ALLERGAN ANNOUNCES INCREASE IN Q4 AND FULL YEAR 2005 EARNINGS PER SHARE
FOLLOWING AGREEMENT WITH U.S. INTERNAL REVENUE SERVICE
IRVINE, Calif., March 3, 2006 - - Allergan, Inc. (NYSE: AGN) today announced that on March 1,
2006, after the publication of Allergans fourth quarter and full year earnings release but before
the filing of Allergans 2005 Form 10-K, Allergan and the United States Internal Revenue Service
entered into an agreement resolving certain tax disputes and permitting Allergan to release a
valuation allowance taken in the fourth quarter of 2005 and certain tax contingencies established
in prior periods. As a result of the settlement with the Internal Revenue Service and the reversal
of these allowances and contingencies, the Companys fourth quarter and full year 2005 GAAP diluted
earnings per share (EPS) reported in the yet-to-be-filed 2005 Form 10-K will increase 13 cents
from $0.90 and $2.88 as was reported in the Companys February 2, 2006 earnings release to $1.03
and $3.01, respectively.
In the fourth quarter of 2005, Allergan determined that it was required to record a valuation
allowance against a deferred tax asset associated with the 2001 acquisition of Allergan Specialty
Therapeutics, Inc. (ASTI). After the close of the fourth quarter of 2005, but prior to the
filing of Allergans 2005 Form 10-K, Allergan held a settlement conference with the Internal
Revenue Service and negotiated a settlement with respect to the issue underlying the requirement to
record the deferred tax asset valuation allowance. As a result of the settlement, Allergan
determined that it is no longer required to record a valuation allowance against the deferred tax
asset, which has the effect of increasing the Companys reported GAAP diluted EPS by 9 cents.
Likewise, because the Companys current written policy for determining adjusted EPS does not
contemplate an intra-quarter tax adjustment such as this, the reversal of the allowance has the
effect of increasing adjusted diluted EPS by 9 cents as well. Due to this settlement, adjusted
diluted EPS in 2005 grew by 23% in comparison to 2004.
Had the Company not obtained this settlement, and thus maintained the established valuation
allowance, 2005 adjusted diluted EPS would have been $3.29, a 20% increase over 2004 adjusted
diluted EPS; likewise, the Companys projected 2006 EPS guidance of $3.76 to $3.82, which excludes
a $0.20 negative impact related to the expensing of stock options in accordance with Statement of
Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, represents a 14%-16%
increase over the pre-settlement EPS number for 2005.
In addition, as part of the settlement noted above, the Company will be releasing $5.9 million of
accrued reserves for income tax contingencies related to certain other related issues associated
with the acquisition of ASTI. The diluted EPS impact of 4 cents for this adjustment will be
reflected in the Companys GAAP earnings reported in the 2005 Form 10-K, but will not have an
impact on the Companys adjusted diluted EPS.