x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2012 | |
OR | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Canada (State or other jurisdiction of incorporation or organization) | 98-0448205 (I.R.S. Employer Identification No.) |
4787 Levy Street, Montreal, Quebec (Address of principal executive offices) | H4R 2P9 (Zip Code) |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Part I. | Financial Information | |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | Other Information | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
• | 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; |
• | the challenges and difficulties associated with managing the rapid growth of our Company and a large, complex business; |
• | our ability to identify, acquire and integrate acquisition targets and to secure and maintain third-party research, development, manufacturing, marketing or distribution arrangements; |
• | our ability to close transactions on a timely basis or at all; |
• | factors relating to the integration of the companies, businesses and products acquired by the Company, such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations, and the achievement of the anticipated benefits from such integrations; |
• | 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 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; |
• | 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; |
• | 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, the Canadian Therapeutic Products Directorate and European, Asian, Brazilian and Australian 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 or by others; |
• | 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; |
• | the results of continuing safety and efficacy studies by industry and government agencies; |
• | our ability to obtain components, raw materials or bulk or finished products supplied by third parties; |
• | the disruption of delivery of our products and the routine flow of manufactured goods; |
• | the seasonality of sales of certain of our 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; |
• | 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; |
• | adverse global economic conditions and credit market uncertainty in European and other countries in which we do business; |
• | 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; |
• | the outcome of legal proceedings, investigations and regulatory proceedings; |
• | the risk that our products could cause, or be alleged to cause, personal injury, leading to withdrawals of products from the market; |
• | the impacts of the Patient Protection and Affordable Care Act and the Food and Drug Administration Safety and Innovation Act in the U.S. and other legislative and regulatory reforms in the countries in which we operate; and |
• | 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 |
As of June 30, 2012 | As of December 31, 2011 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 395,266 | $ | 164,111 | |||
Marketable securities | — | 6,338 | |||||
Accounts receivable, net | 611,204 | 569,268 | |||||
Inventories, net | 388,729 | 355,212 | |||||
Prepaid expenses and other current assets | 56,470 | 41,884 | |||||
Assets held for sale | 28,203 | 72,239 | |||||
Deferred tax assets, net | 150,362 | 148,454 | |||||
Total current assets | 1,630,234 | 1,357,506 | |||||
Property, plant and equipment, net | 409,399 | 414,242 | |||||
Intangible assets, net | 8,121,556 | 7,657,798 | |||||
Goodwill | 3,724,341 | 3,598,786 | |||||
Deferred tax assets, net | 36,181 | 54,681 | |||||
Restricted cash | 8,598 | — | |||||
Other long-term assets, net | 89,511 | 58,700 | |||||
Total assets | $ | 14,019,820 | $ | 13,141,713 | |||
Liabilities | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 156,178 | $ | 157,620 | |||
Accrued liabilities and other current liabilities | 600,657 | 527,583 | |||||
Acquisition-related contingent consideration | 67,115 | 100,263 | |||||
Income taxes payable | 15,537 | 10,335 | |||||
Deferred revenue | 7,031 | 12,783 | |||||
Current portion of long-term debt | 195,154 | 111,250 | |||||
Deferred tax liabilities, net | 7,525 | 4,438 | |||||
Total current liabilities | 1,049,197 | 924,272 | |||||
Deferred revenue | 37,901 | 38,153 | |||||
Acquisition-related contingent consideration | 433,271 | 319,821 | |||||
Long-term debt | 7,356,021 | 6,539,761 | |||||
Liabilities for uncertain tax positions | 95,945 | 91,098 | |||||
Deferred tax liabilities, net | 1,229,030 | 1,144,914 | |||||
Other long-term liabilities | 123,024 | 76,678 | |||||
Total liabilities | 10,324,389 | 9,134,697 | |||||
Shareholders' Equity | |||||||
Common shares, no par value, unlimited shares authorized, 302,052,589 and | |||||||
306,371,032 issued and outstanding at June 30, 2012 and December 31, 2011, respectively | 5,885,225 | 5,963,621 | |||||
Additional paid-in capital | 283,061 | 276,117 | |||||
Accumulated deficit | (2,245,886 | ) | (2,030,292 | ) | |||
Accumulated other comprehensive loss | (226,969 | ) | (202,430 | ) | |||
Total shareholders' equity | 3,695,431 | 4,007,016 | |||||
Total liabilities and shareholders' equity | $ | 14,019,820 | $ | 13,141,713 | |||
Commitments and contingencies (note 19) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues | |||||||||||||||
Product sales | $ | 748,742 | $ | 530,035 | $ | 1,506,334 | $ | 1,030,456 | |||||||
Alliance and royalty | 56,869 | 65,988 | 136,100 | 124,402 | |||||||||||
Service and other | 14,479 | 13,364 | 33,759 | 19,555 | |||||||||||
820,090 | 609,387 | 1,676,193 | 1,174,413 | ||||||||||||
Expenses | |||||||||||||||
Cost of goods sold (exclusive of amortization of | |||||||||||||||
intangible assets shown separately below) | 197,284 | 169,912 | 426,725 | 339,199 | |||||||||||
Cost of alliance and service revenues | 12,483 | 3,395 | 94,878 | 37,340 | |||||||||||
Selling, general and administrative | 185,440 | 149,657 | 362,726 | 289,163 | |||||||||||
Research and development | 17,711 | 17,764 | 39,717 | 31,434 | |||||||||||
Amortization of intangible assets | 210,570 | 114,946 | 411,213 | 226,989 | |||||||||||
Restructuring, integration and other costs | 30,004 | 27,626 | 92,341 | 45,165 | |||||||||||
Acquired in-process research and development | 4,568 | 2,000 | 4,568 | 4,000 | |||||||||||
Acquisition-related costs | 13,867 | 1,869 | 21,372 | 3,376 | |||||||||||
Legal settlements | 53,624 | 2,000 | 56,779 | 2,400 | |||||||||||
Acquisition-related contingent consideration | 7,729 | 1,752 | 17,568 | 2,138 | |||||||||||
733,280 | 490,921 | 1,527,887 | 981,204 | ||||||||||||
Operating income | 86,810 | 118,466 | 148,306 | 193,209 | |||||||||||
Interest income | 1,020 | 1,086 | 2,143 | 1,889 | |||||||||||
Interest expense | (100,614 | ) | (83,073 | ) | (202,639 | ) | (151,824 | ) | |||||||
Loss on extinguishment of debt | — | (14,748 | ) | (133 | ) | (23,010 | ) | ||||||||
Foreign exchange and other | (4,238 | ) | 847 | 20,061 | 3,654 | ||||||||||
(Loss) gain on investments, net | (35 | ) | 21,158 | 2,024 | 22,927 | ||||||||||
(Loss) income before provision for (recovery of) income taxes | (17,057 | ) | 43,736 | (30,238 | ) | 46,845 | |||||||||
Provision for (recovery of) income taxes | 4,550 | (12,624 | ) | 4,290 | (15,997 | ) | |||||||||
Net (loss) income | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | |||||
Basic (loss) earnings per share | $ | (0.07 | ) | $ | 0.19 | $ | (0.11 | ) | $ | 0.21 | |||||
Diluted (loss) earnings per share | $ | (0.07 | ) | $ | 0.17 | $ | (0.11 | ) | $ | 0.19 | |||||
Weighted-average common shares (000s) | |||||||||||||||
Basic | 304,816 | 303,426 | 306,296 | 303,587 | |||||||||||
Diluted | 304,816 | 331,369 | 306,296 | 332,130 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net (loss) income | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | |||||
Other comprehensive (loss) income | |||||||||||||||
Foreign currency translation adjustment | (197,584 | ) | 84,360 | (22,908 | ) | 183,440 | |||||||||
Net unrealized holding gain (loss) on available-for-sale equity securities: | |||||||||||||||
Arising in period | — | 2,441 | — | 21,167 | |||||||||||
Reclassification to net (loss) income | — | (21,316 | ) | (1,634 | ) | (21,316 | ) | ||||||||
Net unrealized holding gain (loss) on available-for-sale debt securities: | |||||||||||||||
Arising in period | 20 | (70 | ) | 7 | (96 | ) | |||||||||
Reclassification to net (loss) income | 197 | — | 197 | — | |||||||||||
Pension adjustment | (78 | ) | (102 | ) | (201 | ) | 898 | ||||||||
Other comprehensive (loss) income | (197,445 | ) | 65,313 | (24,539 | ) | 184,093 | |||||||||
Comprehensive (loss) income | $ | (219,052 | ) | $ | 121,673 | $ | (59,067 | ) | $ | 246,935 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Cash Flows From Operating Activities | |||||||||||||||
Net (loss) income | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | |||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 221,866 | 122,276 | 437,448 | 249,278 | |||||||||||
Amortization of debt discounts and debt issuance costs | (391 | ) | 2,414 | 5,356 | 6,348 | ||||||||||
Acquired in-process research and development | 4,568 | 2,000 | 4,568 | 4,000 | |||||||||||
Acquisition accounting adjustment on inventory sold | 10,294 | 16,262 | 43,392 | 46,171 | |||||||||||
Loss (Gain) on disposal of assets | 1,024 | — | 10,551 | (5,314 | ) | ||||||||||
Acquisition-related contingent consideration | 7,729 | 1,752 | 17,568 | 2,138 | |||||||||||
Allowances for losses on accounts receivable and inventories | 1,720 | 2,091 | 6,103 | 2,472 | |||||||||||
Deferred income taxes | (5,850 | ) | (18,724 | ) | (20,709 | ) | (38,497 | ) | |||||||
Additions to accrued legal settlements | 53,624 | 2,000 | 56,779 | 2,400 | |||||||||||
Payments of accrued legal settlements | (1,752 | ) | (400 | ) | (1,812 | ) | (16,400 | ) | |||||||
Share-based compensation | 15,156 | 25,558 | 34,308 | 55,451 | |||||||||||
Tax benefits from stock options exercised | (2,882 | ) | (7,566 | ) | (3,475 | ) | (31,616 | ) | |||||||
Foreign exchange loss (gain) | 3,299 | (1,100 | ) | (22,265 | ) | (4,273 | ) | ||||||||
Gain on sale of marketable securities | — | (21,316 | ) | — | (21,316 | ) | |||||||||
Payment of accreted interest on contingent consideration | (898 | ) | — | (898 | ) | — | |||||||||
Other | (25 | ) | 12,623 | (9,564 | ) | 17,713 | |||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Accounts receivable | 8,183 | 31,736 | (6,603 | ) | (50,745 | ) | |||||||||
Inventories | (16,433 | ) | (8,217 | ) | (51,513 | ) | 5,143 | ||||||||
Prepaid expenses and other current assets | 1,133 | 12,497 | (3,133 | ) | 5,627 | ||||||||||
Accounts payable, accrued liabilities and other liabilities | (9,035 | ) | (25,860 | ) | (26,195 | ) | 157 | ||||||||
Income taxes payable | (15,121 | ) | (13,730 | ) | (13,546 | ) | (14,593 | ) | |||||||
Net cash provided by operating activities | 254,602 | 190,656 | 421,832 | 276,986 | |||||||||||
Cash Flows From Investing Activities | |||||||||||||||
Acquisition of businesses, net of cash acquired | (454,020 | ) | (96,565 | ) | (726,832 | ) | (560,267 | ) | |||||||
Acquisition of intangible assets | (695 | ) | (8,000 | ) | (2,560 | ) | (310,885 | ) | |||||||
Purchases of property, plant and equipment | (13,601 | ) | (12,474 | ) | (24,717 | ) | (33,979 | ) | |||||||
Proceeds from sales and maturities of marketable securities | 1,048 | 83,865 | 9,412 | 86,639 | |||||||||||
Purchases of marketable securities and other investments | — | (29,326 | ) | (7,200 | ) | (69,342 | ) | ||||||||
Proceeds from sale of assets | — | 36,000 | 66,250 | 36,000 | |||||||||||
Increase in restricted cash | (8,873 | ) | — | (8,873 | ) | — | |||||||||
Net cash used in investing activities | (476,141 | ) | (26,500 | ) | (694,520 | ) | (851,834 | ) | |||||||
Cash Flows From Financing Activities | |||||||||||||||
Issuance of long-term debt, net of discount | 640,767 | 100,000 | 1,286,410 | 2,239,688 | |||||||||||
Repayments of long-term debt | (127,181 | ) | — | (429,993 | ) | (975,000 | ) | ||||||||
Short-term debt borrowings | 12,236 | — | 19,600 | — | |||||||||||
Short-term debt repayments | (21,582 | ) | — | (21,582 | ) | — | |||||||||
Repurchases of convertible debt | — | (199,788 | ) | (3,975 | ) | (339,013 | ) | ||||||||
Repurchases of common shares | (172,000 | ) | (224,814 | ) | (280,724 | ) | (499,564 | ) | |||||||
Proceeds from exercise of stock options | 1,911 | 6,133 | 7,019 | 29,362 | |||||||||||
Tax benefits from stock options exercised | 2,882 | 7,566 | 3,475 | 31,616 | |||||||||||
Payments of employee withholding tax upon vesting of share-based awards | (9,910 | ) | (15,200 | ) | (13,734 | ) | (54,678 | ) | |||||||
Payments of contingent consideration | (33,518 | ) | — | (61,018 | ) | — | |||||||||
Payments of debt issuance costs | (1,107 | ) | (4,066 | ) | (2,542 | ) | (19,813 | ) | |||||||
Net cash provided by (used in) financing activities | 292,498 | (330,169 | ) | 502,936 | 412,598 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (6,172 | ) | 3,206 | 907 | 6,926 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 64,787 | (162,807 | ) | 231,155 | (155,324 | ) | |||||||||
Cash and cash equivalents, beginning of period | 330,479 | 401,752 | 164,111 | 394,269 | |||||||||||
Cash and cash equivalents, end of period | $ | 395,266 | $ | 238,945 | $ | 395,266 | $ | 238,945 | |||||||
Non-Cash Investing and Financing Activities | |||||||||||||||
Acquisition of businesses, contingent consideration at fair value | $ | (108,284 | ) | $ | (369,679 | ) | $ | (126,028 | ) | $ | (397,150 | ) | |||
Settlement of convertible debt, equity issued | — | (892,000 | ) | — | (892,000 | ) | |||||||||
Acquisition of businesses, debt assumed | (46,336 | ) | — | (46,336 | ) | — |
1. | DESCRIPTION OF BUSINESS |
2. | SIGNIFICANT ACCOUNTING POLICIES |
• | Guidance that results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments change some fair value measurement principles and disclosure requirements under U.S. GAAP. The adoption of this guidance did not have a significant impact on the Company’s financial position or results of operations. |
• | Guidance requiring entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. This guidance does not change the components of other comprehensive income or the calculation of earnings per share. The effective date for amendments to the presentation of reclassifications out of accumulated other comprehensive income has been deferred. As this guidance relates to presentation only, the adoption of this guidance did not impact the Company’s financial position or results of operations. |
• | Guidance intended to simplify goodwill impairment testing, by allowing an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform a two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. The adoption of this guidance did not have a significant impact on the Company’s financial position or results of operations. |
3. | BUSINESS COMBINATIONS |
Amounts Recognized as of Acquisition Date | |||
Cash | $ | 14,119 | |
Accounts receivable(a) | 10,348 | ||
Inventories | 3,222 | ||
Other current assets | 4,063 | ||
Property and equipment | 8,181 | ||
Identifiable intangible assets, excluding acquired IPR&D(b) | 466,408 | ||
Acquired IPR&D(c) | 15,464 | ||
Other non-current assets | 1,862 | ||
Current liabilities | (9,675 | ) | |
Long-term debt, including current portion(d) | (37,868 | ) | |
Deferred income taxes, net | (173,907 | ) | |
Other non-current liabilities | (158 | ) | |
Total identifiable net assets | 302,059 | ||
Goodwill(e) | 86,802 | ||
Total fair value of consideration transferred | $ | 388,861 |
(a) | Both the fair value and gross contractual amount of trade accounts receivable acquired were $10.3 million, as the Company expects that the amount to be uncollectible is negligible. |
(b) | 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 Date | ||||
Product brands | 12 | $ | 446,958 | ||
Corporate brand | 15 | 19,450 | |||
Total identifiable intangible assets acquired | 12 | $ | 466,408 |
(c) | The acquired in-process research and development (“IPR&D”) assets primarily relate to the development of Arestin Peri-Implantitis, which is indicated for anti-inflammatory and anti-bacterial use. |
(d) | Effective June 18, 2012, the Company terminated the credit facility agreement, repaid the assumed debt outstanding and cancelled the undrawn credit facilities. |
(e) | Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the provisional 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: |
• | cost savings, operating synergies and other benefits expected to result from combining the operations of OraPharma with those of the Company; |
• | the value of the continuing operations of OraPharma’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, OraPharma’s assembled workforce). |
• | On May 23, 2012, the Company acquired certain assets from University Medical Pharmaceuticals Corp. (“University Medical”), a specialty pharmaceutical company located in the U.S. focused on skincare products. The consideration includes up-front payments of $65.0 million, and the Company may pay a series of contingent consideration payments of up to $40.0 million if certain net sales milestones are achieved. The fair value of the contingent consideration was determined to be $1.5 million as of the acquisition date. As of June 30, 2012, the assumptions used for determining fair value of the contingent consideration have not changed significantly from those used at the acquisition date. University Medical’s main brand is AcneFree, a retail over-the-counter (“OTC”) acne treatment. |
• | On May 2, 2012, the Company acquired certain assets from Atlantis Pharma (“Atlantis”), a branded generics pharmaceutical company located in Mexico, for up-front payments of $65.5 million (MXN$847.3 million), and the Company placed an additional $8.9 million (MXN$114.7 million) into an escrow account. The amounts in escrow will be paid to the sellers only if certain regulatory milestones are achieved and therefore such amounts were treated as contingent consideration. The fair value of the contingent consideration was determined to be $7.6 million as of the acquisition date. As of June 30, 2012, the assumptions used for determining fair value of the contingent consideration have not changed significantly from those used at the acquisition date. The amounts held in escrow as of June 30, 2012 totaled $8.6 million and were classified as Restricted cash in the Company’s consolidated balance sheets. Atlantis has a broad product portfolio, including products in gastro, analgesics and anti-inflammatory therapeutic categories. |
• | On March 13, 2012, the Company acquired certain assets from Gerot Lannach, a branded generics pharmaceutical company based in Austria. The Company made an up-front payment of $164.0 million (€125.0 million), and the Company may pay a series of contingent consideration payments of up to $19.7 million (€15.0 million) if certain net sales milestones are achieved. The fair value of the contingent consideration was determined to be $16.8 million as of the acquisition date. As of June 30, 2012, the assumptions used for determining fair value of the contingent consideration have not changed significantly from those used at the acquisition date. As part of the transaction, the Company also entered into a ten-year exclusive supply agreement with Gerot Lannach for the acquired products. Approximately 90% of sales relating to the acquired assets are in Russia, with sales also made in certain Commonwealth of Independent States (CIS) countries including |
• | On February 1, 2012, the Company acquired Probiotica Laboratorios Ltda. (“Probiotica”), which markets OTC sports nutrition products and other food supplements in Brazil, for a purchase price of $85.9 million (R$150.0 million), as well as a preliminary working capital payment adjustment of $4.1 million (R$7.1 million). |
• | amounts for intangible assets, property, plant and equipment and inventories, pending the finalization of valuation efforts; |
• | amounts for non-current liabilities, and corresponding indemnification assets, pending finalization of the assessment of contingent liabilities; |
• | 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 adjusted) | |||||||||
Cash and cash equivalents | $ | 1,125 | $ | — | $ | 1,125 | |||||
Accounts receivable(b) | 15,674 | — | 15,674 | ||||||||
Assets held for sale(c) | 15,566 | — | 15,566 | ||||||||
Inventories | 10,798 | — | 10,798 | ||||||||
Other current assets | 1,394 | — | 1,394 | ||||||||
Property, plant and equipment | 3,783 | — | 3,783 | ||||||||
Deferred tax assets | 996 | — | 996 | ||||||||
Identifiable intangible assets, excluding acquired IPR&D(d) | 318,265 | 3,725 | 321,990 | ||||||||
Acquired IPR&D | 400 | — | 400 | ||||||||
Indemnification assets(e) | 27,901 | — | 27,901 | ||||||||
Current liabilities | (10,310 | ) | (580 | ) | (10,890 | ) | |||||
Liability for uncertain tax position | (6,682 | ) | 6,682 | — | |||||||
Other non-current liabilities(e) | (27,901 | ) | — | (27,901 | ) | ||||||
Total identifiable net assets | 351,009 | 9,827 | 360,836 | ||||||||
Goodwill(f) | 59,968 | (10,407 | ) | 49,561 | |||||||
Total fair value of consideration transferred | $ | 410,977 | $ | (580 | ) | $ | 410,397 |
(a) | The measurement period adjustments relate to the Probiotica acquisition and primarily reflect: (i) the elimination of the liability for uncertain tax positions; (ii) the changes in the estimated fair value of the corporate brand intangible asset; and (iii) a decrease in the total fair value of consideration transferred due to a working capital 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, |
(b) | The fair value of trade accounts receivable acquired was $15.7 million, with the gross contractual amount being $16.7 million, of which the Company expects that $1.0 million will be uncollectible. |
(c) | Assets held for sale relate to a product brand acquired in the Atlantis acquisition which the Company expects to sell by early 2013. |
(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 Date | Measurement Period Adjustments | Amounts Recognized (as adjusted) | ||||||||||
Product brands | 9 | $ | 265,789 | $ | — | $ | 265,789 | ||||||
Corporate brands | 12 | 21,783 | 3,725 | 25,508 | |||||||||
Partner relationships | 5 | 30,693 | — | 30,693 | |||||||||
Total identifiable intangible assets acquired | 9 | $ | 318,265 | $ | 3,725 | $ | 321,990 |
(e) | Other non-current liabilities, and the corresponding indemnification assets, primarily relate to certain asserted and unasserted claims against Probiotica, which include potential tax-related obligations that existed at the acquisition date. The Company is indemnified by the sellers in accordance with indemnification provisions under its contractual arrangements. Indemnification assets and contingent liabilities were recorded at the same amount and classified in the same manner, as components of the purchase price, representing our best estimates of these amounts at the acquisition date, in accordance with guidance for loss contingencies and uncertain tax positions. Under the Company’s contractual arrangement with Probiotica, there is no limitation on the amount or value of indemnity claims that can be made by the Company; however there is a time restriction of either two or five years, depending on the nature of the claim. Approximately $12.9 million (R$22.5 million) of the purchase price for the Probiotica transaction has been placed in escrow in accordance with the indemnification provisions. The escrow account will be maintained for two years, with 50% being released to the sellers after the first year, and the remaining balance released after the second year. The Company expects the total amount of such indemnification assets to be collectible from the sellers. The Company is continuing to gather and assess information with respect to the non-current liabilities and indemnification assets. |
(f) | The goodwill relates primarily to the Probiotica acquisition. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the provisional values assigned to the assets acquired and liabilities assumed. The Company expects that the goodwill will be deductible for tax purposes. University Medical’s, Atlantis’ and Gerot Lannach’s goodwill recorded represents primarily the cost savings, operating synergies and other benefits expected to result from combining the operations of University Medical, Atlantis and Gerot Lannach with those of the Company. Probiotica’s goodwill recorded represents the following: |
• | the Company’s expectation to develop and market new product brands and product lines in the future; |
• | the value associated with the Company’s ability to develop relationships with new customers; |
• | the value of the continuing operations of Probiotica’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, Probiotica’s assembled workforce). |
• | On June 8, 2012, the Company acquired certain assets from Swiss Herbal Remedies Limited (“Swiss Herbal”), a nutraceutical company that manufactures and markets a broad range of scientifically formulated vitamins, minerals and supplements for a purchase price of $20.6 million. The fair value of the consideration transferred was assigned primarily to identifiable intangible assets ($9.5 million) and inventory ($6.5 million). |
• | On April 11, 2012, the Company acquired Pedinol Pharmacal, Inc. (“Pedinol”), a podiatry-focused, privately-owned specialty pharmaceutical company based in the U.S. for a purchase price of $21.5 million. The fair value of the consideration transferred was assigned primarily to inventory ($12.9 million), identifiable intangible assets ($12.0 million) and loans payable ($(8.5) million). |
• | On February 13, 2012, the Company acquired Eyetech Inc. (“Eyetech”), a privately-owned ophthalmic biotechnology company dedicated to the treatment of sight-threatening diseases of the retina, for an up-front purchase price of $22.3 million and potential milestone payments of up to $4.0 million based on sales of Macugen® in 2012 and 2013. The fair value of the up-front and contingent consideration was determined to be $23.2 million as of the acquisition date. The total fair value of the consideration transferred was assigned primarily to product rights intangible assets ($23.3 million), deferred income tax liability ($(9.8) million), receivables ($5.0 million) and inventory ($4.9 million). |
• | amounts and useful lives for identifiable intangible assets and property, plant and equipment, pending the finalization of valuation efforts; |
• | amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of |
• | amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed. |
Amounts Recognized as of Acquisition Date(a) | Measurement Period Adjustments(b) | Amounts Recognized (as adjusted) | |||||||||
Cash and cash equivalents | $ | 8,792 | $ | — | $ | 8,792 | |||||
Accounts receivable(c) | 30,525 | — | 30,525 | ||||||||
Inventories | 43,387 | (1,400 | ) | 41,987 | |||||||
Property, plant and equipment(d) | 15,257 | (749 | ) | 14,508 | |||||||
Identifiable intangible assets(e) | 423,950 | (2,188 | ) | 421,762 | |||||||
Deferred income taxes, net | — | 15,893 | 15,893 | ||||||||
Current liabilities | (32,500 | ) | (1,713 | ) | (34,213 | ) | |||||
Total identifiable net assets | 489,411 | 9,843 | 499,254 | ||||||||
Goodwill(f) | 211,770 | (9,843 | ) | 201,927 | |||||||
Total fair value of consideration transferred | $ | 701,181 | $ | — | $ | 701,181 |
(a) | As previously reported in the 2011 Form 10-K. |
(b) | The measurement period adjustments primarily reflect: (i) resolution of certain tax aspects of the transaction and the tax impact of pre-tax measurement period adjustments; (ii) changes in the estimated fair value of an intangible asset and the related inventory; (iii) additional information obtained with respect to the fair value of an acquired manufacturing facility; and (iv) additional information obtained with respect to the valuation of compensation-related liabilities. 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 $30.5 million, with the gross contractual amount being $31.5 million, of which the Company expects that $1.0 million will be uncollectible. |
(d) | Property, plant and equipment includes a manufacturing facility, which has a carrying value of $10.2 million as of June 30, 2012 and is classified within Assets held for sale in the consolidated balance sheet as of June 30, 2012. The facility, which is included in the Canada and Australia segment, is expected to be sold during the third quarter of 2012. |
(e) | 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 Date | Measurement Period Adjustments | Amounts Recognized (as adjusted) | ||||||||||
Product brands | 8 | $ | 418,252 | $ | (2,188 | ) | $ | 416,064 | |||||
Corporate brands | 4 | 5,698 | — | 5,698 | |||||||||
Total identifiable intangible assets acquired | 8 | $ | 423,950 | $ | (2,188 | ) | $ | 421,762 |
(f) | Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the provisional 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: |
• | cost savings, operating synergies and other benefits expected to result from combining the operations of iNova with those of the |
• | the value of the continuing operations of iNova’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, iNova’s assembled workforce). |
Amounts Recognized as of Acquisition Date(a) | Measurement Period Adjustments(b) | Amounts Recognized (as adjusted) | |||||||||
Inventories | $ | 32,360 | $ | (3,792 | ) | $ | 28,568 | ||||
Property, plant and equipment | 39,581 | — | 39,581 | ||||||||
Identifiable intangible assets(c) | 341,680 | 1,969 | 343,649 | ||||||||
Deferred tax liability | (1,262 | ) | — | (1,262 | ) | ||||||
Total identifiable net assets | 412,359 | (1,823 | ) | 410,536 | |||||||
Goodwill(d) | 8,141 | 2,935 | 11,076 | ||||||||
Total fair value of consideration transferred | $ | 420,500 | $ | 1,112 | $ | 421,612 |
(a) | As previously reported in the 2011 Form 10-K. |
(b) | The measurement period adjustments primarily reflect: (i) changes in estimated inventory reserves, (ii) revisions to certain assumptions impacting the fair value of intangible assets; and (iii) an increase in the total fair value of consideration transferred pursuant to a working capital adjustment provision under the purchase agreement. 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 following table summarizes the amounts and useful lives assigned to identifiable intangible assets: |
Weighted- Average Useful Lives (Years) | Amounts Recognized as of Acquisition Date | Measurement Period Adjustments | Amounts Recognized (as adjusted) | ||||||||||
Product brands | 9 | $ | 292,472 | $ | 1,816 | $ | 294,288 | ||||||
Product rights | 5 | 33,857 | 227 | 34,084 | |||||||||
Manufacturing agreement | 5 | 15,351 | (74 | ) | 15,277 | ||||||||
Total identifiable intangible assets acquired | 9 | $ | 341,680 | $ | 1,969 | $ | 343,649 |
(d) | 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. The Company expects that $6.4 million of the goodwill will be deductible for tax purposes. The goodwill recorded represents primarily the value of Dermik’s assembled workforce. The goodwill has been allocated to the Company’s U.S. Dermatology segment. |
Amounts Recognized as of Acquisition Date(a) | Measurement Period Adjustments(b) | Amounts Recognized (as adjusted) | |||||||||
Inventories | $ | 6,169 | $ | — | $ | 6,169 | |||||
Property, plant and equipment | 206 | — | 206 | ||||||||
Identifiable intangible assets, excluding acquired IPR&D(c) | 333,599 | — | 333,599 | ||||||||
Acquired IPR&D(d) | 4,318 | — | 4,318 | ||||||||
Deferred tax liability | (1,690 | ) | — | (1,690 | ) | ||||||
Total identifiable net assets | 342,602 | — | 342,602 | ||||||||
Goodwill(e) | 3,507 | (915 | ) | 2,592 | |||||||
Total fair value of consideration transferred | $ | 346,109 | $ | (915 | ) | $ | 345,194 |
(a) | As previously reported in the 2011 Form 10-K. |
(b) | The measurement period adjustment reflects a decrease in the total fair value of consideration transferred pursuant to a working capital adjustment provision under the purchase agreement. The measurement period adjustment was made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. This adjustment 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 identifiable intangible assets acquired relate to product brands intangible assets with an estimated weighted-average useful life of approximately nine years. |
(d) | The acquired IPR&D asset relates to the development of the MC5 program, a topical treatment for acne vulgaris. In the second quarter |
(e) | 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 primarily the cost savings, operating synergies and other benefits expected to result from combining the operations of Ortho Dermatologics with those of the Company. The goodwill has been allocated to the Company’s U.S. Dermatology segment. |
Amounts Recognized as of Acquisition Date(a) | Measurement Period Adjustments(b) | Amounts Recognized (as adjusted) | |||||||||
Cash | $ | 1,558 | $ | — | $ | 1,558 | |||||
Accounts receivable(c) | 9,436 | (1,524 | ) | 7,912 | |||||||
Inventories | 22,489 | — | 22,489 | ||||||||
Other current assets | 5,406 | — | 5,406 | ||||||||
Property and equipment | 8,766 | — | 8,766 | ||||||||
Identifiable intangible assets(d) | 80,580 | (5,850 | ) | 74,730 | |||||||
Current liabilities | (18,104 | ) | — | (18,104 | ) | ||||||
Deferred income taxes, net | (20,533 | ) | 1,462 | (19,071 | ) | ||||||
Other non-current liabilities | (1,138 | ) | — | (1,138 | ) | ||||||
Total identifiable net assets | 88,460 | (5,912 | ) | 82,548 | |||||||
Goodwill(e) | 3,070 | 5,912 | 8,982 | ||||||||
Total fair value of consideration transferred | $ | 91,530 | $ | — | $ | 91,530 |
(a) | As previously reported in the 2011 Form 10-K. |
(b) | The measurement period adjustments primarily reflect: (i) changes in the estimated fair value of certain intangible assets; (ii) changes in estimated sales reserves; 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. |
(c) | Both the fair value and gross contractual amount of trade accounts receivable acquired were $7.9 million, as the Company expects that |
(d) | 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 | Measurement Period Adjustments | Amounts Recognized (as adjusted) | ||||||||||
Product brands | 11 | $ | 65,194 | $ | (5,850 | ) | $ | 59,344 | |||||
Patented technology | 7 | 15,386 | — | 15,386 | |||||||||
Total identifiable intangible assets acquired | 10 | $ | 80,580 | $ | (5,850 | ) | $ | 74,730 |
(e) | 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: |
• | cost savings, operating synergies and other benefits expected to result from combining the operations of Afexa with those of the Company; and |
• | intangible assets that do not qualify for separate recognition (for instance, Afexa’s assembled workforce). |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues | $ | 848,289 | $ | 788,797 | $ | 1,750,458 | $ | 1,579,579 | |||||||
Net (loss) income | (5,408 | ) | 51,475 | (9,407 | ) | 49,622 | |||||||||
Basic (loss) earnings per share | $ | (0.02 | ) | $ | 0.17 | $ | (0.03 | ) | $ | 0.16 | |||||
Diluted (loss) earnings per share | $ | (0.02 | ) | $ | 0.16 | $ | (0.03 | ) | $ | 0.15 |
• | elimination of OraPharma’s, University Medical’s, Atlantis’, Gerot Lannach’s, Probiotica’s, PharmaSwiss’, Sanitas’, Ortho Dermatologics’, iNova’s and Afexa’s historical intangible asset amortization expense; |
• | additional amortization expense related to the provisional 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; |
• | the exclusion from pro forma earnings in the six-month period ended June 30, 2012 of the acquisition accounting adjustments on iNova’s, Ortho Dermatologics’, Afexa’s, Probiotica’s, OraPharma’s, University Medical’s and Atlantis’ inventories that were sold subsequent to the acquisition date of $28.2 million, in the aggregate, and the exclusion of $15.8 million of acquisition-related costs, in the aggregate, incurred for the acquisitions of OraPharma, University Medical, Atlantis, Gerot Lannach, Probiotica, PharmaSwiss, Sanitas, Ortho Dermatologics, iNova and Afexa in the six-month period ended June 30, 2012, and the inclusion of those amounts in pro forma earnings for the applicable comparative periods; and |
• | the exclusion from pro forma earnings in the three-month period ended June 30, 2012 of the acquisition accounting adjustments on iNova’s, Ortho Dermatologics’, Afexa’s, Probiotica’s, OraPharma’s, University Medical’s and Atlantis’ inventories that were sold subsequent to the acquisition date of $11.3 million, and the exclusion of $13.2 million of acquisition-related costs, in the aggregate, incurred for the acquisitions of OraPharma, University Medical, Atlantis, Gerot Lannach, Probiotica, PharmaSwiss, Sanitas, Ortho Dermatologics, iNova and Afexa in the three-month period ended June 30, 2012, and the inclusion of those amounts in pro forma earnings for the applicable comparative periods. |
4. | ACQUISITIONS AND DISPOSITIONS |
5. | COLLABORATION AGREEMENT |
6. | RESTRUCTURING, INTEGRATION AND OTHER COSTS |
Employee Termination Costs | IPR&D Termination Costs | Contract Termination, Facility Closure and Other Costs | |||||||||||||||||
Severance and Related Benefits | Share-Based Compensation | Total | |||||||||||||||||
Balance, January 1, 2010 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Costs incurred and charged to expense | 58,727 | 49,482 | 13,750 | 12,862 | 134,821 | ||||||||||||||
Cash payments | (33,938 | ) | — | (13,750 | ) | (8,755 | ) | (56,443 | ) | ||||||||||
Non-cash adjustments | — | (49,482 | ) | — | (2,437 | ) | (51,919 | ) | |||||||||||
Balance, December 31, 2010 | 24,789 | — | — | 1,670 | 26,459 | ||||||||||||||
Costs incurred and charged to expense | 14,548 | 3,455 | — | 28,938 | 46,941 | ||||||||||||||
Cash payments | (38,168 | ) | (2,033 | ) | — | (15,381 | ) | (55,582 | ) | ||||||||||
Non-cash adjustments | 989 | (741 | ) | — | (4,913 | ) | (4,665 | ) | |||||||||||
Balance, December 31, 2011 | 2,158 | 681 | — | 10,314 | 13,153 | ||||||||||||||
Costs incurred and charged to expense | 1,586 | — | — | 12,334 | 13,920 | ||||||||||||||
Cash payments | (3,288 | ) | — | — | (22,572 | ) | (25,860 | ) | |||||||||||
Non-cash adjustments | 442 | (681 | ) | — | 378 | 139 | |||||||||||||
Balance, March 31, 2012 | 898 | — | — | 454 | 1,352 | ||||||||||||||
Costs incurred and charged to expense | — | — | — | — | — | ||||||||||||||
Cash payments | (409 | ) | — | — | (14 | ) | (423 | ) | |||||||||||
Non-cash adjustments | (6 | ) | — | — | (193 | ) | (199 | ) | |||||||||||
Balance, June 30, 2012 | $ | 483 | $ | — | $ | — | $ | 247 | $ | 730 |
7. | FAIR VALUE MEASUREMENTS |
As of June 30, 2012 | As of December 31, 2011 | ||||||||||||||||||||||||||||||
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: | |||||||||||||||||||||||||||||||
Money market funds | $ | 204,097 | $ | 204,097 | $ | — | $ | — | $ | 27,711 | $ | 27,711 | $ | — | $ | — | |||||||||||||||
Available-for-sale equity securities | — | — | — | — | 3,364 | 3,364 | — | — | |||||||||||||||||||||||
Available-for-sale debt securities: | |||||||||||||||||||||||||||||||
Corporate bonds | — | — | — | — | 2,974 | 2,974 | — | — | |||||||||||||||||||||||
Total financial assets | $ | 204,097 | $ | 204,097 | $ | — | $ | — | $ | 34,049 | $ | 34,049 | $ | — | $ | — | |||||||||||||||
Cash equivalents | $ | 204,097 | $ | 204,097 | $ | — | $ | — | $ | 27,711 | $ | 27,711 | $ | — | $ | — | |||||||||||||||
Marketable securities | — | — | — | — | 6,338 | 6,338 | — | — | |||||||||||||||||||||||
Total financial assets | $ | 204,097 | $ | 204,097 | $ | — | $ | — | $ | 34,049 | $ | 34,049 | $ | — | $ | — | |||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Acquisition-related contingent consideration | $ | (500,386 | ) | $ | — | $ | — | $ | (500,386 | ) | $ | (420,084 | ) | $ | — | $ | — | $ | (420,084 | ) |
• | 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. |
Balance, January 1, 2012 | Issuances(a) | Payments(b) | Net unrealized Loss (c) | Foreign Exchange(d) | Transfers Into Level 3 | Transfers Out of Level 3 | Balance, June 30, 2012 | ||||||||||||||||||||||||
Acquisition-related contingent consideration | $ | (420,084 | ) | $ | (126,028 | ) | $ | 61,916 | $ | (17,568 | ) | $ | 1,378 | $ | — | $ | — | $ | (500,386 | ) |
(a) | Relates primarily to the OraPharma, Gerot Lannach, Atlantis and University Medical acquisitions as described above in note 3. |
(b) | Relates primarily to payments of acquisition-related contingent consideration related to the Elidel®/Xerese® license agreement entered into in June 2011 and the PharmaSwiss acquisition. |
(c) | Recognized as Acquisition-related contingent consideration in the consolidated statements of (loss) income. The balance is primarily driven by fair value adjustments of $13.5 million related to the Elidel®/Xerese® license agreement and $4.0 million related to the iNova acquisition described above in note 3. |
(d) | Included in Foreign exchange and other in the consolidated statements of (loss) income. |
8. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
As of June 30, 2012 | As of December 31, 2011 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Cash equivalents | $ | 204,097 | $ | 204,097 | $ | 27,711 | $ | 27,711 | |||||||
Marketable securities | — | — | 6,338 | 6,338 | |||||||||||
Long-term debt (as described in note 11)(a) | (7,551,175 | ) | (7,772,258 | ) | (6,651,011 | ) | (6,732,568 | ) |
(a) | Fair value measurement of long-term debt was estimated using the quoted market prices for the same issues and other pertinent information available to management (Level 1). |
As of June 30, 2012 | As of December 31, 2011 | ||||||||||||||||||||||||||||||
Cost Basis | Fair Value | Gross Unrealized | Cost Basis | Fair Value | Gross Unrealized | ||||||||||||||||||||||||||
Gains | Losses | Gains | Losses | ||||||||||||||||||||||||||||
Corporate bonds | $ | — | $ | — | $ | — | $ | — | $ | 2,983 | $ | 2,974 | $ | — | $ | (9 | ) | ||||||||||||||
Equity securities | — | — | — | — | 1,730 | 3,364 | 1,634 | — | |||||||||||||||||||||||
$ | — | $ | — | $ | — | $ | — | $ | 4,713 | $ | 6,338 | $ | 1,634 | $ | (9 | ) |
9. | INVENTORIES |
As of June 30, 2012 | As of December 31, 2011 | ||||||
Raw materials | $ | 90,946 | $ | 63,368 | |||
Work in process | 46,624 | 64,108 | |||||
Finished goods | 297,051 | 250,555 | |||||
434,621 | 378,031 | ||||||
Less allowance for obsolescence | (45,892 | ) | (22,819 | ) | |||
$ | 388,729 | $ | 355,212 |
10. | INTANGIBLE ASSETS AND GOODWILL |
As of June 30, 2012 | As of December 31, 2011 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Finite-lived intangible assets: | |||||||||||||||||||||||
Product brands | $ | 6,599,694 | $ | (1,047,262 | ) | $ | 5,552,432 | $ | 6,442,371 | $ | (737,876 | ) | $ | 5,704,495 | |||||||||
Corporate brands | 243,404 | (17,502 | ) | 225,902 | 181,349 | (10,630 | ) | 170,719 | |||||||||||||||
Product rights | 1,941,837 | (393,118 | ) | 1,548,719 | 1,302,748 | (306,936 | ) | 995,812 | |||||||||||||||
Partner relationships | 159,415 | (27,650 | ) | 131,765 | 135,095 | (15,633 | ) | 119,462 | |||||||||||||||
Out-licensed technology and other | 167,235 | (46,980 | ) | 120,255 | 174,873 | (38,915 | ) | 135,958 | |||||||||||||||
Total finite-lived intangible assets | 9,111,585 | (1,532,512 | ) | 7,579,073 | 8,236,436 | (1,109,990 | ) | 7,126,446 | |||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||
Acquired IPR&D(a) | 542,483 | — | 542,483 | 531,352 | — | 531,352 | |||||||||||||||||
$ | 9,654,068 | $ | (1,532,512 | ) | $ | 8,121,556 | $ | 8,767,788 | $ | (1,109,990 | ) | $ | 7,657,798 |
(a) | In the second quarter of 2012, the Company wrote off $4.3 million relating to the termination of the MC5 program (U.S. Dermatology segment) acquired as part of the Ortho Dermatologics acquisition in 2011 described above under note 3. The write-off of the IPR&D asset was recorded in Acquired in-process research and development expense in the consolidated statements of (loss) income. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Alliance and royalty revenue | $ | — | $ | 268 | $ | — | $ | 536 | |||||||
Cost of goods sold | 531 | 2,025 | 2,557 | 4,051 | |||||||||||
Amortization expense | 210,570 | 114,946 | 411,213 | 226,989 | |||||||||||
$ | 211,101 | $ | 117,239 | $ | 413,770 | $ | 231,576 |
2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Amortization expense | $ | 848,426 | $ | 869,463 | $ | 864,646 | $ | 859,778 | $ | 843,659 |
U.S. Dermatology | U.S. Neurology and Other | Canada and Australia | Emerging Markets | Total | |||||||||||||||
Balance, January 1, 2012(a) | $ | 491,651 | $ | 1,542,203 | $ | 498,198 | $ | 1,066,734 | $ | 3,598,786 | |||||||||
Additions(b) | 93,115 | — | 2,093 | 46,722 | 141,930 | ||||||||||||||
Adjustments(c) | 2,020 | — | (3,931 | ) | — | (1,911 | ) | ||||||||||||
Foreign exchange and other | (324 | ) | — | 1,719 | (15,859 | ) | (14,464 | ) | |||||||||||
Balance, June 30, 2012 | $ | 586,462 | $ | 1,542,203 | $ | 498,079 | $ | 1,097,597 | $ | 3,724,341 |
(a) | Effective in the first quarter of 2012, the Company has four reportable segments: U.S. Dermatology, U.S. Neurology and Other, Canada and Australia and Emerging Markets. Accordingly, the Company has restated prior period segment information to conform to the current period presentation. For further details, see note 20 titled “SEGMENT INFORMATION”. |
(b) | Primarily relates to the OraPharma, Probiotica and Gerot Lannach acquisitions (as described in note 3). |
(c) | Primarily reflects the impact of measurement period adjustments related to the iNova, Dermik and Afexa acquisitions (as described in note 3). |
11. | SHORT-TERM BORROWINGS AND LONG-TERM DEBT |
Maturity Date | As of June 30, 2012 | As of December 31, 2011 | |||||||
Short-term borrowings | |||||||||
Brazil Uncommitted Line of Credit(a) | August 2012 | $ | 5,431 | $ | — | ||||
Long-term debt | |||||||||
Revolving Credit Facility(b) | April 2016 | $ | — | $ | 220,000 | ||||
Term Loan A Facility(b) | April 2016 | 2,134,466 | 2,185,520 | ||||||
New Term Loan B Facility(b) | February 2019 | 1,170,651 | — | ||||||
Senior Notes: | |||||||||
6.50% | July 2016 | 915,500 | 915,500 | ||||||
6.75% | October 2017 | 498,127 | 497,949 | ||||||
6.875% | December 2018 | 938,827 | 938,376 | ||||||
7.00% | October 2020 | 686,444 | 686,228 | ||||||
6.75% | August 2021 | 650,000 | 650,000 | ||||||
7.25% | July 2022 | 540,881 | 540,427 | ||||||
5.375% Convertible Notes(c) | August 2014 | 16,279 | 17,011 | ||||||
7,551,175 | 6,651,011 | ||||||||
Less current portion | (195,154 | ) | (111,250 | ) | |||||
Total long-term debt | $ | 7,356,021 | $ | 6,539,761 |
(a) | Short-term borrowings under uncommitted line of credit have been included in Accrued liabilities and other current liabilities in the consolidated balance sheets. |
(b) | On February 13, 2012, the Company and certain of its subsidiaries, as guarantors, amended and restated the credit agreement to provide for a facility of up to $3.1 billion and amend certain provisions. In addition, on June 14, 2012, the Company entered into a joinder agreement to the Third Amended and Restated Credit and Guaranty Agreement (the “Credit Agreement”) to increase the senior secured term loan B facility by $600.0 million to $1.2 billion and amend certain provisions. |
(c) | On June 29, 2012, the Company distributed a notice of redemption to holders of the Company’s 5.375% Convertible Notes, pursuant to which all of the outstanding 5.375% Convertible Notes would be redeemed on August 2, 2012. The outstanding amount of the Company’s 5.375% Convertible Notes has been classified as Current portion of long-term debt in the consolidated balance sheets. Refer to note 12 — Securities Repurchase Program for further details. |
12. | SECURITIES REPURCHASE PROGRAM |
13. | SHARE-BASED COMPENSATION |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Stock options(1) | $ | 5,365 | $ | 9,075 | $ | 12,076 | $ | 26,725 | |||||||
RSUs | 9,791 | 16,483 | 22,232 | 28,726 | |||||||||||
Stock-based compensation expense | $ | 15,156 | $ | 25,558 | $ | 34,308 | $ | 55,451 | |||||||
Cost of goods sold(1) | $ | (230 | ) | $ | 267 | $ | — | $ | 702 | ||||||
Research and development expenses(1) | 210 | 267 | 440 | 702 | |||||||||||
Selling, general and administrative expenses(1) | 15,176 | 25,024 | 33,868 | 53,898 | |||||||||||
Restructuring and other costs | — | — | — | 149 | |||||||||||
Stock-based compensation expense | $ | 15,156 | $ | 25,558 | $ | 34,308 | $ | 55,451 |
(1) | On March 9, 2011, the Company’s compensation committee of the board of directors approved an equitable adjustment to all stock options |
14. | SHAREHOLDERS’ EQUITY |
Shareholders | ||||||||||||||||||||||
Common Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Total Shareholders' equity | ||||||||||||||||||
Shares (000s) | Amount | |||||||||||||||||||||
Balance, January 1, 2011 | 302,449 | $ | 5,251,730 | $ | 495,041 | $ | (934,511 | ) | $ | 98,836 | $ | 4,911,096 | ||||||||||
Settlement of 4% Convertible Notes | 17,783 | 892,000 | (225,971 | ) | (440,046 | ) | — | 225,983 | ||||||||||||||
Repurchase of equity component of 5.375% Convertible Notes | — | — | (17,600 | ) | (214,785 | ) | — | (232,385 | ) | |||||||||||||
Common shares issued under share-based compensation plans | 3,308 | 115,771 | (143,165 | ) | — | — | (27,394 | ) | ||||||||||||||
Settlement of call options | (11,480 | ) | (179,548 | ) | 179,548 | — | — | — | ||||||||||||||
Repurchase of common shares | (11,865 | ) | (206,959 | ) | — | (292,605 | ) | — | (499,564 | ) | ||||||||||||
Share-based compensation | — | — | 55,451 | — | — | 55,451 | ||||||||||||||||
Employee withholding taxes related to share-based awards | — | — | 13,560 | (68,238 | ) | — | (54,678 | ) | ||||||||||||||
Tax benefits from stock options exercised | — | — | 30,703 | — | — | 30,703 | ||||||||||||||||
Reclassification of deferred share units | — | — | 9,271 | — | — | 9,271 | ||||||||||||||||
300,195 | 5,872,994 | 396,838 | (1,950,185 | ) | 98,836 | 4,418,483 | ||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||
Net income | — | — | — | 62,842 | — | 62,842 | ||||||||||||||||
Other comprehensive income | — | — | — | — | 184,093 | 184,093 | ||||||||||||||||
Total comprehensive income | 246,935 | |||||||||||||||||||||
Balance, June 30, 2011 | 300,195 | $ | 5,872,994 | $ | 396,838 | $ | (1,887,343 | ) | $ | 282,929 | $ | 4,665,418 | ||||||||||
Balance, January 1, 2012 | 306,371 | $ | 5,963,621 | $ | 276,117 | $ | (2,030,292 | ) | $ | (202,430 | ) | $ | 4,007,016 | |||||||||
Repurchase of equity component of 5.375% Convertible Notes | — | — | (180 | ) | (2,682 | ) | — | (2,862 | ) | |||||||||||||
Common shares issued under share-based compensation plans | 939 | 23,944 | (16,925 | ) | — | — | 7,019 | |||||||||||||||
Repurchase of common shares | (5,257 | ) | (102,340 | ) | — | (178,384 | ) | — | (280,724 | ) | ||||||||||||
Share-based compensation | — | — | 34,308 | — | — | 34,308 | ||||||||||||||||
Employee withholding taxes related to share-based awards | — | — | (13,734 | ) | — | — | (13,734 | ) | ||||||||||||||
Tax benefits from stock options exercised | — | — | 3,475 | — | — | 3,475 | ||||||||||||||||
302,053 | 5,885,225 | 283,061 | (2,211,358 | ) | (202,430 | ) | 3,754,498 | |||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||
Net loss | — | — | — | (34,528 | ) | — | (34,528 | ) | ||||||||||||||
Other comprehensive loss | — | — | — | — | (24,539 | ) | (24,539 | ) | ||||||||||||||
Total comprehensive loss | (59,067 | ) | ||||||||||||||||||||
Balance, June 30, 2012 | 302,053 | $ | 5,885,225 | $ | 283,061 | $ | (2,245,886 | ) | $ | (226,969 | ) | $ | 3,695,431 |
15. | ACCUMULATED OTHER COMPREHENSIVE LOSS |
Foreign Currency Translation Adjustment | Net Unrealized Holding Gain (Loss) on Available For-Sale Equity Securities | Net Unrealized Holding Gain (Loss) on Available For-Sale Debt Securities | Acquisition of Noncontrolling Interest | Pension Adjustment | Total | ||||||||||||||||||
Balance, January 1, 2012 | $ | (205,521 | ) | $ | 1,634 | $ | (204 | ) | $ | 2,206 | $ | (545 | ) | $ | (202,430 | ) | |||||||
Foreign currency translation adjustment | (22,908 | ) | — | — | — | — | (22,908 | ) | |||||||||||||||
Reclassification to net (loss) income (1) | — | (1,634 | ) | — | — | — | (1,634 | ) | |||||||||||||||
Net unrealized holding gain on available-for-sale debt securities | — | — | 7 | — | — | 7 | |||||||||||||||||
Reclassification to net (loss) income(1) | — | — | 197 | — | — | 197 | |||||||||||||||||
Pension adjustment(2) | — | — | — | — | (201 | ) | (201 | ) | |||||||||||||||
Balance, June 30, 2012 | $ | (228,429 | ) | $ | — | $ | — | $ | 2,206 | $ | (746 | ) | $ | (226,969 | ) |
(1) | Included in (Loss) gain on investments, net. |
(2) | Reflects changes in defined benefit obligations and related plan assets of legacy Valeant defined benefit pension plans. |
16. | (LOSS) GAIN ON INVESTMENTS, NET |
17. | INCOME TAXES |
18. | (LOSS) EARNINGS PER SHARE |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net (loss) income | $ | (21,607 | ) | $ | 56,360 | $ | (34,528 | ) | $ | 62,842 | |||||
Basic weighted-average number of common shares outstanding (000s) | 304,816 | 303,426 | 306,296 | 303,587 | |||||||||||
Diluted effect of stock options and RSUs (000s)(a) | — | 9,975 | — | 9,201 | |||||||||||
Diluted effect of convertible debt (000s)(a) | — | 17,968 | — | 19,342 | |||||||||||
Diluted weighted-average number of common shares outstanding (000s) | 304,816 | 331,369 | 306,296 | 332,130 | |||||||||||
Basic (loss) earnings per share | $ | (0.07 | ) | $ | 0.19 | $ | (0.11 | ) | $ | 0.21 | |||||
Diluted (loss) earnings per share | $ | (0.07 | ) | $ | 0.17 | $ | (0.11 | ) | $ | 0.19 |
(a) | In the three-month and six-month periods ended June 30, 2012, all potential common shares issuable for stock options, RSUs and convertible debt 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, RSUs and convertible debt on the weighted-average number of common shares outstanding would have been as follows: |
Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | ||||
Basic weighted-average number of common shares outstanding (000s) | 304,816 | 306,296 | |||
Diluted effect of stock options and RSUs (000s) | 6,938 | 7,331 | |||
Diluted effect of convertible debt (000s) | 877 | 887 | |||
Diluted weighted-average number of common shares outstanding (000s) | 312,631 | 314,514 |
19. | LEGAL PROCEEDINGS |
20. | SEGMENT INFORMATION |
• | U.S. Dermatology consists of pharmaceutical and OTC product sales, and alliance and contract service revenues, in the areas of dermatology and topical medication, dentistry, ophthalmology and podiatry. |
• | U.S. Neurology and Other consists of sales of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products the Company developed or acquired. |
• | Canada and Australia consists of pharmaceutical and OTC products sold in Canada, Australia and New Zealand. |
• | Emerging Markets consists of branded generic pharmaceutical products, as well as OTC products and agency/in-licensing arrangements with other research-based pharmaceutical companies (where the Company distributes and markets branded, patented products under long-term, renewable contracts). Products are sold primarily in Europe (Poland, Serbia, Hungary, Croatia and Russia), Latin America (Mexico, Brazil and exports out of Mexico to other Latin American markets), Asia and South Africa. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues: | |||||||||||||||
U.S. Dermatology(1) | $ | 218,048 | $ | 111,993 | $ | 510,265 | $ | 266,184 | |||||||
U.S. Neurology and Other | 222,965 | 232,363 | 410,673 | 440,478 | |||||||||||
Canada and Australia(2) | 128,360 | 84,000 | 260,929 | 154,244 | |||||||||||
Emerging Markets(3) | 250,717 | 181,031 | 494,326 | 313,507 | |||||||||||
Total revenues | 820,090 | 609,387 | 1,676,193 | 1,174,413 | |||||||||||
Segment profit (loss): | |||||||||||||||
U.S. Dermatology(4) | 76,179 | 39,200 | 164,205 | 73,776 | |||||||||||
U.S. Neurology and Other | 96,254 | 137,487 | 148,812 | 237,228 | |||||||||||
Canada and Australia(5) | 26,833 | 29,677 | 41,750 | 50,599 | |||||||||||
Emerging Markets(6) | 32,462 | (4,528 | ) | 55,651 | (5,087 | ) | |||||||||
Total segment profit | 231,728 | 201,836 | 410,418 | 356,516 | |||||||||||
Corporate(7) | (35,126 | ) | (48,123 | ) | (69,484 | ) | (106,228 | ) | |||||||
Restructuring, integration and other costs | (30,004 | ) | (27,626 | ) | (92,341 | ) | (45,165 | ) | |||||||
Acquired IPR&D | (4,568 | ) | (2,000 | ) | (4,568 | ) | (4,000 | ) | |||||||
Acquisition-related costs | (13,867 | ) | (1,869 | ) | (21,372 | ) | (3,376 | ) | |||||||
Legal settlements | (53,624 | ) | (2,000 | ) | (56,779 | ) | (2,400 | ) | |||||||
Acquisition-related contingent consideration | (7,729 | ) | (1,752 | ) | (17,568 | ) | (2,138 | ) | |||||||
Operating income | 86,810 | 118,466 | 148,306 | 193,209 | |||||||||||
Interest income | 1,020 | 1,086 | 2,143 | 1,889 | |||||||||||
Interest expense | (100,614 | ) | (83,073 | ) | (202,639 | ) | (151,824 | ) | |||||||
Loss on extinguishment of debt | — | (14,748 | ) | (133 | ) | (23,010 | ) | ||||||||
Foreign exchange and other | (4,238 | ) | 847 | 20,061 | 3,654 | ||||||||||
(Loss) gain on investments, net | (35 | ) | 21,158 | 2,024 | 22,927 | ||||||||||
(Loss) income before provision for (recovery of) income taxes | $ | (17,057 | ) | $ | 43,736 | $ | (30,238 | ) | $ | 46,845 |
(1) | U.S. Dermatology segment revenues reflect incremental product sales revenue of $107.9 million and $207.6 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the three-month and six-month periods ended June 30, 2012, respectively, primarily from Dermik, Ortho Dermatologics, Elidel®/Xerese®, Pedinol, Eyetech, University Medical and OraPharma. |
(2) | Canada and Australia segment revenues reflect incremental product sales revenue of $35.4 million and $77.5 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the three-month and six-month periods ended June 30, 2012, respectively, primarily from iNova, Dermik and Afexa. |
(3) | Emerging Markets segment revenues reflect incremental product sales revenue of $89.5 million and $196.5 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the three-month and six-month periods ended June 30, 2012, respectively, primarily from Sanitas, iNova, PharmaSwiss, Dermik, Probiotica and Gerot Lannach. |
(4) | U.S. Dermatology segment profit reflects the addition of operations from all 2011 acquisitions and all 2012 acquisitions, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $45.8 million and $82.4 million, in the aggregate, in the three-month and six-month periods ended June 30, 2012, respectively, primarily from Dermik and Ortho Dermatologics operations. |
(5) | Canada and Australia segment profit reflects the addition of operations from all 2011 acquisitions and all 2012 acquisitions, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $25.7 million and $67.6 million, in the aggregate, in the three-month and six-month periods ended June 30, 2012, respectively, primarily from iNova and Dermik operations. |
(6) | Emerging Markets segment profit reflects the addition of operations from all 2011 acquisitions and all 2012 acquisitions, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $44.1 |
(7) | Corporate reflects non-restructuring-related share-based compensation expense of $15.2 million and $34.3 million in the three-month and six-month periods ended June 30, 2012, respectively, compared with $25.6 million and $55.3 million in the corresponding periods of 2011. |
As of June 30, 2012 | As of December 31, 2011 | ||||||
Assets: | |||||||
U.S. Dermatology(1) | $ | 3,715,906 | $ | 3,077,119 | |||
U.S. Neurology and Other | 4,324,874 | 4,436,463 | |||||
Canada and Australia | 1,591,293 | 1,611,999 | |||||
Emerging Markets(2) | 3,715,727 | 3,349,821 | |||||
13,347,800 | 12,475,402 | ||||||
Corporate | 672,020 | 666,311 | |||||
Total assets | $ | 14,019,820 | $ | 13,141,713 |
(1) | U.S. Dermatology segment assets as of June 30, 2012 reflect the provisional amounts of identifiable intangible assets and goodwill of OraPharma of $481.9 million and $86.8 million, respectively and provisional amounts of identifiable intangible assets and goodwill of University Medical of $59.0 million and $2.9 million, respectively. |
(2) | Emerging Markets segment assets as of June 30, 2012 reflect the provisional amounts of identifiable intangible assets and goodwill of Gerot Lannach, Atlantis and Probiotica of $263.4 million and $46.6 million, in the aggregate, respectively. |
21. | SUBSEQUENT EVENTS AND PENDING ACQUISITION |
• | On June 18, 2012, we acquired OraPharma Topco Holdings, Inc. (“OraPharma”), a specialty oral health company located in the U.S. that develops and commercializes products that improve and maintain oral health. We made an up-front payment of $289.7 million, and we may pay a series of contingent consideration payments of up to $114.0 million if certain net sales milestones are achieved. We also repaid at the closing $37.9 million of assumed debt. The fair value of the contingent consideration was determined to be $99.2 million as of the acquisition date. The total fair value of the consideration transferred of $388.9 million is comprised primarily of identifiable intangible assets, excluding acquired IPR&D ($466.4 million), a net deferred income tax liability ($(173.9) million) and goodwill ($86.8 million). OraPharma’s lead product is Arestin®, a locally administered antibiotic for the treatment of periodontitis that utilizes an advanced controlled-release delivery system and is indicated for use in conjunction with scaling and root planing for the treatment of adult periodontitis. |
• | On May 23, 2012, we acquired certain assets from University Medical Pharmaceuticals Corp. (“University Medical”), a specialty pharmaceutical company located in the U.S. focused on skincare products. We made up-front payments of $65.0 million, and we may pay a series of contingent consideration payments of up to $40.0 million if certain net sales milestones are achieved. The fair value of the contingent consideration was determined to be $1.5 million as of the acquisition date. University Medical’s main brand is AcneFree, a retail OTC acne treatment. |
• | On May 2, 2012, we acquired certain assets from Atlantis Pharma (“Atlantis”), a branded generics pharmaceutical company located in Mexico, for up-front payments of $65.5 million (MXN$847.3 million), and we placed an |
• | On March 13, 2012, we acquired certain assets from Gerot Lannach, a branded generics pharmaceutical company based in Austria. We made an up-front payment of $164.0 million (€125.0 million), and we may pay a series of contingent consideration payments of up to $19.7 million (€15.0 million) if certain net sales milestones are achieved. The fair value of the contingent consideration was determined to be $16.8 million as of the acquisition date. The total fair value of the consideration transferred of $180.8 million is comprised primarily of identifiable intangible assets ($169.3 million) and goodwill ($9.7 million). Approximately 90% of sales relating to the acquired assets are in Russia, with sales also made in certain Commonwealth of Independent States (CIS) countries including Kazakhstan and Uzbekistan. Gerot Lannach’s largest product is acetylsalicylic acid, a low dose aspirin. As part of the transaction, we also entered into a ten-year exclusive supply agreement with Gerot Lannach for the acquired products. |
• | In connection with the acquisition of Dermik in 2011, we were required by the Federal Trade Commission to divest 1% clindamycin and 5% benzoyl peroxide gel (“IDP-111”), a generic version of BenzaClin®, and 5% fluorouracil cream (“5-FU”), an authorized generic of Efudex®. The divestiture of these products was completed on February 3, 2012. In the fourth quarter of 2011, we recognized $7.9 million and $19.8 million of impairment charges related to the write-down of the carrying values of the IDP-111 and 5-FU intangible assets, respectively, to their estimated fair values, less costs to sell. The adjusted carrying values of $54.4 million and $14.8 million for IDP-111 and 5-FU, respectively, were classified as Assets held for sale on our consolidated balance sheet as of December 31, 2011 and were included within the U.S. Dermatology reporting segment. IDP-111 and 5-FU were considered non-core products with respect to our business strategy, which contemplates, on an ongoing basis, the selective purchase and sale of products and assets with a focus on core geographies and therapeutic classes. We, therefore, consider the sale or the out-license of non-core products to be part of our ongoing major and central operations. Accordingly, proceeds on the sale of non-core products are recognized as alliance revenue, with the associated costs, including the carrying amount of related assets, recorded as cost of alliance revenue. In connection with the sale of IDP-111 and 5-FU, we recognized $66.3 million of cash proceeds as alliance revenue in the first quarter of 2012 and expensed the carrying amounts of the IDP-111 and 5-FU assets of $69.2 million, in the aggregate, as cost of alliance revenue. The cash proceeds from this transaction are classified within investing activities in our consolidated statements of cash flows. |
• | On February 1, 2012, we acquired Probiotica Laboratorios Ltda. (“Probiotica”), which markets OTC sports nutrition products and other food supplements in Brazil, for a purchase price of $85.9 million (R$150.0 million), as well as a preliminary working capital payment adjustment of $4.1 million (R$7.1 million). |
• | On March 26, 2012, we entered into an agreement to acquire Natur Produkt International, JSC (“Natur Produkt”), a specialty pharmaceutical company in Russia, for approximately $180.0 million, with an additional $5.0 million in potential future milestones. Natur Produkt’s key brand products include AntiGrippin®, Anti Angin®, Sage and Eucaplyptus MA. The transaction is subject to certain closing conditions and regulatory approvals. |
Employee Termination Costs | IPR&D Termination Costs | Contract Termination, Facility Closure and other Costs | ||||||||||||
Severance and Related Benefits | Share-Based Compensation | Total | ||||||||||||
($ in 000s) | $ | $ | $ | $ | $ | |||||||||
Balance, January 1, 2010 | — | — | — | — | — | |||||||||
Costs incurred and charged to expense | 58,727 | 49,482 | 13,750 | 12,862 | 134,821 | |||||||||
Cash payments | (33,938 | ) | — | (13,750 | ) | (8,755 | ) | (56,443 | ) | |||||
Non-cash adjustments | — | (49,482 | ) | — | (2,437 | ) | (51,919 | ) | ||||||
Balance, December 31, 2010 | 24,789 | — | — | 1,670 | 26,459 | |||||||||
Costs incurred and charged to expense | 14,548 | 3,455 | — | 28,938 | 46,941 | |||||||||
Cash payments | (38,168 | ) | (2,033 | ) | — | (15,381 | ) | (55,582 | ) | |||||
Non-cash adjustments | 989 | (741 | ) | — | (4,913 | ) | (4,665 | ) | ||||||
Balance, December 31, 2011 | 2,158 | 681 | — | 10,314 | 13,153 | |||||||||
Costs incurred and charged to expense | 1,586 | — | — | 12,334 | 13,920 | |||||||||
Cash payments | (3,288 | ) | — | — | (22,572 | ) | (25,860 | ) | ||||||
Non-cash adjustments | 442 | (681 | ) | — | 378 | 139 | ||||||||
Balance, March 31, 2012 | 898 | — | — | 454 | 1,352 | |||||||||
Costs incurred and charged to expense | — | — | — | — | — | |||||||||
Cash payments | (409 | ) | — | — | (14 | ) | (423 | ) | ||||||
Non-cash adjustments | (6 | ) | — | — | (193 | ) | (199 | ) | ||||||
Balance, June 30, 2012 | 483 | — | — | 247 | 730 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||
($ in 000s, except per share data) | $ | $ | $ | % | $ | $ | $ | % | |||||||||||
Revenues | 820,090 | 609,387 | 210,703 | 35 | 1,676,193 | 1,174,413 | 501,780 | 43 | |||||||||||
Operating expenses | 733,280 | 490,921 | 242,359 | 49 | 1,527,887 | 981,204 | 546,683 | 56 | |||||||||||
Net (loss) income | (21,607 | ) | 56,360 | (77,967 | ) | NM | (34,528 | ) | 62,842 | (97,370 | ) | NM | |||||||
Basic (loss) earnings per share | (0.07 | ) | 0.19 | (0.26 | ) | NM | (0.11 | ) | 0.21 | (0.32 | ) | NM | |||||||
Diluted (loss) earnings per share | (0.07 | ) | 0.17 | (0.24 | ) | NM | (0.11 | ) | 0.19 | (0.30 | ) | NM |
As of June 30, 2012 | As of December 31, 2011 | Change | |||||||
$ | $ | $ | % | ||||||
Total assets | 14,019,820 | 13,141,713 | 878,107 | 7 | |||||
Long-term debt, including current portion | (7,551,175 | ) | (6,651,011 | ) | (900,164 | ) | 14 |
• | incremental product sales revenue of $185.1 million and $425.0 million in the aggregate, from all 2011 acquisitions in the second quarter and first half of 2012, respectively, primarily from iNova, Dermik, Ortho Dermatologics, Sanitas, Elidel® and Xerese®, PharmaSwiss and Afexa. We also recognized incremental product sales revenue of $48.3 million and $58.1 million, in the aggregate, from all 2012 acquisitions in the second quarter and first half of 2012, respectively, primarily from Probiotica, Gerot Lannach, University Medical and Atlantis. The incremental product sales revenue from the 2011 and 2012 acquisitions includes a negative foreign exchange impact of $17.5 million and $20.9 million, in the aggregate, in the second quarter and first half of 2012, respectively; |
• | alliance revenue of $66.3 million on the sale of the IDP-111 and 5-FU products in the first quarter of 2012; |
• | incremental product sales revenue of $54.5 million and $111.9 million in the second quarter and first half of 2012, respectively, related to growth from the existing business, excluding the impact of generic competition in the U.S. Neurology and Other segment described below; |
• | alliance revenue of $45.0 million recognized in the second quarter of 2012, related to the milestone payment received from GSK in connection with the launch of Potiga™; and |
• | incremental service revenue of $14.2 million in the first half of 2012, primarily from the Dermik acquisition. |
• | decrease in product sales of Cardizem® CD, Wellbutrin XL®, Ultram® ER and Diastat® in the U.S. Neurology and Other segment of $24.5 million, or 34%, in the aggregate, to $47.0 million in the second quarter of 2012, compared with $71.5 million in the second quarter of 2011, and a decrease of $54.4 million, or 36%, in the aggregate, to $97.5 million in the first half of 2012, compared with $151.9 million in the first half of 2011, due to generic competition; |
• | alliance revenue of $43.0 million in the first half of 2011, primarily related to the $36.0 million out-license of the Cloderm® product rights that did not similarly occur in the first half of 2012; |
• | a negative foreign currency exchange impact on the existing business of $32.4 million and $45.2 million in the second quarter and first half of 2012, respectively; |
• | alliance revenue of $40.0 million recognized in the second quarter of 2011 related to the milestone payment received from GSK in connection with the launch of Trobalt™; and |
• | a negative impact from divestitures and discontinuations of $20.9 million and $35.6 million, in the aggregate, in the second quarter and first half of 2012, respectively, including a decrease of $9.1 million and $17.6 million in the second quarter and first half of 2012, respectively, related to IDP-111 royalty revenue as a result of the sale of IDP-111 in February 2012. |
• | increases of $95.6 million and $184.2 million in amortization expense in the second quarter and first half of 2012, respectively, primarily related to (i) amortization of ezogabine/retigabine ($28.6 million and $57.2 million in the second quarter and first half of 2012, respectively), which was reclassified from IPR&D to a finite-lived intangible asset in December 2011, and (ii) the acquired identifiable intangible assets of iNova, Elidel®/Xerese®, Dermik, Ortho Dermatologics and Sanitas of $58.0 million and $115.9 million in the second quarter and first half of 2012, respectively; |
• | an increase of $35.8 million and $73.6 million in selling, general and administrative expense in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Operating Expenses — Selling, General and Administrative Expenses”; |
• | an increase of $9.1 million and $57.5 million in cost of alliance and service revenues in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Operating Expenses — Cost of Alliance and Service Revenues”; |
• | an increase of $51.6 million and $54.4 million in legal settlements in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Operating Expenses — Legal Settlements”; |
• | an increase of $17.5 million and $50.8 million in interest expense in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Non-Operating Income (Expense) — Interest Expense”; |
• | an increase of $2.4 million and $47.2 million in restructuring, integration and other costs in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Operating Expenses — Restructuring, Integration and Other Costs”; |
• | a net realized gain of $21.3 million on the disposal of our equity investment in Cephalon, Inc. (“Cephalon”) realized in the second quarter of 2011 that did not similarly occur in the second quarter or first half of 2012, as described below under “Results of Operations — Non-Operating Income (Expense) — (Loss) Gain on Investments, Net”; |
• | an increase of $17.2 million and $20.3 million in the provision for income taxes in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Income Taxes”; and |
• | an increase of $12.0 million and $18.0 million in acquisition-related costs in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Operating Expenses — Acquisition-Related Costs”. |
• | an increase in contribution (product sales revenue less cost of goods sold, exclusive of amortization of intangible assets) of $191.3 million and $388.4 million in the second quarter and first half of 2012, respectively, mainly related to the incremental contribution of Dermik, Ortho Dermatologics, iNova, Sanitas, Zovirax®, PharmaSwiss, Elidel®/Xerese®, Probiotica and Gerot Lannach; |
• | a decrease of $14.7 million and $22.9 million in loss on extinguishment of debt in the second quarter and first half of 2012, respectively, as described below under “Results of Operations — Non-Operating Income (Expense) — Loss on Extinguishment of Debt”; and |
• | an increase of $16.4 million in foreign exchange and other in the first half of 2012, as described below under “Results of Operations — Non-Operating Income (Expense) — Foreign Exchange and Other”. |
• | U.S. Dermatology consists of pharmaceutical and OTC product sales, and alliance and contract service revenues, in the areas of dermatology and topical medication, dentistry, ophthalmology and podiatry. |
• | U.S. Neurology and Other consists of sales of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products we developed or acquired. |
• | Canada and Australia consists of pharmaceutical and OTC products sold in Canada, Australia and New Zealand. |
• | Emerging Markets consists of branded generic pharmaceutical products, as well as OTC products and agency/in-licensing arrangements with other research-based pharmaceutical companies (where we distribute and market branded, patented products under long-term, renewable contracts). Products are sold primarily in Europe (Poland, Serbia, Hungary, Croatia and Russia), Latin America (Mexico, Brazil and exports out of Mexico to other Latin |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||
($ in 000s) | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||
U.S. Dermatology | 218,048 | 27 | 111,993 | 18 | 106,055 | 95 | 510,265 | 30 | 266,184 | 23 | 244,081 | 92 | |||||||||||||
U.S. Neurology and Other | 222,965 | 27 | 232,363 | 38 | (9,398 | ) | (4 | ) | 410,673 | 25 | 440,478 | 38 | (29,805 | ) | (7 | ) | |||||||||
Canada and Australia | 128,360 | 16 | 84,000 | 14 | 44,360 | 53 | 260,929 | 16 | 154,244 | 13 | 106,685 | 69 | |||||||||||||
Emerging Markets | 250,717 | 31 | 181,031 | 30 | 69,686 | 38 | 494,326 | 29 | 313,507 | 27 | 180,819 | 58 | |||||||||||||
Total revenues | 820,090 | 100 | 609,387 | 100 | 210,703 | 35 | 1,676,193 | 100 | 1,174,413 | 100 | 501,780 | 43 |
• | the incremental product sales revenue of $107.9 million and $207.6 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the second quarter and first half of 2012, respectively, primarily from (i) Dermik (mainly driven by BenzaClin®, Sculptra® Aesthetics and Carac® product sales), Ortho Dermatologics (mainly driven by Retin-A Micro® product sales) and Elidel® and Xerese® product sales; and (ii) Pedinol, Eyetech, University Medical and OraPharma product sales; |
• | alliance revenue of $66.3 million on the sale of the IDP-111 and 5-FU products in the first quarter of 2012; and |
• | an increase in product sales from the existing business of $25.3 million or 33%, and $46.6 million or 27%, in the second quarter and first half of 2012, respectively, driven by continued growth of the core dermatology brands, including Zovirax®, Acanya®, Atralin® and CeraVe®. |
• | alliance revenue of $43.0 million in the first half of 2011, primarily related to the $36.0 million out-license of the Cloderm® product rights that did not similarly occur in the first half of 2012; |
• | a decrease in service revenue of $7.0 million and $7.5 million in the second quarter and first half of 2012, respectively; and |
• | a negative impact from divestitures and discontinuations of $11.3 million and $23.3 million in the second quarter and first half of 2012, respectively, including a decrease of $9.1 million and $17.6 million in the second quarter and first half of 2012, respectively, related to IDP-111 royalty revenue as a result of the sale of IDP-111 in February 2012. |
• | decrease in product sales of Cardizem® CD, Wellbutrin XL®, Ultram® ER and Diastat®of $24.5 million, or 34%, in the aggregate, to $47.0 million in the second quarter of 2012, compared with $71.5 million in |
• | alliance revenue of $40.0 million recognized in the second quarter of 2011, related to the milestone payment received from GSK in connection with the launch of Trobalt™. |
• | alliance revenue of $45.0 million recognized in the second quarter of 2012, related to the milestone payment received from GSK in connection with the launch of Potiga™; and |
• | an increase in product sales from the remaining existing business of $6.3 million or 3%, and $17.4 million or 4%, in the second quarter and first half of 2012, respectively. |
• | the incremental product sales revenue of $35.4 million and $77.5 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the second quarter and the first half of 2012, respectively, primarily from iNova (mainly driven by Duromine®, Difflam® and Duro-Tuss® product sales), Dermik and Afexa; |
• | incremental service revenue of $9.6 million and $21.4 million in the second quarter and first half of 2012, respectively, primarily from the Dermik acquisition; and |
• | an increase in product sales from the existing business of $3.3 million or 4%, and $11.5 million or 8%, in the second quarter and first half of 2012, respectively, which includes the negative impact from the introduction of a generic version of Cesamet® by a competitor in March 2012. We anticipate continuing declines in Cesamet® product sales due to generic erosion. |
• | a negative foreign currency exchange impact on the existing business of $3.8 million and $3.5 million in the second quarter and first half of 2012, respectively. |
• | in the Emerging Markets segment: |
• | the incremental product sales revenue of $89.5 million and $196.5 million (which includes a negative foreign currency exchange impact of $16.0 million and $20.3 million in the second quarter and the first half of 2012, respectively), in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the second quarter and the first half of 2012, respectively, primarily from (i) the 2011 acquisitions of Sanitas, iNova (mainly driven by Duromine® and Difflam® product sales), PharmaSwiss, and Dermik; and (ii) the 2012 acquisitions of Probiotica and Gerot Lannach; and |
• | an increase in product sales from the existing business of $19.6 million or 12%, and $36.4 million or 12%, in the second quarter and first half of 2012, respectively. |
• | a negative foreign currency exchange impact on the existing business of $28.6 million and $41.7 million in the second quarter and first half of 2012, respectively; and |
• | a negative impact from divestitures and discontinuations of $9.0 million and $11.4 million in the second quarter and first half of 2012. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||||||
($ in 000s) | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||
U.S. Dermatology | 76,179 | 35 | 39,200 | 35 | 36,979 | 94 | 164,205 | 32 | 73,776 | 28 | 90,429 | 123 | |||||||||||||||
U.S. Neurology and Other | 96,254 | 43 | 137,487 | 59 | (41,233 | ) | (30 | ) | 148,812 | 36 | 237,228 | 54 | (88,416 | ) | (37 | ) | |||||||||||
Canada and Australia | 26,833 | 21 | 29,677 | 35 | (2,844 | ) | (10 | ) | 41,750 | 16 | 50,599 | 33 | (8,849 | ) | (17 | ) | |||||||||||
Emerging Markets | 32,462 | 13 | (4,528 | ) | (3 | ) | 36,990 | NM | 55,651 | 11 | (5,087 | ) | (2 | ) | 60,738 | NM | |||||||||||
Total segment profit | 231,728 | 28 | 201,836 | 33 | 29,892 | 15 | 410,418 | 24 | 356,516 | 30 | 53,902 | 15 |
• | an increase in contribution of $91.6 million and $171.8 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the second quarter and first half of 2012, respectively, primarily from the product sales of Dermik, Ortho Dermatologics, Elidel® and Xerese®, Eyetech, Pedinol, OraPharma and University Medical, including the impact of acquisition accounting adjustments related to inventory of $3.6 million and $12.9 million, in the aggregate, in the second quarter and first half of 2012, respectively; |
• | an increase in contribution from product sales from the existing business of $18.1 million and $54.4 million in the second quarter and first half of 2012, respectively, driven by continued growth of the core dermatology brands, including Zovirax®, Acanya®, Atralin® and CeraVe®, and a lower supply price for Zovirax® inventory purchased from GSK, as a result of the new supply agreement that became effective with the acquisition of the U.S. rights, such that we retain a greater share of the economic interest in the brand; and |
• | a favorable impact of $7.7 million related to the Merger-related acquisition accounting adjustments related to inventory in the first half of 2011 that did not similarly occur in the first half of 2012. |
• | an increase in operating expenses (including amortization expense) of $55.2 million and $105.4 million in the second quarter and first half of 2012, respectively, primarily associated with the acquisitions of new businesses within the segment; |
• | a decrease in contribution of $17.3 million and $37.7 million in the second quarter and first half of 2012, respectively, primarily related to divestitures and discontinuations. The largest contributor to the decrease was a reduction in IDP-111 royalty revenue of $9.1 million and $17.6 million in the second quarter and first half of 2012, respectively, as a result of the sale of IDP-111 in February 2012; and |
• | a decrease in service revenue contribution of $5.8 million and $6.0 million in the second quarter and first |
• | in the U.S. Neurology and Other segment: |
• | alliance revenue of $40.0 million recognized in the second quarter of 2011, related to the milestone payment received from GSK in connection with the launch of Trobalt™; |
• | amortization expense of $28.6 million and $57.2 million in the second quarter and first half of 2012, respectively, related to ezogabine/retigabine, which was reclassified from IPR&D to a finite-lived intangible asset in December 2011; and |
• | lower sales of higher margin products such as Wellbutrin XL®, Ultram® ER, Cardizem® CD and Diastat®, which resulted in a decrease in contribution of $22.0 million and $47.2 million, in the aggregate, in the second quarter and first half of 2012, respectively. |
• | alliance revenue of $45.0 million recognized in the second quarter of 2012, related to the milestone payment received from GSK in connection with the launch of Potiga™; and |
• | an increase in contribution from product sales from the remaining existing business of $4.7 million and $11.6 million in the second quarter and first half of 2012, respectively. |
• | an increase in operating expenses (including amortization expense) of $30.1 million and $61.2 million in the second quarter and first half of 2012, respectively, primarily associated with the acquisitions of new businesses within the segment. |
• | an increase in contribution of $27.2 million and $43.1 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions in the second quarter and first half of 2012, respectively, primarily from the sale of iNova, Dermik, Elidel® and Afexa products, including the impact of acquisition accounting adjustments related to inventory of $6.1 million and $29.7 million, in the aggregate, in the second quarter and first half of 2012, respectively; |
• | an increase in contribution from product sales from the existing business of $9.0 million in the first half of 2012, which includes the negative contribution impact from lower sales of Cesamet®; and |
• | incremental contribution from service revenue of $1.1 million in the first half of 2012, primarily from the Dermik acquisition. |
• | an increase in contribution of $65.0 million and $128.3 million, in the aggregate, from all 2011 acquisitions and all 2012 acquisitions, in the second quarter and first half of 2012, respectively, primarily from the sale of Sanitas, PharmaSwiss, iNova, Probiotica and Gerot Lannach products, including lower acquisition accounting adjustments related to inventory of $14.6 million and $19.8 million, in the aggregate, in the second quarter and first half of 2012, respectively; and |
• | an increase in contribution from product sales from the existing business of $13.8 million and $24.6 million in the second quarter and first half of 2012, respectively. |
• | an increase in operating expenses (including amortization expense) of $24.0 million and $64.8 million |
• | a negative foreign currency exchange impact on the existing business contribution of $14.8 million and $22.1 million in the second quarter and first half of 2012, respectively; and |
• | a negative impact from divestitures and discontinuations of $3.8 million and $5.3 million in the second quarter and first half of 2012. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||||
($ in 000s) | $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||
Cost of goods sold (exclusive of amortization of intangible assets shown separately below) | 197,284 | 24 | 169,912 | 28 | 27,372 | 16 | 426,725 | 25 | 339,199 | 29 | 87,526 | 26 | ||||||||||||||
Cost of alliance and service revenues | 12,483 | 2 | 3,395 | 1 | 9,088 | NM | 94,878 | 6 | 37,340 | 3 | 57,538 | 154 | ||||||||||||||
Selling, general and administrative | 185,440 | 23 | 149,657 | 25 | 35,783 | 24 | 362,726 | 22 | 289,163 | 25 | 73,563 | 25 | ||||||||||||||
Research and development | 17,711 | 2 | 17,764 | 3 | (53 | ) | — | 39,717 | 2 | 31,434 | 3 | 8,283 | 26 | |||||||||||||
Amortization of intangible assets | 210,570 | 26 | 114,946 | 19 | 95,624 | 83 | 411,213 | 25 | 226,989 | 19 | 184,224 | 81 | ||||||||||||||
Restructuring, integration and other costs | 30,004 | 4 | 27,626 | 5 | 2,378 | 9 | 92,341 | 6 | 45,165 | 4 | 47,176 | 104 | ||||||||||||||
Acquired IPR&D | 4,568 | 1 | 2,000 | — | 2,568 | 128 | 4,568 | — | 4,000 | — | 568 | 14 | ||||||||||||||
Acquisition-related costs | 13,867 | 2 | 1,869 | — | 11,998 | NM | 21,372 | 1 | 3,376 | — | 17,996 | NM | ||||||||||||||
Legal settlements | 53,624 | 7 | 2,000 | — | 51,624 | NM | 56,779 | 3 | 2,400 | — | 54,379 | NM | ||||||||||||||
Acquisition-related contingent consideration | 7,729 | 1 | 1,752 | — | 5,977 | NM | 17,568 | 1 | 2,138 | — | 15,430 | NM | ||||||||||||||
Total operating expenses | 733,280 | 89 | 490,921 | 81 | 242,359 | 49 | 1,527,887 | 91 | 981,204 | 84 | 546,683 | 56 |
• | the effect of the lower supply price for Zovirax® inventory purchased from GSK, as a result of a new supply agreement that became effective with the acquisition of the U.S. rights, which favorably impacted cost of goods sold; and |
• | a favorable impact from product mix and the benefits realized from worldwide manufacturing rationalization initiatives. |
• | an unfavorable foreign exchange impact on contribution, as the foreign exchange benefit to Cost of Goods Sold was more than offset by the negative foreign exchange impact on product sales. |
• | increased expenses in our U.S Dermatology segment ($23.3 million and $47.6 million, in the second quarter and first half of 2012, respectively), Canada and Australia segment ($14.7 million and $29.3 million, in the second quarter and first half of 2012, respectively) and Emerging Markets segment ($9.3 million and $29.7 million, in the second quarter and first half of 2012, respectively), primarily driven by the acquisitions of new businesses within these segments. |
• | decreases of $9.8 million and $20.0 million in share-based compensation expense charged to selling, general and administrative expenses in the second quarter and first half of 2012, respectively, primarily due to the vesting of performance stock units as a result of achieving specified performance criteria recognized in the second quarter of 2011 and the impact of the stock option modification recognized in the first quarter of 2011. Refer to note 13 of notes to unaudited consolidated financial statements for further details. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
($ in 000s; Income (Expense)) | $ | $ | $ | % | $ | $ | $ | % | |||||||||||||
Interest income | 1,020 | 1,086 | (66 | ) | (6 | ) | 2,143 | 1,889 | 254 | 13 | |||||||||||
Interest expense | (100,614 | ) | (83,073 | ) | (17,541 | ) | 21 | (202,639 | ) | (151,824 | ) | (50,815 | ) | 33 | |||||||
Loss on extinguishment of debt | — | (14,748 | ) | 14,748 | (100 | ) | (133 | ) | (23,010 | ) | 22,877 | (99 | ) | ||||||||
Foreign exchange and other | (4,238 | ) | 847 | (5,085 | ) | NM | 20,061 | 3,654 | 16,407 | NM | |||||||||||
(Loss) gain on investments, net | (35 | ) | 21,158 | (21,193 | ) | (100 | ) | 2,024 | 22,927 | (20,903 | ) | (91 | ) | ||||||||
Total non-operating expense | (103,867 | ) | (74,730 | ) | (29,137 | ) | 39 | (178,544 | ) | (146,364 | ) | (32,180 | ) | 22 |
• | interest expense of $29.4 million and $76.3 million, in the aggregate, in the second quarter and first half of 2012, respectively, related to the borrowings under our senior secured credit facilities and our senior notes. |
• | a decrease of $10.0 million in the first half of 2012 due to the repayment of our previous term loan A facility in the first quarter of 2011; |
• | a decrease of $4.4 million and $8.6 million in the second quarter and first half of 2012, respectively, related to the repurchases of 5.375% senior convertible notes due 2014 (the “5.375% Convertible Notes”) (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | a decrease of $5.7 million and $4.8 million in the second quarter and first half of 2012, respectively, due to an adjustment to amortization of debt issuance costs related to prior periods; and |
• | a decrease of $1.6 million and $4.4 million in the second quarter and first half of 2012, respectively, related to the redemption of 4.0% convertible subordinated notes due 2013 (the “4% Convertible Notes”) in the second quarter of 2011. Refer to note 11 of notes to unaudited consolidated financial statements for further details. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
($ in 000s; (Income) Expense) | $ | $ | $ | % | $ | $ | $ | % | |||||||||||||
Current income tax expense | 10,400 | 6,100 | 4,300 | NM | 25,000 | 22,500 | 2,500 | NM | |||||||||||||
Deferred income tax benefit | (5,850 | ) | (18,724 | ) | 12,874 | (69 | ) | (20,710 | ) | (38,497 | ) | 17,787 | (46 | ) | |||||||
Total provision for (recovery of) income taxes | 4,550 | (12,624 | ) | 17,174 | (136 | ) | 4,290 | (15,997 | ) | 20,287 | (127 | ) |
As of June 30, 2012 | As of December 31, 2011 | Change | ||||||||
($ in 000s; Asset (Liability)) | $ | $ | $ | % | ||||||
Cash and cash equivalents | 395,266 | 164,111 | 231,155 | 141 | ||||||
Long-lived assets(1) | 12,255,296 | 11,670,826 | 584,470 | 5 | ||||||
Long-term debt, including current portion | (7,551,175 | ) | (6,651,011 | ) | (900,164 | ) | 14 | |||
Shareholders' equity | 3,695,431 | 4,007,016 | (311,585 | ) | (8 | ) |
(1) | Long-lived assets comprise property, plant and equipment, intangible assets and goodwill. |
• | $1,170.7 million of net borrowings under our senior secured term loan B facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | $421.8 million in operating cash flows, which includes the receipt of the $45.0 million milestone payment from GSK in connection with the launch of Potiga™ in the second quarter of 2012; and |
• | $66.3 million of cash proceeds related to the sale of the IDP-111 and 5-FU products in the first quarter of 2012. |
• | $729.4 million paid, in the aggregate, in connection with the purchases of businesses and intangible assets, mainly in respect of the OraPharma, Gerot Lannach, Probiotica, Atlantis and University Medical acquisitions; |
• | $280.7 million related to the repurchase of our common shares (as described below under “Financial Condition, Liquidity and Capital Resources — New Securities Repurchase Program”); |
• | $220.0 million repayment under our revolving credit facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | contingent consideration payments of $61.9 million primarily related to the Elidel®/Xerese® license agreement entered into in June 2011 and the PharmaSwiss acquisition; |
• | $55.6 million repayment under our senior secured term loan A facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | $37.9 million repayment of long-term debt assumed in connection with OraPharma acquisition in June, 2012; and |
• | purchases of property, plant and equipment of $24.7 million. |
• | the inclusion of the identifiable intangible assets, goodwill and property, plant and equipment from the acquisitions of OraPharma, Gerot Lannach, Probiotica, University Medical and Atlantis, which amounted to $952.6 million, in the aggregate; |
• | purchases of property, plant and equipment of $24.7 million; and |
• | a foreign currency exchange impact of $20.1 million. |
• | the depreciation of property, plant and equipment and amortization of intangible assets of $437.4 million in the aggregate. |
• | $1,170.7 million of net borrowings under our senior secured term loan B facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”). |
• | $220.0 million repayment under our revolving credit facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); and |
• | $55.6 million repayment under our senior secured term loan A facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”). |
• | a decrease of $280.7 million related to the repurchase of our common shares in the first half of 2012; |
• | a net loss of $34.5 million; and |
• | a negative foreign currency translation adjustment of $22.9 million to other comprehensive (loss) income, mainly due to the impact of a strengthening of the U.S. dollar relative to a number of other currencies, including the Euro and Brazilian real, which decreased the reported value of our net assets denominated in those currencies. |
• | $34.3 million of share-based compensation recorded in additional paid-in capital. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
($ in 000s) | $ | $ | $ | % | $ | $ | $ | % | |||||||||||||
Net cash provided by operating activities | 254,602 | 190,656 | 63,946 | 34 | 421,832 | 276,986 | 144,846 | 52 | |||||||||||||
Net cash used in investing activities | (476,141 | ) | (26,500 | ) | (449,641 | ) | NM | (694,520 | ) | (851,834 | ) | 157,314 | (18 | ) | |||||||
Net cash provided by (used in) financing activities | 292,498 | (330,169 | ) | 622,667 | NM | 502,936 | 412,598 | 90,338 | 22 | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (6,172 | ) | 3,206 | (9,378 | ) | NM | 907 | 6,926 | (6,019 | ) | (87 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | 64,787 | (162,807 | ) | 227,594 | NM | 231,155 | (155,324 | ) | 386,479 | NM | |||||||||||
Cash and cash equivalents, beginning of period | 330,479 | 401,752 | (71,273 | ) | (18 | ) | 164,111 | 394,269 | (230,158 | ) | (58 | ) | |||||||||
Cash and cash equivalents, end of period | 395,266 | 238,945 | 156,321 | 65 | 395,266 | 238,945 | 156,321 | 65 |
• | the inclusion of cash flows in the second quarter of 2012 from all 2011 acquisitions, primarily Elidel®/Xerese®, Sanitas, Dermik, Ortho Dermatologics, Afexa and iNova, as well as all 2012 acquisitions, primarily OraPharma, Probiotica and certain assets of Gerot Lannach, University Medical and Atlantis, partially offset by the negative impact of foreign exchange related to these acquisitions and the existing business; |
• | the receipt of the $45.0 million milestone payment from GSK in connection with the launch of Potiga™ in the second quarter of 2012; and |
• | incremental cash flows from continued growth in the existing business. |
• | the receipt of the $40.0 million milestone payment from GSK in connection with the launch of Trobalt™ in the second quarter of 2011; |
• | higher payments of $32.5 million related to other restructuring and integration-related costs (not Merger-related) in the second quarter of 2012; and |
• | a decrease in contribution of $28.2 million, in the aggregate, from Cardizem® CD, Wellbutrin XL®, Ultram® ER, Cesamet® and Diastat® product sales in the second quarter of 2012. |
• | the inclusion of cash flows in the first half of 2012 from all 2011 acquisitions, primarily Elidel®/Xerese®, Sanitas, Dermik, Ortho Dermatologics, Afexa and iNova, as well as all 2012 acquisitions, primarily OraPharma, Probiotica and certain assets of Gerot Lannach, University Medical and Atlantis, partially offset by the negative impact of foreign exchange related to these acquisitions and the existing business; |
• | an increase in cash flows from the operations of PharmaSwiss due to the full year-to-date impact in 2012; |
• | the receipt of the $45.0 million milestone payment from GSK in connection with the launch of Potiga™ in the second quarter of 2012; |
• | a decrease in legal settlement payments of $14.6 million; |
• | an increase due to lower payments of $14.2 million related to the Merger-related restructuring charges in the first half of 2012; and |
• | incremental cash flows from continued growth in the existing business. |
• | higher payments of $73.9 million related to other restructuring and integration-related costs (not Merger-related) in the first half of 2012; |
• | a decrease in contribution of $52.9 million, in the aggregate, from Cardizem® CD, Wellbutrin XL®, Ultram® ER, Cesamet® and Diastat® product sales in the first half of 2012; and |
• | the receipt of the $40.0 million milestone payment from GSK in connection with the launch of Trobalt™ in the second quarter of 2011. |
• | an increase of $350.2 million, in the aggregate, related to the purchases of businesses (net of cash acquired) and intangible assets in the aggregate; |
• | a net increase of $61.3 million on the disposal of the Cephalon common stock in the second quarter of 2011 (representing the excess of the $81.3 million in net proceeds received over the $20.0 million paid in the second quarter of 2011 to acquire the shares) that did not similarly occur in the second quarter of 2012; and |
• | an increase of $36.0 million related to the receipt of up-front payment related to the out-license of Cloderm® in the second quarter of 2011 that did not similarly occur in the second quarter of 2012. |
• | a decrease of $141.8 million in the aggregate, related to the purchases of businesses (net of cash acquired) and intangible assets in the aggregate; |
• | a decrease of $66.3 million attributable to the cash proceeds related to the sale of the IDP-111 and 5-FU products in the first quarter of 2012; and |
• | a decrease of $9.3 million in purchases of property, plant and equipment. |
• | a net increase of $21.3 million on the disposal of the Cephalon common stock in the first half of 2011, representing the excess of the $81.3 million in net proceeds received over the $60.0 million paid in the first half of 2011 to acquire the shares; and |
• | an increase of $36.0 million related to the receipt of the up-front payment related to the out-license of Cloderm® in the first half of 2011 that did not similarly occur in the first half of 2012. |
• | an increase of $579.8 million of net borrowings under our senior secured term loan B facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | an increase of $199.8 million related to the repurchases of the 5.375% Convertible Notes (exclusive of the payment of accreted interest reflected as an operating activity) in the second quarter of 2011 that did not similarly occur in the second quarter of 2012; |
• | an increase of $52.8 million related to lower repurchases of common shares in the second quarter of 2012; and |
• | an increase of $5.3 million related to lower employee withholding taxes paid on the exercise of employee share-based awards in the second quarter of 2012. |
• | a decrease of $100.0 million in borrowings under our revolving credit facility in the second quarter of 2012; |
• | $37.9 million repayment of long-term debt assumed in connection with the OraPharma acquisition; |
• | contingent consideration payments of $33.5 million primarily related to the Elidel®/Xerese® license agreement entered into in June 2011 and the PharmaSwiss acquisition; |
• | $27.8 million repayment under our senior secured term loan A facility in the second quarter of 2012; and |
• | a decrease of $8.9 million in proceeds from stock option exercises, including tax benefits in the second quarter of 2012. |
• | an increase of $1,170.7 million of net borrowings under our senior secured term loan B facility (as described below under “Financial Condition, Liquidity and Capital Resources — Financial Assets (Liabilities)”); |
• | an increase of $975.0 million related to the repayment of our previous term loan A facility in the first half of 2011; |
• | an increase of $335.0 million related to lower repurchases of the 5.375% Convertible Notes (exclusive of the payment of accreted interest reflected as an operating activity) in the first half of 2012; |
• | an increase of $218.8 million related to lower repurchases of common shares in the first half of 2012; and |
• | an increase of $40.9 million related to lower employee withholding taxes paid on the exercise of employee share- |
• | a decrease related to net proceeds of $2,139.7 million from the issuance of senior notes in the first half of 2011; |
• | a decrease of $320.0 million in borrowings under our revolving credit facility in the first half of 2012; |
• | contingent consideration payments of $61.0 million primarily related to the Elidel®/Xerese® license agreement entered into in June 2011 and the PharmaSwiss acquisition; |
• | $55.6 million repayment under our senior secured term loan A facility in the first half of 2012; |
• | a decrease of $50.5 million in proceeds from stock option exercises, including tax benefits in the first half of 2012; and |
• | $37.9 million repayment of long-term debt assumed in connection with the OraPharma acquisition. |
Maturity Date | As of June 30, 2012 | As of December 31, 2011 | Change | |||||||||
($ in 000s; Asset (Liability)) | $ | $ | $ | % | ||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | 395,266 | 164,111 | 231,155 | 141 | ||||||||
Marketable securities | — | 6,338 | (6,338 | ) | (100 | ) | ||||||
Total financial assets | 395,266 | 170,449 | 224,817 | 132 | ||||||||
Financial liabilities: | ||||||||||||
Brazil Uncommitted Line of Credit | August 2012 | (5,431 | ) | — | (5,431 | ) | NM | |||||
Revolving Credit Facility | April 2016 | — | (220,000 | ) | 220,000 | (100 | ) | |||||
Term Loan A Facility | April 2016 | (2,134,466 | ) | (2,185,520 | ) | 51,054 | (2 | ) | ||||
New Term Loan B Facility | February 2019 | (1,170,651 | ) | — | (1,170,651 | ) | NM | |||||
Senior Notes: | ||||||||||||
6.50% | July 2016 | (915,500 | ) | (915,500 | ) | — | NM | |||||
6.75% | October 2017 | (498,127 | ) | (497,949 | ) | (178 | ) | NM | ||||
6.875% | December 2018 | (938,827 | ) | (938,376 | ) | (451 | ) | NM | ||||
7.00% | October 2020 | (686,444 | ) | (686,228 | ) | (216 | ) | NM | ||||
6.75% | August 2021 | (650,000 | ) | (650,000 | ) | — | NM | |||||
7.25% | July 2022 | (540,881 | ) | (540,427 | ) | (454 | ) | NM | ||||
5.375% Convertible Notes | August 2014 | (16,279 | ) | (17,011 | ) | 732 | (4 | ) | ||||
Total financial liabilities | (7,556,606 | ) | (6,651,011 | ) | (905,595 | ) | 14 | |||||
Net financial liabilities | (7,161,340 | ) | (6,480,562 | ) | (680,778 | ) | 11 |
Payments Due by Period | ||||||||||||||
2013 | 2015 | |||||||||||||
Total | 2012 | and 2014 | and 2016 | Thereafter | ||||||||||
($ in 000s) | $ | $ | $ | $ | $ | |||||||||
Short-term borrowings and long-term debt obligations, including interest(1) | 10,342,953 | 295,125 | 1,509,511 | 3,128,061 | 5,410,256 |
(1) | Expected interest payments assume repayment of the principal amount of the related debt obligations at maturity. |
• | 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; |
• | the challenges and difficulties associated with managing the rapid growth of our Company and a large, complex business; |
• | our ability to identify, acquire and integrate acquisition targets and to secure and maintain third-party research, development, manufacturing, marketing or distribution arrangements; |
• | our ability to close transactions on a timely basis or at all; |
• | factors relating to the integration of the companies, businesses and products acquired by the Company such as the time and resources required to integrate such companies, businesses and products, the difficulties associated with such integrations, and the achievement of the anticipated benefits from such integrations; |
• | 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 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; |
• | 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; |
• | 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, the Canadian Therapeutic Products Directorate and European, Asian, Brazilian and Australian 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 or by others; |
• | 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; |
• | the results of continuing safety and efficacy studies by industry and government agencies; |
• | our ability to obtain components, raw materials or bulk or finished products supplied by third parties; |
• | the disruption of delivery of our products and the routine flow of manufactured goods; |
• | the seasonality of sales of certain of our 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; |
• | 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; |
• | adverse global economic conditions and credit market uncertainty in European and other countries in which we do business; |
• | 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; |
• | the outcome of legal proceedings, investigations and regulatory proceedings; |
• | the risk that our products could cause, or be alleged to cause, personal injury, leading to withdrawals of products from the market; |
• | the impacts of the Patient Protection and Affordable Care Act and the Food and Drug Administration Safety and Innovation Act in the U.S. and other legislative and regulatory reforms in the countries in which we operate; and |
• | 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. |
Period | Total Number of Shares (or Units) Purchased | Average Price Paid Per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plan | Approximate Dollar Value of Shares (or Units) That May Yet Be Purchased Under the Plan | |||||||||
(In thousands) | |||||||||||||
April 2012 | — | — | — | $ | 1,229,522 | ||||||||
April 2012 | 225,872(1) | $ | 53.70 | 225,872(1) | $ | 1,217,393 | |||||||
April 2012 | 225,872(1) | $ | 54.75 | 225,872(1) | $ | 1,205,026 | |||||||
April 2012 | 154,106(1) | $ | 54.96 | 154,106(1) | $ | 1,196,557 | |||||||
April 2012 | 89,605(1) | $ | 54.98 | 89,605(1) | $ | 1,191,630 | |||||||
April 2012 | 6,600(1) | $ | 55.00 | 6,600(1) | $ | 1,191,267 | |||||||
April 2012 | 223,343(1) | $ | 54.72 | 223,343(1) | $ | 1,179,046 | |||||||
April 2012 | 24,068(1) | $ | 55.00 | 24,068(1) | $ | 1,177,722 | |||||||
May 2012 | 257,597(1) | $ | 51.82 | 257,597(1) | $ | 1,164,373 | |||||||
May 2012 | 133,694(1) | $ | 51.27 | 133,694(1) | $ | 1,157,519 | |||||||
May 2012 | 474,100(1) | $ | 52.20 | 474,100(1) | $ | 1,132,771 | |||||||
May 2012 | 473,000(1) | $ | 51.60 | 473,000(1) | $ | 1,108,364 | |||||||
May 2012 | 473,000(1) | $ | 52.51 | 473,000(1) | $ | 1,083,527 | |||||||
May 2012 | 474,100(1) | $ | 52.87 | 474,100(1) | $ | 1,058,461 | |||||||
May 2012 | 17,545(1) | $ | 53.52 | 17,545(1) | $ | 1,057,522 |
(1) | Common shares. |
4.1* | First Supplemental Indenture, dated as of June 27, 2012, by and among the Company, The Bank of New York Mellon, a New York banking corporation, as trustee, and BNY Trust Company of Canada, a Canadian trust corporation, as co-trustee to the Indenture, dated as of June 10, 2009, among the Company, The Bank of New York Mellon, a New York banking corporation, as trustee, and BNY Trust Company of Canada, a Canadian trust corporation, as co-trustee. |
4.2* | Fifth Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to Indenture, dated as of September 28, 2010, among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.3* | Fourth Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of November 23, 2010, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.4* | Third Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of February 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.5* | Third Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of March 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.6* | Sixth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to Indenture, dated as of September 28, 2010, among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.7* | Fifth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of November 23, 2010, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.8* | Fourth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of February 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.9* | Fourth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of March 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
10.1 | Joinder Agreement, dated June 14, 2012, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012, among the Company, certain subsidiaries of the Company as Guarantors, each of the lenders named therein, J.P. Morgan Securities LLC, Goldman Sachs Lending Partners LLC and Morgan Stanley Senior Funding, Inc., as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A. and Morgan Stanley, as Co-Syndication Agents, JPMorgan, as Issuing Bank, GSLP, as Administrative Agent and Collateral Agent, and the other agents party thereto, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 15, 2012, which is incorporated by reference herein. |
10.2* | Joinder Agreement, dated July 9, 2012, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012, among the Company, certain subsidiaries of the Company as Guarantors, each of the lenders named therein, J.P. Morgan Securities LLC, Goldman Sachs Lending Partners LLC and Morgan Stanley Senior Funding, Inc., as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A. and Morgan Stanley, as Co-Syndication Agents, JPMorgan, as Issuing Bank, GSLP, as Administrative Agent and Collateral Agent, and the other agents party thereto. |
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† |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase† |
101.LAB | XBRL Taxonomy Extension Label Linkbase† |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase† |
101.DEF | XBRL Taxonomy Extension Definition Linkbase† |
* | Filed herewith. |
† | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
Valeant Pharmaceuticals International, Inc. (Registrant) | |
Date: August 3, 2012 | /s/ J. MICHAEL PEARSON J. Michael Pearson Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
Date: August 3, 2012 | /s/ HOWARD B. SCHILLER Howard B. Schiller Executive Vice-President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit Number | Exhibit Description |
4.1* | First Supplemental Indenture, dated as of June 27, 2012, by and among the Company, The Bank of New York Mellon, a New York banking corporation, as trustee, and BNY Trust Company of Canada, a Canadian trust corporation, as co-trustee to the Indenture, dated as of June 10, 2009, among the Company, The Bank of New York Mellon, a New York banking corporation, as trustee, and BNY Trust Company of Canada, a Canadian trust corporation, as co-trustee. |
4.2* | Fifth Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to Indenture, dated as of September 28, 2010, among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.3* | Fourth Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of November 23, 2010, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.4* | Third Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of February 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.5* | Third Supplemental Indenture, dated as of July 3, 2012, by and among Valeant, Valeant Pharmaceuticals Holdings (Barbados) SRL, Valeant International Bermuda, Valeant Laboratories International Bermuda, Valeant Pharmaceuticals Holdings Bermuda, Valeant Pharmaceuticals Nominee Bermuda, Valeant Pharmaceuticals Luxembourg S.à.r.l., Valeant Pharmaceuticals Ireland, and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of March 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.6* | Sixth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to Indenture, dated as of September 28, 2010, among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.7* | Fifth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of November 23, 2010, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.8* | Fourth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of February 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
4.9* | Fourth Supplemental Indenture, dated as of August 2, 2012, by and among Valeant, Orapharma, Inc., Orapharma Topco Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the Indenture, dated as of March 8, 2011, by and among Valeant, the Company, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. |
10.1 | Joinder Agreement, dated June 14, 2012, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012, among the Company, certain subsidiaries of the Company as Guarantors, each of the lenders named therein, J.P. Morgan Securities LLC, Goldman Sachs Lending Partners LLC and Morgan Stanley Senior Funding, Inc., as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A. and Morgan Stanley, as Co-Syndication Agents, JPMorgan, as Issuing Bank, GSLP, as Administrative Agent and Collateral Agent, and the other agents party thereto, originally filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 15, 2012, which is incorporated by reference herein. |
10.2* | Joinder Agreement, dated July 9, 2012, to the Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012, among the Company, certain subsidiaries of the Company as Guarantors, each of the lenders named therein, J.P. Morgan Securities LLC, Goldman Sachs Lending Partners LLC and Morgan Stanley Senior Funding, Inc., as Joint Lead Arrangers and Joint Bookrunners, JPMorgan Chase Bank, N.A. and Morgan Stanley, as Co-Syndication Agents, JPMorgan, as Issuing Bank, GSLP, as Administrative Agent and Collateral Agent, and the other agents party thereto. |
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† |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase† |
101.LAB | XBRL Taxonomy Extension Label Linkbase† |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase† |
101.DEF | XBRL Taxonomy Extension Definition Linkbase† |
* | Filed herewith. |
† | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. | ||||
By: | /s/ Howard B. Schiller | |||
Name: | Howard B. Schiller | |||
Title: | Executive Vice President and Chief Financial Officer |
THE BANK OF NEW YORK MELLON, as Trustee | ||||
By: | /s/ Catherine F. Donohue | |||
Name: | Catherine F. Donohue | |||
Title: | Vice President |
BNY TRUST COMPANY OF CANADA, as Co-Trustee | ||||
By: | /s/ George Bragg | |||
Name: | George Bragg | |||
Title: | Authorized Signatory |
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/ Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | VALEANT PHARMACEUTICALS HOLDINGS (BARBADOS) SRL | ||||
By: | /s/ Mauricio Zavala | ||||
Name: | Mauricio Zavala | ||||
Title: | Manager and Assistant Secretary | ||||
By: | /s/ Rich Wichansky | ||||
Name: | Rich Wichansky | ||||
Title: | Manager | ||||
VALEANT PHARMACEUTICALS LUXEMBOURG S.à r.l. | |||||
By: | /s/ Bruce Goins | ||||
Name: | Bruce Goins | ||||
Title: | Manager | ||||
By: | /s/ Kuy Ly Ang | ||||
Name: | Kuy Ly Ang | ||||
Title: | Manager | ||||
GIVEN UNDER THE COMMON SEAL OF VALEANT PHARMACEUTICALS IRELAND and DELIVERED as a DEED in the presence of | |||||
/s/ Graham Jackson | |||||
Name: | Graham Jackson | ||||
Title: | Director and General Manager | ||||
/s/ Garrett Dempsey | |||||
Name: | Garrett Dempsey | ||||
Title: | Director | ||||
VALEANT INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT LABORATORIES INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS HOLDINGS BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS NOMINEE BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director |
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/ Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | VALEANT PHARMACEUTICALS HOLDINGS (BARBADOS) SRL | ||||
By: | /s/ Mauricio Zavala | ||||
Name: | Mauricio Zavala | ||||
Title: | Manager and Assistant Secretary | ||||
By: | /s/ Rich Wichansky | ||||
Name: | Rich Wichansky | ||||
Title: | Manager | ||||
VALEANT PHARMACEUTICALS LUXEMBOURG S.à.r.l. | |||||
By: | /s/ Bruce Goins | ||||
Name: | Bruce Goins | ||||
Title: | Manager | ||||
By: | /s/ Kuy Ly Ang | ||||
Name: | Kuy Ly Ang | ||||
Title: | Manager | ||||
GIVEN UNDER THE COMMON SEAL OF VALEANT PHARMACEUTICALS IRELAND and DELIVERED as a DEED in the presence of | |||||
/s/ Graham Jackson | |||||
Name: | Graham Jackson | ||||
Title: | Director and General Manager | ||||
/s/ Garrett Dempsey | |||||
Name: | Garrett Dempsey | ||||
Title: | Director | ||||
VALEANT INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT LABORATORIES INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS HOLDINGS BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS NOMINEE BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director |
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/ Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | VALEANT PHARMACEUTICALS HOLDINGS (BARBADOS) SRL | ||||
By: | /s/ Mauricio Zavala | ||||
Name: | Mauricio Zavala | ||||
Title: | Manager and Assistant Secretary | ||||
By: | /s/ Rich Wichansky | ||||
Name: | Rich Wichansky | ||||
Title: | Manager | ||||
VALEANT PHARMACEUTICALS LUXEMBOURG S.à.r.l. | |||||
By: | /s/ Bruce Goins | ||||
Name: | Bruce Goins | ||||
Title: | Manager | ||||
By: | /s/ Kuy Ly Ang | ||||
Name: | Kuy Ly Ang | ||||
Title: | Manager | ||||
GIVEN UNDER THE COMMON SEAL OF VALEANT PHARMACEUTICALS IRELAND and DELIVERED as a DEED in the presence of | |||||
/s/ Graham Jackson | |||||
Name: | Graham Jackson | ||||
Title: | Director and General Manager | ||||
/s/ Garrett Dempsey | |||||
Name: | Garrett Dempsey | ||||
Title: | Director |
VALEANT INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT LABORATORIES INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS HOLDINGS BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS NOMINEE BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director |
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/ Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | VALEANT PHARMACEUTICALS HOLDINGS (BARBADOS) SRL | ||||
By: | /s/ Mauricio Zavala | ||||
Name: | Mauricio Zavala | ||||
Title: | Manager and Assistant Secretary | ||||
By: | /s/ Rich Wichansky | ||||
Name: | Rich Wichansky | ||||
Title: | Manager | ||||
VALEANT PHARMACEUTICALS LUXEMBOURG S.à.r.l. | |||||
By: | /s/ Bruce Goins | ||||
Name: | Bruce Goins | ||||
Title: | Manager | ||||
By: | /s/ Kuy Ly Ang | ||||
Name: | Kuy Ly Ang | ||||
Title: | Manager | ||||
GIVEN UNDER THE COMMON SEAL OF VALEANT PHARMACEUTICALS IRELAND and DELIVERED as a DEED in the presence of | |||||
/s/ Graham Jackson | |||||
Name: | Graham Jackson | ||||
Title: | Director and General Manager | ||||
/s/ Garrett Dempsey | |||||
Name: | Garrett Dempsey | ||||
Title: | Director | ||||
VALEANT INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT LABORATORIES INTERNATIONAL BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS HOLDINGS BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director | ||||
VALEANT PHARMACEUTICALS NOMINEE BERMUDA | |||||
By: | /s/ Peter McCurdy | ||||
Name: | Peter McCurdy | ||||
Title: | Director, President and Assistant Secretary | ||||
By: | /s/ Simon Payne | ||||
Name: | Simon Payne | ||||
Title: | Director |
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | ORAPHARMA, INC. | |||||
By: | /s/Janet Vergis | |||||
Name: | Janet Vergis | |||||
Title: | President | |||||
ORAPHARMA TOPCO HOLDINGS, INC. | ||||||
By: | /s/Howard Schiller | |||||
Name: | Howard Schiller | |||||
Title: | Executive Vice President, Chief Financial Officer and Treasurer | |||||
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | ORAPHARMA, INC. | |||||
By: | /s/Janet Vergis | |||||
Name: | Janet Vergis | |||||
Title: | President | |||||
ORAPHARMA TOPCO HOLDINGS, INC. | ||||||
By: | /s/Howard Schiller | |||||
Name: | Howard Schiller | |||||
Title: | Executive Vice President, Chief Financial Officer and Treasurer | |||||
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | ORAPHARMA, INC. | |||||
By: | /s/Janet Vergis | |||||
Name: | Janet Vergis | |||||
Title: | President | |||||
ORAPHARMA TOPCO HOLDINGS, INC. | ||||||
By: | /s/Howard Schiller | |||||
Name: | Howard Schiller | |||||
Title: | Executive Vice President, Chief Financial Officer and Treasurer | |||||
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
Company: | VALEANT PHARMACEUTICALS INTERNATIONAL | ||||
By: | /s/Rajiv De Silva | ||||
Name: | Rajiv De Silva | ||||
Title: | President and Chief Operating Officer | ||||
New Guarantors: | ORAPHARMA, INC. | |||||
By: | /s/Janet Vergis | |||||
Name: | Janet Vergis | |||||
Title: | President | |||||
ORAPHARMA TOPCO HOLDINGS, INC. | ||||||
By: | /s/Howard Schiller | |||||
Name: | Howard Schiller | |||||
Title: | Executive Vice President, Chief Financial Officer and Treasurer | |||||
Trustee: | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee | ||||
By: | /s/ Melonee Young | ||||
Name: | Melonee Young | ||||
Title: | Authorized Signatory | ||||
1. | Applicable Margin. The Applicable Margin for each New Term Loan made pursuant to this Agreement (each a “Series B Tranche B Term Loan”) shall mean, as of any date of determination, (A) with respect to Series B Tranche B Term Loans that are Eurodollar Loans, 3.75% per annum, and (B) with respect to Series B Tranche B Term Loans that are Base Rate Loans, 2.75% per annum. |
2. | Principal Payments. Borrower shall make principal payments on the Series B Tranche B Term Loans in installments on the dates and in the amounts equal to the percentage set forth below of an amount equal to the aggregate principal amount of the Series B Tranche B Term Loans outstanding as of the date hereof: |
Amortization Date | Series B Tranche B Term Loan Installments |
September 30, 2012 | 0.25% |
December 31, 2012 | 0.25% |
March 31, 2013 | 0.25% |
June 30, 2013 | 0.25% |
September 30, 2013 | 0.25% |
December 31, 2013 | 0.25% |
March 31, 2014 | 0.25% |
June 30, 2014 | 0.25% |
September 30, 2014 | 0.25% |
December 31, 2014 | 0.25% |
March 31, 2015 | 0.25% |
June 30, 2015 | 0.25% |
September 30, 2015 | 0.25% |
December 31, 2015 | 0.25% |
March 31, 2016 | 0.25% |
June 30, 2016 | 0.25% |
September 30, 2016 | 0.25% |
December 31, 2016 | 0.25% |
March 31, 2017 | 0.25% |
June 30, 2017 | 0.25% |
September 30, 2017 | 0.25% |
December 31, 2017 | 0.25% |
March 31, 2018 | 0.25% |
June 30, 2018 | 0.25% |
September 30, 2018 | 0.25% |
December 31, 2018 | 0.25% |
Tranche B Term Loan Maturity Date | Remaining Balance |
3. | Voluntary and Mandatory Prepayments. Scheduled installments of principal of the Series B Tranche B Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Series B Tranche B Term Loans in accordance with Sections 2.12, 2.13 and 2.14 of the Credit Agreement respectively. |
4. | Closing Fee. Borrower agrees to pay on the date hereof to Administrative Agent, for the account of each New Term Loan Lender party to this Agreement, as fee compensation for the funding of such New Term Loan Lender’s Series B Tranche B Term Loans, a closing fee in an amount equal to 2.00% of the aggregate principal amount of such New Term Loan Lender’s Series B Tranche B Term Loans funded as of the date hereof. |
5. | Prepayment Premium. In the event that on or prior to the first anniversary of the Series A Tranche B Term Loan Closing Date, the Borrower (x) makes any prepayment of the Series B Tranche B Term Loans in connection with any Repricing Transaction or (y) effects any amendment of the Credit Agreement resulting in a Repricing Transaction, the Borrower shall pay to the Administrative Agent, for the ratable account of each of the applicable Lenders, (I) in the case of clause (x) above, a prepayment premium of 1% of the amount of the Series B Tranche B Term Loans being prepaid and (II) in the case of clause (y) above, a payment equal to 1% of the aggregate amount of the applicable Series B Tranche B Term Loans outstanding immediately prior to such amendment. |
6. | Proposed Borrowing. In accordance with Section 2.25 of the Credit Agreement, Borrower has previously delivered to Administrative Agent an executed Funding Notice for Series B Tranche B Term Loans, requesting a proposed borrowing in the principal amount of $100,000,000 (the “Proposed Borrowing”) on the date hereof (the “Series B Tranche B Term Loan Funding Date”). Each New Term Loan Lender shall make its Series B Tranche B Term Loan available to Administrative Agent not later than 11:00 a.m. (New York City time) on the date hereof, by wire transfer of same day funds in Dollars at the Principal Office designated by Administrative Agent. Promptly upon receipt thereof, Administrative Agent shall make the proceeds of the Series B Tranche B Term Loans available to Borrower on the date hereof by causing an amount of same day funds in Dollars equal to the proceeds of all such loans received by Administrative Agent from New Term Loan Lenders to be credited to the account of Borrower, at the Principal Office designated by Administrative Agent or to such other account as may be designated in writing to Administrative Agent by Borrower. |
7. | New Lenders. Each New Term Loan Lender (other than any New Term Loan Lender that, immediately prior to the execution of this Agreement, is a “Lender” under the Credit Agreement) acknowledges and agrees that upon its execution of this Agreement its Series B Tranche B Term Loan Commitments shall be effective and that such New Term Loan Lender shall become a “Lender” under, and for all purposes of, the Credit Agreement and the other Credit Documents, |
8. | Credit Agreement Governs. Series B Tranche B Term Loans shall be subject to the provisions of the Credit Agreement and the other Credit Documents, except as set forth in this Agreement, and shall constitute Tranche B Term Loans thereunder. For the avoidance of doubt, Section 5 of this Agreement shall supersede the final paragraph of Section 2.13(a) of the Credit Agreement with respect to Series B Tranche B Term Loans. |
9. | Borrower’s Certifications. By its execution of this Agreement, the undersigned officer, to the best of his or her knowledge, and Borrower hereby certify that: |
i. | The representations and warranties contained in the Credit Agreement and the other Credit Documents are true and correct in all material respects on and as of the date hereof to the same extent as though made on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date; |
ii. | No event has occurred and is continuing or would result from the consummation of the Proposed Borrowing contemplated hereby that would constitute a Default or an Event of Default; and |
iii. | Borrower has performed in all material respects all agreements and satisfied all conditions which the Credit Agreement provides shall be performed or satisfied by it on or before the date hereof in connection with the Proposed Borrowing. |
10. | Borrower Covenants. By its execution of this Agreement, Borrower hereby covenants that: |
i. | Borrower shall deliver or cause to be delivered the following legal opinions and documents: originally executed copies of the favorable written opinions of (a) Skadden, Arps, Slate, Meagher & Flom LLP, U.S. counsel to the Credit Parties, (b) Chancery Chambers, special Barbados counsel to the Credit Parties, (c) Norton Rose OR LLP, special Canadian counsel to the Credit Parties and (d) Baker & McKenzie, special Luxembourg counsel to the Credit Parties, together with all other legal opinions and other documents reasonably requested by Administrative Agent in connection with this Agreement; and |
ii. | Set forth on the attached Officers’ Certificate are the calculations (in reasonable detail) demonstrating compliance, on a Pro Forma Basis after giving effect to the New Term Loans and the application of the proceeds thereof, with the financial tests described in Section 6.7 of the Credit Agreement as of the last day of the most recently ended Fiscal Quarter after giving effect to such New Term Loan Commitments. |
11. | Eligible Assignee. By its execution of this Agreement, each New Term Loan Lender (other than any New Term Loan Lender that, immediately prior to the execution of this Agreement, is a “Lender” under the Credit Agreement) represents and warrants that it is an Eligible Assignee. |
12. | Notice. For purposes of the Credit Agreement, the initial notice address of each New Term Loan |
13. | Non‑U.S. Lenders. For each New Term Loan Lender that is a Non‑U.S. Lender, delivered herewith to Administrative Agent are such forms, certificates or other evidence with respect to United States federal income tax withholding matters as such New Term Loan Lender may be required to deliver to Administrative Agent pursuant to subsection 2.20(d) of the Credit Agreement. |
14. | Recordation of the New Loans. Upon execution and delivery hereof, Administrative Agent will record the Series B Tranche B Term Loans made by New Term Loan Lenders pursuant hereto in the Register. |
15. | Reaffirmation. |
i. | Each Credit Party hereby expressly acknowledges the terms of this Agreement and reaffirms, as of the date hereof, the covenants and agreements contained in each Credit Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Agreement and the transactions contemplated hereby. |
ii. | Each Credit Party, by its signature below, hereby affirms and confirms (a) its obligations under each of the Credit Documents to which it is a party, and (b) the pledge of and/or grant of a security interest or hypothec in its assets as Collateral to secure such Obligations, all as provided in the Collateral Documents as originally executed, and acknowledges and agrees that such guarantee, pledge and/or grant continue in full force and effect in respect of, and to secure, such Obligations under the Credit Agreement and the other Credit Documents. |
ii. | Each Credit Party acknowledges and agrees that each of the Credit Documents in existence as of the date hereof shall be henceforth read and construed in accordance with and so as to give full force and effect to the ratifications, confirmations, acknowledgements and agreements made herein. |
16. | Amendment, Modification and Waiver. This Agreement may not be amended, modified or waived except by an instrument or instruments in writing signed and delivered on behalf of each of the parties hereto. |
17. | Entire Agreement. This Agreement, the Credit Agreement and the other Credit Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subject matter hereof. It is understood and agreed that each reference in each Credit Document to the Credit Agreement, whether direct or indirect, shall hereafter be deemed to be a reference to the Credit Agreement as amended and supplemented hereby and that this Agreement is a Credit Document. |
18. | GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. |
19. | Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as would be enforceable. |
20. | Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. |
GOLDMAN SACHS LENDING PARTNERS LLC, as a “New Term Loan Lender” | ||
By: | /s/ Robert Ehudin | |
Name: Robert Ehudin | ||
Title: Authorized Signatory | ||
Notice Address: Goldman Sachs & Co. 30 Hudson Street, 5th Floor Jersey City, NJ 07302 | ||
Attention: Michelle Latzon | ||
Telephone: 212-934-3921 | ||
Facsimile: 646-769-7700 |
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. | ||
as Borrower | ||
By: | /s/ J. Michael Pearson | |
Name: J. Michael Pearson | ||
Title: Chairman & Chief Executive Officer |
VALEANT PHARMACEUTICALS INTERNATIONAL | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President & Chief Operating Officer |
ATON PHARMA, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President & Chief Operating Officer |
CORIA LABORATORIES, LTD. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President & Chief Operating Officer |
DOW PHARMACEUTICAL SCIENCES, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President & Chief Operating Officer |
VALEANT PHARMACEUTICALS NORTH AMERICA LLC | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
DR. LEWINN’S PRIVATE FORMULA INTERNATIONAL, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
OCEANSIDE PHARMACEUTICALS, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
PRINCETON PHARMA HOLDINGS, LLC | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
PRIVATE FORMULA CORP. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
RENAUD SKIN CARE LABORATORIES, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
VALEANT BIOMEDICALS, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
BIOVAIL AMERICAS CORP. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
PRESTWICK PHARMACEUTICALS, INC. | ||
as Guarantor | ||
By: | /s/ Rajiv De Silva | |
Name: Rajiv De Silva | ||
Title: President |
VALEANT HOLDINGS (BARBADOS) SRL | ||
as Guarantor | ||
By: | /s/ Alexander Matheson | |
Name: Alexander Matheson | ||
Title: Senior Director, Business & Legal Affairs |
HYTHE PROPERTY INCORPORATED | ||
as Guarantor | ||
By: | /s/ Alexander Matheson | |
Name: Alexander Matheson | ||
Title: Senior Director, Business & Legal Affairs |
VALEANT PHARMACEUTICALS HOLDINGS (BARBADOS) SRL | ||
as Guarantor | ||
By: | /s/ Mauricio Zavala | |
Name: Mauricio Zavala | ||
Title: Manager and Assistant Secretary |
VALEANT INTERNATIONAL BERMUDA | ||
as Guarantor | ||
By: | /s/ Peter McCurdy | |
Name: Peter McCurdy | ||
Title: Director and President & Asst. Secretary |
VALEANT LABORATORIES INTERNATIONAL BERMUDA | ||
as Guarantor | ||
By: | /s/ Peter McCurdy | |
Name: Peter McCurdy | ||
Title: Director and President & Asst. Secretary |
VALEANT PHARMACEUTICALS HOLDINGS BERMUDA | ||
as Guarantor | ||
By: | /s/ Peter McCurdy | |
Name: Peter McCurdy | ||
Title: Director and President & Asst. Secretary |
VALEANT PHARMACEUTICALS NOMINEE BERMUDA | ||
as Guarantor | ||
By: | /s/ Peter McCurdy | |
Name: Peter McCurdy | ||
Title: Director and President & Asst. Secretary |
VALEANT CANADA GP LIMITED | ||
as Guarantor | ||
By: | /s/ Robert R. Chai-Onn | |
Name: Robert R. Chai-Onn | ||
Title: Vice President |
VALEANT CANADA LP by its sole general partner, VALEANT CANADA GP LIMITED | ||
as Guarantor | ||
By: | /s/ Robert R. Chai-Onn | |
Name: Robert R. Chai-Onn | ||
Title: Director |
V-BAC HOLDING CORP. | ||
as Guarantor | ||
By: | /s/ Robert R. Chai-Onn | |
Name: Robert R. Chai-Onn | ||
Title:Vice President |
VALEANT PHARMACEUTICALS IRELAND | ||
as Guarantor | ||
By: | /s/ Graham Jackson | |
Name: Graham Jackson | ||
Title: Director |
BIOVAIL INTERNATIONAL, S.À R.L. | ||
as Guarantor | ||
By: | /s/ Kuy Ly Ang | |
Name: Kuy Ly Ang | ||
Title: Director |
VALEANT PHARMACEUTICALS LUXEMBOURG S.À R.L. | ||
as Guarantor | ||
By: | /s/ Kuy Ly Ang | |
Name: Kuy Ly Ang | ||
Title: Director |
PHARMASWISS SA | ||
as Guarantor | ||
By: | /s/ Matthias Courvoisier | |
Name: Matthias Courvoisier | ||
Title: Director |
Signed by | ||
Valeant Holdco 2 Pty Ltd (ACN 154 341 367) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Rajiv De Silva | |
Signature of director | Signature of director | |
Robert Chai-Onn | Rajiv De Silva | |
Name of director (please print) | Name of director (please print) |
Signed by | ||
Wirra Holdings Pty Limited (ACN 122 216 577) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Howard B. Schiller | |
Signature of director | Signature of director | |
Robert Chai-Onn | Howard B. Schiller | |
Name of director (please print) | Name of director (please print) |
Signed by | ||
Wirra Operations Pty Limited (ACN 122 250 088) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Howard B. Schiller | |
Signature of director | Signature of director | |
Robert Chai-Onn | Howard B. Schiller | |
Name of director (please print) | Name of director (please print) |
Signed by | ||
iNova Pharmaceuticals (Australia) Pty Limited (ACN 000 222 408) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Howard B. Schiller | |
Signature of director | Signature of director | |
Robert Chai-Onn | Howard B. Schiller | |
Name of director (please print) | Name of director (please print) |
Signed by | ||
iNova Sub Pty Limited (ACN 134 398 815) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Howard B. Schiller | |
Signature of director | Signature of director | |
Robert Chai-Onn | Howard B. Schiller | |
Name of director (please print) | Name of director (please print) |
Signed by | ||
Wirra IP Pty Limited (ACN 122 536 350) | ||
as Guarantor | ||
in accordance with section 127 of the Corporations Act 2001 by two directors: | ||
/s/ Robert Chai-Onn | /s/ Howard B. Schiller | |
Signature of director | Signature of director | |
Robert Chai-Onn | Howard B. Schiller | |
Name of director (please print) | Name of director (please print) |
Consented to by: | ||
GOLDMAN SACHS LENDING PARTNERS LLC | ||
As Administrative Agent and Collateral Agent | ||
By: /s/ Robert Ehudin | ||
Authorized Signatory |
Name of Lender | Type of Commitment | Amount |
GOLDMAN SACHS LENDING PARTNERS LLC | Series B Tranche B Term Loan Commitment | $100,000,000 |
Total: $100,000,000.00 |
1. | I have reviewed this quarterly report on Form 10-Q of Valeant Pharmaceuticals International, Inc. (the “Company”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and |
5. | The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. |
Date: August 3, 2012 | ||
/s/ J. MICHAEL PEARSON | ||
J. Michael Pearson | ||
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Valeant Pharmaceuticals International, Inc. (the “Company”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and |
5. | The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. |
Date: August 3, 2012 | |||
/s/ HOWARD B. SCHILLER | |||
Howard B. Schiller | |||
Executive Vice-President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
1. | The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 3, 2012 | ||
/s/ J. MICHAEL PEARSON | ||
J. Michael Pearson | ||
Chairman of the Board and Chief Executive Officer |
1. | The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 3, 2012 | |||
/s/ HOWARD B. SCHILLER | |||
Howard B. Schiller | |||
Executive Vice-President and Chief Financial Officer |
(LOSS) EARNINGS PER SHARE (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
|
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(LOSS) EARNINGS PER SHARE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of calculation of earnings per share |
|
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Schedule of weighted-average number of common shares outstanding |
|
FAIR VALUE MEASUREMENTS (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Assets: | ||
Marketable securities | $ 6,338 | |
Corporate bonds
|
||
Assets: | ||
Marketable securities | 2,974 | |
Available-for-sale equity securities
|
||
Assets: | ||
Marketable securities | 3,364 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
|
||
Assets: | ||
Money market funds | 204,097 | 27,711 |
Total financial assets | 204,097 | 34,049 |
Cash equivalents | 204,097 | 27,711 |
Marketable securities | 6,338 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate bonds
|
||
Assets: | ||
Total financial assets | 2,974 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Available-for-sale equity securities
|
||
Assets: | ||
Total financial assets | 3,364 | |
Recurring basis | Significant Unobservable Inputs (Level 3)
|
||
Liabilities: | ||
Acquisition-related contingent consideration | (500,386) | (420,084) |
Carrying Value
|
||
Assets: | ||
Marketable securities | 6,338 | |
Carrying Value | Recurring basis
|
||
Assets: | ||
Money market funds | 204,097 | 27,711 |
Total financial assets | 204,097 | 34,049 |
Cash equivalents | 204,097 | 27,711 |
Marketable securities | 6,338 | |
Liabilities: | ||
Acquisition-related contingent consideration | (500,386) | (420,084) |
Carrying Value | Recurring basis | Corporate bonds
|
||
Assets: | ||
Total financial assets | 2,974 | |
Carrying Value | Recurring basis | Available-for-sale equity securities
|
||
Assets: | ||
Total financial assets | $ 3,364 |
BUSINESS COMBINATIONS (Details 7)
|
3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2011
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2011
USD ($)
|
May 31, 2012
PharmaSwiss
USD ($)
|
May 31, 2012
PharmaSwiss
EUR (€)
|
Mar. 31, 2011
PharmaSwiss
item
|
Mar. 31, 2011
PharmaSwiss
USD ($)
|
Mar. 10, 2011
PharmaSwiss
USD ($)
|
Mar. 10, 2011
PharmaSwiss
EUR (€)
|
Mar. 09, 2011
PharmaSwiss
EUR (€)
|
Jun. 30, 2012
PharmaSwiss
Emerging Markets
USD ($)
|
|
Business Combinations | ||||||||||||
Cash consideration | $ 491,200,000 | € 353,100,000 | ||||||||||
Maximum contingent payment | 41,700,000 | 30,000,000 | ||||||||||
Fair value of contingent payments | 27,500,000 | |||||||||||
Contingent consideration payment | 12,400,000 | 10,000,000 | ||||||||||
Notional amount of foreign currency forward-exchange contract purchased | 130,000,000 | |||||||||||
Gain on settlement of foreign currency forward-exchange contract | 5,100,000 | |||||||||||
Foreign exchange loss recognized on amount bought to finance business acquisition | 2,400,000 | |||||||||||
Remaining foreign currency consideration used to finance transaction of business combination | 220,000,000 | |||||||||||
Net foreign exchange gain recognized in earnings | (4,238,000) | 847,000 | 20,061,000 | 3,654,000 | 2,700,000 | |||||||
Number of therapeutic areas in which broad product portfolio is offered | 7 | |||||||||||
Number of countries of operation | 19 | |||||||||||
Assets acquired and liabilities assumed | ||||||||||||
Goodwill | $ 159,700,000 |
FAIR VALUE MEASUREMENTS (Details 2) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2011
Elidel and Xerese
|
Jun. 30, 2012
iNova
|
Jun. 30, 2012
Acquisition-related contingent consideration
|
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation | |||||||
Balance at the beginning of the period | $ (420,084) | ||||||
Issuances | (126,028) | ||||||
Payments | 61,916 | ||||||
Net Unrealized Loss | (17,568) | ||||||
Foreign Exchange | 1,378 | ||||||
Balance at the end of the period | (500,386) | ||||||
Acquisition-related contingent consideration | $ 7,729 | $ 1,752 | $ 17,568 | $ 2,138 | $ 13,500 | $ 4,000 |
BUSINESS COMBINATIONS (Details 5) (Afexa)
|
6 Months Ended | 12 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
Y
|
Dec. 31, 2011
CAD
|
Oct. 17, 2011
USD ($)
|
Oct. 17, 2011
Amounts Recognized as of Acquisition Date (as previously reported)
USD ($)
|
Jun. 30, 2012
Measurement Period Adjustments
USD ($)
|
Jun. 30, 2012
Amounts Recognized (as adjusted)
USD ($)
|
Jun. 30, 2012
Product brands
Y
|
Oct. 17, 2011
Product brands
Amounts Recognized as of Acquisition Date (as previously reported)
USD ($)
|
Jun. 30, 2012
Product brands
Measurement Period Adjustments
USD ($)
|
Jun. 30, 2012
Product brands
Amounts Recognized (as adjusted)
USD ($)
|
Jun. 30, 2012
Patented technology
Y
|
Oct. 17, 2011
Patented technology
Amounts Recognized as of Acquisition Date (as previously reported)
USD ($)
|
Jun. 30, 2012
Patented technology
Amounts Recognized (as adjusted)
USD ($)
|
|
Business Combinations | |||||||||||||
Outstanding common shares acquired, percentage | 100.00% | 73.80% | |||||||||||
Outstanding common shares acquired | 80,929,921 | ||||||||||||
Cash consideration | $ 67,700,000 | ||||||||||||
Noncontrolling interest, percent | 26.20% | ||||||||||||
Noncontrolling interest, fair value | 23,800,000 | ||||||||||||
Amount paid to remaining shareholders (in Canadian dollars per share) | 0.85 | ||||||||||||
Assets acquired and liabilities assumed | |||||||||||||
Cash and cash equivalents | 1,558,000 | 1,558,000 | |||||||||||
Accounts receivable | 9,436,000 | (1,524,000) | 7,912,000 | ||||||||||
Inventories | 22,489,000 | 22,489,000 | |||||||||||
Other current assets | 5,406,000 | 5,406,000 | |||||||||||
Property and equipment | 8,766,000 | 8,766,000 | |||||||||||
Identifiable intangible assets | 80,580,000 | (5,850,000) | 74,730,000 | 65,194,000 | (5,850,000) | 59,344,000 | 15,386,000 | 15,386,000 | |||||
Current liabilities | (18,104,000) | (18,104,000) | |||||||||||
Deferred income taxes, net | (20,533,000) | 1,462,000 | (19,071,000) | ||||||||||
Other non-current liabilities | (1,138,000) | (1,138,000) | |||||||||||
Total identifiable net assets | 88,460,000 | (5,912,000) | 82,548,000 | ||||||||||
Goodwill | 3,070,000 | 5,912,000 | 8,982,000 | ||||||||||
Total fair value of consideration transferred | 91,530,000 | 91,530,000 | |||||||||||
Fair value of accounts receivable acquired | 7,900,000 | ||||||||||||
Gross contractual amount of trade accounts receivable acquired | $ 7,900,000 | ||||||||||||
Estimated weighted-average useful life (in years) | 10 | 11 | 7 |
INVENTORIES (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the components of inventories |
|
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