XML 87 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
BUSINESS COMBINATIONS (Tables)
 6 Months Ended
Jun. 30, 2014
Business Combinations  
Schedule of pro forma impact of merger and acquisition
The following table presents unaudited pro forma consolidated results of operations for the three-month and six-month periods ended June 30, 2014 and 2013, as if the 2014 acquisitions had occurred as of January 1, 2013 and the 2013 acquisitions had occurred as of January 1, 2012.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2014
 
2013
 
2014
 
2013
Revenues
$
2,041.1

 
$
1,957.6

 
$
3,930.9

 
$
3,874.6

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
127.7

 
(21.5
)
 
102.5

 
(104.2
)
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
 
 
 
 
 
 
 
Basic
$
0.38

 
$
(0.06
)
 
$
0.31

 
$
(0.31
)
Diluted
$
0.37

 
$
(0.06
)
 
$
0.30

 
$
(0.31
)
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. The following recognized amounts related to the Solta Medical acquisition, as well as certain smaller acquisitions, are provisional and subject to change:
•
amounts for intangible assets, property and equipment, inventories and working capital adjustments pending finalization of the valuation;
•
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.
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
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
June 30, 2014
(as adjusted)
Cash and cash equivalents
 
$
2.7

 
$
—

 
$
2.7

Accounts receivable(b)
 
16.8

 
—

 
16.8

Inventories
 
46.1

 
(6.5
)
 
39.6

Other current assets
 
7.5

 
—

 
7.5

Property, plant and equipment, net
 
6.6

 
(0.6
)
 
6.0

Identifiable intangible assets, excluding acquired IPR&D(c)
 
232.6

 
6.3

 
238.9

Acquired IPR&D(d)
 
61.8

 
0.8

 
62.6

Other non-current assets
 
0.9

 
—

 
0.9

Current liabilities
 
(34.6
)
 
(0.6
)
 
(35.2
)
Long-term debt, including current portion
 
(4.0
)
 
—

 
(4.0
)
Deferred income taxes, net
 
(9.4
)
 
(4.7
)
 
(14.1
)
Other non-current liabilities
 
(9.8
)
 
—

 
(9.8
)
Total identifiable net assets
 
317.2

 
(5.3
)
 
311.9

Goodwill(e)
 
106.4

 
5.3

 
111.7

Total fair value of consideration transferred
 
$
423.6

 
$
—

 
$
423.6

________________________
(a)
The measurement period adjustments relate to the Solta Medical acquisition and primarily reflect: (i) reductions in the estimated fair value of inventory, (ii) increases in the estimated fair value of intangible assets, 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.
(b)
The fair value of trade accounts receivable acquired was $16.8 million, with the gross contractual amount being $19.1 million, of which the Company expects that $2.3 million will be uncollectible.
(c)
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
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
June 30, 2014
(as adjusted)
Product brands
 
9
 
$
127.4

 
$
5.7

 
$
133.1

Product rights
 
8
 
86.3

 
(0.9
)
 
85.4

Corporate brand
 
14
 
18.5

 
1.5

 
20.0

In-licensed products
 
7
 
0.4

 
—

 
0.4

Total identifiable intangible assets acquired
 
9
 
$
232.6

 
$
6.3

 
$
238.9


(d)
The acquired in-process research and development (“IPR&D”) assets primarily relate to programs from smaller acquisitions. In addition, the Solta Medical acquisition includes a program for the development of a next generation Thermage® product.
(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 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 ($64.0 million) and Emerging Markets segment ($42.9 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
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
June 30, 2014
(as adjusted)
Product brands
 
9
 
$
127.4

 
$
5.7

 
$
133.1

Product rights
 
8
 
86.3

 
(0.9
)
 
85.4

Corporate brand
 
14
 
18.5

 
1.5

 
20.0

In-licensed products
 
7
 
0.4

 
—

 
0.4

Total identifiable intangible assets acquired
 
9
 
$
232.6

 
$
6.3

 
$
238.9
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.
 
 
Amounts
Recognized as of
Acquisition Date
(as previously
reported)(a)
 
Measurement
Period
Adjustments(b)
 
Amounts
Recognized as of
June 30, 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

 
33.2

 
794.6

Identifiable intangible assets, excluding acquired IPR&D(g)
 
4,316.1

 
17.3

 
4,333.4

Acquired IPR&D(h)
 
398.1

 
17.0

 
415.1

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
)
 
36.0

 
(1,374.9
)
Other non-current liabilities(l)
 
(280.2
)
 
(1.0
)
 
(281.2
)
Total identifiable net assets
 
327.6

 
30.4

 
358.0

Noncontrolling interest(m)
 
(102.3
)
 
(0.4
)
 
(102.7
)
Goodwill(n)
 
4,388.0

 
(30.0
)
 
4,358.0

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 decrease in the net deferred tax liability, (ii) a reduction in the estimated fair value of inventory, (iii) an increase in the estimated fair value of property, plant and equipment mainly related to certain machinery and equipment in Western Europe and the U.S., partially offset by a reduction in the estimated fair value related to certain manufacturing facilities and an office building, (iv) an adjustment between cash and accounts payable, and (v) 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 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
June 30, 2014
(as adjusted)
Land
 
NA
 
$
47.4

 
$
(12.6
)
 
$
34.8

Buildings
 
24
 
273.1

 
(23.8
)
 
249.3

Machinery and equipment
 
5
 
273.5

 
76.3

 
349.8

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

 
(6.2
)
 
124.9

Total property, plant and equipment acquired
 
 
 
$
761.4

 
$
33.2

 
$
794.6


An office building in Rochester, New York, with an adjusted carrying amount of $14.2 million, was classified as held for sale as of June 30, 2014. The Company expects to sell this facility in the third quarter of 2014.
(g)
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
(as previously
reported)
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
June 30, 2014
(as adjusted)
Product brands
 
10
 
$
1,770.2

 
$
4.6

 
$
1,774.8

Product rights
 
8
 
855.4

 
5.7

 
861.1

Corporate brand
 
Indefinite
 
1,690.5

 
7.0

 
1,697.5

Total identifiable intangible assets acquired
 
9
 
$
4,316.1

 
$
17.3

 
$
4,333.4


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 ($223.4 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 ($61.6 million) and non-current net deferred tax liabilities ($1,436.5 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 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 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
June 30, 2014
(as adjusted)
Land
 
NA
 
$
47.4

 
$
(12.6
)
 
$
34.8

Buildings
 
24
 
273.1

 
(23.8
)
 
249.3

Machinery and equipment
 
5
 
273.5

 
76.3

 
349.8

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

 
(6.2
)
 
124.9

Total property, plant and equipment acquired
 
 
 
$
761.4

 
$
33.2

 
$
794.6
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 Date
(as previously
reported)
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
June 30, 2014
(as adjusted)
Product brands
 
10
 
$
1,770.2

 
$
4.6

 
$
1,774.8

Product rights
 
8
 
855.4

 
5.7

 
861.1

Corporate brand
 
Indefinite
 
1,690.5

 
7.0

 
1,697.5

Total identifiable intangible assets acquired
 
9
 
$
4,316.1

 
$
17.3

 
$
4,333.4
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
June 30, 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
June 30, 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
June 30, 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