Financials | Allergan 2008 Annual Report

Highlights | 5-year Cumulative Return
Cash Flow, Pharma Sales Growth & Medical Device Sales Growth

Operations Highlights


	Year Ended December 31,

In millions, except per share data	2008			2007			2006			2005			2004

STATEMENT OF OPERATIONS HIGHLIGHTS
(As reported under U.S. GAAP)
Product net sales	$	4,339.7		$	3,879.0		$	3,010.1		$	2,319.2		$	2,045.6
Total revenues		4,403.4			3,938.9			3,063.3			2,342.6			2,058.9
Research and development		797.9			718.1			1,055.5			388.3			342.9
Earnings (loss) from continuing operations		578.6			501.0			(127.4	)		403.9			377.1
Loss from discontinued operations		—			(1.7	)		—			—			—
Net earnings (loss)	$	578.6		$	499.3		$	(127.4	)	$	403.9		$	377.1
Basic earnings (loss) per share:
Continuing operations	$	1.90		$	1.64		$	(0.43	)	$	1.54		$	1.44
Discontinued operations		—			—			—			—			—
Diluted earnings (loss) per share:
Continuing operations		1.89			1.62			(0.43	)		1.51			1.41
Discontinued operations		—			—			—			—			—
Dividends per share		0.20			0.20			0.20			0.20			0.18
ADJUSTED AMOUNTS ^(a)
Adjusted earnings from continuing operations	$	786.5		$	672.9		$	547.2		$	453.3		$	368.8
Adjusted basic earnings per share:
Continuing operations	$	2.59		$	2.21		$	1.86		$	1.73		$	1.40
Adjusted diluted earnings per share:
Continuing operations		2.57			2.18			1.83			1.69			1.38
NET SALES BY PRODUCT LINE
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals	$	2,009.1		$	1,776.5		$	1,530.6		$	1,321.7		$	1,137.1
BOTOX^®/Neuromodulator		1,310.9			1,211.8			982.2			830.9			705.1
Skin Care		113.7			110.7			125.7			120.2			103.4
Urologics		68.6			6.0			—			—			—

Subtotal pharmaceuticals		3,502.3			3,105.0			2,638.5			2,272.8			1,945.6
Other (primarily contract sales)		—			—			—			46.4			100.0

Total specialty pharmaceuticals		3,502.3			3,105.0			2,638.5			2,319.2			2,045.6
Medical Devices:
Breast Aesthetics		310.0			298.4			177.2			—			—
Obesity Intervention		296.0			270.1			142.3			—			—
Facial Aesthetics		231.4			202.8			52.1			—			—

Core medical devices		837.4			771.3			371.6			—			—
Other		—			2.7			—			—			—

Total medical devices		837.4			774.0			371.6			—			—
Total product net sales	$	4,339.7		$	3,879.0		$	3,010.1		$	2,319.2		$	2,045.6
PRODUCT SOLD BY LOCATION
Domestic		64.6	%		65.7	%		67.4	%		67.5	%		69.1	%
International		35.4	%		34.3	%		32.6	%		32.5	%		30.9	%

^(a)

The adjusted amounts in 2008 exclude a $2.4 million U.S. state and federal deferred tax benefit related to the legal entity integration of the acquisitions of Esprit Pharma Holding Company, Inc. (Esprit) and Inamed Corporation (Inamed), a $3.8 million negative tax impact from non-deductible losses associated with the liquidation of corporate-owned life insurance contracts and the after-tax effects of the following: 1) $129.6 million amortization of acquired intangible assets related to business combinations and asset acquisitions; 2) $68.7 million for upfront payments for technologies that have not achieved regulatory approval; 3) $27.2 million restructuring charge and $10.0 million of termination benefits, asset impairments and accelerated depreciation costs related to the phased closure of the Arklow, Ireland, breast implant manufacturing plant; 4) $3.4 million restructuring charge and $0.9 million gain on sale of technology and fixed assets related to the phased closure of the Fremont, California, collagen manufacturing plant; 5) $6.6 million of restructuring charges and $1.5 million of integration and transition costs related to the acquisition of Groupe Cornéal Laboratoires (Cornéal); 6) $4.1 million of restructuring charges related to the streamlining of the Company’s European operations and the acquisition of EndoArt SA (EndoArt); 7) $11.7 million rollout of fair market value inventory adjustment and $0.7 million of integration and transition costs related to the acquisition of Esprit; 8) $25.7 million of external costs associated with responding to the U.S. Department of Justice subpoena; 9) $13.2 million settlement related to the termination of a distribution agreement in Korea; 10) $5.6 million impairment of intangible asset related to the phase-out of a collagen product; 11) $0.6 million of transaction costs related to ACZONE^®; and 12) $14.8 million unrealized gain on derivative instruments.

The adjusted amounts in 2007 exclude the favorable recovery of $1.6 million in previously paid state income taxes and the after-tax effects of the following: 1) $72.0 million charge for in-process research and development related to the acquisition of EndoArt; 2) $99.9 million amortization of acquired intangible assets related to business combinations and asset acquisitions; 3) $25.9 million of restructuring charges and $14.7 million of integration and transition costs related to the acquisitions of Inamed, Cornéal, EndoArt and Esprit; 4) $3.3 million rollout of fair market value inventory adjustments related to the acquisitions of Esprit and Cornéal; 5) $2.3 million settlement of an unfavorable Cornéal distribution contract; 6) $6.4 million settlement of a patent dispute; 7) $0.9 million restructuring charge related to the streamlining of the Company’s European operations; 8) $0.4 million of interest income related to income tax settlements; and 9) $0.4 million unrealized loss on derivative instruments.

The adjusted amounts in 2006 exclude income tax benefits of $11.7 million related to the resolution of uncertain tax positions and favorable recovery of previously paid state income taxes, an income tax benefit of $17.2 million related to a reduction in valuation allowance associated with a deferred tax asset, an income tax benefit of $2.8 million related to a change in estimated income taxes on 2005 dividend repatriation, income tax expenses of $1.6 million related to intercompany transfers of trade businesses and net assets, and the after-tax effects of the following: 1) $579.3 million charge for in-process research and development related to acquisition of Inamed; 2) $58.6 million amortization of acquired intangible assets related to the acquisition of Inamed; 3) $47.9 million rollout of fair market value inventory adjustment related to the acquisition of Inamed; 4) $12.3 million restructuring charge and $20.7 million of integration and transition costs related to the acquisition of Inamed; 5) $28.5 million contribution to The Allergan Foundation; 6) $9.8 million restructuring charge and $6.2 million of transition/duplicate operating costs related to the streamlining of the Company’s European operations; 7) $0.6 million restructuring charge related to the scheduled termination of the Company’s manufacturing and supply agreement with Advanced Medical Optics; 8) $4.9 million reversal of interest income on previously paid state income taxes and $4.9 million reversal of interest expense related to the resolution of uncertain tax positions; 9) $2.7 million of costs to settle a contingency involving non-income taxes in Brazil; 10) $0.4 million reversal of restructuring charge related to the streamlining of the Company’s operations in Japan; 11) $0.1 million of costs related to the acquisition of Cornéal; and 12) $0.3 million unrealized loss on derivative instruments.

The adjusted amounts in 2005 exclude income taxes of $49.6 million related to the repatriation of foreign earnings that had been previously permanently reinvested outside the United States, income tax benefits of $24.1 million related to the resolution of uncertain tax positions and an additional benefit for state income taxes of $1.4 million, and the after-tax effects of the following: 1) $28.8 million restructuring charge and $5.6 million of transition/duplicate operating costs related to the streamlining of the Company’s European operations; 2) $12.9 million restructuring charge related to the scheduled termination of the Company’s manufacturing and supply agreement with Advanced Medical Optics; 3) $7.9 million gain on the sale of a distribution business in India; 4) $7.3 million reduction in interest expense related to the resolution of uncertain income tax positions and $2.1 million of interest income related to previously paid state income taxes; 5) $5.7 million gain on the sale of assets previously used in contract manufacturing activities; 6) $2.3 million restructuring charge related to the streamlining of the Company’s operations in Japan;
7) $0.6 million gain on the sale of a former manufacturing plant in Argentina; 8) $0.8 million gain on the sale of a third party equity investment;
9) $3.6 million gain on the termination of the Vitrase collaboration agreement with ISTA Pharmaceuticals; 10) $3.0 million buy-out of a license agreement with Johns Hopkins University; 11) $0.4 million in costs related to the acquisition of Inamed; and 12) $1.1 million unrealized gain on derivative instruments.

The adjusted amounts in 2004 exclude the favorable recovery of $6.1 million of previously paid state income taxes and the after-tax effects of the following: 1) income of $2.4 million from a patent infringement settlement; 2) $7.0 million restructuring charge related to the scheduled termination of the Company’s manufacturing and supply agreement with Advanced Medical Optics; 3) $0.4 million unrealized loss on derivative instruments; and 4) income of $11.5 million from a technology transfer fee and a revised Vitrase collaboration agreement with ISTA Pharmaceuticals.

The foregoing presentation contains certain non-GAAP financial measures and non-GAAP adjustments. For a reconciliation of these non-GAAP financial measures to GAAP financial measures, please refer to pages 4 and 5 of this Annual Report.

Comparison of 5-year Cumulative Total Return*

$100 invested on 12/31/03 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. The 16 companies comprising the customized peer group include: Alcon, Inc., Amgen Inc., Biogen Idec Inc., Celgene Corporation, Cephalon, Inc., Eli Lilly and Company, Endo Pharmaceuticals Holdings Inc., Forest Laboratories, Inc., Genentech, Inc., Genzyme Corporation, Gilead Sciences, Inc., Johnson & Johnson, Medicis Pharmaceutical Corporation, Mentor Corporation, Sepracor Inc. and Wyeth.