MERGER-RELATED RESTRUCTURING AND INTEGRATION COSTS

9 Months Ended

Sep. 30, 2011

6. MERGER-RELATED RESTRUCTURING AND INTEGRATION COSTS

In connection with the Merger, the Company initiated measures to integrate the operations of Biovail and Valeant, capture operating synergies and generate cost savings across the Company. Costs associated with these initiatives include: employee termination costs (including related share-based payments) payable to approximately 500 employees of Biovail and Valeant who have been, or will be, terminated as a result of the Merger; IPR&D termination costs related to the transfer of product-development programs that did not align with the Company's research and development model to other parties; costs to consolidate or close facilities and relocate employees; asset impairment charges to write down property, plant and equipment to fair value; and contract termination and lease cancellation costs. The following table summarizes the major components of costs incurred in connection with these initiatives and a reconciliation of the liability balance:

	Employee Termination Costs

	Employee Termination Costs									Contract Termination, Facility Closure and Other Costs
	Severance and Related Benefits			Share-Based Compensation			IPR&D Termination Costs			Contract Termination, Facility Closure and Other Costs			Total
Balance, January 1, 2010	$	—		$	—		$	—		$	—		$	—
Costs incurred and charged to expense		58,727			49,482			13,750			12,862			134,821
Cash payments		(33,938	)		—			(13,750	)		(8,755	)		(56,443	)
Non-cash adjustments		—			(49,482	)		—			(2,437	)		(51,919	)

Balance, December 31, 2010		24,789			—			—			1,670			26,459
Costs incurred and charged to expense		5,260			3,446			—			8,833			17,539
Cash payments		(20,603	)		—			—			(2,510	)		(23,113	)
Non-cash adjustments		—			(165	)		—			—			(165	)

Balance, March 31, 2011		9,446			3,281			—			7,993			20,720
Costs incurred and charged to expense		5,632			295			—			15,847			21,774
Cash payments		(8,305	)		(2,033	)		—			(7,067	)		(17,405	)
Non-cash adjustments		—			—			—			(1,300	)		(1,300	)

Balance, June 30, 2011		6,773			1,543			—			15,473			23,789
Costs incurred and charged to expense		1,689			(286	)		—			2,977			4,380
Cash payments		(7,848	)		—			—			(450	)		(8,298	)
Non-cash adjustments		56			(576	)		—			(772	)		(1,292	)

Balance, September 30, 2011	$	670		$	681		$	—		$	17,228		$	18,579

Facility closure costs incurred in the nine-month period ended September 30, 2011 included a $9.7 million charge for the remaining operating lease obligation (net of estimated sublease rentals that could be reasonably obtained) related to the Company's vacated Mississauga, Ontario corporate office facility and a charge of $1.3 million related to a lease termination payment on the Company's Aliso Viejo, California corporate office facility. The Company is transitioning a number of its corporate office functions to Bridgewater, New Jersey. As a result, portions of the previously vacated space in the Bridgewater facility have been reoccupied, resulting in a $2.0 million reversal of a previously recognized restructuring accrual related to that space.

In addition to costs associated with the Company's Merger-related initiatives, the Company incurred $11.5 million and $17.4 million of integration-related costs in the third quarter and first nine months of 2011, respectively, of which $12.2 million had been paid as of September 30, 2011. These costs were primarily related to the integration of the European operations following the acquisitions of PharmaSwiss and Sanitas, the consolidation of our manufacturing facilities in Brazil, and worldwide systems integration initiatives.