Full Press Release Details
FINANCIAL STATEMENTS
Year Ended December 31, 2016
| Report of Independent Auditors | F-2 | |||
| Financial Statements | ||||
| Balance Sheet | F-3 | |||
| Statement of Income | F-4 | |||
| Statement of Parent Company Net Investment in Pharmica | F-5 | |||
| Statement of Cash Flows | F-6 | |||
| Notes to Financial Statements | F-7 |
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Cook Group Incorporated
We have audited the accompanying financial statements of Cook Pharmica LLC (a wholly owned subsidiary of Cook Group Incorporated) (the
Company), which comprise the balance sheet as of December 31, 2016, and the related statements of income, parent company net investment in Pharmica, and cash flows for the year then ended, and the related notes to the financial statements.
Management s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted
accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor s Responsibility
responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of Cook Pharmica LLC at December 31, 2016, and the results of its operations and its cash flows for the year then ended in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 1,500 | ||
| Accounts receivable, net of allowances of $ 1,225,629 | 33,576,816 | |||
| Inventories | 16,693,378 | |||
| Prepaid expenses and other | 1,578,755 | |||
| Total current assets | 51,850,449 | |||
| Property and equipment, net | 173,712,667 | |||
| Total assets | $ | 225,563,116 | ||
| Liabilities and invested equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 8,029,775 | ||
| Accrued liabilities: | ||||
| Employee compensation | 5,150,379 | |||
| Business taxes | 1,444,158 | |||
| Sundry | 1,474,639 | |||
| Deferred revenue | 5,925,967 | |||
| Total current liabilities | 22,024,918 | |||
| Deferred tax liability | 39,051 | |||
| Deferred compensation | 55,706 | |||
| Total liabilities | 22,119,675 | |||
| Commitments and contingencies | ||||
| Invested equity: | ||||
| Net parent investment | 492,420,650 | |||
| Retained earnings | (288,977,209 | ) | ||
| Total invested equity | 203,443,441 | |||
| Total liabilities and invested equity | $ | 225,563,116 |
See accompanying notes.
Year Ended December 31, 2016
| Net revenues external | $ | 168,335,087 | ||
| Revenues affiliates | 9,441,724 | |||
| Total revenues | 177,776,811 | |||
| Cost of revenues | 121,861,156 | |||
| Gross profit | 55,915,655 | |||
| Sales, marketing, and administrative | 21,856,446 | |||
| Research and development | 984,628 | |||
| Corporate allocation | 2,951,629 | |||
| Other expense, net | 103,979 | |||
| Income before income taxes | 30,018,973 | |||
| Income tax expense | 93,944 | |||
| Net income | $ | 29,925,029 |
See accompanying notes.
STATEMENT OF PARENT COMPANY NET INVESTMENT IN PHARMICA
| Retained Earnings | Net Parent Investment | Total Invested Equity | ||||||||||
| Balance at January 1, 2016 | $ | (318,902,238 | ) | $ | 509,656,218 | $ | 190,753,980 | |||||
| Net income | 29,925,029 | 29,925,029 | ||||||||||
| Net transactions with Cook Group | (17,235,568 | ) | (17,235,568 | ) | ||||||||
| Balance at December 31, 2016 | $ | (288,977,209 | ) | $ | 492,420,650 | $ | 203,443,441 |
See accompanying notes.
STATEMENT OF CASH FLOWS
Year Ended December 31, 2016
| Operating activities | ||||
| Net income | $ | 29,925,029 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation | 16,548,728 | |||
| Deferred income taxes | 65,574 | |||
| Other | 1,281,961 | |||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (11,390,244 | ) | ||
| Inventories | (3,247,261 | ) | ||
| Prepaid expenses and other | 677,965 | |||
| Accounts payable | 2,402,178 | |||
| Deferred revenue | (759,718 | ) | ||
| Deferred compensation | 20,268 | |||
| Accrued liabilities and sundry | (411,936 | ) | ||
| Net cash provided by operating activities | 35,112,544 | |||
| Investing activities | ||||
| Additions of property, plant, and equipment | (17,877,090 | ) | ||
| Net cash used in investing activities | (17,877,090 | ) | ||
| Financing activities | ||||
| Net transactions with Parent Company | (17,235,568 | ) | ||
| Net cash used in financing activities | (17,235,568 | ) | ||
| Net change in cash and cash equivalents | (114 | ) | ||
| Cash and cash equivalents, beginning of year | 1,614 | |||
| Cash and cash equivalents, end of year | $ | 1,500 |
See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation
Cook Pharmica LLC (Pharmica or the Company) is a wholly owned subsidiary of Cook Group Incorporated (Cook Group
or Parent Company). Pharmica is a leading contract development and manufacturing organization (CDMO) centrally located in Bloomington, Indiana, that serves the biopharmaceutical industry. Pharmica provides a
one-source, one-location model that was developed to give biopharmaceutical companies the opportunity to work with a single CDMO through all phases of a project. This
unique model supports everything from process development to large-scale biologics manufacturing, from analytical program design to formulation development (liquid or lyophilized), and from aseptic filling in vials or syringes to final packaged
The accompanying financial statements have been prepared on a stand-alone basis and are derived from Cook Group s
consolidated financial statements and accounting records. The financial statements reflect Pharmica s financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. These financial
statements are presented as if Pharmica had operated on a stand-alone basis for the period presented.
The financial statements include
the recognition of certain assets and liabilities that have historically been recorded at the Cook Group corporate level, but are specifically identifiable or otherwise attributable to Pharmica. Pharmica utilizes centralized functions of Cook Group
to support its operations, and in return, Cook Group allocates certain expenses to Pharmica. Such expenses represent costs related, but not limited to, treasury, legal, accounting, insurance, information technology, payroll administration, human
resources, and other services. These costs, together with an allocation of certain Cook Group overhead costs, are included within the corporate charges on the statement of income. Where it is possible to specifically attribute such expenses to
activities of Pharmica, these amounts have been charged or credited directly to Pharmica without allocation or apportionment. Allocation of all other such expenses is based on a reasonable reflection of the utilization of service provided or
benefits received by Pharmica during the period.
Management believes the assumptions underlying the stand-alone financial statements,
including the assumptions regarding allocated expenses, reasonably reflect the utilization of services provided to or the benefit received by Pharmica during the periods presented. However, these shared expenses may not represent the amounts that
would have been incurred had Pharmica operated autonomously or independently from Cook Group. Actual costs that would have been incurred if Pharmica had been a stand-alone company would depend on multiple factors, including organizational structure
and strategic decisions in various areas, including information technology and infrastructure. For an additional discussion of expense allocations, see Note 4.
Cook Group uses a centralized approach to cash management. Accordingly, cash and cash equivalents are held by Cook Group at the corporate
level and were not attributed to Pharmica for the period presented. Transfers of cash, both to and from Cook Group s centralized cash management system, are reflected as a component of Parent Company s net investment in Pharmica on the
balance sheet. Debt obligations of Cook Group have not been included in the financial statements of Pharmica because Pharmica s assets do not collateralize the obligation between Cook Group and the debt holders.
The income tax provision on the statement of income has been calculated as if Pharmica were operating on a stand-alone basis and filed
separate tax returns in the jurisdiction in which it operates. Pharmica s operations have historically been included in the Cook Group U.S. federal and state tax returns. Cook Group s global tax model has been developed based on its entire
portfolio of businesses. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of Pharmica s actual tax balances prior to or subsequent to Pharmica operating as a stand-alone company.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Significant Accounting Policies
Accounting Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
In accordance with Accounting Standards Codification Topic (ASC) 605, Revenue Recognition, the Company recognizes revenue when
persuasive evidence of an arrangement exists, the services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
The Company s service arrangements contain multiple elements and are accounted for in accordance with the provisions of ASC 605-25, Revenue Recognition Multiple-Element Arrangements. The Company determines the separate units of account and if the deliverable meets the criteria of a separate unit of accounting, the arrangement
consideration is allocated to each deliverable based upon its relative selling price. In determining the best evidence of selling price of a unit of account, the Company utilizes management s best estimate of selling price as vendor-specific
objective evidence and third-party evidence of selling price are unable to be utilized by the Company.
The Company recognizes revenue
when the service for each deliverable has been completed. In the case of manufacturing services, revenue is recognized when products pass quality assurance testing, where the risk of loss has been transferred, service obligations have been
performed, and the Company is entitled to payment under the terms of the contract.
In the case of other services such as process
validation, quality control, studies, and development, revenue is recognized at the completion of the service and the Company is entitled to payment under the terms of the contract.
Deferred revenue represents the amount of payment the Company has received in advance of services provided. Deferred revenue is recognized as
revenue when the related services have been completed.
Cash and Cash Equivalents
Cash and cash equivalents comprise highly liquid investments with original maturities of less than three months at the date of purchase.
Pharmica performs periodic credit evaluations of customers financial condition and generally does not require collateral. Accounts
receivable are carried at their face amounts. Pharmica maintains an allowance for doubtful accounts for estimated losses in the collection of these receivables. Pharmica makes estimates regarding the future ability of its customers to make required
payments based on historical experience, the age of the accounts receivable balances, credit quality of Pharmica s customers, current economic conditions, expected future trends, and other factors that may affect customers ability to pay.
Individual accounts are written off against the allowance for doubtful accounts after all reasonable collection efforts have been exhausted.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Significant Accounting Policies (continued)
Concentration of Risk
Pharmica had certain customers that individually accounted for 10% or more of the Company s external net revenues, or whose accounts
receivable balances individually represented 10% or more of the Company s total accounts receivable.
December 31, 2016, three customers accounted for 43% of external net revenues. At December 31, 2016, two customers represented 27% of accounts receivable.
Financial Instruments
ASC 820, Fair Value Measurement, establishes a three-level valuation hierarchy for fair value measurements of assets and liabilities re-measured at fair value on a recurring basis in the accompanying financial statements. These valuation measurements are based upon the transparency of inputs (observable and unobservable) to the valuation of an
asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company s market assumptions. These two types of inputs create the following fair
Level 1 Valuation is based on quoted prices for identical assets or liabilities in active
Level 2 Valuation is based on quoted prices for similar assets or liabilities in active markets, or
other inputs that are observable for the asset or liability, either directly or indirectly, for the full term of the financial instrument.
Level 3 Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying values due to their
short-term maturities.
Inventories are stated at the lower of first-in, first-out cost
or market. Inventories at December 31 consisted of the following: