ALLERGAN annual report 2009
`
`2525 DUPONT DRIVE
`P.O. BOX 19534
`IRVINE, CA 92623-9534
`(714) 246-4500
`
`WWW.ALLERGAN.COM
`
`NYSE: AGN
`
`ANNUAL REPORT 20 09
`
`TOP OF MIND
`
`TOP OF MIND
`
`APOTEX 1053, pg. 1
`
`

`

`IN ALL THAT WE DO, THERE’S A PATIENT
`WHO IS ALWAYS TOP OF MIND.
`
`This has been a year of change for both the world of
`health care and the pharmaceutical industry. Our business
`landscape is evolving along with major shifts in the
`regulatory environment, political climate and global
`economy. At Allergan, we are responding with agility and
`seeking sustained growth thanks to a business model that
`is at once both diversified to meet today’s challenges and
`deeply specialized. But most of all, we are strengthened
`by the unwavering focus we have maintained for almost
`60 years — doing what is best for the patients who depend
`on our products. It’s a focus shared by every employee
`across our organization and it inspires us to think harder
`and reach further in all that we do.
`
`Amidst today’s changes we are advancing our commitment
`to patients in ways both large and small. In Research and
`Development (R&D) we are challenging ourselves to discover
`and realize a strong pipeline of truly novel products and
`treatments that will make a meaningful difference in people’s
`lives. In quality assurance we are always looking for better
`ways to produce our products and maintain the highest
`safety standards that physicians and patients can trust.
`
`In medical affairs we strive to provide physicians with
`access to the latest scientific information so they can make
`the most informed treatment decisions for their patients.
`In sales and marketing we are concentrating our efforts on
`raising awareness and educating physicians and patients
`about specific disease states and available treatment options.
`And in investor relations, we are building continued value
`for our stockholders through a diversified, global business
`strategy, a specialized approach and a focus on growth.
`
`While we take pride in our ability to demonstrate leadership
`in the face of change, real gratification results from the
`opportunity to bring patients the best of medicine. This is
`not an easy task, often bringing failure as well as success.
`But it continues to drive us in what we do and why we do it,
`for people who could be our loved ones, friends or neighbors.
`This is why we push ourselves harder and reach further in
`finding solutions that don’t exist today. It is a significant
`responsibility, a very personal one for all of us, but one we
`carry with great ownership and pride — and always with the
`patient top of mind.
`
`Sue-Jean Lin
`Senior Vice President and
`Global Chief Information
`Officer/U.S.
`
`Married and mother of two
`
`annual report 2009
`
`a
`
`“OUR WORLD
`REVOLVES AROUND doing
`PATIENTS.”
`
`what is best for
`
`“OUR WORLD
`REVOLVES AROUND doing
`PATIENTS.”
`
`what is best for
`
`+
`
`APOTEX 1053, pg. 2
`
`

`

`FINANCIAL SUMMARY
`
`In millions, except per share data
`
`statement of operations highlights
`(As reported under U.S. GAAP)
`Product net sales
`Total revenues
`Research and development
`Earnings (loss) from continuing operations
`Loss from discontinued operations
`Net earnings (loss) attributable to noncontrolling interest
`Net earnings (loss) attributable to Allergan, Inc.
`
`Net basic earnings (loss) per share attributable to
`
`Allergan, Inc. stockholders
`Net diluted earnings (loss) per share attributable to
`
`Allergan, Inc. stockholders
`
`Dividends per share
`
`2009
`
`2008
`
`Year Ended December 31,
`2007
`
`2006
`
`2005
`
`
`
`
`
`
`
`
`
`$4,447.6
` 4,503.6
` 706.0
` 623.8
`—
` 2.5
`$ 621.3
`
`$4,339.7
` 4,403.4
` 797.9
` 564.7
`—
` 1.6
`$ 563.1
`
`$3,879.0
` 3,938.9
` 718.1
` 487.0
` (1.7)
` 0.5
`$ 484.8
`
`$3,010.1
` 3,063.3
` 1,055.5
` (127.0)
`—
` 0.4
`$ (127.4)
`
`$2,319.2
` 2,342.6
` 388.3
` 406.8
`—
` 2.9
`$ 403.9
`
`$ 2.05
`
`$ 1.85
`
`$ 1.59
`
`$ (0.43)
`
`$ 1.54
`
`2.03
`
` 0.20
`
` 1.84
`
` 0.20
`
` 1.57
`
` 0.20
`
` (0.43)
`
` 0.20
`
`
`$ 547.2
`
` 1.51
`
` 0.20
`
`$ 453.3
`
`adjusted amounts (a)
`Adjusted net earnings attributable to Allergan, Inc.
`
`
`$ 849.8
`
`
`$ 786.5
`
`
`$ 672.9
`
`Adjusted net basic earnings per share attributable to
`
`Allergan, Inc. stockholders
`Adjusted net diluted earnings per share attributable to
`
`Allergan, Inc. stockholders
`
`$ 2.80
`
`$ 2.59
`
`$ 2.21
`
`$ 1.86
`
`$ 1.73
`
`2.78
`
` 2.57
`
` 2.18
`
` 1.83
`
` 1.69
`
`$180
`
`$160
`
`$140
`
`$120
`
`$100
`
`$80
`
`$60
`
`$40
`
`$20
`
`$0
`
`12/04
`
`12/05
`
`12/06
`
`12/07
`
`12/08
`
`12/09
`
`comparison of 5-year cumulative total return*
`
`Allergan, Inc.
`
`S&P 500
`
`NYSE Arca Pharmaceutical
`
`Old Peer Group
`
`New Peer Group
`
`* $100 invested on 12/31/04 in stock or index,
`including reinvestment of dividends. Fiscal year
`ending December 31. The 16 companies
`comprising the customized peer group include:
`Abbott Laboratories, Alcon, Inc., Amgen Inc.,
`Biogen Idec Inc., Bristol-Myers Squibb
`Company, Celgene Corporation, Cephalon, Inc.,
`Eli Lilly and Company, Endo Pharmaceuticals
`Holdings Inc., Forest Laboratories, Inc.,
`Genzyme Corporation, Gilead Sciences, Inc.,
`Johnson & Johnson, Medicis Pharmaceutical
`Corporation, St. Jude Medical, Inc. and Stryker
`Corporation. Revisions to the new peer group
`include removing Genentech, Inc., Mentor
`Corporation, Sepracor Inc. and Wyeth and
`adding Abbott Laboratories, Bristol-Myers
`Squibb Company, St. Jude Medical, Inc. and
`Stryker Corporation.
`
`$763.8
`
`$837.4
`
`$774.0
`
`$371.6
`
`$3,683.8
`
`$3,502.3
`
`$3,105.0
`
`$2,638.5
`
`$2,272.8
`
`$1,113.3
`
`$682.5
`
`$793.2
`
`$746.9
`
`$424.6
`
`+17%
`
`+16%
`
`+18%
`
`+13%
`
`+5%
`
`+108%
`
`+8%
`
`–9%
`
`05
`
`06
`
`07
`
`08
`
`09
`
`05
`
`06
`
`07
`
`08
`
`09
`
`06
`
`07
`
`08
`
`09
`
`cash flow from operations
`(in millions of dollars)
`
`pharmaceutical sales growth
`(in millions of dollars)
`
`medical device sales growth
`(in millions of dollars)
`
`The adjusted amounts in 2007 exclude loss from discontinued operations of $1.7 million, 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 charges related to the streamlining of the Company’s European
`operations; 8) $0.4 million of interest income related to income tax settlements; 9) $23.2 million non-cash interest
`expense associated with amortization of convertible debt discount and related non-cash selling, general and
`administrative expenses of $0.1 million; and 10) $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 the 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
`charges 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 charges and $6.2 million of transition/
`duplicate operating costs related to the streamlining of the Company’s European operations; 7) $0.6 million
`restructuring charges 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
`charges 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 noncontrolling interest related to gain on sale of distribution business in
`India of $3.1 million, 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 charges and $5.6 million of transition/duplicate
`operating costs related to the streamlining of the Company’s European operations; 2) $12.9 million restructuring
`charges 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 charges 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 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.
`
`net sales by product line
`Specialty Pharmaceuticals:
`
`Eye Care Pharmaceuticals
`BOTOX®/Neuromodulator
`
`
`Skin Care
`
`Urologics
`
`
`Subtotal pharmaceuticals
`
`Other (primarily contract sales)
`
`
`Total specialty pharmaceuticals
`
`Medical Devices:
`
`Breast Aesthetics
`
`Obesity Intervention
`
`Facial Aesthetics
`
`
`Core medical devices
`
`Other
`
`
`Total medical devices
`
`Total product net sales
`
`product sold by location
`Domestic
`International
`
`
`
`$2,100.6
`1,309.6
`208.0
`65.6
` 3,683.8
`—
` 3,683.8
`
`
`287.5
`258.2
`218.1
`763.8
`—
` 763.8
`
`
`
`$2,009.1
` 1,310.9
` 113.7
` 68.6
` 3,502.3
`—
` 3,502.3
`
`
` 310.0
` 296.0
` 231.4
` 837.4
`—
` 837.4
`
`
`
`$1,776.5
` 1,211.8
` 110.7
` 6.0
` 3,105.0
`—
` 3,105.0
`
`
` 298.4
` 270.1
` 202.8
` 771.3
` 2.7
` 774.0
`
`
`
`$1,530.6
` 982.2
` 125.7
`—
` 2,638.5
`—
` 2,638.5
`
`
` 177.2
` 142.3
` 52.1
` 371.6
`—
` 371.6
`
`$1,321.7
` 830.9
` 120.2
`—
` 2,272.8
` 46.4
` 2,319.2
`
`—
`—
`—
`—
`—
`—
`
`$4,447.6
`
`$4,339.7
`
`$3,879.0
`
`$3,010.1
`
`$2,319.2
`
`
`65.4%
`34.6%
`
`
`64.6%
`35.4%
`
`
`65.7%
`34.3%
`
`
`67.4%
`32.6%
`
`67.5%
`32.5%
`
`The information for 2008 and 2007 in this Annual Report has been retrospectively adjusted to reflect the impact
`of the adoption in the first quarter of 2009 of updates to Financial Accounting Standards Board guidance related
`to the accounting for convertible debt instruments that may be settled fully or partially in cash upon conversion.
`The information for 2006 and 2005 was not retrospectively adjusted.
`(a)
` The adjusted amounts in 2009 exclude a net expense of $4.1 million for a change in estimated income taxes
`related to pre-acquisition periods associated with business combinations and uncertain tax positions included
`in prior year income tax filings and an income tax benefit of $6.7 million related to foreign research and
`development tax credits received for tax years prior to 2008, and the after-tax effects of the following:
`1) $124.4 million amortization of acquired intangible assets related to business combinations and asset
`acquisitions; 2) $78.6 million compensation expense from stock option modifications, $42.2 million
`restructuring charges and $2.3 million asset impairments and accelerated depreciation costs related to the
`restructuring plan announced in February 2009; 3) $24.5 million non-cash interest expense associated with
`amortization of convertible debt discount; 4) $24.6 million net gain on the sale of investments; 5) $10.0
`million for an upfront payment for the in-licensing of technology that has not achieved regulatory approval;
`6) $8.4 million restructuring charges and $14.5 million for the rollout of capitalized employee retention
`termination benefits and accelerated depreciation costs and one-time termination benefits related to the
`phased closure of the Arklow, Ireland, breast implant manufacturing plant; 7) $32.2 million of external costs
`associated with responding to the U.S. Department of Justice (DOJ) subpoena; 8) $14.0 million gain on
`settlement of a manufacturing and distribution agreement related to an eye care pharmaceuticals product;
`9) $18.0 million contribution to The Allergan Foundation; 10) $5.3 million of loss on the extinguishment of
`convertible debt; 11) a $0.3 million restructuring charge reversal related to the phased closure of the Fremont,
`California, collagen manufacturing plant and $0.6 million of restructuring charges related to the streamlining
`of the Company’s European operations; 12) $0.4 million of integration and transition costs related to the
`
`
`
`acquisition of Groupe Cornéal Laboratoires (Cornéal); 13) $0.8 million for the fair market value inventory
`adjustment rollout and $0.4 million of transaction related costs associated with the acquisition of Samil
`Allergan Ophthalmic Joint Venture Company; and 14) $13.6 million unrealized loss on derivative instruments.
` 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 charges 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 charges 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 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 DOJ 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®;
`12) $24.9 million non-cash interest expense associated with amortization of convertible debt discount
`and related non-cash selling, general and administrative expenses of $0.1 million; and 13) $14.8 million
`unrealized gain on derivative instruments.
`
`2
`
`allergan
`
`annual report 2009
`
`3
`
`APOTEX 1053, pg. 3
`
`

`

`CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
`AND RECONCILIATION OF NON-GAAP ADJUSTMENTS
`
`In millions, except per share data
`
`
`
`
`
`
`
`revenues
`Specialty pharmaceuticals product net sales
`Medical devices product net sales
`
`Product net sales
`Other revenues
`
`Total
`operating costs and expenses
`Cost of sales (excludes amortization of acquired
`
`intangible assets)
`Selling, general and administrative
`Research and development
`Amortization of acquired intangible assets
`Restructuring charges and asset write-offs, net
`
`Operating income (loss)
`Interest income
`Interest expense
`Unrealized (loss) gain on derivative instruments, net
`Gain on investments, net
`Other, net
`
`
`
`
`Earnings (loss) from continuing operations before
`
`income taxes
`Provision for income taxes
`
`year ended december 31, 2009
`non-gaap
`adjustments
`
`
` adjusted
`
`
`gaap
`
`Year Ended December 31, 2008
`Non-GAAP
`Adjustments
`
`
`GAAP
`
`
` Adjusted
`
`Year Ended December 31, 2007
`Non-GAAP
`Adjustments
`
`
` Adjusted
`
`
`GAAP
`
`Year Ended December 31, 2006
`Non-GAAP
`Adjustments
`
`
` Adjusted
`
`
`GAAP
`
`Year Ended December 31, 2005
`Non-GAAP
`Adjustments
`
`
`GAAP
`
` Adjusted
`
`$3,683.8
` 763.8
` 4,447.6
` 56.0
` 4,503.6
`
` $ —
`—
`—
`—
`—
`
`$3,683.8
` 763.8
` 4,447.6
` 56.0
` 4,503.6
`
`$3,502.3
` 837.4
` 4,339.7
` 63.7
` 4,403.4
`
` $ —
`—
`—
`—
`—
`
`$3,502.3
` 837.4
` 4,339.7
` 63.7
` 4,403.4
`
`$3,105.0
` 774.0
` 3,879.0
` 59.9
` 3,938.9
`
`$ —
`—
`—
`—
`—
`
`$3,105.0
` 774.0
` 3,879.0
` 59.9
` 3,938.9
`
`$2,638.5
` 371.6
` 3,010.1
` 53.2
` 3,063.3
`
` $ —
`—
`—
`—
`—
`
`$2,638.5
` 371.6
` 3,010.1
` 53.2
` 3,063.3
`
`$2,319.2
`—
` 2,319.2
` 23.4
` 2,342.6
`
` $ —
`—
`—
`—
`—
`
`$2,319.2
`—
` 2,319.2
` 23.4
` 2,342.6
`
`(20.2) (a)(b)(c)
` 730.7
`(91.9) (a)(c)(d)(e)(f)(g)(h) 1,829.6
`(31.1) (a)(b)(i)
` 674.9
`(124.4) (j)
` 21.9
`(50.9) (k) —
`
`
` 318.5
`—
` 24.5 (l)
` 13.6 (m)
`(24.6) (n)
` 5.3 (o)
` 18.8
`
` 1,246.5
` 7.0
`(52.4)
`—
`—
`(15.3)
`(60.7)
`
` 761.2
` 1,856.1
` 797.9
` 150.9
` 41.3
`
` 796.0
` 33.5
`(85.5)
` 14.8
`—
` 3.4
`(33.8)
`
` 740.6
`(20.6) (q)(r)(s)
`(47.3) (r)(s)(t)(u)(v)(w)(x) 1,808.8
`(69.0) (r)(y)(z)(aa)(ab)
` 728.9
`(129.6) (j)
` 21.3
`(41.3) (k)
`—
`
` 307.8
`—
` 24.9 (x)
`(14.8) (m)
`—
`—
` 10.1
`
` 1,103.8
` 33.5
`(60.6)
` —
`—
` 3.4
`(23.7)
`
` 750.9
` 1,921.5
` 706.0
` 146.3
` 50.9
`
` 928.0
` 7.0
`(76.9)
`(13.6)
` 24.6
`(20.6)
`(79.5)
`
` 848.5
` 224.7
`
` 673.2
` 1,680.2
` 718.1
` 121.3
` 26.8
`
` 719.3
` 65.3
`(94.6)
`(0.4)
`—
`(25.2)
`(54.9)
`
`(3.5) (ad)(ae)
`(23.3) (ae)(af)(ai)
`(72.0) (ag)
`(99.9) (j)
`(26.8) (k)
`
` 669.7
` 1,656.9
` 646.1
` 21.4
`—
`
` 225.5
`(0.4) (ah)
` 23.2 (ai)
` 0.4 (m)
`—
`—
` 23.2
`
` 944.8
` 64.9
`(71.4)
`—
`—
`(25.2)
`(31.7)
`
` 575.7
` 1,333.4
` 1,055.5
` 79.6
` 22.3
`
`(3.2)
` 48.9
`(60.2)
`(0.3)
` 0.3
`(5.0)
`(16.3)
`
` 526.9
`(48.8) (al)(am)
`(53.9) (al)(an)(ao)(ap) 1,279.5
`(580.0) (al)(ao)(aq)
` 475.5
`(58.6) (ar)
` 21.0
`(22.3) (k)
`—
`
` 763.6
` 4.9 (as)
`(4.9) (as)
` 0.3 (m)
`—
` 2.7 (at)
` 3.0
`
` 766.6
` 92.0 (au)
`
` 760.4
` 53.8
`(65.1)
`—
` 0.3
`(2.3)
`(13.3)
`
` 747.1
` 199.5
`
` 385.3
` 936.8
` 388.3
` 17.5
` 43.8
`
` 570.9
` 35.4
`(12.4)
` 1.1
` 0.8
` 3.4
` 28.3
`
` 599.2
` 192.4
`
`(0.5) (av)(aw)
` 10.0 (av)(ax)(ay)
`(4.5) (av)(az)
`—
`(43.8) (aw)
`
` 38.8
`(2.2) (ba)(bb)
`(7.3) (ba)
`(1.1) (m) —
`(0.8) (bc) —
`(3.5) (bb)
`(14.9)
`
` 23.9
`(22.4) (bd)
`
` 384.8
` 946.8
` 383.8
` 17.5
`—
`
` 609.7
` 33.2
`(19.7)
`
`(0.1)
` 13.4
`
` 623.1
` 170.0
`
`Earnings (loss) from continuing operations
`Loss from discontinued operations
`Net earnings (loss) attributable to noncontrolling interest
`
` 623.8
`—
` 2.5
`
` 337.3
` 108.8 (p)
`
` 228.5
`—
`—
`
` 1,185.8
` 333.5
`
` 852.3
`—
` 2.5
`
` 762.2
` 197.5
`
` 564.7
`—
` 1.6
`
` 317.9
` 94.5 (ac)
`
` 223.4
`—
`—
`
`Net earnings (loss) attributable to Allergan, Inc.
`Net earnings (loss) per share attributable to
`
`Allergan, Inc. stockholders
`
`
`Basic
`
`
`Diluted
`Total product net sales
`
`$ 621.3
`
`$ 228.5
`
`$ 849.8
`
`$ 563.1
`
`$ 223.4
`
`$ 2.05
`$ 2.03
`$4,447.6
`
`$ 0.75
`$ 0.75
`$ 106.4 (bf)
`
`$ 2.80
`$ 2.78
`$4,554.0
`
`$ 1.85
`$ 1.84
`$4,339.7
`
`$ 0.74
`$ 0.73
`$ (49.5) (bf)
`
` 1,080.1
` 292.0
`
` 788.1
`—
` 1.6
`
`$ 786.5
`
`$ 2.59
`$ 2.57
`$4,290.2
`
` 664.4
` 177.4
`
` 487.0
`(1.7)
` 0.5
`
` 248.7
` 62.3 (aj)
`
` 186.4
` 1.7 (ak)
`—
`
` 913.1
` 239.7
`
` 673.4
`—
` 0.5
`
`(19.5)
` 107.5
`
`(127.0)
`—
` 0.4
`
` 674.6
`—
`—
`
` 547.6
`—
` 0.4
`
` 406.8
`—
` 2.9
`
` 46.3
`—
`(3.1) (be)
`
` 453.1
`—
`(0.2)
`
`$ 484.8
`
`$188.1
`
`$ 672.9
`
`$ (127.4)
`
`$ 674.6
`
`$ 547.2
`
`$ 403.9
`
`$ 49.4
`
`$ 453.3
`
`$ 1.59
`$ 1.57
`$3,879.0
`
`$ 0.62
`$ 0.61
`$ (87.4) (bf)
`
`$ 2.21
`$ 2.18
`$3,791.6
`
`$ (0.43)
`$ (0.43)
`$3,010.1
`
`$ 2.29
`$ 2.26
`$ (15.2) (bf)
`
`$ 1.86
`$ 1.83
`$2,994.9
`
`$ 1.54
`$ 1.51
`$2,319.2
`
`$ 0.19
`$ 0.18
`$(22.3) (bf)
`
`$ 1.73
`$ 1.69
`$2,296.9
`
`The information for 2008 and 2007 in this Annual Report has been retrospectively adjusted to reflect the impact
`of the adoption in the first quarter of 2009 of updates to Financial Accounting Standards Board guidance related
`to the accounting for convertible debt instruments that may be settled fully or partially in cash upon conversion.
`The information for 2006 and 2005 was not retrospectively adjusted.
`“GAAP” refers to financial information presented in accordance with generally accepted accounting principles in
`the United States.
`In this Annual Report, Allergan included historical non-GAAP financial measures, as defined in Regulation G
`promulgated by the Securities and Exchange Commission, with respect to the year ended December 31, 2009,
`as well as the corresponding periods for 2008 through 2005. Allergan believes that its presentation of historical
`non-GAAP financial measures provides useful supplementary information to investors regarding its operational
`performance because it enhances an investor’s overall understanding of the financial performance and prospects
`for the future of Allergan’s core business activities by providing a basis for the comparison of results of core
`business operations between current, past and future periods. The presentation of historical non-GAAP financial
`measures is not meant to be considered in isolation from or as a substitute for results as reported under GAAP.
`In this Annual Report, Allergan reported the non-GAAP financial measures “non-GAAP earnings attributable to
`Allergan, Inc.” and all of its subcomponents and related “non-GAAP basic and diluted earnings per share attributable
`to Allergan, Inc. stockholders.” Allergan uses non-GAAP earnings to enhance the investor’s overall understanding of
`the financial performance and prospects for the future of Allergan’s core business activities. Non-GAAP earnings is
`one of the primary indicators management uses for planning and forecasting in future periods, including trending
`and analyzing the core operating performance of Allergan’s business from period to period without the effect of
`the non-core business items indicated. Management uses non-GAAP earnings to prepare operating budgets and
`forecasts and to measure Allergan’s performance against those budgets and forecasts on a corporate and segment
`level. Allergan also uses non-GAAP earnings for evaluating management performance for compensation purposes.
`Despite the importance of non-GAAP earnings in analyzing Allergan’s underlying business, the budgeting and
`forecasting process and designing incentive compensation, non-GAAP earnings has no standardized meaning defined
`by GAAP. Therefore, non-GAAP earnings has limitations as an analytical tool, and should not be considered in
`isolation, or as a substitute for analysis of Allergan’s results as reported under GAAP. Some of these limitations are:
`• it does not reflect cash expenditures, or future requirements, for expenditures relating to restructurings, and
`certain acquisitions, including severance and facility transition costs associated with acquisitions;
`• it does not reflect gains or losses on the disposition of assets associated with restructuring and business
`exit activities;
`• it does not reflect the tax benefit or tax expense associated with the items indicated;
`• it does not reflect the impact on earnings of charges or income resulting from certain matters Allergan considers
`not to be indicative of its on-going operations; and
`• other companies in Allergan’s industry may calculate non-GAAP earnings differently than it does, which may limit
`its usefulness as a comparative measure.
`Allergan compensates for these limitations by using non-GAAP earnings only to supplement net earnings (loss) on
`a basis prepared in conformance with GAAP in order to provide a more complete understanding of the factors and
`trends affecting its business. Allergan strongly encourages investors to consider both net earnings (loss) and cash
`flows determined under GAAP as compared to non-GAAP earnings, and to perform their own analysis, as appropriate.
`In this Annual Report, Allergan also reported sales performance using the non-GAAP financial measure of constant
`
`4
`
`(c)
`
`currency sales. Constant currency sales represent current year reported sales adjusted for the translation effect
`of changes in average foreign currency exchange rates between the current year and the corresponding prior year.
`Allergan calculates the currency effect by comparing adjusted current year reported amounts, calculated using
`the monthly average foreign exchange rates for the corresponding prior year, to the actual current year reported
`amounts. Management refers to growth rates in constant currency so that sales results can be viewed without the
`impact of changing foreign currency exchange rates, thereby facilitating period to period comparisons of Allergan’s
`sales. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant
`currency rates will be higher or lower, respectively, than growth reported at actual exchange rates.
`Reporting sales performance using constant currency sales has the limitation of excluding currency effects from
`the comparison of sales results over various periods, even though the effect of changing foreign currency exchange
`rates has an actual effect on Allergan’s operating results. Investors should consider these effects in their overall
`analysis of Allergan’s operating results.
`(a)
` Compensation expense from stock option modifications related to the restructuring plan announced in February
`2009 of $78.6 million, consisting of cost of sales of $5.0 million, selling, general and administrative expenses
`of $52.6 million and research and development expenses of $21.0 million.
`(b) Rollout of retention termination benefits and accelerated depreciation costs capitalized in inventory of $14.4
`million included in cost of sales and one-time termination benefits of $0.1 million included in research and
`development expenses related to the phased closure of the Arklow, Ireland, breast implant manufacturing facility.
` Fair market value inventory adjustment rollout of $0.8 million included in cost of sales and transaction related
`costs of $0.4 million included in selling, general and administrative expenses related to the acquisition of Samil
`Allergan Ophthalmic Joint Venture Company.
`(d) External costs of approximately $32.2 million associated with responding to the U.S. Department of Justice
`(DOJ) subpoena announced in a company press release on March 3, 2008.
`(e) Asset impairments and accelerated depreciation costs related to the 2009 restructuring plan of $2.3 million.
`(f)
`Integration and transition costs related to the acquisition of Groupe Cornéal Laboratoires (Cornéal) of $0.4 million.
`(g) Contribution to The Allergan Foundation of $18.0 million.
`(h) Gain on settlement of a manufacturing and distribution agreement of $14.0 million related to an eye care
`pharmaceuticals product.
` Upfront payment of $10.0 million for a license and development agreement with Pieris AG for technology that
`has not achieved regulatory approval.
`(j) Amortization of acquired intangible assets related to business combinations and asset acquisitions.
`(k) Net restructuring charges.
`(l) Non-cash interest expense associated with amortization of convertible debt discount.
`(m) Unrealized (loss) gain on the mark-to-market adjustment to derivative instruments.
`(n) Net gain on sale of investments.
`(o) Loss on extinguishment of convertible debt.
`(p) Total tax effect for non-GAAP pre-tax adjustments of $(106.2) million, a net expense of $4.1 million for a
`change in estimated income taxes related to pre-acquisition periods associated with business combinations
`and uncertain tax positions included in prior year filings and an income tax benefit of $(6.7) million related to
`foreign research and development tax credits.
`
`(i)
`
`(r)
`
`(s)
`
`(t)
`
`(y)
`
`(z)
`
`(q) Fair market value inventory adjustment rollout of $11.7 million related to the acquisition of Esprit Pharma
`Holding Company, Inc. (Esprit).
` One-time termination benefits, asset impairments and rollout of retention termination benefits and
`accelerated depreciation costs capitalized in inventory related to the phased closure of the Arklow, Ireland,
`breast implant manufacturing facility of $10.0 million, consisting of cost of sales of $8.8 million, selling,
`general and administrative expenses of $0.9 million and research and development expenses of $0.3 million.
` Integration and transition costs related to the acquisitions of Esprit and Cornéal, consisting of cost of sales of
`$0.1 million and selling, general and administrative expenses of $2.1 million.
` External costs of approximately $25.7 million associated with responding to DOJ subpoena and ACZONE®
`transaction costs of $0.6 million.
`(u) Settlement related to the termination of a distribution agreement in Korea of $13.2 million.
`(v)
` Gain on sale of technology and fixed assets of $0.9 million related to the phased closure of the collagen
`manufacturing facility in Fremont, California.
`(w) Impairment of intangible asset of $5.6 million related to the phase-out of a collagen product.
`(x)
` Non-cash interest expense associated with amortization of convertible debt discount of $24.9 million and
`related non-cash selling, general and administrative expenses of $0.1 million.
` Upfront payment of $13.9 million for in-licensing of Canadian SANCTURA® product rights that have not
`achieved regulatory approval.
` Upfront payment of $6.3 million for in-licensing of Asterand plc technology that has not achieved
`regulatory approval.
`(aa) Upfront payment of $41.5 million for a license and development agreement with Spectrum Pharmaceuticals, Inc.
`for technology that has not achieved regulatory approval.
`(ab) Upfront payment of $7.0 million for a license and development agreement with Polyphor Ltd. for technology
`that has not achieved regulatory approval.
`(ac) Total tax effect for non-GAAP pre-tax adjustments of $(95.9) million, U.S. state and federal deferred tax benefit
`from legal entity integration of Esprit and Inamed Corporation (Inamed) of $(2.4) million, and negative tax
`impa