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, Medicaid 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, Medicaid 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 operations, 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,” below). Historically, we have not entered into revenue arrangements with multiple elements.

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-month periods ended September 30, 2015 and 2014, 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, 2013	$	4,076	$	253	$	736	$	735	$	332
Accruals/Adjustments		27,431		1,434		996		3,690		1,243
Credits Taken Against Reserve		(24,722)		(411)		(554)		(3,394)		(1,152)
Balance at September 30, 2014	$	6,785	$	1,276	$	1,178	$	1,031	$	423

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

Credit Concentration

Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and pharmaceutical companies.

During the three-month period ended September 30, 2015, four customers represented 25%, 19%, 17%, and 11% of net revenues, respectively. During the nine-month period ended September 30, 2015, these same four customers represented 21%, 21%, 19%, and 14% of net revenues, respectively. As of September 30, 2015, net accounts receivable from these customers totaled $16.9 million. During the three-month period ended September 30, 2014, four customers represented 26%, 23%, 16%, and 15% of net revenues. During the nine-month period ended September 30, 2014, these same four customers represented 26%, 20%, 16%, and 10% of net revenues, respectively.