BUSINESS COMBINATIONS (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of pro forma impact of merger and acquisition



	Three Months Ended March 31,
	2014			2013
Revenues	$	1,889.9		$	1,917.1
Net loss attributable to Valeant Pharmaceuticals International, Inc.	(25.1		)	(83.3		)

Loss per share attributable to Valeant Pharmaceuticals International, Inc.:
Basic and diluted	$	(0.07	)	$	(0.25	)

Business Combinations in 2014

Business Combinations

Schedule of acquisitions

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed related to the business combinations, in the aggregate, as of the applicable acquisition dates. Due to the timing of these acquisitions, these amounts are provisional and subject to change. The Company will finalize these amounts as it obtains the information necessary to complete the measurement processes. Any changes resulting from facts and circumstances that existed as of the acquisition dates may result in retrospective adjustments to the provisional amounts recognized at the acquisition dates. These changes could be significant. The Company will finalize these amounts no later than one year from the respective acquisition dates.



	Amounts Recognized as of Acquisition Dates
Cash and cash equivalents	$	2.7
Accounts receivable^(a)	14.7
Inventories	39.9
Other current assets	4.7
Property, plant and equipment, net	6.5
Identifiable intangible assets, excluding acquired IPR&D^(b)	184.8
Acquired IPR&D^(c)	15.0
Other non-current assets	0.8
Current liabilities	(27.6		)
Long-term debt, including current portion	(4.0		)
Deferred income taxes, net	(9.4		)
Other non-current liabilities	(8.0		)
Total identifiable net assets	220.1
Goodwill^(d)	103.0
Total fair value of consideration transferred	$	323.1

________________________


(a)	The fair value of trade accounts receivable acquired was $14.7 million, with the gross contractual amount being $17.0 million, of which the Company expects that $2.3 million will be uncollectible.


(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 Dates
Product brands	9	$	80.4
Product rights	8	86.3
Corporate brand	14	18.1
Total identifiable intangible assets acquired	9	$	184.8


(c)	The acquired in-process research and development (“IPR&D”) assets primarily relate to the Solta Medical acquisition, which includes a program for the development of a next generation Thermage® product.


(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. None of the goodwill is expected to be deductible for tax purposes. The goodwill recorded from the Solta Medical acquisition represents the following:


•	cost savings, operating synergies and other benefits expected to result from combining the operations of Solta Medical with those of the Company;


•	the Company’s expectation to develop and market new products and technology; and


•	intangible assets that do not qualify for separate recognition (for instance, Solta Medical’s assembled workforce).

The provisional amount of goodwill from the Solta Medical acquisition has been allocated to both the Company’s Developed Markets segment ($60.8 million) and Emerging Markets segment ($40.7 million).

Summary of amounts and useful lives assigned to identifiable intangible assets

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 Dates
Product brands	9	$	80.4
Product rights	8	86.3
Corporate brand	14	18.1
Total identifiable intangible assets acquired	9	$	184.8

B&L

Business Combinations

Schedule of acquisitions

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of acquisition date. The following recognized amounts are provisional and subject to change:


•	amounts for property, plant and equipment pending finalization of the valuation;


•	amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax implications of the transaction; and


•	amounts for intangibles and goodwill pending the completion of the valuation of the assets acquired and liabilities assumed, including the allocation of such amounts to reporting units.

The Company will finalize these amounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recognized at the acquisition date. These changes could be significant. The Company will finalize these amounts no later than one year from the acquisition date.



	Amounts Recognized as of Acquisition Date (as previously reported)^(a)			Measurement Period Adjustments^(b)			Amounts Recognized as of March 31, 2014 (as adjusted)
Cash and cash equivalents	$	209.5		$	(31.4	)	$	178.1
Accounts receivable^(c)	547.9			(7.2		)	540.7
Inventories^(d)	675.8			(34.0		)	641.8
Other current assets^(e)	146.6			0.3			146.9
Property, plant and equipment, net^(f)	761.4			4.1			765.5
Identifiable intangible assets, excluding acquired IPR&D^(g)	4,316.1			30.5			4,346.6
Acquired IPR&D^(h)	398.1			20.0			418.1
Other non-current assets	58.8			(1.9		)	56.9
Current liabilities⁽ⁱ⁾	(885.6		)	2.1			(883.5		)
Long-term debt, including current portion^(j)	(4,209.9		)	—			(4,209.9		)
Deferred income taxes, net^(k)	(1,410.9		)	(0.1		)	(1,411.0		)
Other non-current liabilities^(l)	(280.2		)	(1.0		)	(281.2		)
Total identifiable net assets	327.6			(18.6		)	309.0
Noncontrolling interest^(m)	(102.3		)	(0.4		)	(102.7		)
Goodwill⁽ⁿ⁾	4,388.0			19.0			4,407.0
Total fair value of consideration transferred	$	4,613.3		$	—		$	4,613.3

________________________


(a)	As previously reported in the 2013 Form 10-K.

(b)

The measurement period adjustments primarily reflect: (i) a reduction in the estimated fair value of inventory, (ii) an adjustment between cash and accounts payable, and (iii) increases in the estimated fair value of intangible assets, which included a net increase to IPR&D assets driven by a higher fair value for the next generation silicone hydrogel lens (Bausch + Lomb Ultra™). 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 $540.7 million, with the gross contractual amount being $555.6 million, of which the Company expects that $14.9 million will be uncollectible.


(d)	Includes an estimated fair value adjustment to inventory of $269.1 million.


(e)	Includes primarily prepaid expenses.


(f)	The following table summarizes the provisional amounts and useful lives assigned to property, plant and equipment:



	Weighted- Average Useful Lives (Years)	Amounts Recognized as of Acquisition Date (as previously reported)		Measurement Period Adjustments			Amounts Recognized as of March 31, 2014 (as adjusted)
Land	NA	$	47.4	$	(12.6	)	$	34.8
Buildings	24	273.1		(39.8		)	233.3
Machinery and equipment	5	273.5		57.0			330.5
Leasehold improvements	5	22.5		(0.3		)	22.2
Equipment on operating lease	3	13.8		(0.2		)	13.6
Construction in progress	NA	131.1		—			131.1
Total property, plant and equipment acquired		$	761.4	$	4.1		$	765.5

An office building in Rochester, New York, with an adjusted carrying amount of $14.2 million, was classified as held for sale as of March 31, 2014. The Company expects to sell this facility in 2014.


(g)	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 (as previously reported)		Measurement Period Adjustments		Amounts Recognized as of March 31, 2014 (as adjusted)
Product brands	10	$	1,770.2	$	14.7	$	1,784.9
Product rights	8	855.4		8.8		864.2
Corporate brand	Indefinite	1,690.5		7.0		1,697.5
Total identifiable intangible assets acquired	9	$	4,316.1	$	30.5	$	4,346.6

The corporate brand represents the B&L corporate trademark and has an indefinite useful life as there are no legal, regulatory, contractual, competitive, economic, or other factors that limit the useful life of this intangible asset. The estimated fair value was determined using the relief from royalty method.

(h)

The significant components of the acquired IPR&D assets primarily relate to the development of (i) various vision care products ($226.4 million in the aggregate), such as the next generation silicone hydrogel lens (Bausch + Lomb Ultra™), (ii) various pharmaceutical products ($170.9 million, in the aggregate), such as latanoprostene bunod, a nitric oxide-donating prostaglandin for reduction of elevated intraocular pressure in patients with glaucoma or ocular hypertension, and (iii) various surgical products ($20.8 million, in the aggregate). A multi-period excess earnings methodology (income approach) was used to determine the estimated fair values of the acquired IPR&D assets from market participant perspective. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project. A risk-adjusted discount rate of 10% was used to present value the projected cash flows. The next generation silicone hydrogel lens (Bausch + Lomb Ultra™) was launched in February 2014.


(i)	Includes accrued liabilities, including reserves for sales returns, rebates and managed care, accounts payable and accrued compensation-related liabilities.


(j)	The following table summarizes the fair value of long-term debt assumed as of the acquisition date:



	Amounts Recognized as of Acquisition Date
Holdco unsecured term loan⁽¹⁾	$	707.0
U.S. dollar-denominated senior secured term loan⁽¹⁾	1,915.8
Euro-denominated senior secured term loan⁽¹⁾	604.0
U.S. dollar-denominated delayed draw term loan⁽¹⁾	398.0
U.S. dollar-denominated revolver loan⁽¹⁾	170.0
9.875% senior notes⁽¹⁾	350.0
Multi-currency denominated revolver loan⁽¹⁾	15.0
Japanese revolving credit facility⁽²⁾	33.8
Debentures	11.8
Other⁽¹⁾	4.5
Total long-term debt assumed	$	4,209.9

___________________________________


(1)	The Company subsequently repaid these amounts in full in the third quarter of 2013.


(2)	In the fourth quarter of 2013, the Company repaid in full the amounts outstanding. In January 2014, the Company terminated this facility.


(k)	Comprises current net deferred tax assets ($78.7 million) and non-current net deferred tax liabilities ($1,489.7 million).


(l)	Includes $224.2 million related to the estimated fair value of pension and other benefits liabilities.


(m)	Represents the estimated fair value of B&L’s noncontrolling interest related primarily to Chinese joint ventures. A discounted cash flow methodology was used to determine the estimated fair values as of the acquisition date.


(n)	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:


•	the Company’s expectation to develop and market new product brands, product lines and technology;


•	cost savings and operating synergies expected to result from combining the operations of B&L with those of the Company;


•	the value of the continuing operations of B&L’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, B&L’s assembled workforce).

The provisional amount of goodwill has been allocated to the Company’s Developed Markets segment ($3.3 billion) and Emerging Markets segment ($1.1 billion).

Fair Value of Consideration Transferred

The following table indicates the consideration transferred to effect the B&L Acquisition:



	Fair Value
Enterprise value	$	8,700.0
Adjusted for the following:
B&L’s outstanding debt, including accrued interest	(4,248.3		)
B&L’s company expenses	(6.4		)
Payment in B&L’s performance-based option^(a)	(48.5		)
Payment for B&L’s cash balance^(b)	149.0
Additional cash payment^(b)	75.0
Other	(3.2		)
Equity purchase price	4,617.6
Less: Cash consideration paid for B&L’s unvested stock options^(c)	(4.3		)
Total fair value of consideration transferred	$	4,613.3

___________________________________


(a)	The cash consideration paid for previously cancelled B&L’s performance-based options was recognized as a post-combination expense within Restructuring, integration and other costs in the third quarter of 2013.


(b)	As defined in the Merger Agreement.


(c)	The cash consideration paid for B&L stock options and restricted stock attributable to pre-combination services has been included as a component of purchase price. The remaining $4.3 million balance related to the acceleration of unvested stock options for B&L employees was recognized as a post-combination expense within Restructuring, integration and other costs in the third quarter of 2013.

Summary of amounts and useful lives assigned to property, plant and equipment

The following table summarizes the provisional amounts and useful lives assigned to property, plant and equipment:



	Weighted- Average Useful Lives (Years)	Amounts Recognized as of Acquisition Date (as previously reported)		Measurement Period Adjustments			Amounts Recognized as of March 31, 2014 (as adjusted)
Land	NA	$	47.4	$	(12.6	)	$	34.8
Buildings	24	273.1		(39.8		)	233.3
Machinery and equipment	5	273.5		57.0			330.5
Leasehold improvements	5	22.5		(0.3		)	22.2
Equipment on operating lease	3	13.8		(0.2		)	13.6
Construction in progress	NA	131.1		—			131.1
Total property, plant and equipment acquired		$	761.4	$	4.1		$	765.5

Summary of amounts and useful lives assigned to identifiable intangible assets

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 (as previously reported)		Measurement Period Adjustments		Amounts Recognized as of March 31, 2014 (as adjusted)
Product brands	10	$	1,770.2	$	14.7	$	1,784.9
Product rights	8	855.4		8.8		864.2
Corporate brand	Indefinite	1,690.5		7.0		1,697.5
Total identifiable intangible assets acquired	9	$	4,316.1	$	30.5	$	4,346.6

Summary of fair value of long-term debt assumed

The following table summarizes the fair value of long-term debt assumed as of the acquisition date:



	Amounts Recognized as of Acquisition Date
Holdco unsecured term loan⁽¹⁾	$	707.0
U.S. dollar-denominated senior secured term loan⁽¹⁾	1,915.8
Euro-denominated senior secured term loan⁽¹⁾	604.0
U.S. dollar-denominated delayed draw term loan⁽¹⁾	398.0
U.S. dollar-denominated revolver loan⁽¹⁾	170.0
9.875% senior notes⁽¹⁾	350.0
Multi-currency denominated revolver loan⁽¹⁾	15.0
Japanese revolving credit facility⁽²⁾	33.8
Debentures	11.8
Other⁽¹⁾	4.5
Total long-term debt assumed	$	4,209.9

___________________________________


(1)	The Company subsequently repaid these amounts in full in the third quarter of 2013.


(2)	In the fourth quarter of 2013, the Company repaid in full the amounts outstanding. In January 2014, the Company terminated this facility.

Other Business Combinations

Business Combinations

Schedule of acquisitions

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed related to the business combinations, in the aggregate, as of the applicable acquisition dates.



	Amounts Recognized as of Acquisition Dates			Measurement Period Adjustments^(a)			Amounts Recognized as of March 31, 2014 (as adjusted)
Cash	$	43.1		$	—		$	43.1
Accounts receivable^(b)	64.0			0.5			64.5
Inventories	33.6			1.9			35.5
Other current assets	14.0			—			14.0
Property, plant and equipment	13.9			(3.3		)	10.6
Identifiable intangible assets, excluding acquired IPR&D^(c)	722.9			3.9			726.8
Acquired IPR&D^(d)	18.7			0.2			18.9
Indemnification assets	3.2			(0.7		)	2.5
Other non-current assets	0.2			3.7			3.9
Current liabilities	(36.2		)	(0.4		)	(36.6		)
Short-term borrowings^(e)	(33.3		)	0.5			(32.8		)
Long-term debt^(e)	(24.0		)	—			(24.0		)
Deferred tax liability, net	(147.8		)	(1.1		)	(148.9		)
Other non-current liabilities	(1.5		)	—			(1.5		)
Total identifiable net assets	670.8			5.2			676.0
Noncontrolling interest^(f)	(11.2		)	—			(11.2		)
Goodwill^(g)	224.3			9.0			233.3
Total fair value of consideration transferred	$	883.9		$	14.2		$	898.1

________________________

(a)

The measurement period adjustments primarily reflect an increase in the total fair value of consideration transferred with respect to the Natur Produkt acquisition pursuant to a purchase price 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, therefore, the Company has not retrospectively adjusted those financial statements.


(b)	The fair value of trade accounts receivable acquired was $64.5 million, with the gross contractual amount being $68.2 million, of which the Company expects that $3.7 million will be uncollectible.


(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 Dates		Measurement Period Adjustments		Amounts Recognized as of March 31, 2014 (as adjusted)
Product brands	7	$	517.2	$	3.1	$	520.3
Corporate brand	13	86.1		0.8		86.9
Patents	3	71.7		—		71.7
Royalty Agreement	5	26.5		—		26.5
Partner relationships	5	16.0		—		16.0
Technology	10	5.4		—		5.4
Total identifiable intangible assets acquired	8	$	722.9	$	3.9	$	726.8

(d)

The acquired IPR&D assets relate to the Obagi and Natur Produkt acquisitions. Obagi’s acquired IPR&D assets primarily relate to the development of dermatology products for anti-aging and suncare. Natur Produkt’s acquired IPR&D assets include a product indicated for the prevention of viral diseases, specifically cold and flu, and a product indicated for the treatment of inflammation and muscular disorders.


(e)	Short-term borrowings and long-term debt primarily relate to the Natur Produkt acquisition. In March 2013, the Company settled all of Natur Produkt’s outstanding third party short-term borrowings and long-term debt.


(f)	Represents the estimated fair value of noncontrolling interest related to a smaller acquisition completed in the third quarter of 2013.

(g)

The goodwill relates primarily to the Obagi and Natur Produkt acquisitions. 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 Obagi’s and Natur Produkt’s goodwill is expected to be deductible for tax purposes. The goodwill recorded from the Obagi and the Natur Produkt acquisitions represents primarily the cost savings, operating synergies and other benefits expected to result from combining the operations with those of the Company.

The amount of goodwill from the Eisai acquisition has been allocated to the Company’s Developed Markets segment. The amount of goodwill from the Natur Produkt acquisition has been allocated to the Company’s Emerging Markets segment. The amount of goodwill from the Obagi acquisition has been allocated primarily to the Company’s Developed Markets segment.

Summary of amounts and useful lives assigned to identifiable intangible assets

The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:



	Weighted- Average Useful Lives (Years)	Amounts Recognized as of Acquisition Dates		Measurement Period Adjustments		Amounts Recognized as of March 31, 2014 (as adjusted)
Product brands	7	$	517.2	$	3.1	$	520.3
Corporate brand	13	86.1		0.8		86.9
Patents	3	71.7		—		71.7
Royalty Agreement	5	26.5		—		26.5
Partner relationships	5	16.0		—		16.0
Technology	10	5.4		—		5.4
Total identifiable intangible assets acquired	8	$	722.9	$	3.9	$	726.8