RESTRUCTURING, INTEGRATION AND OTHER COSTS

In connection with the B&L and Medicis Pharmaceutical Corporation (“Medicis”) acquisitions, as well as other smaller acquisitions, the Company has implemented cost-rationalization and integration initiatives to capture operating synergies and generate cost savings across the Company. These measures included:


•	workforce reductions across the Company and other organizational changes;


•	closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;


•	leveraging research and development spend; and


•	procurement savings.

B&L Acquisition-Related Cost-Rationalization and Integration Initiatives

The Company estimates that it will incur total costs of approximately $600 million (excluding charges of $52.8 million described below) in connection with these cost-rationalization and integration initiatives, which are expected to be substantially completed by the end of 2014. Since the acquisition date, total costs of $554.6 million (including $56.7 million related to cost-rationalization measures at a contact lens manufacturing plant in Waterford, Ireland as described below) have been incurred through September 30, 2014, including (i) $302.2 million of restructuring expenses, (ii) $239.0 million of integration expenses, and (iii) $13.4 million of acquisition-related costs. The estimate of total costs to be incurred primarily includes: employee termination costs payable to approximately 3,000 employees of the Company and B&L who have been or will be terminated as a result of the B&L Acquisition; IPR&D termination costs related to the transfer to other parties of product-development programs that did not align with our research and development model; costs to consolidate or close facilities and relocate employees; and contract termination and lease cancellation costs. The costs described above do not include charges of $52.8 million, in the aggregate, recognized and paid in the third quarter of 2013 related to B&L’s previously cancelled performance-based options and the acceleration of unvested stock options for B&L employees as a result of the B&L Acquisition. As described in note 2 titled “SIGNIFICANT ACCOUNTING POLICIES”, the charges of $52.8 million were reclassified to Other (income) expense to conform to the current year presentation.

B&L Restructuring Costs

The following table summarizes the major components of the restructuring costs incurred in connection with the B&L Acquisition since the acquisition date through September 30, 2014:



	Employee Termination Costs						IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs
	Severance and Related Benefits			Share-Based Compensation⁽¹⁾			IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs			Total
Balance, January 1, 2013	$	—		$	—		$	—	$	—		$	—
Costs incurred and/or charged to expense	155.7			52.8			—		25.6			234.1
Cash payments	(77.8		)	(52.8		)	—		(7.8		)	(138.4		)
Non-cash adjustments	11.4			—			—		(6.8		)	4.6
Balance, December 31, 2013	89.3			—			—		11.0			100.3
Costs incurred and/or charged to expense	22.5			—			—		6.6			29.1
Cash payments	(50.9		)	—			—		(3.2		)	(54.1		)
Non-cash adjustments	(2.3		)	—			—		(3.1		)	(5.4		)
Balance, March 31, 2014	58.6			—			—		11.3			69.9
Costs incurred and charged to expense	12.3			—			—		10.1			22.4
Cash payments	(25.7		)	—			—		(1.8		)	(27.5		)
Non-cash adjustments	(0.5		)	—			—		(0.4		)	(0.9		)
Balance, June 30, 2014	44.7			—			—		19.2			63.9
Costs incurred and charged to expense	8.2			—			—		4.5			12.7
Cash payments	(22.2		)	—			—		(18.7		)	(40.9		)
Non-cash adjustments	(1.7		)	—			—		(0.2		)	(1.9		)
Balance, September 30, 2014	$	29.0		$	—		$	—	$	4.8		$	33.8

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(1)	Relates to B&L’s previously cancelled performance-based options and the acceleration of unvested stock options for B&L employees as a result of the B&L Acquisition. These charges were reclassified to Other (income) expense to conform to the current year presentation.

B&L Integration Costs

As mentioned above, the Company has incurred $239.0 million of integration costs related to the B&L Acquisition since the acquisition date. In the nine-month periods ended September 30, 2014 and 2013, the Company incurred $123.0 million and $45.8 million, respectively, of integration costs related to the B&L Acquisition, which related primarily to integration consulting and manufacturing, duplicate labor, transition service, and other costs. The Company made payments of $128.5 million and $40.4 million related to B&L integration costs during the nine-month periods ended September 30, 2014 and 2013, respectively.

In addition to the restructuring and integration costs described above, the Company incurred $56.7 million of restructuring costs in the nine-month period ended September 30, 2014 related to employee termination costs with respect to cost-rationalization measures at a contact lens manufacturing plant in Waterford, Ireland (the plant was acquired as part of the B&L Acquisition). The Company made payments of $17.5 million in the nine-month period ended September 30, 2014 with respect to this initiative.

Medicis Acquisition-Related Cost-Rationalization and Integration Initiatives

The Company estimates that it will incur total costs of approximately $200 million in connection with these cost-rationalization and integration initiatives, which were substantially completed by the end of 2013. However, additional costs have been incurred in 2014, and the Company expects to incur certain costs during the next six months. Since the acquisition date, total costs of $193.1 million (excluding the charge of $77.3 million described below), including (i) $109.2 million of restructuring expenses, (ii) $51.7 million of integration expenses, and (iii) $32.2 million of acquisition-related costs, which excludes $24.2 million of acquisition-related costs recognized in the fourth quarter of 2012 related to royalties to be paid to Galderma on sales of Sculptra®, have been incurred through September 30, 2014. In connection with the divestiture of Sculptra® and certain other products to Galderma in July 2014, the royalty obligation owed to Galderma on sales of Sculptra® was relieved in the third quarter of 2014 and included as part of the gain on sale. See note 4 “DIVESTITURES” for additional information regarding this divestiture. The estimated costs primarily include: employee termination costs payable to approximately 750 employees of the Company and Medicis who have been terminated as a result of the Medicis acquisition; IPR&D termination costs related to the transfer to other parties of product-development programs that did not align with our research and development model; costs to consolidate or close facilities and relocate employees; and contract termination and lease cancellation costs. The estimate of total costs to be incurred of approximately $200 million does not include a charge of $77.3 million recognized within Other (income) expense and paid in the fourth quarter of 2012 related to the acceleration of unvested stock options, restricted stock awards, and share appreciation rights for Medicis employees that was triggered by the change in control.

Medicis Restructuring Costs

The following table summarizes the major components of the $109.2 million of restructuring costs incurred in connection with the Medicis acquisition since the acquisition date through September 30, 2014:



	Employee Termination Costs						IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs
	Severance and Related Benefits			Share-Based Compensation⁽¹⁾			IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs			Total
Balance, January 1, 2012	$	—		$	—		$	—	$	—		$	—
Costs incurred and/or charged to expense	85.3			77.3			—		0.4			163.0
Cash payments	(78.0		)	(77.3		)	—		—			(155.3		)
Non-cash adjustments	4.1			—			—		(0.2		)	3.9
Balance, December 31, 2012	11.4			—			—		0.2			11.6
Costs incurred and/or charged to expense	20.0			—			—		3.5			23.5
Cash payments	(31.4		)	—			—		(3.6		)	(35.0		)
Non-cash adjustments	0.3			—			—		(0.1		)	0.2
Balance, December 31, 2013⁽²⁾	$	0.3		$	—		$	—	$	—		$	0.3

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(1)	Relates to the acceleration of unvested stock options, restricted stock awards, and share appreciation rights for Medicis employees that was triggered by the change in control. These charges were reclassified to Other (income) expense to conform to the current year presentation.


(2)	The Company has not recognized any restructuring charges, and made a payment of $0.1 million, in the nine-month period ended September 30, 2014 with respect to the Medicis acquisition-related initiatives. In the nine-month period ended September 30, 2013, the Company recognized $23.1 million of restructuring charges and made payments of $34.4 million.

Medicis Integration Costs

As mentioned above, the Company has incurred $51.7 million of integration costs related to the Medicis acquisition since the acquisition date. In the nine-month periods ended September 30, 2014 and 2013, the Company incurred $11.8 million and $31.2 million, respectively, of integration costs related to the Medicis acquisition. The costs incurred in 2014 related primarily to an R&D collaboration inherited from Medicis which does not align with the Company’s research and development model. The costs incurred in 2013 related primarily to integration consulting, duplicate labor, transition service, and other costs. The Company made payments of $8.4 million and $28.3 million related to Medicis integration costs during the nine-month periods ended September 30, 2014 and 2013, respectively.

Other Restructuring and Integration-Related Costs (Excluding B&L and Medicis)

In the nine-month period ended September 30, 2014, in addition to the restructuring and integration costs associated with the B&L and Medicis acquisitions described above, the Company incurred an additional $81.7 million of other restructuring, integration-related and other costs. These costs included (i) $49.3 million of integration consulting, duplicate labor, transition service, and other costs, (ii) $18.5 million of severance costs, (iii) $7.3 million of facility closure costs, and (iv) $6.6 million of other costs. These costs primarily related to (i) integration and restructuring costs for PreCision, Solta Medical and other smaller acquisitions, and (ii) intellectual property migration and the global consolidation of the Company’s manufacturing facilities. The Company made payments of $78.6 million during the nine-month period ended September 30, 2014 (in addition to the payments related to the B&L and Medicis acquisitions described above).

In the nine-month period ended September 30, 2013, in addition to the restructuring and integration costs associated with the B&L and Medicis acquisitions described above, the Company incurred an additional $81.1 million of other restructuring, integration-related and other costs. These costs included (i) $46.8 million of integration consulting, duplicate labor, transition service, and other costs, (ii) $14.9 million of facility closure costs, (iii) $12.4 million of severance costs, and (iv) $7.0 million of other costs, including non-personnel manufacturing integration costs. These costs primarily related to (i) integration and restructuring costs for other smaller acquisitions, (ii) intellectual property migration and the global consolidation of the Company’s manufacturing facilities, and (iii) systems integration initiatives. The Company made payments of $75.9 million, in the aggregate, during the nine-month period ended September 30, 2013 (in addition to the payments related to the B&L and Medicis acquisitions described above).