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Allergan Reports Third Quarter 2012 Operating Results

Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Allergan, as well as Allergan’s public periodic filings with the U.S. Securities and Exchange Commission, including the discussion under the heading “Risk Factors” in Allergan’s 2011 Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Copies of Allergan’s press releases and additional information about Allergan are available at www.allergan.com or you can contact the Allergan Investor Relations Department by calling 714-246-4636.

About Allergan, Inc.

Allergan is a multi-specialty health care company established more than 60 years ago with a commitment to uncover the best of science and develop and deliver innovative and meaningful treatments to help people reach their life’s potential. Today, we have approximately 10,500 highly dedicated and talented employees, global marketing and sales capabilities with a presence in more than 100 countries, a rich and ever-evolving portfolio of pharmaceuticals, biologics, medical devices and over-the-counter consumer products, and state-of-the-art resources in R&D, manufacturing and safety surveillance that help millions of patients see more clearly, move more freely and express themselves more fully. From our beginnings as an eye care company to our focus today on several medical specialties, including eye care, neurosciences, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention and urologics, Allergan is proud to celebrate more than 60 years of medical advances and proud to support the patients and physicians who rely on our products and the employees and communities in which we live and work. For more information regarding Allergan, go to: www.allergan.com.

® and ™ marks owned by Allergan, Inc.

DARPin® is a registered trademark of Molecular Partners AG

Xeomin® is a registered trademark of Merz Pharma Gmbh & Co.

Revitalash® is a registered trademark of Athena Cosmetics, Inc.

ALLERGAN, INC.

Condensed Consolidated Statements of Earnings and

Reconciliation of Non-GAAP Adjustments

(Unaudited)

   
Three months ended

In millions, except per share amounts

September 30, 2012       September 30, 2011
   

 

       

 

   
GAAP

Non-GAAP Adjustments

Non-GAAP GAAP

Non-GAAP Adjustments

Non-GAAP
Revenues  
Product net sales $ 1,391.1 $ --   $ 1,391.1 $ 1,311.1 $ -- $ 1,311.1
Other revenues   22.8     --   22.8     17.3     --   17.3  
1,413.9 -- 1,413.9 1,328.4 -- 1,328.4
 
Operating costs and expenses
Cost of sales (excludes amortization of

acquired intangible assets)

188.8

--

188.8

188.1

(0.4

)

(i)

187.7

Selling, general and administrative 540.8 (3.6

)

(a)(b)(c)(d)

537.2 538.5 (21.4

)

(j)(k)(l)

517.1
Research and development 293.3 (62.5

)

(d)

230.8 221.3 -- 221.3
Amortization of acquired intangible assets 33.2 (27.4

)

(e)

5.8 31.9 (26.0

)

(e)

5.9
Impairment of intangible assets and related costs -- -- -- 4.3 (4.3

)

(m)

--
Restructuring charges (reversal)   3.8     (3.8

)

(f)

  --     (0.1 )  

0.1

 

(f)

  --  
 
Operating income 354.0 97.3 451.3 344.4 52.0 396.4
 
Non-operating income (expense)
Interest income 1.9 -- 1.9 1.8 -- 1.8
Interest expense (15.9 ) -- (15.9 ) (15.2 ) -- (15.2 )
Other, net   (9.2 )  

7.1

(g)

  (2.1 )   25.8  

(17.3

)

(n)(o)

  8.5  
  (23.2 )   7.1   (16.1 )   12.4     (17.3

)

 

  (4.9 )
 
Earnings before income taxes 330.8 104.4 435.2 356.8 34.7 391.5
 
Provision for income taxes   80.2    

28.8

(h)

  109.0     105.8    

0.4

(p)

  106.2  
 
Net earnings 250.6 75.6 326.2 251.0 34.3 285.3
 
Net earnings attributable to noncontrolling interest   1.2     --   1.2     1.2     --   1.2  
 
Net earnings attributable to Allergan, Inc. $ 249.4   $ 75.6 $ 325.0   $ 249.8   $ 34.3 $ 284.1  
 
Net earnings per share attributable to

Allergan, Inc. stockholders:

Basic $ 0.83   $ 1.08   $ 0.82   $ 0.93  
Diluted $ 0.82   $ 1.06   $ 0.81   $ 0.92  
 
Weighted average number of common

shares outstanding:

Basic

300.1

 

300.1

304.2

 

304.2

Diluted

305.3

 

305.3

309.8

 

309.8

 

Selected ratios as a percentage of product net sales

 
Cost of sales (excludes amortization of acquired intangible assets)

13.6

%

13.6

%

14.3

%

14.3

%

Selling, general and administrative 38.9 % 38.6 % 41.1 % 39.4 %
Research and development 21.1 % 16.6 % 16.9 % 16.9 %
 
(a)         Expenses from changes in fair value of contingent consideration of $2.4 million associated with business combinations
(b) External costs of $0.5 million for stockholder derivative litigation costs associated with the U.S. Department of Justice (DOJ) settlement announced in September 2010
(c) Expenses related to the realignment of various business functions and the restructuring of the obesity intervention business of $0.6 million
(d) Upfront licensing fees of $62.5 million included in research and development expenses associated with the license and collaboration agreements with Molecular Partners AG for technology that has not achieved regulatory approval and related transaction costs of $0.1 million included in selling, general and administrative expenses
(e) Amortization of certain acquired intangible assets related to business combinations, asset acquisitions and product licenses
(f) Net restructuring charges (reversal)
(g) Unrealized loss on the mark-to-market adjustment to derivative instruments
(h) Total tax effect for non-GAAP pre-tax adjustments
(i) Fair market value inventory adjustment rollout associated with the purchase of a distributor’s business in South Africa related to Allergan’s products
(j) Transaction costs of $0.6 million associated with business combinations
(k) External costs of $0.8 million for stockholder derivative litigation costs associated with the DOJ settlement announced in September 2010
(l) Milestone payment of $20.0 million for the United States Food and Drug Administration (FDA) acceptance of an New Drug Application (NDA) filing for technology associated with a collaboration and co-promotion agreement with MAP Pharmaceuticals, Inc.
(m) Impairment of an in-process research and development asset related to a tissue reinforcement technology acquired in connection with the 2010 acquisition of Serica Technologies, Inc.
(n) Unrealized gain on the mark-to-market adjustment to derivative instruments of $16.8 million
(o) Gain on sale of investments of $0.5 million
(p) Total tax effect for non-GAAP pre-tax adjustments and other income tax adjustments, consisting of the following amounts (in millions):
    Tax effect
Non-GAAP pre-tax adjustments of $34.7 million $ (10.2 )
Change in estimated tax benefit associated with the upfront licensing fee paid to Molecular Partners AG

11.7

Change in estimated taxes related to uncertain tax positions and tax credits included in prior year filings  

(1.9

)

$ (0.4 )

“GAAP” refers to financial information presented in accordance with generally accepted accounting principles in the United States.

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