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`
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`Note 8—Fair value measurements:
`ASC 820-10 Fair Value Measurements and Disclosures defines fair value as the price that would be received for an asset
`or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
`transaction between market participants on the measurement date. ASC 820 requires that assets and liabilities carried at
`fair value be classified and disclosed in one of the following three categories:
`
`Level 1: (cid:9)
`
`Level 2: (cid:9)
`
`Quoted market prices in active markets for identical assets and liabilities. Active market means a market in
`which transactions for assets or liabilities occur with "sufficient frequency" and volume to provide pricing
`information on an ongoing unadjusted basis. Cash equivalents include highly liquid investments with an original
`maturity of three months or less at acquisition. We have determined that our cash equivalents in their entirety
`are classified as Level 1 within the fair value hierarchy.
`Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs
`that are observable or can be corroborated by observable market data for substantially the full term of the assets
`or liabilities. Our Level 2 assets primarily include debt securities, including corporate bonds with quoted prices
`that are traded less frequently than exchange-traded instruments. All of our Level 2 asset values are determined
`using a pricing model with inputs that are observable in the market or can be derived principally from or
`corroborated by observable market data. The pricing model information is provided by third party entities (e.g.,
`banks or brokers). In some instances, these third party entities engage external pricing services to estimate the
`fair value of these securities. We have a general understanding of the methodologies employed by the pricing
`services in their pricing models. We corroborate the estimates of non-binding quotes from the third party entities'
`pricing services to an independent source that provides quoted market prices from broker or dealer quotations.
`We investigate large differences, if any. Based on historical differences, we have not been required to adjust
`quotes provided by the third party entities' pricing services used in estimating the fair value of these securities.
`
`Level 3: (cid:9)
`
`Unobservable inputs that are not corroborated by market data.
`
`Financial assets and liabilities
`
`The fair value of our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014
`were as follows ($ in thousands):
`
`Cash equivalents
`Senior secured term loan (Note 14)
`7.375% senior notes (Note 14)
`Derivative instruments—Interest rate caps (Note 15)
`
`Estimated
`fair value at
`December 31,
`2014 (cid:9)
`(Successor)
`100,002
`1,399,941
`507,763
`5,700
`
`$
`$
`$
`$
`
`F-25
`
`Level 1 (cid:9)
`
`Level 2 (cid:9)
`
`Level 3
`
`$100,002
`$ (cid:9)
`—
`$ (cid:9)
`—
`$ (cid:9)
`—
`
`—
`$ (cid:9)
`$1,399,941
`$ (cid:9) 507,763
`5,700
`$ (cid:9)
`
`$ (cid:9) —
`$ (cid:9) —
`$ (cid:9) —
`$ (cid:9) —
`
`http://www.sec.gov/Archives/edgar/data/1559149/000119312515089746/d880840ds1.htm (cid:9)
`
`3/17/2015
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`JAZZ EXHIBIT 2015
`Amneal Pharms. et al. (Petitioners) v. Jazz Pharms., Inc. (Patent Owner)
`Case IPR2015-00554
`Part 4 of 4
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`The fair value of our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013
`were as follows ($ in thousands):
`
`Corporate bonds (Note 7)
`Cash equivalents
`Senior secured term loan (Note 14)
`7.375% senior notes (Note 14)
`Derivative instruments—Interest rate caps (Note 15)
`
`Estimated
`fair value at
`December 31,
`2013
`(Successor)
`3,541
`66,782
`1,063,255
`507,150
`1,189
`
`$
`$
`$
`$
`$
`
`Level I
`
`Level 2
`
`Level 3
`
`—
`$ (cid:9)
`$66,782
`$ (cid:9)
`—
`$ (cid:9)
`—
`$ (cid:9)
`—
`
`3,541
`$
`—
`$
`$1,063,255
`$ 507,150
`1,189
`$
`
`$ (cid:9) —
`$ (cid:9) —
`$ (cid:9) —
`$ (cid:9) —
`$ (cid:9) —
`
`The carrying amount reported in the consolidated balance sheets for accounts receivables, net, inventories, prepaid
`expenses and other current assets, accounts payable, payables due to distribution agreement partners, accrued salaries
`and employee benefits, accrued government pricing liabilities, accrued legal settlements, and accrued expenses and other
`current liabilities approximate fair value because of their short-term nature.
`
`Non-financial assets and liabilities
`
`The Company's non-financial assets, such as intangible assets and property, plant and equipment are only recorded at fair
`value if an impairment charge is recognized.
`
`Intangible assets
`
`During the years ended December 31, 2014 and December 31, 2013, we recorded intangible asset impairments totaling
`$146.9 million and $100.1 million, respectively, as detailed in Note 12—"Intangible Assets, net". During the period from
`January 1, 2012 to September 28, 2012 (Predecessor), we abandoned an in-process research and development project
`that was acquired in the Anchen Acquisition and recorded a corresponding intangible asset impairment of $2.0 million, and
`we exited the market of a commercial product that was acquired in the Anchen Acquisition and recorded a corresponding
`intangible asset impairment of $3.7 million.
`
`Derivative instruments—interest rate caps
`
`We use interest rate cap agreements to manage our interest rate risk on our variable rate long-term debt. Refer to Note
`15—"Derivative Instruments and Hedging Activities," for further information.
`
`Note 9—Accounts receivable:
`We account for revenue in accordance with ASC 605 "Revenue Recognition". In accordance with that standard, we
`recognize revenue for product sales when title and risk of loss have transferred to our customers, when reliable estimates of
`rebates, chargebacks, returns and other adjustments can be made, and when collectability is reasonably assured. This is
`generally at the time that products are received by our direct customers. We also review available trade inventory levels at
`certain large wholesalers to evaluate any potential excess supply levels in relation to expected demand. We determine
`whether we will recognize revenue at the time that our products are received by our direct customers or defer revenue
`recognition until a later date on a product by product basis at the time of launch. Upon recognizing revenue from a sale, we
`record estimates for chargebacks, rebates and incentive programs, product returns, cash discounts and other sales
`reserves that reduce accounts receivable.
`
`F-26
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`The following tables summarize the impact of accounts receivable reserves and allowance for doubtful accounts on the
`gross trade accounts receivable balances at each balance sheet date ($ in thousands):
`
`Gross trade accounts receivable
`Chargebacks
`Rebates and incentive programs
`Returns
`Cash discounts and other
`Allowance for doubtful accounts
`Accounts receivable, net
`
`Allowance for doubtful accounts
`
`$ (cid:9)
`
`December 31, (cid:9)
`2014 (cid:9)
`(Successor) (cid:9)
`565,694 (cid:9)
`(96,492) (cid:9)
`(138,989) (cid:9)
`(84,330) (cid:9)
`(86,797) (cid:9)
`(354) (cid:9)
`158,732 (cid:9)
`
`$ (cid:9)
`
`$ (cid:9)
`
`December 31,
`2013
`(Successor)
`383,347
`(48,766)
`(75,321)
`(78,181)
`(37,793)
`(7)
`143,279
`
`$ (cid:9)
`
`For the year
`ended
`
`For the year
`ended
`
`December 31,
`2014
`(Successor)
`
`December 31,
`2013
`(Successor)
`
`July 12, 2012 to (cid:9)
`December 31, (cid:9)
`2012 (cid:9)
`(Successor) (cid:9)
`
`For the period
`January 1, 2012 to
`September 28,
`2012
`(Predecessor)
`
`$ (cid:9)
`
`(7)
`
`$ (cid:9)
`
`(278)
`-
`
`(597)
`
`528
`(354)
`
`$ (cid:9)
`
`$ (cid:9)
`
`-
`
`-
`-
`
`(2)
`
`(5)
`(7)
`
`$ (cid:9)
`
`(100) (cid:9)
`
`$ (cid:9)
`
`- (cid:9)
`- (cid:9)
`
`- (cid:9)
`
`100 (cid:9)
`- (cid:9)
`
`$ (cid:9)
`
`$ (cid:9)
`
`(1)
`
`-
`(100)
`
`-
`
`1
`(100)
`
`Balance at beginning of
`period (cid:9)
`Par Sterile opening
`balance (cid:9)
`Anchen opening balance (cid:9)
`Additions-charge to
`expense (cid:9)
`Adjustments and/or
`deductions (cid:9)
`Balance at end of period (cid:9)
`
`The following tables summarize the activity for the years ended December 31, 2014, 2013 and 2012 in the accounts
`affected by the estimated provisions described below ($ in thousands):
`
`Accounts receivable (cid:9)
`reserves (cid:9)
`Chargebacks (cid:9)
`Rebates and incentive
`programs (cid:9)
`Returns (cid:9)
`Cash discounts and other (cid:9)
`Total (cid:9)
`Accrued liabilities(2) (cid:9)
`
`For the year ended December 31, 2014
`(Successor)
`
`Par (cid:9)
`Sterile (cid:9)
`beginning (cid:9)
`balance (cid:9)
`(6,296) (cid:9)
`
`$
`
`(5,489) (cid:9)
`(4,820) (cid:9)
`(1,792) (cid:9)
`(18,397) (cid:9)
`(382) (cid:9)
`
`$
`$
`
`Beginning (cid:9)
`balance
`(48,766) (cid:9)
`
`$ (cid:9)
`
`(75,321)
`(78,181)
`(37,793)
`$ (240,061) (cid:9)
`(35,829) (cid:9)
`$ (cid:9)
`
`Provision
`recorded
`for
`current
`period
`sales
`(871,139)
`
`$ (cid:9)
`
`(480,949)
`(31,361)
`(291,153)
`$(1,674,602)
`(84,840)
`$ (cid:9)
`
`(Provision)
`reversal
`recorded
`for prior
`period (cid:9)
`sales (cid:9)
`2,628(1) (cid:9)
`
`$ (cid:9)
`
`- (cid:9)
`- (cid:9)
`(1,449)(3) (cid:9)
`1,179 (cid:9)
`2,805(4) (cid:9)
`
`$ (cid:9)
`$ (cid:9)
`
`F-27
`
`Credits (cid:9)
`processed (cid:9)
`$ (cid:9) 827,081 (cid:9)
`
`422,770 (cid:9)
`30,032 (cid:9)
`245,390 (cid:9)
`$1,525,273 (cid:9)
`75,599 (cid:9)
`$ (cid:9)
`
`Ending
`balance
`$ (96,492)
`
`(138,989)
`(84,330)
`(86,797)
`$(406,608)
`$ (42,647)
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`
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`
`Accounts receivable reserves
`Chargebacks
`Rebates and incentive programs
`Returns
`Cash discounts and other
`Total
`Accrued liabilities(2)
`
`Accounts receivable reserves
`Chargebacks
`Rebates and incentive programs
`Returns
`Cash discounts and other
`Total
`Accrued liabilities(2)
`
`Page 214 of 270
`
`For the year ended December 31, 2013
`(Successor)
`
`Provision
`recorded
`for
`current
`period
`sales
`(630,097)
`(290,934)
`(37,956)
`(195,632)
`$(1,154,619)
`(80,726)
`$ (cid:9)
`
`$ (cid:9)
`
`$ (cid:9)
`
`Beginning
`balance
`(41,670)
`(59,426)
`(68,062)
`(26,544)
`$ (195,702)
`(42,162)
`$ (cid:9)
`
`(Provision)
`reversal
`recorded
`for prior
`period
`sales
`- (1) (cid:9)
`659
`-
`1,564
`2,223
`3,566
`
`$ (cid:9)
`
`$ (cid:9)
`$ (cid:9)
`
`(5) (cid:9)
`
`Credits
`processed
`$ (cid:9) 623,001
`274,380
`27,837
`182,819
`$1,108,037
`83,493
`$ (cid:9)
`
`Ending
`balance
`$ (48,766)
`(75,321)
`(78,181)
`(37,793)
`$(240,061)
`$ (35,829)
`
`For the period July 12, 2012 to December 31, 2012
`
`Provision
`recorded for
`current
`period sales
`$ (132,834)
`(69, 749)
`(8,522)
`(46, 053)
`(257,158)
`(24,437)
`
`$ (cid:9)
`$ (cid:9)
`
`Beginning
`balance
`$ (24,223)
`(43,866)
`(64,119)
`(30,817)
`$1(63,025)
`$ (42,455)
`
`(Provision)
`reversal
`recorded
`for prior
`period
`sales
`
`$
`$
`
`(1) (cid:9)
`
`_ (cid:9)
`
`Credits (cid:9)
`processed (cid:9)
`$ (cid:9) 115,387
`54,189
`4,579
`50,326
`$ (cid:9) 224,481
`24,730
`$ (cid:9)
`
`Ending
`balance
`$ (41,670)
`(59,426)
`(68,062)
`(26,544)
`$(195,702)
`$ (42,162)
`
`For the period January 1, 2012 to September 28, 2012
`(Predecessor)
`
`(Provision)
`reversal
`recorded
`Provision
`for prior
`recorded for
`Credits (cid:9)
`Ending
`period
`current
`Beginning
`balance
`processed (cid:9)
`sales
`period sales
`balance
`Accounts receivable reserves (cid:9)
`$ (24,223)
`$ (cid:9) 305,876 (cid:9)
`- (1) (cid:9)
`$ (cid:9)
`(309,411)
`(20,688)
`Chargebacks (cid:9)
`138,437 (cid:9)
`(147,112)
`(43,866)
`(59)
`(35,132)
`Rebates and incentive programs (cid:9)
`17,744 (cid:9)
`(6) (cid:9)
`1,602
`(64,119)
`(24,793)
`(58,672)
`Returns (cid:9)
`(809) _ (cid:9)
`101,382 (cid:9)
`(30,817)
`(102,718)
`(28,672)
`Cash discounts and other (cid:9)
`734 _ (cid:9)
`$ (cid:9) 563,439 (cid:9)
`$(163,025)
`(584,034)
`$ (143,164)
`Total (cid:9)
`$ (cid:9)
`$ (cid:9)
`46,695 (cid:9)
`- _ (cid:9)
`$ (42,455)
`(49,536)
`(39,614)
`Accrued liabilities(2) . (cid:9)
`$ (cid:9)
`$ (cid:9)
`$ (cid:9)
`$ (cid:9)
`(1) Unless specific in nature, the amount of provision or reversal of reserves related to prior periods for chargebacks is not determinable on a product or customer
`specific basis; however, based upon historical analysis and analysis of activity in subsequent periods, we believe that our chargeback estimates remain
`reasonable. During the year ended December 31, 2014 (Successor), the Company settled a dispute with a customer resulting in a recovery payment of
`$3.6 million of which $2.6 million pertained to prior year transactions.
`Includes amounts due to indirect customers for which no underlying accounts receivable exists and is principally comprised of Medicaid rebates and rebates
`due under other U.S. Government pricing programs, such as TriCare and the Department of Veterans Affairs.
`
`$ (cid:9)
`
`$ (cid:9)
`
`(2)
`
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`(3) During the year ended December 31, 2014, the Company recorded expense of approximately $1.0 million related to a re-procurement claim from one customer
`for the period September 2012 through October 2012. In addition, we settled post audit claims from customers for the period January 2009 through December
`2012 that resulted in net expense of approximately $0.5 million.
`(4) During 2014, we received further additional information related to Managed Medicaid utilization in California and performed a recalculation of average
`manufacturer's price. As a result we reduced our 2014 Medicaid accruals by approximately $3.6 million related to the periods March 2010 through December
`2013. This activity was partially offset by the expense of $0.8 million related to disputed TriCare claims for the period from January 2009 through December
`2013. Our Medicaid and TriCare accruals represent our best estimate at this time.
`(5) During 2013, we received additional information related to Managed Medicaid utilization in California and performed a recalculation of average manufacturer's
`price. As a result we reduced our 2013 Medicaid accruals by approximately $3.6 million related to the periods January 2010 through December 2012. Our
`Medicaid accrual represents our best estimate at this time.
`(6) The amount principally represents the resolution of a customer dispute in the first quarter of 2012 regarding invalid deductions taken in prior years of
`approximately $1.6 million.
`
`The Company sells its products directly to wholesalers, retail drug store chains, drug distributors, mail order pharmacies
`and other direct purchasers as well as customers that purchase its products indirectly through the wholesalers, including
`independent pharmacies, non-warehousing retail drug store chains, managed health care providers and other indirect
`purchasers. The Company often negotiates product pricing directly with health care providers that purchase products
`through the Company's wholesale customers. In those instances, chargeback credits are issued to the wholesaler for the
`difference between the invoice price paid to the Company by our wholesale customer for a particular product and the
`negotiated contract price that the wholesaler's customer pays for that product. The information that the Company considers
`when establishing its chargeback reserves includes contract and non-contract sales trends, average historical contract
`pricing, actual price changes, processing time lags and customer inventory information from its three largest wholesale
`customers. The Company's chargeback provision and related reserve vary with changes in product mix, changes in
`customer pricing and changes to estimated wholesaler inventory.
`
`Customer rebates and incentive programs are generally provided to customers as an incentive for the customers to
`continue carrying the Company's products or replace competing products in their distribution channels with our products.
`Rebate programs may be based on either a wholesale or non-wholesale customer's direct purchases. Rebates may also be
`based on a non-wholesale customer's indirect purchases of the Company's products from a wholesaler under a contract
`with us. The incentive programs include stocking or trade show promotions where additional discounts may be given on a
`new product or certain existing products as an added incentive to stock the Company's products. We may, from time to
`time, also provide price and/or volume incentives on new products that have multiple competitors and/or on existing
`products that confront new competition in order to attempt to secure or maintain a certain market share. The information
`that the Company considers when establishing its rebate and incentive program reserves are rebate agreements with, and
`purchases by, each customer, tracking and analysis of promotional offers, projected annual sales for customers with annual
`incentive programs, actual rebates and incentive payments made, processing time lags, and for indirect rebates, the level of
`inventory in the distribution channel that will be subject to indirect rebates. We do not provide incentives designed to
`increase shipments to our customers that we believe would result in out-of-the-ordinary course of business inventory for
`them. The Company regularly reviews and monitors estimated or actual customer inventory information at its three largest
`wholesale customers for its key products to ascertain whether customer inventories are in excess of ordinary course of
`business levels.
`
`Pursuant to a drug rebate agreement with the Centers for Medicare and Medicaid Services, TriCare and similar
`supplemental agreements with various states, the Company provides a rebate on drugs dispensed under such government
`programs. The Company determines its estimate of the Medicaid rebate accrual primarily based on historical experience of
`claims submitted by the various states and any new information regarding changes in the Medicaid program that might
`impact the Company's provision for Medicaid rebates. In determining the appropriate accrual amount we consider historical
`payment rates; processing lag for outstanding claims and payments; levels of inventory in the distribution channel; and the
`impact of the healthcare reform acts. The Company reviews the accrual and assumptions on a quarterly basis against
`actual claims data to help ensure
`
`F-29
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`that the estimates made are reliable. On January 28, 2008, the Fiscal Year 2008 National Defense Authorization Act was
`enacted, which expands TriCare to include prescription drugs dispensed by TriCare retail network pharmacies. TriCare
`rebate accruals reflect this program and are based on actual and estimated rebates on Department of Defense eligible
`sales.
`
`The Company accepts returns of product according to the following criteria: (i) the product returns must be approved by
`authorized personnel with the lot number and expiration date accompanying any request and (ii) we generally will accept
`returns of products from any customer and will provide the customer with a credit memo for such returns if such products
`are returned between 6 months prior to, and 12 months following, such products' expiration date. The Company records a
`provision for product returns based on historical experience, including actual rate of expired and damaged in-transit returns,
`average remaining shelf-lives of products sold, which generally range from 12 to 48 months, and estimated return dates.
`Additionally, we consider other factors when estimating the current period return provision, including levels of inventory in
`the distribution channel, significant market changes that may impact future expected returns, and actual product returns,
`and may record additional provisions for specific returns that we believe are not covered by the historical rates. The
`Company generally will accept returns of injectable products from any customer and provide the customer with a credit
`memo for returns if such products are returned between six months prior to and six months following, such products'
`expiration date. The Company's returns policy also states that refrigerated and temperature controlled injectable products
`are non-returnable.
`
`The Company offers cash discounts to its customers, generally 2% of the sales price, as an incentive for paying within
`invoice terms, which generally range from 30 to 90 days. The Company accounts for cash discounts by reducing accounts
`receivable by the full amount of the discounts that we expect our customers to take.
`
`In addition to the significant gross-to-net sales adjustments described above, we periodically make other sales adjustments.
`The Company generally accounts for these other gross-to-net adjustments by establishing an accrual in the amount equal
`to its estimate of the adjustments attributable to the sale.
`
`The Company may at its discretion provide price adjustments due to various competitive factors, through shelf-stock
`adjustments on customers' existing inventory levels. There are circumstances under which we may not provide price
`adjustments to certain customers as a matter of business strategy, and consequently may lose future sales volume to
`competitors and risk a greater level of sales returns on products that remain in the customer's existing inventory.
`
`As detailed above, we have the experience and access to relevant information that we believe are necessary to reasonably
`estimate the amounts of such deductions from gross revenues, except as described below. Some of the assumptions we
`use for certain of our estimates are based on information received from third parties, such as wholesale customer
`inventories and market data, or other market factors beyond our control. The estimates that are most critical to the
`establishment of these reserves, and therefore, would have the largest impact if these estimates were not accurate, are
`estimates related to contract sales volumes, average contract pricing, customer inventories and return volumes. The
`Company regularly reviews the information related to these estimates and adjusts its reserves accordingly, if and when
`actual experience differs from previous estimates. With the exception of the product returns allowance, the ending balances
`of accounts receivable reserves and allowances generally are processed during a two-month to four-month period.
`
`Use of estimates in reserves
`
`We believe that our reserves, allowances and accruals for items that are deducted from gross revenues are reasonable and
`appropriate based on current facts and circumstances. It is possible however, that other parties applying reasonable
`judgment to the same facts and circumstances could develop different allowance and accrual amounts for items that are
`deducted from gross revenues. Additionally, changes in actual experience or
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`changes in other qualitative factors could cause our allowances and accruals to fluctuate, particularly with newly launched
`or acquired products. We review the rates and amounts in our allowance and accrual estimates on a quarterly basis. If
`future estimated rates and amounts are significantly greater than those reflected in our recorded reserves, the resulting
`adjustments to those reserves would decrease our reported net revenues; conversely, if actual product returns, rebates and
`chargebacks are significantly less than those reflected in our recorded reserves, the resulting adjustments to those reserves
`would increase our reported net revenues. We regularly review the information related to these estimates and adjust our
`reserves accordingly, if and when actual experience differs from previous estimates.
`
`As is customary and in the ordinary course of business, our revenue that has been recognized for product launches
`included initial trade inventory stocking that we believed was commensurate with new product introductions. At the time of
`each product launch, we were able to make reasonable estimates of product returns, rebates, chargebacks and other sales
`reserves by using historical experience of similar product launches and significant existing demand for the products.
`
`Note 10—Inventories:
`
`($ in thousands)
`
`Raw materials and supplies
`Work-in-process
`Finished goods
`
`Inventory write-offs (inclusive of pre-launch inventories detailed below)
`
`$ (cid:9)
`
`December 31,
`2014
`(Successor)
`60,020
`26,343
`68,324
`154,687 (cid:9)
`
`$ (cid:9)
`
`December 31,
`2013
`(Successor)
`44,403
`9,834
`63,070
`117,307
`
`$ (cid:9)
`
`in thousands) (cid:9)
`
`write-offs (cid:9)
`
`For the year ended For the year ended (cid:9)
`
`For the period
`July 12, 2012 to January 1, 2012 to
`December 31. 2014 December 31. 2013 December 31, 2012 eptember 28, 2012
`(Successor) (cid:9)
`(Successor)
`(Successor)
`(Predecessor)
`12,941 $ (cid:9)
`18,299
`17,209
`
`$ (cid:9)
`
`Par capitalizes inventory costs associated with certain products prior to regulatory approval and product launch, based on
`management's judgment of reasonably certain future commercial use and net realizable value, when it is reasonably certain
`that the pre-launch inventories will be saleable. The determination to capitalize is made once Par (or its third party
`development partners) has filed an ANDA that has been acknowledged by the FDA as containing sufficient information to
`allow the FDA to conduct its review in an efficient and timely manner and management is reasonably certain that all
`regulatory and legal hurdles will be cleared. This determination is based on the particular facts and circumstances relating
`to the expected FDA approval of the generic drug product being considered, and accordingly, the time frame within which
`the determination is made varies from product to product. Par could be required to write down previously capitalized costs
`related to pre-launch inventories upon a change in such judgment, or due to a denial or delay of approval by regulatory
`bodies, or a delay in commercialization, or other potential factors. As of December 31, 2014, Par had approximately $4.4
`million in inventories related to generic products that were not yet available to be sold.
`
`Par Specialty also capitalizes inventory costs associated with in-licensed branded products subsequent to FDA approval but
`prior to product launch based on management's judgment of probable future commercial use and net realizable value. We
`believe that numerous factors must be considered in determining probable future
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`commercial use and net realizable value including, but not limited to, Par Specialty's limited number of historical product
`launches, as well as the ability of third party partners to successfully manufacture commercial quantities of product. Par
`Specialty could be required to expense previously capitalized costs related to pre-launch inventory upon a change in such
`judgment, due to a delay in commercialization, product expiration dates, projected sales volume, estimated selling price or
`other potential factors. As of December 31, 2014, Par Specialty had approximately $0.6 million in inventories related to a
`brand product that was not yet available to be sold.
`
`The amounts in the table below represent inventories related to products that were not yet available to be sold and are also
`included in the total inventory balances presented above.
`
`Pre-launch inventories
`
`($ in thousands) (cid:9)
`
`Raw materials and supplies (cid:9)
`Work-in-process (cid:9)
`Finished goods (cid:9)
`
`$ (cid:9)
`
`December 31, 2014 (cid:9)
`(Successor) (cid:9)
`4,515 (cid:9)
`386 (cid:9)
`134 (cid:9)
`5,035 (cid:9)
`
`$ (cid:9)
`
`December 31, 2013
`(Successor)
`6,308
`93
`118
`6,519
`
`$ (cid:9)
`
`For the year ended
`
`December 31, 2014
`
`For the year ended
`December 31, (cid:9)
`2013
`(Successor)
`
`July 12, 2012 to
`December 31, 2012
`(Successor)
`
`For the
`January 1, 2012 to
`eptember 28, 2012
`
`Pre-launch
`inventory
`write-offs, net
`of partner
`allocation
`$ (cid:9)
`4,733
`Note 11 — Property, plant and equipment, net:
`
`($ in thousands)
`
`Land
`Buildings
`Machinery and equipment
`Office equipment, furniture and fixtures
`Computer software and hardware
`Leasehold improvements
`Construction in progress
`
`Accumulated depreciation and amortization
`
`2,310
`
`1,730
`
`$ (cid:9)
`
`10,208
`
`$ (cid:9)
`
`December 31, 2014
`(Successor)
`11,063
`63,589
`97,129
`12,849
`26,369
`26,774
`37,981
`275,754
`(58,440)
`217,314 (cid:9)
`
`$ (cid:9)
`
`December 31, 2013
`(Successor)
`4,553
`29,491
`58,556
`5,433
`21,582
`25,828
`12,286
`157,729
`(30,453)
`127,276
`
`$ (cid:9)
`
`Depreciation and amortization expense related to property, plant and equipment
`
`($ in (cid:9)
`thousands) (cid:9)
`
`Depreciation
`and
`amortization
`
`For the year ended (cid:9)
`December 31, (cid:9)
`2014 (cid:9)
`(Successor) (cid:9)
`
`For the year ended (cid:9)
`December 31, (cid:9)
`2013 (cid:9)
`(Successor) (cid:9)
`
`July 12, 2012 to (cid:9)
`December 31, 2012 (cid:9)
`(Successor) (cid:9)
`
`For the period
`January 1, 2012 to
`September 28, 2012
`(Predecessor)
`
`27,837
`
`23
`
`F-32
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`rD !P1
`
`13,230
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`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
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`Note 12— Intangible assets, net:
`
`December 31, 2014 (Successor) (cid:9)
`Accumulated (cid:9)
`amortization (cid:9)
`Net (cid:9)
`Cost (cid:9)
`$ 957,166 $ (cid:9)
`(373,602) $ 583,564 (cid:9)
`
`December 31, 2013 (Successor)
`Accumulated
`Net
`amortization (cid:9)
`$ (cid:9)
`(204,218) $ 674,389
`
`Cost (cid:9)
`$ 878,607 (cid:9)
`
`($ in thousands) (cid:9)
`Developed products (1) (cid:9)
`Other product related royalty
`streams (cid:9)
`IPR&D (2) (cid:9)
`Trade names (3) (cid:9)
`Other (cid:9)
`
`(37,334) (cid:9)
`(22,709) (cid:9)
`115,600 (cid:9)
`78,266 (cid:9)
`115,600 (cid:9)
`92,891
`351,614 (cid:9)
`— (cid:9)
`351,614 (cid:9)
`— (cid:9)
`298,100 (cid:9)
`298,100
`— (cid:9)
`26,400 (cid:9)
`26,982 (cid:9)
`(118) (cid:9)
`27,100 (cid:9)
`26,400
`(132) (cid:9)
`1,000 (cid:9)
`327 (cid:9)
`1,153 (cid:9)
`(826) (cid:9)
`868
`(227,059) $1,092,648
`$ (cid:9)
`$1,319,707 (cid:9)
`(411,880) $1,040,753 (cid:9)
`$ (cid:9)
`$1,452,633 (cid:9)
`(1) Developed products include intangible assets related to commercial products as part of the Merger, subsequently developed IPR&D, products acquired from
`the Watson/Actavis Merger, and intangible assets related to commercial products as part of the Par Sterile Acquisition. These products are amortized based on
`its remaining useful life.
`IPR&D indefinite-lived assets include IPR&D as part of the Merger, IPR&D acquired from the Watson/Actavis Merger, and IPR&D acquired as part of the Par
`Sterile Acquisition.
`(3) Trade names include Par and Par Sterile Acquisition related trade name. The Par Sterile Acquisition related trade name is being amortized over its useful life,
`while the Par trade name is treated as an indefinite-lived asset and is not amortized.
`We recorded amortization expense related to intangible assets of approximately $184.8 million for the year ended
`December 31, 2014 (Successor), $184.3 million for the year ended December 31, 2013 (Successor), $42.8 million for the
`period July 12, 2012 (inception) to December 31, 2012 (Successor), and $31.2 million for the period January 1, 2012 to
`September 28, 2012 (Predecessor). After the Merger, amortization expense was included in cost of goods sold.
`
`(2)
`
`Intangible asset impairment
`During the year ended December 31, 2014, we recorded intangible asset impairments totaling $146.9 million related to an
`adjustment to the forecasted operating results for two IPR&D intangible asset groups and eight Par Pharmaceutical
`segment products compar