SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT INFORMATION

SEGMENT INFORMATION

26.   SEGMENT INFORMATION

• Business Segments

  Effective with the Merger, the Company operates in the following business segments, based on differences in products and services and geographical areas of operations:

  • •

    U.S. Neurology and Other consists of sales of pharmaceutical products indicated for the treatment of neurological and other diseases, as well as alliance revenue from the licensing of various products the Company developed or acquired. In addition, this segment includes revenue from contract research services provided by CRD prior to its disposal in July 2010.

    •

    U.S. Dermatology consists of pharmaceutical and OTC product sales, and alliance and contract service revenues in the areas of dermatology and topical medication.

    •

    Canada and Australia consists of pharmaceutical and OTC products primarily sold in Canada, Australia and New Zealand.

    •

    Branded Generics — Europe consists primarily of branded generic pharmaceutical products, as well as OTC products and agency/in-licensing arrangements with other research-based pharmaceutical companies (where the Company distributes and markets branded, patented products under long-term, renewable contracts). Products are sold primarily in Poland, Serbia, Hungary, Croatia and Russia.

    •

    Branded Generics — Latin America consists of branded generic pharmaceutical and OTC products sold primarily in Mexico and Brazil and exports out of Mexico to other Latin American markets.

• Segment profit is based on operating income after the elimination of intercompany transactions. Certain costs, such as restructuring and acquisition-related costs and legal settlement and acquired IPR&D charges, are not included in the measure of segment profit, as management excludes these items in assessing financial performance.

  Corporate includes the finance, treasury, tax and legal operations of the Company's businesses and maintains and/or incurs certain assets, liabilities, expenses, gains and losses related to the overall management of the Company, which are not allocated to the other business segments. In addition, share-based compensation is considered a corporate cost, since the amount of such expense depends on company-wide performance rather than the operating performance of any single segment.

  Segment Revenues and Profit

  Segment revenues and profit for the years ended December 31, 2011, 2010 and 2009 were as follows:

			2011			2010			2009
Revenues(1):
	U.S. Neurology and Other		$	829,289		$	658,312		$	575,321
	U.S. Dermatology(2):			568,298			219,008			146,267
	Canada and Australia(3):			340,240			161,568			83,959
	Branded Generics — Europe(4):			470,783			73,312			14,883
	Branded Generics — Latin America			254,840			69,037			—
		Total revenues		2,463,450			1,181,237			820,430
Segment profit (loss)(5):
	U.S. Neurology and Other			415,273			251,129			274,548
	U.S. Dermatology			185,129			47,737			87,860
	Canada and Australia			104,083			51,043			35,037
	Branded Generics — Europe(6):			18,331			20,646			9,152
	Branded Generics — Latin America			(2,164	)		(3,889	)		—
		Total segment profit		720,652			366,666			406,597
Corporate(7)				(180,007	)		(155,794	)		(124,269	)
Restructuring and integration costs				(97,667	)		(140,840	)		(30,033	)
Acquired IPR&D				(109,200	)		(89,245	)		(59,354	)
Acquisition-related costs				(32,964	)		(38,262	)		(5,596	)
Legal settlements				(11,841	)		(52,610	)		(6,191	)
Acquisition-related contingent consideration				10,986			—			—
Operating income (loss)				299,959			(110,085	)		181,154
Interest income				4,084			1,294			1,118
Interest expense				(333,041	)		(84,307	)		(24,881	)
Write-down of deferred financing charges				(1,485	)		(5,774	)		(537	)
Loss on extinguishment of debt				(36,844	)		(32,413	)		—
Foreign exchange and other				26,551			574			507
Gain (loss) on investments, net				22,776			(5,552	)		17,594
(Loss) income before recovery of income taxes			$	(18,000	)	$	(236,263	)	$	174,955

• (1)

  Segment revenues in 2011 reflect revenues from Valeant products and services as follows: U.S. Neurology and Other — $229.5 million; U.S. Dermatology — $275.0 million; Canada and Australia — $190.1 million; Branded Generics — Europe — $186.3 million; and Branded Generics — Latin America — $253.8 million. Segment revenues in 2010 reflect incremental revenues from Valeant products and services commencing on the Merger Date as follows: U.S. Neurology and Other — $60.8 million; U.S. Dermatology — $57.2 million; Canada and Australia — $47.6 million; Branded Generics — Europe — $40.0 million; and Branded Generics — Latin America — $69.0 million.
  
  

  (2)

  U.S. Dermatology segment revenues in 2011 reflect incremental revenues from Dermik products and services of $7.6 million commencing on the acquisition date (as described in note 3). U.S. Dermatology segment revenues in 2011 also reflect incremental revenues from Ortho Dermatologics products and services of $9.6 million, commencing on the acquisition date (as described in note 3).
  
  

  (3)

  Canada and Australia segment revenues in 2011 reflect incremental revenues from Afexa products and services of $12.6 million, commencing on the acquisition date (as described in note 3).
  
  

  (4)

  Branded Generics — Europe segment revenues in 2011 reflect incremental revenues from PharmaSwiss products and services of $199.9 million commencing on the acquisition date (as described in note 3). Branded Generics — Europe segment revenues in 2011 also reflect incremental revenues from Sanitas products and services of $49.6 million, commencing on the acquisition date (as described in note 3).
  
  

  (5)

  Segment profit (loss) in 2011 reflects the addition of Valeant operations. Segment profit in 2011 includes the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets as follows: U.S. Neurology and Other — $42.6 million; U.S. Dermatology — $54.5 million; Canada and Australia — $32.3 million; Branded Generics — Europe — $30.1 million; and Branded Generics — Latin America — $48.7 million. Segment profit (loss) in 2010 reflects Valeant operations commencing on the Merger date. Segment profit (loss) in 2010 includes the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets as follows: U.S. Neurology and Other — $33.1 million; U.S. Dermatology — $27.4 million; Canada and Australia — $17.0 million; Branded Generics — Europe — $12.9 million; and Branded Generics — Latin America — $21.6 million.
  
  

  (6)

  Branded Generics — Europe segment profit in 2011 reflects the addition of PharmaSwiss operations commencing on the acquisition date, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $41.6 million. Branded Generics — Europe segment profit also reflects the addition of Sanitas operations commencing on the Sanitas Acquisition Date, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $16.3 million in 2011.
  
  

  (7)

  Corporate reflects non-restructuring-related share-based compensation expense of $93.0 million, $48.6 million and $5.6 million in 2011, 2010 and 2009, respectively. The non-restructuring-related share-based compensation expense includes the effect of the fair value increment on Valeant stock options and RSUs converted into the Company awards of $58.6 million and $37.1 million in 2011 and 2010, respectively.

  Segment Assets

  Total assets by segment as of December 31, 2011, 2010 and 2009 were as follows:

		2011		2010		2009
Assets(1):
	U.S. Neurology and Other	$	4,436,835	$	5,013,016	$	1,409,243
	U.S. Dermatology(2):		3,076,747		1,905,261		169,164
	Canada and Australia(3):		1,876,529		1,011,722		76,739
	Branded Generics — Europe(4):		1,853,931		920,796		11,560
	Branded Generics — Latin America		1,231,360		1,421,991		—
			12,475,402		10,272,786		1,666,706
	Corporate		666,311		522,331		392,584
Total assets		$	13,141,713	$	10,795,117	$	2,059,290

• (1)

  Segments assets as of December 31, 2011 reflect the measurement period adjustments associated with the Merger. Segment assets as of December 31, 2011 reflect the amounts of identifiable intangible assets and goodwill of Valeant as follows: U.S. Neurology and Other — $3,400.4 million; U.S. Dermatology — $1,537.1 million; Canada and Australia — $658.4 million; Branded Generics — Europe — $644.6 million; and Branded Generics — Latin America — $992.3 million. Segment assets as of December 31, 2010 reflect the provisional amounts of identifiable intangible assets and goodwill of Valeant as follows: U.S. Neurology and Other — $3,639.5 million; U.S. Dermatology — $1,694.7 million; Canada and Australia — $836.8 million; Branded Generics — Europe — $740.5 million; and Branded Generics — Latin America — $1,185.6 million.
  
  

  (2)

  U.S. Dermatology segment assets as of December 31, 2011 reflect the provisional amounts of identifiable intangible assets and goodwill of Dermik of $341.7 million and $8.1 million, respectively. In addition, U.S. Dermatology segment assets as of December 31, 2011 also reflect the provisional amounts of identifiable intangible assets and goodwill of Ortho Dermatologics of $333.6 million and $3.5 million, respectively.
  
  

  (3)

  Canada and Australia segment assets as of December 31, 2011 reflect the provisional amounts of identifiable intangible assets and goodwill of iNova of $424.0 million and $211.8 million, respectively. In addition, Canada and Australia segment assets as of December 31, 2011 reflect the provisional amounts of identifiable intangible assets and goodwill of Afexa of $80.6 million and $3.1 million, respectively.
  
  

  (4)

  Branded Generics — Europe segment assets as of December 31, 2011 reflect the provisional amounts of identifiable intangible assets and goodwill of PharmaSwiss of $209.2 million and $159.7 million, respectively. In addition, Branded Generics — Europe segment assets as of December 31, 2011 reflect the provisional amounts of identifiable intangible assets and goodwill of Sanitas of $247.1 million and $204.8 million, respectively.

  Capital Expenditures, and Depreciation and Amortization

  Capital expenditures, and depreciation and amortization by segment for the years ended December 31, 2011, 2010 and 2009 were as follows:

		2011		2010		2009
Capital expenditures:
	U.S. Neurology and Other	$	233	$	8,080	$	6,098
	U.S. Dermatology		1,401		652		—
	Canada and Australia		2,066		804		—
	Branded Generics — Europe		9,561		3,083		—
	Branded Generics — Latin America		24,428		3,011		—
			37,689		15,630		6,098
	Corporate		20,826		1,193		1,325
Total capital expenditures		$	58,515	$	16,823	$	7,423
Depreciation and amortization(1):
	U.S. Neurology and Other	$	217,110	$	171,817	$	110,876
	U.S. Dermatology		177,876		35,580		23,981
	Canada and Australia		53,627		14,791		5,707
	Branded Generics — Europe		88,367		10,406		—
	Branded Generics — Latin America		69,479		14,792		—
			606,459		247,386		140,564
	Corporate		6,144		7,118		8,696
Total depreciation and amortization		$	612,603	$	254,504	$	149,260

• (1)

  Depreciation and amortization in 2011 reflects the impact of acquisition accounting adjustments related to the fair value adjustment to identifiable intangible assets as follows: U.S. Neurology and Other — $33.1 million; U.S. Dermatology — $50.9 million; Canada and Australia — $32.2 million; Branded Generics — Europe — $62.3 million; and Branded Generics — Latin America — $43.7 million. Depreciation and amortization in 2010 reflects the impact of acquisition accounting adjustments related to the fair value adjustment to identifiable intangible assets as follows: U.S. Neurology and Other — $15.4 million; U.S. Dermatology — $17.8 million; Canada and Australia — $6.7 million; Branded Generics — Europe — $6.7 million; and Branded Generics — Latin America — $12.1 million.

   

  • Depreciation and amortization in 2011 reflects impairment charges of $7.9 million and $19.8 million related to the write-down of the carrying values of the IDP-111 and 5-FU intangible assets, respectively, to their estimated fair values, less costs to sell.

  Geographic Information

  Revenues and long-lived assets by geographic region for the years ended and as of December 31, 2011, 2010 and 2009 were as follows:

	Revenues(1)						Long-Lived Assets(2)
	2011		2010		2009		2011		2010		2009
U.S. and Puerto Rico	$	1,397,636	$	872,112	$	710,214	$	22,619	$	14,231	$	11,067
Canada		256,820		154,200		94,142		129,510		94,435		83,471
Poland		179,501		30,430		—		106,743		60,390		—
Mexico		151,948		42,833		—		53,500		51,367		—
Brazil		87,190		22,595		—		49,231		46,074		—
Serbia		81,867		—		—		10,039		—		—
Australia		79,204		17,616		—		16,636		1,724		—
Other		229,284		41,451		16,074		25,964		13,531		9,310
	$	2,463,450	$	1,181,237	$	820,430	$	414,242	$	281,752	$	103,848

• (1)

  Revenues are attributed to countries based on the location of the customer.
  
  

  (2)

  Long-lived assets consist of property, plant and equipment, net of accumulated depreciation, which is attributed to countries based on the physical location of the assets.

  Major Customers

  External customers that accounted for 10% or more of the Company's total revenues for the years ended December 31, 2011, 2010 and 2009 were as follows:

	2011		2010		2009
McKesson Corporation		23%		28%		25%
Cardinal Health, Inc.		21%		24%		21%
AmerisourceBergen Corporation		10%		12%		10%