Fair Value Measurement

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement

NOTE 10 – FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. Fair values determined based on Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined based on Level 2 inputs utilize observable quoted prices for similar assets and liabilities in active markets and observable quoted prices for identical or similar assets and liabilities in markets that are not very active. Fair values determined based on Level 3 inputs utilize unobservable inputs and include valuations of assets or liabilities for which there is little, if any, market activity. A financial asset or liability’s classification within the above hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring basis as at June 30, 2013 and December 31, 2012 consisted of the following (in millions):

	Fair Value Measurements as at June 30, 2013  Using:
	Total		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	8.0	$	8.0	$	—	$	—
Foreign exchange forward contracts		0.7				0.7
Total assets		8.7		8.0		0.7		—
Liabilities:
Contingent consideration		220.5		14.6		—		205.9
Total liabilities	$	220.5	$	14.6	$	—	$	205.9

	Fair Value Measurements as at December 31, 2012  Using:
	Total		Level 1		Level 2		Level 3
Assets
Marketable securities	$	9.0	$	9.0	$	—	$	—
Total assets		9.0		9.0		—		—
Liabilities:
Contingent consideration		363.1		—		—		363.1
Total liabilities	$	363.1	$	—	$	—	$	363.1

Marketable securities consist of available-for-sale investments in U.S. Treasury and agency securities and publicly traded equity securities for which market prices are readily available. Unrealized gains or losses on marketable securities are recorded in accumulated other comprehensive (loss) income.

The fair value measurement of the contingent consideration obligation is determined using Level 1 inputs for the Actavis Group earn out and Level 3 inputs for all other contingent consideration. The fair value of Level 1 contingent consideration is based on quoted prices of the Company’s stock prices. The fair value of Level 3 contingent consideration obligations is based on a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on our own assumptions. Changes in the fair value of the contingent consideration obligations are recorded as a component of operating income in our consolidated statement of operations. Interest accretion of $1.0 million and $1.4 million for the three and six month period ended June 30, 2013 and $2.3 million and $5.8 million for the three and six month period ended June 30, 2012, respectively, were included within interest expense in the accompanying condensed consolidated statements of operations.

The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2013 and 2012 (in millions):

Six Months Ended June 30, 2013

	Balance at December 31, 2012		Net transfers in to (out of) Level 3			Purchases and settlements, net		Net accretion and fair value adjustments		Foreign currency translation			Balance at June 30, 2013
Liabilities:
Contingent consideration obligations	$	363.1	($	335.8	)	$	179.0	$	1.4	($	1.8	)	$	205.9

Six Months Ended June 30, 2012

	Balance at December 31, 2011		Net transfers in to (out of) Level 3		Purchases and settlements, net			Net accretion and fair value adjustments			Foreign currency translation			Balance at June 30, 2012
Liabilities:
Contingent consideration obligations	$	181.6		—		(115.3	)		(15.5	)		(0.8	)	$	50.0

During the six months ended June 30, 2013, the Company recorded contingent consideration of $43.4 million and $144.8 million in connection with the Uteron acquisition and the license agreement entered into with Medicines360, respectively. During the six months ended June 30, 2012, the Company recorded contingent payments made to the Arrow Group selling shareholders based on the after-tax gross profits on sales of atorvastatin within the U.S. of $4.8 million. For addition information on the Medicines360 and Uteron transactions, refer to “Note 1 – General” and “Note 2 – Acquisitions and Divestitures,” respectively.