##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 Commission
File Number 1-09623
 IVAX CORPORATION
 Florida
    
    16-1003559(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 4400 Biscayne Boulevard, Miami, Florida
    
    33137(Address of principal executive offices)
    
    (Zip Code)
 (305) 575-6000
 þ o
 þ o
  268,916,614 shares of Common Stock, $.10 par value, outstanding as of July 29, 2005.




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IVAX CORPORATION
 INDEX
 PAGE NO.PART I  FINANCIAL INFORMATIONItem 1 - Financial StatementsConsolidated Balance Sheets as of June 30, 2005
and December 31, 2004
    
    
    2Consolidated Statements of Operations
for the three and six months ended June 30, 2005 and 2004
    
    
    3Consolidated Statement of Shareholders Equity
for the six months ended June 30, 2005
    
    
    4Consolidated Statements of Cash Flows
for the six months ended June 30, 2005 and 2004
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2 - Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    24Item 3 - Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4 - Controls and Procedures
    
    
    41PART II  OTHER INFORMATIONItem 1 - Legal Proceedings
    
    
    42Item 6 - Exhibits
    
    
    43Section 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEO and CFO




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1  Financial Statements
 IVAX CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    December 31,2005
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    241,170
    
    
    $
    391,988Marketable securities
    
    
    197,441
    
    
    
    6,058Accounts receivable, net of allowance for doubtful
accounts of $17,862 in 2005 and $19,212 in 2004
    
    
    448,904
    
    
    
    392,418Inventories
    
    
    556,350
    
    
    
    524,644Other current assets
    
    
    207,270
    
    
    
    206,535Total current assets
    
    
    1,651,135
    
    
    
    1,521,643Property, plant and equipment, net
    
    
    608,037
    
    
    
    604,647Goodwill, net
    
    
    1,002,263
    
    
    
    682,778Intangible assets, net
    
    
    339,392
    
    
    
    336,594Other assets
    
    
    78,105
    
    
    
    66,357Total assets
    
    $
    3,678,932
    
    
    $
    3,212,019LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    206,794
    
    
    $
    177,537Current portion of long-term debt
    
    
    35,660
    
    
    
    60,145Loans payable
    
    
    7,937
    
    
    
    18,825Accrued income taxes payable
    
    
    2,766
    
    
    
    34,125Accrued expenses and other current liabilities
    
    
    327,885
    
    
    
    287,789Total current liabilities
    
    
    581,042
    
    
    
    578,421Long-term debt, net of current portion
    
    
    1,394,312
    
    
    
    1,057,843Other long-term liabilities
    
    
    97,493
    
    
    
    72,855Minority interest
    
    
    12,839
    
    
    
    12,571Shareholders equity:Common stock, $0.10 par value, authorized 546,875 shares, issued
and outstanding 268,665 shares in 2005 and 260,531 shares in 2004
    
    
    26,866
    
    
    
    26,053Capital in excess of par value
    
    
    689,512
    
    
    
    571,143Retained earnings
    
    
    967,610
    
    
    
    888,503Accumulated
other comprehensive (loss) income
    
    
    (90,742
    )
    
    
    4,630Total shareholders equity
    
    
    1,593,246
    
    
    
    1,490,329Total liabilities and shareholders equity
    
    $
    3,678,932
    
    
    $
    3,212,019
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements
 2




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IVAX CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004(In thousands, except per share data)Net revenues
    
    $
    577,293
    
    
    $
    463,962
    
    
    $
    1,068,884
    
    
    $
    889,153Cost of sales (excludes amortization,
which is presented below)
    
    
    340,544
    
    
    
    239,408
    
    
    
    629,373
    
    
    
    465,193Gross profit
    
    
    236,749
    
    
    
    224,554
    
    
    
    439,511
    
    
    
    423,960Operating expenses:Selling
    
    
    83,049
    
    
    
    66,496
    
    
    
    158,371
    
    
    
    127,867General and administrative
    
    
    46,512
    
    
    
    43,599
    
    
    
    83,398
    
    
    
    80,105Research and development
    
    
    35,887
    
    
    
    38,662
    
    
    
    69,608
    
    
    
    71,012Amortization of intangible assets
    
    
    7,083
    
    
    
    5,432
    
    
    
    13,829
    
    
    
    10,937Restructuring costs (reversal)
    
    
    1,591
    
    
    
    (36
    )
    
    
    3,139
    
    
    
    597Total operating expenses
    
    
    174,122
    
    
    
    154,153
    
    
    
    328,345
    
    
    
    290,518Operating income
    
    
    62,627
    
    
    
    70,401
    
    
    
    111,166
    
    
    
    133,442Other income (expense):Interest income
    
    
    3,732
    
    
    
    1,193
    
    
    
    6,320
    
    
    
    2,285Interest expense
    
    
    (9,284
    )
    
    
    (19,385
    )
    
    
    (18,233
    )
    
    
    (31,130
    )Other income, net
    
    
    8,074
    
    
    
    6,013
    
    
    
    10,835
    
    
    
    6,351Total other income (expense)
    
    
    2,522
    
    
    
    (12,179
    )
    
    
    (1,078
    )
    
    
    (22,494
    )Income before income taxes and
minority interest
    
    
    65,149
    
    
    
    58,222
    
    
    
    110,088
    
    
    
    110,948Provision for income taxes
    
    
    19,363
    
    
    
    10,071
    
    
    
    30,712
    
    
    
    20,452Income before minority interest
    
    
    45,786
    
    
    
    48,151
    
    
    
    79,376
    
    
    
    90,496Minority interest
    
    
    (225
    )
    
    
    (53
    )
    
    
    (269
    )
    
    
    (57
    )Net income
    
    $
    45,561
    
    
    $
    48,098
    
    
    $
    79,107
    
    
    $
    90,439Earnings per common share:Basic
    
    $
    0.17
    
    
    $
    0.19
    
    
    $
    0.30
    
    
    $
    0.37Diluted
    
    $
    0.17
    
    
    $
    0.18
    
    
    $
    0.29
    
    
    $
    0.35Weighted average number of common
shares outstanding:Basic
    
    
    266,009
    
    
    
    247,835
    
    
    
    263,564
    
    
    
    247,089Diluted
    
    
    270,744
    
    
    
    268,726
    
    
    
    272,955
    
    
    
    262,988
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IVAX CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
   AccumulatedCommon Stock
    
    Capital in
    
    
    
    
    
    OtherNumber of
    
    
    
    
    
    Excess of
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    Par Value
    
    Earnings
    
    Income (Loss)
    
    TotalBALANCE, January 1, 2005
    
    
    260,531
    
    
    $
    26,053
    
    
    $
    571,143
    
    
    $
    888,503
    
    
    $
    4,630
    
    
    $
    1,490,329Comprehensive loss:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,107
    
    
    
    
    
    
    
    79,107Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,386
    )
    
    
    (99,386
    )Unrealized net gain on
available-for-sale equity
securities and derivatives,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,014
    
    
    
    4,014Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,265
    )Exercise of stock options
    
    
    4,243
    
    
    
    424
    
    
    
    31,412
    
    
    
    
    
    
    
    
    
    
    
    31,836Tax benefit of option exercises
    
    
    
    
    
    
    
    
    
    
    15,834
    
    
    
    
    
    
    
    
    
    
    
    15,834Employee stock purchases
    
    
    58
    
    
    
    6
    
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    770Repurchase and retirement of
common stock
    
    
    (226
    )
    
    
    (23
    )
    
    
    (4,643
    )
    
    
    
    
    
    
    
    
    
    
    (4,666
    )Shares issued in acquisition
    
    
    4,059
    
    
    
    406
    
    
    
    74,760
    
    
    
    
    
    
    
    
    
    
    
    75,166Value of stock options issued to
non-employees
    
    
    
    
    
    
    
    
    
    
    242
    
    
    
    
    
    
    
    
    
    
    
    242BALANCE, June 30, 2005
    
    
    268,665
    
    
    $
    26,866
    
    
    $
    689,512
    
    
    $
    967,610
    
    
    $
    (90,742
    )
    
    $
    1,593,246
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IVAX CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months Ended June 30,
    
    2005
    
    2004(In thousands)Cash flows from operating activities:Net income
    
    $
    79,107
    
    
    $
    90,439Adjustments to reconcile net income to net cash flows from
operating activities:Restructuring costs
    
    
    3,139
    
    
    
    597Depreciation and amortization
    
    
    52,315
    
    
    
    43,857Deferred tax provision (benefit)
    
    
    7,982
    
    
    
    (15,777
    )Tax effect of stock options exercised
    
    
    12,969
    
    
    
    3,774Value of stock options issued to non-employees
    
    
    242
    
    
    
    (Credit) provision for doubtful accounts
    
    
    (107
    )
    
    
    1,202Provision for inventory obsolescence
    
    
    24,465
    
    
    
    22,346Interest accretion on notes receivable and payable, net
    
    
    861
    
    
    
    1,219Minority interest in earnings
    
    
    269
    
    
    
    57Equity in earnings of unconsolidated affiliates
    
    
    (59
    )
    
    
    (1,541
    )Gains on sale of marketable securities
    
    
    (56
    )
    
    
    (31
    )Gains on sale of product rights
    
    
    (6,440
    )
    
    
    (6,168
    )Losses on sale of assets, net
    
    
    738
    
    
    
    266(Gain) loss on extinguishment of debt
    
    
    (362
    )
    
    
    8,472Changes in operating assets and liabilities:Accounts receivable
    
    
    (65,613
    )
    
    
    (138,604
    )Inventories
    
    
    (37,352
    )
    
    
    (61,342
    )Other current assets
    
    
    531
    
    
    
    9,738Other assets
    
    
    (23,872
    )
    
    
    802Accounts payable, accrued expenses and other current liabilities
    
    
    30,237
    
    
    
    7,615Other long-term liabilities
    
    
    15,216
    
    
    
    7,223Net cash flows from operating activities
    
    
    94,210
    
    
    
    (25,856
    )Cash flows from investing activities:Proceeds from sale of product rights
    
    
    6,440
    
    
    
    6,168Capital expenditures
    
    
    (41,852
    )
    
    
    (52,607
    )Proceeds from sale of assets
    
    
    1,319
    
    
    
    504Acquisitions of intangible assets
    
    
    (5,691
    )
    
    
    (1,150
    )Acquisitions of businesses, net of cash acquired
    
    
    (195,906
    )
    
    
    (7,717
    )Investment in affiliates
    
    
    (600
    )
    
    
    (667
    )Purchases of marketable securities
    
    
    (864,714
    )
    
    
    (814,132
    )Proceeds from sales of marketable securities
    
    
    694,800
    
    
    
    800,917Net proceeds from discontinued operations
    
    
    5,000
    
    
    
    5,500Net cash flows from investing activities
    
    
    (401,204
    )
    
    
    (63,184
    )Cash flows from financing activities:Borrowings on long-term debt and loans payable
    
    
    344,481
    
    
    
    418,924Payments on long-term debt and loans payable
    
    
    (191,766
    )
    
    
    (302,641
    )Payment of debt redemption premium
    
    
    (13,800
    )
    
    
    (5,868
    )Exercise of stock options and employee stock purchases
    
    
    30,803
    
    
    
    11,278Net cash flows from financing activities
    
    
    169,718
    
    
    
    121,693Effect of exchange rate changes on cash and cash equivalents
    
    
    (13,542
    )
    
    
    (7,580
    )Net (decrease) increase in cash and cash equivalents
    
    
    (150,818
    )
    
    
    25,073Cash and cash equivalents at the beginning of the period
    
    
    391,988
    
    
    
    134,270Cash and cash equivalents at the end of the period
    
    $
    241,170
    
    
    $
    159,343Supplemental disclosures:Interest paid
    
    $
    16,995
    
    
    $
    25,771Income tax payments
    
    $
    34,876
    
    
    $
    25,548Income tax refunds
    
    $
    10,610
    
    
    $
    6,520
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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IVAX CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (1) General:
  (2) Earnings Per Share:
  Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Numerator:Net income
    
    $
    45,561
    
    
    $
    48,098
    
    
    $
    79,107
    
    
    $
    90,439Interest expense on 1.5% contingently
convertible debt, net of tax
    
    
    3
    
    
    
    1,034
    
    
    
    696
    
    
    
    1,353Adjusted net income
    
    $
    45,564
    
    
    $
    49,132
    
    
    $
    79,803
    
    
    $
    91,792Denominator:Basic weighted average number of shares
outstanding
    
    
    266,009
    
    
    
    247,835
    
    
    
    263,564
    
    
    
    247,089Effect of dilutive securities  stock options
and warrants
    
    
    4,693
    
    
    
    5,961
    
    
    
    4,431
    
    
    
    6,136Conversion equivalent of 1.5% contingently
convertible debt
    
    
    42
    
    
    
    14,930
    
    
    
    4,960
    
    
    
    9,763Diluted weighted average number of shares
outstanding
    
    
    270,744
    
    
    
    268,726
    
    
    
    272,955
    
    
    
    262,988Not included
in the calculation of diluted earnings per share because their impact
is antidilutive:Stock options outstanding
    
    
    5,638
    
    
    
    5,983
    
    
    
    11,874
    
    
    
    5,874Convertible debt
    
    
    8,861
    
    
    
    16,664
    
    
    
    8,861
    
    
    
    16,664
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(3) Stock-Based Compensation Plans:
 Accounting
for Stock-Based Compensation Accounting
for Stock Issued to Employees, Accounting for Certain Transactions Involving Stock Compensation Share-Based Payment
  Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Net income as reported
    
    $
    45,561
    
    
    $
    48,098
    
    
    $
    79,107
    
    
    $
    90,439Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related
tax effects
    
    
    3,244
    
    
    
    6,084
    
    
    
    6,306
    
    
    
    12,228Pro forma net income
    
    $
    42,317
    
    
    $
    42,014
    
    
    
    72,801
    
    
    $
    78,211Basic net income per share as reported
    
    
    0.17
    
    
    
    0.19
    
    
    
    0.30
    
    
    
    0.37Pro forma basic net income per share
    
    
    0.16
    
    
    
    0.17
    
    
    
    0.28
    
    
    
    0.32Diluted net income per share as reported
    
    
    0.17
    
    
    
    0.18
    
    
    
    0.29
    
    
    
    0.35Pro forma diluted net income per share
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.27
    
    
    
    0.30Weighted average fair value of options issued
    
    $
    6.22
    
    
    $
    7.17
    
    
    $
    4.84
    
    
    $
    8.41Expected life (years)
    
    
    4.7
    
    
    
    5.1
    
    
    
    4.7
    
    
    
    5.1Risk-free interest rate
    
    
    3.87-3.9
    %
    
    
    3.3-4.6
    %
    
    
    3.8-4.4
    %
    
    
    3.1-4.6
    %Expected volatility
    
    
    25
    %
    
    
    26
    %
    
    
    25
    %
    
    
    26
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  7




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(4) Revenues and Cost of Sales:
  June 30,
    
    December 31,2005
    
    2004Accounts receivable
    
    $
    169,647
    
    
    $
    147,330Accrued expenses
    
    
    132,836
    
    
    
    127,240Total sales returns and allowances reserves
    
    $
    302,483
    
    
    $
    274,570
 (5) Inventories:
  June 30,
    
    December 31,2005
    
    2004Raw materials
    
    $
    208,031
    
    
    $
    194,183Work-in-process
    
    
    80,793
    
    
    
    81,202Finished goods
    
    
    267,526
    
    
    
    249,259Total inventories
    
    $
    556,350
    
    
    $
    524,644
  8




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(6) Acquisition:
   Current assets, excluding cash acquired
    
    $
    67,717Property, plant and equipment
    
    
    28,582Intangible assets
    
    
    27,291Other assets
    
    
    250Total assets acquired
    
    
    123,840Current liabilities
    
    
    25,742Long-term debt
    
    
    176,085Total liabilities assumed
    
    
    201,827Net assets acquired
    
    $
    (77,987
    )Purchase price:Cash paid, net of cash acquired
    
    $
    194,674Acquisition costs
    
    
    1,232Fair market value of stock issued
    
    
    75,166Total
    
    $
    271,072Goodwill
    
    $
    349,059
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(7) Intangible Assets:
  June 30, 2005
    
    December 31, 2004Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationAmortized intangible assets:Patents and related licenses
    
    $
    78,430
    
    
    $
    55,152
    
    
    $
    76,867
    
    
    $
    55,494Trademarks
    
    
    147,082
    
    
    
    33,317
    
    
    
    146,107
    
    
    
    30,042Licenses and other intangibles
    
    
    249,183
    
    
    
    79,523
    
    
    
    217,799
    
    
    
    45,589Total
    
    $
    474,695
    
    
    $
    167,992
    
    
    $
    440,773
    
    
    $
    131,125Unamortized intangible assets:Trademarks and product
registrations
    
    $
    32,689
    
    
    
    
    
    
    $
    26,946
  (8) Debt:
 The Effect of Contingently
Convertible Debt on Diluted Earnings per Share
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
    
    during any fiscal quarter (beginning with the quarter ended September 30, 2005) if
the closing sale price of our common stock for at least 20 consecutive trading days in
the 30 consecutive trading day period ending on the last trading day of the immediately
preceding fiscal quarter exceeds 120% of the conversion price on that 30th trading day;
    
    during any five consecutive trading day period immediately following any five
consecutive trading day period (Note Measurement Period) in which the average market
price for the notes during that Note Measurement Period was less than 95% of the
average conversion value for the notes during such period;
    
    upon the occurrence of specified corporate transactions; or
    
    if we have called the notes for redemption.
  
    
    the conversion rate then in effect; and
    
    the average of the daily volume-weighted average price per share of our common stock
for each of the 10 consecutive trading days beginning on the second trading day
immediately following the day the notes are tendered for conversion (10-day Weighted
Average Price).
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
    
    a cash amount (Principal Return) equal to the lesser of (1) the aggregate Net Share
Conversion Value of the notes to be converted or (2) the aggregate principal amount of
the notes to be converted; and
    
    if the aggregate Net Share Conversion Value of the notes to be converted is greater
than the Principal Return, an amount in whole shares equal to (1) the aggregate
Conversion Value less the Principal Return and (2) a cash amount in lieu of any
factional shares of our common stock.
   (9) Income Taxes:
  Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Current:Domestic
    
    $
    9,939
    
    
    $
    17,506
    
    
    $
    11,848
    
    
    $
    18,021Foreign
    
    
    3,344
    
    
    
    8,573
    
    
    
    10,882
    
    
    
    18,208Deferred:Domestic
    
    
    (1,513
    )
    
    
    (9,846
    )
    
    
    6,289
    
    
    
    (10,995
    )Foreign
    
    
    7,593
    
    
    
    (6,162
    )
    
    
    1,693
    
    
    
    (4,782
    )Total
    
    $
    19,363
    
    
    $
    10,071
    
    
    $
    30,712
    
    
    $
    20,452
  12




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##### Table of Contents



(10) Stockholders Equity:
  (11) Retirement Plans:
  Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    538
    
    
    $
    795
    
    
    $
    1,092
    
    
    $
    1,149Interest cost
    
    
    275
    
    
    
    331
    
    
    
    558
    
    
    
    479Expected return on plan assets
    
    
    (286
    )
    
    
    (264
    )
    
    
    (580
    )
    
    
    (382
    )Amortization of transition obligation
    
    
    72
    
    
    
    91
    
    
    
    147
    
    
    
    132Net periodic pension cost
    
    $
    599
    
    
    $
    953
    
    
    $
    1,217
    
    
    $
    1,378Employer contribution
    
    $
    440
    
    
    $
    303
    
    
    $
    790
    
    
    $
    657
  13




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##### Table of Contents



(12) Business Segment Information:
 Revenues by Region
    
    Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004North AmericaExternal sales
    
    $
    259,946
    
    
    $
    225,347
    
    
    $
    486,580
    
    
    $
    392,728Intersegment sales
    
    
    437
    
    
    
    2,382
    
    
    
    1,013
    
    
    
    4,477Other revenues
    
    
    635
    
    
    
    602
    
    
    
    1,313
    
    
    
    1,092Net revenues  North America
    
    
    261,018
    
    
    
    228,331
    
    
    
    488,906
    
    
    
    398,297EuropeExternal sales
    
    
    165,587
    
    
    
    132,374
    
    
    
    321,060
    
    
    
    273,733Intersegment sales
    
    
    16,452
    
    
    
    25,596
    
    
    
    35,931
    
    
    
    44,230Other revenues
    
    
    14,955
    
    
    
    13,589
    
    
    
    20,368
    
    
    
    42,049Net revenues  Europe
    
    
    196,994
    
    
    
    171,559
    
    
    
    377,359
    
    
    
    360,012Latin AmericaExternal sales
    
    
    97,998
    
    
    
    75,626
    
    
    
    184,931
    
    
    
    149,062Other revenues
    
    
    410
    
    
    
    388
    
    
    
    672
    
    
    
    794Net revenues  Latin America
    
    
    98,408
    
    
    
    76,014
    
    
    
    185,603
    
    
    
    149,856Corporate and otherExternal sales
    
    
    35,015
    
    
    
    13,825
    
    
    
    48,577
    
    
    
    25,214Intersegment sales
    
    
    (16,889
    )
    
    
    (27,978
    )
    
    
    (36,944
    )
    
    
    (48,707
    )Other revenues
    
    
    2,747
    
    
    
    2,211
    
    
    
    5,383
    
    
    
    4,481Net revenues  Corporate
and other
    
    
    20,873
    
    
    
    (11,942
    )
    
    
    17,016
    
    
    
    (19,012
    )Consolidated net revenues
    
    $
    577,293
    
    
    $
    463,962
    
    
    $
    1,068,884
    
    
    $
    889,153
 Profits by Region
    
    Three Months
    
    Six MonthsPeriod Ended June 30,
    
    2005
    
    2004
    
    2005
    
    2004Income before minority
interest:North America
    
    $
    15,637
    
    
    $
    30,579
    
    
    $
    39,553
    
    
    $
    41,175Europe
    
    
    13,716
    
    
    
    11,286
    
    
    
    10,563
    
    
    
    38,215Latin America
    
    
    15,944
    
    
    
    19,697
    
    
    
    29,686
    
    
    
    33,359Corporate and other
    
    
    489
    
    
    
    (13,411
    )
    
    
    (426
    )
    
    
    (22,253
    )Income before minority interest
    
    
    45,786
    
    
    
    48,151
    
    
    
    79,376
    
    
    
    90,496Minority interest
    
    
    (225
    )
    
    
    (53
    )
    
    
    (269
    )
    
    
    (57
    )Net income
    
    $
    45,561
    
    
    $
    48,098
    
    
    $
    79,107
    
    
    $
    90,439
 June 30,
    

December 31,2005
    
    2004Long-Lived Assets:North America
    
    $
    358,686
    
    
    $
    352,529Europe
    
    
    615,345
    
    
    
    678,546Latin America
    
    
    515,985
    
    
    
    522,195Corporate and other
    
    
    525,924
    
    
    
    117,605Total
    
    $
    2,015,940
    
    
    $
    1,670,875
 14




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##### Table of Contents



Net Revenues by Therapeutic Category and Product TypeSix Months Ended June 30,
    
    2005
    
    2004Therapeutic category:RespiratoryProprietary and branded
    
    $
    130,343
    
    
    $
    121,605Generic pharmaceutical
    
    
    61,593
    
    
    
    67,147Total respiratory
    
    
    191,936
    
    
    
    188,752OtherProprietary and branded
    
    
    219,647
    
    
    
    205,117Generic pharmaceutical
    
    
    657,301
    
    
    
    495,284Total other
    
    
    876,948
    
    
    
    700,401Total product type:Proprietary and branded
    
    
    349,990
    
    
    
    326,722Generic pharmaceutical
    
    
    718,894
    
    
    
    562,431Total
    
    $
    1,068,884
    
    
    $
    889,153
  Balance
    
    
    
    
    
    Foreign
    
    BalanceDecember 31,
    
    
    
    
    
    Exchange
    
    June 30,2004
    
    Acquisition
    
    and Other
    
    2005North America
    
    $
    1,472
    
    
    $
    
    
    
    $
    
    
    
    $
    1,472Europe
    
    
    249,455
    
    
    
    
    
    
    
    (24,231
    )
    
    
    225,224Latin America
    
    
    384,557
    
    
    
    
    
    
    
    (5,240
    )
    
    
    379,317Corporate and
other
    
    
    47,294
    
    
    
    349,059
    
    
    
    (103
    )
    
    
    396,250Consolidated goodwill
    
    $
    682,778
    
    
    $
    349,059
    
    
    $
    (29,574
    )
    
    $
    1,002,263
 (13) Recently Issued Accounting Standards:
 Accounting Changes and Error Corrections, Accounting Changes, Reporting Accounting Changes in Interim
Financial Statements
 15




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##### Table of Contents



Accounting for Conditional Asset
Retirement Obligations  an interpretation of FASB Statement No. 143,
 , .
 16




---



##### Table of Contents



Inventory Costs,
 14) Commitments and Contingencies:
 Commitments
 Legal Proceedings (currency amounts in thousands)
 Terazosin Litigation
 Louisiana
Wholesale Drug Co. vs. Abbott Laboratories, Geneva Pharmaceuticals, Inc. and Zenith Goldline
Pharmaceuticals, Inc. Louisiana
Wholesale Louisiana Wholesale
 17




---



##### Table of Contents



per se Louisiana Wholesale inter alia
 Fen-Phen Litigation
  18




---



##### Table of Contents



Average Wholesale Price Litigation
 County of Suffolk vs. Abbott Laboratories,
Inc. et al.
 The
Commonwealth of Massachusetts vs. Mylan Laboratories, et al.
 State of Wisconsin vs. Abbott Laboratories, Inc., et al. Commonwealth
of Kentucky vs. Alpharma, Inc. State of Alabama vs. Abbott Laboratories, Inc.,
et al. The People of the State of Illinois vs. Abbott Laboratories,
Inc. State of
Florida v. Alpharma, et al.
 19




---



##### Table of Contents



United Kingdom Serious Fraud Office Investigation and Related Litigation
     20




---



##### Table of Contents



Commercial Matters
   Patent Litigation
  21




---



##### Table of Contents



Environmental Matters
   Other Litigation
   22




---



##### Table of Contents



(15) Subsequent Event:
  23




---



##### Table of Contents



Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
  Our Business
   Results of Operations
 Overview
  24




---



##### Table of Contents




    
    the outcome and timing of legal proceedings, particularly those related to
Hatch-Waxman Act exclusivity and patent infringement cases;
    
    whether our relationships and/or agreements with third parties, including
distributors, manufacturers, suppliers and customers are impacted by our announcement of
the proposed merger with TEVA Pharmaceuticals;
    
    court and FDA decisions on exclusivity periods;
    
    our ability to obtain and maintain FDA approval of our manufacturing facilities;
    
    our ability to maintain a pipeline of products in development;
    
    our ability to achieve the milestones specified in our license and development agreements;
    
    our ability to manufacture, obtain and maintain a sufficient supply of products to
meet market demand, retain our customers and meet contractual deadlines and terms;
    
    our ability to develop and rapidly introduce new products and to introduce existing
products into new territories;
    
    the timing of regulatory approval of such products;
 25




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##### Table of Contents




    
    the availability and cost of raw materials required to manufacture such products;
    
    market acceptance and demand for new pharmaceutical products or alternative
formulations of existing pharmaceutical products we may develop or sell;
    
    our ability to manufacture such products efficiently;
    
    the number and timing of regulatory approvals of competing products;
    
    the impact of competition from brand name companies that sell or authorize the sale
of their own generic products or successfully extend the exclusivity period of their
branded products;
    
    the impact of competitive pricing pressures within the generic pharmaceutical
industry;
    
    the impact of health care reform initiatives in the United States and abroad,
particularly as governments seek to contain increases in the costs of health care;
    
    the impact of pharmaceutical industry regulations or pending legislation that could
affect the pharmaceutical industry;
    
    the timing of clinical trials and other research and development expenses;
    
    our ability to forecast inventory levels and trends at our customers and their
end-customers; and
    
    our and our competitors pricing and chargeback policies.
  Net Revenues and Gross Profit
  Three Months
    
    Six Months2005
    
    2004
    
    % Change **
    
    2005
    
    2004
    
    % Change **North America
    
    $
    261.0
    
    
    $
    228.3
    
    
    
    14
    %
    
    $
    488.9
    
    
    $
    398.3
    
    
    
    23
    %Europe
    
    
    197.0
    
    
    
    171.6
    
    
    
    15
    %
    
    
    377.4
    
    
    
    360.0
    
    
    
    5
    %Latin America
    
    
    98.4
    
    
    
    76.0
    
    
    
    29
    %
    
    
    185.6
    
    
    
    149.9
    
    
    
    24
    %Corporate and other
    
    
    20.9
    
    
    
    (11.9
    )
    
    
    *
    
    
    
    17.0
    
    
    
    (19.0
    )
    
    
    *Total net revenues
    
    $
    577.3
    
    
    $
    464.0
    
    
    
    24
    %
    
    $
    1,068.9
    
    
    $
    889.2
    
    
    
    20
    %
 
 *
    
    Not meaningful**
    
    % change based on unrounded numbers 26




---



##### Table of Contents



Three Months
    
    Six Months2005
    
    2004
    
    % Change*
    
    2005
    
    2004
    
    % Change*North America
    
    
    $242.4
    
    
    
    $231.8
    
    
    
    5
    %
    
    
    $416.9
    
    
    
    $368.6
    
    
    
    13
    %% of gross product sales
    
    
    48
    %
    
    
    50
    %
    
    
    
    
    
    
    46
    %
    
    
    48
    %Europe
    
    
    17.6
    
    
    
    15.2
    
    
    
    16
    %
    
    
    33.7
    
    
    
    29.3
    
    
    
    15
    %% of gross product sales
    
    
    9
    %
    
    
    9
    %
    
    
    
    
    
    
    9
    %
    
    
    8
    %Latin America
    
    
    18.8
    
    
    
    14.2
    
    
    
    33
    %
    
    
    37.7
    
    
    
    24.5
    
    
    
    54
    %% of gross product sales
    
    
    16
    %
    
    
    16
    %
    
    
    
    
    
    
    17
    %
    
    
    14
    %
 
 *
    
    % change based on unrounded numbers  Three Months
    
    Six MonthsProduct Sales
    
    Other
    
    Currency
    
    Product Sales
    
    Other
    
    CurrencyPrice
    
    Volume
    
    Revenue
    
    Exchange
    
    Price
    
    Volume
    
    Revenue
    
    ExchangeNorth America
    
    
    $(42.0
    )
    
    
    $74.5
    
    
    
    $0.2
    
    
    
    $
    
    
    
    $(60.1
    )
    
    
    $150.8
    
    
    
    $(0.1
    )
    
    
    $Europe
    
    
    19.9
    
    
    
    (5.0
    )
    
    
    (0.5
    )
    
    
    11.0
    
    
    
    22.7
    
    
    
    (3.5
    )
    
    
    (23.6
    )
    
    
    21.8Latin America
    
    
    4.9
    
    
    
    15.3
    
    
    
    (0.1
    )
    
    
    2.3
    
    
    
    7.8
    
    
    
    26.4
    
    
    
    (0.2
    )
    
    
    1.7
   27




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##### Table of Contents



Three Months
    
    Six Months2005
    
    2004
    
    % Change*
    
    2005
    
    2004
    
    % Change*Net revenues
    
    $
    577.3
    
    
    $
    464.0
    
    
    
    24
    %
    
    $
    1,068.9
    
    
    $
    889.2
    
    
    
    20
    %Cost of sales (excludes
amortization)
    
    
    340.6
    
    
    
    239.4
    
    
    
    42
    %
    
    
    629.4
    
    
    
    465.2
    
    
    
    35
    %Gross profit
    
    $
    236.7
    
    
    $
    224.6
    
    
    
    5
    %
    
    $
    439.5
    
    
    $
    424.0
    
    
    
    4
    %% of net revenues
    
    
    41
    %
    
    
    48
    %
    
    
    
    
    
    
    41
    %
    
    
    48
    %
 
 *
    
    % change based on unrounded numbers  Operating Expenses
  Three Months
    
    Six Months2005
    
    2004
    
    % Change **
    
    2005
    
    2004
    
    % Change **Selling
    
    $
    83.0
    
    
    $
    66.5
    
    
    
    25
    %
    
    $
    158.4
    
    
    $
    127.9
    
    
    
    24
    %% of net revenues
    
    
    14
    %
    
    
    14
    %
    
    
    
    
    
    
    15
    %
    
    
    14
    %General and administrative
    
    
    46.5
    
    
    
    43.6
    
    
    
    7
    %
    
    
    83.4
    
    
    
    80.1
    
    
    
    4
    %% of net revenues
    
    
    8
    %
    
    
    9
    %
    
    
    
    
    
    
    8
    %
    
    
    9
    %Research and development
    
    
    35.9
    
    
    
    38.7
    
    
    
    (7
    )%
    
    
    69.6
    
    
    
    71.0
    
    
    
    (2
    )%% of net revenues
    
    
    6
    %
    
    
    8
    %
    
    
    
    
    
    
    7
    %
    
    
    8
    %Amortization
    
    
    7.1
    
    
    
    5.4
    
    
    
    30
    %
    
    
    13.8
    
    
    
    10.9
    
    
    
    26
    %Restructuring
    
    
    1.6
    
    
    
    
    
    
    
    *
    
    
    
    3.1
    
    
    
    0.6
    
    
    
    *Total operating expenses
    
    $
    174.1
    
    
    $
    154.2
    
    
    
    13
    %
    
    $
    328.3
    
    
    $
    290.5
    
    
    
    13
    %
 
 *
    
    Not meaningful**
    
    % change based on unrounded numbers 28




---



##### Table of Contents



Other Income (Expense)
  Three Months
    
    Six Months2005
    
    2004
    
    % Change *
    
    2005
    
    2004
    
    % Change *Interest income
    
    $
    3.7
    
    
    $
    1.2
    
    
    
    213
    %
    
    $
    6.3
    
    
    $
    2.3
    
    
    
    177
    %Interest expense
    
    
    (9.3
    )
    
    
    (19.4
    )
    
    
    (52
    )%
    
    
    (18.2
    )
    
    
    (31.1
    )
    
    
    (41
    )%Other income, net
    
    
    8.1
    
    
    
    6.0
    
    
    
    34
    %
    
    
    10.8
    
    
    
    6.3
    
    
    
    71
    %Total other
income (expense)
    
    $
    2.5
    
    
    $
    (12.2
    )
    
    
    (121
    )%
    
    $
    (1.1
    )
    
    $
    (22.5
    )
    
    
    (95
    )%
 
 *
    
    % change based on unrounded numbers  29




---



##### Table of Contents



Net Income
  Three Months
    
    Six Months2005
    
    2004
    
    % Change*
    
    2005
    
    2004
    
    % Change*Net income
    
    $
    45.6
    
    
    $
    48.1
    
    
    
    (5
    )%
    
    $
    79.1
    
    
    $
    90.4
    
    
    
    (13
    )%
 Three Months
    
    Six Months2005
    
    2004
    
    % Change*
    
    2005
    
    2004
    
    % Change*Earnings per common share:Basic
    
    $
    0.17
    
    
    $
    0.19

    
    
    
    (11
    )%
    
    $
    0.30
    
    
    $
    0.37
    
    
    
    (19
    )%Diluted
    
    $
    0.17
    
    
    $
    0.18
    
    
    
    (6
    )%
    
    $
    0.29
    
    
    $
    0.35
    
    
    
    (17
    )%
 
 *
    
    % change based on unrounded numbers Foreign Currency
  30




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##### Table of Contents



Recently Issued and Proposed Accounting Standards
 Accounting Changes and
Error Corrections, Accounting
Changes, Reporting
Accounting Changes in Interim Financial Statements
 Accounting for Conditional Asset
Retirement Obligations  an interpretation of FASB Statement No. 143,
 31




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##### Table of Contents



Share-Based Payment .
  Inventory Costs,
 Liquidity and Capital Resources
   32




---



##### Table of Contents



The Effect of Contingently
Convertible Debt on Diluted Earnings per Share
 33




---



##### Table of Contents



34




---



##### Table of Contents



Income Taxes
  Application of Critical Accounting Policies
  Revenue Provisions
  35




---



##### Table of Contents



Pre-launch Inventories
  Impairment of Goodwill and Intangibles
  Income Taxes
 Accounting for
Contingencies
 Legal Matters
  36




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##### Table of Contents



Disclosure Regarding Forward-Looking Statements
  
    
    that a significant portion of net sales are made to major pharmaceutical and health care
products distributors and major retail chains in the United States. Consequently, net
sales and quarterly growth comparisons may be affected by fluctuations in the buying
patterns of major distributors, retail chains and other trade buyers. These fluctuations
may result from seasonality, pricing, wholesaler buying decisions or other factors;
    
    that we may experience increased pricing pressures both in the United States and abroad
from managed care organizations, institutions and government agencies and programs. In the
United States, among other developments, consolidation among customers may increase pricing
pressures and may result in various customers having greater influence over prescription
decisions through formulary decisions and other policies;
    
    the outcome and timing of legal and regulatory proceedings, particularly those related
to Hatch-Waxman Act exclusivity and patent infringement cases;
    
    that the change of control of IVAX or regulatory issues arising from our proposed
merger with TEVA Pharmaceuticals could affect our relationships and/or agreements with
third parties, including distributors, manufacturers, suppliers and customers;
    
    the diversion of managements time and attention on issues related to the proposed
merger with TEVA Pharmaceuticals;
    
    our ability to retain and hire qualified employees in light of the pending merger with
TEVA Pharmaceuticals and costs incurred in implementing an appropriate retention plan;
    
    that the proposed merger with TEVA Pharmaceuticals may be delayed or may not occur at
all, or if completed, significant adverse conditions could be imposed on the combined
companies;
    
    our ability to reduce our backlog and manufacture, obtain and maintain a sufficient
supply of products to meet market demand, retain our customers and meet contractual
deadlines and terms;
    
    that we may increase sales and marketing costs and research spending above current
levels;
    
    our ability to obtain and maintain FDA approval of our manufacturing facilities, the
failure of which could result in production stoppage or delays;
 37




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##### Table of Contents




    
    the outcome and timing of any pending or future litigation or investigation (including
patent litigation, AWP investigations, and the United Kingdom National Health Service
claims), and the cost, expenses and possible diversion of managements time and attention
arising from such litigation or investigation;
    
    difficulties in product development and uncertainties related to the timing or outcome
of product development;
    
    the availability on commercially reasonable terms of raw materials and other third-party
sourced products;
    
    our dependence on sole or limited source suppliers and the risk associated with a
production interruption or shipment delays at such suppliers;
    
    our ability to replace or renew license fees, royalties and development service fees as
the related agreements expire or are terminated;
    
    our ability to renew contracts with customers;
    
    that many of the major pharmaceutical distributors have experienced downturns and
financial constraints which could impact both our sales and the collectibility of our
receivables and cause greater consolidation among our customers;
    
    difficulties in complying with governmental regulations;
    
    difficulties or delays in manufacturing products;
    
    efficacy or safety concerns with respect to marketed products, whether or not
scientifically justified, leading to recalls, withdrawals or declining sales;
    
    our ability to obtain approval from the FDA to market new pharmaceutical products;
    
    the acceptance of new products by the medical community as effective as alternative
forms of treatment for indicated conditions;
    
    the impact of new regulations or court decisions or actions by our competitors regarding
the protection of patents and the exclusivity period for the marketing of branded drugs;
    
    our ability to use inventory and raw materials in the manner initially intended or to
find alternative uses, to the extent the inventory and raw materials relate to products
pending final approval or satisfactory resolution of litigation, if such approval or
resolution is not obtained;
    
    the impact of the adoption of certain accounting standards;
    
    our success in acquiring or licensing proprietary technologies that are necessary for
our product development activities;
    
    the impact of political and economic instability in the countries in which we operate,
particularly Venezuela and other Latin American countries;
    
    our successful compliance with extensive, costly, complex and evolving governmental
regulations and restrictions;
    
    the use of estimates in the preparation of our financial statements and the possibility
that those assumptions may prove to be incorrect, incomplete or may change;
    
    our reliance on third-party data for many of our significant estimates;
    
    our ability to continue to document, maintain and test the effectiveness of our internal
control systems and procedures and implement any improvements that may be necessary in
order for us to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002;
    
    our ability to identify potential acquisitions and to successfully acquire and integrate
such operations or products;
    
    our ability to successfully compete in both the branded and generic pharmaceutical sectors;
    
    trade buying patterns;
    
    trends toward managed care and health care cost containment;
    
    possible United States legislation or regulatory action affecting, among other things,
pharmaceutical pricing and reimbursement, including Medicaid and Medicare;
 38




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
    
    interest rate and foreign currency exchange rate fluctuation; and
    
    other risks and uncertainties detailed herein and from time to time in our Securities
and Exchange Commission filings.
  39




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Item 3  Quantitative and Qualitative Disclosures About Market Risk
     40




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Item 4
 Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
  Limitations on the Effectiveness of Controls
   41




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PART II  OTHER INFORMATION
 
 Item 1
 Legal Proceedings
  Average Wholesale Price Litigation
    United Kingdom Serious Fraud Office Investigation and Related Litigation
  Commercial Matters
  Environmental Matters
   42




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##### Table of Contents



Item 6  Exhibits
 (a)
    
    Exhibits
 4.1
    
    Indenture dated May 9, 2005 between IVAX Corporation and
U.S. Bank Trust National Association as trustee with respect to the
$350,000,000 1.5% Convertible Senior Notes due 2025.
    
    *4.2
    
    Form of 1.5% Convertible Senior Notes due 2025.
    
    *4.3
    
    Registration Rights Agreement dated May 9, 2005, between IVAX
Corporation and Merrill Lynch Pierce Fenner & Smith Incorporated as
the Initial Purchasers, with respect to the $350,000,000 1.5%
Convertible Senior Notes due 2025.
    
    *31.1
    
    Certification of the Chief Executive Officer
pursuant to Exchange Act Rules 13a-14(a).
    
    Filed herewith.31.2
    
    Certification of the Chief Financial Officer
pursuant to Exchange Act Rules 13a-14(a).
    
    Filed herewith.32
    
    Certification of the Chief Executive Officer and
Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    Filed herewith.
  
 *
    
    Incorporated by reference to our Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on June 28, 2005 (File No. 333-126171) 43




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Signature
  IVAX CorporationDate: August 5, 2005
    By:
    /s/ Thomas E. BeierThomas E. BeierSenior Vice President-Finance
Chief Financial Officer 44




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EXHIBIT INDEX
 EXHIBIT NUMBER
    
    DESCRIPTION OF DOCUMENT31.1
    
    Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a).31.2
    
    Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a).32
    
    Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.