ACCOUNTS RECEIVABLE ALLOWANCES

9 Months Ended

Sep. 30, 2012

ACCOUNTS RECEIVABLE ALLOWANCES [Abstract]

ACCOUNTS RECEIVABLE ALLOWANCES

NOTE 5 — ACCOUNTS RECEIVABLE ALLOWANCES

The nature of the Company's business inherently involves, in the ordinary course, significant amounts and substantial volumes of transactions and estimates relating to allowances for product returns, chargebacks, rebates, doubtful accounts and discounts given to customers. This is a natural circumstance of the pharmaceutical industry and not specific to the Company and inherently lengthens the final net collections process. Depending on the product, the end-user customer, the specific terms of national supply contracts and the particular arrangements with the Company's wholesaler customers, certain rebates, chargebacks and other credits are deducted from the Company's accounts receivable. The process of claiming these deductions depends on wholesalers reporting to the Company the amount of deductions that were earned under the respective terms with end-user customers (which in turn depends on which end-user customer, with different pricing arrangements might be entitled to a particular deduction). This process can lead to partial payments against outstanding invoices as the wholesalers take the claimed deductions at the time of payment.

The provisions for the following customer reserves are reflected in the accompanying financial statements as reductions of revenues in the statements of income with the exception of the provision for doubtful accounts which is reflected as part of selling, general and administrative expense. The ending reserve amounts are included in trade accounts receivable, net in the Company's balance sheets.

Net trade accounts receivable consists of the following (in thousands):

	SEPTEMBER 30,			DECEMBER 31,
	2012			2011
Gross accounts receivable	$	65,839		$	39,330
Less:
Chargeback and rebates reserves		(11,661	)		(5,949	)
Returns reserve		(7,895	)		(6,846	)
Discount and allowances reserve		(1,139	)		(743	)
Advertising and promotion reserve		(582	)		(386	)
Allowance for doubtful accounts		(26	)		(99	)
Net trade accounts receivable	$	44,536		$	25,307

For the three month periods ended September 30, 2012 and 2011, the Company recorded chargeback and rebate expense of $30,377,000 and $19,031,000, respectively.  For the nine month period ended September 30, 2012 and 2011, the Company recorded chargeback and rebate expense of $75,404,000 and $48,296,000, respectively.

For the three month period ended September 30, 2012, the Company recorded a benefit of $252,000 from a change in estimate of future of product returns, while for the three month period ended September 30, 2011, the Company recorded a provision for product returns of $550,000.  For the nine month periods ended September 30, 2012 and 2011, the Company recorded provisions for product returns of $2,798,000 and $2,035,000, respectively.

For the three month periods ended September 30, 2012 and 2011, the Company recorded provisions for cash discounts of $1,645,000 and $970,000, respectively.  For the nine month periods ended September 30, 2012 and 2011, the Company recorded provisions for cash discounts of $4,208,000 and $2,399,000, respectively.

The increases in the provisions for chargebacks and rebates and for cash discounts over the prior year periods were primarily due to increased sales in the Ophthalmic and Hospital drugs & Injectables segments.  The benefit recorded in the quarter ended September 30, 2012 from reversal of product return allowances was the result of a decline in anticipated future returns based on a favorable long-term trend in returns processed.