Advanced Medical Optics, Inc. Lowers 2006 Revenue And Adjusted EPS Outlook

SANTA ANA, Calif., Sept. 25 /PRNewswire-FirstCall/ -- Advanced Medical Optics, Inc. (AMO) , a global leader in ophthalmic surgical devices and eye care products, today announced revised guidance for 2006 adjusted earnings per share (EPS) in the range of $1.90 to $1.95, compared to prior guidance of $2.05 to $2.21. AMO now expects 2006 revenue to be in the range of $1,010 million to $1,020 million, compared to prior guidance of $1,020 million to $1,040 million.

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For 2007, the company expects revenue to be approximately $1,100 million, compared to prior guidance in the range of $1,100 million and $1,120 million, and adjusted EPS to be approximately $2.60.

The company attributed the reduction in guidance to a slower-than-expected shift in its sales mix to premium-priced products, which is expected to cause gross profit margins to be below the previously targeted range. This change in timing with respect to the company's shift in 2006 sales mix is due primarily to:

* Slower adoption of refractive implants by surgeons outside the United States, which is expected to cause AMO 2006 global refractive implant sales to be $45 million to $50 million, compared to the prior guidance of $50 million to $60 million. * Softer-than-expected domestic laser vision correction (LVC) procedure volumes. * Government reimbursement pressures in Japan and parts of Europe, as well as recent strikes by European surgeons who use the company's cataract products.

"Recent market conditions have made it difficult for us to move as quickly as we had planned to improve our sales mix and deliver the full level of 2006 margin expansion previously projected," said Jim Mazzo, AMO chairman, president and chief executive officer. "While we are disappointed by this near-term change in our outlook, we are experiencing significant progress toward achievement of our key metrics and remain confident in our ability to deliver our 2007 guidance."

The company is now targeting its 2006 adjusted gross margin to be approximately 66 percent and 2006 adjusted operating margin to be approximately 22 percent. For 2007, the company continues to believe its strategy of improved product mix and productivity is intact, and expects adjusted gross margin and adjusted operating margin to be approximately 69 percent and 25 percent, respectively.

Mr. Mazzo continued, "AMO's strategy to achieve sustained, profitable growth through focus on technologically superior products that command premium pricing remains sound. Our U.S. refractive implant sales continue to build momentum, our international LVC expansion is growing our global market share and beginning to deliver custom procedure fees, our flagship Tecnis(R) lens is experiencing favorable sales, our phacoemulsification installed base is expanding and our global eye care sales are returning to sustainable growth. Moreover, our operating costs remain in line, our balance sheet is healthy, our cash flow is growing and we are set to enter 2007 with the strongest pipeline of new products since our spin-off."

AMO expects its third-quarter 2006 revenue to total approximately $255 million, with 48 percent comprising cataract/implant sales, 32 percent comprising eye care sales and 20 percent comprising LVC sales. The company also said that it expects total debt outstanding to be approximately $900 million at the end of the third quarter and adjusted cash from operations for the nine months ended September 29, 2006 to exceed $70 million.

AMO will release its third-quarter 2006 results at approximately 8:00 a.m. ET on Thursday, October 26, 2006. The release will be followed at 10 a.m. ET by a live Web cast to discuss the results and review future expectations. To participate in the Web cast, visit www.amo-inc.com. An audio replay will also be available at approximately noon ET on October 26, 2006 and will continue through midnight ET on Thursday, November 9, 2006 at (800) 642-1687 (conference ID# 7162717).

About Advanced Medical Optics (AMO)

AMO is a global medical device leader focused on the discovery and delivery of innovative vision technologies that optimize the quality of life for people of all ages. Products in the cataract/implant line include intraocular lenses, phacoemulsification systems, viscoelastics, and related products used in cataract and refractive lenticular surgery. Products in the laser vision correction line include laser systems, wavefront diagnostic systems, microkeratomes and related products used in corneal refractive surgery. AMO owns or has the rights to such ophthalmic surgical product brands as ReZoom(TM), Clariflex(R), Sensar(R), CeeOn(R), Tecnis(R) and Verisyse(TM) intraocular lenses, STAR S4 IR(TM) laser vision correction system, WaveScan Wavefront(R) System, CustomVue(TM) procedure, Sovereign(R) and Sovereign(R) Compact(TM) phacoemulsification systems with WhiteStar(R) technology, Amadeus(TM) and Amadeus(TM) II microkeratomes, Healon(R) viscoelastics, and the Baerveldt(R) glaucoma shunt. Products in the contact lens care line include disinfecting solutions, enzymatic cleaners and lens rewetting drops. Among the eye 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(TM) 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 3,600 worldwide. The company has operations in 24 countries and markets products in approximately 60 countries. For more information, visit the company's Web site at www.amo-inc.com.

Use of Non-GAAP Measures

Our guidance for EPS for 2006 and 2007 is provided on a non-GAAP basis. The company's adjusted EPS guidance excludes any charges associated with acquisitions or reorganization, rationalizations and repositioning strategies, recapitalization and litigation settlement. The guidance also assumes no impact of potential 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. This presentation is also consistent with our internal use of the measure, which we use to measure the profitability of ongoing operating results against prior periods and against our internally developed targets. We believe that our investors also use this measure to analyze the sustainable profitability of the on-going business operations. The economic substance related to our use of adjusted EPS is our belief that the appropriate analysis of our profitability cannot be effectively considered while incorporating the effect of unusual items and charges that have not been experienced in prior periods. The company is not able to provide a reconciliation of projected adjusted EPS to expected reported results due to the unknown effect, timing and potential significance of special charges, and our inability to forecast charges associated with future transactions and initiatives.

Our guidance for gross margins for 2006 and 2007 is provided on a non-GAAP basis. The company's adjusted gross margin guidance includes the impacts of adoption of FAS123R and excludes any charges associated with acquisitions and rationalization and repositioning strategies and litigation settlement. The company believes this presentation is useful to investors to conduct a more meaningful, consistent comparison of the company's gross margin, absent special charges which can result in significant variations. This presentation is also consistent with our internal use of the measure, which we use to measure the profitability of our product lines against prior periods and against our internally developed targets. We believe that our investors also use this measure to analyze the sustainable profitability of the on-going business lines. The economic substance related to our use of adjusted gross margins is our belief that the appropriate analysis of our profitability cannot be effectively considered while incorporating the effect of unusual items and charges that have not been experienced in prior periods. The company is not able to provide a reconciliation of projected adjusted gross margins to expected reported results due to the unknown effect, timing and potential significance of special charges, and our inability to forecast charges associated with future and pending transactions and initiatives.

Our guidance for operating margins for 2006 and 2007 is provided on a non-GAAP basis. The company's adjusted operating margin guidance includes the impact of adoption of FAS123R and excludes any charges associated with acquisitions, rationalization and repositioning strategies and litigation settlement. The company believes this presentation is useful to investors to conduct a more meaningful, consistent comparison of the company's operating margin, absent special charges which can result in significant variations. This presentation is also consistent with our internal use of the measure, which we use to measure the profitability of our business, against prior periods and against our internally developed targets. We believe that our investors also use this measure to analyze the sustainable profitability of the business operations. The economic substance related to our use of adjusted gross margins is our belief that the appropriate analysis of our profitability cannot be effectively considered while incorporating the effect of unusual items and charges that have not been experienced in prior periods. The company is not able to provide a reconciliation of projected adjusted operating margins to expected reported results due to the unknown effect, timing and potential significance of special charges, and our inability to forecast charges associated with future and pending transactions and initiatives.

Our guidance for cash flow from operations for the nine months ended September 29, 2006 is provided on a non-GAAP basis. The company's adjusted cash flow from operations guidance excludes net cash proceeds from settlement of litigation matters. The company believes this presentation is useful to investors to conduct a more meaningful, consistent comparison of the company's cash flow from operations, absent special items which can result in significant variations. This presentation is also consistent with our internal use of the measure, which we use to measure the liquidity of the company and against prior periods. We believe that our investors also use this measure to analyze the sustained liquidity of the company. The economic substance related to our use of adjusted cash flow from operations is our belief that the appropriate analysis of our liquidity cannot be effectively considered while incorporating the effect of unusual items that have not been experienced in prior periods. The company is not able to provide a reconciliation of projected adjusted cash flow from operations to expected reported results due to the unknown effect, timing and potential significance of special items, and our inability to forecast changes in liquidity associated with future and pending transactions and initiatives.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with generally accepted accounting principles.

Forward-Looking Statements

This press release contains forecasts about AMO and its businesses, such as management's total revenue, adjusted earnings per share, adjusted gross margin and adjusted operating margin estimates for 2006 and 2007, refractive implant sales estimates for 2006, and total debt, revenue and adjusted cash from operations estimates for the third quarter of 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.

Statements in this press release regarding financial guidance, statements of Mr. Mazzo 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 successful and timely execution of the rationalization and repositioning program and AMO's ability to offset sales of discontinued products; unexpected changes in 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; consumer spending and confidence; 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 or consumer confidence indices, 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 "Risk Factors" in AMO's 2005 Form 10-K filed in March 2006 include information concerning these and other risk factors. Copies of press releases and additional information about AMO are available at www.amo-inc.com, or by contacting AMO's Investor Relations Department by calling 714-247-8348.

Investors: Sheree Aronson (714) 247-8290 sheree.aronson@amo-inc.com Media: Steve Chesterman (714) 247-8711 steve.chesterman@amo-inc.com

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20050324/AMOLOGOAP Archive: http://photoarchive.ap.orgPRN Photo Desk, photodesk@prnewswire.comAdvanced Medical Optics, Inc.

CONTACT: Investors, Sheree Aronson, +1-714-247-8290,sheree.aronson@amo-inc.com, or Media, Steve Chesterman, +1-714-247-8711,steve.chesterman@amo-inc.com, both of Advanced Medical Optics, Inc.

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