| Basis of Presentation and Summary of Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Catalent, Inc. ( “ Catalent ” or the “ Company ” ) directly and wholly owns PTS Intermediate Holdings LLC ( “ Intermediate Holdings ” ). Intermediate Holdings directly and wholly owns Catalent Pharma Solutions, Inc. ( “ Operating Company ” ). The financial results of Catalent are primarily comprised of the financial results of Operating Company and its subsidiaries on a consolidated basis. On July 31, 2014, the Company commenced an initial public offering (the “ IPO ” ) of its common stock, par value $0.01 (the “ Common Stock ” ), in which it sold a total of 48.9 million shares at a price of $20.50 per share, before underwriting discounts and commissions. The Common Stock began trading on the New York Stock Exchange (the “ NYSE ” ) under the symbol “ CTLT ” as of the IPO. The Company is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics, and consumer health products. Its oral, injectable, gene therapy, and respiratory delivery technologies address the full diversity of the pharmaceutical industry, including small molecules, protein and gene therapy biologics and consumer health products. Through its extensive capabilities and deep expertise in product development, it helps its customers take products to market faster, including nearly half of new drug products approved by the U.S. Food and Drug Administration (the “ FDA ” ) in the last decade. Its advanced delivery technology platforms, its proven formulation, manufacturing, and regulatory expertise, and its broad and deep intellectual property enable its customers to develop more products and better treatments for patients and consumers. Across both development and delivery, its commitment to reliably supply its customers’ and their patients’ needs is the foundation for the value it provides; annually, it produces approximately 73 billion doses for nearly 7,000 customer products, or approximately 1 in every 20 doses of such products taken each year by patients and consumers around the world. The Company believes that through its investments in growth-enabling capacity and capabilities, its ongoing focus on operational and quality excellence, the sales of existing customer products, the introduction of new customer products, its innovation activities and patents, and its entry into new markets, it will continue to benefit from attractive and differentiated margins and realize the growth potential from these areas. Reportable Segments In fiscal 2018, the Company engaged in a business reorganization to better align its internal business unit structure with its “ Follow the Molecule ” strategy and the increased focus on its biologics-related offerings. Under the revised structure, the Company created two operating segments from the former Drug Delivery Solutions segment: • Biologics and Specialty Drug Delivery, which encompasses biologic cell-line development and manufacturing, development and manufacturing services for blow-fill-seal unit doses, prefilled syringes, vials, and cartridges; analytical development and testing services for large molecules; and development and manufacturing for inhaled products for delivery via metered dose inhalers, dry powder inhalers, and intra-nasal sprays; and • Oral Drug Delivery, which encompasses comprehensive formulation, development, manufacturing, and analytical development capabilities using advanced processing technologies such as bioavailability enhancement, controlled release, particle size engineering, and taste-masking for solid oral-dose forms. Each of these two segments reports through a separate management team and ultimately reports to the Company's Chief Executive Officer who is designated as the Chief Operating Decision Maker ( “ CODM ” ) for segment reporting purposes. The Company's operating segments are the same as its reporting segments. All prior-period comparative segment information has been restated to reflect the current reportable segments in accordance with Accounting Standards Codification ( “ ASC ” ) 280 Segment Reporting, promulgated by the Financial Accounting Standards Board (the “ FASB ” ). The Company's offerings and services are summarized below by reporting segment. Softgel Technologies Through its Softgel Technologies segment, the Company provides formulation, development and manufacturing services for soft capsules, or “ softgels, ” which the Company’s predecessor first commercialized in the 1930s and which have continually been enhanced. The Company is the market leader in overall softgel development and manufacturing and holds the leading market position in the prescription arena. The Company’s principal softgel technologies include traditional softgel capsules, in which the shell is made of animal-derived gelatin, and Vegicaps and OptiShell capsules, in which the shell is made from plant-derived materials. Softgel capsules are used in a broad range of customer products, including prescription drugs, over-the- counter medications, dietary supplements, unit-dose cosmetics, and animal health medicinal preparations. Softgel capsules encapsulate liquid, paste or oil-based active compounds in solution or suspension within an outer shell. In the manufacturing process, the capsules are formed, filled, and sealed simultaneously. The Company typically performs encapsulation for a product within one of its softgel facilities, with active ingredients provided by customers or sourced directly by the Company. Softgels have historically been used to solve formulation challenges or technical issues for a specific drug, to help improve the clinical performance of compounds, to provide important market differentiation, particularly for over-the-counter medications, and to provide safe handling of hormonal, potent and cytotoxic drugs. The Company also participates in the softgel vitamin, mineral and supplement business in selected regions around the world. With the 2001 introduction of the Company’s plant-derived softgel shell, Vegicaps capsules, consumer health customers have been able to extend the softgel dose form to a broader range of active ingredients and serve patient/consumer populations that were previously inaccessible due to religious, dietary or cultural preferences. In recent years, the Company has extended this platform to pharmaceutical products via its OptiShell capsule offering. The Company’s Vegicaps and OptiShell capsules are protected by patents in most major global markets. Physician and patient studies the Company has conducted have demonstrated a preference for softgels versus traditional tablet and hard capsule dose forms in terms of ease of swallowing, real or perceived speed of delivery, ability to remove or eliminate unpleasant odor or taste and, for physicians, perceived improved patient adherence with dosing regimens. Representative customers of Softgel Technologies include Pfizer, Novartis, Bayer, GlaxoSmithKline, Teva, Johnson & Johnson, Procter & Gamble, and Allergan. Biologics and Specialty Drug Delivery The Company’s Biologics and Specialty Drug Delivery segment provides drug substance development and manufacturing, drug product clinical and commercial manufacturing, integrated clinical and commercial supply solutions for protein and gene therapy biologics and specialty small molecules administered via injection, inhalation and ophthalmic routes, using both traditional and advanced delivery technologies. The business has expertise in development as well as scale up and commercial manufacturing. Representative customers of Biologics and Specialty Drug Delivery include Eli Lilly, Teva, Mylan, Roche, Novartis, Sarepta, and Genentech, along with multiple innovative small and mid-tier pharmaceutical and biologics customers. The Company’s growing biologics offering includes cell-line development based on its advanced and patented GPEx technology, which is used to develop stable, high-yielding mammalian cell lines for both innovator and biosimilar biologic compounds. GPEx technology can provide rapid cell-line development, high biologics production yields, flexibility, and versatility. The Company’s development and manufacturing facility in Madison, Wisconsin has the capability and capacity to produce biologics drug substance from 250L to 4000L scale in single-use reactors, using current good manufacturing practices ( “ cGMP ” ) as defined by the FDA and other health regulatory agencies to provide maximum efficiency and flexibility. The fiscal 2018 acquisition of Cook Pharmica LLC (now Catalent Indiana LLC, “ Catalent Indiana ” ) added a biologics-focused contract development and manufacturing organization with capabilities across biologics development, clinical, and commercial drug substance manufacturing, formulation, finished-dose manufacturing, and packaging. In fiscal 2019, the Company continued to expand production capacity in both Madison and Bloomington, starting construction on a fourth drug substance suite at its facility in Madison, Wisconsin and new drug product manufacturing and packaging capacity at its facility in Bloomington, Indiana. The Company’s SMARTag next-generation antibody-drug conjugate technology enables development of antibody-drug conjugates and other protein conjugates with improved efficacy, safety, and manufacturability. In fiscal 2019, the Company launched its OneBio Suite, which provides customers the potential to seamlessly integrate drug substance, drug product, and clinical supply management for products in development, and for integrated commercial supply across both drug substance and product. Combined with offerings from the Company’s other businesses, the Company provides the broadest range of technologies and services supporting the development and launch of new biologic entities, biosimilars, and biobetters to bring a product from gene to commercialization, faster. The Company’s range of injectable manufacturing offerings includes filling drugs or biologics into pre-filled syringes, cartridges, and vials, with flexibility to accommodate other formats within our existing network, increasingly focused on complex pharmaceuticals and biologics. With the Company’s range of technologies, the segment is able to meet a wide range of specifications, timelines, and budgets. The Company believes that the complexity of the manufacturing process, the importance of experience and know-how, regulatory compliance, and high start-up capital requirements provide it with a substantial competitive advantage in the market. For example, blow-fill-seal is an advanced aseptic processing technology, which uses a continuous process to form, fill with drug or biologic, and seal a plastic container in a sterile environment. Blow-fill-seal units are currently used for a variety of pharmaceuticals in liquid form, such as respiratory, ophthalmic, and otic products. The Company’s sterile blow-fill-seal manufacturing has significant capacity and flexibility in manufacturing configurations. This business provides flexible and scalable solutions for unit-dose delivery of complex formulations such as suspensions and emulsions. Further, the business provides formulation, engineering and manufacturing solutions related to complex containers. The Company’s regulatory expertise can lead to decreased time to commercialization, and its dedicated development production lines support feasibility, stability, and clinical runs. The Company plans to continue to expand its product line in existing and new markets, and in higher margin specialty products with additional respiratory, ophthalmic, injectable, and nasal applications. The segment also offers analytical development and testing services for large molecules, including cGMP release and stability testing. The Company’s respiratory product capabilities include development and manufacturing services for inhaled products for delivery via metered dose inhalers, dry powder inhalers and intra-nasal sprays. Across multiple complex dosage forms, the segment provides drug and biologic solutions from early-stage development and clinical support all the way through to scale up and commercialization. On May 17, 2019, as described below in Note 3, Business Combinations , the Company acquired Paragon Bioservices, Inc. (“Paragon”), which is focused on the development and manufacture of cutting-edge biopharmaceuticals, including viral vectors used in gene therapies. Paragon partners with biotech and pharma companies to develop and manufacture products based on transformative technologies, including gene therapies based on adeno-associated viruses (“AAV”) and other modalities, next-generation vaccines, oncology immunotherapies (oncolytic viruses and CAR-T cell therapies), therapeutic proteins, and other complex biologics. Paragon brings specialized expertise in AAV vectors, the most commonly used delivery system for gene therapy, as well as capabilities in plasmids and lentivirus vectors manufactured using cGMP and differentiated scientific, development, and manufacturing capabilities that will enhance the Company’s biologics business and end-to-end integrated biopharmaceutical solutions for customers. In June 2019, Paragon agreed to acquire two additional laboratory and manufacturing facilities located in southern Maryland from Novavax, Inc. The Novavax transaction closed in late July 2019. Oral Drug Delivery The Company’s Oral Drug Delivery segment provides various advanced formulation development and manufacturing technologies, and related integrated solutions including: clinical development and commercial manufacturing of a broad range of oral dose forms, including our proprietary fast-dissolve Zydis tablets and both conventional immediate and controlled release tablets, capsules, and sachet products. Representative customers of Oral Drug Delivery include Pfizer, Johnson & Johnson, Bayer, Novartis, and Perrigo. The segment provides comprehensive pre-formulation, development, and cGMP manufacturing at both clinical and commercial scales for traditional and advanced complex oral solid-dose formats, including coated and uncoated tablets, pellet/bead/powder-filled two-piece hard capsules, granulated powders, and other forms of immediate and modified release branded prescription, generic, and consumer products. The Company has substantial experience developing and scaling up products requiring accelerated development timelines, bioavailability or solubility enhancement, specialized handling ( e.g., potent or DEA-regulated materials), complex technology transfers, and specialized manufacturing processes. The Company also provides micronization and particle engineering services, which may enhance a drug’s manufacturability or clinical performance. The Company offers comprehensive analytical testing and scientific services and stability testing for small molecules, both to support integrated development programs and on a fee-for-service basis. The Company provides global regulatory and support services for its customers’ clinical strategies during all stages of development. In recent years, the Company has expanded its network of development sites focused on earlier phase compounds, to engage with more customer molecules, earlier, with the intent to provide later stage manufacturing and supporting services as those molecules progress towards commercial approval and beyond. Demand for the segment’s offerings is driven by the need for scientific expertise and depth and breadth of services offered, as well as by the reliability of its supply, including quality, execution, and performance. The Company launched its orally dissolving tablet business in 1986 with the introduction of Zydis tablets, a unique proprietary freeze-dried tablet that typically dissolves in the mouth, without water, in less than three seconds. Most often used for drugs and patient groups that can benefit from rapid oral disintegration, the Company can adapt the Zydis technology to a wide range of products and indications, including treatments for a variety of central nervous system-related conditions such as migraines, Parkinson’s disease, and schizophrenia, and consumer healthcare products targeting indications such as pain and allergy relief. The Company continues to develop Zydis tablets in different ways with its customers as it extends the application of the technology to new therapeutic categories, including immunotherapy, vaccines, and biologic molecule delivery. In August 2018, the Company acquired Juniper Pharmaceuticals, Inc. (“Juniper”), which extends to the U.K. the geographic reach of the early-development and spray-dry dispersion capabilities it gained through its September 2016 acquisition of Pharmatek Laboratories, Inc. (“Pharmatek”). Clinical Supply Services The Company’s Clinical Supply Services segment provides manufacturing, packaging, storage, distribution, and inventory management for drugs and biologics in clinical trials. The segment offers customers flexible solutions for clinical supplies production and provides distribution and inventory management support for both simple and complex clinical trials. This includes over-encapsulation where needed; supplying placebos, comparator drug procurement, and clinical packages and kits for physicians and patients; inventory management; investigator kit ordering and fulfillment; and return supply reconciliation and reporting. The segment supports trials in all regions of the world through its facilities and distribution network. In fiscal 2018, the Company completed the second phase of its expansion program in our Kansas City, Missouri facility. Further, in fiscal 2016 and again in fiscal 2018, the Company expanded its Singapore facility by building additional flexible cGMP space, and the Company introduced clinical supply services at its existing 100,000 square foot facility in Japan, expanding its Asia Pacific capabilities. Additionally, in fiscal 2013, the Company established its first clinical supply services facility in China as a joint venture and assumed full ownership in fiscal 2015. The Company opened a second Clinical Supply Services facility in China in fiscal 2019. The Company is the leading provider of integrated development solutions and one of the leading providers of clinical trial supplies. Representative customers of Clinical Supply Services include Merck KGaA, IQVIA, Eli Lilly, AbbVie, and Incyte Corporation. Basis of Presentation These financial statements include all of the Company’s subsidiaries, including those operating outside the United States ( “ U.S. ” ) and are prepared in accordance with U.S. GAAP. All significant transactions among the Company’s businesses have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates include, but are not limited to, allowance for doubtful accounts, inventory and long-lived asset valuation, goodwill and other intangible asset valuation and impairment, equity-based compensation, income taxes, derivative valuation, and pension plan asset and liability valuation. Actual amounts may differ from these estimated amounts. Foreign Currency Translation The financial statements of the Company’s operations outside the U.S. are generally measured using the local currency as the functional currency. Adjustments to translate the assets and liabilities of the foreign operations into U.S. dollars are accumulated as a component of other comprehensive income/(loss) utilizing period-end exchange rates. In June 2018, as a result of the three-year cumulative consumer price index exceeding 100%, Argentina was classified as a highly inflationary economy. Beginning on July 1, 2018, the Company accounts for its Argentine operations as highly inflationary, but this change has not had a material effect on the consolidated financial statements. The currency fluctuation related to certain long-term inter-company loans deemed to not be repayable in the foreseeable future have been recorded within the cumulative translation adjustment, a component of other comprehensive income/(loss). In addition, the currency fluctuation associated with the portion of the Company’s euro-denominated debt designated as a net investment hedge is included as a component of other comprehensive income/(loss). Foreign currency transaction gains and losses calculated by utilizing weighted average exchange rates for the period are included in the statements of operations in “ other (income)/expense, net. ” Such foreign currency transaction gains and losses include inter-company loans that are repayable in the foreseeable future. Cash and Cash Equivalents All liquid investments purchased with original maturities of three months or less are considered to be cash and equivalents. The carrying value of these cash equivalents approximates fair value. Receivables and Allowance for Doubtful Accounts Trade receivables are primarily comprised of amounts owed to the Company through its operating activities and are presented net of an allowance for doubtful accounts. The Company monitors past due accounts on an ongoing basis and establishes appropriate reserves to cover probable losses. An account is considered past due on the first day after its due date. The Company makes judgments as to its ability to collect outstanding receivables and provides allowances when it concludes that all or a portion of the receivable will not be collected. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation to the Company, and the condition of the general economy and the customer’s industry. Concentrations of Credit Risk and Major Customers Concentration of credit risk, with respect to accounts receivable, is limited due to the large number of customers and their dispersion across different geographic areas. The customers are primarily concentrated in the pharmaceutical and healthcare industry. The Company normally does not require collateral or any other security to support credit sales. The Company performs ongoing credit evaluations of its customers’ financial conditions and maintains reserves for credit losses. Such losses historically have been within the Company’s expectations. No single customer exceeded 10% of revenue during the fiscal years ended 2019, 2018, and 2017 or 10% of accounts receivable as of the years ended 2019 and 2018. Inventories Inventory is stated at the lower of cost or net realizable value, using the first-in, first-out ( “ FIFO ” ) method. The Company provides for cost adjustments for excess, obsolete, or slow-moving inventory based on changes in customer demand, technology developments or other economic factors. Inventory consists of costs associated with raw material, labor, and overhead. Goodwill The Company accounts for purchased goodwill and intangible assets with indefinite lives in accordance with ASC 350 Goodwill, Intangible and Other Assets . Under ASC 350, goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment at least annually. The Company performs an impairment evaluation of goodwill annually during the fourth quarter of its fiscal year or when circumstances otherwise indicate an evaluation should be performed. The evaluation may begin with a qualitative assessment for each reporting unit to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying value. Factors considered in a qualitative assessment include, among other things, macroeconomic conditions, industry and market considerations, financial performance of the respective reporting unit and other relevant entity and reporting-unit specific considerations. If the qualitative assessment does not generate a positive response, or if no qualitative assessment is performed, a quantitative assessment, based upon discounted cash flows, is performed and requires management to estimate future cash flows, growth rates, and macroeconomic, industry, and market conditions. In fiscal 2017 and 2018, the Company proceeded immediately to the quantitative assessment, but in fiscal 2019 the Company began its impairment evaluation as of April 1, 2019 with the qualitative assessment. Based on its qualitative assessments conducted as of April 1, 2019, the Company determined for each reporting unit with goodwill that it was more likely than not that its respective fair value exceeded its carrying value, indicating there was no impairment. For more information regarding goodwill balances at June 30, 2019, see Note 4, Goodwill . Property and Equipment and Other Definite-Lived Intangible Assets Property and equipment are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, including leasehold improvements and capital lease assets that are amortized over the shorter of their useful lives or the terms of the respective leases. The Company generally uses the following range of useful lives for its property and equipment categories: buildings and improvements—5 to 50 years; machinery and equipment—3 to 10 years; and furniture and fixtures—3 to 7 years. Depreciation expense was $140.4 million for the fiscal year ended June 30, 2019, $127.5 million for the fiscal year ended June 30, 2018, and $102.2 million for the fiscal year ended June 30, 2017. Depreciation expense includes amortization of assets related to capital leases. The Company charges repairs and maintenance costs to expense as incurred. The amount of capitalized interest was immaterial for all periods presented. Intangible assets with finite lives, including customer relationships, patents, and trademarks, are amortized over their useful lives. The Company also capitalizes certain computer software and development costs in other intangibles, net, when incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are amortized over the estimated useful lives of the software, which generally range from 3 to 5 years. The Company evaluates the recoverability of its other long-lived assets, including amortizing intangible assets, if circumstances indicate impairment may have occurred pursuant to ASC 360 Property, Plant and Equipment . This analysis is performed by comparing the respective carrying values of the assets to the current and expected future cash flows, on an un-discounted basis, to be generated from such assets. If such analysis indicates that the carrying value of these assets is not recoverable, the carrying value of such assets is reduced to fair value through a charge to the consolidated statements of operations. Fair value is determined based on assumptions the Company believes marketplace participants would utilize and comparable marketplace information in similar arm’s length transactions. The Company recorded impairment charges related to definite-lived intangible assets and property, plant, and equipment of $5.1 million, $8.7 million, and $9.8 million, for the fiscal years ended June 30, 2019, 2018, and 2017, respectively. Post-Retirement and Pension Plans The Company sponsors various retirement and pension plans, including defined benefit retirement plans and defined contribution retirement plans. The measurement of the related benefit obligations and the net periodic benefit costs recorded each year are based upon actuarial computations, which require management’s judgment as to certain assumptions. These assumptions include the discount rates used in computing the present value of the benefit obligations and the net periodic benefit costs, the expected future rate of salary increases (for pay-related plans) and the expected long-term rate of return on plan assets (for funded plans). The Company uses the corridor approach to amortize actuarial gains and losses. Effective June 30, 2016, the approach used to estimate the service and interest components of net periodic benefit cost for benefit plans was changed to provide a more precise measurement of such costs. Historically, the Company estimated these service and interest components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Going forward, the Company has elected to utilize an approach that discounts the individual expected cash flows using the applicable spot rates derived from the yield curve over the projected cash flow period. The Company has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly has accounted for it prospectively. The expected long-term rate of return on plan assets is based on the target asset allocation and the average expected rate of growth for the asset classes invested. The average expected rate of growth is derived from a combination of historic returns, current market indicators, and the expected risk premium for each asset class. The Company uses a measurement date of June 30 for all its retirement and postretirement benefit plans. Derivative Instruments, Hedging Activities, and Fair Value Derivative Instruments and Hedging Activities The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest-rate, liquidity, and credit risk primarily by managing the amount, sources and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. The Company does not net any of its derivative positions under master netting arrangements. Specifically, the Company is exposed to fluctuations in the euro-U.S. dollar exchange rate on its investments in foreign operations in Europe. While the Company does not actively hedge against changes in foreign currency, it has mitigated the exposure of investments in its European operations through a net-investment hedge by denominating a portion of its debt in euros. In addition, as discussed in Note 9, Derivative Instruments and Hedging Activities , the Company has determined that an aspect of the dividend-rate adjustment feature of the Company’s convertible Series A Preferred Stock (as defined below, see Note 13, Redeemable Preferred Stock—Series A Preferred ) should be accounted for as a derivative liability. Fair Value The Company is required to measure certain assets and liabilities at fair value, either upon initial measurement or for subsequent accounting or reporting. The Company uses fair value extensively in the initial measurement of net assets acquired in a business combination and when accounting for and reporting on certain financial instruments. The Company estimates fair value using an exit price approach, which requires, among other things, that it determine the price that would be received to sell an asset or paid to transfer a liability in an orderly market. The determination of an exit price is considered from the perspective of market participants, considering the highest and best use of assets and, for liabilities, assuming the risk of non-performance will be the same before and after the transfer. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. When estimating fair value, depending on the nature and complexity of the assets or liability, the Company may use one or all of the following approaches: • Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities. • Cost approach, which is based on the cost to ac |
