<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_______________________________________________________________________________
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1997................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
_______________________________________________________________________________
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
MARCH 28, 1997 1-10269
ALLERGAN, INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
95-1622442
2525 DUPONT DRIVE, IRVINE, CALIFORNIA 92612
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 April 25, 1997 there were 65,501,989 shares of common stock
outstanding.
1
<PAGE> 2
ALLERGAN, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 28, 1997
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
(A) Consolidated Statements of Earnings - 3
Three Months Ended March 28, 1997
and March 31, 1996
(B) Consolidated Balance Sheets - 4
March 28, 1997 and December 31, 1996
(C) Consolidated Statements of Cash Flows - 5
Three Months Ended March 28, 1997
and March 31, 1996
(D) Notes to Consolidated Financial Statements 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-9
PART II - OTHER INFORMATION
ITEM 4 10
ITEM 6 11
Signature 12
Exhibits
2
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Allergan, Inc.
Consolidated Statements of Earnings
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three months
Ended
March 28, March 31,
1997 1996
-------- --------
<S> <C> <C>
Net Sales $ 256.2 $ 258.1
Operating costs and expenses:
Cost of sales 92.6 85.7
Selling, general and
administrative 113.0 114.3
Research and development 27.6 26.8
-------- --------
233.2 226 .8
-------- --------
Operating income 23.0 31.3
Nonoperating income (expense):
Interest income 1.8 2.3
Interest expense (2.2) (3.3)
Other, net 2.4 2.2
-------- --------
2.0 1.2
-------- --------
Earnings from continuing operations
before income taxes and
minority interest 25.0 32.5
Provision for income taxes 7.3 9.4
Minority interest (0.1) --
-------- --------
Net Earnings $ 17.8 $ 23.1
======== ========
Net Earnings Per Common Share $ 0.27 $ 0.35
======== ========
Weighted Average Common
Shares Outstanding 66.1 65.6
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
Allergan, Inc.
Consolidated Balance Sheets
(In millions, except share data)
<TABLE>
<CAPTION>
March 28, December 31,
1997 1996
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $ 117.6 $ 112.0
Trade receivables, net 222.3 242.5
Inventories 134.2 130.1
Other current assets 119.0 115.1
--------- ---------
Total current assets 593.1 599.7
Investments and other assets 160.9 163.0
Property, plant and equipment, net 340.6 348.5
Goodwill and intangibles, net 232.5 238.6
--------- ---------
Total assets $ 1,327.1 $ 1,349.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 100.5 $ 66.6
Accounts payable 68.3 75.4
Accrued expenses 164.8 186.1
Income taxes 43.8 47.2
--------- ---------
Total current liabilities 377.4 375.3
Long-term debt 148.4 170.0
Other liabilities 51.0 54.1
Commitments and contingencies -- --
Minority interest 0.5 0.6
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 67,233,000
and 67,244,000 shares 0.7 0.7
Additional paid-in capital 207.6 205.6
Foreign currency translation adjustment (4.2) 4.0
Other 1.8 3.1
Retained earnings 584.4 574.8
--------- ---------
790.3 788.2
Less - treasury stock, at cost
(1,702,000 and 1,731,000 shares) (40.5) (38.4)
--------- ---------
Total stockholders' equity 749.8 749.8
--------- ---------
Total liabilities and
stockholders' equity $ 1,327.1 $ 1,349.8
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
Allergan, Inc.
Consolidated Statements of Cash Flows
(In millions)
<TABLE>
<CAPTION>
Three months
Ended
-----
March 28, March 31,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 17.8 $ 23.1
Non-cash items included in net earnings:
Depreciation and amortization 18.0 18.1
Amortization of prepaid royalties 2.3 1.6
Deferred income taxes 0.8 (1.2)
Loss on sale of assets 0.1 --
Expense of compensation plans 1.8 0.4
Minority interest (0.1) --
Changes in assets and liabilities:
Trade receivables 13.6 (9.6)
Inventories (7.0) (9.4)
Accounts payable (6.3) (2.8)
Accrued liabilities (16.6) (13.1)
Income taxes (1.4) 8.2
Other (7.3) (6.1)
--------- ---------
Net cash provided by operating activities 15.7 9.2
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (9.0) (12.1)
Disposals of property, plant and equipment 1.1 4.8
Other, net (7.0) (4.3)
--------- ---------
Net cash used in investing activities (14.9) (11.6)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (8.4) (7.6)
Net borrowings under
commercial paper obligations 17.9 1.9
Increase/(decrease) in notes payable (3.0) 1.9
Sale of stock to employees 6.7 4.6
Increase in long term debt 2.5 11.4
Decrease in long term debt -- (4.0)
Acquisition of capital leases (0.2) (0.3)
Payments to acquire treasury stock (9.3) --
--------- ---------
Net cash provided by financing activities 6.2 7.9
--------- ---------
Effect of exchange rates on cash and
equivalents (1.4) 0.4
--------- ---------
Net increase in cash and equivalents 5.6 5.9
Cash and equivalents at beginning of period 112.0 102.3
--------- ---------
Cash and equivalents at end of period $ 117.6 $ 108.2
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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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,
1996. The results of operations for the three months ended March 28, 1997 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1997. 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>
March 28, December 31,
1997 1996
-------- --------
(in millions)
<S> <C> <C>
Finished goods $ 87.5 $ 87.5
Work in process 13.7 11.1
Raw materials 33.0 31.5
-------- --------
Total $ 134.2 $ 130.1
-------- --------
</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 such earnings are
or will be reinvested in operations outside the United States, 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 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 April 22, 1997 the Board of Directors declared a quarterly
cash dividend of $0.13 per share, payable June 13, 1997 to stockholders of
record on May 23, 1997.
6
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ALLERGAN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 28, 1997
RESULTS OF OPERATIONS
The following table compares 1997 and 1996 net sales by Product Line for the
first quarter periods:
<TABLE>
<CAPTION>
Three Months
Ended
-----
March 28, March 31,
Net Sales by Product Line ($ millions): 1997 1996
-------- --------
<S> <C> <C>
Eye Care
Pharmaceuticals $ 93.3 $ 98.0
Surgical 40.3 40.5
Optical Lens Care 89.4 91.5
-------- --------
223.0 230.0
Skin Care 13.5 13.8
Botox(R) 19.7 14.3
-------- --------
Total Net Sales $ 256.2 $ 258.1
======== ========
</TABLE>
For the quarter ended March 28, 1997 total net sales decreased by $1.9 million
or 0.7% to $256.2 million as compared to the first quarter of 1996. The impact
of foreign currency changes for the three month period ended March 28, 1997
decreased net sales by $7.4 million from the prior comparable period. Sales
growth excluding the impact of foreign exchange between the comparable quarters
was 2.1%.
For the three months ended March 28, 1997, Eye Care Pharmaceuticals sales
decreased $4.7 million or 4.8% from the comparable 1996 period. Excluding the
impact of foreign currency changes, sales decreased by $3.2 million. Sales in
the United States decreased $2.5 million in 1997 primarily as a result of an
increasing rate of product returns. Sales of Alphagan(R), introduced in the
third quarter of 1996, partially offset a decrease in sales of all other
glaucoma products. Sales in international markets decreased by $2.2 million in
1997, primarily as a result of a negative impact of $1.5 million due to foreign
currency changes.
Surgical sales decreased 0.5% in the first quarter of 1997 compared to the
first quarter of 1996. For the quarter, domestic sales were flat while
international sales decreased 0.9%. The negative impact of foreign currency
changes of $1.5 million exceeded the growth in sales in international markets.
Optical Lens Care net sales of $89.4 million for the three months ended March
28, 1997 decreased by $2.1 million or 2.3% compared to the first quarter of
1996. Excluding the negative impact of foreign currency changes of $4.1
million, sales increased by $2.0 million or 2.2%. Domestic sales decreased by
4.4%. Continued growth in sales of the Complete(R) brand multi-purpose
one-bottle lens disinfection system in the United States market was offset by
decreases in sales of other products. International sales decreased by 1.5%.
Excluding the impact of foreign currency changes, international sales increased
by 4.7%.
7
<PAGE> 8
Allergan, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 28, 1997 (Continued)
RESULTS OF OPERATIONS (Continued)
Skin Care Pharmaceutical sales decreased $0.3 million or 2.2% in the first
quarter of 1997. Growth in sales of Azelex(R) (azelaic acid) cream introduced
in 1996 was offset by decreases in sales of off-patent skin care products.
Botox(R) (Botulinum Toxin Type A) purified neurotoxin complex sales increased
by 37.8% compared to 1996 to $19.7 million. The increase was the result of
strong growth in both the United States and international markets.
Allergan's gross margin percentage for the first quarter of 1997 was 63.9% of
net sales, which represents a 2.9 percentage point decrease from the 66.8% rate
for the first quarter of 1996. The gross margin percentage declined in the
first quarter of 1997 compared to 1996 primarily as a result of the negative
impact of foreign currency changes, the increase in allowances for product
returns, and increased royalty costs. Gross margin decreased over the first
quarter of 1996 by $8.8 million or 5.1% as a result of the 0.7% decrease in net
sales and by the 2.9 percentage point decrease in gross margin percentage.
Operating income was $23.0 million for the first quarter, a decrease of $8.3
million or 26.5% from the prior comparable period. The decrease was the result
of the $8.8 million decrease in gross margin partially offset by a $1.3 million
decrease in selling, general and administrative expense. The decrease in
selling, general and administrative expense was the result of reductions in
costs related to restructuring activities begun in the second quarter of 1996
and the favorable impact of foreign currency changes. Such decreases were
partially offset by increased costs related to new product launches. In
addition, research and development expense increased by $0.8 million in 1997
compared to the first quarter of 1996.
Net earnings decreased by $5.3 million in the first quarter of 1997 to $17.8
million compared to $23.1 million for the first quarter of 1996. The decrease
in operating income of $8.3 million was offset by a reduction in income taxes
of $2.1 million, and an increase in non-operating income of $0.8 million
compared to 1996. The increase in non-operating income was the result, in
part, of a decrease in interest expense resulting from decreased debt.
LIQUIDITY AND CAPITAL RESOURCES
As of March 28, 1997, the Company had a medium term note program and three
long-term credit facilities, one of which supports a commercial paper borrowing
arrangement. The note program allows the Company to issue up to $200 million
in notes. The credit facilities allow for borrowings of up to $16.6 million
through February 1998, $30.8 million through 1999, $250 million through 2001,
and $41.6 million through 2003. 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
8
<PAGE> 9
Allergan, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 28, 1997 (Continued)
March 28, 1997, the Company had $85.0 million in borrowings under the note
program and $78.7 million in borrowings under two of the credit facilities. As
of March 28, 1997 the Company has classified $41.2 million borrowed under the
credit facilities as a long-term debt based upon the Company's ability to
maintain such debt under terms of the credit facilities described above. As of
March 28, 1997, the Company had commercial paper borrowings of $32.8 million.
The net cash provided by operating activities for the three months ended March
28, 1997 was $15.7 million compared with cash provided by operating activities
of $9.2 million for the respective 1996 period. Operating cash flow in 1997
increased as a result of significant collections of accounts receivable in the
first quarter of 1997. 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 $9.0 million in new facilities and equipment during the
three months ended March 28, 1997 compared to $12.1 million during the same
period in 1996.
Cash provided by financing activities was $6.2 million in the three months
ended March 28, 1997 compared to $7.9 million cash provided by financing
activities in 1996. The 1997 amount includes $9.3 million used to repurchase
treasury stock, and the amounts are net of dividend outflows of $8.4 million in
1997 and $7.6 million in 1996.
9
<PAGE> 10
Allergan, Inc.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the registrant was held on April
22, 1997 at which five directors, constituting all of the Class II directors,
were re-elected to serve on the Board of Directors for a three year term until
the annual meeting of stockholders to be held in 2000. The names of the
persons elected as directors are as follows:
Herbert W. Boyer
Tamara J. Erickson
William R. Grant
Louis T. Rosso
William C. Shepherd
The terms of the following directors continued after the meeting:
Class III (term expires in 1998)
--------------------------------
Handel E. Evans
Gavin S. Herbert
Leslie G. McCraw
Henry Wendt
Class I (term expires in 1999)
------------------------------
Howard E. Greene, Jr.
Lester J. Kaplan
Leonard D. Schaeffer
No other matters were voted on.
A summary of the voting follows:
<TABLE>
<CAPTION>
Broker
Directors For Withheld Non-votes
- --------- --- -------- ---------
<S> <C> <C>
Herbert W. Boyer 55,600,558 478,687
Tamara J. Erickson 55,602,356 476,889
William R. Grant 55,473,788 605,457
Louis T. Rosso 55,586,001 493,244
William C. Shepherd 53,315,641 2,763,604
</TABLE>
10
<PAGE> 11
Allergan, Inc.
PART II - OTHER INFORMATION (Continued)
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
(27) Financial Data Schedule
- Reports on Form 8-K. The Registrant filed a Current Report on
Form 8-K on March 18, 1997, reporting under Item 5 that it had elected not to
submit an extension of the term of the Rights Agreement dated as of May 18,
1989 between the Registrant and Morgan Shareholder Services Trust Company as
amended by that certain Amendment dated as of September 28, 1993 between the
Registrant and First Chicago Trust Company of New York (as successor Rights
Agent to Morgan Shareholder Services Trust Company) to a vote of the
Registrant's stockholders at the next annual meeting.
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: May 5, 1997 ALLERGAN, INC.
/s/ A. J. Moyer
--------------------------------
A. J. Moyer
Corporate Vice President 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
Ended
March 28, 1997
--------------
<S> <C>
(in millions, except per share amounts)
Weighted average number of common shares
outstanding during the period 65.5
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 0.6
---------
Weighted average number of common shares
including common stock equivalents 66.1
=========
Net Earnings for the period $ 17.8
=========
Primary Earnings Per Common Share $ 0.27
=========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND BALANCE SHEETS OF ALLERGAN, INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT ON FORM 10Q FOR THE
QUARTER ENDED MARCH 28, 1997
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-28-1997
<EXCHANGE-RATE> 1
<CASH> 117,600
<SECURITIES> 0
<RECEIVABLES> 229,900
<ALLOWANCES> 7,600
<INVENTORY> 134,200
<CURRENT-ASSETS> 593,100
<PP&E> 575,500
<DEPRECIATION> 234,900
<TOTAL-ASSETS> 1,327,100
<CURRENT-LIABILITIES> 360,800
<BONDS> 165,000
0
0
<COMMON> 700
<OTHER-SE> 749,100
<TOTAL-LIABILITY-AND-EQUITY> 1,327,100
<SALES> 256,200
<TOTAL-REVENUES> 256,200
<CGS> 92,600
<TOTAL-COSTS> 92,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,100
<INTEREST-EXPENSE> 2,200
<INCOME-PRETAX> 25,000
<INCOME-TAX> 7,300
<INCOME-CONTINUING> 17,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,800
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
