Advanced medical Optics (NYSE:AVO)
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Advanced Medical Optics Announces Fourth-Quarter and Full Year
2004 Results
2004 Adjusted EPS Up 61% vs. 2003; Meeting Previous Company Guidance
SANTA ANA, Calif., Feb. 8 /PRNewswire-FirstCall/ -- Advanced Medical Optics,
Inc. (AMO) (NYSE:AVO), a global leader in ophthalmic surgical devices and eye
care products, today announced financial results for the fourth quarter and
full year of 2004 and the adoption of Emerging Issues Task Force (EITF) Issue
No. 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings Per
Share."
Under generally accepted accounting principles (GAAP), net earnings for the
fourth quarter were $10.1 million, or $0.26 per fully diluted share, compared
to $9.7 million, or $0.28 per fully diluted share, in the same quarter one year
ago. Adjusted net earnings for the quarter, which excludes non-GAAP
adjustments itemized in the table below, were $22.0 million, or $0.55 per fully
diluted share, compared to adjusted net earnings of $10.4 million, or $0.30 per
fully diluted share, in the fourth quarter of 2003.
For the full year, the company recorded a GAAP loss of $129.4 million, or a
loss of $3.89 per share, compared to GAAP net earnings of $10.4 million, or
$0.35 per fully diluted share, for 2003. Adjusted net earnings for the year,
which excludes non-GAAP adjustments itemized in the table below, were $46.4
million, or $1.24 per fully diluted share, compared to adjusted net earnings of
$24.0 million, or $0.77 per fully diluted share, in 2003.
Net revenue for the fourth quarter rose 34.6 percent, including a 5.3 percent
increase related to foreign currency, to $224.7 million, compared to the fourth
quarter of 2003, reflecting continued growth in the company's ophthalmic
surgical and eye care franchises, and the benefits of the Pfizer acquisition.
For 2004, net revenue was $742.1 million, compared to $601.5 million in 2003,
representing a 23.4 percent increase, including a 6.2 percent increase related
to foreign currency.
"Throughout 2004 our focused strategy continued to transform AMO into a
stronger global enterprise capable of delivering sustained growth," said Jim
Mazzo, president and chief executive officer. "Our 2004 sales and operating
results demonstrate that our strategy is working. We acquired and integrated
the Pfizer ophthalmic surgical business, while delivering a broad set of
technologically superior products that improve practitioner productivity and
patient outcomes. We also continued to streamline our global operations to
improve productivity and profitability and remained on track to execute our
comprehensive eye care manufacturing strategy by mid 2005. Building on our
momentum in 2004, we expect our planned acquisition of VISX to further expand
growth and position AMO as a powerful leader in the global medical technology
marketplace."
AMO announced in November 2004 that it had reached an agreement with VISX,
Incorporated, the global leader in laser vision correction, to acquire the
company for a combination of cash and stock. The transaction requires the
approval of both companies' shareholders. AMO continues to work toward closing
the transaction in the first quarter of 2005.
As previously announced, AMO expects the transaction to be neutral to its 2005
earnings-per-share guidance of $1.65 to $1.75, and expects 2006 earnings per
share to be in the range of $2.20 to $2.30. The company's earnings-per- share
guidance excludes any charges associated with the VISX acquisition, option
expensing or the unrealized gains or losses on derivative instruments.
Ophthalmic Surgical
Ophthalmic surgical revenue grew 56.0 percent in the fourth quarter, including
a 5.9 percent increase related to foreign currency, to $135.0 million, compared
to $86.5 million in the year-ago quarter. Quarterly highlights included:
* Total intraocular lens (IOL) sales rose 20.2 percent to $68.4 million,
compared to $56.9 million in the fourth quarter of 2003. The increase
reflects primarily the acquisition of the Pfizer ophthalmic surgical
business and the strength of the company's promoted IOL technologies,
the Tecnis(R) and Sensar(R) lenses. The Tecnis(R) lens, which AMO
acquired as part of the Pfizer ophthalmic surgical acquisition, has a
proprietary modified prolate design that reduces spherical aberrations
and improves contrast sensitivity. It is the only lens on the market
with a unique FDA claim for improved functional vision. The Sensar(R)
lens is AMO's top selling IOL with a patented edge design to reduce
halos, glare and the incidence of posterior capsular opacification.
* Sales of viscoelastics rose more than nine-fold during the quarter to
$37.1 million, compared to $4.0 million one year ago. This rise
reflected the addition of the Healon(R) family of viscoelastics, which
AMO acquired as part of the Pfizer transaction, as well as continued
growth of AMO's existing Vitrax(R) brand.
* Sales of phacoemulsification products grew 4.4 percent during the
quarter to $20.9 million, compared to $20.0 million one year ago.
Growth was led by the company's Sovereign(R) Compact(TM) system with
WhiteStar(TM) technology, as well as recurring revenue from the
consumable surgical packs used during every phacoemulsification
procedure performed with an AMO machine.
For the full year 2004, ophthalmic surgical revenue grew 34.9 percent,
including a 6.3 percent increase related to foreign currency, to $413.4
million, compared to $306.5 million in 2003.
Eye Care
Eye care revenue growth remained strong in the fourth quarter, rising 11.5
percent, including a 4.6 percent increase related to foreign currency, to $89.7
million, compared to $80.5 million in 2003's fourth quarter.
Sales of the company's flagship COMPLETE(R) branded product line were up 4.9
percent for the quarter and 17.6 percent for the full year. AMO's COMPLETE(R)
MoisturePLUS(TM), the first multipurpose solution with two artificial tear
ingredients, is designed to alleviate discomfort and dryness for contact lens
wearers.
For the full year 2004, eye care revenue grew 11.4 percent, including a 6.2
percent increase related to foreign currency, to $328.7 million, compared to
$294.9 million in 2003.
Additional Operating Results
The following are additional operating highlights for the fourth quarter and
full year of 2004. Please refer below to the itemized list and reconciliation
of non-GAAP adjustments that impacted operating results during the period.
* Gross profit for the fourth quarter of 2004 was $131.1 million and
included a $14.1 million manufacturing profit capitalized in inventory
and expensed related to the Pfizer ophthalmic surgical acquisition.
In 2003's fourth quarter, the company's gross profit was
$102.9 million. For 2004, the gross profit was $435.9 million and
included a $28.1 million manufacturing profit capitalized in inventory
and expensed related to the Pfizer ophthalmic surgical acquisition.
In 2003, the company's gross profit was $373.6 million. The year-
over-year growth in gross profit reflected the increase in revenue and
continued execution of the company's manufacturing strategy. The
adjusted gross profit margin for the fourth quarter of 2004, which
excludes non-GAAP adjustments itemized in the table below, was
64.6 percent, compared to 61.6 percent in the same period last year.
For the year, the adjusted gross profit margin, which excludes
non-GAAP adjustments itemized in the table below, was 62.5 percent,
compared to 62.1 percent in 2004.
* Research and development expense in the fourth quarter of 2004 was
$14.6 million, up 40 percent from $10.4 million in the same period
last year. For 2004, R&D expense was $73.7 million and included a
$28.1 million in-process R&D charge related to the Pfizer ophthalmic
surgical acquisition. For 2003, the company recorded R&D expenses of
$37.4 million.
* SG&A expense for the fourth quarter was $92.6 million, or 41.2 percent
of sales. In the fourth quarter of 2003, the company had SG&A
expenses of $71.6 million, or 42.9 percent of sales. For 2004, SG&A
expense stood at $329.2 million and included $2.3 million in certain
charges related to the Pfizer ophthalmic surgical acquisition. SG&A
expense for 2003 was $276.7 million.
* Operating income for the fourth quarter was $23.9 million and included
$14.1 million in certain charges related to the Pfizer ophthalmic
surgical acquisition. In the fourth quarter of 2003, operating income
was $20.9 million. For 2004, operating income was $33.0 million and
included $58.5 million in certain charges related to the Pfizer
ophthalmic surgical acquisition. In 2003, the company reported
$59.5 million in operating income. The adjusted operating margin for
the fourth quarter of 2004, which excludes non-GAAP adjustments
itemized in the table below, was 16.9 percent, compared to
12.5 percent in the same period last year. For the year, the adjusted
operating margin, which excludes non-GAAP adjustments itemized in the
table below, was 12.3 percent, compared to 9.9 percent in 2003.
* During the quarter, AMO reduced its total debt outstanding to
$552.6 million, from $568.4 million at the end of the third quarter.
This reduction reflects the repayment of a portion of the $250 million
Term B loan and the exchange of approximately $4.8 million principal
amount of 3.5 percent convertible bonds during the quarter.
Adoption of EITF 04-8
The company adopted EITF Issue No. 04-8 with respect to its 3.5 percent
convertible senior subordinated notes issued June 24, 2003. Under EITF 04-8,
these securities must be included in the diluted EPS calculation retroactively
to the date of issue.
Adoption of EITF 04-8 had the effect of reducing AMO's adjusted diluted
earnings per share for the first quarter of 2004 by $0.01, thus reducing its
full-year 2004 adjusted diluted earnings per share by $0.01, to $1.24. Adoption
of EITF 04-8 also resulted in a $0.03 reduction to the company's 2003 adjusted
earnings per share.
Under EITF 04-8, AMO's 2.5 percent convertible senior subordinated notes issued
on June 22, 2004 do not impact 2004 adjusted diluted earnings per share because
the company has irrevocably elected to settle the principal amount of the notes
in cash. Therefore, any future dilutive effect of the 2.5 percent notes will
be calculated under the net share settlement method.
Live Webcast & Audio Replay
AMO will host a live Web cast to discuss fourth quarter and full year results,
and future expectations today at 10:00 a.m. EST. To participate, visit the
company's Investors/Media site at http://www.amo-inc.com/. Audio replay will
be available at approximately noon EST today and will continue through midnight
EST on Tuesday, February 15, at 800-642-1687 (Passcode 3719440) or by visiting
http://www.amo-inc.com/.
GAAP to Non-GAAP Reconciliation
Our disclosure of gross profit margin, operating income, operating margin, net
earnings (loss) and net earnings (loss) per share for the quarter and year
ended December 31, 2004 and our disclosure of net earnings and net earnings per
share for the quarter and year ended December 31, 2003 contained in this news
release were prepared in accordance with GAAP and is accompanied by disclosures
that are not prepared in conformity with GAAP. These non-GAAP disclosures are
adjusted for certain non-GAAP adjustments contained in the GAAP presentations.
Management uses each of adjusted gross profit margin, operating income,
operating margin, net earnings and net earnings per share to conduct a more
meaningful, consistent comparison of the company's operating results for the
periods presented on a basis consistent with management's means of evaluating
operating performance, and to provide investors additional information that
allows them to reasonably set their own expectations as to the future
performance of the Company and also to determine how the Company's current
performance compared to their own expectations. Additionally, adjusted gross
profit margin, operating income, operating margin and earnings are the primary
indicators management uses for planning and forecasting in future periods. The
majority of the non-GAAP adjustments are related to specific events the timing
of which are not under the direct control of management's operating team which
limit the Company's ability to include them in the annual budgeting or
forecasting process. The non-GAAP adjustments, and the basis for excluding
them, are outlined below:
Manufacturing Profit Capitalized and Expensed: The Company incurred
manufacturing profit capitalized in inventory and expensed during 2004 as a
result of purchase accounting applied to the acquisition of the Pfizer
ophthalmic surgical business. The effect of this amount was an increase to
cost of sales and a reduction of the Company's gross profit margin. The amount
was excluded from the non-GAAP gross profit as it related solely to the
acquisition of the Pfizer products. In evaluating the overall operating cost
of sales and gross profit performance, management excluded this item as it was
not reflective of the gross profit expected in the future nor did it provide a
meaningful evaluation of current versus past performance. The adjusted gross
profit margin provides investors a more meaningful comparison of the historical
gross profit margin to their internally developed expectations for the Company.
Given the unusual nature of this item relative to the operating results for
the period presented, this item has been excluded from the non- GAAP
disclosure.
Distributor Termination: The Company incurred a charge to terminate a
distributor contract following the decision to move to a direct sales model in
Belgium as a result of the acquisition of the Pfizer ophthalmic surgical
business. As a direct result of the Pfizer acquisition, the Company terminated
the distributor contract in Belgium. This had the effect of increasing the
selling expenses in 2004. In management's evaluation of the business
performance, this item was not included as it did not relate to the performance
of the individual business units responsible for controlling and monitoring the
selling costs. Management believes this adjustment to operating income is
useful to investors because this cost was also not indicative of the level of
selling costs to be incurred in fiscal year 2005. Accordingly, the amount was
excluded in order to enable investors to evaluate the current performance
compared to the past, which would then assist investors in their evaluation of
the past performance as well as assist in the development of future
expectations. Given the unusual nature of this item relative to the operating
results for the period presented, this item has been excluded from the non-GAAP
disclosure.
Severance: The Company incurred a charge related to severance paid to certain
AMO employees upon completion of the Pfizer acquisition. As a direct result of
the Pfizer acquisition, the Company terminated certain AMO employees that were
made redundant. This had the effect of increasing the selling expenses in
2004. In management's evaluation of the business performance, this item was
not included in operating income as it did not relate to the performance of the
individual business units responsible for controlling and monitoring the
selling costs. Management believes this adjustment to operating income is
useful to investors because this cost was also not indicative of the level of
selling costs to be incurred in fiscal year 2005. Accordingly, the amount was
excluded in order to evaluate the current performance compared to the past,
which would then assist investors in their evaluation of the past performance
as well as assist in the development of future expectations. Given the unusual
nature of this expense relative to the operating results for the period
presented, this expense has been excluded from the non-GAAP disclosure.
In-process R&D: The Company incurred a charge associated with in-process R&D
expenses as a result of purchase accounting applied to the acquisition of the
Pfizer ophthalmic surgical business. The in-process research and development
charge was excluded from the 2004 results as it represents an amount that was
not budgeted or forecasted as part of the Company's operating results and was
directly related to the Pfizer acquisition. Due to the method of determining
this amount, it is not possible for the Company to predict such an amount when
preparing annual forecasts upon which to evaluate its results. Management
believes this adjustment to operating income is useful to investors because
otherwise the GAAP measure is not an amount that is indicative of the Company's
current research and development spending and excluding this item assists
investors in evaluating actual research and development spending as well as
assist in the development of future expectations. Given the unusual nature of
this item relative to the operating results for the period presented, this item
has been excluded from the non-GAAP disclosure.
Recapitalization and Debt Retirement: The Company incurred charges and costs
associated with the prepayment of a Japan term loan, prepayment of $55.0
million of the Term B loan and the exchange for stock and cash of approximately
$131.4 million in aggregate principal amount of its 3.5 percent convertible
senior subordinated notes in 2004 and charges and costs associated with the
prepayment of a term loan and the repurchase of $130.0 million of 9.25 percent
senior subordinated notes in June 2003. In order to effect the acquisition of
the Pfizer ophthalmic surgical business, the Company underwent a
recapitalization of its capital structure. This resulted in significant cash
and non-cash charges to expense that were not forecasted in management's
preparation of its budget and forecasts. The Company believes these
adjustments to net earnings (loss) are useful to investors because these
charges were not indicative of the cost of capital that the Company had
previously incurred or were reasonably expected to incur in the future. By
excluding these amounts, the Company is able to compare its current and ongoing
cost of capital to budgeted and forecasted amounts. This also provides
investors a means of evaluating the expectations that they may have developed
in evaluating the Company's annual performance. Given the unusual nature of
these expenses relative to the operating results for the period presented,
these results have been excluded from the non-GAAP disclosure.
Derivative Instruments: The Company recorded an unrealized loss related to
foreign currency fluctuations on currency derivatives in 2003 and 2004. Due to
the unpredictability of foreign currency fluctuations and the value of future
foreign currency derivatives at a point in time, management does not budget or
forecast unrealized gains or losses on currency derivatives. This loss was
excluded from the non-GAAP disclosure in order to measure and compare the
company's regional and global performance absent the impact of foreign currency
fluctuations on currency derivatives due to the unpredictability of foreign
currency fluctuations. The Company believes this adjustment to net earnings
(loss) is useful to investors because without the adjustment, the impact of
foreign currency fluctuations, given its unpredictable nature and inability of
the Company to influence it, could distort the Company's performance.
Our guidance for earnings per share for 2005 and 2006 is provided on a non-GAAP
basis. The company's earnings-per-share guidance excludes any charges
associated with the VISX acquisition, option expensing or the unrealized gains
or losses on derivative instruments. The company believes this presentation is
useful to investors to conduct a more meaningful, consistent comparison of the
company's ongoing operating results. The company is not able to provide a
reconciliation of projected adjusted earnings per share to expected reported
results due to the unknown effect and potential significance of option
expensing, foreign currency fluctuations on the fair value of its currency
derivatives and unknown transaction costs.
About Advanced Medical Optics
Advanced Medical Optics, Inc. (AMO) is a global leader in the development,
manufacturing and marketing of ophthalmic surgical and eye care products. The
company focuses on developing a broad suite of innovative technologies and
devices to address a wide range of eye disorders. Products in the ophthalmic
surgical line include intraocular lenses, phacoemulsification systems,
viscoelastics, microkeratomes and related products used in cataract and
refractive surgery. AMO owns or has the rights to such ophthalmic surgical
product brands as Phacoflex(R), Clariflex(R), Array(R), Sensar(R), CeeOn(R),
Tecnis(R) and Verisyse(TM) intraocular lenses, Sovereign(R) and Sovereign(R)
Compact(TM) phacoemulsification systems with WhiteStar(TM) technology,
Amadeus(TM) and Amadeus(TM) II microkeratomes, Healon(R) and Vitrax(R)
viscoelastics, and the Baerveldt(R) glaucoma shunt. Products in the contact
lens care line include disinfecting solutions, daily cleaners, enzymatic
cleaners and lens rewetting drops. Among the contact lens care product brands
the company possesses are COMPLETE(R) Moisture PLUS(TM), COMPLETE(R) Blink-N-
Clean(R), Consept(R)F, Consept(R) 1 Step, Oxysept(R) 1 Step, UltraCare(R),
Ultrazyme(R), Total Care(R) and blink(TM) branded products. Amadeus is a
licensed product of, and a trademark of, SIS, Ltd. AMO is based in Santa Ana,
California, and employs approximately 2,800 worldwide. The company has
operations in about 20 countries and markets products in approximately 60
countries. For more information, visit the company's Web site at
http://www.amo-inc.com/.
Forward-Looking Statements
This press release contains forward-looking statements and forecasts about AMO
and its businesses, such as management's revenue and earnings estimates for
2005 and 2006. Because forecasts are inherently estimates that cannot be made
with precision, the company's performance may at times differ from its
estimates and targets. The company often does not know what the actual results
will be until after a quarter'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.
Statements in this press release regarding financial guidance and the VISX
transaction, Mr. Mazzo's statements and any other statements in this press
release that refer to AMO's estimated or anticipated future results, are
forward-looking statements. All forward-looking statements in this press
release reflect AMO's current analysis of existing trends and information and
represent AMO'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 AMO's businesses including but not limited to uncertainties
associated with receiving necessary approvals and meeting conditions necessary
to close the VISX transaction within the first quarter of 2005 if at all, risks
associated with the integration and operation of the acquired businesses, and
changing competitive, regulatory and market conditions; the performance of new
products and the continued acceptance of current products; the execution of
strategic initiatives and alliances; AMO's ability to maintain a sufficient
supply of products and successfully transition its manufacturing of products
previously supplied by Allergan; product liability claims or quality issues;
litigation; and the uncertainties associated with intellectual property
protection for the company's products. In addition, matters generally
affecting the domestic and global economy, such as changes in interest and
currency exchange rates, can affect AMO's results. Therefore, the reader is
cautioned not to rely on these forward-looking statements. AMO disclaims any
intent or obligation to update these forward-looking statements.
Additional information concerning these and other risk factors may be found in
previous financial press releases issued by AMO. AMO's public periodic filings
with the Securities and Exchange Commission, including the discussion under the
heading "Certain Factors and Trends Affecting AMO and its Businesses" in AMO's
2003 Form 10-K and Form 10-Q filed in November 2004 include information
concerning these and other risk factors. Copies of press releases and
additional information about AMO are available at http://www.amo-inc.com/, or
you can contact the AMO Investor Relations Department by calling 714-247-8348.
For further information please contact: investors, Sheree Aronson,
+1-714-247-8290, , or media, Steve Chesterman, +1-714-247-8711, , both of
Advanced Medical Optics, Inc.
Advanced Medical Optics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Year Ended
(in thousands, except Dec. 31, Dec. 31, Dec. 31, Dec. 31,
per share amounts) 2004 2003 2004 2003
Net sales:
Ophthalmic surgical $134,992 $86,526 $413,422 $306,508
Eye care 89,693 80,463 328,677 294,945
224,685 166,989 742,099 601,453
Cost of sales 93,586 64,049 306,164 227,811
Gross profit 131,099 102,940 435,935 373,642
Selling, general and
administrative 92,577 71,588 329,197 276,695
Research and development 14,574 10,417 73,716 37,413
Operating income 23,948 20,935 33,022 59,534
Non-operating expense
(income):
Interest expense 7,606 3,782 26,933 24,224
Unrealized loss
on derivative
instruments 1,233 305 403 246
Other, net (1,075) 641 126,902 17,802
7,764 4,728 154,238 42,272
Earnings (loss) before
income taxes 16,184 16,207 (121,216) 17,262
Provision for
income taxes 6,051 6,462 8,154 6,905
Net earnings (loss) $10,133 $9,745 $(129,370) $10,357
Net basic earnings
(loss) per share $0.28 $0.33 $(3.89) $0.36
Net diluted earnings
(loss) per share $0.26 $0.28(A) $(3.89) $0.35(B)
Weighted average number
of shares outstanding:
Basic 36,828 29,340 33,284 29,062
Diluted 39,721 37,551 33,284 29,644
(A) Includes the after-tax impact of $74 and $889 of interest expense on
the 3.5% convertible notes for the three months ended December 31,
2004 and 2003, respectively.
(B) Excludes the impact of the 3.5% convertible notes as the effect would
be anti-dilutive.
Advanced Medical Optics, Inc.
Global Sales
(Unaudited)
(USD in thousands)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
Geographic sales:
Americas $64,605 $47,207 $217,583 $178,387
Europe/Africa/Middle East 82,389 60,614 263,723 212,096
Japan 56,664 45,019 191,535 164,113
Asia Pacific 21,027 14,149 69,258 46,857
$224,685 $166,989 $742,099 $601,453
Product sales:
Ophthalmic surgical:
Intraocular lenses (A) $68,360 $56,860 $234,512 $205,128
Viscoelastics (B) 37,147 4,005 74,283 15,233
Phacoemulsification
products 20,888 20,005 75,172 65,428
Other (C) 8,597 5,656 29,455 20,719
Total Ophthalmic surgical 134,992 86,526 413,422 306,508
Eye care:
Multi-purpose solutions 44,843 36,839 156,809 137,506
Hydrogen-peroxide
solutions 26,338 26,838 101,900 94,415
Other 18,512 16,786 69,968 63,024
Total Eye care 89,693 80,463 328,677 294,945
$224,685 $166,989 $742,099 $601,453
(A) Includes acquired Pfizer IOL sales of $9,240 and $16,072 in the three
months and year ended December 31, 2004, respectively.
(B) Includes Healon sales of $33,001 and $57,437 in the three months and
year ended December 31, 2004, respectively.
(C) Includes Baerveldt shunt sales of $1,268 and $2,272 in the three
months and year ended December 31, 2004, respectively.
Three Months Ended
Dec. 31, Dec. 31, % Exchange
2004 2003 % Growth Impact
Net sales:
Ophthalmic surgical $134,992 $86,526 56.0% 5.9%
Eye care 89,693 80,463 11.5% 4.6%
$224,685 $166,989 34.6% 5.3%
Year Ended
Dec. 31, Dec. 31, % Exchange
2004 2003 % Growth Impact
Net sales:
Ophthalmic surgical $413,422 $306,508 34.9% 6.3%
Eye care 328,677 294,945 11.4% 6.2%
$742,099 $601,453 23.4% 6.2%
Unaudited Reconciliation of GAAP to Non-GAAP Information
Quarter Ended December 31, 2004
Non-GAAP Adjustments
Manufacturing
(in thousands, except Q4 2004 % of Net Profit
per share amounts) GAAP Sales Expensed
Net sales:
Ophthalmic surgical $134,992 $--
Eye care 89,693
224,685
Cost of sales 93,586 (14,064)
Gross profit 131,099 58.3% 14,064
Selling, general and
administrative 92,577
Research and development 14,574
Operating income 23,948 10.7% 14,064
Non-operating expense
(income):
Interest expense 7,606
Unrealized loss on
derivative instruments 1,233
Other, net (1,075)
7,764 --
Earnings before income
taxes 16,184 14,064
Provision for income
taxes 6,051 4,748
Net earnings $10,133 $9,316
Net basic earnings
per share $0.28
Net diluted earnings
per share $0.26(A)
Weighted average number
of shares outstanding:
Basic 36,828
Diluted 39,721
(A) Includes the after-tax impact of $74 of interest expense on the
3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Quarter Ended December 31, 2004
Non-GAAP Adjustments
Write-off of Unrealized Loss
(in thousands, except % of Net Debt Issuance on Derivative
per share amounts) Sales Costs Instruments
Net sales:
Ophthalmic surgical $-- $--
Eye care
Cost of sales
Gross profit 6.3%
Selling, general and
administrative
Research and development
Operating income 6.3%
Non-operating expense
(income):
Interest expense (1,345)
Unrealized loss on
derivative instruments (1,233)
Other, net
(1,345) (1,233)
Earnings before income
taxes 1,345 1,233
Provision for income
taxes 538 493
Net earnings $807 $740
Net basic earnings
per share
Net diluted earnings
per share
Weighted average number
of shares outstanding:
Basic
Diluted
(A) Includes the after-tax impact of $74 of interest expense on the
3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Quarter Ended December 31, 2004
Non-GAAP Adjustments
Charge on
(in thousands, except Convertible Q4 2004 % of Net
per share amounts) Note Exchanges Adjusted Sales
Net sales:
Ophthalmic surgical $-- $134,992
Eye care 89,693
224,685
Cost of sales 79,522
Gross profit 145,163 64.6%
Selling, general and
administrative 92,577
Research and development 14,574
Operating income 38,012 16.9%
Non-operating expense
(income):
Interest expense 6,261
Unrealized loss on
derivative instruments --
Other, net (973) (2,048)
(973) 4,213
Earnings before income
taxes 973 33,799
Provision for income
taxes -- 11,830
Net earnings $973 $21,969
Net basic earnings
per share $0.60
Net diluted earnings
per share $0.55(A)
Weighted average number
of shares outstanding:
Basic 36,828
Diluted 39,721
(A) Includes the after-tax impact of $74 of interest expense on the
3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Quarter Ended December 31, 2003
Non-GAAP
Adjustments
Unrealized
% of Loss on % of
(in thousands, except Q4 2003 Net Derivative Q4 2003 Net
per share amounts) GAAP Sales Instruments Adjusted Sales
Net sales:
Ophthalmic surgical $86,526 $-- $86,526
Eye care 80,463 80,463
166,989 166,989
Cost of sales 64,049 64,049
Gross profit 102,940 61.6% 102,940 61.6%
Selling, general and
administrative 71,588 71,588
Research and
development 10,417 10,417
Operating income 20,935 12.5% 20,935 12.5%
Non-operating expense
(income):
Interest expense 3,782 3,782
Unrealized loss on
derivative instruments 305 (305) --
Other, net 641 641
4,728 (305) 4,423
Earnings before income
taxes 16,207 305 16,512
Provision for income
taxes 6,462 (327) 6,135
Net earnings $9,745 $632 $10,377
Net basic earnings
per share $0.33 $0.35
Net diluted earnings
per share $0.28(A) $0.30(A)
Weighted average number
of shares outstanding:
Basic 29,340 29,340
Diluted 37,551 37,551
(A) Includes the after-tax impact of $889 of interest expense on the
3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Year Ended December 31, 2004
Non-GAAP Adjustments
(in thousands, Manufacturing Distributor
except per % of Net Profit % of Net Termination
share amounts) 2004 GAAP Sales Expensed Sales Charge
Net sales:
Ophthalmic
surgical $413,422 $-- $--
Eye care 328,677
742,099
Cost of sales 306,164 (28,128)
Gross profit 435,935 58.7% 28,128 3.8%
Selling,
general and
administrative 329,197 (1,585)
Research and
development 73,716
Operating
income 33,022 4.4% 28,128 3.8% 1,585
Non-operating
expense
(income):
Interest
expense 26,933
Unrealized
loss on
derivative
instruments 403
Other, net 126,902
154,238 -- --
Earnings (loss)
before income
taxes (121,216) 28,128 1,585
Provision for
income taxes 8,154 9,006 539
Net earnings
(loss) $(129,370) $19,122 $1,046
Net basic
earnings (loss)
per share $(3.89)
Net diluted
earnings (loss)
per share $(3.89)(A)
Weighted average
number of shares
outstanding:
Basic 33,284
Diluted 33,284
(A) Excludes the impact of the 3.5% convertible notes as the effect
would be anti-dilutive.
(B) Includes the after-tax impact of $2,008 of interest expense on
the 3.5% convertible notes.
(C) Includes the aggregate dilutive effect of approximately 5.7
million shares for stock options and the 3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Year Ended December 31, 2004
Non-GAAP Adjustments
(in thousands,
except per % of Net AMO % of Net % of Net
share amounts) Sales Severance Sales IPR&D Sales
Net sales:
Ophthalmic
surgical $-- $--
Eye care
Cost of sales
Gross profit
Selling, general
and administrative (734)
Research and
development (28,100)
Operating income 0.2% 734 0.1% 28,100 3.8%
Non-operating
expense (income):
Interest expense
Unrealized loss
on derivative
instruments
Other, net -- --
Earnings (loss)
before income taxes 734 28,100
Provision for
income taxes 176 --
Net earnings
(loss) $558 $28,100
Net basic
earnings (loss)
per share
Net diluted
earnings (loss)
per share
Weighted average
number of shares
outstanding:
Basic
Diluted
(A) Excludes the impact of the 3.5% convertible notes as the effect
would be anti-dilutive.
(B) Includes the after-tax impact of $2,008 of interest expense on
the 3.5% convertible notes.
(C) Includes the aggregate dilutive effect of approximately 5.7
million shares for stock options and the 3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Year Ended December 31, 2004
Non-GAAP Adjustments
Write-off Unrealized Charge on
(in thousands, of Debt Loss on Convertible % of
except per Issuance Derivative Note 2004 Net
share amounts) Costs Instruments Exchanges Adjusted Sales
Net sales:
Ophthalmic
surgical $-- $-- $-- $413,422
Eye care 328,677
742,099
Cost of sales 278,036
Gross profit 464,063 62.5%
Selling, general
and administrative 326,878
Research and
development 45,616
Operating
income 91,569 12.3%
Non-operating
expense (income):
Interest
expense (6,500) 20,433
Unrealized loss
on derivative
instruments (403) --
Other, net (127,175) (273)
(6,500) (403) (127,175) 20,160
Earnings (loss)
before income taxes 6,500 403 127,175 71,409
Provision for
income taxes 2,600 161 4,357 24,993
Net earnings
(loss) $3,900 $242 $122,818 $46,416
Net basic earnings
(loss) per share $1.39
Net diluted earnings
(loss) per share $1.24(B)
Weighted average
number of shares
outstanding:
Basic 33,284
Diluted 38,968(C)
(A) Excludes the impact of the 3.5% convertible notes as the effect
would be anti-dilutive.
(B) Includes the after-tax impact of $2,008 of interest expense on
the 3.5% convertible notes.
(C) Includes the aggregate dilutive effect of approximately 5.7
million shares for stock options and the 3.5% convertible notes.
Unaudited Reconciliation of GAAP to Non-GAAP Information
Year Ended December 31, 2003
Non-GAAP Adjustments
Unrealized
Loss on
Write-off Deriva- Debt
(in thousands, % of of Debt tive Retire- % of
except per 2003 Net Issuance Instru- ment 2003 Net
share amounts) GAAP Sales Costs ments Charges Adjusted Sales
Net sales:
Ophthalmic
surgical $306,508 $-- $-- $-- $306,508
Eye care 294,945 294,945
601,453 601,453
Cost of sales 227,811 227,811
Gross profit 373,642 62.1% 373,642 62.1%
Selling,
general and
adminis-
trative 276,695 276,695
Research and
development 37,413 37,413
Operating
income 59,534 9.9% 59,534 9.9%
Non-operating
expense
(income):
Interest
expense 24,224 (5,752) 18,472
Unrealized
loss on
derivative
instruments 246 (246) --
Other, net 17,802 (16,754) 1,048
42,272 (5,752) (246) (16,754) 19,520
Earnings before
income taxes 17,262 5,752 246 16,754 40,014
Provision for
income taxes 6,905 2,301 98 6,702 16,006
Net earnings $10,357 $3,451 $148 $10,052 $24,008
Net basic
earnings
per share $0.36 $0.83
Net diluted
earnings
per share $0.35(A) $0.77(B)
Weighted
average
number of
shares
outstanding:
Basic 29,062 29,062
Diluted 29,644 33,548(C)
(A) Excludes the impact of the 3.5% convertible notes as the effect would
be anti-dilutive.
(B) Includes the after-tax impact of $1,765 of interest expense on the
3.5% convertible notes.
(C) Includes the aggregate dilutive effect of approximately 4.5 million
shares for stock options and the 3.5% convertible notes.
Advanced Medical Optics, Inc.
Other Financial Information
(Unaudited)
(USD in thousands)
December 31, December 31,
2004 2003
Cash and equivalents $49,455 $46,104
Trade receivables, net 189,465 130,423
Inventories 85,030 41,596
Working capital, excluding cash 133,447 91,087
Long-term debt, aggregate principal amount 552,593 233,283
Three Months Ended
December 31, December 31,
2004 2003
Depreciation and amortization $8,648 $3,929
Capital expenditures 11,824 8,558
Year Ended
December 31, December 31,
2004 2003
Depreciation and amortization $23,616 $15,547
Capital expenditures, excluding acquisitions 26,685 20,250
DATASOURCE: Advanced Medical Optics, Inc.
CONTACT: investors, Sheree Aronson, +1-714-247-8290,
, or media, Steve Chesterman, +1-714-247-8711,
, both of Advanced Medical Optics, Inc.
Web site: http://www.amo-inc.com/