Note 4 - Accounts Receivable Allowances

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 4 — 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 is not specific to the Company. 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 terms of the respective agreement with the end-user customer (which in turn depends on the specific end-user customer, each having its own pricing arrangement, which entitles it 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.

With the exception of the provision for doubtful accounts, which is reflected as part of selling, general and administrative expense, the provisions for the following customer reserves are reflected as a reduction of revenues in the accompanying condensed consolidated statements of comprehensive income. The ending reserve balances are included in trade accounts receivable, net in the Company’s condensed consolidated balance sheets.

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

	JUNE 30, 2014			DECEMBER 31, 2013
Gross accounts receivable	$	220,165		$	88,165
Less reserves for:
Chargebacks and rebates		(49,330	)		(12,882	)
Product returns		(18,561	)		(8,164	)
Discounts and allowances		(11,597	)		(1,644	)
Advertising and promotions		(566	)		(452	)
Doubtful accounts		(138	)		(25	)
Trade accounts receivable, net	$	139,973		$	64,998

The current period increases in gross accounts receivable, chargebacks and rebates and cash discounts were primarily related to the acquisition of Hi-Tech Pharmacal Co. Inc. (“Hi-Tech”) during the six month period ended June 30, 2014, which acquisition is further described in Note 11 – Business Combinations, Dispositions and Other Strategic Investments.

For the three and six month periods ended June 30, 2014 and 2013, the Company recorded the following adjustments to gross sales (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Gross sales	$	283,842		$	126,113		$	433,142		$	249,930
Less adjustments for:
Chargebacks and rebates		(116,845	)		(42,966	)		(168,718	)		(86,729	)
Product returns		(2,318	)		(482	)		(3,204	)		(1,713	)
Discounts and allowances		(5,700	)		(1,947	)		(8,135	)		(3,922	)
Admin fees		(5,393	)		(2,358	)		(7,545	)		(4,320	)
Advertising and promotions		(2,836	)		(1,348	)		(4,168	)		(2,380	)
Revenues, net	$	150,749		$	77,012		$	241,371		$	150,866

 The increase, year over year, in the provisions for chargebacks and rebates, product returns, discounts and allowances, admin fees, and advertising and promotion were related to the 124.9% and 73.2% increase in gross sales in the three and six month periods ended June 30, 2014, respectively compared to the corresponding prior year quarter and year to date period.