same-store core therapy mix go up or down year-over-year and by how much? Richard M. Smith: On an adjusted basis, probably 8% core therapies were up year-over-year.

Can you repeat that? Richard M. Smith: On an adjusted basis our core therapies were up year-over-year.

As a percentage of total? Richard M. Smith: Yes, as a percentage of year-over-year.

So what I'm asking, Rick, is if you look at the core therapies, they're running at, if I'm correct, about 37% to 38% of revenue. Can you give me a sense 1Q of this year versus 1Q of last year, what percentage it was this year as a percentage of total and what percentage it was last year? Richard M. Smith: Yes. On an adjusted basis when we takeout essentially effective the closed sites, because it does create a lot of other noise and lumpiness, it was about flat relative to the percentage.

Okay. And then, Rick, just wanted to have you walk me through a little bit in terms of the bridge. Bill had asked about the $39 million. If I look at the first quarter, just given the cost saving initiatives that you guys put in place, I would suggest that you got about a $4 million benefit in the first quarter and the total EBITDA was 6.3. I realize year-over-year, the underperforming facilities is a headwind, I would assume IVIG pricing is a bit of a year-over-year headwind and employee costs are up in some of the investments. Is there anything else I'm not thinking about and that just seems like a bit of a widespread between kind of a $39 million and what we saw in the first quarter. So, I just was wondering is there anything else that I'm missing? Richard M. Smith: Well, I think, I mean there are some corporate expenses, but I think the, I mean, every year, I mean there is typically a front-year loaded close to $800,000 payroll tax restart on all the employee base and then you essentially through up and cleanups of employee PTO balances. So there's, we just called out the larger investments, but there are at the beginning of the year normalcy relative to an employee base that is typically also front-loaded that puts pressure on the bottom line margin that smoothes out, the beginning pretty much the second quarter throughout the rest of the year.

And just last question, Rick, can you just remind us what is your reserving policy once you get north of 180 days, how much of that are you reserving for? Richard M. Smith: So, in the 180, we're essentially 50% to essentially 100% is the range over 180 and it’s the different aging bucket.

So when you get to 180 you're reserving at 50% and then as it ages towards 360 it moves towards 100%. Richard M. Smith: Correct.

Okay. Thank you, guys. Richard M. Smith: Yes, thank you.

Thank you. Our next question coming is from the line of Kyle Smith with Jefferies. Please proceed with your question.

Hey, Rick, good morning and Tom and Jeff, pleased to make your acquaintance. Just to start off, there appears to have been sort of two definitional changes in EBITDA. First three quarters of last year, you were taking credit for positive changes in fair value consideration. You were not giving yourself credit for add backs for unusual bad debts. Fourth quarter full year numbers that reversed, you were adding back the bad debts charges, not taking credit for the fair value changes, and then this quarter we've gone back to the old policy. It's kind of gunking up my numbers. I was giving you credit for $2 million of unusual bad debts a year ago. So my bad debts delta is not $1.7 million, $1.8 million, it's more approaching $4 million. Did I hear you right that the only amount of bad debts in the quarter that was unusual was about $1 million and we're going to settle to 2.5% or roughly $6.5 million once things stabilize, did I hear that correctly? Richard M. Smith: Yes. What we’ve said is – essentially, we’ve said before that, we've talked about our pre-disruption and post disruption period relative to our acquisitions and that our historical bad debt provision rate was up 2.7%. What we have stated is that we believe that, that will be our average for this year, but we expect to be around 3% for the first half of the year and based on cash collections moving to about 2.5% for the year, the second half of the year, so averaging to about 2.7% for the full year and so that essentially is what we stated. So in the first quarter according to our expectations we expected a 3% provision rate where about 20% to 40% 40 basis points higher than that based on some additional aging moving to the 360-day bucket.

Okay. And then, the other unusual items, I know there was a lot of talk back and forth, I heard like there was about $800,000 of corporate for recruiting and that's the bulk of the other items that were unusual in the quarter or did I miss something? Richard M. Smith: That was the corporate item that we mentioned, the corporate – our corporate costs sequentially should be down from Q1 into Q2.

So getting into cash flow from operations, I was surprised to see cash flow from operations being a larger negative number in the first quarter than it was a year ago. We're all very familiar with the challenges that you were facing at the time. I'd like you to maybe give additional color on why that was negative. You had mentioned that you cleaned up some payables lag, but I saw that there was a $1 million sequential increase in accounts payable, some decrease in accrued expenses, what's the nature of that cleanup, how large is the amount that's left to be clean up and what's the bottom line explanation for the magnitude of the negative free cash flow in the first quarter? Richard M. Smith: There are couple of things that we talked about, first of all, we had some payable cleanup from the merger integration expenses from 2014 that were funded through cash. And then we also had the first quarter bond payment, and the second Exjade settlement that was funded in January. So that essentially, the line was about $35 million or so prior to the pipe coming in play. The other impact on operating cash flow is the normal Q1 seasonality in terms of just settling setting up the level of new patients resets on deductibles, new plans and essentially identifying who, which patient is part of which plan has a delay. Just as our branches were impacted by cash flow and revenue referral activity in January/February payors also couldn’t essentially get to buildings that were shutdown to process payment. So, we saw some of those different items impacting it, relative to the Q1 cash flow. And so, but our budget and our plan had expected investment and working capital for the first quarter just primarily looking at some of those items I just walked through. And then as you look at accounts payable, we have strong organic growth and our inventory at quarter end went up relative and that essentially matching payable is in accounts payable related to those vendors.

So, on the working capital front, is the cleanup like 50% done, 75% done in terms of what percent…? Richard M. Smith: It’s pretty much close to I’d say it’s close to 100% done.

That’s great to hear. Richard M. Smith: Yes.

And then I have a question for Jeff here. I know you haven’t been in the saddle too terribly long, but hopefully long enough to see what the low hanging fruit is on cash flow improvement. You know, obviously, we all understand that this business needs to do at least $40 million of EBITDA a year just to cover interest expense. What are the things that you see that are easily achievable just so we can have a concrete sense of where you are going to be making changes that are going to have immediate effect? Jeffrey M. Kreger: Yes, Kyle, great question. I mean, I am very focused. I’ve been here about two weeks now, but very focused on getting into a detailed review of all of our operating and overhead costs and expect to identify many of areas of – whether it can be process improvement and cost reductions, which will lead to both P&L expansion in terms of lower cost better margins as well as cash flow improvement from cost savings. So that combined with the payer and self-pay, patients projects we have at AR, which are purely cash focused, but to the extent that it’s older AR could result in benefits to the P&L in terms of recoveries, certain previously reserved receivables. Those are my primary focus areas over the next 60 days.

Okay, great. We look forward to hearing the results of that. Would you be willing to disclose, you know, just given how, you know, there are so many moving parts, what your cash balance and revolver availability positions are as of today or yesterday? Jeffrey M. Kreger: Yes. Our revolver availability, as we mentioned in our script, it's $69.8 million, and basically fully available with the exception of $5.2 million in letters of credit we have for various workers compensation programs. Our cash balance bounces around based on working capital needs from day to day not just collections but semi-monthly payments to some of our larger pharmaceutical supply vendors and whatnot. So probably not good to kind of target that number, but we feel strongly that we've adequate liquidity currently.

Okay. No that's fair. It's just – it's good to hear it hasn't been a revolver draw. And then, I just wanted to do maybe ask as a last question before I jump back in queue everybody's been watching with great interest some of the public releases with respect to decisions around the board. And it seemed that you were going in one direction and then opted to go in a different direction with respect to those leadership changes. It’d just be great to have some color directly from management about what your perspective is on the relationship between the executives and the Board and your major shareholders and if you can give, those of us who aren’t going to be able to make it to Dallas on Monday, a sense of what the key topics to be discussed at the shareholders meeting. That would be very, very helpful for those of us that can’t make the trip. Richard M. Smith: Yes. I guess that – I’m not sure what you mean in terms of change of direction. I think we’ve got Carter Pate and Michael Goldstein who were essentially new director candidates that we expect to be elected to the Board next week. And then, David Golding who essentially will also be elected was as it related to a large shareholder’s introduction to us. And so that process continues and Dave has been an observer to the Board, and actually been a very positive contributing member with deep operational experience that he brings from his business life and other success in other rooms that he served. And so I think that, primarily our order of business will be elect the new Directors. We also have another provision related to the pipe investment with the pipe investment we welcome Chris Shackelton to the Board, and clearly his strategic relationships relative to other post-acute alliances are active with us relative to opening up new doors of core growth and business alliance to increase our strategic positioning in hospitals and other healthcare situations. And then finally, we will look to ratify based on the shareholder vote, the utilization reappointment of KPMG as our auditors for the year.

Okay. Thank you so much. And I apologize. I did have one last one more. I thank you Rick for giving me some consideration on this. It's – just, in terms of, getting to a reasonable level of earnings, and tracking the business to see where the cost savings are, what are the key metrics internally that you track, so we can understand how you're benchmarking yourself? That would be helpful in thinking about all the moving parts in the business. Richard M. Smith: Yes. So clearly, this is the first time that we've talked about census growth. I think, we look at census, new starts, total patient service each month in the targeted areas from a productivity perspective, Tom, essentially has a significant number of dashboards that are sent out to the field relative to the tracking of the supply chain contributions, the nursing productivity, the mix of full-time staff, per diem staff, agency staff, number of visits per day that essentially we're looking at. From pharmacy productivity, it's really about essentially the production environment and relative to highest level of use of the pharmacist's license versus the Pharm Tech ratio. And then, finally, relative to delivery costs, we look on a per package basis and ensuring that our people are working ahead and taking advantage of the lowest costs essentially delivery option relative to as well as ensuring high levels of service. On the controllable expenses, we monitor those on a weekly basis as well and a number of our initiatives in the controllable area is continue to reduce paper through the technology platform that we've built internally in terms of reducing the use of that. So there is a number of different areas that are tracked on a weekly basis by the senior team and then Tom with his meetings on with the area vice presidents and then down to the general managers, are all areas that are monitored and measured on a weekly basis in addition to the items he talked about on intake and cash flow and pending documentation to drop our bills faster.

Great. Thank you Thomas F. Pettit: In addition, we look at the series of metrics really around quality, speed, and effectiveness in each of the areas on the quality, it’s first stats yield, whether it's billing or collections or cash posting, it's speed, a percentage of how many days before we touch, to want to touch invoices every certain period of time and then on effectiveness it's cash collected, it's debts, sorry bad debts, write-offs and then collecting as a percentage of our revenue. We want to be collecting more than 100% of revenue so that we're eating into the past dues as well.

Awesome. Well, thank you so much. You know, Rick always good it talk. Jeff, welcome aboard and Tom I hope you've gotten to the point now where you're starting to see some traction and progress on your initiatives and I wish the best of luck to all three of you. Richard M. Smith: Great. Thomas F. Pettit: Thank you, Kyle. Jeffrey M. Kreger: Thanks, Kyle.

Thank you. Our next question is coming from the line of Dana Hambly with Stephens. Please proceed with your question.

Hey. Good morning. Thanks. Rick, on the chronic growth has been outpacing core for, it seems like, a number of quarters now. And, one, is that the expectation going forward and if it isn't, I mean can you get to your EBITDA margin targets if chronic continues to outpace the core growth? Richard M. Smith: Well, we can. I think the, I mean the primary driver of that chronic growth is Hep C.

Okay Richard M. Smith: Dana. So we have a couple of branches that have been in that business for a long time in the Infusion at the local level and there is referral sources that had warehoused a number of patients waiting for the new technologies. The new technologies have come on and that patient census comps. We don't sell it, we don't commission it. It just comps. And so, based on the revenue per patient, we are seeing improved profitability related to it, primarily because of what the larger PBMs have done to the manufacturers. And so we don’t, even if that continues to grow, which we expect that it will continue this year, we will, it will have an impact on the stated gross margin, but we don't believe it will prevent us from achieving our targeted core growth and contribution to the bottom line.

Okay. And I think the 8% was the target margin for Infusion. Remind me, is that a full-year number, or is that we're trying to get to 8% by the end of the year. Richard M. Smith: No. That would be a full-year number.

Okay. All right. And then on the restructuring charges in the quarter, I thought we were done with the restructuring charges. I think that was about 3.5 million. Should we expect to continue to see that? Richard M. Smith: No, not at that level. I think that was just some year-end tail that came over. I mean, the merger integration charges were substantially down, only 2.20, but it was tail. Thomas F. Pettit: Yes. Basically transitional costs around training, some redundant salaries, certainly some professional fees, some excess facility costs for locations that we've closed, but not yet fully abandoned. There'll probably be a little bit of a tail kind of as we go through the remainder of this year, but those are certainly winding down.

Okay. Can you give me a sense on the patient pay portion, how much of that is in the receivables, and I want to think the collectibility would be very good on that, that you would need to dedicate a lot of resources there? Richard M. Smith: I mean, we have it on slide seven of the – we pool the table that will be in the Q later today into the supplemental deck. So, you can see that the patient responsibility over 180 days. We actually have sent out statements, but you're right. It's not – we have people working after hours and on weekends essentially following up calls, we have the outside agency that Tom mentioned that are also doing follow-up calls. And so we're aggressively looking to make a dent in that over 180. But at the same time, we've put in tools to collect the patient responsibility based on an estimator calculator that we've implemented as patients come on service to collect those dollars. We also did an upgrade to our CPR+ system [ph] to line item financial version that enables us to drop the patient statement at the same time we're dropping the primary payer statement to get it on file with the level of estimation. So we continue to make improvement in terms of our tools to get that cash faster and then similar to our commercial payment and over 180-day projects, we've got significant amount of detail and that's being assembled and presented to payers to affect a level of cash on the billable dollars.

Okay, all right. That's all right I see on page seven now you've broken it out there. And just lastly for me, do you have kind of a pro forma total diluted shares now to include the preferred and the warrants and the rights and all of that stuff? Richard M. Smith: We have to update that. I know that in terms of the pipe in terms of equivalent number of shares, it's an incremental $12 million or so, and then the warrants, we expect to issue the -- effect the rights offering by June 30, and so those will come out there later this year and then I think we'll have an opportunity, Jeff will essentially assemble that information and present it.

Okay, great. Thank you. Richard M. Smith: Okay.

Thank you. Our next question is coming from the line of Michael Petusky with Barrington Research. Please proceed with your question.

Yes. I guess I'd just like to start and I know a couple of people asked questions on this and you’ve sort of answered the questions sort of. Is there a free cash flow positive quarter in our future, either this year or next year that you'd actually be willing to kind of draw a line on? Richard M. Smith: Well, yes. Clearly, our plan would call for free, operating cash flow, positive operating cash flow this year. And so…

I’m asking about free cash. Richard M. Smith: Well, free cash. Our CapEx expenses are not that significant that I think you can see, and I think as we continue to make improvements on our – faster collections of our new payables, new receivables, the collection of our older accounts, our expense is going down in managing our working capital, then we're still taking steps to look at utilization of our CapEx, as well, in terms of getting to a free cash flow number.

So, you're saying positive free cash by the fourth quarter? Richard M. Smith: Yes. Our target is to get it – hit it sooner than that, but yes.

Okay. All right. And then, I didn't catch if you said it, forgive. What was the core therapy percentage this quarter? Richard M. Smith: In the 33%, 35% on an adjusted basis.

And then just in terms – getting to the 55 from 6, is a hike, to say the least. Richard M. Smith: I'm sorry. It's about 36%, just under 37%.

Okay. All right. Richard M. Smith: Through the quarter, yes.

So anyway, getting to the 55 is not going to be easy for the year. This year I think you did between a little north of 11 in terms of EBITDA. I mean, is it fair to say internally you're expecting a positive comp versus last year second quarter in terms of adjusted EBITDA. We're expecting our second quarter to sequentially step-up relative to our Q1 and by –driven by the core revenue growth that we're seeing in March and going into April. And so we're expecting a positive contribution. I think that with that level of mix and expected step up in gross margin, you'll see the cost savings and cost saving programs that we've been talking about as well. So we're expecting a good step up. And then additionally with the expected reduction corporate of the 800-K from Q1, we think it will be a step up in the right positive direction getting us towards our plan.

Okay. All right. So, Rick, I mean I hear you, but I mean a step up – a good step up could mean 8 in your mind. I mean what's a good step up? I mean is it north of 10? What is represented by that statement? Richard M. Smith: Well, we haven't given guidance, I think our plan would look for us to continue to build sequentially up relative to this – essentially our Q1. We would expect that the revenue growth from our core therapies will drop to the bottom line. We clearly expect to collect our older cash, and we would expect that to continue to have an impact relative to our bad debt provision expense. So, you know, so we're going to continue to operate our plan. We said that, for the year, we expect to continue to run towards minimally that 55, and I think that based on our revenue growth and the trends that we're seeing, we believe that we can continue to make the progress we expect this year.

Okay. Rick, I hear you, and you probably hear some level of annoyance in my voice but you guys haven't made a quarter in about 12. And so I think it's somewhat deserved. Thanks.

Thank you. Mr. Smith, there are no further questions at this time. I will turn the call back to you. Please continue with your presentation or closing remarks. Richard M. Smith: Okay, great. Well, thank you, everyone, for joining us today on the call. Look forward to catching up with you in the near future.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day.