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ACTAVIS PLC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[November 05, 2014]

ACTAVIS PLC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion of our financial condition and the results of operations should be read in conjunction with the "Consolidated Financial Statements" and notes thereto included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the "Annual Report"), as revised by Form 8-K filed on May 20, 2014. Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the Actavis PLC level, these notes relate to the consolidated financial statements for both separate registrants, Actavis plc and Warner Chilcott Limited. This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, those identified under "Risk Factors" in our Annual Report, elsewhere in this Quarterly Report and in other reports we file with the SEC.

In prior periods, our consolidated financial statements presented the accounts of Actavis, Inc. On May 16, 2013, Actavis plc was incorporated in Ireland as a private limited company and re-registered effective September 18, 2013 as a public limited company. It was established for the purpose of facilitating the business combination between Actavis, Inc. and Warner Chilcott plc ("Warner Chilcott"). On October 1, 2013, pursuant to the transaction agreement dated May 19, 2013 among Actavis, Inc., Warner Chilcott, the Company, Actavis Ireland Holding Limited, Actavis W.C. Holding LLC (now known as Actavis W.C. Holding Inc.) and Actavis W.C. Holding 2 LLC (now known as Actavis W.C. Holding 2 Inc.) ("MergerSub"), (i) the Company acquired Warner Chilcott (the "Warner Chilcott Acquisition") pursuant to a scheme of arrangement under Section 201, and a capital reduction under Sections 72 and 74, of the Irish Companies Act of 1963 where each Warner Chilcott ordinary share was converted into 0.160 of a Company ordinary share (the "Company Ordinary Shares"), or $5,833.9 million in equity consideration, and (ii) MergerSub merged with and into Actavis, Inc., with Actavis, Inc. as the surviving corporation in the merger (the "Merger" and, together with the Warner Chilcott Acquisition, the "Transactions"). Following the consummation of the Transactions, Actavis, Inc. and Warner Chilcott became wholly-owned subsidiaries of Actavis plc. Each of Actavis, Inc.'s common shares was converted into one Company Ordinary Share. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Actavis plc, the ultimate parent of the group. The results of Warner Chilcott Limited are consolidated into the results of Actavis plc. Due to the de minimis activity between Actavis plc and Warner Chilcott Limited, references throughout Item 2 in this filing relates to both Actavis plc and Warner Chilcott Limited. Refer to "Note 2" in the accompanying footnotes for the details on the differences between Actavis plc and Warner Chilcott Limited.

References throughout to "ordinary shares" refer to Actavis Inc.'s Class A common shares, par value $0.0033 per share, prior to the consummation of the Transactions and to the Company's ordinary shares, par value $0.0001 per share, since the consummation of the Transactions.

On October 31, 2012, Watson Pharmaceuticals, Inc. completed the acquisition of the Actavis Group for a cash payment of €4.2 billion, or approximately $5.5 billion, and contingent consideration of 5.5 million newly issued shares of Actavis, Inc., which have since been issued (the "Actavis Group Acquisition").

Watson Pharmaceuticals, Inc.'s Common Stock was traded on the NYSE under the symbol "WPI" until close of trading on January 23, 2013, at which time Watson Pharmaceuticals, Inc. changed its corporate name to "Actavis, Inc." and changed its ticker symbol to "ACT." References throughout to "we," "our," "us," the "Company" or "Actavis" refer to financial information and transactions of Watson Pharmaceuticals, Inc. prior to January 23, 2013, Actavis, Inc. from January 23, 2013 until October 1, 2013 and Actavis plc on and subsequent to October 1, 2013.

Overview Actavis plc (the "Company") is a unique specialty pharmaceutical company focused on developing, manufacturing and commercializing high quality affordable generic and innovative branded ("brand", "speciality brand" or "branded") pharmaceutical products for patients around the world. Actavis markets a broad portfolio of branded and generic pharmaceuticals and develops innovative medicines for patients suffering from diseases principally in the central nervous system, gastroenterology, women's health, urology, cardiovascular, respiratory and anti-infective therapeutic categories. The Company is an industry leader in product research and development ("R&D"), with one of the broadest brand development pipelines in the pharmaceutical industry, and a leading position in the submission of generic product applications. Actavis has commercial operations in more than 60 countries and operates more than 30 manufacturing and distribution facilities around the world. The Company organizes its global markets by the United States of America ("U.S."), Canada and Puerto Rico (together "North America"), and its key international markets around the world.

2014 Significant Business Developments During 2014, we announced the following transactions and business developments that impacted our results of operations and will continue to have an impact on our future operations.

Tretin-X Acquisition On July 8, 2014, we finalized an agreement to purchase the product rights and inventory for Tretin-X (a product formerly marketed by Onset Dermatologics, a PreCision Dermatology company) from Valeant Pharmaceuticals International, Inc.

("Valeant") for $70.0 million. Included in the purchase price allocation was the fair value of inventory that we purchased of $0.3 million, $37.7 million for intangible assets and $32.0 million of goodwill. We accounted for the acquisition as a business combination requiring that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. As part of the acquisition, we entered into a supply agreement with DPT Laboratories, LTD.

90 -------------------------------------------------------------------------------- Table of Contents Furiex Acquisition On July 2, 2014, we completed an agreement to acquire Furiex Pharmaceuticals, Inc. ("Furiex") in an all-cash transaction (the "Furiex Acquisition") valued at $1,156.2 million (including the assumption of debt) and up to approximately $360.0 million in a Contingent Value Right ("CVR") that may be payable based on the designation of eluxadoline, Furiex's lead product, as a controlled drug following approval, if any, which had an acquisition accounting fair value of $88.0 million on the date of acquisition (included in the value of $1,156.2 million).

Eluxadoline is a first-in-class, locally-acting mu opioid receptor agonist and delta opioid receptor antagonist for treating symptoms of diarrhea-predominant irritable bowel syndrome (IBS-d), a condition that affects approximately 28 million patients in the United States and Europe. The CVR payment is based on the status of eluxadoline, Furiex's lead product, as a controlled drug following approval, if any, as follows: • If eluxadoline is determined to be a schedule III (C-III) drug, there will be no additional consideration for the CVR.

• If eluxadoline is determined to be a schedule IV (C-IV) drug, CVR holders are entitled to $10 in cash for each CVR held.

• If eluxadoline is determined to be a schedule V (C-V) drug, CVR holders are entitled to $20 in cash for each CVR held.

• If eluxadoline is determined to not be subject to DEA scheduling, CVR holders are entitled to $30 in cash for each CVR held.

In connection with the close of the Furiex Acquisition, the Company further announced that it has closed the transaction related to the sale of Furiex's royalties on Alogliptin and Priligy to Royalty Pharma for $408.6 million with no income statement impact.

Acquisition of Forest Laboratories On July 1, 2014, we acquired Forest Laboratories, Inc. ("Forest") for $30.9 billion including outstanding indebtedness assumed of $3.3 billion, equity consideration of $20.6 billion, which includes outstanding equity awards, and cash consideration of $7.1 billion (the "Forest Acquisition"). Under the terms of the transaction, Forest shareholders received 89.8 million Actavis plc ordinary shares, 6.1 million Actavis plc non-qualified stock options and 1.1 million Actavis plc share units. Forest was a leading, fully integrated, specialty pharmaceutical company largely focused on the United States market.

Forest marketed a portfolio of branded drug products and developed new medicines to treat patients suffering from diseases principally in the following therapeutic areas: central nervous system, cardiovascular, gastrointestinal, respiratory, anti-infective, and cystic fibrosis.

May 2014 Acquisition On May 20, 2014, we entered into an agreement to license the product rights for an injectable (the "May 2014 Acquisition") in certain European territories for an upfront and milestone payments of € 5.7 million, or approximately $7.8 million. Under acquisition accounting, the full consideration includes the fair value contingent consideration of € 12.5 million, or approximately $17.1 million, for a total consideration equal to approximately € 18.2 million, or approximately $24.9 million. We are accounting for the acquisition as a business combination requiring that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. As a result of this transaction, we recognized intangible assets of € 18.2 million, or $24.9 million, in the nine months ended September 30, 2014. We also entered into a supply agreement, under which we will receive product for a period of five years from the launch of the product with potential renewals thereafter.

Akorn On April 17, 2014, we entered into agreements with Akorn, Inc. ("Akorn") and Hi-Tech Pharmacal Co. Inc. to purchase four currently marketed products and one product under development for cash consideration of $16.8 million. The agreements include three products marketed under Abbreviated New Drug Applications ("ANDA"): Ciprofloxacin Hydrochloride Ophthalmic Solution, Levofloxacin Ophthalmic Solution and Lidocaine Hydrochloride Jelly, and one product marketed under a New Drug Application ("NDA"): Lidocaine/Prilocaine Topical Cream. The Company treated the purchase of the specific products as an acquisition of a business requiring that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. Included in the purchase price allocation was the fair value of inventory that the Company purchased of $0.7 million and $16.1 million for intangible assets. The Company also entered into a supply agreement with Akorn, under which Akorn will supply product for a period of either of two years or until an alternative supplier is found.

Silom Medical Company On April 1, 2014, we acquired the Silom Medical Company ("Silom"), a privately held generic pharmaceutical company focused on developing and marketing therapies in Thailand, for consideration of approximately $103.0 million in cash (the "Silom Acquisition"). The Silom Acquisition immediately elevates us into a top-five position in the Thai generic pharmaceutical market, with leading positions in the ophthalmic and respiratory therapeutic categories and a strong cardiovascular franchise.

91 -------------------------------------------------------------------------------- Table of Contents Lincolnton Manufacturing Facility During the second quarter of 2014, we sold the Lincolnton manufacturing facility to G&W NC Laboratories, LLC ("G&W") for $21.5 million. In addition, the Company and G&W entered into a supply agreement, whereby G&W will supply us product during a specified transition period. The Company allocated the fair value of the consideration to the business sold of $25.8 million and the supply agreement, which resulted in a prepaid asset to be amortized into cost of sales over the transition period of $4.3 million. As a result of the final sales terms, we recorded a gain on business sold of $0.9 million during the nine months ended September 30, 2014.

Corona Facility During the nine months ended September 30, 2014, we held for sale assets in our Corona, California manufacturing facility. As a result, the Company recognized an impairment charge of $18.6 million in the nine months ended September 30, 2014, including a write-off of property, plant and equipment, net, due to the integration of Warner Chilcott of $5.8 million.

Valeant During the second quarter of 2014, the Company and Valeant terminated our existing co-promotion agreements relating to Zovirax and Cordan ® Tape. Prior to this termination, we co-promoted Zovirax ® cream (acyclovir 5%) to obstetricians and gynecologists in the U.S. and Valeant co-promoted Actavis' Cordran ® Tape (flurandrenolide) product in the U.S. Under terms of the agreement related to the co-promotion of Zovirax ® cream, we utilized our existing Actavis sales and marketing structure to promote the product and received a co-promotion fee from sales generated by prescriptions written by our defined targeted physician group. The fees we earned under the Zovirax cream co-promotion arrangement were recognized in other revenues in the period in which the revenues are earned.

Under the terms of the Cordran ® Tape co-promotion agreement, Valeant utilized its existing Dermatology sales and marketing structure to promote the product, and received a co-promotion fee on sales. The fees we paid under the Cordran Tape arrangement were recognized in the period incurred as an operating expense.

Metronidazole 1.3% Vaginal Gel On May 1, 2013, we entered into an agreement to acquire the worldwide rights to Valeant's metronidazole 1.3% vaginal gel antibiotic development product, a topical antibiotic for the treatment of bacterial vaginosis, which is being accounted for as a business combination. Under the terms of the agreement, we acquired the product upon U.S. Food and Drug Administration ("FDA") approval on March 25, 2014 for acquisition accounting consideration of approximately $62.3 million, which includes the fair value contingent consideration of $50.3 million and upfront and milestone payments of $12.0 million, of which $9.0 million was incurred in the nine months ended September 30, 2014. As a result of this transaction, we recognized intangible assets and goodwill of $61.8 million and $0.5 million, respectively in the nine months ended September 30, 2014.

Columbia Laboratories Inc.

During the nine months ended September 30, 2014, we sold our minority interest in Columbia Laboratories Inc. for $8.5 million. As a result, we recorded a gain on the sale of the investment of $4.3 million in the nine months ended September 30, 2014. Our former investment in Columbia Laboratories, Inc. was accounted for as an equity method investment.

2013 Significant Business Developments During 2013, we completed and / or initiated the following transactions that impacted our results of operations and will continue to have an impact on our future operations.

Actavis (Foshan) Pharmaceuticals Co., Ltd. Assets Held for Sale During the year ended December 31, 2013, we held our Chinese subsidiary, Actavis (Foshan) Pharmaceuticals Co., Ltd. ("Foshan"), for sale, which resulted in an impairment charge of $8.4 million in the fourth quarter of 2013. On January 24, 2014, we completed an agreement with Zhejiang Chiral Medicine Chemicals Co., Ltd to acquire our interest in Foshan (the "Foshan Sale").

Western European Assets Held for Sale During the year ended December 31, 2013, we held for sale our then current commercial infrastructure in France, Italy, Spain, Portugal, Belgium, Germany and the Netherlands, including products, marketing authorizations and dossier license rights. We believe that the divestiture allowed the Company to focus on faster growth markets including Central and Eastern Europe, and other emerging markets which we believe will enhance our long-term strategic objectives. On January 17, 2014, we announced our intention to enter into an agreement with Aurobindo Pharma Limited ("Aurobindo") to sell these businesses. On April 1, 2014, the Company completed the sale of the assets in Western Europe.

92-------------------------------------------------------------------------------- Table of Contents In connection with the sale of our Western European assets, we entered into a supply agreement whereby the Company will supply product to Aurobindo over a period of five years. In the second quarter of 2014, we allocated the fair value of the consideration for the sale of the Western European assets of $65.0 million to each element of the agreement, including the supply of product.

As a result of the transactions, we recognized income / (loss) on the net assets held for sale of $3.4 million and $(34.3) million in the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively. In addition, the Company recognized a loss on the disposal of the assets in the nine months ended September 30, 2014 of $20.9 million and deferred revenue of $10.1 million to be recognized over the course of the supply agreement.

Amendment to Sanofi Collaboration Agreement On October 28, 2013, Warner Chilcott Company, LLC ("WCCL"), one of our indirect wholly-owned subsidiaries, and Sanofi-Aventis U.S. LLC ("Sanofi") entered into an amendment (the "Sanofi Amendment") to the global collaboration agreement as amended (the "Collaboration Agreement") to which WCCL and Sanofi are parties.

WCCL and Sanofi co-develop and market Actonel ® and Atelvia ® (risedronate sodium) on a global basis, excluding Japan.

Pursuant to the Sanofi Amendment, the parties amended the Collaboration Agreement with respect to Actonel® and Atelvia® in the U.S. and Puerto Rico (the "Exclusive Territory") to provide that, in exchange for the payment of a lump sum of $125.0 million by WCCL to Sanofi in the year ended December 31, 2013, WCCL's obligations with respect to the global reimbursement payment, which represented a percentage of Actavis' net sales as defined, as it relates to the Exclusive Territory for the year ended December 31, 2014, shall be satisfied in full. The Sanofi Amendment did not and does not apply to or affect the parties' respective rights and obligations under the Collaboration Agreement with respect to (i) the year ended December 31, 2013 or (ii) territories outside the Exclusive Territory. The $125.0 million was recorded as an intangible asset during the year ended December 31, 2013, which is being amortized over the course of the year ending December 31, 2014 using the economic benefit model.

Acquisition of Warner Chilcott On October 1, 2013, we completed the Warner Chilcott Acquisition for a transaction value, including the assumption of debt, of $9.2 billion. Warner Chilcott was a leading specialty pharmaceutical company focused on women's healthcare, gastroenterology, urology and dermatology segments of the branded pharmaceuticals market, primarily in North America. The Warner Chilcott Acquisition expands our presence in our North American Brands segments. For additional information, refer to "NOTE 4 - Acquisitions and Other Agreements" in the accompanying "Notes to Consolidated Financial Statements" in this Quarterly Report.

Endo Pharmaceuticals Inc.

We entered into an agreement with Endo Pharmaceuticals Inc. ("Endo") and Teikoku Seiyaku Co., Ltd to settle all outstanding patent litigation related to our generic version of Lidoderm ®. Per the terms of the agreement, on September 15, 2013, we launched our generic version of Lidoderm ® (lidocaine topical patch 5%) to customers in the U.S. more than two years before the product's patents expire. Lidoderm ®is a local anesthetic indicated to relieve post-shingles pain.

Additionally, under the terms of the agreement, we received and distributed branded Lidoderm ® prior to the launch of the generic version of Lidoderm ®.

Acquisition of Uteron Pharma, S.A On January 23, 2013, we completed the acquisition of Belgium-based Uteron Pharma SA. The acquisition was consummated for a cash payment of $142.0 million, plus the assumption of debt and other liabilities of $7.7 million and up to $155.0 million in potential future milestone payments, of which $43.4 million was recognized on the date of acquisition (the "Uteron Acquisition"). The Uteron Acquisition expanded our pipeline of Women's Health products, including two potential near term commercial opportunities in contraception and infertility, and one oral contraceptive project. Several additional products in earlier stages of development were also included in the Uteron Acquisition.

2012 Significant Business Development During 2012, we completed the following transaction that impacted our results of operations and will continue to have an impact on our future operations.

Acquisition of Actavis Group On October 31, 2012, we completed the Actavis Group Acquisition. The Actavis Group was a privately held generic pharmaceutical company specializing in the development, manufacture and sale of generic pharmaceuticals.

93-------------------------------------------------------------------------------- Table of Contents Operating results Segments In the third quarter of 2014 in connection with the Forest Acquisition, the Board of Directors realigned our global strategic business structure. Prior to the realignment, we operated and managed our business as two distinct operating segments: Actavis Pharma and Anda Distribution.

Under the new organizational structure being reported, we organized our business into three operating segments: North American Brands, North American Generics and International and Anda Distribution. The North American Brands segment includes patent-protected and off-patent products that the Company sells and markets as brand pharmaceutical products within North America. The North American Generic and International segment includes certain trademarked off-patent products that the Company sells and markets as off-patent pharmaceutical products that are therapeutically equivalent to proprietary products within North America. Also included in this segment are international revenues which include patent-protected and off-patent products that the Company sells and markets as brand pharmaceutical products, certain trademarked off-patent products that the Company sells and markets as off-patent pharmaceutical products that are therapeutically equivalent to proprietary products, over the counter products and revenues from our third party Medis business. The Anda Distribution segment distributes generic and brand pharmaceutical products manufactured by third parties, as well as by the Company, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians' offices. The Anda Distribution segment operating results exclude sales of products developed, acquired, or licensed by the North American Brands and North American Generics and International segments.

The Company evaluates segment performance based on segment contribution. Segment contribution for North American Brands, North American Generics and International, and Anda Distribution represents segment net revenues less cost of sales (excluding amortization and impairment of acquired intangibles including product rights), selling and marketing expenses and general and administrative expenses. The Company does not report total assets, capital expenditures, R&D expenses, amortization, goodwill impairments, in-process research and development impairments and asset sales, impairments and contingent consideration adjustment, net by segment as not all such information has been accounted for at the segment level, nor has such information been used by all segments.

Segment net revenues, segment operating expenses and segment contribution information for the Company's North American Brands, North American Generics and International and Anda Distribution segments consisted of the following for the three months ended September 30, 2014 and 2013 ($ in millions): Three months Ended September 30, 2014 2013 North North North America North America America Generics and Anda America Generics and Anda Brands International Distribution Total Brands International Distribution Total Product sales $ 1,608.3 $ 1,613.2 $ 423.2 $ 3,644.7 $ 136.9 $ 1,528.0 $ 307.1 $ 1,972.0 Other revenue 11.0 27.4 - 38.4 16.1 24.9 - 41.0 Net revenues 1,619.3 1,640.6 423.2 3,683.1 153.0 1,552.9 307.1 2,013.0 Operating expenses: Cost of sales(1) 706.3 811.9 364.8 1,883.0 41.4 774.6 267.2 1,083.2 Selling and marketing 503.3 175.1 28.8 707.2 46.1 153.8 23.7 223.6 General and administrative 377.0 181.2 9.1 567.3 32.8 190.7 8.6 232.1 Contribution $ 32.7 $ 472.4 $ 20.5 $ 525.6 $ 32.7 $ 433.8 $ 7.6 $ 474.1 Contribution margin 2.0 % 28.8 % 4.8 % 14.3 % 21.4 % 27.9 % 2.5 % 23.6 % Research and Development 391.8 163.7 Amortization 873.6 146.3 Goodwill impairments - - In-process research and development impairments 305.0 - Asset sales, impairments and contingent consideration adjustment, net 7.3 13.6 Operating (loss) / income $ (1,052.1 ) $ 150.5 Operating margin (28.6 )% 7.5 % (1) Excludes amortization and impairment of acquired intangibles including product rights.

94 -------------------------------------------------------------------------------- Table of Contents North American Brands Segment The following table presents net contribution for the North American Brands segment for the three months ended September 30, 2014 and 2013 ($ in millions): Three Months Ended September 30, Change 2014 2013 Dollars % Product sales $ 1,608.3 $ 136.9 $ 1,471.4 1,074.8 % Other revenue 11.0 16.1 (5.1 ) (31.7 )% Net revenues 1,619.3 153.0 1,466.3 958.4 % Operating expenses: Cost of sales(1) 706.3 41.4 664.9 1,606.0 % Selling and marketing 503.3 46.1 457.2 991.8 % General and administrative 377.0 32.8 344.2 1,049.4 % Segment contribution $ 32.7 $ 32.7 $ - 0.0 % Segment margin 2.0 % 21.4 % (19.4 )% (1) Cost of sales excludes amortization and impairment of acquired intangibles.

Net Revenues The following table presents net revenues for the reporting units in the North American Brand segment for the three months ended September 30, 2014 and 2013 ($ in millions): Three Months Ended September 30 Change 2014 2013 Dollars % North American Brands CNS Namenda franchise $ 427.6 $ - $ 427.6 100.0 % Viibyrd® / Fetzima® 66.4 - 66.4 100.0 % Saphris ® 36.8 - 36.8 100.0 % Other CNS 23.8 - 23.8 100.0 % Total CNS 554.6 - 554.6 100.0 % Gastroenterology Delzicol®/Asacol®HD 141.2 - 141.2 100.0 % Linzess®/Costella ™ 80.0 - 80.0 100.0 % Carafate ® / Sulcrate ® 42.3 - 42.3 100.0 % Canasa ® / Salofalk ® 34.8 - 34.8 100.0 % Zenpep ®, Ultrase ®& Viokace ® 34.1 - 34.1 100.0 % Other Gastroenterology 8.5 - 8.5 100.0 % Total Gastroenterology 340.9 - 340.9 100.0 % Women's Health Lo Loestrin® Fe 71.6 - 71.6 100.0 % Estrace® Cream 66.7 - 66.7 100.0 % Minastrin® 24 Fe 54.0 - 54.0 100.0 % Other Women's Health 49.2 26.9 22.3 82.9 % Total Women's Health 241.5 26.9 214.6 797.8 % Cardiovascular, Respiratory & Acute Care Bystolic® 138.6 - 138.6 100.0 % Daliresp ® 30.0 - 30.0 100.0 % Tudorza ® 28.4 - 28.4 100.0 % Total Cardiovascular, Respiratory & Acute Care 197.0 - 197.0 100.0 % Urology 73.5 60.1 13.4 22.3 % Infectious Disease 20.2 - 20.2 100.0 % Dermatology/Established Brands 191.6 66.0 125.6 190.2 % Total North American Brands $ 1,619.3 $ 153.0 $ 1,466.3 958.4 % North American Brand revenues are classified based on the current mix of promoted products within the respective categories. Movement of products between categories may occur from time to time based on changes in promotional activities.

95 -------------------------------------------------------------------------------- Table of Contents Net revenues in our North American Brands segment include product sales and other revenue derived from branded products. Our North American Brands segment product line includes a variety of products and dosage forms. In October 2013, as a result of the Warner Chilcott Acquisition, we began promoting a number of products, including, but not limited to, Asacol ® HD, Delzicol ®, Doryx ®, Estrace ® Cream, Lo Loestrin ® Fe and Minastrin ® 24 Fe. In July 2014, as a result of the Forest Acquisition, the Company also began recognizing revenues on key North American brands, including, but not limited to, Bystolic ®, Canasa®, Carafate®, Daliresp ®, Fetzima ®, Linzess ®, Namenda ®, Namenda XR ®, Telflaro ® and Viibryd ®.

The increase in the North American Brands net revenues is primarily due to the Forest and Warner Chilcott Acquisitions, which contributed three months of sales in 2014 compared to no sales in the prior period ($1,126.3 million and $473.6 million worldwide, respectively), including $1,054.1 million and $428.4 million in North American Brands, respectively.

Other revenues consist primarily of royalties, milestone receipts, commission income and revenue from licensing arrangements, co-promotion revenue and the recognition of deferred revenue relating to our obligation to manufacture and supply brand products to third parties. Other revenues also include revenue recognized from R&D and licensing agreements.

Cost of Sales Cost of sales includes production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements, inventory reserve charges and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles.

The increase in cost of sales was due to higher product sales driving, the corresponding cost of sales primarily, as a result of the Forest Acquisition ($633.8 million) and the Warner Chilcott Acquisition ($45.0 million), including the impact of selling through a portion of the inventory associated with the fair value step-up of the July 1, 2014 Forest inventory acquired of $423.3 million and the October 1, 2013 Warner Chilcott inventory acquired of $13.8 million.

Selling and Marketing Expenses Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs.

The increase in selling and marketing expenses was primarily due to higher selling and marketing costs associated with the Forest Acquisition ($295.5 million) and the Warner Chilcott Acquisition ($54.5 million), as well as a charge of $105.0 million to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service, offset, in part, by decreased spending as a result of restructuring activities related to the Actavis Group during the year ended December 31, 2013. Included in selling and marketing in the three months ended September 30, 2014 are expenses associated with stock-based compensation, including the fair value adjustment of the awards as part of acquisition accounting, for awards issued to acquired Forest employees of $37.9 million as well as integration and restructuring costs associated with the Forest Acquisition of $40.4 million.

General and Administrative Expenses General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation and settlement costs and professional services costs which are general in nature.

The increase in general and administrative expenses was due in part to increased operating costs related to the expansion of the Company's size, including costs incurred by Forest for ongoing operating expenses of $105.7 million as well as acquisition related expenses, which includes stock-based compensation charges (including the fair value adjustment of the awards as part of acquisition accounting) of $123.9 million, severance related charges of $49.1 million and other integration and financing costs of $54.2 million. Also included in the three months ended September 30, 2014 are expenses relating to Warner Chilcott for ongoing operating expenses of $21.7 million.

96-------------------------------------------------------------------------------- Table of Contents North American Generics and International Segment The following table presents net contribution for the North American Generics and International segment for the three months ended September 30, 2014 and 2013 ($ in millions): Three Months Ended September 30, Change 2014 2013 Dollars % Product sales $ 1,613.2 $ 1,528.0 $ 85.2 5.6 % Other revenue 27.4 24.9 2.5 10.0 % Net revenues 1,640.6 1,552.9 87.7 5.6 % Operating expenses: Cost of sales(1) 811.9 774.6 37.3 4.8 % Selling and marketing 175.1 153.8 21.3 13.8 % General and administrative 181.2 190.7 (9.5 ) (5.0 )% Segment contribution $ 472.4 $ 433.8 $ 38.6 8.9 % Segment margin 28.8 % 27.9 % 0.9 % (1) Cost of sales excludes amortization and impairment of acquired intangibles.

Net Revenues Net revenues in our North American Generics and International segment consisted of the following ($ in millions): Three Months Ended September 30, Change 2014 2013 Dollars % North American Generics $ 979.9 $ 976.1 $ 3.8 0.4 % International 660.7 576.8 83.9 14.5 % Net revenues $ 1,640.6 $ 1,552.9 $ 87.7 5.6 % Net revenues in our North American Generics and International segment include product sales and other revenue derived from generic, branded generic, and OTC products in North America and the rest of the world and all patent-protected and trademarked off-patent pharmaceutical products outside of North America. Our North American Generics and International segment product line includes a variety of products and dosage forms.

The movement in North American Generics revenues was primarily the result of changes in product mix.

The increase in international revenues is primarily due to the results of the Forest ($67.5 million) and Warner Chilcott ($45.2 million) acquisitions, which had no sales in the three months ended September 30, 2013.

Other revenues consist primarily of royalties, milestone receipts, commission income and revenue from licensing arrangements, co-promotion revenue and the recognition of deferred revenue relating to our obligation to manufacture and supply brand products to third parties. Other revenues also include revenue recognized from R&D and licensing agreements.

Cost of Sales Cost of sales includes production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements, inventory reserve charges and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles.

The increase in cost of sales was due to the Forest Acquisition ($86.0 million) and the Warner Chilcott Acquisition ($10.5 million), including the impact of selling through a portion of the inventory associated with the fair value step-up of the July 1, 2014 Forest inventory acquired of $56.2 million.

Offsetting the increased cost of sales from recent acquisitions were cost savings resulting from our global supply chain initiatives and divestitures in Western Europe.

Selling and Marketing Expenses Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs. The increase in selling and marketing expenses was primarily due to costs incurred in connection with the acquired Forest business of $17.7 million, the acquired Warner Chilcott business of $5.5 million, as well as a charge of $10.8 million to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service, offset, in part, by savings due to the restructuring of the legacy Actavis business as well as the sale of our Western European assets.

97-------------------------------------------------------------------------------- Table of Contents General and Administrative Expenses General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation and settlement costs and professional services costs, which are general in nature.

The decrease in G&A was primarily the result of our restructurings throughout 2013 of the legacy Actavis business along with the sale of our Western European assets, offset, in part, by increased costs associated with the Forest business of $14.3 million.

Anda Distribution Segment The following table presents net contribution for the Anda Distribution segment for the three months ended September 30, 2014 and 2013 ($ in millions): Three Months Ended September 30, Change 2014 2013 Dollars % Net revenues $ 423.2 $ 307.1 $ 116.1 37.8 % Operating expenses: Cost of sales(1) 364.8 267.2 97.6 36.5 % Selling and marketing 28.8 23.7 5.1 21.5 % General and administrative 9.1 8.6 0.5 5.8 % Segment contribution $ 20.5 $ 7.6 $ 12.9 169.7 % Segment margin 4.8 % 2.5 % 2.3 % (1) Cost of sales excludes amortization and impairment of acquired intangibles.

Net Revenues Our Anda Distribution segment distributes generic and brand pharmaceutical products manufactured by third parties, as well as by Actavis, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians' offices. Sales are principally generated through an in-house telemarketing staff and through internally developed ordering systems. The Anda Distribution segment operating results exclude sales by Anda of products developed, acquired, or licensed by the North American Brands and North American Generics and International segments.

The increase was primarily due to an increase in U.S. base product sales due to volume increases ($94.1 million) and an increase in period-over-period third party launches ($22.0 million).

Cost of Sales Cost of sales includes third party acquisition costs, profit-sharing or royalty payments for products sold pursuant to licensing agreements and inventory reserve charges, where applicable. Cost of sales does not include amortization or impairment costs for other acquired intangibles.

The increase in cost of sales within our Anda Distribution segment was due to higher product sales. Cost of sales as a percentage of revenue decreased to 86.2% compared to 87.0% in the prior year period primarily due to product and customer mix.

Selling and Marketing Expenses Selling and marketing expenses consist mainly of personnel costs, facilities costs, insurance and freight costs which support the Anda Distribution segment sales and marketing functions. Selling and marketing costs exclude fees allocated from the Anda Distribution segment for services they provide on behalf of North American Brands and North American Generics and International.

The increase in selling and marketing expenses relate to higher freight costs and higher personnel costs.

98 -------------------------------------------------------------------------------- Table of Contents General and Administrative Expenses General and administrative expenses consist mainly of personnel-related costs, facilities costs, insurance, depreciation and professional services costs.

General and administrative costs within the segment excludes fees allocated from the Anda Distribution segment for services they provide on behalf of North American Brands and North American Generics and International.

Research and Development Expenses Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Research and development $ 391.8 $ 163.7 $ 228.1 139.3 % as % of net revenues 10.6 % 8.1 % R&D expenses consist predominantly of personnel-related costs, API costs, contract research, clinical, biostudy and facilities costs associated with product development. The increase in R&D expenses was primarily due to higher costs associated with ongoing operating expenses for the acquired Forest business of $124.2 million, Forest related stock-based compensation charges, including the fair value adjustment of the awards as part of acquisition accounting, of $38.8 million, acquisition accounting stock-based compensation charges associated with the Furiex Acquisition of $7.4 million, severance charges associated with the Forest Acquisition of $19.1 million, the operating costs associated with the acquired Warner Chilcott business of $18.6 million and milestone payments of $17.1 million. In the three months ended September 30, 2013, the Company paid $28.3 million of milestone expenses.

Amortization Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Amortization $ 873.6 $ 146.3 $ 727.3 497.1 % as % of net revenues 23.7 % 7.3 % Amortization for the three months ended September 30, 2014 increased as compared to the prior year period primarily as a result of amortization of identifiable assets acquired in the Forest Acquisition of $478.2 million and the Warner Chilcott Acquisition of $255.8 million.

In-process research and development impairments Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % In-process research and development impairments $ 305.0 $ - $ 305.0 100.0 % In-process research and development impairments for the three months ended September 30, 2014 increased as compared to the prior year period primarily as a result of an impairment charge of $165.0 million related to the abandonment of certain R&D projects and an impairment charge of $140.0 million related to acquired IPR&D due to the U.S. Food and Drug Administration's (FDA) Cardiovascular and Renal Drugs Advisory Committee (CRDAC) voting to recommend against approval of Actavis' New Drug Application (NDA) for the fixed-dose combination of nebivolol and valsartan for the treatment of hypertension.

Asset sales, impairments and contingent consideration adjustment, net Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Asset sales, impairments and contingent consideration adjustment, net $ 7.3 $ 13.6 $ (6.3 ) (46.3 )% Asset sales, impairments and contingent consideration adjustment, net for the three months ended September 30, 2014 primarily included the impairment of property, plant and equipment, net relating to an international facility of $9.8 million, offset in part by the impact of a gain of $5.4 million on the sale of the Lamotrigine ODT and Ursodiol Tablets assets divested.

Asset sales, impairments and contingent consideration adjustment, net for three months ended September 30, 2013 includes an impairment of a product right intangible assets acquired as part of the Specifar acquisition ($13.9 million), offset in part by net gains on miscellaneous asset sales and impairments ($0.3 million).

99 -------------------------------------------------------------------------------- Table of Contents Interest Income Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Interest income $ 1.6 $ 1.4 $ 0.2 14.3 % Interest income represents interest earned on cash and cash equivalents held during the respective periods.

Interest Expense Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Interest expense - 2009 Senior Notes $ 6.3 $ 12.3 $ (6.0 ) (48.9 )% Interest expense - 2012 Senior Notes 32.5 32.4 0.1 0.3 % Interest expense - 2014 New Notes 35.9 - 35.9 100.0 % Interest expense - WC Notes 4.4 - 4.4 100.0 % Interest expense - Forest Notes 24.5 - 24.5 100.0 % Interest expense - Term Loans 25.9 7.8 18.1 231.6 % Interest expense - Revolving Credit Facility 0.6 0.3 0.3 96.1 % Interest expense - Other 2.0 0.1 1.9 n.m.

Interest expense $ 132.1 $ 52.9 $ 79.2 149.7 % Interest expense increased for the three months ended September 30, 2014 over the prior year primarily due to the indebtedness under the 2014 New Notes (defined below), the $2.0 billion of term-loan borrowings incurred as part of the Forest Acquisition financing, and the $3.0 billion of notes acquired in connection with the Forest Acquisition, as well as the WC Notes (defined below) and the WC Term Loan Agreement (defined below) incurred in connection with the Warner Chilcott Acquisition.

Other Income (expense), net Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Extinguishment of debt $ 29.9 $ - $ 29.9 100.0 % Other 2.0 (2.1 ) 4.1 (195.2 )% Other income (expense), net $ 31.9 $ (2.1 ) $ 34.0 1,619.0 % Extinguishment of Debt On July 21, 2014, the Company redeemed the WC Notes for $1,311.8 million, which includes a make-whole premium of $61.8 million and the principal amount of the WC Notes of $1,250.0 million. As a result of the transaction, the Company recognized a gain of $29.9 million, which includes the write-off of the then outstanding unamortized premium.

Provision for Income Taxes Three Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Provision for income taxes $ (107.9 ) $ 31.4 $ (139.3 ) (443.6 )% Effective tax rate 9.4 % 32.4 % The Company's effective tax rate for the three months ended September 30, 2014 was 9.4% compared to 32.4% for the three months ended September 30, 2013. The effective tax rate for the three months ended September 30, 2014 was impacted by a one-time non-deductible pre-tax expense for the 2015 Branded Prescription Drug Fee of $115.8 million and certain IPR&D impairments of $305.0 million in low tax jurisdictions, losses in certain jurisdictions for which no tax benefit is provided and the amortization of intangibles and the step-up in inventory tax benefited at a lower rate than the Irish statutory rate and a one time restructuring tax charge of $10.3 million.

100-------------------------------------------------------------------------------- Table of Contents Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013 Results of operations, including segment net revenues, segment operating expenses and segment contribution information for our North American Brands, North American Generics and International, and Anda Distribution segments consisted of the following ($ in millions): Nine Months Ended September 30, 2014 2013 North North North America North America America Generics and Anda America Generics and Anda Brands International Distribution Total Brands International Distribution Total Product sales $ 2,754.6 $ 4,872.6 $ 1,240.4 $ 8,867.6 $ 379.0 $ 4,578.6 $ 813.9 $ 5,771.5 Other revenue 45.9 91.9 - 137.8 48.4 78.4 - 126.8 Net revenues 2,800.5 4,964.5 1,240.4 9,005.4 427.4 4,657.0 813.9 5,898.3 Operating expenses: Cost of sales(1) 1,055.6 2,346.4 1,070.5 4,472.5 105.6 2,414.0 700.5 3,220.1 Selling and marketing 694.9 503.9 83.0 1,281.8 136.6 483.5 66.3 686.4 General and administrative 529.8 557.7 25.7 1,113.2 78.9 540.9 23.9 643.7 Contribution $ 520.2 $ 1,556.5 $ 61.2 $ 2,137.9 $ 106.3 $ 1,218.6 $ 23.2 $ 1,348.1 Contribution margin 18.6 % 31.4 % 4.9 % 23.7 % 24.9 % 26.2 % 2.9 % 22.9 % Research and Development 721.3 432.1 Amortization 1,720.7 454.3 Goodwill impairments - 647.5 In-process research and development impairments 321.3 4.4 Asset sales, impairments and contingent consideration adjustment, net 12.7 165.0 Operating (loss) / income $ (638.1 ) $ (355.2 ) Operating margin (7.1 )% (6.0 )% (1) Excludes amortization and impairment of acquired intangibles including product rights.

North American Brands Segment The following table presents net contribution for the North American Brands segment for the nine months ended September 30, 2014 and 2013 ($ in millions): Nine Months Ended September 30, Change 2014 2013 Dollars % Product sales $ 2,754.6 $ 379.0 $ 2,375.6 626.8 % Other revenue 45.9 48.4 (2.5 ) (5.2 )% Net revenues 2,800.5 427.4 2,373.1 555.2 % Operating expenses: Cost of sales(1) 1,055.6 105.6 950.0 899.6 % Selling and marketing 694.9 136.6 558.3 408.7 % General and administrative 529.8 78.9 450.9 571.5 % Segment contribution $ 520.2 $ 106.3 $ 413.9 389.4 % Segment margin 18.6 % 24.9 % (6.3 )% (1) Cost of sales excludes amortization and impairment of acquired intangibles.

101 -------------------------------------------------------------------------------- Table of Contents Net Revenues The following table presents net revenues for the reporting units in the North American Brands segment for the nine months ended September 30, 2014 and 2013 ($ in millions): Nine Months Ended September 30 Change 2014 2013 Dollars % North American Brands CNS Namenda franchise $ 427.6 $ - $ 427.6 100.0 % Viibyrd® / Fetzima® 66.4 - 66.4 100.0 % Saphris ® 36.8 - 36.8 100.0 % Other CNS 23.8 - 23.8 100.0 % Total CNS 554.6 - 554.6 100.0 % Gastroenterology Delzicol®/Asacol®HD 418.4 - 418.4 100.0 % Linzess®/Costella ™ 80.0 - 80.0 100.0 % Carafate ® / Sulcrate ® 42.3 - 42.3 100.0 % Canasa ® / Salofalk ® 34.8 - 34.8 100.0 % Zenpep ®, Ultrase ®& Viokace ® 34.1 - 34.1 100.0 % Other Gastroenterology 8.5 -- 8.5 100.0 % Total Gastroenterology 618.1 - 618.1 100.0 % Women's Health Lo Loestrin® Fe 202.0 - 202.0 100.0 % Estrace® Cream 177.9 - 177.9 100.0 % Minastrin® 24 Fe 158.4 - 158.4 100.0 % Other Women's Health 146.5 68.2 78.3 114.8 % Total Women's Health 684.8 68.2 616.6 904.1 % Cardiovascular, Respiratory & Acute Care Bystolic® 138.6 - 138.6 100.0 % Daliresp ® 30.0 - 30.0 100.0 % Tudorza ® 28.4 - 28.4 100.0 % Total Cardiovascular, Respiratory & Acute Care 197.0 - 197.0 100.0 % Urology 213.3 172.6 40.7 23.6 % Infectious Disease 20.2 - 20.2 100.0 % Dermatology/Established Brands 512.5 186.6 325.9 174.6 % Total North American Brands $ 2,800.5 $ 427.4 $ 2,373.1 555.2 % The increase in the North American Brands net revenues is primarily due to the Forest and Warner Chilcott Acquisitions, which contributed nine months of sales in 2014 compared to no sales in the prior period ($1,126.3 million and $1,448.1 million worldwide, respectively), including $1,054.1 million and $1,305.4 million in North American Brands, respectively.

Cost of Sales The increase in cost of sales was due to higher product sales driving the corresponding cost of sales primarily, as a result of the Forest Acquisition ($633.8 million) and the Warner Chilcott Acquisition ($317.2 million), including the impact of selling through a portion of the inventory associated with the fair value step-up of the July 1, 2014 Forest inventory acquired of $423.3 million and the October 1, 2013 Warner Chilcott inventory acquired of $211.9 million.

Selling and Marketing Expenses The increase in selling and marketing expenses was primarily due to higher selling and marketing costs associated with the Forest Acquisition ($295.5 million) and the Warner Chilcott Acquisition ($154.0 million), and a charge of $105.0 million to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service.

102-------------------------------------------------------------------------------- Table of Contents Included in selling and marketing in the nine months ended September 30, 2014 are expenses associated with stock-based compensation, including the fair value adjustment of the awards as part of acquisition accounting, for awards issued to acquired Forest employees of $37.9 million as well as integration and restructuring costs associated with the Forest Acquisition of $45.6 million.

General and Administrative Expenses The increase in general and administrative expenses was due in part to increased operating costs related to the expansion of the Company's size, including costs incurred by Forest for ongoing operating expenses of $105.7 million as well as acquisition related expenses, which includes stock-based compensation charges (including the fair value adjustment of the awards as part of acquisition accounting) of $123.9 million, severance related charges of $59.3 million and other integration and financing costs of $89.8 million. Also included in the nine months ended September 30, 2014 are expenses relating to Warner Chilcott for ongoing operating expenses of $113.9 million. Included in the nine months ended September 30, 2013 were $21.2 million of costs incurred for the Warner Chilcott Acquisition and other costs associated with the restructuring of the Actavis Group.

North American Generics and International Segment The following table presents net contribution for the North American Generics and International segment for the nine months ended September 30, 2014 and 2013 ($ in millions): Nine Months Ended September 30, Change 2014 2013 Dollars % Product sales $ 4,872.6 $ 4,578.6 $ 294.0 6.4 % Other revenue 91.9 78.4 13.5 17.2 % Net revenues 4,964.5 4,657.0 307.5 6.6 % Operating expenses: Cost of sales(1) 2,346.4 2,414.0 (67.6 ) (2.8 )% Selling and marketing 503.9 483.5 20.4 4.2 % General and administrative 557.7 540.9 16.8 3.1 % Segment contribution $ 1,556.5 $ 1,218.6 $ 337.9 27.7 % Segment margin 31.4 % 26.2 % 5.2 % (1) Cost of sales excludes amortization and impairment of acquired intangibles.

Net revenues in our North American Generics and International segment consisted of the following ($ in millions): Nine Months Ended September 30, Change 2014 2013 Dollars % North American Generics $ 3,035.5 $ 2,882.6 $ 152.9 5.3 % International 1,929.0 1,774.4 154.6 8.7 % Net revenues $ 4,964.5 $ 4,657.0 $ 307.5 6.6 % The increase in North American Generics revenues was primarily the result of period-over-period increases in Lidocaine topical patch 5% (generic of Lidoderm ®) of $197.2 million due to the timing of the launch in 2013 and Duloxetine HCI (generic of Cymbalta ® ), which was not sold in the first nine months of 2013, of $122.1 million, offset, in part by declines in Methlyphenidate ER (generic of Concerta ® ) of $228.0 million due primarily to decreased volume. Other movements within this category are due to product mix.

The increase in international revenues is primarily due to the results of the Forest ($67.5 million) and Warner Chilcott ($142.7 million) acquisitions, which had no sales in the nine months ended September 30, 2013.

103-------------------------------------------------------------------------------- Table of Contents Cost of Sales The decrease in cost of sales is due to the impact of our global supply chain initiatives occurring throughout 2013 and the sale of our Western European assets that were held for sale in 2013 and sold in 2014 as well as a charge of $93.5 million in the nine months ended September 30, 2013 relating to the impact of selling a portion of the inventory associated with the fair value step-up on inventory related to the Actavis Group Acquisition, more than offsetting the increase in cost of as a result of the Forest Acquisition ($86.0 million) and the Warner Chilcott Acquisition ($45.0 million), including the impact of selling through a portion of the inventory associated with the fair value step-up of the July 1, 2014 Forest inventory acquired of $56.2 million.

Selling and Marketing Expenses The increase in selling and marketing expenses was primarily due to costs incurred in connection with the acquired Forest business of $17.7 million, the acquired Warner Chilcott business of $21.8 million, as well as a charge of $10.8 million to account for an additional year of the non-tax deductible Branded Prescription Drug Fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service, offset, in part, by savings due to the restructuring of the legacy Actavis business as well as the sale of our Western European assets.

General and Administrative Expenses The increase in general and administrative expenses was primarily due to costs incurred in connection with the acquired Forest business of $14.3 million.

Anda Distribution Segment The following table presents net contribution for the ANDA Distribution segment for the nine months ended September 30, 2014 and 2013 ($ in millions): Nine Months Ended September 30, Change 2014 2013 Dollars % Net revenues $ 1,240.4 $ 813.9 $ 426.5 52.4 % Operating expenses: Cost of sales 1,070.5 700.5 370.0 52.8 % Selling and marketing 83.0 66.3 16.7 25.2 % General and administrative 25.7 23.9 1.8 7.5 % Segment contribution $ 61.2 $ 23.2 $ 38.0 163.8 % Segment margin 4.9 % 2.9 % 2.0 % Net Revenues The increase in revenues was primarily due to an increase in U.S. base product sales due to volume increases ($383.9 million) and an increase in period-over-period third party launches ($42.6 million).

Cost of Sales The increase in cost of sales within our Anda Distribution segment was due to higher product sales. Cost of sales as a percentage of revenue increased to 86.3% compared to 86.1% in the prior year period primarily due to product and customer mix.

104 -------------------------------------------------------------------------------- Table of Contents Selling and Marketing Expenses The increase in selling and marketing expenses relate to higher freight costs and higher personnel costs.

General and Administrative Expenses General and administrative expenses were in line period-over-period.

Research and Development Expenses Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Research and development $ 721.3 $ 432.1 $ 289.2 66.9 % as % of net revenues 8.0 % 7.3 % The increase in R&D expenses was primarily due to higher costs associated with ongoing operating expenses for the acquired Forest business of $124.2 million, Forest related stock-based compensation charges, including the fair value adjustment of the awards as part of acquisition accounting, of $38.8 million, acquisition accounting stock-based compensation charges associated with the Furiex Acquisition of $7.4 million, severance charges associated with the Forest Acquisition of $19.1 million, the operating costs associated with the acquired Warner Chilcott business of $56.7 million and milestone payments of $17.1 million, offset, in part, by $13.3 million of income relating to the reduction of acquisition related contingent consideration liabilities, net of accretion expense, including $24.3 million associated with the write-off of contingent consideration associated with Estelle and Colvir. In the nine months ended September 30, 2013, the Company paid $34.7 million of milestone expenses. The remaining increase is due to higher spending on both legacy branded and biologic products ($34.2 million) and generics ($39.7 million).

Amortization Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Amortization $ 1,720.7 $ 454.3 $ 1,266.4 278.8 % as % of net revenues 19.2 % 7.7 % Amortization for the nine months ended September 30, 2014 increased as compared to the prior year period primarily as a result of amortization of identifiable assets acquired in the Warner Chilcott Acquisition of $823.1 million and the Forest Acquisition of $478.2 million.

Goodwill Impairments In the nine months ended September 30, 2013, we recorded an impairment charge related to the goodwill in the Actavis Pharma - Europe reporting unit of $647.5 million.

In-process research and development impairments Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % In-process research and development impairments $ 321.3 $ 4.4 $ 316.9 n.m.

In-process research and development impairments for the nine months ended September 30, 2014 increased as compared to the prior year period primarily as a result of an impairment charge of $165.0 million related to the abandonment of certain R&D projects, an impairment charge of $140.0 million related to acquired IPR&D due to the U.S. Food and Drug Administration's (FDA) Cardiovascular and Renal Drugs Advisory Committee (CRDAC) voting to recommend against approval of Actavis' New Drug Application (NDA) for the fixed-dose combination of nebivolol and valsartan for the treatment of hypertension, and impairments related to the Estelle and Colvir assets acquired in the Uteron Acquisition of $15.1 million.

In process research and development impairments for the nine months ended September 30, 2013 included an impairment IPR&D intangibles in connection with the Arrow Group (acquired on December 2, 2009, in exchange for cash consideration of $1.05 billion, approximately 16.9 million shares of the Company's Restricted Ordinary Shares and 200,000 shares of the Company's Mandatorily Redeemable Preferred Stock and certain contingent consideration (the "Arrow Group Acquisition")) of $4.4 million.

Asset sales, impairments and contingent consideration adjustment, net Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Asset sales, impairments and contingent consideration adjustment, net $ 12.7 $ 165.0 $ (152.3 ) (92.3 )% 105 -------------------------------------------------------------------------------- Table of Contents Asset sales, impairments and contingent consideration adjustment, net for the nine months ended September 30, 2014 primarily included an impairment charge related to our Corona manufacturing facility assets held for sale of $12.8 million, and the impairment of property, plant and equipment, net relating to an international facility of $9.8 million, offset, in part, by a gain on assets related to our Western European assets held for sale of $3.4 million and a gain of $5.4 million on the sale of the Lamotrigine ODT and Ursodiol Tablets assets divested.

Asset sales, impairments, and contingent consideration fair value adjustment, net for the nine months ended September 30, 2013 includes a charge associated with the issuance of an additional 1.7 million ordinary shares in connection with the Actavis Group Acquisition of $150.3 million, an impairment charge related to a facility in Greece of $19.4 million, and an impairment of a product right intangible asset in connection with the Specifar acquisition of $13.9 million, offset in part by gains related to the sale of our Russian subsidiary, a manufacturing facility in India, the sale of a German subsidiary and net gains on miscellaneous asset sales and impairments of $18.6 million.

Interest Income Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Interest income $ 3.8 $ 3.4 $ 0.4 11.8 % Interest Expense Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Interest expense - 2009 Senior Notes $ 18.9 $ 37.1 $ (18.2 ) (49.1 )% Interest expense - 2012 Senior Notes 97.9 96.7 1.2 1.2 % Interest expense - 2014 New Notes 40.5 - 40.5 100.0 % Interest expense - WC Notes 42.0 - 42.0 100.0 % Interest expense - Forest Notes 24.5 - 24.5 100.0 % Interest expense - Term Loans 54.2 23.9 30.3 126.6 % Interest expense - Revolving Credit Facility 1.9 0.9 1.0 109.8 % Interest expense - Other 4.1 3.5 0.6 17.1 % Interest expense $ 284.0 $ 162.1 $ 121.9 75.2 % Interest expense increased for the nine months ended September 30, 2014 over the prior year primarily due to the indebtedness under the 2014 New Notes, the $2.0 billion of term-loan borrowings incurred as part of the Forest Acquisition financing, and the $3.0 billion of notes acquired in connection with the Forest Acquisition, as well as the WC Notes and the WC Term Loan Agreement incurred in connection with the Warner Chilcott Acquisition.

Other Income (expense), net Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Gain on sale of investments $ 4.3 $ - 4.3 100.0 % Extinguishment of debt 29.9 - 29.9 100.0 % Bridge loan commitment fee (25.8 ) - (25.8 ) (100.0 )% Disposal of a business (20.9 ) - (20.9 ) (100.0 )% Other 13.6 22.3 8.7 (39.0 )% Other income (expense), net $ 1.1 $ 22.3 $ (21.2 ) (95.1 )% Gain on Sale of Investment During the nine months ended September 30, 2014, we sold our minority interest in Columbia Laboratories Inc. for $8.5 million. As a result, we recognized a gain on the sale of $4.3 million.

106-------------------------------------------------------------------------------- Table of Contents Extinguishment of Debt On July 21, 2014, the Company redeemed the WC Notes for $1,311.8 million, which includes a make-whole premium of $61.8 million and the principal amount of the WC Notes of $1,250.0 million. As a result of the transaction, the Company recognized a gain of $29.9 million, which includes the write-off of the then outstanding unamortized premium.

Bridge Loan Commitment Fee In connection with the Forest Merger Agreement, we secured a bridge loan commitment of up to $7.0 billion and incurred associated commitment costs of $25.8 million. During the nine months ended September 30, 2014, we recorded an expense associated with these fees.

Disposal of a business Disposal of a business includes the loss on the disposal of our Western European operations divested in the second quarter of 2014 of $20.9 million.

Other Income In the nine months ended September 30, 2014, we recorded income of $5.0 million, in connection with the agreement entered into on January 24, 2014 with Nitrogen DS Limited, one of the sellers associated with the Actavis Group Acquisition, in which we received payment from Nitrogen DS Limited in exchange for their right to transfer, sell, or assign or otherwise dispose of 50% of the locked up Actavis shares owned.

Other income (expense), net for the nine months ended September 30, 2013 includes a gain from the release of funds held in an escrow account established in connection with the Arrow Acquisition of $15.0 million, a gain on foreign currency transactions of $10.9 million, and a gain on the sale of securities of $1.1 million, offset in part by the release of an indemnification receivable established in connection with an acquisition of $8.8 million.

Provision for Income Taxes Nine Months Ended September 30, Change ($ in millions) 2014 2013 Dollars % Provision for income taxes $ (19.9 ) $ 111.0 $ (130.9 ) (117.9 )% Effective tax rate 2.2 % (22.6 )% The Company's effective tax rate for the nine months ended September 30, 2014 was 2.2% compared to (22.6)% for the nine months ended September 30, 2013. The effective tax rate for the nine months ended September 30, 2014 was impacted by a one-time non-deductible pre-tax expense for the 2015 Branded Prescription Drug Fee of $115.8 million and certain IPR&D impairments of $305 million in low tax jurisdictions, losses in certain jurisdictions for which no tax benefit is provided, and the amortization of intangibles and the step-up in inventory tax benefited at a lower rate than the Irish statutory rate and a one time restructuring tax charge of $10.3 million. Additionally, the tax provision included a benefit of $9.7 million related to certain changes in the Company's uncertain tax positions. The effective tax rate for the nine months ended September 30, 2013 was impacted by certain one-time non-deductible pre-tax expenses including a goodwill impairment charge of $647.5 million and a charge for consideration due to the former Actavis stakeholders of $150.3 million. This was partially offset by non-taxable pre-tax income of $15.0 million related to the Arrow Acquisition.

Liquidity and Capital Resources Working Capital Position Working capital at September 30, 2014 and December 31, 2013 is summarized as follows: September 30, December 31, Increase ($ in millions): 2014 2013 (Decrease) Current Assets: Cash and cash equivalents $ 339.4 $ 329.0 $ 10.4 Marketable securities 1.0 2.5 (1.5 ) Accounts receivable, net 2,229.3 1,404.9 824.4 Inventories, net 2,627.3 1,786.3 841.0 Prepaid expenses and other current assets 652.1 409.2 242.9 Current assets held for sale 124.7 271.0 (146.3 ) Deferred tax assets 278.5 231.8 46.7 Total current assets 6,252.3 4,434.7 1,817.6 Current liabilities: Accounts payable and accrued expenses $ 3,937.5 $ 2,343.2 $ 1,594.3 Income taxes payable 11.3 96.6 (85.3 ) Current portion of long-term debt and capital leases 443.3 534.6 (91.3 ) Deferred revenue 35.6 38.8 (3.2 ) Current liabilities held for sale - 246.6 (246.6 ) Deferred tax liabilities 53.6 35.1 18.5 Total current liabilities 4,481.3 3,294.9 1,186.4 Working Capital $ 1,771.0 $ 1,139.8 $ 631.2 Working Capital excluding assets held for sale, net $ 1,646.3 $ 1,115.4 $ 530.9 Adjusted Current Ratio 1.37 1.37 Working capital excluding assets held for sale, net, increased $530.9 million to $1,646.3 million at September 30, 2014 compared to $1,115.4 million at December 31, 2013. This increase is primarily due to net income excluding non-cash charges of $1,885.7 million, net cash raised through borrowings in the nine months ended September 30, 2014 of $3,280.7, cash received from the sale of asset rights acquired in the Furiex Acquisition of $408.6 million and the working capital acquired in the Forest Acquisition on July 1, 2014 of $4,457.8 million, offset by cash utilized to fund the Forest ($7,070.6 million) and Furiex ($1,086.0 million) acquisitions as well as other balance movements including the amortization of inventory step-ups of $703.3 million.

107-------------------------------------------------------------------------------- Table of Contents Cash Flows from Operations Summarized cash flow from operations is as follows: Nine Months Ended September 30, ($ in millions) 2014 2013 Net cash provided by operating activities $ 1,431.4 $ 561.8 Cash flows from operations represent net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities increased $869.6 million in the nine months ended September 30, 2014 versus the prior year period, due primarily to an increase in net income, adjusted for non-cash activity of $1,062.8 million ($1,885.7 million and $822.9 million of net income, adjusted for non-cash activity in the nine months ended September 30, 2014 and 2013, respectively).

Management expects that available cash balances and the remaining 2014 cash flows from operating activities will provide sufficient resources to fund our operating liquidity needs and expected 2014 non-operating funding requirements.

Investing Cash Flows Our cash flows from investing activities are summarized as follows: Nine Months Ended September 30, ($ in millions) 2014 2013 Net cash (used in) investing activities $ (4,632.1 ) $ (286.1 ) Investing cash flows consist primarily of cash used in acquisitions of businesses and intangibles (primarily product rights), capital expenditures for property, plant and equipment and purchases of investments and marketable securities partially offset by proceeds from the sale of investments and marketable securities. Included in the nine months ended September 30, 2014 was net cash used in connection with the acquisitions of Forest ($3,646.4 million) and Furiex ($1,086.0 million), capital expenditures for property, plant and equipment of $174.1 million and the purchases of other businesses, net of cash acquired of $190.2 million, offset, in part by cash received from the sale of assets of $451.2 million, including royalty streams related to former Furiex products.

Included in the nine months ended September 30, 2013 was cash used in connection with the Uteron Acquisition, net of cash acquired ($141.3 million), cash used in connection with Medicines360 acquisition ($52.3 million) and capital expenditures for property and equipment ($117.4 million), offset by proceeds from the sale of property and equipment and marketable securities and other investments ($30.9 million).

Financing Cash Flows Our cash flows from financing activities are summarized as follows: Nine Months Ended September 30, ($ in millions) 2014 2013 Net cash provided by / (used in) financing activities $ 3,176.2 $ (201.8 ) Financing cash flows consist primarily of borrowings and repayments of debt, repurchases of ordinary shares and proceeds from the exercise of stock options.

Cash used in financing activities in the nine months ended September 30, 2014 includes the net proceeds from the issuance of the 2014 New Notes of $3,676.2 million, term-loan indebtedness of $2,000.0 million and a bridge loan of $2,400.0 million, offset, in part, by net repayments of other indebtedness, net of $4,875.5 million, including the bridge loan of $2,400.0 million, the repurchase of shares of $99.7 million and the payment of debt issuance costs of $58.2 million.

Included in the nine months ended September 30, 2013 were net payments on debt ($135.6 million), acquisition of non-controlling interests ($10.4 million), the repurchase of common stock to satisfy tax withholding obligations in connection with vested restricted stock issued to employees ($165.4 million), offset by excess tax benefit from stock based compensation ($69.2 million) and proceeds from stock option exercises ($44.0 million).

108-------------------------------------------------------------------------------- Table of Contents Debt and Borrowing Capacity Debt consisted of the following (in millions): September 30, December 31, 2014 2013 WC Term Loan Agreement $ 1,410.9 $ 1,832.8 Amended and Restated ACT Term Loan 2,911.7 1,310.0 Revolving Credit Facility - 265.0 Senior Notes: $500.0 million 1.300% notes due June 15, 2017 500.0 - $1,200.0 million 1.875% notes due October 1, 2017 1,200.0 1,200.0 $1,250.0 million 7.75% notes due September 15, 2018 - 1,250.0 $1,050.0 million 4.375% notes due February 1, 2019 1,050.0 - $500.0 million 2.450% notes due June 15, 2019 500.0 - $400.0 million 6.125% notes due August 14, 2019 400.0 400.0 $750.0 million 4.875% notes due February 15, 2021 750.0 - $1,200.0 million 5.000% notes due December 15, 2021 1,200.0 - $1,700.0 million 3.250% notes due October 1, 2022 1,700.0 1,700.0 $1,200.0 million 3.850% notes due June 15, 2024 1,200.0 - $1,000.0 million 4.625% notes due October 1, 2042 1,000.0 1,000.0 $1,500.0 million 4.850% notes due June 15, 2044 1,500.0 - Plus: Unamortized premium 249.2 103.9 Less: Unamortized discount (53.2 ) (31.9 ) Senior Notes, net 11,196.0 5,622.0 Capital leases 18.5 22.2 Total debt and capital leases 15,537.1 9,052.0 Less: Current portion 443.3 534.6 Total long-term debt and capital leases $ 15,093.8 $ 8,517.4 Credit Facility Indebtedness 2013 Term Loan Amended and Restated Actavis, Inc. Credit and Guaranty Agreements Amended and Restated ACT Term Loan On the Closing Date and pursuant to the Term Loan Amendment Agreement (the "Term Amendment Agreement"), by and among Actavis, Inc., a wholly owned subsidiary of the Company, Bank of America ("BofA"), as administrative agent thereunder, and the lenders party thereto, dated as of August 1, 2013, the Company, as parent guarantor, Actavis WC Holding S.à r.l. (the "ACT Borrower"), as borrower, Actavis, Inc., as a subsidiary guarantor, and BofA, as administrative agent, entered into the Amended and Restated Actavis Term Loan Credit and Guaranty Agreement (the "Existing ACT Term Loan Agreement"), dated as of October 1, 2013.

The Existing ACT Term Loan Agreement amended and restated Actavis, Inc.'s $1,800.0 million senior unsecured term loan credit facility, dated as of June 22, 2012. At closing, an aggregate principal amount of $1,572.5 million was outstanding under the Existing ACT Term Loan Agreement (the "2017 term-loan").

The 2017 term-loan matures on October 31, 2017. The outstanding principal amount is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date.

On March 31, 2014, Actavis plc, Actavis Capital, Actavis, Inc., BofA, as Administrative Agent, and a syndicate of banks participating as lenders entered into an amendment agreement (the "ACT Term Loan Amendment") to amend and restate Actavis Capital's Existing ACT Term Loan Agreement. On July 1, 2014, in connection with the Forest Acquisition and under the ACT Term Loan Amendment, the Company borrowed $2.0 billion of term loan indebtedness under tranche A-2, which is due July 1, 2019 (the "2019 term-loan"). The outstanding principal amount is payable in equal quarterly installments of 2.50% per quarter, with the remaining balance payable on the maturity date.

The Existing ACT Term Loan Agreement together with the ACT Term Loan Amendment is referred to herein as the "ACT Term Loan Agreement." The ACT Term Loan Agreement became effective in accordance with its terms on March 31, 2014.

The Amended and Restated Term Loan provides that loans thereunder will bear interest, at the Company's choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 1.00% per annum to 2.00% per annum depending on the Debt Rating.

109 -------------------------------------------------------------------------------- Table of Contents The Company is subject to, and at September 30, 2014 was in compliance with, all financial and operational covenants under the terms of the ACT Term Loan Agreement. The outstanding balance of the 2017 term-loan and the 2019 term-loan at September 30, 2014 was $961.7 million and $1,950.0 million, respectively. The book value of the outstanding indebtedness approximates fair value as the debt is at variable interest rates and re-prices frequently.

Revolving Credit Facility On the Closing Date and pursuant to the Revolver Loan Amendment Agreement (the "Revolver Amendment Agreement" and, together with the Term Amendment Agreement, the "Amendment Agreements"), by and among Actavis, Inc., as subsidiary guarantor, BofA, as administrative agent thereunder, and the lenders party thereto, dated as of August 1, 2013, the Company, as parent guarantor, the ACT Borrower, as borrower, Actavis, Inc., as a subsidiary guarantor, and BofA, as administrative agent, entered into that certain Amended and Restated Actavis Revolving Credit and Guaranty Agreement (the "Existing ACT Revolving Credit Agreement" and, together with the Existing ACT Term Loan Agreement, the "Amended and Restated Credit Agreements"), dated as of October 1, 2013. The ACT Revolving Credit Agreement amended and restated Actavis, Inc.'s $750.0 million senior unsecured revolving credit facility dated as of September 16, 2011, as amended by that certain Amendment No. 1 to the credit agreement and joinder agreement, dated as of May 21, 2012. At closing, $9.4 million of letters of credit were outstanding under the ACT Revolving Credit Agreement.

The ACT Revolving Credit Agreement provides that loans thereunder will bear interest, at the Company's choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 0.75% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 0.875% per annum to 1.75% per annum depending on the Debt Rating. Additionally, to maintain availability of funds, the Company pays an unused commitment fee, which according to the pricing grid is set at 0.15% of the unused portion of the revolver.

The Company is subject to, and as of September 30, 2014 was in compliance with, all financial and operational covenants under the terms of the Revolving Credit Facility. At September 30, 2014, no amounts were outstanding and letters of credit outstanding were $17.3 million. The net availability under the Revolving Credit Facility was $732.7 million.

WC Term Loan Agreement On October 1, 2013 (the "Closing Date"), Warner Chilcott Corporation ("WC Corporation"), WC Luxco S.à r.l. ("WC Luxco"), WCCL ("WC Company" and, together with WC Corporation and WC Luxco, the "WC Borrowers"), as borrowers, and Warner Chilcott Finance LLC, as a subsidiary guarantor, became parties to the Warner Chilcott Term Loan Credit and Guaranty Agreement (the "WC Term Loan Agreement"), dated as of August 1, 2013, by and among the Company, as parent guarantor, BofA, as administrative agent thereunder and a syndicate of banks participating as lenders. Pursuant to the WC Term Loan Agreement, on the Closing Date, the lenders party thereto provided term loans to the WC Borrowers in a total aggregate principal amount of $2.0 billion, comprised of (i) a $1.0 billion tranche that will mature on October 1, 2016 (the "Three Year Tranche") and (ii) a $1.0 billion tranche that will mature on October 1, 2018 (the "Five Year Tranche"). The proceeds of borrowings under the WC Term Loan Agreement, together with $41.0 million of cash on hand, were used to finance, the repayment in full of all amounts outstanding under Warner Chilcott's then-existing Credit Agreement, dated as of March 17, 2011, as amended by Amendment No. 1 on August 20, 2012, among the WC Borrowers, BofA, as administrative agent and a syndicate of banks participating as lenders.

Borrowings under the WC Term Loan Agreement bear interest at the applicable WC Borrower's choice of a per annum rate equal to either (a) a base rate plus an applicable margin per annum varying from (x) 0.00% per annum to 0.75% per annum under the Three Year Tranche and (y) 0.125% per annum to 0.875% per annum under the Five Year Tranche, depending on the publicly announced debt ratings for non-credit-enhanced, senior unsecured long-term indebtedness of the parent (such applicable debt rating the "Debt Rating") or (b) a Eurodollar rate, plus an applicable margin varying from (x) 1.00% per annum to 1.75% per annum under the Three Year Tranche and (y) 1.125% per annum to 1.875% per annum under the Five Year Tranche, depending on the Debt Rating.

The outstanding principal amount of loans under the Three Year Tranche is not subject to quarterly amortization and shall be payable in full on the three year anniversary of the Closing Date. The outstanding principal amount of loans under the Five Year Tranche is payable in equal quarterly amounts of 2.50% per quarter prior to the fifth anniversary of the Closing Date, with the remaining balance payable on the fifth year anniversary of the Closing Date.

The Company is subject to, and, at September 30, 2014, was in compliance with, all financial and operational covenants under the terms of the WC Term Loan Agreement. As of September 30, 2014, the outstanding indebtedness under the Three Year Tranche and the Five Year Tranche was $573.0 million and $837.9 million, respectively. The book value of the outstanding indebtedness approximates fair value as the debt is at variable interest rates and re-prices frequently.

110 -------------------------------------------------------------------------------- Table of Contents Senior Notes Indebtedness Acquired Forest Notes On July 1, 2014 in connection with the Forest Acquisition, the Company acquired the indebtedness of Forest comprised of the $1,050.0 million 4.375% senior notes due 2019, the $750.0 million 4.875% senior notes due 2021 and the $1,200.0 million 5.000% senior notes due 2021 (together the "Acquired Forest Notes").

Interest payments are due on the $1,050.0 million senior notes semi-annually in arrears on February 1 and August 1 beginning August 1, 2014. Interest payments are due on the $750.0 million senior notes due 2021 semi-annually in arrears on February 15 and August 15 beginning August 15, 2014. Interest payments are due on the $1,200.0 million senior note due 2021 semi-annually in arrears on June 15 and December 15, beginning December 15, 2014. As a result of acquisition accounting, the notes were fair valued with a premium of $260.3 million as of July 1, 2014, which will be amortized as contra-interest over the life of the notes. The fair value of the Company's outstanding Acquired Forest Notes ($3,000.0 million face value), as determined in accordance with ASC Topic 820 "Fair Value Measurement" ("ASC 820") under Level 2 based upon quoted prices for similar items in active markets, was $3,188.2 million as of September 30, 2014.

2014 Notes Issuance On June 10, 2014, Actavis Funding SCS, a limited partnership (societe en commandite simple), organized under the laws of the Grand Duchy of Luxembourg, an indirect subsidiary of Actavis plc, issued $500.0 million 1.300% notes due 2017, $500.0 million 2.450% notes due 2019, $1,200.0 million 3.850% notes due 2024 and $1,500.0 million 4.850% notes due 2044 (collectively the "2014 New Notes"). Interest payments are due on the 2014 New Notes on June 15 and December 15 semi-annually, beginning on December 15, 2014. The guarantors of the debt are Warner Chilcott Limited, Actavis Capital Sarl, and Actavis, Inc.

Actavis plc will not guarantee the 2014 New Notes. The fair value of the Company's outstanding 2014 New Notes ($3,700.0 million face value), as determined in ASC 820 under Level 2 based upon quoted prices for similar items in active markets, was $3,554.4 million as of September 30, 2014.

Actavis, Inc. Supplemental Indenture On October 1, 2013, the Company, Actavis, Inc., a wholly owned subsidiary of the Company, and Wells Fargo Bank, National Association, as trustee, entered into a fourth supplemental indenture (the "Fourth Supplemental Indenture") to the indenture, dated as of August 24, 2009 (the "Base Indenture" and, together with the First Supplemental Indenture, the Second Supplemental Indenture and the Third Supplemental Indenture (each as defined below), the "Indenture"), as supplemented by the first supplemental indenture, dated as of August 24, 2009 (the "First Supplemental Indenture"), the second supplemental indenture, dated as of May 7, 2010 (the "Second Supplemental Indenture"), and the third supplemental indenture, dated as of October 2, 2012 (the "Third Supplemental Indenture"). Pursuant to the Fourth Supplemental Indenture, the Company has provided a full and unconditional guarantee of Actavis, Inc.'s obligations under its then outstanding $450.0 million 5.000% senior notes due August 15, 2014, (the "2014 Notes"), its $400.0 million 6.125% senior notes due August 15, 2019 (the "2019 Notes"), its $1,200.0 million 1.875% senior notes due October 1, 2017 (the "2017 Notes"), its $1,700.0 million 3.250% senior notes due October 1, 2022 (the "2022 Notes") and its $1,000.0 million 4.625% Senior Notes due October 1, 2042 (the "2042 Notes", and together with the 2014 Notes, the 2019 Notes, the 2017 Notes and the 2022 Notes, the "Notes").

WC Supplemental Indenture On October 1, 2013, the Company, WCCL, Warner Chilcott Finance LLC (the "Co-Issuer" and together with WC Company, the "Issuers") and Wells Fargo Bank, National Association, as trustee (the "WC Trustee"), entered into a third supplemental indenture (the "Supplemental Indenture") to the indenture, dated as of August 20, 2010 (the "WC Indenture"), among the Issuers, the guarantors party thereto and the WC Trustee, with respect to the Issuers' 7.75% senior notes due 2018 (the "WC Notes"). Pursuant to the Supplemental Indenture, the Company had provided a full and unconditional guarantee of the Issuers' obligations under the WC Notes and the WC Indenture.

On July 21, 2014, the Company redeemed the WC Notes for $1,311.8 million, which includes a make-whole premium of $61.8 million and the principal amount of the WC Notes of $1,250.0 million. As a result of the transaction, the Company recognized a gain in July of 2014 of $29.9 million, which includes the write-off of the then outstanding unamortized premium.

2012 Notes Issuance On October 2, 2012, Actavis, Inc. issued the 2017 Notes, the 2022 Notes, and the 2042 Notes (collectively the "2012 Senior Notes"). Interest payments are due on the 2012 Senior Notes semi-annually in arrears on April 1 and October 1 beginning April 1, 2013. Net proceeds from the offering of the 2012 Senior Notes were used for the Actavis Group Acquisition. The fair value of the Company's outstanding 2012 Senior Notes ($3,900.0 million face value), as determined in accordance with ASC 820 under Level 2 based upon quoted prices for similar items in active markets, was $3,733.9 million and $3,683.2 million as of September 30, 2014 and December 31, 2013, respectively.

2009 Notes Issuance On August 24, 2009, Actavis, Inc. issued the 2014 Notes and the 2019 Notes (collectively the "2009 Senior Notes"). Interest payments are due on the 2009 Senior Notes semi-annually in arrears on February 15 and August 15, respectively, beginning February 15, 2010. Net proceeds from the offering of 2009 Senior Notes were used to repay certain debt with the remaining net proceeds 111 -------------------------------------------------------------------------------- Table of Contents being used to fund a portion of the cash consideration for the Arrow Group Acquisition. The 2014 Notes, which had an outstanding principal balance of $450.0 million and which were fully and unconditionally guaranteed by us, were redeemed on November 5, 2013 at a redemption price equal to $465.6 million, which resulted in a cash expense of $15.6 million in the fourth quarter of 2013.

The fair value of the Company's outstanding 2009 Senior Notes ($400.0 million face value), as determined in accordance with ASC 820 under Level 2 based upon quoted prices for similar items in active markets, was $453.6 million and $460.9 million as of September 30, 2014 and December 31, 2013, respectively.

Off-Balance Sheet Arrangements We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, net revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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