Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2020 | Jul. 31, 2020 | Dec. 31, 2019 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2020 | ||
Entity Registrant Name | LANNETT CO INC | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
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 Public Float | $ 277,527,086 | ||
Entity Common Stock, Shares Outstanding | 40,220,659 | ||
Entity Central Index Key | 0000057725 | ||
Current Fiscal Year End Date | --06-30 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 144,329 | $ 140,249 |
Accounts receivable, net | 125,688 | 164,752 |
Inventories | 142,867 | 143,971 |
Income taxes receivable | 14,419 | |
Assets held for sale | 2,678 | 9,671 |
Other current assets | 13,227 | 13,606 |
Total current assets | 443,208 | 472,249 |
Property, plant and equipment, net | 179,518 | 186,670 |
Intangible assets, net | 374,735 | 411,229 |
Operating lease right-of-use assets | 9,343 | |
Deferred tax assets | 117,890 | 109,305 |
Other assets | 11,861 | 7,960 |
TOTAL ASSETS | 1,136,555 | 1,187,413 |
Current liabilities: | ||
Accounts payable | 32,535 | 13,493 |
Accrued expenses | 14,962 | 5,805 |
Accrued payroll and payroll-related expenses | 16,304 | 19,924 |
Rebates payable | 38,175 | 46,175 |
Royalties payable | 20,863 | 16,215 |
Restructuring liability | 27 | 2,315 |
Income taxes payable | 2,198 | |
Current operating lease liabilities | 1,097 | |
Short-term borrowings and current portion of long-term debt | 88,189 | 66,845 |
Other current liabilities | 2,713 | 3,652 |
Total current liabilities | 214,865 | 176,622 |
Long-term debt, net | 592,940 | 662,203 |
Long-term operating lease liabilities | 9,844 | |
Other liabilities | 16,010 | 14,547 |
TOTAL LIABILITIES | 833,659 | 853,372 |
Commitments (Note 11) | ||
STOCKHOLDERS' EQUITY | ||
Common stock ($0.001 par value, 100,000,000 shares authorized; 39,963,127 and 38,969,518 shares issued; 38,798,787 and 38,010,714 shares outstanding at June 30, 2020 and June 30, 2019, respectively) | 40 | 39 |
Additional paid-in capital | 321,164 | 317,023 |
Retained earnings (accumulated deficit) | (1,291) | 32,075 |
Accumulated other comprehensive loss | (627) | (615) |
Treasury stock (1,164,340 and 958,804 shares at June 30, 2020 and June 30, 2019, respectively) | (16,390) | (14,481) |
Total stockholders’ equity | 302,896 | 334,041 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,136,555 | $ 1,187,413 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2020 | 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 | 39,963,127 | 38,969,518 |
Common stock, outstanding shares | 38,798,787 | 38,010,714 |
Treasury stock, shares | 1,164,340 | 958,804 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net sales | $ 545,744 | $ 655,407 | $ 684,563 |
Cost of sales | 348,508 | 379,601 | 363,729 |
Amortization of intangibles | 32,016 | 32,196 | 32,128 |
Gross profit | 165,220 | 243,610 | 288,706 |
Operating expenses: | |||
Research and development expenses | 29,978 | 38,807 | 29,196 |
Selling, general and administrative expenses | 79,467 | 87,648 | 82,196 |
Acquisition and integration-related expenses | 83 | ||
Restructuring expenses | 1,771 | 4,095 | 7,061 |
Loss on sale of intangible asset | 15,514 | ||
Asset impairment charges | 34,448 | 375,381 | 24,960 |
Total operating expenses | 145,664 | 505,931 | 159,010 |
Operating income (loss) | 19,556 | (262,321) | 129,696 |
Other income (loss): | |||
Loss on extinguishment of debt | (2,145) | (448) | |
Investment income | 1,646 | 3,166 | 4,753 |
Interest expense | (66,845) | (84,624) | (85,634) |
Other | (840) | (2,018) | 2,278 |
Total other loss | (68,184) | (83,924) | (78,603) |
Income (loss) before income tax | (48,628) | (346,245) | 51,093 |
Income tax expense (benefit) | (15,262) | (74,138) | 22,403 |
Net income (loss) | $ (33,366) | $ (272,107) | $ 28,690 |
Earnings (loss) per common share: | |||
Basic (in dollars per share) | $ (0.86) | $ (7.20) | $ 0.77 |
Diluted (in dollars per share) | $ (0.86) | $ (7.20) | $ 0.75 |
Weighted average common shares outstanding: | |||
Basic (in shares) | 38,592,618 | 37,779,812 | 37,127,306 |
Diluted (in shares) | 38,592,618 | 37,779,812 | 38,162,514 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||
Net loss | $ (33,366) | $ (272,107) | $ 28,690 |
Other comprehensive income (loss), before tax: | |||
Foreign currency translation loss | (12) | (100) | (293) |
Total other comprehensive loss, net of taxes | (12) | (100) | (293) |
Comprehensive income (loss) | $ (33,378) | $ (272,207) | $ 28,397 |
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 Deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balance, beginning at Jun. 30, 2017 | $ 37 | $ 292,780 | $ 277,774 | $ (222) | $ (9,247) | $ 561,122 |
Balance, beginning (in shares) at Jun. 30, 2017 | 37,528 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 4,141 | 4,142 | |||
Shares issued in connection with share-based compensation plans (in shares) | 729 | |||||
Share-based compensation | 9,896 | 9,896 | ||||
Purchase of treasury stock | (4,642) | (4,642) | ||||
Other comprehensive income (loss), net of income tax | (293) | (293) | ||||
Net loss | 28,690 | 28,690 | ||||
Balance, ending at Jun. 30, 2018 | $ 38 | 306,817 | 306,464 | (515) | (13,889) | 598,915 |
Balance, ending (in shares) at Jun. 30, 2018 | 38,257 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 1,179 | 1,180 | |||
Shares issued in connection with share-based compensation plans (in shares) | 713 | |||||
Share-based compensation | 9,027 | 9,027 | ||||
Purchase of treasury stock | (592) | (592) | ||||
Other comprehensive income (loss), net of income tax | (100) | (100) | ||||
ASC 606 adjustment, net of tax | (2,282) | (2,282) | ||||
Net loss | (272,107) | (272,107) | ||||
Balance, ending at Jun. 30, 2019 | $ 39 | 317,023 | 32,075 | (615) | (14,481) | 334,041 |
Balance, ending (in shares) at Jun. 30, 2019 | 38,970 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Shares issued in connection with share-based compensation plans | $ 1 | 997 | 998 | |||
Shares issued in connection with share-based compensation plans (in shares) | 993 | |||||
Share-based compensation | 10,216 | 10,216 | ||||
Purchase of treasury stock | (1,909) | (1,909) | ||||
Other comprehensive income (loss), net of income tax | (12) | (12) | ||||
Capped call transaction | (7,072) | (7,072) | ||||
Net loss | (33,366) | (33,366) | ||||
Balance, ending at Jun. 30, 2020 | $ 40 | $ 321,164 | $ (1,291) | $ (627) | $ (16,390) | $ 302,896 |
Balance, ending (in shares) at Jun. 30, 2020 | 39,963 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
OPERATING ACTIVITIES: | |||
Net income (loss) | $ (33,366) | $ (272,107) | $ 28,690 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 56,309 | 55,594 | 55,115 |
Deferred income tax expense (benefit) | (8,585) | (87,242) | 30,690 |
Share-based compensation | 10,216 | 9,027 | 9,896 |
Asset impairment charges | 34,448 | 375,381 | 24,960 |
Loss (gain) on sale/disposal of assets | (159) | 1,559 | 848 |
Gain on investment securities | (3,313) | ||
Loss on extinguishment of debt | 2,145 | 448 | |
Loss on sale of intangible asset | 15,514 | ||
Amortization of debt discount and other debt issuance costs | 14,336 | 17,641 | 21,866 |
Other noncash (income) expenses | 1,969 | 2,579 | 5 |
Changes in assets and liabilities which provided (used) cash: | |||
Accounts receivable, net | 39,064 | 84,949 | (48,585) |
Inventories | 1,104 | (2,336) | (19,031) |
Prepaid income taxes/income taxes payable | (14,465) | 18,319 | 2,174 |
Other assets | 4,095 | 2,643 | (2,287) |
Rebates payable | (8,000) | (3,225) | 4,807 |
Royalties payable | 4,648 | 10,260 | 2,940 |
Restructuring liability | (2,288) | (4,391) | 1,275 |
Operating lease liability | (1,464) | ||
Accounts payable | 19,042 | (43,274) | (4,953) |
Accrued expenses | 2,213 | (1,620) | (5,074) |
Accrued payroll and payroll-related expenses | (3,620) | 12,105 | 2,986 |
Other liabilities | (1,628) | ||
Net cash provided by operating activities | 116,014 | 176,310 | 118,523 |
INVESTING ACTIVITIES: | |||
Purchases of property, plant and equipment | (18,330) | (24,340) | (52,316) |
Proceeds from sale of property, plant and equipment | 7,380 | 14,450 | 28 |
Proceeds from sale of outstanding loan to Variable Interest Entity ("VIE") | 5,600 | ||
Advance to VIE | 250 | 10,254 | |
Purchases of intangible assets | (28,800) | (3,000) | (19,038) |
Proceeds from sale of investment securities | 94,047 | ||
Purchase of investment securities | (63,643) | ||
Net cash used in investing activities | (40,000) | (7,290) | (51,176) |
FINANCING ACTIVITIES: | |||
Proceeds from issuance of long-term debt | 86,250 | ||
Purchase of capped call | (7,072) | ||
Repayments of short-term borrowings and long-term debt | (146,700) | (126,743) | (85,705) |
Proceeds from issuance of stock | 998 | 1,180 | 4,142 |
Payment of debt issuance costs | (3,489) | (1,102) | |
Purchase of treasury stock | (1,909) | (592) | (4,642) |
Net cash used in financing activities | (71,922) | (127,257) | (86,205) |
Effect on cash and cash equivalents of changes in foreign exchange rates | (12) | (100) | (293) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 4,080 | 41,663 | (19,151) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 140,249 | 98,586 | 117,737 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 144,329 | 140,249 | 98,586 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||
Interest paid (net of amounts capitalized of $0, $0 and $1.6 million for the years ended June 30, 2020, 2019 and 2018, respectively) | 51,928 | 66,750 | 63,563 |
Income taxes paid (refunded) | 7,787 | (4,641) | (6,559) |
Accrued purchases of property, plant and equipment | $ 2,295 | 765 | 3,572 |
Credits issued pursuant to a Settlement Agreement | $ 17,000 | ||
Andor Pharmaceuticals, LLC ("Andor") License Agreement acquisition | $ 16,000 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Capitalized interest, net | $ 0 | $ 0 | $ 1.6 |
The Business And Nature of Oper
The Business And Nature of Operations | 12 Months Ended |
Jun. 30, 2020 | |
The Business And Nature of Operations | |
The Business And Nature of Operations | Note 1. 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. COVID-19 Update In December 2019, the COVID-19 virus emerged in Wuhan, China and spread to other parts of the world. In March 2020, the World Health Organization (“WHO”) designated COVID-19 a global pandemic. Governments on the national, state and local level in the United States, and around the world, implemented lockdown and shelter-in-place orders, requiring many non-essential businesses to shut down operations. The Company’s business, however, is deemed “essential” and it has continued to operate and it has continued to manufacture and distribute its medicines to customers. In light of the economic impacts of COVID-19, the Company performed a review of the assets on our Consolidated Balance Sheet as of June 30, 2020, including intangible and other long-lived assets. Based on our review, we believe that we will be able to realize the full value of our assets and that a triggering event does not exist at this time. As such, no impairments or other write-downs were recorded during Fiscal 2020 specifically related to COVID-19. Our assessment is based on information currently available and is highly reliant on various assumptions. Changes in market conditions or other changes in the future outlook may lead to impairments in the future. While COVID-19 has thus far not had a material impact on the Company’s operations, subsequent to an initial stocking up of supplies at the start of the pandemic the total volume of drug prescriptions being written in the country has decreased causing less demand for our products. We cannot reasonably predict the ultimate impact of COVID-19 on our future results of operations and cashflows due to the continued uncertainty around the duration and severity of the pandemic. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2. 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 value of inventories and 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 5 to 15 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew or extend the term of a recognized intangible asset are expensed as incurred. Valuation of Long-Lived Assets, including Intangible Assets other than Goodwill The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. In-Process Research and Development Amounts allocated to in-process research and development in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected lives of the related assets. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for fiscal years ended June 30, 2020, 2019 and 2018. The medical indication categories for the fiscal years ended June 30, 2019 and 2018 were reclassified to better align with industry standards and the Company’s peers. (In thousands) Fiscal Year Ended June 30, Medical Indication 2020 2019 2018 Analgesic $ 8,680 $ 8,251 $ 3,809 Anti-Psychosis 104,934 73,453 59,557 Cardiovascular 88,576 101,467 64,011 Central Nervous System 77,256 59,019 59,672 Endocrinology — 197,522 245,929 Gastrointestinal 73,477 63,043 67,762 Infectious Disease 73,237 16,950 17,685 Migraine 44,266 41,592 54,015 Respiratory/Allergy/Cough/Cold 11,576 12,479 25,284 Urinary 4,225 6,755 8,068 Other 35,013 51,517 58,936 Contract manufacturing revenue 24,504 23,359 19,835 Total net sales $ 545,744 $ 655,407 $ 684,563 Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2020, 2019 and 2018, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, 2020 2019 2018 Product 1 18 % 10 % 8 % Product 2 10 % — % — % Product 3 — % 30 % 36 % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2020, 2019 and 2018, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, 2020 2019 2018 Customer A 25 % 21 % 29 % Customer B 23 % 18 % 17 % Customer C 11 % 10 % 5 % Customer D — % 12 % — % 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 29% and 37% of the Company’s inventory purchases in fiscal years 2019 and 2018, respectively. There were no purchases of finished goods inventory from JSP in the fiscal year ended June 30, 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 these 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 cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application (“ANDA’). 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 plus 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 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 expense 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 was not material to the consolidated financial position of the Company as of June 30, 2020 and 2019. 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 current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 required 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. On March 27, 2020, in response to COVID-19 and its detrimental impact to the global economy, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law, which provides a stimulus to the U.S. economy in the form of various individual and business assistance programs as well as temporary changes to existing tax law. Among the changes to the provision in business tax laws include a five-year net operating loss carryback for the Fiscal 2019 - 2021 tax years, a deferral of the employer’s portion of certain payroll tax, and an increase in the interest expense deductibility limitation for the Fiscal 2020 and 2021 tax years. ASC 740 requires the tax effects of changes in tax laws or rates to be recorded in the period of enactment. As a result of the CARES Act, the Company will carry back its Fiscal 2020 taxable loss into the Fiscal 2015 tax year. The Company also reviewed its existing deferred tax assets in light of COVID-19 and determined that no additional valuation allowance is required at this time. However, the Company will continue to monitor the status of the COVID-19 pandemic and its impact on our results of operations. 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 net income (loss) as these 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 early adopted 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. The adoption of ASU 2019-12 did not have an impact on the Company’s income tax benefit for the fiscal year ended June 30, 2020. 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 sta |
Restructuring Charges
Restructuring Charges | 12 Months Ended |
Jun. 30, 2020 | |
Restructuring Charges | |
Restructuring Charges | Note 3. Restructuring Charges Cody Restructuring Program On June 29, 2018, the Company announced a restructuring plan related to the future of Cody Laboratories, Inc. (“Cody Labs”) and the Company’s operations (the “Cody Restructuring Plan”). The plan focused on a more select set of opportunities which would result 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 expenses associated with the Cody Restructuring Plan included in restructuring expenses during the fiscal year ended June 30, 2019 were as follows: Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs (credits) $ (585) Facility closure costs — Total $ (585) A reconciliation of the changes in restructuring liabilities associated with the Cody Restructuring Plan from June 30, 2019 through June 30, 2020 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 June 30, 2020 $ — — $ — 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 decided to sell the 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, the Company eliminated approximately 70 positions at Cody Labs. The restructuring activities under the Cody API Restructuring Plan are substantially complete as of June 30, 2020. During Fiscal 2020, the Company completed the sale of the equipment associated with the Cody API business for $3.0 million. In the second quarter of Fiscal 2020, the Company signed a two-year agreement to lease a portion of the real estate to a third party. The costs to implement the Cody API Restructuring Plan totaled approximately $6.2 million, including approximately $3.7 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 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 fiscal years ended June 30, 2020 and 2019 were as follows: Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2020 June 30, 2019 Employee separation costs $ 1,275 $ 2,430 Facility closure costs 496 — Total $ 1,771 $ 2,430 A reconciliation of the changes in restructuring liabilities associated with the Cody API Restructuring Plan from June 30, 2018 through June 30, 2020 is set forth in the following table: Employee Contract Facility Separation Termination Closure (In thousands) Costs Costs Costs Total Balance at June 30, 2018 $ — $ — $ — $ — Restructuring Charges 2,430 — — 2,430 Payments (223) — — (223) Balance at June 30, 2019 $ 2,207 $ — $ — $ 2,207 Restructuring Charges 1,275 — 496 1,771 Payments (3,455) — (496) (3,951) Balance at June 30, 2020 $ 27 $ — — $ 27 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 fiscal year ended June 30, 2019 were as follows: Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2019 June 30, 2018 Employee separation costs $ 1,084 $ 246 Facility closure costs 1,166 3,723 Total $ 2,250 $ 3,969 |
Accounts Receivable, net
Accounts Receivable, net | 12 Months Ended |
Jun. 30, 2020 | |
Accounts Receivable, net | |
Accounts Receivable, net | Note 4. Accounts Receivable Accounts receivable consisted of the following components at June 30, 2020 and 2019: June 30, June 30, (In thousands) 2020 2019 Gross accounts receivable $ 271,557 $ 361,323 Less: Chargebacks reserve (61,877) (89,567) Less: Rebates reserve (24,536) (32,099) Less: Returns reserve (40,796) (55,554) Less: Other deductions (17,557) (18,128) Less: Allowance for doubtful accounts (1,103) (1,223) Accounts receivable, net $ 125,688 $ 164,752 For the fiscal year ended June 30, 2020, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $761.8 million, $223.9 million, $16.9 million and $88.5 million, respectively. For the fiscal year ended June 30, 2019, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $1.0 billion, $250.6 million, $42.0 million and $67.3 million, respectively. For the fiscal year ended June 30, 2018, the Company recorded a provision for chargebacks, rebates, returns and other deductions of $1.1 billion, $296.8 million, $24.0 million and $69.9 million, respectively. The following table identifies the activity and ending balances of each major category of revenue-related reserve for fiscal years 2020, 2019 and 2018: Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2017 $ 79,537 $ 87,616 $ 42,135 $ 11,096 $ 220,384 Current period provision 1,141,995 296,784 24,024 69,898 1,532,701 Credits issued during the period (1,068,498) (301,898) (23,100) (60,973) (1,454,469) 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 1,047,192 250,555 41,982 67,344 1,407,073 Credits issued during the period (1,110,659) (254,783) (29,487) (72,773) (1,467,702) Balance at June 30, 2019 89,567 78,274 55,554 18,128 241,523 Current period provision 761,787 223,932 16,863 88,468 1,091,050 Credits issued during the period (789,477) (239,495) (31,621) (89,039) (1,149,632) Balance at June 30, 2020 $ 61,877 $ 62,711 $ 40,796 $ 17,557 $ 182,941 For the fiscal years ended June 30, 2020, 2019 and 2018, as a percentage of gross sales the provision for chargebacks was 47.2%, 51.4% and 52.0%, respectively, the provision for rebates was 13.9%, 12.3% and 13.5%, respectively, the provision for returns was 1.0%, 2.1% and 1.1%, respectively and the provision for other adjustments was 5.5%, 3.3% and 3.2%, 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 June 30, 2020 was primarily attributable to a decrease in total net sales as well as product sales mix in the fiscal year ended June 30, 2020 as compared to the fiscal year ended June 30, 2019. The decrease in the chargebacks reserve was primarily due to decreases to wholesale acquisition pricing to our customers, which decrease the expected chargeback submitted by the wholesaler. The rebates reserve decreased primarily as a result of 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 in the returns reserve was primarily due to higher returns associated with Levothyroxine sales during the fiscal year ended June 30, 2019. Historically, we have not recorded any material amounts in the current period related to reversals or additions of prior period reserves. |
Inventories
Inventories | 12 Months Ended |
Jun. 30, 2020 | |
Inventories | |
Inventories | Note 5. Inventories Inventories at June 30, 2020 and 2019 consisted of the following: June 30, June 30, (In thousands) 2020 2019 Raw Materials $ 59,703 $ 56,740 Work-in-process 12,235 18,988 Finished Goods 70,929 68,243 Total $ 142,867 $ 143,971 Inventory balances were written-down by $13.6 million and $20.7 million at June 30, 2020 and 2019, respectively, for excess and obsolete inventory amounts. During the fiscal years ended June 30, 2020, 2019 and 2018, the Company recorded write-downs to net realizable value for excess and obsolete inventory of $10.3 million, $21.8 million and $12.2 million, respectively. |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Note 6. Property, Plant and Equipment Property, plant and equipment at June 30, 2020 and 2019 consisted of the following: June 30, June 30, (In thousands) Useful Lives 2020 2019 Land — $ 1,783 $ 1,783 Building and improvements 10 - 39 years 100,285 87,609 Machinery and equipment 5 - 10 years 164,704 156,166 Furniture and fixtures 5 - 7 years 3,116 3,105 Less accumulated depreciation (102,983) (83,424) 166,905 165,239 Construction in progress 12,613 21,431 Property, plant and equipment, net $ 179,518 $ 186,670 Depreciation expense for the fiscal years ended June 30, 2020, 2019 and 2018 was $24.3 million, $23.4 million and $22.4 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 decided 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 June 30, 2020, the Company has a remaining balance of $2.7 million recorded in the assets held for sale caption in the Consolidated Balance Sheet. See Note 18 “Assets Held for Sale” for more information. Property, plant and equipment, net included amounts held in foreign countries in the amount of $0.6 million and $1.0 million at June 30, 2020 and June 30, 2019, respectively. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jun. 30, 2020 | |
Fair Value Measurements | |
Fair Value Measurements | Note 7. 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. The Company’s cash and cash equivalents include 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 $608 million and $724 million as of June 30, 2020 and June 30, 2019, respectively. The estimated fair value of our 4.5% Convertible Senior Notes was approximately $58 million as of June 30, 2020, which was lower than the carrying value primarily due to the Company’s stock price at June 30, 2020 as compared to the $15.29 conversion price. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 8. 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 June 30, 2020 and June 30, 2019, consisted of the following: Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, (In thousands) (Yrs.) 2020 2019 2020 2019 2020 2019 Definite-lived: KUPI product rights 15 416,154 416,154 (125,327) (97,583) 290,827 318,571 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (5,828) (4,562) 13,172 14,438 Silarx product rights 15 20,000 10,000 (3,556) (2,722) 16,444 7,278 Other product rights 10 50,718 39,160 (5,426) (4,667) 45,292 34,493 Total definite-lived $ 508,792 $ 487,234 $ (143,057) $ (112,454) $ 365,735 $ 374,780 Indefinite-lived: KUPI in-process research and development — $ 9,000 $ 18,000 $ — $ — $ 9,000 $ 18,000 Silarx in-process research and development — — 18,000 — — — 18,000 Other product rights — — 449 — — — 449 Total indefinite-lived 9,000 36,449 — — 9,000 36,449 Total intangible assets, net $ 517,792 $ 523,683 $ (143,057) $ (112,454) $ 374,735 $ 411,229 For the fiscal years ended June 30, 2020, 2019 and 2018, the Company recorded amortization expense of $32.0 million, $32.2 million and $32.7 million, respectively. In the fourth quarter of Fiscal 2020, the Company performed its annual impairment test of our indefinite-lived intangible assets. As a result, the Company recorded a $9.0 million and an $8.0 million impairment charge to its KUPI IPR&D and Silarx IPR&D assets, respectively, due to the abandonment of several pipeline products within both portfolios. The Company also reclassed $10.0 million of Silarx IPR&D assets into Silarx product rights and the Company began amortization of the assets over a useful life of 15 years in Fiscal 2020. In the third quarter of Fiscal 2020, the Company performed an impairment analysis of its AB-rated Methylphenidate Hydrochloride product, which is distributed under a license agreement with Andor Pharmaceuticals, LLC (“Andor”), due to additional competition resulting in a significant decline in sales and overall profitability of the distribution arrangement. The analysis resulted in the Company recording a $14.0 million impairment charge. The remaining carrying value of the intangible asset as of June 30, 2020, totaling $2.1 million, is recorded within the definite-lived “other product rights” caption in the table above and will continue to be amortized over its remaining useful life. 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. In July 2019, the Company entered into a distribution and supply agreement with Cediprof, Inc. The Company made an upfront payment of $20.0 million to distribute Levothyroxine Sodium Tablets USP, commencing no later than August 1, 2022, which is included within the “Other product rights” category of definite-lived intangible assets. In August 2019, the Company entered into a distribution and supply agreement with Sinotherapeutics Inc. to distribute Posaconazole Delayed-Release Tablets 100mg. The Company paid $2.0 million upon FDA approval of the product and $1.5 million upon the first commercial sale of the product, which is included within the “Other product rights” category of definite-lived intangible assets. Future annual amortization expense consists of the following: (In thousands) Amortization Fiscal Year Ending June 30, Expense 2021 $ 34,068 2022 35,668 2023 35,367 2024 35,067 2025 34,667 Thereafter 190,898 $ 365,735 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Jun. 30, 2020 | |
Long-Term Debt | |
Long-Term Debt | Note 9. Long-Term Debt Long-term debt, net consisted of the following: June 30, June 30, (In thousands) 2020 2019 Term Loan A due 2020; 6.00% as of June 30, 2020 $ 48,844 $ 153,933 Unamortized discount and other debt issuance costs (433) (4,722) Term Loan A, net 48,411 149,211 Term Loan B due 2022; 6.38% as of June 30, 2020 572,857 614,468 Unamortized discount and other debt issuance costs (23,278) (34,631) Term Loan B, net 549,579 579,837 4.50% Convertible Senior Notes due 2026 86,250 — Unamortized discount and other debt issuance costs (3,111) — 4.50% Convertible Senior Notes, net 83,139 — $125 million Revolving Credit Facility due 2020 — — Total debt, net 681,129 729,048 Less short-term borrowings and current portion of long-term debt (88,189) (66,845) Total long-term debt, net $ 592,940 $ 662,203 The weighted average interest rate for Fiscal 2020 and 2019 was 8.8% and 9.7%, respectively. 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 and were 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 Fiscal 2020. Long-term debt amounts due, for the twelve month periods ending June 30 were as follows: Amounts Payable (In thousands) to Institutions 2021 $ 88,189 2022 39,345 2023 494,167 2024 — Thereafter 86,250 Total $ 707,951 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 | 12 Months Ended |
Jun. 30, 2020 | |
Legal, Regulatory Matters and Contingencies | |
Legal, Regulatory Matters and Contingencies | Note 10. 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 requests information regarding allegations that the generic pharmaceutical industry engaged in market allocation, price fixing, payment of illegal remuneration and submission of false claims. The CID requests information from 2009-present. The Company is in the process of responding to the CID. Based on 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 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 have conspired to fix prices of generic digoxin, levothyroxine, ursodiol and baclofen. These cases are part of a larger group of more than 100 lawsuits generally alleging that over 30 generic pharmaceutical manufacturers and distributors conspired to fix prices for multiple different generic drugs in violation of the federal Sherman Act, various state antitrust laws, and various state consumer protection statutes. The United States also has been granted leave to intervene in the cases. On April 6, 2017, the Judicial Panel on Multidistrict Litigation (the “JPML”) ordered that all of the cases alleging price-fixing for generic drugs be consolidated for pretrial proceedings in the United States District Court for the Eastern District of Pennsylvania under the caption In re: Generic Pharmaceuticals Pricing Antitrust Litigation (the “MDL”). The various plaintiffs are grouped into three categories - Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers - and filed Consolidated Amended Complaints (“CACs”) against the Company and the other defendants on August 15, 2017. The CACs naming the Company as a defendant involve generic digoxin, levothyroxine, ursodiol and baclofen. Pursuant to a court-ordered schedule grouping the 18 different drug cases into three separate tranches, the Company and other generic pharmaceutical manufacturer defendants on October 6, 2017 filed joint and individual motions to dismiss the CACs involving the six drugs in the first tranche, including digoxin. On October 16, 2018, the Court (with one exception) denied defendants’ motions to dismiss plaintiffs’ Sherman Act claims with respect to the drugs in the first tranche. On March 15, 2019, the Company and other defendants filed answers to the Sherman Act claims. In addition, on February 15, 2019, the Court granted defendants’ motions to dismiss 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 various territories 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. On June 10, 2020, the Attorneys General filed a third overarching conspiracy complaint involving scores of different drugs, including alleged price-fixing by the Company for acetazolamide. 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 alleging an overarching conspiracy, making similar allegations to those of the state Attorneys General, 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 the Company 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 addition, between December 2019 and February 2020, the End Payer Plaintiffs, Indirect Reseller Purchasers, and Direct Purchaser Plaintiffs filed separate complaints alleging overarching, industry-wide price-fixing conspiracies modeled on the second one filed by the state Attorneys General. The new complaint involve 135 new drugs in addition to those named in previous complaints. As to the Company, the new drugs involved are Pilocarpine HCL, Triamterence HCTZ capsules, Amantadine HCL, and Oxycodone HCL. None of the defendants, including the Company, has responded yet to these new complaints. Between January 2018 and June 2020, a number of opt-out parties have filed individual complaints or otherwise commenced actions against the Company and dozens of other companies alleging an overarching conspiracy and individual conspiracies to fix the prices and allocate markets on scores of different drug products, including digoxin, doxycycline, levothyroxine, ursodiol and baclofen. The opt-out parties include various retailers, insurers and county governments, which have filed federal suits in Pennsylvania, New York, California, and Texas. All of those complaints have been added to the MDL but none of the defendants, including the Company, has responded to any of the complaints. Other groups of insurers have commenced actions in Pennsylvania state court against the Company and other drug companies by filing writs of summons, which are not complaints but can serve to toll the running of statutes of limitations. Those state-court cases have not been added to the MDL, although the parties have agreed to stay those cases pending further developments in the MDL. In June 2020, the Company was named as a Defendant in a Statement of Claim, along with a number of other generic pharmaceutical manufacturers, in a proposed class proceeding in federal court in Toronto, Ontario, Canada. The case alleges a violation of Canada’s Competition Act. The allegations are similar to those contained in the antitrust litigation pending in the United States, including claims that the generic pharmaceutical manufacturers engaged in an overarching, industry-wide conspiracy to allocate markets and fix the price of generic drugs. That alleged conspiracy reached Canada because these same manufacturers also allegedly sell the majority of generic drugs in Canada. The Statement of Claim alleges that the conspiracy extends to the entire generic pharmaceutical market. The specific drugs identified with respect to the Company are: Acetazolamide, Baclofen, Digoxin, Doxycycline Monohydrate, Levothyroxine, and Ursodiol. The Company has not yet responded to the Statement of Claim. On July 13, 2020, the court overseeing the MDL overruled the objections of the Company and various other defendants and adopted a report and recommendation of a special master regarding the selection of certain “bellwether” cases in the MDL to be placed first on a trial track. The court selected the second overarching conspiracy case filed by the state Attorneys General on May 10, 2019 as well as individual-conspiracy cases filed by the Direct Purchaser Plaintiffs, End Payer Plaintiffs, and Indirect Reseller Purchasers involving the drugs clobetasol, clomipramine and pravastatin. The Company is a defendant in the overarching conspiracy case, but not in the clobetasol, clomipramine and pravastatin cases. To date, none of the “bellwether” cases has been scheduled for trial. 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 its securities filings false and misleading statements regarding the Company’s drug pricing methodologies and internal controls. An amended complaint was filed in May 2017, and the Company filed a motion to dismiss the amended complaint in September 2017. In December 2017, counsel for the putative class filed a second amended complaint, and the Court denied as moot the Company’s motion to dismiss the first amended complaint. The Company filed a motion to dismiss the second amended complaint in February 2018. In July 2018, the court granted the Company’s motion to dismiss the second amended complaint . In September 2018, counsel for the putative class filed a third amended complaint. The Company filed a motion to dismiss the third amended complaint in November 2018. 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 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, as described below. 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. 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, as described above. 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 of the two consolidated cases, 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 with respect to both of the consolidated cases. On March 27, 2020, the parties jointly submitted a letter to the Court enclosing an executed Memorandum of Understanding setting forth the terms of their agreement and stating that the parties intend to execute and file a formal settlement stipulation for approval by the Court. On May 22, 2020, the plaintiffs filed an unopposed motion for preliminary approval of the proposed settlement. On June 1, 2020, in view of the plaintiffs’ unopposed motion for preliminary approval of the proposed settlement, the Court denied the defendants’ motions to dismiss the consolidated cases, without prejudice to the defendants’ ability to renew those motions if the proposed settlement is not approved. The Company cannot reasonably predict the outcome of the consolidated suits at this time. 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 16, 2020, the Court entered the parties’ 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 February 18, 2020, the Court entered the parties’ stipulation to withdraw the Company’s motion to dismiss without prejudice to the Company’s ability to refile a renewed motion to dismiss after the stay is lifted. On March 11, 2020, following notice that Plaintiffs no longer consented to the stay, the Court lifted the stay. On April 6, 2020, certain of the defendants, including the Company, filed a renewed motion to dismiss or, in the alternative, to stay the account. On April 29, 2020, the Court entered the parties’ stipulation to stay the action, pending a decision from the Court regarding the settlement in the consolidated derivative actions discussed above. On May 14, 2020, the parties filed a joint letter and a stipulation to withdraw the defendants’ motion to dismiss without prejudice to the defendants’ ability to refile a renewed motion to dismiss after the stay is lifted. On May 15, 2020, the Court entered the parties’ stipulation. The Company cannot reasonably predict the outcome of the suit at this time. In February 2020, a shareholder derivative lawsuit was filed against certain of the Company’s current and former officers, directors and employees in the Court of Chancery of the State 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, and were unjustly enriched. On March 16, 2020, the Company filed a motion to dismiss the complaint, and a motion to stay the proceedings. On March 27, 2020, the Company filed its opening brief in support of its motion to stay the proceedings. On April 6, 2020, the parties entered into a stipulation and proposed order to stay the action. The Court granted the stipulation and proposed order that same day. Under the terms of the stipulated stay, the action shall be stayed pending a decision from the Court in the shareholder derivative lawsuit filed in May 2019 on the plaintiffs’ unopposed motion for approval of the proposed settlement. 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. Sandoz, Inc. On July 20, 2020, Sandoz, Inc. (“Sandoz”) filed a complaint in federal court in Philadelphia, alleging claims for tortious interference with contract, unfair competition and conversion of confidential information, arising out of the Cediprof, Inc.’s (“Cediprof”) termination of Sandoz’ contract to distribute levothyroxine tablets in the United States and certain territories. Along with the complaint, Sandoz filed a motion for a temporary restraining order and preliminary injunction, seeking to enjoin the Company from commencing the distribution of levothyroxine tablets on August 3, 2020. On the same day, Sandoz filed a separate complaint and application for a temporary restraining order and preliminary injunction against Cediprof in federal court in New York, seeking to prevent Cediprof from selling its levothyroxine tablets in the United States and certain of its territories to anyone other than Sandoz. On July 27, 2020, the New York court held a hearing and denied Sandoz’s application for a temporary restraining order, ruling Sandoz had failed to establish irreparable harm. On July 28, 2020, the Philadelphia court held a hearing and denied Sandoz’s application for a temporary restraining order, ruling that Sandoz had failed to establish irreparable harm and failed to establish that it is likely to succeed on the merits of its claim against Lannett. The Company denies that it tortiously interfered with Sandoz’s contract or that it converted any of Sandoz’s alleged confidential information. The Company has not yet responded to the complaint. 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 | 12 Months Ended |
Jun. 30, 2020 | |
Commitments | |
Commitments | Note 11. 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 June 30, 2020, the Company has a ROU lease asset of $9.3 million and a ROU liability of $10.9 million, of which $1.1 million and $9.8 million represent the current and non-current balance, respectively. In November 2019, the Company signed an eight year lease for its new headquarters in Trevose, Pennsylvania. The Company is currently providing lease improvements and met the lease commencement date criteria under ASC Topic 842 Leases as of March 31, 2020. Accordingly, the Company recorded a ROU lease asset and liability totaling $4.3 million, respectively, in the third quarter of Fiscal 2020. Components of lease costs are as follows: Fiscal Year Ended (In thousands) June 30, 2020 Operating lease cost $ 2,246 Variable lease cost 153 Short-term lease cost (a) 579 Total $ 2,978 ______________________ (a) Not recorded on the Consolidated Balance Sheet Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Fiscal Year Ended (In thousands) June 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,086 Non-cash activity: ROU assets obtained in exchange for new operating lease liabilities $ 4,317 Weighted average remaining lease term and discount rate for our operating leases are as follows: Fiscal Year Ended June 30, 2020 Weighted-average remaining lease term years Weighted-average discount rate % Maturities of lease liabilities by fiscal year for our operating leases are as follows: (In thousands) Amounts Due 2021 $ 1,101 2022 2,125 2023 2,144 2024 2,164 2025 2,183 Thereafter 5,749 Total lease payments 15,466 Less: Imputed interest 4,525 Present value of lease liabilities $ 10,941 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 2021 $ 1,450 2022 1,123 2023 1,123 2024 1,123 2025 — Thereafter 3,839 Total $ 8,658 Other Commitments During 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 from the loan origination date 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. In Fiscal 2019, the Company sold 50% of the outstanding loan to a third party for $5.6 million, in addition to assigning 50% of all rights, title and interest in the loan and loan documents. As of June 30, 2020, $6.5 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 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. To date, the COVID-19 pandemic has not had a material impact on the development of the insulin glargine product. The longer countries around the world remain on lockdown, the more likely the timing of the product development and approval will be delayed. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 12 Months Ended |
Jun. 30, 2020 | |
Accumulated Other Comprehensive Loss. | |
Accumulated Other Comprehensive Loss | Note 12. Accumulated Other Comprehensive Loss The Company’s Accumulated Other Comprehensive Loss was comprised of the following components as of June 30, 2020 and 2019: June 30, (In thousands) 2020 2019 Foreign Currency Translation Beginning Balance $ (615) $ (515) Net (loss) on foreign currency translation (net of tax of $0 and $0) (12) (100) Other comprehensive (loss), net of tax (12) (100) Ending Balance (627) (615) Total Accumulated Other Comprehensive Loss $ (627) $ (615) |
Earnings (Loss) Per Common Shar
Earnings (Loss) Per Common Share | 12 Months Ended |
Jun. 30, 2020 | |
Earnings (Loss) Per Common Share | |
Earnings (Loss) Per Common Share | Note 13. Earnings (Loss) Per Common Share A reconciliation of the Company’s basic and diluted earnings (loss) per common share was as follows: For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2020 2019 2018 Numerator: Net income (loss) $ (33,366) $ (272,107) $ 28,690 Interest expenses applicable to the Notes, net of tax — — — Amortization of debt issuance costs applicable to the Notes, net of tax — — — Adjusted "if-converted" net income (loss) $ (33,366) $ (272,107) $ 28,690 Denominator: Basic weighted average common shares outstanding 38,592,618 37,779,812 37,127,306 Effect of potentially dilutive options and restricted stock awards — — 1,035,208 Effect of conversion of the Notes — — — Diluted weighted average common shares outstanding 38,592,618 37,779,812 38,162,514 Earnings (loss) per common share: Basic $ (0.86) $ (7.20) $ 0.77 Diluted $ (0.86) $ (7.20) $ 0.75 The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the fiscal years ended June 30, 2020, 2019 and 2018 were 6.6 million, 1.9 million and 3.0 million, respectively. The effect of potentially dilutive shares was excluded from the calculation of diluted loss per share in the fiscal years ended June 30, 2020 and 2019 because the effect of including such securities would be anti-dilutive. |
Share-based Compensation
Share-based Compensation | 12 Months Ended |
Jun. 30, 2020 | |
Share-based Compensation | |
Share-based Compensation | Note 14. Share-based Compensation At June 30, 2020, 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 June 30, 2020, the plans have a total of 1.3 million shares available for future issuances. Historically, the Company has issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. The Company issues new shares of stock when stock options are exercised. As of June 30, 2020, there was $9.5 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 2.2 years. Stock Options The Company measures share-based compensation costs 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, the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted during the fiscal years ended June 30: 2020 2019 2018 Risk-free interest rate 1.9 % 2.9 % 2.1 % Expected volatility 73.7 % 58.4 % 57.6 % Expected dividend yield — % — % — % Forfeiture rate — % 6.5 % 6.5 % Expected term 5.1 years 5.3 years 5.4 years Weighted average fair value $ 4.0 $ 6.52 $ 11.25 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 June 30, 2020, 2019 and 2018 and changes during the years 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, 2017 1,475 $ 18.02 $ 12,212 5.7 Granted 50 $ 21.43 Exercised (445) $ 7.23 $ 4,243 Forfeited, expired or repurchased (23) $ 30.83 Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 5.4 Granted 73 $ 12.20 Exercised (94) $ 4.06 $ 311 Forfeited, expired or repurchased (464) $ 30.61 Outstanding at June 30, 2019 572 $ 17.56 $ 273 5.0 Granted 522 $ 6.57 Exercised (56) $ 5.42 $ 237 Forfeited, expired or repurchased (47) $ 24.73 Outstanding at June 30, 2020 991 $ 12.11 $ 678 5.6 Vested and expected to vest at June 30, 2020 989 $ 12.10 $ 678 5.6 Exercisable at June 30, 2020 493 $ 16.82 $ 371 2.3 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%, 6.5% and 5.7% for fiscal years ended June 30, 2020, 2019 and 2018, respectively. A summary of restricted stock awards as of June 30, 2020, 2019 and 2018 and changes during the fiscal years 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, 2017 334 $ 30.71 Granted 641 18.01 Vested (191) 31.30 $ 4,104 Forfeited (80) 20.95 Non-vested at June 30, 2018 704 $ 20.06 Granted 1,176 9.90 Vested (434) 19.75 $ 4,107 Forfeited (158) 14.00 Non-vested at June 30, 2019 1,288 $ 11.63 Granted 941 6.45 Vested (773) 10.54 $ 6,401 Forfeited (112) 10.75 Non-vested at June 30, 2020 1,344 $ 8.70 Performance-Based Shares In September 2017, the Company approved a plan to begin 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 performance 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 June 30, 2020, 2019 and 2018 and changes during the current fiscal years then ended, is presented below: Weighted Average Grant - Aggregate (In thousands, except for weighted average price and life data) Awards date Fair Value Intrinsic Value Non-vested at June 30, 2017 — $ — Granted 47 25.58 Vested (27) 25.58 $ 574 Forfeited — — Non-vested at June 30, 2018 20 $ 25.58 Granted 52 17.69 Vested — — $ — Forfeited — — Non-vested at June 30, 2019 72 $ 19.92 Granted 178 $ 10.71 Vested (46) $ 15.08 $ 477 Forfeited — $ — Non-vested at June 30, 2020 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 fiscal years ended June 30, 2020, 2019 and 2018, 118 thousand shares, 185 thousand shares and 66 thousand shares were issued under the ESPP, respectively. As of June 30, 2020, 910 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: For Fiscal Year Ended June 30, (In thousands) 2020 2019 2018 Selling, general and administrative expenses $ 7,087 $ 5,715 $ 7,570 Research and development expenses 801 750 680 Cost of sales 2,328 2,562 1,646 Total $ 10,216 $ 9,027 $ 9,896 Tax benefit at statutory rate $ 2,299 $ 2,031 $ 2,919 |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Jun. 30, 2020 | |
Employee Benefit Plan | |
Employee Benefit Plan | Note 15. Employee Benefit Plan The Company has a 401(k) 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 fiscal years ended June 30, 2020, 2019 and 2018 were $2.2 million, $2.3 million and $2.3 million, respectively. In Fiscal 2020, the Company implemented a non-qualified deferred compensation plan for certain senior-level management and executives. The non-qualified deferred compensation plan allows certain eligible employees to defer additional pre-tax earnings for retirement, beyond the IRS limits in place under the Plan. Contributions to the non-qualified deferred compensation plan during Fiscal 2020 were not material. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2020 | |
Income Taxes | |
Income Taxes | Note 16. 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. On December 22, 2017, the 2017 Tax Reform was enacted into law, which significantly revised the Internal Revenue Code of 1986, as amended. The 2017 Tax Reform includes, among other items, permanent reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%; and modifying or repealing many other business deductions and credits. On March 27, 2020, in response to COVID-19 and its detrimental impact to the global economy, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law, which provides a stimulus to the U.S. economy in the form of various individual and business assistance programs as well as temporary changes to existing tax law. Among the changes to the provision in business tax laws include a five-year net operating loss carryback for the Fiscal 2019 - 2021 tax years, a deferral of the employer’s portion of certain payroll tax, and an increase in the interest expense deductibility limitation for the Fiscal 2020 and 2021 tax years. ASC 740 requires the tax effects of changes in tax laws or rates to be recorded in the period of enactment. As a result of the CARES Act, the Company will carry back its Fiscal 2020 taxable loss into the Fiscal 2015 tax year, which resulted in an approximately $2.8 million tax rate benefit in the current year. The Company also reviewed its existing deferred tax assets in light of COVID-19 and determined that no valuation allowance is required at this time. However, the Company will continue to monitor the status of the COVID-19 pandemic and its impact on our results of operations. The following table summarizes the components of the provision for income taxes for the fiscal years ended June 30: June 30, June 30, June 30, (In thousands) 2020 2019 2018 Current Income Tax Expense (Benefit) Federal $ (7,082) $ 13,185 $ (9,439) State and Local 405 (81) 1,152 Total Current Income Tax Expense (Benefit) (6,677) 13,104 (8,287) Deferred Income Tax Expense (Benefit) Federal (6,525) (85,022) 31,263 State and Local (2,060) (2,220) (573) Total Deferred Income Tax Expense (Benefit) (8,585) (87,242) 30,690 Total Income Tax Expense (Benefit) $ (15,262) $ (74,138) $ 22,403 A reconciliation of the differences between the effective rates and federal statutory rates was as follows: June 30, June 30, June 30, 2020 2019 2018 Federal income tax at statutory rate 21.0 % 21.0 % 28.1 % State and local income tax, net 2.7 % 0.5 % 0.6 % Nondeductible expenses (1.1) % (0.1) % 0.2 % Nondeductible drug fee (1.6) % — % — % Foreign rate differential (0.1) % (0.4) % 0.4 % Income tax credits 2.5 % 0.5 % (1.4) % Domestic production activity deduction — % — % (1.5) % Unrecognized tax benefits (5.0) % 0.1 % (6.7) % Change in tax laws 15.4 % — % 25.6 % Excess tax benefits on share-based compensation (0.8) % (0.3) % (0.3) % Other (1.6) % 0.1 % (1.2) % Effective income tax rate 31.4 % 21.4 % 43.8 % The principal types of differences between assets and liabilities for financial statement and tax return purposes are accruals, reserves, impairment of intangibles, accumulated amortization, accumulated depreciation and share-based compensation expense. A deferred tax asset is recorded for the future benefits created by the timing of accruals and reserves and the application of different amortization lives for financial statement and tax return purposes. The Company’s deferred tax liability is mainly attributable to different depreciation methods for financial statement and tax return purposes. A deferred tax asset valuation allowance is established if it is more likely than not that the Company will be unable to realize certain of the deferred tax assets. As of June 30, 2020 and 2019, temporary differences which give rise to deferred tax assets and liabilities were as follows: June 30, June 30, (In thousands) 2020 2019 Deferred tax assets: Share-based compensation expense $ 2,661 $ 4,134 Reserve for returns 11,022 12,014 Reserves for accounts receivable and inventory 5,526 8,208 Federal net operating loss 273 324 State net operating loss 8,387 6,479 Impairment on Cody note receivable 1,171 1,161 Accumulated amortization on intangible assets 79,939 76,401 Foreign net operating loss 1,822 1,792 Interest Carryforward 25,392 11,008 Operating lease 3,439 — Other 2,747 2,506 Total deferred tax asset 142,379 124,027 Valuation allowance (14,622) (13,549) Total deferred tax asset less valuation allowance 127,757 110,478 Deferred tax liabilities: Prepaid expenses 681 182 Property, plant and equipment 5,383 991 Operating lease 3,803 — Total deferred tax liability 9,867 1,173 Net deferred tax asset $ 117,890 $ 109,305 The net deferred tax asset as of June 30, 2020 and 2019 is reduced by a valuation allowance of $14.6 million and $13.5 million, respectively, which are primarily related to deferred tax assets for various states and foreign net operating losses. The federal and state and local tax deferred tax assets begin to expire in fiscal years 2026 and 2036, respectively. The increase in the valuation allowance in Fiscal 2020 primarily related to an increase of state deferred tax assets. 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. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of interest and penalties) was as follows: (In thousands) Balance Balance at June 30, 2018 $ 2,537 Additions for tax positions of the current year 244 Additions for tax positions of prior years 36 Lapse of statute of limitations (618) Balance at June 30, 2019 $ 2,199 Additions for tax positions of the current year 2,467 Additions for tax positions of prior years (51) Lapse of statute of limitations (24) Balance at June 30, 2020 $ 4,591 The amount of unrecognized tax benefits at June 30, 2020, 2019 and 2018 was $4.6 million, $2.2 million and $2.5 million, respectively, of which $4.5 million, $2.1 million and $2.3 million would impact the Company’s effective tax rate, respectively, if recognized. The Company has not recorded any interest and penalties for the periods ended June 30, 2020, 2019 and 2018 in the statement of operations and no cumulative interest and penalties have been recorded either in the Company’s Consolidated Balance Sheet as of June 30, 2020 and 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 2015 through 2017 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. 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. The Company has received preliminary assessments from the IRS and the Florida Department of Revenue; however, we cannot reasonably predict the final outcome of the examinations at this time. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions | |
Related Party Transactions | Note 17. Related Party Transactions The Company had sales of $3.0 million, $3.8 million and $3.9 million during the fiscal years ended June 30, 2020, 2019 and 2018, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn ”), which is a member of the Premier Buying Group. Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $0.7 million and $1.2 million at June 30, 2020 and 2019, respectively. The Company also had net sales of $2.6 million, $2.4 million, and $1.9 million during the fiscal years ended June 30, 2020, 2019 and 2018, respectively, to a generic distributor, KeySource Medical (“KeySource), which is a member of the OptiSource Buying Group. Albert Paonessa, a board member until the date of the Company’s 2020 Annual meeting of Stockholders, was appointed the CEO of KeySource in May 2017. Accounts receivable includes amounts due from KeySource of $0.6 million and $0.7 million as of June 30, 2020 and 2019. |
Assets Held for Sale
Assets Held for Sale | 12 Months Ended |
Jun. 30, 2020 | |
Assets Held for Sale | |
Assets held for Sale | Note 18. 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 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. During Fiscal 2020, the Company completed the sale of the equipment associated with the Cody API business for approximately $3.0 million. In the second quarter of Fiscal 2020, the Company signed a two year agreement to lease a portion of the real estate to a third party. As of June 30, 2020, the real estate associated with the Cody API business, totaling $2.7 million, is 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 fiscal years ended June 30, 2020 and 2019: Fiscal Year Ended June 30, (In thousands) 2020 2019 Net sales $ 1,067 $ 3,139 Pretax loss attributable to Cody API business (6,549) (51,509) The pretax loss attributable to the Cody API business during the fiscal year ended June 30, 2020 includes a full impairment of a $1.2 million ROU lease asset 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 fiscal year ended June 30, 2019 includes impairment charges totaling $32.8 million to adjust the long-lived assets to their fair value less costs to sell. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Jun. 30, 2020 | |
Subsequent Events | |
Subsequent Events | Note 19. Subsequent Events 2020 Restructuring Plan On July 10, 2020, the Board of Directors authorized a restructuring and cost savings plan (the “2020 Restructuring Plan”). The purpose of the 2020 Restructuring Plan is to enhance manufacturing efficiencies, streamline operations and reduce the Company’s cost structure, and is being implemented, in part, as a result of previously anticipated near-term competition and pricing pressure with respect to certain key products. The 2020 Restructuring Plan will include the consolidation of the Company’s R&D function into a single location in Philadelphia, PA, lowering operating costs and reducing the workforce by approximately 80 positions, equal to approximately 8.5% of the Company’s total number of employees. The 2020 Restructuring Plan was initiated on July 13, 2020. The Company estimates that it will incur approximately $4.0 million in severance-related costs, primarily in the first quarter of Fiscal 2021, in connection with the 2020 Restructuring Plan. The Company expects the 2020 Restructuring Plan to result in annual cost savings in excess of $15.0 million. The amounts are preliminary estimates based on the information currently available to management. It is possible that additional charges and future cash payments could occur in relation to the restructuring actions. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Jun. 30, 2020 | |
Interim Financial Information | |
Quarterly Financial Information (Unaudited) | Note 20. Quarterly Financial Information (Unaudited) Lannett’s quarterly consolidated results of operations are shown below: Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2020 Net sales $ 137,920 $ 144,372 $ 136,110 $ 127,342 Cost of sales 98,328 102,696 94,816 84,684 Gross profit 39,592 41,676 41,294 42,658 Operating expenses 44,123 43,768 24,519 33,254 Operating income (loss) (4,531) (2,092) 16,775 9,404 Other loss (15,247) (16,164) (16,999) (19,774) Income tax expense (benefit) (10,077) (1,664) (5,308) 1,787 Net income (loss) $ (9,701) $ (16,592) $ 5,084 $ (12,157) Earnings (loss) per common share (1) Basic $ (0.25) $ (0.43) $ 0.13 $ (0.32) Diluted $ (0.25) $ (0.43) $ 0.13 $ (0.32) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2019 Net sales $ 133,841 $ 172,794 $ 193,718 $ 155,054 Cost of sales 84,499 107,477 123,908 95,913 Gross profit 49,342 65,317 69,810 59,141 Operating expenses 39,940 31,939 33,133 400,919 Operating income (loss) 9,402 33,378 36,677 (341,778) Other loss (19,532) (21,374) (21,668) (21,350) Income tax expense (benefit) (2,544) 1,359 2,647 (75,600) Net income (loss) $ (7,586) $ 10,645 $ 12,362 $ (287,528) Earnings (loss) per common share (1) Basic $ (0.20) $ 0.28 $ 0.33 $ (7.65) Diluted $ (0.20) $ 0.27 $ 0.32 $ (7.65) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2018 Net sales $ 170,911 $ 174,386 $ 184,305 $ 154,961 Cost of sales 104,383 107,329 96,855 87,290 Gross profit 66,528 67,057 87,450 67,671 Operating expenses 57,926 33,777 40,315 26,992 Operating income 8,602 33,280 47,135 40,679 Other loss (20,844) (22,785) (14,975) (19,999) Income tax expense (benefit) (883) (2,275) 18,138 7,423 Net income (loss) $ (11,359) $ 12,770 $ 14,022 $ 13,257 Earnings (loss) per common share (1) Basic $ (0.30) $ 0.34 $ 0.38 $ 0.36 Diluted $ (0.30) $ 0.33 $ 0.37 $ 0.35 (1) The increase in operating expenses in the third and fourth quarters of Fiscal 2020 is primarily driven by asset impairment charges related to the abandonment of several pipeline products within the KUPI IPR&D and Silarx IPR&D asset portfolios, as well as a significant decline in sales and overall profitability of the distribution agreement with Andor for the AB-rated Methylphenidate Hydrochloride product. The increase in net sales and gross profit in the second and third quarters of Fiscal 2019 is primarily due to increased sales of Levothyroxine as customer demand increased in anticipation of the transition of the product to Amneal. The subsequent decrease in net sales and gross profit in the fourth quarter of Fiscal 2019 is primarily due to the expiration of the JSP Distribution Agreement on March 23, 2019. The significant operating loss in the first quarter of Fiscal 2019 was mainly attributable to the full impairment of goodwill totaling $339.6 million as a result of JSP’s decision not to renew the JSP Distribution Agreement. The increase in net sales and gross profit in the second quarter of Fiscal 2018 is primarily due to a temporary disruption of our competitor’s supplies in the Thyroid Deficiency and Migraine medical indications. The declines in operating income in the third and fourth quarters of Fiscal 2018 were primarily related to a loss on sale of an intangible asset and asset impairment charges as a result of the Cody Restructuring Plan as well as other activities related to the consolidation of the Company’s manufacturing facilities. Income tax expense in the second quarter of Fiscal 2018 was negatively impacted due to the adoption of 2017 Tax Reform which resulted in a revaluation of the Company’s net long term deferred tax assets. |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts | 12 Months Ended |
Jun. 30, 2020 | |
Schedule II - Valuation and Qualifying Accounts | |
Schedule II - Valuation and Qualifying Accounts | Lannett Company, Inc. Schedule II - Valuation and Qualifying Accounts For the years ended June 30: Balance at Charged to Balance at Description Beginning of (Reduction of) End of Fiscal (In thousands) Fiscal Year Expense Deductions Year Allowance for Doubtful Accounts 2020 $ 1,223 $ 386 $ (506) $ 1,103 2019 1,308 870 (955) 1,223 2018 796 1,560 (1,048) 1,308 Deferred Tax Asset Valuation Allowance 2020 $ 13,549 $ 1,073 $ — $ 14,622 2019 8,120 5,429 — 13,549 2018 6,391 1,729 — 8,120 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2020 | |
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 value of inventories and 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 5 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 other than Goodwill The Company’s long-lived assets primarily consist of property, plant and equipment and definite and indefinite-lived intangible assets. Property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances (“triggering events”) indicate that the carrying amount of the asset may not be recoverable. If a triggering event is determined to have occurred, the asset’s carrying value is compared to the future undiscounted cash flows expected to be generated by the asset. If the carrying value exceeds the undiscounted cash flows of the asset, then impairment exists. Indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of each fiscal year or more frequently if events or triggering events indicate that the asset might be impaired. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, which in most cases is calculated using a discounted cash flow model. Discounted cash flow models are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
In-Process Research and Development | In-Process Research and Development Amounts allocated to in-process research and development in connection with a business combination are recorded at fair value and are considered indefinite-lived intangible assets subject to impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over their estimated useful lives. Definite-lived intangible assets are amortized over the expected lives of the related assets. The judgments made in determining the estimated fair value of in-process research and development, as well as asset lives, can materially impact our results of operations. The Company’s fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. |
Segment Information | Segment Information The Company operates in one reportable segment, generic pharmaceuticals. As such, the Company aggregates its financial information for all products. The following table identifies the Company’s net sales by medical indication for fiscal years ended June 30, 2020, 2019 and 2018. The medical indication categories for the fiscal years ended June 30, 2019 and 2018 were reclassified to better align with industry standards and the Company’s peers. (In thousands) Fiscal Year Ended June 30, Medical Indication 2020 2019 2018 Analgesic $ 8,680 $ 8,251 $ 3,809 Anti-Psychosis 104,934 73,453 59,557 Cardiovascular 88,576 101,467 64,011 Central Nervous System 77,256 59,019 59,672 Endocrinology — 197,522 245,929 Gastrointestinal 73,477 63,043 67,762 Infectious Disease 73,237 16,950 17,685 Migraine 44,266 41,592 54,015 Respiratory/Allergy/Cough/Cold 11,576 12,479 25,284 Urinary 4,225 6,755 8,068 Other 35,013 51,517 58,936 Contract manufacturing revenue 24,504 23,359 19,835 Total net sales $ 545,744 $ 655,407 $ 684,563 |
Customer, Supplier and Product Concentration | Customer, Supplier and Product Concentration The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2020, 2019 and 2018, for certain of the Company’s products, defined as products containing the same active ingredient or combination of ingredients, which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, 2020 2019 2018 Product 1 18 % 10 % 8 % Product 2 10 % — % — % Product 3 — % 30 % 36 % The following table presents the percentage of total net sales, for the fiscal years ended June 30, 2020, 2019 and 2018, for certain of the Company’s customers which accounted for at least 10% of total net sales in any of those periods: June 30, June 30, June 30, 2020 2019 2018 Customer A 25 % 21 % 29 % Customer B 23 % 18 % 17 % Customer C 11 % 10 % 5 % Customer D — % 12 % — % 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 29% and 37% of the Company’s inventory purchases in fiscal years 2019 and 2018, respectively. There were no purchases of finished goods inventory from JSP in the fiscal year ended June 30, 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 these 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 cost-sharing program for certain Medicare Part D beneficiaries designed primarily for the sale of brand drugs and certain generic drugs if their Food and Drug Administration (“FDA”) approval was granted under a New Drug Application (“NDA”) or 505(b) NDA versus an Abbreviated New Drug application (“ANDA’). 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 plus 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 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 expense 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 was not material to the consolidated financial position of the Company as of June 30, 2020 and 2019. |
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 current U.S. tax law, resulting in pervasive financial reporting implications. As a result of the new law, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of 2017 Tax Reform. SAB 118 required 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. On March 27, 2020, in response to COVID-19 and its detrimental impact to the global economy, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law, which provides a stimulus to the U.S. economy in the form of various individual and business assistance programs as well as temporary changes to existing tax law. Among the changes to the provision in business tax laws include a five-year net operating loss carryback for the Fiscal 2019 - 2021 tax years, a deferral of the employer’s portion of certain payroll tax, and an increase in the interest expense deductibility limitation for the Fiscal 2020 and 2021 tax years. ASC 740 requires the tax effects of changes in tax laws or rates to be recorded in the period of enactment. As a result of the CARES Act, the Company will carry back its Fiscal 2020 taxable loss into the Fiscal 2015 tax year. The Company also reviewed its existing deferred tax assets in light of COVID-19 and determined that no additional valuation allowance is required at this time. However, the Company will continue to monitor the status of the COVID-19 pandemic and its impact on our results of operations. |
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 net income (loss) as these 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 early adopted 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. The adoption of ASU 2019-12 did not have an impact on the Company’s income tax benefit for the fiscal year ended June 30, 2020. 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 11 "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 does not anticipate that the adoption will have a material impact on its Consolidated Financial Statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Summary of Significant Accounting Policies | |
Schedule of the Company's net sales by medical indication | (In thousands) Fiscal Year Ended June 30, Medical Indication 2020 2019 2018 Analgesic $ 8,680 $ 8,251 $ 3,809 Anti-Psychosis 104,934 73,453 59,557 Cardiovascular 88,576 101,467 64,011 Central Nervous System 77,256 59,019 59,672 Endocrinology — 197,522 245,929 Gastrointestinal 73,477 63,043 67,762 Infectious Disease 73,237 16,950 17,685 Migraine 44,266 41,592 54,015 Respiratory/Allergy/Cough/Cold 11,576 12,479 25,284 Urinary 4,225 6,755 8,068 Other 35,013 51,517 58,936 Contract manufacturing revenue 24,504 23,359 19,835 Total net sales $ 545,744 $ 655,407 $ 684,563 |
Summary of products which accounted for at least 10% of total net sales | June 30, June 30, June 30, 2020 2019 2018 Product 1 18 % 10 % 8 % Product 2 10 % — % — % Product 3 — % 30 % 36 % |
Summary of customers which accounted for at least 10% of total net sales | June 30, June 30, June 30, 2020 2019 2018 Customer A 25 % 21 % 29 % Customer B 23 % 18 % 17 % Customer C 11 % 10 % 5 % Customer D — % 12 % — % |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Cody Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended (In thousands) June 30, 2019 Employee separation costs (credits) $ (585) Facility closure costs — Total $ (585) |
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 June 30, 2020 $ — — $ — |
Cody API Restructuring Plan | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2020 June 30, 2019 Employee separation costs $ 1,275 $ 2,430 Facility closure costs 496 — Total $ 1,771 $ 2,430 |
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, 2018 $ — $ — $ — $ — Restructuring Charges 2,430 — — 2,430 Payments (223) — — (223) Balance at June 30, 2019 $ 2,207 $ — $ — $ 2,207 Restructuring Charges 1,275 — 496 1,771 Payments (3,455) — (496) (3,951) Balance at June 30, 2020 $ 27 $ — — $ 27 |
2016 Restructuring Program | |
Schedule of restructuring charges associated with restructuring program | Fiscal Year Ended Fiscal Year Ended (In thousands) June 30, 2019 June 30, 2018 Employee separation costs $ 1,084 $ 246 Facility closure costs 1,166 3,723 Total $ 2,250 $ 3,969 |
Accounts Receivable, net (Table
Accounts Receivable, net (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Accounts Receivable, net | |
Schedule of accounts receivable | June 30, June 30, (In thousands) 2020 2019 Gross accounts receivable $ 271,557 $ 361,323 Less: Chargebacks reserve (61,877) (89,567) Less: Rebates reserve (24,536) (32,099) Less: Returns reserve (40,796) (55,554) Less: Other deductions (17,557) (18,128) Less: Allowance for doubtful accounts (1,103) (1,223) Accounts receivable, net $ 125,688 $ 164,752 |
Schedule of major category of revenue-related reserves | Reserve Category (In thousands) Chargebacks Rebates Returns Other Total Balance at June 30, 2017 $ 79,537 $ 87,616 $ 42,135 $ 11,096 $ 220,384 Current period provision 1,141,995 296,784 24,024 69,898 1,532,701 Credits issued during the period (1,068,498) (301,898) (23,100) (60,973) (1,454,469) 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 1,047,192 250,555 41,982 67,344 1,407,073 Credits issued during the period (1,110,659) (254,783) (29,487) (72,773) (1,467,702) Balance at June 30, 2019 89,567 78,274 55,554 18,128 241,523 Current period provision 761,787 223,932 16,863 88,468 1,091,050 Credits issued during the period (789,477) (239,495) (31,621) (89,039) (1,149,632) Balance at June 30, 2020 $ 61,877 $ 62,711 $ 40,796 $ 17,557 $ 182,941 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Inventories | |
Schedule of Inventories | June 30, June 30, (In thousands) 2020 2019 Raw Materials $ 59,703 $ 56,740 Work-in-process 12,235 18,988 Finished Goods 70,929 68,243 Total $ 142,867 $ 143,971 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment | |
Schedule of property, plant and equipment | June 30, June 30, (In thousands) Useful Lives 2020 2019 Land — $ 1,783 $ 1,783 Building and improvements 10 - 39 years 100,285 87,609 Machinery and equipment 5 - 10 years 164,704 156,166 Furniture and fixtures 5 - 7 years 3,116 3,105 Less accumulated depreciation (102,983) (83,424) 166,905 165,239 Construction in progress 12,613 21,431 Property, plant and equipment, net $ 179,518 $ 186,670 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets | |
Summary of intangible assets, net | Weighted Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Avg. Life June 30, June 30, June 30, June 30, June 30, June 30, (In thousands) (Yrs.) 2020 2019 2020 2019 2020 2019 Definite-lived: KUPI product rights 15 416,154 416,154 (125,327) (97,583) 290,827 318,571 KUPI trade name 2 2,920 2,920 (2,920) (2,920) — — KUPI other intangible assets 15 19,000 19,000 (5,828) (4,562) 13,172 14,438 Silarx product rights 15 20,000 10,000 (3,556) (2,722) 16,444 7,278 Other product rights 10 50,718 39,160 (5,426) (4,667) 45,292 34,493 Total definite-lived $ 508,792 $ 487,234 $ (143,057) $ (112,454) $ 365,735 $ 374,780 Indefinite-lived: KUPI in-process research and development — $ 9,000 $ 18,000 $ — $ — $ 9,000 $ 18,000 Silarx in-process research and development — — 18,000 — — — 18,000 Other product rights — — 449 — — — 449 Total indefinite-lived 9,000 36,449 — — 9,000 36,449 Total intangible assets, net $ 517,792 $ 523,683 $ (143,057) $ (112,454) $ 374,735 $ 411,229 |
Summary of future annual amortization expense | (In thousands) Amortization Fiscal Year Ending June 30, Expense 2021 $ 34,068 2022 35,668 2023 35,367 2024 35,067 2025 34,667 Thereafter 190,898 $ 365,735 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Long-Term Debt | |
Summary of long-term debt, net | June 30, June 30, (In thousands) 2020 2019 Term Loan A due 2020; 6.00% as of June 30, 2020 $ 48,844 $ 153,933 Unamortized discount and other debt issuance costs (433) (4,722) Term Loan A, net 48,411 149,211 Term Loan B due 2022; 6.38% as of June 30, 2020 572,857 614,468 Unamortized discount and other debt issuance costs (23,278) (34,631) Term Loan B, net 549,579 579,837 4.50% Convertible Senior Notes due 2026 86,250 — Unamortized discount and other debt issuance costs (3,111) — 4.50% Convertible Senior Notes, net 83,139 — $125 million Revolving Credit Facility due 2020 — — Total debt, net 681,129 729,048 Less short-term borrowings and current portion of long-term debt (88,189) (66,845) Total long-term debt, net $ 592,940 $ 662,203 |
Summary of long-term debt amounts due | Amounts Payable (In thousands) to Institutions 2021 $ 88,189 2022 39,345 2023 494,167 2024 — Thereafter 86,250 Total $ 707,951 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Commitments | |
Schedule of components of lease cost | Fiscal Year Ended (In thousands) June 30, 2020 Operating lease cost $ 2,246 Variable lease cost 153 Short-term lease cost (a) 579 Total $ 2,978 ______________________ (a) Not recorded on the Consolidated Balance Sheet |
Schedule of supplemental cash flow information and non-cash activity | Fiscal Year Ended (In thousands) June 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 2,086 Non-cash activity: ROU assets obtained in exchange for new operating lease liabilities $ 4,317 |
Schedule of weighted-average remaining lease term | Fiscal Year Ended June 30, 2020 Weighted-average remaining lease term years Weighted-average discount rate % |
Schedule of maturities of lease liabilities | (In thousands) Amounts Due 2021 $ 1,101 2022 2,125 2023 2,144 2024 2,164 2025 2,183 Thereafter 5,749 Total lease payments 15,466 Less: Imputed interest 4,525 Present value of lease liabilities $ 10,941 |
Schedule of future minimum lease previous | (In thousands) Amounts Due 2021 $ 1,450 2022 1,123 2023 1,123 2024 1,123 2025 — Thereafter 3,839 Total $ 8,658 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Accumulated Other Comprehensive Loss. | |
Schedule of Accumulated Other Comprehensive Loss | June 30, (In thousands) 2020 2019 Foreign Currency Translation Beginning Balance $ (615) $ (515) Net (loss) on foreign currency translation (net of tax of $0 and $0) (12) (100) Other comprehensive (loss), net of tax (12) (100) Ending Balance (627) (615) Total Accumulated Other Comprehensive Loss $ (627) $ (615) |
Earnings (Loss) Per Common Sh_2
Earnings (Loss) Per Common Share (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Earnings (Loss) Per Common Share | |
Summary of reconciliation of the Company's basic and diluted earnings (loss) per common share | For Fiscal Year Ended June 30, (In thousands, except share and per share data) 2020 2019 2018 Numerator: Net income (loss) $ (33,366) $ (272,107) $ 28,690 Interest expenses applicable to the Notes, net of tax — — — Amortization of debt issuance costs applicable to the Notes, net of tax — — — Adjusted "if-converted" net income (loss) $ (33,366) $ (272,107) $ 28,690 Denominator: Basic weighted average common shares outstanding 38,592,618 37,779,812 37,127,306 Effect of potentially dilutive options and restricted stock awards — — 1,035,208 Effect of conversion of the Notes — — — Diluted weighted average common shares outstanding 38,592,618 37,779,812 38,162,514 Earnings (loss) per common share: Basic $ (0.86) $ (7.20) $ 0.77 Diluted $ (0.86) $ (7.20) $ 0.75 |
Share-based Compensation (Table
Share-based Compensation (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Share-based Compensation | |
Schedule of weighted average assumptions | 2020 2019 2018 Risk-free interest rate 1.9 % 2.9 % 2.1 % Expected volatility 73.7 % 58.4 % 57.6 % Expected dividend yield — % — % — % Forfeiture rate — % 6.5 % 6.5 % Expected term 5.1 years 5.3 years 5.4 years Weighted average fair value $ 4.0 $ 6.52 $ 11.25 |
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, 2017 1,475 $ 18.02 $ 12,212 5.7 Granted 50 $ 21.43 Exercised (445) $ 7.23 $ 4,243 Forfeited, expired or repurchased (23) $ 30.83 Outstanding at June 30, 2018 1,057 $ 22.46 $ 2,584 5.4 Granted 73 $ 12.20 Exercised (94) $ 4.06 $ 311 Forfeited, expired or repurchased (464) $ 30.61 Outstanding at June 30, 2019 572 $ 17.56 $ 273 5.0 Granted 522 $ 6.57 Exercised (56) $ 5.42 $ 237 Forfeited, expired or repurchased (47) $ 24.73 Outstanding at June 30, 2020 991 $ 12.11 $ 678 5.6 Vested and expected to vest at June 30, 2020 989 $ 12.10 $ 678 5.6 Exercisable at June 30, 2020 493 $ 16.82 $ 371 2.3 |
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, 2017 334 $ 30.71 Granted 641 18.01 Vested (191) 31.30 $ 4,104 Forfeited (80) 20.95 Non-vested at June 30, 2018 704 $ 20.06 Granted 1,176 9.90 Vested (434) 19.75 $ 4,107 Forfeited (158) 14.00 Non-vested at June 30, 2019 1,288 $ 11.63 Granted 941 6.45 Vested (773) 10.54 $ 6,401 Forfeited (112) 10.75 Non-vested at June 30, 2020 1,344 $ 8.70 |
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, 2017 — $ — Granted 47 25.58 Vested (27) 25.58 $ 574 Forfeited — — Non-vested at June 30, 2018 20 $ 25.58 Granted 52 17.69 Vested — — $ — Forfeited — — Non-vested at June 30, 2019 72 $ 19.92 Granted 178 $ 10.71 Vested (46) $ 15.08 $ 477 Forfeited — $ — Non-vested at June 30, 2020 204 $ 12.99 |
Schedule of allocation of share-based compensation | For Fiscal Year Ended June 30, (In thousands) 2020 2019 2018 Selling, general and administrative expenses $ 7,087 $ 5,715 $ 7,570 Research and development expenses 801 750 680 Cost of sales 2,328 2,562 1,646 Total $ 10,216 $ 9,027 $ 9,896 Tax benefit at statutory rate $ 2,299 $ 2,031 $ 2,919 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Income Taxes | |
Schedule of provision for income taxes | June 30, June 30, June 30, (In thousands) 2020 2019 2018 Current Income Tax Expense (Benefit) Federal $ (7,082) $ 13,185 $ (9,439) State and Local 405 (81) 1,152 Total Current Income Tax Expense (Benefit) (6,677) 13,104 (8,287) Deferred Income Tax Expense (Benefit) Federal (6,525) (85,022) 31,263 State and Local (2,060) (2,220) (573) Total Deferred Income Tax Expense (Benefit) (8,585) (87,242) 30,690 Total Income Tax Expense (Benefit) $ (15,262) $ (74,138) $ 22,403 |
Schedule of reconciliation of the differences between the effective rates and federal statutory rates | June 30, June 30, June 30, 2020 2019 2018 Federal income tax at statutory rate 21.0 % 21.0 % 28.1 % State and local income tax, net 2.7 % 0.5 % 0.6 % Nondeductible expenses (1.1) % (0.1) % 0.2 % Nondeductible drug fee (1.6) % — % — % Foreign rate differential (0.1) % (0.4) % 0.4 % Income tax credits 2.5 % 0.5 % (1.4) % Domestic production activity deduction — % — % (1.5) % Unrecognized tax benefits (5.0) % 0.1 % (6.7) % Change in tax laws 15.4 % — % 25.6 % Excess tax benefits on share-based compensation (0.8) % (0.3) % (0.3) % Other (1.6) % 0.1 % (1.2) % Effective income tax rate 31.4 % 21.4 % 43.8 % |
Schedule of differences which give rise to deferred tax assets and liabilities | June 30, June 30, (In thousands) 2020 2019 Deferred tax assets: Share-based compensation expense $ 2,661 $ 4,134 Reserve for returns 11,022 12,014 Reserves for accounts receivable and inventory 5,526 8,208 Federal net operating loss 273 324 State net operating loss 8,387 6,479 Impairment on Cody note receivable 1,171 1,161 Accumulated amortization on intangible assets 79,939 76,401 Foreign net operating loss 1,822 1,792 Interest Carryforward 25,392 11,008 Operating lease 3,439 — Other 2,747 2,506 Total deferred tax asset 142,379 124,027 Valuation allowance (14,622) (13,549) Total deferred tax asset less valuation allowance 127,757 110,478 Deferred tax liabilities: Prepaid expenses 681 182 Property, plant and equipment 5,383 991 Operating lease 3,803 — Total deferred tax liability 9,867 1,173 Net deferred tax asset $ 117,890 $ 109,305 |
Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits | (In thousands) Balance Balance at June 30, 2018 $ 2,537 Additions for tax positions of the current year 244 Additions for tax positions of prior years 36 Lapse of statute of limitations (618) Balance at June 30, 2019 $ 2,199 Additions for tax positions of the current year 2,467 Additions for tax positions of prior years (51) Lapse of statute of limitations (24) Balance at June 30, 2020 $ 4,591 |
Assets Held for Sale (Tables)
Assets Held for Sale (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Assets Held for Sale | |
Schedule of financial results of the Cody API business | Fiscal Year Ended June 30, (In thousands) 2020 2019 Net sales $ 1,067 $ 3,139 Pretax loss attributable to Cody API business (6,549) (51,509) |
Quarterly Financial Informati_2
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Interim Financial Information | |
Schedule of quarterly consolidated results of operations | Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2020 Net sales $ 137,920 $ 144,372 $ 136,110 $ 127,342 Cost of sales 98,328 102,696 94,816 84,684 Gross profit 39,592 41,676 41,294 42,658 Operating expenses 44,123 43,768 24,519 33,254 Operating income (loss) (4,531) (2,092) 16,775 9,404 Other loss (15,247) (16,164) (16,999) (19,774) Income tax expense (benefit) (10,077) (1,664) (5,308) 1,787 Net income (loss) $ (9,701) $ (16,592) $ 5,084 $ (12,157) Earnings (loss) per common share (1) Basic $ (0.25) $ (0.43) $ 0.13 $ (0.32) Diluted $ (0.25) $ (0.43) $ 0.13 $ (0.32) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2019 Net sales $ 133,841 $ 172,794 $ 193,718 $ 155,054 Cost of sales 84,499 107,477 123,908 95,913 Gross profit 49,342 65,317 69,810 59,141 Operating expenses 39,940 31,939 33,133 400,919 Operating income (loss) 9,402 33,378 36,677 (341,778) Other loss (19,532) (21,374) (21,668) (21,350) Income tax expense (benefit) (2,544) 1,359 2,647 (75,600) Net income (loss) $ (7,586) $ 10,645 $ 12,362 $ (287,528) Earnings (loss) per common share (1) Basic $ (0.20) $ 0.28 $ 0.33 $ (7.65) Diluted $ (0.20) $ 0.27 $ 0.32 $ (7.65) Fourth Third Second First (In thousands, except per share data) Quarter Quarter Quarter Quarter Fiscal 2018 Net sales $ 170,911 $ 174,386 $ 184,305 $ 154,961 Cost of sales 104,383 107,329 96,855 87,290 Gross profit 66,528 67,057 87,450 67,671 Operating expenses 57,926 33,777 40,315 26,992 Operating income 8,602 33,280 47,135 40,679 Other loss (20,844) (22,785) (14,975) (19,999) Income tax expense (benefit) (883) (2,275) 18,138 7,423 Net income (loss) $ (11,359) $ 12,770 $ 14,022 $ 13,257 Earnings (loss) per common share (1) Basic $ (0.30) $ 0.34 $ 0.38 $ 0.36 Diluted $ (0.30) $ 0.33 $ 0.37 $ 0.35 (1) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Intangible Assets (Details) | 12 Months Ended |
Jun. 30, 2020 | |
Minimum | |
Intangible Assets | |
Estimated useful lives | 5 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 | 12 Months Ended | |||||||||||||
Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2020USD ($)segment | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | |
Medical Indication Information | |||||||||||||||
Total net sales | $ 137,920 | $ 144,372 | $ 136,110 | $ 127,342 | $ 133,841 | $ 172,794 | $ 193,718 | $ 155,054 | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 545,744 | $ 655,407 | $ 684,563 |
Number of reportable segments | segment | 1 | ||||||||||||||
Analgesic | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | $ 8,680 | 8,251 | 3,809 | ||||||||||||
Anti-Psychosis | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 104,934 | 73,453 | 59,557 | ||||||||||||
Cardiovascular | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 88,576 | 101,467 | 64,011 | ||||||||||||
Central Nervous System | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 77,256 | 59,019 | 59,672 | ||||||||||||
Endocrinology | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 197,522 | 245,929 | |||||||||||||
Gastrointestinal | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 73,477 | 63,043 | 67,762 | ||||||||||||
Infectious Disease | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 73,237 | 16,950 | 17,685 | ||||||||||||
Migraine | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 44,266 | 41,592 | 54,015 | ||||||||||||
Respiratory/Allergy/Cough/Cold | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 11,576 | 12,479 | 25,284 | ||||||||||||
Urinary | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 4,225 | 6,755 | 8,068 | ||||||||||||
Other | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | 35,013 | 51,517 | 58,936 | ||||||||||||
Contract manufacturing revenue | |||||||||||||||
Medical Indication Information | |||||||||||||||
Total net sales | $ 24,504 | $ 23,359 | $ 19,835 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Concentrations (Details) | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net sales | Products | Product 1 | |||
Concentration risk | |||
Concentration risk (as a percent) | 18.00% | 10.00% | 8.00% |
Net sales | Products | Product 2 | |||
Concentration risk | |||
Concentration risk (as a percent) | 10.00% | ||
Net sales | Products | Product 3 | |||
Concentration risk | |||
Concentration risk (as a percent) | 30.00% | 36.00% | |
Net sales | Customers | Customer A | |||
Concentration risk | |||
Concentration risk (as a percent) | 25.00% | 21.00% | 29.00% |
Net sales | Customers | Customer B | |||
Concentration risk | |||
Concentration risk (as a percent) | 23.00% | 18.00% | 17.00% |
Net sales | Customers | Customer C | |||
Concentration risk | |||
Concentration risk (as a percent) | 11.00% | 10.00% | 5.00% |
Net sales | Customers | Customer D | |||
Concentration risk | |||
Concentration risk (as a percent) | 12.00% | ||
Inventory purchases | Suppliers | JSP | |||
Concentration risk | |||
Concentration risk (as a percent) | 0.00% | 29.00% | 37.00% |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jul. 01, 2019 | Jun. 30, 2019 |
Recent Accounting Pronouncements | |||
Assets | $ 1,136,555 | $ 1,187,413 | |
Liabilities | $ 833,659 | $ 853,372 | |
ASU 2016-02 | Restatement | |||
Recent Accounting Pronouncements | |||
Assets | $ 7,900 | ||
Liabilities | $ 7,900 |
Restructuring Charges - Cody Re
Restructuring Charges - Cody Restructuring Program (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 29, 2018 | |
Restructuring Charges | ||||
Restructuring expenses | $ 1,771 | $ 4,095 | $ 7,061 | |
Cody Restructuring Plan | ||||
Restructuring Charges | ||||
Restructuring expenses | (585) | |||
Cody Restructuring Plan | Employee separation costs | ||||
Restructuring Charges | ||||
Aggregate restructuring charges | $ 2,500 | |||
Restructuring expenses | $ (585) |
Restructuring Charges - Cody _2
Restructuring Charges - Cody Restructuring Program - Change (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | $ 1,771 | $ 4,095 | $ 7,061 |
Cody Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 108 | ||
Restructuring charges | (585) | ||
Payments | (108) | ||
Ending balance for the period | 108 | ||
Cody Restructuring Plan | Employee separation costs | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 108 | ||
Restructuring charges | (585) | ||
Payments | $ (108) | ||
Ending balance for the period | $ 108 |
Restructuring Charges - Cody AP
Restructuring Charges - Cody API Restructuring Plan (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Jun. 30, 2019employee | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Dec. 31, 2019 | |
Restructuring Charges | |||||
Restructuring expenses | $ 1,771 | $ 4,095 | $ 7,061 | ||
Cody API Restructuring Plan | |||||
Restructuring Charges | |||||
Positions eliminated | employee | 70 | ||||
Proceeds from sale of equipment | 3,000 | ||||
Aggregate restructuring charges | 6,200 | ||||
Restructuring expenses | 1,771 | 2,430 | |||
Operating lease term | 2 years | ||||
Cody API Restructuring Plan | Employee separation costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 3,700 | ||||
Restructuring expenses | 1,275 | $ 2,430 | |||
Cody API Restructuring Plan | Contract termination costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 2,000 | ||||
Cody API Restructuring Plan | Facility closure costs | |||||
Restructuring Charges | |||||
Aggregate restructuring charges | 500 | ||||
Restructuring expenses | $ 496 |
Restructuring Charges - Cody _3
Restructuring Charges - Cody API Restructuring Plan - Change (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Reconciliation of the changes in restructuring liabilities | |||
Restructuring charges | $ 1,771 | $ 4,095 | $ 7,061 |
Cody API Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 2,207 | ||
Restructuring charges | 1,771 | 2,430 | |
Payments | (3,951) | (223) | |
Ending balance for the period | 27 | 2,207 | |
Employee separation costs | Cody API Restructuring Plan | |||
Reconciliation of the changes in restructuring liabilities | |||
Beginning balance for the period | 2,207 | ||
Restructuring charges | 1,275 | 2,430 | |
Payments | (3,455) | (223) | |
Ending balance for the period | 27 | $ 2,207 | |
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 | 12 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | Feb. 01, 2016 | |
Restructuring Charges | ||||
Restructuring expenses | $ 1,771 | $ 4,095 | $ 7,061 | |
2016 Restructuring Program | ||||
Restructuring Charges | ||||
Aggregate restructuring charges | $ 21,000 | |||
Restructuring expenses | 2,250 | 3,969 | ||
2016 Restructuring Program | Employee separation costs | ||||
Restructuring Charges | ||||
Aggregate restructuring charges | 11,000 | |||
Restructuring expenses | 1,084 | 246 | ||
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 | $ 1,166 | $ 3,723 |
Accounts Receivable, net (Detai
Accounts Receivable, net (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Accounts receivable, net | ||
Gross accounts receivable | $ 271,557 | $ 361,323 |
Less: Allowance for doubtful accounts | (1,103) | (1,223) |
Accounts receivable, net | 125,688 | 164,752 |
Chargebacks | ||
Accounts receivable, net | ||
Less: reserve | (61,877) | (89,567) |
Rebates | ||
Accounts receivable, net | ||
Less: reserve | (24,536) | (32,099) |
Returns | ||
Accounts receivable, net | ||
Less: reserve | (40,796) | (55,554) |
Other | ||
Accounts receivable, net | ||
Less: reserve | $ (17,557) | $ (18,128) |
Accounts Receivable, net - Reve
Accounts Receivable, net - Revenue reserve (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Change in revenue related reserves | |||
Balance at the beginning of the period | $ 241,523 | $ 298,616 | $ 220,384 |
Current period provision | 1,091,050 | 1,407,073 | 1,532,701 |
Adjustment related to adoption of ASC 606 | 3,536 | ||
Credits issued during the period | (1,149,632) | (1,467,702) | (1,454,469) |
Balance at the end of the period | 182,941 | 241,523 | 298,616 |
Chargebacks | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 89,567 | 153,034 | 79,537 |
Current period provision | 761,787 | 1,047,192 | 1,141,995 |
Credits issued during the period | (789,477) | (1,110,659) | (1,068,498) |
Balance at the end of the period | 61,877 | 89,567 | 153,034 |
Rebates | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 78,274 | 82,502 | 87,616 |
Current period provision | 223,932 | 250,555 | 296,784 |
Credits issued during the period | (239,495) | (254,783) | (301,898) |
Balance at the end of the period | 62,711 | 78,274 | 82,502 |
Returns | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 55,554 | 43,059 | 42,135 |
Current period provision | 16,863 | 41,982 | 24,024 |
Credits issued during the period | (31,621) | (29,487) | (23,100) |
Balance at the end of the period | 40,796 | 55,554 | 43,059 |
Other | |||
Change in revenue related reserves | |||
Balance at the beginning of the period | 18,128 | 20,021 | 11,096 |
Current period provision | 88,468 | 67,344 | 69,898 |
Adjustment related to adoption of ASC 606 | 3,536 | ||
Credits issued during the period | (89,039) | (72,773) | (60,973) |
Balance at the end of the period | 17,557 | 18,128 | 20,021 |
Rebates | |||
Change in revenue related reserves | |||
Current period provision | $ 223,900 | $ 250,600 | $ 296,800 |
Accounts Receivable, net - Re_2
Accounts Receivable, net - Revenue reserve information (Details) - USD ($) $ in Millions | Jul. 01, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 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% | 51.40% | 52.00% | |
Rebates | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 13.90% | 12.30% | 13.50% | |
Returns | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 1.00% | 2.10% | 1.10% | |
Other | ||||
Accounts receivable, net | ||||
Percentage of provision for rebates, chargebacks, returns and other adjustments on gross sales | 5.50% | 3.30% | 3.20% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Inventories: | ||
Raw Materials | $ 59,703 | $ 56,740 |
Work-in-process | 12,235 | 18,988 |
Finished Goods | 70,929 | 68,243 |
Net inventory | $ 142,867 | $ 143,971 |
Inventories - Additional inform
Inventories - Additional information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Inventories: | |||
Inventory adjustments | $ 13.6 | $ 20.7 | |
Write-down to net realizable value | $ 10.3 | $ 21.8 | $ 12.2 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property, Plant and Equipment, net | ||||
Less: accumulated depreciation | $ (102,983) | $ (83,424) | ||
Property, plant and equipment, net before construction in progress | 166,905 | 165,239 | ||
Property, plant and equipment, net | 179,518 | 186,670 | ||
Depreciation expense | 24,300 | 23,400 | $ 22,400 | |
Assets held for sale | 2,678 | 9,671 | ||
Disposal group held for sale | ||||
Property, Plant and Equipment, net | ||||
Impairment of long-lived assets | $ 29,900 | 32,800 | ||
Assets held for sale | 2,700 | 6,700 | ||
Held in foreign countries | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, net | 600 | 1,000 | ||
Land | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, gross | 1,783 | 1,783 | ||
Building and improvements | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, gross | 100,285 | 87,609 | ||
Machinery and equipment | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, gross | 164,704 | 156,166 | ||
Furniture and fixtures | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, gross | 3,116 | 3,105 | ||
Construction in progress | ||||
Property, Plant and Equipment, net | ||||
Property, plant and equipment, net | $ 12,613 | $ 21,431 |
Property, Plant and Equipment -
Property, Plant and Equipment - Useful Lives (Details) | 12 Months Ended |
Jun. 30, 2020 | |
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 ($) $ / shares in Units, $ in Millions | Jun. 30, 2020 | Sep. 27, 2019 | Jun. 30, 2019 |
Term loan | |||
Debt Instrument [Line Items] | |||
Estimated fair value of loan | $ 608 | $ 724 | |
4.50% Convertible Senior Notes due 2026 | |||
Debt Instrument [Line Items] | |||
Estimated fair value of loan | $ 58 | ||
Interest rate (as a percent) | 4.50% | 4.50% | |
Initial conversion price | $ 15.29 | $ 15.29 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Definite-lived (Details) - USD ($) $ in Thousands | Oct. 04, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 |
Finite-Lived Intangible Assets | ||||
Impairment of goodwill | $ 339,600 | $ 339,600 | ||
Gross Carrying Amount | $ 508,792 | $ 487,234 | ||
Accumulated Amortization | (143,057) | (112,454) | ||
Intangible Assets, Net | $ 365,735 | 374,780 | ||
Silarx | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Product rights | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | $ 416,154 | 416,154 | ||
Accumulated Amortization | (125,327) | (97,583) | ||
Intangible Assets, Net | $ 290,827 | 318,571 | ||
Product rights | Silarx | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | $ 20,000 | 10,000 | ||
Accumulated Amortization | (3,556) | (2,722) | ||
Intangible Assets, Net | $ 16,444 | 7,278 | ||
Trade name | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 2 years | |||
Gross Carrying Amount | $ 2,920 | 2,920 | ||
Accumulated Amortization | $ (2,920) | (2,920) | ||
Other intangible assets | KUPI | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 15 years | |||
Gross Carrying Amount | $ 19,000 | 19,000 | ||
Accumulated Amortization | (5,828) | (4,562) | ||
Intangible Assets, Net | $ 13,172 | 14,438 | ||
Other product rights | ||||
Finite-Lived Intangible Assets | ||||
Weighted Avg. Life | 10 years | |||
Gross Carrying Amount | $ 50,718 | 39,160 | ||
Accumulated Amortization | (5,426) | (4,667) | ||
Intangible Assets, Net | $ 45,292 | $ 34,493 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Indefinite lived (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Indefinite-lived | ||
Indefinite-lived assets, net | $ 9,000 | $ 36,449 |
Total intangible assets - Gross Carrying Amount | 517,792 | 523,683 |
Accumulated Amortization | (143,057) | (112,454) |
Total intangible assets, Net | 374,735 | 411,229 |
Other intangible assets | ||
Indefinite-lived | ||
Indefinite-lived assets, net | 449 | |
In-process research and development | KUPI | ||
Indefinite-lived | ||
Indefinite-lived assets, net | $ 9,000 | 18,000 |
In-process research and development | Silarx | ||
Indefinite-lived | ||
Indefinite-lived assets, net | 18,000 | |
Other product rights | ||
Indefinite-lived | ||
Indefinite-lived assets, net | $ 449 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Info (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Aug. 31, 2019 | Jul. 31, 2019 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Finite-Lived Intangible Assets | ||||||||
Amortization expense | $ 32,000 | $ 32,200 | $ 32,700 | |||||
Finite-lived intangible assets | $ 365,735 | 365,735 | 374,780 | |||||
Purchases of intangible assets | 28,800 | 3,000 | $ 19,038 | |||||
Methylphenidate Hydrochloride | ||||||||
Finite-Lived Intangible Assets | ||||||||
Intangible assets impairment | $ 14,000 | |||||||
Finite-lived intangible assets | 2,100 | 2,100 | ||||||
Other product rights | ||||||||
Finite-Lived Intangible Assets | ||||||||
Finite-lived intangible assets | 45,292 | 45,292 | $ 34,493 | |||||
Purchases of intangible assets | $ 3,000 | |||||||
Upfront payment | $ 2,000 | $ 20,000 | ||||||
Amount Agreed to Pay on Commercial sale | $ 1,500 | |||||||
KUPI | ||||||||
Finite-Lived Intangible Assets | ||||||||
Impairment charge related to intangible assets | 9,000 | |||||||
Silarx | ||||||||
Finite-Lived Intangible Assets | ||||||||
Impairment charge related to intangible assets | $ 8,000 | |||||||
Reclassified intangible assets | $ 10,000 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Future annual amortization expense: | ||
2021 | $ 34,068 | |
2022 | 35,668 | |
2023 | 35,367 | |
2024 | 35,067 | |
2025 | 34,667 | |
Thereafter | 190,898 | |
Intangible Assets, Net | $ 365,735 | $ 374,780 |
Long-Term Debt - Net (Details)
Long-Term Debt - Net (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Sep. 27, 2019 | Jun. 30, 2019 |
Long-term debt | |||
Debt, gross | $ 707,951 | ||
Total debt, net | 681,129 | $ 729,048 | |
Less short-term borrowings and current portion of long-term debt | (88,189) | (66,845) | |
Long-term debt, net | $ 592,940 | $ 662,203 | |
Weighted average interest rate (as a percent) | 8.80% | 9.70% | |
Term Loan A due 2020 | |||
Long-term debt | |||
Debt, gross | $ 48,844 | $ 153,933 | |
Unamortized discount and other debt issuance costs | (433) | (4,722) | |
Total debt, net | $ 48,411 | 149,211 | |
Interest rate (as a percent) | 6.00% | ||
Term Loan B due 2022 | |||
Long-term debt | |||
Debt, gross | $ 572,857 | 614,468 | |
Unamortized discount and other debt issuance costs | (23,278) | (34,631) | |
Total debt, net | $ 549,579 | $ 579,837 | |
Interest rate (as a percent) | 6.38% | ||
4.50% Convertible Senior Notes due 2026 | |||
Long-term debt | |||
Debt, gross | $ 86,250 | ||
Unamortized discount and other debt issuance costs | (3,111) | ||
Total debt, net | $ 83,139 | ||
Interest rate (as a percent) | 4.50% | 4.50% | |
Revolving Credit Facility due 2020 | |||
Long-term debt | |||
Maximum borrowing capacity | $ 125,000 |
Long-Term Debt - Debt (Details)
Long-Term Debt - Debt (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 27, 2019 | Jun. 30, 2020 | Jun. 30, 2019 |
Debt Instrument [Line Items] | |||
Proceeds from issuance of long-term debt | $ 86,250 | ||
Loss on extinguishment of debt | $ (2,145) | $ (448) | |
4.50% Convertible Senior Notes due 2026 | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 86,250 | ||
Interest rate (as a percent) | 4.50% | 4.50% | |
Initial conversion rate | 0.0654022 | ||
Initial conversion price | $ 15.29 | $ 15.29 | |
Redemption price in principal amount (as a percent) | 100.00% | ||
Redemption price in principal amount, minimum percentage | 25.00% | ||
Proceeds from issuance of long-term debt | $ 77,000 | ||
Loss on extinguishment of debt | $ (2,100) | ||
Capped call transaction | |||
Debt Instrument [Line Items] | |||
Initial conversion price | $ 19.46 | ||
Debt fees | $ 7,100 |
Long-Term Debt - Maturity (Deta
Long-Term Debt - Maturity (Details) $ in Thousands | Jun. 30, 2020USD ($) |
Long-term Debt, Rolling Maturity | |
2021 | $ 88,189 |
2022 | 39,345 |
2023 | 494,167 |
Thereafter | 86,250 |
Total | $ 707,951 |
Legal, Regulatory Matters and_2
Legal, Regulatory Matters and Contingencies (Details) | Jan. 14, 2020USD ($) | May 22, 2019USD ($) | May 10, 2019companyemployee | Dec. 31, 2016company | Nov. 30, 2016item | Jun. 30, 2020USD ($)Distributorlawsuittrancheproduct | Aug. 15, 2019item | Jun. 30, 2018item | 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 manufacturers and distributors | company | 33 | 6 | ||||||||
Number of drugs | product | 13 | |||||||||
Number of officers | employee | 1 | |||||||||
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 manufacturers and distributors | Distributor | 30 | |||||||||
Number of drugs | 18 | 135 | 6 | |||||||
Number of Tranches | tranche | 3 | |||||||||
Private Antitrust and Consumer Protection Litigation | Minimum | ||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||
Number of lawsuits | lawsuit | 100 | |||||||||
End Payer Plaintiffs | ||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||
Number of drugs | item | 14 | |||||||||
Indirect Reseller Plaintiffs | ||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||
Number of drugs | item | 15 | |||||||||
Shareholder Litigation | ||||||||||
Legal, Regulatory Matters and Contingencies | ||||||||||
Number of officers | item | 2 | |||||||||
Litigation settlement amount payable to other party | $ 600,000 |
Commitments - Leases (Details)
Commitments - Leases (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Mar. 31, 2020 | Nov. 30, 2019 | Sep. 30, 2019 | Jul. 01, 2019 |
Loss Contingencies [Line Items] | |||||
Right-of-use asset | $ 9,343 | ||||
Present value of lease liabilities | 10,941 | ||||
ROU current liability | 1,097 | ||||
ROU non-current liability | $ 9,844 | ||||
Trevose PA headquarters | |||||
Loss Contingencies [Line Items] | |||||
Right-of-use asset | $ 4,300 | ||||
Present value of lease liabilities | $ 4,300 | ||||
Operating lease term | 8 years | ||||
ASU 2016-02 | Restatement | |||||
Loss Contingencies [Line Items] | |||||
Right-of-use asset | $ 7,900 | ||||
Present value of lease liabilities | $ 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) $ in Thousands | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Commitments | |
Operating lease cost | $ 2,246 |
Variable lease cost | 153 |
Short-term lease cost | 579 |
Lease, Cost, Total | $ 2,978 |
Commitments - Cash flow informa
Commitments - Cash flow information (Details) $ in Thousands | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Lease cash flow | |
Operating cash flows from operating leases. | $ 2,086 |
ROU assets obtained in exchange for new operating lease liabilities | $ 4,317 |
Weighted-average | |
Weighted-average remaining lease term | 9 years |
Weighted-average discount rate | 7.91% |
Commitments - Maturities of lea
Commitments - Maturities of lease liabilities (Details) $ in Thousands | Jun. 30, 2020USD ($) |
Maturities of lease liabilities | |
2021 | $ 1,101 |
2022 | 2,125 |
2023 | 2,144 |
2024 | 2,164 |
2025 | 2,183 |
Thereafter | 5,749 |
Total lease payments | 15,466 |
Less: Imputed interest | 4,525 |
Present value of lease liabilities | $ 10,941 |
Commitments - Other Commitment
Commitments - Other Commitment (Details) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2017USD ($) | |
License and Collaboration Agreement With HEC | |||
Commitments | |||
Maximum amount to be loaned | $ 32 | ||
License and Collaboration Agreement, Excess Development Cost Split Ratio | 1 | ||
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% | ||
Percentage of outstanding loan | 50.00% | ||
Proceeds from sale of loan | $ 5.6 | ||
Loan receivable | $ 6.5 |
Commitments - Minimum lease pay
Commitments - Minimum lease payments - Prior (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Future minimum lease payments | |
2021 | $ 1,450 |
2022 | 1,123 |
2023 | 1,123 |
2024 | 1,123 |
Thereafter | 3,839 |
Total | $ 8,658 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Accumulated Other Comprehensive Loss. | ||
Beginning Balance | $ (615) | $ (515) |
Net gain (loss) on foreign currency translation | (12) | (100) |
Other comprehensive income (loss), net of tax | (12) | (100) |
Ending Balance | (627) | (615) |
Total Accumulated Other Comprehensive Loss | (627) | (615) |
Net gain (loss) on foreign currency translation, tax | $ 0 | $ 0 |
Earnings (Loss) Per Common Sh_3
Earnings (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator: | |||||||||||||||
Net loss | $ (9,701) | $ (16,592) | $ 5,084 | $ (12,157) | $ (7,586) | $ 10,645 | $ 12,362 | $ (287,528) | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ (33,366) | $ (272,107) | $ 28,690 |
Adjusted “if-converted” net income (loss) | $ (33,366) | $ (272,107) | $ 28,690 | ||||||||||||
Denominator: | |||||||||||||||
Basic weighted average common shares outstanding | 38,592,618 | 37,779,812 | 37,127,306 | ||||||||||||
Effect of potentially dilutive options and restricted stock awards | 1,035,208 | ||||||||||||||
Diluted weighted average common shares outstanding | 38,592,618 | 37,779,812 | 38,162,514 | ||||||||||||
Earnings (loss) per common share: | |||||||||||||||
Basic (in dollars per share) | $ (0.25) | $ (0.43) | $ 0.13 | $ (0.32) | $ (0.20) | $ 0.28 | $ 0.33 | $ (7.65) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ (0.86) | $ (7.20) | $ 0.77 |
Diluted (in dollars per share) | $ (0.25) | $ (0.43) | $ 0.13 | $ (0.32) | $ (0.20) | $ 0.27 | $ 0.32 | $ (7.65) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ (0.86) | $ (7.20) | $ 0.75 |
Anti-dilutive shares excluded in the computation of diluted earnings per share | 6,600,000 | 1,900,000 | 3,000,000 |
Share-based Compensation - Empl
Share-based Compensation - Employee Compensation Plans (Details) shares in Millions, $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($)ShareBasedCompensationPlanshares | |
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 | 1.3 |
Total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Plans | $ | $ 9.5 |
Weighted average period during which the cost is expected to be recognized | 2 years 2 months 12 days |
Maximum | |
Stock-based Compensation | |
Share-based compensation awards vesting period | 3 years |
Share-based compensation awards maximum contractual term | 10 years |
Share-based Compensation - Opti
Share-based Compensation - Options Valuation (Details) - Stock options - $ / shares | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Assumptions used to estimate fair values | |||
Risk-free interest rate (as a percent) | 1.90% | 2.90% | 2.10% |
Expected volatility (as a percent) | 73.70% | 58.40% | 57.60% |
Expected dividend yield (as a percent) | 0.00% | 0.00% | 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 | 5 years 4 months 24 days |
Weighted average fair value (in dollars per share) | $ 4 | $ 6.52 | $ 11.25 |
Share-based Compensation - Op_2
Share-based Compensation - Options Rollforward (Details) - Stock options - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Awards | ||||
Outstanding at the beginning of the period (in shares) | 572 | 1,057 | 1,475 | |
Granted (in shares) | 522 | 73 | 50 | |
Exercised (in shares) | (56) | (94) | (445) | |
Forfeited, expired or repurchased (in shares) | (47) | (464) | (23) | |
Outstanding at the end of the period (in shares) | 991 | 572 | 1,057 | 1,475 |
Vested and expected to vest, Awards (in shares) | 989 | |||
Exercisable at the end of the period (in shares) | 493 | |||
Weighted-Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 17.56 | $ 22.46 | $ 18.02 | |
Granted (in dollars per share) | 6.57 | 12.20 | 21.43 | |
Exercised (in dollars per share) | 5.42 | 4.06 | 7.23 | |
Forfeited, expired or repurchased (in dollars per share) | 24.73 | 30.61 | 30.83 | |
Outstanding at the end of the period (in dollars per share) | 12.11 | $ 17.56 | $ 22.46 | $ 18.02 |
Vested and expected to vest, Weighted-Average Exercise Price (in dollars per share) | 12.10 | |||
Exercisable at the end of the period (in dollars per share) | $ 16.82 | |||
Aggregate Intrinsic Value | ||||
Outstanding at the beginning of the period (in dollars) | $ 273 | $ 2,584 | $ 12,212 | |
Exercised (in dollars) | 237 | 311 | 4,243 | |
Outstanding at the end of the period (in dollars) | 678 | $ 273 | $ 2,584 | $ 12,212 |
Vested and expected to vest, Aggregate Intrinsic Value | 678 | |||
Exercisable at the end of the period (in dollars) | $ 371 | |||
Weighted Average Remaining Contractual Life (yrs.) | ||||
Outstanding at the end of the period (in years) | 5 years 7 months 6 days | 5 years | 5 years 4 months 24 days | 5 years 8 months 12 days |
Vested and expected to vest (in years) | 5 years 7 months 6 days | |||
Exercisable at the end of the period (in years) | 2 years 3 months 18 days |
Share-based Compensation - Rest
Share-based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Aggregate Intrinsic Value | |||
Vested | $ 477 | ||
Restricted stock | |||
Stock-based Compensation | |||
Annual forfeiture rate used to calculate compensation expense (as a percent) | 6.50% | 6.50% | 5.70% |
Awards | |||
Non-vested at the beginning of the period (in shares) | 1,288 | 704 | 334 |
Granted (in shares) | 941 | 1,176 | 641 |
Vested (in shares) | (773) | (434) | (191) |
Forfeited (in shares) | (112) | (158) | (80) |
Non-vested at the end of the period (in shares) | 1,344 | 1,288 | 704 |
Weighted Average Grant-date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 11.63 | $ 20.06 | $ 30.71 |
Granted (in dollars per share) | 6.45 | 9.90 | 18.01 |
Vested (in dollars per share) | 10.54 | 19.75 | 31.30 |
Forfeited (in dollars per share) | 10.75 | 14 | 20.95 |
Non-vested at the end of the period (in dollars per share) | $ 8.70 | $ 11.63 | $ 20.06 |
Aggregate Intrinsic Value | |||
Vested | $ 6,401 | $ 4,107 | $ 4,104 |
Share-based Compensation - Perf
Share-based Compensation - Performance-Based Shares (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Aggregate Intrinsic Value | |||
Vested | $ 477 | ||
Performance-Based Shares | |||
Stock-based Compensation | |||
Share-based compensation awards vesting period | 3 years | ||
Awards | |||
Non-vested at the beginning of the period (in shares) | 72 | 20 | |
Granted (in shares) | 178 | 52 | 47 |
Vested (in shares) | (46) | (27) | |
Non-vested at the end of the period (in shares) | 204 | 72 | 20 |
Weighted Average Grant-date Fair Value | |||
Non-vested at the beginning of the period (in dollars per share) | $ 19.92 | $ 25.58 | |
Granted (in dollars per share) | 10.71 | 17.69 | $ 25.58 |
Vested (in dollars per share) | 15.08 | 25.58 | |
Non-vested at the end of the period (in dollars per share) | $ 12.99 | $ 19.92 | $ 25.58 |
Aggregate Intrinsic Value | |||
Vested | $ 574 |
Share-based Compensation - Em_2
Share-based Compensation - Employee Stock Purchase Plan (Details) - shares shares in Thousands | 12 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 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) | 118 | 185 | 66 | |
Cumulative shares issued (in shares) | 910 |
Share-based Compensation - Cost
Share-based Compensation - Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based compensation costs | |||
Share based compensation | $ 10,216 | $ 9,027 | $ 9,896 |
Tax benefit at statutory rate | 2,299 | 2,031 | 2,919 |
Selling, general and administrative | |||
Share-based compensation costs | |||
Share based compensation | 7,087 | 5,715 | 7,570 |
Research and development | |||
Share-based compensation costs | |||
Share based compensation | 801 | 750 | 680 |
Cost of sales | |||
Share-based compensation costs | |||
Share based compensation | $ 2,328 | $ 2,562 | $ 1,646 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Employee Benefit Plan | |||
Company matching contributions (as a percent) | 50.00% | ||
Maximum company contribution (as a percent) | 4.00% | ||
Contributions to the plan | $ 2.2 | $ 2.3 | $ 2.3 |
Income Taxes - Expense (Details
Income Taxes - Expense (Details) - USD ($) $ in Thousands | Dec. 22, 2017 | Dec. 21, 2017 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Current Income Tax Expense (Benefit) | |||||||||||||||||
Federal | $ (7,082) | $ 13,185 | $ (9,439) | ||||||||||||||
State and Local | 405 | (81) | 1,152 | ||||||||||||||
Total Current Income Tax Expense (Benefit) | (6,677) | 13,104 | (8,287) | ||||||||||||||
Deferred Income Tax Expense (Benefit) | |||||||||||||||||
Federal | (6,525) | (85,022) | 31,263 | ||||||||||||||
State and Local | (2,060) | (2,220) | (573) | ||||||||||||||
Total Deferred Income Tax Expense (Benefit) | (8,585) | (87,242) | 30,690 | ||||||||||||||
Total Income Tax Expense (Benefit) | $ (10,077) | $ (1,664) | $ (5,308) | $ 1,787 | $ (2,544) | $ 1,359 | $ 2,647 | $ (75,600) | $ (883) | $ (2,275) | $ 18,138 | $ 7,423 | $ (15,262) | $ (74,138) | $ 22,403 | ||
Reconciliation of federal statutory rate to effective rate | |||||||||||||||||
Federal income tax at statutory rate (as a percent) | 21.00% | 35.00% | 21.00% | 21.00% | 28.10% | ||||||||||||
State and local income tax, net (as a percent) | 2.70% | 0.50% | 0.60% | ||||||||||||||
Nondeductible expenses (as a percent) | (1.10%) | (0.10%) | 0.20% | ||||||||||||||
Nondeductible drug fee | (1.60%) | ||||||||||||||||
Foreign rate differential (as a percent) | (0.10%) | (0.40%) | 0.40% | ||||||||||||||
Income tax credits (as a percent) | 2.50% | 0.50% | (1.40%) | ||||||||||||||
Domestic production activity deduction (as a percent) | (1.50%) | ||||||||||||||||
Unrecognized tax benefits | (5.00%) | 0.10% | (6.70%) | ||||||||||||||
Change in tax laws (as a percent) | 15.40% | 25.60% | |||||||||||||||
Excess tax benefits on share-based compensation (as a percent) | (0.80%) | (0.30%) | (0.30%) | ||||||||||||||
Other (as a percent) | (1.60%) | 0.10% | (1.20%) | ||||||||||||||
Effective income tax rate (as a percent) | 31.40% | 21.40% | 43.80% | ||||||||||||||
COVID 19 [Member] | |||||||||||||||||
Deferred Income Tax Expense (Benefit) | |||||||||||||||||
Total Income Tax Expense (Benefit) | $ (2,800) |
Income Taxes - Deferred (Detail
Income Taxes - Deferred (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Deferred tax assets: | ||
Share-based compensation expense | $ 2,661 | $ 4,134 |
Reserve for returns | 11,022 | 12,014 |
Reserves for accounts receivable and inventory | 5,526 | 8,208 |
Federal net operating loss | 273 | 324 |
State net operating loss | 8,387 | 6,479 |
Impairment on Cody note receivable | 1,171 | 1,161 |
Accumulated amortization on intangible assets | 79,939 | 76,401 |
Foreign net operating loss | 1,822 | 1,792 |
Interest Carryforward | 25,392 | 11,008 |
Operating lease | 3,439 | |
Other | 2,747 | 2,506 |
Total deferred tax asset | 142,379 | 124,027 |
Valuation allowance | (14,622) | (13,549) |
Total deferred tax asset less valuation allowance | 127,757 | 110,478 |
Deferred tax liabilities: | ||
Prepaid expenses | 681 | 182 |
Property, plant and equipment | 5,383 | 991 |
Operating lease | 3,803 | |
Total deferred tax liability | 9,867 | 1,173 |
Net deferred tax asset | $ 117,890 | $ 109,305 |
Income Taxes - Unrecognized Ben
Income Taxes - Unrecognized Benefits (Details) - USD ($) $ in Thousands | Dec. 22, 2017 | Dec. 21, 2017 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Income Taxes | |||||
Balance at the beginning of the period | $ 2,199 | $ 2,537 | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% | 21.00% | 21.00% | 28.10% |
Additions for tax positions of the current year | $ 2,467 | $ 244 | |||
Additions for tax positions of prior years | 36 | ||||
Reductions for tax positions of prior years | (51) | ||||
Lapse of statute of limitations | (24) | (618) | |||
Balance at the end of the period | 4,591 | 2,199 | $ 2,537 | ||
Unrecognized tax benefits that would impact rate | 4,500 | 2,100 | 2,300 | ||
Unrecognized tax benefits cumulative interest and penalties recorded | $ 0 | $ 0 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Auburn | |||
Related Party Transactions | |||
Sales to related party | $ 3 | $ 3.8 | $ 3.9 |
Accounts receivable related party | 0.7 | 1.2 | |
KeySource | |||
Related Party Transactions | |||
Sales to related party | 2.6 | 2.4 | $ 1.9 |
Accounts receivable related party | $ 0.6 | $ 0.7 |
Assets Held for Sale (Details)
Assets Held for Sale (Details) - USD ($) $ in Thousands | Jul. 01, 2019 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Assets Held for Sale | |||||
Assets held for sale | $ 2,678 | $ 9,671 | |||
Cody API Restructuring Plan | |||||
Assets Held for Sale | |||||
Proceeds from Divestiture of Businesses | 3,000 | ||||
Operating lease term | 2 years | ||||
Disposal group held for sale | |||||
Assets Held for Sale | |||||
Impairment of long-lived assets | $ 29,900 | 32,800 | |||
Proceeds from Divestiture of Businesses | 3,000 | ||||
Operating lease term | 2 years | ||||
Assets held for sale | 2,700 | 6,700 | |||
Net sales | 1,067 | 3,139 | |||
Pretax loss attributable to Cody API business | $ (6,549) | (51,509) | |||
Impairment of the ROU lease asset | $ 1,200 | ||||
Disposal group held for sale | Cody API Restructuring Plan | |||||
Assets Held for Sale | |||||
Impairment of long-lived assets | $ 29,900 |
Subsequent Events (Details)
Subsequent Events (Details) - 2020 Restructuring Plan - Subsequent Event $ in Millions | Jul. 10, 2020USD ($)employee |
Subsequent Events | |
Work force positions reduced (as a percent) | 8.50% |
Positions eliminated estimate | employee | 80 |
Severance Costs | $ 4 |
Expected cost savings due to restructuring | $ 15 |
Quarterly Financial Informati_3
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 04, 2018 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Interim Financial Information | ||||||||||||||||
Net sales | $ 137,920 | $ 144,372 | $ 136,110 | $ 127,342 | $ 133,841 | $ 172,794 | $ 193,718 | $ 155,054 | $ 170,911 | $ 174,386 | $ 184,305 | $ 154,961 | $ 545,744 | $ 655,407 | $ 684,563 | |
Cost of sales | 98,328 | 102,696 | 94,816 | 84,684 | 84,499 | 107,477 | 123,908 | 95,913 | 104,383 | 107,329 | 96,855 | 87,290 | ||||
Gross profit | 39,592 | 41,676 | 41,294 | 42,658 | 49,342 | 65,317 | 69,810 | 59,141 | 66,528 | 67,057 | 87,450 | 67,671 | 165,220 | 243,610 | 288,706 | |
Operating expenses | 44,123 | 43,768 | 24,519 | 33,254 | 39,940 | 31,939 | 33,133 | 400,919 | 57,926 | 33,777 | 40,315 | 26,992 | 145,664 | 505,931 | 159,010 | |
Operating income (loss) | (4,531) | (2,092) | 16,775 | 9,404 | 9,402 | 33,378 | 36,677 | (341,778) | 8,602 | 33,280 | 47,135 | 40,679 | 19,556 | (262,321) | 129,696 | |
Other loss | (15,247) | (16,164) | (16,999) | (19,774) | (19,532) | (21,374) | (21,668) | (21,350) | (20,844) | (22,785) | (14,975) | (19,999) | (68,184) | (83,924) | (78,603) | |
Income tax expense (benefit) | (10,077) | (1,664) | (5,308) | 1,787 | (2,544) | 1,359 | 2,647 | (75,600) | (883) | (2,275) | 18,138 | 7,423 | (15,262) | (74,138) | 22,403 | |
Net income (loss) | $ (9,701) | $ (16,592) | $ 5,084 | $ (12,157) | $ (7,586) | $ 10,645 | $ 12,362 | $ (287,528) | $ (11,359) | $ 12,770 | $ 14,022 | $ 13,257 | $ (33,366) | $ (272,107) | $ 28,690 | |
Loss per common share attributable to Lannett Company, Inc.: | ||||||||||||||||
Basic (in dollars per share) | $ (0.25) | $ (0.43) | $ 0.13 | $ (0.32) | $ (0.20) | $ 0.28 | $ 0.33 | $ (7.65) | $ (0.30) | $ 0.34 | $ 0.38 | $ 0.36 | $ (0.86) | $ (7.20) | $ 0.77 | |
Diluted (in dollars per share) | $ (0.25) | $ (0.43) | $ 0.13 | $ (0.32) | $ (0.20) | $ 0.27 | $ 0.32 | $ (7.65) | $ (0.30) | $ 0.33 | $ 0.37 | $ 0.35 | $ (0.86) | $ (7.20) | $ 0.75 | |
Impairment of goodwill | $ 339,600 | $ 339,600 |
Schedule II - Valuation and Q_2
Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Allowance for Doubtful Accounts | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Valuation Allowances and Reserves, Balance, Beginning Balance | $ 1,223 | $ 1,308 | $ 796 |
Charged to (Reduction of) Expense | 386 | 870 | 1,560 |
Deductions | (506) | (955) | (1,048) |
Valuation Allowances and Reserves, Balance, Ending Balance | 1,103 | 1,223 | 1,308 |
Valuation Allowance of Deferred Tax Assets | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Valuation Allowances and Reserves, Balance, Beginning Balance | 13,549 | 8,120 | 6,391 |
Charged to (Reduction of) Expense | 1,073 | 5,429 | 1,729 |
Valuation Allowances and Reserves, Balance, Ending Balance | $ 14,622 | $ 13,549 | $ 8,120 |