SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2012

SEGMENT INFORMATION

SEGMENT INFORMATION

18.   SEGMENT INFORMATION

• Reportable Segments

  As a result of the acquisition of iNova in December 2011, the Company operates in five new territories: Malaysia, Philippines, Singapore, Hong Kong and South Africa, with a distribution business in Thailand, Taiwan and some sub-Saharan Africa markets. iNova also distributes through partners in China, Korea and Japan. Consequently, the Company's Chief Executive Officer, who is the Company's Chief Operating Decision Maker ("CODM") has begun to manage the business differently, which has necessitated a realignment of the segment structure, effective in the first quarter of 2012. Pursuant to this change, the Company now has four reportable segments: (i) U.S. Dermatology, (ii) U.S. Neurology and Other, (iii) Canada and Australia and (iv) Emerging Markets. Accordingly, the Company has restated prior period segment information to conform to the current period presentation. The following is a brief description of the Company's segments:

  •

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

  •

  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.

  •

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

  •

  Emerging Markets consists 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 Europe (Poland, Serbia, Hungary, Croatia and Russia), Latin America (Mexico, Brazil and exports out of Mexico to other Latin American markets), South East Asia and South Africa.

  Segment profit is based on operating income after the elimination of intercompany transactions. Certain costs, such as restructuring and acquisition-related costs, 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 three-month periods ended March 31, 2012 and 2011 were as follows:

			Three Months Ended March 31
			2012			2011
Revenues:
	U.S. Dermatology(1)		$	292,217		$	154,191
	U.S. Neurology and Other			187,708			208,115
	Canada and Australia(2)			132,569			70,244
	Emerging Markets(3)			243,609			132,476
		Total revenues		856,103			565,026
Segment profit (loss):
	U.S. Dermatology(4)			88,026			34,576
	U.S. Neurology and Other			52,558			99,741
	Canada and Australia(5)			14,917			20,922
	Emerging Markets(6)			23,189			(559	)
		Total segment profit		178,690			154,680
Corporate(7)				(34,358	)		(58,105	)
Restructuring, integration and other costs				(62,337	)		(17,539	)
Acquired IPR&D				—			(2,000	)
Acquisition-related costs				(7,505	)		(1,507	)
Legal settlements				(3,155	)		(400	)
Acquisition-related contingent consideration				(9,839	)		(386	)
Operating income				61,496			74,743
Interest income				1,123			803
Interest expense				(102,025	)		(68,751	)
Loss on extinguishment of debt				(133	)		(8,262	)
Foreign exchange and other				24,299			2,807
Gain on investments, net				2,059			1,769
(Loss) income before recovery of income taxes			$	(13,181	)	$	3,109

(1)

U.S. Dermatology segment revenues in the three-month period ended March 31, 2012 reflect incremental revenues from Dermik, Ortho Dermatologics and Elidel®/Xerese® products and services of $96.0 million, in the aggregate.

(2)

Canada and Australia segment revenues in the three-month period ended March 31, 2012 reflect incremental revenues from iNova, Dermik and Afexa products and services of $50.3 million, in the aggregate.

(3)

Emerging Markets segment revenues in the three-month period ended March 31, 2012 reflect revenues from PharmaSwiss, Sanitas, iNova, Probiotica, Dermik and Gerot Lannach products and services of $128.9 million, in the aggregate. Emerging Markets segment revenues in the three-month period ended March 31, 2011 reflect revenues from PharmaSwiss products and services of $16.2 million.

(4)

U.S. Dermatology segment profit in the three-month period ended March 31, 2012 reflects the addition of Dermik operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $5.7 million and $10.4 million, respectively. U.S. Dermatology segment profit in the three-month period ended March 31, 2012 also reflects the addition of Ortho Dermatologics operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $3.3 million and $9.8 million, respectively.

(5)

Canada and Australia segment profit in the three-month period ended March 31, 2012 reflects the addition of Afexa operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $2.4 million and $1.7 million, respectively. Canada and Australia segment profit in the three-month period ended March 31, 2012 also reflects the addition of iNova operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $11.1 million and $8.3 million, respectively. In addition, Canada and Australia segment profit in the three-month period ended March 31, 2012 reflects the addition of Dermik operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $10.0 million and $2.4 million, respectively.

(6)

Emerging Markets segment profit in the three-month periods ended March 31, 2012 and 2011 reflects the addition of PharmaSwiss operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to identifiable intangible assets of $7.6 million and the impact of acquisition accounting adjustments related to the fair value adjustments to inventory and identifiable intangible assets of $5.1 million, respectively. Emerging Markets segment profit also reflects the addition of Sanitas and iNova operations, including the impact of acquisition accounting adjustments related to the fair value adjustments to identifiable intangible assets of $7.6 million and $6.3 million, respectively, in the three-month period ended March 31, 2012.

(7)

Corporate reflects non-restructuring-related share-based compensation expense of $19.2 million and $29.7 million in the three-month periods ended March 31, 2012 and 2011, respectively.

• Segment Assets

        Total assets by segment as of March 31, 2012 and December 31, 2011 were as follows:

		As of March 31 2012		As of December 31 2011
Assets:
	U.S. Dermatology	$	3,041,252	$	3,077,119
	U.S. Neurology and Other		4,271,010		4,436,463
	Canada and Australia		1,626,030		1,611,999
	Emerging Markets(1)		3,879,790		3,349,821
			12,818,082		12,475,402
	Corporate		801,652		666,311
Total assets		$	13,619,734	$	13,141,713

(1)

Emerging Markets segment assets as of March 31, 2012 reflect the provisional amounts of identifiable intangible assets and goodwill of Gerot Lannach of $169.3 million and $9.7 million, respectively. Emerging Markets segment assets as of March 31, 2012 also reflect the amounts of identifiable intangible assets and goodwill of Probiotica of $37.9 million and $45.1 million, respectively.