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REVENUE RECOGNITION AND RELATED ALLOWANCES
9 Months Ended
Sep. 30, 2016
Revenue Recognition [Abstract]  
REVENUE RECOGNITION AND RELATED ALLOWANCES
2.
REVENUE RECOGNITION AND RELATED ALLOWANCES
 
Revenue Recognition
 
Revenue is recognized for product sales and contract manufacturing product sales upon passing of risk and title to the customer, when estimates of the selling price and discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments are reasonably determinable, collection is reasonably assured, and we have no further performance obligations. Contract manufacturing arrangements are typically less than two weeks in duration, and therefore the revenue is recognized upon completion of the aforementioned factors rather than using a proportional performance method of revenue recognition. The estimates for discounts, rebates, promotional adjustments, price adjustments, returns, chargebacks, and other potential adjustments reduce gross revenues to net revenues in the accompanying unaudited interim condensed consolidated statements of earnings, and are presented as current liabilities or reductions in accounts receivable in the accompanying unaudited interim condensed consolidated balance sheets (see “Accruals for Chargebacks, Rebates, Returns, and Other Allowances”). Historically, we have not entered into revenue arrangements with multiple elements.
 
We record revenue related to marketing and distribution agreements with third parties in which we sell products under Abbreviated New Drug Applications (“ANDAs”) or New Drug Applications (“NDAs”) owned or licensed by these third parties. We have assessed and determined that we are the principal for sales under each of these marketing and distribution agreements and recognize the revenue on a gross basis. Under these agreements, we pay these third parties a specified percentage of the gross profit earned on sales of the products. These profit-sharing percentages are recognized in Cost of sales in our consolidated statements of earnings and are accrued in Accrued royalties in our consolidated balance sheets until payment has occurred.
 
Occasionally, we engage in contract services, which include product development services, laboratory services, and royalties on net sales of certain contract manufactured products. For these services, revenue is recognized according to the terms of the agreement with the customer, which sometimes include substantive, measurable risk-based milestones, and when we have a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured, and we have no further performance obligations under the agreement.
   
Accruals for Chargebacks, Rebates, Returns, and Other Allowances
 
Our generic and branded product revenues are typically subject to agreements with customers allowing chargebacks, Medicaid rebates, product returns, administrative fees and other rebates, and prompt payment discounts. We accrue for these items at the time of sale and continually monitor and re-evaluate the accruals as additional information becomes available. We adjust the accruals at the end of each reporting period, to reflect any such updates to the relevant facts and circumstances. Accruals are relieved upon receipt of payment from the customer or upon issuance of credit to the customer.
 
The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the nine months ended September 30, 2015 and 2016, respectively:
 
(in thousands)
 
Accruals for Chargebacks, Rebates, Returns, and Other Allowances
 
 
 
 
 
 
 
 
 
 
 
 
Administrative
 
Prompt
 
 
 
 
 
 
Medicaid
 
 
 
 
Fees and Other
 
Payment
 
 
 
Chargebacks
 
Rebates
 
Returns
 
Rebates
 
Discounts
 
Balance at December 31, 2014
 
$
6,865
 
$
2,264
 
$
1,445
 
$
1,487
 
$
471
 
Accruals/Adjustments
 
 
34,516
 
 
4,785
 
 
1,402
 
 
4,187
 
 
1,942
 
Credits Taken Against Reserve
 
 
(32,973)
 
 
(2,621)
 
 
(958)
 
 
(4,570)
 
 
(1,813)
 
Balance at September 30, 2015
 
$
8,408
 
$
4,428
 
$
1,889
 
$
1,104
 
$
600
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
$
11,381
 
$
4,631
 
$
2,648
 
$
1,653
 
$
674
 
Accruals/Adjustments
 
 
74,373
 
 
8,013
 
 
5,840
 
 
8,559
 
 
3,743
 
Credits Taken Against Reserve
 
 
(67,449)
 
 
(6,193)
 
 
(4,389)
 
 
(7,225)
 
 
(3,023)
 
Balance at September 30, 2016
 
$
18,305
 
$
6,451
 
$
4,099
 
$
2,987
 
$
1,394
 
  
Credit Concentration
 
Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and pharmaceutical companies.
 
During the three months ended September 30, 2016, three customers represented 31%, 18%, and 17% of net revenues, respectively. During the nine months ended September 30, 2016, these same three customers represented 27%, 21%, and 17% of net revenues, respectively, and accounts receivable from these customers totaled 72% of accounts receivable, net as of September 30, 2016. During the three months ended September 30, 2015, four customers represented 25%, 19%, 17%, and 11% of net revenues, respectively. During the nine months ended September 30, 2015, these same four customers represented 21%, 21%, 19%, and 14% of net revenues, respectively.