REORGANIZATION

6 Months Ended

Jun. 30, 2012

REORGANIZATION

REORGANIZATION

3.REORGANIZATION

Overall, the implementation of the Recapitalization Transaction triggered a $67.3 million gain related to the forgiveness of debt calculated as follows:

	May 1, 2011 in 000’s
Predecessor Company liabilities subject to compromise:
Subordinated Notes	$	250,000
Pre-petition interest payable on Subordinated Notes	16,145
Trade accounts payable and accruals	4,480
Less: new common shares issued to satisfy Subordinated Noteholders’ claims	(202,948		)
Less: cash settlement of lender claims related to trade accounts payable and accruals	(370		)
Gain on extinguishment of debt and settlement of other liabilities	$	67,307

Reorganization Items

Reorganization items represent certain recoveries, expenses, gains and losses and loss provisions that are directly related to the Company’s Creditor Protection Proceedings and Recapitalization Transaction. In accordance with ASC No. 852, these reorganization items have been separately disclosed as follows:

	Predecessor Company
	One month ended April 30, 2011			Four months ended April 30, 2011
Professional fees (1)	(9,008		)	(17,868		)
Director’s and officer’s insurance (2)	(219		)	(1,601		)
KEIP payment, net of tax (3)	(793		)	(793		)
Gain on settlement of financial liability approved by the Canadian Court (4)	—			1,500
Cancellation of options and awards (5)	(1,371		)	(1,371		)
Net gains due to fresh start accounting adjustments (6)	341,217			341,217
	$	329,826		$	321,084

(1)Professional fees represent legal, accounting and other financial consulting fees paid to advisors; which represented the Predecessor Company and Subordinated Noteholders during the Recapitalization Transaction. These advisors assisted in the analysis of financial and strategic alternatives as well as the execution and completion of the Recapitalization Transaction, throughout the Predecessor Company’s Creditor Protection Proceedings.

(2)Directors’ and officers’ insurance represents the purchase of additional insurance coverage required to indemnify the preceding directors and officers of the Predecessor Company for a period of six years after the Plan Implementation Date. Given that a new board of directors was appointed upon implementation of the CCAA Plan, total fees of $1.6 million were expensed to reorganization items during the four months ended April 30, 2011.

(3)Upon completion of the Recapitalization Transaction, a $0.8 million incentive payment (net of a $0.2 million tax recovery) was triggered under the terms of the Key Employment Incentive Plan (“KEIP”), which was established as part of the Recapitalization Transaction. The KEIP was fully paid out by August 10, 2011.

(4)In connection with the termination and settlement of an agreement with a previous distributor, the Predecessor Company recorded a $1.5 million recovery during the four months ended April 30, 2011 related to the full and final settlement of all milestone and royalty obligations owing and accrued as at December 31, 2010 under the terms of the original agreement.

(5)Upon implementation of the Recapitalization Transaction, the Predecessor Company cancelled all existing stock options and charged the total unrecognized stock based compensation of $1.4 million to earnings on April 30, 2011.

(6)Upon reorganization and implementation of fresh start accounting, the Company’s reorganization value of $692.8 million was allocated to all tangible and identifiable intangible assets based on their fair values, which totaled $567.6 million. The fresh start revaluation resulted in goodwill of $125.2 million and net revaluation gains of $341.1 million.

Unless specifically prescribed under ASC No. 852, other items that are indirectly related to the Predecessor Company’s reorganization activities, have been recorded in accordance with other applicable U.S. GAAP, including accounting for impairments of long-lived assets, modification of leases, accelerated depreciation and amortization, and severance and termination costs associated with exit and disposal activities.

For more detailed information about the Creditor Protection Proceedings and the Recapitalization Transaction, refer to the annual audited consolidated financial statements included in the 2011 Annual Report filed with the SEC on Form 10-K on March 29, 2012.