Valeant Pharmaceuticals Reports 2013 Third Quarter Financial Results

Valeant Pharmaceuticals Reports 2013 Third Quarter Financial Results 
LAVAL, Quebec, Oct. 31, 2013 /CNW/ - Valeant Pharmaceuticals International, 
Inc. (NYSE: VRX) (TSX: VRX) announces third quarter financial results for 2013. 


    --  Total Revenue $1.54 billion; an increase of 74% over the prior
        year
        o 4% organic growth (same store sales) for the Developed
          Markets segment, excluding the impact from Zovirax franchise,
          Retin-A Micro and BenzaClin generic products
        o 14% organic growth (same store sales) for the Emerging
          Markets segment
        o 10% organic growth for Bausch + Lomb since close versus prior
          year
    --  GAAP EPS loss of $2.92; Cash EPS $1.43, an increase of 24% over
        the prior year; adjusting for pre-closing Bausch + Lomb
        financing costs of $0.09, Cash EPS would have been $1.51, an
        increase of 31% over prior year
    --  GAAP Operating Cash Flow $202 million; Adjusted Operating Cash
        Flow $408 million; an increase of 69% over the prior year
    --  Bausch + Lomb integration on track and Valeant expects to
        realize more than $850 million in synergies
    --  2013 Guidance for Cash EPS updated to $6.11 to $6.16

"Despite an unexpected early launch of a generic Retin-A Micro, significant 
headwinds this quarter from foreign exchange movements, and the demands of a 
major integration, we managed to beat expectations and position Valeant for a 
terrific fourth quarter and a strong 2014," stated J. Michael Pearson, 
chairman and chief executive officer.  "I thank our team, both at Valeant and 
our new colleagues from Bausch + Lomb, for their commitment, diligence, and 
focus on execution.  I am confident that our strategic focus on 
diversification, durable assets, key geographies, and low risk R&D will 
continue to benefit our shareholders as we look forward to continuing our 
track record of outperformance."

Valeant Third Quarter Financial Results

Valeant's total revenues were $1.54 billion, up 74% compared to the third 
quarter of 2012. Same store organic product sales growth for Legacy Valeant 
was 7%, excluding the impact of the genericization of the Zovirax franchise, 
Retin-A Micro and BenzaClin. These products accounted for approximately $100 
million in lost sales as compared to the prior year.

Valeant's Developed Markets revenue was $1.14 billion, up 77% as compared to 
the third quarter of 2012. This increase was primarily led by the acquisition 
of Bausch + Lomb, which was completed on August 5, 2013. Same store organic 
product sales growth was 4%, excluding the impact of the genericization of the 
Zovirax franchise, Retin-A Micro (unexpectedly launched following Valeant's 
second quarter financial results conference call) and BenzaClin. The growth in 
the Developed Markets was driven by continued improvement in many of our 
Dermatology prescription brands, our aesthetics and oral health portfolios, 
our orphan drug products and CeraVe.

Valeant's Emerging Markets revenue was $399 million, up 68% as compared to the 
third quarter of 2012.  This increase was also primarily led by the 
acquisition of Bausch + Lomb.  Total same store sales growth was 14% for the 
segment, driven by continued strong growth in all of our emerging markets, 
particularly Poland, Russia, South East Asia and South Africa.

Since the transaction closed on August 5, 2013, Bausch + Lomb has delivered a 
same store sales organic growth rate of 10% as compared to the prior year, 
driven primarily by the U.S. and Emerging Market operations.

The Company reported a net loss of $973 million for the third quarter of 2013, 
or a loss of $2.92 per share due to the following one-time items: 1) 
impairment charges of $645 million for ezogabine/retigabine immediate-release 
formulation and the discontinuation of the modified-release formulation; 2) 
agreement to pay Anacor Pharmaceuticals $142.5 million to settle all 
outstanding existing and future claims related to a breach of contract and 
other existing disputes; and 3) restructuring, integration and other charges 
of $305 million primarily related to the acquisition of Bausch + Lomb.

On a Cash EPS basis, adjusted income was $486 million, or $1.43 per diluted 
share, an increase of 24% over the prior year.  Excluding the pre-closing 
financing costs and increased share count associated with the financing of the 
Bausch + Lomb transaction, Cash EPS would have been $1.51, or an increase of 
31% over the prior year.  In addition, the unexpected early launch of a 
generic competitor to Retin-A Micro following Valeant's second quarter 
financial results conference call negatively impacted Cash EPS by $0.04 and 
the strengthening of the dollar against many of our major currencies 
negatively cost the Company an additional $0.03 in the third quarter.

GAAP cash flow from operations was $202 million in the third quarter of 2013, 
and adjusted cash flow from operations was $408 million, an increase of 69% 
over the prior year. This increase in adjusted cash flow from operations was 
driven by growth across all our businesses, offset by an investment in working 
capital due to the Bausch + Lomb acquisition.

The Company's cost of goods sold (COGS) was $561 million in the third quarter 
of 2013.  After backing out the fair value adjustment to inventory, 
amortization expense and other items related to acquisitions, COGS represented 
27% of product sales, an increase of four percentage points as compared to the 
third quarter of 2012 due to the acquisition of Bausch + Lomb which has a 
higher COGS profile.

Selling, General and Administrative expenses were $356 million in the third 
quarter of 2013 which includes a $4 million step-up in stock based 
compensation expenses.  Excluding these expenses, SG&A was approximately 23% 
of revenue.  Research and Development expenses were $49 million in the third 
quarter of 2013, or approximately 3% of revenue.

Bausch + Lomb Transaction

On August 5, 2013, Valeant completed its acquisition of Bausch + Lomb.  We 
expect to realize more than $850 million of cost synergies from the combined 
Company, with a run rate north of $500 million by year-end 2013 and a run rate 
more than $850 million by year-end 2014.

2013 Guidance

The Company is updating its 2013 Cash EPS guidance to $6.11 to $6.16.  Total 
revenue for 2013 is expected to be in the range of $5.7 billion to $5.9 
billion and adjusted Cash Flow from Operations is expected to be greater than 
$1.8 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), October 31, 2013 to 
discuss its third quarter financial results for 2013. The dial-in number to 
participate on this call is (877) 876-8393 confirmation code 72650802. 
International callers should dial (973) 200-3961, confirmation code 72650802. 
A replay will be available approximately two hours following the conclusion of 
the conference call through November 7, 2013 and can be accessed by dialing 
(855) 859-2056, or (404) 537-3406, confirmation code 72650802. 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, 
eye health, 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 amount and timing of synergies, and our 
expected future performance, including 2013 guidance with respect to Cash EPS, 
total revenue and adjusted cash flow from operations.  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.

Non-GAAP Information

To supplement the financial measures prepared in accordance with U.S. 
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 & property, plant 
and equipment step up, stock-based compensation step-up, contingent 
consideration fair value adjustments, restructuring, acquisition-related and 
other costs, In-process research and development, impairments and other 
charges, ("IPR&D"), legal settlements outside the ordinary course of business, 
the impact of currency fluctuations, amortization and other non-cash charges, 
amortization including intangible asset impairments and write-down 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                                     Table 1
International, Inc.

Condensed Consolidated Statements
of Income (Loss)

For the Three and Nine Months Ended September
30, 2013 and 2012
                       Three Months Ended      Nine Months Ended
                       September 30,           September 30,

(In thousands, except  2013         2012       2013         2012
per share data)

Product sales          $ 1,506,421  $ 852,747  $ 3,608,801  $ 2,346,599

Alliance and royalty   16,471       12,248     39,651       148,348

Service and other      18,839       19,145     57,396       65,386

Total revenues         1,541,731    884,140    3,705,848    2,560,333

Cost of goods sold
(exclusive of
amortization of        560,855      216,494    1,128,942    633,618
intangible assets
shown separately
below)

Cost of services       13,580       13,758     42,557       49,417

Cost of alliances      773          -          1,684        68,820

Selling, general and
administrative         355,637      188,660    854,909      551,386
("SG&A")

Research and           49,009       19,170     97,273       58,887
development

Acquisition-related
contingent             (34,995)     5,630      (33,511)     23,198
consideration

In-process research
and development        123,981      145,300    128,811      149,868
impairments and other
charges

Legal settlements and  149,601      -          155,173      56,779
related fees

Restructuring,
integration and other  304,540      47,477     422,968      161,190
costs

Amortization and
impairments of         910,248      218,187    1,540,021    629,400
finite-lived
intangible assets
                       2,433,229    854,676    4,338,827    2,382,563

Operating income       (891,498)    29,464     (632,979)    177,770
(loss)

Interest expense, net  (246,620)    (114,886)  (576,078)    (315,382)

Gain (loss) on
extinguishment of      (8,161)      (2,322)    (29,540)     (2,455)
debt

Gain (loss) on         -            -          5,822        2,024
investments, net

Foreign exchange and   5,079        (1,603)    (3,564)      18,458
other

Income (loss) before
(recovery of)          (1,141,200)  (89,347)   (1,236,339)  (119,585)
provision for income
taxes

(Recovery of)
provision for income   (169,225)    (96,992)   (247,700)    (92,702)
taxes

Net income (loss)      (971,975)    7,645      (988,639)    (26,883)

Less: Net income
(loss) attributable    1,268        -          1,268        -
to noncontrolling
interest

Net income (loss)
attributable to
Valeant                $ (973,243)  $ 7,645    $ (989,907)  $ (26,883)
Pharmaceuticals
International, Inc.

Earnings per share:

Basic:

Net income (loss)      $ (2.92)     $ 0.03     $ (3.13)     $ (0.09)

Shares used in per     333,643      304,075    316,462      305,550
share computation

Diluted:

Net income (loss)      $ (2.92)     $ 0.02     $ (3.13)     $ (0.09)

Shares used in per     333,643      311,743    316,462      305,550
share computation

Valeant Pharmaceuticals                                     Table 2
International, Inc.

Reconciliation of GAAP EPS to Cash EPS

For the Three and Nine Months Ended September
30, 2013 and 2012
                       Three Months Ended      Nine Months Ended
                       September 30,           September 30,

(In thousands, except  2013         2012       2013         2012
per share data)

Net income (loss)
attributable to
Valeant                $ (973,243)  $ 7,645    $ (989,907)  $ (26,883)
Pharmaceuticals
International, Inc.

Non-GAAP adjustments
(a):

Inventory step-up (b)  149,400      6,009      219,159      49,401

Alliance product
assets & PP&E          1,053        (264)      1,604        50,770
step-up/down (c)

Stock-based            4,029        9,061      20,883       26,764
compensation (d)

Acquisition-related
contingent             (34,995)     5,630      (33,511)     23,198
consideration (e)

In-process research
and development        123,981      145,300    128,811      149,868
impairments and other
charges (f)

Legal settlements and  149,601      -          155,173      56,779
related fees (g)

Restructuring,
integration and other  304,540      47,477     422,968      161,190
costs (h)

Amortization and
impairments of
finite-lived           919,000      232,560    1,571,872    651,414
intangible assets and
other non-GAAP
charges (i)
                       1,616,609    445,773    2,486,959    1,169,384

Amortization of
deferred financing
costs, debt discounts  27,572       8,859      70,498       14,214
and ASC 470-20 (FSP
APB 14-1) interest
(j)

(Gain) loss on
extinguishment of      8,161        2,322      29,540       2,455
debt

(Gain) loss on
disposal of fixed
assets and assets      -            -          -            1,002
held for
sale/impairment, net

Foreign exchange and   (7,721)      -          583          -
other (k)

Tax (l)                (185,611)    (107,093)  (286,186)    (127,802)

Total adjustments      1,459,010    349,861    2,301,394    1,059,253

Adjusted net income
attributable to
Valeant                $ 485,767    $ 357,506  $ 1,311,487  $ 1,032,370
Pharmaceuticals
International, Inc.

GAAP earnings (loss)   $ (2.92)     $ 0.02     $ (3.13)     $ (0.09)
per share - diluted

Cash earnings per      $ 1.43       $ 1.15     $ 4.06       $ 3.29
share - diluted

Cash earnings per
share excluding        $ 1.43       $ 1.15     $ 4.06       $ 2.93
one-time items -
diluted

Shares used in
diluted per share      340,223      311,743    322,949      313,584
calculation - cash
earnings per share

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

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

(c) See footnote (d) to Table 2b.

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

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

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

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

(h) See footnote (h)(i) to Table 2a
and (j)(k) to Table 2b.

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

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

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

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

Valeant Pharmaceuticals                               Table 2a
International, Inc.

Reconciliation of GAAP EPS to Cash EPS

For the Three Months Ended September 30, 2013 and 2012
                                   Non-GAAP Adjustments((a) )for
                                   Three Months Ended
                                   September 30,

(In thousands, except per share    2013               2012
data)

Product sales                      $ -                $ -

Alliance and royalty               -                  -

Service and other                  -                  -

Total revenues                     -                  -

Cost of goods sold (exclusive of
amortization of intangible assets  (159,209)   (b)(c) (20,030)   (b)(c)
shown separately below)

Cost of services                   -                  -

Cost of alliances                  -                  -

Selling, general and               (4,025)     (d)    (9,149)    (d)
administrative ("SG&A")

Research and development           -                  -

Acquisition-related contingent     34,995      (e)    (5,630)    (e)
consideration

In-process research and
development impairments and other  (123,981)   (f)    (145,300)  (f)
charges

Legal settlements and related      (149,601)   (g)    -          (g)
fees

Restructuring, integration and     (304,540)   (h)    (47,477)   (i)
other costs

Amortization and impairments of    (910,248)          (218,187)
finite-lived intangible assets
                                   (1,616,609)        (445,773)

Operating income (loss)            1,616,609          445,773

Interest expense, net              27,572      (j)    8,859      (j)

Gain (loss) on extinguishment of   8,161              2,322
debt

Foreign exchange and other         (7,721)     (k)    -

Income (loss) before (recovery     1,644,621          456,954
of) provision for income taxes

(Recovery of) provision for        185,611     (l)    107,093    (l)
income taxes

Total adjustments to net income
(loss) attributable to Valeant     $ 1,459,010        $ 349,861
Pharmaceuticals International,
Inc.

Earnings per share:

Diluted:

Total adjustments to net income    $ 4.29             $ 1.12
(loss)

Shares used in per share           340,223            311,743
computation

(a) To supplement the financial measures prepared in accordance with
U.S. 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 & property, plant and equipment step up, stock-based
compensation step-up, contingent consideration fair value adjustments,
restructuring, acquisition-related and other costs, In-process research
and development, impairments and other charges, ("IPR&D"), legal
settlements outside the ordinary course of business, the impact of
currency fluctuations, amortization and other non-cash charges,
amortization including intangible asset impairments and write-down 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, 2013 is $149.4 million primarily relating to the
acquisitions of Bausch & Lomb Holdings Incorporated on August 5, 2013
and Medicis Pharmaceutical Corporation on December 11, 2012. For the
three months ended September 30, 2012 the impact of inventory fair
value step-up is $6.0 million primarily relating to the acquisitions of
Afexa Life Sciences on October 17, 2011, Pedinol Pharmacal, Inc. on
April 11, 2012 and BC Pharma B.V. on July 1, 2012.

(c) For the three months ended September 30, 2013 and 2012 cost of
goods include costs associated with integration related tech transfers,
$7.3 million and $14.4 million, respectively. For the three months
ended September 30, 2013 cost of goods include amortization of a BMS
fair value inventory adjustment of $1.5 million.

(d) For the three months ended September 30, 2013 and 2012 SG&A
primarily includes $4.0 million and $9.1 million of stock-based
compensation, respectively, which reflects the acceleration of certain
equity instruments and the amortization of the fair value step-up
increment resulting from the merger of Legacy Valeant into Legacy
Biovail.

(e) Net income/expenses from the changes in acquisition-related
contingent consideration for the three months ended September 30, 2013
and 2012 of $35.0 million and $5.6 million, respectively.

(f) In-process research and development impairments and other charges
for the three months ended September 30, 2013 of $124.0 million
primarily due to the write-off of IPR&D assets relating to the
modified-release formulation of ezogabine/retigabine of $93.8 million
and IPR&D assets acquired as part of Aton Pharma, Inc. acquisition in
May 2010. In-process research and development impairments and other
charges for the three months ended September 30, 2012 of $145.3 million
is the write-off of the IPR&D asset relating to IDP-107 dermatology
program, $133.4 million and a $12.0 million payment to terminate a
research and development commitment to a third party.

(g) For the three months ended September 30, 2013 legal settlement and
related fees of $149.6 million primarily relating to a settlement
agreement with Anacor Pharmaceuticals, Inc.

(h) Restructuring, acquisition-related and other costs of $304.5
million primarily represent costs relating to the acquisitions of
Bausch & Lomb Holdings Incorporation, Medicis Pharmaceutical
Corporation, Obagi Medical Products, Inc. and other Valeant
restructuring and integration initiatives. These include $165.2 million
relating to employee severance costs, $54.1 million of stock-based
compensation, $66.1 million relating to duplicative labor, contract
terminations, integration consulting, transition services, and other,
$8.7 million relating to acquisition costs, $5.5 million relating to
facility closure costs, $2.5 million relating to other, $1.8 million
relating to non-personnel manufacturing integration costs and $0.6
million of other non-cash charges.

(i) Restructuring, acquisition-related and other costs of $47.5 million
represent costs relating to internal Valeant restructuring and
integration initiatives and the acquisitions of Medicis Pharmaceutical
Corporation, iNova, Dermik and Sanitas. These include $18.5 million
relating to integration consulting, duplicative labor, transition
services, and other, $14.4 million relating to employee severance
costs, $4.6 million relating to acquisition costs, $3.8 million
relating to facility closure costs and $6.2 million relating to other.

(j) Non-cash interest expense associated with amortization and
write-down of deferred financing costs and debt discounts for the three
months ended September 30, 2013 of $27.6 million. For the three months
ended September 30, 2012 non-cash interest expense associated with
amortization and write-down of deferred financing costs, debt discounts
and ASC 470-20 (FSP APB 14-1) interest, $8.9 million.

(k) Unrealized foreign exchange on intercompany financing arrangements,
$7.7 million.

(l) 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                              Table 2b
International, Inc.

Reconciliation of GAAP EPS to
Cash EPS

For the Nine Months Ended September 30, 2013
and 2012
                                  Non-GAAP Adjustments((a) )for
                                  Nine Months Ended
                                  September 30,

(In thousands, except per share   2013               2012
data)

Product sales                     $ -                $ -

Alliance and royalty              -                  -

Service and other                 -                  -

Total revenues                    -                  -

Cost of goods sold (exclusive of
amortization of intangible        (252,158)   (b)(c) (70,435)    (b)(c)
assets shown separately below)

Cost of services                  -                  -

Cost of alliances                 -                  (50,958)    (d)

Selling, general and              (21,339)    (e)    (28,558)    (e)(f)
administrative ("SG&A")

Research and development          -                  -

Acquisition-related contingent    33,511      (g)    (23,198)    (g)
consideration

In-process research and
development impairments and       (128,811)   (h)    (149,868)   (h)
other charges

Legal settlements and related     (155,173)   (i)    (56,779)    (i)
fees

Restructuring, integration and    (422,968)   (j)    (161,190)   (k)
other costs

Amortization and impairments of   (1,540,021)        (629,400)
finite-lived intangible assets
                                  (2,486,959)        (1,170,386)

Operating income (loss)           2,486,959          1,170,386

Interest expense, net             70,498      (l)    14,214      (l)

Gain (loss) on extinguishment of  29,540             2,455
debt

Foreign exchange and other        583         (m)    -

Income (loss) before (recovery    2,587,580          1,187,055
of) provision for income taxes

(Recovery of) provision for       286,186     (n)    127,802     (n)
income taxes

Total adjustments to net income
(loss) attributable to Valeant    $ 2,301,394        $ 1,059,253
Pharmaceuticals International,
Inc.

Earnings per share:

Diluted:

Total adjustments to net income   $ 7.13             $ 3.38
(loss)

Shares used in per share          322,949            313,584
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, 2013 is $219.2 million primarily
relating to the acquisition of Bausch & Lomb Holdings
Incorporated on August 5, 2013 and Medicis Pharmaceutical
Corporation on December 11, 2012. For the nine months ended
September 30, 2012 the impact of inventory fair value step-up is
$49.4 million primarily relating to the acquisitions of iNova on
December 21, 2011, Dermik on December 16, 2011, Afexa Life
Sciences on October 17, 2011, Ortho Dermatologics on December
12, 2011 and Pedinol Pharmacal, Inc. on April 11, 2012.

(c) For the nine months ended September 30, 2013 and 2012 cost
of goods include costs associated with integration related tech
transfers, $25.4 million and $18.9 million, respectively. For
the nine months ended September 30, 2013 cost of goods include
amortization of a BMS fair value inventory adjustment of $5.0
million.

(d) Cost of alliances represents the divestiture of 5-FU and
IDP-111 resulting from the acquisition of Dermik, $50.9 million
for the nine months ended September 30, 2012.

(e) For the nine months ended September 30, 2013 and 2012 SG&A
primarily includes $20.9 million and $26.8 million of
stock-based compensation, respectively, which reflects the one
time modification and cash settlement of certain board of
directors equity instruments, acceleration of certain equity
instruments and the amortization of the fair value step-up
increment resulting from the merger of Legacy Valeant into
Legacy Biovail.

(f) SG&A includes $1.0 million loss on assets held
for sale/impairment for the nine months ended
September 30, 2012.

(g) Net income/expenses from the changes in acquisition-related
contingent consideration for the nine months ended September 30,
2013 and 2012 of $33.5 million and $23.2 million, respectively.

(h) In-process research and development impairments and other
charges for the nine months ended September 30, 2013 of $128.8
million primarily due to the write-off of IPR&D assets relating
to the modified-release formulation of ezogabine/retigabine of
$93.8 million and IPR&D assets acquired as part of Aton Pharma,
Inc. acquisition in May 2010. In-process research and
development impairments and other charges for the nine months
ended September 30, 2012 of $149.9 million primarily due to the
write-off of IRP&D asset relating to IDP-107 dermatology
program, $133.4 million, a $12.0 million payment to terminate
research and development with a third party and the termination
of an IPR&D program acquired from Ortho Dermatologics, $4.3
million.

(i) For the nine months ended September 30, 2013 legal
settlement and related fees of $155.2 million primarily relating
to a settlement agreement with Anacor Pharmaceuticals, Inc. For
the nine months ended September 30, 2012 legal settlement and
related fees of $56.8 million relating to settlements and
associated legal fees of patent-related and anti-trust
litigations.

(j) Restructuring, acquisition-related and other costs of $423.0
million primarily represent costs relating to the acquisitions
of Bausch & Lomb Holdings Incorporated, Medicis Pharmaceutical
Corporation, Obagi Medical Products, Inc. and other Valeant
restructuring and integration initiatives. These include $192.6
million relating to employee severance costs, $116.1 million
relating to duplicative labor, contract terminations,
integration consulting, transition services, and other, $56.3
million of stock-based compensation, $24.4 million relating to
acquisition costs, $14.8 million relating to facility closure
costs, $10.0 million relating to other, $4.6 million relating to
non-personnel manufacturing integration costs and $4.2 million
of other non-cash charges.

(k) Restructuring, acquisition-related and other costs of $161.2
million primarily represent costs relating to internal Valeant
restructuring and integration initiatives and the acquisitions
of iNova, Dermik, OraPharma, Sanitas, Medicis Pharmaceutical
Corporation and Pedinol Pharmacal, Inc.. These include $46.6
million relating to integration consulting, duplicative labor,
transition services, and other, $46.4 million relating to
employee severance costs, $27.5 million relating to facility
closure costs, $26.0 million relating to acquisition costs,
$10.7 million relating to other, and $4.0 million relating to
non-personnel manufacturing integration costs.

(l) Non-cash interest expense associated with amortization and
write-down of deferred financing costs and debt discounts for
the nine months ended September 30, 2013 of $70.5 million. For
the nine months ended September 30, 2012 non-cash interest
expense associated with amortization and write-down of deferred
financing costs, debt discounts and ASC 470-20 (FSP APB 14-1)
interest, $14.2 million.

(m) Unrealized foreign exchange on intercompany financing
arrangements, $0.6 million.

(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 Revenues - by Segment

For the Three and Nine Months Ended September 30,
2013 and 2012

(In thousands)
                       Three Months Ended
                       September 30,
                                                               2013
                                                     2013      excluding


                   2013       2012       %                            %
Revenues (a)(b)                                      currency  currency 


                       GAAP       GAAP       Change                       Change
                                                     impact    impact
                                                               non-GAAP

Total U.S.             $ 815,823  $ 497,998  64%     $ -       $ 815,823  64%

ROW Developed          326,889    149,196    119%    14,572    341,461    129%

Developed Markets      1,142,712  647,194    77%     14,572    1,157,284  79%

Emerging
Markets-Europe/Middle  205,147    136,189    51%     (2,989)   202,158    48%
East

Emerging               100,495    80,581     25%     5,798     106,293    32%
Markets-Latin America

Emerging               93,377     20,176     363%    2,628     96,005     376%
Markets-Asia/Africa

Emerging Markets       399,019    236,946    68%     5,437     404,456    71%

Total revenues         $          $ 884,140  74%     $ 20,009  $          77%
                       1,541,731                               1,561,740
                       Nine Months Ended
                       September 30,
                                                               2013
                                                     2013      excluding


                   2013       2012       %                            %
Revenues (a)(b)                                      currency  currency 


                       GAAP       GAAP       Change                       Change
                                                     impact    impact
                                                               non-GAAP

Total U.S.             $          $          47%     $ -       $          47%
                       2,108,921  1,433,944                    2,108,921

ROW Developed          613,913    426,889    44%     17,837    631,750    48%

Developed Markets      2,722,834  1,860,833  46%     17,837    2,740,671  47%

Emerging
Markets-Europe/Middle  564,922    415,396    36%     (8,425)   556,497    34%
East

Emerging               271,346    224,869    21%     6,780     278,126    24%
Markets-Latin America

Emerging               146,746    59,235     148%    6,341     153,087    158%
Markets-Asia/Africa

Emerging Markets       983,014    699,500    41%     4,696     987,710    41%

Total revenues         $          $          45%     $ 22,533  $          46%
                       3,705,848  2,560,333                    3,728,381

(a) Note: Currency effect for constant currency sales is determined by
comparing 2013 reported amounts adjusted to exclude currency impact,
calculated using 2012 monthly average exchange rates, to the actual 2012
reported amounts. Constant currency sales is not a GAAP-defined measure
of revenue growth. Constant currency sales as defined and presented by us
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, 2013

(In thousands)
               Three Months Ended


Cost of
4.1 goods      September 30, 


    sold (a)
                                   2013        2013
                                   fair value  excluding
                                               fair
                                   step-up
               2013       %                    value       %
                                   adjustment  step-up
               as         of       to                      of product
               reported   product              adjustment
                                   inventory               sales
               GAAP       sales    and         to
                                               inventory
                                   other non-
                                               and other
                                   GAAP (b)
                                               non-GAAP
    Developed  $ 374,305  34%      $ 126,559   $ 247,746   22%
    Markets
    Emerging   186,550    48%      32,650      153,900     39%
    Markets
               $ 560,855  37%      $ 159,209   $ 401,646   27%
               Nine Months Ended
               September 30,
                                   2013        2013
                                   fair value  excluding
                                               fair
                                   step-up
               2013       %                    value       %
                                   adjustment  step-up
               as         of       to                      of product
               reported   product              adjustment
                                   inventory               sales
               GAAP       sales    and         to
                                               inventory
                                   other non-
                                               and other
                                   GAAP (c)
                                               non-GAAP
    Developed  $ 701,775  26%      $ 207,846   $ 493,929   19%
    Markets
    Emerging   427,167    45%      44,312      382,855     40%
    Markets
               $          31%      $ 252,158   $ 876,784   24%
               1,128,942
    (a) See footnote (a) to Table 2a.
    (b) Developed Markets include $122.2 million of fair value
    step-up adjustment to inventory, $3.1 million of integration
    related tech transfer costs and $1.5 million BMS fair value
    inventory adjustment offset by PP&E step down of $0.2 million.
    Emerging Markets include $27.2 million of fair value step up
    adjustment to inventory, $4.2 million of integration related tech
    transfer costs and $1.2 million of PP&E step up and other.
    (c) Developed Markets include $187.8 million of fair value
    step-up adjustment to inventory, $15.8 million of integration
    related tech transfer costs and $5.0 million BMS fair value
    inventory adjustment offset by PP&E step down of $0.8 million.
    Emerging Markets include $31.4 million of fair value step up
    adjustment to inventory, $9.6 million of integration related tech
    transfer costs and $3.3 million of PP&E step up and other.
    Valeant Pharmaceuticals                                     Table 5
    International, Inc.
    Consolidated Balance Sheet and
    Other Data
    (In thousands)
                                    As of          As of
                                    September 30,  December 31,

5.1 Cash                            2013           2012
    Cash and cash equivalents       $ 596,347      $ 916,091
    Marketable securities           -              4,410
    Total cash and marketable       $ 596,347      $ 920,501
    securities
    Debt
    New Term Loan A Facility        $ 1,666,535    $ 2,083,462
    Tranche A Term Loans            742,528        -
    New Term Loan B Facility        1,255,373      1,275,167
    New Incremental Term Loan B     965,790        973,988
    Facility
    Tranche B Term Loans            3,087,242      -
    Japanese Revolving Credit       34,192         -
    Facility
    Senior Notes                    9,639,479      6,448,317
    Convertible Notes               209            233,793
    Other                           13,366         898
                                    17,404,714     11,015,625
    Less: current portion           (360,964)      (480,182)
    Total long-term debt            $ 17,043,750   $ 10,535,443

5.2 Summary of Cash Flow Statements Three Months Ended
                                    September 30,
                                    2013           2012
    Cash flow provided by (used
    in):
    Net cash provided by operating  $ 201,712      $ 166,827
    activities (GAAP)
    Restructuring, integration and  303,898        47,477
    acquisition-related costs( (c))
    Payment of accrued legal        150            37,739
    settlements
    Payment of accreted interest on -              -
    convertible debt
    Tax benefit from stock options  32,179         2,367
    exercised ((a))
    Cash settlement of BOD equity   -              -
    awards
    Working capital change related
    to business development         -              -
    activities
    Non-cash adjustments to income  -              -
    taxes payable
    Changes in working capital
    related to restructuring,       (129,549)      (13,254)
    integration and
    acquisition-related costs((c))
    Adjusted cash flow from         $ 408,390      $ 241,156
    operations (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, integration and
    acquisition-related costs cash payments of $174,349 are
    broken down as follows:
    Project Type                    Amount Paid
    Bausch & Lomb                   128,642
    Medicis                         14,045
    Obagi                           6,901
    Other                           6,323
    Intellectual property migration 5,296
    Europe (including Nature
    Produkt, Lek-Am, Croma &        4,539
    Ekomir)
    Manufacturing integration       4,248
    (various deals)
    OraPharma                       3,398
    Systems integration (various    957
    deals U.S./Canada)
    Total                           $ 174,349
    Expense Type                    Amount Paid
    Integration related consulting,
    duplicative labor, transition   60,716
    services, and other
    Stock-based compensation        53,506
    Severance payments              35,288
    Acquisition-related costs paid  16,056
    to 3rd parties
    Facility closure costs, other
    manufacturing integration, and  8,108
    other
    DSU payments for retired board  675
    members
    Total                           $ 174,349

Valeant Pharmaceuticals                                                                          Table
International, Inc.                                                                              6

Organic Growth - by Segment

For the Three Months Ended September
30, 2013

(In thousands)
          For the Three Months Ended September 30, 2013
                                                                                          Organic
                                                                                          growth
                                                     (a)      (b)                         (b)    (b)
                         (3)          (5)            (7)                (9)               Pro    Same
          (1)     (2)           (4)         (6)               (8)                         Forma  store
                         QTD          Pro            Currency           Divestitures /    (1)+   (3)+
          QTD     Acq           QTD   Forma Pro      impact   Currency  Discontinuations  (7)+   (7) /
                         Same               Forma    Same     impact                      (8)+   (4)-
          2013    impact store  2012  Adj   2012     store    Acq       (c)               (9) /  (9)
                                                                                          (6)

Total
U.S. (d)  776.6   428.4  348.2  340.3 409.5 749.8    -        -         8.6               5%     5%
(f) (g)

ROW
Developed 318.9   191.9  127.0  139.1 192.3 331.4    8.4      6.0       5.3               2%     1%
(e) (h)

Developed 1,095.5 620.4  475.2  479.4 601.8 1,081.1  8.4      6.0       13.9              4%     4%
Markets

Emerging
Markets   390.9   136.8  254.1  231.7 124.6 356.3    2.6      3.1       5.6               13%    14%
(i)

Total
product   1,486.5 757.2  729.3  711.1 726.3 1,437.4  11.0     9.1       19.5              6%     7%
sales

(a) Note: Currency effect for constant currency sales is determined by comparing 2013 reported amounts
adjusted to exclude currency impact, calculated using 2012 monthly average exchange rates, to the
actual 2012 reported amounts. Constant currency sales is not a GAAP-defined measure of revenue growth.
Constant currency sales as defined and presented by us may not be comparable to similar measures
reported by other companies.

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

(c) Includes divestitures, discontinuations and supply
interuptions.

(d) Includes Valeant's attributable portion of revenue from joint ventures (JV) - $0.9M Q3'12 and
$1.2M Q3'13.

(e) Includes Valeant's attributable portion of revenue from joint ventures (JV) - $2.0M
Q3'12 and $2.9M Q3'13.

(f) Excludes revenues from certain genericized products (Zovirax franchise, Retin-A Micro and
BenzaClin) of $144.6M Q3'12 and $24.0M Q3'13.

(g) Reflects Bausch & Lomb post-acquisition revenue of $216.5M for Q3'13 and $188.5M pro forma revenue
adjustment for Q3'12.

(h) Reflects Bausch & Lomb post-acquisition revenue of $183.3M and a currency impact of $5.4M Q3'13
and $184.0M pro forma revenue adjustment for Q3'12.

(i) Reflects Bausch & Lomb post-acquisition revenue of $100.2M and a currency impact of $2.4M Q3'13
and $90.0M pro forma revenue adjustment for Q3'12.

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