Valeant Pharmaceuticals Reports Third Quarter 2015 Financial Results

Valeant Pharmaceuticals International, Inc.

 Table 1 

Condensed Consolidated Statements of Income (Loss)

For the Three and Nine Months Ended September 30, 2015 and 2014

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In millions)

2015

2014

2015

2014

Product sales

$      2,748.2

$      2,022.9

$      7,590.1

$       5,868.1

Other revenues

38.6

33.3

120.0

115.4

Total revenues

2,786.8

2,056.2

7,710.1

5,983.5

Cost of goods sold (exclusive of amortization and impairments of finite-lived
intangible assets shown separately below)

634.6

545.8

1,864.9

1,619.5

Cost of other revenues

13.6

15.0

43.1

45.3

Selling, general and administrative ("SG&A")

697.6

504.1

1,956.9

1,501.8

Research and development

101.6

59.1

238.5

186.9

Acquisition-related contingent consideration

3.8

4.0

22.6

14.8

In-process research and development impairments and other charges

95.8

19.9

108.1

40.3

Other (income)/expense

30.2

(232.0)

213.2

(275.7)

Restructuring, integration, acquisition-related and other costs

82.6

63.3

300.3

341.1

Amortization and impairments of finite-lived intangible assets

679.2

393.1

1,629.8

1,113.9

2,339.0

1,372.3

6,377.4

4,587.9

Operating income (loss)

447.8

683.9

1,332.7

1,395.6

Interest expense, net

(419.5)

(257.6)

(1,128.2)

(742.3)

Loss on extinguishment of debt

-

-

(20.0)

(93.7)

Gain (loss) on investments, net

-

3.4

-

5.9

Foreign exchange and other

(34.0)

(53.0)

(99.5)

(63.0)

Income (loss) before (recovery of) provision for income taxes

(5.7)

376.7

85.0

502.5

(Recovery of) provision for income taxes

(57.4)

100.3

10.4

124.4

Net income (loss)

51.7

276.4

74.6

378.1

Less:  Net income (loss) attributable to noncontrolling interest

2.2

1.0

4.4

(0.5)

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$           49.5

$         275.4

$           70.2

$          378.6

Earnings (loss) per share:

Basic:

Earnings (loss)

$           0.14

$           0.82

$           0.21

$            1.13

Shares used in per share computation

344.9

335.4

340.8

335.2

Diluted:

Earnings (loss)

$           0.14

$           0.81

$           0.20

$            1.11

Shares used in per share computation

351.0

341.3

347.2

341.4

Valeant Pharmaceuticals International, Inc.

 Table 2 

Reconciliation of GAAP EPS to Cash EPS 

For the Three and Nine Months Ended September 30, 2015 and 2014

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In millions)

2015

2014

2015

2014

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$          49.5

$        275.4

$           70.2

$          378.6

Non-GAAP adjustments (a):

Inventory step-up (b)

27.2

12.3

97.7

21.9

PP&E step-up/down (c)

6.4

6.3

21.7

15.8

Stock-based compensation (d)

15.5

(1.9)

17.1

2.4

Acquisition-related contingent consideration (e)

3.8

4.0

22.6

14.8

In-process research and development impairments and other charges (f)

95.8

19.9

108.1

40.3

Other (income)/expense (g)

30.2

(232.0)

213.2

(275.7)

Restructuring, integration, acquisition-related and other costs (h)

82.6

63.3

300.3

341.1

Amortization and impairments of finite-lived intangible assets and other non-GAAP charges (i)

683.1

405.1

1,639.8

1,149.8

944.6

277.0

2,420.5

1,310.4

Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest (j)

20.3

34.7

131.5

58.1

Loss on extinguishment of debt

-

-

20.0

93.7

(Gain) loss on disposal of fixed assets and assets held for sale/impairment, net

7.4

1.9

7.9

2.7

Foreign exchange and other (k)

31.0

55.2

96.6

62.4

Tax (l)

(91.5)

74.6

(79.0)

63.2

Total adjustments

911.8

443.4

2,597.5

1,590.5

Adjusted net income attributable to Valeant Pharmaceuticals International, Inc.

$        961.3

$        718.8

$      2,667.7

$       1,969.1

GAAP earnings (loss) per share - diluted

$          0.14

$          0.81

$           0.20

$            1.11

Cash earnings per share - diluted

$          2.74

$          2.11

$           7.68

$            5.77

(a) See footnote (a) to Table 2a and Table 2b.

(b) See footnote (b) to Table 2a and Table 2b.

(c) See footnote (c) & (d) to Table 2a and Table 2b.

(d) See footnote (d) to Table 2a and Table 2b.

(e) See footnote (e) to Table 2a and Table 2b.

(f) See footnote (f) to Table 2a and Table 2b.

(g) See footnote (g) to Table 2a and Table 2b.

(h) See footnote (h) (i) to Table 2a and Table 2b.

(i) See footnote (c) to Table 2a and Table 2b.

(j) See footnote (j) to Table 2a and Table 2b.

(k) See footnote (k) to Table 2a and Table 2b.

(l) See footnote (l) to Table 2a and Table 2b.

Valeant Pharmaceuticals International, Inc.

 Table 2a 

Reconciliation of GAAP EPS to Cash EPS 

For the Three Months Ended September 30, 2015 and 2014

Non-GAAP Adjustments^(a) for

Three Months Ended

September 30,

(In millions)

2015

2014

Product sales

$             -

$              -

Other revenues

-

-

Total revenues

-

-

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(36.2)

 (b)(c) 

(27.0)

 (b)(c) 

Cost of other revenues

-

-

Selling, general and administrative ("SG&A")

(23.9)

 (d) 

(3.3)

 (d) 

Research and development

(0.3)

(0.3)

Acquisition-related contingent consideration

(3.8)

 (e) 

(4.0)

 (e) 

In-process research and development impairments and other charges

(95.8)

 (f) 

(19.9)

 (f) 

Other income/(expense)

(30.2)

 (g) 

232.0

 (g) 

Restructuring, integration, acquisition-related and other costs

(82.6)

 (h) 

(63.3)

 (i) 

Amortization and impairments of finite-lived intangible assets

(679.2)

(393.1)

(952.0)

(278.9)

Operating income (loss)

952.0

278.9

Interest expense, net

20.3

 (j) 

34.7

 (j) 

Loss on extinguishment of debt

-

-

(Gain) loss on investments, net

-

-

Foreign exchange and other

31.0

 (k) 

55.2

 (k) 

Income (loss) before (recovery of) provision for income taxes

1,003.3

368.8

(Recovery of) provision for income taxes

(91.5)

 (l) 

74.6

 (l) 

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$       911.8

$         443.4

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$         2.60

$           1.30

Shares used in per share computation

351.0

341.3

(a) To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration, acquisition-related and other costs, In-process research and development, impairments and other charges, ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization including intangible asset impairments and other non-cash charges, amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets sold/held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. 

Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP.  Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. 

(b) ASC 805, Business Combinations, requires an inventory fair value step-up whose total impact for the three months ended September 30, 2015 is $27.2 million primarily due to the acquisition of Salix Pharmaceuticals Ltd on April 1, 2015.  For the three months ended September 30, 2014 the impact of inventory fair value step-up is $12.3 million primarily due to the acquisition of PreCision Dermatology Inc. on July 7, 2014 and other smaller acquisitions.

(c) For the three months ended September 30, 2015 and 2014, cost of goods sold includes $4.0 million and $7.6 million, respectively, of costs associated with integration related tech transfers, PP&E step up of $5.1 million and $5.6 million, respectively, primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated.  For the three months ended September 30, 2014, cost of goods sold also includes $1.5 million amortization of a BMS fair value inventory adjustment.

(d) For the three months ended September 30, 2015, SG&A primarily includes $15.5 million of stock-based compensation which primarily reflects the expense associated with the modified equity awards for an executive who retired in June 2015 and PP&E step up of $1.0 million primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated.  For the three months ended September 30, 2014, SG&A primarily includes ($1.9) million of stock-based compensation which reflects the acceleration of certain equity instruments, $1.9 million loss on assets held for sale and fees associated with the proposed Allergan transaction, $1.7 million.

(e) Net expense/(income) from the changes in acquisition-related contingent consideration for the three months ended September 30, 2015 and 2014 is $3.8 million and $4.0 million, respectively.

(f) In-process research and development impairments and other charges for the three months ended September 30, 2015 of $95.8 million is primarily due to the write-off of the Rifaximin SSD development program of $90.2 million.  In-process research and development impairments and other charges for the three months ended September 30, 2014 is $19.9 million due to the write-offs of IPR&D assets including $12.5 million acquired in the Medicis Pharmaceuticals Corporation acquisition in December 2012.

(g) For the three months ended September 30, 2015, other (income)/expense of $30.2 million primarily due to a legal related charge associated with the AntiGrippin® litigation, $25.4 million.  For the three months ended September 30, 2014, other (income)/expense of ($232.0) million primarily relating to the gain on sale of filler and toxin assets, ($323.9) million, offset by $58.5 million loss on sale of Metronidazole 1.3%, a post combination expense of $20.4 million related to acceleration of unvested stock options for PreCision employees and $8.8 million loss on sale of generic tretinoin product rights acquired in the PreCision Dermatology Inc. acquisition.

(h) Restructuring, integration, acquisition-related and other costs of $82.6 million primarily driven by the acquisitions of Salix Pharmaceuticals, Ltd and Dendreon Corporation.   These include $45.7 million of contract terminations, integration consulting, transition services, duplicative labor and other, $18.8 million of other, $8.2 million of employee severance costs, $7.1 million of acquisition costs, $2.2 million of facility closure costs and $0.6 million of non-personnel manufacturing integration costs.

(i) Restructuring, integration, acquisition-related and other costs of $63.3 million primarily relates to the acquisitions of Bausch & Lomb Holdings Incorporated, PreCision Dermatology Inc. and Solta Medical, Inc., and other Valeant restructuring and integration initiatives.  These include $34.4 million of contract terminations, integration consulting, transition services, duplicative labor and other, $15.1 million of employee severance costs, $8.3 million of facility closure costs, $2.1 million of other, $1.8 million of non-personnel manufacturing integration costs and $1.6 million of acquisition costs.

(j) Non-cash interest expense associated with amortization and write-down of deferred financing costs and debt discounts for the three months ended September 30, 2015 and 2014 is $20.3 million and $34.7 million, respectively.  

(k) Unrealized foreign exchange loss on intercompany financing arrangements for the three months ended September 30, 2015 and 2014 is $31.0 million and $55.2 million, respectively. 

(l) Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in deferred taxes.

Valeant Pharmaceuticals International, Inc.

 Table 2b 

Reconciliation of GAAP EPS to Cash EPS 

For the Nine Months Ended September 30, 2015 and 2014

Non-GAAP Adjustments^(a) for

Nine Months Ended

September 30,

(In millions)

2015

2014

Product sales

$              -

$                -

Other revenues

-

-

Total revenues

-

-

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(124.9)

 (b)(c) 

(64.3)

 (b)(c) 

Cost of other revenues

-

-

Selling, general and administrative ("SG&A")

(28.5)

 (d) 

(13.4)

 (d) 

Research and development

(1.0)

(1.0)

Acquisition-related contingent consideration

(22.6)

 (e) 

(14.8)

 (e) 

In-process research and development impairments and other charges

(108.1)

 (f) 

(40.3)

 (f) 

Other income/(expense)

(213.2)

 (g) 

275.7

 (g) 

Restructuring, integration, acquisition-related and other costs

(300.3)

 (h) 

(341.1)

 (i) 

Amortization and impairments of finite-lived intangible assets

(1,629.8)

(1,113.9)

(2,428.4)

(1,313.1)

Operating income (loss)

2,428.4

1,313.1

Interest expense, net

131.5

 (j) 

58.1

 (j) 

Loss on extinguishment of debt

20.0

93.7

Foreign exchange and other

96.6

 (k) 

62.4

 (k) 

Income (loss) before (recovery of) provision for income taxes

2,676.5

1,527.3

(Recovery of) provision for income taxes

(79.0)

 (l) 

63.2

 (l) 

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$      2,597.5

$       1,590.5

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$           7.48

$            4.66

Shares used in per share computation

347.2

341.4

(a) To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the company uses non-GAAP financial measures that exclude certain items, such as amortization of inventory step-up, amortization of alliance product assets & property, plant and equipment step up, stock-based compensation step-up, contingent consideration fair value adjustments, restructuring, integration, acquisition-related and other costs, In-process research and development, impairments and other charges, ("IPR&D"), legal settlements outside the ordinary course of business, the impact of currency fluctuations, amortization including intangible asset impairments and other non-cash charges, amortization and write-down of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of debt, (gain) loss on assets sold/held for sale/impairment, net, (gain) loss on investments, net, and adjusts tax expense to cash taxes. 

Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a meaningful, consistent comparison of the company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP.  Therefore, the information is not necessarily comparable to other companies and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. 

(b) ASC 805, Business Combinations, requires an inventory fair value step-up whose total impact for the nine months ended September 30, 2015 is $97.7 million primarily due to the acquisitions of Salix Pharmaceuticals Ltd on April 1, 2015 and Marathon Pharmaceuticals, LLC on February 10, 2015.  For the nine months ended September 30, 2014, the impact of inventory fair value step-up is $21.9 million primarily relating to the acquisitions of Solta Medical, Inc. on January 23, 2014 and PreCision Dermatology Inc. on July 7, 2014.

(c) For the nine months ended September 30, 2015 and 2014, cost of goods sold includes $10.0 million and $22.2 million, respectively, of costs associated with integration related tech transfers, PP&E step up of $17.2 million and $15.7 million, respectively, primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated.  For the nine months ended September 30, 2014, cost of goods sold also includes $4.5 million amortization of a BMS fair value inventory adjustment.

(d) For the nine months ended September 30, 2015, SG&A primarily includes $17.1 million of stock-based compensation which primarily reflects the expense associated with the modified equity awards for an executive who retired in June 2015 and PP&E step up of $3.5 million primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated.  For the nine months ended September 30, 2014, SG&A primarily includes $2.4 million of stock-based compensation which reflects acceleration of certain equity instruments and registration fees associated with the proposed Allergan transaction, $6.2 million.

(e) Net expense/(income) from the changes in acquisition-related contingent consideration for the nine months ended September 30, 2015 and 2014 is $22.6 million and $14.8 million, respectively.

(f) In-process research and development impairments and other charges for the nine months ended September 30, 2015 of $108.1 million is primarily due to the write-offs of the Rifaximin SSD developmental program, $90.2 million, and Arestin® Peri-Implantitis developmental program, $12.3 million.   In-process research and development impairments and other charges for the nine months ended September 30, 2014, $40.3 million is primarily due to the write-offs of IPR&D assets including $12.5 million acquired in the Medicis Pharmaceutical Corporation acquisition in December 2012, an upfront payment made in connection with an amendment to a license and distribution agreement with a third party, $12.0 million, and payments to third parties with the achievement of specific developmental and regulatory milestones under our R&D programs, including Jublia®, $8.4 million.

(g) For the nine months ended September 30, 2015, other (income)/expense of $213.2 million primarily relates to post-combination expense of $168.4 million related to the acceleration of unvested restricted stock for Salix employees, legal related charge associated with the AntiGrippin® litigation, $25.4 million, and loss on sale of divested assets of $13.0 million.  For the nine months ended September 30, 2014, other (income)/expense of ($275.7) million primarily relating to the gain on sale of filler and toxin assets, ($323.9) million and the reversal of the AntiGrippin® litigation reserve of ($50.0) million, offset by $58.5 million loss on sale of Metronidazole 1.3%, a post combination expense of $20.4 million related to acceleration of unvested stock options for PreCision employees, $8.8 million loss on generic tretinoin product rights acquired in the PreCision Dermatology Inc. acquisition and $5.6 million related to a settlement of a preexisting relationship with respect to the acquisition of Solta Medical, Inc.

(h) Restructuring, integration, acquisition-related and other costs of $300.3 million primarily driven by the acquisitions of Salix Pharmaceuticals, Ltd, Dendreon Corporation and Bausch & Lomb Holdings Incorporated.   These include $128.8 million of contract terminations, integration consulting, transition services, duplicative labor and other, $113.0 million of employee severance costs, $24.9 million of other, $26.3 million of acquisition costs, $5.9 million of facility closure costs and $1.4 million of non-personnel manufacturing integration costs.

(i) Restructuring, integration, acquisition-related and other costs of $341.1 million primarily relates to the acquisitions of Bausch & Lomb Holdings Incorporated, the restructuring of a manufacturing facility in Waterford, Ireland, the acquisition of Solta Medical, Inc., other Valeant restructuring and integration initiatives and the acquisitions of PreCision Dermatology Inc. and OnPharma Inc.  These include $158.3 million of contract terminations, integration consulting, transition services, duplicative labor and other, $118.0 million of employee severance costs, $35.9 million of facility closure costs, $15.4 million of other, $6.3 million of non-personnel manufacturing integration costs, $3.7 million of acquisition costs and $3.5 million of stock-based compensation.

(j) Non-cash interest expense associated with amortization of deferred financing costs and debt discounts for the nine months ended September 30, 2015 and 2014 is $51.1 million and $58.1 million, respectively.  The nine months ended September 30, 2015 also includes $72.4 million write-down of deferred finance costs and $8.0 million of interest expense resulting from the acquisition of Salix Pharmaceuticals, Ltd.

(k) Unrealized foreign exchange loss on intercompany financing arrangements for the nine months ended September 30, 2015 and 2014 is $70.0 million and $62.4 million, respectively.  The nine months ended September 30, 2015 also includes unrealized foreign exchange loss of $26.6M relating to a foreign currency forward-exchange contracts.

(l) Total tax effect of non-GAAP pre-tax adjustments, resolution of uncertain tax positions and change in deferred taxes.

Valeant Pharmaceuticals International, Inc.

 Table 3 

Statement of Revenues - by Segment

For the Three and Nine Months Ended September 30, 2015 and 2014

(In millions)

 Three Months Ended 

September 30,

Revenues(a)(b)

2015
GAAP

2014
GAAP

%
Change

2015
currency
impact

2015
excluding
currency
impact
 non-GAAP

%
Change

    Dermatology

$          465.5

$         305.2

53%

$            -

$         465.5

53%

    Consumer

151.0

141.4

7%

-

151.0

7%

    Ophthalmology Rx

114.3

117.8

-3%

-

114.3

-3%

    Contact Lenses

60.4

44.8

35%

-

60.4

35%

    Surgical

54.6

54.0

1%

-

54.6

1%

    Neuro & Other/Generics

546.5

391.6

40%

-

546.5

40%

    Dental

43.8

32.4

35%

-

43.8

35%

    Oncology/Urology

69.3

-

-

69.3

    GI

462.8

-

-

462.8

  Total U.S.

1,968.2

1,087.2

81%

-

1,968.2

81%

  ROW Developed

352.5

420.7

-16%

67.6

420.1

0%

Developed Markets

2,320.7

1,507.9

54%

67.6

2,388.3

58%

  Emerging Markets-Europe/Middle East/Africa

224.7

295.0

-24%

66.3

291.0

-1%

  Emerging Markets-Latin America

92.6

113.6

-18%

29.8

122.4

8%

  Emerging Markets-Asia

148.8

139.7

7%

8.3

157.1

12%

Emerging Markets

466.1

548.3

-15%

104.4

570.5

4%

Total revenues

$       2,786.8

$      2,056.2

36%

$      172.0

$      2,958.8

44%

 Nine Months Ended 

September 30,

Revenues(a)(b)

2015
GAAP

2014
GAAP

%
Change

2015
currency
impact

2015
excluding
currency
impact
 non-GAAP

%
Change

    Dermatology

$       1,346.6

$         907.7

48%

$            -

$      1,346.6

48%

    Consumer

469.7

446.0

5%

-

469.7

5%

    Ophthalmology Rx

378.8

333.6

14%

-

378.8

14%

    Contact Lenses

159.3

127.8

25%

-

159.3

25%

    Surgical

159.2

158.5

0%

-

159.2

0%

    Neuro & Other/Generics

1,611.8

1,075.8

50%

-

1,611.8

50%

    Dental

137.6

82.3

67%

-

137.6

67%

    Oncology/Urology

173.1

-

-

173.1

    GI

776.1

-

-

776.1

  Total U.S. 

5,212.2

3,131.7

66%

-

5,212.2

66%

  ROW Developed

1,110.5

1,277.7

-13%

204.8

1,315.3

3%

Developed Markets

6,322.7

4,409.4

43%

204.8

6,527.5

48%

  Emerging Markets-Europe/Middle East/Africa

691.7

859.2

-19%

199.2

890.9

4%

    Emerging Markets-Latin America

275.9

322.7

-15%

65.0

340.9

6%

    Emerging Markets-Asia

419.8

392.2

7%

15.4

435.2

11%

Emerging Markets

1,387.4

1,574.1

-12%

279.6

1,667.0

6%

Total revenues

$       7,710.1

$      5,983.5

29%

$      484.4

$      8,194.5

37%

(a) Note: Currency effect for constant currency sales is determined by comparing 2015 reported amounts adjusted to exclude currency impact, calculated using 2014 monthly average exchange rates, to the actual 2014 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth. Constant currency sales as defined and presented by us may not be comparable to similar measures reported by other companies. 

(b) See footnote (a) to Table 2a.

Valeant Pharmaceuticals International, Inc.

Table 4

Reconciliation of GAAP Cost of Goods Sold to Non-GAAP Cost of Goods Sold - by Segment

For the Three and Nine Months Ended September 30, 2015 

(In millions)

4.1

Cost of goods sold (a)

 Three Months Ended 

September 30,

2015
as reported
GAAP

%
of product
sales

2015
 fair value
step-up
adjustment to
inventory and
other non-
GAAP    (b)

2015
excluding
fair value
step-up
adjustment
to inventory
and other
non-GAAP

%
of product
sales

Developed Markets

$        453.7

20%

$           34.2

$         419.5

18%

Emerging Markets

180.9

39%

2.0

178.9

39%

$        634.6

23%

$           36.2

$         598.4

22%

 Nine Months Ended 

September 30,

2015
as reported
GAAP

%
of product
sales

2015
 fair value
step-up
adjustment to
inventory and
other non-
GAAP    (c)

2015
excluding
fair value
step-up
adjustment
to inventory
and other
non-GAAP

%
of product
sales

Developed Markets

$     1,325.9

21%

$         119.3

$      1,206.6

19%

Emerging Markets

539.0

40%

5.6

533.4

39%

$     1,864.9

25%

$         124.9

$      1,740.0

23%

(a) See footnote (a) to Table 2a.

(b) Developed Markets include $26.2 million of fair value step-up adjustment to inventory, PP&E net step up adjustment of $4.8 million and $3.2 million of integration related tech transfer costs.  Emerging Markets include $1.0 million of fair value step-up adjustment to inventory, $0.8 million of integration related tech transfer costs and $0.2 million of PP&E step up adjustment.

(c) Developed Markets include $96.8 million of fair value step-up adjustment to inventory, PP&E net step up adjustment of $16.2 million and $6.3 million of integration related tech transfer costs.  Emerging Markets include $0.9 million of fair value step-up adjustment to inventory, $3.7 million of integration related tech transfer costs and $1.0 million of PP&E step up adjustment.

Valeant Pharmaceuticals International, Inc.

Table 5

Consolidated Balance Sheet and Other Data

(In millions)

As of

As of

September 30,

December 31,

5.1

Cash

2015

2014

Cash and cash equivalents 

$       1,420.0

$          322.6

Marketable securities 

-

-

Total cash and marketable securities

$       1,420.0

$          322.6

Debt

Revolving Credit Facility

$                -

$          165.0

Series A-1 Tranche A Term Loan Facility

139.8

139.3

Series A-2 Tranche A Term Loan Facility

136.6

135.5

Series A-3 Tranche A Term Loan Facility

1,878.8

1,633.8

Series A-4 Tranche A Term Loan Facility

962.8

-

Series D-2 Tranche B Term Loan Facility

1,085.8

1,088.4

Series C-2 Tranche B Term Loan Facility

833.7

835.0

Series E-1 Tranche B Term Loan Facility

2,530.3

2,543.8

Series F Tranche B Term Loan Facility

4,062.2

-

Senior Notes 

19,241.3

8,675.2

Other

12.0

12.9

30,883.3

15,228.9

Less: current portion

(707.0)

(0.9)

Total long-term debt

$     30,176.3

$     15,228.0

5.2

Summary of Cash Flow Statements

Three Months Ended

September 30,

2015

2014

Cash flow provided by (used in):

Net cash provided by operating activities (GAAP)

$          736.5

$          618.7

Restructuring, integration and acquisition-related costs^(c)

82.6

63.3

Payment of accrued legal settlements

26.2

0.2

Excess tax benefit from share-based compensation^(a)

(3.9)

15.9

Acquired in-process research and development

-

5.0

Working capital change related to business development activities

-

27.1

Changes in working capital related to restructuring, integration and acquisition-related costs^(c)

23.9

41.2

Adjusted cash flow from operations (Non-GAAP)^(b)

$          865.3

$          771.4

(a) Includes excess tax benefit from share-based compensation which will reduce taxes in future periods.

(b) See footnote (a) to Table 2a.

(c) Total restructuring, integration and acquisition-related costs cash payments of $106.5 million are broken down as follows:

Project Type

Cash Paid

Expensed

Salix Pharmaceuticals, Ltd

74.8

54.3

Dendreon Corporation

15.5

7.6

Bausch & Lomb Holdings Incorporated

2.7

1.0

Marathon Pharmaceuticals, LLC

2.4

2.3

Project Vision/Waterford

2.0

-

Europe (Various Deals)

3.2

3.1

Other (Various deals)

5.9

14.3

Total

106.5

82.6

Expense Type

Cash Paid

Integration related consulting, duplicative labor, transition services, and other

47.7

Severance payments

28.3

Facility closure costs, other manufacturing integration, and other

20.6

Acquisition-related costs paid to 3rd parties

9.9

Total

106.5

Valeant Pharmaceuticals International, Inc.

Table 6

Organic Growth - by Segment 

For the Three Months Ended September 30, 2015 

(In Millions)

As reported

 For the Three Months Ended September 30, 

(a)

(b)

(b)

(b)

 (1)  Q3
2015 

 (2)
Acq
impact