Welcome to the InfuSystem Holdings’ Corporate Fourth Quarter Fiscal Year 2015 Conference Call. My name is Adrian and I’ll be your operator for today’s call. [Operator Instructions] I’ll now turn the call over to Jonathan Foster, Chief Financial Officer. Jonathan Foster, you may begin.

Thank you, Adrian. Good morning everybody. First of all, let me get some administrative matters out of the way. The company issued a press release today. The release is available on most financial websites. Additionally, a web replay will be available on the company’s website for 30 days. Both the press release and Form 8-K and the company’s Form 10-K for 2015 were filed with the SEC today as well. Except for historical information contained herein, the matters discussed on the conference call are forward-looking statements that involve risks and uncertainties. Such risks and uncertainties could cause actual results to differ materially from those predicted by such forward-looking statements. The words believe, expect, anticipate, and estimate or other similar statements or expectations identify forward-looking statements. These risks and uncertainties include general, economic conditions as well as other risks detailed from time-to-time in InfuSystem’s publicly filed documents with the Securities and Exchange Commission. Specifically, information about risks and uncertainties that could cause the company’s actual results and financial conditions to differ from those predicted by forward-looking statements are disclosed in the company’s yearend report on Form 10-K for the year ended December 31, 2015 under the heading Risk Factors and elsewhere in the report and in other filings made by the company from time-to-time with the SEC including subsequently filed quarterly reports on Form 10-Q. Forward-looking statements reflect management’s analysis only as of today. The company has no obligation to update the forward-looking information contained in this conference call. While discussing the company’s performance, the company will refer to certain non-GAAP measures, such as adjusted EBITDA and adjusted net income, which are not considered measures of the financial performance under Generally Accepted Accounting Principles or GAAP. A reconciliation of the differences between non-GAAP financial measures and those measures such as adjusted EBITDA and adjusted net income and the most comparable GAAP measures are contained in today’s press release. And with that, I would like to turn the call over to Mr. Eric Steen, our Chief Executive Officer.

Good morning everyone and thank you for joining the InfuSystem Holdings Inc. fourth quarter and yearend 2015 earnings call. Joining me today from our infusion Center of Excellence in Lenexa, Kansas are Jan Skonieczny, Chief Operating Officer; Michael McReynolds, Chief Information Officer; Jon Foster, Chief Financial Officer; Sean Schembri, Executive Vice President, General Counsel. There are three things that I want to talk about today, an update on the implementation of our electronic connectivity initiatives and the impact on the business; our progress on expanding into new areas to increase and diversify our revenue sources and finally some guidance on what we see for 2016. But first, let’s go to the final 2015 numbers and their comparison to fourth quarter and full-year 2014 results. We met our 2015 guidance of double-digit net collected revenue growth with an increase of 10% to $66.9 million. Total revenue was up 9% to $72.1 million. We are first and foremost an infusion pump rental company and revenues from rental and the infusion pumps to all sites of care grew at 10% in 2015. Net income was $3.7 million, an increase of 11%, adjusted EBITDA was $18.8 million an increase of 17%. Adjusted EBITDA margin increased 2% to 26%. Adjusted earnings per share were $0.23, an increase of 53% compared to $0.15. As we look at the results for the fourth quarter of 2015 and their comparison to the fourth quarter of 2014, net collected revenue increased 18% to $18.1 million driven by a 16% increase in rental revenue and a 54% increases in sales revenue. Adjusted EBITDA for the quarter was $6 million, an increase of 30%. We are now connected through a complete, electronic, medical record integration with 75 infusion centers. These integrations include EPIC, Cerner, Varian and Altos electronic medical record platforms.…

Thank you, Eric. Net revenue for full year ended December 31, 2015, was $72.1 million a 9% increase over 2014. Rental revenue increased 10%, revenue from product sales decreased 2% from 2014. Gross profit as a percentage of revenues for the full-year 2015 remained consistent with the same 12-month period in 2014 at 71%. We’re very pleased with this increase in recurring rental revenue. Net collected rental revenue was $59.3 million an increase of 12% compared to last year's $53 million. Bad debt decreased $0.5 million compared to the prior year from 10% of rental revenue to 8%. This change is the result of an increased number of third-party payor contracts that are now being billed at in-network rates with lower rates of bad debt whereby previous insurance billings were billed at higher out-of-network rates and higher rates of bad debt. Year-to-date selling and marketing expenses were up $0.7 million, or 7%, compared to $10.4 million – excuse me, $10.4 million, compared to $9.7 million in the same prior year period. As a percentage of total revenues, selling and marketing expenses remained consistent at approximately 15% for the same comparable 2014 period. General and administrative expenses, G&A year-to-date were up $3.8 million, or 19%, to $23.8 million, compared to $20.0 million in the same prior year period. The increase in G&A expenses versus the same prior year period was mainly attributable to increase in spending on information technology, IT and Pain Management initiatives of $0.9 million. Increases in compensation and personnel of $1.9 million, increases in stock-based comp at $0.4 million and $0.7 million in deal costs related to our acquisition, transition and integration of Ciscura offset by savings in other G&A categories. Net income for the year increased 12% to $3.7 million, or $0.16 per diluted share, versus $3.4…

Thank you, Jon. We remain committed to our growth strategy of electronic connectivity and the continued expansion of our rental pump fleet. We will consider opportunistic asset acquisitions that meet our financial criteria and can be integrated quickly and efficiently, just as we did with the Ciscura acquisition in 2015. During 2015, we added over 9,200 infusion pumps to our fleet, an investment of $10.5 million, and continued to gain traction in our Pain Management initiatives. The progress we made in 2015 is a testament to the hard work, commitment and creativity of our employees to do the job and to do it well. We successfully executed on a key strategic initiative to drive profitable growth in 2015. We will extend that momentum into 2016 and beyond. With that I’d like to open up the phone lines to answer any questions that you may have.

We’ll now begin the question-and-answer session. [Operator Instructions]

Operator, we’re ready for questions.

Thank you. Our first question comes from Chris Sansone with Samson Advisors. Please go ahead.

Hi, guys. Good quarter, good year.

Thanks, Chris.

So I guess just to start off what are you seeing with respect to pump uptick? How long it takes for our pumps to start generating revenue, is it similar patterns that you’ve seen in the past?

I would say, probably from the time we ordered the pump the way that its integrated health networks operate, it can take longer to implement. I think that one thing that you see happening in the market is the individual stay [indiscernible] oncology practices, continue to get gobbled up by these systems. So in InfuSystem’s case the fact that these big systems that are buying oncology practices like [indiscernible] and the other customers we serve its growing our share but the downside its it certainly is more complicated to work with in-servicing around nursing schedules in that hospital and integrated health network environment and being able to go into an individual doctor’s office and install the pumps very quickly. So the times – the lead time to implement is increasing due to the fact that we’re dealing in more hospital and integrated health network settings with little more bureaucracy.

Okay. And I guess I’m curious with respect to your guidance, you talk about continuing to grow net rental revenue, high-single-digits. The year-over-year you start 2015 with – I’m sorry you started 2016 with 61,000 pumps which is up from, I guess my math shows you had something like 46,000 pumps in 2015. So that’s obviously a much greater increase in the number of pumps. I’m just trying to understand how that might correlate to – what should we expect with respect to revenue growth?

That's one thing, one thing that we do have in 2016 is $2 million in revenue cuts from CMS. I mean this, we’ve known this was – I do that was coming when I took the job. And that's one of the reasons that we, the strategic initiative of electronic connectivity is to make this company a lot more cost effectively. So I think that’s one thing that you look at. So despite $2 million haircut from the federal government, we’re still growing high single digit there wasn't for that would push us to double digit if it wasn’t for that haircut. I also think that Jon and Jan could add something.

Yes, Chirs from a numbers point of view, you're exactly right, the large increase in our pump fleet in the fourth quarter is prepared for business since we move into 2016. And from the time it shows on our balance sheet, it takes about six months for that revenue to hit the P&L. So as I’ve said in the past calls buying pumps is a good thing, it indicates increase in revenue in the future. And we – as you’ve seen this year the pump fleet grew $10 million, $2.3 million of that was the allocation form Ciscura, but still that was record increase in our pump fleet and majority of that, not a majority but a good chunk of that came in the fourth quarter.

Yes I think that's a great point Jon. Our biggest part of our business is insurance reimbursement. And even though we're growing our rental business to home infusion companies and long term care facilities and that business is growing, because oncology rates are growing and our market share is growing, and our biggest segment which is insurance reimbursement of ambulatory pumps, there is a revenue cycle, collecting forms submitting forms to insurance, answering any questions, so it’s a great business. Once you get the payor contract and you get the pumps on the customer’s shelves [ph] it’s a great business. It’s a 27-year old business model that has generated cash for InfuSystem for years. But it’s a patience business, you need both the patience to put your pumps on and you got to have the patience to go through the revenue cycle to know that your investment is going to generate a long-term stream of profitability that’s going to take you six months before you see that first dollar.

Okay. Thanks, its helpful.

And your next question comes from Doug Weiss from DSW Investments. Please go ahead.

Hey good morning, congrats on a good quarter. It seems like things are really moving in the right direction. That’s good to see. I just want to follow-up on the prior question on pumps a little bit. How many pumps did you add this quarter?

For the fourth quarter of 2015?

Yes.

We had a $3.6 million in pumps.

Okay. And I guess following on that, it’s a big capital investment in IT in 2015. And I know you've given some guidance on this, but I wondered if you could just refresh my memory what is your plan for IT spend this year in terms of capitalized expenses?

Well, IT spend will get to decrease now. The last earnings call I did a long list of all the different projects that we've done in my close to three years. Each year that all goes into IT whether its phone systems, or cyber security systems, BlockPain Dashboard, asset tracking, integrations, taking what was primarily – not primarily a business run on paper forms and taking that to automated, integrated transfer electronically of data. So that investment has been made now we’re rolling it out. And so the big news now from the call and our emphasize is we've now launched a product called EXPRESS for the 1,300 clinics we have that are using iPads, but iPads that create a PDF that need to be entered into two different systems. And we can grow the business as fast as we want to that way so now that investment has been made and we’ve already got our first 100 accounts onto the EXPRESS system, it's going great, people love it. The salesforce is working to rollout 1,300 customers that’s going to eliminate all these facts in the order entry of documents. Now we build an IT department, so its going to be continued spend, but I would the main guidance we’ve given on IT spent so far is just to say that it’s decreasing, let me see, Jon, or Mike [ph] do you – is there anything else you want to add?

Yes, I’d say that, we’ve already seen internally we've looked at our cost per billing internally of processing and having the billing from beginning to end. For the first time ever it’s starting to come down from recent years.

The question was specifically on IT spend, the decreasing IT spend do we want to give any further detail on that [indiscernible].

It’s decreasing and from a standpoint, I think we’ve talked in general terms of roughly $3 million going into 2016.

Okay.

So it’s only less.

. :

Yes well no – excuse me for interrupting. Doug one of the best things to do if you’re going to look at what we’ve spending on pumps again, is work at the footnote on medical equipment you’ll see where the actual historical value of our pump fleet and also from a standpoint of our inventory held for sale. And also we’ll be following in investor presentation, shortly. And you’ll see a different free cash flow, the GAAP presentation for the cash flow is a very complicated, the purchase of pump also includes …

I know that’s very….

Yes, it also includes pumps that we sell.

I think those are initiatives with the – for sale on for rent. Okay, I will check out that that’s pretty good, that’s fine. And then on CMS, you said $2 million in your answer to the first question, but in the 10-K it was a slightly higher number I believe. Can you reconcile those two, I thought – maybe I misread the 10-K, may be I’ll have to go back and look but I thought it was a higher number?

Yes okay, Jon would you want to talk about the details of that please?

Sure. Yes the $2 million that we previously announced that was based on 2014 volume has increased significantly since then. Also the entrants got little more complicated. You also have the impact of the managed care plans that had come out of the ACA. And so, what we’ve disclosed in the risk section is, we have a decrease in cost of $3.8 million that includes all the hot projects [ph] the new programs, as well as the increase in volume, including adding on the Ciscura acquisition that conversely with the expansion of our payor networks, we expect price increases of $1.5 million and a lot of those are attributable to getting these managed care programs underneath contracts. So it nets out to that $2.3 million. So the $2 million still stands – that was the number – the net numbers what Eric was referring to.

Okay. So and then I guess one of the really nice thing to hear is that you think you're going to be able to offset all from a margin standpoint. What specifically, where is some of the savings going to come, is it [indiscernible]?

Yes, I think that's big news when you go back to a couple of years ago when InfuSystem got included in the competitive bid, people were like, well what's going to happen we, captured a lot of different ways. And it sort of starts on the P&L, you start at the top. All these new payor contracts that we signed are going to give us increased revenue from our existing flow of patients. So the way our system works is one of the secrets to our business model is we taking patient. And that’s the price we paid for having shelf space with our comps in the customers account that’s the secret to the model and the patients are in network, its harder to collect that money. So as we've had an increased focus, I know I’ve talked on previous earnings calls when I introduced Steve Marc as the rain maker of payor contracts. And Steve increased all those contracts and what was it Jan was it $1.2 million?

Yes $1.2 million.

So $1.2 million in revenue due to new insurance contracts that we didn’t have a year ago, that offsets over half the Medicare cut. So over half of the Medicare cut is offset right out the bat just with our payor contracting team. Number two, our improvement of our automated electronic connectivity strategy, we are finding that we are getting more billings, more insurance billings from our existing accounts as they grow to electronic systems. And so its hard as Jan and her team worked and the sales force out there worked with what I call the [indiscernible] portfolio performs the paper from patient singing the assignment of benefit to a physician signing a order to ensure its information, just collecting all the paper getting it into the right way with all this manual order entry. I think it’s amazing that’s a team is harvest as many insurance billings as they get from, it’s been a incredible work but automation and electronic connectivity is going to reduce some many chances for problem and error as you flowchart the process of what it used to look or still looks like for 1,200 accounts for this company to get the business. We’re going to harvest more insurance billings, through the new contracts as well. So now we make up another chunk there. The other thing is, we restructured our field [ph] sales force a bit and we’ve restructured that group to because they’ve got less time to take a paperwork, they’ve got more time for our cross selling initiative. And our cross selling initiative is to take our infusion products and sell those into our existing insurance accounts, because they need pulling on pumps most oncology infusion is given pulling out a pump. And we’ve got 1,600 client relationships based on ambulatory pumps that provide an introduction to us and we’ve got excellent relationships we’ve now built with many of the pulling out of [ph] pump companies. And are selling the razor blade or the IV administration set with those pumps and so we’re getting enhanced leverage of our sales force and that’s a way for our cost to go down.

Can I just ask one more thing on that.

Sure.

G&A was up sequentially $500,000 or $450,000 I think it was well certainly the highest, it’s been. I think it was your highest, your sales are going up your G&A, I think this quarter was the highest it’s been. Is that a one time spike or is there something happening on G&A line that is going to keep it high going forward?

You’ve seen an increase in your amortization from the IT projects that we’re releasing, that’s the main increase. And so as I just mentioned earlier we’re already starting to see the improvement in our cost per unit/billing that we’re seeing on that process. And that goes along with whether you’re seeing that increase now, but you'll see more leverage on G&A, as we move forward with our IT projects in 2016 that Eric just talked about.

One of the things I would add, you will see the IT amortization right away. But the efficiencies and cost savings follow that. And so I think you’re just like you got the patience for the billing, you've got to realize that long term, year from now those companies have worked very different as we become a completely automated company. But now we’ve developed with the EXPRESS System we’ve invested in and got this whole streamlined system with realtime data for our customers, our reps, our customers' service, the billing department, everybody is looking at the same data, it’s all up-to-date. There is not all this double keying of forms, of four different forms in problems for errors we’re reducing the number of phone calls with customers, the amount of time talking about paperwork, its more efficient form them. And they’ve appreciated the cost efficiencies of HC [ph] and we’re starting to see the efficiencies as well. But in the short-term we are – its all hands on deck rolling out 1,300 customers over the next few months here.

Right. So and – maybe I’m just interested [ph] but I was actually referring to the $6.1 million G&A. That doesn’t include amortization you break out amortization separately as the 784 [ph].

Well, that also includes – that also includes IT expense, the cash expense of IT. Once you roll projects out, you can capitalize internal cost little more, so you have maintenance cost. So that relates to IT department part.

Well, I guess that my question is that, is the $6.1 million is that kind of a new run rate for you guys or are there some sort of special IT expenses that are going to disappear over the next couple of quarters?

No, that would be the run rate, that eventually you’ll start seeing some savings on the G&A line on the operational side.

Okay. All right, thanks. So I’ll get back in the queue. I have couple of other questions but I’ll let someone ask.

And our next question comes from Tim Vestal from Kleinheinz Capital. Please go ahead.

Hey, guys good morning.

Good morning.

Just following-up on the G&A question, so you disclosed that $1.9 million of that was from compensation and personal expenses, how much of that is from the Ciscura acquisition and are there other cost synergy opportunities from that?

I think actually very little of that was the Ciscura acquisition. That we hired I think total of five employees from Ciscura, most of them were sales employees. And but all the billings, and operation, and customers service and all that, we do not hire those people from Ciscura. Remember Ciscura was not a company acquisition, we just bought their pumps that were was over 100 infusion clinics and we continued with their sales people at those 100 infusion clinics. But we only had a couple of service center hires. As we took over the lease of their Alpharetta, Georgia facility.

Okay Joan.

Do you have anything to add?

No, I mean, from the standpoint now that IT costs are going to be a higher percentage of our higher cost from the G&A line. And as Eric has mentioned, the savings from – the corresponding saving from these programs will come later in 2016 and that’s part of our plan in offsetting the CMS cut. So the $6.1 million was a good number there’s nothing on it to the year. Now for the full-year, there was a $0.7 million of Ciscura and roughly $100,000 this quarter some wrap up professional fees.

Right, okay. But 50% of the increase in G&A is from the personnel and competition expense. Can you just kind of flush that out a little bit is it corporate level adding staff or?

One [Indiscernible] that we’ve have had some IT staff and as we build on IT department, we have added some corporate IT staff – that’s part of it.

. :

But again, you got to recall some of our G&A is operational base. As we continue to grow our warehousing cost like, for example, a year ago we didn’t have the warehouse and operate at Georgia today we do. That’s why in the beginning of the MD&A section I state what is in G&A. So G&A actually have some variable costs that will naturally increase as revenue builds up.

Got it, okay. What it the – do you know just kind of show how fixed versus variable cost in G&A.

I’ll have to pin the paper on that. Without acquisitions anything else [indiscernible]. Again that’s why Eric’s comments were more overly on the focus on bottom line EBITDA margins and gross profit margins.

Okay, great. Thanks a lot

And our next question comes from Bill Gordon from Gordon Capital. Please go ahead.

Good morning. The fourth quarter, then Medicare $2 million hit, is that something one-off situation that we’re not going to see anything from that again are we up with price now reimbursement levels or so in the fourth quarter go forward that basically are acceptable to all parties concerned. And Page 2 kind of seasonality if any do we see here?

Well thanks Bill for the question. So to be clear the CMS cuts that we’re talking about for the $2 million, that’s for 2016. So for 2015 competitive bid pricing hasn’t been rolled out to those customers. So this is we are talking about going forward and that’s why again I want to draw attention to my statement that we’re keeping adjusted EBITDA margins intact despite these two million cuts and that’s why the previous question was what have done to offset these cuts, payor contracting, automation, harvesting more billings from automated system versus our current double manual order entry system and the comments about G&A. And again Jon makes a good point, there is a lot of things up in G&A that I'm not use to be in a G&A for running the P&L for four. So the gross margin is kind of overstated but its confusing to not to try to explain the profitability of this great little business to people, but I don’t want to make another change and Jon didn’t want to make another change. And so the $2 million in going forward and we are offsetting it and keeping our EBITDA margins intact.

When you say going forward in those we've got the correct reimbursement rates at this particular point and the fourth quarter represented those and we should have no more – we should not have any of the problems with conceptually going forward.

Now I’m going to say another way effective January 1, 2016. Medicare, one of our biggest insurance reimbursement cut rates effective January 1, 2016. 2015 results do not reflect the impact. The impact is going to felt in 2016 or two months into it and we know that based on our base of business we’re going to get $2 million less from those same Medicare patients in 2016 than we got in 2015. You mentioned seasonality and yes, there is some seasonality in the business. One of the things we tried to show that is in the investor presentation that we filed with the SEC, you can look at our quarter-to-quarter results, and you can see that typically the fourth quarter is stronger than the first quarter. And there is reasons for that that have to do with patients meeting deductibles there is some typically the good flu season in the winter is better for IV pump rental business, but there are some seasonality effects that you can see in the numbers.

Let’s try the question – try it differently, you point that a $0.09 quarter in the fourth quarter, if you had the new reimbursement rates in Medicare, et cetera in there what would that quarter look like?

Can you answer this one Mike?

No again Bill I think the point, from if you’re looking at the bottom line…

Yes.

What Eric is saying no different, because there will be a different next between revenue and our cost structure

Yes I think, Bill questions is, we have the cuts now with our existing thing we have really calculated that, because we’ve been looking at 2016, when the effect is going to play. So if we had a fourth quarter, where we had $2 million divided by four quarters is $500,000 less in and that would drop like a rock all the way from the revenue line right the way down to the net income and earnings so it will be $500,000 less

Got it, okay. Thank you

And our next question comes from. Sorry

No please go ahead.

Our next question comes from Richard Dearnley from Longport Partners. Please go ahead.

Good morning, could you put some numbers around the size of your direct selling of disposables revenue and cash [ph] that which was up 67% and how much of product sales was that which – product sales down to and direct up 67%, was that because your base business is taking less disposables?

Currently we don’t disclose the amount of disposable sales for competitive reasons. But you can see what our direct sales, we’re going to – we’ll file when we do our investor reports. And we’re just about to attend a conference that we signed up for some time ago. You will see finally a presentation for that conference. Now will talk a little bit more about the four revenue streams. So disposable sales, I think it is a small numbers. When we look at our total company it’s small numbers, and its relatively new initiative and this is the direct selling of disposables, IV sets and closed system transfer devices to protect clinicians with the infusion of chemotherapy. And its small numbers, but we got a big base of accounts to take our new product catalog to. And as it becomes more significant I’ll probably talk to the numbers in more detail going forward. But I choose not to do that at this time.

Okay, thank you.

And our next question comes from Douglas Weiss from DSW Investments. Please go ahead.

Hi, couple follow-ups. So given that you bought the pumps, you expanded your pumps in use the fourth quarter. Is 2016 going to look similar to 2015 in terms of the seasonality where things really accelerated in the second half of the year?

I think so, one thing we’ve started off this year with a bang implementing some large university hospitals that we expect to have – we’re forecasting the impact of those accounts as they get up. So I think you’ll see – and again some of the things you see toward the bigger second half of the year is because of the things have got implemented earlier as Jon made a great point with the revenue cycle insurance sometimes it takes up to six months to your real stream of revenue coming from the date, we pay a purchase order from one of our contenders. And so but I think it will look similar. Our business right now is growing as fast as it ever has. And the electronic connectivity and initiatives that we have in place continues to fund us. One project comes to mind we did have a large capital sale in the fourth quarter. I think our product sales were up something like 54%. And believe me that was IV sets, those were IV pumps. And one thing about this business is if you look at the past, when the company has had an opportunistic sale and got a big capital equipment sale like we did this year that’s what pushes us to double digit growth. But you can't count on that. And so I don't want to be chasing capital equipment sales to try to get double-digit growth because I promised guidance. I'd rather say the high single-digit, that I know just are recurring money machine of rental infusion pumps is going to provide. And then if we get a big capital equipment sale then we will be able to update our guidance when we know we’ve got that big pump sale in the bag.

Right, okay. And then on Pain Management, you started a little more excited about that this quarter than you maybe have in the last few quarters. And I think there was a sense that the business has stalled a little bit. Is that the right way to characterize it or you seeing sort of a reacceleration there, are you more excited about what's happening there?

Well, I'm really surprised by the question Doug. And I'm only surprised that there was a time when I do seem excited about paying. It’s a tough business and maybe there were some times that I know people said oh, when I don't talk about in my quarterly call, it looks like I'm moving off subject. I still see tremendous upside for pain. And exciting news for me is some of these prestigious orthopedic surgery institutions that were getting into they love it. They love it so much that they are helping us. I’m going to be in Washington, D.C. tomorrow doing lobbying. And I’ve got one of our customers flying half way across the country to meet me there, because he is so excited about what this recovery, this non-narcotic recovery does for all these, get replacements, new replacements. So I continue to be bullish on paying the opportunity and how it’s working in the market. I would say the – our reimbursement for pain is growing well, we’re getting lots of private insurance reimbursement on it. But it’s hard in today’s busy surgery environment to catch somebody’s attention with this issue. So it’s a lot of just hard industry selling trying to find somebody to become a champion of this great issue. Now we’re finding people that are champions, who are on their own time coming to join me in Washington, D.C., because they feel so strong about the issue and I do as well.

Yes. And you think at some point you might start to break out pain either from a revenue standpoint or from a utilization standpoint. [Indiscernible] this point, but.

Yes. Let’s – let me think how we can do that. It gets a little complicated on to be – on our insurance reimbursement and knowing, we got a checking from Blue Cross and this is I think some of our electronic connectivity is going to give us better reporting. We’ve just implemented this BI360 project and I think we’re going to have improved reporting in the future. But to be honest with you, some – we’re taking care of the patient, we’re making the customer happy and revenues coming in, but a lot of work for Jon and Jan’s team to go through and find every [indiscernible] by disease type. I know we’re getting, one thing, we’re getting better is our different cancer diagnosis. And as you see in our investor reporting one thing that’s interesting is the growth that still happens is the growth of the non-colorectal cancer segment for 5FU. 5FU is increasingly being used for head and neck cancers, pancreatic cancers. And I talked about this on future calls – our past calls, these new oncology, chemotherapeutic compounds have come out. And we’re in a great position to help our accounts with those new drugs and some of those drugs use a lot more days of therapy than 5FU. We're seeing that trend, as well. But our coding of making sure the patients go into the right bucket, it takes us a while to track that from insurance billings to really weigh out our net collected revenue whether it's pain or oncology. But we're going to do better in the future on that as more of our business becomes electronic.

Okay, just couple of things…

[Indiscernible] Doug this is Jon.

Okay.

Doug, this is Jon. And also when we released the investor presentation just like we did in the 2014, you’ll see we break it out on an annual basis.

Okay, okay. On utilization you've added another distribution point. I mean, how – do you feel like you’re making progress on improving those utilization numbers and gaining efficiencies there and is there lot of opportunity there?

There's opportunity for sure. We really reduced our FedEx shipping, I don't know I'm sort of to say a number but I know we've were FedEx in so many products that we have a tremendous reduction. FedEx, which has allowed us to have all these local service centers and Jon says our service centers are up in the G&A line. And they've been paid for being closer to our customers and reducing our long-term delivery expense by getting out of the FedEx business. And we have improved utilizations in some areas it’s hard to when you're growing fast with big accounts and ordering pumps and pumps you’re sitting there waiting for the nursing supervisor of three East [ph] to schedule the in-services so you can start the program. It's just you got [indiscernible] sitting there and I just see gas leader [ph] spinning with how many cents per minutes we’re spending to have all these pumps sitting in University Hospital. But you got to try to encourage the customer to help them at the program as soon as possible. And I think an interesting is when we look at around long established accounts, the utilization is improving I would say, in general our longer-term customer and it’s our new customers and new large customers that multiple facilities and want to transfer pumps between the nine different doctors offices that Memorial Hospital of any city USA on in main street has bought all these oncology practices and now earning they are working with them. And the logistics get a little more confusing than it used to be when you went to Dr. Smith’s office and plot five pumps in there.

Right, okay. And then last question on private pay reimbursement. It sounds like you actually like things have stabilized, not there so bad before, but it sounds like you actually made some progress with some of those relationship, it that accurate?

Well, I just want to say, again stabilized we’ve made so much improvement I’d like Jan to talk about the things that team has accomplished and how we can improve [indiscernible] contact.

All your contract

Sure, I think as Eric and Jon both mentioned, we improved the number of contracts by 70 which is a huge accomplishment in a time where, you’ve got the Affordable Care Act in place and the exchange an obvious new plan entering into the mix and we’ve been able to – that [indiscernible] put those plans under contract and service all of our patients and gain reimbursement where we didn’t have reimbursement before. So I would say quite the opposite that we’ve made huge strides as supposed.

Jan in some cases we’ve had some great improvements as well.

Yes, that is part of our initiative as well the payor group. We added staff to our payor group this year or last year and one of their objectives is to take a look at national contracts and see where we can do better on the rates that we had under contract and we are starting to see some success in that area as well.

I will comment on, well I’ll make – I get this question as lot is do you expect private payors to follow CMS. Private payors are leading in home infusion. CMS is the behind and private payors reimburse for antibiotic cared home and peripheral nerve block at home, because they know the home is a least expensive place care. Our federal government is still behind in reimbursing for home infusion. And there’s a lot of senior citizens out there that deserve to receive care in their home the most effective place of care. And so I think the federal government is behind the times and their price cuts are kind of behind the times of what private contractors have done previously.

And if you look at your total book of [indiscernible], do you think that overtime rates will probably remain flat or they’ll still improve a little bit, or they’ll decline a little bit?

It’s hard to predict the future. But what we’re going to do is we’re going to go out there and we’re going to get payor contracts, and we’re going to be the most cost effective way to deliver care. Home infusion is here to stay, and its going to grow, we are the most cost effective model and we’re the model that provides the greatest continuity of care for a great help networks and their patients they are special things about our model that have us positioned. And I’ve been in this business my whole life. I’ve always seen reimbursement cuts whether it was DRGs or managed care and the people who survive are those who provide the best patient care at the most cost effective rates and that’s what we’re going to focus on.

Okay. All right. Well, thanks. Thanks for all the answers.

Yes. [Multiple Speakers] Go ahead please.

Our next question comes from Chris Sansone with Samson Advisors. Please go ahead.

Hi. What do you think your investment in new pumps will be in 2016? And what do you think the balance sheet looks like as we progress throughout the year and make those investments. And then lastly, but also balance sheet related, DSO’s picked up in the fourth quarter a lot. So can you talk about what’s going on there with the accounts receivable. Thanks.

Okay. Very good, Chris. Jon, why don’t you talk about the balance sheet?

Sure. Great question there, Chris. From a standpoint DSO we had a opportunistic pump sales, we discussed of $0.9 million that came in the last month. So that was $1 million of your spike also compared year-over-year rental revenue was up $2.3 million. And so we’ve added a lot of new business and that does calls a lot of spike in the last month of the quarter. We’re getting paper work, getting the pumps online and getting the customer used to our processes. December was a very big month for us. We call it the hockey stick internally. So we had a big hockey stick in the month. So first of all if you take the pump sale out of the DSO it was 64 days, which is the same 64 days that we were in the third quarter. And then the increase and basically the increase in AR over the prior year is the same as the increase in rental revenue. And we were tracking again most of that increase that you looked at year-over-year came in the last, last December, Jan had a very busy December.

And then the balance sheet and the pump purchases.

The pump purchasing, Chris, we spend about $0.75 to $0.80 on – in CapEx for every dollar that we’re going to get in rental revenue. So as we – so if you look at the increase that Eric’s mentioning from his standpoint of high-single digits, whatever your model is, this is based on historical numbers we’ve given out the rental revenue, revenue ratio with $0.75 to $0.80 for every dollar we grow.

Yes. But you are already put in a bunch of money in Q4. So I guess moving track of the timing, why we need to keep the rate as high as it is given.

No, that’s over a period you are exactly right over a period of time. The pumps that we’re buying now are for the increase that we’re going into 2016. And again, we’ll be buying, we haven’t given guidance for 2017. So the pumps that we will be buying in the second half of 2016 will be for 2017. So for that reason, I don’t forecast a number for pump purchases for the year.

Okay. So what impact do you think that’s going to have on the balance sheet and what sort of debt level are you guys comfortable with.

Right now, if you look at it from a standpoint on the leverage ratio, we’re less than two times EBITDA. So we feel very comfortable with where we’re at. Now, on the other hand, we’re three payments prepaid on our term loan currently. So when we have excess cash and we’re maintaining it nice, good, strong liquidity whether it is cash on hand or revolver availability in the $10 million range. We’re paying down debt. And so we’re right now we ended the year with three prepayments on senior debt. I don’t know how many companies out there, are prepaid on the senior debt three payments. So we’re comfortable with it. With the level we are at our strategy is first buy pumps for growth. Second is to paydown debt and as we have that dry powder if we have opportunistic acquisitions is like we have switch gear up. We can go out and do a 100% debt financing on those and add value to our shareholders.

Okay. And so Jon, it sounds like the DSOs have come down and post 12\31

Yes.

Okay, thanks.

I guess that answers the AR question that was received by email then.

Yes.

Okay, very good.

[Operator Instructions]

Operator, do we have any more questions.

Standing by for questions, and we have Brooks ONeil from White Oaks in line. Please go ahead.

Good morning. I just wanted to follow-up on that balance sheet question and clearly you answered where you are today. But I’m curious if you could just speak to what level of debt are you comfortable with as you think about making acquisitions in 2016 maybe as a percentage of as a multiple of adjusted EBITDA or something.

Yes. Thanks, Brooks for the question. I'm comfortable with our current debt level but more interested in reducing it than growing it. And just about three years here now and the only acquisition we've done is the Ciscura acquisition. Far more of that has been organic growth. And so I think for me any acquisitions that we do would be – would not be large and we’ll keep our debt level where it is now. And again we want to – we get such a fast return on pumps, its a great way to invest in the company. Now that our IT spend is down, we can look forward at hopefully reducing our debt level. But you never know opportunities that appear in the market. And if we can find outstanding return for our shareholders we’ll probably trigger but I'm not interested in doing a lot of acquisition and getting highly leveraged.

Great, congratulations and terrific performance.

Thank you, Brooks.

And our next question comes from Bill Gordon from Gordon Capital. Please go ahead.

Can you offer some sort of annualized run rate for the fourth quarter for each pump.

Sorry, Bill. Could you ask the question again?

Fourth quarter run rate for the pumps on an annualized basis. Can you give us a number?

No that’s – that was a question that was just asked by Chris. We don’t forecast that pump number. We don’t go exact with our guidance on that. But if you look historically as we grow over a year’s period of time it takes $0.75 for every dollar we grow in rental revenue.

Okay.

And we only buy – the way we buy parts only by parts when we see enough.

Okay. Thank you.

Thank you, Bill.

We have no further questions at this time. I’ll now turn the call back over to Eric Steen, Chief Executive Officer. Please go ahead.

Thank you so much. And thanks for everyone for joining the call today. We’ll talk to you next quarter. Have a good day.

Thank you, ladies and gentlemen. This concludes today’s call. Thank you for participating. And you may now disconnect.