Table of Contents
`
`measurement period (up to one year from the acquisition date). The primary areas subject to change relate to the finalization of the working capital components and
`income taxes.
`
`The acquisition ofMeda creates a more diversified and expansive portfolio of branded and generic medicines along with a strong and growing portfolio of
`over-the-counter ("OTC") products. Meda has a balanced global footprint with significant scale in key geographic markets, particularly the U.S. and Europe. The
`acquisition of Meda expanded our presence in emerging markets, which includes countries in Africa, as well as countries throughout Asia and the Middle East, and
`is complemented by Mylan's presence in India, Brazil and Africa (including South Africa). The Company recorded a step-up in the fair value of inventory of
`approximately $107 million at the acquisition date which was fully amortized as of December 31,2016. The amortization ofthe inventory step-up was included in
`cost of sales in the Consolidated Statements of Operations.
`
`The identified intangible assets of $8.06 billion are comprised of product rights and licenses that have a weighted average useful life of 20 years .
`Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not
`observable in the market and are thus consideredLevel3 measurements as defined by U.S. GAAP. Refer to Note 7 ''Financial Instruments and Risk Management''
`for more information on the U.S. GAAP fair value hierarchy. The goodwill of $3.68 billion arising from the acquisition consisted largely of the value of the
`employee workforce, and the expected value of products to be developed in the future. The final allocation of goodwill to Mylan's reportable segments has not
`been completed; however, the majority of goodwill is expected to be allocated to the Europe segment. None of the goodwill recognized in this transaction is
`currently expected to be deductible for income tax purposes.
`
`The settlement of the Offer constituted an Acceleration Event (as defined in the Rottapharm Agreement referred to below) under the Sale and Purchase
`Agreement, dated as of July 30, 2014 (the "Rottapharm Agreement''), among Fidim S.r.l., Meda Pharma S.p.A and Meda, the occurrence of which accelerated an
`unconditional deferred purchase price payment of approximately $308 million ( f275 million) relating to Meda's acquisition ofRottapharm S.p.A. which
`otherwise would have been payable in January 2017. The amount was paid during the year ended December 31, 2016.
`
`The operating results ofMeda have been included in the Company's Consolidated Statements of Operations since the acquisition date. The total revenues
`ofMeda for the period from the acquisition date to December 31,2016 were $833.9 million and the net loss, net of tax, was $208.7 million, which includes the
`effects of the purchase accounting adjustments and acquisition related costs.
`
`Renllis8tmce Topicab B11siness
`
`On June 15, 2016, the Company completed the acquisition of the non-sterile, topicals-focused business (the" Topicals Business") of Renaissance
`Acquisition Holdings, LLC (" Renaissance '') for approximately $1.0 billion in cash at closing, including amounts deposited into escrow for potential contingent
`payments, subject to customary adjustments. The Topicals Business provides the Company with a complementary portfolio of approximately 25 products, an active
`pipeline of approximately 25 products, and an established U.S. sales and marketing infrastructure targeting dermatologists. The Topicals Business also provides an
`integrated manufacturing and development platform. In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this
`transaction. Under the acquisition method of accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated
`fair values at the acquisition date. The U.S. GAAP purchase price was $972.7 million, which includes estimated contingent consideration of approximately $16
`million at the date of acquisition related to the potential $50 million payment contingent on the achievement of certain 2016 financial targets. The $50 million
`contingent payment remains in escrow and is classified as restricted cash included in prepaid expenses and other current assets on the Consolidated Balance Sheets
`at December 31, 2016.
`
`During the year ended December 31,2016, adjustments were made to the preliminary purchase price recorded at June 15,2016 and are reflected as
`''Measurement Period Adjustments" in the table below. The preliminary allocation of the $972.7 million purchase price to the assets acquired and liabilities
`assumed for the Topicals Business is as follows:
`
`104
`
`0106
`
`MYLAN - EXHIBIT 1056 - Part 2 of 5
`Mylan Laboratories Limited v. Aventis Pharma S.A.
`IPR2016-00712
`
`

`

`Table of Contents
`
`(111 llti/IWIU)
`Current assets (excluding inventories)
`Inventories
`Property, plant and equipment
`Identified intangible assets
`In-process research and development
`Goodwill
`Other assets
`Total assets acquired
`Current liabilities
`Deferred tax liabilities
`Other noncurrent liabilities
`
`Net assets acquired
`
`$
`
`$
`
`Preliminary Purcbue
`Price Allocation u of Measurement Period
`Adjortmenta lbl
`June 15, 2016 <•l
`68.8
`(11.1)
`74.2
`54.8
`467.0
`275.0
`307.3
`0.9
`
`$
`
`Preliminary
`Purehue Price
`Allocation aa of
`December 31, 2016
`(a• adjo1ted)
`57.7
`74.2
`54.8
`467.0
`275.0
`318.6
`0.1
`
`11.3
`(0.8)
`
`1,248.0
`(65.0)
`(203.6)
`(6.7)
`
`(0.6)
`(9.2)
`9.0
`0.8
`
`$
`
`972.7
`
`$
`
`$
`
`1,247.4
`(74.2)
`(194.6)
`(5.9)
`
`972.7
`
`(a) As previously reported in the Company's Quarterly Report on Form 10-Q for the six months ended June 30, 2016.
`(b) The measurement period adjustments were recorded in the fourth quarter of2016 and are primarily related to certain working capital adjustments to
`reflect facts and circumstances that existed as of the acquisition date, and adjustments to deferred tax liabilities and goodwill.
`
`The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations, valuations and assumptions
`that are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The primary
`areas subject to change relate to the finalization of the working capital components and income taxes.
`
`The acquisition of the Topicals Business broadened the Company's dermatological portfolio. The amount allocated to IPR&D represents an estimate of
`the fair value of purchased in-process technology for research projects that, as of the closing date of the acquisition, had not reached technological feasibility and
`had no alternative future use. The fair value ofiPR&D of$275.0 million was based on the excess earnings method, which utilizes forecasts of expected cash
`inflows (including estimates for ongoing costs) and other contributory charges. A discount rate of 12.5% was utilized to discount net cash inflows to present values.
`IPR&D is accounted for as an indefinite-lived intangible asset and will be subject to impairment testing until completion or abandonment of the projects. Upon
`successful completion and launch of each product, the Company will make a determination of the estimated useful life of the individual IPR&D asset and amounts
`will be allocated to product rights and licenses in intangible assets. The acquired IPR&D projects are in various stages of completion and the estimated costs to
`complete these projects total approximately $65 million, which is expected to be incurred through 2018. There are risks and uncertainties associated with the
`timely and successful completion of the projects included in IPR&D, and no assurances can be given that the underlying assumptions used to estimate the fair value
`ofiPR&D will not change or the timely completion of each project to commercial success will occur.
`
`The identified intangible assets of $467.0 million are comprised of $454.0 million of product rights and licenses that have a weighted average useful life
`14 years and $13.0 million of contract manufacturing agreements that have a weighted average useful life offive years . Significant assumptions utilized in the
`valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus
`considered Level3 measurements as defined by U.S. GAAP. Refer to Note 7 ''Financial Instruments and Risk Management" for more information on the U.S.
`GAAP fair value hierarchy.
`
`The goodwill of $318.6 million arising from the acquisition consisted largely of the value of the employee workforce and the expected value of products
`to be developed in the future. All of the goodwill was assigned to the North America segment. None of the goodwill recognized in this transaction is currently
`expected to be deductible for income tax purposes. Acquisition related costs of approximately $3.6 million were incurred during the year ended December 31, 2016
`related to this transaction, which were recorded as a component of SG&A in the Consolidated Statements of Operations. The acquisition did
`
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`
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`

`Table of Contents
`
`not have a material impact on the Company's results of operations since the acquisition date or on a pro forma basis for the twelve months ended December 31,
`2016 and 2015 .
`
`Jai Pluumll Limited
`
`On November 20, 2015, the Company completed the acquisition of certain female healthcare businesses from Famy Care Limited (such businesses," Jai
`Phanna Limited ") through its wholly owned subsidiary Mylan Laboratories Limited for a cash payment of $750 million plus additional contingent payments of up
`to $50 million for the filing for approval with. and receipt of approval from, the U.S. Food and Drug Administration ("FDA") of a product under development with
`Jai Phanna Limited .
`
`In accordance with U.S. GAAP, the Company used the acquisition method of accounting to account for this transaction. Under the acquisition method of
`accounting, the assets acquired and liabilities assumed in the transaction were recorded at their respective estimated fair values at the acquisition date. The U.S.
`GAAP purchase price was $711.1 million , which excludes the $50 million paid into escrow at closing that is contingent upon at least one of two former principal
`shareholders of Jai Phanna Limited continuing to provide consulting services to the acquired business for the two -year post-closing period which is being treated
`as compensation expense over the service period. The U.S. GAAP purchase price also excludes $7 million of working capital and other adjustments and includes
`estimated contingent consideration at the date of acquisition of approximately $18 million related to the $50 million contingent payment.
`
`During the year ended December 31, 2016, adjustments were made to the preliminary purchase price recorded at November 20, 2015 and are reflected in
`the "Measurement Period Adjustments" below. The purchase price was finalized during the fourth quarter of2016. The allocation of the $711.1 million purchase
`price to the assets acquired and liabilities assumed for Jai Pharma Limited is as follows:
`
`(111 milliou)
`Current assets (excluding inventories)
`Inventories
`Property, plant and equipment
`Identified intangible assets
`In-process research and development
`
`Goodwill
`Other assets
`
`Total assets acquired
`Current liabilities
`Deferred tax liabilities
`
`Net assets acquired
`
`Preliminary
`Purebue Priee
`Allocation u of
`November 10,1015
`(a)
`
`$
`
`25.7
`4.9
`17.2
`437.0
`98.0
`317.2
`0.7
`
`900.7
`(9.1)
`(180.5)
`
`Mearurement Period
`Adjustments (bJ
`2.9
`
`$
`
`6.7
`
`9.6
`(5.4)
`(4.2)
`
`$
`
`711.1
`
`$
`
`$
`
`$
`
`Purehase Price
`Allocation •• or
`Deeember 31, 1016
`(u adjusted)
`28.6
`4.9
`17.2
`437.0
`98.0
`323.9
`0.7
`
`910.3
`(14.5)
`(184.7)
`
`711.1
`
`(a) As previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, as amended.
`(b) The measurement period adjustments were recorded in the first and fourth quarters of 2016 and are related to the recognition of goodwill, deferred tax
`liabilities, current liabilities and adjustments to working capital components to reflect facts and circumstances that existed as of the acquisition date.
`
`The acquisition of Jai Phanna Limited significantly broadened the Company's women's healthcare portfolio and strengthened its technical and
`manufacturing capabilities. The amount allocated to IPR&D represents an estimate of the fair value of purchased in-process technology for research projects that,
`as of the closing date of the acquisition. had not reached technological feasibility and had no alternative future use. The fair value of IPR&D was based on the
`excess earnings method, which utilizes forecasts of expected cash inflows (including estimates for ongoing costs) and other contributory charges. Disco unt rates of
`1 00/o and 11% were utilized to discount net cash inflows to present values. IPR&D is accounted for as an indefinite-lived intangible asset and will be subject to
`impairment testing until completion or abandonment of the projects. Upon successful completion and launch of each product, the Company will make a
`determination of the estimated useful life of
`
`106
`
`0108
`
`

`

`Table of Contents
`
`the individual IPR&D asset and amounts will be allocated to product rights and licenses in intangible assets. The acquired IPR&D projects are in various stages of
`completion and the estimated costs to complete these products will total approximately $5 million and are expected to be incurred through 2019. There are risks
`and uncertainties associated with the timely and successful completion of the projects included in IPR&D, and no assurances can be given that the underlying
`assumptions used to estimate the fair value of IPR&D will not change or the timely completion of each project to commercial success will occur.
`
`The identified intangible assets of $437.0 million are comprised of product rights and licenses that have weighted average useful lives of nine years .
`Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not
`observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP. Refer to Note 7 ''Financial Instruments and Risk Management''
`for more information on the U.S. GAAP fair value hierarchy. The goodwill of $323.9 million arising from the acquisition consisted largely of the value of the
`employee workforce and the value of products to be developed in the future. A majority of the goodwill was assigned to Mylan's Rest of World segment. During
`the year ended December 31, 2016, the Company received approvals from the relevant Indian regulatory authorities to legally merge its wholly owned subsidiary,
`Jai Pharma Limited, into Mylan Laboratories Limited. The merger resulted in the recognition of a deferred tax asset of $150 million for the tax deductible goodwill
`in excess of the book goodwill with a corresponding benefit to income tax provision for the year ended December 31, 2016. Acquisition related costs of
`approximately $8.5 million were incurred during the year ended December 31, 2015, which were recorded as a component ofSG&A expense in the Consolidated
`Statements of Operations . On a pro forma basis, the acquisition did not have a material impact on the Company's results of operations for the year ended
`December 31,2015.
`
`EPD B'llsiness
`
`On July 13, 2014, Mylan N.V., Mylan Inc., and Moon ofPA Inc. entered into a definitive agreement with Abbott Laboratories(" Abbott'') to acquire the
`EPD Business in an all-stock transaction (the "EPD Transaction"). On November 4, 2014, Mylan N.V., Mylan Inc., Moon ofPA Inc. and Abbott entered into an
`amended and restated definitive agreement implementing the transaction. The EPD Transaction closed on February 27, 2015 (the" EPD Transaction Closing Date
`''),after receiving approval from Mylan Inc.'s shareholders on January 29, 2015 . At closing, Abbott transferred the EPD Business to Mylan N.V. , in exchange for
`110 million ordinary shares of Mylan N.V. Immediately after the transfer of the EPD Business , Mylan Inc. merged with Moon ofP A Inc., an indirect wholly
`owned subsidiary of Mylan N.V. , with Mylan Inc. becoming an indirect wholly owned subsidiary ofMylan N.V. In addition, Mylan Inc.'s outstanding common
`stock was exchanged on a one to one basis forMylan N.V. ordinary shares. Following the EPD Transaction, Mylan N.V. 's corporate seat is located in
`Amsterdam, the Netherlands , its principal executive offices are located in Hatfield, Hertfordshire, England and Mylan N.V. group's global headquarters are
`located in Canonsburg, Pennsylvania .
`
`The acquired EPD Business included more than 100 specialty and branded generic pharmaceutical products in five major therapeutic areas and included
`several patent protected, novel and/or hard-to-manufacture products. As a result of the acquisition, Mylan has significantly expanded and strengthened its product
`portfolio in Europe, Japan, Canada, Australia and New Zealand.
`
`The purchase price for Mylan N.V. of the acquired EPD Business, which was on a debt-free basis, was $6.31 billion based on the closing price ofMylan
`Inc.'s stock as of the EPD Transaction Closing Date , as reported by NASDAQ . At the closing of the EPD Transaction , former shareholders of Mylan Inc. owned
`approximately 78% ofMylan N.V. 's ordinary shares and certain affiliates of Abbott (the "Abbott Shareholders") owned approximately 22% ofMylan N.V. 's
`ordinary shares. On the EPD Transaction Closing Date, Mylan N.V., Abbott and the Abbott Shareholders entered into a shareholder agreement. Following an
`underwritten public offering of the Abbott Shareholders of a portion of the Mylan N.V. ordinary shares held by them, which offering closed on April6, 2015, the
`Abbott Shareholders collectively owned approximately 13% ofMylan N.V. 's outstanding ordinary shares. The Company and Abbott engage in commercial
`transactions for the supply of products. In addition, Abbott provides certain transitional services to Mylan. The Company believes that these transactions are
`conducted on commercially reasonable terms.
`
`In accordance with U.S. GAAP, Mylan N.V. used the acquisition method of accounting to account for the EPD Transaction with Mylan Inc. being treated
`as the accounting acquirer. Under the purchase method of accounting, the assets acquired and liabilities assumed in the EPD Transaction were recorded at their
`respective estimated fair values at the EPD Transaction Closing Date . The purchase price was finalized during the fourth quarter of 2015. The allocation of the
`$6.31 billion purchase price (as valued on the EPD Transaction Closing Date) to the assets acquired and liabilities assumed for the
`
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`
`0109
`
`

`

`Table of Contents
`
`acquired EPD Business is as follows:
`
`(111 •illioiU)
`Accounts receivable
`Inventories
`Other current assets
`Property, plant and equipment
`Identified intangible assets
`Goodwill
`Other assets
`Total assets acquired
`Current liabilities
`Deferred tax liabilities
`Other non-current liabilities
`
`Net assets acquired
`
`$
`
`$
`
`443.8
`198.5
`43.0
`140.8
`4,843.0
`1,341.0
`41.0
`7,051.1
`(268.9)
`(421.9)
`(54.5)
`
`6,305.8
`
`The identified intangible assets of $4.84 billion are comprised of $4.52 billion of product rights and licenses that have weighted average useful lives of 13
`years and $320 million of contractual rights that have weighted average useful lives ranging from two to five years . Significant assumptions utilized in the
`valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus
`considered Level3 measurements as defined by U.S. GAAP. The goodwill of $1.34 billion arising from the acquisition primarily relates to the expected synergies
`of the combined company and the value of the employee workforce. A majority of the goodwill was assigned to the North America segment. Goodwill of$486.4
`million is currently expected to be deductible for income tax purposes. Acquisition related costs of approximately $86.1 million were incurred during the year
`ended December 31, 2015, which were recorded as a component ofSG&A in the Consolidated Statements of Operations.
`
`The operating results of the acquired EPD Business have been included in the Company's Consolidated Statements of Operations since February 27, 2015
`. The revenues of the acquired EPD Business for the period from the acquisition date to December 31, 2015 were $1.47 billion and the net loss, net of tax, was
`$62.4 million . The net loss, net of tax, includes the effects of the purchase accounting adjustments and acquisition related costs.
`
`Unaudited Pro Forma Fillanc:Ud Results
`
`The following table presents supplemental unaudited pro forma information for the acquisitions of Meda, as if it had occurred on January 1, 2015 and the
`EPD Business, as if it had occurred on January 1, 2014. The unaudited pro forma results reflect certain adjustments related to past operating performance and
`acquisition accounting adjustments, such as increased amortization expense based on the fair value of assets acquired, the impact of transaction costs and the
`related income tax effects. The unaudited pro forma results do not include any anticipated synergies which may be achievable subsequent to acquisition ofMeda or
`the EPD Business. Accordingly, the unaudited pro forma results are not necessarily indicative of the results that actually would have occurred, nor are they
`indicative of the future operating results ofMylan N.Y.
`
`(UIIIUUIIted, ill lllillioM, e:xt:ept per rll~~n -o1111ts)
`Total revenues
`
`Net earnings attributable to Mylan N.Y. ordinary shareholders
`Earnings per ordinary share attributable to Mylan N.Y. ordinary shareholders:
`Basic
`
`Diluted
`
`Weighted average ordinary shares outstanding:
`
`Basic
`
`Diluted
`
`108
`
`$
`
`$
`
`$
`
`$
`
`Year Eaded December 31,
`
`$
`
`$
`
`$
`
`$
`
`2016
`12,376.0
`
`560.6
`
`1.06
`
`1.05
`
`528.7
`
`536.2
`
`$
`
`$
`
`$
`
`$
`
`2015
`11,930.0
`
`604.1
`
`1.17
`
`1.11
`
`516.9
`
`542.1
`
`2014
`9,704.6
`
`694.0
`
`1.37
`
`1.37
`
`483.7
`
`508.0
`
`0110
`
`

`

`Table of Contents
`
`Other Trtlnsactions
`
`On Januacy 9, 2017, the Company announced that it has agreed to acquire the global rights to Cold-EEZE® brand cold remedy line from ProPhase Labs,
`Inc. for approximately $50 million in cash. The closing of the transaction is subject to the approval of the shareholders of ProPhase Labs, Inc and other customary
`closing conditions. On February 14, 2017, the Company entered into a joint development and marketing agreement for a respiratory product that will result in
`approximately $50 million in expense in the first quarter of 2017.
`
`During the year ended December 31, 2016, the Company entered into an agreement to acquire a marketed pharmaceutical product for an up front payment
`of approximately $57.9 million , which is included in investing activities in the Consolidated Statements of Cash Flows. The Company accounted for this
`transaction as an asset acquisition and is amortizing the product over a weighted useful life of five years .
`
`In December 2015, the Company entered into an agreement to acquire certain European intellectual property rights and marketing authorizations. The
`purchase price was $202.5 million including approximately $2.5 million of transaction costs. The Company accounted for this transaction as an asset acquisition.
`The Company paid $10 million at the closing of the transaction, which is included in investing in the Consolidated Statements of Cash Flows . The Company paid
`approximately $165 million during 2016, which is also included in investing in the Consolidated Statements of Cash Flows, and the remaining $25 million is
`expected to be paid during the first quarter of2017, subject to certain timing conditions. The asset is being amortized over a useful life of five years .
`
`On April3, 2015 , the Company and Stichting Preferred Shares Mylan (the "Foundation") entered into a call option agreement (the "Call Option
`Agreement''). Pursuant to the terms of the Call Option Agreement, Mylan N.Y. granted the Foundation a call option (the "Option''), permitting the Foundation to
`acquire from time-to-time Mylan N.Y. preferred shares up to a maximum number equal to the total number ofMylan N.V. ordinary shares issued at such time to
`the extent such shares are not held by the Foundation. The exercise price of the Option is €0.01 per preferred share. On April21, 2015, the Company received a
`letter from the President and ChiefExecutive Officer ofTeva Pharmaceutical Industries Ltd. ("Teva"), containing a non-binding expression of interest from Teva
`to acquire Mylan for $82 per Mylan ordinary share. On July 23, 2015, in response to Teva's unsolicited expression of interest in acquiring Mylan, the Foundation
`exercised the Option and acquired 488,388,431 Mylan preferred shares pursuant to the terms of the Call Option Agreement. In compliance with the current
`statutory arrangement, 25% of the nominal value of the preferred shares, approximately $1.3 million, was paid to Mylan in cash upon issuance. Each Mylan
`ordinary share and preferred share is entitled to one vote on each matter properly brought before a general meeting of shareholders. On July 27, 2015, Teva
`announced its entry into an agreement to acquire the Generic Drug Unit of Allergan plc and the withdrawal of its unsolicited, non-binding expression of interest to
`acquire Mylan. On September 19, 2015, the Foundation requested the redemption of the Mylan preferred shares issued on July 23, 2015, informing Mylan that it
`was reasonably convinced that the influences that might adversely affect or threaten the strategy, mission, independence, continuity and/or identity ofMylan and its
`business in a manner that is contrary to the interest ofMylan, its business, and its stakeholders had been sufficiently addressed. Mylan ordinary shareholders
`approved the redemption of the preferred shares on January 7, 2016 at an extraordinary general meeting of shareholders, and on March 17, 2016 the redemption of
`the Mylan preferred shares became effective. The Foundation will continue to have the right to exercise the Option in the future in response to a new threat to the
`interests ofMylan, its businesses and its stakeholders from time to time.
`
`During 2015, the Company entered into agreements with multiple counteiparties to acquire certain marketed pharmaceutical products for upfront
`payments totaling approximately $360.8 million , which were paid during the year ended December 31, 2015 and are included in investing activities in the
`Consolidated Statements of Cash Flows . The Company will be subject to potential future sales and other contingent milestone payments under the terms of one of
`the agreements.
`
`4. Balan~e Sheet Components
`
`Selected balance sheet components consist of the following:
`
`Acco11ntf receivable, net
`
`(111 milHoiU)
`Trade receivables, net
`Other receivables
`
`Aeeounts receivable, net
`
`109
`
`Deeember 31, l016 Deeember 31, 2015
`$
`3,015.4
`$
`2,434.0
`295.5
`255.1
`
`$
`
`3,310.9
`
`$
`
`2,689.1
`
`0111
`
`

`

`Table of Contents
`
`Trade receivables, net includes certain sales allowances totaling $2.05 billion and $1.84 billion at December 31,2016 and 2015, respectively. See Note 2
`Summary of Significant Accounting Policies for further discussion of such allowances. Total allowances for doubtful accounts were $59.0 million and $33.6 million
`at December 31,2016 and 2015, respectively. Mylan perfonns ongoing credit evaluations of its customers and generally does not require collateral.
`Approximately 45% and 42% of the accounts receivable balances represent amounts due from three customers at December 31, 2016 and 2015 , respectively.
`
`Inventoms
`
`(11t ttlllllom)
`Raw materials
`Work in process
`Finished goods
`Inventories
`
`December 31, Z016 December 31, Z015
`$
`783.4
`$
`592.4
`436.0
`387.0
`1,237.0
`971.6
`1,951.0
`2,456.4
`
`$
`
`$
`
`Inventory reserves totaled $174.6 million and $157.3 million at December 31, 2016 and 2015, respectively. Included as a component of cost of sales is
`expense related to the net realizable value of inventories of$195.7 million, $221.4 million and $182.5 million for the years ended December 31,2016, 2015 and
`2014, respectively.
`
`Prqxdd IUtd other cu"ent IISSels
`
`(I" mi/Uou)
`Prepaid expenses
`Restricted cash
`Available-for-sale securities
`Fair value of financial instruments
`Momenta collaboration prepaid expenses
`Trading securities
`Other current assets
`Prepaid expenses and other current assets
`
`December 31,2016 December 31,2015
`$
`138.3
`137.3
`$
`148.1
`106.6
`83.7
`54.0
`62.2
`64.7
`30.8
`29.6
`263.7
`756.4
`
`22.8
`211.2
`596.6
`
`$
`
`$
`
`Prepaid expenses consists primarily of prepaid rent, insurance and other individually insignificant items. At December 31, 2016, restricted cash includes
`$50 million paid into escrow for contingent consideration related to the acquisition of the Topicals Business.
`
`Property, p/lult IUtd equipment, net
`
`(llf llltlli81U)
`Machinery and equipment
`Buildings and improvements
`Construction in progress
`Land and improvements
`Gross property, plant and equipment
`Accumulated depreciation
`Property, plant and equipment, net
`
`December 31, 1016 December 31,l015
`2,227.9
`$
`1,928.4
`$
`1,106.5
`950.6
`328.8
`290.5
`144.7
`124.5
`3,807.9
`3,294.0
`1,485.7
`1,310.1
`2,322.2
`1,983.9
`
`$
`
`$
`
`Capitalized software costs included on our Consolidated Balance Sheets were $145.4 million and $130.0 million, net of accumulated depreciation, at
`December 31, 2016 and 2015 , respectively. The Company periodically reviews the original estimated useful lives of assets and makes adjustments when
`appropriate. Depreciation expense was approximately $259.4 million , $186.1 million and $172.8 million for the years ended December 31, 2016 , 2015 and 2014 ,
`respectively.
`
`110
`
`0112
`
`

`

`Table of Contents
`
`(111 •illioiU)
`Equity method investments, clean energy investments
`Equity method investments, Sagent Agila
`
`Restricted cash
`Other long-term assets
`Other assets
`
`December 31, 2016
`$
`320.6
`75.8
`
`172.2
`
`December 31, 2015
`$
`379.3
`96.2
`100.0
`176.0
`
`$
`
`568.6
`
`$
`
`751.5
`
`During the year ended December 31, 2016, restricted cash of $100 million principally related to amounts deposited in escrow for potential contingent
`consideration payments related to the Company's acquisition of Agila Specialties ("Agila'') was reclassified to prepaid expenses and other current assets or
`released from restrictions, in conjunction with the Strides Settlement, as discussed in Note 14 Commitments.
`
`December 31, 2016 December 31, 2015
`$
`939.5
`$
`717.5
`408.6
`392.1
`1,348.1
`
`$
`
`-----
`
`1,109.6
`
`$
`
`(111 •UII81U)
`Trade accounts payable
`Other payables
`Trade accounts payable
`
`Other cllrrent liabilities
`
`(111 •illioiU)
`Accrued sales allowances
`Payroll and employee benefit plan accruals
`Legal and professional accruals, including litigation accruals
`Contingent consideration
`Restructuring
`Compulsory acquisition proceeding
`Equity method investments, clean energy investments
`Accrued interest
`Fair value of financial instruments
`Other
`Other current liabilities
`
`December 31, 2016 December 31, 2015
`$
`$
`809.0
`681.8
`409.8
`367.9
`720A
`122.6
`256.9
`35.0
`138.6
`14.8
`70.2
`64.7
`41.0
`15.3
`732.6
`
`62.3
`25.1
`19.8
`512.6
`
`$
`
`3,258.5
`
`$
`
`1,841.9
`
`Included in legal and professional accruals, including litigation accruals at December 31, 2016 was $465 million for a settlement with the U.S.
`Department of Justice and other government agencies related to the classification of the EpiPen® Auto-Injector and EpiPen Jr® Auto-Injector (collectively,"
`EpiPen® Auto-Injector'') for purposes of the Medicaid Drug Rebate Program (the "Medicaid Drug Rebate Program Settlement'') and approximately $96.5 million
`related to the Modafinil antitrust litigation matter, as discussed further in Note 18 Litigation.
`
`At the close of the Meda transaction, the Company recorded a current liability of approximately $431.0 million related to the purchase of the non-tendered
`shares ofMeda pursuant to the compulsory acquisition proceeding. In conjunction with the November Offer, Meda shareholders, holding appr