Advanced Medical Optics Reports 2002 Fourth Quarter and Year-End Operating Results.Business Editors & Health/Medical Writers SANTA ANA Santa Ana, city, El Salvador Santa Ana (sän'tä ä`nä), city (1993 pop. 129,873), W El Salvador. It is the second largest city in the country and the commercial and processing center for a sugarcane, coffee, and cattle region. , Calif.--(BUSINESS WIRE)--Feb. 20, 2003 -- 2002 Pro Forma Diluted EPS of $0.58 -- 2002 Revenues of $538.1 Million Advanced Medical Optics Advanced Medical Optics, Inc., (NYSE: EYE) (known as AMO) is a global medical device leader focused on the discovery and delivery of innovative vision technologies that optimize the quality of life for people of all ages. , Inc. (NYSE NYSE See: New York Stock Exchange :AVO a·vo n. pl. a·vos See Table at currency. [Portuguese, shortened from oitavo, eighth, from Latin oct ), a global leader in ophthalmic ophthalmic /oph·thal·mic/ (of-thal´mik) ocular (1). oph·thal·mic adj. Of or relating to the eye; ocular. Ophthalmic Pertaining to the eye. surgical devices and eye care products, today announced its financial results for the quarter and the year ending December December: see month. 31, 2002. For the year ending December 31, 2002, AMO AMO - America's Multimedia Online reported net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $538.1 million, net income of $25.9 million, and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.89. The Company's pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma diluted earnings per share were $0.58. The financial results announced today are in line with the preliminary guidance AMO provided on January January: see month. 30, 2003. Jim Mazzo, AMO's president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated, "2002 marked AMO's successful debut and I am quite proud of our team's accomplishments. It was a little over a year ago that we first announced the spin off from Allergan and established some very ambitious goals. I am pleased to report that in looking back today, we have more than met these goals. We have exceeded our financial goals, improved our capital structure, launched innovative products, entered into strategic alliances, and reallocated expenditures in our research and development portfolio to accelerate certain projects. More importantly, we accomplished all this with no interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. to the customer. I firmly believe we are well positioned to continue to expand our current businesses and take advantage of strategic opportunities." In an effort to more clearly present its financial performance, AMO is providing its 2001 and 2002 results in two formats. The first format presents reported, or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , results for the fourth quarters of 2001 and 2002, and the fiscal years 2001 and 2002. The second format presents pro forma, or comparable, results for the fourth quarter of 2001 and fiscal years 2001 and 2002. The pro forma results reflect adjusted financial statements that include the incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. associated with operating an independent company and exclude the non-recurring costs related to AMO's spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. from Allergan, Inc. in June 2002. The attached statements reflect these two formats and include footnotes that provide more detail of the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. adjustments. The Company expects to present its financial information in this format until the year-over-year results no longer include pre-spin periods. For 2002, net sales were $538.1 million compared to net sales of $543.1 million in 2001, a decrease of 0.9 percent. The net sales decrease was primarily attributable to AMO's decision to exit the lower-margin private label business in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Excluding the U.S. private label business, 2002 net sales were $532.6 million compared to $527.6 million in 2001, a 1.0 percent increase over 2001. For the year, the impact of foreign currency increased sales by 0.9 percent. For 2002, sales for the ophthalmic surgical business were $270.4 million compared to $253.1 million during 2001, an increase of 6.8 percent. For 2002, eye care business sales were $267.7 million compared to sales of $290.0 million in 2001, a decrease of 7.7 percent. Reported net income for 2002 was $25.9 million versus reported net income of $55.0 million for 2001. On a pro forma basis, net income for 2002 was $16.9 million versus net income of $14.8 million for 2001. AMO reported 2002 diluted earnings per share of $0.89 versus reported 2001 diluted earnings per share of $1.90. On a pro forma basis, AMO's diluted earnings per share were $0.58 for 2002 versus diluted earnings per share of $0.51 for 2001. In the fourth quarter of 2002, net sales were $147.1 million compared to net sales of $146.3 million in the fourth quarter of 2001, an increase of 0.6 percent. The increase in net sales was attributable to the continued strong performance of AMO's surgical business. In the fourth quarter of 2002, the impact of foreign currency increased sales by 4.1 percent. For the fourth quarter of 2002, sales for the ophthalmic surgical business were $75.3 million compared to $70.7 million in the fourth quarter of 2001, an increase of 6.4 percent. Sales for the eye care business were $71.8 million compared to sales of $75.6 million for the fourth quarter of 2001, a 4.9 percent decrease. Reported net income in the fourth quarter of 2002 was $8.8 million versus reported net income of $23.2 million in the fourth quarter of 2001. On a pro forma basis, net income for the fourth quarter of 2001 was $11.7 million. Diluted earnings per share for the fourth quarter of 2002 were $0.30 versus diluted earnings per share of $0.80 reported for the fourth quarter of 2001. On a pro forma basis, AMO's diluted earnings per share were $0.40 for the fourth quarter of 2001. During the fourth quarter of 2002, the Company recorded an unrealized loss Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc foreign currency option contracts expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in 2003 and entered into prior to year-end 2002. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 133, the Company records mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustments on these instruments during the life of the contracts. While AMO amortizes the cost of these contracts, fluctuations in currency levels at the end of each period require AMO to adjust the value of each derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. to market, with such gain or loss reflected on the income statement. The impact of the 2003 foreign currency option contracts on the Company's reported EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. for the fourth quarter of 2002 was an unrealized loss of $0.02. Financial Highlights The reported gross profit for 2002 was $333.7 million compared to $331.0 million reported for 2001. On a pro forma basis, the gross profit for 2002 was $332.9 million compared to $324.2 million for 2001. Reported gross margin was 62.0 percent of net sales in 2002 versus 60.9 percent in 2001. On a pro forma basis, the gross margin in 2002 was 61.9 percent of net sales compared to 59.7 percent of net sales in 2001. The reported gross profit for the fourth quarter of 2002 was $91.9 million compared to $91.8 million for the fourth quarter of 2001. In the fourth quarter of 2002, reported gross margin was 62.4 percent of net sales versus 62.8 percent in the fourth quarter of 2001. On a pro forma basis, the gross profit for the fourth quarter of 2001 was $90.1 million, or 61.6 percent of net sales. The gross margin improvement for the year and the quarter was partially attributable to a product mix shift toward higher technology oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. products, and benefits related to lower cost inventory as a result of the spin. For 2002, SG&A expenses were $236.0 million versus $222.9 million, or 43.9 percent of net sales in 2002 versus 41.0 percent of net sales in 2001. On a pro forma basis, SG&A expenses for 2002 were $245.8 million versus $244.9 million, or 45.7 percent of net sales in 2002 versus 45.1 percent of net sales in 2001. For the fourth quarter of 2002, SG&A expenses were $60.9 million compared to $51.2 million for the fourth quarter of 2001, or 41.4 percent of net sales in 2002 versus 35.0 percent of net sales in 2001. On a reported basis, SG&A expenses for the fourth quarter and fiscal year 2001 include goodwill amortization of $2.2 million and $9.0 million, respectively. On a pro forma basis, SG&A expenses for the fourth quarter of 2001 were $56.7 million, or 38.7 percent of net sales. On a pro forma basis, SG&A expenses increased in 2002 as a result of previously disclosed incremental costs and increased investment in the Company's North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. sales and marketing operations. For 2002, research and development expenses were $29.9 million versus $29.0 million in 2001, or 5.6 percent of net sales in 2002 compared to 5.3 percent of net sales in 2001. On a pro forma basis, research and development expenses in 2002 were $30.3 million versus $29.8 million in 2001, or 5.6 percent of net sales in 2002 compared to 5.5 percent of net sales in 2001. In the fourth quarter of 2002, research and development expenses were $8.5 million, or 5.8 percent of net sales. The Company's research and development spending in 2002 marks a return to AMO's heritage of developing leading technologies and AMO's efforts to improve its return on investment by bringing greater focus on the development of new products. Non-operating expenses for 2002 were $23.3 million compared to $3.2 million in 2001. On a pro forma basis, 2002 and 2001 non-operating expenses were $26.8 million. Non-operating expenses in 2002 include interest expense of $13.8 million, a $3.2 million unrealized loss on foreign currency derivative instruments, $3.5 million of early debt extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. costs, as well as a $3.9 million reduction in the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain assets received from Allergan, Inc. in the spin-off. Non-operating expenses in the fourth quarter of 2002 were $7.0 million compared to $0.9 million in 2001. On a pro forma basis, non-operating expenses for the fourth quarter 2001 were $6.9 million. Tax expense for 2002 was $18.7 million, which represents a 41.9 percent effective tax rate, compared to a reported $20.6 million in 2001. On a pro forma basis, tax expense for 2002 was $13.1 million compared to $7.8 million for 2001. Tax expense for the fourth quarter of 2002 was $6.8 million, which represents a 43.5 percent effective tax rate, compared to a reported $8.0 million in 2001. The higher tax rate in the quarter is a result of the lower estimated effective tax rate in the first half of the year and the strong performance of AMO's international business. As of December 31, 2002, AMO's cash and equivalents balance was $80.6 million, and the principal amount of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was $275 million. Other 2002 balance sheet items include accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $121.6 million, inventory of $46.1 million, and working capital (excluding cash) of $85.7 million. For 2002, pro forma EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. plus depreciation/amortization) was $72.6 million. As a result of AMO's ongoing strong financial performance, the Company paid down an additional $25 million, resulting in a principal amount of long-term debt of $250 million at the end of January 2003. The following is a discussion of AMO's ophthalmic surgical and eye care businesses. Ophthalmic Surgical For 2002, sales for the ophthalmic surgical business were $270.4 million compared to $253.1 million during 2001, an increase of 6.8 percent. The increase is attributable to the continued acceptance of AMO's unique foldable intraocular lens Intraocular lens Lens made of silicone or plastic placed within the eye; can be corrective. Mentioned in: Cataract Surgery technology and technologically advanced phacoemulsification phacoemulsification /phaco·emul·si·fi·ca·tion/ (-e-mul?si-fi-ka´shun) a method of cataract extraction in which the lens is fragmented by ultrasonic vibrations and simultaneously irrigated and aspirated. systems. In 2002, the impact of foreign currency increased surgical sales by 1.2 percent. For the fourth quarter of 2002, sales for the ophthalmic surgical business were $75.3 million compared to $70.7 million in the fourth quarter of 2001, an increase of 6.4 percent. In the fourth quarter of 2002, the impact of foreign currency increased surgical sales by 4.4 percent. In 2002, total intraocular lens sales were $181.4 million compared to sales of $171.3 million in 2001, an increase of 5.8 percent over 2001. Foldable intraocular lens sales increased 7.5 percent in 2002 when compared to 2001. In the fourth quarter of 2002, total intraocular lens sales were $49.3 million compared to sales of $46.7 million in the fourth quarter 2001, an increase of 5.5 percent. Foldable intraocular lens sales increased 6.6 percent in the fourth quarter of 2002 over the fourth quarter of 2001. Strong performance of the SENSAR(R) and the CLARIFLEX(R) intraocular lenses, both with the OPTIEDGE(TM) design, continued as their unique advantages gained market acceptance. In 2002, AMO's phacoemulsification product line sales increased 10.1 percent when compared to 2001. On a global basis, AMO's SOVEREIGN(R) with WHITESTAR(TM) technology, the technologically advanced phacoemulsification system, continued to exhibit positive market acceptance through new placements. At the American Academy of Ophthalmology The American Academy of Ophthalmology (AAO) is a medical association of ophthalmologists–medical doctors (MDs) specializing in eye care and surgery). The group is based in San Francisco, California. meeting in October 2002, AMO introduced two new intraocular lens delivery systems for cataract surgery Cataract Surgery Definition Cataract surgery is a procedure performed to remove a cloudy lens from the eye; usually an intraocular lens is implanted at the same time. Purpose The purpose of cataract surgery is to restore clear vision. : the UNFOLDER(R) Emerald and the UNFOLDER(R) Silver-Z systems. The new UNFOLDER(R) systems enhance the delivery of AMO's foldable acrylic acrylic, artificial fiber made from a special group of vinyl compounds, primarily acrylonitrile. Acrylic fibers are thermoplastic (i.e., soften when heated, reharden upon cooling), have low moisture regain, are low in density, and can be made into bulky fabrics. and silicone silicone, polymer in which atoms of silicon and oxygen alternate in a chain; various organic radicals, such as the methyl group, CH3, are bound to the silicon atoms. lenses. AMO recently entered into another strategic alliance. In January 2003, AMO acquired worldwide distribution rights from Optikon to market an AMO branded vitreal retinal retinal /ret·i·nal/ (ret´i-n'l) 1. pertaining to the retina. 2. the aldehyde of retinol, derived from absorbed dietary carotenoids or esters of retinol and having vitamin A activity. system. Optikon is a technology driven medical equipment manufacturer. This system, which offers a full featured vitreal retinal workstation in a compact product format, complements AMO's portfolio of surgical products and allows the Company to enter the back of the eye segment. Eye Care For 2002, eye care sales were $267.7 million compared to sales of $290.0 million in 2001, a decrease of 7.7 percent. Excluding the results of the U.S. private label business, eye care sales decreased 4.4 percent when compared to 2001. In 2002, the impact of foreign currency on eye care sales was negligible  This article or section is written like a personal reflection or and may require .Please [ improve this article] by rewriting this article or section in an . . For the fourth quarter of 2002, sales for the eye care business were $71.8 million compared to fourth quarter of 2001 sales of $75.6 million, a decrease of 4.9 percent. Excluding the results of the U.S. private label business, eye care sales decreased 2.2 percent when compared to the fourth quarter of 2001. In the fourth quarter of 2002, the impact of foreign currency increased eye care sales by 3.8 percent. AMO's COMPLETE(R) branded product line continued to perform well. In 2002, COMPLETE(R) branded sales were $106.7 million, an increase of 1.6 percent compared to 2001. These results support AMO's decision to exit the lower-margin U.S. private label business and increase its focus on the COMPLETE(R) branded product line. COMPLETE(R) branded products continued to achieve exceptional growth in Europe and Japan. Additionally, AMO restructured and expanded its U.S. sales force in the third quarter of 2002. These efforts were designed to enhance the Company's ability to address customers' needs and thus far, have been enthusiastically received by practitioners. 2003 Guidance The Company is updating its guidance for the full year 2003 by increasing its estimated ranges. AMO currently anticipates revenues to be in the range of $550-$560 million, diluted earnings per share in the range of $0.66 - $0.68 and EBITDA in the range of $76 - $78 million. For the first quarter of 2003, AMO is providing the following guidance: revenues in the range of $117 - $122 million, and a loss per share in the range of $(0.02) - $(0.03). In addition, AMO's current and future EPS guidance excludes the impact of any gain or loss associated with derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. (SFAS 133) due to the inherent volatility of currency and the unpredictability of interest rates. Live Webcast & Audio Replay James V James V, king of Scotland James V, 1512–42, king of Scotland (1513–42), son and successor of James IV. His mother, Margaret Tudor, held the regency until her marriage in 1514 to Archibald Douglas, 6th earl of Angus, when she lost it to John . Mazzo, AMO's President and Chief Executive Officer, and Richard A. Meier, Corporate Vice President and Chief Financial Officer, will host a live webcast to discuss 2002 fourth quarter and year-end results and guidance for 2003, today at 10:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . To participate, please visit AMO's Investors/Media site at http://www.amo-inc.com. Audio replay will be available today at approximately 12:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. and will continue through Thursday, March 6th at 12:00 a.m. EST, at 800-405-2236 (Passcode 522471#) or by visiting http://www.amo-inc.com. About Advanced Medical Optics Advanced Medical Optics, Inc. (AMO) is a global leader in the development, manufacturing and marketing of ophthalmic surgical and contact lens contact lens, thin plastic lens worn between the eye and eyelid that may be used instead of eyeglasses. Actors, models, and others wear them for appearance, and athletes use them for safety and convenience. care products. The Company focuses on developing a broad suite of innovative technologies and devices to address a wide range of eye disorders. Products in the ophthalmic surgical line include foldable intraocular lenses, phacoemulsification systems, viscoelastics and related products used in cataract surgery, and microkeratomes used in LASIK LASIK laser-assisted in-situ keratomileusis. LA·SIK n. Eye surgery in which the surface of the cornea is reshaped using a laser, performed to correct certain refractive disorders such as myopia. procedures for refractive error refractive error Ametropia, myopic shift Ophthalmology The inability of images to focus properly on the retina, often corrected by glasses contact lenses, or refractive surgery. See Astigmatism, Farsightedness, Myopia, Presbyopia. correction. Among the well-known ophthalmic surgical product brands the company owns or has the rights to are PHACOFLEX(R), CLARIFLEX(R), ARRAY(R) and SENSAR(R) foldable intraocular lenses, the SOVEREIGN(R) phacoemulsification system and the AMADEUS(TM) microkeratome microkeratome /mi·cro·ker·a·tome/ (-ker´ah-tom) an instrument for removing a thin slice, or creating a thin hinged flap, on the surface of the cornea. . Products in the contact lens care line include disinfecting solutions, daily cleaners, enzymatic enzymatic of, relating to, caused by, or of the nature of an enzyme. cleaners and lens rewetting drops. Among the well-known contact lens care product brands the company possesses are COMPLETE(R), COMPLETE(R) Blink-N-Clean(R), CONSEPT(R)F, CONSEPT(R) 1 Step, OXYSEPT(R) 1 Step, ULTRACARE(R), ULTRAZYME(R), TOTAL CARE(R) and blink blink the involuntary movement of one or both eyelids of both eyes simultaneously. The frequency varies between species. Cats blink the least, with the possible exception of owls. In birds it is the lower eyelid which is moved up to meet the upper lid. (TM). Amadeus is a licensed product of, and a trademark of, SIS, Ltd. OPTIEDGE is a trademark of Ocular ocular /oc·u·lar/ (ok´u-lar) 1. of, pertaining to, or affecting the eye. 2. eyepiece. oc·u·lar adj. 1. Of or relating to the eye or the sense of sight. Sciences, Inc. Advanced Medical Optics, Inc. is based in Santa Ana, California Santa Ana is the most populous city in Orange County, California and is the county seat. It lies approximately 10 miles inland from the Pacific Ocean, on the largely seasonal Santa Ana River. , and employs approximately 2,000 worldwide. The Company has operations in about 20 countries and markets products in approximately 60 countries. For more information, visit the company's web site at www.amo-inc.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements and forecasts about AMO and its businesses in the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "2003 Guidance." Because forecasts are inherently estimates that cannot be made with precision, the Company's performance may at times differ from its estimates and targets, and the Company often does not know what the actual results will be until after a quarter's end. Therefore, the Company will not report or comment on its progress during the quarter. Any statement made by others with respect to progress mid-quarter cannot be attributed to the Company. Statements in this press release regarding our expectations for research and development, new products and alliances, and any other statements in this press release that refer to AMO's estimated or anticipated future results are forward-looking statements. All forward-looking statements in this press release reflect AMO's current analysis of existing trends and information and represent AMO's judgment only as of the date of this press release. Actual results may differ from current expectations based on a number of factors affecting AMO's businesses, including but not limited to competitive, regulatory and market conditions; the performance of new products and the continued acceptance of current products; the execution of strategic initiatives and alliances; AMO's ability to maintain a sufficient supply of products; product liability claims; and the uncertainties associated with intellectual property protection for these products. In addition, matters generally affecting the domestic and global economy, such as changes in interest and currency exchange rates, can affect AMO's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. AMO disclaims any intent or obligation to update these forward-looking statements. Additional information concerning these and other risk factors may be found in previous financial press releases issued by AMO. AMO's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Risk Factors" in the Information Statement filed as an exhibit to the amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Form 10 filed by AMO with the Securities and Exchange Commission on May 24, 2002, also include information concerning these and other risk factors. Copies of press releases and additional information about AMO are available on the World Wide Web at www.amo-inc.com, or you can contact the AMO Investor Relations Investor relations The process by which the corporation communicates with its investors. Department by calling 714-247-8348.
Advanced Medical Optics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Years Ended
(in thousands, except per share December 31, December 31,
amounts) 2002 2001 2002 2001
Net sales:
Ophthalmic surgical $75,274 $70,730 $270,395 $253,143
Eye care 71,836 75,572 267,692 289,952
147,110 146,302 538,087 543,095
Cost of sales 55,245 54,492 204,338 212,090
Gross margin 91,865 91,810 333,749 331,005
Selling, general and administrative 60,853 51,198 235,977 222,885
Research and development 8,478 8,473 29,917 28,990
Operating income 22,534 32,139 67,855 79,130
Non-operating expense (income):
Interest expense 5,949 786 13,764 3,302
Unrealized loss (gain) on
derivative instruments 1,267 (1,085) 3,199 (1,294)
Other, net (231) 1,180 6,320 1,178
6,985 881 23,283 3,186
Earnings before income taxes 15,549 31,258 44,572 75,944
Provision for income taxes 6,763 8,039 18,662 20,594
Earnings before cumulative effect of
change in accounting principle 8,786 23,219 25,910 55,350
Cumulative effect of change in
accounting principle, net of
$160 of tax - - - (391)
Net earnings $8,786 $23,219 $25,910 $54,959
Basic earnings per share:(1)
Before cumulative effect of change
in accounting principle $0.31 $0.81 $0.90 $1.92
Cumulative effect of accounting
change, net - - - (0.01)
Net basic earnings per share $0.31 $0.81 $0.90 $1.91
Diluted earnings per share:(1)
Before cumulative effect of change
in accounting principle $0.30 $0.80 $0.89 $1.91
Cumulative effect of accounting
change, net - - - (0.01)
Net diluted earnings per share $0.30 $0.80 $0.89 $1.90
(1) Basic earnings per share is computed based on 28,723,512 shares
outstanding on June 29, 2002, the date of the spin-off, through the
end of 2002. Diluted earnings per share includes the dilutive effect
of approximately 445,000 shares and 181,000 shares for the three
months ended December 31, 2002 and 2001, respectively, and
approximately 247,000 shares and 181,000 shares for the years ended
December 31, 2002 and 2001, respectively, resulting from AMO stock
options granted in July 2002 and stock options converted from Allergan
stock options as of June 29, 2002.
The presentation of earnings per share for periods prior to the
spin-off is for additional analysis purposes only as the Company's
earnings were part of Allergan's earnings through the spin-off date.
Advanced Medical Optics, Inc.
Proforma Condensed Consolidated Statements of Operations (1)
(Unaudited)
Three Months Ended Years Ended
(in thousands, except per share December 31, December 31,
amounts) 2002 2001 2002 2001
Net sales:
Ophthalmic surgical $75,274 $70,730 $270,395 $253,143
Eye care 71,836 75,572 267,692 289,952
147,110 146,302 538,087 543,095
Cost of sales (2) 55,245 56,199 205,180 218,897
Gross margin 91,865 90,103 332,907 324,198
Selling, general and
administrative (3) 60,853 56,672 245,755 244,943
Research and development (3) 8,478 8,673 30,317 29,790
Operating income 22,534 24,758 56,835 49,465
Non-operating expense: (4)
Interest expense 5,949 6,457 22,641 25,986
Other, net 1,036 490 4,137 841
6,985 6,947 26,778 26,827
Earnings before income taxes 15,549 17,811 30,057 22,638
Provision for income taxes (5) 6,763 6,145 13,147 7,810
Net earnings (6) $8,786 $11,666 $16,910 $14,828
Basic earnings per share $0.31 $0.41 $0.59 $0.52
Diluted earnings per share $0.30 $0.40 $0.58 $0.51
(1) The Proforma Condensed Consolidated Statements of Operations
exclude certain non-recurring items and include proforma adjustments
to reflect the estimated incremental costs associated with being an
independent public company. See below for additional detail.
(2) The six-month period ended June 28, 2002, included in the year
ended December 31, 2002, excludes the write-off of $2,558 of inventory
deemed unusable due to the Company's spin-off from Allergan and
includes quarterly adjustments of $1,700 to reflect the estimated
incremental costs resulting from an agreed to mark-up on costs for
certain products to be manufactured and supplied by Allergan. Similar
estimated incremental costs have been included in the three-month
period and year ended December 31, 2001.
(3) The six-month period ended June 28, 2002, included in the year
ended December 31, 2002, excludes duplicate operating expenses of
$8,282 associated with the Company's spin-off from Allergan and
includes an adjustment of $18,460 to reflect the estimated incremental
costs associated with being an independent public company. Similar
estimated incremental costs of $7,908 and $31,838 have been included
in the three-month period and the year ended December 31, 2001,
respectively. For comparability purposes, the three-month period and
the year ended December 31, 2001 exclude goodwill amortization of
$2,234 and $8,980, respectively. Amortization of goodwill ceased
effective January 1, 2002 upon the adoption of SFAS No. 142.
(4) All pre-spin off periods exclude the unrealized non-cash
(gain)/loss on foreign currency derivative instruments. Additionally,
the six-month period ended June 28, 2002, included in the year ended
December 31, 2002, excludes early debt extinguishment costs of $3,450
associated with the prepayment of debt in Japan with a portion of the
proceeds from the senior subordinated notes and senior credit
facility. The six-month period ended June 28, 2002, included in the
year ended December 31, 2002, and the 2001 periods include adjustments
to reflect the increase in estimated interest expense, including the
amortization of the original issue discount, and the amortization of
debt origination fees and expenses associated with the Company's
issuance of senior subordinated notes and the Company's credit
facility. Such adjustments were $8,877 in the six-month period ended
June 28, 2002 and $5,671 and $22,684 in the three-month period and the
year ended December 31, 2001, respectively. The three-month period and
the year ended December 31, 2001 also exclude losses on certain
investments, net, of $690 and $337, respectively.
The 2002 adjustment includes the benefit of interest rate swaps
entered into to hedge portions of the senior subordinated notes and
borrowing under the credit facility. The 2001 adjustments exclude any
benefit of the interest rate swaps as the Company was unable to
ascertain the rates that might have been attained if the interest rate
swaps had been in place during 2001.
(5) The 2001 periods include adjustments to reflect the estimated
income tax rate applicable to the Company on a stand-alone basis.
(6) The year ended December 31, 2001 excludes the cumulative effect of
the adoption of SFAS No. 133.
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