Allergan Reports Third Quarter Operating Results.Business Editors IRVINE, Calif.--(BUSINESS WIRE)--Oct. 24, 2002 -- Sales increase 23 percent on a comparable basis. -- Earnings per share increase 33 percent on a pro forma basis. -- Board of Directors declares dividend. -- Global settlement in principle reached with Pharmacia and Columbia University regarding Lumigan(R). Allergan, Inc. (NYSE NYSE See: New York Stock Exchange :AGN AGN Again (Amateur Radio) AGN Active Galactic Nucleus AGN Acute Glomerulonephritis AGN Accountants Global Network AGN Air Gabon (ICAO code) ) today announced operating results for the quarter ended September 27, 2002. Allergan's Board of Directors declared a third quarter dividend of $0.09 per share, payable on December 12, 2002, to stockholders of record on November 14, 2002. For the quarter ended September 27, 2002, Allergan's 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 were $350.6 million including $10.5 million of non-pharmaceutical product sales primarily consisting of contract manufacturing sales to 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. (AMO AMO - America's Multimedia Online ). Net sales for the third quarter of 2002, excluding sales of non-pharmaceutical products, were up 20.6 percent, or 22.5 percent at constant currency and excluding divested products compared with net sales from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in the third quarter of 2001. Consolidated results exclude sales and earnings from the AMO businesses, which have been restated in the financial statements as income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . For the nine months ended September 27, 2002, net sales from continuing operations were $1,006.8 million including $10.5 million of non-pharmaceutical product sales primarily consisting of contract manufacturing sales to AMO. Net sales from continuing operations for the first nine months of 2002, excluding sales of non-pharmaceutical products were up 19.3 percent, or 21.7 percent at constant currency and excluding divested products, compared with net sales from continuing operations in the same period in 2001. As reported in a separate press release, Allergan has entered into a global settlement in principle, subject only to formal execution of definitive agreements, with Pharmacia Corporation (NYSE:PHA PHA abbr. phytohemagglutinin PHA phytohemagglutinin, a plant lectin. ) and Columbia University Columbia University, mainly in New York City; founded 1754 as King's College by grant of King George II; first college in New York City, fifth oldest in the United States; one of the eight Ivy League institutions. resolving all intellectual property disputes regarding Lumigan(R). Allergan has recorded a reserve of $118.7 million in connection with the settlement. Non-recurring items in the third quarter of 2002 amount to $138.2 million pre-tax and include a $118.7 million pre-tax charge incurred in connection with the global settlement in principle with Pharmacia and Columbia University of intellectual property disputes regarding Lumigan(R). Including the effect of $138.2 million of pre-tax non-recurring items described in detail below, Allergan reported a loss per share from continuing operations of $0.28 for the third quarter ended September 27, 2002. Excluding non-recurring pre-tax charges of $138.2 million, or $0.76 per share, Allergan's diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings from continuing operations were $0.48 per share for the third quarter of 2002, up 33.3 percent from the $0.36 per share unaudited estimate of 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 for Allergan's continuing pharmaceutical operations for last year's third quarter. Including the effect of the $251.8 million of non-recurring pre-tax items described in detail below, Allergan reported zero earnings per share from continuing operations for the nine months ended September 27, 2002. Excluding non-recurring pre-tax charges of $251.8 million, or $1.38 per share, Allergan's diluted earnings from continuing operations were $1.38 per share for the first nine months of 2002, up 24.3 percent from the $1.11 per share excluding non-recurring items reported last year. For the nine months ended September 27, 2002, the unaudited estimate of pro forma diluted earnings for Allergan's continuing pharmaceutical operations was $1.34 per share, a 27.6 percent increase over $1.05 per share for the first nine months of 2001. The pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share estimates reflect the approximate impact of additional expenses that would have been incurred in the first nine months of 2001 and the first six months of 2002 if Allergan's specialty pharmaceutical businesses and AMO had been operating as stand-alone companies stand-alone company An independent operating firm. For example, a large diversified firm may consider spinning off a subsidiary because, as a stand-alone company, the subsidiary would command a higher price-earnings ratio than the parent. . The 2001 nine-month earnings per share amount includes amortization of goodwill of $0.02 per share, which is not included in 2002 as a result of the adoption of 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. 142. "The 23 percent sales growth in the third quarter and 28 percent pro forma earnings per share growth year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. demonstrates the strength of the Allergan products and the Company's ability to exceed our stated objectives," said David E.I. Pyott, Chairman of the Board, 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. . Description of the non-recurring items For the quarter ended September 27, 2002, the following non-recurring items amounted to $138.2 million pre-tax, or $0.76 per share (all per share amounts are after tax): -- Reserve of $118.7 million pre-tax, or $0.65 per share, associated with the global settlement in principle with Pharmacia and Columbia University of all intellectual property disputes involving Lumigan(R). -- Marked-to-market Marked-to-market An arrangement whereby the profits or losses on a futures contract are settled each day. loss on investments and related third-party collaborations of $22.2 million pre-tax, or $0.12 per share -- the Company firmly believes the technology continues to be viable from a development perspective; the attached schedule further clarifies the specific investments that were negatively impacted by the current environment in the capital markets. -- Gain of $5.7 million pre-tax, or $0.03 per share, on the sale of a facility (spin-related). -- Duplicate DUPLICATE. The double of anything. 2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. before tax of $3.8 million, or $0.02 per share. -- Other items that resulted in a net pre-tax gain of $0.8 million, or zero per share, consisting of an unrealized marked-to-market gain on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. partially offset by adjustments to the restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and asset write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. related to the 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. of the AMO business. For the nine months ended September 27, 2002, the following non-recurring items amounted to $251.8 million pre-tax, or $1.38 per share (all per share amounts are after tax): -- Reserve of $118.7 million pre-tax, or $0.65 per share, associated with the global settlement in principle with Pharmacia and Columbia University of all intellectual property disputes involving Lumigan(R). -- Net expenses of $101.2 million pre-tax, or $0.56 per share associated with the spin-off of Allergan's medical device business, AMO, which consist of: -- Restructuring charge and asset write-off of $65.8 million pre-tax, or $0.36 per share. -- Duplicate operating expenses before tax of $41.1 million, or $0.23 per share. -- Gain of $5.7 million pre-tax, or $0.03 per share, on the sale of a facility. -- Marked-to-market loss on investments and related third-party collaborations of $30.2 million pre-tax, or $0.16 per share. -- Unrealized marked-to-market adjustment on derivative instruments that amounted to a loss of $2.7 million pre-tax, or $0.02 per share. -- Gain on partnering deals of $1.0 million pre-tax, or $0.01 per share. Eye Care Pharmaceutical Product Line At constant currency and excluding products divested at the end of 2001, third quarter 2002 eye care pharmaceutical sales increased 11.1 percent over the third quarter of 2001. The growth rate of the eye care pharmaceutical product line was negatively impacted by the Company's decision to focus on Alphagan Alphagan Brimonidine Ophthalmology An alpha-2 agonist for treating open-angle glaucoma. See Open angle glaucoma. (R) P during the quarter (discussed below). Including the effects of currency rates and divested products, third quarter 2002 eye care pharmaceutical sales amounted to $202.5 million, an 8.6 percent increase over $186.5 million reported in the same quarter last year. At constant currency and excluding divested products, eye care pharmaceutical sales for the first nine months of 2002 increased 13.2 percent over the same period in the prior year. Including the effects of currency rates and divested products, eye care pharmaceutical sales for the first nine months of 2002 amounted to $616.5 million, a 10.3 percent increase over the $559.1 million reported for the same period in 2001. Excluding the negative sales impact associated with the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of Alphagan(R) and adjusting for the prior year's launch of Alphagan(R) P, sales of Allergan's glaucoma glaucoma (glôkō`mə), ocular disorder characterized by pressure within the eyeball caused by an excessive amount of aqueous humor (the fluid substance filling the eyeball). products, comprising of Alphagan(R) (Brimonidine Tartrate tartrate /tar·trate/ (tahr´trat) a salt of tartaric acid. tar·trate n. A salt or ester of tartaric acid. tartrate a salt of tartaric acid. Ophthalmic Solution ophthalmic solution n. A sterile solution that is free from foreign particles and is compounded and dispensed for eyedrops. 0.2%), Alphagan(R) P (Brimonidine Tartrate Ophthalmic Solution 0.15%) preserved with Purite(R), Lumigan(R) (Bimatoprost Ophthalmic Solution 0.03%), Betagan(R), Propine(R) and other glaucoma products increased by 30.3 percent in the third quarter 2002 over the third quarter of 2001. Allergan introduced Alphagan(R) P in the third quarter of 2001 and discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the U.S. distribution of Alphagan(R) in the third quarter of 2002. The initial launch quantities associated with the introduction of Alphagan(R) P last year and the negative sales impact related to the discontinuation of Alphagan(R) stock keeping units this year amounted to a net comparative sales impact of approximately $13 million. Including these adjustments, the third quarter 2002 sales for Alphagan(R) ophthalmic solutions product lines would have been roughly flat when compared with third quarter of 2001. Both Alphagan(R) P and Alphagan(R) are indicated for lowering intraocular pressure intraocular pressure n. The pressure of the intraocular fluid within the eye. intraocular pressure (in´tr (IOP IOP intraocular pressure. IOP Intraocular pressure, see there ) in patients with ocular hypertension Ocular hypertension (OHT) is intraocular pressure higher than normal in the absence of optic nerve damage or visual field loss.[1][2] Current consensus in ophthalmology defines normal introcular pressure (IOP) as that between 10 mmHg and 21 mmHg. and primary open angle glaucoma. For the nine months ended September 27, 2002, worldwide net product sales for the Alphagan(R) ophthalmic solutions product lines were $183.9 million, a decrease of 0.8 percent, or 0.7 percent decrease at constant currency over the $185.3 million reported in the first nine months of 2001. As of the week ended October 11, 2002, new prescriptions of Alphagan(R) P as a percentage of the new prescriptions for the total Alphagan(R) franchise were 93 percent according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. VeriSpan (Scott Levin lev·in n. Archaic Lightning. [Middle English levene, levin; see leuk- in Indo-European roots.] ). For the third quarter of 2002, worldwide net product sales for Lumigan(R) were $35.0 million, an increase of 230.2 percent, or 228.5 percent at constant currency when compared with the third quarter of last year. Lumigan(R) is indicated for the reduction of elevated intraocular pressure (IOP) in patients with open-angle glaucoma o·pen-an·gle glaucoma n. Primary glaucoma in which the aqueous humor has free access to the trabecular reticulum. Also called simple glaucoma. or ocular hypertension who are intolerant in·tol·er·ant adj. Not tolerant, especially: a. Unwilling to tolerate differences in opinions, practices, or beliefs, especially religious beliefs. b. of other IOP-lowering medications or insufficiently responsive to another IOP-lowering medication. For the nine months ended September 27, 2002, worldwide net product sales for Lumigan(R) were $88.0 million, an increase of 333.5 percent, or 334.3 percent at constant currency over the first nine months of 2001. Lumigan(R) sales were driven by a successful European launch of the product and continued growth in U.S. market share. Botox(R)/Neuromodulator Product Line At constant currency rates, Botox(R) (Botulinum Toxin Type A botulinum toxin type A Botox, Botox Cosmetic, Dysport (UK), Vistabel (UK) Pharmacologic class: Neurotoxin Therapeutic class: Neuromuscular blocker Pregnancy risk category C Action) net sales for the third quarter of 2002 increased by 43.8 percent over the third quarter of 2001. Including the effects of currency rates, sales for Botox(R) were $110.7 million during the third quarter of 2002, a 43.4 percent increase over 2001's third quarter sales of $77.2 million.At constant currency rates, Botox(R) net sales for the nine months ended September 27, 2002 increased by 41.9 percent over the nine months of 2001. Including the effects of currency rates, net sales for Botox(R) were $311.5 million in the first nine months of 2002, a 40.8 percent increase over the $221.2 million reported in the first nine months of 2001. Allergan received an untitled letter in September from the United States Food and Drug Administration United States Food and Drug Administration (FDA), n.pr a unit of the Public Health Service created to protect the health of the nation against impure and unsafe foods, drugs, and cosmetics. (FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ) regarding certain Botox(R) Cosmetic cosmetic /cos·met·ic/ (koz-met´ik) 1. pertaining to cosmesis. 2. a beautifying substance or preparation. cos·met·ic n. marketing materials. In this letter, the FDA raised some points with certain promotional items Promotional items or promotional products refers to articles of merchandise that are used in marketing and communication programs. The items are usually imprinted or decorated with a company's name, logo or message, using techniques such as Embroidery, Silkscreen, or for Botox(R) Cosmetic. As part of the normal process, Allergan responded to this letter on September 13, 2002 and remains in productive discussions with the FDA. The application for the use of Botox(R) therapy in the treatment of axillary ax·il·lar·y n. Relating to the axilla. Axillary Located in or near the armpit. Mentioned in: Mastectomy axillary of or pertaining to the armpit. hyperhidrosis has been submitted in Europe via the Mutual Recognition Procedure (MRP (Material Requirements Planning) An information system that determines what assemblies must be built and what materials must be procured in order to build a unit of equipment by a certain date. ). The initial part of the MRP was started in late 2000 with Ireland acting as the Reference Member State. The application was then rolled out to the remaining countries participating in the MRP. During the evaluation period Evaluation period The time interval over which funds assess a money manager's performance. , two out of the 14 countries reviewing the file raised a few questions that were not possible to resolve during the limited time provided. The application has been referred to arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the to allow more time for further evaluation under the auspices aus·pi·ces 1 n. Plural of auspex. auspices Noun, pl under the auspices of with the support and approval of [Latin auspicium augury from birds] Noun of the European Medicines Evaluation Agency (EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. ). Allergan currently believes that the hyperhidrosis approval will be obtained in the first half of 2003. It is anticipated the individual country licenses will be granted starting in the middle of 2003 and should have no material impact on the Company's earnings objectives for 2003. After the end of the quarter, Allergan received approval in Switzerland for Vistabel(R), which is the European trade name for Botox(R) Cosmetic. This marks the first approval for the cosmetic indication of Botox(R) in Europe. Skin Care Product Line Sales for Allergan skin care products were $26.9 million for the quarter ended September 27, 2002, an increase of 46.2 percent from the $18.4 million in sales reported in the third quarter of 2001. Allergan reported skin care product sales of $68.3 million for the first nine months of 2002, an increase of 24.0 percent over the comparable period in 2001. Worldwide net sales for Tazorac(R) and Zorac(R) brands (Tazarotene Gel and Cream 0.05% and 0.1%), indicated for the treatment of acne acne, common inflammatory disease of the hair follicles and sebaceous glands characterized by blackheads, whiteheads, pustules, nodules and, in the more severe forms, by cysts and scarring. The lesions appear on the face, neck, back, chest, and arms. and psoriasis psoriasis (sôrī`əsĭs), occasionally acute but usually chronic and recurrent inflammation of the skin. The exact cause is unknown, but the disease appears to be an inherited, possibly autoimmune disorder that causes the , were $20.2 million in the third quarter of 2002, an 80.4 percent increase, or a 79.8 percent increase at constant currency rates over the same period last year. For the first nine months of 2002, worldwide net sales for the Tazorac(R) and Zorac(R) brands were $46.9 million, a 57.9 percent increase, or a 58.0 percent increase at constant currency rates over the same period last year. Year-to-date, Tazorac(R) total prescriptions 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. have grown 43.7 percent over the same period last year, according to VeriSpan (Scott-Levin) September, 2002 data. During the third quarter of 2002, Allergan received approval from the FDA for Avage(TM) (tazarotene cream 0.1%) as an adjunctive ad·junct n. 1. Something attached to another in a dependent or subordinate position. See Synonyms at appendage. 2. A person associated with another in a subordinate or auxiliary capacity. 3. agent in the topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. treatment of facial facial /fa·cial/ (fa´shul) pertaining to or directed toward the face. fa·cial adj. Relating to the face. facial, adj pertaining to the face. fine wrinkling, mottled mottled /mot·tled/ (mot´ld) marked by spots or blotches of different colors or shades. hypo-and hyperpigmentation Hyperpigmentation Definition Hyperpigmentation is the increase in the natural color of the skin. Description Melanin, a brown pigment manufactured by certain cells in the skin called melanocytes, is responsible for skin color. (blotchy blotch n. 1. A spot or blot; a splotch. 2. A discoloration on the skin; a blemish. 3. Any of several plant diseases caused by fungi and resulting in brown or black dead areas on leaves or fruit. tr. skin discoloration dis·col·or·a·tion n. 1. a. The act of discoloring. b. The condition of being discolored. 2. A discolored spot, smudge, or area; a stain. Noun 1. ), and benign benign /be·nign/ (be-nin´) not malignant; not recurrent; favorable for recovery. be·nign adj. Of no danger to health, especially relating to a tumorous growth; not malignant. facial lentigines lentigines /len·tig·i·nes/ (len-tij´i-nez) plural of lentigo. (flat patches of skin discoloration) in patients using a comprehensive skin care and sunlight avoidance program. Avage(TM) will be launched at the end of the fourth quarter of 2002. Additional Financial Highlights For the quarter ended September 27, 2002, consolidated gross profit excluding one-time items was $291.2 million, or 83.1 percent of net sales. For the nine months ended September 27, 2002, gross profit from continuing operations and excluding one-time items, was $858.3 million, or 85.3 percent of net sales. For the third quarter of 2002, selling, general and administrative expenses (SG&A) amounted to $148.4 million, or 42.3 percent of net sales. SG&A, excluding non-recurring items as a ratio to net sales, was 41.5 percent for the 2002 third quarter. For the nine months ended September 27, 2002, SG&A from continuing operations and excluding one-time items was $442.3 million, or 43.9 percent of net sales. For the third quarter of 2002, research and development expenses amounted to $59.0 million and, as a ratio to net sales, was 16.8 percent. For the nine months ended September 27, 2002, research and development expenses, from continuing operations and excluding one-time items, were $165.7 million, or 16.5 percent of net sales. At September 27, 2002, Allergan's stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $737.7 million. The Company had cash net of debt of $261.3 million. Cash and cash equivalents were $754.3 million and debt was $493.0 million. Allergan's debt-to-equity percentage was 66.8 percent and debt-to-capital percentage was 40.1 percent. The Company's days-sales-outstanding was 58 and inventory days-on-hand level was 106. Outlook Having exceeded its third quarter earnings per share guidance provided in July 2002 by $0.04, the Company is increasing its 2002 pharmaceutical-only 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 estimate by two cents to $1.87, on a full-year pro forma basis, excluding one-time items. This is consistent with the Company's stated policy of sharing over performance with its investors. This represents a 26 percent increase over 2001 pharmaceutical-only pro forma diluted earnings of $1.48 per share. The additional two cents of over-performance will be reinvested into the long-term growth drivers of the Company. Accordingly, the Company now estimates earnings per share, excluding one-time items, of $0.53 for the fourth quarter of 2002. For the fourth quarter of 2002, the Company estimates sales of approximately $375 million to $385 million. Allergan is updating its guidance for 2002 full-year product sales with an increase in Lumigan(R) to $115 million to $120 million. Allergan's full-year product sales guidance for Botox(R), the Alphagan(R) franchise, and Tazorac(R) remains unchanged. 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. In this press release, the statements regarding the outlook for Allergan's earnings per share and revenue forecasts, and statements from Mr. Pyott, among other statements above, are forward-looking statements. Because forecasts are inherently estimates that cannot be made with precision, the Company's performance at times differs from its estimates and targets, and the Company often does not know what the actual results will be until after a quarter's end and year'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. Any other statements in this press release that refer to Allergan's estimated or anticipated future results are forward-looking statements. All forward-looking statements in this press release reflect Allergan's current analysis of existing trends and information and represent Allergan's judgment only as of the date of this press release. Until definitive agreements are signed regarding intellectual property disputes with Pharmacia and Columbia University, there can be no guarantee that an actual settlement will be reached. Actual results may differ from current expectations based on a number of factors affecting Allergan's businesses, including changing competitive, market and regulatory conditions; the timing and uncertainty of the results of both the research and development and regulatory processes; domestic and foreign health care and cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. reforms; technological advances and patents obtained by competitors; the performance, including the approval, introduction and consumer acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; the uncertainty associated with the identification of and successful consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. and execution of external corporate development initiatives and strategic partnering transactions; and Allergan's ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, matters generally affecting the economy, such as changes in interest and currency exchange rates, international relations international relations, study of the relations among states and other political and economic units in the international system. Particular areas of study within the field of international relations include diplomacy and diplomatic history, international law, and the state of the economy worldwide, can affect Allergan's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Allergan expressly disclaims any intent or obligation to update these forward-looking statements. Additional information concerning these and other risk factors can be found in press releases issued by Allergan as well as Allergan's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Certain Factors and Trends Affecting Allergan and its Businesses" in Allergan's 2001 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , and the discussion under the heading "Risk Factors"in the Preliminary 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 April 18, 2002 and Allergan's Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 28, 2002. Copies of Allergan press releases and additional information about Allergan is available on the World Wide Web at www.allergan.com or you can contact the Allergan Investor Relations Investor relations The process by which the corporation communicates with its investors. Department by calling 714/246-4636. About Allergan, Inc. Allergan, Inc., with headquarters in Irvine, California Irvine is an incorporated city in Orange County, California, United States. It is a planned city, mainly developed by the Irvine Company since the 1960s. Formally incorporated on December 28 1971, the 69.7 square mile (180.5 km²) city has a population of 202,079 (as of 2007). , is a technology-driven, global health care company providing eye care and specialty pharmaceutical products worldwide. Allergan develops and commercializes products in the eye care, neuromuscular neuromuscular /neu·ro·mus·cu·lar/ (-mus´ku-ler) pertaining to nerves and muscles, or to the relationship between them. neu·ro·mus·cu·lar adj. 1. and skin care markets that deliver value to our customers, satisfy unmet un·met adj. Not satisfied or fulfilled: unmet demands. medical needs, and improve patients' lives.
ALLERGAN, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
in millions, except
per share amounts Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2002 2001 2002 2001
Product sales
Net sales $350.6 $282.1 $1,006.8 $835.4
Cost of sales 60.7 50.4 151.9 145.2
Product gross margin 289.9 231.7 854.9 690.2
Research services
Research service revenues
(primarily from related
parties through April 16,
2001) 9.4 8.2 27.6 49.7
Cost of research services 8.6 7.5 25.1 46.5
Research services margin 0.8 0.7 2.5 3.2
Selling, general and
administrative 148.4 114.2 480.8 362.0
Technology fees from related
party -- -- -- (0.7)
Research and development 59.0 50.9 170.3 177.0
Legal settlement 118.7 -- 118.7 --
Restructuring charge and asset
write-off 0.5 -- 64.4 --
Operating (loss) income (35.9) 67.3 23.2 155.1
Interest income 3.7 6.7 10.7 25.8
Interest expense (4.0) (4.6) (12.8) (13.8)
Loss on investments, net (22.2) -- (30.2) --
Unrealized gains/(losses) on
derivative instruments 1.6 (1.6) (2.7) 1.7
Other, net 6.3 2.1 12.2 4.4
(14.6) 2.6 (22.8) 18.1
(Loss) earnings from
continuing operations
before income taxes and
minority interest (50.5) 69.9 0.4 173.2
(Benefit) provision for income
taxes (14.1) 20.7 0.1 62.2
Minority interest 0.4 0.3 0.7 0.7
(Loss) earnings from continuing
operations before cumulative
effect of change in accounting
principle (36.8) 48.9 (0.4) 110.3
Income from discontinued
operations, net of applicable
income tax expense of $6.7
million for the quarter ended
2001 and $6.9 million and
$12.6 million for the nine
months ended 2002 and 2001,
respectively -- 17.9 11.2 31.7
Cumulative effect of change in
accounting principle, net
$0.5 million of tax -- -- -- (1.2)
Net (loss) earnings $(36.8) $ 66.8(a) $ 10.8 $140.8(a)
Basic (loss) earnings per
share:
Continuing operations before
cumulative effect of change
in accounting principle $(0.28) $ 0.37(a) $ -- $ 0.84(a)
Discontinued operations -- 0.14 0.08 0.24
Cumulative effect of
accounting change, net -- -- -- (0.01)
Net basic (loss) earnings
per share $(0.28) $ 0.51 $ 0.08 $ 1.07
Diluted (loss) earnings per
share:
Continuing operations before
cumulative effect of change
in accounting principle $(0.28) $ 0.37(a) $ -- $ 0.82(a)
Discontinued operations -- 0.13 0.08 0.24
Cumulative effect of
accounting change, net -- -- -- (0.01)
Net diluted (loss) earnings
per share $(0.28) $ 0.50 $ 0.08 $ 1.05
Weighted average number of
common shares outstanding:
Basic 129.3 132.0 129.6 131.9
Diluted 129.3 137.7 131.1 134.2
(a) Includes amortization of goodwill amounting to $0.7 million, or
zero per share and $2.0 million, or $0.02 per share, after tax for
the three and nine month periods ended September 28, 2001 which
was not included in 2002 due to adoption of SFAS No. 142.
ALLERGAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
in millions September 27, December 31,
2002 2001
Assets
Cash and equivalents $ 754.3 $ 774.9
Trade receivables, net 223.8 164.7
Inventories 70.2 55.0
Other current assets 121.1 120.2
Total current assets 1,169.4 1,114.8
Assets from discontinued operations -- 377.5
Property, plant and equipment, net 320.8 360.4
Other noncurrent assets 244.9 193.5
Total assets $ 1,735.1 $ 2,046.2
Liabilities and stockholders' equity
Notes payable $ 47.7 $ 75.1
Accounts payable 79.7 74.7
Accrued expenses and income taxes 355.8 254.6
Total current liabilities 483.2 404.4
Liabilities from discontinued operations -- 163.6
Long-term debt 445.3 444.8
Other liabilities 68.9 56.0
Stockholders' equity 737.7 977.4
Total liabilities and stockholders' equity $ 1,735.1 $ 2,046.2
ALLERGAN, INC.
Net Sales by Product Line
(Unaudited)
in millions Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2002 2001 2002 2001
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $ 202.5 $ 186.5 $ 616.5 $ 559.1
Skin Care 26.9 18.4 68.3 55.1
Botox/Neuromodulator 110.7 77.2 311.5 221.2
Total 340.1 282.1 996.3 835.4
Other 10.5 -- 10.5 --
TOTAL NET SALES $ 350.6 $ 282.1 $1,006.8 $835.4
Domestic 70% 67% 71% 68%
International 30% 33% 29% 32%
Alphagan(R) $49.2 $61.6 $183.9 $185.3
Lumigan(R) $35.0 $10.6 $88.0 $20.3
Tazorac(R) and Zorac(R) $20.2 $11.2 $46.9 $29.7
ALLERGAN, INC.
Reconciliation of Non-Recurring Items
(Unaudited)
in millions, except
per share amounts Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2002 2001 2002 2001
Net (loss) earnings, as
reported $(36.8) $48.9(a) $ (0.4) $110.3(a)
Pro forma pre-tax adjustments
for non-recurring items:
Legal settlement 118.7 -- 118.7 --
Loss on investments 22.2 -- 30.2 --
Restructure charge and
asset write-off 0.8(b) -- 65.8(b) --
Duplicate operating
expenses 3.8 -- 41.1 --
Unrealized (gain) loss on
derivative instruments (1.6) 1.6 2.7 (1.7)
In-process R&D charge -- -- -- 40.0
Partnering deals -- -- (1.0) --
Gain on sale of facility (5.7) -- (5.7) --
138.2 1.6 251.8 38.3
Tax effect for non-recurring
items (38.7) (0.5) (70.5) 0.5
Adjusted net (loss) earnings
from continuing operations $62.7 $50.0(a) $180.9 $149.1(a)
Diluted (loss) earnings per
share from continuing
operations, as reported $(0.28) $0.37(a) $ -- $0.82(a)
Non-recurring adjustments:
Legal settlement 0.65 -- 0.65 --
Loss on investments 0.12 -- 0.16 --
Restructure charge and
asset write-off -- -- 0.36 --
Duplicate operating
expenses 0.02 -- 0.23 --
Unrealized (gain) loss on
derivative instruments -- 0.01 0.02 (0.01)
In-process R&D charge -- -- -- 0.30
Partnering deals -- -- (0.01) --
Gain on sale of facility (0.03) -- (0.03) --
0.76 0.01 1.38 0.29
Adjusted earnings per share
from continuing operations $0.48 $0.38 $1.38 $1.11
Pro forma adjustments (Net
effect of G&A disynergies,
cash from distribution and
estimated income from
contract sales to AMO) -- (0.02) (0.04) (0.06)
Proforma earnings per share
from continuing operations $ 0.48 $ 0.36(a) $ 1.34 $ 1.05(a)
Pro forma year over year
change 33.3% 27.6%
(a) Includes amortization of goodwill amounting to $0.7 million, or
zero per share and $2.0 million, or $0.02 per share, after tax for
the three and nine month periods ended September 28, 2001 which
was not included in 2002 due to adoption of SFAS No. 142.
(b) The restructuring charge and asset write-off include charges of
$0.3 million and $1.4 million to cost of sales for the quarter and
nine month period ended September 27, 2002.
ALLERGAN, INC.
Condensed Combined Statements of Earnings from Continuing Operations,
Adjusted for Non-Recurring Items
(Unaudited)
in millions, except per Three Months Ended Nine Months Ended
share amounts September 27, 2002 September 27, 2002
Product sales
Net sales $ 350.6 $1,006.8
Cost of sales 59.4 148.5
Product gross margin 291.2 858.3
Research services
Research service revenues 9.4 27.6
Cost of research services 8.6 25.1
Research services margin 0.8 2.5
Selling, general and administrative 145.6 442.3
Research and development 59.0 165.7
Operating income 87.4 252.8
Interest income 3.7 10.7
Interest expense (4.0) (12.8)
Other, net 0.6 1.5
0.3 (0.6)
Earnings before income taxes and
minority interest 87.7 252.2
Provision for income taxes 24.6 70.6
Minority interest expense 0.4 0.7
Earnings from continuing operations $ 62.7 $ 180.9
Earnings Per Share:
Basic $ 0.48 $ 1.40
Diluted $ 0.48 $ 1.38
Weighted average number of common
shares outstanding:
Basic 129.3 129.6
Diluted 130.5 131.1
ALLERGAN, INC.
Schedule of Selected Investments and Notes Receivable
(Unaudited)
in millions June 28, Third Quarter September 27,
2002 Impairment 2002
Investments/notes from
collaborations:
Oculex Pharmaceuticals,
Inc., Entremed, Inc.,
Ista Pharmaceuticals,
Inc., Acadia
Pharmaceuticals Inc. and
miscellaneous others $29.4 $22.2 $6.8
Note receivable from sale
of business 3.7 -- 2.9
$33.1 $22.2 $ 9.7
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