SECURITIES REPURCHASE PROGRAM

6 Months Ended

Jun. 30, 2011

SECURITIES REPURCHASE PROGRAM

SECURITIES REPURCHASE PROGRAM

12.   SECURITIES REPURCHASE PROGRAM

• On November 4, 2010, the Company announced that its board of directors had approved a securities repurchase program (the "securities repurchase program"), pursuant to which the Company may make purchases of its common shares, convertible notes and/or senior notes, from time to time, up to an aggregate maximum value of $1.5 billion, subject to any restrictions in the Company's financing agreements and applicable law.

  In the six-month period ended June 30, 2011, the Company repurchased $109.0 million aggregate principal amount of the 5.375% senior convertible notes due 2014 (the "5.375% Convertible Notes") for an aggregate purchase price of $344.0 million. The carrying amount of the 5.375% Convertible Notes purchased was $93.3 million (net of $3.1 million of related unamortized deferred financing costs) and the estimated fair value of the 5.375% Convertible Notes exclusive of the conversion feature was $111.6 million. The difference of $18.3 million between the net carrying amount and the estimated fair value was recognized as a loss on extinguishment of debt. The difference of $232.4 million between the estimated fair value of $111.6 million and the purchase price of $344.0 million resulted in charges to additional paid-in capital and accumulated deficit of $17.6 million and $214.8 million, respectively. The portion of the purchase price attributable to accreted interest on the debt discount amounted to $5.0 million, and is presented in the consolidated statements of cash flows as payment of accreted interest in cash flows from operating activities. The remaining portion of the payment of $339.0 million is presented in the consolidated statement of cash flows as an outflow from financing activities, which includes a payment to the note holders of a $15.2 million premium above the carrying value.

  In March 2011, the Company repurchased 7,366,419 of its common shares from ValueAct for an aggregate purchase price of $274.8 million. These common shares were subsequently cancelled. As of June 30, 2011, the Company had recorded an estimated $24.2 million receivable from ValueAct in relation to withholding taxes on the March 2011 repurchase. In May 2011, a subsidiary of the Company purchased 4,498,180 of the Company's common shares from ValueAct for an aggregate purchase price of $224.8 million. In June 2011, the Company purchased these common shares from its subsidiary and the common shares were subsequently cancelled. G. Mason Morfit is a partner and a member of the Management Committee of ValueAct Capital. Mr. Morfit joined the Company's board of directors on September 28, 2010, effective with the Merger, and prior thereto served as a member of Valeant's board of directors since 2007. ValueAct Capital is the general partner and the manager of ValueAct.

  In connection with the securities repurchase program, through June 30, 2011, the Company had repurchased a total of $235.2 million principal amount of the 5.375% Convertible Notes for consideration of $603.3 million and 14,169,599 of its common shares for consideration of $559.7 million. Subsequent to June 30, 2011, the Company repurchased an additional $11.4 million principal amount of the 5.375% Convertible Notes for cash consideration of $41.7 million.