Allergan Announces Corporate Restructuring Plan; Special Charges of Approximately $103 Million for Work Force Reductions, Plant Consolidations and Asset Write-offs.

IRVINE, Calif.--(BW HealthWire)--Sept. 15, 1998--Today, Allergan, Inc. (NYSE: AGN) announced comprehensive plans to streamline operations and reduce costs through global general and administrative staff and services (G&A) restructuring and manufacturing plant consolidations. These plans are part of an on-going business initiative targeting greater operational efficiencies. The operational efficiency initiative complements two other business initiatives, one to improve global sales performance and the other to evaluate longer-term growth and other strategic value-creation opportunities.

The G&A and plant consolidation plans announced today will result in a net worldwide workforce reduction of approximately 550 positions over a three-year period. Currently, there are approximately 6,150 employees worldwide. In addition, management has completed a critical review of its asset bases as a result of a number of recent management decisions relating to the future strategic direction of the Company, and management has made business decisions around the anticipated future use of certain assets. Such decisions resulted in a reassessment of the carrying value of such assets.

As a result of these actions, special charges will be incurred in the third quarter which management estimates to be approximately $103 million pretax, or $1.12 per share after tax. Included in the charges are approximately $43 million resulting from the G&A restructuring, approximately $26 million from the manufacturing plant consolidations and approximately $34 million from write-downs in asset values. The actual amounts to be included in the third quarter special charges will be determined upon close of the quarter and disclosed when the actual results for the third quarter are announced. As a result of certain business initiatives anticipated to be completed in the fourth quarter, additional restructuring charges of up to $10 million may be incurred in the fourth quarter of 1998.

There are significant operating savings associated with the G&A and plant consolidation components of the restructuring charge. Significant streamlining of Allergan's general and administrative functions will result in estimated savings of $18 million in 1999, $23 million in 2000, and $22 million in 2001 versus our expected 1998 G&A expenses.

Rationalizing Allergan's plant network to approximately half the number of manufacturing plants by 2001 will result in an estimated increase in operating expense of $3 million in 1999, and thereafter savings of $2 million in 2000 and $13 million in 2001. In combination, the G&A and plant consolidation plans are expected to yield estimated savings of $15 million in 1999, $25 million in 2000 and $35 million in 2001 against a restructuring charge of $69 million, resulting in a payback period of less than three years.

Strict expense controls in G&A areas will continue, and expenses and investments in all other areas including promotion, marketing, selling, and research and development will be actively managed to ensure appropriate levels of return and efficiencies are achieved. In 1999, increased operating expenses of some $10 million will be recognized in connection with the continued SAP implementation which is underway, and scheduled to be completed by mid-1999 at all Allergan sites globally. This will ensure that Allergan's financial systems are Year 2000 and Euro compliant.

"These actions are elements in our overall plan to substantially improve all aspects of Allergan's business," stated David E. I. Pyott, President and Chief Executive Officer of Allergan, Inc.

"When I assumed leadership of Allergan at the beginning of this year, I was given a clear mandate by the Board: to move Allergan into the ranks of top-quartile performing companies in our industry," continued Mr. Pyott. "I intend to do so by relentlessly focusing our management team on three key initiatives: First, improving global sales performance; sales and marketing functions have been restructured, and improved focus and execution plans are in place and being implemented. Second, improving operating efficiencies; the G&A restructuring is designed to reduce support costs and the plant consolidations should deliver lower cost of goods. Thirdly, developing, and then executing a clear set of options for longer-term growth; improved sales and profitability resulting from the first two initiatives will allow Allergan to invest a significant portion of additional earnings in opportunities to enhance performance in future years, including realizing the potential of our new products and capturing the value of our robust R&D pipeline."

"The actions announced today are essential elements in the foundation we are laying to build a new Allergan, one capable of continuing to deliver innovative products and superior performance," concluded Mr. Pyott. "We have delivered two solid quarters this year and, excluding the special charges, the third quarter is on track."

The Company previously noted that wholesaler demand in the U.S. market for pharmaceutical products needed to be monitored to determine whether it was supported by underlying in-market demand. Continued monitoring of U.S. wholesaler buying patterns indicates that in-market demand to date appears to be consistent with Allergan's U.S. ex-factory sales.

Facilities Consolidation

As part of Allergan's corporate restructuring, the company will close five manufacturing facilities, in addition to the previously announced closure of its Argentine plant. This reduction in plant capacity is consistent with the previously established strategy of consolidating manufacturing operations into larger, more cost-efficient technology centers of excellence. This consolidation strategy supports Allergan's technology-driven specialty health-care focus by creating global centers with advanced manufacturing capabilities for all of our major product categories.

Taking into account the transfer of certain manufacturing capabilities to other Allergan plants, the net reduction in manufacturing headcount will be approximately 250 employees. Manufacturing sites located in Brazil, Puerto Rico, California, North Carolina, and Massachusetts will be impacted by this plant rationalization program. Transition work will begin immediately to achieve this consolidation and to satisfy related manufacturing regulatory requirements, with the last plant closure scheduled for 2001.

G&A Review and Workforce Reduction

As part of a strategic initiative to improve global sales performance which was completed earlier this year, the sales and marketing functions were reviewed and restructured. To complement this initiative, during the second quarter of 1998 Allergan initiated an in depth review of its G&A related processes and organizational structure. This review resulted in a plan to deliver "low-cost-to-serve" G&A support which will substantially reduce the corporate staff functions, resulting in a small corporate staff of approximately 70 people, increased use of shared services centers, simplified work processes, and further realignment of certain sales operations outside the United States.

To facilitate these reductions, as previously announced, the Company implemented an early retirement program for eligible employees at the Irvine, California corporate headquarters. As a result of the early retirement program, implementation of the G&A redesign, and the offshore sales realignment, approximately 300 positions will have been eliminated, worldwide. One-half of these positions are located at corporate headquarters in Irvine, California. Over 50% of these Irvine positions were vacated through the early retirement program and attrition since initiating this project.

Forward-looking Statements 

Any of the above statements that refer to the Company's estimated or anticipated future results or product performance are forward-looking and reflect the Company's current analysis of existing trends and information. Actual results may differ from current expectations based on a number of factors affecting Allergan's businesses, including new product performance, competitive conditions, changing market conditions, the timing and uncertainty of results of both research and regulatory processes, timely consumer demand for products in wholesaler inventories, the effective use of a portion of earnings dedicated to improving performance in future years, and prompt and successful efforts to reduce G&A costs and consolidate manufacturing plants. In addition, matters generally affecting the economy, such as currency exchange rates and the state of the economy worldwide, can affect the Company's results. These forward-looking statements represent the Company's judgment only as of the date of this press release. Actual results could differ materially from expectations reflected in this release. As a result, the reader is cautioned not to rely on these forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements.

Allergan, Inc., headquartered in Irvine, California, is a technology-driven, global health-care company, providing eye care and specialty pharmaceutical products throughout the world. Allergan develops and commercializes products in the ophthalmic pharmaceutical and surgical device, over-the-counter contact lens care, movement disorder and dermatological markets.

CONTACT: Allergan Inc., Irvine

Jeff Edwards (Investor)

714/246-4636 (office)

714/367-0643 (home)

or

Ryan Abbate (Media)

714/246-4219 (office)

714/497-3028 (home)

Web site: www.allergan.com