XML 88 R36.htm IDEA: XBRL DOCUMENT v2.4.1.9
BUSINESS COMBINATIONS (Tables)
 12 Months Ended
Dec. 31, 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 years ended December 31, 2014, 2013 and 2012, as if the 2014 acquisitions had occurred as of January 1, 2013, the 2013 acquisitions had occurred as of January 1, 2012, and the 2012 acquisitions occurred as of January 1, 2011.
 
 
Unaudited
 
 
2014
 
2013
 
2012
Revenues
 
$
8,348.9

 
$
7,929.9

 
$
7,700.6

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
 
909.3

 
(801.9
)
 
(709.6
)
Earnings (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
 
 
 
 
 
 
Basic
 
$
2.71

 
$
(2.43
)
 
$
(2.14
)
Diluted
 
$
2.66

 
$
(2.43
)
 
$
(2.14
)
2014 Other Business Combinations  
Business Combinations  
Schedule of acquisitions
 
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2014
(as adjusted)
Cash and cash equivalents
 
$
33.6

 
$
(0.5
)
 
$
33.1

Accounts receivable(b)
 
87.7

 
(5.7
)
 
82.0

Assets held for sale(c)
 
125.7

 
—

 
125.7

Inventories
 
170.4

 
(14.8
)
 
155.6

Other current assets
 
19.1

 
(1.0
)
 
18.1

Property, plant and equipment, net
 
58.5

 
(1.5
)
 
57.0

Identifiable intangible assets, excluding acquired IPR&D(d)
 
697.2

 
23.7

 
720.9

Acquired IPR&D(e)
 
65.8

 
(2.7
)
 
63.1

Other non-current assets
 
4.0

 
(2.0
)
 
2.0

Current liabilities
 
(152.0
)
 
(11.8
)
 
(163.8
)
Long-term debt, including current portion
 
(11.2
)
 
—

 
(11.2
)
Deferred income taxes, net
 
(116.0
)
 
22.6

 
(93.4
)
Other non-current liabilities
 
(13.4
)
 
(0.1
)
 
(13.5
)
Total identifiable net assets
 
969.4

 
6.2

 
975.6

Noncontrolling interest
 
(15.0
)
 
—

 
(15.0
)
Goodwill(f)
 
410.4

 
(14.1
)
 
396.3

Total fair value of consideration transferred
 
$
1,364.8

 
$
(7.9
)
 
$
1,356.9

________________________
(a)
The measurement period adjustments primarily reflect: (i) a decrease in the net deferred tax liability primarily related to the PreCision and Solta Medical acquisitions, (ii) increases in the estimated fair value of intangible assets for the Solta Medical and other smaller acquisitions, and (iii) reductions in the estimated fair value of inventory for Solta Medical and other smaller acquisitions. 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 $82.0 million, with the gross contractual amount being $88.2 million, of which the Company expects that $6.2 million will be uncollectible.
(c)
Assets held for sale relate to the divestitures of the Tretin-X® product rights and the product rights for the generic tretinoin gel and cream products acquired in the PreCision acquisition. See note 4 titled “DIVESTITURES” for further information.
(d)
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
December 31, 2014
(as adjusted)
Product brands
 
10
 
$
506.0

 
$
22.8

 
$
528.8

Product rights
 
8
 
95.2

 
(0.9
)
 
94.3

Corporate brand
 
15
 
28.9

 
1.7

 
30.6

In-licensed products
 
8
 
1.5

 
0.1

 
1.6

Partner relationships
 
9
 
37.5

 
—

 
37.5

Other
 
9
 
28.1

 
—

 
28.1

Total identifiable intangible assets acquired
 
10
 
$
697.2

 
$
23.7

 
$
720.9


(e)
The acquired 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.
(f)
The goodwill relates primarily to the PreCision and Solta Medical 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. Substantially all of the goodwill is not expected to be deductible for tax purposes. The goodwill recorded from the PreCision and Solta Medical acquisitions represents the following:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of PreCision and 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, PreCision’s and Solta Medical’s assembled workforce).
The provisional amount of goodwill from the PreCision acquisition has been allocated to the Company’s Developed Markets segment ($170.5 million). The amount of goodwill from the Solta Medical acquisition has been allocated to both the Company’s Developed Markets segment ($56.4 million) and Emerging Markets segment ($37.8 million).
Schedule of estimated fair value of assets acquired and liabilities assumed
 
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2014
(as adjusted)
Cash and cash equivalents
 
$
33.6

 
$
(0.5
)
 
$
33.1

Accounts receivable(b)
 
87.7

 
(5.7
)
 
82.0

Assets held for sale(c)
 
125.7

 
—

 
125.7

Inventories
 
170.4

 
(14.8
)
 
155.6

Other current assets
 
19.1

 
(1.0
)
 
18.1

Property, plant and equipment, net
 
58.5

 
(1.5
)
 
57.0

Identifiable intangible assets, excluding acquired IPR&D(d)
 
697.2

 
23.7

 
720.9

Acquired IPR&D(e)
 
65.8

 
(2.7
)
 
63.1

Other non-current assets
 
4.0

 
(2.0
)
 
2.0

Current liabilities
 
(152.0
)
 
(11.8
)
 
(163.8
)
Long-term debt, including current portion
 
(11.2
)
 
—

 
(11.2
)
Deferred income taxes, net
 
(116.0
)
 
22.6

 
(93.4
)
Other non-current liabilities
 
(13.4
)
 
(0.1
)
 
(13.5
)
Total identifiable net assets
 
969.4

 
6.2

 
975.6

Noncontrolling interest
 
(15.0
)
 
—

 
(15.0
)
Goodwill(f)
 
410.4

 
(14.1
)
 
396.3

Total fair value of consideration transferred
 
$
1,364.8

 
$
(7.9
)
 
$
1,356.9

________________________
(a)
The measurement period adjustments primarily reflect: (i) a decrease in the net deferred tax liability primarily related to the PreCision and Solta Medical acquisitions, (ii) increases in the estimated fair value of intangible assets for the Solta Medical and other smaller acquisitions, and (iii) reductions in the estimated fair value of inventory for Solta Medical and other smaller acquisitions. 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 $82.0 million, with the gross contractual amount being $88.2 million, of which the Company expects that $6.2 million will be uncollectible.
(c)
Assets held for sale relate to the divestitures of the Tretin-X® product rights and the product rights for the generic tretinoin gel and cream products acquired in the PreCision acquisition. See note 4 titled “DIVESTITURES” for further information.
(d)
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
December 31, 2014
(as adjusted)
Product brands
 
10
 
$
506.0

 
$
22.8

 
$
528.8

Product rights
 
8
 
95.2

 
(0.9
)
 
94.3

Corporate brand
 
15
 
28.9

 
1.7

 
30.6

In-licensed products
 
8
 
1.5

 
0.1

 
1.6

Partner relationships
 
9
 
37.5

 
—

 
37.5

Other
 
9
 
28.1

 
—

 
28.1

Total identifiable intangible assets acquired
 
10
 
$
697.2

 
$
23.7

 
$
720.9


(e)
The acquired 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.
(f)
The goodwill relates primarily to the PreCision and Solta Medical 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. Substantially all of the goodwill is not expected to be deductible for tax purposes. The goodwill recorded from the PreCision and Solta Medical acquisitions represents the following:
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
December 31, 2014
(as adjusted)
Product brands
 
10
 
$
506.0

 
$
22.8

 
$
528.8

Product rights
 
8
 
95.2

 
(0.9
)
 
94.3

Corporate brand
 
15
 
28.9

 
1.7

 
30.6

In-licensed products
 
8
 
1.5

 
0.1

 
1.6

Partner relationships
 
9
 
37.5

 
—

 
37.5

Other
 
9
 
28.1

 
—

 
28.1

Total identifiable intangible assets acquired
 
10
 
$
697.2

 
$
23.7

 
$
720.9
B&L  
Business Combinations  
Schedule of acquisitions
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 Other (income) expense 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 Other (income) expense in the third quarter of 2013.
Assets Acquired and Liabilities Assumed
The transaction has been accounted for as a business combination under the acquisition method of accounting. 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)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2014
(as adjusted)
Cash and cash equivalents
 
$
209.5

 
$
(31.4
)
 
$
178.1

Accounts receivable(b)
 
547.9

 
(7.2
)
 
540.7

Inventories(c)
 
675.8

 
(34.0
)
 
641.8

Other current assets
 
146.6

 
0.3

 
146.9

Property, plant and equipment, net(d)
 
761.4

 
33.2

 
794.6

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

 
17.3

 
4,333.4

Acquired IPR&D(f)
 
398.1

 
17.0

 
415.1

Other non-current assets
 
58.8

 
(1.9
)
 
56.9

Current liabilities
 
(885.6
)
 
2.1

 
(883.5
)
Long-term debt, including current portion(g)
 
(4,209.9
)
 
—

 
(4,209.9
)
Deferred income taxes, net(h)
 
(1,410.9
)
 
36.0

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

 
30.4

 
358.0

Noncontrolling interest(j)
 
(102.3
)
 
(0.4
)
 
(102.7
)
Goodwill(k)
 
4,388.0

 
(30.0
)
 
4,358.0

Total fair value of consideration transferred
 
$
4,613.3

 
$
—

 
$
4,613.3

________________________
(a)
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.
(b)
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.
(c)
Includes an estimated fair value adjustment to inventory of $269.1 million.
(d)
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
December 31, 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


The Company sold an office building in Rochester, New York, with an adjusted carrying amount of $14.2 million, in the third quarter of 2014. There was no gain or loss associated with the sale.
(e)
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
December 31, 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.
(f)
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). See note 21 titled “COMMITMENTS AND CONTINGENCIES” for further information related to the worldwide licensing agreement with NicOx, S.A. (“NicOx”) for latanoprostene bunod. 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, and a risk-adjusted discount rate of 10% was used to present value the projected cash flows. In determining fair value for latanoprostene bunod and Bausch + Lomb Ultra®, the Company assumed, as of the acquisition date, that material cash inflows for these products would commence in 2016 and 2014, respectively. In September 2013, the U.S. Food and Drug Administration (“FDA”) approved Bausch + Lomb Ultra®, and the product was launched in February 2014. As of December 31, 2014, the Company estimated that it will incur remaining development costs, including certain milestone payments, of approximately $80 million, in the aggregate, to complete the development of the IPR&D assets.    
(g)
In 2013, the Company repaid in full the amounts outstanding, with the exception of certain debentures. In connection with the redemption of the assumed 9.875% senior notes, the Company recognized a loss on extinguishment of debt of $8.2 million in the third quarter of 2013. As of December 31, 2014 and 2013, the debentures have an outstanding balance of $11.8 million, in the aggregate.
(h)
Comprises current net deferred tax assets ($61.6 million) and non-current net deferred tax liabilities ($1,436.5 million).
(i)
Includes $224.2 million related to the estimated fair value of pension and other benefits liabilities.
(j)
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.
(k)
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).
Schedule of estimated fair value of assets acquired and liabilities assumed
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)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2014
(as adjusted)
Cash and cash equivalents
 
$
209.5

 
$
(31.4
)
 
$
178.1

Accounts receivable(b)
 
547.9

 
(7.2
)
 
540.7

Inventories(c)
 
675.8

 
(34.0
)
 
641.8

Other current assets
 
146.6

 
0.3

 
146.9

Property, plant and equipment, net(d)
 
761.4

 
33.2

 
794.6

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

 
17.3

 
4,333.4

Acquired IPR&D(f)
 
398.1

 
17.0

 
415.1

Other non-current assets
 
58.8

 
(1.9
)
 
56.9

Current liabilities
 
(885.6
)
 
2.1

 
(883.5
)
Long-term debt, including current portion(g)
 
(4,209.9
)
 
—

 
(4,209.9
)
Deferred income taxes, net(h)
 
(1,410.9
)
 
36.0

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

 
30.4

 
358.0

Noncontrolling interest(j)
 
(102.3
)
 
(0.4
)
 
(102.7
)
Goodwill(k)
 
4,388.0

 
(30.0
)
 
4,358.0

Total fair value of consideration transferred
 
$
4,613.3

 
$
—

 
$
4,613.3

________________________
(a)
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.
(b)
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.
(c)
Includes an estimated fair value adjustment to inventory of $269.1 million.
(d)
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
December 31, 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


The Company sold an office building in Rochester, New York, with an adjusted carrying amount of $14.2 million, in the third quarter of 2014. There was no gain or loss associated with the sale.
(e)
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
December 31, 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.
(f)
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). See note 21 titled “COMMITMENTS AND CONTINGENCIES” for further information related to the worldwide licensing agreement with NicOx, S.A. (“NicOx”) for latanoprostene bunod. 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, and a risk-adjusted discount rate of 10% was used to present value the projected cash flows. In determining fair value for latanoprostene bunod and Bausch + Lomb Ultra®, the Company assumed, as of the acquisition date, that material cash inflows for these products would commence in 2016 and 2014, respectively. In September 2013, the U.S. Food and Drug Administration (“FDA”) approved Bausch + Lomb Ultra®, and the product was launched in February 2014. As of December 31, 2014, the Company estimated that it will incur remaining development costs, including certain milestone payments, of approximately $80 million, in the aggregate, to complete the development of the IPR&D assets.    
(g)
In 2013, the Company repaid in full the amounts outstanding, with the exception of certain debentures. In connection with the redemption of the assumed 9.875% senior notes, the Company recognized a loss on extinguishment of debt of $8.2 million in the third quarter of 2013. As of December 31, 2014 and 2013, the debentures have an outstanding balance of $11.8 million, in the aggregate.
(h)
Comprises current net deferred tax assets ($61.6 million) and non-current net deferred tax liabilities ($1,436.5 million).
(i)
Includes $224.2 million related to the estimated fair value of pension and other benefits liabilities.
(j)
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.
(k)
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).
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
December 31, 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
Schedule of 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 Other (income) expense 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 Other (income) expense 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
December 31, 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
2013 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
December 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
December 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 Obagi acquisition has been allocated primarily 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.
Schedule of estimated fair value of assets acquired and liabilities assumed
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
December 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
December 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 Obagi acquisition has been allocated primarily 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.
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
December 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
Medicis  
Business Combinations  
Schedule of acquisitions
The following table indicates the consideration transferred to effect the acquisition of Medicis:
(Number of shares, stock options and restricted
share units in millions)
 
Conversion
Calculation
 
Fair
Value
Number of common shares of Medicis outstanding as of acquisition date
 
57.1

 
 

Multiplied by Medicis Per Share Consideration
 
$
44.00

 
$
2,513.9

Number of stock options of Medicis cancelled and exchanged for cash(a)
 
3.2

 
33.1

Number of outstanding restricted shares cancelled and exchanged for cash(a)
 
2.0

 
31.9

Total fair value of consideration transferred
 
 

 
$
2,578.9

____________________________________
(a)
The cash consideration paid for Medicis stock options and restricted shares attributable to pre-combination services has been included as a component of purchase price. The remaining $77.3 million balance 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 was recognized as a post-combination expense within Other (income) expense in the fourth quarter of 2012.
Assets Acquired and Liabilities Assumed
The transaction has been accounted for as business combination under the acquisition method of accounting. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date.
 
 
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
Cash and cash equivalents
 
$
169.6

 
$
—

 
$
169.6

Accounts receivable(b)
 
81.1

 
9.1

 
90.2

Inventories(c)
 
145.1

 
(7.6
)
 
137.5

Short-term and long-term investments(d)
 
626.6

 
—

 
626.6

Income taxes receivable
 
40.4

 
—

 
40.4

Other current assets
 
74.6

 
—

 
74.6

Property and equipment, net
 
8.2

 
(5.6
)
 
2.6

Identifiable intangible assets, excluding acquired IPR&D(e)
 
1,390.7

 
(21.8
)
 
1,368.9

Acquired IPR&D(f)
 
153.8

 
6.0

 
159.8

Other non-current assets
 
0.6

 
—

 
0.6

Current liabilities
 
(453.8
)
 
(12.5
)
 
(466.3
)
Long-term debt, including current portion(g)
 
(778.0
)
 
—

 
(778.0
)
Deferred income taxes, net
 
(205.0
)
 
12.2

 
(192.8
)
Other non-current liabilities
 
(8.8
)
 
—

 
(8.8
)
Total identifiable net assets
 
1,245.1

 
(20.2
)
 
1,224.9

Goodwill(h)
 
1,333.8

 
20.2

 
1,354.0

Total fair value of consideration transferred
 
$
2,578.9

 
$
—

 
$
2,578.9

______________________
(a)
The measurement period adjustments primarily reflect: (i) reductions in the estimated fair value of a product brand intangible asset and property and equipment; (ii) changes in estimated inventory reserves; (iii) changes in certain assumptions impacting the fair value of acquired IPR&D; (iv) additional information obtained with respect to the valuation of certain pre-acquisition contingent assets, as well as legal and milestone obligations; and (v) 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 $90.2 million, with the gross contractual amount being $90.3 million, of which the Company expects that $0.1 million will be uncollectible.
(c)
Includes an estimated fair value adjustment to inventory of $104.6 million.
(d)
Short-term and long-term investments consist of corporate and various government agency and municipal debt securities, investments in auction rate floating securities (student loans), and investments in equity securities. Subsequent to the acquisition date, the Company liquidated these investments for proceeds of $615.4 million, $9.0 million and $8.0 million in the fourth quarter of 2012, the first quarter of 2013, and the second quarter of 2013, respectively.
(e)
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
December 31, 2013
(as adjusted)
In-licensed products
 
11
 
$
633.4

 
$
2.3

 
$
635.7

Product brands
 
8
 
491.6

 
(24.8
)
 
466.8

Patents
 
5
 
225.0

 
1.1

 
226.1

Corporate brands
 
14
 
40.7

 
(0.4
)
 
40.3

Total identifiable intangible assets acquired
 
9
 
$
1,390.7

 
$
(21.8
)
 
$
1,368.9


(f)
The significant components of the acquired IPR&D assets relate to the development of dermatology products, such as Luliconazole, a new imidazole, antimycotic cream for the treatment of tinea cruris, pedis and corporis, and Metronidazole 1.3%, a topical antibiotic for the treatment of bacterial vaginosis ($136.9 million, in the aggregate), and the development of aesthetics programs ($22.9 million). In November 2013, the FDA approved a New Drug Application (“NDA”) for Luliconazole, which triggered the commencement of amortization. A multi-period excess earnings methodology (income approach) was primarily used to determine the estimated fair values of the acquired IPR&D assets. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project. Risk-adjusted discount rates of 10% - 11% were used to present value the projected cash flows. On July 1, 2014, the Company sold the worldwide rights in its Metronidazole 1.3% Vaginal Gel antibiotic development product to Actavis Specialty Brands. For further details, see note 4 titled “DIVESTITURES”.
(g)
During the period from the acquisition date to December 31, 2013, the Company settled a significant portion of Medicis’ outstanding long-term debt. As of December 31, 2014 and 2013, Medicis’ outstanding long-term debt includes 1.375% Convertible Senior Notes, with an outstanding principal amount of $0.2 million.
(h)
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:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of Medicis with those of the Company;
•
the value of the continuing operations of Medicis’ 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, Medicis’ assembled workforce).
The goodwill has been allocated to the Company’s Developed Markets segment.
Schedule of estimated fair value of assets acquired and liabilities assumed
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date.
 
 
Amounts
Recognized as of
Acquisition Date
(as previously
reported)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
Cash and cash equivalents
 
$
169.6

 
$
—

 
$
169.6

Accounts receivable(b)
 
81.1

 
9.1

 
90.2

Inventories(c)
 
145.1

 
(7.6
)
 
137.5

Short-term and long-term investments(d)
 
626.6

 
—

 
626.6

Income taxes receivable
 
40.4

 
—

 
40.4

Other current assets
 
74.6

 
—

 
74.6

Property and equipment, net
 
8.2

 
(5.6
)
 
2.6

Identifiable intangible assets, excluding acquired IPR&D(e)
 
1,390.7

 
(21.8
)
 
1,368.9

Acquired IPR&D(f)
 
153.8

 
6.0

 
159.8

Other non-current assets
 
0.6

 
—

 
0.6

Current liabilities
 
(453.8
)
 
(12.5
)
 
(466.3
)
Long-term debt, including current portion(g)
 
(778.0
)
 
—

 
(778.0
)
Deferred income taxes, net
 
(205.0
)
 
12.2

 
(192.8
)
Other non-current liabilities
 
(8.8
)
 
—

 
(8.8
)
Total identifiable net assets
 
1,245.1

 
(20.2
)
 
1,224.9

Goodwill(h)
 
1,333.8

 
20.2

 
1,354.0

Total fair value of consideration transferred
 
$
2,578.9

 
$
—

 
$
2,578.9

______________________
(a)
The measurement period adjustments primarily reflect: (i) reductions in the estimated fair value of a product brand intangible asset and property and equipment; (ii) changes in estimated inventory reserves; (iii) changes in certain assumptions impacting the fair value of acquired IPR&D; (iv) additional information obtained with respect to the valuation of certain pre-acquisition contingent assets, as well as legal and milestone obligations; and (v) 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 $90.2 million, with the gross contractual amount being $90.3 million, of which the Company expects that $0.1 million will be uncollectible.
(c)
Includes an estimated fair value adjustment to inventory of $104.6 million.
(d)
Short-term and long-term investments consist of corporate and various government agency and municipal debt securities, investments in auction rate floating securities (student loans), and investments in equity securities. Subsequent to the acquisition date, the Company liquidated these investments for proceeds of $615.4 million, $9.0 million and $8.0 million in the fourth quarter of 2012, the first quarter of 2013, and the second quarter of 2013, respectively.
(e)
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
December 31, 2013
(as adjusted)
In-licensed products
 
11
 
$
633.4

 
$
2.3

 
$
635.7

Product brands
 
8
 
491.6

 
(24.8
)
 
466.8

Patents
 
5
 
225.0

 
1.1

 
226.1

Corporate brands
 
14
 
40.7

 
(0.4
)
 
40.3

Total identifiable intangible assets acquired
 
9
 
$
1,390.7

 
$
(21.8
)
 
$
1,368.9


(f)
The significant components of the acquired IPR&D assets relate to the development of dermatology products, such as Luliconazole, a new imidazole, antimycotic cream for the treatment of tinea cruris, pedis and corporis, and Metronidazole 1.3%, a topical antibiotic for the treatment of bacterial vaginosis ($136.9 million, in the aggregate), and the development of aesthetics programs ($22.9 million). In November 2013, the FDA approved a New Drug Application (“NDA”) for Luliconazole, which triggered the commencement of amortization. A multi-period excess earnings methodology (income approach) was primarily used to determine the estimated fair values of the acquired IPR&D assets. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project. Risk-adjusted discount rates of 10% - 11% were used to present value the projected cash flows. On July 1, 2014, the Company sold the worldwide rights in its Metronidazole 1.3% Vaginal Gel antibiotic development product to Actavis Specialty Brands. For further details, see note 4 titled “DIVESTITURES”.
(g)
During the period from the acquisition date to December 31, 2013, the Company settled a significant portion of Medicis’ outstanding long-term debt. As of December 31, 2014 and 2013, Medicis’ outstanding long-term debt includes 1.375% Convertible Senior Notes, with an outstanding principal amount of $0.2 million.
(h)
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:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of Medicis with those of the Company;
•
the value of the continuing operations of Medicis’ 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, Medicis’ assembled workforce).
The goodwill has been allocated 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 Date
(as previously
reported)
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
In-licensed products
 
11
 
$
633.4

 
$
2.3

 
$
635.7

Product brands
 
8
 
491.6

 
(24.8
)
 
466.8

Patents
 
5
 
225.0

 
1.1

 
226.1

Corporate brands
 
14
 
40.7

 
(0.4
)
 
40.3

Total identifiable intangible assets acquired
 
9
 
$
1,390.7

 
$
(21.8
)
 
$
1,368.9
Schedule of fair value of consideration transferred
The following table indicates the consideration transferred to effect the acquisition of Medicis:
(Number of shares, stock options and restricted
share units in millions)
 
Conversion
Calculation
 
Fair
Value
Number of common shares of Medicis outstanding as of acquisition date
 
57.1

 
 

Multiplied by Medicis Per Share Consideration
 
$
44.00

 
$
2,513.9

Number of stock options of Medicis cancelled and exchanged for cash(a)
 
3.2

 
33.1

Number of outstanding restricted shares cancelled and exchanged for cash(a)
 
2.0

 
31.9

Total fair value of consideration transferred
 
 

 
$
2,578.9

____________________________________
(a)
The cash consideration paid for Medicis stock options and restricted shares attributable to pre-combination services has been included as a component of purchase price. The remaining $77.3 million balance 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 was recognized as a post-combination expense within Other (income) expense in the fourth quarter of 2012.
2012 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 other business combinations, in the aggregate, as of the acquisition dates.
 
 
Amounts
Recognized as of
Acquisition Dates
(as previously
reported)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
Cash and cash equivalents
 
$
21.4

 
$
(0.3
)
 
$
21.1

Accounts receivable(b)
 
40.2

 
—

 
40.2

Assets held for sale(c)
 
15.6

 
—

 
15.6

Inventories
 
68.0

 
(8.8
)
 
59.2

Other current assets
 
6.6

 
—

 
6.6

Property, plant and equipment
 
17.2

 
—

 
17.2

Identifiable intangible assets, excluding acquired IPR&D(d)
 
1,133.0

 
(62.6
)
 
1,070.4

Acquired IPR&D(e)
 
16.7

 
13.1

 
29.8

Indemnification assets
 
27.9

 
—

 
27.9

Other non-current assets
 
1.9

 
—

 
1.9

Current liabilities
 
(41.8
)
 
(0.7
)
 
(42.5
)
Long-term debt(f)
 
(38.8
)
 
—

 
(38.8
)
Liability for uncertain tax position
 
(6.7
)
 
6.7

 
—

Other non-current liabilities
 
(28.7
)
 
—

 
(28.7
)
Deferred income taxes, net
 
(184.8
)
 
18.8

 
(166.0
)
Total identifiable net assets
 
1,047.7

 
(33.8
)
 
1,013.9

Goodwill(g)
 
157.4

 
24.7

 
182.1

Total fair value of consideration transferred
 
$
1,205.1

 
$
(9.1
)
 
$
1,196.0

________________________
(a)
The measurement period adjustments primarily relate to the OraPharma acquisition and primarily reflect: (i) changes in the estimated fair value of the Arestin® product brand; (ii) the reclassification of intangible assets from product brands to IPR&D; (iii) a decrease in the total fair value of consideration transferred due to a working capital adjustment; and (iv) 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 $40.2 million, with the gross contractual amount being $41.5 million, of which the Company expects that $1.3 million will be uncollectible.
(c)
Assets held for sale relate to a product brand acquired in the other smaller acquisition. Subsequent to that acquisition, the plan of sale changed, and the Company no longer intends to sell the asset. Consequently, the product brand was not classified as an asset held for sale as of December 31, 2012.
(d)
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
December 31, 2013
(as adjusted)
Product brands
 
11
 
$
903.7

 
$
(63.8
)
 
$
839.9

Corporate brands
 
13
 
51.4

 
2.1

 
53.5

Product rights
 
10
 
109.3

 
(0.9
)
 
108.4

Royalty agreement
 
9
 
36.2

 
—

 
36.2

Partner relationships
 
5
 
32.4

 
—

 
32.4

Total identifiable intangible assets acquired
 
11
 
$
1,133.0

 
$
(62.6
)
 
$
1,070.4


(e)
The IPR&D assets primarily relate to the OraPharma acquisition. OraPharma’s acquired IPR&D assets primarily relate to the development of Arestin® ER, which is indicated for oral hygiene use and Arestin® Peri-Implantitis, which is indicated for anti-inflammatory and anti-bacterial use.
(f)
Primarily relates to the OraPharma acquisition. Effective June 18, 2012, the Company terminated the OraPharma’s credit facility agreement, repaid the assumed debt outstanding ($37.9 million) and cancelled the undrawn credit facilities.
(g)
The goodwill relates primarily to the OraPharma acquisition. 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 OraPharma’s goodwill is expected to be deductible for tax purposes. The goodwill recorded from the OraPharma acquisition represents the following:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of OraPharma with those of the Company;
•
the value of the continuing operations of OraPharma’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, OraPharma’s assembled workforce).
The amount of goodwill from OraPharma acquisition has been allocated to the Company’s Developed Markets segment. The amount of goodwill from the Gerot Lannach acquisition has been allocated to the Company’s Emerging Markets segment.
Schedule of estimated fair value of assets acquired and liabilities assumed
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed related to the other business combinations, in the aggregate, as of the acquisition dates.
 
 
Amounts
Recognized as of
Acquisition Dates
(as previously
reported)
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
Cash and cash equivalents
 
$
21.4

 
$
(0.3
)
 
$
21.1

Accounts receivable(b)
 
40.2

 
—

 
40.2

Assets held for sale(c)
 
15.6

 
—

 
15.6

Inventories
 
68.0

 
(8.8
)
 
59.2

Other current assets
 
6.6

 
—

 
6.6

Property, plant and equipment
 
17.2

 
—

 
17.2

Identifiable intangible assets, excluding acquired IPR&D(d)
 
1,133.0

 
(62.6
)
 
1,070.4

Acquired IPR&D(e)
 
16.7

 
13.1

 
29.8

Indemnification assets
 
27.9

 
—

 
27.9

Other non-current assets
 
1.9

 
—

 
1.9

Current liabilities
 
(41.8
)
 
(0.7
)
 
(42.5
)
Long-term debt(f)
 
(38.8
)
 
—

 
(38.8
)
Liability for uncertain tax position
 
(6.7
)
 
6.7

 
—

Other non-current liabilities
 
(28.7
)
 
—

 
(28.7
)
Deferred income taxes, net
 
(184.8
)
 
18.8

 
(166.0
)
Total identifiable net assets
 
1,047.7

 
(33.8
)
 
1,013.9

Goodwill(g)
 
157.4

 
24.7

 
182.1

Total fair value of consideration transferred
 
$
1,205.1

 
$
(9.1
)
 
$
1,196.0

________________________
(a)
The measurement period adjustments primarily relate to the OraPharma acquisition and primarily reflect: (i) changes in the estimated fair value of the Arestin® product brand; (ii) the reclassification of intangible assets from product brands to IPR&D; (iii) a decrease in the total fair value of consideration transferred due to a working capital adjustment; and (iv) 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 $40.2 million, with the gross contractual amount being $41.5 million, of which the Company expects that $1.3 million will be uncollectible.
(c)
Assets held for sale relate to a product brand acquired in the other smaller acquisition. Subsequent to that acquisition, the plan of sale changed, and the Company no longer intends to sell the asset. Consequently, the product brand was not classified as an asset held for sale as of December 31, 2012.
(d)
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
December 31, 2013
(as adjusted)
Product brands
 
11
 
$
903.7

 
$
(63.8
)
 
$
839.9

Corporate brands
 
13
 
51.4

 
2.1

 
53.5

Product rights
 
10
 
109.3

 
(0.9
)
 
108.4

Royalty agreement
 
9
 
36.2

 
—

 
36.2

Partner relationships
 
5
 
32.4

 
—

 
32.4

Total identifiable intangible assets acquired
 
11
 
$
1,133.0

 
$
(62.6
)
 
$
1,070.4


(e)
The IPR&D assets primarily relate to the OraPharma acquisition. OraPharma’s acquired IPR&D assets primarily relate to the development of Arestin® ER, which is indicated for oral hygiene use and Arestin® Peri-Implantitis, which is indicated for anti-inflammatory and anti-bacterial use.
(f)
Primarily relates to the OraPharma acquisition. Effective June 18, 2012, the Company terminated the OraPharma’s credit facility agreement, repaid the assumed debt outstanding ($37.9 million) and cancelled the undrawn credit facilities.
(g)
The goodwill relates primarily to the OraPharma acquisition. 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 OraPharma’s goodwill is expected to be deductible for tax purposes. The goodwill recorded from the OraPharma acquisition represents the following:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of OraPharma with those of the Company;
•
the value of the continuing operations of OraPharma’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, OraPharma’s assembled workforce).
The amount of goodwill from OraPharma acquisition has been allocated to the Company’s Developed Markets segment. The amount of goodwill from the Gerot Lannach acquisition has been allocated to the Company’s Emerging 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 Date
(as previously
reported)
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
December 31, 2013
(as adjusted)
Product brands
 
11
 
$
903.7

 
$
(63.8
)
 
$
839.9

Corporate brands
 
13
 
51.4

 
2.1

 
53.5

Product rights
 
10
 
109.3

 
(0.9
)
 
108.4

Royalty agreement
 
9
 
36.2

 
—

 
36.2

Partner relationships
 
5
 
32.4

 
—

 
32.4

Total identifiable intangible assets acquired
 
11
 
$
1,133.0

 
$
(62.6
)
 
$
1,070.4