BAUSCH HEALTH COMPANIES INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019

INDEX



Part I.	Financial Information
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	1
	Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	2
	Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	3
	Consolidated Statements of ~~Cash Flows~~Shareholders' Equity for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
	~~Notes to~~Consolidated Statements of Cash Flows for the ~~Consolidated Financial Statements~~six months ended June 30, 2019 and 2018	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4739
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9881
Item 4.	Controls and Procedures	9882
Part II.	Other Information
Item 1.	Legal Proceedings	9983
Item 1A.	Risk Factors	9983
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9983
Item 3.	Defaults Upon Senior Securities	9983
Item 4.	Mine Safety Disclosures	9983
Item 5.	Other Information	9983
Item 6.	Exhibits	~~100~~84
Signatures		~~101~~85

BAUSCH HEALTH COMPANIES INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019

Introductory Note

Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2018~~2019 (this “Form 10-Q”) to the “Company”, “we”, “us”, “our” or similar words or phrases are to Bausch Health Companies Inc. ~~(formerly Valeant Pharmaceuticals International, Inc.)~~ and its subsidiaries, taken together. In this Form 10-Q, references to “$” are to United States (“U.S.”) dollars and references to “€” are to euros. Unless otherwise indicated, the statistical and financial data contained in this Form 10-Q are presented as of ~~September~~June 30, ~~2018.~~2019.

Forward-Looking Statements

Caution regarding forward-looking information and statements and “Safe-Harbor” statements under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws:

To the extent any statements made in this Form 10-Q contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and may be forward-looking information within the meaning defined under applicable Canadian securities laws (collectively, “forward-looking statements”).

These forward-looking statements relate to, among other things: our business strategy, business plans and prospects and forecasts and changes thereto; product pipeline, prospective products and product approvals, product development and future performance and results of current and anticipated products; anticipated revenues for our products, including the Significant Seven; anticipated growth in our Ortho Dermatologics business; expected research and development ("R&D&D") and marketing spend, including in connection with the promotion of the Significant Seven; our expected primary cash and working capital requirements for ~~2018~~2019 and beyond; the Company's plans ~~to reduce U.S. channel inventory~~for continued improvement in operational efficiency and the anticipated impact of such plans; our liquidity and our ability to satisfy our debt maturities as they become due; our ability to reduce debt levels; our ability to meet the financial and other covenants contained in our Fourth Amended and Restated Credit and Guaranty Agreement (the "Restated Credit Agreement"), and indentures; the impact of our distribution, fulfillment and other third-party arrangements; proposed pricing actions; exposure to foreign currency exchange rate changes and interest rate changes; the outcome of contingencies, such as litigation, subpoenas, investigations, reviews, audits and regulatory proceedings; the anticipated impact of the adoption of new accounting standards; general market conditions; our expectations regarding our financial performance, including revenues, expenses, gross margins and income taxes; ~~our ability to meet the financial and other covenants contained in our Fourth Amended and Restated Credit and Guaranty Agreement (the "Restated Credit Agreement"), and indentures;~~ and our impairment assessments, including the assumptions used therein and the results thereof.

Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “continue”, “will”, “may”, “could”, “would”, “should”, “target”, “potential”, “opportunity”, “designed”, “create”, “predict”, “project”, “forecast”, “seek”, “strive”, “ongoing” or “increase” and variations or other similar expressions. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements may not be appropriate for other purposes. Although we have previously indicated certain of these statements set out herein, all of the statements in this Form 10-Q that contain forward-looking statements are qualified by these cautionary statements. These statements are based upon the current expectations and beliefs of management. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making such forward-looking statements, including, but not limited to, factors and assumptions regarding the items previously outlined, those factors, risks and uncertainties outlined below and the assumption that none of these factors, risks and uncertainties will cause actual results or events to differ materially from those described in such forward-looking statements. Actual results may differ materially from those expressed or implied in such statements. Important factors, risks and uncertainties that could cause actual results to differ materially from these expectations include, among other things, the following:

the expense, timing and outcome of legal and governmental proceedings, investigations and information requests relating to, among other matters, our past distribution, marketing, pricing, disclosure and accounting practices (including with respect to our former relationship with Philidor Rx Services, LLC ("Philidor")), including pending investigations by the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York, the pending investigations by the U.S. Securities and Exchange Commission (the “SEC”) of the Company, the investigation order issued by the Company from the Autorité des marchés financiers (the “AMF”) (the Company’s principal securities regulator in Canada), a number of pending putative securities class action litigations in the U.S. (including

related opt-out actions) and Canada (including related opt-out actions) and purported class actions under the federal RICO statute and other claims, investigations or proceedings that may be initiated or that may be asserted;

potential additional litigation and regulatory investigations (and any costs, expenses, use of resources, diversion of management time and efforts, liability and damages that may result therefrom), negative publicity and reputational harm on our Company, products and business that may result from the past and ongoing public scrutiny of our past distribution, marketing, pricing, disclosure and accounting practices and from our former relationship with Philidor;

the past and ongoing scrutiny of our legacy business practices, including with respect to pricing (including the investigations by the U.S. Attorney's Offices for the District of Massachusetts and the Southern District of New York), and any pricing controls or price adjustments that may be sought or imposed on our products as a result thereof;

pricing decisions that we have implemented, or may in the future elect to implement, ~~whether as a result of recent scrutiny or otherwise,~~ such as the Patient Access and Pricing Committee’s commitment that the average annual price increase for our branded prescription pharmaceutical products will be set at no greater than single digits, ~~and the Company’s announcement, in August 2018, that it will not increase prices on our U.S. branded prescription drugs for the remainder of 2018,~~ or any future pricing actions we may take following review by our Patient Access and Pricing Committee (which is responsible for the pricing of our drugs);

legislative or policy efforts, including those that may be introduced and passed by the U.S. Congress, designed to reduce patient out-of-pocket costs for medicines, which could result in new mandatory rebates and discounts or other pricing restrictions, controls or regulations (including mandatory price reductions);

ongoing oversight and review of our products and facilities by regulatory and governmental agencies, including periodic audits by the U.S. Food and Drug Administration (the "FDA") and the results thereof;

actions by the FDA or other regulatory authorities with respect to our products or facilities;

our substantial debt (and potential additional future indebtedness) and current and future debt service obligations, our ability to reduce our outstanding debt levels and the resulting impact on our financial condition, cash flows and results of operations;

our ability to meet the financial and other covenants contained in our Restated Credit Agreement, indentures and other current or future debt agreements and the limitations, restrictions and prohibitions such covenants impose or may impose on the way we conduct our business, including prohibitions on incurring additional debt if certain financial covenants are not met, limitations on the amount of additional debt we are able to incur where not prohibited, and restrictions on our ability to make certain investments and other restricted payments;

any default under the terms of our senior notes indentures or Restated Credit Agreement and our ability, if any, to cure or obtain waivers of such default;

any delay in the filing of any future financial statements or other filings and any default under the terms of our senior notes indentures or Restated Credit Agreement as a result of such delays;

any downgrade by rating agencies in our credit ratings, which may impact, among other things, our ability to raise debt and the cost of capital for additional debt issuances;

any reductions in, or changes in the assumptions used in, our forecasts for fiscal year ~~2018~~2019 or beyond, which could lead to, among other things: (i) a failure to meet the financial and/or other covenants contained in our Restated Credit Agreement and/or indentures and/or (ii) impairment in the goodwill associated with certain of our reporting units or impairment charges related to certain of our products or other intangible assets, which impairments could be material;

changes in the assumptions used in connection with our impairment analyses or assessments, which would lead to a change in such impairment analyses and assessments and which could result in an impairment in the goodwill associated with any of our reporting units or impairment charges related to certain of our products or other intangible assets;

any additional divestitures of our assets or businesses and our ability to successfully complete any such divestitures on commercially reasonable terms and on a timely basis, or at all, and the impact of any such divestitures on our Company, including the reduction in the size or scope of our business or market share, loss of revenue, any loss on sale, including any resultant write-downs of goodwill, or any adverse tax consequences suffered as a result of any such divestitures;

~~our shift in focus to much lower business development activity through acquisitions for the foreseeable future;~~

~~iii~~

•

the uncertainties associated with the acquisition and launch of new products (such as our recently launched Bryhali™, Duobrii™ and Ocuvite^® Eye Performance products), including, but not limited to, our ability to provide the time, resources, expertise and costs required for the commercial launch of new products, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and pricing, which could lead to material impairment charges;

our ability or inability to extend the profitable life of our products, including through line extensions and other life-cycle programs;

our ability to retain, motivate and recruit executives and other key employees;

iii

our ability to implement effective succession planning for our executives and key employees;

•

factors impacting our ability to achieve anticipated growth in our Ortho Dermatologics business, including the success of recently launched products (such as Bryhali™ andDuobrii™), the ability to successfully implement and operate Dermatology.com, our new cash-pay prescription program for certain of our Ortho Dermatologics branded products, and the ability of such program to achieve the anticipated goals respecting patient access and fulfillment, the approval of pending and pipeline products (and the timing of such approvals), expected geographic expansion, changes in estimates on market potential for dermatology products and continued investment in and success of our sales force;

factors impacting our ability to achieve anticipated revenues for our Significant Seven products, including ~~the approval of pending products in the Significant Seven (and the timing of such approvals),~~ changes in anticipated marketing spend on such products and launch of competing products;

the challenges and difficulties associated with managing a large complex business, which has, in the past, grown rapidly;

our ability to compete against companies that are larger and have greater financial, technical and human resources than we do, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by our competitors;

our ability to effectively operate ~~stabilize~~ and grow our businesses in light of the challenges that the Company ~~currently faces,~~has faced and market conditions, including with respect to its substantial debt, pending investigations and legal proceedings, scrutiny of our past pricing ~~distribution~~ and other practices, ~~reputational harm~~ and limitations on the way we conduct business imposed by the covenants in our Restated Credit Agreement, indentures and the agreements governing our other indebtedness;

the extent to which our products are reimbursed by government authorities, pharmacy benefit managers ("PBMs") and other third-party payors; the impact our distribution, pricing and other practices (including as it relates to our current relationship with Walgreen Co. ("Walgreens")) may have on the decisions of such government authorities, PBMs and other third-party payors to reimburse our products; and the impact of obtaining or maintaining such reimbursement on the price and sales of our products;

the inclusion of our products on formularies or our ability to achieve favorable formulary status, as well as the impact on the price and sales of our products in connection therewith;

the consolidation of wholesalers, retail drug chains and other customer groups and the impact of such industry consolidation on our business;

our eligibility for benefits under tax treaties and the continued availability of low effective tax rates for the business profits of certain of our subsidiaries;

the actions of our third-party partners or service providers of research, development, manufacturing, marketing, distribution or other services, including their compliance with applicable laws and contracts, which actions may be beyond our control or influence, and the impact of such actions on our Company, including the impact to the Company of our former relationship with Philidor and any alleged legal or contractual non-compliance by Philidor;

the risks associated with the international scope of our operations, including our presence in emerging markets and the challenges we face when entering and operating in new and different geographic markets (including the challenges created by new and different regulatory regimes in such countries and the need to comply with applicable anti-bribery and economic sanctions laws and regulations);

adverse global economic conditions and credit markets and foreign currency exchange uncertainty and volatility in certain of the countries in which we do business;

the impact of the recently signed United States-Mexico-Canada Agreement (“USMCA”) and any potential changes to other trade agreements;

the final outcome and impact of Brexit negotiations;

the trade conflict between the United States and China;

our ability to obtain, maintain and license sufficient intellectual property rights over our products and enforce and defend against challenges to such intellectual property;

the introduction of generic, biosimilar or other competitors of our branded products and other products, including the introduction of products that compete against our products that do not have patent or data exclusivity rights;

~~to the extent we elect to conduct business development activities through acquisitions,~~

our ability to identify, finance, acquire, close and integrate acquisition targets successfully and on a timely basis and the difficulties, challenges, time and resources associated with the integration of acquired companies, businesses and products;

any additional divestitures of our assets or businesses and our ability to successfully complete any such divestitures on commercially reasonable terms and on a timely basis, or at all, and the impact of any such divestitures on our Company, including the reduction in the size or scope of our business or market share, loss of revenue, any loss on sale, including any resultant impairments of goodwill or other assets, or any adverse tax consequences suffered as a result of any such divestitures;

the expense, timing and outcome of pending or future legal and governmental proceedings, arbitrations, investigations, subpoenas, tax and other regulatory audits, examinations, reviews and regulatory proceedings against us or relating to us and settlements thereof;

our ability to negotiate the terms of or obtain court approval for the settlement of certain legal and regulatory proceedings;

our ability to obtain components, raw materials or finished products supplied by third parties (some of which may be single-sourced) and other manufacturing and related supply difficulties, interruptions and delays;

the disruption of delivery of our products and the routine flow of manufactured goods;

economic factors over which the Company has no control, including changes in inflation, interest rates, foreign currency rates, and the potential effect of such factors on revenues, expenses and resulting margins;

interest rate risks associated with our floating rate debt borrowings;

our ability to effectively distribute our products and the effectiveness and success of our distribution arrangements, including the impact of our arrangements with Walgreens;


•	our ability to effectively promote our own products and those of our co-promotion partners, such as Doptelet^® (Dova Pharmaceuticals, Inc.) and Lucemyra^® (US WorldMeds, LLC);

the success of our fulfillment arrangements with Walgreens, including market acceptance of, or market reaction to, such arrangements (including by customers, doctors, patients, PBMs, third-party payors and governmental agencies), and the continued compliance of such arrangements with applicable ~~laws, and our ability to successfully negotiate any improvements to our arrangements with Walgreens;~~laws;

our ability to secure and maintain third-party research, development, manufacturing, licensing, marketing or distribution arrangements;

the risk that our products could cause, or be alleged to cause, personal injury and adverse effects, leading to potential lawsuits, product liability claims and damages and/or recalls or withdrawals of products from the market;

the mandatory or voluntary recall or withdrawal of our products from the market and the costs associated therewith;

the availability of, and our ability to obtain and maintain, adequate insurance coverage and/or our ability to cover or insure against the total amount of the claims and liabilities we face, whether through third-party insurance or self-insurance;

the difficulty in predicting the expense, timing and outcome within our legal and regulatory environment, including with respect to approvals by the FDA, Health Canada and similar agencies in other countries, legal and regulatory proceedings and settlements thereof, the protection afforded by our patents and other intellectual and proprietary property, successful generic challenges to our products and infringement or alleged infringement of the intellectual property of others;

the results of continuing safety and efficacy studies by industry and government agencies;

the success of preclinical and clinical trials for our drug development pipeline or delays in clinical trials that adversely impact the timely commercialization of our pipeline products, as well as other factors impacting the commercial success of our products, which could lead to material impairment charges;

the results of management reviews of our research and development portfolio (including following the receipt of clinical results or feedback from the FDA or other regulatory authorities), which could result in terminations of specific projects which, in turn, could lead to material impairment charges;

the seasonality of sales of certain of our products;

~~declines in the pricing and sales volume of certain of our products that are distributed or marketed by third parties, over which we have no or limited control;~~


•	declines in the pricing and sales volume of certain of our products or the products that we co-promote (such as Doptelet^® and Lucemyra^®) that are distributed or marketed by third parties, over which we have no or limited control;

compliance by the Company or our ~~third-party~~third party partners and service providers (over whom we may have limited influence), or the failure of our Company or these third parties to comply, with health care “fraud and abuse” laws and other extensive regulation of our marketing, promotional and business practices (including with respect to pricing), worldwide anti-bribery laws (including the U.S. Foreign Corrupt Practices Act and the Canadian Corruption of Foreign Public Officials Act), worldwide economic sanctions and/or export laws, worldwide environmental laws and regulation and privacy and security regulations;

the impacts of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Health Care Reform Act”) and potential amendment thereof and other legislative and

regulatory health care reforms in the countries in which we operate, including with respect to recent government inquiries on pricing;

the impact of any changes in or reforms to the legislation, laws, rules, regulation and guidance that apply to the Company and its business and products or the enactment of any new or proposed legislation, laws, rules, regulations or guidance that will impact or apply to the Company or its businesses or products;

the impact of changes in federal laws and policy under consideration by the Trump administration and Congress, including the effect that such changes will have on fiscal and tax policies, the potential revision of all or portions of the Health Care Reform Act, international trade agreements and policies and policy efforts designed to reduce patient out-of-pocket costs for medicines (which could result in new mandatory rebates and discounts or other pricing restrictions);

illegal distribution or sale of counterfeit versions of our products;

interruptions, breakdowns or breaches in our information technology systems; and

risks in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed on February ~~28, 2018,~~20, 2019, and risks detailed from time to time in our other filings with the SEC and the Canadian Securities Administrators (the “CSA”), as well as our ability to anticipate and manage the risks associated with the foregoing.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed on February ~~28, 2018,~~20, 2019, under Item 1A. “Risk Factors” and in the Company’s other filings with the SEC and CSA. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. These forward-looking statements speak only as of the date made. We undertake no obligation to update or revise any of these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect actual outcomes, except as required by law. We caution that, as it is not possible to predict or identify all relevant factors that may impact forward-looking statements, the foregoing list of important factors that may affect future results is not exhaustive and should not be considered a complete statement of all potential risks and uncertainties.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

(Unaudited)


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	973		$	720		$	878		$	721
Restricted cash	—			77			2			2
Trade receivables, net	2,041			2,130			1,829			1,865
Inventories, net	971			1,048			1,060			934
Prepaid expenses and other current assets	757			771			698			689
Total current assets	4,742			4,746			4,467			4,211
Property, plant and equipment, net	1,341			1,403			1,372			1,353
Intangible assets, net	12,655			15,211			11,196			12,001
Goodwill	13,290			15,593			13,160			13,142
Deferred tax assets, net	1,641			433			1,799			1,676
Other non-current assets	108			111			360			109
Total assets	$	33,777		$	37,497		$	32,354		$	32,492
Liabilities
Current liabilities:
Accounts payable	$	440		$	365		$	527		$	411
Accrued and other current liabilities	3,424			3,694			3,122			3,197
Current portion of long-term debt and other	298			209			56			228
Total current liabilities	4,162			4,268			3,705			3,836
Acquisition-related contingent consideration	282			344			271			298
Non-current portion of long-term debt	24,433			25,235			24,023			24,077
Deferred tax liabilities, net	1,131			1,180			884			885
Other non-current liabilities	532			526			783			581
Total liabilities	30,540			31,553			29,666			29,677
Commitments and contingencies (Note 18)
Commitments and contingencies (Note 19)
Equity
Common shares, no par value, unlimited shares authorized, 349,754,139 and 348,708,567 issued and outstanding at September 30, 2018 and December 31, 2017, respectively	10,117			10,090
Common shares, no par value, unlimited shares authorized, 352,248,896 and 349,871,102 issued and outstanding at June 30, 2019 and December 31, 2018, respectively							10,165			10,121
Additional paid-in capital	409			380			384			413
Accumulated deficit	(5,320		)	(2,725		)	(5,887		)	(5,664		)
Accumulated other comprehensive loss	(2,053		)	(1,896		)	(2,061		)	(2,137		)
Total Bausch Health Companies Inc. shareholders’ equity	3,153			5,849			2,601			2,733
Noncontrolling interest	84			95			87			82
Total equity	3,237			5,944			2,688			2,815
Total liabilities and equity	$	33,777		$	37,497		$	32,354		$	32,492

The accompanying notes are an integral part of these consolidated financial statements.

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues
Product sales	$	2,108		$	2,186		$	6,173		$	6,462		$	2,122		$	2,100		$	4,111		$	4,065
Other revenues	28			33			86			99			30			28			57			58
	2,136			2,219			6,259			6,561			2,152			2,128			4,168			4,123
Expenses
Cost of goods sold (excluding amortization and impairments of intangible assets)	573			650			1,717			1,869			580			584			1,104			1,144
Cost of other revenues	9			9			32			32			14			10			27			23
Selling, general and administrative	614			623			1,847			1,943			651			642			1,238			1,233
Research and development	107			81			293			271			117			94			234			186
Amortization of intangible assets	658			657			2,142			1,915			488			741			977			1,484
Goodwill impairments	—			312			2,213			312			—			—			—			2,213
Asset impairments	89			406			434			629			13			301			16			345
Restructuring and integration costs	3			6			16			42			4			7			24			13
Acquired in-process research and development costs	—			—			1			5
Acquisition-related contingent consideration	(19		)	(238		)	(23		)	(297		)	20			(6		)	(1		)	(4		)
Other income, net	(15		)	(325		)	(4		)	(584		)
Other expense, net													8			—			5			12
	2,019			2,181			8,668			6,137			1,895			2,373			3,624			6,649
Operating income (loss)	117			38			(2,409		)	424			257			(245		)	544			(2,526		)
Interest income	3			3			9			9			3			3			7			6
Interest expense	(420		)	(459		)	(1,271		)	(1,392		)	(409		)	(435		)	(815		)	(851		)
Loss on extinguishment of debt	—			(1		)	(75		)	(65		)	(33		)	(48		)	(40		)	(75		)
Foreign exchange and other	—			19			18			87			3			(9		)	3			18
Loss before (provision for) benefit from income taxes	(300		)	(400		)	(3,728		)	(937		)
(Provision for) benefit from income taxes	(51		)	1,700			(74		)	2,829
Net (loss) income	(351		)	1,300			(3,802		)	1,892
Net loss (income) attributable to noncontrolling interest	1			1			(2		)	(1		)
Net (loss) income attributable to Bausch Health Companies Inc.	$	(350	)	$	1,301		$	(3,804	)	$	1,891
(Loss) earnings per share attributable to Bausch Health Companies Inc.:
Basic	$	(1.00	)	$	3.71		$	(10.83	)	$	5.40
Diluted	$	(1.00	)	$	3.69		$	(10.83	)	$	5.38
Loss before benefit from (provision for) income taxes													(179		)	(734		)	(301		)	(3,428		)
Benefit from (provision for) income taxes													9			(138		)	83			(23		)
Net loss													(170		)	(872		)	(218		)	(3,451		)
Net income attributable to noncontrolling interest													(1		)	(1		)	(5		)	(3		)
Net loss attributable to Bausch Health Companies Inc.													$	(171	)	$	(873	)	$	(223	)	$	(3,454	)

Weighted-average common shares
Basic	351.5			350.4			351.1			350.1
Diluted	351.5			352.3			351.1			351.4
Basic and diluted loss per share attributable to Bausch Health Companies Inc.:													$	(0.49	)	$	(2.49	)	$	(0.63	)	$	(9.84	)

Basic and diluted weighted-average common shares													352.1			351.3			351.7			351.0

The accompanying notes are an integral part of these consolidated financial statements.

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(in millions)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Net (loss) income $ (351 ) $ 1,300
$ (3,802 ) $ 1,892
Other comprehensive (loss) income
Foreign currency translation adjustment 13
81
(159 ) 227
Pension and postretirement benefit plan adjustments, net of income taxes (1 ) (3 ) (2 ) (4 )
Other comprehensive (loss) income 12
78
(161 ) 223
Comprehensive (loss) income (339 ) 1,378
(3,963 ) 2,115
Comprehensive (income) loss attributable to noncontrolling interest 4
1
2
3
Comprehensive (loss) income attributable to Bausch Health Companies Inc. $ (335 ) $ 1,379
$ (3,961 ) $ 2,118



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss	$	(170	)	$	(872	)	$	(218	)	$	(3,451	)
Other comprehensive income
Foreign currency translation adjustment	56			(218		)	77			(172		)
Pension and postretirement benefit plan adjustments, net of income taxes	(1		)	(1		)	(1		)	(1		)
Other comprehensive income	55			(219		)	76			(173		)
Comprehensive loss	(115		)	(1,091		)	(142		)	(3,624		)
Comprehensive (income) loss attributable to noncontrolling interest	(1		)	2			(5		)	(2		)
Comprehensive loss attributable to Bausch Health Companies Inc.	$	(116	)	$	(1,089	)	$	(147	)	$	(3,626	)

The accompanying notes are an integral part of these consolidated financial statements.

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions)

(Unaudited)



	Bausch Health Companies Inc. Shareholders' Equity
	Common Shares									Accumulated Other Comprehensive Loss			Bausch Health Companies Inc. Shareholders' Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Bausch Health Companies Inc. Shareholders' Equity			Noncontrolling Interest			Total Equity

	Three Months Ended June 30, 2019
Balances, April 1, 2019	351.9	$	10,151	$	374		$	(5,716	)	$	(2,116	)	$	2,693		$	86		$	2,779
Common shares issued under share-based compensation plans	0.3	14		(12		)	—			—			2			—			2
Share-based compensation	—	—		27			—			—			27			—			27
Employee withholding taxes related to share-based awards	—	—		(5		)	—			—			(5		)	—			(5		)
Net (loss) income	—	—		—			(171		)	—			(171		)	1			(170		)
Other comprehensive income	—	—		—			—			55			55			—			55
Balances, June 30, 2019	352.2	$	10,165	$	384		$	(5,887	)	$	(2,061	)	$	2,601		$	87		$	2,688

	Three Months Ended June 30, 2018
Balances, April 1, 2018	349.2	$	10,103	$	382		$	(4,097	)	$	(1,852	)	$	4,536		$	99		$	4,635
Common shares issued under share-based compensation plans	0.4	11		(10		)	—			—			1			—			1
Share-based compensation	—	—		22			—			—			22			—			22
Employee withholding taxes related to share-based awards	—	—		(3		)	—			—			(3		)	—			(3		)
Noncontrolling interest distributions	—	—		—			—			—			—			(6		)	(6		)
Net (loss) income	—	—		—			(873		)	—			(873		)	1			(872		)
Other comprehensive income	—	—		—			—			(216		)	(216		)	(3		)	(219		)
Balances, June 30, 2018	349.6	$	10,114	$	391		$	(4,970	)	$	(2,068	)	$	3,467		$	91		$	3,558

	Six Months Ended June 30, 2019
Balances, January 1, 2019	349.9	$	10,121	$	413		$	(5,664	)	$	(2,137	)	$	2,733		$	82		$	2,815
Common shares issued under share-based compensation plans	2.3	44		(41		)	—			—			3			—			3
Share-based compensation	—	—		51			—			—			51			—			51
Employee withholding taxes related to share-based awards	—	—		(39		)	—			—			(39		)	—			(39		)
Net (loss) income	—	—		—			(223		)	—			(223		)	5			(218		)
Other comprehensive income	—	—		—			—			76			76			—			76
Balances, June 30, 2019	352.2	$	10,165	$	384		$	(5,887	)	$	(2,061	)	$	2,601		$	87		$	2,688

	Six Months Ended June 30, 2018
Balances, January 1, 2018	348.7	$	10,090	$	380		$	(2,725	)	$	(1,896	)	$	5,849		$	95		$	5,944
Effect of application of new accounting standard: Income taxes	—	—		—			1,209			—			1,209			—			1,209
Common shares issued under share-based compensation plans	0.9	24		(23		)	—			—			1			—			1
Share-based compensation	—	—		43			—			—			43			—			43
Employee withholding taxes related to share-based awards	—	—		(9		)	—			—			(9		)	—			(9		)
Noncontrolling interest distributions	—	—		—			—			—			—			(6		)	(6		)
Net (loss) income	—	—		—			(3,454		)	—			(3,454		)	3			(3,451		)
Other comprehensive income	—	—		—			—			(172		)	(172		)	(1		)	(173		)
Balances, June 30, 2018	349.6	$	10,114	$	391		$	(4,970	)	$	(2,068	)	$	3,467		$	91		$	3,558

The accompanying notes are an integral part of these consolidated financial statements.

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Cash Flows From Operating Activities
Net (loss) income	$	(3,802	)	$	1,892
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net loss							$	(218	)	$	(3,451	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of intangible assets	2,273			2,039			1,063			1,570
Amortization and write-off of debt discounts and debt issuance costs	62			100
Amortization and write-off of debt premiums, discounts and issuance costs							32			44
Asset impairments	434			629			16			345
Loss (gain) on disposals of assets and businesses, net	26			(695		)
Acquisition-related contingent consideration	(23		)	(297		)	(1		)	(4		)
Allowances for losses on trade receivable and inventories	48			71			27			33
Deferred income taxes	(2		)	(2,985		)	(141		)	(42		)
(Reductions) additions to accrued legal settlements	(30		)	112
Insurance proceeds for legal settlement	—			60
Gain on sale of assets							(9		)	—
Additions to accrued legal settlements							3			10
Payments of accrued legal settlements	(222		)	(221		)	(1		)	(220		)
Goodwill impairments	2,213			312			—			2,213
Share-based compensation	65			70			51			43
Foreign exchange gain	(16		)	(83		)	(2		)	(15		)
Loss on extinguishment of debt	75			65			40			75
Payments of contingent consideration adjustments, including accretion	(2		)	(3		)	(1		)	(2		)
Other	(19		)	(24		)	16			(2		)
Changes in operating assets and liabilities:
Trade receivables	56			338			56			128
Inventories	(8		)	1			(121		)	(12		)
Prepaid expenses and other current assets	(53		)	32			1			(76		)
Accounts payable, accrued and other liabilities	107			299			(59		)	23
Net cash provided by operating activities	1,182			1,712			752			660

Cash Flows From Investing Activities
Acquisition of businesses, net of cash acquired	5			—			(180		)	5
Payments for intangible and other assets	(76		)	(146		)	(1		)	(75		)
Purchases of property, plant and equipment	(95		)	(118		)	(109		)	(63		)
Purchases of marketable securities	(5		)	(4		)	(5		)	(4		)
Proceeds from sale of marketable securities	5			2			1			4
Proceeds from sale of assets and businesses, net of costs to sell	32			3,063			33			(6		)
Net cash (used in) provided by investing activities	(134		)	2,797
Net cash used in investing activities							(261		)	(139		)

Cash Flows From Financing Activities
Issuances of long-term debt, net of discount	7,471			6,231
Net proceeds from the issuances of long-term debt							3,243			7,474
Repayments of long-term debt	(8,200		)	(9,249		)	(3,503		)	(7,836		)
Proceeds from the issuances of short-term debt							12			—
Repayments of short-term debt	(1		)	(8		)	(8		)	(1		)
Payments of employee withholding tax upon vesting of share-based awards	(10		)	(4		)
Payments of contingent consideration	(26		)	(34		)
Payments of employee withholding taxes related to share-based awards							(39		)	(8		)
Payments of acquisition-related contingent consideration							(20		)	(18		)
Payments of financing costs							(26		)	(59		)
Payments of deferred consideration	(18		)	—			—			(18		)
Payments of financing costs	(62		)	(39		)
Proceeds from exercise of stock options	1			—
Other	(6		)	(18		)	3			1
Net cash used in financing activities	(851		)	(3,121		)	(338		)	(465		)
Effect of exchange rate changes on cash and cash equivalents	(21		)	39			4			(15		)
Net increase in cash and cash equivalents and restricted cash	176			1,427			157			41
Cash and cash equivalents and restricted cash, beginning of period	797			542			723			797
Cash and cash equivalents and restricted cash, end of period	$	973		$	1,969		$	880		$	838

Cash and cash equivalents	$	973		$	964		$	878		$	838
Restricted cash, current	—			928			2			—
Restricted cash, noncurrent	—			77
Cash and cash equivalents and restricted cash, end of period	$	973		$	1,969		$	880		$	838

The accompanying notes are an integral part of these consolidated financial statements.

BAUSCH HEALTH COMPANIES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	DESCRIPTION OF BUSINESS

Bausch Health Companies Inc. (the “Company”)~~, formerly known as Valeant Pharmaceuticals International, Inc.,~~ is a ~~multinational, specialty~~ pharmaceutical and medical device company that develops, manufactures, and markets, primarily in the therapeutic areas of eye-health, gastroenterology ("GI") and dermatology, a broad range ofof: (i) branded pharmaceuticals, (ii) generic and branded generic pharmaceuticals, (iii) over-the-counter (“OTC”) products and (iv) medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and aesthetics devices), which are marketed directly or indirectly in over 90 countries.


2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying unaudited ~~consolidated financial statements~~Consolidated Financial Statements have been prepared by the Company in ~~United States (“~~U.S.”) dollars and in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting, which do not conform in all respects to the requirements of U.S. GAAP for annual financial statements. Accordingly, these notes to the unaudited ~~consolidated financial statements~~Consolidated Financial Statements should be read in conjunction with the audited ~~consolidated financial statements~~Consolidated Financial Statements prepared in accordance with U.S. GAAP that are contained in the Company’s Annual Report on Form 10-K ~~(as updated by the Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators on August 10, 2018)~~ for the year ended December 31, ~~2017,~~2018, filed with the SEC and the ~~Canadian Securities Administrators.~~CSA on February 20, 2019. The unaudited ~~consolidated financial statements~~Consolidated Financial Statements have been prepared using accounting policies that are consistent with the policies used in preparing the Company’s audited ~~consolidated financial statements~~Consolidated Financial Statements for the year ended December 31, ~~2017,~~2018, except for the new accounting guidance adopted during the period. The unaudited ~~consolidated financial statements~~Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

In preparing the unaudited ~~consolidated financial statements,~~Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited ~~consolidated financial statements,~~Consolidated Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted.

Principles of Consolidation

The unaudited ~~consolidated financial statements~~Consolidated Financial Statements include the accounts of the Company and those of its subsidiaries and any variable interest entities for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

~~Changes in Reportable Segments~~

In the second quarter of 2018, the Company began operating in the following operating segments: (i) Bausch + Lomb/International, (ii) Salix, (iii) Ortho Dermatologics and (iv) Diversified Products. Prior to the second quarter of 2018, the Company operated in the following operating segments: (i) Bausch + Lomb/International, (ii) Branded Rx and (iii) U.S. Diversified Products. The Bausch + Lomb/International segment consists of the: (i) U.S. Bausch + Lomb and (ii) International reporting units. The Salix segment consists of the Salix reporting unit (originally part of the former Branded Rx segment). The Ortho Dermatologics segment consists of the: (i) Ortho Dermatologics (originally part of the former Branded Rx segment) and (ii) Global Solta (originally part of the former Branded Rx segment) reporting units. The Diversified Products segment consists of the: (i) Neurology and Other (originally part of the former U.S. Diversified Product segment), (ii) Generics (originally part of the former U.S. Diversified Product segment) and (iii) Dentistry (originally part of the former Branded Rx segment) reporting units. In 2017, the Neurology and Other reporting unit also included the: (i) oncology business (originally

part of the former Branded Rx segment) and (ii) women's health business (originally part of the former Branded Rx segment). Upon divesting its equity interests in Dendreon Pharmaceuticals LLC (“Dendreon”) on June 28, 2017 and Sprout Pharmaceuticals, Inc. (“Sprout”) on December 20, 2017, the Company exited the oncology and women's health businesses, respectively. Prior period presentations of segment revenues and segment profits have been recast to conform to the current segment reporting structure. See Note 19, "SEGMENT INFORMATION" for additional information.

Adoption of New Accounting Guidance

In ~~May 2014,~~February 2016, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued guidance on recognizing revenue from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity will: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. In addition to these provisions, the new standard ~~provides implementation guidance on several other topics, including~~revising the accounting for certain revenue-related costs, as well as enhanced disclosure requirements. The new guidance requires entities to disclose both quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued an amendment to clarify the implementation guidance around considerations whether an entity is a principal or an agent, impacting whether an entity reports revenue on a gross or net basis. In April 2016, the FASB issued an amendment to clarify guidance on identifying performance obligations and the implementation guidance on licensing. The guidance is effective for annual reporting periods beginning after December 15, 2017. Entities had the option of using either a full retrospective or a modified retrospective approach to adopt the guidance.

The Company completed its detailed assessment and training program for its personnel. Pursuant to the detailed assessment program, the Company reviewed its revenue arrangements and assessed the differences in accounting for such contracts under the new guidance as compared with prior revenue accounting guidance. Based upon review of current customer contracts, the Company concluded the implementation of the new guidance did not have a material quantitative impact on its consolidated financial statements as the timing of revenue recognition for product sales did not significantly change.

The Company adopted this guidance effective January 1, 2018 using the modified retrospective approach. Accordingly, the amounts reported in the prior period have not been restated. The new guidance did however result in additional disclosures as to the nature, amounts, and concentrations of revenue. See Note 3, "REVENUE RECOGNITION" and Note 19, "SEGMENT INFORMATION" for additional details and the application of this guidance.

In October 2016, the FASB issued guidance requiring an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. This guidance was effective for the Company January 1, 2018 and was applied using a modified retrospective approach through a cumulative-effect adjustment to accumulated deficit and deferred income taxes as of the effective date. The Company recorded a net cumulative-effect adjustment of $1,209 million to increase deferred income tax assets and decrease the opening balance of Accumulated deficit for the income tax consequences deferred from past intra-entity transfers involving assets other than inventory.

In January 2017, the FASB issued guidance which clarifies the definition of a business with the objective of assisting with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company prospectively applied the new definition to all transactions effective January 1, 2018.

In January 2017, the FASB issued guidance which simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. Instead, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods, with early adoption permitted. The Company elected to adopt this guidance effective January 1, 2018. The Company tested goodwill for impairment upon adopting this guidance and recognized impairment charges of $2,213 million, related to its Salix reporting unit and Ortho Dermatologics reporting unit at January 1, 2018. See Note 8, "INTANGIBLE ASSETS AND GOODWILL" for additional details and the application of this guidance.

~~Recently Issued Accounting Standards, Not Adopted as of September 30, 2018~~

~~In February 2016, the FASB issued guidance on lease accounting~~leases to increase transparency and comparability among organizations that lease buildings, equipment and other assets by requiring the recognition of lease assets and lease liabilities on the balance sheet. ~~Consistent with~~Under the ~~current lease accounting~~new standard, all leases ~~will continue to be~~are classified as either a finance ~~leases~~lease or an operating ~~leases.~~lease. The classification is determined based on whether ~~the risks and rewards, as well as~~ substantive control ~~have~~has been transferred to the ~~Company~~lessee and its determination will govern the pattern of lease cost recognition. Finance leases ~~will be~~are accounted for in substantially the same manner as capital leases under the former U.S. GAAP standard. Operating leases are accounted for ~~under current U.S. GAAP. Operating leases will be accounted for (both~~ in the ~~statement~~statements of operations and ~~statement~~statements of cash ~~flows)~~flows in a manner substantially consistent with operating leases under ~~existing~~the former U.S. ~~GAAP.~~GAAP standard. However, as it relates to the balance sheet, lessees ~~will recognize~~are, with limited exception, required to record a right-of-use asset and a corresponding lease ~~liabilities based upon~~liability, equal to the present value of ~~remaining~~the lease payments ~~and corresponding right of use~~for each operating lease. Lessees are not required to recognize a right-of-use asset or lease ~~assets~~liability for ~~operating~~short-term leases, ~~with limited exception.~~but instead recognizes lease payments as an expense on a straight-line basis over the lease term. The ~~new guidance will~~standard also ~~require~~requires lessees

and lessors to provide additional qualitative and quantitative disclosures to help financial statement users assess the ~~amount,~~amounts, timing and uncertainty of cash flows arising from leases.

The Company adopted the new ~~guidance is~~standard effective ~~for annual reporting periods beginning after December 15, 2018. Early application is permitted. The Company will adopt the standard on~~ January 1, 2019, ~~and is electing to apply~~using the modified retrospective ~~approach to recognize a cumulative-effect adjustment to accumulated deficit at~~approach. Upon adoption, the ~~adoption date. The~~ Company ~~also intends to elect~~elected the available practical expedients, ~~upon adoption.~~including: (i) the package of practical expedients as defined in the accounting guidance, which among other things, allowed the carry forward of historical lease classifications, (ii) the election to use hindsight in determining the lease terms for all leases, (iii) the transition method, which does not require the restatement of prior periods, (iv) the election to aggregate lease components with non-lease components and account for these payments as a single lease component and (v) the short-term lease exemption, which does not require recognition on the balance sheet for leases with an initial term of 12 months or less. The Company ~~continues to make progress on its implementation plan for adopting the new standard. The Company is in the process of updating~~has updated its systems, processes and controls to track, record and account for its lease ~~portfolio. The Company has selected~~portfolio, including implementation of a third-party software tool to assist in complying with the new ~~standard and is in~~standard. Upon adoption of the ~~process of configuring the software. The Company is also assessing the potential impact that embedded leases within its service arrangements have on its consolidated balance sheet.~~

~~Although~~new standard, the Company ~~anticipates that~~recognized a right-of-use asset and a corresponding lease liability of $302 million. In addition, approximately $20 million of restructuring liabilities associated with facility closures and deferred rents, included in Other non-current liabilities as of December 31, 2018, were reclassified to reduce right-of-use assets. The adoption of the ~~inclusion of lease-related assets and liabilities will have a material impact on the consolidated balance sheets, the Company believes its adoption will~~standard did not have a material impact on the ~~consolidated statements~~Consolidated Statements of ~~operations upon adoption. While the Company is still in the process of finalizing the assessment~~Operations, Comprehensive Loss, Equity and Cash Flows for any of the ~~impacts on~~periods presented. See Note 12, "LEASES" for additional details and application of this standard.

In August 2018, the ~~consolidated balance sheets, based on~~FASB issued guidance aligning the ~~assessment~~requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to ~~date, the Company currently believes the most significant impact relates to assets~~develop or obtain internal-use software. The guidance is effective for annual periods beginning after December 15, 2019, and ~~liabilities arising from facilities, vehicles and equipment operating leases.~~interim periods within those fiscal years with early adoption permitted. The Company ~~expects that accounting~~has early-adopted this guidance prospectively for ~~capital leases will remain substantially unchanged under the new standard. The Company does not expect the new standard to have a material impact on lessor activities.~~all implementation costs incurred after January 1, 2019.

Recently Issued Accounting Standards, Not Adopted as of June 30, 2019

In June 2016, the FASB issued guidance on the impairment of financial instruments requiring an impairment model based on expected losses rather than incurred losses. Under this guidance, an entity recognizes as an allowance its estimate of expected credit losses. The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those annual periods. In May 2019, the FASB issued an update allowing a targeted transition relief for the option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The Company is evaluating the impact of adoption of this guidance on its financial position, results of operations and cash flows.

In August 2018, the FASB issued guidance modifying the disclosure requirements for fair value measurement. The guidance is effective for annual periods beginning after December 15, 2019. The Company is permitted to ~~early adopt~~early-adopt any removed or modified disclosures upon issuance of this update and delay adoption of the additional disclosures until the effective date. The Company is evaluating the impact of adoption of this guidance on its disclosures.

In August 2018, the FASB issued guidance modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance is effective for annual periods ending after December 15, 2020, with early adoption permitted. The Company is evaluating the impact of adoption of this guidance on its disclosures.

In August 2018, the FASB issued guidance aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years with early adoption permitted. The Company is evaluating the impact of adoption of this guidance on its financial position, results of operations and cash flows.


3.	REVENUE RECOGNITION

The Company’s revenues are primarily generated from product sales, primarily in the therapeutic areas of eye-health, GI and dermatology, that consist of: (i) branded pharmaceuticals, (ii) generic and branded generic pharmaceuticals, (iii) OTC products and (iv) medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and aesthetics devices). Other revenues include alliance and service revenue from the licensing and co-promotion of products and contract service revenue primarily in the areas of dermatology and topical medication. Contract service revenue is derived primarily from contract manufacturing for third parties and is not material. See Note ~~19,~~20, "SEGMENT INFORMATION" for the disaggregation of revenue which depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by the economic factors of each category of customer contracts.

~~Product Sales~~

The Company recognizes revenue when the customer obtains control of promised goods or services and in an amount that reflects the consideration to which the Company expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, the Company applies the five-step revenue model to contracts within its scope: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

A contract with the Company’s customers exists for each product sale. Where a contract with a customer contains more than one performance obligation, the Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. The transaction price is adjusted for variable consideration which is discussed further below. The Company generally recognizes revenue for product sales at a point in time, when the customer obtains control of the products.

Product Sales Provisions

As is customary in the pharmaceutical industry, gross product sales are subject to a variety of deductions in arriving at reported net product sales. The transaction price for product sales is typically adjusted for variable consideration, which may be in the

form of cash discounts, allowances, returns, rebates, chargebacks and distribution fees paid to customers. Provisions for variable consideration are established to reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in ~~the~~a future period.

Provisions for these deductions are recorded concurrently with the recognition of gross product sales revenue and include cash discounts and allowances, chargebacks, and distribution fees, which are paid to direct customers, as well as rebates and returns, which can be paid to direct and indirect customers. Returns provision balances and volume discounts to direct customers are included in Accrued and other current liabilities. All other provisions related to direct customers are included in Trade receivables, net, while provision balances related to indirect customers are included in Accrued and other current liabilities.

The following ~~table presents~~tables present the activity and ending balances of the Company’s variable consideration provisions for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018.



	Six Months Ended June 30, 2019
(in millions)	Discounts and Allowances			Returns			Rebates			Chargebacks			Distribution Fees			Total
Reserve balances, January 1, 2019	$	175		$	813		$	1,024		$	209		$	163		$	2,384
Acquisition of Synergy	—			3			12			—			1			16
Current period provisions	406			78			1,100			930			98			2,612
Payments and credits	(408		)	(120		)	(1,125		)	(979		)	(119		)	(2,751		)
Reserve balances, June 30, 2019	$	173		$	774		$	1,011		$	160		$	143		$	2,261

Nine Months Ended September 30, 2018
(in millions)
Discounts
and
Allowances
Returns Rebates Chargebacks
Distribution
Fees
Total
Reserve balance, January 1, 2018 $ 167
$ 863
$ 1,094
$ 274
$ 148
$ 2,546
Current period provision 643
209
1,976
1,462
178
4,468
Payments and credits (632 ) (264 ) (1,939 ) (1,512 ) (167 ) (4,514 )
Reserve balance, September 30, 2018 $ 178
$ 808
$ 1,131
$ 224
$ 159
$ 2,500

Included in Rebates in the table above are cooperative advertising credits due to customers of approximately ~~$29~~$30 million and $26 million as of ~~September~~June 30, ~~2018,~~2019 and January 1, 2019, respectively, which are reflected as a reduction of Trade ~~accounts receivable,~~receivables, net in the Consolidated Balance Sheets.

The Company continually monitors its variable consideration provisions and evaluates the estimates used as additional information becomes available. Adjustments will be made to these provisions periodically to reflect new facts and circumstances that may indicate that historical experience may not be indicative of current and/or future results. The Company is required to make subjective judgments based primarily on its evaluation of current market conditions and trade inventory levels related to the Company's products. This evaluation may result in an increase or decrease in the experience rate that is applied to current and future sales, or an adjustment related to past sales, or both. If the actual amounts paid vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variance becomes known. The Company applies this method consistently for contracts with similar characteristics. The following describes the major sources of variable consideration in the Company’s customer arrangements and the methodology, estimates and judgments applied to estimate each type of variable consideration.

~~Cash Discounts and Allowances~~

Cash discounts are offered for prompt payment and allowances for volume purchases. Provisions for cash discounts are estimated at the time of sale and recorded as direct reductions to trade receivables and revenue. Management estimates the provisions for cash discounts and allowances based on contractual sales terms with customers, an analysis of unpaid invoices and historical payment experience. Estimated cash discounts and allowances have historically been predictable and less subjective, due to the limited number of assumptions involved, the consistency of historical experience and the fact that these amounts are generally settled within one month of incurring the liability.

~~Returns~~

Consistent with industry practice, customers are generally allowed to return product within a specified period of time before and after its expiration date, excluding European businesses which generally do not carry a right of return. The returns provision is estimated utilizing historical sales and return rates over the period during which customers have a right of return, taking into account available information on competitive products and contract changes. The information utilized to estimate the returns provision includes: (i) historical return and exchange levels, (ii) external data with respect to inventory levels in the wholesale distribution channel, (iii) external data with respect to prescription demand for products, (iv) remaining shelf lives of products at the date of sale and (v) estimated returns liability to be processed by year of sale based on an analysis of lot information related to actual historical returns.

In determining the estimate for returns, management is required to make certain assumptions regarding the timing of the introduction of new products and the potential of these products to capture market share. In addition, certain assumptions with respect to the extent and pattern of decline associated with generic competition are necessary. These assumptions are formulated using market data for similar products, past experience and other available information. These assumptions are continually reassessed, and changes to the estimates and assumptions are made as new information becomes available. A change of 1% in the estimated return rates would have impacted the Company’s pre-tax earnings by approximately $68 million for the nine months ended September 30, 2018.

The estimate for returns may be impacted by a number of factors, but the principal factor relates to the inventory levels in the distribution channel. When management becomes aware of an increase in such inventory levels, it considers whether the increase may be temporary or other-than-temporary. Temporary increases in wholesaler inventory levels will not differ from original estimates of provision for returns. Other-than-temporary increases in wholesaler inventory levels, however, may be an indication that future product returns could be higher than originally anticipated, and, as a result, estimates for returns may need to be adjusted. Factors that suggest increases in wholesaler inventory levels are temporary include: (i) recently implemented or announced price increases for certain products, (ii) new product launches or expanded indications for existing products and (iii) timing of purchases by wholesale customers. Conversely, factors that suggest increases in wholesaler inventory levels are other-than-temporary include: (i) declining sales trends based on prescription demand, (ii) introduction of new products or generic competition, (iii) increasing price competition from generic competitors and (iv) recent changes to the U.S. National Drug Codes (“NDC”) of products. Changes in the NDC of products could result in a period of higher returns related to products with the old NDC, as U.S. customers generally permit only one NDC per product for identification and tracking within their inventory systems.

~~Rebates and Chargebacks~~

Product sales made under governmental and managed-care pricing programs in the U.S. are subject to rebates. The Company participates in state government-managed Medicaid programs, as well as certain other qualifying federal and state government programs whereby rebates are provided to participating government entities. Medicaid rebates are generally billed 45 days

after the quarter, but can be billed up to 270 days after the quarter in which the product is dispensed to the Medicaid participant. As a result, the Medicaid rebate reserve includes an estimate of outstanding claims for end-customer sales that occurred, but for which the related claim has not been billed and/or paid, and an estimate for future claims that will be made when inventory in the distribution channel is sold through to plan participants. The calculation of the Medicaid rebate reserve also requires other estimates, such as estimates of sales mix, to determine which sales are subject to rebates and the amount of such rebates. A change of 1% in the volume of product sold through to Medicaid plan participants would have impacted the Company’s pre-tax earnings by approximately $68 million for the nine months ended September 30, 2018. Quarterly, the Medicaid rebate reserve is adjusted based on actual claims paid. Due to the delay in billing, adjustments to actual claims paid may incorporate revisions of that reserve for several periods.

Managed Care rebates relate to contractual agreements to sell products to managed care organizations and pharmacy benefit managers at contractual rebate percentages in exchange for volume and/or market share.

Chargebacks relate to contractual agreements to sell products to government agencies, group purchasing organizations and other indirect customers at contractual prices that are lower than the list prices the Company charges wholesalers. When these group purchasing organizations or other indirect customers purchase products through wholesalers at these reduced prices, the wholesaler charges the Company for the difference between the prices they paid the Company and the prices at which they sold the products to the indirect customers.

In estimating provisions for rebates and chargebacks, management considers relevant statutes with respect to governmental pricing programs and contractual sales terms with managed-care providers and group purchasing organizations. Management estimates the amount of product sales subject to these programs based on historical utilization levels. Changes in the level of utilization of products through private or public benefit plans and group purchasing organizations will affect the amount of rebates and chargebacks that the Company is obligated to pay. Management continually updates these factors based on new contractual or statutory requirements, and any significant changes in sales trends that may impact the percentage of products subject to rebates or chargebacks.

The amount of Managed Care, Medicaid and other rebates and chargebacks has become more significant as a result of a combination of deeper discounts due to the price increases implemented in each of the last three years, changes in the Company’s product portfolio due to recent acquisitions and increased Medicaid utilization due to expansion of government funding for these programs. Management’s estimate for rebates and chargebacks may be impacted by a number of factors, but the principal factor relates to the level of inventory in the distribution channel.

Rebate provisions are based on factors such as timing and terms of plans under contract, time to process rebates, product pricing, sales volumes, amount of inventory in the distribution channel and prescription trends. Adjustments to actual for the nine months ended September 30, 2018 and 2017 There were ~~not material to the Company’s revenues or earnings.~~

Patient Co-Pay Assistance programs, Consumer Rebates and Loyalty Programs are rebates offered on many of the Company’s products. Patient Co-Pay Assistance Programs are patient discount programs offered in the form of coupon cards or point of sale discounts, with which patients receive certain discounts off their prescription at participating pharmacies, as defined by the specific product program. An accrual for these programs is established, equal to management’s estimate of the discount, rebate and loyalty incentives attributable to a sale. That estimate is based on historical experience and other relevant factors. The accrual is adjusted throughout each quarter based on actual experience and changes in other factors, if any.

~~Distribution Fees~~

The Company sells product primarily to wholesalers, and in some instances to large pharmacy chains such as CVS and Wal-Mart. The Company has Distribution Services Agreements ("DSAs") with several large wholesale customers such as McKesson Corporation, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Specialty. Under the DSAs, the wholesalers agree to provide services, and the Company pays the contracted DSA distribution service fees for these services based on product volumes. Additionally, price appreciation credits are generated when the Company increases a product’s wholesaler acquisition cost (“WAC”) under contracts with certain wholesalers. Under such contracts, the Company is entitled to credits from such wholesalers for the impact of that WAC increase on inventory currently on hand at the wholesalers. Such credits are offset against the total distribution service fees paid to each such wholesaler. The variable consideration associated with price appreciation credits is reflected in the transaction price of products sold when it is determined to be probable that a significant reversal will not occur. Net revenue fromno price appreciation credits for the ~~nine~~six months ended ~~September~~June 30, ~~2018 was $15 million and is~~2019.



	Six Months Ended June 30, 2018
(in millions)	Discounts and Allowances			Returns			Rebates			Chargebacks			Distribution Fees			Total
Reserve balances, January 1, 2018	$	167		$	863		$	1,094		$	274		$	148		$	2,546
Current period provisions	406			163			1,330			947			116			2,962
Payments and credits	(409		)	(185		)	(1,287		)	(971		)	(120		)	(2,972		)
Reserve balances, June 30, 2018	$	164		$	841		$	1,137		$	250		$	144		$	2,536

Included as a reduction of ~~distribution fees~~current period provisions for Distribution Fees in the ~~variable consideration provisions~~ table ~~above.~~

above are price appreciation credits of $15 million for the six months ended June 30, 2018.

Contract Assets and Contract Liabilities

There are no contract assets for any period presented. Contract liabilities consist of deferred revenue, the balance of which is not material to any period presented.

~~Sales Commissions~~

~~The Company expenses sales commissions when incurred because the amortization period would have been less than one year. Sales commissions are included in selling, general and administrative expenses.~~

~~Financing Component~~

The Company has elected not to adjust consideration for the effects of a significant financing component when the period between the transfer of a promised good or service to the customer and when the customer pays for that good or service will be one year or less. The Company's global payment terms are generally between thirty to ninety days.


4.	~~DIVESTITURES~~ACQUISITION

~~In 2017,~~Synergy Pharmaceuticals Inc.

On March 6, 2019, the Company ~~divested~~acquired certain ~~businesses~~assets of Synergy Pharmaceuticals Inc. ("Synergy") for a cash purchase price of approximately $180 million and the assumption of certain assumed liabilities, pursuant to the terms approved by the U.S. Bankruptcy Court for the Southern District of New York on March 1, 2019. Among the assets ~~which, in each case, were not aligned with its core business objectives.~~

~~CeraVe~~acquired are the worldwide rights to the Trulance^®~~, AcneFree™~~ (plecanatide) product, a once-daily tablet for adults with chronic idiopathic constipation and ~~AMBI~~^® ~~skincare brands~~irritable

~~On March 3, 2017,~~

bowel syndrome with constipation. This acquisition is expected to result in additional revenues and costs savings associated with business synergies.

Assets Acquired and Liabilities Assumed

The acquisition of certain assets of Synergy has been accounted for as a business combination under the acquisition method of accounting since: (i) substantially all of the fair value of the assets acquired is not concentrated in a single identifiable asset or group of similar identifiable assets and (ii) sufficient inputs and processes were acquired to contribute to the creation of outputs. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed related to the acquisition of certain assets of Synergy as of the acquisition date:



(in millions)
Accounts receivable	$	7
Inventories	24
Prepaid expenses and other current assets	5
Product brand intangible assets (estimated useful life - 7 years)	159
Accounts payable	(1		)
Accrued expenses	(17		)
Total identifiable net assets	177
Goodwill	3
Total fair value of consideration transferred	$	180

Due to the timing of the acquisition, the following are provisional and are subject to change:

amounts for intangible assets, property and equipment, inventories, receivables and other working capital adjustments pending finalization of the valuation;

amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and

amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.

The Company ~~completed~~will finalize these amounts no later than one year from the ~~sale~~acquisition date, once it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of ~~its interests~~the acquisition date may result in adjustments to the provisional amounts recognized at the acquisition date which will impact the reported results in the ~~CeraVe~~^®~~, AcneFree™ and AMBI~~^® ~~skincare brands for $1,300 million in cash (the “Skincare Sale”), subject to~~period those adjustments are identified. These adjustments, if any, could be material.

Goodwill associated with the ~~finalization~~acquisition of certain ~~working capital provisions. The CeraVe~~^®~~, AcneFree™~~assets of Synergy is not deductible for income tax purposes.

Revenue and ~~AMBI~~^® ~~skincare business was part~~Operating Results

Revenues associated with the acquired assets of Synergy during the ~~Bausch + Lomb/International segment~~period March 6, 2019 through June 30, 2019 were $23 million. Operating results associated with the acquired assets of Synergy during the period March 6, 2019 through June 30, 2019 and ~~was reclassified as held for sale as of December 31, 2016. Included in Other income, net~~pro-forma revenues and operating results for the nine months ended September 30, 2017 is the Gain on the Skincare Sale of $316 million. The working capital provisions were finalized during 2017 and the Gain on the Skincare Sale was adjusted to $309 million.

~~Dendreon Pharmaceuticals LLC~~

On June 28, 2017, the Company completed the sale of all outstanding equity interests in Dendreon for $845 million in cash (the “Dendreon Sale”), as adjusted. Dendreon was part of the former Branded Rx segment and was reclassified as held for sale as of December 31, 2016. Included in Other income, net is the Gain on the Dendreon Sale of $73 million during the threesix months ended June 30, ~~2017. During the three months ended September 30, 2017, a working capital adjustment of $25 million was provided~~2019 and ~~the Gain on the Dendreon Sale was adjusted to $98 million.~~

~~iNova Pharmaceuticals~~

On September 29, 2017, the Company completed the sale of its Australian-based iNova Pharmaceuticals (“iNova”) business for $938 million in cash (the “iNova Sale”), as adjusted. iNova markets a diversified portfolio of weight management, pain management, cardiology and cough and cold prescription and OTC products in more than 15 countries, with leading market positions in Australia and South Africa, as well as an established platform in Asia. The Company continues to operate in these geographies through the Bausch + Lomb franchise. The iNova business was part of the Bausch + Lomb/International segment and was reclassified as held for sale as of December 31, 2016.2018 were not material. Included in Other ~~income,~~expense, net is the Gain on the iNova Sale of $306 million, as adjusted. Restricted cash as of September 30, 2017 includes $923 million of proceeds from the iNova Sale, which the Company used to repay a portion of its Series F Tranche B Term Loan Facility on October 5, 2017.

~~Obagi Medical Products, Inc.~~

On November 9, 2017, certain of the Company's affiliates completed the sale of its Obagi Medical Products, Inc. (“Obagi”) business for $190 million in cash (the “Obagi Sale”). Obagi is a global specialty skin care pharmaceutical business with products focused on premature skin aging, skin damage, hyperpigmentation, acne and sun damage which are primarily available through dermatologists, plastic surgeons and other skin care professionals. The Obagi business was part of the former U.S. Diversified Products segment and was reclassified as held for sale as of March 31, 2017. The carrying value of the Obagi business, including associated goodwill, was adjusted to its estimated fair value less costs to sell and an impairment of $103 million was recognized in Asset impairments during the six months ended June 30, ~~2017. Upon consummation~~2019 are acquisition-related costs of ~~this transaction, a loss of $13~~$8 million ~~was recognized in Other income, net~~directly related to ~~this transaction during~~ the ~~three months ended December 31, 2017.~~

~~Sprout Pharmaceuticals, Inc.~~

On December 20, 2017, the Company completed the sale of all outstanding equity interests in Sprout to a buyer affiliated with certain former shareholders of Sprout (the “Sprout Sale”), in exchange for a 6% royalty on global sales of Addyi^® ~~(flibanserin 100 mg) beginning June 2019. In connection with the completion of the Sprout Sale, the terms of the October 2015 merger agreement relating to the Company's~~ acquisition of ~~Sprout were amended to terminate the Company's ongoing obligation to make future royalty payments associated with the Addyi~~^® ~~product, as well as~~ certain ~~related provisions (including the obligation to make certain marketing~~assets of Synergy, which includes expenditures for advisory, legal, valuation, accounting and other expenditures). In connection with the completion of the Sprout Sale, the litigation against the Company, initiated on behalf of the former shareholders of Sprout, which disputed the Company's compliance with certain contractual terms of that same merger agreement with respect to the use of certain diligent efforts to develop and commercialize the Addyi^® product (including a disputed contractual term with respect to the spend of no less than $200 million in certain expenditures), was dismissed with prejudice. In connection with the completion of the Sprout Sale, the Company issued the buyer a five-year $25 million loan for initial operating expenses. Addyi^®, a once-daily, non-hormonal tablet approved for the treatment of acquired, generalized hypoactive sexual desire disorder in premenopausal women, was Sprout's only approved and commercialized product. Sprout was part of the former Branded Rx segment and was reclassified as held for sale as of September 30, 2017. The carrying value of the Sprout business, including associated goodwill, was adjusted to its estimated fair value less costs to sell and a $352 million impairment was recognized in Asset impairments during the three months ended September 30, 2017. Upon consummation of this transaction, a loss of $98 million was recognized in Other income, net during the three months ended December 31, 2017. The Company will recognize the agreed upon 6% royalty of global sales of Addyi^® ~~beginning in June 2019 as these royalties become due, as the Company does not recognize contingent payments until such amounts are realizable.~~

~~Assets Held For Sale~~

~~Included in Other non-current assets at September 30, 2018 and December 31, 2017 are assets held for sale of $0 and $12 million, respectively.~~similar services.


5.	RESTRUCTURING AND INTEGRATION COSTS

In connection with acquisitions prior to 2016, the Company implemented cost-rationalization and integration initiatives to capture operating synergies and generate cost savings. These measures included: (i) workforce reductions company-wide and other organizational changes, (ii) closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities, (iii) leveraging research and development spend and (iv) procurement savings. The remaining liability associated with these Restructuring and integration costs as of September 30, 2018 was $25 million.

During the nine months ended September 30, 2018, the Company incurred $16 million of Restructuring and integration costs. These costs included: (i) $8 million of severance costs and (ii) $8 million of facility closure costs. The Company ~~made payments of $29 million for the nine months ended September 30, 2018.~~

During the nine months ended September 30, 2017, the Company incurred $42 million of Restructuring and integration costs. These costs included: (i) $17 million of integration consulting, transition service, and other costs, (ii) $17 million of facility closure costs and (iii) $8 million of severance costs. The Company made payments of $72 million for the nine months ended September 30, 2017.

~~The Company continues to evaluate~~evaluates opportunities to improve its operating results and ~~may initiate additional~~implements cost savings programs to streamline its operations and eliminate redundant processes and expenses. The expenses associated with the implementation of these cost savings programs ~~could be material and may~~ include ~~but are not limited to,~~ expenses associated with: (i) reducing headcount, (ii) eliminating real estate costs associated with unused or under-utilized facilities and (iii) implementing contribution margin improvement and other cost reduction initiatives. The remaining liability associated with restructuring and integration costs as of June 30, 2019 was $27 million.

During the six months ended June 30, 2019, the Company incurred $24 million of restructuring and integration costs. These costs included: (i) $11 million of severance and other costs associated with the acquisition of certain assets of Synergy, which were not essential to complete, close and report the acquisition, (ii) $6 million of other severance costs, (iii) $6 million of facility closure costs and (iv) $1 million of other costs. The Company made payments of $24 million for the six months ended June 30, 2019.

During the six months ended June 30, 2018, the Company incurred $13 million of restructuring and integration costs. These costs included: (i) $8 million of severance costs and (ii) $5 million of facility closure costs. The Company made payments of $13 million for the six months ended June 30, 2018.


6.	FAIR VALUE MEASUREMENTS

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 — Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using discounted cash flow methodologies, pricing models, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

~~Assets and Liabilities Measured at Fair Value on a Recurring Basis~~

The following ~~fair value hierarchy~~ table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring ~~basis.~~basis:



	June 30, 2019								December 31, 2018
(in millions)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	258	$	206	$	52	$	—	$	197	$	166	$	31	$	—
Restricted cash	$	2	$	2	$	—	$	—	$	2	$	2	$	—	$	—
Liabilities:
Acquisition-related contingent consideration	$	318	$	—	$	—	$	318	$	339	$	—	$	—	$	339

September 30, 2018 December 31, 2017
(in millions)
Carrying
Value

Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Carrying
Value

Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents $ 251
$ 227
$ 24
$ —
$ 265
$ 230
$ 35
$ —
Restricted cash $ —
$ —
$ —
$ —
$ 77
$ 77
$ —
$ —
Liabilities:

Acquisition-related contingent consideration $ (336 ) $ —
$ —
$ (336 ) $ (387 ) $ —
$ —
$ (387 )

Cash equivalents consist of highly liquid investments, primarily money market funds, with maturities of three months or less when purchased, and are reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to their short-term nature.

Restricted cash of $77 million as of December 31, 2017 was deposited with a bank as collateral to secure a bank guarantee. On January 9, 2018, the cash collateral of $77 million of Restricted cash was returned to the Company in exchange for a $77 million letter of credit.

There were no transfers between Level 1, Level 2 or Level 3 during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The fair value measurement of contingent consideration obligations arising from business combinations is determined via a probability-weighted discounted cash flow analysis, ~~or Monte Carlo Simulation,~~ using unobservable (Level 3) inputs. These inputs may include: (i) the estimated amount and timing of projected cash flows, (ii) the probability of the achievement of the factor(s) on which the contingency is based and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash ~~flows and (iv) volatility of projected performance (Monte Carlo Simulation).~~flows. Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement. At June 30, 2019, the fair value measurements of acquisition-related contingent consideration were determined using risk-adjusted discount rates ranging from 5% to 25%.

The following table presents a reconciliation of contingent consideration obligations measured on a recurring basis using significant unobservable inputs (Level 3) for the ~~nine~~six months ended ~~September~~June 30,: 2019 and 2018:



(in millions)	2019						2018
Balance, beginning of period				$	339					$	387
Adjustments to Acquisition-related contingent consideration:
Accretion for the time value of money	$	11					$	12
Fair value adjustments due to changes in estimates of other future payments	(12		)				(16		)
Acquisition-related contingent consideration				(1		)				(4		)
Foreign currency translation adjustment included in other comprehensive loss				—						1
Payments				(20		)				(20		)
Balance, end of period				318						364
Current portion included in Accrued and other current liabilities				47						54
Non-current portion				$	271					$	310

(in millions) 2018 2017
Balance, beginning of period $ 387
$ 892
Adjustments to Acquisition-related contingent consideration:
Accretion for the time value of money $ 18
$ 48

Fair value adjustments to the future royalty payments for Addyi^®
—
(312 )
Fair value adjustments due to changes in estimates of other future payments (41 ) (33 )
Acquisition-related contingent consideration (23 ) (297 )
Reclassified to liabilities held for sale —
(168 )
Payments (28 ) (37 )
Balance, end of period 336
390
Current portion included in Accrued and other current liabilities 54
45
Non-current portion $ 282
$ 345

~~During~~Included in Fair value adjustments due to changes in estimates of other future payments in the table above for the three and six months ended ~~September~~June 30, ~~2017 and prior to identifying the Sprout business as held for sale, the Company recorded~~2019, is an $8 million fair value ~~adjustments~~adjustment related to ~~contingent consideration to reflect management's revised estimates of the future sales of Addyi~~^®.an acquisition which occurred in 2011.

Fair Value of Long-term Debt

The fair value of long-term debt as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$25,213~~$25,275 million and ~~$25,385~~$23,357 million, respectively, and was estimated using the quoted market prices for the same or similar debt issuances (Level 2).


7.	INVENTORIES

Inventories, net of allowances for obsolescence consist of:



(in millions)	June 30, 2019		December 31, 2018
Raw materials	$	307	$	275
Work in process	145		95
Finished goods	608		564
	$	1,060	$	934

(in millions) September 30,
2018
December 31,
2017
Raw materials $ 284
$ 276
Work in process 103
146
Finished goods 584
626
$ 971
$ 1,048


8.	INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The major components of intangible assets consist of:



	June 30, 2019							December 31, 2018
(in millions)	Gross Carrying Amount		Accumulated Amortization and Impairments			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Impairments			Net Carrying Amount
Finite-lived intangible assets:
Product brands	$	21,109	$	(12,815	)	$	8,294	$	20,891	$	(11,958	)	$	8,933
Corporate brands	930		(301		)	629		926		(263		)	663
Product rights/patents	3,297		(2,769		)	528		3,292		(2,658		)	634
Partner relationships	169		(167		)	2		168		(166		)	2
Technology and other	209		(182		)	27		208		(173		)	35
Total finite-lived intangible assets	25,714		(16,234		)	9,480		25,485		(15,218		)	10,267
Acquired IPR&D not in service	18		—			18		36		—			36
Bausch + Lomb Trademark	1,698		—			1,698		1,698		—			1,698
	$	27,430	$	(16,234	)	$	11,196	$	27,219	$	(15,218	)	$	12,001

September 30, 2018 December 31, 2017
(in millions)
Gross
Carrying
Amount

Accumulated
Amortization
and
Impairments

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization
and
Impairments

Net
Carrying
Amount
Finite-lived intangible assets:
Product brands $ 20,924
$ (11,488 ) $ 9,436
$ 20,913
$ (9,281 ) $ 11,632
Corporate brands 930
(246 ) 684
933
(179 ) 754
Product rights/patents 3,300
(2,542 ) 758
3,310
(2,346 ) 964
Partner relationships 171
(167 ) 4
179
(169 ) 10
Technology and other 210
(171 ) 39
214
(147 ) 67
Total finite-lived intangible assets 25,535
(14,614 ) 10,921
25,549
(12,122 ) 13,427
Acquired IPR&D not in service 36
—
36
86
—
86
Bausch + Lomb Trademark 1,698
—
1,698
1,698
—
1,698
$ 27,269
$ (14,614 ) $ 12,655
$ 27,333
$ (12,122 ) $ 15,211

Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The Company continues to monitor the recoverability of its finite-lived intangible assets and tests the intangible assets for impairment if indicators of impairment are present.

Asset impairments for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 include impairments of: (i) ~~$341~~$13 million reflecting decreases in forecasted sales of a certain product line due to generic competition and (ii) $3 million, in aggregate, related to certain product/patent assets associated with the discontinuance of specific product lines not aligned with the focus of the Company's core businesses.

Asset impairments for the six months ended June 30, 2018 include: (i) impairments of $323 million reflecting decreases in forecasted sales for the Uceris^® Tablet product and other product lines due to generic competition, (ii) ~~$60~~impairments of $17 million, in aggregate, related to certain product/patent assets associated with the discontinuance of specific product lines not aligned with the focus of the Company's core businesses and revisions to forecasted sales and (iii) ~~$28 million to Acquired IPR&D not in service related to a certain product and (iv)~~impairments of $5 million related to assets being classified as held for sale.

Asset impairments for the nine months ended September 30, 2017 include impairments of: (i) $352 million related to the Sprout business classified as held for sale, (ii) $115 million to other assets classified as held for sale, (iii) $86 million to certain product/patent assets associated with the discontinuance of specific product lines not aligned with the focus of the Company's core businesses, (iv) $73 million reflecting decreases in forecasted sales for other product lines and (v) $3 million related to Acquired IPR&D not in service.

The impairments to assets classified as held for sale were measured as the difference of the carrying value of these assets as compared to the estimated fair value of these assets less costs to sell determined using a discounted cash flow analysis which utilized unobservable inputs (Level 3). The other impairments and adjustments to finite-lived intangible assets were measured as the difference of the carrying value of these finite-lived assets as compared to the fair value as determined using a discounted cash flow analysis using unobservable inputs (Level 3).

Periodically, the Company’s products face the expiration of their patent or regulatory exclusivity. The Company anticipates that product sales for such ~~product~~products would decrease shortly following a loss of exclusivity, due to the possible entry of a generic competitor. Where the Company has the rights, it may elect to launch an authorized generic of such product (either as the Company’s own branded generic or through a third-party). This may occur prior to, upon or following generic entry, which may mitigate the anticipated decrease in product sales; however, even with launch of an authorized generic, the decline in product sales of such product could still be significant, and the effect on future revenues could be material.

As a result of the launch of a generic competitor in July 2018, the Company revised its near and long-term financial projections of the Uceris^® Tablet related intangible assets. As of June 30, 2018, the carrying value of the Uceris^® Tablet related intangible assets exceeded the undiscounted expected cash flows from the Uceris^® Tablet. As a result, the Company recognized an impairment of $263 million to reduce the carrying value of the Uceris^® Tablet related intangible assets to their estimated fair value. As of ~~September~~June 30, ~~2018,~~2019, the remaining carrying value of the Uceris^® Tablet related intangible assets was ~~$164~~$93 million. Prior to its launch, the Company initiated infringement proceedings against this generic competitor. The Company continues

to believe that its Uceris^® ~~Tablet related~~ Tablet-related patents are enforceable and is proceeding in the ongoing litigation between the Company and the generic competitor, however the ultimate outcome of the matter is not predictable.

Management continually assesses the useful lives related to the Company's long-lived assets to reflect the most current assumptions. ~~Based on management's~~In review of the Company’s finite-lived intangible assets, management revised the estimated useful lives ~~will be adjusted where appropriate. As a result~~ of certain intangible assets in 2018.

Effective September 12, 2018, the Company changed the estimated useful life of its Xifaxan^®-related intangible assets due to the positive impact of the ~~settlement~~ agreement between the Company and Actavis Laboratories ~~FL.~~FL, Inc. ("Actavis") resolving the intellectual property litigation regarding Xifaxan^® tablets, 550 mg. As discussed in further detail in Note ~~18,~~20, "LEGAL ~~PROCEEDINGS”, management adjusted~~PROCEEDINGS" to the Company's Annual Consolidated Financial Statements contained in its Annual Report on Form 10-K for the year ended December 31, 2018, the parties agreed to dismiss all litigation related to Xifaxan^® tablets, 550 mg and all intellectual property protecting Xifaxan^® will remain intact and enforceable. As a result, the useful life of the Xifaxan^® ~~related~~-related intangible assets was extended from 2024 to ~~align with its expected future cash flows.~~January 1, 2028. As this change in the estimated useful life is a change in an accounting estimate, amortization expense is impacted prospectively. The change in the estimated useful life of the Xifaxan^®-related intangible assets resulted in a decrease to the Net loss attributable to Bausch Health Companies Inc. of $235 million, and a decrease to the Basic and Diluted Loss per share attributable to Bausch Health Companies Inc. of $0.67 for the six months ended June 30, 2019. As of June 30, 2019, the net carrying value of the Xifaxan^®-related intangible assets was $4,579 million.

Estimated amortization expense of finite-lived intangible assets for the remainder of ~~2018~~2019 and each of the five succeeding years ending December 31 and thereafter is as follows:

(in millions)
October through December 2018 $ 508
2019 1,922
2020 1,653
2021 1,402
2022 1,222
2023 1,069
Thereafter 3,145
Total $ 10,921



(in millions)	Remainder of 2019		2020		2021		2022		2023		2024		Thereafter		Total
Amortization	$	924	$	1,641	$	1,392	$	1,239	$	1,089	$	955	$	2,240	$	9,480

Goodwill

The changes in the carrying amounts of goodwill during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and the year ended December 31, ~~2017~~2018 were as follows:



(in millions)	Bausch + Lomb/ International			Branded Rx			U.S. Diversified Products			Salix		Ortho Dermatologics		Diversified Products			Total
Balance, January 1, 2018	$	6,016		$	6,631		$	2,946		$	—	$	—	$	—		$	15,593
Impairment of the Salix and Ortho Dermatologics reporting units	—			(2,213		)	—			—		—		—			(2,213		)
Realignment of Global Solta reporting unit goodwill	(82		)	115			(33		)	—		—		—			—
Goodwill reclassified to assets held for sale and subsequently disposed	(2		)	—			—			—		—		—			(2		)
Realignment of segment goodwill	—			(4,533		)	(2,913		)	3,156		1,267		3,023			—
Impairment of the Dentistry reporting unit	—			—			—			—		—		(109		)	(109		)
Foreign exchange and other	(127		)	—			—			—		—		—			(127		)
Balance, December 31, 2018	5,805			—			—			3,156		1,267		2,914			13,142
Acquisition of certain assets of Synergy	—			—			—			3		—		—			3
Foreign exchange and other	15			—			—			—		—		—			15
Balance, June 30, 2019	$	5,820		$	—		$	—		$	3,159	$	1,267	$	2,914		$	13,160

(in millions) Bausch + Lomb/ International Branded Rx U.S. Diversified Products Salix Ortho Dermatologics Diversified Products Total
Balance, December 31, 2016 $ 5,499
$ 7,265
$ 3,030
$ —
$ —
$ —
$ 15,794
Realignment of segment goodwill 264
(264 ) —
—
—
—
—
Balance, January 1, 2017 5,763
7,001
3,030
—
—
—
15,794
Goodwill reclassified to assets held for sale and subsequently disposed (30 ) (61 ) (84 ) —
—
—
(175 )
Impairment —
(312 ) —
—
—
—
(312 )
Foreign exchange and other 283
3
—
—
—
—
286
Balance, December 31, 2017 6,016
6,631
2,946
—
—
—
15,593
Impairment —
(2,213 ) —
—
—
—
(2,213 )
Realignment of Global Solta reporting unit goodwill (82 ) 115
(33 ) —
—
—
—
Goodwill reclassified to assets held for sale (2 ) —
—
—
—
—
(2 )
Foreign exchange and other 54
—
—
—
—
—
54
Balance, March 31, 2018 5,986
4,533
2,913
—
—
—
13,432
Realignment of segment goodwill —
(4,533 ) (2,913 ) 3,156
1,267
3,023
—
Balance after realignment 5,986
—
—
3,156
1,267
3,023
13,432
Foreign exchange and other (142 ) —
—
—
—
—
(142 )
Balance, September 30, 2018 $ 5,844
$ —
$ —
$ 3,156
$ 1,267
$ 3,023
$ 13,290

Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. The Company estimates the fair values of all reporting units using a discounted cash flow model which utilizes Level 3 unobservable inputs.

The discounted cash flow model relies on assumptions regarding revenue growth rates, gross profit, projected working capital needs, selling, general and administrative expenses, research and development expenses, capital expenditures, income tax rates, discount rates and terminal growth rates. To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit. The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. The Company performed its annual impairment test as of October 1, 2018, utilizing long-term growth rates for its reporting units ranging from 1.0% to 3.0% and discount rates applied to the estimated cash flows ranging from 7.5% to 14.0% in estimation of fair value. To estimate cash flows beyond the final year of its model, the Company estimates

a terminal value by applying an in perpetuity growth assumption and discount factor to determine the reporting unit's terminal value.

The Company forecasts cash flows for each reporting unit and takes into consideration economic conditions and trends, estimated future operating results, management's and a market participant's view of growth rates and product lives, and anticipates future economic conditions. Revenue growth rates inherent in these forecasts were based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles. Macroeconomic factors such as changes in economies, changes in the competitive landscape including the unexpected loss of exclusivity to the Company's product portfolio, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future.

~~2017~~

~~2017 Realignment of Segment Structure~~

Effective for the first quarter of 2017, the revenues and profits from the Company's operations in Canada were reclassified. In connection with this change, the prior-period presentation of segment goodwill has been recast to conform to the current reporting structure, of which $264 million of goodwill as of December 31, 2016 was reclassified from the former Branded Rx segment to the Bausch + Lomb/International segment. No facts or circumstances were then identified in connection with this change in alignment that would suggest an impairment exists.

~~2017 Impairment~~

On December 20, 2017, the Company completed the sale of Sprout to a buyer affiliated with certain former shareholders of Sprout. Sprout was part of the former Branded Rx segment and was reclassified as held for sale as of September 30, 2017. As the Sprout business represented only a portion of a former Branded Rx reporting unit, the Company assessed the remaining reporting unit for impairment and determined the carrying value of the remaining reporting unit exceeded its fair value. After completing step two of the impairment testing, the Company determined and recorded a goodwill impairment charge of $312 million during the three months ended September 30, 2017.

2018

Adoption of New Accounting Guidance for Goodwill Impairment Testing

Upon adopting the new guidance, the Company tested goodwill for impairment and determined that the carrying value of the Salix reporting unit exceeded its fair value. As a result of the adoption of new accounting guidance, the Company recognized a goodwill impairment of $1,970 million associated with the Salix reporting unit.

As of October 1, 2017, the date of the 2017 annual goodwill impairment test, the fair value of the Ortho Dermatologics reporting unit exceeded its carrying value. However, at January 1, 2018, ~~the carrying value of the Ortho Dermatologics reporting unit exceeded its fair value. Unforeseen~~unforeseen changes in the business dynamics of the Ortho Dermatologics reporting unit, such as: (i) changes in the dermatology sector, (ii) increased pricing pressures from third-party payors, (iii) additional risks to the exclusivity of certain products and (iv) an expected longer launch cycle for a new product, were factors that negatively impacted the reporting unit's operating results beyond management's expectations as of October 1, 2017, when the Company performed its 2017 annual goodwill impairment test. In response to these adverse business indicators, as of January 1, 2018, the Company reduced its near and

long term financial projections for the Ortho Dermatologics reporting unit. As a result of the reductions in the near and long term financial projections, the carrying value of the Ortho Dermatologics reporting unit exceeded its fair value at January 1, 2018 and the Company recognized a goodwill impairment of $243 million.

As of January 1, 2018, with the exception of the Salix reporting unit and Ortho Dermatologics reporting unit, the fair value of all ~~other~~ reporting units exceeded their respective carrying value by more than 15%.

2018 Realignment of Solta Business

Effective March 1, 2018, revenues and profits from the U.S. Solta business included in the former U.S. Diversified Products segment in prior periods and revenues and profits from the international Solta business included in the Bausch + Lomb/International segment in prior periods, are reported in the new Global Solta reporting unit, which, at that time, was a part of the former Branded Rx segment. As a result of this change, $115 million of goodwill was reallocated to the new Global Solta reporting unit and the Company assessed the impact on the fair values of each of the reporting units affected. After considering, among other matters: (i) the limited period of time between last impairment test (January 1, 2018) and the realignment (March 1, 2018), (ii) the results of the last impairment test and (iii) the amount of goodwill reallocated to the new Global Solta reporting unit, the Company did not identify any indicators of impairment at the time of the realignment.

~~March 31, 2018~~

Except for the impact of the adoption of the new accounting guidance for goodwill impairment testing noted above, no additional events occurred or circumstances changed during the period January 1, 2018 (the date goodwill was last tested for impairment) through March 31, 2018 that would indicate that the fair value of any reporting unit might be below its carrying value. As a result, management concluded that the fair value of the Salix reporting unit and Ortho Dermatologics reporting unit marginally exceed their respective carrying values as of March 31, 2018. Therefore, during the three months ended March 31, 2018, the Company performed qualitative assessments of the Salix reporting unit and Ortho Dermatologics reporting unit to determine if testing was required.

As part of its qualitative assessments, management compared the reporting units' operating results to its original forecasts. The latest forecasts as of March 31, 2018 for the Salix and Ortho Dermatologics reporting units were not materially different than the forecast used in management's January 1, 2018 testing and the difference in the forecasts would not change the conclusion of the Company’s goodwill impairment testing as of January 1, 2018. As part of these qualitative assessments, the Company also considered the sensitivity of its conclusions as they relate to changes in the estimates and assumptions used in the latest forecast available for each period. Based on its qualitative assessments, management believed that the carrying value of these reporting units did not exceed their respective fair values and, therefore, concluded quantitative assessments were not required.

2018 Realignment of Segment Structure

In the second quarter of 2018, the Company began operating in the following reportable segments: (i) Bausch + Lomb/International segment, (ii) Salix segment, (iii) Ortho Dermatologics segment and (iv) Diversified Products segment. The Bausch + Lomb/International segment consists of the: (i) U.S. Bausch + Lomb and (ii) International reporting units. The Salix segment consists of the Salix reporting unit. The Ortho Dermatologics segment consists of the: (i) Ortho Dermatologics and (ii) Global Solta reporting units. The Diversified Products segment consists of the: (i) Neurology and Other, (ii) Generics and (iii) Dentistry reporting units. There was no triggering event which would require the Company to test goodwill for

impairment as a result of the second quarter realignment of the segment structure as it did not result in a change in the reporting units.

~~June 30,~~ 2018 Annual Goodwill Impairment Test

~~During the three months ended June 30, 2018, the~~The Company ~~made certain revisions to~~conducted its ~~forecasts for the Salix reporting unit. The revisions reflected, among other matters: (i) the launch of a generic competitor in July 2018 to the Company’s Uceris~~^® ~~Tablet product, (ii) the improved performance of the remaining Salix product portfolio, including the Xifaxan~~^® products and (iii) certain other assumptions used in preparing its discounted cash flow model. Using the revised forecasts, management performed a qualitative assessment of the Salix reporting unit to determine if testing was required. As part of this assessment, management compared the reporting unit’s operating results to its original forecasts. Management noted that the forecasts as revisedannual goodwill impairment test as of ~~June 30, 2018 for the Salix reporting unit did not result in cash flows materially different than those used in management's January~~October 1, 2018 ~~testing~~ and the difference in the forecasts would not change the conclusion of the Company’s goodwill impairment testing as of January 1, 2018. The Company also considered the sensitivity of its conclusions as they

~~relate to changes in the estimates and assumptions. Based on its qualitative assessments, management believes~~determined that the carrying value of the ~~Salix~~Dentistry reporting unit ~~did not exceed~~exceeded its fair value and, as a result, the Company recognized a goodwill impairment of ~~June 30, 2018 and, therefore, concluded a quantitative assessment was not required.~~

~~During~~$109 million for the ~~three months ended June 30, 2018, unforeseen changes in the business dynamics of the Ortho Dermatologics~~Dentistry reporting unit, representing the full amount of goodwill for the reporting unit. Changing market conditions such ~~as changes in the dermatology sector, additional risks to the exclusivity of certain products~~as: (i) an increasing competitive environment and ~~a longer than originally expected launch cycle for a certain product, were factors that~~(ii) increasing pricing pressures negatively impacted the reporting unit's operating ~~results beyond management's expectations as of January 1, 2018, when the~~results. The Company ~~performed its last goodwill impairment test. In response~~is taking steps to address these ~~adverse~~changing market and business ~~indicators, the Company performed a goodwill impairment test of the Ortho Dermatologics~~conditions.

The Company's remaining reporting ~~unit. Based on~~units passed the goodwill impairment test ~~performed,~~as the estimated fair value of ~~the Ortho Dermatologics~~each reporting unit exceeded its carrying value at the date of testing ~~by approximately 5%~~ and, therefore, there was no impairment to ~~goodwill.~~goodwill for any reporting unit other than the Dentistry reporting unit. In order to evaluate the sensitivity of its fair value calculations on the goodwill impairment test, the Company compared the carrying value of each reporting unit to its fair value as of October 1, 2018, the date of testing. As of October 1, 2018, the fair value of each reporting unit with associated goodwill exceeded its carrying value by more than 15%.

2019 Interim Goodwill Impairment Assessment

No ~~other~~ events occurred or circumstances changed during the period ~~January~~October 1, 2018 (the date goodwill was last tested for ~~impairment for all reporting units other than the Ortho Dermatologics reporting unit)~~impairment) through June 30, ~~2018 that would indicate that the fair value of any reporting unit, other than the Salix and Ortho Dermatologics reporting units, might be below its carrying value.~~

~~September 30, 2018~~

Other than the events previously disclosed, no events occurred or circumstances changed during the period January 1, 2018 (the date goodwill was last tested for impairment for all reporting units other than the Ortho Dermatologics reporting unit) through September 30, 20182019 that would indicate that the fair value of any reporting unit might be below its carrying value. ~~However, as management concluded that~~Based on the ~~fair value~~results of the ~~Salix reporting unit and Ortho Dermatologics reporting unit only marginally exceeded their respective carrying values as of June 30,~~October 1, 2018 annual goodwill impairment test, the Company ~~performed~~continues to perform qualitative interim assessments of the ~~Salix reporting unit~~carrying value and ~~Ortho Dermatologics reporting unit to determine if testing was required.~~

~~As part of its qualitative assessment~~fair value of the Ortho Dermatologics reporting unit on a quarterly basis to determine if impairment testing of goodwill will be warranted. As part of the qualitative assessment as of June 30, 2019, management compared the reporting unit’s operating results to ~~its~~the forecast asused to test the goodwill of ~~June 30, 2018. The latest forecast as of September 30, 2018 for~~ the Ortho Dermatologics reporting unit was not materially different than the forecast used in management's June 30, 2018 testing and the differences in the forecast would not change the conclusion of the Company’s goodwill impairment testing as of ~~June 30,~~October 1, 2018. As part of the qualitative assessment, the Company also considered the sensitivity of its conclusion as it relates to changes in the estimates and assumptions used in the latest forecast available for each period. Based on the qualitative assessment, management ~~believes~~believed that the carrying value of Ortho Dermatologics reporting unit did not exceed its fair value and, therefore, concluded a quantitative assessment was not ~~required.~~required at June 30, 2019.

As part of its qualitative assessment of the Salix reporting unit, management compared the reporting unit’s operating results to its forecast as of January 1, 2018. During the three months ended September 30, 2018, the Company made certain revisions to its forecast for the Salix reporting unit, the most significant of which was to reflect the positive impact of the settlement agreement between the Company and Actavis resolving the intellectual property litigation regarding Xifaxan^®~~tablets, 550 mg. As discussed in further detail in Note 18, "LEGAL PROCEEDINGS”, the parties have agreed to dismiss all litigation related to Xifaxan~~^® ~~tablets, 550 mg, granting a license to Actavis to enter the market effective January 1, 2028 (or earlier under certain circumstances). All intellectual property protecting Xifaxan~~^®~~will remain intact and enforceable. Final patent expiry on Xifaxan~~^® tablets, 550 mg is late 2029. Using the revised forecasts, management performed a qualitative assessment of the Salix reporting unit to determine if testing was required. As part of this assessment, management considered the sensitivity of its conclusions as they relate to changes in the estimates and assumptions used in the latest forecast available for each period. Based on its qualitative assessment and the positive resolution of the Xifaxan^® agreement, management believes that the fair value of the Salix reporting unit exceeded its carrying value as of September 30, 2018 and, therefore, concluded a quantitative assessment was not required.

The Company does not believe there were any qualitative factors which would indicate it is more likely than not that the carrying value of any reporting unit exceeds its fair value as of September 30, 2018. However, the Company continues to monitor the market conditions of its Dentistry reporting unit including: (i) an increasing competitive environment and (ii) increasing pricing pressures, which could negatively impact the reporting unit's operating results over the long term. The Company is taking steps to address these changing market conditions.

If market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the ~~future. In accordance with the Company's accounting policies, the Company will perform its annual goodwill impairment test as of October 1, 2018.~~future and those charges can be material.

Accumulated goodwill impairment charges through ~~September~~June 30, ~~2018~~2019 were ~~$3,602~~$3,711 million.


9.	ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consist of:



(in millions)	June 30, 2019		December 31, 2018
Product rebates	$	981	$	998
Product returns	774		813
Interest	284		273
Employee compensation and benefit costs	241		301
Income taxes payable	150		167
Other	692		645
	$	3,122	$	3,197

(in millions) September 30,
2018 December 31,
2017
Product rebates $ 1,102
$ 1,094
Product returns 808
863
Interest 432
324
Employee compensation and benefit costs 285
259
Income taxes payable 156
202
Other 641
952
$ 3,424
$ 3,694


10.	FINANCING ARRANGEMENTS

Principal amounts of debt obligations and principal amounts of debt obligations net of premiums, discounts and issuance costs consist of the following:



		June 30, 2019				December 31, 2018
(in millions)	Maturity	Principal Amount		Net of Premiums, Discounts and Issuance Costs		Principal Amount		Net of Premiums, Discounts and Issuance Costs
Senior Secured Credit Facilities:
2023 Revolving Credit Facility	June 2023	$	150	$	150	$	75	$	75
June 2025 Term Loan B Facility	June 2025	4,141		4,029		4,394		4,269
November 2025 Term Loan B Facility	November 2025	1,406		1,384		1,481		1,456
Senior Secured Notes:
6.50% Secured Notes	March 2022	1,250		1,240		1,250		1,239
7.00% Secured Notes	March 2024	2,000		1,981		2,000		1,979
5.50% Secured Notes	November 2025	1,750		1,732		1,750		1,730
5.75% Secured Notes	August 2027	500		493		—		—
Senior Unsecured Notes:
5.625%	December 2021	—		—		700		697
5.50%	March 2023	402		400		1,000		995
5.875%	May 2023	1,548		1,539		3,250		3,229
4.50% euro-denominated debt	May 2023	1,706		1,696		1,720		1,709
6.125%	April 2025	3,250		3,228		3,250		3,226
9.00%	December 2025	1,500		1,471		1,500		1,469
9.25%	April 2026	1,500		1,483		1,500		1,482
8.50%	January 2027	1,750		1,757		750		738
7.00%	January 2028	750		740		—		—
7.25%	May 2029	750		740		—		—
Other	Various	16		16		12		12
Total long-term debt and other		$	24,369	24,079		$	24,632	24,305
Less: Current portion of long-term debt and other				56				228
Non-current portion of long-term debt				$	24,023			$	24,077

September 30, 2018
December 31, 2017
(in millions)
Maturity
Principal Amount
Net of Discounts and Issuance Costs
Principal Amount
Net of Discounts and Issuance Costs
Senior Secured Credit Facilities:

2018 Revolving Credit Facility April 2018 $ —
$ —
$ —
$ —
2020 Revolving Credit Facility
(1)
—

—

250

250
2023 Revolving Credit Facility
June 2023
75

75

—

—
Series F Tranche B Term Loan Facility
April 2022
—

—

3,521

3,420
2025 Term Loan B Facility June 2025 4,451
4,320
—
—
Senior Secured Notes:

6.50% Secured Notes
March 2022
1,250

1,238

1,250

1,235
7.00% Secured Notes
March 2024
2,000

1,978

2,000

1,975
5.50% Secured Notes November 2025 1,750
1,730
1,750
1,729
Senior Unsecured Notes:

5.375%
March 2020
—

—

1,708

1,699
7.00%
October 2020
—

—

71

71
6.375%
October 2020
—

—

661

656
7.50%
July 2021
1,625

1,617

1,625

1,615
6.75%
August 2021
—

—

650

648
5.625%
December 2021
900

896

900

896
7.25%
July 2022
—

—

550

545
5.50%
March 2023
1,000

994

1,000

993
5.875%
May 2023
3,250

3,228

3,250

3,224
4.50% euro-denominated debt
May 2023
1,740

1,729

1,801

1,787
6.125%
April 2025
3,250

3,225

3,250

3,222
9.00% December 2025 1,500
1,468
1,500
1,464
9.25% April 2026 1,500
1,481
—
—
8.50% January 2027 750
738
—
—
Other
Various
14

14

15

15
Total long-term debt and other

$ 25,055

24,731

$ 25,752

25,444
Less: Current portion of long-term debt and other

298

209
Non-current portion of long-term debt

$ 24,433

$ 25,235

¹ ~~The 2020 Revolving Credit Facility available at December 31, 2017 had a maturity date of April 2020 and was replaced with the 2023 Revolving Credit Facility on June 1, 2018 as discussed below.~~

On September 26, 2018, the Company issued an irrevocable 30-day notice to redeem $125 million of 7.50% Senior Unsecured Notes due 2021. These notes were redeemed on October 26, 2018 using cash generated from operations and are included in Current portion of long-term debt and other as of September 30, 2018.

Covenant Compliance

The Senior Secured Credit Facilities (as defined below) and the indentures governing the ~~Company’s~~ Senior Secured Notes and Senior Unsecured Notes contain customary affirmative and negative covenants and specified events of default. These affirmative and negative covenants include, among other things, and subject to certain qualifications and exceptions, covenants that restrict the Company’s ability and the ability of its subsidiaries to: incur or guarantee additional indebtedness; create or permit liens on assets; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness;

make certain investments and other restricted payments; engage in mergers, acquisitions, consolidations and amalgamations; transfer and sell certain assets; and engage in transactions with affiliates. The 2023 Revolving Credit Facility (as defined below) also contains a financial maintenance covenant ~~consisting of~~that requires the Company to maintain a first lien net leverage ~~ratio.~~ratio of not greater than 4.00:1.00. The financial maintenance covenant may be waived or amended without the consent of the term loan facility lenders and contains a customary term loan facility standstill.

As of ~~September~~June 30, ~~2018,~~2019, the Company was in compliance with its financial maintenance covenant related to its debt obligations. The Company, based on its current forecast for the next twelve months from the date of issuance of these financial statements, expects to remain in compliance with its financial maintenance covenant and meet its debt service obligations over that same period.

The Company continues to take steps to improve its operating results to ensure continual compliance with its financial maintenance covenant and may take other actions to reduce its debt levels to align with the Company’s long term strategy, including divesting other businesses, refinancing debt and issuing equity or equity-linked securities as deemed appropriate.

Senior Secured Credit Facilities

On February 13, 2012, the Company and certain of its subsidiaries as guarantors entered into the “Senior Secured Credit Facilities” under the Company’s Third Amended and Restated Credit and Guaranty Agreement, as amended (the “Third Amended Credit Agreement”) with a syndicate of financial institutions and investors, as lenders. As of January 1, ~~2017,~~2018, the Third Amended Credit Agreement, as amended, provided for: (i) a $1,500 million ~~Revolving Credit Facility maturing on April 20, 2018 (the "2018 Revolving Credit Facility"),~~of revolving credit facilities, which included a sublimit for the issuance of standby and commercial letters of credit and a sublimit for swing line loans and (ii) a series of tranche B term loans maturing ~~during the years 2016 through 2022.~~

On March 21, 2017, the Company entered into Amendment No. 14 to the Third Amended Credit Agreement (“Amendment No. 14”), which: (i) provided additional financing from an incremental term loan under the Company's Serieson April 1, 2022 (the "Series F Tranche B Term Loan Facility of $3,060 million (the “Series F-3 Tranche B Term Loan Facility”), (ii) amended the financial covenants contained in the Third Amended Credit Agreement, (iii) increased the amortization rate for the Series F-3 Tranche B Term Loan Facility from 0.25% per quarter (1% per annum) to 1.25% per quarter (5% per annum), with quarterly repayments starting March 31, 2017, (iv) amended certain financial definitions, including the definition of Consolidated Adjusted EBITDA and (v) provided additional ability for the Company to, among other things, incur indebtedness and liens, consummate acquisitions and make other investments, including relaxing certain limitations imposed by prior amendments. The proceeds from the additional financing, combined with the proceeds from the issuance of the March 2022 Secured Notes (as they are defined below) and the March 2024 Secured Notes (as they are defined below) and cash generated from operations, were used to: (i) repay all outstanding balances under the Company’s Series A-3 Tranche A Term Loan Facility, Series A-4 Tranche A Term Loan Facility, Series D-2 Tranche B Term Loan Facility, Series C-2 Tranche B Term Loan Facility, and Series E-1 Tranche B Term Loan Facility (collectively the “March 2017 Refinanced Debt”), (ii) repurchase $1,100 million in principal amount of 6.75% Senior Unsecured Notes due August 2018 (the “August 2018 Unsecured Notes”), (iii) repay $350 million of amounts outstanding under the Company's 2018 Revolving Credit Facility and (iv) pay related fees and expenses (collectively, the “March 2017 Refinancing Transactions”Facility").

Amendment No. 14 was accounted for as a modification of debt to the extent the March 2017 Refinanced Debt was replaced with the incremental Series F-3 Tranche B Term Loan Facility issued to the same creditor and an extinguishment of debt to the extent the March 2017 Refinanced Debt was replaced with Series F-3 Tranche B Term Loan Facility issued to a different creditor. The March 2017 Refinanced Debt that was replaced with the proceeds of the newly issued Senior Secured Notes was accounted for as an extinguishment of debt. For amounts accounted for as an extinguishment of debt, the Company incurred a Loss on extinguishment of debt of $27 million representing the difference between the amount paid to settle the extinguished debt and the extinguished debt’s carrying value (the stated principal amount net of unamortized discount and debt issuance costs). Payments made to the lenders of $38 million associated with the issuance of the new Series F-3 Tranche B Term Loan Facility were capitalized and were being amortized as interest expense over the remaining term of the Series F-3 Tranche B Term Loan Facility. Third-party expenses of $3 million associated with the modification of debt were expensed as incurred and included in Interest expense.

On March 28, 2017, the Company entered into Amendment No. 15 to the Third Amended Credit Agreement (“Amendment No. 15”) which provided for the extension of the maturity date of $1,190 million of revolving credit commitments under the 2018 Revolving Credit Facility from April 20, 2018 to the earlier of: (i) April 20, 2020 and (ii) the date that was 91 calendar days prior to the scheduled maturity of any series or tranche of term loans under the Third Amended Credit Agreement, certain Senior Secured Notes or Senior Unsecured Notes and any other indebtedness for borrowed money in excess of $750 million (the "Extended Revolving Maturity Date", and these extended commitments comprising the “2020 Revolving Credit Facility”). Amendment No. 15 was accounted for, in part, as a debt modification, whereby the fees paid to lenders agreeing to extend

their commitment through April 20, 2020 and the fees paid to lenders providing additional commitments were recognized as additional debt issuance costs and were being amortized over the remaining term of the 2020 Revolving Credit Facility. Amendment No. 15 was also accounted for, in part, as an extinguishment of debt and the Company incurred a Loss on extinguishment of debt of $1 million representing the unamortized debt issuance costs associated with the commitments canceled by lenders in the amendment. On April 19, 2018, the Company entered into Amendment No. 17 to the Third Amended Credit Agreement which provided for the extension of the maturity date of an additional $60 million of revolving credit commitments under the 2018 Revolving Credit Facility from April 20, 2018 to the Extended Revolving Maturity Date under the 2020 Revolving Credit Facility consistent with the terms of Amendment No. 15 outlined above. The remaining $250 million of revolving credit commitments under the 2018 Revolving Credit Facility matured on April 20, 2018.

In April 2017, using the net proceeds from the Skincare Sale and the proceeds from the divestiture of a manufacturing facility in Brazil, the Company repaid $220 million of its Series F Tranche B Term Loan Facility. On July 3, 2017, using the net proceeds from the Dendreon Sale, the Company repaid $811 million of its Series F Tranche B Term Loan Facility. On October 5, 2017, using the net proceeds from the iNova Sale, the Company repaid $923 million of its Series F Tranche B Term Loan Facility. On November 10, 2017, using the net proceeds from the Obagi Sale, the Company repaid $181 million of its Series F Tranche B Term Loan Facility. On November 21, 2017, using the proceeds from the November 2017 Refinancing Transactions (as defined below), the Company repaid $750 million of its Series F Tranche B Term Loan Facility.

On November 21, 2017, the Company entered into Amendment No. 16 to the Third Amended Credit Agreement (“Amendment No. 16”) to reprice the Series F Tranche B Term Loan Facility. The applicable margins for borrowings under the Series F Tranche B Term Loan Facility, as modified by the repricing, were 2.50% with respect to base rate borrowings and 3.50% with respect to LIBO rate borrowings. Amendment No. 16 also increased the letter of credit facility sublimit under the Third Amended Credit Agreement to $300 million and made certain other amendments to provide the Company with additional flexibility to enter into certain cash management transactions.

On June 1, 2018, the Company entered into ~~a Restatement Agreement in respect of a Fourth Amended and~~the Restated Credit ~~and Guaranty Agreement (the “Restated Credit Agreement”).~~Agreement. The Restated Credit Agreement amended and restated in full the Third Amended Credit Agreement. The Restated Credit Agreement replaced the 2020 Revolving Credit Facility with a revolving credit facility of $1,225 million (the "2023 Revolving Credit Facility") and replaced the Series F Tranche B Term Loan Facility principal amount outstanding of $3,315 million with ~~the~~a seven year Tranche B Term Loan Facility of $4,565 million (the ~~“2025~~“June 2025 Term Loan B Facility”) borrowed by the Company’s subsidiary, Bausch Health Americas, Inc. ("BHA") (formerly Valeant Pharmaceuticals ~~International (“VPI”)~~International).

The 2023 Revolving Credit Facility matures on the earlier of June 1, 2023 and the date that is 91 calendar days prior to the scheduled maturity of indebtedness for borrowed money of the Company or ~~VPI~~BHA in an aggregate principal amount in excess of $1,000 million. Both the Company and ~~VPI~~BHA are borrowers with respect to the 2023 Revolving Credit Facility. Borrowings under the 2023 Revolving Credit Facility may be made in U.S. dollars, Canadian dollars or euros.

On June 1, 2018, the Company issued an irrevocable notice of redemption for the remaining outstanding principal amounts of: (i) $691 million of 5.375% Senior Unsecured Notes due 2020 (the "March 2020 Unsecured Notes"), (ii) $578 million of 6.75% Senior Unsecured Notes due 2021(the "August 2021 Unsecured Notes"), (iii) $550 million of 7.25% Senior Unsecured Notes due 2022 (the “July 2022 Unsecured Notes”) and (iv) $146 million of 6.375% Senior Unsecured Notes due 2020 (the “6.375% October 2020 Unsecured Notes” and together with the March 2020 Unsecured Notes, August 2021 Unsecured Notes and July 2022 Unsecured Notes the “June 2018 Unsecured Refinanced Debt”). On June 1, 2018, using the remaining net proceeds from the June 2025 Term Loan B Facility, the net proceeds from the issuance of $750 million in aggregate principal amount of 8.50% Senior Unsecured Notes due 2027 (the "January 2027 Unsecured Notes") by ~~VPI~~BHA and cash ~~generated from operations,~~on hand, the Company prepaid the remaining Series F Tranche B Term Loan Facility and ~~deposited sufficient funds with The Bank of New York Mellon Trust Company, N.A., as trustee under the indentures governing the June 2018 Unsecured Refinanced Debt, to redeem~~redeemed the June 2018 Unsecured Refinanced Debt at ~~their~~its aggregate redemption price and the indentures governing the June 2018 Unsecured Refinanced Debt were discharged (collectively, the “June 2018 Refinancing Transactions”).

~~The~~In connection with the Restated Credit Agreement, was accounted for as a modification of debt, to the extent the June 2018 Unsecured Refinanced Debt was replaced with newly issued debt to the same creditor, and as an extinguishment of debt if: (i) the June 2018 Unsecured Refinanced Debt was replaced with newly issued debt to a different creditor, (ii) a portion of the unamortized deferred financing fees was allocated to debt that was paid down or (iii) the borrowing capacity declined when issuing a new revolving credit facility. The following was accounted for as an extinguishment of debt: (i) the difference between the amounts paid to redeem

the June 2018 Unsecured Refinanced Debt and the June 2018 Unsecured Refinanced Debt’s carrying value, (ii) the replacement of the Series F Tranche B Term Loan with the 2025 Term Loan B Facility to the extent any unamortized deferred financing fees were associated with the portion of the Series F Tranche B Term Loan that was paid down and (iii) the replacement of the 2020 Revolving Credit Facility with the 2023 Revolving Credit Facility to the extent any unamortized deferred financing fees were associated with the decline in borrowing capacity. For amounts accounted for as an extinguishment of debt, the Company incurred a ~~Loss~~loss on extinguishment of debt of $48 million. ~~Payments~~Certain payments made to the lenders and ~~a portion of payments made to~~ third parties of $74 million associated with the ~~June 2018 Refinancing Transactions~~Restated Credit Agreement were capitalized and are being amortized as interest expense over the remaining terms of the ~~debt, ranging from 2023 through 2027.~~debt. Third-party expenses of $4 million were expensed as Interest expense.

On November 27, 2018, the Company entered into the First Incremental Amendment to the Restated Credit Agreement, which provided an additional seven year Tranche B Term Loan Facility of $1,500 million (the "November 2025 Term Loan B Facility") and used the net proceeds, and cash on hand, to repay $1,483 million of 7.50% Senior Unsecured Notes due July 2021 (the “July 2021 Unsecured Notes”) in a tender offer (the "November 2018 Refinancing Transactions"). On December 27, 2018, the Company redeemed, using cash on hand, the remaining outstanding principal amount of $17 million of the July 2021 Unsecured Notes.

In connection with the repayment of the July 2021 Unsecured Notes, the Company incurred a loss on extinguishment of debt of $43 million. Certain payments made to the lenders and third parties of $25 million associated with the ~~modification~~issuance of ~~debt~~the November 2025 Term Loan B Facility were ~~expensed~~capitalized and are being amortized as ~~incurred and included in Interest expense.~~interest expense over the remaining term of the November 2025 Term Loan B Facility.

As of ~~September~~June 30, ~~2018,~~2019, the Company had ~~$75~~$150 million of outstanding borrowings, ~~$170~~$169 million of issued and outstanding letters of credit and remaining availability of ~~$980~~$906 million under its 2023 Revolving Credit Facility.

Current Description of Senior Secured Credit Facilities

Borrowings under the Senior Secured Credit Facilities in U.S. dollars bear interest at a rate per annum equal to, at the Company's option, either: (i) a base rate determined by reference to the ~~higher~~highest of: (a) the prime rate (as defined in the Restated Credit Agreement), (b) the federal funds effective rate plus 1/2 of 1.00% orand (c) the eurocurrency rate (as defined in the Restated Credit Agreement) for a period of one month plus 1.00% (or if such eurocurrency rate shall not be ascertainable, 1.00%) or (ii) a eurocurrency rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs (provided however, that the eurocurrency rate shall at no time be less than ~~zero)~~0.00% per annum), in each case plus an applicable margin.

Borrowings under the 2023 Revolving Credit Facility in ~~Euros~~euros bear interest at a eurocurrency rate determined by reference to the costs of funds for ~~Euro~~euro deposits for the interest period relevant to such borrowing (provided however, that the eurocurrency rate shall at no time be less than 0.00% per annum), plus an applicable margin.

Borrowings under the 2023 Revolving Credit Facility in Canadian dollars bear interest at a rate per annum equal to, at the Company's option, ~~either (a)~~either: (i) a prime rate determined by reference to the higher of: ~~(1)~~(a) the rate of interest last quoted by The Wall Street Journal as the “Canadian Prime Rate” or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Bank of Canada as its prime rate and ~~(2)~~(b) the 1 month BA rate (as defined below) calculated daily plus 1.00% (provided however, that the prime rate shall at no time be less than 0.00%) or ~~(b)~~(ii) the bankers’ acceptance rate for Canadian dollar deposits in the Toronto interbank market (the “BA rate”) for the interest period relevant to such borrowing (provided however, that the BA rate shall at no time be less than 0.00% per annum), in each case plus an applicable margin.

Subject to certain exceptions and customary baskets set forth in the Restated Credit Agreement, the Company is required to make mandatory prepayments of the loans under the Senior Secured Credit Facilities under certain circumstances, including from: (i) 100% of the net cash proceeds of insurance and condemnation proceeds for property or asset losses (subject to reinvestment rights and net proceeds threshold), (ii) 100% of the net cash proceeds from the incurrence of debt (other than permitted debt as described in the Restated Credit Agreement), (iii) 50% of ~~Consolidated~~ Excess Cash Flow (as defined in the Restated Credit Agreement) subject to decrease based on leverage ratios and subject to a threshold amount and (iv) 100% of net cash proceeds from asset sales (subject to reinvestment rights). These mandatory prepayments may be used to satisfy future amortization.

The applicable interest rate margins for the June 2025 Term Loan B Facility and the November 2025 Term Loan B Facility are 2.00% and 1.75%, respectively, with respect to base rate and prime rate borrowings and 3.00% and 2.75%, respectively, with respect to eurocurrency rate and BA rate borrowings.

As of ~~September~~June 30, ~~2018,~~2019, the stated ~~rate~~rates of interest on the Company’s borrowings under the June 2025 Term Loan B Facility ~~was 5.10%~~and the November 2025 Term Loan B Facility were 5.41% and 5.16% per ~~annum.~~annum, respectively.

The amortization rate for both the June 2025 Term Loan B Facility and the November 2025 Term Loan B Facility is 5.00% per annum. The Company may direct that prepayments be applied to such amortization payments in order of maturity.

As of ~~September~~June 30, ~~2018,~~2019, the remaining mandatory quarterly amortization payments for the Senior Secured Credit Facilities were ~~$1,427~~$1,530 million through ~~June~~November 1, 2025.

The applicable interest rate margins for borrowings under the 2023 Revolving Credit Facility are 1.50%-2.00% with respect to base rate or prime rate borrowings and 2.50%-3.00% with respect to eurocurrency rate or BA rate borrowings. As of ~~September~~June 30, ~~2018,~~2019, the stated

rate of interest on the 2023 Revolving Credit Facility was ~~5.10%~~5.42% per annum. In addition, the Company is required to pay commitment fees of 0.25%~~- 0.50%~~-0.50% per annum with respect to the unutilized commitments under the 2023 Revolving Credit Facility, payable quarterly in arrears. The Company also is required to pay: (i) letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on eurocurrency rate borrowings under the 2023 Revolving Credit Facility on a per annum basis, payable quarterly in arrears, (ii) customary fronting fees for the issuance of letters of credit and (iii) agency fees.

The 2023 Revolving Credit Facility includes a financial maintenance covenant that requires the Company to maintain a first lien net leverage ratio of not greater than 4.00:1.00. The financial maintenance covenant may be waived or amended without the consent of the term loan facility lenders and contains a customary term loan facility standstill.

The Restated Credit Agreement permits the incurrence of ~~$1,000 million of~~ incremental credit facility borrowings up to the greater of $1,000 million and 28.5% of Consolidated Adjusted EBITDA (as defined in the Restated Credit Agreement), subject to customary terms and conditions, as well as the incurrence of additional incremental credit facility borrowings subject to ~~in the case of secured debt,~~ a secured leverage ratio of not greater than 3.50:~~1.00, and, in the case of unsecured debt, a total leverage ratio of not greater than 6.50:1.00 or an interest coverage ratio of not less than 2.00:~~1.00.

Senior Secured Notes

The Senior Secured Notes are guaranteed by each of the Company’s subsidiaries that is a guarantor under the Restated Credit Agreement and existing Senior Unsecured Notes (together, the “Note Guarantors”). The Senior Secured Notes and the guarantees related thereto are senior obligations and are secured, subject to permitted liens and certain other exceptions, by the same first priority liens that secure the Company’s obligations under the Restated Credit Agreement under the terms of the ~~indenture~~indentures governing the Senior Secured Notes.

The Senior Secured Notes and the guarantees rank equally in right of repayment with all of the Company’s and Note Guarantors’ respective existing and future unsubordinated indebtedness and senior to the Company’s and Note Guarantors’ respective future subordinated indebtedness. The Senior Secured Notes and the guarantees related thereto are effectively pari passu with the Company’s and the Note Guarantors’ respective existing and future indebtedness secured by a first priority lien on the collateral securing the Senior Secured Notes and effectively senior to the Company’s and the Note Guarantors’ respective existing and future indebtedness that is unsecured, including the existing Senior Unsecured Notes, or that is secured by junior liens, in each case to the extent of the value of the collateral. In addition, the Senior Secured Notes are structurally subordinated to: (i) all liabilities of any of the Company’s subsidiaries that do not guarantee the Senior Secured Notes and (ii) any of the Company’s debt that is secured by assets that are not collateral.

Upon the occurrence of a change in control (as defined in the indentures governing the Senior Secured Notes), unless the Company has exercised its right to redeem all of the notes of a series, holders of the Senior Secured Notes may require the Company to repurchase such holder’s notes, in whole or in part, at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest.

~~6.50%~~5.75% Senior Secured Notes due ~~2022 and7.00% Senior Secured Notes due 2024~~2027 - March ~~2017 Refinancing Transactions~~

As part of the March 2017 Refinancing Transactions, the Company issued $1,250 million aggregate principal amount of 6.50% senior secured notes due March 15, 2022 (the “March 2022 Secured Notes”) and $2,000 million aggregate principal amount of 7.00% senior secured notes due March 15, 2024 (the “March 2024 Secured Notes”), in a private placement, the proceeds of which, when combined with the proceeds from the Series F-3 Tranche B Term Loan Facility and cash generated from operations, were used to: (i) repay the March 2017 Refinanced Debt, (ii) repurchase $1,100 million in principal amount of August 2018 Senior Unsecured Notes, (iii) repay $350 million of amounts outstanding under the Company's 2018 Revolving Credit Facility and (iv) pay related fees and expenses. Interest on these notes is payable semi-annually in arrears on each March 15 and September 15.

~~5.50% Senior Secured Notes due 2025 - October 2017 Refinancing Transactions and November 2017~~2019 Refinancing Transactions

On ~~October 17, 2017,~~March 8, 2019, BHA and the Company ~~issued~~issued: (i) $1,000 million aggregate principal amount of ~~5.50%~~January 2027 Unsecured Notes and (ii) $500 million aggregate principal amount of 5.75% Senior Secured Notes due ~~November 2025~~August 2027 (the ~~“November 2025~~"August 2027 Secured ~~Notes”~~Notes"), respectively, in a private placement, a portion of the net proceeds of which, and cash on hand, were used to: (i) repurchase ~~$569~~$584 million ~~in principal amount~~ of ~~the 6.375% October 2020 Unsecured Notes and (ii) repurchase $431 million in principal amount of the 7.00%~~5.875% Senior Unsecured Notes due ~~2020~~2023 (the ~~"7.00% October 2020~~"May 2023 Unsecured Notes"), (ii) repurchase $518 million of 5.625% Senior Unsecured Notes due 2021 (the “December 2021 Unsecured Notes”), (iii) repurchase $216 million of 5.50% Senior Unsecured Notes due 2023 (the "March 2023 Unsecured Notes”) and (iv) pay all fees and expenses associated with these transactions (collectively, the ~~“October 2017~~“March 2019 Refinancing Transactions”). During April 2019, the Company redeemed $182 million of the December 2021 Unsecured Notes, representing the remaining outstanding principal balance of the December 2021 Unsecured Notes and completing the refinancing of $1,500 million of debt in connection with the March 2019 Refinancing Transactions. The ~~related fees~~March 2019 Refinancing Transactions were accounted for as an extinguishment of debt and ~~expenses were~~the Company incurred a loss on extinguishment of debt of $8 million representing the difference between the amount paid ~~using cash generated from operations.~~to settle the extinguished debt and the extinguished debt’s carrying value. Interest on the ~~November 2025~~August 2027 Secured Notes is payable semi-annually in arrears on each ~~May 1~~February 15 and ~~November 1.~~August 15.

~~On November 21, 2017,~~The August 2027 Secured Notes are redeemable at the option of the Company, ~~issued $750 million~~in whole or in part, at any time on or after August 15, 2022, at the redemption prices set forth in the indenture. The Company may redeem some or all of the August 2027 Secured Notes prior to August 15, 2022 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium. Prior to August 15, 2022, the Company may redeem up to 40% of the aggregate principal amount of the ~~November 2025~~August 2027 Secured Notes using the proceeds of certain equity offerings at the redemption price set forth in ~~a private placement. These are additional notes and form part of~~ the same series as the Company’s existing November 2025 Secured Notes. The proceeds were used to prepay $750 million of its Series F Tranche B Term Loan Facility. The related fees and expenses were paid using cash generated from operations (collectively, the “November 2017 Refinancing Transactions”).indenture.

Senior Unsecured Notes

The Senior Unsecured Notes issued by the Company are the Company’s senior unsecured obligations and are jointly and severally guaranteed on a senior unsecured basis by each of its subsidiaries that is a guarantor under the Senior Secured Credit Facilities. The Senior Unsecured Notes issued by ~~VPI~~BHA are senior unsecured obligations of ~~VPI~~BHA and are jointly and severally guaranteed on a senior unsecured basis by the Company and each of its subsidiaries (other than ~~VPI)~~BHA) that is a guarantor under the Senior Secured Credit Facilities. Future subsidiaries of the Company and ~~VPI,~~BHA, if any, may be required to guarantee the Senior Unsecured Notes.

If the Company experiences a change in control, the Company may be required to make an offer to repurchase each series of Senior Unsecured Notes, in whole or in part, at a purchase price equal to 101% of the aggregate principal amount of the Senior Unsecured Notes repurchased, plus accrued and unpaid interest.

~~6.75% Senior Unsecured Notes due 2018~~

In addition to the repurchase of $1,100 million of August 2018 Unsecured Notes as part of the March 2017 Refinancing Transactions, on August 15, 2017, the Company repurchased the remaining $500 million of outstanding August 2018 Unsecured Notes using cash generated from operations, plus accrued and unpaid interest.

~~9.00%Senior Unsecured Notes due 2025 - December 2017 Refinancing Transactions~~

On December 18, 2017, the Company issued $1,500 million aggregate principal amount of 9.00% Senior Unsecured Notes due 2025 (the “December 2025 Unsecured Notes”) in a private placement, the proceeds of which were used to: (i) repurchase $1,021 million in principal amount of the 6.375% October 2020 Unsecured Notes, (ii) repurchase $291 million in principal amount of the March 2020 Unsecured Notes and (iii) repurchase $188 million in principal amount of the 7.00% October 2020 Unsecured Notes (collectively, the “December 2017 Refinancing Transactions”). The related fees and expenses were paid using cash generated from operations. The December 2025 Unsecured Notes accrue interest at the rate of 9.00% per year, payable semi-annually in arrears on each of June 15 and December 15.

9.25% Senior Unsecured Notes due 2026 - March 2018 Refinancing Transactions

On March 26, 2018, ~~VPI~~BHA issued $1,500 million in aggregate principal amount of 9.25% Senior Unsecured Notes due 2026 (the “April 2026 Unsecured Notes”) in a private placement, the net proceeds of which, and cash on hand, were used to repurchase $1,500 million in aggregate principal amount of unsecured notes, which consisted of: (i) $1,017 million in principal amount of the March 2020 Unsecured Notes, (ii) $411 million in principal amount of the 6.375% October 2020 Unsecured Notes and (iii) $72 million in principal amount of the August 2021 Unsecured Notes. All fees and expenses associated with these transactions were paid with cash ~~generated from operations~~on hand (collectively, the “March 2018 Refinancing Transactions”). ~~During May~~The March 2018 ~~VPI redeemed~~Refinancing Transactions were accounted for as an ~~additional $104~~extinguishment of debt and the Company incurred a loss on extinguishment of debt of $26 million ~~in principal~~representing the difference between the amount ~~of 6.375% October 2020 Unsecured Notes using cash generated from operations.~~paid to settle the extinguished debt and the extinguished debt’s carrying value. The April 2026 Unsecured Notes accrue interest at the rate of 9.25% per year, payable semi-annually in arrears on each of April 1 and October 1.

VPI may redeem all or a portion of the April 2026 Unsecured Notes at any time prior to April 1, 2022, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, plus a “make-whole” premium. In addition, at any time prior to April 1, 2021, VPI may redeem up to 40% of the aggregate principal amount of the outstanding April 2026 Unsecured Notes with the net proceeds of certain equity offerings at the redemption price set forth in the April 2026 Unsecured Notes indenture. On or after April 1, 2022, VPI may redeem all or a portion of the April 2026 Unsecured Notes at the applicable redemption prices set forth in the April 2026 Unsecured Notes indenture, plus accrued and unpaid interest to the date of redemption.

8.50% Senior Unsecured Notes due 2027 - June 2018 Refinancing Transactions and March 2019 Refinancing Transactions

As part of the June 2018 Refinancing Transactions, ~~VPI~~BHA issued $750 million in aggregate principal amount of January 2027 Unsecured Notes in a private placement, the proceeds of which, when combined with the remaining net proceeds from the June 2025 Term Loan B Facility and cash ~~generated from operations,~~on hand, were deposited with The Bank of New York Mellon Trust Company, N.A., as trustee under the indentures governing the June 2018 Unsecured Refinanced Debt, to redeem the June 2018 Unsecured Refinanced Debt at its aggregate redemption price and the indentures governing the June 2018 Unsecured Refinanced Debt were discharged. The January 2027 Unsecured Notes accrue interest at the rate of 8.50% per year, payable semi-annually in arrears on each of January 31 and July 31.

~~VPI~~As part of the March 2019 Refinancing Transactions described above, BHA issued $1,000 million aggregate principal amount of 8.50% Senior Unsecured Notes due January 2027. These are additional notes and form part of the same series as BHA’s existing January 2027 Unsecured Notes.

7.00% Senior Unsecured Notes due 2028 and 7.25% Senior Unsecured Notes due 2029 - May 2019 Refinancing Transactions

On May 23, 2019, the Company issued: (i) $750 million aggregate principal amount of 7.00% Senior Unsecured Notes due January 2028 (the "January 2028 Unsecured Notes") and (ii) $750 million aggregate principal amount of 7.25% Senior Unsecured Notes due May 2029 (the "May 2029 Unsecured Notes"), respectively, in a private placement, the net proceeds of which, and cash on hand, were used to: (i) repurchase $1,118 million of May 2023 Unsecured Notes, (ii) repurchase $382 million of March 2023 Unsecured Notes and (iii) pay all fees and expenses associated with these transactions (collectively, the “May 2019 Refinancing Transactions”). The May 2019 Refinancing Transactions were accounted for as an extinguishment of debt and the Company incurred a loss on extinguishment of debt of $32 million representing the difference between the amount paid to settle the extinguished debt and the extinguished debt’s carrying value. Interest on the January 2028 Unsecured Notes is payable semi-annually in arrears on each January 15 and July 15. Interest on the May 2029 Unsecured Notes is payable semi-annually in arrears on each May 30 and November 30.

The January 2028 Unsecured Notes and the May 2029 Unsecured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after January 15, 2023 and May 30, 2024, respectively, at the redemption prices set forth in the respective indenture. The Company may redeem ~~all~~some or ~~a portion~~all of the January ~~2027~~2028 Unsecured Notes ~~at any time~~or the May 2029 Unsecured Notes prior to ~~July 31, 2022,~~January 15, 2023 and May 30, 2024, respectively, at a price equal to 100% of the principal amount thereof plus ~~accrued and unpaid interest, if any, to the date of redemption, plus~~ a “make-whole” premium. ~~In addition, at any time prior~~Prior to July ~~31, 2021, VPI~~15, 2022, and May 30, 2022, the Company may redeem up to 40% of the aggregate principal amount of the ~~outstanding~~ January ~~2027~~2028 Unsecured Notes ~~with~~or the ~~net~~May 2029 Unsecured Notes, respectively, using the proceeds of certain equity offerings at the redemption price set forth in the ~~January 2027 Unsecured Notes~~respective indenture. On or after July 31, 2022, VPI may redeem all or a portion of the January 2027 Unsecured Notes at the applicable redemption prices set forth in the January 2027 Unsecured Notes indenture, plus accrued and unpaid interest to the date of redemption.

Weighted Average Stated Rate of Interest

The weighted average stated rate of interest for the Company's outstanding debt obligations as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~6.32%~~6.44% and ~~6.07%~~6.23%, respectively.

Maturities and Mandatory Payments

Maturities and mandatory payments of debt obligations for the ~~period October through December 2018,~~remainder of 2019, the five succeeding years ending December 31 and thereafter are as follows:



(in millions)
Remainder of 2019	$	4
2020	203
2021	303
2022	1,553
2023	4,109
2024	2,303
Thereafter	15,894
Total debt obligations	24,369
Unamortized premiums, discounts and issuance costs	(290		)
Total long-term debt and other	$	24,079

(in millions)
October through December 2018 $ 125
2019 230
2020 228
2021 2,628
2022 1,478
2023 6,293
Thereafter 14,073
Total gross maturities 25,055
Unamortized discounts (324 )
Total long-term debt and other $ 24,731
On August 1, 2019, the Company repaid $100 million of long-term debt, which included: (i) $81 million of the June 2025 Term Loan B Facility and (ii) $19 million of the November 2025 Term Loan B Facility. These transactions are not reflected in the table above and are therefore included as due during 2020.


11.	PENSION AND POSTRETIREMENT EMPLOYEE BENEFIT PLANS

The Company sponsors defined benefit plans and a participatory defined benefit postretirement medical and life insurance plan, which covers certain U.S. employees and employees in certain other countries. Net periodic (benefit) cost for the Company’s defined benefit pension plans and postretirement benefit plan for the ~~three and nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 consists of:



	Pension Benefit Plans												Postretirement Benefit Plan
	U.S. Plan						Non-U.S. Plans						Postretirement Benefit Plan
(in millions)	2019			2018			2019			2018			2019			2018
Service cost	$	1		$	1		$	1		$	1		$	—		$	—
Interest cost	4			3			3			3			—			—
Expected return on plan assets	(6		)	(7		)	(3		)	(3		)	—			—
Amortization of prior service credit	—			—			—			—			(1		)	(1		)
Net periodic (benefit) cost	$	(1	)	$	(3	)	$	1		$	1		$	(1	)	$	(1	)

Pension Benefit Plans
Postretirement
Benefit
Plan
U.S. Plan Non-U.S. Plans
Three Months Ended September 30,
(in millions) 2018 2017 2018 2017 2018 2017
Service cost $ —
$ 1
$ 1
$ 1
$ —
$ —
Interest cost 2
2
1
1
1
1
Expected return on plan assets (4 ) (4 ) (1 ) (2 ) —
—
Amortization of prior service credit —
—
(1 ) —
(1 ) —
Amortization of net loss —
—
1
—
—
—
Net periodic (benefit) cost $ (2 ) $ (1 ) $ 1
$ —
$ —
$ 1

Pension Benefit Plans Postretirement
Benefit
Plan
U.S. Plan Non-U.S. Plans
Nine Months Ended September 30,
(in millions) 2018 2017 2018 2017 2018 2017
Service cost $ 1
$ 2
$ 2
$ 2
$ —
$ —
Interest cost 5
6
4
3
1
2
Expected return on plan assets (11 ) (10 ) (4 ) (4 ) —
—
Amortization of prior service credit —
—
(1 ) (1 ) (2 ) (2 )
Amortization of net loss —
—
1
1
—
—
Net periodic (benefit) cost $ (5 ) $ (2 ) $ 2
$ 1
$ (1 ) $ —

During the nine months ended September 30, 2018, the Company contributed $4 million, $6 million and $3 million to the U.S. pension benefit plans, the non-U.S. pension benefit plans and the postretirement benefit plan, respectively. The Company expects to contribute $5 million, $7 million and $6 million in 2018 to the U.S. pension benefit plans, the non-U.S. pension benefit plans and the postretirement benefit plan, respectively, inclusive of amounts contributed during the nine months ended September 30, 2018.


12.	LEASES

The Company leases certain facilities, vehicles and equipment principally under multi-year agreements generally having a lease term of one to twenty years, some of which include termination options and options to extend the lease term from one to five years or on a month-to-month basis. The Company includes options that are reasonably certain to be exercised as part of the lease term. The Company may negotiate termination clauses in anticipation of changes in market conditions but generally, these termination options are not exercised. Certain lease agreements also include variable payments that are dependent on usage or may vary month-to-month such as insurance, taxes and maintenance costs. None of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.

As discussed in Note 2, "SIGNIFICANT ACCOUNTING POLICIES" under the new standard for accounting for leases, which the Company adopted effective January 1, 2019, the Company is required to record a right-of-use asset and corresponding lease liability, equal to the present value of the lease payments at the commencement date of each lease. For all asset classes, in determining future lease payments, the Company has elected to aggregate lease components, such as payments for rent, taxes and insurance costs with non-lease components such as maintenance costs, and account for these payments as a single

lease component. In limited circumstances, when the information necessary to determine the rate implicit in a lease is available, the present value of the lease payments is determined using the rate implicit in that lease. If the information necessary to determine the rate implicit in a lease is not available, the Company uses its incremental borrowing rate at the commencement of the lease, which represents the rate of interest that the Company would incur to borrow on a collateralized basis over a similar term.

All leases must be classified as either an operating lease or finance lease. The classification is determined based on whether substantive control has been transferred to the lessee. The classification governs the pattern of lease expense recognition. For leases classified as operating leases, total lease expense over the term of the lease is equal to the undiscounted payments due in accordance with the lease arrangement. Fixed lease expense is recognized periodically on a straight-line basis over the term of each lease and includes: (i) imputed interest during the period on the lease liability determined using the effective interest rate method plus (ii) amortization of the right-of-use asset for that period. Amortization of the right-of-use asset during the period is calculated as the difference between the straight-line expense and the imputed interest on the lease liability for that period. Variable lease expense is recognized when the achievement of the specific target is considered probable. As of June 30, 2019, the Company's finance leases were not material.

Right-of-use assets and lease liabilities associated with the Company's operating leases are included in the Consolidated Balance Sheet as of June 30, 2019 as follows:



(in millions)
Right-of-use assets included in:
Other non-current assets	$	263
Lease liabilities included in:
Accrued and other current liabilities	$	47
Other non-current liabilities	235
Total lease liabilities	$	282

Sub-lease income is not material. Lease expense includes:



(in millions)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease costs	$	16	$	32
Variable operating lease costs	$	5	$	9
Short-term lease expense	$	1	$	1

Other information related to operating leases for the six months ended June 30, 2019 is as follows:



(dollars in millions)
Cash paid from operating cash flows for amounts included in the measurement of lease liabilities	$	39
Right-of-use assets obtained in exchange for new operating lease liabilities	$	11
Weighted-average remaining lease term	8.5 years
Weighted-average discount rate	6.2		%

Right-of-use assets obtained in exchange for new operating lease liabilities during the six months ended June 30, 2019 of $11 million in the table above does not include $282 million of right-of-use assets recognized upon adoption of the new standard for accounting for leases on January 1, 2019. See Note 2, "SIGNIFICANT ACCOUNTING POLICIES" for further detail regarding the impact of adoption.

As of June 30, 2019, future payments under noncancelable operating leases for the remainder of 2019, each of the five succeeding years ending December 31 and thereafter are as follows:



(in millions)
Remainder of 2019	$	33
2020	59
2021	45
2022	38
2023	33
2024	28
Thereafter	137
Total	373
Less: Imputed interest	91
Present value of remaining lease payments	282
Less: Current portion	47
Non-current portion	$	235

Upon adopting the new lease guidance, the Company elected the modified retrospective approach without revising prior periods. Accordingly, the Company is providing the following table of future payments under noncancelable operating leases as of December 31, 2018, for each of the five succeeding years ending December 31 and thereafter as previously disclosed under prior accounting guidance:



(in millions)	2019		2020		2021		2022		2023		Thereafter		Total
Future payments	$	78	$	60	$	44	$	39	$	32	$	166	$	419


13.	SHARE-BASED COMPENSATION

In May 2014, ~~the~~ shareholders approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”) which replaced the Company’s 2011 Omnibus Incentive Plan (the ~~"2011 Plan"~~“2011 Plan”) for future equity awards granted by the Company. The Company transferred the common shares available under the 2011 Plan to the 2014 Plan. The maximum number of common shares that may be issued to participants under the 2014 Plan is equal to 18,000,000 common shares, plus the number of common shares under the 2011 Plan reserved but unissued and not underlying outstanding awards and the number of common shares becoming available for reuse after awards are terminated, forfeited, cancelled, exchanged or surrendered under the 2011 Plan and the Company’s 2007 Equity Compensation Plan. The Company registered ~~in the aggregate,~~ 20,000,000 common shares of common stock for issuance under the 2014 Plan.

Effective April 30, 2018, the Company amended and restated the 2014 Plan (the “Amended and Restated 2014 Plan”). The Amended and Restated 2014 Plan ~~includes~~included the following amendments: (i) the number of common shares authorized for issuance under the Amended and Restated 2014 Plan ~~has been~~was increased by an additional 11,900,000 common shares, as approved by the requisite number of shareholders at the Company’s annual general meeting held on April 30, 2018, (ii) introduction of a $750,000 aggregate fair market value limit on awards (in either equity, cash or other compensation) that can be granted in any calendar year to a participant who is a non-employee director, (iii) housekeeping changes to address ~~recent~~ changes to Section 162(m) of the Internal Revenue Code, (iv) awards ~~are~~were made expressly subject to the Company’s clawback policy and (v) awards not assumed or substituted in connection with a Change of Control (as defined in the Amended and Restated 2014 Plan) will only vest on a pro rata basis.

Approximately ~~14,228,000~~9,754,000 common shares were available for future grants as of ~~September~~June 30, ~~2018.~~2019. The Company uses reserved and unissued common shares to satisfy its obligations under its share-based compensation plans.

During the three months ended March 31, 2017, the Company introduced a ~~new~~ long-term incentive program with the objective to re-align the share-based awards granted to senior management with the Company’s focus on improving its tangible capital usage and allocation while maintaining focus on improving total shareholder return over the long-term. The share-based awards granted under this long-term incentive program consist of time-based stock options, time-based restricted share units (“RSUs”) and performance-based RSUs. Performance-based RSUs are comprised of awards that vest upon achievement of certain share price appreciation conditions that are based on total shareholder return (“TSR”) and awards that vest upon attainment of certain performance targets that are based on the Company’s return on tangible capital (“ROTC”).

The following table summarizes the components and classification of share-based compensation expense related to stock options and RSUs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:



	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Stock options	$	6	$	6	$	12	$	11
RSUs	21		16		39		32
	$	27	$	22	$	51	$	43

Research and development expenses	$	3	$	2	$	5	$	4
Selling, general and administrative expenses	24		20		46		39
	$	27	$	22	$	51	$	43

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions) 2018
2017
2018
2017
Stock options $ 6
$ 4
$ 17
$ 14
RSUs 16
15
48
56
$ 22
$ 19
$ 65
$ 70

Research and development expenses $ 3
$ 2
$ 7
$ 6
Selling, general and administrative expenses 19
17
58
64
$ 22
$ 19
$ 65
$ 70
Share-based awards granted consist of:

During the nine months ended September 30, 2018 and 2017, the Company granted approximately 2,106,000 stock options with a weighted-average exercise price of $15.46 per option and approximately 1,545,000 stock options with a weighted-average exercise price of $14.28 per option, respectively. The weighted-average fair values of all stock options granted to employees during the nine months ended September 30, 2018 and 2017 were $7.82 and $5.97, respectively.



	Six Months Ended June 30,
	2019		2018
Stock options
Granted	1,725,000		2,076,000
Weighted-average exercise price	$	23.16	$	15.35
Weighted-average grant date fair value	$	8.46	$	7.82

Time-based RSUs
Granted	2,667,000		2,726,000
Weighted-average grant date fair value	$	24.06	$	17.07

TSR performance-based RSUs
Granted	454,000		469,000
Weighted-average grant date fair value	$	34.53	$	29.35

ROTC performance-based RSUs
Granted	505,000		409,000
Weighted-average grant date fair value	$	25.03	$	18.80

~~During the nine months ended September 30, 2018 and 2017, the Company granted approximately2,844,000time-based RSUs with a weighted-average grant date fair value of $17.36per RSU and approximately 3,557,000 time-based RSUs with a weighted-average grant date fair value of $11.78 per RSU, respectively.~~

~~During the nine months ended September 30, 2018 and 2017, the Company granted approximately878,000and 416,000~~performance-based RSUs, consisting of approximately 469,000 and 208,000 units of TSR performance-based RSUs with an average grant date fair value of $29.35 and $16.34 per RSU and approximately 409,000 and 208,000 units of ROTC performance-based RSUs with a weighted-average grant date fair value of $18.80 and $15.76 per RSU, respectively.

The granted stock options, time-based RSUs and performance-based RSUs includes long-term incentive awards granted to the Company’s Chief Executive Officer ("CEO") during the three months ended March 31, 2018, which had an aggregate value of $10 million. In connection with his award, approximately 933,000 performance-based RSUs received by the CEO upon his hire in 2016 were cancelled, and the shares underlying those performance-based RSUs were permanently retired and are not available for future grants under the Amended and Restated 2014 Plan. The CEO's long-term incentive award iswas accounted for as an award modification whereby the Company continues to recognize the unamortized compensation associated

with the original award plus the incremental fair value of the new award measured at the date of grant, over the vesting period of the new award.

As of ~~September~~June 30, ~~2018,~~2019, the remaining unrecognized compensation expense related to all outstanding non-vested stock options, time-based RSUs and performance-based RSUs amounted to ~~$111~~$142 million, which will be amortized over a weighted-average period of ~~1.89~~2.07 years.


~~13.~~14.	ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss consists of:



(in millions)	June 30, 2019			December 31, 2018
Foreign currency translation adjustments	$	(2,034	)	$	(2,111	)
Pension and postretirement benefit plan adjustments, net of tax	(27		)	(26		)
	$	(2,061	)	$	(2,137	)

(in millions) September 30,
2018 December 31,
2017
Foreign currency translation adjustments $ (2,032 ) $ (1,877 )
Pension and postretirement benefit plan adjustments, net of tax (21 ) (19 )
$ (2,053 ) $ (1,896 )

Income taxes are not provided for foreign currency translation adjustments arising on the translation of the Company’s operations having a functional currency other than the U.S. dollar, except to the extent of translation adjustments related to the Company’s retained earnings for foreign jurisdictions in which the Company is not considered to be permanently reinvested.


~~14.~~15.	RESEARCH AND DEVELOPMENT

Included in Research and development are costs related to product development and quality assurance programs. Quality assurance are the costs incurred to meet evolving customer and regulatory standards. Research and development costs consist of:



	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
Product related research and development	$	108	$	84	$	215	$	167
Quality assurance	9		10		19		19
	$	117	$	94	$	234	$	186

Three Months Ended
September 30, Nine Months Ended
September 30,
(in millions) 2018 2017 2018 2017
Product related research and development $ 98
$ 73
$ 265
$ 245
Quality assurance 9
8
28
26
$ 107
$ 81
$ 293
$ 271


~~15.~~	~~OTHER INCOME, NET~~

~~Other income, net consists of:~~

Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions)
2018
2017
2018
2017
Gain on the iNova Sale (Note 4) $ —
$ (306 ) $ —
$ (306 )
Gain on the Skincare Sale (Note 4)
—

3

—

(316 )
Gain on the Dendreon Sale (Note 4)
—

(25 )
—

(98 )
Net loss on other sales of assets
26

—

26

25
Litigation and other matters
(40 )
3

(30 )
112
Other, net
(1 )
—

—

(1 )

$ (15 )
$ (325 )
$ (4 )
$ (584 )

Litigation and other matters includes a favorable adjustment of $40 million during the three months ended September 30, 2018 related to the Salix SEC litigation offset by other amounts provided for certain matters. See Note 18, "LEGAL PROCEEDINGS" for additional information.


16.	OTHER EXPENSE, NET

Other expense, net consists of:



	Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2019		2018			2019			2018
Net loss (gain) on sale of assets	$	1	$	—		$	(9	)	$	—
Acquisition-related costs	—		1			8			1
Litigation and other matters	1		(1		)	3			10
Other, net	6		—			3			1
	$	8	$	—		$	5		$	12

Included in Other, net in the table above for the three and six months ended June 30, 2019, is $8 million of in-process research and development costs associated with the upfront payment to enter into an exclusive licensing agreement.


17.	INCOME TAXES

For interim financial statement purposes, U.S. GAAP income tax expense/benefit related to ordinary income is determined by applying an estimated annual effective income tax rate against a company's ordinary income, subject to certain limitations on the benefit of losses. Income tax expense/benefit related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company's income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The ~~estimate~~Company's estimated annual effective income tax rate may be revised, if necessary, in each interim period.

Benefit from income taxes for the six months ended June 30, 2019 was $83 million and included: (i) $52 million of net income tax ~~expense~~benefit for discrete items, which includes: (a) a $32 million tax benefit recognized upon a ruling from the Polish tax

authorities confirming the deductibility of royalty payments by an affiliate, (b) $23 million in ~~2018 includes an estimate~~tax benefits associated with the filing of certain tax returns and (c) $4 million of net tax charges related to other changes in uncertain tax positions and (ii) $31 million of income tax benefit for the ~~effects of~~Company's ordinary loss during the ~~U.S. Tax Cuts and Jobs Act (the “Tax Act”) including both GILTI and BEAT as defined below.~~six months ended June 30, 2019.

Provision for income taxes for the ~~nine~~six months ended ~~September~~June 30, 2018 was ~~$74~~$23 million and included: (i) ~~$203~~$170 million of income tax benefit for the Company's ordinary loss during the six months ended June 30, 2018 and (ii) $193 million of net income tax expense for discrete items. The net income tax expense for discrete items ~~which~~ includes: ~~(a)~~(i) $255 million of tax charges related to internal restructurings, ~~and (b)~~(ii) a $57 million tax benefit related to the impairment of intangible assets and ~~(ii) $129 million of income tax benefit for the Company's ordinary loss during the nine months ended September 30, 2018.~~

Benefit from income taxes for the nine months ended September 30, 2017 was $2,829 million and included: (i) $334 million of income tax benefit for the Company's ordinary loss for the nine months ended September 30, 2017, (ii) $2,626(iii) $10 million of tax ~~benefit from internal restructuring efforts, consisting~~benefits associated with the filing of ~~the reversal of a $1,947 million deferred~~ tax ~~liability~~returns for ~~previously recorded outside basis differences and a $679 million increase in deferred~~various tax assets for net operating losses ("NOLs") available after the carryback of a capital loss and utilization against current year income, (iii) a charge of $224 million resulting from the Company’s divestitures during the nine months ended September 30, 2017 and (iv) a $108 million tax benefit related to an intangible impairment during the nine months ended September 30, 2017.jurisdictions.

The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made except that, as a result of the 2018 adoption of guidance regarding intra-entity transfers, any change in valuation allowance surrounding the adoption of the intra-entity transfer resulting from this adoption was recorded within equity. The valuation allowance against deferred tax assets was ~~$2,473~~$3,058 million and ~~$2,001~~$2,913 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. The increase was primarily due to continued losses in ~~Canada and the Company's internal restructuring efforts recorded discretely.~~Canada. The Company will continue to assess the need for a valuation allowance on a go-forward basis.

As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had ~~$639~~$642 million and ~~$598~~$654 million of unrecognized tax benefits, which included ~~$47~~$45 million and ~~$41~~$42 million of interest and penalties, respectively. Of the total unrecognized tax benefits as of ~~September~~June 30, ~~2018, $263~~2019, $334 million would reduce the Company’s effective tax rate, if recognized. The Company anticipates that unrecognized tax benefits resolved within the next 12 months will not be material.

On December 22, 2017, the Tax Act was signed into law and includes a number of changes in the U.S. tax law, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The Tax Act also implements a modified territorial tax system that includes a one-time transition tax on the accumulated previously untaxed earnings of foreign subsidiaries (the “Transition Toll Tax”) equal to 15.5% (reinvested in liquid assets) or 8% (reinvested in non-liquid assets). At the taxpayer's election, the Transition Toll Tax can be paid over an eight-year period without interest, starting in 2018. In October 2018, the Company has provisionally elected not to use this option and instead used U.S. NOLs to offset this income inclusion.

The Tax Act also includes two new U.S. tax base erosion provisions: (i) the base-erosion and anti-abuse tax (“BEAT”) and (ii) the global intangible low-taxed income (“GILTI”). BEAT provides a minimum tax on U.S. tax deductible payments made to related foreign parties after December 31, 2017. GILTI requires an entity to include in its U.S. taxable income the earnings of its foreign subsidiaries in excess of an allowable return on each foreign subsidiary’s depreciable tangible assets. Accounting guidance provides that the impacts of this provision can be included in the consolidated financial statements either by recording the impacts in the period in which GILTI has been incurred or by adjusting deferred tax assets or liabilities in the period of enactment related to basis differences expected to reverse as a result of the GILTI provisions in future years. The Company has provisionally elected to provide for the GILTI tax in the period in which it is incurred and, therefore, the 2017 Benefit for income taxes did not include a provision for GILTI. The 2018 Provision for income taxes includes the estimate of the effects of the Tax Act including GILTI and BEAT.

can be carried forward indefinitely and any unused interest deduction assessed for recoverability. The Company considered such provisions in the 2018 annual estimated effective rate assessment and expects to fully utilize any interest carry forwards in future periods.

The Company has provided for income taxes, including the impacts of the Tax Act, in accordance with the accounting guidance issued through the date of issuance of these consolidated financial statements. In accordance with accounting guidance, the Company has provisionally provided for the income tax effects of the Tax Act as of December 31, 2017 and will finalize the provisional amounts associated with the Tax Act within one year of its enactment, namely December 22, 2018.

The Company’s Benefit from income taxes for the year 2017 included provisional net tax benefits of $975 million attributable to the Tax Act which included: (i) the re-measurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future of $774 million, (ii) the one-time Transition Toll Tax of $88 million and (iii) the decrease in deferred tax assets attributable to certain legal accruals, the deductibility of which is uncertain for U.S. federal income tax purposes, of $10 million. The Company has provisionally utilized NOLs to offset the provisionally determined $88 million Transition Toll Tax and therefore no amount was recorded as payable. The Company has previously provided for residual U.S. federal income tax on its outside basis differences in certain foreign subsidiaries which, due to the Tax Act, are no longer taxable. As such, the Company's residual U.S. federal tax liability of $299 million prior to the law change was reversed and the Company recognized a deferred income tax benefit of $299 million in the fourth quarter of 2017.

The provisional amounts included in the Company's Benefit from income taxes for the year 2017 will be finalized as regulations and other guidance are published. The Company continually updates the provisional amounts based upon recently issued guidance by accounting regulatory bodies, the U.S. Internal Revenue Service and state and local governments, including the proposed regulations regarding the one-time Transition Toll Tax on the pre-2018 earnings of certain non-U.S. subsidiaries released by the U.S. Treasury Department on August 1, 2018. As part of its full assessment, the Company will assess the impact of the Tax Act on the Company’s tax filings for the year 2017. Although its assessment is still in progress, through the date of issuance of these unaudited consolidated financial statements, the Company has not identified any material revisions to the provisional amounts provided in the Company's Benefit from income taxes for the year 2017. Differences between the provisional Benefit from income taxes as provided in 2017 and the benefit or provision for income taxes when those provisional amounts are finalized in 2018 can be expected and those differences could be material.

On September 5, 2018, Ireland’s Minister for Finance and Public Expenditure and Reform published Ireland’s Corporation Tax Roadmap incorporating implementation of the European Union Anti-Tax Avoidance Directives. Additionally, a Finance Bill including some of these directives was issued in October 2018. The Company is in the process of evaluating these proposals and the impacts on its results as necessary.

The Company continues to be under examination by the Canada Revenue Agency. ~~Subsequent to September 30, 2018, the Company received additional assessments from the Canada Revenue Agency, which the Company is in the process of evaluating.~~ The Company’s position as of ~~September~~June 30, ~~2018~~2019 with regard to proposed audit adjustments has not changed and the proposed adjustments continue to result primarily in a loss of tax attributes that are subject to a full valuation allowance.

The Internal Revenue Service completed its examinations of the Company’s U.S. consolidated federal income tax returns for the years 2013 and 2014. There were no material adjustments to the Company's taxable income as a result of these examinations. The Company has filed tax returns which used a capital loss generated in 2017 to offset capital gains generated in 2014. As these tax returns were filed subsequent to the commencement of the examination by the Internal Revenue Service, the Company’s 2014 tax year cannot be closed commensurate with the examination’s conclusion. Additionally, the Internal Revenue Service has selected for examination the Company's annual tax filings for 2015 and 2016 and the Company's short period tax return for the period ended September 8, 2017, which was filed as a result of the Company's internal restructuring efforts during 2017. At this time, the Company does not expect that proposed adjustments, if any, for these periods would be material to the Company's consolidated financial statements.

The Company's U.S. affiliates remain under examination for various state tax audits in the U.S. for years ~~2002~~2012 through ~~2016.~~2017.

The Company’s subsidiaries in Germany are under audit for tax years ~~2014~~2013 through ~~2016.~~2017. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company's consolidated financial statements.

The Company’s subsidiaries in Australia are under audit by the Australian Tax Office for various years beginning in 2010. ~~On August 8, 2017,~~At this time, the ~~Australian Taxation Office issued a notice of assessment for the tax years 2011 through 2017 in the aggregate amount of $117 million, which includes penalties and interest. The~~ Company ~~disagrees with the assessment and~~

~~continues to believe~~does not expect that its tax positions are appropriate and supported by the facts, circumstances and applicable laws. The Company intends to defend its tax position in this matter vigorously and has filed a holding objection against the assessment by the Australian Taxation Office and has secured a bank guarantee to coverproposed adjustments, if any, potential cash outlays regarding this assessment. Other non-current assets as of September 30, 2017 includes restricted cash of $77 million deposited with a bank as collateral to secure the bank guarantee for the benefit of the Australian Government. On January 9, 2018, the cash collateral of $77 million of restricted cash was returnedwould be material to the ~~Company in exchange for a $77 million letter of credit.~~Company's consolidated financial statements.

Certain affiliates of the Company in regions outside of Canada, the U.S., Germany and Australia are currently under examination by relevant taxing authorities, and all necessary accruals have been recorded, including uncertain tax benefits. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company's consolidated financial statements.


~~17.~~18.	~~(LOSS) EARNINGS~~LOSS PER SHARE

~~(Loss) earnings~~Loss per share attributable to Bausch Health Companies Inc. were calculated as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per share amounts)	2019			2018			2019			2018
Net loss attributable to Bausch Health Companies Inc.	$	(171	)	$	(873	)	$	(223	)	$	(3,454	)

Basic and diluted weighted-average common shares outstanding	352.1			351.3			351.7			351.0

Basic and diluted loss per share attributable to Bausch Health Companies Inc.:	$	(0.49	)	$	(2.49	)	$	(0.63	)	$	(9.84	)

Three Months Ended
September 30, Nine Months Ended
September 30,
(in millions, except per share amounts) 2018 2017 2018 2017
Net (loss) income attributable to Bausch Health Companies Inc. $ (350 ) $ 1,301
$ (3,804 ) $ 1,891

Basic weighted-average common shares outstanding 351.5
350.4
351.1
350.1
Diluted effect of stock options and RSUs —
1.9
—
1.3
Diluted weighted-average common shares outstanding 351.5
352.3
351.1
351.4

(Loss) earnings per share attributable to Bausch Health Companies Inc.:
Basic $ (1.00 ) $ 3.71
$ (10.83 ) $ 5.40
Diluted $ (1.00 ) $ 3.69
$ (10.83 ) $ 5.38

During the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, all potential common shares issuable for stock options and RSUs were excluded from the calculation of diluted loss per share, as the effect of including them would have been anti-dilutive. The dilutive effect of potential common shares issuable for stock options and RSUs on the weighted-average number of common shares outstanding would have been ~~as follows:~~

Three Months Ended
September 30, 2018
Nine Months Ended
September 30, 2018
(in millions)
Basic weighted-average common shares outstanding 351.5
351.1
Diluted effect of stock options and RSUs 4.2
3.4
Diluted weighted-average common shares outstanding 355.7
354.5
approximately 4,395,000 and 3,245,000 common shares for the three months ended June 30, 2019 and 2018, respectively, and approximately 4,657,000 and 2,865,000 common shares for the six months ended June 30, 2019 and 2018, respectively.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, time-based RSUs, performance-based RSUs and stock options to purchase approximately ~~3,750,000 and 3,979,000~~4,855,000 common shares ~~respectively,~~ were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive under the treasury stock method. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, time-based RSUs, performance-based RSUs and stock options to purchase approximately ~~7,601,000~~5,369,000 and ~~7,601,000~~6,286,000 common shares, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive under the treasury stock method.


~~18.~~19.	LEGAL PROCEEDINGS

From time to time, the Company becomes involved in various legal and administrative proceedings, which include product liability, intellectual property, commercial, tax, antitrust, governmental and regulatory investigations, related private litigation and ordinary course employment-related issues. From time to time, the Company also initiates actions or files counterclaims. The Company could be subject to counterclaims or other suits in response to actions it may initiate. The Company believes that the prosecution of these actions and counterclaims is important to preserve and protect the Company, its reputation and its assets. Certain of these proceedings and actions are described below.

On a quarterly basis, the Company evaluates developments in legal proceedings, potential settlements and other matters that could increase or decrease the amount of the liability accrued. As of ~~September~~June 30, ~~2018,~~2019, the Company's ~~consolidated balance sheet~~Consolidated Balance Sheet includes accrued current loss contingencies of ~~$11~~$12 million related to matters which are both probable and reasonably estimable. For all other matters, unless otherwise indicated, the Company cannot reasonably predict the outcome of these legal proceedings, nor can it estimate the amount of loss, or range of loss, if any, that may result from these proceedings. An adverse outcome in certain of these proceedings could have a material adverse effect on the Company’s business, financial condition and results of operations, and could cause the market value of its common shares and/or debt securities to decline.

Governmental and Regulatory Inquiries

Investigation by the U.S. Attorney's Office for the District of Massachusetts

In October 2015, the Company received a subpoena from the U.S. Attorney's Office for the District of Massachusetts, and, in June 2016, the Company received a ~~follow up~~follow-up subpoena. The materials requested, pursuant to the subpoenas and follow-up requests, include documents and witness interviews with respect to the Company’s patient assistance programs and contributions to patient assistance organizations that provide financial assistance to Medicare patients taking products sold by the Company, and the Company’s pricing of its products. The Company is cooperating with this investigation. The Company cannot predict the outcome or the duration of this investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on the Company arising out of this investigation.

Investigation by the U.S. Attorney's Office for the Southern District of New York

In October 2015, the Company received a subpoena from the U.S. Attorney's Office for the Southern District of New York. The materials requested, pursuant to the subpoena and follow-up requests, include documents and witness interviews with respect to the Company’s patient assistance programs; its former relationship with Philidor ~~Rx Services, LLC ("Philidor")~~ and other pharmacies; the Company’s accounting treatment for sales by specialty pharmacies; information provided to the Centers for Medicare and Medicaid Services; the Company’s pricing (including discounts and rebates), marketing and distribution of its products; the Company’s compliance program; and employee compensation. The Company is cooperating with this investigation. The Company cannot predict the outcome or the duration of this investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on the Company arising out of this investigation.

SEC Investigation

Beginning in November 2015, the Company received from the staff of the Los Angeles Regional Office of the SEC subpoenas for documents, as well as various document, testimony and interview requests, related to its investigation of the Company, including requests concerning the Company's former relationship with Philidor, its accounting practices and policies, its public disclosures and other matters. The Company is cooperating with the SEC in this matter. The Company cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on the Company arising out of the SEC investigation.

AMF Investigation

On April 12, 2016, the Company received a request letter from the Autorité des marchés financiers (the “AMF”) requesting documents concerning the work of the Company’s ad hoc committee of independent directors (established to review certain allegations regarding the Company’s former relationship with Philidor and related matters), the Company’s former relationship with Philidor, the Company's accounting practices and policies and other matters. The Company is cooperating with the AMF in this matter. In July 2018, the Company was advised by the AMF that it had issued a formal investigation order ~~in respect of the Company on February 2, 2018.~~against it. The Company cannot predict whether any enforcement action against the Company will result from such investigation.

Investigation by the State of Texas

On May 27, 2014, the State of Texas served Bausch & Lomb Incorporated ("B&L Inc.") with a Civil Investigative Demand concerning various price reporting matters relating to the State's Medicaid program and the amounts the State paid in reimbursement for B&L products for the period from 1995 to the date of the Civil Investigative Demand. The Company and B&L Inc. have cooperated fully with the State's investigation and have produced all of the documents requested by the State. In April 2016, the State sent B&L Inc. a demand letter claiming damages in the amount of $20 million. The Company and B&L Inc. have evaluated the letter and disagree with the allegations and methodologies set forth in the letter. In June 2016, the Company and B&L Inc. responded to the State. In July 2018, the State responded to the Company's June 2016 letter and indicated that it disagreed with certain of the Company’s positions and would send a response to the Company's June 2016 letter, which the Company has not yet received.

Securities and RICO Class Actions and Related Matters

U.S. Securities Litigation

~~From~~In October ~~22, 2015 to October 30,~~ 2015, four putative securities class actions were filed in the U.S. District Court for the District of New Jersey against the Company and certain current or former officers and directors. Those four actions, captioned Potter v. Valeant Pharmaceuticals International, Inc. et al. (Case No. 15-cv-7658), Chen v. Valeant Pharmaceuticals International, Inc. et al. (Case No. 15-cv-7679), Yang v. Valeant Pharmaceuticals International, Inc. et al. (Case No. 15-cv-7746), and Fein v. Valeant Pharmaceuticals International, Inc. et al. (Case No. 15-cv-7809), all asserted securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) on behalf of putative classes of persons who purchased or otherwise acquired the Company’s stock during various time periods between February 28, 2014 and October 21, 2015. The allegations ~~relate~~related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, including relating to drug pricing, the Company’s use of specialty pharmacies, and the Company’s relationship with Philidor.

On May 31, 2016, the Court entered an order consolidating the four actions under the caption In re Valeant Pharmaceuticals International, Inc. Securities Litigation, Case No. 3:~~15-cv-07658, and appointing a lead plaintiff and lead plaintiff’s counsel.~~15-cv-07658. On June 24, 2016, the lead plaintiff filed a consolidated complaint ~~naming additional defendants and~~ asserting ~~additional claims based on allegations of false and misleading statements and/or omissions similar to those in the initial complaints. Specifically, the consolidated complaint asserts~~ claims under Sections 10(b) and 20(a) of the Exchange Act against the Company, and certain current or former officers and directors, as well as claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”) against the Company, certain current or former officers and directors, and certain other parties. The lead plaintiff seeks to bring these claims on behalf of a putative class of persons who purchased the Company’s equity securities and senior notes in the United States between January 4, 2013 and March 15, 2016, including all those who purchased the Company’s securities in the United States in the Company’s debt and stock offerings between July 2013 to March 2015. On September 13, 2016, the Company and the other defendants moved to dismiss the consolidated complaint. ~~Briefing on the Company's motion was completed on January 13, 2017.~~ On April 28, 2017, the Court dismissed

certain claims arising out of the Company's private placement offerings and otherwise denied the motions to dismiss. ~~Defendants' answers~~On September 20, 2018, lead plaintiff filed an amended complaint, adding claims against ValueAct Capital Management L.P. and affiliated entities. On October 31, 2018, ValueAct filed a motion to dismiss. On June 30, 2019, the ~~consolidated complaint were filed on August 18, 2017.~~ Court denied the motion to dismiss.

On June 6, 2018, a putative class action was filed in the U.S. District Court for the District of New Jersey against the Company and certain current or former officers and directors. This action, captioned Timber Hill LLC, v. Valeant Pharmaceuticals International, Inc., et al., (Case No. 2:18-cv-10246) (“Timber Hill”), asserts securities fraud claims under Sections 10(b) and 20(a) of the Exchange Act on behalf of a putative class of persons who purchased call options or sold put options on the Company’s common stock during the period January 4, 2013 through August 11, 2016. On June 11, 2018, this action was consolidated with In re Valeant Pharmaceuticals International, Inc. Securities Litigation, (Case No. 3:15-cv-07658). On ~~September 20, 2018, lead plaintiff~~January 14, 2019, the defendants filed ~~an amended complaint, adding claims against ValueAct Capital Management L.P. and affiliated entities.~~a motion to dismiss the Timber Hill complaint. Briefing on that motion was completed on February 13, 2019.

In addition to the consolidated putative class action, ~~twenty-nine~~as previously reported in the Company’s Form 10-K, thirty-one groups of individual investors in the Company’s stock and debt securities ~~at this point~~ have chosen to opt out of the consolidated putative class action and filed securities actions pending in the U.S. District Court for the District of New Jersey against the Company and certain current or former officers and directors and other such proceedings may be initiated or asserted. These actions are captioned: T. Rowe Price Growth Stock Fund, Inc. v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-5034); Equity Trustees Limited as Responsible Entity for T. Rowe Price Global Equity Fund v. Valeant Pharmaceuticals International Inc. (Case No. 16-cv-6127); Principal Funds, Inc. v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-6128); BloombergSen Partners Fund LP v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7212); Discovery Global Citizens Master Fund, Ltd. v. Valeant

Pharmaceuticals International, Inc. (Case No. 16-cv-7321); MSD Torchlight Partners, L.P. v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7324); BlueMountain Foinaven Master Fund, L.P. v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7328); Incline Global Master LP v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7494); VALIC Company I v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7496); Janus Aspen Series v. Valeant Pharmaceuticals International, Inc. (Case No. 16-cv-7497) (“Janus Aspen”); Okumus Opportunistic Value Fund, LTD v. Valeant Pharmaceuticals International, Inc. (Case No. 17-cv-6513) (“Okumus”); Lord Abbett Investment Trust- Lord Abbett Short Duration Income Fund, v. Valeant Pharmaceuticals International, Inc. (Case No. 17-cv-6365) (“Lord Abbett”); Pentwater Equity Opportunities Master Fund LTD v. Valeant Pharmaceuticals International, Inc., et al. (Case No. 17-cv-7552), Public Employees’ Retirement System of Mississippi v. Valeant Pharmaceuticals International Inc. (Case No. 17-cv-7625) (“Mississippi”);The Boeing Company Employee Retirement Plans Master Trust v. Valeant Pharmaceuticals International Inc., et al., (Case No. 17-cv-7636) (“Boeing”); State Board of Administration of Florida v. Valeant Pharmaceuticals International Inc. (Case No. 17-cv-12808); The Regents of the University of California v. Valeant Pharmaceuticals International, Inc. (Case No. 17-cv-13488); GMO Trust v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0089); Första AP Fonden v. Valeant Pharmaceuticals International, Inc. (Case No. 17-cv-12088); New York City Employees’ Retirement System v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0032) (“NYCERS”); Blackrock Global Allocation Fund, Inc. v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0343) (“Blackrock”); Colonial First State Investments Limited As Responsible Entity for Commonwealth Global Shares Fund 1 v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0383); Bharat Ahuja v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0846); Brahman Capital Corp. v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0893); The Prudential Insurance Company of America v. Valeant Pharmaceuticals International, Inc. (Case No. 3:18-cv-01223) (“Prudential”); Senzar Healthcare Master Fund LP v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-02286) ("Senzar"); and 2012 Dynasty UC LLC v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-08595) ("2012 Dynasty"); and Catalyst Dynamic Alpha Fund v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-12673) (“Catalyst”); and Northwestern Mutual Life Insurance Co., v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-15286) (“Northwestern Mutual”).

In addition, one group of individual investors in the Company’s stock securities chose to opt out of the consolidated putative class action and filed a securities action in the U.S. District Court for the Southern District of New York against the Company and certain current or former officers and directors. This action was captioned: Hound Partners Offshore Fund, LP v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-0076) (“Hound Partners”). Defendants filed a motion to transfer the Hound Partners case to the District of New Jersey on February 2, 2018. On April 24, 2018, the Court granted Defendants' motion and the case was transferred to the District of New Jersey on May 1, 2018 (Case No. 3:18-cv-08705).

These individual shareholder actions assert claims under Sections 10(b), 18, and 20(a) of the Exchange Act, Sections 11, 12(a)(2), and 15 of the Securities Act, common law fraud, and negligent misrepresentation under state law, based on alleged purchases of Company stock, options, and/or debt at various times between January 3, 2013 and August 10, 2016. ~~Plaintiffs in the Lord Abbett, Boeing, Mississippi, NYCERS, Hound Partners, Blackrock, Catalyst, 2012 Dynasty cases and Northwestern Mutual~~Some plaintiffs additionally assert claims under the New Jersey Racketeer Influenced and Corrupt Organizations Act. The allegations in the complaints are similar to those made by plaintiffs in the putative class action.

~~Plaintiffs~~ Motions to dismiss have been filed in ~~the Janus Aspen action amended the complaint on April 28, 2017. Defendants filed motions for partial dismissal in ten~~many of these individual ~~actions in the U.S. District Court for the District of New Jersey on June 16, 2017. Briefing of those motions was completed on August 25, 2017. On January 12, 2018,~~actions. To date, the Court has dismissed ~~the negligent misrepresentation~~state law claims ~~and otherwise denied the motions for partial dismissal.~~

On October 19, 2017, the U.S. District Court for the District of New Jersey entered an order requesting briefs from the parties regarding whether the Court should stay the putative securities class action and the individual securities law actions filed in the District of New Jersey until after the resolution of criminal proceedings against Andrew Davenport and Gary Tanner. The Court's order immediately stayed all deadlines, briefing schedules, and discovery in securities actions pending completion of the briefing and the Court’s decision. The Court directed the parties to file briefs either supporting or opposing the stay, with such briefs to be concluded by November 8, 2017. On November 29, 2017, the Court entered an order staying all proceedings and discovery, except for a document production in the putative securities class action and the briefing and resolution of any motions to dismiss, in the putative securities class action and all current and subsequent related individual securities law actions filed in the District of New Jersey. On June 5, 2018, the Court lifted the stay.

Defendants filed motions for partial dismissal in the Lord Abbett, Mississippi, and Boeing cases on December 6, 2017. Briefing on those motions was completed on March 15, 2018. On July 31, 2018, the Court dismissed the common law fraud and negligent misrepresentation claims and otherwise denied the motions for partial dismissal. Defendants filed actions for partial

dismissal in the Okumus case in December 18, 2017. On February 1, 2018, the parties filed a stipulation and proposed order in the Okumus case that would withdraw Defendants’ motions for partial dismissal, and dismiss Okumus’ state-law claims. The Court entered that stipulation on February 2, 2018. Defendants filed a motion for partial dismissal in the Pentwater case on February 13, 2018. Briefing on that motion was completed on March 27, 2018. On September 14, 2018, the Court denied the motion for partial dismissal. Defendants filed motions for partial dismissal in the NYCERS and Blackrock cases on February 23, 2018. Briefing on those motions was completed on April 30, 2018. On September 14, 2018, the Court denied the motion for partial dismissal in the Blackrock case. On September 26, 2018, the Court denied the motion for partial dismissal in the NYCERS case. On September 21, 2018 plaintiffs in the Blackrock case amended the complaint to add claims under the New Jersey Racketeer Influenced and Corrupt Organizations Act. Defendants filed a motion for partial dismissal in the Senzar case on May 4, 2018. Briefing on this motion was completed on June 18, 2018. On September 14, 2018, the Court denied the motion for partial dismissal. Defendants filed a motion for partial dismissal in the Hound Partners case on May 22, 2018. Briefing on that motion was completed on July 30, 2018. On September 14, 2018, the Court dismissed all claims brought under theincluding New Jersey Racketeer Influenced and Corrupt Organizations Act, ~~as well as the~~ common law fraud, and negligent misrepresentation claims ~~and otherwise denied~~in certain cases. On January 7, 2019, the ~~motion for partial dismissal. Defendants filed~~Court entered a ~~motion for partial~~stipulation of voluntary dismissal in the ~~2012 Dynasty case~~Senzar Healthcare Master Fund LP v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-02286) opt-out action, closing the case. On May 31, 2019, the Court dismissed the Catalyst Dynamic Alpha Fund v. Valeant Pharmaceuticals International, Inc. (Case No. 18-cv-12673) opt-out action on ~~June 15, 2018. Briefing on that motion was completed~~statute of limitations and other grounds, with leave to re-plead. The Catalyst Plaintiffs filed an amended complaint on July ~~27, 2018. Defendants filed a motion for partial dismissal in the Catalyst case on October 22, 2018. Briefing on that motion will be completed on December 21, 2018.~~1, 2019.

The Company believes the individual complaints and the consolidated putative class action are without merit and intends to defend itself vigorously.

Canadian Securities Litigation

In 2015, six putative class actions were filed and served against the Company and certain current or former officers and directors in Canada in the provinces of British Columbia, Ontario and ~~Quebec. These~~Quebec, as previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 20, 2019.

The actions are captioned: (a) Alladina v. Valeant, et al. (Case No. S-1594B6) (Supreme Court of British Columbia) (filed November 17, 2015); (b) Kowalyshyn v. Valeant, et al. (CV-15-540593-00CP) (Ontario Superior Court) (filed November 16, 2015); (c) Kowalyshyn et al. v. Valeant, et al. (CV-15-541082-00CP) (Ontario Superior Court) (filed November 23, 2015); (d) O’Brien v. Valeant et al. (CV-15-543678-00CP) (Ontario Superior Court) (filed December 30, 2015); (e) Catucci v. Valeant, et al. (Court File No. 540-17-011743159) (Quebec Superior Court) (filed October 26, 2015); and (f) Rousseau-Godbout v. Valeant, et al. (Court File No. 500-06-000770-152) (Quebec Superior Court) (filed October 27, 2015). The Alladina, Kowalyshyn, O’Brien, Catucci and Rousseau-Godbout actions also name, among others, certain current or former directors and officers of the Company. The Rosseau-Godbout action was subsequently stayed by the Quebec Superior Court by consent order.

~~Each of the five remaining actions alleges~~generally allege violations of Canadian provincial securities legislation on behalf of putative classes of persons who purchased or otherwise acquired securities of the Company for periods commencing as early as January 1, 2013 and ending as late as November 16, 2015. The alleged violations relate to ~~among other things, alleged misrepresentations and/or failures to disclose material information about~~ the ~~Company’s business and prospects, relating to drug pricing,~~same matters described in the ~~Company’s policies and accounting practices, the Company’s use of specialty pharmacies and, in particular, the Company’s relationship with Philidor.~~ U.S. Securities Litigation description above.

The Alladina, Kowalyshyn and O’Brien actions also assert common law claims for negligent misrepresentation, and the Alladina claim additionally asserts common law negligence, conspiracy, and claims under the British Columbia Business Corporations Act, including the statutory oppression remedies in that legislation. The CatucciRosseau-Godbout action ~~asserts claims under~~was stayed by the Quebec ~~Civil Code, alleging the Company breached its duty of care under the civil standard of liability contemplated by the Code.~~

The Company is aware of two additional putative class actions that have been filed with the applicable court but which have not yet been served on the Company. These actions are captioned: (i) Okeley v. Valeant, et al. (Case No. S-159991) (Supreme Court of British Columbia) (filed December 2, 2015); and (ii) Sukenaga v Valeant et al. (CV-15-540567-00CP) (Ontario Superior Court) (filed November 16, 2015), and the factual allegations made in these actions are substantially similar to those outlined above. The Company has been advised that the plaintiffs in these actions do not intend to pursue the actions.

~~On June 10, 2016, the Ontario~~ Superior Court of Justice rendered its decision on carriage motions (motions held to determine who will have carriage of the class action) heard on April 8, 2016, provisionally staying the O'Brien action, in favor of the Kowalyshyn action. On September 15, 2016, in response to an arrangement between the plaintiffs in theby consent order. The Kowalyshyn action ~~and the O’Brien action, the court ordered both that the Kowalyshyn action be~~has been consolidated with the O’Brien action and that ~~the~~ consolidated action beis stayed in favor of the Catucci ~~action pending either the further order of the Ontario court or the determination of the motion for leave in the Catucci~~ action.

In the Catucci action, motions for leave under the Quebec Securities Act and for authorization as a class proceeding were heard the week of April 24, 2017, with the motion judge reserving her decision. Prior to that hearing, the parties resolved applications by the defendants concerning jurisdiction and class composition, with the plaintiffs agreeing to revise the definition of the proposed class to exclude claims in respect of Company securities purchased in the United States. Onon August 29, 2017, the judge ~~released her reasons for judgment granting~~granted the plaintiffs leave to proceed with their claims under the Quebec Securities Act and ~~authorizing~~authorized the class proceeding. On October 12, 2017, the Company and the other defendants filed applications for leave to appeal from certain aspects of the decision authorizing the class proceeding. The applications for leave to appeal were heard on November 22, 2017 and were dismissed on November 30, 2017. On October 26, 2017, the plaintiffs issued their Judicial Application Originating Class Proceedings. A timetable for certain pre-trial procedural matters in the action has been set and the notice of certification has been disseminated to class members. Among other things, the timetable established a deadline of June 19, 2018 for class members to exercise their right to opt-out of the class.

The Company is aware of two additional putative class actions that have been filed with the applicable court but which have not yet been served on the Company, as previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 20, 2019, and the factual allegations made in these actions are substantially similar to those outlined above. The Company has been advised that the plaintiffs in these actions do not intend to pursue the actions.

In addition to the class proceedings described above, on April 12, 2018, the Company was served with an application for leave filed in the Quebec Superior Court of Justice to pursue an action under the Quebec Securities Act against the Company and certain current or former officers and directors. This ~~action~~proceeding is captioned BlackRock Asset Management Canada Limited et al. v. Valeant, et al. (Court File No. 500-11-054155-185). The allegations in the proceeding are similar to those made by plaintiffs in the Catucci class action. On June 18, 2018, the same BlackRock entities filed an originating application (Court File No. 500-17-103749-183) against the same defendants asserting claims under the Quebec Civil Code in respect of the same alleged misrepresentations.

The Company is aware that certain other members of the Catucci class exercised their opt-out rights prior to the June 19, 2018 deadline. On February 15, 2019, one of the entities which exercised its opt-out rights served the Company with an application in the Quebec Superior Court of Justice for leave to pursue an action under the Quebec Securities Act against the Company, certain current or former officers and directors of the Company and its auditor. That proceeding is captioned California State Teachers’ Retirement System v. Bausch Health Companies Inc. et al. (Court File No. 500-11-055722-181). The allegations in the proceeding are similar to those made by the plaintiffs in the Catucci class action and in the BlackRock opt-out proceedings. On that same date, California State Teachers’ Retirement System also served the Company with proceedings (Court File No. 500-17-106044-186) against the same defendants asserting claims under the Quebec Civil Code in respect of the same alleged misrepresentations.

The Company believes that it has viable defenses in each of these actions. In each case, the Company intends to defend itself vigorously.

Insurance Coverage Lawsuit

On December 7, 2017, the Company filed a lawsuit against its insurance companies that issued insurance policies covering claims made against the Company, its subsidiaries, and its directors and officers during two distinct policy periods, (i) 2013-14 and (ii) 2015-16. The lawsuit is currently pending in the United States District Court for the District of New Jersey (Valeant Pharmaceuticals International, Inc., et al. v. AIG Insurance Company of Canada, et al.; 3:18-CV-00493). In the lawsuit, the Company seeks coverage for (1) the costs of defending and resolving claims brought by former shareholders and debtholders of Allergan, Inc. in In re Allergan, Inc. Proxy Violation Securities Litigation and Timber Hill LLC, individually and on behalf of all others similarly situated v. Pershing Square Capital Management, L.P., et al. (under the 2013-2014 coverage period), and (2) costs incurred and to be incurred in connection with the securities class actions and opt-out cases described in this section and certain of the investigations described above (under the 2015-2016 coverage period).

RICO Class Actions

Between May 27, 2016 and September 16, 2016, three virtually identical actions were filed in the U.S. District Court for the District of New Jersey against the Company and various ~~third parties,~~third-parties, alleging claims under the federal Racketeer Influenced Corrupt Organizations Act (“RICO”) on behalf of a putative class of certain third-party payors that paid claims submitted by Philidor for certain Company branded drugs between January 2, 2013 and November 9, 2015 (Airconditioning and Refrigeration Industry Health and Welfare Trust Fund et al. v. Valeant Pharmaceuticals International. Inc. et al., No. 3:16-cv-03087, Plumbers Local Union No. 1 Welfare Fund v. Valeant Pharmaceuticals International Inc. et al., No. 3:16-cv-3885 and N.Y. Hotel Trades Council et al v. Valeant Pharmaceuticals International. Inc. et al., No. 3:16-cv-05663).2015. On November 30, 2016, the Court entered an order consolidating the three actions under the caption In re Valeant Pharmaceuticals International, Inc. Third-Party Payor Litigation, No. 3:16-cv-03087. A consolidated class action complaint was filed on December 14, 2016. The consolidated complaint alleges, among other things, that the ~~Defendants~~defendants committed predicate acts of mail and wire fraud by submitting or causing to be submitted prescription reimbursement requests that misstated or omitted facts regarding (1) the identity and licensing status of the dispensing pharmacy; (2) the resubmission of previously denied claims; (3) patient co-pay waivers; (4) the availability of generic alternatives; and (5) the insured’s consent to renew the prescription. The complaint further alleges that these acts constitute a pattern of racketeering or a racketeering conspiracy in violation of the RICO statute and caused plaintiffs and the putative class unspecified damages, which may be trebled under the RICO statute. The Company moved to dismiss the consolidated complaint on February 13, 2017. ~~Briefing of the motion was completed on May 17, 2017.~~ On March 14, 2017, other defendants filed a motion to stay the RICO class action pending the resolution of criminal proceedings against Andrew Davenport and Gary Tanner. ~~The Company did not oppose the motion~~

~~to stay.~~ On August 9, 2017, the Court granted the motion to stay and entered an order staying all proceedings in the case and accordingly terminating other pending motions. On April 12, 2019, the court lifted the stay. On July 30, 2019, the plaintiffs filed an amended complaint.

The Company believes these claims are without merit and intends to defend itself vigorously.

~~Horizon Blue Cross Blue Shield of New Jersey Lawsuit~~

On July 26, 2018, Horizon Blue Cross Blue Shield of New Jersey filed a lawsuit against the Company in the Superior Court of New Jersey Law Division/Essex County. This action is captioned Horizon Blue Cross Blue Shield of New Jersey v. Valeant Pharmaceuticals International Inc., et. al., (No. ESX-L-005234-18). This suit asserts a claim under the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, as well as claims for common law fraud and negligent misrepresentation. In its complaint, Horizon alleges that the Company and other defendants submitted and caused Horizon to pay fraudulent insurance claims. The Company disputes the claims and intends to vigorously defend this matter.

Hound Partners Lawsuit

On October 19, 2018, Hound Partners Offshore Fund, LP, Hound Partners Long Master, LP, and Hound Partners Concentrated Master, LP, filed a lawsuit against the Company in the Superior Court of New Jersey Law Division/Mercer County. This action is captioned Hound Partners Offshore Fund, LP et al., v. Valeant Pharmaceuticals International, Inc., et al. (No. MER-L-002185-18). This suit asserts claims for common law fraud, negligent misrepresentation, and violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act. The factual allegations made in this complaint are similar to those made in the District of New Jersey Hound Partners action. On March 29, 2019, the Company, certain individual defendants, and Plaintiffs submitted a consent order to stay further proceedings pending the completion of discovery in the federal opt-out case Hound Partners Offshore Funds, LP et al. v. Valeant Pharmaceuticals International, Inc. The Company disputes the claims and intends to vigorously defend this matter.

Antitrust

Contact Lens Antitrust Class Actions

Beginning in March 2015, a number of civil antitrust class action suits were filed by purchasers of contact lenses against B&L Inc., three other contact lens manufacturers, and a contact lens distributor, alleging that the defendants engaged in an anticompetitive scheme to eliminate price competition on certain contact lens lines through the use of unilateral pricing ~~policies. The plaintiffs in such suits alleged~~policies, and alleging violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, and of various state antitrust and consumer protection ~~laws, and further alleged that the defendants~~laws. These cases have been unjustly enriched through their alleged conduct. The plaintiffs sought declaratory and injunctive relief and, where applicable, treble, punitive and/or other damages, including attorneys’ fees. By order dated June 8, 2015, the JPML centralized the suitsconsolidated in the Middle District of Florida by the Judicial Panel for Multidistrict Litigation, under the caption In re Disposable Contact Lens Antitrust Litigation, Case No. 3:15-md-02626-HES-JRK, before U.S. District Judge Harvey E. Schlesinger. After the Class Plaintiffs filed a corrected consolidated class action complaint on December 16, 2015, the defendants jointly moved to dismiss those complaints. On June 16, 2016, the Court granted the Defendants' motion to dismiss with respect to claims brought under the Maryland Consumer Protection Act, but denied the motion to dismiss with respect to claims brought under Sherman Act, Section 1 and other state laws. Discovery has been concluded. On March 3, 2017, the Class Plaintiffs filed their motion for class certification. On June 15, 2017, defendants filed a motion to oppose the plaintiffs' class certification motion, as well as motions to exclude plaintiffs' expert reports. An evidentiary hearing was held before Judge Schlesinger on August 1 and 2, 2018.15-md-02626-HES-JRK. On August 20, 2018, ~~the Company~~defendants filed ~~a motion~~motions for summary judgment. ~~Briefing related to~~The Court has set oral argument on the ~~motion~~motions for summary ~~judgment is scheduled~~judgement for August 21 and 22, 2019. On December 4, 2018, the Court certified six classes, four of which relate to ~~be completed on December 17, 2018.~~B&L Inc. Defendants' petitions seeking leave from the Eleventh Circuit Court of Appeals to file an immediate appeal of the class certification order have been denied. On February 20, 2019, the Court removed the case from the trial calendar. The Company ~~intends~~continues to vigorously defend ~~all of these actions.~~this matter.

Generic Pricing Antitrust Class Action

OnAs of June ~~22,~~ 2018, the Company's subsidiaries, Oceanside Pharmaceuticals, Inc. (“Oceanside”), Bausch Health US, LLC (formerly Valeant Pharmaceuticals North America ~~LLC~~LLC) (“~~VPNA”~~Bausch Health US”), and Bausch Health Americas, Inc. (formerly Valeant Pharmaceuticals ~~International and Oceanside Pharmaceuticals, Inc.~~International) (“Bausch Health Americas”) (for the purposes of this subsection, collectively, the “Company”), were added as defendants in putative class action multidistrict antitrust litigation entitled In re: Generic Pharmaceuticals Pricing Antitrust Litigation, pending in the United States District Court for the Eastern District of Pennsylvania (MDL 2724, 16-MD-2724). The ~~complaint~~lawsuit to which the Company was added was filed by direct purchaser plaintiffs ~~on behalf of themselves~~ and ~~others similarly situated. The plaintiffs seek~~seeks damages under federal antitrust laws. Separate complaints have been filed by other plaintiffs that have been consolidated in the same multidistrict litigation that do not name the Company or any of its subsidiaries as a defendant. Plaintiffs assertlaws, alleging that the Company’s subsidiaries ~~purportedly~~ entered into a conspiracy to fix, stabilize, and raise prices, rig bids and engage in market and customer allocation for generic pharmaceuticals. Specific claims against the Company’s subsidiaries relate to generic pricing of the Company’s metronidazole vaginal product as part of an alleged overarching conspiracy among generic drug manufacturers. ~~Prior to the Company’s subsidiaries being added to the case, some~~As of December 2018, three direct purchaser plaintiffs that had opted out of the ~~defendants moved to dismiss certain~~putative class filed an amended complaint in the MDL that added Oceanside, Bausch Health US and Bausch Health Americas, alleging similar claims as the direct purchaser plaintiffs’ putative class action complaint. Separate complaints by other plaintiffs which had been consolidated in the same multidistrict litigation do not name the Company or any of ~~the consolidated amended~~

~~complaints. On October 16, 2018, the Court granted in part and denied in part these defendants’~~its subsidiaries as a defendant. The Company has filed motions to dismiss. ~~The parties will now agree on a briefing schedule for the remaining defendants, including the Company’s subsidiaries, to move to dismiss or otherwise respond to the complaint.~~ Discovery against the Company’s subsidiaries has commenced. The Company ~~intends~~continues to vigorously defend this matter.

Intellectual Property

Patent Litigation/Paragraph IV Matters

From time to time, the Company (and/or certain of its affiliates) is also party to certain patent infringement proceedings in the United States and Canada, including as arising from claims filed by the Company (or that the Company anticipates filing within the required time periods) in connection with Notices of Paragraph IV Certification (in the United States) and Notices of Allegation (in Canada) received from third-party generic manufacturers respecting their pending applications for generic versions of certain products sold by or on behalf of the Company, including Relistor^®, Apriso^®, Uceris^®, ~~Cardizem~~Xifaxan^® 200mg, Plenvu^®, Glumetza^®, Bryhali^™, Prolensa^®and Jublia^®in the United States, ~~and Glumetza~~^® ~~in Canada,~~ or other similar suits. These matters are proceeding in the ordinary course. In July 2019, the Company announced that the U.S. District Court of New Jersey had upheld the validity of and determined Actavis' infringement of a patent protecting the Company's Relistor^® tablets, expiring in March 2031. In

July, the Company also announced that it had agreed to resolve the outstanding intellectual property litigation with Teva Pharmaceuticals USA, Inc. ("Teva") regarding Apriso^® extended-release capsules 0.375g. As part of the settlement, the parties agreed to dismiss all litigation related to Apriso^®, and intellectual property protecting Apriso^®will remain intact and enforceable. In addition, the Company will grant Teva a non-exclusive license effective October 1, 2021to the intellectual property relating to Apriso^®in the United States (provided that Teva will be able to begin marketing prior to such date if another generic version of the product is granted approval and starts selling or distributing such generic prior to October 1, 2021).

In addition, patents covering the Company's branded pharmaceutical products may be challenged in proceedings other than court proceedings, including inter partes review ~~(IPR)~~("IPR") at the USU.S. Patent & Trademark Office. The proceedings operate under different standards from district court proceedings, and are often completed within 18 months of institution. IPR challenges have been brought against patents covering the Company's branded pharmaceutical products. For example, following Acrux DDS’s IPR petition, the USU.S. Patent and Trial Appeal Board, in May 2017, instituted inter partes review for an Orange Book-listed patent covering Jublia^®and, on June 6, 2018, issued a written determination invalidating such patent. An appeal of this decision was filed on August 7, 2018. Jublia^®continues to be covered by seven other Orange Book-listed patents owned by the Company, which expire in the years 2028 through 2034.

Product Liability

Shower to Shower^® Products Liability Litigation

~~The~~Since 2016, the Company has been named in one hundred and ~~sixty-three~~sixty-six (166) product liability lawsuits involving the Shower to Shower^® body powder product acquired in September 2012 from Johnson & ~~Johnson. The Company has been successful in obtaining a number~~Johnson; due to dismissals, only twelve (12) of ~~dismissals as~~such product liability suits currently remain pending, and these twelve (12) matters are subject to the Company and/or its subsidiary, VPNA, in some of these cases. The Company continues to seek dismissals in these cases and to pursue agreements from plaintiffs to not oppose the Company’s motions for summary judgment.Johnson & Johnson indemnification referenced below.

These lawsuits include ~~one case~~three cases originally filed ~~on December 30, 2016~~ in the In re Johnson & Johnson Talcum Powder Litigation, Multidistrict Litigation 2738, pending in the United States District Court for the District of New ~~Jersey.~~Jersey, and one case that was filed in the District of Puerto Rico and subsequently transferred to the MDL. The Company and ~~VPNA~~Bausch Health US were first named in a lawsuit filed directly into the MDL alleging that the use of the Shower to Shower^® product caused the plaintiff to develop ovarian cancer. ~~On March 24, 2017, the~~The plaintiff agreed to a dismissal of all claims against the Company and ~~VPNA~~Bausch Health US without prejudice. The Company has subsequently been named in one additional lawsuit, originally filed in the District of Puerto Rico and subsequently transferred into the MDL, but has not been served in that case. The Company was also named in two additional lawsuits filed directly into the MDL that have also not yet been served.

These lawsuits also include a number of matters filed in the Superior Court of Delaware and five cases filed in the Superior Court of New Jersey alleging that the use of Shower to Shower^® caused the plaintiffs to develop ovarian cancer. The Company has been voluntarily dismissed from nearly all of these cases, with claims against ~~VPNA~~Bausch Health US only remaining in ~~most of these cases.~~one case pending in New Jersey and one case pending in Delaware. Four of the five cases in the Superior Court of New Jersey were voluntarily dismissed as to ~~VPNA~~Bausch Health US as well. These lawsuits also include allegations against Johnson & Johnson, directed primarily to its marketing of and warnings for the Shower to Shower product prior to the Company’s acquisition of the product in September 2012. The allegations in ~~these~~the remaining two cases specifically directed to ~~VPNA~~Bausch Health US include failure to warn, design defect, negligence, gross negligence, breach of express and implied warranties, civil conspiracy concert in action, negligent misrepresentation, wrongful death, and punitive damages. ~~Plaintiffs seek compensatory damages including medical expenses, pain~~One hundred twenty-two (122) of the Delaware actions were voluntarily dismissed without prejudice pursuant to stipulation in January 2019, and ~~suffering, mental anguish anxiety and discomfort, physical impairment, loss~~although the stipulation permitted the cases to be filed again within 60 days, none of ~~enjoyment of life. Plaintiffs also seek pre- and post-judgment interest, exemplary and punitive damages, treble damages, and attorneys’ fees.~~the cases have been refiled.

~~These~~In addition, these lawsuits also include a number of cases filed in certain state courts in the United States (including the Superior Courts of California, Delaware and New Jersey); the District Court of Louisiana; the Supreme Court of New York (Niagara County); the District Court of Oklahoma City, Oklahoma; the South Carolina Court of Common Pleas (Richland County); and the District Court of Nueces County, Texas (transferred to the asbestos MDL docket in the District Court of Harris County, Texas for pre-trial purposes) alleging use of Shower to Shower^® and other products resulted in the plaintiffs developing mesothelioma.

The Company has been successful in obtaining voluntarily dismissals in most of these cases or the plaintiffs have not opposed summary judgment. Presently, four cases remain pending in the Superior Court of New Jersey and one case in the Superior Court of California. The allegations in these cases generally include design defect, manufacturing defect, failure to warn, negligence, and punitive damages, and in some cases breach of express and implied warranties, misrepresentation, and loss of consortium. The ~~plaintiffs seek~~damages sought by the various Plaintiffs include compensatory damages, ~~for loss of services, economic loss, pain and suffering, and, in some cases,~~including medical expenses, lost wages or earning capacity, and loss of ~~consortium, in~~consortium. In addition, toPlaintiffs seek compensation for pain and suffering, mental anguish anxiety and discomfort, physical impairment and loss of enjoyment of life. Plaintiffs also seek pre- and post-judgment interest, exemplary and punitive damages, ~~interest, litigation costs,~~ and attorneys’ fees.

~~Finally,~~

Additionally, two proposed class actions have been filed in Canada against the Company and various Johnson & Johnson entities (one in the Supreme Court of British Columbia and one in the Superior Court of Quebec). The Company also acquired the rights to the Shower to Shower^® product in Canada from Johnson & Johnson in September 2012. In the British Columbia matter, the plaintiff seeks to certify a proposed class action on behalf of persons in British Columbia and Canada who have purchased or used Johnson & Johnson’s Baby Powder or Shower to Shower^®, including their estates, executors and personal representatives, and is alleging that the use of this product increases certain health risks. In the Quebec matter, the plaintiff sought to certify a proposed class action on behalf of persons in Quebec who have used Johnson & Johnson’s Baby Powder or Shower to Shower^®, as well as their family members, assigns and heirs, and is alleging negligence in failing to properly test, failing to warn of health risks, and failing to remove the products from the market in a timely manner. A certification (also known as authorization) hearing was held in the Quebec matter ~~was held on January 11, 2018. On May 2, 2018,~~and the Court certified (or as stated under Quebec law, authorized) the bringing of a class action by a representative plaintiff on behalf of people in Quebec who have used Johnson & Johnson's Baby Powder and/or Shower to Shower^® in their perineal area and have been diagnosed with ovarian cancer and/or family members, assigns and heirs. The plaintiffs in these actions are seeking awards of general, special, compensatory and punitive damages.

The Company intends to defend itself vigorously in each of the remaining actions that are not voluntarily dismissed or subject to a grant of summary judgment. ~~The Company believes that its potential~~Potential liability (including its attorneys’ fees and costs) arising out of the covered Shower to Shower^® lawsuits filed against the Company is subject to certain indemnification obligations of Johnson & Johnson owed to the Company, and legal fees and costs have been and ~~are currently being~~will continue to be reimbursed by Johnson & Johnson. The Company ~~has provided~~and Johnson & Johnson ~~with notice that~~reached an agreement on April 17, 2019, regarding the ~~lawsuits filed against~~scope of the ~~Company~~indemnification relating to the majority of the Shower to Shower ~~are subject to indemnification by Johnson & Johnson. While Johnson & Johnson continues to indemnify the Company,~~^® matters (the “Covered Matters”) and the Company has ~~initiated proceedings in~~dismissed the demand for arbitration that the Company filed against Johnson & Johnson ~~relating~~ to assert its rights to indemnification. Johnson & Johnson will fully indemnify the ~~scope~~Company in the Covered Matters, which include (i) personal injury and ~~amount~~products liability actions arising from alleged exposure to Shower to Shower^® prior to March 2020, and (ii) consumer fraud, consumer protection, false advertising or other regulatory actions arising out of ~~such indemnification.~~the manufacture, use, or sale of Shower to Shower^® up to and including September 9, 2012. The Company does not believe that the Covered Matters will have a material impact on the Company’s financial results going forward.

General Civil Actions

~~Afexa Class Action~~

On March 9, 2012, a Notice of Civil Claim was filed in the Supreme Court of British Columbia which sought an order certifying a proposed class proceeding against the Company and a predecessor, Afexa Life Sciences Inc. ("Afexa") (Case No. NEW-S-S-140954). The proposed claim asserted that Afexa and the Company made false representations respecting Cold-FX^® to residents of British Columbia who purchased the product during the applicable period and that the proposed class has suffered damages as a result. On November 8, 2013, the Plaintiff served an amended notice of civil claim which sought to re-characterize the representation claims and broaden them from what was originally claimed. On December 8, 2014, the Company filed a motion to strike certain elements of the Plaintiff’s claim for failure to state a cause of action. In response, the Plaintiff proposed further amendments to its claim. The hearing on the motion to strike and the Plaintiff’s amended claim was held on February 4, 2015. The Court allowed certain additional subsequent amendments, while it struck others. The hearing to certify the class was held on April 4-8, 2016 and, on November 16, 2016, the Court issued a decision dismissing the plaintiff’s application for certification of this action as a class proceeding. On December 15, 2016, the plaintiff filed a notice of appeal in the British Columbia Court of Appeal appealing the decision to dismiss the application for certification. The plaintiff filed its appeal factum on March 15, 2017 and the Company filed its appeal factum on April 19, 2017. The appeal hearing was held on September 19, 2017 and, on April 30, 2018, the British Columbia Court of Appeal dismissed the appeal. On June 29, 2018, the plaintiff filed leave to appeal to the Supreme Court of Canada in this matter and the Company filed its reply on August 30, 2018. The Company intends to continue to vigorously defend this matter.

Mississippi Attorney General Consumer Protection Action

The Company and ~~VPNA~~Bausch Health US are named in an action brought by James Hood, Attorney General of Mississippi, in the Chancery Court of the First Judicial District of Hinds County, Mississippi (Hood ex rel. State of Mississippi, Civil Action No. G2014-1207013, filed on August 22, 2014), alleging consumer protection claims against Johnson & Johnson ~~Johnson~~ and Johnson Consumer Companies, Inc., the Company and ~~VPNA~~Bausch Health US related to the Shower to Shower^® body powder product and its

alleged causal link to ovarian cancer. As indicated above, the Company acquired the Shower to Shower^® body powder product in September 2012 from Johnson & Johnson. The State seeks compensatory damages, punitive damages, injunctive relief requiring warnings for talc-containing products, removal from the market of products that fail to warn, and to prevent the continued violation of the Mississippi Consumer Protection Act (“MCPA”). The State also seeks disgorgement of profits from the sale of the product and civil penalties. In October 2017, ~~Plaintiffs~~plaintiffs dismissed certain claims under the MCPA related to advertising/marketing that did not appear on the label and/or packaging of Shower to ~~Shower.~~Shower^®. The State has not made specific allegations as to the Company or ~~VPNA.~~Bausch Health US. The Company intends to defend itself vigorously in this ~~action, which the Company believes will also fall, in whole or in part, within the indemnification obligations of~~action. Johnson & Johnson ~~owed~~will fully indemnify the Company in this case with respect to liabilities arising out of the manufacture, use, or sale of Shower to Shower^® prior to the Company's acquisition of the product.

California Proposition 65 Related Matters

On February 11, 2019, plaintiffs filed a pre-suit notice letter with the California Attorney General notifying the Attorney General’s office of their intent to file suit after 60 days against the Company and certain of its subsidiaries, alleging they committed violations of the California Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65) by manufacturing and distributing Shower to Shower^® that they allege contained talc contaminated with asbestos, a listed carcinogen. That notice letter was served on the Company on February 22, 2019. By statute, a private lawsuit may not be filed until at least 60 days have passed following service of this pre-suit notice letter. In April 2019, rather than filing a lawsuit against Bausch Health US, the plaintiffs moved for leave to amend their complaint in a pending Proposition 65 lawsuit (Luna, et al. v. Johnson & Johnson, et al., case 2:18-cv-04830-GW-KS) against Johnson & Johnson in federal court in California to

add Bausch Health US as ~~indicated above.~~a defendant. Plaintiffs subsequently filed a motion to dismiss the lawsuit without prejudice. The court has ordered that the case be dismissed without prejudice.

On April 15, 2019, a plaintiff filed a pre-suit notice letter with the California Attorney General notifying the Attorney General’s office of their intent to file suit after 60 days against the Company and certain of its subsidiaries, alleging they committed violations of Proposition 65 by manufacturing and distributing Shower to Shower^® that they allege contained silica, arsenic, lead and chromium (hexavalent compounds), which they allege are known to cause cancer and/or reproductive toxicity. That notice letter was served on the Company on April 18, 2019. While the statutory 60 days have passed before a private lawsuit may be filed, no lawsuit has been filed to date.

On June 19, 2019, plaintiffs filed a proposed class action in California state court against Bausch Health US and Johnson & Johnson (Gutierrez, et al. v. Johnson & Johnson, et al., Case No. 37-2019-00025810-CU-NP-CTL), asserting claims for purported violations of the California Consumer Legal Remedies Act, False Advertising Law and Unfair Competition Law in connection with their sale of talcum powder products that the plaintiffs allege violated Proposition 65. This lawsuit was served on Bausch Health US on June 28, 2019. Plaintiffs seek damages, disgorgement of profits, injunctive relief, and reimbursement/restitution. The Company and Bausch Health US intend to defend this lawsuit vigorously.

Doctors Allergy Formula Lawsuit

In April 2018, Doctors Allergy Formula, LLC (“Doctors Allergy”), filed a lawsuit against ~~Valeant Pharmaceuticals International (“VPI”)~~Bausch Health Americas in the Supreme Court of the State of New York, County of New York, Index No. 651597/2018. Doctors Allergy asserts breach of contract and related claims under a 2015 Asset Purchase Agreement, which purports to include milestone payments that Doctors Allergy alleges should have been paid by ~~VPI.~~Bausch Health Americas. Doctors Allergy claims its damages are not less than $23 million. On June 14, 2018, ~~VPI~~Bausch Health Americas filed a motion to dismiss the complaint in part and a motion to ~~strike~~strike. On July 16, 2019 the court granted the Company's motion in part and ~~the matter~~dismissed Doctor's Allergy's fraud and punitive damages claims. Discovery is ~~currently in discovery. Oral argument on this motion has been scheduled for November 13, 2018. VPI~~proceeding. Bausch Health Americas disputes the claims and intends to vigorously defend ~~this~~the remaining claims.

Litigation with Former Salix CEO

On January 28, 2019, former Salix Ltd. CEO and director Carolyn Logan filed a lawsuit in the Delaware Court of Chancery, Case No. 2019-0059, asserting claims for breach of contract and declaratory relief. The lawsuit arises out of the contractual termination of approximately $30 million in unvested equity awards following the determination by the Salix Ltd. Board of Directors that Logan intentionally engaged in wrongdoing that resulted, or would reasonably be expected to result, in material harm to Salix Ltd., or to the business or reputation of Salix Ltd. Logan seeks the restoration of the unvested equity awards and a declaration regarding certain rights related to indemnification. On June 19, 2019, the Court entered an order staying the claim for declaratory relief pending the final resolution of the breach of contract claim. The Company disputes the claims and intends to vigorously defend the matter.

Completed or Inactive Matters

The following matters have concluded, have settled, are the subject of an agreement to settle or have otherwise been closed since ~~July~~January 1, ~~2018,~~2019, have been inactive from the Company’s perspective for several quarters or the Company anticipates that no further material activity will take place with respect thereto. Due to the closure, settlement, inactivity or change in status of the matters referenced below, these matters will no longer appear in the Company's next public reports and disclosures, unless required. With respect to inactive matters, to the extent material activity takes place in subsequent quarters with respect thereto, the Company will provide updates as required or as deemed appropriate.

Settlement of ~~Arbitration with Alfasigma S.p.A. (“Alfasigma”) (formerly Alfa Wasserman S.p.A.)~~

On or about July 21, 2016, Alfasigma commenced arbitration against the Company and its subsidiary, Salix Pharmaceuticals, Inc.’s (“Salix Inc.”) under the Rules of Arbitration of the International Chamber of Commerce (No. 22132/GR, Alfa Wasserman S.p.A. v. Salix Pharmaceuticals, Inc. et al.), pursuant to the terms of the Amended and Restated License Agreement between Alfasigma and Salix Inc. (the “ARLA”). In the arbitration, Alfasigma made certain allegations respecting a development project for a formulation of the rifaximin compound (a different formulation to the current formulation, not the Xifaxan^® product) that is being conducted under the terms of the ARLA, including allegations that Salix Inc. has failed to use the required efforts with respect to this development and that the Company’s acquisition of Salix Ltd. resulted in a change of control under the ARLA, which entitled Alfasigma to assume control of this development. Alfasigma sought, among other things, a declaration that the provisions of the ARLA relating to the development product and the rights relating to the rifaximin formulation being developed had been terminated and such development and rights shall be returned to Alfasigma, an order requiring the Company and Salix Inc. to pay for the costs of such development (in an amount of at least $80 million), and alleged damages in the amount of approximately $285 million plus arbitration costs and attorney fees. The Company’s Xifaxan^® ~~products (and Salix Inc.'s rights thereto under the ARLA) were not the subject of any of the relief sought in this arbitration.~~

On October 25, 2018, Alfasigma, the Company and Salix Inc. entered into a settlement agreement, pursuant to which the parties released each other from all of the claims raised in the arbitration. In connection with the settlement, the parties have requested a dismissal of the arbitration on a with prejudice basis. In addition, in connection with the settlement, the parties also entered into an amendment to the ARLA providing for the initiation of a late-stage clinical program to study an investigational formulation of the rifaximin compound in patients with Postoperative Crohn’s disease.

~~Settlement of~~ Salix Ltd. SEC Investigation

In the fourth quarter of 2014, the SEC commenced a formal investigation into alleged securities law violations by Salix Ltd. The investigation related to certain disclosures made prior to the ~~Company’s acquisition of~~ Salix ~~Ltd. (the “Salix Acquisition”)~~Acquisition by Salix Ltd. and its then-chief financial officer relating to the amounts of Salix Ltd. drugs held in inventory by certain wholesaler customers. The Company cooperated with the SEC's investigation. On September 28, 2018, the Company reached

a settlement of the relevant charges with the ~~SEC, which settlement remains subject to approval by the U.S. District Court for the Southern District of New York.~~SEC. Under the terms of the settlement, Salix Ltd. neither admitted nor denied the SEC’s allegations. No monetary penalty against the Company or Salix Ltd. was assessed by the terms of the settlement. ~~As a result, the Company recorded a favorable adjustment of $40 million reflecting the reversal of the contingent liability assumed in connection with the Salix Acquisition.~~

~~Settlement of Xifaxan~~^® ~~Patent Litigation~~

On or about February 16, 2016, the Company received a Notice of Paragraph IV Certification dated February 11, 2016, from Actavis Laboratories FL, Inc. (“Actavis”), in which Actavis asserted that the U.S. patents listed in the FDA’s Orange Book for Salix Inc. Xifaxan^® ~~tablets, 550 mg (the “Xifaxan~~^® Patents”), are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Actavis’ generic rifaximin tablets, 550 mg, for which an Abbreviated New Drug Application (“ANDA”) has been filed by Actavis. On March 23, 2016, Salix Inc. and its affiliates, Salix Pharmaceuticals, Ltd. (“Salix Ltd.”) and Valeant Pharmaceuticals Luxembourg S.à r.l., Alfa Wassermann S.p.A. (“Alfa Wassermann”) (as owner of certain of the Xifaxan^® ~~Patents) and Cedars-Sinai Medical Center (as owner of certain of the Xifaxan~~^® ~~Patents) (collectively, the “Plaintiffs”) filed suit against Actavis in~~April 4, 2019, the U.S. District Court for the Southern District of ~~Delaware (Case No. 1:16-cv-00188), pursuant to~~New York rendered its final judgment approving the ~~Hatch-Waxman Act, alleging infringement by Actavis of one or more claims of each of the Xifaxan~~^® ~~Patents, thereby triggering a 30-month stay of the approval of Actavis’ ANDA for rifaximin tablets, 550 mg. On May 24, 2016, Actavis filed its answer in this matter.~~settlement.

On September 12, 2018, the Company announced that it had agreed to resolve all outstanding intellectual property litigation regarding Actavis’ ANDA. Under the terms of the agreement, beginning January 1, 2028 (or earlier under certain circumstances), Actavis will have the option to: (1) market a royalty-free generic version of Xifaxan^® ~~tablets, 550 mg, should it receive approval from the FDA on its ANDA, or (2) market an authorized generic version of Xifaxan~~^® tablets, 550 mg, with drug supply being provided by Salix Ltd. In the case an authorized generic is marketed, the volume of the authorized generic will be subject to manufacturing and supply quantities until final patent expiry, and the Company will receive a share of the economics from Actavis on its sales of such an authorized generic. The parties have agreed to dismiss all litigation related to Xifaxan^®~~, and all intellectual property protecting Xifaxan~~^® ~~will remain intact and enforceable. The Company will not make any financial payments or other transfers of value as part of the agreement. Actavis acknowledges the validity of the Xifaxan~~^® ~~Patents.~~

~~Settlement of Solodyn~~^® ~~Antitrust Class Actions~~

Beginning in July 2013, a number of civil antitrust class action suits were filed against Medicis Pharmaceutical Corporation (“Medicis”), Valeant Pharmaceuticals International, Inc. (“VPII”) and various manufacturers of generic forms of Solodyn^®, alleging that the defendants engaged in an anticompetitive scheme to exclude competition from the market for minocycline hydrochloride extended release tablets, a prescription drug for the treatment of acne marketed by Medicis under the brand name, Solodyn^®. The plaintiffs in such suits alleged violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and of various state antitrust and consumer protection laws, and further alleged that the defendants have been unjustly enriched through their alleged conduct. The plaintiffs sought declaratory and injunctive relief and, where applicable, treble, multiple, punitive and/or other damages, including attorneys’ fees. By order dated February 25, 2014, the Judicial Panel for Multidistrict Litigation (‘‘JPML’’) centralized the suits in the District of Massachusetts, under the caption In re Solodyn (Minocycline Hydrochloride) Antitrust Litigation, Case No. 1:14-md-02503-DJC, before U.S. District Judge Denise Casper. After the Direct Purchaser Class Plaintiffs and the End-Payor Class Plaintiffs each filed a consolidated amended class action complaint on September 12, 2014, the defendants jointly moved to dismiss those complaints. On August 14, 2015, the Court granted the Defendants' motion to dismiss with respect to claims brought under Sherman Act, Section 2 and various state laws but denied the motion to dismiss with respect to claims brought under Sherman Act, Section 1 and other state laws. VPII was dismissed from the case, but the litigation continued against Medicis and the generic manufacturers as to the remaining claims.

On March 26, 2015, and on April 6, 2015, while the motion to dismiss the class action complaints was pending, two additional non-class action complaints were filed against Medicis by certain retail pharmacy and grocery chains ("Individual Plaintiffs") making similar allegations and seeking similar relief to that sought by Direct Purchaser Class Plaintiffs. Those suits were centralized with the class action suits in the District of Massachusetts. Following the Court's August 14, 2015 decision on the motion to dismiss, the Individual Plaintiffs each filed amended complaints on October 1, 2015, and Medicis answered on December 7, 2015. A third non-class action was filed by another retail pharmacy against Medicis on January 26, 2016, and Medicis answered on March 28, 2016.

Plaintiffs reached settlements with two of three generic manufacturer defendants prior to the close of discovery. On April 14, 2017, the Court granted the Direct Purchaser Plaintiffs' and End-Payor Plaintiffs' motions for preliminary approval of those settlements and granted final approval on November 27, 2017. For the remaining parties, following the close of fact discovery and expert discovery, the Court granted Direct Purchaser Plaintiffs' and End-Payor Plaintiffs' motions for class certification for the purposes of damages, but denied End-Payor Plaintiffs' motion for class certification for the purposes of injunctive and declaratory relief. The remaining defendants petitioned to appeal the certification of the End-Payor Class and this petition was denied. Plaintiffs and the remaining defendants each filed motions for summary judgment. The Court heard oral argument on the parties’ summary judgment motions on January 12, 2018. On January 25, 2018, the Court issued a Memorandum and Order denying the parties’ motions, except for partially allowing defendants’ motion on market power. In February 2018, Medicis agreed to resolve the class action litigation with the End Payor and Direct Payor classes for an amount of $58 million and has resolved related litigation with opt-out retailers for additional consideration. On July 18, 2018, the district court granted final approval of these settlements with the End-Payor and Direct Purchaser classes.


~~19.~~20.	SEGMENT INFORMATION

Reportable Segments

~~During 2017, the Company divested certain businesses. In 2018, the Company began reallocating capital and resources to other businesses. As a result, during~~Since the second quarter of 2018 ~~the Company’s CEO, who is the Company’s Chief Operating Decision Maker, commenced managing the business differently through changes in its operating~~ and ~~reportable segments, which necessitated a realignment of the Company's historical segment structure. This realignment is~~ consistent with how the Company’s CEO currently: (i) assesses operating performance on a regular basis, (ii) makes resource allocation decisions and (iii) designates responsibilities of his direct ~~reports. Pursuant to these changes, in the second quarter of 2018,~~reports; the Company ~~began operating~~operates in the following reportable segments: (i) Bausch + Lomb/International segment, (ii) Salix segment, (iii) Ortho Dermatologics segment and (iv) Diversified Products segment. Prior period presentations of segment revenues and segment profits have been recast to conform to the current segment reporting structure. See Note 2, "SIGNIFICANT ACCOUNTING POLICIES" for additional information regarding changes to the Company's reportable segments.

The following is a brief description of the Company’s segments:

~~The Bausch + Lomb/International segment~~

•

The Bausch + Lomb/International segment consists of: (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products, primarily comprised of Bausch + Lomb products, with a focus on the Vision Care, Surgical, Consumer and Ophthalmology Rx products and (ii) with the exception of sales of Solta products, sales in Canada, Europe, Asia, Australia, Latin America, Africa and the Middle East of branded pharmaceutical products, branded generic pharmaceutical products, OTC products, medical device products and Bausch + Lomb products.


•	The Salix segment consists of sales in the U.S. of GI products.


•	The Ortho Dermatologics segment consists of: (i) sales in the U.S. of Ortho Dermatologics (dermatological) products and (ii) global sales of Solta medical aesthetic devices.


•	The Diversified Products segment consists of sales in the U.S. of: (i) pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) generic products and (iii) dentistry products.

Effective in the ~~U.S.~~first quarter of pharmaceutical products, OTC products and medical device products, primarily comprised of Bausch + Lomb products, with a focus on the Vision Care, Surgical, Consumer and Ophthalmology Rx products and (ii) with the exception of sales of Solta products, sales in Canada, Europe, Asia, Latin America, Africa and the Middle East of branded pharmaceutical products, branded generic pharmaceutical products, OTC products, medical device products and Bausch + Lomb products.

~~The Salix segment~~ ~~consists of sales~~2019, one product historically included in the ~~U.S.~~reported results of ~~gastrointestinal ("GI") products.~~

~~The~~the Ortho Dermatologics business unit in the Ortho Dermatologics segment ~~consists of: (i) sales~~is now included in the ~~U.S.~~reported results of ~~Ortho Dermatologics (dermatological) products and (ii) global sales of Solta medical aesthetic devices.~~

~~The~~the Generics business unit in the Diversified Products segment ~~consists of: (i) sales~~and another product historically included in the ~~U.S.~~reported results of ~~pharmaceutical products~~the Ortho Dermatologics business unit in the ~~areas of neurology and certain other therapeutic classes, (ii) sales~~Ortho Dermatologics segment is now included in the ~~U.S.~~reported results of ~~generic products, (iii) sales~~the Dentistry business unit in the ~~U.S.~~Diversified Products segment as management believes the products better align with the new respective business units. These changes in product alignment are not material. Prior period presentations of ~~dentistry products, (iv) sales in the U.S. of oncology (or Dendreon) products, (v) global sales of women’s health (or Sprout) products~~business unit and ~~(vi) sales of certain other businesses divested during 2017 that were not core~~segment revenues and profits have been conformed to ~~the Company's operations.~~ ~~As a result of the divestitures of the Company's equity interests in Dendreon (June 28, 2017)~~current segment and ~~Sprout (December 20, 2017), the Company exited the oncology and women's health businesses, respectively.~~

business unit reporting structures.

Segment profit is based on operating income after the elimination of intercompany transactions. Certain costs, such as Amortization of intangible assets, Asset impairments, In-process research and development costs, Restructuring and integration costs, Acquisition-related contingent consideration costs and Other income, net, are not included in the measure of segment profit, as management excludes these items in assessing segment financial performance.

Corporate includes the finance, treasury, certain research and development programs, tax and legal operations of the Company’s businesses and incurs certain expenses, gains and losses related to the overall management of the Company, which are not allocated to the other business segments. In assessing segment performance and managing operations, management does not review segment assets. Furthermore, a portion of share-based compensation is considered a corporate cost, since the amount of such expense depends on company-wide performance rather than the operating performance of any single segment.

Segment Revenues and Profits

Segment revenues and profits were as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2019			2018			2019			2018
Revenues:
Bausch + Lomb/International	$	1,208		$	1,209		$	2,326		$	2,312
Salix	509			441			954			863
Ortho Dermatologics	122			141			260			281
Diversified Products	313			337			628			667
	$	2,152		$	2,128		$	4,168		$	4,123

Segment profits:
Bausch + Lomb/International	$	337		$	350		$	656		$	647
Salix	332			292			620			564
Ortho Dermatologics	41			58			98			102
Diversified Products	232			259			468			499
	942			959			1,842			1,812
Corporate	(152		)	(161		)	(277		)	(275		)
Amortization of intangible assets	(488		)	(741		)	(977		)	(1,484		)
Goodwill impairments	—			—			—			(2,213		)
Asset impairments	(13		)	(301		)	(16		)	(345		)
Restructuring and integration costs	(4		)	(7		)	(24		)	(13		)
Acquisition-related contingent consideration	(20		)	6			1			4
Other income (expense), net	(8		)	—			(5		)	(12		)
Operating income (loss)	257			(245		)	544			(2,526		)
Interest income	3			3			7			6
Interest expense	(409		)	(435		)	(815		)	(851		)
Loss on extinguishment of debt	(33		)	(48		)	(40		)	(75		)
Foreign exchange and other	3			(9		)	3			18
Loss before benefit from (provision for) income taxes	$	(179	)	$	(734	)	$	(301	)	$	(3,428	)

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2018 2017 2018 2017
Revenues:
Bausch + Lomb/International $ 1,147
$ 1,234
$ 3,459
$ 3,591
Salix 460
452
1,323
1,141
Ortho Dermatologics 177
177
460
556
Diversified Products 352
356
1,017
1,273
$ 2,136
$ 2,219
$ 6,259
$ 6,561

Segment profits:
Bausch + Lomb/International $ 341
$ 381
$ 988
$ 1,078
Salix 304
277
868
677
Ortho Dermatologics 89
73
193
264
Diversified Products 266
251
763
859
1,000
982
2,812
2,878
Corporate (167 ) (126 ) (442 ) (432 )
Amortization of intangible assets (658 ) (657 ) (2,142 ) (1,915 )
Goodwill impairments —
(312 ) (2,213 ) (312 )
Asset impairments (89 ) (406 ) (434 ) (629 )
Restructuring and integration costs (3 ) (6 ) (16 ) (42 )
Acquired in-process research and development costs —
—
(1 ) (5 )
Acquisition-related contingent consideration 19
238
23
297
Other (expense) income, net 15
325
4
584
Operating income (loss) 117
38
(2,409 ) 424
Interest income 3
3
9
9
Interest expense (420 ) (459 ) (1,271 ) (1,392 )
Loss on extinguishment of debt —
(1 ) (75 ) (65 )
Foreign exchange and other —
19
18
87
Loss before (provision for) benefit from income taxes $ (300 ) $ (400 ) $ (3,728 ) $ (937 )

Revenues by Segment and Product Category

Revenues by segment and product category were as follows:


	Three Months Ended September 30, 2018										Three Months Ended September 30, 2017										Three Months Ended June 30, 2019										Three Months Ended June 30, 2018
(in millions)	Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total		Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total		Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total		Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total
Pharmaceuticals	$	222	$	460	$	140	$	233	$	1,055	$	241	$	452	$	140	$	272	$	1,105	$	235	$	509	$	75	$	199	$	1,018	$	242	$	441	$	101	$	245	$	1,029
Devices	365		—		29		—		394		367		—		25		—		392		387		—		45		—		432		389		—		32		—		421
OTC	352		—		—		—		352		397		—		—		—		397		367		—		—		—		367		368		—		—		—		368
Branded and Other Generics	192		—		—		115		307		213		—		—		79		292		194		—		—		111		305		193		—		—		89		282
Other revenues	16		—		8		4		28		16		—		12		5		33		25		—		2		3		30		17		—		8		3		28
	$	1,147	$	460	$	177	$	352	$	2,136	$	1,234	$	452	$	177	$	356	$	2,219	$	1,208	$	509	$	122	$	313	$	2,152	$	1,209	$	441	$	141	$	337	$	2,128

	Nine Months Ended September 30, 2018										Nine Months Ended September 30, 2017
(in millions)	Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total		Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total
Pharmaceuticals	$	667	$	1,323	$	348	$	712	$	3,050	$	722	$	1,140	$	448	$	1,016	$	3,326
Devices	1,117		—		90		—		1,207		1,049		—		75		—		1,124
OTC	1,046		—		—		—		1,046		1,153		—		—		—		1,153
Branded and Other Generics	576		—		—		294		870		613		—		—		246		859
Other revenues	53		—		22		11		86		54		1		33		11		99
	$	3,459	$	1,323	$	460	$	1,017	$	6,259	$	3,591	$	1,141	$	556	$	1,273	$	6,561



	Six Months Ended June 30, 2019										Six Months Ended June 30, 2018
(in millions)	Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total		Bausch + Lomb/ International		Salix		Ortho Dermatologics		Diversified Products		Total
Pharmaceuticals	$	452	$	954	$	170	$	410	$	1,986	$	445	$	863	$	206	$	481	$	1,995
Devices	753		—		83		—		836		752		—		61		—		813
OTC	691		—		—		—		691		694		—		—		—		694
Branded and Other Generics	385		—		—		213		598		384		—		—		179		563
Other revenues	45		—		7		5		57		37		—		14		7		58
	$	2,326	$	954	$	260	$	628	$	4,168	$	2,312	$	863	$	281	$	667	$	4,123

The top ten products for the six months ended June 30, 2019 and 2018 represented 38% and 35% of total revenues for the six months ended June 30, 2019 and 2018, respectively.

Geographic Information

Revenues are attributed to a geographic region based on the location of the customer and were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2019		2018		2019		2018
U.S. and Puerto Rico	$	1,282	$	1,261	$	2,482	$	2,437
China	101		98		190		182
Canada	88		76		167		153
Japan	59		55		114		106
France	58		58		111		113
Poland	49		52		107		115
Mexico	58		54		102		97
Egypt	49		44		102		89
Germany	41		42		86		92
Russia	41		40		77		68
United Kingdom	30		31		58		58
Italy	22		23		44		45
Spain	23		23		44		44
Other	251		271		484		524
	$	2,152	$	2,128	$	4,168	$	4,123

Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2018 2017 2018 2017
U.S. and Puerto Rico $ 1,329
$ 1,306
$ 3,766
$ 3,945
China 91
90
273
240
Canada 78
83
231
238
Japan 59
58
165
166
Poland 49
51
164
147
France 46
41
159
142
Mexico 56
54
153
144
Egypt 45
41
134
116
Germany 38
39
130
119
Russia 38
57
106
148
United Kingdom 29
29
87
79
Italy 19
19
64
58
Spain 17
17
61
55
Other 242
334
766
964
$ 2,136
$ 2,219
$ 6,259
$ 6,561

Major Customers

Customers that accounted for 10% or more of total revenues ~~consist of:~~were as follows:



	Six Months Ended June 30,
	2019	2018
McKesson Corporation (including McKesson Specialty)	17%	17%
AmerisourceBergen Corporation	16%	18%
Cardinal Health, Inc.	14%	13%

Nine Months Ended September 30,
2018 2017
AmerisourceBergen Corporation 18% 15%
McKesson Corporation (including McKesson Specialty) 18% 20%
Cardinal Health, Inc. 13% 13%


~~20.~~	~~SUBSEQUENT EVENT~~

~~Acquisition of Noncontrolling Interest in Medpharma~~

~~On October 16, 2018, using cash on hand, the Company acquired the 40% noncontrolling interest of Medpharma Pharmaceutical & Chemical Industries LLC (“Medpharma”) for $20 million.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

Unless the context otherwise indicates, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the terms “we,” “us,” “our,” “the Company,” and similar terms refer to Bausch Health Companies Inc. and its subsidiaries. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been updated through ~~November~~August 6, ~~2018~~2019 and should be read in conjunction with the unaudited interim Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~June 30, ~~2018~~2019 (this “Form 10-Q”). The matters discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements within the meaning of Section 27A of The Securities Act of 1993, as amended, and Section 21E of The Securities Exchange Act of 1934, as amended, and that may be forward-looking information within the meaning defined under applicable Canadian securities laws (collectively, “Forward-Looking Statements”). See “Forward-Looking Statements” at the end of this discussion.

Our accompanying unaudited interim Consolidated Financial Statements as of ~~September~~June 30, ~~2018~~2019 and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial statements, and should be read in conjunction with our Consolidated Financial Statements for the year ended December 31, ~~2017,~~2018, which were included in our Annual Report on Form 10-K ~~(as updated by the Current Report on Form 8-K~~ filed on ~~August 10, 2018).~~February 20, 2019. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of the financial condition, results of operations and cash flows for the periods indicated. Additional company information is available on SEDAR at www.sedar.com and on the SEC website at www.sec.gov. All currency amounts are expressed in U.S. dollars, unless otherwise noted.

OVERVIEW

We are a global pharmaceutical and medical device company whose mission is to improve people’s lives with our health care products. We develop, manufacture and market, primarily in the therapeutic areas of eye-health, gastroenterology ("GI") and dermatology, a broad range ofof: (i) branded pharmaceuticals, (ii) generic and branded generic pharmaceuticals, (iii) over-the-counter (“OTC”) products and (iv) medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment and aesthetics devices) ~~and over-the-counter (“OTC”) products.~~, which are marketed directly or indirectly in over 90 countries.

Business Strategy

Core Businesses

Our strategy is to focus our business on core ~~geographies and~~ therapeutic classes that offer attractive growth opportunities. Within our chosen therapeutic classes, ~~and geographies,~~ we prioritize durable products which we believe have the potential for strong operating margins and evidence of growth opportunities. We believe this strategy has reduced complexity in our operations and maximized the value of our: (i) eye-health, (ii) GI and (iii) dermatology businesses which collectively now represent a substantial portion of our revenues. We have found and continue to believe there is significant opportunity in ~~the: (i) eye-health, (ii) GI~~these businesses and ~~(iii) dermatology businesses. We~~we believe that our existing portfolio, commercial footprint and pipeline of product development projects position us to successfully compete in these markets and provide us with the greatest opportunity to build value for our shareholders. We identify these businesses as “core”, meaning that we believe we are best positioned to grow and develop them.

Reportable Segments and Strategies

~~In the second quarter~~Our portfolio of ~~2018, the Company began~~products falls into four operating ~~in the following operating~~and reportable segments: (i) Bausch + Lomb/International, (ii) Salix, (iii) Ortho Dermatologics and (iv) Diversified Products. ~~Prior to the second quarter of 2018, the Company operated in the following operating segments: (i) Bausch + Lomb/International, (ii) Branded Rx and (iii) U.S. Diversified Products.~~

The Bausch + Lomb/International segment - consists of ~~the: (i) U.S.~~our Global Bausch + Lomb eye-health business and ~~(ii)~~our International ~~reporting units. The Salix segment consists of the Salix reporting unit (originally part of the former Branded~~ Rx ~~segment). The Ortho Dermatologics segment consists of the: (i) Ortho Dermatologics (originally part of the former Branded Rx segment) and (ii)~~business. Our Global Solta (originally part of the former Branded Rx segment) reporting units. The Diversified Products segment consists of the: (i) Neurology and Other (originally part of the former U.S. Diversified Product segment), (ii) Generics (originally part of the former U.S. Diversified Product segment) and (iii) Dentistry (originally part of the former Branded Rx segment) reporting units. In 2017, the Neurology and Other reporting unit also included the: (i) oncology business (originally part of the former Branded Rx segment) and (ii) women's health business (originally part of the former Branded Rx segment). Upon divesting its equity interests in Dendreon Pharmaceuticals LLC (“Dendreon”) on June 28, 2017 and Sprout Pharmaceuticals, Inc. (“Sprout”)

on December 20, 2017, the Company exited the oncology and women's health businesses, respectively. Prior period presentations of segment revenues and segment profits have been recast to conform to the current segment reporting structure.

~~The following is a brief description of the Company’s segments:~~

~~The Bausch + Lomb/International segment~~ ~~consists of: (i) sales in the U.S. of pharmaceutical products, OTC products and medical device products, primarily comprised of~~ Bausch + Lomb ~~products, with a focus on the~~eye-health business includes our Vision Care, Surgical, Consumer and Ophthalmology Rx products, which in aggregate accounted for approximately 43%, 43% and ~~(ii)~~41% of our Company's revenues for the six months ended June 30, 2019 and the years 2018 and 2017, respectively. Our International Rx business, with the exception of ~~sales of~~our Solta products, includes sales in Canada, Europe, Asia, Australia, Latin America, Africa and the Middle East of branded pharmaceutical products, branded generic pharmaceutical products, OTC products and medical device ~~products and~~products.

Our Bausch + Lomb ~~products.~~

business is a fully-integrated eye-health business, which we believe is critical to maintaining our position in the global eye-health market. As a fully-integrated eye-health business with a 165-year legacy, Bausch + Lomb has an established line of contact lenses, intraocular lenses and other medical devices, surgical systems and devices, vitamin and mineral supplements, lens care products, prescription eye-medications and other consumer products that positions us to compete in all areas of the eye-health market.

As part of our Global Bausch + Lomb business strategy, we continually look for key trends in the eye-health market to meet changing consumer/patient needs and identify areas for investment and growth. For instance, one of these trends, myopia, is increasing substantially, and importantly, myopia is a risk factor for glaucoma, macular degeneration and retinal detachment. We continue to see increased demand for new eye-health products that address conditions brought on by factors such as increased screen time, lack of outdoor activities and academic pressures, as well as conditions brought on by an aging population for example, as more and more baby-boomers in the U.S. are reaching the age of 65. To supplement our well-established Bausch + Lomb product lines, we continue to identify new products tailored to address these key trends, which we develop internally with our own research and development (“R&D”) team to generate organic growth. Recent product launches include Biotrue^® ONEday daily disposable contact lenses, the next generation of Bausch + Lomb ULTRA^® contact lenses, SiHy Daily contact lenses, Lumify^® (an eye redness treatment), Vyzulta^® (a pressure lowering eye drop for patients with angle glaucoma or ocular hypertension) and Ocuvite^® Eye Performance (vitamins to protect the eye from stressors such as sun light and blue light emitted from digital devices).

The Salix segment - consists of sales in the U.S. of gastrointestinal ~~("GI"~~or GI products and includes Xifaxan^® which accounted for approximately 16%, 14% and 11% of our total revenues for the six months ended June 30, 2019 and the years 2018 and 2017, respectively.

As part of our acquisition of Salix Pharmaceutical, Ltd. in April 2015 (the "Salix Acquisition"), we acquired the intellectual property to a number of products that have provided us with year-over-year revenue growth, particularly the intellectual properties behind Xifaxan^® for, amongst other indications, irritable bowel syndrome with diarrhea (“IBS-D”), and Relistor^® for opioid induced constipation (“OIC”). Revenues from our Xifaxan^® and Relistor^® products increased approximately 22% and 37%, respectively, in 2018 when compared to 2017 and increased 16% and 14%, respectively, for the six months ended June 30, 2019 when compared to the six months ended June 30, 2018. We attribute these increases, in part, to our January 2017 sales force expansion program described later in the discussion of our Salix infrastructure.

Our Salix business strategy includes building upon our Xifaxan^® and Relistor^® business models. Specifically, we have identified and continue to look for opportunities to capitalize on the sales force and infrastructure we have built around our Xifaxan^® and Relistor^® products. Part of that strategy is to gain access to new products through innovation, co-promotion and acquisition. We have been executing on these strategies in the second half of 2018 and during 2019, as we: (i) have entered into strategic co-promotion relationships with pharmaceutical companies with new GI products, (ii) are in the process of developing next generation formulations of our Salix intellectual properties to address new indications, (iii) have completed the strategic acquisition of certain assets of Synergy Pharmaceuticals Inc. (“Synergy”) ~~products.~~

as we discuss later and (iv) have entered into licensing agreements for investigational products, which, once developed and if approved by the U.S. Food and Drug Administration (the "FDA"), will be new treatments for certain GI and liver diseases. Each of these opportunities potentially provides us with the ability to expand our GI portfolio and allows us to leverage our existing GI sales force, supply channel and distribution channel.

The Ortho Dermatologics segment - consists of: (i) sales in the U.S. of Ortho Dermatologics ~~(dermatological) products~~(dermatological products) and (ii) global sales of Solta medical ~~aesthetic~~dermatological devices.

As part of our business strategy for the Ortho Dermatologics segment, we have made significant investments to build out our aesthetics, psoriasis and acne product portfolios, which are the markets within dermatology where we see the greatest opportunities, with a focus on topical gel and lotion products over injectable biologics. We continue to support and develop injectable biologics; however, we believe some patients prefer topical products as an alternative to injectable biologics. Further, as topical products can, in many cases, defer the use of injectable biologics that often come with associated risk/benefit profiles, a topical product is usually more readily adopted by payors, is less expensive and can be more cost-effective than injectable biologics. Therefore, we believe topical products represent alternative treatments for physicians, payors and patients, and as the preferred choice of treatment, have the potential to drive greater volumes, generate better margins and will ultimately be a key contributing factor of our Ortho Dermatologics business.

As we later discuss, in addition to our established and in-development product lines, we also look to gain access to other dermatology products through strategic licensing agreements. We believe this allows us to leverage our experienced dermatology sales leadership team and our recently expanded Ortho Dermatologics sales force to drive growth in our Ortho Dermatologics business.

The Diversified Products segment - consists ~~of: (i)~~of sales in the U.S. ofof: (i) pharmaceutical products in the areas of neurology and certain other therapeutic classes, such as Wellbutrin XL^®, Cuprimine^® and Migranal^®, (ii) ~~sales in the U.S. of~~ generic products, such as Diastat^®, Uceris^®and Zegerid^® and (iii) ~~sales in the U.S. of~~ dentistry products, ~~(iv) sales in the U.S. of oncology (or Dendreon) products, (v) global sales of women’s health (or Sprout) products~~such as Arestin^® and ~~(vi) sales of certain other businesses divested during 2017 that were not core to the Company's operations.~~ As a result of the divestitures of the Company's equity interests in Dendreon (June 28, 2017) and Sprout (December 20, 2017), the Company exited the oncology and women's health businesses, respectively.

NeutraSal^®.

Significant Seven

We have focused our ~~research and development (“~~R~~&D”)~~&D to advance development programs that we believe will drive growth in our core businesses, while creating efficiencies in our R&D efforts and expenses. These ~~R&D projects~~programs include ~~certain~~the following products which we have dubbed our "Significant Seven", all of which ~~are products recently~~have been launched ~~or expected to launch~~as of June 2019.

Duobrii™ (Ortho Dermatologics) - Launched in June 2019 and is the ~~near future pending completion~~first and only topical lotion that contains a unique combination of ~~testing~~halobetasol propionate and ~~receiving approval from~~tazarotene for the ~~U.S. Food~~treatment of moderate-to-severe plaque psoriasis in adults.

Bryhali™ (Ortho Dermatologics) - Launched in November 2018 and ~~Drug Administration (the "FDA"). These Significant Seven products are: (i) Vyzulta~~^® ~~(Bausch + Lomb), (ii) Siliq™ (psoriasis), (iii) Bryhali™ (psoriasis), (iv) Lumify~~^® ~~(Bausch + Lomb), (v) Duobrii™ (provisional name) (psoriasis), (vi) Relistor~~^® ~~(GI) and (vii) SiHy Daily~~^TM ~~(Bausch + Lomb).~~ is a novel product that contains a unique, lower concentration of halobetasol propionate for the treatment of moderate-to-severe psoriasis.


•	Lumify^® (Bausch + Lomb) - Launched in May 2018 and is an OTC eye drop developed as an ocular redness reliever.


•	SiHy Daily AQUALOX^TM(Bausch + Lomb) - Launched in Japan in September 2018 and is a silicone hydrogel daily disposable contact lens designed to provide clear vision throughout the day.


•	Siliq^® (Ortho Dermatologics) - Launched in the U.S. in 2017 and is an IL-17 receptor blocker monoclonal antibody for patients with moderate-to-severe plaque psoriasis.


•	Vyzulta^® (Bausch + Lomb) - Launched in December 2017 and is an intraocular pressure lowering single-agent eye drop dosed once daily for patients with open angle glaucoma or ocular hypertension.


•	Relistor^® (Salix) - Launched in 2016 and is given to adults who use narcotic medicine to treat severe chronic pain that is not caused by cancer to prevent constipation without reducing the pain-relieving effects of the narcotic.

As outlined later in this discussion, although revenues associated with our Significant Seven products are currently not material, we believe the prospects for this group ~~over the next five years~~ are substantial.

For a comprehensive discussion of our business, business strategy, products and other business matters, see Item 1. “Business” included in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC and the Canadian Securities Administrators on SEDAR on February ~~28, 2018.~~20, 2019.

~~Our Transformation~~

~~Realignment and Name Change~~

Prior to 2016, we completed a series of mergers and acquisitions which were in-line with the Company’s previous strategy for growth. However, in response to changing business dynamics within our Company, we recognized the need to change our focus in order to build a world-class health care organization. In 2016, we retained a new executive team which immediately implemented a multi-year plan to stabilize, turnaround and transform the Company.

As we continue to work through our plan to build a world-class health care organization, the Company has made changes to its leadership, product focus, infrastructure, geographic footprint and capital structure, which changes we outline below. As a result of these changes and the progress we made, on May 8, 2018, the Company announced a realignment of the Company’s business structure, including changes to the Company’s operating and reportable segments. Pursuant to these changes, in the second quarter of 2018, the Company began operating in four operating and reportable segments: (i) Bausch + Lomb/International, (ii) Salix, (iii) Ortho Dermatologics and (iv) Diversified Products. We believe these changes better support and align us with our core businesses and are a better representation of how management measures and reviews our businesses.

We also evaluated our corporate name and looked for a name that we believe more accurately represents the full scope of the Company today as we continue to build an innovative company, striving to improve the health of patients globally. Therefore, effective July 13, 2018, the Company changed its corporate name from Valeant Pharmaceuticals International, Inc. to Bausch Health Companies Inc. We believe our new name, Bausch Health Companies Inc., more accurately represents the Company today, which develops and manufactures a wide range of pharmaceutical, medical device and OTC products, primarily in the therapeutic areas of eye-health, GI and dermatology.

~~Stabilize~~

In 2016, the new executive team: (i) identified and retained a new leadership team, (ii) enhanced the Company's focus on core assets, which enabled the Company to recruit and retain stronger talent for its sales initiatives and (iii) realigned the Company’s operations to improve transparency and operational efficiency and better support the Company's sales force. Once in place, the new leadership team began executing on the turnaround phase of the multi-year action plan and delivering on commitments to narrow the Company's activities to our core businesses where we believe we have an existing and sustainable competitive edge and to identify opportunities to improve operational efficiencies and our capital structure.

~~Turnaround~~

Throughout 2017 and into 2018, the Company has executed and continues to execute on its commitments to stabilize and turnaround our business. During this time, we believe we: (i) have better defined our core businesses, (ii) made measurable progress in improving our capital structure and (iii) have been aggressively addressing and resolving certain legacy matters to eliminate disruptions to our operations.

Focus on Core Businesses

As part of our turnaround, we narrowed our operating focus to our core businesses. We believe this strategy has reduced complexity in our operations and maximized the value of our eye-health, GI and dermatology businesses. In order to focus our efforts, we performed a review of our portfolio of assets within these core businesses to identify those products where we believe we have, and can maintain, a competitive advantage and we continue to define and shape our operations and business strategies around these assets.

~~Once we committed~~commitment to our core businesses, we began analyzing ~~what to do with those~~the strategic alternatives for business units and assets that fall outside our definition of “core”. In order to focus on our objectives, in 2016 and 2017, we ~~began divesting~~divested businesses and assets, which ~~in each case,~~ were not aligned with our core business objectives. This ~~step~~ not only allowed us to better focus our internal resources on our eye-health, GI and dermatology businesses, but also provided us with significant sources of capital, which we used to reduce our debt and improve our capital ~~structure~~structure.

~~As a result of the~~In order to continue to focus on our core businesses ~~and the divestitures of businesses not aligned with~~we have: (i) directed capital allocation to drive growth within our core ~~business objectives,~~businesses, (ii) made measurable progress in improving our capital structure and ~~reduced sales of products in other segments due~~(iii) aggressively addressed and resolved certain legacy legal matters to ~~the loss of exclusivity, a greater portion of~~eliminate disruptions to our revenues are now driven by our core businesses. During the nine months ended September 30, 2018 and 2017, our eye-health, GI and dermatology revenues collectively represented approximately 71% and 66% of our total revenues, respectively. The year-over-year increase in this percentage demonstrates our convictions in these businesses.operations.

~~Begin Redirecting the~~ Allocation of Capital to Drive Growth

~~The ranking of our business units during 2016 changed our view as to how to allocate capital across our activities.~~ In support of our core activities, ~~our leadership team~~we have been aggressively ~~reallocated~~allocating resources to: (i) promote our core businesses globally, (ii) make strategic investments in our infrastructure and (iii) direct R&D to our ~~eye-health,~~Bausch + Lomb, GI and dermatology businesses to drive ~~growth.~~growth organically. The outcome of this process allows us to better drive value in our product portfolio and generate operational efficiencies.

~~Promotion of our Core Businesses~~ - To position the Company to drive the value of our core assets, we made a number of leadership changes and took steps to increase our promotional and sales force efforts, particularly in our GI business.

~~In support of our GI business, we initiated a significant sales force expansion program in December 2016 to reach potential primary care physician (“PCP”) prescribers of Xifaxan~~^® ~~for irritable bowel syndrome with diarrhea (“IBS-D”) and Relistor~~^® tablets for opioid induced constipation (“OIC”). In the first quarter of 2017, we hired approximately 250 trained and experienced sales force representatives and managers to create, bolster and sustain deep relationships with PCPs. With approximately 70% of IBS-D patients initially presenting symptoms to a PCP, we believe that the dedicated PCP sales force is better positioned to reach more patients in need of IBS-D treatment. In addition, we have expanded our dedicated pain sales representatives to strengthen our position in the OIC market. The investment in these additional sales resources, including an increase in associated promotional costs, was in excess of $50 million during 2017; we consider these amounts well spent as they have allowed us to capitalize on the potential of our Xifaxan^® ~~and Relistor~~^® ~~franchises. Revenues from our Xifaxan~~^® ~~and Relistor~~^® ~~franchises increased approximately 26% and 62%, respectively, for the nine months ended September 30, 2018 when compared to the nine months ended September 30, 2017.~~

Continued Investment in ~~a Strategic Joint Venture~~ Emerging Markets - In ~~addition to investments in our infrastructure, in~~ October 2018, we acquired the 40% minority interests of Medpharma Pharmaceutical and Chemical Industries LLC ("Medpharma") for ~~$20~~$18 million, thereby completing the planned acquisition of this joint venture. Medpharma formulates, manufactures and distributes certain branded

generic pharmaceuticals and non-patented generic pharmaceuticals for the Company and third parties. In 2014, we entered into the Medpharma joint venture to provide the Company with a presence in the United Arab Emirates ("UAE"). The completion of this acquisition provides us

with full control over the business activities of Medpharma and allows us to wholly benefit from the allocation of additional Company resources and the growth, if any, in the UAE and the surrounding region.

Strategic Investments in our Infrastructure - In support of our core businesses, we have and continue to make strategic investments in our infrastructure, the most significant of which are at our Waterford facility in Ireland and our Rochester facility in New ~~York, and our Greenville facility in South Carolina.~~York.

To meet the forecasted demand for our Biotrue^® ONEday lenses, in July 2017, we placed into service a $175 million multi-year strategic expansion project of the Waterford facility. The emphasis of the expansion project was to: (i) develop new technology to manufacture, automatically inspect and package contact lenses, (ii) bring that technology to full validation and (iii) increase the size of the Waterford facility. As a result of the increased production capacity and in support of our core eye-health business, we added 300 production employees since the project’s inception and succeeded in increasing production, which in 2017 was over 30% higher than it was in 2015 at the facility. We continue to invest in this facility, spending approximately $4 million during the nine months ended September 30, 2018 and budgeting an additional $19 million through June 2020 to create additional production lines to meet the anticipated commercial demand in 2020.

~~In order to~~To address the expected global demand for our Bausch + Lomb ULTRA^® contact lens, in December 2017, we completed a multi-year, $200 million strategic upgrade to our Rochester facility. The upgrade increased production capacity in support of our Bausch + Lomb Ultra^® and ~~Bausch + Lomb~~ SiHy Daily AQUALOX^TM product lines and better supports the production of other ~~well established~~well-established contact lenses, such as our PureVision^®, PureVision^®2 (SVS, Toric, and Multifocal), SofLens^® 38 and SilSoft^®. ~~In connection with~~

To address the ~~increased~~expected global demand for our SiHy Daily disposable contact lenses, in November 2018, we initiated $300 million of additional expansion projects to add multiple production capacity, we added 120 production employees since the project’s inception and continue to make investments to enhance our production technologies and capacity at the facility, which we expect will exceed $27 million in 2018. These enhancementslines to our ~~production technologies~~Rochester and ~~capacity led, in part, to the validation of~~Waterford facilities. SiHy Daily^TM ~~production at the Rochester facility and the successful launch of SiHy Daily~~^TM ~~AQUALOX~~^TM disposable contact lenses, ~~in Japan in September 2018.~~

~~To support the growth~~one of our ~~Biotrue~~^® lens care product lines, in May 2018, we placed into service a new production line in our Bausch + Lomb Greenville, South Carolina manufacturing facility, which produces a substantial portion of our lens care product lines. The new production line has been validated to produce contact-lens solutions for our Biotrue^��~~, ReNu~~^® ~~and Sensitive Eyes~~^® brands and replaces one of the facility’s original 1983 production lines that had limitations in product configurations. In planning and development for more than two years, the new production line cost $25 million, has a capacity ranging between 40 million and 50 million bottles annually and isSignificant Seven products, are expected to ~~generate additional operational efficiencies through 2019.~~be commercially available in the second half of 2020.

We believe the investments in our Waterford ~~Rochester~~ and ~~Greenville~~Rochester facilities and related expansion of labor forces further demonstrates the growth potential we see in our Bausch + Lomb products and our eye-health business.

Direct R&D Investment to our ~~Eye-health,~~Bausch + Lomb, GI and Dermatology Businesses to Drive Growth Organically - Our R&D organization focuses on the development of products through clinical trials. ~~During 2017, we launched and/or relaunched over 120 products.~~ As of December 31, ~~2017,~~2018, approximately ~~1,000~~1,200 dedicated R&D and quality assurance employees in 23 R&D facilities were involved in our R&D efforts.

~~Our R&D expense was approximately 4% as a percentage of revenue for the full year 2017 and 2016 and approximately 5% for the nine months ended September 30, 2018.~~ As part of our turnaround, we removed projects related to divested businesses and rebalanced our portfolio to better align with our long-term plans and focus on core businesses. Our investment in R&D reflects our commitment to drive organic growth through internal development of new products, a pillar of our new strategy. ~~For the full year 2018, we anticipate R&D expense as a percentage of revenue will exceed 4%, which demonstrates our commitment to our R&D strategy.~~ We have over ~~275~~225 projects in our global pipeline and anticipate submitting approximately ~~130~~125 of those projects for regulatory approval in ~~2018~~2019 and ~~2019.~~2020.

Core assets that have received a significant portion of our R&D investment in current and prior periods are listed below.

Dermatology - In June 2019, we launched Duobrii™ ~~(provisional name)~~, ~~under development as Internal Development Project ("IDP") 118, is~~ the first and only topical lotion that contains a unique combination of halobetasol propionate and tazarotene for the treatment of moderate-to-severe plaque psoriasis in adults. Halobetasol propionate and tazarotene are each approved to treat plaque psoriasis when used separately, but ~~are limited in~~the duration of ~~use. Halobetasol~~halobetasol propionate ~~may be used for up to two weeks~~is limited by FDA labeling constraints and the use of tazarotene ~~may~~can be limited due to ~~irritation. Based on existing data from clinical studies,~~tolerability concerns. However, the combination of these ingredients in Duobrii™ ~~(provisional name)~~, with a dual mechanism of action, ~~potentially~~ allows for expanded duration of use, with reduced adverse events. ~~On June 18, 2018 we announced that we received a Complete~~

Response Letter (“CRL”) from the FDA to our New Drug Application (“NDA”) for Duobrii™ (provisional name). The CRL did not specify any deficiencies related to the clinical efficacy or safety of Duobrii™ (provisional name) and did not identify issues with our Chemistry, Manufacturing and Controls processes. The CRL only noted questions regarding pharmacokinetic data. Working to resolve this matter expeditiously, we met with the FDA to understand the additional data requirements. We resubmitted our NDA, and on August 29, 2018, we announced that the FDA accepted the application as a Class 2 resubmission, with a Prescription Drug User Fee Act (“PDUFA”) action date of February 15, 2019. We continue to have confidence in Duobrii™ (provisional name) and its approval.

Dermatology - In November 2018, we launched Bryhali™, ~~under development as IDP-122, is~~ a novel product that contains a unique, lower concentration of halobetasol propionate for the treatment of moderate-to-severe ~~psoriasis. Halobetasol~~psoriasis which is FDA approved for 8 weeks of use. The FDA has previously approved halobetasol propionate ~~is approved~~ to treat plaque psoriasis, but is limited in duration of ~~use. Based on existing data from clinical studies, this novel formulation potentially allows for expanded duration of use. On October 5, 2018, we received~~use to two weeks.

Dermatology - Internal Development Project ("IDP") 133 is a ~~tentative approval of our NDA~~project to expand the indication for Bryhali™ (halobetasol propionate lotion 0.01%) from plaque psoriasis to include the ~~FDA. Final FDA approval~~topical treatment of atopic dermatitis. A Phase 3 study is ~~pending~~planned to start in the ~~expiration~~second half of ~~exclusivity for a related product, which is expected to occur in November 2018, at which time we anticipate launching Bryhali™ lotion, as originally scheduled.~~2019.

Dermatology - IDP-131 is a new chemical entity, KP-470, for the topical treatment of psoriasis. On February 27, 2018, we announced that we entered into an exclusive license agreement with Kaken Pharmaceutical Co., Ltd. to develop and commercialize ~~products containing a new chemical entity, KP-470, for~~ the ~~topical treatment of psoriasis. Early~~compound. An early proof of concept ~~studies are now planned for~~study was initiated in the first half of 2019. If approved by the FDA, KP-470 could represent a novel drug with an alternative mechanism of action in the topical treatment of psoriasis.


•	Bausch + Lomb - Bausch + Lomb ULTRA^® for Astigmatism is a monthly planned replacement contact lens for astigmatic patients. The Bausch + Lomb ULTRA^® for Astigmatism lens was developed using the proprietary MoistureSeal^® technology. In addition, the Bausch + Lomb ULTRA^® for Astigmatism lens integrates an OpticAlign^® design engineered

for lens stability and to promote a successful wearing experience for the astigmatic patient. In ~~2017, we launched this product and the extended power range for this product. In 2018, we launched the Bausch + Lomb ULTRA~~^® ~~for Astigmatism -2.75 cylinder expanded SKU range.~~

~~Dermatology - On July 27,~~ 2017, we launched ~~Siliq™ in~~this product and the ~~U.S. Siliq™ is an IL-17 receptor blocker monoclonal antibody biologic~~extended power range for ~~treatment of moderate-to-severe plaque psoriasis, which~~this product. In 2018, we ~~estimate to be an over $5,000 million market in~~launched the ~~U.S. The FDA approved the Biologics License Application~~Bausch + Lomb ULTRA^® for Siliq™ injection for subcutaneous use for the treatment of moderate-to-severe plaque psoriasis in adult patients who are candidates for systemic therapy or phototherapy and have failed to respond or have lost response to other systemic therapies. Siliq™ has a Black Box Warning for the risks in patients with a history of suicidal thoughts or behavior and was approved with a Risk Evaluation and Mitigation Strategy involving a one-time enrollment for physicians and one-time informed consent for patients.Astigmatism -2.75 cylinder expanded SKU range.


•	~~Bausch + Lomb - Vyzulta~~^® (latanoprostene bunod ophthalmic solution, 0.024%) is an intraocular pressure lowering single-agent eye drop dosed once daily for patients with open angle glaucoma or ocular hypertension and was launched in December 2017.


•	Bausch + Lomb - SiHy Daily^TM AQUALOX^TMis a silicone hydrogel daily disposable contact lens designed to provide clear vision throughout the day. Product validation was completed in June 2018 and SiHy Daily AQUALOX^TM ~~AQUALOX~~^TM was launched in Japan in September 2018.

Dermatology - IDP-126 is an acne product with a fixed combination of benzoyl peroxide, clindamycin phosphate and adapalene, currently in Phase 2 testing.


•	Bausch + Lomb - Lumify^® (brimonidine tartrate ophthalmic solution, 0.025%) is an OTC eye drop developed as an ocular redness ~~reliever. Lumify~~^® ~~was approved by the FDA in December 2017 and~~reliever which we launched in May 2018.

Gastrointestinal - We have initiated a Phase 2 study for the treatment of overt hepatic encephalopathy with a new formulation of rifaximin, which we acquired as part of ~~our acquisition~~the Salix Acquisition. We expect to complete an interim analysis by the end of ~~Salix Pharmaceuticals, Ltd. ("Salix") in April 2015 (the "Salix Acquisition").~~2019.

~~Dermatology~~Gastrointestinal - ~~On August 24, 2018, the FDA approved Altreno™ (tretinoin 0.05%) lotion, indicated~~We are initiating a Phase 2 study to evaluate rifaximin for the ~~topical~~ treatment of ~~acne vulgaris~~small intestinal bacterial overgrowth or SIBO. Patient enrollment is expected to begin in ~~patients 9 years of age and older. Altreno™ is~~ the first ~~formulation~~quarter of ~~tretinoin in~~2020.

Gastrointestinal - Our partner Alfasigma S.p.A. is initiating a ~~lotion, and has been shown~~Phase 2/3 study for the treatment of postoperative Crohns disease using a novel rifaximin extended release formulation. The study is expected to ~~be effective and generally well-tolerated. In October 2018, we launched Altreno™~~start in the ~~U.S.~~first half of 2020.


•	Gastrointestinal - We are initiating a Phase 2 study evaluating Xifaxan^® 550mg tablets for the prevention of complications of decompensation cirrhosis. The study is expected to start in the fourth quarter of 2019.


•	Dermatology - In October 2018, we launched Altreno^® (tretinoin 0.05%) lotion, indicated for the topical treatment of acne vulgaris in patients 9 years of age and older. Altreno^® is the first tretinoin formulation in a lotion, approved for patients 9 years of age and older.

Dermatology - IDP-120 is an acne product with a fixed combination of mutually incompatible ingredients; benzoyl peroxide and tretinoin. ~~Enrollment for~~ Phase 3 ~~testing of this product is scheduled to begin in November 2018.~~

clinical studies are ongoing.

Dermatology - IDP-123 is an acne product containing lower concentration of tazarotene in a lotion form to help reduce irritation while ~~keeping~~maintaining efficacy. We ~~have completed Phase 3 testing and plan to file an NDA~~submitted a New Drug Application (“NDA”) with the FDA ~~in the first half of~~on February 22, 2019.

Dermatology - IDP-124 is a topical lotion product ~~being~~ designed to treat moderate to severe atopic dermatitis, with pimecrolimus, currently in Phase 3 testing.

Dermatology - IDP-135 is a topical retinoid product in development. We are seeking guidance from the FDA to develop this product for OTC use for the treatment of acne. The guidance meeting is targeted for 2019.


•	Gastrointestinal - On September 11, 2018, we announced the launch of Plenvu^® in the U.S. We license Plenvu^® from Norgine B.V. Plenvu^® is a novel, lower-volume polyethylene glycol-based bowel preparation ~~that has been~~ developed to help provide complete bowel cleansing, with an additional focus on the ascending colon.

Bausch + Lomb - In April 2017, we launched our Stellaris Elite™ Vision Enhancement System. The Stellaris Elite™ Vision Enhancement System is our next generation phacoemulsification cataract platform, which offers new innovations, as well as the opportunity to add upgrades and enhancements every one to two years. Stellaris Elite™ is the first phacoemulsification platform on the market to offer Adaptive Fluidics™, which combines aspiration control with predictive infusion management to create a responsive and controlled surgical environment for efficient cataract lens removal.

•

~~Bausch + Lomb - Vitesse~~^® is a hypersonic vitrectomy system for the removal of the vitreous humor gel that fills the eye cavity to provide better access to the retina and allows for a variety of repairs, including the removal of scar tissue, laser repair of retinal detachments and treatment of macular holes. Available exclusively on the Stellaris Elite system, Vitesse^® liquefies tissue in a highly-localized zone at the edge of the port to increase the level of surgical control and precision to vitrectomies. We launched this product on a limited basis in October 2017.

•

~~Dermatology - Next Generation Thermage FLX~~^TM is a fourth-generation non-invasive treatment option using a radiofrequency platform designed to optimize key functional characteristics, expand clinical indication set and improve patient outcomes. On September 22, 2017, we received 510(k) clearance from the FDA and launched this product in the United States. International launches of this product are underway as part of our Solta business.


•	Bausch + Lomb - On May 1, 2018, we received Premarket Approval ("PMA") from the FDA for, and subsequently launched, 7-day extended wear for our Bausch + Lomb ULTRA^® monthly planned replacement contact lenses.

•

~~Bausch + Lomb - Bausch + Lomb ULTRA~~^® ~~for Presbyopia is a monthly planned replacement contact lens for presbyopic patients. The Bausch + Lomb ULTRA~~^® ~~for Presbyopia lens was developed using the proprietary MoistureSeal~~^® ~~technology. In addition, the Bausch + Lomb ULTRA~~^® ~~for Presbyopia lens integrates a 3 zone progressive design for near, intermediate and distance vision. We launched expanded parameters of this product throughout 2017.~~

•

Bausch + Lomb - Biotrue^® ONEday for Astigmatism is a daily disposable contact lens for astigmatic patients. The Biotrue^® ONEday lenses incorporate Surface Active Technology^TMto provide a dehydration barrier. The Biotrue^® ONEday for Astigmatism also includes evolved peri-ballast geometry to deliver stability and comfort for the astigmatic patient. We launched this product in December 2016 and launched an extended power range ~~in 2017. During 2018, we launched a~~and further extended power range in 2017 and 2018, respectively. We expect to launch a further power expansion for this ~~product.~~product in 2019.

Bausch + Lomb - We are developing a new Ophthalmic Viscosurgical Device product, with a formulation to protect corneal endothelium during ~~Phaco emulsification~~phacoemulsification process during a cataract surgery and to help chamber maintenance and lubrication during interocular lens delivery. In April 2018, we initiated an investigative device exemption (“IDE”) study for this ~~product.~~product and completed enrollment in December 2018. We expect to complete the clinical trial in the fourth quarter of 2019 and anticipate filing a PMA application with the FDA in the first quarter of 2020.

Dermatology - Traser™ is an energy-based platform device with significant versatility and power capabilities to address various dermatological conditions, including vascular and pigmented lesions. We are planning to launch this product in the second half of ~~2020~~2022 as part of our Solta business.

Bausch + Lomb - Loteprednol Gel 0.38% is a new formulation for the treatment of post-operative ocular inflammation and pain. The FDA has accepted for review our NDA for Loteprednol Gel 0.38% and set a PDUFA action date of February 25, 2019. If approved, the product would be the lowest concentrated loteprednol ophthalmic corticosteroid indicated for the treatment of post-operative inflammation and pain following ocular surgery in the U.S.


•	Bausch + Lomb - In April 2019, we launched Lotemax^®SM (loteprednol etabonate ophthalmic gel) 0.38%, a new formulation for the treatment of post-operative inflammation and pain following ocular surgery. Lotemax^®SM is the lowest concentrated loteprednol ophthalmic corticosteroid indicated for the treatment of post-operative inflammation and pain following ocular surgery in the U.S.


•	Bausch + Lomb - enVista^® Trifocal intraocular lens is an innovative lens ~~design, for which we have~~design. We initiated an IDE study for this product in May ~~2018.~~2018 and expect to initiate a Phase 2 study in the fourth quarter of 2019.


•	Bausch + Lomb - enVista^® Toric intraocular lens ~~received FDA approval in June 2018 and~~ was launched in July 2018.

Bausch + Lomb - We are developing a preloaded intraocular lens injector platform for enVista interocular lens. The PMA application was submitted to the FDA in July 2018 and the CE Mark notification was submitted in Europe in February 2019.

•

Bausch + Lomb ULTRA^® Multifocal for Astigmatism contact lens is the first and only multifocal toric lens available as a standard offering in the eye care professional's fit set. The new monthly silicone hydrogel lens, which was specifically designed to address the lifestyle and vision needs of patients with both astigmatism and presbyopia, combines the Company's unique 3-Zone Progressive^™ multifocal design with the stability of its OpticAlign^® toric with MoistureSeal^® technology to provide eye care professionals and their patients an advanced contact lens technology that offers the convenience of same-day fitting during the initial lens exam. Bausch + Lomb ULTRA^® Multifocal for Astigmatism was launched in June 2019.

•

Bausch + Lomb - ~~We are developing an ULTRA~~Renu^® ~~Multifocal~~ Advanced Multi-Purpose Solution (“MPS”) contains a triple disinfectant system that kills 99.9% of germs, and has a dual surfactant system that provides up to 20 hours of moisture. Renu Advanced MPS is FDA cleared with indications for ~~Astigmatism~~use to condition, clean, remove protein, disinfectant, rinse and store soft contact lenses including those composed of silicone hydrogels. Renu Advanced MPS has gained regulatory approvals in Korea, India, Mexico, Indonesia, Malaysia and Singapore.

Bausch + Lomb - Custom soft contact lens (Ultra buttons) is a latheable silicone hydrogel button for custom soft specialty lenses including; Sphere, Toric, Multifocal, Toric Multifocal and irregular corneas. If approved by the FDA, we may launch in the second half of 2020.

Bausch + Lomb - In January 2019, we launched Zen™ Multifocal Scleral Lens for presbyopia exclusively available with Zenlens™ and Zen™ RC scleral lenses and will allow eye care professionals to fit presbyopic patients with irregular and regular corneas and those with ocular surface disease, such as dry eye. The Zen™ multifocal Scleral Lens incorporates decentered optics, enabling the near power to be positioned over the visual axis.

•

Bausch + Lomb - In March 2019, we launched Tangible^® Hydra-PEG^® is a high-water polymer coating that is bonded to the surface of a contact lens ~~combining the benefits of our ULTRA~~and designed to address contact lens discomfort and dry eye. Tangible^® ~~for Presbyopia design~~ Hydra-PEG^® coating technology in combination with our ~~ULTRA~~Boston^® ~~for Astigmatism OpticAlign™ design engineered for~~ materials and Zenlens™ family of scleral lenses will help eye care professionals provide a better lens ~~stability and to promote a successful~~ wearing experience for ~~the presbyopic/astigmatic patient. We anticipate launching this product in 2019, pending completion of testing and receiving approval from the FDA.~~their patients with challenging vision needs.

Improve Capital Structure

~~By executing our turnaround strategies, we~~We have made measurable progress in improving our capital structure by: (i) reducing our debt through repayments and (ii) extending the maturities of debt ~~reduction~~through refinancing. Using the net cash proceeds from divestitures of non-core assets, cash generated from operations and ~~extending~~cash generated from tighter working capital management, through the date of this filing, we repaid (net of additional borrowings) over $7,200 million of long-term debt ~~maturities.~~since the beginning of 2016, in the aggregate. Further, as a result of the refinancing and debt repayments outlined below, as of the date of this filing, we have eliminated all mandatory scheduled principal repayments of our debt obligations through the second quarter of 2020 and our mandatory scheduled principal repayments through 2021 are approximately $410 million.

Divestitures - During 2017, we divested businesses and assets not aligned with our core business objectives, which simplified our operating model and generated over $3,200 million of net cash proceeds that we used to improve our capital structure, the most significant of which were the divestitures of the Company's interests in the CeraVe^®, AcneFree^™ and AMBI^® skincare brands ~~(the "Skincare Sale")~~ (March 3, 2017), the iNova Pharmaceuticals business ~~(the "iNova Sale")~~ (September 29, 2017), the Company's equity interest in Dendreon Pharmaceuticals LLC ~~(the "Dendreon Sale")~~ (June 28, 2017) and the Obagi Medical Products, Inc. business ~~(the "Obagi Sale")~~ (November 9, 2017).

Debt Repayments - During ~~2017 and~~the years 2016 through 2018, we repaid (net of additional borrowings) over ~~$5,800~~$6,800 million of long-term debt using the net cash proceeds from divestitures of non-core assets, cash generated from operations and cash generated from tighter working capital management. During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we ~~repaid:~~repaid approximately $250 million of long-term debt, net of borrowings under our 2023 Revolving Credit Facility (as defined below). Repayments of long-term debt during the six months ended June 30, 2019 included: (i) ~~$206~~$253 million of our ~~Series F~~seven year Tranche B Term Loan Facility ~~(ii) $114 million of our~~maturing in June 2025 (the “June 2025 Term Loan B ~~Facility (as defined below), (iii) $104~~Facility”) and (ii) $75 million of our ~~6.375% October 2020 Unsecured Notes~~seven year Tranche B Term Loan Facility maturing in November 2025 (the ~~“6.375% October 2020 Unsecured Notes”~~"November 2025 Term Loan B Facility"), (iv) the remaining $71 million of outstanding principal amount of our 7.00% Senior Unsecured Notes Due 2020 and (v) $175 million (net of additional borrowings) of amounts outstanding under our revolving credit facilities.. In addition to these repayments, on ~~October 26, 2018,~~August 1, 2019, we ~~redeemed $125~~repaid $100 million of long-term debt, which included: (i) $81 million of the June 2025 Term Loan B Facility and (ii) $19 million of the November 2025 Term Loan B Facility. Net borrowings during the six months ended June 30, 2019 under our ~~7.50% Senior Unsecured Notes~~2023 Revolving Credit Facility of $75 million were primarily used for the payment of interest due ~~2021 (the "July 2021 Unsecured Notes"). These repayments during 2018 were funded with cash on hand~~in April 2019 and ~~reduced our outstanding debt obligations by more than $750 million.~~other short-term capital needs.

2017 Refinancing Transactions - In March, October, November and December of 2017, we accessed the credit markets and completed a series of ~~refinancing~~ transactions, whereby we extended ~~the~~approximately $9,500 million in aggregate maturities of certain debt obligations ~~originally scheduled~~due to mature in ~~the years~~April 2018 through April 2022, out to March 2022 through December 2025. ~~Furthermore, on April 19, 2018,~~As part of these transactions we ~~executed an extension of an additional $60 million of~~also extended commitments under our revolving credit facility, originally set to expire in April ~~2018. This brought~~2018, out to April 2020.

2018 Refinancing Transactions - In March, June and November 2018, we accessed the ~~current total~~credit markets and completed a series of transactions, whereby we extended approximately $8,300 million in aggregate maturities of certain debt obligations due to mature in March 2020 through July 2022, out to June 2025 through January 2027. As part of these transactions we obtained less stringent loan financial maintenance covenants under our Senior Secured Credit Facilities and extended commitments under our revolving credit facility by more than three years by replacing our then-existing revolving credit facility, set to ~~$1,250 million through~~expire in April 2020 ~~(subject to certain springing maturity triggers).~~

~~2018 Refinancing Transactions~~ - In March 2018, Valeant Pharmaceuticals International (“VPI”) issued $1,500 million aggregate principal amount of 9.25% Senior Unsecured Notes due April 2026 (the “April 2026 Unsecured Notes”) in a private placement, the proceeds of which were used to repurchase $1,500 million in aggregate principal amount of unsecured notes which consisted of: (i) $1,017 million in principal amount of our existing 5.375% Senior Unsecured Notes due March 2020 (the “March 2020 Unsecured Notes”), (ii) $411 million in principal amount of our existing 6.375% October 2020 Unsecured Notes and (iii) $72 million in principal amount of our existing 6.75% Senior Unsecured Notes due 2021 (the "August 2021 Unsecured Notes") (collectively, the “March 2018 Refinancing Transactions”). All fees and expenses associated with these transactions were paid with cash generated from operations.

On June 1, 2018, the Company entered into a Restatement Agreement in respect of a Fourth Amended and Restated Credit and Guaranty Agreement (the “Restated Credit Agreement”). The Restated Credit Agreement amended and restated in full the Third Amended Credit Agreement (as defined below). The Restated Credit Agreement replaced the 2020 Revolving Credit Facility with a revolving credit facility of $1,225 million due in June 2023 (the ~~"2023~~“2023 Revolving Credit ~~Facility"~~Facility”).

2019 Refinancing Transactions - In March and ~~replaced~~May 2019, we accessed the ~~Series F Tranche B Term Loan Facility principal amount outstanding~~credit markets and completed a series of ~~$3,315~~transactions, whereby we extended approximately $3,000 million ~~with the seven year Tranche B Term Loan Facility~~in aggregate maturities of ~~$4,565 million (the “2025 Term Loan B Facility”) borrowed by VPI.~~certain debt obligations due to mature in December 2021 through May 2023, out to January 2027 through May 2029.

On ~~June 1, 2018, the Company issued an irrevocable notice of redemption for the remaining outstanding principal amounts of:~~March 8, 2019, we issued: (i) ~~$691~~$1,000 million March 2020 Unsecured Notes, (ii) $578 million of the August 2021 Unsecured Notes, (iii) $550 million of 7.25% Senior Unsecured Notes due 2022 (the “July 2022 Unsecured Notes”) and (iv) $146 million of 6.375% October 2020 Unsecured Notes (collectively, the 6.375% October 2020 Unsecured Notes, March 2020 Unsecured Notes, August 2021 Unsecured Notes and July 2022 Unsecured Notes, being the “June 2018 Unsecured Refinanced Debt”). On June 1, 2018, using the net proceeds from the 2025 Term Loan B Facility, the net proceeds from the issuance of $750 million in aggregate principal amount of 8.50% Senior Unsecured Notes due January 2027 and (ii) $500 million aggregate principal amount of 5.75% Senior Secured Notes due August 2027 (the "August 2027 Secured Notes") in a private placement. The unsecured notes form part of the same series as our existing 8.50% Senior Unsecured Notes due January 2027 (the "January 2027 Unsecured Notes") ~~by VPI~~. A portion of the net proceeds of the January 2027 Unsecured Notes and the August 2027 Secured Notes and cash ~~generated from operations, the Company prepaid~~on hand were used to: (i) repurchase the remaining ~~Series F Tranche B Term Loan Facility~~$700 million outstanding principal amount of 5.625% Senior Unsecured Notes due 2021 (the “December 2021 Unsecured Notes”), (ii) repurchase $584 million of 5.875% Senior Unsecured Notes due 2023 (the "May 2023 Unsecured Notes"), (iii) repurchase $216 million of 5.50% Senior Unsecured Notes due 2023 (the "March 2023 Unsecured Notes") and ~~deposited sufficient funds~~(iv) pay all fees and expenses associated with these transactions (collectively, the “March 2019 Refinancing Transactions”).

On May 23, 2019, we issued: (i) $750 million aggregate principal amount of 7.00% Senior Unsecured Notes due January 2028 (the "January 2028 Unsecured Notes") and (ii) $750 million aggregate principal amount of 7.25% Senior Unsecured Notes due May 2029 (the "May 2029 Unsecured Notes") in a private placement. The ~~Bank~~net proceeds and cash on hand were used to: (i) repurchase $1,118 million of ~~New York Mellon Trust Company, N.A., as trustee under~~May 2023 Unsecured Notes, (ii) repurchase $382 million of March 2023 Unsecured Notes and (iii) pay all fees and expenses associated with these transactions (collectively, the ~~indentures governing the June 2018 Unsecured Refinanced~~“May 2019 Refinancing Transactions”).

Debt, to redeem the June 2018 Unsecured Refinanced Debt at its aggregate redemption price and the indentures governing the June 2018 Unsecured Refinanced Debt were discharged (collectively, the “June 2018 Refinancing Transactions”).

As a result of prepayments and a series of refinancing transactions through ~~September~~June 30, ~~2018,~~2019, we have extended the maturities of a substantial portion of our long-term debt, ~~beyond 2023,~~ providing us with additional liquidity and greater flexibility to execute our business plans. The tables below summarize our outstanding debt portfolio and maturities as of ~~September~~June 30, ~~2018~~2019 as compared to December 31, ~~2017.~~2018.


		September 30, 2018				December 31, 2017					June 30, 2019				December 31, 2018
(in millions)	Maturity	Principal Amount		Net of Discounts and Issuance Costs		Principal Amount		Net of Discounts and Issuance Costs		Maturity	Principal Amount		Net of Premiums, Discounts and Issuance Costs		Principal Amount		Net of Premiums, Discounts and Issuance Costs
Senior Secured Credit Facilities:
Revolving Credit Facilities	June 2023	$	75	$	75	$	250	$	250
Series F Tranche B Term Loan Facility	April 2022	—		—		3,521		3,420
2025 Term Loan B Facility	June 2025	4,451		4,320		—		—
Senior Secured Notes	March 2022 through November 2025	5,000		4,946		5,000		4,939
2023 Revolving Credit Facility										June 2023	$	150	$	150	$	75	$	75
June 2025 Term Loan B Facility										June 2025	4,141		4,029		4,394		4,269
November 2025 Term Loan B Facility										November 2025	1,406		1,384		1,481		1,456
Senior Secured Notes:
5.75% Secured Notes										August 2027	500		493		—		—
All other Senior Secured Notes										March 2022 through November 2025	5,000		4,953		5,000		4,948
Senior Unsecured Notes:
5.375%	March 2020	—		—		1,708		1,699
5.625%										December 2021	—		—		700		697
5.50%										March 2023	402		400		1,000		995
5.875%										May 2023	1,548		1,539		3,250		3,229
8.50%										January 2027	1,750		1,757		750		738
7.00%	October 2020	—		—		71		71		January 2028	750		740		—		—
6.375%	October 2020	—		—		661		656
6.75%	August 2021	—		—		650		648
7.25%	July 2022	—		—		550		545		May 2029	750		740		—		—
9.25%	April 2026	1,500		1,481		—		—
8.50%	January 2027	750		738		—		—
All other Senior Unsecured Notes	July 2021 through December 2025	13,265		13,157		13,326		13,201		May 2023 through April 2026	7,956		7,878		7,970		7,886
Other	Various	14		14		15		15		Various	16		16		12		12
Total long-term debt and other		$	25,055	$	24,731	$	25,752	$	25,444		$	24,369	$	24,079	$	24,632	$	24,305

The weighted average stated interest rate of the Company's outstanding debt as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~
2018 was ~~6.32%~~6.44% and ~~6.07%~~6.23%, respectively.

~~Maturities and mandatory payments~~The scheduled principal repayments of our debt obligations ~~through~~as of June 30, 2019 compared with December 31, ~~2023 and thereafter, as of September 30,~~ 2018 ~~compared with those of December 31, 2017 are~~were as follows:


(in millions)	September 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Remainder of 2018	$	125	$	209
2019	230		—		$	4	$	228
2020	228		2,690		203		303
2021	2,628		3,175		303		1,003
2022	1,478		5,115		1,553		1,553
2023	6,293		6,051		4,109		6,348
2024					2,303		2,303
Thereafter	14,073		8,512		15,894		12,894
Gross maturities	$	25,055	$	25,752	$	24,369	$	24,632

On ~~September 26, 2018, the Company issued an irrevocable 30-day notice to redeem $125~~August 1, 2019, we repaid $100 million of ~~7.50% Senior Unsecured Notes due 2021,~~long-term debt, which isincluded: (i) $81 million of the June 2025 Term Loan B Facility and (ii) $19 million of the November 2025 Term Loan B Facility. These transactions are not reflected in the table above and are therefore included as due during ~~the remainder of 2018 in the table above. This amount, along with the costs of redemption, was paid on October 26, 2018 using cash generated from operations.~~

2020.

See Note 10, "FINANCING ARRANGEMENTS" to our unaudited interim Consolidated Financial Statements and “Management's Discussion and Analysis - Liquidity and Capital Resources: Long-term Debt” for further details.

~~Refocus the Ortho Dermatologics Business~~

During 2017, we began the turnaround of our dermatology business by taking a number of actions which we believe will help our efforts to stabilize our dermatology business, which included: (i) rebranding our dermatology business, (ii) recruiting a new experienced leadership team, (iii) making significant investment in the dermatology pipeline, (iv) adjusting the size of the dermatology sales force and (v) reorganizing that sales force around roughly 150 territories, as we work to rebuild relationships with prescribers of our products.

In July 2017, we rebranded our dermatology business as Ortho Dermatologics, dedicated to helping patients in the treatment of a range of therapeutic areas including actinic keratosis, acne, atopic dermatitis, psoriasis, cold sores, athlete's foot, nail fungus and other dermatoses. The Ortho Dermatologics portfolio includes several leading acne, anti-fungal and anti-infective products. The name change to Ortho Dermatologics is part of a larger rebranding initiative for the dermatology business.

During 2017, the new leadership team directed significant R&D resources to our Ortho Dermatologics business. As previously discussed, Siliq™ was launched in the U.S. in July 2017. On June 18, 2018, we announced that we received a CRL from the FDA to our NDA for Duobrii™ (provisional name), the first and only topical lotion that contains a unique combination of halobetasol propionate and tazarotene for the treatment of moderate-to-severe plaque psoriasis in adults. The CRL did not specify any deficiencies related to the clinical efficacy or safety of Duobrii™ (provisional name) and did not identify issues with our Chemistry, Manufacturing and Controls processes. The CRL only noted questions regarding pharmacokinetic data. Working to resolve this matter expeditiously, we met with the FDA to understand the additional data requirements. We resubmitted our NDA, and on August 29, 2018, we announced that the FDA accepted the application as a Class 2 resubmission, with a PDUFA action date of February 15, 2019. Siliq™ and, if approved, Duobrii™ (provisional name) are treatments for moderate-to-severe plaque psoriasis and are two of our Significant Seven, which we believe will provide substantial revenues over the next five years.

Address Legacy Legal Matters

The Company was burdened with addressing certain ongoing legal matters, some of which were inherited as part of the acquisitions we completed in 2015 and prior. In order to better focus on our core activities and simplify our operations, we have been vigorously addressing many of these matters, and, ~~during 2018 to~~through the date of this filing, we achieved dismissals and other positive outcomes in ~~approximately 60~~a number of litigations, disputes and investigations, as we continue to actively address others. ~~This included: (i)~~For example, in July 2019, we announced that the U.S. District Court of New Jersey had upheld the validity of and determined Actavis Laboratories FL, Inc.’s ("Actavis") infringement of a ~~win~~patent protecting our Relistor^® tablets, expiring in ~~the Cosmo (Uceris~~^®~~) arbitration, (ii) a partial win in the Relistor~~^® ~~(injectable) Abbreviated New Drug Application (“ANDA”) case on validity in the Company's favor protecting the product to at least April 2024, (iii) a settlement~~March 2031. In July, we also announced that we had agreed to resolve the ~~Solodyn~~outstanding intellectual property litigation with Teva Pharmaceuticals USA, Inc. ("Teva") regarding Apriso^® ~~antitrust litigations, (iv)~~ extended-release capsules 0.375g. As part of the settlement, the parties agreed to dismiss all litigation related to Apriso^®, and intellectual property protecting Apriso^®will remain intact and enforceable. In addition, we will grant Teva a ~~settlement with~~non-exclusive license effective October 1, 2021to the ~~California Department of Insurance to resolve the matter~~intellectual property relating to ~~our terminated relationship with Philidor Rx Services, LLC ("Philidor"), (v) a settlement on the Mimetogen litigation, (vi) a settlement~~ Apriso^®in the ~~Allergan~~United States (provided that Teva will be able to begin marketing prior to such date if another generic version of the product is granted approval and starts selling or distributing such generic prior to October 1, 2021). The Company has now resolved litigation ~~(vii) a settlement in~~related to Apriso^® with two out of the ~~Xifaxan~~^® ~~patent litigation~~four Paragraph IV filers.

These matters and ~~(viii) a settlement with the SEC relating to the Salix investigation of 2014 with no monetary penalty against the Company or Salix Ltd.~~

~~We have made substantial progress in the following matters in the later portion of 2017 and in 2018. The~~other significant matters are discussed in further detail in Note ~~18,~~19, "LEGAL PROCEEDINGS" to our unaudited interim Consolidated Financial Statements presented elsewhere in this Form 10-Q and ~~include:~~

~~Solodyn~~^® ~~Antitrust Class Actions~~ - Beginning in July 2013, we were named as co-defendants in a number of civil antitrust class action suits alleging that the defendants engaged in an anticompetitive scheme to exclude competition from the market for minocycline hydrochloride extended release tablets, a prescription drug for the treatment of acne marketed by our subsidiary, Medicis Pharmaceutical Corporation, under the brand name Solodyn^®. The plaintiffs sought declaratory and injunctive relief and, where applicable, treble, multiple, punitive and/or other damages, including attorneys’ fees. In February 2018, we agreed to resolve the class action litigation with the End Payor and Direct Payor classes for an amount of $58 million, subject to Court approval, and have resolved related litigation with opt-out retailers for additional consideration. On July 18, 2018, the Court granted approval of these settlements with the End-Payor and Direct Purchaser classes. All amounts in settlement of these matters were paid during the first quarter of 2018.

~~Xifaxan~~^® ~~Patent Litigation -~~ ~~As disclosed in previous filings and discussed in further detail in~~ Note ~~18,~~20, "LEGAL ~~PROCEEDINGS - Patent Litigation/Paragraph IV Matters”~~PROCEEDINGS" to our ~~unaudited~~audited Consolidated Financial Statements the Company initiated litigation alleging infringement by Actavis Laboratories FL, Inc. (“Actavis”) which filed an Abbreviated New Drug Application (“ANDA”) for a generic version of the Company’s Xifaxan^® (rifaximin) 550 mg tablets. In February 2016, the Company received a Notice of Paragraph IV Certification Actavis, in which Actavis asserted that certain U.S. patents, owned or licensed by certain subsidiaries of the Company for Xifaxan^® ~~550 mg tablets, are either invalid, unenforceable and/or will not be infringed by~~

~~the commercial manufacture, use or sale of Actavis’ generic version of Xifaxan~~^® (rifaximin) 550 mg tablets, for which it filed an ANDA. On March 23, 2016, the Company initiated litigation against Actavis which alleged infringement by Actavis of one or more claims of each of the Xifaxan^® ~~patents.~~

On September 12, 2018, we announced that we had agreed to resolve all outstanding intellectual property litigation regarding Actavis’ ANDA. The parties have agreed to dismiss all litigation related to Xifaxan^®~~, and all intellectual property protecting Xifaxan~~^®~~will remain intact and enforceable. We will not make any financial payments or other transfers of value as part of the agreement and Actavis acknowledges the validity of the Xifaxan~~^® ~~patents. In addition, under the terms of the agreement, beginning January 1, 2028, Actavis will have the option to: (1) market a royalty-free generic version of Xifaxan~~^®~~tablets, 550 mg, should it receive approval from the FDA on its ANDA, or (2) market an authorized generic version of Xifaxan~~^®tablets, 550 mg, in which case we will receive a share of the economics from Actavis on its sales of such an authorized generic. Actavis will be able to commence such marketing earlier if another generic rifaximin product is granted approval and such other generic rifaximin product begins to be sold or distributed before January 1, 2028.

~~Salix SEC Investigation -~~ In the fourth quarter of 2014, the SEC commenced a formal investigation into alleged securities law violations by Salix Ltd. The investigation related to certain disclosures made prior to the Salix Acquisition by Salix Ltd. and its then-chief financial officer relating to the amounts of Salix Ltd. drugs held in inventory by certain wholesaler customers. Following the Salix Acquisition, we self-reported the relevant conduct to the SEC and cooperated with the investigation. On September 28, 2018, we reached a settlement of the relevant charges with the SEC, which remains subject to approval by the U.S. District Court for the Southern District of New York. Salix Ltd. did not admit or deny the SEC’s allegations. No monetary penalty against the Company or Salix Ltd. was assessed by the terms of the settlement. As a result, we recorded a favorable adjustment of $40 million reflecting the reversal of the contingent liability assumedyear ended December 31, 2018, which were included in ~~connection with the Salix Acquisition.~~

~~Arbitration with Alfasigma S.p.A. (“Alfasigma”)~~ - In July 2016, Alfasigma commenced arbitration against the Company and its subsidiary, Salix Inc., pursuant to which Alfasigma made certain allegations respecting a development project for a formulation of the rifaximin compound that was being conducted under the terms of the Amended and Restated License Agreement between Alfasigma and Salix Inc.On October 25, 2018, Alfasigma, the Company and Salix Inc. entered into a settlement agreement, pursuant to which the parties released each other from all of the claims raised in the arbitration. In connection with the settlement, the parties have requested a dismissal of the arbitrationour Annual Report on ~~a with prejudice basis.~~Form 10-K filed on February 20, 2019.

Address Regulatory Matters

In the normal course of business, our products, devices and facilities are the subject of ongoing oversight and review, by regulatory and governmental agencies, including general, for cause and pre-approval inspections by the ~~FDA. In 2016, FDA inspections of our Rochester, New York and Tampa, Florida facilities resulted in observations that~~relevant competent authorities where we ~~needed to address as we disclosed in previous filings. As we discussed in previous filings, in 2017, we resolved these matters with~~have business operations, including the FDA.

~~Following the resolution of these matters and the completion of U.S. FDA inspections of our other facilities going back to February 2017,~~ Currently, all of our global operations and facilities have the relevant operational certificates. Through the date of this filing, the Company's operating sites are in good compliance standing, ~~with the FDA. With these confirmations, we have addressed manufacturing uncertainties related to our current~~ and ~~upcoming regulatory submissions and have cleared the way for new product approvals and the continued shipment of our products to countries outside the U.S.~~

~~All of our facilities~~all sites under FDA jurisdiction are ~~now~~ rated as either as No Action Indicated ~~(or NAI, where~~(where there was no Form 483 observation) or Voluntary Action Indicated ~~(or VAI, where~~(“VAI”) (where there was a Form 483 with one or more observations). In the case of ~~the~~ VAI inspection ~~outcome,~~outcomes, the FDA has accepted our responses to the issues cited in the Form 483, which will be verified when the agency makes its next inspection of those specific facilities. (AA Form 483 is issued at the end of each inspection when FDA investigators have observed any condition that in their judgment may constitute violations of ~~CGMP.)~~current good manufacturing practice.

Patient Access and Pricing Committee and New Pricing Actions

Improving patient access to our products, as well as making them more affordable, is an important element of our turnaround. In May 2016, we formed the Patient Access and Pricing Committee responsible for setting, changing and monitoring the pricing of our ~~branded~~ products to ~~insure~~ensure launch prices and price changes are assessed and implemented across channels with a focus on patient accessibility and affordability while maintaining profitability. Since that time, the Patient Access and Pricing Committee has been committed to limiting the average annual price increase for our branded prescription pharmaceutical products to no greater than single ~~digits.~~digits and reaffirmed this commitment for 2019. We expect that the Patient Access and Pricing Committee will continue to implement or recommend additional price changes and/or new programs in-line with this commitment to enhance patient access to our drugs. These pricing changes and programs could affect the average realized pricing for our products and may have a significant impact on our revenue trends. ~~Additionally,~~

Dermatology.com Cash-pay Prescription Program

In February 2019, we launched Dermatology.com, a cash-pay prescription program to make certain Ortho Dermatologics branded products available directly to patients with a valid prescription, regardless of their insurance status and without prior authorizations needed. The program is specifically designed to provide patients with direct access to a range of proven treatment options for certain disease states that typically encounter insurance coverage hassles and high prescription costs including acne, actinic keratosis, superficial basal cell carcinoma, barrier repair (e.g. eczema treatments), wounds and corticosteroid-responsive diseases such as rashes, psoriasis and atopic dermatitis.

Through Dermatology.com, all patients, regardless of their insurance status, will be able to purchase medicines at prices ranging from $50 to $115 per prescription. By doing so, the program will provide branded options that offer proven medicines with straightforward access. It will include certain Ortho Dermatologics brands, such as Retin-A^® (tretinoin) cream, as well as novel products, such as Altreno^®(tretinoin) Lotion, 0.05%. All products included in ~~August 2018,~~ the ~~Company announced it~~Dermatology.com program will ~~not increase prices on its U.S.-branded prescription drugs~~be eligible for Flexible Spending Accounts or Health Saving Accounts and will continue to be supported by the ~~remainder~~Company's Patient Assistance Program, which offers free medication for patients who meet income and other eligibility criteria. We plan to include approximately 15 Ortho Dermatologics products in the Dermatology.com program by the end of ~~2018.~~2019 including some investigational therapies that will be added to the program as soon as, and if, they are approved by the FDA.

Walgreens Fulfillment Arrangements

In the beginning of 2016, we launched a brand fulfillment arrangement with Walgreen Co. ("Walgreens") and extended these programs to additional participating independent retail pharmacies. Under the terms of the brand fulfillment arrangement, we made available certain of our products to eligible patients through a patient access and co-pay program available at Walgreens U.S. retail pharmacy locations, as well as participating independent retail pharmacies. The program under this 20-year agreement initially covers certain of our dermatology products, including Jublia^®, Luzu^®~~, Solodyn~~^®, Retin-A Micro^® Gel 0.08% and 0.06%, Onexton^® ~~and Acanya~~^® ~~Gel,~~, certain of our ophthalmology products, including Vyzulta^™®, Besivance^®, Lotemax^®, Alrex^®, Prolensa^®, Bepreve^® and Zylet^®. ~~The~~In July 2019, the Company ~~continues~~announced that it had entered into an amendment to ~~explore options to modify~~its existing fulfillment agreement with Walgreens, which the ~~Walgreens arrangement to~~Company believes will further improve the distribution and sales of its products and bring patients lower prices, increased transparency and convenience for the products in the program. As part of this amendment, the arrangement was expanded to cover select dermatology products included in our ~~products.~~Dermatology.com cash-pay prescription program.

~~Transform~~

~~With our business objectives now set and our leadership team in place, while we continue our plans to stabilize the business, we have begun to move toward our transformation.~~

Increase the Focus of our Pipeline

We are constantly challenged by the dynamics of our industry to innovate and bring new products to market. ~~Now that we~~We have divested certain businesses where we saw limited growth opportunities so that we can ~~redirect the~~be more aggressive in redirecting our R&D spend and other corporate investments to innovate within our core businesses where we ~~had in those businesses to innovation focused on our~~believe we can be most profitable ~~businesses~~and where we aim to be an industry leader.

We believe that we have a well-established product portfolio that is diversified within our core businesses and provides a sustainable revenue stream to fund our operations. However, ~~the~~our future success ~~of our transformation~~ is also dependent upon our ability to continually refresh our pipeline, to provide a rotation of product launches that meet new and changing demands and replace other products that have lost momentum. We believe we have a robust pipeline that not only provides for the next generation of our existing products, but is also poised to bring new products to market.

During ~~2017,~~2018, we launched and/or relaunched ~~over 120~~innovative products ~~globally, which~~across multiple countries that contributed to organic growth in most of our core businesses and we currently have over ~~275~~225 R&D projects in our global pipeline. ~~These products and R&D~~In addition to these projects, ~~include the~~we have recently launched products we have dubbed our "Significant Seven"~~, which were products recently launched or which we expect to launch pending completion of testing and receiving approval from the FDA.~~. These Significant Seven products are: (i) ~~Vyzulta~~Bryhali™ (Ortho Dermatologics), (ii) Duobrii™ (Ortho Dermatologics), (iii) Lumify^® (Bausch + Lomb), ~~(ii) Siliq™ (psoriasis), (iii) Bryhali™ (psoriasis),~~ (iv) ~~Lumify~~Relistor^® (Salix), (v) SiHy Daily (Bausch + Lomb), ~~(v) Duobrii™ (provisional name) (psoriasis),~~ (vi) ~~Relistor~~Siliq^® ~~(GI)~~ (Ortho Dermatologics) and (vii) ~~SiHy Daily~~Vyzulta^TM® (Bausch + Lomb). ~~Descriptions of these products and relevant launch dates and/or stages of testing were previously discussed.~~ Revenues for our Significant Seven were ~~less~~greater than ~~$100~~$150 million in ~~2017; however, we~~2018 and were approximately $75 million in 2017. We believe the prospects for this group of products ~~over the next five years~~ to be substantial and anticipate devoting significant marketing efforts toward their promotion. We also believe that the strength ~~of these launches~~ and ~~the~~ impact of these products on their respective markets will demonstrate the effectiveness of our pipeline and R&D strategies and ~~inspire~~promote further innovation in our businesses.

~~In addition to focusing on~~Leveraging our ~~Significant Seven,~~Salix Infrastructure

As we ~~also look to~~strongly believe in our existing brands to build our pipeline. In connection with our previously discussed settlement with Alfasigma, we also entered into an amendment to our license agreement with Alfasigma to initiate a late stage clinical program to study an investigational formulation of rifaximin in patients with postoperative Crohn's disease. Based on existing clinical data, we believe our rifaximin compound, which we acquiredXifaxan^® and Relistor^® business models, as part of our ~~acquisition~~transformation, we have taken initiatives to further capitalize on the value of ~~Salix in April 2015, may be a potential treatment solution to help postoperative patients manage their Crohn's disease.~~the infrastructure we built around these products.

~~Leveraging our Existing Sales Force~~

~~As previously discussed, in December 2016,~~In the first quarter of 2017, we ~~initiated a significant GI~~hired approximately 250 trained and experienced sales force ~~expansion program~~representatives and managers to create, bolster and sustain deep relationships with primary care physicians (“PCP”). With approximately 70% of IBS-D patients initially presenting symptoms to a PCP, we believe that the dedicated PCP sales force is better positioned to reach more patients in ~~support~~need of ~~our Xifaxan~~^® ~~for~~ IBS-D ~~and Relistor~~^® ~~tablets for OIC products.~~ treatment.

This initiative provided us with positive results, as we experienced consistent growth in demand for these products throughout ~~the balance of~~ 2017 and 2018. Revenues from our Xifaxan^® and Relistor^® ~~franchises~~ products increased approximately ~~26%~~22% and ~~62%~~37%, respectively, ~~for the nine months ended September 30,~~in 2018 when compared to ~~the nine months ended September 30,~~ 2017. These results encouraged us to seek out ways to bring out further value through leveraging our existing sales ~~force. In~~force and in the ~~last five months,~~later portion of 2018 and in 2019 we have identified and executed on certain opportunities which we describe below.

For instance, in order to continue to generate growth in these products, we continue to directly invest in next generation formulations of Xifaxan^® and rifaximin, the ~~following~~principal semi-synthetic antibiotic used in our Xifaxan^® product. In addition to one R&D program in progress, we have three other R&D programs planned to start in 2019 for next generation formulations of Xifaxan^® and rifaximin which address new indications.

In addition to driving growth through internal R&D development, we seek to align ourselves with new external product development opportunities. As recently as this past April, we entered into two licensing agreements which present us with unique developmental opportunities to address unmet needs of individuals suffering with certain GI and liver diseases. The first of these two licensing agreements is with the University of California for certain intellectual property relating to an investigational compound targeting the pituitary adenylate cyclase receptor 1 in non-alcoholic fatty liver disease (“NAFLD”), nonalcoholic steatohepatitis

(“NASH”) and other GI and liver diseases. We believe this compound, once fully developed, could address certain unmet medical needs in the treatment of NAFLD and NASH. The second, is an exclusive licensing agreement with Mitsubishi Tanabe Pharma Corporation to develop and commercialize MT-1303 (amiselimod), a late-stage oral compound that targets the sphingosine 1-phosphate receptor that plays a role in autoimmune diseases, such ~~opportunities.~~as inflammatory bowel disease and ulcerative colitis. We plan to initiate a Phase 2 study for the development of MT-1303 in ulcerative colitis in the first half of 2020, and additionally the cardiovascular Holter study is expected to readout around year end.

In ~~June~~addition to product development opportunities, we strive to access innovative and established GI products outside our existing Salix business that allow us to leverage our existing GI sales force, supply channel and distribution channel to bring about growth through co-promotion and acquisition. For instance, in the second half of 2018, we entered into ~~an exclusive agreement~~agreements with Dova Pharmaceuticals, Inc. to co-promote Doptelet^®, a new treatment of thrombocytopenia in adult patients with chronic liver disease, and with US WorldMeds, LLC to co-promote ~~its drug LUCEMYRA™ (lofexidine). On August 6, 2018, we announced the U.S. launch and availability of LUCEMYRA™ 0.18 mg tablets. LUCEMYRA™ is~~Lucemyra^®, a non-opioid medication ~~approved by the FDA on May 16, 2018~~ for the mitigation of withdrawal symptoms to facilitate abrupt discontinuation of ~~opioids~~opioids. We also completed the acquisition of certain assets of Synergy in ~~adults. As~~March 2019, whereby we ~~have already developed~~acquired certain assets of Synergy including its worldwide rights to the Trulance^® (plecanatide) product, a ~~national sales footprint in pain management~~once-daily tablet for adults with chronic idiopathic constipation and irritable bowel syndrome with constipation.

We continue to ~~support our Relistor~~^® ~~franchise, our treatment for opioid-induced constipation, the addition of LUCEMYRA™ now offers a~~

~~second solution~~see growth in our ~~portfolio~~Xifaxan^® and Relistor^® products as a result of the continued focus of our sales force on PCPs. Revenues from our Xifaxan^® and Relistor^® franchises increased approximately 16% and 14%, respectively, for the six months ended June 30, 2019 when compared to ~~address~~ the ~~complexities of treatment with opioid-based pain medications~~six months ended June 30, 2018. We therefore believe that the co-promotion and ~~allows~~acquisition opportunities, as previously discussed, will be accretive to our business during our transformation by providing us access to products that are a natural pairing to either our Xifaxan^® or Relistor^® businesses, allowing us to ~~more fully utilize~~effectively leverage our existing ~~sales force.~~infrastructure and generate growth.

~~In September 2018, we entered into an exclusive agreement with Dova Pharmaceuticals, Inc. to co-promote its product DOPTELET~~^® ~~(avatrombopag) in the U.S. DOPTELET~~^® is approved by the FDA for the treatment of thrombocytopenia in adult patients with chronic liver disease who are scheduled to undergo a procedure. As part of this co-promotion arrangement, we will use our sales specialists to promote DOPTELET^® ~~to gastroenterology health care professionals, further utilizing our existing sales force.~~

~~Turnaround of~~Refocus the Ortho Dermatologics Business

In support of our ~~dermatology portfolio~~Ortho Dermatologics business and the opportunities we see for growth in this business, we continue to allocate ~~assets~~resources and make additional investments in this business to recruit and retain talent and focus on our core dermatology portfolio of products.

To turnaround our dermatology business we have taken and are taking a number of actions which we believe will help our efforts to stabilize our dermatology business. These actions include: (i) rebranding our dermatology business, (ii) recruiting a new experienced leadership team, (iii) making significant investment in our core dermatology portfolio, (iv) increasing and reorganizing our dermatology sales force around roughly 150 territories, as we work to rebuild relationships with prescribers of our products and (v) improving patient access to our Ortho Dermatologics products through Dermatology.com, our cash-pay prescription program previously discussed.

Recruit and Retain Talent - In 2017, we identified and retained a proven leadership team of experienced dermatology sales professionals and marketers. In January 2018, the leadership team, encouraged by the success of our ~~2016~~ GI sales force expansion program, increased our Ortho Dermatologics sales force by more than 25% in support of our growth initiatives for our Ortho Dermatologics business. We believe the additional sales force is vital to meet the demand we expect from our recently launched products and those we expect to launch in the near term, pending FDA approval. We continue to monitor our pipeline for other near term launches that we believe will create opportunity needs in our other core businesses requiring us to make additional investment ~~in our sales force~~ to retain people for additional leadership and sales force roles.

~~Focus on~~Investment in Our Core Dermatology Portfolio - We have made significant investments to build out our aesthetics, psoriasis and acne product portfolios, which are the markets within dermatology where we see the greatest ~~opportunities~~opportunities.

Aesthetics - On September 22, 2017, we received 510(k) clearance from the FDA and ~~which~~launched our Next Generation Thermage FLX^® product in the United States. Next Generation Thermage FLX^® is a fourth-generation non-invasive treatment option using a radiofrequency platform designed to optimize key functional characteristics and improve patient outcomes. During 2018 and 2019, Next Generation Thermage FLX^® was launched in Hong Kong, Japan, Korea, Taiwan, Philippines, Singapore, Indonesia, Malaysia, China, Thailand, Vietnam, and Australia as part of our Solta medical aesthetic devices portfolio. These launches have been successful as Next Generation Thermage FLX^® revenues for the six months ended June 30, 2019 were in excess of $26 million. During the remainder of 2019, we ~~believe will allow us to attain growth in our Ortho Dermatologics business.~~

We have also emphasized the advancement of topical gel and lotion products. While we continue to support and develop injectable biologics, we believe some patients prefer topical products as an alternative delivery method to injectable biologics. Further, as topical products can, in many cases, defer the use of injectable biologics and need not be administered by a certified biologic physician, a topical product is usually more cost effective and better supported by managed care payors over its alternative injectable biologic product. Therefore, we believe topical products represent significant innovation for physicians, payors and patients, and as the preferred choice of treatment, have the potential to drive greater volumes, generate better margins and will ultimately be a key contributing factor in our turnaroundexpect additional worldwide launches of the ~~Ortho Dermatologics business.~~Next Generation Thermage FLX^® in Asia, Canada and Europe, paced by country-specific regulatory registrations.

Psoriasis - As the number of reported cases of psoriasis in the U.S. has increased, we believe there is a need to make further investments in this market in order to maximize our opportunity and supplement our current psoriasis product portfolio. We have filed NDAs for several new topical psoriasis products, ~~including~~launched Bryhali™ ~~and Duobrii~~^TM (provisional name), which we expect to launch in the near term pending FDA approval. On October 5, 2018, we received a tentative approval of our NDA for Bryhali™ from the FDA. Final FDA approval is pending the expiration of exclusivity for a related product, which is expected to occur in November 2018 ~~at which time we anticipate launching Bryhali™ lotion, as originally scheduled. On June 18, 2018, we announced that we received a CRL from the FDA to our NDA for~~and launched Duobrii^TM ~~(provisional name). The CRL did not specify any deficiencies related to the clinical efficacy or safety of Duobrii~~^TM (provisional name) and did not identify issues with our Chemistry, Manufacturing and Controls processes. The CRL only noted questions regarding pharmacokinetic data. Working to resolve this matter expeditiously, we met with the FDA to understand the additional data requirements. We resubmitted our NDA, and on August 29, 2018, we announced that the FDA accepted the application as a Class 2 resubmission, with a PDUFA action date of February 15, in June 2019. We expect that ~~if approved by the FDA, these products currently in development~~Bryhali™ and Duobrii^TM will line up well with our existing topical portfolio of psoriasis treatments and, supplemented by our injectable biologic products, such as Siliq^TM® ~~launched in July 2017,~~, will provide a diverse choice of psoriasis treatments to doctors and patients. In July 2017, we launched Siliq^®, an IL-17 receptor blocker monoclonal antibody biologic

for treatment of moderate-to-severe plaque psoriasis, which we estimate to be an over $5,000 million market in the U.S. (Siliq^® has a Black Box Warning for the risks in patients with a history of suicidal thoughts or behavior and was approved with a Risk Evaluation and Mitigation Strategy involving a one-time enrollment for physicians and one-time informed consent for patients.) In addition, on February 27, 2018, we announced that we entered into an exclusive license agreement with Kaken Pharmaceutical Co., Ltd. to develop and commercialize products containing a new chemical entity, KP-470, for the topical treatment of psoriasis. ~~Early~~An early proof of concept ~~studies are now planned for~~study was initiated in the first half of 2019. If approved by the FDA, KP-470 could represent a novel drug with an alternative mechanism of action in the topical treatment of psoriasis.

Acne - In support of our established acne product portfolio, we have ~~been developing~~developed several products, which ~~includes~~include Retin-A Micro^® 0.06% (launched in January 2018) and ~~other products~~Altreno^®(launched in ~~various stages of development, such as Altreno~~^TMthe U.S. October 2018), the first lotion (rather than a gel or cream) product containing tretinoin for the treatment of acne. ~~The FDA has approved~~Revenues for the six months ended June 30, 2019 were approximately $13 million and $2 million for Retin-A Micro^® 0.06% and Altreno^TM®, ~~which is expected to be available during the fourth quarter of 2018.~~respectively. In addition to Retin-A Micro^® 0.06% and Altreno^TM®, we have three other unique acne projects ~~that are~~ in earlier stages of development that, if approved by the FDA, we believe will further innovate and advance the treatment of acne.

Improving Patient Access to Our Ortho Dermatologics Products - We see a real opportunity to be a leader in delivering affordable prescription dermatology products. As previously discussed, we recently announced our new cash-pay prescription model, Dermatology.com. Under the recent amendment to our existing Walgreens fulfillment agreement, we expect the program will be available at more than 9,500 Walgreens retail pharmacy locations in the U.S. by the end of August 2019, and we are working on ways to expand this program even further. We expect that approximately 15 products will be available through this channel before year end; and that e-commerce and telemedicine will be available sometime next year.

Bolstered by ~~the~~ new product ~~opportunities we are creating~~launches in our aesthetics, psoriasis and acne product lines and the potential of other products under development, our experienced dermatology sales leadership team, ~~and~~ our increased sales force and our Dermatology.com cash-pay prescription program, we believe we have set the groundwork for the potential to achieve growth in our Ortho Dermatologics ~~business over the next five years.~~business.

Continue to Manage Our Capital Structure

As previously outlined, we completed a series of transactions that reduced our debt levels, extended our debt maturities and improved our capital ~~structure.~~structure, providing us with additional liquidity and greater flexibility to execute our business plans. As a result of prepayments and a series of refinancing transactions, ~~through September 30, 2018,~~ we have extended the maturities of a substantial portion of our long-term debt ~~beyond 2023, providing us with additional liquidity~~ and, ~~greater flexibility to execute~~as a result, as of the date of this filing, scheduled principal repayments of our ~~business plans.~~debt obligations through 2021 are approximately $410 million. Our reduced debt levels and improved debt portfolio will translate to lower repayments of principal over the next ~~four~~five years, which, in turn, will permit more cash flows to be directed toward developing our core assets and repay additional debt amounts. In addition, as a result of the changes in our debt portfolio, approximately ~~82%~~75% of our debt is fixed rate debt as of ~~September~~June 30, ~~2018,~~2019, as compared to approximately 65% as of January 1, 2017.

We continue to monitor our capital structure and to evaluate other opportunities to simplify our business and improve our capital structure giving us the ability to better focus on our core businesses. While we anticipate focusing any future divestiture activities on non-core assets, consistent with our duties to our shareholders and other stakeholders, we will consider dispositions in core areas that we believe represent attractive opportunities for the Company. Also, the Company regularly evaluates market conditions, its liquidity profile and various financing alternatives for opportunities to enhance its capital structure. If ~~opportunities~~the Company determines that conditions are favorable, the Company may refinance or repurchase existing debt or issue additional debt, equity or equity-linked securities.

Managing Generic Competition and Loss of Exclusivity

Certain of our products face the expiration of their patent or regulatory exclusivity in ~~2018~~2019 or in later years, following which we anticipate generic competition of these products. In addition, in certain cases, as a result of negotiated settlements of some of our patent infringement proceedings against generic competitors, we have granted licenses to such generic companies, which will permit them to enter the market with their generic products prior to the expiration of our applicable patent or regulatory exclusivity. Finally, for certain of our products that lost patent or regulatory exclusivity in prior years, we anticipate that generic competitors may launch in ~~2018~~2019 or in later years. Following a loss of exclusivity of and/or generic competition for a product, we would anticipate that product sales for such product would decrease significantly shortly following the loss of exclusivity or entry of a generic competitor. Where we have the rights, we may elect to launch an authorized generic of such product (either ourselves or through a third party) prior to, upon or following generic entry, which may mitigate the anticipated decrease in product sales; however, even with launch of an authorized generic, the decline in product sales of such product would still be expected to be significant, and the effect on our future revenues could be material.

A number of our products already face generic competition. Prior to and during ~~2018,~~2019, in the U.S., these products include, among others, Ammonul^®, Benzaclin^®, Bupap^®, Cuprimine^®, Edecrin^®, Elidel^®, Glumetza^®, Istalol^®, Isuprel^®, Locoid^® Lotion, ~~Mephyton~~Lotemax^® Suspension, Mephyton^®, Nitropress^®, Solodyn^®, Syprine^®, Virazole^®, Uceris^® Tablet, Wellbutrin XL^®, Xenazine^®~~and Zegerid~~^®.,Zegerid^® and Zovirax^® cream. In Canada, these products include, among others, Glumetza^®, Sublinox^® and Wellbutrin^® XL.

Based on current patent expiration dates, settlement agreements and/or competitive information, our key products that began facing or those which we believe ~~that key products~~will be facing a potential loss of exclusivity and/or generic competition in the ~~five year period from 2018 to and including 2022~~U.S. during the years 2019 through 2023 include, but are not limited to, ~~the following key products in the U.S.: in 2018, Elidel~~Apriso^®, ~~Locoid~~Clindagel^® ~~Lotion, Mephyton~~, Cuprimine^®, ~~Syprine~~Lotemax^®~~, Uceris~~ Gel, Lotemax^® ~~Tablet~~ Suspension, Migranal^®, Noritate^®, Onexton^®, PreserVision^®, Prolensa^®, Solodyn^®, Targretin^® Gel, Xerese^®, Zovirax^® cream and certain other products subject to settlement ~~agreements, which~~agreements. Aggregate revenues from key products that we believe will face potential loss of exclusivity and/or generic competition in ~~aggregate~~the U.S. during: (i) 2019 represented 6%9% and 8%; (ii) 2020 represented 1% and 1%; (iii) 2021 represented 4% and 4%; (iv) 2022 represented less than 1% and 1%; and (v) 2023 represented 2% and 2% of our aggregate U.S., Mexico and Puerto Rico revenues for ~~the nine months ended September 30,~~ 2018 and ~~the year 2017, respectively; in 2019, Apriso~~^®~~, Cuprimine~~^®~~, Lotemax~~^® ~~Gel, Lotemax~~^® Suspension and certain products subject to settlement agreements, which in aggregate represented 8% and 8% of our U.S., Mexico and Puerto Rico revenues for the nine months ended September 30, 2018 and the year 2017, respectively; in 2020, Clindagel^®~~, Migranal~~^®~~, Noritate~~^® ~~and Zovirax~~^® cream and certain products subject to settlement agreements which in aggregate represented 1% and 1% of our U.S., Mexico and Puerto Rico revenues for the nine months ended September 30, 2018 and the year 2017, respectively; in 2021, PreserVision^® and certain products subject to settlement agreements, which in aggregate represented 4% and 4% of our U.S., Mexico and Puerto Rico revenues for the nine months ended September 30, 2018 and the year 2017, respectively; in 2022, Xerese^® ~~which represented less than 1% of our U.S., Mexico and Puerto Rico revenues for the nine months ended September 30, 2018 and the year~~ 2017, respectively. These dates may change based on, among other things, successful challenge to our patents, settlement of existing or future patent litigation and at-risk generic launches.

In addition, for a number of our products (including Apriso^®, ~~Cardizem~~Uceris^®, ~~Uceris~~Relistor^®, ~~Relistor~~Plenvu^®, Xifaxan^® 200mg, Glumetza^®, Jublia^®, Prolensa^® and ~~Jublia~~Bryhali™^®in the U.S. ~~and Glumetza~~^® ~~in Canada)~~), we have commenced (or anticipate commencing) infringement proceedings against potential generic competitors in the U.S. and Canada. If we are not successful in these proceedings, we may face increased generic competition for these products.

~~Xifaxan~~Apriso^® Extended Release Capsules Patent Litigation - On March 27, 2017, the Company initiated litigation against Teva Pharmaceuticals USA, Inc. ("Teva"), which alleged infringement by Teva of one or more claims of U.S. Patent No. 8,865,688, which protects the formulation for Apriso^® extended-release capsules 0.375g. In July, we announced that we had agreed to resolve the outstanding intellectual property litigation with Teva regarding Apriso^® extended-release capsules 0.375g. As part of the settlement, the parties agreed to dismiss all litigation related to Apriso^®, and intellectual property protecting Apriso^®will remain intact and enforceable. In addition, the Company will grant Teva a non-exclusive license effective October 1, 2021to the intellectual property relating to Apriso^®in the United States (provided that Teva will be able to begin marketing prior to such date if another generic version of the product is granted approval and starts selling or distributing such generic prior to October 1, 2021). The final patent expiry on Apriso^® is 2030. The Company has now resolved litigation related to Apriso^® with two out of the four Paragraph IV filers.

Relistor^® Tablets Patent Litigation - On December 6, 2016, the Company initiated litigation against Actavis, which alleged infringement by Actavis of one or more claims of U.S. Patent No. 8,524,276 (the “‘276 Patent”), which protects the formulation of RELISTOR^® tablets. Actavis had challenged the validity of such patent and alleged non-infringement by its generic version of such product. In July 2019, we announced that the U.S. District Court of New Jersey had upheld the validity of and determined that Actavis infringed the ‘276 Patent, expiring in March 2031.

Xifaxan^® 550mg Patent Litigation - ~~As previously discussed, on~~On March 23, 2016, the Company initiated litigation against Actavis, which alleged infringement by Actavis of one or more claims of each of the Xifaxan^® patents. On September 12, 2018, we announced

that we had reached an agreement with Actavis ~~which~~that resolved the existing litigation and eliminated the pending challenges to our intellectual property protecting Xifaxan^® (rifaximin) 550 mg tablets. As part of the agreement, the parties ~~have~~ agreed to dismiss all litigation related to Xifaxan^® (rifaximin), Actavis ~~acknowledges~~acknowledged the validity of the licensed patents for Xifaxan^® (rifaximin) 550 mg tablets and all intellectual property protecting Xifaxan^® (rifaximin) 550 mg tablets will remain intact and enforceable until expiry in 2029. The agreement also grants Actavis a non-exclusive license to the intellectual property relating to Xifaxan^® (rifaximin) 550 mg tablets in the United States beginning January 1, 2028 (or earlier under certain circumstances). The Company will not make any financial payments or other transfers of value as part of the agreement. In addition, under the terms of the agreement, beginning January 1, 2028 (or earlier under certain circumstances), Actavis will have the option to: (1) market a royalty-free generic version of Xifaxan^®tablets, 550 mg, should it receive approval from the FDA on its ANDA, or (2) market an authorized generic version of Xifaxan^®tablets, 550 mg, in which case, we will receive a share of the economics from Actavis on its sales of such an authorized generic. Actavis will be able to commence such marketing earlier if another generic rifaximin product is granted approval and such other generic rifaximin product begins to be sold or distributed before January 1, 2028.

Generic Competition to Uceris^® - In July 2018, a generic competitor launched a product which ~~we expect~~ will directly compete with our Uceris^® Tablet product. ~~The ultimate impact of this generic competitor on our future revenues cannot be predicted; however, Uceris~~^® ~~Tablet revenues for the six months ended June 30, 2018 and full years 2017 and 2016 were approximately $70 million, $134 million and $156 million, respectively.~~ As disclosed in our prior filings, the Company initiated various infringement proceedings against this and other generic ~~competitor.~~competitors. The Company continues to believe that its Uceris^® ~~Tablet related~~ Tablet-related patents are enforceable and is proceeding in the ongoing litigation between the Company and the generic competitor; however, the ultimate outcome of the matter is not predictable. The ultimate impact of this generic competitor on our future revenues cannot be predicted; however, Uceris^® Tablet revenues for the six months ended June 30, 2019 and 2018 were approximately $13 million and $70 million, respectively, and for the full years 2018 and 2017 were approximately $84 million and $134 million, respectively.

Generic Competition to Jublia^® - On June 6, 2018, the U.S. Patent and Trial Appeal Board completed its inter partes review for an Orange Book-listed patent covering Jublia^® and issued a written determination invalidating such patent. Although the Company is not aware of any imminent launches of a generic competitor to Jublia^®, the ultimate impact of this decision on our future revenues cannot be predicted. Jublia^® revenues for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 were approximately $47 million and $39 million, respectively, and for the full years 2018 and ~~full years~~ 2017 ~~and 2016~~ were approximately ~~$62 million, $96~~$89 million and ~~$140~~$96 million, respectively. The Company continues to believe that the Jublia^®-related patent is valid and enforceable and, on August 7, 2018, an appeal of this decision was filed. The ultimate outcome of this matter is not predictable. Jublia^® continues to be covered by seven remaining Orange Book-listed patents owned by the Company, which expire in the years 2028 through 2034. In August and September 2018, we received notices of the filing of a number of ANDAs with paragraph IV certification, and have timely filed patent infringement suits against these ANDA filers.

See Note ~~18,~~19, "LEGAL PROCEEDINGS" to our unaudited interim Consolidated Financial Statements elsewhere in this Form 10-Q, as well as Note 20, "LEGAL PROCEEDINGS" ofour Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC and the Canadian Securities Administrators on SEDAR on February 20, 2019 for further details regarding certain infringement proceedings.

The risks of generic competition are a fact of the health care industry and are not specific to our operations or product portfolio. These risks are not avoidable, but we believe they are manageable. To manage these risks, our leadership team continually evaluates the impact that generic competition may have on future profitability and operations. In addition to aggressively defending the Company's patents and other intellectual property, our leadership team makes operational and investment decisions regarding these products and businesses at risk, not the least of which are decisions regarding our pipeline. Our leadership team actively manages the Company's pipeline in order to identify what we believe are the proper projects to pursue. Innovative and realizable projects aligned with our core businesses that are expected to provide incremental and sustainable revenues and growth into the future. We believe that our current pipeline is strong enough to meet these objectives and provide future sources of revenues, in our core businesses, sufficient enough to sustain our growth and corporate health as other products in our established portfolio face generic competition and lose momentum.

We believe that we have a well-established product portfolio that is diversified within our core businesses. We also believe that we have a robust pipeline that not only provides for the next generation of our existing products, but also brings new solutions into the market. Revenues for our Significant Seven were ~~less~~greater than ~~$100~~$150 million in 2018 and approximately $75 million in 2017, as several of these products have only recently been ~~launched and others are yet to be~~ launched. However, we believe the potential revenues for our Significant Seven ~~over the next five years~~ to be substantial and will positively impact our revenues and operating results. We are confident that revenues from our Significant Seven, our existing pipeline and newly identified projects during the next five years will exceed the anticipated loss of revenues from those products identified as facing loss of exclusivity during that same period.substantial.

See Item 1A “Risk Factors” ofour Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC and the Canadian Securities Administrators on SEDAR on February ~~28, 2018~~20, 2019for additional information on our competition risks.

Business Trends

In addition to the acquisition and divestiture actions previously outlined, the following events have affected and are expected to affect our business trends:

U.S. Health Care Reform

The U.S. federal and state governments continue to propose and pass legislation designed to regulate the health care industry. In March 2010, the Patient Protection and Affordable Care Act (the “ACA”) was enacted in the U.S. The ACA contains several provisions that impact our business, including: (i) an increase in the minimum Medicaid rebate to states participating in the Medicaid program, (ii) the extension of the Medicaid rebates to Managed Care Organizations that dispense drugs to Medicaid beneficiaries, (iii) the expansion of the 340(B) Public Health Services drug pricing program, which provides outpatient drugs at reduced rates, to include additional hospitals, clinics and health care centers and (iv) a fee payable to the federal government based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs.

In addition, in 2013: (i) federal subsidies began to be phased in for brand-name prescription drugs filled in the Medicare Part D cover gap and (ii) the law requires the medical device industry to subsidize health care reform in the form of a 2.3% excise tax on U.S. sales of most medical devices. However, the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law on December 18, 2015, included a two-year moratorium on the medical device excise tax. On January 22, 2018, with the passage of continuing appropriations through February 8, 2018 (HR 195), the moratorium on the medical device excise tax was further extended until January 1, 2020. The ACA also included provisions designed to increase the number of Americans covered by health insurance. In 2014, the ACA's private health insurance exchanges began to operate. The ACA also allows states to expand Medicaid coverage with most of the expansion’s cost paid for by the federal government.

For ~~2017, 2016~~2018 and ~~2015,~~2017, we incurred costs of ~~$48 million,~~ $36 million and ~~$28~~$48 million, respectively, related to the annual fee assessed on prescription drug manufacturers and importers that sell branded prescription drugs to specified U.S. government programs (e.g., Medicare and Medicaid). For ~~2017, 2016~~2018 and ~~2015,~~2017, we also incurred costs of ~~$106 million, $128~~$90 million and ~~$104~~$106 million, respectively, on Medicare Part D utilization incurred by beneficiaries whose prescription drug costs cause them to be subject to the Medicare Part D coverage gap (i.e., the “donut hole”). ~~The increase in Medicare Part D coverage gap liability is mainly due to Xifaxan~~^®. Under legislation, which provided for a moratorium on the medical device excise tax beginning January 1, 2016 as previously discussed, the Company incurred medical device excise taxes for 2017, 2016 and 2015 of $0, $0 and $5 million, respectively.

On July 28, 2014, the U.S. Internal Revenue Service issued final regulations related to the branded pharmaceutical drug annual fee pursuant to the ACA. Under the final regulations, an entity’s obligation to pay the annual fee is triggered by qualifying sales in the current year, rather than the liability being triggered upon the first qualifying sale of the following year. We adopted this guidance in the third quarter of 2014, and it did not have a material impact on our financial position or results of operations.

The financial impact of the ACA will be affected by certain additional developments over the next few years, including pending implementation guidance and certain health care reform proposals. Additionally, policy efforts designed specifically to reduce patient out-of-pocket costs for medicines could result in new mandatory rebates and discounts or other pricing restrictions. Also, it is possible, as discussed further below, that under the current administration, legislation will be passed by ~~the Republican-controlled~~ Congress repealing the ACA in whole or in part. Adoption of legislation at the federal or state level could materially affect demand for, or pricing of, our products.

In 2018, we ~~face~~faced uncertainties due to federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the ACA. However, we believe there is low likelihood of repeal of the ACA, given the recent failure of the Senate’s multiple attempts to repeal various combinations of ACA provisions. There is no assurance that any replacement or administrative modifications of the ACA will not adversely affect our business and financial results, particularly if the replacing legislation reduces incentives for employer-sponsored insurance coverage, and we cannot predict how future federal or state legislative or administrative changes relating to the reform will affect our business.

Other legislative efforts relating to drug pricing have been proposed and considered at the U.S. federal and state level. We also anticipate that Congress, state legislatures and third-party payors may continue to review and assess alternative health care delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations affecting additional fundamental changes in the health care delivery system.

~~U.S. Tax Reform~~

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law which includes a number of changes to existing U.S. tax laws. Among the tax law changes affecting the Company are a reduction in the U.S. corporate federal statutory tax rate from 35% to 21%. The Tax Act also implements a modified territorial tax system that includes a one-time transition

tax on the accumulated previously untaxed earnings of foreign subsidiaries (the “Transition Toll Tax”) equal to 15.5% (reinvested in liquid assets) or 8% (reinvested in non-liquid assets). At the taxpayer's election, the Transition Toll Tax can be paid over an eight-year period without interest, beginning in 2018.

As part of the Tax Act, the Company’s U.S. interest expense is subject to limitation rules which limit U.S. interest expense to 30% of adjusted taxable income, defined similar to EBITDA (through 2021) and then EBIT thereafter. Disallowed interest can be carried forward indefinitely and any unused interest deduction assessed for recoverability. The Company considered such provisions in the 2018 annual estimated effective rate assessment and expects to fully utilize any interest carry forwards in future periods.

In December 2017, the SEC issued guidance in situations where the accounting for certain elements of the Tax Act cannot be completed prior to the release of an entity's financial statements. For the elements of the Tax Act where a reasonable estimate of the tax effects could not be completed prior to the release of our financial statements, we will recognize the resulting tax effects in the period our assessment is complete. The Company did not identify items for which the income tax effects of the Tax Act have been completed and the Company did not identify items for which the accounting and a reasonable estimate could not be determined as of December 31, 2017. As the Tax Act was only recently passed, full guidance associated with its impacts have not yet been provided from the relevant state and federal jurisdictions. As such we have used all available information to form appropriate accounting estimates for the changes within the law but have not completed any aspects of the implementation of the law in expectation of further guidance.

We have provided for income taxes, including the impacts of the Tax Act, in accordance with the accounting guidance issued through the date of the issuance of this filing. Our tax benefit for 2017 was $4,145 million and included provisional net tax benefits of $975 million attributable to the Tax Act for: (i) the re-measurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future of $774 million, (ii) the one-time Transition Toll Tax of $88 million and (iii) the decrease in deferred tax assets attributable to certain legal accruals, the deductibility of which is uncertain for U.S. federal income tax purposes, of $10 million. We provisionally utilized net operating losses (“NOLs”) to offset the provisionally determined $88 million Transition Toll Tax and therefore no amount was recorded as payable. We have previously provided for residual U.S. federal income tax on its outside basis differences in certain foreign subsidiaries which, due to the Tax Act, are no longer taxable. As such, our residual U.S. federal tax liability of $299 million prior to the law change was reversed and we recognized a deferred tax benefit of $299 million in the fourth quarter of 2017.

The provisional amounts included in the Company's Benefit from income taxes for the year 2017 will be finalized as regulations and other guidance are published. We continually update the provisional amounts based upon recently issued guidance by accounting regulatory bodies, the U.S. Internal Revenue Service and state and local governments, including the proposed regulations regarding the one-time Transition Toll Tax on the pre-2018 earnings of certain non-U.S. subsidiaries released by the U.S. Treasury Department on August 1, 2018. As part of its full assessment, we will assess the impact of the Tax Act on the Company’s tax filings for the year 2017. Although its assessment is still in progress, through the date of issuance of this filing, we have not identified any material revisions to the provisional amounts provided in the Company's Benefit from income taxes for the year 2017. Differences between the provisional Benefit from income taxes as provided in 2017 and the benefit or provision for income taxes when those provisional amounts are finalized in 2018 can be expected and those differences could be material.

~~See Note 16, "INCOME TAXES" to our unaudited interim Consolidated Financial Statements for further details.~~

SELECTED FINANCIAL INFORMATION

Organic Revenues and Organic Growth Rates (non-GAAP)

Organic growth, a non-GAAP metric, is defined as a change on a period-over-period basis in revenues on a constant currency basis (if applicable) excluding the impact of recent acquisitions, divestitures and discontinuations. Organic revenue growth (non-GAAP) is growth in GAAP Revenue (its most directly comparable GAAP financial measure), adjusted for certain items, of businesses that have been owned for one or more years. The Company uses organic revenue (non-GAAP) and organic revenue growth (non-GAAP) to assess performance of its reportable segments, and the Company in total, without the impact of foreign currency exchange fluctuations and recent acquisitions, divestitures and product discontinuations. The Company believes that such measures are useful to investors as they provide a supplemental period-to-period comparison.

Organic revenue growth (non-GAAP) reflects adjustments for: (i) the impact of period-over-period changes in foreign currency exchange rates on revenues and (ii) the revenues associated with acquisitions, divestitures and discontinuations of businesses divested and/or discontinued. These adjustments are determined as follows:

Foreign currency exchange rates: Although changes in foreign currency exchange rates are part of our business, they are not within management’s control. Changes in foreign currency exchange rates, however, can mask positive or negative trends in the ~~business.~~underlying business performance. The impact for changes in foreign currency exchange rates is determined as the difference in the current period reported revenues at their current period currency exchange rates and the current period reported revenues revalued using the monthly average currency exchange rates during the comparable prior period.

Acquisitions, divestitures and discontinuations: In order to present period-over-period organic revenues (non-GAAP) on a comparable basis, revenues associated with acquisitions, divestitures and discontinuations are adjusted to include only revenues from those businesses and assets owned during both periods. Accordingly, organic revenue growth (non-GAAP) ~~growth~~ excludes from the current period, all revenues attributable to each acquisition for twelve months subsequent to the day of acquisition, as there are no revenues from those businesses and assets included in the comparable prior period. Organic revenue growth (non-GAAP) ~~growth~~ excludes from the prior period (but not the current period), all revenues attributable to each divestiture and discontinuance during the twelve months prior to the day of divestiture or discontinuance, as there are no revenues from those businesses and assets included in the comparable current period.

Please refer to the tables of organic revenues (non-GAAP) and organic revenue growth (non-GAAP) rates presented in the subsequent section titled “Reportable Segment Revenues and Profits” for a reconciliation of GAAP revenues to organic revenues (non-GAAP).

The following table provides selected unaudited financial information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:

Three Months Ended September 30, Nine Months Ended September 30,
(in millions, except per share data) 2018 2017 Change 2018 2017 Change
Revenues $ 2,136
$ 2,219
$ (83 ) $ 6,259
$ 6,561
$ (302 )
Operating income (loss) $ 117
$ 38
$ 79
$ (2,409 ) $ 424
$ (2,833 )
Loss before (provision for) benefit from income taxes $ (300 ) $ (400 ) $ 100
$ (3,728 ) $ (937 ) $ (2,791 )
Net (loss) income attributable to Bausch Health Companies Inc. $ (350 ) $ 1,301
$ (1,651 ) $ (3,804 ) $ 1,891
$ (5,695 )
(Loss) earnings per share attributable to Bausch Health Companies Inc.:
Basic $ (1.00 ) $ 3.71
$ (4.71 ) $ (10.83 ) $ 5.40
$ (16.23 )
Diluted $ (1.00 ) $ 3.69
$ (4.69 ) $ (10.83 ) $ 5.38
$ (16.21 )



	Three Months Ended June 30,								Six Months Ended June 30,
(in millions, except per share data)	2019			2018			Change		2019			2018			Change
Revenues	$	2,152		$	2,128		$	24	$	4,168		$	4,123		$	45
Operating income (loss)	$	257		$	(245	)	$	502	$	544		$	(2,526	)	$	3,070
Loss before benefit from (provision for) income taxes	$	(179	)	$	(734	)	$	555	$	(301	)	$	(3,428	)	$	3,127
Net loss attributable to Bausch Health Companies Inc.	$	(171	)	$	(873	)	$	702	$	(223	)	$	(3,454	)	$	3,231

Basic and diluted loss per share attributable to Bausch Health Companies Inc.:	$	(0.49	)	$	(2.49	)	$	2.00	$	(0.63	)	$	(9.84	)	$	9.21

Financial Performance

Summary of the Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to the Three Months Ended ~~September~~June 30, ~~2017~~2018

Revenue for the three months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ was ~~$2,136~~$2,152 million and ~~$2,219~~$2,128 million, respectively, ~~a decrease~~an increase of ~~$83~~$24 million, or 4%1%. The ~~decrease~~increase was primarily driven by: (i) higher net average realized pricing, (ii) sales of our Trulance^® product, which we added to our portfolio in March 2019 as part of the ~~impact~~acquisition of ~~2017 divestitures and discontinuations, (ii) lower~~certain assets of Synergy, (iii) higher net volumes and ~~(iii)~~(iv) an increase in other revenues. The increase in net average realized pricing was the result of higher gross selling prices, primarily in our Salix segment. The net increase in volumes was driven by our Bausch + Lomb/International segment. These increases in Revenue were partially offset by: (i) the unfavorable effect of foreign currencies, primarily in Europe

and ~~Latin America. These decreases in Revenue were partially offset by increased average realized pricing, primarily in our Salix~~Asia and ~~Diversified Products segments.~~(ii) the impact of divestitures and discontinuations. The changes in our segment revenues and segment profits are discussed in further detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

Operating income for the three months ended ~~September~~June 30, 2019 was $257 million, as compared to an Operating loss for the three months ended June 30, 2018 ~~and 2017 was $117 million and $38~~of $245 million, respectively, an increase of ~~$79~~$502 million and reflects, among other factors:

•

an increase in contribution (Product sales revenue less Cost of goods sold, excluding amortization and impairments of intangible assets) of $26 million primarily due to: (i) higher gross selling prices, (ii) the incremental contribution of the sales of our Trulance^® product, which we added to our portfolio in March 2019 as part of the acquisition of certain assets of Synergy, (iii) better inventory management and (iv) an increase in net volumes, partially offset by: (i) the unfavorable effect of foreign currencies, (ii) the impact of divestitures and discontinuations and (iii) higher third-party royalty costs;

a decrease in contribution (Product sales revenue less Cost of goods sold, excluding amortization and impairments of intangible assets) of $1 million. The decrease was primarily driven by: (i) the impact of 2017 divestitures and discontinuations, (ii) lower third-party royalty costs and (iii) the unfavorable effect of foreign currencies, partially offset by increased average realized pricing, primarily in our Salix and Diversified Products segments;

~~a decrease~~an increase in Selling, general and administrative expenses (“SG&A”) of $9 million primarily ~~attributable~~due to: (i) higher selling, advertising and promotion expenses, (ii) costs in 2019 attributable to our IT infrastructure improvement projects and (iii) the impact of ~~2017 divestitures and discontinuations, (ii) a decrease in legal expenses as we resolved~~the acquisition of certain ~~legacy legal issues and (iii) the favorable effect~~assets of ~~foreign currencies.~~Synergy. The ~~decrease~~increase was partially offset by: (i) ~~higher~~the favorable impact of foreign currencies, (ii) lower compensation expense and (iii) lower costs ~~due in part~~related to ~~higher headcount and (ii) higher advertising and promotion expenses;~~professional services;

an increase in R&D of $26 million reflecting our commitment to drive organic growth through internal development of new products, partially offset by the removal of projects related to 2017 divestitures and discontinuances;

an increase in Amortization of intangible assets of $1 million primarily attributable to changes in estimates made in 2017 of the remaining useful lives of certain products and the Salix brand name to reflect management's changes in assumptions and was partially offset by lower amortization due to impairments to intangible assets and the impact of 2017 divestitures and discontinuations;

~~a decrease in Goodwill impairments of $312 million, as a result of Goodwill impairments of $312 million, recognized in 2017 in connection with a change in a reporting unit;~~

a decrease in Asset impairments of $317 million, as a result of Asset impairments of $406 million, recognized in 2017, that were primarily related to the Sprout business being classified as held for sale;$23 million;

•

a decrease in Amortization of intangible assets of $253 million primarily due to: (i) the ~~gain from Acquisition-related contingent consideration~~impact of ~~$219 million~~the change in the estimated useful life of the Xifaxan^®related intangible assets made in September 2018 to reflect management's changes in assumptions and (ii) lower amortization as a result of ~~fair value adjustments~~impairments to intangible assets in ~~2017, which reflected a decrease in forecasted sales for specific products, including Addyi~~^®prior periods; ~~and~~

a decrease in ~~Other income, net~~Asset impairments of ~~$310 million. The decrease was~~$288 million, primarily ~~attributable to the Gain on the iNova Sale of $306 million in 2017 and a working capital adjustment of $25 million in 2017~~ related to the ~~Gain on~~decrease in forecasted sales during the ~~Dendreon sale partially offset by~~three months ended June 30, 2018 for a certain product line facing generic competition; and

an increase in Other expense, net ~~favorable adjustments~~of $8 million primarily attributable to: (i) costs associated with an upfront payment to enter into an exclusive licensing agreement incurred in ~~2018 for~~2019 and (ii) an increase Litigation and other matters ~~which includes~~during the ~~favorable adjustment of $40 million related to the resolution of the Salix SEC litigation.~~three months ended June 30, 2019.

Operating income for the three months ended ~~September~~June 30, 2019 was $257 million and Operating loss for the three months ended June 30, 2018 ~~and 2017 was $117~~of $245 million, and ~~$38 million, respectively, and includes~~included non-cash charges for Depreciation and amortization of intangible assets of ~~$703~~$531 million and ~~$698 million, Goodwill impairments of $0 and $312~~$784 million, Asset impairments of ~~$89~~$13 million and ~~$406~~$301 million and Share-based compensation of $27 million and $22 million for the three months ended June 30, 2019 and ~~$19 million,~~2018, respectively.

Our Loss before benefit from (provision for) ~~benefit from~~ income taxes for the three months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ was ~~$300~~$179 million and ~~$400~~$734 million, respectively, a decrease of ~~$100~~$555 million. The decrease in our Loss before benefit from (provision for) ~~benefit from~~ income taxes is primarily attributable to: (i) the increase in our operating results of ~~$79~~$502 million, as previously discussed, ~~and~~ (ii) a decrease in Interest expense of ~~$39~~$26 million as a result of lower principal amounts of outstanding debt partially offset by the effect of higher interest rates during the three months ended ~~September~~June 30, ~~2018. The~~2019, (iii) a decrease in ~~our~~ Loss ~~before (provision for) benefit from income taxes was partially offset by~~on extinguishment of debt of $15 million, and (iv) the net change in Foreign exchange and other of ~~$19~~$12 million.

Net loss attributable to Bausch Health Companies Inc. for the three months ended ~~September~~June 30, 2019 and 2018 was ~~$350~~$171 million and ~~Net income attributable to Bausch Health Companies Inc. for the three months ended September 30, 2017 was $1,301~~$873 million, respectively, ~~a decrease~~an increase in our reported results of ~~$1,651~~$702 million. The ~~decrease~~increase in our results was primarily due ~~to the unfavorable change in (Provision for) benefit from income taxes of $1,751 million partially offset by~~to: (i) the decrease in our Loss before benefit from (provision for) ~~benefit from~~ income taxes of ~~$100~~$555 million, as previously ~~discussed. For~~discussed and (ii) the ~~three months ended September 30, 2017, the~~favorable change in Benefit from (provision for) income taxes ~~includes $1,397 million~~ of ~~income tax benefit related to the discrete treatment of internal restructuring efforts not recurring in 2018.~~$147 million.

Summary of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

Revenue for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ was ~~$6,259~~$4,168 million and ~~$6,561~~$4,123 million, respectively, ~~a decrease~~an increase of ~~$302~~$45 million, or 5%1%. The ~~decrease~~increase was primarily driven by: (i) higher gross selling prices, (ii) higher net volumes, (iii) sales of our Trulance^® product, which we added to our portfolio in March 2019 as part of the ~~impact~~acquisition of ~~2017 divestitures~~certain assets of Synergy and ~~discontinuations and (ii)~~(iv) lower sales deductions. The higher gross selling prices was primarily in our Salix segment. The increase in net volumes ~~primarily~~was driven by ~~the loss of exclusivity of certain products.~~our Bausch + Lomb/International segment. These ~~decreases~~increases in Revenue were partially offset by: (i) ~~increased average realized pricing, primarily in our Salix and Diversified Products segments and (ii)~~ the ~~favorable~~unfavorable effect of foreign currencies, primarily in Europe and Asia. and (ii) the impact of divestitures and discontinuations. The changes in our segment revenues and segment profits are discussed in further detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

Operating ~~loss~~income for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~$2,409~~$544 million, as compared to Operating ~~income~~loss for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 of ~~$424~~$2,526 million, ~~a decrease~~an increase in our reported results of ~~$2,833~~$3,070 million and reflects, among other factors:

a decrease in contribution (Product sales revenue less Cost of goods sold, excluding amortization and impairments of intangible assets) of $137 million. The decrease was primarily driven by the impact of 2017 divestitures and discontinuations, partially offset by: (i) increased average realized pricing, primarily in our Salix and Diversified Products segments, (ii) the favorable effect of foreign currencies and (iii) lower third-party royalty costs;

a decrease in SG&A of $96 million primarily attributable to: (i) the impact of 2017 divestitures and discontinuations, (ii) a decrease in legal expenses as we resolved certain legacy legal issues and (iii) a decrease in bad debt expense. The decrease was partially offset by: (i) higher compensation costs due in part to higher headcount, (ii) higher advertising and promotion expenses and (ii) the unfavorable impact of the effect of foreign currencies;

an increase in R&D of $22 million reflecting our commitment to drive organic growth through internal development of new products, partially offset by the removal of projects related to 2017 divestitures and discontinuances;

an increase in Amortization of intangible assets of $227 million primarily attributable to changes in estimates made in 2017 of the remaining useful lives of certain products and the Salix brand name to reflect management's changes in assumptions and was partially offset by lower amortization due to impairments to intangible assets and the impact of 2017 divestitures and discontinuations;

an increase in Goodwill impairments of $1,901 million, as a result of Goodwill impairments of $2,213 million, recognized in 2018, attributable to impairments to the goodwill of our Salix and Ortho Dermatologics reporting units recognized upon adopting new accounting guidance at January 1, 2018, compared to Goodwill impairments of $312 million, recognized in 2017, in connection with a change in a reporting unit during the three months ended September 30, 2017;

•

~~a decrease~~an increase in ~~Asset~~contribution (Product sales revenue less Cost of goods sold, excluding amortization and impairments of ~~$195 million,~~intangible assets) of $86 million. The increase was primarily driven by: (i) higher gross selling prices and lower sales deductions, (ii) better inventory management, (iii) an increase in net volumes and (iv) the incremental contribution of the sales of our Trulance^® product, which we added to our portfolio in March 2019 as ~~a result~~part of ~~Asset impairments~~the acquisition of ~~$629 million, recognized in 2017, primarily related to~~certain assets of Synergy, partially offset by: (i) the ~~Sprout business being classified as held for sale, compared to Asset impairments~~unfavorable effect of ~~$434 million, in 2018, that were primarily due to decreases in forecasted sales for~~foreign currencies and (ii) the ~~Uceris~~^® ~~Tablet product~~impact of divestitures and ~~other product lines due to generic competition;~~discontinuations;

an increase in SG&A of $5 million primarily attributable to: (i) higher selling, advertising and promotion expenses, (ii) costs in 2019 attributable to our IT infrastructure improvement projects and (iii) the impact of the acquisition of certain assets of Synergy. The increase was partially offset by: (i) the favorable impact of foreign currencies, (ii) lower costs related to professional services and (iii) lower compensation expense;

an increase in R&D of $48 million;

•

a decrease in Amortization of intangible assets of $507 million primarily due to: (i) the ~~gain from Acquisition-related contingent consideration~~impact of ~~$274 million~~the change in the estimated useful life of the Xifaxan^®related intangible assets made in September 2018 to reflect management's changes in assumptions and (ii) lower amortization as a result of ~~a fair value adjustments~~impairments to intangible assets in ~~2017 which reflected a decrease in forecasted sales for specific products, including Addyi~~^®prior periods; ~~and~~

a decrease in Goodwill impairments of $2,213 million, as a result of impairments in 2018 to the goodwill of our: (i) Salix reporting unit upon adopting the new guidance for goodwill impairment accounting at January 1, 2018 and (ii) Ortho Dermatologics reporting unit due to unforeseen changes in business dynamics during the three months ended March 31, 2018;

a decrease in Asset impairments of $329 million, primarily related to the decrease in forecasted sales in 2018 for a certain product line facing generic competition; and

a decrease in Other ~~income,~~expense, net of ~~$580 million. The decrease was~~$7 million primarily attributable toto: (i) the net ~~gains related to our 2017 divestitures, including the Gain~~gain on ~~the Skincare Sale of $316 million, Gain on the iNova~~ sale of ~~$306 million~~assets in 2019 and ~~Gain on the Dendreon Sale of $98 million, partially offset by the favorable change~~(ii) a decrease in Litigation and other ~~matters of $142~~matters. These decreases were partially offset by acquisition-related costs and costs associated with an upfront payment to enter into an exclusive licensing agreement incurred in 2019.

Operating income for the six months ended June 30, 2019 was $544 million ~~which included the favorable adjustment of $40 million in 2018 related to the settlement of the Salix SEC litigation.~~

and Operating loss for the ~~nine~~six months ended ~~September~~June 30, 2018 of ~~$2,409~~$2,526 million, and ~~Operating income for the nine months ended September 30, 2017 of $424 million includes~~included non-cash charges for Depreciation and amortization of intangible assets of ~~$2,273~~$1,063 million and ~~2,039~~$1,570 million, Goodwill impairments of ~~$2,213 million~~$0 and ~~$312~~$2,213 million, Asset impairments of ~~$434~~$16 million and ~~$629~~$345 million and Share-based compensation of ~~$65~~$51 million and ~~$70~~$43 million, respectively.

Our Loss before benefit from (provision for) ~~benefit from~~ income taxes for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ was ~~$3,728~~$301 million and ~~$937~~$3,428 million, respectively, ~~an increase~~a decrease of ~~$2,791~~$3,127 million. The ~~increase~~decrease in our Loss before benefit from (provision for) ~~benefit from~~ income taxes is primarily attributable to: (i) the ~~decrease~~increase in our operating results of ~~$2,833~~$3,070 million, as previously discussed, (ii) the net change in Foreign exchange and other of $69 million and (iii) an increase in Loss on extinguishment of debt of $10 million. The increase in our Loss before (provision for) benefit from income taxes was partially offset by a decrease

in Interest expense of ~~$121~~$36 million as a result of lower principal amounts of outstanding debt partially offset by the effect of higher interest rates during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019 and (iii) a decrease in Loss on extinguishment of debt of $35 million. The decrease in our Loss before benefit from (provision for) income taxes was partially offset by the net change in Foreign exchange and other of $15 million.

Net loss attributable to Bausch Health Companies Inc. for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 was ~~$3,804~~$223 million and ~~Net income attributable to Bausch Health Companies Inc. for the nine months ended September 30, 2017 was $1,891~~$3,454 million, ~~a decrease~~respectively, an increase of ~~$5,695~~$3,231 million. The ~~decrease~~increase in our ~~reported~~ results was primarily due to: (i) the ~~unfavorable change in (Provision for) benefit from income taxes of $2,903 million and (ii) the increase~~decrease in our Loss before benefit from (provision for) ~~benefit from~~ income taxes of ~~$2,791~~$3,127 million, as previously ~~discussed. For~~discussed and (ii) the ~~nine months ended September 30, 2017, the~~favorable change in Benefit from (provision for) income taxes ~~includes $2,626 million~~ of ~~income tax benefit related to the discrete treatment of internal restructuring efforts not recurring in 2018.~~$106 million.

RESULTS OF OPERATIONS

Our unaudited operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(in millions)	2018			2017			Change			2018			2017			Change			2019			2018			Change			2019			2018			Change
Revenues
Product sales	$	2,108		$	2,186		$	(78	)	$	6,173		$	6,462		$	(289	)	$	2,122		$	2,100		$	22		$	4,111		$	4,065		$	46
Other revenues	28			33			(5		)	86			99			(13		)	30			28			2			57			58			(1		)
	2,136			2,219			(83		)	6,259			6,561			(302		)	2,152			2,128			24			4,168			4,123			45
Expenses
Cost of goods sold (excluding amortization and impairments of intangible assets)	573			650			(77		)	1,717			1,869			(152		)	580			584			(4		)	1,104			1,144			(40		)
Cost of other revenues	9			9			—			32			32			—			14			10			4			27			23			4
Selling, general and administrative	614			623			(9		)	1,847			1,943			(96		)	651			642			9			1,238			1,233			5
Research and development	107			81			26			293			271			22			117			94			23			234			186			48
Amortization of intangible assets	658			657			1			2,142			1,915			227			488			741			(253		)	977			1,484			(507		)
Goodwill impairments	—			312			(312		)	2,213			312			1,901			—			—			—			—			2,213			(2,213		)
Asset impairments	89			406			(317		)	434			629			(195		)	13			301			(288		)	16			345			(329		)
Restructuring and integration costs	3			6			(3		)	16			42			(26		)	4			7			(3		)	24			13			11
Acquired in-process research and development costs	—			—			—			1			5			(4		)
Acquisition-related contingent consideration	(19		)	(238		)	219			(23		)	(297		)	274			20			(6		)	26			(1		)	(4		)	3
Other income, net	(15		)	(325		)	310			(4		)	(584		)	580
Other expense, net																			8			—			8			5			12			(7		)
	2,019			2,181			(162		)	8,668			6,137			2,531			1,895			2,373			(478		)	3,624			6,649			(3,025		)
Operating income (loss)	117			38			79			(2,409		)	424			(2,833		)	257			(245		)	502			544			(2,526		)	3,070
Interest income	3			3			—			9			9			—			3			3			—			7			6			1
Interest expense	(420		)	(459		)	39			(1,271		)	(1,392		)	121			(409		)	(435		)	26			(815		)	(851		)	36
Loss on extinguishment of debt	—			(1		)	1			(75		)	(65		)	(10		)	(33		)	(48		)	15			(40		)	(75		)	35
Foreign exchange and other	—			19			(19		)	18			87			(69		)	3			(9		)	12			3			18			(15		)
Loss before (provision for) benefit from income taxes	(300		)	(400		)	100			(3,728		)	(937		)	(2,791		)
(Provision for) benefit from income taxes	(51		)	1,700			(1,751		)	(74		)	2,829			(2,903		)
Net (loss) income	(351		)	1,300			(1,651		)	(3,802		)	1,892			(5,694		)
Net loss (income) attributable to noncontrolling interest	1			1			—			(2		)	(1		)	(1		)
Net (loss) income attributable to Bausch Health Companies Inc.	$	(350	)	$	1,301		$	(1,651	)	$	(3,804	)	$	1,891		$	(5,695	)
Loss before benefit from (provision for) income taxes																			(179		)	(734		)	555			(301		)	(3,428		)	3,127
Benefit from (provision for) income taxes																			9			(138		)	147			83			(23		)	106
Net loss																			(170		)	(872		)	702			(218		)	(3,451		)	3,233
Net income attributable to noncontrolling interest																			(1		)	(1		)	—			(5		)	(3		)	(2		)
Net loss attributable to Bausch Health Companies Inc.																			$	(171	)	$	(873	)	$	702		$	(223	)	$	(3,454	)	$	3,231

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to the Three Months Ended ~~September~~June 30, ~~2017~~2018

Revenues

Our revenue was ~~$2,136~~$2,152 million and ~~$2,219~~$2,128 million for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively, ~~a decrease~~an increase of ~~$83~~$24 million, or 4%1%. The ~~decrease~~increase was primarily driven by: (i) ~~the impact~~higher gross selling prices of ~~divestitures and discontinuations of $112~~$53 million, (ii) ~~lower~~the incremental product sales of our Trulance^® product, which we added to our portfolio in March 2019 as part of the acquisition of certain assets of Synergy, of $17 million, (iii) higher net volumes ~~from~~of $12 million and (iv) an increase in other revenues of $2 million. The increase in gross selling prices was primarily in our ~~existing business (excluding the effect of foreign currencies and the impact of 2017 divestitures and discontinuations) of $51 million, (iii)~~Salix segment. The increase in net volumes was driven by our Bausch + Lomb/International segment. The increases in our revenues were partially offset by: (i) the unfavorable effect of foreign currencies, primarily in Europe and ~~Latin America,~~Asia, of ~~$30~~$38 million, (ii) the impact of divestitures and discontinuations of $16 million and ~~(iv) the decrease~~(iii) net higher sales deductions of $6 million primarily in ~~other revenues of $4 million. These decreases were~~our Diversified Products segment, partially offset by ~~the net increase~~lower sales deductions in ~~average realized pricing from our existing business of $114 million primarily driven by~~ our Salix ~~and Diversified Products segments.~~segment.

Our segment revenues and segment profits for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are discussed in further detail in the subsequent section titled “Reportable Segment Revenues and Profits”.

Cash Discounts and Allowances, Chargebacks and Distribution Fees

As is customary in the pharmaceutical industry, gross product sales are subject to a variety of deductions in arriving at net product sales. Provisions for these deductions are recognized concurrently with the recognition of gross product sales. These provisions include cash discounts and allowances, chargebacks, and distribution fees, which are paid or credited to direct customers, as well as rebates and returns, which can be paid or credited to direct and indirect customers. Price appreciation credits are generated when we increase a product’s wholesaler acquisition cost (“WAC”) under our contracts with certain wholesalers. Under such contracts, we are entitled to credits from such wholesalers for the impact of that WAC increase on inventory on hand at the wholesalers. In wholesaler contracts such credits are offset against the total distribution service fees we pay on all of our products to each such wholesaler. In addition, some payor contracts require discounting if a price increase or series of price increases in a contract period exceeds a negotiated threshold. Provision balances relating to amounts payable to direct customers are netted against trade receivables and balances relating to indirect customers are included in accrued liabilities.

We actively manage these offerings, focusing on the incremental costs of our patient assistance programs, the level of discounting to non-retail accounts and identifying opportunities to minimize product returns. We also concentrate on managing our relationships with our payors and wholesalers, reviewing the ranges of our offerings and being disciplined as to the amount and type of incentives we negotiate. ~~Overall, the Company’s product sales provision as a percentage of gross product sales for the year 2018 as compared to 2017 was unchanged.~~ Provisions recorded to reduce gross product sales to net product sales and revenues for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


	Three Months Ended September 30,								Three Months Ended June 30,
	2018				2017				2019				2018
(in millions)	Amount		Pct.		Amount		Pct.		Amount		Pct.		Amount		Pct.
Gross product sales	$	3,614	100	%	$	3,777	100	%	$	3,473	100.0	%	$	3,630	100.0	%
Provisions to reduce gross product sales to net product sales
Discounts and allowances	237		7	%	214		6	%	202		5.8	%	222		6.1	%
Returns	46		1	%	104		3	%	45		1.3	%	75		2.1	%
Rebates	646		18	%	656		17	%	567		16.4	%	695		19.1	%
Chargebacks	515		14	%	546		14	%	487		14.0	%	470		12.9	%
Distribution fees	62		2	%	71		2	%	50		1.4	%	68		1.9	%
Total provisions	1,506		42	%	1,591		42	%	1,351		38.9	%	1,530		42.1	%
Net product sales	2,108		58	%	2,186		58	%	2,122		61.1	%	2,100		57.9	%
Other revenues	28				33				30				28
Revenues	$	2,136			$	2,219			$	2,152			$	2,128



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended ~~September~~		June 30, ~~2018~~2019
OR
o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to



British Columbia		,	Canada	98-0448205
(State or other jurisdiction of incorporation or organization)				~~98-0448205~~ (I.R.S. Employer Identification No.)
~~2150 St. Elzéar Blvd. West, Laval, Québec~~ ~~(Address of principal executive offices)~~	~~H7L 4A8~~ ~~(Zip Code)~~



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, No Par Value	BHC	New York Stock Exchange	,	Toronto Stock Exchange



Large accelerated filer	x☒	Accelerated filer	o☐	Non-accelerated filer	o☐	Smaller reporting company	o☐	Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o ☐



(in millions)
October through December 2018	$	508
2019	1,922
2020	1,653
2021	1,402
2022	1,222
2023	1,069
Thereafter	3,145
Total	$	10,921



	Three Months Ended September 30, 2018	Nine Months Ended September 30, 2018
(in millions)	Three Months Ended September 30, 2018	Nine Months Ended September 30, 2018
Basic weighted-average common shares outstanding	351.5	351.1
Diluted effect of stock options and RSUs	4.2	3.4
Diluted weighted-average common shares outstanding	355.7	354.5



	Three Months Ended June 30, 2019									Three Months Ended June 30, 2018							Change in Organic Revenue
	Revenue as Reported		Changes in Exchange Rates		Acquisition			Organic Revenue (Non-GAAP)		Revenue as Reported		Divestitures and Discontinuations			Organic Revenue (Non-GAAP)		Change in Organic Revenue
(in millions)	Revenue as Reported		Changes in Exchange Rates		Acquisition			Organic Revenue (Non-GAAP)		Revenue as Reported		Divestitures and Discontinuations			Organic Revenue (Non-GAAP)		Amount			Pct.
Bausch + Lomb/International	$	1,208	$	37	$	—		$	1,245	$	1,209	$	(12	)	$	1,197	$	48		4	%
Salix	509		—		(17		)	492		441		(3		)	438		54			12	%
Ortho Dermatologics	122		1		—			123		141		—			141		(18		)	(13	)%
Diversified Products	313		—		—			313		337		(1		)	336		(23		)	(7	)%
Total	$	2,152	$	38	$	(17	)	$	2,173	$	2,128	$	(16	)	$	2,112	$	61		3	%


•	returns as a percentage of gross product sales was lower primarily due to the impact of: (i) lower return rates for products, such as Glumetza^® SLX, Mephyton^® and Xifaxan^® and (ii) lower gross product sales of Isuprel^® and Mephyton^®as a result of generic competition;


•	~~discounts and allowances as a percentage of gross product sales were unchanged as higher sales and discount and allowance rates associated with Migranal~~^® ~~AG, Tobramycin~~^® ~~CD and Xenazine~~^® ~~AG and the launch of Diastat~~^® ~~AG were offset by lower sales and discount and allowance rates for Zegerid~~^® ~~AG, Isuprel~~^® ~~and Metrogel~~^® ~~AG;~~


•	~~returns as a percentage of gross product sales was lower primarily due to lower sales and lower return rates associated with certain products, primarily Nitropress~~^®~~which was impacted by multiple generics in 2017, Glumetza~~^® ~~SLX and Mephyton~~^®;


•	IT Infrastructure Investment—We expect to make payments of approximately $53 million for licensing, maintenance and other costs associated with our IT infrastructure improvement projects during the remainder of 2019;


•	Capital expenditures—We expect to make payments of approximately $165 million for property, plant and equipment during the remainder of 2019;


•	Contingent consideration payments—We expect to make contingent consideration and other approval/sales-based milestone payments of approximately $21 million during the remainder of 2019;


•	Restructuring and integration payments—We expect to make payments of approximately $15 million during the remainder of 2019 for employee separation costs and lease termination obligations associated with restructuring and integration actions we have taken through June 30, 2019; and


•	Benefit obligations—We expect to make payments under our pension and postretirement obligations of approximately $7 million during the remainder of 2019.



~~3.1~~4.1	~~Notice~~Indenture, dated as of ~~Articles of~~May 23, 2019, by and among Bausch Health Companies Inc., the note guarantors party thereto, The Bank of New York Mellon, as of July 16, 2018, originally filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2018, which is incorporated by reference herein.
~~3.2~~	Articles of Bausch Health Companies Inc., as of July 13, 2018, originally filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2018, which is incorporated by reference herein.
~~4.1~~	~~Form of Common Share Certificate of Bausch Health Companies Inc.,~~trustee, originally filed as Exhibit 4.1 to the ~~Company's~~Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on ~~July 16, 2018,~~May 24, 2019, which is incorporated by reference herein.
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certificate of the Chief Executive Officer of Bausch Health Companies Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certificate of the Chief Financial Officer of Bausch Health Companies Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS	XBRL Instance Document
*101.SCH	XBRL Taxonomy Extension Schema Document
*101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


†	~~Management contract or compensatory plan or arrangement.~~



	Bausch Health Companies Inc. (Registrant)

Date: ~~November~~August 6, ~~2018~~2019	/s/ JOSEPH C. PAPA
	Joseph C. Papa Chief Executive Officer (Principal Executive Officer and Chairman of the Board)


Date: ~~November~~August 6, ~~2018~~2019	/s/ PAUL S. HERENDEEN
	Paul S. Herendeen Executive Vice President and Chief Financial Officer (Principal Financial Officer)



Exhibit Number	Exhibit Description
~~3.1~~4.1	~~Notice~~Indenture, dated as of ~~Articles of~~May 23, 2019, by and among Bausch Health Companies Inc., the note guarantors party thereto, The Bank of New York Mellon, as of July 16, 2018, originally filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2018, which is incorporated by reference herein.
~~3.2~~	Articles of Bausch Health Companies Inc., as of July 13, 2018, originally filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2018, which is incorporated by reference herein.
~~4.1~~	~~Form of Common Share Certificate of Bausch Health Companies Inc.,~~trustee, originally filed as Exhibit 4.1 to the ~~Company's~~Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on ~~July 16, 2018,~~May 24, 2019, which is incorporated by reference herein.
31.1*	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certificate of the Chief Executive Officer of Bausch Health Companies Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certificate of the Chief Financial Officer of Bausch Health Companies Inc. pursuant to 18 U.S.C. § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS	XBRL Instance Document
*101.SCH	XBRL Taxonomy Extension Schema Document
*101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
*101.DEF	XBRL Taxonomy Extension Definition Linkbase Document