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Revenue | 9 Months Ended
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Sep. 30, 2018
Revenue [Abstract] |
Revenue from Contract with Customer [Text Block] | Revenue Adoption of ASC 606 On January 1, 2018, we adopted ASC 606, on a modified retrospective basis, applied to those contracts which were not completed as of January 1, 2018. As a result of our adoption, we recorded a cumulative-effect adjustment of $11.4 million within retained earnings in our condensed consolidated balance sheet as of January 1, 2018, to reflect a change in the timing of revenue recognition under ASC 606, from point in time to over time, on our Contract-Manufactured Products product sales, certain Proprietary Products product sales, development and tooling agreements, as well as an acceleration on a portion of the remaining unearned income from a nonrefundable customer payment. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for those periods. The cumulative effect of the changes made to our condensed consolidated January 1, 2018 balance sheet for the adoption of ASC 606 was as follows:
($ in millions) | Balance at December 31, 2017 |  | Adjustments Due to ASC 606 |  | Balance at January 1, 2018
Assets: |  |  |  |  |
Accounts receivable, net | $ | 253.2 |  |  | $ | 25.0 |  |  | $ | 278.2 |
Inventories | 215.2 |  |  | (20.8 | ) |  | 194.4 |
Other current assets | 39.2 |  |  | (8.4 | ) |  | 30.8 |
Liabilities and Equity: |  |  |  |  |
Other current liabilities | $ | 77.0 |  |  | $ | (13.7 | ) |  | $ | 63.3 |
Deferred income taxes | 10.4 |  |  | 3.0 |  |  | 13.4 |
Other long-term liabilities | 42.6 |  |  | (4.9 | ) |  | 37.7 |
Retained earnings | 1,178.2 |  |  | 11.4 |  |  | 1,189.6 |
The impact of the adoption of ASC 606 on our condensed consolidated income statement for the three months ended September 30, 2018 was as follows:
($ in millions) | As Reported |  | Balances without Adoption of ASC 606 |  | Effects of Change Higher/(Lower)
Net sales | $ | 431.7 |  |  | $ | 423.5 |  |  | $ | 8.2 |
Cost of goods and services sold | 296.1 |  |  | 290.3 |  |  | 5.8 |
Research and development | 10.1 |  |  | 10.0 |  |  | 0.1 |
Other (income) expense | (0.2 | ) |  | (0.4 | ) |  | 0.2 |
Income tax expense | 8.0 |  |  | 7.8 |  |  | 0.2 |
Net income | $ | 55.2 |  |  | $ | 53.2 |  |  | $ | 2.0 |
The impact of the adoption of ASC 606 on our condensed consolidated income statement for the nine months ended September 30, 2018 was as follows:
($ in millions) | As Reported |  | Balances without Adoption of ASC 606 |  | Effects of Change Higher/(Lower)
Net sales | $ | 1,294.9 |  |  | $ | 1,294.4 |  |  | $ | 0.5 |
Cost of goods and services sold | 882.7 |  |  | 878.9 |  |  | 3.8 |
Research and development | 30.5 |  |  | 30.5 |  |  | — |
Other expense | 4.0 |  |  | 3.5 |  |  | 0.5 |
Income tax expense | 26.5 |  |  | 27.5 |  |  | (1.0 | )
Net income | $ | 154.9 |  |  | $ | 157.6 |  |  | $ | (2.7 | )
The impact of the adoption of ASC 606 on our condensed consolidated balance sheet as of September 30, 2018 was as follows:
($ in millions) | As Reported |  | Balances without Adoption of ASC 606 |  | Effects of Change Higher/(Lower)
Assets: |  |  |  |  |
Accounts receivable, net | $ | 302.9 |  |  | $ | 277.6 |  |  | $ | 25.3 |
Inventories | 206.8 |  |  | 228.5 |  |  | (21.7 | )
Other current assets | 43.1 |  |  | 54.2 |  |  | (11.1 | )
Liabilities and Equity: |  |  |  |  |
Other current liabilities | $ | 76.4 |  |  | $ | 90.2 |  |  | $ | (13.8 | )
Deferred income taxes | 11.7 |  |  | 9.7 |  |  | 2.0 |
Other long-term liabilities | 43.8 |  |  | 48.2 |  |  | (4.4 | )
Retained earnings | 1,312.7 |  |  | 1,304.0 |  |  | 8.7 |
Revenue Recognition Our revenue results from the sale of goods or services and reflects the consideration to which we expect to be entitled to in exchange for those goods or services. We record revenue based on a five-step model, in accordance with ASC 606. Following the identification of a contract with a customer, we identify the performance obligations (goods or services) in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize the revenue when (or as) we satisfy the performance obligations by transferring the promised goods or services to our customers. A good or service is transferred when (or as) the customer obtains control of that good or service. We recognize the majority of our revenue, primarily relating to Proprietary Products product sales, at a point in time, following the transfer of control of our products to our customers, which typically occurs upon shipment or delivery, depending on the terms of the related agreements. We recognize revenue relating to our Contract-Manufactured Products product sales and certain Proprietary Products product sales over time, as our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date. We recognize revenue relating to our development and tooling agreements over time, as our performance creates or enhances an asset that the customer controls as the asset is created or enhanced. For revenue recognized over time, revenue is recognized by applying a method of measuring progress toward complete satisfaction of the related performance obligation. When selecting the method for measuring progress, we select the method that best depicts the transfer of control of goods or services promised to our customers. Revenue for our Contract-Manufactured Products product sales, certain Proprietary Products product sales, and our development and tooling agreements is recorded under an input method, which recognizes revenue on the basis of our efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time elapsed, or machine hours used) relative to the total expected inputs to the satisfaction of that performance obligation. The input method that we use is based on costs incurred. The majority of the performance obligations within our contracts are satisfied within one year or less. Performance obligations satisfied beyond one year include those relating to a nonrefundable customer payment of $20.0 million received in June 2013 in return for the exclusive use of the SmartDose® technology platform within a specific therapeutic area. As of September 30, 2018, there was $6.7 million of unearned income related to this payment, of which $0.9 million was included in other current liabilities and $5.8 million was included in other long-term liabilities. The unearned income is being recognized as income on a straight-line basis over the remaining term of the agreement. The agreement does not include a future minimum purchase commitment from the customer. Our revenue can be generated from contracts with multiple performance obligations. When a sales agreement involves multiple performance obligations, each obligation is separately identified and the transaction price is allocated based on the amount of consideration we expect to be entitled to in exchange for transferring the promised good or service to the customer. Some customers receive pricing rebates upon attaining established sales volumes. We record rebate costs when sales occur based on our assessment of the likelihood that the required volumes will be attained. We also maintain an allowance for product returns, as we believe that we are able to reasonably estimate the amount of returns based on our substantial historical experience. The following table presents the approximate percentage of our net sales by market group:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
Biologics | 21 | % |  | 23 | % |  | 21 | % |  | 23 | %
Generics | 21 | % |  | 22 | % |  | 21 | % |  | 21 | %
Pharma | 34 | % |  | 33 | % |  | 35 | % |  | 35 | %
Contract-Manufactured Products | 24 | % |  | 22 | % |  | 23 | % |  | 21 | %
| 100 | % |  | 100 | % |  | 100 | % |  | 100 | %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.
The following table presents the approximate percentage of our net sales by product category:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
High-Value Components | 41 | % |  | 42 | % |  | 42 | % |  | 42 | %
Standard Packaging | 31 | % |  | 32 | % |  | 32 | % |  | 33 | %
Delivery Devices | 4 | % |  | 4 | % |  | 3 | % |  | 4 | %
Contract-Manufactured Products | 24 | % |  | 22 | % |  | 23 | % |  | 21 | %
| 100 | % |  | 100 | % |  | 100 | % |  | 100 | %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.
The following table presents the approximate percentage of our net sales by geographic location:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
Americas | 51 | % |  | 50 | % |  | 48 | % |  | 51 | %
Europe, Middle East, Africa | 41 | % |  | 42 | % |  | 44 | % |  | 41 | %
Asia Pacific | 8 | % |  | 8 | % |  | 8 | % |  | 8 | %
| 100 | % |  | 100 | % |  | 100 | % |  | 100 | %
(1) As noted above, prior period amounts have not been adjusted under the modified retrospective method.
Contract Assets and Liabilities Contract assets or liabilities result from transactions with revenue recorded over time. If the measure of remaining rights exceeds the measure of the remaining performance obligations, we record a contract asset. Contract assets are recorded on the condensed consolidated balance sheet in accounts receivable, net, and other assets (current and noncurrent portions, respectively). Contract assets included in accounts receivable, net, relate to the unbilled amounts of our product sales for which we have recognized revenue over time. Contract assets included in other assets represent the remaining performance obligations of our development and tooling agreements. Conversely, if the measure of the remaining performance obligations exceeds the measure of the remaining rights, we record a contract liability. Contract liabilities are recorded on the condensed consolidated balance sheet in other liabilities (current and noncurrent portions, respectively) and represent cash payments received in advance of our performance. The following table summarizes our contract assets and liabilities, excluding contract assets included in accounts receivable, net:
| ($ in millions)
Contract assets, December 31, 2017 | $ | 7.5 |
Contract assets, September 30, 2018 | 7.6 |
Change in contract assets - increase (decrease) | $ | 0.1 |
Deferred income, December 31, 2017 | $ | (33.6 | )
Deferred income, September 30, 2018 | (30.0 | )
Change in deferred income - decrease (increase) | $ | 3.6 |
The decrease in deferred income during the nine months ended September 30, 2018 was primarily due to the recognition of revenue of $67.0 million, including $34.5 million of revenue that was included in deferred income at the beginning of the year (of which $18.6 million was recognized in the cumulative-effect adjustment as of January 1, 2018), partially offset by additional cash payments of $62.3 million received in advance of satisfying future performance obligations along with $1.1 million in other adjustments. Practical Expedients and Exemptions We have elected to disregard the effects of a significant financing component, as we expect, at the inception of our contracts, that the period between when we transfer a promised good or service to the customer and when the customer pays for that good or service will be one year or less. In addition, we have elected to omit the disclosure of the majority of our remaining performance obligations, which are satisfied within one year or less. Supply Chain Financing We have entered into supply chain financing agreements with certain banks, pursuant to which we offer for sale certain accounts receivable to such banks from time to time, subject to the terms of the applicable agreements. These transactions result in a reduction in accounts receivable, as the agreements transfer effective control over, and credit risk related to, the receivables to the banks. These agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. As of September 30, 2018, we derecognized $2.3 million of accounts receivable under these agreements. Discount fees related to the sale of such accounts receivable on our condensed consolidated income statements for the three and nine months ended September 30, 2018 were not material.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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