Accounts Receivable

6 Months Ended

Dec. 31, 2018

Accounts Receivable

Accounts Receivable

Note 5.  Accounts Receivable

Accounts receivable consisted of the following components at December 31, 2018 and June 30, 2018:

	December 31,		June 30,
(In thousands)	2018		2018
Gross accounts receivable	$	515,266	$	503,175
Less Chargebacks reserve		(128,102)		(153,034)
Less Rebates reserve		(34,673)		(33,102)
Less Returns reserve		(49,508)		(43,059)
Less Other deductions		(26,263)		(20,021)
Less Allowance for doubtful accounts		(1,356)		(1,308)
Accounts receivable, net	$	275,364	$	252,651

For the three months ended December 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $334.6 million, $78.8 million, $11.3 million, and $20.7 million, respectively.  For the three months ended December 31, 2017, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $220.2 million, $77.6 million, $4.1 million, and $16.3 million, respectively.

For the six months ended December 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $612.6 million, $143.6 million, $18.7 million, and $34.6 million, respectively.  For the six months ended December 31, 2017, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $474.9 million, $156.1 million, $14.5 million, and $28.6 million, respectively.

The following table identifies the activity and ending balances of each major category of revenue-related reserve for the six months ended December 31, 2018 and 2017:

Reserve Category
(In thousands)	Chargebacks		Rebates		Returns		Other		Total
Balance at June 30, 2018	$	153,034	$	82,502	$	43,059	$	20,021	$	298,616
Adjustment related to adoption of ASC 606		—		—		—		3,536		3,536
Current period provision		612,560		143,578		18,662		34,574		809,374
Credits issued during the period		(637,492)		(147,023)		(12,213)		(31,868)		(828,596)
Balance at December 31, 2018	$	128,102	$	79,057	$	49,508	$	26,263	$	282,930

Reserve Category
(In thousands)	Chargebacks		Rebates		Returns		Other		Total
Balance at June 30, 2017	$	79,537	$	87,616	$	42,135	$	11,096	$	220,384
Current period provision		474,882		156,073		14,541		28,623		674,119
Credits issued during the period		(499,959)		(157,071)		(11,881)		(21,713)		(690,624)
Balance at December 31, 2017	$	54,460	$	86,618	$	44,795	$	18,006	$	203,879

For the three months ending December 31, 2018 and 2017, as a percentage of gross sales the provision for chargebacks was 53.0% and 44.4%, the provision for rebates was 12.5% and 15.7%, the provision for returns was 1.8% and 0.8% and the provision for other adjustments was 3.3% and 3.3%, respectively.

For the six months ending December 31, 2018 and 2017, as a percentage of gross sales the provision for chargebacks was 53.5% and 47.3%, the provision for rebates was 12.5% and 15.6%, the provision for returns was 1.6% and 1.4%, and the provision for other adjustments was 3.0% and 2.9%, respectively.

On July 1, 2018, the Company adopted ASC 606 which resulted in a $3.2 million pre-tax adjustment to opening retained earnings and accounts receivable, of which $3.5 million related to “failure-to-supply” reserves offset by $0.3 million related to the timing of recognition of certain contract manufacturing arrangements.

The decrease in the chargebacks reserve from June 30, 2018 to December 31, 2018 was primarily the result of increased customer orders in June 2018 in advance of a mid-week holiday as well as a related maintenance shutdown of the Company’s Seymour, Indiana manufacturing facility in the first week of July 2018.  The Amneal Distribution and Transition Support Agreement  (the “Amneal Agreement”), which shifted the Company’s sales of Levothyroxine Sodium Tablets directly to Amneal, also contributed to the decrease in the chargebacks reserve.  The activity in the “Other” category for the six months ended December 31, 2018 and 2017 includes, shelf-stock, shipping and other sales adjustments including prompt payment discounts and “failure-to-supply” adjustments.  Historically, we have not recorded any material amounts in the current period related to reversals or additions of prior period reserves.  If the Company were to record a material reversal or addition of any prior period reserve amount, it would be separately disclosed.