Revenue Recognition and Accounts Receivable

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition and Accounts Receivable

Revenue Recognition and Accounts Receivable

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes net revenue for product sales when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, governmental rebate programs, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the condensed consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash).

Our net sales may be impacted by wholesaler and distributor inventory levels of our products, which can fluctuate throughout the year due to the seasonality of certain products, pricing, the timing of product demand, customer purchasing decisions and other factors. Such fluctuations may impact the comparability of our net sales between periods.

Consideration received from licenses of intellectual property is recorded as other revenues. Royalty or profit share amounts, which are based on sales of licensed products or technology, are recorded when the customer’s subsequent sales or usages occur. Such consideration is included in other revenue in the condensed consolidated statements of operations.

The following table presents the Company’s net sales by therapeutic franchise for each of our reportable segments for the three and nine months ended September 30, 2020 and 2019, respectively:

(In millions)	North America		Europe		Rest of World		Total
Three Months Ended September 30, 2020
Central Nervous System & Anesthesia	$	181.8	$	211.5	$	81.1	$	474.4
Infectious Disease	37.3		197.2		272.6		507.1
Respiratory & Allergy	284.9		103.1		74.4		462.4
Cardiovascular	58.5		125.6		38.4		222.5
Gastroenterology	41.8		166.2		91.7		299.7
Diabetes & Metabolism	70.8		80.1		36.3		187.2
Dermatology	33.2		72.8		20.3		126.3
Women’s Healthcare	96.0		60.5		34.0		190.5
Oncology	171.4		30.4		40.0		241.8
Immunology	7.9		35.2		10.2		53.3
Other (1)	45.2		41.2		96.5		182.9
Total	$	1,028.8	$	1,123.8	$	795.5	$	2,948.1
Nine Months Ended September 30, 2020
Central Nervous System & Anesthesia	$	484.0	$	631.0	$	210.8	$	1,325.8
Infectious Disease	120.7		320.1		756.8		1,197.6
Respiratory & Allergy	890.4		362.3		165.6		1,418.3
Cardiovascular	184.4		372.7		102.9		660.0
Gastroenterology	121.0		465.6		252.6		839.2
Diabetes & Metabolism	187.4		231.7		89.7		508.8
Dermatology	87.8		215.0		57.2		360.0
Women’s Healthcare	275.9		180.6		84.9		541.4
Oncology	470.8		71.2		103.8		645.8
Immunology	26.9		88.3		27.2		142.4
Other (1)	174.0		142.2		276.7		592.9
Total	$	3,023.3	$	3,080.7	$	2,128.2	$	8,232.2

(In millions)	North America		Europe		Rest of World		Total
Three Months Ended September 30, 2019
Central Nervous System & Anesthesia	$	155.5	$	214.3	$	87.0	$	456.8
Infectious Disease	28.7		179.0		270.3		478.0
Respiratory & Allergy	308.5		98.2		66.6		473.3
Cardiovascular	63.3		126.2		41.3		230.8
Gastroenterology	30.0		147.9		95.9		273.8
Diabetes & Metabolism	91.3		68.9		34.2		194.4
Dermatology	38.2		75.8		29.3		143.3
Women’s Healthcare	100.4		60.5		26.1		187.0
Oncology	196.1		22.0		42.8		260.9
Immunology	12.3		20.3		10.3		42.9
Other (1)	64.3		32.8		89.9		187.0
Total	$	1,088.6	$	1,045.9	$	793.7	$	2,928.2
Nine Months Ended September 30, 2019
Central Nervous System & Anesthesia	$	426.4	$	619.3	$	243.9	$	1,289.6
Infectious Disease	77.3		299.7		783.0		1,160.0
Respiratory & Allergy	805.3		327.9		166.5		1,299.7
Cardiovascular	159.1		358.6		116.1		633.8
Gastroenterology	94.9		434.9		276.3		806.1
Diabetes & Metabolism	326.1		208.0		110.4		644.5
Dermatology	77.6		217.7		70.7		366.0
Women’s Healthcare	269.5		165.3		65.4		500.2
Oncology	567.8		59.9		107.0		734.7
Immunology	31.4		41.3		27.6		100.3
Other (1)	199.6		198.1		274.4		672.1
Total	$	3,035.0	$	2,930.7	$	2,241.3	$	8,207.0

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(1)    Other consists of numerous therapeutic franchises, none of which individually exceeds 5% of consolidated net sales.

Variable Consideration and Accounts Receivable

The following table presents a reconciliation of gross sales to net sales by each significant category of variable consideration during the three and nine months ended September 30, 2020 and 2019, respectively:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Gross sales	$	4,986.4	$	5,051.5	$	13,868.0	$	13,841.0
Gross to net adjustments:
Chargebacks	(967.0)		(913.5)		(2,616.9)		(2,368.8)
Rebates, promotional programs and other sales allowances	(926.3)		(979.2)		(2,592.3)		(2,709.9)
Returns	(76.6)		(82.3)		(193.2)		(203.3)
Governmental rebate programs	(68.4)		(148.3)		(233.4)		(352.0)
Total gross to net adjustments	$	(2,038.3)	$	(2,123.3)	$	(5,635.8)	$	(5,634.0)
Net sales	$	2,948.1	$	2,928.2	$	8,232.2	$	8,207.0

No significant revisions were made to the methodology used in determining these provisions or the nature of the provisions during the three and nine months ended September 30, 2020. Such allowances were comprised of the following at September 30, 2020 and December 31, 2019, respectively:

(In millions)	September 30, 2020		December 31, 2019
Accounts receivable, net	$	1,502.6	$	1,512.0
Other current liabilities	697.9		796.5
Total	$	2,200.5	$	2,308.5

Accounts receivable, net was comprised of the following at September 30, 2020 and December 31, 2019, respectively:

(In millions)	September 30, 2020		December 31, 2019
Trade receivables, net	$	2,587.8	$	2,640.1
Other receivables	376.3		418.7
Accounts receivable, net	$	2,964.1	$	3,058.8

Receivables Facility and Note Securitization Facility

Through its wholly owned subsidiary Mylan Pharmaceuticals Inc., the Company has access to a $400 million accounts receivable securitization facility (the “Receivables Facility”) and a $200 million note securitization facility (the “Note Securitization Facility”). The receivables underlying any borrowings are included in accounts receivable, net, in the condensed consolidated balance sheets. There were $480.6 million and $407.0 million of securitized accounts receivable at September 30, 2020 and December 31, 2019, respectively.

On August 4, 2020, the Company entered into (i) an amendment to the Receivables Facility to permit the occurrence of the Combination (as defined below) and to make certain other updates and (ii) an amendment to the Note Securitization Facility to extend the maturity date to August 30, 2021.

We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $123.0 million and $90.1 million of accounts receivable as of September 30, 2020 and December 31, 2019, respectively, under these factoring arrangements.