Allergan Inc. (AGN, Financial) filed Quarterly Report for the period ended 2009-06-30.
Allergan Inc. is a provider of eye care and specialty pharmaceutical products throughout the world with products in the eye care pharmaceutical ophthalmic surgical device over-the-counter contact lens care movement disorder and dermatological markets. Its worldwide consolidated revenues are principally generated by prescription and non-prescription pharmaceutical products in the areas of ophthalmology and skin care neurotoxins intraocular lenses and other ophthalmic surgical products and contact lens care products. Allergan Inc. has a market cap of $16.8 billion; its shares were traded at around $55.17 with a P/E ratio of 20.36 and P/S ratio of 3.81. The dividend yield of Allergan Inc. stocks is 0.36%.
We permit returns of product from most product lines by any class of customer if such product is returned in a timely manner, in good condition and from normal distribution channels. Return policies in certain international markets and for certain medical device products, primarily breast implants, provide for more stringent guidelines in accordance with the terms of contractual agreements with customers. Our estimates for sales returns are based upon the historical patterns of product returns matched against sales, and managements evaluation of specific factors that may increase the risk of product returns. The amount of allowances for sales returns recognized in our consolidated balance sheets at June 30, 2009 and December 31, 2008 were $29.8 million and $25.3 million, respectively, and are recorded in Other accrued expenses and Trade receivables, net in our consolidated balance sheets. Provisions for sales returns deducted from consolidated sales were $95.4 million and $87.9 million in the second quarter of 2009 and 2008, respectively. Provisions for sales returns deducted from consolidated sales were $181.0 million and $165.9 million in the first six months of 2009 and 2008, respectively. The increase in the provision for sales returns in the second quarter and first six months of 2009 compared to the second quarter and first six months of 2008 is primarily due to an increase in estimated product return rates for our specialty pharmaceuticals products and increased sales returns related to breast implant products. Historical allowances for cash discounts and product returns have been within the amounts reserved or accrued.
Sales rebates and incentive accruals reduce revenue in the same period that the related sale is recorded and are included in Other accrued expenses in our consolidated balance sheets. The amounts accrued for sales rebates and other incentive programs were $119.6 million and $100.9 million at June 30, 2009 and December 31, 2008, respectively. Provisions for sales rebates and other incentive programs deducted from consolidated sales were $111.0 million and $73.7 million in the second quarter of 2009 and 2008, respectively. Provisions for sales rebates and other incentive programs deducted from consolidated sales were $198.4 million and $147.7 million in the first six months of 2009 and 2008, respectively. The increases in the amounts accrued at June 30, 2009 compared to December 31, 2008 and the provisions for sales rebates and other incentive programs in the second quarter and the first six months of 2009 compared to the second quarter and first six months of 2008 are primarily due to increased incentive programs, primarily related to our eye care pharmaceuticals, Botox® Cosmetic, skin care and facial aesthetics products. In addition, an increase in our published list prices in the United States for pharmaceutical products, which occurred for several of our products early in each of 2009 and 2008, generally results in higher provisions for sales rebates and other incentive programs deducted from consolidated sales.
Our procedures for estimating amounts accrued for sales rebates and other incentive programs at the end of any period are based on available quantitative data and are supplemented by managements judgment with respect to many factors, including but not limited to, current market dynamics, changes in contract terms, changes in sales trends, an evaluation of current laws and regulations and product pricing. Quantitatively, we use historical sales, product utilization and rebate data and apply forecasting techniques in order to estimate our liability amounts. Qualitatively, managements judgment is applied to these items to modify, if appropriate, the estimated liability amounts. There are inherent risks in this process. For example, customers may not achieve assumed utilization levels; customers may misreport their utilization to us; and actual movements of the U.S. Consumer Price Index-Urban, or CPI-U, which affect our rebate programs with U.S. federal and state government agencies, may differ from those estimated. On a quarterly basis, adjustments to our estimated liabilities for sales rebates and other incentive programs related to sales made in prior periods have not been material and have generally been less than 0.5% of consolidated product net sales. An adjustment to our estimated liabilities of 0.5% of consolidated product net sales on a quarterly basis would result in an increase or decrease to net sales and earnings before income taxes of approximately $5.0 million to $6.0 million. The sensitivity of our estimates can vary by program and type of customer. Additionally, there is a significant time lag between the date we determine the estimated liability and when we actually pay the liability. Due to this time lag, we record adjustments to our estimated liabilities over several periods, which can result in a net increase to earnings or a net decrease to earnings in those periods. Material differences may result in the amount of revenue we recognize from product sales if the actual amount of rebates and incentives differ materially from the amounts estimated by management.
The weighted average discount rates used to calculate our U.S. and non-U.S. pension benefit obligations at December 31, 2008 were 6.19% and 5.71%, respectively. The weighted average discount rates used to calculate our U.S. and non-U.S. net periodic benefit costs for 2009 are 6.19% and 5.71%, respectively, and for 2008 were 6.25% and 5.50%, respectively. We determine the discount rate based upon a hypothetical portfolio of high quality fixed income investments with maturities that mirror the pension benefit obligations at the plans measurement date. Market conditions and other factors can vary over time and could significantly affect our estimates for the discount rates used to calculate our pension benefit obligations and net periodic benefit costs for future years. As a sensitivity measure, the effect of a 0.25% decline in the discount rate assumption for our U.S and non-U.S. pension plans would increase our expected 2009 pre-tax pension benefit costs by approximately $3.6 million and increase our pension plans projected benefit obligations at December 31, 2008 by approximately $26.9 million.
Read the The complete ReportAGN is in the portfolios of Edward Owens of Vanguard Health Care Fund, Edward Owens of Vanguard Health Care Fund.
Allergan Inc. is a provider of eye care and specialty pharmaceutical products throughout the world with products in the eye care pharmaceutical ophthalmic surgical device over-the-counter contact lens care movement disorder and dermatological markets. Its worldwide consolidated revenues are principally generated by prescription and non-prescription pharmaceutical products in the areas of ophthalmology and skin care neurotoxins intraocular lenses and other ophthalmic surgical products and contact lens care products. Allergan Inc. has a market cap of $16.8 billion; its shares were traded at around $55.17 with a P/E ratio of 20.36 and P/S ratio of 3.81. The dividend yield of Allergan Inc. stocks is 0.36%.
Highlight of Business Operations:
We generally offer cash discounts to customers for the early payment of receivables. Those discounts are recorded as a reduction of revenue and accounts receivable in the same period that the related sale is recorded. The amounts reserved for cash discounts were $4.1 million and $3.3 million at June 30, 2009 and December 31, 2008, respectively. Provisions for cash discounts deducted from consolidated sales in the second quarter of 2009 and 2008 were $12.2 million and $10.4 million, respectively. Provisions for cash discounts deducted from consolidated sales in the first six months of 2009 and 2008 were $23.0 million and $20.8 million, respectively.We permit returns of product from most product lines by any class of customer if such product is returned in a timely manner, in good condition and from normal distribution channels. Return policies in certain international markets and for certain medical device products, primarily breast implants, provide for more stringent guidelines in accordance with the terms of contractual agreements with customers. Our estimates for sales returns are based upon the historical patterns of product returns matched against sales, and managements evaluation of specific factors that may increase the risk of product returns. The amount of allowances for sales returns recognized in our consolidated balance sheets at June 30, 2009 and December 31, 2008 were $29.8 million and $25.3 million, respectively, and are recorded in Other accrued expenses and Trade receivables, net in our consolidated balance sheets. Provisions for sales returns deducted from consolidated sales were $95.4 million and $87.9 million in the second quarter of 2009 and 2008, respectively. Provisions for sales returns deducted from consolidated sales were $181.0 million and $165.9 million in the first six months of 2009 and 2008, respectively. The increase in the provision for sales returns in the second quarter and first six months of 2009 compared to the second quarter and first six months of 2008 is primarily due to an increase in estimated product return rates for our specialty pharmaceuticals products and increased sales returns related to breast implant products. Historical allowances for cash discounts and product returns have been within the amounts reserved or accrued.
Sales rebates and incentive accruals reduce revenue in the same period that the related sale is recorded and are included in Other accrued expenses in our consolidated balance sheets. The amounts accrued for sales rebates and other incentive programs were $119.6 million and $100.9 million at June 30, 2009 and December 31, 2008, respectively. Provisions for sales rebates and other incentive programs deducted from consolidated sales were $111.0 million and $73.7 million in the second quarter of 2009 and 2008, respectively. Provisions for sales rebates and other incentive programs deducted from consolidated sales were $198.4 million and $147.7 million in the first six months of 2009 and 2008, respectively. The increases in the amounts accrued at June 30, 2009 compared to December 31, 2008 and the provisions for sales rebates and other incentive programs in the second quarter and the first six months of 2009 compared to the second quarter and first six months of 2008 are primarily due to increased incentive programs, primarily related to our eye care pharmaceuticals, Botox® Cosmetic, skin care and facial aesthetics products. In addition, an increase in our published list prices in the United States for pharmaceutical products, which occurred for several of our products early in each of 2009 and 2008, generally results in higher provisions for sales rebates and other incentive programs deducted from consolidated sales.
Our procedures for estimating amounts accrued for sales rebates and other incentive programs at the end of any period are based on available quantitative data and are supplemented by managements judgment with respect to many factors, including but not limited to, current market dynamics, changes in contract terms, changes in sales trends, an evaluation of current laws and regulations and product pricing. Quantitatively, we use historical sales, product utilization and rebate data and apply forecasting techniques in order to estimate our liability amounts. Qualitatively, managements judgment is applied to these items to modify, if appropriate, the estimated liability amounts. There are inherent risks in this process. For example, customers may not achieve assumed utilization levels; customers may misreport their utilization to us; and actual movements of the U.S. Consumer Price Index-Urban, or CPI-U, which affect our rebate programs with U.S. federal and state government agencies, may differ from those estimated. On a quarterly basis, adjustments to our estimated liabilities for sales rebates and other incentive programs related to sales made in prior periods have not been material and have generally been less than 0.5% of consolidated product net sales. An adjustment to our estimated liabilities of 0.5% of consolidated product net sales on a quarterly basis would result in an increase or decrease to net sales and earnings before income taxes of approximately $5.0 million to $6.0 million. The sensitivity of our estimates can vary by program and type of customer. Additionally, there is a significant time lag between the date we determine the estimated liability and when we actually pay the liability. Due to this time lag, we record adjustments to our estimated liabilities over several periods, which can result in a net increase to earnings or a net decrease to earnings in those periods. Material differences may result in the amount of revenue we recognize from product sales if the actual amount of rebates and incentives differ materially from the amounts estimated by management.
The weighted average discount rates used to calculate our U.S. and non-U.S. pension benefit obligations at December 31, 2008 were 6.19% and 5.71%, respectively. The weighted average discount rates used to calculate our U.S. and non-U.S. net periodic benefit costs for 2009 are 6.19% and 5.71%, respectively, and for 2008 were 6.25% and 5.50%, respectively. We determine the discount rate based upon a hypothetical portfolio of high quality fixed income investments with maturities that mirror the pension benefit obligations at the plans measurement date. Market conditions and other factors can vary over time and could significantly affect our estimates for the discount rates used to calculate our pension benefit obligations and net periodic benefit costs for future years. As a sensitivity measure, the effect of a 0.25% decline in the discount rate assumption for our U.S and non-U.S. pension plans would increase our expected 2009 pre-tax pension benefit costs by approximately $3.6 million and increase our pension plans projected benefit obligations at December 31, 2008 by approximately $26.9 million.
Read the The complete ReportAGN is in the portfolios of Edward Owens of Vanguard Health Care Fund, Edward Owens of Vanguard Health Care Fund.
