Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Basis Of Presentation [Abstract]

Basis Of Presentation

Note 1—Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of Savient Pharmaceuticals, Inc.'s ("Savient" or the "Company") financial position at September 30, 2011, the results of its operations for the nine months ended September 30, 2011 and 2010, and cash flows for the nine months ended September 30, 2011 and 2010. Interim financial statements are prepared on a basis consistent with the Company's annual financial statements. Results of operations for the nine months ended September 30, 2011 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2011.

The consolidated balance sheet as of December 31, 2010 was derived from the audited financial statements at that date and does not include all of the information and notes required by GAAP for complete financial statements. The interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Savient Pharma Holdings, Inc. and Savient Pharma Ireland Limited.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to investments, accounts receivable, reserve for product returns, inventories, rebates, property and equipment, share-based compensation and income taxes. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Results may differ from these estimates due to actual outcomes differing from those on which the Company bases its assumptions.

Investments

The Company classifies investments as "available-for-sale securities," "held-to-maturity securities" or "trading securities." Investments that are purchased and held principally for the purpose of selling them in the near-term are classified as trading securities and marked to fair value through earnings. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity securities. Investments not classified as trading securities or held-to-maturity securities are considered to be available-for-sale securities. Changes in the fair value of available-for-sale securities are reported as a component of accumulated other comprehensive income in the consolidated statements of stockholders' equity and are not reflected in the consolidated statements of operations until a sale transaction occurs or when declines in fair value are deemed to be other-than-temporary ("OTT").

Inventories, net

Inventories are stated at the lower of cost or market. Cost is determined based on actual cost. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, reserves are recorded for the difference between cost and market value. These reserves are determined based on estimates.

Convertible debt

The debt and equity components of the Company's 4.75% Convertible Senior Notes ("the 2018 Convertible Notes") due on February 1, 2018 are bifurcated and accounted for separately. The debt component of the 2018 Convertible Notes, which excludes the associated equity conversion feature, is recorded at fair value as of the issuance date. The equity component, representing the difference between the amount allocated to the debt component and the proceeds received upon issuance of the 2018 Convertible Notes, is recorded in additional paid-in-capital in the consolidated balance sheets. The carrying value of the 2018 Convertible Notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. See Note 14 to the consolidated financial statements for more details.

 

Deferred Financing Costs, net

The Company incurred $7.3 million in financing costs related to the issuance of $230 million principal amount of the 2018 Convertible Notes, which is allocated to the debt and equity components of the Company's convertible debt instruments. The Company allocated $5.4 million to the debt component and recorded it as deferred finance costs. The Company allocated the remaining $1.9 million to the equity component and recorded it against additional paid-in-capital. At September 30, 2011, the Company had $4.9 million of net deferred financing costs recorded with respect to the Convertible Notes on the consolidated balance sheets, $4.2 million of which was recorded as a long-term asset. These costs are being amortized using the effective interest rate method over the seven-year contract term that the 2018 Convertible Notes are outstanding.