DIPLOMAT PHARMACY, INC., 10-Q filed on 5/10/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 03, 2019
Document and Entity Information    
Entity Registrant Name Diplomat Pharmacy, Inc.  
Entity Central Index Key 0001610092  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   74,713,696
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
v3.19.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and equivalents $ 2,739 $ 9,485
Receivables, net 329,881 326,602
Inventories 174,507 210,573
Prepaid expenses and other current assets 10,544 9,596
Total current assets 517,671 556,256
Property and equipment, net 31,244 34,525
Capitalized software for internal use, net 29,844 30,506
Operating lease right-of-use assets 27,325  
Goodwill 609,592 609,592
Definite-lived intangible assets, net 227,005 240,810
Other noncurrent assets 4,387 4,670
Total assets 1,447,068 1,476,359
Current liabilities:    
Accounts payable 283,893 308,084
Rebates payable to PBM customers 21,573 23,264
Borrowings on revolving line of credit 156,500 176,300
Current portion of long-term debt 11,500 11,500
Current portion of operating lease liabilities 4,239  
Accrued expenses:    
Compensation and benefits 12,228 13,348
Contingent consideration 5,225 5,075
Other 22,361 21,014
Total current liabilities 517,519 558,585
Long-term debt, less current portion 436,187 438,369
Noncurrent operating lease liabilities 23,950  
Deferred income taxes 3,233 2,781
Contingent consideration 1,880 1,820
Derivative liability 6,419 4,292
Deferred gain   5,175
Other   253
Total liabilities 989,188 1,011,275
Shareholders' equity:    
Preferred stock (10,000,000 shares authorized; none issued and outstanding)
Common stock (no par value; 590,000,000 shares authorized; 74,713,696 and 74,474,677 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively) 634,214 629,411
Additional paid-in capital 49,313 50,544
Accumulated deficit (219,228) (210,579)
Accumulated other comprehensive loss (6,419) (4,292)
Total shareholders' equity 457,880 465,084
Total liabilities and shareholders' equity $ 1,447,068 $ 1,476,359
v3.19.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2019
Dec. 31, 2018
Condensed Consolidated Balance Sheets    
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common shares, par value (in dollars per share) $ 0 $ 0
Common shares, authorized shares 590,000,000 590,000,000
Common shares, issued shares 74,713,696 74,474,677
Common shares, outstanding shares 74,713,696 74,474,677
v3.19.1
Condensed Consolidated Statements of Comprehensive Loss - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Condensed Consolidated Statements of Comprehensive Loss    
Net sales $ 1,256,808 $ 1,342,484
Cost of sales (1,177,588) (1,252,106)
Gross profit 79,220 90,378
Selling, general and administrative expenses (82,868) (81,687)
(Loss) income from operations (3,648) 8,691
Other (expense) income:    
Interest expense (10,215) (10,427)
Other 181 418
Total other expense (10,034) (10,009)
Loss before income taxes (13,682) (1,318)
Income tax (expense) benefit (619) 868
Net loss (14,301) (450)
Other comprehensive loss, net of tax (2,127)  
Total comprehensive loss $ (16,428) $ (450)
Loss per common share, basic and diluted (in dollars per share) $ (0.19) $ (0.01)
Weighted average common shares outstanding, basic and diluted (in shares) 74,460,990 73,996,313
v3.19.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash flows from operating activities:    
Net loss $ (14,301) $ (450)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 21,395 23,951
Share-based compensation expense 3,572 3,161
Net provision for doubtful accounts 2,447 2,322
Amortization of debt issuance costs 961 1,132
Change in fair value of contingent consideration 210  
Contingent consideration payment   (470)
Deferred income tax expense (benefit) 452 (547)
Other 633 (3)
Changes in operating assets and liabilities:    
Accounts receivable (5,726) 21
Inventories 36,779 11,903
Accounts payable (24,191) 8,465
Rebates payable (1,691) 3,288
Other assets and liabilities 3,112 (4,201)
Net cash provided by operating activities 23,652 48,572
Cash flows from investing activities:    
Expenditures for property and equipment (6,840) (567)
Expenditures for capitalized software for internal use (897) (2,302)
Other 14 3
Net cash used in investing activities (7,723) (2,866)
Cash flows from financing activities:    
Net payments on revolving line of credit (19,800) (48,250)
Payments on long-term debt (2,875) (76,875)
Payments of debt issuance costs   (171)
Proceeds from issuance of stock upon stock option exercises   1,909
Contingent consideration payment   (530)
Net cash used in financing activities (22,675) (123,917)
Net decrease in cash and equivalents (6,746) (78,211)
Cash and equivalents at beginning of period 9,485  
Cash and equivalents at end of period 2,739 6,040
Supplemental disclosures of cash flow information:    
Cash paid for interest (9,254) (10,160)
Cash paid for income taxes $ (67) $ (48)
v3.19.1
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($)
$ in Thousands
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Loss
Total
Balance at Dec. 31, 2017 $ 619,235 $ 38,450 $ 91,816   $ 749,501
Balance (in shares) at Dec. 31, 2017 73,871,424        
Changes in Shareholders' Equity          
Net loss     (450)   (450)
Stock issued upon exercises of stock options $ 2,461 (552)     1,909
Stock issued upon exercises of stock options (in shares) 200,677        
Stock issued upon vesting of restricted stock units $ 157 (157)      
Stock issued upon vesting of restricted stock units (in shares) 10,705        
Share-based compensation   3,161     3,161
Balance at Mar. 31, 2018 $ 621,853 40,902 91,240   753,995
Balance (in shares) at Mar. 31, 2018 74,082,806        
Changes in Shareholders' Equity          
Cumulative effect adjustment | ASU 2014-09     (126)   (126)
Balance at Dec. 31, 2018 $ 629,411 50,544 (210,579) $ (4,292) $ 465,084
Balance (in shares) at Dec. 31, 2018 74,474,677       74,474,677
Changes in Shareholders' Equity          
Net loss     (14,301)   $ (14,301)
Stock issued upon vesting of restricted stock units $ 4,766 (4,766)      
Stock issued upon vesting of restricted stock units (in shares) 244,948        
Share-based compensation   3,572     3,572
Restricted stock award activity $ 37 (37)      
Restricted stock award activity (in shares) (5,929)        
Other comprehensive loss, net of tax       (2,127) (2,127)
Balance at Mar. 31, 2019 $ 634,214 $ 49,313 (219,228) $ (6,419) $ 457,880
Balance (in shares) at Mar. 31, 2019 74,713,696       74,713,696
Changes in Shareholders' Equity          
Cumulative effect adjustment | ASU 2016-02     $ 5,652   $ 5,652
v3.19.1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
3 Months Ended
Mar. 31, 2019
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION  
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Description of Business

 

Diplomat Pharmacy, Inc. and its consolidated subsidiaries (the “Company”) is the largest independent provider of specialty pharmacy and infusion services in the United States of America (“U.S.”). The Company is focused on improving the lives of patients with complex chronic diseases while also delivering unique solutions for manufacturers, hospitals, payers and providers. The Company’s patient-centric approach positions it at the center of the healthcare continuum for treatment of complex chronic disease states, including oncology, specialty infusion therapy, immunology, hepatitis, multiple sclerosis and many other serious or long-term conditions. The Company operates in two reportable segments - Specialty and Pharmacy Benefit Management (“PBM”). The Specialty segment offers a broad range of innovative solutions to address the dispensing, delivery, dosing and reimbursement of clinically intensive, high-cost specialty drugs and a wide range of applications. The PBM segment provides services designed to help customers reduce the cost and manage the complexity of their prescription drug programs. The Company dispenses to patients in all U.S. states and territories through its advanced distribution centers and manages centralized clinical call centers to deliver localized services on a national scale.

 

Basis of Presentation

 

Unaudited Condensed Consolidated Financial Statements

 

The condensed consolidated balance sheet as of March 31, 2019, and the condensed consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the three months ended March 31, 2019 and 2018 are unaudited. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations, cash flows and changes in shareholders’ equity for the periods presented. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any future annual or interim period. The consolidated balance sheet at December 31, 2018 included herein was derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

Reclassifications

 

During the second quarter of 2018, the Company changed its accounting policy to classify shipping and handling costs incurred at its dispensing pharmacies in “Cost of sales” which were previously reported in “Selling, general and administrative expenses” (“SG&A”) in its consolidated statements of comprehensive loss. The amount of the reclassifications from SG&A to Cost of sales was $15,139 for the three months ended March 31, 2018.

 

The Company has historically classified the cost of its nursing support services within SG&A as these amounts were not considered significant in relation to total cost of sales. During the second quarter of 2018, the Company reclassified these nursing support service costs from SG&A to Cost of sales in its consolidated statements of comprehensive loss. The amount reclassified was $5,095 for the three months ended March 31, 2018.

 

In addition, certain prior year amounts have been reclassified to conform with the current year presentation.

 

These reclassifications, discussed above, had no impact on “(Loss) income from operations,” “Net loss,” or “Loss per common share, basic and diluted,” for the three months ended March 31, 2018.

v3.19.1
NEW ACCOUNTING STANDARDS
3 Months Ended
Mar. 31, 2019
NEW ACCOUNTING STANDARDS  
NEW ACCOUNTING STANDARDS

2.  NEW ACCOUNTING STANDARDS

 

Adoption of New Accounting Standard

 

Leases

 

The Company has adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) and all subsequent amendments as of January 1, 2019.  Topic 842 requires a lessee to recognize the following for all leases, except short-term leases, at the commencement date: (1) a lease liability which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Topic 842 also requires expanded disclosures.

 

Topic 842 permits entities to use a modified retrospective transition approach to apply the guidance as of the beginning of the earliest period presented in the financial statements in the period adopted or the optional transition method which allows entities to apply the new guidance at the adoption date and record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and not to restate the comparative periods presented.

 

The Company adopted Topic 842 as of January 1, 2019 using the optional transition method. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.  The adoption of the standard resulted in the recognition of net operating lease right-of-use assets of $28.4 million and operating lease liabilities of $29.3 million on the condensed consolidated balance sheet as of January 1, 2019 primarily related to its real estate operating leases. The operating lease right-of-use assets includes the impact of deferred rent. The Company does not have any finance leases.

 

Also, upon adoption, the Company recorded a cumulative-effect adjustment, after tax, of $5,652 (a valuation allowance was established against the full amount of the net deferred taxes of $1,387) to increase retained earnings for the amount of a previously deferred gain on a sale-leaseback transaction that closed in 2018.  Such gain recorded on the sale-leaseback transaction would have been fully recognized under Topic 842.

 

The Company elected to apply the package of practical expedients upon transition, which includes no reassessment of whether existing contracts are or contain leases and allowed for the lease classification for existing leases to be retained. The Company did not elect the practical expedient to use hindsight, and accordingly the initial lease term did not differ under the new standard versus prior accounting practice.  After transition, in certain instances, the cost of renewal options will be recognized earlier in the term of the lease than under the previous lease accounting rules.  The operating lease agreements include lease and non-lease components for which the Company elected the practical expedient to not separate non-lease components from the lease components but instead to combine them and account for them as a single lease component and will continue to do so for its real estate operating leases. The Company has selected as its accounting policy to keep leases with a term of twelve months or less off the balance sheet and recognize these lease payments on a straight-line basis over the lease term.

 

The Company has recorded operating lease right-of-use assets and operating lease liabilities in its condensed consolidated balance sheet at March 31, 2019. The lessors’ rate implicit in the operating leases was not available to the Company and was not determinable from the terms of the lease.  Therefore, the Company used its incremental borrowing rate to determine the present value of the future lease payments. The incremental borrowing rates were not observable and therefore, the rates were estimated primarily using a methodology dependent on the Company’s financial condition, creditworthiness, and availability of certain observable data.  In particular, the Company considered its actual cost of borrowing for collateralized loans and its credit rating, along with the corporate bond yield curve in estimating its incremental borrowing rates. These estimated incremental borrowing rates were applied to future lease payments to determine the present value of the operating lease liability for each lease.   

 

The new standard did not have a significant impact on the timing or measurement of lease expense in the condensed consolidated statement of comprehensive loss and had no impact on the condensed consolidated statement of cash flows for the three months ended March 31, 2019. As noted above, the comparative prior period information for the three months ended March 31, 2018 has not been adjusted and continues to be reported under the Company’s historical lease recognition policies under ASC Topic 840, Leases.

 

The disclosure requirements of Topic 842 are included within Note 13, Leases.

 

Accounting Standards Issued But Not Yet Adopted

 

Credit Losses

 

In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring the recording of credit losses on financial assets, including receivables, on a more timely basis. The guidance will replace the current incurred loss accounting model with an expected loss approach. The new methodology requires an entity to estimate the credit losses expected over the life of an exposure based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses. ASU No. 2016-13 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2019. The effect of adoption of the standard is required as an adjustment to the opening balance of retained earnings as of the beginning of the first reporting period in which ASU No. 2016-13 is effective. The Company has not yet determined the magnitude of any such one-time adjustment or the overall impact of ASU No. 2016-13 on its consolidated financial statements.

 

v3.19.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Diplomat Pharmacy, Inc., and its wholly owned subsidiaries.

 

All intercompany transactions and balances have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

 

Receivables, net

 

Receivables, net consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

Trade receivables, net of allowances of $(27,191) and $(25,342), respectively

 

$

312,371

 

$

299,407

Rebate receivables

 

 

12,129

 

 

22,375

Other receivables

 

 

5,381

 

 

4,820

 

 

$

329,881

 

$

326,602

 

Trade receivables are stated at the invoiced amount. Trade receivables primarily include amounts due from clients, third-party pharmacy benefit managers and insurance providers and are based on contracted prices. Trade receivables are unsecured and require no collateral. Trade receivable terms vary by payer, but generally are due within 30 days after the sale of the product or performance of the service.

 

Rebate receivables are amounts due from pharmaceutical manufacturers related to drug purchases by participants of the various pharmacy benefit plans that the Company manages, a portion of which, depending on contract terms, are paid back to the Company’s customers. The Company estimates these rebates at period-end based on its contractual arrangements with its manufacturers and such rebates are recorded as a reduction of cost of sales.

 

Inventories

 

Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Prescription medications are returnable to the Company’s vendors and fully refundable before six months of expiration, and any remaining expired medication is relieved from inventory on a quarterly basis. 

v3.19.1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2019
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

4.  FAIR VALUE MEASUREMENTS

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy was established, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1: Observable inputs such as quoted prices in active markets;

 

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs.

 

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

 

A.

Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

 

B.

Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

 

C.

Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

 

The following table presents the placement in the fair value hierarchy of liabilities that are measured and disclosed at fair value on a recurring basis:

                                                                                                                                                                                   

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Asset /

    

Valuation

    

Valuation

    

 

 

    

(Liability)

    

Level 2

    

Level 3

    

Technique

March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration                 

 

$

(7,105)

 

$

 —

 

$

(7,105)

 

C

Interest rate swaps (Note 7) 

 

 

(6,419)

 

 

(6,419)

 

 

 —

 

A

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration 

 

$

(6,895)

 

$

 —

 

$

(6,895)

 

C

Interest rate swaps (Note 7) 

 

 

(4,292)

 

 

(4,292)

 

 

 —

 

A

 

The following table sets  forth the change in contingent consideration (Level 3 measurements) for the three months ended March 31, 2019:

 

 

 

 

 

 

 

Contingent

 

    

Consideration

Balance at January 1, 2019

 

$

(6,895)

Change in fair value

 

 

(210)

Payments

 

 

 —

Balance at March 31, 2019

 

$

(7,105)

 

The carrying amount of debt approximates fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing.

v3.19.1
DEFINITE-LIVED INTANGIBLE ASSETS
3 Months Ended
Mar. 31, 2019
DEFINITE-LIVED INTANGIBLE ASSETS  
DEFINITE-LIVED INTANGIBLE ASSETS

5.  DEFINITE-LIVED INTANGIBLE ASSETS

 

Definite-lived intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

March 31, 2019

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

Gross

 

 

 

 

 

 

 

Amortization

 

Carrying

 

Accumulated

 

Carrying

 

    

Period

 

Amount

    

Amortization

    

Amount

Customer relationships

 

9.6

 

$

100,200

 

$

(4,637)

 

$

95,563

Patient relationships

 

5.7

 

 

170,100

 

 

(72,474)

 

 

97,626

Trade names and trademarks

 

1.7

 

 

30,650

 

 

(22,307)

 

 

8,343

Non-compete employment agreements

 

1.5

 

 

61,389

 

 

(47,136)

 

 

14,253

Physician relationships

 

4.6

 

 

21,700

 

 

(10,480)

 

 

11,220

 

 

 

 

$

384,039

 

$

(157,034)

 

$

227,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

    

Weighted

    

 

 

    

 

 

    

 

 

 

 

Average

 

Gross

 

 

 

 

 

 

 

Amortization

 

Carrying

 

Accumulated

 

Carrying

 

 

Period

 

Amount

 

Amortization

 

Amount

Customer relationships

 

9.8

 

$

100,200

 

$

(1,238)

 

$

98,962

Patient relationships

 

5.9

 

 

170,100

 

 

(67,964)

 

 

102,136

Trade names and trademarks

 

1.8

 

 

30,650

 

 

(20,270)

 

 

10,380

Non-compete employment agreements

 

1.6

 

 

61,389

 

 

(44,100)

 

 

17,289

Physician relationships

 

4.8

 

 

21,700

 

 

(9,657)

 

 

12,043

 

 

 

 

$

384,039

 

$

(143,229)

 

$

240,810

 

Amortization expense for the three months ended March 31, 2019 and 2018 was $13,805 and $17,010, respectively.

v3.19.1
DEBT
3 Months Ended
Mar. 31, 2019
DEBT  
DEBT

6.  DEBT

 

Total outstanding debt consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31,

    

December 31,

 

 

2019

 

2018

Short-term debt, borrowings on revolving line of credit

 

$

156,500

 

$

176,300

Long-term debt:

 

 

  

 

 

  

Term loan A

 

$

140,625

 

$

142,500

Term loan B

 

 

321,000

 

 

322,000

Total

 

 

461,625

 

 

464,500

Unamortized debt issuance costs

 

 

(13,938)

 

 

(14,631)

Total long-term debt

 

 

447,687

 

 

449,869

Less: current portion

 

 

11,500

 

 

11,500

Long-term debt, less current portion

 

$

436,187

 

$

438,369

 

The Company has a credit agreement with JP Morgan Chase Bank, N.A., and Capital One, National Association, that provides for a $250,000 revolving line of credit and a $150,000 Term Loan A and $400,000 Term Loan B (“credit facility”).  The credit agreement also provides for issuances of letters of credit of up to $10 million and swingline loans up to $20 million.  The revolving line of credit and Term Loan A mature on December 20, 2022 and Term Loan B matures on December 20, 2024.

 

Interest on the revolving line of credit and Term Loan A is accrued at a rate equal to (i) the monthly LIBOR plus an applicable margin or (ii) a base rate that is the highest of the U.S. prime rate, federal funds rate (plus ½ of 1 percent) and LIBOR (plus 1 percent), at the Company’s option. The applicable margin is adjusted quarterly based on the Company’s leverage ratio. At March 31, 2019, the applicable margin was 2.25 percent for LIBOR loans and 1.25 percent for base rate loans. Interest on the Term Loan B is accrued similarly to Term Loan A, except the applicable margin is fixed at 4.50 percent for LIBOR loans and 3.50 percent for base rate loans.  The Company’s Term Loan A and Term Loan B interest rates were 4.75 percent and 7.0 percent, respectively, at March 31, 2019 and 4.78 percent and 7.03 percent, respectively, at December 31, 2018. The interest rate on the revolving line of credit was 5.0 percent and 5.19 percent at March 31, 2019 and December 31, 2018, respectively. The Company is charged a monthly unused commitment fee ranging from 0.3 percent to 0.4 percent on the average unused daily balance on its $250,000 revolving line of credit.

 

The Company had weighted average borrowings on its revolving line of credit of $165,064 and $163,992 and maximum borrowings on its revolving line of credit of $196,300 and $188,250 during the three months ended March 31, 2019 and 2018, respectively. The Company had $93,500 and $73,700 available to borrow on its revolving line of credit at March 31, 2019 and December 31, 2018, respectively.  Revolving line of credit-related unamortized debt issuance costs of $3,978 and $4,246 as of March 31, 2019 and December 31, 2018, respectively, are classified within “Other noncurrent assets” in the condensed consolidated balance sheets.

 

The Term Loan A and Term Loan B requires quarterly principal payments of $1,875 and $1,000, plus accrued interest, respectively.  During the three months ended March 31, 2018, the Company made a voluntary prepayment of $74,000 on the Term Loan B.

 

The credit facility is collateralized by substantially all of the Company’s assets.  The credit facility contains covenants that requires the Company, among other things, to provide financial and other information reporting, and to provide notice upon certain events. These covenants also place restrictions on the Company’s ability to incur additional indebtedness, pay dividends or make other distributions, redeem or repurchase capital stock, make investments and loans, and enter into certain transactions, including selling assets, engaging in mergers or acquisitions, or engaging in transactions with affiliates. The Company was in compliance with all such covenants as of March 31, 2019.

v3.19.1
INTEREST RATE SWAPS
3 Months Ended
Mar. 31, 2019
INTEREST RATE SWAPS  
INTEREST RATE SWAPS

7.  INTEREST RATE SWAPS

 

The Company enters into interest rate swap contracts to hedge variable interest rate risk related to certain variable rate borrowings. These interest rate swap contracts are designated as cash flow hedges for the purposes of hedge accounting treatment and any unrealized gains or losses that result from changes in the fair value of the interest rate swap contracts are reported in “Accumulated other comprehensive loss” as a component of shareholders’ equity. The Company measures hedge effectiveness on a quarterly basis. The Company does not use derivative financial instruments for speculative purposes.

 

In 2018, the Company became a party to two pay-fixed and receive-floating interest rate swaps, which are effective on March 29, 2019 and terminate on March 31, 2022. The combined notional amount of the interest rate swaps was $290.6 million at March 31, 2019 and December 31, 2018, respectively. At March 31, 2019 and December 31, 2018, the fair value of the interest rate swaps (derivative liability) was $6,419 and $4,292, respectively (a valuation allowance was established against the full amount of the net deferred tax benefit of $1,643  and $1,099, respectively). The Company recognized other comprehensive loss of $2,127 during the three months ending March 31, 2019.

v3.19.1
REVENUE
3 Months Ended
Mar. 31, 2019
REVENUE  
REVENUE

8.    REVENUE

 

The following table disaggregates net sales by therapeutic categories for the Specialty segment and by product and service distribution channels for the PBM segment:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

    

2019

    

2018

Specialty Segment:

 

 

 

 

 

 

Oncology

 

$

686,634

 

$

686,897

Specialty infusion

 

 

178,448

 

 

165,717

Immunology

 

 

135,692

 

 

135,599

Other

 

 

167,591

 

 

164,766

Total Specialty segment

 

 

1,168,365

 

 

1,152,979

PBM Segment:

 

 

 

 

 

 

Retail networks

 

 

67,412

 

 

145,161

Specialty pharmacy

 

 

16,097

 

 

22,313

Mail order

 

 

10,965

 

 

16,993

Other

 

 

3,443

 

 

7,001

Total PBM segment

 

 

97,917

 

 

191,468

Inter-segment eliminations

 

 

(9,474)

 

 

(1,963)

Total net sales

 

$

1,256,808

 

$

1,342,484

 

Rebates retained, which represents the difference between the manufacturers’ rebates earned and rebates incurred to customers, approximated 11.6% of total gross profit for each of the three months ended March 31, 2019 and 2018.

v3.19.1
SHARE-BASED COMPENSATION
3 Months Ended
Mar. 31, 2019
SHARE-BASED COMPENSATION  
SHARE-BASED COMPENSATION

9.  SHARE-BASED COMPENSATION

 

Stock Options

 

A summary of the Company’s stock option activity as of and for the three months ended March 31, 2019 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

Number

 

Exercise

 

Contractual

 

Intrinsic

 

    

of Options

    

Price

    

Life

    

Value

 

 

 

 

 

 

 

(Years)

 

 

 

Outstanding at January 1, 2019

 

5,186,025

 

$

18.42

 

8.0

 

$

2,910

Granted

 

 —

 

 

 —

 

 

 

 

 

Exercised

 

 —

 

 

 —

 

 

 

 

 

Expired/cancelled

 

380,147

 

 

18.77

 

 

 

 

 

Outstanding at March 31, 2019

 

4,805,878

 

$

18.40

 

7.9

 

$

171

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2019

 

2,140,475

 

$

18.48

 

7.2

 

$

171

 

The Company recorded share-based compensation expense associated with stock options of $1,793 and $2,155 for the three months ended March 31, 2019 and 2018, respectively.At March 31, 2019, the total compensation cost related to nonvested options not yet recognized was $13,623 which will be recognized over a weighted average period of 2.2 years, assuming all employees complete their respective service periods for vesting of the options.

 

Restricted Stock Units (“RSU” or “RSUs”)

 

A summary of the Company’s RSU activity as of and for the three months ended March 31, 2019 is as follows:

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

 

Average

 

 

Number

 

Grant Date

 

    

of RSUs

    

Fair Value

Nonvested at January 1, 2019

 

1,869,029

 

$

21.67

Granted

 

1,498,500

 

 

13.78

Vested and issued

 

(244,948)

 

 

19.46

Cancelled / expired

 

(767,247)

 

 

23.54

Nonvested at March 31, 2019

 

2,355,334

 

$

16.18

 

The Company granted a performance-based award of 1,498,500 RSUs as a sign-on inducement award to an executive during the second quarter of 2018.  The award will be earned or forfeited based upon the Company’s performance relative to specified cumulative Adjusted EBITDA and revenue goals for the years ending December 31, 2018 and 2019 and the executive’s completion of the service condition.  In January 2019, the performance goals were measurable and determinable, therefore, a grant date for accounting purposes was established. The Company is accounting for these performance-based RSUs under the current presumption that the award will be forfeited. 

 

The Company recorded share-based compensation expense associated with RSUs of $1,653 and $868 for the three months ended March 31, 2019 and 2018, respectively. At March 31, 2019, the total compensation cost related to nonvested RSUs not yet recognized was $14,985, which will be recognized over the next 1.78 years, assuming all employees complete their respective service periods for vesting of the RSUs.

 

Restricted Stock Awards (“RSA” or RSAs”)

 

A summary of the Company’s RSA activity as of and for the three months ended March 31, 2019 is as follows:

 

 

 

 

 

 

 

 

    

Number

    

Weighted

 

 

of Shares

 

Average

 

 

Subject to

 

Grant Date

 

    

Restriction

    

Fair Value

Nonvested at January 1, 2019

 

43,355

 

$

20.91

Vested

 

(2,559)

 

 

14.65

Forfeited

 

(5,929)

 

 

21.63

Nonvested at March 31, 2019

 

34,867

 

 

21.24

 

The Company recorded share-based compensation expense associated with RSAs of $126 and  $138 for the three months ended March 31, 2019 and 2018, respectively.  At March 31, 2019, the total compensation cost related to nonvested RSAs not yet recognized was $231 which will be recognized during 2019, assuming the non-employee directors complete their service period for vesting of the RSAs.

v3.19.1
LOSS PER COMMON SHARE
3 Months Ended
Mar. 31, 2019
LOSS PER COMMON SHARE  
LOSS PER COMMON SHARE

10.  LOSS PER COMMON SHARE

 

Basic (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted income per common share further includes any common shares available to be issued upon exercise of outstanding service-based stock options; exercise of outstanding performance-based stock options for which all performance conditions were satisfied; and satisfaction of all contingent consideration performance conditions; and RSAs and RSUs, if such inclusions would be dilutive. The potentially dilutive common shares are determined for inclusion in diluted income per common share using the treasury stock method. For periods of net loss, basic and diluted per common share information are the same.

 

The following table sets forth the computation of basic and diluted loss per common share:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2019

    

2018

    

Numerator:

 

 

 

 

 

 

 

Net loss

 

$

(14,301)

 

$

(450)

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

74,460,990

 

 

73,996,313

 

Weighted average dilutive effect of stock options, RSAs and RSUs

 

 

 —

 

 

 —

 

Weighted average common shares outstanding, diluted

 

 

74,460,990

 

 

73,996,313

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

Basic

 

$

(0.19)

 

$

(0.01)

 

Diluted

 

$

(0.19)

 

$

(0.01)

 

 

The Company had a net loss for the three months ended March 31, 2019 and 2018.  As a result, basic and diluted loss per common share were the same as any potentially dilutive securities would be anti-dilutive.  In the absence of a net loss, the weighted average dilutive effect of stock options, RSUs and RSAs would have been 205,058 for the three months ended March 31, 2019.

 

The weighted average effect of certain common stock equivalents including stock options, RSUs and RSAs were excluded from the computation of weighted average diluted shares outstanding as inclusion of such items would be anti-dilutive, are summarized as follows:

 

 

 

 

 

 

 

    

Three Months Ended

 

 

March 31,

 

 

2019

 

2018

Service-based and earned performance-based stock options

 

3,946,288

 

4,011,211

Unearned performance-based stock options

 

574,138

 

574,138

Weighted average service-based RSUs

 

1,010,148

 

51,553

Weighted average performance based RSUs

 

1,523,451

 

7,751

Weighted average RSAs

 

17,911

 

 —

Total

 

7,071,936

 

4,644,653

 

v3.19.1
INCOME TAXES
3 Months Ended
Mar. 31, 2019
INCOME TAXES  
INCOME TAXES

11.  INCOME TAXES

 

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax (expense) benefit is as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2019

    

2018

Income tax benefit at U.S. statutory rate

 

$

2,873

 

$

277

Tax effect from:

 

 

 

 

 

  

State income taxes, net of federal benefit

 

 

(323)

 

 

279

State income taxes, valuation allowance

 

 

(296)

 

 

Share-based compensation

 

 

(709)

 

 

218

Valuation allowance

 

 

(1,994)

 

 

Disallowed compensation

 

 

(64)

 

 

42

Other

 

 

(106)

 

 

52

Income tax (expense) benefit

 

$

(619)

 

$

868

 

In determining the requirement for a valuation allowance against its deferred tax assets, the Company considers its historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset, along with other available positive and negative evidence. Due primarily to the parent company, along with several of its subsidiaries, being in a three-year cumulative loss from continuing operations position at March 31, 2019, the Company has determined it more likely than not its consolidated deferred tax asset and a substantial portion of separate entities’ deferred tax assets established for state loss carryforwards, will not be realized as a benefit in the future.  Accordingly, the Company has increased its valuation allowance against these net deferred tax assets by $2,290 at March 31, 2019.

v3.19.1
RELATED PARTY TRANSACTION
3 Months Ended
Mar. 31, 2019
RELATED PARTY TRANSACTION  
RELATED PARTY TRANSACTION

12.  RELATED PARTY TRANSACTION

 

In December 2018, the Company signed a definitive agreement with ReactiveCore, Inc. (“ReactiveCore”) to provide information technology services to the Company over a period of three years, commencing on January 1, 2019. Kenneth Klepper, a member of the Board of Directors, is the co-founder, chairman and chief executive officer of ReactiveCore. Prior to the signing of this agreement, the Board of Directors reviewed and approved this transaction in accordance with the Company’s related persons transaction policy.

 

The Company will pay base fees to ReactiveCore of approximately $2,400 over the term of the agreement, with the potential of paying additional fees for the provision of additional services.  During the three months ended March 31, 2019, the Company incurred a three-year licensing fee of $1,946 for the term of the agreement, which has been recorded in capitalized software for internal use, net in the condensed consolidated balance sheet.

 

v3.19.1
LEASES
3 Months Ended
Mar. 31, 2019
LEASES  
LEASES

13.  LEASES

 

The Company leases many of its pharmacy locations, office facilities, distribution centers, and certain office equipment through noncancelable operating lease contracts. Such noncancelable operating lease contracts convey the right to control such property for a period of time in exchange for consideration.  The operating leases have initial terms ranging from three to 12 years and generally have options to extend for one or two five -year periods. Additionally, most frequently, the lease contracts include a provision for early termination after a specified time period along with payment of a  termination fee. Beginning in 2019, the lease term, for accounting purposes, will include renewal option periods when it is reasonably certain that the option to extend the lease will be exercised based on the facts and circumstances at lease commencement. The lease agreements, most often, provide for rental payments that increase over the lease term based on a fixed percentage or specified amount.  Additionally, the Company, in most cases, is required to pay real estate taxes, insurance costs and other occupancy costs such as common area maintenance that vary over the lease term. 

 

Rent expense was $1,886 for the three months ended March 31, 2018. The components of lease expense in the condensed consolidated statements of comprehensive loss for the three months ended March 31, 2019, were as follows:

 

 

 

 

 

 

    

 

    

Operating lease cost

 

$

2,059

Variable lease cost

 

 

377

Short-term lease cost

 

 

108

  Total

 

$

2,544

 

Maturities of lease liabilities for each of the next five years and thereafter, including reconciliation to the lease liabilities, were as follows:

 

 

 

 

 

2019 (excluding the three months ended March 31, 2019)

    

$

4,567

2020

 

 

5,473

2021

 

 

4,832

2022

 

 

4,195

2023

 

 

3,311

Thereafter

 

 

14,386

Total future lease payments

 

 

36,764

Less: imputed interest costs (a)

 

 

(8,575)

Lease liabilities

 

$

28,189


(a)

Computed using the estimated incremental borrowing rate for each lease

 

Other Information related to the Company's lease liabilities as of and for the three months ended March 31, 2019 was as follows:

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

Operating cash flows for operating leases

 

$

1,585

 

Weighted average remaining lease term (in years)

    

 

7.76

 

Weighted average discount rate 

 

 

6.77

%

 

v3.19.1
CONTINGENCIES
3 Months Ended
Mar. 31, 2019
CONTINGENCIES  
CONTINGENCIES

14.  CONTINGENCIES

 

On November 10, 2016, a putative class action complaint was filed in the U.S. District Court for the Eastern District of Michigan against Diplomat Pharmacy, Inc. and certain former officers of the Company. Following the appointment of lead plaintiffs and lead counsel, an amended complaint was filed on April 11, 2017. The amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with public filings made between February 29, 2016 and November 2, 2016 (the “potential class period”). The plaintiffs seek to represent a class of shareholders who purchased stock in the potential class period. The complaint seeks unspecified monetary damages and other relief. The Company filed a motion to dismiss the amended complaint on May 24, 2017. The court issued orders denying the Company’s motion to dismiss on January 19, 2018 and the Company’s motion for reconsideration of its motion to dismiss on August 9, 2018. The parties reached an agreement-in-principle on April 22, 2019 to resolve the litigation. The court preliminarily approved the settlement on May 7, 2019, and a final settlement approval hearing is scheduled for August 20,2019. If approved by the court, the settlement would not have a material impact on the Company’s results of operations, financial condition or cash flows.

 

On February 10, 2017, the Company’s Board of Directors received a demand letter from a purported shareholder containing allegations similar to those contained in the putative class action complaint described above. The letter demanded that the Board of Directors take action to remedy the alleged violations. In response, the Board of Directors established a Special Independent Committee of its disinterested and independent members to investigate the claims. Subsequently, on June 2, 2017, the shareholder filed a putative shareholder’s derivative lawsuit in the Michigan Circuit Court for the County of Genesee regarding the same matters alleged in the demand letter. The complaint names the Company as a nominal defendant and names a number of the Company’s current and former officers and directors as defendants. The complaint seeks unspecified monetary damages and other relief. On February 6, 2019, the parties reached an agreement-in-principle to settle the action. The court preliminarily approved the settlement on April 8, 2019, and a final settlement approval hearing is scheduled for June 17, 2019. If approved by the court, the settlement would not have a material impact on the Company’s results of operations, financial condition or cash flows.

 

On February 24, 2019 and March 6, 2019, in the U.S. District Court for the Central District of California and on March 12, 2019 in the U.S. District Court for the Northern District of Illinois, putative class actions complaints were filed against Diplomat Pharmacy, Inc. and certain current and former officers of the Company. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 in connection with our public filings made between February 26, 2018 and February 21, 2019 (the “potential class period”). The plaintiffs each seek to represent a class of shareholders who purchased stock in the potential class period. The complaints seek unspecified monetary damages and other relief. The Company has filed unopposed motions to transfer the two complaints pending in the Central District of California to the Northern District of Illinois. The Company believes the complaints and allegations to be without merit and intends to vigorously defend itself against the actions. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flows.

 

The Company’s business of providing specialized pharmacy services and other related services may subject it to litigation and liability for damages in the ordinary course of business. Nevertheless, the Company believes there are no other legal proceedings, the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business, financial position, cash flows, or results of operations.

v3.19.1
SEGMENT REPORTING
3 Months Ended
Mar. 31, 2019
SEGMENT REPORTING  
SEGMENT REPORTING

15.  SEGMENT REPORTING

 

The Company reports in two reportable segments: Specialty and PBM. The Specialty segment offers a broad range of innovative solutions to address the dispensing, delivery, dosing and reimbursement of clinically intensive, high-cost specialty drugs and a wide range of applications and the PBM segment provides services designed to help the Company’s customers reduce the cost and manage the complexity of their prescription drug programs. The chief operating decision maker evaluates segment performance principally upon net sales and gross profit. Net sales, cost of sales and gross profit information by segment are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

Net Sales

 

Cost of Sales

 

Gross Profit

 

    

2019

    

2018

    

2019

    

2018

    

2019

    

2018

Specialty

 

$

1,168,365

 

$

1,152,979

 

$

(1,100,841)

 

$

(1,080,159)

 

$

67,524

 

$

72,820

PBM

 

 

97,917

 

 

191,468

 

 

(86,221)

 

 

(173,910)

 

 

11,696

 

 

17,558

Inter-segment eliminations

 

 

(9,474)

 

 

(1,963)

 

 

9,474

 

 

1,963

 

 

 

 

 

 

$

1,256,808

 

$

1,342,484

 

$

(1,177,588)

 

$

(1,252,106)

 

$

79,220

 

$

90,378

 

Total assets by segment are as follows:

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31,

 

    

2019

    

2018

Specialty

 

$

1,032,201

 

$

1,045,174

PBM

 

 

414,867

 

 

431,185

 

 

$

1,447,068

 

$

1,476,359

 

v3.19.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Principles of Consolidation

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Diplomat Pharmacy, Inc., and its wholly owned subsidiaries.

 

All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

Receivables, net

Receivables, net

 

Receivables, net consisted of the following:

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

Trade receivables, net of allowances of $(27,191) and $(25,342), respectively

 

$

312,371

 

$

299,407

Rebate receivables

 

 

12,129

 

 

22,375

Other receivables

 

 

5,381

 

 

4,820

 

 

$

329,881

 

$

326,602

 

Trade receivables are stated at the invoiced amount. Trade receivables primarily include amounts due from clients, third-party pharmacy benefit managers and insurance providers and are based on contracted prices. Trade receivables are unsecured and require no collateral. Trade receivable terms vary by payer, but generally are due within 30 days after the sale of the product or performance of the service.

 

Rebate receivables are amounts due from pharmaceutical manufacturers related to drug purchases by participants of the various pharmacy benefit plans that the Company manages, a portion of which, depending on contract terms, are paid back to the Company’s customers. The Company estimates these rebates at period-end based on its contractual arrangements with its manufacturers and such rebates are recorded as a reduction of cost of sales.

Inventories

Inventories

 

Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. Prescription medications are returnable to the Company’s vendors and fully refundable before six months of expiration, and any remaining expired medication is relieved from inventory on a quarterly basis.

v3.19.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Mar. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Schedule of receivables, net

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

Trade receivables, net of allowances of $(27,191) and $(25,342), respectively

 

$

312,371

 

$

299,407

Rebate receivables

 

 

12,129

 

 

22,375

Other receivables

 

 

5,381

 

 

4,820

 

 

$

329,881

 

$

326,602

 

v3.19.1
FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Mar. 31, 2019
FAIR VALUE MEASUREMENTS  
Schedule of liabilities measured and disclosed at fair value on a recurring basis

                                                                                                                                                                                   

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Asset /

    

Valuation

    

Valuation

    

 

 

    

(Liability)

    

Level 2

    

Level 3

    

Technique

March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration                 

 

$

(7,105)

 

$

 —

 

$

(7,105)

 

C

Interest rate swaps (Note 7) 

 

 

(6,419)

 

 

(6,419)

 

 

 —

 

A

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018: