Contract Assets and Liabilities

9 Months Ended

Sep. 30, 2019

Contract with Customer, Asset and Liability [Abstract]

CONTRACT ASSETS AND LIABILITIES

NOTE 10. CONTRACT ASSETS AND LIABILITIES

Our revenue consists almost entirely of sales of our pharmaceutical products to customers, whereby we ship products 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. At September 30, 2019, the unfulfilled performance obligations for these types of contracts relate to ordered but undelivered products. We generally expect to fulfill the performance obligations and recognize revenue within one week of entering into the underlying contract. Based on the short-term initial contract duration, additional disclosure about the remaining performance obligations is not required.

Certain of our other revenue-generating contracts, including license and collaboration agreements, may result in contract assets and/or contract liabilities. For example, we may recognize contract liabilities upon receipt of certain upfront and milestone payments from customers when there are remaining performance obligations.

The following table shows the opening and closing balances of contract assets and contract liabilities from contracts with customers (dollars in thousands):

	September 30, 2019		December 31, 2018		$ Change			% Change
Contract assets, net (1)	$	4,283	$	12,065	$	(7,782	)	(65	)%
Contract liabilities, net (2)	$	6,864	$	19,217	$	(12,353	)	(64	)%

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(1) At September 30, 2019 and December 31, 2018, approximately $4.3 million and $9.3 million, respectively, of these contract asset amounts are classified as current assets and are included in Prepaid expenses and other current assets in the Company’s Condensed Consolidated Balance Sheets. The remaining amounts are classified as noncurrent and are included in Other assets. The net decrease in contract assets during the nine months ended September 30, 2019 was primarily due to reclassifications to accounts receivable following the resolution of certain conditions other than the passage of time affecting the Company’s rights to consideration for the sale of certain goods, partially offset by certain sales activity during the period.

(2) At September 30, 2019 and December 31, 2018, approximately $2.1 million and $1.7 million, respectively, of these contract liability amounts are classified as current liabilities and are included in Accounts payable and accrued expenses in the Company’s Condensed Consolidated Balance Sheets. The remaining amounts are classified as noncurrent and are included in Other liabilities. During the nine months ended September 30, 2019, the Company entered into new contracts resulting in an increase to contract liabilities of approximately $4.0 million. This increase was more than offset by approximately $14.9 million in reductions following certain product discontinuation activities in our International Pharmaceuticals segment and approximately $1.1 million in revenue recognized during the period.

During the nine months ended September 30, 2019, we recognized revenue of $6.7 million relating to performance obligations satisfied, or partially satisfied, in prior periods. Such revenue generally relates to changes in estimates with respect to our variable consideration.