Discontinued Operations and Assets and Liabilities Held For Sale

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

NOTE 3. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

American Medical Systems

On February 24, 2015, the Company’s Board of Directors (Board of Directors) approved a plan to sell the Company’s American Medical Systems Holdings, Inc. (AMS) business. The AMS business included the Men’s Health and Prostate Health businesses, which were sold to Boston Scientific Corporation on August 3, 2015, as well as the Women’s Health business (Astora). On February 24, 2016, the Company’s Board of Directors resolved to wind-down the remaining Astora business as it did not align with the Company’s strategic direction and to reduce Astora’s exposure to the mesh-related product liability. Astora ceased business operations on March 31, 2016.

The operating results of this business are reported as Discontinued operations, net of tax in the Condensed Consolidated Statements of Operations for all periods presented.

The following table provides the operating results of AMS Discontinued operations, net of tax for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	81		$	387		$	260		$	30,101
Litigation-related and other contingencies, net	$	—		$	17,705		$	775,684		$	20,155
Asset impairment charges	$	—		$	—		$	—		$	21,328
Loss from discontinued operations before income taxes	$	(8,957	)	$	(27,309	)	$	(813,442	)	$	(118,633	)
Income tax benefit	$	(11,974	)	$	—		$	(107,556	)	$	—
Discontinued operations, net of tax	$	3,017		$	(27,309	)	$	(705,886	)	$	(118,633	)

Amounts reported in the table above as Litigation-related and other contingencies, net primarily relate to charges for vaginal-mesh-related matters, which are further described in Note 11. Commitments and Contingencies.

The cash flows from discontinued operating activities related to AMS included the impact of net losses of $705.9 million and $118.6 million for the nine months ended September 30, 2017 and 2016, respectively, and the impact of cash activity related to vaginal mesh cases, which is further described in Note 11. Commitments and Contingencies. Net cash used in discontinued investing activities related to AMS consisted of purchases of property, plant and equipment of $0.1 million for the nine months ended September 30, 2016, with no comparable amount during the nine months ended September 30, 2017. There was no depreciation or amortization during the three and nine months ended September 30, 2017 or 2016 related to AMS.

Astora Restructuring

The Astora wind-down process included a restructuring initiative implemented during the three months ended March 31, 2016, which included a reduction of the Astora workforce consisting of approximately 250 employees.

The Company did not incur any pre-tax charges during the three and nine months ended September 30, 2017 as a result of the Astora restructuring initiative. A summary of expenses related to the Astora restructuring initiative is included below for the three and nine months ended September 30, 2016 (in thousands):

	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016
Employee separation, retention and other benefit-related costs	$	715	$	22,181
Asset impairment charges	—		21,328
Contract termination-related items	769		10,569
Other wind down costs	285		14,315
Total	$	1,769	$	68,393

The Company anticipates there will be no significant additional pre-tax restructuring expenses related to this initiative. The majority of these actions were completed as of September 30, 2016 and substantially all cash payments were made by June 30, 2017. These restructuring costs are included in Discontinued operations in the Condensed Consolidated Statements of Operations.

The liability related to the Astora restructuring initiative is included in Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets. Changes to this liability during the nine months ended September 30, 2017 were as follows (in thousands):

	Employee Separation and Other Benefit-Related Costs			Contract Termination Charges			Total
Liability balance as of January 1, 2017	$	3,855		$	1,661		$	5,516
Cash distributions	(3,677		)	(1,094		)	(4,771		)
Liability balance as of September 30, 2017	$	178		$	567		$	745

Litha

During the fourth quarter of 2016, the Company initiated a process to sell its Litha Healthcare Group Limited and related Sub-Sahara African business assets (Litha) and, on February 27, 2017, the Company entered into a definitive agreement to sell Litha to Acino Pharma AG (Acino). The sale closed on July 3, 2017 and the Company received net cash proceeds of approximately $94.2 million, after giving effect to cash and net working capital purchase price adjustments, as well as a short-term receivable of $4.4 million, which was subsequently collected in October 2017. No additional gain or loss was recognized upon sale. The Litha purchase agreement contains certain contingencies that are expected to be resolved by June 30, 2018. These contingencies could result in either an increase or a decrease in the purchase price, ranging from up to $11 million of additional consideration received from Acino, or up to $26 million of additional payments to Acino, which would result in an additional gain or loss on the sale, respectively.

The assets and liabilities of Litha are classified as held for sale in the Condensed Consolidated Balance Sheets as of December 31, 2016. Litha was part of the Company’s International Pharmaceuticals segment.

The following table provides the components of Assets and Liabilities held for sale of Litha as of and December 31, 2016 (in thousands):

	December 31, 2016
Current assets	$	50,167
Property, plant and equipment	3,527
Other intangibles, net	29,950
Other assets	11,343
Assets held for sale	$	94,987
Current liabilities	18,642
Other liabilities	5,696
Liabilities held for sale	$	24,338

Litha does not meet the requirements for treatment as a discontinued operation.

Somar

During the first quarter of 2017, the Company announced that it was assessing strategic alternatives for Grupo Farmacéutico Somar, S.A.P.I. de C.V. and its subsidiaries (collectively, Somar). On June 30, 2017, the Company entered into a definitive agreement to sell Somar and all of the securities thereof, to AI Global Investments (Netherlands) PCC Limited acting for and on behalf of the Soar Cell (the Purchaser). The sale closed on October 25, 2017 and the Purchaser paid an aggregate purchase price of approximately $124 million in cash, after giving effect to estimated cash, debt and net working capital purchase price adjustments. The assets and liabilities of Somar are classified as held for sale in the Condensed Consolidated Balance Sheets as of September 30, 2017. Somar is part of the Company’s International Pharmaceuticals segment.

The following table provides the components of Assets and Liabilities held for sale of Somar as of September 30, 2017 (in thousands):

	September 30, 2017
Current assets	$	64,476
Property, plant and equipment	560
Other assets	529
Assets held for sale	$	65,565
Current liabilities	13,456
Liabilities held for sale	$	13,456

Somar does not meet the requirements for treatment as a discontinued operation.