Revenue Recognition

6 Months Ended

Dec. 31, 2018

Revenue Recognition [Abstract]

Revenue Recognition

(2) Revenue Recognition

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) for all contracts in the first quarter of fiscal 2019 on a modified retrospective basis. The adoption of Topic 606 had no cumulative impact on the Company’s results of operations, cash flows or financial position. The amounts reported in these condensed consolidated financial statements were the same as the amounts would have been if the previous accounting guidance was in effect. As part of the adoption of this ASU, the Company completed its comprehensive evaluation of the amended guidance following the five-step model, including identification of revenue streams and determined that the timing of recognition of revenue is unchanged under the amended guidance.

All revenue recognized in the accompanying unaudited interim condensed consolidated financial statements of operations is considered to be revenue from contracts with customers. The Company recognizes revenue from product sales at the time of shipment and upon the transfer of control of the Company’s product. The Company has no acceptance or other post-shipment obligations and does not offer product warranties or services to its customers. The Company generally does not have incremental costs to obtain contracts that would otherwise not have been incurred. Payment terms can vary by the type and location of the customer. The term between invoicing and when payment is due is typically 30 to 90 days.

The following tables show the Company’s revenues disaggregated by business segment and product lines offered to customers:

	Six months ended December 31, 2018
			Pharmaceutical		Performance		Consolidated
	Human Health		Ingredients		Chemicals		Totals
Finished dosage from generic drugs	$	142,876	$	-	$	-	$	142,876
Nutraceutical products		22,951		-		-		22,951
Pharmaceutical intermediates		-		22,754		-		22,754
Active pharmaceutical ingredients (APIs)		-		58,136		-		58,136
Specialty chemicals		-		-		67,803		67,803
Agricultural protection products		-		-		13,534		13,534
	$	165,827	$	80,890	$	81,337	$	328,054

	Six months ended December 31, 2017
			Pharmaceutical		Performance		Consolidated
	Human Health		Ingredients		Chemicals		Totals
Finished dosage from generic drugs	$	186,322	$	-	$	-	$	186,322
Nutraceutical products		23,159		-		-		23,159
Pharmaceutical intermediates		-		19,975		-		19,975
Active pharmaceutical ingredients (APIs)		-		50,230		-		50,230
Specialty chemicals		-		-		64,553		64,553
Agricultural protection products		-		-		12,245		12,245
	$	209,481	$	70,205	$	76,798	$	356,484

	Three months ended December 31, 2018
			Pharmaceutical		Performance		Consolidated
	Human Health		Ingredients		Chemicals		Totals
Finished dosage from generic drugs	$	73,663	$	-	$	-	$	73,663
Nutraceutical products		11,318		-		-		11,318
Pharmaceutical intermediates		-		12,532		-		12,532
Active pharmaceutical ingredients (APIs)		-		29,510		-		29,510
Specialty chemicals		-		-		31,582		31,582
Agricultural protection products		-		-		5,044		5,044
	$	84,981	$	42,042	$	36,626	$	163,649

	Three months ended December 31, 2017
			Pharmaceutical		Performance		Consolidated
	Human Health		Ingredients		Chemicals		Totals
Finished dosage from generic drugs	$	90,761	$	-	$	-	$	90,761
Nutraceutical products		12,705		-		-		12,705
Pharmaceutical intermediates		-		9,839		-		9,839
Active pharmaceutical ingredients (APIs)		-		23,790		-		23,790
Specialty chemicals		-		-		30,533		30,533
Agricultural protection products		-		-		3,601		3,601
	$	103,466	$	33,629	$	34,134	$	171,229

Variable Consideration

The Company has arrangements with various third parties, such as drug store chains and managed care organizations, establishing prices for its finished dosage form generics. While these arrangements are made between Aceto and its customers, the customers independently select a wholesaler from which they purchase the products. Alternatively, certain wholesalers may enter into agreements with the customers, with the Company’s concurrence, which establishes the pricing for certain products which the wholesalers provide. Upon each sale of finished dosage form generics, significant estimates of chargebacks, rebates, returns, government reimbursed rebates, sales discounts and other adjustments are made. These estimates are accounted for as variable consideration and are recorded as reductions to gross revenues, with corresponding adjustments either as a reduction of accounts receivable or as a liability for price concessions.

The Company estimates variable consideration after considering applicable information that is reasonably available. These estimates are based on historical experience, future expectations, contractual arrangements with wholesalers and indirect customers, and other factors known to management at the time of accrual. The consideration the Company receives in exchange for its goods is only recognized when it is probable that a significant reversal will not occur.

Chargebacks

Under certain arrangements, Rising will issue a credit (referred to as a “chargeback”) to the wholesaler for the difference between the invoice price to the wholesaler and the customer’s contract price. In order to calculate the chargeback allowance, prior period chargebacks claimed by wholesalers are analyzed to determine the average chargeback amount for each product and wholesaler. These amounts are adjusted for any information that will better reflect future average chargeback amounts. Management receives on-hand inventory reports from wholesalers to which the average chargeback amount is applied. The provision for chargebacks varies in relation to changes in sales volume, product and customer mix, terms with customers, pricing, changes in Wholesale Acquisition Cost (“WAC”), the level of inventory at the wholesalers, and changes in the volume of off-contract purchases. As sales to the large wholesale customers increase or decrease, the liability for chargebacks will also generally increase or decrease. The Company continually monitors the liability for chargebacks and makes adjustments when management believes that expected chargebacks may differ from the actual chargeback liability.

Returns

The Company maintains a policy that allows customers to return product within a specified period prior to and subsequent to the product expiration date. Product returns are settled through a credit issued to the customer. The Company estimates its provision for returns of finished dosage generics based on historical experience, product expiration dates, changes to business practices, credit terms, new competition, shortages in the market and any extenuating circumstances known to management. While historical experience has allowed for reasonable estimations in the past, future returns may or may not follow historical trends. Generally, the liability for returns increases as net sales increase. The Company continually monitors the liability for returns and makes adjustments when management believes that actual product returns may differ from the established liability.

Sales of nutraceutical products, pharmaceutical active ingredients and intermediates, specialty performance chemicals, including agricultural intermediates and agricultural protection products are recorded net of estimated returns of damaged goods from customers, which historically have been immaterial.

Government Rebates

Government rebates relate to our reimbursement arrangements with state and federal government agencies. Government rebate accruals are based on estimated payments due to governmental agencies for purchases made by plan participants. The Company provides a provision for government reimbursed rebates at the time of sale based on historical redemption rates. Government rebate amounts per product unit for generic products are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a monthly and quarterly basis. Aceto regularly reviews the information related to these estimates and adjusts the provision accordingly.

Non-Governmental Rebates & Other

Other rebates are offered to the Company’s key chain drug store, distributor and wholesaler customers to promote customer loyalty and increase product sales. These rebate programs provide customers with credits upon attainment of pre-established volumes or attainment of net sales milestones for a specified period. Other promotional programs are incentive programs offered to the customers. These rebates and other promotional programs vary by product and by volume purchase by each eligible customer. The Company provides a provision for other rebates at the time of sale based on contracted rates, actual product sales data and historical redemption rates. Aceto regularly reviews the information related to these estimates and adjusts the provision accordingly.

Sales of nutraceutical products, pharmaceutical active ingredients and intermediates, specialty performance chemicals, including agricultural intermediates and agricultural protection products are recorded net of sales incentives which include volume incentive rebates. The Company records volume incentive rebates based on the underlying revenue transactions that result in progress by the customer in earning the rebate.

Sales Discounts

Sales discount accruals are based on payment terms extended to customers purchasing our finished dosage form generic products. The sales discount liability is based on the invoices outstanding at period end and the sales discount rate.

The following table summarizes activity in the consolidated balance sheet for contra assets and liability for price concessions for the six months ended December 31, 2018:

	Accruals for Chargebacks, Rebates, Returns and Other Allowances
							Government			Non-Governmental			Sales
	Chargebacks			Returns			Reimbursed Rebates			Rebates & Other			Discounts
Balance at June 30, 2018	$	66,687		$	41,511		$	9,658		$	86,259		$	6,408
Current period provision		344,813			8,949			7,562			83,023			14,541
Credits issued during the period		(346,117	)		(4,824	)		(4,227	)		(85,254	)		(14,857	)
Balance at December 31, 2018	$	65,383		$	45,636		$	12,993		$	84,028		$	6,092

Credits issued during a given period represent cash payments or credit memos issued to the Company’s customers as settlement for the related liability. Management has the experience and access to relevant information that it believes is necessary to reasonably estimate the amounts of such deductions from gross revenues. The Company regularly reviews the information related to these estimates and adjusts its liabilities accordingly, if and when actual experience differs from previous estimates. The Company has not experienced any significant changes in its estimates as it relates to its chargebacks, rebates, sales discounts or product returns for the periods presented.