20 November 2007

WPI: Financial Analysis through September 2007 (Updated)

We previously posted an analysis of Watson Pharmaceuticals' (WPI) preliminary report on the September 2007 quarter. The company's initial report was limited in that the Balance Sheet omitted various details, including those characterizing Watson's inventory, current liabilities, and stockholder's equity.

Watson subsequently filed with the SEC a more complete quarterly report in a 10-Q, and we adjusted our evaluation to incorporate the new information. The additional data did not materially affect the analysis results. The gauge scores did not change.

For details, please see the earlier posting.

One point of interest worth noting is that Finished Goods/Inventory moved up to 67.1 percent (believed to be a record high for Watson), from 65.5 percent in June, and 52.3 percent in September 2006 (before the acquisition of Andrx Corporation). An increase in this ratio can hint that a company's products sold at a slower pace than expected. When this is the case, the company might have to cut production or take back unsold goods from wholesalers.

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