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Price
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended September 30, 2014
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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British Columbia, Canada
(State or other jurisdiction of incorporation or organization) |
98-0448205
(I.R.S. Employer Identification No.) |
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2150 St. Elzéar Blvd. West, Laval, Quebec
(Address of principal executive offices) |
H7L 4A8
(Zip Code) |
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company
o
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Part I.
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Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Part II
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Other Information
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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the challenges and difficulties associated with managing the rapid growth of our Company and a larger, more complex business;
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•
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the introduction of generic competitors of our brand products;
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•
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the introduction of products that compete against our products that do not have patent or data exclusivity rights, which products represent a significant portion of our revenues;
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our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
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our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
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•
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factors relating to the integration of the companies, businesses and products acquired by the Company (including the integration relating to our recent acquisitions of PreCision Dermatology, Inc. (“PreCision”), Solta Medical, Inc. (“Solta Medical”), and Bausch & Lomb Holdings Incorporated (“B&L”)), such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations (including potential disruptions in sales activities and potential challenges with information technology systems integrations), the difficulties and challenges associated with entering into new business areas and new geographic markets, the difficulties, challenges
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•
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factors relating to our ability to achieve all of the estimated synergies from our acquisitions as a result of cost-rationalization and integration initiatives. These factors may include greater than expected operating costs, the difficulty in eliminating certain duplicative costs, facilities and functions, and the outcome of many operational and strategic decisions, some of which have not yet been made;
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the ultimate outcome of any possible transaction between the Company and Allergan, Inc. (“Allergan”), including the ultimate removal or the failure to render inapplicable the obstacles to consummation of such transaction, or the possibility that the Company will not continue to pursue a transaction with Allergan and factors relating to the time, resources and efforts expended in pursuing a transaction with Allergan;
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•
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ability to obtain regulatory approvals and meet other closing conditions to the proposed Allergan transaction, including all necessary stockholder approvals, on a timely basis;
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•
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if a transaction between the Company and Allergan occurs, the ultimate outcome and results of integrating the operations of the Company and Allergan, the ultimate outcome of the Company’s pricing and operating strategy applied to Allergan and the ultimate ability to realize synergies;
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•
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the effects of the business combination of the Company and Allergan, including the combined company’s future financial condition, operating results, strategy and plans;
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our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
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•
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our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries;
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•
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our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
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•
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our future cash flow, our ability to service and repay our existing debt and our ability to raise additional funds, if needed, in light of our current and projected levels of operations, acquisition activity and general economic conditions;
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•
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interest rate risks associated with our floating rate debt borrowings;
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•
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the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering new geographic markets (including the challenges created by new and different regulatory regimes in those markets);
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•
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adverse global economic conditions and credit market and foreign currency exchange uncertainty in the countries in which we do business (such as the recent instability in Russia, Ukraine and the Middle East);
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economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;
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our ability to retain, motivate and recruit executives and other key employees;
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•
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our ability to obtain and maintain sufficient intellectual property rights over our products and defend against challenge to such intellectual property;
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the outcome of legal proceedings, investigations and regulatory proceedings;
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the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits and/or withdrawals of products from the market;
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the availability of and our ability to obtain and maintain adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third party insurance or self-insurance;
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the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including, but not limited to, the U.S. Food and Drug Administration, Health Canada and other regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others;
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•
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the results of continuing safety and efficacy studies by industry and government agencies;
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the availability and extent to which our products are reimbursed by government authorities and other third party payors, as well as the impact of obtaining or maintaining such reimbursement on the price of our products;
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the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price of our products in connection therewith;
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•
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the impact of price control restrictions on our products, including the risk of mandated price reductions;
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•
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the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our currently marketed products, which could lead to material impairment charges;
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•
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the results of management reviews of our research and development portfolio, conducted periodically and in connection with certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could lead to material impairment charges;
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negative publicity or reputational harm to our products and business, including as faced in connection with our proposed transaction with Allergan;
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the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing;
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our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and related supply difficulties, interruptions and delays;
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•
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the disruption of delivery of our products and the routine flow of manufactured goods;
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•
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the seasonality of sales of certain of our products;
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•
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declines in the pricing and sales volume of certain of our products that are distributed by third parties, over which we have no or limited control;
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compliance with, or the failure to comply with, health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act), worldwide environmental laws and regulation and privacy and security regulations;
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•
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the impacts of the Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate;
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interruptions, breakdowns or breaches in our information technology systems; and
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•
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other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
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As of
September 30,
2014
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As of
December 31,
2013
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Assets
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Current assets:
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Cash and cash equivalents
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$
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808.8
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$
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600.3
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Trade receivables, net
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1,880.2
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1,676.4
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Inventories, net
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932.7
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883.0
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Prepaid expenses and other current assets
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465.6
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343.4
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Assets held for sale
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10.0
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15.9
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Deferred tax assets, net
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316.4
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366.9
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Total current assets
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4,413.7
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3,885.9
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Property, plant and equipment, net
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1,300.4
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1,234.2
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Intangible assets, net
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11,620.4
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12,848.2
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Goodwill
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9,467.8
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9,752.1
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Deferred tax assets, net
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23.9
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54.9
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Other long-term assets, net
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233.4
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195.5
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Total assets
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$
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27,059.6
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$
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27,970.8
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Liabilities
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Current liabilities:
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Accounts payable
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$
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323.3
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$
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327.0
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Accrued and other current liabilities
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1,993.9
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1,800.2
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Acquisition-related contingent consideration
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116.5
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114.5
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Current portion of long-term debt
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690.6
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204.8
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Deferred tax liabilities, net
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19.0
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66.0
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Total current liabilities
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3,143.3
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2,512.5
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Acquisition-related contingent consideration
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211.3
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241.3
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Long-term debt
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15,584.3
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17,162.9
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Pension and other benefit liabilities
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157.7
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172.0
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Liabilities for uncertain tax positions
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113.8
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169.1
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||
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Deferred tax liabilities, net
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2,407.0
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2,319.2
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Other long-term liabilities
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208.6
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160.5
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Total liabilities
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21,826.0
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22,737.5
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Commitments and contingencies (note 18)
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Equity
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||||
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Common shares, no par value, unlimited shares authorized, 334,004,879 and
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||||
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333,036,637 issued and outstanding at September 30, 2014 and December 31, 2013, respectively
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8,334.4
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8,301.2
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Additional paid-in capital
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240.2
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228.8
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Accumulated deficit
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(2,899.9
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)
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(3,278.5
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)
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Accumulated other comprehensive loss
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(552.0
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)
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(132.8
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)
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||
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Total Valeant Pharmaceuticals International, Inc. shareholders’ equity
|
5,122.7
|
|
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5,118.7
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Noncontrolling interest
|
110.9
|
|
|
114.6
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||
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Total equity
|
5,233.6
|
|
|
5,233.3
|
|
||
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Total liabilities and equity
|
$
|
27,059.6
|
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$
|
27,970.8
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||||||
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|
2014
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2013
|
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2014
|
|
2013
|
||||||||
|
Revenues
|
|
|
|
|
|
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|
||||||||
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Product sales
|
$
|
2,022.9
|
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|
$
|
1,506.4
|
|
|
$
|
5,868.1
|
|
|
$
|
3,608.8
|
|
|
Other revenues
|
33.3
|
|
|
35.3
|
|
|
115.4
|
|
|
97.0
|
|
||||
|
|
2,056.2
|
|
|
1,541.7
|
|
|
5,983.5
|
|
|
3,705.8
|
|
||||
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Expenses
|
|
|
|
|
|
|
|
||||||||
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Cost of goods sold (exclusive of amortization and impairments of
|
|
|
|
|
|
|
|
||||||||
|
finite-lived intangible assets shown separately below)
|
545.8
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|
560.8
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|
1,619.5
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|
1,128.9
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|
||||
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Cost of other revenues
|
15.0
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|
14.4
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|
45.3
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|
44.3
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||||
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Selling, general and administrative
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504.1
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|
|
355.7
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|
1,501.8
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|
854.9
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||||
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Research and development
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59.1
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|
|
49.0
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186.9
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|
97.3
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||||
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Amortization and impairments of finite-lived intangible assets (see Note 9)
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393.1
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910.2
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1,113.9
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1,540.0
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||||
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Restructuring, integration and other costs
|
61.7
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|
243.1
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|
337.4
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|
345.7
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|
||||
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In-process research and development impairments and other charges
|
19.9
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|
124.0
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|
40.3
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|
|
128.8
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|
||||
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Acquisition-related costs
|
1.6
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|
|
8.6
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3.7
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|
24.4
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||||
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Acquisition-related contingent consideration
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4.0
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(35.0
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)
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|
14.8
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(33.5
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)
|
||||
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Other (income) expense
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(232.0
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)
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|
202.4
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(275.7
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)
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|
208.0
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|
||||
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|
1,372.3
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2,433.2
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4,587.9
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4,338.8
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|
||||
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Operating income (loss)
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683.9
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(891.5
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)
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|
1,395.6
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(633.0
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)
|
||||
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Interest income
|
0.8
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|
|
2.8
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|
|
3.8
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|
|
5.4
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|
||||
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Interest expense
|
(258.4
|
)
|
|
(249.3
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)
|
|
(746.1
|
)
|
|
(581.4
|
)
|
||||
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Loss on extinguishment of debt
|
—
|
|
|
(8.2
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)
|
|
(93.7
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)
|
|
(29.6
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)
|
||||
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Foreign exchange and other
|
(53.0
|
)
|
|
5.1
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|
|
(63.0
|
)
|
|
(3.5
|
)
|
||||
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Gain on investments, net
|
3.4
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|
|
—
|
|
|
5.9
|
|
|
5.8
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|
||||
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Income (loss) before provision for (recovery of) income taxes
|
376.7
|
|
|
(1,141.1
|
)
|
|
502.5
|
|
|
(1,236.3
|
)
|
||||
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Provision for (recovery of) income taxes
|
100.3
|
|
|
(169.2
|
)
|
|
124.4
|
|
|
(247.7
|
)
|
||||
|
Net income (loss)
|
276.4
|
|
|
(971.9
|
)
|
|
378.1
|
|
|
(988.6
|
)
|
||||
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Less: Net income (loss) attributable to noncontrolling interest
|
1.0
|
|
|
1.3
|
|
|
(0.5
|
)
|
|
1.3
|
|
||||
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
275.4
|
|
|
$
|
(973.2
|
)
|
|
$
|
378.6
|
|
|
$
|
(989.9
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
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Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||||
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Basic
|
$
|
0.82
|
|
|
$
|
(2.92
|
)
|
|
$
|
1.13
|
|
|
$
|
(3.13
|
)
|
|
Diluted
|
$
|
0.81
|
|
|
$
|
(2.92
|
)
|
|
$
|
1.11
|
|
|
$
|
(3.13
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average common shares
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
335.4
|
|
|
333.6
|
|
|
335.2
|
|
|
316.5
|
|
||||
|
Diluted
|
341.3
|
|
|
333.6
|
|
|
341.4
|
|
|
316.5
|
|
||||
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Net income (loss)
|
$
|
276.4
|
|
|
$
|
(971.9
|
)
|
|
$
|
378.1
|
|
|
$
|
(988.6
|
)
|
|
Other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
|
Foreign currency translation adjustment
|
(446.8
|
)
|
|
183.0
|
|
|
(440.4
|
)
|
|
(41.1
|
)
|
||||
|
Unrealized gain on equity method investment, net of tax
|
4.0
|
|
|
—
|
|
|
22.5
|
|
|
—
|
|
||||
|
Net unrealized holding (loss) gain on available-for-sale equity securities:
|
|
|
|
|
|
|
|
||||||||
|
Arising in period
|
(0.9
|
)
|
|
—
|
|
|
1.8
|
|
|
3.6
|
|
||||
|
Reclassification to net income (loss)
|
(1.8
|
)
|
|
—
|
|
|
(1.8
|
)
|
|
(4.0
|
)
|
||||
|
Pension and postretirement benefit plan adjustments
|
(0.6
|
)
|
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
||||
|
Other comprehensive (loss) income
|
(446.1
|
)
|
|
183.0
|
|
|
(419.7
|
)
|
|
(41.5
|
)
|
||||
|
Comprehensive loss
|
(169.7
|
)
|
|
(788.9
|
)
|
|
(41.6
|
)
|
|
(1,030.1
|
)
|
||||
|
Less: Comprehensive income (loss) attributable to noncontrolling interest
|
2.2
|
|
|
0.7
|
|
|
(1.0
|
)
|
|
0.7
|
|
||||
|
Comprehensive loss attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
(171.9
|
)
|
|
$
|
(789.6
|
)
|
|
$
|
(40.6
|
)
|
|
$
|
(1,030.8
|
)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss)
|
$
|
276.4
|
|
|
$
|
(971.9
|
)
|
|
$
|
378.1
|
|
|
$
|
(988.6
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization, including impairments of finite-lived intangible assets
|
439.3
|
|
|
946.0
|
|
|
1,248.1
|
|
|
1,605.3
|
|
||||
|
Amortization and write-off of debt discounts and debt issuance costs
|
34.6
|
|
|
27.6
|
|
|
58.1
|
|
|
70.5
|
|
||||
|
In-process research and development impairments
|
19.9
|
|
|
124.0
|
|
|
20.3
|
|
|
128.8
|
|
||||
|
Acquisition accounting adjustment on inventory sold
|
12.4
|
|
|
149.4
|
|
|
21.9
|
|
|
219.2
|
|
||||
|
(Gain) loss on disposal of assets, net
|
(254.5
|
)
|
|
0.6
|
|
|
(254.5
|
)
|
|
0.6
|
|
||||
|
Acquisition-related contingent consideration
|
4.0
|
|
|
(35.0
|
)
|
|
14.8
|
|
|
(33.5
|
)
|
||||
|
Allowances for losses on accounts receivable and inventories
|
12.0
|
|
|
16.1
|
|
|
47.6
|
|
|
36.7
|
|
||||
|
Deferred income taxes
|
74.6
|
|
|
(185.6
|
)
|
|
63.2
|
|
|
(286.2
|
)
|
||||
|
(Reduction) additions to accrued legal settlements
|
(0.9
|
)
|
|
149.6
|
|
|
(48.2
|
)
|
|
155.2
|
|
||||
|
Payments of accrued legal settlements
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(1.2
|
)
|
|
(14.7
|
)
|
||||
|
Share-based compensation
|
20.2
|
|
|
16.0
|
|
|
60.6
|
|
|
32.5
|
|
||||
|
Tax benefits from stock options exercised
|
(15.9
|
)
|
|
(32.2
|
)
|
|
(17.1
|
)
|
|
(48.6
|
)
|
||||
|
Foreign exchange loss (gain)
|
55.1
|
|
|
(5.4
|
)
|
|
62.4
|
|
|
3.4
|
|
||||
|
Loss on extinguishment of debt
|
—
|
|
|
8.2
|
|
|
93.7
|
|
|
29.6
|
|
||||
|
Payment of accreted interest on contingent consideration
|
(1.3
|
)
|
|
(3.3
|
)
|
|
(9.5
|
)
|
|
(6.2
|
)
|
||||
|
Other
|
9.7
|
|
|
(4.9
|
)
|
|
15.8
|
|
|
(13.5
|
)
|
||||
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
|
Trade receivables
|
(121.4
|
)
|
|
54.8
|
|
|
(205.2
|
)
|
|
(106.2
|
)
|
||||
|
Inventories
|
(41.5
|
)
|
|
(46.2
|
)
|
|
(122.8
|
)
|
|
(105.1
|
)
|
||||
|
Prepaid expenses and other current assets
|
5.5
|
|
|
48.0
|
|
|
34.5
|
|
|
80.2
|
|
||||
|
Accounts payable, accrued and other liabilities
|
90.7
|
|
|
(53.9
|
)
|
|
18.4
|
|
|
2.7
|
|
||||
|
Net cash provided by operating activities
|
618.7
|
|
|
201.7
|
|
|
1,479.0
|
|
|
762.1
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
||||||||
|
Acquisition of businesses, net of cash acquired
|
(606.8
|
)
|
|
(4,439.4
|
)
|
|
(981.1
|
)
|
|
(5,190.4
|
)
|
||||
|
Acquisition of intangible assets and other assets
|
(74.3
|
)
|
|
(4.9
|
)
|
|
(105.8
|
)
|
|
(38.1
|
)
|
||||
|
Purchases of property, plant and equipment
|
(39.6
|
)
|
|
(24.9
|
)
|
|
(211.2
|
)
|
|
(51.7
|
)
|
||||
|
Proceeds from sales and maturities of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
17.0
|
|
||||
|
Purchase of equity method investment
|
—
|
|
|
—
|
|
|
(75.9
|
)
|
|
—
|
|
||||
|
Proceeds from sale of assets and businesses, net of costs to sell
|
1,477.0
|
|
|
—
|
|
|
1,479.8
|
|
|
27.4
|
|
||||
|
Net cash provided by (used in) investing activities
|
756.3
|
|
|
(4,469.2
|
)
|
|
105.8
|
|
|
(5,235.8
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
||||||||
|
Issuance of long-term debt, net of discount
|
555.0
|
|
|
7,165.1
|
|
|
965.6
|
|
|
7,505.1
|
|
||||
|
Repayments of long-term debt
|
(1,629.8
|
)
|
|
(4,781.1
|
)
|
|
(2,184.0
|
)
|
|
(5,385.8
|
)
|
||||
|
Short-term debt borrowings
|
6.1
|
|
|
4.8
|
|
|
12.5
|
|
|
23.4
|
|
||||
|
Short-term debt repayments
|
(6.0
|
)
|
|
(25.2
|
)
|
|
(19.2
|
)
|
|
(37.5
|
)
|
||||
|
Issuance of common stock, net
|
—
|
|
|
(1.3
|
)
|
|
—
|
|
|
2,269.9
|
|
||||
|
Repurchases of common shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(55.6
|
)
|
||||
|
Settlement of stock options
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
||||
|
Proceeds from exercise of stock options
|
3.8
|
|
|
2.5
|
|
|
10.9
|
|
|
7.1
|
|
||||
|
Tax benefits from stock options exercised
|
15.9
|
|
|
32.2
|
|
|
17.1
|
|
|
48.6
|
|
||||
|
Payments of employee withholding tax upon vesting of share-based awards
|
(2.0
|
)
|
|
(14.4
|
)
|
|
(38.5
|
)
|
|
(35.9
|
)
|
||||
|
Payments of contingent consideration
|
(14.4
|
)
|
|
(15.2
|
)
|
|
(96.6
|
)
|
|
(98.1
|
)
|
||||
|
Payments of debt issuance costs
|
(10.2
|
)
|
|
(46.9
|
)
|
|
(21.0
|
)
|
|
(80.5
|
)
|
||||
|
Other
|
(0.5
|
)
|
|
(2.1
|
)
|
|
(5.1
|
)
|
|
(2.1
|
)
|
||||
|
Net cash (used in) provided by financing activities
|
(1,082.1
|
)
|
|
2,318.4
|
|
|
(1,361.4
|
)
|
|
4,158.6
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(15.3
|
)
|
|
6.0
|
|
|
(14.9
|
)
|
|
(4.7
|
)
|
||||
|
Net increase (decrease) in cash and cash equivalents
|
277.6
|
|
|
(1,943.1
|
)
|
|
208.5
|
|
|
(319.8
|
)
|
||||
|
Cash and cash equivalents, beginning of period
|
531.2
|
|
|
2,539.4
|
|
|
600.3
|
|
|
916.1
|
|
||||
|
Cash and cash equivalents, end of period
|
$
|
808.8
|
|
|
$
|
596.3
|
|
|
$
|
808.8
|
|
|
$
|
596.3
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
||||||||
|
Acquisition of businesses, contingent consideration obligations at fair value
|
$
|
(16.0
|
)
|
|
$
|
—
|
|
|
$
|
(65.1
|
)
|
|
$
|
(67.4
|
)
|
|
Acquisition of businesses, debt assumed
|
(4.5
|
)
|
|
(4,222.1
|
)
|
|
(8.5
|
)
|
|
(4,264.7
|
)
|
||||
|
1.
|
DESCRIPTION OF BUSINESS
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
3.
|
BUSINESS COMBINATIONS
|
|
•
|
On July 7, 2014, the Company acquired all of the outstanding common stock of PreCision Dermatology, Inc. (“PreCision”) for an aggregate purchase price of
$454.5 million
. The Company may also pay contingent consideration of
$25.0 million
upon the achievement of a sales-based milestone for 2014. The fair value of this contingent consideration was determined to be nominal as of the acquisition date, based on the current sales forecast. The Company recognized a post-combination expense of
$20.4 million
within Other (income) expense in the third quarter of 2014 related to the acceleration of unvested stock options for PreCision employees. In connection with the acquisition of PreCision, the Company was required by the Federal Trade Commission (“FTC”) to divest the rights to PreCision’s Tretin-X® (tretinoin) cream product and PreCision’s generic tretinoin gel and cream products. For further details, see note 4 titled “DIVESTITURES”. PreCision develops and markets a range of medical dermatology products, treating a number of topical disease states such as acne and atopic dermatitis with products such as Locoid® and Clindagel®.
|
|
•
|
On January 23, 2014, the Company acquired all of the outstanding common stock of Solta Medical, Inc. (“Solta Medical”) for
$292.5 million
, which includes
$2.92
per share in cash and
$44.2 million
for the repayment of Solta Medical’s long-term debt, including accrued interest. In connection with the acquisition, the Company recognized a charge of
$5.6 million
in the first quarter of 2014 relating to a settlement of a pre-existing relationship with Solta Medical, which is included in Other (income) expense in the consolidated statements of income (loss). Solta Medical designs, develops, manufactures, and markets energy-based medical device systems for aesthetic applications. Solta Medical’s products include the Thermage CPT® system that provides non-invasive treatment options using radiofrequency energy for skin tightening, the Fraxel® repair system for use in dermatological procedures requiring ablation, coagulation, and resurfacing of soft tissue, the Clear + Brilliant® system to improve skin texture and help prevent the signs of aging skin, and the Liposonix® system that destroys unwanted fat cells resulting in waist circumference reduction.
|
|
•
|
During the
nine-month period ended September 30, 2014
, the Company completed other smaller acquisitions which are not material individually or in the aggregate. These acquisitions are included in the aggregated amounts presented below.
|
|
•
|
amounts for intangible assets, property and equipment, inventories, receivables and other working capital adjustments pending finalization of the valuation;
|
|
•
|
amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and
|
|
•
|
amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.
|
|
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
(a)
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Cash and cash equivalents
|
|
$
|
18.3
|
|
|
$
|
—
|
|
|
$
|
18.3
|
|
|
Accounts receivable
(b)
|
|
57.1
|
|
|
0.2
|
|
|
57.3
|
|
|||
|
Assets held for sale
(c)
|
|
125.7
|
|
|
—
|
|
|
125.7
|
|
|||
|
Inventories
|
|
87.0
|
|
|
(10.0
|
)
|
|
77.0
|
|
|||
|
Other current assets
|
|
17.0
|
|
|
(0.8
|
)
|
|
16.2
|
|
|||
|
Property, plant and equipment, net
|
|
37.3
|
|
|
(0.7
|
)
|
|
36.6
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(d)
|
|
590.3
|
|
|
15.0
|
|
|
605.3
|
|
|||
|
Acquired IPR&D
(e)
|
|
65.8
|
|
|
0.8
|
|
|
66.6
|
|
|||
|
Other non-current assets
|
|
3.4
|
|
|
—
|
|
|
3.4
|
|
|||
|
Current liabilities
|
|
(129.3
|
)
|
|
(10.5
|
)
|
|
(139.8
|
)
|
|||
|
Long-term debt, including current portion
|
|
(8.5
|
)
|
|
—
|
|
|
(8.5
|
)
|
|||
|
Deferred income taxes, net
|
|
(112.0
|
)
|
|
(4.7
|
)
|
|
(116.7
|
)
|
|||
|
Other non-current liabilities
|
|
(12.8
|
)
|
|
(3.1
|
)
|
|
(15.9
|
)
|
|||
|
Total identifiable net assets
|
|
739.3
|
|
|
(13.8
|
)
|
|
725.5
|
|
|||
|
Goodwill
(f)
|
|
315.0
|
|
|
6.1
|
|
|
321.1
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
1,054.3
|
|
|
$
|
(7.7
|
)
|
|
$
|
1,046.6
|
|
|
(a)
|
The measurement period adjustments primarily relate to the Solta Medical acquisition and reflect: (i) increases in the estimated fair value of intangible assets, (ii) reductions in the estimated fair value of inventory, and (iii) the tax impact of pre-tax measurement period adjustments. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$57.3 million
, with the gross contractual amount being
$61.7 million
, of which the Company expects that
$4.4 million
will be uncollectible.
|
|
(c)
|
Assets held for sale relate to the divestitures of the Tretin-X® product rights and the product rights for the generic tretinoin gel and cream products acquired in the PreCision acquisition. See note 4 titled “DIVESTITURES” for further information.
|
|
(d)
|
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Product brands
|
|
10
|
|
$
|
468.4
|
|
|
$
|
14.2
|
|
|
$
|
482.6
|
|
|
Product rights
|
|
8
|
|
95.2
|
|
|
(0.9
|
)
|
|
94.3
|
|
|||
|
Corporate brand
|
|
15
|
|
25.2
|
|
|
1.6
|
|
|
26.8
|
|
|||
|
In-licensed products
|
|
8
|
|
1.5
|
|
|
0.1
|
|
|
1.6
|
|
|||
|
Total identifiable intangible assets acquired
|
|
10
|
|
$
|
590.3
|
|
|
$
|
15.0
|
|
|
$
|
605.3
|
|
|
(e)
|
The acquired in-process research and development (“IPR&D”) assets primarily relate to programs from smaller acquisitions. In addition, the Solta Medical acquisition includes a program for the development of a next generation Thermage® product.
|
|
(f)
|
The goodwill relates primarily to the PreCision and Solta Medical acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Substantially all of the goodwill is not expected to be deductible for tax purposes. The goodwill recorded from the PreCision and Solta Medical acquisitions represents the following:
|
|
•
|
cost savings, operating synergies and other benefits expected to result from combining the operations of PreCision and Solta Medical with those of the Company;
|
|
•
|
the Company’s expectation to develop and market new products and technology; and
|
|
•
|
intangible assets that do not qualify for separate recognition (for instance, Precision’s and Solta Medical’s assembled workforce).
|
|
|
|
Fair Value
|
||
|
Enterprise value
|
|
$
|
8,700.0
|
|
|
Adjusted for the following:
|
|
|
||
|
B&L’s outstanding debt, including accrued interest
|
|
(4,248.3
|
)
|
|
|
B&L’s company expenses
|
|
(6.4
|
)
|
|
|
Payment in B&L’s performance-based option
(a)
|
|
(48.5
|
)
|
|
|
Payment for B&L’s cash balance
(b)
|
|
149.0
|
|
|
|
Additional cash payment
(b)
|
|
75.0
|
|
|
|
Other
|
|
(3.2
|
)
|
|
|
Equity purchase price
|
|
4,617.6
|
|
|
|
Less: Cash consideration paid for B&L’s unvested stock options
(c)
|
|
(4.3
|
)
|
|
|
Total fair value of consideration transferred
|
|
$
|
4,613.3
|
|
|
(a)
|
The cash consideration paid for previously cancelled B&L’s performance-based options was recognized as a post-combination expense within Other (income) expense in the third quarter of 2013.
|
|
(b)
|
As defined in the Merger Agreement.
|
|
(c)
|
The cash consideration paid for B&L stock options and restricted stock attributable to pre-combination services has been included as a component of purchase price. The remaining
$4.3 million
balance related to the acceleration of unvested stock options for B&L employees was recognized as a post-combination expense within Other (income) expense in the third quarter of 2013.
|
|
|
|
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
(a)
|
|
Measurement
Period
Adjustments
(b)
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Cash and cash equivalents
|
|
$
|
209.5
|
|
|
$
|
(31.4
|
)
|
|
$
|
178.1
|
|
|
Accounts receivable
(c)
|
|
547.9
|
|
|
(7.2
|
)
|
|
540.7
|
|
|||
|
Inventories
(d)
|
|
675.8
|
|
|
(34.0
|
)
|
|
641.8
|
|
|||
|
Other current assets
(e)
|
|
146.6
|
|
|
0.3
|
|
|
146.9
|
|
|||
|
Property, plant and equipment, net
(f)
|
|
761.4
|
|
|
33.2
|
|
|
794.6
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(g)
|
|
4,316.1
|
|
|
17.3
|
|
|
4,333.4
|
|
|||
|
Acquired IPR&D
(h)
|
|
398.1
|
|
|
17.0
|
|
|
415.1
|
|
|||
|
Other non-current assets
|
|
58.8
|
|
|
(1.9
|
)
|
|
56.9
|
|
|||
|
Current liabilities
(i)
|
|
(885.6
|
)
|
|
2.1
|
|
|
(883.5
|
)
|
|||
|
Long-term debt, including current portion
(j)
|
|
(4,209.9
|
)
|
|
—
|
|
|
(4,209.9
|
)
|
|||
|
Deferred income taxes, net
(k)
|
|
(1,410.9
|
)
|
|
36.0
|
|
|
(1,374.9
|
)
|
|||
|
Other non-current liabilities
(l)
|
|
(280.2
|
)
|
|
(1.0
|
)
|
|
(281.2
|
)
|
|||
|
Total identifiable net assets
|
|
327.6
|
|
|
30.4
|
|
|
358.0
|
|
|||
|
Noncontrolling interest
(m)
|
|
(102.3
|
)
|
|
(0.4
|
)
|
|
(102.7
|
)
|
|||
|
Goodwill
(n)
|
|
4,388.0
|
|
|
(30.0
|
)
|
|
4,358.0
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
4,613.3
|
|
|
$
|
—
|
|
|
$
|
4,613.3
|
|
|
(a)
|
As previously reported in the 2013 Form 10-K.
|
|
(b)
|
The measurement period adjustments primarily reflect: (i) a decrease in the net deferred tax liability, (ii) a reduction in the estimated fair value of inventory, (iii) an increase in the estimated fair value of property, plant and equipment mainly related to certain machinery and equipment in Western Europe and the U.S., partially offset by a reduction in the estimated fair value related to certain manufacturing facilities and an office building, (iv) an adjustment between cash and accounts payable, and (v) increases in the estimated fair value of intangible assets, which included a net increase to IPR&D assets driven by a higher fair value for the next generation silicone hydrogel lens (Bausch + Lomb Ultra®). The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(c)
|
The fair value of trade accounts receivable acquired was
$540.7 million
, with the gross contractual amount being
$555.6 million
, of which the Company expects that
$14.9 million
will be uncollectible.
|
|
(d)
|
Includes an estimated fair value adjustment to inventory of
$269.1 million
.
|
|
(e)
|
Includes primarily prepaid expenses.
|
|
(f)
|
The following table summarizes the amounts and useful lives assigned to property, plant and equipment:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Land
|
|
NA
|
|
$
|
47.4
|
|
|
$
|
(12.6
|
)
|
|
$
|
34.8
|
|
|
Buildings
|
|
24
|
|
273.1
|
|
|
(23.8
|
)
|
|
249.3
|
|
|||
|
Machinery and equipment
|
|
5
|
|
273.5
|
|
|
76.3
|
|
|
349.8
|
|
|||
|
Leasehold improvements
|
|
5
|
|
22.5
|
|
|
(0.3
|
)
|
|
22.2
|
|
|||
|
Equipment on operating lease
|
|
3
|
|
13.8
|
|
|
(0.2
|
)
|
|
13.6
|
|
|||
|
Construction in progress
|
|
NA
|
|
131.1
|
|
|
(6.2
|
)
|
|
124.9
|
|
|||
|
Total property, plant and equipment acquired
|
|
|
|
$
|
761.4
|
|
|
$
|
33.2
|
|
|
$
|
794.6
|
|
|
(g)
|
The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Product brands
|
|
10
|
|
$
|
1,770.2
|
|
|
$
|
4.6
|
|
|
$
|
1,774.8
|
|
|
Product rights
|
|
8
|
|
855.4
|
|
|
5.7
|
|
|
861.1
|
|
|||
|
Corporate brand
|
|
Indefinite
|
|
1,690.5
|
|
|
7.0
|
|
|
1,697.5
|
|
|||
|
Total identifiable intangible assets acquired
|
|
9
|
|
$
|
4,316.1
|
|
|
$
|
17.3
|
|
|
$
|
4,333.4
|
|
|
(h)
|
The significant components of the acquired IPR&D assets primarily relate to the development of (i) various vision care products (
$223.4 million
in the aggregate), such as the next generation silicone hydrogel lens (Bausch + Lomb Ultra®), (ii) various pharmaceutical products (
$170.9 million
, in the aggregate), such as latanoprostene bunod, a nitric oxide-donating prostaglandin for reduction of elevated intraocular pressure in patients with glaucoma or ocular hypertension, and (iii) various surgical products (
$20.8 million
, in the aggregate). A multi-period excess earnings methodology (income approach) was used to determine the estimated fair values of the acquired IPR&D assets from market participant perspective. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project. A risk-adjusted discount rate of
10%
was used to present value the projected cash flows. The next generation silicone hydrogel lens (Bausch + Lomb Ultra®) was launched in February 2014.
|
|
(i)
|
Includes accrued liabilities, including reserves for sales returns, rebates and managed care, accounts payable and accrued compensation-related liabilities.
|
|
(j)
|
The following table summarizes the fair value of long-term debt assumed as of the acquisition date:
|
|
|
|
Amounts
Recognized as of
Acquisition Date
|
||
|
Holdco unsecured term loan
(1)
|
|
$
|
707.0
|
|
|
U.S. dollar-denominated senior secured term loan
(1)
|
|
1,915.8
|
|
|
|
Euro-denominated senior secured term loan
(1)
|
|
604.0
|
|
|
|
U.S. dollar-denominated delayed draw term loan
(1)
|
|
398.0
|
|
|
|
U.S. dollar-denominated revolver loan
(1)
|
|
170.0
|
|
|
|
9.875% senior notes
(1)
|
|
350.0
|
|
|
|
Multi-currency denominated revolver loan
(1)
|
|
15.0
|
|
|
|
Japanese revolving credit facility
(2)
|
|
33.8
|
|
|
|
Debentures
|
|
11.8
|
|
|
|
Other
(1)
|
|
4.5
|
|
|
|
Total long-term debt assumed
|
|
$
|
4,209.9
|
|
|
(1)
|
The Company subsequently repaid these amounts in full in the third quarter of 2013. In connection with the redemption of the
9.875%
senior notes, the Company recognized a loss on extinguishment of debt of
$8.2 million
in the third quarter of 2013.
|
|
(2)
|
In the fourth quarter of 2013, the Company repaid in full the amounts outstanding. In January 2014, the Company terminated this facility.
|
|
(k)
|
Comprises current net deferred tax assets (
$61.6 million
) and non-current net deferred tax liabilities (
$1,436.5 million
).
|
|
(l)
|
Includes
$224.2 million
related to the estimated fair value of pension and other benefits liabilities.
|
|
(m)
|
Represents the estimated fair value of B&L’s noncontrolling interest related primarily to Chinese joint ventures. A discounted cash flow methodology was used to determine the estimated fair values as of the acquisition date.
|
|
(n)
|
Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. None of the goodwill is expected to be deductible for tax purposes. The goodwill recorded represents the following:
|
|
•
|
the Company’s expectation to develop and market new product brands, product lines and technology;
|
|
•
|
cost savings and operating synergies expected to result from combining the operations of B&L with those of the Company;
|
|
•
|
the value of the continuing operations of B&L’s existing business (that is, the higher rate of return on the assembled net assets versus if the Company had acquired all of the net assets separately); and
|
|
•
|
intangible assets that do not qualify for separate recognition (for instance, B&L’s assembled workforce).
|
|
•
|
On
April 25, 2013
, the Company acquired all of the outstanding shares of Obagi Medical Products, Inc. (“Obagi”) at a price of
$24.00
per share in cash. The aggregate purchase price paid by the Company was approximately
$437.1 million
. Obagi is a specialty pharmaceutical company that develops, markets, and sells topical aesthetic and therapeutic skin-health systems with a product portfolio of dermatology brands including Obagi Nu-Derm®, Condition & Enhance®, Obagi-C® Rx, ELASTIDerm® and CLENZIDerm®.
|
|
•
|
On
February 20, 2013
, the Company acquired certain assets from Eisai Inc. (“Eisai”) relating to the U.S. rights to Targretin®, which is indicated for the treatment of Cutaneous T-Cell Lymphoma. The consideration includes up-front payments of
$66.5 million
and the Company may pay up to an additional
$60.0 million
of contingent consideration based on the occurrence of potential future events. The fair value of the contingent consideration was determined to be
$50.8 million
as of the acquisition date.
As of September 30, 2014
, the assumptions used for determining fair value of the
|
|
•
|
On
February 1, 2013
, the Company acquired Natur Produkt International, JSC (“Natur Produkt”), a specialty pharmaceutical company in Russia, for a purchase price of
$149.9 million
, including a
$20.0 million
contingent refund of purchase price relating to the outcome of certain litigation involving AntiGrippin® that commenced prior to the acquisition. Subsequent to the acquisition, during the
three-month
period ended
March 31, 2013
, the litigation was resolved, and the
$20.0 million
was refunded back to the Company. Natur Produkt’s key brand products include AntiGrippin®, Anti-Angin®, Sage™ and Eucalyptus MA™.
|
|
•
|
During the year ended December 31, 2013, the Company completed other smaller acquisitions which are not material individually or in the aggregate. These acquisitions are included in the aggregated amounts presented below.
|
|
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
(a)
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Cash
|
|
$
|
43.1
|
|
|
$
|
—
|
|
|
$
|
43.1
|
|
|
Accounts receivable
(b)
|
|
64.0
|
|
|
0.5
|
|
|
64.5
|
|
|||
|
Inventories
|
|
33.6
|
|
|
1.9
|
|
|
35.5
|
|
|||
|
Other current assets
|
|
14.0
|
|
|
—
|
|
|
14.0
|
|
|||
|
Property, plant and equipment
|
|
13.9
|
|
|
(3.3
|
)
|
|
10.6
|
|
|||
|
Identifiable intangible assets, excluding acquired IPR&D
(c)
|
|
722.9
|
|
|
3.9
|
|
|
726.8
|
|
|||
|
Acquired IPR&D
(d)
|
|
18.7
|
|
|
0.2
|
|
|
18.9
|
|
|||
|
Indemnification assets
|
|
3.2
|
|
|
(0.7
|
)
|
|
2.5
|
|
|||
|
Other non-current assets
|
|
0.2
|
|
|
3.7
|
|
|
3.9
|
|
|||
|
Current liabilities
|
|
(36.2
|
)
|
|
(0.4
|
)
|
|
(36.6
|
)
|
|||
|
Short-term borrowings
(e)
|
|
(33.3
|
)
|
|
0.5
|
|
|
(32.8
|
)
|
|||
|
Long-term debt
(e)
|
|
(24.0
|
)
|
|
—
|
|
|
(24.0
|
)
|
|||
|
Deferred tax liability, net
|
|
(147.8
|
)
|
|
(1.1
|
)
|
|
(148.9
|
)
|
|||
|
Other non-current liabilities
|
|
(1.5
|
)
|
|
—
|
|
|
(1.5
|
)
|
|||
|
Total identifiable net assets
|
|
670.8
|
|
|
5.2
|
|
|
676.0
|
|
|||
|
Noncontrolling interest
(f)
|
|
(11.2
|
)
|
|
—
|
|
|
(11.2
|
)
|
|||
|
Goodwill
(g)
|
|
224.3
|
|
|
9.0
|
|
|
233.3
|
|
|||
|
Total fair value of consideration transferred
|
|
$
|
883.9
|
|
|
$
|
14.2
|
|
|
$
|
898.1
|
|
|
(a)
|
The measurement period adjustments primarily reflect an increase in the total fair value of consideration transferred with respect to the Natur Produkt acquisition pursuant to a purchase price adjustment. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
|
|
(b)
|
The fair value of trade accounts receivable acquired was
$64.5 million
, with the gross contractual amount being
$68.2 million
, of which the Company expects that
$3.7 million
will be uncollectible.
|
|
(c)
|
The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:
|
|
|
|
Weighted-
Average
Useful Lives
(Years)
|
|
Amounts
Recognized as of
Acquisition Dates
|
|
Measurement
Period
Adjustments
|
|
Amounts
Recognized as of
September 30, 2014
(as adjusted)
|
||||||
|
Product brands
|
|
7
|
|
$
|
517.2
|
|
|
$
|
3.1
|
|
|
$
|
520.3
|
|
|
Corporate brand
|
|
13
|
|
86.1
|
|
|
0.8
|
|
|
86.9
|
|
|||
|
Patents
|
|
3
|
|
71.7
|
|
|
—
|
|
|
71.7
|
|
|||
|
Royalty Agreement
|
|
5
|
|
26.5
|
|
|
—
|
|
|
26.5
|
|
|||
|
Partner relationships
|
|
5
|
|
16.0
|
|
|
—
|
|
|
16.0
|
|
|||
|
Technology
|
|
10
|
|
5.4
|
|
|
—
|
|
|
5.4
|
|
|||
|
Total identifiable intangible assets acquired
|
|
8
|
|
$
|
722.9
|
|
|
$
|
3.9
|
|
|
$
|
726.8
|
|
|
(d)
|
The acquired IPR&D assets relate to the Obagi and Natur Produkt acquisitions. Obagi’s acquired IPR&D assets primarily relate to the development of dermatology products for anti-aging and suncare. Natur Produkt’s acquired IPR&D assets include a product indicated for the prevention of viral diseases, specifically cold and flu, and a product indicated for the treatment of inflammation and muscular disorders.
|
|
(e)
|
Short-term borrowings and long-term debt primarily relate to the Natur Produkt acquisition. In
March 2013
, the Company settled all of Natur Produkt’s outstanding third party short-term borrowings and long-term debt.
|
|
(f)
|
Represents the estimated fair value of noncontrolling interest related to a smaller acquisition completed in the third quarter of 2013.
|
|
(g)
|
The goodwill relates primarily to the Obagi and Natur Produkt acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. None of Obagi’s and Natur Produkt’s goodwill is expected to be deductible for tax purposes.
The goodwill recorded from the Obagi and the Natur Produkt acquisitions represents primarily the cost savings, operating synergies and other benefits expected to result from combining the operations with those of the Company.
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Revenues
|
$
|
2,060.2
|
|
|
$
|
1,867.3
|
|
|
$
|
6,039.6
|
|
|
$
|
5,794.9
|
|
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
279.8
|
|
|
(907.8
|
)
|
|
376.1
|
|
|
(1,023.9
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
0.83
|
|
|
$
|
(2.72
|
)
|
|
$
|
1.12
|
|
|
$
|
(3.07
|
)
|
|
Diluted
|
$
|
0.82
|
|
|
$
|
(2.72
|
)
|
|
$
|
1.10
|
|
|
$
|
(3.07
|
)
|
|
•
|
elimination of the historical intangible asset amortization expense of these acquisitions;
|
|
•
|
additional amortization expense related to the fair value of identifiable intangible assets acquired;
|
|
•
|
additional depreciation expense related to fair value adjustment to property, plant and equipment acquired;
|
|
•
|
additional interest expense associated with the financing obtained by the Company in connection with the various acquisitions; and
|
|
•
|
the exclusion from pro forma earnings in the three-month and nine-month periods ended September 30, 2014 of (i) the acquisition accounting adjustments on these acquisitions’ inventories that were sold subsequent to the acquisition date and (ii) the acquisition-related costs incurred for these acquisitions, and the inclusion of those amounts in pro forma earnings for the corresponding comparative periods.
|
|
4.
|
DIVESTITURES
|
|
5.
|
CO-PROMOTION AGREEMENTS
|
|
6.
|
RESTRUCTURING, INTEGRATION AND OTHER COSTS
|
|
•
|
workforce reductions across the Company and other organizational changes;
|
|
•
|
closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;
|
|
•
|
leveraging research and development spend; and
|
|
•
|
procurement savings.
|
|
|
|
Employee Termination Costs
|
|
IPR&D
Termination
Costs
|
|
Contract
Termination,
Facility Closure
and Other Costs
|
|
|
||||||||||||
|
|
Severance and
Related Benefits
|
|
Share-Based
Compensation
(1)
|
|
|
|
Total
|
|||||||||||||
|
Balance, January 1, 2013
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Costs incurred and/or charged to expense
|
|
155.7
|
|
|
52.8
|
|
|
—
|
|
|
25.6
|
|
|
234.1
|
|
|||||
|
Cash payments
|
|
(77.8
|
)
|
|
(52.8
|
)
|
|
—
|
|
|
(7.8
|
)
|
|
(138.4
|
)
|
|||||
|
Non-cash adjustments
|
|
11.4
|
|
|
—
|
|
|
—
|
|
|
(6.8
|
)
|
|
4.6
|
|
|||||
|
Balance, December 31, 2013
|
|
89.3
|
|
|
—
|
|
|
—
|
|
|
11.0
|
|
|
100.3
|
|
|||||
|
Costs incurred and/or charged to expense
|
|
22.5
|
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
29.1
|
|
|||||
|
Cash payments
|
|
(50.9
|
)
|
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
|
(54.1
|
)
|
|||||
|
Non-cash adjustments
|
|
(2.3
|
)
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
(5.4
|
)
|
|||||
|
Balance, March 31, 2014
|
|
58.6
|
|
|
—
|
|
|
—
|
|
|
11.3
|
|
|
69.9
|
|
|||||
|
Costs incurred and charged to expense
|
|
12.3
|
|
|
—
|
|
|
—
|
|
|
10.1
|
|
|
22.4
|
|
|||||
|
Cash payments
|
|
(25.7
|
)
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
(27.5
|
)
|
|||||
|
Non-cash adjustments
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
(0.9
|
)
|
|||||
|
Balance, June 30, 2014
|
|
44.7
|
|
|
—
|
|
|
—
|
|
|
19.2
|
|
|
63.9
|
|
|||||
|
Costs incurred and charged to expense
|
|
8.2
|
|
|
—
|
|
|
—
|
|
|
4.5
|
|
|
12.7
|
|
|||||
|
Cash payments
|
|
(22.2
|
)
|
|
—
|
|
|
—
|
|
|
(18.7
|
)
|
|
(40.9
|
)
|
|||||
|
Non-cash adjustments
|
|
(1.7
|
)
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(1.9
|
)
|
|||||
|
Balance, September 30, 2014
|
|
$
|
29.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.8
|
|
|
$
|
33.8
|
|
|
(1)
|
Relates to B&L’s previously cancelled performance-based options and the acceleration of unvested stock options for B&L employees as a result of the B&L Acquisition. These charges were reclassified to Other (income) expense to conform to the current year presentation.
|
|
|
|
Employee Termination Costs
|
|
IPR&D
Termination
Costs
|
|
Contract
Termination,
Facility Closure
and Other Costs
|
|
|
||||||||||||
|
|
Severance and
Related Benefits
|
|
Share-Based
Compensation
(1)
|
|
|
|
Total
|
|||||||||||||
|
Balance, January 1, 2012
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Costs incurred and/or charged to expense
|
|
85.3
|
|
|
77.3
|
|
|
—
|
|
|
0.4
|
|
|
163.0
|
|
|||||
|
Cash payments
|
|
(78.0
|
)
|
|
(77.3
|
)
|
|
—
|
|
|
—
|
|
|
(155.3
|
)
|
|||||
|
Non-cash adjustments
|
|
4.1
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
3.9
|
|
|||||
|
Balance, December 31, 2012
|
|
11.4
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
11.6
|
|
|||||
|
Costs incurred and/or charged to expense
|
|
20.0
|
|
|
—
|
|
|
—
|
|
|
3.5
|
|
|
23.5
|
|
|||||
|
Cash payments
|
|
(31.4
|
)
|
|
—
|
|
|
—
|
|
|
(3.6
|
)
|
|
(35.0
|
)
|
|||||
|
Non-cash adjustments
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
0.2
|
|
|||||
|
Balance, December 31, 2013
(2)
|
|
$
|
0.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
(1)
|
Relates to the acceleration of unvested stock options, restricted stock awards, and share appreciation rights for Medicis employees that was triggered by the change in control. These charges were reclassified to Other (income) expense to conform to the current year presentation.
|
|
(2)
|
The Company has not recognized any restructuring charges, and made a payment of
$0.1 million
, in the
nine-month period ended September 30, 2014
with respect to the Medicis acquisition-related initiatives.
In the
nine-month period ended September 30, 2013
, the Company recognized
$23.1 million
of restructuring charges and made payments of
$34.4 million
.
|
|
7.
|
FAIR VALUE MEASUREMENTS
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
|
•
|
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
|
|
|
|
As of September 30, 2014
|
|
As of December 31, 2013
|
||||||||||||||||||||||||||||
|
|
|
Carrying
Value
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Carrying
Value
|
|
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||||||||
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Cash equivalents
(1)
|
|
$
|
395.9
|
|
|
$
|
389.5
|
|
|
$
|
6.4
|
|
|
$
|
—
|
|
|
$
|
171.3
|
|
|
$
|
171.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Acquisition-related contingent consideration
|
|
$
|
(327.8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(327.8
|
)
|
|
$
|
(355.8
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(355.8
|
)
|
|
(1)
|
Cash equivalents include highly liquid investments with an original maturity of
three
months or less at acquisition, primarily including money market funds, reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.
|
|
|
Balance,
January 1,
2014
|
|
Issuances
(a)
|
|
Payments
(b)
|
|
Net
Unrealized
Loss
(c)
|
|
Foreign
Exchange
(d)
|
|
Transfers
Into
Level 3
|
|
Transfers
Out of
Level 3
|
|
Balance,
September 30,
2014
|
||||||||||||||||
|
Acquisition-related contingent consideration
|
$
|
(355.8
|
)
|
|
$
|
(65.1
|
)
|
|
$
|
106.1
|
|
|
$
|
(14.8
|
)
|
|
$
|
1.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(327.8
|
)
|
|
(a)
|
Primarily relates to a contingent consideration liability assumed in the Solta Medical acquisition, as well as contingent consideration with respect to other smaller acquisitions, as described in note 3.
|
|
(b)
|
Relates primarily to payments of acquisition-related contingent consideration related to the OraPharma Topco Holdings, Inc. and Eisai (Targretin®) acquisitions and the Elidel®/Xerese®/Zovirax® agreement entered into with Meda Pharma SARL (“Meda”) in June 2011 (the “Elidel®/Xerese®/Zovirax® agreement”).
|
|
(c)
|
For the
nine months ended September 30, 2014
, a net loss of
$14.8 million
was recognized as Acquisition-related contingent consideration in the consolidated statements of income (loss). The acquisition-related contingent consideration net loss was primarily driven by fair value adjustments to reflect accretion for the time value of money related to the Elidel®/Xerese®/Zovirax® agreement.
|
|
(d)
|
Included in other comprehensive (loss) income.
|
|
8.
|
INVENTORIES
|
|
|
|
As of
September 30, 2014 |
|
As of
December 31, 2013 |
||||
|
Raw materials
|
|
$
|
241.1
|
|
|
$
|
221.8
|
|
|
Work in process
|
|
108.1
|
|
|
104.7
|
|
||
|
Finished goods
|
|
697.3
|
|
|
656.3
|
|
||
|
|
|
1,046.5
|
|
|
982.8
|
|
||
|
Less allowance for obsolescence
|
|
(113.8
|
)
|
|
(99.8
|
)
|
||
|
|
|
$
|
932.7
|
|
|
$
|
883.0
|
|
|
9.
|
INTANGIBLE ASSETS AND GOODWILL
|
|
|
|
As of September 30, 2014
|
|
As of December 31, 2013
|
||||||||||||||||||||
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization,
Including
Impairments
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization,
Including
Impairments
|
|
Net
Carrying
Amount
|
||||||||||||
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Product brands
|
|
$
|
10,378.0
|
|
|
$
|
(3,384.1
|
)
|
|
$
|
6,993.9
|
|
|
$
|
10,554.2
|
|
|
$
|
(2,729.1
|
)
|
|
$
|
7,825.1
|
|
|
Corporate brands
|
|
379.0
|
|
|
(67.3
|
)
|
|
311.7
|
|
|
365.6
|
|
|
(44.4
|
)
|
|
321.2
|
|
||||||
|
Product rights
|
|
3,193.1
|
|
|
(1,101.3
|
)
|
|
2,091.8
|
|
|
3,021.0
|
|
|
(876.9
|
)
|
|
2,144.1
|
|
||||||
|
Partner relationships
|
|
195.9
|
|
|
(104.2
|
)
|
|
91.7
|
|
|
194.0
|
|
|
(83.2
|
)
|
|
110.8
|
|
||||||
|
Out-licensed technology and other
|
|
250.8
|
|
|
(111.9
|
)
|
|
138.9
|
|
|
264.0
|
|
|
(93.8
|
)
|
|
170.2
|
|
||||||
|
Total finite-lived intangible assets
|
|
14,396.8
|
|
|
(4,768.8
|
)
|
|
9,628.0
|
|
|
14,398.8
|
|
|
(3,827.4
|
)
|
|
10,571.4
|
|
||||||
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Acquired IPR&D
(1)
|
|
294.9
|
|
|
—
|
|
|
294.9
|
|
|
579.3
|
|
|
—
|
|
|
579.3
|
|
||||||
|
Corporate brand
(2)
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
|
1,697.5
|
|
|
—
|
|
|
1,697.5
|
|
||||||
|
|
|
$
|
16,389.2
|
|
|
$
|
(4,768.8
|
)
|
|
$
|
11,620.4
|
|
|
$
|
16,675.6
|
|
|
$
|
(3,827.4
|
)
|
|
$
|
12,848.2
|
|
|
(1)
|
In the third quarter of 2014, the Company wrote-off IPR&D assets of
$19.9 million
primarily related to analysis of Phase 2 study data for a dermatological product candidate acquired in the December 2012 Medicis acquisition.
|
|
(2)
|
Represents the B&L corporate trademark, which has an indefinite useful life and is not amortizable. See note 3 “BUSINESS COMBINATIONS” for further information.
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
||||||||||
|
Amortization expense
(1)
|
|
$
|
1,421.7
|
|
|
$
|
1,379.9
|
|
|
$
|
1,289.2
|
|
|
$
|
1,231.1
|
|
|
$
|
1,108.6
|
|
|
(1)
|
Estimated amortization expense shown in the table above does not include potential future impairments of finite-lived intangible assets, if any.
|
|
|
|
Developed
Markets
|
|
Emerging
Markets
|
|
Total
|
||||||
|
Balance, January 1, 2014
|
|
$
|
7,428.7
|
|
|
$
|
2,323.4
|
|
|
$
|
9,752.1
|
|
|
Additions
(a)
|
|
259.5
|
|
|
61.6
|
|
|
321.1
|
|
|||
|
Adjustments
(b)
|
|
10.3
|
|
|
(4.3
|
)
|
|
6.0
|
|
|||
|
Divestitures
(c)
|
|
(428.9
|
)
|
|
—
|
|
|
(428.9
|
)
|
|||
|
Foreign exchange and other
|
|
(111.8
|
)
|
|
(70.7
|
)
|
|
(182.5
|
)
|
|||
|
Balance, September 30, 2014
|
|
$
|
7,157.8
|
|
|
$
|
2,310.0
|
|
|
$
|
9,467.8
|
|
|
(a)
|
Primarily relates to the PreCision and Solta Medical acquisitions (as described in note 3).
|
|
(b)
|
Primarily reflects the impact of measurement period adjustments related to the B&L Acquisition (as described in note 3).
|
|
(c)
|
See note 4, titled “DIVESTITURES” for additional information.
|
|
10.
|
|
|
|
|
Maturity
Date
|
|
As of
September 30,
2014
|
|
As of
December 31,
2013
|
||||
|
Revolving Credit Facility
(1)
|
|
April 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Series A-1 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
182.3
|
|
|
259.0
|
|
||
|
Series A-2 Tranche A Term Loan Facility
(1)
|
|
April 2016
|
|
166.3
|
|
|
228.1
|
|
||
|
Series A-3 Tranche A Term Loan Facility
(1)
|
|
October 2018
|
|
1,813.9
|
|
|
1,935.7
|
|
||
|
Series D-2 Tranche B Term Loan Facility
(1)
|
|
February 2019
|
|
1,088.6
|
|
|
1,256.7
|
|
||
|
Series C-2 Tranche B Term Loan Facility
(1)
|
|
December 2019
|
|
837.5
|
|
|
966.8
|
|
||
|
Series E-1 Tranche B Term Loan Facility
(1)
|
|
August 2020
|
|
2,544.8
|
|
|
3,090.5
|
|
||
|
Senior Notes:
|
|
|
|
|
|
|
||||
|
6.75%
(2)
|
|
October 2017
|
|
498.9
|
|
|
498.7
|
|
||
|
6.875%
|
|
December 2018
|
|
940.9
|
|
|
940.2
|
|
||
|
7.00%
|
|
October 2020
|
|
687.4
|
|
|
687.1
|
|
||
|
6.75%
|
|
August 2021
|
|
650.0
|
|
|
650.0
|
|
||
|
7.25%
|
|
July 2022
|
|
542.9
|
|
|
542.2
|
|
||
|
6.375%
|
|
October 2020
|
|
2,224.5
|
|
|
2,221.4
|
|
||
|
6.75%
|
|
August 2018
|
|
1,584.8
|
|
|
1,581.9
|
|
||
|
7.50%
|
|
July 2021
|
|
1,607.8
|
|
|
1,605.9
|
|
||
|
5.625%
|
|
December 2021
|
|
892.3
|
|
|
891.5
|
|
||
|
Other
(3)
|
|
Various
|
|
12.0
|
|
|
12.0
|
|
||
|
|
|
|
|
16,274.9
|
|
|
17,367.7
|
|
||
|
Less current portion
|
|
|
|
(690.6
|
)
|
|
(204.8
|
)
|
||
|
Total long-term debt
|
|
|
|
$
|
15,584.3
|
|
|
$
|
17,162.9
|
|
|
(1)
|
Together, the “Senior Secured Credit Facilities” under the Company’s Third Amended and Restated Credit and Guaranty Agreement, as amended (the “Credit Agreement”).
|
|
(2)
|
On October 15, 2014, Valeant redeemed all of the outstanding
$500.0 million
aggregate principal amount of its
6.75%
senior notes due 2017 (the “2017 Notes”) for
$518.2 million
, including a call premium of
$16.9 million
, plus accrued and unpaid interest, and satisfied and discharged the 2017 Notes indenture, solely with respect to the 2017 Notes (the
7.00%
senior notes due 2020, issued under the same indenture, remain outstanding at this time). The balance of the 2017 Notes was reclassified to Current portion of long-term debt as of September 30, 2014.
|
|
(3)
|
Relates primarily to the debentures from B&L.
|
|
11.
|
SECURITIES REPURCHASE PROGRAM
|
|
12.
|
SHARE-BASED COMPENSATION
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Stock options
|
$
|
5.4
|
|
|
$
|
4.6
|
|
|
$
|
14.7
|
|
|
$
|
12.8
|
|
|
RSUs
|
14.8
|
|
|
11.4
|
|
|
45.9
|
|
|
19.7
|
|
||||
|
Share-based compensation expense
|
$
|
20.2
|
|
|
$
|
16.0
|
|
|
$
|
60.6
|
|
|
$
|
32.5
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Research and development expenses
|
$
|
1.4
|
|
|
$
|
—
|
|
|
$
|
4.2
|
|
|
$
|
—
|
|
|
Selling, general and administrative expenses
|
18.8
|
|
|
16.0
|
|
|
56.4
|
|
|
32.5
|
|
||||
|
Share-based compensation expense
|
$
|
20.2
|
|
|
$
|
16.0
|
|
|
$
|
60.6
|
|
|
$
|
32.5
|
|
|
13.
|
PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS
|
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||
|
Service cost
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
1.0
|
|
|
$
|
0.7
|
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
Interest cost
|
|
2.7
|
|
|
1.8
|
|
|
2.1
|
|
|
1.4
|
|
|
0.6
|
|
|
0.6
|
|
||||||
|
Expected return on plan assets
|
|
(3.7
|
)
|
|
(2.4
|
)
|
|
(2.0
|
)
|
|
(1.2
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
(0.9
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
1.1
|
|
|
$
|
0.9
|
|
|
$
|
0.3
|
|
|
$
|
0.9
|
|
|
|
|
Pension Benefit Plans
|
|
Postretirement
Benefit
Plan
|
||||||||||||||||||||
|
|
U.S. Plan
|
|
Non-U.S. Plans
|
|
||||||||||||||||||||
|
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||
|
Service cost
|
|
$
|
0.3
|
|
|
$
|
0.1
|
|
|
$
|
3.0
|
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
|
$
|
0.4
|
|
|
Interest cost
|
|
8.1
|
|
|
1.8
|
|
|
6.4
|
|
|
1.6
|
|
|
1.8
|
|
|
0.6
|
|
||||||
|
Expected return on plan assets
|
|
(11.1
|
)
|
|
(2.4
|
)
|
|
(6.0
|
)
|
|
(1.2
|
)
|
|
(0.3
|
)
|
|
(0.1
|
)
|
||||||
|
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
||||||
|
Net periodic (benefit) cost
|
|
$
|
(2.7
|
)
|
|
$
|
(0.5
|
)
|
|
$
|
3.4
|
|
|
$
|
1.6
|
|
|
$
|
0.9
|
|
|
$
|
0.9
|
|
|
14.
|
SHAREHOLDERS’ EQUITY
|
|
|
Valeant Pharmaceuticals International, Inc. Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
|
Common Shares
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Valeant
Pharmaceuticals
International, Inc.
Shareholders’
Equity
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|||||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance, January 1, 2013
|
303.9
|
|
|
$
|
5,940.7
|
|
|
$
|
267.1
|
|
|
$
|
(2,371.0
|
)
|
|
$
|
(119.4
|
)
|
|
$
|
3,717.4
|
|
|
$
|
—
|
|
|
$
|
3,717.4
|
|
|
Issuance of common stock
(1)
|
27.1
|
|
|
2,269.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,269.3
|
|
|
—
|
|
|
2,269.3
|
|
|||||||
|
Common shares issued under share-based compensation plans
(2)
|
2.5
|
|
|
64.2
|
|
|
(60.6
|
)
|
|
—
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|||||||
|
Repurchase of common shares
(2)
|
(0.7
|
)
|
|
(14.2
|
)
|
|
—
|
|
|
(41.4
|
)
|
|
—
|
|
|
(55.6
|
)
|
|
—
|
|
|
(55.6
|
)
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
32.5
|
|
|
—
|
|
|
—
|
|
|
32.5
|
|
|
—
|
|
|
32.5
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(35.9
|
)
|
|
—
|
|
|
—
|
|
|
(35.9
|
)
|
|
—
|
|
|
(35.9
|
)
|
|||||||
|
Tax benefits from stock options exercised
|
—
|
|
|
—
|
|
|
48.6
|
|
|
—
|
|
|
—
|
|
|
48.6
|
|
|
—
|
|
|
48.6
|
|
|||||||
|
Noncontrolling interest from business combinations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
113.5
|
|
|
113.5
|
|
|||||||
|
Noncontrolling interest distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
|
(2.1
|
)
|
|||||||
|
|
332.8
|
|
|
8,260.0
|
|
|
251.7
|
|
|
(2,412.4
|
)
|
|
(119.4
|
)
|
|
5,979.9
|
|
|
111.4
|
|
|
6,091.3
|
|
|||||||
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net loss (income)
|
—
|
|
|
—
|
|
|
—
|
|
|
(989.9
|
)
|
|
—
|
|
|
(989.9
|
)
|
|
1.3
|
|
|
(988.6
|
)
|
|||||||
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40.9
|
)
|
|
(40.9
|
)
|
|
(0.6
|
)
|
|
(41.5
|
)
|
|||||||
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(1,030.8
|
)
|
|
0.7
|
|
|
(1,030.1
|
)
|
||||||||||||
|
Balance, September 30, 2013
|
332.8
|
|
|
$
|
8,260.0
|
|
|
$
|
251.7
|
|
|
$
|
(3,402.3
|
)
|
|
$
|
(160.3
|
)
|
|
$
|
4,949.1
|
|
|
$
|
112.1
|
|
|
$
|
5,061.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, January 1, 2014
|
333.0
|
|
|
$
|
8,301.2
|
|
|
$
|
228.8
|
|
|
$
|
(3,278.5
|
)
|
|
$
|
(132.8
|
)
|
|
$
|
5,118.7
|
|
|
$
|
114.6
|
|
|
$
|
5,233.3
|
|
|
Common shares issued under share-based compensation plans
|
1.0
|
|
|
33.2
|
|
|
(23.6
|
)
|
|
—
|
|
|
—
|
|
|
9.6
|
|
|
—
|
|
|
9.6
|
|
|||||||
|
Settlement of stock options
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
—
|
|
|
(3.1
|
)
|
|
—
|
|
|
(3.1
|
)
|
|||||||
|
Share-based compensation
|
—
|
|
|
—
|
|
|
60.6
|
|
|
—
|
|
|
—
|
|
|
60.6
|
|
|
—
|
|
|
60.6
|
|
|||||||
|
Employee withholding taxes related to share-based awards
|
—
|
|
|
—
|
|
|
(38.5
|
)
|
|
—
|
|
|
—
|
|
|
(38.5
|
)
|
|
—
|
|
|
(38.5
|
)
|
|||||||
|
Tax benefits from stock options exercised
|
—
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
|
17.1
|
|
|||||||
|
Acquisition of noncontrolling interest
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
(2.2
|
)
|
|
(3.3
|
)
|
|||||||
|
Noncontrolling interest distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|||||||
|
|
334.0
|
|
|
8,334.4
|
|
|
240.2
|
|
|
(3,278.5
|
)
|
|
(132.8
|
)
|
|
5,163.3
|
|
|
111.9
|
|
|
5,275.2
|
|
|||||||
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
378.6
|
|
|
—
|
|
|
378.6
|
|
|
(0.5
|
)
|
|
378.1
|
|
|||||||
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(419.2
|
)
|
|
(419.2
|
)
|
|
(0.5
|
)
|
|
(419.7
|
)
|
|||||||
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
(40.6
|
)
|
|
(1.0
|
)
|
|
(41.6
|
)
|
||||||||||||
|
Balance, September 30, 2014
|
334.0
|
|
|
$
|
8,334.4
|
|
|
$
|
240.2
|
|
|
$
|
(2,899.9
|
)
|
|
$
|
(552.0
|
)
|
|
$
|
5,122.7
|
|
|
$
|
110.9
|
|
|
$
|
5,233.6
|
|
|
(1)
|
On June 24, 2013, the Company completed, pursuant to an Underwriting Agreement with Goldman Sachs & Co. and Goldman Sachs Canada, Inc., a public offering of
27,058,824
of its common shares, no par value, at a price of
$85.00
per share, or aggregate gross proceeds of approximately
$2.3 billion
. In connection with the issuance of these new common shares, the Company incurred approximately
$30.7 million
of issuance costs, which has been reflected as reduction to the gross proceeds from the equity issuance.
|
|
(2)
|
During the second quarter of 2013,
225,000
common shares were repurchased by the Company pursuant to a purchase agreement with Goldman, Sachs & Co. Under this purchase program, the repurchases were made by Goldman, Sachs & Co. in compliance with Rule 10b5-1(c)(1)(i) of the Securities Exchange Act of 1934.
217,294
of these common shares were repurchased on behalf of certain members of the Company’s Board of Directors, and were subsequently transferred to such directors, in connection with the share settlement of certain deferred stock units and restricted stock units held by such directors following the termination of the applicable equity program. The remaining
7,706
common shares were repurchased on behalf of the Company pursuant to the 2012 Securities Repurchase Program (and therefore these shares are included in the
507,957
of total common shares repurchased under the 2012 Securities Repurchase Program as of September 30, 2013) and were subsequently cancelled (see note 11 titled “SECURITIES REPURCHASE PROGRAM” for further information).
|
|
15.
|
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Unrealized
Gain on
Equity Investment
|
|
Net
Unrealized
Holding
Gain
on Available-
For-Sale
Equity
Securities
|
|
Pension
Adjustment
|
|
Total
|
||||||||||
|
Balance, January 1, 2013
|
|
$
|
(119.5
|
)
|
|
$
|
—
|
|
|
$
|
0.4
|
|
|
$
|
(0.3
|
)
|
|
$
|
(119.4
|
)
|
|
Foreign currency translation adjustment
|
|
(40.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40.5
|
)
|
|||||
|
Reclassification to net income (loss)
(1)
|
|
—
|
|
|
—
|
|
|
(4.0
|
)
|
|
—
|
|
|
(4.0
|
)
|
|||||
|
Net unrealized holding gain on available-for-sale equity securities
|
|
—
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|||||
|
Balance, September 30, 2013
|
|
$
|
(160.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
(160.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance, January 1, 2014
|
|
$
|
(170.3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
37.5
|
|
|
$
|
(132.8
|
)
|
|
Foreign currency translation adjustment
|
|
(439.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(439.9
|
)
|
|||||
|
Unrealized gain on equity method investment, net of tax
|
|
—
|
|
|
22.5
|
|
|
—
|
|
|
—
|
|
|
22.5
|
|
|||||
|
Net unrealized holding gain on available-for-sale equity securities, net of tax
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|||||
|
Reclassification to net income (loss)
(1)
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
—
|
|
|
(1.8
|
)
|
|||||
|
Pension adjustment
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8
|
)
|
|
(1.8
|
)
|
|||||
|
Balance, September 30, 2014
|
|
$
|
(610.2
|
)
|
|
$
|
22.5
|
|
|
$
|
—
|
|
|
$
|
35.7
|
|
|
$
|
(552.0
|
)
|
|
(1)
|
Included in gain on investments, net.
|
|
(2)
|
Reflects changes in defined benefit obligations and related plan assets of the Company’s defined benefit pension plans and the U.S. postretirement benefit plan (as described in note 13).
|
|
16.
|
INCOME TAXES
|
|
17.
|
EARNINGS (LOSS) PER SHARE
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
$
|
275.4
|
|
|
$
|
(973.2
|
)
|
|
$
|
378.6
|
|
|
$
|
(989.9
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic weighted-average number of common shares outstanding
|
335.4
|
|
|
333.6
|
|
|
335.2
|
|
|
316.5
|
|
||||
|
Diluted effect of stock options and RSUs
(a)
|
5.9
|
|
|
—
|
|
|
6.2
|
|
|
—
|
|
||||
|
Diluted weighted-average number of common shares outstanding
|
341.3
|
|
|
333.6
|
|
|
341.4
|
|
|
316.5
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
0.82
|
|
|
$
|
(2.92
|
)
|
|
$
|
1.13
|
|
|
$
|
(3.13
|
)
|
|
Diluted
|
$
|
0.81
|
|
|
$
|
(2.92
|
)
|
|
$
|
1.11
|
|
|
$
|
(3.13
|
)
|
|
(a)
|
In the three-month and nine-month periods ended September 30, 2013, all potential common shares issuable for stock options and RSUs were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive. The dilutive effect of potential common shares issuable for stock options and RSUs on the weighted-average number of common shares outstanding would have been as follows:
|
|
|
|
Three Months
Ended
September 30, |
|
Nine Months
Ended
September 30,
|
||
|
|
|
2013
|
|
2013
|
||
|
Basic weighted-average number of common shares outstanding
|
|
333.6
|
|
|
316.5
|
|
|
Dilutive effect of stock options and RSUs
|
|
6.6
|
|
|
6.4
|
|
|
Diluted weighted-average number of common shares outstanding
|
|
340.2
|
|
|
322.9
|
|
|
18.
|
LEGAL PROCEEDINGS
|
|
19.
|
SEGMENT INFORMATION
|
|
•
|
Developed Markets
consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device products, as well as alliance and contract service revenues, in the areas of eye health, dermatology and podiatry, aesthetics, and dentistry, (ii) sales in the U.S. of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products we developed or acquired, and (iii) pharmaceutical products, OTC products, and medical device products sold in Canada, Australia, New Zealand, Western Europe and Japan.
|
|
•
|
Emerging Markets
consists of branded generic pharmaceutical products and branded pharmaceuticals, OTC products, and medical device products. Products are sold primarily in Central and Eastern Europe (primarily Poland and Russia), Asia, Latin America (Mexico, Brazil, and Argentina and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||||
|
Developed Markets
(1)
|
$
|
1,507.9
|
|
|
$
|
1,142.7
|
|
|
$
|
4,409.4
|
|
|
$
|
2,722.8
|
|
|
Emerging Markets
(2)
|
548.3
|
|
|
399.0
|
|
|
1,574.1
|
|
|
983.0
|
|
||||
|
Total revenues
|
2,056.2
|
|
|
1,541.7
|
|
|
5,983.5
|
|
|
3,705.8
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Segment profit (loss):
|
|
|
|
|
|
|
|
||||||||
|
Developed Markets
(3)
|
478.0
|
|
|
(328.6
|
)
|
|
1,375.3
|
|
|
106.3
|
|
||||
|
Emerging Markets
(4)
|
104.0
|
|
|
19.5
|
|
|
268.1
|
|
|
63.9
|
|
||||
|
Total segment profit (loss)
|
582.0
|
|
|
(309.1
|
)
|
|
1,643.4
|
|
|
170.2
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Corporate
(5)
|
(42.9
|
)
|
|
(39.3
|
)
|
|
(127.3
|
)
|
|
(129.8
|
)
|
||||
|
Restructuring, integration and other costs
|
(61.7
|
)
|
|
(243.1
|
)
|
|
(337.4
|
)
|
|
(345.7
|
)
|
||||
|
In-process research and development impairments and other charges
|
(19.9
|
)
|
|
(124.0
|
)
|
|
(40.3
|
)
|
|
(128.8
|
)
|
||||
|
Acquisition-related costs
|
(1.6
|
)
|
|
(8.6
|
)
|
|
(3.7
|
)
|
|
(24.4
|
)
|
||||
|
Acquisition-related contingent consideration
|
(4.0
|
)
|
|
35.0
|
|
|
(14.8
|
)
|
|
33.5
|
|
||||
|
Other income (expense)
|
232.0
|
|
|
(202.4
|
)
|
|
275.7
|
|
|
(208.0
|
)
|
||||
|
Operating income (loss)
|
683.9
|
|
|
(891.5
|
)
|
|
1,395.6
|
|
|
(633.0
|
)
|
||||
|
Interest income
|
0.8
|
|
|
2.8
|
|
|
3.8
|
|
|
5.4
|
|
||||
|
Interest expense
|
(258.4
|
)
|
|
(249.3
|
)
|
|
(746.1
|
)
|
|
(581.4
|
)
|
||||
|
Loss on extinguishment of debt
|
—
|
|
|
(8.2
|
)
|
|
(93.7
|
)
|
|
(29.6
|
)
|
||||
|
Foreign exchange and other
|
(53.0
|
)
|
|
5.1
|
|
|
(63.0
|
)
|
|
(3.5
|
)
|
||||
|
Gain on investments, net
|
3.4
|
|
|
—
|
|
|
5.9
|
|
|
5.8
|
|
||||
|
Income (loss) before provision for (recovery of) income taxes
|
$
|
376.7
|
|
|
$
|
(1,141.1
|
)
|
|
$
|
502.5
|
|
|
$
|
(1,236.3
|
)
|
|
(1)
|
Developed Markets segment revenues reflect incremental product sales revenue of
$254.2 million
and
$1,628.6 million
, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions in the
three-month and nine-month periods ended September 30, 2014
, respectively, primarily from the B&L, Solta Medical and PreCision acquisitions.
|
|
(2)
|
Emerging Markets segment revenues reflect incremental product sales revenue of
$89.3 million
and
$556.3 million
, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions in the
three-month and nine-month periods ended September 30, 2014
, respectively, primarily from the B&L and Solta Medical acquisitions.
|
|
(3)
|
Developed Markets segment profit (loss) reflects the addition of operations from all 2013 acquisitions and all 2014 acquisitions, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$223.9 million
and
$665.3 million
, in the aggregate, in the
three-month and nine-month periods ended September 30, 2014
, respectively, primarily from B&L and Medicis operations. Developed Markets segment profit (loss) in the three-month and nine-month periods ended September 30, 2013 reflects an impairment charge of
$551.6 million
related to ezogabine/retigabine.
|
|
(4)
|
Emerging Markets segment profit reflects the addition of operations from all 2013 acquisitions and all 2014 acquisitions, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of
$89.5 million
, and
$243.2 million
in the aggregate, in the
three-month and nine-month periods ended September 30, 2014
, respectively, primarily from B&L operations.
|
|
(5)
|
Corporate reflects non-restructuring-related share-based compensation expense of
$11.0 million
and
$32.1 million
in the
three-month and nine-month periods ended September 30, 2014
, respectively, compared with
$16.0 million
and
$32.5 million
in the corresponding periods of
2013
.
|
|
|
As of
September 30, 2014 |
|
As of
December 31, 2013 |
||||
|
Assets
(1)
:
|
|
|
|
||||
|
Developed Markets
(2)
|
$
|
19,450.2
|
|
|
$
|
20,007.2
|
|
|
Emerging Markets
(3)
|
6,298.8
|
|
|
6,907.8
|
|
||
|
|
25,749.0
|
|
|
26,915.0
|
|
||
|
Corporate
|
1,310.6
|
|
|
1,055.8
|
|
||
|
Total assets
|
$
|
27,059.6
|
|
|
$
|
27,970.8
|
|
|
(1)
|
The segment assets as of December 31, 2013 contain reclassifications between segments to conform to the current period presentation.
|
|
(2)
|
Developed Markets segment assets as of
September 30, 2014
reflect (i) the divestiture of filler and toxin assets in July 2014 with the carrying values of the related assets of
$1.0 billion
, in the aggregate, (see note 4 titled “DIVESTITURES” for further information), (ii) the provisional amounts of identifiable intangible assets and goodwill of the PreCision acquisition of
$261.2 million
and
$181.3 million
, respectively, and (iii) the provisional amounts of identifiable intangible assets and goodwill of the Solta Medical acquisition of
$103.5 million
and
$64.4 million
, respectively.
|
|
(3)
|
Emerging Markets segment assets as of
September 30, 2014
reflect the provisional amounts of identifiable intangible assets and goodwill of the Solta Medical acquisition of
$69.4 million
and
$42.9 million
, respectively.
|
|
20.
|
PROPOSED TRANSACTIONS
|
|
|
|
Acquisition
Date
|
|
Acquisitions of businesses and product rights
|
|
|
|
Solta Medical, Inc. (“Solta Medical”)
|
|
January 2014
|
|
PreCision Dermatology, Inc. (“PreCision”)
|
|
July 2014
|
|
|
|
Divestiture
Date
|
|
Divestitures
|
|
|
|
Filler and toxin assets
|
|
July 2014
|
|
Metronidazole 1.3%
|
|
July 2014
|
|
Tretin-X® (tretinoin) cream and generic tretinoin gel and cream products
(1)
|
|
July 2014
|
|
(1)
|
In connection with the acquisition of PreCision, we were required by the Federal Trade Commission to divest the rights to
PreCision’s Tretin-X® (tretinoin) cream product and PreCision’s generic tretinoin gel and cream products.
|
|
•
|
workforce reductions across the Company and other organizational changes;
|
|
•
|
closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;
|
|
•
|
leveraging research and development spend; and
|
|
•
|
procurement savings.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
|||||||||||
|
($ in millions, except per share data)
|
$
|
|
$
|
|
$
|
|
%
|
|
$
|
|
$
|
|
$
|
|
%
|
|||||||
|
Revenues
|
2,056.2
|
|
|
1,541.7
|
|
|
514.5
|
|
|
33
|
|
|
5,983.5
|
|
|
3,705.8
|
|
|
2,277.7
|
|
|
61
|
|
Operating expenses
|
1,372.3
|
|
|
2,433.2
|
|
|
(1,060.9
|
)
|
|
(44
|
)
|
|
4,587.9
|
|
|
4,338.8
|
|
|
249.1
|
|
|
6
|
|
Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
|
275.4
|
|
|
(973.2
|
)
|
|
1,248.6
|
|
|
NM
|
|
|
378.6
|
|
|
(989.9
|
)
|
|
1,368.5
|
|
|
NM
|
|
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Basic
|
0.82
|
|
|
(2.92
|
)
|
|
3.74
|
|
|
NM
|
|
|
1.13
|
|
|
(3.13
|
)
|
|
4.26
|
|
|
NM
|
|
Diluted
|
0.81
|
|
|
(2.92
|
)
|
|
3.73
|
|
|
NM
|
|
|
1.11
|
|
|
(3.13
|
)
|
|
4.24
|
|
|
NM
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
|
$
|
||||
|
Gross product sales
|
|
2,980.2
|
|
|
2,108.6
|
|
|
8,180.3
|
|
|
5,011.8
|
|
|
Provisions to reduce gross product sales to net product sales
|
|
957.3
|
|
|
602.2
|
|
|
2,312.2
|
|
|
1,403.0
|
|
|
Net product sales
|
|
2,022.9
|
|
|
1,506.4
|
|
|
5,868.1
|
|
|
3,608.8
|
|
|
Percentage of provisions to gross sales
|
|
32
|
%
|
|
29
|
%
|
|
28
|
%
|
|
28
|
%
|
|
•
|
Developed Markets
consists of (i) sales in the U.S. of pharmaceutical products, OTC products, and medical device products, as well as alliance and contract service revenues, in the areas of eye health, dermatology and podiatry, aesthetics, and dentistry, (ii) sales in the U.S. of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products we developed or acquired, and (iii) pharmaceutical products, OTC products, and medical device products sold in Canada, Australia, New Zealand, Western Europe and Japan.
|
|
•
|
Emerging Markets
consists of branded generic pharmaceutical products and branded pharmaceuticals, OTC products, and medical device products. Products are sold primarily in Central and Eastern Europe (primarily Poland and Russia), Asia, Latin America (Mexico, Brazil, and Argentina and exports out of Mexico to other Latin American markets), Africa and the Middle East.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
||||||||||||
|
($ in millions)
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
|
$
|
%
|
||||||
|
Developed Markets
|
1,507.9
|
|
73
|
|
1,142.7
|
|
74
|
|
365.2
|
|
32
|
|
4,409.4
|
|
74
|
|
2,722.8
|
|
73
|
|
1,686.6
|
|
62
|
|
Emerging Markets
|
548.3
|
|
27
|
|
399.0
|
|
26
|
|
149.3
|
|
37
|
|
1,574.1
|
|
26
|
|
983.0
|
|
27
|
|
591.1
|
|
60
|
|
Total revenues
|
2,056.2
|
|
100
|
|
1,541.7
|
|
100
|
|
514.5
|
|
33
|
|
5,983.5
|
|
100
|
|
3,705.8
|
|
100
|
|
2,277.7
|
|
61
|
|
•
|
the incremental product sales revenue of
$254.2 million
and
$1,628.6 million
, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions in the third quarter and first nine months of 2014, respectively, primarily from (i) the 2013 acquisitions of B&L (driven by Ocuvite®/PreserVision®, Lotemax®, ReNu Multiplus®, and Biotrue® MultiPurpose Solution product sales) and (ii) the 2014 acquisitions of Solta Medical (mainly driven by Thermage CPT® system product sales) and PreCision (mainly driven by Clindagel® product sales).
|
|
•
|
a negative impact from divestitures and discontinuations of $75.5 million in the third quarter of 2014, and a negative impact from divestitures, discontinuations and supply interruptions of $176.0 million in first nine months of 2014. The largest contributors were the divestitures of facial injectables products (filler and toxin assets) in the third quarter of 2014, the discontinuation of Maxair® and the divestiture of Buphenyl® in 2013;
|
|
•
|
a decrease in product sales of $33.7 million and $141.2 million, in the aggregate, in the third quarter and first nine months of 2014, respectively, due to generic competition. The decrease in the third quarter of 2014 related to a decline in sales of the Vanos® franchise and Wellbutrin® XL (Canada). The decrease in the first nine months of 2014 related to a decline in sales of the Vanos®, Retin-A Micro® (excluding RAM 0.08%), and Zovirax® franchises and Wellbutrin® XL (Canada). We anticipate a continuing decline in sales of the Vanos® franchise and Wellbutrin® XL (Canada) due to continued generic erosion. However, the rate of decline is expected to decrease in the future, and these brands are expected to represent a declining percentage of total revenues primarily due to anticipated growth in other parts of our business and recent acquisitions; and
|
|
•
|
a negative foreign currency exchange impact on the existing business of $7.7 million and $25.1 million in the third quarter and first nine months of 2014, respectively.
|
|
•
|
the incremental product sales revenue of
$89.3 million
and
$556.3 million
, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions in the third quarter and first nine months of 2014, respectively, primarily from the 2013 acquisition of B&L (driven by ReNu Multiplus®, Ocuvite®, and Artelac™ product sales) and the 2014 acquisition of Solta Medical (mainly driven by Thermage CPT® system product sales).
|
|
•
|
a negative impact from divestitures and discontinuations of $6.2 million in the third quarter of 2014, and a negative impact from divestitures, discontinuations and supply interruptions of $50.1 million in the first nine months of 2014, primarily from Eastern Europe and Brazil; and
|
|
•
|
a negative foreign currency exchange impact on the existing business of $17.2 million and $31.5 million in the third quarter and first nine months of 2014, respectively.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
|||||||||||||
|
($ in millions)
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|||||||
|
Developed Markets
|
478.0
|
|
32
|
|
(328.6
|
)
|
(29
|
)
|
|
806.6
|
|
NM
|
|
1,375.3
|
|
31
|
|
106.3
|
|
4
|
|
1,269.0
|
|
NM
|
|
Emerging Markets
|
104.0
|
|
19
|
|
19.5
|
|
5
|
|
|
84.5
|
|
NM
|
|
268.1
|
|
17
|
|
63.9
|
|
7
|
|
204.2
|
|
NM
|
|
Total segment profit (loss)
|
582.0
|
|
28
|
|
(309.1
|
)
|
(20
|
)
|
|
891.1
|
|
NM
|
|
1,643.4
|
|
27
|
|
170.2
|
|
5
|
|
1,473.2
|
|
NM
|
|
•
|
an increase in contribution of $153.7 million and $1,096.2 million, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions in the third quarter and first nine months of 2014, respectively, primarily from the product sales of B&L and Solta Medical, including higher expenses for acquisition accounting adjustments related to inventory of $10.6
million and $24.1 million, in the aggregate, in the third quarter and first nine months of 2014, respectively;
|
|
•
|
a decrease in operating expenses (including amortization and impairments of finite-lived intangible assets) of $410.2 million in third quarter of 2014 primarily due to an impairment charge of $551.6 million related to ezogabine/retigabine in the third quarter of 2013, partially offset by the acquisitions of new businesses within the segment; and
|
|
•
|
a favorable impact of $122.2 million and $187.8 million related to the existing business acquisition accounting adjustments related to inventory in the third quarter and first nine months of 2013, respectively, that did not similarly occur in the third quarter and first nine months of 2014.
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $60.3 million in the third quarter of 2014, and a decrease in contribution related to divestitures, discontinuations and supply interruptions of $144.6 million in the first nine months of 2014;
|
|
•
|
a decrease in contribution of $31.5 million and $134.6 million in the third quarter and first nine months of 2014, respectively, as a result of the continued impact of generic competition. The decrease in the third quarter of 2014 related to a decline in sales of the Vanos® franchise and Wellbutrin® XL (Canada). The decrease in the first nine months of 2014 related to a decline in sales of the Vanos®, Retin-A Micro® (excluding RAM 0.08%), and Zovirax® franchises and Wellbutrin® XL (Canada);
|
|
•
|
an increase in operating expenses (including amortization and impairments of finite-lived intangible assets) of $89.7 million in the first nine months of 2014 primarily due to the acquisitions of new businesses within the segment, partially offset by the impairment charge of $551.6 million related to ezogabine/retigabine in the third quarter of 2013; and
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $5.9
million and $19.2 million in the third quarter and first nine months of 2014, respectively.
|
|
•
|
an increase in contribution of $55.2 million and $365.2 million, in the aggregate, from all 2013 acquisitions and all 2014 acquisitions, in the third quarter and first nine months of 2014, respectively, primarily from the sale of B&L and Solta Medical products; and
|
|
•
|
a favorable impact of $27.2 million and $31.4 million related to the existing business acquisition accounting adjustments related to inventory in the third quarter and first nine months of 2013, respectively, that did not similarly occur in the third quarter and first nine months of 2014.
|
|
•
|
an increase in operating expenses (including amortization and impairments of finite-lived intangible assets) of $45.3 million and $220.5 million in the third quarter and first nine months of 2014, respectively, primarily associated with the acquisitions of new businesses within the segment;
|
|
•
|
a decrease in contribution related to divestitures and discontinuations of $3.8 million in the third quarter of 2014, and a decrease in contribution related to divestitures, discontinuations and supply interruptions of $31.1 million in the first nine months of 2014; and
|
|
•
|
a negative foreign currency exchange impact on the existing business contribution of $10.7
million and $19.6 million in the third quarter and first nine months of 2014, respectively.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
|||||||||||||||||
|
($ in millions)
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|
$
|
%
(1)
|
|
$
|
%
(1)
|
|
$
|
%
|
|||||||||||
|
Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)
|
545.8
|
|
27
|
|
|
560.8
|
|
36
|
|
|
(15.0
|
)
|
(3
|
)
|
|
1,619.5
|
|
27
|
|
1,128.9
|
|
30
|
|
|
490.6
|
|
43
|
|
|
Cost of other revenues
|
15.0
|
|
1
|
|
|
14.4
|
|
1
|
|
|
0.6
|
|
4
|
|
|
45.3
|
|
1
|
|
44.3
|
|
1
|
|
|
1.0
|
|
2
|
|
|
Selling, general and administrative
|
504.1
|
|
25
|
|
|
355.7
|
|
23
|
|
|
148.4
|
|
42
|
|
|
1,501.8
|
|
25
|
|
854.9
|
|
23
|
|
|
646.9
|
|
76
|
|
|
Research and development
|
59.1
|
|
3
|
|
|
49.0
|
|
3
|
|
|
10.1
|
|
21
|
|
|
186.9
|
|
3
|
|
97.3
|
|
3
|
|
|
89.6
|
|
92
|
|
|
Amortization and impairments of finite-lived intangible assets
|
393.1
|
|
19
|
|
|
910.2
|
|
59
|
|
|
(517.1
|
)
|
(57
|
)
|
|
1,113.9
|
|
19
|
|
1,540.0
|
|
42
|
|
|
(426.1
|
)
|
(28
|
)
|
|
Restructuring, integration and other costs
|
61.7
|
|
3
|
|
|
243.1
|
|
16
|
|
|
(181.4
|
)
|
(75
|
)
|
|
337.4
|
|
6
|
|
345.7
|
|
9
|
|
|
(8.3
|
)
|
(2
|
)
|
|
In-process research and development impairments and other charges
|
19.9
|
|
1
|
|
|
124.0
|
|
8
|
|
|
(104.1
|
)
|
(84
|
)
|
|
40.3
|
|
1
|
|
128.8
|
|
3
|
|
|
(88.5
|
)
|
(69
|
)
|
|
Acquisition-related costs
|
1.6
|
|
—
|
|
|
8.6
|
|
1
|
|
|
(7.0
|
)
|
(81
|
)
|
|
3.7
|
|
—
|
|
24.4
|
|
1
|
|
|
(20.7
|
)
|
(85
|
)
|
|
Acquisition-related contingent consideration
|
4.0
|
|
—
|
|
|
(35.0
|
)
|
(2
|
)
|
|
39.0
|
|
NM
|
|
|
14.8
|
|
—
|
|
(33.5
|
)
|
(1
|
)
|
|
48.3
|
|
NM
|
|
|
Other (income) expense
|
(232.0
|
)
|
(11
|
)
|
|
202.4
|
|
13
|
|
|
(434.4
|
)
|
NM
|
|
|
(275.7
|
)
|
(5)
|
|
208.0
|
|
6
|
|
|
(483.7
|
)
|
NM
|
|
|
Total operating expenses
|
1,372.3
|
|
67
|
|
|
2,433.2
|
|
158
|
|
|
(1,060.9
|
)
|
(44
|
)
|
|
4,587.9
|
|
77
|
|
4,338.8
|
|
117
|
|
|
249.1
|
|
6
|
|
|
•
|
the impact of lower acquisition accounting adjustments of $137.2 million and $197.3 million in the third quarter and first nine months of 2014, respectively, primarily related to the fair value step-up for acquired inventory from the B&L and Medicis acquisitions which was expensed in the third quarter and first nine months of 2013 that did not similarly occur in the third quarter and first nine months of 2014; and
|
|
•
|
a favorable impact from product mix driven by new product launches, including Jublia®, Luzu™, and RAM 0.08%. These products have a higher gross profit margin than our overall margin.
|
|
•
|
an unfavorable impact from product mix related to (i) the product portfolio acquired as part of the B&L Acquisition and (ii) decreased sales of certain products in the Developed Markets segment due to generic competition (as described above) which have a higher gross profit margin than our overall margin.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
||||||||||
|
($ in millions; Income (Expense))
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
||||||||
|
Interest income
|
0.8
|
|
|
2.8
|
|
|
(2.0
|
)
|
(71
|
)
|
|
3.8
|
|
|
5.4
|
|
|
(1.6
|
)
|
(30
|
)
|
|
Interest expense
|
(258.4
|
)
|
|
(249.3
|
)
|
|
(9.1
|
)
|
4
|
|
|
(746.1
|
)
|
|
(581.4
|
)
|
|
(164.7
|
)
|
28
|
|
|
Loss on extinguishment of debt
|
—
|
|
|
(8.2
|
)
|
|
8.2
|
|
(100
|
)
|
|
(93.7
|
)
|
|
(29.6
|
)
|
|
(64.1
|
)
|
NM
|
|
|
Foreign exchange and other
|
(53.0
|
)
|
|
5.1
|
|
|
(58.1
|
)
|
NM
|
|
|
(63.0
|
)
|
|
(3.5
|
)
|
|
(59.5
|
)
|
NM
|
|
|
Gain on investments, net
|
3.4
|
|
|
—
|
|
|
3.4
|
|
NM
|
|
|
5.9
|
|
|
5.8
|
|
|
0.1
|
|
2
|
|
|
Total non-operating expense
|
(307.2
|
)
|
|
(249.6
|
)
|
|
(57.6
|
)
|
23
|
|
|
(893.1
|
)
|
|
(603.3
|
)
|
|
(289.8
|
)
|
48
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
||||||||
|
($ in millions; Expense (Income))
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
||||||
|
Current income tax expense
|
25.7
|
|
|
16.4
|
|
|
9.3
|
|
57
|
|
61.2
|
|
|
38.5
|
|
|
22.7
|
|
59
|
|
Deferred income tax expense (recovery)
|
74.6
|
|
|
(185.6
|
)
|
|
260.2
|
|
NM
|
|
63.2
|
|
|
(286.2
|
)
|
|
349.4
|
|
NM
|
|
Total provision (recovery of) for income taxes
|
100.3
|
|
|
(169.2
|
)
|
|
269.5
|
|
NM
|
|
124.4
|
|
|
(247.7
|
)
|
|
372.1
|
|
NM
|
|
|
As of
September 30, 2014 |
|
As of
December 31, 2013 |
|
Change
|
|||||
|
($ in millions; Asset (Liability))
|
$
|
|
$
|
|
$
|
%
|
||||
|
Cash and cash equivalents
|
808.8
|
|
|
600.3
|
|
|
208.5
|
|
35
|
|
|
Long-lived assets
(1)
|
22,388.6
|
|
|
23,834.5
|
|
|
(1,445.9
|
)
|
(6
|
)
|
|
Total debt, including current portion
|
(16,274.9
|
)
|
|
(17,367.7
|
)
|
|
1,092.8
|
|
(6
|
)
|
|
•
|
$1.5 billion
in operating cash flows; and
|
|
•
|
$1.5 billion of net cash proceeds from divestitures primarily related to the divestitures of filler and toxin assets in July 2014. Refer to note 4 to the unaudited consolidated financial statements for additional information.
|
|
•
|
$1.2 billion in net repayments, in the aggregate, under our senior secured credit facilities in the first nine months of 2014;
|
|
•
|
$1.1 billion
paid, in the aggregate, in connection with the purchases of businesses and intangible assets, mainly in respect of the PreCision and Solta Medical acquisitions in the first nine months of 2014;
|
|
•
|
purchases of property, plant and equipment of
$211.2 million
;
|
|
•
|
contingent consideration payments within financing activities of
$96.6 million
primarily related to the OraPharma Topco Holdings, Inc. acquisition in June 2012, the Eisai (Targretin®) acquisition in February 2013 and the Elidel®/Xerese®/Zovirax® agreement entered into in June 2011;
|
|
•
|
$75.9 million payment related to the investment in PS Fund 1, LLC (“PS Fund 1”), a newly formed company jointly owned by Pershing Square Capital Management, L.P. (“Pershing Square”) and Valeant in connection with a merger proposal to the Board of Directors of Allergan. Refer to note 20 to the unaudited consolidated financial statements for additional information;
|
|
•
|
$38.5 million
of employee withholding taxes paid in connection with the exercise of share-based awards; and
|
|
•
|
$21.0 million
related to debt issue costs paid primarily due to the refinancing of our Series E tranche B term loan facility in February 2014 (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”).
|
|
•
|
the depreciation of property, plant and equipment and amortization of intangible assets of
$1.2 billion
, in the aggregate;
|
|
•
|
a reduction of the carrying amount of intangible assets and goodwill of $1.0 billion and $91.0 million, in the aggregate, related to the divestitures of (i) filler and toxin assets and (ii) Metronidazole 1.3%, respectively, which were divested in July 2014. Refer to note 4 to the unaudited consolidated financial statements for additional information; and
|
|
•
|
a negative foreign currency exchange impact of $431.8 million.
|
|
•
|
the inclusion of the identifiable intangible assets, goodwill and property, plant and equipment from the 2014 acquisitions of $1.0 billion, in the aggregate, primarily related to the PreCision and Solta Medical acquisitions; and
|
|
•
|
purchases of property, plant and equipment of
$211.2 million
.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
||||||||||
|
($ in millions)
|
$
|
|
$
|
|
$
|
%
|
|
$
|
|
$
|
|
$
|
%
|
||||||||
|
Net cash provided by operating activities
|
618.7
|
|
|
201.7
|
|
|
417.0
|
|
NM
|
|
|
1,479.0
|
|
|
762.1
|
|
|
716.9
|
|
94
|
|
|
Net cash provided by (used in) investing activities
|
756.3
|
|
|
(4,469.2
|
)
|
|
5,225.5
|
|
NM
|
|
|
105.8
|
|
|
(5,235.8
|
)
|
|
5,341.6
|
|
NM
|
|
|
Net cash (used in) provided by financing activities
|
(1,082.1
|
)
|
|
2,318.4
|
|
|
(3,400.5
|
)
|
NM
|
|
|
(1,361.4
|
)
|
|
4,158.6
|
|
|
(5,520.0
|
)
|
NM
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(15.3
|
)
|
|
6.0
|
|
|
(21.3
|
)
|
NM
|
|
|
(14.9
|
)
|
|
(4.7
|
)
|
|
(10.2
|
)
|
NM
|
|
|
Net increase (decrease) in cash and cash equivalents
|
277.6
|
|
|
(1,943.1
|
)
|
|
2,220.7
|
|
NM
|
|
|
208.5
|
|
|
(319.8
|
)
|
|
528.3
|
|
NM
|
|
|
Cash and cash equivalents, beginning of period
|
531.2
|
|
|
2,539.4
|
|
|
(2,008.2
|
)
|
(79
|
)
|
|
600.3
|
|
|
916.1
|
|
|
(315.8
|
)
|
(34
|
)
|
|
Cash and cash equivalents, end of period
|
808.8
|
|
|
596.3
|
|
|
212.5
|
|
36
|
|
|
808.8
|
|
|
596.3
|
|
|
212.5
|
|
36
|
|
|
•
|
the inclusion of cash flows in the third quarter of 2014 from all 2013 acquisitions, primarily the B&L Acquisition, as well as all 2014 acquisitions; and
|
|
•
|
incremental cash flows from the continued growth of the existing business, including new product launches, partially offset by a decrease in contribution of $31.5 million in the third quarter of 2014 related to the lower sales of the Vanos® franchise and Wellbutrin® XL (Canada) as a result of generic competition.
|
|
•
|
an increased investment in working capital of
$69.4 million
in the third quarter of 2014, primarily related to (i) an increase in receivables driven by higher gross sales and product mix and (ii) the impact of changes related to timing of payments, including interest, severance, and integration payments, and receipts in the ordinary course of business, partially offset by an increase in accrued liabilities due to higher sales reserves.
|
|
•
|
the inclusion of cash flows in the first nine months of 2014 from all 2013 acquisitions, primarily the B&L and Obagi acquisitions, as well as all 2014 acquisitions; and
|
|
•
|
incremental cash flows from the continued growth of the existing business, including new product launches, partially offset by a decrease in contribution of $134.6 million in the first nine months of 2014 related to the lower sales of the Vanos®, Retin-A Micro® (excluding RAM 0.08%), and Zovirax® franchises and Wellbutrin® XL (Canada) as a result of generic competition.
|
|
•
|
higher payments of $147.9 million related to restructuring, integration and other costs in the first nine months of 2014; and
|
|
•
|
an increased investment in working capital of
$146.7 million
in the first nine months of 2014, primarily related to (i) an increase in receivables driven by higher gross sales and product mix and (ii) the impact of changes related to timing of payments, including interest, severance, and integration payments, and receipts in the ordinary course of business, partially offset by an increase in accrued liabilities due to higher sales reserves.
|
|
•
|
an increase of
$3.8 billion
, in the aggregate, related to higher purchases of businesses (net of cash acquired) and intangible assets in the prior year, driven mainly by the August 2013 B&L Acquisition; and
|
|
•
|
an increase of
$1.5 billion
, related to higher proceeds from the sale of assets and businesses, net of costs to sell, primarily attributable to the cash proceeds of approximately $1.4 billion for the divestiture of filler and toxin assets to Galderma in the third quarter of 2014.
|
|
•
|
an increase of
$4.1 billion
, in the aggregate, related to higher purchases of businesses (net of cash acquired) and intangible assets in the prior year, driven mainly by the August 2013 B&L Acquisition; and
|
|
•
|
an increase of
$1.5 billion
, related to higher proceeds from the sale of assets and businesses, net of costs to sell, primarily attributable to the cash proceeds of approximately $1.4 billion for the divestiture of filler and toxin assets to Galderma in the third quarter of 2014.
|
|
•
|
a decrease of
$159.5 million
related to higher purchases of property, plant and equipment; and
|
|
•
|
a decrease of $75.9 million related to the investment in the PS Fund 1, a newly formed company jointly owned by Pershing Square and Valeant, formed in connection with a merger proposal to the Board of Directors of Allergan.
|
|
•
|
a decrease of $3.4 billion related to borrowings under our senior secured credit facilities primarily due to the borrowings in the third quarter of 2013 in connection with the B&L Acquisition;
|
|
•
|
a decrease related to net proceeds of $3.2 billion from the issuance of senior notes in the third quarter of 2013; and
|
|
•
|
a decrease of $1.0 billion related to higher repayments under our senior secured credit facilities in the third quarter of 2014. Refer to note 10 to the unaudited consolidated financial statements for additional information.
|
|
•
|
an increase of $4.2 billion related to the repayment of long-term debt assumed in connection with the B&L Acquisition in the third quarter of 2013 that did not similarly occur in the third quarter of 2014.
|
|
•
|
a decrease of $3.4 billion related to borrowings under our senior secured credit facilities in the third quarter of 2014 primarily due to the borrowings in the third quarter of 2013 in connection with the B&L Acquisition;
|
|
•
|
a decrease related to net proceeds of $3.2 billion from the issuance of senior notes in the third quarter of 2013;
|
|
•
|
a decrease of
$2.3 billion
related to the net proceeds from the issuance of common stock in June 2013, which were utilized to fund the B&L Acquisition; and
|
|
•
|
a decrease of $1.2 billion related to the higher repayments under our senior secured credit facilities in the first nine months of 2014, primarily driven by the principal payments of $1.0 billion, in the aggregate, in the third quarter of 2014. Refer to note 10 to the unaudited consolidated financial statements for additional information.
|
|
•
|
an increase of $4.2 billion related to the repayment of long-term debt assumed in connection with the B&L Acquisition in the third quarter of 2013 that did not similarly occur in the third quarter of 2014;
|
|
•
|
an increase of $233.6 million related to the repayments of long-term debt assumed in connection with the Medicis acquisition in the first nine months of 2013 that did not similarly occur in the first nine months of 2014;
|
|
•
|
an increase of
$59.5 million
related to the lower debt issue costs paid in the first nine months of 2014 due to the lower refinancing activities in the first nine months of 2014;
|
|
•
|
an increase of
$55.6 million
related to the repurchases of common shares in the first nine months of 2013 that did not similarly occur in the first nine months of 2014; and
|
|
•
|
an increase of $37.6 million related to the repayments of short-term borrowings and long-term debt, in the aggregate, assumed in connection with the Natur Produkt acquisition in the first nine months of 2013 that did not similarly occur in the first nine months of 2014.
|
|
|
|
Payments Due by Period
|
|||||||||||||
|
|
|
Total
|
|
2014
|
|
2015 and 2016
|
|
2017 and 2018
|
|
Thereafter
|
|||||
|
($ in millions)
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|||||
|
Long-term debt obligations, including interest
(1)
|
|
21,725.9
|
|
|
728.6
|
|
|
2,623.2
|
|
|
5,684.5
|
|
|
12,689.6
|
|
|
(1)
|
Expected interest payments assume repayment of the principal amount of the debt obligations at maturity.
|
|
•
|
the challenges and difficulties associated with managing the rapid growth of our Company and a larger, more complex business;
|
|
•
|
the introduction of generic competitors of our brand products;
|
|
•
|
the introduction of products that compete against our products that do not have patent or data exclusivity rights, which products represent a significant portion of our revenues;
|
|
•
|
our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;
|
|
•
|
our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis;
|
|
•
|
factors relating to the integration of the companies, businesses and products acquired by the Company (including the integration relating to our recent acquisitions of PreCision, Solta Medical, and B&L, such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations (including potential disruptions in sales activities and potential challenges with information technology systems integrations), the difficulties and challenges associated with entering into new business areas and new geographic markets, the difficulties, challenges and costs associated with managing and integrating new facilities, equipment and other assets, and the achievement of the anticipated benefits from such integrations;
|
|
•
|
factors relating to our ability to achieve all of the estimated synergies from our acquisitions as a result of cost-rationalization and integration initiatives. These factors may include greater than expected operating costs, the difficulty in eliminating certain duplicative costs, facilities and functions, and the outcome of many operational and strategic decisions, some of which have not yet been made;
|
|
•
|
the ultimate outcome of any possible transaction between the Company and Allergan, Inc. (“Allergan”), including the ultimate removal or the failure to render inapplicable the obstacles to consummation of such transaction, or the possibility that the Company will not continue to pursue a transaction with Allergan and factors relating to the time, resources and efforts expended in pursuing a transaction with Allergan;
|
|
•
|
ability to obtain regulatory approvals and meet other closing conditions to the proposed Allergan transaction, including all necessary stockholder approvals, on a timely basis;
|
|
•
|
if a transaction between the Company and Allergan occurs, the ultimate outcome and results of integrating the operations of the Company and Allergan, the ultimate outcome of the Company’s pricing and operating strategy applied to Allergan and the ultimate ability to realize synergies;
|
|
•
|
the effects of the business combination of the Company and Allergan, including the combined company’s future financial condition, operating results, strategy and plans;
|
|
•
|
our ability to secure and maintain third party research, development, manufacturing, marketing or distribution arrangements;
|
|
•
|
our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries;
|
|
•
|
our substantial debt and debt service obligations and their impact on our financial condition and results of operations;
|
|
•
|
our future cash flow, our ability to service and repay our existing debt and our ability to raise additional funds, if needed, in light of our current and projected levels of operations, acquisition activity and general economic conditions;
|
|
•
|
interest rate risks associated with our floating rate debt borrowings;
|
|
•
|
the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering new geographic markets (including the challenges created by new and different regulatory regimes in those markets);
|
|
•
|
adverse global economic conditions and credit market and foreign currency exchange uncertainty in the countries in which we do business (such as the recent instability in Russia, Ukraine and the Middle East);
|
|
•
|
economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;
|
|
•
|
our ability to retain, motivate and recruit executives and other key employees;
|
|
•
|
our ability to obtain and maintain sufficient intellectual property rights over our products and defend against challenge to such intellectual property;
|
|
•
|
the outcome of legal proceedings, investigations and regulatory proceedings;
|
|
•
|
the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits and/or withdrawals of products from the market;
|
|
•
|
the availability of and our ability to obtain and maintain adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third party insurance or self-insurance;
|
|
•
|
the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including, but not limited to, the U.S. Food and Drug Administration, Health Canada and other regulatory approvals, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others;
|
|
•
|
the results of continuing safety and efficacy studies by industry and government agencies;
|
|
•
|
the availability and extent to which our products are reimbursed by government authorities and other third party payors, as well as the impact of obtaining or maintaining such reimbursement on the price of our products;
|
|
•
|
the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price of our products in connection therewith;
|
|
•
|
the impact of price control restrictions on our products, including the risk of mandated price reductions;
|
|
•
|
the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as factors impacting the commercial success of our currently marketed products, which could lead to material impairment charges;
|
|
•
|
the results of management reviews of our research and development portfolio, conducted periodically and in connection with certain acquisitions, the decisions from which could result in terminations of specific projects which, in turn, could lead to material impairment charges;
|
|
•
|
negative publicity or reputational harm to our products and business, including as faced in connection with our proposed transaction with Allergan;
|
|
•
|
the uncertainties associated with the acquisition and launch of new products, including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing;
|
|
•
|
our ability to obtain components, raw materials or finished products supplied by third parties and other manufacturing and related supply difficulties, interruptions and delays;
|
|
•
|
the disruption of delivery of our products and the routine flow of manufactured goods;
|
|
•
|
the seasonality of sales of certain of our products;
|
|
•
|
declines in the pricing and sales volume of certain of our products that are distributed by third parties, over which we have no or limited control;
|
|
•
|
compliance with, or the failure to comply with, health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and pricing practices, worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act), worldwide environmental laws and regulation and privacy and security regulations;
|
|
•
|
the impacts of the Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate;
|
|
•
|
interruptions, breakdowns or breaches in our information technology systems; and
|
|
•
|
other risks detailed from time to time in our filings with the SEC and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.
|
|
Period
|
Total Number of
Shares (or Units)
Purchased
(1)(2)
|
|
Average Price
Paid Per Share
(3)
|
|
Total Number of Shares
Purchased as
Part of Publicly
Announced Plan
|
|
Maximum Number
(Approximate Dollar Value)
of Shares That
May Yet Be Purchased
Under the Plan
(1)
|
||||||
|
|
|
|
|
|
|
|
(In millions)
|
||||||
|
July 1, 2014 to July 31, 2014
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,500
|
|
|
August 1, 2014 to August 31, 2014
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,500
|
|
|
September 1, 2014 to September 30, 2014
|
200
|
|
|
$
|
130.43
|
|
|
—
|
|
|
$
|
1,500
|
|
|
(1)
|
On November 21, 2013, our Board of Directors authorized the repurchase of up to $1.5 billion of convertible notes, senior notes, common shares and/or other future debt or shares, subject to any restrictions in our financing agreements and applicable law (the “2013 Securities Repurchase Program”). The 2013 Securities Repurchase Program will terminate on November 21, 2014 or at such time as the Company completes its purchases. During the three-month period ended September 30, 2014, we did not make any repurchases of our senior notes or common shares under the 2013 Securities Repurchase Program.
|
|
(2)
|
Includes 200 shares purchased (subsequently cancelled) under the employee stock purchase program.
Such purchases were not made under the 2013 Securities Repurchase Program.
|
|
(3)
|
The average price paid per share excludes any broker commissions.
|
|
31.1*
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1*
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2*
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
|
XBRL Instance Document
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
*
|
Filed herewith.
|
|
|
Valeant Pharmaceuticals International, Inc.
(Registrant) |
|
Date: October
24
, 2014
|
/s/ J. MICHAEL PEARSON
J. Michael Pearson
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
|
Date: October
24
, 2014
|
/s/ HOWARD B. SCHILLER
Howard B. Schiller
Executive Vice-President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director |
|
Exhibit
Number
|
|
Exhibit Description
|
|
31.1*
|
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2*
|
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1*
|
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2*
|
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
|
XBRL Instance Document
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
*
|
Filed herewith.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|