July 11, 2019
Wetteny Joseph
Senior Vice President and Chief Financial Officer
Catalent, Inc.
14 Schoolhouse Road
Somerset, NJ 08873
Re: Catalent, Inc.
Form 10-K for the Fiscal Year Ended June 30, 2018
Filed August 28, 2018
Form 10-Q for the Quarterly Period Ended December 31, 2018
Filed February 5, 2019
Form 10-Q for the Quarterly Period Ended March 31, 2019
Filed May 7, 2019
Form 8-K dated February 5, 2019
Filed February 5, 2019
File No. 001-36587
Dear Mr. Joseph:
We have reviewed your June 11, 2019 response to our comment letter and
have the
following comments. In some of our comments, we may ask you to provide us with
information
so we may better understand your disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments. Unless we note otherwise, our references to prior comments are to
comments in
our May 28, 2019 letter.
Form 10-Q for the Quarterly Period ended December 31, 2018
Notes to Unaudited Consolidated Financial Statements
2. Revenue Recognition
Development Service Revenue, page 15
1. In your response to our comment 3, you provided revised disclosure to
clarify when
Wetteny Joseph
FirstName LastNameWetteny Joseph
Catalent, Inc.
Comapany NameCatalent, Inc.
July 11, 2019
July 11, 2019 Page 2
Page 2
FirstName LastName
control transfers. Please revise this disclosure to address the
significant judgments made in
evaluating when a customer obtains control as required under ASC
606-10-50-19 (i.e.
whether the contract includes a bill-and-hold arrangement or if the
customer is responsible
for shipping and handling activities). Include similar disclosure with
regards to your
Manufacturing and Commercial Product Supply Revenue.
Manufacturing & Commercial Product Supply, page 15
2. Refer to your response to prior comment 5. You state that, under ASC
606, you attribute a
cancellation notice from the customer as a contract modification.
Please clarify for us why
you believe that a contract cancellation according to terms in the
original agreement can
be analogized to a modification for accounting purposes rather than be
accounted for as
variable consideration under ASC 606-10-32. Please also provide
proposed disclosure to
be included in future filings describing your accounting policy for
contract cancellations.
Form 10-Q for the Quarterly Period Ended March 31, 2019
Managements Discussion and Analysis of Financial Condition and Results of
Operations
Three Months Ended March 31, 2019 compared to the Three months ended March 31,
2018
Segment Review
Oral Drug Delivery segment, page 37
3. Refer to your response to prior comment 7. Given the impact of
"product participation"
activities on your Oral Drug Delivery segment EBITDA of 29% and 9% for
the three
months and nine months ended March 31, 2019, respectively, relative to
the comparative
periods, please provide us proposed disclosure to be included in
future filings explaining
"product participation" activities and what they entail. To the extent
not already explained
in your revenue recognition accounting policy note to financial
statements, also provide us
revised disclosure to be included in future filings for your
accounting policy related to
"product participation" activities.
4. Refer to your response to prior comment 7. Regarding the licensing fee
recognized
immediately upon execution of the arrangement during the quarter ended
March 31, 2019,
which you believe to be appropriate under ASC 606, please tell us why
you describe this
product revenue in the filing as being "accelerated into the third
quarter." If appropriate,
please provide us proposed revised disclosure to be included in future
filings to clarify.
5. Refer to your response to prior comment 7. Subsequent to the immediate
recognition of
the license fee, you determined that the license had no future
economic value and
accelerated the amortization of the remaining balance of this
intangible asset of $12.3
million. Please provide us additional analysis supporting this
accounting treatment. Also
elaborate for us on the following factors you noted in your response:
the contract term of exclusivity and any termination provisions; and
a description of current and future market conditions you
considered.
Wetteny Joseph
Catalent, Inc.
July 11, 2019
Page 3
Liquidity and Capital Resources
Cash Flows
Operating Activities, page 44
6. Refer to your response to prior comment 6. In the quarter ended March
31, 2019, days
sales outstanding appears to have increased from the quarter ended
December 31, 2018 as
well as the March 31, 2018 comparative period. Please provide us
proposed disclosure to
be included in future filings:
describing the reasons for the increase; and
the impact and expected impact of this trend on your financial
position, results of
operations and cash flows.
Form 8-K Dated February 5, 2019
Exhibit 99.1, page 14
7. Refer to your response to prior comment 5. Although recognizing the
$15.1 million
adjustment may be permitted in computing a covenant under your credit
agreement, we do
not believe it is an appropriate adjustment in your non-GAAP financial
measure, which
must comply with Regulation G. Recognizing the adjustment in your
adjusted EBITDA
that was not recognized in your GAAP net earnings for the period would
appear to
represent the use of an individually tailored recognition method.
Refer to question 100.04
of the Compliance & Disclosure Interpretation for Non-GAAP Financial
Measures.
Please represent to us that you will revise your future presentations
to exclude this
adjustment from your non-GAAP measure.
You may contact Sasha Parikh at 202-551-3627 or Rolf Sundwall at
202-551-3105 with
any questions.
FirstName LastNameWetteny Joseph Sincerely,
Comapany NameCatalent, Inc.
Division of
Corporation Finance
July 11, 2019 Page 3 Office of
Healthcare & Insurance
FirstName LastName