Allergan Reports Year End Operating Results.Business Editors & Health/Medical Writers IRVINE Irvine, town, Scotland Irvine (ûr`vĭn), town (1991 pop. 32,507), North Ayrshire, SW Scotland, on the Irvine River estuary. Industries include iron and brass foundries. Other products are chemicals, electric goods, and clothing. , Calif.--(BUSINESS WIRE)--Jan. 29, 2003 -- Pharmaceutical sales increased 21.2 percent for the full year on a comparable basis -- Full year earnings per share up 27.0 percent, on a pro forma basis 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 and year ended December 31, 2002. For the quarter ended December 31, 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 $378.2 million including $17.3 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 ), a former subsidiary that was spun-off from Allergan on June 29, 2002. Excluding sales of non-pharmaceutical and divested products, net sales were up 19.9 percent at constant currency, 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 fourth quarter of 2001. For the year ended December 31, 2002, net sales from continuing operations were $1,385.0 million including $27.8 million of non-pharmaceutical product sales. Excluding the sales of non-pharmaceutical and divested products, net sales from continuing operations were up 20.6 percent, or 21.2 percent at constant currency, compared with 2001. Including the effect of non-recurring pre-tax charges of $9.8 million, or $0.05 per share on an after tax basis, Allergan reported 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 from continuing operations of $0.49 for the quarter ended December 31, 2002. Excluding non-recurring pre-tax charges, Allergan's diluted earnings per share from continuing operations were $0.54 for the fourth quarter of 2002, up 25.6 percent from the $0.43 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 per share for Allergan's continuing pharmaceutical operations for 2001. For a detailed breakout of non-recurring items, see the "Description of the non-recurring items" section of this press release. Including the effect of non-recurring pre-tax charges of $261.6 million, or $1.43 per share on an after tax basis, described in detail in the "Description of the non-recurring items" section of this press release, Allergan reported $0.49 diluted earnings per share from continuing operations for the year ended December 31, 2002. Excluding those non-recurring pre-tax charges, 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 $1.92 per share for the year ended December 31, 2002. The 2002 unaudited estimate of pro forma diluted earnings for Allergan's continuing operations was $1.88 per share, a 27.0 percent increase over the unaudited estimate of pro forma diluted earnings per share of $1.48 for 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 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. . For the year ended December 31, 2001, earnings per share includes amortization of goodwill of $0.02 per share. There was no amortization of goodwill 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. "2002 marked a turning point in the evolution of Allergan as we completed our journey to become a specialty pharmaceutical company. I am particularly pleased that with all of the change, Allergan exceeded the financial objectives we provided last January, executed 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 AMO on time, under budget, and with no service issues for any of our customers," 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. . Eye Care Pharmaceutical Product Line At constant currency and excluding products divested at the end of 2001, fourth quarter 2002 worldwide eye care pharmaceutical sales increased 11.3 percent over the fourth quarter of 2001. Including the effects of currency rates and divested products, fourth quarter 2002 worldwide eye care pharmaceutical sales amounted to $210.8 million, an 8.3 percent increase over the $194.6 million reported in the same quarter of 2001. For the year ended December 31, 2002, at constant currency and excluding divested products, worldwide eye care pharmaceutical sales increased 12.7 percent over the prior year. Including the effects of currency rates and divested products, worldwide eye care pharmaceutical sales for the year ended 2002 amounted to $827.3 million, a 9.8 percent increase over the $753.7 million reported for 2001. 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, comprised of Alphagan Alphagan Brimonidine Ophthalmology An alpha-2 agonist for treating open-angle glaucoma. See Open angle glaucoma. (R) (Brimonidine brimonidine /bri·mo·ni·dine/ (bri-mo´ni-den) an a agonist used as the tartrate salt in the treatment of open-angle glaucoma and ocular hypertension. 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) (Alphagan(R) Franchise), Lumigan(R) (Bimatoprost bimatoprost /bi·mat·o·prost/ (bi-mat´o-prost) a synthetic prostaglandin analogue used topically in the treatment of open-angle glaucoma and ocular hypertension. Ophthalmic Solution 0.03%), Betagan(R), Propine(R) and other glaucoma products increased by 24.6 percent at constant currency for the year ended December 31, 2002 as compared to 2001. For the quarter ended December 31, 2002, worldwide net product sales for the Alphagan(R) Franchise were $64.7 million, a decrease of 1.2 percent, or a 2.5 percent decrease at constant currency over the $65.5 million reported in the same quarter last year. As of the week ended December 31, 2002, new prescriptions of Alphagan(R) P as a percentage of the new prescriptions for the total Alphagan(R) Franchise were 96.2 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 year ended 2002, worldwide net product sales for the Alphagan(R) Franchise were $248.5 million, a 0.9 percent decrease, or a 1.2 percent decrease at constant currency, over 2001. For the quarter ended December 31, 2002, worldwide net product sales for Lumigan(R) were $35.1 million, an increase of 130.8 percent, or 128.8 percent at constant currency over the same period last year. For the year ended December 31, 2002, worldwide net product sales for Lumigan(R) were $123.0 million, an increase of 245.8 percent, or 245.0 percent at constant currency, over 2001. Lumigan(R) sales were driven by continued growth in U.S. market share and a successful European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. launch of the product. At the end of the fourth quarter of 2002, Allergan received approval from the 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. for RESTASIS(TM) (cyclosporine ophthalmic emulsion cyclosporine ophthalmic emulsion Sandimmun (UK), Restasis Pharmacologic class: Polypeptide antibiotic Therapeutic class: Immunosuppressant Pregnancy risk category C FDA Boxed Warning, 0.05%), the first and only therapy approved by the FDA for patients with keratoconjunctivitis sicca keratoconjunctivitis sic·can. See dry eye. keratoconjunctivitis sicca (ker´ (chronic dry eye disease-CDED), whose tear production is presumed to be suppressed sup·press tr.v. sup·pressed, sup·press·ing, sup·press·es 1. To put an end to forcibly; subdue. 2. To curtail or prohibit the activities of. 3. due to 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. inflammation inflammation, reaction of the body to injury or to infectious, allergic, or chemical irritation. The symptoms are redness, swelling, heat, and pain resulting from dilation of the blood vessels in the affected part with loss of plasma and leucocytes (white blood . Allergan anticipates launching RESTASIS(TM) in the U.S. during the second quarter of 2003. Botox Botox Trademark for botulinum toxin type A, a drug produced by the bacterium Clostridium botulinum. It contains the same toxin that causes severe food poisoning (botulism). (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) fourth quarter 2002 worldwide net sales increased by 46.0 percent over the fourth quarter of 2001. Including the effects of currency rates, fourth quarter 2002 sales for Botox(R) were $128.2 million, a 45.2 percent increase over the $88.3 million reported in the same quarter last year.For the year ended December 31, 2002, worldwide net sales of Botox(R) were $439.7 million, an increase of 43.1 percent over the prior year at constant currency rates. Including the effects of currency rates, net sales for Botox(R) increased 42.1 percent over the $309.5 million reported in 2001. Botox(R) sales primarily fall into two categories, therapeutic and cosmetic cosmetic /cos·met·ic/ (koz-met´ik) 1. pertaining to cosmesis. 2. a beautifying substance or preparation. cos·met·ic n. . On a year to date basis, therapeutic sales accounted for approximately 60 percent of total sales and grew at over 30 percent. Over the same period, cosmetic sales accounted for approximately 40 percent of total sales and grew at over 60 percent. Allergan currently intends to break down the Botox(R) sales mix sales mix See product mix. and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. on an annual basis in the fourth quarter of each year. Skin Care Product Line Sales for Allergan skin care products were $21.9 million for the quarter ended December 31, 2002, a decrease of 8.0 percent from the $23.8 million in sales reported in the fourth quarter of 2001. Allergan reported skin care product sales of $90.2 million for the year ended 2002, an increase of 14.3 percent over 2001. For the quarter ended December 31, 2002, worldwide net product sales for the Tazorac(R) and Zorac Zorac® Tazarotene, see there (R) brands (Tazarotene tazarotene /ta·zar·o·tene/ (tah-zar´o-ten) a retinoid prodrug used topically in the treatment of acne vulgaris and psoriasis. tazarotene Allergan®, Tazorac®, Zorac® 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 $15.2 million, a decrease of 3.3 percent. For the year ended December 31, 2002, worldwide net product sales for Tazorac(R) and Zorac(R) brands were $62.1 million, an increase of 36.7 percent, over the $45.4 million reported in 2001. For the year ended December 31, 2002, 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. grew 38 percent over the same period last year, according to VeriSpan (Scott-Levin). The launch of Avage(TM) (tazarotene cream 0.1%), 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 recently approved by the FDA for 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- hypo- or hyp- pref. 1. Below; beneath; under: hypochondriac. 2. Less than normal; deficient: hypofunction. 3. 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. ), was originally anticipated for the fourth quarter of 2002. We commenced shipments to wholesalers in January 2003 and are currently preparing for the product launch in the first quarter of 2003. During the fourth quarter of 2002, Allergan announced that it had entered into a research collaboration Working together on a project. See collaborative software. and license agreement with Peplin Biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. Ltd. for the right to develop and commercialize PEP005 for the topical treatment for non-melanoma skin cancer Skin Cancer, Non-Melanoma Definition Non-melanoma skin cancer is a malignant growth of the external surface or epithelial layer of the skin. Description and actinic keratosis actinic keratosis n. A warty lesion, often premalignant, occurring on the sun-exposed skin of the face or hands, especially of light-skinned persons. Also called senile keratosis. . Description of the non-recurring items For the quarter ended December 31, 2002, the following non-recurring items amounted to a $9.8 million pre-tax, or a $0.05 per share (all per share amounts are after tax) charge against earnings: -- Unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustment to derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. investments of $1.0 million pre-tax, or $0.01 per share -- 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. associated with the AMO spin-off of $1.4 million pre-tax, or $0.01 per share -- Charge for the early 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. of convertible debt of $11.7 million pre-tax, or $0.06 per share -- Restructure charge 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. reversal of $2.3 million pre-tax, or $0.01 per share For the year ended December 31, 2002, the following non-recurring items amounted to a $261.6 million pre-tax, or a $1.43 per share (all per share amounts are after tax) charge against earnings: -- Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement costs of $118.7 million pre-tax, or $0.65 per share, associated with the global settlement with Pharmacia 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. of all intellectual property disputes involving Lumigan(R) -- Net expenses of $100.3 million pre-tax, or $0.56 per share associated with the AMO spin-off which consist of: -- 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 of $63.5 million pre-tax, or $0.35 per share -- Duplicate operating expenses before tax of $42.5 million, or $0.24 per share -- Gain of $5.7 million pre-tax, or $0.03 per share, on the sale of a facility -- Mark-to-market loss on investments and related third-party collaborations of $30.2 million pre-tax, or $0.16 per share -- Unrealized mark-to-market adjustment on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. that amounted to a loss of $1.7 million pre-tax, or $0.01 per share -- Gain on partnering deals of $1.0 million pre-tax, or $0.01 per share -- Charge for the early extinguishment of convertible debt of $11.7 million pre-tax, or $0.06 per share. Additional Financial Highlights For the quarter ended December 31, 2002, gross profit excluding non-recurring one-time items was $308.7 million, or 81.6 percent of net sales. For the quarter ended December 31, 2002, pharmaceutical only gross profit excluding contract sales and non-recurring one-time items was 85.5 percent of net sales. For the year ended December 31, 2002, gross profit from continuing operations and excluding non-recurring one-time items, was $1,167.0 million, or 84.3 percent of net sales. For the fourth quarter of 2002, selling, general and administrative expenses (SG&A) amounted to $148.7 million, or 39.3 percent of net sales. For the year ended December 31, 2002, SG&A from continuing operations and excluding one-time items was $590.3 million, or 42.6 percent of net sales. For the fourth quarter of 2002, research and development expenses amounted to $62.8 million and, as a ratio to net sales, was 16.6 percent. For the year ended December 31, 2002, research and development expenses from continuing operations and excluding one-time items were $228.4 million, or 16.5 percent of net sales. At December 31, 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 $808.3 million. The Company had cash net of debt of $157.9 million. Cash and cash equivalents were $774.0 million and debt was $616.1 million. Allergan's debt-to-capital percentage was 43.3 percent. The Company's days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). was 53 and inventory days-on-hand level was 92. During the fourth quarter of 2002, Allergan sold $641.5 million principal amount at maturity of zero coupon convertible senior notes due 2022. The notes carry a yield to maturity of 1.25%. In December 2002, Allergan completed a tender offer to purchase approximately 90 percent of the Company's previously issued and outstanding liquid yield option zero coupon convertible subordinated notes due 2020. Allergan paid approximately $380 million to complete the tender offer. Outlook Consistent with prior mid-term guidance of revenue growth in the mid-to-high teens and diluted earnings per share growth at 22-25 percent, the Company forecasts 2003 sales between $1,610 and $1,690 million, an increase of between 16 percent and 22 percent over 2002. The Company anticipates diluted earnings per share to be between $2.29 and $2.31 for the year ended 2003, an increase of between 22 percent and 23 percent over the unaudited estimate of pro forma diluted earnings per share of $1.88 for 2002. Allergan's full-year product sales guidance is as follows: Alphagan(R) Franchise $205 million to $215 million, Botox(R) $540 million to $580 million, Lumigan(R) $175 million to $195 million, RESTASIS(TM) $20 million to $40 million, Tazorac(R)/Avage(TM) $75 million to $85 million, and pharmaceutical only revenue of $1,550 million to $1,610 million, an increase of between 14 percent and 19 percent over 2002 pharmaceutical only revenue. Allergan is forecasting income statement ratios for the full year 2003 as follows: pharmaceutical only gross profit, excluding contract sales, of approximately 85.0 percent, SG&A of approximately 39-40 percent, research and development of approximately 16-17 percent, and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of approximately 25-26 percent. Days sales outstanding are forecasted at approximately 60-65 days due to a continued shift in sales mix. For the first quarter of 2003, the Company estimates total worldwide sales of between $375 million and $395 million, and diluted earnings per share of between $0.52 and $0.53. 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. Actual results may differ from current expectations based on a number of factors affecting Allergan's businesses, including among other things, 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 Allergan's Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 27, 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, neuromodulator neuromodulator /neu·ro·mod·u·la·tor/ (-mod´u-la?ter) a substance, other than a neurotransmitter, released by a neuron and transmitting information to other neurons, altering their activities. 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 Earnings
(Unaudited)
in millions, Three Months Year
except per share Ended Ended
amounts
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Product sales
Net sales $ 378.2 $ 306.7 $1,385.0 $1,142.1
Cost of sales 69.8 52.9 221.7 198.1
Product gross margin 308.4 253.8 1,163.3 944.0
Research services
Research service
revenues
(primarily from
related parties
through April
16, 2001) 12.7 10.6 40.3 60.3
Cost of research
services 11.5 9.6 36.6 56.1
Research services
margin 1.2 1.0 3.7 4.2
Selling, general
and
administrative 148.7 119.1 629.5 481.1
Technology fees
from related
party -- -- -- (0.7)
Research and
development 62.8 50.5 233.1 227.5
Legal settlement -- -- 118.7 --
Restructuring
charge (reversal)
and asset write-
off (2.0) (1.7) 62.4 (1.7)
Operating income 100.1 86.9 123.3 242.0
Interest income 5.1 4.8 15.8 30.6
Interest expense (4.6) (4.3) (17.4) (18.1)
(Loss)/gain on
investments, net -- (4.5) (30.2) (4.5)
Unrealized gain
(loss) on
derivative
instruments 1.0 2.5 (1.7) 4.2
Other, net (12.2) 1.7 -- 6.1
(10.7) 0.2 (33.5) 18.3
Earnings from
continuing
operations before
income taxes and
minority
interest 89.4 87.1 89.8 260.3
Provision for
income taxes 25.0 26.3 25.1 88.5
Minority interest -- (0.1) 0.7 0.6
Earnings from
continuing
operations 64.4 60.9(a) 64.0 171.2(a)
Income from
discontinued
operations, net
of applicable
income
tax expense of
$8.0 million
for the quarter
ended 2001 and
$7.0 million
and $20.6
million for
the year ended
2002 and 2001,
respectively -- 23.2 11.2 54.9
Cumulative effect
of change in
accounting
principle,
net of $0.5
million of tax -- -- -- (1.2)
Net earnings $ 64.4 $ 84.1 $ 75.2 $ 224.9
Basic earnings per
share:
Continuing
operations $ 0.50 $ 0.46(a) $ 0.49 $ 1.30(a)
Discontinued
operations -- 0.18 0.09 0.42
Cumulative
effect of
accounting
change, net -- -- -- (0.01)
Net basic
earnings per
share $ 0.50 $ 0.64 $ 0.58 $ 1.71
Diluted earnings
per share:
Continuing
operations $ 0.49 $ 0.46(a) $ 0.49 $ 1.29(a)
Discontinued
operations -- 0.16 0.08 0.40
Cumulative
effect of
accounting
change, net -- -- -- (0.01)
Net diluted
earnings per
share $ 0.49 $ 0.62 $ 0.57 $ 1.68
Weighted average
number of common
shares
outstanding:
Basic 129.4 131.4 129.6 131.8
Diluted 134.5 137.6 131.1 138.0
(a) Includes amortization of goodwill amounting to $0.7 million,
or zero per share and $2.7 million, or $0.02 per share, after tax for
the quarter and year ended December 31, 2001, respectively, which was
not included in 2002 due to adoption of SFAS No. 142.
ALLERGAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
in millions Dec. 31, Dec. 31,
2002 2001
Assets
Cash and equivalents $ 774.0 $ 774.9
Trade receivables, net 220.6 164.7
Inventories 70.4 55.0
Other current assets 135.2 120.2
Total current assets 1,200.2 1,114.8
Assets from discontinued operations -- 377.5
Property, plant and equipment, net 352.0 360.4
Other noncurrent assets 254.4 193.5
Total assets $1,806.6 $2,046.2
Liabilities and stockholders' equity
Notes payable $ 89.7 $ 75.1
Accounts payable 82.0 74.7
Accrued expenses and income taxes 231.9 254.6
Total current liabilities 403.6 404.4
Liabilities from discontinued operations -- 163.6
Long-term debt 526.4 444.8
Other liabilities 68.3 56.0
Stockholders' equity 808.3 977.4
Total liabilities and stockholders' equity $1,806.6 $2,046.2
ALLERGAN, INC.
Net Sales by Product Line
(Unaudited)
in millions Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $210.8 $194.6 $ 827.3 $ 753.7
Skin Care 21.9 23.8 90.2 78.9
Botox/Neuromodular 128.2 88.3 439.7 309.5
Total 360.9 306.7 1,357.2 1,142.1
Other 17.3 -- 27.8 --
TOTAL NET SALES $378.2 $306.7 $1,385.0 $1,142.1
Domestic 69% 65% 71% 67%
International 31% 35% 29% 33%
Alphagan(R) and Alphagan(R) P $ 64.7 $ 65.6 $ 248.5 $ 250.9
Lumigan(R) $ 35.1 $ 15.2 $ 123.0 $ 35.4
Tazorac(R) and Zorac(R) $ 15.2 $ 15.7 $ 62.1 $ 45.4
ALLERGAN, INC.
Reconciliation of Non-Recurring and Other Items
(Unaudited)
in millions, except per share amounts
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Earnings from continuing
operations, as reported $ 64.4 $ 60.9 $ 64.0 $171.2
Pre-tax adjustments for non-
recurring items:
Legal settlement -- -- 118.7 --
Restructure charge
(reversal) and asset
write-off (2.3)(b) (6.0) 63.5(b) (6.2)
Duplicate operating
expenses 1.4 4.4 42.5 4.4
Early extinguishment of
debt 11.7 -- 11.7 --
Loss on investments -- 4.5 30.2 4.5
Gain on sale of facility -- -- (5.7) --
Unrealized (gain) loss on
derivative instruments (1.0) (2.5) 1.7 (4.2)
In-process R&D charge -- -- -- 40.0
Partnering deals -- (1.5) (1.0) (1.5)
Divestiture of
pharmaceutical products
in Brazil -- (2.0) -- (2.0)
9.8 (3.1) 261.6 35.0
Tax effect for non-recurring
items (2.7) 1.0 (73.3) 1.5
Adjusted earnings from
continuing operations $ 71.5 $ 58.8(a) $252.3 $207.7(a)
Diluted earnings per share
from continuing
operations, as reported $ 0.49 $ 0.46(a) $ 0.49 $ 1.29(a)
Non-recurring adjustments:
Legal settlement -- -- 0.65 --
Restructure charge
(reversal) and asset
write-off (0.01) (0.03) 0.35 (0.03)
Duplicate operating
expenses 0.01 0.02 0.24 0.02
Early extinguishment of
debt 0.06 -- 0.06 --
Loss on investments -- 0.02 0.16 0.02
Gain on sale of facility -- -- (0.03) --
Unrealized (gain) loss on
derivative instruments (0.01) (0.01) 0.01 (0.02)
In-process R&D charge -- -- -- 0.29
Partnering deals -- (0.01) (0.01) (0.01)
Divestiture of
pharmaceutical products
in Brazil -- (0.01) -- (0.01)
0.05 (0.02) 1.43 0.26
Adjusted earnings per share
from
continuing operations 0.54 0.44 1.92 1.55
Pro forma adjustments (Net
effect of G&A dissynergies,
cash from distribution and
estimated income from
contract sales to AMO) -- (0.01) (0.04) (0.07)
Pro forma earnings per share
from
continuing operations $ 0.54 $ 0.43 $ 1.88 $ 1.48
Pro forma year over year
change 25.6% 27.0%
(a) Includes amortization of goodwill amounting to $0.7 million,
or zero per share and $2.7 million, or $0.02 per share, after tax
for the quarter and year ended December 31, 2001, respectively,
which was not included in 2002 due to adoption of SFAS No. 142.
(b) The restructuring charge (reversal) and asset write-off
include a reversal of $0.3 million and charge of $1.1 million to
cost of sales for the quarter and year ended December 31, 2002,
respectively.
ALLERGAN, INC.
Condensed Combined Statements of Earnings from Continuing Operations,
Adjusted for Non-Recurring Items
(Unaudited)
in millions, except per share amounts Three Months Year
Ended Ended
Dec. 31, Dec. 31,
2002 2002
Product sales
Net sales $378.2 $1,385.0
Cost of sales 69.5 218.0
Product gross margin 308.7 1,167.0
Research services
Research service revenues 12.7 40.3
Cost of research services 11.5 36.6
Research services margin 1.2 3.7
Selling, general and administrative 148.0 590.3
Research and development 62.8 228.4
Operating income 99.1 352.0
Interest income 5.1 15.8
Interest expense (4.6) (17.4)
Other, net (0.4) 1.0
0.1 (0.6)
Earnings before income taxes and minority
interest 99.2 351.4
Provision for income taxes 27.7 98.4
Minority interest -- 0.7
Earnings from continuing operations $ 71.5 $ 252.3
Earnings per share:
Basic $ 0.55 $ 1.95
Diluted $ 0.54 $ 1.92
Weighted average number of common
shares outstanding:
Basic 129.4 129.6
Diluted 134.5 131.1
ALLERGAN, INC.
Reconciliation of Diluted Earnings Per Share
(Unaudited)
in millions, except per share amounts
Three Months Year
Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Earnings from continuing
operations, as reported $ 64.4 $ 60.9 $ 64.0 $171.2
Interest expense from convertible
subordinated notes,
net of tax 1.6 1.8 -- 6.8
Diluted earnings from continuing
operations 66.0 62.7 64.0 178.0
Non-recurring adjustments,
net of tax 7.1 (2.1) 188.3 36.5
Adjusted diluted earnings from
continuing operations $ 73.1 $ 60.6 $252.3 $214.5
Weighted average number of shares
issued 129.4 131.4 129.6 131.8
Net shares assumed issued using the
treasury stock
method for options outstanding
during each period
based on average market price 1.6 2.2 1.5 2.2
Diluted effect of assumed conversion
of subordinated
notes outstanding 3.5 4.0 -- 4.0
134.5 137.6 131.1 138.0
Diluted earnings per share from
continuing operations $ 0.49 $ 0.46 $ 0.49 $ 1.29
Earnings per share for non-recurring
items 0.05 (0.02) 1.43 0.26
Adjusted diluted earnings per share
from continuing operations $ 0.54 $ 0.44 $ 1.92 $ 1.55
ALLERGAN, INC.
Supplemental Non-GAAP Information
(Unaudited)
in millions, except per share amounts
Three Months Year
Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2002 2001 2002 2001
Net sales, as reported $378.2 $306.7 $1,385.0 $1,142.1
Currency effect 0.5 6.5
Net sales, excluding currency
effect $378.7 $1,391.5
Net sales, as reported $378.2 $306.7 $1,385.0 $1,142.1
Non-pharmaceutical products (17.3) -- (27.8) --
Divested products -- (5.4) (0.3) (17.1)
Net sales, excluding non-
pharmaceutical
and divested products 360.9 $301.3 1,356.9 $1,125.0
Currency effect 0.5 6.5
Net sales, excluding non-
pharmaceutical
and divested products and
currency effect $361.4 $1,363.4
Eye care pharmaceuticals net
sales, as reported $210.8 $194.6 $ 827.3 $ 753.7
Divested products -- (5.4) (0.3) (17.1)
Currency effect (0.3) -- 3.2 --
Eye care pharmaceuticals net
sales, excluding
divested products and
currency effect $210.5 $189.2 $ 830.2 $ 736.6
Alphagan Franchise, as reported $ 64.7 $ 65.6 $ 248.5 $ 250.9
Currency effect (0.8) (0.7)
Alphagan Franchise, excluding
currency effect $ 63.9 $ 247.8
Lumigan, as reported $ 35.1 $ 15.2 $ 123.0 $ 35.4
Currency effect (0.3) (0.9)
Lumigan, excluding currency
effect $ 34.8 $ 122.1
Tazorac and Zorac, as reported $ 15.2 $ 15.7 $ 62.1 $ 45.4
Currency effect -- --
Tazorac and Zorac, excluding
currency effect $ 15.2 $ 62.1
Botox, as reported $128.2 $ 88.3 $ 439.7 $ 309.5
Currency effect 0.7 3.1
Botox, excluding currency effect $128.9 $ 442.8
Note: Currency effect is determined by comparing adjusted 2002
reported amounts, calculated using 2001 monthly average exchange
rates, to the actual 2001 reported amounts. Constant currency sales is
not a GAAP defined measure of revenue growth. This measure provides
information on sales growth assuming that foreign currency exchange
rates have not changed between years. Constant currency sales, as
defined and presented by the Company, may not be comparable to similar
measures reported by other companies.
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