Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2018 | Jan. 31, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | LANNETT CO INC | |
Entity Central Index Key | 57,725 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 39,286,744 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 163,774 | $ 98,586 |
Accounts receivable, net | 275,364 | 252,651 |
Inventories | 136,128 | 141,635 |
Prepaid income taxes | 15,159 | |
Assets held for sale | 11,422 | 13,976 |
Other current assets | 7,958 | 4,863 |
Total current assets | 594,646 | 526,870 |
Property, plant and equipment, net | 195,607 | 233,247 |
Intangible assets, net | 409,870 | 424,425 |
Goodwill | 339,566 | |
Deferred tax assets | 100,013 | 22,063 |
Other assets | 19,320 | 29,133 |
TOTAL ASSETS | 1,319,456 | 1,575,304 |
Current liabilities: | ||
Accounts payable | 60,178 | 56,767 |
Accrued expenses | 7,283 | 7,425 |
Accrued payroll and payroll-related expenses | 15,545 | 7,819 |
Deferred revenue | 23,998 | |
Rebates payable | 44,384 | 49,400 |
Royalties payable | 9,615 | 5,955 |
Restructuring liability | 5,693 | 6,706 |
Liabilities held for sale | 1,204 | |
Settlement liability | 8,000 | |
Income taxes payable | 1,346 | |
Short-term borrowings and current portion of long-term debt | 66,845 | 66,845 |
Total current liabilities | 244,091 | 200,917 |
Long-term debt, net | 746,607 | 772,425 |
Other liabilities | 2,247 | 3,047 |
TOTAL LIABILITIES | 992,945 | 976,389 |
Commitments and contingencies (Note 12 and 13) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 38,766,807 and 38,256,839 shares issued; 37,822,927, and 37,380,517 shares outstanding at December 31, 2018 and June 30, 2018, respectively) | 39 | 38 |
Additional paid-in capital | 312,322 | 306,817 |
Retained earnings | 29,016 | 306,464 |
Accumulated other comprehensive loss | (502) | (515) |
Treasury stock (943,880 and 876,322 shares at December 31, 2018 and June 30, 2018, respectively) | (14,364) | (13,889) |
Total stockholders' equity | 326,511 | 598,915 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,319,456 | $ 1,575,304 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2018 | Jun. 30, 2018 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 38,766,807 | 38,256,839 |
Common stock, outstanding shares | 37,822,927 | 37,380,517 |
Treasury stock, shares | 943,880 | 876,322 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net sales | $ 193,718 | $ 184,305 | $ 348,772 | $ 339,266 |
Cost of sales | 115,751 | 88,914 | 203,441 | 168,467 |
Amortization of intangibles | 8,157 | 7,941 | 16,380 | 15,678 |
Gross profit | 69,810 | 87,450 | 128,951 | 155,121 |
Operating expenses: | ||||
Research and development expenses | 9,723 | 10,722 | 19,533 | 18,131 |
Selling, general and administrative expenses | 23,197 | 28,493 | 43,785 | 47,531 |
Acquisition and integration-related expenses | 65 | 83 | ||
Restructuring expenses | 213 | 1,035 | 1,235 | 1,562 |
Asset impairment charges | 369,499 | |||
Total operating expenses | 33,133 | 40,315 | 434,052 | 67,307 |
Operating income (loss) | 36,677 | 47,135 | (305,101) | 87,814 |
Other income (loss): | ||||
Investment income | 556 | 2,325 | 935 | 3,489 |
Interest expense | (21,512) | (20,686) | (42,945) | (41,598) |
Other | (712) | 3,386 | (1,008) | 3,135 |
Total other loss | (21,668) | (14,975) | (43,018) | (34,974) |
Income (loss) before income tax | 15,009 | 32,160 | (348,119) | 52,840 |
Income tax expense (benefit) | 2,647 | 18,138 | (72,953) | 25,561 |
Net income (loss) | $ 12,362 | $ 14,022 | $ (275,166) | $ 27,279 |
Earnings (loss) per common share: | ||||
Basic (in dollars per share) | $ 0.33 | $ 0.38 | $ (7.30) | $ 0.74 |
Diluted (in dollars per share) | $ 0.32 | $ 0.37 | $ (7.30) | $ 0.72 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 37,761,176 | 37,066,902 | 37,674,200 | 37,029,483 |
Diluted (in shares) | 39,112,547 | 38,290,358 | 37,674,200 | 38,087,826 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ 12,362 | $ 14,022 | $ (275,166) | $ 27,279 |
Other comprehensive income (loss), before tax: | ||||
Foreign currency translation gain (loss) | 7 | (126) | 13 | (125) |
Total other comprehensive income (loss), before tax | 7 | (126) | 13 | (125) |
Total other comprehensive income (loss), net of tax | 7 | (126) | 13 | (125) |
Comprehensive income (loss) | $ 12,369 | $ 13,896 | $ (275,153) | $ 27,154 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance at Jun. 30, 2017 | $ 37 | $ 292,780 | $ 277,774 | $ (222) | $ (9,247) | $ 561,122 |
Balance (in shares) at Jun. 30, 2017 | 37,528 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 805 | 806 | |||
Shares issued in connection with share-based compensation plans (in shares) | 233 | |||||
Share-based compensation | 4,752 | 4,752 | ||||
Purchase of treasury stock | (1,038) | (1,038) | ||||
Other comprehensive income (loss), net of tax | (125) | (125) | ||||
Net income (loss) | 27,279 | 27,279 | ||||
Balance at Dec. 31, 2017 | $ 38 | 298,337 | 305,053 | (347) | (10,285) | 592,796 |
Balance (in shares) at Dec. 31, 2017 | 37,761 | |||||
Balance at Sep. 30, 2017 | $ 38 | 295,282 | 291,031 | (221) | (9,859) | 576,271 |
Balance (in shares) at Sep. 30, 2017 | 37,672 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | 492 | 492 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 89 | |||||
Share-based compensation | 2,563 | 2,563 | ||||
Purchase of treasury stock | (426) | (426) | ||||
Other comprehensive income (loss), net of tax | (126) | (126) | ||||
Net income (loss) | 14,022 | 14,022 | ||||
Balance at Dec. 31, 2017 | $ 38 | 298,337 | 305,053 | (347) | (10,285) | 592,796 |
Balance (in shares) at Dec. 31, 2017 | 37,761 | |||||
Balance at Jun. 30, 2018 | $ 38 | 306,817 | 306,464 | (515) | (13,889) | 598,915 |
Balance (in shares) at Jun. 30, 2018 | 38,257 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Other comprehensive income (loss), net of tax | 13 | |||||
Net income (loss) | (275,166) | |||||
Balance at Dec. 31, 2018 | $ 39 | 312,322 | 29,016 | (502) | (14,364) | 326,511 |
Balance (in shares) at Dec. 31, 2018 | 38,767 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
ASC 606 adjustment | ASU 2014-09 | (2,282) | (2,282) | ||||
Shares issued in connection with share-based compensation plans | $ 1 | 520 | 521 | |||
Shares issued in connection with share-based compensation plans (in shares) | 510 | |||||
Share-based compensation | 4,985 | 4,985 | ||||
Purchase of treasury stock | (475) | (475) | ||||
Other comprehensive income (loss), net of tax | 13 | 13 | ||||
Net income (loss) | (275,166) | (275,166) | ||||
Balance at Dec. 31, 2018 | $ 39 | 312,322 | 29,016 | (502) | (14,364) | 326,511 |
Balance (in shares) at Dec. 31, 2018 | 38,767 | |||||
Balance at Sep. 30, 2018 | $ 39 | 310,135 | 16,654 | (509) | (14,295) | 312,024 |
Balance (in shares) at Sep. 30, 2018 | 38,665 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | 237 | 237 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 102 | |||||
Share-based compensation | 1,950 | 1,950 | ||||
Purchase of treasury stock | (69) | (69) | ||||
Other comprehensive income (loss), net of tax | 7 | 7 | ||||
Net income (loss) | 12,362 | 12,362 | ||||
Balance at Dec. 31, 2018 | $ 39 | $ 312,322 | $ 29,016 | $ (502) | $ (14,364) | $ 326,511 |
Balance (in shares) at Dec. 31, 2018 | 38,767 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
OPERATING ACTIVITIES: | ||
Net income (loss) | $ (275,166) | $ 27,279 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 28,622 | 27,354 |
Deferred income tax expense (benefit) | (77,950) | 22,169 |
Share-based compensation | 4,985 | 4,752 |
Asset impairment charges | 369,499 | |
Loss on sale of assets | 644 | 233 |
Loss (gain) on investment securities | (2,834) | |
Amortization of debt discount and other debt issuance costs | 8,934 | 9,987 |
Other noncash (income) expenses | (510) | 87 |
Changes in assets and liabilities which provided (used) cash: | ||
Accounts receivable, net | (25,887) | (52,662) |
Inventories | 2,156 | (12,987) |
Prepaid income taxes/Income taxes payable | 17,516 | 15,040 |
Other assets | (678) | (8,160) |
Accounts payable | 3,701 | 28,913 |
Accrued expenses | (4) | 231 |
Accrued payroll and payroll-related expenses | 8,501 | 11,203 |
Deferred revenue | 23,998 | |
Rebates payable | (5,016) | 3,786 |
Royalties payable | 3,660 | 2,564 |
Restructuring liability | (1,013) | (850) |
Settlement liability | 8,000 | |
Net cash provided by operating activities | 93,992 | 76,105 |
INVESTING ACTIVITIES: | ||
Purchases of property, plant and equipment | (12,030) | (26,402) |
Proceeds from sale of property, plant and equipment | 14,091 | 17 |
Proceeds from sale of outstanding loan to Variable Interest Entity ("VIE") | 5,600 | |
Purchase of intangible asset | (2,000) | (2,038) |
Proceeds from sale of investment securities | 44,924 | |
Purchase of investment securities | (42,841) | |
Net cash provided by (used in) investing activities | 5,661 | (26,340) |
FINANCING ACTIVITIES: | ||
Repayments of long-term debt | (33,422) | (27,283) |
Proceeds from issuance of stock | 521 | 806 |
Payment of debt issuance costs | (1,102) | |
Purchase of treasury stock | (475) | (1,038) |
Net cash used in financing activities | (34,478) | (27,515) |
Effect on cash and cash equivalents of changes in foreign exchange rates | 13 | (125) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 65,188 | 22,125 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 98,586 | 117,737 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 163,774 | 139,862 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest paid (net of capitalized interest of $0 and $974 thousand for the six months ended December 31, 2018 and 2017, respectively) | 34,190 | 31,250 |
Income taxes paid (refunded) | $ (11,993) | (7,567) |
Credits issued pursuant to a Settlement Agreement | $ 5,000 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
Capitalized interest, net | $ 0 | $ 974 |
Interim Financial Information
Interim Financial Information | 6 Months Ended |
Dec. 31, 2018 | |
Interim Financial Information | |
Interim Financial Information | Note 1. Interim Financial Information The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for the presentation of interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations and cash flows for the periods presented. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for the three and six months ended December 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019. These unaudited financial statements should be read in combination with the other Notes in this section; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2; and the Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018. The Consolidated Balance Sheet as of June 30, 2018 was derived from audited financial statements. |
The Business and Nature of Oper
The Business and Nature of Operations | 6 Months Ended |
Dec. 31, 2018 | |
The Business and Nature of Operations | |
The Business and Nature of Operations | Note 2. The Business and Nature of Operations Lannett Company, Inc. (a Delaware corporation) and its subsidiaries (collectively, the “Company” or “Lannett”) primarily develop, manufacture, package, market and distribute solid oral and extended release (tablets and capsules), topical, nasal and oral solution finished dosage forms of drugs that address a wide range of therapeutic areas. Certain of these products are manufactured by others and distributed by the Company. The Company also manufactures active pharmaceutical ingredients through its Cody Laboratories, Inc. (“Cody Labs”) subsidiary primarily for use in its finished dosage forms. In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business. See Note 22 “Assets Held for Sale” for more information. On November 25, 2015, the Company completed the acquisition of Kremers Urban Pharmaceuticals, Inc. (“KUPI”), the former U.S. specialty generic pharmaceuticals subsidiary of global biopharmaceuticals company UCB S.A. (“UCB”). KUPI is a specialty pharmaceuticals manufacturer focused on the development of products that are difficult to formulate or utilize specialized delivery technologies. The Company operates pharmaceutical manufacturing plants in Philadelphia, Pennsylvania; Cody, Wyoming; Carmel, New York and Seymour, Indiana. The Company’s customers include generic pharmaceutical distributors, drug wholesalers, chain drug stores, private label distributors, mail-order pharmacies, other pharmaceutical manufacturers, managed care organizations, hospital buying groups, governmental entities and health maintenance organizations. In the second quarter of Fiscal 2019, the Company ceased manufacturing functions at its State Road facility in Philadelphia, Pennsylvania. The Company discontinued distribution from its Townsend Road facility in Philadelphia, Pennsylvania as of January 31, 2019. The Company intends to sell its Townsend Road facility by the end of Fiscal 2019. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Business Combinations Acquired businesses are accounted for using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The fair values and useful lives assigned to each class of assets acquired and liabilities assumed are based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset and projected future cash flows. Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above could have a material impact on our consolidated results of operations. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the fair value of long-lived assets, including goodwill and intangible assets, income taxes, contingencies and share-based compensation. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. Foreign currency translation The Consolidated Financial Statements are presented in U.S. Dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at Cash and cash equivalents The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and certificates of deposit that are readily convertible into cash. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. Investment securities The Company’s investment securities consisted of publicly-traded equity securities which were classified as trading investments. Investment securities were recorded at fair value based on quoted market prices from broker or dealer quotations or transparent pricing sources at each reporting date. Realized and unrealized gains and losses are included in the Consolidated Statements of Operations under Other income (loss). In May 2018, the Company liquidated the remainder of the investment securities portfolio. As of December 31, 2018 and June 30, 2018, the Company does not own investment securities. Allowance for doubtful accounts The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time balances are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible. Inventories Inventories are stated at the lower of cost or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date and estimated sales forecasts. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, generally for periods ranging from 10 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. Valuation of Long-Lived Assets, including Intangible Assets other than Goodwill The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. In-Process Research and Development Amounts allocated to in-process research and development in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected lives of the related assets. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. Goodwill Goodwill, which represented the excess of purchase price over the fair value of net assets acquired, was carried at cost. Goodwill was tested for impairment on an annual basis on the first day of the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. The Company utilized a quantitative assessment to determine the fair value of our reporting unit (generic pharmaceuticals) based on market data as well as projected cash flows. If the carrying value of our reporting unit exceeded its fair value, the difference would be recorded as a goodwill impairment, not to exceed the carrying amount of goodwill. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. The judgments made in determining the estimated fair value of goodwill can materially impact our results of operations. Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2018 and 2017: Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2018 2017 2018 2017 Antibiotic $ 4,187 $ 3,552 $ 8,276 $ 6,900 Anti-Psychosis 14,036 22,799 24,924 37,791 Cardiovascular 25,680 10,135 47,450 21,441 Central Nervous System 6,187 6,925 13,384 15,742 Gallstone 2,489 5,282 4,703 11,846 Gastrointestinal 10,009 15,055 25,048 29,608 Glaucoma 512 2,164 1,060 4,832 Migraine 12,551 15,484 22,288 30,499 Muscle Relaxant 3,121 3,219 6,300 7,010 Pain Management 8,968 6,128 13,915 11,889 Respiratory 1,163 2,230 2,178 3,876 Thyroid Deficiency 88,477 68,794 142,354 116,008 Urinary 1,606 2,840 3,158 5,837 Other 6,827 13,105 21,168 25,802 Contract manufacturing revenue 7,905 6,593 12,566 10,185 Net sales $ 193,718 $ 184,305 $ 348,772 $ 339,266 Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the three and six months ended December 31, 2018 and 2017, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Product 1 46 % 37 % 41 % 34 % Product 2 7 % % % % The following table presents the percentage of total net sales, for the three and six months ended December 31, 2018 and 2017, for certain of the Company’s customers which accounted for at least 10% of net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Customer A 18 % 22 % 23 % 25 % Customer B 14 % — % 8 % — % Customer C 14 % 19 % 16 % 20 % Customer D 13 % 5 % 11 % 5 % Customer E 3 % 13 % 3 % 8 % The Company’s primary finished goods inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for approximately 34% and 39% of the Company’s inventory purchases during the three months ended December 31, 2018 and 2017, respectively. Purchases of finished goods inventory from JSP accounted for approximately 33% and 36% of the Company’s inventory purchases during the six months ended December 31, 2018 and 2017, respectively. See Note 21 “Material Contracts with Suppliers” for more information. Revenue Recognition On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , which superseded ASC Topic 605, Revenue Recognition . Under ASC 606, the Company recognizes revenue when (or as) we satisfy our performance obligations by transferring a promised good or service to a customer at an amount that reflects the consideration the Company is expected to be entitled. Our revenue consists almost entirely of sales of our pharmaceutical products to customers, whereby we ship product to a customer pursuant to a purchase order. Revenue contracts such as these do not generally give rise to contract assets or contract liabilities because: (i) the underlying contracts generally have only a single performance obligation and (ii) we do not generally receive consideration until the performance obligation is fully satisfied. The new revenue standard impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time”. However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The Company adopted ASC 606 using the modified retrospective method. Refer to the “ Recent Accounting Pronouncements ” section of this footnote for further discussion of the impact of the adoption. When revenue is recognized, a simultaneous adjustment to gross sales is made for estimated chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a new cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration ("FDA") approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application ("ANDA’). Because our drugs used for the treatment of thyroid deficiency and our Morphine Sulfate Oral Solution product were both approved by the FDA as 505(b)(2) NDAs, they are considered “brand” drugs for purposes of the PPACA. Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments, also known as “shelf-stock adjustments” and “price protections,” which are both 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 credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the FDA. Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expenses line item. Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists and the amount is reasonably estimable. Share-based Compensation Share-based compensation costs are recognized over the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the Black-Scholes valuation model to determine the fair value of stock options, the stock price on the grant date to value restricted stock and the Monte-Carlo simulation model to determine the fair value of performance-based shares. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the consolidated financial statements. Self-Insurance Effective January 1, 2017, the Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit its total liability exposure. The liability for self-insured risks is primarily calculated using independent third-party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan as of December 31, 2018 totaled $2.9 million and was not material to the financial position of the Company as of June 30, 2018. Income Taxes The Company uses the liability method to account for income taxes as prescribed by Accounting Standards Codification (“ASC”) 740, Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Under ASC 740, Income Taxes, a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. On December 22, 2017, President Trump signed the Tax Cut and Jobs Act legislation (“2017 Tax Reform”) into law, which included a broad range of tax reform provisions affecting businesses, including corporate tax rates, business deductions and international tax provisions. Many of these provisions significantly differ from the then-current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 requires registrants to report the tax effects of 2017 Tax Reform, inclusive of provisional amounts for which the accounting is incomplete but a reasonable estimate can be determined. SAB 118 also allows for a measurement period of up to one year in cases where a registrant reports a provisional amount or is unable to reasonably estimate the impact of 2017 Tax Reform. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments, in accordance with the expiration of the SAB 118 measurement period. Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earnings (loss) is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and performance-based shares. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss), but excluded from income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, which created ASC Topic 606 Revenue from Contracts with Customers . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The authoritative guidance is effective for annual reporting periods beginning after December 15, 2017. Based on a review of the contracts representing a substantial portion of our revenues, which is primarily generated from product sales, the Company determined that the updated guidance does not have a material impact on our disclosures or the timing and recognition of our revenues. Under the new standard, the Company estimates certain amounts as variable consideration, specifically any “failure-to-supply” adjustments at the point of product sale in future periods. The new revenue standard also impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time”. However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The cumulative impact of the adoption of ASC 606 resulted in a $2.3 million adjustment, net of tax, to opening retained earnings on July 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases . ASU 2016-02 requires an entity to recognize right-of-use assets and liabilities on its balance sheet for all leases with terms longer than 12 months. Lessees and lessors are required to disclose quantitative and qualitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and requires a modified retrospective application, with early adoption permitted. In December 2018, the FASB issued ASU 2018-20, Leases – Narrow Scope Improvements for lessors , which allows entities to choose an additional transition method of adoption, under which an entity initially applies the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earinings in the period of adoption. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments . ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was adopted on July 1, 2018 and did not have an impact on the Company’s consolidated financial statements. |
Restructuring Charges
Restructuring Charges | 6 Months Ended |
Dec. 31, 2018 | |
Restructuring Charges | |
Restructuring Charges | Note 4. Restructuring Charges Cody Restructuring Program On June 29, 2018, the Company announced a restructuring plan with respect to Cody Labs (the “Cody Restructuring Plan”). The plan focuses on a more select set of opportunities which will result in streamlined operations, improved efficiencies and a reduced cost structure. The Company currently estimates that it will incur approximately $4.5 million of total costs to implement the Cody Restructuring Plan, comprised primarily of approximately $3.0 million of severance and employee-related costs. The expenses associated with the Cody Restructuring Plan included in restructuring expenses (credits) during the three and six months ended December 31, 2018 were as follows: Three Months Ended Six Months Ended (In thousands) December 31, 2018 December 31, 2018 Employee separation costs (credits) $ (640) $ (496) Facility closure costs — — Total $ (640) $ (496) In the second quarter of Fiscal 2019, the Company adjusted separation costs related to changes in stock price for unvested equity awards, which will be paid upon termination to certain employees. A reconciliation of the changes in restructuring liabilities associated with the Cody Restructuring Plan from June 30, 2018 through December 31, 2018 is set forth in the following table: Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,092 $ — $ 3,092 Restructuring Charges (496) — (496) Payments (1,074) — (1,074) Balance at December 31, 2018 $ 1,522 — $ 1,522 2016 Restructuring Program On February 1, 2016, in connection with the acquisition of KUPI, the Company announced a plan related to the future integration of KUPI and the Company’s operations (the “2016 Restructuring Program”). The plan focuses on the closure of KUPI’s corporate functions and the consolidation of manufacturing, sales, research and development and distribution functions. The Company estimates that it will incur an aggregate of up to approximately $20.0 million in restructuring charges for actions that have been announced or communicated since the 2016 Restructuring Program began. Of this amount, approximately $11.0 million relates to employee separation costs, approximately $1.0 million relates to contract termination costs and approximately $8.0 million relates to facility closure costs and other actions. The 2016 Restructuring Program is expected to be completed by the end of Fiscal 2019. The expenses associated with the restructuring program included in restructuring expenses during the three and six months ended December 31, 2018 and 2017 were as follows: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Employee separation costs (credits) $ 293 $ 210 $ 707 $ (380) Facility closure costs 560 825 1,024 1,942 Total $ 853 $ 1,035 $ 1,731 $ 1,562 A reconciliation of the changes in restructuring liabilities associated with the 2016 Restructuring Program from June 30, 2018 through December 31, 2018 is set forth in the following table: Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,614 $ — $ 3,614 Restructuring Charges 707 1,024 1,731 Payments (150) (1,024) (1,174) Balance at December 31, 2018 $ 4,171 $ — $ 4,171 |
Accounts Receivable
Accounts Receivable | 6 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable | |
Accounts Receivable | Note 5. Accounts Receivable Accounts receivable consisted of the following components at December 31, 2018 and June 30, 2018: December 31, June 30, (In thousands) 2018 2018 Gross accounts receivable $ 515,266 $ 503,175 Less Chargebacks reserve (128,102) (153,034) Less Rebates reserve (34,673) (33,102) Less Returns reserve (49,508) (43,059) Less Other deductions (26,263) (20,021) Less Allowance for doubtful accounts (1,356) (1,308) Accounts receivable, net $ 275,364 $ 252,651 For the three months ended December 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $334.6 million, $78.8 million, $11.3 million, and $20.7 million, respectively. For the three months ended December 31, 2017, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $220.2 million, $77.6 million, $4.1 million, and $16.3 million, respectively. For the six months ended December 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $612.6 million, $143.6 million, $18.7 million, and $34.6 million, respectively. For the six months ended December 31, 2017, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $474.9 million, $156.1 million, $14.5 million, and $28.6 million, respectively. The following table identifies the activity and ending balances of each major category of revenue-related reserve for the six months ended December 31, 2018 and 2017: Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2018 $ 153,034 $ 82,502 $ 43,059 $ 20,021 $ 298,616 Adjustment related to adoption of ASC 606 — — — 3,536 3,536 Current period provision 612,560 143,578 18,662 34,574 809,374 Credits issued during the period (637,492) (147,023) (12,213) (31,868) (828,596) Balance at December 31, 2018 $ 128,102 $ 79,057 $ 49,508 $ 26,263 $ 282,930 Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2017 $ 79,537 $ 87,616 $ 42,135 $ 11,096 $ 220,384 Current period provision 474,882 156,073 14,541 28,623 674,119 Credits issued during the period (499,959) (157,071) (11,881) (21,713) (690,624) Balance at December 31, 2017 $ 54,460 $ 86,618 $ 44,795 $ 18,006 $ 203,879 For the three months ending December 31, 2018 and 2017, as a percentage of gross sales the provision for chargebacks was 53.0% and 44.4%, the provision for rebates was 12.5% and 15.7%, the provision for returns was 1.8% and 0.8% and the provision for other adjustments was 3.3% and 3.3%, respectively. For the six months ending December 31, 2018 and 2017, as a percentage of gross sales the provision for chargebacks was 53.5% and 47.3%, the provision for rebates was 12.5% and 15.6%, the provision for returns was 1.6% and 1.4%, and the provision for other adjustments was 3.0% and 2.9%, respectively. On July 1, 2018, the Company adopted ASC 606 which resulted in a $3.2 million pre-tax adjustment to opening retained earnings and accounts receivable, of which $3.5 million related to “failure-to-supply” reserves offset by $0.3 million related to the timing of recognition of certain contract manufacturing arrangements. The decrease in the chargebacks reserve from June 30, 2018 to December 31, 2018 was primarily the result of increased customer orders in June 2018 in advance of a mid-week holiday as well as a related maintenance shutdown of the Company’s Seymour, Indiana manufacturing facility in the first week of July 2018. The Amneal Distribution and Transition Support Agreement (the “Amneal Agreement”), which shifted the Company’s sales of Levothyroxine Sodium Tablets directly to Amneal, also contributed to the decrease in the chargebacks reserve. The activity in the “Other” category for the six months ended December 31, 2018 and 2017 includes, shelf-stock, shipping and other sales adjustments including prompt payment discounts and “failure-to-supply” adjustments. Historically, we have not recorded any material amounts in the current period related to reversals or additions of prior period reserves. If the Company were to record a material reversal or addition of any prior period reserve amount, it would be separately disclosed. |
Inventories
Inventories | 6 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Inventories | Note 6. Inventories Inventories at December 31, 2018 and June 30, 2018 consisted of the following: (In thousands) December 31, 2018 June 30, 2018 Raw materials $ 57,780 $ 64,647 Work-in-process 30,726 19,983 Finished goods 47,622 57,005 Total $ 136,128 $ 141,635 Inventory balances were written-down by $20.7 million and $11.9 million at December 31, 2018 and June 30, 2018, respectively for excess and obsolete inventory amounts. During the three months ended December 31, 2018 and 2017, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $8.9 million and $2.2 million, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $12.8 million and $4.4 million, respectively. In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business. As such, all assets, including inventory totaling $3.4 million, and liabilities associated with the Cody API business are recorded in the assets and liabilities held for sale captions in the Consolidated Balance Sheet as of December 31, 2018. See Note 22 “Assets Held for Sale” for more information. |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note 7. Property, Plant and Equipment Property, plant and equipment,net at December 31, 2018 and June 30, 2018 consisted of the following: (In thousands) Useful Lives December 31, 2018 June 30, 2018 Land — $ 2,283 $ 2,900 Building and improvements 10 - 39 years 85,958 105,041 Machinery and equipment 5 - 10 years 156,903 173,988 Furniture and fixtures 5 - 7 years 3,224 4,099 Less: accumulated depreciation (79,991) (89,996) 168,377 196,032 Construction in progress 27,230 37,215 Property, plant and equipment, net $ 195,607 $ 233,247 Depreciation expense for the three months ended December 31, 2018 and 2017 was $5.7 million and $5.4 million, respectively. Depreciation expense for the six months ended December 31, 2018 and 2017 was $12.2 million and $11.1 million, respectively. In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business. As such, all assets, including property, plant and equipment totaling $36.6 million, and liabilities associated with the Cody API business are recorded in the assets and liabilities held for sale captions in the Consolidated Balance Sheet as of December 31, 2018. In addition, as part of the held for sale classification, the Company is required to record the assets of the Cody API business at fair value less costs to sell. The Company performed a fair value analysis which resulted in a $29.9 million impairment of the Cody API property, plant and equipment assets. See Note 22 “Assets Held for Sale” for more information. During the three months ended December 31, 2018, the Company had no impairment charges related to property, plant and equipment. Property, plant and equipment, net included amounts held in foreign countries in the amount of $1.7 million and $1.1 million at December 31, 2018 and June 30, 2018, respectively. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | Note 8. Fair Value Measurements The Company’s financial instruments recorded in the Consolidated Balance Sheets include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt obligations. Included in cash and cash equivalents are certificates of deposit with maturities less than or equal to three months at the date of purchase and money market funds. The carrying value of certain financial instruments, primarily cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate their estimated fair values based upon the short-term nature of their maturity dates. The Company follows the authoritative guidance of ASC Topic 820 “Fair Value Measurements and Disclosures.” Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s financial assets and liabilities measured at fair value are entirely within Level 1 of the hierarchy as defined below: Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. Level 2 — Directly or indirectly observable inputs, other than quoted prices, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 — Unobservable inputs that are supported by little or no market activity and that are material to the fair value of the asset or liability. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation are examples of Level 3 assets and liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial Instruments Disclosed, But Not Reported, at Fair Value The fair value of our long-term debt was approximately $727 million and $893 million as of December 31, 2018 and June 30, 2018, respectively. We estimate the fair value of our debt utilizing market quotations for debt that have quoted prices in active markets. Since our debt does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2). |
Investment Securities
Investment Securities | 6 Months Ended |
Dec. 31, 2018 | |
Investment Securities | |
Investment Securities | Note 9. Investment Securities The Company uses the specific identification method to determine the cost of securities sold, which consisted entirely of equity securities classified as trading. In May 2018, the Company liquidated the remainder of the investment securities portfolio. As of December 31, 2018 and June 30, 2018, the Company does not own investment securities. The Company had a net gain on investment securities of $2.0 million during the three months ended December 31, 2017, which included an unrealized gain related to securities still held at December 31, 2017 of $1.2 million. The Company had a net gain on investment securities of $2.8 million during the six months ended December 31, 2017, which included an unrealized gain related to securities still held at December 31, 2017 of $1.1 million. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 10. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the six months ended December 31, 2018 are as follows: Generic (In thousands) Pharmaceuticals Balance at June 30, 2018 $ 339,566 Goodwill acquired — Impairment (339,566) Balance at December 31, 2018 $ — On August 17, 2018, JSP notified the Company that it will not extend or renew the JSP Distribution Agreement when the current term expires on March 23, 2019. The Company determined that JSP’s decision represented a triggering event under U.S. GAAP to perform an analysis to determine the potential for impairment of goodwill. On October 4, 2018, the Company completed the analysis based on market data and concluded a full impairment of goodwill was required. Intangible assets, net as of December 31, 2018 and June 30, 2018, consisted of the following: Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life December 31, June 30, December 31, June 30, December 31, June 30, (In thousands) (Yrs.) 2018 2018 2018 2018 2018 2018 Definite-lived: Cody Labs import license 15 $ — $ 581 $ — $ (386) $ — $ 195 KUPI product rights 15 416,154 416,154 (83,712) (69,840) 332,442 346,314 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (3,928) (3,295) 15,072 15,705 Silarx product rights 15 10,000 10,000 (2,389) (2,056) 7,611 7,944 Other product rights 13 21,692 19,693 (3,396) (1,875) 18,296 17,818 Total definite-lived $ 469,766 $ 468,348 $ (96,345) $ (80,372) $ 373,421 $ 387,976 Indefinite-lived: KUPI in-process research and development — $ 18,000 $ 18,000 $ — $ — $ 18,000 $ 18,000 Silarx in-process research and development — 18,000 18,000 — — 18,000 18,000 Other product rights — 449 449 — — 449 449 Total indefinite-lived 36,449 36,449 — — 36,449 36,449 Total intangible assets, net $ 506,215 $ 504,797 $ (96,345) $ (80,372) $ 409,870 $ 424,425 For the three months ended December 31, 2018 and 2017, the Company recorded amortization expense of $8.2 million. For the six months ended December 31, 2018 and 2017, the Company recorded amortization expense of $16.4 million and $16.3 million, respectively. Future annual amortization expense consisted of the following as of December 31, 2018: (In thousands) Fiscal Year Ending June 30, Annual Amortization Expense 2019 $ 15,224 2020 30,443 2021 30,443 2022 30,443 2023 30,443 Thereafter 236,425 $ 373,421 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Dec. 31, 2018 | |
Long-Term Debt | |
Long-Term Debt | Note 11. Long-Term Debt Long-term debt, net consisted of the following: December 31, June 30, (In thousands) 2018 2018 Term Loan A due 2020; 7.52% as of December 31, 2018 $ 213,526 $ 227,276 Unamortized discount and other debt issuance costs (8,843) (10,178) Term Loan A, net 204,683 217,098 Term Loan B due 2022; 7.90% as of December 31, 2018 650,338 670,011 Unamortized discount and other debt issuance costs (41,569) (47,839) Term Loan B, net 608,769 622,172 Revolving Credit Facility due 2020 — — Total debt, net 813,452 839,270 Less short-term borrowings and current portion of long-term debt (66,845) (66,845) Total long-term debt, net $ 746,607 $ 772,425 On December 10, 2018, the Company entered into an amendment to the Senior Secured Credit Facility and the Credit and Guaranty Agreement. Pursuant to the amendment, the Secured Net Leverage Ratio applicable to the financial leverage ratio covenant was increased from 3:25:1.00 to 4.25:1.00 as of December 31, 2019 and prior to September 30, 2020, and then to 4:00:1:00 as of September 30, 2020. In exchange, the Company agreed to include a minimum liquidity covenant of $75 million, a 25-basis point increase to the interest rate margin paid on the Term A Loans and pay a consent fee equal to 50 basis points, paid only to consenting lenders. Long-term debt amounts due, for the twelve-month periods ending December 31 are as follows: Amounts Payable (In thousands) to Institutions 2019 $ 66,845 2020 225,371 2021 39,345 2022 532,303 Total $ 863,864 |
Legal, Regulatory Matters and C
Legal, Regulatory Matters and Contingencies | 6 Months Ended |
Dec. 31, 2018 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 12. Legal, Regulatory Matters and Contingencies Connecticut Attorney General Inquiry In July 2014, the Company received interrogatories and subpoena from the State of Connecticut Office of the Attorney General concerning its investigation into the pricing of digoxin. According to the subpoena, the Connecticut Attorney General is investigating whether anyone engaged in any activities that resulted in (a) fixing, maintaining or controlling prices of digoxin or (b) allocating and dividing customers or territories relating to the sale of digoxin in violation of Connecticut antitrust law. In June 2016, the Connecticut Attorney General issued interrogatories and a subpoena to an employee of the Company in order to gain access to documents and responses previously supplied to the Department of Justice. In December 2016, the Connecticut Attorney General, joined by numerous other State Attorneys General, filed a civil complaint alleging that six pharmaceutical companies engaged in anti-competitive behavior related to doxycycline hyclate and gliburide. The Company was not named in the action and does not compete on the products that formed the basis of the complaint. The complaint was later transferred for pretrial purposes to the United States District Court for the Eastern District of Pennsylvania as part of a multidistrict litigation captioned In re: Generic Pharmaceuticals Pricing Antitrust Litigation. On October 31, 2017, the state Attorneys General filed a motion in the District Court for leave to amend their complaint to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The claim relating to Lannett involves alleged price-fixing for one drug, doxycycline monohydrate, but does not involve the pricing for digoxin. The state Attorneys General also allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. The Court granted that motion on June 5, 2018. The state Attorneys General filed their amended complaint on June 15, 2018. None of the defendants, including the Company, has responded yet to the amended complaint. The Company maintains that it acted in compliance with all applicable laws and regulations and continues to cooperate with the Connecticut Attorney General investigation. Federal Investigation into the Generic Pharmaceutical Industry The Company and certain affiliated individuals and customers have been served with grand jury subpoenas relating to a federal investigation of the generic pharmaceutical industry into possible violations of the Sherman Act. The subpoenas request corporate documents of the Company relating to corporate, financial and employee information, communications or correspondence with competitors regarding the sale of generic prescription medications and the marketing, sale, or pricing of certain products, generally for the period of 2005 through the dates of the subpoenas. The Company received a Civil Investigative Demand (“CID”) from the Department of Justice on May 14, 2018. The CID requests information regarding allegations that the generic pharmaceutical industry engaged in market allocation, price fixing, payment of illegal remuneration and submission of false claims. The CID requests information from 2009-present. The Company is in the process of responding to the CID. Based on reviews performed to date by outside counsel, the Company currently believes that it has acted in compliance with all applicable laws and regulations and continues to cooperate with the federal investigation. Texas Medicaid Investigation In August 2015, KUPI received a letter from the Texas Office of the Attorney General alleging that it had inaccurately reported certain price information in violation of the Texas Medicaid Fraud Prevention Act. UCB, KUPI’s previous parent company is handling the defense and is evaluating the allegations and cooperating with the Texas Attorney General’s Office. Per the terms of the Stock Purchase Agreement between the Company and UCB (“Stock Purchase Agreement”) dated September 2, 2015, the Company is fully indemnified for any pre-acquisition amounts. In December 2018, KUPI and the State of Texas settled the allegations for the sum of $8.0 million, which is fully indemnified by UCB. UCB forwarded the $8.0 million to KUPI in December 2018 and, following its receipt of the fully executed settlement agreement, KUPI forwarded the settlement funds to the State of Texas in January 2019. Government Pricing During the quarter ended December 31, 2016, the Company completed a contract compliance review, for the period January 1, 2012 through June 30, 2016, for one of KUPI’s government-entity customers. As a result of the review, the Company identified certain commercial customer prices and other terms that were not properly disclosed to the government-entity resulting in potential overcharges. As of December 31, 2018 and June 30, 2018, the Company’s best estimate of the liability for potential overcharges was approximately $9.3 million. For the period January 1, 2012 through November 24, 2015 (“the pre-acquisition period”), the Company is fully indemnified per the Stock Purchase Agreement. Accordingly, the Company has recorded an indemnification asset and related liability of $8.3 million related to the pre-acquisition period. The Company does not believe that the ultimate resolution of this matter will have a significant impact on our financial position, results of operations or cash flows. EPA Violation Notice On July 13, 2017, the United States Department of Environmental Protection Agency (“EPA”) sent a Finding of Violation to KUPI alleging several violations of national emissions standards for hazardous air pollutants at KUPI’s Seymour, Indiana facility . The EPA and KUPI have entered into an agreed Administrative Consent Order and Consent Assessment and Final Order to resolve the alleged violations, whereby KUPI made a payment of $60,000 to the EPA and escrowed the sum of $225,000 to be used to fund an environmental project. The Orders were fully executed on December 31, 2018. Private Antitrust and Consumer Protection Litigation The Company and certain competitors have been named as defendants in a number of lawsuits filed in 2016 and 2017 alleging that the Company and certain generic pharmaceutical manufacturers have conspired to fix prices of generic digoxin, levothyroxine, ursodiol and baclofen. These cases are part of a larger group of more than 100 lawsuits generally alleging that over 30 generic pharmaceutical manufacturers and distributors conspired to fix prices for at least 18 different generic drugs in violation of the federal Sherman Act, various state antitrust laws, and various state consumer protection statutes. The United States also has been granted leave to intervene in the cases. On April 6, 2017, the Judicial Panel on Multidistrict Litigation (the “JPML”) ordered that all of the cases alleging price-fixing for generic drugs be consolidated for pretrial proceedings in the United States District Court for the Eastern District of Pennsylvania under the caption In re: Generic Pharmaceuticals Pricing Antitrust Litigation. The various plaintiffs are grouped into three categories — Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers — and filed Consolidated Amended Complaints (“CACs”) against the Company and the other defendants on August 15, 2017. The CACs naming the Company as a defendant involve generic digoxin, levothyroxine, ursodiol and baclofen. Pursuant to a court-ordered schedule grouping the 18 different drug cases into three separate tranches, the Company and other generic pharmaceutical manufacturer defendants on October 6, 2017 filed joint and individual motions to dismiss the CACs involving the six drugs in the first tranche, including digoxin. On October 16, 2018, the Court (with one exception) denied defendants’ motions to dismiss plaintiffs’ Sherman Act claims with respect to the drugs in the first tranche. Defendants’ motions to dismiss plaintiffs’ state law claims with respect to those drugs remain pending. On January 22, 2018, three opt-out direct purchasers filed a complaint alleging an overarching conspiracy and individual conspiracies on behalf of the Company and numerous other defendants to fix the prices of and allocate markets for at least 30 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. On August 3, 2018, another opt-out direct purchaser filed a complaint alleging an overarching conspiracy and individual conspiracies on behalf of the Company and numerous other defendants to fix the prices of and allocate markets for 16 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. On January 16, 2019, another opt-out direct purchaser filed a complaint alleging an overarching conspiracy and individual conspiracies on behalf of the Company and numerous other defendants to fix the prices of and allocate markets for the 30 different drugs, including digoxin, doxycycline, levothyroxine, ursodiol, baclofen and acetazolamide. None of the defendants, including the Company, has responded yet to the opt-out complaints. In addition to the lawsuits brought by private plaintiffs, the Attorneys General of 48 states, the District of Columbia and Puerto Rico have filed parens patriae lawsuits alleging price-fixing conspiracies by various generic pharmaceutical manufacturers. The JPML has consolidated the suits by the state Attorneys General in the Eastern District of Pennsylvania as part of the multidistrict litigation. The original lawsuits did not name the Company, but the state Attorneys General filed an amended complaint on June 5, 2018 to add numerous additional defendants, including the Company, and claims relating to 13 additional drugs. The claim relating to Lannett involves alleged price-fixing for one drug, doxycycline monohydrate, although the state Attorneys General allege that all defendants were part of an overarching, industry-wide conspiracy to allocate markets and fix prices generally. None of the defendants, including the Company, has responded yet to the amended complaint. Following the lead of the state Attorneys General, the Direct Purchaser Plaintiffs, End Payer Plaintiffs and Indirect Reseller Plaintiffs have filed their own complaints also alleging an overarching conspiracy, making similar allegations to those contained in the state Attorneys General complaint, relating to 14 generic drugs in the End Payer complaint and 15 generic drugs in the Indirect Reseller complaint. The End Payer Plaintiffs filed their complaint on June 7, 2018, the Indirect Reseller Plaintiffs filed their complaint on June 18, 2018, and the Direct Purchaser Plaintiffs filed their complaint on June 22, 2018. Although the complaints allege an overarching conspiracy with respect to all of the drugs identified, the specific allegations related to drugs Lannett makes involve acetazolamide and doxycycline monohydrate. None of the defendants, including the Company, has responded yet to these complaints. On September 25, 2018, two other alleged direct purchasers filed a purported class action complaint alleging an overreaching, industry-wide horizontal and vertical conspiracy involving the company, other generic pharmaceutical manufacturers, and various pharmaceutical distributors to allocate markets and fix prices generally for a variety of generic drugs. The case has been added to the multidistrict litigation. On December 21, 2018, the plaintiffs filed an amended complaint. None of the defendants, including the Company, has responded yet to the amended complaint. The Company believes that it acted in compliance with all applicable laws and regulations. Accordingly, the Company disputes the allegations set forth in these class actions. Shareholder Litigation In November 2016, a putative class action lawsuit was filed against the Company and two of its officers claiming that the Company damaged the purported class by including in its securities filings false and misleading statements regarding the Company’s drug pricing methodologies and internal controls. An amended complaint was filed in May 2017, and the Company filed a motion to dismiss the amended complaint in September 2017. In December 2017, counsel for the putative class filed a second amended complaint, and the Court denied as moot the Company’s motion to dismiss the first amended complaint. The Company filed a motion to dismiss the second amended complaint in February 2018. In July 2018, the court granted the Company’s motion to dismiss the second amended complaint. In September 2018, counsel for the putative class filed a third amended complaint. The Company filed a motion to dismiss the third amended complaint in November 2018. The Company cannot reasonably predict the outcome of the suit at this time. In July 2018, a shareholder derivative complaint was filed against the Company and certain of its current and former directors and executives in the United States District Court for the Eastern District of Pennsylvania. The derivative complaint alleges that the Company engaged in an illegal conspiracy to fix generic drug prices and that the Company’s directors and executives violated their fiduciary duties by allowing the Company to violate the applicable laws and regulations and failing to take any action to curtail management’s deliberate price-fixing scheme. The derivative complaint includes causes of action for violation of Section 10(b) of the Exchange Act, violation of Section 14(a) of the Exchange Act, violation of Section 29(a) of the Exchange Act, and for breach of fiduciary duty. In October 2018, the Court issued an order stating the derivative suit for all purposes for a period of 180 days or until the Court issues an order on the motion to dismiss the third amended complaint filed in the matter of Utesch v. Lannett Co., Inc., et al., No. 2:16cv-05932, whichever is later. The Company cannot reasonably predict the outcome of the suit at this time. In October 2018, a putative class action lawsuit was filed against the Company and two of its officers in the federal court for the Eastern District of Pennsylvania, alleging that the Company, its Chief Executive Officer and its Chief Financial Officer damaged the purported class by making false and misleading statements in connection with the possible renewal of the JSP Distribution Agreement. The Company and the corporate executives named in the complaint deny that they made any false or misleading statements. In December 2018, counsel for the putative class filed an amended complaint. The Company moved to dismiss the amended complaint in January 2019. The Company cannot reasonably predict the outcome of this suit at this time. In December 2018, the Chairman of the Company’s Board of Directors received a letter sent on behalf of two purported shareholders demanding that the Company’s Board of Directors investigate and commence legal proceedings against certain former and/or current directors, officers, and agents of the Company relating to alleged breaches of fiduciary duties, corporate waste, and unjust enrichment. The Company and the Company’s Board of Directors responded to the demand letter by requesting that the purported shareholders provide proof of their status and shareholders of the Company. The Company and the Company’s Board of Directors recently received a reply to the letter sent in response to the demand letter and are reviewing the information provided. At this time the Company cannot reasonably predict what outcome, if any, will follow from the Company and the Company’s Board of Director’s receipt of the demand letter. Genus Life Sciences In December 2018, Genus Lifesciences, Inc. (“Genus”) sued the Company, Cody Labs, and others in California federal court, alleging violations of the Lanham Act, Sherman Act, and California false advertising law. Genus received FDA approval for a cocaine hydrochloride product in December 2018, and its claims are premised in part on allegations that the Company falsely advertises its unapproved cocaine hydrochloride product, C-Topical. The Company denies that it is falsely advertising its C-Topical product and continues to market its unapproved product relying on the Guidance for FDA Staff and Industry, Marketed Unapproved Drugs – Compliance Policy Guide, pending approval of its 505(b)(2) application. The Company cannot reasonably predict the outcome of this suit at this time. Patent Infringement (Paragraph IV Certification) There is substantial litigation in the pharmaceutical industry with respect to the manufacture, use and sale of new products which are the subject of conflicting patent and intellectual property claims. Certain of these claims relate to paragraph IV certifications, which allege that an innovator patent is invalid or would not be infringed upon by the manufacture, use, or sale of the new drug. Zomig® The Company filed with the FDA an ANDA No. 206350, along with a paragraph IV certification, alleging that the two patents associated with the Zomig® nasal spray product (U.S. Patent No. 6,750,237 and U.S. Patent No. 67,220,767) are invalid. In July 2014, AstraZeneca AB, AstraZeneca UK Limited and Impax Laboratories, Inc. filed two patent infringement lawsuits in the United States District Court for the District of Delaware, alleging that the Company’s filing of ANDA No. 206350 constitutes an act of patent infringement and seeking a declaration that the two patents at issue are valid and infringed. In September 2014, the Company filed a motion to dismiss one patent infringement lawsuit for lack of standing and responded to the second lawsuit by denying that any valid patent claim would be infringed. In the second lawsuit, the Company also counterclaimed for a declaratory judgment that the patent claims are invalid and not infringed. The Court has consolidated the two actions and denied the motion to dismiss the first action without prejudice. In July 2015, the Company filed with the United States Patent and Trademark Office (“USPTO”) a Petition for Inter Partes Review of each of the patents in suit seeking to reject as invalid all claims of the patents in suit. The USPTO has issued a decision denying initiation of the Inter Partes Review. A trial was conducted in September 2016. The Court issued its decision on March 29, 2017, finding that Lannett did not prove that the patents at issue are invalid. The Company has appealed the decision. All briefing to the appellate court has been submitted, and oral argument before the appellate court was conducted on April 5, 2018. The appellate court issued an opinion on June 28, 2018, upholding the decision of the District Court. The Company requested a rehearing by the appellate court on August 13, 2018. The appellate court denied the request on September 14, 2018, and issued its mandate terminating the appeal on September 21, 2018. Other Litigation Matters The Company is also subject to various legal proceedings arising out of the normal course of its business including, but not limited to, product liability, intellectual property, patent infringement claims and antitrust matters. It is not possible to predict the outcome of these various proceedings. An adverse determination in any of these proceedings in the future could have a significant impact on the financial position, results of operations and cash flows of the Company. |
Commitments
Commitments | 6 Months Ended |
Dec. 31, 2018 | |
Commitments | |
Commitments | Note 13. Commitments Leases The Company leases certain manufacturing and office equipment, in the ordinary course of business. These leases are typically renewed annually. Rental and lease expense was not material for all periods presented. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) for the remainder of Fiscal 2019 and the twelve-month periods ending June 30 thereafter are as follows: (In thousands) Amounts Due Remainder of 2019 $ 922 2020 1,855 2021 1,406 2022 1,080 2023 1,080 Thereafter 4,158 Total $ 10,501 Other Commitment During the third quarter of Fiscal 2017, the Company signed an agreement with a company operating in the pharmaceutical business, under which the Company agreed to provide up to $15.0 million in revolving loans, which expires in seven years and bears interest at 2.0%, for the purpose of expansion and other business needs. The decision to provide any portion of the revolving loan is at the Company’s sole discretion. Prior to the first quarter of Fiscal 2019, the Company had the option to convert the first $7.5 million into a 50% ownership interest in the entity. The board of the entity is comprised of five members, one of which is an employee of the Company. In the first quarter of Fiscal 2019, the Company sold 50% of the outstanding loan to a third party for $5.6 million and, in addition to assigning 50% of all right, title and interest in the loan and loan documents, the Company relinquished its right to convert a portion of the outstanding loan balance to an equity interest in the entity. As of December 31, 2018, $5.8 million was outstanding under the revolving loan and is included in other assets. In addition to the loan repayment, the agreement was amended to eliminate the Company’s ability to convert the outstanding loan balance into an ownership interest. Based on the guidance set forth in ASC 810-10 Consolidation , the Company has concluded that it has a variable interest in the entity. However, the Company is not the primary beneficiary to the entity and as such, is not required to consolidate the entity’s results of operations. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | Note 14. Accumulated Other Comprehensive Loss The Company’s Accumulated Other Comprehensive Loss was comprised of the following components as of December 31, 2018 and 2017: December 31, December 31, (In thousands) 2018 2017 Foreign Currency Translation Beginning Balance, June 30 $ (515) $ (222) Net gain (loss) on foreign currency translation (net of tax of $0 and $0) 13 (125) Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive income (loss), net of tax 13 (125) Ending Balance, December 31 (502) (347) Total Accumulated Other Comprehensive Loss $ (502) $ (347) |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 6 Months Ended |
Dec. 31, 2018 | |
Earnings (Loss) Per Common Share | |
Earnings (Loss) Per Common Share | Note 15. Earnings (Loss) Per Common Share A dual presentation of basic and diluted earnings (loss) per common share is required on the face of the Company’s Consolidated Statement of Operations as well as a reconciliation of the computation of basic earnings per common share to diluted earnings per common share. Basic earnings (loss) per common share excludes the dilutive impact of potentially dilutive securities and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed using the treasury stock method and includes the effect of potential dilution from the exercise of outstanding stock options and treats unvested restricted stock and performance-based shares as if they were vested. Potentially dilutive securities have been excluded in the weighted average number of common shares used for the calculation of earnings per share in periods of net loss because the effect of including such securities would be anti-dilutive. A reconciliation of the Company’s basic and diluted earnings (loss) per common share was as follows: Three Months Ended December 31, (In thousands, except share and per share data) 2018 2017 Net income $ 12,362 $ 14,022 Basic weighted average common shares outstanding 37,761,176 37,066,902 Effect of potentially dilutive stock options and restricted stock awards 1,351,371 1,223,456 Diluted weighted average common shares outstanding 39,112,547 38,290,358 Earnings per common share: Basic $ 0.33 $ 0.38 Diluted $ 0.32 $ 0.37 Six Months Ended December 31, (In thousands, except share and per share data) 2018 2017 Net income (loss) $ (275,166) $ 27,279 Basic weighted average common shares outstanding 37,674,200 37,029,483 Effect of potentially dilutive stock options and restricted stock awards — 1,058,343 Diluted weighted average common shares outstanding 37,674,200 38,087,826 Earnings (loss) per common share: Basic $ (7.30) $ 0.74 Diluted $ (7.30) $ 0.72 The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the three months ended December 31, 2018 and 2017 were 540 thousand and 3.0 million, respectively. The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the six months ended December 31, 2018 and 2017 were 2.2 million and 3.0 million, respectively. |
Warrant
Warrant | 6 Months Ended |
Dec. 31, 2018 | |
Warrant | |
Warrant | Note 16. Warrant In connection with the KUPI acquisition on November 25, 2015, Lannett issued to UCB Manufacturing a warrant to purchase up to a total of 2.5 million shares of Lannett’s common stock (the “Warrant”). The Warrant had a term of three years (expiring November 25, 2018) and an exercise price of $48.90 per share, subject to customary adjustments, including for stock splits, dividends and combinations. The Warrant also contained a “weighted average” anti-dilution adjustment provision. The fair value included as part of the total consideration transferred to UCB at the acquisition date was $29.9 million. The fair value assigned to the Warrant was determined using the Black-Scholes valuation model. The Company concluded that the warrant was indexed to its own stock and therefore the Warrant was classified as an equity instrument. On November 25, 2018, the Warrant expired and was not exercised. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Dec. 31, 2018 | |
Share-Based Compensation | |
Share-Based Compensation | Note 17. Share-Based Compensation At December 31, 2018, the Company had two share-based employee compensation plans (the 2011 Long-Term Incentive Plan “LTIP” and the 2014 “LTIP”). Together these plans authorized an aggregate total of 4.5 million shares to be issued. The plans have a total of 615 thousand shares available for future issuances. On January 23, 2019, the shareholders of the Company approved an Amendment to and Restatement of the 2014 LTIP to increase the amount of shares authorized to be issued by 2.0 million shares. The Company issues share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. The Company issues new shares of stock when stock options are exercised. As of December 31, 2018, there was $14.4 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 2.2 years. Stock Options The Company measures share-based compensation cost for options using the Black-Scholes option pricing model. The following table presents the weighted average assumptions used to estimate fair values of the stock options granted during the six months ended December 31, 2018 and 2017: Six Months Ended December 31, 2018 December 31, 2017 Risk-free interest rate 2.9 % 1.9 % Expected volatility 58.4 % 57.4 % Expected dividend yield — % — % Forfeiture rate 6.5 % 6.5 % Expected term (in years) years years Weighted average fair value $ 6.52 $ 9.06 Expected volatility is based on the historical volatility of the price of our common shares during the historical period equal to the expected term of the option. The Company uses historical information to estimate the expected term, which represents the period of time that options granted are expected to be outstanding. The risk-free rate for the period equal to the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate assumption is the estimated annual rate at which unvested awards are expected to be forfeited during the vesting period. This assumption is based on our actual forfeiture rate on historical awards. Periodically, management will assess whether it is necessary to adjust the estimated rate to reflect changes in actual forfeitures or changes in expectations. Additionally, the expected dividend yield is equal to zero, as the Company has not historically issued and has no immediate plans to issue, a dividend. A stock option roll-forward as of December 31, 2018 and changes during the six months then ended, is presented below: Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 Granted 73 $ 12.20 — Exercised (32) $ 4.39 $ 141 Forfeited, expired or repurchased (336) $ 34.95 Outstanding at December 31, 2018 762 $ 16.71 $ 170 Vested and expected to vest at December 31, 2018 752 $ 16.74 $ 170 Exercisable at December 31, 2018 648 $ 16.84 $ 170 Restricted Stock The Company measures restricted stock compensation costs based on the stock price at the grant date less an estimate for expected forfeitures. The annual forfeiture rate used to calculate compensation expense was 6.5% for the six months ended December 31, 2018 and 2017. A summary of restricted stock awards as of December 31, 2018 and changes during the six months then ended, is presented below: Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2018 704 $ 20.06 Granted 1,170 $ 9.91 Vested (383) $ 20.12 $ 3,732 Forfeited (94) $ 14.33 Non-vested at December 31, 2018 1,397 $ 11.93 Performance-Based Shares On September 22, 2017 and July 30, 2018, the Company approved and granted performance-based awards to certain key executives. The stock-settled awards will vest based on relative Total Shareholder Return (“TSR”) over a three-year period. The Company measures share-based compensation cost for TSR awards using a Monte-Carlo simulation model. A summary of performance-based share awards as of December 31, 2018 and changes during the current fiscal year, is presented below: Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2018 20 $ 25.58 Granted 52 $ 17.69 Vested — $ — $ — Forfeited — $ — Non-vested at December 31, 2018 72 $ 19.92 Employee Stock Purchase Plan In February 2003, the Company’s stockholders approved an Employee Stock Purchase Plan (“ESPP”). Employees eligible to participate in the ESPP may purchase shares of the Company’s stock at 85% of the lower of the fair market value of the common stock on the first day of the calendar quarter or the last day of the calendar quarter. Under the ESPP, employees can authorize the Company to withhold up to 10% of their compensation during any quarterly offering period, subject to certain limitations. The ESPP was implemented on April 1, 2003 and is qualified under Section 423 of the Internal Revenue Code. The Board of Directors authorized an aggregate total of 1.1 million shares of the Company’s common stock for issuance under the ESPP. During the six months ended December 31, 2018 and 2017, 95 thousand shares and 28 thousand shares were issued under the ESPP, respectively. As of December 31, 2018, 702 thousand total cumulative shares have been issued under the ESPP. The following table presents the allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Selling, general and administrative expenses $ 1,095 $ 1,926 $ 3,309 $ 3,713 Research and development expenses 199 176 400 327 Cost of sales 655 461 1,276 712 Total $ 1,949 $ 2,563 $ 4,985 $ 4,752 Tax benefit at statutory rate $ 439 $ 756 $ 1,122 $ 1,402 |
Employee Benefit Plan
Employee Benefit Plan | 6 Months Ended |
Dec. 31, 2018 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 18. Employee Benefit Plan The Company has a 401k defined contribution plan (the “Plan”) covering substantially all employees. Pursuant to the Plan provisions, the Company is required to make matching contributions equal to 50% of each employee’s contribution, not to exceed 4% of the employee’s compensation for the Plan year. Contributions to the Plan during the three months ended December 31, 2018 and 2017 were $445 thousand and $458 thousand, respectively. Contributions to the Plan during the six months ended December 31, 2018 and 2017 were $1.1 million and $1.0 million, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | Note 19. Income Taxes The Company uses the liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. The federal, state and local income tax expense for the three months ended December 31, 2018 was $2.6 million compared to $18.1 million for the three months ended December 31, 2017. The effective tax rates for the three months ended December 31, 2018 and 2017 were 17.6% and 56.4%, respectively. The effective tax rate for the three months ended December 31, 2018 was lower compared to the three months ended December 31, 2017 primarily due to the application of 2017 Tax Reform in the prior-year period, which resulted in a revaluation of the Company’s net long term deferred tax assets. In addition, the federal statutory tax rate for the three months ended December 31, 2018 was 21% compared to a blended federal statutory tax rate of 28% in the prior-year period. The federal, state and local income tax benefit for the six months ended December 31, 2018 was $73.0 million compared to income tax expense of $25.6 million for the six months ended December 31, 2017. The effective tax rates for the six months ended December 31, 2018 and 2017 were 21.0% and 48.4%, respectively. The effective tax rate for the six months ended December 31, 2018 was lower compared to the six months ended December 31, 2017 primarily due to the application of 2017 Tax Reform in the prior-year period, which resulted in a revaluation of the Company’s net long term deferred tax assets. In addition, the federal statutory tax rate for the six months ended December 31, 2018 was 21% compared to a blended federal statutory tax rate of 28% in the prior-year period. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2018 and June 30, 2018, the Company has total unrecognized tax benefits of $2.2 million and 2.5 million, respectively, which would impact the Company’s effective tax rate if recognized. As a result of the positions taken during the period, the Company has not recorded any interest and penalties for the period ended December 31, 2018 in the statement of operations and no cumulative interest and penalties have been recorded either in the Company’s statement of financial position as of December 31, 2018 and June 30, 2018. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses. As of December 31, 2018 and June 30, 2018, the Company had net long term deferred tax assets of $100.0 million and $22.1 million, respectively. The significant increase was primarily a result of the goodwill impairment charge recorded in the first quarter of Fiscal 2019, which negatively impacted book income, but is excluded from the calculation of taxable income. The Company files income tax returns in the United States federal jurisdiction and various states. The Company’s tax returns for Fiscal Year 2014 and prior generally are no longer subject to review as such years generally are closed. The Company’s Fiscal Year 2016 federal return is currently under examination by the Internal Revenue Service (“IRS”). The Company cannot reasonably predict the outcome of the examination at this time. In July 2018, the Company was notified that the IRS will also expand their examination to include the Company’s Fiscal 2015 and Fiscal 2017 federal returns. In October 2018, the Company was notified that the State of Pennsylvania will conduct a routine field audit of the Company’s Fiscal 2016 and Fiscal 2017 corporate tax returns. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions | |
Related Party Transactions | Note 20. Related Party Transactions The Company had sales of $1.0 million and $1.2 million during the three months ended December 31, 2018 and 2017, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”), which is a member of the Premier Buying Group. Sales to Auburn for the six months ended December 31, 2018 and 2017 were $1.5 million and $2.0 million, respectively. Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $849 thousand and $585 thousand at December 31, 2018 and June 30, 2018, respectively. The Company also had sales of $920 thousand and $516 thousand during the three months ended December 31, 2018 and 2017, respectively, to a generic distributor, KeySource, which is a member of the OptiSource Buying Group The Company incurred expenses totaling $188 thousand and $369 thousand during the three and six months ended December 31, 2018, respectively, for online medical benefit services provided by a subsidiary of a variable interest entity. See Note 13 “Commitments” for more information. Accounts payable includes amounts due to the variable interest entity of $58 thousand as of June 30, 2018. There were no amounts due to the variable interest entity as of December 31, 2018. |
Material Contracts with Supplie
Material Contracts with Suppliers | 6 Months Ended |
Dec. 31, 2018 | |
Material Contracts with Suppliers | |
Material Contracts with Suppliers | Note 21. Material Contracts with Suppliers Jerome Stevens Pharmaceuticals Distribution Agreement: The Company’s primary finished goods inventory supplier is JSP, in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for approximately 34% and 39% of the Company’s inventory purchases in the three months ended December 31, 2018 and 2017, respectively. Purchases of finished goods inventory from JSP accounted for approximately 33% and 36% of the Company’s inventory purchases in the six months ended December 31, 2018 and 2017, respectively. On August 19, 2013, the Company entered into an agreement with JSP to extend its initial contract to continue as the exclusive distributor in the United States of three JSP products: Butalbital, Aspirin, Caffeine with Codeine Phosphate Capsules USP; Digoxin Tablets USP; and Levothyroxine Sodium Tablets USP. The amendment to the original agreement extends the initial contract, which was due to expire on March 22, 2014, for five years through March 2019. In connection with the amendment, the Company issued a total of 1.5 million shares of the Company’s common stock to JSP and JSP’s designees. In accordance with its policy related to renewal and extension costs for recognized intangible assets, the Company recorded a $20.1 million expense in cost of sales, which represents the fair value of the shares on August 19, 2013. On August 20, 2018, the Company announced that the JSP Distribution Agreement, which expires on March 23, 2019, will not be renewed or extended. |
Assets Held for Sale
Assets Held for Sale | 6 Months Ended |
Dec. 31, 2018 | |
Assets Held for Sale | |
Assets held for Sale | Note 22. Assets Held for Sale In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business, which includes the manufacturing and distribution of active pharmaceutical ingredients for use in finished goods production. As such, all assets and liabilities associated with the Cody API business are recorded in the assets and liabilities held for sale captions in the Consolidated Balance Sheet as of December 31, 2018. As part of the held for sale classification, the Company recorded the assets of the Cody API business at fair value less costs to sell. The Company performed a fair value analysis which resulted in a $29.9 million impairment of the Cody long-lived assets. The following table summarizes the assets and liabilities of the Cody API business as of December 31, 2018: December 31, (In thousands) 2018 Assets Inventories $ 3,351 Other current assets 355 Property, plant and equipment 6,736 Intangible assets, net 176 Other assets 804 Total assets held for sale $ 11,422 Liabilities Accounts payable $ 291 Accrued expenses 138 Accrued payroll and payroll-related expenses 775 Total liabilities held for sale $ 1,204 The following table summarizes the financial results of the Cody API business for the three and six months ended December 31, 2018 and 2017: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Net sales $ 654 $ 387 $ 2,142 $ 1,086 Pretax loss attributable to Cody API business (4,314) (4,468) (39,335) (9,957) The loss attributable to the Cody API business during the six months ended December 31, 2018 includes the $29.9 million impairment charge to adjust the long-lived assets to its fair value less costs to sell. |
Amneal Distribution and Transit
Amneal Distribution and Transition Support Agreement | 6 Months Ended |
Dec. 31, 2018 | |
Amneal Distribution and Transition Support Agreement | |
Amneal Distribution and Transition Support Agreement | Note 23. Amneal Distribution and Transition Support Agreement On November 9, 2018, the Company entered into the Amneal Agreement, pursuant to which Amneal will be the Company’s sole customer for Levothyroxine Sodium Tablets USP (the “Product”) from December 1, 2018 through March 23, 2019 and Amneal will re-sell the Product to its customers. Pursuant to the terms of the Agreement, the Company will receive an upfront payment of $50 million, which will guarantee the Company at least $50 million of gross profit on approximately $80 million of net sales of the Product during the term of the Agreement, subject to certain adjustments. The Company will continue to distribute Butalbital, Aspirin, Caffeine with Codeine Phosphate Capsules USP and Digoxin Tablets USP pursuant to its distribution agreement with JSP through March 23, 2019. Upon the effective date of the agreement on December 1, 2018, the Company received an upfront payment of $43.0 million, which was recorded as deferred revenue in the Consolidated Balance Sheet, with the remaining $7.0 million to be received on February 1, 2019. As of December 31, 2018, based on Product sold to Amneal under the agreement, the remaining deferred revenue balance is $24.0 million. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). |
Principles of consolidation | Principles of consolidation The Consolidated Financial Statements include the accounts of Lannett Company, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. |
Business Combinations | Business Combinations Acquired businesses are accounted for using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The fair values and useful lives assigned to each class of assets acquired and liabilities assumed are based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset and projected future cash flows. Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above could have a material impact on our consolidated results of operations. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, returns and other adjustments including a provision for the Company’s liability under the Medicare Part D program. Additionally, significant estimates and assumptions are required when determining the fair value of long-lived assets, including goodwill and intangible assets, income taxes, contingencies and share-based compensation. Because of the inherent subjectivity and complexity involved in these estimates and assumptions, actual results could differ from those estimates. |
Foreign currency translation | Foreign currency translation The Consolidated Financial Statements are presented in U.S. Dollars, the reporting currency of the Company. The financial statements of the Company’s foreign subsidiary are maintained in local currency and translated into U.S. dollars at the end of each reporting period. Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments with original maturities less than or equal to three months at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value, and consist of bank deposits and certificates of deposit that are readily convertible into cash. The Company maintains its cash deposits and cash equivalents at well-known, stable financial institutions. Such amounts frequently exceed insured limits. |
Investment securities | Investment securities The Company’s investment securities consisted of publicly-traded equity securities which were classified as trading investments. Investment securities were recorded at fair value based on quoted market prices from broker or dealer quotations or transparent pricing sources at each reporting date. Realized and unrealized gains and losses are included in the Consolidated Statements of Operations under Other income (loss). In May 2018, the Company liquidated the remainder of the investment securities portfolio. As of December 31, 2018 and June 30, 2018, the Company does not own investment securities. |
Allowance for doubtful accounts | Allowance for doubtful accounts The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time balances are past due, the Company’s previous loss history, the customer’s current ability to pay its obligations to the Company and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value by the first-in, first-out method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date and estimated sales forecasts. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the assets’ estimated useful lives. Repairs and maintenance costs that do not extend the useful life of the asset are expensed as incurred. |
Intangible Assets | Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, generally for periods ranging from 10 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. |
Valuation of Long-Lived Assets, including Intangible Assets other than Goodwill | Valuation of Long-Lived Assets, including Intangible Assets other than Goodwill The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
In-Process Research and Development | In-Process Research and Development Amounts allocated to in-process research and development in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected lives of the related assets. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
Goodwill | Goodwill Goodwill, which represented the excess of purchase price over the fair value of net assets acquired, was carried at cost. Goodwill was tested for impairment on an annual basis on the first day of the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. The Company utilized a quantitative assessment to determine the fair value of our reporting unit (generic pharmaceuticals) based on market data as well as projected cash flows. If the carrying value of our reporting unit exceeded its fair value, the difference would be recorded as a goodwill impairment, not to exceed the carrying amount of goodwill. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. The judgments made in determining the estimated fair value of goodwill can materially impact our results of operations. |
Segment Information | Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2018 and 2017: Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2018 2017 2018 2017 Antibiotic $ 4,187 $ 3,552 $ 8,276 $ 6,900 Anti-Psychosis 14,036 22,799 24,924 37,791 Cardiovascular 25,680 10,135 47,450 21,441 Central Nervous System 6,187 6,925 13,384 15,742 Gallstone 2,489 5,282 4,703 11,846 Gastrointestinal 10,009 15,055 25,048 29,608 Glaucoma 512 2,164 1,060 4,832 Migraine 12,551 15,484 22,288 30,499 Muscle Relaxant 3,121 3,219 6,300 7,010 Pain Management 8,968 6,128 13,915 11,889 Respiratory 1,163 2,230 2,178 3,876 Thyroid Deficiency 88,477 68,794 142,354 116,008 Urinary 1,606 2,840 3,158 5,837 Other 6,827 13,105 21,168 25,802 Contract manufacturing revenue 7,905 6,593 12,566 10,185 Net sales $ 193,718 $ 184,305 $ 348,772 $ 339,266 |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the three and six months ended December 31, 2018 and 2017, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Product 1 46 % 37 % 41 % 34 % Product 2 7 % % % % The following table presents the percentage of total net sales, for the three and six months ended December 31, 2018 and 2017, for certain of the Company’s customers which accounted for at least 10% of net sales in any of those periods: Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Customer A 18 % 22 % 23 % 25 % Customer B 14 % — % 8 % — % Customer C 14 % 19 % 16 % 20 % Customer D 13 % 5 % 11 % 5 % Customer E 3 % 13 % 3 % 8 % The Company’s primary finished goods inventory supplier is Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for approximately 34% and 39% of the Company’s inventory purchases during the three months ended December 31, 2018 and 2017, respectively. Purchases of finished goods inventory from JSP accounted for approximately 33% and 36% of the Company’s inventory purchases during the six months ended December 31, 2018 and 2017, respectively. See Note 21 “Material Contracts with Suppliers” for more information. |
Revenue Recognition and Net Sales Adjustments | Revenue Recognition On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , which superseded ASC Topic 605, Revenue Recognition . Under ASC 606, the Company recognizes revenue when (or as) we satisfy our performance obligations by transferring a promised good or service to a customer at an amount that reflects the consideration the Company is expected to be entitled. Our revenue consists almost entirely of sales of our pharmaceutical products to customers, whereby we ship product to a customer pursuant to a purchase order. Revenue contracts such as these do not generally give rise to contract assets or contract liabilities because: (i) the underlying contracts generally have only a single performance obligation and (ii) we do not generally receive consideration until the performance obligation is fully satisfied. The new revenue standard impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time”. However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The Company adopted ASC 606 using the modified retrospective method. Refer to the “ Recent Accounting Pronouncements ” section of this footnote for further discussion of the impact of the adoption. When revenue is recognized, a simultaneous adjustment to gross sales is made for estimated chargebacks, rebates, returns, promotional adjustments and other potential adjustments. These provisions are primarily estimated based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers and other factors known to management at the time of accrual. Accruals for provisions are presented in the Consolidated Financial Statements as a reduction to gross sales with the corresponding reserve presented as a reduction of accounts receivable or included as rebates payable, depending on the nature of the reserve. Provisions for chargebacks, rebates, returns and other adjustments require varying degrees of subjectivity. While rebates generally are based on contractual terms and require minimal estimation, chargebacks and returns require management to make more subjective assumptions. Each major category is discussed in detail below: Chargebacks The provision for chargebacks is the most significant and complex estimate used in the recognition of revenue. The Company sells its products directly to wholesale distributors, generic distributors, retail pharmacy chains and mail-order pharmacies. The Company also sells its products indirectly to independent pharmacies, managed care organizations, hospitals, nursing homes and group purchasing organizations, collectively referred to as “indirect customers.” The Company enters into agreements with its indirect customers to establish pricing for certain products. The indirect customers then independently select a wholesaler from which to purchase the products. If the price paid by the indirect customers is lower than the price paid by the wholesaler, the Company will provide a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and the wholesaler purchase price. The provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels. As sales to the large wholesale customers, such as Cardinal Health, AmerisourceBergen and McKesson increase (decrease), the reserve for chargebacks will also generally increase (decrease). However, the size of the increase (decrease) depends on product mix and the amount of sales made to indirect customers with which the Company has specific chargeback agreements. The Company continually monitors the reserve for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback reserve. Rebates Rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. Additionally, as a result of the Patient Protection and Affordable Care Act (“PPACA”) enacted in the U.S. in March 2010, the Company participates in a new cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration ("FDA") approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application ("ANDA’). Because our drugs used for the treatment of thyroid deficiency and our Morphine Sulfate Oral Solution product were both approved by the FDA as 505(b)(2) NDAs, they are considered “brand” drugs for purposes of the PPACA. Drugs purchased within the Medicare Part D coverage gap (commonly referred to as the “donut hole”) result in additional rebates. The Company estimates the reserve for rebates and other promotional credit programs based on the specific terms in each agreement when revenue is recognized. The reserve for rebates increases (decreases) as sales to certain wholesale and retail customers increase (decrease). However, since these rebate programs are not identical for all customers, the size of the reserve will depend on the mix of sales to customers that are eligible to receive rebates. Returns Consistent with industry practice, the Company has a product returns policy that allows customers to return product within a specified time period prior to and subsequent to the product’s expiration date in exchange for a credit to be applied to future purchases. The Company’s policy requires that the customer obtain pre-approval from the Company for any qualifying return. The Company estimates its provision for returns based on historical experience, changes to business practices, credit terms and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. The Company continually monitors the reserve for returns and makes adjustments when management believes that actual product returns may differ from the established reserve. Generally, the reserve for returns increases as net sales increase. Other Adjustments Other adjustments consist primarily of “price adjustments, also known as “shelf-stock adjustments” and “price protections,” which are both 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 credit is given for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in a similar credit when the invoice or contract prices of the Company’s products increase, effectively allowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimated shelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes in market prices and estimates of inventory held by customers. The Company regularly monitors these and other factors and evaluates the reserve as additional information becomes available. Other adjustments also include prompt payment discounts and “failure-to-supply” adjustments. If the Company is unable to fulfill certain customer orders, the customer can purchase products from our competitors at their prices and charge the Company for any difference in our contractually agreed upon prices. |
Cost of Sales, including Amortization of Intangibles | Cost of Sales, including Amortization of Intangibles Cost of sales includes all costs related to bringing products to their final selling destination, which includes direct and indirect costs, such as direct material, labor and overhead expenses. Additionally, cost of sales includes product royalties, depreciation, amortization and costs to renew or extend recognized intangible assets, freight charges and other shipping and handling expenses. |
Research and Development | Research and Development Research and development costs are expensed as incurred, including all production costs until a drug candidate is approved by the FDA. Research and development expenses include costs associated with internal projects as well as costs associated with third-party research and development contracts. |
Contingencies | Contingencies Loss contingencies, including litigation-related contingencies, are included in the Consolidated Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees for litigation-related matters are expensed as incurred and included in the Consolidated Statements of Operations under the Selling, general and administrative expenses line item. |
Restructuring Costs | Restructuring Costs The Company records charges associated with approved restructuring plans to remove duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations and contract cancellation costs. The Company records restructuring charges based on estimated employee terminations, site closure and consolidation plans. The Company accrues severance and other employee separation costs under these actions when it is probable that a liability exists and the amount is reasonably estimable. |
Share-Based Compensation | Share-based Compensation Share-based compensation costs are recognized over the vesting period, using a straight-line method, based on the fair value of the instrument on the date of grant less an estimate for expected forfeitures. The Company uses the Black-Scholes valuation model to determine the fair value of stock options, the stock price on the grant date to value restricted stock and the Monte-Carlo simulation model to determine the fair value of performance-based shares. The Black-Scholes valuation and Monte-Carlo simulation models include various assumptions, including the expected volatility, the expected life of the award, dividend yield and the risk-free interest rate as well as performance assumptions of peer companies. These assumptions involve inherent uncertainties based on market conditions which are generally outside the Company’s control. Changes in these assumptions could have a material impact on share-based compensation costs recognized in the consolidated financial statements. |
Self-Insurance | Self-Insurance Effective January 1, 2017, the Company self-insures for certain employee medical and prescription benefits. The Company also maintains stop loss coverage with third party insurers to limit its total liability exposure. The liability for self-insured risks is primarily calculated using independent third-party actuarial valuations which take into account actual claims, claims growth and claims incurred but not yet reported. Actual experience, including claim frequency and severity as well as health-care inflation, could result in different liabilities than the amounts currently recorded. The liability for self-insured risks under this plan as of December 31, 2018 totaled $2.9 million and was not material to the financial position of the Company as of June 30, 2018. |
Income Taxes | Income Taxes The Company uses the liability method to account for income taxes as prescribed by Accounting Standards Codification (“ASC”) 740, Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense (benefit) is the result of changes in deferred tax assets and liabilities. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Under ASC 740, Income Taxes, a valuation allowance is required when it is more likely than not that all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The authoritative accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. On December 22, 2017, President Trump signed the Tax Cut and Jobs Act legislation (“2017 Tax Reform”) into law, which included a broad range of tax reform provisions affecting businesses, including corporate tax rates, business deductions and international tax provisions. Many of these provisions significantly differ from the then-current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 requires registrants to report the tax effects of 2017 Tax Reform, inclusive of provisional amounts for which the accounting is incomplete but a reasonable estimate can be determined. SAB 118 also allows for a measurement period of up to one year in cases where a registrant reports a provisional amount or is unable to reasonably estimate the impact of 2017 Tax Reform. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments, in accordance with the expiration of the SAB 118 measurement period. |
Earnings (Loss) Per Common Share | Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted earnings (loss) is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period including additional shares that would have been outstanding related to potentially dilutive securities. These potentially dilutive securities consist of stock options, unvested restricted stock and performance-based shares. Anti-dilutive securities are excluded from the calculation. Dilutive shares are also excluded in the calculation in periods of net loss because the effect of including such securities would be anti-dilutive. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss), but excluded from income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, which created ASC Topic 606 Revenue from Contracts with Customers . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The authoritative guidance is effective for annual reporting periods beginning after December 15, 2017. Based on a review of the contracts representing a substantial portion of our revenues, which is primarily generated from product sales, the Company determined that the updated guidance does not have a material impact on our disclosures or the timing and recognition of our revenues. Under the new standard, the Company estimates certain amounts as variable consideration, specifically any “failure-to-supply” adjustments at the point of product sale in future periods. The new revenue standard also impacts the timing of the Company’s revenue recognition by requiring recognition of certain contract manufacturing arrangements to change from “upon shipment or delivery” to “over time”. However, the recognition of these arrangements over time does not currently have a material impact on the Company’s consolidated results of operations or financial position. The cumulative impact of the adoption of ASC 606 resulted in a $2.3 million adjustment, net of tax, to opening retained earnings on July 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases . ASU 2016-02 requires an entity to recognize right-of-use assets and liabilities on its balance sheet for all leases with terms longer than 12 months. Lessees and lessors are required to disclose quantitative and qualitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and requires a modified retrospective application, with early adoption permitted. In December 2018, the FASB issued ASU 2018-20, Leases – Narrow Scope Improvements for lessors , which allows entities to choose an additional transition method of adoption, under which an entity initially applies the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earinings in the period of adoption. The Company is currently in the process of assessing the impact this guidance will have on the consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments . ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was adopted on July 1, 2018 and did not have an impact on the Company’s consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Schedule of the Company's net sales by medical indication | Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2018 2017 2018 2017 Antibiotic $ 4,187 $ 3,552 $ 8,276 $ 6,900 Anti-Psychosis 14,036 22,799 24,924 37,791 Cardiovascular 25,680 10,135 47,450 21,441 Central Nervous System 6,187 6,925 13,384 15,742 Gallstone 2,489 5,282 4,703 11,846 Gastrointestinal 10,009 15,055 25,048 29,608 Glaucoma 512 2,164 1,060 4,832 Migraine 12,551 15,484 22,288 30,499 Muscle Relaxant 3,121 3,219 6,300 7,010 Pain Management 8,968 6,128 13,915 11,889 Respiratory 1,163 2,230 2,178 3,876 Thyroid Deficiency 88,477 68,794 142,354 116,008 Urinary 1,606 2,840 3,158 5,837 Other 6,827 13,105 21,168 25,802 Contract manufacturing revenue 7,905 6,593 12,566 10,185 Net sales $ 193,718 $ 184,305 $ 348,772 $ 339,266 |
Summary of products which accounted for at least 10% of total net sales | Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Product 1 46 % 37 % 41 % 34 % Product 2 7 % % % % |
Summary of customers which accounted for at least 10% of total net sales | Three Months Ended Six Months Ended December 31, December 31, 2018 2017 2018 2017 Customer A 18 % 22 % 23 % 25 % Customer B 14 % — % 8 % — % Customer C 14 % 19 % 16 % 20 % Customer D 13 % 5 % 11 % 5 % Customer E 3 % 13 % 3 % 8 % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Schedule of restructuring charges associated with restructuring program | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Employee separation costs (credits) $ 293 $ 210 $ 707 $ (380) Facility closure costs 560 825 1,024 1,942 Total $ 853 $ 1,035 $ 1,731 $ 1,562 |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,614 $ — $ 3,614 Restructuring Charges 707 1,024 1,731 Payments (150) (1,024) (1,174) Balance at December 31, 2018 $ 4,171 $ — $ 4,171 |
Cody Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Three Months Ended Six Months Ended (In thousands) December 31, 2018 December 31, 2018 Employee separation costs (credits) $ (640) $ (496) Facility closure costs — — Total $ (640) $ (496) |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2018 $ 3,092 $ — $ 3,092 Restructuring Charges (496) — (496) Payments (1,074) — (1,074) Balance at December 31, 2018 $ 1,522 — $ 1,522 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable | |
Schedule of accounts receivable | December 31, June 30, (In thousands) 2018 2018 Gross accounts receivable $ 515,266 $ 503,175 Less Chargebacks reserve (128,102) (153,034) Less Rebates reserve (34,673) (33,102) Less Returns reserve (49,508) (43,059) Less Other deductions (26,263) (20,021) Less Allowance for doubtful accounts (1,356) (1,308) Accounts receivable, net $ 275,364 $ 252,651 |
Schedule of major category of revenue-related reserves | Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2018 $ 153,034 $ 82,502 $ 43,059 $ 20,021 $ 298,616 Adjustment related to adoption of ASC 606 — — — 3,536 3,536 Current period provision 612,560 143,578 18,662 34,574 809,374 Credits issued during the period (637,492) (147,023) (12,213) (31,868) (828,596) Balance at December 31, 2018 $ 128,102 $ 79,057 $ 49,508 $ 26,263 $ 282,930 Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2017 $ 79,537 $ 87,616 $ 42,135 $ 11,096 $ 220,384 Current period provision 474,882 156,073 14,541 28,623 674,119 Credits issued during the period (499,959) (157,071) (11,881) (21,713) (690,624) Balance at December 31, 2017 $ 54,460 $ 86,618 $ 44,795 $ 18,006 $ 203,879 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Schedule of Inventories | (In thousands) December 31, 2018 June 30, 2018 Raw materials $ 57,780 $ 64,647 Work-in-process 30,726 19,983 Finished goods 47,622 57,005 Total $ 136,128 $ 141,635 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment | |
Schedule of property, plant and equipment | (In thousands) Useful Lives December 31, 2018 June 30, 2018 Land — $ 2,283 $ 2,900 Building and improvements 10 - 39 years 85,958 105,041 Machinery and equipment 5 - 10 years 156,903 173,988 Furniture and fixtures 5 - 7 years 3,224 4,099 Less: accumulated depreciation (79,991) (89,996) 168,377 196,032 Construction in progress 27,230 37,215 Property, plant and equipment, net $ 195,607 $ 233,247 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Schedule of changes in the carrying amount of goodwill | Generic (In thousands) Pharmaceuticals Balance at June 30, 2018 $ 339,566 Goodwill acquired — Impairment (339,566) Balance at December 31, 2018 $ — |
Summary of intangible assets, net | Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life December 31, June 30, December 31, June 30, December 31, June 30, (In thousands) (Yrs.) 2018 2018 2018 2018 2018 2018 Definite-lived: Cody Labs import license 15 $ — $ 581 $ — $ (386) $ — $ 195 KUPI product rights 15 416,154 416,154 (83,712) (69,840) 332,442 346,314 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (3,928) (3,295) 15,072 15,705 Silarx product rights 15 10,000 10,000 (2,389) (2,056) 7,611 7,944 Other product rights 13 21,692 19,693 (3,396) (1,875) 18,296 17,818 Total definite-lived $ 469,766 $ 468,348 $ (96,345) $ (80,372) $ 373,421 $ 387,976 Indefinite-lived: KUPI in-process research and development — $ 18,000 $ 18,000 $ — $ — $ 18,000 $ 18,000 Silarx in-process research and development — 18,000 18,000 — — 18,000 18,000 Other product rights — 449 449 — — 449 449 Total indefinite-lived 36,449 36,449 — — 36,449 36,449 Total intangible assets, net $ 506,215 $ 504,797 $ (96,345) $ (80,372) $ 409,870 $ 424,425 |
Summary of future annual amortization expense | (In thousands) Fiscal Year Ending June 30, Annual Amortization Expense 2019 $ 15,224 2020 30,443 2021 30,443 2022 30,443 2023 30,443 Thereafter 236,425 $ 373,421 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Long-Term Debt | |
Summary of long-term debt, net | December 31, June 30, (In thousands) 2018 2018 Term Loan A due 2020; 7.52% as of December 31, 2018 $ 213,526 $ 227,276 Unamortized discount and other debt issuance costs (8,843) (10,178) Term Loan A, net 204,683 217,098 Term Loan B due 2022; 7.90% as of December 31, 2018 650,338 670,011 Unamortized discount and other debt issuance costs (41,569) (47,839) Term Loan B, net 608,769 622,172 Revolving Credit Facility due 2020 — — Total debt, net 813,452 839,270 Less short-term borrowings and current portion of long-term debt (66,845) (66,845) Total long-term debt, net $ 746,607 $ 772,425 |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2019 $ 66,845 2020 225,371 2021 39,345 2022 532,303 Total $ 863,864 |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Commitments | |
Schedule of future minimum lease payments under noncancelable operating leases | (In thousands) Amounts Due Remainder of 2019 $ 922 2020 1,855 2021 1,406 2022 1,080 2023 1,080 Thereafter 4,158 Total $ 10,501 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Loss | |
Schedule of Accumulated Other Comprehensive Loss | December 31, December 31, (In thousands) 2018 2017 Foreign Currency Translation Beginning Balance, June 30 $ (515) $ (222) Net gain (loss) on foreign currency translation (net of tax of $0 and $0) 13 (125) Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive income (loss), net of tax 13 (125) Ending Balance, December 31 (502) (347) Total Accumulated Other Comprehensive Loss $ (502) $ (347) |
Earnings (Loss) Per Common Sh_2
Earnings (Loss) Per Common Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings (Loss) Per Common Share | |
Summary of reconciliation of the Company's basic and diluted earnings (loss) per common share | Three Months Ended December 31, (In thousands, except share and per share data) 2018 2017 Net income $ 12,362 $ 14,022 Basic weighted average common shares outstanding 37,761,176 37,066,902 Effect of potentially dilutive stock options and restricted stock awards 1,351,371 1,223,456 Diluted weighted average common shares outstanding 39,112,547 38,290,358 Earnings per common share: Basic $ 0.33 $ 0.38 Diluted $ 0.32 $ 0.37 Six Months Ended December 31, (In thousands, except share and per share data) 2018 2017 Net income (loss) $ (275,166) $ 27,279 Basic weighted average common shares outstanding 37,674,200 37,029,483 Effect of potentially dilutive stock options and restricted stock awards — 1,058,343 Diluted weighted average common shares outstanding 37,674,200 38,087,826 Earnings (loss) per common share: Basic $ (7.30) $ 0.74 Diluted $ (7.30) $ 0.72 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Share-Based Compensation | |
Schedule of weighted average assumptions used to estimate fair values of the stock options granted and the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted | Six Months Ended December 31, 2018 December 31, 2017 Risk-free interest rate 2.9 % 1.9 % Expected volatility 58.4 % 57.4 % Expected dividend yield — % — % Forfeiture rate 6.5 % 6.5 % Expected term (in years) years years Weighted average fair value $ 6.52 $ 9.06 |
Summary of stock option award activity | Weighted Weighted- Average Average Aggregate Remaining Exercise Intrinsic Contractual (In thousands, except for weighted average price and life data) Awards Price Value Life (yrs.) Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 Granted 73 $ 12.20 — Exercised (32) $ 4.39 $ 141 Forfeited, expired or repurchased (336) $ 34.95 Outstanding at December 31, 2018 762 $ 16.71 $ 170 Vested and expected to vest at December 31, 2018 752 $ 16.74 $ 170 Exercisable at December 31, 2018 648 $ 16.84 $ 170 |
Summary of non-vested restricted stock awards | Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2018 704 $ 20.06 Granted 1,170 $ 9.91 Vested (383) $ 20.12 $ 3,732 Forfeited (94) $ 14.33 Non-vested at December 31, 2018 1,397 $ 11.93 |
Schedule of non-vested performance-based shares | Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2018 20 $ 25.58 Granted 52 $ 17.69 Vested — $ — $ — Forfeited — $ — Non-vested at December 31, 2018 72 $ 19.92 |
Schedule of allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Selling, general and administrative expenses $ 1,095 $ 1,926 $ 3,309 $ 3,713 Research and development expenses 199 176 400 327 Cost of sales 655 461 1,276 712 Total $ 1,949 $ 2,563 $ 4,985 $ 4,752 Tax benefit at statutory rate $ 439 $ 756 $ 1,122 $ 1,402 |
Assets Held for Sale (Tables)
Assets Held for Sale (Tables) | 6 Months Ended |
Dec. 31, 2018 | |
Assets Held for Sale | |
Schedule of financial results of the Cody API business | The following table summarizes the assets and liabilities of the Cody API business as of December 31, 2018: December 31, (In thousands) 2018 Assets Inventories $ 3,351 Other current assets 355 Property, plant and equipment 6,736 Intangible assets, net 176 Other assets 804 Total assets held for sale $ 11,422 Liabilities Accounts payable $ 291 Accrued expenses 138 Accrued payroll and payroll-related expenses 775 Total liabilities held for sale $ 1,204 The following table summarizes the financial results of the Cody API business for the three and six months ended December 31, 2018 and 2017: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2017 2018 2017 Net sales $ 654 $ 387 $ 2,142 $ 1,086 Pretax loss attributable to Cody API business (4,314) (4,468) (39,335) (9,957) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Intangible Assets (Details) | 6 Months Ended |
Dec. 31, 2018 | |
Minimum | |
Intangible Assets | |
Estimated useful lives | 10 years |
Maximum | |
Intangible Assets | |
Estimated useful lives | 15 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Segment Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | |
Medical Indication Information | ||||
Net sales | $ 193,718 | $ 184,305 | $ 348,772 | $ 339,266 |
Segment information | ||||
Number of reportable segments | segment | 1 | |||
Antibiotic | ||||
Medical Indication Information | ||||
Net sales | 4,187 | 3,552 | $ 8,276 | 6,900 |
Anti-Psychosis | ||||
Medical Indication Information | ||||
Net sales | 14,036 | 22,799 | 24,924 | 37,791 |
Cardiovascular | ||||
Medical Indication Information | ||||
Net sales | 25,680 | 10,135 | 47,450 | 21,441 |
Central Nervous System | ||||
Medical Indication Information | ||||
Net sales | 6,187 | 6,925 | 13,384 | 15,742 |
Gallstone | ||||
Medical Indication Information | ||||
Net sales | 2,489 | 5,282 | 4,703 | 11,846 |
Gastrointestinal | ||||
Medical Indication Information | ||||
Net sales | 10,009 | 15,055 | 25,048 | 29,608 |
Glaucoma | ||||
Medical Indication Information | ||||
Net sales | 512 | 2,164 | 1,060 | 4,832 |
Migraine | ||||
Medical Indication Information | ||||
Net sales | 12,551 | 15,484 | 22,288 | 30,499 |
Muscle Relaxant | ||||
Medical Indication Information | ||||
Net sales | 3,121 | 3,219 | 6,300 | 7,010 |
Pain Management | ||||
Medical Indication Information | ||||
Net sales | 8,968 | 6,128 | 13,915 | 11,889 |
Respiratory | ||||
Medical Indication Information | ||||
Net sales | 1,163 | 2,230 | 2,178 | 3,876 |
Thyroid Deficiency | ||||
Medical Indication Information | ||||
Net sales | 88,477 | 68,794 | 142,354 | 116,008 |
Urinary | ||||
Medical Indication Information | ||||
Net sales | 1,606 | 2,840 | 3,158 | 5,837 |
Other | ||||
Medical Indication Information | ||||
Net sales | 6,827 | 13,105 | 21,168 | 25,802 |
Contract manufacturing revenue | ||||
Medical Indication Information | ||||
Net sales | $ 7,905 | $ 6,593 | $ 12,566 | $ 10,185 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Customer, Supplier and Product Concentration (Details) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net sales | Products | Product 1 | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 46.00% | 37.00% | 41.00% | 34.00% |
Net sales | Products | Product 2 | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 7.00% | 12.00% | 7.00% | 10.00% |
Net sales | Customers | Customer A | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 18.00% | 22.00% | 23.00% | 25.00% |
Net sales | Customers | Customer B | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 14.00% | 8.00% | ||
Net sales | Customers | Customer C | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 14.00% | 19.00% | 16.00% | 20.00% |
Net sales | Customers | Customer D | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 13.00% | 5.00% | 11.00% | 5.00% |
Net sales | Customers | Customer E | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 3.00% | 13.00% | 3.00% | 8.00% |
Inventory purchases | Suppliers | JSP | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 34.00% | 39.00% | 33.00% | 36.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Self Insurance (Details) $ in Millions | Dec. 31, 2018USD ($) |
Summary of Significant Accounting Policies | |
Self-insured risks | $ 2.9 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) $ in Thousands | Jul. 01, 2018USD ($) |
ASU 2014-09 | |
Recent Accounting Pronouncements | |
ASC 606 adjustment, net of tax | $ (2,282) |
Restructuring Charges - Cody Re
Restructuring Charges - Cody Restructuring Program (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 29, 2018 | |
Restructuring Charges | |||||
Restructuring expenses | $ 213 | $ 1,035 | $ 1,235 | $ 1,562 | |
Cody Restructuring Plan | |||||
Restructuring Charges | |||||
Estimated restructuring charges | $ 4,500 | ||||
Restructuring expenses | (640) | (496) | |||
Cody Restructuring Plan | Employee separation costs (credits) | |||||
Restructuring Charges | |||||
Estimated restructuring charges | $ 3,000 | ||||
Restructuring expenses | $ (640) | $ (496) |
Restructuring Charges - Cody _2
Restructuring Charges - Cody Restructuring Program - Changes in restructuring liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring expenses | $ 213 | $ 1,035 | $ 1,235 | $ 1,562 |
Cody Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 3,092 | |||
Restructuring expenses | (640) | (496) | ||
Payments | (1,074) | |||
Ending balance for the period | 1,522 | 1,522 | ||
Cody Restructuring Plan | Employee separation costs (credits) | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 3,092 | |||
Restructuring expenses | (640) | (496) | ||
Payments | (1,074) | |||
Ending balance for the period | $ 1,522 | $ 1,522 |
Restructuring Charges - 2016 Re
Restructuring Charges - 2016 Restructuring Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Feb. 01, 2016 | |
Restructuring Charges | |||||
Restructuring expenses | $ 213 | $ 1,035 | $ 1,235 | $ 1,562 | |
2016 Restructuring Plan | |||||
Restructuring Charges | |||||
Estimated restructuring charges | $ 20,000 | ||||
Restructuring expenses | 853 | 1,035 | 1,731 | 1,562 | |
2016 Restructuring Plan | Employee separation costs (credits) | |||||
Restructuring Charges | |||||
Estimated restructuring charges | 11,000 | ||||
Restructuring expenses | 293 | 210 | 707 | (380) | |
2016 Restructuring Plan | Contract termination costs | |||||
Restructuring Charges | |||||
Estimated restructuring charges | 1,000 | ||||
2016 Restructuring Plan | Facility closure costs | |||||
Restructuring Charges | |||||
Estimated restructuring charges | $ 8,000 | ||||
Restructuring expenses | $ 560 | $ 825 | $ 1,024 | $ 1,942 |
Restructuring Charges - 2016 _2
Restructuring Charges - 2016 Restructuring Plan - Changes in restructuring liabilities - (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring Charges | $ 213 | $ 1,035 | $ 1,235 | $ 1,562 |
2016 Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 3,614 | |||
Restructuring Charges | 853 | 1,035 | 1,731 | 1,562 |
Payments | (1,174) | |||
Ending balance for the period | 4,171 | 4,171 | ||
2016 Restructuring Plan | Employee separation costs (credits) | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 3,614 | |||
Restructuring Charges | 293 | 210 | 707 | (380) |
Payments | (150) | |||
Ending balance for the period | 4,171 | 4,171 | ||
2016 Restructuring Plan | Facility closure costs | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring Charges | $ 560 | $ 825 | 1,024 | $ 1,942 |
Payments | $ (1,024) |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2018 |
Accounts receivable | ||
Gross accounts receivable | $ 515,266 | $ 503,175 |
Less: Allowance for doubtful accounts | (1,356) | (1,308) |
Accounts receivable, net | 275,364 | 252,651 |
Chargebacks | ||
Accounts receivable | ||
Less: reserve | (128,102) | (153,034) |
Rebates | ||
Accounts receivable | ||
Less: reserve | (34,673) | (33,102) |
Returns | ||
Accounts receivable | ||
Less: reserve | (49,508) | (43,059) |
Other | ||
Accounts receivable | ||
Less: reserve | $ (26,263) | $ (20,021) |
Accounts Receivable - Provision
Accounts Receivable - Provisions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Chargebacks | ||||
Accounts receivable | ||||
Provisions | $ 334.6 | $ 220.2 | $ 612.6 | $ 474.9 |
Rebates | ||||
Accounts receivable | ||||
Provisions | 78.8 | 77.6 | 143.6 | 156.1 |
Returns | ||||
Accounts receivable | ||||
Provisions | 11.3 | 4.1 | 18.7 | 14.5 |
Other | ||||
Accounts receivable | ||||
Provisions | $ 20.7 | $ 16.3 | $ 34.6 | $ 28.6 |
Accounts Receivable - Revenue R
Accounts Receivable - Revenue Reserve (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Change in revenue related reserves | ||
Balance at the beginning of the period | $ 298,616 | $ 220,384 |
Adjustment related to adoption of ASC 606 | 3,536 | |
Current period provision | 809,374 | 674,119 |
Credits issued during the period | (828,596) | (690,624) |
Balance at the end of the period | 282,930 | 203,879 |
Chargebacks | ||
Change in revenue related reserves | ||
Balance at the beginning of the period | 153,034 | 79,537 |
Current period provision | 612,560 | 474,882 |
Credits issued during the period | (637,492) | (499,959) |
Balance at the end of the period | 128,102 | 54,460 |
Rebates | ||
Change in revenue related reserves | ||
Balance at the beginning of the period | 82,502 | 87,616 |
Current period provision | 143,578 | 156,073 |
Credits issued during the period | (147,023) | (157,071) |
Balance at the end of the period | 79,057 | 86,618 |
Returns | ||
Change in revenue related reserves | ||
Balance at the beginning of the period | 43,059 | 42,135 |
Current period provision | 18,662 | 14,541 |
Credits issued during the period | (12,213) | (11,881) |
Balance at the end of the period | 49,508 | 44,795 |
Other | ||
Change in revenue related reserves | ||
Balance at the beginning of the period | 20,021 | 11,096 |
Adjustment related to adoption of ASC 606 | 3,536 | |
Current period provision | 34,574 | 28,623 |
Credits issued during the period | (31,868) | (21,713) |
Balance at the end of the period | $ 26,263 | $ 18,006 |
Accounts Receivable - Revenue_2
Accounts Receivable - Revenue Reserve additional information (Details) - USD ($) $ in Millions | Jul. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
ASU 2014-09 | |||||
Accounts receivable | |||||
Net adjustment to opening retained earnings and accounts receivable | $ 3.2 | ||||
Failure-to-supply reserves offset | 3.5 | ||||
Timing of recognition of contract manufacturing arrangements | $ 0.3 | ||||
Chargebacks | |||||
Accounts receivable | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 53.00% | 44.40% | 53.50% | 47.30% | |
Rebates | |||||
Accounts receivable | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 12.50% | 15.70% | 12.50% | 15.60% | |
Returns | |||||
Accounts receivable | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 1.80% | 0.80% | 1.60% | 1.40% | |
Other | |||||
Accounts receivable | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 3.30% | 3.30% | 3.00% | 2.90% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2018 |
Inventories: | ||
Raw Materials | $ 57,780 | $ 64,647 |
Work-in-process | 30,726 | 19,983 |
Finished Goods | 47,622 | 57,005 |
Net inventory | $ 136,128 | $ 141,635 |
Inventories - Additional inform
Inventories - Additional information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Disposal group held for sale | |||||
Inventories: | |||||
Inventory held for sale | $ 3,351 | $ 3,351 | |||
Excess and Obsolete | |||||
Inventories: | |||||
Inventory adjustments | (20,700) | (20,700) | $ (11,900) | ||
Write-down to net realizable value | $ 8,900 | $ 2,200 | $ 12,800 | $ 4,400 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Property, Plant and Equipment | ||||||
Less: accumulated depreciation | $ (79,991) | $ (79,991) | $ (89,996) | |||
Property, plant and equipment, net before construction in progress | 168,377 | 168,377 | 196,032 | |||
Property, plant and equipment, net | 195,607 | 195,607 | 233,247 | |||
Depreciation expense | 5,700 | $ 5,400 | 12,200 | $ 11,100 | ||
Impairment charges | 0 | |||||
Disposal group held for sale | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, held for sale | $ 36,600 | |||||
Impairment of the Cody long-lived assets | $ 29,900 | 29,900 | ||||
Held in foreign countries | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, net | 1,700 | 1,700 | 1,100 | |||
Land | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, gross | 2,283 | 2,283 | 2,900 | |||
Building and improvements | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, gross | 85,958 | 85,958 | 105,041 | |||
Machinery and equipment | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, gross | 156,903 | 156,903 | 173,988 | |||
Furniture and fixtures | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, gross | 3,224 | 3,224 | 4,099 | |||
Construction in progress | ||||||
Property, Plant and Equipment | ||||||
Property, plant and equipment, net | $ 27,230 | $ 27,230 | $ 37,215 |
Property, Plant and Equipment -
Property, Plant and Equipment - Useful Lives (Details) | 6 Months Ended |
Dec. 31, 2018 | |
Building and improvements | Minimum | |
Property, Plant and Equipment | |
Useful Lives | 10 years |
Building and improvements | Maximum | |
Property, Plant and Equipment | |
Useful Lives | 39 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment | |
Useful Lives | 5 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment | |
Useful Lives | 10 years |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment | |
Useful Lives | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment | |
Useful Lives | 7 years |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Jun. 30, 2018 |
Fair Value Measurements | ||
Fair value of long-term debt | $ 727 | $ 893 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Dec. 31, 2017 | Dec. 31, 2017 | |
Investment Securities | ||
Net gain on investment securities | $ 2,000 | $ 2,834 |
Unrealized gain on investment securities | $ 1,200 | $ 1,100 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands | 6 Months Ended |
Dec. 31, 2018USD ($) | |
Schedule of changes in the carrying amount of goodwill | |
Goodwill, beginning balance | $ 339,566 |
Impairment | $ (339,566) |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Intangible Assets - Definite (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2018 | Jun. 30, 2018 | |
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 469,766 | $ 468,348 |
Accumulated Amortization | (96,345) | (80,372) |
Intangible Assets, Net | $ 373,421 | 387,976 |
Cody Labs import license | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 581 | |
Accumulated Amortization | (386) | |
Intangible Assets, Net | 195 | |
Weighted Avg. Life (Yrs.) | 15 years | |
Product rights | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 21,692 | 19,693 |
Accumulated Amortization | (3,396) | (1,875) |
Intangible Assets, Net | $ 18,296 | 17,818 |
Weighted Avg. Life (Yrs.) | 13 years | |
Product rights | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 416,154 | 416,154 |
Accumulated Amortization | (83,712) | (69,840) |
Intangible Assets, Net | $ 332,442 | 346,314 |
Weighted Avg. Life (Yrs.) | 15 years | |
Product rights | Silarx | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 10,000 | 10,000 |
Accumulated Amortization | (2,389) | (2,056) |
Intangible Assets, Net | $ 7,611 | 7,944 |
Weighted Avg. Life (Yrs.) | 15 years | |
Trade name | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 2,920 | 2,920 |
Accumulated Amortization | $ (2,920) | (2,920) |
Weighted Avg. Life (Yrs.) | 2 years | |
Other Intangible Assets | KUPI | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 19,000 | 19,000 |
Accumulated Amortization | (3,928) | (3,295) |
Intangible Assets, Net | $ 15,072 | $ 15,705 |
Weighted Avg. Life (Yrs.) | 15 years |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Indefinite lived (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2018 |
Indefinite-lived | ||
Indefinite-lived assets, net | $ 36,449 | $ 36,449 |
Total intangible assets - Gross Carrying Amount, | 506,215 | 504,797 |
Accumulated Amortization | (96,345) | (80,372) |
Total intangible assets, Net | 409,870 | 424,425 |
Other product rights | ||
Indefinite-lived | ||
Indefinite-lived assets, net | 449 | 449 |
In-process research and development | KUPI | ||
Indefinite-lived | ||
Indefinite-lived assets, net | 18,000 | 18,000 |
In-process research and development | Silarx | ||
Indefinite-lived | ||
Indefinite-lived assets, net | $ 18,000 | $ 18,000 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Annual Amortization Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Goodwill and Intangible Assets | |||||
Amortization expense | $ 8,200 | $ 8,200 | $ 16,400 | $ 16,300 | |
Future annual amortization expense: | |||||
2,019 | 15,224 | 15,224 | |||
2,020 | 30,443 | 30,443 | |||
2,021 | 30,443 | 30,443 | |||
2,022 | 30,443 | 30,443 | |||
2,023 | 30,443 | 30,443 | |||
Thereafter | 236,425 | 236,425 | |||
Intangible assets, net | $ 373,421 | $ 373,421 | $ 387,976 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) $ in Thousands | Dec. 10, 2018USD ($) | Dec. 31, 2018USD ($) | Dec. 09, 2018 | Jun. 30, 2018USD ($) |
Long-term debt | ||||
Debt, gross | $ 863,864 | |||
Total debt, net | 813,452 | $ 839,270 | ||
Less short-term borrowings and current portion of long-term debt | (66,845) | (66,845) | ||
Total long-term debt, net | 746,607 | 772,425 | ||
Secured net leverage ratio | 4.25 | 3.25 | ||
Minimum liquidity covenant | $ 75,000 | |||
Increase in interest rate margin (as a percent) | 25.00% | |||
Consent fee (as a percent) | 50.00% | |||
Term Loan A due 2020 | ||||
Long-term debt | ||||
Debt, gross | 213,526 | 227,276 | ||
Unamortized discount and other debt issuance costs | (8,843) | (10,178) | ||
Total debt, net | $ 204,683 | 217,098 | ||
Debt instrument, stated percentage | 7.52% | |||
Term Loan B due 2022 | ||||
Long-term debt | ||||
Debt, gross | $ 650,338 | 670,011 | ||
Unamortized discount and other debt issuance costs | (41,569) | (47,839) | ||
Total debt, net | $ 608,769 | $ 622,172 | ||
Debt instrument, stated percentage | 7.90% |
Long-Term Debt - Due (Details)
Long-Term Debt - Due (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Debt maturities | |
2,019 | $ 66,845 |
2,020 | 225,371 |
2,021 | 39,345 |
2,022 | 532,303 |
Total | $ 863,864 |
Legal, Regulatory Matters and_2
Legal, Regulatory Matters and Contingencies (Details) | Jan. 22, 2018itemproduct | Jul. 13, 2017USD ($) | Dec. 31, 2018USD ($)product | Oct. 31, 2018item | Nov. 30, 2016item | Sep. 30, 2014lawsuit | Jul. 31, 2014lawsuitpatent | Dec. 31, 2016customer | Dec. 31, 2018USD ($)Distributorlawsuitproductpatent | Jan. 16, 2019product | Aug. 03, 2018product | Jun. 30, 2018USD ($) | Jun. 18, 2018product | Jun. 07, 2018product | Oct. 31, 2017stateproduct | Oct. 06, 2017product | Nov. 24, 2015USD ($) |
Zomig | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of lawsuits | lawsuit | 1 | 2 | |||||||||||||||
Patents allegedly invalid | patent | 2 | ||||||||||||||||
Patents allegedly infringed | patent | 2 | ||||||||||||||||
Connecticut Attorney General Inquiry | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 13 | ||||||||||||||||
Connecticut Attorney General Inquiry | Doxycycline Monohydrate | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 1 | ||||||||||||||||
Texas Medicaid Investigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Litigation settlement amount payable to other party | $ 8,000,000 | ||||||||||||||||
Proceeds from UCB for litigation settlement | 8,000,000 | ||||||||||||||||
Government Pricing | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Compliance reviews, number of customers | customer | 1 | ||||||||||||||||
Liability estimate | $ 9,300,000 | $ 9,300,000 | $ 9,300,000 | ||||||||||||||
FDIC Indemnification Asset | $ 8,300,000 | ||||||||||||||||
EPA Violation Notice | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Payment to litigation settlement | $ 60,000 | ||||||||||||||||
Escrow deposit | $ 225,000 | ||||||||||||||||
Private Antitrust and Consumer Protection Litigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 18 | 18 | 30 | 16 | 15 | 14 | 6 | ||||||||||
Number of manufacturers and distributors | Distributor | 30 | ||||||||||||||||
Number of States | state | 48 | ||||||||||||||||
Opt-out purchasers, number | item | 3 | ||||||||||||||||
Private Antitrust and Consumer Protection Litigation | Minimum | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of drugs | product | 30 | ||||||||||||||||
Number of lawsuits | lawsuit | 100 | ||||||||||||||||
Shareholder Litigation | |||||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||||
Number of officers | item | 2 | 2 |
Commitments (Details)
Commitments (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Future minimum lease payments | |
Remainder of 2019 | $ 922 |
2,020 | 1,855 |
2,021 | 1,406 |
2,022 | 1,080 |
2,023 | 1,080 |
Thereafter | 4,158 |
Total | $ 10,501 |
Commitments - Other Commitment
Commitments - Other Commitment (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Sep. 30, 2018USD ($) | Mar. 31, 2017USD ($)itememployee | Dec. 31, 2018USD ($) | |
Commitments | |||
Proceeds from sale of outstanding loan | $ 5,600 | ||
Revolving loans | |||
Commitments | |||
Amount of potential loans offered | $ 15,000 | ||
Expiration period | 7 years | ||
Interest rate | 2.00% | ||
Members in the board of the entity | item | 5 | ||
Lannett employees as members of the board of the entity | employee | 1 | ||
Percentage of outstanding loan | 50.00% | ||
Proceeds from sale of outstanding loan | $ 5,600 | ||
Current amount due from outstanding loan | $ 5,800 | ||
Revolving loans | If loan balance is equal to or greater than $7.5 million | |||
Commitments | |||
Minimum amount to be considered for conversion of loan to ownership interest | $ 7,500 | ||
Ownership interest for conversion (in percentage) | 50.00% |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss - Foreign Currency Translation (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Accumulated Other Comprehensive Loss | |||
Beginning Balance | $ (515) | $ (222) | |
Net gain (loss) on foreign currency translation (net of tax of $0 and $0) | 13 | (125) | |
Other comprehensive income (loss), net of tax | 13 | (125) | |
Ending Balance | (502) | (347) | |
Total Accumulated Other Comprehensive Loss | (502) | (347) | $ (515) |
Net gain (loss) on foreign currency translation, tax | 0 | 0 | |
Reclassifications to net income, tax | $ 0 | $ 0 |
Earnings (Loss) Per Common Sh_3
Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings (Loss) Per Common Share | |||||
Net income (loss) | $ 12,362 | $ 14,022 | $ (275,166) | $ (275,166) | $ 27,279 |
Basic weighted average common shares outstanding | 37,761,176 | 37,066,902 | 37,674,200 | 37,029,483 | |
Effect of potentially dilutive stock options and restricted stock awards | 1,351,371 | 1,223,456 | 1,058,343 | ||
Diluted weighted average common shares outstanding | 39,112,547 | 38,290,358 | 37,674,200 | 38,087,826 | |
Earnings (loss) per common share: | |||||
Basic (in dollars per share) | $ 0.33 | $ 0.38 | $ (7.30) | $ 0.74 | |
Diluted (in dollars per share) | $ 0.32 | $ 0.37 | $ (7.30) | $ 0.72 | |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 540,000 | 3,000,000 | 2,200,000 | 3,000,000 |
Warrant (Details)
Warrant (Details) - KUPI - Warrant issued to UCB $ / shares in Units, shares in Millions, $ in Millions | Nov. 25, 2015USD ($)$ / sharesshares |
Class of Warrant or Right | |
Number of common stock to be purchased under the warrant | shares | 2.5 |
Warrants expiration period | 3 years |
Warrants exercise price | $ / shares | $ 48.90 |
Issuance of a warrant to finance KUPI acquisition | $ | $ 29.9 |
Share-Based Compensation - Empl
Share-Based Compensation - Employee Compensation Plans (Details) shares in Thousands, $ in Millions | Jan. 23, 2019shares | Dec. 31, 2018USD ($)ShareBasedCompensationPlanshares |
Stock-based Compensation | ||
Number of share-based employee compensation plans | ShareBasedCompensationPlan | 2 | |
Aggregate number of shares authorized for issuance | 4,500 | |
Increase in aggregate number of shares authorized for issuance | 2,000 | |
Shares for future issuances | 615 | |
Maximum | ||
Other disclosures | ||
Share-based compensation awards vesting period | 3 years | |
Share-based compensation awards maximum contractual term | 10 years | |
Restricted stock | ||
Other disclosures | ||
Total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Plans | $ | $ 14.4 | |
Weighted average period during which the cost is expected to be recognized | 2 years 2 months 12 days |
Share-Based Compensation - Opti
Share-Based Compensation - Options Valuation (Details) - Stock options - $ / shares | 6 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Assumptions used to estimate fair values | ||
Risk-free interest rate (as a percent) | 2.90% | 1.90% |
Expected volatility (as a percent) | 58.40% | 57.40% |
Forfeiture rate (as a percent) | 6.50% | 6.50% |
Expected term (in years) | 5 years 3 months 18 days | 5 years 4 months 24 days |
Weighted average fair value (in dollars per share) | $ 6.52 | $ 9.06 |
Share-Based Compensation - Op_2
Share-Based Compensation - Options Rollforward (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Jun. 30, 2018 | |
Awards | ||
Outstanding at the beginning of the period (in shares) | 1,057 | |
Granted (in shares) | 73 | |
Exercised (in shares) | (32) | |
Forfeited, expired or repurchased (in shares) | (336) | |
Outstanding at the end of the period (in shares) | 762 | 1,057 |
Vested and expected to vest, Awards (in shares) | 752 | |
Exercisable at the end of the period (in shares) | 648 | |
Weighted-Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 22.46 | |
Granted (in dollars per share) | 12.20 | |
Exercised (in dollars per share) | 4.39 | |
Forfeited, expired or repurchased (in dollars per share) | 34.95 | |
Outstanding at the end of the period (in dollars per share) | 16.71 | $ 22.46 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 16.74 | |
Exercisable at the end of the period (in dollars per share) | $ 16.84 | |
Aggregate Intrinsic Value | ||
Outstanding at the beginning of the period (in dollars) | $ 2,584 | |
Exercised (in dollars) | 141 | |
Outstanding at the end of the period (in dollars) | 170 | $ 2,584 |
Vested and expected to vest, Aggregate Intrinsic Value | 170 | |
Exercisable at the end of the period (in dollars) | $ 170 | |
Weighted Average Remaining Contractual Life (yrs.) | ||
Outstanding at the end of the period (in years) | 5 years 2 months 12 days | 5 years 4 months 24 days |
Vested and expected to vest, Weighted Average Remaining Contractual Life | 5 years 1 month 6 days | |
Exercisable at the end of the period (in years) | 4 years 4 months 24 days |
Share-Based Compensation - Rest
Share-Based Compensation - Restricted Stock (Details) - Restricted stock - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stock-based Compensation | ||
Annual forfeiture rate used to calculate compensation expense (as a percent) | 6.50% | 6.50% |
Awards | ||
Non-vested at the beginning of the period (in shares) | 704 | |
Granted (in shares) | 1,170 | |
Vested (in shares) | (383) | |
Forfeited (in shares) | (94) | |
Non-vested at the end of the period (in shares) | 1,397 | |
Weighted Average Grant-date Fair Value | ||
Non-vested at the beginning of the period (in dollars per share) | $ 20.06 | |
Granted (in dollars per share) | 9.91 | |
Vested (in dollars per share) | 20.12 | |
Forfeited (in dollars per share) | 14.33 | |
Non-vested at the end of the period (in dollars per share) | $ 11.93 | |
Aggregate Intrinsic Value | ||
Vested | $ 3,732 |
Share-Based Compensation - Perf
Share-Based Compensation - Performance-Based Shares (Details) - Performance-Based Shares shares in Thousands | 6 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Awards | |
Non-vested at the beginning of the period (in shares) | shares | 20 |
Granted (in shares) | shares | 52 |
Non-vested at the end of the period (in shares) | shares | 72 |
Weighted Average Grant-date Fair Value | |
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 25.58 |
Granted (in dollars per share) | $ / shares | 17.69 |
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 19.92 |
Share-Based Compensation - Em_2
Share-Based Compensation - Employee Stock Purchase Plan (Details) - shares shares in Thousands | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Apr. 01, 2003 | |
Stock-based Compensation | |||
Shares authorized for issuance (in shares) | 4,500 | ||
Employee Stock Purchase Plan | |||
Stock-based Compensation | |||
Purchase price of stock as percent of market fair value (in percent) | 85.00% | ||
Compensation authorized by the employee to be withheld for stock purchase (in percent) | 10.00% | ||
Shares authorized for issuance (in shares) | 1,100 | ||
Shares issued (in shares) | 95 | 28 | |
Cumulative shares issued (in shares) | 702 |
Share-Based Compensation - Cost
Share-Based Compensation - Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based compensation costs | ||||
Share based compensation | $ 1,949 | $ 2,563 | $ 4,985 | $ 4,752 |
Tax benefit at statutory rate | 439 | 756 | 1,122 | 1,402 |
Selling, general and administrative | ||||
Share-based compensation costs | ||||
Share based compensation | 1,095 | 1,926 | 3,309 | 3,713 |
Research and development | ||||
Share-based compensation costs | ||||
Share based compensation | 199 | 176 | 400 | 327 |
Cost of sales | ||||
Share-based compensation costs | ||||
Share based compensation | $ 655 | $ 461 | $ 1,276 | $ 712 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Employee Benefit Plan | ||||
Company matching contributions equal to each employee's contribution (as a percent) | 50.00% | |||
Maximum contribution by the company as a percentage of employee's compensation for the plan year | 4.00% | |||
Contributions to the plan | $ 445 | $ 458 | $ 1,100 | $ 1,000 |
Income Taxes - Federal, State &
Income Taxes - Federal, State & Local (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Income Taxes | |||||
Federal, state and local income tax benefit | $ 2,647 | $ 18,138 | $ (72,953) | $ 25,561 | |
Effective tax rates (as a percent) | 17.60% | 56.40% | 21.00% | 48.40% | |
Federal income tax at statutory rate (as a percent) | 21.00% | 21.00% | 28.00% |
Income Taxes - Unrecognized Ben
Income Taxes - Unrecognized Benefits (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jun. 30, 2018 |
Income Taxes | ||
Unrecognized tax benefits | $ 2,200 | $ 2,500 |
Net long term deferred tax assets | 100,013 | 22,063 |
Unrecognized tax benefits cumulative interest and penalties recorded | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Related Party Transactions | |||||
Expenses incurred for online medical benefit services | $ 188 | $ 369 | |||
Accounts payable to related party | 0 | 0 | $ 58 | ||
Board Member | Auburn | |||||
Related Party Transactions | |||||
Sales to related party | 1,000 | $ 1,200 | 1,500 | $ 2,000 | |
Accounts receivable related party | 849 | 849 | 585 | ||
Board Member | KeySource | |||||
Related Party Transactions | |||||
Sales to related party | 920 | $ 516 | 1,500 | $ 983 | |
Accounts receivable related party | $ 605 | $ 605 | $ 514 |
Material Contracts with Suppl_2
Material Contracts with Suppliers (Details) - JSP shares in Millions, $ in Millions | Aug. 19, 2013USD ($)productshares | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Material Contracts with Suppliers | |||||
Number of products under the exclusive distribution agreement | product | 3 | ||||
Extension term of the agreement | 5 years | ||||
Number of shares of common stock issued in exchange for exclusive distribution rights | shares | 1.5 | ||||
Cost of sales | |||||
Material Contracts with Suppliers | |||||
Fair value of shares | $ | $ 20.1 | ||||
Inventory purchases | Suppliers | |||||
Material Contracts with Suppliers | |||||
Purchases of finished goods inventory from JSP as a percentage of the company's inventory purchases | 34.00% | 39.00% | 33.00% | 36.00% |
Assets Held for Sale - Summary
Assets Held for Sale - Summary of Assets and Liabilities (Details) - Disposal group held for sale $ in Thousands | Dec. 31, 2018USD ($) |
Assets | |
Inventories | $ 3,351 |
Other current assets | 355 |
Property, plant and equipment | 6,736 |
Intangible assets, net | 176 |
Other assets | 804 |
Total assets held for sale | 11,422 |
Liabilities | |
Accounts payable | 291 |
Accrued expenses | 138 |
Accrued payroll and payroll-related expenses | 775 |
Total liabilities held for sale | $ 1,204 |
Assets Held for Sale - Summar_2
Assets Held for Sale - Summary of Financial Results (Details) - Disposal group held for sale - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Assets Held for Sale | |||||
Impairment of long-lived assets | $ 29,900 | $ 29,900 | |||
Net sales | $ 654 | $ 387 | 2,142 | $ 1,086 | |
Pretax loss attributable to Cody API business | $ (4,314) | $ (4,468) | $ (39,335) | $ (9,957) |
Amneal Distribution and Trans_2
Amneal Distribution and Transition Support Agreement (Details) - USD ($) $ in Thousands | Dec. 01, 2018 | Nov. 09, 2018 | Feb. 01, 2019 | Dec. 31, 2018 |
Distribution and Transition Support Agreement | ||||
Deferred revenue | $ 23,998 | |||
Amneal Agreement | Amneal | Levothyroxine Sodium Tablets USP | ||||
Distribution and Transition Support Agreement | ||||
Upfront payment | $ 50,000 | |||
Minimum guarantee gross profit | 50,000 | |||
Net sales for guarantee gross profit | $ 80,000 | |||
Proceeds form upfront payment | $ 43,000 | |||
Deferred revenue | $ 24,000 | |||
Amneal Agreement | Amneal | Levothyroxine Sodium Tablets USP | Forecast | ||||
Distribution and Transition Support Agreement | ||||
Remaining upfront payment receivable | $ 7,000 |