What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-24 compared with 2020-02-19 · 984 added, 917 removed, 1809 unchanged (51% of the section changed)

29 unchanged sentences

Exhibits and Financial Statement Schedules

Documents filed as a part of the report:

(a) Documents filed as a part of the report:

(1) The consolidated financial statements required to be filed in the Annual Report on Form 10-K are listed on page F-1 hereof.

Schedule II — Valuation and Qualifying Accounts.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(in millions)

Year ended December 31, 2019

Allowance for doubtful accounts

Deferred tax asset valuation allowance

Year ended December 31, 2018

Allowance for doubtful accounts

Deferred tax asset valuation allowance

Year ended December 31, 2017

Allowance for doubtful accounts

Deferred tax asset valuation allowance

All schedules are omitted because they are not applicable or the required information is included in the financial statements or notes.

Form 10-K Summary

INDEX TO EXHIBITS

Exhibit Description

Number Exhibit Description

3.1 Certificate of Continuation, dated August 9, 2013, originally filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 13, 2013, which is incorporated by reference herein.

13 unchanged sentences

4.10 Indenture, dated as of December 30, 2019, by and among Bausch Health Companies Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, governing the 5.000% Senior Notes due 2028 and the 5.250% Senior Notes due 2030, originally filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 30, 2019, which is incorporated by reference herein.

4.11 Indenture, dated as of May 26, 2020, by and among Bausch Health Companies Inc., the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, governing the 6.250% Senior Notes due 2029, originally filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 26, 2020, which is incorporated by reference herein.

4.12 Indenture, dated as of December 3, 2020, by and among Bausch Health Companies Inc., the guarantors named therein and The Bank of New York Mellon, N.A., as trustee, governing the 5.000% Senior Notes due 2029 and the 5.250% Senior Notes due 2031, originally filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 3, 2020, which is incorporated by reference herein.

4.13 Form of Common Share Certificate of Bausch Health Companies Inc., originally filed as Exhibit 4.1 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.

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, As Amended

4.14 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, As Amended, originally filed as Exhibit 4.12 to the Company’s Annual Report on Form 10-K filed on February 19, 2020, which is incorporated by reference herein.

10.1* Bausch Health Companies Inc.

Amended and Restated 2014 Omnibus Incentive Plan, effective as of April 30, 2018 (the "Amended and Restated 2014 Omnibus Incentive Plan").†

Further Amended and Restated 2014 Omnibus Incentive Plan, effective as of April 28, 2020 (the "Amended and Restated 2014 Omnibus Incentive Plan").†

10.2 Form of Matching Restricted Stock Unit Agreement (Matching Units) under the Amended and Restated 2014 Omnibus Incentive Plan, originally filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2018, which is incorporated by reference herein.†

1 unchanged sentence

10.4 Form of Stock Option Grant Agreement (Nonstatutory Stock Options), under the Amended and Restated 2014 Omnibus Incentive Plan, originally filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed on February 28, 2018, which is incorporated by reference herein.†

Form of Restricted Stock Unit Award Agreement (Restricted Stock Units), under the Amended and Restated 2014 Omnibus Incentive Plan, originally filed as Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed on February 28, 2018, which is incorporated by reference herein.†

10.5 Form of Director Restricted Share Units Award Agreement (Annual Grants), under the Amended and Restated 2014 Omnibus Incentive Plan, originally filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed on February 28, 2018, which is incorporated by reference herein.

8 unchanged sentences

10.13 Form of Stock Option Grant Agreement under the 2011 Omnibus Incentive Plan, originally filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on February 28, 2012, which is incorporated by reference herein.†

10.14* Form of Spinoff Bonus Program Letter Agreement dated November 2, 2020 .†

10.15 Valeant Pharmaceuticals International, Inc.

32 unchanged sentences

10.30 Stipulation of Settlement dated December 15, 2019 in the U.S.

Securities Litigation ††

Securities Litigation, originally filed as Exhibit 10.30 to the Company’s Annual Report on Form 10-K filed on February 19, 2020, which is incorporated by reference herein.

21.1* Subsidiaries of Bausch Health Companies Inc.

8 unchanged sentences

§ 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.INS* Inline XBRL Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

1 unchanged sentence

* Filed herewith.

** Portions of this exhibit have been omitted pursuant to an application for confidential treatment.

Such information has been omitted and filed separately with the SEC.

† Management contract or compensatory plan or arrangement.

3 unchanged sentences

BAUSCH HEALTH COMPANIES INC.

February 19, 2020

February 24, 2021 By:

/s/ JOSEPH C.

2 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ JOSEPH C.

Chief Executive Officer and Chairman of the Board

February 19, 2020

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

February 19, 2020

Chief Executive Officer and Chairman of the Board February 24, 2021

Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 24, 2021

/s/ SAM ELDESSOUKY

Sam Eldessouky

Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)

February 19, 2020

Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) February 24, 2021

/s/ RICHARD U.

February 19, 2020

Director February 24, 2021

/s/ ARGERIS N.

February 19, 2020

Director February 24, 2021

/s/ ROBERT N.

February 19, 2020

Director February 24, 2021

/s/ RUSSEL C.

February 19, 2020

Director February 24, 2021

/s/ THOMAS W.

February 19, 2020

Director February 24, 2021

/s/ ANDREW C.

1 unchanged sentence

von Eschenbach

February 19, 2020

Director February 24, 2021

BAUSCH HEALTH COMPANIES INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Management on Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017

Notes to Consolidated Financial Statements

Report of Management on Financial Statements F- 2

Report of Independent Registered Public Accounting Firm F- 3

Consolidated Balance Sheets as of December 31, 2020 and 2019 F- 6

Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 F- 7

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018 F- 8

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018 F- 9

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F- 10

Notes to Consolidated Financial Statements F- 11

REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS

10 unchanged sentences

/s/ JOSEPH C.

Chief Executive Officer

PAPA /s/ PAUL S.

Chief Executive Officer Paul S.

Executive Vice President and

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Bausch Health Companies Inc.

and its subsidiaries (the "Company") as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes, and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2019 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive loss, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

19 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

8 unchanged sentences

The provisions for these deductions are recorded concurrently with the recognition of gross product sales revenue as a reduction in revenue.

The variable consideration provisions, either recognized within accrued and other current liabilities or as a reduction of trade receivables, included $691 million related to return allowances and $927 million related to rebate allowances, including Medicaid rebates as of December 31, 2019.

The variable consideration provisions, either recognized within accrued and other current liabilities or as a reduction of trade receivables, included $575 million related to return allowances and $779 million related to rebates, including Medicaid rebates as of December 31, 2020.

For certain rebate programs, such as Medicaid, provisions recognized by management are based on the terms of state government-managed programs, estimates of outstanding and future claims for end-customer sales and the sales mix.

For sales returns, management estimates provisions utilizing existing return policies with customers, historical sales and return rates, inventory levels in the distribution channel, prescription demand and product shelf lives.

The principal considerations for our determination that performing procedures relating to Medicaid rebates and sales return allowances is a critical audit matter are there was significant judgment by management when developing the estimate of Medicaid rebates and allowances for sales returns.

This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate management’s estimates, including significant assumptions related to terms of state government managed Medicaid programs, existing return policies with customers, projected sales mix and prescription demand.

The principal considerations for our determination that performing procedures relating to Medicaid rebates and sales return allowances is a critical audit matter are (i) the significant judgment by management when developing the estimate of Medicaid rebates and allowances for sales returns and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s estimates, including significant assumptions related to terms of state government-managed Medicaid programs, existing return policies with customers, and projected outstanding and future claims for end-customer sales.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to provisions for Medicaid rebates and allowances for sales returns, including controls over the assumptions used to estimate these rebates and allowances.

These procedures also included, among others, (i) developing an independent estimate of Medicaid rebates by utilizing third-party information on price and projected market conditions, the terms of the specific Medicaid rebate programs, and the historical trends of actual Medicaid rebate claims paid, (ii) comparing the independent estimate for these Medicaid rebates to management’s estimates, (iii) evaluating the reasonableness of management’s assumptions related to the allowances for sales returns, including existing return policies with customers, projected sales mix and forecasted prescription demand, by comparing to historical trends and considering whether these assumptions were consistent with evidence obtained in other areas of the audit, (iv) evaluating the appropriateness of the sales return model and testing the completeness, accuracy, and relevance of underlying data used in the model, and (v) testing Medicaid rebate and sales return claims processed by the Company, including evaluating those claims for consistency with the contractual terms of the Company’s arrangements and policies.

These procedures also included, among others (i) developing an independent estimate of Medicaid rebates by utilizing third-party information on inventory levels in the distribution channel, the terms of the specific Medicaid rebate programs, and the historical trends of actual Medicaid rebate claims paid adjusted for price and projected market conditions (ii) comparing the independent estimate for these Medicaid rebates to management’s estimates, (iii) evaluating the reasonableness of management’s assumptions related to the allowances for sales returns, including existing return policies, comparing to historical trends and considering whether these assumptions were consistent with evidence obtained in other areas of the audit, (iv) evaluating the appropriateness of the sales return model and testing the completeness and accuracy of underlying data used in the model, and (v) testing Medicaid rebate and sales return claims processed by the Company, including evaluating those claims for consistency with the contractual terms of the Company’s arrangements and policies.

Finite-Lived Intangible Assets Impairment Assessment

As described in Note 9 to the consolidated financial statements, the Company’s consolidated finite-lived net intangible asset balance was $8,490 million as of December 31, 2019, which consists of product and corporate brands, product rights/patents, partner relationships and technology and other assets.

As described in Note 8 to the consolidated financial statements, the Company’s consolidated finite-lived net intangible assets balance was $6,740 million as of December 31, 2020, which consists of product and corporate brands, product rights/patents, partner relationships and technology and other assets.

Finite-lived intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

2 unchanged sentences

Management’s impairment tests included significant estimates and assumptions related to the amount and timing of projected future cash flows and in the situation when the asset is determined to not be recoverable, the discount rate.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to management’s future cash flow projections and the discount rate assumption.

The principal considerations for our determination that performing procedures relating to the finite-lived intangible assets impairment assessment is a critical audit matter are (i) the significant judgment by management in the identification of events that suggest an asset group might not be recoverable and in developing the assumptions used in the impairment testing assessment and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s undiscounted future cash flow projections.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s finite-lived intangible assets impairment process, including the Company’s controls over the development of assumptions used to estimate recoverability or the fair value and controls over the identification of events that suggest an asset group might not be recoverable.

These procedures also included, among others, testing management’s process for identifying potential impairment events and determining the recoverability of the intangible assets, evaluating the appropriateness of the cash flow model used in the impairment testing process;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and evaluating the reasonableness of the significant assumptions used by management, including the future cash flow projections and discount rates.

Evaluating the reasonableness of management's assumptions for future cash flow projections and discount rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the asset group, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

These procedures included testing the effectiveness of controls relating to management’s finite-lived intangible assets impairment assessment, including controls over the development of assumptions used to estimate recoverability and controls over the identification of events that suggest an asset group might not be recoverable.

These procedures also included, among others (i) testing management’s process for identifying potential impairment events and determining the recoverability of the intangible assets, (ii) evaluating the appropriateness of the undiscounted cash flow model used in the impairment testing assessment, (iii) testing the completeness and accuracy of underlying data used in the model, and (iv) evaluating the reasonableness of the significant assumptions used by management related to the undiscounted future cash flow projections.

Evaluating the reasonableness of management's assumptions for undiscounted future cash flow projections involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the asset group and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Goodwill Impairment Assessment – Ortho Dermatologics Reporting Unit

4 unchanged sentences

As disclosed by management, goodwill impairment is measured by the amount the carrying value exceeds the fair value.

Fair value of each reporting unit is estimated by management based on the income approach, using a discounted cash flow model.

Management’s discounted cash flow model includes judgments and assumptions relating to revenue growth rates, gross profit, projected working capital requirements, selling, general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to management’s cash flow projections and significant assumptions, including revenue growth rates, terminal growth rates, gross profit, and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the significant assumptions included in the valuation of the Company’s reporting units.

These procedures also included, among others, evaluating management’s qualitative assessment and testing management’s process for developing the fair value estimate of the reporting unit;

evaluating the appropriateness of the discounted cash flow model;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and evaluating the reasonableness of the significant assumptions used by management, including the revenue growth rates, terminal growth rates, gross profit and the discount rate.

Fair value of each reporting unit is estimated by management based on the income approach.

Management’s discounted cash flow model includes judgments and assumptions relating to 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.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Ortho Dermatologics reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the reporting unit (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions related to revenue growth rates, terminal growth rate, gross profit, and the discount rate, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s Ortho Dermatologics reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Ortho Dermatologics reporting unit, (ii) evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness and accuracy of underlying data used in the model, and (iv) evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rates, terminal growth rate, gross profit and the discount rate.

Evaluating management’s assumptions related to revenue growth rates and gross profit involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and certain significant assumptions, including the terminal growth rates and discount rate.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and terminal growth rate and discount rate assumptions.

/s/ PricewaterhouseCoopers LLP

14 unchanged sentences

Intangible assets, net 8,445 10,201

Goodwill 13,044 13,126

Deferred tax assets, net 2,137 1,690

Other non-current assets 664 411

Total assets $ 31,199 $ 33,863

Current liabilities:

10 unchanged sentences

Common shares, no par value, unlimited shares authorized, 355,422,347 and 352,562,636 issued and outstanding at December 31, 2020 and 2019, respectively

10,227 10,172

Additional paid-in capital 454 429

4 unchanged sentences

Noncontrolling interest 70 73

Total equity 605 1,136

Total liabilities and equity $ 31,199 $ 33,863

1 unchanged sentence

/s/ JOSEPH C.

/s/ RUSSEL C.

Chief Executive Officer

Chairperson, Audit and Risk Committee

PAPA /s/ RUSSEL C.

Papa Russel C.

Chief Executive Officer Chairperson, Audit and Risk Committee

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

3 unchanged sentences

Years Ended December 31,

2020 2019 2018

Product sales $ 7,924 $ 8,489 $ 8,271

Other revenues 103 112 109

8,027 8,601 8,380

Cost of goods sold (excluding amortization and impairments of intangible assets) 2,202 2,297 2,309

4 unchanged sentences

Goodwill impairments — — 2,322

Asset impairments

Restructuring and integration costs

Asset impairments, including loss on assets held for sale 114 75 568

Restructuring, integration and separation costs 22 31 22

Acquisition-related contingent consideration 48 12 ( 9 )

Other expense (income), net 454 1,414 ( 20 )

Operating (loss) income

7,351 8,804 10,764

Operating income (loss) 676 ( 203 ) ( 2,384 )

Interest income 13 12 11

4 unchanged sentences

Benefit from income taxes 375 54 10

Net (loss) income

Net loss ( 559 ) ( 1,783 ) ( 4,144 )

Net income attributable to noncontrolling interest ( 1 ) ( 5 ) ( 4 )

Net (loss) income attributable to Bausch Health Companies Inc.

(Loss) earnings per share attributable to Bausch Health Companies Inc.

Weighted-average common shares

Net loss attributable to Bausch Health Companies Inc.

$ ( 560 ) $ ( 1,788 ) $ ( 4,148 )

Basic and diluted loss per share attributable to Bausch Health Companies Inc.

$ ( 1.58 ) $ ( 5.08 ) $ ( 11.81 )

Basic and diluted weighted-average common shares 355.0 352.1 351.3

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

BAUSCH HEALTH COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

Years Ended December 31,

Net (loss) income

Other comprehensive income (loss)

2020 2019 2018

Net loss $ ( 559 ) $ ( 1,783 ) $ ( 4,144 )

Other comprehensive (loss) income

Pension and postretirement benefit plan adjustments:

Net actuarial (loss) gain arising during the year

Net actuarial loss arising during the year ( 15 ) ( 8 ) ( 7 )

Amortization of prior service credit ( 4 ) ( 4 ) ( 4 )

Amortization or settlement recognition of net loss 1 2 1

Income tax (expense) benefit

Income tax benefit (expense) 2 ( 2 ) 3

Foreign currency impact — ( 2 ) —

1 unchanged sentence

Foreign currency translation adjustment ( 29 ) 64 ( 237 )

Net unrealized holding loss on sale of assets and businesses:

Arising in period

Reclassification to net (loss) income

Other comprehensive income (loss)

Comprehensive (loss) income

Other comprehensive (loss) income ( 45 ) 50 ( 244 )

Comprehensive loss ( 604 ) ( 1,733 ) ( 4,388 )

Comprehensive income attributable to noncontrolling interest ( 3 ) ( 4 ) ( 1 )

Comprehensive (loss) income attributable to Bausch Health Companies Inc.

Comprehensive loss attributable to Bausch Health Companies Inc.

$ ( 607 ) $ ( 1,737 ) $ ( 4,389 )

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

4 unchanged sentences

Shareholders' Equity

Common Shares

Common Shares Accumulated

Comprehensive

Bausch Health

Loss Bausch Health

Companies Inc.

Shareholders'

Noncontrolling

Shares Amount Additional

Capital Accumulated

Deficit Noncontrolling

Interest Total

Balance, January 1, 2018 348.7 $ 10,090 $ 380 $ ( 2,725 ) $ ( 1,896 ) $ 5,849 $ 95 $ 5,944

Effect of application of new accounting standard:

— — — 1,209 — 1,209 — 1,209

Common shares issued under share-based compensation plans

1.2 31 ( 29 ) — — 2 — 2

Share-based compensation — — 87 — — 87 — 87

Share-based awards tax withholding

— — ( 10 ) — — ( 10 ) — ( 10 )

Acquisition of noncontrolling interest — — ( 15 ) — — ( 15 ) ( 3 ) ( 18 )

Noncontrolling interest distributions — — — — — — ( 11 ) ( 11 )

Other comprehensive income

Net (loss) income — — — ( 4,148 ) — ( 4,148 ) 4 ( 4,144 )

Other comprehensive loss — — — — ( 241 ) ( 241 ) ( 3 ) ( 244 )

Balance, December 31, 2018 349.9 10,121 413 ( 5,664 ) ( 2,137 ) 2,733 82 2,815

Effect of application of new accounting standard:

Common shares issued under share-based compensation plans

2.7 51 ( 46 ) — — 5 — 5

Share-based compensation — — 102 — — 102 — 102

Share-based awards tax withholding

Acquisition of noncontrolling interest

— — ( 40 ) — — ( 40 ) — ( 40 )

Noncontrolling interest distributions — — — — — — ( 13 ) ( 13 )

Net (loss) income — — — ( 1,788 ) — ( 1,788 ) 5 ( 1,783 )

Other comprehensive loss

Other comprehensive income (loss) — — — — 51 51 ( 1 ) 50

Balance, December 31, 2019 352.6 10,172 429 ( 7,452 ) ( 2,086 ) 1,063 73 1,136

Effect of application of new accounting standard:

financial instruments - credit losses

— — — ( 1 ) — ( 1 ) — ( 1 )

Common shares issued under share-based compensation plans

2.8 55 ( 50 ) — — 5 — 5

Share-based compensation — — 105 — — 105 — 105

Share-based awards tax withholding

— — ( 30 ) — — ( 30 ) — ( 30 )

Noncontrolling interest distributions — — — — — — ( 6 ) ( 6 )

Net (loss) income — — — ( 560 ) — ( 560 ) 1 ( 559 )

Other comprehensive income (loss)

Other comprehensive (loss) income — — — — ( 47 ) ( 47 ) 2 ( 45 )

Balance, December 31, 2020 355.4 $ 10,227 $ 454 $ ( 8,013 ) $ ( 2,133 ) $ 535 $ 70 $ 605

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

Cash Flows From Operating Activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net loss $ ( 559 ) $ ( 1,783 ) $ ( 4,144 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization of intangible assets 1,825 2,075 2,819

Amortization and write-off of debt discounts and debt issuance costs 61 63 79

Asset impairments

Asset impairments, including loss on assets held for sale 114 75 568

Goodwill impairment — — 2,322

2 unchanged sentences

Deferred income taxes ( 475 ) ( 230 ) ( 144 )

(Gain) loss on disposal of assets and businesses

(Gain) loss on disposal of assets ( 1 ) ( 31 ) 6

Additions (reductions) to accrued legal settlements 442 1,401 ( 27 )

Insurance proceeds for legal settlement

Payments of accrued legal settlements ( 168 ) ( 15 ) ( 224 )

1 unchanged sentence

Foreign exchange loss (gain) 8 7 ( 19 )

Interest expense on cross-currency swaps

Gain excluded from hedge effectiveness ( 23 ) ( 9 ) —

Loss on extinguishment of debt 59 42 119

Payments of contingent consideration adjustments, including accretion ( 1 ) ( 1 ) ( 2 )

Other ( 18 ) 36 ( 17 )

Changes in operating assets and liabilities:

Trade receivables 170 39 216

Inventories ( 77 ) ( 209 ) ( 5 )

Prepaid expenses and other current assets 12 1 ( 72 )

8 unchanged sentences

Proceeds from sale of assets and businesses, net of costs to sell 21 45 34

Net cash (used in) provided by investing activities

Interest settlements from cross-currency swaps 23 — —

Net cash used in investing activities ( 261 ) ( 419 ) ( 196 )

Cash Flows From Financing Activities

3 unchanged sentences

Repayments of short-term debt ( 1 ) ( 12 ) ( 3 )

Payment of share-based awards tax withholding

Payments of contingent consideration

Payment of employee withholding taxes related to share-based awards ( 30 ) ( 40 ) ( 10 )

Payments of acquisition-related contingent consideration ( 35 ) ( 35 ) ( 37 )

Payments of deferred consideration — — ( 18 )

Payments of financing costs ( 39 ) ( 28 ) ( 102 )

Net cash provided by (used in) financing activities

Other ( 3 ) ( 8 ) ( 26 )

Net cash (used in) provided by financing activities ( 2,294 ) 1,443 ( 1,353 )

Effect of exchange rate changes on cash and cash equivalents 16 ( 4 ) ( 26 )

Net increase (decrease) in cash and cash equivalents and restricted cash

Net (decrease) increase in Cash and cash equivalents and Restricted cash ( 1,428 ) 2,521 ( 74 )

Cash and cash equivalents and Restricted cash, beginning of year 3,244 723 797

16 unchanged sentences

GAAP”), applied on a consistent basis.

The Consolidated Financial Statements include the accounts of the Company and those of its subsidiaries and any variable interest entities (“VIEs”) for which the Company is the primary beneficiary.

The 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.

In preparing the Company’s 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 financial statements and the reported amounts of revenues and expenses during the reporting periods.

Separation of the Bausch + Lomb Eye-Health Business

On August 6, 2020, the Company announced that it intends to separate its eye-health business into an independent publicly traded entity from the remainder of Bausch Health Companies Inc.

(the “Separation”).

The Separation will establish two separate companies that include:

(i) a fully integrated eye-health company which will consist of the Company’s Bausch + Lomb Global Vision Care, Global Surgical, Global Consumer and Global Ophthalmology Rx businesses and (ii) a diversified pharmaceutical company which will include the Company’s Salix, International Rx, Solta, neurology and medical dermatology pharmaceutical businesses.

The anticipated separation is subject to regulatory approvals and certain conditions, including final approval by the Company’s Board of Directors and any shareholder vote requirements that may be applicable.

The Company has begun addressing the internal organizational design and structure of the new entity which it anticipates having substantially completed by late 2021.

Management is also exploring various capitalization structures and the form of the Separation transaction in order to properly capitalize both entities post-separation.

As of the date of the issuance of these financial statements, the Company is in the planning phase of the Separation.

As such, there are considerations, approvals and conditions that will determine the ultimate timing and structure of the Separation and there can be no assurance that such a transaction will occur.

These Consolidated Financial Statements do not include any adjustments to give effect to the Separation.

Impacts of COVID-19 Pandemic

The unprecedented nature of the COVID-19 pandemic has adversely impacted the global economy.

The COVID-19 pandemic and the rapidly evolving reactions of governments, private sector participants and the public in an effort to contain the spread of the COVID-19 virus and/or address its impacts have intensified and have had significant direct and indirect effects on businesses and commerce.

This includes, but is not limited to, disruption to supply chains, employee base and transactional activity, facilities closures and production suspensions.

The COVID-19 pandemic has also significantly increased demand for certain goods and services, such as pandemic-related medical services and supplies, alongside decreased demand for others, such as retail, hospitality, elective medical procedures and travel.

The extent to which these events may continue to impact the Company's business, financial condition, cash flows and results of operations, in particular, will depend on future developments which are highly uncertain and many of which are outside the Company's control.

Such developments include the availability and effectiveness of vaccines for the COVID-19 virus, the ultimate geographic spread and duration of the pandemic, the extent and duration of a resurgence of the COVID-19 virus and variant strains thereof, if any, new information concerning the severity of the COVID-19 virus, the effectiveness and intensity of measures to contain the COVID-19 virus and the economic impact of the pandemic and the

reactions to it.

Such developments, among others, depending on their nature, duration and intensity, could have a significant adverse effect on the Company's business, financial condition, cash flows and results of operations.

To date, the Company has been able to continue its operations with limited disruptions in supply and manufacturing.

Although it is difficult to predict the broad macroeconomic effects that the COVID-19 pandemic will have on industries or individual companies, the Company has assessed the possible effects and outcomes of the pandemic on, among other things, its supply chain, customers and distributors, discounts and rebates, employee base, product sustainability, research and development efforts, product pipeline and consumer demand and currently believes that its estimates are reasonable.

Use of Estimates

In preparing the Company's Consolidated Financial Statements, management is required to make estimates and assumptions.

This includes estimates and assumptions regarding the nature, timing and extent of the impacts that the COVID-19 pandemic will have on its operations and cash flows.

The estimates and assumptions used by the Company affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Significant estimates made by management include:

17 unchanged sentences

If the acquired net assets do not constitute a business, the transaction is accounted for as an asset acquisition and no goodwill is recognized.

In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is charged to expense at the acquisition date.

In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is charged to expense at the acquisition date and any future contingent consideration is not recorded until it becomes probable.

Fair Value of Financial Instruments

The estimated fair values of cash and cash equivalents, trade receivables, accounts payable and accrued liabilities approximate their carrying values due to their short maturity periods.

The fair value of acquisition-related contingent consideration is based

on estimated discounted future cash flows or Monte Carlo Simulation (when appropriate) analyses and assessment of the probability of occurrence of potential future events.

The fair value of acquisition-related contingent consideration is based on estimated discounted future cash flows or Monte Carlo Simulation (when appropriate) analyses and assessment of the probability of occurrence of potential future events.

Fair Value of Derivative Instruments

6 unchanged sentences

(i) the foreign currency exchange spot rate between the euro and U.S.

dollar, (ii) the risk-free interest rate and (iii) the credit risk rating for each applicable counterparty.

The net change in fair value of cross-currency swaps, is reported as a gain or loss in the Consolidated Statements of Comprehensive Loss as part of Foreign currency translation adjustment to the extent they are effective, and remain in Accumulative Comprehensive Income until either the sale or complete, or substantially complete, liquidation of the subsidiary.

No portion of the cross-currency swaps were ineffective for the year 2019 .

dollar, (ii) the interest rate yield curves in the euro and U.S.

dollar and (iii) the credit risk rating for each applicable counterparty.

The net change in fair value of cross-currency swaps is reported as a gain or loss in the Consolidated Statements of Comprehensive Loss as part of Foreign currency translation adjustment to the extent they are effective, and remain in Accumulated other comprehensive loss until either the sale or complete, or substantially complete, liquidation of the subsidiary.

No portion of the cross-currency swaps was ineffective.

The Company uses the spot method of assessing hedge effectiveness.

The Company has elected to amortize amounts excluded from the assessment of effectiveness over the term of its cross-currency swaps as Interest expense in the Consolidated Statements of Operations.

The Company has elected to amortize amounts excluded from the assessment of effectiveness over the term of its cross-currency swaps as a reduction of Interest expense in the Consolidated Statements of Operations.

The Company uses foreign currency exchange contracts to economically hedge the foreign exchange exposure on certain of the Company’s intercompany and third party balances.

The Company's foreign currency exchange contracts are remeasured at each reporting date to reflect changes in their fair values determined using forward rates, which are observable market inputs, multiplied by the notional amount.

These contracts have not been designated as an accounting hedge, and therefore the net change in their fair value is reported as a gain or loss in the Consolidated Statements of Operations as part of Foreign exchange and other.

Cash and Cash Equivalents

1 unchanged sentence

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and trade receivables.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, trade receivables, cross-currency swaps and foreign currency exchange contracts.

The Company invests its excess cash in high-quality, money market instruments and term deposits with varying maturities, but typically less than three months .

7 unchanged sentences

The credit and economic conditions within Argentina, Brazil, Egypt, Greece, among other members of the European Union, Turkey, Ukraine and Venezuela have been weak in recent years.

In November 2016, as a result of the Egyptian government’s decision to float the Egyptian pound and un-peg it to the U.S.

Dollar, the Egyptian pound was significantly devalued.

The Company's exposure to the Egyptian pound is with respect to the Amoun Pharmaceutical Company S.A.E.

business acquired in October 2015, which represented approximately 3 % , 2 % and 2 % of the Company's total revenues in each of the years 2019, 2018 and 2017 , respectively.

These conditions have increased, and may continue to increase, the average length of time that it takes to collect on the Company’s trade receivables outstanding in these countries.

1 unchanged sentence

wholesaler customers accounted for approximately 38 % of net trade receivables.

In addition, as of December 31, 2019 and 2018 , the Company’s net trade receivable balance from Argentina, Brazil, Egypt, Greece, Turkey, Ukraine and Venezuela amounted to $ 128 million and $ 105 million , respectively, the majority of which is current or less than 90 days past due.

In addition, as of December 31, 2020 and 2019, the Company’s net trade receivable balance from Argentina, Brazil, Egypt, Greece, Serbia, Turkey, Ukraine, Venezuela and Vietnam amounted to $ 166 million and $ 156 million, respectively, the majority of which is current or less than 90 days past due.

The portion of the net trade receivable from these countries that is past due more than 90 days amounted to $ 2 million, as of December 31, 2020, a portion of which is comprised of public hospitals.

Based on analysis of bad debt experience and assessment of historical payment patterns for such customers, the Company has established a reserve covering more than half of the balance past due more than 90 days for such countries.

Over the three-

year period ended December 31, 2019 , the Company has not experienced any material losses from uncollectible accounts in excess of the established reserves.

Based on an analysis of credit risk, including an analysis of bad debt experience

and assessment of historical payment patterns for such customers, the Company has established a reserve covering more than half of the balance past due more than 90 days for such countries.

Over the three-year period ended December 31, 2020, the Company has not experienced any material losses from uncollectible accounts in excess of the established reserves.

The Company does not enter into financial instruments for trading or speculative purposes.

Further, the Company has a policy of only entering into contracts with parties that have at least an investment grade credit rating.

The Company enters into cross-currency swaps and foreign currency exchange contracts with high credit quality financial institutions.

The counter-parties to the Company's cross-currency swaps and foreign currency exchange contracts are major financial institutions, and there is no significant concentration of exposure with any one counter-party.

To date, no counterparty has failed to meet its obligations to the Company and management believes the risk of loss associated with these contracts is remote.

See Note 5, "FAIR VALUE MEASUREMENTS" for additional details regarding the Company's cross-currency swaps and foreign currency exchange contracts.

Allowance for Credit Losses

An allowance for doubtful accounts is maintained for potential credit losses based on the aging of trade receivables, historical bad debts experience and changes in customer payment patterns.

Trade receivable balances are written off against the allowance when it is deemed probable that the receivable will not be collected.

Trade receivables, net are stated net of reserves for certain sales allowances and provisions for doubtful accounts.

Provisions for doubtful accounts were $ 48 million and $ 47 million as of December 31, 2019 and 2018 , respectively.

An allowance is maintained for potential credit losses.

The Company estimates the current expected credit loss on its receivables based on various factors, including historical credit loss experience, customer credit worthiness, value of collaterals (if any), and any relevant current and reasonably supportable future economic factors.

Additionally, the Company generally estimates the expected credit loss on a pool basis when customers are deemed to have similar risk characteristics.

Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected.

Trade receivables, net are stated net of certain sales provisions and the allowance for credit losses.

Allowance for credit losses were $ 39 million, $ 48 million and $ 47 million as of December 31, 2020, 2019 and 2018, respectively.

The activity in the allowance for credit losses for trade receivables for the years 2020, 2019 and 2018 is as follows.

(in millions) 2020 2019 2018

Balance, beginning of period $ 48 $ 47 $ 97

Retrospective effect of application of new accounting standard 1 — —

Provision 2 10 4

Write-offs ( 12 ) ( 10 ) ( 50 )

Recoveries 3 1 2

Foreign exchange and other

( 3 ) — ( 6 )

Balance, end of period $ 39 $ 48 $ 47

Inventories comprise raw materials, work in process and finished goods, which are valued at the lower of cost or net realizable value, on a first-in, first-out basis.

5 unchanged sentences

Depreciation is calculated using the straight-line method, commencing when the assets become available for productive use, based on the following estimated useful lives:

Land improvements

15 - 30 years

Buildings and improvements

Up to 40 years

Machinery and equipment

Other equipment

Equipment on operating lease

Up to 5 years

Leasehold improvements

Lesser of term of lease or 10 years

Land improvements 15 - 30 years

Buildings and improvements Up to 40 years

Machinery and equipment 3 - 20 years

Other equipment 3 - 10 years

Equipment on operating lease Up to 5 years

Leasehold improvements Lesser of term of lease or 10 years

Intangible Assets

2 unchanged sentences

Amortization is calculated primarily using the straight-line method based on the following estimated useful lives:

Product brands

Corporate brands

Product rights

Partner relationships

Out-licensed technology and other

Product brands 1 - 20 years

Corporate brands 7 - 20 years

Product rights/patents 4 - 15 years

Partner relationships 7 - 9 years

Out-licensed technology and other 8 - 9 years

Divestitures of Products

3 unchanged sentences

When the related research and development is completed, the asset will be assigned a useful life and amortized.

IPR&D assets are tested for impairment at least annually or when triggering events are identified.

The fair value of an IPR&D intangible asset is typically determined using an income approach.

Acquired IPR&D assets are tested for impairment at least annually or when triggering events are identified.

The fair value of an acquired IPR&D intangible asset is typically determined using an income approach.

This approach starts with a forecast of the net cash flows expected to be generated by the asset over its estimated useful life.

The net cash flows reflect the asset’s stage of completion, the probability of technical success, the projected costs to complete, expected market

competition and an assessment of the asset’s life-cycle.

The net cash flows reflect the asset’s stage of completion, the probability of technical success, the projected costs to complete, expected market competition and an assessment of the asset’s life-cycle.

The net cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the expected cash flow streams.

7 unchanged sentences

Goodwill is not amortized but is tested for impairment at least annually as of October 1st at the reporting unit level.

Goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value.

A reporting unit is the same as, or one level below, an operating segment.

A n entity is permitted to first assess qualitatively whether it is necessary to perform a quantitative impairment test for any of its reporting units.

The quantitative impairment test is required only when the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers the totality of all relevant events or circumstances that affect the fair value or carrying amount of a reporting unit.

An interim goodwill impairment test in advance of the annual impairment assessment may be required if events occur that indicate an impairment might be present.

For example, a substantial decline in the Company’s market capitalization, changes in reportable segments, unexpected adverse business conditions, economic factors and unanticipated competitive activities may signal that an interim impairment test is needed.

Accordingly, among other factors, the Company monitors changes in its share price between annual impairment tests.

Accordingly, among other factors, the Company monitors

changes in its share price between annual impairment tests.

The Company considers a decline in its share price that corresponds to an overall deterioration in stock market conditions to be less of an indicator of goodwill impairment than a unilateral decline in its share price reflecting adverse changes in its underlying operating performance, cash flows, financial condition and/or liquidity.

1 unchanged sentence

The Company believes that short-term fluctuations in share prices may not necessarily reflect underlying values.

Prior to January 1, 2018, the goodwill impairment test consisted of two steps.

In step one, the Company compared the carrying value of each reporting unit to its fair value.

In step two, if the carrying value of a reporting unit exceeded its fair value, the Company would measure goodwill impairment as the excess of the carryi ng value of the reporting unit’s goodwill over the fair value of its goodwill, if any.

The fair value of goodwill was derived as the excess of the fair value of the reporting unit over the fair value of the reporting unit’s identifiable assets and liabilities.

Effective January 1, 2018, the Company elected to early adopt guidance issued by the Financial Accounting Standards Board ("FASB") which simplified the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test.

Instead, as of January 1, 2018 and all subsequent periods, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value.

Further, an entity is permitted to first assess qualitatively whether it is necessary to perform a quantitative impairment test for any of its reporting units.

The quantitative impairment test is required only when the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

Debt Discounts and Premiums, Issuance Costs and Deferred Financing Costs

5 unchanged sentences

dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts.

The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity.

Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized in Net (loss) income .

The cumulative foreign currency translation adjustment is recorded as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.

Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized as a component of Foreign exchange and other in the Consolidated Statements of Operations.

Revenue Recognition

Effective January 1, 2018, the Company adopted guidance issued by the FASB regarding recognizing revenue from contracts with customers.

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 using the modified retrospective approach, and therefore, revenue reported for the year 2017 has not been restated.

Although the new guidance did result in additional disclosures as to the nature, amounts and concentrations of revenue, it did not have a material impact on the Company's significant accounting policies.

The revenue recognition policies as enumerated below reflect the Company's accounting policies effective January 1, 2018, which did not have a materially different financial statement result than what the results would have been under the previous accounting policies for revenue recognition.

The Company’s revenues are primarily generated from product sales, primarily in the therapeutic areas of eye-health, gastroenterology ("GI") and dermatology that consist of:

2 unchanged sentences

Contract service revenue is derived primarily from contract manufacturing for third parties and is not material.

See Note 23, "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.

See Note 22, "SEGMENT INFORMATION" for the disaggregation of revenues 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.

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.

4 unchanged sentences

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 transaction price is adjusted for variable consideration which is discussed below.

The Company generally recognizes revenue for product sales at a point in time, when the customer obtains control of the products.

7 unchanged sentences

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 the activity and ending balances of the Company’s variable consideration provisions for years ended December 31, 2019 and 2018 .

(in millions)

The following table presents the activity and ending balances of the Company’s variable consideration provisions the years 2020 and 2019.

(in millions) Discounts

Allowances Returns Rebates Chargebacks Distribution

Reserve balance, January 1, 2019 $ 175 $ 813 $ 1,024 $ 209 $ 163 $ 2,384

Acquisition of Synergy — 3 12 — 1 16

Current period provision 776 113 2,265 1,938 195 5,287

1 unchanged sentence

Reserve balance, December 31, 2019 182 691 927 168 82 2,050

Acquisition of Synergy

Current period provision 621 120 2,174 1,925 196 5,036

5 unchanged sentences

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.

These judgments include the potential impact of the COVID-19 pandemic on, among other things, unemployment and related changes in customer health insurance levels, customer behaviors during the COVID-19 pandemic and government stimulus bills that focus on ensuring availability and access to lifesaving drugs during a public health crisis.

This evaluation may result in an increase or decrease in the experience rate that is applied to current and future sales, or require an adjustment related to past sales, or both.

If the trend in actual amounts of variable consideration varies from the Company’s prior estimates, the Company adjusts these estimates when such trend is believed to be sustainable.

At that time, the Company would record the necessary adjustments which would affect net product revenue and earnings reported in the current period.

The Company applies this method consistently for contracts with similar characteristics.

5 unchanged sentences

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.

Consistent with industry practice, customers are generally allowed to return products within a specified period of time before and after its expiration date, excluding European businesses which generally do not provide 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.

Consistent with industry practice, customers are generally allowed to return a product within a specified period of time before and after its expiration date, excluding European businesses which generally do not provide a right of return.

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:

6 unchanged sentences

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.

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 warrant revision to the 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.

6 unchanged sentences

customers generally permit only one NDC per product for identification and tracking within their inventory systems.

Over the last several years the Company increased its focus on maximizing operational efficiencies and reducing product returns.

The Company continually takes actions to address product returns including but not limited to:

Over the last several years, the Company increased its focus on maximizing operational efficiencies and continues to take actions to reduce product returns, including but not limited to:

(i) monitoring and reducing customer inventory levels, (ii) instituting disciplined pricing policies and (iii) improving contracting.

These actions resulted in improved sales return experience related to current branded products and previously genericized products.

As a result, for the year 2019 as compared to 2018 , the provision for sales returns improved by a net of $ 180 million .

During the three months ended September 30, 2019 and 2018 we recorded a reduction in variable consideration for sales returns of approximately $ 80 million and $ 30 million , respectively, related to past sales.

These actions have had the effect of improving sales return experience, primarily related to branded and generic products.

Sales return provisions for 2020 and 2019 were $ 120 million and $ 113 million, respectively, and includes reductions in variable consideration for sales return provisions related to past sales of approximately $ 38 million and $ 80 million, respectively.

Rebates and Chargebacks

15 unchanged sentences

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.

The amount of Managed Care, Medicaid and other rebates and chargebacks has become more significant as a result of a combination of deeper discounts 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.

7 unchanged sentences

Distribution Fees

The Company sells product primarily to wholesalers, and in some instances to large pharmacy chains such as CVS and Walmart.

The Company sells products primarily to wholesalers, and in some instances to large pharmacy chains such as CVS and Walmart.

The Company has Distribution Services Agreements ("DSAs") with several large wholesale customers such as McKesson Corporation, AmerisourceBergen Corporation, Cardinal Health, Inc.

17 unchanged sentences

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.

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 under the caption "Adoption of New Accounting Standards" to this Note 2, effective January 1, 2019, the Company adopted guidance issued by the FASB regarding accounting for leases.

Effective January 1, 2019, the Company adopted a new standard revising the accounting for leases, using the modified retrospective approach.

Upon adoption, the Company elected the available practical expedients, 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 has updated its systems, processes and controls to track, record and account for its lease portfolio, including implementation of a third-party software tool to assist in complying with the new standard.

Upon adoption of the new standard, the Company recognized a right-of-use asset and a corresponding lease liability of $ 302 million .

The adoption of the standard did not have a material impact on the Consolidated Statements of Operations, Comprehensive Loss, Equity and Cash Flows for any of the periods presented.

See Note 12, "LEASES" for additional details and application of this standard.

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.

6 unchanged sentences

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:

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.

8 unchanged sentences

Legal fees and other costs related to litigation and other legal proceedings or services are expensed as incurred and are included in Selling, general and administrative expenses.

Certain legal costs associated with acquisitions are included in Acquisition-related costs and certain legal costs associated with divestitures, legal settlements and other business development activities are included in Litigation and other matters or Gain on investments, net within Other expense (income), net, as appropriate.

Certain legal costs associated with acquisitions are included in Acquisition-related costs and certain legal costs associated with divestitures, legal settlements and other business development activities are included in Litigation and other matters or Net (gain) loss on sales of assets within Other expense (income), net, as appropriate.

Legal costs expensed are reported net of expected insurance recoveries.

1 unchanged sentence

Advertising Costs

Advertising costs comprise product samples, print media, promotional materials and television advertising.

Advertising costs related to new product launches are expensed on the first use of the advertisement.

Advertising costs comprise product samples, print media, promotional materials and television advertising and are expensed on the first use of the advertisement.

Included in Selling, general and administrative expenses are advertising costs of $ 451 million, $ 544 million and $ 481 million, for 2020, 2019 and 2018, respectively.

11 unchanged sentences

Interest costs are expensed as incurred, except to the extent such interest is related to construction in progress, in which case interest is capitalized.

Capitalized interest related to construction in progress as of December 31, 2019 and 2018 was $ 34 million and is included in Property, plant and equipment, net.

Capitalized interest related to construction in progress as of December 31, 2020 and 2019 was $ 45 million and $ 34 million, respectively, and is included in Property, plant and equipment, net.

Income taxes are accounted for under the liability method.

Deferred tax assets and liabilities are recognized for the temporary differences between the financial statement and income tax bases of assets and liabilities, and for operating losses and tax

credit carryforwards.

Deferred tax assets and liabilities are recognized for the temporary differences between the financial statement and income tax bases of assets and liabilities, and for operating losses and tax credit carryforwards.

A valuation allowance is provided for the portion of deferred tax assets that is more likely than not to remain unrealized.

8 unchanged sentences

Interest and penalties related to uncertain tax positions, if any, are recorded in the provision for income taxes and classified with the related liability on the consolidated balance sheets.

In accordance with accounting guidance, the Company provided for the income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 and finalized the provisional amounts during 2018.

Earnings Per Share

Basic (loss) earnings per share attributable to Bausch Health Companies Inc.

is calculated by dividing Net (loss) income attributable to Bausch Health Companies Inc.

Loss Per Share Attributable to Bausch Health Companies Inc.

Basic loss per share attributable to Bausch Health Companies Inc.

is calculated by dividing Net loss attributable to Bausch Health Companies Inc.

by the weighted-average number of common shares outstanding during the reporting period.

Diluted (loss) earnings per share attributable to Bausch Health Companies Inc.

is calculated by dividing Net (loss) income attributable to Bausch Health Companies Inc.

by the weighted-average number of common shares outstanding during the reporting period after giving effect to dilutive potential common shares for stock options and RSUs, determined using the treasury stock method.

Comprehensive Income

Comprehensive (loss) income comprises Net (loss) income and Other comprehensive income (loss) .

Other comprehensive income (loss) includes items such as foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale and other investments and certain pension and other postretirement benefit plan adjustments.

Diluted loss per share attributable to Bausch Health Companies Inc.

is calculated by dividing Net loss attributable to Bausch Health Companies Inc.

by the weighted-average number of common shares outstanding during the reporting period

after giving effect to dilutive potential common shares for stock options and RSUs, determined using the treasury stock method.

Comprehensive Loss

Comprehensive loss comprises Net loss and Other comprehensive (loss) income.

Other comprehensive (loss) income includes items such as foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale and other investments and certain pension and other postretirement benefit plan adjustments.

Accumulated other comprehensive loss is recorded as a component of shareholders’ equity.

11 unchanged sentences

Adoption of New Accounting Standards

In February 2016, the FASB issued a new standard revising the accounting for 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.

Under the new standard, all leases are classified as either a finance lease or an operating lease.

The classification is determined based on whether substantive control has been transferred to the lessee and its determination will govern the pattern of lease cost recognition.

Finance leases are accounted for in substantially the same manner as capital leases under the former U.S.

GAAP standard.

Operating leases are accounted for in the statements of operations and statements of cash flows in a manner substantially consistent with operating leases under the former U.S.

GAAP standard.

However, as it relates to the balance sheet, operating lessees are, with limited exception, required to record a right-of-use asset and a corresponding lease liability, equal to the present value of the lease payments for each operating lease.

Lessees are not required to recognize a right-of-use asset or lease liability for short-term leases, but instead recognizes lease payments as an expense on a straight-line basis over the lease term.

The standard also requires lessees and lessors to provide additional qualitative and quantitative disclosures to help financial statement users assess the amounts, timing and uncertainty of cash flows arising from leases.

The Company adopted the new standard effective January 1, 2019, using the modified retrospective approach.

Upon adoption, the Company elected the available practical expedients, including:

Upon adoption of the new standard, the Company 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 standard did not have a material impact on the Consolidated Statements of Operations, Comprehensive Loss, Equity and Cash Flows for any of the periods presented.

See Note 13, "LEASES" for additional details and application of this standard.

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 has early-adopted this guidance prospectively for all implementation costs incurred after January 1, 2019.

In 2019, implementation costs incurred in the Company's hosting arrangements which were capitalized were not material.

Recently Issued Accounting Standards, Not Adopted as of December 31, 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 the Company beginning January 1, 2020.

The application of this guidance is not expected to have a material effect on the Company's financial position, results of operations and cash flows.

The guidance was effective for the Company beginning January 1, 2020 and was applied using a modified retrospective approach through a cumulative-effect adjustment to accumulated deficit, which resulted in an increase to Accumulated deficit of less than $ 1 million.

The application of this guidance did not have a material effect on the Company's 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 the Company beginning January 1, 2020.

The application of this guidance is not expected to have a material effect on the Company's disclosures.

The guidance was effective for the Company beginning January 1, 2020.

The application of this guidance did not have a material effect on the Company's disclosures.

In March 2020, the FASB issued guidance providing optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or a reference rate that is expected to be discontinued as a result of reference rate reform.

Optional expedients are provided for contract modification accounting within the areas of receivables, debt, leases, derivatives and hedging.

The optional amendments are effective for all entities as of March 12, 2020, through December 31, 2022.

During 2020, the Company has not entered into any contract modifications in which the optional expedients were applied.

However, if prior to December 31, 2022 the Company enters into a contract modification in which the optional expedients are applied, the Company will evaluate 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 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 December 2019, the FASB issued guidance simplifying the accounting for income taxes.

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 the Company's financial position, results of operations and cash flows.

ACQUISITIONS AND LICENSING AGREEMENTS

The guidance was effective for annual periods ending after December 15, 2020.

The application of this guidance did not have a material effect on the Company's disclosures.

Recently Issued Accounting Standards, Not Adopted as of December 31, 2020

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The guidance is effective for annual periods beginning after December 15, 2020.

The application of this guidance is not expected to have a material effect on the Company's financial position, results of operations and cash flows.

ACQUISITIONS, LICENSING AGREEMENTS AND ASSETS HELD FOR SALE

Acquisition Agreement for Synergy Pharmaceuticals Inc.

10 unchanged sentences

Accounts receivable $ 7

Inventories 24

Prepaid expenses and other current assets 5

7 unchanged sentences

Revenues associated with the acquired assets of Synergy during the period March 6, 2019 through December 31, 2019 were $ 55 million.

Operating results associated with the acquired assets of Synergy during the period March 6, 2019 through December 31, 2019 and pro-forma revenues and operating results for the years 2019 and 2018 were not material.

Included in Other expense (income), net for 2019 are acquisition-related costs of $ 8 million directly related to the acquisition of certain assets of Synergy, which include expenditures for advisory, legal, valuation, accounting and other similar services.

4 unchanged sentences

The measurement period for all acquisitions has closed.

Licensing Agreement

In the normal course of business, the Company may enter into select licensing and collaborative agreements for the commercialization and/or development of unique products primarily in the U.S.

Option to Purchase All Ophthalmology Assets of Allegro Ophthalmics, LLC ("Allegro")

On September 21, 2020, the Company announced that it had entered into an agreement to acquire an option to purchase all of the ophthalmology assets of Allegro (the "Option"), a privately held biopharmaceutical company focused on the development of therapies that regulate integrin functions for the treatment of ocular diseases.

Among the assets to be acquired if the Option is exercised, is the worldwide rights to risuteganib (Luminate ® ), Allegro's lead investigational compound in retina, which is believed to simultaneously act on the angiogenic, inflammatory and mitochondrial metabolic pathways implicated in diseases such as intermediate dry Age-related Macular Degeneration ("AMD").

Phase 2a study with risuteganib in intermediate dry AMD met its primary endpoint of vision recovery and Phase 3 testing is in the planning stages.

The aggregate payments to acquire the Option are $ 50 million and include an upfront payment of $ 10 million and a second payment of $ 40 million should Allegro raise additional funding.

During the three months ended September 30, 2020, the Company made and expensed the upfront payment of $ 10 million as acquired IPR&D included in Other expense (income), net.

If the Option is exercised, additional payments to acquire all ophthalmology assets of Allegro will be due.

Licensing Agreements

In the normal course of business, the Company may enter into select licensing and collaborative agreements for the commercialization and/or development of unique products.

These products are sometimes investigational treatments in early stage development that target unique conditions.

The ultimate outcome, including whether the product will be:

(i) fully developed, (ii) approved by the FDA, (iii) covered by third-party payors or (iv) profitable for distribution cannot be fairly predicted.

(i) fully developed, (ii) approved by regulatory agencies, (iii) covered by third-party payors or (iv) profitable for distribution, is highly uncertain.

The commitment periods under these agreements vary and include customary termination provisions.

1 unchanged sentence

Royalties due are recognized when earned and milestone payments are accrued when each milestone has been achieved and payment is probable and can be reasonably estimated.

On February 21, 2017, EyeGate Pharmaceuticals, Inc.

(“EyeGate”) granted a subsidiary of the Company the exclusive worldwide licensing rights to manufacture and sell the EyeGate ® II Delivery System and EGP-437 combination product candidate for the treatment of post-operative pain and inflammation in ocular surgery patients.

Under the terms of the licensing agreement, EyeGate was responsible for the continued development of this product candidate in the U.S.

for the treatment of post-operative pain and inflammation in ocular surgery patients, and all associated costs, and the Company had the right to further develop the product in the field outside of the U.S.

In connection with the licensing agreement, the Company paid an initial license fee of $ 4 million during the three months ended March 31, 2017 and was obligated to make future payments of:

(i) up to $ 34 million upon the achievement of certain development and regulatory milestones, of which $ 3 million was paid, (ii) up to $ 65 million upon the achievement of certain sales-based milestones and (iii) royalties.

Based on early stage of development of the asset, and lack of acquired significant inputs, the Company concluded this was an asset acquisition.

On December 14, 2018, the Company issued a notice voluntarily terminating this licensing agreement dated February 21, 2017 and another license agreement dated July 9, 2015 with EyeGate, such termination was effective March 14, 2019.

Following the termination of these agreements on March 14, 2019, the Company relinquished all rights to the EyeGate ® II Delivery System and EGP-437 combination product.

During the three months ended September 30, 2018, the Company fully impaired the EyeGate ® II Delivery System and EGP-437 combination product intangible assets and reduced the carrying value of the contingent consideration liabilities associated with these licensing agreements to zero .

All payments due to EyeGate for reimbursement of certain out-of-pocket costs incurred in connection with development work have been provided for in the Company's Consolidated Financial Statements.

During 2019, the Company reclassified certain products as held for sale.

During 2018, the Company did no t make any material divestitures.

During 2017, the Company divested certain businesses and assets, which, in each case, was not aligned with its core business objectives.

Assets Held for Sale

The Company has identified certain products in the Bausch + Lomb/International segment and one product in the Diversified Products segment for disposal as of December 31, 2019 .

The products and the related assets and liabilities of this disposal group qualify as a business.

Revenues associated with this business were $ 14 million and $ 19 million for the years 2019 and 2018 , respectively.

The carrying value of the business, including inventories, intangible assets, goodwill and deferred income taxes, was adjusted to its estimated fair value less costs to sell and reclassified as held for sale as of December 31, 2019 .

Included in Asset impairments in 2019 is a charge of $ 8 million associated with these assets held for sale.

CeraVe ® , AcneFree ™ and AMBI ® skincare brands

On March 3, 2017, the Company completed the sale of its interests in the CeraVe ® , AcneFree ™ and AMBI ® skincare brands for $ 1,300 million in cash (the “Skincare Sale”).

The CeraVe ® , AcneFree ™ and AMBI ® skincare business was part of the Bausch + Lomb/International segment and was reclassified as held for sale as of December 31, 2016.

Included in Other expense (income), net for the year 2017 is the Gain on the Skincare Sale of $ 309 million , as adjusted.

Dendreon Pharmaceuticals LLC

On June 28, 2017, the Company completed the sale of all outstanding equity interests in Dendreon Pharmaceuticals LLC (formerly Dendreon Pharmaceuticals, Inc.) (“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 expense (income), net for the year 2017 is the Gain on the Dendreon Sale of $ 97 million , as adjusted.

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.

Included in Other expense (income), net for the year 2017 is the Gain on the iNova Sale of $ 309 million , as adjusted.

Obagi Medical Products, Inc.

On November 9, 2017, certain of the Company's affiliates completed the sale 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 in the Consolidated Statement of Operations.

Included in Other expense (income), net for the year 2017 is a $ 13 million loss related to this transaction.

Sprout Pharmaceuticals, Inc.

On December 20, 2017 , the Company completed the sale of 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 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, is 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 $ 351 million impairment was recognized in Asset impairments in the year ended December 31, 2017.

Upon consummation of the transaction, a loss of $ 98 million was recognized in Other expense (income), net .

Beginning in June 2019, the Company has been recognizing the agreed upon 6 % royalty of global sales of Addyi ® as these royalties become due, as the Company does not recognize contingent payments until such amounts are realizable.

During the three months ended December 31, 2020, the Company identified for disposal a certain business within the Bausch + Lomb/International segment.

This business was classified as held for sale as of December 31, 2020.

The carrying amounts of the assets and liabilities held for sale included in the Consolidated Balance Sheet as of December 31, 2020 are as follows:

(in millions)

Prepaid expenses and other current assets:

Trade receivables, net $ 91

Inventories, net 63

Prepaid expenses and other current assets 8

Other non-current assets:

Property, plant and equipment, net $ 68

Goodwill and Intangible assets, net 245

Deferred tax assets, net 2

Accrued and other current liabilities:

Accounts payable $ 7

Accrued and other current liabilities 28

Other non-current liabilities:

Deferred tax liabilities, net $ 36

Other non-current liabilities 21

Included within Deferred tax liabilities, net, are book to income tax differences related to the Company's intangible assets.

As a result of meeting the criteria for held for sale classification, the carrying value of this business, was adjusted to its estimated fair value, less costs to sell, and the Company recognized a loss of $ 96 million within Asset impairments, including loss on assets held for sale in the Consolidated Statements of Operations.

This loss was primarily due to the anticipated release of non-cash cumulative foreign currency translation losses of $ 344 million, which were included as part of the carrying value of this business when measuring for impairment.

These losses will be reclassified from Accumulated other comprehensive loss to Net loss upon the disposal of this business.

RESTRUCTURING, INTEGRATION AND SEPARATION COSTS

Restructuring and integration costs

The Company evaluates opportunities to improve its operating results and 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 include expenses associated with:

Restructuring and integration costs are expenses associated with the implementation of these cost savings programs and include 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.

Cost-rationalization and integration initiatives relating to the acquisition of Salix Pharmaceuticals, Ltd.

("Salix Ltd.") in April 2015 (the "Salix Acquisition") were substantially completed by mid-2016.

The remaining liability associated with all cost-rationalization and integration initiatives as of December 31, 2019 was $ 27 million .

The liability associated with restructuring and integration costs as of December 31, 2020 was $ 20 million.

During 2020, the Company incurred $ 11 million of restructuring and integration-related costs.

These costs included:

(i) $ 11 million of severance costs and other costs associated with the acquisition of certain assets of Synergy, (ii) $ 11 million of facility closure costs and (iii) $ 9 million of other severance costs.

(i) $ 10 million of facility closure costs and (ii) $ 1 million of severance and other costs.

The Company made payments of $ 18 million during 2020.

During 2018, the Company incurred $ 22 million of restructuring and integration-related costs.

During 2019, the Company incurred $ 31 million of restructuring and integration costs.

These costs included:

(i) $ 11 million of severance costs, (ii) $ 10 million of facility closure costs and (iii) $ 1 million of other costs.

The Company made payments of $ 31 million during 2019.

During 2017, the Company incurred $ 52 million of restructuring and integration-related costs.

During 2018, the Company incurred $ 22 million of restructuring and integration costs.

These costs included:

(i) $ 16 million of integration consulting, transition service and other costs, (ii) $ 16 million of severance costs and (iii) $ 20 million of facility closure costs.

(i) $ 11 million of severance costs, (ii) $ 10 million of facility closure costs and (iii) $ 1 million of other costs.

The Company made payments of $ 33 million during 2018.

Separation costs and separation-related costs

The Company has incurred, and will incur, costs associated with activities to effectuate the Separation.

These activities include:

(i) separating the eye-health business from the remainder of the Company and (ii) registering the eye-health business as an independent publicly traded entity.

Separation costs are incremental costs directly related to the Separation and include, but are not limited to:

(i) legal, audit and advisory fees, (ii) employee hiring, relocation and travel costs and (iii) costs associated with establishing a new board of directors and audit committee.

Included in Restructuring, integration and separation costs for 2020 is $ 11 million of separation costs.

The Company has also incurred, and will incur, separation-related costs which are incremental costs indirectly related to the Separation.

Separation-related costs include, but are not limited to:

(i) IT infrastructure and software licensing costs, (ii) rebranding costs and (iii) costs associated with facility relocation and/or modification.

Included in Selling, general and administrative expenses for 2020 is $ 21 million of separation-related costs.

The Company is in the planning phase of the Separation and the extent and timing of future charges for these costs cannot be reasonably estimated at this time and could be material.

FAIR VALUE MEASUREMENTS

5 unchanged sentences

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 as of December 31, 2019 and 2018 :

(in millions)

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 as of:

December 31, 2020 December 31, 2019

(in millions) Carrying

Value Level 1 Level 2 Level 3 Carrying

Value Level 1 Level 2 Level 3

Cash equivalents $ 41 $ 8 $ 33 $ — $ 2,696 $ 2,646 $ 50 $ —

Restricted Cash $ 1,211 $ 1,211 $ — $ — $ 1 $ 1 $ — $ —

Foreign currency exchange contracts $ 3 $ — $ 3 $ — $ — $ — $ — $ —

Acquisition-related contingent consideration

$ 328 $ — $ — $ 328 $ 316 $ — $ — $ 316

Cross-currency swaps

There were no transfers between Level 1, Level 2 or Level 3 during 2019 and 2018 .

$ 70 $ — $ 70 $ — $ 13 $ — $ 13 $ —

Foreign currency exchange contracts $ 11 $ — $ 11 $ — $ — $ — $ — $ —

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.

As of December 31, 2020, Restricted cash includes $ 1,210 million of payments into an escrow fund under the terms of a settlement agreement regarding certain U.S.

securities litigation, subject to an objector's appeal of the final court approval, and is reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to its short-term nature.

These payments will remain in escrow until final approval of the settlement as discussed in Note 20, "LEGAL PROCEEDINGS".

There were no transfers into or out of Level 3 during 2020 and 2019.

Cross-currency Swaps

1 unchanged sentence

The euro-denominated net investment being hedged is the Company’s investment in certain euro-denominated subsidiaries.

Prior to 2019, the Company had no derivative instruments for any period presented.

The fair value of the Company’s cross-currency swaps liability as of December 31, 2019 was $ 13 million .

Included in Other non-current liabilities is $ 22 million of cross-currency swaps liability and included in Prepaid expenses and other current assets is $ 9 million of earned interest within the Consolidated Balance Sheets.

The following table presents the effect of hedging instruments on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Loss for the year 2019 :

Prior to 2019, the Company had no cross-currency swaps.

The fair value of the Company’s cross-currency swaps liability as of December 31, 2020 and 2019 was $ 70 million and $ 13 million, respectively.

Included in Other non-current liabilities is $ 79 million and $ 22 million of cross-currency swaps and included in Prepaid expenses and other current assets is $ 9 million and $ 9 million of earned interest within the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively.

The following table presents the effect of hedging instruments on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Loss for 2020 and 2019:

(in millions) 2020 2019

Loss recognized in

Other comprehensive loss

Loss recognized in Other comprehensive loss $ ( 57 ) $ ( 22 )

Gain excluded from assessment of hedge effectiveness $ 23 $ 9

Location of gain in income of excluded component

Cross-currency swaps

Interest expense

During 2019 , there were no payments or receipts in settlement of the Company’s cross-currency swaps as the settlement dates occur in February and August of each year, with the first settlement in February 2020.

Future settlements of the Company’s cross-currency swaps will be reported as investing activities in the Consolidated Statement of Cash Flows.

Location of gain of excluded component Interest Expense

Settlement of the Company's cross-currency swaps occurs in February and August each year.

During 2020, the Company received $ 23 million in settlements which are reported as Investing activities in the Consolidated Statements of Cash Flows.

Foreign Currency Exchange Contracts

During 2020, the Company entered into foreign currency exchange contracts, with an aggregate notional amount of $ 485 million.

Prior to 2020, the Company had no foreign currency exchange contracts for any period presented.

The fair value of the Company's foreign currency exchange contracts liability as of December 31, 2020 was $ 8 million.

Included in Accrued and other current liabilities are $ 11 million and included in Prepaid expenses and other current assets are $ 3 million of foreign currency exchange contracts within the Consolidated Balance Sheets.

During 2020, the net change

in fair value was a loss of $ 8 million.

Settlements of the Company's foreign currency exchange contracts are reported as a gain or loss in the Consolidated Statements of Operations as part of Foreign exchange and other and reported as operating activities in the Consolidated Statements of Cash Flows.

During 2020, the Company reported a realized loss of $ 2 million related to settlements of the Company's foreign currency exchange contracts.

Acquisition-related Contingent Consideration Obligations

The fair value measurement of acquisition-related contingent consideration arising from business combinations is determined via a probability-weighted discounted cash flow analysis or Monte Carlo Simulation (if deemed appropriate), using unobservable (Level 3) inputs.

The fair value measurement of contingent consideration obligations arising from business combinations is determined via a probability-weighted discounted cash flow analysis, 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, (iii) the risk-adjusted discount rate used to

present value the probability-weighted cash flows and (iv) volatility of projected performance (Monte Carlo Simulation).

Significant increases (decreases) in any of those inputs in isolation could result in a significantly lower (higher) fair value measurement.

At December 31, 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 2019 and 2018 :

(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.

Significant increases or decreases in any of those inputs in isolation could result in a significantly higher or lower fair value measurement.

At December 31, 2020, the fair value measurements of acquisition-related contingent consideration were determined using risk-adjusted discount rates ranging from 6 % to 25 %, and a weighted average risk-adjusted discount rate of 8 %.

The weighted average risk-adjusted discount rate was calculated by weighting each contract's relative fair value at December 31, 2020.

The following table presents a reconciliation of contingent consideration obligations measured on a recurring basis using significant unobservable inputs (Level 3) for the years 2020 and 2019:

(in millions) 2020 2019

2 unchanged sentences

Accretion for the time value of money $ 23 $ 22

Fair value adjustments due to changes in estimates of future payments

Fair value adjustments 25 ( 10 )

Acquisition-related contingent consideration adjustments 48 12

6 unchanged sentences

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

December 31, 2019

December 31, 2018

(in millions)

December 31, 2020 December 31, 2019

(in millions) Carrying

Value Level 1 Level 2 Level 3 Carrying

Value Level 1 Level 2 Level 3

Other non-current assets:

Non-current assets held for sale $ 245 $ — $ — $ 245 $ 39 $ — $ — $ 39

Non-current assets held for sale of $ 39 million included in the Consolidated Balance Sheets as of December 31, 2019 were remeasured to estimated fair values less costs to sell.

Included in Asset impairments in 2019 is a charge of $ 8 million associated with these assets held for sale.

The estimated fair values of these assets less costs to sell were determined using a discounted cash flow analysis which utilized Level 3 unobservable inputs.

See Note 4, "DIVESTITURES" for additional details regarding these assets held for sale.

Non-current assets held for sale of $ 245 million as of December 31, 2020 were remeasured to estimated fair value, less costs to sell, which utilized Level 3 unobservable inputs.

See Note 3, "ACQUISITIONS, LICENSING AGREEMENTS AND ASSETS HELD FOR SALE" for additional details regarding these assets held for sale.

In 2019, the Company identified certain products in the Bausch + Lomb/International segment and one product in the Diversified Products segment for disposal.

The products and the related assets and liabilities of this disposal group qualified as a business and an impairment of $ 8 million associated with this business was recognized during the three months ended September 30, 2019.

As a result of changing business dynamics, during the three months ended March 31, 2020, the Company decided not to sell these assets and reclassified $ 39 million of held for sale assets as assets held and used at their respective fair values at the date of the decision not to sell.

This reclassification did not impact the Consolidated Statement of Operations for 2020.

Fair Value of Long-term Debt

The fair value of long-term debt as of December 31, 2020 and 2019 was $ 25,378 million and $ 27,520 million, respectively, and was estimated using the quoted market prices for the same or similar debt issuances (Level 2).

Inventories, net of allowance for obsolescence, as of December 31, 2019 and 2018 consist of:

Inventories, net, as of December 31, 2020 and 2019 consist of:

(in millions) 2020 2019

2 unchanged sentences

Finished goods 665 639

$ 1,094 $ 1,107

PROPERTY, PLANT AND EQUIPMENT

1 unchanged sentence

(in millions) 2020 2019

Land $ 79 $ 79

Buildings and improvements 686 696

Machinery and equipment 1,722 1,606

2 unchanged sentences

Construction in progress 436 301

Less accumulated depreciation

Accumulated depreciation ( 1,781 ) ( 1,641 )

$ 1,567 $ 1,466

Depreciation expense was $ 180 million, $ 178 million and $ 175 million for 2020, 2019 and 2018, respectively.

2 unchanged sentences

The major components of intangible assets as of December 31, 2020 and 2019 consist of:

(in millions)

Amortization and Impairments

(Years) 2020 2019

(in millions) Gross

Amount Accumulated

Amortization and Impairments Net

Amount Accumulated

Amortization and Impairments Net

Finite-lived intangible assets:

5 unchanged sentences

Total finite-lived intangible assets 25,481 ( 18,741 ) 6,740 25,613 ( 17,123 ) 8,490

Acquired IPR&D not in service

B&L Trademark

Acquired IPR&D not in service NA 7 — 7 13 — 13

B&L Trademark NA 1,698 — 1,698 1,698 — 1,698

$ 27,186 $ ( 18,741 ) $ 8,445 $ 27,324 $ ( 17,123 ) $ 10,201

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.

Impairment charges associated with these assets are included in Asset impairments in the Consolidated Statement of Operations.

Impairment charges associated with these assets are included in Asset impairments, including loss on assets held for sale in the Consolidated Statement of Operations.

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 2019 included impairments of:

Asset impairments, including loss on assets held for sale in 2020 included impairments of:

(i) $ 96 million to reduce the carrying value of a business within the Bausch + Lomb/International segment to its estimated fair value less costs to sell due to classifying the business as held for sale as discussed in Note 3, "ACQUISITIONS, LICENSING AGREEMENTS

AND ASSETS HELD FOR SALE", (ii) $ 16 million in aggregate, due to decreases in forecasted sales of certain product lines, (iii) $ 1 million in aggregate, related to the discontinuance of certain product lines not aligned with the focus of the Company's core businesses and (iv) $ 1 million related to Acquired IPR&D not in service.

Asset impairments, including loss on assets held for sale in 2019 included impairments of:

(i) $ 58 million reflecting decreases in forecasted sales of certain product lines due to generic competition and other factors, (ii) $ 8 million related to assets being classified as held for sale, (iii) $ 5 million 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 (iv) $ 4 million related to Acquired IPR&D not in service.

Asset impairments in 2018 included impairments of:

(i) $ 348 million reflecting decreases in forecasted sales for the Uceris ® Tablet product in the Company's Salix reporting unit and other product lines due to generic competition, (ii) $ 132 million reflecting decreases in forecasted sales for the Arestin ® product in the Company's Dentistry reporting unit and other product lines due to changing market conditions, (iii) $ 55 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, (iv) $ 28 million to Acquired IPR&D not in service related to a certain product and (v) $ 5 million related to assets being classified as held for sale.

Asset impairments in 2017 included impairments of:

(i) $ 351 million related to the Sprout business being classified as held for sale, (ii) $ 151 million reflecting decreases in forecasted sales for other product lines, (iii) $ 114 million to other assets classified as held for sale, primarily related to the Obagi business, (iv) $ 95 million , in aggregate, to certain product/patent assets associated with the discontinuance of specific product lines not aligned with the focus of the Company's core business and (v) $ 3 million related to acquired IPR&D.

Asset impairments, including loss on assets held for sale in 2018 included impairments of:

(i) $ 263 million reflecting decreases in forecasted sales for the Uceris ® Tablet product in the Company's Salix reporting unit due to generic competition, (ii) $ 85 million reflecting decreases in forecasted sales of certain other product lines due to generic competition, (iii) $ 132 million reflecting decreases in forecasted sales for the Arestin ® product in the Company's Dentistry reporting unit and other product lines due to changing market conditions, (iv) $ 55 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, (v) $ 28 million to Acquired IPR&D not in service related to a certain product and (vi) $ 5 million related to assets being classified as held for sale.

The impairments to assets reclassified as held for sale were measured as the difference of the carrying value of these assets as compared to the estimated fair values of these assets less costs to sell determined using a discounted cash flow analysis which utilized Level 3 unobservable inputs.

1 unchanged sentence

Periodically, the Company’s products face the expiration of their patent or regulatory exclusivity.

The Company anticipates that product sales for such product would decrease shortly following a loss of exclusivity, due to the possible entry of a generic competitor.

The Company anticipates that product sales for such product would decrease shortly following a loss of exclusivity ("LOE"), 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).

1 unchanged sentence

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 December 31, 2019 , the remaining carrying value of the Uceris ® Tablet-related intangible assets was $ 47 million .

Prior to its launch, the Company initiated infringement proceedings against this generic competitor.

The Company continues to believe that its Uceris ® 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.

In review of the Company’s finite-lived intangible assets, management revised the estimated useful lives of certain intangible assets in 2018 and 2017.

In review of the Company’s finite-lived intangible assets, management revised the estimated useful lives of certain intangible assets in the third and fourth quarters of 2017.

As a result, the useful lives of certain product brands, with an aggregate carrying value of $ 7,618 million as of December 31, 2017, were revised from an average of seven years to four years primarily due to revisions in forecasted sales as a result of revisions to the date each product is expected to lose exclusivity.

In addition, the useful life of the Salix Brand, with a carrying value of $ 569 million as of December 31, 2017, was revised from seventeen years to ten years , due to a change in the forecasted sales of its product portfolio.

Effective September 12, 2018, the Company changed the estimated useful life of its Xifaxan ® -related intangible assets due to the positive impact of an agreement between the Company and Actavis Laboratories FL, Inc.

4 unchanged sentences

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 $ 473 million and $ 143 million , and a decrease to the Basic and Diluted Loss per share attributable to Bausch Health Companies Inc.

of $ 476 million, $ 473 million and $ 143 million, and a decrease to the Basic and Diluted Loss per share attributable to Bausch Health Companies Inc.

of $ 1.34 , $ 1.34 and $ 0.41 for the years 2020, 2019 and 2018, respectively.

1 unchanged sentence

Estimated amortization expense of finite-lived intangible assets for the five years ending December 31 and thereafter are as follows:

(in millions)

(in millions) 2021 2022 2023 2024 2025 Thereafter Total

Amortization $ 1,389 $ 1,204 $ 1,030 $ 905 $ 822 $ 1,390 $ 6,740

The changes in the carrying amounts of goodwill during the years ended December 31, 2020, 2019 and 2018 were as follows:

(in millions)

International

Diversified Products

Ortho Dermatologics

Diversified Products

(in millions) Bausch +

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

Realignment of segment goodwill

Goodwill reclassified to assets held for sale and subsequently disposed

Impairment of the former Branded Rx reporting unit

Foreign exchange and other

Balance, December 31, 2017

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 )

1 unchanged sentence

Acquisition of certain assets of Synergy

— — — 3 — — 3

Goodwill reclassified to assets held for sale (Note 5) ( 18 ) — — — — — ( 18 )

1 unchanged sentence

Balance, December 31, 2019 5,786 — — 3,159 1,267 2,914 13,126

Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level.

Assets held for sale reclassified to goodwill (Note 5) 18 — — — — — 18

Goodwill reclassified to assets held for sale (Note 3) ( 217 ) — — — — — ( 217 )

Foreign exchange and other 117 — — — — — 117

Balance, December 31, 2020 $ 5,704 $ — $ — $ 3,159 $ 1,267 $ 2,914 $ 13,044

Goodwill is not amortized but is tested for impairment at least annually on October 1st at the reporting unit level.

A reporting unit is the same as, or one level below, an operating segment.

The Company performs its annual impairment test by first assessing qualitative factors.

Where the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed for that reporting unit (Step 1).

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 Company estimates the fair values of a reporting unit 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.

1 unchanged sentence

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, 2019 by first assessing qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount (Step 0).

Where the qualitative assessment suggested that it was more likely than not that the fair value of a reporting unit was less than its carrying amount, a quantitative fair value test was performed for that reporting unit (Step 1).

The quantitative fair value test was performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value.

The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows 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.

To forecast a reporting unit's cash flows the Company 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 are 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 LOE 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 Realignment of Segment Structure

Effective January 1, 2017, revenues and profits from the Company's operations in Canada were reclassified from the former Branded Rx segment to the Bausch + Lomb/International segment.

In connection with this change, the prior-period presentation of segment goodwill has been recast to conform to the then-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 identified in connection with this change in alignment that would suggest an impairment existed.

As detailed in Note 4, "DIVESTITURES" , the Sprout business was classified 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.

2017 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2017 and determined that the carrying value of the Salix reporting unit exceeded its fair value and, as a result, the Company proceeded to perform step two of the goodwill impairment test for the Salix reporting unit.

After completing step two of the impairment testing, the Company determined that the carrying value of the unit's goodwill did not exceed its implied fair value and, therefore, no impairment was identified to the goodwill of the Salix reporting unit.

As of the date of testing, the Salix reporting unit had an estimated fair value of $ 10,660 million and a carrying value of $ 13,404 million , including goodwill of $ 5,127 million .

The Company's remaining reporting units passed step one of the goodwill impairment test as the estimated fair value of each reporting unit exceeded its carrying value at the date of testing and, therefore, there was no impairment to goodwill.

Subsequent to the annual impairment test, the Company considered events occurring after October 1 st to determine if further testing was required.

The Company considered the impact of the changes in the Tax Cuts and Jobs Act (the “Tax Act”) on its reporting units, including the impact on the carrying value, for changes in deferred tax assets and liabilities, and changes in assumptions related to the tax rate when assessing the fair value.

The Company concluded that the fair value continued to exceed the carrying value for all reporting units, except Salix, after considering the impact of the changes in the Tax Act.

Further, the Step 2 impairment test for Salix continued to support the carrying value of goodwill.

As a result, no additional impairment charges were recorded.

Adoption of New Accounting Guidance for Goodwill Impairment Testing

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 Company elected to adopt this guidance effective January 1, 2018.

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.

Effective January 1, 2018, the Company elected to early adopt a new accounting standard which simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test.

Goodwill impairment is now measured as the amount by which a reporting unit's carrying value exceeds its fair value.

Upon adopting the new standard, the Company tested goodwill for impairment and determined that the carrying value of the Salix reporting unit exceeded its fair value resulting in the Company recognizing a goodwill impairment of $ 1,970 million associated with the Salix reporting unit.

The Company conducted its 2017 annual goodwill impairment test as of October 1, 2017 and determined that the fair value of the Ortho Dermatologics reporting unit exceeded its carrying value.

However, at January 1, 2018, 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.

3 unchanged sentences

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.

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 a 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.

12 unchanged sentences

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.

2018 Interim Goodwill Impairment Assessments - Salix

As a result of the change in accounting policy for goodwill impairment testing and the resulting impairment to the goodwill of the Salix reporting unit as of January 1, 2018, the carrying value of the Salix reporting unit approximated its fair value at that time.

Therefore, during the three months ended March 31, 2018, June 30, 2018 and September 30, 2018, the Company performed qualitative assessments of the Salix reporting unit to determine if testing was warranted.

As part of these qualitative assessments, management considered the revisions made to its forecasts for the Salix reporting unit and compared the reporting unit’s revised operating results to its original forecasts through the date of each assessment.

The revisions to the forecasts 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, (iii) the positive impact of the settlement agreement between the Company and Actavis resolving the intellectual property litigation regarding Xifaxan ® tablets, 550 mg and (iv) certain other assumptions used in preparing its discounted cash flow model.

As part of these qualitative assessments, management also considered the sensitivity of its conclusions as they related to changes in the estimates and assumptions used in the latest forecast available for each period.

Based on these qualitative assessments, management believed that the carrying value of the Salix reporting unit did not exceed its fair value and, therefore, concluded a quantitative assessment was not required for the Salix reporting unit.

2018 Interim Goodwill Impairment Assessments and Testing - Ortho Dermatologics

As a result of the change in accounting policy for goodwill impairment testing and the resulting impairment to the goodwill of the Ortho Dermatologics reporting unit as of January 1, 2018, the carrying value of the Ortho Dermatologics reporting unit approximated its fair value at that time.

Therefore, during the three months ended March 31, 2018, June 30, 2018 and September 30, 2018, the Company performed qualitative assessments of the Ortho Dermatologics reporting unit to determine if testing was warranted.

As part of the qualitative assessment as of March 31, 2018, management compared the reporting unit’s operating results to the forecast used to test the goodwill of the Ortho Dermatologics reporting unit as of January 1, 2018.

Based on the qualitative assessment, management 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 at March 31, 2018.

During the three months ended June 30, 2018, unforeseen changes in the business dynamics of the Ortho Dermatologics reporting unit, such as changes in the dermatology sector, additional risks to the exclusivity of certain products and a longer than originally expected launch cycle for a certain product, were factors that negatively impacted the reporting unit's operating results beyond management's expectations as of January 1, 2018, when the Company performed its last goodwill impairment test.

In response to these adverse business indicators, the Company performed a goodwill impairment test of the Ortho Dermatologics reporting unit.

Based on the goodwill impairment test performed, the estimated fair value of the Ortho Dermatologics reporting unit exceeded its carrying value at the date of testing by approximately 5 % and, therefore, there was no impairment to goodwill.

As part of the qualitative assessment as of September 30, 2018, management compared the reporting unit’s operating results to the forecast used to test the goodwill of the Ortho Dermatologics reporting unit as of June 30, 2018.

Based on the qualitative

assessment, management 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 at September 30, 2018.

2018 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2018 and determined that the carrying value of the Dentistry reporting unit exceeded its fair value and, as a result, the Company recognized a goodwill impairment of $ 109 million for the Dentistry reporting unit, representing the full amount of goodwill for the reporting unit.

The Company conducted its 2018 annual goodwill impairment test as of October 1, 2018 and determined that the carrying value of the Dentistry reporting unit exceeded its fair value and, as a result, the Company recognized a goodwill impairment of $ 109 million, representing the full amount of goodwill for the Dentistry reporting unit.

Changing market conditions such as:

(i) an increasing competitive environment and (ii) increasing pricing pressures negatively impacted the reporting unit's operating results.

The Company is taking steps to address these changing market and business conditions.

The Company's remaining reporting units passed the goodwill impairment test as the estimated fair value of each reporting unit exceeded its carrying value at the date of testing and, therefore, there was no impairment to goodwill for any reporting unit other than the Dentistry reporting unit.

1 unchanged sentence

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 events occurred or circumstances changed during the period October 1, 2018 through September 30, 2019 that would indicate that the fair value of any reporting unit might be below its carrying value.

Based on the results of the October 1, 2018 annual goodwill impairment test, the Company performed qualitative interim assessments of the carrying value and fair value of the Ortho Dermatologics reporting unit on a quarterly basis to determine if quantitative fair value testing was warranted.

As part of these qualitative assessments, management considered the totality of all relevant events or circumstances that affect the carrying amount or fair value of the reporting unit, including comparing the reporting unit’s operating results to the forecast used to test the goodwill of the Ortho Dermatologics reporting unit as of October 1, 2018.

Based on the qualitative assessments, management 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 for any period.

2019 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2019 by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The Company conducted its annual goodwill impairment test as of October 1, 2019 by first assessing qualitative factors.

1 unchanged sentence

As a result, there was no impairment to the goodwill of any reporting unit.

2020 Interim Goodwill Impairment Assessment

In response to the COVID-19 pandemic, the Company has taken actions to protect its employees, customers and other stakeholders and mitigate the negative impact of the COVID-19 pandemic on its operations and operating results.

These and additional actions can increase the costs of doing business during the pandemic and, in the periods that follow, may include the costs of idling and reopening certain facilities in affected areas.

Further, social restrictions and other precautionary measures taken by customers, health care patients and consumers in response to the pandemic are expected to impact the timing and amount of revenues during the COVID-19 pandemic.

Although the Company's revenues for 2020 were less than those forecasted on the date goodwill was last tested for impairment (October 1, 2019), there were no indications that these trends are materially related to developments other than the COVID-19 pandemic.

The negative impacts of the COVID-19 pandemic on the global economy have led to significant volatility in the global equity markets.

The Company has been able to continue its operations with limited disruptions and has assessed the potential impact that the COVID-19 pandemic is likely to have on its forecasted cash flows.

In performing its assessment, the Company considered the possible affects and outcomes of the COVID-19 pandemic on, among other things, its supply chain, customers and distributors, employee base, product sustainability, research and development activities, product pipeline and consumer demand and related rebates and discounts and has made adjustments, although not considered to be material, to its long-term forecasts as of October 1, 2019 (the date goodwill was last tested for impairment) for these and other matters.

After completing this assessment, although not completely insulated from the negative effects of the COVID-19 pandemic, the Company believes that its long-term forecasted cash flows, as adjusted for the possible outcome of the COVID-19 pandemic and other matters, do not indicate that the fair value of any reporting unit may be below its carrying value.

During the pandemic, the public has been advised to engage in certain "social restrictions" such as:

(i) remaining at home or shelter-in-place, (ii) limiting social interaction, (iii) closing non-essential businesses and (iv) postponing certain surgical and elective medical procedures in order to prioritize/conserve available health care resources.

During the three months ended March 31, 2020, these factors negatively impacted, most notably, the revenues of the Company's Global Vision Care and Global Surgical businesses in Asia where the COVID-19 pandemic originated.

Beginning in March 2020, and throughout most of the second quarter of 2020, the Company experienced steeper declines in these revenues and the revenues of other businesses as social restrictions expanded worldwide, particularly in the U.S.

Social restrictions negatively impacted the Company's revenues for contact lenses, intraocular lenses, medical devices, surgical systems and certain pre- and post-operative eye-medications of its Global Ophtho Rx business, medical aesthetics and therapeutic products of its Global Solta business, and certain branded pharmaceutical products of its Salix, Ortho Dermatologics and Dentistry businesses, as the offices of many health care providers were closed and certain surgeries and elective medical procedures were deferred.

The Company's 2020 revenues were most negatively impacted during its second quarter by the social restrictions and other precautionary measures taken in response to the COVID-19 pandemic.

However, as governments began lifting social restrictions, allowing offices of certain health care providers to reopen and certain surgeries and elective medical procedures to proceed, the negative trend in the revenues of certain businesses began to level off and stabilize prior to the third quarter.

Revenues for the three months ended December 31, 2020 and 2019 were $ 2,213 million and $ 2,224 million, respectively, a decrease of $ 11 million.

This decrease of less than 1 % represents a continuing improving trend over the decreases in year-over-year revenues for the three month periods ended June 30, 2020 and September 30, 2020 of 23 % and 3 %, respectively.

Presuming there continues to be increased availability of effective vaccines and any further resurgence of the COVID-19 virus and variant strains thereof do not have a material adverse impact on efforts to contain the COVID-19 virus, the Company anticipates an ongoing, gradual global recovery from the macroeconomic and health care impacts of the pandemic that occurred during the first-half of 2020 and anticipates that its affected businesses could return to pre-pandemic levels during 2021.

However, the rates of recovery for each business will vary by geography and will be dependent upon, among other things, the availability and effectiveness of vaccines for the COVID-19 virus, government

responses, rates of economic recovery, precautionary measures taken by patients and customers, the rate at which remaining social restrictions are lifted and once lifted, the presumption that social restrictions will not be materially reenacted in the event of a resurgence of the virus and other actions taken in response to the COVID-19 pandemic.

On a quarterly basis, using its latest forecasts of cash flows, the Company gave consideration to the nature and timing of the expected revenue losses discussed above.

No events occurred or circumstances changed during the period October 1, 2019 through September 30, 2020 that would indicate that the fair value of any reporting unit, other than the Ortho Dermatologics reporting unit, might be below its carrying value.

The changes in the amounts and timing of revenues as presented in the Company's latest forecasts included a range of potential outcomes and, with the exception of the Ortho Dermatologics reporting unit as discussed below, were not substantial enough to materially adversely affect the recoverability of any of the associated reporting units’ assets and were not material enough to indicate that the fair values of those reporting units might be below their respective carrying values.

However, based on the results of the October 1, 2019 annual goodwill impairment test, the Company continued to assess the performance of the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit on a quarterly basis throughout 2020.

2020 Interim Goodwill Impairment Assessments - Neuro and Other

As part of its quarterly qualitative interim assessments of the Neuro and Other reporting unit, management considered the totality of all relevant events or circumstances that could have affected the carrying amount or fair value of the reporting unit, including comparing the reporting unit’s operating results to the forecast used to test the goodwill of the Neuro and Other reporting unit as of October 1, 2019.

Based on the qualitative assessments, management believed that the carrying value of Neuro and Other reporting unit did not exceed its fair value and, therefore, concluded a quantitative fair value test was not required for any quarterly period.

2020 Interim Goodwill Impairment Assessments and Testing - Ortho Dermatologics

During the three months ended March 31, 2020, the operating results for the Ortho Dermatologics reporting unit were less than those forecasted at October 1, 2019 for that period.

As part of its qualitative assessment as of March 31, 2020, the Company revised its forecasts for the year 2020, for among other matters, the lower than originally forecasted operating results for the three months ended March 31, 2020 and the range of potential impacts of the COVID-19 pandemic, including longer than expected launch cycles for certain new products.

Management believed that the revisions to its forecasts for the year 2020 were indicators that there was less headroom as of March 31, 2020 as compared to the headroom calculated on the date goodwill was last tested for impairment (October 1, 2019).

Therefore, a quantitative fair value test for the Ortho Dermatologics reporting unit was performed at March 31, 2020.

Based on the quantitative fair value test, the fair value of the Ortho Dermatologics reporting unit continued to be greater than its carrying value and as a result there was no impairment to the goodwill of the reporting unit at March 31, 2020.

During the three months ended June 30, 2020, the Company identified certain Ortho Dermatologics’ products that were experiencing longer launch cycles than originally anticipated due to the COVID-19 pandemic and, as a direct result, took actions to mitigate the impact of these matters, including right-sizing its Ortho Dermatologics’ sales force.

As part of its qualitative assessment as of June 30, 2020, the Company revised its long-term forecasts for, among other matters, the decrease in forecasted revenues of the identified products, the reduction in sales force and related costs and a range of potential impacts of COVID-19 pandemic related matters.

Management believed that these events were indicators that there was less headroom as of June 30, 2020 as compared to the headroom calculated on the date Ortho Dermatologics goodwill was last tested for impairment (March 31, 2020).

Therefore, a quantitative fair value test for impairment to the goodwill of the Ortho Dermatologics reporting unit was performed at June 30, 2020.

Management believed that based on its qualitative assessments as of September 30, 2020, it was more likely than not that the carrying amount of the Ortho Dermatologics reporting unit was less than its fair value and, therefore, concluded a quantitative fair value test was not required at September 30, 2020.

2020 Annual Goodwill Impairment Test

The Company conducted its annual goodwill impairment test as of October 1, 2020 by first assessing qualitative factors.

Based on its qualitative assessment as of October 1, 2020, management believed that, with the exception of the Ortho Dermatologics reporting unit, it was more likely than not that the carrying amounts of its reporting units were less than their respective fair values and therefore concluded a quantitative fair value test for those reporting units was not required.

As part of its qualitative assessment of the Ortho Dermatologics reporting unit as of October 1, 2020, the Company considered, among other matters, a range of potential impacts of COVID-19 pandemic related matters and the limited headroom calculated on the date Ortho Dermatologics goodwill was last tested for impairment (June 30, 2020).

The Company believed that these factors may suggest that it is more likely than not that the fair value of the Ortho Dermatologics reporting unit is less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit.

The Company performed a quantitative fair value test for the Ortho Dermatologics reporting unit as of October 1, 2020, utilizing a long-term growth rate of 2.0 % and a range of discount rates between 9.5 % and 9.75 %, in estimation of the fair value of this reporting unit.

Based on the quantitative fair value test, the fair value of the Ortho Dermatologics reporting unit was approximately 10 % greater than its carrying value and as a result there was no impairment to the goodwill of the reporting unit.

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.

Specifically, the Company continues to assess the performance of the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit as compared to their respective projections and will perform qualitative interim assessments of the carrying value and fair value on a quarterly basis to determine if impairment testing of goodwill will be warranted.

The Company performed quantitative fair value tests for the Ortho Dermatologics reporting unit and the Neuro and Other reporting unit as of October 1, 2019, utilizing long-term growth rates of 2.0 % and 1.5 % , and discount rates of 9.8 % and 9.0 % , respectively, in estimation of the fair value of these reporting units.

Specifically, the Company continues to assess the performance of the Ortho Dermatologics reporting unit as compared to its respective projections and will perform qualitative interim assessments of the carrying value and fair value on a quarterly basis to determine if impairment testing of goodwill will be warranted.

In addition, the Company expects to realign and begin managing its operations in a manner consistent with the organizational structure of the two separate entities as proposed by the Separation during the first quarter of 2021, and as a result the Company may need to perform an impairment test upon realignment of its operating segments.

Accumulated goodwill impairment charges through December 31, 2020 were $ 3,711 million.

5 unchanged sentences

Product returns 575 691

Interest 341 305

Employee compensation and benefit costs 316 304

Income taxes payable 158 196

Other 767 720

$ 4,576 $ 4,511

FINANCING ARRANGEMENTS

Principal amounts of debt obligations and principal amounts of debt obligations net of premiums, discounts and issuance costs as of December 31, 2020 and 2019 consists of the following:

(in millions)

Principal Amount

Net of Premiums, Discounts and Issuance Costs

Principal Amount

Net of Premiums, Discounts and Issuance Costs

(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 2025 Term Loan B Facility

November 2025 Term Loan B Facility

November 2025

2023 Revolving Credit Facility June 2023 $ — $ — $ — $ —

June 2025 Term Loan B Facility June 2025 3,298 3,220 3,869 3,768

November 2025 Term Loan B Facility November 2025 1,125 1,112 1,275 1,257

Senior Secured Notes:

6.50 % Secured Notes

March 2022 — — 1,250 1,242

7.00 % Secured Notes

March 2024 2,000 1,987 2,000 1,983

5.50 % Secured Notes

1 unchanged sentence

5.75 % Secured Notes

August 2027 500 494 500 493

Senior Unsecured Notes:

December 2021

March 2023 — — 402 400

May 2023 — — 1,448 1,441

4.50 % euro-denominated debt

May 2023 — — 1,682 1,674

April 2025 3,250 3,234 3,250 3,230

December 2025 1,500 1,478 1,500 1,473

April 2026 1,500 1,487 1,500 1,484

January 2027 1,750 1,755 1,750 1,756

January 2028 750 742 750 741

January 2028 1,250 1,236 1,250 1,234

February 2029 1,500 1,480 — —

February 2029 1,000 988 — —

May 2029 750 741 750 740

January 2030 1,250 1,235 1,250 1,234

February 2031 1,000 988 — —

Other Various 12 12 12 12

Total long-term debt and other $ 24,185 23,925 $ 26,188 25,895

11 unchanged sentences

and engage in transactions with affiliates.

As of December 31, 2020, the amount available for restricted payments under the "builder basket" in the Company’s most restrictive indentures (as defined by those indentures) was approximately $ 13,000 million (although such availability is subject to the Company's compliance with a 2.00 :1.00 fixed charge coverage ratio).

The 2023 Revolving Credit Facility (as defined below) also contains a financial maintenance covenant that requires the Company to maintain a first lien net leverage ratio of not greater than 4.00 :1.00.

6 unchanged sentences

As of January 1, 2018, the Third Amended Credit Agreement provided for:

(i) a $ 1,500 million Revolving Credit Facility maturing on April 20, 2018 (the "2018 Revolving Credit Facility") and (ii) $ 9,939 million in a series of term loans maturing during the years 2018 through 2022.

(i) a $ 1,500 million Revolving Credit Facility maturing on April 20, 2020 (the "2020 Revolving Credit Facility") and (ii) a $ 3,521 million term loan under the Company's Series F Tranche B Term Loan Facility maturing in 2022 (the “Series F Tranche B Term Loan Facility”).

There was $ 250 million outstanding under the 2020 Revolving Credit Facility as of January 1, 2018.

2018 Activity

During 2017, the Company repaid $ 3,221 million of outstanding debt under its Senior Secured Credit Facilities using the net proceeds from the Skincare Sale, Dendreon Sale, iNova Sale, Obagi Sale and the divestiture of a manufacturing facility in Brazil.

During 2017, the Company also repaid another $ 786 million of outstanding debt under its Senior Secured Credit Facilities using cash on hand.

On March 21, 2017, the Company entered into Amendment No.

14 to the Third Amended Credit Agreement, which, among other changes, provided additional financing from an incremental term loan under the Company's Series F Tranche B Term Loan Facility (the “Series F Tranche B Term Loan Facility”), the proceeds of which, combined with the proceeds from the issuance of the March 2022 Secured Notes (as defined below) and the March 2024 Secured Notes (as defined below) and cash on hand, were used to:

(i) refinance $ 4,962 million of term loans under the Senior Secured Credit Facilities (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”).

On March 28, 2017, the Company entered into Amendment No.

15 to the Third Amended Credit Agreement 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 April 20, 2020 (the “2020 Revolving Credit Facility”).

On November 21, 2017, the Company entered into Amendment No.

16 to the Third Amended Credit Agreement to reprice the then outstanding term loans under its Senior Credit Facilities.

In connection with the repayments of debt and amendments to its Senior Secured Credit Facilities during 2017, the Company recognized $ 66 million in aggregate losses on extinguishment of debt representing:

(i) the difference between the amounts paid to settle extinguished debt and its carrying value (the stated principal amount net of unamortized discount and debt issuance costs) and (ii) prepayment penalties.

Third-party expenses of $ 3 million associated with the modification of certain debt under the Senior Secured Credit Facilities were expensed as incurred and included in Interest expense during 2017.

2018 Activity

During 2018, the Company repaid (net of additional borrowings) $ 571 million of outstanding debt under its Senior Secured Credit Facilities using cash on hand.

1 unchanged sentence

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 a new seven year Tranche B Term Loan Facility of $ 4,565 million (the “June 2025 Term Loan B Facility”) borrowed by the Company’s subsidiary, Bausch Health Americas, Inc.

("BHA") (formerly Valeant Pharmaceuticals 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 BHA in an aggregate principal amount in excess of $ 1,000 million.

3 unchanged sentences

On June 1, 2018, the Company issued an irrevocable notice of redemption for the remaining outstanding principal amounts of:

2022 (the “July 2022 Unsecured Notes”) and (iv) $ 146 million of 6.375 % Senior Unsecured Notes due October 2020 (the March 2020 Unsecured Notes (as defined below), together with the August 2021 Unsecured Notes, the July 2022 Unsecured Notes and the 6.375 % Senior Unsecured Notes due October 2020 the “June 2018 Unsecured Refinanced Debt”).

(i) $ 691 million of the March 2020 Unsecured Notes (as defined below), (ii) $ 578 million of 6.75 % Senior Unsecured Notes due August 2021 (the “August 2021 Unsecured Notes”), (iii) $ 550 million of 7.25 % Senior Unsecured Notes due July 2022 (the “July 2022 Unsecured Notes”) and (iv) $ 146 million of 6.375 % Senior Unsecured Notes due October 2020 (the March 2020 Unsecured Notes (as defined below), together with the August 2021 Unsecured Notes, the July 2022 Unsecured Notes and the 6.375 % Senior Unsecured Notes due October 2020 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 BHA and cash on hand, the Company prepaid the remaining Series F Tranche B Term Loan Facility and redeemed 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”).

4 unchanged sentences

For amounts accounted for as an extinguishment of debt, the Company incurred a loss on extinguishment of debt of $ 48 million.

Payments made to the lenders and a portion of payments made to third parties of $ 74 million associated with the June 2018 Refinancing Transactions were capitalized and are being amortized as interest expense over the remaining terms of the debt, ranging from 2023 through 2027.

expense over the remaining terms of the debt, ranging from 2023 through 2027.

Third-party expenses of $ 4 million associated with the modification of debt were expensed as incurred and included in Interest expense.

5 unchanged sentences

During 2019, the Company repaid (net of additional borrowings) $ 806 million of outstanding debt under its Senior Secured Credit Facilities using cash on hand.

2020 Activity

During 2020, the Company repaid:

(i) $ 471 million of outstanding debt under its Senior Secured Credit Facilities using cash on hand and (ii) $ 250 million of outstanding debt under its Senior Secured Credit Facilities as part of the May 2020 Refinancing Transactions (as defined below).

As of December 31, 2020, the Company had no outstanding borrowings, $ 104 million of issued and outstanding letters of credit, and remaining availability of $ 1,121 million under its 2023 Revolving Credit Facility.

8 unchanged sentences

(i) a prime rate determined by reference to the higher of:

(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 (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 (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.

(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 (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 (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:

5 unchanged sentences

The Company may direct that prepayments be applied to such amortization payments in order of maturity.

As of December 31, 2019 , the aggregate remaining mandatory quarterly amortization payments for the Senior Secured Credit Facilities were $ 1,126 million through November 1, 2025.

As of December 31, 2020, the aggregate remaining mandatory quarterly amortization payments for the Senior Secured Credit Facilities are $ 405 million through 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.

12 unchanged sentences

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 % Senior Secured Notes due 2022 and 7.00 % Senior Secured Notes due 2024 - 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 Tranche B Term Loan Facility and cash on hand, were used to:

(i) repay the March 2017 Refinanced Debt, (ii) repurchase $ 1,100 million in principal amount of August 2018 Unsecured Notes , (iii) repay $ 350 million of amounts outstanding under the 2018 Revolving Credit Facility and (iv) pay related fees and expenses.

6.50 % Senior Secured Notes due 2022 and 7.00 % Senior Secured Notes due 2024

In March 2017, 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.

Interest on these notes is payable semi-annually in arrears on each March 15 and September 15.

The March 2022 Secured Notes are redeemable at the option of the Company, in whole or in part, at the redemption prices set forth in the indenture.

The March 2024 Secured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after March 15, 2020, at the redemption prices set forth in the indenture.

The Company may redeem some or all of the March 2024 Secured Notes prior to March 15, 2020 at a price equal to 100 % of the principal amount thereof plus a “make-whole” premium.

Prior to March 15, 2020, the Company may redeem up to 40 % of the aggregate principal amount of the March 2024 Secured Notes using the proceeds of certain equity offerings at the redemption price set forth in the indenture.

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

On October 17, 2017, the Company issued $ 1,000 million aggregate principal amount of 5.50 % Senior Secured Notes due November 2025 (the “ November 2025 Secured Notes ”), in a private placement, the proceeds of which were used to repurchase $ 1,000 million in aggregate principal amount of previously outstanding senior unsecured notes (the “October 2017 Refinancing Transactions”).

The related fees and expenses were paid using cash on hand.

The March 2022 Secured Notes were repaid in full as part of the May 2020 Refinancing Transactions (as defined below).

The March 2024 Secured Notes are redeemable at the option of the Company, in whole or in part, at any time, at the redemption prices set forth in the indenture.

5.50 % Senior Secured Notes due 2025

On October 17, 2017, the Company issued $ 1,000 million, and, on November 21, 2017, the Company issued $ 750 million, aggregate principal amount of 5.50 % Senior Secured Notes due November 2025 (the “November 2025 Secured Notes”), in a private placement.

Interest on the November 2025 Secured Notes is payable semi-annually in arrears on each May 1 and November 1.

The November 2025 Secured Notes are redeemable at the option of the Company, in whole or in part, at any time on or after November 1, 2020, at the redemption prices set forth in the indenture.

The Company may redeem some or all of the November 2025 Secured Notes prior to November 1, 2020 at a price equal to 100 % of the principal amount thereof plus a “make-whole” premium.

Prior to November 1, 2020, the Company may redeem up to 40 % of the aggregate principal amount of the November 2025 Secured Notes using the proceeds of certain equity offerings at the redemption price set forth in the indenture.

On November 21, 2017 , the Company issued $ 750 million aggregate principal amount of the November 2025 Secured Notes 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 on hand (collectively, the “November 2017 Refinancing Transactions”).

The November 2025 Secured Notes are redeemable at the option of the Company, in whole or in part, at any time, at the redemption prices set forth in the indenture.

5.75 % Senior Secured Notes due 2027 - March 2019 Refinancing Transactions

7 unchanged sentences

The August 2027 Secured Notes are redeemable at the option of the Company, 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”

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 August 2027 Secured Notes using the proceeds of certain equity offerings at the redemption price set forth in the indenture.

10 unchanged sentences

On January 30, 2015, the Company issued $ 1,000 million aggregate principal amount of March 2023 Unsecured Notes in a private placement.

The March 2023 Unsecured Notes accrued interest at the rate of 5.50 % per year, payable semi-annually in arrears.

On March 8, 2019 and May 23, 2019, the Company repurchased $ 216 million and $ 382 million of March 2023 Unsecured Notes as part of the March 2019 Refinancing Transactions and the May 2019 Refinancing Transactions (as defined below), respectively.

The March 2023 Unsecured Notes accrue interest at the rate of 5.50 % per year, payable semi-annually in arrears.

The Company may redeem all or a portion of the remaining March 2023 Unsecured Notes at the applicable redemption prices set forth in the March 2023 Unsecured Notes indenture, plus accrued and unpaid interest to the date of redemption.

Throughout 2020, the Company repurchased, in aggregate, $ 169 million of March 2023 Unsecured Notes using cash on hand.

The Company repurchased the remaining outstanding balance of $ 233 million in December 2020 as part of the December 2020 Refinancing Transactions (as defined below).

5.375 % Senior Unsecured Notes due 2020, 5.875 % Senior Unsecured Notes due 2023, 4.50 % Senior Unsecured Notes due 2023 and 6.125 % Senior Unsecured Notes due 2025

1 unchanged sentence

(the "VRX Issuer"), a newly formed wholly owned subsidiary of the Company, issued $ 2,000 million aggregate principal amount of 5.375 % Senior Unsecured Notes due 2020 (the "March 2020 Unsecured Notes"), $ 3,250 million aggregate principal amount of 5.875 % Senior Unsecured Notes due 2023 (the "May 2023 Unsecured Notes"), € 1,500 million aggregate principal amount of 4.50 % Senior Unsecured Notes due 2023 (the "Euro Notes”) and $ 3,250 million aggregate principal amount of 6.125 % Senior Unsecured Notes due 2025 (the "April 2025 Unsecured Notes" and, together with the March 2020 Unsecured Notes, the May 2023 Unsecured Notes and the Euro Notes, the "VRX Notes") in a private placement.

In addition, the VRX Issuer entered into an escrow and security agreement (the “Escrow Agreement”) dated as of March 27, 2015, with an escrow agent.

Pursuant to the Escrow Agreement, the proceeds from the issuance of the VRX Notes, together with cash sufficient to fund certain accrued and unpaid interest on the VRX Notes, totaling $ 10,340 million in the aggregate, were deposited into escrow accounts and held as security for the VRX Issuer’s obligations until the consummation of the Salix Acquisition, which occurred on April 1, 2015.

At the time of the closing of the Salix Acquisition, (1) the VRX Issuer was voluntarily liquidated and all of its obligations were assumed by, and all of its assets were distributed to, the Company, (2) the Company assumed all of the VRX Issuer's obligations under the VRX Notes and the related indenture and (3) the funds previously held in escrow were released to the Company and were used to finance the Salix Acquisition (as such, the $ 10,340 million referenced in this paragraph was released from restricted cash and cash equivalents in April 2015.)

The March 2020 Unsecured Notes accrued interest at the rate of 5.375 % per year and were repaid in full as part of:

(i) the December 2017 Refinancing Transactions (as defined below), (ii) the March 2018 Refinancing Transactions (as defined below) and (iii) the June 2018 Refinancing Transactions.

The May 2023 Unsecured Notes , the Euro Notes and the April 2025 Unsecured Notes accrue interest at the rate of 5.875 % , 4.50 % and 6.125 % per year, respectively, payable semi-annually in arrears.

The May 2023 Unsecured Notes and the Euro Notes accrued interest at the rate of 5.875 % and 4.50 % per year, respectively and were each repaid in full as of December 31, 2020, as discussed below.

The April 2025 Unsecured Notes accrue interest at the rate of 6.125 % per year, payable semi-annually in arrears.

As part of the June 2018 Refinancing Transactions, the Company repaid the remaining outstanding principal amounts of the March 2020 Unsecured Notes.

On March 8, 2019 and May 23, 2019, the Company repurchased $ 584 million and $ 1,118 million of May 2023 Unsecured Notes as part of the March 2019 Refinancing Transactions and the May 2019 Refinancing Transactions (as defined below), respectively, and on October 3, 2019, the Company repaid an additional $ 100 million of May 2023 Unsecured Notes using cash on hand.

On December 18, 2019, the Company issued a conditional notice of redemption to redeem $ 1,240 million of

May 2023 Unsecured Notes on January 16, 2020.

On December 30, 2019, the Company received the proceeds associated with the December 2019 Financing and Refinancing Transactions (as defined below), satisfying the condition included in this conditional notice of redemption.

On January 16, 2020, the Company redeemed $ 1,240 million aggregate principal amount of May 2023 Unsecured Notes .

The Company may redeem all or a portion of the April 2025 Unsecured Notes at any time prior to April 15, 2020 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.

The Company may redeem all or a portion of the May 2023 Unsecured Notes or the Euro Notes and, on or after April 15, 2020, the Company may redeem all or a portion of the April 2025 Unsecured Notes , at the redemption prices applicable to each series of such notes, as set forth in the applicable indenture, plus accrued and unpaid interest to the date of redemption.

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

On January 16, 2020, the Company redeemed $ 1,240 million aggregate principal amount of the May 2023 Unsecured Notes as part of the December 2019 Financing and Refinancing Transactions (as defined below).

Throughout 2020, the Company repaid, in aggregate, $ 208 million of the May 2023 Unsecured Notes, with the May 2023 Unsecured Notes having been fully repaid during November 2020.

The Company may redeem all or a portion of the April 2025 Unsecured Notes at the redemption prices set forth in the applicable indenture, plus accrued and unpaid interest to the date of redemption.

On December 3, 2020, the Company redeemed the remaining outstanding balance of the Euro Notes as part of the December 2020 Refinancing Transactions, as defined below.

9.00 % Senior Unsecured Notes due 2025

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 net proceeds of which were used to repurchase $ 1,500 million in aggregate principal amount of previously outstanding senior unsecured notes (the "December 2017 Refinancing Transactions").

7 unchanged sentences

All fees and expenses associated with these transactions were paid with cash on hand (collectively, the “March 2018 Refinancing Transactions”).

The March 2018 Refinancing Transactions were accounted for as an extinguishment of debt and the Company incurred a loss on extinguishment of debt of $ 26 million representing the difference between the amount paid to settle the extinguished debt and the extinguished debt’s carrying value.

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.

3 unchanged sentences

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

As part of the June 2018 Refinancing Transactions, BHA issued $ 750 million in aggregate principal amount of January 2027 Unsecured Notes in a private placement, the net proceeds of which, when combined with the remaining net proceeds from the June 2025 Term Loan B Facility and cash 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.

As part of the June 2018 Refinancing Transactions, BHA issued $ 750 million in aggregate principal amount of January 2027 Unsecured Notes in a private placement, the net proceeds of which, when combined with the remaining net proceeds from the June 2025 Term Loan B Facility and cash on hand, were used 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.

19 unchanged sentences

The proceeds and cash on hand were used to:

(i) redeem $ 1,240 million of May 2023 Unsecured Notes on January 16, 2020, (ii) finance the $ 1,210 million settlement of certain U.S.

(i) redeem $ 1,240 million of May 2023 Unsecured Notes on January 16, 2020, (ii)

finance the $ 1,210 million settlement of certain U.S.

Securities litigation as discussed in Note 20, "LEGAL PROCEEDINGS" and (iii) pay all fees and expenses associated with these transactions (collectively, the "December 2019 Financing and Refinancing Transactions").

The redemption of $ 1,240 million of May 2023 Unsecured notes was accounted for as an extinguishment of debt and the Company incurred a loss on extinguishment of debt of $ 24 million representing the difference between the amount paid to settle the extinguished debt and the extinguished debt's carrying value.

Interest on the 5.00 % January 2028 Unsecured Notes is payable semi-annually in arrears on each January 30 and July 30.

3 unchanged sentences

Prior to January 30, 2023, the Company may redeem up to 40 % of the aggregate principal amount of the 5.00 % January 2028 Unsecured Notes or the January 2030 Unsecured Notes using the proceeds of certain equity offerings at the redemption price set forth in the respective indenture.

6.25 % Senior Unsecured Notes due 2029 - May 2020 Refinancing Transactions

On May 26, 2020, the Company issued $ 1,500 million aggregate principal amount of 6.25 % Senior Unsecured Notes due February 2029 (the " 6.25 % February 2029 Unsecured Notes") in a private placement.

The proceeds and cash on hand were used to:

(i) repurchase $ 1,250 million aggregate principal amount of the outstanding March 2022 Secured Notes, (ii) prepay $ 303 million of mandatory amortization scheduled for payment in 2022 under the Company's June 2025 and November 2025 Term Loan B Facilities and (iii) pay all fees and expenses associated with these transactions (collectively, the "May 2020 Refinancing Transactions").

The May 2020 Refinancing Transactions were accounted for as an extinguishment of debt and 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 6.25 % February 2029 Unsecured Notes accrue interest at the rate of 6.25 % per year, payable semi-annually in arrears on each of February 15 and August 15.

The Company may redeem all or a portion of the 6.25 % February 2029 Unsecured Notes at any time prior to February 15, 2024, 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 August 15, 2023, the Company may redeem up to 40 % of the aggregate principal amount of the outstanding 6.25 % February 2029 Unsecured Notes with the net proceeds of certain equity offerings at the redemption price set forth in the 6.25 % February 2029 Unsecured Notes indenture.

On or after February 15, 2024, the Company may redeem all or a portion of the 6.25 % February 2029 Unsecured Notes at the applicable redemption prices set forth in the 6.25 % February 2029 Unsecured Notes indenture, plus accrued and unpaid interest to, but not including, the date of redemption.

5.00 % Senior Unsecured Notes due 2029 and 5.25 % Senior Unsecured Notes due 2031 – December 2020 Refinancing Transactions

On December 3, 2020, the Company issued $ 1,000 million aggregate principal amount of 5.00 % Senior Unsecured Notes due February 2029 (the " 5.00 % February 2029 Unsecured Notes") and $ 1,000 million aggregate principal amount of 5.25 % Senior Unsecured Notes due February 2031 (the "February 2031 Unsecured Notes") in a private placement.

The aggregate proceeds and cash on hand were used to repurchase the remaining outstanding principal amounts of:

(i) € 1,500 million of the Euro Notes, (ii) $ 233 million of the March 2023 Unsecured Notes and (iii) pay all fees and expenses associated with these transactions (collectively, the "December 2020 Refinancing Transactions").

The December 2020 Refinancing Transactions were accounted for as an extinguishment of debt and the Company incurred a loss on extinguishment of debt of $ 7 million representing the difference between the amount paid to settle the extinguished debt and the extinguished debt's carrying value.

The 5.00 % February 2029 Unsecured Notes accrue interest at the rate of 5.00 % per year, payable semi-annually in arrears on each of February 15 and August 15.

The February 2031 Unsecured Notes accrue interest at the rate of 5.25 % per year, payable semi-annually in arrears on each of February 15 and August 15.

The Company may redeem all or a portion of the 5.00 % February 2029 Unsecured Notes at any time prior to February 15, 2024, 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 February 15, 2024, the Company may redeem up to 40 % of the aggregate principal amount of the outstanding 5.00 % February 2029 Unsecured Notes with the net proceeds of certain equity offerings at the redemption price set forth in the 5.00 % February 2029 Unsecured Notes indenture.

On or after February 15, 2024, the Company may redeem all or a portion of the 5.00 % February 2029 Unsecured

Notes at the applicable redemption prices set forth in the 5.00 % February 2029 Unsecured Notes indenture, plus accrued and unpaid interest to, but not including, the date of redemption.

The Company may redeem all or a portion of the February 2031 Unsecured Notes at any time prior to February 15, 2026, 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 February 15, 2024, the Company may redeem up to 40 % of the aggregate principal amount of the outstanding February 2031 Unsecured Notes with the net proceeds of certain equity offerings at the redemption price set forth in the February 2031 Unsecured Notes indenture.

On or after February 15, 2026, the Company may redeem all or a portion of the February 2031 Unsecured Notes at the applicable redemption prices set forth in the February 2031 Unsecured Notes indenture, plus accrued and unpaid interest to, but not including, 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 December 31, 2020 and 2019 was 6.02 % and 6.21 %, respectively.

Maturit ies and Mandatory Payments

Maturities and mandatory payments of debt obligations for the five succeeding years ending December 31 and t hereafter are as follows:

Maturities and Mandatory Payments

Maturities and mandatory payments of debt obligations for the five succeeding years ending December 31 and thereafter are as follows:

(in millions)

Thereafter 11,262

Total gross maturities 24,185

1 unchanged sentence

Total long-term debt and other $ 23,925

On December 18, 2019, the Company issued a conditional notice of redemption to redeem $ 1,240 million of May 2023 Unsecured Notes on January 16, 2020.

On December 30, 2019, the Company received the proceeds associated with the December 2019 Financing and Refinancing Transactions, satisfying the condition included in the conditional notice of redemption.

On January 16, 2020, the Company repaid $ 1,240 million aggregate principal amount of May 2023 Unsecured Notes which were due in 2020 in the table above.

Under the Restated Credit Agreement, there is no Excess Cash Flow payment due for 2020.

3 unchanged sentences

defined benefit accruals were frozen as of December 31, 2004 and benefits that were earned up to December 31, 2004 were preserved.

Participants continue to earn interest credits on their cash balance.

Participants continue to earn interest credits on their cash balance at an interest crediting rate that is equal to the greater of:

(i) the average annual yield on 10-year treasury bonds in effect for the November preceding the plan year or (ii) 4.50 %.

The most significant non-U.S.

14 unchanged sentences

The amounts included in Accumulated other comprehensive loss as of December 31, 2020 and 2019 were as follows:

Pension Benefit Plans

Pension Benefit Plans U.S.

Postretirement

Plan Non-U.S.

(in millions) 2020 2019 2020 2019 2020 2019

1 unchanged sentence

Unrecognized prior service credits $ — $ — $ 27 $ 26 $ 11 $ 14

Of the December 31, 2019 amounts, the Company expects to recognize $ 3 million and $ 1 million of unrecognized prior service credits related to the U.S.

postretirement benefit plan and the non-U.S.

defined benefit plans, respectively, in net periodic (benefit) cost during 2020 .

In addition, the Company expects to recognize $ 2 million of unrecognized actuarial losses related to the non-U.S.

pension benefit plans in net periodic (benefit) cost during 2020 .

Net Periodic (Benefit) Cost

The following table provides the components of net periodic (benefit) cost for the Company’s defined benefit pension plans and postretirement benefit plan in 2020, 2019 and 2018:

Pension Benefit Plans

Pension Benefit Plans U.S.

Postretirement

Plan Non-U.S.

(in millions) 2020 2019 2018 2020 2019 2018 2020 2019 2018

Service cost $ 1 $ 2 $ 2 $ 3 $ 3 $ 3 $ — $ — $ —

Interest cost 6 8 7 4 5 5 1 1 1

2 unchanged sentences

Amortization of prior service credit — — — ( 1 ) ( 1 ) ( 1 ) ( 3 ) ( 2 ) ( 2 )

Other — — — — 1 — — — —

Net periodic (benefit) cost $ ( 6 ) $ ( 3 ) $ ( 6 ) $ 3 $ 4 $ 3 $ ( 2 ) $ ( 1 ) $ ( 1 )

1 unchanged sentence

The table below presents components of the change in projected benefit obligation, change in plan assets and funded status for 2020 and 2019:

Pension Benefit Plans

Pension Benefit Plans U.S.

Postretirement

Plan Non-U.S.

(in millions) 2020 2019 2020 2019 2020 2019

1 unchanged sentence

Projected benefit obligation, beginning of year $ 227 $ 214 $ 259 $ 235 $ 41 $ 41

Service cost 1 2 3 3 — —

Interest cost 6 8 4 5 1 1

Employee contributions — — — — — 1

Settlements — — ( 3 ) ( 2 ) — —

Benefits paid ( 15 ) ( 15 ) ( 4 ) ( 8 ) ( 4 ) ( 4 )

Actuarial losses (gains)

Actuarial losses 17 18 13 30 1 2

Currency translation adjustments — — 22 ( 4 ) — —

5 unchanged sentences

Company contributions 1 2 8 10 4 3

Settlements — — ( 2 ) ( 2 ) — —

Benefits paid ( 15 ) ( 15 ) ( 4 ) ( 8 ) ( 4 ) ( 4 )

1 unchanged sentence

Fair value of plan assets, end of year 231 216 189 161 — —

Funded Status at end of year

Funded status, end of year $ ( 5 ) $ ( 11 ) $ ( 105 ) $ ( 98 ) $ ( 39 ) $ ( 41 )

Recognized as:

3 unchanged sentences

Information for the underfunded pension benefit plans is as follows:

Plan Non-U.S.

(in millions) 2020 2019 2020 2019

4 unchanged sentences

These contributions are determined based upon recommendations made by the actuary under accepted actuarial principles.

In 2020 , the Company expects to contribute $ 3 million , $ 9 million and $ 5 million to the U.S.

In 2021, the Company expects to contribute $ 0 , $ 10 million and $ 4 million to the U.S.

pension benefit plan, the non-U.S.

5 unchanged sentences

Future benefit payments over the next 10 years for the pension benefit plans and the postretirement benefit plan, which reflect expected future service, as appropriate, are expected to be paid as follows:

(in millions)

Pension Benefit Plans

(in millions) Pension Benefit Plans U.S.

Postretirement

Plan Non-U.S.

2021 $ 14 $ 6 $ 4

2026-2030 75 42 12

The weighted-average assumptions used to determine net periodic benefit costs and benefit obligations for 2020, 2019 and 2018 were as follows:

Pension Benefit Plans

Pension Benefit Plans U.S.

Postretirement Benefit Plan

2020 2019 2018 2020 2019 2018

For Determining Net Periodic (Benefit) Cost

2 unchanged sentences

Rate of compensation increase — — — — — —

Interest crediting rate 5.00 % 5.00 % 5.00 %

Discount rate 1.68 % 2.39 % 2.29 %

1 unchanged sentence

Rate of compensation increase 3.05 % 2.89 % 2.87 %

Pension Benefit Plans

Interest crediting rate — — —

Pension Benefit Plans U.S.

Postretirement Benefit Plan

2020 2019 2020 2019

For Determining Benefit Obligation

1 unchanged sentence

Rate of compensation increase — — — —

Interest crediting rate 4.75 % 5.00 %

Discount rate 1.37 % 1.68 %

Rate of compensation increase 2.60 % 3.05 %

Interest crediting rate — —

The expected long-term rate of return on plan assets was developed based on a capital markets model that uses expected asset class returns, variance and correlation assumptions.

14 unchanged sentences

The following presents the actual asset allocation as of December 31, 2020 and 2019:

Cash and cash equivalents 1 % 1 %

Equity securities 39 % 55 %

3 unchanged sentences

Fixed income securities 58 % 64 %

Other 11 % 6 %

The investment strategy underlying pension plan asset allocation is to manage the assets of the plan to provide for the non-current liabilities while maintaining sufficient liquidity to pay current benefits.

12 unchanged sentences

Pension Benefit Plans - U.S.

December 31, 2019

December 31, 2018

(in millions)

Quoted Prices in Active Markets for Identical Assets

December 31, 2020 December 31, 2019

(in millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 2 $ — $ — $ 2 $ 1 $ — $ — $ 1

1 unchanged sentence

Equity securities:

broad market — 48 — 48 — 64 — 64

Emerging markets — 9 — 9 — 15 — 15

Worldwide developed markets — 20 — 20 — 26 — 26

Other assets — 14 — 14 — 15 — 15

Fixed income securities:

Investment grade — 138 — 138 — 95 — 95

$ 2 $ 229 $ — $ 231 $ 1 $ 215 $ — $ 216

Pension Benefit Plans - Non-U.S.

December 31, 2019

December 31, 2018

(in millions)

Quoted Prices in Active Markets for Identical Assets

December 31, 2020 December 31, 2019

(in millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Cash equivalents $ — $ 5 $ — $ 5 $ — $ 9 $ — $ 9

7 unchanged sentences

Government bond funds 1 102 — 103 1 90 — 91

Other assets — 20 2 22 — 8 1 9

$ 1 $ 186 $ 2 $ 189 $ 1 $ 159 $ 1 $ 161

Cash equivalents consisted primarily of term deposits and money market instruments.

3 unchanged sentences

The underlying assets in these funds are publicly traded on the exchanges and have readily available price quotes.

The Ireland pension plans held approximately 95 % of the non-U.S.

commingled funds in 2019 and 2018 .

The Ireland pension plans held approximately 96 % and 95 % of the non-U.S.

commingled funds in 2020 and 2019, respectively.

The commingled funds held by the U.S.

5 unchanged sentences

The Company contributed $ 43 million, $ 41 million and $ 36 million to these plans during the years ended December 31, 2020, 2019 and 2018, respectively.

Right-of-use assets and lease liabilities associated with the Company's operating leases are included in the Consolidated Balance Sheet as of December 31, 2019 as follows:

Right-of-use assets and lease liabilities associated with the Company's operating leases are included in the Consolidated Balance Sheet as of December 31, 2020 and 2019 as follows:

(in millions) 2020 2019

5 unchanged sentences

Total lease liabilities $ 279 $ 293

As of December 31, 2019 , the Company's finance leases were no t material and for the year 2019 sub-lease income and short-term lease expense were no t material.

Lease expense for the year 2019 includes:

As of December 31, 2020 and 2019, the Company's finance leases were no t material and for the years 2020 and 2019 sub-lease income and short-term lease expense were no t material.

Lease expense for the years 2020 and 2019 include:

(in millions) 2020 2019

1 unchanged sentence

Variable operating lease costs $ 12 $ 16

Other information related to operating leases for 2019 is as follows:

Upon adoption of the new standard for accounting for leases on January 1, 2019, the Company elected the modified retrospective approach without revising prior periods.

Rent expense related to operating lease agreements was $ 92 million for 2018.

Other information related to operating leases for 2020 and 2019 is as follows:

(dollars in millions) 2020 2019

1 unchanged sentence

Right-of-use assets obtained in exchange for new operating lease liabilities $ 39 $ 47

Weighted-average remaining lease term

Weighted-average remaining lease term 7.6 years 8.2 years

Weighted-average discount rate 6.2 % 6.2 %

3 unchanged sentences

(in millions)

Thereafter 121

Imputed interest 77

2 unchanged sentences

Non-current portion $ 227

Upon adopting the new lease guidance, the Company elected the modified retrospective approach without revising prior periods.

Accordingly, rental expense related to operating lease agreements was $ 92 million and $ 102 million for 2018 and 2017, respectively, and 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)

Future payments

SHARE-BASED COMPENSATION

1 unchanged sentence

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 maximum number of common shares that may be issued to participants under the 2014 Plan was 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 20,000,000 common shares of common stock for issuance under the 2014 Plan.

2 unchanged sentences

(i) the number of common shares authorized for issuance under the Amended and Restated 2014 Plan has been 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 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.

During 2017, the Company introduced a new long-term incentive program with the objective of realigning 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.

Effective April 28, 2020, the Company further amended and restated the Amended and Restated 2014 Plan (the “Further Amended and Restated 2014 Plan”).

The Further Amended and Restated 2014 Plan includes the following amendments:

(i) the number of common shares authorized for issuance under the Further Amended and Restated 2014 Plan has been

increased by an additional 13,500,000 common shares, as approved by the requisite number of shareholders at the Company’s annual general meeting held on April 28, 2020, (ii) the exercise price of stock options and share appreciation rights (“SARs”) will be based on the closing price of the underlying common shares on the date such stock options or SARs are granted (rather than on the last preceding trading date), (iii) additional provisions clarifying that:

(a) stock options and SARs will not be eligible for the payment of dividend or dividend equivalents and (b) the Talent and Compensation Committee of the Board of Directors of the Company cannot, without shareholder approval, seek to effect any repricing of any previously granted “underwater” stock option or SAR and (iv) other housekeeping and/or clerical changes.

Approximately 16,902,000 common shares were available for future grants as of December 31, 2020.

The Company uses reserved and unissued common shares to satisfy its obligation under its share-based compensation plans.

The Company has a long-term incentive program with the objective of aligning 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 RSUs and performance-based RSUs.

1 unchanged sentence

(i) awards that vest upon achievement of certain share price appreciation conditions that are based on total shareholder return (“TSR”) and (ii) awards that vest upon attainment of certain performance targets that are based on the Company’s return on tangible capital (“ROTC”).

Approximately 9,864,000 common shares were available for future grants as of December 31, 2019 .

The Company uses reserved and unissued common shares to satisfy its obligation under its share-based compensation plans.

The components and classification of share-based compensation expense related to stock options and RSUs for the years 2020, 2019 and 2018 were as follows:

1 unchanged sentence

Stock options $ 15 $ 21 $ 23

RSUs 90 81 64

Share-based compensation expense $ 105 $ 102 $ 87

4 unchanged sentences

Stock options granted under the 2011 Plan and the Amended and Restated 2014 Plan generally expire on the fifth or tenth anniversary of the grant date.

The exercise price of any stock option granted under the 2011 Plan and the Amended and Restated 2014 Plan will not be less than the closing price per common share preceding the date of grant.

The exercise price of any stock option granted under the 2011 Plan and the Amended and Restated 2014 Plan will not be less than the closing price per common share on the date of grant.

Stock options generally vest 33 % and 25 % each year over a three-year and four-year period, respectively, on the anniversary of the date of grant.

The fair values of all stock options granted for the years 2020, 2019 and 2018 were estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

2020 2019 2018

Expected stock option life (years) 3.0 3.0 3.0

10 unchanged sentences

The following table summarizes stock option activity during 2020:

(in millions, except per share amounts)

Price Per Share

(in millions, except per share amounts) Options Weighted-

Price Per Share Weighted-

(Years) Aggregate

Outstanding, January 1, 2020 7.1 $ 26.99

Granted 2.3 $ 24.74

Exercised ( 0.4 ) $ 14.65

Expired or forfeited ( 0.3 ) $ 72.40

20 unchanged sentences

The following table summarizes non-vested time-based RSU activity during 2020:

(in millions, except per share amounts)

(in millions, except per share amounts) Time-Based

RSUs Weighted-

Fair Value Per Share

Non-vested, January 1, 2020 6.1 $ 20.54

Granted 3.3 $ 21.92

Vested ( 3.4 ) $ 19.37

Forfeited ( 0.3 ) $ 21.78

Non-vested, December 31, 2020 5.7 $ 21.98

10 unchanged sentences

The fair values of TSR performance-based RSUs granted during 2020, 2019 and 2018 were estimated with the following assumptions:

2020 2019 2018

Contractual term (years) 3.0 3.0 3.0

Expected Company share volatility 38.6 % 46.5 % 54.2 %

67.2% - 77.2%

Risk-free interest rate 1.2 % 2.5 % 2.7 %

3 unchanged sentences

The following table summarizes non-vested performance-based RSU activity during 2020:

(in millions, except per share amounts)

Performance-based

(in millions, except per share amounts) Performance-based

RSUs Weighted-

Fair Value Per Share

Non-vested, January 1, 2020 2.0 $ 25.80

Granted 0.9 $ 26.61

Vested ( 0.6 ) $ 19.02

Non-vested, December 31, 2020 2.3 $ 28.10

9 unchanged sentences

Pension adjustment, net of tax ( 56 ) ( 40 )

Accumulated other comprehensive loss $ ( 2,133 ) $ ( 2,086 )

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.

11 unchanged sentences

(in millions) 2020 2019 2018

Gain on the Skincare Sale

Gain on the iNova Sale

Gain on the Dendreon Sale

Loss on the Sprout Sale

Net (gain) loss on other sales of assets

Litigation and other matters $ 422 $ 1,401 $ ( 27 )

Acquired in-process research and development costs 32 41 1

Net (gain) loss on sales of assets ( 1 ) ( 31 ) 6

Acquisition-related costs — 8 1

Other, net 1 ( 5 ) ( 1 )

Other expense (income), net $ 454 $ 1,414 $ ( 20 )

In 2020, Litigation and other matters of $ 422 million includes net charges related to the U.S.

Securities Litigation, the SEC Investigation and the Canadian Securities Litigation and related opt-outs.

In 2020, Litigation and other matters also includes an insurance recovery related to a certain litigation matter.

In 2019, Litigation and other matters of $ 1,401 million includes the settlement of a legacy U.S.

securities class action matter (which is subject to final court approval) .

securities class action matter (which is subject to an objector’s appeal of the final court approval).

In 2018, Litigation and other matters of $ 27 million includes a favorable adjustment of $ 40 million related to the Salix legacy litigation matter.

In 2017, Litigation and other matters of $ 226 million includes:

(i) $ 96 million related to the settlement of the Allergan shareholder class actions, (ii) $ 93 million related to the settlement of the Solodyn ® antitrust class actions litigation and (iii) $ 20 million related to the Mimetogen Pharmaceuticals litigation.

These matters and other significant matters are discussed in further detail in Note 20, "LEGAL PROCEEDINGS".

In 2019, Net (gain) loss on other sales of assets includes $ 20 million related to the achievement of a milestone related to a certain product.

In 2019, Acquired in-process research and development costs includes $ 38 million of in-process research and development costs associated with the upfront payments to enter into certain exclusive licensing agreements.

In 2020 and 2019, Acquired in-process research and development costs of $ 32 million and $ 41 million, primarily consist of costs associated with the upfront payments to enter into certain exclusive licensing agreements.

In 2019, Net (gain) loss on sales of assets includes $ 20 million related to the achievement of a milestone related to a certain product.

The components of Loss before benefit from income taxes for 2020, 2019 and 2018 consist of:

(in millions) 2020 2019 2018

Domestic $ ( 410 ) $ ( 2,396 ) $ ( 1,475 )

Foreign ( 524 ) 559 ( 2,679 )

$ ( 934 ) $ ( 1,837 ) $ ( 4,154 )

The components of Benefit from income taxes for 2020, 2019 and 2018 consist of:

(in millions) 2020 2019 2018

Domestic $ ( 8 ) $ ( 12 ) $ —

Foreign ( 216 ) ( 116 ) ( 327 )

( 224 ) ( 128 ) ( 327 )

Domestic 9 ( 5 ) 17

Foreign 590 187 320

$ 375 $ 54 $ 10

The Benefit from income taxes differs from the expected amount calculated by applying the Company’s Canadian statutory rate of 26.9 % to Loss before benefit from income taxes for 2020, 2019 and 2018 as follows:

5 unchanged sentences

Adjustments to tax attributes 26 ( 99 ) ( 4 )

Impact of changes in enacted income tax rates

Change in valuation allowance related to foreign tax credits and NOLs

Change in valuation allowance on Canadian deferred tax assets and tax rate changes

687 ( 142 ) ( 875 )

Change in uncertain tax positions ( 163 ) ( 350 ) ( 47 )

1 unchanged sentence

Non-deductible portion of Goodwill impairments — — ( 488 )

Tax differences on divestitures of businesses

Tax benefit on intra-entity transfers ( 338 ) — 356

Other ( 13 ) ( 49 ) ( 33 )

$ 375 $ 54 $ 10

Deferred tax assets and liabilities as of December 31, 2020 and 2019 consist of:

2 unchanged sentences

Tax loss carryforwards $ 2,924 $ 2,911

Provisions 1,004 641

Research and development tax credits 172 155

13 unchanged sentences

Outside basis differences 71 41

Unrealized FX on U.S.

dollar debt and other financing cost 2 —

Total deferred tax liabilities 390 150

Net deferred tax asset (liability)

On December 22, 2017, the Tax Act was signed into law and included a number of changes in the U.S.

Net deferred tax asset $ 1,609 $ 985

The following table presents a reconciliation of the deferred tax asset valuation allowance for 2020, 2019 and 2018:

(in millions) 2020 2019 2018

Balance, beginning of year $ 2,831 $ 2,913 $ 2,001

Charged to Benefit from income taxes ( 773 ) 13 870

Charged to other accounts 194 ( 95 ) 42

Balance, end of year $ 2,252 $ 2,831 $ 2,913

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 EBIT thereafter.

Disallowed interest can be carried forward indefinitely and any unused interest deduction assessed for recoverability.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

The CARES Act also amended the annual limitation on the deduction of interest in the following respects:

(i) increasing the limitation to 50% of adjusted taxable income (“ATI”), (ii) providing a rule for a partnership’s 2019 section 163(j)-disallowed interest expense and (iii) allowing an election to apply 2019 ATI to the 2020 section 163(j) computation.

For corporations, the increase to 50% of ATI applies to all taxable years beginning in 2019 or 2020 and permits taxpayers whose 2020 income will decrease from its 2019 level, an election to apply their 2019 ATI, rather than their 2020 ATI, to their 2020 computation.

The Company considered such provisions and expects to fully utilize any interest carry forwards in future periods.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law and included a number of changes in the U.S.

tax law, most notably a reduction of the U.S.

4 unchanged sentences

net operating losses ("NOLs") to offset this income inclusion.

The Tax Act also includes two 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 GILTI 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 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.

Income tax expense for years after 2017 includes the effects of the Tax Act including both GILTI and BEAT.

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 EBIT thereafter.

Disallowed interest can be carried forward indefinitely and any unused interest deduction assessed for recoverability.

The Company considered such provisions in 2018 and 2019 and expects to fully utilize any interest carry forwards in future periods.

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 utilized NOLs to offset the provisionally determined $ 88 million Transition Toll Tax and therefore no amount was recorded as payable.

The Company 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.

the Company's residual U.S.

federal income tax liability of $ 299 million prior to the Tax Act was reversed and the Company recognized a deferred tax benefit of $ 299 million in the fourth quarter of 2017.

The provisional amounts included in Benefit from income taxes for the year 2017, including the Transition Toll Tax, were finalized during 2018.

Differences between the provisional net income tax benefits provided for the year 2017 attributable to the Tax Act of $ 975 million , as previously disclosed, and the benefit for income taxes as finalized are included in the Benefit from income taxes for 2018 and were not material to the Company’s financial results for the year 2018.

The Company has provided for income taxes, including the impacts of the Tax Act, in accordance with guidance issued by accounting regulatory bodies, the U.S.

Differences between the provisional net income tax benefits provided for the year 2017 attributable to the Tax Act and the benefit for income taxes as finalized are included in the Benefit from income taxes for 2018 and were not material to the Company’s financial results for the year 2018.

The Company has provided for income taxes in accordance with guidance issued by accounting regulatory bodies, the U.S.

Internal Revenue Service and state and local governments through the date of the issuance of these Consolidated Financial Statements.

1 unchanged sentence

While management continues to monitor these matters, the ultimate impact, if any, as a result of the application of any guidance issued in the future cannot be determined at this time.

In 2017, the Company liquidated its top U.S.

subsidiary (Biovail Americas Corp.) in a taxable transaction that resulted in a taxable loss which was of a character that offset certain gains from internal restructurings and third-party divestitures, the excess of which was, under U.S.

tax law, able to be carried back to offset previously recognized gains in 2016, 2015 and 2014.

This carryback resulted in an increase in the deferred tax asset for NOLs previously utilized against such gains.

In connection with this taxable transaction, the Company recognized a net income tax benefit of approximately $ 400 million related to the carryback of losses and reversed a previously established deferred tax liability of approximately $ 1,900 million .

The realization of deferred tax assets is dependent on the Company generating sufficient domestic and foreign taxable income in the years that the temporary differences become deductible.

A valuation allowance has been provided for the portion of the deferred tax assets that the Company determined is more likely than not to remain unrealized based on estimated future taxable income and tax planning strategies.

As a result of taxable losses in Canada as offset by a reduction of deferred tax assets due to internal restructurings, the valuation allowance decreased by $ 82 million during 2019 and increased by $ 912 million during 2018.

As a result of taxable losses in Canada as offset by a reduction of deferred tax assets due to internal restructurings, the valuation allowance decreased by $ 579 million during 2020 and decreased by $ 82 million during 2019.

Given the Company’s history of pre-tax losses and expected future losses in Canada, the Company maintained that there was insufficient objective evidence to release the valuation allowance against Canadian tax loss carryforwards, International Tax Credits (“ITC”) and pooled Scientific Research and Experimental Development Tax Incentive (“SR&ED”) expenditures.

10 unchanged sentences

were approximately $ 110 million and $ 106 million, respectively, which includes acquired research and development credits and which expire in the years 2021 through 2040.

The Company intends to amend prior U.S.

tax filings in order to deduct foreign taxes rather than take a foreign tax credit.

Therefore, during 2017, the Company reversed the deferred tax asset and associated valuation allowance of approximately $ 342 million in U.S.

foreign tax credits, including acquired U.S.

foreign tax credits.

The Company recorded a deferred tax benefit of $ 84 million for such deduction and adjusted its expected NOL carryforward accordingly.

In conjunction with the Sprout Sale in 2017, the Company recognized a capital loss and established a valuation allowance on the portion of the loss for which a benefit is not expected to be realized.

Previously valued capital loses utilized during 2019 were not material.

As of December 31, 2020 and 2019, the Company had accumulated taxable losses available to offset future years’ taxable income in Ireland of approximately $ 8,387 million and $ 6,765 million, respectively.

3 unchanged sentences

The Company continues to assert that the unremitted earnings of its U.S.

subsidiaries will be permanently

reinvested and not repatriated.

subsidiaries will be permanently reinvested and not repatriated.

As of December 31, 2020, the Company estimates there will be no tax liability attributable to the permanently reinvested U.S.

2 unchanged sentences

In 2020 and 2019, the Company recognized net increases to unrecognized tax benefits for current year tax positions of $ 66 million and $ 362 million, respectively.

The Company recognized a net reduction of $ 13 million during 2019 and a net increase of $ 38 million during 2018 in the unrecognized tax benefits related to tax positions taken in the prior years.

The Company recognized a net reduction of $ 42 million during 2020 and a net reduction of $ 13 million during 2019 in the unrecognized tax benefits related to tax positions taken in the prior years.

The Company provides for interest and penalties related to unrecognized tax benefits in the provision for income taxes.

As of December 31, 2019 and 2018 , accrued interest and penalties related to unrecognized tax benefits were approximately $ 45 million and $ 42 million , respectively.

As of December 31, 2020 and 2019, accrued interest and penalties related to unrecognized tax benefits were approximately

$ 49 million and $ 45 million, respectively.

In 2020 and 2019, the Company recognized a net increase of approximately $ 4 million and $ 3 million of interest and penalties, respectively.

5 unchanged sentences

United States - Federal 2015 - 2019

Canada 2005 - 2019

Germany 2014 - 2019

France 2013 - 2019

China 2016 - 2019

Ireland 2016 - 2019

Netherlands 2016 - 2019

Australia 2011 - 2019

The Internal Revenue Service completed its examinations of the Company’s U.S.

17 unchanged sentences

On August 8, 2017, 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 that its tax positions are appropriate and supported by the facts, circumstances and applicable laws.

The Company disagrees with the assessment and continues to believe 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 cover any potential cash outlays regarding this assessment.

As of December 31, 2017, Restricted cash of $ 77 million was deposited with a bank as collateral to secure a bank guarantee for the benefit of the Australian Government.

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.

The Company's U.S.

11 unchanged sentences

Balance, end of year $ 1,025 $ 1,002 $ 654

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits at December 31, 2019 could decrease by approximately $ 110 million in the next twelve months as a result of the resolution of certain tax audits and other events.

(LOSS) EARNINGS PER SHARE

(Loss) earnings per share attributable to Bausch Health Companies Inc.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits at December 31, 2020 could decrease by approximately $ 145 million in the next twelve months as a result of the resolution of certain tax and transfer pricing audits and other events.

LOSS PER SHARE

Loss per share attributable to Bausch Health Companies Inc.

for 2020, 2019 and 2018 were calculated as follows:

(in millions, except per share amounts) 2020 2019 2018

Net (loss) income attributable to Bausch Health Companies Inc.

Basic weighted-average number of common shares outstanding

Dilutive effect of stock options, RSUs and other

Diluted weighted-average number of common shares outstanding

(Loss) earnings per share attributable to Bausch Health Companies Inc.

Net loss attributable to Bausch Health Companies Inc.

$ ( 560 ) $ ( 1,788 ) $ ( 4,148 )

Basic and diluted weighted-average common shares 355.0 352.1 351.3

Basic and diluted loss per share attributable to Bausch Health Companies Inc.

$ ( 1.58 ) $ ( 5.08 ) $ ( 11.81 )

In 2020, 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.

15 unchanged sentences

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 December 31, 2019 , the Company's Consolidated Balance Sheets includes accrued current loss contingencies of $ 1,397 million , inclusive of the settlement of the U.S.

Securities Litigation (as discussed below) and related to other matters which the Company believes a potential resolution or settlement is both probable and reasonably estimable.

As of December 31, 2020, the Company's Consolidated Balance Sheets includes accrued current loss contingencies of $ 1,672 million related to matters which the Company believes a potential resolution or settlement is 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.

1 unchanged sentence

Governmental and Regulatory Inquiries

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 Rx Services, LLC ("Philidor"), its accounting practices and policies, its public disclosures and other matters.

The Company is cooperating with the SEC in this matter, has agreed to a tolling agreement with the SEC regarding certain potential claims and continues to engage in discussions with the SEC regarding resolution of the matter.

Although 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, the Company expects that it will likely result in damages, settlement payments, fines, penalties, consent orders or other administrative sanctions against the Company and/or certain of its former legacy directors and officers, any of which could be material.

As a result, although no agreement has been reached, the Company has recorded an estimated liability based on these discussions which is included in the Company's accrued current loss contingencies.

The final resolution may differ from the Company's current estimate and it could be material to the Company’s results of operations.

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 against it.

The Company cannot predict whether any enforcement action against the Company will result from such investigation.

Investigation by the U.S.

Attorney's Office for the District of Massachusetts - re Arestin ®

Attorney's Office for the District of Massachusetts - re OraPharma

In August 2019, the Company received a subpoena from the U.S.

Attorney's Office for the District of Massachusetts.

The materials requested pursuant to the subpoena include documents concerning the sales, marketing, coverage and reimbursement

of Arestin ® , including related support services, and other matters.

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 District of Massachusetts - re patient assistance and pricing

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 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.

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 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.

Attorney's Office for the District of Massachusetts requesting materials including documents concerning the sales, marketing, coverage and reimbursement of Arestin ® , including related support services, and other matters.

The Company is cooperating with this investigation.

6 unchanged sentences

15-cv-07658).

On January 31, 2021 the District Court issued an order granting final approval of this settlement.

On February 4, 2021, Timber Hill filed a notice of appeal of the Court’s final approval order, which overruled its objections to the allocation of settlement proceeds as between common stock and options.

The deadline for other parties to file notices of appeal from the final approval order is March 2, 2021.

In October 2015, four putative securities class actions were filed in the U.S.

3 unchanged sentences

Securities Litigation, Case No.

On June 24, 2016, the lead plaintiff filed a consolidated complaint asserting 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.

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.

On September 20, 2018, lead plaintiff filed an amended complaint, adding claims against ValueAct Capital Management L.P.

and affiliated entities ("ValueAct").

On October 31, 2018, a third-party defendant, ValueAct, filed a motion to dismiss.

On June 30, 2019, the Court denied the motion to dismiss and ValueAct has filed for interlocutory appeal of this decision.

On December 16, 2019, the Company, the current or former officers and directors, ValueAct, and the underwriters announced that they agreed to resolve the securities action for $ 1,210 million , subject to final court approval.

Once approved by the court, the settlement will resolve and discharge all claims against the Company in the class action.

As part of the settlement, the Company and the other settling defendants admitted no liability as to the claims against it and deny all allegations of wrongdoing .

The opt-out litigations related to this matter discussed above remain ongoing.

On January 10, 2020, the Company made a payment of $ 200 million into an escrow fund under the terms of the settlement agreement.

On January 27, 2020 the court preliminarily approved the settlement and scheduled the final settlement approval hearing for May 27, 2020.

The balance of the settlement will be paid in accordance with the payment schedule outlined in the settlement agreement.

On December 16, 2019, the Company, the current or former officers and directors, ValueAct, and the underwriters announced that they agreed to resolve the securities action for $ 1,210 million.

This settlement received final approval from the court on January 31, 2021 and will resolve and discharge all claims against the Company in the class action.

As part of the settlement, the Company and the other settling defendants admitted no liability as to the claims against it and denied all allegations of wrongdoing.

In order to qualify for a settlement payment all persons and entities that purchased or otherwise acquired the Company securities during the class period must have submitted a proof of claim and release form by May 6, 2020.

The settlement payment was paid into an escrow fund in accordance with the settlement agreement.

The opt-out litigations discussed below remain ongoing.

10 unchanged sentences

On August 15, 2019, the Court denied the motion to dismiss the Timber Hill action, holding that this complaint was a legal nullity as a result of the June 11, 2018 consolidation order.

In addition to the consolidated putative class action, thirty-three groups of individual investors in the Company’s stock and debt securities have chosen to opt out of the consolidated putative class action and filed securities actions pending in the U.S.

In addition to the consolidated putative class action, thirty-seven groups of individual investors in the Company’s stock and debt securities 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.

15 unchanged sentences

Valeant Pharmaceuticals International, Inc.

16-cv-7328) (“BlueMountain”);

Incline Global Master LP v.

66 unchanged sentences

19-cv-18473) (“Connecticut”);

and Delaware Public Employees’ Retirement System v.

Delaware Public Employees’ Retirement System v.

Valeant Pharmaceuticals International, Inc.

19-cv-18475) (“Delaware”);

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.

Some plaintiffs additionally assert claims under the New Jersey Racketeer Influenced and Corrupt Organizations Act and one plaintiff asserts claims under the Connecticut Uniform Securities Act.

Maverick Neutral Levered Fund v.

Valeant Pharmaceuticals International, Inc.

20-cv-02190) (“Maverick”), Templeton v.

Valeant Pharmaceuticals International, Inc.

20-cv-05478) (“Templeton”), USAA Mutual Funds Trust, et al.

Valeant Pharmaceuticals International, Inc., et al., (Case No.

20-cv-07462) (“USAA”), and GIC Private Ltd.

Valeant Pharmaceuticals International, Inc., (Case No.

20-cv-07460) (“GIC”).

Twelve of the thirty-seven opt out actions have been dismissed;

and the total number of remaining opt out actions pending in the District of New Jersey is twenty-five actions.

Four additional matters have been settled and dismissals are expected in March 2021.

These individual shareholder actions assert claims under Sections 10(b), and 20(a) of the Exchange Act.

Certain of these individual actions assert additional claims, including claims under Section 18 of the Exchange Act, Sections 11, 12(a)(2), and 15 of the Securities Act, common law fraud, negligent misrepresentation, and claims under the New Jersey Racketeer Influenced and Corrupt Organizations Act.

These claims are based on alleged purchases of Company stock, options, and/or debt at various times between January 3, 2013 and August 10, 2016.

The allegations in the complaints are similar to those made by plaintiffs in the putative class action.

7 unchanged sentences

(“Aly”) (Case No.

18-cv-17393) opt-out

18-cv-17393) opt-out action.

On October 9, 2019, the Aly Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit.

On December 13, 2019, the Court granted the Company’s motion to dismiss the Catalyst complaint in its entirety.

Oral argument on Plaintiffs’ appeal was held on October 20, 2020.

On June 19, 2020, the Court entered stipulations of voluntary dismissal in the Catalyst, Mississippi, Connecticut, and Delaware actions.

On July 13, 2020, the Court entered a stipulation of voluntary dismissal in the NYCERS action.

On December 30, 2020, the Court entered a stipulation of voluntary dismissal in the BlueMountain action.

On February 18, 2021, the Court entered stipulations of voluntary dismissal in the T.

Rowe, BloombergSen, Principal Funds and Equity Trustees actions.

The Company disputes the claims against it in the remaining individual opt-out complaints and intends to defend itself vigorously.

35 unchanged sentences

On October 26, 2017, the plaintiffs issued their Judicial Application Originating Class Proceedings.

After a hearing on November 11, 2019, the court approved a settlement in the Catucci action between the class members and the Company’s auditors and the action was dismissed as against them.

On August 4, 2020, the Company entered into a settlement agreement with the plaintiffs in Catucci, on behalf of the class, pursuant to which it agreed to resolve the Catucci action for the amount of CAD 94,000,000 plus payment of an additional amount to cover notice and settlement administration costs and disbursements.

As part of the settlement, the Company and the other defendants admitted no liability as to the claims against it and deny all allegations of wrongdoing.

Court approval of the settlement was granted after a hearing on November 16, 2020.

The Catucci action has now been dismissed against the Company, its current and former directors and officers, its underwriters and its insurers.

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.

16 unchanged sentences

On February 3, 2020, the Quebec Superior Court granted the applications of CalSTRS and BlackRock for leave to pursue their respective actions asserting claims under the Quebec Securities Act.

After a hearing on November 11, 2019, the court approved a settlement in the Catucci action between the class members and the Company’s auditors.

On June 16, 2020, the Quebec Court of Appeal granted the defendants leave to appeal that decision.

On October 8 and 9, 2020, respectively, CalSTRS delivered amended proceedings to, among other things, include a new alleged misrepresentation concerning the accounting treatment of “price appreciation credits” in respect of Glumetza ®

during the period covered by the claims.

CalSTRS has filed an application for permission to amend and the Company has filed an application to strike the amendments.

The Company believes that it has viable defenses in each of these actions.

10 unchanged sentences

Pershing Square Capital Management, L.P., et al.

(under the 2013-2014 coverage period), and (ii) 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, 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.

Between May 27, 2016 and September 16, 2016, three actions were filed in the U.S.

District Court for the District of New Jersey against the Company and various third-parties (these actions were subsequently consolidated), 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.

On November 30, 2016, the Court entered an order consolidating the three actions under the caption In re Valeant Pharmaceuticals International, Inc.

8 unchanged sentences

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.

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.

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.

On August 28, 2019, the Company filed a motion to dismiss the amended complaint.

Briefing on this motion concluded on October 25, 2019.

A Special Master appointed by the Court has recommended that the Company’s motion to dismiss be denied, but a final decision is still pending with the Court.

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

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.

In October 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.

2 unchanged sentences

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.

Valeant Pharmaceuticals International, Inc.

3:18-cv-08705).

On October 9, 2019, the Court entered the consent order.

This matter is currently stayed pending the completion of discovery in one of the above-noted federal opt-out cases.

The Company disputes the claims and intends to vigorously defend this matter.

6 unchanged sentences

3:19-cv-17987).

Plaintiffs in both cases assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment 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.

The claims alleged in these cases are based on the same purported conduct that is at issue in In re Valeant Pharmaceuticals International, Inc.

On March 7, 2020, a consolidated amended derivative complaint was filed, captioned In re Bausch Health Companies Inc.

F/K/A/ Valeant Pharmaceuticals International, Inc.

Stockholder Derivative Litigation (Case No.

19-cv-17833).

Plaintiffs assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment 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.

The consolidated complaint also asserts a claim for contribution and indemnification by the Defendants for any liability the Company ultimately faces as a result of the conduct alleged in the complaint.

alleged in these cases are based on the same purported conduct that is at issue in In re Valeant Pharmaceuticals International, Inc.

Securities Litigation, all of which occurred prior to 2017.

1 unchanged sentence

On January 3, 2020, the parties submitted a letter to the Court requesting consolidation of the two derivative lawsuits.

The Company disputes these claims and intends to defend itself vigorously.

On April 21, 2020, the Defendants filed a motion to dismiss the consolidated amended complaint.

Briefing on this motion concluded on August 3, 2020.

On November 24, 2020, the Special Master appointed by the Court issued a report recommending that the motion to dismiss be granted in full.

While a final decision is still pending with the Court, Plaintiffs are not contesting the dismissal in full.

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

Generic Pricing Antitrust Litigation

1 unchanged sentence

(“Oceanside”), Bausch Health US, LLC (formerly Valeant Pharmaceuticals North America LLC) (“Bausch Health US”), and Bausch Health Americas, Inc.

(formerly Valeant Pharmaceuticals International) (“Bausch Health Americas”) (for the purposes of this subsection, collectively, the “Company”), are defendants in multidistrict antitrust litigation (“MDL”) entitled In re:

(formerly Valeant Pharmaceuticals International) (“Bausch Health Americas”) (for the purposes of this paragraph, collectively, the “Company”), are defendants in multidistrict antitrust litigation (“MDL”) 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 lawsuits seek damages under federal and state antitrust laws, state consumer protection and unjust enrichment laws and allege that the Company’s subsidiaries entered into a conspiracy to fix, stabilize, and raise prices, rig bids and engage in market and customer allocation for generic pharmaceuticals.

The initial lawsuit to which the Company was added as a defendant in June 2018 was filed by a putative class of direct purchaser plaintiffs.

In December 2018, certain direct purchaser plaintiffs that had opted out of this putative class filed an amended complaint in the MDL that added the Company, alleging similar claims as the direct purchaser plaintiffs’ putative class action complaint.

In February 2019, the Company filed a motion to dismiss the individual claims brought against it and that motion remains pending.

In October 2019, an end payer plaintiff that had opted out of the putative end payer class filed a complaint against the Company in the Eastern District of Pennsylvania alleging similar claims.

In December 2019, end payer opt-out complaints also were filed against the Company in the Eastern District of Pennsylvania and in the Northern District of California.

In December 2019, separate putative class action complaints were filed against the Company in the Eastern District of Pennsylvania by end payer and indirect reseller plaintiffs.

In February 2020, a new putative class action complaint was filed against the Company in the Eastern District of Pennsylvania by direct purchaser plaintiffs.

The cases have been consolidated into the MDL.

There are also additional, separate complaints by other plaintiffs which have been consolidated in the same MDL that do not name the Company or any of its subsidiaries as a defendant.

The lawsuits, which have been brought as putative class actions by direct purchasers, end payers, and indirect resellers, and as direct actions by direct purchasers, end payers, insurers, States, and various Counties, Cities, and Towns, have been or are expected to be consolidated into the MDL.

There are also additional, separate complaints which have been consolidated in the same MDL that do not name the Company or any of its subsidiaries as a defendant.

In July 2019, 87 health plans commenced an action in the Court of Common Pleas of Philadelphia County against the Company and other defendants related to the multidistrict litigation, but no complaint has been filed and the case has been put in deferred status.

In May 2020, seven health plans commenced an additional action in the Court of Common Pleas of Philadelphia County against the Company and other defendants related to the multidistrict litigation, but no complaint has been filed.

The Company disputes the claims against it and continues to defend itself vigorously.

Additionally, Bausch Health Companies Inc.

and certain U.S.

and Canadian subsidiaries (for the purposes of this paragraph, collectively “the Company”) have been named as defendants in a proposed class proceeding entitled Kathryn Eaton vs.

Teva Canada Limited, et al.

in the Federal Court in Toronto, Ontario, Canada (Court File No.

The plaintiff seeks to certify a proposed class action on behalf of persons in Canada who purchased generic drugs in the private sector, alleging that the Company and other defendants violated the Competition Act by conspiring to allocate the market, fix prices, and maintain the supply of generic drugs, and seeking damages under federal law.

The proposed class action contains similar allegations to the In re:

Generic Pharmaceuticals Pricing Antitrust Litigation pending in the United States Court for the Eastern District of Pennsylvania.

The Company disputes the claims against it and will defend itself vigorously.

Glumetza Antitrust Litigation

Between August and December 2019, six (6) putative antitrust class actions and two (2) non-class complaints were filed in the Northern District of California against the Company, Salix Pharmaceuticals, Ltd., Salix Pharmaceuticals, Inc., and Santarus, Inc.

(among other defendants) (the “California Actions”).

One of these class actions has been voluntarily dismissed.

Three of the remaining class actions were filed by plaintiffs seeking to represent a class of direct purchasers and two of the class actions were filed by end payer purchasers.

The purported classes of direct purchasers and end payer purchasers filed consolidated amended complaints on November 25, 2019.

The two non-class complaints were filed by direct purchasers.

These actions have been consolidated and coordinated in In re Glumetza Antitrust Litigation , Case No.

Between August 2019 and July 2020, eight (8) putative antitrust class actions and four (4) non-class complaints naming the Company, Salix Pharmaceuticals, Ltd., Salix Pharmaceuticals, Inc., and Santarus, Inc.

(for purposes of this subsection, collectively, the “Company”), among other defendants, were filed or transferred to the Northern District of California.

Three (3) of the class actions were filed by plaintiffs seeking to represent a class of direct purchasers.

The purported classes of direct purchasers filed a consolidated first amended complaint and a motion for class certification in April 2020.

The court certified a direct purchaser class in August 2020.

The putative class action complaints filed by end payer purchasers have all been voluntarily dismissed.

Three (3) of the non-class complaints were filed by direct purchasers.

The fourth non-class complaint, asserting claims based on both direct and indirect purchases, was filed by an insurer plaintiff in July 2020 and subsequently amended in September 2020.

In December 2020, the court denied the Company’s motion to dismiss as to the insurer plaintiff’s direct claims but dismissed the insurer plaintiff’s indirect claims.

On February 2, 2021, the insurer plaintiff’s motion for leave to amend its complaint was denied.

On February 8, 2021, the insurer plaintiff filed an action in state court asserting state law claims.

The federal actions, five (5) of which remain pending, have been consolidated and coordinated in In re Glumetza Antitrust Litigation , Case No.

3:19-cv-05822-WHA.

In February 2020, an additional non-class complaint was filed in the Northern District of California and two (2) additional class actions were filed - one in the Northern District of California and one in the Southern District of Florida (the "Florida Action") (collectively, the "February 2020 Actions").

The February 2020 Actions are brought against the same defendants and allege the same anticompetitive conduct alleged in the California Actions.

The Florida Action has been ordered to be transferred to the Northern District of California.

Both class and non-class direct purchaser plaintiffs seek damages under federal antitrust laws and the end payer purchasers seek damages under state antitrust, consumer protection, and unjust enrichment laws.

The lawsuits allege that a 2012 settlement of a patent litigation regarding Glumetza ® delayed generic entry in exchange for an agreement not to launch an authorized generic of Glumetza ® or grant any other company a license to do so.

The complaints allege that the settlement agreement resulted in higher prices for Glumetza ® and its generic equivalent both prior to and after generic entry.

Motions to dismiss the California Actions are fully briefed and set for oral argument on February 20, 2020.

The Company and its affiliates named in these cases dispute the claims against them and intend to vigorously defend these matters.

The complaints allege that the settlement agreement resulted in higher prices for

Glumetza ® and its generic equivalent both prior to and after generic entry.

Both the class and non-class plaintiffs seek damages under federal antitrust laws for claims based on direct purchases.

All Plaintiffs have filed a motion for partial summary judgment concerning market power, whereas all Defendants have filed a motion for summary judgment on all claims against them.

The Company disputes the claims against it and intends to vigorously defend these matters.

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 ® , Uceris ® , Xifaxan ® 200mg, Xifaxan ® 550mg, Plenvu ® , and Jublia ® in the United States and Jublia ® in Canada, or other similar suits.

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 ® , Xifaxan ® 550mg, Plenvu ® , Bryhali ® , Duobrii ® and Jublia ® in the United States and Jublia ® 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 December 2019, the Company announced that the Company had agreed to resolve the outstanding intellectual property litigation with Glenmark Pharmaceuticals, Ltd.

("Glenmark") regarding Bryhali ® .

As part of the agreement the Company grants Glenmark a non-exclusive license effective 2026 to its intellectual property relating to Bryhali ® and the parties agreed to dismiss all litigation related to Bryhali ® and all intellectual property protecting Bryhali ® remains intact.

In September 2019, the Company received a Notice of Paragraph IV Certification from Sandoz, Inc.

24 unchanged sentences

19-18566) pursuant to the Hatch-Waxman Act, alleging infringement by Sandoz of one or more claims of each of the Xifaxan ® Patents, thereby triggering a 30 -month stay of the approval of Sandoz’s ANDA for rifaximin tablets, 550 mg.

Xifaxan ® is protected by 23 patents covering the composition of matter and the use of Xifaxan ® listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or the Orange Book.

The claim is substantially similar to the claim brought by Actavis in February 2016 that was settled in September 2018.

The Company remains confident in the strength of the Xifaxan ® patents and will continue to vigorously pursue this matter and defend its intellectual property.

On February 17, 2020, the Company and Alfasigma received a Notice of Paragraph IV Certification from Norwich Pharmaceuticals Inc.

Xifaxan ® 550 mg is protected by 26 patents covering the composition of matter and the use of Xifaxan ® listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or the Orange Book.

On May 6, 2020, the Company announced that an agreement had been reached with Sandoz that resolved this litigation.

Under the terms of the agreement, the parties agreed to dismiss all litigation related to Xifaxan ® (rifaximin), Sandoz 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 October 2029.

The agreement also grants Sandoz 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).

Under the terms of the agreement, beginning January 1, 2028 (or earlier under certain circumstances), Sandoz will have the right to market a royalty-free generic version of Xifaxan ® (rifaximin) 550 mg tablets, should it receive approval from the FDA on its ANDA.

Sandoz 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 in the United States before January 1, 2028.

The Company will not make any financial payments or other transfers of value as part of this agreement with Sandoz.

On February 17, 2020, the Company and Alfasigma S.p.A.

("Alfasigma") received a Notice of Paragraph IV Certification from Norwich Pharmaceuticals Inc.

(“Norwich”), in which Norwich asserted that the following U.S.

patents, each of which is listed in the FDA’s Orange Book for Salix Inc.

Xifaxan ® tablets, 550 mg, are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Norwich’s generic rifaximin tablets, 550 mg, for which an ANDA has been filed by Norwich:

8,309,569 (the “‘569 patent”), U.S.

7,045,620 (the “‘620 patent”), U.S.

7,612,199 (the “‘199 patent”), U.S.

7,902,206 (the “‘206 patent”), U.S.

7,906,542 (the “‘542 patent”), U.S.

7,915,275 (the “‘275 patent”), U.S.

8,158,644 (the “‘644 patent”), U.S.

8,158,781 (the “‘781 patent”), U.S.

8,193,196 (the “‘196 patent”), U.S.

8,518,949 (the “‘949 patent”), U.S.

8,642,573 (the “573 patent”), U.S.

patents, each of which is listed in the FDA’s Orange Book for the Company's Xifaxan ® tablets, 550 mg, are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Norwich’s generic rifaximin tablets, 550 mg, for which an ANDA has been filed by Norwich:

each of the Xifaxan ® Patents (as described above), as well as U.S.

8,642,573 (the “573 patent”), U.S.

9 unchanged sentences

10,709,694 (the “‘694 patent”), and U.S.

10,456,384 (the “‘384 patent”) (collectively, the “Xifaxan ® Patents”).

holds the NDA for Xifaxan ® and is the owner of the ‘569 patent, the ‘573 patent, the ‘017 patent, the ‘252 patent, the ‘398 patent, the ‘195 patent, the ‘9828 patent, the ‘4828 patent, the ‘397 patent, the ‘384 patent.

Alfasigma is the owner of the ‘620 patent, the ‘199 patent, the ‘206 patent, the ‘542 patent, the ‘275 patent, the ‘644 patent, the ‘781 patent, the ‘196 patent, the ‘949 patent, the ‘904 patent, the ‘452 patent, the ‘231 patent, and the ‘968 patent, each of which has been exclusively licensed to Salix Inc.

10,765,667 (the “‘667 patent”).

holds the NDA for Xifaxan ® and is the

owner of the ‘569 patent, the ‘573 patent, the ‘017 patent, the ‘252 patent, the ‘398 patent, the ‘195 patent, the ‘9828 patent, the ‘4828 patent, the ‘397 patent, the ‘384 patent, the ‘694 patent, and the ‘667 patent.

Alfasigma is the owner of the ‘620 patent, the ‘199 patent, the ‘206 patent, the ‘542 patent, the ‘275 patent, the ‘644 patent, the ‘781 patent, the ‘196 patent, the ‘949 patent, the ‘904 patent, the ‘452 patent, the ‘231 patent, the ‘968 patent, and the ‘763 patent, each of which has been exclusively licensed to Salix Inc.

and/or its affiliate, Bausch Health Ireland Limited (“BIRL”) to market Xifaxan ® tablets, 550 mg.

and its affiliates and Alfasigma (the “Plaintiffs”) have forty-five (45) days from the date of receipt of notice to file suit against Norwich pursuant to the Hatch-Waxman Act, alleging infringement by Norwich of one or more claims of each of the Xifaxan ® Patents, thereby triggering a 30-month stay of the approval of Norwich’s ANDA for rifaximin tablets, 550 mg.

The Plaintiffs intend to file suit per the regulations.

On March 26, 2020, certain of the Company’s subsidiaries and Alfasigma filed suit against Norwich in the U.S.

District Court for the District of Delaware (Case No.

20-cv-00430) pursuant to the Hatch-Waxman Act, alleging infringement by Norwich of one or more claims of the Xifaxan ® Patents, thereby triggering a 30 -month stay of the approval of Norwich’s ANDA for rifaximin tablets, 550 mg.

The Company remains confident in the strength of the Xifaxan ® patents and will continue to vigorously pursue this matter and defend its intellectual property.

In April 2019, the Company and Alfasigma commenced litigation against Sun Pharmaceutical Industries Ltd.

(“Sun”), alleging patent infringement by Sun’s filing of its ANDA for Xifaxan ® (rifaximin) 200 mg tablets.

This suit had been filed following receipt of a Notice of Paragraph IV Certification from Sun, in which Sun had asserted that the U.S.

patents listed in the FDA's Orange Book for the Company’s Xifaxan ® tablets, 200 mg, were either invalid, unenforceable and/or would not be infringed by the commercial manufacture, use or sale of Sun’s generic rifaximin tablets, 200 mg.

Subsequently, on August 10, 2020, the Company received an additional Notice of Paragraph IV Certification from Sun, in which Sun asserted that the U.S.

patents listed in the FDA's Orange Book for the Company’s Xifaxan ® tablets, 550 mg, were either invalid, unenforceable and/or would not be infringed by the commercial manufacture, use or sale of Sun’s generic rifaximin tablets, 550 mg, for which an ANDA had been filed by Sun.

On September 22, 2020, the Company announced that an agreement had been reached with Sun that resolved the outstanding intellectual property disputes with Sun regarding Xifaxan ® (rifaximin) 200 mg and 550 mg tablets.

Under the terms of the agreement, the parties agreed to dismiss all litigation related to Xifaxan ® (rifaximin) and all intellectual property protecting Xifaxan ® (rifaximin) 200 mg and 550 mg tablets will remain intact and enforceable until expiry in July and October 2029, respectively.

The agreement also grants Sun a non-exclusive license to the intellectual property relating to Xifaxan ® (rifaximin) 200 mg and 550 mg tablets in the United States beginning January 1, 2028 (or earlier under certain circumstances).

Under the terms of the agreement, beginning January 1, 2028 (or earlier under certain circumstances), Sun will have the right to market royalty-free generic versions of Xifaxan ® (rifaximin) 200 mg and 550 mg tablets, should it receive approval from the FDA on its ANDAs.

Sun 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 in the United States before January 1, 2028.

On July 23, 2020, the Company received a Notice of Paragraph IV Certification from Perrigo Israel Pharmaceuticals, Ltd.

(“Perrigo”), in which Perrigo asserted that certain U.S.

patents, each of which is listed in the U.S.

Food and Drug Administration's (the "FDA") Orange Book for Duobrii ® (halobetasol propionate and tazarotine) lotion, are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Perrigo’s generic lotion, for which an Abbreviated New Drug Application (“ANDA”) has been filed by Perrigo.

On August 28, 2020, the Company filed suit against Perrigo pursuant to the Hatch-Waxman Act, alleging infringement by Perrigo of one or more claims of the Duobrii ® Patents, thereby triggering a 30 -month stay of the approval of the Perrigo ANDA.

On September 3, 2020, this action was consolidated with the action between the Company and Perrigo described below, regarding Perrigo’s ANDA for generic Bryhali ® (halobetasol propionate) lotion.

The Company remains confident in the strength of the Duobrii ® related patents and will vigorously defend its intellectual property.

On March 20, 2020, the Company received a Notice of Paragraph IV Certification from Perrigo, in which Perrigo asserted that certain U.S.

patents, each of which is listed in the FDA’s Orange Book for Bryhali ® (halobetasol propionate) lotion, 0.01% are either invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of Perrigo’s generic halobetasol propionate lotion, for which an ANDA has been filed by Perrigo.

On May 1, 2020, the Company filed suit against Perrigo pursuant to the Hatch-Waxman Act, alleging infringement by Perrigo of one or more claims of the Bryhali ® Patents, thereby triggering a 30 -month stay of the approval of the Perrigo ANDA for halobetasol propionate lotion.

On September 3, 2020, this action was consolidated with the action between the Company and Perrigo described above, regarding Perrigo’s ANDA for generic Duobrii ® (halobetasol propionate and tazarotine) lotion.

The Company remains confident in the strength of the Bryhali ® Patents and intends to vigorously pursue this matter and defend its intellectual property.

In addition, patents covering the Company's branded pharmaceutical products may be challenged in proceedings other than court proceedings, including inter partes review ("IPR") at the U.S.

3 unchanged sentences

For example, following Acrux DDS’s IPR petition, the U.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 eight other Orange Book-listed patents owned by the Company, which expire in the years 2028 through 2034.

Patent and Trial Appeal Board ("PTAB"), in May 2017, instituted inter

partes review for an Orange Book-listed patent covering Jublia ® , U.S.

7,214,506 (the “‘506 patent”).

On June 6, 2018, the PTAB issued a written determination invalidating such patent;

and on March 13, 2020, the Court of Appeals for the Federal Circuit reversed this decision and remanded the matter back to the PTAB for further proceedings.

As a result of a settlement, a joint motion to terminate the proceedings was filed on November 12, 2020 and, on January 8, 2021, the PTAB granted this motion.

The ‘506 Patent therefore remains valid and enforceable until its expected expiration in 2026.

Jublia ® continues to be covered by fourteen other Orange Book-listed patents owned by the Company and its licensor, which expire in the years 2028 through 2035.

Product Liability

Shower to Shower ® Products Liability Litigation

Since 2016, the Company has been named in one hundred sixty-five ( 165 ) product liability lawsuits involving the Shower to Shower ® body powder product acquired in September 2012 from Johnson & Johnson;

due to dismissals, only twelve ( 12 ) of such product liability suits currently remain pending, and these twelve ( 12 ) matters are subject to the Johnson & Johnson indemnification referenced below.

Since 2016, the Company has been named in a number of product liability lawsuits involving the Shower to Shower ® body powder product acquired in September 2012 from Johnson & Johnson;

due to dismissals, only twenty-eight ( 28 ) of such product liability suits currently remain pending, and these twenty-eight ( 28 ) matters are subject to the Johnson & Johnson indemnification referenced below.

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 will be paid by Johnson & Johnson.

The Company and Johnson & Johnson reached an agreement on April 17, 2019, regarding the scope of the indemnification relating to the majority of the Shower to Shower ® matters (the “Covered Matters”) and the Company has dismissed the demand for arbitration that the Company filed against Johnson & Johnson to assert its rights to indemnification.

Johnson & Johnson will fully indemnify the Company in the Covered Matters, which include (i) personal injury and 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 the manufacture, use, or sale of Shower to Shower ® up to and including September 9, 2012.

Johnson & Johnson will fully indemnify the Company in the Covered Matters, which include:

(i) personal injury and 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 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.

The various lawsuits include three cases originally filed 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, and one case that was filed in the District of Puerto Rico and subsequently transferred to the MDL.

The various lawsuits include a number of cases, either originally filed in or transferred to the In re Johnson & Johnson Talcum Powder Litigation , Multidistrict Litigation 2738, pending in the United States District Court for the District of New Jersey (“MDL”).

The Company and 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.

The plaintiff agreed to a dismissal of all claims against the Company and Bausch Health US without prejudice.

The plaintiff agreed to a dismissal of all claims against the Company and Bausch Health US in that matter 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 six 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 Bausch Health US only remaining in two cases pending in New Jersey and one case pending in Delaware.

Four of the six cases in the Superior Court of New Jersey were voluntarily dismissed as to Bausch Health US as well.

The allegations in the remaining three cases specifically directed to 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.

One hundred twenty-two ( 122 ) of the Delaware actions were voluntarily dismissed without prejudice pursuant to stipulation in January 2019, and although the stipulation permitted the cases to be filed again within 60 days , no ne of the cases have been refiled.

The Company has also been named in eighteen 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 the Superior Court of New Jersey alleging that the use of Shower to Shower ® caused the plaintiffs to develop ovarian cancer.

Nearly all of these actions have been voluntarily dismissed.

Presently, two cases remain pending in New Jersey and one in Delaware.

One of the New Jersey cases has not yet been served.

The allegations in these cases generally 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.

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);

3 unchanged sentences

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.

the Ohio Court of Common Pleas (Cuyahoga County);

and the District Court of Nueces County, Texas (transferred to the asbestos multidistrict litigation 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 voluntary 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 Court of Common Pleas of Cuyahoga County, Ohio, in which a Notice of Voluntary Dismissal Without Prejudice has been agreed to between the parties.

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.

4 unchanged sentences

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 British Columbia matter, the plaintiff sought 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.

On November 7, 2020, the British Columbia court issued a judgment declining to certify a class as to the Company or Shower to Shower ® , and at this time no appeal of that judgment has been filed.

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.

4 unchanged sentences

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.

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 a defendant.

Plaintiffs subsequently filed a motion to dismiss the lawsuit without prejudice.

The court dismissed the case without prejudice on December 18, 2019.

On April 15, 2019, a plaintiff filed a pre-suit notice letter with the California Attorney General notifying the Attorney General’s office of its 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.

On April 15, 2019, a plaintiff filed a pre-suit notice letter with the California Attorney General notifying the Attorney General’s office of its 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 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.

1 unchanged sentence

Bausch Health Companies, Inc., et al.

20STCV03578) in Los Angeles County Superior Court against the Company, Bausch Health US and several other manufacturers, distributors and retailers of talcum powder products, alleging violations of California Proposition 65 by manufacturing and distributing talcum powder products containing chemicals listed under the statue, without a compliant warning on the label.

The Company and Bausch Health US dispute the claims against them and intend to defend this lawsuit vigorously.

20STCV03578) in Los Angeles County Superior Court against the Company, Bausch Health US and several other manufacturers, distributors and retailers of talcum powder products, alleging violations of Proposition 65 by manufacturing and distributing talcum powder products containing chemicals listed under the statute, without a compliant warning on the label.

On January 29, 2021, certain defendants including the Company and Bausch Health US filed a Motion for Summary Judgment or in the Alternative Motion for Summary Adjudication, which remains pending.

On June 19, 2019, plaintiffs filed a proposed class action in California state court against Bausch Health US and Johnson & Johnson ( Gutierrez, et al.

1 unchanged sentence

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 and/or the California Safe Cosmetics Act.

This lawsuit was served on Bausch Health US on June 28, 2019 and was subsequently removed to the United States District Court for the Southern District of California, where it is currently pending.

This lawsuit was served on Bausch Health US in June 2019 and was subsequently removed to the United States District Court for the Southern District of California.

Plaintiffs seek damages, disgorgement of profits, injunctive relief, and reimbursement/restitution.

The Company filed a motion to dismiss Plaintiffs’ claims, which is fully briefed.

The Company and Bausch Health US dispute the claims against them and intend to defend this lawsuit vigorously.

The Company filed a motion to dismiss plaintiffs’ claims, which was granted in April 2020 without prejudice.

In May 2020, plaintiffs filed an amended complaint and in June 2020, filed a motion for leave to amend the complaint further, which was granted.

In August 2020, plaintiffs filed the Fifth Amended Complaint.

On January 22, 2021, the Court granted the motion to dismiss on all claims and dismissed the case with prejudice.

On February 19, 2021, plaintiffs filed a Notice of Appeal with the Ninth Circuit Court of Appeals.

The Company and Bausch Health US dispute the claims against them and intend to defend each of these lawsuits vigorously.

New Mexico Attorney General Consumer Protection Action

3 unchanged sentences

D-101-CV-2020-00013, filed on January 2, 2020), alleging consumer protection claims against Johnson & Johnson and Johnson & Johnson Consumer Companies, Inc., the Company and Bausch Health US related to Shower to Shower ® and its alleged causal link to mesothelioma and other cancers.

As indicated above,

the Company acquired Shower to Shower ® in September 2012 from Johnson & Johnson.

The State of New Mexico brings claims against all defendants under the New Mexico Unfair Practices Act, the New Mexico Medicaid Fraud Act, the New Mexico Fraud Against Taxpayers Act, and other common law and equitable causes of action, alleging defendants engaged in wrongful marketing, sale and promotion of talcum powder products.

In April 2020, Bausch Health US filed a motion to dismiss, which in September 2020, the Court granted in part as to the New Mexico Medicaid Fraud Act and New Mexico Fraud Against Taxpayers Act claims and denied as to all other claims.

State of New Mexico brings claims against all defendants under the New Mexico Unfair Practices Act and other common law and equitable causes of action, alleging defendants engaged in wrongful marketing, sale and promotion of talcum powder products.

The lawsuit seeks to recover the cost of the talcum powder products as well as the cost of treating asbestos-related cancers allegedly caused by those products.

The Company disputes the claims asserted in this lawsuit and intends to vigorously defend the matter.

Bausch Health US filed its Answer to the Complaint on November 16, 2020.

On December 30, 2020 Johnson & Johnson filed a Motion for Partial Judgment on the Pleadings and on January 4, 2021, Bausch Health US filed a joinder to that motion, which remains pending.

The Company and Bausch Health US dispute the claims against them and intend to defend this lawsuit vigorously.

Doctors Allergy Formula Lawsuit

19 unchanged sentences

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.

Canadian Securities Litigation

As described above, the following putative Canadian class actions were discontinued in the fourth quarter of 2019:

(a) Alladina v.

Valeant, et al.

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);

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);

(f) Rousseau-Godbout v.

Valeant, et al.

(Court File No.

500-06-000770-152) (Quebec Superior Court) (filed October 27, 2015);

(g) Okeley v.

Valeant, et al.

S-159991) (Supreme Court of British Columbia) (filed December 2, 2015);

and (h) Sukenaga v Valeant et al.

(CV-15-540567-00CP) (Ontario Superior Court) (filed November 16, 2015).

Settlement of Horizon Blue Cross Blue Shield of New Jersey Lawsuit

On July 26, 2018, Horizon Blue Cross Blue Shield of New Jersey ("Horizon") filed a lawsuit against the Company in the Superior Court of New Jersey Law Division/Essex County.

This action was captioned Horizon Blue Cross Blue Shield of New Jersey v.

Valeant Pharmaceuticals International Inc., et.

ESX-L-005234-18).

This suit asserted 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 alleged that the Company and other defendants submitted and caused Horizon to pay fraudulent insurance claims.

On October 5, 2018, the Company filed a motion to dismiss the claims against it.

While that motion was pending, plaintiff and the Company entered into a confidential settlement agreement, pursuant to which the Company was dismissed from the action on January 8, 2019.

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, on February 7, 2019, the Supreme Court of Canada dismissed the application for leave to appeal with costs.

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 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.

The Company cooperated with the SEC's investigation.

On September 28, 2018, the Company reached a settlement of the relevant charges with the 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.

On April 4, 2019, the U.S.

District Court for the Southern District of New York rendered its final judgment approving the settlement.

Beginning in November 2015, the Company received from the staff of the Los Angeles Regional Office of the SEC ("the Staff") 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 Rx Services, LLC ("Philidor"), its accounting practices and policies, its public disclosures and other matters.

On March 27, 2020, the Staff issued a Wells Notice informing the Company that they had reached a preliminary determination to recommend that the SEC bring charges against the Company for violating the federal securities laws as a result of SEC filings and other statements made by Valeant and its former executives in 2014-2015 concerning Philidor, as well as other accounting and disclosure matters, including the Company’s disclosure of certain price appreciation credits in 2015 - 2016.

The Company has entered into a settlement with the SEC that has resolved all allegations by the SEC against the Company.

Under the terms of the settlement, the Company neither admitted nor denied the SEC’s allegations and agreed to pay a $ 45 million civil monetary penalty.

AMF Investigation

On April 12, 2016, the Company received a letter from the Autorité des marchés financiers (the “AMF”) requesting documents concerning the work of the Company’s ad hoc committee of independent directors, the Company’s former relationship with Philidor, the Company's accounting practices and policies and other matters.

In July 2018, the Company

was advised by the AMF that it had issued a formal investigation order against it.

On September 30, 2020, the AMF confirmed that it had closed its investigation.

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 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.

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 a defendant.

Plaintiffs subsequently filed a motion to dismiss the lawsuit without prejudice.

The court dismissed the case without prejudice on December 18, 2019.

Contact Lens Antitrust Class Actions

6 unchanged sentences

On October 8, 2019, the settlement agreement was preliminarily approved by the court.

A final fairness hearing regarding the settlement has been scheduled for February 25, 2020.

A final fairness hearing regarding the settlement was held on February 25, 2020.

On March 4, 2020, the Court granted final approval of the settlement agreement in all respects and dismissed the case with prejudice as to B&L Inc., except as to any claim by persons who validly and timely requested exclusion from the settlement classes.

Mississippi Attorney General Consumer Protection Action

3 unchanged sentences

As indicated above, the Company acquired the Shower to Shower ® body powder product in September 2012 from Johnson & Johnson.

The State sought 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 sought disgorgement of profits from the sale of the product and civil penalties.

The State did not make specific allegations as to the Company or Bausch Health US.

The Company and Bausch Health US agreed to resolve this litigation pursuant to a settlement agreement with the State of Mississippi for a non-material amount.

The Company and Bausch Health US agreed to resolve this litigation pursuant to a settlement agreement with the State of Mississippi for a no n-material amount.

On January 8, 2020, an order of dismissal with prejudice was entered by the Court.

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.

cooperated fully with the State's investigation and produced all the documents requested by the State to date.

After an exchange of positions, B&L Inc.

and the State have agreed in principle to settle the matter for $ 10 million , subject to finalization of a definitive agreement.

Letter from the U.S.

Department of Justice Civil Division and the U.S.

Attorney’s Office for the Eastern District of Pennsylvania

The Company has received a letter dated September 10, 2015 from the U.S.

Department of Justice Civil Division and the U.S.

Attorney’s Office for the Eastern District of Pennsylvania stating that they are investigating potential violations of the False Claims Act arising out of Biovail Pharmaceuticals, Inc.'s ("Biovail Pharmaceuticals") treatment of certain service fees under agreements with wholesalers when calculating and reporting Average Manufacturer Prices in connection with the Medicaid Drug Rebate Program.

The letter requests that the Company voluntarily produce documents and information relating to the investigation.

The Company produced certain documents and clarifying information in response to the government’s request and has cooperated with the government’s investigation;

although, during 2019, there has been no material activity on the part of the Company with respect to this matter nor has the Company had contact from the government with respect to this matter.

The underlying qui tam complaint asserting claims under the federal and certain state False Claims Acts has been voluntarily dismissed, on a without prejudice basis, as it relates to Biovail Pharmaceuticals, Inc.

and two of the other defendants.

Investigation by the State of North Carolina Department of Justice

In the beginning of March 2016, the Company received an investigative demand from the State of North Carolina Department of Justice.

The materials requested relate to the Company's Nitropress ® , Isuprel ® and Cuprimine ® products, including documents relating to the production, marketing, distribution, sale and pricing of, and patient assistance programs covering, such products, as well as issues relating to the Company's pricing decisions for certain of its other products.

The Company has cooperated with this investigation;

although, during 2019, there has been no material activity on the part of the Company with respect to this matter nor has the Company had contact from the State with respect to this matter.

California Department of Insurance Investigation

On May 4, 2016, B&L International, Inc.

(“B&L International”) received from the Office of the California Insurance Commissioner an administrative subpoena to produce books, records and documents.

On September 1, 2016, a revised and corrected subpoena, issued to B&L Inc., was received naming that entity in place of B&L International and seeking additional books records and documents.

The requested books, records and documents are being requested in connection with an investigation by the California Department of Insurance and relate to, among other things, consulting agreements and financial arrangements between Bausch & Lomb Holdings Incorporated and its subsidiaries (“B&L”) and health care professionals in California, the provision of ocular equipment, including the Victus ® femtosecond laser platform, by B&L to health care professionals in California and prescribing data for prescriptions written by health care professionals in California for certain of B&L’s products, including the Crystalens ® , Lotemax ® , Besivance ® and Prolensa ® .

and the Company have cooperated with the investigation, although, during 2019, there has been no material activity on the part of either B&L Inc.

or the Company with respect to this matter nor has B&L Inc.

nor the Company had contact from the California Department of Insurance with respect to this matter.

On May 27, 2014, the State of Texas served Bausch & Lomb Incorporated (“B&L Inc.”) with a Civil Investigative Demand (“CID”) 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 CID.

and the State agreed to settle the matter for $ 10 million.

The Company made the payment on April 1, 2020.

On July 1, 2020, the State moved to dismiss the case by filing a notice that it was taking a nonsuit, with prejudice to refiling, effective immediately.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

Under certain agreements, the Company may be required to make payments contingent upon the achievement of specific developmental, regulatory, or commercial milestones.

As of December 31, 2019 , the Company believes it is reasonably possible that it may potentially make milestone and license fee payments, including sales-based milestone payments, of approximately $ 315 million over time, in the aggregate, to third parties for products currently under development or being marketed, primarily consisting of the following:

Under the terms of a June 2013 distribution and supply agreement with Spear Pharmaceuticals, Inc and Spear Dermatology Products Inc., the Company may be required to make sales-based milestone payments.

As of December 31, 2020, the Company believes it is reasonably possible that it may potentially make milestone and license fee payments, including sales-based milestone payments, of

approximately $ 360 million over time, in the aggregate, to third parties for products currently under development or being marketed, primarily consisting of the following:

• Under the terms of a June 2013 distribution and supply agreement with Mylan Pharmaceuticals Inc.

(as assignee of Spear Pharmaceuticals, Inc and Spear Dermatology Products Inc.), the Company may be required to make sales-based milestone payments.

The Company believes it is reasonably possible that these payments over time may approximate $ 70 million, in the aggregate.

Under the terms of an April 2019 agreement with Mitsubishi Tanabe Pharma Corporation, the Company has acquired an exclusive license to develop and commercialize MT-1303 (amiselimod), a late-stage oral compound that targets the sphingosine 1-phosphate (S1P) receptor that plays a role in autoimmune diseases, such as Inflammatory Bowel Disease (IBD) and ulcerative colitis.

• Under the terms of an April 2019 agreement with Mitsubishi Tanabe Pharma Corporation, the Company has acquired an exclusive license to develop and commercialize MT-1303 (amiselimod), a late-stage oral compound that targets the sphingosine 1-phosphate (S1P) receptor that plays a role in autoimmune diseases, such as Inflammatory Bowel Disease and ulcerative colitis.

The Company may be required to make development and sales-based milestone payments over time of up to $ 60 million, in the aggregate, as well as royalties on future sales.

2 unchanged sentences

The Company believes it is reasonably possible that these payments over time may approximate $ 45 million, in the aggregate, as well as royalties on future sales.

Under the terms of a February 2018 agreement with Kaken Pharmaceutical Co., Ltd., the Company has acquired an exclusive license to develop and commercialize products containing an investigational compound, KP-470, a new chemical entity, which is being studied for the topical treatment of psoriasis and may be required to make potential development and sales-based milestone payments.

The Company believes it is reasonably possible that these payments over time may approximate $ 43 million , in the aggregate, as well as royalties on future sales.

• Under the terms of a November 2019 agreement with Cedars-Sinai Medical Center, to evaluate a new formulation of rifaximin for the treatment of irritable bowel syndrome, the Company may be required to make development and sales-based milestone payments.

The Company believes it is reasonably possible that these payments over time may approximate $ 36 million, in the aggregate.

• Under the terms of an October 2020 agreement with Eyenovia, Inc., the Company has acquired an exclusive license in the United States and Canada for the development and commercialization of an investigational microdose formulation of atropine ophthalmic solution, which is being investigated for the reduction of pediatric myopia progression, also known as nearsightedness, in children ages 3-12.

Under the terms of the agreement, the Company may be required to make development and sales-based milestone payments.

The Company believes it is reasonably possible that these payments over time may approximate $ 35 million, in the aggregate.

• Under the terms of a May 2020 agreement with STADA Arzneimittel AG and its development partner, Xbrane Biopharma AB, to commercialize in the United States and Canada a biosimilar candidate to Lucentis (ranibizumab), the Company may be required to make development and sales-based milestone payments.

In addition, under the terms of a September 2020 agreement with Allegro, the Company may be required to make a payment of $ 40 million should Allegro raise additional funding.

This amount is excluded from the milestone and license fee payments disclosed above.

See Note 3, "ACQUISITIONS, LICENSING AGREEMENTS AND ASSETS HELD FOR SALE" for additional details regarding this agreement.

On February 27, 2018, the Company announced that it entered into an exclusive license agreement with Kaken Pharmaceutical Co., Ltd.

("Kaken") to develop and commercialize a new chemical entity, IDP-131 (KP-470), for the topical treatment of psoriasis.

An early proof of concept study has been completed and the results did not meet expectations.

As a result, the Company and Kaken have terminated the license agreement.

Due to the nature of these arrangements, the future potential payments related to the attainment of the specified milestones over a period of several years are inherently uncertain.

As of December 31, 2020, no accruals related to the aforementioned agreements exist because the milestone targets are not yet probable of being achieved.

Indemnification Provisions

1 unchanged sentence

These provisions are generally subject to maximum amounts, specified claim periods and other conditions and limits.

As of December 31, 2019 and 2018 , no material amounts were accrued for the Company’s obligations under these indemnification provisions.

In addition, the Company is obligated to indemnify its officers and directors in respect of any legal claims or actions initiated against them in their capacity as officers and directors of the Company in accordance with applicable law.

Pursuant to such indemnities, the Company is indemnifying certain former officers and directors in respect of certain litigation and regulatory matters.

As of December 31, 2020 and 2019, no material amounts were accrued for the Company’s obligations under these indemnification provisions.

SEGMENT INFORMATION

13 unchanged sentences

of Ortho Dermatologics (dermatological) products and (ii) global sales of Solta medical aesthetic devices.

The Diversified Products segment consists of sales:

(i) in the U.S.

of pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) in the U.S.

of generic products, (iii) in the U.S.

of dentistry products and (iv) of certain other businesses divested during 2017 that were not core to the Company's operations, including the Company's equity interests in Dendreon (June 28, 2017) and Sprout (December 20, 2017).

As a result of the divestitures of Dendreon and Sprout, the Company exited the oncology and women's health businesses, respectively.

business unit in the Ortho Dermatologics segment is now included in the reported results of the Dentistry business unit in the Diversified Products segment as management believes the products better align with the new respective business units.

• The Diversified Products segment consists of sales in the U.S.

(i) pharmaceutical products in the areas of neurology and certain other therapeutic classes, (ii) generic products and (iii) dentistry products.

Effective in the first quarter of 2019, one product historically included in the reported results of the Ortho Dermatologics business unit in the Ortho Dermatologics segment is now included in the reported results of the Generics business unit in the Diversified Products segment and another product historically included in the reported results of the Ortho Dermatologics business unit in the Ortho Dermatologics segment is now included in the reported results of the Dentistry business unit in the Diversified Products segment as management believes the products better align with the new respective business units.

These changes in product alignment are not material.

1 unchanged sentence

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 expense (income), net, are not included in the measure of segment profit, as management excludes these items in assessing segment financial performance.

Certain costs, such as Amortization of intangible assets, Asset impairments, including loss on assets held for sale, Restructuring, integration and separation costs, Acquisition-related contingent consideration costs and Other expense (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.

1 unchanged sentence

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.

In connection with the planned separation of its eye-health business into an independent publicly traded entity from the remainder of Bausch Health Companies Inc., the Company has begun addressing the internal organizational design and structure of the new entity, which it anticipates having substantially complete by late 2021.

As of the date of the issuance of these financial statements, these matters are in the planning phase.

In connection with the Separation, the Company expects to realign and begin managing its operations in a manner consistent with the organizational structure of the two separate entities as proposed by the Separation during the first quarter of 2021.

Accordingly, the Company expects to begin reporting under the following reporting segments on a retrospective basis beginning with its first quarter of 2021:

Bausch + Lomb, International Rx, Salix, Ortho Dermatologics and Diversified Products.

Segment Revenues and Profit

2 unchanged sentences

Bausch + Lomb/International $ 4,408 $ 4,739 $ 4,664

Salix 1,904 2,022 1,749

Ortho Dermatologics 553 565 617

3 unchanged sentences

Bausch + Lomb/International $ 1,159 $ 1,332 $ 1,330

Salix 1,338 1,349 1,149

Ortho Dermatologics 233 222 257

1 unchanged sentence

Total segment profit 3,578 3,835 3,748

Corporate ( 619 ) ( 609 ) ( 605 )

Amortization of intangible assets ( 1,645 ) ( 1,897 ) ( 2,644 )

Goodwill impairments — — ( 2,322 )

Asset impairments

Restructuring and integration costs

Asset impairments, including loss on assets held for sale ( 114 ) ( 75 ) ( 568 )

Restructuring, integration and separation costs ( 22 ) ( 31 ) ( 22 )

Acquisition-related contingent consideration ( 48 ) ( 12 ) 9

Other (expense) income, net ( 454 ) ( 1,414 ) 20

Operating (loss) income

Operating income (loss) 676 ( 203 ) ( 2,384 )

Interest income 13 12 11

10 unchanged sentences

Diversified Products 2 2 2

Corporate 13 40 13

Total capital expenditures $ 302 $ 270 $ 157

Revenues by Product and by Product Category

The top ten products represented 39 % , 36 % and 32 % of total product sales for the years 2019, 2018 and 2017 , respectively.

Revenues for the Company's top ten products for the years 2020, 2019 and 2018 represented 41 %, 39 % and 36 % of total product sales, respectively.

Revenues by segment and product category were as follows:

(in millions)

Bausch + Lomb/ International

Ortho Dermatologics

Diversified Products

(in millions) Bausch + Lomb/ International Salix Ortho Dermatologics Diversified Products Total

2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018

Pharmaceuticals $ 759 $ 885 $ 892 $ 1,899 $ 2,022 $ 1,752 $ 279 $ 355 $ 457 $ 741 $ 810 $ 927 $ 3,678 $ 4,072 $ 4,028

Devices 1,313 1,524 1,505 — — — 253 193 135 — — — 1,566 1,717 1,640

OTC 1,432 1,452 1,412 — — — — — — — — — 1,432 1,452 1,412

Branded and Other Generics 838 801 784 — — — — — — 410 447 407 1,248 1,248 1,191

Other revenues 66 77 71 5 — ( 3 ) 21 17 25 11 18 16 103 112 109

$ 4,408 $ 4,739 $ 4,664 $ 1,904 $ 2,022 $ 1,749 $ 553 $ 565 $ 617 $ 1,162 $ 1,275 $ 1,350 $ 8,027 $ 8,601 $ 8,380

Geographic Information

2 unchanged sentences

and Puerto Rico $ 4,791 $ 5,164 $ 5,011

China 341 368 361

Canada 331 339 319

Egypt 243 218 178

Poland 238 231 218

Japan 226 241 226

Mexico 225 228 211

France 179 201 205

Germany 144 150 170

Russia 137 180 154

United Kingdom 86 115 117

Spain 78 86 83

Other 1,008 1,080 1,127

$ 8,027 $ 8,601 $ 8,380

Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation, are attributed to geographic regions based on their physical location as of December 31, 2020 and 2019 were as follows:

1 unchanged sentence

and Puerto Rico $ 725 $ 656

Ireland 328 255

Canada 110 103

Germany 80 68

$ 1,567 $ 1,466

Major Customers

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

2020 2019 2018

McKesson Corporation 17 % 17 % 18 %

1 unchanged sentence

Cardinal Health, Inc.

13 % 14 % 13 %

SUPPLEMENTARY DATA (UNAUDITED)

Selected unaudited quarterly consolidated financial data are shown below:

(in millions, except per share amounts)

(in millions, except per share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 2,012 $ 1,664 $ 2,138 $ 2,213

Expenses 1,764 1,691 1,678 2,218

Operating income (loss) $ 248 $ ( 27 ) $ 460 $ ( 5 )

Net loss attributable to Bausch Health Companies Inc.

Basic and Diluted loss per share attributable to Bausch Health Companies Inc.:

Net (loss) income attributable to Bausch Health Companies Inc.

$ ( 152 ) $ ( 326 ) $ 71 $ ( 153 )

Basic and Diluted (loss) earnings per share attributable to Bausch Health Companies Inc.

$ ( 0.43 ) $ ( 0.92 ) $ 0.20 $ ( 0.43 )

Net cash provided by operating activities $ 261 $ 200 $ 256 $ 394

(in millions, except per share amounts)

Operating (loss) income

(in millions, except per share amounts) First

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 2,016 $ 2,152 $ 2,209 $ 2,224

Expenses 1,729 1,895 1,880 3,300

Operating income (loss) $ 287 $ 257 $ 329 $ ( 1,076 )

Net loss attributable to Bausch Health Companies Inc.

$ ( 52 ) $ ( 171 ) $ ( 49 ) $ ( 1,516 )

Basic and Diluted loss per share attributable to Bausch Health Companies Inc.

$ ( 0.15 ) $ ( 0.49 ) $ ( 0.14 ) $ ( 4.30 )

Net cash provided by operating activities $ 413 $ 339 $ 515 $ 234

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures