Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 27, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | Diplomat Pharmacy, Inc. | ||
Entity Central Index Key | 1,610,092 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 709 | ||
Entity Common Stock, Shares Outstanding | 74,069,226 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and equivalents | $ 84,251 | $ 7,953 |
Accounts receivable, net | 332,091 | 275,568 |
Inventories | 206,603 | 215,351 |
Prepaid expenses and other current assets | 11,125 | 6,235 |
Total current assets | 634,070 | 505,107 |
Property and equipment, net | 38,990 | 20,372 |
Capitalized software for internal use, net | 36,520 | 50,247 |
Goodwill | 832,624 | 316,616 |
Definite-lived intangible assets, net | 392,011 | 199,862 |
Deferred income taxes | 6,010 | |
Other noncurrent assets | 6,208 | 1,040 |
Total assets | 1,940,423 | 1,099,254 |
Current liabilities: | ||
Accounts payable | 413,463 | 320,684 |
Borrowings on line of credit | 188,250 | 39,255 |
Short-term debt, including current portion of long-term debt | 11,500 | 7,500 |
Accrued expenses: | ||
Compensation and benefits | 9,584 | 5,674 |
Contingent consideration | 8,100 | |
Other | 20,560 | 12,233 |
Total current liabilities | 651,457 | 385,346 |
Long-term debt, less current portion | 521,098 | 100,184 |
Deferred income taxes | 14,367 | |
Contingent consideration | 4,000 | |
Total liabilities | 1,190,922 | 485,530 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Preferred stock (10,000,000 shares authorized; none issued and outstanding) | ||
Common stock (no par value; 590,000,000 shares authorized; 73,871,424 and 66,764,999 shares issued and outstanding at December 31, 2017 and 2016, respectively) | 619,235 | 503,828 |
Additional paid-in capital | 38,450 | 33,268 |
Retained earnings | 91,816 | 76,306 |
Total Diplomat Pharmacy shareholders' equity | 749,501 | 613,402 |
Noncontrolling interests | 322 | |
Total shareholders' equity | 749,501 | 613,724 |
Total liabilities and shareholders' equity | $ 1,940,423 | $ 1,099,254 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common shares, par value (in dollars per share) | $ 0 | $ 0 |
Common shares, authorized shares | 590,000,000 | 590,000,000 |
Common shares, issued shares | 73,871,424 | 66,764,999 |
Common shares, outstanding shares | 73,871,424 | 66,764,999 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Consolidated Statements of Operations | |||
Net sales | $ 4,485,230 | $ 4,410,388 | $ 3,366,631 |
Cost of products sold | (4,136,552) | (4,085,560) | (3,103,392) |
Gross profit | 348,678 | 324,828 | 263,239 |
Selling, general and administrative expenses | (330,113) | (277,751) | (217,302) |
Income from operations | 18,565 | 47,077 | 45,937 |
Other (expense) income: | |||
Interest expense | (10,716) | (6,573) | (5,239) |
Equity loss and impairment of non-consolidated entities | (4,659) | ||
Other | 213 | 370 | 308 |
Total other expense | (10,503) | (10,862) | (4,931) |
Income before income taxes | 8,062 | 36,215 | 41,006 |
Income tax benefit (expense) | 7,126 | (11,195) | (16,234) |
Net income | 15,188 | 25,020 | 24,772 |
Less net loss attributable to noncontrolling interest | (322) | (3,253) | (1,004) |
Net income allocable to Diplomat Pharmacy, Inc. | $ 15,510 | $ 28,273 | $ 25,776 |
Net income per common share: | |||
Basic (in dollars per share) | $ 0.23 | $ 0.43 | $ 0.42 |
Diluted (in dollars per share) | $ 0.23 | $ 0.42 | $ 0.41 |
Weighted average common shares outstanding: | |||
Basic (in shares) | 68,130,322 | 65,970,396 | 60,730,133 |
Diluted (in shares) | 68,780,053 | 68,047,723 | 63,096,951 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | |||
Net income | $ 15,188 | $ 25,020 | $ 24,772 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 66,566 | 50,045 | 30,841 |
Net provision for doubtful accounts | 9,424 | 9,534 | 5,990 |
Share-based compensation expense | 7,281 | 5,412 | 3,936 |
Changes in fair values of contingent consideration | 3,675 | (8,922) | 6,724 |
Contingent consideration payments | (4,174) | (3,738) | |
Deferred income tax (benefit) expense | (10,795) | 8,779 | (4,615) |
Amortization of debt issuance costs | 2,655 | 1,176 | 963 |
Impairment expense | 4,804 | 150 | |
Equity loss and impairment of non-consolidated entities | 4,659 | ||
Excess tax benefits related to share-based awards (Note 10) | (20,805) | ||
Other | 1 | 2 | 85 |
Changes in operating assets and liabilities, net of business acquisitions: | |||
Accounts receivable | 7,735 | (15,128) | (50,771) |
Inventories | 13,813 | (44,342) | (41,657) |
Accounts payable | 24,327 | (5,906) | 43,202 |
Other assets and liabilities | (4,615) | 367 | 34,370 |
Net cash provided by operating activities | 135,254 | 31,326 | 29,447 |
Cash flows from investing activities: | |||
Payments to acquire businesses, net of cash acquired | (623,067) | (67,156) | (293,496) |
Expenditures for property and equipment | (6,652) | (6,217) | (4,624) |
Expenditures for capitalized software for internal use | (3,505) | (12,595) | (12,021) |
Capital investments in and loans to non-consolidated entities | (100) | (1,459) | |
Other | 5 | 1 | 27 |
Net cash used in investing activities | (633,319) | (85,967) | (311,573) |
Cash flows from financing activities: | |||
Net proceeds from line of credit | 148,995 | 39,255 | |
Proceeds from long-term debt | 575,000 | 120,000 | |
Payments on long-term debt | (136,000) | (6,000) | (3,000) |
Payments of debt issuance costs | (21,507) | (28) | (5,055) |
Proceeds from issuance of stock upon stock option exercises | 7,875 | 4,448 | 10,341 |
Contingent consideration payments | (2,681) | (3,012) | |
Proceeds from public offering, net of transaction costs | 187,988 | ||
Payments made to repurchase stock options | (36,298) | ||
Excess tax benefits related to share-based awards (Note 10) | 20,805 | ||
Net cash provided by financing activities | 574,363 | 34,994 | 291,769 |
Net increase (decrease) in cash and equivalents | 76,298 | (19,647) | 9,643 |
Cash and equivalents at beginning of year | 7,953 | 27,600 | 27,600 |
Cash and equivalents at end of year | 84,251 | 7,953 | 27,600 |
Supplemental disclosures of cash flow information: | |||
Cash paid for interest | 7,327 | 5,273 | 3,949 |
Cash paid for income taxes | $ 5,876 | $ 728 | $ 351 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Shareholders' Equity - USD ($) $ in Thousands | BioRx, LLCCommon Stock | BioRx, LLCDiplomat Pharmacy, Inc. Shareholders' Equity | BioRx, LLC | Burman's Apothecary, LLCCommon Stock | Burman's Apothecary, LLCAdditional Paid-In Capital | Burman's Apothecary, LLCDiplomat Pharmacy, Inc. Shareholders' Equity | Burman's Apothecary, LLC | Valley Campus Pharmacy, IncCommon Stock | Valley Campus Pharmacy, IncDiplomat Pharmacy, Inc. Shareholders' Equity | Valley Campus Pharmacy, Inc | Several AcquisitionsCommon Stock | Several AcquisitionsDiplomat Pharmacy, Inc. Shareholders' Equity | Several Acquisitions | Common Stock | Additional Paid-In Capital | Retained Earnings | Diplomat Pharmacy, Inc. Shareholders' Equity | Noncontrolling Interest | Total |
Balance at Dec. 31, 2014 | $ 148,901 | $ 9,893 | $ 5,354 | $ 164,148 | $ 4,579 | $ 168,727 | |||||||||||||
Balance at the beginning of the period (in shares) at Dec. 31, 2014 | 51,457,023 | ||||||||||||||||||
Changes in Shareholders' Equity | |||||||||||||||||||
Net income (loss) | 25,776 | 25,776 | (1,004) | 24,772 | |||||||||||||||
Proceeds from follow-on public offering, net of issuance costs | $ 187,988 | 187,988 | 187,988 | ||||||||||||||||
Proceeds from follow-on public offering, net of issuance costs (in shares) | 6,821,125 | ||||||||||||||||||
Repurchase of stock options | $ (34,194) | (2,104) | (36,298) | (36,298) | |||||||||||||||
Issuance of stock as partial consideration | $ 125,697 | $ 125,697 | $ 125,697 | $ 9,578 | $ 9,578 | $ 9,578 | |||||||||||||
Issuance of stock as partial consideration (in shares) | 4,038,853 | 253,036 | |||||||||||||||||
Stock issued upon stock option exercises | $ 13,650 | (3,309) | 10,341 | 10,341 | |||||||||||||||
Stock issued upon stock option exercises (in shares) | 1,943,022 | ||||||||||||||||||
Excess tax benefits related to share-based awards | 20,805 | 20,805 | 20,805 | ||||||||||||||||
Share-based compensation expense | 3,936 | 3,936 | 3,936 | ||||||||||||||||
Restricted stock awards (in shares) | 10,805 | ||||||||||||||||||
Balance at Dec. 31, 2015 | $ 451,620 | 29,221 | 31,130 | 511,971 | 3,575 | 515,546 | |||||||||||||
Balance at the end of the period (in shares) at Dec. 31, 2015 | 64,523,864 | ||||||||||||||||||
Changes in Shareholders' Equity | |||||||||||||||||||
Adoption of ASU 2016-09 (Note 10) | 16,903 | 16,903 | 16,903 | ||||||||||||||||
Net income (loss) | 28,273 | 28,273 | (3,253) | 25,020 | |||||||||||||||
Issuance of stock upon full contingent consideration payout | 36,888 | 36,888 | |||||||||||||||||
Issuance of stock upon full contingent consideration payout (in shares) | 1,346,282 | ||||||||||||||||||
Issuance of stock as partial consideration | $ 9,507 | $ 9,507 | $ 9,507 | $ 36,888 | |||||||||||||||
Issuance of stock as partial consideration (in shares) | 324,244 | ||||||||||||||||||
Stock issued upon stock option exercises | $ 5,813 | $ (1,365) | $ 4,448 | $ 4,448 | |||||||||||||||
Stock issued upon stock option exercises (in shares) | 564,844 | ||||||||||||||||||
Share-based compensation expense | 5,412 | 5,412 | 5,412 | ||||||||||||||||
Restricted stock awards (in shares) | 5,765 | ||||||||||||||||||
Balance at Dec. 31, 2016 | $ 503,828 | 33,268 | 76,306 | 613,402 | 322 | $ 613,724 | |||||||||||||
Balance at the end of the period (in shares) at Dec. 31, 2016 | 66,764,999 | 66,764,999 | |||||||||||||||||
Changes in Shareholders' Equity | |||||||||||||||||||
Net income (loss) | 15,510 | 15,510 | $ (322) | $ 15,188 | |||||||||||||||
Issuance of stock as partial consideration | $ 105,433 | $ 105,433 | $ 105,433 | ||||||||||||||||
Issuance of stock as partial consideration (in shares) | 5,852,291 | ||||||||||||||||||
Stock issued upon stock option exercises | $ 9,974 | (2,099) | 7,875 | 7,875 | |||||||||||||||
Stock issued upon stock option exercises (in shares) | 1,217,320 | ||||||||||||||||||
Share-based compensation expense | 7,281 | 7,281 | 7,281 | ||||||||||||||||
Restricted stock awards (in shares) | 36,814 | ||||||||||||||||||
Balance at Dec. 31, 2017 | $ 619,235 | $ 38,450 | $ 91,816 | $ 749,501 | $ 749,501 | ||||||||||||||
Balance at the end of the period (in shares) at Dec. 31, 2017 | 73,871,424 | 73,871,424 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2017 | |
DESCRIPTION OF BUSINESS | |
DESCRIPTION OF BUSINESS | 1. DESCRIPTION OF BUSINESS Diplomat Pharmacy, Inc. and its consolidated subsidiaries (the “Company”) is the largest independent provider of specialty pharmacy services in the United States of America (“U.S.”). The Company is focused on improving the lives of patients with complex chronic diseases while also delivering unique solutions for manufacturers, hospitals, payers and providers. The Company’s patient-centric approach positions it at the center of the healthcare continuum for treatment of complex chronic disease states, including oncology, specialty infusion therapy, immunology, hepatitis, multiple sclerosis and many other serious or long-term conditions. The Company offers a broad range of innovative solutions to address the dispensing, delivery, dosing and reimbursement of clinically intensive, high-cost specialty drugs and a wide range of applications and prescription benefit management (“PBM”) services designed to help the Company’s customers reduce the cost and manage the complexity of their prescription drug programs. The Company dispenses to patients in all U.S. states and territories through its advanced distribution centers and manages centralized clinical call centers to deliver localized services on a national scale. |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Principles of Consolidation The consolidated financial statements include the accounts of Diplomat Pharmacy, Inc., its wholly owned subsidiaries, and a 51 percent owned subsidiary, formed in August 2014, which the Company controlled and which was dissolved during the fourth quarter of 2017. The Company also owns a 22 percent interest in a non-consolidated entity which is accounted for under the equity method of accounting since the Company does not control the entity but has the ability to exercise significant influence over its operating and financial policies. This equity method investment was fully impaired during the fourth quarter of 2014 (Note 8). An investment in an entity in which the Company owns less than 20 percent and does not have the ability to exercise significant influence is accounted for under the cost method. This cost method investment was impaired during the fourth quarter of 2016 (Note 8). In addition, the Company paid $100 to acquire an 11.1 percent interest in a non-consolidated entity during 2017, which is accounted for under the cost method, as the Company owns less than 20 percent and does not have the ability to exercise significant influence over the entity. Noncontrolling interest in a consolidated subsidiary in the consolidated balance sheets represents the minority shareholders’ proportionate share of the equity in such subsidiary. Consolidated net income (loss) is allocated to the Company and noncontrolling interests (i.e., minority shareholders) in proportion to their percentage ownership. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates. Concentrations of Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with banks or other financial institutions and trade accounts receivable. A federal program provides non-interest bearing cash balances insurance coverage up to $250 per depositor at each financial institution. The Company’s cash balances often exceed federally insured limits. Concentration of credit risk with respect to trade accounts receivable is limited by the large number of patients comprising the Company’s customer base and their dispersion across multiple payers and multiple geographic areas. No single payer customer accounted for more than 10 percent of net sales for any period presented or trade accounts receivable at December 31, 2017 and 2016. The Company purchases a significant portion of its prescription drug inventory from AmerisourceBergen, a prescription drug wholesaler. These purchases accounted for approximately 41 percent, 49 percent and 50 percent of cost of products sold for the years ended December 31, 2017, 2016 and 2015, respectively. The Company has alternative vendors available if necessary. See Note 13 for discussion of the Company’s minimum purchase obligation with AmerisourceBergen. The Company purchases certain prescription drugs from Celgene Corporation (“Celgene”) and Pharmacyclics, Inc. (“Pharmacyclics”), drug manufacturers. Purchases from Celgene and Pharmacyclics accounted for approximately 17 percent and 14 percent, 13 percent and 10 percent, and 12 percent and 9 percent of cost of products sold for the years ended December 31, 2017, 2016 and 2015, respectively, with no minimum purchase obligation. The specialty drugs that the Company purchases from Celgene and Pharmacyclics are not available from any other source. Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. Accounts Receivable, net Trade accounts receivable are stated at the invoiced amount. Trade accounts receivable primarily include amounts from third-party pharmacy benefit managers and insurance providers and are based on contracted prices. Trade accounts receivable are unsecured and require no collateral. Trade accounts receivable terms vary by payer, but generally are due within 30 days after the sale of the product or performance of the service. The Company maintains an allowance for doubtful accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance, management considers factors such as current overall economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past due accounts. The Company’s general policy for uncollectible accounts, if not reserved through specific examination procedures, is to reserve based upon the aging categories of accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Activity in the allowance for doubtful accounts was as follows: Year Ended December 31, 2017 2016 2015 Beginning balance $ ) $ ) $ ) Charged to expense ) ) ) Write-offs, net of recoveries Ending balance $ ) $ ) $ ) Inventories Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Prescription medications are returnable to the Company’s vendors and fully refundable before six months of expiration, and any remaining expired medication is relieved from inventory on a quarterly basis. Property and Equipment, net Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally computed on a straight-line basis over the estimated useful lives of the assets. The costs of leasehold improvements are depreciated either over the life of the improvement or the lease term, whichever is shorter. For income tax purposes, accelerated methods of depreciation are generally used. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in earnings. Capitalized Software for Internal Use, net The Company capitalizes certain development costs primarily related to a custom-developed, proprietary, scalable patient care system. The Company expenses the costs incurred during the preliminary project stage, and capitalizes the direct development costs, including the associated payroll and related costs for employees and outside contractors working on development, during the application development stage. The Company monitors development on an ongoing basis and capitalizes the costs of any major improvements or that result in significant additional functionality. Capitalized internal use software costs are amortized on a straight-line basis over the estimated useful lives of the assets, generally three years. For income tax purposes, accelerated methods of amortization are generally used. Management evaluates the useful lives of these assets on an annual basis. Definite-Lived Intangible Assets, net Definite-lived intangible assets consist of assets related to acquisitions and are amortized over their estimated useful lives using an accelerated method for the majority of customer, patient and physician relationships, and the straight-line method for the remaining intangible assets. Long-Lived Assets Long-lived assets, such as property and equipment, capitalized software for internal use and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected present value calculations to the estimated future cash flows using assumptions a market participant would utilize, or through the use of a third-party independent appraiser or valuation specialist. Goodwill Goodwill represents the excess acquisition cost of an acquired entity over the estimated fair values of the net tangible assets and the identifiable intangible assets acquired. Goodwill is not amortized, but rather is reviewed for impairment annually during the fourth quarter, or more frequently if facts or circumstances indicate that the carrying value may not be recoverable. An entity has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount prior to performing a quantitative impairment test. The qualitative assessment evaluates various events and circumstances, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends that may impact a reporting unit’s fair value. If it is determined that the estimated fair value of the reporting unit is more-likely-than-not less than its carrying amount, including goodwill, a quantitative assessment is required. Otherwise, no further analysis is necessary. If a quantitative assessment is performed, a reporting unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate with the risks involved, and multiples of current and future earnings. If the fair value of a reporting unit is less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. Debt Issuance Costs Costs incurred related to the issuance of the Company’s credit facility were deferred and are being amortized to interest expense using the effective interest method over the term of the agreement. Revenue Recognition The Company recognizes revenue from dispensing prescription drugs for home delivery at the time the drugs are shipped. At the time of shipment, the Company has performed substantially all of its obligations under its payer contracts and does not experience a significant level of returns or reshipments. Revenues from dispensing prescription drugs that are picked up by patients at an open-door or retail pharmacy location are recorded at prescription adjudication, which approximates the fill date. Revenue generated from dispensing prescription drugs was $4,444,486, $4,386,643 and $3,346,652 for the years ended December 31, 2017, 2016 and 2015, respectively. The Company accrues an estimate of fees, including direct and indirect remuneration fees (“DIR fees”), which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction at the time revenue is recognized. Changes in the Company’s estimate of such fees are recorded when the change becomes known. The Company recognizes revenue from the sale of prescription drugs by its retail pharmacy network when the claim is adjudicated. When the Company acts as principal in the arrangement, exercises pricing latitude and independently has a contractual obligation to pay its network pharmacy providers for benefits provided to its clients’ members, the Company includes the total prescription price (ingredient cost plus dispensing fee) it has contracted with these clients as revenue, including member co-payments to pharmacies. Revenue generated from the sale of prescription drugs by retail pharmacies was $6,531 for the year ended December 31, 2017. When the Company merely administers a client’s network pharmacy contracts and does not assume credit risk, the Company earns an administrative fee for collecting payments from the client and remits the corresponding amount to the pharmacies in the client’s network, drug ingredient cost is not included in the Company’s revenues or cost of products sold. Administrative fee revenue was $1,724 for the year ended December 31, 2017. The Company recognizes revenue from service, data and consulting services when the services have been performed and the earnings process is therefore complete. Revenues generated from service, data and consulting services were $32,489, $23,745 and $19,979 for the years ended December 31, 2017, 2016 and 2015, respectively. Sales taxes are presented on a net basis (excluded from revenues and costs). The Company derived its revenue from the following therapeutic classes: Year Ended December 31, 2017 2016 2015 Oncology $ $ $ Specialty Infusion Immunology(1) Hepatitis <10 % Other (none greater than 10% in the period) Total revenue $ $ $ (1) Includes drugs dispensed to treat arthritis, Crohn’s disease and psoriasis. Shipping and Handling Costs Shipping and handling costs are not billed to patients; therefore, there are no shipping and handling revenues. The Company recognizes shipping and handling costs as incurred as a component of “Selling, general and administrative expenses” and were $15,689, $15,144 and $13,899 for the years ended December 31, 2017, 2016 and 2015, respectively. Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred as a component of “Selling, general and administrative expenses” and were $2,251, $3,868 and $3,553 for the years ended December 31, 2017, 2016 and 2015, respectively. Defined Contribution Savings Plans The Company maintains certain defined contribution savings plans for eligible employees. The total expenses attributable to the Company’s defined contribution savings plans are recognized as a component of “Selling, general and administrative expenses” and were $2,908, $2,665 and $1,877 for the years ended December 31, 2017, 2016 and 2015, respectively. Share-Based Compensation The Company grants stock options to key employees, which are accounted for as equity awards. The exercise price of a granted stock option is equal to the closing market stock price of the underlying common share on the date the option is granted. The grant date fair value of these awards is measured using the Black-Scholes-Merton option pricing model. Stock options generally become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of ten years. Certain stock option grants have performance-based conditions, which require the satisfaction of certain revenue and/or Adjusted EBITDA targets prior to vesting. The Company expenses the grant date fair value of its stock options over their respective vesting periods on a straight-line basis. The Company also grants restricted stock units (“RSU” or “RSUs”) to key employees, which are accounted for as equity awards. Some granted RSUs cliff vest after three years, whereas others vest one-third per year. The grant date fair value of a RSU is determined by the closing market price of our common stock as of the date of grant. The Company expenses the grant date fair value of the RSU over the three-year vesting period on a straight-line basis. The Company grants restricted stock awards (“RSA” or “RSAs”) to non-employee directors, which are accounted for as equity awards. Generally, such RSAs fully vest on the first anniversary of the grant date. The grant date fair value of a RSA is determined by the closing market price of the Company’s common stock as of the date of grant. The grant date fair value of the RSU is expensed over the vesting period on a straight-line basis. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. The Company records interest and penalties related to tax uncertainties as income tax expense. Based on management’s evaluation, the Company concluded there were no significant uncertain tax positions requiring recognition in its consolidated financial statements. Segment Information The Company’s chief operating decision maker reviews the financial results of the Company in total when evaluating financial performance and for purposes of allocating resources. The Company has thus determined that it operates in a single reportable segment — specialty pharmacy services. Accounting Standards Update (“ASU”) Adoption — Balance Sheet Classification of Deferred Taxes In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-17 , Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), eliminating the requirement for companies to present deferred tax assets and liabilities as current and noncurrent. Instead, companies are required to classify all deferred tax assets and liabilities as noncurrent. Effective January 1, 2017, the Company retrospectively adopted the accounting guidance contained within ASU 2015-17. The following December 31, 2016 consolidated balance sheet line items were adjusted due to this adoption: As Previously Reported Adjustment As Adjusted Deferred income taxes (current asset) $ $ ) $ — Total current assets ) Deferred income taxes (noncurrent asset) — Total assets ) Deferred income taxes (noncurrent liability) ) — Total liabilities ) Total liabilities and shareholders’ equity ) ASU Adoption — Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued ASU No. 2017-04 , Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), eliminating Step 2 from the quantitative goodwill impairment test. Instead, an entity will perform its annual, or interim, quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount (Step 1). An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, though early adoption is permitted. Effective January 1, 2017, the Company adopted the accounting guidance contained within ASU 2017-04. This adoption had no impact on the Company’s consolidated financial statements. New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 , Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB issued ASU No. 2015-14 , Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, for public entities, though early adoption was permitted. Topic 606 permits two methods of adoption: retrospective approach reflecting the application of the standard in each prior reporting period presented (full retrospective method), or retrospective approach with the cumulative effect of initially applying the guidance recognized at the date of initial application (cumulative catch-up transition method). The new standard also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers. The Company is finalizing the impact of Topic 606 on the disclosures for its consolidated financial statement footnotes and expects the disclosures to be enhanced. On January 1, 2018, the Company adopted Topic 606 using the cumulative catch-up transition method and will record an immaterial after-tax adjustment to reduce retained earnings. This cumulative adjustment relates to a shift in the recognition of dispensing prescription drugs for home delivery from the date the drugs are shipped under the Company’s existing accounting policy to the date the drugs are physically delivered (when control transfers) under the new standard. The effect of this change will not be significant as there is a very short timeframe from shipment to physical delivery of the prescription medication. For the Company’s PBM businesses acquired late in the fourth quarter of 2017, the Company has gathered most of its data from customer contracts, is finalizing its evaluation of the potential impact of the new standard and is in the process of completing its applicable accounting policy memorandums. A portion of the Company’s PBM businesses includes dispensing prescription drugs for home delivery, the impact of which will be included in the cumulative adjustment previously discussed. For the remainder of its PBM businesses, the Company is finalizing the evaluation of reporting revenues on a gross or net basis under its payer contracts, however, based on the preliminary analysis to date, it is not expected that other aspects of the new standard will have a significant impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 , Leases (Topic 842) , requiring lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at lease commencement date. This ASU is effective for annual periods beginning on or after December 15, 2018, including interim periods within those annual periods, though early adoption is permitted. The Company is in the early stages of evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and/or notes thereto. In May 2017, the FASB issued ASU No. 2017-09 , Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting , providing guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for annual periods beginning on or after December 15, 2017, including interim periods within those annual periods. This ASU is to be applied prospectively to an award modified on or after the adoption date. The adoption of this guidance is not expected to have any immediate impact on the Company’s consolidated financial statements. |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | 12 Months Ended |
Dec. 31, 2017 | |
BUSINESS ACQUISITIONS | |
BUSINESS ACQUISITIONS | 3. BUSINESS ACQUISITIONS The Company accounts for its business acquisitions using the acquisition method as required by FASB Accounting Standards Codification Topic 805, Business Combinations . The Company ascribes significant value to the synergies and other benefits that do not meet the recognition criteria of acquired identifiable intangible assets. Accordingly, the value of these components is included within goodwill. The Company’s business acquisitions described below, except for portions of BioRx, LLC (“BioRx”) and LDI (defined below), were treated as asset purchases for income tax purposes and the related goodwill resulting from these business acquisitions is deductible for income tax purposes. The results of operations for acquired businesses are included in the Company’s consolidated financial statements from their respective acquisition dates. For the entities acquired by the Company during 2017, 2016 and 2015, their net sales following their acquisition dates and solely in the year acquired represented approximately 2 percent, 6 percent and 12 percent, respectively, of the Company’s consolidated net sales. The assets acquired and liabilities assumed in the business combinations described below, including identifiable intangible assets, were based on their estimated fair values as of the acquisition date. The excess of purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The allocation of the purchase price required management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to identifiable intangible assets. These estimated fair values were based on information obtained from management of the acquired companies and historical experience and, with respect to the long-lived tangible and intangible assets, were made with the assistance of an independent valuation firm. These estimates included, but were not limited to, the cash flows that an asset is expected to generate in the future, and the cost savings expected to be derived from acquiring an asset, discounted at rates commensurate with the risks and uncertainties involved. For acquisitions that involved contingent consideration, the Company recognized a liability equal to the fair value of the contingent consideration obligation as of the acquisition date. The estimate of fair value of a contingent consideration obligation required subjective assumptions regarding future business results, discount rates and probabilities assigned to various potential business result scenarios. These estimates are preliminary and subject to change up to one year following each acquired entity’s respective acquisition date. LDI Holding Company LLC On December 20, 2017, the Company acquired LDI Holding Company LLC, doing business as LDI Integrated Pharmacy Services (“LDI”). LDI is a full-service PBM based in St. Louis, Missouri. LDI’s service offerings include URAC-accredited mail-order and specialty pharmacies, a national network of retail pharmacies and comprehensive clinical programs. The following table summarizes the consideration transferred to acquire LDI: Cash $ 4,113,188 restricted common shares $ The above share consideration at closing is based on 4,113,188 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of December 19, 2017 ($20.24) and multiplied by 95 percent to account for the restricted nature of the shares. Approximately $7,500 of the purchase consideration was deposited into an escrow account to be held for 12 months after the closing date to satisfy any indemnification claims that may be made by the Company. The Company incurred acquisition-related costs of $948 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Deferred income taxes ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Customer relationships 10 years $ Trade names and trademarks 4 years $ Pharmaceutical Technologies, Inc. On November 27, 2017, the Company acquired Pharmaceuticals Technologies, Inc., doing business as National Pharmaceutical Services (“NPS”). NPS is a full-service PBM based in Omaha, Nebraska. The following table summarizes the consideration transferred to acquire NPS: Cash $ 835,017 restricted common shares $ The above share consideration at closing is based on 835,017 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of November 24, 2017 ($16.97) and multiplied by 90 percent to account for the restricted nature of the shares. Approximately $9,005 of the purchase consideration was deposited into an escrow account to be held for 12 months after the closing date to satisfy any indemnification claims that may be made by the Company. The Company incurred acquisition-related costs of $804 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Customer relationships 10 years $ Trade names and trademarks 2 years $ Focus Rx Pharmacy Services Inc. and Focus Rx Inc. On September 1, 2017, the Company acquired Focus Rx Pharmacy Services Inc. and Focus Rx Inc. (collectively, “Focus”), a specialty pharmacy focusing on infusion services located in Ronkonkoma, New York. The following table summarizes the consideration transferred to acquire Focus: Cash $ 374,297 restricted common shares Contingent consideration at fair value $ The above share consideration at closing is based on 374,297 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of August 31, 2017 ($16.75) and multiplied by 90 percent to account for the restricted nature of the shares. The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners additional cash payouts of up to $1,500 per performance period based upon the achievement of certain gross profit targets in each of the 12-month periods ending September 30, 2018 and 2019. The maximum additional cash payout is $3,000. Approximately $1,200 of the purchase consideration was deposited into an escrow account to be held for 12 months after the closing date to satisfy any of the Company’s indemnification claims. The Company incurred acquisition-related costs of $329 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Patient relationships 7 years $ Non-compete employment agreements 3 years Trade names and trademarks 3 years $ Accurate Rx Pharmacy Consulting, LLC On July 5, 2017, the Company acquired Accurate Rx Pharmacy Consulting, LLC (“Accurate”), a specialty pharmacy focusing on infusion services located in Columbia, Missouri. The following table summarizes the consideration transferred to acquire Accurate: Cash $ 131,108 restricted common shares Contingent consideration at fair value $ The above share consideration at closing is based on 131,108 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of July 3, 2017 ($15.05) and multiplied by 90 percent to account for the restricted nature of the shares. The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners additional cash payouts of up to $3,600 per performance period based upon the achievement of certain gross profit targets in each of the 12-month periods ending July 31, 2018 and 2019. The maximum additional cash payout is $7,200. Approximately $1,000 of the purchase consideration was deposited into an escrow account to be held for 15 months after the closing date to satisfy any of the Company’s indemnification claims. The Company incurred acquisition-related costs of $218 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventory Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Patient relationships 7 years $ Non-compete employment agreements 5 years Trade names and trademarks 4 years $ WRB Communications, LLC On May 8, 2017, the Company acquired WRB Communications, LLC (“WRB”), a communications and contact center company based in Chantilly, Virginia that specializes in relationship management programs for leading pharmaceutical manufacturers and service organizations. The following table summarizes the consideration transferred to acquire WRB: Cash $ 299,325 restricted common shares Contingent consideration at fair value $ The above share consideration at closing is based on 299,325 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of May 5, 2017 ($15.93) and multiplied by 90 percent to account for the restricted nature of the shares. The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners additional cash payouts of up to $500 per performance period based upon the achievement of certain earnings before interest, taxes, depreciation and amortization targets in each of the 12-month periods ending May 31, 2018 and 2019. During the fourth quarter of 2017, the Company guaranteed a full payout to allow for the acceleration of certain integration. The formers owners received $1,000 in cash in January 2018. Approximately $1,950 of the purchase consideration was deposited into an escrow account to be held for 18 months after the closing date to satisfy any of the Company’s indemnification claims. The Company incurred acquisition-related costs of $259 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Prepaid expenses and other current assets Property and equipment Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Customer relationships 7 years $ Non-compete employment agreements 4 years Trade names and trademarks 2 years $ Comfort Infusion, Inc. On March 22, 2017, the Company acquired Comfort Infusion, Inc. (“Comfort”), a specialty pharmacy and infusion services company based in Birmingham, Alabama that specializes in intravenous immune globulin therapy to support patients’ immune systems. The following table summarizes the consideration transferred to acquire Comfort: Cash $ Contingent consideration at fair value $ The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners additional cash payouts of up to $2,000 per performance period based upon the achievement of certain gross profit targets in each of the 12-month periods ending March 31, 2018, 2019 and 2020. The maximum payout of contingent consideration is $6,000. Approximately $1,050 of the purchase consideration was deposited into an escrow account to be held for 18 months after the closing date to satisfy any of the Company’s indemnification claims. The Company incurred acquisition-related costs of $204 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Physician relationships 7 years $ Non-compete employment agreements 5 years $ Affinity Biotech, Inc. On February 1, 2017, the Company acquired Affinity Biotech, Inc. (“Affinity”), a specialty pharmacy and infusion services company based in Houston, Texas that provides treatments and nursing services for patients with hemophilia. The following table summarizes the consideration transferred to acquire Affinity: Cash $ Contingent consideration at fair value $ The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners an additional cash payout based upon the achievement of a certain earnings before interest, taxes, depreciation and amortization target in the 12-month period ending February 28, 2018. The maximum payout of contingent consideration is $4,000. Approximately $2,000 of the purchase consideration was deposited into an escrow account to be held for 18 months after the closing date to satisfy any of the Company’s indemnification claims. The Company incurred acquisition-related costs of $204 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2017. The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Patient relationships 7 years $ Non-compete employment agreements 5 years $ Valley Campus Pharmacy, Inc. On June 1, 2016, the Company acquired Valley Campus Pharmacy, Inc., doing business as TNH Advanced Specialty Pharmacy (“TNH”). TNH, a specialty pharmacy based in Van Nuys, California, provides medication management programs for individuals with complex chronic diseases, including oncology, hepatitis and immunology. The following table summarizes the consideration transferred to acquire TNH: Cash $ 324,244 restricted common shares $ The above share consideration at closing is based on 324,244 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of May 31, 2016 ($32.58) and multiplied by 90 percent to account for the restricted nature of the shares. Approximately $3,800 of the purchase consideration was deposited into an escrow account to be held for 12 months after the closing date to satisfy any indemnification claims that may be made by the Company. All but $150 was released to the sellers from escrow in January 2018. The Company incurred acquisition-related costs of $410 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2016. The following table summarizes the fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Physician relationships 10 years $ Non-compete employment agreements 5 years Trade names and trademarks 1 year $ Burman’s Apothecary, LLC On June 19, 2015, the Company acquired all of the outstanding equity interests of Burman’s Apothecary, LLC (“Burman’s”). Burman’s, located in the greater Philadelphia area of Pennsylvania, is a provider of individualized patient care with a primary focus on those infected with the hepatitis C virus. The Company acquired Burman’s to expand its existing hepatitis business, enhance its proprietary technology, and increase its national presence. The following table summarizes the consideration transferred to acquire Burman’s: Cash $ 253,036 restricted common shares $ The above share consideration is based on 253,036 shares, as computed in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of June 18, 2015 ($42.06), and multiplied by 90 percent to account for the restricted nature of the shares. Approximately $5,000 of the purchase consideration was deposited into an escrow account to be held for two years after the closing date to satisfy any indemnification claims that may be made by the Company. The full amount was released to the sellers from escrow in the third quarter of 2017. The Company incurred acquisition-related costs of $860 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2015. The following table summarizes the fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Accounts receivable $ Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Physician relationships 10 years $ Noncompete employment agreements 5 years Favorable supply agreement 1 year $ BioRx On April 1, 2015, the Company acquired BioRx, a highly specialized pharmacy and infusion services company based in Cincinnati, Ohio. BioRx provides treatments for patients with ultra-orphan and rare, chronic diseases — predominately administered in the home and often via intravenous infusion. The Company acquired BioRx to expand its existing specialty infusion business and increase its national presence. The following table summarizes the consideration transferred to acquire BioRx: Cash $ 4,038,853 restricted common shares Contingent consideration at fair value $ The above share consideration at closing is based on 4,038,853 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of March 31, 2015 ($34.58), and multiplied by 90 percent to account for the restricted nature of the shares. The purchase price included a contingent consideration arrangement that required the Company to issue up to 1,350,309 shares of its restricted common stock, as computed in accordance with the purchase agreement, to the former holders of BioRx’s equity interests based upon the achievement of a certain earnings before interest, taxes, depreciation and amortization target in the 12-month period ending March 31, 2016. An independent valuation firm assisted with the Company’s determination of the fair value of the contingent consideration utilizing a Monte Carlo simulation. The fair value of the contingent consideration liability was $46,208 as of December 31, 2015. The Company issued 1,346,282 shares of its common stock, with a fair value of $36,888, along with $104 in cash, in full payout of the contingent consideration arrangement in April 2016. Approximately $10,000 of the purchase consideration was deposited into an escrow account to be held for two years after the closing date to satisfy any indemnification claims made by the Company. The full amount was released to the sellers from escrow in the second quarter of 2017. The Company incurred acquisition-related costs of $1,398 which were charged to “Selling, general and administrative expenses” during the year ended December 31, 2015. The following table summarizes the fair values of identifiable assets acquired and liabilities assumed at the acquisition date: Cash and cash equivalents $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Deferred income taxes ) Total identifiable net assets Goodwill $ Definite-lived intangible assets that were acquired and their respective useful lives are as follows: Useful Amount Patient relationships 10 years $ Noncompete employment agreements 5 years Trade names and trademarks 8 years $ Pro Forma Operating Results The following 2017 unaudited pro forma summary presents consolidated financial information as if the Accurate, Affinity, Comfort, Focus, LDI, NPS and WRB acquisitions had occurred on January 1, 2016. The following 2016 unaudited pro forma summary presents consolidated financial information as if the Accurate, Affinity, Comfort, Focus, LDI, NPS and WRB acquisitions had occurred on January 1, 2016 and the TNH acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect certain adjustments related to the acquisitions, such as amortization expense resulting from intangible assets acquired and adjustments to reflect the Company’s borrowings and tax rates. Accordingly, such pro forma operating results were prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of the as if dates or of results that may occur in the future. Year Ended December 31, 2017 2016 Net sales $ $ Net income attributable to Diplomat Pharmacy, Inc. $ $ Net income per common share — basic $ $ Net income per common share — diluted $ $ |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2017 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 4. FAIR VALUE MEASUREMENTS The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy was established, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. An asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques: A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost). C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models). The following table presents the placement in the fair value hierarchy of assets and liabilities that were measured and disclosed at fair value on a recurring basis at December 31, 2017: Asset / Valuation (Liability) Level 3 Technique Contingent consideration $ ) $ ) C The following table sets forth a roll forward of the Level 3 measurements: Contingent Balance at January 1, 2015 $ ) BioRx acquisition ) Change in fair value ) Payments Balance at December 31, 2015 ) Change in fair value Payments Balance at December 31, 2016 — Affinity acquisition ) Comfort acquisition ) WRB acquisition ) Accurate acquisition ) Focus acquisition ) Changes in fair values ) Balance at December 31, 2017 $ ) The carrying amounts of the Company’s financial instruments — consisting primarily of cash and cash equivalents, accounts receivable, accounts payable and other liabilities — approximate their estimated fair values due to the relative short-term nature of the amounts. The carrying amount of debt approximates fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following: December 31, Useful Life 2017 2016 Land — $ $ Buildings 40 years Leasehold improvements 5 - 15 years* Equipment and fixtures 5 - 10 years Computer equipment 3 - 5 years Construction in progress Accumulated depreciation ) ) $ $ * Unless applicable lease term is shorter. Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $4,941, $3,075 and $2,071, respectively. |
CAPITALIZED SOFTWARE FOR INTERN
CAPITALIZED SOFTWARE FOR INTERNAL USE | 12 Months Ended |
Dec. 31, 2017 | |
CAPITALIZED SOFTWARE FOR INTERNAL USE | |
CAPITALIZED SOFTWARE FOR INTERNAL USE | 6. CAPITALIZED SOFTWARE FOR INTERNAL USE Capitalized software, consisting of software acquired and developed internally, was comprised as follows: December 31, Useful Life 2017 2016 Capitalized software for internal use 3 years $ $ Construction in progress Accumulated amortization ) ) $ $ Amortization expense for the years ended December 31, 2017, 2016 and 2015 was $19,781, $13,102 and $4,541, respectively. Estimated future amortization expense is as follows: 2018 $ 2019 2020 2021 $ |
GOODWILL AND DEFINITE-LIVED INT
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS | |
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS | 7. GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS The following table sets forth a roll forward of goodwill: Balance at January 1, 2015 $ BioRx acquisition Burman’s acquisition Miscellaneous Balance at December 31, 2015 TNH acquisition Miscellaneous Balance at December 31, 2016 Affinity acquisition Comfort acquisition WRB acquisition TNH purchase price adjustment Accurate acquisition Focus acquisition NPS acquisition LDI acquisition Miscellaneous Balance at December 31, 2017 $ Definite-lived intangible assets consisted of the following: December 31, 2017 December 31, 2016 Gross Accumulated Net Gross Accumulated Net Customer relationships $ $ ) $ $ — $ — $ — Patient relationships ) ) Non-compete employment agreements ) ) Trade names and trademarks ) ) Physician relationships ) ) $ $ ) $ $ $ ) $ Amortization expense for the years ended December 31, 2017, 2016 and 2015 was $41,844, $33,868 and $24,229, respectively. As of December 31, 2017, the weighted average remaining useful lives for the net carrying amounts of customer relationships, patient relationships, non-compete employment agreements, trade names and trademarks, and physician relationships are 9.9 years, 6.8 years, 2.6 years, 3.1 years and 5.7 years, respectively. Estimated future amortization expense is as follows: 2018 $ 2019 2020 2021 2022 Thereafter $ On August 28, 2014, the Company and two unrelated third party entities entered into a contribution agreement to form a new company, Primrose Healthcare, LLC (“Primrose”). Primrose functioned as a management company, managing a network of physicians and medical professionals providing continuum care for patients infected with the hepatitis C virus. The Company contributed $5,000 for its 51 percent ownership interest, of which $2,000 and $3,000 were contributed during the years ended December 31, 2015 and 2014, respectively. The unrelated third party entities contributed a software licensing agreement valued at $2,647 and intellectual property valued at $2,157. During the third quarter of 2016, primarily due to updated projections of continuing losses into the foreseeable future, the Company fully impaired Primrose’s intangible assets. The $4,804 impairment is contained within “Selling, general and administrative expenses” for the year ended December 31, 2016. Primrose was dissolved during the fourth quarter of 2017. |
INVESTMENT IN NON-CONSOLIDATED
INVESTMENT IN NON-CONSOLIDATED ENTITIES | 12 Months Ended |
Dec. 31, 2017 | |
INVESTMENT IN NON-CONSOLIDATED ENTITIES | |
INVESTMENT IN NON-CONSOLIDATED ENTITIES | 8. INVESTMENTS IN NON-CONSOLIDATED ENTITIES Ageology From October 2011 through January 2017, the Company maintained a 25 percent minority interest in Worksmart MD, LLC, also known as Ageology, though it fully impaired its investment during the fourth quarter of 2014. In transactions unrelated to the Company, SkyPoint Ventures LLC (“SkyPoint”), an affiliated entity of the Company’s former chief executive officer, loaned $16,000 to Ageology through January 2017. In February 2017, SkyPoint elected to convert its $16,000 in outstanding loans into equity in Ageology, which equated to an approximate ownership of 43 percent. Concurrently, the Company converted its $2,500 in outstanding loans (which the Company had written off during the fourth quarter of 2014) into equity in Ageology, which resulted in the Company having an approximate 22 percent minority interest following the recapitalization. Because the Company does not direct the activities that most significantly impact the economic performance of Ageology, management has determined that the Company is not nor ever has been Ageology’s primary beneficiary. Subsequent to the February 2017 concurrent conversion transactions, SkyPoint loaned Ageology $3,970 during the remainder of the year ended December 31, 2017. Physician Resource Management, Inc. In December 2014, the Company invested $3,500 in Physician Resource Management, Inc. (“PRM”) in exchange for a 15 percent equity position. In October 2015, the Company invested an additional $1,459, which increased its equity position in PRM to 19.9 percent. The Company accounted for this investment under the cost method, as the Company does not have significant influence over its operations. In transactions unrelated to the Company, the Company’s former chief executive officer personally invested $250 in PRM through December 31, 2016. During January 2017, PRM completed the planned sale of its primary asset. Based upon the terms of the sales agreement, the Company anticipates that it will receive approximately $300 in future proceeds from this sale. The Company recognized a $4,659 impairment, which is contained within “Equity loss and impairment of non-consolidated entities,” for the year ended December 31, 2016 to write its cost method investment in PRM to net realizable value. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
DEBT | 9. DEBT On December 20, 2017, in conjunction with the LDI acquisition, the Company fully syndicated an $800,000 debt financing led by JPMorgan Chase Bank, N.A. and Capital One, National Association (“Capital One”), comprised of a $250,000 line of credit and a $150,000 Term Loan A, each with a December 20, 2022 maturity date, and a $400,000 Term Loan B with a December 20, 2024 maturity date (“credit facility”). The credit facility is secured by substantially all of the Company’s assets. The proceeds of this credit facility were used to finance the LDI acquisition, pay related transaction fees and expenses, and repay the Company’s former credit facility (as defined below), as well as provide sufficient liquidity for the Company’s future needs. The Company incurred debt issuance costs of $21,507 associated with the credit facility, of which all but $744 were capitalized. These capitalized costs, along with $2,079 in previously incurred unamortized debt issuance costs, are being amortized to interest expense over the term of the credit facility. The Company also expensed $636 in previously incurred unamortized debt issuance costs to interest expense upon entering into the credit facility. On April 1, 2015, in conjunction with the BioRx acquisition, the Company entered into a Second Amended and Restated Credit Agreement with Capital One, as agent and as a lender, the other lenders party thereto, and the other credit parties thereto, which provided for an increase in the Company’s line of credit from $120,000 to $175,000, a fully drawn term loan for $120,000 and a delayed draw term loan (“DDTL”) for an additional $25,000 (“former credit facility”). The Company fully drew upon the $25,000 DDTL during the first quarter of 2017. The former credit facility was subsequently extinguished with the proceeds of the credit facility. At December 31, 2017 and 2016, the Company had $550,000 and $111,000, respectively, in outstanding term loans. Term loan-related unamortized debt issuance costs of $17,402 and $3,316 as of December 31, 2017 and 2016, respectively, are presented in the consolidated balance sheets as direct deductions to the outstanding debt balances. The Company had $188,250 and $39,255 outstanding on its line of credit at December 31, 2017 and 2016, respectively. The Company had $61,750 and $129,908 available to borrow on its line of credit at December 31, 2017 and 2016, respectively. The Company had weighted average borrowings on its line of credit of $28,238 and $11,986 and maximum borrowings on its line of credit of $188,250 and $82,683 during the years ended December 31, 2017 and 2016, respectively. Line of credit-related unamortized debt issuance costs of $5,316 and $550 as of December 31, 2017 and 2016, respectively, are classified within “Other noncurrent assets” in the consolidated balance sheets. The interest rates the Company pays under the credit facility are a function of a defined margin above LIBOR. The Company’s Term Loan A and Term Loan B interest rates were 4.04 percent and 6.04 percent, respectively, at December 31, 2017. The Company’s term loan interest rate was 3.13 percent at December 31, 2016. The Company’s line of credit interest rate was 4.04 percent and 4.75 percent at December 31, 2017 and 2016, respectively. The Company is charged a monthly unused commitment fee ranging from 0.3 percent to 0.4 percent on the average unused daily balance on its $250,000 line of credit. The credit facility contains, and former credit facility contained, certain financial and non-financial covenants. The Company was in compliance with all such covenants as of December 31, 2017 and 2016. The Company has the following contractual debt obligations outstanding associated with its term loans at December 31, 2017: 2018 $ 2019 2020 2021 2022 Thereafter $ |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2017 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 10. SHARE-BASED COMPENSATION Effective October 2014, the Company established the 2014 Omnibus Incentive Plan (the “2014 Plan”), which permits the granting of stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards. The 2014 Plan initially authorized up to 4,000,000 shares of common stock for awards to be issued to employees, directors or consultants of the Company, and each fiscal year, the number of shares reserved for issuance under the plan automatically increases by an amount equal to 2 percent of the total number of outstanding shares of common stock as of the beginning of such fiscal year. The Company’s 2007 Stock Option Plan, as amended (the “2007 Plan”), authorized the granting of stock options to employees, directors or consultants at no less than the market price on the date the option was granted. Options generally become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of 10 years. No further awards will be granted under the 2007 Plan. All outstanding awards previously granted under the 2007 Plan, including those granted in 2014, will continue to be governed by their existing terms. Prior Year Adoption of ASU 2016-09 Effective January 1, 2016, the Company early adopted the accounting guidance contained within ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The Company recorded a $16,903 deferred tax asset and a $16,903 increase to retained earnings on January 1, 2016 to recognize the Company’s excess tax benefits related to share-based awards that existed as of December 31, 2015 (modified retrospective application). Beginning January 1, 2016, the Company recognizes all newly arising excess tax benefits related to share-based awards as a reduction to income taxes in its consolidated statement of operations, which resulted in the Company’s recognition of $3,003 and $4,148 in benefits to income taxes during the years ended December 31, 2017 and 2016, respectively. Also beginning January 1, 2016, the Company elected the prospective transition method such that excess tax benefits related to share-based awards will no longer be reflected as a decrease to cash flows from operating activities and as an increase to cash flows from financing activities on the consolidated statement of cash flows. Finally, effective January 1, 2016, the Company elected to account for share-based compensation forfeitures when they occur. There was no impact of this election because prior to the adoption the Company did not have adequate historical information to estimate forfeitures. No prior period amounts were adjusted as a result of the adoption of ASU 2016-09. Stock Options A summary of the Company’s stock option activity for the years ended December 31, 2015, 2016 and 2017 is as follows: Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic of Options Price Life Value (In years) Outstanding at January 1, 2015 $ $ Granted Repurchased ) Exercised ) Expired/cancelled ) Outstanding at December 31, 2015 Granted Exercised ) Expired/cancelled ) Outstanding at December 31, 2016 Granted Exercised ) Expired/cancelled ) Outstanding at December 31, 2017 $ $ Exercisable at December 31, 2017 $ $ The Company recorded share-based compensation expense associated with stock options of $6,628, $5,073 and $3,748 for the years ended December 31, 2017, 2016 and 2015, respectively. The Company granted service-based awards of 2,805,976, 1,165,000 and 893,896 options to purchase common stock to key employees under its 2014 Plan during the years ended December 31, 2017, 2016 and 2015, respectively. The options become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of 10 years. The Company granted service-based awards of 200,000 options to purchase common stock to key employees under its 2014 Plan during the year ended December 31, 2017 that were immediately vested at time of grant. These options have a maximum term of 10 years. The Company granted performance-based awards of 260,759, 381,532 and 391,043 options to purchase common stock to key employees under the 2014 Plan during the years ended December 31, 2017, 2016 and 2015, respectively, that are earned based upon the Company’s performance relative to specified revenue and adjusted earnings before interest, taxes, depreciation and amortization goals corresponding to the year in which granted. None of the performance-based awards granted during 2017 and 2016 were earned and, therefore, no share-based compensation expense was recorded for these awards in either 2017 or 2016. All but 2,084 of the performance-based awards granted during 2015 were earned. The earned options vest in four installments of 25%, with the first installment vesting upon Audit Committee confirmation of the satisfaction of the applicable performance goals, and the remaining installments vesting annually thereafter. These options have a maximum term of 10 years. The Company granted performance-based awards of 800,000 options to purchase common stock to key employees under its 2014 Plan during the year ended December 31, 2017 that will be earned or forfeited in increments based on the cumulative growth in adjusted earnings before interest, taxes, depreciation and amortization of a certain therapeutic category during the years ending December 31, 2017, 2018, 2019 and 2020. The earned options, if any, will be determined annually each March 31 of the subsequent year and vest as of that date. These options have a maximum term of 10 years. At December 31, 2017, the total compensation cost related to non-vested options not yet recognized was $25,633, which will be recognized over a weighted average period of 3.3 years, assuming all employees complete their respective service periods for vesting of the options. The total intrinsic value of options exercised/repurchased during the years ended December 31, 2017, 2016 and 2015 was $11,973, $13,048 and $103,317, respectively. The weighted average grant date fair value of options granted during the years ended December 31, 2017, 2016 and 2015 was $6.23, $6.34 and $11.84, respectively. The grant-date fair value of each option award was estimated using the Black-Scholes-Merton option-pricing model using the assumptions set forth in the following table: Year Ended December 31, 2017 2016 2015 Exercise price $14.36 - $20.87 $14.40 - $36.60 $27.80 - $48.72 Expected volatility 33.44% - 36.38% 23.90% - 24.76% 25.12% - 26.70% Expected dividend yield 0% 0% 0% Risk-free rate for expected term 1.88% - 2.34% 1.23% - 2.06% 1.53% - 2.01% Expected term (in years) 5.00 - 6.25 6.25 6.25 Estimating grant date fair values for employee stock options requires management to make assumptions regarding expected volatility of value of those underlying shares, the risk-free rate over the expected life of the stock options and the date on which share-based payments will be settled. Expected volatility is based on a weighted average of the Company’s historic volatility and an implied volatility for a group of industry-relevant healthcare companies as of the measurement date. Risk-free rate is determined based upon U.S. Treasury rates over the estimated expected option lives. Expected dividend yield is zero as the Company does not anticipate that any dividends will be declared during the expected term of the options. The expected term of options granted is calculated using the simplified method (the midpoint between the end of the vesting period and the end of the maximum term). Forfeitures are accounted for when they occur. In March 2015, the Company repurchased vested stock options to buy 1,641,387 shares of common stock from certain current employees, including certain executive officers, for cash consideration totaling $36,298. All repurchased stock options were granted under the Company’s 2007 Stock Option Plan. No incremental compensation expense was recognized as a result of these repurchases. For U.S. GAAP purposes, share-based compensation expense associated with stock options is based upon recognition of the grant date fair value over the vesting period of the option. For income tax purposes, share-based compensation tax deductions associated with nonqualified stock option exercises and repurchases are based upon the difference between the stock price and the exercise price at time of exercise or repurchase. Prior to the Company’s adoption of ASU 2016-09 , in instances where share-based compensation expense for income tax purposes was in excess of share-based compensation expense for U.S. GAAP purposes, which had historically been the case for the Company, U.S. GAAP required that the tax benefit associated with this excess expense be recorded to shareholders’ equity to the extent that it reduced cash taxes payable. During the year ended December 31, 2015, the Company recorded excess tax benefits related to share-based awards of $20,805 as an increase to shareholders’ equity. Prior to the Company’s adoption of ASU 2016-09, U.S. GAAP also required that excess tax benefits related to share-based awards be reported as a decrease to cash flows from operating activities and as an increase to cash flows from financing activities. The Company reported $20,805 of excess tax benefits related to share-based awards as a decrease to cash flows from operating activities and as an increase to cash flows from financing activities for the year ended December 31, 2015. Restricted Stock Units A summary of the Company’s RSU activity as of and for the year ended December 31, 2017 is as follows: Weighted Average Number Grant Date of RSUs Fair Value Nonvested at January 1, 2017 — $ — Granted Expired/cancelled ) Nonvested at December 31, 2017 $ The Company granted 90,718 RSUs to key employees under its 2014 Plan during the year ended December 31, 2017. The value of an RSU is determined by the market value of the Company’s common stock at the date of grant. This value is recorded as compensation expense on a straight-line basis over the vesting period, which is three years. Of the 66,639 RSUs as of December 31, 2017, 34,747 RSUs cliff vest after three years, while the remaining 31,892 RSUs vest one-third per year. The Company recorded share-based compensation expense associated with RSUs of $203 for the year ended December 31, 2017. At December 31, 2017, the total compensation cost related to non-vested RSUs not yet recognized was $615, which will be recognized over the next 2.3 years, assuming all employees complete their respective service periods for vesting of the RSUs. Restricted Stock Awards A summary of the Company’s RSA activity for the years ended December 31, 2015, 2016 and 2017 is as follows: Number Weighted of Shares Average Subject to Grant Date Restriction Fair Value Nonvested at January 1, 2015 $ Granted Vested ) Nonvested at December 31, 2015 $ Granted Vested ) Nonvested at December 31, 2016 $ Granted Vested ) Nonvested at December 31, 2017 $ Under the 2014 Plan, the Company issued RSAs to non-employee directors. The value of a RSA is determined by the market value of the Company’s common stock at the date of grant. The value of a RSA is recorded as share-based compensation expense on a straight-line basis over the vesting period, which is typically one year. The Company recorded share-based compensation expense associated with RSAs of $450, $339 and $188 for the years ended December 31, 2017, 2016 and 2015, respectively. At December 31, 2017, the total compensation cost related to non-vested RSAs not yet recognized was $255, which will be recognized during 2018, assuming the non-employee directors complete their service period for vesting of the RSAs. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Tax Act; however, as described below, the Company made a reasonable estimate of the effects on its existing deferred tax balances. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. The measurement period ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. For existing deferred tax balances for which the Company was able to determine an impact and those which the Company was able to determine a reasonable estimate including the provisional amounts discussed below, the Company recognized an income tax benefit of $7,828, which is included as a component of income tax benefit for the year ended December 31, 2017. The Company re-measured these deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. Provisional amounts were provided for deferred tax assets and liabilities for which reasonable estimates were available associated with the Company’s 2017 acquisitions (Note 3); certain equity interest; and deferred assets impacted by cash payments after December 31, 2017. The Company re-measured these deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The provisional amount recorded related to the re-measurement of these deferred tax balances was an income tax benefit of $9,069, which is included in the Company’s Tax Act effect of $7,828. Significant components of the benefit (expense) for income taxes for the years ended December 31, 2017, 2016 and 2015 are as follows: 2017 2016 2015 Current: Federal $ ) $ ) $ ) State and local ) ) ) Total current ) ) ) Deferred: Federal ) State and local ) Total deferred ) $ $ ) $ ) The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax benefit (expense) is as follows: Year Ended December 31, 2017 2016 2015 Income tax expense at U.S. statutory rate $ ) $ ) $ ) Tax effect from: Share-based compensation (Note 3) — State income taxes, net of federal benefit ) ) ) Loss on noncontrolling interest ) ) ) Tax Act effect — — Other ) Income tax benefit (expense) $ $ ) $ ) Significant components of deferred tax assets and liabilities are as follows: December 31, 2017 2016 Deferred tax assets: Allowance for doubtful accounts $ $ Net operating loss and credit carryforwards Compensation and benefits Investments — Other temporary differences Total deferred tax assets Deferred tax liabilities: Property and intangible assets ) ) Prepaid expenses and other current assets ) ) Investments ) — Total deferred tax liabilities ) ) Net deferred tax (liabilities) assets $ ) $ At December 31, 2017, the Company had $53,148 of state and local gross net operating loss carry-forwards. The state and local gross net operating loss carry-forwards expire at various times through 2036. The Company prepares and files tax returns based on interpretations of tax laws and regulations. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain income tax positions unless it is determined to be more likely than not that such tax positions would be sustained upon examination, based on their technical merits. That is, for financial reporting purposes, the Company only recognizes a tax benefit taken on its tax return if it believes it is more likely than not that such tax position would be sustained. There is considerable judgment involved in determining whether it is more likely than not that such tax positions would be sustained. As of both December 31, 2017 and 2016, the Company had unrecognized tax benefits of $268; all of which, if recognized, would reduce both tax expense and the effective tax rate. The Company would adjust its tax reserve estimates periodically because of ongoing examinations by, and settlements with, varying taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated tax provision of any given year includes adjustments to prior year income tax accruals and related estimated interest charges that are considered appropriate. The Company’s 2016, 2015 and 2014 C corporation tax returns are open to examination by U.S. federal, state and local taxing authorities. The Company’s 2014 and 2015 tax years are currently under examination by the U.S. federal tax authority. To date, no material adjustments have been proposed. |
INCOME PER COMMON SHARE
INCOME PER COMMON SHARE | 12 Months Ended |
Dec. 31, 2017 | |
INCOME PER COMMON SHARE | |
INCOME PER COMMON SHARE | 12. INCOME PER COMMON SHARE Basic income per common share is computed by dividing net income allocable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income per common share further includes any common shares available to be issued upon: exercise of outstanding service-based stock options; exercise of outstanding performance-based stock options for which all performance conditions were satisfied; and satisfaction of all contingent consideration performance conditions; and RSAs and RSUs, if such inclusions would be dilutive. The following table sets forth the computation of basic and diluted income per common share: Year Ended December 31, 2017 2016 2015 Numerator: Net income attributable to Diplomat Pharmacy, Inc. $ $ $ Denominator: Weighted average common shares outstanding, basic Weighted average dilutive effect of stock options, RSAs and RSUs Weighted average dilutive effect of contingent consideration — Weighted average common shares outstanding, diluted Net income per common share: Basic $ $ $ Diluted $ $ $ Service-based and earned performance-based stock options to purchase a weighted average of 3,242,919, 1,542,064 and 649,564 common shares were excluded from the computation of diluted weighted average common shares outstanding for the years ended December 31, 2017, 2016 and 2015, respectively, as inclusion of such options would be anti-dilutive. Performance-based stock options to purchase up to a weighted average of 770,503, 291,277 and 410,452 common shares were excluded from the computation of diluted weighted average common shares outstanding for the years ended December 31, 2017, 2016 and 2015, respectively, as all performance conditions were not satisfied at some/all quarter-end periods within the respective years. Weighted average RSUs of 21,623 common shares were excluded from the computation of diluted weighted average common shares outstanding for the year ended December 31, 2017 as inclusion of such RSUs would be anti-dilutive. Weighted average RSAs of 10,038 and 475 common shares were excluded from the computation of diluted weighted average common shares outstanding for the years ended December 31, 2017 and 2016, respectively, as inclusion of such RSAs would be anti-dilutive. Contingent consideration to issue a weighted average of 1,012,732 common shares was excluded in the computation of diluted weighted average common shares outstanding for the year ended December 31, 2015, as all performance conditions were not satisfied until the quarter ended December 31, 2015. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 13. COMMITMENTS AND CONTINGENCIES Legal Proceedings On November 10, 2016, a putative class action complaint was filed in the U.S. District Court for the Eastern District of Michigan against Diplomat Pharmacy, Inc. and certain officers of the Company. Following appointment of lead plaintiffs and lead counsel, an amended complaint was filed on April 11, 2017. The amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with public filings made between February 29, 2016 and November 2, 2016 (the “potential class period”). The plaintiff seeks to represent a class of shareholders who purchased stock in the potential class period. The complaint seeks unspecified monetary damages and other relief. The Company filed a motion to dismiss the amended complaint on May 24, 2017. The court issued an order denying the Company’s motion to dismiss on January 19, 2018. The Company filed a motion for reconsideration of its motion to dismiss on February 2, 2018. The Company believes the complaint and allegations to be without merit and intends to vigorously defend itself against the action. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows. On February 10, 2017, the Company’s Board of Directors (the “Board”) received a demand letter from a purported shareholder containing allegations similar to those contained in the putative class action complaint described above. The letter demanded that the Board take action to remedy the alleged violations. In response, the Board established a Special Independent Committee of its disinterested and independent members to investigate the claims. Subsequently, on June 2, 2017, the shareholder filed a putative shareholder’s derivative lawsuit in the Michigan Circuit Court for the County of Genesee regarding the same matters alleged in the demand letter. The complaint names the Company as a nominal defendant and names a number of the Company’s current and former officers and directors as defendants. The complaint seeks unspecified monetary damages and other relief. In connection with the ongoing Special Independent Committee investigation, on July 20, 2017, by agreement between the Company and the shareholder, the court ordered a stay of legal proceedings for 90 days, after which time by further agreement of the Company and the shareholder, the court has extended the stay until April 3, 2018. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows. The results of legal proceedings are often uncertain and difficult to predict, and the Company could from time to time incur judgments, enter into settlements, materially change its business practices or technologies or revise its expectations regarding the outcome of certain matters. In addition, the costs incurred in litigation can be substantial, regardless of the outcome. The Company’s business of providing specialized pharmacy services and other related services may subject it to litigation and liability for damages in the ordinary course of business. Nevertheless, the Company believes there are no other legal proceedings, the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business, financial position, cash flows or results of operations. Purchase Commitments The Company’s amended contract with AmerisourceBergen expires on September 30, 2018. This amended contract commits the Company to a minimum purchase obligation of approximately $2,000,000 per contract year to maintain its current negotiated discounts and rates. Lease Commitments The Company leases multiple pharmacy and distribution facilities and office equipment under various operating lease agreements expiring through December 2027. Total rental expense under operating leases for the years ended December 31, 2017, 2016 and 2015 was $4,215, $4,179 and $3,295, respectively, exclusive of property taxes, insurance and other occupancy costs generally payable by the Company. Future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year as of December 31, 2017 are as follows: 2018 $ 2019 2020 2021 2022 Thereafter $ |
SELECTED QUARTERLY FINANCIAL DA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents selected quarterly financial data for each of the quarters in the years ended December 31, 2017 and 2016: For the 2017 Quarter Ended March 31 June 30 September 30 December 31 Net sales $ $ $ $ Gross profit Income (loss) before income taxes ) Net income Net income attributable to Diplomat Basic income per common share Diluted income per common share For the 2016 Quarter Ended March 31 June 30 September 30 December 31 Net sales $ $ $ $ Gross profit Income (loss) before income taxes ) Net income (loss) ) Net income (loss) attributable to Diplomat ) Basic income (loss) per common share ) Diluted income (loss) per common share ) The Company’s results were impacted by the following: · Quarter ended December 31, 2017: The Company recognized $1,710 of changes in the fair values of contingent consideration. The Company recognized a $7,828 income tax benefit due to the enactment of the Tax Act (Note 11). · Quarter ended September 30, 2017: The Company recognized $1,965 of changes in the fair values of contingent consideration. · Quarter ended December 31, 2016: The Company recognized a $4,659 impairment of its cost method investment in PRM (Note 9). · Quarter ended September 30, 2016: The Company was assessed and recorded approximately $8,000 in additional DIR fees, of which approximately $4,000 were retroactive DIR fees that increased its previous estimates by approximately $1,700 and $2,300 for the first and second quarters of 2016, respectively. The Company recognized a $4,804 impairment of its Primrose intangible assets (Note 8), partially offset by $2,354 which was the noncontrolling interests’ allocation of the recognized impairment. The Company recognized $3,076 in excess tax benefits related to share-based awards (Note 3). · Quarter ended March 31, 2016: The Company recognized a $9,071 change in the fair value of contingent consideration, primarily due to a reduction in its BioRx contingent consideration liability caused by a decrease in the Company’s stock price. |
BASIS OF PRESENTATION AND SUM21
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Diplomat Pharmacy, Inc., its wholly owned subsidiaries, and a 51 percent owned subsidiary, formed in August 2014, which the Company controlled and which was dissolved during the fourth quarter of 2017. The Company also owns a 22 percent interest in a non-consolidated entity which is accounted for under the equity method of accounting since the Company does not control the entity but has the ability to exercise significant influence over its operating and financial policies. This equity method investment was fully impaired during the fourth quarter of 2014 (Note 8). An investment in an entity in which the Company owns less than 20 percent and does not have the ability to exercise significant influence is accounted for under the cost method. This cost method investment was impaired during the fourth quarter of 2016 (Note 8). In addition, the Company paid $100 to acquire an 11.1 percent interest in a non-consolidated entity during 2017, which is accounted for under the cost method, as the Company owns less than 20 percent and does not have the ability to exercise significant influence over the entity. Noncontrolling interest in a consolidated subsidiary in the consolidated balance sheets represents the minority shareholders’ proportionate share of the equity in such subsidiary. Consolidated net income (loss) is allocated to the Company and noncontrolling interests (i.e., minority shareholders) in proportion to their percentage ownership. All intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates. |
Concentrations of Risk | Concentrations of Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash on deposit with banks or other financial institutions and trade accounts receivable. A federal program provides non-interest bearing cash balances insurance coverage up to $250 per depositor at each financial institution. The Company’s cash balances often exceed federally insured limits. Concentration of credit risk with respect to trade accounts receivable is limited by the large number of patients comprising the Company’s customer base and their dispersion across multiple payers and multiple geographic areas. No single payer customer accounted for more than 10 percent of net sales for any period presented or trade accounts receivable at December 31, 2017 and 2016. The Company purchases a significant portion of its prescription drug inventory from AmerisourceBergen, a prescription drug wholesaler. These purchases accounted for approximately 41 percent, 49 percent and 50 percent of cost of products sold for the years ended December 31, 2017, 2016 and 2015, respectively. The Company has alternative vendors available if necessary. See Note 13 for discussion of the Company’s minimum purchase obligation with AmerisourceBergen. The Company purchases certain prescription drugs from Celgene Corporation (“Celgene”) and Pharmacyclics, Inc. (“Pharmacyclics”), drug manufacturers. Purchases from Celgene and Pharmacyclics accounted for approximately 17 percent and 14 percent, 13 percent and 10 percent, and 12 percent and 9 percent of cost of products sold for the years ended December 31, 2017, 2016 and 2015, respectively, with no minimum purchase obligation. The specialty drugs that the Company purchases from Celgene and Pharmacyclics are not available from any other source. |
Cash Equivalents | Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. |
Accounts Receivable, net | Accounts Receivable, net Trade accounts receivable are stated at the invoiced amount. Trade accounts receivable primarily include amounts from third-party pharmacy benefit managers and insurance providers and are based on contracted prices. Trade accounts receivable are unsecured and require no collateral. Trade accounts receivable terms vary by payer, but generally are due within 30 days after the sale of the product or performance of the service. The Company maintains an allowance for doubtful accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance, management considers factors such as current overall economic conditions, historical and anticipated customer performance, historical experience with write-offs and the level of past due accounts. The Company’s general policy for uncollectible accounts, if not reserved through specific examination procedures, is to reserve based upon the aging categories of accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Activity in the allowance for doubtful accounts was as follows: Year Ended December 31, 2017 2016 2015 Beginning balance $ ) $ ) $ ) Charged to expense ) ) ) Write-offs, net of recoveries Ending balance $ ) $ ) $ ) |
Inventories | Inventories Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Prescription medications are returnable to the Company’s vendors and fully refundable before six months of expiration, and any remaining expired medication is relieved from inventory on a quarterly basis. |
Property and Equipment, net | Property and Equipment, net Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally computed on a straight-line basis over the estimated useful lives of the assets. The costs of leasehold improvements are depreciated either over the life of the improvement or the lease term, whichever is shorter. For income tax purposes, accelerated methods of depreciation are generally used. Significant improvements are capitalized, and disposed or replaced property is written off. Maintenance and repairs are charged to expense in the period they are incurred. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in earnings. |
Capitalized Software for Internal Use, net | Capitalized Software for Internal Use, net The Company capitalizes certain development costs primarily related to a custom-developed, proprietary, scalable patient care system. The Company expenses the costs incurred during the preliminary project stage, and capitalizes the direct development costs, including the associated payroll and related costs for employees and outside contractors working on development, during the application development stage. The Company monitors development on an ongoing basis and capitalizes the costs of any major improvements or that result in significant additional functionality. Capitalized internal use software costs are amortized on a straight-line basis over the estimated useful lives of the assets, generally three years. For income tax purposes, accelerated methods of amortization are generally used. Management evaluates the useful lives of these assets on an annual basis. |
Definite-Lived Intangible Assets, net | Definite-Lived Intangible Assets, net Definite-lived intangible assets consist of assets related to acquisitions and are amortized over their estimated useful lives using an accelerated method for the majority of customer, patient and physician relationships, and the straight-line method for the remaining intangible assets. |
Long-Lived Assets | Long-Lived Assets Long-lived assets, such as property and equipment, capitalized software for internal use and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected present value calculations to the estimated future cash flows using assumptions a market participant would utilize, or through the use of a third-party independent appraiser or valuation specialist. |
Goodwill | Goodwill Goodwill represents the excess acquisition cost of an acquired entity over the estimated fair values of the net tangible assets and the identifiable intangible assets acquired. Goodwill is not amortized, but rather is reviewed for impairment annually during the fourth quarter, or more frequently if facts or circumstances indicate that the carrying value may not be recoverable. An entity has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount prior to performing a quantitative impairment test. The qualitative assessment evaluates various events and circumstances, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends that may impact a reporting unit’s fair value. If it is determined that the estimated fair value of the reporting unit is more-likely-than-not less than its carrying amount, including goodwill, a quantitative assessment is required. Otherwise, no further analysis is necessary. If a quantitative assessment is performed, a reporting unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate with the risks involved, and multiples of current and future earnings. If the fair value of a reporting unit is less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. |
Debt Issuance Costs | Debt Issuance Costs Costs incurred related to the issuance of the Company’s credit facility were deferred and are being amortized to interest expense using the effective interest method over the term of the agreement. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from dispensing prescription drugs for home delivery at the time the drugs are shipped. At the time of shipment, the Company has performed substantially all of its obligations under its payer contracts and does not experience a significant level of returns or reshipments. Revenues from dispensing prescription drugs that are picked up by patients at an open-door or retail pharmacy location are recorded at prescription adjudication, which approximates the fill date. Revenue generated from dispensing prescription drugs was $4,444,486, $4,386,643 and $3,346,652 for the years ended December 31, 2017, 2016 and 2015, respectively. The Company accrues an estimate of fees, including direct and indirect remuneration fees (“DIR fees”), which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction at the time revenue is recognized. Changes in the Company’s estimate of such fees are recorded when the change becomes known. The Company recognizes revenue from the sale of prescription drugs by its retail pharmacy network when the claim is adjudicated. When the Company acts as principal in the arrangement, exercises pricing latitude and independently has a contractual obligation to pay its network pharmacy providers for benefits provided to its clients’ members, the Company includes the total prescription price (ingredient cost plus dispensing fee) it has contracted with these clients as revenue, including member co-payments to pharmacies. Revenue generated from the sale of prescription drugs by retail pharmacies was $6,531 for the year ended December 31, 2017. When the Company merely administers a client’s network pharmacy contracts and does not assume credit risk, the Company earns an administrative fee for collecting payments from the client and remits the corresponding amount to the pharmacies in the client’s network, drug ingredient cost is not included in the Company’s revenues or cost of products sold. Administrative fee revenue was $1,724 for the year ended December 31, 2017. The Company recognizes revenue from service, data and consulting services when the services have been performed and the earnings process is therefore complete. Revenues generated from service, data and consulting services were $32,489, $23,745 and $19,979 for the years ended December 31, 2017, 2016 and 2015, respectively. Sales taxes are presented on a net basis (excluded from revenues and costs). The Company derived its revenue from the following therapeutic classes: Year Ended December 31, 2017 2016 2015 Oncology $ $ $ Specialty Infusion Immunology(1) Hepatitis <10 % Other (none greater than 10% in the period) Total revenue $ $ $ (1) Includes drugs dispensed to treat arthritis, Crohn’s disease and psoriasis. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are not billed to patients; therefore, there are no shipping and handling revenues. The Company recognizes shipping and handling costs as incurred as a component of “Selling, general and administrative expenses” and were $15,689, $15,144 and $13,899 for the years ended December 31, 2017, 2016 and 2015, respectively. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs are expensed as incurred as a component of “Selling, general and administrative expenses” and were $2,251, $3,868 and $3,553 for the years ended December 31, 2017, 2016 and 2015, respectively. |
Defined Contribution Savings Plans | Defined Contribution Savings Plans The Company maintains certain defined contribution savings plans for eligible employees. The total expenses attributable to the Company’s defined contribution savings plans are recognized as a component of “Selling, general and administrative expenses” and were $2,908, $2,665 and $1,877 for the years ended December 31, 2017, 2016 and 2015, respectively. |
Share-Based Compensation | Share-Based Compensation The Company grants stock options to key employees, which are accounted for as equity awards. The exercise price of a granted stock option is equal to the closing market stock price of the underlying common share on the date the option is granted. The grant date fair value of these awards is measured using the Black-Scholes-Merton option pricing model. Stock options generally become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of ten years. Certain stock option grants have performance-based conditions, which require the satisfaction of certain revenue and/or Adjusted EBITDA targets prior to vesting. The Company expenses the grant date fair value of its stock options over their respective vesting periods on a straight-line basis. The Company also grants restricted stock units (“RSU” or “RSUs”) to key employees, which are accounted for as equity awards. Some granted RSUs cliff vest after three years, whereas others vest one-third per year. The grant date fair value of a RSU is determined by the closing market price of our common stock as of the date of grant. The Company expenses the grant date fair value of the RSU over the three-year vesting period on a straight-line basis. The Company grants restricted stock awards (“RSA” or “RSAs”) to non-employee directors, which are accounted for as equity awards. Generally, such RSAs fully vest on the first anniversary of the grant date. The grant date fair value of a RSA is determined by the closing market price of the Company’s common stock as of the date of grant. The grant date fair value of the RSU is expensed over the vesting period on a straight-line basis. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. The Company records interest and penalties related to tax uncertainties as income tax expense. Based on management’s evaluation, the Company concluded there were no significant uncertain tax positions requiring recognition in its consolidated financial statements. |
Segment Information | Segment Information The Company’s chief operating decision maker reviews the financial results of the Company in total when evaluating financial performance and for purposes of allocating resources. The Company has thus determined that it operates in a single reportable segment — specialty pharmacy services. |
Accounting Standards Update (ASU) Adoption | Accounting Standards Update (“ASU”) Adoption — Balance Sheet Classification of Deferred Taxes In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-17 , Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), eliminating the requirement for companies to present deferred tax assets and liabilities as current and noncurrent. Instead, companies are required to classify all deferred tax assets and liabilities as noncurrent. Effective January 1, 2017, the Company retrospectively adopted the accounting guidance contained within ASU 2015-17. The following December 31, 2016 consolidated balance sheet line items were adjusted due to this adoption: As Previously Reported Adjustment As Adjusted Deferred income taxes (current asset) $ $ ) $ — Total current assets ) Deferred income taxes (noncurrent asset) — Total assets ) Deferred income taxes (noncurrent liability) ) — Total liabilities ) Total liabilities and shareholders’ equity ) ASU Adoption — Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued ASU No. 2017-04 , Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), eliminating Step 2 from the quantitative goodwill impairment test. Instead, an entity will perform its annual, or interim, quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount (Step 1). An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, though early adoption is permitted. Effective January 1, 2017, the Company adopted the accounting guidance contained within ASU 2017-04. This adoption had no impact on the Company’s consolidated financial statements. |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 , Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB issued ASU No. 2015-14 , Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, for public entities, though early adoption was permitted. Topic 606 permits two methods of adoption: retrospective approach reflecting the application of the standard in each prior reporting period presented (full retrospective method), or retrospective approach with the cumulative effect of initially applying the guidance recognized at the date of initial application (cumulative catch-up transition method). The new standard also includes a cohesive set of disclosure requirements intended to provide users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a company’s contracts with customers. The Company is finalizing the impact of Topic 606 on the disclosures for its consolidated financial statement footnotes and expects the disclosures to be enhanced. On January 1, 2018, the Company adopted Topic 606 using the cumulative catch-up transition method and will record an immaterial after-tax adjustment to reduce retained earnings. This cumulative adjustment relates to a shift in the recognition of dispensing prescription drugs for home delivery from the date the drugs are shipped under the Company’s existing accounting policy to the date the drugs are physically delivered (when control transfers) under the new standard. The effect of this change will not be significant as there is a very short timeframe from shipment to physical delivery of the prescription medication. For the Company’s PBM businesses acquired late in the fourth quarter of 2017, the Company has gathered most of its data from customer contracts, is finalizing its evaluation of the potential impact of the new standard and is in the process of completing its applicable accounting policy memorandums. A portion of the Company’s PBM businesses includes dispensing prescription drugs for home delivery, the impact of which will be included in the cumulative adjustment previously discussed. For the remainder of its PBM businesses, the Company is finalizing the evaluation of reporting revenues on a gross or net basis under its payer contracts, however, based on the preliminary analysis to date, it is not expected that other aspects of the new standard will have a significant impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 , Leases (Topic 842) , requiring lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at lease commencement date. This ASU is effective for annual periods beginning on or after December 15, 2018, including interim periods within those annual periods, though early adoption is permitted. The Company is in the early stages of evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and/or notes thereto. In May 2017, the FASB issued ASU No. 2017-09 , Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting , providing guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for annual periods beginning on or after December 15, 2017, including interim periods within those annual periods. This ASU is to be applied prospectively to an award modified on or after the adoption date. The adoption of this guidance is not expected to have any immediate impact on the Company’s consolidated financial statements. |
BASIS OF PRESENTATION AND SUM22
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of allowance for doubtful accounts | Year Ended December 31, 2017 2016 2015 Beginning balance $ ) $ ) $ ) Charged to expense ) ) ) Write-offs, net of recoveries Ending balance $ ) $ ) $ ) |
Schedule of revenue from therapeutic classes | Year Ended December 31, 2017 2016 2015 Oncology $ $ $ Specialty Infusion Immunology(1) Hepatitis <10 % Other (none greater than 10% in the period) Total revenue $ $ $ (1) Includes drugs dispensed to treat arthritis, Crohn’s disease and psoriasis. |
Schedule of consolidated balance sheet line items adjusted due to this adoption | The following December 31, 2016 consolidated balance sheet line items were adjusted due to this adoption: As Previously Reported Adjustment As Adjusted Deferred income taxes (current asset) $ $ ) $ — Total current assets ) Deferred income taxes (noncurrent asset) — Total assets ) Deferred income taxes (noncurrent liability) ) — Total liabilities ) Total liabilities and shareholders’ equity ) |
BUSINESS ACQUISITION (Tables)
BUSINESS ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
BUSINESS ACQUISITIONS | |
Schedule of unaudited pro forma results of operations | Year Ended December 31, 2017 2016 Net sales $ $ Net income attributable to Diplomat Pharmacy, Inc. $ $ Net income per common share — basic $ $ Net income per common share — diluted $ $ |
LDI Holding Company | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 4,113,188 restricted common shares $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Deferred income taxes ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Customer relationships 10 years $ Trade names and trademarks 4 years $ |
Pharmaceutical Technologies, Inc. | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 835,017 restricted common shares $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Customer relationships 10 years $ Trade names and trademarks 2 years $ |
Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 374,297 restricted common shares Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Patient relationships 7 years $ Non-compete employment agreements 3 years Trade names and trademarks 3 years $ |
Accurate Rx Pharmacy Consulting, LLC | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 131,108 restricted common shares Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventory Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Patient relationships 7 years $ Non-compete employment agreements 5 years Trade names and trademarks 4 years $ |
WRB Communications, LLC | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 299,325 restricted common shares Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Prepaid expenses and other current assets Property and equipment Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Customer relationships 7 years $ Non-compete employment agreements 4 years Trade names and trademarks 2 years $ |
Comfort Infusion, Inc. | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Physician relationships 7 years $ Non-compete employment agreements 5 years $ |
Affinity Biotech, Inc | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Patient relationships 7 years $ Non-compete employment agreements 5 years $ |
Valley Campus Pharmacy, Inc | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 324,244 restricted common shares $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Physician relationships 10 years $ Non-compete employment agreements 5 years Trade names and trademarks 1 year $ |
Burman's Apothecary, LLC | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 253,036 restricted common shares $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Accounts receivable $ Inventories Prepaid expenses and other current assets Property and equipment Capitalized software for internal use Definite-lived intangible assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Physician relationships 10 years $ Noncompete employment agreements 5 years Favorable supply agreement 1 year $ |
BioRx, LLC | |
BUSINESS ACQUISITIONS | |
Schedule of consideration transferred | Cash $ 4,038,853 restricted common shares Contingent consideration at fair value $ |
Summary of the fair values of identifiable acquired assets and assumed liabilities | Cash and cash equivalents $ Accounts receivable Inventories Prepaid expenses and other current assets Property and equipment Definite-lived intangible assets Other noncurrent assets Accounts payable ) Accrued expenses — compensation and benefits ) Accrued expenses — other ) Deferred income taxes ) Total identifiable net assets Goodwill $ |
Schedule of definite-lived intangible assets that were acquired and their respective useful lives | Useful Amount Patient relationships 10 years $ Noncompete employment agreements 5 years Trade names and trademarks 8 years $ |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
FAIR VALUE MEASUREMENTS | |
Schedule of assets and liabilities measured and disclosed at fair value on a recurring basis | The following table presents the placement in the fair value hierarchy of assets and liabilities that were measured and disclosed at fair value on a recurring basis at December 31, 2017: Asset / Valuation (Liability) Level 3 Technique Contingent consideration $ ) $ ) C |
Schedule of a roll forward of the Level 3 measurements | Contingent Balance at January 1, 2015 $ ) BioRx acquisition ) Change in fair value ) Payments Balance at December 31, 2015 ) Change in fair value Payments Balance at December 31, 2016 — Affinity acquisition ) Comfort acquisition ) WRB acquisition ) Accurate acquisition ) Focus acquisition ) Changes in fair values ) Balance at December 31, 2017 $ ) |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | December 31, Useful Life 2017 2016 Land — $ $ Buildings 40 years Leasehold improvements 5 - 15 years* Equipment and fixtures 5 - 10 years Computer equipment 3 - 5 years Construction in progress Accumulated depreciation ) ) $ $ * Unless applicable lease term is shorter. |
CAPITALIZED SOFTWARE FOR INTE26
CAPITALIZED SOFTWARE FOR INTERNAL USE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
CAPITALIZED SOFTWARE FOR INTERNAL USE | |
Schedule of balances of capitalized software, acquired and developed internally | December 31, Useful Life 2017 2016 Capitalized software for internal use 3 years $ $ Construction in progress Accumulated amortization ) ) $ $ |
Schedule of estimated future amortization expense for its capitalized software for internal use | 2018 $ 2019 2020 2021 $ |
GOODWILL AND DEFINITE-LIVED I27
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS | |
Schedule of changes in the carrying amount of goodwill | Balance at January 1, 2015 $ BioRx acquisition Burman’s acquisition Miscellaneous Balance at December 31, 2015 TNH acquisition Miscellaneous Balance at December 31, 2016 Affinity acquisition Comfort acquisition WRB acquisition TNH purchase price adjustment Accurate acquisition Focus acquisition NPS acquisition LDI acquisition Miscellaneous Balance at December 31, 2017 $ |
Schedule of definite-lived intangible assets | December 31, 2017 December 31, 2016 Gross Accumulated Net Gross Accumulated Net Customer relationships $ $ ) $ $ — $ — $ — Patient relationships ) ) Non-compete employment agreements ) ) Trade names and trademarks ) ) Physician relationships ) ) $ $ ) $ $ $ ) $ |
Schedule of estimated future amortization expense of definite-lived intangible assets | 2018 $ 2019 2020 2021 2022 Thereafter $ |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DEBT | |
Schedule of contractual debt obligations outstanding | The Company has the following contractual debt obligations outstanding associated with its term loans at December 31, 2017: 2018 $ 2019 2020 2021 2022 Thereafter $ |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SHARE-BASED COMPENSATION | |
Summary of entity's stock option activity | Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic of Options Price Life Value (In years) Outstanding at January 1, 2015 $ $ Granted Repurchased ) Exercised ) Expired/cancelled ) Outstanding at December 31, 2015 Granted Exercised ) Expired/cancelled ) Outstanding at December 31, 2016 Granted Exercised ) Expired/cancelled ) Outstanding at December 31, 2017 $ $ Exercisable at December 31, 2017 $ $ |
Schedule of assumptions used to determine the valuation of granted options | Year Ended December 31, 2017 2016 2015 Exercise price $14.36 - $20.87 $14.40 - $36.60 $27.80 - $48.72 Expected volatility 33.44% - 36.38% 23.90% - 24.76% 25.12% - 26.70% Expected dividend yield 0% 0% 0% Risk-free rate for expected term 1.88% - 2.34% 1.23% - 2.06% 1.53% - 2.01% Expected term (in years) 5.00 - 6.25 6.25 6.25 |
Summary of restricted stock units activity | Weighted Average Number Grant Date of RSUs Fair Value Nonvested at January 1, 2017 — $ — Granted Expired/cancelled ) Nonvested at December 31, 2017 $ |
Summary of restricted stock award activity | Number Weighted of Shares Average Subject to Grant Date Restriction Fair Value Nonvested at January 1, 2015 $ Granted Vested ) Nonvested at December 31, 2015 $ Granted Vested ) Nonvested at December 31, 2016 $ Granted Vested ) Nonvested at December 31, 2017 $ |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
Schedule of components of the benefit (expense) for income taxes | 2017 2016 2015 Current: Federal $ ) $ ) $ ) State and local ) ) ) Total current ) ) ) Deferred: Federal ) State and local ) Total deferred ) $ $ ) $ ) |
Schedule of reconciliation of income taxes computed at the United States federal statutory tax rate to income tax benefit (expense) | Year Ended December 31, 2017 2016 2015 Income tax expense at U.S. statutory rate $ ) $ ) $ ) Tax effect from: Share-based compensation (Note 3) — State income taxes, net of federal benefit ) ) ) Loss on noncontrolling interest ) ) ) Tax Act effect — — Other ) Income tax benefit (expense) $ $ ) $ ) |
Schedule of components of the entity's deferred tax assets and liabilities | December 31, 2017 2016 Deferred tax assets: Allowance for doubtful accounts $ $ Net operating loss and credit carryforwards Compensation and benefits Investments — Other temporary differences Total deferred tax assets Deferred tax liabilities: Property and intangible assets ) ) Prepaid expenses and other current assets ) ) Investments ) — Total deferred tax liabilities ) ) Net deferred tax (liabilities) assets $ ) $ |
INCOME PER COMMON SHARE (Tables
INCOME PER COMMON SHARE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME PER COMMON SHARE | |
Schedule of the calculation for basic and diluted income per common share | Year Ended December 31, 2017 2016 2015 Numerator: Net income attributable to Diplomat Pharmacy, Inc. $ $ $ Denominator: Weighted average common shares outstanding, basic Weighted average dilutive effect of stock options, RSAs and RSUs Weighted average dilutive effect of contingent consideration — Weighted average common shares outstanding, diluted Net income per common share: Basic $ $ $ Diluted $ $ $ |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum payments under non-cancelable operating leases | Future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year as of December 31, 2017 are as follows: 2018 $ 2019 2020 2021 2022 Thereafter $ |
SELECTED QUARTERLY FINANCIAL 33
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
Schedule of selected quarterly financial data | For the 2017 Quarter Ended March 31 June 30 September 30 December 31 Net sales $ $ $ $ Gross profit Income (loss) before income taxes ) Net income Net income attributable to Diplomat Basic income per common share Diluted income per common share For the 2016 Quarter Ended March 31 June 30 September 30 December 31 Net sales $ $ $ $ Gross profit Income (loss) before income taxes ) Net income (loss) ) Net income (loss) attributable to Diplomat ) Basic income (loss) per common share ) Diluted income (loss) per common share ) |
BASIS OF PRESENTATION AND SUM34
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Principles of Consolidation thru Inventories (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Feb. 28, 2017 | |
Principles of Consolidation | ||||
Percentage of ownership interest in subsidiary that the entity has the ability to control | 51.00% | |||
Percentage of interest in a non-consolidated entity | 22.00% | 22.00% | ||
Percentage of interest in a consolidated entity | 11.10% | |||
Cash paid to acquire interest in a non-consolidated entity | $ 100,000 | |||
Concentrations of risk | ||||
Non-interest bearing cash balances insurance coverage per depositor at each financial institution | 250 | |||
Accounts receivable and allowance for doubtful accounts | ||||
Trade receivables collateral amount | $ 0 | |||
Accounts receivable terms after sale of product or performance of service | 30 days | |||
Beginning balance | $ (15,257,000) | $ (8,123,000) | $ (3,043,000) | |
Charged to expense | (9,424,000) | (9,534,000) | (5,990,000) | |
Write-offs, net of recoveries | 2,631,000 | 2,400,000 | 910,000 | |
Ending balance | $ (22,050,000) | $ (15,257,000) | $ (8,123,000) | |
Inventories | ||||
Maximum period before expiration within which Inventory is returnable and fully refundable | 6 months | |||
Software and Software Development Costs | ||||
Capitalized Software for Internal Use, net | ||||
Useful Life | 3 years | |||
AmerisourceBergen | ||||
Concentrations of risk | ||||
Percentage of costs of goods sold | 41.00% | 49.00% | 50.00% | |
Celgene | ||||
Concentrations of risk | ||||
Percentage of costs of goods sold | 17.00% | 14.00% | 13.00% | |
Minimum purchase obligation | $ 0 | $ 0 | $ 0 | |
Pharmacyclics | ||||
Concentrations of risk | ||||
Percentage of costs of goods sold | 10.00% | 12.00% | 9.00% | |
Minimum purchase obligation | $ 0 | $ 0 | $ 0 |
BASIS OF PRESENTATION AND SUM35
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition thru New Accounting Pronouncements (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | |
Revenue recognition | ||||
Revenues | $ 4,485,230 | $ 4,410,388 | $ 3,366,631 | |
Administrative fee revenue | 1,724 | |||
Retroactive DIR fees | $ 4,000 | |||
Revenues from service, data and consulting services | 32,489 | 23,745 | 19,979 | |
Shipping and handling revenues | 0 | 0 | 0 | |
Shipping and handling costs | 15,689 | 15,144 | 13,899 | |
Advertising and marketing costs | ||||
Advertising and marketing costs | 2,251 | 3,868 | 3,553 | |
Defined contribution savings plans | ||||
Expenses for defined contribution savings plans | 2,908 | 2,665 | 1,877 | |
Income taxes | ||||
Uncertain tax positions | 0 | 0 | 0 | |
Change in Accounting Principle | ||||
Total current assets | 634,070 | 505,107 | ||
Deferred income taxes (noncurrent asset) | 6,010 | |||
Total assets | 1,940,423 | 1,099,254 | ||
Deferred income taxes (noncurrent liability) | 14,367 | |||
Total liabilities | 1,190,922 | 485,530 | ||
Total liabilities and shareholders' equity | $ 1,940,423 | 1,099,254 | ||
Restricted Stock Units | ||||
Share-based compensation | ||||
Vesting period | 3 years | |||
Restricted Stock Units | Cliff Vest | ||||
Share-based compensation | ||||
Vesting period | 3 years | |||
Prescription Drugs | ||||
Revenue recognition | ||||
Revenues | $ 4,444,486 | 4,386,643 | 3,346,652 | |
Revenue by retail pharmacies | 6,531 | |||
Oncology | ||||
Revenue recognition | ||||
Revenues | 2,545,708 | 2,102,130 | 1,432,091 | |
Specialty Infusion | ||||
Revenue recognition | ||||
Revenues | 561,730 | 644,173 | 510,708 | |
Immunology | ||||
Revenue recognition | ||||
Revenues | 617,904 | 505,240 | 374,884 | |
Hepatitis | ||||
Revenue recognition | ||||
Revenues | 10 | 583,751 | 520,771 | |
Other | ||||
Revenue recognition | ||||
Revenues | $ 759,888 | 575,094 | $ 528,177 | |
Increase in estimate of first quarter | ||||
Revenue recognition | ||||
Retroactive DIR fees | 1,700 | |||
Increase in estimate of second quarter | ||||
Revenue recognition | ||||
Retroactive DIR fees | $ 2,300 | |||
As Previously Reported | ||||
Change in Accounting Principle | ||||
Deferred income taxes (current asset) | 14,703 | |||
Total current assets | 519,810 | |||
Total assets | 1,107,947 | |||
Deferred income taxes (noncurrent liability) | 8,693 | |||
Total liabilities | 494,223 | |||
Total liabilities and shareholders' equity | 1,107,947 | |||
Adjustment | ||||
Change in Accounting Principle | ||||
Deferred income taxes (current asset) | (14,703) | |||
Total current assets | (14,703) | |||
Deferred income taxes (noncurrent asset) | 6,010 | |||
Total assets | (8,693) | |||
Deferred income taxes (noncurrent liability) | (8,693) | |||
Total liabilities | (8,693) | |||
Total liabilities and shareholders' equity | $ (8,693) |
BUSINESS ACQUISITIONS - LDI Hol
BUSINESS ACQUISITIONS - LDI Holding Company LLC (Details) - USD ($) $ / shares in Units, $ in Thousands | Dec. 20, 2017 | Dec. 19, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
BUSINESS ACQUISITIONS | ||||||
Percentage of acquired entities sales in consolidated net sales | 2.00% | 6.00% | 12.00% | |||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | ||
LDI Holding Company | ||||||
BUSINESS ACQUISITIONS | ||||||
Cash | $ 521,300 | |||||
Restricted common shares | 79,088 | |||||
Total | $ 600,388 | |||||
Restricted common shares (in shares) | 4,113,188 | |||||
Market price (in dollars per share) | $ 20.24 | |||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 95.00% | |||||
Purchase consideration deposited into an escrow account | $ 7,500 | |||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 948 | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Cash | 965 | |||||
Accounts receivable | 38,273 | |||||
Inventories | 2,979 | |||||
Prepaid expenses and other current assets | 837 | |||||
Property and equipment | 2,659 | |||||
Capitalized software for internal use | 791 | |||||
Definite-lived intangible assets | 201,523 | |||||
Accounts payable | (35,472) | |||||
Accrued expenses - compensation and benefits | (2,137) | |||||
Accrued expenses - other | (4,862) | |||||
Deferred income taxes | (31,173) | |||||
Total identifiable net assets | 174,383 | |||||
Goodwill | 426,005 | |||||
Total acquisition price | 600,388 | |||||
Customer relationships | LDI Holding Company | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 184,973 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 10 years | |||||
Trade names and trademarks | LDI Holding Company | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 16,550 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 4 years |
BUSINESS ACQUISITIONS - Pharmac
BUSINESS ACQUISITIONS - Pharmaceutical Technologies, Inc. (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 27, 2017 | Nov. 24, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | ||
Pharmaceutical Technologies, Inc. | ||||||
BUSINESS ACQUISITIONS | ||||||
Cash | $ 34,437 | |||||
Restricted common shares | 12,753 | |||||
Total | $ 47,190 | |||||
Restricted common shares (in shares) | 835,017 | |||||
Market price (in dollars per share) | $ 16.97 | |||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | |||||
Purchase consideration deposited into an escrow account | $ 9,005 | |||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 804 | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Cash | 10,151 | |||||
Accounts receivable | 21,286 | |||||
Inventories | 100 | |||||
Prepaid expenses and other current assets | 650 | |||||
Property and equipment | 13,713 | |||||
Capitalized software for internal use | 1,800 | |||||
Definite-lived intangible assets | 6,720 | |||||
Accounts payable | (23,084) | |||||
Accrued expenses - other | (4,881) | |||||
Total identifiable net assets | 26,455 | |||||
Goodwill | 20,735 | |||||
Total acquisition price | 47,190 | |||||
Customer relationships | Pharmaceutical Technologies, Inc. | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 5,900 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 10 years | |||||
Trade names and trademarks | Pharmaceutical Technologies, Inc. | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 820 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 2 years |
BUSINESS ACQUISITIONS - Focus R
BUSINESS ACQUISITIONS - Focus Rx Pharmacy Services Inc. and Focus Rx Inc. (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 01, 2017 | Aug. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | ||
Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | ||||||
BUSINESS ACQUISITIONS | ||||||
Cash | $ 17,252 | |||||
Restricted common shares | 5,643 | |||||
Contingent consideration at fair value | 2,080 | |||||
Total | $ 24,975 | |||||
Restricted common shares (in shares) | 374,297 | |||||
Market price (in dollars per share) | $ 16.75 | |||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | |||||
Maximum additional cash payouts per performance period | $ 1,500 | |||||
Maximum payout of contingent consideration | 3,000 | |||||
Purchase consideration deposited into an escrow account | $ 1,200 | |||||
Deposit term into an escrow account | 12 months | |||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 329 | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Cash | $ 1,809 | |||||
Accounts receivable | 4,936 | |||||
Inventories | 1,177 | |||||
Prepaid expenses and other current assets | 20 | |||||
Definite-lived intangible assets | 7,100 | |||||
Other noncurrent assets | 21 | |||||
Accounts payable | (5,169) | |||||
Accrued expenses - compensation and benefits | (156) | |||||
Total identifiable net assets | 9,738 | |||||
Goodwill | 15,237 | |||||
Total acquisition price | 24,975 | |||||
Patient relationships | Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 3,700 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 7 years | |||||
Non-compete employment agreements | Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 2,200 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 3 years | |||||
Trade names and trademarks | Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 1,200 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 3 years |
BUSINESS ACQUISITIONS - Accurat
BUSINESS ACQUISITIONS - Accurate Rx Pharmacy Consulting, LLC (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 05, 2017 | Jul. 03, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | ||
Accurate Rx Pharmacy Consulting, LLC | ||||||
BUSINESS ACQUISITIONS | ||||||
Cash | $ 9,408 | |||||
Restricted common shares | 1,776 | |||||
Contingent consideration at fair value | 1,980 | |||||
Total | $ 13,164 | |||||
Restricted common shares (in shares) | 131,108 | |||||
Market price (in dollars per share) | $ 15.05 | |||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | |||||
Maximum additional cash payouts per performance period | $ 3,600 | |||||
Maximum payout of contingent consideration | 7,200 | |||||
Purchase consideration deposited into an escrow account | $ 1,000 | |||||
Deposit term into an escrow account | 15 months | |||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 218 | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Cash | $ 1,295 | |||||
Accounts receivable | 2,196 | |||||
Inventory | 936 | |||||
Prepaid expenses and other current assets | 34 | |||||
Definite-lived intangible assets | 3,420 | |||||
Other noncurrent assets | 3 | |||||
Accounts payable | (3,303) | |||||
Accrued expenses - compensation and benefits | (152) | |||||
Accrued expenses - other | (6) | |||||
Total identifiable net assets | 4,423 | |||||
Goodwill | 8,741 | |||||
Total acquisition price | 13,164 | |||||
Patient relationships | Accurate Rx Pharmacy Consulting, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 2,100 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 7 years | |||||
Non-compete employment agreements | Accurate Rx Pharmacy Consulting, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 670 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 5 years | |||||
Trade names and trademarks | Accurate Rx Pharmacy Consulting, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 650 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 4 years |
BUSINESS ACQUISITIONS - WRB Com
BUSINESS ACQUISITIONS - WRB Communications, LLC (Details) - USD ($) $ / shares in Units, $ in Thousands | May 08, 2017 | May 05, 2017 | Dec. 31, 2017 | Jan. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | |||
WRB Communications, LLC | |||||||
BUSINESS ACQUISITIONS | |||||||
Cash | $ 26,804 | ||||||
Restricted common shares | 4,291 | ||||||
Contingent consideration at fair value | 530 | ||||||
Total | $ 31,625 | ||||||
Restricted common shares (in shares) | 299,325 | ||||||
Market price (in dollars per share) | $ 15.93 | ||||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | ||||||
Maximum additional cash payouts per performance period | $ 500 | ||||||
Amount received by the formers owners | $ 1,000 | ||||||
Purchase consideration deposited into an escrow account | $ 1,950 | ||||||
Deposit term into an escrow account | 18 months | ||||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 259 | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Cash | $ 1,018 | ||||||
Accounts receivable | 2,593 | ||||||
Prepaid expenses and other current assets | 179 | ||||||
Property and equipment | 498 | ||||||
Definite-lived intangible assets | 7,730 | ||||||
Other noncurrent assets | 24 | ||||||
Accounts payable | (100) | ||||||
Accrued expenses - other | (498) | ||||||
Total identifiable net assets | 11,444 | ||||||
Goodwill | 20,181 | ||||||
Total acquisition price | 31,625 | ||||||
Customer relationships | WRB Communications, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 5,200 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 7 years | ||||||
Non-compete employment agreements | WRB Communications, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 1,530 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 4 years | ||||||
Trade names and trademarks | WRB Communications, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 1,000 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 2 years |
BUSINESS ACQUISITIONS - Comfort
BUSINESS ACQUISITIONS - Comfort Infusion, Inc. (Details) - USD ($) $ in Thousands | Mar. 22, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | |
Comfort Infusion, Inc. | |||||
BUSINESS ACQUISITIONS | |||||
Cash | $ 10,613 | ||||
Contingent consideration at fair value | 3,800 | ||||
Total | 14,413 | ||||
Maximum additional cash payouts per performance period | 2,000 | ||||
Maximum payout of contingent consideration | 6,000 | ||||
Purchase consideration deposited into an escrow account | $ 1,050 | ||||
Deposit term into an escrow account | 18 months | ||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 204 | ||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Cash | $ 104 | ||||
Accounts receivable | 575 | ||||
Inventories | 118 | ||||
Prepaid expenses and other current assets | 15 | ||||
Definite-lived intangible assets | 2,400 | ||||
Other noncurrent assets | 5 | ||||
Accounts payable | (372) | ||||
Accrued expenses - other | (101) | ||||
Total identifiable net assets | 2,744 | ||||
Goodwill | 11,669 | ||||
Total acquisition price | 14,413 | ||||
Physician relationships | Comfort Infusion, Inc. | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Definite-lived intangible assets | $ 1,200 | ||||
Definite-lived intangible assets | |||||
Useful Life | 7 years | ||||
Non-compete employment agreements | Comfort Infusion, Inc. | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Definite-lived intangible assets | $ 1,200 | ||||
Definite-lived intangible assets | |||||
Useful Life | 5 years |
BUSINESS ACQUISITIONS - Affinit
BUSINESS ACQUISITIONS - Affinity Biotech, Inc. (Details) - USD ($) $ in Thousands | Feb. 01, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Goodwill | $ 832,624 | $ 316,616 | $ 256,318 | $ 23,148 | |
Affinity Biotech, Inc | |||||
BUSINESS ACQUISITIONS | |||||
Cash | $ 17,377 | ||||
Contingent consideration at fair value | 35 | ||||
Total | 17,412 | ||||
Maximum payout of contingent consideration | 4,000 | ||||
Purchase consideration deposited into an escrow account | $ 2,000 | ||||
Deposit term into an escrow account | 18 months | ||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 204 | ||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Cash | $ 1,043 | ||||
Accounts receivable | 3,583 | ||||
Inventories | 79 | ||||
Prepaid expenses and other current assets | 74 | ||||
Definite-lived intangible assets | 5,100 | ||||
Other noncurrent assets | 5 | ||||
Accounts payable | (1,075) | ||||
Accrued expenses - compensation and benefits | (144) | ||||
Accrued expenses - other | (25) | ||||
Total identifiable net assets | 8,640 | ||||
Goodwill | 8,772 | ||||
Total acquisition price | 17,412 | ||||
Patient relationships | Affinity Biotech, Inc | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Definite-lived intangible assets | $ 4,000 | ||||
Definite-lived intangible assets | |||||
Useful Life | 7 years | ||||
Non-compete employment agreements | Affinity Biotech, Inc | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||
Definite-lived intangible assets | $ 1,100 | ||||
Definite-lived intangible assets | |||||
Useful Life | 5 years |
BUSINESS ACQUISITIONS - Valley
BUSINESS ACQUISITIONS - Valley Campus Pharmacy, Inc (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 01, 2016 | May 31, 2016 | Jan. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Goodwill | $ 316,616 | $ 832,624 | $ 256,318 | $ 23,148 | |||
Valley Campus Pharmacy, Inc | |||||||
BUSINESS ACQUISITIONS | |||||||
Cash | $ 70,267 | ||||||
Restricted common shares | 9,507 | ||||||
Total | $ 79,774 | ||||||
Restricted common shares (in shares) | 324,244 | ||||||
Market price (in dollars per share) | $ 32.58 | ||||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | ||||||
Purchase consideration deposited into an escrow account | $ 3,800 | ||||||
Deposit term into an escrow account | 12 months | ||||||
Released from escrow account to the sellers | $ 150 | ||||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 410 | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Cash | $ 2,114 | ||||||
Accounts receivable | 16,271 | ||||||
Inventories | 4,740 | ||||||
Prepaid expenses and other current assets | 46 | ||||||
Property and equipment | 200 | ||||||
Capitalized software for internal use | 14,000 | ||||||
Definite-lived intangible assets | 13,890 | ||||||
Other noncurrent assets | 21 | ||||||
Accounts payable | (29,773) | ||||||
Accrued expenses - compensation and benefits | (400) | ||||||
Accrued expenses - other | (1,962) | ||||||
Total identifiable net assets | 19,147 | ||||||
Goodwill | 60,627 | ||||||
Total acquisition price | 79,774 | ||||||
Physician relationships | Valley Campus Pharmacy, Inc | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 7,700 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 10 years | ||||||
Non-compete employment agreements | Valley Campus Pharmacy, Inc | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 4,490 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 5 years | ||||||
Trade names and trademarks | Valley Campus Pharmacy, Inc | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 1,700 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 1 year |
BUSINESS ACQUISITIONS - Burman'
BUSINESS ACQUISITIONS - Burman's Apothecary, LLC (Detail) - USD ($) $ / shares in Units, $ in Thousands | Jun. 19, 2015 | Jun. 18, 2015 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2014 |
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Goodwill | $ 256,318 | $ 832,624 | $ 316,616 | $ 23,148 | ||
Burman's Apothecary, LLC | ||||||
BUSINESS ACQUISITIONS | ||||||
Cash | $ 77,416 | |||||
Restricted common shares | 9,578 | |||||
Total | $ 86,994 | |||||
Restricted common shares (in shares) | 253,036 | |||||
Market price (in dollars per share) | $ 42.06 | |||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | |||||
Purchase consideration deposited into an escrow account | $ 5,000 | |||||
Deposit term into an escrow account | 2 years | |||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 860 | |||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Accounts receivable | $ 17,109 | |||||
Inventories | 8,064 | |||||
Prepaid expenses and other current assets | 7,513 | |||||
Property and equipment | 88 | |||||
Capitalized software for internal use | 17,000 | |||||
Definite-lived intangible assets | 22,200 | |||||
Accounts payable | (25,761) | |||||
Accrued expenses - compensation and benefits | (169) | |||||
Accrued expenses - other | (6) | |||||
Total identifiable net assets | 46,038 | |||||
Goodwill | 40,956 | |||||
Total acquisition price | 86,994 | |||||
Physician relationships | Burman's Apothecary, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 14,000 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 10 years | |||||
Non-compete employment agreements | Burman's Apothecary, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 5,500 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 5 years | |||||
Favorable supply agreement | Burman's Apothecary, LLC | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | ||||||
Definite-lived intangible assets | $ 2,700 | |||||
Definite-lived intangible assets | ||||||
Useful Life | 1 year |
BUSINESS ACQUISITIONS - BioRx (
BUSINESS ACQUISITIONS - BioRx (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 01, 2015 | Mar. 31, 2015 | Apr. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2014 |
BUSINESS ACQUISITIONS | |||||||
Number of additional restricted Company shares to be issued upon achievement of EBITDA-based metric (in shares) | 1,012,732 | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Goodwill | $ 256,318 | $ 832,624 | $ 316,616 | $ 23,148 | |||
BioRx, LLC | |||||||
BUSINESS ACQUISITIONS | |||||||
Cash | $ 217,024 | $ 104 | |||||
Restricted common shares | 125,697 | ||||||
Contingent consideration at fair value | 41,000 | $ 36,888 | 46,208 | ||||
Total | $ 383,721 | ||||||
Restricted common shares (in shares) | 4,038,853 | ||||||
Market price (in dollars per share) | $ 34.58 | ||||||
Market price multiplier to factor in restricted nature of the shares (as a percent) | 90.00% | ||||||
Number of additional restricted Company shares to be issued upon achievement of EBITDA-based metric (in shares) | 1,350,309 | ||||||
Number of shares issued | 1,346,282 | ||||||
Purchase consideration deposited into an escrow account | $ 10,000 | ||||||
Deposit term into an escrow account | 2 years | ||||||
Acquisition-related costs charged to Selling, general, and administrative expenses | $ 1,398 | ||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Cash and cash equivalents | $ 1,786 | ||||||
Accounts receivable | 37,716 | ||||||
Inventories | 5,546 | ||||||
Prepaid expenses and other current assets | 287 | ||||||
Property and equipment | 494 | ||||||
Definite-lived intangible assets | 181,700 | ||||||
Other noncurrent assets | 163 | ||||||
Accounts payable | (25,088) | ||||||
Accrued expenses - compensation and benefits | (1,653) | ||||||
Accrued expenses - other | (852) | ||||||
Deferred income taxes | (7,780) | ||||||
Total identifiable net assets | 192,319 | ||||||
Goodwill | 191,402 | ||||||
Total acquisition price | 383,721 | ||||||
Patient relationships | BioRx, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 130,000 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 10 years | ||||||
Non-compete employment agreements | BioRx, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 39,700 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 5 years | ||||||
Trade names and trademarks | BioRx, LLC | |||||||
Summary of the preliminary fair value determination of the acquired assets and liabilities | |||||||
Definite-lived intangible assets | $ 12,000 | ||||||
Definite-lived intangible assets | |||||||
Useful Life | 8 years |
BUSINESS ACQUISITIONS - Pro For
BUSINESS ACQUISITIONS - Pro Forma Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Pro Forma Operating Results | ||
Net sales | $ 4,954,494 | $ 5,117,678 |
Net income attributable to Diplomat Pharmacy, Inc. | $ 6,733 | $ 8,498 |
Net income per common share - basic (in dollars per share) | $ 0.09 | $ 0.12 |
Net income per common share - diluted (in dollars per share) | $ 0.09 | $ 0.11 |
FAIR VALUE MEASUREMENTS - Recur
FAIR VALUE MEASUREMENTS - Recurring Basis (Details) - Recurring - Contingent consideration $ in Thousands | Dec. 31, 2017USD ($) |
Fair value measurements | |
Asset (Liability) | $ (12,100) |
Level 3 | |
Fair value measurements | |
Asset (Liability) | $ (12,100) |
FAIR VALUE MEASUREMENTS - Roll
FAIR VALUE MEASUREMENTS - Roll forward of Level 3 Measurements (Details) - Contingent consideration - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Level 3 measurements | |||
Balance at beginning of the period | $ (52,665) | $ (11,691) | |
Changes in fair values | $ 3,675 | 8,922 | (6,724) |
Payments | $ 43,743 | 6,750 | |
Balance at end of the period | (12,100) | (52,665) | |
BioRx, LLC | |||
Level 3 measurements | |||
Acquisition | $ (41,000) | ||
Affinity Biotech, Inc | |||
Level 3 measurements | |||
Acquisition | (35) | ||
Comfort Infusion, Inc. | |||
Level 3 measurements | |||
Acquisition | (3,800) | ||
WRB Communications, LLC | |||
Level 3 measurements | |||
Acquisition | (530) | ||
Accurate Rx Pharmacy Consulting, LLC | |||
Level 3 measurements | |||
Acquisition | (1,980) | ||
Focus Rx Pharmacy Services Inc. | |||
Level 3 measurements | |||
Acquisition | $ (2,080) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property and equipment | |||
Property and equipment, gross | $ 54,365 | $ 31,303 | |
Accumulated depreciation | (15,375) | (10,931) | |
Property and equipment, net | 38,990 | 20,372 | |
Depreciation expense | 4,941 | 3,075 | $ 2,071 |
Land | |||
Property and equipment | |||
Property and equipment, gross | $ 5,232 | 332 | |
Buildings | |||
Property and equipment | |||
Useful Life | 40 years | ||
Property and equipment, gross | $ 18,818 | 10,007 | |
Leasehold improvements | |||
Property and equipment | |||
Property and equipment, gross | $ 5,247 | 1,644 | |
Leasehold improvements | Minimum | |||
Property and equipment | |||
Useful Life | 5 years | ||
Leasehold improvements | Maximum | |||
Property and equipment | |||
Useful Life | 15 years | ||
Equipment and fixtures | |||
Property and equipment | |||
Property and equipment, gross | $ 14,116 | 12,178 | |
Equipment and fixtures | Minimum | |||
Property and equipment | |||
Useful Life | 5 years | ||
Equipment and fixtures | Maximum | |||
Property and equipment | |||
Useful Life | 10 years | ||
Computer equipment | |||
Property and equipment | |||
Property and equipment, gross | $ 8,527 | 6,657 | |
Computer equipment | Minimum | |||
Property and equipment | |||
Useful Life | 3 years | ||
Computer equipment | Maximum | |||
Property and equipment | |||
Useful Life | 5 years | ||
Construction in progress | |||
Property and equipment | |||
Property and equipment, gross | $ 2,425 | $ 485 |
CAPITALIZED SOFTWARE FOR INTE50
CAPITALIZED SOFTWARE FOR INTERNAL USE (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Capitalized software for internal use | |||
Capitalized Computer Software, Gross | $ 82,519 | $ 76,465 | |
Accumulated amortization | (45,999) | (26,218) | |
Capitalized software for internal use, net | 36,520 | 50,247 | |
Amortization expense for capitalized software | 19,781 | 13,102 | $ 4,541 |
Estimated future amortization expense: | |||
2,018 | 67,630 | ||
2,019 | 66,420 | ||
2,020 | 54,184 | ||
2,021 | 44,130 | ||
Total | 392,011 | 199,862 | |
Capitalized software for internal use | |||
Capitalized software for internal use | |||
Capitalized Computer Software, Gross | $ 82,017 | $ 74,471 | |
Useful Life | 3 years | 3 years | |
Estimated future amortization expense: | |||
2,018 | $ 22,198 | ||
2,019 | 13,599 | ||
2,020 | 640 | ||
2,021 | 83 | ||
Total | 36,520 | ||
Construction in progress | |||
Capitalized software for internal use | |||
Capitalized Computer Software, Gross | $ 502 | $ 1,994 |
GOODWILL AND DEFINITE-LIVED I51
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS (Details) $ in Thousands | Aug. 28, 2014USD ($)entity | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Feb. 28, 2017 |
Changes in the carrying amount of goodwill | ||||||
Balance as of beginning of period | $ 316,616 | $ 256,318 | $ 23,148 | |||
TNH purchase price adjustment | 1,351 | |||||
Miscellaneous | 3,317 | 1,023 | 812 | |||
Balance as of end of period | 832,624 | 316,616 | 256,318 | $ 23,148 | ||
Gross Carrying Amount | 493,282 | 259,289 | ||||
Accumulated Amortization | (101,271) | (59,427) | ||||
Net Carrying Amount | 392,011 | 199,862 | ||||
Aggregate amortization expense for amortizing intangible assets | 41,844 | 33,868 | 24,229 | |||
Estimated amortization expense | ||||||
2,018 | 67,630 | |||||
2,019 | 66,420 | |||||
2,020 | 54,184 | |||||
2,021 | 44,130 | |||||
2,022 | 37,233 | |||||
Thereafter | 122,414 | |||||
Total | $ 392,011 | |||||
Ownership percentage (as a percent) | 22.00% | 22.00% | ||||
Primrose | ||||||
Estimated amortization expense | ||||||
Number of unrelated third party entities (in entities) | entity | 2 | |||||
Committed contribution | $ 5,000 | |||||
Ownership percentage (as a percent) | 51.00% | |||||
Amount contributed | 2,000 | $ 3,000 | ||||
Impairment | 4,804 | |||||
Primrose | Selling, General and Administrative Expenses | ||||||
Estimated amortization expense | ||||||
Impairment | 4,804 | |||||
Customer relationships | ||||||
Changes in the carrying amount of goodwill | ||||||
Gross Carrying Amount | $ 196,073 | |||||
Accumulated Amortization | (1,141) | |||||
Net Carrying Amount | $ 194,932 | |||||
Weighted average remaining useful lives (in years) | 9 years 10 months 24 days | |||||
Patient relationships | ||||||
Changes in the carrying amount of goodwill | ||||||
Gross Carrying Amount | $ 170,100 | 159,100 | ||||
Accumulated Amortization | (49,643) | (31,445) | ||||
Net Carrying Amount | $ 120,457 | 127,655 | ||||
Weighted average remaining useful lives (in years) | 6 years 9 months 18 days | |||||
Non-compete employment agreements | ||||||
Changes in the carrying amount of goodwill | ||||||
Gross Carrying Amount | $ 61,389 | 54,689 | ||||
Accumulated Amortization | (30,560) | (18,674) | ||||
Net Carrying Amount | $ 30,829 | 36,015 | ||||
Weighted average remaining useful lives (in years) | 2 years 7 months 6 days | |||||
Trade names and trademarks | ||||||
Changes in the carrying amount of goodwill | ||||||
Gross Carrying Amount | $ 44,020 | 23,800 | ||||
Accumulated Amortization | (13,624) | (6,477) | ||||
Net Carrying Amount | $ 30,396 | 17,323 | ||||
Weighted average remaining useful lives (in years) | 3 years 1 month 6 days | |||||
Physician relationships | ||||||
Changes in the carrying amount of goodwill | ||||||
Gross Carrying Amount | $ 21,700 | 21,700 | ||||
Accumulated Amortization | (6,303) | (2,831) | ||||
Net Carrying Amount | $ 15,397 | 18,869 | ||||
Weighted average remaining useful lives (in years) | 5 years 8 months 12 days | |||||
Software licensing agreement | Primrose | ||||||
Estimated amortization expense | ||||||
Amount contributed by unrelated third party entities | $ 2,647 | |||||
Intellectual property | Primrose | ||||||
Estimated amortization expense | ||||||
Amount contributed by unrelated third party entities | $ 2,157 | |||||
BioRx, LLC | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 191,402 | |||||
Burman's Apothecary, LLC | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | $ 40,956 | |||||
Valley Campus Pharmacy, Inc | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | $ 59,275 | |||||
Affinity Biotech, Inc | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | $ 8,772 | |||||
Comfort Infusion, Inc. | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 11,669 | |||||
WRB Communications, LLC | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 20,181 | |||||
Accurate Rx Pharmacy Consulting, LLC | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 8,741 | |||||
Focus Rx Pharmacy Services Inc. and Focus Rx Inc. | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 15,237 | |||||
Pharmaceutical Technologies, Inc. | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | 20,735 | |||||
LDI Holding Company | ||||||
Changes in the carrying amount of goodwill | ||||||
Acquired during the period | $ 426,005 |
INVESTMENT IN NON-CONSOLIDATE52
INVESTMENT IN NON-CONSOLIDATED ENTITIES (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
Feb. 28, 2017 | Jan. 31, 2017 | Oct. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Oct. 31, 2011 | |
Schedule of Equity Method Investments | |||||||||
Ownership percentage (as a percent) | 22.00% | 22.00% | |||||||
Conversion of outstanding loans in to equity | $ 2,500 | ||||||||
Cash paid for investment | $ 100 | $ 1,459 | |||||||
Impairment of non-consolidated entities | $ 4,804 | $ 150 | |||||||
Affiliated entity | Chief Executive Officer | |||||||||
Schedule of Equity Method Investments | |||||||||
Ownership percentage (as a percent) | 43.00% | ||||||||
Amount loaned | $ 3,970 | ||||||||
Conversion of outstanding loans in to equity | $ 16,000 | ||||||||
Ageology | |||||||||
Schedule of Equity Method Investments | |||||||||
Ownership percentage (as a percent) | 25.00% | ||||||||
Amount loaned | $ 16,000 | ||||||||
Physician Resource Management, Inc. | |||||||||
Schedule of Equity Method Investments | |||||||||
Ownership percentage (as a percent) | 19.90% | 15.00% | |||||||
Cash paid for investment | $ 1,459 | $ 3,500 | |||||||
Proceeds from sale of primary asset | $ 300 | ||||||||
Impairment of non-consolidated entities | $ 4,659 | 4,659 | |||||||
Physician Resource Management, Inc. | Chief Executive Officer | |||||||||
Schedule of Equity Method Investments | |||||||||
Cash paid for investment | $ 250 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 20, 2017 | Mar. 31, 2017 | Apr. 01, 2015 | Mar. 31, 2015 | |
Debt | |||||||
Amortization of debt issuance costs | $ 2,655 | $ 1,176 | $ 963 | ||||
JPMorgan Chase Bank N.A. And Capital One National Association | |||||||
Debt | |||||||
Amount of borrowing | $ 800,000 | ||||||
Debt issuance costs | 21,507 | ||||||
Capitalized debt issuance costs | 744 | ||||||
Unamortized debt issuance costs | 2,079 | ||||||
DDTL | GE | |||||||
Debt | |||||||
Maximum borrowing capacity | $ 25,000 | ||||||
Term Loan | |||||||
Debt | |||||||
Unamortized debt issuance costs | 17,402 | 3,316 | |||||
Amount of borrowings outstanding | 550,000 | $ 111,000 | |||||
Term Loan | GE | |||||||
Debt | |||||||
Interest rate (as a percent) | 3.13% | ||||||
Contractual debt obligations | |||||||
2,018 | 11,500 | ||||||
2,019 | 11,500 | ||||||
2,020 | 11,500 | ||||||
2,021 | 11,500 | ||||||
2,022 | 124,000 | ||||||
Thereafter | 380,000 | ||||||
Total | $ 550,000 | ||||||
Term Loan A | GE | |||||||
Debt | |||||||
Maximum borrowing capacity | 120,000 | ||||||
Term Loan A | JPMorgan Chase Bank N.A. And Capital One National Association | |||||||
Debt | |||||||
Amount of borrowing | 150,000 | ||||||
Interest rate (as a percent) | 4.04% | ||||||
Term Loan B | JPMorgan Chase Bank N.A. And Capital One National Association | |||||||
Debt | |||||||
Amount of borrowing | 400,000 | ||||||
Interest rate (as a percent) | 6.04% | ||||||
Line of credit | GE | |||||||
Debt | |||||||
Amount of borrowings outstanding | $ 188,250 | $ 39,255 | |||||
Amount of borrowings available under the credit agreement | 61,750 | 129,908 | |||||
Weighted average borrowings | 28,238 | 11,986 | |||||
Maximum borrowing capacity | $ 188,250 | $ 82,683 | $ 175,000 | $ 120,000 | |||
Interest rate (as a percent) | 4.04% | 4.75% | |||||
Line of credit | JPMorgan Chase Bank N.A. And Capital One National Association | |||||||
Debt | |||||||
Amount of borrowing | $ 250,000 | ||||||
Minimum | Line of credit | GE | |||||||
Debt | |||||||
Monthly unused commitment fee (as a percent) | 0.30% | ||||||
Maximum | DDTL | GE | |||||||
Debt | |||||||
Maximum borrowing capacity | $ 25,000 | ||||||
Maximum | Line of credit | GE | |||||||
Debt | |||||||
Monthly unused commitment fee (as a percent) | 0.40% | ||||||
Interest Expense | DDTL | JPMorgan Chase Bank N.A. And Capital One National Association | |||||||
Debt | |||||||
Amortization of debt issuance costs | $ 636 | ||||||
Other Noncurrent Assets | Line of credit | |||||||
Debt | |||||||
Unamortized debt issuance costs | $ 5,316 | $ 550 |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Option Activity (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($)$ / sharesshares | Jan. 01, 2016USD ($) | Oct. 31, 2014shares | |
Additional disclosures | ||||||
Retained earnings | $ | $ 91,816 | $ 76,306 | ||||
Income tax benefit | $ | $ 7,126 | $ (11,195) | $ (16,234) | |||
2007 Stock Option Plan | ||||||
Additional disclosures | ||||||
Number of shares reserved for issuance (in shares) | shares | 0 | |||||
Percentage of options exercisable in installments beginning on the first anniversary of the grant date and each of the three anniversaries thereafter | 25.00% | |||||
Number of anniversary dates upon which options become exercisable | 3 | |||||
Maximum term of stock option plan | 10 years | |||||
Omnibus Incentive Plan 2014 | ||||||
Additional disclosures | ||||||
Number of shares reserved for issuance (in shares) | shares | 4,000,000 | |||||
Increase to number of shares available for issuance (as a percent) | 2.00% | |||||
Stock options | ||||||
Number of Options | ||||||
Outstanding at beginning of period (in shares) | shares | 4,413,341 | 4,114,685 | 7,217,331 | |||
Granted (in shares) | shares | 4,066,735 | 1,546,532 | 1,284,939 | |||
Repurchased (in shares) | (1,641,387) | |||||
Exercised (in shares) | shares | (1,217,320) | (564,844) | (1,943,022) | |||
Expired/cancelled (in shares) | shares | (1,154,464) | (683,032) | (803,176) | |||
Outstanding at end of period (in shares) | shares | 6,108,292 | 4,413,341 | 4,114,685 | 7,217,331 | ||
Exercisable at end of period (in shares) | shares | 1,459,459 | |||||
Weighted Average Exercise Price | ||||||
Outstanding at beginning of period (in dollars per share) | $ / shares | $ 19.02 | $ 17.53 | $ 7.54 | |||
Granted (in dollars per share) | $ / shares | 16.43 | 22.64 | 39.11 | |||
Repurchased (in dollars per share) | $ / shares | 5.44 | |||||
Exercised (in dollars per share) | $ / shares | 6.47 | 7.87 | 5.32 | |||
Expired/cancelled (in dollars per share) | $ / shares | 25.25 | 27.41 | 16.59 | |||
Outstanding at end of period (in dollars per share) | $ / shares | 18.62 | $ 19.02 | $ 17.53 | $ 7.54 | ||
Exercisable at end of period (in dollars per share) | $ / shares | $ 19.09 | |||||
Weighted Average Remaining Contractual Life | ||||||
Weighted Average Remaining Contractual Life (in years) | 8 years 6 months | 7 years | 7 years 8 months 12 days | 6 years 10 months 24 days | ||
Exercisable at end of period | 6 years | |||||
Aggregate Intrinsic Value | ||||||
Outstanding at beginning of period | $ | $ 11,558 | $ 76,567 | $ 142,262 | |||
Outstanding at end of period | $ | 16,205 | 11,558 | $ 76,567 | $ 142,262 | ||
Exercisable at end of period | $ | 8,058 | |||||
ASU 2016-09 | ||||||
Additional disclosures | ||||||
Deferred tax asset | $ | $ 16,903 | |||||
Retained earnings | $ | $ 16,903 | |||||
Income tax benefit | $ | $ 3,003 | $ 4,148 |
SHARE-BASED COMPENSATION - Info
SHARE-BASED COMPENSATION - Information and Valuation Assumptions (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2015USD ($)shares | Oct. 31, 2014 | Sep. 30, 2016USD ($) | Dec. 31, 2017USD ($)installment$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | |
Share-based compensation | ||||||
Total compensation expense | $ 6,628 | $ 5,073 | $ 3,748 | |||
Assumptions used to determine the valuation of granted options | ||||||
Expected dividend yield (as a percent) | 0.00% | 0.00% | 0.00% | |||
Expected life (in years) | 6 years 3 months | 6 years 3 months | ||||
Additional disclosures | ||||||
Total compensation cost related to non-vested options not yet recognized | $ 25,633 | |||||
Weighted average period to recognize compensation cost related to non-vested options not yet recognized | 3 years 3 months 18 days | |||||
Excess tax benefits related to share-based awards | $ 3,076 | $ 20,805 | ||||
2007 Stock Option Plan | ||||||
Share-based compensation | ||||||
Percentage of options exercisable in installments beginning on the first anniversary of the grant date and each of the three anniversaries thereafter | 25.00% | |||||
Number of anniversary dates upon which options become exercisable | 3 | |||||
Maximum term of stock option plan | 10 years | |||||
Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Percentage of options exercisable in installments beginning on the first anniversary of the grant date and each of the three anniversaries thereafter | 25.00% | |||||
Minimum | ||||||
Assumptions used to determine the valuation of granted options | ||||||
Exercise price | $ / shares | $ 14.36 | $ 14.40 | $ 27.80 | |||
Expected volatility (as a percent) | 33.44% | 23.90% | 25.12% | |||
Risk-free rate over the estimated expected life (as a percent) | 1.88% | 1.23% | 1.53% | |||
Expected life (in years) | 5 years | |||||
Maximum | ||||||
Assumptions used to determine the valuation of granted options | ||||||
Exercise price | $ / shares | $ 20.87 | $ 36.60 | $ 48.72 | |||
Expected volatility (as a percent) | 36.38% | 24.76% | 26.70% | |||
Risk-free rate over the estimated expected life (as a percent) | 2.34% | 2.06% | 2.01% | |||
Expected life (in years) | 6 years 3 months | |||||
Maximum | Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Maximum term of stock option plan | 10 years | |||||
Service-based awards | Omnibus Incentive Plan 2014 | ||||||
Share-based compensation | ||||||
Percentage of options exercisable in installments beginning on the first anniversary of the grant date and each of the three anniversaries thereafter | 25.00% | |||||
Number of anniversary dates upon which options become exercisable | 3 | |||||
Maximum term of stock option plan | 10 years | 10 years | ||||
Service-based awards | Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Number of shares issued during the period (in shares) | shares | 2,805,976 | 1,165,000 | 893,896 | |||
Vested (in shares) | shares | 200,000 | |||||
Performance-based awards | Omnibus Incentive Plan 2014 | ||||||
Share-based compensation | ||||||
Vested (in shares) | shares | 2,084 | |||||
Additional disclosures | ||||||
Incremental compensation expense | $ 0 | $ 0 | ||||
Performance-based awards | Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Number of installments for vesting (in installments) | installment | 4 | |||||
Options earned or forfeited for the current fiscal year | Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Number of shares issued during the period (in shares) | shares | 260,759 | 381,532 | 391,043 | |||
Options earned or forfeited for the current fiscal year through two thousand and twenty | ||||||
Share-based compensation | ||||||
Maximum term of stock option plan | 10 years | |||||
Options earned or forfeited for the current fiscal year through two thousand and twenty | Omnibus Incentive Plan 2014 | Key employees | ||||||
Share-based compensation | ||||||
Granted (in shares) | shares | 800,000 | |||||
Stock options | ||||||
Share-based compensation | ||||||
Granted (in shares) | shares | 4,066,735 | 1,546,532 | 1,284,939 | |||
Weighted average grant-date fair value of options granted (in dollars per share) | $ / shares | $ 6.23 | $ 6.34 | $ 11.84 | |||
Additional disclosures | ||||||
Intrinsic value of options exercised | $ 11,973 | $ 13,048 | $ 103,317 | |||
Excess tax benefits related to share-based awards | $ 20,805 | |||||
Current Employees | ||||||
Additional disclosures | ||||||
Stock options repurchased to buy shares from certain current and former employees (in shares) | shares | 1,641,387 | |||||
Cash consideration for redeemed stock options | $ 36,298 | |||||
Incremental compensation expense | $ 0 |
SHARE-BASED COMPENSATION - Rest
SHARE-BASED COMPENSATION - Restricted Stock Units and Restricted Stock Awards (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Additional disclosures | |||
Share-based compensation expense | $ 6,628 | $ 5,073 | $ 3,748 |
Weighted average period to recognize compensation cost related to non-vested options not yet recognized | 3 years 3 months 18 days | ||
Restricted Stock Units | |||
Number of Shares Subject to Restriction | |||
Granted (in shares) | 90,718 | ||
Expired/cancelled (in shares) | (24,079) | ||
Nonvested at the end of the period (in shares) | 66,639 | ||
Weighted Average Grant Date Fair Value | |||
Granted (in dollars per share) | $ 14.65 | ||
Expired/cancelled (in dollars per share) | 14.65 | ||
Nonvested at the end of the period (in dollars per share) | $ 14.65 | ||
Additional disclosures | |||
Vesting period | 3 years | ||
Share-based compensation expense | $ 203 | ||
Total compensation cost not yet recognized | $ 615 | ||
Weighted average period to recognize compensation cost related to non-vested options not yet recognized | 2 years 3 months 18 days | ||
Restricted Stock Units | Key employees | |||
Number of Shares Subject to Restriction | |||
Granted (in shares) | 90,718 | ||
Restricted Stock Units | Cliff Vest | |||
Number of Shares Subject to Restriction | |||
Nonvested at the end of the period (in shares) | 34,747 | ||
Additional disclosures | |||
Vesting period | 3 years | ||
Restricted Stock Units | One-third per year vest | |||
Number of Shares Subject to Restriction | |||
Nonvested at the end of the period (in shares) | 31,892 | ||
Restricted Stock Awards | |||
Number of Shares Subject to Restriction | |||
Nonvested at the beginning of the period (in shares) | 5,765 | 10,805 | 8,277 |
Granted (in shares) | 36,814 | 5,765 | 10,805 |
Vested (in shares) | (8,288) | (10,805) | (8,277) |
Nonvested at the end of the period (in shares) | 34,291 | 5,765 | 10,805 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 32.97 | $ 26.60 | $ 18.12 |
Granted (in dollars per share) | 17.13 | 32.97 | 26.60 |
Vested (in dollars per share) | 26.80 | 26.60 | 18.12 |
Nonvested at the end of the period (in dollars per share) | $ 17.45 | $ 32.97 | $ 26.60 |
Additional disclosures | |||
Vesting period | 1 year | ||
Share-based compensation expense | $ 450 | $ 339 | $ 188 |
Total compensation cost not yet recognized | $ 255 | ||
Performance-based awards | Omnibus Incentive Plan 2014 | |||
Number of Shares Subject to Restriction | |||
Vested (in shares) | (2,084) |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
U.S. federal corporate tax rate | 35.00% | |||
Provisional amount of income tax benefit on re-measurement | $ 9,069 | |||
Current | ||||
Federal | (1,748) | $ (703) | $ (17,592) | |
State and local | (1,921) | (1,713) | (3,257) | |
Total current | (3,669) | (2,416) | (20,849) | |
Deferred | ||||
Federal | 10,343 | (7,989) | 4,061 | |
State and local | 452 | (790) | 554 | |
Total deferred | 10,795 | (8,779) | 4,615 | |
Income tax benefit (expense) | 7,126 | (11,195) | (16,234) | |
Reconciliation of income taxes computed at the United States federal statutory tax rate to income tax benefit (expense) | ||||
Income tax expense at U.S. statutory rate | (2,822) | (12,675) | (14,352) | |
Share-based compensation (Note 3) | 3,003 | 4,148 | ||
State income taxes, net of federal benefit | (418) | (1,904) | (1,563) | |
Loss on non-controlling interest | (113) | (1,138) | (351) | |
Tax Act effect | 7,828 | |||
Other | (352) | 374 | 32 | |
Income tax benefit (expense) | 7,126 | (11,195) | $ (16,234) | |
Deferred tax assets | ||||
Allowance for doubtful accounts | 5,696 | 8,861 | ||
Net operating loss and credit carryforwards | 2,114 | 6,383 | ||
Compensation and benefits | 4,611 | 3,598 | ||
Investments | 1,101 | |||
Other temporary differences | 679 | 1,014 | ||
Total deferred tax assets | 13,100 | 20,957 | ||
Deferred tax liabilities | ||||
Property and intangible assets | (26,406) | (13,825) | ||
Prepaid expenses and other current assets | (740) | (1,122) | ||
Investments | (321) | |||
Total deferred tax liabilities | (27,467) | (14,947) | ||
Net deferred tax assets | 6,010 | |||
Net deferred tax (liabilities) assets | (14,367) | |||
Net operating loss carry-forwards, state and local | 53,148 | |||
Unrecognized tax benefits | $ 268 | $ 268 | ||
Forecast | ||||
U.S. federal corporate tax rate | 21.00% |
INCOME PER COMMON SHARE (Detail
INCOME PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Numerator: | |||||||||||
Net income attributable to Diplomat Pharmacy, Inc. | $ 6,536 | $ 1,016 | $ 3,591 | $ 4,367 | $ (1,098) | $ 5,408 | $ 8,534 | $ 15,429 | $ 15,510 | $ 28,273 | $ 25,776 |
Denominator: | |||||||||||
Weighted average common shares outstanding, basic (in shares) | 68,130,322 | 65,970,396 | 60,730,133 | ||||||||
Weighted average dilutive effect of stock options, RSAs and RSUs | 649,731 | 1,739,750 | 2,029,241 | ||||||||
Weighted average dilutive effect of contingent consideration (in shares) | 337,577 | 337,577 | |||||||||
Weighted average common shares outstanding, diluted (in shares) | 68,780,053 | 68,047,723 | 63,096,951 | ||||||||
Net income per common share : | |||||||||||
Basic (in dollars per share) | $ 0.09 | $ 0.01 | $ 0.05 | $ 0.07 | $ (0.02) | $ 0.08 | $ 0.13 | $ 0.24 | $ 0.23 | $ 0.43 | $ 0.42 |
Diluted (in dollars per share) | $ 0.09 | $ 0.01 | $ 0.05 | $ 0.06 | $ (0.02) | $ 0.08 | $ 0.13 | $ 0.23 | $ 0.23 | $ 0.42 | $ 0.41 |
Contingent consideration common shares included in computation of diluted weighted average common shares (in shares) | 1,012,732 | ||||||||||
Service-based and Performance-based stock options | |||||||||||
Net income per common share : | |||||||||||
Anti-dilutive securities excluded (in shares) | 3,242,919 | 1,542,064 | 649,564 | ||||||||
Restricted Stock Awards | |||||||||||
Net income per common share : | |||||||||||
Anti-dilutive securities excluded (in shares) | 10,038 | 475 | |||||||||
Restricted Stock Units | |||||||||||
Net income per common share : | |||||||||||
Anti-dilutive securities excluded (in shares) | 21,623 | ||||||||||
Performance-based stock options | |||||||||||
Net income per common share : | |||||||||||
Anti-dilutive securities excluded (in shares) | 770,503 | 291,277 | 410,452 |
COMMITMENTS AND CONTINGENCIES59
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Operating lease obligations and future minimum operating lease payments | |||
Total rental expense under operating leases | $ 4,215 | $ 4,179 | $ 3,295 |
2,018 | 2,740 | ||
2,019 | 2,761 | ||
2,020 | 2,476 | ||
2,021 | 2,142 | ||
2,022 | 1,677 | ||
Thereafter | 2,348 | ||
Total | 14,144 | ||
Purchase Commitments | AmerisourceBergen | |||
Purchase commitments | |||
Minimum purchase obligation | $ 2,000,000 |
SELECTED QUARTERLY FINANCIAL 60
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Selected Quarterly Financial Information | |||||||||||
Net sales | $ 1,155,069 | $ 1,124,957 | $ 1,126,464 | $ 1,078,740 | $ 1,144,838 | $ 1,181,173 | $ 1,088,506 | $ 995,870 | $ 4,485,230 | $ 4,410,388 | $ 3,366,631 |
Gross profit | 93,492 | 85,303 | 84,834 | 85,049 | 83,808 | 78,512 | 83,270 | 79,238 | 348,678 | 324,828 | 263,239 |
Income (loss) before income taxes | (1,714) | 299 | 2,946 | 6,532 | 468 | (408) | 12,438 | 23,717 | 8,062 | 36,215 | 41,006 |
Net income (loss) | 6,513 | 961 | 3,490 | 4,225 | (1,284) | 2,828 | 8,293 | 15,183 | 15,188 | 25,020 | 24,772 |
Net income (loss) attributable to Diplomat | $ 6,536 | $ 1,016 | $ 3,591 | $ 4,367 | $ (1,098) | $ 5,408 | $ 8,534 | $ 15,429 | $ 15,510 | $ 28,273 | $ 25,776 |
Basic income (loss) per common share | $ 0.09 | $ 0.01 | $ 0.05 | $ 0.07 | $ (0.02) | $ 0.08 | $ 0.13 | $ 0.24 | $ 0.23 | $ 0.43 | $ 0.42 |
Diluted income (loss) per common share | $ 0.09 | $ 0.01 | $ 0.05 | $ 0.06 | $ (0.02) | $ 0.08 | $ 0.13 | $ 0.23 | $ 0.23 | $ 0.42 | $ 0.41 |
Changes in fair values of contingent consideration | $ 1,710 | $ 1,965 | $ 3,675 | $ (8,922) | $ 6,724 | ||||||
Income tax benefit | $ (7,828) | ||||||||||
Impairment of non-consolidated entities | 4,804 | 150 | |||||||||
Direct and indirect remuneration fee | $ 8,000 | ||||||||||
Retroactive DIR fees | 4,000 | ||||||||||
Excess tax benefits related to share-based awards | 3,076 | 20,805 | |||||||||
Contingent consideration expense recognized | $ 9,071 | ||||||||||
Noncontrolling Interest | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Net income (loss) | $ (322) | (3,253) | $ (1,004) | ||||||||
Increase in estimate of first quarter | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Retroactive DIR fees | 1,700 | ||||||||||
Increase in estimate of second quarter | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Retroactive DIR fees | 2,300 | ||||||||||
Physician Resource Management, Inc. | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Impairment of non-consolidated entities | $ 4,659 | 4,659 | |||||||||
Primrose | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Impairment | $ 4,804 | ||||||||||
Primrose | Noncontrolling Interest | |||||||||||
Selected Quarterly Financial Information | |||||||||||
Impairment | $ 2,354 |