Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Sales-Related Reserves

At June 30, 2014 and December 31, 2013, sales-related reserves included in the accompanying condensed consolidated balance sheets were as follows (in thousands):

	June 30, 2014		December 31, 2013
Medicaid rebates	$	22,961	$	30,981
Other rebates, chargebacks and discounts	3,952		4,389
Total	$	26,913	$	35,370

The following table summarizes the activity in the account for sales-related reserves for Medicaid rebates (in thousands):

	2014			2013
Balance at January 1	$	30,981		$	33,921
Actual Medicaid payments for sales made in prior year	(19,071		)	(21,463		)
Actual Medicaid payments for sales made in current year	(6,799		)	(6,923		)
Current Medicaid provision for sales made in prior year	(4,545		)	11,497
Current Medicaid provision for sales made in current year	22,395			13,510
Balance at June 30	$	22,961		$	30,542

Inventories, net of allowance

The components of inventory are as follows (in thousands):

	June 30, 2014			December 31, 2013
Raw material	$	10,145		$	9,835
Work-in-process	3,565			2,194
Intermediates	1,620			1,572
Finished goods	2,493			4,096
	17,823			17,697
Less: Reserve for obsolescence	(1,441		)	(1,329		)
	$	16,382		$	16,368

Included in inventories at June 30, 2014 is $8.8 million held at BioVectra, in Canada.

Property, Plant and Equipment

Equipment, building, land and leasehold improvements and related accumulated depreciation and amortization are as follows (in thousands):

	June 30, 2014			December 31, 2013
Equipment (including manufacturing, laboratory and office)	$	32,816		$	26,237
Building	13,000			12,015
Land and land improvements	502			406
Leasehold improvements	1,523			1,446
	47,841			40,104
Less accumulated depreciation and amortization	(11,432		)	(8,371		)
	$	36,409		$	31,733

Summary Of Cash And Cash Equivalents And Short-Term Investments

A summary of cash and cash equivalents and short-term investments, classified as available-for-sale, and carried at fair value is as follows (in thousands):

	Amortized Cost		Gross Unrealized Gain		Gross Unrealized (Loss)			Estimated Fair Value
June 30, 2014
Cash and cash equivalents	$	21,566	$	—	$	—		$	21,566
Short-term investments:
Corporate bonds	32,861		18		(2		)	32,877
Government-sponsored enterprises	12,019		10		(1		)	12,028
Municipal bonds	16,158		12		(1		)	16,169
	$	61,038	$	40	$	(4	)	$	61,074
December 31, 2013
Cash and cash equivalents	$	13,351	$	—	$	—		$	13,351
Short-term investments:
Corporate bonds	45,190		11		(14		)	45,187
Government-sponsored enterprises	14,539		3		(4		)	14,538
Municipal bonds	9,438		4		(1		)	9,441
	$	69,167	$	18	$	(19	)	$	69,166

Amortized Cost And Fair Value Of Short-Term Investment Securities

The amortized cost and fair value of short-term investment securities at June 30, 2014, by contractual maturity, are as follows (in thousands):

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	22,410	$	22,414
Due after one through two years	38,628		38,660
Total short-term investments	$	61,038	$	61,074

Available-For-Sale Securities In An Unrealized Loss Position, Not Deemed To Be Other-Than-Temporarily Impaired

As of June 30, 2014, we had the following available-for-sale securities that were in an unrealized loss position but were not deemed to be other-than-temporarily impaired (in thousands):

	Less Than 12 Months					12 Months or Greater
	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Corporate bonds	$	(1	)	$	4,025	$	(1	)	$	2,392
Government-sponsored enterprises	—			—		(1		)	1,998
Municipal bonds	—			1,391		(1		)	1,314
Total	$	(1	)	$	5,416	$	(3	)	$	5,704

Assets and Liabilities Measured At Fair Value On A Recurring Basis

As of June 30, 2014 and December 31, 2013, assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

		Basis of Fair Value Measurements
		Balance at
Balance Sheet Classification		June 30, 2014		Level 1		Level 2		Level 3
Cash and cash equivalents	Cash and cash equivalents	$	21,566	$	19,216	$	2,350	$	—
Short-term investments	Corporate bonds	32,877		—		32,877		—
Short-term investments	Government-sponsored enterprises	12,028		—		12,028		—
Short-term investments	Municipal bonds	16,169		—		16,169		—
	Total assets	$	82,640	$	19,216	$	63,424	$	—
Current liabilities	Current portion of contingent consideration in conjunction with acquisition of BioVectra	$	4,124	$	—	$	—	$	4,124
Non-current liabilities	Contingent consideration in conjunction with acquisition of BioVectra	30,642		—		—		30,642
Non-current liabilities	Contingent consideration in conjunction with acquisition of Synacthen Depot	72,011		—		—		72,011
	Total liabilities	$	106,777	$	—	$	—	$	106,777

		Basis of Fair Value Measurements
		Balance at
Balance Sheet Classification		December 31, 2013		Level 1		Level 2		Level 3
Cash and cash equivalents	Cash and cash equivalents	$	13,351	$	5,260	$	8,091	$	—
Short-term investments	Corporate bonds	45,187		—		45,187		—
Short-term investments	Government-sponsored enterprises	14,538		—		14,538		—
Short-term investments	Municipal bonds	9,441		—		9,441		—
	Total assets	$	82,517	$	5,260	$	77,257	$	—
Current liabilities	Current portion of contingent consideration in conjunction with acquisition of BioVectra	$	4,238	$	—	$	—	$	4,238
Non-current liabilities	Contingent consideration in conjunction with acquisition of BioVectra	33,224		—		—		33,224
Non-current liabilities	Contingent consideration in conjunction with acquisition of Synacthen Depot	70,290		—		—		70,290
	Total liabilities	$	107,752	$	—	$	—	$	107,752

Fair Value, Valuation Technique and Related Unobservable Input for Level 3 Measurements

The following table presents the fair value, valuation technique and related unobservable input for the Level 3 measurements:

	Fair Value		Valuation Technique	Unobservable Input	Rate
Contingent consideration in conjunction with the acquisition of Bio Vectra estimate	$	34,766	Probability weighted discounted future cash flows	Discount rate	5%
Contingent consideration in conjunction with the acquisition of Synacthen Depot estimate	$	72,011	Probability weighted discounted future cash flows	Discount rate	5%

Roll Forward of Level 3 Instruments

The following table represents a roll forward of the fair value of Level 3 instruments, comprised solely of the contingent consideration, including the current portion of the contingent consideration:

	June 30, 2014
Balance at beginning of period	$	107,752
Amounts acquired or issued	(4,581		)
Change due to compensation expense	1,059
Change due to time value of money	2,382
Change due to foreign currency translation adjustment	165
Changes in fair value	—
Balance at end of period	$	106,777

Long-term Debt

The term loan has an interest rate of 4%, is due in full by February 2022 and is secured by certain of our BioVectra assets. Under the supply agreement, the customer agreed to reimburse BioVectra for the quarterly financing payments of C$450,743 during the term of the loan.

	June 30, 2014
4% Term Loan, due February 2022, payable in quarterly installments of C$450,743 including principal and interest	$	11,519
Less: Current Portion	1,249
Funded long-term debt, less current portion	$	10,270

Long-term debt

Our subsidiary, BioVectra, has a 2.85% term loan. The loan is payable monthly and is due April 2016. The loan is secured with BioVectra accounts receivable, inventory and certain owned properties.

	June 30, 2014
2.85% Term Loan, due April 2016, payable in monthly installments of C$48,170 including principal and interest	$	3,363
Less: Current Portion	452
Funded long-term debt, less current portion	$	2,911

Share-Based Compensation Cost

Share-based compensation cost is summarized below (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Selling and marketing	$	3,749	$	2,570	$	6,866	$	5,024
General and administrative	3,462		2,685		7,297		5,223
Research and development	1,562		1,276		3,306		2,432
Total	$	8,773	$	6,531	$	17,469	$	12,679

Computation Of Basic And Diluted Net Income Per Share Applicable To Common Shareholders

The following table presents the amounts used in computing basic and diluted net income per share applicable to common shareholders for the three and six months ended June 30, 2014 and 2013 and the effect of dilutive potential common shares on the number of shares used in computing dilutive net income per share applicable to common shareholders. Diluted potential common shares resulting from the assumed exercise of outstanding stock options and restricted stock are determined based on the treasury stock method (in thousands, except per share amounts).

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income applicable to common shareholders	$	96,436	$	69,123	$	170,746	$	108,185
Shares used in computing net income per share applicable to common shareholders:
Basic	59,686		58,938		59,415		58,075
Effect of dilutive potential common shares:
Stock options	2,221		2,238		2,222		2,276
Restricted stock	544		322		535		230
Diluted	62,451		61,498		62,172		60,581
Net income per share applicable to common shareholders:
Basic	$	1.62	$	1.17	$	2.87	$	1.86
Diluted	$	1.54	$	1.12	$	2.75	$	1.79

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following table presents the amounts excluded from the computation of diluted net income per share applicable to common shareholders for the three and six months ended June 30, 2014 and 2013 as the inclusion of these securities would have been anti-dilutive (in thousands):

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014	2013	2014	2013
Stock options	25	2,010	63	2,004
Restricted stock awards	3	—	11	—

Calculation of Unallocated Undistributed Earnings Using Two Class Method

The following table sets forth the calculation of unallocated undistributed earnings, both basic and diluted, using the two-class method for amounts attributable to our common stock and our restricted stock awards (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Net income applicable to common shareholders	$	96,436	$	69,123	$	170,746	$	108,185
Less: Dividends declared	18,426		15,000		36,773		29,887
Undistributed earnings	$	78,010	$	54,123	$	133,973	$	78,298
Common stock undistributed earnings	$	76,009	$	53,172	$	130,543	$	76,648
Unvested restricted stock award undistributed earnings	2,001		951		3,430		1,650
Total undistributed earnings	$	78,010	$	54,123	$	133,973	$	78,298

Schedule of Intangible Assets and Goodwill Acquired with the Acquisition of BioVectra

Goodwill and intangibles acquired in conjunction with the acquisition of BioVectra, consists of the following (in thousands):

	June 30, 2014			December 31, 2013
Acquired intangibles	$	33,235		$	33,186
Less accumulated amortization	(4,646		)	(3,055		)
Acquired intangibles, net	$	28,589		$	30,131
Goodwill	$	20,527		$	20,464

Changes in Goodwill

The following table summarizes the changes in the carrying amount of goodwill (in thousands):

Balance at December 31, 2013	$	20,464
Currency translation	63
Balance at June 30, 2014	$	20,527

The following table provides a rollforward of goodwill by country (in thousands):

	December 31, 2013		Additions from Purchase Accounting		Currency Translation		June 30, 2014
United States	$	—	$	—	$	—	$	—
Canada	20,464		—		63		20,527
Total	$	20,464	$	—	$	63	$	20,527

Schedule of Finite-Lived Intangible Assets

The following table provides a rollforward of the intangibles (in thousands):

	June 30, 2014
	Gross Book Value		Accumulated Amortization			Currency Translation			Net Book Value
Trademark	$	8,151	$	—		$	(553	)	$	7,598
Patent	58		(30		)	(4		)	24
Contracted customer relationships	17,208		(2,434		)	(1,133		)	13,641
Non-contracted customer relationships	10,164		(2,182		)	(656		)	7,326
Total acquired intangibles	$	35,581	$	(4,646	)	$	(2,346	)	$	28,589

Changes in Intangibles

The following table summarizes the changes in the carrying amount of intangibles (in thousands):

Balance at December 31, 2013	$	30,131
Amortization expense	(1,591		)
Currency translation	49
Balance at June 30, 2014	$	28,589

Schedule of Finite-Lived Intangible Assets

Intangibles acquired in conjunction with the acquisition of Synacthen, consists of the following (in thousands):

	June 30, 2014			December 31, 2013
In process R&D asset	$	196,663		$	196,663
Less accumulated amortization	(10,133		)	(5,212		)
In process R&D asset, net	$	186,530		$	191,451

Net Sales and Net Income for Operating Segments

For the three and six months ended June 30, 2014 and 2013, information regarding our net sales and net income for our operating segments is as follows (in millions):

	Questcor		BioVectra			Intersegment Eliminations			Consolidated
Net Sales
For the three months ended June 30, 2014	$	261,412	$	17,467		$	(49	)	$	278,830
For the three months ended June 30, 2013	$	177,045	$	7,693		$	(165	)	$	184,573
Net Income
For the three months ended June 30, 2014	$	92,239	$	4,215		$	(18	)	$	96,436
For the three months ended June 30, 2013	$	70,125	$	(1,015	)	$	13		$	69,123

Assets for Operating Segments

June 30, 2014 and December 31, 2013, information regarding total assets for our operating segments is as follows (in millions):

	Questcor		BioVectra		Intersegment Eliminations			Consolidated
Total Assets
June 30, 2014	$	874,006	$	118,516	$	(84,684	)	$	907,838
December 31, 2013	$	711,507	$	108,510	$	(83,663	)	$	736,354

Schedule of capital expenditures by operating segment

As of June 30, 2014 and December 31, 2013, information regarding capital expenditures for our operating segments is as follows (in millions):

	Questcor		BioVectra		Intersegment Eliminations		Consolidated
Total Capital Expenditures
June 30, 2014	$	1,620	$	6,646	$	—	$	8,266
December 31, 2013	$	1,100	$	2,426	$	10	$	3,536