Valeant Pharmaceuticals Reports 2012 Third Quarter Financial Results

Valeant Pharmaceuticals Reports 2012 Third Quarter Financial Results 
MONTREAL, Nov. 2, 2012 /CNW/ - 


    --  2012 Third Quarter Total Revenue $884 million
        o Organic growth (same store sales) was approximately 14%
        o Pro forma organic growth was approximately 12%
    --  2012 Third Quarter GAAP EPS $0.02; Cash EPS $1.15
    --  2012 Third Quarter GAAP Cash Flow from Operations was $167
        million; Adjusted Cash Flow from Operations was $241 million
    --  Updated Guidance for 2012:
        o Narrowing Cash EPS guidance for the fourth quarter to $1.30
          to $1.35, which excludes new interest expense of $0.12 from
          $2.75 billion Medicis related financing
          # Previous Guidance for the fourth quarter was $1.25 to $1.45
            Cash EPS
        o Lowering Adjusted Cash Flow from Operations from greater than
          $1.4 billion to $1.2 to $1.3 billion due to the increased
          investment in working capital

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) announces 
third quarter financial results for 2012.

"The third quarter results again demonstrate our ability to deliver strong 
growth and profitability," said J. Michael Pearson, chairman and chief 
executive officer.  "We are very pleased with the third quarter's double-digit 
organic growth and record Cash EPS.  Our U.S. Dermatology business had an 
outstanding quarter, the trends in our U.S. Neurology and Other business are 
clearly improving, and our businesses outside the U.S. continue to perform 
strongly.  This continued strength in our base business, coupled with the 
potential approval of efinaconazole (IDP-108) and the pending acquisition of 
Medicis, should provide us with a solid foundation to deliver strong continued 
growth in 2013 and beyond."

Business Performance

Valeant's business continued to perform well in the third quarter of 2012 with 
all businesses achieving results within or above expectations.  Same store 
organic growth was approximately 14% and pro forma organic growth was 
approximately 12% for the third quarter of 2012 (See Table 6).  Total revenue 
was $884.1 million in the third quarter of 2012, as compared to $600.6 million 
in the third quarter of 2011, an increase of 47%.  Product sales were $856.9 
million in the third quarter of 2012, as compared to $570.4 million in the 
year-ago quarter, an increase of 50%.

Valeant's base business also continued to deliver strong organic growth.  
Particularly positive was Valeant's U.S. Dermatology business, which continued 
its exceptional growth performance in the third quarter.  Key contributors to 
organic growth included Zovirax®, Elidel®, Retin-A Micro®, Acanya® and 
CeraVe®.

Our U.S. Neurology and Other portfolio declined slightly in the quarter, but 
the rate of decline improved significantly, reflecting the diminishing impact 
of the year over year negative impact from generic competitors of Wellbutrin 
XL®, Ultram® ER and Cardizem® CD. Excluding these products, the remaining 
U.S. Neurology and Other segment increased 9% (same store sales), as compared 
to the third quarter of 2011. We expect that this segment will return to 
positive organic growth in 2013.

The Canadian and Australian segment delivered negative organic growth this 
quarter, as expected, due to the rapid genericization of Cesamet® in Canada 
that began in March 2012. Excluding Cesamet, the Canadian and Australian 
segment delivered 12% organic growth (same store sales).

Finally, our Emerging Markets segment provided pro forma organic growth of 9%, 
primarily driven by our operations in Latin America and South East Asia/South 
Africa. While overall market rates in Central and Eastern Europe slowed, our 
European operations significantly outperformed and delivered organic growth 
levels well above the market.

Financial Performance

The Company reported net income of $7.6 million for the third quarter of 2012, 
or $0.02 per diluted share.  On a Cash EPS basis, adjusted income was $357.5 
million, or $1.15 per diluted share.

GAAP cash flow from operations was $166.8 million in the third quarter of 
2012, and adjusted cash flow from operations was $241.2 million.  Cash flow 
was negatively impacted by an increase in accounts receivable principally due 
to sequential revenue growth as compared to the second quarter, and the strong 
seasonal sales in the month of September, primarily in U.S. Dermatology and 
Europe; the Wellbutrin XL litigation settlement costs of $37.7 million; and 
restructuring charges from our acquisitions.

The Company's cost of goods sold (COGS) was $219.7 million in the third 
quarter of 2012.  After backing out the fair value adjustment to inventory, 
amortization expense and other items related to acquisitions of $20.0 million, 
COGS represented 23% of product sales. COGS for the third quarter of 2012 were 
positively impacted by the strong growth in our U.S. Dermatology segment which 
has a lower COGS profile than other segments.

Selling, General and Administrative expenses were $188.7 million in the third 
quarter of 2012, which includes a $9.1 million step-up in stock based 
compensation expenses related to the acquisition of Legacy Valeant.  Excluding 
the step-up in stock based compensation, SG&A was approximately 20% of 
revenue. Research and Development expenses were $19.2 million in the third 
quarter of 2012, or approximately 2% of revenue.

2012 Guidance

The Company is updating previous 2012 Guidance from $4.55 to $4.75 Cash EPS, 
or $1.25 to $1.45 Cash EPS for the fourth quarter 2012, to $4.60 - $4.65 Cash 
EPS, or $1.30 to $1.35 Cash EPS for the fourth quarter of 2012, which excludes 
the interest expense of $0.12 Cash EPS from the $2.75 billion Medicis related 
financing. Valeant is lowering 2012 adjusted cash flow from operations 
expectations from greater than $1.4 billion to $1.2 to $1.3 billion due to 
increased investment in working capital associated with the growth in emerging 
markets, asset deals which require an investment in working capital 
post-closing, and plant consolidations including the closing of the Bourdon 
facility in Canada and the exiting of a legacy Valeant contract manufacturer 
in Puerto Rico.  Valeant is maintaining prior guidance of total revenue in the 
range of $3.4 to $3.6 billion.

Conference Call and Webcast Information

The Company will host a conference call and a live Internet webcast along with 
a slide presentation today at 8:00 a.m. ET (5:00 a.m. PT), November 2, 2012 to 
discuss its third quarter financial results for 2012. The dial-in number to 
participate on this call is (877) 281-0402, confirmation code 39252322. 
International callers should dial (631) 813-4869, confirmation code 39252322. 
A replay will be available approximately two hours following the conclusion of 
the conference call through November 9, 2012 and can be accessed by dialing 
(855) 859-2056, or (404) 537-3406, confirmation code 39252322. The live 
webcast of the conference call may be accessed through the investor relations 
section of the Company's corporate website at www.valeant.com.

About Valeant

Valeant Pharmaceuticals International, Inc. (NYSE/TSX:VRX) is a multinational 
specialty pharmaceutical company that develops, manufactures and markets a 
broad range of pharmaceutical products primarily in the areas of dermatology, 
neurology and branded generics. More information about Valeant can be found at 
www.valeant.com.

Forward-looking Statements

This press release may contain forward-looking statements, including, but not 
limited to, statements regarding the closing of the Medicis acquisitions, the 
approval of efinaconazole (IDP-108), future results and performance and 
financial guidance, including expected revenue and adjusted cash flow from 
operations and anticipated Cash EPS for 2012 and the fourth quarter of 2012.  
Forward-looking statements may generally be identified by the use of the words 
"anticipates," "expects," "intends," "plans," "should," "could," "would," 
"may," "will," "believes," "estimates," "potential," "target", or "continue" 
and variations or similar expressions. These statements are based upon the 
current expectations and beliefs of management and are subject to certain 
risks and uncertainties that could cause actual results to differ materially 
from those described in the forward-looking statements. These risks and 
uncertainties include, but are not limited to, risks and uncertainties 
discussed in the Company's most recent annual or quarterly report and detailed 
from time to time in Valeant's other filings with the Securities and Exchange 
Commission and the Canadian Securities Administrators, which factors are 
incorporated herein by reference. Readers are cautioned not to place undue 
reliance on any of these forward-looking statements. These forward-looking 
statements speak only as of the date hereof.  Valeant undertakes no obligation 
to update any of these forward-looking statements to reflect events or 
circumstances after the date of this press release or to reflect actual 
outcomes.

Note on Guidance

The guidance contained in this press release is only effective as of the date 
given, November 2, 2012, and will not be updated or confirmed until the 
Company publicly announces updated or affirmed guidance.

Non-GAAP Information

To supplement the financial measures prepared in accordance with generally 
accepted accounting principles (GAAP), the company uses non-GAAP financial 
measures that exclude certain items, such as amortization of inventory 
step-up, amortization of alliance product assets & pp&e step up, stock-based 
compensation step-up, contingent consideration fair value adjustments, 
restructuring, acquisition-related and other costs, acquired in-process 
research and development ("IPR&D"), legal settlements outside the ordinary 
course of business, the impact of currency fluctuations, amortization and 
other non-cash charges, amortization of deferred financing costs, debt 
discounts and ASC 470-20 (FSP APB 14-1) interest, loss on extinguishment of 
debt, (gain) loss on assets held for sale/impairment, net, (gain) loss on 
investments, net, and adjusts tax expense to cash taxes. Management uses 
non-GAAP financial measures internally for strategic decision making, 
forecasting future results and evaluating current performance. By disclosing 
non-GAAP financial measures, management intends to provide investors with a 
meaningful, consistent comparison of the company's core operating results and 
trends for the periods presented. Non-GAAP financial measures are not prepared 
in accordance with GAAP.  Therefore, the information is not necessarily 
comparable to other companies and should be considered as a supplement to, not 
a substitute for, or superior to, the corresponding measures calculated in 
accordance with GAAP.

Contact Information: Laurie W. Little  949-461-6002  laurie.little@valeant.com

Financial Tables follow.

Valeant Pharmaceuticals International, Inc.                 Table 1

Condensed Consolidated Statement of Income

For the Three and Nine Months Ended September 30, 2012 and 2011
                         Three Months Ended    Nine Months Ended
                         September 30,         September 30,

(In thousands, except    2012       2011       2012         2011
per share data)



Product sales            $ 856,892  $ 570,423  $ 2,363,226  $ 1,600,879

Alliance and royalty     12,248     22,471     148,348      146,873

Service and other (a)    15,000     7,690      48,759       27,245

Total revenues           884,140    600,584    2,560,333    1,774,997



Cost of goods sold
(exclusive of
amortization of          219,670    162,568    646,395      501,767
intangible assets shown
separately below)

Cost of services         10,582     3,078      36,640       9,683

Cost of alliances        -          -          68,820       30,735

Selling, general and     188,660    134,801    551,386      423,964
administrative ("SG&A")

Research and             19,170     17,476     58,887       48,910
development

Contingent
consideration fair       5,630      6,904      23,198       9,042
value adjustments

Acquired in-process
research and             145,300    -          149,868      4,000
development

Legal settlements        -          -          56,779       2,400

Restructuring,
acquisition-related and  47,477     25,372     161,190      73,913
other costs

Amortization of          218,187    138,027    629,400      365,016
intangible assets
                         854,676    488,226    2,382,563    1,469,430

Operating income         29,464     112,358    177,770      305,567



Interest expense, net    (114,886)  (86,452)   (315,382)    (236,387)

Loss on extinguishment   (2,322)    (10,315)   (2,455)      (33,325)
of debt

Gain (loss) on           -          (140)      2,024        22,787
investments, net

Other income, net
including translation    (1,603)    (3,590)    18,458       64
and exchange



Income (loss) before
(recovery) provision     (89,347)   11,861     (119,585)    58,706
for income taxes



Recovery of income       (96,992)   (29,001)   (92,702)     (44,998)
taxes



Net income (loss)        $ 7,645    $ 40,862   $ (26,883)   $ 103,704



Earnings per share:



Basic:

Net income (loss)        $ 0.03     $ 0.13     $ (0.09)     $ 0.34

Shares used in per       304,075    302,702    305,550      303,285
share computation



Diluted:

Net income (loss)        $ 0.02     $ 0.13     $ (0.09)     $ 0.32

Shares used in per       311,743    322,783    305,550      329,010
share computation

(a) Service and Other revenue includes contract manufacturing
revenue of $10.3 million and $30.1 million for the three and
nine months ended September 30, 2012, respectively.

Valeant Pharmaceuticals International, Inc.                   Table 2

Reconciliation of GAAP EPS to Cash EPS

For the Three and Nine Months Ended September 30, 2012 and 2011
                           Three Months Ended    Nine Months Ended
                           September 30,         September 30,

(In thousands, except per  2012       2011       2012         2011
share data)



Net income (loss)          $ 7,645    $ 40,862   $ (26,883)   $ 103,704



Non-GAAP adjustments(a):

Inventory step-up (b)      6,009      2,768      49,401       48,939

Alliance product assets &  (264)      138        50,770       19,478
pp&e step-up/down(c)

Stock-based compensation   9,061      11,149     24,624       50,556
step-up (d)

Contingent consideration   5,630      6,904      23,198       9,042
fair value adjustment(e)

Acquired in-process
research and development   145,300    -          149,868      4,000
(IPR&D)(f)

Legal settlements(g)       -          -          56,779       2,400

Restructuring,
acquisition-related and    47,477     25,372     161,190      73,913
other costs(h)

Amortization and other     232,560    140,321    653,554      371,897
non-gaap charges(i)
                           445,773    186,652    1,169,384    580,225

Amortization of deferred
financing costs, debt
discounts and ASC 470-20   8,859      12,686     14,214       19,034
(FSP APB 14-1) interest
(j)

Loss on extinguishment of  2,322      10,315     2,455        33,325
debt

(Gain) loss on assets
held for sale/impairment,  -          -          1,002        -
net (k)

(Gain) loss on             -          -          -            (1,769)
investments, net

Tax(l)                     (107,093)  (38,601)   (127,802)    (77,098)

Total adjustments          349,861    171,052    1,059,253    553,717



Adjusted income            $ 357,506  $ 211,914  $ 1,032,370  $ 657,421



GAAP earnings per share -  $ 0.02     $ 0.13     $ (0.09)     $ 0.32
diluted



Cash earnings per share -  $ 1.15     $ 0.66     $ 3.29       $ 2.00
diluted



Cash earnings per share
excluding one-time items   $ 1.15     $ 0.66     $ 2.93       $ 1.76
- diluted



Shares used in diluted
per share calculation -    311,743    322,783    313,584      329,010
Cash earnings per share

(a) See footnote (a) to Table 2a.

(b) See footnote (b) to Table 2a and Table 2b.

(c) See footnote (c) to Table 2a and footnotes (c) (e) to Table
2b.

(d) See footnote (e) to Table 2a and footnote (f) to Table 2b.

(e) See footnote (f) to Table 2a and footnote (h) to Table 2b.

(f) See footnote (g) to Table 2a and footnote (i) to Table 2b.

(g) See footnote (j) to Table 2b.

(h) See footnotes (h) (i) to Table 2a and footnotes (k) (l) to
Table 2b.

(i) See footnote (d) to Table 2a and Table 2b.

(j) See footnote (j) to Table 2a and footnote (m) to Table 2b.

(k) See footnote (g) Table 2b.

(l) See footnote (k) to Table 2a and footnote (n) Table 2b.

Valeant Pharmaceuticals International, Inc.            Table 2a

Reconciliation of GAAP EPS to Cash EPS

For the Three Months Ended September 30, 2012 and 2011
                                   Non-GAAP Adjustments((a))for
                                   Three Months Ended
                                   September 30,

(In thousands, except per share    2012                2011
data)



Product sales                      $ -                 $ -

Alliance and royalty               -                   268

Service and other                  -                   -

Total revenues                     -                   268



Cost of goods sold (exclusive of
amortization of intangible assets  (20,030)  (b)(c)(d) (5,031)   (b)(c)
shown separately below)

Cost of services                   -                   -

Cost of alliances                  -                   -

Selling, general and               (9,149)   (c)(e)    (11,050)  (c)(e)
administrative ("SG&A")

Research and development           -                   -

Contingent consideration fair      (5,630)   (f)       (6,904)   (f)
value adjustments

Acquired in-process research and   (145,300) (g)       -
development

Legal settlements                  -                   -

Restructuring,
acquisition-related and other      (47,477)  (h)       (25,372)  (i)
costs

Amortization of intangible assets  (218,187)           (138,027)
                                   (445,773)           (186,384)

Operating income                   445,773             186,652



Interest expense, net              8,859     (j)       12,686    (j)

(Gain) loss on extinguishment of   2,322               10,315
debt

Gain (loss) on investments, net    -                   -

Other income (expense), net
including translation and          -                   -
exchange



Income before (recovery of)        456,954             209,653
provision for income taxes



Provision for income taxes         107,093   (k)       38,601    (k)



Total Adjustments to Net income    $ 349,861           $ 171,052



Earnings per share:



Diluted:

Total Adjustments to Net income    $ 1.12              $ 0.53

Shares used in per share           311,743             322,783
computation

(a) To supplement the financial measures prepared in accordance
with generally accepted accounting principles (GAAP), the company
uses non-GAAP financial measures that exclude certain items, such
as amortization of inventory step-up, amortization of alliance
product assets & pp&e step up, stock-based compensation step-up,
contingent consideration fair value adjustments, restructuring,
acquisition-related and other costs, acquired in-process research
and development ("IPR&D"), legal settlements outside the ordinary
course of business, the impact of currency fluctuations,
amortization and other non-cash charges, amortization of deferred
financing costs, debt discounts and ASC 470-20 (FSP APB 14-1)
interest, loss on extinguishment of debt, (gain) loss on assets
held for sale/impairment, net, (gain) loss on investments, net,
and adjusts tax expense to cash taxes.



Management uses non-GAAP financial measures internally for
strategic decision making, forecasting future results and
evaluating current performance. By disclosing non-GAAP financial
measures, management intends to provide investors with a
meaningful, consistent comparison of the company's core operating
results and trends for the periods presented. Non-GAAP financial
measures are not prepared in accordance with GAAP. Therefore, the
information is not necessarily comparable to other companies and
should be considered as a supplement to, not a substitute for, or
superior to, the corresponding measures calculated in accordance
with GAAP.



(b) ASC 805, accounting for business combinations requires an
inventory fair value step-up whose total impact for the three
months ended September 30, 2012 is $6.0 million primarily relating
to the acquisitions of Afexa on October 17, 2011, Pedinol
Pharmacal, Inc. on April 11, 2012 and BC Pharma B.V. on July 1,
2012. For the three months ended September 30, 2011 the impact of
inventory fair value step-up is $2.8 million primarily relating to
the acquisition of Sanitas on August 19, 2011.



(c) PP&E step-up/down represents the step-up/down to fair market
value from Legacy Valeant's original cost resulting from the
merger of Legacy Valeant into Legacy Biovail and subsequent
acquisitions.



(d) Costs associated with integration related tech transfers,
$14.4 million.



(e) For the three months ended September 30, 2012 SG&A primarily
includes $9.1 million of Stock-based compensation which reflects
the amortization of the fair value step-up increment resulting
from the merger of Legacy Valeant into Legacy Biovail and the
acceleration of certain equity instruments. For the three months
ended September 30, 2011 SG&A primarily includes $11.1 million of
Stock-based compensation which reflects the amortization of the
fair value step-up increment resulting from the merger of Legacy
Valeant into Legacy Biovail.



(f) Net expenses from the changes in fair value of contingent
consideration for the three months ended September 30, 2012 and
2011 of $5.6 million and $6.9 million, respectively.



(g) Total Acquired IPR&D for the three months ended September 30,
2012 of $145.3 million is the write-off of the IPR&D asset related
to the IDP-107 dermatology program, $133.4 million, and a $12.0
million payment to terminate a research and development commitment
with a third party.



(h) Restructuring, acquisition-related and other costs of $47.5
million represent costs related to the acquisitions of Sanitas,
Dermik, iNova, Probiotica, OraPharma, University Medical, and
Swiss Herbal as well as other internal restructuring and
integration initiatives. These include $4.6 million related to
acquisition costs, $14.4 million related to employee severance
costs, $18.5 million related to integration consulting,
duplicative labor, and transition services, $3.8 million related
to facility closure costs, and $6.2 million related to other.



(i) Restructuring, acquisition-related and other costs of $25.4
million represent costs related to the merger of Legacy Valeant
into Legacy Biovail and include $0.9 million related to facility
closure costs, $8.9 million related to contract cancellation fees,
consulting, legal and other costs, $5.0 million related to
severance, $9.5 million related to acquisition costs, and $1.1
million related to manufacturing integration.



(j) Non cash interest expense associated with amortization of
deferred financing costs, debt discounts and ASC 470-20 (FSP APB
14-1) interest totals for the nine months ended September 30, 2012
and September 30, 2011 are $8.9 million and $12.7 million,
respectively.



(k) Total tax effect of non-GAAP pre-tax adjustments, resolution
of uncertain tax positions and change in valuation allowance
associated with deferred tax asset.

Valeant Pharmaceuticals International, Inc.            Table 2b

Reconciliation of GAAP EPS to Cash EPS

For the Nine Months Ended September 30, 2012 and 2011
                                 Nine Months Ended
                                 September 30,

(In thousands, except per share  2012                  2011
data)



Product sales                    $ -                   $ -

Alliance and royalty             -                     804

Service and other                -                     -

Total revenues                   -                     804



Cost of goods sold (exclusive
of amortization of intangible    (70,435)    (b)(c)(d) (55,892)  (b)(c)
assets shown separately below)

Cost of services                 -                     -

Cost of alliances                (50,958)    (e)       (18,835)  (e)

Selling, general and             (28,558)    (c)(f)(g) (50,323)  (c)(f)
administrative ("SG&A")

Research and development         -                     -

Contingent consideration fair    (23,198)    (h)       (9,042)   (h)
value adjustments

Acquired in-process research     (149,868)   (i)       (4,000)   (i)
and development

Legal settlements                (56,779)    (j)       (2,400)

Restructuring,
acquisition-related and other    (161,190)   (k)       (73,913)  (l)
costs

Amortization of intangible       (629,400)             (365,016)
assets
                                 (1,170,386)           (579,421)

Operating income                 1,170,386             580,225



Interest expense, net            14,214      (m)       19,034    (m)

(Gain) loss on extinguishment    2,455                 33,325
of debt

Gain (loss) on investments, net  -                     (1,769)

Other income (expense), net
including translation and        -                     -
exchange



Income before (recovery of)      1,187,055             630,815
provision for income taxes



Provision for income taxes       127,802     (n)       77,098    (n)



Total Adjustments to Net income  $ 1,059,253           $ 553,717



Earnings per share:



Diluted:

Total Adjustments to Net income  $ 3.38                $ 1.68

Shares used in per share         313,584               329,010
computation

(a) See footnote (a) to Table 2a.



(b) ASC 805, accounting for business combinations requires an
inventory fair value step-up whose total impact for the nine
months ended September 30, 2012 is $49.4 million primarily
relating to the acquisitions of iNova on December 21, 2011, Ortho
Dermatologics on December 12, 2011, Dermik on December 16, 2011,
Afexa on October 17, 2011, and Pedinol Pharmacal, Inc. on April
11, 2012. For the nine months ended September 30, 2011 the impact
of inventory fair value step-up is $48.9 million primarily
relating to the merger of Legacy Valeant into Legacy Biovail and
the acquisition of PharmaSwiss SA on March 10, 2011.



(c) PP&E step-up/down represents the step-up/down to fair market
value from Legacy Valeant's original cost resulting from the
merger of Legacy Valeant into Legacy Biovail and subsequent
acquisitions.



(d) Costs associated with integration related tech transfers,
$18.9 million.



(e) Cost of Alliances represents the divestiture of 5FU and
IDP-111 resulting from the acquisition of Dermik, $50.9 million
for the nine months ended September 30, 2012 and the divestiture
of Cloderm resulting from the Legacy Valeant into Legacy Biovail
merger, $18.8 million for the nine months ended September 30,
2011.



(f) For the nine months ended September 30, 2012 SG&A primarily
includes $26.8 million of Stock-based compensation which reflects
the amortization of the fair value step-up increment resulting
from the merger of Legacy Valeant into Legacy Biovail,
acceleration of certain equity instruments and the expense
associated with certain award modifications. For the nine months
ended September 30, 2011 SG&A primarily includes $50.0 million of
Stock-based compensation which reflects the amortization of the
fair value step-up increment resulting from the merger of Legacy
Valeant into Legacy Biovail.



(g) SG&A includes loss on assets held for sale/impairment.



(h) Net expenses from the changes in fair value of contingent
consideration for the nine months ended September 30, 2012 and
2011 of $23.2 million and $9.0 million, respectively.



(i) Total Acquired IPR&D for the nine months ended September 30,
2012 of $149.9 million is primarily the write-off of the IPR&D
asset related to the IDP-107 dermatology program, $133.4 million,
a $12.0 million payment to terminate a research and development
commitment with a third party, and $4.3 million related to the
termination of the MC5 program acquired from Ortho Dermatologics.
Total Acquired IPR&D for the nine months ended September 30, 2011
of $4.0 million relates to the acquisition of the Canadian rights
to Lodalis (TM).



(j) For the nine months ended September 30, 2012 Legal settlement
costs of $56.8 million primarily relate to the litigation
settlement and associated legal fees with respect to a class
action antitrust complaint regarding Wellbutrin XL ®.



(k) Restructuring, acquisition-related and other costs of $161.2
million represent costs related to the acquisitions of Sanitas,
Afexa, Ortho Dermatologics, Dermik, iNova, Probiotica, Eyetech,
OraPharma, University Medical, Gerot Lannach, Atlantis, Swiss
Herbal, and Pedinol as well as other internal restructuring and
integration initiatives. These include $26.0 million related to
acquisition costs, $46.4 million related to employee severance
costs, $46.6 million related to integration consulting,
duplicative labor, and transition services, $27.5 million related
to facility closure costs, $10.7 million related to other, and
$4.0 million related to non-personnel manufacturing integration
costs.



(l) Restructuring, acquisition-related and other costs of $73.9
million represent costs related to the merger of Legacy Valeant
into Legacy Biovail and the acquisitions of PharmaSwiss SA and
Sanitas. These costs include $18.0 million related to facility
closure costs, $24.3 million related to contract cancellation
fees, consulting, legal and other costs, $14.3 million related to
severance, $12.9 million related to acquisition costs, and $4.4
million related to manufacturing integration.



(m) Non cash interest expense associated with amortization of
deferred financing costs, debt discounts and ASC 470-20 (FSP APB
14-1) interest totals for the nine months ended September 30, 2012
and September 30, 2011 are $14.2 million and $19.0 million,
respectively.



(n) Total tax effect of non-GAAP pre-tax adjustments, resolution
of uncertain tax positions and change in valuation allowance
associated with deferred tax asset.

Valeant Pharmaceuticals International, Inc.                          Table
                                                                     3

Statement of Revenue - by Segment

For the Three and Nine Months Ended September 30, 2012 and 2011

(In thousands)
                  Three Months Ended
                  September 30,
                                                          2012


                                    %       2012      excluding  %
Revenue(a)(b)     2012       2011       Change  currency  currency   Change 
              GAAP       GAAP               impact    impact 


                                                          non-GAAP

U.S. Dermatology  $ 312,449  $ 133,649  134%    $ -       $ 312,449  134%

U.S. Neurology &  180,909    180,281    0%      -         180,909    0%
Other

Canada/Australia  141,072    84,644     67%     1,911     142,983    69%

Emerging Markets  249,709    202,010    24%     29,820    279,529    38%

Total Revenue     $ 884,140  $ 600,584  47%     $ 31,731  $ 915,870  52%
                  Nine Months Ended
                  September 30,
                                                          2012


                                    %       2012      excluding  %
Revenue(a)(b)     2012       2011       Change  currency  currency   Change 
              GAAP       GAAP               impact    impact 
                                                      non-GAAP 
U.S. Dermatology  $ 822,714  $ 399,833  106%    $ -       $ 822,714  106% 
U.S. Neurology &  591,582    620,759    -5%     -         591,582    -5%
Other 
Canada/Australia  402,001    238,888    68%     6,779     408,780    71% 
Emerging Markets  744,035    515,517    44%     92,136    836,171    62% 
Total Revenue     $          $          44%     $ 98,915  $          50% 
              2,560,333  1,774,997                    2,659,247 
(a) Note: Currency effect for constant currency sales is
determined by comparing 2012 reported amounts adjusted to
exclude currency impact, calculated using 2011 monthly
average exchange rates, to the actual 2011 reported
amounts. Constant currency sales is not a GAAP-defined
measure of revenue growth. Constant currency sales as
defined and presented by Valeant may not be comparable to
similar measures reported by other companies. 
(b) See footnote (a) to Table 2a. 
Valeant Pharmaceuticals International, Inc.                      Table 4 
Reconciliation of GAAP Cost of Goods Sold to Non-GAAP Cost of Goods Sold
- by Segment 
For the Three and Nine Months Ended September 30, 2012 and 2011 
(In thousands) 


                      Three Months Ended

4.1 Cost of goods     September 30,
    sold (a)
                                         2012        2012
                                         fair value  excluding
                      2012      %        step-up     fair value  %
                      as        of       adjustment  step-up     of
                      reported  product  to          adjustment  product
                      GAAP      sales    inventory   to          sales
                                         and Other   inventory
                                         non-GAAP    and Other
                                         (b)         non-GAAP
    U.S. Dermatology  $ 28,802  9%       $ 4,594     $ 24,208    8%
    U.S. Neurology &  33,680    19%      355         33,325      19%
    Other
    Canada/Australia  42,197    33%      4,427       37,770      29%
    (d)
    Emerging Markets  114,991   46%      10,654      104,337     42%
    Corporate/other   -                  -           -
                      $         26%      $ 20,030    $ 199,640   23%
                      219,670
                      Nine Months Ended
                      September 30,
                                         2012        2012
                                         fair value  excluding
                      2012      %        step-up     fair value  %
                      as        of       adjustment  step-up     of
                      reported  product  to          adjustment  product
                      GAAP      sales    inventory   to          sales
                                         and Other   inventory
                                         non-GAAP    and Other
                                         (c)         non-GAAP
    U.S. Dermatology  $ 88,734  12%      $ 18,165    $ 70,569    10%
    U.S. Neurology &  102,160   19%      5,920       96,240      18%
    Other
    Canada/Australia  129,377   35%      33,656      95,721      26%
    (d)
    Emerging Markets  326,138   44%      12,694      313,444     42%
    Corporate/other   -                  -           -
                      $         27%      $ 70,435    $ 575,974   24%
                      646,395

 (a) See footnote (a) to Table 2a.


(b) U.S. Dermatology includes $1.9 million of fair value
 step-up adjustment to inventory and $2.7 million of
 integration related tech transfer costs, U.S. Neurology and
 Other includes $0.4 million of integration related tech
 transfer costs. Canada/Australia includes $2.8 million of
 fair value step up adjustment to inventory, -$0.6 million
 PP&E step-down and $2.2M of integration related tech
 transfer costs and other. Emerging Markets includes $1.3
 million of fair value step up adjustment to inventory, $9.1M
 of integration related tech transfer costs and $0.3 million
 of PP&E step up. 
(c) U.S. Dermatology includes $14.8 million of fair value
 step-up adjustment to inventory and $3.4 million of
 integration related tech transfer costs, U.S. Neurology and
 Other includes $3.2 million of integration related tech
 transfer costs and $2.6 million of amortization.
 Canada/Australia includes $32.5 million of fair value step
 up adjustment to inventory, -$1.2 million PP&E step-down and
 $2.4M of integration related tech transfer costs and other.
 Emerging Markets includes $2.1 million of fair value step up
 adjustment to inventory, $9.8M of integration related tech
 transfer costs and $0.8 million of PP&E step up. 
(d) Cost of Goods Sold excludes contract manufacturing costs
 currently reported in Cost of Services. 


    Valeant Pharmaceuticals International, Inc             Table 5
    Consolidated Balance Sheet and Other Data
    (In thousands)
                                            As of          As of
                                            September 30,  December 31,

5.1 Cash                                    2012           2011
    Cash and cash equivalents               $ 257,730      $ 164,111
    Marketable securities                   -              6,338
    Total cash and marketable securities    $ 257,730      $ 170,449
    Debt
    New Revolving Credit Facility           $ 25,000       $ 220,000
    Term loan A Facility                    2,108,964      2,185,520
    New Term Loan B Facility                1,265,854      -
    Senior notes                            4,230,428      4,228,480
    Convertible notes                       -              17,011
    Other                                   -              -
                                            7,630,246      6,651,011
    Less: Current portion                   (207,688)      (111,250)
                                            $ 7,422,558    $ 6,539,761



5.2 Summary of Cash Flow Statement          Three Months Ended
                                            September 30,
                                            2012           2011
    Cash flow provided by (used in):
    Net cash provided by (used in)          $ 166,824      $ 173,707
    operating activities (GAAP)
    Restructuring and acquisition-related   47,477         25,372
    costs( (c))
    Payment of accrued legal settlements    37,739         -
    Payment of Accreted Interest on         -              3,362
    Convertible Debt
    Tax Benefit from Stock Options          2,367          2,042
    Exercised((a))
    Working Capital change related to       -              -
    Business Development Activities
    Non-Cash adjustments to Income Taxes    -              -
    Payable
    Changes in working capital related to
    restructuring and acquisition-related   (13,251)       3,918
    costs((c))
    Adjusted cash flow from operations      $ 241,156      $ 208,401
    (Non-GAAP)((b))
    Proceeds from sale of intangible assets -              -
    Adjusted cash flow from operations      $ 241,156      $ 208,401
    (Non-GAAP)( (b))

 (a) Includes stock option tax benefit which will reduce taxes in
 future periods.
    (b) See footnote (a) to Table 2a.


(c) Total Restructuring and Acquisition-related costs cash payments
 of $34,226 are broken down as follows: 
 Project Type                                           Amount Paid 


    iNova                                                  5,736

 Intellectual Property Migration                        5,390

 Dermik                                                 4,560

 Other (Probiotica, University Medical, Swiss Herbal)   3,475

 Europe (PharmaSwiss, Sanitas, Gernot Lannach)          2,621

 Manufacturing Integration (Various Deals)              2,266

 Atlantis                                               1,849

 OraPharma                                              1,798

 Ortho                                                  1,784

 Pedinol                                                1,722

 US Restructuring                                       1,553

 Afexa                                                  801

 Eyetech                                                669
    Total                                                  $ 34,226
    Expense Type                                           Amount Paid


Integration related consulting, duplicative labor, and 15,269
 transition services 
 Severance Payments                                     11,614 
 Acquisition Related Costs Paid to 3rd Parties          3,712 
 Travel/Other                                           2,362 
 Facility Closure Costs                                 679 
 Other Manufacturing integration                        591 
Total                                                  $ 34,226 
Valeant Pharmaceuticals International, Inc.                                                         Table 


                                                                                                    6

Organic Growth - by Segment

For the Three Months Ended September 30th, 2012

(In thousands)
                 For the Three Months Ended September 30th, 2012
                                                                                             Organic
                                                                                             growth
                                                        (a)      (b)                         (b)    (b)
                                                        (7)                                  Pro
                                           (5)   (6)             (8)                         Forma  Same
                 (1)   (2)    (3)    (4)                Currency           (9)                      store
                                           Pro   Pro             Currency                    (1)+
                 QTD   Acq    QTD    QTD   Forma Forma  impact             Divestitures /    (7)+   (3)+
                 2012         Same   2011                        impact                      (8)+   (7) /
                       impact store        Adj   2011   Same     Acq       Discontinuations  (9) /  (4)-
                                                                                             (6)    (9)
                                                        store



U.S. Dermatology 305.8 128.1  177.6  112.7 116.2 228.8  -        -         3.1               35%    62%

U.S. Neurology & 174.5 0.5    174.0  175.5 0.5   176.0  -        -         0.3               -1%    -1%
Other (c)

Canada/Australia 131.3 53.8   77.4   84.2  56.6  140.8  1.2      0.5       0.4               -5%    -6%
(d)

Emerging Markets
-                144.0 23.9   120.1  131.1 30.3  161.4  13.4     3.8       5.9               3%     7%
Central/Eastern
Europe

Emerging Markets 80.6  18.5   62.1   68.0  15.0  83.0   6.8      4.0       5.4               17%    10%
- Latin America

Emerging Markets
- Southeast      23.7  23.6   0.1    -     21.9  21.9   0.0      1.7       -                 16%
Asia/Africa (e)

Emerging Markets 248.3 66.0   182.2  199.0 67.1  266.2  20.3     9.4       11.3              9%     8%

Total product    859.8 248.5  611.3  571.4 240.3 811.8  21.4     9.9       15.0              12%    14%
sales



Less: Neuro      174.5 0.5    174.0  175.5 0.5   176.0  -        -         0.3



Total product    685.3 248.0  437.3  395.9 239.9 635.8  21.4     9.9       14.7              15%    20%
sales less Neuro

(a) Note: Currency effect for constant currency sales is
determined by comparing 2012 reported amounts adjusted to
exclude currency impact, calculated using 2011 monthly
average exchange rates, to the actual 2011 reported
amounts. Constant currency sales is not a GAAP-defined
measure of revenue growth. Constant currency sales as
defined and presented by Valeant may not be comparable to
similar measures reported by other companies.



(b) See footnote (a) to Table 2a.



(c) Includes Valeant's attributable portion of revenue
from joint ventures (JV) - $0.9 million Q3'12. QTD 2012
includes a $16.5 million reduction in Revenues of Cardizem
CD, Ultram ER, Diastat and Wellbutrin XL versus prior
year. Excluding these products, organic growth is 9% on a
same store basis.



(d) Includes Valeant's attributable portion of revenue
from joint ventures (JV) - $1.1 million Q3'11 and $2
million Q3'12. QTD 2012 includes a $13.4 million reduction
in Cesamet sales versus prior year. Excluding Cesamet
sales, organic growth is 12% on a same store basis.



(e) QTD 2012 excludes $0.3 million that has been
reclassed to Australia in order to align current
quarter with historical reporting of same store export
sales.

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-0- Nov/02/2012 10:09 GMT


 
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