SERP

9 Months Ended

Sep. 30, 2012

Notes To Consolidated Financial Statement [Abstract]

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

6.       SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

On June 24, 2011, the Company's Compensation Committee adopted the Medicis Pharmaceutical Corporation Supplemental Executive Retirement Plan, as amended on October 3, 2011 (the “SERP”), a non-qualified, noncontributory, defined benefit pension plan that provides supplemental retirement income for a select group of officers, including the Company's named executive officers. The SERP became effective as of June 1, 2011. Retirement benefits are calculated based on a percentage of a SERP participant's average earnings, beginning with the 2009 calendar year. The SERP retirement benefit is intended to be paid to participants who reach the “normal retirement date,” which is age 65, or age 59 ½ with twenty years of service, subject to certain exceptions.

A SERP participant vests in 1/6th of his or her retirement benefit per plan year, (which runs from June 1 to May 31), effective as of the first day of the plan year, and becomes fully vested in his or her accrued retirement benefit upon (1) the participant's normal retirement date, provided that the participant has at least fifteen years of service with the Company and is employed by the Company on such date, (2) the participant's separation from service due to a discharge without “cause” or resignation for “good reason” (as such terms are defined in the participant's employment agreement, or in the absence of such employment agreement or definitions, in the Company's Executive Retention Plan), or (3) a “change in control” of the Company. The completion of the pending merger with Valeant (see Note 2) will constitute a change in control of the Company under the SERP, upon which each participant's accrued retirement benefit will become fully vested and distributable on the 30th dayfollowing the merger.

Participants in the SERP received credit for prior service with the Company. The prior service accrued benefit of approximately $33.8 million was recorded during the three months ended June 30, 2011 as other comprehensive income within stockholders' equity, and is amortized as compensation expense over the remaining service years of each participant. The Company also established a deferred tax asset of approximately $12.0 million, the benefit of which was also recorded in other comprehensive income. During the three months ended March 31, 2012, an additional participant was added to the plan, and a prior service accrued benefit of approximately $0.8 million was recorded as other comprehensive income within stockholders' equity, and is being amortized over the remaining service years of the participant. Total amortization of prior service costs recognized as compensation expense during the three and nine months ended September 30, 2012, was approximately $1.2 million and $3.6 million, respectively. Amortization of prior service costs recognized as compensation expense during the three and nine months ended September 30, 2011, was approximately $1.2 million and $1.6 million, respectively.

Compensation expense recognized during the three and nine months ended September 30, 2012 related to current service costs was approximately $0.3 million and $0.7 million, respectively. Compensation expense recognized during the three and nine months ended September 30, 2011 was $0.3 million. Interest cost accrued related to prior and current service costs during the three and nine months ended September 30, 2012 was approximately $0.4 million and $1.2 million, respectively. Interest cost accrued related to prior and current service costs during the three and nine months ended September 30, 2011 was approximately $0.4 million. The total present value of accrued benefits for the SERP as of September 30, 2012 was approximately $37.8 million, which is included in other long-term liabilities in the Company's condensed consolidated balance sheets as of September 30, 2012.

The Company maintains a rabbi trust to fund the SERP benefit. During the three months ended September 30, 2011 and three months ended June 30, 2012, the Company purchased life insurance policy investments of approximately $9.8 million and $12.1 million, respectively, to fund the SERP. The life insurance policies cover the SERP participants. The Company intends to make similar annual purchases during each of the next three years. During the three months ended March 31, 2012 and September 30, 2012, the Company made additional life insurance policy investment purchases of approximately $0.4 million and $0.4 million, respectively, related to the new participant added to the SERP during the three months ended March 31, 2012. Net gains on the investments aggregating approximately $1.2 million were recognized during the three andnine months ended September 30, 2012. The Company's expected return on the plan assets is 4%. The total investment related to the SERP of $24.0million is included in other assets in the Company's condensed consolidated balance sheets as of September 30, 2012, and is the cash surrender value of the life insurance policies, representing the fair value of the plan assets.