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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K/T
  o
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended
 or
 þ
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from July 1, 2006 to December 31, 2006
 Commission file number 1-9860
 
 Barr Pharmaceuticals, Inc.
 (Exact name of Registrant as specified in its charter)
 Delaware
    
    42-1612474(State or Other Jurisdiction of
    
    (I.R.S.  EmployerIncorporation or Organization)
    
    Identification No.)400 Chestnut Ridge Road
    
    07677-7668Woodcliff Lake, New Jersey
    
    (Zip Code)(Address of principal executive offices)
 201-930-3300
(Registrants telephone number)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registered:Common Stock, Par Value $0.01
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 þ o
 o þ
 þ o
 o
  þ o o
 o þ




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##### 



BARR PHARMACEUTICALS, INC.
  
 INDEX
TO TRANSITION REPORT ON FORM 10-K/T
FOR THE SIX MONTHS ENDED DECEMBER 31, 2006
 PagePARTIItem 1:
    
    Business
    
    
    3Item 1A:
    
    Risk Factors
    
    
    26Item 1B:
    
    Unresolved Staff Comments
    
    
    33Item 2:
    
    Properties
    
    
    34Item 3:
    
    Legal Proceedings
    
    
    35Item 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    41PART IIItem 5:
    
    Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    42Item 6:
    
    Selected Financial Data
    
    
    43Item 7:
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    44Item 7A:
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    73Item 8:
    
    Financial Statements and Supplementary Data
    
    
    73Item 9:
    
    Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
    
    
    73Item 9A:
    
    Controls and Procedures
    
    
    74Item 9B:
    
    Other Information
    
    
    77PART IIIItem 10:
    
    Directors, Executives Officers and Corporate Governance
    
    
    78Item 11:
    
    Executive Compensation
    
    
    78Item 12:
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    78Item 13:
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    78Item 14:
    
    Principal Accounting Fees and Services
    
    
    78PART IVItem 15:
    
    Exhibits and Financial Statement Schedules
    
    
    79SIGNATURES
    
    
    83Index to Financial Statements and Financial Statement Schedule
    
    
    F-1EX-10.27: EMPLOYMENT AGREEMENTEX-21.0: SUBSIDIARIESEX-23.1: CONSENT OF DELOITTE & TOUCHE LLPEX-23.2: CONSENT OF KPMG HUNGARIA KFTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.O: CERTIFICATIONS
  2




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PART I
 
 ITEM 1. BUSINESS
 Safe
Harbor Statement and Market Data
   Change in Fiscal Year
  OVERVIEW
       3




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 ® ® ® 
      PLIVA Acquisition
   4




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
    
    We have established a single point of contact for all of our U.S. customers.
    
    Our Forest, Virginia facility became the single point of distribution for all
generic products in the United States.
    
    We have moved all PLIVA proprietary products sold previously under the Odyssey
label to our Duramed label.
    
    We completed the FTC-ordered divestitures of four products.
    
    We timely complied with our post-closing regulatory reporting requirements,
including the filing of a Form 8-K/A with the SEC on January 9, 2007 that included a
reconciliation of the historical PLIVA financial statements under International
Financial Reporting Standards (IFRS) to U.S. Generally Accepted Accounting
Principles (GAAP), and presented pro forma financial information for the twelve
months ended June 30, 2006.
    
    We have identified certain less profitable businesses as
candidates for possible disposition.
 GENERIC PHARMACEUTICALS
   5




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
    
    those with complex formulation or development characteristics;
    
    those requiring specialized manufacturing capabilities;
    
    those where sourcing the raw material may be difficult; and
    
    those that must overcome unusual regulatory or legal challenges,
including patent challenges.
    Filings and Approvals
  United States
  
    
    filed 11 abbreviated new drug applications (ANDAs) with the FDA;
    
    received FDA approvals for seven generic products; and
    
    launched seven new generic products.
  Other Markets
  6




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Operations in our Key Non-US Markets
 Croatia.
 Germany.
 Poland.
 Russia.
 Czech Republic
 7




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##### Table of Contents



Generic Product Portfolio
  Oral Contraceptives ® ® ®
 Fentanyl Citrate.
 Azithromycin/Sumamed. ®
 Katadolon (flupirtin
  Transition
    
    Fiscal Year Ended June 30,Period
    
    2006
    
    2005
    
    2004Oral contraceptives
    
    
    53
    %
    
    
    48
    %
    
    
    53
    %
    
    
    35
    %Ciprofloxacin
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    33
    %Desmopressin
    
    
    *
    
    
    
    13
    %
    
    
    *
    
    
    
    *
 
 *
    
    Denotes less than 10% in the period indicated. 8




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Sales and Marketing
    Transition
    
    Fiscal Year Ended June 30,Period
    
   2006
    
    2005
    
    2004McKesson Drug Company
    
    
    17
    %
    
    
    22
    %
    
    
    15
    %
    
    
    21
    %Cardinal Health
    
    
    *
    
    
    
    10
    %
    
    
    13
    %
    
    
    12
    %AmeriSource Bergen
    
    
    *
    
    
    
    *
    
    
    
    10
    %
    
    
    *Walgreens
    
    
    11
    %
    
    
    13
    %
    
    
    15
    %
    
    
    16
    %CVS
    
    
    *
    
    
    
    12
    %
    
    
    12
    %
    
    
    *
 
 *
    
    Denotes less than 10% in the period indicated. Patent Challenges
  Our Patent Challenge History
  
    
    ADDERALL XR.ADDERALL XR is a once-daily, extended-release, mixed salt
amphetamine product that is indicated for the treatment of ADHD and narcolepsy.
In August 2006, we entered into a product acquisition agreement, a product
development agreement, and settlement and license agreements with Shire plc to
settle our pending patent infringement dispute. Under the terms of the
agreements, we (1) purchased Shires ADDERALL® (immediate-release mixed
amphetamine salts) tablets for $63 million; (2) granted Shire a license to
obtain regulatory approval for and market in certain specified territories our
SEASONIQUE.
 9




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extended-cycle oral contraceptive product, along with five products in various
stages of development, for an initial $25 million payment for previously incurred
product development expenses, and for reimbursement of development expenses
incurred going forward, up to a maximum of $140 million over an
eight-year period,
not to exceed $30 million per year; and (3) are able to launch a generic version
of ADDERALL XR on April 1, 2009, more than nine years earlier than the
last-to-expire Shire listed patent.
    
    Desmopressin.Desmopressin is the generic equivalent of Ferring B.V.s
DDAVP® Tablets. DDAVP Tablets are indicated as antidiuretic
replacement therapy in the management of central diabetes insipidus and for the
management of the temporary polyuria and polydipsia following head trauma or
surgery in the pituitary region. DDAVP is also indicated for the management of
primary nocturnal enuresis. Following the February 2005 summary judgment ruling
by the U.S. District Court for the Southern District of New York that the patent
alleged to cover DDAVP is unenforceable and not infringed by our product, we
launched Desmopressin Acetate tablets, 0.1 mg and 0.2 mg, on July 5, 2005. In
February 2006, the Federal Circuit Court affirmed the District Courts ruling
that the patent at issue is unenforceable. In October 2006, the U.S. Supreme
Court denied Ferrings petition for a writ of certiorari.
    
    Modafinil.Modafinil is the generic equivalent of Cephalons
PROVIGIL®. In February 2006, we entered into an agreement with
Cephalon to settle our pending patent infringement dispute in the U.S. related
to PROVIGIL. Under the terms of the settlement, Cephalon granted us a
non-exclusive, royalty-bearing right to market and sell a generic version of
PROVIGIL in the U.S. Our license will become effective in October 2011, unless
Cephalon obtains a pediatric extension for PROVIGIL, in which case we would be
permitted entry in April 2012. We may be allowed to enter at an earlier date
based upon the entry of another generic version of PROVIGIL.
    
    Niacin.Niacin is the generic equivalent of Kos Pharmaceuticals
Niaspan® product. In April 2005, we entered into co-promotion,
licensing and manufacturing, and settlement and license agreements relating to
the resolution of the patent litigation involving Niaspan. Under the terms of
the agreements, we: (1) co-promote the current Niaspanand
Advicor® products (the Kos Products) to obstetricians,
gynecologists and other practitioners with a focus on womens healthcare in the
U.S. using our 103-person specialty sales force and in return we receive a
royalty based upon overall sales of the Kos Products, whether by Kos or our
sales force, as described elsewhere in this report; (2) serve as a stand-by,
alternate supply source for the Kos Products; and (3) will be allowed to launch
generic versions of the Kos Products on September 20, 2013, about four years
before the last of the applicable Kos patents is set to expire.
 Pending Patent Challenges
  10




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U.S.BrandedMarket ValueANDA Name(Brand Product)
    
    ($ millions)*Alendronate Sodium (Fosamax®)
    
    $
    1,909.0Drospirenone and Ethinyl Estradiol (YASMIN®)
    
    
    552.2Fexofenadine
(Allegra®Tablets, Allegra D®)
    
    
    1,331.1Fluoxetine
HCl (Prozac®Weekly)
    
    
    30.7Galantamine Hydrobromide Tablets (RAZADYNE®)
    
    
    150.7Galantamine Hydrobromide Extended-Release Capsules
(RAZADYNE®ER)
    
    
    83.7Norgestimate/EE (TRI-CYCLEN LO®)
    
    
    403.7Olanzapine
ODT (ZYPREXA®Zydis®ODT)
    
    
    246.4Oxandrolone Tablets (Oxandrin®)
    
    
    58.7Pramipexole Dihydrochloride (MIRAPEX®)
    
    
    291.0Raloxifene Hydrochloride (EVISTA®)
    
    
    685.7Thalidomide (Thalomid®)
    
    
    415.6Topiramate
Capsules (Topamax®Sprinkle Capsules)
    
    
    43.7Tramadol HCl & Acetaminophen (ULTRACET®)
    
    
    135.9Triamcinolone Acetonide (NASACORT®AQ)
    
    
    345.9Total
    
    $
    6,684.0
 
 *
    
    Source: IMS Health  twelve months sales ended December 31, 2006.  Allegra
Tablets. ®
  PROPRIETARY PHARMACEUTICALS
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Proprietary Product Portfolio
  
    
    SEASONIQUE (Levonorgestrel/Ethinyl Estradiol and Ethinyl Estradiol)
extended-cycle oral contraceptive
    
    ENJUVIA (Synthetic Conjugated Estrogens, B) hormone therapy
    
    ParaGard® T 380A (Intrauterine Copper Contraceptive) IUD
    
    Mircette® (Desogestrel and Ethinyl Estradiol) oral contraceptive
    
    Plan B® OTC/Rx (Levonorgestrel) emergency oral contraceptive
    
    Niaspan® (Niacin Extended-Release Tablets) for high cholesterol (marketed
under agreement with Kos Pharmaceuticals, Inc., a wholly owned subsidiary of Abbott)
    
    Advicor® (Niacin Extended-Release/Lovastatin Tablets) for high cholesterol
(also marketed under agreement with Kos Pharmaceuticals, Inc.)
  SEASONIQUE  .
 Plan
B ® Emergency Contraceptive.
 12




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(SM)
 ParaGard ® IUD. ®
 ENJUVIA   ®
 ® ®
 ® ® ® ® ®
  Transition
    
    Fiscal Year Ended June 30,Period
    
    2006
    
    2005
    
    2004ParaGard
    
    
    16
    %
    
    
    11
    %
    
    
    *
    
    
    
    *Plan B
    
    
    14
    %
    
    
    *
    
    
    
    *
    
    
    
    *SEASONALE
    
    
    14
    %
    
    
    30
    %
    
    
    31
    %
    
    
    17
    %Cenestin
    
    
    *
    
    
    
    11
    %
    
    
    16
    %
    
    
    32
    %Loestrin
    
    
    *
    
    
    
    *
    
    
    
    15
    %
    
    
    *Ziac
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    12
    %Viaspan
    
    
    *
    
    
    
    *
    
    
    
    *
    
    
    
    12
    %
 
 *
    
    Denotes less than 10% in the period indicated. 13




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Products in Development
  Lo SEASONIQUE  . 
 Bijuva  (Synthetic Conjugated Estrogens, A) Cream.
 Transvaginal Ring (TVR) Products.
 Oxybutynin TVR.
 Vaccines.
 Sales and Marketing
  
    
    Our Womens Healthcare Sales Force, which has approximately 250 sales
representatives, currently promotes SEASONIQUE extended-cycle oral
contraceptive, our ENJUVIA hormone therapy products, our Plan B OTC/Rx
emergency contraceptive, and our Mircette® oral contraceptive product to womens
healthcare practitioners. This sales force may market additional womens healthcare
products we develop or acquire.
    
    Our Specialty Sales Force, which has 103 sales representatives, promotes the
ParaGard® IUD product, Mircette® and SEASONIQUE to obstetricians,
gynecologists and other practitioners with a focus on womens healthcare. This
sales force also promotes Niaspan® and Advicor® cholesterol
treatments under a co-promotion agreement with Kos Pharmaceuticals,
Inc. that we entered
into in April 2005.
  14




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Transition
    
    Fiscal Year Ended June 30,Period
    
    2006
    
    2005
    
    2004McKesson Drug Company
    
    
    36
    %
    
    
    30
    %
    
    
    26
    %
    
    
    21
    %Cardinal Health
    
    
    16
    %
    
    
    15
    %
    
    
    20
    %
    
    
    21
    %Integrated
Commercialization
Services
    
    
    15
    %
    
    
    11
    %
    
    
    *
    
    
    
    *AmeriSource Bergen
    
    
    *
    
    
    
    *
    
    
    
    11
    %
    
    
    15
    %
 
 *
    
    Denotes less than 10% in the period indicated. BIOPHARMACEUTICALS
   ®
    15




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® ® ®
   RESEARCH AND DEVELOPMENT
  RAW MATERIALS
 ®
  PATENTS AND PROPRIETARY RIGHTS
  16




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GOVERNMENT REGULATION
 United States
  Abbreviated New Drug Application Process
      17




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Patent Challenges
      18




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Patent Challenge Process
    Mova Pharmaceutical Corp. v.
Shalala Mylan Pharmaceuticals v.
Shalala
  19




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##### Table of Contents




    
    Only one 30-month stay allowed per drug;.
    
    Product-by-product exclusivity;
    
    Shared 180-day exclusivity in limited circumstances;.
    
    Counterclaim for an Orange Book delisting allowed; and
    
    180-day exclusivity cannot be triggered by a district court decision.
  New Drug Application Process
   
    
    In Phase I, which frequently begins with the initial introduction of the
compound into healthy human subjects prior to introduction into patients, the
product is tested for safety, adverse effects, dosage, tolerance absorption,
metabolism, excretion and other elements of clinical pharmacology.
    
    Phase II typically involves studies in a small sample of the intended patient
population to assess the efficacy of the compound for a specific indication, to
determine dose tolerance and the optimal dose range, and to gather additional
information relating to safety and potential adverse effects.
    
    Phase III trials are undertaken to further evaluate clinical safety and
efficacy in an expanded patient population at typically dispersed study sites,
in order to determine the overall risk-benefit ratio of the compound and to
provide an adequate basis for product labeling.
  20




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United States Drug Enforcement Agency (DEA)
  Medicaid
   Medicare
 
 21




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Other Countries
     Government Relations Activities
  22




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COMPETITION
  
    
    the generic divisions and subsidiaries of brand pharmaceutical companies,
including Sandoz US, a subsidiary of Novartis AG;
    
    large independent domestic and international generic manufacturers including
Mylan Laboratories, Watson Pharmaceuticals, Inc., Teva Pharmaceuticals and
distributors with large product lines where there is competition with some of
our products;
    
    generic manufacturers in Europe such as Ratiopharm, Gedeon Richter Ltd,
Actavis and Krka d.d.;
    
    generic manufacturers in India that have certain cost advantages over U.S.
generic manufacturers, such as Ranbaxy and Dr. Reddys; and
    
    brand pharmaceutical companies whose therapies compete with our generic and
proprietary products, including Johnson & Johnson, Wyeth, Organon, Berlex and
Warner Chilcott.
  
    
    filing new patents on drugs whose original patent protection is about to
expire;
    
    obtaining patents on next-generation products reflecting, for example
changes in formulation, means of delivery or other product improvement
modifications;
    
    increasing marketing initiatives;
    
    launching authorized generic versions of their branded products;
    
    using the Citizens Petition process to request amendments to FDA standards;
    
    pricing the brand product below the already reduced price of the generic
product in certain formularies in order to maintain a favored reimbursement
status; and
    
    commencing litigation.
   23




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
    
    focus our proprietary and generic product development in areas of historical
strength or competitive advantage;
    
    target generic products for development that have unique characteristics,
including difficulty in sourcing raw materials, difficulty in formulation or
establishing bioequivalence, and manufacturing that requires unique facilities,
processes or expertise;
    
    develop innovative, cost-effective proprietary products that serve unmet medical needs; and
    
    make significant investments in plant and equipment to improve our efficiency.
  EMPLOYEES
   INSURANCE
  24




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ENVIRONMENTAL
  25




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ITEM 1A. RISK FACTORS
  Our disclosure and analysis in this Form 10-K/T contain some forward-looking statements that
set forth anticipated results based on managements plans and assumptions. From time to time, we
also provide forward-looking statements in other materials we release to the public as well as oral
forward-looking statements. Such statements give our current expectations or forecasts of future
events; they do not relate strictly to historical or current facts. We have tried, wherever
possible, to identify such statements by using words such as anticipate, estimate, expect,
project, intend, plan,
believe, target, forecast and similar expressions in connection
with any discussion of future operating or financial performance. In particular, these include
statements relating to future actions, prospective products or product approvals, potential
acquisitions, future performance or results of current and anticipated products, sales efforts,
expenses, foreign exchange rates, the outcome of contingencies, such as legal proceedings, and
financial results.
 We cannot guarantee that any forward-looking statement will be realized, although we believe
we have been prudent in our plans and assumptions. Achievement of future results is subject to
risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could
differ materially from past results and those anticipated, estimated or projected. You should bear
this in mind as you consider forward-looking statements.
 We undertake no obligation to publicly update forward-looking statements, whether as a result
of new information, future events or otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our reports on forms 10-Q
and 8-K filed with the SEC. Also note that we
provide the following cautionary discussion of risks, uncertainties and possibly inaccurate
assumptions relevant to our businesses. These are factors that, individually or in the aggregate,
we think could cause our actual results to differ materially from expected and historical results.
We note these factors for investors as permitted by the Private Securities Litigation Reform Act of
1995. You should understand that it is not possible to predict or identify all such factors.
Consequently, you should not consider the following to be a complete discussion of all potential
risks or uncertainties.
 Our success depends on our ability to successfully develop and commercialize additional
pharmaceutical products
  Impact on our revenues and profits as competition is introduced
  26




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Resolving Paragraph IV patent challenges
  
    
    legislation recently introduced in Congress that, if passed as currently
written, could significantly limit the ability of companies to settle patent
litigation under the Hatch-Waxman Act;
    
    an increase in the number of competitors who pursue patent challenges could
make it more difficult for us to be the first to file a Paragraph IV certification
on a patent protected product;
    
    a branded companys decision to launch an authorized generic version of a
product will reduce our market share and lower the revenues and gross profits we
could have otherwise earned if an authorized generic were not launched;
    
    claims brought by third parties, including the FTC, various states Attorneys
General and other third-party payers challenging the legality of our settlement
agreements could affect the way in which we resolve our patent challenges with
the brand pharmaceutical companies; and
    
    the efforts of brand companies to use legislative and regulatory tactics to
delay the launch of generic products.
 Impact of At Risk Launches
 ®
 27




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Uncertainty associated with pharmaceutical pricing, reimbursement and related matters  Managed Care Trends
  Government Regulation
    28




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Product Manufacturing
  Dependence on Third Parties
   Customer Consolidation
  Acquisitions
  Acquisition and Integration of PLIVA
  29




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
    
    the necessity of coordinating and consolidating geographically separated
organizations, systems and facilities, including as they relate to disclosure
controls and internal controls for purposes of regulations promulgated under the
Sarbanes-Oxley Act;
    
    the successful integration of our management and personnel with that of PLIVA
and retaining key employees; and
    
    changes in intellectual property legal protections and remedies, trade
regulations and procedures and actions affecting approval, production, pricing,
reimbursement and marketing of products.
  
    
    our ability to satisfy obligations with respect to the $2.4 billion of debt
that we incurred to help finance this transaction, nearly all of which is at a
variable rate of interest based upon LIBOR;
    
    the ability of the combined company to meet certain revenue and cost-synergy
objectives;
    
    charges associated with this transaction, including the write-off of acquired
in-process research and development costs, additional depreciation and
amortization of acquired assets and interest expense and other financing costs
related to the new Credit Facility have impacted and will continue to negatively impact our net income;
    
    our ability to accurately forecast financial results is affected by a
significant increase in the scope and complexity of our business;
    
    our international-based revenues and expenses are subject to foreign currency
exchange rate fluctuations; and
    
    to the extent goodwill or intangible assets associated with the acquisition
become impaired, we may be required to incur material charges to our earnings
for those impairments.
  We are subject to risks associated with doing business outside of the United States
  
    
    changes in non-U.S. medical reimbursement policies and programs;
    
    multiple non-U.S. regulatory requirements that are subject to change and that
could restrict our ability to manufacture and sell our products;
    
    compliance with anti-bribery laws such as the U.S. Foreign Corrupt Practices
Act and similar anti-bribery laws in other jurisdictions, as discussed in
further detail below;
    
    different local product preferences and product requirements;
    
    trade protection measures and import or export licensing requirements;
    
    difficulty in establishing, staffing and managing non-U.S. operations;
 30




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
    
    different labor regulations;
    
    changes in environmental, health and safety laws;
    
    potentially negative consequences from changes in or interpretations of tax laws;
    
    political instability and actual or anticipated military or political conflicts;
    
    economic instability, inflation, recession, and interest rate or foreign
currency fluctuations; and
    
    minimal or diminished protection of intellectual property in some countries.
  We are subject to the restrictions imposed by the U.S. Foreign Corrupt Practices Act and
similar worldwide anti-bribery laws
  Foreign currency exchange rates may adversely affect our results
  Cost and Expense Control/Unusual Events
  Legal Proceedings
  31




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Availability of Product Liability Insurance
  Exposure to Environmental Laws and Regulations
  
    
    the generation, storage, use and transportation of hazardous materials;
    
    emissions or discharges of substances into the environment;
    
    investigation and remediation of hazardous substances or materials at various sites; and
    
    the health and safety of our employees.
    Managing Rapidly Growing Operations
  32




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Changes in Laws and Accounting Standards
  Terrorist Activity
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  33




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ITEM 2. PROPERTIES
  Owned/Location
    
    Sq. Feet
    
    Leased
    
    Principal Usage(s)Woodcliff Lake, NJ
    
    
    90,000
    
    
    Leased
    
    AdministrativeEast Hanover, NJ
    
    
    279,861
    
    
    Leased
    
    Manufacturing; Warehousing;
AdministrativePomona, NY
    
    
    174,000
    
    
    Owned
    
    R&D; Laboratories;
Administrative; Manufacturing;
WarehousingCincinnati, OH
    
    
    305,000
    
    
    Owned
    
    Manufacturing; Laboratories;
Packaging; Warehousing;
AdministrativeBala Cynwyd, PA
    
    
    39,000
    
    
    Leased
    
    Proprietary R&D; AdministrativeForest, VA
    
    
    375,000
    
    
    Owned
    
    Adenovirus
Facility; Administrative;
Warehousing;
Packaging; DistributionBrno, Czech Republic
    
    
    458,397
    
    
    Owned
    
    Manufacturing; API;
Warehousing; Engineering; R&D;
AdministrativeZagreb, Croatia
    
    
    2,126,561
    
    
    Owned
    
    Administrative; Manufacturing;
PackagingZagreb, Croatia
    
    
    205,031
    
    
    Owned
    
    Administrative HeadquartersZagreb, Croatia
    
    
    236,806
    
    
    Owned
    
    R&D; Manufacturing; API;
BiologicsKrakow, Poland
    
    
    948,548
    
    
    Owned
    
    Manufacturing; Warehousing;
Engineering; AdministrativeGoa, India
    
    
    45,165
    
    
    Owned
    
    R&D Biostudy Center
  34




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##### Table of Contents



ITEM 3. LEGAL PROCEEDINGS
 Litigation Settlement
  Pending Litigation Matters
    Patent Matters
 Desmopressin Acetate Suit
  en banc
 Fexofenadine Hydrochloride Suit
  35




---



##### Table of Contents



Sanofi-Aventis
 36




---



##### Table of Contents



Product Liability Matters
 Hormone Therapy Litigation
   Antitrust Matters
 Ciprofloxacin
(Cipro ®
  en banc en
banc
     37




---



##### Table of Contents



Tamoxifen
 en banc en banc
  Ovcon
 ® ®
    Provigil
 ®
 38




---



##### Table of Contents



Medicaid Reimbursement Cases
          Breach of Contract Action
  39




---



##### Table of Contents



Other Litigation
  Government Inquiries
  40




---



##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   For
    
    SharesPaul M. Bisaro
    
    
    87,874,930Harold Chefitz
    
    
    92,236,617Bruce L. Downey
    
    
    87,761,008Richard Frankovic
    
    
    92,246,209James Gilmore III
    
    
    45,765,389Peter Seaver
    
    
    92,715,666George P. Stephan
    
    
    87,934,261
  For
    
    Against
    
    Abstain93,036,051
    
    6,133,057
    
    824,535
 41




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##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 (a) Market for Barrs Common Equity
  High
    
    LowTransition PeriodThree months ended September 30, 2006
    
    $
    59.25
    
    
    $
    44.60Three months ended December 31, 2006
    
    
    53.89
    
    
    
    47.52Fiscal year ended June 30, 2006:First quarter
    
    $
    55.08
    
    
    $
    45.00Second quarter
    
    
    63.60
    
    
    
    53.53Third quarter
    
    
    70.25
    
    
    
    60.83Fourth quarter
    
    
    64.51
    
    
    
    47.24Fiscal year ended June 30, 2005:First quarter
    
    $
    42.80
    
    
    $
    32.01Second quarter
    
    
    46.90
    
    
    
    35.07Third quarter
    
    
    50.45
    
    
    
    43.71Fourth quarter
    
    
    54.29
    
    
    
    47.00
   (b) Recent Sales of Unregistered Securities
  (c) Issuer Purchases of Equity Securities
  42




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 th st
 Six monthsendedTransition
    
    December 31,Period
    
    2005(in thousands, except per share data)Statements of Operations DataTotal revenues
    
    $
    916,403
    
    
    $
    635,956Earnings
(loss) before income taxes and minority interest
    
    
    (304,279
    )
    
    
    279,634Income tax expense
    
    
    34,505
    
    
    
    101,507Net earnings (loss)
    
    
    (338,155
    )
    
    
    178,127Earnings (loss) per common share  basic
    
    
    (3.18
    )
    
    
    1.71Earnings (loss) per common share  diluted
    
    
    (3.18
    )
    
    
    1.66
 December 31,2006
    
    2005Balance Sheet DataWorking capital
    
    $
    876,106
    
    
    $
    711,797Total assets
    
    
    4,961,862
    
    
    
    1,686,597Long-term debt (1)
    
    
    1,937,215
    
    
    
    11,520Shareholders equity
    
    
    1,465,228
    
    
    
    1,493,078
 Fiscal
Year Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(in thousands, except per share data)Statements of Operations DataTotal revenues
    
    $
    1,314,465
    
    
    $
    1,047,399
    
    
    $
    1,309,088
    
    
    $
    902,864
    
    
    $
    1,188,984Earnings before income taxes
    
    
    522,948
    
    
    
    329,876
    
    
    
    194,440
    
    
    
    262,715
    
    
    
    337,537Income tax expense
    
    
    186,471
    
    
    
    114,888
    
    
    
    71,337
    
    
    
    95,149
    
    
    
    125,318Net earnings
    
    
    336,477
    
    
    
    214,988
    
    
    
    123,103
    
    
    
    167,566
    
    
    
    210,269Earnings per common share  basic
    
    
    3.20
    
    
    
    2.08
    
    
    
    1.21
    
    
    
    1.69
    (2)
    
    
    2.17
    (2)(3)Earnings per common share  diluted
    
    
    3.12
    
    
    
    2.03
    
    
    
    1.15
    
    
    
    1.62
    (2)
    
    
    2.06
    (2)(3)
 June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002Balance Sheet DataWorking capital
    
    $
    921,663
    
    
    $
    780,386
    
    
    $
    670,601
    
    
    $
    582,183
    
    
    $
    457,393Total assets
    
    
    1,921,419
    
    
    
    1,490,306
    
    
    
    1,333,269
    
    
    
    1,180,937
    
    
    
    888,554Long-term debt (1)
    
    
    7,431
    
    
    
    15,493
    
    
    
    32,355
    
    
    
    34,027
    
    
    
    42,634Shareholders equity
    
    
    1,690,956
    
    
    
    1,233,970
    
    
    
    1,042,046
    
    
    
    867,995
    
    
    
    666,532
 
 (1)
    
    Includes capital leases and excludes current installments.(2)
    
    Amounts have been adjusted for the March 16, 2004 3-for-2 stock split effected
in the form of a 50% stock dividend.(3)
    
    Amounts have been adjusted for the March 17, 2003 3-for-2 stock split effected
in the form of a 50% stock dividend. 43




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Change in Fiscal Year
  
    
    Transition Period  July 1, 2006 through December 31, 2006.
    
    comparable 2005 six months  July 1, 2005 through December 31, 2005
    
    fiscal 2006  July 1, 2005 through June 30, 2006.
    
    fiscal 2005  July 1, 2004 through June 30, 2005.
    
    fiscal 2004  July 1, 2003 through June 30, 2004.
    
    PLIVA Stub Period  October 25, 2006 through December 31, 2006.
  Executive Overview
   PLIVA Acquisition
   44




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##### Table of Contents



Generic Products
     45




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##### Table of Contents



Proprietary Products
  46




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##### Table of Contents



Comparison of the six months ended December 31, 2006 and December 31, 2005
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Generic products:Oral contraceptives
    
    $
    235.8
    
    
    $
    191.2
    
    
    $
    44.6
    
    
    
    23
    %Other generic
    
    
    400.8
    
    
    
    225.1
    
    
    
    175.7
    
    
    
    78
    %Total generic products
    
    
    636.6
    
    
    
    416.3
    
    
    
    220.3
    
    
    
    53
    %Proprietary products
    
    
    200.9
    
    
    
    140.4
    
    
    
    60.5
    
    
    
    43
    %Total product sales
    
    
    837.5
    
    
    
    556.7
    
    
    
    280.8
    
    
    
    50
    %Alliance and development revenue
    
    
    65.9
    
    
    
    79.3
    
    
    
    (13.4
    )
    
    
    -17
    %Other revenue
    
    
    13.0
    
    
    
    0.0
    
    
    
    13.0
    
    
    
    0
    %Total revenues
    
    $
    916.4
    
    
    $
    636.0
    
    
    $
    280.4
    
    
    
    44
    %
 Product Sales
 Generic Products
    Proprietary Products
 ®
 47




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##### Table of Contents



Alliance and Development Revenue
  Teva
  Kos
  Shire
  Adenovirus Vaccine
  Other Revenue
  48




---



##### Table of Contents



Cost of Sales
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Generic products
    
    $
    307.1
    
    
    $
    138.3
    
    
    $
    168.8
    
    
    
    122
    %Gross margin
    
    
    52
    %
    
    
    67
    %Proprietary products
    
    $
    56.2
    
    
    $
    33.8
    
    
    $
    22.4
    
    
    
    66
    %Gross margin
    
    
    72
    %
    
    
    76
    %Other
    
    $
    12.0
    
    
    $
    
    
    
    $
    12.0
    
    
    
    100
    %Gross margin
    
    
    8
    %
    
    
    0
    %Total cost of sales
    
    $
    375.3
    
    
    $
    172.1
    
    
    $
    203.2
    
    
    
    118
    %Gross margin
    
    
    56
    %
    
    
    69
    %
  
    
    our manufacturing and packaging costs for products we manufacture;
    
    amortization expense (as discussed further below);
    
    the write-off of the step-up in inventory arising from acquisitions, including PLIVA;
    
    profit-sharing or royalty payments we make to third parties, including raw material suppliers;
    
    the cost of products we purchase from third parties;
    
    lower of cost or market adjustments to our inventories; and
    
    stock-based compensation expense relating to employees within certain departments
that we allocate to cost of sales.
    49




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##### Table of Contents



Selling, General and Administrative Expense
  Six MonthsEndedTransition
    
    December 31,
    
    ChangePeriod
    
    2005
    
    $
    
    %Selling, general and administrative
    
    

$        267.7
    
    
    
    $        126.4
    
    
    

$        141.3
    
    
    
    112
    %
  
    
    PLIVAs selling, general and administrative expenses for the PLIVA Stub Period,
including the sales force costs associated with approximately 1,400 incremental global
sales representatives and other general and administrative expenses associated our
worldwide operations;
    
    professional fees associated with the integration activities; and
    
    incremental legal and audit fees relating to the acquisition.
    50




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##### Table of Contents



Research
and Development
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Research and development
    
    $
    107.5
    
    
    $
    66.0
    
    
    $
    41.5
    
    
    
    63
    %Write-off of
acquired IPR&D
    
    $
    380.7
    
    
    $
    
    
    
    $
    380.7
    
    
    
    N/A
   Interest Income
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Interest income
    
    $
    15.7
    
    
    $
    8.9
    
    
    $
    6.8
    
    
    
    76
    %
  Interest Expense
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Interest expense
    
    $
    32.4
    
    
    $
    0.1
    
    
    $
    32.3
    
    
    
    32300
    %
  51




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##### Table of Contents



Other (Expense) Income
  Transition
    
    
    Six Months Ended December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Other (expense) income
    
    $
    (72.9
    )
    
    $
    (0.6
    )
    
    $
    (72.3
    )
    
    
    12050
    %
  Income Taxes
  Six MonthsEndedTransition
    
    
    December 31,
    
    
    ChangePeriod
    
    
    2005
    
    
    $
    
    
    %Income tax expense
    
    $
    34.5
    
    
    $
    101.5
    
    
    $
    (67.0
    )
    
    
    -66
    %Effective tax rate
    
    
    -11.3
    %
    
    
    36.3
    %
     52




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##### Table of Contents



Comparison of the fiscal years ended June 30, 2006 and June 30, 2005
  Twelve Months Ended June 30,Change2006
    
    
    2005
    
    
    $
    
    
    %Generic products:Oral contraceptives
    
    $
    399.4
    
    
    $
    396.6
    
    
    $
    2.8
    
    
    
    1
    %Other generic
    
    
    439.4
    
    
    
    354.8
    
    
    
    84.6
    
    
    
    24
    %Total generic products
    
    
    838.8
    
    
    
    751.4
    
    
    
    87.4
    
    
    
    12
    %Proprietary products
    
    
    330.9
    
    
    
    279.3
    
    
    
    51.6
    
    
    
    18
    %Total product sales
    
    
    1,169.7
    
    
    
    1,030.7
    
    
    
    139.0
    
    
    
    13
    %Alliance and development revenue
    
    
    144.7
    
    
    
    16.7
    
    
    
    128.0
    
    
    
    766
    %Total revenues
    
    $
    1,314.4
    
    
    $
    1,047.4
    
    
    $
    267.0
    
    
    
    25
    %
 Product Sales
  Generic Products
     53




---



##### Table of Contents



Proprietary Products
 , )
  Alliance, Development and Other Revenue
   Cost of Sales
  Change2006
    
    
    2005
    
    
    $
    
    
    %Generic products
    
    $
    286.0
    
    
    $
    264.8
    
    
    $
    21.2
    
    
    
    8
    %Gross margin
    
    
    66
    %
    
    
    65
    %Proprietary products
    
    $
    91.9
    
    
    $
    52.6
    
    
    $
    39.3
    
    
    
    75
    %Gross margin
    
    
    72
    %
    
    
    81
    %Total cost of sales
    
    $
    377.9
    
    
    $
    317.4
    
    
    $
    60.5
    
    
    
    19
    %Gross margin
    
    
    68
    %
    
    
    69
    %
  
    
    the cost of products we purchase from third parties;
    
    our manufacturing and packaging costs for products we manufacture;
    
    profit-sharing or royalty payments we make to third parties, including raw material suppliers;
    
    lower of cost or market inventory provisions; and
 54




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##### Table of Contents




    
    stock-based compensation expense relating to employees within certain departments
that we allocate to cost of sales.
     Selling, General and Administrative Expense
  Change2006
    
    
    2005
    
    
    $
    
    
    %Selling, general and administrative
    
    $
    309.0
    
    
    $
    285.6
    
    
    $
    23.4
    
    
    
    8
    %Charges included in general and administrative
    
    $
    14.1
    
    
    $
    63.2
    
    
    $
    (49.1
    )
    
    
    -78
    %
   Fiscal 2006:
  55




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##### Table of Contents



Fiscal
2005
  Research and Development
  Change2006
    
    
    2005
    
    
    $
    
    
    %Research and development
    
    $
    140.2
    
    
    $
    128.4
    
    
    $
    11.8
    
    
    
    9
    %
  Other Income (expense)
  Change2006
    
    
    2005
    
    
    $
    
    
    %Other income (expense)
    
    $
    17.2
    
    
    $
    3.9
    
    
    $
    13.3
    
    
    
    341
    %
   56




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##### Table of Contents



Income Taxes
  Change2006
    
    
    2005
    
    
    $
    
    
    %Income tax expense
    
    $
    186.5
    
    
    $
    114.9
    
    
    $
    71.6
    
    
    
    62
    %Effective tax rate
    
    
    35.7
    %
    
    
    34.8
    %
   57




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##### Table of Contents



Comparison of the fiscal years ended June 30, 2005 and June 30, 2004
  Twelve Months Ended June 30,Change2005
    
    
    2004
    
    
    $
    
    
    %Generic products:Distributed alternative brands(1)
    
    $
    
    
    
    $
    385.3
    
    
    $
    (385.3
    )
    
    
    -100
    %Oral contraceptives
    
    
    396.6
    
    
    
    403.9
    
    
    
    (7.3
    )
    
    
    -2
    %Other generic(2)
    
    
    354.8
    
    
    
    361.4
    
    
    
    (6.6
    )
    
    
    -2
    %Total generic products
    
    
    751.4
    
    
    
    1,150.6
    
    
    
    (399.2
    )
    
    
    -35
    %Proprietary products
    
    
    279.3
    
    
    
    146.2
    
    
    
    133.1
    
    
    
    91
    %Total product sales
    
    
    1,030.7
    
    
    
    1,296.8
    
    
    
    (266.1
    )
    
    
    -21
    %Alliance and development revenue
    
    
    16.7
    
    
    
    12.3
    
    
    
    4.4
    
    
    
    36
    %Total revenues
    
    $
    1,047.4
    
    
    $
    1,309.1
    
    
    $
    (261.7
    )
    
    
    -20
    %
 
 (1)
    
    Reflects sales of Ciprofloxacin during Bayers pediatric exclusivity period which ended on
June 9, 2004.(2)
    
    Includes sales of Ciprofloxacin after June 9, 2004. Revenues  Product Sales
 (
 Generic Products
 Distributed Alternative Brands (Ciprofloxacin)
 â
 Oral Contraceptives
  58




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##### Table of Contents



Generic Products  Other
  Proprietary Products
   Cost of Sales
    Change2005
    
    
    2004
    
    
    $
    
    
    %Generic products
    
    $
    264.8
    
    
    $
    604.6
    
    
    $
    (339.8
    )
    
    
    -56
    %Gross margin
    
    
    65
    %
    
    
    47
    %Proprietary products
    
    $
    52.6
    
    
    $
    34.4
    
    
    $
    18.2
    
    
    
    53
    %Gross margin
    
    
    81
    %
    
    
    76
    %Total cost of sales
    
    $
    317.4
    
    
    $
    639.0
    
    
    $
    (321.6
    )
    
    
    -50
    %Gross margin
    
    
    69
    %
    
    
    51
    %
  59




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##### Table of Contents



Selling, General and Administrative Expense
  Change2005
    
    
    2004
    
    
    $
    
    
    %Selling, general and administrative
    
    $
    285.6
    
    
    $
    308.2
    
    
    $
    (22.6
    )
    
    
    -7
    %Charges included in general and administrative
    
    $
    63.2
    
    
    $
    96.6
    
    
    $
    (33.4
    )
    
    
    -35
    %
   
    
    A $16 million valuation allowance we established in September 2003 for our loans to
Natural Biologics, LLC, the raw material supplier for our generic equine-based conjugated
estrogens product, as the result of an unfavorable court decision rendered in September
2003;
    
    A $4.2 million write-off in February 2004 associated with the acquisition of certain
emergency contraception assets from Gynetics, Inc;
    
    An arbitration panels decision in June 2004 to award Solvay Pharmaceuticals $68 million
in damages on its claim that we improperly terminated a joint venture agreement; and
    
    An $8.5 million charge in June 2004 related to costs associated with our settlement of
the Estrostep and Femhrt patent challenge litigation with Galen.
 Research and Development
  Change2005
    
    
    2004
    
    
    $
    
    
    %Research and development
    
    $
    128.4
    
    
    $
    123.1
    
    
    $
    5.3
    
    
    
    4
    %Write-off of
IPR&D
    
    $
    
    
    
    $
    45.9
    
    
    $
    (45.9
    )
    
    
    N/ACharges included in research and development
    
    $
    
    
    
    $
    68.2
    
    
    $
    (68.2
    )
    
    
    -100
    %
  60




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##### Table of Contents



Income Taxes
  Twelve Months Ended June 30,Change2005
    
    
    2004
    
    
    $
    
    
    %Income tax expense
    
    $
    114.9
    
    
    $
    71.3
    
    
    $
    43.6
    
    
    
    61
    %Effective tax rate
    
    
    34.8
    %
    
    
    36.7
    %
   61




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##### Table of Contents



Liquidity and Capital Resources
 Overview
     December 31,
    
    June 30,
    
    Change2006
    
    2006
    
    $
    
    %Cash & cash equivalents, short term marketable securities
    
    $
    905.7
    
    
    $
    601.9
    
    
    $
    303.8
    
    
    
    50
    %Debt/Capital lease obligations:Short-term
    
    
    742.4
    
    
    
    8.8
    
    
    
    733.6
    
    
    
    8336
    %Long-term
    
    
    1,937.2
    
    
    
    7.4
    
    
    
    1,929.8
    
    
    
    26078
    %Working capital
    
    
    876.1
    
    
    
    921.7
    
    
    
    (45.6
    )
    
    
    -5
    %Cash flow from operations
    
    
    213.3
    
    
    
    327.3
    
    
    
    (114.0
    )
    
    
    -35
    %Ratio of current assets to current liabilities
    
    
    1.7 : 1
    
    
    
    5.9 : 1
 Operating Activities
  Investing Activities
  62




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##### Table of Contents



Financing
Activities; New Credit Facilities
   
    
    Five-Year Term Facility: We borrowed the entire $2.0 billion available under this
facility, which bears interest at LIBOR plus 75 basis points (6.13% at December 31,
2006) and matures in October 2011.
    
    364-Day Term Facility: We drew down $415.7 million of the $500 million
available under this facility, which also bears interest at LIBOR
plus 75 basis points and matures on October 23, 2007.
   Capital Expenditures
   Proceeds from Equity Transactions
  63




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##### Table of Contents



Share Repurchase Program
  Sufficiency of Cash Resources
  Contractual Obligations
  Payments due by periodTotal
    
    
    Less than 1 Year
    
    
    1 to 3 Years
    
    
    4 to 5 Years
    
    
    ThereafterLong-term debt
    
    $
    2,673.8
    
    
    $
    741.4
    
    
    $
    431.5
    
    
    $
    1,499.6
    
    
    $
    1.3Capital leases
    
    
    3.0
    
    
    
    1.1
    
    
    
    1.4
    
    
    
    0.2
    
    
    
    0.3Operating leases
    
    
    66.2
    
    
    
    11.7
    
    
    
    20.4
    
    
    
    15.6
    
    
    
    18.5Purchase obligations (1)
    
    
    143.8
    
    
    
    137.4
    
    
    
    6.1
    
    
    
    0.3
    
    
    
    Venture
fund commitments (2)
    
    
    14.0
    
    
    
    14.0
    
    
    
    
    
    
    
    
    
    
    
    Annual interest on debt
    
    
    576.1
    
    
    
    169.8
    
    
    
    240.9
    
    
    
    165.4
    
    
    
    Other long-term liabilities
    
    
    17.9
    
    
    
    6.2
    
    
    
    5.2
    
    
    
    4.5
    
    
    
    2.0Total
    
    $
    3,494.8
    
    
    $
    1,081.6
    
    
    $
    705.5
    
    
    $
    1,685.6
    
    
    $
    22.1
 
 (1)
    
    Purchase obligations consist mainly of commitments for raw materials used in our
manufacturing and research and development operations.(2)
    
    Payments related to our venture fund commitments are payable when capital calls are
made.  Off-Balance Sheet Arrangements
  64




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##### Table of Contents



Critical Accounting Policies
  Revenue Recognition and Provisions for Estimated Reductions to Gross Product Sales
    
    
    returns and allowances (including shelf-stock adjustments)
    
    chargebacks
    
    rebates
    
    managed care rebates
    
    Medicaid rebates
    
    prompt payment discounts and other allowances
  65




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##### Table of Contents



Current
    
    
    Currentprovision
    
    
    provision
    
    
    Actualrelated to
    
    
    related to
    
    
    returns orsales
    
    
    sales
    
    
    credits inBeginning
    
    
    made in the
    
    
    made in
    
    
    the current
    
    
    Endingbalance
    
    
    current period
    
    
    prior periods
    
    
    period
    
    
    balanceSix months ended December 31, 2006Accounts receivable reserves:Returns and allowances
    
    $
    53.1
    
    
    $
    32.5
    
    
    $
    4.0
    
    
    $
    (27.0
    )
    
    $
    62.6Chargebacks
    
    
    44.3
    
    
    
    279.7
    
    
    
    (1.0
    )
    
    
    (229.0
    )
    
    
    94.0Rebates
    
    
    32.2
    
    
    
    125.5
    
    
    
    (0.2
    )
    
    
    (82.0
    )
    
    
    75.5Cash discounts
    
    
    7.7
    
    
    
    22.4
    
    
    
    
    
    
    
    (17.5
    )
    
    
    12.6Total
    
    $
    137.3
    
    
    $
    460.1
    
    
    $
    2.8
    
    
    $
    (355.5
    )
    
    $
    244.7Accrued liabilities:Managed care rebates
    
    $
    10.4
    
    
    $
    10.1
    
    
    $
    0.3
    
    
    $
    (12.5
    )
    
    $
    8.3Medicaid rebates
    
    $
    13.2
    
    
    $
    21.7
    
    
    $
    
    
    
    $
    (18.9
    )
    
    $
    16.0Fiscal year ended June 30, 2006Accounts receivable reserves:Returns and allowances
    
    $
    52.7
    
    
    $
    59.8
    
    
    $
    0.2
    
    
    $
    (59.6
    )
    
    $
    53.1Chargebacks
    
    
    44.9
    
    
    
    386.0
    
    
    
    (0.9
    )
    
    
    (385.7
    )
    
    
    44.3Rebates
    
    
    37.8
    
    
    
    164.5
    
    
    
    (3.2
    )
    
    
    (166.9
    )
    
    
    32.2Cash discounts
    
    
    7.1
    
    
    
    40.4
    
    
    
    
    
    
    
    (39.8
    )
    
    
    7.7Total
    
    $
    142.5
    
    
    $
    650.7
    
    
    $
    (3.9
    )
    
    $
    (652.0
    )
    
    $
    137.3Accrued liabilities:Managed care rebates
    
    $
    7.5
    
    
    $
    20.5
    
    
    $
    (1.0
    )
    
    $
    (16.6
    )
    
    $
    10.4Medicaid rebates
    
    $
    10.1
    
    
    $
    29.0
    
    
    $
    
    
    
    $
    (26.9
    )
    
    $
    12.2Fiscal year ended June 30, 2005Accounts receivable reserves:Returns and allowances
    
    $
    57.5
    
    
    $
    64.8
    
    
    $
    1.0
    
    
    $
    (70.6
    )
    
    $
    52.7Chargebacks
    
    
    38.8
    
    
    
    267.6
    
    
    
    6.0
    
    
    
    (267.5
    )
    
    
    44.9Rebates
    
    
    36.0
    
    
    
    188.4
    
    
    
    
    
    
    
    (186.6
    )
    
    
    37.8Cash discounts
    
    
    6.2
    
    
    
    32.0
    
    
    
    
    
    
    
    (31.1
    )
    
    
    7.1Total
    
    $
    138.5
    
    
    $
    552.8
    
    
    $
    7.0
    
    
    $
    (555.8
    )
    
    $
    142.5Accrued liabilities:Managed care rebates
    
    $
    3.4
    
    
    $
    12.2
    
    
    $
    
    
    
    $
    (8.1
    )
    
    $
    7.5Medicaid rebates
    
    $
    11.4
    
    
    $
    17.2
    
    
    $
    3.0
    
    
    $
    (21.5
    )
    
    $
    10.1
 Returns and allowances
 66




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##### Table of Contents




    
    the shelf life or expiration date of each product;
    
    historical levels of expired product returns; and
    
    the estimated date of return.
  
    
    the estimated launch date of a competing product, which we determine based on market
intelligence;
    
    the estimated decline in the market price of our product, which we determine based on
historical experience and input from customers; and,
    
    the estimated levels of inventory held by our customers at the time of the anticipated
decrease in market price, which we determine based upon historical experience and customer
input.
 Chargebacks
 
    
    the average historical chargeback credits; and
    
    an estimate of the inventory held by our wholesalers, based on internal analysis of a
wholesalers historical purchases and contract sales.
 Rebates
 
    
    direct rebates;
    
    indirect rebates;
    
    managed care rebates; and
    
    Medicaid rebates.
   Prompt Pay Discounts
 67




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Revenue Recognition and Provisions of Alliance and Development Revenue
  Inventories
    Income Taxes
   68




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##### Table of Contents



Contingencies
   Acquisitions and Amortization of Intangible Assets
    69




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##### Table of Contents



Derivative Instruments
  Accounting for Derivative Instruments and
Hedging Activities
      Foreign Currency Translation and Transactions
 Foreign Currency Translation
  Foreign Currency Transactions
 70




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##### Table of Contents



Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109
 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans
 Fair Value Measurements,
 Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities,
 Effects of Inflation; Seasonality
  Forward-Looking Statements
  
    
    the difficulty in predicting the timing and outcome of legal proceedings, including
patent-related matters such as patent challenge settlements and patent infringement cases;
 71




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##### Table of Contents




    
    the difficulty of predicting the timing of FDA approvals;
    
    court and FDA decisions on exclusivity periods;
    
    the ability of competitors to extend exclusivity periods for their products;
    
    our ability to complete product development activities in the timeframes and for the costs we expect;
    
    market and customer acceptance and demand for our pharmaceutical products;
    
    our dependence on revenues from significant customers;
    
    reimbursement policies of third party payors;
    
    our dependence on revenues from significant products;
    
    the use of estimates in the preparation of our financial statements;
    
    the impact of competitive products and pricing on products, including the launch of
authorized generics;
    
    the ability to launch new products in the timeframes we expect;
    
    the availability of raw materials;
    
    the availability of any product we purchase and sell as a distributor;
    
    the regulatory environment;
    
    our exposure to product liability and other lawsuits and contingencies;
    
    the cost of insurance and the availability of product liability insurance coverage;
    
    our timely and successful completion of strategic initiatives, including integrating
companies and products we acquire and implementing our new enterprise resource planning
system;
    
    risks associated with doing business outside the United States, as discussed in Risk
Factors above;
    
    fluctuations in operating results, including the effects on such results from spending
for research and development, sales and marketing activities and patent challenge
activities; and
    
    other risks detailed from time-to-time in our filings with the Securities and Exchange
Commission.
  72




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Interest Rate Risk
    Foreign Exchange Rate Risk
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  73




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ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   74




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##### Table of Contents



Internal Control Over Financial Reporting
 MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    Internal
Control-Integrated Framework
   75




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
  /s/ DELOITTE & TOUCHE LLP
 
 76




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##### Table of Contents



Changes in Internal Controls
  
 ITEM 9B. OTHER INFORMATION
  77




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Code of Business Conduct and Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
   
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  78




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    a) Financial Statement Schedules:
  (b)
    
    Exhibits
 2.1
    
    Agreement and Plan of Merger, dated as of December 31, 2003 between Barr
Pharmaceuticals, Inc., a Delaware corporation, and Barr Laboratories,
Inc., a New York corporation (1)2.2
    
    Asset Purchase Agreement dated November 20, 2003 between Endeavor
Pharmaceuticals, Inc. and Barr Laboratories, Inc. (2)2.3
    
    Agreement and Plan of Merger, dated February 6, 2004, among Duramed
Pharmaceuticals, Inc., WCC Merger Sub, Inc. and Womens Capital
Corporation (3)2.4
    
    Purchase Agreement dated as of October 14, 2005, by and among Duramed
Pharmaceuticals, Inc., Copper 380T, FEI Womens Health, LLC and the
individuals listed on the signature pages thereto. (21)3.1
    
    Amended and Restated Certificate of Incorporation of the Registrant (1)3.2
    
    Restated By-Laws of the Registrant (1)4.1
    
    The Registrant agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of any instrument defining the rights of
the holders of its long-term debt wherein the total amount of securities
authorized there under does not exceed 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis.4.2
    
    Note Purchase Agreement dated November 18, 1997 relating to $10 million of
Series A Senior Notes due November, 2004 and $20 million of Series B
Senior Notes due November, 2007 (4)4.3
    
    Credit Agreement (five-year facilities), dated July 21, 2006, among the
Company, certain of its subsidiaries, Bank of America, N.A., as
Administrative Agent, Banc of America Securities LLC, as Lead Arranger and
Book Manager, and certain other lenders. (23)4.4
    
    Credit Agreement (364-day facility), dated July 21, 2006, among the
Company, certain of its subsidiaries, Bank of America, N.A., as
Administrative Agent, Banc of America Securities LLC, as Lead Arranger and
Book Manager, and certain other lenders. (23)10.1
    
    Lease, dated February 6, 2003, between Mack-Cali Properties Co. No. 11
L.P. and Barr Laboratories, Inc. (5)10.2
    
    Amended and Restated Employment Agreement with Bruce L. Downey, dated as
of March 13, 2006 (22)10.3
    
    1993 Stock Incentive Plan (7)10.4
    
    Non-Qualified Deferred Compensation Plan (2)10.5
    
    1993 Employee Stock Purchase Plan (8)10.6
    
    1993 Stock Option Plan for Non-Employee Directors (9)10.7
    
    2002 Stock and Incentive Award Plan (10)10.8
    
    2002 Stock Option Plan for Non-Employee Directors (10)10.9
    
    Supply Agreement for Ciprofloxacin Hydrochloride dated January 8, 1997 (11)
 79




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##### Table of Contents



10.10
    
    Proprietary Drug Development and Marketing Agreement, dated March 20,
2000, between Barr Laboratories, Inc. and Dupont Pharmaceuticals Company
(12)10.11
    
    Description of Excess Savings and Retirement Plan (13)10.12
    
    Amended and Restated Employment Agreement with Paul M. Bisaro, dated as of
March 13, 2006 (22)10.13
    
    Amended and Restated Employment Agreement with Carole S. Ben-Maimon, dated
as of August 19, 2005 (6)10.14
    
    Amended and Restated Employment Agreement with Timothy P. Catlett, dated
as of February 19, 2003 (14)10.15
    
    Amended and Restated Employment Agreement with William T. McKee, dated as
of February 19, 2003 (5)10.16
    
    Amended and Restated Employment Agreement with Fredrick J. Killion, dated
as of February 19, 2003 (5)10.17
    
    Amended and Restated Employment Agreement with Salah U. Ahmed, dated as of
February 19, 2003 (14)10.18
    
    Amended and Restated Employment Agreement with Christine A. Mundkur, dated
as of February 19, 2003 (14)10.19
    
    Amended and Restated Employment Agreement with Catherine F. Higgins, dated
as of February 19, 2003 (14)10.20
    
    Employment Agreement with Michael J. Bogda, dated as of May 15, 2003 (14)10.21
    
    Duramed 1988 Stock Option Plan (15)10.22
    
    Duramed 1991 Stock Option Plan for Nonemployee Directors (16)10.23
    
    Duramed 1997 Stock Option Plan (17)10.24
    
    Duramed 2000 Stock Option Plan (18)10.25
    
    Duramed 1999 Nonemployee Director Stock Plan (19)10.26
    
    Employment Agreement with G. Frederick Wilkinson, dated as of January 5,
2006 (20)10.27
    
    Employment Agreement between Zeljko Covic and PLIVA d.d.
dated October 24, 200510.28
    
    Letter Agreement, dated October 5, 2006, made between
Barr Pharmaceuticals, Inc. and Carole Ben-Maimon, amending certain
provisions of her Amended and Restated Employment Agreement (6)10.29
    
    Release of Claims, dated October 5, 2006, made by Carole
Ben-Maimon in favor of Barr Pharmaceuticals, Inc. and its
subsidiaries and affiliates (6)21.0
    
    Subsidiaries of the Company23.1
    
    Consent of Deloitte & Touche LLP23.2
    
    Consent of KPMG Hungāria Kft.31.1
    
    Certification of Bruce L. Downey pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of William T. McKee pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.0
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Previously filed with the Securities and Exchange Commission on January 6, 2004 as an
Exhibit to the Registrants Current Report on Form 8-K and incorporated herein by
reference.(2)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 and
incorporated herein by reference. 80




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##### Table of Contents



(3)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and
incorporated herein by reference.(4)
    
    Previously filed with the Securities and Exchange Commission as Exhibit 4-3 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 and
incorporated herein by reference.(5)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and
incorporated herein by reference.(6)
    
    Previously filed with the Securities and Exchange Commission
on October 10, 2006 as an Exhibit to the
Registrants Current Report on Form 8-K and
incorporated herein by reference.(7)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Registration Statement on Form S-8 Nos. 33-73696 and 333-17349 and
incorporated herein by reference.(8)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Registration Statement on Form S-8 No. 33-73700 and incorporated herein by
reference.(9)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Registration Statement on Form S-8 Nos. 33-73698 and 333-17351 incorporated
herein by reference.(10)
    
    Previously filed with the Securities and Exchange Commission as an Appendix to the
Registrants Proxy Statement relating to the 2002 Annual Meeting of Stockholders and
incorporated herein by reference.(11)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
incorporated herein by reference.(12)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 and
incorporated herein by reference.(13)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Annual Report on Form 10-K for the year ended June 30, 2000 and incorporated
herein by reference.(14)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Annual Report on Form 10-K for the year ended June 30, 2003 and incorporated
herein by reference.(15)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Duramed Pharmaceuticals, Inc. Proxy Statement relating to the 1993 Annual Meeting of
Stockholders and incorporated herein by reference.(16)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Duramed Pharmaceuticals, Inc. Proxy Statement relating to the 1998 Annual Meeting of
Stockholders and incorporated herein by reference.(17)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Duramed Pharmaceuticals, Inc. Proxy Statement relating to the 1997 Annual Meeting of
Stockholders and incorporated herein by reference.(18)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Duramed Pharmaceuticals, Inc. Proxy Statement relating to the 2000 Annual Meeting of
Stockholders and incorporated herein by reference.(19)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Duramed
Pharmaceuticals, Inc. Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference. 81




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##### Table of Contents



(20)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and
incorporated herein by reference.(21)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the
Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 2005 and
incorporated herein by reference.(22)
    
    Previously filed with the Securities and Exchange Commission on March 20, 2006 as an
Exhibit to the Registrants Current Report on Form 8-K and incorporated herein by reference.(23)
    
    Previously filed with the Securities and Exchange Commission on July 26, 2006 as an
Exhibit to the Registrants Current Report on Form 8-K and incorporated herein by reference. 82




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SIGNATURES
  BARR PHARMACEUTICALS, INC.Date:  March 1, 2007
    By:

/s/ Bruce L. DowneyBruce L. DowneyChairman of the Board and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Bruce L. Downey

Bruce L. Downey
    
    Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
    
    March 1, 2007/s/ William T. McKee

William T. McKee
    
    Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer and 
Principal Accounting Officer)
    
    March 1, 2007/s/ Paul M. Bisaro

Paul M. Bisaro
    
    Director
    
    March 1, 2007/s/ Harold N. Chefitz

Harold N. Chefitz
    
    Director
    
    March 1, 2007/s/ Richard R. Frankovic

Richard R. Frankovic
    
    Director
    
    March 1, 2007/s/ James S. Gilmore III

James S. Gilmore III
    
    Director
    
    March 1, 2007/s/ Peter R. Seaver

Peter R. Seaver
    
    Director
    
    March 1, 2007/s/ George P. Stephan

George P. Stephan
    
    Director
    
    March 1, 2007
 83




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PART IV
 
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 PageReport of Independent Registered Public Accounting Firm  Deloitte & Touche LLP
    
    
    F-2Report of Independent Registered Public Accounting Firm  KPMG Hungária Kft.
    
    
    F-3Consolidated Balance Sheets as of December 31, 2006, June 30, 2006 and June 30, 2005
    
    
    F-4Consolidated Statements of Operations for the six months ended December 31, 2006 and 2005
(unaudited), and the fiscal years ended June 30, 2006, 2005 and 2004
    
    
    F-5Consolidated Statements of Shareholders Equity for the six months ended December 31, 2006 and
the fiscal years ended June 30, 2006, 2005 and 2004
    
    
    F-6Consolidated Statements of Cash Flows for the six months ended December 31, 2006 and 2005
(unaudited), and the fiscal years ended June 30, 2006, 2005 and 2004
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-8Schedule II  Valuation and Qualifying Accounts for the six months ended December 31, 2006 and the years ended June 30, 2006, 2005 and 2004
    
    
    S-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal Control-Integrated Framework
 /s/ DELOITTE & TOUCHE LLP
 
 F-2




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
 F-3




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BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,(in thousands, except share and per share data)
    
    2006
    
    
    2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    231,975
    
    
    $
    24,422
    
    
    $
    115,793Marketable securities
    
    
    673,762
    
    
    
    577,482
    
    
    
    527,462Accounts receivable, net
    
    
    533,065
    
    
    
    226,026
    
    
    
    160,059Other receivables, net
    
    
    78,218
    
    
    
    50,235
    
    
    
    21,411Inventories
    
    
    452,411
    
    
    
    134,266
    
    
    
    137,638Deferred income taxes
    
    
    82,597
    
    
    
    25,680
    
    
    
    30,224Prepaid expenses and other current assets
    
    
    35,971
    
    
    
    70,871
    
    
    
    8,229Total current assets
    
    
    2,087,999
    
    
    
    1,108,982
    
    
    
    1,000,816Property, plant and equipment, net
    
    
    1,010,199
    
    
    
    275,960
    
    
    
    249,485Deferred income taxes
    
    
    40,250
    
    
    
    30,204
    
    
    
    60,504Marketable securities
    
    
    8,946
    
    
    
    18,132
    
    
    
    53,793Other intangible assets
    
    
    1,474,170
    
    
    
    417,258
    
    
    
    98,343Goodwill
    
    
    276,449
    
    
    
    47,920
    
    
    
    17,998Other assets
    
    
    63,849
    
    
    
    22,963
    
    
    
    9,367Total assets
    
    $
    4,961,862
    
    
    $
    1,921,419
    
    
    $
    1,490,306Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    156,122
    
    
    $
    69,954
    
    
    $
    49,743Accrued liabilities
    
    
    283,701
    
    
    
    99,213
    
    
    
    151,888Current portion of long-term debt and capital lease obligations
    
    
    742,445
    
    
    
    8,816
    
    
    
    5,446Income taxes payable
    
    
    21,359
    
    
    
    9,336
    
    
    
    13,353Deferred tax liabilities
    
    
    8,266
    
    
    
    
    
    
    
    Total current liabilities
    
    
    1,211,893
    
    
    
    187,319
    
    
    
    220,430Long-term debt and capital lease obligations
    
    
    1,937,215
    
    
    
    7,431
    
    
    
    15,493Deferred tax liabilities
    
    
    221,895
    
    
    
    
    
    
    
    Other liabilities
    
    
    84,533
    
    
    
    35,713
    
    
    
    20,413Commitments & Contingencies (Note 19)Minority interest
    
    
    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 109,536,481, 109,179,208 and 106,340,470 at December 31,
2006 and June 30, 2006 and 2005, respectively
    
    
    1,095
    
    
    
    1,092
    
    
    
    1,063Additional paid-in capital
    
    
    610,232
    
    
    
    574,785
    
    
    
    454,489Retained earnings
    
    
    877,991
    
    
    
    1,216,146
    
    
    
    879,669Accumulated
other comprehensive income (loss)
    
    
    76,600
    
    
    
    (377
    )
    
    
    (561
    )Treasury stock at cost: 2,972,997 shares
    
    
    (100,690
    )
    
    
    (100,690
    )
    
    
    (100,690
    )Total shareholders equity
    
    
    1,465,228
    
    
    
    1,690,956
    
    
    
    1,233,970Total liabilities and shareholders equity
    
    $
    4,961,862
    
    
    $
    1,921,419
    
    
    $
    1,490,306
 SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 F-4




---



##### Table of Contents



BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(in thousands, except per share data)
    
    
    
    
    
    (Unaudited)Revenues:Product sales
    
    $
    837,524
    
    
    $
    556,643
    
    
    $
    1,169,783
    
    
    $
    1,030,672
    
    
    $
    1,296,822Alliance and development revenue
    
    
    65,882
    
    
    
    79,313
    
    
    
    144,682
    
    
    
    16,727
    
    
    
    12,266Other revenue
    
    
    12,997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    916,403
    
    
    
    635,956
    
    
    
    1,314,465
    
    
    
    1,047,399
    
    
    
    1,309,088Costs and expenses:Cost of sales
    
    
    375,331
    
    
    
    172,067
    
    
    
    377,902
    
    
    
    317,434
    
    
    
    639,014Selling, general and administrative
    
    
    267,672
    
    
    
    126,413
    
    
    
    308,987
    
    
    
    285,554
    
    
    
    308,231Research and development
    
    
    107,487
    
    
    
    66,006
    
    
    
    140,158
    
    
    
    128,384
    
    
    
    123,095Write-off of
acquired in-process research and development
    
    
    380,673
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,900Earnings (loss) from operations
    
    
    (214,760
    )
    
    
    271,470
    
    
    
    487,418
    
    
    
    316,027
    
    
    
    192,848Interest income
    
    
    15,747
    
    
    
    8,904
    
    
    
    18,851
    
    
    
    11,449
    
    
    
    5,768Interest expense
    
    
    32,374
    
    
    
    147
    
    
    
    489
    
    
    
    1,463
    
    
    
    2,643Other (expense) income
    
    
    (72,892
    )
    
    
    (593
    )
    
    
    17,168
    
    
    
    3,863
    
    
    
    (1,533
    )Earnings (loss) before income taxes and minority interest
    
    
    (304,279
    )
    
    
    279,634
    
    
    
    522,948
    
    
    
    329,876
    
    
    
    194,440Income tax expense
    
    
    34,505
    
    
    
    101,507
    
    
    
    186,471
    
    
    
    114,888
    
    
    
    71,337Minority interest
    
    
    629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    $
    (338,155
    )
    
    $
    178,127
    
    
    $
    336,477
    
    
    $
    214,988
    
    
    $
    123,103Net earnings (loss) per common share
 basic
    
    $
    (3.18
    )
    
    $
    1.71
    
    
    $
    3.20
    
    
    $
    2.08
    
    
    $
    1.21Net earnings (loss) per common share
 diluted
    
    $
    (3.18
    )
    
    $
    1.66
    
    
    $
    3.12
    
    
    $
    2.03
    
    
    $
    1.15Weighted average shares
    
    
    106,377
    
    
    
    104,219
    
    
    
    105,129
    
    
    
    103,180
    
    
    
    101,823Weighted average shares  diluted
    
    
    106,377
    
    
    
    106,984
    
    
    
    107,798
    
    
    
    106,052
    
    
    
    106,661
 SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 F-5




---



##### Table of Contents



BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Paid
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid
    
    
    in Capital -
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury Stock
    
    
    Shareholders(in thousands, except shares)
    
    Shares
    
    
    Amount
    
    
    in Capital
    
    
    Warrants
    
    
    Earnings
    
    
    Income / (Loss)
    
    
    Shares
    
    
    Amount
    
    
    EquityBalance, July 1, 2003
    
    
    67,066,196
    
    
    $
    671
    
    
    $
    309,583
    
    
    $
    16,418
    
    
    $
    542,210
    
    
    $
    (179
    )
    
    
    280,398
    
    
    $
    (708
    )
    
    $
    867,995Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,103Reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    179Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,282Tax benefit of stock incentive plans
and warrants
    
    
    
    
    
    
    
    
    
    
    25,262
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,262Issuance of common stock for
exercised stock options and
employees stock purchase plans
    
    
    1,456,808
    
    
    
    14
    
    
    
    25,784
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,798Issuance of common stock for
exercised warrants
    
    
    2,340,610
    
    
    
    23
    
    
    
    16,395
    
    
    
    (16,418
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Stock split (3-for-2)
    
    
    34,052,489
    
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    (632
    )
    
    
    
    
    
    
    140,199
    
    
    
    
    
    
    
    (291
    )Balance, June 30, 2004
    
    
    104,916,103
    
    
    
    1,049
    
    
    
    377,024
    
    
    
    
    
    
    
    664,681
    
    
    
    
    
    
    
    420,597
    
    
    
    (708
    )
    
    
    1,042,046Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214,988Unrealized loss on marketable
securities, net of tax of $320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (561
    )
    
    
    
    
    
    
    
    
    
    
    (561
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214,427Tax benefit of stock incentive plans
and warrants
    
    
    
    
    
    
    
    
    
    
    56,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,212Issuance of common stock for
exercised stock options and
employees stock purchase plans
    
    
    1,136,141
    
    
    
    11
    
    
    
    18,506
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,517Issuance of common stock for
exercised warrants
    
    
    288,226
    
    
    
    3
    
    
    
    2,747
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750Purchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,552,400
    
    
    
    (99,982
    )
    
    
    (99,982
    )Balance, June 30, 2005
    
    
    106,340,470
    
    
    
    1,063
    
    
    
    454,489
    
    
    
    
    
    
    
    879,669
    
    
    
    (561
    )
    
    
    2,972,997
    
    
    
    (100,690
    )
    
    
    1,233,970Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336,477
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336,477Unrealized gain on marketable
securities, net of tax of $106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    184Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336,661Tax benefit of stock incentive plans
and warrants
    
    
    
    
    
    
    
    
    
    
    29,026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,026Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    27,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,092Issuance of common stock for
exercised stock options and
employees stock purchase plans
    
    
    2,838,738
    
    
    
    29
    
    
    
    64,178
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,207Balance, June 30, 2006
    
    
    109,179,208
    
    
    
    1,092
    
    
    
    574,785
    
    
    
    
    
    
    
    1,216,146
    
    
    
    (377
    )
    
    
    2,972,997
    
    
    
    (100,690
    )
    
    
    1,690,956Comprehensive income:Net earnings (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338,155
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338,155
    )Currency translation adjustment, net of tax of $12,329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,850
    
    
    
    
    
    
    
    
    
    
    
    76,850Unrealized
gain on marketable securities, net of tax of $21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    105Unrealized gain on pension and other
post retirement benefits, net of
tax of $11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (261,178
    )Tax benefit of stock incentive plans
and warrants
    
    
    
    
    
    
    
    
    
    
    10,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,615Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    13,926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,926Issuance of common stock for
exercised stock options and
employees stock purchase plans
    
    
    357,273
    
    
    
    3
    
    
    
    10,906
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,909Balance, December 31, 2006
    
    
    109,536,481
    
    
    $
    1,095
    
    
    $
    610,232
    
    
    $
    
    
    
    $
    877,991
    
    
    $
    76,600
    
    
    
    2,972,997
    
    
    $
    (100,690
    )
    
    $
    1,465,228
 SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 F-6




---



##### Table of Contents



BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)
    
    
    
    
    
    (Unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings (loss)
    
    $
    (338,155
    )
    
    $
    178,127
    
    
    $
    336,477
    
    
    $
    214,988
    
    
    $
    123,103Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    74,418
    
    
    
    25,455
    
    
    
    61,979
    
    
    
    40,820
    
    
    
    32,059Minority interest
    
    
    (629
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    13,926
    
    
    
    13,894
    
    
    
    27,092
    
    
    
    
    
    
    
    Deferred income tax (benefit) expense
    
    
    (35,219
    )
    
    
    28,311
    
    
    
    34,739
    
    
    
    7,100
    
    
    
    (44,330
    )Write-off of intangible asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,333Provision for losses on loans to Natural Biologics
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050
    
    
    
    16,079Gain on sale of divested products
    
    
    (5,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss (gain) on derivative instruments
    
    
    75,888
    
    
    
    
    
    
    
    (10,300
    )
    
    
    
    
    
    
    Other
    
    
    (2,916
    )
    
    
    (647
    )
    
    
    (8,768
    )
    
    
    2,480
    
    
    
    17,699Tax benefit of stock incentive plans and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,846
    
    
    
    25,262Write-off of in-process research and development associated with acquisitions
    
    
    380,673
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,900Changes in assets and liabilities:(Increase) decrease in:Accounts receivable and other receivables, net
    
    
    (12,500
    )
    
    
    (66,024
    )
    
    
    (85,652
    )
    
    
    36,678
    
    
    
    34,671Inventories
    
    
    40,354
    
    
    
    14,825
    
    
    
    24,598
    
    
    
    12,614
    
    
    
    13,771Prepaid expenses
    
    
    (6,648
    )
    
    
    (4,513
    )
    
    
    (2,929
    )
    
    
    6,396
    
    
    
    (8,052
    )Other assets
    
    
    6,122
    
    
    
    (79
    )
    
    
    (2,540
    )
    
    
    6,668
    
    
    
    (201
    )Increase (decrease) in:Accounts payable, accrued liabilities and other liabilities
    
    
    17,824
    
    
    
    (71,240
    )
    
    
    (43,340
    )
    
    
    1,169
    
    
    
    (29,018
    )Income taxes payable
    
    
    5,408
    
    
    
    (13,353
    )
    
    
    (4,017
    )
    
    
    (6,774
    )
    
    
    8,823Net cash provided by operating activities
    
    
    213,346
    
    
    
    104,756
    
    
    
    327,339
    
    
    
    363,035
    
    
    
    258,099CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (33,667
    )
    
    
    (36,045
    )
    
    
    (61,000
    )
    
    
    (55,225
    )
    
    
    (46,907
    )Proceeds from sale of property, plant and equipment and intangible assets
    
    
    11,245
    
    
    
    1
    
    
    
    3
    
    
    
    68
    
    
    
    216Acquisitions, net of cash acquired
    
    
    (2,301,630
    )
    
    
    (378,128
    )
    
    
    (378,430
    )
    
    
    (46,500
    )
    
    
    (90,563
    )Purchases of derivative instruments
    
    
    
    
    
    
    
    
    
    
    (48,900
    )
    
    
    
    
    
    
    Settlement of derivative instruments
    
    
    (12,576
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases of marketable securities
    
    
    (2,159,934
    )
    
    
    (960,438
    )
    
    
    (2,120,480
    )
    
    
    (1,220,869
    )
    
    
    (1,126,043
    )Sales of marketable securities
    
    
    2,082,007
    
    
    
    1,124,641
    
    
    
    2,108,979
    
    
    
    1,152,485
    
    
    
    1,001,130Investment
in debt securities
    
    
    (3,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    338
    
    
    
    (3,018
    )
    
    
    (6,647
    )
    
    
    (6,990
    )
    
    
    (5,151
    )Net cash used in investing activities
    
    
    (2,417,217
    )
    
    
    (252,987
    )
    
    
    (506,475
    )
    
    
    (177,031
    )
    
    
    (267,318
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on long-term debt and capital leases
    
    
    (30,027
    )
    
    
    (4,733
    )
    
    
    (5,468
    )
    
    
    (20,004
    )
    
    
    (8,522
    )Proceeds from long-term debt and capital leases
    
    
    2,440,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Principal payment on note assumed in acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,500
    )Payment of
deferred financing fees
    
    
    (23,580
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,982
    )
    
    
    Tax benefits of stock incentives
    
    
    10,615
    
    
    
    24,622
    
    
    
    29,026
    
    
    
    
    
    
    
    Proceeds from exercise of stock options, employee stock purchases and warrants
    
    
    14,306
    
    
    
    42,559
    
    
    
    64,207
    
    
    
    21,267
    
    
    
    25,798Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291
    )Net cash provided by (used in) financing activities
    
    
    2,412,017
    
    
    
    62,448
    
    
    
    87,765
    
    
    
    (98,719
    )
    
    
    10,485Effect of exchange-rate changes on cash and cash equivalents
    
    
    (593
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    207,553
    
    
    
    (85,783
    )
    
    
    (91,371
    )
    
    
    87,285
    
    
    
    1,266Cash and cash equivalents at beginning of period/year
    
    
    24,422
    
    
    
    115,793
    
    
    
    115,793
    
    
    
    28,508
    
    
    
    27,242Cash and cash equivalents at end of period/year
    
    $
    231,975
    
    
    $
    30,010
    
    
    $
    24,422
    
    
    $
    115,793
    
    
    $
    28,508SUPPLEMENTAL CASH FLOW DATA:Cash paid during the period:Interest, net of portion capitalized
    
    $
    6,245
    
    
    $
    97
    
    
    $
    351
    
    
    $
    1,458
    
    
    $
    2,658Income taxes
    
    $
    52,807
    
    
    $
    75,180
    
    
    $
    126,723
    
    
    $
    74,711
    
    
    $
    80,733
 SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 F-7




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##### Table of Contents



BARR PHARMACEUTICALS, INC. AND SUBSIDARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except for share and per share amounts)
 (1) Summary of Significant Accounting Policies
 (a) Principles of Consolidation and Other Matters
      (b) Use of Estimates in the Preparation of Financial Statements
  (c) Foreign currency translation and transactions
 Foreign currency translation
   F-8




---



##### Table of Contents



Foreign currency transactions
  (d) Revenue Recognition
     (e) Sales Returns and Allowances
  (f) Stock-Based Compensation
  F-9




---



##### Table of Contents



(g) Research and Development
  (h) Advertising and Promotion Costs
  (i) Income Taxes
    F-10




---



##### Table of Contents



(j) Earnings Per Share
  Six Months EndedDecember 31,
    
    
    Fiscal Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(table in thousands, except per share data)
    
    
    
    
    
    (Unaudited)Numerator for basic and diluted earnings (loss) per shareNet earnings (loss)
    
    $
    (338,155
    )
    
    $
    178,127
    
    
    $
    336,477
    
    
    $
    214,988
    
    
    $
    123,103Earnings (loss) per common share  basic:Numerator: Net earnings (loss)
    
    $
    (338,155
    )
    
    $
    178,127
    
    
    $
    336,477
    
    
    $
    214,988
    
    
    $
    123,103Denominator: Weighted average shares
    
    
    106,377
    
    
    
    104,219
    
    
    
    105,129
    
    
    
    103,180
    
    
    
    101,823Earnings (loss) per common share  basic
    
    $
    (3.18
    )
    
    $
    1.71
    
    
    $
    3.20
    
    
    $
    2.08
    
    
    $
    1.21Earnings (loss) per common share  diluted:Numerator: Net earnings (loss)
    
    $
    (338,155
    )
    
    $
    178,127
    
    
    $
    336,477
    
    
    $
    214,988
    
    
    $
    123,103Denominator: Weighted average shares  diluted
    
    
    106,377
    
    
    
    106,984
    
    
    
    107,798
    
    
    
    106,052
    
    
    
    106,661Earnings (loss) per common share  diluted
    
    $
    (3.18
    )
    
    $
    1.66
    
    
    $
    3.12
    
    
    $
    2.03
    
    
    $
    1.15Calculation of weighted average
common shares  dilutedWeighted average shares
    
    
    106,377
    
    
    
    104,219
    
    
    
    105,129
    
    
    
    103,180
    
    
    
    101,823Effect of dilutive options and warrants
    
    
    
    
    
    
    2,765
    
    
    
    2,669
    
    
    
    2,872
    
    
    
    4,838Weighted average shares  diluted
    
    
    106,377
    
    
    
    106,984
    
    
    
    107,798
    
    
    
    106,052
    
    
    
    106,661Not included in the calculation of
diluted earnings
(loss) per-share because their impact is antidilutive:Stock options outstanding
    
    
    1,833
    
    
    
    23
    
    
    
    66
    
    
    
    84
    
    
    
    57
  (k) Cash and Cash Equivalents
  (l) Investments
in Marketable Securities, Debt and Equity Method Investments
 Investments
in Marketable Securities and Debt
  F-11




---



##### Table of Contents



Venture Funds and Other Investments
   (m) Inventories
  (n) Credit and Market Risk
  (o) Fair Value of Financial Instruments
     (p) Derivative Instruments
  Accounting for Derivative Instruments and
Hedging Activities
 F-12




---



##### Table of Contents



(q) Property, Plant and Equipment
  (r) Acquisitions and Related Amortization Expense
   (s) Asset Impairment
   F-13




---



##### Table of Contents



(t) Contingencies
 Accounting for Contingencies
 (u) Pensions and Other Post Employment Benefits
   (v) Restructuring
  (w) New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109
 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans
 F-14




---



##### Table of Contents



Fair Value Measurements,
 Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements
 The Fair Value Option for Financial
Assets and Financial Liabilities
 (2) Acquisitions and Business Combinations
 Six
Months Ended December 31, 2006 Acquisitions
 PLIVA d.d.
   Cash consideration for 96.4% of common shares
    
    $
    2,377,773Transaction costs
    
    
    29,700Total purchase price for 96.4% of common shares
    
    $
    2,407,473
  Business Combinations,
 F-15




---



##### Table of Contents



Current assets (excluding cash and inventories)
    
    $
    337,954Inventories (1)
    
    
    345,122Property, plant & equipment (2)
    
    
    697,416Identifiable intangible assets (3)
    
    
    983,856Other non-current assets, including deferred tax assets
    
    
    120,245In-process research & development (4)
    
    
    378,331Goodwill (5)
    
    
    215,998Total assets acquired
    
    
    3,078,922Current liabilities, excluding restructuring
    
    
    (330,946
    )Restructuring costs (6)
    
    
    (27,104
    )Deferred tax liabilities
    
    
    (284,503
    )Other
non-current liabilities, including long-term debt (7)
    
    
    (178,457
    )Total liabilities assumed
    
    
    (821,010
    )Total minority interest
    
    
    (41,493
    )Net assets acquired
    
    $
    2,216,419
  
  §
    
    Raw materials  valued at current replacement cost.§
    
    Work in progress  valued at the expected selling price of the inventory less the
cost to complete, cost of disposal and reasonable profit on the selling effort of the
acquiring entity.§
    
    Finished & merchandised goods  valued at expected selling price less the cost of
disposal and a reasonable profit for the selling effort.
   Weighted-AverageAmortizationPeriod (Years)Trade names
    
    $
    75,600
    
    
    IndefiniteExisting products and product rights
    
    
    786,948
    
    
    10Land usage
rights
    
    
    83,386
    
    
    99Other intangible assets
    
    
    38,374
    
    
    6Total identifiable intangible assets
    
    $
    984,308
  F-16




---



##### Table of Contents



Year EndedSix Months Ended December 31,
    
    
    June 30,2006
    
    
    2005
    
    
    2006Revenues
    
    $
    1,208,347
    
    
    $
    1,150,958
    
    
    $
    2,343,968Net earnings
(loss)
    
    
    (457,295
    )
    
    
    (369,671
    )
    
    
    (246,642
    )Earnings
(loss) per common share  basic
    
    $
    (4.30
    )
    
    
    (3.55
    )
    
    $
    (2.35
    )Earnings
(loss) per common share  diluted
    
    $
    (4.30
    )
    
    $
    (3.55
    )
    
    $
    (2.35
    )Weighted
average shares  basic
    
    
    106,377
    
    
    
    104,219
    
    
    
    105,129Weighted average shares  diluted
    
    
    106,377
    
    
    
    104,219
    
    
    
    105,129
  Shire PLC Product Acquisition and Development Agreement
   F-17




---



##### Table of Contents



Fiscal 2006 Acquisitions
 FEI Womens Health, LLC
 ®
 Business Combinations,
  Current assets (excluding cash)
    
    $
    30,876Property and equipment
    
    
    1,955Intangible asset  ParaGard T 380A IUD
    
    
    256,000Goodwill
    
    
    29,921Other assets
    
    
    4,677Total assets acquired
    
    $
    323,429Current liabilities
    
    
    10,780Other liabilities
    
    
    22,919Total liabilities assumed
    
    
    33,699Net assets acquired
    
    $
    289,730
  Goodwill and Other Intangible Assets
 F-18




---



##### Table of Contents



Products from Organon Ltd., Organon USA Inc. and Savient Pharmaceuticals, Inc.
 ® Accounting for Contingencies
 ®
 Fiscal 2005 and 2004 Acquisitions
 Urinary Incontinence Product
  Endeavor Pharmaceuticals, Inc .
  Womens Capital Corporation
 ®
 Certain Assets from Gynétics, Inc.
 ®
 F-19




---



##### Table of Contents



Products from Galen (Chemicals) Limited
 ® ®
 Buy-Out of Royalty Interest from Eastern Virginia Medical School
  Products from King Pharmaceuticals, Inc.
 ® ®
 (3) Derivative Instruments
 Interest Rate Risk
    Foreign Exchange Risk
    F-20




---



##### Table of Contents



Balance SheetAssets
    
    
    LiabilitiesInterest rate swap
    
    $
    1,267
    
    
    $
    (443
    )Forward rate agreements
    
    
    997
    
    
    
    (163
    )Foreign exchange forward contracts
    
    
    383
    
    
    
    (106
    )Total
    
    $
    2,647
    
    
    $
    (712
    )
 (4) Accounts Receivable, net
  December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Trade accounts receivable
    
    $
    762,744
    
    
    $
    357,268
    
    
    $
    296,994Other trade receivables
    
    
    15,080
    
    
    
    6,055
    
    
    
    5,549Subtotal
    
    
    777,824
    
    
    
    363,323
    
    
    
    302,543Less: allowances
    
    
    244,759
    
    
    
    137,297
    
    
    
    142,484Accounts receivable, net
    
    $
    533,065
    
    
    $
    226,026
    
    
    $
    160,059
 (5) Inventories
  December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Raw materials and supplies
    
    $
    163,438
    
    
    $
    86,239
    
    
    $
    79,120Work-in-process
    
    
    69,255
    
    
    
    22,063
    
    
    
    16,405Finished goods
    
    
    219,718
    
    
    
    25,964
    
    
    
    42,113Total inventories
    
    $
    452,411
    
    
    $
    134,266
    
    
    $
    137,638
 F-21




---



##### Table of Contents



(6) Property, plant and equipment, net
  December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Land
    
    $
    58,599
    
    
    $
    8,317
    
    
    $
    7,461Buildings and improvements
    
    
    529,164
    
    
    
    140,149
    
    
    
    135,737Machinery and equipment
    
    
    533,072
    
    
    
    253,088
    
    
    
    189,906Leasehold improvements
    
    
    12,726
    
    
    
    9,345
    
    
    
    8,414Construction in progress
    
    
    73,425
    
    
    
    28,723
    
    
    
    37,5841,206,986
    
    
    
    439,622
    
    
    
    379,102Less: accumulated depreciation and amortization
    
    
    196,787
    
    
    
    163,662
    
    
    
    129,617Total plant, property and equipment, net
    
    $
    1,010,199
    
    
    $
    275,960
    
    
    $
    249,485
  (7) Investments in Marketable Securities, Debt and Equity Method Investments
 Investments in Marketable Securities and Debt
 Trading Securities
  Available-for-Sale Securities
     F-22




---



##### Table of Contents



Available for SaleGross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueDecember 31, 2006Debt securities
    
    $
    668,239
    
    
    $
    
    
    
    $
    (534
    )
    
    $
    667,705Equity securities
    
    
    10,914
    
    
    
    68
    
    
    
    
    
    
    
    10,982$
    679,153
    
    
    $
    68
    
    
    $
    (534
    )
    
    $
    678,687June 30, 2006Debt securities
    
    $
    588,421
    
    
    $
    
    
    
    $
    (592
    )
    
    $
    587,829Equity securities
    
    
    7,785
    
    
    
    
    
    
    
    
    
    
    
    7,785$
    596,206
    
    
    $
    
    
    
    $
    (592
    )
    
    $
    595,614June 30, 2005Debt securities
    
    $
    576,687
    
    
    $
    
    
    
    $
    (881
    )
    
    $
    575,806Equity securities
    
    
    5,449
    
    
    
    
    
    
    
    
    
    
    
    5,449$
    582,136
    
    
    $
    
    
    
    $
    (881
    )
    
    $
    581,255
 Held-to-Maturity Securities
    MaturitiesLess than one year
    
    
    15One to two years
    
    
    257Two to five years
    
    
    31Total
    
    
    303
 Equity Method Investments
 Medika d.d.
   F-23




---



##### Table of Contents



At October 24, 2006
    
    $
    14,795Share of
Medika profit
    
    
    54Elimination of unrealized profit on sale of inventories
    
    
    (1,012
    )Foreign exchange movements
    
    
    574At December 31, 2006
    
    $
    14,411
 Venture Funds
  (8) Goodwill and Other Intangible Assets
  Generic
    
    
    ProprietaryPharmaceuticals
    
    
    Pharmaceuticals
    
    
    TotalGoodwill balance at June 30, 2005
    
    $
    
    
    
    $
    17,998
    
    
    $
    17,998Acquisition of FEI
    
    
    
    
    
    
    29,922
    
    
    
    29,922Goodwill balance at June 30, 2006
    
    
    
    
    
    
    47,920
    
    
    
    47,920Acquisition of PLIVA d.d.
    
    
    223,379
    
    
    
    
    
    
    
    223,379Currency translation effect
    
    
    5,150
    
    
    
    
    
    
    
    5,150Goodwill balance at December 31, 2006
    
    $
    228,529
    
    
    $
    47,920
    
    
    $
    276,449
  F-24




---



##### Table of Contents



December 31,
    
    June 30,
    
    June 30,2006
    
    2006
    
    2005Gross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationFinite-lived intangible assets:Product licenses
    
    $
    45,350
    
    
    $
    15,624
    
    
    $
    45,350
    
    
    $
    13,039
    
    
    $
    45,600
    
    
    $
    7,572Product rights
    
    
    1,302,423
    
    
    
    64,780
    
    
    
    415,745
    
    
    
    30,798
    
    
    
    70,796
    
    
    
    10,481Land use rights
    
    
    88,053
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    39,136
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total amortized finite-lived intangible assets
    
    
    1,474,962
    
    
    
    80,770
    
    
    
    461,095
    
    
    
    43,837
    
    
    
    116,396
    
    
    
    18,053Indefinite-lived intangible assets-
Tradenames
    
    
    79,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total indefinite-lived intangible assets
    
    
    79,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total identifiable intangible assets
    
    $
    1,554,940
    
    
    $
    80,770
    
    
    $
    461,095
    
    
    $
    43,837
    
    
    $
    116,396
    
    
    $
    18,053Total identifiable intangible
assets, less accumulated
amortization
    
    
    
    
    
    $
    1,474,170
    
    
    
    
    
    
    $
    417,258
    
    
    
    
    
    
    $
    98,343
    ®
  Year Ending December 31,2007
    
    $
    143,3272008
    
    $
    137,7292009
    
    $
    126,4932010
    
    $
    119,0682011
    
    $
    111,042
  F-25




---



##### Table of Contents



(9) Solvay Arbitration Award
 ®
 (10) Accrued Liabilities
  December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Payroll, taxes & benefits
    
    $
    54,929
    
    
    $
    21,283
    
    
    $
    19,184Restructuring
    
    
    24,600
    
    
    
    
    
    
    
    Interest
    
    
    29,979
    
    
    
    401
    
    
    
    279Taxes
    
    
    24,282
    
    
    
    
    
    
    
    Profit splits due to third parties
    
    
    23,505
    
    
    
    22,007
    
    
    
    23,158Medicaid obligations
    
    
    16,047
    
    
    
    12,167
    
    
    
    10,060Cash settled share based compensation
    
    
    14,679
    
    
    
    
    
    
    
    Managed care rebates
    
    
    8,288
    
    
    
    10,370
    
    
    
    7,460Legal settlement
    
    
    
    
    
    
    
    
    
    
    63,238Other
    
    
    87,392
    
    
    
    32,985
    
    
    
    28,509Total accrued liabilities
    
    $
    283,701
    
    
    $
    99,213
    
    
    $
    151,888
 F-26




---



##### Table of Contents



(11) Debt
  December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Credit Facilities (a)
    
    $
    2,415,703
    
    
    $
    
    
    
    $
    Senior unsecured notes (b)
    
    
    
    
    
    
    8,000
    
    
    
    12,000Note due to WCC shareholders (c)
    
    
    6,500
    
    
    
    6,500
    
    
    
    6,500Obligation under capital leases (d)
    
    
    2,819
    
    
    
    1,747
    
    
    
    2,439Fixed rate bonds (e)
    
    
    101,780
    
    
    
    
    
    
    
    Dual-currency syndicated credit
facility (f)
    
    
    86,287
    
    
    
    
    
    
    
    Euro commercial paper program (g)
    
    
    26,334
    
    
    
    
    
    
    
    Dual-currency term loan facility
(h)
    
    
    25,000
    
    
    
    
    
    
    
    Multi-currency revolving credit
facility (i)
    
    
    13,167
    
    
    
    
    
    
    
    Other
    
    
    2,070
    
    
    
    
    
    
    
    2,679,660
    
    
    
    16,247
    
    
    
    20,939Less: current installments of debt
and capital lease obligations
    
    
    742,445
    
    
    
    8,816
    
    
    
    5,446Total
long-term debt and capital lease obligations
    
    $
    1,937,215
    
    
    $
    7,431
    
    
    $
    15,493
         F-27




---



##### Table of Contents



Years Ending December 31,2007
    
    $
    742,4452008
    
    $
    220,3762009
    
    $
    212,3452010
    
    $
    200,5662011
    
    $
    1,299,325Thereafter
    
    $
    1,572Total principal maturities and amounts due on capital leases
    
    $
    2,676,629Premium on fixed rate bond (e)
    
    $
    3,031Total debt and capital lease obligations
    
    $
    2,679,660
 F-28




---



##### Table of Contents



(12) Accumulated Other Comprehensive Income
   Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Beginning Balance
    
    
    (377
    )
    
    $
    (561
    )
    
    $
    (561
    )
    
    $
    
    
    
    $
    (179
    )Net unrealized gain (loss) on
marketable securities net of tax
expense (benefit) $21, $(54), $106, $(320), and $102
    
    
    105
    
    
    
    (94
    )
    
    
    184
    
    
    
    (561
    )
    
    
    179Net unrealized gain on
currency translation adjustments net of tax
expense $12,329, $0, $0, $0, and $0
    
    
    76,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrealized gain on pension
and other post employment benefits net of tax
expense $11, $0, $0, $0, and $0
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net unrecognized gain (loss)
    
    
    76,977
    
    
    
    (94
    )
    
    
    184
    
    
    
    (561
    )
    
    
    179Ending Balance
    
    $
    76,600
    
    
    $
    (655
    )
    
    $
    (377
    )
    
    $
    (561
    )
    
    $
    
 (13) Related-party Transactions
 Dr. Bernard C. Sherman and Jack M. Kay
    F-29




---



##### Table of Contents



Six-Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Purchases from the Sherman Companies
    
    $
    3,916
    
    
    $
    1,634
    
    
    $
    4,931
    
    
    $
    5,575
    
    
    $
    2,808Sales to the Sherman Companies
    
    $
    6,915
    
    
    $
    6,774
    
    
    $
    15,802
    
    
    $
    10,149
    
    
    $
    9,486Recovery of shared litigation costs included
in operating expenses
    
    $
    
    
    
    $
    
    
    
    $
    13
    
    
    $
    77
    
    
    $
    1,004Profit split
(income) expense charged to cost of goods
    
    $
    (283
    )
    
    $
    (333
    )
    
    $
    (586
    )
    
    $
    1,027
    
    
    $
    3,680Royalty revenue
    
    $
    238
    
    
    $
    349
    
    
    $
    557
    
    
    $
    216
    
    
    $
    295
   Sales of goods and services:
    
    $
    6,532Year-end receivables:
    
    $
    27,079Purchases of goods and services:
    
    $
    5Year-end liabilities:
    
    $
    1
 (14) Income Taxes
  Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Current:Federal
    
    $
    63,000
    
    
    $
    64,859
    
    
    $
    135,362
    
    
    $
    101,355
    
    
    $
    101,477State
    
    
    7,090
    
    
    
    9,609
    
    
    
    16,370
    
    
    
    6,482
    
    
    
    18,097Foreign
    
    
    (366
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    69,724
    
    
    $
    74,468
    
    
    $
    151,732
    
    
    $
    107,837
    
    
    $
    119,574Deferred:Federal
    
    $
    (17,226
    )
    
    $
    24,389
    
    
    $
    30,780
    
    
    $
    4,441
    
    
    $
    (41,348
    )State
    
    
    (1,531
    )
    
    
    2,650
    
    
    
    3,959
    
    
    
    2,610
    
    
    
    (6,889
    )Foreign
    
    
    (16,462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,219
    )
    
    
    27,039
    
    
    
    34,739
    
    
    
    7,051
    
    
    
    (48,237
    )Total
    
    $
    34,505
    
    
    $
    101,507
    
    
    $
    186,471
    
    
    $
    114,888
    
    
    $
    71,337
  F-30




---



##### Table of Contents



Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Federal income taxes at statutory rate
    
    $
    (106,498
    )
    
    $
    97,872
    
    
    $
    183,032
    
    
    $
    115,457
    
    
    $
    68,054State income taxes, net of federal income tax effect
    
    
    3,369
    
    
    
    7,968
    
    
    
    14,099
    
    
    
    9,092
    
    
    
    6,687Tax credits
    
    
    (5,500
    )
    
    
    (2,000
    )
    
    
    (2,778
    )
    
    
    (6,900
    )
    
    
    (5,900
    )Foreign rate differential
    
    
    139,394
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Domestic
manufacturers deduction(IRC Section 199)
    
    
    (1,110
    )
    
    
    (1,957
    )
    
    
    (3,661
    )
    
    
    
    
    
    
    Change in
valuation allowance
    
    
    5,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write-off of
in-process research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,605Other, net
    
    
    (503
    )
    
    
    (376
    )
    
    
    (4,221
    )
    
    
    (2,761
    )
    
    
    (1,109
    )Total
    
    $
    34,505
    
    
    $
    101,507
    
    
    $
    186,471
    
    
    $
    114,888
    
    
    $
    71,337
    December 31,
    
    
    June 30,2006
    
    
    2006
    
    
    2005Deferred tax assets:Net operating loss
    
    $
    106,317
    
    
    $
    3,008
    
    
    $
    3,677Receivable reserves
    
    
    48,208
    
    
    
    16,541
    
    
    
    17,833Inventory
    
    
    3,512
    
    
    
    3,820
    
    
    
    2,865Warrants issued
    
    
    13,997
    
    
    
    14,844
    
    
    
    16,366
    *Capital loss carryforward
    
    
    
    
    
    
    
    
    
    
    2,864Amortization of intangibles/goodwill
    
    
    
    
    
    
    35,593
    
    
    
    60,467Deferred revenue
    
    
    14,043
    
    
    
    5,366
    
    
    
    7,239Stock compensation
    
    
    9,400
    
    
    
    6,966
    
    
    
    Investments
    
    
    184
    *
    
    
    215
    *
    
    
    320
    *Solvay litigation
    
    
    
    
    
    
    
    
    
    
    4,003Restructuring reserve
    
    
    9,408
    
    
    
    
    
    
    
    Other
    
    
    25,101
    
    
    
    461
    
    
    
    7,108Total deferred tax assets
    
    
    230,170
    
    
    
    86,814
    
    
    
    122,742Deferred tax liabilities:Plant and equipment
    
    
    (78,500
    )
    
    
    (27,857
    )
    
    
    (24,905
    )Amortization of intangibles/goodwill
    
    
    (169,435
    )
    
    
    
    
    
    
    Other
    
    
    (2,641
    )
    
    
    (2,312
    )
    
    
    (3,452
    )Total deferred tax liabilities
    
    
    (250,576
    )
    
    
    (30,169
    )
    
    
    (28,357
    )Less valuation allowance
    
    
    (86,908
    )
    
    
    (761
    )
    
    
    (3,657
    )Net deferred
tax asset (liability)
    
    $
    (107,314
    )
    
    $
    55,884
    
    
    $
    90,728
 
 *
    
    changes reflected directly in equity F-31




---



##### Table of Contents



(15) Stock-Based Compensation
 Share-Based Payment
 Accounting for Stock Issued to Employees,
  F-32




---



##### Table of Contents



Fiscal
Year Ended June 30,(in thousands, expect per share data)
    
    2005
    
    
    2004NET EARNINGS, AS REPORTED
    
    $
    214,988
    
    
    $
    123,103Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    20,178
    
    
    
    13,747PRO FORMA NET EARNINGS
    
    $
    194,810
    
    
    $
    109,356EARNINGS PER SHARE:Basic  as reported
    
    $
    2.08
    
    
    $
    1.21Basic  pro forma
    
    $
    1.89
    
    
    $
    1.07Diluted  as reported
    
    $
    2.03
    
    
    $
    1.15Diluted
 pro forma
    
    $
    1.84
    
    
    $
    1.03
  Six Months Ended
    
    Fiscal Year EndedDecember 31,
    
    June 30,2006
    
    2005
    
    2006
    
    2005
    
    2004(unaudited)Average expected term (years)
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    3.3
    
    
    
    3.5Weighted average risk-free interest rate
    
    
    5.09
    %
    
    
    3.72
    %
    
    
    3.76
    %
    
    
    2.40
    %
    
    
    2.20
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    32.12
    %
    
    
    36.85
    %
    
    
    36.85
    %
    
    
    48.22
    %
    
    
    54.15
    %Weighted average grant date fair value
    
    $
    18.17
    
    
    $
    18.18
    
    
    $
    18.57
    
    
    $
    12.90
    
    
    $
    17.79
  F-33




---



##### Table of Contents



Employee Stock Compensation Plans
      F-34




---



##### Table of Contents



Weighted-AverageNumber of
    
    Weighted-
    
    Remaining
    
    AggregateOption/SARs
    
    Average
    
    Contractual
    
    IntrinsicAwards
    
    Exercise Price
    
    Life
    
    ValueOutstanding
at June 30, 2005


8,221,058


    $
28.96Granted


1,620,000



48.04Forfeited


(138,019
    )


42.59Exercised


(2,710,082
    )


22.21Outstanding at June 30, 2006
    
    
    6,992,957
    
    
    $
    35.72
    
    
    
    6.82
    
    
    $
    87,667Granted
    
    
    1,601,500
    
    
    
    48.81Forfeited
    
    
    (152,093
    )
    
    
    43.11Exercised
    
    
    (241,761
    )
    
    
    31.44Outstanding at December 31, 2006
    
    
    8,200,603
    
    
    $
    38.27
    
    
    
    6.94
    
    
    $
    109,767Available for grant (20,067,188 authorized)
    
    
    1,559,400Exercisable at December 31, 2006
    
    
    5,128,805
    
    
    $
    33.21
    
    
    
    5.74
    
    
    $
    93,820
  Non-Employee Directors Stock Option Plans
    Weighted-AverageWeighted-
    
    Remaining
    
    AggregateNumber of
    
    Average
    
    Contractual
    
    IntrinsicOptions
    
    Exercise Price
    
    Life
    
    ValueOutstanding at June 30, 2005


630,021


    $
25.68Granted


60,000



57.35Forfeited


    



    Exercised


(37,368
    )


12.40Outstanding at June 30, 2006
    
    
    652,653
    
    
    $
    29.35
    
    
    
5.21
    
    
$
    12,816Granted
    
    
    50,000
    
    
    
    48.84Forfeited
    
    
    
    
    
    
    Exercised
    
    
    (32,968
    )
    
    
    5.11Outstanding at December 31, 2006
    
    
    669,685
    
    
    $
    32.00
    
    
    
    5.33
    
    
    $
    13,410Available for Grant (2,798,438 authorized)
    
    
    796,469Exercisable at December 31, 2006
    
    
    619,685
    
    
    $
    30.64
    
    
    
    4.96
    
    
    $
    13,277
  F-35




---



##### Table of Contents



PLIVA Stock Based Compensation Plans
   Employee Stock Purchase Plan
  Warrants
    (16) Savings and Retirement
  F-36




---



##### Table of Contents



Defined Benefit Pension Plan and Other Post Employment Benefits
  Application of SFAS No. 158
   Balance
    
    
    
    
    
    BalanceDecember 31,
    
    
    
    
    
    December 31,2006
    
    
    
    
    
    2006Prior to SFAS
    
    
    
    
    
    Post SFASNo. 158
    
    SFAS No. 158
    
    No. 158Adjustments
    
    Adjustments
    
    AdjustmentsPension and post employment liabilities
    
    $
    (11,686
    )
    
    $
    33
    
    
    $
    (11,653
    )Accumulated other comprehensive gain
    
    
    
    
    
    
    (33
    )
    
    
    (33
    )
    F-37




---



##### Table of Contents



PostPension
    
    
    EmploymentBenefits
    
    
    BenefitsChanges in benefit obligations:Benefit obligations at June 30, 2006
    
    $
    
    
    
    $
    Benefit obligations assumed from PLIVA
    
    
    10,517
    
    
    
    518Service costs
    
    
    42
    
    
    
    6Interest cost
    
    
    92
    
    
    
    3Actuarial gains
    
    
    (33
    )
    
    
    Benefits paid
    
    
    (49
    )
    
    
    (5
    )Exchange rate changes
    
    
    508
    
    
    
    30Deferred compensation
    
    
    24
    
    
    
    Benefit obligations at December 31, 2006
    
    $
    11,101
    
    
    $
    552Fair value of plan assets at December 31, 2006
    
    $
    
    
    
    $
    Funded status of the plan at December 31, 2006
    
    $
    (11,101
    )
    
    $
    (552
    )Net amount recognized before SFAS No. 158
    
    $
    (11,134
    )
    
    $
    (552
    )Impact of SFAS No. 158
    
    
    33
    
    
    
    Net amounts recognized after SFAS No. 158
    
    $
    (11,101
    )
    
    $
    (552
    )Amounts recognized in accumulated other
comprehensive loss consists of:Net gain
    
    $
    (33
    )
    
    $
    Total amount recognized
    
    
    (33
    )
    
    
    Plans with underfunded or non-funded
accumulated benefit obligation:Projected benefit obligation
    
    $
    11,101
    
    
    $
    552Accumulated benefit obligation
    
    
    11,101
    
    
    
    552
 Components of Net Periodic Benefit Expense
  PostPension
    
    
    EmploymentBenefits
    
    
    BenefitsService cost
    
    $
    42
    
    
    $
    6Interest cost on benefit obligations
    
    
    92
    
    
    
    3Subtotal
    
    
    134
    
    
    
    9Deferred compensation
    
    
    24
    
    
    
    Total net periodic benefit cost
    
    $
    158
    
    
    $
    9
 Key Assumptions
  F-38




---



##### Table of Contents



Period EndingDecember 31, 2006PostPension
    
    EmploymentBenefits
    
    BenefitsDiscount rate
    
    
    4.50
    %
    
    
    4.98/3.76
    %Future salary increase
    
    
    2.75
    %
    
    
    1.5%/2.4
    %Future pension increase
    
    
    1.25
    %
    
    
    N/A
  Benefit Payments
  PostExpected Future
    
    Pension
    
    EmploymentBenefit Payments
    
    Benefits
    
    Benefits2007
    
    $
    276
    
    
    $
    1322008
    
    
    279
    
    
    
    242009
    
    
    285
    
    
    
    382010
    
    
    390
    
    
    
    562011
    
    
    393
    
    
    
    482012-16
    
    
    2,160
    
    
    
    303
  Defined Contribution Plans
    F-39




---



##### Table of Contents



(17) Other (Expense) Income, net
  Six Months EndedDecember 31,
    
    
    Year Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Proceeds from insurance settlement
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,600
    
    
    $
    Gain (loss) in venture funds
    
    
    (384
    )
    
    
    (283
    )
    
    
    5,223
    
    
    
    (796
    )
    
    
    (1,346
    )Gain (loss) on derivatives
    
    
    (75,554
    )
    
    
    
    
    
    
    10,300
    
    
    
    
    
    
    
    Net foreign
exchange gain
    
    
    2,997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income (expense)
    
    
    49
    
    
    
    (310
    )
    
    
    1,645
    
    
    
    59
    
    
    
    (187
    )Total other income (expense), net
    
    $
    (72,892
    )
    
    $
    (593
    )
    
    $
    17,168
    
    
    $
    3,863
    
    
    $
    (1,533
    )
 
  (18) Restructuring Charges
   F-40




---



##### Table of Contents



Balanceas ofOctober 24,
    
    
    
    
    
    December 31,2006
    
    Payments
    
    2006Costs capitalized through
December 31, 2006:Involuntary termination of PLIVA employees
    
    $
    11,159
    
    
    $
    (2,882
    )
    
    $
    8,277Lease termination costs
    
    
    10,201
    
    
    
    
    
    
    
    10,201$
    21,360
    
    
    $
    (2,882
    )
    
    $
    18,478
   (19) Commitments and Contingencies
 Leases
  Years Ended December 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterOperating leases
    
    $
    11,669
    
    
    $
    10,957
    
    
    $
    9,477
    
    
    $
    8,619
    
    
    $
    7,003
    
    
    $
    18,526Capital leases
    
    
    1,094
    
    
    
    888
    
    
    
    462
    
    
    
    107
    
    
    
    118
    
    
    
    302Minimum lease payments
    
    $
    12,763
    
    
    $
    11,845
    
    
    $
    9,939
    
    
    $
    8,726
    
    
    $
    7,121
    
    
    $
    18,828
  Capital commitments
  F-41




---



##### Table of Contents



Investment in Venture Funds
  Employment Agreements
  Product Liability Insurance
      Indemnity Provisions
   F-42




---



##### Table of Contents



Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness to Others
 Litigation Settlement
  Litigation Matters
    Patent Matters
 Desmopressin Acetate Suit
  en banc
 F-43




---



##### Table of Contents



Fexofenadine Hydrochloride Suit
          F-44




---



##### Table of Contents



Product Liability Matters
 Hormone Therapy Litigation
   Antitrust Matters
 Ciprofloxacin (Cipro®) Antitrust Class Actions
  en banc en banc
  F-45




---



##### Table of Contents



Tamoxifen Antitrust Class Actions
 en banc en banc
  Ovcon Antitrust Proceedings
 ® ®
    Provigil Antitrust Proceedings
 ®
 F-46




---



##### Table of Contents



Medicaid Reimbursement Cases
         F-47




---



##### Table of Contents



Breach of Contract Action
  Other Litigation
  Government Inquiries
   (20) Segment Reporting
  Generic Pharmaceuticals
    F-48




---



##### Table of Contents



Proprietary Pharmaceuticals
   Other
   F-49




---



##### Table of Contents



Six-months ended
 Generic
    
    
    
    
    
    Proprietary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofDecember 31, 2006
    
    Pharmaceuticals
    
    %
    
    Pharmaceuticals
    
    %
    
    Other
    
    %
    
    Consolidated
    
    revenueRevenues:Product sales
    
    $
    636,581
    
    
    
    69
    %
    
    $
    200,943
    
    
    
    22
    %
    
    $
    
    
    
    
    
    %
    
    $
    837,524
    
    
    
    91
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    65,882
    
    
    
    7
    %
    
    
    65,882
    
    
    
    7
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    12,997
    
    
    
    2
    %
    
    
    12,997
    
    
    
    2
    %Total revenues
    
    $
    636,581
    
    
    
    69
    %
    
    $
    200,943
    
    
    
    22
    %
    
    $
    78,879
    
    
    
    9
    %
    
    $
    916,403
    
    
    
    100
    %Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin%
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Gross Profit:Product sales
    
    $
    329,399
    
    
    
    52
    %
    
    $
    144,761
    
    
    
    72
    %
    
    $
    
    
    
    
    
    %
    
    $
    474,160
    
    
    
    57
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    65,882
    
    
    
    100
    %
    
    
    65,882
    
    
    
    100
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    1,030
    
    
    
    8
    %
    
    
    1,030
    
    
    
    8
    %Total gross profit
    
    $
    329,399
    
    
    
    52
    %
    
    $
    144,761
    
    
    
    72
    %
    
    $
    66,912
    
    
    
    85
    %
    
    $
    541,072
    
    
    
    59
    %
 Six-months ended
    
    Generic
    
    
    
    
    
    Proprietary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofDecember 31, 2005 (unaudited)
    
    Pharmaceuticals
    
    %
    
    Pharmaceuticals
    
    %
    
    Other
    
    %
    
    Consolidated
    
    revenueRevenues:Product sales
    
    $
    416,262
    
    
    
    65
    %
    
    $
    140,381
    
    
    
    22
    %
    
    $
    
    
    
    
    
    %
    
    $
    556,643
    
    
    
    88
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    79,313
    
    
    
    12
    %
    
    
    79,313
    
    
    
    12
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total revenues
    
    $
    416,262
    
    
    
    65
    %
    
    $
    140,381
    
    
    
    22
    %
    
    $
    79,313
    
    
    
    12
    %
    
    $
    635,956
    
    
    
    100
    %Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin%
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Gross
Profit:(1)Product sales
    
    $
    277,966
    
    
    
    67
    %
    
    $
    106,610
    
    
    
    76
    %
    
    $
    
    
    
    
    
    %
    
    $
    384,576
    
    
    
    69
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    79,313
    
    
    
    100
    %
    
    
    79,313
    
    
    
    100
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total gross profit
    
    $
    277,966
    
    
    
    67
    %
    
    $
    106,610
    
    
    
    76
    %
    
    $
    79,313
    
    
    
    100
    %
    
    $
    463,889
    
    
    
    73
    %
 F-50




---



##### Table of Contents



Fiscal year ended
    
    Generic
    
    
    
    
    
    
    Proprietary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofJune 30, 2006
    
    Pharmaceuticals
    
    
    %
    
    
    Pharmaceuticals
    
    
    %
    
    
    Other
    
    
    %
    
    
    Consolidated
    
    
    revenueRevenues:Product sales
    
    $
    838,820
    
    
    
    64
    %
    
    $
    330,963
    
    
    
    25
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,169,783
    
    
    
    89
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    144,682
    
    
    
    11
    %
    
    
    144,682
    
    
    
    11
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total revenues
    
    $
    838,820
    
    
    
    64
    %
    
    $
    330,963
    
    
    
    25
    %
    
    $
    144,682
    
    
    
    11
    %
    
    $
    1,314,465
    
    
    
    100
    %Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin%
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Gross
Profit:(1)Product sales
    
    $
    552,793
    
    
    
    66
    %
    
    $
    239,088
    
    
    
    72
    %
    
    $
    
    
    
    
    
    %
    
    $
    791,881
    
    
    
    68
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    144,682
    
    
    
    100
    %
    
    
    144,682
    
    
    
    100
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total gross profit
    
    $
    552,793
    
    
    
    66
    %
    
    $
    239,088
    
    
    
    72
    %
    
    $
    144,682
    
    
    
    100
    %
    
    $
    936,563
    
    
    
    71
    %
 Fiscal year ended
    
    Generic
    
    
    
    
    
    
    Proprietary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %ofJune 30, 2005
    
    Pharmaceuticals
    
    
    %
    
    
    Pharmaceuticals
    
    
    %
    
    
    Other
    
    
    %
    
    
    Consolidated
    
    
    revenueRevenues:Product sales
    
    $
    751,388
    
    
    
    72
    %
    
    $
    279,284
    
    
    
    27
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,030,672
    
    
    
    98
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    16,727
    
    
    
    2
    %
    
    
    16,727
    
    
    
    2
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total revenues
    
    $
    751,388
    
    
    
    72
    %
    
    $
    279,284
    
    
    
    27
    %
    
    $
    16,727
    
    
    
    2
    %
    
    $
    1,047,399
    
    
    
    100
    %Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin%
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Gross
Profit:(1)Product sales
    
    $
    486,533
    
    
    
    65
    %
    
    $
    226,705
    
    
    
    81
    %
    
    $
    
    
    

    $
    
    %
    
    $
    713,238
    
    
    
    69
    %Alliance and development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    16,727
    
    
    
    100
    %
    
    
    16,727
    
    
    
    100
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total gross profit
    
    $
    486,533
    
    
    
    65
    %
    
    $
    226,705
    
    
    
    81
    %
    
    $
    16,727
    
    
    
    100
    %
    
    $
    729,965
    
    
    
    70
    %
 Fiscal year ended
    
    Generic
    
    
    
    
    
    Proprietary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofJune 30, 2004
    
    Pharmaceuticals
    
    %
    
    Pharmaceuticals
    
    %
    
    Other
    
    %
    
    Consolidated
    
    revenueRevenues:Product sales
    
    $
    1,150,622
    
    
    
    88
    %
    
    $
    146,200
    
    
    
    11
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,296,822
    
    
    
    99
    %Alliance and
development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    12,266
    
    
    
    1
    %
    
    
    12,266
    
    
    
    1
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total revenues
    
    $
    1,150,622
    
    
    
    88
    %
    
    $
    146,200
    
    
    
    11
    %
    
    $
    12,266
    
    
    
    1
    %
    
    $
    1,309,088
    
    
    
    100
    %Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin
    
    
    
    
    
    Margin%
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Gross
Profit:(1)Product sales
    
    $
    545,960
    
    
    
    47
    %
    
    $
    111,848
    
    
    
    77
    %
    
    $
    
    
    
    
    
    %
    
    $
    657,808
    
    
    
    51
    %Alliance and
development revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    12,266
    
    
    
    100
    %
    
    
    12,266
    
    
    
    100
    %Other revenue
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %Total gross profit
    
    $
    545,960
    
    
    
    47
    %
    
    $
    111,848
    
    
    
    77
    %
    
    $
    12,266
    
    
    
    100
    %
    
    $
    670,074
    
    
    
    51
    %
  (1)
    
    Prior period amounts have been reclassified to include
the effect of intangible amortization and conform to current year presentation. F-51




---



##### Table of Contents



Geographic Information
  Product sales by geographic area
 Six-Months Ended
    
    
    Fiscal Year EndedDecember 31,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2004United States
    
    $
    696,328
    
    
    $
    552,883
    
    
    $
    1,163,148
    
    
    $
    1,023,657
    
    
    $
    1,293,641ROW
    
    
    141,196
    
    
    
    3,760
    
    
    
    6,635
    
    
    
    7,015
    
    
    
    3,181Total product sales
    
    $
    837,524
    
    
    $
    556,643
    
    
    $
    1,169,783
    
    
    $
    1,030,672
    
    
    $
    1,296,822
  F-52




---



##### Table of Contents



(21) Quarterly Data (unaudited)
  Three Month Period EndedSept. 30
    
    
    Dec. 31Six Months Ended December 31, 2006Total revenues
    
    $
    332,370
    
    
    $
    584,033Gross profit
    
    
    242,792
    
    
    
    298,280Net earnings
(loss)
    
    
    52,761
    
    
    
    (390,916
    )Earnings
(loss) per common share  basic (1)
    
    $
    0.50
    
    
    $
    (3.67
    )Earnings
(loss) per common share  diluted (1)
    
    $
    0.49
    
    
    $
    (3.67
    )Price range of Common StockHigh
    
    $
    59.25
    
    
    $
    53.89Low
    
    $
    44.60
    
    
    $
    47.82
 Three Month Period EndedSept. 30
    
    
    Dec. 31
    
    
    Mar. 31
    
    
    Jun. 30FISCAL YEAR 2006:Total revenues
    
    $
    310,439
    
    
    $
    325,517
    
    
    $
    326,841
    
    
    $
    351,668Gross profit
    
    
    227,269
    
    
    
    236,621
    
    
    
    228,334
    
    
    
    244,339Net earnings
    
    
    83,243
    
    
    
    94,884
    
    
    
    76,096
    
    
    
    82,254Earnings per common share  basic (1)
    
    $
    0.80
    
    
    $
    0.91
    
    
    $
    0.72
    
    
    $
    0.77Earnings per common share  diluted (1)
    
    $
    0.78
    
    
    $
    0.88
    
    
    $
    0.70
    
    
    $
    0.76Price range of Common StockHigh
    
    $
    55.08
    
    
    $
    63.60
    
    
    $
    70.25
    
    
    $
    64.51Low
    
    $
    45.00
    
    
    $
    53.53
    
    
    $
    60.83
    
    
    $
    47.24FISCAL YEAR 2005:Total revenues
    
    $
    244,508
    
    
    $
    257,369
    
    
    $
    265,007
    
    
    $
    280,515Gross profit
    
    
    172,426
    
    
    
    175,815
    
    
    
    183,644
    
    
    
    198,080Net earnings
    
    
    52,135
    
    
    
    59,387
    
    
    
    61,345
    
    
    
    42,121Earnings per common share  basic (1)
    
    $
    0.50
    
    
    $
    0.58
    
    
    $
    0.60
    
    
    $
    0.41Earnings per common share  diluted (1)
    
    $
    0.49
    
    
    $
    0.56
    
    
    $
    0.58
    
    
    $
    0.40Price range of Common StockHigh
    
    $
    42.80
    
    
    $
    46.90
    
    
    $
    50.45
    
    
    $
    54.29Low
    
    $
    32.01
    
    
    $
    35.07
    
    
    $
    43.71
    
    
    $
    47.00
 
 (1)
    
    The sum of the individual quarters may not equal the full year amounts due to the effects
of the market prices in the application of the treasury stock method. During its two most recent
fiscal years, the Company did not pay any cash dividends. F-53




---



##### Table of Contents



SCHEDULE II
 BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES
 VALUATION AND QUALIFYING ACCOUNTS
 Balance at
    
    Additions,Beginning
    
    Costs and
    
    Deductions,
    
    Balance at(In thousands)
    
    of Year
    
    Expenses
    
    Write-offs
    
    End of YearTotal Accounts Receivable Reserves:Year Ended June 30, 2004
    
    
    134,653
    
    
    
    460,665
    
    
    
    (456,853
    )
    
    
    138,465Year Ended June 30, 2005
    
    
    138,465
    
    
    
    559,786
    
    
    
    (555,767
    )
    
    
    142,484Year Ended June 30, 2006
    
    
    142,484
    
    
    
    646,844
    
    
    
    (652,031
    )
    
    
    137,297Six Months Ended December 31, 2006
    
    
    137,297
    
    
    
    463,001
    
    
    
    (355,539
    )
    
    
    244,759
 S-1