UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

BARR PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

Delaware		42-1612474
(State or Other Jurisdiction of		(I.R.S. — Employer
Incorporation or Organization)		Identification No.)

400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677-7668
(Address of principal executive offices)

201-930-3300
(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ       Accelerated filer ¨       Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of July 27, 2007 the registrant had 107,211,697 shares of $0.01 par value common stock outstanding.

 

 

BARR PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

				Page
				Number
Part I		Condensed Financial Information
Item 1.		Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2007 and December 31, 2006			3
		Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2007 and 2006			4
		Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2007 and 2006			5
		Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			32
Item 4.		Controls and Procedures			32
Part II		Other Information
Item 1.		Legal Proceedings			34
Item 1A.		Risk Factors			34
Item 4.		Submissions of Matters to a Vote of Security Holders			34
Item 5.		Other Matters			35
Item 6.		Exhibits			35
		Signatures			36
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.0: CERTIFICATION

Part I. CONDENSED FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Barr Pharmaceuticals, Inc. and Subsidiaries

		June 30,				December 31,
		2007				2006
Assets
Current assets:
Cash and cash equivalents		$	203,956			$	231,975
Marketable securities			543,070				673,746
Accounts receivable, net of reserves of $273,592 and $238,311, respectively			477,080				515,303
Other receivables, net			68,099				76,491
Inventories			457,776				429,592
Deferred income taxes			81,497				82,597
Prepaid expenses and other current assets			36,275				35,936
Current assets held for sale			48,348				42,359
Total current assets			1,916,101				2,087,999
Property, plant and equipment, net of accumulated depreciation of $248,421 and $196,709, respectively			1,037,791				1,004,618
Deferred income taxes			37,838				37,872
Marketable securities			20,495				8,946
Other intangible assets, net			1,447,600				1,472,418
Goodwill			277,207				276,449
Long-term assets held for sale			10,288				9,820
Other assets			61,432				63,740
Total assets		$	4,808,752			$	4,961,862
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	140,541			$	144,807
Accrued liabilities			239,963				280,636
Current portion of long-term debt and capital lease obligations			634,524				742,192
Income taxes payable			7,939				21,359
Deferred tax liabilities			445				8,266
Current liabilities held for sale			13,350				14,633
Total current liabilities			1,036,762				1,211,893
Long-term debt and capital lease obligations			1,824,088				1,935,477
Deferred tax liabilities			210,984				221,471
Long-term liabilities held for sale			2,173				2,201
Other liabilities			94,881				84,494
Commitments & Contingencies (Note 15)
Minority interest			35,528				41,098
Shareholders’ equity:
Preferred stock, $1 par value per share; authorized 2,000,000; none issued			—				—
Common stock, $.01 par value per share; authorized 200,000,000; issued 110,084,741 and 109,536,481, respectively			1,101				1,095
Additional paid-in capital			645,103				610,232
Retained earnings			934,908				877,991
Accumulated other comprehensive income			123,914				76,600
Treasury stock at cost: 2,972,997 shares			(100,690	)			(100,690	)
Total shareholders’ equity			1,604,336				1,465,228
Total liabilities and shareholders’ equity		$	4,808,752			$	4,961,862

SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Barr Pharmaceuticals, Inc. and Subsidiaries

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Revenues:
Product sales		$	588,901			$	319,619			$	1,152,719			$	613,140
Alliance and development revenue			36,423				32,049				61,544				65,369
Other revenue			11,626				—				22,065				—
Total revenues			636,950				351,668				1,236,328				678,509
Costs and expenses:
Cost of sales			277,613				107,328				580,148				205,835
Selling, general and administrative			189,364				104,303				370,229				182,460
Research and development			65,413				36,447				126,637				74,152
Write-off of in-process research and development			2,809				—				4,358				—
Earnings from operations			101,751				103,590				154,956				216,062
Interest income			8,133				5,734				18,755				9,947
Interest expense			41,798				289				83,567				456
Other income, net			3,730				16,690				4,826				17,761
Earnings before income taxes and minority interest			71,816				125,725				94,970				243,314
Income tax expense			25,520				43,471				35,245				84,964
Minority interest			(376	)			—				(1,911	)			—
Net earnings from continuing operations			45,920				82,254				57,814				158,350
Loss from discontinued operations, net of taxes			(575	)			—				(897	)			—
Net earnings		$	45,345			$	82,254			$	56,917			$	158,350
Basic:
Earnings per common share — continuing operations		$	0.43			$	0.77			$	0.54			$	1.49
Loss per common share — discontinued operations			(0.01	)			—				(0.01	)			—
Net earnings per common share — basic		$	0.42			$	0.77			$	0.53			$	1.49
Diluted:
Earnings per common share — continuing operations		$	0.42			$	0.76			$	0.53			$	1.46
Loss per common share — discontinued operations			(0.01	)			—				(0.01	)			—
Net earnings per common share — diluted		$	0.41			$	0.76			$	0.52			$	1.46
Weighted average shares — basic			106,909				106,185				106,838				106,009
Weighted average shares — diluted			108,191				108,084				108,124				108,399

SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Barr Pharmaceuticals, Inc. and Subsidiaries

		Six Months Ended
		June 30,
		2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$	56,917			$	158,350
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			143,482				36,410
Deferred revenue			(3,297	)			(2,223	)
Minority interest			1,891				—
Stock-based compensation expense			15,432				13,198
Deferred income tax expense (benefit)			(29,164	)			6,428
Loss (gain) on derivative instruments, net			1,465				(10,300	)
Write-off of acquired in-process research and development			4,358				—
Other			(1,814	)			(5,898	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable and other receivables, net			45,736				(19,628	)
Inventories			(19,444	)			9,773
Prepaid expenses			(1,029	)			1,584
Other assets			4,055				(2,347	)
Increase (decrease) in:
Accounts payable, accrued liabilities and other liabilities			(55,424	)			27,900
Income taxes payable			(13,702	)			9,336
Net cash provided by operating activities			149,462				222,583
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(49,809	)			(24,955	)
Proceeds from sale of property, plant and equipment			1,470				—
Purchases of marketable securities			(1,146,516	)			(1,160,042	)
Sales of marketable securities			1,269,573				984,338
Settlement of derivative instruments			—				(48,900	)
Acquisitions, net of cash acquired			(49,135	)			(302	)
Investment in debt securities			(2,000	)			—
Other			(2	)			(3,627	)
Net cash provided by (used in) investing activities			23,581				(253,488	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital leases			(223,040	)			(735	)
Tax benefit of stock incentives			5,136				4,404
Proceeds from exercise of stock options and employee stock purchases			17,073				21,648
Other			363				—
Net cash (used in) provided by financing activities			(200,468	)			25,317
Effect of exchange-rate changes on cash and cash equivalents			(594	)			—
Decrease in cash and cash equivalents			(28,019	)			(5,588	)
Cash and cash equivalents at beginning of period			231,975				30,010
Cash and cash equivalents at end of period		$	203,956			$	24,422

SEE ACCOMPANYING NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES

1. Basis of Presentation

     Barr Pharmaceuticals, Inc. (“Barr” or the “Company”) is a Delaware holding company whose principal subsidiaries are Barr Laboratories, Inc., Duramed Pharmaceuticals, Inc. (“Duramed”) and PLIVA d.d. (“PLIVA”). The accompanying unaudited interim financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements of Barr Pharmaceuticals, Inc. and its subsidiaries and the accompanying notes that are included in the Company’s Transition Report on Form 10-K/T for the six-month period ended December 31, 2006 (the “Transition Period”). The Company prepared these condensed consolidated financial statements following the requirements of the Securities and Exchange Commission and generally accepted accounting principles in the United States (“GAAP”) for interim reporting. In management’s opinion, the unaudited financial statements reflect all adjustments (including those that are normal and recurring) that are necessary in the judgment of management for a fair presentation of such statements in conformity with GAAP.

     The consolidated financial statements include all companies which Barr directly or indirectly controls (meaning it has more than 50% of voting rights in those companies). Investments in companies where Barr owns between 20% and 50% of a company’s voting rights are accounted for by using the equity method, with Barr recording its proportionate share of that company’s net income and shareholder’s equity. The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries, after elimination of inter-company accounts and transactions. Non-controlling interests in the Company’s subsidiaries are recorded, net of tax, as minority interest.

     In preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. All information, data and figures provided in this report for the three and six months ended June 30, 2006 relate solely to Barr’s financial results and do not include PLIVA’s results.

     Certain amounts in the Company’s prior-period financial statements have been reclassified to conform to the presentation for the three and six months ended June 30, 2007. Such amounts include the Company’s reclassification of amortization expense from selling, general and administrative expense to cost of sales. See Note 9 below.

2. Recent Accounting Pronouncements

     In September 2006, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosure about fair value measurements. The statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that adopting this statement will have on its consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities, providing companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. GAAP has required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS 159

helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect a company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which a company has chosen to use fair value on the face of the balance sheet. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact that adopting this statement will have on its consolidated financial statements.

     In June 2007, the American Institute for Certified Public Accountants (“AICPA”) issued a Statement of Position “SOP 07-1”, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies. This SOP provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide. For those entities that are investment companies under this SOP, this SOP also addresses whether the specialized industry accounting principles of the Guide (referred to as investment company accounting) should be retained by a parent company in consolidation or by an investor that has the ability to exercise significant influence over the investment company and applies the equity method of accounting to its investment in the entity (referred to as an equity method investor). In addition, this SOP includes certain disclosure requirements for parent companies and equity method investors in investment companies that retain investment company accounting in the parent company’s consolidated financial statements or the financial statements of an equity method investor.

     This SOP also provides guidance for determining whether investment company accounting applied by a subsidiary or equity method investee should be retained in the financial statements of the parent company or an equity method investor. This SOP is effective for fiscal years beginning on or after December 15, 2007. The Company is currently evaluating the impact that adopting this statement will have on its consolidated financial statements.

     In June 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 07-3, Accounting for Advance Payments for Goods or Services to be Received for Use in Future Research and Development Activities. EITF 07-3 provides clarification surrounding the accounting for nonrefundable research and development advance payments, whereby such payments should be recorded as an asset when the advance payment is made and recognized as an expense when the research and development activities are performed. EITF 07-3 is effective for interim and annual reporting periods beginning after December 15, 2007. The Company is currently evaluating the impact that adopting this EITF will have on its consolidated financial statements.

3. Earnings Per Share

     The following is a reconciliation of the numerators and denominators used to calculate earnings per common share (“EPS”) as presented in the condensed consolidated statements of operations:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
(table in thousands, except per share data)
Numerator for basic and diluted earnings (loss) per share
Net earnings from continuing operations		$	45,920			$	82,254			$	57,814			$	158,350
Net loss from discontinued operations			(575	)			—				(897	)			—
Net earnings		$	45,345			$	82,254			$	56,917			$	158,350
Denominator: Weighted average shares — basic			106,909				106,185				106,838				106,009
Earnings per common share — continuing operations		$	0.43			$	0.77			$	0.54			$	1.49
Loss per common share — discontinued operations			(0.01	)			—				(0.01	)			—
Earnings per common share — basic		$	0.42			$	0.77			$	0.53			$	1.49
Denominator: Weighted average shares — diluted			108,191				108,084				108,124				108,399
Earnings per common share — continuing operations		$	0.42			$	0.76			$	0.53			$	1.46
Loss per common share — discontinued operations			(0.01	)			—				(0.01	)			—
Earnings per common share — diluted		$	0.41			$	0.76			$	0.52			$	1.46
Calculation of weighted average common shares — diluted
Weighted average shares — basic			106,909				106,185				106,838				106,009
Effect of dilutive options and warrants			1,282				1,899				1,286				2,390
Weighted average shares — diluted			108,191				108,084				108,124				108,399
Not included in the calculation of diluted earnings per-share because their impact is antidilutive:
Stock options outstanding			270				149				212				45

4. Acquisitions and Business Combinations

PLIVA d.d.

     On October 24, 2006, the Company’s wholly owned subsidiary, Barr Laboratories Europe B.V. (“Barr Europe”), completed the acquisition of PLIVA, headquartered in Zagreb, Croatia. Under the terms of the cash tender offer, Barr Europe made a payment of $2,377,773 based on an offer price of HRK 820 (Croatian Kuna (“HRK”)) per share for all shares tendered during the offer period. The transaction closed with 96.4% of PLIVA’s total outstanding share capital being tendered to Barr Europe (17,056,977 of 17,697,419 outstanding shares at the date of the acquisition). Subsequent to the close of the cash tender offer, Barr Europe purchased an additional 337,681 shares on the Croatian stock market for $49,877, including 120,150 shares totaling $18,162 purchased during the three months ended June 30, 2007 and 187,728 shares totaling $27,940 during the six months ended June 30, 2007. As the acquisition was structured as a purchase of equity, the amortization of purchase price assigned to assets in excess of PLIVA’s historic tax basis will not be deductible for income tax purposes. With the addition of the treasury shares held by PLIVA, Barr Europe owned or controlled 98.05% of PLIVA’s voting share capital as of June 30, 2007 (17,394,658 of 17,740,016 outstanding shares).

     The purchase price of $27,940 for the 187,728 shares acquired during the six months ended June 30, 2007 has been allocated to the estimated fair values using the same valuation methodology as employed with shares acquired on October 24, 2006. The fair values attributed to in-process research and development (“IPR&D”), which was expensed during the three months ended June 30, 2007, was $2,809, and was $4,358 for the six months ended June 30, 2007. The share purchases in the six months ended June 30, 2007 resulted in an increase in goodwill of $1,043.

     The Company continues to refine its estimates and expects to finalize the valuation and complete the purchase price allocation for the PLIVA acquisition as soon as possible, but no later than October 24, 2007, which is the first anniversary of the closing date.

     Refer to Note 9 below for the factors impacting the PLIVA goodwill adjustments.

5. Discontinued Operations

     Since its acquisition of PLIVA on October 24, 2006, the Company has been evaluating PLIVA’s operations and has decided to divest or exit certain non-core operations. The Company has decided to divest or exit its operations in Spain and its animal health business. As a result, as of June 30, 2007, the assets and liabilities relating to these businesses met the “held for sale” criteria of FAS 144, Accounting for the Impairment or Disposal of Long Lived Assets. The Company expects to divest these assets and the related liabilities held for sale by early 2008. Following the divestiture, the cash flows and operations of the divested operations will be eliminated from the Company’s ongoing operations, and the Company will cease to have continuing involvement with these operations. The Company’s operations in Spain are part of the generic pharmaceuticals segment. The Company’s animal health business is a separate operating segment which does not meet the quantitative thresholds for separate disclosure and, as such, is included in “other” in Note 16 below.

     The following combined amounts of our operations in Spain and the Company’s animal health business have been segregated from continuing operations and included in discontinued operations, net of taxes, in the condensed consolidated statement of operations, as shown below:

		Three				Six
		Months Ended				Months Ended
		June 30,				June 30,
		2007				2007
Revenues — Spain
Generics		$	6,157			$	13,617
Other			—				813
Net revenues — Spain		$	6,157			$	14,430
Revenues — Animal health
Other		$	9,131			$	16,436
Net revenues — Animal health		$	9,131			$	16,436
Total net revenues of discontinued operations		$	15,288			$	30,866
Loss before income taxes and minority interest			(453	)			(687	)
Income tax expense			(133	)			(230	)
Minority interest			11				20
Loss from discontinued operations- net of tax		$	(575	)		$	(897	)

     The following combined amounts of assets and liabilities of those businesses have been segregated and included in assets held for sale and liabilities held for sale on the Company’s condensed consolidated balance sheet as of June 30, 2007 and December 31, 2006, as shown below:

		June 30,				December 31,
		2007				2006
Accounts receivable, net		$	25,173			$	17,762
Inventories			19,747				22,819
Prepaid expenses and other current assets			3,428				1,778
Current assets held for sale			48,348				42,359
Property, plant and equipment, net			6,181				5,581
Deferred income taxes			2,179				2,378
Other intangible assets, net			1,819				1,752
Other assets			109				109
Long-term assets held for sale			10,288				9,820
Assets held for sale		$	58,636			$	52,179
Accounts payable		$	9,033			$	11,316
Accrued liabilities			4,030				3,065
Current portion of long-term debt and capital lease obligations			287				252
Current liabilities held for sale			13,350				14,633
Long-term debt and capital lease obligations			1,686				1,738
Deferred tax liabilities			434				424
Other liabilities			53				39
Long-term liabilities held for sale			2,173				2,201
Liabilities held for sale		$	15,523			$	16,834

6. Investments in Marketable Securities

     Investments in Marketable Securities and Debt

     Trading Securities

     The fair value of marketable securities classified as trading at June 30, 2007 and December 31, 2006 was $3,368 and $3,718, respectively, which is included as a component of current marketable securities. Net gains for the six-month periods ended June 30, 2007 and December 31, 2006 were $971 and $572, respectively. These amounts are included as a component of other income. Of such amount, losses in the amount of $44 are unrealized and relate to securities still held at June 30, 2007.

     Available-for-Sale Securities

     Available-for-sale equity securities include amounts invested in connection with the Company’s excess 401(k) and other deferred compensation plans of $10,719 and $10,293 at June 30, 2007 and December 31, 2006, respectively.

     Available-for-sale debt securities at June 30, 2007 include $512,487 in commercial paper and market auction debt securities and $35,145 in municipal and corporate bonds and federal agency issues. The commercial paper and market auction debt securities are readily convertible into cash at par value with interest rate reset or underlying

maturity dates ranging from July 2, 2007 to December 11, 2008. The municipal and corporate bonds and federal agency issues have maturity dates ranging from July 1, 2007 to February 1, 2010.

     Available-for-sale debt securities at December 31, 2006 included $617,286 in commercial paper and market auction debt securities and $50,419 in municipal and corporate bonds and federal agency issues. The commercial paper and market auction debt securities were readily convertible into cash at par value with interest rate reset or underlying maturity dates that ranged from January 1, 2007 to February 11, 2008. The municipal and corporate bonds and federal agency issues had maturity dates that ranged from January 1, 2007 to April 1, 2009.

     The realized gains and (losses) from the sale of available-for-sale investments for the six-month periods ended June 30, 2007 and December 31, 2006 were $2 and $(17), respectively. The unrealized gains and (losses) on available-for-sale investments at June 30, 2007 and December 31, 2006 were $276 and $(466), respectively.

7. Derivative Instruments

     During the three-month period ended June 30, 2007, the Company unwound its treasury lock on a ten-year U.S. Treasury security used to lock-in the current benchmark interest rate. The treasury lock was previously designated as a cash flow hedge of the Company’s forecasted floating rate interest payments on an anticipated transaction. As of June 30, 2007, this hedging relationship no longer qualified for hedge accounting. Consequently, the unwinding of this treasury lock resulted in a $3,515 net gain reclassified from accumulated other comprehensive income and recorded in other income. During the period ended June 30, 2007, there was no ineffectiveness recognized in earnings relating to this hedging relationship.

8. Inventories

     Inventories consist of the following:

		June 30,				December 31,
		2007				2006
Raw materials and supplies		$	162,192			$	160,345
Work-in-process			99,743				67,798
Finished goods			195,841				201,449
Total inventories		$	457,776			$	429,592

9. Goodwill and Other Intangible Assets

     Goodwill at December 31, 2006 and June 30, 2007 was as follows:

		Generic				Proprietary
		Pharmaceuticals				Pharmaceuticals				Total
Goodwill balance at December 31, 2006		$	228,529			$	47,920			$	276,449
Additional acquisition of PLIVA shares			1,043				—				1,043
PLIVA goodwill adjustments			(6,469	)			—				(6,469	)
Currency translation effect			6,184				—				6,184
Goodwill balance at June 30, 2007		$	229,287			$	47,920			$	277,207

     PLIVA goodwill adjustments for the six months ended June 30, 2007 include the following purchase price allocation and valuation revisions made based on additional information available to modify the Company’s initial estimates for certain assets and liabilities. The Company expects to make additional valuation revisions in the next calendar quarter for items where complete information has not been obtained.

Current assets (excluding cash)		$	206
Property, plant & equipment			(32,474	)
Other non-current assets			291
Current liabilities			13,607
Deferred tax liabilities			6,320
Other liabilities			5,581
Total PLIVA goodwill adjustments		$	(6,469	)

     Intangible assets at June 30, 2007 and December 31, 2006 consist of the following:

		June 30,												December 31,
		2007												2006
		Gross								Net				Gross								Net
		Carrying				Accumulated				Carrying				Carrying				Accumulated				Carrying
		Amount				Amortization				Amount				Amount				Amortization				Amount
Finite-lived intangible assets:
Product licenses		$	45,350			$	17,795			$	27,555			$	45,350			$	15,624			$	29,726
Product rights			1,357,134				139,482				1,217,652				1,302,116				64,788				1,237,328
Land use rights			92,812				770				92,042				88,053				166				87,887
Other			33,491				4,869				28,622				38,899				188				38,711
Total amortized finite-lived intangible assets			1,528,787				162,916				1,365,871				1,474,418				80,766				1,393,652
Indefinite-lived intangible assets — tradenames:			81,729				—				81,729				78,766				—				78,766
Total identifiable intangible assets		$	1,610,516			$	162,916			$	1,447,600			$	1,553,184			$	80,766			$	1,472,418

     The Company’s product licenses, product rights, land use rights and other finite lived intangible assets have weighted average useful lives of approximately 10, 17, 99 and 10 years, respectively. Amortization expense associated with these acquired intangibles was $40,252 and $8,647 for the three months ended June 30, 2007 and 2006, respectively, and $80,978 and $17,512 for the six months ended June 30, 2007 and 2006, respectively. During the Transition Period (six months ended December 31, 2006), the Company revised the presentation of amortization expense to include this item within cost of sales instead of selling, general and administrative expense. The presentation for the three and six months ended June 30, 2006 was reclassified to conform to that of the three and six months ended June 30, 2007.

     The annual estimated amortization expense for the next five calendar years on finite-lived intangible assets is as follows:

Years Ending December 31,
2008		$	142,648
2009		$	128,082
2010		$	121,437
2011		$	113,107
2012		$	105,749

     Included in the finite-lived intangible assets table above are product rights to over 200 intangible assets acquired by the Company over the past five years. The following table disaggregates the values of these product rights into therapeutic categories as of June 30, 2007:

		June 30, 2007
														Weighted
		Gross								Net				Average
		Carrying				Accumulated				Carrying				Amortization
Product Rights by Therapeutic Category		Amount				Amortization				Amount				period
Contraception		$	383,339			$	48,920			$	334,419				18
Antibiotics, antiviral & anti-infectives			213,024				21,264				191,760				10
Cardiovascular			202,938				20,511				182,427				10
Psychotherapeutics			155,776				12,856				142,920				12
Other (1)			402,057				35,931				366,126				10
Total product rights		$	1,357,134			$	139,482			$	1,217,652

10. Debt

     A summary of outstanding debt is as follows:

		June 30,				December 31,
		2007				2006
Credit facilities (a)		$	2,215,700			$	2,415,703
Note due to WCC shareholders (b)			6,500				6,500
Obligation under capital leases (c)			1,404				2,819
Fixed rate bonds (d)			103,784				101,780
Dual-currency syndicated credit facility (e)			64,057				86,287
Euro commercial paper program (f)			26,936				26,334
Dual-currency term loan facility (g)			25,000				25,000
Multi-currency revolving credit facility (h)			13,468				13,167
Other			1,763				79
			2,458,612				2,677,669
Less: current installments of debt and capital lease obligations			634,524				742,192
Total long-term debt		$	1,824,088			$	1,935,477

The Company’s debt includes the following liabilities incurred by PLIVA prior to the acquisition and recorded at fair value based on their prevailing market prices on the PLIVA acquisition date, pursuant to the provisions of SFAS No. 141. (Euro to U.S. dollar equivalents are based on the exchange rate in effect at June 30, 2007):

     Principal maturities of existing long-term debt and amounts due on capital leases for the next five years and thereafter are as follows:

Twelve Months Ending June 30,		Total
2009		$	212,456
2010		$	206,308
2011		$	301,316
2012		$	1,100,326
2013		$	349
Thereafter		$	559
Total principal maturities and amounts due on capital leases		$	1,821,314
Premium on fixed rate bond (see (e) above)		$	2,774
Total debt and capital lease obligations		$	1,824,088

11. Accumulated Other Comprehensive Income

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2007				2006				2007				2006
Net income		$	45,345			$	82,254			$	56,917			$	158,350
Net unrealized gain (losses) on marketable securities, net of tax			(202	)			81				783				278
Net gain (loss) on derivative financial instruments designated as cash flow hedges, net of tax			1,778				—				(435	)			—
Net unrealized gain on pension and other post employment benefits, net of tax			—				—				—				—
Net unrealized gain on currency translation adjustments			38,348				—				46,966				—
Total comprehensive income		$	85,269			$	82,335			$	104,231			$	158,628

     Accumulated other comprehensive income, as reflected on the balance sheet, is comprised of the following:

		June 30,				December 31,
		2007				2006
Cumulative unrealized gains (losses) on marketable securities, net of tax		$	511			$	(272	)
Cumulative net (loss) gain on derivative financial instruments designated as cash flow hedges, net of tax			(435	)			—
Cumulative net unrealized gain on pension and other post employment benefits, net of tax			22				22
Cumulative net unrealized gain on currency translation adjustments			123,816				76,850
Accumulated other comprehensive income		$	123,914			$	76,600

12. Income Taxes

     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FIN No. 48 (“FIN 48”) Accounting for Uncertainty in Income Taxes– an interpretation of FASB Statement 109. FIN 48 establishes a single model to address accounting for uncertain tax positions. On January 1, 2007, the Company adopted FIN 48, and as a result, recorded a $4,500 increase in the net liability for unrecognized tax positions, which was entirely recorded as a $4,500 adjustment to the opening balance of goodwill relating to the PLIVA acquisition. The total amount of gross unrecognized tax benefits as of January 1, 2007 was $25,000, and did not change materially as of June 30, 2007. Included in the balance at June 30, 2007 was $13,200 of tax positions that, if recognized, would affect the Company’s effective tax rate. The Company does not believe that the amount of the liability for unrecognized tax benefits will change during the next 52-week period.

     Upon adoption of FIN 48, the Company has elected an accounting policy to classify accrued interest and related penalties relating to unrecognized tax benefits in interest expense. Previously, the Company’s policy was to classify interest and penalties in its income tax provision. The Company had $2,600 accrued for interest and penalties at January 1, 2007 which has not changed materially as of June 30, 2007.

     The Company is currently being audited by the IRS for its June 30 and December 31, 2006 tax years. Prior periods have either been audited or are no longer subject to an IRS audit. Audits in several state jurisdictions are currently underway for tax years 2004 to 2006. The foreign jurisdiction with significant operations currently being audited is Croatia for 2004 and 2005 (tax years that remain subject to examination are 2003 and 2006). Additionally, although Germany and Poland are not currently being audited, the tax years that remain subject to examination in Germany are 2004-2006 and in Poland 2001-2002 and 2004-2006.

13. Stock-based Compensation

     The Company adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), effective July 1, 2005. SFAS 123(R) requires the recognition of the fair value of stock-based compensation in net earnings. The Company has three stock-based employee compensation plans, two stock-based non-employee director compensation plans and an employee stock purchase plan. Stock-based compensation consists of stock options and stock-settled stock appreciation rights (“SSARs”) granted under the employee equity compensation plans, and shares purchased under the employee stock purchase plan. Stock options and SSARS are granted to employees at exercise prices equal to the fair market value of the Company’s stock at the dates of grant. Generally, stock options and SSARs granted to employees fully vest three years from the grant date and have a term of 10 years. Stock options granted to directors are generally exercisable on the date of the first annual shareholders’ meeting immediately following the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grants, which generally equals the vesting period.

     The Company utilized the modified prospective transition method for adopting SFAS 123(R). Under this method, the provisions of SFAS 123(R) apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS No. 123, are recognized in net earnings in the periods after the date of adoption.

     The Company recognized stock-based compensation expense for the three months ended June 30, 2007 and 2006 in the amount of $8,133 and $6,265, respectively, and for the six months ended June 30, 2007 and 2006 in the amount of $15,432 and $13,198, respectively. The Company also recorded related tax benefits for the three months ended June 30, 2007 and 2006 in the amount of $2,691 and $1,683, respectively, and for the six months ended June 30, 2007 and 2006 in the amount of $5,103 and $3,936, respectively. The effect on net income from recognizing stock-based compensation for the three months ended June 30, 2007 and 2006 was $5,442 and $4,582, or $0.05 and $0.04 per basic and $0.05 and $0.04 per diluted share, respectively, and for the six months ended June 30, 2007 and 2006 was $10,329 and $9,263, or $0.10 and $0.09 per basic and $0.10 and $0.09 per diluted share, respectively.

     The total number of shares of common stock issuable upon the exercise of stock options and SSARs granted during the six months ended June 30, 2007 and 2006 was 1,177,150 and 92,700, respectively, with weighted-average exercise prices of $50.27 and $64.14, respectively.

     For all of the Company’s stock-based compensation plans, the fair value of each grant was estimated at the date of grant using the Black-Scholes option-pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as the Company has not paid any cash dividends) and option holder exercise behavior. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The average expected term is derived from historical and other factors. The stock-based compensation for the awards issued in the respective periods was determined using the following assumptions and calculated average fair values:

		Three								Six
		Months Ended								Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Average expected term (years)			4				5				4				5
Weighted average risk-free interest rate			5.00	%			4.35	%			4.55	%			4.35	%
Dividend yield			0	%			0	%			0	%			0	%
Volatility			29.20	%			36.85	%			29.96	%			36.85	%
Weighted average grant date fair value		$	16.48			$	20.70			$	15.43			$	25.27

     As of June 30, 2007, the aggregate intrinsic value of awards outstanding and exercisable was $100,707 and $88,773, respectively. In addition, the aggregate intrinsic value of awards exercised during the six months ended June 30, 2007 and 2006 were $15,797 and $32,088, respectively. The total remaining unrecognized compensation cost related to unvested awards amounted to $49,262 at June 30, 2007 and is expected to be recognized over the next three years. The weighted average remaining requisite service period of the unvested awards was 25 months.

14. Restructuring

     Management’s plans for the restructuring of the Company’s operations as a result of its acquisition of PLIVA are ongoing. As of June 30, 2007, certain elements of the plan that have been finalized have been recorded as a cost of the acquisition. Plans for other restructuring activities are expected to be completed by October 24, 2007.

     Through June 30, 2007, the Company has recorded restructuring costs primarily associated with severance costs and the costs of vacating certain duplicative PLIVA facilities in the U.S. Certain of these costs were recognized as liabilities assumed in the acquisition. Additionally, further restructuring costs incurred as part of the Company’s restructuring plan in connection with the acquisition will be considered part of the purchase price of PLIVA and will be recorded as an increase in goodwill. The components of the restructuring costs capitalized as a cost of the acquisition are as follows and are included in the generic pharmaceuticals segment:

		Balance												Balance
		as of												as of
		December 31,												June 30,
		2006				Payments				Additions				2007
Involuntary termination of PLIVA employees		$	8,277			$	1,292			$	328			$	7,313
Lease termination costs			10,201				—				—				10,201
		$	18,478			$	1,292			$	328			$	17,514

     Lease termination costs represent costs incurred to exit duplicative activities of PLIVA. Severance includes accrued severance benefits and costs associated with change-in-control provisions of certain PLIVA employment contracts.

     In addition, in connection with its restructuring of PLIVA’s U.S. operations, the Company incurred $5,974 of severance and retention bonus expense in the six months ended June 30, 2007.

15. Commitments and Contingencies

Litigation Matters

     The Company is involved in various legal proceedings incidental to its business, including product liability, intellectual property and other commercial litigation and antitrust actions. The Company records accruals for such contingencies to the extent that it concludes a loss is probable and the amount can be reasonably estimated. The Company also records accruals for litigation settlement offers made by the Company, whether or not the settlement offers have been accepted.

     The Company’s material litigation matters are summarized in its Transition Report on Form 10-K/T for the six month period ended December 31, 2006 and its Form 10-Q for the quarter ended March 31, 2007. Except for the matters summarized below, no material changes have occurred in the Company’s litigation matters since the filing of the Form 10-Q for the first quarter of 2007.

     Antitrust Matters

     Ciprofloxacin (Cipro^®) Antitrust Class Actions

     The Company has been named as a co-defendant with Bayer Corporation, The Rugby Group, Inc. and others in approximately 38 class action complaints filed in state and federal courts by direct and indirect purchasers of Ciprofloxacin (Cipro) from 1997 to the present. The complaints allege that the 1997 Bayer-Barr patent litigation settlement agreement was anti-competitive and violated federal antitrust laws and/or state antitrust and consumer protection laws. As previously disclosed, these lawsuits include one pending in Wisconsin. On September 19, 2003, the Circuit Court for the County of Milwaukee dismissed the Wisconsin state class action for failure to state a claim for relief under Wisconsin state law. The Court of Appeals reinstated the complaint on May 9, 2006 and the

Wisconsin Supreme Court affirmed that decision on July 13, 2007, while not reaching the underlying merits of plaintiffs’ case. The matter will now return to the trial court for further proceedings; no schedule or trial date has been set.

     Tamoxifen Antitrust Class Actions

     To date approximately 33 consumer or third-party payor class action complaints have been filed in state and federal courts against Zeneca, Inc., AstraZeneca Pharmaceuticals L.P. and the Company alleging, among other things, that the 1993 settlement of patent litigation between Zeneca and the Company violated the antitrust laws, insulated Zeneca and the Company from generic competition and enabled Zeneca and the Company to charge artificially inflated prices for tamoxifen citrate. A prior investigation of this agreement by the U.S. Department of Justice was closed without further action. On May 19, 2003, the U.S. District Court dismissed the complaints for failure to state a viable antitrust claim. On November 2, 2005, the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s order dismissing the cases for failure to state a viable antitrust claim. On November 30, 2005, plaintiffs petitioned the U.S. Court of Appeals for the Second Circuit for a rehearing en banc. On September 14, 2006, the Court of Appeals denied plaintiffs’ petition for rehearing en banc. On December 13, 2006, plaintiffs filed a petition for writ of certiorari with the U.S. Supreme Court. On June 25, 2007, the Supreme Court denied plaintiffs’ petition for writ of certiorari, definitively ending the litigation.

     Ovcon Antitrust Proceedings

     To date, the Company has been named as a co-defendant with Warner Chilcott Holdings, Co. III, Ltd., and others in complaints filed in federal courts by the Federal Trade Commission, various state Attorneys General and certain private class action plaintiffs claiming to be direct and indirect purchasers of Ovcon-35^®. These actions, the first of which was filed by the FTC on or about December 2, 2005, allege, among other things, that a March 24, 2004 agreement between the Company and Warner Chilcott (then known as Galen Holdings PLC) constitutes an unfair method of competition, is anticompetitive and restrains trade in the market for Ovcon-35^® and its generic equivalents.

     In the actions brought on behalf of the indirect purchasers, the Company has reached an agreement in principle with the class representatives to settle plaintiffs’ claims. On June 27, 2007 and 28, 2007, the court entered an order conditionally certifying a settlement class and preliminarily approving the parties’ settlement. The Court has scheduled a fairness hearing for November 6, 2007. This settlement is conditioned on the number of plaintiffs who exercise their right to opt-out of the settlement class not exceeding the threshold established by the terms of the settlement agreement.

     During the six months ended June 30, 2007, the Company established a reserve (and corresponding charge in selling, general and administrative expenses) of $8,000 related to these and other settlement offers in the Ovcon litigation.

     Government Inquiries

     On October 3, 2006, the FTC notified the Company it was investigating a patent litigation settlement reached in matters pending in the U.S. District Court for the Southern District of New York between the Company and Shire PLC concerning Shire’s Adderall XR product. On June 20, 2007, the Company received a Civil Investigative Demand seeking documents and data. The FTC is investigating whether the Company and the other parties to the litigation have engaged in unfair methods of competition in violation of the Federal Trade Commission Act by entering into agreements relating to Adderall XR and generic alternatives to Adderall XR, or other products for the treatment of attention deficit hyperactivity disorder. The Company believes that its settlement agreement is in compliance with all applicable laws and intends to cooperate with the FTC in its investigation.

16. Segment Reporting

     The Company operates in two reportable business segments: generic pharmaceuticals and proprietary pharmaceuticals. The Company evaluates the performance of its operating segments based on net revenues and gross profit. The Company does not report depreciation expense, total assets or capital expenditures by segment as

such information is neither used by management nor accounted for at the segment level. Net product sales and gross profit information for the Company’s operating segments consisted of the following:

Three months ended		Generic								Proprietary																				% of
June 30, 2007		Pharmaceuticals				%				Pharmaceuticals				%				Other				%				Consolidated				revenue
Revenues:
Product sales		$	486,601				76	%		$	102,300				16	%		$	—				—	%		$	588,901				92	%
Alliance and development revenue			—				—	%			—				—	%			36,423				6	%			36,423				6	%
Other revenue			—				—	%			—				—	%			11,626				2	%			11,626				2	%
Total revenues		$	486,601				76	%		$	102,300				16	%		$	48,049				8	%		$	636,950				100	%
						Margin								Margin								Margin								Margin
Gross Profit:						%								%								%								%
Product sales		$	235,826				48	%		$	80,435				79	%		$	—				—	%		$	316,261				54	%
Alliance and development revenue			—				—	%			—				—	%			36,423				100	%			36,423				100	%
Other revenue			—				—	%			—				—	%			6,653				57	%			6,653				57	%
Total gross profit		$	235,826				48	%		$	80,435				79	%		$	43,076				90	%		$	359,337				56	%
Three months ended		Generic								Proprietary																				% of
June 30, 2006		Pharmaceuticals				%				Pharmaceuticals				%				Other				%				Consolidated				revenue
Revenues:
Product sales		$	222,188				63	%		$	97,431				28	%		$	—				—	%		$	319,619				91	%
Alliance and development revenue			—				—	%			—				—	%			32,049				9	%			32,049				9	%
Other revenue			—				—	%			—				—	%			—				—	%			—				—	%
Total revenues		$	222,188				63	%		$	97,431				28	%		$	32,049				9	%		$	351,668				100	%
						Margin								Margin								Margin								Margin
Gross Profit: (1)						%								%								%								%
Product sales		$	145,408				65	%		$	66,884				69	%		$	—				—	%		$	212,292				66	%
Alliance and development revenue			—				—	%			—				—	%			32,049				100	%			32,049				100	%
Other revenue			—				—	%			—				—	%			—				—	%			—				—	%
Total gross profit		$	145,408				65	%		$	66,884				69	%		$	32,049				100	%		$	244,341				69	%

Six months ended		Generic								Proprietary																				% of
June 30, 2007		Pharmaceuticals				%				Pharmaceuticals				%				Other				%				Consolidated				revenue
Revenues:
Product sales		$	961,405				78	%		$	191,314				15	%		$	—				—	%		$	1,152,719				93	%
Alliance and development revenue			—				—	%			—				—	%			61,544				5	%			61,544				5	%
Other revenue			—				—	%			—				—	%			22,065				2	%			22,065				2	%
Total revenues		$	961,405				78	%		$	191,314				15	%		$	83,609				7	%		$	1,236,328				100	%
						Margin								Margin								Margin								Margin
Gross Profit:						%								%								%								%
Product sales		$	444,753				46	%		$	139,567				73	%		$	—				—	%		$	584,320				51	%
Alliance and development revenue			—				—	%			—				—	%			61,544				100	%			61,544				100	%
Other revenue			—				—	%			—				—	%			10,316				47	%			10,316				47	%
Total gross profit		$	444,753				46	%		$	139,567				73	%		$	71,860				86	%		$	656,180				53	%
Six months ended		Generic								Proprietary																				% of
June 30, 2006		Pharmaceuticals				%				Pharmaceuticals				%				Other				%				Consolidated				revenue
Revenues:
Product sales		$	422,558				62	%		$	190,582				28	%		$	—				—	%		$	613,140				90	%
Alliance and development revenue			—				—	%			—				—	%			65,369				10	%			65,369				10	%
Other revenue			—				—	%			—				—	%			—				—	%			—				—	%
Total revenues		$	422,558				62	%		$	190,582				28	%		$	65,369				10	%		$	678,509				100	%
						Margin								Margin								Margin								Margin
Gross Profit: (1)						%								%								%								%
Product sales		$	274,826				65	%		$	132,479				70	%		$	—				—	%		$	407,305				66	%
Alliance and development revenue			—				—	%			—				—	%			65,369				100	%			65,369				100	%
Other revenue			—				—	%			—				—	%			—				—	%			—				—	%
Total gross profit		$	274,826				65	%			132,479				70	%		$	65,369				100	%			472,674				70	%