Good morning. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valeant Fourth Quarter 2015 Unaudited Financial Results Conference Call. [Operator Instructions] Head of Investor Relations, Laurie Little, you may begin your conference. .

Thanks, Heidi, and good morning, everyone. Welcome to Valeant's Investor Conference Call. Participating on today's call are Mike Pearson, Chief Executive Officer; Rob Rosiello, Chief Financial Officer; Dr. Ari Kellen, Company Group Chairman; Anne Whitaker, Company Group Chairman; and Linda LaGorga, our Treasurer.

In addition to a live webcast, a copy of today's slide presentation can be found on our website under the Investor Relations section. .

Before we begin, our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information. .

In addition, this presentation contains non-GAAP financial measures. Non-GAAP financial reconciliations can be found in the press release issued earlier today and posted on our website. .

Finally, the financial guidance in this presentation is effective only as of today. It is our policy to affirm -- to update or affirm guidance only through broadly disseminated public disclosure. .

And with that, I will turn the call over to Mike. .

Good morning, everyone, and thank you, Laurie. Thanks for joining us. .

Today we would like to cover the following topics. First, we will discuss our preliminary unaudited fourth quarter 2015 results. Second, we are going to take you through our new tax presentation. Third, we're going to provide revised Q1 2016 financial guidance.

Fourth, I'd like to take a few minutes to provide my perspective on the current state of the business since I've been back a couple of weeks including our revised 2016 guidance and other key business updates. Fifth, Linda LaGorga, our Treasurer, will provide liquidity and cash flow update.

And finally, I'm going to address some questions that we've got ahead of the call. And then we'll open up to Q&A..

We've added a number of slides in the appendix around assumptions and our top 30 products, which we will not be going through, but are -- will be made available to you. .

As we have previously disclosed, there's an ongoing review of our 2014 financials, and as such, we are not able to provide year-over-year comparisons today. Financial metrics that are impacted by this include the organic growth, business unit growth and price/volume detail.

What we can provide today are preliminary unaudited 2015 fourth quarter results. .

With this, let me turn the call over to our CFO, Rob Rosiello, to cover Q1 -- and Q4 and Q1. .

On Page 5. For the quarter, our total revenue was $2.8 billion versus our guidance of $2.7 billion to $2.8 billion. GAAP EPS was a loss of $0.98. Adjusted non-GAAP EPS was $2.50, which falls below the guidance range of $2.55 to $2.65 we provided in December.

The shortfall was caused by unexpected reductions in higher-margin product sales driven in part by channel destocking and negative reaction to our agreement with Walgreens. GAAP cash flow from operations was $562 million. Adjusted cash flow from operations came in at $838 million, above our expected target of greater than $600 million.

As a reminder, we have listed adjusted cash flow from operations on this slide, but as we reported previously, we will no longer provide this metric going forward..

On the next slide, I'd like to discuss changes in Valeant's tax reporting for 2016. Historically, Valeant has reported our non-GAAP tax provision on Table 2A and B of the press tables, that combined the tax effects of non-GAAP adjustments and the use of tax attributes and other timing issues.

This number, approximately 5%, matched the actual cash tax that Valeant paid each year. Going forward, we will no longer include the tax effects from the use of tax attributes and other timing issues, which will in turn raise our reported tax rate between 10% and 15%. This new reporting metric has no change to either cash flow or actual taxes paid..

On the next page, we are also updating our previous guidance for 2015 Q1 from revenue of $2.8 billion to $3.1 billion to $2.3 billion to $2.4 billion. We expect adjusted EPS will now be $1.30 to $1.55 from $2.35 to $2.55 as compared to the guidance we provided December.

With the new tax presentation shown on the far right, adjusted EPS will be $1.18 to $1.43 for the first quarter. .

While most of our businesses remain strong, there are a few of areas that changed since December that will impact our first quarter. First, we are realizing a decrease of roughly approximately $0.80 per share coming from the underperformance in several businesses. This includes slower-than-expected growth in GI including additional product destocking.

We are also realizing a slower-than-expected rebound in dermatology that includes additional product destocking and loss refills from the Philidor transition to Walgreens. .

Finally, we are also seeing underperformance in several other U.S. businesses such as Ophthalmology Rx, Obagi, Solta and Women's Health as well as in Western Europe. We have also experienced headwinds from currency fluctuations since our guidance was first set.

We also expect that another $0.20, roughly, comes from the fact that even as revenue was brought down, we took little expense reduction despite this lower revenue forecast. .

Let me turn it back to Mike. .

Thanks, Rob. So as you all know, I've been back from my medical leave for about 2 weeks. And as I had a chance to review what's happening in the businesses and there's a combination -- mixed combination of some good news and some bad news. And I just want to take a few minutes to sort of give you my assessment and then what we plan to do about it. .

While our businesses continue to grow, we are now forecasting a lower growth rate in certain businesses such as dermatology given the continued external pressure for managed care, the pricing environment and our slower-than-expected start in 2016.

We continue to expect strong growth in GI, contact lenses, oral health, oncology, generics and certain emerging markets. This strong growth will be somewhat offset by some of our other businesses including Western Europe, Ophthalmology RX, Solta and Obagi.

Many of our business units have lowered their revenue forecasts for the year from when they first put them together in the fall..

We have launched our Branded Access program with Walgreens, and this is a piece of the good news in mid-January, with our dermatology portfolio followed in mid-February with Ophthalmology Rx and Addyi. Negotiations are underway to add networks of independent pharmacies. .

The program itself is off to a terrific start. Within 2 months of launch in dermatology, approximately 30% of our dermatology scripts are flowing through Walgreens. This is approximately 2x the volume flowing through Walgreens from when we started.

More importantly, well over 90% of our doctors who were using Philidor are now using Walgreens and many new doctors are also using this channel. .

Walgreen's senior management that we met with last week is equally excited about the program, and we continue to fine-tune it to better serve our physicians and patients and improve the economics. Our Brand for Generic program is on track to launch sometime this summer. .

Finally, another piece of good news, we are continuing to focus on improving patient access as well as improving our relationships with our channel partners. We have strengthened our managed care organization with several key hires, and we have been in active discussions with the payers to ensure continued patient coverage and access.

I'll address this point in more detail in a minute..

During the past few weeks, we have already taken steps to restructure a number of our underperforming smaller businesses and we are taking steps to launch a broad-based cost reduction program.

These actions will be partially offset by increased investment in key functions such as financial reporting, public and government relations and our managed care organization. We are also currently exploring divestitures of noncore assets, which will enhance our liquidity..

Returning to market access. Maintaining U.S. market access is critical -- for our entire portfolio is critical to our success. To achieve this goal, we are investing more in rebates and building our organization's managed care capability.

The increases in rebates are due to more competitive pressure and response to our -- and -- in response to our store price increases for our late life cycle products. Our U.S.

market access team, led by Sandy Loreaux who joined us in January this year, continues to have productive dialogue and negotiations concerning access for our entire portfolio with national health plans, PBMs and regional plans.

These negotiations include our Part D and commercial bids for 2017, response to ad hoc therapeutic area reviews by payers and requests for price inflation protection agreements. .

Through these negotiations, beginning late last fall to this year, we have been able to maintain good coverage of commercial lives for our key brands and franchises including dermatology, GI and our ophthalmology franchise.

We are working hard as a team including the senior management team sitting here in this room today to continue to improve our relationships with PBMs and health plans as well as access for our current portfolio, and importantly, future launch products.

We have made a great deal of progress and feel confident that we will improve our access in 2016 and 2017 and are laying a strong foundation for access to our expected new product launches. .

We are committed to engaging with these important customers more broadly across our organizations, building back trust through our actions and strengthening our capability to collaborate with them on initiatives involving our products..

Turning to our revised guidance. With the first quarter now updated, our new full year 2016 guidance as compared to what we previously reported is expected to be $11 billion to $11.2 billion in revenue and adjusted EPS of $9.50 to $10.50. With our change to a different tax presentation, we expect to report adjusted EPS of $8.50 to $9.50.

As we are moving away from adjusted cash flow from operations, we will now report an expected adjusted EBITDA number of $5.6 billion to $5.8 billion for 2016..

As we look at the budget we prepared in December, several factors have changed our outlook for 2016. First, as Rob covered, the Q1 underperformance is expected to reduce adjusted EPS by $1 due to the higher-than-expected inventory reductions, the transition from Philidor to Walgreens and the cancellation of almost all price increases.

In addition, there has been a negative impact from FX. .

Next, we're taking a more conservative approach to our revenue assumptions and we are assuming lower growth rates for most of our franchises and geographies including a slower rebound in dermatology, more modest growth in GI and underperformance in Women's Health, Commonwealth and Western Europe based on current expectations from economic factors and the current managed care environment in the U.S.

This conservatism is expected to reduce adjusted EPS approximately $1 in 2016. .

As previously mentioned, any future price increases will be more modest and in line with industry practices and managed care contracts.

We have experienced increased competitive pressure at the payer level resulting in increased rebates for access to our key growth products like Jublia and this accounts for a further $1 reduction from our budget in the fall of last year..

Other items that have reduced our outlook for 2016 include increased investments in select functions, FX headwinds and continued organizational distractions that will be a cause of, we estimate, another $0.50 in 2016. .

Finally, the new tax presentation will reduce reported adjusted EPS by another $1, although it has no impact on either the actual taxes paid or the cash flow..

To assist in the walk-down from our revenue guidance in December to today, we have bucketed the main areas. GI, dermatology and neurology portfolios represent the bulk of this change due to the items already mentioned. Underperformance in certain U.S. business units accounts were approximately $300 million and ex U.S. $200 million in revenue reduction.

In terms of FX, we estimate that to be $110 million. And the remaining $90 million covers the rest of the decrease. .

As we look out to the next several years, we want to highlight our growth expectations for our major business units. We expect double-digit growth from GI, Dendreon, dentistry, contact lens and Women's Health over the next 3 years. Single-digit growth should be realized in dermatology, emerging markets in Europe, Asia, Latin America, U.S.

consumer, Ophthalmology RX, Canada, Surgical and our aesthetic businesses. Finally, we expect our neurology and other, Western Europe and the U.S. generics units to have flat to declining revenue growth over this 3-year period. .

I do want to highlight that we do have some very exciting products that are either in the market and that are new launches or we hope to get approved over the next year or so. We continue to be very excited about the prospects for Xifaxan and you've seen its continued script growth.

We're also excited about growth opportunities in a number of our emerging markets and our Ultra and Biotrue contact lens lines.

Potential opportunities lie with several other R&D projects such as latanoprostene bunod for glaucoma, which we hope to get approved later this year; IDP-118, a topical for moderate to severe psoriasis, which we hope to get approved next year; and brodalumab for moderate to severe psoriasis, which we hope to get approved at the end of this year.

A number of these growth products have $1 billion-plus potential..

In terms of the next 4 quarters guidance. With the weak results for the first quarter of 2016, we are providing a forward look at the next 4 quarters taking us through the first quarter of 2017.

On a roll-forward basis, we expect to realize between $11.6 billion and $11.8 billion in total revenues and approximately $9.65 to $10.15 on adjusted EPS under the new tax reporting. And we expect to realize approximately $6 billion in adjusted EBITDA over this time period. .

At this point, let me turn the call over to Linda LaGorga, our Treasurer, to discuss our balance sheet. .

Thank you, Mike. First, focusing on our liquidity. We are comfortable with our current liquidity and expect strong cash flow generation from our business for the remainder of the year and beyond. Currently, we have approximately $1.2 billion of cash on hand including the proceeds from recent revolver draws.

Our revolver is currently drawn at $1.45 billion. We most recently drew our revolver to fund cash timing related to ordinary course needs for operations including anticipated upcoming debt payment. .

We are expecting to close the sale of the Synergetics contract manufacturing business in the second quarter, providing additional cash..

To date, in the first quarter, we have completed the Sprout payment of $500 million in January and have repaid $405 million in term loans including our Q1 $145 million mandatory amortization and $260 million in term loan maturities.

We have approximately $520 million of remaining mandatory term loan repayments in 2016, including $417 million of mandatory amortization and an estimated $100 million mandatory excess cash flow payment, which is an annual calculation under our credit agreement, which will be due at the end of March.

We believe our term loan amortization and term loan and bond maturities in 2017 and '18 are manageable..

Next, turning to some covenant highlights. Based on preliminary unaudited 2015 financial information and our 2016 guidance, we expect to remain in compliance with the financial maintenance covenants in our credit agreement for year-end 2015 and throughout 2016. There are no financial maintenance covenants in our indentures governing our bonds. .

Our credit agreement includes 2 maintenance covenants, a secured leverage ratio and an interest coverage ratio. For the year-end 2015, we expect our secured leverage ratio to be approximately 2.1x and our interest coverage ratio to be approximately 3.3x, both within credit agreement requirements..

Our net leverage to pro forma adjusted EBITDA per the credit agreement is expected to be approximately 5.8x at year-end 2015. .

A couple of key factors contributed to the increase of our Q4 leverage ratio relative to our Q3 leverage ratio. First, for our last 12 months adjusted EBITDA per our credit agreement, we no longer have the benefit of the Allergan gain from Q4 '14 of approximately $287 million.

Second, also for our adjusted EBITDA per our credit agreement, our Q4 adjusted EBITDA was impacted by $100 million by our broda transaction, which is treated as cash IT R&D and reduces adjusted EBITDA in our credit agreement.

Based on our 2016 guidance, we expect our net leverage to pro forma adjusted EBITDA per our credit agreement to be approximately 5x by year-end 2016..

Now moving to some covenant highlights related to financial statement reporting. Both our credit agreement and our bond indentures contain financial reporting requirements, which are impacted by the delay in the filing of our 10-K. If we do not file our 10-K by March 30, a default will occur under our credit agreement.

We will have 30 days or until April 29 to cure this default by filing our 10-K. If our 10-K has not been filed before March 16, a breach of reporting covenant occurs under our bond indentures. At any time after this breach, the trustee or holders of at least 25% of any series of notes may deliver a notice of default.

From receipt of this notice, we will have 60 days to file our 10-K and thus secure the default. .

While the failure to file the 10-K before March 16 does not have any immediate implications under our bond indentures, it does result in a cross default under our credit agreement.

The credit agreement lenders do not immediately have the right to accelerate on account of this cross default, but our ability to borrow under the revolver is restricted while the default continues.

We now -- next week, we intend to launch an amendment process with our lenders to waive this cross default and also to extend the time period for delivery of our 10-K and our Q1 10-Q..

Moving now to cash available for debt repayment and other purposes. One of our key 2016 priorities is to focus on our balance sheet. We remain committed to using the vast majority of our cash flow to pay down debt. At our Investor Day in December, we said we expect to pay down more than $2.25 billion of permanent debt in 2016.

Based on our revised guidance, we remain committed to debt repayment and now expect to pay down more than $1.7 billion of permanent debt this year. Relative to our prior guidance, the reduction in cash available for debt repayment and other purposes is less than the reduction in adjusted EBITDA.

This is primarily due to less use of cash from working cap and less taxes based on our reduced sales expectation. .

I will now turn it back over to Mike. .

We have received several key questions from many of you. So we thought we would address a number of them during our presentation. .

First, our approach to pricing. We have already committed to reducing pricing on our branded dermatology and ophthalmology products within the Walgreens portfolio on average 10%. This price reduction is on WAC and will impact and will be taken across all channels, not just Walgreens.

Other price increases will be modest and in line with market and payer contracts. .

In terms of divestitures. As a public company, we continue to review our assets in order to maximize shareholder value. We have no current plans to divest any major platform. However, we will continue to look at our nonstrategic assets and make appropriate decisions. .

The ad hoc committee. The ad hoc committee has provided the following statement, I quote, "The ad hoc committee has completed a substantial amount of work related to Philidor and certain accounting and financial reporting matters.

The committee and its advisers are working diligently and hope to complete the committee's work in the near future." As noted, in light of the ongoing nature of these matters, we will not be providing any further comments on the ad hoc committee at this time. .

Finally, we are the subject to several ongoing investigations. These include investigations by the U.S. Attorney's Office for Massachusetts and the Southern District of New York, the SEC and Congress.

We are cooperating in these investigations and have provided and will be providing documents, information and testimony in these various investigations whether pursuant to subpoenas or otherwise. We are also subject to shareholder litigation in both the United States and Canada, which we intend to defend vigorously.

Given the ongoing nature of the investigations and litigation, we do not intend to comment further at this time..

So in summary. Our business is not operating on all cylinders, but we and I are committed to getting it back on track. We have a set of terrific products and brands and a loyal set of physicians, patients and customers.

Through both revenue enhancement and cost reduction, we are confident that we can and again will be able to begin to deliver the cash flows our shareholders and debt holders are accustomed to. .

With that, -- with this, I will open the line to questions. .

[Operator Instructions] Your first question comes from the line of Louise Chen from Guggenheim. .

I have a few here. So first question I had was on your weak GI sales in the fourth quarter related to Walgreens, wondering if you could give more color there, since the focus was on derma, as you had mentioned before on Walgreens, there was only 15 days left in the quarter and there was already some destocking from the Salix deal.

And the second, I was wondering if you could talk about the changes in your managed care contracts that you mentioned in your press release? And then last thing, maybe more color on the gross margin and how we think about gross to net for the Walgreens drugs?.

Sure. Let me talk about the weak GI sales, I'll have Anne Whitaker talk about the changes in managed care and I'll come back and address the Walgreens economics. So at the end of the fourth quarter, a number of orders were canceled of Salix products.

This was sort of, at least we were told based on reducing inventories in some distributors and some retailers, there was a negative reaction initially to the Walgreens program and some aspects of it.

The managed care team has done a terrific job working with the payers to modify the Walgreens program to make it sort of acceptable and so we feel good about that. You can notice the script trends in the GI franchise, which continue to be very strong. So we think that will even out over time.

Anne, managed care?.

As Mike mentioned, with regard to our contracting this last fall, we've been involved in committing our bid for the Part D program for 2017. We've been going through the process of renewing contracts for 2017, and some of those, we have -- did extensions for 2016, even last fall.

And payers on a routine basis each quarter pick categories that they do reviews of, therapeutic areas they do reviews of, and so we've been responding to some of those reviews.

Dermatology is one of those reviews that many of the payers are undertaking because as they look back and their clients look back at last year, dermatology was one of the biggest trend drivers for them. So they've picked that category to focus on this year.

And then we also have been engaging in discussions as part of the process of our contracting and in these ad hoc reviews on price inflation protection. We've had price protection agreements in place with payers. We've been negotiating through that process on specific rates, and those range, depending on the volume and the particular product.

So I'll just echo what Mike said, I feel very good about the progress that we are making as a company with really rebuilding our relationships with the payers and working through this negotiations process and I think we're building a strong team here at Valeant with some of the new folks that we have brought in, and we brought a number of them in just over the past few months to really beef up that capability.

And I'm confident we have good prospects for laying a firm foundation for the launch products as Mike mentioned as well. .

Let me address sort of the way the Walgreens economics work and thus the gross margins, gross to net, et cetera. The way the contract's negotiated, it's an activity-based fees that we pay Walgreens. What I mean by activity based is that they get paid different amounts based on different scripts. If it's a cash-paid script, it's one fee.

If they adjudicate insurance, we pay a little bit more. If they do a prior auth, we do a little bit more. If they do work around refills, we pay a little bit more. So it's an activity-based fee.

The early experience with Walgreens compared to Philidor is that there is more cash paid than what we have -- what we saw with Philidor, but that's largely a function of prior auths and that's not a capability that Walgreens currently has. So what we'll be doing is using a third party.

We agreed with them last week to use of third party until they either build that capability or we'll continue to use a third party. So we expect the economics, as I mentioned, to improve over time. What we've been focused primarily on is volume.

The key is to get scripts in through Walgreens and to make sure the physicians have a good alternative to Philidor, and many physicians really like the Philidor program. And again, as I mentioned, well over 90% of the physicians that were using Philidor are currently using Walgreens.

But perhaps more important is the number of new doctors that, given Walgreens' reputation and national brand, are now using Walgreens that weren't using Philidor.

So we've been focused on getting our physicians comfortable with Walgreens and then we will continue to tweak the program with Walgreens to better serve patients and -- patients and doctors and also improve the economics of both companies. .

Your next question comes from the line of Annabel Samimy from Stifel. .

First, I want to go back to the adjustments that you made for GI with regard to the Walgreens program. Originally, it was supposed to be only in derma and ophthalmology.

So can you just explain a little bit more what the issues were that they were upset with? And what the specific changes you made for GI within Walgreens because originally it was not going to be included.

Also, there were a lot of inventory changes within GI in the first quarter, and I guess in the past, it was thought that the Salix inventories were going to be -- the destocking for Salix was going to be finished at the end of 2015.

So is this destocking now related to those canceled orders and that continues into the first quarter? And do you see more normal growth after that second quarter forward? And then, finally, on the divestitures, can you just detail what businesses that you generally believe are noncore to Valeant? And how much that might be able to contribute to debt paydown going forward?.

So first of all, to clarify. GI is not part of the Walgreens program, but I think that maybe we weren't clear on that and therefore it did have -- the announcement with Walgreens did have an impact on GI because, I think, just like you probably assumed, GI was going to be part of it, so did other players.

We probably -- we should take responsibility, I'll take the responsibility. We probably did not communicate the Walgreens program as well as we could have to payers and channel partners. We've done that. They had some suggestions in terms of how we could modify it, that they get more comfortable, I'm not going to go into the specifics of those.

We have accepted their suggestions. Walgreens and us, we've been working well together, so the comfort level is much higher now. So -- but GI is not part of the Walgreens program. In December, we -- I think we tried to be clear, and if we weren't clear, I apologize.

But in terms of destocking, we talked about destocking taking place both in the fourth quarter and first quarter. For example, we didn't turn on the Walgreens program till January 15, and at that point, all the inventory in Walgreens that they were carrying converted to consignment, so by definition there was a destocking element.

We do expect that both the dermatology and ophthalmology franchises will return to growth in the second quarter once the destocking will occur. We were unable to measure precisely how much would happen in fourth quarter and how much would happen in first quarter. So we gave our best estimate in December.

Turns out a little bit more happened in the fourth quarter. We've given you our first quarter estimates, but going forward, in the second quarter, we expect that destocking to occur. In terms of divestitures of noncore, we do not want to give specifics. We are in discussions with other parties. We have confidentiality around that.

But it will be things like Synergetics where, when we bought Synergetics, the part that we were interested in that was strategic was the ophthalmology VersaVIT franchise. What we sold was a contract manufacturing in surgical neurology, which is not an area that we compete in. We had no sales force.

And rather than build a sales force and get into an entirely new area, we ended up selling it to a company that was in that area. And then if you look at the net price we ended up paying for, for the ophthalmology assets, it was less than $15 million. So that is an example of sort of a nonstrategic asset that we were able to monetize.

Again, we will only do this if we believe that the cash flows that we would expect from that franchise are less than what someone's willing to pay for the assets. .

Your next question comes from the line of Marc Goodman from UBS. .

A couple of things. Number one, I didn't see you talk about the emerging markets at all. Can you talk a little bit about what's happening there and obviously those markets have weakened a little bit, you didn't really talk about them.

Second, what happened with Solta and Obagi relative to how you were thinking about those 2 or 3 months ago? Did these businesses just slow down just dramatically? Or is there something going on there? Third thing is can you give us an update on the contact lens capacity? I know this is important as you ramp up capacity.

I mean, are you going to be able to sell your lenses just in the U.S. or is the new lens still just going -- is this still just going in the U.S. or you're able to sell it in Europe this year? I'm just trying to get a sense of how much capacity is ramping up.

And then last on tax, can you just explain to us like why the change in tax now?.

Sure. So emerging markets, so 2 things are happening in emerging markets. One, FX continues to work against us, which, in a sense, doesn't necessarily have an impact on market demand but does have an impact in terms of gross margins because, as you guys know, most of the API is sourced either from the U.S. or Europe.

And so they're euro-denominated or dollar-denominated, and as the dollar continues to strengthen relative to the emerging markets, it puts pressure on our profitability. In terms of -- it's sort of by market. Russia continues to be a challenge.

Some of the Eastern European markets are continuing to be influenced by Europe and they continue to be challenged. There are some bright spots. Our Middle East, and in particular, our Amoun acquisition, continues to grow very robustly. Mexico continues to be a strong market for us.

And Asia continues to do very well, in particular, China, which is a real strength for us. So I think emerging markets will always be a mix. I think one of the advantages of being in many of the emerging markets is there are always some that are outperforming and some that are not outperforming.

So we do continue to expect to have sort of high single-digit growth in the emerging markets. But in terms of actual dollars, as FX continues to strengthen both on the revenue side, the dollars will be depressed.

And then in terms of profitability, because of the API issue, it will continue to hurt us if the dollar stays where it is or continues to strengthen versus where we were in December. Maybe I'll have Ari talk a little about Solta and Obagi, which we just took over recently, and maybe he can also talk about the Ultra capacity.

And then Rob maybe can address the tax issue. .

Yes, on the contact lens capacity, we have said before that we'll have 3 to 4 lines of Ultra up and running this year. We're out of capacity through Q1 and Q2, but we have capacity coming online Q3 and Q4.

So we actually are going to be expanding sales into Europe and other parts of Asia and we are fortunate to have additional capacity on this very close [ph]. We've also launched a Multi Focal and that's gaining a lot of traction in the U.S. So there'll be a good amount of Ultra that we'll be able to expand outside the U.S.

in Q3 and Q4 while still doubling sales of Ultra in the U.S. this year. On Biotrue, we're adding several lines. Today, we are still tight for capacity. The demand has been very strong in North America and elsewhere in the world. So there, it's really catch-up but we're investing heavily in capacity.

Turning to Solta and Obagi, Obagi is a nicely profitable business. We were at the American Academy of Dermatology last week, spent several days there talking to many key opinion leaders across medical dermatology and aesthetics and we actually have a lot of positive suggestions and encouragement across both these businesses. So Obagi is profitable.

I think what we need to do a better job on is expanding our focus across the national accounts, bolstering leadership and basic sales execution. We have a terrific team across marketing and sales. I think we probably have not put in our focus against this business.

This is a great set of products with a great brand and we think we could do a better job and we're accountable for that and we'll do the job we need to. Likewise, on Solta, we had our machines on display at the AAD. We actually had a good number of sales there. Again, we have a terrific team with Vlad who's well known in the business.

But there, we have work to do. We have to restore this business to profitability.

The good news is we have a new Thermage system coming online and we've also recently launched pelo, a hair loss -- hair removal system, which again we expect to do well in North America, but we also had representatives from the Latin American region and we're going to be selling this system across the world.

There, again, it's just restoring profitability, getting focused in the field, improving sales execution. Again, we're -- we believe we have a good set of products and it's our job to make sure that we support the appropriate demand in the field. .

Marc, on the tax issue, we have had ongoing dialogue with the SEC. It has been quite productive from our perspective. We think this is an appropriate presentation. I'd point out that it has no impact on the cash flow or actual taxes paid. .

Your next question comes from the line of Andrew Finkelstein from Susquehanna. .

Could you talk a bit more about the cash flow guidance for the year and some of the level of clarity around the individual moving parts? Given both the operational factors with destocking and uncertainties on pricing as well as the additional adjustments you talk about, restructuring and the other things that don't affect the non-GAAP P&L.

What's the level of confidence in achieving that level of cash generation in 2016? And then as you approach these payer negotiations, particularly for 2017, can you talk a little bit more about the process? In particular, to what extent are you able to leverage your portfolio of products in trying to maintain access for some of the categories that have been more of a focus for payers to show savings to their clients?.

Sure. I will take a shot at these, but I'm going to ask Linda and Anne to expand if I miss anything. In terms of cash flow guidance, we've tried to be conservative. You can do the math. If you take our guidance and do the arithmetic, you can see how much cash flow we -- at that guidance levels.

And we've tried to -- so I think we feel quite comfortable at the 1.7 that we now have good line of sight on price for our entire portfolio for the year. And managed care, we have good sight -- line of sight. Most of these negotiations have either been completed in terms of managed care or close to completion.

So we're not embarking sort of on the negotiations. We are sort of finalizing them, and we're in final rounds. And they have been very constructive. We've done a lot of listening to the payers, and we have tried to be very accommodating. And Anne and her team has just done a terrific job sort of changing the momentum from a managed care standpoint.

And as we talked about, the whole company is involved and is in on this. So it's moved from sort of something that was lower down in the organization to the -- with Anne's joining the company, to sort of a top-level priority for the company. So that's sort of the highest level. I don't know, Linda, any other comments on the cash flow, on the... .

And just to be clear, if I can interrupt, when you're talking about the visibility, you're talking about visibility for 2017?.

Correct, '16 and '17. .

So I think a couple quick comments. You asked about cash restructuring. This is our estimate at this time. We have previously estimated $200 million. We've reduced it to $175 million based on getting to the end of the year and having more information now that it's March.

As you might remember from a prior call or more than a prior call, the Salix severance is a big piece of that. There's a lot of Salix charges that were paid out for over a year, and so that is still flowing through just based on how the severance was structured.

On contingent consideration milestones and payments, again, that number does include the Sprout payment, which is done. And the other big payment in there is the $150 million milestone payment for the drug that's listed on the page. And what I would say is depending -- there are some things that are scheduled for fourth quarter.

And if they don't happen in fourth quarter, they could happen in first quarter, but that's our best estimate. .

So this is Anne. I'll add a few comments just on managed care, to add to what Mike had said. So I do want to emphasize, I think the payer negotiations are going very well. The process is you usually get your Part D bid in, in the first quarter of the year, and then you have the negotiation process.

Until -- the plans have to submit into CMS, and you're usually notified in the third quarter of the decision. So we feel good about our submissions. We've been going back and forth with the payers. The commercial contracts are on a different schedule based on the terms of our contract, and I mentioned the ad hoc sort of therapeutic reviews.

With regard to your question around portfolio and how our portfolio helps us, well, number one, Valeant has a sizable portfolio now in the U.S. with over $8 billion in sales. So we are as important to payers as they are important to us. We evaluate with each payer how we build our contract with them based on their needs and how they go about it.

So where it makes sense, we're leveraging our portfolios like in ophthalmology or dermatology and GI and various formats. So I think that kind of -- I think that covers your questions on the payers. .

Your next question comes from the line of Tim Chiang from BTIG. .

Mike, could you talk a little bit more about the noncore assets that you would consider selling? I mean, certainly, you've got a lot of debt on your books. You're trying to revamp the business, and I realize you've just gotten back.

But it just seems like, given how the stock's reacting in the free market and all the investors' concerns, I mean, would not debt repayment be one of your largest priorities right now?.

It is, fully agreed. We're very committed, as Linda said, in '16 and 7 -- to reduce our debt. And that -- we have not changed that commitment, and we'll do that through generating cash flow. We hope to generate more cash this year than what we're projecting at this point. But we -- projections are projections.

And -- but we'll be looking at revenue enhancement. We'll be looking at further cost reduction. Because what we've done is taken revenue down significantly. We have not attacked the cost base in any major way, and that's something that we will do. And we will continue to look at opportunities to raise cash through divestitures.

As I mentioned, I'm not going to get into specifics, but you should expect that there will be a series of noncore divestitures over the course of the year, which we'll use that cash to pay down debt and to accelerate the debt paydown. .

And Mike, is the fact that your tax rate is going up or you're changing your reporting structure and your tax rate, is that part of -- is that tied to the fact that you're deleveraging the balance sheet at all?.

No, no. Every year, there's a comment letter from the SEC. It's not the investigation, it's a comment letter that all companies get, and we sit down with the SEC. It's a change, as Rob said, that they suggested, and we thought their suggestion made a lot of sense.

But I think the key from an equity investor standpoint and also from a debt standpoint is it has 0 impact on our cash flows, right? It's -- so the reported tax rate will change because the NOLs -- it will sort of be pre-NOL in terms of what's reported, but in terms of the actual taxes paid, our previous guidance still stands.

We expect it to sort of stay in the 5% range. So it's purely a presentation difference. It has 0 impact at all in terms of generation of cash flows. .

Your next question comes from the line of Chris Schott from JPMorgan. .

Just 2 questions here. First, I know you rendered in a lot detail the reasons for the updated guidance.

But maybe just more broadly, how did so much change so quickly with the business? I think what investors are trying to get their heads around is, how much of this guidance is conservatism or just different approach to guidance given the management disruptions and controversies as compared to a deterioration of fundamentals over the last 3 months.

So any color there would be really helpful. The second question is just coming back to the divestitures. I know you're not planning to divest core assets.

But as you just think about the evolution of Valeant, once you kind of addressed some of these near-term challenges, if the stock doesn't recover, I mean, what would cause the company to go down a path and consider a broader breakup of the Valeant business units?.

Sure. So in terms of -- if you look at what's happening, the -- one of the big differences in the reduction in guidance is Q1. In a sense, we've lost a quarter. So Q1 is -- and that's -- which is why we tried to show sort of Q2 through Q1 of next year, where we made very conservative assumptions on Q1 of next year.

All we did is took Q1 of this year, what we expected and added it to it. So on a going-forward basis, I don't think there's been a big deterioration at all in the business, if you guys see the script trends. Things like FX, you just live with. But -- so that's a piece of it.

I think we have -- the managed care environment was something that we certainly needed to address. And so that is -- certainly has led us to, I think, a more conservative outlook on revenues than we had before. So hopefully, those are numbers that we can meet and beat. There was a pretty high deductible plan impact in the first quarter.

It's up now to 26% of our lives. So each year, that increases. So the first quarter will always be tough. So I think it's a first quarter phenomenon. We feel good about the rest of the year. The fundamentals are good. And probably we have taken a little bit more conservative approach around the forecasting.

In terms of -- if the stock price does not recover, I think that will be a function of not delivering the cash flows that we're promising and/or exceeding the cash flows. And then the company should think about other moves, I think, because we're here to serve shareholders. And I know our board is committed to that.

I know management is committed to it. But we do think we have a plan that will generate strong cash flows, allow us to reduce debt, and we can demonstrate real growth, organic growth in our businesses. And I think we believe, when we're successful doing that, the stock price will start trading more on fundamentals, which is it's not right now. .

Your next question comes from the line of Corey Davis from Canaccord Genuity. .

Just probably 2 questions. Number one, would you be willing to give us Xifaxan normalized run rate ex-inventory on an annualized basis? 210 in Q4, but I suspect that once inventories are normalized starting in Q2 of this year, it's going to be much higher than that. .

And the second question?.

Second question is, how do you think your retention program is going now and will be going over the next 6 months to ensure that you keep, retain and empower all your key employees not just at the upper levels but all the way down the ranks?.

So let me talk about retention, and then I'll let Ari talk a little about Xifaxan. So far, the retention program is working. We've had very few losses. We obviously lost Deb Jorn, and that -- we're disappointed. It's a shame [ph].

On the EMT, at the very senior level, we don't have a retention program, right? We did not put that in place for -- we have nothing in place currently for the EMT, where she was a member.

What we have is -- below the EMT, we have about 70 people that are in what we call AIP, which are sort of our next level sort of key, and we've had minimal, if any, losses there. We just paid bonuses for the year on Friday. So this is -- we'll see what happens in the next few weeks.

But there is sort of a comrade -- we have a meeting with the AIP group every week where we have an open discussion. And they're the leaders of the company, and there's a very positive attitude in the group that we're committed. I think they know how strong our brands are, how strong our products are.

They spend a lot of time with our customers, whether it be the physicians, be it retailers. And many of them have been at other pharma companies and have gotten -- gone through similar types of experiences, so I think there's esprit de corps.

So we're hopeful the board was very supportive of what we believe to be a pretty generous retention program for this level. So, so far, so good. But as you point out, it's tough. It's -- right now, it's a bit of a tough company to work for. So I really thank our employees for their commitment and dedication.

Ari, on Xifaxan?.

Yes. On Xifaxan, I think we said back in December, we expect it will be greater than $1 billion drug this year. We obviously expect that to be the case. We have over 400 reps in the field promoting Xifaxan.

We continue to believe that we will see growth across both IBS-D and increasingly, HE, where, as we've said before, the medical indications for concomitant use of Xifaxan with lactulose is in the guidelines. And we just -- we're putting in another 100 reps into the field. They've just gone through training.

So we're putting a lot of energy behind the drug. Scripts are, as you -- as Mike said, you see them. They're running north of 12,000 a week. And in total this year, we expect to see in and around 50% growth for total Xifaxan scripts. .

Your next question comes from the line of Shibani Malhotra from Nomura Securities. .

I've got a couple. The first is, Mike, can you just clarify -- you were saying that the reason the Salix inventory -- or Salix revenues have been brought down is because managed care didn't read the Walgreens press release correctly. Is that correct? That's a bit difficult for us to kind of fathom that it would have such a big impact on your sales.

And then second, over the last 6 months, we've been talking to you, and I guess investors have as well, about the fact that management needs to rebuild credibility with investors. And we've been through a spate of negative news.

It started with pricing in Philidor, then just general communication and now the guidance, which I would say is lowered far more than any investor kind of anticipated.

I guess the question is, how can we be confident in what you're saying today about the business given that you were positive in December and January? And how do we get comfortable that Valeant is able to execute and deliver for shareholders?.

Yes. Maybe I misspoke. In terms of the first one, it's not managed care per se because managed care does not deliver any product. Distributors and retailers deliver products, which lead to revenue recognition.

So -- and again, I think Walgreens did not do a very good job explaining, and then there were aspects of the Walgreen programs that people didn't like. So I think we've done a better job of explaining, and we've modified the program to accommodate important channel partners.

And so I don't think it would be -- and then there was sort of some lack of clarity whether GI was part of the program or not. So on that one, I guess I wouldn't necessarily agree that it was completely unexpected negative response to the GI. But I would point to the script, and the end demand is based on scripts written and filled.

And I would sort of point to the continued strong script growth across the Salix portfolio as sort of being the leading indicator of how that's doing, and we're quite pleased with the growth that we continue to see.

And as Ari said, we are putting more resources behind it because we think there's a lot of untapped growth in Xifaxan, in particular in the HE indication In terms of management credibility, we have to earn it.

And while you raised some terrific points, I would argue January -- I don't think we said -- I don't think I said a whole lot in January, I think, I was in a hospital bed. But I do accept your point, and it starts with me. So our team has been working hard, and we obviously have to deliver on our commitments.

The world has changed to some degree since December, but we have to do a better job. We've had some underperforming businesses. That's on us, right? That's totally on us. So we have to earn back the credibility. We have to deliver on the results. We have to meet or exceed this guidance. And I think we all recognize that.

And so it's a bit of a starting-over point at this point for me and the company. And clearly, if we don't deliver then, again, I'll -- that's on me. And -- but I can assure you, I am completely committed to making sure that we do deliver. And I do think we knew -- we have a lot more line of sight in terms of managed care at this point.

We have a lot more line of sight in terms of pricing at this point, and I think we have a better line of sight in terms of script trends. So I think that all 3 of those help. There are certain things we don't control like FX, but we have built in our guidance that we hope that's manageable as well. Thank you for the questions, Shibani. .

Your next question comes from the line of Umer Raffat from Evercore ISI. .

I have a few today, if I may. I just really want to focus in on some of the changes in fundamentals business that seem to be coming out in the first quarter. So first few for Mike, if I may.

Mike, how different is the guidance number today versus what you came out -- versus when you first came back a couple of weeks ago? And then on Xifaxan, what I'm trying to understand is, if orders were canceled towards the end of first quarter but the TRx continued to grow, that would imply to me that there's more inventory in the channel than expectation.

Am I on the right track there? And then on ophthalmology RX, I don't see any disruption in IMS, so I'm trying to understand what is it that you're seeing disruption-wise.

And the first quarter base business trend, too, Mike, how does the January plus February compare to what you're seeing in March? And then Rob, I'm sorry, if I may, a couple of things. Number one, free cash -- on EBITDA to free cash flow bridge, you previously mentioned working capital change of $600 million. It's now $200 million.

So what's driving that? Is it just Walgreens? Secondly, Rob, tax rates. Howard previously said, if you guys do delever, cash taxes go into the low teens versus about mid-single digit that it used to be. So my question is, if you guys do delever, would the non-GAAP tax rate approach 20%? And then finally, on EBITDA for the next 4 quarters.

So the press release says the adjusted EBITDA for the next 4 quarters will be $6.2 billion to $6.6 billion. But the slide, Slide 16 I believe, says it's $6 billion. So I just want to understand that. .

That's a lot of questions, Umer. Let's try to pick them off. I'll start. So guidance is saying that we have had -- been having a lot of debate within management and with the board in terms of where we take guidance, and quite frankly, we continue to have discussions. We have made a lot of progress with managed care over the last couple of weeks.

And so again, we have some of the numbers -- some of the negatives have increased, but there's certainty around them. And then the first quarter, we've gotten a lot more clarification on first quarter as the quarter has progressed, so we feel comfortable with the guidance that we're -- we gave out this morning.

In terms of inventory, as you said, if scripts continue to grow but people aren't ordering as much product, it's 1 of 2 things. One is there's more inventory out there than we thought. The second is people are holding lower levels of inventory, right? Those are the 2 possible explanations.

And actually, we think it's a little bit the latter in terms of both distributors and retailers. They're also focused on cash management, and we do think inventories throughout the channel continue to go down. But by definition, if scripts continue to grow, at some point, we do believe, as we get into the second quarter, everything will be normalized.

Ophthalmology, again, I don't think we said there's a major change. There's not a major change. What we have is a set of older products that alone are -- have experienced a slow decline. This is not -- actually, our branded share is increasing. This is largely due to more and more generics is what's growing.

And so the pool of branded ophthalmology products in the areas we compete is going down. Now we have not included in our guidance any new launches. So if we get approval on our glaucoma drug, then we would expect that would help bolster ophthalmology.

Similarly, in dermatology, if we get approval on some of our pipeline products, that will enhance there. So what we're forecasting now in our guidance is products that are currently on the market, and we don't have launch products in there.

In terms of progression, January, February, March, March is always a much larger month than January and February. It's even more in -- the first quarter, because of these high deductible plans, it's even more acute in terms of what we see in March. But -- so clearly, March is a much better month than January and February. Rob, there are a number of... .

So let me take those in turn. Firstly, with respect to the working capital on Slide 20, the reduction reflects the lower growth in the updated guidance, and it's simply 30% of the change in revenue. In terms of the tax rate, I agree that over time, it would increase if we were to delever.

The 10% to 15% that we are showing is to try to do it on a comparable basis to the 5% that we were showing. I think we've always said that our -- over the longer term, our tax rate would increase, and likewise and commensurate, the 10% to 15% would increase.

And with respect to the 4 quarter guidance, which Mike presented on Page 16, the chart is correct. The adjusted EBITDA non-GAAP guidance is $6 billion. And we will correct that. .

So Rob, to be clear, the next 4 quarters EBITDA is $6 billion?.

Correct. .

Or $6.2 billion to $6.6 billion?.

$6 billion. .

Your next question comes from the line of David Risinger from Morgan Stanley. .

I have 13 questions also, but I'll keep it a little bit briefer.

So first, with respect to divestitures, should we expect them to be dilutive to EPS given the fact that you'll be paying off low interest rate debt? Second, with respect to the rebates, discounts and channel fees, including Walgreens, could you just explain to us -- I'm assuming most of those are netted out of revenue and are reflected in net revenue, but any of those channel payments, et cetera, reflected in COGS or SG&A? And then finally, with respect to the launches, Mike, you've mentioned that you're excluding launches from revenue guidance.

Are you also excluding launch expenses from your guidance as well?.

Thank you, David, for prioritizing your questions, and I hope your colleagues take from your lead. So thank you very much. Depending on the divestitures, some could be dilutive, some actually may not be. It kind of depends on the asset.

If it's an early-stage asset, if it's -- obviously, it's not -- so as you know, it really depends on the asset and the price we get. If we do anything major, it could be -- it could lower our EPS, there's no question about that.

But we'll be clear, just like we are when -- in the past when we made acquisitions, whether it will be or it won't be dilutive. In terms of -- the launch expenses are also not included in the budget. So -- but I will note that launches in the area of dermatology and ophthalmology, we don't anticipate major changes to our infrastructure.

I think we would prioritize our call patterns differently. But the launch -- we do have good strong critical mass in dermatology, in ophthalmology and in GI in terms of our sales force capabilities, et cetera, so I don't anticipate we'll be adding lots of people for -- as part of these launches.

In terms of Walgreens, in terms of revenue deductions versus cost, I think we're taking -- we're taking the Walgreen costs through our SG&A. In terms of -- that's how we're treating the Walgreens sort of -- they're doing -- we're basically paying them a dispensing fee based on activity, and that will run through.

So it will not be in that reduction in revenue. It will be in -- it will flow through SG&A. Thank you for your questions, David. .

Your next question comes from David Amsellem from Piper Jaffray. .

I just have 2. So first, on the tax reporting -- the new tax reporting, and I know you made it clear that there's no impact on cash flow or actual taxes paid. But I guess what I'm trying to understand here is, under the old reporting, you had characterized your EPS guidance ranges and your reported EPS as cash EPS.

So under the old reporting for past EPS, is that cash EPS not really, quote, cash EPS? I mean I'm just trying to understand if there's an inconsistency here. And then secondly, this is a high-level question. Can you -- I think one of my peers had talked -- asked about retention earlier.

Maybe you can -- can you speak to morale in the company? And you had talked about distractions.

Can you speak to that and how that potentially could impact the business? And is there an issue internally in your view in terms of confidence in your ability to lead the company going forward given what's transpired?.

All right. So I'm going to ask -- let's take your second question first. And then Rob, we can talk about tax. I'm going to ask Ari and Anne because I've already commented a little bit on morale. I'd like to get their takes. And large portions of the company report to both of them in terms of the people side.

So I'll address the personal question, but Ari and Anne, why don't you -- Ari, you can go first and talk about what you think about morale. .

Okay. From the text? [laughter].

No. You can talk about the taxes too. .

Look, I think, Mike as you said, these are challenging times, but we truly have an amazing bench of general managers and leaders of functions in the businesses. And you've heard their names repeated again and again.

I think we have strong and talented leadership and people who are committed to GI, to derm, to ophthalmology, Solta, Obagi, Latin America, the B&L businesses. I'm thinking across the teams and these incredibly talented people. We come to work every day -- obviously, we have to return money to shareholders.

But we come to work worrying about patients, putting quality products into the market and serving our doctor customers compliantly and to the best of our ability, and I think that's what motivates our team. I think we believe in our mission. We believe in what our company is trying to achieve, and that's what we do day to day.

The issues surrounding us are distracting, and it takes courage to forge ahead to execute our mission day to day in the face of all that. So all I can say is we have fabulous people. We're blessed to have them. We believe in them, and we think they'll do the right thing for the business. .

So I'll just add a few comments to what Ari has said. I think he described it well. When you talk about morale, I think people have sort of worked through the process internally, through a typical change process.

And people now are actually -- they're angry, I think, more about -- at the outside because they see the company being described in a way that they know is not what they experience at Valeant. And so I'm encouraged that I've really seen people trying to move to action. They want to help. They want to help change the image of the company.

And we have really strong leaders who I think are channeling that energy into the best thing that everyone can do in this organization to really change and shift the organization. It's performed every day. And that's what we're emphasizing each and every day, is that really delivering performance is going to get us out of the situation that we're in.

I think the tenet that Valeant has really built the organization around a decentralized approach helps us here. Because we have some new businesses, you have an identity with a select set of customers who are really building their image, even in their own brand, as a Valeant company, one of those being Dendreon that I think is doing very well.

And then just a couple of other points. I think we have one of the best incentive comp programs in the industry for our sales representatives, and so that keeps them motivated on clear goals that they can achieve. And we're working to shape the environment such that they can do that.

And then I'll just end with, I think, Ari's point around people really believing in the products that they're selling. When I talk to our sales reps, when I talk to our marketers and our R&D folks, they are very committed that these products that we brought to market and are bringing to market make a real difference in patients' lives.

And so I think keeping that commitment, that conviction and that determination to really change our image and perform our way out of this, and we'll keep our organization and the morale going in the right direction. .

If I -- Anne has a good point. If I can just add. There's important functions that enable all our frontline people to do their work, and that's specifically manufacturing and R&D. And I think Tage and his team in R&D have -- are cranking out products that are going to fill our pipeline. We talked about brodalumab, IDP-118, latanoprostene bunod.

These things are being worked on by this terrific team while remaining focused on the future. I think Dennis, Angelo and their team in manufacturing, as we travel around to the operations, you couldn't hope to have a team of people more focused on just driving quality and efficiency day to day. .

And then, David, you were being placed -- I guess the question is, am I the appropriate person to lead this company? That's clearly up to the board. I do think we have a great board. We've made a number of new additions to our board that will provide even more independence.

And we basically have representation from 2 activist investors, Pershing Square and ValueAct. And so I think we have 2 major investors also on our board, and our board interacts with investors. And so I can't comment on -- I'm not going to choose to comment in terms of -- that's up to the board.

And -- but I do think our board's a lot closer to the investors than many boards, both given the composition, the new independent directors as well as sort of representation from a couple of activists.

Tax?.

Historically, our tax presentation, Table 2A and 2B, showed a single number, and it was the combined tax effect of the non-GAAP adjustment as well as the use of tax attributes and other timing issues, such as NOLs.

What we've done in the Q4 unaudited preliminary presentation is to break that out into 2 pieces, the tax provision plus the effects of the non-GAAP adjustment as well as the tax effect of use of tax attributes and other timing items. We're reporting the combined amount of that as 5%.

Going forward, we're just going to report the tax provision plus the effect of the non-GAAP adjustment only on Tables 2A and 2B. We will continue to note in a separate table the tax effect of tax attributes and other timing effects. So there's -- as we mentioned, there's no impact on cash flow or actual taxes paid.

Our approach has been to match the actual cash tax that Valeant paid each year. But again, it's been made up of those 2 terms, which we historically combined. .

Your next question comes from the line of Ram Selvaraju from H.C. Wainwright. .

I just have 2. One is, in a general sense, whether you can comment on your philosophy of curtailing price increases versus what your peers in the Specialty Pharmaceuticals arena are doing.

And how high your conviction is that, going forward, this is the best approach to take given changes in the managed care environment, i.e., get rid of as many price increases as possible versus pursuing a judicious approach to maybe increasing prices on some products or not? And then the second question is specific to what you previously commented on back in December regarding converting written prescriptions to filled prescriptions on addyi.

Could you give us an update on that, please?.

Sure, so I think we're trying to be very clear on our approach to pricing and, which is that going forward, and this has been in place since September, we will take single-digit price increases across some of our portfolio in line with managed care contracts.

What we made was a commitment, as part of the Walgreens deal this year, to reduce prices on dermatology -- WAC prices on dermatology and ophthalmology, the branded products, 10% this year. And we're no longer in the market for sort of underpriced assets out there.

If you actually -- WAC price increases are public knowledge, and if you actually look at us versus competitors, both in the specialty and in the big pharma space, and with what WAC price increases have been this year, you will see that we're actually below what most, if not all, the other companies have done. So I think we've talked about that.

And I guess the question is, how committed are we? We are very committed. And in fact, that's been one of the keys in managed care, is that commitment, and they are applauding and appreciating the approach we're taking, and they are using that when I talk to other companies.

So I think one of the very smart things that Anne and her team have done is offered something that the rest of the industry has not offered yet. And that has played a big role in terms of improving overall relationships.

Is that fair, Anne?.

Yes, that's very accurate. What the payers need, and they're very clear in this, and I understand this, after being in the industry for 25 years with other pharma companies, they want predictability.

And so we -- we're working with each of the payers, whether they're a health plan or a PBM on contracts around price inflation protection and, as Mike said, aligning our price increases with more modest industry standards. So I think you have that addyi question. .

So why don't you address the addyi. .

Yes, so with addyi, you're right, when we see the number of written prescriptions versus filled. And then at the beginning, back in the fourth quarter, we were only seeing between 25% and 30% of the prescriptions actually get paid for or filled.

That number is now up to, in the most recent weeks, 57% of those prescriptions are being filled and paid for. And really, that sort of ramp up with the number of prescriptions is being impacted by, one, having a complex REMS program.

This is the first time that, according to our knowledge, that there's been a pharmacist and physician certification process. And so, really working through that has been a challenge, but we've certainly addressed it with the pharmacies. We're down to around anywhere 10% to 12% of REMS -- of scripts being kicked back for pharmacists.

We're still working through the physician -- the physician certification and making sure that those that are writing are certified. And part of that has to do with, this is a new product that we weren't sure exactly who the targets and the writers of the products would be.

We have much more clear information now on who the targets are, who's treating HSDD and other diseases like that. And so we are taking more targeted effect. And then lastly, the managed care process has changed dramatically just -- even in this past year. And all of the large PBMs now lock new products in those cases from launch.

And they take 6 to 9 months to actually do the clinical review and then enter into negotiations.

And so it has taken us that time as we transition from Sprout to Valeant, and our managed care team here picking it up to really work through that process, and I feel very confident, by midyear, we will have improved access and for addyi, and we'll start to see the prescriptions, that are coming through, being filled.

And then, based on the enhancements that we've made to our commercial organization and filing of actual marketing materials this month to OPDP, that second half will be a much better, I think, time period to really judge the performance of this product. .

That being said, we take sort of full responsibility for the reduction in the -- we probably didn't move quick enough, that's my fault. But I think to Anne's point, we have not given up on this product. .

We've absolutely not. .

We've -- there's something you should know. But clearly, we have to demonstrate our ability to have success, and we have not done that yet. So that's on us, and we're working hard to deliver. .

Just a last comment. The testimonials we hear from physicians and patients each day inspire us every day to keep going with addyi, and really, educating around HSDD. So as Mike said, we haven't given up. I have a lot of confidence in this product. .

Your next question comes from Alex Arfaei from BMO Capital Markets. .

Most of my questions have been asked and answered. Looking at some of your top 30 products specifically, Jublia and Solodyn. It looks like much of the total business isn't being made up from other channels.

Could you provide your outlook for these products, specifically for Jublia which was thought to be a growth driver? And just a follow-up on addyi, do you still expect it to be $100 million to $150 million drug in 2016?.

Well, in terms of addyi, no. We don't expect it to be $100 million to $150 million in 2016. That's one of the products that we've reduced the forecast significantly on. What we are is hopeful and if we -- we're hopeful that we will get it to that level, but certainly not in 2016.

In terms of Jublia, it is one of the products that is -- there was a question earlier about sort of leverage, can you leverage your portfolio? And as Anne said, or mentioned, that Derm has been one of the reviews that the managed care companies have really focused on, and Jublia in particular.

So we have -- the net of many of our negotiations is we've sacrificed the price on Jublia in order to ensure access to the rest of our portfolio. So we would expect -- and we have better access for Jublia as a result of this than we had before. So we would expect scripts to continue to grow on Jublia. We think it's a great product.

But the average price will come down. And so in order to return it to growth, we will really need to expand the number of scripts. But it has been disproportionately hit in terms of managed care, in order to protect, because that's what many managed care plans were looking for.

And again, as Anne said, each negotiation is specific, it's not the case with every managed care plan. Everyone has their own needs, but that's what we're seeing in Jublia. .

Your next question is from David Maris from Wells Fargo. .

I have a few questions. The first, Rob, why no GAAP guidance and then a bridge to non-GAAP, since then investors could make a decision on what to include and what not to include? Second, on the tax effects, I want to get it right, use of tax attributes and other timing issues.

I know a few questions have been asked about this, but does this relate to deferred tax liabilities and use of recovery of income tax or anything else like that? I know I asked that when I met with you about a month ago, just wondering if that's related to that. And then the second half guidance seems to be a dramatic increase.

Other than the inventory drawdown, is there anything else that we should expect, that should account for that? And then lastly, I think, Mike, you just mentioned that launch expenses for a couple of these launches are not included in the guidance.

Why would they not be included?.

Let me -- we have no launch -- until our product's approved, we don't include it in our guidance. So we don't include the revenues or the launch expenses.

Now because most of our products are in new launch products or in categories where we already have strong sales and marketing, the net impact of launching these products, we believe, will be neutral at worse, in terms of our EPS. So that's just the way we treat it.

We don't put in the revenues and we don't put in the costs, because they're not approved yet. And that's always been what we've -- that's always been the approach we've taken to guidance. And at least from our vantage point, that makes sense. To include revenues and not the costs wouldn't make sense.

To include the cost but not the revenues wouldn't make sense. So we choose not to include either. .

Just as a follow-up to that, Mike, is it fair to say that if they're approved, since products aren't usually profitable in the first year or 2, that we'd see an increase in the expenses just for the launch expenses, not for the infrastructure or the new sales people, but just for launch expenses?.

But the net -- I believe, at least for the products this year, we would not expect it to have an impact on overall guidance, for example, if that's the question. So we'll have -- ophthalmology we hope to get approved. .

PDUFA date's July. .

July. So we believe we'll have enough revenues to cover any of the launch expenses. And broda, we do not expect to get approved till November, December. And so again, it should have minimal impact on our guidance. So we don't expect to be taking down guidance if we get products approved.

So Rob?.

So I'll take your second question first, tax effects are largely NOLs in the use of deferred tax assets, not liabilities.

With respect to the GAAP guidance, as we explained in the footnotes of the press release, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary to do it, we find it more accurate and better for our investors to guide to the non-GAAP measures that we do. .

Your next question comes from Luca Salvaro from Newman Capital. .

Your next question comes from Alan Ridgeway from Scotia Bank. .

I just have a question about the bridge to the 2016 guidance. I'm trying to just get a feel for your reduced revenue expectations for both the Derm and the Salix business, and then the managed care contracting piece as well.

Can you speak to sort of in your reduced expectations from a revenue perspective this year, what the sort of split between volume declines or decline in your expectations for demand versus your expectations on pricing? And then how that may have changed in the last little while as you've contracted with managed care? And I'll leave it at that. .

Great. Well, managed care is just all price, right. We've quantified that. And it's -- hopefully what we hope to be able to do is with this better access, is actually drive more volume. We have not built a lot of that into our forecast, and that should be upside. But in terms of managed care, that's basically price.

In terms of, as we think about, sort of prices, the prices captured there, obviously, with -- there is some price in the revenue side ex not the managed care piece, partly through the price reductions that we are giving in ophthalmology and dermatology, as well as the fact that we are -- price increases we're more limited in what we can do.

In some cases, some of the commitments to managed care was to keep price increases lower than we have historically. So there's a price element. We actually -- and then there's first quarter where demand has been lower.

But we do expect, if you actually look at the scripts, we are running ahead of last year in dermatology, and so we're quite pleased with that. We are seeing, experiencing great script growth in the GI franchise. In terms of ophthalmology, again, there, we have a decrease in scripts, but we're increasing share in the branded portion.

And those are the 3 main franchises. So overall, we expect demand to continue to increase over the course of the year. .

Your next question comes from Gregg Gilbert from DB. .

First, Mike, when you talk about script growth for Derm, are you talking about scripts of IMS plus Philidor, so i.e.

real prescriptions or just those that we see on IMS which might be inflated due to the Walgreens shift away from Philidor? Secondly, when do you expect to be able to file the 10-K? And can you share your game plan with us, i.e., what is in your control? What is in the board's control or gated by the board? And are your auditors in agreement with your game plan and your timeline? I suspect a lot of folks are going to wonder after this call, when you expect to get the K done and all the implications that come with that.

And lastly, Mike, can you comment on the situations, specifically with Deb and with Tanya, given that we only have media reports to rely on them. Clearly you know at a personal level what happened in those cases. .

Okay. So script growth.

Ari Kellen, you want to take that?.

Derm is running year-to-date roughly 10% ahead of last year all-in. We are now using Symphony IDB data, so just so you know, that's what we're going to be tracking. So far, all in Derm is growing. The access program is still relatively new, as Mike described, and we're expanding into networks of independence.

So we will continue to expect good TRx growth through the course of the year. .

Yes. In terms of the 10-K, certain things are within our control and certain things aren't. As management, we have the ad hoc committee continuing to do their review. And so it partly depends on that, partly depends on us. We have to do our work in terms of submitting the 10-K.

And then we are in constant conversations with PwC, in terms of, they have to do their work. The best estimate I can give, but again, we don't control, is that we hopefully get this 10-K filed sometime in April. But I can't commit to that. But that would be my best estimate of -- based on everything that I know.

In terms of Deb and Tanya, Deb, as we said, resigned. She was a valued employee. She led a lot of the marketing initiatives, she led our Derm business and did a great job. We were disappointed that she left.

As I mentioned, she was part of the EMT where we had no retention in place, so -- because they're executive officers of the company, and we wish her well and we were quite clear that it had nothing to do with the ad hoc committee or anything else. It was a decision that she made. And Tanya, again, that happened when I wasn't here.

So I can't comment on the -- I don't have information on that, so I can't comment on that. .

Your next question comes from the line of David Steinberg from Jefferies. .

You've mentioned destocking quite a few times in the call, in particular for some of your key brands. I was wondering if you could help us with inventory levels. I believe in the past, you said normal levels in the U.S. were about 2 to 6 weeks, and 2 to 4 months globally.

Are you -- could you confirm you're within that normal range? And then, perhaps pinpoint in the United States, given the last public forum, are you higher or lower than you were last time you spoke to the investment community? Secondly, Valeant's benefited from the lowest tax rate in your industry, and I'm just curious, could you remind us how long that tax rate is iron clad, if there's a tax treaty? And if there's a period of time when it will be reviewed, and if, when that time is? And then lastly, bigger picture question, Mike, on your corporate culture, do you think elements of it need to change? Do you think there's some components that incentivize suboptimal behavior? And then could you comment on, are there any changes to the top level management, that was not part of the retention plan? Has there been any changes to the compensation package?.

So in terms of compensation package, there's been no changes, in terms of the senior management. In terms of the inventory levels, those continue to be sort of our guidelines, 2 to 6 and sort of 4 outside, although that varies by country. Gregg, I think we've been completely flat in terms of inventory levels and in terms of the U.S.

And outside of the U.S., I think actually inventories have been down a little bit. But -- so no changes in inventory levels. Since the volume has increased through Walgreens, that, in terms of absolute dollars, that means our inventory levels have come down because what we're talking about flat, we're talking in terms of weeks.

And since Walgreens is consignment, sort of the absolute level of distributor inventories in the U.S. for dermatology, for example, has come down, although the weeks have remained in the same. So hopefully, that's clear. In terms of tax rate, we do not know of any imminent and/or any changes that are coming down.

So again, we'll see that's based by -- on governments that determine our rate. We are unaware of anything that would change our tax rate. In terms of -- we've you talked about bolstering -- in terms of corporate culture, it's interesting, when we meet with our AIP, I think there's couple of areas that we are investing in.

We will continue to try to upgrade our financial reporting. Certainly, from a PR and government relations side we are committed to investing and we're now in the process of investing in those functions. And as we said in the press release, we are -- as all pharma companies do, we're continuing to emphasize compliance.

We are continuing to emphasize, from a quality standpoint, we've been continuing to build that capability quite a bit. I think we've almost more than doubled our quality department in corporate in the U.S. We've made big investments in quality in terms of headcount and capability, and we feel very good about that.

So we will -- we've grown pretty quickly, and we are going to continue to invest in the core functions to make sure that we deliver high-quality products to physicians and to patients, and work in the most compliant way in the U.S. and beyond the U.S. .

Your next question comes from Randy Raisman from Marathon Asset Management. .

Can you just kind of provide us a little bit of a bridge on the cash balance, because when we look at it, we see you had roughly $600 million of cash at Q4. Looks like you drew down $1.2 billion on your revolver. So it will take you to $1.8 billion. You paid $900 million between the -- for the term loan. And then there was another payment that you made.

That sort of left you with about $900 million of cash, and you're saying you have $1.2 billion of cash. So that would imply then that you generated $300 million of cash in the first quarter, and that doesn't really line up with the guidance for $2.2 billion of cash flow for the year.

So like, how do we get comfortable that you're going to generate an extra $1 billion of cash than where you're currently running?.

It's Linda. On the revolver, we ended the year with $250 million drawn on the revolver. And we're now at $1.45 billion. We obviously are generating cash in the first quarter.

We did have, however, some large payments in the first quarter that we discussed, $500 million for Sprout, that we talked about, we've paid early, they were not due until April 20, $260 million of maturities. I mentioned the excess cash flow payment of about $100 million, which will be due at the end of March 31.

And those are some of the big payments. But again, without these large payments, we weren't generating cash in this quarter. .

They all right, but my question is, based on my math, it looks like you generated maybe $300 million of cash quarter-to-date from what you've disclosed. And you're telling us we should think you're going to generate $2.2 billion of cash for the year. So where's the ramp going to come from? From Q1, that's a big jump. .

It is, but we took down revenue in Q1, considerably, because of -- whether that it would factor in our explanation and starting in Q2 and Q3 and Q4, cash generation will be stronger than it has been in Q1. .

That's correct. And obviously, cash generation depends on working cap. So we are not quite done with the quarter, so that's going to impact. So I can't confirm specifically if it's exactly $300 million, but you should think of it as cash generation before these types of payments. .

And then just on the leverage covenants. So if you're at 2.1x and the covenant is 2.5x, is that something you're going look to amend as well when you go out to the bank group, because it's not that big of a cushion here. .

Right now, for what we spoke about before, we're thinking about amending or we're going to amend for the cost default as well as timing. We've done stress cases on our covenants based on our guidance and we are comfortable as we said in the call. .

Your next question comes from Irina Koffler from Mizuho. .

Just curious, what would you do in the future, once your business is normalized? I mean, is it more going back to buying additional assets? You mentioned you're not going to buy inexpensive or mispriced assets in the future, but what can we look for from your company, once this period blows over?.

Well, we're going to work hard to get this period to blow over. And we're going to reduce our debt. And we've made a commitment to get under 4x. And until we get under 4x, we will -- we're not looking to make any acquisitions. So that's our -- we're excited about our launch products.

We're excited about many of our products that we've recently launched like ULTRA and Biotrue. And we want to demonstrate we can drive growth with our current portfolio and our R&D pipeline, which we feel that we can.

As we fast forward to that period, through that period, which is probably a long time from now, then we will continue to look for assets that fit into probably the areas where we have strength today, which would be dermatology, ophthalmology, GI and emerging markets.

And -- but as you mentioned, we will not be looking at acquisitions that involve sort of the mispriced assets. That will not be part of our agenda. .

Your next question comes from David Common from JP Morgan. .

My question relates to any non-core assets sold.

Can you tell us whether you are currently required or expect to be required to pay off secured debt with those assets? To the extent that you've given us an expected debt reduction for 2016, does that presume any asset sales? And also you previously, I believe, planned to pay off, I think it was $800 million you had in your revolver at December in addition to a, I believe, $2.25 billion of other debt.

Could you tell us what your expectations are for reductions in the revolver balance over the next 12 months or in this fiscal year?.

Sure, David. First on asset sales, per our credit agreement, we have 365 days that we could reinvest the proceeds. But as Mike said, we are very focused on debt paydown. So I expect we will use some of those proceeds to pay down debt further.

Secondly, the $1.7 billion that I mentioned in the slide is permanent debt reduction, and it doesn't include any additional debt reduction we would do from asset sales.

And to answer your third question, going back to the JPMorgan slide, and I know exactly you're referencing on the A25, that A25 was paying down year-end revolver balance as well as discretionary cash. The year-end revolver balance was 2 50, so I did want to clarify that, that wasn't implying we were going to pay down A25's revolver.

Lastly, we're committed to the $1.7 billion of permanent debt. And we also want to bring the revolver balance down significantly, but through the course of the year, but I don't want to commit right now that it'll be 0 at the end of the year. .

Your next question comes from Tim Chiang from BTIG. .

Mike, I have one follow-up. I know that you guys had said that you're going to lower your cost structure on the SG&A side for some of these niche divisions, whether it's Solta, Obagi. I've known that these groups have been pretty -- they've been run pretty lean already.

And I'm just sort of wondering, how much additional cost cutting can you really do in these types of groups here?.

So I think we talked about cost reduction, both in terms of some of the smaller businesses but we also had to step back and look at the overall SG&A, which, as a percent, has increased and we actually took a look at that with, again, caveat of reinventing core functions that we want to build capabilities in.

Some of the expenses, quite frankly, have grown in some of the smaller businesses. And as Ari mentioned, we're not in the business of running unprofitable businesses. So at Solta, we are taking steps to make sure it's profitable and delivering cash flow to our investors.

So it's not like Solta, there will be cost reduction and we're spending too much in terms of, relative to the revenues in the U.S. Obagi is a different issue, it's more around sales. It's making money. And there, it's focusing on increasing the growth rates. We have a great franchise there, et cetera.

In terms of businesses like a Commonwealth, we had a plan to expand sales and marketing quite a bit. And the demand is slower, it's growing, and continues to grow, which is positive. But we are not going to increase spending at the same rate that we were planning on increasing spending.

We're going to be more moderate in terms of our approach, and as the revenues build, then we'll continue to invest, but we'll do it in a profitable way. It's sort of the same approach as launching any new product. You can choose to spend a lot of money in the short-term in hopes of accelerating revenue or you can take a more measured approach.

And that's what we're going to do in these businesses to ensure that we continue to grow the businesses, but we also continue to put dollars to the bottom line. .

And Mike, just one follow-up. I think back in December, you guys had originally thought, this is on Xifaxan by the way, that you guys were originally to going to hire another 100 reps to support Xifaxan's growth in AG.

Is that still part of the plan in 2016?.

Yes, we've done that and it's already, I think, mentioned earlier is, those reps have been hired and trained and -- when do they get out in the field, Ari?.

In the next couple of weeks. .

In the next couple of weeks, so certainly, by the second quarter, they'll be up -- by the end of the second quarter, up running and fully trained. So that has not changed. .

Your next question comes from Derek McGirt from Marathon. .

My question has been answered. .

Your next question comes from Cindy Guan from Goldman Sachs. .

I wanted to ask, have you bought back any bonds in 4Q or 1Q in the open market? I think I saw the senior note balance is about 35 million lower from 3Q, but is that just translation for the euro tranche or was there any debt bought back in the senior note side?.

Cindy, no debt has been bought back on the open market for bonds, and you're absolutely correct, that it would be translations because the euro bond needs to be marked to those current FX rates. .

Any comment in 1Q if there was any debt buyback?.

No, there have been no bonds bought back in 1Q to date. .

Your next question comes from David Maris from Wells Fargo. .

Mike, one of the questions that an investor asked me to ask, has to do with the kind of state of the business and the decline of the market cap and all the rest, and that, they had seen that in a news report that the board had thought of bringing in a new CEO, a new management team to start things afresh.

But one of the pushback's was that there was a large parachute or downstream payment.

Is that true to your knowledge? And second, are you, given the way the Philidor thing and all of the rest that has played out so far, are you willing, if the board said to, that they wanted to bring in a new management team to forgo those, what are sometimes called Golden parachute payments?.

I'm not aware of a golden parachute payment. So... .

Any termination-related payments?.

Again, I don't think -- I'm not sure -- I don't know if everything in that article was correct. I wasn't on the board. So I can't speak to that. I do not -- maybe I should wish I could get $200 million if I leave. But unfortunately, I don't think that's the case, or fortunately from an investor's standpoint, it's not a case.

So actually, I think, I've a pretty modest, if I got fired, it's pretty modest. They may be referring to some stock that is vested, that's not delivered till in the future, but that's been divested. I mean, that was -- so David, I'm not aware of any golden parachute that I have. .

Your next question comes from Henry Reukauf from Deutsche Bank. .

Just had a quick question on the forward-looking guidance for the next 12 months. I think you said it's going to be $6 billion now, instead of $6.2 billion to $6.4 billion that was in the press release today. Did I hear that correctly? And if I did, what's the reason for the change? And one more after that. .

The chart was correct, and what was in the press release was an error. .

Was it -- It definitely looks like it was switched kind of intentionally.

Was there any further comment on that or no?.

No, it wasn't switched intentionally. It was a -- it's a wrong number and we apologize. .

Okay. And then the last one is just on the debt. You want to get the debt to 4x, and you mentioned no more acquisitions.

Does that also include share repurchases? So can we assume that basically all the free cash flow is going to go to repay debt?.

Again, that's probably our current intent is to do that. We reserve the right to change that. But what we are 100% committed to is, reducing debt to $1.7 billion and our focus is on debt repay down. .

Your next question comes from Dimitry Khmelnitsky from Veritas. .

So I have 2 questions. One relates to the $58 million restatement. Was wondering if you can elaborate whether that restatement primarily related to Q4? And if you could break out the details by products, to what products it's related? If you can financially quantify that? And the other question has to do with the change in tax presentation.

So can you please clarify on Slide 6, when you talk about Q4 2015 unaudited results there, is this the old presentation? Or is that the new presentation? I'm talking about the middle section of the slide.

And if you can elaborate what you mean by tax provision there? Is that a tax provision that includes both deferred as well as current income taxes? Or is it something else? And the same thing obviously applies to effects of non-GAAP adjustments.

Is it related to deferred or current taxes?.

Okay.

So in terms of the ad hoc committee, I think put out a press release that talked about the timing in 2014 of, what was it, $68 million?.

$58 million. .

$58 million in terms of Q4 2014 versus Q1 2015. So that is, what... .

So it's all Q4 related?.

It was second half?.

Second-half. .

Second half. But it's primarily Q4. In terms of the mix of products, we took a look at that, it's a normal mix. You may be referring there were some -- I'd heard some speculation that it was like all Solodyn or something like that, which is not true. It was a sort of a normal mix across our dermatology, primarily our dermatology product portfolio.

Rob, tax?.

So 2 things. The middle part of the chart is the way we are presenting the press tables that were released this morning, where we're breaking out for the first time the tax provision plus the effects of the non-GAAP adjustment, which are, they're both current and deferred on an ongoing basis from the other.

Going forward, what we will report is just that first term. So if you look at tables 2a and 2b it's the first term that we will report and we will apply that to calculate our adjusted EPS.

And so therefore, our reported tax rate, again, on a comparable basis, and this will change if we delever and reduce our NOLs, would move from approximately 5% to approximately 10% to 15%. .

So my understanding is that's the last question, so we appreciate everyone's patience. And we look forward to our next call. Thank you. .

This concludes today's conference call. You may now disconnect..