<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
______________________________________________________________________________
(Mark One)
--- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934
---
For the quarterly period ended June 30, 1994.........................
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934.
<TABLE>
<S> <C>
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
JUNE 30, 1994 1-10269
ALLERGAN, INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
95-1622442
</TABLE>
2525 DUPONT DRIVE, IRVINE, CALIFORNIA 92715
TELEPHONE NUMBER 714/752-4500
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) X yes no
--- ---
(2) X yes no
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of July 29, 1994 there were 63,348,358 shares of common stock outstanding.
1
<PAGE> 2
ALLERGAN, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1994
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(A) Consolidated Statements of Earnings - 3
Three Months and Six Months Ended
June 30, 1994 and 1993
(B) Consolidated Balance Sheets - 4
June 30, 1994 and December 31, 1993
(C) Consolidated Statements of Cash Flows - 5
Six Months Ended June 30, 1994 and 1993
(D) Notes to Consolidated Financial Statements 6-7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-10
PART II - OTHER INFORMATION
ITEM 5 11
ITEM 6 11
Signature 12
Exhibits
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Allergan, Inc.
Consolidated Statements of Earnings
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
----------------- -----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales $224.7 $207.9 $434.8 $410.7
Operating costs and expenses:
Cost of sales 67.4 61.0 130.9 118.6
Selling, general and administrative 96.1 89.5 182.4 181.3
Research and development 26.9 24.4 53.8 47.1
------ ------ ------ ------
190.4 174.9 367.1 347.0
------ ------ ------ ------
Operating income 34.3 33.0 67.7 63.7
Nonoperating income (expense):
Interest income 2.0 1.8 3.7 2.9
Interest expense (2.7) (2.4) (5.0) (4.4)
Other, net 0.6 (0.2) 0.3 0.5
------ ------ ------ ------
(0.1) (0.8) (1.0) (1.0)
------ ------ ------ ------
Earnings from continuing operations
before income taxes and minority interest 34.2 32.2 66.7 62.7
Provision for income taxes 10.2 8.2 19.8 15.9
Minority interest 0.5 0.6 1.2 1.1
------ ------ ------ ------
Earnings from continuing operations 23.5 23.4 45.7 45.7
Earnings from discontinued operations,
net of income taxes -- 1.2 -- 2.6
------ ------ ------ ------
Net Earnings $ 23.5 $ 24.6 $ 45.7 $ 48.3
====== ====== ====== ======
Net Earnings Per Common Share:
Continuing operations $ 0.37 $ 0.35 $ 0.72 $ 0.68
Discontinued operations -- 0.02 -- 0.04
------- ------- ------- -------
$ 0.37 $ 0.37 $ 0.72 $ 0.72
======= ======= ======= =======
Weighted Average Common Shares Outstanding 63.5 66.6 63.8 66.7
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
Allergan, Inc.
Consolidated Balance Sheets
(In millions, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $139.8 $141.8
Trade receivables, net 153.4 146.8
Inventories 94.7 90.2
Other current assets 73.4 65.1
------ ------
Total current assets 461.3 443.9
Investments and other assets 115.8 89.9
Property, plant and equipment, net 292.7 288.1
Goodwill and intangibles, net 122.6 117.9
------ ------
Total assets $992.4 $939.8
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 40.4 $ 38.0
Accounts payable 43.2 59.1
Accrued expenses 153.1 132.6
Income taxes 48.0 46.7
------ ------
Total current liabilities 284.7 276.4
Long-term debt 125.7 104.6
Other liabilities 32.9 29.6
Commitments and contingencies
Minority interest 12.8 14.7
Stockholders' equity:
Preferred stock, $.01 par value; authorized
5,000,000 shares; none issued -- --
Common stock, $.01 par value; authorized
150,000,000 shares; issued 67,447,000
and 67,495,000 shares 0.7 0.7
Additional paid-in capital 193.9 194.5
Foreign currency translation adjustment (0.3) (5.0)
Retained earnings 435.0 403.2
------ ------
629.3 593.4
Less - treasury stock, at cost
(4,142,000 and 3,512,000 shares) (93.0) (78.9)
------ ------
Total stockholders' equity 536.3 514.5
------ ------
Total liabilities and
stockholders' equity $992.4 $939.8
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
Allergan, Inc.
Consolidated Statements of Cash Flows
(In millions)
<TABLE>
<CAPTION>
Six months
ended June 30,
------------------
1994 1993
------ ------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 45.7 $ 48.3
Non-cash items included in net earnings:
Depreciation and amortization 24.6 23.9
Deferred income taxes (0.3) --
Loss on sale of assets 1.5 2.2
Expense of compensation plans 2.7 3.7
Minority interest 1.2 1.1
Changes in assets and liabilities:
Trade receivables (3.4) (9.7)
Inventories (3.0) (7.8)
Accounts payable (16.1) (12.0)
Accrued liabilities (11.2) (5.4)
Income taxes 1.4 1.6
Other (5.4) (6.7)
------ ------
Net cash provided by operating activities 37.7 39.2
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (19.4) (22.6)
Disposals of property, plant and equipment 0.4 0.1
Other (14.8) (9.6)
------ ------
Net cash used in investing activities (33.8) (32.1)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (12.7) (13.3)
Net borrowings under commercial paper obligations 22.5 10.9
Increase in notes payable 0.9 1.1
Sale of stock to employees 2.6 2.4
Decrease in long term debt (0.9) (1.0)
Payments to acquire treasury stock (21.6) (19.4)
------ ------
Net cash used in financing activities (9.2) (19.3)
------ ------
Effect of exchange rates on cash and
equivalents 3.4 4.6
------ ------
Net decrease in cash and equivalents (1.9) (7.6)
Cash and equivalents at beginning of period 141.8 121.3
------ ------
Cash and equivalents at end of period $139.9 $113.7
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
Allergan, Inc.
Notes to Consolidated Financial Statements
1. In the opinion of management, the accompanying consolidated
financial statements contain all adjustments necessary (consisting only of
normal recurring accruals) to present fairly the financial information
contained therein. These statements do not include all disclosures required by
generally accepted accounting principles and should be read in conjunction with
the audited financial statements of the Company for the year ended December 31,
1993. The results of operations for the six months ended June 30, 1994 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1994. Earnings per common and common equivalent share were
computed by dividing net earnings by the weighted average number of common and
common equivalent shares outstanding during the respective periods.
2. Components of inventory were:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
--------- ------------
(in millions)
<S> <C> <C>
Finished goods $ 63.0 $ 58.7
Work in process 12.1 13.8
Raw materials 19.6 17.7
------ ------
Total $ 94.7 $ 90.2
====== ======
</TABLE>
3. Income taxes are determined using an estimated annual effective
tax rate, which is less than the U.S. Federal statutory rate, primarily because
of lower tax rates in Puerto Rico and in certain non U.S. jurisdictions.
Withholding and U.S. taxes have not been provided for unremitted earnings of
certain non U.S. subsidiaries because the Company expects that such earnings
have been or will be reinvested in operations, or will be offset by appropriate
credits for foreign income taxes paid.
4. The Company is involved in various litigation and claims
arising in the normal course of business. The Company's management believes
that recovery or liability with respect to these matters would not have a
material adverse effect on the consolidated financial position and results of
operations of the Company.
5. On July 26, 1994 the Board of Directors declared a quarterly
cash dividend of $0.11 per share, payable September 15, 1994 to stockholders of
record on August 26, 1994.
6
<PAGE> 7
Allergan, Inc.
Notes to Consolidated Financial Statements (Continued)
6. In November 1992, the Company sold its contact lens business in
North and South America. In August 1993, the Company completed the divestiture
of its contact lens business outside of the Americas. Results of operations of
the contact lens business have been reported as a discontinued operation, and
the consolidated statements of earnings exclude sales and expenses of this
business from results of continuing operations for all periods presented.
Results of operations of the contact lens business were as follows:
<TABLE>
<CAPTION>
Three Months Six Months
ended June 30, ended June 30,
1993 1993
---- ----
(in millions)
<S> <C> <C>
Net sales $10.9 $21.1
Earnings from operations before
income taxes 2.0 4.3
Earnings from operations,
net of income taxes 1.2 2.6
</TABLE>
7
<PAGE> 8
ALLERGAN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1994
RESULTS OF OPERATIONS
The following table compares 1994 and 1993 net sales by Product Line for the
second quarter and year-to-date periods:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- --------------
(in millions)
Product Line Sales: 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Specialty Pharmaceuticals
Eye Care $100.9 $ 90.6 $198.4 $183.8
Skin Care 8.1 9.3 15.8 16.0
------ ------ ------ ------
109.0 99.9 214.2 199.8
Surgical 33.9 27.7 61.2 52.3
Optical lens care 81.8 80.3 159.4 158.6
------ ------ ------ ------
Total Net Sales $224.7 $207.9 $434.8 $410.7
====== ====== ====== ======
</TABLE>
For the quarter ended June 30, 1994 total net sales increased 8% to $224.7
million as compared to the second quarter of 1993. Net sales for the six
months ended June 30, 1994 were $434.8 million, or 6% greater than the
comparable 1993 amount. The impact of foreign currency fluctuations for the
three month period ended June 30, 1994 decreased sales by $4.0 million over the
prior comparable period. For the six months ended June 30, 1994, the impact of
foreign currency fluctuations decreased sales by $9.4 million over the prior
comparable period. Sales growth excluding the impact of foreign exchange
between comparable periods was 10% for the second quarter and 8% for the six
months ended June 30, 1994. These sales growth rates are affected, in part, by
the highly competitive and, in certain cases, also highly regulated markets
worldwide in which the company competes. The ability to increase prices has
been limited by, among other reasons, governmental actions, customer demands,
the introduction of competitors' innovative products and the introduction of
lower cost generic products. The impact to the Company for those affected
product lines is the partial loss of the ability to utilize price increases to
offset the effect of inflation on costs and expenses.
For the three months ended June 30, 1994, Eye Care Pharmaceuticals sales
increased 11% over the comparable 1993 period. For the six months ended June
30, 1994, such sales increased by 8% over the comparable 1993 period. This
growth is attributable to increased sales of Acular(R) ophthalmic solution
introduced in the United States in 1993, continued growth in sales of Botox(R)
(Botulinum Toxin Type A) purified neurotoxin complex and other products.
Growth in sales has been negatively impacted by governmental pressure to
restrict price increases in the United States, and governmental actions to
control or reduce prices in many international markets. The largest sales
volume products in this product line are glaucoma therapy products, including
Betagan(R) and Propine(R) ophthalmic solutions. In 1994, two major competitors
introduced generic versions of levobunolol (Betagan(R)) and dipivefrin
(Propine(R)). The Company responded by offering its own versions of generic
Betagan(R) and Propine(R) solutions through a distribution agreement with
Schein Pharmaceutical. Future generic competition with other Allergan products
is anticipated. The impact of this form of competition will be reduced sales.
8
<PAGE> 9
Allergan, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1994 (Continued) RESULTS OF
OPERATIONS (Continued)
Skin Care Pharmaceuticals second quarter 1994 sales were 13% lower than the
comparable quarter in 1993. Sales for the six months ended June 30, 1994 were
1% lower than the comparable period in 1994. Sales decreases were primarily
the result of the discontinuation of sales of Photoplex(R) sunscreen in 1993.
Surgical sales increased 22% in the second quarter of 1994 compared to the
second quarter of 1993. For the first six months of 1994, surgical sales were
17% greater than the comparable period in 1993. For the second quarter,
domestic sales increased 14% while international sales increased 34% over the
prior comparable quarter. For the six month period ended June 30, 1994,
domestic sales increased 7% and international sales increased 32% compared to
the first six months of 1993. The increases in the U.S. market are primarily
the result of increased silicone intraocular lens (IOLs) sales due to the
introduction of new silicone IOL models. U.S. market sales were impacted by a
decline in PMMA IOL sales due to competitive pressures. Sales growth in
international markets is primarily the result of growth in silicone IOL sales.
IOL selling prices continue to decline in the United States and many
international markets as a result of competitive pressures and governmental
actions reducing reimbursement rates for cataract surgery.
Optical lens care sales of $81.8 million for the three months ended June 30,
1994 were 2% higher than the second quarter of 1993. Sales for the six months
ended June 30, 1994 of $159.4 million were essentially flat compared to 1993
sales. Domestic optical sales declined by 4% in the second quarter and by 9%
in the first six months of 1994 compared to comparable 1993 results. Optical
sales in international markets increased by 4% in the second quarter and the
first six months of 1994 compared to comparable 1993 results. The decrease in
domestic sales was the result of continuing competitive pressures within the
U.S. contact lens care market including, among other things, the introduction
by Allergan's competitors of disposable contact lenses and lens disinfection
systems that are easier to use. In 1992 the Company introduced a new contact
lens disinfection system marketed in the United States under the name
UltraCare(R) (hydrogen peroxide based system), which has slowed the overall
decrease in U.S. sales. International lens care product sales increased
primarily as a result of increases in sales of UltraCare(R). During 1993, the
Company introduced in certain overseas markets the Complete(R) one bottle
disinfection system. Complete(R) was introduced in the United States in June
1994. Sales increases in 1994 were depressed as a result of the relative
strength of the U.S. dollar versus foreign currencies in the first six months
of 1994 in comparison with the comparable period in 1993.
Allergan's gross margin percentage for the second quarter of 1994 was 70.0% of
net sales, which represents a 0.7 percentage point decrease from the second
quarter of 1993. The gross margin percentage for the six months ended June 30,
1994 was 69.9% representing a 1.2 percentage point decrease from the comparable
1993 percentage. These decreases are a result of, among other things, the net
unfavorable impact of pressures on certain unit average selling prices, product
mix shifts and declining margins on surgical sales. Gross margin increased in
the second quarter of 1994 and for the first six months of 1994 over 1993
periods as a result of increases in net sales offset by the decreases in gross
margin percentage.
9
<PAGE> 10
Allergan, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1994 (Continued)
RESULTS OF OPERATIONS (Continued)
Operating income was $34.3 million for the second quarter and $67.7 million for
the six months ended June 30, 1994, representing increases of 4% for the second
quarter and 6% for the six months over comparable 1993 amounts. The increases
are the result of increases in gross margin discussed above, decreases in
selling, general and administrative expenses as a percentage of sales, and
increases in research and development. Selling, general and administrative
expenses were 42.8% of sales for the second quarter and 42.0% of sales for the
first six months of 1994 compared to 43.0% and 44.1% for the comparable periods
in 1993. These declines are the result of management actions to reduce such
costs. Research and development expenditures increased 10% in the second
quarter and 14% for the first six months of 1994 compared to 1993 amounts.
Such increases are the result of increased spending related to Botox(R), and
the clinical trials for the topical retinoid tazarotene (AGN190168).
Net earnings decreased by $1.1 million to $23.5 million in the second quarter
and by $2.6 million to $45.7 million for the first six months of 1994 compared
to 1993 results. Results for 1993 include earnings from discontinued
operations of the contact lens business sold in 1993 amounting to $1.2 million
in the second quarter and $2.6 million for the six months ended June 30, 1993.
Net earnings were decreased in 1994 compared to 1993 as a result of an increase
in the effective tax rate from 25% in 1993 to 30% in 1994. Such tax rate
increase was the result of changes in the United States tax laws governing
Puerto Rican operations enacted in 1993.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1994, the Company had no borrowings against its bank credit
facilities. These facilities allow for borrowings of up to $150 million on a
revolving basis through December 1998 and an additional $50 million over a
period ending December 1994. Borrowings under the credit facilities are
subject to certain financial and operating covenants, including a requirement
that the Company maintain certain financial ratios and other customary
covenants for credit facilities of similar kind. As of June 30, 1994, the
Company had commercial paper borrowings of $125 million including $95 million
classified as long-term debt.
The net cash provided by operating activities for the six months ended June 30,
1994 was $34.5 million compared with $39.2 million for the respective 1993
period. Operating cash flow in 1994 was reduced primarily by the decrease in
net earnings. Most of the Company's existing cash and equivalents are held by
its non-U.S. subsidiaries and will be reinvested in operations outside the
United States.
The Company invested $19.4 million in new facilities and equipment during the
six months ended June 30, 1994 compared to $22.6 million during the same period
in 1993.
Cash outflow committed to financing activities was $9.2 million in the six
months ended June 30, 1994 compared to $19.3 million cash outflow in 1993. The
1994 outflow includes $21.6 million in payments to acquire treasury stock
compared to $19.4 million during the comparable period in 1993.
10
<PAGE> 11
Allergan, Inc.
PART II - OTHER INFORMATION
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
- Exhibits
(numbered in accordance with Item 601 of Regulation S-K)
11 Statement re Computation of Per Share Earnings
- Reports on Form 8-K. None.
11
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 10, 1994 ALLERGAN, INC.
---------------
/s/ Edgar J. Cummins
-------------------------------
Edgar J. Cummins
Vice President of Finance and
Chief Financial Officer
12
<PAGE> 1
ALLERGAN, INC.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
Earnings per share of common stock, including common stock equivalents, have
been computed based on the following weighted average number of shares and net
earnings:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, 1994 June 30, 1994
------------- -------------
<S> <C> <C>
(000's, except per share amounts)
Weighted average number of shares
outstanding during the period 63,214 63,513
Weighted average number of additional
shares issuable in connection with
dilutive stock options based upon
use of the treasury stock method
and average market prices 277 255
------- -------
Weighted average number of common shares
including common stock equivalents 63,491 63,768
======= =======
Net earnings for the period $23,542 $45,709
======= =======
Primary earnings per common share $ 0.37 $ 0.72
======= =======
</TABLE>
