DIPLOMAT PHARMACY, INC., 10-Q filed on 5/9/2017
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2017
May 8, 2017
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, 2017 
 
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
 
67,197,543 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q1 
 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and equivalents
$ 16,581 
$ 7,953 
Accounts receivable, net
255,461 
275,568 
Inventories
200,286 
215,351 
Prepaid expenses and other current assets
7,378 
6,235 
Total current assets
479,706 
505,107 
Property and equipment, net
19,923 
20,372 
Capitalized software for internal use, net
46,838 
50,247 
Goodwill
336,775 
316,616 
Definite-lived intangible assets, net
197,638 
199,862 
Deferred income taxes
4,263 
6,010 
Other noncurrent assets
1,045 
1,040 
Total assets
1,086,188 
1,099,254 
Current liabilities:
 
 
Accounts payable
301,392 
320,684 
Borrowings on line of credit
5,718 
39,255 
Short-term debt, including current portion of long-term debt
9,925 
7,500 
Accrued expenses:
 
 
Compensation and benefits
7,905 
5,674 
Other
14,279 
12,233 
Total current liabilities
339,219 
385,346 
Long-term debt, less current portion
121,514 
100,184 
Contingent consideration
3,735 
 
Total liabilities
464,468 
485,530 
Commitments and contingencies
   
   
Shareholders' equity:
 
 
Preferred stock (10,000,000 shares authorized; none issued and outstanding)
   
   
Common stock (no par value; 590,000,000 shares authorized; 67,164,606 and 66,764,999 issued and outstanding at March 31, 2017 and December 31, 2016, respectively)
507,381 
503,828 
Additional paid-in capital
33,486 
33,268 
Retained earnings
80,673 
76,306 
Total Diplomat Pharmacy shareholders' equity
621,540 
613,402 
Noncontrolling interests
180 
322 
Total shareholders' equity
621,720 
613,724 
Total liabilities and shareholders' equity
$ 1,086,188 
$ 1,099,254 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Condensed Consolidated Balance Sheets
 
 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common shares, par value (in dollars per share)
$ 0.00 
$ 0.00 
Common shares, authorized shares
590,000,000 
590,000,000 
Common shares, issued shares
67,164,606 
66,764,999 
Common shares, outstanding shares
67,164,606 
66,764,999 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Condensed Consolidated Statements of Operations
 
 
Net sales
$ 1,078,740 
$ 995,870 
Cost of products sold
(993,691)
(916,632)
Gross profit
85,049 
79,238 
Selling, general, and administrative expenses
(76,501)
(54,194)
Income from operations
8,548 
25,044 
Other (expense) income:
 
 
Interest expense
(2,049)
(1,434)
Other
33 
107 
Total other expense
(2,016)
(1,327)
Income before income taxes
6,532 
23,717 
Income tax expense
(2,307)
(8,534)
Net income
4,225 
15,183 
Less net loss attributable to noncontrolling interest
(142)
(246)
Net income attributable to Diplomat Pharmacy, Inc.
$ 4,367 
$ 15,429 
Net income per common share:
 
 
Basic (in dollars per share)
$ 0.07 
$ 0.24 
Diluted (in dollars per share)
$ 0.06 
$ 0.23 
Weighted average common shares outstanding:
 
 
Basic (in shares)
66,886,866 
64,539,161 
Diluted (in shares)
67,780,434 
67,844,937 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:
 
 
Net income
$ 4,225 
$ 15,183 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
Depreciation and amortization
15,397 
10,119 
Net provision for doubtful accounts
2,784 
2,246 
Deferred income tax expense
1,746 
7,633 
Share-based compensation expense
972 
1,503 
Amortization of debt issuance costs
297 
285 
Change in fair value of contingent consideration
 
(9,071)
Contingent consideration payment
 
(400)
Other
 
Changes in operating assets and liabilities, net of business acquisitions:
 
 
Accounts receivable
21,406 
(15,983)
Inventories
14,819 
(14,912)
Accounts payable
(20,640)
(4,881)
Other assets and liabilities
3,289 
2,698 
Net cash provided by (used in) operating activities
44,295 
(5,579)
Cash flows from investing activities:
 
 
Payments to acquire businesses, net of cash acquired
(26,532)
 
Expenditures for capitalized software for internal use
(1,285)
(4,432)
Expenditures for property and equipment
(569)
(1,316)
Other
(43)
Net cash used in investing activities
(28,429)
(5,747)
Cash flows from financing activities:
 
 
Net payments on line of credit
(33,537)
 
Proceeds from long-term debt
25,000 
 
Payments on long-term debt
(1,500)
(1,500)
Proceeds from issuance of stock upon stock option exercises
2,799 
510 
Contingent consideration payments
 
(600)
Net cash used in financing activities
(7,238)
(1,590)
Net increase (decrease) in cash and equivalents
8,628 
(12,916)
Cash and equivalents at beginning of period
7,953 
27,600 
Cash and equivalents at end of period
16,581 
14,684 
Supplemental disclosures of cash flow information:
 
 
Cash paid for interest
1,710 
875 
Cash paid for income taxes
$ 117 
$ 443 
Condensed Consolidated Statement of Changes in Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Common stock
Additional Paid-in Capital
Retained Earnings
Diplomat Pharmacy, Inc. Shareholders' Equity
Noncontrolling Interest
Total
Balance at Dec. 31, 2016
$ 503,828 
$ 33,268 
$ 76,306 
$ 613,402 
$ 322 
$ 613,724 
Balance at the beginning of the period (in shares) at Dec. 31, 2016
66,764,999 
 
 
 
 
66,764,999 
Changes in Shareholders' Equity
 
 
 
 
 
 
Net income (loss)
 
 
4,367 
4,367 
(142)
4,225 
Stock issued upon stock option exercises
3,553 
(754)
 
2,799 
 
2,799 
Stock issued upon stock option exercises (in shares)
391,965 
 
 
 
 
 
Share-based compensation expense
 
972 
 
972 
 
972 
Restricted stock awards (in shares)
7,642 
 
 
 
 
 
Balance at Mar. 31, 2017
$ 507,381 
$ 33,486 
$ 80,673 
$ 621,540 
$ 180 
$ 621,720 
Balance at the end of the period (in shares) at Mar. 31, 2017
67,164,606 
 
 
 
 
67,164,606 
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS

 

1.DESCRIPTION OF BUSINESS

 

Diplomat Pharmacy, Inc. and its consolidated subsidiaries (the “Company”) operate a specialty pharmacy business which stocks, dispenses and distributes prescriptions for various biotechnology and specialty pharmaceutical manufacturers. Its primary focus is on medication management programs for individuals with complex chronic diseases. Disease states covered include oncology, immunology, specialty infusion therapy, hepatitis, multiple sclerosis, and many other serious or long-term conditions. The Company has its corporate headquarters and main distribution facility in Flint, Michigan, and operates 24 other pharmacy locations in Alabama, Arizona, California, Connecticut, Florida, Illinois, Iowa, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin. The Company also has centralized call centers to effectively deliver services to customers located in all 50 states in the United States of America (“U.S.”) and U.S. territories. The Company operates as one reportable segment.

 

BASIS OF PRESENTATION
BASIS OF PRESENTATION

 

2.BASIS OF PRESENTATION

 

Interim Unaudited Condensed Consolidated Financial Statements

 

The accompanying 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 interim 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. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 8, 2017.

 

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., its wholly-owned subsidiaries, and a 51 percent owned subsidiary, formed in August 2014, which the Company controls. An investment in an entity in which the Company owns less than 20 percent and does not have the ability to exercise significant influence is accounted for under the cost method.

 

Noncontrolling interest in a consolidated subsidiary in the condensed consolidated balance sheets represents the minority shareholders’ proportionate share of the equity in such subsidiary. Consolidated net income (loss) is allocated to the Company and noncontrolling interests (i.e., minority shareholders) in proportion to their percentage ownership.

 

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.

 

Inventories

 

Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or market. 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.

 

Revenue Recognition

 

The Company recognizes revenue from prescription drug sales for home delivery at the time the drugs are shipped. At the time of shipment, the Company has performed substantially all of its obligations under its payor contracts and does not experience a significant level of returns or reshipments. Revenues from dispensing specialty prescriptions that are picked up by patients at an open door or retail pharmacy location are recorded at prescription adjudication, which approximates the fill date. Sales taxes are presented on a net basis (excluded from revenues and costs). Revenues generated from prescription drug sales were $1,073,865 and $990,011 for the three months ended March 31, 2017 and 2016, respectively.

 

The Company recognizes revenue from service, data, and consulting services when the services have been performed and the earnings process is therefore complete. Revenues generated from service, data, and consulting services were $4,875 and $5,859 for the three months ended March 31, 2017 and 2016, respectively.

 

Accounting Standards Update (“ASU”) Adoption — Balance Sheet Classification of Deferred Taxes

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), eliminating the current requirement for companies to present deferred tax assets and liabilities as current and noncurrent. Instead, companies will be required to classify all deferred tax assets and liabilities as noncurrent. This ASU is effective for annual periods beginning on or after December 15, 2016, including interim periods within those annual periods, and can be adopted either prospectively or retrospectively.

 

Effective January 1, 2017, the Company retrospectively adopted the accounting guidance contained within ASU 2015-17. The following December 31, 2016 condensed consolidated balance sheet line items were adjusted due to this adoption:

 

 

 

As

 

 

 

 

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Adjustment

 

As Adjusted

 

Deferred income taxes (current asset)

 

$

14,703

 

$

(14,703

)

$

 

Total current assets

 

519,810

 

(14,703

)

505,107

 

Deferred income taxes (noncurrent asset)

 

 

6,010

 

6,010

 

Total assets

 

1,107,947

 

(8,693

)

1,099,254

 

Deferred income taxes (noncurrent liability)

 

8,693

 

(8,693

)

 

Total liabilities

 

494,223

 

(8,693

)

485,530

 

Total liabilities and shareholders’ equity

 

1,107,947

 

(8,693

)

1,099,254

 

 

ASU Adoption — Simplifying the Test for Goodwill Impairment

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the quantitative goodwill impairment test. Instead, an entity should perform its annual, or interim, quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount (Step 1). An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted.

 

Effective January 1, 2017, the Company adopted the accounting guidance contained within ASU 2017-04. There was no current impact to the Company as a result of this adoption.

 

New Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017 for public entities, though early adoption is permitted. ASU 2014-09 permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (cumulative catch-up transition method). The Company currently anticipates adopting ASU 2014-09 using the cumulative catch-up transition method. The Company continues to assess the impact that the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and/or notes thereto, although the Company does not expect the impact to be significant.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), requiring lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at lease commencement date. This ASU is effective for annual periods beginning on or after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating whether to early adopt and the impact that the adoption of this guidance will have on its condensed consolidated financial statements and/or notes thereto.

 

BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS

 

4.BUSINESS ACQUISITIONS

 

The Company accounts for its business acquisitions using the acquisition method as required by FASB Accounting Standards Codification Topic 805, Business Combinations. The Company ascribes significant value to the synergies and other benefits that do not meet the recognition criteria of acquired identifiable intangible assets. Accordingly, the value of these components is included within goodwill. The Company’s business acquisitions described below were treated as asset purchases for income tax purposes and the related goodwill resulting from these business acquisitions is deductible for income tax purposes. The results of operations for acquired businesses are included in the Company’s consolidated financial statements from their respective acquisition dates.

 

The assets acquired and liabilities assumed in the business combinations described below, including identifiable intangible assets, were based on their estimated fair values as of the acquisition date. The excess of purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The allocation of the purchase price required management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to identifiable intangible assets. These estimated fair values were based on information obtained from management of the acquired companies and historical experience and, with respect to the long-lived tangible and intangible assets, were made with the assistance of an independent valuation firm. These estimates included, but were not limited to, the cash flows that an asset is expected to generate in the future, and the cost savings expected to be derived from acquiring an asset, discounted at rates commensurate with the risks and uncertainties involved. For acquisitions that involved contingent consideration, the Company recognized a liability equal to the fair value of the contingent consideration obligation as of the acquisition date. The estimate of fair value of a contingent consideration obligation required subjective assumptions regarding future business results, discount rates, and probabilities assigned to various potential business result scenarios.

 

Comfort Infusion, Inc.

 

On March 22, 2017, the Company acquired Comfort Infusion, Inc. (“Comfort Infusion”), a specialty pharmacy and infusion services company based in Birmingham, AL that specializes in intravenous immune globulin therapy to support patients’ immune systems. The following table summarizes the consideration transferred to acquire Comfort Infusion:

 

Cash

 

$

10,600

 

Contingent consideration at fair value

 

3,700

 

 

 

 

 

 

 

$

14,300

 

 

 

 

 

 

 

The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners additional cash payouts of up to $2,000 per performance period based upon the achievement of a certain gross profit targets in each of the 12-month periods ending March 31, 2018, 2019, and 2020. The maximum payout of contingent consideration is $6,000.

 

Approximately $1,050 of the purchase consideration was deposited into an escrow account to be held for 18 months after the closing date to satisfy any of the Company’s indemnification claims.

 

The Company incurred acquisition-related costs of $133 which were charged to “Selling, general and administrative expenses” during the three months ended March 31, 2017.

 

The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date:

 

Cash

 

$

122

 

Accounts receivable

 

546

 

Inventories

 

86

 

Prepaid expenses and other current assets

 

24

 

Definite-lived intangible assets

 

2,360

 

Accounts payable

 

(273

)

Accrued expenses — other

 

(207

)

 

 

 

 

Total identifiable net assets

 

2,658

 

Goodwill

 

11,642

 

 

 

 

 

 

 

$

14,300

 

 

 

 

 

 

 

Definite-lived intangible assets that were acquired and their respective useful lives are as follows:

 

 

 

Useful
Life

 

Amount

 

Patient relationships

 

9 years

 

$

1,400

 

Non-compete employment agreements

 

5 years

 

960

 

 

 

 

 

 

 

 

 

 

 

$

2,360

 

 

 

 

 

 

 

 

 

Affinity Biotech, Inc.

 

On February 1, 2017, the Company acquired Affinity Biotech, Inc. (“Affinity”), a specialty pharmacy and infusion services company based in Houston, TX that provides treatments and nursing services for patients with hemophilia. The following table summarizes the consideration transferred to acquire Affinity:

 

Cash

 

$

17,097

 

Contingent consideration at fair value

 

35

 

 

 

 

 

 

 

$

17,132

 

 

 

 

 

 

 

The purchase price includes a contingent consideration arrangement that requires the Company to pay the former owners an additional cash payout based upon the achievement of a certain earnings before interest, taxes, depreciation, and amortization target in the 12-month period ending January 31, 2018. The maximum payout of contingent consideration is $4,000.

 

Approximately $2,000 of the purchase consideration was deposited into an escrow account to be held for 18 months after the closing date to satisfy any of the Company’s indemnification claims.

 

The Company incurred acquisition-related costs of $224 which were charged to “Selling, general and administrative expenses” during the three months ended March 31, 2017.

 

The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date:

 

Cash

 

$

1,043

 

Accounts receivable

 

3,537

 

Inventories

 

79

 

Prepaid expenses and other current assets

 

72

 

Definite-lived intangible assets

 

5,100

 

Other noncurrent assets

 

5

 

Accounts payable

 

(1,075

)

Accrued expenses — compensation and benefits

 

(144

)

Accrued expenses — other

 

(2

)

 

 

 

 

Total identifiable net assets

 

8,615

 

Goodwill

 

8,517

 

 

 

 

 

 

 

$

17,132

 

 

 

 

 

 

 

Definite-lived intangible assets that were acquired and their respective useful lives are as follows:

 

 

 

Useful
Life

 

Amount

 

Patient relationships

 

7 years

 

$

4,000

 

Non-compete employment agreements

 

5 years

 

1,100

 

 

 

 

 

 

 

 

 

 

 

$

5,100

 

 

 

 

 

 

 

 

 

Valley Campus Pharmacy, Inc.

 

On June 1, 2016, the Company acquired Valley Campus Pharmacy, Inc., doing business as TNH Advanced Specialty Pharmacy (“TNH”). TNH, a specialty pharmacy based in Van Nuys, California, provides medication management programs for individuals with complex chronic diseases, including oncology, hepatitis, and immunology. The Company acquired TNH to expand its existing business, enhance its proprietary technology, and increase its geographic presence, particularly in California and Texas. The following table summarizes the consideration transferred to acquire TNH:

 

Cash

 

$

68,915

 

324,244 restricted common shares

 

9,507

 

 

 

 

 

 

 

$

78,422

 

 

 

 

 

 

 

The above share consideration at closing is based on 324,244 shares, in accordance with the purchase agreement, multiplied by the per share closing market price of the Company’s common stock as of May 31, 2016 ($32.58), and multiplied by 90 percent to account for the restricted nature of the shares.

 

Approximately $3,800 of the purchase consideration was deposited into an escrow account to be held for one year after the closing date to satisfy any indemnification claims that may be made by the Company.

 

The following table summarizes the preliminary fair values of identifiable assets acquired and liabilities assumed at the acquisition date:

 

Cash

 

$

2,114

 

Accounts receivable

 

16,271

 

Inventories

 

4,740

 

Prepaid expenses and other current assets

 

46

 

Property and equipment

 

200

 

Capitalized software for internal use

 

14,000

 

Definite-lived intangible assets

 

13,890

 

Other noncurrent assets

 

21

 

Accounts payable

 

(29,773

)

Accrued expenses — compensation and benefits

 

(400

)

Accrued expenses — other

 

(1,962

)

 

 

 

 

Total identifiable net assets

 

19,147

 

Goodwill

 

59,275

 

 

 

 

 

 

 

$

78,422

 

 

 

 

 

 

 

Definite-lived intangible assets that were acquired and their respective useful lives are as follows:

 

 

 

Useful
Life

 

Amount

 

Physician relationships

 

10 years

 

$

7,700

 

Noncompete employment agreements

 

5 years

 

4,490

 

Trade names and trademarks

 

1 year

 

1,700

 

 

 

 

 

 

 

 

 

 

 

$

13,890

 

 

 

 

 

 

 

 

 

Pro Forma Operating Results

 

The following 2017 unaudited pro forma summary presents condensed consolidated financial information as if the Affinity and Comfort Infusion acquisitions had occurred on January 1, 2016. The following 2016 unaudited pro forma summary presents condensed consolidated financial information as if the Affinity and Comfort Infusion acquisitions had occurred on January 1, 2016 and the TNH acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect certain adjustments related to the acquisitions, such as amortization expense resulting from intangible assets acquired and adjustments to reflect the Company’s borrowings and tax rates. Accordingly, such pro forma operating results were prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions been made as of the as if dates or of results that may occur in the future.

 

 

 

Three Months Ended
March 31,

 

 

 

2017

 

2016

 

Net sales

 

$

1,082,592

 

$

1,124,300

 

 

 

 

 

 

 

 

 

Net income attributable to Diplomat Pharmacy, Inc.

 

$

3,807

 

$

15,985

 

 

 

 

 

 

 

 

 

Net income per common share — basic

 

$

0.06

 

$

0.25

 

 

 

 

 

 

 

 

 

Net income per common share — diluted

 

$

0.06

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS

 

5.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 need to 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 assets and liabilities that are measured and disclosed at fair value on a recurring basis at March 31, 2017:

 

 

 

Asset /

 

 

 

Valuation

 

 

 

(Liability)

 

Level 3

 

Technique

 

Contingent consideration

 

$

(3,735

)

$

(3,735

)

C

 

 

The following table sets forth a roll forward of the Level 3 measurements:

 

 

 

Contingent
Consideration

 

Balance at January 1, 2017

 

$

 

Affinity acquisition

 

(35

)

Comfort Infusion acquisition

 

(3,700

)

 

 

 

 

Balance at March 31, 2017

 

$

(3,735

)

 

 

 

 

 

 

The carrying amounts of the Company’s financial instruments — consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, and other liabilities — approximate their estimated fair values due to the relative short-term nature of the amounts. 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.

 

GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS

 

6.GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS

 

The following table sets forth a roll forward of goodwill for the three months ended March 31, 2017:

 

Balance at January 1, 2017

 

$

316,616

 

Affinity acquisition

 

8,517

 

Comfort Infusion acquisition

 

11,642

 

 

 

 

 

Balance at March 31, 2017

 

$

336,775

 

 

 

 

 

 

 

Definite-lived intangible assets consisted of the following:

 

 

 

March 31, 2017

 

December 31, 2016

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Patient relationships

 

$

164,500

 

$

(35,710

)

$

128,790

 

$

159,100

 

$

(31,445

)

$

127,655

 

Non-compete employment agreements

 

56,749

 

(21,445

)

35,304

 

54,689

 

(18,674

)

36,015

 

Physician relationships

 

21,700

 

(3,630

)

18,070

 

21,700

 

(2,831

)

18,869

 

Trade names and trademarks

 

23,800

 

(8,326

)

15,474

 

23,800

 

(6,477

)

17,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

266,749

 

$

(69,111

)

$

197,638

 

$

259,289

 

$

(59,427

)

$

199,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT IN NON-CONSOLIDATED ENTITY
INVESTMENT IN NON-CONSOLIDATED ENTITY

7.INVESTMENT IN NON-CONSOLIDATED ENTITY

 

From October 2011 through January 2017, the Company maintained a 25.0 percent minority interest in Worksmart MD, LLC, also known as Ageology, though it fully impaired its investment during the fourth quarter of 2014. In transactions unrelated to the Company, SkyPoint Ventures LLC (“SkyPoint”), an affiliated entity of the Company’s chief executive officer, loaned $16,000 to Ageology through January 2017. In February 2017, SkyPoint elected to convert its $16,000 in outstanding loans into equity in Ageology, which equated to an approximate ownership of 51.8 percent. Concurrently, the Company converted its $2,500 in outstanding loans (which the Company had written off during the fourth quarter of 2014) into equity in Ageology, thereby increasing the Company’s minority interest to approximately 26.5 percent. Because the Company does not direct the activities that most significantly impact the economic performance of Ageology, management has determined that the Company is not nor ever has been Ageology’s primary beneficiary.

 

Subsequent to the February 2017 concurrent conversion transactions, SkyPoint loaned Ageology $860 during the three months ended March 31, 2017.

DEBT
DEBT

 

8.DEBT

 

The Company had $109,500 and $111,000 outstanding on Term Loan A as of March 31, 2017 and December 31, 2016, respectively. Unamortized debt issuance costs of $3,061 and $3,316 as of March 31, 2017 and December 31, 2016, respectively, are presented in the condensed consolidated balance sheets as direct deductions from the outstanding debt balances. During the first quarter of 2017, the Company fully drew down its $25,000 deferred draw term loan (“DDTL”), which was outstanding as of March 31, 2017. The Company also had $5,718 and $39,255 outstanding on its line of credit as of March 31, 2017 and December 31, 2016, respectively. The Company had $149,845 and $129,908 available to borrow on its line of credit at March 31, 2017 and December 31, 2016, respectively.

 

The interest rate on the Company’s Term Loan A and DDTL was 3.31 percent and 3.13 percent at March 31, 2017 and December 31, 2016, respectively. The Company’s line of credit interest rate was 4.50 percent at both March 31, 2017 and December 31, 2016. In addition, the Company is charged a monthly unused commitment fee ranging from 0.25 percent to 0.50 percent on its average unused daily balance on its $175,000 line of credit.

 

The Company’s credit facility, consisting of the Term Loan A, DDTL, and line of credit, contains certain financial and non-financial covenants. The Company was in compliance with all such covenants as of March 31, 2017 and December 31, 2016.

SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION

 

9.SHARE-BASED COMPENSATION

 

A summary of the Company’s stock option activity as of and for the three months ended March 31, 2017 is as follows:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

Number

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

of Options

 

Price

 

Life

 

Value

 

 

 

 

 

 

 

(Years)

 

 

 

Outstanding at January 1, 2017

 

4,413,341

 

$

19.02

 

7.0

 

$

11,558

 

Granted

 

300,000

 

14.86

 

 

 

 

 

Exercised

 

(391,965

)

7.14

 

 

 

 

 

Expired/cancelled

 

(532,916

)

27.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2017

 

3,788,460

 

$

18.73

 

6.9

 

$

10,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2017

 

1,736,876

 

$

12.25

 

4.3

 

$

10,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company recorded share-based compensation expense associated with stock options of $896 and $1,432 for the three months ended March 31, 2017 and 2016, respectively.

 

The Company granted service-based awards of 300,000 options to purchase common stock to key employees under its 2014 Omnibus Incentive Plan during the three months ended March 31, 2017. The options become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of ten years.

 

The 300,000 options to purchase common stock that were granted during the three months ended March 31, 2017 have a weighted average grant date fair value of $5.58 per option. The grant date fair values of these stock option awards were estimated using the Black-Scholes-Merton option pricing model using the assumptions set forth in the following table:

 

Exercise price

 

$

14.66 - $15.71

 

Expected volatility

 

33.82% - 33.93

%

Expected dividend yield

 

0

%

Risk-free rate over the estimated expected life

 

2.11% - 2.32

%

Expected life (in years)

 

6.25

 

 

Estimating grant date fair values for employee stock options requires management to make assumptions regarding expected volatility of value of those underlying shares, the risk-free rate over the expected life of the stock options and the date on which share-based payments will be settled. Expected volatility is based on an implied volatility for a group of industry-relevant healthcare companies as of the measurement date. Risk-free rate is determined based upon U.S. Treasury rates over the estimated expected option lives. Expected dividend yield is zero as the Company does not anticipate that any dividends will be declared during the expected term of the options. The expected term of options granted is calculated using the simplified method (the midpoint between the end of the vesting period and the end of the maximum term).

 

Restricted Stock Awards

 

The Company issues restricted stock awards to non-employee directors. A summary of the Company’s restricted stock award activity as of and for the three months ended March 31, 2017 is as follows:

 

 

 

Number

 

Weighted

 

 

 

of Shares

 

Average

 

 

 

Subject to

 

Grant Date

 

 

 

Restriction

 

Fair Value

 

Nonvested at January 1, 2017

 

5,765

 

$

32.97

 

Granted

 

7,642

 

14.01

 

 

 

 

 

 

 

Nonvested at March 31, 2017

 

13,407

 

$

22.16

 

 

 

 

 

 

 

 

 

The Company recorded share-based compensation expense associated with restricted stock awards of $76 and $71 for the three months ended March 31, 2017 and 2016, respectively.

CONTINGENCIES
CONTINGENCIES

 

10.CONTINGENCIES

 

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. In addition, 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 officers of the Company. Following 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 plaintiff seeks 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 believes the complaint and allegations to be without merit and intends to vigorously defend itself against these 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. In the opinion of management, the disposition or ultimate resolution of all other currently known claims and lawsuits will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

 

INCOME PER COMMON SHARE
INCOME PER COMMON SHARE

 

11.INCOME PER COMMON SHARE

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

2016

 

Numerator:

 

 

 

 

 

Net income attributable to Diplomat Pharmacy, Inc.

 

$

4,367

 

$

15,429

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted average common shares outstanding, basic

 

66,886,866

 

64,539,161

 

Weighted average dilutive effect of stock options and restricted stock awards

 

893,568

 

1,959,494

 

Weighted average dilutive effect of contingent consideration

 

 

1,346,282

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted

 

67,780,434

 

67,844,937

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

 

$

0.07

 

$

0.24

 

Diluted

 

$

0.06

 

$

0.23

 

 

Stock options to purchase a weighted average of 2,433,510 and 1,369,375 common shares were excluded from the computation of diluted weighted average common shares outstanding for the three months ended March 31, 2017 and 2016, respectively, as inclusion of such options would be anti-dilutive. Performance-based stock options to purchase up to a weighted average of 46,119 common shares were excluded from the computation of diluted weighted average common shares outstanding for the three months ended March 31, 2016 as all performance conditions were not satisfied as of March 31, 2016. Weighted average restricted stock awards of 2,560 common shares were excluded from the computation of diluted weighted average common shares outstanding for the three months ended March 31, 2017 as inclusion of such shares would be anti-dilutive.

SUBSEQUENT EVENT
SUBSEQUENT EVENT

12.SUBSEQUENT EVENT

 

On May 8, 2017, the Company acquired WRB Communications, Inc., a communications and contact center company based in Chantilly, VA that specializes in relationship management programs for leading pharmaceutical manufacturers and service organizations. Under the terms of the agreement, Diplomat transferred cash and stock consideration of approximately $24,500 and $4,500, respectively, with additional cash payouts of up to $500 per performance period based upon the achievement of certain earnings before interest, taxes, depreciation, and amortization targets in the 12-month periods ending April 30, 2018 and 2019. The maximum additional cash payout is $1,000.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Diplomat Pharmacy, Inc., its wholly-owned subsidiaries, and a 51 percent owned subsidiary, formed in August 2014, which the Company controls. An investment in an entity in which the Company owns less than 20 percent and does not have the ability to exercise significant influence is accounted for under the cost method.

 

Noncontrolling interest in a consolidated subsidiary in the condensed consolidated balance sheets represents the minority shareholders’ proportionate share of the equity in such subsidiary. Consolidated net income (loss) is allocated to the Company and noncontrolling interests (i.e., minority shareholders) in proportion to their percentage ownership.

 

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.

 

Inventories

 

Inventories consist of prescription and over-the-counter medications and are stated at the lower of cost or market. 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.

 

Revenue Recognition

 

The Company recognizes revenue from prescription drug sales for home delivery at the time the drugs are shipped. At the time of shipment, the Company has performed substantially all of its obligations under its payor contracts and does not experience a significant level of returns or reshipments. Revenues from dispensing specialty prescriptions that are picked up by patients at an open door or retail pharmacy location are recorded at prescription adjudication, which approximates the fill date. Sales taxes are presented on a net basis (excluded from revenues and costs). Revenues generated from prescription drug sales were $1,073,865 and $990,011 for the three months ended March 31, 2017 and 2016, respectively.

 

The Company recognizes revenue from service, data, and consulting services when the services have been performed and the earnings process is therefore complete. Revenues generated from service, data, and consulting services were $4,875 and $5,859 for the three months ended March 31, 2017 and 2016, respectively.

 

Accounting Standards Update (“ASU”) Adoption — Balance Sheet Classification of Deferred Taxes

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), eliminating the current requirement for companies to present deferred tax assets and liabilities as current and noncurrent. Instead, companies will be required to classify all deferred tax assets and liabilities as noncurrent. This ASU is effective for annual periods beginning on or after December 15, 2016, including interim periods within those annual periods, and can be adopted either prospectively or retrospectively.

 

Effective January 1, 2017, the Company retrospectively adopted the accounting guidance contained within ASU 2015-17. The following December 31, 2016 condensed consolidated balance sheet line items were adjusted due to this adoption:

 

 

 

As

 

 

 

 

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Adjustment

 

As Adjusted

 

Deferred income taxes (current asset)

 

$

14,703

 

$

(14,703

)

$

 

Total current assets

 

519,810

 

(14,703

)

505,107

 

Deferred income taxes (noncurrent asset)

 

 

6,010

 

6,010

 

Total assets

 

1,107,947

 

(8,693

)

1,099,254

 

Deferred income taxes (noncurrent liability)

 

8,693

 

(8,693

)

 

Total liabilities

 

494,223

 

(8,693

)

485,530

 

Total liabilities and shareholders’ equity

 

1,107,947

 

(8,693

)

1,099,254

 

 

ASU Adoption — Simplifying the Test for Goodwill Impairment

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the quantitative goodwill impairment test. Instead, an entity should perform its annual, or interim, quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount (Step 1). An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted.

 

Effective January 1, 2017, the Company adopted the accounting guidance contained within ASU 2017-04. There was no current impact to the Company as a result of this adoption.

 

 

New Accounting Pronouncements

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard focuses on creating a single source of revenue guidance for revenue arising from contracts with customers for all industries. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. In July 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017 for public entities, though early adoption is permitted. ASU 2014-09 permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (cumulative catch-up transition method). The Company currently anticipates adopting ASU 2014-09 using the cumulative catch-up transition method. The Company continues to assess the impact that the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and/or notes thereto, although the Company does not expect the impact to be significant.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), requiring lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at lease commencement date. This ASU is effective for annual periods beginning on or after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating whether to early adopt and the impact that the adoption of this guidance will have on its condensed consolidated financial statements and/or notes thereto.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Schedule of consolidated balance sheet line items adjusted due to this adoption

The following December 31, 2016 condensed consolidated balance sheet line items were adjusted due to this adoption:

 

 

 

As

 

 

 

 

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Adjustment

 

As Adjusted

 

Deferred income taxes (current asset)

 

$

14,703

 

$

(14,703

)

$

 

Total current assets

 

519,810

 

(14,703

)

505,107

 

Deferred income taxes (noncurrent asset)

 

 

6,010

 

6,010

 

Total assets

 

1,107,947

 

(8,693

)

1,099,254

 

Deferred income taxes (noncurrent liability)

 

8,693

 

(8,693

)

 

Total liabilities

 

494,223

 

(8,693

)

485,530

 

Total liabilities and shareholders’ equity

 

1,107,947

 

(8,693

)

1,099,254

 

 

BUSINESS ACQUISITION (Tables)

 

 

 

Three Months Ended
March 31,

 

 

 

2017

 

2016

 

Net sales

 

$

1,082,592

 

$

1,124,300

 

 

 

 

 

 

 

 

 

Net income attributable to Diplomat Pharmacy, Inc.

 

$

3,807

 

$

15,985

 

 

 

 

 

 

 

 

 

Net income per common share — basic

 

$

0.06

 

$

0.25

 

 

 

 

 

 

 

 

 

Net income per common share — diluted

 

$

0.06

 

$

0.23

 

 

 

 

 

 

 

 

 

 

Cash

 

$

10,600

 

Contingent consideration at fair value

 

3,700

 

 

 

 

 

 

 

$

14,300

 

 

 

 

 

 

 

 

Cash

 

$

122

 

Accounts receivable

 

546

 

Inventories

 

86

 

Prepaid expenses and other current assets

 

24

 

Definite-lived intangible assets

 

2,360

 

Accounts payable

 

(273

)

Accrued expenses — other

 

(207

)

 

 

 

 

Total identifiable net assets

 

2,658

 

Goodwill

 

11,642

 

 

 

 

 

 

 

$

14,300

 

 

 

 

 

 

 

 

 

 

Useful
Life

 

Amount

 

Patient relationships

 

9 years

 

$

1,400

 

Non-compete employment agreements

 

5 years

 

960

 

 

 

 

 

 

 

 

 

 

 

$

2,360

 

 

 

 

 

 

 

 

 

 

Cash

 

$

17,097

 

Contingent consideration at fair value

 

35

 

 

 

 

 

 

 

$

17,132

 

 

 

 

 

 

 

 

Cash

 

$

1,043

 

Accounts receivable

 

3,537

 

Inventories

 

79

 

Prepaid expenses and other current assets

 

72

 

Definite-lived intangible assets

 

5,100

 

Other noncurrent assets

 

5

 

Accounts payable

 

(1,075

)

Accrued expenses — compensation and benefits

 

(144

)

Accrued expenses — other

 

(2

)

 

 

 

 

Total identifiable net assets

 

8,615

 

Goodwill

 

8,517

 

 

 

 

 

 

 

$

17,132

 

 

 

 

 

 

 

 

 

 

Useful
Life

 

Amount

 

Patient relationships

 

7 years

 

$

4,000

 

Non-compete employment agreements

 

5 years

 

1,100

 

 

 

 

 

 

 

 

 

 

 

$

5,100

 

 

 

 

 

 

 

 

 

 

Cash

 

$

68,915

 

324,244 restricted common shares

 

9,507

 

 

 

 

 

 

 

$

78,422

 

 

 

 

 

 

 

 

Cash

 

$

2,114

 

Accounts receivable

 

16,271

 

Inventories

 

4,740

 

Prepaid expenses and other current assets

 

46

 

Property and equipment

 

200

 

Capitalized software for internal use

 

14,000

 

Definite-lived intangible assets

 

13,890

 

Other noncurrent assets

 

21

 

Accounts payable

 

(29,773

)

Accrued expenses — compensation and benefits

 

(400

)

Accrued expenses — other

 

(1,962

)

 

 

 

 

Total identifiable net assets

 

19,147

 

Goodwill

 

59,275

 

 

 

 

 

 

 

$

78,422

 

 

 

 

 

 

 

 

 

 

Useful
Life

 

Amount

 

Physician relationships

 

10 years

 

$

7,700

 

Noncompete employment agreements

 

5 years

 

4,490

 

Trade names and trademarks

 

1 year

 

1,700

 

 

 

 

 

 

 

 

 

 

 

$

13,890

 

 

 

 

 

 

 

 

 

FAIR VALUE MEASUREMENTS (Tables)

 

The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured and disclosed at fair value on a recurring basis at March 31, 2017:

 

 

 

Asset /

 

 

 

Valuation

 

 

 

(Liability)

 

Level 3

 

Technique

 

Contingent consideration

 

$

(3,735

)

$

(3,735

)

C

 

 

 

 

 

 

Contingent
Consideration

 

Balance at January 1, 2017

 

$

 

Affinity acquisition

 

(35

)

Comfort Infusion acquisition

 

(3,700

)

 

 

 

 

Balance at March 31, 2017

 

$

(3,735

)

 

 

 

 

 

 

 

GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS (Tables)

 

Balance at January 1, 2017

 

$

316,616

 

Affinity acquisition

 

8,517

 

Comfort Infusion acquisition

 

11,642

 

 

 

 

 

Balance at March 31, 2017

 

$

336,775

 

 

 

 

 

 

 

 

 

 

March 31, 2017

 

December 31, 2016

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Patient relationships

 

$

164,500

 

$

(35,710

)

$

128,790

 

$

159,100

 

$

(31,445

)

$

127,655

 

Non-compete employment agreements

 

56,749

 

(21,445

)

35,304

 

54,689

 

(18,674

)

36,015

 

Physician relationships

 

21,700

 

(3,630

)

18,070

 

21,700

 

(2,831

)

18,869

 

Trade names and trademarks

 

23,800

 

(8,326

)

15,474

 

23,800

 

(6,477

)

17,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

266,749

 

$

(69,111

)

$

197,638

 

$

259,289

 

$

(59,427

)

$

199,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHARE-BASED COMPENSATION (Tables)

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

Number

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

of Options

 

Price

 

Life

 

Value

 

 

 

 

 

 

 

(Years)

 

 

 

Outstanding at January 1, 2017

 

4,413,341

 

$

19.02

 

7.0

 

$

11,558

 

Granted

 

300,000

 

14.86

 

 

 

 

 

Exercised

 

(391,965

)

7.14

 

 

 

 

 

Expired/cancelled

 

(532,916

)

27.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2017

 

3,788,460

 

$

18.73

 

6.9

 

$

10,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2017

 

1,736,876

 

$

12.25

 

4.3

 

$

10,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise price

 

$

14.66 - $15.71

 

Expected volatility

 

33.82% - 33.93

%

Expected dividend yield

 

0

%

Risk-free rate over the estimated expected life

 

2.11% - 2.32

%

Expected life (in years)

 

6.25

 

 

 

 

 

Number

 

Weighted

 

 

 

of Shares

 

Average

 

 

 

Subject to

 

Grant Date

 

 

 

Restriction

 

Fair Value

 

Nonvested at January 1, 2017

 

5,765

 

$

32.97

 

Granted

 

7,642

 

14.01

 

 

 

 

 

 

 

Nonvested at March 31, 2017

 

13,407

 

$

22.16

 

 

 

 

 

 

 

 

 

INCOME PER COMMON SHARE (Tables)
Schedule of the calculation for basic and diluted income per common share

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

2016

 

Numerator:

 

 

 

 

 

Net income attributable to Diplomat Pharmacy, Inc.

 

$

4,367

 

$

15,429

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted average common shares outstanding, basic

 

66,886,866

 

64,539,161

 

Weighted average dilutive effect of stock options and restricted stock awards

 

893,568

 

1,959,494

 

Weighted average dilutive effect of contingent consideration

 

 

1,346,282

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted

 

67,780,434

 

67,844,937

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

 

$

0.07

 

$

0.24

 

Diluted

 

$

0.06

 

$

0.23

 

 

DESCRIPTION OF BUSINESS - Operations (Details)
3 Months Ended
Mar. 31, 2017
segment
location
state
DESCRIPTION OF BUSINESS
 
Number of pharmacy locations (in locations)
24 
Number of states with call center locations (in states)
50 
Number of reportable segments
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Principles of Consolidation thru Inventories (Details)
3 Months Ended
Mar. 31, 2017
Principles of Consolidation
 
Percentage of ownership interest in subsidiary that the entity has the ability to control
51.00% 
Inventories
 
Maximum period before expiration within which Inventory is returnable and fully refundable
6 months 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition thru New Accounting Pronouncements (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Revenue recognition
 
 
 
Revenues from service, data and consulting services
$ 4,875 
$ 5,859 
 
Change in Accounting Principle
 
 
 
Total current assets
479,706 
 
505,107 
Deferred income taxes (noncurrent asset)
4,263 
 
6,010 
Total assets
1,086,188 
 
1,099,254 
Total liabilities
464,468 
 
485,530 
Total liabilities and shareholders' equity
1,086,188 
 
1,099,254 
Prescription Drugs
 
 
 
Revenue recognition
 
 
 
Revenues
1,073,865 
990,011 
 
As Previously Reported
 
 
 
Change in Accounting Principle
 
 
 
Deferred income taxes (current asset)
 
 
14,703 
Total current assets
 
 
519,810 
Total assets
 
 
1,107,947 
Deferred income taxes (noncurrent liability)
 
 
8,693 
Total liabilities
 
 
494,223 
Total liabilities and shareholders' equity
 
 
1,107,947 
Adjustment
 
 
 
Change in Accounting Principle
 
 
 
Deferred income taxes (current asset)
 
 
(14,703)
Total current assets
 
 
(14,703)
Deferred income taxes (noncurrent asset)
 
 
6,010 
Total assets
 
 
(8,693)
Deferred income taxes (noncurrent liability)
 
 
(8,693)
Total liabilities
 
 
(8,693)
Total liabilities and shareholders' equity
 
 
$ (8,693)
BUSINESS ACQUISITIONS - Comfort Infusion, Inc. (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended 3 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 22, 2017
Comfort Infusion
Mar. 31, 2017
Comfort Infusion
Mar. 22, 2017
Comfort Infusion
Mar. 22, 2017
Patient relationships
Comfort Infusion
Mar. 22, 2017
Patient relationships
Comfort Infusion
Mar. 22, 2017
Non-compete employment agreements
Comfort Infusion
Mar. 22, 2017
Non-compete employment agreements
Comfort Infusion
BUSINESS ACQUISITIONS
 
 
 
 
 
 
 
 
 
Cash
 
 
$ 10,600 
 
 
 
 
 
 
Contingent consideration at fair value
 
 
3,700 
 
 
 
 
 
 
Total
 
 
14,300 
 
 
 
 
 
 
Maximum additional cash payouts per performance period
 
 
 
 
2,000 
 
 
 
 
Maximum payout of contingent consideration
 
 
 
 
6,000 
 
 
 
 
Purchase consideration deposited into an escrow account
 
 
1,050 
 
 
 
 
 
 
Deposit term into an escrow account
 
 
18 months 
 
 
 
 
 
 
Acquisition-related costs charged to Selling, general, and administrative expenses
 
 
 
133 
 
 
 
 
 
Summary of the preliminary fair value determination of the acquired assets and liabilities
 
 
 
 
 
 
 
 
 
Cash
 
 
 
 
122 
 
 
 
 
Accounts receivable
 
 
 
 
546 
 
 
 
 
Inventories
 
 
 
 
86 
 
 
 
 
Prepaid expenses and other current assets
 
 
 
 
24 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
2,360 
 
1,400 
 
960 
Accounts payable
 
 
 
 
(273)
 
 
 
 
Accrued expenses - other
 
 
 
 
(207)
 
 
 
 
Total identifiable net assets
 
 
 
 
2,658 
 
 
 
 
Goodwill
336,775 
316,616 
 
 
11,642 
 
 
 
 
Total acquisition price
 
 
 
 
14,300 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
 
 
 
 
 
Useful Life
 
 
 
 
 
9 years 
 
5 years 
 
Amount
 
 
 
 
$ 2,360 
 
$ 1,400 
 
$ 960 
BUSINESS ACQUISITIONS - Affinity Biotech, Inc. (Details) (USD $)
In Thousands, unless otherwise specified
0 Months Ended 3 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Feb. 1, 2017
Affinity Biotech, Inc
Mar. 31, 2017
Affinity Biotech, Inc
Feb. 1, 2017
Affinity Biotech, Inc
Feb. 1, 2017
Patient relationships
Affinity Biotech, Inc
Feb. 1, 2017
Patient relationships
Affinity Biotech, Inc
Feb. 1, 2017
Non-compete employment agreements
Affinity Biotech, Inc
Feb. 1, 2017
Non-compete employment agreements
Affinity Biotech, Inc
BUSINESS ACQUISITIONS
 
 
 
 
 
 
 
 
 
Cash
 
 
$ 17,097 
 
 
 
 
 
 
Contingent consideration at fair value
 
 
35 
 
 
 
 
 
 
Total
 
 
17,132 
 
 
 
 
 
 
Maximum payout of contingent consideration
 
 
 
 
4,000 
 
 
 
 
Purchase consideration deposited into an escrow account
 
 
2,000 
 
 
 
 
 
 
Deposit term into an escrow account
 
 
18 months 
 
 
 
 
 
 
Acquisition-related costs charged to Selling, general, and administrative expenses
 
 
 
224 
 
 
 
 
 
Summary of the preliminary fair value determination of the acquired assets and liabilities
 
 
 
 
 
 
 
 
 
Cash
 
 
 
 
1,043 
 
 
 
 
Accounts receivable
 
 
 
 
3,537 
 
 
 
 
Inventories
 
 
 
 
79 
 
 
 
 
Prepaid expenses and other current assets
 
 
 
 
72 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
5,100 
 
4,000 
 
1,100 
Other noncurrent assets
 
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
(1,075)
 
 
 
 
Accrued expenses - compensation and benefits
 
 
 
 
(144)
 
 
 
 
Accrued expenses - other
 
 
 
 
(2)
 
 
 
 
Total identifiable net assets
 
 
 
 
8,615 
 
 
 
 
Goodwill
336,775 
316,616 
 
 
8,517 
 
 
 
 
Total acquisition price
 
 
 
 
17,132 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
 
 
 
 
 
Useful Life
 
 
 
 
 
7 years 
 
5 years 
 
Amount
 
 
 
 
$ 5,100 
 
$ 4,000 
 
$ 1,100 
BUSINESS ACQUISITIONS - Valley Campus Pharmacy, Inc (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Jun. 1, 2016
Valley Campus Pharmacy, Inc
May 31, 2016
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Valley Campus Pharmacy, Inc
May 31, 2016
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Physician relationships
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Physician relationships
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Non-compete employment agreements
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Non-compete employment agreements
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Trade names and trademarks
Valley Campus Pharmacy, Inc
Jun. 1, 2016
Trade names and trademarks
Valley Campus Pharmacy, Inc
BUSINESS ACQUISITIONS
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
 
$ 68,915 
 
 
 
 
 
 
 
 
 
Restricted common shares
 
 
9,507 
 
 
 
 
 
 
 
 
 
Total
 
 
78,422 
 
 
 
 
 
 
 
 
 
Restricted common shares (in shares)
 
 
324,244 
 
 
 
 
 
 
 
 
 
Market price (in dollars per share)
 
 
 
 
 
$ 32.58 
 
 
 
 
 
 
Market price multiplier to factor in restricted nature of the shares (as a percent)
 
 
 
90.00% 
 
 
 
 
 
 
 
 
Purchase consideration deposited into an escrow account
 
 
3,800 
 
 
 
 
 
 
 
 
 
Deposit term into an escrow account
 
 
1 year 
 
 
 
 
 
 
 
 
 
Summary of the preliminary fair value determination of the acquired assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
 
 
 
2,114 
 
 
 
 
 
 
 
Accounts receivable
 
 
 
 
16,271 
 
 
 
 
 
 
 
Inventories
 
 
 
 
4,740 
 
 
 
 
 
 
 
Prepaid expenses and other current assets
 
 
 
 
46 
 
 
 
 
 
 
 
Property and equipment
 
 
 
 
200 
 
 
 
 
 
 
 
Capitalized software for internal use
 
 
 
 
14,000 
 
 
 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
13,890 
 
 
7,700 
 
4,490 
 
1,700 
Other noncurrent assets
 
 
 
 
21 
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
(29,773)
 
 
 
 
 
 
 
Accrued expenses - compensation and benefits
 
 
 
 
(400)
 
 
 
 
 
 
 
Accrued expenses - other
 
 
 
 
(1,962)
 
 
 
 
 
 
 
Total identifiable net assets
 
 
 
 
19,147 
 
 
 
 
 
 
 
Goodwill
336,775 
316,616 
 
 
59,275 
 
 
 
 
 
 
 
Total acquisition price
 
 
 
 
78,422 
 
 
 
 
 
 
 
Definite-lived intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Useful Life
 
 
 
 
 
 
10 years 
 
5 years 
 
1 year 
 
Amount
 
 
 
 
$ 13,890 
 
 
$ 7,700 
 
$ 4,490 
 
$ 1,700 
BUSINESS ACQUISITIONS - Pro Forma Data (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Pro Forma Operating Results
 
 
Net sales
$ 1,082,592 
$ 1,124,300 
Net income attributable to Diplomat Pharmacy, Inc.
$ 3,807 
$ 15,985 
Net income per common share - basic (in dollars per share)
$ 0.06 
$ 0.25 
Net income per common share - diluted (in dollars per share)
$ 0.06 
$ 0.23 
FAIR VALUE MEASUREMENTS - Recurring Basis (Details) (Recurring, Contingent consideration, USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Fair value measurements
 
Asset (Liability)
$ (3,735)
Level 3
 
Fair value measurements
 
Asset (Liability)
$ (3,735)
FAIR VALUE MEASUREMENTS - Roll forward of Level 3 Measurements (Details) (Contingent consideration, USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Level 3 measurements
 
Balance at end of the period
$ (3,735)
Affinity Biotech, Inc
 
Level 3 measurements
 
Acquisition
(35)
Comfort Infusion
 
Level 3 measurements
 
Acquisition
$ (3,700)
GOODWILL AND DEFINITE-LIVED INTANGIBLE ASSETS (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Patient relationships
Dec. 31, 2016
Patient relationships
Mar. 31, 2017
Non-compete employment agreements
Dec. 31, 2016
Non-compete employment agreements
Mar. 31, 2017
Physician relationships
Dec. 31, 2016
Physician relationships
Mar. 31, 2017
Trade names and trademarks
Dec. 31, 2016
Trade names and trademarks
Mar. 31, 2017
Affinity
Mar. 31, 2017
Comfort Infusion
Mar. 22, 2017
Comfort Infusion
Changes in the carrying amount of goodwill
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of beginning of period
$ 336,775 
$ 316,616 
 
 
 
 
 
 
 
 
 
 
$ 11,642 
Acquired during the period
 
 
 
 
 
 
 
 
 
 
8,517 
11,642 
 
Balance as of end of period
336,775 
316,616 
 
 
 
 
 
 
 
 
 
 
11,642 
Gross Carrying Amount
266,749 
259,289 
164,500 
159,100 
56,749 
54,689 
21,700 
21,700 
23,800 
23,800 
 
 
 
Accumulated Amortization
(69,111)
(59,427)
(35,710)
(31,445)
(21,445)
(18,674)
(3,630)
(2,831)
(8,326)
(6,477)
 
 
 
Net Carrying Amount
$ 197,638 
$ 199,862 
$ 128,790 
$ 127,655 
$ 35,304 
$ 36,015 
$ 18,070 
$ 18,869 
$ 15,474 
$ 17,323 
 
 
 
INVESTMENT IN NON-CONSOLIDATED ENTITY (Details) (Ageology, USD $)
In Thousands, unless otherwise specified
1 Months Ended
Feb. 28, 2017
Mar. 31, 2017
Jan. 31, 2017
Schedule of Equity Method Investments
 
 
 
Ownership percentage (as a percent)
26.50% 
 
25.00% 
Conversion of outstanding loans in to equity
$ 2,500 
 
 
Affiliated entity |
Chief Executive Officer
 
 
 
Schedule of Equity Method Investments
 
 
 
Ownership percentage (as a percent)
51.80% 
 
 
Amount loaned
 
860 
16,000 
Conversion of outstanding loans in to equity
$ 16,000 
 
 
DEBT (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Debt
 
 
Debt issuance costs
$ 3,061 
$ 3,316 
Term Loan A |
GE
 
 
Debt
 
 
Amount of borrowings outstanding
109,500 
111,000 
DDTL
 
 
Debt
 
 
Maximum borrowing capacity
25,000 
 
Line of credit |
GE
 
 
Debt
 
 
Amount of borrowings outstanding
5,718 
39,255 
Maximum borrowing capacity
175,000 
 
Amount of borrowings available under the credit agreement
$ 149,845 
$ 129,908 
Interest rate (as a percent)
4.50% 
4.50% 
Term Loan A and DDTL |
GE
 
 
Debt
 
 
Interest rate (as a percent)
3.31% 
3.13% 
Minimum |
Line of credit |
GE
 
 
Debt
 
 
Monthly unused commitment fee (as a percent)
0.25% 
 
Maximum |
Line of credit |
GE
 
 
Debt
 
 
Monthly unused commitment fee (as a percent)
0.50% 
 
SHARE-BASED COMPENSATION - Stock Option Activity (Details) (Stock options, USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Stock options
 
 
Number of Options
 
 
Outstanding at beginning of period (in shares)
4,413,341 
 
Granted (in shares)
300,000 
 
Exercised (in shares)
(391,965)
 
Expired/cancelled (in shares)
(532,916)
 
Outstanding at end of period (in shares)
3,788,460 
4,413,341 
Exercisable at end of period (in shares)
1,736,876 
 
Weighted Average Exercise Price
 
 
Outstanding at beginning of period (in dollars per share)
$ 19.02 
 
Granted (in dollars per share)
$ 14.86 
 
Exercised (in dollars per share)
$ 7.14 
 
Expired/cancelled (in dollars per share)
$ 27.55 
 
Outstanding at end of period (in dollars per share)
$ 18.73 
$ 19.02 
Exercisable at end of period (in dollars per share)
$ 12.25 
 
Weighted Average Remaining Contractual Life
 
 
Outstanding at beginning of period
6 years 10 months 24 days 
7 years 
Exercisable at end of period
4 years 3 months 18 days 
 
Aggregate Intrinsic Value
 
 
Outstanding at beginning of period
$ 11,558 
 
Outstanding at end of period
10,883 
11,558 
Exercisable at end of period
$ 10,781 
 
SHARE-BASED COMPENSATION - Information and Valuation Assumptions (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Share-based compensation
 
 
Total compensation expense
$ 896 
$ 1,432 
Assumptions used to determine the valuation of granted options
 
 
Expected dividend yield (as a percent)
0.00% 
 
Expected life (in years)
6 years 3 months 
 
Maximum
 
 
Assumptions used to determine the valuation of granted options
 
 
Exercise price
$ 15.71 
 
Expected volatility (as a percent)
33.93% 
 
Risk-free rate over the estimated expected life (as a percent)
2.32% 
 
Minimum
 
 
Assumptions used to determine the valuation of granted options
 
 
Exercise price
$ 14.66 
 
Expected volatility (as a percent)
33.82% 
 
Risk-free rate over the estimated expected life (as a percent)
2.11% 
 
Stock options
 
 
Share-based compensation
 
 
Granted (in shares)
300,000 
 
Weighted average grant-date fair value of options granted (in dollars per share)
$ 5.58 
 
Service-based awards |
2014 Plan
 
 
Share-based compensation
 
 
Percentage of options exercisable in installments beginning on the first anniversary of the grant date and each of the three anniversaries thereafter
25.00% 
 
Number of anniversary dates upon which options become exercisable
 
Maximum term of stock option plan
10 years 
 
Service-based awards |
2014 Plan |
Key employees
 
 
Share-based compensation
 
 
Number of shares issued during the period (in shares)
300,000 
 
SHARE-BASED COMPENSATION - Restricted Stock Awards (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Additional disclosures
 
 
Share-based compensation expense
$ 896 
$ 1,432 
Restricted Stock Awards
 
 
Number of Shares Subject to Restriction
 
 
Nonvested at the beginning of the period (in shares)
5,765 
 
Granted (in shares)
7,642 
 
Nonvested at the end of the period (in shares)
13,407 
 
Weighted Average Grant Date Fair Value
 
 
Nonvested at the beginning of the period (in dollars per share)
$ 32.97 
 
Granted (in dollars per share)
$ 14.01 
 
Nonvested at the end of the period (in dollars per share)
$ 22.16 
 
Additional disclosures
 
 
Share-based compensation expense
$ 76 
$ 71 
INCOME PER COMMON SHARE (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Numerator:
 
 
Net income attributable to Diplomat Pharmacy, Inc
$ 4,367 
$ 15,429 
Denominator:
 
 
Weighted average common shares outstanding, basic (in shares)
66,886,866 
64,539,161 
Weighted average dilutive effect of stock options and restricted stock awards (in shares)
893,568 
1,959,494 
Weighted average dilutive effect of contingent consideration (in shares)
 
1,346,282 
Weighted average common shares outstanding, diluted (in shares)
67,780,434 
67,844,937 
Net income per common share:
 
 
Basic (in dollars per share)
$ 0.07 
$ 0.24 
Diluted (in dollars per share)
$ 0.06 
$ 0.23 
Stock options
 
 
Net income per common share:
 
 
Anti-dilutive securities excluded (in shares)
2,433,510 
1,369,375 
Performance-based stock options
 
 
Net income per common share:
 
 
Anti-dilutive securities excluded (in shares)
 
46,119 
Restricted Stock Awards
 
 
Net income per common share:
 
 
Anti-dilutive securities excluded (in shares)
2,560 
 
SUBSEQUENT EVENT (Details) (WRB Communications, Inc, Subsequent event, USD $)
In Thousands, unless otherwise specified
0 Months Ended
May 8, 2017
May 8, 2017
WRB Communications, Inc |
Subsequent event
 
 
SUBSEQUENT EVENT
 
 
Cash consideration
$ 24,500 
 
Consideration paid in shares
4,500 
 
Maximum additional cash payouts per performance period during 12-month periods ending April 30, 2018 and 2019
 
500 
Maximum payout of contingent consideration
 
$ 1,000