Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2019 | Jan. 31, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2019 | |
Entity Registrant Name | LANNETT CO INC | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 40,343,569 | |
Entity Central Index Key | 0000057725 | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 30, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 119,176 | $ 140,249 |
Accounts receivable, net | 158,498 | 164,752 |
Inventories | 152,090 | 143,971 |
Prepaid income taxes | 6,949 | |
Assets held for sale | 3,757 | 9,671 |
Other current assets | 8,709 | 13,606 |
Total current assets | 449,179 | 472,249 |
Property, plant and equipment, net | 183,631 | 186,670 |
Intangible assets, net | 422,849 | 411,229 |
Operating lease right-of-use assets | 6,015 | |
Deferred tax assets | 111,514 | 109,305 |
Other assets | 7,896 | 7,960 |
TOTAL ASSETS | 1,181,084 | 1,187,413 |
Current liabilities: | ||
Accounts payable | 30,883 | 13,493 |
Accrued expenses | 10,750 | 5,805 |
Accrued payroll and payroll-related expenses | 12,238 | 19,924 |
Rebates payable | 48,447 | 46,175 |
Royalties payable | 20,298 | 16,215 |
Restructuring liability | 515 | 2,315 |
Income taxes payable | 2,198 | |
Current operating lease liabilities | 1,848 | |
Short-term borrowings and current portion of long-term debt | 101,939 | 66,845 |
Other current liabilities | 2,851 | 3,652 |
Total current liabilities | 229,769 | 176,622 |
Long-term debt, net | 606,073 | 662,203 |
Long-term operating lease liabilities | 5,358 | |
Other liabilities | 14,712 | 14,547 |
TOTAL LIABILITIES | 855,912 | 853,372 |
Commitments (Note 12) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 39,851,828 and 38,969,518 shares issued; 38,698,403 and 38,010,714 shares outstanding at December 31, 2019 and June 30, 2019, respectively) | 40 | 39 |
Additional paid-in capital | 317,012 | 317,023 |
Retained earnings | 25,002 | 32,075 |
Accumulated other comprehensive loss | (578) | (615) |
Treasury stock (1,153,425 and 958,804 shares at December 31, 2019 and June 30, 2019, respectively) | (16,304) | (14,481) |
Total stockholders’ equity | 325,172 | 334,041 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,181,084 | $ 1,187,413 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Jun. 30, 2019 |
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 | 39,851,828 | 38,969,518 |
Common stock, outstanding shares | 38,698,403 | 38,010,714 |
Treasury stock, shares | 1,153,425 | 958,804 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
Net sales | $ 136,110 | $ 193,718 | $ 263,452 | $ 348,772 | |
Cost of sales | 86,663 | 115,751 | 164,319 | 203,441 | |
Amortization of intangibles | 8,153 | 8,157 | 15,181 | 16,380 | |
Gross profit | 41,294 | 69,810 | 83,952 | 128,951 | |
Operating expenses: | |||||
Research and development expenses | 6,906 | 9,723 | 15,846 | 19,533 | |
Selling, general and administrative expenses | 17,421 | 23,197 | 38,729 | 43,785 | |
Restructuring expenses | 192 | 213 | 1,580 | 1,235 | |
Asset impairment charges | 1,618 | 369,499 | |||
Total operating expenses | 24,519 | 33,133 | 57,773 | 434,052 | |
Operating income (loss) | 16,775 | 36,677 | 26,179 | (305,101) | |
Other income (loss): | |||||
Loss on extinguishment of debt | (2,145) | ||||
Investment income | 430 | 556 | 1,159 | 935 | |
Interest expense | (16,694) | (21,512) | (35,986) | (42,945) | |
Other | (735) | (712) | 199 | (1,008) | |
Total other loss | (16,999) | (21,668) | (36,773) | (43,018) | |
Income (loss) before income tax | (224) | 15,009 | (10,594) | (348,119) | |
Income tax expense (benefit) | (5,308) | 2,647 | (3,521) | (72,953) | |
Net income (loss) | $ 5,084 | $ 12,362 | $ (7,073) | $ (275,166) | |
Earnings (loss) per common share: | |||||
Basic (in dollars per share) | $ 0.13 | $ 0.33 | $ (0.18) | $ (7.30) | |
Diluted (in dollars per share) | $ 0.13 | $ 0.32 | $ (0.18) | $ (7.30) | |
Weighted average common shares outstanding: | |||||
Basic (in shares) | 38,605,052 | 37,761,176 | 38,457,159 | 37,674,200 | |
Diluted (in shares) | [1] | 40,557,503 | 39,112,547 | 38,457,159 | 37,674,200 |
[1] | See Note 14 “Earnings (Loss) Per Common Share” for details on calculation. |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ 5,084 | $ 12,362 | $ (7,073) | $ (275,166) |
Other comprehensive income (loss), before tax: | ||||
Foreign currency translation gain (loss) | 83 | 7 | 37 | 13 |
Total other comprehensive income (loss), before tax | 83 | 7 | 37 | 13 |
Total other comprehensive income (loss), net of tax | 83 | 7 | 37 | 13 |
Comprehensive income (loss) | $ 5,167 | $ 12,369 | $ (7,036) | $ (275,153) |
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, beginning at Jun. 30, 2018 | $ 38 | $ 306,817 | $ 306,464 | $ (515) | $ (13,889) | $ 598,915 |
Balance, beginning (in shares) at Jun. 30, 2018 | 38,257 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
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 loss, net of income tax | (13) | (13) | ||||
ASC 606 adjustment, net of tax | (2,282) | (2,282) | ||||
Net income (loss) | (275,166) | (275,166) | ||||
Balance, ending at Dec. 31, 2018 | $ 39 | 312,322 | 29,016 | (502) | (14,364) | 326,511 |
Balance, ending (in shares) at Dec. 31, 2018 | 38,767 | |||||
Balance, beginning at Sep. 30, 2018 | $ 39 | 310,135 | 16,654 | (509) | (14,295) | 312,024 |
Balance, beginning (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 loss, net of income tax | (7) | (7) | ||||
Net income (loss) | 12,362 | 12,362 | ||||
Balance, ending at Dec. 31, 2018 | $ 39 | 312,322 | 29,016 | (502) | (14,364) | 326,511 |
Balance, ending (in shares) at Dec. 31, 2018 | 38,767 | |||||
Balance, beginning at Jun. 30, 2019 | $ 39 | 317,023 | 32,075 | (615) | (14,481) | 334,041 |
Balance, beginning (in shares) at Jun. 30, 2019 | 38,970 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 595 | 596 | |||
Shares issued in connection with share-based compensation plans (in shares) | 882 | |||||
Share-based compensation | 6,466 | 6,466 | ||||
Purchase of treasury stock | (1,823) | (1,823) | ||||
Other comprehensive loss, net of income tax | (37) | (37) | ||||
Purchase of capped call | (7,072) | (7,072) | ||||
Net income (loss) | (7,073) | (7,073) | ||||
Balance, ending at Dec. 31, 2019 | $ 40 | 317,012 | 25,002 | (578) | (16,304) | 325,172 |
Balance, ending (in shares) at Dec. 31, 2019 | 39,852 | |||||
Balance, beginning at Sep. 30, 2019 | $ 40 | 314,645 | 19,918 | (661) | (15,838) | 318,104 |
Balance, beginning (in shares) at Sep. 30, 2019 | 39,630 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | 360 | 360 | ||||
Shares issued in connection with share-based compensation plans (in shares) | 222 | |||||
Share-based compensation | 2,007 | 2,007 | ||||
Purchase of treasury stock | (466) | (466) | ||||
Other comprehensive loss, net of income tax | (83) | (83) | ||||
Net income (loss) | 5,084 | 5,084 | ||||
Balance, ending at Dec. 31, 2019 | $ 40 | $ 317,012 | $ 25,002 | $ (578) | $ (16,304) | $ 325,172 |
Balance, ending (in shares) at Dec. 31, 2019 | 39,852 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (7,073) | $ (275,166) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 26,878 | 28,622 |
Deferred income tax benefit | (2,209) | (77,950) |
Share-based compensation | 6,466 | 4,985 |
Asset impairment charges | 1,618 | 369,499 |
Loss (gain) on sale/disposal of assets | (1,195) | 644 |
Loss on extinguishment of debt | 2,145 | |
Amortization of debt discount and other debt issuance costs | 7,571 | 8,934 |
Other noncash expenses | 829 | (510) |
Changes in assets and liabilities which provided (used) cash: | ||
Accounts receivable, net | 6,254 | (25,887) |
Inventories | (8,119) | 2,156 |
Prepaid income taxes/income taxes payable | (8,982) | 17,516 |
Other assets | 5,801 | (678) |
Rebates payable | 2,272 | (5,016) |
Royalties payable | 4,083 | 3,660 |
Restructuring liability | (1,800) | (1,013) |
Operating lease liability | (716) | |
Accounts payable | 17,390 | 3,701 |
Accrued expenses | 4,988 | (4) |
Accrued payroll and payroll-related expenses | (7,686) | 8,501 |
Settlement liability | 8,000 | |
Deferred revenue | 23,998 | |
Other liabilities | (801) | |
Net cash provided by operating activities | 47,714 | 93,992 |
INVESTING ACTIVITIES: | ||
Purchases of property, plant and equipment | (8,796) | (12,030) |
Proceeds from sale of property, plant and equipment | 6,288 | 14,091 |
Proceeds from sale of outstanding loan to Variable Interest Entity ("VIE") | 5,600 | |
Advance to VIE | 250 | |
Purchases of intangible assets | (27,250) | (2,000) |
Net cash provided by (used in) provided by investing activities | (30,008) | 5,661 |
FINANCING ACTIVITIES: | ||
Proceeds from issuance of long-term debt | 86,250 | |
Purchase of capped call | (7,072) | |
Repayments of long-term debt | (113,278) | (33,422) |
Proceeds from issuance of stock | 596 | 521 |
Payment of deferred financing fees | (3,489) | (1,102) |
Purchase of treasury stock | (1,823) | (475) |
Net cash used in financing activities | (38,816) | (34,478) |
Effect on cash and cash equivalents of changes in foreign exchange rates | 37 | 13 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (21,073) | 65,188 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 140,249 | 98,586 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 119,176 | 163,774 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest paid | 27,762 | 34,190 |
Income taxes paid (refunded) | 7,670 | (11,993) |
Accrued purchases of property, plant and equipment | $ 2,304 | $ 2,416 |
Interim Financial Information
Interim Financial Information | 6 Months Ended |
Dec. 31, 2019 | |
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, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2020. 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, 2019. The Consolidated Balance Sheet as of June 30, 2019 was derived from audited financial statements. |
The Business And Nature of Oper
The Business And Nature of Operations | 6 Months Ended |
Dec. 31, 2019 | |
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 operates pharmaceutical manufacturing plants in 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Dec. 31, 2019 | |
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 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. Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. 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 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 average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under Other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. 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. 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 which commences upon shipment of the product, 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 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. Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The table below identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2019 and 2018. The medical indication categories for the three and six months ended December 31, 2018 were reclassified to better align with industry standards and the Company’s peers. Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2019 2018 2019 2018 Analgesic $ 2,111 $ 2,547 $ 3,995 $ 4,376 Anti-Psychosis 22,697 14,036 50,730 24,925 Cardiovascular 23,972 25,680 45,579 47,450 Central Nervous System 19,331 7,373 38,588 21,659 Endocrinology — 88,477 — 142,355 Gastrointestinal 18,313 12,943 35,275 30,537 Infectious Disease 18,078 4,616 29,973 9,096 Migraine 10,878 12,551 20,021 22,288 Respiratory/Allergy/Cough/Cold 3,075 3,388 5,781 6,972 Urinary 1,233 1,596 1,668 3,137 Other 9,934 12,606 19,796 23,411 Contract manufacturing revenue 6,488 7,905 12,046 12,566 Total net sales $ 136,110 $ 193,718 $ 263,452 $ 348,772 Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the three and six months ended December 31, 2019 and 2018, for one 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, 2019 2018 2019 2018 Product 1 15 % 7 % 18 % 7 % Product 2 10 % — % 9 % — % Product 3 — % % — % % The following table presents the percentage of total net sales, for the three and six months ended December 31, 2019 and 2018, 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, 2019 2018 2019 2018 Customer A 26 % 14 % 26 % 16 % Customer B 21 % 18 % 23 % 23 % Customer C 8 % 13 % 10 % 11 % Customer D — % 14 % — % 8 % The Company’s primary finished goods inventory supplier through March 23, 2019 was Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for approximately 34% and 33% of the Company’s inventory purchases during the three and six months ended December 31, 2018, respectively. There were no purchases of finished goods inventory from JSP in the first six months of Fiscal 2020. 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. 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 FDA approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an abbreviated new drug application ("ANDA’). 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. Leases On July 1, 2019, the Company adopted ASC Topic 842, Leases , which superseded ASC Topic 840, Leases . Refer to the “Recent Accounting Pronouncements” section of this footnote for further discussion on the impact of the adoption. Under ASC 842, when the Company enters into a new arrangement, it must determine, at the inception date, whether the arrangement is or contains a lease. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. Once a lease has been identified, the Company must determine the lease term, the present value of lease payments and the classification of the lease as either operating or financing. The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants The present value of lease payments includes fixed and certain variable payments, less lease incentives, together with amounts probable of being owed by the Company under residual value guarantees and, if reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth in the lease arrangement. To calculate the present value of lease payments, we use our incremental borrowing rate based on the information available at commencement date, as the rate implicit in the lease is generally not readily available. In making the determination of whether a lease is an operating lease or a finance lease, the Company considers the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors. Upon the commencement of the lease, the Company will record a lease liability and right-of-use (“ROU”) asset based on the present value of the future minimum lease payments over the lease term at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. For operating leases, a single lease cost is generally recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term unless an impairment has been recorded with respect to a leased asset. For finance leases, amortization expense and interest expense are recognized separately in the Consolidated Statements of Operations, with amortization expense generally recorded on a straight-line basis and interest expense recorded using the effective interest method. Variable lease costs not initially included in the lease liability and ROU asset impairment charges are expensed as incurred. 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 Food and Drug Administration ("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 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, 2019 and June 30,2019 was not material to the consolidated financial position of the Company. Income Taxes The Company uses the liability method to account for income taxes as prescribed by 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 Securities and Exchange Commission (“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. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments. 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 (loss) per common share to diluted earnings (loss) 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 shares outstanding during the period. Beginning in the first quarter of Fiscal 2020, the Company's diluted earnings (loss) per common share is computed using the "if-converted" method by dividing the adjusted "if-converted" net income by the adjusted weighted average number of shares of common stock outstanding during the period. The adjusted "if-converted" net income is adjusted for interest expense and amortization of debt issuance costs, both net of tax, associated with the Company’s 4.50% Convertible Senior Notes due 2026. The weighted average number of diluted shares is adjusted for the potential dilutive effect of the exercise of stock options, treats unvested restricted stock and performance-based shares as if it were vested, and assumes the conversion of the 4.50% Convertible Senior Notes. 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) for all amounts are recorded directly as an adjustment to stockholders’ equity. Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes , which is meant to reduce complexity in the accounting for income taxes, eliminates certain exceptions within ASC 740, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted for periods for which financial statements have not been issued as of December 15, 2019. The Company has elected to early adopt this guidance in the second quarter of Fiscal 2020. As a result of the adoption, the Company is no longer subject to the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Thus, the income tax benefit recorded in the six months ended December 31, 2019 was not limited to the expected tax benefit associated with the anticipated full year results, which would have otherwise been the case. The income tax benefit recorded in each of the three and six months ended December 31, 2019 would have been reduced by $1.8 million had the Company elected not to early adopt this pronouncement. There is no impact on the Company’s first quarter of Fiscal 2020 income taxes recorded. The Company does not believe that the remaining amendments in ASU 2019-12 will have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . ASU 2016-02 requires an entity to recognize ROU 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. The Company adopted ASU 2016-02 as of July 1, 2019 on a modified retrospective basis applying the guidance to leases existing as of this effective date. The Company has determined that there was no cumulative-effect adjustment to beginning retained earnings on the consolidated balance sheet. The Company will continue to report periods prior to July 1, 2019 in our financial statements under prior guidance as outlined in Topic 840. Refer to Note 12 "Commitments" for additional information. The Company’s adoption of ASU No. 2016-02 resulted in an increase in the Company’s assets and liabilities of $7.9 million at July 1, 2019. The Company’s adoption of ASU No. 2016-02 did not have any impact to the Company’s consolidated state |
Restructuring Charges
Restructuring Charges | 6 Months Ended |
Dec. 31, 2019 | |
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 focused on a more select set of opportunities which resulted in streamlined operations, improved efficiencies and a reduced cost structure. The Company incurred approximately $2.5 million of severance and employee-related costs under this plan. The restructuring activities under the Cody Restructuring Program were completed as of June 30, 2019. The credits associated with the Cody Restructuring Plan included in restructuring 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) A reconciliation of the changes in restructuring liabilities associated with the Cody Restructuring Plan from June 30, 2019 through December 31, 2019 is set forth in the following table: Employee Facility Closure (In thousands) Separation Costs Costs Total Balance at June 30, 2019 $ 108 $ — $ 108 Restructuring Charges — — — Payments (108) — (108) Balance at December 31, 2019 $ — — $ — Cody API Restructuring Plan In September 2018, the Company approved a plan to sell the active pharmaceutical ingredient manufacturing distribution business of Cody Labs (the “Cody API business”). The Company was unable to sell the Cody API business as an ongoing operation and intends to sell the equipment and real estate utilized by the Cody API business and to have Cody Labs cease all operations. In June 2019, the Company approved the Cody API Restructuring Plan. In connection with the Cody API Restructuring Plan, there has been a reduction of almost 70 positions at Cody Labs. The restructuring activities under the Cody API Restructuring Plan are substantially complete as of December 31, 2019. In the first quarter of Fiscal 2020, the Company completed the sale of a portion of the equipment associated with the Cody API business for $2.0 million. In the second quarter of Fiscal 2020, the Company signed a two-year agreement to lease a portion of the real estate. The costs to implement the Cody API Restructuring Plan total approximately $6.0 million, including approximately $3.5 million of severance and employee-related costs and approximately $2.0 million of contract termination costs, as well as approximately $0.5 million of costs to be incurred in connection with moving equipment and other property to other Company-owned facilities that were originally anticipated to be incurred in connection with the Cody Restructuring Plan announced in June 2018. The expenses associated with the Cody API Restructuring Plan included in restructuring expenses during the three and six months ended December 31, 2019 were as follows: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2019 2019 Employee separation costs $ 192 $ 1,084 Facility closure costs — 496 Total $ 192 $ 1,580 A reconciliation of the changes in restructuring liabilities associated with the Cody API Restructuring Plan from June 30, 2019 through December 31, 2019 is set forth in the following table: Employee Contract Facility Separation Termination Closure (In thousands) Costs Costs Costs Total Balance at June 30, 2019 $ 2,207 $ — $ — $ 2,207 Restructuring Charges 1,084 — 496 1,580 Payments (2,776) — (496) (3,272) Balance at December 31, 2019 $ 515 $ — — $ 515 2016 Restructuring Program On February 1, 2016, in connection with the acquisition of Kremers Urban Pharmaceuticals Inc.("KUPI "), the Company announced a plan related to the future integration of KUPI and the Company’s operations (the “2016 Restructuring Program”). The plan focused on the closure of KUPI’s corporate functions and the consolidation of manufacturing, sales, research and development and distribution functions. The restructuring activities under the 2016 Restructuring Program were completed as of March 31, 2019. The Company incurred an aggregate of approximately $21.0 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 related to employee separation costs, approximately $1.0 million relates to contract termination costs and approximately $9.0 million related to facility closure costs and other actions. The expenses associated with the restructuring program included in restructuring expenses during the three and six months ended December 31, 2018 were as follows: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2018 Employee separation costs $ 293 $ 707 Facility closure costs 560 1,024 Total $ 853 $ 1,731 |
Accounts Receivable, net
Accounts Receivable, net | 6 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, net | |
Accounts Receivable, net | Note 5. Accounts Receivable, net Accounts receivable, net consisted of the following components at December 31, 2019 and June 30, 2019: December 31, June 30, (In thousands) 2019 2019 Gross accounts receivable $ 337,076 $ 361,323 Less: Chargebacks reserve (69,797) (89,567) Less: Rebates reserve (26,929) (32,099) Less: Returns reserve (54,651) (55,554) Less: Other deductions (26,102) (18,128) Less: Allowance for doubtful accounts (1,099) (1,223) Accounts receivable, net $ 158,498 $ 164,752 For the three months ended December 31, 2019, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $199.6 million, $58.3 million, $6.5 million and $28.7 million, respectively. 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 six months ended December 31, 2019, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $407.5 million, $116.8 million, $10.2 million, and $41.4 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. The following table identifies the activity and ending balances of each major category of revenue-related reserve for the six months ended December 31, 2019 and 2018: Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2019 $ 89,567 $ 78,274 $ 55,554 $ 18,128 $ 241,523 Current period provision 407,523 116,803 10,217 41,424 575,967 Credits issued during the period (427,293) (119,701) (11,120) (33,450) (591,564) Balance at December 31, 2019 $ 69,797 $ 75,376 $ 54,651 $ 26,102 $ 225,926 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 For the three months ending December 31, 2019 and 2018, as a percentage of gross sales the provision for chargebacks was 47.2% and 53.0%, the provision for rebates was 13.8% and 12.5%, the provision for returns was 1.5% and 1.8% and the provision for other adjustments was 6.8% and 3.3%, respectively. For the six months ending December 31, 2019 and 2018, as a percentage of gross sales the provision for chargebacks was 49.3% and 53.5%, the provision for rebates was 14.1% and 12.5%, the provision for returns was 1.2% and 1.6%, and the provision for other adjustments was 5.0% and 3.0%, 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 total reserves from June 30, 2019 to December 31, 2019 was primarily attributable to the timing of sales in the three months ended June 30, 2019 as compared to the three months ended December 31, 2019 as well as a $9.4 million rebate payment to the Department of Veteran's Affairs related to pricing overcharges, of which $8.1 million was indemnified by UCB , the former parent company of KUPI. The decrease was partially offset by additional shelf-stock adjustments related to contractual price adjustments during the second quarter of Fiscal 2020. 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, 2019 | |
Inventories | |
Inventories | Note 6. Inventories Inventories at December 31, 2019 and June 30, 2019 consisted of the following: December 31, June 30, (In thousands) 2019 2019 Raw Materials $ 64,226 $ 56,740 Work-in-process 16,373 18,988 Finished Goods 71,491 68,243 Total $ 152,090 $ 143,971 Inventory balances were written-down by $16.5 million and $20.7 million at December 31, 2019 and June 30, 2019, respectively for excess and obsolete inventory amounts. During the three months ended December 31, 2019 and 2018, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $2.5 million and $8.9 million, respectively. During the six months ended December 31, 2019 and 2018, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $6.1 million and $12.8 million, respectively. |
Property, Plant and Equipment,
Property, Plant and Equipment, net | 6 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, net. | |
Property, Plant and Equipment, net | Note 7. Property, Plant and Equipment, net Property, plant and equipment, net at December 31, 2019 and June 30, 2019 consisted of the following: December 31, June 30, (In thousands) Useful Lives 2019 2019 Land — $ 1,783 $ 1,783 Building and improvements 10 - 39 years 95,032 87,609 Machinery and equipment 5 - 10 years 164,300 156,166 Furniture and fixtures 5 - 7 years 3,110 3,105 Less accumulated depreciation (93,999) (83,424) 170,226 165,239 Construction in progress 13,405 21,431 Property, plant and equipment, net $ 183,631 $ 186,670 Depreciation expense for the three months ended December 31, 2019 and 2018 was $5.9 million and $5.7 million, respectively. Depreciation expense for the six months ended December 31, 2019 and 2018 was $11.7 million and $12.2 million, respectively. In the first quarter of Fiscal 2019, the Company approved a plan to sell the Cody API business and performed a fair value analysis which resulted in a $29.9 million impairment of the Cody API property, plant and equipment assets . The Company was unable to sell the Cody API business as an ongoing operation and intended to sell the equipment and real estate utilized by the Cody API business and to have Cody Labs cease all operations. As such, Cody Labs' property, plant and equipment totaling $6.7 million, were recorded in the assets held for sale caption in the Consolidated Balance Sheet as of June 30, 2019. As of December 31, 2019, the Company has a remaining balance of $3.8 million recorded in the assets held for sale caption in the Consolidated Balance Sheet. See Note 19 “Assets Held for Sale” for more information. Property, plant and equipment, net included amounts held in foreign countries in the amount of $0.7 million and $1.0 million at December 31, 2019 and June 30, 2019, respectively. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Dec. 31, 2019 | |
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 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). The estimated fair value of our term loan debt was approximately $643 million and $724 million as of December 31, 2019 and June 30, 2019, respectively. The estimated fair value of our 4.5% Convertible Senior Notes was approximately $72 million as of December 31, 2019. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 9. Goodwill and Intangible Assets On August 17, 2018, JSP notified the Company that it would not extend or renew the JSP Distribution Agreement when the current term expired 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, totaling $339.6 million, was required. Intangible assets, net as of December 31, 2019 and June 30, 2019 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.) 2019 2019 2019 2019 2019 2019 Definite-lived: Cody Labs import license 15 $ 581 $ 581 $ (444) $ (424) $ 137 $ 157 KUPI product rights 15 416,154 416,154 (111,455) (97,583) 304,699 318,571 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (5,195) (4,562) 13,805 14,438 Silarx product rights 15 10,000 10,000 (3,056) (2,722) 6,944 7,278 Other product rights 12 33,942 26,579 (4,678) (4,243) 29,264 22,336 Total definite-lived $ 482,597 $ 475,234 $ (127,748) $ (112,454) $ 354,849 $ 362,780 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 — 32,000 12,449 — — 32,000 12,449 Total indefinite-lived 68,000 48,449 — — 68,000 48,449 Total intangible assets, net $ 550,597 $ 523,683 $ (127,748) $ (112,454) $ 422,849 $ 411,229 The Company recorded amortization expense of $8.2 million in each of the three months ended December 31, 2019 and December 31, 2018, respectively. For the six months ended December 31, 2019 and 2018, the Company recorded amortization expense of $15.2 million and $16.4 million, respectively. The Company previously entered into a distribution and supply agreement with Dexcel Pharma Technologies to distribute Venlafaxine XR upon FDA approval. In the second quarter of Fiscal 2020, Dexcel Pharma Technologies received FDA approval and the Company initiated commercial launch of the product. The Company paid total consideration of $3.0 million upon reaching certain milestones, which is included within the “Other product rights” category of definite-lived intangible assets. Future annual amortization expense consisted of the following as of December 31, 2019: (In thousands) Amortization Fiscal Year Ending June 30, Expense 2020 $ 16,607 2021 33,214 2022 33,111 2023 32,904 2024 32,567 Thereafter 206,446 $ 354,849 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Dec. 31, 2019 | |
Long-Term Debt | |
Long-Term Debt | Note 10. Long-Term Debt Long-term debt, net consisted of the following: December 31, June 30, (In thousands) 2019 2019 Term Loan A due 2020; 6.80% as of December 31, 2019 $ 62,594 $ 153,933 Unamortized discount and other debt issuance costs (1,236) (4,722) Term Loan A, net 61,358 149,211 Term Loan B due 2022; 7.17% as of December 31, 2019 592,529 614,468 Unamortized discount and other debt issuance costs (28,766) (34,631) Term Loan B, net 563,763 579,837 4.50% Convertible Senior Notes due 2026 86,250 — Unamortized discount and other debt issuance costs (3,359) — 4.50% Convertible Senior Notes, net 82,891 — Revolving Credit Facility due 2020 — — Total debt, net 708,012 729,048 Less short-term borrowings and current portion of long-term debt (101,939) (66,845) Total long-term debt, net $ 606,073 $ 662,203 Long-term debt amounts due, for the twelve-month periods ending December 31 are as follows: Amounts Payable (In thousands) to Institutions 2020 $ 101,939 2021 39,345 2022 513,839 2023 — Thereafter 86,250 Total $ 741,373 On September 27, 2019, the Company issued $86,250,000 aggregate principal amount of its 4.50% convertible senior notes due 2026 (the “Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 4.50% payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2020. The Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms. The Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 65.4022 shares per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $15.29 per share), subject to adjustments upon the occurrence of certain events (but will not be adjusted for any accrued and unpaid interest). The Company may redeem all or a part of the Notes on or after October 6, 2023 at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date, subject to certain conditions relating to the Company's stock price having been met. Following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or notice of redemption. The indenture covering the Notes contains certain other customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or holders of at least 25% in principal amount of the outstanding Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable. In connection with the offering of the Notes, the Company also entered into privately negotiated “capped call” transactions with several counterparties. The capped call transaction will initially cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the Notes. The capped call transactions are expected to generally reduce the potential dilutive effect on the Company’s common stock upon any conversion of the Notes with such reduction subject to a cap which is initially $19.46 per share. The capped call transactions are recorded in stockholders' equity and are not accounted for as derivatives. The fees associated with the capped call transactions totaled $7.1 million, which was recorded as a reduction to additional paid-in capital on the Consolidated Balance Sheet. The form of capped call confirmations was filed as Exhibit 10.57 to the Form 8-K filed with the SEC on September 27, 2019. A portion of the net proceeds received from the offering of the Notes was used to pay the cost of the capped call transactions. The remaining net proceeds, totaling $77.0 million, was used to repay a portion of the outstanding Term Loan A balance on September 27, 2019. As a result of the repayment, the Company recorded a loss on extinguishment of debt of $2.1 million in the Consolidated Statement of Operations in the first quarter of Fiscal 2020. The outstanding Term Loan A, Term Loan B and Revolving Credit Facility amounts above are guaranteed by all of Lannett’s significant wholly-owned domestic subsidiaries and are collateralized by substantially all present and future assets of the Company. |
Legal, Regulatory Matters and C
Legal, Regulatory Matters and Contingencies | 6 Months Ended |
Dec. 31, 2019 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 11. Legal, Regulatory Matters and Contingencies State Attorneys General Inquiry into the Generic Pharmaceutical Industry In July 2014, the Company received interrogatories and a 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 pursuant to the federal investigation described below. 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. 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 Court granted that motion on June 5, 2018. The State Attorneys General filed their amended complaint on June 18, 2018. 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. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overreaching conspiracy claims as to it. On May 10, 2019, the State Attorneys General filed a new lawsuit naming the Company and one of its employees as defendants, along with 33 other corporations and individuals. The new complaint again alleges an overarching conspiracy and contains claims for price fixing and market allocation under the Sherman Act and related state laws. The complaint focuses on the conduct of another generic pharmaceutical company, and the relationships that company had with other generic companies and their employees. The specific allegations in the new complaint against Lannett relate to the Company’s sales of baclofen and levothyroxine. The new complaint also names another current employee as a defendant, however the allegations pertain to conduct that occurred prior to their employment by Lannett. The Company has not responded to the new complaint as of the date of this report. Based on internal investigations performed to date, the Company currently believes that it has acted in compliance with all applicable laws and regulations. Federal Investigation into the Generic Pharmaceutical Industry In November and December 2014, the Company and certain affiliated individuals and customers were 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 requested 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 requested information from 2009-present. The Company has provided a response to the CID. Based on internal investigations performed to date, the Company believes that it has acted in compliance with all applicable laws and regulations. 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. For the period January 1, 2012 through November 24, 2015 (“the pre-acquisition period”), the Company is fully indemnified per the Stock Purchase Agreement. On May 22, 2019, the Department of Veterans Affairs ("VA") issued a Contracting Officer's Final Decision and Demand for Payment, assessing the sum of $9.4 million for overpayments by the Veteran's Administration for the period of January 1, 2012 through June 30, 2016. In August 2019, the Company remitted payment to the VA and received reimbursement from UCB for the indemnified portion of the payment in the amount of $8.1 million. Private Antitrust and Consumer Protection Litigation In 2016 and 2017, the Company and certain competitors were named as defendants in a number of lawsuits alleging that the Company and certain generic pharmaceutical manufacturers 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 was 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 “MDL”). The various private 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. On March 15, 2019, the Company and other defendants filed answers to the Sherman Act claims. In addition, on February 15, 2019, the Court dismissed certain of the plaintiffs’ state law claims brought under the laws of Illinois, Rhode Island, Georgia, South Carolina, Montana, West Virginia, Alabama, New Jersey, Michigan and Nevada, but denied the remainder of defendants’ motions to dismiss. The Court set a deadline of April 1, 2019 for certain plaintiffs to amend their existing complaints to reflect the rulings set forth in the Court’s February 15, 2019 ruling on the state law motions to dismiss. Those plaintiffs amended their complaints, but further motions to dismiss the state-law claims have been deferred until the Court decides pending motions to dismiss with respect to the plaintiffs’ various overarching-conspiracy claims. In addition to lawsuits brought by private plaintiffs, the Attorneys General of 49 states, the District of Columbia, Puerto Rico and Guam have filed their own lawsuits alleging overarching, industry-wide price-fixing conspiracies by the Company and various other generic pharmaceutical manufacturers. Those suits have been consolidated in the MDL. The first suit alleges that the Company was involved in price-fixing for one drug, doxycycline monohydrate. Defendants’ joint motion to dismiss the overarching conspiracy claims in that suit was denied on August 15, 2019, but the Company’s individual motion to dismiss the overarching conspiracy claims as to it remains outstanding. The Attorneys General also filed a second overarching conspiracy complaint on May 10, 2019 involving dozens of different drugs, including alleged price-fixing by the company for baclofen and levothyroxine. Following the lead of the state Attorneys General, the Direct Purchaser Plaintiffs, End Payer Plaintiffs and Indirect Reseller Plaintiffs filed their own complaints in June 2018 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. Although the complaints allege an overarching conspiracy with respect to all of the drugs identified, the specific allegations related to drugs Lannett manufactures involve acetazolamide and doxycycline monohydrate. The Company and the other defendants filed motions to dismiss the overarching conspiracy claims. On August 15, 2019, the Court denied the defendants' joint motion to dismiss the overarching conspiracy claims, but has yet to decide an individual motion filed by the Company to dismiss the overarching conspiracy claims as to it. In December 2019, the End Payer Plaintiffs and Indirect Reseller Plaintiffs filed new overarching conspiracy complaints modeled on the second one filed by the States Attorneys General, and the Direct Purchaser Plaintiffs have indicated that they also will be filing a new overarching conspiracy complaint. Between January 2018 and December 2019, a number of opt-out parties have filed individual complaints against the Company and dozens of other companies alleging an overarching conspiracy and individual conspiracies to fix the prices and allocate markets on dozens of different drug products, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. All of these complaints have been added to the MDL. No responses have been filed to any of the opt-out complaints. On July 29, 2019, a group of insurance companies filed a writ of summons in the Court of Common Pleas of Philadelphia against the Company and dozens of other companies. The state court case has been stayed indefinitely pending further developments in the MDL. On November 13, 2019, 14 New York counties filed a complaint in the Nassau County Supreme Court alleging an overarching, industry-wide conspiracy involving the Company and other generic pharmaceutical manufacturers to allocate markets and fix prices generally for a variety of generic drugs. The defendants have removed the case to federal court in New York and it is now in the process of being transferred for pretrial purposes to the multidistrict litigation pending in the Eastern District of Pennsylvania. None of the defendants, including the Company, has responded yet to this particular complaint. On December 11, 2019, another opt-out direct purchaser filed a complaint in the Eastern District of Pennsylvania alleging an overarching, industry-wide conspiracy involving the Company and other generic pharmaceutical manufacturers to allocate markets and fix prices generally for a variety of generic drugs. On December 27, 2019, another opt-out direct purchaser filed a similar complaint in the Northern District of California. The defendants expect that these complaints will be added to the pending multidistrict litigation. None of the defendants, including the Company, has responded yet to these particular complaints. 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 and plans to vigorously defend itself from these claims. Shareholder Litigation In November 2016, a putative class action lawsuit was filed against the Company and two of its former officers in the federal court for the Eastern District of Pennsylvania, alleging that the Company, its former Chief Executive Officer, and its former Chief Financial Officer damaged the purported class by including in the Company's 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. In May 2019, the court denied the Company’s motion to dismiss the third amended complaint. In July 2019, the Company filed an answer to the third amended complaint. The Company believes it acted in compliance with all applicable laws and plans to vigorously defend itself from these claims. 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 former Chief Financial Officer damaged the purported class by making false and misleading statements in connection with the possible renewal of the JSP Distribution Agreement. In December 2018, counsel for the putative class filed an amended complaint. The Company moved to dismiss the amended complaint in January 2019. In March 2019, the Court granted in part and denied in part the Company’s motion to dismiss. In May 2019, the Company filed an answer to the amended complaint. During May and June 2019, the parties negotiated a proposed settlement and agreed to settle the litigation, by which the Company agreed to pay the sum of $300,000 without an admission of liability and subject to the negotiation of the terms of a stipulation of settlement and approval by the Court. In July 2019, counsel for the putative class filed a motion for preliminary approval of the proposed settlement and on July 31, 2019, the Court issued an Order granting the motion and scheduling a hearing for final approval of the settlement for February 7, 2020. In May 2019, a shareholder derivative lawsuit was filed against certain of the Company’s current and former officers and certain of the current and former members of the Company’s Board of Directors in the federal court for the District of Delaware. The Company was also named as a nominal defendant in the suit. The suit alleges that the defendants breached their fiduciary duties as directors and/or officers of the Company, that certain of the defendants caused the Company to issue false and misleading proxy statements in violation of Section 14(a) of the Securities Exchange Act of 1934, that the defendants were unjustly enriched at the expense of the Company, and that the defendants wasted corporate assets belonging to the Company. On December 4, 2019 the court entered a stipulation consolidating the suit with a separate shareholder derivative suit filed in July 2019. On December 6, 2019, the Company filed a motion to dismiss the consolidated cases. On January 14, 2020, the parties reached an agreement in principle to resolve the consolidated cases, subject to the execution of a mutually acceptable settlement document and Court approval. The settlement, if approved by the Court, will require the Company to implement certain new corporate policies and pay the plaintiff’s counsel in the consolidated cases, collectively, the sum of $600,000 in exchange for a release of all liability. In July 2019, a shareholder derivative lawsuit was filed against certain of the Company’s current and former officers and directors in the federal court for the Eastern District of Pennsylvania. The Company was also named as a nominal defendant in the suit. The suit alleges that the defendants breached their fiduciary duties as directors and/or officers of the Company and that certain of the defendants caused the Company to violate Sections 10(b), 14(a), and 29(b) of the Securities Exchange Act of 1934. In October 2019, this suit was transferred to the federal court for the District of Delaware and is pending before the same judge presiding over the shareholder derivative suit that was filed in May 2019. On December 4, 2019, the Court entered a stipulation consolidating the suit with a separate shareholder derivative suit filed in May 2019. On December 6, 2019, the Company filed a motion to dismiss the consolidated cases. On January 14, 2020, the parties reached an agreement in principle to resolve the consolidated cases, subject to the execution of a mutually agreeable settlement document and Court approval. The settlement, if approved by the Court, will require the Company to implement certain new corporate policies and pay the plaintiffs’ counsel in the consolidated cases, collectively, the sum of $600,000 in exchange for a release of all liability. In September 2019, a shareholder derivative lawsuit was filed against certain of the Company’s current and former officers, directors and employees in the federal court for the District of Delaware. The Company was also named as a nominal defendant in the suit. The suit alleges that the defendants breached their fiduciary duties as directors and/or officers of the Company, alleges waste of corporate assets and gross mismanagement, and alleges that certain of the defendants caused the Company to violate Section 14(a) of the Securities and Exchange Act of 1934. On November 22, 2019, the Company filed a motion to dismiss the complaint. On January 9, 2020, the parties filed a stipulation to stay the case pending the resolution of the defendants’ motion to dismiss the two earlier filed consolidated shareholder derivative cases referenced above. On January 16, 2020, the Court entered the parties’ stipulation. The Company cannot reasonably predict the outcome of the suit at this time. 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 solution product. The Company denies that it is falsely advertising its cocaine hydrochloride solution 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 Section 505(b)(2) application. In January 2019, the Company filed a motion to dismiss the complaint. On May 3, 2019, the Court issued a written decision granting in part and denying in part the motion to dismiss. On June 6, 2019, Genus filed an Amended Complaint. On June 27, 2019, the Company filed a motion to dismiss the amended complaint. By Order dated September 3, 2019, the Court granted in part and denied in part the Company's motion to dismiss. On November 20, 2019, Genus filed a second amended complaint. On December 17, 2019, the Company filed an answer to the second amended complaint. The Company believes it acted in compliance with all applicable laws and regulations and plans to vigorously defend itself from these claims. Discovery is ongoing and the Company cannot reasonably predict the outcome of this suit at this time. 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, 2019 | |
Commitments | |
Commitments | Note 12. Commitments Leases The Company’s adoption of ASU No. 2016-02 resulted in an increase in the Company’s assets and liabilities of $7.9 million at July 1, 2019. In the first quarter of Fiscal 2020, the Company recorded a ROU lease asset totaling $1.2 million related to an existing lease at Cody Labs upon adoption of ASU No. 2016-02. The Company subsequently recorded a full impairment of the asset as a result of the decision to cease operations at Cody Labs. At December 31, 2019, the Company has a ROU lease asset of $6.0 million and a ROU liability of $7.2 million, of which $1.8 million and $5.4 million represent the current and non-current balance, respectively. The Company recently signed an eight year lease for its new headquarters in Trevose, Pennsylvania. The Company will provide lease improvements prior to the lease commencement date, which is anticipated to be during the fourth quarter of Fiscal 2020. As of December 31, 2019, per ASC Topic 842, Leases , the Company has not recorded a ROU lease asset and liability related to the lease of its new headquarters since the lease has not commenced. Components of lease cost are as follows: Three Months Ended Six Months Ended (In thousands) December 31, 2019 December 31, 2019 Operating lease cost $ 590 $ 1,071 Variable lease cost 32 61 Short-term lease cost (a) 124 279 Total $ 746 $ 1,411 (a) Not recorded on the Consolidated Balance Sheet. Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Six Months Ended (In thousands) December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 966 Non-cash activity: ROU assets obtained in exchange for new operating lease liabilities $ — Weighted-average remaining lease term and discount rate for our operating leases are as follows: Six Months Ended December 31, 2019 Weighted-average remaining lease term 9 years Weighted-average discount rate 7.50 % Maturities of lease liabilities by fiscal year for our operating leases are as follows: (In thousands) Amounts Due 2020 $ 975 2021 1,487 2022 1,169 2023 1,169 2024 1,169 Thereafter 3,929 Total lease payments 9,898 Less: Imputed interest 2,692 Present value of lease liabilities $ 7,206 As of June 30, 2019, future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) for the twelve-month periods ending June 30 thereafter are as follows: (In thousands) Amounts Due 2020 $ 1,898 2021 1,450 2022 1,123 2023 1,123 2024 1,123 Thereafter 3,839 Total $ 10,556 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, 2019, $6.4 million was outstanding under the revolving loan and is included in other assets. 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. In the second quarter of Fiscal 2020, the Company executed a License and Collaboration Agreement with North South Brother Pharmacy Investment Co., Ltd. and HEC Group PTY, Ltd. (collectively, “HEC”) to develop an insulin glargine product that would be biosimilar to Lantus Solostar. Under the terms of the deal, among other things, the Company shall fund up to the initial $32 million of the development costs and split 50/50 any development costs in excess thereof. Lannett shall receive an exclusive license to distribute and market the product in the United States upon FDA approval under the 50/50 profit split for the first ten years following commercialization, followed by a 60/40 split in favor of HEC for the following five years. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Loss. | |
Accumulated Other Comprehensive Loss | Note 13. Accumulated Other Comprehensive Loss The Company’s Accumulated Other Comprehensive Loss was comprised of the following components as of December 31, 2019 and 2018: December 31, (In thousands) 2019 2018 Foreign Currency Translation Beginning Balance, June 30 $ (615) $ (515) Net gain on foreign currency translation (net of tax of $0 and $0) 37 13 Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive income (loss), net of tax 37 13 Ending Balance, December 31 (578) (502) Total Accumulated Other Comprehensive Loss $ (578) $ (502) |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 6 Months Ended |
Dec. 31, 2019 | |
Earnings (Loss) Per Common Share | |
Earnings (Loss) Per Common Share | Note 14. Earnings (Loss) Per Common Share A reconciliation of the Company’s basic and diluted earnings (loss) per common share is as follows: Three Months Ended December 31, (In thousands, except share and per share data) 2019 2018 Numerator: Net income $ 5,084 $ 12,362 Interest expense applicable to the Notes, net of tax — — Amortization of debt issuance costs applicable to the Notes, net of tax — — Adjusted “if-converted” net income $ 5,084 $ 12,362 Denominator: Basic weighted average common shares outstanding 38,605,052 37,761,176 Effect of potentially dilutive options and restricted stock awards 1,952,451 1,351,371 Effect of conversion of the Notes — — Diluted weighted average common shares outstanding 40,557,503 39,112,547 Earnings per common share: Basic $ 0.13 $ 0.33 Diluted $ 0.13 $ 0.32 Six Months Ended December 31, (In thousands, except share and per share data) 2019 2018 Numerator: Net loss $ (7,073) $ (275,166) Interest expense applicable to the Notes, net of tax — — Amortization of debt issuance costs applicable to the Notes, net of tax — — Adjusted “if-converted” net loss $ (7,073) $ (275,166) Denominator: Basic weighted average common shares outstanding 38,457,159 37,674,200 Effect of potentially dilutive options and restricted stock awards — — Effect of conversion of the Notes — — Diluted weighted average common shares outstanding 38,457,159 37,674,200 Loss per common share: Basic $ (0.18) $ (7.30) Diluted $ (0.18) $ (7.30) 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, 2019 and 2018 were 6.0 million and 540 thousand, respectively. The number of anti-dilutive shares that have been excluded in the computation of diluted loss per share for the six months ended December 31, 2019 and 2018 were 6.7 million and 2.2 million, respectively. The effect of potentially dilutive shares was excluded from the calculation of diluted loss per share in the six months ended December 31, 2019 and 2018 because the effect of including such securities would be anti-dilutive. |
Share-based Compensation
Share-based Compensation | 6 Months Ended |
Dec. 31, 2019 | |
Share-based Compensation | |
Share-based Compensation | Note 15. Share-based Compensation At December 31, 2019, 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 6.5 million shares to be issued. As of December 31, 2019, the plans have a total of 1.2 million shares available for future issuances. Historically, the Company issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. Beginning in Fiscal 2020, the Company extended the vesting period of new share-based compensation awards to 4 years. The Company issues new shares of stock when stock options are exercised. As of December 31, 2019, there was $13.2 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 2.5 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, 2019 and 2018, 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, December 31, 2019 2018 Risk-free interest rate 1.9 % 2.9 % Expected volatility 73.7 % 58.4 % Expected dividend yield — — Forfeiture rate 6.5 % 6.5 % Expected term 5.1 years 5.3 years Weighted average fair value $ 4.04 $ 6.52 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 summary as of December 31, 2019 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, 2019 572 $ 17.56 $ 273 5.0 Granted 522 $ 6.57 Exercised (50) $ 5.60 $ 210 Forfeited, expired or repurchased (32) $ 24.86 Outstanding at December 31, 2019 1,012 $ 12.24 $ 1,685 7.3 Vested and expected to vest at December 31, 2019 1,009 $ 12.23 $ 1,685 7.3 Exercisable at December 31, 2019 504 $ 16.74 $ 682 5.1 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, 2019 and 2018. A summary of restricted stock awards as of December 31, 2019 and changes during the six months then ended, is presented below: Weighted Average Grant - Aggregate (In thousands, except for weighted average price data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2019 1,288 $ 11.63 Granted 936 6.44 Vested (735) 10.28 $ 6,096 Forfeited (46) 13.49 Non-vested at December 31, 2019 1,443 $ 8.90 Performance-Based Shares In September 2017, the Company began granting performance-based awards to certain key executives. The stock-settled awards will cliff 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, 2019 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, 2019 72 $ 19.92 Granted 178 $ 10.71 Vested (46) $ 15.08 $ 477 Forfeited — $ — Non-vested at December 31, 2019 204 $ 12.99 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, 2019 and 2018, 52 thousand shares and 95 thousand shares were issued under the ESPP, respectively. As of December 31, 2019, 844 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) 2019 2018 2019 2018 Selling, general and administrative expenses $ 1,205 $ 1,095 $ 4,840 $ 3,309 Research and development expenses 214 199 438 400 Cost of sales 588 655 1,188 1,276 Total $ 2,007 $ 1,949 $ 6,466 $ 4,985 Tax benefit at statutory rate $ 452 $ 439 $ 1,455 $ 1,122 |
Employee Benefit Plan
Employee Benefit Plan | 6 Months Ended |
Dec. 31, 2019 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 16. 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, 2019 and 2018 were $0.5 million and $0.4 million, respectively. Contributions to the Plan for both the six months ended December 31, 2019 and 2018 were $1.1 million, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Income Taxes | Note 17. 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 benefit for the three months ended December 31, 2019 was $5.3 million compared to an income tax expense of $2.6 million for the three months ended December 31, 2018. The effective tax rates for the three months ended December 31, 2019 and 2018 were 2369.6% and 17.6%, respectively. The effective tax rate for the three months ended December 31, 2019 was higher compared to the three months ended December 31, 2018 primarily due to tax credits and deductions relative to a lower pre-tax loss in the three months ended December 31, 2019. The federal, state and local income tax benefit for the six months ended December 31, 2019 was $3.5 million compared to $73.0 million for the six months ended December 31, 2018. The effective tax rates for the six months ended December 31, 2019 and 2018 were 33.2% and 21.0%, respectively. The effective tax rate for the six months ended December 31, 2019 was higher compared to the six months ended December 31, 2018 primarily due to research and development credits relative to expected pre-tax loss, partially offset by the impact of excess tax shortfalls related to stock compensation. 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, 2019 and June 30, 2019, the Company has total unrecognized tax benefits of $2.4 million and $2.2 million, respectively, of which $2.1 million would impact the Company’s effective tax rate for each period, if recognized. As a result of the positions taken during the period, the Company has not recorded any material interest and penalties for the period ended December 31, 2019 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, 2019 and June 30, 2019. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses. 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 2014 - 2016 federal returns are currently under examination by the Internal Revenue Service (“IRS”). In October 2018, the Company was notified that the Commonwealth of Pennsylvania will conduct a routine field audit of the Company’s Fiscal 2016 and Fiscal 2017 corporate tax returns. The Company cannot reasonably predict the outcome of the examinations at this time. In December 2019, the Company was notified that the Florida Department of Revenue will conduct a routine field audit of the Company’s Fiscal 2016, 2017 and 2018 corporate tax returns. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions | |
Related Party Transactions | Note 18. Related Party Transactions The Company had sales of $0.6 million and $1.0 million during the three months ended December 31, 2019 and 2018, 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, 2019 and 2018 were $1.3 million and $1.5 million, respectively. Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $0.4 million and $1.2 million at December 31, 2019 and June 30, 2019, respectively. The Company also had sales of $0.5 million and $0.9 million during the three months ended December 31, 2019 and 2018, respectively, to a generic distributor, KeySource, which is a member of the OptiSource Buying Group. Sales to KeySource for the six months ended December 31, 2019 and 2018 were $1.2 million and $1.5 million, respectively. Albert Paonessa a board member until January 22, 2020, was appointed the CEO of KeySource in May 2017. Accounts receivable includes amounts due from KeySource of $0.5 million and $0.7 million as of December 31, 2019 and June 30, 2019, respectively. |
Assets Held for Sale
Assets Held for Sale | 6 Months Ended |
Dec. 31, 2019 | |
Assets Held for Sale | |
Assets held for Sale | Note 19. 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 a result of the plan, 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 Labs’ long-lived assets in the first quarter of Fiscal 2019. The Company was unable to sell the Cody API business as an ongoing operation and intended to sell the equipment utilized by the Cody API business as well as the real estate upon receiving approval of the Company’s cocaine hydrochloride solution Section 505(b)(2) NDA application and to have Cody Labs cease all operations. In the first quarter of Fiscal 2020, the Company completed the sale of a portion of the equipment associated with the Cody API business for $2.0 million. In the second quarter of Fiscal 2020, the Company signed a two-year agreement to lease a portion of the real estate. As of December 31, 2019, the real estate and remaining equipment associated with the Cody API business, totaling $3.8 million, was recorded in the assets held for sale caption in the Consolidated Balance Sheet. The following table summarizes the financial results of the Cody API business for the three and six months ended December 31, 2019 and 2018: Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2019 2018 2019 2018 Net sales $ 669 $ 654 $ 1,736 $ 2,142 Pretax loss attributable to Cody API business (644) (4,314) (5,061) (39,335) The pretax loss attributable to the Cody API business during the six months ended December 31, 2019 includes a full impairment of the ROU lease asset, totaling $1.2 million, that was recorded upon adoption of ASU No. 2016-02 on July 1, 2019. The pretax loss attributable to the Cody API business during the six months ended December 31, 2018 includes impairment charges totaling $29.9 million to adjust the long-lived assets to its fair value less costs to sell. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with 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. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. |
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 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 average exchange rates during the period. The adjustments resulting from the use of differing exchange rates are recorded as part of stockholders’ equity in accumulated other comprehensive income (loss). Gains and losses resulting from transactions denominated in foreign currencies are recognized in the Consolidated Statements of Operations under Other income (loss). Amounts recorded due to foreign currency fluctuations are immaterial to the Consolidated Financial Statements. |
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. |
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 which commences upon shipment of the product, 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 | Valuation of Long-Lived Assets, including Intangible Assets 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. |
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 table below identifies the Company’s net sales by medical indication for the three and six months ended December 31, 2019 and 2018. The medical indication categories for the three and six months ended December 31, 2018 were reclassified to better align with industry standards and the Company’s peers. Three Months Ended Six Months Ended (In thousands) December 31, December 31, Medical Indication 2019 2018 2019 2018 Analgesic $ 2,111 $ 2,547 $ 3,995 $ 4,376 Anti-Psychosis 22,697 14,036 50,730 24,925 Cardiovascular 23,972 25,680 45,579 47,450 Central Nervous System 19,331 7,373 38,588 21,659 Endocrinology — 88,477 — 142,355 Gastrointestinal 18,313 12,943 35,275 30,537 Infectious Disease 18,078 4,616 29,973 9,096 Migraine 10,878 12,551 20,021 22,288 Respiratory/Allergy/Cough/Cold 3,075 3,388 5,781 6,972 Urinary 1,233 1,596 1,668 3,137 Other 9,934 12,606 19,796 23,411 Contract manufacturing revenue 6,488 7,905 12,046 12,566 Total net sales $ 136,110 $ 193,718 $ 263,452 $ 348,772 |
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, 2019 and 2018, for one 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, 2019 2018 2019 2018 Product 1 15 % 7 % 18 % 7 % Product 2 10 % — % 9 % — % Product 3 — % % — % % The following table presents the percentage of total net sales, for the three and six months ended December 31, 2019 and 2018, 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, 2019 2018 2019 2018 Customer A 26 % 14 % 26 % 16 % Customer B 21 % 18 % 23 % 23 % Customer C 8 % 13 % 10 % 11 % Customer D — % 14 % — % 8 % The Company’s primary finished goods inventory supplier through March 23, 2019 was Jerome Stevens Pharmaceuticals, Inc. (“JSP”), in Bohemia, New York. Purchases of finished goods inventory from JSP accounted for approximately 34% and 33% of the Company’s inventory purchases during the three and six months ended December 31, 2018, respectively. There were no purchases of finished goods inventory from JSP in the first six months of Fiscal 2020. |
Revenue Recognition | 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. 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 FDA approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an abbreviated new drug application ("ANDA’). 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. |
Leases | Leases On July 1, 2019, the Company adopted ASC Topic 842, Leases , which superseded ASC Topic 840, Leases . Refer to the “Recent Accounting Pronouncements” section of this footnote for further discussion on the impact of the adoption. Under ASC 842, when the Company enters into a new arrangement, it must determine, at the inception date, whether the arrangement is or contains a lease. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. Once a lease has been identified, the Company must determine the lease term, the present value of lease payments and the classification of the lease as either operating or financing. The lease term is determined to be the non-cancelable period including any lessee renewal options which are considered to be reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants The present value of lease payments includes fixed and certain variable payments, less lease incentives, together with amounts probable of being owed by the Company under residual value guarantees and, if reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth in the lease arrangement. To calculate the present value of lease payments, we use our incremental borrowing rate based on the information available at commencement date, as the rate implicit in the lease is generally not readily available. In making the determination of whether a lease is an operating lease or a finance lease, the Company considers the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors. Upon the commencement of the lease, the Company will record a lease liability and right-of-use (“ROU”) asset based on the present value of the future minimum lease payments over the lease term at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. For operating leases, a single lease cost is generally recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term unless an impairment has been recorded with respect to a leased asset. For finance leases, amortization expense and interest expense are recognized separately in the Consolidated Statements of Operations, with amortization expense generally recorded on a straight-line basis and interest expense recorded using the effective interest method. Variable lease costs not initially included in the lease liability and ROU asset impairment charges are expensed as incurred. |
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 Food and Drug Administration ("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 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, 2019 and June 30,2019 was not material to the consolidated financial position of the Company. |
Income Taxes | Income Taxes The Company uses the liability method to account for income taxes as prescribed by 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 Securities and Exchange Commission (“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. In the second quarter of Fiscal 2019, the Company finalized the provisional amounts without any further adjustments. |
Earnings (Loss) Per Common Share | 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 (loss) per common share to diluted earnings (loss) 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 shares outstanding during the period. Beginning in the first quarter of Fiscal 2020, the Company's diluted earnings (loss) per common share is computed using the "if-converted" method by dividing the adjusted "if-converted" net income by the adjusted weighted average number of shares of common stock outstanding during the period. The adjusted "if-converted" net income is adjusted for interest expense and amortization of debt issuance costs, both net of tax, associated with the Company’s 4.50% Convertible Senior Notes due 2026. The weighted average number of diluted shares is adjusted for the potential dilutive effect of the exercise of stock options, treats unvested restricted stock and performance-based shares as if it were vested, and assumes the conversion of the 4.50% Convertible Senior Notes. 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) for all amounts are recorded directly as an adjustment to stockholders’ equity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Simplifying the Accounting for Income Taxes , which is meant to reduce complexity in the accounting for income taxes, eliminates certain exceptions within ASC 740, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted for periods for which financial statements have not been issued as of December 15, 2019. The Company has elected to early adopt this guidance in the second quarter of Fiscal 2020. As a result of the adoption, the Company is no longer subject to the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. Thus, the income tax benefit recorded in the six months ended December 31, 2019 was not limited to the expected tax benefit associated with the anticipated full year results, which would have otherwise been the case. The income tax benefit recorded in each of the three and six months ended December 31, 2019 would have been reduced by $1.8 million had the Company elected not to early adopt this pronouncement. There is no impact on the Company’s first quarter of Fiscal 2020 income taxes recorded. The Company does not believe that the remaining amendments in ASU 2019-12 will have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases . ASU 2016-02 requires an entity to recognize ROU 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. The Company adopted ASU 2016-02 as of July 1, 2019 on a modified retrospective basis applying the guidance to leases existing as of this effective date. The Company has determined that there was no cumulative-effect adjustment to beginning retained earnings on the consolidated balance sheet. The Company will continue to report periods prior to July 1, 2019 in our financial statements under prior guidance as outlined in Topic 840. Refer to Note 12 "Commitments" for additional information. The Company’s adoption of ASU No. 2016-02 resulted in an increase in the Company’s assets and liabilities of $7.9 million at July 1, 2019. The Company’s adoption of ASU No. 2016-02 did not have any impact to the Company’s consolidated statements of operations, or its consolidated statements of cash flows. Further, there was no impact on the Company’s covenant compliance under its current debt agreements as a result of the adoption of ASU No. 2016-02. The Company elected the package of practical expedients included in this guidance, which allowed it to not reassess: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and, (iii) the initial direct costs for existing leases. The Company does not recognize short-term leases of 12 months or less on its consolidated balance sheets and will recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. Recent Accounting Pronouncements, Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments , which changes the impairment model used to measure credit losses for most financial assets. We will be required to use a new forward-looking expected credit loss model that will replace the existing incurred credit loss model for our accounts receivables and loans. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact the adoption will have on its consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
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 2019 2018 2019 2018 Analgesic $ 2,111 $ 2,547 $ 3,995 $ 4,376 Anti-Psychosis 22,697 14,036 50,730 24,925 Cardiovascular 23,972 25,680 45,579 47,450 Central Nervous System 19,331 7,373 38,588 21,659 Endocrinology — 88,477 — 142,355 Gastrointestinal 18,313 12,943 35,275 30,537 Infectious Disease 18,078 4,616 29,973 9,096 Migraine 10,878 12,551 20,021 22,288 Respiratory/Allergy/Cough/Cold 3,075 3,388 5,781 6,972 Urinary 1,233 1,596 1,668 3,137 Other 9,934 12,606 19,796 23,411 Contract manufacturing revenue 6,488 7,905 12,046 12,566 Total net sales $ 136,110 $ 193,718 $ 263,452 $ 348,772 |
Summary of products which accounted for at least 10% of total net sales | Three Months Ended Six Months Ended December 31, December 31, 2019 2018 2019 2018 Product 1 15 % 7 % 18 % 7 % Product 2 10 % — % 9 % — % Product 3 — % % — % % |
Summary of customers which accounted for at least 10% of total net sales | Three Months Ended Six Months Ended December 31, December 31, 2019 2018 2019 2018 Customer A 26 % 14 % 26 % 16 % Customer B 21 % 18 % 23 % 23 % Customer C 8 % 13 % 10 % 11 % Customer D — % 14 % — % 8 % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
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, 2019 $ 108 $ — $ 108 Restructuring Charges — — — Payments (108) — (108) Balance at December 31, 2019 $ — — $ — |
Cody API Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2019 2019 Employee separation costs $ 192 $ 1,084 Facility closure costs — 496 Total $ 192 $ 1,580 |
Schedule of reconciliation of changes in restructuring liabilities associated with restructuring program | Employee Contract Facility Separation Termination Closure (In thousands) Costs Costs Costs Total Balance at June 30, 2019 $ 2,207 $ — $ — $ 2,207 Restructuring Charges 1,084 — 496 1,580 Payments (2,776) — (496) (3,272) Balance at December 31, 2019 $ 515 $ — — $ 515 |
2016 Restructuring Program | |
Schedule of restructuring charges associated with restructuring program | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2018 2018 Employee separation costs $ 293 $ 707 Facility closure costs 560 1,024 Total $ 853 $ 1,731 |
Accounts Receivable, net (Table
Accounts Receivable, net (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, net | |
Schedule of accounts receivable | December 31, June 30, (In thousands) 2019 2019 Gross accounts receivable $ 337,076 $ 361,323 Less: Chargebacks reserve (69,797) (89,567) Less: Rebates reserve (26,929) (32,099) Less: Returns reserve (54,651) (55,554) Less: Other deductions (26,102) (18,128) Less: Allowance for doubtful accounts (1,099) (1,223) Accounts receivable, net $ 158,498 $ 164,752 |
Schedule of major category of revenue-related reserves | Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2019 $ 89,567 $ 78,274 $ 55,554 $ 18,128 $ 241,523 Current period provision 407,523 116,803 10,217 41,424 575,967 Credits issued during the period (427,293) (119,701) (11,120) (33,450) (591,564) Balance at December 31, 2019 $ 69,797 $ 75,376 $ 54,651 $ 26,102 $ 225,926 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 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Inventories | |
Schedule of Inventories | December 31, June 30, (In thousands) 2019 2019 Raw Materials $ 64,226 $ 56,740 Work-in-process 16,373 18,988 Finished Goods 71,491 68,243 Total $ 152,090 $ 143,971 |
Property, Plant and Equipment_2
Property, Plant and Equipment, net (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, net. | |
Schedule of property, plant and equipment | December 31, June 30, (In thousands) Useful Lives 2019 2019 Land — $ 1,783 $ 1,783 Building and improvements 10 - 39 years 95,032 87,609 Machinery and equipment 5 - 10 years 164,300 156,166 Furniture and fixtures 5 - 7 years 3,110 3,105 Less accumulated depreciation (93,999) (83,424) 170,226 165,239 Construction in progress 13,405 21,431 Property, plant and equipment, net $ 183,631 $ 186,670 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets | |
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.) 2019 2019 2019 2019 2019 2019 Definite-lived: Cody Labs import license 15 $ 581 $ 581 $ (444) $ (424) $ 137 $ 157 KUPI product rights 15 416,154 416,154 (111,455) (97,583) 304,699 318,571 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (5,195) (4,562) 13,805 14,438 Silarx product rights 15 10,000 10,000 (3,056) (2,722) 6,944 7,278 Other product rights 12 33,942 26,579 (4,678) (4,243) 29,264 22,336 Total definite-lived $ 482,597 $ 475,234 $ (127,748) $ (112,454) $ 354,849 $ 362,780 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 — 32,000 12,449 — — 32,000 12,449 Total indefinite-lived 68,000 48,449 — — 68,000 48,449 Total intangible assets, net $ 550,597 $ 523,683 $ (127,748) $ (112,454) $ 422,849 $ 411,229 |
Summary of future annual amortization expense | (In thousands) Amortization Fiscal Year Ending June 30, Expense 2020 $ 16,607 2021 33,214 2022 33,111 2023 32,904 2024 32,567 Thereafter 206,446 $ 354,849 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Long-Term Debt | |
Summary of long-term debt, net | December 31, June 30, (In thousands) 2019 2019 Term Loan A due 2020; 6.80% as of December 31, 2019 $ 62,594 $ 153,933 Unamortized discount and other debt issuance costs (1,236) (4,722) Term Loan A, net 61,358 149,211 Term Loan B due 2022; 7.17% as of December 31, 2019 592,529 614,468 Unamortized discount and other debt issuance costs (28,766) (34,631) Term Loan B, net 563,763 579,837 4.50% Convertible Senior Notes due 2026 86,250 — Unamortized discount and other debt issuance costs (3,359) — 4.50% Convertible Senior Notes, net 82,891 — Revolving Credit Facility due 2020 — — Total debt, net 708,012 729,048 Less short-term borrowings and current portion of long-term debt (101,939) (66,845) Total long-term debt, net $ 606,073 $ 662,203 |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2020 $ 101,939 2021 39,345 2022 513,839 2023 — Thereafter 86,250 Total $ 741,373 |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Commitments | |
Schedule of components of lease cost | Three Months Ended Six Months Ended (In thousands) December 31, 2019 December 31, 2019 Operating lease cost $ 590 $ 1,071 Variable lease cost 32 61 Short-term lease cost (a) 124 279 Total $ 746 $ 1,411 (a) Not recorded on the Consolidated Balance Sheet. |
Schedule of supplemental cash flow information and non-cash activity | Six Months Ended (In thousands) December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 966 Non-cash activity: ROU assets obtained in exchange for new operating lease liabilities $ — |
Schedule of weighted-average remaining lease term | Six Months Ended December 31, 2019 Weighted-average remaining lease term 9 years Weighted-average discount rate 7.50 % |
Schedule of maturities of lease liabilities | (In thousands) Amounts Due 2020 $ 975 2021 1,487 2022 1,169 2023 1,169 2024 1,169 Thereafter 3,929 Total lease payments 9,898 Less: Imputed interest 2,692 Present value of lease liabilities $ 7,206 |
Schedule of future minimum lease payments under noncancelable operating leases | (In thousands) Amounts Due 2020 $ 1,898 2021 1,450 2022 1,123 2023 1,123 2024 1,123 Thereafter 3,839 Total $ 10,556 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Loss. | |
Schedule of Accumulated Other Comprehensive Loss | December 31, (In thousands) 2019 2018 Foreign Currency Translation Beginning Balance, June 30 $ (615) $ (515) Net gain on foreign currency translation (net of tax of $0 and $0) 37 13 Reclassifications to net income (net of tax of $0 and $0) — — Other comprehensive income (loss), net of tax 37 13 Ending Balance, December 31 (578) (502) Total Accumulated Other Comprehensive Loss $ (578) $ (502) |
Earnings (Loss) Per Common Sh_2
Earnings (Loss) Per Common Share (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
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) 2019 2018 Numerator: Net income $ 5,084 $ 12,362 Interest expense applicable to the Notes, net of tax — — Amortization of debt issuance costs applicable to the Notes, net of tax — — Adjusted “if-converted” net income $ 5,084 $ 12,362 Denominator: Basic weighted average common shares outstanding 38,605,052 37,761,176 Effect of potentially dilutive options and restricted stock awards 1,952,451 1,351,371 Effect of conversion of the Notes — — Diluted weighted average common shares outstanding 40,557,503 39,112,547 Earnings per common share: Basic $ 0.13 $ 0.33 Diluted $ 0.13 $ 0.32 Six Months Ended December 31, (In thousands, except share and per share data) 2019 2018 Numerator: Net loss $ (7,073) $ (275,166) Interest expense applicable to the Notes, net of tax — — Amortization of debt issuance costs applicable to the Notes, net of tax — — Adjusted “if-converted” net loss $ (7,073) $ (275,166) Denominator: Basic weighted average common shares outstanding 38,457,159 37,674,200 Effect of potentially dilutive options and restricted stock awards — — Effect of conversion of the Notes — — Diluted weighted average common shares outstanding 38,457,159 37,674,200 Loss per common share: Basic $ (0.18) $ (7.30) Diluted $ (0.18) $ (7.30) |
Share-based Compensation (Table
Share-based Compensation (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Share-based Compensation | |
Schedule of weighted average assumptions | Six Months Ended December 31, December 31, 2019 2018 Risk-free interest rate 1.9 % 2.9 % Expected volatility 73.7 % 58.4 % Expected dividend yield — — Forfeiture rate 6.5 % 6.5 % Expected term 5.1 years 5.3 years Weighted average fair value $ 4.04 $ 6.52 |
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, 2019 572 $ 17.56 $ 273 5.0 Granted 522 $ 6.57 Exercised (50) $ 5.60 $ 210 Forfeited, expired or repurchased (32) $ 24.86 Outstanding at December 31, 2019 1,012 $ 12.24 $ 1,685 7.3 Vested and expected to vest at December 31, 2019 1,009 $ 12.23 $ 1,685 7.3 Exercisable at December 31, 2019 504 $ 16.74 $ 682 5.1 |
Summary of non-vested restricted stock awards | Weighted Average Grant - Aggregate (In thousands, except for weighted average price data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2019 1,288 $ 11.63 Granted 936 6.44 Vested (735) 10.28 $ 6,096 Forfeited (46) 13.49 Non-vested at December 31, 2019 1,443 $ 8.90 |
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, 2019 72 $ 19.92 Granted 178 $ 10.71 Vested (46) $ 15.08 $ 477 Forfeited — $ — Non-vested at December 31, 2019 204 $ 12.99 |
Schedule of allocation of share-based compensation | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2019 2018 2019 2018 Selling, general and administrative expenses $ 1,205 $ 1,095 $ 4,840 $ 3,309 Research and development expenses 214 199 438 400 Cost of sales 588 655 1,188 1,276 Total $ 2,007 $ 1,949 $ 6,466 $ 4,985 Tax benefit at statutory rate $ 452 $ 439 $ 1,455 $ 1,122 |
Assets Held for Sale (Tables)
Assets Held for Sale (Tables) | 6 Months Ended |
Dec. 31, 2019 | |
Assets Held for Sale | |
Schedule of financial results of the Cody API business | Three Months Ended Six Months Ended December 31, December 31, (In thousands) 2019 2018 2019 2018 Net sales $ 669 $ 654 $ 1,736 $ 2,142 Pretax loss attributable to Cody API business (644) (4,314) (5,061) (39,335) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Intangible Assets (Details) | 6 Months Ended |
Dec. 31, 2019 | |
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, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2019USD ($)segment | Dec. 31, 2018USD ($) | |
Medical Indication Information | ||||
Total net sales | $ 136,110 | $ 193,718 | $ 263,452 | $ 348,772 |
Number of reportable segments | segment | 1 | |||
Analgesic | ||||
Medical Indication Information | ||||
Total net sales | 2,111 | 2,547 | $ 3,995 | 4,376 |
Anti-Psychosis | ||||
Medical Indication Information | ||||
Total net sales | 22,697 | 14,036 | 50,730 | 24,925 |
Cardiovascular | ||||
Medical Indication Information | ||||
Total net sales | 23,972 | 25,680 | 45,579 | 47,450 |
Central Nervous System | ||||
Medical Indication Information | ||||
Total net sales | 19,331 | 7,373 | 38,588 | 21,659 |
Endocrinology | ||||
Medical Indication Information | ||||
Total net sales | 88,477 | 142,355 | ||
Gastrointestinal | ||||
Medical Indication Information | ||||
Total net sales | 18,313 | 12,943 | 35,275 | 30,537 |
Infectious Disease | ||||
Medical Indication Information | ||||
Total net sales | 18,078 | 4,616 | 29,973 | 9,096 |
Migraine | ||||
Medical Indication Information | ||||
Total net sales | 10,878 | 12,551 | 20,021 | 22,288 |
Respiratory/Allergy/Cough/Cold | ||||
Medical Indication Information | ||||
Total net sales | 3,075 | 3,388 | 5,781 | 6,972 |
Urinary | ||||
Medical Indication Information | ||||
Total net sales | 1,233 | 1,596 | 1,668 | 3,137 |
Other | ||||
Medical Indication Information | ||||
Total net sales | 9,934 | 12,606 | 19,796 | 23,411 |
Contract manufacturing revenue | ||||
Medical Indication Information | ||||
Total net sales | $ 6,488 | $ 7,905 | $ 12,046 | $ 12,566 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Concentrations (Details) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Net sales | Products | Product 1 | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 15.00% | 7.00% | 18.00% | 7.00% |
Net sales | Products | Product 2 | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 10.00% | 9.00% | ||
Net sales | Products | Product 3 | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 46.00% | 41.00% | ||
Net sales | Customers | Customer A | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 26.00% | 14.00% | 26.00% | 16.00% |
Net sales | Customers | Customer B | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 21.00% | 18.00% | 23.00% | 23.00% |
Net sales | Customers | Customer C | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 8.00% | 13.00% | 10.00% | 11.00% |
Net sales | Customers | Customer D | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 14.00% | 8.00% | ||
Inventory purchases | Suppliers | JSP | ||||
Concentration risk | ||||
Concentration risk (as a percent) | 34.00% | 0.00% | 33.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jul. 01, 2019 | |
Recent Accounting Pronouncements | ||||||
Right-of-use asset | $ 6,015 | $ 6,015 | ||||
Lease liability | 7,206 | 7,206 | ||||
Income tax expense (benefit) | (5,308) | $ 2,647 | (3,521) | $ (72,953) | ||
ASU 2019-12 | Pro Forma [Member] | ||||||
Recent Accounting Pronouncements | ||||||
Income tax expense (benefit) | 1,800 | $ 0 | 1,800 | |||
ASU 2016-02 | Restatement | ||||||
Recent Accounting Pronouncements | ||||||
Right-of-use asset | 7,900 | 7,900 | $ 7,900 | |||
Lease liability | $ 7,900 | $ 7,900 | $ 7,900 |
Restructuring Charges - Cody Re
Restructuring Charges - Cody Restructuring Program (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Restructuring Charges | ||||
Restructuring expenses | $ 192 | $ 213 | $ 1,580 | $ 1,235 |
Cody Restructuring Plan | ||||
Restructuring Charges | ||||
Restructuring expenses | (640) | (496) | ||
Cody Restructuring Plan | Employee separation costs | ||||
Restructuring Charges | ||||
Aggregate restructuring charges | $ 2,500 | $ 2,500 | ||
Restructuring expenses | $ (640) | $ (496) |
Restructuring Charges - Cody _2
Restructuring Charges - Cody Restructuring Program - Change (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring charges | $ 192 | $ 213 | $ 1,580 | $ 1,235 |
Cody Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 108 | |||
Restructuring charges | (640) | (496) | ||
Payments | (108) | |||
Cody Restructuring Plan | Employee separation costs | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 108 | |||
Restructuring charges | $ (640) | $ (496) | ||
Payments | $ (108) |
Restructuring Charges - Cody AP
Restructuring Charges - Cody API Restructuring Plan (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2019USD ($)employee | Dec. 31, 2018USD ($) | |
Restructuring Charges | |||||
Restructuring expenses | $ 192 | $ 213 | $ 1,580 | $ 1,235 | |
Lessee, Operating Lease, Term of Contract | 8 years | 8 years | |||
Cody API Restructuring Plan | |||||
Restructuring Charges | |||||
Positions eliminated | employee | 70 | ||||
Proceeds from sale of equipment | $ 2,000 | ||||
Aggregate restructuring charges | $ 6,000 | $ 6,000 | |||
Restructuring expenses | $ 192 | $ 1,580 | |||
Lessee, Operating Lease, Term of Contract | 2 years | 2 years | |||
Cody API Restructuring Plan | Employee separation costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | $ 3,500 | $ 3,500 | |||
Restructuring expenses | 192 | 1,084 | |||
Cody API Restructuring Plan | Contract termination costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 2,000 | 2,000 | |||
Cody API Restructuring Plan | Facility closure costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | $ 500 | 500 | |||
Restructuring expenses | $ 496 |
Restructuring Charges - Cody _3
Restructuring Charges - Cody API Restructuring Plan - Change (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring charges | $ 192 | $ 213 | $ 1,580 | $ 1,235 |
Cody API Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 2,207 | |||
Restructuring charges | 192 | 1,580 | ||
Payments | (3,272) | |||
Ending balance for the period | 515 | 515 | ||
Employee separation costs | Cody API Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Beginning balance for the period | 2,207 | |||
Restructuring charges | 192 | 1,084 | ||
Payments | (2,776) | |||
Ending balance for the period | $ 515 | 515 | ||
Facility closure costs | Cody API Restructuring Plan | ||||
Reconciliation of the changes in restructuring liabilities | ||||
Restructuring charges | 496 | |||
Payments | $ (496) |
Restructuring Charges - 2016 Re
Restructuring Charges - 2016 Restructuring Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2019 | |
Restructuring Charges | |||||
Restructuring expenses | $ 192 | $ 213 | $ 1,580 | $ 1,235 | |
2016 Restructuring Program | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | $ 21,000 | ||||
Restructuring expenses | 853 | 1,731 | |||
2016 Restructuring Program | Employee separation costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 11,000 | ||||
Restructuring expenses | 293 | 707 | |||
2016 Restructuring Program | Contract termination costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 1,000 | ||||
2016 Restructuring Program | Facility closure costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | $ 9,000 | ||||
Restructuring expenses | $ 560 | $ 1,024 |
Accounts Receivable, net (Detai
Accounts Receivable, net (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 30, 2019 |
Accounts receivable, net | ||
Gross accounts receivable | $ 337,076 | $ 361,323 |
Less: Allowance for doubtful accounts | (1,099) | (1,223) |
Accounts receivable, net | 158,498 | 164,752 |
Chargebacks | ||
Accounts receivable, net | ||
Less: reserve | (69,797) | (89,567) |
Rebates | ||
Accounts receivable, net | ||
Less: reserve | (26,929) | (32,099) |
Returns | ||
Accounts receivable, net | ||
Less: reserve | (54,651) | (55,554) |
Other | ||
Accounts receivable, net | ||
Less: reserve | $ (26,102) | $ (18,128) |
Accounts Receivable, net - Reve
Accounts Receivable, net - Revenue reserve (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Change in revenue related reserves | ||||
Balance at the beginning of the period | $ 241,523 | $ 298,616 | ||
Current period provision | 575,967 | 809,374 | ||
Adjustment related to adoption of ASC 606 | 3,536 | |||
Credits issued during the period | (591,564) | (828,596) | ||
Balance at the end of the period | $ 225,926 | $ 282,930 | 225,926 | 282,930 |
Chargebacks | ||||
Change in revenue related reserves | ||||
Balance at the beginning of the period | 89,567 | 153,034 | ||
Current period provision | 199,600 | 334,600 | 407,523 | 612,560 |
Credits issued during the period | (427,293) | (637,492) | ||
Balance at the end of the period | 69,797 | 128,102 | 69,797 | 128,102 |
Rebates | ||||
Change in revenue related reserves | ||||
Balance at the beginning of the period | 78,274 | 82,502 | ||
Current period provision | 116,803 | 143,578 | ||
Credits issued during the period | (119,701) | (147,023) | ||
Balance at the end of the period | 75,376 | 79,057 | 75,376 | 79,057 |
Returns | ||||
Change in revenue related reserves | ||||
Balance at the beginning of the period | 55,554 | 43,059 | ||
Current period provision | 6,500 | 11,300 | 10,217 | 18,662 |
Credits issued during the period | (11,120) | (12,213) | ||
Balance at the end of the period | 54,651 | 49,508 | 54,651 | 49,508 |
Other | ||||
Change in revenue related reserves | ||||
Balance at the beginning of the period | 18,128 | 20,021 | ||
Current period provision | 28,700 | 20,700 | 41,424 | 34,574 |
Adjustment related to adoption of ASC 606 | 3,536 | |||
Credits issued during the period | (33,450) | (31,868) | ||
Balance at the end of the period | 26,102 | 26,263 | 26,102 | 26,263 |
Rebates | ||||
Change in revenue related reserves | ||||
Current period provision | $ 58,300 | $ 78,800 | $ 116,800 | $ 143,600 |
Accounts Receivable, net - Re_2
Accounts Receivable, net - Revenue reserve information (Details) - USD ($) $ in Millions | Jul. 01, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 |
Accounts receivable, net | |||||
Settlement payment | $ 9.4 | ||||
Reimbursement of overpayment | $ 8.1 | ||||
ASU 2014-09 | |||||
Accounts receivable, net | |||||
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, net | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 47.20% | 53.00% | 49.30% | 53.50% | |
Rebates | |||||
Accounts receivable, net | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 13.80% | 12.50% | 14.10% | 12.50% | |
Returns | |||||
Accounts receivable, net | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 1.50% | 1.80% | 1.20% | 1.60% | |
Other | |||||
Accounts receivable, net | |||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 6.80% | 3.30% | 5.00% | 3.00% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 30, 2019 |
Inventories: | ||
Raw Materials | $ 64,226 | $ 56,740 |
Work-in-process | 16,373 | 18,988 |
Finished Goods | 71,491 | 68,243 |
Net inventory | $ 152,090 | $ 143,971 |
Inventories - Additional inform
Inventories - Additional information (Details) - Excess and Obsolete - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Inventories: | |||||
Inventory adjustments | $ 16.5 | $ 16.5 | $ 20.7 | ||
Write-down to net realizable value | $ 2.5 | $ 8.9 | $ 6.1 | $ 12.8 |
Property, Plant and Equipment_3
Property, Plant and Equipment, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Property, Plant and Equipment, net | |||||||
Less: accumulated depreciation | $ (93,999) | $ (93,999) | $ (83,424) | ||||
Property, plant and equipment, net before construction in progress | 170,226 | 170,226 | 165,239 | ||||
Property, plant and equipment, net | 183,631 | 183,631 | 186,670 | ||||
Depreciation expense | 5,900 | $ 5,700 | 11,700 | $ 12,200 | |||
Assets held for sale | 3,757 | 3,757 | 9,671 | ||||
Disposal group held for sale | |||||||
Property, Plant and Equipment, net | |||||||
Impairment of long-lived assets | $ 29,900 | ||||||
Proceeds from divestiture of businesses | $ 2,000 | ||||||
Property, plant and equipment, held for sale | 3,800 | 3,800 | 6,700 | ||||
Held in foreign countries | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, net | 700 | 700 | 1,000 | ||||
Land | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, gross | 1,783 | 1,783 | 1,783 | ||||
Building and improvements | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, gross | 95,032 | 95,032 | 87,609 | ||||
Machinery and equipment | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, gross | 164,300 | 164,300 | 156,166 | ||||
Furniture and fixtures | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, gross | 3,110 | 3,110 | 3,105 | ||||
Construction in progress | |||||||
Property, Plant and Equipment, net | |||||||
Property, plant and equipment, net | $ 13,405 | $ 13,405 | $ 21,431 |
Property, Plant and Equipment_4
Property, Plant and Equipment, net - Useful Lives (Details) | 6 Months Ended |
Dec. 31, 2019 | |
Building and improvements | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 10 years |
Building and improvements | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 39 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 5 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 10 years |
Furniture and fixtures | Minimum | |
Property, Plant and Equipment, net | |
Useful Lives | 5 years |
Furniture and fixtures | Maximum | |
Property, Plant and Equipment, net | |
Useful Lives | 7 years |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Jun. 30, 2019 |
Term loan | ||
Debt Instrument [Line Items] | ||
Estimated fair value of loan | $ 643 | $ 724 |
4.50% Convertible Senior Notes due 2026 | ||
Debt Instrument [Line Items] | ||
Estimated fair value of loan | $ 72 | |
Interest rate (as a percent) | 4.50% |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Definite-lived (Details) - USD ($) $ in Thousands | Oct. 04, 2018 | Dec. 31, 2019 | Dec. 31, 2019 | Jun. 30, 2019 |
Finite-Lived Intangible Assets | ||||
Impairment of goodwill | $ 339,600 | |||
Gross Carrying Amount | $ 482,597 | $ 482,597 | $ 475,234 | |
Accumulated Amortization | (127,748) | (127,748) | (112,454) | |
Intangible Assets, Net | 354,849 | $ 354,849 | 362,780 | |
Cody Labs import license | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | 581 | $ 581 | 581 | |
Accumulated Amortization | (444) | (444) | (424) | |
Intangible Assets, Net | 137 | $ 137 | 157 | |
Product rights | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | 416,154 | $ 416,154 | 416,154 | |
Accumulated Amortization | (111,455) | (111,455) | (97,583) | |
Intangible Assets, Net | 304,699 | $ 304,699 | 318,571 | |
Product rights | Silarx | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | 10,000 | $ 10,000 | 10,000 | |
Accumulated Amortization | (3,056) | (3,056) | (2,722) | |
Intangible Assets, Net | 6,944 | $ 6,944 | 7,278 | |
Trade name | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 2 years | |||
Gross Carrying Amount | 2,920 | $ 2,920 | 2,920 | |
Accumulated Amortization | (2,920) | $ (2,920) | (2,920) | |
Other intangible assets | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 12 years | |||
Gross Carrying Amount | 33,942 | $ 33,942 | 26,579 | |
Accumulated Amortization | (4,678) | (4,678) | (4,243) | |
Intangible Assets, Net | 29,264 | $ 29,264 | 22,336 | |
Other intangible assets | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | 19,000 | $ 19,000 | 19,000 | |
Accumulated Amortization | (5,195) | (5,195) | (4,562) | |
Intangible Assets, Net | 13,805 | $ 13,805 | $ 14,438 | |
Other product rights | ||||
Finite-Lived Intangible Assets | ||||
Amount Agreed to Pay on Approval | $ 3,000 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Indefinite lived (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 30, 2019 |
Indefinite-lived | ||
Indefinite-lived assets, net | $ 68,000 | $ 48,449 |
Total intangible assets - Gross Carrying Amount, | 550,597 | 523,683 |
Accumulated Amortization | (127,748) | (112,454) |
Total intangible assets, Net | 422,849 | 411,229 |
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 |
Other product rights | ||
Indefinite-lived | ||
Indefinite-lived assets, net | $ 32,000 | $ 12,449 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Goodwill and Intangible Assets | |||||
Amortization expense | $ 8,200 | $ 8,200 | $ 15,200 | $ 16,400 | |
Future annual amortization expense: | |||||
2020 | 16,607 | 16,607 | |||
2021 | 33,214 | 33,214 | |||
2022 | 33,111 | 33,111 | |||
2023 | 32,904 | 32,904 | |||
2024 | 32,567 | 32,567 | |||
Thereafter | 206,446 | 206,446 | |||
Intangible assets, net | $ 354,849 | $ 354,849 | $ 362,780 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 30, 2019 |
Long-term debt | ||
Debt, gross | $ 741,373 | |
Total debt, net | 708,012 | $ 729,048 |
Less short-term borrowings and current portion of long-term debt | (101,939) | (66,845) |
Total long-term debt, net | 606,073 | 662,203 |
Term Loan A due 2020 | ||
Long-term debt | ||
Debt, gross | 62,594 | 153,933 |
Unamortized discount and other debt issuance costs | (1,236) | (4,722) |
Total debt, net | $ 61,358 | 149,211 |
Interest rate (as a percent) | 6.80% | |
Term Loan B due 2022 | ||
Long-term debt | ||
Debt, gross | $ 592,529 | 614,468 |
Unamortized discount and other debt issuance costs | (28,766) | (34,631) |
Total debt, net | $ 563,763 | $ 579,837 |
Interest rate (as a percent) | 7.17% | |
4.50% Convertible Senior Notes due 2026 | ||
Long-term debt | ||
Debt, gross | $ 86,250 | |
Unamortized discount and other debt issuance costs | (3,359) | |
Total debt, net | $ 82,891 | |
Interest rate (as a percent) | 4.50% |
Long-Term Debt - Due (Details)
Long-Term Debt - Due (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Long-term Debt, Rolling Maturity | |
2020 | $ 101,939 |
2021 | 39,345 |
2022 | 513,839 |
Thereafter | 86,250 |
Total | $ 741,373 |
Long-Term Debt - Debt (Details)
Long-Term Debt - Debt (Details) | Sep. 27, 2019USD ($)$ / shares | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) |
Long-term debt | |||
Loss on extinguishment of debt | $ (2,145,000) | ||
4.50% Convertible Senior Notes due 2026 | |||
Long-term debt | |||
Aggregate principal amount | $ 86,250,000 | ||
Initial conversion rate | 0.0654022 | ||
Initial conversion price | $ / shares | $ 15.29 | ||
Redemption price in principal amount | 100.00% | ||
Redemption price in principal amount, minimum percentage | 25 | ||
Proceeds, net | $ 77,000,000 | ||
Capped call transaction | |||
Long-term debt | |||
Initial conversion price | $ / shares | $ 19.46 | ||
Debt fees | $ 7,100,000 | ||
Term Loan A due 2020 | |||
Long-term debt | |||
Loss on extinguishment of debt | $ (2,100,000) |
Legal, Regulatory Matters and_2
Legal, Regulatory Matters and Contingencies (Details) | Jan. 14, 2020USD ($) | May 22, 2019USD ($) | May 10, 2019companyemployee | Oct. 31, 2019item | Aug. 31, 2019USD ($) | Dec. 31, 2016company | Nov. 30, 2016item | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($)Distributorlawsuittranchestate | Dec. 31, 2019product | Dec. 31, 2019USD ($) | Jun. 18, 2018product | Jun. 07, 2018product | Oct. 31, 2017product | Oct. 06, 2017product |
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Settlement payment | $ 9,400,000 | ||||||||||||||
Reimbursement of overpayment | $ 8,100,000 | ||||||||||||||
State Attorneys General Inquiry into The Generic Pharmaceutical Industry | |||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Number of drugs | product | 13 | ||||||||||||||
Number of officers | employee | 1 | ||||||||||||||
Number of manufacturers and distributors | company | 33 | 6 | |||||||||||||
State Attorneys General Inquiry into The Generic Pharmaceutical Industry | Doxycycline Monohydrate | |||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Number of drugs | product | 1 | ||||||||||||||
Government Pricing | |||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Settlement payment | $ 9,400,000 | ||||||||||||||
Reimbursement of overpayment | $ 8,100,000 | ||||||||||||||
Private Antitrust and Consumer Protection Litigation | |||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Number of drugs | 18 | 18 | 15 | 14 | 6 | ||||||||||
Number of manufacturers and distributors | Distributor | 30 | ||||||||||||||
Number of lawsuits | lawsuit | 100 | ||||||||||||||
Number of Tranches | tranche | 3 | ||||||||||||||
Number of States | state | 49 | ||||||||||||||
Shareholder Litigation | |||||||||||||||
Legal, Regulatory Matters and Contingencies | |||||||||||||||
Number of officers | item | 2 | 2 | |||||||||||||
Litigation settlement amount payable to other party | $ 600,000 | $ 300,000 |
Commitments - Leases (Details)
Commitments - Leases (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Sep. 30, 2019 | Jul. 01, 2019 |
Loss Contingencies [Line Items] | |||
Right-of-use asset | $ 6,015 | ||
Present value of lease liabilities | 7,206 | ||
ROU current liability | 1,848 | ||
ROU non-current liability | $ 5,358 | ||
Operating lease term | 8 years | ||
ASU 2016-02 | Restatement | |||
Loss Contingencies [Line Items] | |||
Right-of-use asset | $ 7,900 | $ 7,900 | |
Present value of lease liabilities | $ 7,900 | $ 7,900 | |
ASU 2016-02 | Restatement | Cody Restructuring Plan | |||
Loss Contingencies [Line Items] | |||
Right-of-use asset | $ 1,200 |
Commitments - Components of lea
Commitments - Components of lease cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Dec. 31, 2019 | Dec. 31, 2019 | |
Commitments | ||
Operating lease cost | $ 590 | $ 1,071 |
Variable lease cost | 32 | 61 |
Short-term lease cost | 124 | 279 |
Lease, Cost, Total | $ 746 | $ 1,411 |
Commitments - Cash flow informa
Commitments - Cash flow information (Details) $ in Thousands | 6 Months Ended |
Dec. 31, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases. | $ 966 |
ROU assets obtained in exchange for new operating lease liabilities | $ 0 |
Commitments - Weighted-average
Commitments - Weighted-average remaining lease term (Details) | Dec. 31, 2019 |
Weighted-average remaining lease term | |
Weighted-average remaining lease term | 9 years |
Weighted-average discount rate | 7.50% |
Commitments - Maturities of lea
Commitments - Maturities of lease liabilities (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Maturities of lease liabilities | |
Remainder of 2020 | $ 975 |
2021 | 1,487 |
2022 | 1,169 |
2023 | 1,169 |
2024 | 1,169 |
Thereafter | 3,929 |
Total lease payments | 9,898 |
Less: Imputed interest | 2,692 |
Present value of lease liabilities | $ 7,206 |
Commitments - Minimum lease pay
Commitments - Minimum lease payments - Prior (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Future minimum lease payments | |
2020 | $ 1,898 |
2021 | 1,450 |
2022 | 1,123 |
2023 | 1,123 |
2024 | 1,123 |
Thereafter | 3,839 |
Total | $ 10,556 |
Commitments - Other Commitment
Commitments - Other Commitment (Details) $ in Millions | 3 Months Ended | ||
Dec. 31, 2019USD ($) | Sep. 30, 2018USD ($) | Mar. 31, 2017USD ($)itememployee | |
License and Collaboration Agreement With HEC | |||
Commitments | |||
Maximum amount to be loaned | $ 32 | ||
License and Collaboration Agreement, Excess Development Cost Split Ratio | 1 | ||
Other Commitment | $ 32 | ||
License and Collaboration Agreement With HEC | First ten years | |||
Commitments | |||
License and Collaboration Agreement, Profit Split Ratio | 1 | ||
License and Collaboration Agreement, Profit Split Period | 10 years | ||
License and Collaboration Agreement With HEC | Next five years | |||
Commitments | |||
License and Collaboration Agreement, Profit Split Ratio | 1.5 | ||
License and Collaboration Agreement, Profit Split Period | 5 years | ||
Variable interest entity | |||
Commitments | |||
Maximum amount to be loaned | $ 15 | ||
Expiration period | 7 years | ||
Loans receivable fixed rate (as a percent) | 2.00% | ||
Minimum amount to be considered for conversion of loan to ownership interest | $ 7.5 | ||
Ownership interest for conversion (in percentage) | 50.00% | ||
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 loan | $ 5.6 | ||
Loan receivable | $ 6.4 | ||
Other Commitment | $ 15 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Accumulated Other Comprehensive Loss. | |||
Beginning Balance | $ (615) | $ (515) | |
Net gain on foreign currency translation | 37 | 13 | |
Other comprehensive income (loss), net of tax | 37 | 13 | |
Ending Balance | (578) | (502) | |
Total Accumulated Other Comprehensive Loss | (578) | (502) | $ (615) |
Net gain 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, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Numerator: | |||||
Net income (loss) | $ 5,084 | $ 12,362 | $ (7,073) | $ (275,166) | |
Adjusted “if-converted” net loss | $ 5,084 | $ 12,362 | $ (7,073) | $ (275,166) | |
Denominator: | |||||
Basic weighted average common shares outstanding | 38,605,052 | 37,761,176 | 38,457,159 | 37,674,200 | |
Effect of potentially dilutive options and restricted stock awards | 1,952,451 | 1,351,371 | |||
Diluted weighted average common shares outstanding | [1] | 40,557,503 | 39,112,547 | 38,457,159 | 37,674,200 |
Earnings (loss) per common share: | |||||
Basic (in dollars per share) | $ 0.13 | $ 0.33 | $ (0.18) | $ (7.30) | |
Diluted (in dollars per share) | $ 0.13 | $ 0.32 | $ (0.18) | $ (7.30) | |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 6,000,000 | 540,000 | 6,700,000 | 2,200,000 | |
[1] | See Note 14 “Earnings (Loss) Per Common Share” for details on calculation. |
Share-based Compensation - Empl
Share-based Compensation - Employee Compensation Plans (Details) shares in Millions, $ in Millions | 6 Months Ended | 12 Months Ended |
Dec. 31, 2019USD ($)ShareBasedCompensationPlanshares | Jun. 30, 2019 | |
Stock-based Compensation | ||
Number of share-based employee compensation plans | ShareBasedCompensationPlan | 2 | |
Aggregate number of shares authorized for issuance | 6.5 | |
Shares for future issuances | 1.2 | |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Plans | $ | $ 13.2 | |
Weighted average period during which the cost is expected to be recognized | 2 years 6 months | |
Maximum | ||
Stock-based Compensation | ||
Share-based compensation awards vesting period | 4 years | 3 years |
Share-based compensation awards maximum contractual term | 10 years |
Share-based Compensation - Opti
Share-based Compensation - Options Valuation (Details) - Stock options - $ / shares | 6 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Assumptions used to estimate fair values | ||
Risk-free interest rate (as a percent) | 1.90% | 2.90% |
Expected volatility (as a percent) | 73.70% | 58.40% |
Expected dividend yield (as a percent) | 0.00% | |
Forfeiture rate (as a percent) | 6.50% | 6.50% |
Expected term (in years) | 5 years 1 month 6 days | 5 years 3 months 18 days |
Weighted average fair value (in dollars per share) | $ 4.04 | $ 6.52 |
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, 2019 | Jun. 30, 2019 | |
Awards | ||
Outstanding at the beginning of the period (in shares) | 572 | |
Granted (in shares) | 522 | |
Exercised (in shares) | (50) | |
Forfeited, expired or repurchased (in shares) | (32) | |
Outstanding at the end of the period (in shares) | 1,012 | 572 |
Vested and expected to vest, Awards (in shares) | 1,009 | |
Exercisable at the end of the period (in shares) | 504 | |
Weighted-Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 17.56 | |
Granted (in dollars per share) | 6.57 | |
Exercised (in dollars per share) | 5.60 | |
Forfeited, expired or repurchased (in dollars per share) | 24.86 | |
Outstanding at the end of the period (in dollars per share) | 12.24 | $ 17.56 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 12.23 | |
Exercisable at the end of the period (in dollars per share) | $ 16.74 | |
Aggregate Intrinsic Value | ||
Outstanding at the beginning of the period (in dollars) | $ 273 | |
Exercised (in dollars) | 210 | |
Outstanding at the end of the period (in dollars) | 1,685 | $ 273 |
Vested and expected to vest, Aggregate Intrinsic Value | 1,685 | |
Exercisable at the end of the period (in dollars) | $ 682 | |
Weighted Average Remaining Contractual Life (yrs.) | ||
Outstanding at the end of the period (in years) | 7 years 3 months 18 days | 5 years |
Vested and expected to vest (in years) | 7 years 3 months 18 days | |
Exercisable at the end of the period (in years) | 5 years 1 month 6 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, 2019 | Dec. 31, 2018 | |
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) | 1,288 | |
Granted (in shares) | 936 | |
Vested (in shares) | (735) | |
Forfeited (in shares) | (46) | |
Non-vested at the end of the period (in shares) | 1,443 | |
Weighted Average Grant-date Fair Value | ||
Non-vested at the beginning of the period (in dollars per share) | $ 11.63 | |
Granted (in dollars per share) | 6.44 | |
Vested (in dollars per share) | 10.28 | |
Forfeited (in dollars per share) | 13.49 | |
Non-vested at the end of the period (in dollars per share) | $ 8.90 | |
Aggregate Intrinsic Value | ||
Vested | $ 6,096 |
Share-based Compensation - Perf
Share-based Compensation - Performance-Based Shares (Details) - Performance-Based Shares $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Stock-based Compensation | |
Share-based compensation awards vesting period | 3 years |
Awards | |
Non-vested at the beginning of the period (in shares) | shares | 72 |
Granted (in shares) | shares | 178 |
Vested (in shares) | shares | (46) |
Non-vested at the end of the period (in shares) | shares | 204 |
Weighted Average Grant-date Fair Value | |
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 19.92 |
Granted (in dollars per share) | $ / shares | 10.71 |
Vested (in dollars per share) | $ / shares | 15.08 |
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 12.99 |
Aggregate Intrinsic Value | |
Vested | $ | $ 477 |
Share-based Compensation - Em_2
Share-based Compensation - Employee Stock Purchase Plan (Details) - shares shares in Thousands | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Apr. 01, 2003 | |
Stock-based Compensation | |||
Shares authorized for issuance (in shares) | 6,500 | ||
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) | 52 | 95 | |
Cumulative shares issued (in shares) | 844 |
Share-based Compensation - Cost
Share-based Compensation - Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based compensation costs | ||||
Share based compensation | $ 2,007 | $ 1,949 | $ 6,466 | $ 4,985 |
Tax benefit at statutory rate | 452 | 439 | 1,455 | 1,122 |
Selling, general and administrative | ||||
Share-based compensation costs | ||||
Share based compensation | 1,205 | 1,095 | 4,840 | 3,309 |
Research and development | ||||
Share-based compensation costs | ||||
Share based compensation | 214 | 199 | 438 | 400 |
Cost of sales | ||||
Share-based compensation costs | ||||
Share based compensation | $ 588 | $ 655 | $ 1,188 | $ 1,276 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
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 | $ 0.5 | $ 0.4 | $ 1.1 | $ 1.1 |
Income Taxes - Quarter (Details
Income Taxes - Quarter (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Reconciliation of the company's federal statutory tax rate to its effective rate | |||||
Income tax expense (benefit) | $ (5,308) | $ 2,647 | $ (3,521) | $ (72,953) | |
Effective income tax rate (as a percent) | 2369.60% | 17.60% | (33.20%) | 21.00% | |
Unrecognized tax benefits | $ 2,400 | $ 2,400 | $ 2,200 | ||
Unrecognized tax benefits that would impact rate | 2,100 | ||||
Unrecognized tax benefits cumulative interest and penalties recorded | $ 0 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Auburn | |||||
Related Party Transactions | |||||
Sales to related party | $ 0.6 | $ 1 | $ 1.3 | $ 1.5 | |
Accounts receivable related party | 0.4 | 0.4 | $ 1.2 | ||
KeySource | |||||
Related Party Transactions | |||||
Sales to related party | 0.5 | $ 0.9 | 1.2 | $ 1.5 | |
Accounts receivable related party | $ 0.5 | $ 0.5 | $ 0.7 |
Assets Held for Sale (Details)
Assets Held for Sale (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2019 | |
Assets Held for Sale | |||||||
Operating lease term | 8 years | 8 years | |||||
Cody API Restructuring Plan | |||||||
Assets Held for Sale | |||||||
Proceeds from Divestiture of Businesses | $ 2,000 | ||||||
Operating lease term | 2 years | 2 years | |||||
Disposal group held for sale | |||||||
Assets Held for Sale | |||||||
Impairment of long-lived assets | $ 29,900 | ||||||
Proceeds from Divestiture of Businesses | 2,000 | ||||||
Property, plant and equipment, held for sale | $ 3,800 | $ 3,800 | $ 6,700 | ||||
Net sales | 669 | $ 654 | 1,736 | $ 2,142 | |||
Pretax loss attributable to Cody API business | $ (644) | $ (4,314) | $ (5,061) | $ (39,335) | |||
Impairment of the ROU lease asset | $ 1,200 | ||||||
Disposal group held for sale | Cody API Restructuring Plan | |||||||
Assets Held for Sale | |||||||
Operating lease term | 2 years | 2 years |