Reportable Segments

6 Months Ended

Jun. 30, 2011

Reportable Segments [Abstract]

REPORTABLE SEGMENTS

NOTE 4 — REPORTABLE SEGMENTS

     Watson has three reportable segments: Global Generics, Global Brands and Distribution. The Global Generics segment includes off-patent pharmaceutical products that are therapeutically equivalent to proprietary products. The Global Brands segment includes patent-protected products and certain trademarked off-patent products that Watson sells and markets as brand pharmaceutical products. The Distribution segment mainly distributes generic pharmaceutical products manufactured by third parties, as well as by Watson, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians’ offices. The Distribution segment operating results exclude sales of products developed, acquired, or licensed by Watson’s Global Generics and Global Brands segments.

     The Company evaluates segment performance based on segment contribution. Segment contribution represents segment net revenues less cost of sales (excludes amortization), direct R&D expenses and selling and marketing expenses. The Company does not report total assets, capital expenditures, corporate general and administrative expenses, amortization, gains on disposal or impairment losses by segment as such information has not been used by management, or has not been accounted for at the segment level.

     Segment net revenues, segment operating expenses and segment contribution information for the Company’s Global Generics, Global Brands and Distribution segments consisted of the following (in millions):

	Three Months Ended June 30, 2011												Three Months Ended June 30, 2010
	Global Generics			Global Brands			Distribution			Total			Global Generics			Global Brands			Distribution			Total
Product sales	$	781.5		$	92.0		$	176.4		$	1,049.9		$	560.8		$	76.9		$	200.8		$	838.5
Other		10.9			20.9			—			31.8			10.2			26.6			—			36.8
Net revenues		792.4			112.9			176.4			1,081.7			571.0			103.5			200.8			875.3
Operating expenses:
Cost of sales(1)		439.1			25.1			149.2			613.4			305.9			23.6			168.5			498.0
Research and development		58.3			22.2			—			80.5			44.6			17.2			—			61.8
Selling and marketing		37.7			44.8			19.6			102.1			27.5			35.4			17.8			80.7
Contribution	$	257.3		$	20.8		$	7.6			285.7		$	193.0		$	27.3		$	14.5			234.8
Contribution margin		32.5	%		18.4	%		4.3	%		26.4	%		33.8	%		26.4	%		7.2	%		26.8	%
General and administrative											85.4												75.9
Amortization											74.6												43.1
Loss on asset sales and impairments											7.4												0.1
Operating income										$	118.3											$	115.7
Operating margin											10.9	%											13.2	%

	Six Months Ended June 30, 2011												Six Months Ended June 30, 2010
	Global Generics			Global Brands			Distribution			Total			Global Generics			Global Brands			Distribution			Total
Product sales	$	1,366.5		$	172.3		$	355.9		$	1,894.7		$	1,094.9		$	149.3		$	422.2			$	1,666.4
Other		26.0			37.5			—			63.5			19.9			45.5			—				65.4
Net revenues		1,392.5			209.8			355.9			1,958.2			1,114.8			194.8			422.2				1,731.8
Operating expenses:
Cost of sales(1)		728.2			42.9			297.9			1,069.0			593.4			48.3			361.0				1,002.7
Research and development		112.7			42.1			—			154.8			86.8			34.5			—				121.3
Selling and marketing		68.3			81.3			38.0			187.6			54.4			67.9			36.0				158.3
Contribution	$	483.3		$	43.5		$	20.0			546.8		$	380.2		$	44.1		$	25.2				449.5
Contribution margin		34.7	%		20.7	%		5.6	%		27.9	%		34.1	%		22.6	%		6.0	%			26.0	%
General and administrative											164.7													150.3
Amortization											131.2													82.1
Loss on asset sales and impairments											21.8													1.1
Operating income										$	229.1												$	216.0
Operating margin											11.7	%												12.5	%

(1) Excludes amortization of acquired intangibles including product rights.