Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 23, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 001-32360 | |
Entity Registrant Name | AKORN, INC | |
Entity Incorporation, State or Country Code | LA | |
Entity Tax Identification Number | 72-0717400 | |
Entity Address, Address Line One | 1925 W. Field Court, | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Lake Forest, | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 60045 | |
City Area Code | 847 | |
Local Phone Number | 279-6100 | |
Title of 12(b) Security | Common Stock, No Par Value | |
Trading Symbol | AKRX | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 126,145,832 | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false | |
Entity Central Index Key | 0000003116 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 205,542 | $ 224,868 |
Trade accounts receivable, net | 142,871 | 153,126 |
Inventories, net | 167,701 | 173,645 |
Prepaid expenses and other current assets | 17,842 | 32,180 |
TOTAL CURRENT ASSETS | 533,956 | 583,819 |
PROPERTY, PLANT AND EQUIPMENT, NET | 322,119 | 334,853 |
OTHER LONG-TERM ASSETS | ||
Goodwill | 267,923 | 283,879 |
Intangible assets, net | 243,926 | 284,976 |
Right-of-use assets, net - Operating leases | 23,016 | |
Other non-current assets | 7,424 | 7,730 |
TOTAL OTHER LONG-TERM ASSETS | 542,289 | 576,585 |
TOTAL ASSETS | 1,398,364 | 1,495,257 |
CURRENT LIABILITIES | ||
Trade accounts payable | 52,389 | 39,570 |
Income taxes payable | 165 | 0 |
Accrued royalties | 7,285 | 6,786 |
Accrued compensation | 29,695 | 19,745 |
Accrued administrative fees | 32,400 | 36,767 |
Current portion of accrued legal fees and contingencies | 40,891 | 52,413 |
Current portion of lease liability - Operating leases | 2,334 | |
Accrued expenses and other liabilities | 12,235 | 15,542 |
Current portion of long-term debt (net of deferred financing costs) | 838,517 | 0 |
TOTAL CURRENT LIABILITIES | 1,015,911 | 170,823 |
LONG-TERM LIABILITIES | ||
Long-term debt (net of non-current deferred financing costs) | 0 | 820,411 |
Deferred tax liability | 943 | 566 |
Uncertain tax liabilities | 2,285 | 49,990 |
Long-term lease liability - Operating leases | 22,562 | |
Long-term portion of accrued legal fees and contingencies | 37,000 | 0 |
Pension obligations and other liabilities | 7,255 | 9,601 |
TOTAL LONG-TERM LIABILITIES | 70,045 | 880,568 |
TOTAL LIABILITIES | 1,085,956 | 1,051,391 |
SHAREHOLDERS’ EQUITY | ||
Preferred stock, $1 par value - 5,000,000 shares authorized; no shares issued or outstanding at September 30, 2019 and December 31, 2018. | 0 | 0 |
Common stock, no par value – 150,000,000 shares authorized; 126,145,832 and 125,492,373 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively. | 590,274 | 574,553 |
Accumulated deficit | (253,278) | (107,168) |
Accumulated other comprehensive (loss) | (24,588) | (23,519) |
TOTAL SHAREHOLDERS’ EQUITY | 312,408 | 443,866 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 1,398,364 | $ 1,495,257 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock, shares authorized (in Shares) | 150,000,000 | 150,000,000 |
Common stock, shares issued (in Shares) | 126,145,832 | 125,492,373 |
Common stock, shares outstanding (in Shares) | 126,145,832 | 125,492,373 |
Preferred stock, par value (in Dollars per share) | $ 1 | $ 1 |
Preferred stock, shares authorized (in Shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in Shares) | 0 | 0 |
Preferred stock, shares outstanding (in Shares) | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Income/(Loss) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenues, net | $ 176,244 | $ 165,625 | $ 520,172 | $ 540,632 |
Cost of sales (exclusive of amortization of intangibles, included within operating expenses below) | 104,842 | 108,363 | 327,273 | 319,863 |
GROSS PROFIT | 71,402 | 57,262 | 192,899 | 220,769 |
Selling, general and administrative expenses | 55,550 | 63,197 | 189,090 | 209,949 |
Research and development expenses | 9,334 | 12,439 | 27,543 | 36,454 |
Amortization of intangibles | 9,375 | 13,613 | 30,390 | 39,985 |
Impairment of goodwill | 0 | 0 | 15,955 | 0 |
Impairment of intangible assets | 0 | 29,649 | 10,748 | 112,998 |
Litigation rulings, settlements and contingencies | (11,625) | 14,344 | 63,254 | 13,944 |
TOTAL OPERATING EXPENSES | 62,634 | 133,242 | 336,980 | 413,330 |
OPERATING INCOME/(LOSS) | 8,768 | (75,980) | (144,081) | (192,561) |
Amortization of deferred financing costs | (8,581) | (1,304) | (15,540) | (3,912) |
Interest expense, net | (18,982) | (11,691) | (50,650) | (32,331) |
Other non-operating income/(expense), net | 208 | 436 | 806 | (18) |
(LOSS) BEFORE INCOME TAXES | (18,587) | (88,539) | (209,465) | (228,822) |
Income tax (benefit) | (66,257) | (18,399) | (63,355) | (41,951) |
NET INCOME/(LOSS) | $ 47,670 | $ (70,140) | $ (146,110) | $ (186,871) |
NET INCOME/(LOSS) PER SHARE | ||||
NET (LOSS) PER SHARE, BASIC (in Dollars per share) | $ 0.38 | $ (0.56) | $ (1.16) | $ (1.49) |
NET (LOSS) PER SHARE, DILUTED (in Dollars per share) | $ 0.38 | $ (0.56) | $ (1.16) | $ (1.49) |
SHARES USED IN COMPUTING NET INCOME/(LOSS) PER SHARE | ||||
BASIC (in Shares) | 126,144 | 125,462 | 125,920 | 125,346 |
DILUTED (in Shares) | 126,826 | 125,462 | 125,920 | 125,346 |
COMPREHENSIVE INCOME/(LOSS) | ||||
Net income/(loss) | $ 47,670 | $ (70,140) | $ (146,110) | $ (186,871) |
Unrealized holding (loss) on available-for-sale securities, net of tax of $0 and $2 for the three month periods ended September 30, 2019 and 2018, and $1 and $3 the nine month periods ended September 30, 2019 and 2018, respectively. | 0 | (4) | (3) | (9) |
Foreign currency translation (loss) | (2,135) | (4,669) | (1,179) | (11,867) |
Pension liability adjustment gain, net of tax of ($10) and ($1) for the three month periods ended September 30, 2019 and 2018, and ($29) and ($3) for the nine month periods ended September 30, 2019 and 2018, respectively. | 39 | 4 | 113 | 12 |
COMPREHENSIVE INCOME/(LOSS) | $ 45,574 | $ (74,809) | $ (147,179) | $ (198,735) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income/(Loss) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Other Comprehensive Income (Loss), Tax | ||||
Unrealized holding gain (loss) on available-for-sale securities, tax benefit (expense) | $ 0 | $ 2 | $ 1 | $ 3 |
Pension liability adjustment, tax expense (benefit) | $ (10) | $ (1) | $ (29) | $ (3) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Accumulated Deficit | Other Comprehensive (Loss) |
BEGINNING BALANCES (In Shares) at Dec. 31, 2017 | 125,091,000 | |||
BEGINNING BALANCES at Dec. 31, 2017 | $ 831,245 | $ 550,472 | $ 294,741 | $ (13,968) |
Increase (Decrease) in Stockholders' Equity | ||||
Consolidated net income | (186,871) | (186,871) | ||
Exercise of stock options (in Shares) | 22,000 | |||
Exercise of stock options | 546 | $ 546 | ||
Compensation and share issuances related to restricted stock awards (in Shares) | 288,000 | |||
Compensation and share issuances related to stock awards | 9,206 | $ 9,206 | ||
Stock-based compensation expense - stock options | 7,993 | $ 7,993 | ||
Foreign currency translation gain (loss) | (11,867) | (11,867) | ||
Stock compensation plan withholdings for employee taxes (in Shares) | (55,000) | |||
Stock compensation plan withholdings for employee taxes | (776) | $ (776) | ||
Unrealized holding loss on available-for-sale securities | (9) | (9) | ||
Akorn AG pension liability adjustment | 12 | 12 | ||
Employee stock purchase plan expense (in Shares) | 146,000 | |||
Employee stock purchase plan expense | 2,809 | $ 2,809 | ||
ENDING BALANCES (In Shares) at Sep. 30, 2018 | 125,492,000 | |||
ENDING BALANCES at Sep. 30, 2018 | 652,288 | $ 570,250 | 107,870 | (25,832) |
BEGINNING BALANCES (In Shares) at Jun. 30, 2018 | 125,404,000 | |||
BEGINNING BALANCES at Jun. 30, 2018 | 721,835 | $ 564,988 | 178,010 | (21,163) |
Increase (Decrease) in Stockholders' Equity | ||||
Consolidated net income | (70,140) | (70,140) | ||
Exercise of stock options | 0 | |||
Compensation and share issuances related to restricted stock awards (in Shares) | 118,000 | |||
Compensation and share issuances related to stock awards | 3,389 | $ 3,389 | ||
Stock-based compensation expense - stock options | 2,357 | $ 2,357 | ||
Foreign currency translation gain (loss) | (4,669) | (4,669) | ||
Stock compensation plan withholdings for employee taxes (in Shares) | (30,000) | |||
Stock compensation plan withholdings for employee taxes | (484) | $ (484) | ||
Unrealized holding loss on available-for-sale securities | (4) | (4) | ||
Akorn AG pension liability adjustment | 4 | 4 | ||
Employee stock purchase plan expense | 0 | |||
ENDING BALANCES (In Shares) at Sep. 30, 2018 | 125,492,000 | |||
ENDING BALANCES at Sep. 30, 2018 | $ 652,288 | $ 570,250 | 107,870 | (25,832) |
BEGINNING BALANCES (In Shares) at Dec. 31, 2018 | 125,492,373 | 125,492,000 | ||
BEGINNING BALANCES at Dec. 31, 2018 | $ 443,866 | $ 574,553 | (107,168) | (23,519) |
Increase (Decrease) in Stockholders' Equity | ||||
Consolidated net income | $ (146,110) | (146,110) | ||
Exercise of stock options (in Shares) | 0 | |||
Exercise of stock options | $ 0 | |||
Compensation and share issuances related to restricted stock awards (in Shares) | 751,000 | |||
Compensation and share issuances related to stock awards | 10,923 | $ 10,923 | ||
Stock-based compensation expense - stock options | 4,274 | $ 4,274 | ||
Foreign currency translation gain (loss) | (1,179) | (1,179) | ||
Stock compensation plan withholdings for employee taxes (in Shares) | (97,000) | |||
Stock compensation plan withholdings for employee taxes | (313) | $ (313) | ||
Unrealized holding loss on available-for-sale securities | (3) | (3) | ||
Akorn AG pension liability adjustment | 113 | 113 | ||
Employee stock purchase plan expense | $ 837 | $ 837 | ||
ENDING BALANCES (In Shares) at Sep. 30, 2019 | 126,145,832 | 126,146,000 | ||
ENDING BALANCES at Sep. 30, 2019 | $ 312,408 | $ 590,274 | (253,278) | (24,588) |
BEGINNING BALANCES (In Shares) at Jun. 30, 2019 | 126,108,000 | |||
BEGINNING BALANCES at Jun. 30, 2019 | 261,152 | $ 584,592 | (300,948) | (22,492) |
Increase (Decrease) in Stockholders' Equity | ||||
Consolidated net income | 47,670 | 47,670 | ||
Exercise of stock options | 0 | |||
Compensation and share issuances related to restricted stock awards (in Shares) | 47,000 | |||
Compensation and share issuances related to stock awards | 3,934 | $ 3,934 | ||
Stock-based compensation expense - stock options | 1,453 | $ 1,453 | ||
Foreign currency translation gain (loss) | (2,135) | (2,135) | ||
Stock compensation plan withholdings for employee taxes (in Shares) | (9,000) | |||
Stock compensation plan withholdings for employee taxes | (44) | $ (44) | ||
Unrealized holding loss on available-for-sale securities | 0 | |||
Akorn AG pension liability adjustment | 39 | 39 | ||
Employee stock purchase plan expense | $ 339 | $ 339 | ||
ENDING BALANCES (In Shares) at Sep. 30, 2019 | 126,145,832 | 126,146,000 | ||
ENDING BALANCES at Sep. 30, 2019 | $ 312,408 | $ 590,274 | $ (253,278) | $ (24,588) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
OPERATING ACTIVITIES: | ||
Net income/(loss) | $ (146,110) | $ (186,871) |
Adjustments to reconcile consolidated net (loss) to net cash provided by/(used in) operating activities: | ||
Depreciation and amortization | 53,237 | 61,101 |
Amortization of debt financing costs | 15,540 | 3,912 |
Impairment of intangible assets | 10,748 | 112,998 |
Goodwill impairment | 15,955 | 0 |
Fixed asset impairment and other | 10,385 | 0 |
Non-cash stock compensation expense | 16,034 | 17,199 |
Non-cash interest expense | 2,567 | 0 |
Deferred income taxes, net | 381 | (42,726) |
Other | (29) | 467 |
Changes in operating assets and liabilities: | ||
Other non-current assets | 455 | (2,389) |
Trade accounts receivable | 10,148 | (22,269) |
Inventories, net | 5,909 | (11,422) |
Prepaid expenses and other current assets | 12,486 | 373 |
Trade accounts payable | 15,868 | 10,752 |
Accrued legal fees and contingencies | 25,478 | 20,922 |
Uncertain tax liabilities | (47,705) | 646 |
Accrued expenses and other liabilities | 3,447 | 567 |
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | 4,794 | (36,740) |
INVESTING ACTIVITIES: | ||
Proceeds from disposal of assets | 0 | 28 |
Payments for intangible assets | (87) | (50) |
Purchases of property, plant and equipment | (23,522) | (51,045) |
NET CASH (USED IN) INVESTING ACTIVITIES | (23,609) | (51,067) |
FINANCING ACTIVITIES: | ||
Proceeds from the exercise of stock options | 0 | 546 |
Stock compensation plan withholdings for employee taxes | (313) | (776) |
Payment of contingent acquisition liabilities | 0 | (4,793) |
Lease payments | (344) | (10) |
NET CASH (USED IN) FINANCING ACTIVITIES | (657) | (5,033) |
Effect of exchange rate changes on cash and cash equivalents | 19 | (900) |
(DECREASE) IN CASH AND CASH EQUIVALENTS | (19,453) | (93,740) |
Cash, cash equivalents, and restricted cash at beginning of period | 225,794 | 369,889 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | 206,341 | 276,149 |
SUPPLEMENTAL DISCLOSURES: | ||
Amount paid for interest | 52,973 | 40,487 |
Amount (received) paid for income taxes, net | (14,460) | 9,667 |
Additional capital expenditures included in accounts payable | $ 3,515 | $ 10,504 |
Business and Basis of Presentat
Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
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 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. In previous years, the Company completed numerous mergers, acquisitions and product acquisitions which resulted in significant growth. Akorn, Inc. 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 have pharmaceutical manufacturing facilities in Decatur, Illinois; Somerset, New Jersey; Amityville, New York; Hettlingen, Switzerland; and Paonta Sahib, Himachal Pradesh, India. We 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 and Cranbury, New Jersey. We maintain other corporate offices in Ann Arbor, Michigan and Gurgaon, Haryana, India. During the three and nine month periods ended September 30, 2019 and 2018, 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. Terminated 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 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, which Merger Agreement subsequently resulted in litigation following Parent’s purported termination of the Merger Agreement. For a more detailed description of the litigation, please see Part I, Item 1, Note 12 - “ Commitments and Contingencies-Litigation Related to the Terminated Merger. ” 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 annual 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 and nine month periods ended September 30, 2019 , 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, 2018 , included in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2019. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
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 have been translated from Indian Rupees to U.S. Dollars and Swiss Francs to U.S. Dollars, respectively, based on the currency translation rates in effect 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 relate to the allowances for chargebacks, rebates, 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, impairments 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 legal settlement accruals. Going Concern: In connection with the preparation of the financial statements as of and for the nine month period ended September 30, 2019 , 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. As further described in Note 8 - " Financing Arrangements ,” on May 6, 2019, the Company and certain Lenders entered into a Standstill Agreement and First Amendment (the “Standstill Agreement”) to its Term Loan Agreements. Pursuant to the terms of the Standstill Agreement, the Company must enter into a comprehensive amendment of the Term Loan Agreements (the “Comprehensive Amendment”) that is satisfactory in form and substance to the Lenders. If the Company does not enter into a Comprehensive Amendment by December 13, 2019 or refinance or otherwise address the outstanding Term Loans, an event of default will occur under the Term Loan Agreements which, if not waived, could materially affect the Company’s business, financial position and results of operations. If an event of default occurs and the Lenders accelerate the obligations under the Term Loan Agreements, the Company may not be able to repay the obligations that become immediately due and it could have a material negative impact on the Company’s liquidity and business. The Company evaluated the impact of entering into the Standstill Agreement on its ability to continue as a going concern. As the Company’s ability to enter into a Comprehensive Amendment with the Lenders is not within its control, and failure to do so would result in an event of default under the Term Loan Agreements, these conditions in the aggregate raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements are filed. The Company is actively seeking to refinance or otherwise address the Term Loans or enter into a Comprehensive Amendment to the Term Loan Agreements by December 13, 2019. In the event that the Company is unable to refinance or otherwise address the Term Loans, the Company would seek to enter into a Comprehensive Amendment to the Term Loan Agreements. The Standstill Agreement requires the Company and Lenders to negotiate in good faith to enter into such a Comprehensive Amendment. Revenue Recognition: Revenue is recognized at a point in time upon the transfer of control of the Company’s products, which occurs upon delivery for substantially all of the Company’s sales. The promises within the contract that are distinct are primarily the Company’s supply of products, which represents a single performance obligation. The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration. The Company makes significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns and other discounts and allowances. All sales taxes are excluded from the transaction price. The Company expenses contract fulfillment costs when incurred since the amortization period would have been less than one year. Payment terms are primarily less than 90 days. 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 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. At September 30, 2019 and December 31, 2018, approximately $0.8 million and $0.9 million , respectively, of cash held by AIPL was restricted, and was reported within prepaid expenses and other current assets. The following table sets forth the components of the Company’s cash, cash equivalents, and restricted cash as reported in the Condensed Consolidated Statement of Cash Flows for the nine month periods ended September 30, 2019 and 2018 (in thousands): Cash, Cash Equivalents, and Restricted Cash Nine Months Ended 2019 2018 Cash and cash equivalents $ 205,542 $ 275,346 Restricted cash 799 803 Total cash, cash equivalents, and restricted cash $ 206,341 $ 276,149 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. Certain rebates, chargebacks and other credits are recorded as deductions to the Company’s trade accounts receivable where applicable, based on product and customer specific terms. Unless otherwise noted, the provisions and allowances for the following customer deductions are reflected in the accompanying 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 out 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 versus 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 September 30, 2019 , the Company incurred a chargeback provision of $141.9 million , or 37.4% of gross sales of $379.0 million , compared to $188.9 million , or 43.3% of gross sales of $436.7 million in the prior year period. The dollar decrease and percent decrease from the comparative period were due to volume declines as well as decreases in wholesale acquisition cost of certain products in the current period as compared to prior year. The Company ensures that the chargeback 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 or contract pricing structures 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 and 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 249 basis point (“BP”) change in the ratio of sales subject to chargeback to indirect sales would increase the chargeback reserve by $0.4 million or decrease the chargeback reserve by $0.9 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 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. 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 and is reserved at the point of sale. 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 protection are based upon specified terms with 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 September 30, 2019 , the Company incurred rebates, administrative fees and others of $46.2 million , or 12.2% of gross sales of $379.0 million , compared to $66.8 million , or 15.3% of gross sales of $436.7 million in the prior year period. The dollar and percent decreases from the comparative period was primarily due to volume declines, decreases in contract prices and product mix. 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 or contract pricing structures 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 and 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 249 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 less than twenty-five thousand seven hundred dollars or decrease the same reserve by $0.1 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 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 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, wholesaler inventory levels, and the expected impact of any product recalls 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 of substitute products which can increase or decrease the pull-through of sales of the Company’s products and ultimately impact the level of sales returns. For the three month period ended September 30, 2019 , the Company incurred a return provision of $5.9 million , or 1.6% of gross sales of $379.0 million , compared to $4.8 million , or 1.1% of gross sales of $436.7 million in the prior year period. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of historical trends and evaluation of recent activity. 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 0.5 months 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 $0.4 million or decrease of $0.5 million in return reserve expense if the lag increases or decreases, respectively. The average 0.5 months change in the lag from the time of sale to the time the product return is processed was determined based on the difference between the high and low lag time for the past six month historical activities. This sensitivity analysis is a change from the three month period ended September 30, 2018, which was determined based on the average variances for the last six months of returns activity. The prior method did not give a measurable variance to calculate a sensitivity. 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, Advertising, Promotions and Co-Pay Discount Cards: The Company issues coupons from time to time that are redeemable against certain of our Consumer Health products. In addition to coupons, from time to time the Company authorizes various retailers to run in-store promotions and co-pay discounts for its products. At the point of sale, the Company records an estimate of the dollar value of coupons expected to be redeemed, the dollar amount owed back to the retailer and the co-pay discount as variable consideration since the Company intends to continue to issue coupons, advertising promotion and co-pay discount from time to time. The coupon estimate is based on historical experience and is adjusted as needed based on actual redemptions. Upon receiving confirmation that an advertising promotion was run, the Company adjusts the estimate of the dollar amount expected to be owed back to the retailer as needed. 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. The Company records an estimate of the dollar value of co-pay discounts expected to be redeemed based on historical experience and adjusts 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. 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. 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 calculated 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, subject to impairment testing, 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 are recorded within the impairment of intangible assets line in the Condensed Consolidated Statements of Comprehensive Income/(Loss). Leases: The Company leases real and personal property in the normal course of business under various operating leases and other insignificant finance leases, including non-cancelable and month-to-month agreements. Our leases have initial lease terms of one to ten years , some of which include options to extend and/or terminate the lease. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and lease payment obligation. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or any material restrictive covenants. Certain leases have free rent periods or escalating rent payment provisions. Leases with an initial term of twelve months or less ("Short-term leases") are not recorded on the Condensed Consolidated Balance Sheet. We recognize rent expense on a straight-line basis over the lease term. Right-of-use ("ROU") assets, net represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. The operating lease ROU assets also include any lease prepayments and are reduced by any lease incentives. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. When the lease agreement does not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. See Note 17 — Leasing Arrangements for more information. Earnings Per Share: Basic net income/(loss) per share is based upon the weighted average common shares outstanding. Diluted net income/(loss) per share is based upon the weighted average number of common shares outstanding, including the dilutive effect, if any, of stock options and restricted stock using the treasury stock method. Anti-dilutive shares are excluded from the computation of diluted net income/(loss) 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. See Note 14 — Income Taxes for more information. 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 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 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 September 30, 2019 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 $ 205,542 $ 205,542 $ — $ — Nicox stock with lockup provisions 16 — — 16 Total assets $ 205,558 $ 205,542 $ — $ 16 Description December 31, 2018 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 $ 224,868 $ 224,868 $ — $ — Nicox stock with lockup provisions 18 — — 18 Total assets $ 224,886 $ 224,868 $ — $ 18 In accordance with ASC 820 - Fair Value Measurement , the Company records unrealized holding gains and losses on available-for-sale securities in the “Accumulated other comprehensive (loss)” caption in the Condensed Consolidated Balance Sheet. 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 |
Equity Compensation Plans
Equity Compensation Plans | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Equity Compensation Plans | Equity Compensation Plans The Company maintains equity compensation plans that allow the Company’s Board of Directors to grant stock options and other equity awards to eligible employees, officers, directors and consultants. On April 27, 2017, the Company’s shareholders voted to approve the Akorn, Inc. 2017 Omnibus Incentive Compensation Plan (the “Omnibus Plan”), setting aside 8.0 million shares of the Company’s common stock for issuance pursuant to equity awards. Subsequently, at the 2019 Annual Meeting of Shareholders on May 1, 2019, the Company’s shareholders approved a 4.4 million increase to the shares available for awards granted under the Omnibus Plan, raising the overall total to 12.4 million shares. The Omnibus Plan replaced 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 had reserved 7.5 million shares for issuance upon the grant of stock options, restricted stock units (“RSUs”), performance share unit awards ("PSUs") or various other instruments to directors, employees and consultants. Following shareholder approval of the Omnibus Plan, no new awards could be granted under the 2014 Plan, although previously granted awards remain outstanding pursuant to their original terms. As of September 30, 2019 , there were approximately 2.1 million stock options and thirty-four thousand one hundred RSU shares outstanding under the 2014 Plan. Under the Omnibus Plan, there were approximately 4.5 million RSU shares, 1.0 million PSU shares and 2.6 million stock option award shares outstanding as of September 30, 2019 . As of September 30, 2019 , approximately 3.5 million shares remained available for future award grants under the Omnibus Plan. Also granted in, and outstanding as of the nine month period ended September 30, 2019 , were inducement awards consisting of 0.5 million RSU shares, 0.3 million PSU shares and 0.4 million stock option award shares. The Company accounts for stock-based compensation in accordance with ASC Topic 718 - Compensation — Stock Compensation . Accordingly, stock-based compensation cost for stock options and RSUs is estimated at the 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 that enter into the model is highly subjective and requires judgment. The Company uses an expected volatility that is based on the historical volatility of its 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 in effect during the quarter in which the options were granted. The dividend yield reflects 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 in subsequent periods, as necessary, if actual forfeitures differ from those estimates. 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 grant. PSU awards granted with vesting subject to market conditions are valued at date of grant through a Monte Carlo simulation model. The calculated grant-date fair value is recognized ratably over the vesting period, subject to forfeiture estimates. PSU awards granted with vesting subject to, and determined based on achievement of, performance conditions are valued at date of grant based on the closing price of the Company’s stock and anticipated vesting level at grant date. The awards are re-evaluated quarterly to determine the vesting level that is more likely than not to be achieved, and cumulative expense is adjusted accordingly. 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 and nine month periods ended September 30, 2019 and 2018 (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Stock options $ 1,453 $ 2,357 $ 4,274 $ 7,993 Employee stock purchase plan 339 — 837 — Restricted stock units and Performance share units 3,934 3,389 10,923 9,206 Total stock-based compensation expense $ 5,726 $ 5,746 $ 16,034 $ 17,199 Stock Option awards From time to time, the Company has granted stock option awards to certain employees, executives and directors. No stock options were granted in 2018. Set forth in the following table are the weighted-average assumptions used in estimating the grant date fair value of the stock options granted under the Company's equity compensation plans during the three and nine month periods ended September 30, 2019 , along with the weighted-average grant date fair values: Three Months Ended Nine Months Ended 2019 2018 2019 2018 Expected volatility 55.86 % — % 56.45 % — % Expected life (in years) 6.2 — 6.2 0 Risk-free interest rate 1.60 % — % 2.34 % — % Dividend yield — — — — Fair value per stock option $ 1.73 $ — $ 2.35 $ — Forfeiture rate 8 % — % 8 % — % The table below sets forth a summary of stock option activity within the Company’s stock-based compensation plans for the nine month period ended September 30, 2019 : 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, 2018 3,418 $ 28.55 3.69 $ — Granted 3,088 4.27 Exercised — — Forfeited (1,333 ) 26.22 Outstanding at September 30, 2019 5,173 $ 14.66 7.05 $ 120 Exercisable at September 30, 2019 1,713 $ 30.48 3.42 $ — (1) The Aggregate Intrinsic Value of 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. Restricted Stock Unit awards From time to time, the Company has granted RSUs to certain employees, executives and directors. Historically, the majority of RSU grants to employees and executives have been pursuant to the Company's long-term incentive plans (the "LTIPs"), which allow for annual grants of RSUs to all eligible employees and executives. The RSU awards vest 25% per year on each of the first four anniversaries of the grant date. During the nine month period ended September 30, 2019 , the Company granted 4.3 million RSUs to certain employees, executives and directors. Of this total, 2.7 million RSUs were granted to certain employees as a retention incentive under the Omnibus Plan, and vest in full two years after grant date. Another 1.1 million RSUs were granted as LTIP awards under the Omnibus Plan, and the remaining 0.5 million RSUs were granted as an inducement award to the Company’s new President and Chief Executive Officer ("CEO"). Set forth below is a summary of unvested RSU activity during the nine month period ended September 30, 2019 : Number of Units (in thousands) Weighted Average Per Share Grant Date Fair Value Unvested at December 31, 2018 1,643 $ 19.85 Granted 4,296 $ 4.11 Vested (631) $ 24.10 Forfeited (295) $ 14.97 Unvested at September 30, 2019 5,013 $ 7.21 During the three and nine month periods ended September 30, 2019 , forty-six thousand five hundred and approximately 0.6 million RSU shares vested and were released, generating tax-deductible expenses totaling $0.2 million and $2.1 million respectively. During the three and nine month periods ended September 30, 2018, approximately 0.1 million and 0.3 million RSU shares vested and were released, generating tax-deductible expenses totaling $1.9 million and $3.9 million , respectively. Performance Share Unit awards During the three month period ended September 30, 2019 , no PSU award shares were granted by the Company, while 1.2 million PSU award shares were granted to certain executives during the nine month period ended September 30, 2019 . Of this total, 1.0 million vest two years after grant with vesting level contingent upon meeting various performance conditions, while the remaining 0.2 million vest four years after grant with vesting level contingent on various market conditions. No PSU awards were granted by the Company prior to 2019. Set forth below is a summary of unvested PSU activity during the nine month period ended September 30, 2019 : Total Number of Units (in thousands) Weighted Average Grant Date Fair Value per Unit Vesting Based on Performance Conditions Weighted Average Grant Date Fair Value per Unit Vesting Based on Market Conditions Weighted Average Grant Date Fair Value per Unit Unvested at December 31, 2018 — $ — — $ — — $ — Granted 1,239 3.99 985 4.06 254 3.73 Vested — — — — — — Forfeited (21 ) 4.06 (21 ) 4.06 — — Unvested at September 30, 2019 1,218 $ 3.99 964 $ 4.06 254 $ 3.73 Set forth below is a summary of the valuation inputs for PSUs granted with vesting subject to market conditions during the nine month period ended September 30, 2019 : Valuation Inputs for PSUs with Vesting Subject to Market Conditions: PSUs Issued (units in thousands) 254 Risk Free Rate 2.58 % Volatility 55.10 % Dividend — % Valuation Per Share $ 3.73 Total Fair Value (in thousands) $ 947 Expected Term (years) 4 Forfeiture Rate Assumed 8.00 % LTIP Cash awards In May 2019, the Company awarded $9.7 million in cash-based awards to certain non-executive employees in lieu of the customary RSUs as part of its 2019 LTIP grants. The cash awards are equivalent to the value of RSUs that would have been granted under the previous program design, and will vest over two years and be paid in two equal installments after each of the first two anniversaries of the grant date. During the three month and nine month periods ended September 30, 2019 , the Company recorded $1.1 million and $1.8 million in expenses, respectively, net of forfeitures. 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, typically running from January 1st to December 31st and from July 1st to December 31st. In a given year, employees may enroll in only one offering period, 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. The ESPP was approved by vote of the Company’s shareholders on December 16, 2016. A total of 2.0 million shares of the Company’s stock have been set aside for issuance under the ESPP, of which 146,247 shares have been issued to date. During the three and nine month periods ended September 30, 2019 , participants contributed approximately $0.6 million and $1.7 million , respectively, through payroll deductions toward the future purchase of shares under the ESPP. |
Accounts Receivable, Sales and
Accounts Receivable, Sales and Allowances | 9 Months Ended |
Sep. 30, 2019 | |
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 that 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/(Loss). 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. Trade accounts receivable, net consists of the following (in thousands): September 30, December 31, Gross accounts receivable $ 272,036 $ 308,305 Less reserves for: Chargebacks (1) (41,092 ) (55,312 ) Rebates (2) (47,478 ) (55,963 ) Product returns (33,114 ) (35,146 ) Discounts and allowances (5,348 ) (6,561 ) Advertising and promotions (1,549 ) (1,574 ) Doubtful accounts (584 ) (623 ) Trade accounts receivable, net $ 142,871 $ 153,126 (1) The decrease in the Chargebacks balance as of September 30, 2019 , when compared to the December 31, 2018 balance, was primarily due to decreases in wholesale acquisition cost of certain products and changes to product and customer mix. (2) The decrease in the Rebates balance as of September 30, 2019 , when compared to the December 31, 2018 balance, was primarily due to timing of payments and settlements, changes in product and customer mix, and lower failure to supply claims. For the three and nine month periods ended September 30, 2019 and 2018 , the Company recorded the following adjustments to gross sales (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Gross sales $ 379,022 $ 436,700 $ 1,303,671 $ 1,465,052 Less adjustments for: Chargebacks (1) (141,943 ) (188,884 ) (540,055 ) (635,329 ) Rebates, administrative and other fees (2) (46,212 ) (66,843 ) (188,445 ) (234,217 ) Product returns (3) (5,900 ) (4,805 ) (23,273 ) (18,059 ) Discounts and allowances (7,297 ) (8,471 ) (25,371 ) (28,654 ) Advertising, promotions and others (1,426 ) (2,072 ) (6,355 ) (8,161 ) Revenues, net $ 176,244 $ 165,625 $ 520,172 $ 540,632 (1) The decreases in chargebacks for the three and nine month periods ended September 30, 2019, as compared to the same periods in 2018, were due to volume declines as well as decreases in wholesale acquisition cost of certain products. (2) The decrease in the rebates, administrative and other fees for the three month period ended September 30, 2019, compared to the same period in 2018, was mainly due to decreases in the rebate rate of certain products and lower failure to supply penalties. The decrease in the rebates, administrative and other fees for the nine month period ended September 30, 2019, compared to the same period in 2018, was primarily due to volume declines and decreases in the rebate rate of certain products. (3) The increase in product returns for the three and nine month periods ended September 30, 2019, as compared to the same periods in 2018, were primarily due to the timing of returns processing. |
Inventories, Net
Inventories, Net | 9 Months Ended |
Sep. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net The components of inventories are as follows (in thousands): September 30, December 31, Finished goods $ 86,541 $ 76,981 Work in process 8,196 13,870 Raw materials and supplies 72,964 82,794 Inventories, net $ 167,701 $ 173,645 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 reserves were $46.9 million and $46.5 million , at September 30, 2019 and December 31, 2018, respectively. |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 9 Months Ended |
Sep. 30, 2019 | |
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): September 30, December 31, Land and land improvements $ 17,492 $ 17,608 Buildings and leasehold improvements 143,097 138,126 Furniture and equipment 263,094 240,080 Sub-total 423,683 395,814 Accumulated depreciation (179,562 ) (158,824 ) Property, plant and equipment in service, net $ 244,121 $ 236,990 Construction in progress 77,998 97,863 Property, plant and equipment, net $ 322,119 $ 334,853 At September 30, 2019 and December 31, 2018 , property, plant and equipment, net of $97.8 million and $91.9 million , respectively, was located outside the United States. At September 30, 2019 , the Company had $78.0 million of assets under construction which consisted primarily of manufacturing facility expansion and improvement projects. Depreciation will begin on these assets once they are placed into service. The Company assesses its long-lived assets, consisting primarily of property and equipment, for impairment when material events and changes in circumstances indicate that the carrying value may not be recoverable. During the three and nine month periods ended September 30, 2019 , the Company recorded impairment losses of $0.2 million and $9.2 million , respectively, compared to $0.1 million for both the three and nine month periods ended September 30, 2018. Of the $9.2 million impairment, $8.9 million is a result of the Company's decision to explore strategic alternatives to exit the India manufacturing facility. The remaining net book value of the India manufacturing facility is $55.5 million , of which $51.1 million is related to Property, plant and equipment, net. The Company recorded depreciation expense of $7.7 million and $7.0 million during the three month periods ended September 30, 2019 and 2018 , respectively, and $22.8 million and $21.1 million during the nine month periods ended September 30, 2019 and 2018 , respectively. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net Intangible assets consist primarily of Goodwill, which is carried at its initial value, subject to evaluation for impairment, 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 rights, trademarks and other such rights, which are capitalized and amortized on a straight-line basis over their useful lives, ranging from one to thirty years . As of September 30, 2019 and 2018 , accumulated amortization of intangible assets was $243.2 million and $257.2 million , respectively. The Company recorded amortization expense of $9.4 million and $13.6 million during the three month periods ended September 30, 2019 and 2018, respectively and $30.4 million and $40.0 million during the nine month periods ended September 30, 2019 and 2018, respectively. The Company regularly assesses its amortizable intangible assets for impairment based on several factors, including estimated fair value and anticipated cash flows. IPR&D intangible assets represent the value assigned to acquired R&D projects that principally represent rights to develop and sell a product that the Company has acquired which have not yet been completed or approved. These assets are subject to impairment testing until completion or abandonment of each project. Impairment testing requires significant estimates and assumptions involving the determination of estimated net cash flows for each year for each project or product (including net revenue, cost of sales, selling and marketing costs and other costs which may be allocated), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, and competitive trends impacting the asset and each cash flow stream as well as other factors. The major risks and uncertainties associated with the timely and successful completion of the IPR&D projects include legal risk, market risk and regulatory risk. If applicable, upon abandonment of the IPR&D product, the assets are fully impaired. During the three month period ended September 30, 2019 , no IPR&D projects were impaired, while during the three month period ended September 30, 2018, eight IPR&D projects were impaired primarily due to the anticipated market conditions and competition upon launch, resulting in impairment expenses of $20.6 million . Additionally, during the three month period ended September 30, 2019 , no product licensing right was impaired, compared to impairments of $9.0 million related to six product licensing rights during the comparative prior year period. During the nine month period ended September 30, 2019 , no IPR&D projects were impaired, while during the nine month period ended September 30, 2018, sixteen IPR&D projects were impaired primarily due to anticipated market conditions upon launch, resulting in impairment expenses of $100.1 million . Additionally, during the nine month period ended September 30, 2019 , two product licensing rights were impaired due to competition resulting in impairment expenses of $10.7 million , compared to impairments of $12.9 million expenses related to ten product licensing rights due to competition during the comparative prior year period. Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist. In its annual goodwill impairment analysis, the Company uses widely accepted valuation techniques to determine the fair value of its reporting units. 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 also models the fair value of the reporting unit based on projected earnings and cash flows of the reporting unit. As a result of the Company's decision to explore strategic alternatives to exit the India manufacturing facility, the Company performed impairment testing and recorded goodwill impairment of $16.0 million during the three month period ended March 31, 2019. The following table provides a summary of the activity in goodwill by segment for the nine month period ended September 30, 2019 (in thousands): Consumer Health Prescription Pharmaceuticals Total Balances at December 31, 2018 $ 16,717 $ 267,162 $ 283,879 Currency translation adjustments — (1 ) (1 ) Acquisitions — — — Impairments — (15,955 ) (15,955 ) Dispositions — — — Balances at September 30, 2019 $ 16,717 $ 251,206 $ 267,923 The following table sets forth the major categories of the Company’s intangible assets as of September 30, 2019 and December 31, 2018 , and the weighted average remaining amortization period as of September 30, 2019 and December 31, 2018 (dollar amounts in thousands): Gross Amount (2) Accumulated Amortization Reclassifications Impairment (1) Net Balance Wtd Avg Remaining Amortization Period (years) September 30, 2019 Product licensing rights $ 472,041 $ (227,678 ) $ — $ (15,550 ) $ 228,813 8.6 IPR&D 4,400 — — — 4,400 N/A - Indefinite lived Trademarks 16,000 (6,999 ) — — 9,001 17.2 Customer relationships 4,225 (2,513 ) — — 1,712 6.6 Other intangibles 6,000 (6,000 ) — — — 0.0 502,666 $ (243,190 ) $ — $ (15,550 ) $ 243,926 December 31, 2018 Product licensing rights $ 597,960 $ (203,323 ) $ 5,300 $ (131,306 ) $ 268,631 9.2 IPR&D 149,161 — (5,300 ) (139,461 ) 4,400 N/A - Indefinite lived Trademarks 16,000 (6,304 ) — — 9,696 17.5 Customer relationships 4,225 (2,318 ) — — 1,907 7.3 Other intangibles 11,235 (5,658 ) — (5,235 ) 342 0.3 $ 778,581 $ (217,603 ) $ — $ (276,002 ) $ 284,976 (1) Impairment of product licensing rights is stated at gross carrying cost of $15.6 million less accumulated amortization of $4.9 million as of the impairment date. Accordingly, the total net impairment expense was $10.7 million , for the nine month period ended September 30, 2019 . (2) Differences in the Gross Amounts between periods are due to the write down of fully amortized assets and additions during the period. |
Financing Arrangements
Financing Arrangements | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Financing Arrangements | Financing Arrangements Term Loans During 2014, in order to finance its acquisitions of Hi-Tech Pharmacal Co Inc. and VersaPharm Inc., Akorn, Inc., together with certain of its subsidiaries (Akorn, Inc., together with such subsidiaries, the “Akorn Loan Parties”), entered into two term loan agreements (the “Term Loan Agreements” and the loans outstanding thereunder, the “Term Loans”) with certain lenders (the “Lenders”) and with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent (the “Term Loan Administrative Agent”). The aggregate principal amount of the Term Loans was $1,045.0 million . As of September 30, 2019 , outstanding debt under the Term Loan Agreements was $845.4 million . The Company believes it was in compliance with all applicable covenants in the Term Loan Agreements, which included customary limitations on indebtedness, distributions, liens, acquisitions, investments, and other activities, as of September 30, 2019 . As of September 30, 2019 , the Term Loans were scheduled to mature on April 16, 2021. On May 6, 2019, the Akorn Loan Parties entered into a Standstill Agreement and First Amendment (the “Standstill Agreement”) with respect to the Term Loan Agreements with an ad hoc group of Lenders (the “Ad Hoc Group”), certain other Lenders (together with the Ad Hoc Group, the “Standstill Lenders”) and the Term Loan Administrative Agent (together with the Akorn Loan Parties and the Standstill Lenders, the “Standstill Parties”). Capitalized terms used but not defined herein have the meanings given to them in the Standstill Agreement or the Term Loan Agreements, as applicable. The Standstill Agreement provides that, for the duration of the Standstill Period (as defined below), among other matters, neither the Term Loan Administrative Agent nor the Lenders may (i) declare any Event of Default or (ii) otherwise seek to exercise any rights or remedies, in each case of clauses (i) and (ii) above, to the extent directly relating to any alleged Event of Default arising from any alleged breach of any of the covenants contained in Sections 5.01, 5.02, 5.03, 5.06 or 5.07 of the Term Loan Agreements (the “Specified Covenants”), to the extent the facts and circumstances giving rise to any such breach have been (x) publicly disclosed by the Company or (y) disclosed in writing by the Company to private side Lenders or certain advisors to the Ad Hoc Group (collectively, the “Specified Matters”). “Standstill Period” means the period of time from the effective date of the Standstill Agreement (the “Effective Date”) through the earliest of (a) December 13, 2019; (b) the delivery of a notice of termination of the Standstill Period by Lenders holding a majority of the Term Loans (the “Required Lenders”) upon the occurrence of a Default or Event of Default under the Term Loan Agreements, excluding any Default or Event of Default relating to a Specified Matter; or (c) the delivery of a notice of termination of the Standstill Period by the Required Lenders as a result of any breach of, or non-compliance with, any provision of the Standstill Agreement by the Akorn Loan Parties, including without limitation any such breach or noncompliance by the Akorn Loan Parties of or with any Affirmative Covenants and Milestones or Negative Covenants (each as defined below) or other covenants set forth in the Standstill Agreement, subject, in each case, to any applicable cure period expressly set forth therein (each, a “Standstill Event of Default”). In exchange for the agreement of the Lenders to standstill during the Standstill Period, the Standstill Agreement provides, among other matters, that: • during the Standstill Period: ◦ the Company must deliver certain financial and other reporting to the Lenders or their advisors, including monthly financial statements, 13-week cash flow forecasts and variance reports and certain regulatory information, and participate in various update calls with the Lenders and their advisors (the “Affirmative Covenants and Milestones”); ◦ the Company and its subsidiaries are restricted, among other matters, from (i) consummating certain asset sales and investments, (ii) making certain restricted payments with respect to the Company’s common stock and any subordinated indebtedness, (iii) engaging in sale and leaseback transactions, (iv) incurring certain liens and indebtedness, (v) reinvesting any proceeds received from certain asset sales, and (vi) without the consent of the Required Lenders at such time, (A) designating any Restricted Subsidiary as an Unrestricted Subsidiary, or otherwise creating or forming any Unrestricted Subsidiary, and/or (B) transferring any assets of the Company or any of its Restricted Subsidiaries to any Unrestricted Subsidiary, except as otherwise permitted under the Term Loan Agreements (after giving effect to the Standstill Agreement) (collectively, the “Negative Covenants”); ◦ the Company must pay a fee in an amount equal to 0.625% of the outstanding principal of any Term Loans prepaid or repaid during the Standstill Period (other than as a result of any asset sale, condemnation event, incurrence of non-permitted indebtedness or excess cash flow); ◦ the Company must notify the Ad Hoc Group and/or such advisors before making certain payments in respect of judgments or settlements of ongoing litigation matters (a “Specified Litigation Payment”); and ◦ the Company must pay the fees and expenses of certain advisors to the Ad Hoc Group; • the Company and the Standstill Lenders must negotiate in good faith to enter into a comprehensive amendment of the Term Loan Agreements (the “Comprehensive Amendment”), which Comprehensive Amendment must be satisfactory in form and substance to the Required Lenders; • As of September 30, 2019 , the $845.4 million outstanding principal amount of the Term Loans includes aggregate paid-in-kind fee and non-cash interest of $10.9 million and $2.6 million , respectively that are related to the Standstill Agreement. • the interest margins payable by the Company with respect to outstanding Term Loans (as described above) were increased on an ongoing basis by 1.50% ( i.e. , 150 basis points), with 0.75% ( i.e. , 75 basis points) of such increase payable in cash and 0.75% ( i.e. , 75 basis points) of such increase payable in kind. Subject to a five business day cure period (the “Cure Period”), the Company’s failure to comply with the Affirmative Covenants and Milestones during the Standstill Period would permit the Required Lenders to terminate the Standstill Period and exercise any rights and remedies under the Term Loan Agreements with respect to the Specified Matters or a Standstill Event of Default. The Company’s failure to comply with the Negative Covenants during the Standstill Period would permit the Required Lenders to terminate the Standstill Agreement and constitute an immediate Event of Default under the Term Loan Agreements. The Company’s failure to comply with any Affirmative Covenants and Milestones (subject to the Cure Period), Negative Covenants or other covenants in the Standstill Agreement would also result in a further increase of the interest margins payable with respect to outstanding Term Loans by 0.50% ( i.e. , 50 basis points), which increased interest would be payable in kind. Any Specified Litigation Payment made over the objection of the Ad Hoc Group would (i) entitle the Required Lenders to terminate the Standstill Period and (ii) constitute an Event of Default under the Term Loan Agreements if such payment has a Material Adverse Effect (as defined in the Term Loan Agreements). The failure of the Company to comply with the covenant in respect of the Specified Litigation Payment during the Standstill Period would result in an Event of Default under the Loan Agreement. The settlement agreement with respect to the Securities Class Action Litigation (as defined below in Note 12 - " Commitments and Contingencies ") provides that the D&O Proceeds Payment (as defined below in Note 12 - " Commitments and Contingencies ") will come from D&O insurance proceeds only; accordingly, the D&O Proceeds Payment, if made, would not constitute "Specified Litigation Payments" under the Standstill Agreement. The failure to enter into a Comprehensive Amendment on or prior to November 15, 2019, would result in payment by the Company of a one-time in-kind fee in an amount equal to 0.625% of the Term Loans outstanding on such date and require the Akorn Loan Parties to pledge for the benefit of the Lenders all unpledged equity interests in foreign subsidiaries. The failure to enter into a Comprehensive Amendment or otherwise address the term loans on or prior to December 13, 2019, constitutes an immediate Event of Default under the Term Loan Agreements. The Company is actively seeking to refinance or otherwise address the Term Loans or enter into a Comprehensive Amendment to the Term Loan Agreements by December 13, 2019. In the event that the Company is unable to refinance or otherwise address the Term Loans, the Company would seek to enter into a Comprehensive Amendment to the Term Loan Agreements. The Standstill Agreement requires the Company and Lenders to negotiate in good faith to enter into such a Comprehensive Amendment. During the three and nine month periods ended September 30, 2019 , the Company amortized $8.6 million and $15.5 million , respectively of the deferred financing cost related to the Term Loans, resulting in $6.9 million remaining balance of deferred financing costs at September 30, 2019 . As a result of the obligation to enter into a Comprehensive Amendment by December 13, 2019, the Company will amortize this balance using the straight-line method through December 2019. As of September 30, 2019 , the Company's spread was based upon the Ratings Level as documented below. As of September 30, 2019 , the Company was a Ratings Level III for the Term Loan Agreements and related Standstill Agreement. Ratings Level Index Ratings (Moody’s/S&P) Adjusted LIBOR (Eurodollar) Spread Adjusted Base Rate (ABR) Spread Level I B1/B+ or higher 5.75% 4.75% Level II B2/B 6.25% 5.25% Level III B3/B- or lower 7.00% 6.00% For the three month periods ended September 30, 2019 and 2018, the Company recorded interest expense of $20.0 million and $14.6 million , respectively in relation to the Term Loans, while for the nine month periods ended September 30, 2019 and 2018, the Company recorded interest expense of $55.6 million and $40.6 million , respectively in relation to the Term Loans. The increase in interest expense is related to higher interest rates, in part due to the Standstill Agreement, during the three and nine month periods ended September 30, 2019 , compared to the same periods in 2018. 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, Bank of America, N.A., as syndication agent, and the lenders party thereto (at closing, JPMorgan, Bank of America, N.A. and Wells Fargo Bank, N. A.) for a $150.0 million revolving credit facility (the “JPM Revolving Facility”). On April 16, 2019, the Akorn Loan Parties, entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) governing the JPM Revolving Facility with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The A&R Credit Agreement provided for a revolving line of credit of up to $150.0 million on an uncommitted basis, and amended the JPM Credit Agreement in certain other respects, including, among other things: • extended the maturity date by 90 days to July 16, 2019; and • decreased the undrawn fee from 0.25% to 0.05% . The JPM Revolving Facility, as amended by the A&R Credit Agreement, was fully uncommitted and discretionary with each lender under the A&R Credit Agreement permitted to make revolving loans or issue letters of credit in its sole discretion. The A&R Credit Agreement expired on July 16, 2019, with no amounts outstanding as of such date. Debt Maturities Schedule Aggregate cumulative maturities of debt obligations as of September 30, 2019 are: (In thousands) 2021 Maturities of debt (1) $ 845,436 (1) Pursuant to the terms of the Standstill Agreement, the Company must enter into a Comprehensive Amendment to the Term Loan Agreements that is satisfactory in form and substance to the Lenders by December 13, 2019. If the Company does not enter into a Comprehensive Amendment, refinance or otherwise address the outstanding Term Loans by December 13, 2019, an event of default will occur under the Term Loan Agreements. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic net income/(loss) per share is based upon the weighted average number of common shares outstanding during the period. Diluted net income/(loss) per 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. The Company’s potentially dilutive shares consist of: (i) vested and unvested stock options that are in-the-money, and (ii) unvested RSUs and PSUs. A reconciliation of the income/(loss) per share data from a basic to a fully diluted basis is detailed below (amounts in thousands, except per share data): Three Months Ended Nine Months Ended 2019 2018 2019 2018 NET INCOME/(LOSS) $ 47,670 $ (70,140 ) $ (146,110 ) $ (186,871 ) NET INCOME/(LOSS) PER SHARE: Basic $ 0.38 $ (0.56 ) $ (1.16 ) $ (1.49 ) Diluted $ 0.38 $ (0.56 ) $ (1.16 ) $ (1.49 ) SHARES USED IN COMPUTING NET INCOME/(LOSS) PER SHARE: Weighted average basic shares outstanding 126,144 125,462 125,920 125,346 Dilutive securities: Stock option — — — — Unvested RSUs and PSUs 682 — — — Total dilutive securities 682 — — — Weighted average diluted shares outstanding 126,826 125,462 125,920 125,346 Shares subject to stock options omitted from the calculation of income/(loss) per share as their effect would have been anti-dilutive 5,201 3,603 4,690 3,823 Shares subject to unvested RSUs and PSUs omitted from the calculation of income/(loss) per share as their effect would have been anti-dilutive 1,901 1,831 2,090 761 |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information During the three and nine month periods ended September 30, 2019 and 2018, 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 over-the-counter ("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 Nine Months Ended 2019 2018 2019 2018 Revenues, net: Prescription Pharmaceuticals $ 155,568 $ 148,469 $ 461,962 $ 484,933 Consumer Health 20,676 17,156 58,210 55,699 Total revenues, net 176,244 165,625 520,172 540,632 Gross Profit: Prescription Pharmaceuticals 62,133 50,231 167,361 197,025 Consumer Health 9,269 7,031 25,538 23,744 Total gross profit 71,402 57,262 192,899 220,769 Operating expenses 62,634 133,242 336,980 413,330 OPERATING INCOME/(LOSS) 8,768 (75,980 ) (144,081 ) (192,561 ) Other expenses, net (27,355 ) (12,559 ) (65,384 ) (36,261 ) (Loss) before income taxes $ (18,587 ) $ (88,539 ) $ (209,465 ) $ (228,822 ) 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 by product or product line is not provided as to do so would be impracticable. The following table sets forth the Company’s net revenues by geographic region for the three and nine month periods ended September 30, 2019 and 2018. The Domestic region represents sales within the United States of America and its territories while the Foreign region represents sales within all other countries and territories (dollar amounts in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Region Amount % of Total Revenues Amount % of Total Revenues Amount % of Total Revenues Amount % of Total Revenues Domestic $ 171,986 97.6% $ 161,858 97.7% $ 510,228 98.1% $ 529,598 98.0% Foreign 4,258 2.4% 3,767 2.3% 9,944 1.9% 11,034 2.0% Total Revenues $ 176,244 100.0% $ 165,625 100.0% $ 520,172 100.0% $ 540,632 100.0% |
Share Repurchases
Share Repurchases | 9 Months Ended |
Sep. 30, 2019 | |
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 from time to time 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. In addition, the terms of the Standstill Agreement prohibits repurchasing the Company's common stock without the Standstill Lenders' consent. The Company did no t repurchase any shares during the nine month period ended September 30, 2019 . In aggregate, over the life of the Stock Repurchase Program, the Company repurchased 1.8 million shares at an average purchase price of $24.89 . As of September 30, 2019 , the Company 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 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. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company has entered into strategic business agreements for the development and marketing of pharmaceutical products with various companies. Each strategic business agreement generally includes a future payment schedule for contingent milestone payments and in certain 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 timeline, successful product testing and validation, successful clinical studies, U.S. Food and Drug Administration ("FDA") or other regulatory approvals and other factors as negotiated in each agreement. None of the contingent milestone payments or minimum royalty payments is individually material to the Company. The Company is engaged in various supply agreements with third parties that obligate the Company to purchase various active pharmaceutical ingredients or finished products at contractual minimum levels. None of these agreements is 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 that would become due to strategic partners in the years 2019 and beyond, assuming all such contingencies occur (in thousands): Year ending December 31, Milestone Payments 2019 $ 121 2020 2,099 2021 2,150 2022 550 Total $ 4,920 Legal Proceedings Akorn, Inc. v. Fresenius Kabi AG On April 22, 2018, Fresenius Kabi AG delivered to Akorn a letter purporting to terminate the Merger Agreement. On April 23, 2018, Akorn filed a verified complaint entitled Akorn, Inc. v. Fresenius Kabi AG, Quercus Acquisition, Inc. and Fresenius SE & Co. KGaA , in the Court of Chancery of the State of Delaware for breach of contract and declaratory judgment. The complaint alleged, among other things, that (i) the defendants anticipatorily breached their obligations under the Merger Agreement by repudiating their obligation to close the Merger, (ii) the defendants knowingly and intentionally breached their obligations under the Merger Agreement by working to slow the antitrust approval process and by engaging in a series of actions designed to hamper and ultimately block the Merger and (iii) Akorn had performed its obligations under the Merger Agreement, and was ready, willing and able to close the Merger. The complaint sought, among other things, a declaration that Fresenius Kabi AG’s termination was invalid, an order enjoining the defendants from terminating the Merger Agreement, and an order compelling the defendants to specifically perform their obligations under the Merger Agreement to use reasonable best efforts to consummate and make effective the Merger. On April 30, 2018, the defendants filed a verified counterclaim alleging that, due primarily to purported data integrity deficiencies, the Company had breached representations, warranties and covenants in the Merger Agreement, and that it had experienced a material adverse effect. The verified counterclaim sought, among other things, a declaration that defendants’ purported termination of the Merger Agreement was valid and that defendants were not obligated to consummate the transaction, and damages. Following expedited discovery, from July 9 to 13, 2018, the Court of Chancery held a trial on the parties’ claims (the “Delaware Action”). At the conclusion of trial, the Court of Chancery ordered post-trial briefing, which was completed on August 20, 2018, and a post-trial hearing, which was held on August 23, 2018. On October 1, 2018, the Court of Chancery issued an opinion (the “Opinion”) denying Akorn’s claims for relief and concluding that Fresenius Kabi AG had validly terminated the Merger Agreement. The Court of Chancery concluded that Akorn had experienced a material adverse effect due to its financial performance following the signing of the Merger Agreement; that Akorn had breached representations and warranties in the Merger Agreement and that those breaches would reasonably be expected to give rise to a material adverse effect; that Akorn had materially breached covenants in the Merger Agreement; and that Fresenius was materially in compliance with its own contractual obligations. On October 17, 2018, the Court of Chancery entered partial final judgment against Akorn on its claims and in favor of the Fresenius parties on their claims for declaratory judgment. The Court of Chancery entered an order holding proceedings on the Fresenius parties’ damages claims in abeyance pending the resolution of any appeal from the partial final judgment. On October 18, 2018, Akorn filed a notice of appeal from the Opinion and the partial final judgment, as well as a motion seeking expedited treatment of its appeal. On October 23, 2018, the Delaware Supreme Court granted Akorn’s motion for expedited treatment and set a hearing on Akorn’s appeal for December 5, 2018. On December 7, 2018, the Delaware Supreme Court affirmed the Court of Chancery’s opinion denying Akorn’s claims for declaratory and injunctive relief and granting Defendants’ counterclaim for a declaration that the termination was valid. On December 27, 2018, the Delaware Supreme Court issued a mandate returning the case to the Court of Chancery for consideration of all remaining issues, including the Fresenius parties’ damages claims. On January 15, 2019, the parties filed a joint letter to the Court of Chancery seeking thirty days to discuss the potential resolution of the Fresenius parties’ damages claims. On February 19, 2019, the parties filed a joint letter advising the Court that they have been unable to resolve the Fresenius parties’ damages claims. The Fresenius parties stated their intention to seek leave to amend their counterclaims to assert a new claim for fraud and that they would seek an expedited trial on such claim purportedly due to Akorn’s financial condition. Akorn stated that it expected to oppose the motions for amendment and expedition, and that it would move to dismiss the Fresenius parties’ damages claims in their entirety. On February 20, 2019, the Fresenius parties filed a motion for leave to amend and supplement their counterclaim. The Fresenius parties’ proposed amended and supplemented counterclaim alleged that Akorn fraudulently induced Fresenius to enter into the Merger Agreement and thereafter breached contractual representations and warranties and covenants therein. It sought damages of approximately $102 million . On February 25, 2019, Akorn filed an opposition to the Fresenius parties’ motion for leave to amend and supplement their counterclaim, arguing that the motion was untimely and prejudicial. On February 27, 2019, the Fresenius parties filed a reply in further support of their motion to file an amended and supplemented counterclaim. On February 28, 2019, the Court of Chancery denied the Fresenius parties’ motion for leave to file an amended and supplemented counterclaim. On August 16, 2019, the Fresenius parties filed a motion for summary judgment seeking damages of approximately $123 million . On September 30, 2019, Akorn filed a combined cross-motion for summary judgment and opposition to the Fresenius parties’ motion. The Court of Chancery has approved a briefing schedule whereby (i) the Fresenius parties file a combined opposition to Akorn’s cross-motion and a reply in further support of the Fresenius parties’ motion by November 14, 2019; and (ii) Akorn files a reply in further support of its cross-motion for summary judgment by December 9, 2019. In re Akorn, Inc. Data Integrity Securities Litigation On March 8, 2018, a purported shareholder of the Company filed a putative class action complaint entitled Joshi Living Trust v. Akorn, Inc. et al ., in the United States District Court for the Northern District of Illinois alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint named as defendants the Company, Chief Executive Officer Rajat Rai, Chief Financial Officer Duane Portwood and Chief Accounting Officer Randall Pollard. The complaint alleged that defendants made materially false or misleading statements and/or material omissions by failing to disclose sooner the existence of investigations into data integrity at the Company. The complaint sought, among other things, an award of damages, attorneys’ fees and expenses. The Company disputes these claims. On May 31, 2018, the Court issued an order appointing Gabelli & Co. Investment Advisors, Inc. and Gabelli Funds, LLC as lead plaintiffs pursuant to the Private Securities Litigation Reform Act (“PSLRA”), approving their selection of lead counsel and liaison counsel and amending the case caption to In re Akorn, Inc. Data Integrity Securities Litigation (the “Securities Class Action Litigation”). On June 26, 2018, the Court denied a motion to lift the PSLRA stay, subject to entry of a preservation order. On September 5, 2018, lead plaintiffs filed an amended complaint against the Company, Rajat Rai, Duane A. Portwood, Mark M. Silverberg, Alan Weinstein, Ronald M. Johnson, Brian Tambi, John Kapoor, Kenneth S. Abramowitz, Adrienne L. Graves, Steven J. Meyer and Terry A. Rappuhn. The amended complaint asserted (i) claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Fraud Claims”) against Defendants Akorn, Rai, Portwood, Silverberg, Weinstein, Johnson and Tambi; and (ii) claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Proxy Claims”) against defendants Akorn, Rai, Kapoor, Weinstein, Abramowitz, Graves, Johnson, Meyer, Rappuhn and Tambi. The amended complaint alleged that, during a class period from November 3, 2016, to April 20, 2018, defendants knew or recklessly disregarded widespread institutional data integrity problems at Akorn’s manufacturing and research and development facilities, while making or causing Akorn to make contrary misleading statements and omissions of material fact concerning the Company’s data integrity at its facilities. The amended complaint alleged that corrective information was provided to the market on two separate dates, causing non-insider shareholders to lose over $1.07 billion and $613 million in value respectively. The amended complaint sought an award of equitable relief and damages. On October 29, 2018, the parties filed a stipulation and joint motion providing for the dismissal of certain claims and defendants. On October 30, 2018, the Court granted the parties’ joint motion, dismissing the Proxy Claims without prejudice; dismissing defendants Kapoor, Abramowitz, Graves, Meyer and Rappuhn without prejudice; and dismissing Defendant Silverberg with prejudice. On February 21, 2019, Plaintiff Johnny Wickstrom, a purported shareholder of the Company, filed a putative class action complaint in the United States District Court for the Northern District of Illinois alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Wickstrom Action”). The complaint named as defendants the Company, Rai and Portwood. The complaint alleged that defendants made materially false or misleading statements and/or material omissions concerning its compliance with U.S. Food and Drug Administration (“FDA”) regulations and that those misstatements were corrected when the Company disclosed its receipt from the FDA of a warning letter at the Company’s facility in Decatur, IL. The complaint sought, among other things, an award of damages, attorneys’ fees and expenses. On March 8, 2019, the parties in the Securities Class Action Litigation filed a proposed stipulation which sought, among other things: (i) leave to file a second amended class action complaint, which would extend the end date of the alleged class period from November 3, 2016, through September 28, 2018; (ii) to consolidate the Wickstrom complaint into the Securities Class Action Litigation for all purposes; and (iii) to extend the existing discovery schedule in order to permit time to mediate lead plaintiffs’ claims and to conduct additional discovery related to the expanded class period. During a March 27, 2019 conference, the Court found that the Wickstrom Action was related to the Securities Class Action Litigation and ordered oral argument for April 22, 2019, on lead plaintiffs’ requests to file a second amended complaint and to consolidate the Wickstrom complaint. Following the March 27, 2019 hearing, the Court entered an order finding the Securities Class Action Litigation and Wickstrom Action to be related and requesting the reassignment of the Wickstrom Action. The Court also extended the discovery and pretrial deadlines. On April 22, 2019, Plaintiff Vicente Juan, a purported shareholder of the Company, filed a putative class action complaint in the United States District Court for the Northern District of Illinois alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Juan Action”). The complaint named as defendants the Company, Rai and Portwood. The complaint alleged that defendants made or caused the Company to make materially false or misleading statements and/or material omissions concerning the Company’s compliance with FDA regulations and that those misstatements were corrected when the Company disclosed its receipt from the FDA of a warning letter at the Company’s facility in Decatur, IL. The complaint sought, among other things, an award of damages, attorneys’ fees and expenses. Also on April 22, 2019, lead plaintiffs, by and through their attorneys, filed a second amended complaint against the Company, Rai, Portwood, Weinstein, Johnson and Tambi. The second amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The second amended complaint alleges that, during a class period from November 3, 2016, to January 8, 2019, defendants knew or recklessly disregarded widespread institutional data integrity problems at Akorn’s manufacturing and research and development facilities, while making or causing Akorn to make contrary misleading statements and/or omissions of material fact concerning the Company’s data integrity at its facilities. The second amended complaint alleges that corrective information was provided to the market on three separate dates. The second amended complaint seeks an award of equitable relief and damages. On April 23, 2019, the Court entered an order finding the Securities Class Action Litigation and Juan Action to be related and requesting reassignment of the Juan Action. On May 3, 2019, the Company and lead plaintiffs commenced mediation. On May 9, 2019, the Court entered an order consolidating both the Wickstrom Action and the Juan Action with and into the Securities Class Action Litigation. The Court also extended the discovery and pretrial deadlines. On May 31, 2019, Plaintiffs Twin Master Fund, Ltd., Twin Opportunities Fund, LP and Twin Securities, Inc., purported shareholders of the Company, filed a complaint in the United States District Court for the Northern District of Illinois alleging violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934, and common law fraud (the “Twin Master Fund Action”). The complaint names as defendants the Company, Rai, Portwood, Weinstein, Johnson and Tambi. The complaint alleges that defendants made or caused Akorn to make materially false or misleading statements and/or material omissions concerning the Company’s compliance with FDA regulations, among other things. The complaint seeks, among other things, an award of damages, punitive damages and expenses. Following a June 5, 2019 conference, the Court extended the discovery and pretrial deadlines. On June 11, 2019, the Court entered an order finding the Securities Class Action Litigation and Twin Master Fund Action to be related and requesting reassignment of the Twin Master Fund Action. On July 5, 2019, lead plaintiffs filed a motion seeking certification of a proposed class of all persons or entities that purchased or otherwise acquired Akorn’s common stock between November 3, 2016 and January 8, 2019, inclusive, and were damaged thereby. On July 10, 2019, Plaintiffs Manikay Master Fund, LP and Manikay Merger Fund, LP, purported shareholders of the Company, filed a complaint in the United States District Court for the Northern District of Illinois alleging violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934, and common law fraud (the “Manikay Master Fund Action”). The complaint names as defendants the Company, Rai, Portwood, Weinstein, Johnson and Tambi. The complaint alleges that defendants made or caused Akorn to make materially false or misleading statements and/or material omissions concerning the Company’s compliance with FDA regulations, among other things. The complaint seeks, among other things, an award of damages, punitive damages and expenses. On July 25, 2019, after extensive arm’s-length negotiations, the parties in the Securities Class Action Litigation reached a non-binding agreement in principle, memorialized in a signed term sheet, with respect to the principal terms of a settlement that, if consummated, would provide for, among other things, the dismissal of that action and the release of all claims asserted by or on behalf of the putative class in that action. Under the terms of the non-binding agreement in principle, the putative class would release its claims in exchange for a combination of (i) up to $30 million in insurance proceeds from the Company's D&O insurance policies (the "D&O Proceeds Payment"), (ii) the issuance by the Company of approximately 6.5 million shares of the Company's common stock and any additional shares of Company common stock that are released as a result of the expiration of out of the money options through December 31, 2024 and (iii) the issuance by the Company of contingent value rights ("CVR") with a five year term, subject to an extension of up to two years under certain circumstances. Under the terms of the non-binding agreement in principle, holders of the CVR would be entitled to receive an annual cash payment from the Company of 33.3% of "Excess EBITDA" (i.e., earnings before interest, taxes, depreciation and amortization (EBITDA) above the amount of EBITDA required to meet a 3.0 x net leverage ratio, assuming a $100.0 million minimum cash cushion, before any such CVR payment is triggered). To the extent any such annual payments are triggered under the CVR, they are capped at an aggregate of $12.0 million per year and $60.0 million in the aggregate during the term of the CVR. Upon certain change of control transactions during the term of the CVR, if the Company’s first lien term loan lenders and holders of the Company’s other debt are repaid in full, the CVR would entitle the holders thereof to a cash payment in the aggregate amount of $30.0 million (the "Change of Control Payment"). If the Company is the subject of a voluntary or involuntary bankruptcy filing during the term of the CVR, the CVR agreement would provide that holders of the CVR would receive in the aggregate a $30.0 million unsecured claim (which unsecured claim will be subordinated to any deficiency claim of the Company's first lien term loan lenders and holders of the Company's other secured debt in any such bankruptcy case) (the "Bankruptcy Claim"). The $60.0 million cap on annual payments would not apply to the Change of Control Payment or the Bankruptcy Claim, if any. No further amounts would be payable under the CVR following such a change of control transaction or bankruptcy event. The Company and the other defendants in the Securities Class Action Litigation have denied and continue to deny each and all of the claims alleged in the action, and the entry into the non-binding agreement in principle is not an admission of wrongdoing or acceptance of fault by the Company or any of the other defendants. At a July 30, 2019 conference, the parties to the Securities Class Action Litigation disclosed to the Court that they had reached a non-binding agreement in principle to settle the action. At the July 30, 2019 conference, the Court entered a finding of relatedness with respect to the Manikay Master Fund Action, and requested reassignment of that action. On August 9, 2019, the lead plaintiffs filed a motion for preliminary approval of the proposed settlement, approval of the form of class notice and a hearing date for final settlement approval (the “Final Approval Hearing”), with supporting papers. On August 26, 2019, the Court formally entered an order (the “Preliminary Approval Order”) preliminarily approving the proposed settlement, approving the form of class notice, and setting a hearing on final approval of the settlement for December 3, 2019. Pursuant to the Preliminary Approval Order: lead plaintiffs shall file a motion for final approval of the proposed settlement, the proposed plan of allocation and lead counsel’s motion for attorneys’ fees and litigation expenses no later than thirty-five (35) calendar days prior to the Final Approval Hearing, or October 29, 2019; any potential class members seeking to exclude themselves from or object to the proposed settlement shall file requests for exclusion or objections no later than twenty-one (21) calendar days prior to the Final Approval Hearing, or November 12, 2019; and lead plaintiffs shall file reply papers, if any, in further support of lead plaintiffs’ motion for final approval of the proposed settlement, the proposed plan of allocation and lead counsel’s motion for attorneys’ fees and litigation expenses no later than seven (7) calendar days prior to the Final Approval Hearing, or November 26, 2019. The definitive settlement agreement is subject to numerous terms and conditions including, among other things, (i) the unilateral right of the Company and the other defendants in the action to terminate the definitive settlement agreement if persons who purchased a number of shares exceeding a to be agreed threshold opt out of and elect not to participate in or be bound by the proposed settlement and (ii) final approval by the Court. There can be no guarantee that the Company and the other defendants will not exercise their termination right or that the definitive settlement agreement will receive Court approval. By orders dated September 11, 2019, in light of the definitive settlement agreement, the Court disassociated the Twin Master Fund Action and the Manikay Master Fund Action from the Securities Class Action Litigation. On September 13, 2019, defendants in the Twin Master Fund Action and Manikay Master Fund Action moved to dismiss both complaints. On September 16, 2019, the Securities Class Action Litigation was reassigned to the Honorable Steven Seeger. During a status conference on October 29, 2019, the court reaffirmed the December 3, 2019 date for the Final Approval Hearing. On October 15, 2019, plaintiffs in the Twin Master Fund Action and Manikay Master Fund Action filed oppositions to defendants’ motions to dismiss both complaints. Kogut v. Akorn, Inc. et. al. On March 8, 2016, a purported shareholder of the Company filed a putative derivative suit entitled Kogut v. Akorn, Inc., et al ., in Louisiana state court in the Parish of East Baton Rouge. On June 10, 2016, the plaintiff filed an amended complaint asserting shareholder derivative claims alleging breaches of fiduciary duty in connection with the Company’s accounting for its acquisition and the restatement of its financials. On September 23, 2016, the Company filed a motion to dismiss the case. The case was subsequently stayed. On September 21, 2018, the plaintiff filed a second amended complaint, which added claims for shareholder derivative claims alleging breaches by certain present and former officers and directors of Akorn of fiduciary duties related to, among other matters, Akorn’s compliance with FDA regulations and requirements regarding data integrity. On December 3, 2018, the Company and certain individual defendants moved to dismiss the complaint. Briefing on the motion to dismiss was completed on January 31, 2019. On February 4, 2019, the court held a hearing, at which it instructed the parties to confer concerning the possible retention of a special master to resolve the pending motions to dismiss and to oversee any proceedings thereafter. After conferring, the parties jointly proposed a candidate for special master. On March 6, 2019, the Court entered an order appointing the parties’ proposed candidate as special master. On May 13, 2019, the special master issued a report and recommendation on defendants’ motion to dismiss. The report and recommendation recommends dismissing from the case the Company and all named defendants other than Mark Silverberg. On July 11, 2019, the plaintiff filed a third amended complaint naming as defendants former Akorn officers Rajat Rai, Bruce Kutinsky, Steven Lichter and Mark Silverberg, as well as nominal defendant Akorn. The third amended complaint purports to allege derivatively on behalf of the Company that Akorn’s former officers: (i) breached their fiduciary duties to the Company by intentionally causing Akorn to not comply with FDA regulations; and (ii) were unjustly enriched thereby. The third amended complaint seeks an award of damages and injunctive relief. On October 7, 2019, the Court entered an order adopting the findings of the special master, dismissing without prejudice all named individual defendants other than Mark Silverberg, granting plaintiffs leave to file their third amended complaint and granting defendants 30 days to move to dismiss the third amended complaint. The defendants have denied and continue to deny each and all of the claims alleged in the action. Pulchinski v. Abramowitz et al. On September 26, 2019, Dennis Pulchinski, a purported shareholder of the Company, filed a putative derivative suit captioned Pulchinski v. Abramowitz et al ., in the Circuit Court of Cook County, IL. The suit alleges breaches by certain present and former officers and directors of Akorn of fiduciary duties related to, among other matters, Akorn’s compliance with FDA regulations and requirements regarding data integrity. In re Akorn, Inc. Shareholder Derivative Litigation On October 15, 2018, Dale Trsar, a purported shareholder of the Company, filed a putative derivative suit captioned Trsar v. Kapoor, et al. , in the Circuit Court of Cook County, IL. The suit alleged breaches by certain present and former officers and directors of Akorn of fiduciary duties related to, among other matters, Akorn’s compliance with FDA regulations and requirements regarding data integrity. On October 26, 2018, Trsar moved to dismiss the complaint voluntarily. On November 5, 2018, the Court granted Plaintiff Trsar’s motion and dismissed the complaint without prejudice. On November 6, 2018, Trsar filed a putative derivative complaint captioned Trsar v. Kapoor, et al. against defendants John N. Kapoor, Rajat Rai, Duane A. Portwood, Mark M. Silverberg, Alan Weinstein, Kenneth S. Abramowitz, Steven J. Meyer, Terry Allison Rappuhn, Adrienne L. Graves, Ronald M. Johnson and Brian Tambi in the United States District Court for the Northern District of Illinois (the “Trsar Action”). The complaint purports to allege derivatively on behalf of the Company that (i) the defendants breached their fiduciary duties to the Company and its shareholders by failing to address the Company’s alleged non-compliance with FDA regulations; and (ii) the defendants violated Section 14(a) of the Securities Exchange Act of 1934, and SEC Rule 14a-9 promulgated thereunder, by making false or misleading statements in proxy statements issued to Akorn shareholders on November 14, 2016 and March 20, 2017. The complaint seeks an award of equitable relief and damages. On December 10, 2018, Felix Glaubach, a purported shareholder of the Company, filed a putative derivative complaint captioned Glaubach v. Kapoor, et al. against John N. Kapoor, Rajat Rai, Mark M. Silverberg, Duane A. Portwood, Alan Weinstein, Kenneth S. Abramowitz, Steven J. Meyer, Terry Allison Rappuhn, Adrienne L. Graves, Ronald M. Johnson, and Brian Tambi in the United States District Court for the Northern District of Illinois (the “Glaubach Action”). The complaint purported to allege derivatively on behalf of the Company that (i) the defendants breached their fiduciary duties to the Company and its shareholders by failing to address the Company’s alleged non-compliance with FDA regulations; (ii) John N. Kapoor and Brian Tambi breached their fiduciary duties to the Company and its shareholders by misappropriating inside information in connection with sales of the Company’s stock; (iii) Rajat Rai and Duane A. Portwood were unjustly enriched; (iv) the Defendants wasted the Company’s assets; and (v) the Defendants violated Section 14(a) of the Securities Exchange Act of 1934, and SEC Rule 14a-9 promulgated thereunder, by making false or misleading statements in proxy statements issued to the Company’s shareholders. The complaint sought an award of equitable relief and damages. On January 11, the Glaubach Action was consolidated with the Trsar Action, with the complaint filed in the Trsar Action designated as operative, and the case caption was amended to In re Akorn, Inc. Shareholder Derivative Litigation. On January 14, 2019, defendants filed a motion to dismiss the operative complaint in the consolidated action. Plaintiffs filed an opposition to defendants’ motion to dismiss on February 14, 2019. Defendants filed a reply memorandum of law in further support of their motion to dismiss on February 28, 2019. On March 29, 2019, defendants filed a motion to amend their motion to dismiss to reflect the appointment of a special master by the court in Kogut v. Akorn, Inc., et al . On April 1, 2019, the Court entered an order granting defendants’ motion to amend their motion to dismiss. On May 24, 2019, defendants filed a motion to defer the Court’s ruling on defendants’ motion to dismiss in light of the special master’s recommendation and report in Kogut v. Akorn, Inc., et al . On June 10, 2019, the Court entered an order denying defendants’ motion to defer the Court’s ruling on defendants’ motion to dismiss. Pope v. Akorn Sales Inc. and Akorn, Inc. 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 a 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 plaintiffs claimed the Company provided inadequate labeling on its product methylene blue. While an intermediate appellate decision affirmed the verdict on November 2, 2018, the Company filed a petition for certiorari with the Georgia Supreme Court on November 29, 2018, challenging liability as well as the compensatory and punitive damage awards. On August 5, 2019, the Georgia Supreme Court denied the petition for certiorari. On September 13, 2019, Akorn paid the judgment amount to the plaintiffs. ========================================================================================== 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 and intermediate appellate decision related to Methylene Blue Injection, the Company had recorded a $20.5 million liability as of December 31, 2018 for which a corresponding insurance receivable of $8.8 million was also recorded. As of September 30, 2019 the Company’s primary insurance carrier reimbursed Akorn the $8.8 million , the remaining limits available on that policy, which partially offset the approximately $24 million , inclusive of interest, Akorn paid to plaintiffs. The Company maintains product liability insurance coverage in excess of the amount of the verdict, and is currently involved in litigation with its excess insurer to recover the remainder of the judgment amount. Regarding the other matters disclosed above, the Compan |
Customer, Supplier and Product
Customer, Supplier and Product Concentration | 9 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration Customer Concentration In the three and nine month periods ended September 30, 2019 and 2018, a significant portion of the Company’s gross and net revenues reported were to three large wholesale drug distributors, and a significant portion of the Company’s accounts receivable as of September 30, 2019 and December 31, 2018 were due from these wholesale drug distributors as well. AmerisourceBergen Health Corporation (“Amerisource”), Cardinal Health, Inc. (“Cardinal”) and McKesson Drug Company (“McKesson”) collectively referred to herein as the “Big 3 Wholesalers”, are all distributors of the Company’s products, as well as suppliers of a broad range of health care products. Aside from these three wholesale drug distributors, no other individual customer accounted for 10% or more of gross sales, net revenue or gross trade receivables for the indicated dates and periods. If sales to the Big 3 Wholesalers were to diminish or cease, the Company believes that the end users of its products would find little difficulty obtaining the Company’s products from another distributor. The Company is subject to credit risk from its accounts receivable, heavily weighted to the Big 3 Wholesalers, but as of and for the three and nine month periods ended September 30, 2019 and December 31, 2018, the Company has not experienced significant losses with respect to collection of these gross accounts receivable balances. The following table sets forth the percentage of the Company's gross accounts receivable attributable to the Big 3 Wholesalers as of September 30, 2019 and December 31, 2018: Big 3 Wholesalers combined: September 30, December 31, Percentage of gross trade accounts receivable 83% 86% The following table sets forth the percentage of the Company’s gross sales attributable to the Big 3 Wholesalers for the three and nine month periods ended September 30, 2019 and 2018: Three Months Ended Nine Months Ended Big 3 Wholesalers combined: 2019 2018 2019 2018 Percentage of gross sales 81% 83% 83% 83% The following table sets forth the Company’s net revenues disaggregated by major customers for the three and nine month periods ended September 30, 2019 and 2018 (dollar amounts in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Disaggregation of net revenues by major customers Net Revenue Net Revenue % Net Revenue Net Revenue % Net Revenue Net Revenue % Net Revenue Net Revenue % Amerisource $ 36,831 20.9% $ 36,613 22.1% $ 107,203 20.6% $ 113,824 21.1% Cardinal 31,156 17.7% 26,835 16.2% 89,255 17.2% 83,886 15.5% McKesson 38,525 21.9% 40,274 24.3% 117,020 22.5% 136,623 25.3% Big 3 Wholesalers combined 106,512 60.4% 103,722 62.6% 313,478 60.3% 334,333 61.8% All Others 69,732 39.6% 61,903 37.4% 206,694 39.7% 206,299 38.2% Total Revenues $ 176,244 100.0% $ 165,625 100.0% $ 520,172 100.0% $ 540,632 100.0% Sales to the Big 3 Wholesalers primarily represent purchases of products in the Prescription Pharmaceuticals segment and generate the majority of the Prescription Pharmaceuticals segment revenue. The Prescription Pharmaceuticals segment revenue represented 88.3% and 89.6% of the consolidated net revenue for three month periods ended September 30, 2019 and 2018, respectively, while during the nine month periods ended September 30, 2019 and 2018 the Prescription Pharmaceuticals segment revenue represented 88.8% and 89.7% of the consolidated net revenue, respectively. Chain pharmacies are the major customers in the Consumer Health segment. For more information, see Note 10 — Segment Information . Supplier Concentration 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 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 the three and nine month periods ended September 30, 2019 or 2018. Product Concentration In the three and nine month periods ended September 30, 2019 and 2018, none of the Company's products represented 10% or more of its total net revenue. The Company attempts to minimize the risk associated with product concentration by continuing to acquire and develop new products to add to its existing product portfolio. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table sets forth information about the Company’s income tax (benefit) provision for the periods indicated (dollar amounts in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 (Loss) before income taxes $ (18,587 ) $ (88,539 ) $ (209,465 ) $ (228,822 ) Income tax (benefit) (66,257 ) (18,399 ) (63,355 ) (41,951 ) Net income/(loss) $ 47,670 $ (70,140 ) $ (146,110 ) $ (186,871 ) Income tax (benefit) as a percentage of (loss) before income taxes NM - Not Meaningful 20.8 % 30.2 % 18.3 % During the three month periods ended September 30, 2019 and 2018, the Company recorded income tax benefit of $66.3 million and $18.4 million , respectively, on (loss) before income taxes. The reason for the overall tax benefit during the three month period ended September 30, 2019 , was due to the release of a reserve for an uncertain tax position as a result of the IRS acceptance of a method change and a release of tax liability due to expiring federal and state statutes of limitation. During the nine month period ended September 30, 2019 , the Company recorded an income tax benefit of $63.4 million on (loss) before income taxes of $209.5 million , which principally relates to the release of a reserve for an uncertain tax position as a result of the IRS acceptance of a method change, including related penalties and interest and a release of tax liability due to expiring federal and state statutes of limitation. During the nine month period ended September 30, 2018, the Company recorded an income tax benefit of $42.0 million on (loss) before income taxes of $228.8 million . The Company did not use the discrete method to calculate the quarterly provision due to the company’s overall valuation allowance position. The Company records a valuation allowance to reduce net deferred income tax assets to the amount that is more likely than not to be realized. In performing its analysis of whether a valuation allowance to reduce the deferred income tax asset was necessary, the Company evaluated the data and believes that it is not more likely than not that the deferred tax assets in the U.S., India, and Switzerland will be realized. Accordingly, the Company has recorded a full valuation allowance against U.S., India, and Switzerland deferred tax assets. The Company has a valuation allowance of $93.6 million against its deferred tax assets as of September 30, 2019 . 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 $2.1 million related to uncertain tax positions as of September 30, 2019 . If recognized, $2.1 million of the above positions would impact the Company’s effective rate. The Company accounts for interest and penalties related to uncertain tax positions as income tax expense. During the nine month period ended September 30, 2019 , the Company recorded no penalties and $0.1 million of interest related to unrecognized tax liabilities. As of September 30, 2019 , the Company had accrued no penalties and a total of $0.2 million of interest. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions In 2019 and 2018, the Company obtained legal services from Polsinelli PC, a firm for which the spouse of the Company’s Executive Vice President, General Counsel and Secretary is a shareholder. During the three month periods ended September 30, 2019 and 2018, the Company obtained legal services totaling $1.9 million and $1.2 million , respectively. During the nine month periods ended September 30, 2019 and 2018, the Company obtained legal services totaling $5.1 million and $2.9 million , respectively, of which $1.9 million and $0.9 million was payable as of September 30, 2019 and 2018, respectively. During the three month periods ended September 30, 2019 and 2018, the Company also obtained and paid legal services totaling six thousand two hundred and $0.2 million , respectively, 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 shareholder. During the nine month periods ended September 30, 2019 and 2018, the Company also obtained and paid legal services totaling $0.1 million and $0.5 million to the same firm. |
Recently Issued and Adopted Acc
Recently Issued and Adopted Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Recently Issued and Adopted Accounting Pronouncements | Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-15 — Intangibles — Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company believes that the adoption of this ASU will not have a material impact on its financial position, results of operations or cash flows. In August 2018, the FASB issued ASU No. 2018-13— Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company believes that the adoption of this ASU will not have a material impact on its financial position, results of operations or cash flows. In June 2016, the FASB issued ASU No. 2016-13— Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. T opic 326 amends guidance on reporting credit losses for financial assets held at amortized cost. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2018. This ASU is required to be adopted using the modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance of this ASU is effective. Based upon the level and makeup of our financial asset portfolio, the Company does not expect that the adoption of this ASU will have a material impact on its financial position, results of operations or cash flows. Recently Adopted Accounting Pronouncements In June 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under this ASU, an entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The standard was adopted on January 1, 2019, and did not have a material impact on the Company's financial statements or financial statement disclosures. In February 2016, FASB issued ASU No. 2016-02 - Leases (Topic 842), as modified by subsequently issued ASUs 2019-01, 2018-10, 2018-11 and 2018-20 (collectively ASU 2016-02). ASU 2018-02 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. The new standard initially required 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. In July 2018, the FASB decided to provide another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This additional transition method changes only when an entity is required to initially apply the transition requirements of the new leases standard; it does not change how those requirements apply. We elected the practical expedient to not separate non-lease components, to not provide comparative reporting periods and the ‘package of practical expedients’, which permits us to forgo reassessment of our prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to the effective date. We did not elect the use-of-hindsight practical expedient. We have completed our review of all material leases including the search for any embedded leases, elected the package of practical expedients and accounting policy, and finalized our assessment of the overall financial statement impact. We adopted the ASC on January 1, 2019, using the modified retrospective method and did not restate comparative periods. At adoption, we recorded Total Lease liabilities of $24.7 million and Total Right-of-use assets, net of $23.0 million in its consolidated statement of financial position. The impact on the Company’s results of operations did not materially differ from recorded amounts under ASC 840. The impact of the adoption of this ASU is non-cash in nature and therefore did not materially affect the Company’s cash flows. See Note 17 — Leasing Arrangements for additional disclosures. In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting , which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per the ASU, a n entity should account for the effects of a modification unless all the following are met: (1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this ASU. T he standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In March 2017, the FASB issued ASU No. 2017-07 — Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715. The amendments in this ASU require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60- 35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this ASU also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In November 2016, the FASB issued 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 standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements 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 . The standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In May 2014, FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606) , as modified by subsequently issued ASUs 2015-14, 2016-08, 2016-10, 2016-12 and 2016-20 (collectively ASU 2014-09). ASU 2014-09 superseded the revenue recognition requirements in ASC (Topic 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 . Similar to the previous guidance, the Company makes significant estimates related to variable consideration at the point of sale, including chargebacks, rebates, product returns, and other discounts and allowances. Revenue is recognized at a point in time upon the transfer of control of the Company's products, which occurs upon delivery for substantially all of the Company's sales. The Company has adopted the practical expedient to exclude all sales taxes and contract fulfillment costs from the transaction price. The Company adopted the standard effective January 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the three months ended March 31, 2018. See Note 13 — Customer, Supplier and Product Concentration for the disaggregation of net revenues by major customers. |
Leasing Arrangements
Leasing Arrangements | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leasing Arrangements | Leasing Arrangements The Company leases real and personal property in the normal course of business under various operating leases and other insignificant finance leases, including non-cancelable and immaterial month-to-month agreements. We recognize rent expense on a straight-line basis over the lease term. During the three and nine month periods ended September 30, 2019 , total lease cost was $1.6 million and $4.9 million , respectively. During the three and nine month period ended September 30, 2018, total lease cost under ASC 840 was $1.6 million and $4.9 million , respectively. The following table sets forth the Company’s lease cost components (in thousands): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Operating lease cost $ 1,200 $ 3,613 Amortization of finance lease assets 5 54 Interest on finance lease liabilities 1 9 Short-term lease cost 1 28 Variable lease cost 445 1,238 Sublease income (18 ) (24 ) Total lease cost (1) $ 1,634 $ 4,918 (1) Of the total lease cost of $1.6 million during the three months ended September 30, 2019 , $0.8 million was included within selling, general and administrative expenses, $0.4 million was including within cost of sales, and $0.4 million was included in research and development expenses in the Condensed Consolidated Statement of Comprehensive Income/(Loss). Of the total lease cost of $4.9 million during the nine months ended September 30, 2019 , $2.6 million is being reported in selling, general and administrative expenses, $1.2 million was included within cost of sales and $1.1 million was included in research and development expenses within the Condensed Consolidated Statement of Comprehensive Income/(Loss). The following table sets forth the Company’s Supplemental cash flow information related to leases (in thousands): Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,491 Operating cash flows from finance leases 9 Financing cash flows from finance leases 344 Nine Months Ended September 30, 2019 Right-of-use assets, net obtained in exchange for new lease obligations: Operating leases 24,764 Finance leases $ 71 The following table sets forth the Company’s Supplemental balance sheet information related to leases (in thousands): September 30, 2019 Right-of-use assets, net: Operating leases, gross $ 24,711 Accumulated amortization 1,695 Operating leases, net $ 23,016 Finance leases (included in "Other non-current assets"), gross 70 Accumulated depreciation 15 Finance leases (included in "Other non-current assets"), net $ 55 Total Right-of-use assets, net $ 23,071 Lease liabilities: Current portion of Operating lease liability $ 2,334 Long-term Operating lease liability 22,562 Total Operating lease liability $ 24,896 Current portion of Finance lease (included in "Accrued expenses and other liabilities") liability $ 19 Long-term Finance lease (included in "Pension obligations and other liabilities") liability 38 Total Finance lease liability $ 57 Total Lease liabilities $ 24,953 The following table sets forth the Company’s Weighted-average lease terms and discount rates (lease term in years): September 30, 2019 Weighted-average remaining lease terms: Operating leases 8.48 Finance leases 2.83 Weighted-average discount rates: Operating leases 9.95 % Finance leases 5.50 % The following table sets forth the Company’s scheduled maturities of lease liabilities as of September 30, 2019 (in thousands): Year ending December 31, Operating leases Finance leases 2019 (last three months of 2019) $ 1,210 $ 6 2020 4,592 22 2021 4,771 22 2022 4,517 13 2023 3,860 — 2024 and thereafter 18,901 — Total lease payments (1) $ 37,851 $ 63 Less: Imputed interest $ 12,955 $ 6 Total lease liabilities $ 24,896 $ 57 (1) Under ASC 842, the Company is required to take into consideration contractual lease renewal options that are reasonably assured to be exercised when determining the lease liability. As of September 30, 2019 , the Company has approximately $11.4 million of reasonably assured renewal option payments included in the total lease payments. The following table sets forth the Company’s schedule of future minimum rental payments for operating leases under ASC 840 as of December 31, 2018 (in thousands): Year ending December 31, Operating leases 2019 $ 4,564 2020 4,647 2021 4,283 2022 3,724 2023 2,673 2024 and thereafter 6,976 Total lease payments $ 26,867 |
Leasing Arrangements | Leasing Arrangements The Company leases real and personal property in the normal course of business under various operating leases and other insignificant finance leases, including non-cancelable and immaterial month-to-month agreements. We recognize rent expense on a straight-line basis over the lease term. During the three and nine month periods ended September 30, 2019 , total lease cost was $1.6 million and $4.9 million , respectively. During the three and nine month period ended September 30, 2018, total lease cost under ASC 840 was $1.6 million and $4.9 million , respectively. The following table sets forth the Company’s lease cost components (in thousands): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Operating lease cost $ 1,200 $ 3,613 Amortization of finance lease assets 5 54 Interest on finance lease liabilities 1 9 Short-term lease cost 1 28 Variable lease cost 445 1,238 Sublease income (18 ) (24 ) Total lease cost (1) $ 1,634 $ 4,918 (1) Of the total lease cost of $1.6 million during the three months ended September 30, 2019 , $0.8 million was included within selling, general and administrative expenses, $0.4 million was including within cost of sales, and $0.4 million was included in research and development expenses in the Condensed Consolidated Statement of Comprehensive Income/(Loss). Of the total lease cost of $4.9 million during the nine months ended September 30, 2019 , $2.6 million is being reported in selling, general and administrative expenses, $1.2 million was included within cost of sales and $1.1 million was included in research and development expenses within the Condensed Consolidated Statement of Comprehensive Income/(Loss). The following table sets forth the Company’s Supplemental cash flow information related to leases (in thousands): Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,491 Operating cash flows from finance leases 9 Financing cash flows from finance leases 344 Nine Months Ended September 30, 2019 Right-of-use assets, net obtained in exchange for new lease obligations: Operating leases 24,764 Finance leases $ 71 The following table sets forth the Company’s Supplemental balance sheet information related to leases (in thousands): September 30, 2019 Right-of-use assets, net: Operating leases, gross $ 24,711 Accumulated amortization 1,695 Operating leases, net $ 23,016 Finance leases (included in "Other non-current assets"), gross 70 Accumulated depreciation 15 Finance leases (included in "Other non-current assets"), net $ 55 Total Right-of-use assets, net $ 23,071 Lease liabilities: Current portion of Operating lease liability $ 2,334 Long-term Operating lease liability 22,562 Total Operating lease liability $ 24,896 Current portion of Finance lease (included in "Accrued expenses and other liabilities") liability $ 19 Long-term Finance lease (included in "Pension obligations and other liabilities") liability 38 Total Finance lease liability $ 57 Total Lease liabilities $ 24,953 The following table sets forth the Company’s Weighted-average lease terms and discount rates (lease term in years): September 30, 2019 Weighted-average remaining lease terms: Operating leases 8.48 Finance leases 2.83 Weighted-average discount rates: Operating leases 9.95 % Finance leases 5.50 % The following table sets forth the Company’s scheduled maturities of lease liabilities as of September 30, 2019 (in thousands): Year ending December 31, Operating leases Finance leases 2019 (last three months of 2019) $ 1,210 $ 6 2020 4,592 22 2021 4,771 22 2022 4,517 13 2023 3,860 — 2024 and thereafter 18,901 — Total lease payments (1) $ 37,851 $ 63 Less: Imputed interest $ 12,955 $ 6 Total lease liabilities $ 24,896 $ 57 (1) Under ASC 842, the Company is required to take into consideration contractual lease renewal options that are reasonably assured to be exercised when determining the lease liability. As of September 30, 2019 , the Company has approximately $11.4 million of reasonably assured renewal option payments included in the total lease payments. The following table sets forth the Company’s schedule of future minimum rental payments for operating leases under ASC 840 as of December 31, 2018 (in thousands): Year ending December 31, Operating leases 2019 $ 4,564 2020 4,647 2021 4,283 2022 3,724 2023 2,673 2024 and thereafter 6,976 Total lease payments $ 26,867 |
Pension plan and 401(k) Program
Pension plan and 401(k) Program | 9 Months Ended |
Sep. 30, 2019 | |
Retirement Benefits [Abstract] | |
Pension plan and 401(k) Program | Pension plan and 401(k) Program Akorn AG Pension Plan The Company maintains a pension plan for its employees in Switzerland as required by local law. The pension plan is funded by contributions by both employees and employers, with the sum of the contributions made by the employer required to be at least equal to the sum of the contributions made by employees. The Company contributes the necessary amounts required by local laws and regulations. Plan assets for the pension plan are held in a retirement trust fund with investments primarily in publicly traded securities and assets. The purpose of this pension plan is to provide pension benefits. Some of the pension funds also provide benefits in case of disability and to the next of kin in case of premature death. Additionally, the pension funds can be used before retirement to buy a principal residence, to start an independent activity, or when leaving Switzerland permanently. If a participant leaves the company, accumulated pension funds are transferred either into a savings account or into the pension fund of a new employer. The following table sets forth the components of net periodic cost for our pension plan: Components of net periodic benefit cost ($ in thousands) ($ in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Service cost $ 638 $ 718 $ 1,900 $ 1,624 Interest cost 62 66 183 149 Expected return on plan assets (177 ) (244 ) (526 ) (552 ) Amortization of: Prior service (benefit) (5 ) (6 ) $ (14 ) (14 ) Net actuarial loss 49 — $ 146 — Participant contributions (196 ) (217 ) $ (584 ) (491 ) Net periodic benefit cost $ 371 $ 317 $ 1,105 $ 716 The Company contributed approximately $1.2 million for the nine month period ended September 30, 2019 , and expects to contribute a total of approximately $1.7 million to the pension plan in 2019. Akorn's 401(k) Program All U.S. full-time Akorn employees are eligible to participate in the Company’s 401(k) plan, the Smart Choice! Akorn Inc. 401(k) Retirement Plan. The Company matches employee contributions to 50% of the first 6% of an employee's eligible compensation. Company matching contributions vest 50% after two years of credited service and 100% after three years of credited service. During the three month periods ended September 30, 2019 and 2018, plan-related expenses totaled approximately $0.6 million and $0.6 million , respectively. During the nine month periods ended September 30, 2019 and 2018, plan-related expenses totaled approximately $2.1 million and $2.0 million , respectively. The Company's matching contribution is funded on a current basis. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
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 have been translated from Indian Rupees to U.S. Dollars and Swiss Francs to U.S. Dollars, respectively, based on the currency translation rates in effect 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 relate to the allowances for chargebacks, rebates, 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, impairments 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 legal settlement accruals. |
Going Concern | Going Concern: In connection with the preparation of the financial statements as of and for the nine month period ended September 30, 2019 , 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. As further described in Note 8 - " Financing Arrangements ,” on May 6, 2019, the Company and certain Lenders entered into a Standstill Agreement and First Amendment (the “Standstill Agreement”) to its Term Loan Agreements. Pursuant to the terms of the Standstill Agreement, the Company must enter into a comprehensive amendment of the Term Loan Agreements (the “Comprehensive Amendment”) that is satisfactory in form and substance to the Lenders. If the Company does not enter into a Comprehensive Amendment by December 13, 2019 or refinance or otherwise address the outstanding Term Loans, an event of default will occur under the Term Loan Agreements which, if not waived, could materially affect the Company’s business, financial position and results of operations. If an event of default occurs and the Lenders accelerate the obligations under the Term Loan Agreements, the Company may not be able to repay the obligations that become immediately due and it could have a material negative impact on the Company’s liquidity and business. The Company evaluated the impact of entering into the Standstill Agreement on its ability to continue as a going concern. As the Company’s ability to enter into a Comprehensive Amendment with the Lenders is not within its control, and failure to do so would result in an event of default under the Term Loan Agreements, these conditions in the aggregate raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements are filed. The Company is actively seeking to refinance or otherwise address the Term Loans or enter into a Comprehensive Amendment to the Term Loan Agreements by December 13, 2019. In the event that the Company is unable to refinance or otherwise address the Term Loans, the Company would seek to enter into a Comprehensive Amendment to the Term Loan Agreements. The Standstill Agreement requires the Company and Lenders to negotiate in good faith to enter into such a Comprehensive Amendment. |
Revenue Recognition; Freight; Chargebacks; Rebates, Administrative Fees and Others; 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 out 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 versus 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 September 30, 2019 , the Company incurred a chargeback provision of $141.9 million , or 37.4% of gross sales of $379.0 million , compared to $188.9 million , or 43.3% of gross sales of $436.7 million in the prior year period. The dollar decrease and percent decrease from the comparative period were due to volume declines as well as decreases in wholesale acquisition cost of certain products in the current period as compared to prior year. The Company ensures that the chargeback 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 or contract pricing structures 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 and 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 249 basis point (“BP”) change in the ratio of sales subject to chargeback to indirect sales would increase the chargeback reserve by $0.4 million or decrease the chargeback reserve by $0.9 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 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. 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 and is reserved at the point of sale. 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 protection are based upon specified terms with 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 September 30, 2019 , the Company incurred rebates, administrative fees and others of $46.2 million , or 12.2% of gross sales of $379.0 million , compared to $66.8 million , or 15.3% of gross sales of $436.7 million in the prior year period. The dollar and percent decreases from the comparative period was primarily due to volume declines, decreases in contract prices and product mix. 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 or contract pricing structures 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 and 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 249 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 less than twenty-five thousand seven hundred dollars or decrease the same reserve by $0.1 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 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 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, wholesaler inventory levels, and the expected impact of any product recalls 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 of substitute products which can increase or decrease the pull-through of sales of the Company’s products and ultimately impact the level of sales returns. For the three month period ended September 30, 2019 , the Company incurred a return provision of $5.9 million , or 1.6% of gross sales of $379.0 million , compared to $4.8 million , or 1.1% of gross sales of $436.7 million in the prior year period. The Company ensures that this rate as a percent of gross sales is reasonable through inspection of historical trends and evaluation of recent activity. 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 0.5 months 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 $0.4 million or decrease of $0.5 million in return reserve expense if the lag increases or decreases, respectively. The average 0.5 months change in the lag from the time of sale to the time the product return is processed was determined based on the difference between the high and low lag time for the past six month historical activities. This sensitivity analysis is a change from the three month period ended September 30, 2018, which was determined based on the average variances for the last six months of returns activity. The prior method did not give a measurable variance to calculate a sensitivity. 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. Revenue Recognition: Revenue is recognized at a point in time upon the transfer of control of the Company’s products, which occurs upon delivery for substantially all of the Company’s sales. The promises within the contract that are distinct are primarily the Company’s supply of products, which represents a single performance obligation. The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration. The Company makes significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns and other discounts and allowances. All sales taxes are excluded from the transaction price. The Company expenses contract fulfillment costs when incurred since the amortization period would have been less than one year. Payment terms are primarily less than 90 days. 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 shipping and handling expense related to product sales as cost of sales. |
Cash and Cash Equivalents | 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. Certain rebates, chargebacks and other credits are recorded as deductions to the Company’s trade accounts receivable where applicable, based on product and customer specific terms. Unless otherwise noted, the provisions and allowances for the following customer deductions are reflected in the accompanying consolidated financial statements as reductions of revenues and trade accounts receivable, respectively. |
Allowance for Coupons, Advertising, Promotions and Co-Pay Discount Cards | Allowance for Coupons, Advertising, Promotions and Co-Pay Discount Cards: The Company issues coupons from time to time that are redeemable against certain of our Consumer Health products. In addition to coupons, from time to time the Company authorizes various retailers to run in-store promotions and co-pay discounts for its products. At the point of sale, the Company records an estimate of the dollar value of coupons expected to be redeemed, the dollar amount owed back to the retailer and the co-pay discount as variable consideration since the Company intends to continue to issue coupons, advertising promotion and co-pay discount from time to time. The coupon estimate is based on historical experience and is adjusted as needed based on actual redemptions. Upon receiving confirmation that an advertising promotion was run, the Company adjusts the estimate of the dollar amount expected to be owed back to the retailer as needed. 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. The Company records an estimate of the dollar value of co-pay discounts expected to be redeemed based on historical experience and adjusts 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. 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. |
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 calculated 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, subject to impairment testing, 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 are recorded within the impairment of intangible assets line in the Condensed Consolidated Statements of Comprehensive Income/(Loss). |
Leases | Leases: The Company leases real and personal property in the normal course of business under various operating leases and other insignificant finance leases, including non-cancelable and month-to-month agreements. Our leases have initial lease terms of one to ten years |
Earnings Per Share | Per Share: Basic net income/(loss) per share is based upon the weighted average common shares outstanding. Diluted net income/(loss) per share is based upon the weighted average number of common shares outstanding, including the dilutive effect, if any, of stock options and restricted stock using the treasury stock method. Anti-dilutive shares are excluded from the computation of diluted net income/(loss) per share. |
Income Taxes | Income Taxes: |
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 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. |
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. The stock-based compensation expense related to performance share units (“PSUs”) is estimated at grant date based on the fair value of the award. For PSUs granted with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo model, and expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. For PSUs granted with vesting subject to performance conditions, the fair value of the award is based on the market price of the underlying shares on grant date. Expense from such awards is recognized ratably over the vesting period, but is based upon an ongoing evaluation of the number of shares expected to vest and will be adjusted to reflect those awards that do ultimately vest. The stock-based compensation expense related to restricted stock unit awards (“RSUs”) is based on the fair value of the underlying shares on date of grant. Expense is recognized ratably over the vesting period, reduced by an estimate of future forfeitures. |
Recently Issued and Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-15 — Intangibles — Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company believes that the adoption of this ASU will not have a material impact on its financial position, results of operations or cash flows. In August 2018, the FASB issued ASU No. 2018-13— Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company believes that the adoption of this ASU will not have a material impact on its financial position, results of operations or cash flows. In June 2016, the FASB issued ASU No. 2016-13— Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. T opic 326 amends guidance on reporting credit losses for financial assets held at amortized cost. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2018. This ASU is required to be adopted using the modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance of this ASU is effective. Based upon the level and makeup of our financial asset portfolio, the Company does not expect that the adoption of this ASU will have a material impact on its financial position, results of operations or cash flows. Recently Adopted Accounting Pronouncements In June 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under this ASU, an entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The standard was adopted on January 1, 2019, and did not have a material impact on the Company's financial statements or financial statement disclosures. In February 2016, FASB issued ASU No. 2016-02 - Leases (Topic 842), as modified by subsequently issued ASUs 2019-01, 2018-10, 2018-11 and 2018-20 (collectively ASU 2016-02). ASU 2018-02 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. The new standard initially required 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. In July 2018, the FASB decided to provide another transition method in addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This additional transition method changes only when an entity is required to initially apply the transition requirements of the new leases standard; it does not change how those requirements apply. We elected the practical expedient to not separate non-lease components, to not provide comparative reporting periods and the ‘package of practical expedients’, which permits us to forgo reassessment of our prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to the effective date. We did not elect the use-of-hindsight practical expedient. We have completed our review of all material leases including the search for any embedded leases, elected the package of practical expedients and accounting policy, and finalized our assessment of the overall financial statement impact. We adopted the ASC on January 1, 2019, using the modified retrospective method and did not restate comparative periods. At adoption, we recorded Total Lease liabilities of $24.7 million and Total Right-of-use assets, net of $23.0 million in its consolidated statement of financial position. The impact on the Company’s results of operations did not materially differ from recorded amounts under ASC 840. The impact of the adoption of this ASU is non-cash in nature and therefore did not materially affect the Company’s cash flows. See Note 17 — Leasing Arrangements for additional disclosures. In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting , which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per the ASU, a n entity should account for the effects of a modification unless all the following are met: (1) The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this ASU. T he standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In March 2017, the FASB issued ASU No. 2017-07 — Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which apply to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715. The amendments in this ASU require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60- 35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this ASU also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In November 2016, the FASB issued 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 standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements 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 . The standard was adopted on January 1, 2018, and did not have a material impact on the Company's consolidated financial statements or financial statement disclosures. In May 2014, FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606) , as modified by subsequently issued ASUs 2015-14, 2016-08, 2016-10, 2016-12 and 2016-20 (collectively ASU 2014-09). ASU 2014-09 superseded the revenue recognition requirements in ASC (Topic 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 . Similar to the previous guidance, the Company makes significant estimates related to variable consideration at the point of sale, including chargebacks, rebates, product returns, and other discounts and allowances. Revenue is recognized at a point in time upon the transfer of control of the Company's products, which occurs upon delivery for substantially all of the Company's sales. The Company has adopted the practical expedient to exclude all sales taxes and contract fulfillment costs from the transaction price. The Company adopted the standard effective January 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Cash and Cash Equivalents | The following table sets forth the components of the Company’s cash, cash equivalents, and restricted cash as reported in the Condensed Consolidated Statement of Cash Flows for the nine month periods ended September 30, 2019 and 2018 (in thousands): Cash, Cash Equivalents, and Restricted Cash Nine Months Ended 2019 2018 Cash and cash equivalents $ 205,542 $ 275,346 Restricted cash 799 803 Total cash, cash equivalents, and restricted cash $ 206,341 $ 276,149 |
Restrictions on Cash and Cash Equivalents | The following table sets forth the components of the Company’s cash, cash equivalents, and restricted cash as reported in the Condensed Consolidated Statement of Cash Flows for the nine month periods ended September 30, 2019 and 2018 (in thousands): Cash, Cash Equivalents, and Restricted Cash Nine Months Ended 2019 2018 Cash and cash equivalents $ 205,542 $ 275,346 Restricted cash 799 803 Total cash, cash equivalents, and restricted cash $ 206,341 $ 276,149 |
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 September 30, 2019 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 $ 205,542 $ 205,542 $ — $ — Nicox stock with lockup provisions 16 — — 16 Total assets $ 205,558 $ 205,542 $ — $ 16 Description December 31, 2018 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 $ 224,868 $ 224,868 $ — $ — Nicox stock with lockup provisions 18 — — 18 Total assets $ 224,886 $ 224,868 $ — $ 18 |
Equity Compensation Plans (Tabl
Equity Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan | The following table sets forth the components of the Company’s share-based compensation expense for the three and nine month periods ended September 30, 2019 and 2018 (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Stock options $ 1,453 $ 2,357 $ 4,274 $ 7,993 Employee stock purchase plan 339 — 837 — Restricted stock units and Performance share units 3,934 3,389 10,923 9,206 Total stock-based compensation expense $ 5,726 $ 5,746 $ 16,034 $ 17,199 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Set forth in the following table are the weighted-average assumptions used in estimating the grant date fair value of the stock options granted under the Company's equity compensation plans during the three and nine month periods ended September 30, 2019 , along with the weighted-average grant date fair values: Three Months Ended Nine Months Ended 2019 2018 2019 2018 Expected volatility 55.86 % — % 56.45 % — % Expected life (in years) 6.2 — 6.2 0 Risk-free interest rate 1.60 % — % 2.34 % — % Dividend yield — — — — Fair value per stock option $ 1.73 $ — $ 2.35 $ — Forfeiture rate 8 % — % 8 % — % |
Schedule of Share-based Compensation, Activity | The table below sets forth a summary of stock option activity within the Company’s stock-based compensation plans for the nine month period ended September 30, 2019 : 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, 2018 3,418 $ 28.55 3.69 $ — Granted 3,088 4.27 Exercised — — Forfeited (1,333 ) 26.22 Outstanding at September 30, 2019 5,173 $ 14.66 7.05 $ 120 Exercisable at September 30, 2019 1,713 $ 30.48 3.42 $ — (1) The Aggregate Intrinsic Value of 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 | Set forth below is a summary of unvested RSU activity during the nine month period ended September 30, 2019 : Number of Units (in thousands) Weighted Average Per Share Grant Date Fair Value Unvested at December 31, 2018 1,643 $ 19.85 Granted 4,296 $ 4.11 Vested (631) $ 24.10 Forfeited (295) $ 14.97 Unvested at September 30, 2019 5,013 $ 7.21 |
Schedule of Nonvested Performance-based Units Activity | Set forth below is a summary of unvested PSU activity during the nine month period ended September 30, 2019 : Total Number of Units (in thousands) Weighted Average Grant Date Fair Value per Unit Vesting Based on Performance Conditions Weighted Average Grant Date Fair Value per Unit Vesting Based on Market Conditions Weighted Average Grant Date Fair Value per Unit Unvested at December 31, 2018 — $ — — $ — — $ — Granted 1,239 3.99 985 4.06 254 3.73 Vested — — — — — — Forfeited (21 ) 4.06 (21 ) 4.06 — — Unvested at September 30, 2019 1,218 $ 3.99 964 $ 4.06 254 $ 3.73 |
Schedule of Share-based Payment Award, Performance Stock Units, Valuation Assumptions | Set forth below is a summary of the valuation inputs for PSUs granted with vesting subject to market conditions during the nine month period ended September 30, 2019 : Valuation Inputs for PSUs with Vesting Subject to Market Conditions: PSUs Issued (units in thousands) 254 Risk Free Rate 2.58 % Volatility 55.10 % Dividend — % Valuation Per Share $ 3.73 Total Fair Value (in thousands) $ 947 Expected Term (years) 4 Forfeiture Rate Assumed 8.00 % |
Accounts Receivable, Sales an_2
Accounts Receivable, Sales and Allowances (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Summary of Net Trade Accounts Receivable | Trade accounts receivable, net consists of the following (in thousands): September 30, December 31, Gross accounts receivable $ 272,036 $ 308,305 Less reserves for: Chargebacks (1) (41,092 ) (55,312 ) Rebates (2) (47,478 ) (55,963 ) Product returns (33,114 ) (35,146 ) Discounts and allowances (5,348 ) (6,561 ) Advertising and promotions (1,549 ) (1,574 ) Doubtful accounts (584 ) (623 ) Trade accounts receivable, net $ 142,871 $ 153,126 (1) The decrease in the Chargebacks balance as of September 30, 2019 , when compared to the December 31, 2018 balance, was primarily due to decreases in wholesale acquisition cost of certain products and changes to product and customer mix. (2) The decrease in the Rebates balance as of September 30, 2019 , when compared to the December 31, 2018 balance, was primarily due to timing of payments and settlements, changes in product and customer mix, and lower failure to supply claims. |
Schedule of Adjustments to Gross Sales | For the three and nine month periods ended September 30, 2019 and 2018 , the Company recorded the following adjustments to gross sales (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Gross sales $ 379,022 $ 436,700 $ 1,303,671 $ 1,465,052 Less adjustments for: Chargebacks (1) (141,943 ) (188,884 ) (540,055 ) (635,329 ) Rebates, administrative and other fees (2) (46,212 ) (66,843 ) (188,445 ) (234,217 ) Product returns (3) (5,900 ) (4,805 ) (23,273 ) (18,059 ) Discounts and allowances (7,297 ) (8,471 ) (25,371 ) (28,654 ) Advertising, promotions and others (1,426 ) (2,072 ) (6,355 ) (8,161 ) Revenues, net $ 176,244 $ 165,625 $ 520,172 $ 540,632 (1) The decreases in chargebacks for the three and nine month periods ended September 30, 2019, as compared to the same periods in 2018, were due to volume declines as well as decreases in wholesale acquisition cost of certain products. (2) The decrease in the rebates, administrative and other fees for the three month period ended September 30, 2019, compared to the same period in 2018, was mainly due to decreases in the rebate rate of certain products and lower failure to supply penalties. The decrease in the rebates, administrative and other fees for the nine month period ended September 30, 2019, compared to the same period in 2018, was primarily due to volume declines and decreases in the rebate rate of certain products. (3) The increase in product returns for the three and nine month periods ended September 30, 2019, as compared to the same periods in 2018, were primarily due to the timing of returns processing. |
Inventories, Net (Tables)
Inventories, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Components of Inventory | The components of inventories are as follows (in thousands): September 30, December 31, Finished goods $ 86,541 $ 76,981 Work in process 8,196 13,870 Raw materials and supplies 72,964 82,794 Inventories, net $ 167,701 $ 173,645 |
Property, Plant and Equipment_2
Property, Plant and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment, net consist of the following (in thousands): September 30, December 31, Land and land improvements $ 17,492 $ 17,608 Buildings and leasehold improvements 143,097 138,126 Furniture and equipment 263,094 240,080 Sub-total 423,683 395,814 Accumulated depreciation (179,562 ) (158,824 ) Property, plant and equipment in service, net $ 244,121 $ 236,990 Construction in progress 77,998 97,863 Property, plant and equipment, net $ 322,119 $ 334,853 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table provides a summary of the activity in goodwill by segment for the nine month period ended September 30, 2019 (in thousands): Consumer Health Prescription Pharmaceuticals Total Balances at December 31, 2018 $ 16,717 $ 267,162 $ 283,879 Currency translation adjustments — (1 ) (1 ) Acquisitions — — — Impairments — (15,955 ) (15,955 ) Dispositions — — — Balances at September 30, 2019 $ 16,717 $ 251,206 $ 267,923 |
Schedule of Other Intangible Assets | The following table sets forth the major categories of the Company’s intangible assets as of September 30, 2019 and December 31, 2018 , and the weighted average remaining amortization period as of September 30, 2019 and December 31, 2018 (dollar amounts in thousands): Gross Amount (2) Accumulated Amortization Reclassifications Impairment (1) Net Balance Wtd Avg Remaining Amortization Period (years) September 30, 2019 Product licensing rights $ 472,041 $ (227,678 ) $ — $ (15,550 ) $ 228,813 8.6 IPR&D 4,400 — — — 4,400 N/A - Indefinite lived Trademarks 16,000 (6,999 ) — — 9,001 17.2 Customer relationships 4,225 (2,513 ) — — 1,712 6.6 Other intangibles 6,000 (6,000 ) — — — 0.0 502,666 $ (243,190 ) $ — $ (15,550 ) $ 243,926 December 31, 2018 Product licensing rights $ 597,960 $ (203,323 ) $ 5,300 $ (131,306 ) $ 268,631 9.2 IPR&D 149,161 — (5,300 ) (139,461 ) 4,400 N/A - Indefinite lived Trademarks 16,000 (6,304 ) — — 9,696 17.5 Customer relationships 4,225 (2,318 ) — — 1,907 7.3 Other intangibles 11,235 (5,658 ) — (5,235 ) 342 0.3 $ 778,581 $ (217,603 ) $ — $ (276,002 ) $ 284,976 (1) Impairment of product licensing rights is stated at gross carrying cost of $15.6 million less accumulated amortization of $4.9 million as of the impairment date. Accordingly, the total net impairment expense was $10.7 million , for the nine month period ended September 30, 2019 . (2) Differences in the Gross Amounts between periods are due to the write down of fully amortized assets and additions during the period. |
Financing Arrangements (Tables)
Financing Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Variable Interest Rates | As of September 30, 2019 , the Company was a Ratings Level III for the Term Loan Agreements and related Standstill Agreement. Ratings Level Index Ratings (Moody’s/S&P) Adjusted LIBOR (Eurodollar) Spread Adjusted Base Rate (ABR) Spread Level I B1/B+ or higher 5.75% 4.75% Level II B2/B 6.25% 5.25% Level III B3/B- or lower 7.00% 6.00% |
Schedule of Maturities of Long-term Debt | Aggregate cumulative maturities of debt obligations as of September 30, 2019 are: (In thousands) 2021 Maturities of debt (1) $ 845,436 (1) Pursuant to the terms of the Standstill Agreement, the Company must enter into a Comprehensive Amendment to the Term Loan Agreements that is satisfactory in form and substance to the Lenders by December 13, 2019. If the Company does not enter into a Comprehensive Amendment, refinance or otherwise address the outstanding Term Loans by December 13, 2019, an event of default will occur under the Term Loan Agreements. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | A reconciliation of the income/(loss) per share data from a basic to a fully diluted basis is detailed below (amounts in thousands, except per share data): Three Months Ended Nine Months Ended 2019 2018 2019 2018 NET INCOME/(LOSS) $ 47,670 $ (70,140 ) $ (146,110 ) $ (186,871 ) NET INCOME/(LOSS) PER SHARE: Basic $ 0.38 $ (0.56 ) $ (1.16 ) $ (1.49 ) Diluted $ 0.38 $ (0.56 ) $ (1.16 ) $ (1.49 ) SHARES USED IN COMPUTING NET INCOME/(LOSS) PER SHARE: Weighted average basic shares outstanding 126,144 125,462 125,920 125,346 Dilutive securities: Stock option — — — — Unvested RSUs and PSUs 682 — — — Total dilutive securities 682 — — — Weighted average diluted shares outstanding 126,826 125,462 125,920 125,346 Shares subject to stock options omitted from the calculation of income/(loss) per share as their effect would have been anti-dilutive 5,201 3,603 4,690 3,823 Shares subject to unvested RSUs and PSUs omitted from the calculation of income/(loss) per share as their effect would have been anti-dilutive 1,901 1,831 2,090 761 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Selected Financial Info by Reportable Segment | Selected financial information by reportable segment is presented below (in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 Revenues, net: Prescription Pharmaceuticals $ 155,568 $ 148,469 $ 461,962 $ 484,933 Consumer Health 20,676 17,156 58,210 55,699 Total revenues, net 176,244 165,625 520,172 540,632 Gross Profit: Prescription Pharmaceuticals 62,133 50,231 167,361 197,025 Consumer Health 9,269 7,031 25,538 23,744 Total gross profit 71,402 57,262 192,899 220,769 Operating expenses 62,634 133,242 336,980 413,330 OPERATING INCOME/(LOSS) 8,768 (75,980 ) (144,081 ) (192,561 ) Other expenses, net (27,355 ) (12,559 ) (65,384 ) (36,261 ) (Loss) before income taxes $ (18,587 ) $ (88,539 ) $ (209,465 ) $ (228,822 ) |
Revenue from External Customers by Geographic Areas | The following table sets forth the Company’s net revenues by geographic region for the three and nine month periods ended September 30, 2019 and 2018. The Domestic region represents sales within the United States of America and its territories while the Foreign region represents sales within all other countries and territories (dollar amounts in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Region Amount % of Total Revenues Amount % of Total Revenues Amount % of Total Revenues Amount % of Total Revenues Domestic $ 171,986 97.6% $ 161,858 97.7% $ 510,228 98.1% $ 529,598 98.0% Foreign 4,258 2.4% 3,767 2.3% 9,944 1.9% 11,034 2.0% Total Revenues $ 176,244 100.0% $ 165,625 100.0% $ 520,172 100.0% $ 540,632 100.0% |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitment Payment to Strategic Business Partners | The table below summarizes contingent, potential milestone payments that would become due to strategic partners in the years 2019 and beyond, assuming all such contingencies occur (in thousands): Year ending December 31, Milestone Payments 2019 $ 121 2020 2,099 2021 2,150 2022 550 Total $ 4,920 |
Customer, Supplier and Produc_2
Customer, Supplier and Product Concentration (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Risks and Uncertainties [Abstract] | |
Schedules of Concentration of Risk, by Risk Factor | The following table sets forth the percentage of the Company's gross accounts receivable attributable to the Big 3 Wholesalers as of September 30, 2019 and December 31, 2018: Big 3 Wholesalers combined: September 30, December 31, Percentage of gross trade accounts receivable 83% 86% The following table sets forth the percentage of the Company’s gross sales attributable to the Big 3 Wholesalers for the three and nine month periods ended September 30, 2019 and 2018: Three Months Ended Nine Months Ended Big 3 Wholesalers combined: 2019 2018 2019 2018 Percentage of gross sales 81% 83% 83% 83% The following table sets forth the Company’s net revenues disaggregated by major customers for the three and nine month periods ended September 30, 2019 and 2018 (dollar amounts in thousands): Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Disaggregation of net revenues by major customers Net Revenue Net Revenue % Net Revenue Net Revenue % Net Revenue Net Revenue % Net Revenue Net Revenue % Amerisource $ 36,831 20.9% $ 36,613 22.1% $ 107,203 20.6% $ 113,824 21.1% Cardinal 31,156 17.7% 26,835 16.2% 89,255 17.2% 83,886 15.5% McKesson 38,525 21.9% 40,274 24.3% 117,020 22.5% 136,623 25.3% Big 3 Wholesalers combined 106,512 60.4% 103,722 62.6% 313,478 60.3% 334,333 61.8% All Others 69,732 39.6% 61,903 37.4% 206,694 39.7% 206,299 38.2% Total Revenues $ 176,244 100.0% $ 165,625 100.0% $ 520,172 100.0% $ 540,632 100.0% |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Information about the Company's Income Tax Provision | The following table sets forth information about the Company’s income tax (benefit) provision for the periods indicated (dollar amounts in thousands): Three Months Ended Nine Months Ended 2019 2018 2019 2018 (Loss) before income taxes $ (18,587 ) $ (88,539 ) $ (209,465 ) $ (228,822 ) Income tax (benefit) (66,257 ) (18,399 ) (63,355 ) (41,951 ) Net income/(loss) $ 47,670 $ (70,140 ) $ (146,110 ) $ (186,871 ) Income tax (benefit) as a percentage of (loss) before income taxes NM - Not Meaningful 20.8 % 30.2 % 18.3 % |
Leasing Arrangements (Tables)
Leasing Arrangements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Lease, Cost | The following table sets forth the Company’s lease cost components (in thousands): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Operating lease cost $ 1,200 $ 3,613 Amortization of finance lease assets 5 54 Interest on finance lease liabilities 1 9 Short-term lease cost 1 28 Variable lease cost 445 1,238 Sublease income (18 ) (24 ) Total lease cost (1) $ 1,634 $ 4,918 (1) Of the total lease cost of $1.6 million during the three months ended September 30, 2019 , $0.8 million was included within selling, general and administrative expenses, $0.4 million was including within cost of sales, and $0.4 million was included in research and development expenses in the Condensed Consolidated Statement of Comprehensive Income/(Loss). Of the total lease cost of $4.9 million during the nine months ended September 30, 2019 , $2.6 million is being reported in selling, general and administrative expenses, $1.2 million was included within cost of sales and $1.1 million was included in research and development expenses within the Condensed Consolidated Statement of Comprehensive Income/(Loss). The following table sets forth the Company’s Supplemental cash flow information related to leases (in thousands): Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 3,491 Operating cash flows from finance leases 9 Financing cash flows from finance leases 344 Nine Months Ended September 30, 2019 Right-of-use assets, net obtained in exchange for new lease obligations: Operating leases 24,764 Finance leases $ 71 The following table sets forth the Company’s Weighted-average lease terms and discount rates (lease term in years): September 30, 2019 Weighted-average remaining lease terms: Operating leases 8.48 Finance leases 2.83 Weighted-average discount rates: Operating leases 9.95 % Finance leases 5.50 % |
Assets And Liabilities, Lease | table sets forth the Company’s Supplemental balance sheet information related to leases (in thousands): September 30, 2019 Right-of-use assets, net: Operating leases, gross $ 24,711 Accumulated amortization 1,695 Operating leases, net $ 23,016 Finance leases (included in "Other non-current assets"), gross 70 Accumulated depreciation 15 Finance leases (included in "Other non-current assets"), net $ 55 Total Right-of-use assets, net $ 23,071 Lease liabilities: Current portion of Operating lease liability $ 2,334 Long-term Operating lease liability 22,562 Total Operating lease liability $ 24,896 Current portion of Finance lease (included in "Accrued expenses and other liabilities") liability $ 19 Long-term Finance lease (included in "Pension obligations and other liabilities") liability 38 Total Finance lease liability $ 57 Total Lease liabilities $ 24,953 |
Maturities of Finance Leases | The following table sets forth the Company’s scheduled maturities of lease liabilities as of September 30, 2019 (in thousands): Year ending December 31, Operating leases Finance leases 2019 (last three months of 2019) $ 1,210 $ 6 2020 4,592 22 2021 4,771 22 2022 4,517 13 2023 3,860 — 2024 and thereafter 18,901 — Total lease payments (1) $ 37,851 $ 63 Less: Imputed interest $ 12,955 $ 6 Total lease liabilities $ 24,896 $ 57 (1) Under ASC 842, the Company is required to take into consideration contractual lease renewal options that are reasonably assured to be exercised when determining the lease liability. As of September 30, 2019 , the Company has approximately $11.4 million of reasonably assured renewal option payments included in the total lease payments. |
Maturities of Operating Leases | The following table sets forth the Company’s scheduled maturities of lease liabilities as of September 30, 2019 (in thousands): Year ending December 31, Operating leases Finance leases 2019 (last three months of 2019) $ 1,210 $ 6 2020 4,592 22 2021 4,771 22 2022 4,517 13 2023 3,860 — 2024 and thereafter 18,901 — Total lease payments (1) $ 37,851 $ 63 Less: Imputed interest $ 12,955 $ 6 Total lease liabilities $ 24,896 $ 57 (1) Under ASC 842, the Company is required to take into consideration contractual lease renewal options that are reasonably assured to be exercised when determining the lease liability. As of September 30, 2019 , the Company has approximately $11.4 million of reasonably assured renewal option payments included in the total lease payments. |
Schedule of Future Minimum Rental Payments for Operating Leases | The following table sets forth the Company’s schedule of future minimum rental payments for operating leases under ASC 840 as of December 31, 2018 (in thousands): Year ending December 31, Operating leases 2019 $ 4,564 2020 4,647 2021 4,283 2022 3,724 2023 2,673 2024 and thereafter 6,976 Total lease payments $ 26,867 |
Pension plan and 401(k) Progr_2
Pension plan and 401(k) Program (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Retirement Benefits [Abstract] | |
Schedule of Net Benefit Costs | The following table sets forth the components of net periodic cost for our pension plan: Components of net periodic benefit cost ($ in thousands) ($ in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Service cost $ 638 $ 718 $ 1,900 $ 1,624 Interest cost 62 66 183 149 Expected return on plan assets (177 ) (244 ) (526 ) (552 ) Amortization of: Prior service (benefit) (5 ) (6 ) $ (14 ) (14 ) Net actuarial loss 49 — $ 146 — Participant contributions (196 ) (217 ) $ (584 ) (491 ) Net periodic benefit cost $ 371 $ 317 $ 1,105 $ 716 |
Business and Basis of Present_2
Business and Basis of Presentation (Details) - segment | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Number of reportable segments (in segment) | 2 | 2 | 2 | 2 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Chargebacks, Rebates, Administrative Fees and Other, and Sales Returns (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||
Contract with customer, payment terms | 90 days | ||||
Restricted cash | $ 799,000 | $ 803,000 | $ 799,000 | $ 803,000 | $ 900,000 |
Extended chargeback period | 84 days | ||||
Chargeback provision | $ 141,943,000 | $ 188,884,000 | $ 540,055,000 | 635,329,000 | |
Sales chargebacks as percentage of gross sales | 37.40% | 43.30% | |||
Gross sales | $ 379,022,000 | $ 436,700,000 | $ 1,303,671,000 | 1,465,052,000 | |
Chargeback reserves | 2.49% | 2.49% | |||
Potential increase in chargeback expense based on sensitivity analysis | $ 400,000 | $ 400,000 | |||
Potential decrease in chargeback expense based on sensitivity analysis | 900,000 | 900,000 | |||
Rebates, administrative and other fees | $ 46,212,000 | $ 66,843,000 | $ 188,445,000 | 234,217,000 | |
Rebates, administrative and other fees as a percentage of gross sales | 12.20% | 15.30% | |||
Rebates, administrative and other fees | 2.49% | 2.49% | |||
Potential increase in rebates, administrative and other fees expense based on sensitivity analysis | $ 25,700,000 | $ 25,700,000 | |||
Potential decrease in rebates, administrative and other fees expense based on sensitivity analysis | 100,000 | 100,000 | |||
Sales returns | $ 5,900,000 | $ 4,805,000 | $ 23,273,000 | $ 18,059,000 | |
Change in ratio of direct to indirect sales for sales return reserve used in sensitivity analysis | 1.60% | 1.10% | |||
Returns, change in average return time | 6 months | ||||
Potential increase in sales returns expense based on sensitivity analysis | $ 400,000 | $ 400,000 | |||
Potential decrease in sales returns expense based on sensitivity analysis | $ 500,000 | $ 500,000 | |||
Minimum | |||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||
Standard chargeback period | 28 days | ||||
Maximum | |||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||
Standard chargeback period | 42 days |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 205,542 | $ 224,868 | $ 275,346 | |
Restricted cash | 799 | 900 | 803 | |
Total cash, cash equivalents, and restricted cash | $ 206,341 | $ 225,794 | $ 276,149 | $ 369,889 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Intangible Assets (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Minimum | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Intangible asset useful life | 1 year |
Maximum | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Intangible asset useful life | 30 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Leases (Details) | Sep. 30, 2019 |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, term of contract | 10 years |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease, term of contract | 1 year |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Summary of Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 205,542 | $ 224,868 |
Nicox stock with lockup provisions | 16 | 18 |
Total assets | 205,558 | 224,886 |
Recurring Measurements | Quoted Prices in Active Markets for Identical Items (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 205,542 | 224,868 |
Nicox stock with lockup provisions | 0 | 0 |
Total assets | 205,542 | 224,868 |
Recurring Measurements | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
Nicox stock with lockup provisions | 0 | 0 |
Total assets | 0 | 0 |
Recurring Measurements | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
Nicox stock with lockup provisions | 16 | 18 |
Total assets | $ 16 | $ 18 |
Equity Compensation Plans - Add
Equity Compensation Plans - Additional Information (Details) | May 19, 2019installmentshares | Sep. 30, 2019USD ($)shares | Sep. 30, 2018USD ($)shares | Sep. 30, 2019USD ($)offering_periodshares | Sep. 30, 2018USD ($)shares | Dec. 31, 2018shares | May 01, 2019shares | Apr. 27, 2017shares | May 02, 2014shares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Options outstanding (in Shares) | 5,173,000 | 5,173,000 | 3,418,000 | ||||||
Number of options granted (in Shares) | 3,088,000 | 0 | |||||||
Stock-based compensation expense | $ | $ 5,726,000 | $ 5,746,000 | $ 16,034,000 | $ 17,199,000 | |||||
Contributions from plan participants through payroll deductions (in Shares) | $ | $ 600,000 | $ 1,700,000 | |||||||
Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 4,296,000 | ||||||||
Award vesting period | 4 years | ||||||||
Number of units vested in period (in Shares) | 46,500,000 | 100,000 | 631,000 | 300,000 | |||||
Share-based compensation expense for awards vested | $ | $ 200,000 | $ 1,900,000 | $ 2,100,000 | $ 3,900,000 | |||||
Performance Shares | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of shares reserved for issuance (in Shares) | 0 | 0 | |||||||
Number of awards granted (in Shares) | 0 | 1,239,000 | |||||||
Number of units vested in period (in Shares) | 0 | ||||||||
Cash-Based Award | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 9,700,000 | ||||||||
Award vesting period | 2 years | ||||||||
Number of installments | installment | 2 | ||||||||
Stock-based compensation expense | $ | $ 1,100,000 | $ 1,800,000 | |||||||
Omnibus Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of shares authorized (in Shares) | 3,500,000 | 3,500,000 | 12,400,000 | 8,000,000 | |||||
Number of additional shares authorized (in shares) | 4,400,000 | ||||||||
Options outstanding (in Shares) | 2,600,000 | 2,600,000 | |||||||
Omnibus Plan | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Other than options, outstanding (in Shares) | 4,500,000 | 4,500,000 | |||||||
Omnibus Plan | Performance Shares | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Other than options, outstanding (in Shares) | 1,000,000 | 1,000,000 | |||||||
2014 Plan | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of shares reserved for issuance (in Shares) | 7,500,000 | ||||||||
Options outstanding (in Shares) | 2,100,000 | 2,100,000 | |||||||
2014 Plan | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Other than options, outstanding (in Shares) | 34,100,000 | 34,100,000 | |||||||
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 | 2,000,000 | |||||||
Discount from market price at the beginning or end of the offering period | 15.00% | ||||||||
Number of offering periods | offering_period | 2 | ||||||||
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 | ||||||||
Employee stock purchase plan (in Shares) | 146,247 | ||||||||
Employee Stock Purchase Plan ESPP | Minimum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Percentage of base wages withheld for purchase of stock | 1.00% | ||||||||
Employee Stock Purchase Plan ESPP | Maximum | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Percentage of base wages withheld for purchase of stock | 15.00% | ||||||||
Tranche One | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Annual award vesting percentage | 25.00% | ||||||||
Tranche One | Performance Shares | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 1,000,000 | ||||||||
Award vesting period | 2 years | ||||||||
Tranche Two | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Annual award vesting percentage | 25.00% | ||||||||
Tranche Two | Performance Shares | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 200,000 | ||||||||
Award vesting period | 4 years | ||||||||
Tranche Three | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Annual award vesting percentage | 25.00% | ||||||||
Tranche Four | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Annual award vesting percentage | 25.00% | ||||||||
Prospective Employee | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of options granted (in Shares) | 400,000 | ||||||||
Prospective Employee | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 500,000 | ||||||||
Prospective Employee | Performance Shares | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 300,000 | ||||||||
Employee | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 2,700,000 | ||||||||
Award vesting period | 2 years | ||||||||
Employees And Executives | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 1,100,000 | ||||||||
Chief Executive Officer | Restricted stock units | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of awards granted (in Shares) | 500,000 |
Equity Compensation Plans - All
Equity Compensation Plans - Allocated Share-based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 5,726 | $ 5,746 | $ 16,034 | $ 17,199 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | 1,453 | 2,357 | 4,274 | 7,993 |
Employee stock purchase plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | 339 | 0 | 837 | 0 |
Restricted stock units and Performance share units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 3,934 | $ 3,389 | $ 10,923 | $ 9,206 |
Equity Compensation Plans - Wei
Equity Compensation Plans - Weighted-average Assumptions for Stock Options (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Payment Arrangement [Abstract] | ||||
Expected volatility | 55.86% | 0.00% | 56.45% | 0.00% |
Expected life (in years) | 6 years 2 months 12 days | 0 years | 6 years 2 months 12 days | 0 years |
Risk-free interest rate | 1.60% | 0.00% | 2.34% | 0.00% |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Fair value per stock option (in Dollars per share) | $ 1.73 | $ 0 | $ 2.35 | $ 0 |
Forfeiture rate | 8.00% | 0.00% | 8.00% | 0.00% |
Equity Compensation Plans - Sto
Equity Compensation Plans - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Number of Options | ||
Outstanding, beginning balance (in Shares) | 3,418,000 | |
Granted (in Shares) | 3,088,000 | 0 |
Exercised (in Shares) | 0 | |
Forfeited (in Shares) | (1,333,000) | |
Outstanding, ending balance (in Shares) | 5,173,000 | 3,418,000 |
Options, exercisable (in Shares) | 1,713,000 | |
Weighted Average Exercise Price | ||
Outstanding, beginning balance (in Dollars per share) | $ 28.55 | |
Granted (in Dollars per share) | 4.27 | |
Exercised (in Dollars per share) | 0 | |
Forfeited (in Dollars per share) | 26.22 | |
Outstanding, ending balance (in Dollars per share) | 14.66 | $ 28.55 |
Weighted average exercise price, exercisable (in Dollars per share) | $ 30.48 | |
Weighted Average Remaining Contractual Term (Years) | ||
Weighted Average Remaining Contractual Term | 7 years 18 days | 3 years 8 months 8 days |
Weighted Average Remaining Contractual Term, exercisable | 3 years 5 months 1 day | |
Aggregate Intrinsic Value (in thousands) | ||
Aggregate Intrinsic Value | $ 120 | $ 0 |
Aggregate Intrinsic Value, exercisable | $ 0 |
Equity Compensation Plans - Non
Equity Compensation Plans - Non-vested Restricted Stock Activity (Details) - Restricted stock units - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Number of Units | ||||
Unvested at beginning balance (in Shares) | 1,643,000 | |||
Granted (in Shares) | 4,296,000 | |||
Vested (in Shares) | (46,500,000) | (100,000) | (631,000) | (300,000) |
Forfeited (in Shares) | (295,000) | |||
Unvested at ending balance (in Shares) | 5,013,000 | 5,013,000 | ||
Weighted Average Per Share Grant Date Fair Value | ||||
Unvested at beginning balance (in Dollars per share) | $ 19.85 | |||
Granted (in Dollars per share) | 4.11 | |||
Vested (in Dollars per share) | 24.10 | |||
Forfeited (in Dollars per share) | 14.97 | |||
Unvested at ending balance (in Dollars per share) | $ 7.21 | $ 7.21 |
Equity Compensation Plans - Sum
Equity Compensation Plans - Summary of Unvested PSU Activity (Details) - $ / shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Performance Shares | ||
Total Number of Units (in thousands) | ||
Unvested at beginning balance (in Shares) | 0 | |
Granted (in Shares) | 0 | 1,239,000 |
Vested (in Shares) | 0 | |
Forfeited (in Shares) | (21,000) | |
Unvested at ending balance (in Shares) | 1,218,000 | 1,218,000 |
Weighted Average Grant Date Fair Value per Unit | ||
Unvested at beginning balance (in Dollars per share) | $ 0 | |
Granted (in Dollars per share) | 3.99 | |
Vested (in Dollars per share) | 0 | |
Forfeited (in Dollars per share) | 4.06 | |
Unvested at ending balance (in Dollars per share) | $ 3.99 | $ 3.99 |
Performance Shares, Vesting Subject to Performance Conditions | ||
Total Number of Units (in thousands) | ||
Unvested at beginning balance (in Shares) | 0 | |
Granted (in Shares) | 985,000 | |
Vested (in Shares) | 0 | |
Forfeited (in Shares) | (21,000) | |
Unvested at ending balance (in Shares) | 964,000 | 964,000 |
Weighted Average Grant Date Fair Value per Unit | ||
Unvested at beginning balance (in Dollars per share) | $ 0 | |
Granted (in Dollars per share) | 4.06 | |
Vested (in Dollars per share) | 0 | |
Unvested at ending balance (in Dollars per share) | $ 4.06 | $ 4.06 |
Performance Shares, Vesting Subject to Market Conditions | ||
Total Number of Units (in thousands) | ||
Unvested at beginning balance (in Shares) | 0 | |
Granted (in Shares) | 254,000 | |
Vested (in Shares) | 0 | |
Forfeited (in Shares) | 0 | |
Unvested at ending balance (in Shares) | 254,000 | 254,000 |
Weighted Average Grant Date Fair Value per Unit | ||
Unvested at beginning balance (in Dollars per share) | $ 0 | |
Granted (in Dollars per share) | 3.73 | |
Vested (in Dollars per share) | 0 | |
Forfeited (in Dollars per share) | 0 | |
Unvested at ending balance (in Dollars per share) | $ 3.73 | $ 3.73 |
Equity Compensation Plans - S_2
Equity Compensation Plans - Summary of Valuation Inputs for PSUs with Vesting Subject to Market Conditions (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk Free Rate | 1.60% | 0.00% | 2.34% | 0.00% |
Dividend | 0.00% | 0.00% | 0.00% | 0.00% |
Expected Term (years) | 6 years 2 months 12 days | 0 years | 6 years 2 months 12 days | 0 years |
Performance Shares, Vesting Subject to Market Conditions | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
PSUs Issued (in Shares) | 254 | |||
Risk Free Rate | 2.58% | |||
Volatility | 55.10% | |||
Dividend | 0.00% | |||
Valuation Per Share (in Dollars per share) | $ 3.73 | |||
Total Fair Value (in thousands) | $ 947 | |||
Expected Term (years) | 4 years | |||
Forfeiture Rate Assumed | 8.00% |
Accounts Receivable, Sales an_3
Accounts Receivable, Sales and Allowances - Net Trade Accounts Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Receivables [Abstract] | ||
Gross accounts receivable | $ 272,036 | $ 308,305 |
Less reserves for: | ||
Chargebacks | (41,092) | (55,312) |
Rebates | (47,478) | (55,963) |
Product returns | (33,114) | (35,146) |
Discounts and allowances | (5,348) | (6,561) |
Advertising and promotions | (1,549) | (1,574) |
Doubtful accounts | (584) | (623) |
Trade accounts receivable, net | $ 142,871 | $ 153,126 |
Accounts Receivable, Sales an_4
Accounts Receivable, Sales and Allowances - Adjustments to Gross Sales (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Receivables [Abstract] | ||||
Gross sales | $ 379,022 | $ 436,700 | $ 1,303,671 | $ 1,465,052 |
Less adjustments for: | ||||
Chargebacks | (141,943) | (188,884) | (540,055) | (635,329) |
Rebates, administrative and other fees | (46,212) | (66,843) | (188,445) | (234,217) |
Product returns | (5,900) | (4,805) | (23,273) | (18,059) |
Discounts and allowances | (7,297) | (8,471) | (25,371) | (28,654) |
Advertising, promotions and others | (1,426) | (2,072) | (6,355) | (8,161) |
Revenues, net | $ 176,244 | $ 165,625 | $ 520,172 | $ 540,632 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 86,541 | $ 76,981 |
Work in process | 8,196 | 13,870 |
Raw materials and supplies | 72,964 | 82,794 |
Inventories, net | 167,701 | 173,645 |
Inventory valuation reserves | $ 46,900 | $ 46,500 |
Property, Plant and Equipment_3
Property, Plant and Equipment, Net - Schedule of Components (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment, Net | ||
Property, plant and equipment, net | $ 322,119 | $ 334,853 |
Property, plant and equipment in service, net | ||
Property, Plant and Equipment, Net | ||
Property, plant, and equipment, gross | 423,683 | 395,814 |
Accumulated depreciation | (179,562) | (158,824) |
Property, plant and equipment, net | 244,121 | 236,990 |
Land and land improvements | ||
Property, Plant and Equipment, Net | ||
Property, plant, and equipment, gross | 17,492 | 17,608 |
Buildings and leasehold improvements | ||
Property, Plant and Equipment, Net | ||
Property, plant, and equipment, gross | 143,097 | 138,126 |
Furniture and equipment | ||
Property, Plant and Equipment, Net | ||
Property, plant, and equipment, gross | 263,094 | 240,080 |
Construction in progress | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, net | $ 77,998 | $ 97,863 |
Property, Plant and Equipment_4
Property, Plant and Equipment, Net - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment, Net | ||||||
Property, plant and equipment, net | $ 322,119 | $ 322,119 | $ 334,853 | |||
Tangible asset impairment charges | 200 | $ 100 | 9,200 | $ 100 | ||
Remaining net book value of assets | 1,398,364 | 1,398,364 | 1,495,257 | |||
Depreciation expense | 7,700 | $ 7,000 | 22,800 | $ 21,100 | ||
Foreign | ||||||
Property, Plant and Equipment, Net | ||||||
Property, plant and equipment, net | 97,800 | 97,800 | 91,900 | |||
Construction in progress | ||||||
Property, Plant and Equipment, Net | ||||||
Property, plant and equipment, net | $ 77,998 | 77,998 | $ 97,863 | |||
India Manufacturing Facility | ||||||
Property, Plant and Equipment, Net | ||||||
Property, plant and equipment, net | $ 51,100 | |||||
impairment of long-lived assets to be disposed of | $ 8,900 | |||||
Remaining net book value of assets | $ 55,500 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019USD ($)product | Mar. 31, 2019USD ($) | Sep. 30, 2018USD ($)product | Sep. 30, 2019USD ($)product | Sep. 30, 2018USD ($)product | Dec. 31, 2018USD ($) | |
Finite-Lived Intangible Assets | ||||||
Accumulated amortization | $ 243,190 | $ 257,200 | $ 243,190 | $ 257,200 | $ 217,603 | |
Amortization of intangibles | 9,375 | 13,613 | 30,390 | 39,985 | ||
Impairment of intangible assets | 10,748 | 112,998 | ||||
Impairment of goodwill | $ 0 | $ 16,000 | $ 0 | $ 15,955 | $ 0 | |
IPR&D | ||||||
Finite-Lived Intangible Assets | ||||||
Number of products impaired | product | 0 | 8 | 0 | 16 | ||
Impairment of intangible assets | $ 20,600 | $ 0 | $ 100,100 | 139,461 | ||
Product licensing rights | ||||||
Finite-Lived Intangible Assets | ||||||
Accumulated amortization | $ 227,678 | $ 227,678 | 203,323 | |||
Number of products impaired | product | 6 | 2 | 10 | |||
Impairment of intangible assets | $ 9,000 | |||||
Impairment of intangible assets, finite-lived | $ 10,700 | $ 12,900 | ||||
Impairment of intangible assets | 15,550 | 131,306 | ||||
Impairment of intangible assets, accumulated amortization | 4,900 | |||||
Other Intangibles | ||||||
Finite-Lived Intangible Assets | ||||||
Accumulated amortization | $ 6,000 | 6,000 | 5,658 | |||
Impairment of intangible assets | $ 0 | $ 5,235 | ||||
Minimum | ||||||
Finite-Lived Intangible Assets | ||||||
Intangible asset useful life | 1 year | |||||
Maximum | ||||||
Finite-Lived Intangible Assets | ||||||
Intangible asset useful life | 30 years | |||||
Other Operating Income (Expense) | Product licensing rights | ||||||
Finite-Lived Intangible Assets | ||||||
Impairment of intangible assets, finite-lived | $ 10,700 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Summary of the Activity in Goodwill by Segment | |||||
Balances at December 31, 2018 | $ 283,879 | $ 283,879 | |||
Currency translation adjustments | (1) | ||||
Acquisitions | 0 | ||||
Impairments | $ 0 | (16,000) | $ 0 | (15,955) | $ 0 |
Dispositions | 0 | ||||
Balances at September 30, 2019 | 267,923 | 267,923 | |||
Consumer Health | |||||
Summary of the Activity in Goodwill by Segment | |||||
Balances at December 31, 2018 | 16,717 | 16,717 | |||
Currency translation adjustments | 0 | ||||
Acquisitions | 0 | ||||
Impairments | 0 | ||||
Dispositions | 0 | ||||
Balances at September 30, 2019 | 16,717 | 16,717 | |||
Prescription Pharmaceuticals | |||||
Summary of the Activity in Goodwill by Segment | |||||
Balances at December 31, 2018 | $ 267,162 | 267,162 | |||
Currency translation adjustments | (1) | ||||
Acquisitions | 0 | ||||
Impairments | (15,955) | ||||
Dispositions | 0 | ||||
Balances at September 30, 2019 | $ 251,206 | $ 251,206 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets, Net - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Indefinite-lived Intangible Assets | ||||
Impairment | $ (10,748) | $ (112,998) | ||
Finite-Lived Intangible Assets | ||||
Accumulated Amortization | $ (257,200) | (243,190) | (257,200) | $ (217,603) |
Reclassifications | 0 | 0 | ||
Gross amount | 502,666 | 778,581 | ||
Impairment | (15,550) | (276,002) | ||
Net Balance | 243,926 | 284,976 | ||
IPR&D | ||||
Indefinite-lived Intangible Assets | ||||
Gross amount | 4,400 | 149,161 | ||
Reclassifications | 0 | (5,300) | ||
Impairment | (20,600) | 0 | $ (100,100) | (139,461) |
Net Balance | 4,400 | 4,400 | ||
Product licensing rights | ||||
Indefinite-lived Intangible Assets | ||||
Impairment | $ (9,000) | |||
Finite-Lived Intangible Assets | ||||
Gross amount | 472,041 | 597,960 | ||
Accumulated Amortization | (227,678) | (203,323) | ||
Reclassifications | 0 | 5,300 | ||
Impairment | (15,550) | (131,306) | ||
Net Balance | $ 228,813 | $ 268,631 | ||
Wtd Avg Remaining Amortization Period (years) | 8 years 7 months 6 days | 9 years 2 months 12 days | ||
Trademarks | ||||
Finite-Lived Intangible Assets | ||||
Gross amount | $ 16,000 | $ 16,000 | ||
Accumulated Amortization | (6,999) | (6,304) | ||
Reclassifications | 0 | 0 | ||
Impairment | 0 | 0 | ||
Net Balance | $ 9,001 | $ 9,696 | ||
Wtd Avg Remaining Amortization Period (years) | 17 years 2 months 12 days | 17 years 6 months | ||
Customer relationships | ||||
Finite-Lived Intangible Assets | ||||
Gross amount | $ 4,225 | $ 4,225 | ||
Accumulated Amortization | (2,513) | (2,318) | ||
Reclassifications | 0 | 0 | ||
Impairment | 0 | 0 | ||
Net Balance | $ 1,712 | $ 1,907 | ||
Wtd Avg Remaining Amortization Period (years) | 6 years 7 months 6 days | 7 years 3 months 18 days | ||
Other intangibles | ||||
Finite-Lived Intangible Assets | ||||
Gross amount | $ 6,000 | $ 11,235 | ||
Accumulated Amortization | (6,000) | (5,658) | ||
Reclassifications | 0 | 0 | ||
Impairment | 0 | (5,235) | ||
Net Balance | $ 0 | $ 342 | ||
Wtd Avg Remaining Amortization Period (years) | 0 years | 3 months 18 days |
Financing Arrangements - Additi
Financing Arrangements - Additional Information (Details) | May 06, 2019 | Apr. 16, 2019USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Dec. 31, 2014USD ($)instrument | Apr. 17, 2014USD ($) |
Debt Instrument [Line Items] | ||||||||
Number of debt instruments | instrument | 2 | |||||||
Non-cash interest expense | $ 2,567,000 | $ 0 | ||||||
Amortization of deferred financing costs | $ 8,581,000 | $ 1,304,000 | 15,540,000 | 3,912,000 | ||||
Term Loan Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal amount | $ 1,045,000,000 | |||||||
Amount outstanding | 845,400,000 | 845,400,000 | ||||||
Paid-in-kind fee | 10,900,000 | 10,900,000 | ||||||
Non-cash interest expense | 2,600,000 | |||||||
Amortization of deferred financing costs | 8,600,000 | 15,500,000 | ||||||
Unamortized deferred financing costs | 6,900,000 | 6,900,000 | ||||||
Debt interest expense | $ 20,000,000 | $ 14,600,000 | $ 55,600,000 | $ 40,600,000 | ||||
Line of Credit | Term Loan Facility | Standstill Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Commitment fee percentage | 0.625% | |||||||
Increase in interest rate percentage | 1.50% | |||||||
Increase in interest rate percentage, payable in cash | 0.75% | |||||||
Increase in interest rate percentage, payable in kind | 0.75% | |||||||
Number of consecutive business days in cure period | 5 days | |||||||
Increase in interest rate percentage due to failure to comply with covenants | 0.50% | |||||||
Line of Credit | Revolving Credit Facility | JPM Revolving Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 150,000,000 | |||||||
Line of credit facility, undrawn fee percentage | 0.25% | |||||||
Line of Credit | Revolving Credit Facility | A&R Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 150,000,000 | |||||||
Line of credit facility, extension of maturity | 90 days | |||||||
Line of credit facility, undrawn fee percentage | 0.05% |
Financing Arrangements - Variab
Financing Arrangements - Variable Interest Rates (Details) - Existing Term Loan Facility | 9 Months Ended |
Sep. 30, 2019 | |
Adjusted LIBOR (Eurodollar) Spread | Moody's, B1 Rating | Standard & Poor's, B Plus Rating or Higher | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 5.75% |
Adjusted LIBOR (Eurodollar) Spread | Moody's, B2 Rating | Standard & Poor's, B Rating | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 6.25% |
Adjusted LIBOR (Eurodollar) Spread | Moody's, B3 Rating | Standard & Poor's, B Minus Rating or Lower | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 7.00% |
Adjusted Base Rate (ABR) Spread | Moody's, B1 Rating | Standard & Poor's, B Plus Rating or Higher | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 4.75% |
Adjusted Base Rate (ABR) Spread | Moody's, B2 Rating | Standard & Poor's, B Rating | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 5.25% |
Adjusted Base Rate (ABR) Spread | Moody's, B3 Rating | Standard & Poor's, B Minus Rating or Lower | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 6.00% |
Financing Arrangements - Maturi
Financing Arrangements - Maturities of Long-Term Obligations (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Maturities of Long-term Obligations | |
Maturities of debt | $ 845,436 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
NET INCOME/(LOSS) | $ 47,670 | $ (70,140) | $ (146,110) | $ (186,871) |
NET INCOME/(LOSS) PER SHARE: | ||||
Basic (in Dollars per share) | $ 0.38 | $ (0.56) | $ (1.16) | $ (1.49) |
Diluted (in Dollars per share) | $ 0.38 | $ (0.56) | $ (1.16) | $ (1.49) |
SHARES USED IN COMPUTING NET INCOME/(LOSS) PER SHARE: | ||||
Weighted average basic shares outstanding (in Shares) | 126,144 | 125,462 | 125,920 | 125,346 |
Dilutive securities: | ||||
Total dilutive securities (in Shares) | 682 | 0 | 0 | |
Weighted average diluted shares outstanding (in Shares) | 126,826 | 125,462 | 125,920 | 125,346 |
Stock option | ||||
Dilutive securities: | ||||
Stock option and unvested RSUs and PSUs (in Shares) | 0 | 0 | 0 | 0 |
Shares subject to stock options, unvested RSUs and PSUs omitted from the calculation of (loss) per share as their effect would have been anti-dilutive (in Shares) | 5,201 | 3,603 | 4,690 | 3,823 |
Unvested RSUs and PSUs | ||||
Dilutive securities: | ||||
Stock option and unvested RSUs and PSUs (in Shares) | 682 | 0 | 0 | 0 |
Shares subject to stock options, unvested RSUs and PSUs omitted from the calculation of (loss) per share as their effect would have been anti-dilutive (in Shares) | 1,901 | 1,831 | 2,090 | 761 |
Segment Information - Additiona
Segment Information - Additional Information (Details) - segment | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting [Abstract] | ||||
Number of reportable segments (in segment) | 2 | 2 | 2 | 2 |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues, net: | ||||
Total revenues, net | $ 176,244 | $ 165,625 | $ 520,172 | $ 540,632 |
Gross Profit: | ||||
Total gross profit | 71,402 | 57,262 | 192,899 | 220,769 |
Operating expenses | 62,634 | 133,242 | 336,980 | 413,330 |
OPERATING INCOME/(LOSS) | 8,768 | (75,980) | (144,081) | (192,561) |
Other expenses, net | (27,355) | (12,559) | (65,384) | (36,261) |
(LOSS) BEFORE INCOME TAXES | (18,587) | (88,539) | (209,465) | (228,822) |
Prescription Pharmaceuticals | ||||
Revenues, net: | ||||
Total revenues, net | 155,568 | 148,469 | 461,962 | 484,933 |
Gross Profit: | ||||
Total gross profit | 62,133 | 50,231 | 167,361 | 197,025 |
Consumer Health | ||||
Revenues, net: | ||||
Total revenues, net | 20,676 | 17,156 | 58,210 | 55,699 |
Gross Profit: | ||||
Total gross profit | $ 9,269 | $ 7,031 | $ 25,538 | $ 23,744 |
Segment Information - Disaggreg
Segment Information - Disaggregation of Revenue By Geographical Region (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Revenues, net | $ 176,244 | $ 165,625 | $ 520,172 | $ 540,632 |
Domestic | ||||
Segment Reporting Information [Line Items] | ||||
Revenues, net | 171,986 | 161,858 | 510,228 | 529,598 |
Foreign | ||||
Segment Reporting Information [Line Items] | ||||
Revenues, net | $ 4,258 | $ 3,767 | $ 9,944 | $ 11,034 |
Geographic Concentration Risk | Net Revenue | ||||
Segment Reporting Information [Line Items] | ||||
Concentration risk percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Geographic Concentration Risk | Net Revenue | Domestic | ||||
Segment Reporting Information [Line Items] | ||||
Concentration risk percentage | 97.60% | 97.70% | 98.10% | 98.00% |
Geographic Concentration Risk | Net Revenue | Foreign | ||||
Segment Reporting Information [Line Items] | ||||
Concentration risk percentage | 2.40% | 2.30% | 1.90% | 2.00% |
Share Repurchases (Details)
Share Repurchases (Details) - USD ($) | 9 Months Ended | 39 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | Jul. 31, 2016 | |
Equity [Abstract] | |||
Maximum stock repurchase program amount | $ 200,000,000 | ||
Stock repurchased during period (in Shares) | 0 | 1,800,000 | |
Average price per share of stock repurchased (in Dollars per share) | $ 24.89 | ||
Remaining repurchase authorization | $ 155,000,000 | $ 155,000,000 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) shares in Millions | Sep. 30, 2019USD ($) | Sep. 13, 2019USD ($) | Aug. 16, 2019USD ($) | Jul. 25, 2019USD ($)shares | Feb. 20, 2019USD ($) | Sep. 05, 2018USD ($) | Apr. 07, 2017USD ($) | Dec. 31, 2018USD ($) |
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
2019 | $ 121,000 | |||||||
2020 | 2,099,000 | |||||||
2021 | 2,150,000 | |||||||
2022 | 550,000 | |||||||
Total | 4,920,000 | |||||||
Akorn, Inc v. Fresenius | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Damages sought | $ 123,000,000 | $ 102,000,000 | ||||||
Date Integrity Securities Litigation, First Occurrence | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Damages sought | $ 1,070,000,000 | |||||||
Date Integrity Securities Litigation, Second Occurrence | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Damages sought | $ 613,000,000 | |||||||
Ann Pope And Anthony Pope v. Horatio V. Cabasares M.D.P.C. Houston Healthcare Systems Inc. Akorn Sales Inc. and Akorn Inc. [Member] | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Damages sought | $ 20,500,000 | |||||||
Loss contingency liability | $ 20,500,000 | |||||||
Insurance settlements receivable | 8,800,000 | |||||||
Proceeds received from insurance carrier | $ 8,800,000 | |||||||
Payments paid to plaintiffs | $ 24,000,000 | |||||||
Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency, number of shares to be issued (shares) | shares | 6.5 | |||||||
Contingent value rights, duration of term | 5 years | |||||||
Contingent value rights, extension term | 2 years | |||||||
Percentage of excess EBITDA | 33.30% | |||||||
Loss contingency, EBITDA net leverage ratio | 3 | |||||||
Contingent value rights, minimum cash cushion | $ 100,000,000 | |||||||
Contingent value rights, aggregate cap per year | 12,000,000 | |||||||
Contingent value rights, aggregate cap per term | 60,000,000 | |||||||
Loss contingency liability | 74,000,000 | |||||||
Loss contingency, effect of 10% change in common stock price on reserve estimate | 3,100,000 | |||||||
Decrease in loss contingency accrual | 12,000,000 | |||||||
Payment of Insurance Proceeds | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency, estimate of possible loss | 30,000,000 | |||||||
Contingent Value Rights, Change of Control Payment | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency, estimate of possible loss | 30,000,000 | |||||||
Contingent Value Rights, Bankruptcy Claim | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency, estimate of possible loss | 30,000,000 | |||||||
Contingent Value Rights, Contingent Cash Payments | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency liability | 30,000,000 | |||||||
Liability to Issue Common Stock, Noncurrent | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency liability | 8,500,000 | |||||||
Liability to Issue Common Stock, Current | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency liability | $ 35,500,000 | |||||||
Possible Loss In Excess Of Estimated Liability | Securities Class Action Litigation | ||||||||
Contingent Potential Milestone Payments, Year ending December 31, | ||||||||
Loss contingency, estimate of possible loss | $ 30,000,000 |
Customer, Supplier and Produc_3
Customer, Supplier and Product Concentration - Additional Information (Details) - customer | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Risks and Uncertainties [Abstract] | ||||
Number of customers considered as concentration risks | 3 | 3 | 3 | 3 |
Prescription Pharmaceuticals | Net Revenue | Segment Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 88.30% | 89.60% | 88.80% | 89.70% |
Customer, Supplier and Produc_4
Customer, Supplier and Product Concentration - Sales and Receivables (Details) - Big 3 Wholesalers combined - Customer Concentration Risk | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Percentage of gross trade accounts receivable | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 83.00% | 86.00% | |||
Percentage of gross sales | |||||
Concentration Risk [Line Items] | |||||
Concentration risk percentage | 81.00% | 83.00% | 83.00% | 83.00% |
Customer, Supplier and Produc_5
Customer, Supplier and Product Concentration - Disaggregation of Revenue by Customer (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Concentration Risk [Line Items] | ||||
Revenues, net | $ 176,244 | $ 165,625 | $ 520,172 | $ 540,632 |
Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 100.00% | 100.00% | 100.00% | 100.00% |
Big 3 Wholesalers combined | ||||
Concentration Risk [Line Items] | ||||
Revenues, net | $ 106,512 | $ 103,722 | $ 313,478 | $ 334,333 |
Big 3 Wholesalers combined | Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 60.40% | 62.60% | 60.30% | 61.80% |
Amerisource | ||||
Concentration Risk [Line Items] | ||||
Revenues, net | $ 36,831 | $ 36,613 | $ 107,203 | $ 113,824 |
Amerisource | Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 20.90% | 22.10% | 20.60% | 21.10% |
Cardinal | ||||
Concentration Risk [Line Items] | ||||
Revenues, net | $ 31,156 | $ 26,835 | $ 89,255 | $ 83,886 |
Cardinal | Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 17.70% | 16.20% | 17.20% | 15.50% |
McKesson | ||||
Concentration Risk [Line Items] | ||||
Revenues, net | $ 38,525 | $ 40,274 | $ 117,020 | $ 136,623 |
McKesson | Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 21.90% | 24.30% | 22.50% | 25.30% |
All Others | ||||
Concentration Risk [Line Items] | ||||
Revenues, net | $ 69,732 | $ 61,903 | $ 206,694 | $ 206,299 |
All Others | Net Revenue | Customer Concentration Risk | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 39.60% | 37.40% | 39.70% | 38.20% |
Income Taxes - Provision (Detai
Income Taxes - Provision (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
(Loss) before income taxes | $ (18,587) | $ (88,539) | $ (209,465) | $ (228,822) |
Income tax (benefit) | (66,257) | (18,399) | (63,355) | (41,951) |
NET INCOME/(LOSS) | $ 47,670 | $ (70,140) | $ (146,110) | $ (186,871) |
Income tax (benefit) as a percentage of (loss) before income taxes | 20.80% | 30.20% | 18.30% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) | $ (66,257,000) | $ (18,399,000) | $ (63,355,000) | $ (41,951,000) |
(Loss) before income taxes | (18,587,000) | $ (88,539,000) | (209,465,000) | $ (228,822,000) |
Valuation allowance | 93,600,000 | 93,600,000 | ||
Unrecognized tax benefits | 2,100,000 | 2,100,000 | ||
Unrecognized tax benefits that would impact the Company's effective tax rate | 2,100,000 | 2,100,000 | ||
Unrecognized tax benefits, income tax penalties expense | 0 | |||
Unrecognized tax benefits, interest on income taxes expense | 100,000 | |||
Unrecognized tax benefits, income tax penalties accrued | 0 | 0 | ||
Unrecognized tax benefits, interest on income taxes accrued | $ 200,000 | $ 200,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Polsinelli | ||||
Related Party Transaction [Line Items] | ||||
Legal services obtained | $ 1,900,000 | $ 1,200,000 | $ 5,100,000 | $ 2,900,000 |
Accounts payable for legal services | 1,900,000 | 900,000 | 1,900,000 | 900,000 |
Family Member of the Company's Executive Vice President | Legal Services from Segal McCambridge Singer & Mahone | ||||
Related Party Transaction [Line Items] | ||||
Legal services obtained | $ 6,200,000 | $ 200,000 | $ 100,000 | $ 500,000 |
Recently Issued and Adopted A_2
Recently Issued and Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liabilities | $ 24,896 | |
Right-of-use assets, net - Operating leases | $ 23,016 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liabilities | $ 24,700 | |
Right-of-use assets, net - Operating leases | $ 23,000 |
Leasing Arrangements - Narrativ
Leasing Arrangements - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Lessee, Lease, Description [Line Items] | ||||
Lease cost | $ 1,634 | $ 4,918 | ||
Operating lease, rent expense | $ 1,600 | $ 4,900 | ||
Selling, General and Administrative Expenses | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease cost | 800 | 2,600 | ||
Cost of Sales | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease cost | 400 | 1,200 | ||
Research and Development Expense | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease cost | $ 400 | $ 1,100 |
Leasing Arrangements - Componen
Leasing Arrangements - Components of Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Leases [Abstract] | ||
Operating lease cost | $ 1,200 | $ 3,613 |
Amortization of finance lease assets | 5 | 54 |
Interest on finance lease liabilities | 1 | 9 |
Short-term lease cost | 1 | 28 |
Variable lease cost | 445 | 1,238 |
Sublease income | (18) | (24) |
Total lease cost | $ 1,634 | $ 4,918 |
Leasing Arrangements - Suppleme
Leasing Arrangements - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 3,491 | |
Operating cash flows from finance leases | 9 | |
Financing cash flows from finance leases | 344 | $ 10 |
Right-of-use assets, net obtained in exchange for new lease obligations: | ||
Operating leases | 24,764 | |
Finance leases | $ 71 |
Leasing Arrangements - Supple_2
Leasing Arrangements - Supplemental Balance Sheet Information (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Right-of-use assets, net: | |
Operating leases, gross | $ 24,711 |
Accumulated amortization | 1,695 |
Operating leases, net | 23,016 |
Finance leases (included in Other non-current assets), gross | 70 |
Accumulated depreciation | 15 |
Finance leases (included in Other non-current assets), net | 55 |
Total Right-of-use assets, net | 23,071 |
Lease liabilities: | |
Current portion of Operating lease liability | 2,334 |
Long-term Operating lease liability | 22,562 |
Total Operating lease liability | 24,896 |
Current portion of Finance lease (included in Accrued expenses and other liabilities) liability | 19 |
Long-term Finance lease (included in Pension obligations and other liabilities) liability | 38 |
Total Finance lease liability | 57 |
Total Lease liabilities | $ 24,953 |
Leasing Arrangements - Weighted
Leasing Arrangements - Weighted Average Lease Terms and Discount Rate (Details) | Sep. 30, 2019 |
Weighted-average remaining lease terms: | |
Operating leases | 8 years 5 months 23 days |
Finance leases | 2 years 9 months 29 days |
Weighted-average discount rates: | |
Operating leases | 9.95% |
Finance leases | 5.50% |
Leasing Arrangements - Schedule
Leasing Arrangements - Scheduled Maturities of Lease Liabilities (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |
2019 (last three months of 2019) | $ 1,210 |
2020 | 4,592 |
2021 | 4,771 |
2022 | 4,517 |
2023 | 3,860 |
2024 and thereafter | 18,901 |
Total lease payments | 37,851 |
Less: Imputed interest | 12,955 |
Total lease liabilities | 24,896 |
Finance leases | |
2019 (last three months of 2019) | 6 |
2020 | 22 |
2021 | 22 |
2022 | 13 |
2023 | 0 |
2024 and thereafter | 0 |
Total lease payments | 63 |
Less: Imputed interest | 6 |
Total lease liabilities | 57 |
Lease liability, reasonably assured renewal option payments | $ 11,400 |
Leasing Arrangements - Future M
Leasing Arrangements - Future Minimum Lease Payments Before Adoption of ASU (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Leases [Abstract] | |
2019 | $ 4,564 |
2020 | 4,647 |
2021 | 4,283 |
2022 | 3,724 |
2023 | 2,673 |
2024 and thereafter | 6,976 |
Total lease payments | $ 26,867 |
Pension plan and 401(k) Progr_3
Pension plan and 401(k) Program - Net Periodic Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Retirement Benefits [Abstract] | ||||
Service cost | $ 638 | $ 718 | $ 1,900 | $ 1,624 |
Interest cost | 62 | 66 | 183 | 149 |
Expected return on plan assets | (177) | (244) | (526) | (552) |
Amortization of: | ||||
Prior service (benefit) | (5) | (6) | (14) | (14) |
Net actuarial loss | 49 | 0 | 146 | 0 |
Participant contributions | (196) | (217) | (584) | (491) |
Net periodic benefit cost | $ 371 | $ 317 | $ 1,105 | $ 716 |
Pension plan and 401(k) Progr_4
Pension plan and 401(k) Program - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Retirement Benefits [Abstract] | ||||
Company contributions | $ 1.2 | |||
Expected future employer contributions, next fiscal year | $ 1.7 | $ 1.7 | ||
Employer's matching contribution, percent of match | 50.00% | |||
Employer's matching contribution, percent of employee's gross pay | 6.00% | |||
Employers matching contribution vesting percentage after two years of credited service | 50.00% | |||
Employers matching contribution vesting percentage after three years of credited service | 100.00% | |||
401k plan expense | $ 0.6 | $ 0.6 | $ 2.1 | $ 2 |