Valeant Pharmaceuticals International, Inc.

Table 1

Condensed Consolidated Statements of Income (Loss)

For the Three and Twelve Months Ended December 31, 2014 and 2013

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In millions)

2014

2013

2014

2013

Product sales

$ 2,235.5

$ 2,031.5

$ 8,103.6

$ 5,640.3

Other revenues

44.5

32.3

159.9

129.3

Total revenues

2,280.0

2,063.8

8,263.5

5,769.6

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

576.7

717.4

2,196.2

1,846.3

Cost of other revenues

13.1

14.5

58.4

58.8

Selling, general and administrative (“SG&A”)

524.5

450.3

2,026.3

1,305.2

Research and development

59.1

59.5

246.0

156.8

Acquisition-related contingent consideration

(28.9)

4.3

(14.1)

(29.2)

In-process research and development impairments and other charges

0.7

24.8

41.0

153.6

Other (income)/expense

7.0

79.2

(268.7)

287.2

Restructuring, integration, acquisition-related and other costs

46.9

128.3

388.0

498.4

Amortization and impairments of finite-lived intangible assets

436.8

362.0

1,550.7

1,902.0

1,635.9

1,840.3

6,223.8

6,179.1

Operating income (loss)

644.1

223.5

2,039.7

(409.5)

Interest expense, net

(223.7)

(260.3)

(966.0)

(836.3)

Loss on extinguishment of debt

(35.9)

(35.4)

(129.6)

(65.0)

Gain (loss) on investments, net

286.7

–

292.6

5.8

Foreign exchange and other

(81.1)

(5.9)

(144.1)

(9.4)

Income (loss) before (recovery of) provision for income taxes

590.1

(78.1)

1,092.6

(1,314.4)

(Recovery of) provision for income taxes

56.0

(203.1)

180.4

(450.8)

Net income (loss)

534.1

125.0

912.2

(863.6)

Less: Net income (loss) attributable to noncontrolling interest

(0.8)

1.2

(1.3)

2.5

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 534.9

$ 123.8

$ 913.5

$ (866.1)

Earnings (loss) per share:

Basic:

Earnings (loss)

$ 1.59

$ 0.37

$ 2.72

$ (2.70)

Shares used in per share computation

335.8

334.4

335.4

321.0

Diluted:

Earnings (loss)

$ 1.56

$ 0.36

$ 2.67

$ (2.70)

Shares used in per share computation

341.9

340.9

341.5

321.0

Valeant Pharmaceuticals International, Inc.

Table 2

Reconciliation of GAAP EPS to Cash EPS

For the Three and Twelve Months Ended December 31, 2014 and 2013

Three Months Ended

Twelve Months Ended

December 31,

December 31,

(In millions)

2014

2013

2014

2013

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 534.9

$ 123.8

$ 913.5

$ (866.1)

Non-GAAP adjustments (a):

Inventory step-up (b)

5.4

153.3

27.3

372.5

PP&E step-up/down (c)

14.0

7.1

29.8

8.7

Stock-based compensation (d)

(2.1)

0.4

0.3

21.3

Acquisition-related contingent consideration (e)

(28.9)

4.3

(14.1)

(29.2)

In-process research and development impairments and other charges (f)

0.7

24.8

41.0

153.6

Other (income)/expense (g)

7.0

79.2

(268.7)

287.2

Restructuring, integration, acquisition-related and other costs (h)

46.9

128.3

388.0

498.4

Amortization and impairments of finite-lived intangible assets and other non-GAAP charges (i)

449.2

385.4

1,599.0

1,957.3

492.2

782.8

1,802.6

3,269.8

Amortization of deferred financing costs, debt discounts and ASC 470-20 (FSP APB 14-1) interest (j)

11.9

19.0

70.0

89.5

Loss on extinguishment of debt

35.9

35.4

129.6

65.0

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

1.2

–

3.9

–

(Gain) loss on investments, net (l)

(286.7)

–

(286.7)

–

Foreign exchange and other (m)

72.7

0.2

135.1

0.8

Tax (n)

18.6

(229.7)

81.8

(515.9)

Total adjustments

345.8

607.7

1,936.3

2,909.2

Adjusted net income attributable to Valeant Pharmaceuticals International, Inc.

$ 880.7

$ 731.5

$ 2,849.8

$ 2,043.1

GAAP earnings (loss) per share – diluted

$ 1.56

$ 0.36

$ 2.67

$ (2.70)

Cash earnings per share – diluted

$ 2.58

$ 2.15

$ 8.34

$ 6.24

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Valeant Pharmaceuticals International, Inc.

Table 2a

Reconciliation of GAAP EPS to Cash EPS

For the Three Months Ended December 31, 2014 and 2013

Non-GAAP Adjustments^(a)for

Three Months Ended

December 31,

(In millions)

2014

2013

Product sales

$ –

$ –

Other revenues

–

–

Total revenues

–

–

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(31.1)

(b)(c)

(183.8)

(b)(c)

Cost of other revenues

–

–

Selling, general and administrative (“SG&A”)

0.5

(d)

(0.4)

(d)

Research and development

(0.3)

–

Acquisition-related contingent consideration

28.9

(e)

(4.3)

(e)

In-process research and development impairments and other charges

(0.7)

(f)

(24.8)

(f)

Other income/(expense)

(7.0)

(g)

(79.2)

(g)

Restructuring, integration, acquisition-related and other costs

(46.9)

(h)

(128.3)

(i)

Amortization and impairments of finite-lived intangible assets

(436.8)

(362.0)

(493.4)

(782.8)

Operating income (loss)

493.4

782.8

Interest expense, net

11.9

(j)

19.0

(j)

Loss on extinguishment of debt

35.9

35.4

(Gain) loss on investments, net

(286.7)

(k)

–

Foreign exchange and other

72.7

(l)

0.2

Income (loss) before (recovery of) provision for income taxes

327.2

837.4

(Recovery of) provision for income taxes

18.6

(m)

(229.7)

(m)

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 345.8

$ 607.7

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$ 1.01

$ 1.78

Shares used in per share computation

341.9

340.9

(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, integration, 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 including intangible asset impairments and other non-cash charges, amortization 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 sold/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 December 31, 2014 is $5.4 million primarily due to the acquisition of PreCision Dermatology Inc. on July 7, 2014. For the three months ended December 31, 2013 the impact of inventory fair value step-up is $153.3 million primarily due to the acquisition of Bausch & Lomb Holdings Incorporated on August 5, 2013.

(c) For the three months ended December 31, 2014 and 2013, cost of goods sold includes costs associated with integration related tech transfers, $11.2 million and $22.0 million, respectively, PP&E step up of $13.1 million and $7.1 million, respectively, primarily relating to the acquisition of Bausch & Lomb Holdings Incorporated and $1.4 million and $1.5 million, respectively, of amortization of a BMS fair value inventory adjustment.

(d) For the three months ended December 31, 2014, SG&A primarily includes ($2.1) million of stock-based compensation which reflects the acceleration of certain equity instruments offset by $1.2 million on disposal of assets. For the three months ended December 31, 2013, SG&A primarily includes $0.4 million of stock-based compensation 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 expense/(income) from the changes in acquisition-related contingent consideration for the three months ended December 31, 2014 and 2013 is ($28.9) million and $4.3 million, respectively.

(f) In-process research and development impairments and other charges for the three months ended December 30, 2014 is $0.7 million primarily due to the write-off of IPR&D assets. In-process research and development impairments and other charges for the three months ended December 31, 2013 is $24.8 million primarily due to the write-off of IPR&D assets acquired as part of Bausch & Lomb acquisition in August 2013 of $14.4 million and an impairment related to Xerese ointment of $8.8 million.

(g) For the three months ended December 31, 2014, other (income)/expense of $7.0 million primarily relates to legal settlements and associated legal fees as well as a net loss on sale of assets. For the three months ended December 31, 2013, other (income)/expense of $79.2 million primarily relates to settlement agreement with Anacor Pharmaceuticals, Inc. and an AntiGrippin litigation.

(h) Restructuring, integration, acquisition-related and other costs of $46.9 million primarily relates to the acquisitions of Bausch & Lomb Holdings Incorporated, Croma, Solta Medical, Inc., PreCision Dermatology Inc. and other Valeant restructuring and integration initiatives. These include $25.8 million of contract terminations, integration consulting, transition services, duplicative labor and other, $9.0 million of employee severance costs, $7.2 million of facility closure costs, $2.6 million of acquisition costs, $1.3 million of other and $1.0 million of non-personnel manufacturing integration costs.

(i) Restructuring, integration, acquisition-related and other costs of $128.3 million primarily relates to the acquisitions of Bausch & Lomb Holdings Incorporation, Medicis Pharmaceutical Corporation, Obagi Medical Products, Inc. and other internal Valeant restructuring and integration initiatives. These include $83.6 million of contract terminations, integration consulting, transition services, duplicative labor and other, $24.3 million of facility closure costs, $12.0 million of acquisition costs, $4.9 million of other, $4.4 million of non-personnel manufacturing integration costs, $0.3 million of stock-based compensation, $0.5 million of other non-cash charges offset by $1.7 million reduction to employee severance costs.

(j) Non-cash interest expense associated with amortization and write-down of deferred financing costs and debt discounts for the three months ended December 31, 2014 and 2013 is $11.9 million and $19.0 million, respectively.

(k) Gain on investment, net was a gain recognized in connection with the sale by PS Fund 1, LLC of the Allergan Inc. shares.

(l) Unrealized foreign exchange loss on intercompany financing arrangements for the three months ended December 31, 2014 is $72.7 million.

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

Valeant Pharmaceuticals International, Inc.

Table 2b

Reconciliation of GAAP EPS to Cash EPS

For the Twelve Months Ended December 31, 2014 and 2013

Non-GAAP Adjustments^(a)for

Twelve Months Ended

December 31,

(In millions)

2014

2013

Product sales

$ –

$ –

Other revenues

–

–

Total revenues

–

–

Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below)

(95.4)

(b)(c)

(436.1)

(b)(c)

Cost of other revenues

–

–

Selling, general and administrative (“SG&A”)

(12.9)

(d)

(21.7)

(d)

Research and development

(1.3)

–

Acquisition-related contingent consideration

14.1

(e)

29.2

(e)

In-process research and development impairments and other charges

(41.0)

(f)

(153.6)

(f)

Other income/(expense)

268.7

(g)

(287.2)

(g)

Restructuring, integration, acquisition-related and other costs

(388.0)

(h)

(498.4)

(i)

Amortization and impairments of finite-lived intangible assets

(1,550.7)

(1,902.0)

(1,806.5)

(3,269.8)

Operating income (loss)

1,806.5

3,269.8

Interest expense, net

70.0

(j)

89.5

(j)

Loss on extinguishment of debt

129.6

65.0

(Gain) loss on investments, net

(286.7)

(k)

–

Foreign exchange and other

135.1

(l)

0.8

(l)

Income (loss) before (recovery of) provision for income taxes

1,854.5

3,425.1

(Recovery of) provision for income taxes

81.8

(m)

(515.9)

(m)

Total adjustments to net income (loss) attributable to Valeant Pharmaceuticals International, Inc.

$ 1,936.3

$ 2,909.2

Earnings (loss) per share:

Diluted:

Total adjustments to earnings (loss)

$ 5.67

$ 8.88

Shares used in per share computation

341.5

327.5

(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, integration, 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 including intangible asset impairments and other non-cash charges, amortization 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 sold/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 twelve months ended December 31, 2014 is $27.3 million primarily due to the acquisitions of Solta Medical, Inc. on January 23, 2014 and PreCision Dermatology Inc. on July 7, 2014. For the twelve months ended December 31, 2013 the impact of inventory fair value step-up is $372.5 million primarily due to the acquisitions Bausch & Lomb Holdings Incorporated on August 5, 2013 and Medicis Pharmaceutical Corporation on December 11, 2012.

(c) For the twelve months ended December 31, 2014 and 2013, cost of goods sold include $33.4 million and $47.7 million, respectively, of costs associated with integration related tech transfers, PP&E step up of $28.8 million and $7.1 million, respectively, primarily relates to the acquisition of Bausch & Lomb Holdings Incorporated and $5.9 million and $6.5 million, respectively, of amortization of a BMS fair value inventory adjustment.

(d) For the twelve months ended December 31, 2014, SG&A primarily includes $7.9 million of registration and fees associated with the Allergan transaction, $2.7 million loss on assets held for sale and $1.2 million on disposal of assets. For the twelve months ended December 31, 2013, SG&A primarily includes $21.3 million of stock-based compensation 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.

(e) Net expense/(income) from the changes in acquisition-related contingent consideration for the twelve months ended December 31, 2014 and 2013 is ($14.1) million and ($29.2) million, respectively.

(f) In-process research and development impairments and other charges for the twelve months ended December 31, 2014 is $41.0 million primarily due to the write-off of IPR&D asset of $12.5 million acquired in the Medicis Pharmaceutical Corporation acquisition in December 2012, an up-front payment of $12 million made in connection with an amendment to a license and distribution agreement with a third party and payments to third parties for the achievement of specific development and regulatory milestones under our R&D programs, including Jublia of $8.4 million. For the twelve months ended December 31, 2013, $153.6 million is primarily due to the write-off of IPR&D assets relating to the modified-release formulation of ezogabine/retigabine of $93.8 million, $27.3 million of IPR&D assets acquired as part of Aton Pharma, Inc. acquisition in May 2010, IPR&D assets acquired as part of the Bausch & Lomb acquisition of $14.4 million and an impairment to Xerese Ointment of $8.8 million.

(g) For the twelve months ended December 31, 2014, other (income)/expense of ($268.7) million primarily relates to the net gain on the divestiture of filler and toxin assets, ($323.9) million and the reserve reversal related to the AntiGrippin litigation, ($50.0) million, offset by $58.5 million loss on the divestiture of Metronidazole 1.3%, a post-combination expense of $20.4 million related to acceleration of unvested stock options for PreCision employees, $8.8 million loss on the divestiture of generic tretinoin product rights acquired in the PreCision Dermatology Inc. acquisition. For the twelve months ended December 31, 2013, other (income)/expense of $287.2 million primarily relates to a $142.5 million settlement agreement with Anacor Pharmaceuticals, Inc., $52.8 million of stock-based compensation expense related to the acquisition of Bausch & Lomb Holdings Incorporated and a $50.0 million charge related to an AntiGrippin litigation.

(h) Restructuring, integration, acquisition-related and other costs of $388.0 million primarily relates to the acquisition of Bausch & Lomb Holdings Incorporated, the restructuring of a manufacturing facility in Waterford, Ireland, the acquisition of Solta Medical, Inc., other Valeant restructuring and integration initiatives and the acquisitions of PreCision Dermatology Inc. and OnPharma Inc. These include $184.1 million of contract terminations, integration consulting, transition services, duplicative labor and other, $127.0 million of employee severance costs, $43.1 million of facility closure costs, $15.9 million of other, $7.3 million of non-personnel manufacturing integration costs, $6.3 million of acquisition costs, $3.5 million of stock-based compensation and $0.8 million of other non-cash charges.

(i) Restructuring, integration, acquisition-related and other costs of $498.4 million primarily relates to the acquisitions of Bausch & Lomb Holdings Incorporated, Medicis Pharmaceutical Corporation, Obagi Medical Products, Inc. and internal Valeant restructuring and integration initiatives. These include $199.7 million of contract terminations, integration consulting, transition services, duplicative labor and other, $190.9 million of employee severance costs, $39.1 million of facility closure costs, $36.4 million of acquisition costs, $14.8 million of other, $9.1 million of non-personnel manufacturing integration costs, $4.7 million of other non-cash charges and $3.7 million of stock-based compensation.

(j) Non-cash interest expense associated with amortization of deferred financing costs and debt discounts for the twelve months ended December 31, 2014 and 2013 is $70.0 million and $89.5 million, respectively.

(k) Gain on investment, net was a gain recognized in connection with the sale by PS Fund 1, LLC of the Allergan Inc. shares.

(l) Unrealized foreign exchange loss on intercompany financing arrangements for the twelve months ended December 31, 2014 and 2013 is $135.1 million and $0.8 million, respectively.

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

Valeant Pharmaceuticals International, Inc.

Table 3

Statement of Revenues – by Segment

For the Three and Twelve Months Ended December 31, 2014 and 2013

(In millions)

Three Months Ended

December 31,

Revenues(a)(b)

2014
GAAP

2013
GAAP

% Change

2014 currency impact

2014 excluding currency impact
non-GAAP

% Change

Dermatology

$ 424.7

$ 249.2

70%

$ –

$ 424.7

70%

Consumer

141.4

133.3

6%

–

141.4

6%

Ophthalmology Rx

131.8

122.6

8%

–

131.8

8%

Contact Lenses

42.6

37.6

13%

–

42.6

13%

Surgical

56.6

59.3

-5%

–

56.6

-5%

Neuro & Other/Generics

452.9

353.4

28%

–

452.9

28%

Dental

41.1

29.8

38%

–

41.1

38%

Aesthetics

43.6

100.4

-57%

–

43.6

-57%

Total U.S.

1,334.7

1,085.6

23%

–

1,334.7

23%

ROW Developed

423.0

484.8

-13%

37.6

460.6

-5%

Developed Markets

1,757.7

1,570.4

12%

37.6

1,795.3

14%

Emerging Markets-Europe/Middle East

266.7

244.6

9%

59.8

326.5

33%

Emerging Markets-Latin America

112.7

121.5

-7%

12.0

124.7

3%

Emerging Markets-Asia/Africa

142.9

127.3

12%

3.7

146.6

15%

Emerging Markets

522.3

493.4

6%

75.5

597.8

21%

Total revenues

$ 2,280.0

$ 2,063.8

10%

$ 113.1

$ 2,393.1

16%

Twelve Months Ended

December 31,

Revenues(a)(b)

2014
GAAP

2013
GAAP

% Change

2014 currency impact

2014 excluding currency impact
non-GAAP

% Change

Dermatology

$ 1,134.9

$ 905.8

25%

$ –

$ 1,134.9

25%

Consumer

587.4

313.4

87%

–

587.4

87%

Ophthalmology Rx

465.4

223.9

108%

–

465.4

108%

Contact Lenses

170.4

62.2

174%

–

170.4

174%

Surgical

215.1

90.4

138%

–

215.1

138%

Neuro & Other/Generics

1,528.7

1,122.3

36%

–

1,528.7

36%

Dental

123.4

109.6

13%

–

123.4

13%

Aesthetics

241.1

366.9

-34%

–

241.1

-34%

Total U.S.

4,466.4

3,194.5

40%

–

4,466.4

40%

ROW Developed

1,700.7

1,098.7

55%

56.5

1,757.2

60%

Developed Markets

6,167.1

4,293.2

44%

56.5

6,223.6

45%

Emerging Markets-Europe/Middle East

1,086.6

809.6

34%

76.9

1,163.5

44%

Emerging Markets-Latin America

435.4

392.8

11%

38.3

473.7

21%

Emerging Markets-Asia/Africa

574.4

274.0

110%

11.1

585.5

114%

Emerging Markets

2,096.4

1,476.4

42%

126.3

2,222.7

51%

Total revenues

$ 8,263.5

$ 5,769.6

43%

$ 182.8

$ 8,446.3

46%

(a) Note: Currency effect for constant currency sales is determined by comparing 2014 reported amounts adjusted to exclude currency impact, calculated using 2013 monthly average exchange rates, to the actual 2013 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 Twelve Months Ended December 31, 2014

(In millions)

4.1

Cost of goods sold (a)

Three Months Ended

December 31,

2014
as reported
GAAP

%
of product sales

2014
fair value step-up
adjustment to inventory and
other non-GAAP (b)

2014
excluding fair value step-up
adjustment to inventory and
other non-GAAP

%
of product sales

Developed Markets

$ 382.6

22%

$ 26.6

$ 356.0

21%

Emerging Markets

194.1

38%

4.5

189.6

37%

$ 576.7

26%

$ 31.1

$ 545.6

24%

Twelve Months Ended

December 31,

2014
as reported
GAAP

%
of product sales

2014
fair value step-up
adjustment to inventory and
other non-GAAP (c)

2014
excluding fair value step-up
adjustment to inventory and
other non-GAAP

%
of product sales

Developed Markets

$ 1,412.0

23%

$ 78.6

$ 1,333.4

22%

Emerging Markets

784.2

38%

16.8

767.4

37%

$ 2,196.2

27%

$ 95.4

$ 2,100.8

26%

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

(b) Developed Markets include $4.6 million of fair value step-up adjustment to inventory, $7.8 million of integration related tech transfer costs, $1.4 million BMS fair value inventory adjustment and PP&E net step up adjustment of $12.8 million. Emerging Markets include $0.8 million of fair value step up adjustment to inventory, $3.4 million of integration related tech transfer costs and $0.3 million of PP&E step up adjustment.

(c) Developed Markets include $28.8 million of fair value step-up adjustment to inventory, $16.8 million of integration related tech transfer costs, $5.9 million BMS fair value inventory adjustment and PP&E net step up adjustment of $27.1 million. Emerging Markets include ($1.5) million of fair value step down adjustment to inventory, $16.6 million of integration related tech transfer costs and $1.7 million of PP&E step up adjustment.

Valeant Pharmaceuticals International, Inc.

Table 5

Consolidated Balance Sheet and Other Data

(In millions)

As of

As of

December 31,

December 31,

5.1

Cash

2014

2013

Cash and cash equivalents

$ 322.6

$ 600.3

Marketable securities

–

–

Total cash and marketable securities

$ 322.6

$ 600.3

Debt

Revolving Credit Facility

$ 165.0

$ –

Series A-1 Tranche A Term Loan Facility

139.6

259.0

Series A-2 Tranche A Term Loan Facility

135.7

228.1

Series A-3 Tranche A Term Loan Facility

1,637.9

1,935.7

Series D-2 Tranche B Term Loan Facility

1,089.7

1,256.7

Series C-2 Tranche B Term Loan Facility

838.3

966.8

Series E-1 Tranche B Term Loan Facility

2,544.9

3,090.5

Senior Notes

8,690.8

9,618.9

Other

12.7

12.0

15,254.6

17,367.7

Less: current portion

(0.9)

(204.8)

Total long-term debt

$ 15,253.7

$ 17,162.9

5.2

Summary of Cash Flow Statements

Three Months Ended

December 31,

2014

2013

Cash flow provided by (used in):

Net cash provided by operating activities (GAAP)

$ 815.6

$ 279.9

Net Gain on Proposed Allergan Transaction

(286.7)

–

Restructuring, integration and acquisition-related costs^(c)

46.9

127.7

Payment of accrued legal settlements

2.0

166.2

Tax benefit from stock options exercised ^(a)

–

(24.4)

Working capital change related to business development activities

19.8

–

Changes in working capital related to restructuring, integration and acquisition-related costs^(c)

26.6

58.1

Adjusted cash flow from operations (Non-GAAP)^(b)

$ 624.2

$ 607.5

(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 $73.5 million are broken down as follows:

Project Type

Amount Paid

Bausch & Lomb

29.0

Solta Medical, Inc.

7.0

Other

6.7

Project Vision/Waterford

6.6

Intellectual property migration

5.3

Europe (Various Deals)

4.2

PreCision Dermatology, Inc.

4.0

Medicis Pharmaceutical Corporation

3.6

Obagi Medical Products, Inc.

2.3

OnPharma Inc.

2.2

Systems Integration (various deals US/Canada)

1.2

Manufacturing integration (various deals)

0.7

Bescon

0.7

Total

73.5

Expense Type

Amount Paid

Integration related consulting, duplicative labor, transition services, and other

31.8

Severance payments

22.0

Facility closure costs, other manufacturing integration, and other

10.8

Acquisition-related costs paid to 3rd parties

8.9

Total

73.5

Valeant Pharmaceuticals International, Inc.

Table 6

Organic Growth – by Segment

For the Three and Twelve Months Ended December 31, 2014

(In millions)

As reported

For the Three Months Ended December 31,

Organic growth

(a)

(b)

(b)

(b)

(1)
Dec QTD
2014

(1a)

Dec QTD
Same store Injectables

(1b)

Dec QTD
Same store w/o Inj

(2)

Acq impact

(3)

Dec QTD
Same store

(4)

Dec QTD
2013

(4a)

Dec QTD
Same store Injectables

(4b)

Dec QTD
2013 w/o Inj

(5)

Pro Forma Adj

(6)

Pro Forma Dec QTD 2013

(7)

Currency impact Same store

(8)

Currency impact Acq

(9)

Divestitures / Discontinuations (c )

Pro Forma (1b)+(7)+(8) / (6)-(9)
(j)

Same store (3)+(7) / (4b)-(9)
(j)

Total U.S. (d)

1,319.3

–

1,319.3

48.1

1,271.1

1,073.5

–

1,073.5

44.6

1,118.1

–

–

77.1

27%

28%

ROW Developed (e) (f)

405.6

–

405.6

22.4

383.2

425.3

–

425.3

28.8

454.2

34.5

1.5

9.2

-1%

0%

Developed Markets

1,724.9

–

1,724.9

70.5

1,654.3

1,498.9

–

1,498.9

73.5

1,572.3

34.5

1.5

86.4

19%

20%

Emerging Markets (f)

511.5

–

511.5

25.1

486.4

537.4

–

537.4

26.6

564.0

73.1

1.6

10.3

6%

6%

Total product sales

2,236.3

–

2,236.3

95.6

2,140.7

2,036.2

–

2,036.2

100.0

2,136.3

107.6

3.1

96.7

15%

16%

As reported

For the Twelve Months Ended December 31,

Organic growth

(a)

(b)

(b)

(b)

(1)

Dec YTD
2014

(1a)

Dec YTD
Same store Injectables

(1b)

Dec YTD
Same store w/o Inj

(2)

Acq impact

(3)

Dec YTD
Same store

(4)

Dec YTD
2013

(4a)

Dec YTD
Same store Injectables

(4b)

Dec YTD
2013 w/o Inj

(5)

Pro Forma Adj

(6)

Pro Forma Dec YTD 2013

(7)

Currency impact Same store

(8)

Currency impact Acq

(9)

Divestitures / Discontinuations (c )

Pro Forma (1b)+(7)+(8) / (6)-(9)
(j)

Same store (3)+(7) / (4b)-(9)
(j)

Total U.S. (d) (g)

4,412.8

(94.1)

4,318.7

946.4

3,372.3

3,151.6

(146.9)

3,004.7

875.5

3,880.2

–

–

176.9

17%

19%

ROW Developed (e) (f) (h)

1,641.1

(6.2)

1,634.9

752.7

882.2

983.2

(6.8)

976.4

691.8

1,668.2

59.7

(5.7)

32.2

3%

0%

Developed Markets

6,053.9

(100.3)

5,953.6

1,699.1

4,254.5

4,134.7

(153.7)

3,981.1

1,567.3

5,548.4

59.7

(5.7)

209.2

13%

14%

Emerging Markets (f) (i)

2,054.9

(3.7)

2,051.2

580.8

1,470.4

1,523.6

(7.5)

1,516.1

563.8

2,079.9

104.8

22.3

56.4

8%

8%

Total product sales

8,108.8

(104.0)

8,004.8

2,279.9

5,724.9

5,658.4

(161.2)

5,497.1

2,131.1

7,628.3

164.5

16.6

265.6

11%

13%

(a) Note: Currency effect for constant currency sales is determined by comparing 2014 reported amounts adjusted to exclude currency impact, calculated using 2013 monthly average exchange rates, to the actual 2013 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 interruptions.

(d) Includes Valeant’s attributable portion of revenue from joint ventures (JV) – $0.9M Q4’14 and $1.3M Q4’13 and $2.2M Q4′ 14 YTD and $7.1M Q4’13 YTD.

(e) Includes Valeant’s attributable portion of revenue from joint ventures (JV) – $3.4M Q4’13 and $3.0M Q4’14 YTD and $11.0M Q4’13 YTD.

(f) Reflects Bausch & Lomb Same Store Europe adjustment between Dev & Emerging Europe of $51.4M Q4’13 and $81.2M Q4’13 YTD.

(g) Reflects Bausch & Lomb post-acquisition revenue of $803.3M for Q4’14 YTD and $720.0M Q4’13 YTD pro forma revenue adjustments.

(h) Reflects Bausch & Lomb post-acquisition revenue of $680.6M Q4’14 YTD, currency impact of $7.8M Q4’14 YTD and $624.7M Q4’13 YTD pro forma revenue adjustments.

(i) Reflects Bausch & Lomb post-acquisition revenue of $488.2M Q4’14 YTD, currency impact of $21.0M Q4’14 YTD and $453.8M Q4’13 YTD pro forma revenue adjustments.

(j) Organic Growth Definitions:

Same Store (SS): This measure provides growth rates for businesses that have been owned for one year or more.

((Current Year Total product sales – acquisitions within the last year + YoY FX impact)- (Prior Year Total product sales – divestitures & discontinuations))/( Prior Year Total product sales – divestitures & discontinuations)

Pro Forma (PF): This measure provides year over year growth rates for the entire business, including those that have been acquired within the last year.

((Current Year Total product sales + YoY FX impact) – (Prior Year Total product sales + Pro Forma impact of acquisitions within the last year – divestitures or discontinuations))/(Prior Year Total product sales + Pro Forma impact of acquisitions within the last year – divestitures or discontinuations).