Accounts Receivable

9 Months Ended

Mar. 31, 2019

Accounts Receivable

Accounts Receivable

Note 5.  Accounts Receivable

Accounts receivable consisted of the following components at March 31, 2019 and June 30, 2018:

	March 31,		June 30,
(In thousands)	2019		2018
Gross accounts receivable	$	362,148	$	503,175
Less Chargebacks reserve		(99,527)		(153,034)
Less Rebates reserve		(30,529)		(33,102)
Less Returns reserve		(50,721)		(43,059)
Less Other deductions		(28,314)		(20,021)
Less Allowance for doubtful accounts		(1,253)		(1,308)
Accounts receivable, net	$	151,804	$	252,651

For the three months ended March 31, 2019, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $221.7 million, $50.4 million, $12.4 million, and $25.6 million, respectively.  For the three months ended March 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns and other deductions of $323.1 million, $72.0 million, $7.1 million, and $23.7 million, respectively.

For the nine months ended March 31, 2019, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $834.3 million, $194.0 million, $31.1 million, and $60.2 million, respectively.  For the nine months ended March 31, 2018, the Company recorded a provision for chargebacks, rebates (including rebates presented as rebates payable), returns, and other deductions of $798.0 million, $228.1 million, $21.7 million, and $52.3 million, respectively.

The following table identifies the activity and ending balances of each major category of revenue-related reserve for the nine months ended March 31, 2019 and 2018:

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		834,270		194,012		31,069		60,167		1,119,518
Credits issued during the period		(887,777)		(204,112)		(23,407)		(55,410)		(1,170,706)
Balance at March 31, 2019	$	99,527	$	72,402	$	50,721	$	28,314	$	250,964

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		797,964		228,100		21,661		52,329		1,100,054
Credits issued during the period		(764,055)		(239,665)		(16,543)		(40,399)		(1,060,662)
Balance at March 31, 2018	$	113,446	$	76,051	$	47,253	$	23,026	$	259,776

For the three months ending March 31, 2019 and 2018, as a percentage of gross sales the provision for chargebacks was 46.7% and 54.3%, the provision for rebates was 10.6% and 12.1%, the provision for returns was 2.6% and 1.2% and the provision for other adjustments was 5.4% and 4.0%, respectively.

For the nine months ending March 31, 2019 and 2018, as a percentage of gross sales the provision for chargebacks was 51.5% and 49.9%, the provision for rebates was 12.0% and 14.3%, the provision for returns was 1.9% and 1.4%, and the provision for other adjustments was 3.7% and 3.3%, respectively.

The decrease in the provision for chargebacks as a percentage of gross sales in the three months ended March 31, 2019 as compared to the same prior-year period was due to the Amneal Distribution and Transition Support Agreement (the “Amneal Agreement”), which shifted the Company’s sales of Levothyroxine Sodium Tablets away from wholesalers and directly to Amneal. 

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 March 31, 2019 was primarily due to the expiration of the JSP Distribution Agreement, which resulted in lower Levothyroxine-related chargebacks at March 31, 2019 as compared to June 30, 2018.  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 also contributed to the decrease in the chargebacks reserve.  The activity in the “Other” category for the nine months ended March 31, 2019 and 2018 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.