Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 28, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | AKORN INC | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 124,555,268 | |
Amendment Flag | false | |
Entity Central Index Key | 3,116 | |
Entity Filer Category | Large Accelerated Filer | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 307,425 | $ 200,772 |
Trade accounts receivable, net | 233,682 | 283,154 |
Inventories, net | 172,325 | 174,793 |
Available-for-sale securities, current | 1,310 | 1,106 |
Prepaid expenses and other current assets | 21,208 | 25,986 |
TOTAL CURRENT ASSETS | 735,950 | 685,811 |
PROPERTY, PLANT AND EQUIPMENT, NET | 252,656 | 238,404 |
OTHER LONG-TERM ASSETS | ||
Goodwill | 285,031 | 284,293 |
Intangible assets, net | 743,158 | 758,854 |
Deferred tax assets | 7,042 | 5,286 |
Other non-current assets | 1,900 | 1,072 |
TOTAL OTHER LONG-TERM ASSETS | 1,037,131 | 1,049,505 |
TOTAL ASSETS | 2,025,737 | 1,973,720 |
CURRENT LIABILITIES | ||
Trade accounts payable | 50,647 | 59,534 |
Purchase consideration payable | 4,994 | 4,994 |
Income taxes payable | 41,707 | 16,198 |
Accrued royalties | 8,168 | 15,044 |
Accrued compensation | 13,543 | 19,113 |
Accrued administrative fees | 31,885 | 36,436 |
Accrued expenses and other liabilities | 23,900 | 24,236 |
TOTAL CURRENT LIABILITIES | 174,844 | 175,555 |
LONG-TERM LIABILITIES: | ||
Long-term debt (net of non-current deferred financing costs) | 811,283 | 809,979 |
Deferred tax liability | 157,749 | 157,607 |
Other long-term liabilities | 11,449 | 11,395 |
TOTAL LONG-TERM LIABILITIES | 980,481 | 978,981 |
TOTAL LIABILITIES | 1,155,325 | 1,154,536 |
SHAREHOLDERS’ EQUITY | ||
Common stock, no par value – 150,000,000 shares authorized; 124,472,468 and 124,390,217 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 527,684 | 521,860 |
Retained earnings | 360,318 | 319,291 |
Accumulated other comprehensive loss | (17,590) | (21,967) |
TOTAL SHAREHOLDERS’ EQUITY | 870,412 | 819,184 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 2,025,737 | $ 1,973,720 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common stock, no par value (in dollars per share) | ||
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 124,472,468 | 124,390,217 |
Common stock, shares outstanding | 124,472,468 | 124,390,217 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Revenues, net | $ 253,420 | $ 268,347 |
Cost of sales (exclusive of amortization of intangibles, included within operating expenses below) | 104,288 | 105,330 |
GROSS PROFIT | 149,132 | 163,017 |
Selling, general and administrative expenses | 47,526 | 49,086 |
Acquisition-related costs | 11 | 197 |
Research and development expenses | 11,291 | 9,479 |
Amortization of intangibles | 15,471 | 16,518 |
Impairment of intangible assets | 0 | 158 |
TOTAL OPERATING EXPENSES | 74,299 | 75,438 |
OPERATING INCOME | 74,833 | 87,579 |
Amortization of deferred financing costs | (1,304) | (6,311) |
Interest expense, net | (9,566) | (11,518) |
Other non-operating income (expense), net | 1,363 | (3,178) |
INCOME BEFORE INCOME TAXES | 65,326 | 66,572 |
Income tax provision | 24,299 | 24,686 |
CONSOLIDATED NET INCOME | $ 41,027 | $ 41,886 |
CONSOLIDATED NET INCOME PER SHARE | ||
CONSOLIDATED NET INCOME, BASIC (in Dollars per share) | $ 0.33 | $ 0.35 |
CONSOLIDATED NET INCOME, DILUTED (in Dollars per share) | $ 0.33 | $ 0.34 |
SHARES USED IN COMPUTING NET INCOME PER SHARE | ||
BASIC (in Shares) | 124,421 | 119,516 |
DILUTED (in Shares) | 124,666 | 125,621 |
COMPREHENSIVE INCOME | ||
Consolidated net income | $ 41,027 | $ 41,886 |
Unrealized holding gain (loss) on available-for-sale securities, net of tax of $75 and $386 for the three months ended March 31, 2017 and 2016, respectively. | 128 | (654) |
Foreign currency translation gain | 4,026 | 869 |
Pension liability adjustment gain, net of tax of $57 and $0 for the three months ended March 31, 2017 and 2016, respectively. | 223 | 0 |
COMPREHENSIVE INCOME | $ 45,404 | $ 42,101 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Other Comprehensive Income (Loss), Tax | ||
Unrealized holding gain (loss) on available-for-sale securities, tax expense (benefit) | $ 75 | $ (386) |
Pension liability adjustment, tax expense (benefit) | $ 57 | $ 0 |
Condensed Consolidated Stateme6
Condensed Consolidated Statement of Shareholders' Equity - 3 months ended Mar. 31, 2017 - USD ($) $ in Thousands | Total | Common Stock | Retained Earnings | Other Comprehensive Loss |
BALANCES AT at Dec. 31, 2016 | $ 819,184 | $ 521,860 | $ 319,291 | $ (21,967) |
BALANCES AT (in Shares) at Dec. 31, 2016 | 124,390,217 | 124,390,000 | ||
Increase (Decrease) in Stockholders' Equity | ||||
Consolidated net income | $ 41,027 | 41,027 | ||
Exercise of stock options | 1,115 | $ 1,115 | ||
Exercise of stock options (in Shares) | 82,000 | |||
Restricted stock units | 1,133 | $ 1,133 | ||
Stock-based compensation expense | 3,314 | 3,314 | ||
Foreign currency translation gain | 4,026 | 4,026 | ||
Unrealized holding gain on available-for-sale securities | 128 | 128 | ||
Akorn AG pension liability adjustment | 223 | 223 | ||
Employee stock purchase plan | 262 | 262 | ||
BALANCES AT at Mar. 31, 2017 | $ 870,412 | $ 527,684 | $ 360,318 | $ (17,590) |
BALANCES AT (in Shares) at Mar. 31, 2017 | 124,472,468 | 124,472,000 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
OPERATING ACTIVITIES: | ||
Consolidated net income | $ 41,027 | $ 41,886 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | ||
Depreciation and amortization | 20,914 | 22,468 |
Amortization of debt financing costs | 1,304 | 6,311 |
Impairment of intangible assets | 225 | 158 |
Non-cash stock compensation expense | 4,709 | 2,921 |
Non-cash interest expense | 0 | 454 |
Deferred income taxes, net | (1,174) | (8,009) |
Other | 31 | 0 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 49,563 | (21,355) |
Inventories, net | 2,708 | (5,928) |
Prepaid expenses and other current assets | 4,137 | (1,190) |
Trade accounts payable | (4,286) | (1,948) |
Accrued expenses and other liabilities | 8,296 | (26,783) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 127,454 | 8,985 |
INVESTING ACTIVITIES: | ||
Proceeds from disposal of assets | 152 | 0 |
Payments for intangible assets | 0 | (1,000) |
Purchases of property, plant and equipment | (22,483) | (9,918) |
NET CASH USED IN INVESTING ACTIVITIES | (22,331) | (10,918) |
FINANCING ACTIVITIES: | ||
Proceeds from the exercise of stock options | 1,115 | 0 |
Debt financing costs | 0 | (3,571) |
Debt payments | 0 | (200,000) |
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES | 1,115 | (203,571) |
Effect of exchange rate changes on cash and cash equivalents | 415 | 236 |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 106,653 | (205,268) |
Cash and cash equivalents at beginning of period | 200,772 | 346,266 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 307,425 | 140,998 |
SUPPLEMENTAL DISCLOSURES: | ||
Amount paid for interest | 11,041 | 10,613 |
Amount (received) paid for income taxes, net | (42) | 43,075 |
Additional capital expenditures included in accounts payable | $ 7,571 | $ 2,874 |
Business and Basis of Presentat
Business and Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Basis of Presentation | Business and Basis of Presentation Business: Akorn, Inc., together with its wholly-owned subsidiaries (collectively “Akorn,” the “Company,” “we,” “our” or “us”) is a specialty generic pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals, branded as well as private-label over-the-counter consumer health products and animal health pharmaceuticals. We are an industry leader in the development, manufacturing and marketing of specialized generic pharmaceutical products in alternative dosage forms. We focus on difficult-to-manufacture sterile and non-sterile dosage forms including, but not limited to, ophthalmics, injectables, oral liquids, otics, topicals, inhalants and nasal sprays. Akorn is a Louisiana corporation founded in 1971 in Abita Springs, Louisiana. In 1997, we relocated our corporate headquarters to the Chicago, Illinois area and currently maintain our principal corporate offices in Lake Forest, Illinois. We operate pharmaceutical manufacturing facilities in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland; and Paonta Sahib, Himachal Pradesh, India. We also operate a central distribution warehouse in Gurnee, Illinois and additional distribution facilities in Amityville, New York and Decatur, Illinois. Our research and development (“R&D”) centers are located in Vernon Hills, Illinois; Copiague, New York and Cranbury, New Jersey. In the fourth quarter of 2016, we moved our previous R&D center in Warminster, Pennsylvania to Cranbury, New Jersey. We also have other corporate offices in Ann Arbor, Michigan and Gurgaon, Haryana, India. During the three month periods ended March 31, 2017 and 2016, the Company reported results for two reportable segments: Prescription Pharmaceuticals and Consumer Health. For further detail concerning our reportable segments please see Part I, Item 1, Note 10 - “ Segment Information.” Our common shares are traded on The NASDAQ Global Select Market under the ticker symbol AKRX. Our principal corporate office is located at 1925 West Field Court, Suite 300, Lake Forest, Illinois 60045 with telephone number (847) 279-6100. Basis of Presentation : The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and accordingly do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in these financial statements. Operating results for the three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes for the year ended December 31, 2016 , included in the Company’s Annual Report on Form 10-K filed on March 1, 2017. The Company has considered the accounting and disclosure of events occurring after the balance sheet date of March 31, 2017 through the filing date of this Form 10-Q. Certain prior-period amounts such as the provision and allowance components of net trade receivables and gross sales to net revenue adjustments have been reclassified to conform to current-period presentation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Consolidation: The accompanying condensed consolidated financial statements include the accounts of Akorn, Inc. and its wholly-owned domestic and foreign subsidiaries. All inter-company transactions and balances have been eliminated in consolidation, and the financial statements of Akorn India Private Limited ("AIPL") and Akorn AG (formerly "Excelvision AG" or "Hettlingen") have been translated from Indian Rupees and Swiss Francs, respectively, to U.S. Dollars based on the currency translation rates in effect either during the period or as of the date of consolidation, as applicable. The Company has no involvement with variable interest entities. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates and assumptions for the Company may relate to the allowances for chargebacks, rebates and administrative fees, product returns, coupons, promotions and doubtful accounts, as well as the reserve for slow-moving and obsolete inventories, the carrying value and lives of intangible assets, the useful lives of fixed assets, the carrying value of deferred income tax assets and liabilities, the assumptions underlying share-based compensation, accrued but unreported employee benefit costs and assumptions underlying the accounting for business combinations. Going Concern: In connection with the preparation of the financial statements as of and for the three month period ended March 31, 2017, the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to the entity's ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity's ability to continue as a going concern. Revenue Recognition: Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue from product sales are recognized when title and risk of loss have passed to the customer. Provision for estimated chargebacks, rebates, discounts, managed care rebates, product returns and doubtful accounts is made at the time of sale and is analyzed and adjusted, if necessary, at each balance sheet date. Freight: The Company records amounts billed to customers for shipping and handling as revenue, and records shipping and handling expense related to product sales as cost of sales. Cash and Cash Equivalents: The Company considers all unrestricted, highly liquid investments with maturity of three months or less when acquired, to be cash and cash equivalents. Accounts Receivable: Trade accounts receivable are stated at their net realizable value. The nature of the Company’s business involves, in the ordinary course, significant judgments and estimates relating to chargebacks, coupon redemption, product returns, rebates, discounts given to customers and allowances for doubtful accounts. Depending on the products, the customers, the specific terms of national supply contracts and the particular arrangements with the Company’s wholesaler customers, rebates, chargebacks and other credits are recorded as deductions to the Company’s trade accounts receivable. Unless otherwise noted, the provisions and allowances for the following customer deductions are reflected in the accompanying condensed consolidated financial statements as reductions of revenues and trade accounts receivable, respectively. Chargebacks : The Company enters into contractual agreements with certain third parties such as retailers, hospitals, group-purchasing organizations (“GPOs”) and managed care organizations to sell certain products at predetermined prices. Similarly, we maintain an allowance for rebates and discounts related to billbacks, wholesaler fee for service contracts, GPO administrative fees, government programs, prompt payment and other adjustments with certain customers. Most of the parties have elected to have these contracts administered through wholesalers that buy the product from the Company and subsequently sell it to these third parties. As noted elsewhere, these wholesalers represent a significant percentage of the Company’s gross sales. When a wholesaler sells products to one of these third parties that are subject to a contractual price agreement, the difference between the price paid to the Company by the wholesaler and the price under the specific contract is charged back to the Company by the wholesaler. This process typically takes four to six weeks, but for some products may extend to twelve weeks. The Company tracks sales and submitted chargebacks by product number and contract for each wholesaler. Utilizing this information, the Company estimates a chargeback percentage for each product and records an allowance as a reduction to gross sales when the Company records its sale of the products. The Company reduces the chargeback allowance when a chargeback request from a wholesaler is processed. Actual chargebacks processed by the Company can vary materially from period to period based upon actual sales volume through the wholesalers. However, the Company’s provision for chargebacks is fully reserved for at the time revenues are recognized. Management obtains product inventory reports from certain wholesalers to aid in analyzing the reasonableness of the chargeback allowance and to monitor whether wholesaler inventory levels do not significantly exceed customer demand. The Company assesses the reasonableness of its chargeback allowance by applying a product chargeback percentage that is based on a combination of historical activity and future price and mix expectations to the quantities of inventory on hand at the wholesalers according to wholesaler inventory reports. In addition, the Company estimates the percent of gross sales generated through direct and indirect sales channels and the percent of contract vs. non-contract revenue in the period, as these each affect the estimated reserve calculation. In accordance with its accounting policy, the Company also estimates the percent of wholesaler inventory that will ultimately be sold to third parties that are subject to contractual price agreements based on a trend of such sales through wholesalers. The Company uses this percentage estimate until historical trends indicate that a revision should be made. On an ongoing basis, the Company evaluates its actual chargeback rate experience, and new trends are factored into its estimates each quarter as market conditions change. For the three month period ended March 31, 2017, the Company incurred a chargeback provision of $280.2 million , or 41.2% of gross sales of $680.5 million , compared to $219.4 million , or 37.0% of gross sales of $593.4 million in the prior year period. We note that the dollar and percent increase in the comparative period was the result of gross sales increases and product mix shifts to products with higher chargeback expense percentages. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of contractual obligations, review of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter chargeback rates include: changes in product pricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specific products due to external factors such as competitor supply position or consumer preferences, customer shifts in buying patterns from direct to indirect through wholesalers, which could either individually or in aggregate increase or decrease the chargeback rate depending on the direction and velocity of the change(s). To better understand the impact of changes in chargeback reserve based on circumstances that are not fully outside the Company’s control, for instance, the ratio of sales subject to chargeback to indirect sales, the Company performs a sensitivity analysis. Holding all other assumptions constant, for a 119 basis point (“BP”) change in the ratio of sales subject to chargeback to indirect sales would increase the chargeback reserve by $0.5 million or decrease the chargeback reserve by $1.0 million depending on the change in the direction of the ratio. Fundamentally, the BP change calculation is determined based on the six month trend of the average ratio of sales subject to chargeback to indirect sales. Due to the competitive generic pharmaceutical industry and our recent experience with wholesalers’ strategy and shifts in contracted and non-contracted indirect sales, we believe that the six month trend of the proportion of direct to indirect sales provides a representative basis for sensitivity analysis. Starting with the second quarter of 2016, the Company determined that in order to more closely align with internal analysis of associated reserves it would adjust the allowances disclosure to separately report rebates from chargebacks and rebates for both net trade accounts receivable and gross sales adjustments and to consolidate administrative fees and others with rebates for purposes of reporting gross sales to net revenue reserves. As a result, the first quarter 2016 information has been recast to reflect this disclosure change. Rebates, Administrative Fees and Others : The Company maintains an allowance for rebates, administrative fees and others, related to contracts and other rebate programs that it has in place with certain customers. Rebates, administrative fees and other percentages vary by product and by volume purchased by each eligible customer. The Company tracks sales by product number for each eligible customer and then applies the applicable rebate, administrative fees and other percentage, using both historical trends and actual experience to estimate its rebates, administrative fees and others allowances. The Company reduces gross sales and increases the rebates, administrative fees and others allowance by the estimated rebates, administrative fees and others amounts when the Company sells its products to eligible customers. The Company reduces the rebate allowance when it processes a customer request for a rebate. At each balance sheet date, the Company analyzes the allowance for rebates, administrative fees and others against actual rebates processed and makes adjustments as appropriate. The amount of actual rebates processed can vary materially from period to period as discussed below. The allowances for rebates, administrative fees and others further takes into consideration price adjustments which are credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a shelf-stock adjustment credit may be given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices, and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Similar to rebates, the reserve for administrative fees and others represents those amounts processed related to contracts and other fee programs which have been in place with certain entities, but they are settled through cash payment to these entities and accordingly are accounted for as a current liability. Otherwise, administrative fees and others operate similarly to rebates. For the three month period ended March 31, 2017 the Company recorded a rebates, administrative fees and others provision of $124.4 million , or 18.3% of gross sales of $680.5 million , compared to $88.3 million , or 14.9% of gross sales of $593.4 million in the prior year period. We note that the dollar and percent increase from the comparative period was the result of gross sales increases and product mix shifts to products with higher rebates, administrative fees and others expense percentages. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of contractual obligations, review of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter rebates, administrative fees and others rates include: changes in product pricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specific products due to external factors such as competitor supply position or consumer preferences, customer shifts in buying patterns from direct to indirect through wholesalers, which could either individually or in aggregate increase or decrease the rebate rate depending on the direction and velocity of the change(s). To better understand the impact of changes in reserves for rebates, administrative fees and others based on circumstances that are not fully outside the Company’s control, for instance, the proportion of direct to indirect sales subject to rebates, administrative fees and others, the Company performs a sensitivity analysis. Holding all other assumptions constant, for a 119 BP change in the ratio of sales subject to rebates, administrative fees and others to indirect sales would increase the reserve for rebates, administrative fees and others by $0.2 million or decrease the same reserve by $0.2 million depending on the direction of the change in the ratio. Fundamentally, the BP change calculation is determined based on the six month trend of the average ratio of sales subject to rebates, administrative fees and others to indirect sales. Due to the competitive generic pharmaceutical industry and our recent experience with wholesalers’ strategy and shifts in contracted and non-contracted indirect sales, we believe the six month trend of the average ratio of sales subject to rebates, administrative fees and others to indirect sales provides a representative basis for sensitivity analysis. Sales Returns: Certain of the Company’s products are sold with the customer having the right to return the product within specified periods. Provisions are made at the time of sale based upon historical experience. Historical factors such as one-time recall events as well as pending new developments like comparable product approvals or significant pricing movement that may impact the expected level of returns are taken into account to determine the appropriate reserve estimate at each balance sheet date. As part of the evaluation of the reserve required, the Company considers actual returns to date that are in process, the expected impact of any product recalls and the amount of wholesaler’s inventory to assess the magnitude of unconsumed product that may result in sales returns to the Company in the future. The sales returns level can be impacted by factors such as overall market demand and market competition and availability for substitute products which can increase or decrease the pull through for sales of the Company’s products and ultimately impact the level of sales returns. For the three month period ended March 31, 2017, the Company incurred a return provision of $8.4 million , or 1.2% of gross sales of $680.5 million , compared to $4.3 million , or 0.7% of gross sales of $593.4 million in the prior year period. We note that the dollar increase and percent decrease in the comparative period was the result of gross sales increases and product mix shifts to products with higher return rates. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter return rates include: acquisitions and integration activities that consolidate dissimilar contract terms and could decrease the return rate as typically the Company purchases smaller entities with less contracting power and integrates those product sales to Akorn contracts; and consumer demand shifts by products, which could either increase or decrease the return rate depending on the product or products specifically demanded and ultimately returned. To better understand the impact of changes in return reserve based on certain circumstances, the Company performs a sensitivity analysis. Holding all other assumptions constant, for an average 1.0 month change in the lag from the time of sale to the time the product return is processed, this change would result in an increase of $1.8 million or decrease of $1.5 million in return reserve expense if the lag increases or decreases, respectively. The average 1.0 month change in the lag from the time of sale to the time the product return is processed was determined based on the average variances of the last six-month historical activities. Due to the change in the volume and type of products sold by the Company in the recent past, we have determined that the lag calculation provides a reasonable basis for sensitivity analysis. Allowance for Coupons, Promotions and Co-Pay discount cards: The Company issues coupons from time to time that are redeemable against certain of our Consumer Health products. Upon release of coupons into the market, the Company records an estimate of the dollar value of coupons expected to be redeemed. This estimate is based on historical experience and is adjusted as needed based on actual redemptions. In addition to couponing, from time to time the Company authorizes various retailers to run in-store promotional sales of its products. Upon receiving confirmation that a promotion was run, the Company accrues an estimate of the dollar amount expected to be owed back to the retailer. This estimate is then adjusted to actual upon receipt of an invoice from the retailer. Additionally, the Company provides consumer co-pay discount cards, administered through outside agents to provide discounted products when redeemed. Upon release of the cards into the market, the Company records an estimate of the dollar value of co-pay discounts expected to be utilized. This estimate is based on historical experience and is adjusted as needed based on actual experience. Doubtful Accounts: Provisions for doubtful accounts, which reflect trade receivable balances owed to the Company that are believed to be uncollectible, are recorded as a component of selling, general and administrative ("SG&A") expenses. In estimating the allowance for doubtful accounts, the Company considers its historical experience with collections and write-offs, the credit quality of its customers and any recent or anticipated changes thereto, and the outstanding balances and past due amounts from its customers. Note that in the ordinary course of business, and consistent with our peers, we may from time to time offer extended payment terms to our customers as an incentive for new product launches or in other circumstances in accordance with standard industry practices. These extended payment terms do not represent a significant risk to the collectability of accounts receivable as of the period-end and are evaluated in accordance with Accounting Standards Codification ("ASC") 605 - Revenue Recognition as applicable. Accounts are considered past due when they remain uncollected beyond the due date specified in the applicable contract or on the applicable invoice, whichever is deemed to take precedence. Advertising and Promotional Allowances to Customers: The Company routinely sells its over-the-counter Consumer Health products to major retail drug chains. From time to time, the Company may arrange for these retailers to run in-store promotional sales of the Company’s products. The Company reserves an estimate of the dollar amount owed back to the retailer for these promotions, recording the amount as a reduction to revenue at the later of the date which the revenue is recognized or the date the sales incentive is offered. When the actual invoice for the sales promotion is received from the retailer, the Company adjusts its estimate accordingly. Advertising and promotional expenses paid to customers are expensed as incurred in accordance with ASC 605-50 - Customer Payments and Incentives . Inventories: Inventories are stated at the lower of cost and net realizable value ("NRV") (see Note 5 - Inventories, net ). The Company maintains an allowance for slow-moving and obsolete inventory as well as inventory where the cost is in excess of its NRV. For finished goods inventory, the Company estimates the amount of inventory that may not be sold prior to its expiration or is slow-moving based upon recent sales activity by unit and wholesaler inventory information. The Company also analyzes its raw material and component inventory for slow-moving items and NRV. The Company capitalizes inventory costs associated with its products prior to regulatory approval when, based on management judgment, future commercialization is considered probable and future economic benefit is expected to be realized. The Company assesses the regulatory approval process and where the product stands in relation to that approval process including any known constraints or impediments to approval. The Company also considers the shelf life of the product in relation to the product timeline for approval. Property, Plant and Equipment: Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method in amounts considered sufficient to amortize the cost of the assets to operations over their estimated useful lives. Intangible Assets: Intangible assets consist primarily of goodwill, which is carried at its initial value, In-Process Research and Development ("IPR&D"), which is accounted for as an indefinite-lived intangible asset, subject to impairment testing until completion or abandonment of the project, and product licensing costs, trademarks and other such costs, which are capitalized and amortized on a straight-line basis over their useful lives, normally ranging from one year to thirty years . The Company regularly assesses its amortizable intangible assets for impairment based on several factors, including estimated fair value and anticipated cash flows. If the Company incurs additional costs to renew or extend the life of an intangible asset, such costs are added to the remaining unamortized cost of the asset, if any, and the sum is amortized over the extended remaining life of the asset. Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist. The Company uses widely accepted valuation techniques to determine the fair value of its reporting units used in its annual goodwill impairment analysis. The Company’s valuation is primarily based on qualitative and quantitative assessments regarding the fair value of the reporting unit relative to its carrying value. The Company models the fair value of the reporting unit based on projected earnings and cash flows of the reporting unit. Impairments of IPR&D are recorded in R&D expenses in the Consolidated Statements of Comprehensive Income, while all other impairments of intangible assets are recorded in impairment of intangible assets line. Net Income Per Common Share: Basic net income per common share is based upon the weighted average common shares outstanding. Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect, if any, of stock options, restricted stock and convertible securities using the treasury stock and if converted methods. Anti-dilutive shares are excluded from the computation of diluted net income per share. Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and net operating loss and other tax credit carry-forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. Fair Value of Financial Instruments: The Company applies ASC 820 - Fair Value Measurement , which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 - Fair Value Measurement defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 - Fair Value Measurement generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability, and are to be developed based on the best information available in the circumstances. The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below: - Level 1 —Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. The carrying value of the Company‘s cash and cash equivalents and the portion of the value of the Nicox S.A. ("Nicox") shares which are available to be traded on the exchange are considered Level 1 assets. - Level 2 —Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company has no Level 2 assets or liabilities in any of the periods presented. - Level 3 —Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. The portion of the fair valuation of the available-for-sale investment held in shares of Nicox stock that is subject to a lock-up provision is considered a Level 3 asset. The additional consideration payable as a result of prior years' divestitures and other insignificant contingent amounts are considered Level 3 liabilities. The following table summarizes the basis used to measure the fair values of the Company’s financial instruments (amounts in thousands): Fair Value Measurements at Reporting Date, Using: Description March 31, 2017 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and cash equivalents $ 307,425 $ 307,425 $ — $ — Available-for-sale securities 1,310 1,268 — 42 Total assets $ 308,735 $ 308,693 $ — $ 42 Purchase consideration payable $ 4,994 $ — $ — $ 4,994 Total liabilities $ 4,994 $ — $ — $ 4,994 Description December 31, 2016 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and cash equivalents $ 200,772 $ 200,772 $ — $ — Available-for-sale securities 1,106 1,074 — 32 Total assets $ 201,878 $ 201,846 $ — $ 32 Purchase consideration payable $ 4,994 $ — $ — $ 4,994 Total liabilities $ 4,994 $ — $ — $ 4,994 As of March 31, 2017 , the Company was carrying available-for-sale investments in shares of Nicox stock fair valued at $1.3 million . In 2014, the Company acquired Nicox stock fair valued at $12.5 million , consisting of an original cost basis of $10.8 million , discounted to reflect certain lockup provisions preventing immediate sale of the underlying shares received, and $1.7 million unrealized gain from the original costs basis of $10.8 million . From 2014 through 2016, the Company sold available-for-sale Nicox stock with a total original cost basis of $9.2 million and realized immaterial losses through these sales. During the three month period ended March 31, 2017 , the Company did not sell any available-for-sale securities, and as of March 31, 2017 , recorded $0.2 million unrealized loss on the investment. An immaterial amount of the remaining $1.3 million of securities were subject to certain lockup provisions and as such, the fair value of that portion of the investment was estimated using observable and unobservable inputs to discount for lack of marketability. The remaining purchase consideration payable is principally comprised of amounts owed relating to various prior years' divestitures, at fair value as determined based on the underlying contracts and the Company’s subjective evaluation of the additional consideration obligation estimate. Stock-Based Compensation: Stock-based compensation cost is estimated at grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. The Company uses the Black-Scholes model for estimating the grant date fair value of stock options. Determining the assumptions to be used in the model is highly subjective and requires judgment. The Company uses an expected volatility that is based on the historical volatility of its common stock. The expected life assumption is based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the average market rate on U.S. Treasury securities of similar term in effect during the quarter in which the options were granted. The dividend yield reflects the Company’s historical experience as well as future expectations over the expected term of the option. The Company estimates forfeitures at the time of grant and revises the estimate in subsequent periods, as necessary, if actual forfeitures differ from initial estimates. |
Stock Options, Employee Stock P
Stock Options, Employee Stock Purchase Plan and Restricted Stock | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options, Employee Stock Purchase Plan and Restricted Stock | Stock Options, Employee Stock Purchase Plan and Restricted Stock The Company maintains equity compensation plans that allow the Company’s Board of Directors to grant stock option and other equity awards to eligible employees, officers, directors and consultants. As of March 31, 2017 , the active plan from which new awards could be granted was the Akorn, Inc. 2014 Stock Option Plan ("the 2014 Plan"), which was approved by shareholders at the Company's 2014 Annual Meeting of Shareholders on May 2, 2014 and subsequently amended by proxy vote of the Company’s shareholders on December 16, 2016. The 2014 Plan reserved 7.5 million shares for issuance upon the grant of stock options, restricted stock units (“RSUs”), or various other instruments to directors, employers and consultants. The 2014 Plan replaced the Amended and Restated Akorn, Inc. 2003 Stock Option Plan (the “2003 Plan”), which expired on November 6, 2013, although previously granted awards remain outstanding under the 2003 Plan. The Company uses the single-award method for allocating compensation cost related to stock options to each period. The following table sets forth the components of the Company’s share-based compensation expense for the three month periods ended March 31, 2017 and 2016 (in thousands): Three Months Ended 2017 2016 Stock options $ 3,314 $ 2,049 Employee stock purchase plan 262 — Restricted stock units 1,133 872 Total stock-based compensation expense $ 4,709 $ 2,921 Stock Option awards From time to time, the Company grants stock option awards to certain employees and directors. The weighted-average assumptions used in estimating the grant date fair value of the stock options granted under the 2014 Plan during the three -month periods ended March 31, 2017 and 2016 , respectively, along with the weighted-average grant date fair values, are set forth in the table below: Three Months Ended 2017 2016 Expected volatility 50 % 47 % Expected life (in years) 4.8 4.8 Risk-free interest rate 1.75 % 1.26 % Dividend yield — — Fair value per stock option $ 9.25 $ 9.95 Forfeiture rate 8 % 8 % The table below sets forth a summary of stock option activity within the 2014 Plan and the 2003 Plan for the three month period ended March 31, 2017 : Number of Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) (1) Outstanding at December 31, 2016 4,766 $ 27.27 5.03 $ 5,714 Granted 66 21.28 Exercised (88 ) 12.68 Forfeited (38 ) 31.83 Outstanding at March 31, 2017 4,706 $ 27.43 4.89 $ 7,034 Exercisable at March 31, 2017 1,688 $ 25.09 3.46 $ 5,800 (1) The Aggregate Intrinsic Value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the date indicated and the exercise price of the stock options. Stock options for which the exercise price exceeded the market price have been omitted. Fluctuations in the intrinsic value of both outstanding and exercisable options may result from changes in underlying stock price and the timing and volume of option grants, exercises and forfeitures. During the three month period ended March 31, 2017 , 0.1 million stock options were exercised resulting in cash payments to the Company of $1.1 million . These stock option exercises generated tax deductible expense of $0.8 million . During the three month period ended March 31, 2016 , no stock options were exercised. Restricted Stock Unit awards From time to time, the Company has granted RSUs to certain executives, employees and directors. During 2016, the Company adopted a new Long-Term Incentive Plan for salaried, non-executive employees. That plan called for annual grants of RSUs to all such eligible employees, and the first such grants took place on July 1, 2016. These grants were calculated based on the average pay by employee class and vest 25% per year on each of the first four anniversaries of the grant date. All RSUs are valued at the closing market price of the Company’s common stock on the day of grant and the total value of the units is recognized as expense ratably over the vesting period of the grants. During the three month period ended March 31, 2017 , there were no grants of new RSU awards, and no existing RSUs either vested or were released to holders. Set forth below is a summary of non-vested RSU activity during the three month period ended March 31, 2017 : Number of Units (in thousands) Weighted Average Per Share Grant Date Fair Value Non-vested at December 31, 2016 416 $ 31.52 Granted — $ — Vested — $ — Forfeited (6) $ 29.50 Non-vested at March 31, 2017 410 $ 31.55 Employee Stock Purchase Plan The 2016 Akorn, Inc. Employee Stock Purchase Plan (the “ESPP”) permits eligible employees to acquire shares of the Company’s common stock through payroll deductions. The ESPP has been structured to qualify under Section 423 of the Internal Revenue Code (“IRC”). Employees who elect to participate in the ESPP may withhold from 1% to 15% of eligible wages toward the purchase of stock. Shares will be purchased at a 15% discount off the lesser of the market price at the beginning or the ending of the applicable offering period. The ESPP is designed with two offering periods each year, one running from January 1st to December 31st and the other running from July 1st to December 31st. In a given year, employees may enroll in either offering period, but not both. Per IRC rules, annual purchases per employee are limited to $25,000 worth of stock, valued as of the beginning of the offering period. Accordingly, with the 15% discount, employees may withhold no more than $21,250 per year toward the purchase of stock under the ESPP. Employees are further limited to purchasing no more than 15,000 shares of stock per year. A total of 2.0 million shares of the Company’s stock have been set aside for issuance under the ESPP. The ESPP was approved by vote of the Company’s shareholders on December 16, 2016. The initial offering period under the ESPP began in January 2017 and is scheduled to run through the end of the year. During the quarter ended March 31, 2017 , participants contributed approximately $0.9 million through payroll deductions toward the future purchase of shares under the ESPP. |
Accounts Receivable, Sales and
Accounts Receivable, Sales and Allowances | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Accounts Receivable, Sales and Allowances | Accounts Receivable, Sales and Allowances The nature of the Company’s business inherently involves, in the ordinary course, significant amounts and substantial volumes of transactions and estimates relating to allowances for product returns, chargebacks, rebates, doubtful accounts and discounts given to customers. This is typical of the pharmaceutical industry and is not necessarily specific to the Company. Depending on the product, the end-user customer, the specific terms of national supply contracts and the particular arrangements with the Company’s wholesaler customers, certain rebates, chargebacks and other credits are deducted from the Company’s accounts receivable. The process of claiming these deductions depends on wholesalers reporting to the Company the amount of deductions that were earned under the terms of the respective agreement with the end-user customer (which in turn depends on the specific end-user customer, each having its own pricing arrangement, which entitles it to a particular deduction). This process can lead to partial payments to the Company against outstanding invoices as the wholesalers take the claimed deductions at the time of payment. With the exception of the provision for doubtful accounts, which is reflected as part of selling, general and administrative expense, the provisions for the following customer reserves are reflected as a reduction of revenues in the accompanying condensed consolidated statements of comprehensive income. Additionally, with the exception of administrative fees and others, which is included as a current liability, the ending reserve balances are included in trade accounts receivable, net in the Company’s condensed consolidated balance sheets. In the quarter ended June 30, 2016, the Company determined that in order to more closely align with internal analysis of associated reserves it would adjust the allowances disclosure to separately report rebates from chargebacks and rebates for both net trade accounts receivable and gross sale adjustments and to consolidate administrative fees and others with rebates for purposes of reporting gross sales to net revenues. As a result, information as of and for the three month period ended March 31, 2016 has been recast to reflect this disclosure change. Net trade accounts receivable consists of the following (in thousands): March 31, December 31, Gross accounts receivable (1) $ 462,013 $ 519,175 Less reserves for: Chargebacks (77,472 ) (80,360 ) Rebates (93,449 ) (97,935 ) Product returns (45,660 ) (43,689 ) Discounts and allowances (10,293 ) (12,389 ) Advertising and promotions (641 ) (688 ) Doubtful accounts (816 ) (960 ) Trade accounts receivable, net $ 233,682 $ 283,154 (1) The reduction in the Gross accounts receivable balance as of March 31, 2017 when compared to the December 31, 2016 balance is due to higher Gross sales in the last two months of the fourth quarter of 2016 compared to the last two months of the first quarter of 2017. For the three month periods ended March 31, 2017 and 2016 , the Company recorded the following adjustments to gross sales (in thousands): Three Months Ended 2017 2016 Gross sales $ 680,534 $ 593,392 Less adjustments for: Chargebacks (1) (280,160 ) (219,376 ) Rebates, administrative and other fees (1) (124,378 ) (88,348 ) Product returns (8,418 ) (4,286 ) Discounts and allowances (12,922 ) (11,954 ) Advertising, promotions and others (1,236 ) (1,081 ) Revenues, net $ 253,420 $ 268,347 |
Inventories, Net
Inventories, Net | 3 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net The components of inventories are as follows (in thousands): March 31, December 31, Finished goods $ 73,918 $ 73,027 Work in process 10,819 14,719 Raw materials and supplies 87,588 87,047 Inventories, net $ 172,325 $ 174,793 The Company maintains an allowance for excess and obsolete inventory, as well as inventory for which its cost is in excess of its net realizable value. Inventory at March 31, 2017 and December 31, 2016 was reported net of these reserves of $27.6 million and $33.5 million , respectively. |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | Property, Plant and Equipment, Net Property, plant and equipment, net consist of the following (in thousands): March 31, December 31, Land and land improvements $ 17,645 $ 17,410 Buildings and leasehold improvements 93,106 88,825 Furniture and equipment 168,482 160,546 Sub-total 279,233 266,781 Accumulated depreciation (113,322 ) (108,425 ) Property, plant and equipment in service, net $ 165,911 $ 158,356 Construction in progress 86,745 80,048 Property, plant and equipment, net $ 252,656 $ 238,404 At March 31, 2017 and December 31, 2016 , property, plant and equipment, net, with a net carrying value of $68.9 million and $65.1 million , respectively, was located outside the United States at the Company’s manufacturing facilities in India and Switzerland. The Company recorded depreciation expense of $5.4 million and $6.0 million during the three month periods ended March 31, 2017 and 2016 , respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net The following table provides a summary of the activity in goodwill by segment for the three month period ended March 31, 2017 (in thousands): Consumer Health Prescription Pharmaceuticals Total Balances at December 31, 2016 $ 16,717 $ 267,576 $ 284,293 Currency translation adjustments — 738 738 Acquisitions — — — Impairments — — — Dispositions — — — Balances at March 31, 2017 $ 16,717 $ 268,314 $ 285,031 The following table sets forth the major categories of the Company’s intangible assets as of March 31, 2017 and December 31, 2016, and the weighted average remaining amortization period as of March 31, 2017 and December 31, 2016 (dollar amounts in thousands): Gross Amount (1) Accumulated Amortization Reclass-ifications Gross Impairment Net Balance Wtd Avg Remaining Amortization Period (years) March 31, 2017 Product licensing rights $ 746,906 $ (197,563 ) $ — $ — $ 549,343 10.4 IPR&D 173,757 — — (225 ) 173,532 N/A - Indefinite lived Trademarks 16,000 (4,559 ) — — 11,441 18.0 Customer relationships 4,225 (1,863 ) — — 2,362 9.1 Other intangibles 11,235 (4,755 ) — — 6,480 5.9 $ 952,123 $ (208,740 ) $ — $ (225 ) $ 743,158 December 31, 2016 Product licensing rights $ 790,143 $ (182,901 ) $ 9,400 $ (52,637 ) $ 564,005 10.5 IPR&D 187,007 — (9,400 ) (3,850 ) 173,757 N/A - Indefinite lived Trademarks 16,000 (4,244 ) — — 11,756 18.0 Customer relationships 6,290 (3,863 ) — — 2,427 9.3 Other intangibles 11,235 (4,326 ) — — 6,909 6.0 $ 1,010,675 $ (195,334 ) $ — $ (56,487 ) $ 758,854 The Company recorded amortization expense of $15.5 million and $16.5 million during the three month periods ended March 31, 2017 and 2016, respectively. (1) Differences in the Gross Amounts between periods are due to either impairment of assets or the write down of fully amortized assets. |
Financing Arrangements
Financing Arrangements | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Financing Arrangements | 1.50 to 1.0 0.50% 1.50% Category 2 > 1.25 to 1.00 but < 1.50 to 1.00 0.75% 1.75% Category 3 < 1.25 to 1.00 1.00% 2.00% In addition to interest on borrowings, the Company will pay an unused line fee of 0.25% per annum on the unused portion of the JPM Revolving Facility. During an event of default, as defined in the JPM Credit Agreement, any interest rate will be increased by 2.00% per annum. The JPM Revolving Facility is secured by all of the assets of the Akorn Loan Parties, including springing control of the Company’s primary deposit account pursuant to a Deposit Account Control Agreement. The financial covenants require the Akorn Loan Parties to maintain the following on a consolidated basis: (a) Minimum Liquidity, as defined in the JPM Credit Agreement, of not less than (a) $120.0 million plus (b) 25% of the JPM Revolving Facility commitments during the three month period preceding the June 1, 2016 maturity date of the Company’s senior convertible notes. (b) Ratio of EBITDA to fixed charges of no less than 1.00 to 1.00 (measured quarterly for the trailing 4 quarters). As of March 31, 2017 the Company was in full compliance with all covenants applicable to the JPM Revolving Facility. The Company may use any proceeds from borrowings under the JPM Revolving Facility for working capital needs and for the general corporate purposes of the Company and its subsidiaries. At March 31, 2017 , there were no outstanding borrowings and one outstanding letter of credit in the amount of $2.2 million under the JPM Revolving Facility. Availability under the facility as of March 31, 2017 was $147.8 million . The JPM Credit Agreement places customary limitations on indebtedness, distributions, liens, acquisitions, investments, and other activities of the Akorn Loan Parties in a manner designed to protect the collateral while providing flexibility for growth and the historic business activities of the Company and its subsidiaries. Aggregate cumulative maturities of long-term obligations (including the Term Loans and the JPM Revolving Facility) as of March 31, 2017 are: (In thousands) 2017 2018 2019 2020 Thereafter Maturities of debt $ — $ — $ — $ — $ 831,938 " id="sjs-B4" xml:space="preserve">Financing Arrangements Term Loans Concurrent with the closing of its acquisition of Hi-Tech (the “Hi-Tech Acquisition”), Akorn, Inc. and its wholly-owned domestic subsidiaries (the "Akorn Loan Parties") entered into a $600.0 million Term Facility (the “Existing Term Facility”) pursuant to a Loan Agreement dated April 17, 2014 (the “Existing Term Loan Agreement”) between Akorn Loan Parties as borrowers, certain other lenders and JPMorgan Chase Bank, N.A. ("JPMorgan") acting as administrative agent. The Company may increase the loan amount up to an additional $150.0 million , or more, provided certain financial covenants and other conditions are satisfied. The proceeds received pursuant to the Existing Term Loan Agreement were used to finance the Hi-Tech Acquisition. Additionally and concurrent with the closing of its acquisition of VersaPharm, the Akorn Loan Parties entered into a $445.0 million Incremental Facility Joinder Agreement (the “Incremental Term Loan Facility”) pursuant to a Loan Agreement (the “Incremental Term Loan Agreement”) dated August 12, 2014 between Akorn Loan Parties as borrowers and JPMorgan as lender and administrative agent for certain other lenders. The proceeds received pursuant to the Incremental Term Loan Agreement were used to finance the VersaPharm acquisition. The Existing Term Facility and Incremental Term Loan Facility are collectively the “Term Loans” or the “Term Loan Agreements.” The Term Loans are secured by all of the assets of the Akorn Loan Parties, including springing control of the Company’s primary deposit account pursuant to a deposit account control agreement. Prior to February 16, 2016, the Term Loan Agreements required quarterly principal repayment equal to 0.25% of the initial aggregate loan amount beginning with the second full quarter following the closing date of the Existing Term Loan Agreement, with a final payment of the remaining principal balance due at maturity seven years from the date of closing of the Existing Term Loan Agreement. The Company was also able to prepay all or a portion of the remaining outstanding principal amount under the Term Loan Agreements at any time, or from time to time, subject to prior notice to the lenders and payment of applicable fees. Prepayment of principal was required should the Company incur any indebtedness not permitted under the Term Loan Agreements, or effect the sale, transfer or disposition of any property or asset, other than in the ordinary course of business. On February 16, 2016, the Company made a voluntary prepayment of its Existing Term Facility of $200.0 million which settled all future quarterly principal repayments of the Term Loan Agreements as denoted above until the date of the maturity of the Term Loan Agreements or April 16, 2021, although future voluntary principal repayments are permitted. As of March 31, 2017 , outstanding debt under the Term Loans was $831.9 million and the Company was in full compliance with all applicable covenants which included customary limitations on indebtedness, distributions, liens, acquisitions, investments, and other activities. On May 20, 2015, the Company modified the Term Loan Agreements with JPMorgan and certain other lenders to remedy certain covenant defaults related to the fiscal year 2014 financial restatement by incurring nominal charges affected through a temporary interest rate increase and an upfront payment. Prior to November 13, 2015, interest accrued based, at the Company’s election, on an adjusted prime/federal funds rate or an adjusted LIBOR (“Eurodollar Loan”) rate, plus a margin of 2.50% for ABR Loans, and 3.50% for Eurodollar Loans. Each such margin would decrease by 0.25% in the event of the Company’s senior debt to EBITDA ratio for any quarter falling to 2.25 : 1.00 or below. During an event of default, as defined in the Term Loan Agreements, any interest rate would have been increased by 2.00% per annum. Per the Term Loan Agreements, the interest rate on LIBOR loans could not fall below 4.50% . On November 13, 2015, the Company again modified the Term Loan Agreements with JPMorgan and certain other lenders to remedy certain remaining covenant defaults related to the FY 2014 financial restatement by incurring additional charges affected through a temporary interest rate increase and an upfront payment. During 2016, the Company incurred an additional $5.1 million of financing costs related to the 2014 restatement process that ended on May 10, 2016, and carried a deferred financing fees balance of $21.5 million at December 31, 2016. During the three month period ended March 31, 2017 , the Company amortized $1.3 million of the Term Loans-related costs, resulting in $20.2 million remaining balance of deferred financing fees at March 31, 2017 . The Company will amortize this balance using the effective interest method over the life of the Term Loan Agreements. Subsequent to November 13, 2015, interest accrues based, at the Company’s election, on an adjusted prime/federal funds rate (“ABR Loan”) or an adjusted LIBOR (“Eurodollar Loan”) rate, plus a margin of 4.00% for ABR Loans, and 5.00% for Eurodollar Loans. As of the date of the filing of this Form 10-Q until the maturity of the Term Loans, the Company's spread will be based upon the Ratings Level applicable on such date as documented below. As of the period ended March 31, 2017 , the Company was a Ratings Level I for the Term Loan Agreements. Ratings Level Index Ratings (Moody’s/S&P) Eurodollar Spread ABR Spread Level I B1/B+ or higher 4.25% 3.25% Level II B2/B 4.75% 3.75% Level III B3/B- or lower 5.50% 4.50% For the three month periods ended March 31, 2017 and 2016, the Company recorded interest expense of $10.9 million and $10.8 million , respectively in relation to the Term Loans. JPMorgan Credit Facility On April 17, 2014, the Akorn Loan Parties entered into a Credit Agreement (the “JPM Credit Agreement”) with JPMorgan as administrative agent, and Bank of America, N.A., as syndication agent for certain other lenders (at closing, Bank of America, N.A. and Wells Fargo Bank, N. A.) for a $150.0 million revolving credit facility (the “JPM Revolving Facility”). Subject to other conditions in the JPM Credit Agreement, advances under the JPM Revolving Facility will be made in accordance with a borrowing base consisting of the sum of the following: (a) 85% of eligible accounts receivable; (b) The lesser of: a. 65% of the lower of cost or market value of eligible raw materials and work in process inventory, valued on a first in first out basis, and b. 85% of the orderly liquidation value of eligible raw materials and work in process inventory, valued on a first in first out basis; (c) The lesser of: a. 75% of the lower of cost or market value of eligible finished goods inventory, valued on a first in first out basis, and b. 85% of the orderly liquidation value of eligible finished goods inventory, valued on a first in first out basis up to 85% of the liquidation value of eligible inventory (or 75% of market value finished goods inventory); and (d) Less any reserves deemed necessary by the administrative agent, and allowed in its permitted discretion. The total amount available under the JPM Revolving Facility includes a $10.0 million letter of credit facility. Under the terms of the JPM Credit Agreement, if availability under the JPM Revolving Facility falls below 12.5% of commitments or $15.0 million for more than 30 consecutive days, the Company may be subject to cash dominion, additional reporting requirements, and additional covenants and restrictions. The Company may seek additional commitments to increase the maximum amount of the JPM Revolving Facility to $200.0 million . Unless cash dominion is exercised by the lenders in connection with the JPM Revolving Facility, the Company will be required to repay the JPM Revolving Facility upon its expiration five years from issuance, subject to permitted extension, and will pay interest on the outstanding balance monthly based, at the Company’s election, on an adjusted prime/federal funds rate (“ABR”) or an adjusted LIBOR (“Eurodollar”), plus a margin determined in accordance with the Company’s consolidated fixed charge coverage ratio (EBITDA to fixed charges) as follows: Fixed Charge Coverage Ratio Revolver ABR Spread Revolver Eurodollar Spread Category 1 > 1.50 to 1.0 0.50% 1.50% Category 2 > 1.25 to 1.00 but < 1.50 to 1.00 0.75% 1.75% Category 3 < 1.25 to 1.00 1.00% 2.00% In addition to interest on borrowings, the Company will pay an unused line fee of 0.25% per annum on the unused portion of the JPM Revolving Facility. During an event of default, as defined in the JPM Credit Agreement, any interest rate will be increased by 2.00% per annum. The JPM Revolving Facility is secured by all of the assets of the Akorn Loan Parties, including springing control of the Company’s primary deposit account pursuant to a Deposit Account Control Agreement. The financial covenants require the Akorn Loan Parties to maintain the following on a consolidated basis: (a) Minimum Liquidity, as defined in the JPM Credit Agreement, of not less than (a) $120.0 million plus (b) 25% of the JPM Revolving Facility commitments during the three month period preceding the June 1, 2016 maturity date of the Company’s senior convertible notes. (b) Ratio of EBITDA to fixed charges of no less than 1.00 to 1.00 (measured quarterly for the trailing 4 quarters). As of March 31, 2017 the Company was in full compliance with all covenants applicable to the JPM Revolving Facility. The Company may use any proceeds from borrowings under the JPM Revolving Facility for working capital needs and for the general corporate purposes of the Company and its subsidiaries. At March 31, 2017 , there were no outstanding borrowings and one outstanding letter of credit in the amount of $2.2 million under the JPM Revolving Facility. Availability under the facility as of March 31, 2017 was $147.8 million . The JPM Credit Agreement places customary limitations on indebtedness, distributions, liens, acquisitions, investments, and other activities of the Akorn Loan Parties in a manner designed to protect the collateral while providing flexibility for growth and the historic business activities of the Company and its subsidiaries. Aggregate cumulative maturities of long-term obligations (including the Term Loans and the JPM Revolving Facility) as of March 31, 2017 are: (In thousands) 2017 2018 2019 2020 Thereafter Maturities of debt $ — $ — $ — $ — $ 831,938 |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic net income per common share is based upon the weighted average number of common shares outstanding during the period. Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect, if any, of potentially dilutive securities using the treasury stock method. Additionally, For the three month period ended March 31, 2016, the earnings per share amount was calculated using the if-converted method to account for the dilutive impact of the Convertible Notes. The Convertible Notes matured in the quarter ended June 30, 2016. The Company’s potentially dilutive shares consist of: (i) vested and unvested stock options that are in-the-money, (ii) unvested RSUs, and (iii) for the three month period ended March 31, 2016, shares potentially issuable upon conversion of the Notes. A reconciliation of the earnings per share data from a basic to a fully diluted basis is detailed below (amounts in thousands, except per share data): Three Months Ended 2017 2016 Net income $ 41,027 $ 41,886 Convertible debt income adjustments, net of tax — 604 Net income adjusted for convertible debt as used for diluted earnings per share $ 41,027 $ 42,490 Net income per share: Basic $ 0.33 $ 0.35 Diluted (1) $ 0.33 $ 0.34 Shares used in computing net income per share: Weighted average basic shares outstanding 124,421 119,516 Dilutive securities: Stock option and unvested RSUs 245 1,172 Shares issuable upon conversion of the notes — 4,933 Total dilutive securities 245 6,105 Weighted average diluted shares outstanding 124,666 125,621 Shares subject to stock options omitted from the calculation of income per share as their effect would have been anti-dilutive 4,093 2,430 (1) As a result of the Company's expectation that it would likely settle all future note conversions in shares of the Company's common stock, the diluted income from continuing operations per share calculation for the periods prior to the complete conversion of the convertible debt on June 1, 2016, included the dilutive effect of convertible debt and was offset by the exclusion of interest expense and deferred financing fees related to the convertible debt of $0.6 million , after-tax for the three month period ended March 31, 2016. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information During the three month periods ended March 31, 2017 and 2016, the Company reported results for the following two reportable segments: - Prescription Pharmaceuticals - Consumer Health The Company’s Prescription Pharmaceuticals segment principally consists of generic and branded prescription pharmaceuticals products which span a broad range of indications as well as a variety of dosage forms including: sterile ophthalmics, injectables and inhalants, and non-sterile oral liquids, topicals and nasal sprays. The Company’s Consumer Health segment principally consists of animal health and OTC products, both branded and private label. OTC products include, but are not limited to, a suite of products for the treatment of dry eye sold under the TheraTears ® brand name. Financial information about the Company’s reportable segments is based upon internal financial reports that aggregate certain operating information. The Company’s Chief Operating Decision Maker (“CODM”), as defined in ASC 280 - Segment Reporting , who is also the CEO, oversees operational assessments and resource allocations based upon the results of the Company’s reportable segments, which have available and discrete financial information. Selected financial information by reportable segment is presented below (in thousands): Three Months Ended 2017 2016 Revenues, net: Prescription Pharmaceuticals $ 237,379 $ 250,749 Consumer Health 16,041 17,598 Total revenues, net 253,420 268,347 Gross Profit: Prescription Pharmaceuticals 141,319 154,635 Consumer Health 7,813 8,382 Total gross profit 149,132 163,017 Operating expenses 74,299 75,438 Operating income 74,833 87,579 Other expense (9,507 ) (21,007 ) Income before income taxes $ 65,326 $ 66,572 The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. Inter-segment activity at the gross profit level is minimal. The Company does not have discrete assets by segment, as certain manufacturing and warehouse facilities support more than one segment, and therefore does not report assets by segment. Financial information including revenues and gross profit from external customers by product or product line is not provided as to do so would be impracticable. |
Share Repurchases
Share Repurchases | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Share Repurchases | Share Repurchases In July 2016, the Company announced that the Board of Directors authorized a stock repurchase program (the "Stock Repurchase Program") pursuant to which the Company may repurchase up to $200.0 million of the Company’s common stock. The shares may be repurchased in open market transactions at prevailing market prices, in privately negotiated transactions or others, including accelerated stock repurchase arrangements, pursuant to a Rule 10b5-1 repurchase plan or by other means in accordance with federal securities laws. The timing and the amount of any repurchases will be determined by the Company’s management based on its evaluation of market conditions, capital allocation alternatives, and other factors. There is no guarantee as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time without notice and at the Company's discretion, and at this time no estimate to the effect on the results of the Company due to the Stock Repurchase Program can be made. The Company did no t repurchase any shares during the three month period ended March 31, 2017 , and had $155.0 million remaining under the repurchase authorization. Companies incorporated under Louisiana law are subject to the Louisiana Business Corporation Act ("LBCA"). Provisions of the LBCA eliminate the concept of treasury stock and require that shares repurchased by a company are to be treated as authorized but unissued shares instead of treasury stock. As a result, all stock repurchases are presented as a reduction to issued and outstanding shares of common stock, the stated par value of common stock and retained earnings. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company is subject to certain due-course complaints and claims arising out of its business, typically brought by competitors, suppliers, customers and others. In accordance with ASC 450 - Contingencies , the Company records reserves when loss is probable and the amount of loss can be reasonably estimated. As such, the Company believes that it has provided adequate reserves and that any matters currently pending will not materially affect the condensed, consolidated financials of the Company as of the period end. The Company has entered into strategic business agreements for the development and marketing of finished dosage form pharmaceutical products with various pharmaceutical development companies. Each strategic business agreement includes a future payment schedule for contingent milestone payments and in certain strategic business agreements, minimum royalty payments. The Company will be responsible for contingent milestone payments and minimum royalty payments to these strategic business partners based upon the occurrence of future events. Each strategic business agreement defines the triggering event of its future payment schedule, such as meeting product development progress timelines, successful product testing and validation, successful clinical studies, various FDA and other regulatory approvals and other factors as negotiated. None of the contingent milestone payments or minimum royalty payments are individually material to the Company. The Company is engaged in various supply agreements with third parties which obligate the Company to purchase various active pharmaceutical ingredients ("API") or finished products at contractual minimum levels. None of these agreements are individually or in aggregate material to the Company. Further, the Company does not believe at this time that any of the purchase obligations represent levels above that of normal business demands. The table below summarizes contingent potential milestone payments due to strategic partners in the years 2017 and beyond, assuming all such contingencies occur (in thousands): Year ending December 31, Amount 2017 $ 5,247 2018 9,392 2019 70 2020 and Beyond 800 Total $ 15,509 Legal Proceedings The Company is a party to legal proceedings and potential claims arising in the ordinary course of our business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management of the Company believes that the ultimate disposition of such proceedings and exposure will not have a material adverse impact on the financial condition, results of operations, or cash flows of the Company. Set forth below are material updates to legal proceedings of the Company. As previously disclosed in various reports filed with the SEC, on March 4, 2015, a purported class action complaint was filed entitled Yeung v. Akorn, Inc., et al. , in the federal district court of Northern District of Illinois, No. 15-cv-1944. The complaint alleged that the Company and three of its officers violated the federal securities laws in connection with matters related to its accounting and financial reporting in the wake of its acquisitions of Hi-Tech Pharmaceutical Co., Inc. and VersaPharm, Inc. A second, related case entitled Sarzynski v. Akorn, Inc., et al. , No. 15-cv-3921, was filed on May 4, 2015 making similar allegations. On August 24, 2015, the two cases were consolidated and a lead plaintiff appointed in In re Akorn, Inc. Securities Litigation. On July 5, 2016, the lead plaintiff group filed a consolidated amended complaint making similar allegations against the Company and an officer and former officer of the Company. The consolidated amended complaint seeks damages on behalf of the putative class. On August 9, 2016, the defendants filed a motion to dismiss the case. On March 6, 2017, the court denied the motion to dismiss and the defendants subsequently filed an answer to the consolidated amended complaint on March 27, 2017. The case is now in the discovery phase, and no trial date has been scheduled. As previously disclosed in various reports filed with the SEC, the Company’s Board of Directors also received shareholder demand letters and four shareholder derivative lawsuits have been filed alleging breaches of fiduciary duty in connection with the Company’s accounting for its acquisition and the restatement of its financials. Two of the derivative lawsuits, Safriet v. Rai, et al., No. 15-cv-7275, and Glaubach v. Rai, et al ., No. 15- 11129, which were filed in the U.S. District Court for the Northern District of Illinois, had been stayed pending anticipated rulings on the defendants’ motion to dismiss in In re Akorn, Inc. Securities Litigation. The two cases have been consolidated into a single action and the stay lifted. Plaintiffs in the consolidated action have not yet filed or designated a consolidated complaint. As previously disclosed in various reports filed with the SEC, Fera Pharmaceuticals, LLC v. Akorn Inc., Sean Brynjelsen, and Michael Stehn , in the United States District Court for the Southern District of New York, Case No. 12-cv-07692-LLS. Fera Pharmaceuticals, LLC (“Fera”) filed this action on September 12, 2012. The defendants in the case are the Company, one former employee of the Company, Sean Brynjelsen, and a current employee of the Company, Michael Stehn. The amended complaint generally alleges that the Company breached certain terms of a contract manufacturing supply agreement by, among other things, failing to manufacture Fera’s products, raising the manufacturing cost, and impermissibly terminating the contract. In addition, Fera alleges that the Company misappropriated Fera’s trade secrets in order to manufacture Erythromycin and Bacitracin for its own benefit. The counts in the amended complaint are for (1) breach of contract, (2) misappropriation of trade secrets, (3) fraudulent inducement, and (4) declaratory and injunctive relief. Fera seeks $135 million in compensatory damages, an additional, unspecified amount in punitive damages, and injunctive relief restraining the Company from selling the products at issue in the case. The Company filed a counterclaim against Fera and certain affiliates, as well as Perrigo Company of Tennessee and Perrigo Company plc, asserting violations of Sections 1 and 2 of the Sherman Act and tortious interference with business relations. The case is still in the discovery phase, with fact discovery expected to close approximately at the end of May 2017, and expert discovery expected to be completed by September 1, 2017. The court has indicated it would like the trial to commence in mid-October 2017, but has not entered a scheduling order to that effect. As previously disclosed in various reports filed with the SEC, State of Louisiana v. Abbott Laboratories, Inc., et al. The Louisiana Attorney General filed suit, Number 624,522, Nineteenth Judicial District Court, Parish of East Baton Rouge, including Hi-Tech Pharmacal and other defendants, in Louisiana state court. Louisiana’s complaint alleges that the defendants violated Louisiana state laws in connection with Medicaid reimbursement for certain vitamins, dietary supplements, and DESI products that were allegedly ineligible for reimbursement. The defendants filed exceptions of no cause of action and no right of action in response to Louisiana’s amended complaint. In a judgment entered on October 2, 2015, the trial court sustained the defendants’ exception of no right of action, which dismissed all of Louisiana’s claims. Louisiana sought appellate review of the court’s decision by filing an application for supervisory writs, as well as an appeal pending in the First Circuit Court of Appeal in Louisiana. On October 21, 2016, the First Circuit Court of Appeal affirmed the trial court’s judgment in part, reversed it in part, and remanded the case for further proceedings. Specifically, the First Circuit affirmed the dismissal of four of the six causes of action pled in Louisiana’s amended complaint, but reversed the dismissal with respect to the two remaining statutory claims. On December 22, 2016, the First Circuit denied Louisiana’s application for rehearing with respect to the First Circuit’s affirmance. On January 20, 2017, Louisiana filed an application for certiorari in the Louisiana Supreme Court as to the portion of the First Circuit’s decision affirming the trial court’s judgment. On January 23, 2017, the defendants filed an application for certiorari in the Louisiana Supreme Court as to the portion of the First Circuit’s decision reversing the trial court’s judgment. On March 13, 2017, the Louisiana Supreme Court denied both writ applications. On March 31, 2017, the trial court judge entered an order permitting Defendants to respond to the State’s First Amended Petition on or before May 11, 2017. There are presently no other scheduled dates in the proceeding. In addition to the foregoing matters, Akorn has received shareholder demands for legal action to be taken against certain of the Company’s directors and officers based on alleged breaches of fiduciary duties and other misconduct in connection with the Company’s restatement of financial results and other matters. Akorn’s Board of Directors formed a special committee that conducted an inquiry into the demand allegations and provided its conclusions and recommendations to the Board. On April 7, 2017, a jury in the State Court of Houston County in the State of Georgia reached a verdict of $20.5 million in damages against Akorn, Inc. in the product liability case Ann Pope and Anthony Pope v. Horatio V. Cabasares, M.D., Horatio V. Cabasares, M.D., P.C. Houston Healthcare Systems, Inc., Akorn Sales, Inc., and Akorn, Inc. in which plaintiff claimed Akorn provided inadequate labeling on its product methylene blue. The Company maintains sufficient product liability insurance coverage for the defense costs and expenses as well as the verdict related to this case. Further, on April 27, 2017, Akorn filed a motion for a new trial and intends to appeal, thereby challenging liability as well as the compensatory and punitive damage awards. The legal matters discussed above and others could result in losses, including damages, fines and civil penalties, and criminal charges, which could be substantial. We record accruals for these contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. Regarding the aforementioned labeling verdict related to methylene blue, the Company recorded a reasonable estimate of the liability less than the verdict amount (for which a corresponding insurance receivable is also recorded). Regarding the other matters disclosed above, the Company has determined that liabilities associated with these legal matters are reasonably possible but they cannot be reasonably estimated. Given the nature of the litigation and investigations and the complexities involved, the Company is unable to reasonably estimate a possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation or investigation. However, we could incur judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on our results of operations in the period in which the amounts are accrued and/or our cash flows in the period in which the amounts are paid. |
Customer, Supplier and Product
Customer, Supplier and Product Concentration | 3 Months Ended |
Mar. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration Customer Concentrations A significant percentage of the Company’s sales are to three wholesale drug distributors: AmerisourceBergen Corporation; Cardinal Health, Inc. and McKesson Corporation. These three wholesalers (the “Big 3 Wholesalers”) are all distributors of the Company’s products, as well as suppliers of a broad range of health care products. The following table sets forth the percentage of the Company’s gross and net sales for the three month periods ended March 31, 2017 and 2016, and gross accounts receivable as of March 31, 2017 and December 31, 2016, attributable to the Big 3 Wholesalers: Three Months Ended Big 3 Wholesalers combined : 2017 2016 Percentage of gross sales 79% 76% Percentage of net revenues 64% 62% March 31, 2017 December 31, 2016 Percentage of gross trade accounts receivable 83% 84% If sales to any of the Big 3 Wholesalers were to diminish or cease, the Company believes that the end users of its products would have little difficulty obtaining the Company’s products either directly from the Company or from another distributor. No other customers accounted for more than 10% of gross sales, net revenues or gross trade receivables for the indicated dates and periods. Supplier Concentrations The Company requires a supply of quality raw materials and components to manufacture and package pharmaceutical products for its own use and for third parties with which it has contracted. The principal components of the Company’s products are active and inactive pharmaceutical ingredients and certain packaging materials. Certain of these ingredients and components are available from only a single source and, in the case of certain of the Company’s abbreviated new drug applications and new drug applications, only one supplier of raw materials has been identified. Because FDA approval of drugs requires manufacturers to specify their proposed suppliers of active ingredients and certain packaging materials in their applications, FDA approval of any new supplier would be required if active ingredients or such packaging materials were no longer available from the specified supplier. The qualification of a new supplier could delay the Company’s development and marketing efforts. In addition, certain of the pharmaceutical products marketed by the Company are manufactured by a partnered third party manufacturer, which serves as the Company’s sole source of that finished product. If for any reason the Company is unable to obtain sufficient quantities of any of the raw materials or components required to produce and package its products, it may not be able to manufacture its products as planned, which could have a material adverse effect on the Company’s business, financial condition and results of operations. Likewise, if the Company’s manufacturing partners experience any similar difficulties in obtaining raw materials or in manufacturing the finished product, the Company’s results of operations would be negatively impacted. No individual supplier represented 10% or more of the Company’s purchases in either of the three month periods ended March 31, 2017 or 2016. Product Concentrations In the three month periods ended March 31, 2017 and 2016, one Prescription Pharmaceutical product represented approximately 19% and 18% , respectively of the Company’s total net sales revenue. The Company attempts to minimize the risk associated with product concentrations by continuing to acquire and develop new products to add to its existing portfolio. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table sets forth information about the Company’s income tax provision for the periods indicated (dollar amounts in thousands): Three Months Ended 2017 2016 Income before income taxes $ 65,326 $ 66,572 Income tax provision 24,299 24,686 Net income $ 41,027 $ 41,886 Income tax provision as a percentage of income before income taxes 37.2 % 37.1 % During the three month periods ended March 31, 2017 and 2016, the Company recorded an income tax provision of $24.3 million and $24.7 million , or 37.2% and 37.1% of income before income taxes, respectively. The Company anticipates that its effective tax rate will for the year 2017 will be approximately 37.5% . The income tax provision rate in the current year was increased in comparison to the prior year due to losses at the Company’s Indian and Swiss subsidiaries. As of March 31, 2017 , the Company could not conclude that it was more likely than not that tax benefits from certain of these net operating losses would be realized. Accordingly, as of March 31, 2017 , the Company increased its valuation allowance to $11.2 million for certain of the losses at its Indian subsidiary and the entire amount of the loss at its Swiss subsidiary, compared to a valuation allowance of $9.9 million as of December 31, 2016. In accordance with ASC 740-10-25, Income Taxes - Recognition , the Company reviews its tax positions to determine whether it is “more likely than not” that its tax positions will be sustained upon examination, and if any tax positions are deemed to fall short of that standard, the Company establishes reserves based on the financial exposure and the likelihood that its tax positions would not be sustained. Based on its evaluations, the Company determined that it would not recognize tax benefits on $1.4 million and $1.3 million related to uncertain tax positions as of March 31, 2017 and December 31, 2016, respectively. If recognized, of the $1.4 million of uncertain tax positions as of March 31, 2017, $1.2 million of these tax positions will impact the Company’s effective rate with the remaining $0.2 million affecting goodwill. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions During the three month periods ended March 31, 2017 and 2016, the Company obtained legal services totaling $0.5 million and $0.4 million , of which $0.3 million and $0.1 million was payable as of March 31, 2017 and 2016, respectively, to Polsinelli PC, a law firm for which the spouse of the Company’s Executive Vice President, General Counsel and Secretary is an attorney and shareholder. The Company also paid legal services totaling $0.1 million during the three month period ended March 31, 2017 to Segal McCambridge Singer & Mahoney, a firm for which the brother in law of the Company's Executive Vice President, General Counsel and Secretary is a partner. |
Recently Issued and Adopted Acc
Recently Issued and Adopted Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued and Adopted Accounting Pronouncements | Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements In November 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) , which addresses classification and presentation of changes in restricted cash on the statement of cash flows. The standard requires an entity’s reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents. The ASU does not define restricted cash or restricted cash equivalents, but an entity will need to disclose the nature of the restrictions. The ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, adjustments should be reflected at the beginning of the fiscal year that includes that interim period. Entities should apply this ASU using a retrospective transition method to each period presented. The Company is currently evaluating the impact that ASU 2016-18 will have on its statement of financial position or financial statement disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments . This standard amends and adjusts how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and will require adoption on a retrospective basis unless impracticable. If impracticable the Company would be required to apply the amendments prospectively as of the earliest date possible. The Company is currently evaluating the impact that ASU 2016-15 will have on its statement of financial position or financial statement disclosures. In February 2016, the FASB issued ASU 2016-02 - Leases, which establishes a comprehensive new lease accounting model. The new standard clarifies the definition of a lease and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease term of more than one year. ASU 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. Upon adoption, the operating leases reporting in Note 9 - Leasing Arrangements, will be reported on the statement of financial position as gross-up assets and liabilities. The Company is currently evaluating the impact that ASU 2016-02 will have on its statement of financial position or financial statement disclosures. Revenue Recognition Related ASUs: In February 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2017-05 - Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The amendments in this ASU address the recognition of gains and losses on the transfer (i.e., sale) of nonfinancial (and in substance nonfinancial) assets to counterparties other than customers. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The amendments are effective at the same time as the new revenue standard. For public entities that means annual periods beginning after December 15, 2017 and interim periods therein. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this ASU affect narrow aspects of the guidance in ASU 2014-09 , which is not yet effective. The amendments in this ASU address loan guarantee fees, impairment testing of contract costs, provisions for losses on construction-type and production-type contracts, and various disclosures. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09 ). ASU 2015-14 , Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , defers the effective date of ASU 2014-09 by one year. In May 2016, the FASB issued ASU 2016-12 - Narrow-Scope Improvements and Practical Expedients . This standard amends the guidance in ASU 2014-09 to specifically provide a practical expedient for reflecting contract modifications at transition. The effective date for ASU 2016-12 is the same as the effective date for ASU 2014-09 , ASU 2015-14 , ASU 2016-08 and ASU 2016-10 . In April 2016, the FASB issued ASU 2016-10 - Revenue from Contracts with Customers (Topic 606) — Identifying Performance Obligations and Licensing . This standard amends the guidance in ASU 2014-09 and ASU 2016-08 specifically related to identifying performance obligations and accounting for licenses of intellectual property. The effective date for ASU 2016-10 is the same as the effective date for ASU 2014-09 , ASU 2015-14 and ASU 2016-08 . In March 2016, the FASB issued ASU 2016-08 - Revenue from Contracts with Customers: Principal versus Agent Considerations . The amendments of this standard are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09 and ASU 2015-14 . In August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date , which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09 . The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. In May 2014, FASB issued ASU 2014-09 - Revenue from Contracts with Customers , which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition , and most industry-specific guidance. This ASU also supersedes some cost guidance included in ASC 605-35 - Revenue Recognition-Construction-Type and Production-Type Contracts . The standard’s core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The ASU defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company may adopt the new standard under the full retrospective approach or the modified retrospective approach, as permitted under the standard. Early adoption of the standard is not permitted. This ASU and related updates are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We have completed an initial review of the contracts for our three largest customers to determine the impact that ASU 2014-09 and its subsequent updates through December 31, 2016 will have on the Company's consolidated financial statements or financial statement disclosures upon adoption. Based on our preliminary review, we believe that the timing and measurement of revenue for these customers will be similar to our current revenue recognition. However, this view is preliminary and could change based on the detailed analysis associated with the conversion and implementation phases of our ASU 2014-09 project. We will complete our assessment during 2017, and will include other significant wholesale and retail customers as part of the review. Recently Adopted Accounting Pronouncements In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2017-04 - Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This ASU simplifies the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 was early adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In January 2017, the FASB issued ASU 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. This standard changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the amendments in this Update narrow the definition of the term output so that the term is consistent with how outputs are described in Topic 606. The ASU is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this Update should be applied prospectively on or after the effective date. No disclosures are required at transition. Early application of the amendments in this Update is allowed as follows: (1) for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. ASU 2017-01 was early adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In July 2015, the FASB issued ASU 2015-11 - Inventory. ASU 2015-11 simplifies the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value . ASU 2015-11 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2015-11 was adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In August 2014, the FASB issued ASU 2014-15 - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for financial statements issued for fiscal years ending after December 15, 2016, and interim periods thereafter. ASU 2014-15 - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern was adopted by the Company for the year ending December 31, 2016. In connection with the preparation of the financial statements for the three month period ended March 31, 2017 , the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to the entity's ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity's ability to continue as a going concern. In March 2016, the FASB issued ASU 2016-09 - Compensation - Stock Compensation , which simplifies the accounting for the tax effects related to stock based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified, amongst other items. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years with early adoption permitted. ASU 2016-09 was early adopted by the Company for the year beginning January 1, 2016 and resulted in various effects, most notably a reduction in income tax expense of $11.4 million due to stock option exercises in the year ended December 31, 2016. In November 2015, the FASB issued ASU 2015-17 - Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes was early adopted by the Company for the year beginning January 1, 2016 resulting in the reclassification of the current portion of deferred tax assets to non-current deferred tax assets for the years ended December 31, 2016 and 2015. In September 2015, the FASB issued ASU 2015-16 - Business Combinations . ASU 2015-16 - Business Combinations simplifies the accounting for measurement-period adjustments by requiring adjustments to provisional amounts in a business combination to be recognized in the reporting period in which the adjustment amounts are determined and eliminates the requirement to retrospectively account for those adjustments. ASU 2015-16 - Business Combinations requires an entity to present separately on the face of the income statement or disclose in the notes the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 - Business Combinations was adopted by the Company for the year beginning January 1, 2016 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In April 2015, the FASB issued ASU 2015-03 - Interest - Imputation of Interest , which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU 2015-03 was adopted by the Company for the year beginning January 1, 2016 resulting in the reclassification of the deferred financing fees to the respective face value of debt outstanding for the year ended December 31, 2016. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Merger Agreement On April 24, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fresenius Kabi AG, a German stock corporation (“Parent”), Quercus Acquisition, Inc., a Louisiana corporation and a wholly owned subsidiary of Parent (“Merger Sub”) and, solely for purposes of Article VIII thereof, Fresenius SE & Co. KGaA, a German partnership limited by shares. The Merger Agreement, which has been adopted by the Board of Directors of the Company, provides for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each of the Company’s issued and outstanding shares of common stock, no par value per share (the “Shares”) (other than Shares owned by the Company or by Parent, Merger Sub or any direct or indirect wholly owned subsidiary of the Company or of Parent (other than Merger Sub) immediately prior to the Effective Time), will be converted into the right to receive $34.00 in cash per Share (the “Merger Consideration”), without interest. Completion of the Merger is subject to customary closing conditions, including (1) the approval of the Merger Agreement by the affirmative vote of the holders of at least a majority of all outstanding Shares (the “Shareholder Approval”), (2) there being no judgment or law enjoining or otherwise prohibiting the consummation of the Merger and (3) the expiration of the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The obligation of each of the Company and Parent to consummate the Merger is also conditioned on the other party’s representations and warranties being true and correct (subject to certain materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement. The Merger Agreement contains representations and warranties and covenants of the parties customary for a transaction of this nature. Among other things, Parent has agreed to promptly take all actions necessary to obtain antitrust approval of the Merger, including (i) entering into consent decrees or undertakings with a regulatory authority, (ii) divesting or holding separate any assets or businesses of Parent or the Company, (iii) terminating existing contractual relationships or entering into new contractual relationships, (iv) effecting any other change or restructuring of Parent or the Company and (v) defending through litigation any claim asserted by a regulatory authority that would prevent the closing of the Merger. Until the earlier of the termination of the Merger Agreement and the Effective Time, the Company has agreed to operate its business in the ordinary course of business in all material respects and has agreed to certain other operating covenants and to not take certain specified actions prior to the consummation of the Merger, as set forth more fully in the Merger Agreement. The Company has also agreed to convene and hold a meeting of its shareholders for the purpose of obtaining the Shareholder Approval. In addition, the Merger Agreement requires that, subject to certain exceptions, the Board recommend that the Company’s shareholders approve the Merger Agreement. Shareholder Derivative and Class Action Complaint in Connection with the Merger On May 2, 2017 a shareholder derivative and class action complaint for breach of fiduciary duties in connection with the Merger was filed entitled Robert J. Shannon, Jr., et. al. v. Fresenius Kabi AG et. al. No. 2017-CH-06322 in the Circuit Court of Cook County, Illinois, Chancery Division. The complaint seeks injunctive relief. Defendants intend to vigorously defend this case. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Consolidation | Consolidation: The accompanying condensed consolidated financial statements include the accounts of Akorn, Inc. and its wholly-owned domestic and foreign subsidiaries. All inter-company transactions and balances have been eliminated in consolidation, and the financial statements of Akorn India Private Limited ("AIPL") and Akorn AG (formerly "Excelvision AG" or "Hettlingen") have been translated from Indian Rupees and Swiss Francs, respectively, to U.S. Dollars based on the currency translation rates in effect either during the period or as of the date of consolidation, as applicable. The Company has no involvement with variable interest entities. |
Use of Estimates | Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Significant estimates and assumptions for the Company may relate to the allowances for chargebacks, rebates and administrative fees, product returns, coupons, promotions and doubtful accounts, as well as the reserve for slow-moving and obsolete inventories, the carrying value and lives of intangible assets, the useful lives of fixed assets, the carrying value of deferred income tax assets and liabilities, the assumptions underlying share-based compensation, accrued but unreported employee benefit costs and assumptions underlying the accounting for business combinations. |
Going Concern | Going Concern: In connection with the preparation of the financial statements as of and for the three month period ended March 31, 2017, the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to the entity's ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity's ability to continue as a going concern. |
Revenue Recognition | Revenue Recognition: Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue from product sales are recognized when title and risk of loss have passed to the customer. Provision for estimated chargebacks, rebates, discounts, managed care rebates, product returns and doubtful accounts is made at the time of sale and is analyzed and adjusted, if necessary, at each balance sheet date. |
Freight | Freight: The Company records amounts billed to customers for shipping and handling as revenue, and records shipping and handling expense related to product sales as cost of sales. |
Cash and Cash Equivalents | Cash and Cash Equivalents: The Company considers all unrestricted, highly liquid investments with maturity of three months or less when acquired, to be cash and cash equivalents. |
Accounts Receivable | Accounts Receivable: Trade accounts receivable are stated at their net realizable value. The nature of the Company’s business involves, in the ordinary course, significant judgments and estimates relating to chargebacks, coupon redemption, product returns, rebates, discounts given to customers and allowances for doubtful accounts. Depending on the products, the customers, the specific terms of national supply contracts and the particular arrangements with the Company’s wholesaler customers, rebates, chargebacks and other credits are recorded as deductions to the Company’s trade accounts receivable. Unless otherwise noted, the provisions and allowances for the following customer deductions are reflected in the accompanying condensed consolidated financial statements as reductions of revenues and trade accounts receivable, respectively. |
Chargebacks, Rebates, Administrative and Other Fees, and Sales Returns | Chargebacks : The Company enters into contractual agreements with certain third parties such as retailers, hospitals, group-purchasing organizations (“GPOs”) and managed care organizations to sell certain products at predetermined prices. Similarly, we maintain an allowance for rebates and discounts related to billbacks, wholesaler fee for service contracts, GPO administrative fees, government programs, prompt payment and other adjustments with certain customers. Most of the parties have elected to have these contracts administered through wholesalers that buy the product from the Company and subsequently sell it to these third parties. As noted elsewhere, these wholesalers represent a significant percentage of the Company’s gross sales. When a wholesaler sells products to one of these third parties that are subject to a contractual price agreement, the difference between the price paid to the Company by the wholesaler and the price under the specific contract is charged back to the Company by the wholesaler. This process typically takes four to six weeks, but for some products may extend to twelve weeks. The Company tracks sales and submitted chargebacks by product number and contract for each wholesaler. Utilizing this information, the Company estimates a chargeback percentage for each product and records an allowance as a reduction to gross sales when the Company records its sale of the products. The Company reduces the chargeback allowance when a chargeback request from a wholesaler is processed. Actual chargebacks processed by the Company can vary materially from period to period based upon actual sales volume through the wholesalers. However, the Company’s provision for chargebacks is fully reserved for at the time revenues are recognized. Management obtains product inventory reports from certain wholesalers to aid in analyzing the reasonableness of the chargeback allowance and to monitor whether wholesaler inventory levels do not significantly exceed customer demand. The Company assesses the reasonableness of its chargeback allowance by applying a product chargeback percentage that is based on a combination of historical activity and future price and mix expectations to the quantities of inventory on hand at the wholesalers according to wholesaler inventory reports. In addition, the Company estimates the percent of gross sales generated through direct and indirect sales channels and the percent of contract vs. non-contract revenue in the period, as these each affect the estimated reserve calculation. In accordance with its accounting policy, the Company also estimates the percent of wholesaler inventory that will ultimately be sold to third parties that are subject to contractual price agreements based on a trend of such sales through wholesalers. The Company uses this percentage estimate until historical trends indicate that a revision should be made. On an ongoing basis, the Company evaluates its actual chargeback rate experience, and new trends are factored into its estimates each quarter as market conditions change. For the three month period ended March 31, 2017, the Company incurred a chargeback provision of $280.2 million , or 41.2% of gross sales of $680.5 million , compared to $219.4 million , or 37.0% of gross sales of $593.4 million in the prior year period. We note that the dollar and percent increase in the comparative period was the result of gross sales increases and product mix shifts to products with higher chargeback expense percentages. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of contractual obligations, review of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter chargeback rates include: changes in product pricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specific products due to external factors such as competitor supply position or consumer preferences, customer shifts in buying patterns from direct to indirect through wholesalers, which could either individually or in aggregate increase or decrease the chargeback rate depending on the direction and velocity of the change(s). To better understand the impact of changes in chargeback reserve based on circumstances that are not fully outside the Company’s control, for instance, the ratio of sales subject to chargeback to indirect sales, the Company performs a sensitivity analysis. Holding all other assumptions constant, for a 119 basis point (“BP”) change in the ratio of sales subject to chargeback to indirect sales would increase the chargeback reserve by $0.5 million or decrease the chargeback reserve by $1.0 million depending on the change in the direction of the ratio. Fundamentally, the BP change calculation is determined based on the six month trend of the average ratio of sales subject to chargeback to indirect sales. Due to the competitive generic pharmaceutical industry and our recent experience with wholesalers’ strategy and shifts in contracted and non-contracted indirect sales, we believe that the six month trend of the proportion of direct to indirect sales provides a representative basis for sensitivity analysis. Starting with the second quarter of 2016, the Company determined that in order to more closely align with internal analysis of associated reserves it would adjust the allowances disclosure to separately report rebates from chargebacks and rebates for both net trade accounts receivable and gross sales adjustments and to consolidate administrative fees and others with rebates for purposes of reporting gross sales to net revenue reserves. As a result, the first quarter 2016 information has been recast to reflect this disclosure change. Rebates, Administrative Fees and Others : The Company maintains an allowance for rebates, administrative fees and others, related to contracts and other rebate programs that it has in place with certain customers. Rebates, administrative fees and other percentages vary by product and by volume purchased by each eligible customer. The Company tracks sales by product number for each eligible customer and then applies the applicable rebate, administrative fees and other percentage, using both historical trends and actual experience to estimate its rebates, administrative fees and others allowances. The Company reduces gross sales and increases the rebates, administrative fees and others allowance by the estimated rebates, administrative fees and others amounts when the Company sells its products to eligible customers. The Company reduces the rebate allowance when it processes a customer request for a rebate. At each balance sheet date, the Company analyzes the allowance for rebates, administrative fees and others against actual rebates processed and makes adjustments as appropriate. The amount of actual rebates processed can vary materially from period to period as discussed below. The allowances for rebates, administrative fees and others further takes into consideration price adjustments which are credits issued to reflect increases or decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a shelf-stock adjustment credit may be given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices, and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Similar to rebates, the reserve for administrative fees and others represents those amounts processed related to contracts and other fee programs which have been in place with certain entities, but they are settled through cash payment to these entities and accordingly are accounted for as a current liability. Otherwise, administrative fees and others operate similarly to rebates. For the three month period ended March 31, 2017 the Company recorded a rebates, administrative fees and others provision of $124.4 million , or 18.3% of gross sales of $680.5 million , compared to $88.3 million , or 14.9% of gross sales of $593.4 million in the prior year period. We note that the dollar and percent increase from the comparative period was the result of gross sales increases and product mix shifts to products with higher rebates, administrative fees and others expense percentages. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of contractual obligations, review of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter rebates, administrative fees and others rates include: changes in product pricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specific products due to external factors such as competitor supply position or consumer preferences, customer shifts in buying patterns from direct to indirect through wholesalers, which could either individually or in aggregate increase or decrease the rebate rate depending on the direction and velocity of the change(s). To better understand the impact of changes in reserves for rebates, administrative fees and others based on circumstances that are not fully outside the Company’s control, for instance, the proportion of direct to indirect sales subject to rebates, administrative fees and others, the Company performs a sensitivity analysis. Holding all other assumptions constant, for a 119 BP change in the ratio of sales subject to rebates, administrative fees and others to indirect sales would increase the reserve for rebates, administrative fees and others by $0.2 million or decrease the same reserve by $0.2 million depending on the direction of the change in the ratio. Fundamentally, the BP change calculation is determined based on the six month trend of the average ratio of sales subject to rebates, administrative fees and others to indirect sales. Due to the competitive generic pharmaceutical industry and our recent experience with wholesalers’ strategy and shifts in contracted and non-contracted indirect sales, we believe the six month trend of the average ratio of sales subject to rebates, administrative fees and others to indirect sales provides a representative basis for sensitivity analysis. Sales Returns: Certain of the Company’s products are sold with the customer having the right to return the product within specified periods. Provisions are made at the time of sale based upon historical experience. Historical factors such as one-time recall events as well as pending new developments like comparable product approvals or significant pricing movement that may impact the expected level of returns are taken into account to determine the appropriate reserve estimate at each balance sheet date. As part of the evaluation of the reserve required, the Company considers actual returns to date that are in process, the expected impact of any product recalls and the amount of wholesaler’s inventory to assess the magnitude of unconsumed product that may result in sales returns to the Company in the future. The sales returns level can be impacted by factors such as overall market demand and market competition and availability for substitute products which can increase or decrease the pull through for sales of the Company’s products and ultimately impact the level of sales returns. For the three month period ended March 31, 2017, the Company incurred a return provision of $8.4 million , or 1.2% of gross sales of $680.5 million , compared to $4.3 million , or 0.7% of gross sales of $593.4 million in the prior year period. We note that the dollar increase and percent decrease in the comparative period was the result of gross sales increases and product mix shifts to products with higher return rates. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of historical trends and evaluation of recent activity. Furthermore, other events that could materially alter return rates include: acquisitions and integration activities that consolidate dissimilar contract terms and could decrease the return rate as typically the Company purchases smaller entities with less contracting power and integrates those product sales to Akorn contracts; and consumer demand shifts by products, which could either increase or decrease the return rate depending on the product or products specifically demanded and ultimately returned. To better understand the impact of changes in return reserve based on certain circumstances, the Company performs a sensitivity analysis. Holding all other assumptions constant, for an average 1.0 month change in the lag from the time of sale to the time the product return is processed, this change would result in an increase of $1.8 million or decrease of $1.5 million in return reserve expense if the lag increases or decreases, respectively. The average 1.0 month change in the lag from the time of sale to the time the product return is processed was determined based on the average variances of the last six-month historical activities. Due to the change in the volume and type of products sold by the Company in the recent past, we have determined that the lag calculation provides a reasonable basis for sensitivity analysis. |
Allowance for Coupons, Promotions and Co-Pay discount cards | Allowance for Coupons, Promotions and Co-Pay discount cards: The Company issues coupons from time to time that are redeemable against certain of our Consumer Health products. Upon release of coupons into the market, the Company records an estimate of the dollar value of coupons expected to be redeemed. This estimate is based on historical experience and is adjusted as needed based on actual redemptions. In addition to couponing, from time to time the Company authorizes various retailers to run in-store promotional sales of its products. Upon receiving confirmation that a promotion was run, the Company accrues an estimate of the dollar amount expected to be owed back to the retailer. This estimate is then adjusted to actual upon receipt of an invoice from the retailer. Additionally, the Company provides consumer co-pay discount cards, administered through outside agents to provide discounted products when redeemed. Upon release of the cards into the market, the Company records an estimate of the dollar value of co-pay discounts expected to be utilized. This estimate is based on historical experience and is adjusted as needed based on actual experience. |
Doubtful Accounts | Doubtful Accounts: Provisions for doubtful accounts, which reflect trade receivable balances owed to the Company that are believed to be uncollectible, are recorded as a component of selling, general and administrative ("SG&A") expenses. In estimating the allowance for doubtful accounts, the Company considers its historical experience with collections and write-offs, the credit quality of its customers and any recent or anticipated changes thereto, and the outstanding balances and past due amounts from its customers. Note that in the ordinary course of business, and consistent with our peers, we may from time to time offer extended payment terms to our customers as an incentive for new product launches or in other circumstances in accordance with standard industry practices. These extended payment terms do not represent a significant risk to the collectability of accounts receivable as of the period-end and are evaluated in accordance with Accounting Standards Codification ("ASC") 605 - Revenue Recognition as applicable. Accounts are considered past due when they remain uncollected beyond the due date specified in the applicable contract or on the applicable invoice, whichever is deemed to take precedence. |
Advertising and Promotional Allowances to Customers | Advertising and Promotional Allowances to Customers: The Company routinely sells its over-the-counter Consumer Health products to major retail drug chains. From time to time, the Company may arrange for these retailers to run in-store promotional sales of the Company’s products. The Company reserves an estimate of the dollar amount owed back to the retailer for these promotions, recording the amount as a reduction to revenue at the later of the date which the revenue is recognized or the date the sales incentive is offered. When the actual invoice for the sales promotion is received from the retailer, the Company adjusts its estimate accordingly. Advertising and promotional expenses paid to customers are expensed as incurred in accordance with ASC 605-50 - Customer Payments and Incentives . |
Inventories | Inventories: Inventories are stated at the lower of cost and net realizable value ("NRV") (see Note 5 - Inventories, net ). The Company maintains an allowance for slow-moving and obsolete inventory as well as inventory where the cost is in excess of its NRV. For finished goods inventory, the Company estimates the amount of inventory that may not be sold prior to its expiration or is slow-moving based upon recent sales activity by unit and wholesaler inventory information. The Company also analyzes its raw material and component inventory for slow-moving items and NRV. The Company capitalizes inventory costs associated with its products prior to regulatory approval when, based on management judgment, future commercialization is considered probable and future economic benefit is expected to be realized. The Company assesses the regulatory approval process and where the product stands in relation to that approval process including any known constraints or impediments to approval. The Company also considers the shelf life of the product in relation to the product timeline for approval. |
Property, Plant and Equipment | Property, Plant and Equipment: Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method in amounts considered sufficient to amortize the cost of the assets to operations over their estimated useful lives. |
Intangible Assets | Intangible Assets: Intangible assets consist primarily of goodwill, which is carried at its initial value, In-Process Research and Development ("IPR&D"), which is accounted for as an indefinite-lived intangible asset, subject to impairment testing until completion or abandonment of the project, and product licensing costs, trademarks and other such costs, which are capitalized and amortized on a straight-line basis over their useful lives, normally ranging from one year to thirty years . The Company regularly assesses its amortizable intangible assets for impairment based on several factors, including estimated fair value and anticipated cash flows. If the Company incurs additional costs to renew or extend the life of an intangible asset, such costs are added to the remaining unamortized cost of the asset, if any, and the sum is amortized over the extended remaining life of the asset. Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist. The Company uses widely accepted valuation techniques to determine the fair value of its reporting units used in its annual goodwill impairment analysis. The Company’s valuation is primarily based on qualitative and quantitative assessments regarding the fair value of the reporting unit relative to its carrying value. The Company models the fair value of the reporting unit based on projected earnings and cash flows of the reporting unit. Impairments of IPR&D are recorded in R&D expenses in the Consolidated Statements of Comprehensive Income, while all other impairments of intangible assets are recorded in impairment of intangible assets line. |
Net Income Per Common Share | Net Income Per Common Share: Basic net income per common share is based upon the weighted average common shares outstanding. Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect, if any, of stock options, restricted stock and convertible securities using the treasury stock and if converted methods. Anti-dilutive shares are excluded from the computation of diluted net income per share. |
Income Taxes | Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and net operating loss and other tax credit carry-forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The Company applies ASC 820 - Fair Value Measurement , which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 - Fair Value Measurement defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 - Fair Value Measurement generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability, and are to be developed based on the best information available in the circumstances. The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below: - Level 1 —Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. The carrying value of the Company‘s cash and cash equivalents and the portion of the value of the Nicox S.A. ("Nicox") shares which are available to be traded on the exchange are considered Level 1 assets. - Level 2 —Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company has no Level 2 assets or liabilities in any of the periods presented. - Level 3 —Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. The portion of the fair valuation of the available-for-sale investment held in shares of Nicox stock that is subject to a lock-up provision is considered a Level 3 asset. The additional consideration payable as a result of prior years' divestitures and other insignificant contingent amounts are considered Level 3 liabilities. |
Stock-Based Compensation | Stock-Based Compensation: Stock-based compensation cost is estimated at grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. The Company uses the Black-Scholes model for estimating the grant date fair value of stock options. Determining the assumptions to be used in the model is highly subjective and requires judgment. The Company uses an expected volatility that is based on the historical volatility of its common stock. The expected life assumption is based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the average market rate on U.S. Treasury securities of similar term in effect during the quarter in which the options were granted. The dividend yield reflects the Company’s historical experience as well as future expectations over the expected term of the option. The Company estimates forfeitures at the time of grant and revises the estimate in subsequent periods, as necessary, if actual forfeitures differ from initial estimates. |
Recently issued accounting pronouncements and Recently adopted accounting pronouncements | Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements In November 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) , which addresses classification and presentation of changes in restricted cash on the statement of cash flows. The standard requires an entity’s reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents. The ASU does not define restricted cash or restricted cash equivalents, but an entity will need to disclose the nature of the restrictions. The ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, adjustments should be reflected at the beginning of the fiscal year that includes that interim period. Entities should apply this ASU using a retrospective transition method to each period presented. The Company is currently evaluating the impact that ASU 2016-18 will have on its statement of financial position or financial statement disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments . This standard amends and adjusts how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years and will require adoption on a retrospective basis unless impracticable. If impracticable the Company would be required to apply the amendments prospectively as of the earliest date possible. The Company is currently evaluating the impact that ASU 2016-15 will have on its statement of financial position or financial statement disclosures. In February 2016, the FASB issued ASU 2016-02 - Leases, which establishes a comprehensive new lease accounting model. The new standard clarifies the definition of a lease and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease term of more than one year. ASU 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. Upon adoption, the operating leases reporting in Note 9 - Leasing Arrangements, will be reported on the statement of financial position as gross-up assets and liabilities. The Company is currently evaluating the impact that ASU 2016-02 will have on its statement of financial position or financial statement disclosures. Revenue Recognition Related ASUs: In February 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2017-05 - Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The amendments in this ASU address the recognition of gains and losses on the transfer (i.e., sale) of nonfinancial (and in substance nonfinancial) assets to counterparties other than customers. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The amendments are effective at the same time as the new revenue standard. For public entities that means annual periods beginning after December 15, 2017 and interim periods therein. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this ASU affect narrow aspects of the guidance in ASU 2014-09 , which is not yet effective. The amendments in this ASU address loan guarantee fees, impairment testing of contract costs, provisions for losses on construction-type and production-type contracts, and various disclosures. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09 ). ASU 2015-14 , Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , defers the effective date of ASU 2014-09 by one year. In May 2016, the FASB issued ASU 2016-12 - Narrow-Scope Improvements and Practical Expedients . This standard amends the guidance in ASU 2014-09 to specifically provide a practical expedient for reflecting contract modifications at transition. The effective date for ASU 2016-12 is the same as the effective date for ASU 2014-09 , ASU 2015-14 , ASU 2016-08 and ASU 2016-10 . In April 2016, the FASB issued ASU 2016-10 - Revenue from Contracts with Customers (Topic 606) — Identifying Performance Obligations and Licensing . This standard amends the guidance in ASU 2014-09 and ASU 2016-08 specifically related to identifying performance obligations and accounting for licenses of intellectual property. The effective date for ASU 2016-10 is the same as the effective date for ASU 2014-09 , ASU 2015-14 and ASU 2016-08 . In March 2016, the FASB issued ASU 2016-08 - Revenue from Contracts with Customers: Principal versus Agent Considerations . The amendments of this standard are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09 and ASU 2015-14 . In August 2015, the FASB issued ASU No. 2015-14 - Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date , which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09 . The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. In May 2014, FASB issued ASU 2014-09 - Revenue from Contracts with Customers , which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition , and most industry-specific guidance. This ASU also supersedes some cost guidance included in ASC 605-35 - Revenue Recognition-Construction-Type and Production-Type Contracts . The standard’s core principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The ASU defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company may adopt the new standard under the full retrospective approach or the modified retrospective approach, as permitted under the standard. Early adoption of the standard is not permitted. This ASU and related updates are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We have completed an initial review of the contracts for our three largest customers to determine the impact that ASU 2014-09 and its subsequent updates through December 31, 2016 will have on the Company's consolidated financial statements or financial statement disclosures upon adoption. Based on our preliminary review, we believe that the timing and measurement of revenue for these customers will be similar to our current revenue recognition. However, this view is preliminary and could change based on the detailed analysis associated with the conversion and implementation phases of our ASU 2014-09 project. We will complete our assessment during 2017, and will include other significant wholesale and retail customers as part of the review. Recently Adopted Accounting Pronouncements In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2017-04 - Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This ASU simplifies the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 was early adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In January 2017, the FASB issued ASU 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. This standard changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the amendments in this Update narrow the definition of the term output so that the term is consistent with how outputs are described in Topic 606. The ASU is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this Update should be applied prospectively on or after the effective date. No disclosures are required at transition. Early application of the amendments in this Update is allowed as follows: (1) for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. ASU 2017-01 was early adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In July 2015, the FASB issued ASU 2015-11 - Inventory. ASU 2015-11 simplifies the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value . ASU 2015-11 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2015-11 was adopted by the Company for the year beginning January 1, 2017 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In August 2014, the FASB issued ASU 2014-15 - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for financial statements issued for fiscal years ending after December 15, 2016, and interim periods thereafter. ASU 2014-15 - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern was adopted by the Company for the year ending December 31, 2016. In connection with the preparation of the financial statements for the three month period ended March 31, 2017 , the Company conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to the entity's ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to be issued, noting that there did not appear to be evidence of substantial doubt of the entity's ability to continue as a going concern. In March 2016, the FASB issued ASU 2016-09 - Compensation - Stock Compensation , which simplifies the accounting for the tax effects related to stock based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified, amongst other items. ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years with early adoption permitted. ASU 2016-09 was early adopted by the Company for the year beginning January 1, 2016 and resulted in various effects, most notably a reduction in income tax expense of $11.4 million due to stock option exercises in the year ended December 31, 2016. In November 2015, the FASB issued ASU 2015-17 - Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2015-17 - Balance Sheet Classification of Deferred Taxes was early adopted by the Company for the year beginning January 1, 2016 resulting in the reclassification of the current portion of deferred tax assets to non-current deferred tax assets for the years ended December 31, 2016 and 2015. In September 2015, the FASB issued ASU 2015-16 - Business Combinations . ASU 2015-16 - Business Combinations simplifies the accounting for measurement-period adjustments by requiring adjustments to provisional amounts in a business combination to be recognized in the reporting period in which the adjustment amounts are determined and eliminates the requirement to retrospectively account for those adjustments. ASU 2015-16 - Business Combinations requires an entity to present separately on the face of the income statement or disclose in the notes the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 - Business Combinations was adopted by the Company for the year beginning January 1, 2016 and did not have a material impact on the Company's condensed consolidated financial statements or financial statement disclosures. In April 2015, the FASB issued ASU 2015-03 - Interest - Imputation of Interest , which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU 2015-03 was adopted by the Company for the year beginning January 1, 2016 resulting in the reclassification of the deferred financing fees to the respective face value of debt outstanding for the year ended December 31, 2016. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis used to measure the fair value of financial instruments | The following table summarizes the basis used to measure the fair values of the Company’s financial instruments (amounts in thousands): Fair Value Measurements at Reporting Date, Using: Description March 31, 2017 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and cash equivalents $ 307,425 $ 307,425 $ — $ — Available-for-sale securities 1,310 1,268 — 42 Total assets $ 308,735 $ 308,693 $ — $ 42 Purchase consideration payable $ 4,994 $ — $ — $ 4,994 Total liabilities $ 4,994 $ — $ — $ 4,994 Description December 31, 2016 Quoted Prices in Active Markets for Identical Items (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash and cash equivalents $ 200,772 $ 200,772 $ — $ — Available-for-sale securities 1,106 1,074 — 32 Total assets $ 201,878 $ 201,846 $ — $ 32 Purchase consideration payable $ 4,994 $ — $ — $ 4,994 Total liabilities $ 4,994 $ — $ — $ 4,994 |
Stock Options, Employee Stock27
Stock Options, Employee Stock Purchase Plan and Restricted Stock (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan | The Company uses the single-award method for allocating compensation cost related to stock options to each period. The following table sets forth the components of the Company’s share-based compensation expense for the three month periods ended March 31, 2017 and 2016 (in thousands): Three Months Ended 2017 2016 Stock options $ 3,314 $ 2,049 Employee stock purchase plan 262 — Restricted stock units 1,133 872 Total stock-based compensation expense $ 4,709 $ 2,921 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | From time to time, the Company grants stock option awards to certain employees and directors. The weighted-average assumptions used in estimating the grant date fair value of the stock options granted under the 2014 Plan during the three -month periods ended March 31, 2017 and 2016 , respectively, along with the weighted-average grant date fair values, are set forth in the table below: Three Months Ended 2017 2016 Expected volatility 50 % 47 % Expected life (in years) 4.8 4.8 Risk-free interest rate 1.75 % 1.26 % Dividend yield — — Fair value per stock option $ 9.25 $ 9.95 Forfeiture rate 8 % 8 % |
Schedule of Share-based Compensation, Activity | The table below sets forth a summary of stock option activity within the 2014 Plan and the 2003 Plan for the three month period ended March 31, 2017 : Number of Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) (1) Outstanding at December 31, 2016 4,766 $ 27.27 5.03 $ 5,714 Granted 66 21.28 Exercised (88 ) 12.68 Forfeited (38 ) 31.83 Outstanding at March 31, 2017 4,706 $ 27.43 4.89 $ 7,034 Exercisable at March 31, 2017 1,688 $ 25.09 3.46 $ 5,800 (1) The Aggregate Intrinsic Value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the date indicated and the exercise price of the stock options. Stock options for which the exercise price exceeded the market price have been omitted. Fluctuations in the intrinsic value of both outstanding and exercisable options may result from changes in underlying stock price and the timing and volume of option grants, exercises and forfeitures. |
Schedule of Nonvested Restricted Stock Units Activity | During the three month period ended March 31, 2017 , there were no grants of new RSU awards, and no existing RSUs either vested or were released to holders. Set forth below is a summary of non-vested RSU activity during the three month period ended March 31, 2017 : Number of Units (in thousands) Weighted Average Per Share Grant Date Fair Value Non-vested at December 31, 2016 416 $ 31.52 Granted — $ — Vested — $ — Forfeited (6) $ 29.50 Non-vested at March 31, 2017 410 $ 31.55 |
Accounts Receivable, Sales an28
Accounts Receivable, Sales and Allowances (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Summary of net trade accounts receivable | Net trade accounts receivable consists of the following (in thousands): March 31, December 31, Gross accounts receivable (1) $ 462,013 $ 519,175 Less reserves for: Chargebacks (77,472 ) (80,360 ) Rebates (93,449 ) (97,935 ) Product returns (45,660 ) (43,689 ) Discounts and allowances (10,293 ) (12,389 ) Advertising and promotions (641 ) (688 ) Doubtful accounts (816 ) (960 ) Trade accounts receivable, net $ 233,682 $ 283,154 (1) The reduction in the Gross accounts receivable balance as of March 31, 2017 when compared to the December 31, 2016 balance is due to higher Gross sales in the last two months of the fourth quarter of 2016 compared to the last two months of the first quarter of 2017. |
Schedule of adjustments to gross sales | For the three month periods ended March 31, 2017 and 2016 , the Company recorded the following adjustments to gross sales (in thousands): Three Months Ended 2017 2016 Gross sales $ 680,534 $ 593,392 Less adjustments for: Chargebacks (1) (280,160 ) (219,376 ) Rebates, administrative and other fees (1) (124,378 ) (88,348 ) Product returns (8,418 ) (4,286 ) Discounts and allowances (12,922 ) (11,954 ) Advertising, promotions and others (1,236 ) (1,081 ) Revenues, net $ 253,420 $ 268,347 (1) The increases in chargebacks and rebates, administrative and other fees for the three month periods ended March 31, 2017 as compared to the same period in 2016 , were primarily due to product, customer mix, price erosion and volume declines. The price erosion and volume declines were due to increased industry pricing pressure and the competitive nature of our business. |
Inventories, Net (Tables)
Inventories, Net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Components of inventory | The components of inventories are as follows (in thousands): March 31, December 31, Finished goods $ 73,918 $ 73,027 Work in process 10,819 14,719 Raw materials and supplies 87,588 87,047 Inventories, net $ 172,325 $ 174,793 |
Property, Plant and Equipment30
Property, Plant and Equipment, Net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment | Property, plant and equipment, net consist of the following (in thousands): March 31, December 31, Land and land improvements $ 17,645 $ 17,410 Buildings and leasehold improvements 93,106 88,825 Furniture and equipment 168,482 160,546 Sub-total 279,233 266,781 Accumulated depreciation (113,322 ) (108,425 ) Property, plant and equipment in service, net $ 165,911 $ 158,356 Construction in progress 86,745 80,048 Property, plant and equipment, net $ 252,656 $ 238,404 |
Goodwill and Other Intangible31
Goodwill and Other Intangible Assets, Net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | The following table provides a summary of the activity in goodwill by segment for the three month period ended March 31, 2017 (in thousands): Consumer Health Prescription Pharmaceuticals Total Balances at December 31, 2016 $ 16,717 $ 267,576 $ 284,293 Currency translation adjustments — 738 738 Acquisitions — — — Impairments — — — Dispositions — — — Balances at March 31, 2017 $ 16,717 $ 268,314 $ 285,031 |
Schedule of other intangible assets | The following table sets forth the major categories of the Company’s intangible assets as of March 31, 2017 and December 31, 2016, and the weighted average remaining amortization period as of March 31, 2017 and December 31, 2016 (dollar amounts in thousands): Gross Amount (1) Accumulated Amortization Reclass-ifications Gross Impairment Net Balance Wtd Avg Remaining Amortization Period (years) March 31, 2017 Product licensing rights $ 746,906 $ (197,563 ) $ — $ — $ 549,343 10.4 IPR&D 173,757 — — (225 ) 173,532 N/A - Indefinite lived Trademarks 16,000 (4,559 ) — — 11,441 18.0 Customer relationships 4,225 (1,863 ) — — 2,362 9.1 Other intangibles 11,235 (4,755 ) — — 6,480 5.9 $ 952,123 $ (208,740 ) $ — $ (225 ) $ 743,158 December 31, 2016 Product licensing rights $ 790,143 $ (182,901 ) $ 9,400 $ (52,637 ) $ 564,005 10.5 IPR&D 187,007 — (9,400 ) (3,850 ) 173,757 N/A - Indefinite lived Trademarks 16,000 (4,244 ) — — 11,756 18.0 Customer relationships 6,290 (3,863 ) — — 2,427 9.3 Other intangibles 11,235 (4,326 ) — — 6,909 6.0 $ 1,010,675 $ (195,334 ) $ — $ (56,487 ) $ 758,854 The Company recorded amortization expense of $15.5 million and $16.5 million during the three month periods ended March 31, 2017 and 2016, respectively. (1) Differences in the Gross Amounts between periods are due to either impairment of assets or the write down of fully amortized assets. |
Financing Arrangements (Tables)
Financing Arrangements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Variable Interest Rates | As of the period ended March 31, 2017 , the Company was a Ratings Level I for the Term Loan Agreements. Ratings Level Index Ratings (Moody’s/S&P) Eurodollar Spread ABR Spread Level I B1/B+ or higher 4.25% 3.25% Level II B2/B 4.75% 3.75% Level III B3/B- or lower 5.50% 4.50% |
Schedule of Guarantor Obligations | Unless cash dominion is exercised by the lenders in connection with the JPM Revolving Facility, the Company will be required to repay the JPM Revolving Facility upon its expiration five years from issuance, subject to permitted extension, and will pay interest on the outstanding balance monthly based, at the Company’s election, on an adjusted prime/federal funds rate (“ABR”) or an adjusted LIBOR (“Eurodollar”), plus a margin determined in accordance with the Company’s consolidated fixed charge coverage ratio (EBITDA to fixed charges) as follows: Fixed Charge Coverage Ratio Revolver ABR Spread Revolver Eurodollar Spread Category 1 > 1.50 to 1.0 0.50% 1.50% Category 2 > 1.25 to 1.00 but < 1.50 to 1.00 0.75% 1.75% Category 3 < 1.25 to 1.00 1.00% 2.00% |
Schedule of Maturities of Long-term Debt | Aggregate cumulative maturities of long-term obligations (including the Term Loans and the JPM Revolving Facility) as of March 31, 2017 are: (In thousands) 2017 2018 2019 2020 Thereafter Maturities of debt $ — $ — $ — $ — $ 831,938 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | A reconciliation of the earnings per share data from a basic to a fully diluted basis is detailed below (amounts in thousands, except per share data): Three Months Ended 2017 2016 Net income $ 41,027 $ 41,886 Convertible debt income adjustments, net of tax — 604 Net income adjusted for convertible debt as used for diluted earnings per share $ 41,027 $ 42,490 Net income per share: Basic $ 0.33 $ 0.35 Diluted (1) $ 0.33 $ 0.34 Shares used in computing net income per share: Weighted average basic shares outstanding 124,421 119,516 Dilutive securities: Stock option and unvested RSUs 245 1,172 Shares issuable upon conversion of the notes — 4,933 Total dilutive securities 245 6,105 Weighted average diluted shares outstanding 124,666 125,621 Shares subject to stock options omitted from the calculation of income per share as their effect would have been anti-dilutive 4,093 2,430 (1) As a result of the Company's expectation that it would likely settle all future note conversions in shares of the Company's common stock, the diluted income from continuing operations per share calculation for the periods prior to the complete conversion of the convertible debt on June 1, 2016, included the dilutive effect of convertible debt and was offset by the exclusion of interest expense and deferred financing fees related to the convertible debt of $0.6 million , after-tax for the three month period ended March 31, 2016. |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Selected financial info by reportable segment | Selected financial information by reportable segment is presented below (in thousands): Three Months Ended 2017 2016 Revenues, net: Prescription Pharmaceuticals $ 237,379 $ 250,749 Consumer Health 16,041 17,598 Total revenues, net 253,420 268,347 Gross Profit: Prescription Pharmaceuticals 141,319 154,635 Consumer Health 7,813 8,382 Total gross profit 149,132 163,017 Operating expenses 74,299 75,438 Operating income 74,833 87,579 Other expense (9,507 ) (21,007 ) Income before income taxes $ 65,326 $ 66,572 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitment Payment to Strategic Business Partners | The table below summarizes contingent potential milestone payments due to strategic partners in the years 2017 and beyond, assuming all such contingencies occur (in thousands): Year ending December 31, Amount 2017 $ 5,247 2018 9,392 2019 70 2020 and Beyond 800 Total $ 15,509 |
Customer, Supplier and Produc36
Customer, Supplier and Product Concentration (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Net Sales | |
Concentration Risk [Line Items] | |
Schedules of Concentration of Risk, by Risk Factor | The following table sets forth the percentage of the Company’s gross and net sales for the three month periods ended March 31, 2017 and 2016, and gross accounts receivable as of March 31, 2017 and December 31, 2016, attributable to the Big 3 Wholesalers: Three Months Ended Big 3 Wholesalers combined : 2017 2016 Percentage of gross sales 79% 76% Percentage of net revenues 64% 62% |
Accounts Receivable | |
Concentration Risk [Line Items] | |
Schedules of Concentration of Risk, by Risk Factor | March 31, 2017 December 31, 2016 Percentage of gross trade accounts receivable 83% 84% |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Information about the Company's Income Tax Provision | The following table sets forth information about the Company’s income tax provision for the periods indicated (dollar amounts in thousands): Three Months Ended 2017 2016 Income before income taxes $ 65,326 $ 66,572 Income tax provision 24,299 24,686 Net income $ 41,027 $ 41,886 Income tax provision as a percentage of income before income taxes 37.2 % 37.1 % |
Business and Basis of Present38
Business and Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2017segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 2 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies - Chargebacks, Rebates, Administrative Fees and Other, and Sales Returns (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accounting Policies [Abstract] | ||
Chargeback provision | $ 280,160 | $ 219,376 |
Sales chargebacks as percentage of gross sales | 41.20% | 37.00% |
Gross sales | $ 680,534 | $ 593,392 |
Change in ratio of direct to indirect sales for chargeback reserves used in sensitivity analysis | 1.19% | |
Potential increase in chargeback expense based on sensitivity analysis | $ 500 | |
Potential decrease in chargeback expense based on sensitivity analysis | 1,000 | |
Rebates, administrative and other fees | $ 124,378 | $ 88,348 |
Rebates, administrative and other fees as a percentage of gross sales | 18.30% | 14.90% |
Change in ratio of direct to indirect sales for rebates, administrative and other fees used in sensitivity analysis | 1.19% | |
Potential increase in rebates, administrative and other fees expense based on sensitivity analysis | $ 200 | |
Potential decrease in rebates, administrative and other fees expense based on sensitivity analysis | 200 | |
Sales returns | $ 8,418 | $ 4,286 |
Change in ratio of direct to indirect sales for sales return reserve used in sensitivity analysis | 1.20% | 0.70% |
Change in lag time to process returns for sales returns reserve used in sensitivity analysis | 1 month | |
Potential increase in sales returns expense based on sensitivity analysis | $ 1,500 | |
Potential decrease in sales returns expense based on sensitivity analysis | $ 1,800 |
Summary of Significant Accoun40
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | Oct. 24, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Available-for-sale securities | $ 1,310 | $ 1,106 | |
Nicox | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Available-for-sale securities | 1,300 | ||
Unrealized gain (loss) on securities | 1,700 | ||
Original cost basis | $ 10,800 | ||
Original cost of investments sold | $ 9,200 | ||
Proceeds from sale of investment | 6,000 | ||
Unrealized gain (loss) on investment | (200) | ||
Initial Value | Nicox | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Available-for-sale securities | $ 12,500 | ||
Minimum | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Intangible asset useful life (in years) | 1 year | ||
Maximum | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Intangible asset useful life (in years) | 30 years |
Summary of Significant Accoun41
Summary of Significant Accounting Policies - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 307,425 | $ 200,772 |
Available-for-sale securities | 1,310 | 1,106 |
Total assets | 308,735 | 201,878 |
Purchase consideration payable | 4,994 | 4,994 |
Total liabilities | 4,994 | 4,994 |
Quoted Prices in Active Markets for Identical Items (Level 1) | Recurring Measurements | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 307,425 | 200,772 |
Available-for-sale securities | 1,268 | 1,074 |
Total assets | 308,693 | 201,846 |
Purchase consideration payable | 0 | 0 |
Total liabilities | 0 | 0 |
Significant Other Observable Inputs (Level 2) | Recurring Measurements | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
Available-for-sale securities | 0 | 0 |
Total assets | 0 | 0 |
Purchase consideration payable | 0 | 0 |
Total liabilities | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Recurring Measurements | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
Available-for-sale securities | 42 | 32 |
Total assets | 42 | 32 |
Purchase consideration payable | 4,994 | 4,994 |
Total liabilities | $ 4,994 | $ 4,994 |
Stock Options, Employee Stock42
Stock Options, Employee Stock Purchase Plan and Restricted Stock - Additional Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | May 02, 2014 | |
Restricted stock units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Annual award vesting percentage | 25.00% | ||
Award vesting period | 4 years | ||
2014 Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares reserved for issuance (in Shares) | 7,500,000 | ||
2014 and 2003 Stock Option Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise of stock options (in Shares) | 100,000 | ||
Proceeds from stock options exercised | $ 1,100,000 | ||
Tax benefit from compensation expense | $ 800,000 | ||
2003 Stock Option Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise of stock options (in Shares) | 0 | ||
Employee Stock Purchase Plan ESPP | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares reserved for issuance (in Shares) | 2,000,000 | ||
Discount from market price at the beginning or end of the offering period | 15.00% | ||
Maximum annual purchase per employee under ESPP | $ 25,000 | ||
Maximum annual withholdings per employee for purchases under ESPP | $ 21,250 | ||
Maximum number of shares available for purchase per employee (in shares) | 15,000 | ||
Contributions from plan participants through payroll deductions | $ 900,000 | ||
Minimum | Employee Stock Purchase Plan ESPP | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of base wages withheld for purchase of stock | 1.00% | ||
Maximum | Employee Stock Purchase Plan ESPP | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of base wages withheld for purchase of stock | 15.00% |
Stock Options, Employee Stock43
Stock Options, Employee Stock Purchase Plan and Restricted Stock - Allocated Share-based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 4,709 | $ 2,921 |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 3,314 | 2,049 |
Employee stock purchase plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 262 | 0 |
Restricted stock units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 1,133 | $ 872 |
Stock Options, Employee Stock44
Stock Options, Employee Stock Purchase Plan and Restricted Stock - Weighted-average Assumptions for Stock Options (Details) - 2014 Plan - $ / shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 50.00% | 47.00% |
Expected life | 4 years 9 months | 4 years 9 months |
Risk-free interest rate | 1.75% | 1.26% |
Dividend yield | 0.00% | 0.00% |
Fair value per stock option (in Dollars per share) | $ 9.25 | $ 9.95 |
Forfeiture rate (as a percent) | 8.00% | 8.00% |
Stock Options, Employee Stock45
Stock Options, Employee Stock Purchase Plan and Restricted Stock - Stock Option Activity (Details) - 2014 and 2003 Stock Option Plan - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Number of Options | ||
Options outstanding, beginning balance (in Shares) | 4,766 | |
Granted (in Shares) | 66 | |
Exercised (in Shares) | (88) | |
Forfeited (in Shares) | (38) | |
Options outstanding, ending balance (in Shares) | 4,706 | 4,766 |
Options, exercisable (in Shares) | 1,688 | |
Weighted Average Exercise Price | ||
Weighted average exercise price, beginning balance (in Dollars per share) | $ 27.27 | |
Granted (in Dollars per share) | 21.28 | |
Exercised (in Dollars per share) | 12.68 | |
Forfeited (in Dollars per share) | 31.83 | |
Weighted average exercise price, ending balance (in Dollars per share) | 27.43 | $ 27.27 |
Weighted average exercise price, exercisable (in Dollars per share) | $ 25.09 | |
Weighted Average Remaining Contractual Term | 4 years 10 months 20 days | 5 years 11 days |
Weighted Average Remaining Contractual Term, exercisable | 3 years 5 months 15 days | |
Aggregate Intrinsic Value | $ 7,034 | $ 5,714 |
Aggregate Intrinsic Value, exercisable | $ 5,800 |
Stock Options, Employee Stock46
Stock Options, Employee Stock Purchase Plan and Restricted Stock - Non-vested Restricted Stock Activity (Details) - Restricted stock units shares in Thousands | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Units | |
Non-vested shares, beginning balance (in Shares) | shares | 416 |
Granted (in Shares) | shares | 0 |
Vested (in Shares) | shares | 0 |
Forfeited (in Shares) | shares | (6) |
Non-vested shares, ending balance (in Shares) | shares | 410 |
Weighted Average Per Share Grant Date Fair Value | |
Weighted average grant date fair value, beginning balance (in Dollars per share) | $ / shares | $ 31.52 |
Granted (in Dollars per share) | $ / shares | 0 |
Vested (in Dollars per share) | $ / shares | 0 |
Forfeited (in Dollars per share) | $ / shares | 29.50 |
Weighted average grant date fair value, ending balance (in Dollars per share) | $ / shares | $ 31.55 |
Accounts Receivable, Sales an47
Accounts Receivable, Sales and Allowances - Net Trade Accounts Receivable (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Gross accounts receivable (1) | $ 462,013 | $ 519,175 |
Less reserves for: | ||
Chargebacks | (77,472) | (80,360) |
Rebates | (93,449) | (97,935) |
Product returns | (45,660) | (43,689) |
Discounts and allowances | (10,293) | (12,389) |
Advertising and promotions | (641) | (688) |
Doubtful accounts | (816) | (960) |
Trade accounts receivable, net | $ 233,682 | $ 283,154 |
Accounts Receivable, Sales an48
Accounts Receivable, Sales and Allowances - Adjustments to Gross Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Receivables [Abstract] | ||
Gross sales | $ 680,534 | $ 593,392 |
Less adjustments for: | ||
Chargebacks (1) | (280,160) | (219,376) |
Rebates, administrative and other fees (1) | (124,378) | (88,348) |
Product returns | (8,418) | (4,286) |
Discounts and allowances | (12,922) | (11,954) |
Advertising, promotions and others | (1,236) | (1,081) |
Revenues, net | $ 253,420 | $ 268,347 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 73,918 | $ 73,027 |
Work in process | 10,819 | 14,719 |
Raw materials and supplies | 87,588 | 87,047 |
Inventories, net | 172,325 | 174,793 |
Inventory valuation reserves | $ 27,600 | $ 33,500 |
Property, Plant and Equipment50
Property, Plant and Equipment, Net - Schedule of Components (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 252,656 | $ 238,404 |
Land and land improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, and equipment, gross | 17,645 | 17,410 |
Buildings and leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, and equipment, gross | 93,106 | 88,825 |
Furniture and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, and equipment, gross | 168,482 | 160,546 |
Property, plant and equipment in service, net | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant, and equipment, gross | 279,233 | 266,781 |
Accumulated depreciation | (113,322) | (108,425) |
Property, plant and equipment, net | 165,911 | 158,356 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, net | $ 86,745 | $ 80,048 |
Property, Plant and Equipment51
Property, Plant and Equipment, Net - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, net | $ 252,656 | $ 238,404 | |
Depreciation expense | 5,400 | $ 6,000 | |
India and Switzerland | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, net | $ 68,900 | $ 65,100 |
Goodwill and Other Intangible52
Goodwill and Other Intangible Assets, Net - Goodwill (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Summary of the Activity in Goodwill by Segment | |
Beginning balance | $ 284,293 |
Currency translation adjustments | 738 |
Acquisitions | 0 |
Impairments | 0 |
Dispositions | 0 |
Ending balance | 285,031 |
Consumer Health | |
Summary of the Activity in Goodwill by Segment | |
Beginning balance | 16,717 |
Currency translation adjustments | 0 |
Acquisitions | 0 |
Impairments | 0 |
Dispositions | 0 |
Ending balance | 16,717 |
Prescription Pharmaceuticals | |
Summary of the Activity in Goodwill by Segment | |
Beginning balance | 267,576 |
Currency translation adjustments | 738 |
Acquisitions | 0 |
Impairments | 0 |
Dispositions | 0 |
Ending balance | $ 268,314 |
Goodwill and Other Intangible53
Goodwill and Other Intangible Assets, Net - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets | |||
Accumulated Amortization | $ (208,740) | $ (195,334) | |
Intangible Assets, Gross Amount | 952,123 | 1,010,675 | |
Gross Impairment | 225 | 56,487 | |
Intangible assets, net | 743,158 | 758,854 | |
Intangible assets amortization expense | 15,471 | $ 16,518 | |
IPR&D | |||
Indefinite-lived Intangible Assets | |||
Gross Amount (1) | 173,757 | 187,007 | |
Reclassifications | 0 | (9,400) | |
Impairment | (225) | (3,850) | |
Net Balance | 173,532 | 173,757 | |
Product licensing rights | |||
Finite-Lived Intangible Assets | |||
Gross Amount (1) | 746,906 | 790,143 | |
Accumulated Amortization | (197,563) | (182,901) | |
Reclassifications | 0 | 9,400 | |
Gross Impairment | 0 | (52,637) | |
Net Balance | $ 549,343 | $ 564,005 | |
Wgtd Avg Remaining Amortization Period (years) | 10 years 4 months 24 days | 10 years 6 months | |
Trademarks | |||
Finite-Lived Intangible Assets | |||
Gross Amount (1) | $ 16,000 | $ 16,000 | |
Accumulated Amortization | (4,559) | (4,244) | |
Reclassifications | 0 | 0 | |
Gross Impairment | 0 | 0 | |
Net Balance | $ 11,441 | $ 11,756 | |
Wgtd Avg Remaining Amortization Period (years) | 18 years | 18 years | |
Customer relationships | |||
Finite-Lived Intangible Assets | |||
Gross Amount (1) | $ 4,225 | $ 6,290 | |
Accumulated Amortization | (1,863) | (3,863) | |
Reclassifications | 0 | 0 | |
Gross Impairment | 0 | 0 | |
Net Balance | $ 2,362 | $ 2,427 | |
Wgtd Avg Remaining Amortization Period (years) | 9 years 1 month 6 days | 9 years 3 months 18 days | |
Other intangibles | |||
Finite-Lived Intangible Assets | |||
Gross Amount (1) | $ 11,235 | $ 11,235 | |
Accumulated Amortization | (4,755) | (4,326) | |
Reclassifications | 0 | 0 | |
Gross Impairment | 0 | 0 | |
Net Balance | $ 6,480 | $ 6,909 | |
Wgtd Avg Remaining Amortization Period (years) | 5 years 10 months 24 days | 6 years |
Financing Arrangements - Additi
Financing Arrangements - Additional Information (Details) | Feb. 16, 2016USD ($) | Apr. 17, 2014USD ($) | Apr. 17, 2014USD ($) | Mar. 31, 2017USD ($)letter_of_credit | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | Aug. 12, 2014USD ($) |
Debt Instrument [Line Items] | |||||||
Amortization of deferred financing costs | $ 1,304,000 | $ 6,311,000 | |||||
Term Loan Facility | Eurodollar | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 5.00% | ||||||
Term Loan Facility | ABR Spread | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 4.00% | ||||||
JPM Revolving Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Debt term | 5 years | ||||||
Annual increase in interest rate in an event of default | 2.00% | 2.00% | |||||
Commitment fee, minimum percentage of commitments | 12.50% | 12.50% | |||||
Commitment fee, minimum amount of commitments | $ 15,000,000 | $ 15,000,000 | |||||
Commitment fee, number of consecutive days for commitments | 30 days | ||||||
Potential maximum borrowing capacity | $ 200,000,000 | 200,000,000 | |||||
Unused line fee as a percentage | 0.25% | ||||||
Debt covenant, minimum liquidity | $ 120,000,000 | $ 120,000,000 | |||||
Debt covenant, minimum liquidity, additional percentage of commitments | 25.00% | 25.00% | |||||
Debt covenant, minimum EBITDA to fixed charges ratio | 1 | 1 | |||||
Debt covenant, minimum EBITDA to fixed charges ratio, measurement duration | 12 months | ||||||
Incremental Term Loan Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 445,000,000 | ||||||
Term Loan Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 600,000,000 | $ 600,000,000 | |||||
Potential increase in maximum borrowing capacity | $ 150,000,000 | $ 150,000,000 | |||||
Quarterly principal repayment as a percent of the initial loan amount | 0.25% | 0.25% | |||||
Potential reduction in basis spread on variable rate | 0.25% | 0.25% | |||||
Annual increase in interest rate in an event of default | 2.00% | 2.00% | |||||
Additional financing costs related to continued restatement of loans | $ 5,100,000 | ||||||
Unamortized deferred financing costs | $ 20,200,000 | $ 21,500,000 | |||||
Amortization of deferred financing costs | 1,300,000 | ||||||
Debt interest expense | 10,900,000 | $ 10,800,000 | |||||
Term Loan Facility | Maximum | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Potential reduction in basis spread on variable rate, senior debt to EBITDA ratio | 2.25 | 2.25 | |||||
Term Loan Facility | Eurodollar | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 3.50% | ||||||
Minimum effective interest rate | 4.50% | ||||||
Term Loan Facility | Base Rate | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 2.50% | ||||||
Line of Credit | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Debt term | 7 years | ||||||
Voluntary prepayment of all future quarterly principal payments | $ (200,000,000) | ||||||
Amount outstanding | 831,900,000 | ||||||
JPM Revolving Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Remaining availability under credit facility | $ 147,800,000 | ||||||
JPM Revolving Facility | JPM Revolving Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 150,000,000 | $ 150,000,000 | |||||
JPM Revolving Facility | Letter of Credit | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Number of letters of credit outstanding (in letter of credit) | letter_of_credit | 1 | ||||||
Amount outstanding under credit facility | $ 2,200,000 | ||||||
Revolving Credit Facility | JPM Revolving Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Borrowing base, percent of eligible accounts receivable | 85.00% | 85.00% | |||||
Borrowing base, percent of materials and WIP on FIFO | 65.00% | 65.00% | |||||
Borrowing base, percent of liquidation value | 85.00% | 85.00% | |||||
Borrowing base, percent finished goods | 75.00% | 75.00% | |||||
Borrowing base, percent of liquidation of finished goods | 85.00% | 85.00% | |||||
Borrowing base, percent of eligible inventory liquidation value | 85.00% | 85.00% | |||||
Borrowing base, percent of market value finished goods | 75.00% | 75.00% | |||||
Letter of Credit | JPM Revolving Facility | JP Morgan | |||||||
Debt Instrument [Line Items] | |||||||
Maximum borrowing capacity | $ 10,000,000 | $ 10,000,000 |
Financing Arrangements - Variab
Financing Arrangements - Variable Interest Rates (Details) - JP Morgan - Existing Term Loan Facility | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Eurodollar Spread | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 5.00% | |
Eurodollar Spread | Moody's, B1 Rating | Standard & Poor's, B Plus Rating or higher | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 4.25% | |
Eurodollar Spread | Moody's, B2 Rating | Standard & Poor's, B Rating | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 4.75% | |
Eurodollar Spread | Moody's, B3 Rating | Standard & Poor's, B Minus or lower Rating | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 5.50% | |
ABR Spread | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 4.00% | |
ABR Spread | Moody's, B1 Rating | Standard & Poor's, B Plus Rating or higher | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 3.25% | |
ABR Spread | Moody's, B2 Rating | Standard & Poor's, B Rating | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 3.75% | |
ABR Spread | Moody's, B3 Rating | Standard & Poor's, B Minus or lower Rating | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 4.50% |
Financing Arrangements - JPM Re
Financing Arrangements - JPM Revolving Facility, Interest Terms (Details) | Apr. 17, 2014 |
Category 1: greater than1.50 to 1.0 | Base Rate | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 0.50% |
Category 1: greater than1.50 to 1.0 | Base Rate | Minimum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.50 |
Category 1: greater than1.50 to 1.0 | Eurodollar | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 1.50% |
Category 1: greater than1.50 to 1.0 | Eurodollar | Minimum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.50 |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Base Rate | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 0.75% |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Base Rate | Minimum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.25 |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Base Rate | Maximum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.50 |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Eurodollar | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 1.75% |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Eurodollar | Minimum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.25 |
Category 2: greater than 1.25 to 1.00 but less than 1.50 to 1.00 | Eurodollar | Maximum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.50 |
Category 3: less than 1.25 to 1.00 | Base Rate | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 1.00% |
Category 3: less than 1.25 to 1.00 | Base Rate | Maximum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.25 |
Category 3: less than 1.25 to 1.00 | Eurodollar | |
Guarantor Obligations [Line Items] | |
Basis spread on variable rate | 2.00% |
Category 3: less than 1.25 to 1.00 | Eurodollar | Maximum | |
Guarantor Obligations [Line Items] | |
Fixed charge coverage ratio | 1.25 |
Financing Arrangements - Maturi
Financing Arrangements - Maturities of Long-Term Obligations (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Maturities of Long-term Obligations | |
2,017 | $ 0 |
2,018 | 0 |
2,019 | 0 |
2,020 | 0 |
Thereafter | $ 831,938 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Net income | $ 41,027 | $ 41,886 |
Convertible debt income adjustments, net of tax | 0 | 604 |
Net income adjusted for convertible debt as used for diluted earnings per share | $ 41,027 | $ 42,490 |
Net income per share: | ||
Basic (in Dollars per share) | $ 0.33 | $ 0.35 |
Diluted (in Dollars per share) | $ 0.33 | $ 0.34 |
Shares used in computing net income per share: | ||
Weighted average basic shares outstanding (in Shares) | 124,421 | 119,516 |
Dilutive securities: | ||
Stock option and unvested RSAs (in Shares) | 245 | 1,172 |
Shares issuable upon conversion of convertible notes (in Shares) | 0 | 4,933 |
Total dilutive securities (in Shares) | 245 | 6,105 |
Weighted average diluted shares outstanding (in Shares) | 124,666 | 125,621 |
Shares subject to stock options omitted from the calculation of income per share as their effect would have been anti-dilutive | 4,093 | 2,430 |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2017segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues, net: | ||
Revenues, net | $ 253,420 | $ 268,347 |
Gross Profit: | ||
Total gross profit | 149,132 | 163,017 |
Operating expenses | 74,299 | 75,438 |
OPERATING INCOME | 74,833 | 87,579 |
Other expense | (9,507) | (21,007) |
INCOME BEFORE INCOME TAXES | 65,326 | 66,572 |
Prescription Pharmaceuticals | ||
Revenues, net: | ||
Revenues, net | 237,379 | 250,749 |
Gross Profit: | ||
Total gross profit | 141,319 | 154,635 |
Consumer Health | ||
Revenues, net: | ||
Revenues, net | 16,041 | 17,598 |
Gross Profit: | ||
Total gross profit | $ 7,813 | $ 8,382 |
Share Repurchases (Details)
Share Repurchases (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Jul. 31, 2016 | |
Equity [Abstract] | ||
Maximum stock repurchase program amount | $ 200,000,000 | |
Stock repurchased during period | 0 | |
Remaining repurchase authorization | $ 155,000,000 |
Commitments and Contingencies62
Commitments and Contingencies (Details) $ in Thousands | Oct. 21, 2016claim | Mar. 04, 2015defendant | Sep. 12, 2012USD ($) | Mar. 31, 2017USD ($)lawsuit |
Contingent Potential Milestone Payments, Year ending December 31, | ||||
2,017 | $ 5,247 | |||
2,018 | 9,392 | |||
2,019 | 70 | |||
2020 and Beyond | 800 | |||
Total | $ 15,509 | |||
Pending Litigation | Akorn, Inc. Securities Litigation | ||||
Loss Contingencies [Line Items] | ||||
Number of defendants (in defendant) | defendant | 3 | |||
New derivative lawsuits filed (in lawsuit) | lawsuit | 4 | |||
Pending Litigation | Akorn, Inc. Securities Litigation | Northern District of Illinois | ||||
Loss Contingencies [Line Items] | ||||
New derivative lawsuits filed (in lawsuit) | lawsuit | 2 | |||
Pending Litigation | Fera Pharmaceuticals, LLC v. Akorn Inc. | ||||
Loss Contingencies [Line Items] | ||||
Damages sought | $ 135,000 | |||
Pending Litigation | State of Louisiana v. Abbott Laboratories, Inc., et al. | ||||
Loss Contingencies [Line Items] | ||||
Number of claims dismissed (in claim) | claim | 4 | |||
Number of claims filed (in claim) | claim | 6 |
Customer, Supplier and Produc63
Customer, Supplier and Product Concentration - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net Sales | Product Concentration Risk | One Prescription Pharmaceutical Product | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 19.00% | 18.00% |
Customer, Supplier and Produc64
Customer, Supplier and Product Concentration - Sales and Receivables (Details) - Big 3 Wholesalers - Customer Concentration Risk | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Percentage of gross sales | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 79.00% | 76.00% | |
Percentage of net sales revenue | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 64.00% | 62.00% | |
Accounts receivable | |||
Concentration Risk [Line Items] | |||
Concentration risk percentage | 83.00% | 84.00% |
Income Taxes - Provision (Detai
Income Taxes - Provision (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Income before income taxes | $ 65,326 | $ 66,572 |
Income tax provision | 24,299 | 24,686 |
CONSOLIDATED NET INCOME | $ 41,027 | $ 41,886 |
Income tax provision as a percentage of income before income taxes | 37.20% | 37.10% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) | $ 24,299 | $ 24,686 | ||
Income Tax Disclosure [Line Items] | ||||
Effective income tax rate | 37.20% | 37.10% | ||
Valuation allowance | $ 11,200 | $ 9,900 | ||
Unrecognized tax benefits | 1,400 | $ 1,300 | ||
Unrecognized tax benefits that would impact the Company's effective tax rate | 1,200 | |||
Unrecognized tax benefits that would impact goodwill | $ 200 | |||
Forecast | ||||
Income Tax Disclosure [Line Items] | ||||
Effective income tax rate | 37.50% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Polsinelli | ||
Related Party Transaction [Line Items] | ||
Legal services obtained | $ 0.5 | $ 0.4 |
Accounts payable for legal services | 0.3 | $ 0.1 |
Family member of the Company's Executive Vice President | Legal services from Segal McCambridge Singer & Mahone | ||
Related Party Transaction [Line Items] | ||
Legal services obtained | $ 0.1 |
Recently Issued and Adopted A68
Recently Issued and Adopted Accounting Pronouncements (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Accounting Changes and Error Corrections [Abstract] | |
Reduction in income tax expense from excess stock compensation benefits | $ 11.4 |
Subsequent Events (Details)
Subsequent Events (Details) | Apr. 24, 2017$ / shares |
Subsequent Event | Fresenius Kabi AG | Merger of Akorn Inc. | |
Subsequent Event [Line Items] | |
Consideration given in cash per share (in Dollars per share) | $ 34 |