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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(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 30, 2007

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from  to
.

COMMISSION FILE NUMBER 001-31257



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ADVANCED MEDICAL OPTICS, INC.

(Exact name of registrant as specified in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|DELAWARE                                                      |  | 33-0986820                         
|(State or other jurisdictionof incorporation or organization) |  | (I.R.S. EmployerIdentification No.)



|                                               |  |           
|---------------------------------------------- |  | ----------
|1700 E. St. Andrew Place Santa Ana, California |  | 92705     
|(Address of principal executive offices)       |  | (Zip Code)

Registrants telephone number, including area code 714/247-8200



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Indicate by 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.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer ̈Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

As of April 30, 2007, there were 59,940,915 shares of common stock outstanding.



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ADVANCED MEDICAL OPTICS, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 30, 2007

INDEX



|                               |  |                                                                                   |  |                                                                                                        |  |   
|------------------------------ |  | --------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | --
|PART I - FINANCIAL INFORMATION |  | 3                                                                                
|                               |  |                                                                                   | 
|                               |  | Item 1.                                                                           |  | Financial Statements                                                                                   |  | 3 
|                               |  |                                                                                   | 
|                               |  | (A).                                                                              |  | Unaudited Consolidated Statements of Operations - Three Months Ended March 30, 2007 and March 31, 2006 |  | 3 
|                               |  |                                                                                   | 
|                               |  | (B).                                                                              |  | Unaudited Consolidated Balance Sheets  March 30, 2007 and December 31, 2006                           |  | 4 
|                               |  |                                                                                   | 
|                               |  | (C).                                                                              |  | Unaudited Consolidated Statements of Cash Flows - Three Months Ended March 30, 2007 and March 31, 2006 |  | 5 
|                               |  |                                                                                   | 
|                               |  | (D).                                                                              |  | Notes to Unaudited Consolidated Financial Statements                                                   |  | 6 
|                               |  |                                                                                   | 
|                               |  | Item 2.                                                                           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 19
|                               |  |                                                                                   | 
|                               |  |                                                                                   |  | Certain Factors and Trends Affecting AMO and Its Businesses                                            |  | 24
|                               |  |                                                                                   | 
|                               |  | Item 3.                                                                           |  | Quantitative and Qualitative Disclosures About Market Risk                                             |  | 26
|                               |  |                                                                                   | 
|                               |  | Item 4.                                                                           |  | Controls and Procedures                                                                                |  | 28
|                               | 
|PART II - OTHER INFORMATION    |  | 29                                                                               
|                               |  |                                                                                   | 
|                               |  | Item 1.                                                                           |  | Legal Proceedings                                                                                      |  | 29
|                               |  |                                                                                   | 
|                               |  | Item 1A.                                                                          |  | Risk Factors                                                                                           |  | 29
|                               |  |                                                                                   | 
|                               |  | Item 6.                                                                           |  | Exhibits                                                                                               |  | 30
|                               |  |                                                                                  
|                               |  | Note: Items 2, 3, 4 and 5 of Part II are omitted because they are not applicable. |  |                                                                                                       
|                               |  |                                                                                   | 
|Signatures                     |  |                                                                                   |  |                                                                                                        |  | 31
|                               |  |                                                                                   | 
|Exhibit Index                  |  |                                                                                   |  |                                                                                                        |  |   
|                               |  |                                                                                   | 
|EXHIBIT 10.1                   |  |                                                                                   |  |                                                                                                        |  |   
|                               |  |                                                                                   | 
|EXHIBIT 31.1                   |  |                                                                                   |  |                                                                                                        |  |   
|                               |  |                                                                                   | 
|EXHIBIT 31.2                   |  |                                                                                   |  |                                                                                                        |  |   
|                               |  |                                                                                   | 
|EXHIBIT 32.1                   |  |                                                                                   |  |                                                                                                        |  |   



2



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PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

Advanced Medical Optics, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except per share data)



|                                               |  |                    |         |                |   |        
|---------------------------------------------- |  | ------------------ | ------- | -------------- | - | -------
|                                               |  | Three Months Ended
|                                               |  | March 30, 2007     |         | March 31, 2006
|Net sales                                      |  | $                  | 251,673 |                | $ | 238,228
|Cost of sales (Note 3)                         |  |                    | 94,167  |                |   | 86,835 
|                                               |  |                    |         |                |   |        
|Gross profit                                   |  |                    | 157,506 |                |   | 151,393
|Selling, general and administrative            |  |                    | 109,518 |                |   | 95,439 
|Research and development                       |  |                    | 19,164  |                |   | 16,973 
|In-process research and development            |  |                    | 1,580   |                |   |       
|Business repositioning costs, net (Note 3)     |  |                    |        |                |   | 29,254 
|                                               |  |                    |         |                |   |        
|Operating income                               |  |                    | 27,244  |                |   | 9,727  
|                                               |  |                    |         |                |   |        
|Non-operating expense:                         |  |                    |         |                |   |        
|Interest expense                               |  |                    | 6,164   |                |   | 4,507  
|Unrealized loss on derivative instruments      |  |                    | 383     |                |   | 438    
|Other, net                                     |  |                    | 1,216   |                |   | 1,004  
|                                               |  |                    |         |                |   |        
|                                               |  |                    | 7,763   |                |   | 5,949  
|                                               |  |                    |         |                |   |        
|Earnings before income taxes                   |  |                    | 19,481  |                |   | 3,778  
|Provision for income taxes                     |  |                    | 7,372   |                |   | 1,149  
|                                               |  |                    |         |                |   |        
|Net earnings                                   |  | $                  | 12,109  |                | $ | 2,629  
|                                               |  |                    |         |                |   |        
|Net earnings per share:                        |  |                    |         |                |   |        
|Basic                                          |  | $                  | 0.20    |                | $ | 0.04   
|Diluted                                        |  | $                  | 0.20    |                | $ | 0.04   
|                                               |  |                    |         |                |   |        
|Weighted average number of shares outstanding: |  |                    |         |                |   |        
|Basic                                          |  |                    | 59,399  |                |   | 68,228 
|Diluted                                        |  |                    | 61,044  |                |   | 71,026 
|                                               |  |                    |         |                |   |        

See accompanying notes to unaudited consolidated financial statements.



3



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Advanced Medical Optics, Inc.

Unaudited Consolidated Balance Sheets

(In thousands, except share data)



|                                                                                                     |  |               |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                     |  | March 30,2007 |           |   | December 31,2006 |  
|ASSETS                                                                                               |  |               |           |   |                  |   |           |  
|Current assets:                                                                                      |  |               |           |   |                  |   |           |  
|Cash and equivalents                                                                                 |  | $             | 43,899    |   |                  | $ | 34,522    |  
|Trade receivables, net                                                                               |  |               | 216,131   |   |                  |   | 232,408   |  
|Inventories                                                                                          |  |               | 127,600   |   |                  |   | 127,532   |  
|Deferred income taxes                                                                                |  |               | 41,744    |   |                  |   | 41,698    |  
|Income tax receivable                                                                                |  |               | 18,680    |   |                  |   | 15,045    |  
|Other current assets                                                                                 |  |               | 22,114    |   |                  |   | 26,938    |  
|                                                                                                     |  |               |           |   |                  |   |           |  
|Total current assets                                                                                 |  |               | 470,168   |   |                  |   | 478,143   |  
|Property, plant and equipment, net                                                                   |  |               | 135,354   |   |                  |   | 132,756   |  
|Deferred income taxes                                                                                |  |               | 11,861    |   |                  |   | 13,260    |  
|Other assets                                                                                         |  |               | 74,168    |   |                  |   | 69,365    |  
|Intangible assets, net                                                                               |  |               | 467,023   |   |                  |   | 471,664   |  
|Goodwill                                                                                             |  |               | 848,113   |   |                  |   | 848,709   |  
|                                                                                                     |  |               |           |   |                  |   |           |  
|Total assets                                                                                         |  | $             | 2,006,687 |   |                  | $ | 2,013,897 |  
|                                                                                                     |  |               |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 |  |               |           |   |                  |   |           |  
|Current liabilities:                                                                                 |  |               |           |   |                  |   |           |  
|Accounts payable                                                                                     |  | $             | 47,679    |   |                  | $ | 53,897    |  
|Accrued compensation                                                                                 |  |               | 28,784    |   |                  |   | 41,896    |  
|Other accrued expenses                                                                               |  |               | 106,315   |   |                  |   | 120,384   |  
|Deferred income taxes                                                                                |  |               | 1,245     |   |                  |   | 1,276     |  
|                                                                                                     |  |               |           |   |                  |   |           |  
|Total current liabilities                                                                            |  |               | 184,023   |   |                  |   | 217,453   |  
|Long-term debt                                                                                       |  |               | 851,105   |   |                  |   | 851,105   |  
|Deferred income taxes                                                                                |  |               | 181,486   |   |                  |   | 185,844   |  
|Other liabilities                                                                                    |  |               | 51,810    |   |                  |   | 43,504    |  
|Commitments and contingencies                                                                        |  |               |           |   |                  |   |           |  
|Stockholders equity:                                                                                |  |               |           |   |                  |   |           |  
|Preferred stock, $.01 par value; 5,000,000 shares authorized; none issued                            |  |               |          |   |                  |   |          |  
|Common stock, $.01 par value; 240,000,000 shares authorized; 59,825,012 and 59,512,106 shares issued |  |               | 598       |   |                  |   | 595       |  
|Additional paid-in capital                                                                           |  |               | 1,421,622 |   |                  |   | 1,409,475 |  
|Accumulated deficit                                                                                  |  |               | (718,411  | ) |                  |   | (730,800  | )
|Accumulated other comprehensive income                                                               |  |               | 34,478    |   |                  |   | 36,745    |  
|Treasury stock, at cost (1,397 shares)                                                               |  |               | (24       | ) |                  |   | (24       | )
|                                                                                                     |  |               |           |   |                  |   |           |  
|Total stockholders equity                                                                           |  |               | 738,263   |   |                  |   | 715,991   |  
|                                                                                                     |  |               |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                           |  | $             | 2,006,687 |   |                  | $ | 2,013,897 |  
|                                                                                                     |  |               |           |   |                  |   |           |  

See accompanying notes to unaudited consolidated financial statements.



4



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Advanced Medical Optics, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands)



|                                                                                              |  |                    |         |   |               |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                                                              |  | Three Months Ended |        
|                                                                                              |  | March 30,2007      |         |   | March 31,2006 |  
|Cash flows from operating activities:                                                         |  |                    |         |   |               |   |         |  
|Net earnings                                                                                  |  | $                  | 12,109  |   |               | $ | 2,629   |  
|Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |  |                    |         |   |               |   |         |  
|Amortization of debt issuance costs                                                           |  |                    | 975     |   |               |   | 839     |  
|Depreciation and amortization                                                                 |  |                    | 17,116  |   |               |   | 16,482  |  
|In-process research and development                                                           |  |                    | 1,580   |   |               |   |        |  
|Loss on investments and assets                                                                |  |                    | 375     |   |               |   | 2,539   |  
|Deferred income taxes                                                                         |  |                    | (1,474  | ) |               |   | (1,500  | )
|Unrealized loss on derivatives                                                                |  |                    | 383     |   |               |   | 438     |  
|Share-based compensation                                                                      |  |                    | 4,746   |   |               |   | 5,071   |  
|Changes in assets and liabilities (net of effect of business acquired):                       |  |                    |         |   |               |   |         |  
|Trade receivables, net                                                                        |  |                    | 19,741  |   |               |   | 15,594  |  
|Inventories                                                                                   |  |                    | 1,680   |   |               |   | (3,331  | )
|Other current assets                                                                          |  |                    | 4,761   |   |               |   | 2,882   |  
|Accounts payable                                                                              |  |                    | (7,703  | ) |               |   | (8,260  | )
|Accrued expenses and other liabilities                                                        |  |                    | (27,284 | ) |               |   | (24,595 | )
|Income taxes                                                                                  |  |                    | 3,123   |   |               |   | (3,626  | )
|Other non-current assets and liabilities                                                      |  |                    | (5,312  | ) |               |   | (5,948  | )
|                                                                                              |  |                    |         |   |               |   |         |  
|Net cash provided by (used in) operating activities                                           |  |                    | 24,816  |   |               |   | (786    | )
|                                                                                              |  |                    |         |   |               |   |         |  
|Cash flows from investing activities:                                                         |  |                    |         |   |               |   |         |  
|Acquisition of businesses, net of cash acquired                                               |  |                    | (13,540 | ) |               |   |        |  
|Additions to property, plant and equipment                                                    |  |                    | (7,188  | ) |               |   | (6,575  | )
|Proceeds from sale of property, plant and equipment                                           |  |                    | 21      |   |               |   |        |  
|Additions to capitalized internal-use software                                                |  |                    | (915    | ) |               |   |        |  
|Additions to demonstration and bundled equipment                                              |  |                    | (1,942  | ) |               |   | (2,406  | )
|                                                                                              |  |                    |         |   |               |   |         |  
|Net cash used in investing activities                                                         |  |                    | (23,564 | ) |               |   | (8,981  | )
|                                                                                              |  |                    |         |   |               |   |         |  
|Cash flows from financing activities:                                                         |  |                    |         |   |               |   |         |  
|Net repayment of short-term debt                                                              |  |                    |        |   |               |   | (15,000 | )
|Proceeds from issuance of common stock                                                        |  |                    | 5,989   |   |               |   | 15,918  |  
|Excess tax benefits from share-based compensation                                             |  |                    | 1,082   |   |               |   | 5,229   |  
|                                                                                              |  |                    |         |   |               |   |         |  
|Net cash provided by financing activities                                                     |  |                    | 7,071   |   |               |   | 6,147   |  
|Effect of exchange rates on cash and equivalents                                              |  |                    | 1,054   |   |               |   | 401     |  
|                                                                                              |  |                    |         |   |               |   |         |  
|Net increase (decrease) in cash and equivalents                                               |  |                    | 9,377   |   |               |   | (3,219  | )
|Cash and equivalents at beginning of period                                                   |  |                    | 34,522  |   |               |   | 40,826  |  
|                                                                                              |  |                    |         |   |               |   |         |  
|Cash and equivalents at end of period                                                         |  | $                  | 43,899  |   |               | $ | 37,607  |  
|                                                                                              |  |                    |         |   |               |   |         |  

See accompanying notes to unaudited consolidated financial statements.



5



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Advanced Medical Optics, Inc.

Notes to Unaudited Consolidated Financial Statements

Note 1: Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary (consisting only of normal,
recurring adjustments) for a fair statement of the financial information contained therein. These statements do not include all disclosures required by accounting principles generally accepted in the United States of America for annual
financial statements and should be read in conjunction with the audited consolidated financial statements of Advanced Medical Optics, Inc. (the Company or AMO) for the year ended December 31, 2006. The results of
operations for the three months ended March 30, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007.

All material intercompany balances have been eliminated.

Reclassification

Certain prior period amounts have been reclassified to conform with current period presentation.

Recently Adopted and Issued Accounting Standards

The Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on January 1, 2007 and
recorded an increase in retained earnings of $0.3 million related to the cumulative effect of adoption. The components of the cumulative effect of adoption included an increase of $1.8 million in the gross liability for unrecognized tax benefits, an
increase in gross deferred tax assets of $3.5 million and a decrease in goodwill of $1.4 million.

As of the adoption date, the Company had
unrecognized tax benefits of $30.1 million of which $20.2 million, if recognized, would affect the effective tax rate. As of March 30, 2007, the Company had unrecognized tax benefits of $31.3 million of which $21.1 million, if recognized, would
affect the effective tax rate. The difference primarily relates to timing differences and amounts arising from business combinations which, if recognized, would be recorded to goodwill.

We conduct business globally and, as a result, the Company or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction
and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Ireland, Japan, Germany, China, and
Netherlands. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 1999.

The Company anticipates that the total amount of liability for unrecognized tax benefits may change due to the settlement of audits and the expiration of statute of limitations in the next 12 months. Quantification of
such change cannot be estimated at this time.

The Company recognizes potential accrued interest and penalties related to unrecognized tax
benefits in income tax expense. As of the date of adoption, the Company had a liability for interest and penalties of $1.4 million (net of tax). As of March 30, 2007, the Company had a liability for interest and penalties of $1.6 million (net
of tax).

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This
Statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. The Company is currently assessing the impact (if any) of SFAS No. 159 on its financial statements.

Note 2: Common Stock

AMO has an Incentive
Compensation Plan (ICP) that provides for the granting of stock options, restricted stock and restricted stock units to directors, employees and consultants. The Company has two Employee Stock Purchase Plans (ESPP) for United
States and international employees, respectively, which allow employees to purchase AMO common stock.

Share-Based Compensation Expense

Total share-based compensation expense included in the unaudited consolidated statements of operations for the three months ended
March 30, 2007 and March 31, 2006 was as follows (in thousands):



6



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|                                    |  |                                  |        |   |                                  |   |        |  
|----------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | - | ------ | -
|                                    |  | Three Months EndedMarch 30, 2007 |        |   | Three Months EndedMarch 31, 2006 |  
|Cost of sales                       |  | $                                | 581    |   |                                  | $ | 540    |  
|                                    |  |                                  |        |   |                                  |   |        |  
|Operating Expenses -                |  |                                  |        |   |                                  |   |        |  
|Research and development            |  |                                  | 590    |   |                                  |   | 480    |  
|Selling, general and administrative |  |                                  | 3,575  |   |                                  |   | 4,051  |  
|                                    |  |                                  |        |   |                                  |   |        |  
|                                    |  |                                  | 4,165  |   |                                  |   | 4,531  |  
|                                    |  |                                  |        |   |                                  |   |        |  
|Pre-tax expense                     |  |                                  | 4,746  |   |                                  |   | 5,071  |  
|Income tax benefit                  |  |                                  | (1,474 | ) |                                  |   | (1,683 | )
|                                    |  |                                  |        |   |                                  |   |        |  
|Net of tax expense                  |  | $                                | 3,272  |   |                                  | $ | 3,388  |  
|                                    |  |                                  |        |   |                                  |   |        |  

Stock Options

Stock options granted to employees are exercisable at a price equal to the fair market value of the common stock on the date of the grant and generally vest at a rate of 25% per year beginning twelve months after
the date of grant. Grants under these plans expire ten years from the date of grant.

The Company issues new shares to satisfy option
exercises.

The following is a summary of stock option activity (in thousands, except per share amounts):



|                                              |  |                 |   |  |                               |       |                                                  |      |                          |   |       
|--------------------------------------------- |  | --------------- | - |  | ----------------------------- | ----- | ------------------------------------------------ | ---- | ------------------------ | - | ------
|                                              |  | Number ofShares |   |  | WeightedAverageExercise Price |       | WeightedAverageRemainingContractualTerm in Years |      | AggregateIntrinsic Value
|Outstanding at December 31, 2006              |  | 7,628           |   |  | $                             | 25.16 |                                                  |      |                          |   |       
|Granted                                       |  | 18              |   |  |                               | 38.34 |                                                  |      |                          |   |       
|Exercised                                     |  | (310            | ) |  |                               | 19.26 |                                                  |      |                          |   |       
|Forfeitures and cancellations                 |  | (20             | ) |  |                               | 36.26 |                                                  |      |                          |   |       
|Expirations                                   |  | (3              | ) |  |                               | 36.33 |                                                  |      |                          |   |       
|                                              |  |                 |   |  |                               |       |                                                  |      |                          |   |       
|Outstanding at March 30, 2007                 |  | 7,313           |   |  |                               | 25.40 |                                                  | 6.08 |                          | $ | 86,306
|                                              |  |                 |   |  |                               |       |                                                  |      |                          |   |       
|Vested and expected to vest at March 30, 2007 |  | 7,205           |   |  |                               | 25.21 |                                                  | 6.09 |                          | $ | 86,362
|                                              |  |                 |   |  |                               |       |                                                  |      |                          |   |       
|Exercisable at March 30, 2007                 |  | 5,047           |   |  | $                             | 19.87 |                                                  | 5.23 |                          | $ | 87,475
|                                              |  |                 |   |  |                               |       |                                                  |      |                          |   |       

Note 3: Product Rationalization and Business Repositioning

On October 31, 2005, the Companys Board of Directors approved a product rationalization and repositioning plan covering the discontinuation of
non-strategic cataract surgical and eye care products and the elimination or redeployment of resources that support these product lines. The plan also included organizational changes and potential reductions in force in manufacturing, sales and
marketing associated with these product lines, as well as organizational changes in research and development and other corporate functions designed to align the organization with our strategy and strategic business unit organization.

The plan further called for increasing the Companys investment in key growth opportunities, specifically the Companys refractive implant
product line and international laser vision correction business, and accelerating the implementation of productivity initiatives. Following an analysis of its IOL manufacturing capabilities in the second quarter of 2006, the Company decided to
consolidate certain operations. In addition, the Company expanded the scope of its eye care rationalization initiatives in order to maximize manufacturing capacity and seize growth opportunities. The plan was completed in the fourth quarter of 2006.
Total cumulative charges of $105.0 million were incurred through December 31, 2006.

In the three months ended March 31, 2006, we
incurred $32.4 million of pre-tax charges, which included $3.2 million for inventory and manufacturing related charges included in cost of sales and $29.2 million included in operating expenses.



7



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Charges included in operating expenses comprised productivity and brand repositioning costs of $26.2 million, severance, relocation and other one-time
termination benefits of $1.6 million and asset write-downs of $1.4 million. Business repositioning charges and related activity in the accrual balances during the three months ended March 30, 2007 were as follows (in thousands):



|                                                       |  |                            |        |               |   |              |  |   |                     |   |                         |   |   |  |   |       
|------------------------------------------------------ |  | -------------------------- | ------ | ------------- | - | ------------ |  | - | ------------------- | - | ----------------------- | - | - |  | - | ------
|Business Repositioning Costs:                          |  | Balance atDecember 31,2006 |        | CostsIncurred |   | CashPayments |  |   | Non-CashAdjustments |   | Balance atMarch 30,2007
|Severance, relocation and related costs                |  | $                          | 11,399 |               | $ |             |  | $ | (2,322              | ) |                         | $ |  |  | $ | 9,077 
|Contractual obligations                                |  |                            | 248    |               |   |             |  |   | (94                 | ) |                         |   |  |  |   | 154   
|Productivity initiatives and brand repositioning costs |  |                            | 1,188  |               |   |             |  |   | (128                | ) |                         |   |  |  |   | 1,060 
|                                                       |  |                            |        |               |   |              |  |   |                     |   |                         |   |   |  |   |       
|                                                       |  | $                          | 12,835 |               | $ |             |  | $ | (2,544              | ) |                         | $ |  |  | $ | 10,291
|                                                       |  |                            |        |               |   |              |  |   |                     |   |                         |   |   |  |   |       

Note 4: Composition of Certain Financial Statement Captions

Inventories:



|                                                                                                     |  |               |         |                  |   |        
|---------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|(In thousands)                                                                                       |  | March 30,2007 |         | December 31,2006
|Finished goods, including consignment inventory of $8,805 and $13,958 in 2007 and 2006, respectively |  | $             | 76,287  |                  | $ | 83,358 
|Work in process                                                                                      |  |               | 10,156  |                  |   | 13,538 
|Raw materials                                                                                        |  |               | 41,157  |                  |   | 30,636 
|                                                                                                     |  |               |         |                  |   |        
|                                                                                                     |  | $             | 127,600 |                  | $ | 127,532
|                                                                                                     |  |               |         |                  |   |        

Intangible assets, net



|                                |  |                    |  |                |         |                         |                   |         |             |  |                         |         |  |   |         |  
|------------------------------- |  | ------------------ |  | -------------- | ------- | ----------------------- | ----------------- | ------- | ----------- |  | ----------------------- | ------- |  | - | ------- | -
|                                |  |                    |  | March 30, 2007 |         |                         | December 31, 2006 |        
|(In thousands)                  |  | UsefulLife (Years) |  | GrossAmount    |         | AccumulatedAmortization |                   |         | GrossAmount |  | AccumulatedAmortization |        
|Amortizable Intangible Assets:  |  |                    |  |                |         |                         |                   |         |             |  |                         |         |  |   |         |  
|Patent                          |  | 17                 |  | $              | 350     |                         | $                 | (6      | )           |  | $                       |        |  | $ |        |  
|Licensing                       |  | 3  5              |  |                | 4,590   |                         |                   | (4,275  | )           |  |                         | 4,590   |  |   | (4,243  | )
|Technology rights               |  | 8  19             |  |                | 369,165 |                         |                   | (70,374 | )           |  |                         | 364,219 |  |   | (61,997 | )
|Trademarks                      |  | 13.5               |  |                | 16,624  |                         |                   | (3,818  | )           |  |                         | 16,933  |  |   | (3,545  | )
|Customer relationships          |  | 5                  |  |                | 22,580  |                         |                   | (8,213  | )           |  |                         | 22,400  |  |   | (7,093  | )
|                                |  |                    |  |                |         |                         |                   |         |             |  |                         |         |  |   |         |  
|                                |  |                    |  |                | 413,309 |                         |                   | (86,686 | )           |  |                         | 408,142 |  |   | (76,878 | )
|Nonamortizable Tradename (VISX) |  | Indefinite         |  |                | 140,400 |                         |                   |        |             |  |                         | 140,400 |  |   |        |  
|                                |  |                    |  |                |         |                         |                   |         |             |  |                         |         |  |   |         |  
|                                |  |                    |  | $              | 553,709 |                         | $                 | (86,686 | )           |  | $                       | 548,542 |  | $ | (76,878 | )
|                                |  |                    |  |                |         |                         |                   |         |             |  |                         |         |  |   |         |  

The amortizable intangible assets balance increased due to the impact of foreign currency
fluctuation and $6.5 million of acquired intangible assets as a result of the acquisition of WaveFront Sciences, Inc. (WFSI). Amortization expense was $10.1 million and $9.7 million for the three months ended March 30, 2007 and March 31,
2006, respectively, and is recorded in selling, general and administrative in the accompanying unaudited consolidated statements of operations. Amortization expense is expected to be $40.2 million in 2007 and 2008, $39.9 million in 2009, $37.3
million in 2010 and $35.5 million in 2011. Actual amortization expense may vary due to the impact of foreign currency fluctuations.



8



---

Goodwill



|                              |  |                            |         |                               |   |      |                            |  |   |                      |   |                   |   |       |                         |   |        |   |  |   |        
|----------------------------- |  | -------------------------- | ------- | ----------------------------- | - | ---- | -------------------------- |  | - | -------------------- | - | ----------------- | - | ----- | ----------------------- | - | ------ | - |  | - | -------
|(In thousands)                |  | Balance atDecember 31,2006 |         | Excess TaxBenefitsAdjustments |   |      | ForeignCurrencyAdjustments |  |   | WaveFrontAcquisition |   | FIN 48Adjustments |   |       | Balance atMarch 30,2007
|Goodwill:                     |  |                            |         |                               |   |      |                            |  |   |                      |   |                   |   |       |                         |   |        |   |  |   |        
|Eye Care                      |  | $                          | 28,540  |                               | $ |     |                            |  | $ | 268                  |   |                   | $ |      |                         | $ |       |   |  | $ | 28,808 
|                              |  |                            |         |                               |   |     
|Cataract/Implant              |  |                            | 349,347 |                               |   |     |                            |  |   | (3,577               | ) |                   |   |      |                         |   |       |   |  |   | 345,770
|                              |  |                            |         |                               |   |     
|Laser Vision Correction (LVC) |  |                            | 470,822 |                               |   | (677 | )                          |  |   |                     |   |                   |   | 4,790 |                         |   | (1,400 | ) |  |   | 473,535
|                              |  |                            |         |                               |   |      |                            |  |   |                      |   |                   |   |       |                         |   |        |   |  |   |        
|                              |  | $                          | 848,709 |                               | $ | (677 | )                          |  | $ | (3,309               | ) |                   | $ | 4,790 |                         | $ | (1,400 | ) |  | $ | 848,113
|                              |  |                            |         |                               |   |      |                            |  |   |                      |   |                   |   |       |                         |   |        |   |  |   |        

The change in goodwill during the three months ended March 30, 2007 included an adjustment of
Laser Vision Correction goodwill of $0.7 million as a result of excess tax benefits from the exercise of converted VISX stock options that were fully vested at the acquisition date and a decrease of $3.3 million from foreign currency fluctuations in
the Eye Care and Cataract/Implant segments. In addition, during the current quarter the Company recorded $4.8 million of goodwill from the acquisition of WFSI, which was included in the LVC segment. As a result of the adoption of FIN 48, the Company
decreased goodwill by $1.4 million as a result of a reduction in the liability for unrecognized tax benefits accounted for in connection with the VISX acquisition. The Company will perform its annual impairment test of goodwill during the second
quarter of 2007.

In January 2007, The Company acquired WFSI, an optical medical device research and development company, for approximately
$14 million, excluding future contingent consideration noted below. The purchase price included $1.6 million of in-process research and development (IPR&D) which was expensed in the quarter ended March 30, 2007, as it represented the fair
value of projects that had not reached technological feasibility and had no alternative future use at the date of acquisition. The purchase agreement also provides for additional future payments of approximately $6 million that are contingent on
successful achievement of certain milestones. The acquisition of WFSI was not material to the historical consolidated financial position, results of operations or cash flows of the Company.

Note 5: Debt



|                                                                                                                                    |  |                         |   |  |               |         |                  |   |        
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | - |  | ------------- | ------- | ---------------- | - | -------
|(In thousands)                                                                                                                      |  | Average Rateof Interest |   |  | March 30,2007 |         | December 31,2006
|Convertible Senior Subordinated Notes due 2024 (21/2% Notes), with put dates of January 15, 2010, July 15, 2014 and July 15, 2019 |  | 2.500                   | % |  | $             | 246,105 |                  | $ | 246,105
|Convertible Senior Subordinated Notes due 2025 (1.375% Notes), with put dates of July 1, 2011, July 1, 2016 and
July 1, 2021      |  | 1.375                   | % |  |               | 105,000 |                  |   | 105,000
|Convertible Senior Subordinated Notes due 2026 (3.25% Notes), with put dates of August 1, 2014, August 1, 2017 and
August 1, 2021  |  | 3.250                   | % |  |               | 500,000 |                  |   | 500,000
|                                                                                                                                    |  |                         |   |  |               |         |                  |   |        
|Total long-term debt                                                                                                                |  |                         |   |  | $             | 851,105 |                  | $ | 851,105
|                                                                                                                                    |  |                         |   |  |               |         |                  |   |        

All of the convertible notes issued by the Company may be converted, at the option of the holders,
on or prior to the final maturity date under certain circumstances, none of which had occurred as of March 30, 2007. Upon conversion of the convertible notes, the Company will satisfy in cash the conversion obligation with respect to the
principal amount of the convertible notes, with any remaining amount of the conversion obligation to be satisfied in shares of common stock. As a result of this election, the Company also is required to satisfy in cash its obligations to repurchase
any convertible notes that holders may put to the Company on the respective dates noted in the table above.

At March 30, 2007,
approximately $8.4 million of the Companys senior revolving credit facility was reserved to support letters of credit issued on the Companys behalf for normal operating purposes and the Company has approximately $291.6 million undrawn
and available revolving loan commitments.

Borrowings under the revolving credit facility, if any, bear interest at current market rates
plus a margin based upon the Companys ratio of debt to EBITDA, as defined. The incremental interest margin on borrowings under the revolving credit



9



---

facility decreases as the Companys ratio of debt to EBITDA decreases to specified levels. Under the senior credit facility, certain transactions may
trigger mandatory prepayment of borrowings, if any. Such transactions may include equity or debt offerings, certain asset sales and extraordinary receipts. The Company pays a quarterly fee (1.95% per annum at March 30, 2007) on the average
balance of outstanding letters of credit and a quarterly commitment fee (0.375% per annum at March 30, 2007) on the average unused portion of the revolving credit facility.

The senior credit facility provided that the Company maintain certain financial and operating covenants which included, among other provisions,
maintaining specific leverage and coverage ratios. Certain covenants under the senior credit facility may limit the incurrence of additional indebtedness. The senior credit facility prohibited dividend payments. The Company was in compliance with
these covenants at March 30, 2007. The senior credit facility was collateralized by a first priority perfected lien on, and pledge of, all of the combined Companys present and future property and assets (subject to certain exclusions),
100% of the stock of the domestic subsidiaries, 66% of the stock of foreign subsidiaries and all present and future intercompany debts.

As
of March 30, 2007, the aggregate maturities of total long-term debt of $851.1 million are due after 2011.

Subsequent to
March 30, 2007, the Company terminated the senior revolving credit facility described above and obtained new senior credit facilities on April 2, 2007 consisting of a $300 million revolving credit facility and a $450 million term loan. The
Company also issued additional senior subordinated notes as further described in Note 12.

Note 6: Related Party Transactions

As of March 30, 2007, an interest-free relocation loan of $0.5 million, collateralized by real property, was outstanding from the chief executive
officer. The principal amount of the loan is payable upon the earlier to occur of (a) 60 days following the chief executive officers termination of employment; (b) the date of the sale or other transfer of the property or
(c) July 3, 2007. This relocation loan is evidenced by a promissory note dated July 3, 2002, prior to the adoption of the Sarbanes-Oxley Act of 2002.

Note 7: Earnings Per Share

Basic earnings per share is calculated by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adjusting net earnings and the weighted average outstanding shares, assuming the conversion of all potentially dilutive convertible
securities, stock options and stock purchase plan awards.

During the three months
ended March 30, 2007, the Company included the dilutive effect of stock options and stock purchase plan awards of approximately 1,645,000 shares. During the three months ended March 30, 2007, there were 2,057,378 antidilutive stock options
excluded from the computation of dilutive shares outstanding. During the three months ended March 31, 2006, there were no antidilutive stock options. There were no potentially diluted common shares associated with the 2 1/2% Notes, 1.375% Notes and the 3.25% Notes as the Companys quarter-end stock price was less than the
conversion prices of the notes.

Note 8: Other Comprehensive Income (Loss)

The following table summarizes the components of comprehensive income (loss) (in thousands):



|                                         |  |                    |        |   |                |   |                  |  |   |                  |   |           |   |                  |  |   |   |  |   |       
|---------------------------------------- |  | ------------------ | ------ | - | -------------- | - | ---------------- |  | - | ---------------- | - | --------- | - | ---------------- |  | - | - |  | - | ------
|                                         |  | Three Months Ended
|                                         |  | March 30, 2007     |        |   | March 31, 2006
|                                         |  | Before-taxamount   |        |   | Incometax      |   | Net-of-taxamount |  |   | Before-taxamount |   | IncomeTax |   | Net-of-taxamount
|Foreign currency translation adjustments |  | $                  | (2,267 | ) |                | $ |                 |  | $ | (2,267           | ) |           | $ | 7,581            |  | $ |  |  | $ | 7,581 
|Net earnings                             |  |                    |        |   |                |   |                  |  |   | 12,109           |   |           |   |                  |  |   |   |  |   | 2,629 
|                                         |  |                    |        |   |                |   |                  |  |   |                  |   |           |   |                  |  |   |   |  |   |       
|Total comprehensive income               |  |                    |        |   |                |   |                  |  | $ | 9,842            |   |           |   |                  |  |   |   |  | $ | 10,210
|                                         |  |                    |        |   |                |   |                  |  |   |                  |   |           |   |                  |  |   |   |  |   |       



10



---

Note 9: Business Segment Information

The operating segments are segments for which separate financial information is available and upon which operating results are evaluated on a timely basis to assess performance and to allocate resources.

The Companys reportable segments are represented by three business units: Cataract/Implant, Laser Vision Correction and Eye Care. The
cataract/implant segment markets four key products required for cataract surgery  foldable intraocular lenses, or IOLs, implantation systems, phacoemulsification systems and viscoelastics. The laser vision correction segment markets laser
systems, diagnostic devices, and treatment cards. The eye care segment provides a full range of contact lens care products for use with most types of contact lenses. These products include single-bottle, multi-purpose cleaning and disinfecting
solutions, hydrogen peroxide-based disinfecting solutions, daily cleaners, enzymatic cleaners and contact lens rewetting drops.

The
Company evaluates segment performance based on operating income excluding certain costs such as business repositioning costs, non-recurring acquisition-related costs and share-based compensation expense. Research and development costs, manufacturing
variances, inventory provision/repricing costs and supply chain costs are managed on a global basis and are considered corporate costs. The Company presents the measure which management believes is determined in accordance with the measurement
principles consistent with those used in measuring the corresponding amounts in the unaudited consolidated financial statements. Because operating segments are generally defined by the products they design and sell, they do not make sales to each
other. Depreciation and amortization related to the manufacturing of goods is included in gross profit. The Company does not discretely allocate assets to its operating segments, nor does the Companys chief operating decision maker evaluate
operating segments using discrete asset information.

Business Segments



|                                    |  |                    |         |                         |   |               |  |   |               |   |  |   |         |  
|----------------------------------- |  | ------------------ | ------- | ----------------------- | - | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                    |  | Net Sales          |         | Operating Income (Loss) |  
|                                    |  | Three Months Ended |         | Three Months Ended      |  
|(In thousands)                      |  | March 30,2007      |         | March 31,2006           |   | March 30,2007 |  |   | March 31,2006 |  
|Operating segments:                 |  |                    |         |                         |   |               |  |   |               |   |  |   |         |  
|Cataract/Implant                    |  | $                  | 127,749 |                         | $ | 120,444       |  | $ | 67,990        |   |  | $ | 55,266  |  
|Laser Vision Correction             |  |                    | 64,615  |                         |   | 60,955        |  |   | 39,576        |   |  |   | 42,860  |  
|Eye Care                            |  |                    | 59,309  |                         |   | 56,829        |  |   | 21,616        |   |  |   | 21,363  |  
|                                    |  |                    |         |                         |   |               |  |   |               |   |  |   |         |  
|Total segments                      |  |                    | 251,673 |                         |   | 238,228       |  |   | 129,182       |   |  |   | 119,489 |  
|Manufacturing operations            |  |                    |        |                         |   |              |  |   | (10,655       | ) |  |   | (2,994  | )
|Research and development            |  |                    |        |                         |   |              |  |   | (19,164       | ) |  |   | (16,973 | )
|In-process research and development |  |                    |        |                         |   |              |  |   | (1,580        | ) |  |   |        |  
|Business repositioning              |  |                    |        |                         |   |              |  |   |              |   |  |   | (32,432 | )
|Global supply chain                 |  |                    |        |                         |   |              |  |   | (17,290       | ) |  |   | (13,812 | )
|General corporate                   |  |                    |        |                         |   |              |  |   | (53,249       | ) |  |   | (43,551 | )
|                                    |  |                    |         |                         |   |               |  |   |               |   |  |   |         |  
|Total                               |  | $                  | 251,673 |                         | $ | 238,228       |  | $ | 27,244        |   |  | $ | 9,727   |  
|                                    |  |                    |         |                         |   |               |  |   |               |   |  |   |         |  



11



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Geographic Area Information



|                                        |  |                    |         |               |   |        
|--------------------------------------- |  | ------------------ | ------- | ------------- | - | -------
|                                        |  | Net Sales         
|                                        |  | Three Months Ended
|(In thousands)                          |  | March 30,2007      |         | March 31,2006
|United States:                          |  |                    |         |               |   |        
|Cataract/Implant                        |  | $                  | 41,722  |               | $ | 38,098 
|Laser Vision Correction                 |  |                    | 50,795  |               |   | 49,917 
|Eye Care                                |  |                    | 17,211  |               |   | 14,215 
|                                        |  |                    |         |               |   |        
|Total United States                     |  |                    | 109,728 |               |   | 102,230
|Americas, excluding United States:      |  |                    |         |               |   |        
|Cataract/Implant                        |  |                    | 9,029   |               |   | 8,412  
|Laser Vision Correction                 |  |                    | 2,316   |               |   | 2,110  
|Eye Care                                |  |                    | 2,804   |               |   | 2,685  
|                                        |  |                    |         |               |   |        
|Total Americas, excluding United States |  |                    | 14,149  |               |   | 13,207 
|Europe/Africa/Middle East:              |  |                    |         |               |   |        
|Cataract/Implant                        |  |                    | 51,547  |               |   | 46,385 
|Laser Vision Correction                 |  |                    | 6,225   |               |   | 4,099  
|Eye Care                                |  |                    | 20,024  |               |   | 15,905 
|                                        |  |                    |         |               |   |        
|Total Europe/Africa/Middle East         |  |                    | 77,796  |               |   | 66,389 
|Japan:                                  |  |                    |         |               |   |        
|Cataract/Implant                        |  |                    | 13,355  |               |   | 14,958 
|Laser Vision Correction                 |  |                    | 1,480   |               |   | 816    
|Eye Care                                |  |                    | 13,689  |               |   | 16,129 
|                                        |  |                    |         |               |   |        
|Total Japan                             |  |                    | 28,524  |               |   | 31,903 
|Asia Pacific:                           |  |                    |         |               |   |        
|Cataract/Implant                        |  |                    | 12,096  |               |   | 12,591 
|Laser Vision Correction                 |  |                    | 3,799   |               |   | 4,013  
|Eye Care                                |  |                    | 5,581   |               |   | 7,895  
|                                        |  |                    |         |               |   |        
|Total Asia Pacific                      |  |                    | 21,476  |               |   | 24,499 
|                                        |  |                    |         |               |   |        
|Total                                   |  | $                  | 251,673 |               | $ | 238,228
|                                        |  |                    |         |               |   |        

The United States information is presented separately as it is the Companys headquarters
country, and U.S. sales represented 43.6% and 42.9% of total net sales for the three months ended March 30, 2007 and March 31, 2006, respectively. Additionally, sales in Japan represented 11.3% and 13.4% of total net sales for the three
months ended March 30, 2007 and March 31, 2006, respectively. No other country, or single customer, generated over 10% of total net sales in the periods presented.

Note 10: Commitments and Contingencies

On January 4, 2005, Dr. James Nielsen filed a
complaint against the Company and Allergan, Inc. in the U.S. District Court of the Northern District of Texas, Dallas Division, for infringement of U.S. Patent No. 5,158,572. Dr. Nielsen alleges that the Companys Arraymultifocal intraocular lens infringes the patent. He is seeking damages and a permanent injunction. The matter is set for trial in the Courts four-week docket beginning December 3, 2007.

The Company does not believe, based on current knowledge, that the foregoing legal proceeding is likely to have a material adverse effect on its
financial position, results of operations or cash flows. However, the Company may incur substantial expenses in defending against third party claims. In the event of a determination adverse to the Company or its subsidiaries, the Company may incur
substantial monetary liability, and be required to change its business practices. Either of these could have a material adverse effect on the Companys financial position, results of operations or cash flows.

While the Company is involved from time to time in litigation arising in the ordinary course of business, including product liability claims, the Company
is not currently aware of any other actions against AMO or Allergan relating to the optical medical device business that the Company believes would have a material adverse effect on the Companys business, financial condition, results of
operations or cash flows. The Company may be subject to future litigation and infringement claims, which could cause the Company to incur significant expenses or prevent the Company from selling its products. The



12



---

Company operates in an industry susceptible to significant product liability claims. Product liability claims may be asserted against AMO in the future
arising out of events not known to the Company at the present time. Under the terms of the contribution and distribution agreement affecting the spin-off, Allergan agreed to assume responsibility for, and to indemnify AMO against, all current and
future litigation relating to its retained businesses and the Company agreed to assume responsibility for, and to indemnify Allergan against, all current and future litigation related to the optical medical device business.

Note 11: Pension Benefit Plans

The Company sponsors
defined benefit pension plans in Japan and in certain European countries. Components of net periodic benefit cost under these plans were (in thousands):



|                                   |  |                    |     |   |               |   |     |  
|---------------------------------- |  | ------------------ | --- | - | ------------- | - | --- | -
|                                   |  | Three Months Ended |    
|                                   |  | March 30,2007      |     |   | March 31,2006 |  
|Service cost                       |  | $                  | 551 |   |               | $ | 569 |  
|Interest cost                      |  |                    | 174 |   |               |   | 137 |  
|Expected return on plan assets     |  |                    | (80 | ) |               |   | (61 | )
|Amortization of prior service cost |  |                    | 11  |   |               |   | 15  |  
|Amortization of net actuarial loss |  |                    | 26  |   |               |   | 10  |  
|                                   |  |                    |     |   |               |   |     |  
|Net periodic benefit cost          |  | $                  | 682 |   |               | $ | 670 |  
|                                   |  |                    |     |   |               |   |     |  

Note 12: Subsequent Events

Acquisition of IntraLase

On April 2, 2007, AMO acquired IntraLase Corp. (IntraLase) for total
consideration of approximately $813 million in cash. IntraLase manufactures femtosecond laser systems utilized in LASIK surgery. Under terms of the agreement, AMO paid $25 in cash per share of IntraLase stock totaling $742 million and $71 million to
settle the individually determined cash value per share of outstanding stock options.

Debt and Guarantor Subsidiaries

In April 2007, the Company issued $250 million of 71/2% Senior Subordinated Notes due May 1, 2017 (the 71/2% Notes). Interest on the 71/2% Notes is payable on May 1
and November 1 of each year, commencing on November 1, 2007. The 71/2% Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after May 1, 2012 at various redemption prices, together with accrued and unpaid interest and additional interest, if any, to the redemption date. In addition, at any time on or
before May 1, 2010, the Company may, at its option and subject to certain requirements, use the cash proceeds from one or more qualified equity offerings by the Company to redeem up to 35% of the aggregate principal amount of the Notes issued
under the Indenture at a redemption price equal to 107.5% of the principal amount, together with accrued and unpaid interest, if any, thereon to the redemption date.

In connection with the issuance of the 71/2% Notes, certain of the Companys subsidiaries (the Guarantor Subsidiaries) jointly, fully, severally and unconditionally guaranteed such Notes. The
following presents the condensed consolidating financial information separately for:



| | i. | Advanced Medical Optics, Inc. (the Parent Company), the issuer of the guaranteed obligations;
| | -- | -----------------------------------------------------------------------------------------------



| | ii. | Guarantor subsidiaries, on a combined basis, as specified in the Indenture;
| | --- | ---------------------------------------------------------------------------



| | iii. | Non-guarantor subsidiaries, on a combined basis, as specified in the Indenture;
| | ---- | -------------------------------------------------------------------------------



| | iv. | Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Parent Company, the guarantor subsidiaries and
the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Advanced Medical Optics, Inc. and Subsidiaries on a consolidated basis.
| | -- | -----------------------------------------------------------------------

Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use by the Parent Company and Guarantor subsidiaries of the equity method of
accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.



13



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|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|--------------------------------------------------------------------- |  | ------ | --------- | --------------------- | - | -------------------------- |  | ------------------------------------ | --------- |  | ------------ | ---------- | - |  | - | ---------
|Condensed Consolidating Balance Sheet  March 30, 2007 (in thousands) |  | Parent |           | GuarantorSubsidiaries |   | Non- GuarantorSubsidiaries |  | ConsolidatingEntries andEliminations |           |  | Consolidated
|Assets:                                                               |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Cash and equivalents                                                  |  | $      | 4,146     |                       | $ | 2,621                      |  | $                                    | 37,132    |  | $            |           |   |  | $ | 43,899   
|Trade receivables, net                                                |  |        | 354       |                       |   | 70,334                     |  |                                      | 145,443   |  |              |           |   |  |   | 216,131  
|Inventories                                                           |  |        | 11,810    |                       |   | 110,697                    |  |                                      | 103,012   |  |              | (97,919    | ) |  |   | 127,600  
|Other current assets                                                  |  |        | 70,212    |                       |   | 272,338                    |  |                                      | 38,241    |  |              | (298,253   | ) |  |   | 82,538   
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Total current assets                                                  |  |        | 86,522    |                       |   | 455,990                    |  |                                      | 323,828   |  |              | (396,172   | ) |  |   | 470,168  
|Property, plant and equipment                                         |  |        | 15,155    |                       |   | 3,069                      |  |                                      | 117,130   |  |              |           |   |  |   | 135,354  
|Goodwill and intangibles, net                                         |  |        | 29,673    |                       |   | 830,701                    |  |                                      | 495,080   |  |              | (40,318    | ) |  |   | 1,315,136
|Other assets                                                          |  |        | 63,851    |                       |   | 23,156                     |  |                                      | 46,189    |  |              | (47,167    | ) |  |   | 86,029   
|Investment in subsidiaries                                            |  |        | 1,679,925 |                       |   | 1,208,306                  |  |                                      | 2,153,683 |  |              | (5,041,914 | ) |  |   |         
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Total assets                                                          |  | $      | 1,875,126 |                       | $ | 2,521,222                  |  | $                                    | 3,135,910 |  | $            | (5,525,571 | ) |  | $ | 2,006,687
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Liabilities and stockholders equity:                                 |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Accounts payable and other current liabilities                        |  | $      | 86,889    |                       | $ | 181,788                    |  | $                                    | 228,383   |  | $            | (313,037   | ) |  | $ | 184,023  
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Total current liabilities                                             |  |        | 86,889    |                       |   | 181,788                    |  |                                      | 228,383   |  |              | (313,037   | ) |  |   | 184,023  
|Long-term debt, net of current portion                                |  |        | 851,105   |                       |   |                           |  |                                      |          |  |              |           |   |  |   | 851,105  
|Other liabilities                                                     |  |        | 198,869   |                       |   | 7,974                      |  |                                      | 72,928    |  |              | (46,475    | ) |  |   | 233,296  
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Total liabilities                                                     |  |        | 1,136,863 |                       |   | 189,762                    |  |                                      | 301,311   |  |              | (359,512   | ) |  |   | 1,268,424
|Total stockholders equity                                            |  |        | 738,263   |                       |   | 2,331,460                  |  |                                      | 2,834,599 |  |              | (5,166,059 | ) |  |   | 738,263  
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          
|Total liabilities and stockholders equity                            |  | $      | 1,875,126 |                       | $ | 2,521,222                  |  | $                                    | 3,135,910 |  | $            | (5,525,571 | ) |  | $ | 2,006,687
|                                                                      |  |        |           |                       |   |                            |  |                                      |           |  |              |            |   |  |   |          



14



---

|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|------------------------------------------------------------------------ |  | ------ | --------- | --------------------- | - | ------------------------- |  | ------------------------------------ | --------- |  | ------------ | ---------- | - |  | - | ---------
|Condensed Consolidating Balance Sheet  December 31, 2006 (in thousands) |  | Parent |           | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | ConsolidatingEntries andEliminations |           |  | Consolidated
|Assets:                                                                  |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Cash and equivalents                                                     |  | $      | 344       |                       | $ | 1,187                     |  | $                                    | 32,991    |  | $            |           |   |  | $ | 34,522   
|Trade receivables, net                                                   |  |        | 723       |                       |   | 77,906                    |  |                                      | 153,779   |  |              |           |   |  |   | 232,408  
|Inventories                                                              |  |        | 10,166    |                       |   | 106,976                   |  |                                      | 101,498   |  |              | (91,108    | ) |  |   | 127,532  
|Other current assets                                                     |  |        | 70,163    |                       |   | 256,612                   |  |                                      | 37,543    |  |              | (280,637   | ) |  |   | 83,681   
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Total current assets                                                     |  |        | 81,396    |                       |   | 442,681                   |  |                                      | 325,811   |  |              | (371,745   | ) |  |   | 478,143  
|Property, plant and equipment                                            |  |        | 15,212    |                       |   | 2,620                     |  |                                      | 114,924   |  |              |           |   |  |   | 132,756  
|Goodwill and intangibles, net                                            |  |        | 29,673    |                       |   | 828,849                   |  |                                      | 501,851   |  |              | (40,000    | ) |  |   | 1,320,373
|Other assets                                                             |  |        | 29,874    |                       |   | 20,870                    |  |                                      | 32,572    |  |              | (691       | ) |  |   | 82,625   
|Investment in subsidiaries                                               |  |        | 1,638,781 |                       |   | 1,203,100                 |  |                                      | 2,162,731 |  |              | (5,004,612 | ) |  |   |         
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Total assets                                                             |  | $      | 1,794,936 |                       | $ | 2,498,120                 |  | $                                    | 3,137,889 |  | $            | (5,417,048 | ) |  | $ | 2,013,897
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Liabilities and stockholders equity:                                    |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Accounts payable and other current liabilities                           |  | $      | 58,715    |                       | $ | 206,799                   |  | $                                    | 263,012   |  | $            | (311,073   | ) |  | $ | 217,453  
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Total current liabilities                                                |  |        | 58,715    |                       |   | 206,799                   |  |                                      | 263,012   |  |              | (311,073   | ) |  |   | 217,453  
|Long-term debt, net of current portion                                   |  |        | 851,105   |                       |   |                          |  |                                      |          |  |              |           |   |  |   | 851,105  
|Other liabilities                                                        |  |        | 169,125   |                       |   | 783                       |  |                                      | 59,440    |  |              |           |   |  |   | 229,348  
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Total liabilities                                                        |  |        | 1,078,945 |                       |   | 207,582                   |  |                                      | 322,452   |  |              | (311,073   | ) |  |   | 1,297,906
|Total stockholders equity                                               |  |        | 715,991   |                       |   | 2,290,538                 |  |                                      | 2,815,437 |  |              | (5,105,975 | ) |  |   | 715,991  
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          
|Total liabilities and stockholders equity                               |  | $      | 1,794,936 |                       | $ | 2,498,120                 |  | $                                    | 3,137,889 |  | $            | (5,417,048 | ) |  | $ | 2,013,897
|                                                                         |  |        |           |                       |   |                           |  |                                      |           |  |              |            |   |  |   |          



15



---

|                                                                                                   |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        
|-------------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | ------------------------------------ | ------- |  | ------------ | -------- | - |  | - | -------
|Condensed Consolidating Statement of Operations  Three months ended March 30, 2007 (in thousands) |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | ConsolidatingEntries andEliminations |         |  | Consolidated
|Net sales                                                                                          |  | $      | 54,868  |   |                       | $ | 155,920 |                           |  | $                                    | 201,543 |  | $            | (160,658 | ) |  | $ | 251,673
|Operating costs and expenses:                                                                      |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        
|Cost of sales                                                                                      |  |        | 33,594  |   |                       |   | 89,683  |                           |  |                                      | 122,787 |  |              | (151,897 | ) |  |   | 94,167 
|Selling, general and administrative                                                                |  |        | 11,576  |   |                       |   | 37,980  |                           |  |                                      | 62,120  |  |              | (2,158   | ) |  |   | 109,518
|Research and development                                                                           |  |        | 3,303   |   |                       |   | 4,683   |                           |  |                                      | 11,178  |  |              |         |   |  |   | 19,164 
|In-process research & development                                                                  |  |        |        |   |                       |   | 1,580   |                           |  |                                      |        |  |              |         |   |  |   | 1,580  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        
|Operating income                                                                                   |  |        | 6,395   |   |                       |   | 21,994  |                           |  |                                      | 5,458   |  |              | (6,603   | ) |  |   | 27,244 
|Non-operating expense (income), net                                                                |  |        | 6,533   |   |                       |   | (600    | )                         |  |                                      | 872     |  |              | 958      |   |  |   | 7,763  
|Equity in earnings of subsidiaries                                                                 |  |        | (19,768 | ) |                       |   | (5,206  | )                         |  |                                      |        |  |              | 24,974   |   |  |   |       
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        
|Earnings before income taxes                                                                       |  |        | 19,630  |   |                       |   | 27,800  |                           |  |                                      | 4,586   |  |              | (32,535  | ) |  |   | 19,481 
|(Benefit) provision for income taxes                                                               |  |        | (40     | ) |                       |   | 6,482   |                           |  |                                      | 930     |  |              |         |   |  |   | 7,372  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        
|Net earnings                                                                                       |  | $      | 19,670  |   |                       | $ | 21,318  |                           |  | $                                    | 3,656   |  | $            | (32,535  | ) |  | $ | 12,109 
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |                                      |         |  |              |          |   |  |   |        



|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        
|-------------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------------------ | - |  | ------------ | -------- | - |  | - | -------
|Condensed Consolidating Statement of Operations  Three months ended March 31, 2006 (in thousands) |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEntries andEliminations |   |  | Consolidated
|Net sales                                                                                          |  | $      | 73,163  |   |                       | $ | 153,845 |                           |  | $ | 202,805                              |   |  | $            | (191,585 | ) |  | $ | 238,228
|Operating costs and expenses:                                                                      |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        
|Cost of sales                                                                                      |  |        | 48,009  |   |                       |   | 87,750  |                           |  |   | 136,159                              |   |  |              | (185,083 | ) |  |   | 86,835 
|Selling, general and administrative                                                                |  |        | 14,562  |   |                       |   | 32,827  |                           |  |   | 50,364                               |   |  |              | (2,314   | ) |  |   | 95,439 
|Research and development                                                                           |  |        | 3,078   |   |                       |   | 5,116   |                           |  |   | 8,779                                |   |  |              |         |   |  |   | 16,973 
|Business repositioning                                                                             |  |        | 11,720  |   |                       |   | 5,389   |                           |  |   | 12,145                               |   |  |              |         |   |  |   | 29,254 
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        
|Operating (loss) income                                                                            |  |        | (4,206  | ) |                       |   | 22,763  |                           |  |   | (4,642                               | ) |  |              | (4,188   | ) |  |   | 9,727  
|Non-operating expense (income), net                                                                |  |        | 3,095   |   |                       |   | (860    | )                         |  |   | 3,572                                |   |  |              | 142      |   |  |   | 5,949  
|Equity in (earnings) losses of subsidiaries                                                        |  |        | (13,032 | ) |                       |   | 181     |                           |  |   |                                     |   |  |              | 12,851   |   |  |   |       
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        
|Earnings (loss) before income taxes                                                                |  |        | 5,731   |   |                       |   | 23,442  |                           |  |   | (8,214                               | ) |  |              | (17,181  | ) |  |   | 3,778  
|(Benefit) provision for income taxes                                                               |  |        | (1,228  | ) |                       |   | 3,974   |                           |  |   | (1,597                               | ) |  |              |         |   |  |   | 1,149  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        
|Net earnings (loss)                                                                                |  | $      | 6,959   |   |                       | $ | 19,468  |                           |  | $ | (6,617                               | ) |  | $            | (17,181  | ) |  | $ | 2,629  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |                                      |   |  |              |          |   |  |   |        



16



---

|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------------------ | - | ------------ | - | - |  | - | ------- | -
|Condensed Consolidating Statement of Cash
Flows  Three months ended March 30, 2007 (in thousands) |  | Parent |        |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEntries andEliminations |   | Consolidated |  
|Net cash (used in) provided by operating activities                                                |  | $      | (2,007 | ) |                       | $ | 15,918  |                           |  | $ | 10,905                               |   |              | $ |  |  | $ | 24,816  |  
|Cash flows from investing activities:                                                              |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Acquisition of business, net of cash acquired                                                      |  |        |       |   |                       |   | (13,540 | )                         |  |   |                                     |   |              |   |  |  |   | (13,540 | )
|Additions to property, plant and equipment                                                         |  |        | (362   | ) |                       |   | (749    | )                         |  |   | (6,077                               | ) |              |   |  |  |   | (7,188  | )
|Proceeds from sale of property, plant and equipment                                                |  |        |       |   |                       |   |        |                           |  |   | 21                                   |   |              |   |  |  |   | 21      |  
|Additions to capitalized internal-use software                                                     |  |        | (900   | ) |                       |   | (15     | )                         |  |   |                                     |   |              |   |  |  |   | (915    | )
|Additions to demonstration and bundled equipment                                                   |  |        |       |   |                       |   | (181    | )                         |  |   | (1,761                               | ) |              |   |  |  |   | (1,942  | )
|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Net cash used in investing activities                                                              |  |        | (1,262 | ) |                       |   | (14,485 | )                         |  |   | (7,817                               | ) |              |   |  |  |   | (23,564 | )
|                                                                                                   |  |        |        |   |                      
|Cash flows from financing activities:                                                              |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Proceeds from issuance of common stock                                                             |  |        | 5,989  |   |                       |   |        |                           |  |   |                                     |   |              |   |  |  |   | 5,989   |  
|Excess tax benefit from stock-based compensation                                                   |  |        | 1,082  |   |                       |   |        |                           |  |   |                                     |   |              |   |  |  |   | 1,082   |  
|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Net cash provided by financing activities                                                          |  |        | 7,071  |   |                       |   |        |                           |  |   |                                     |   |              |   |  |  |   | 7,071   |  
|                                                                                                   |  |        |        |   |                      
|Effect of exchange rates on cash and equivalents                                                   |  |        |       |   |                       |   |        |                           |  |   | 1,054                                |   |              |   |  |  |   | 1,054   |  
|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Net increase in cash and equivalents                                                               |  |        | 3,802  |   |                       |   | 1,433   |                           |  |   | 4,142                                |   |              |   |  |  |   | 9,377   |  
|Cash and equivalents at beginning of period                                                        |  |        | 344    |   |                       |   | 1,187   |                           |  |   | 32,991                               |   |              |   |  |  |   | 34,522  |  
|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  
|Cash and equivalents at end of period                                                              |  | $      | 4,146  |   |                       | $ | 2,620   |                           |  | $ | 37,133                               |   |              | $ |  |  | $ | 43,899  |  
|                                                                                                   |  |        |        |   |                       |   |         |                           |  |   |                                      |   |              |   |   |  |   |         |  



17



---

|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------ | ------------------------- |  | - | ------------------------------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|Condensed Consolidating Statement of Cash
Flows  Three months ended March 31, 2006 (in thousands) |  | Parent |         |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | ConsolidatingEntries andEliminations |   |  | Consolidated |       
|Net cash (used in) provided by operating activities                                                |  | $      | (17,699 | ) |                       | $ | 2,437  |                           |  | $ | 14,476                               |   |  | $            |       |   |  | $ | (786    | )
|Cash flows from investing activities:                                                              |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Capital contribution                                                                               |  |        |        |   |                       |   | (1,400 | )                         |  |   |                                     |   |  |              | 1,400  |   |  |   |        |  
|Additions to property, plant and equipment                                                         |  |        | (536    | ) |                       |   | (230   | )                         |  |   | (5,809                               | ) |  |              |       |   |  |   | (6,575  | )
|Additions to demonstration and bundled equipment                                                   |  |        |        |   |                       |   | (580   | )                         |  |   | (1,826                               | ) |  |              |       |   |  |   | (2,406  | )
|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Net cash used in investing activities                                                              |  |        | (536    | ) |                       |   | (2,210 | )                         |  |   | (7,635                               | ) |  |              | 1,400  |   |  |   | (8,981  | )
|Cash flows from financing activities:                                                              |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Capital contribution                                                                               |  |        |        |   |                       |   |       |                           |  |   | 1,400                                |   |  |              | (1,400 | ) |  |   |        |  
|Short-term borrowings, net                                                                         |  |        | (5,000  | ) |                       |   |       |                           |  |   | (10,000                              | ) |  |              |       |   |  |   | (15,000 | )
|Proceeds from issuance of common stock                                                             |  |        | 15,918  |   |                       |   |       |                           |  |   |                                     |   |  |              |       |   |  |   | 15,918  |  
|Excess tax benefit from stock-based compensation                                                   |  |        | 5,229   |   |                       |   |       |                           |  |   |                                     |   |  |              |       |   |  |   | 5,229   |  
|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                |  |        | 16,147  |   |                       |   |       |                           |  |   | (8,600                               | ) |  |              | (1,400 | ) |  |   | 6,147   |  
|Effect of exchange rates on cash and equivalents                                                   |  |        |        |   |                       |   |       |                           |  |   | 401                                  |   |  |              |       |   |  |   | 401     |  
|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Net (decrease) increase in cash and equivalents                                                    |  |        | (2,088  | ) |                       |   | 227    |                           |  |   | (1,358                               | ) |  |              |       |   |  |   | (3,219  | )
|Cash and equivalents at beginning of period                                                        |  |        | 3,106   |   |                       |   | 985    |                           |  |   | 36,735                               |   |  |              |       |   |  |   | 40,826  |  
|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  
|Cash and equivalents at end of period                                                              |  | $      | 1,018   |   |                       | $ | 1,212  |                           |  | $ | 35,377                               |   |  | $            |       |   |  | $ | 37,607  |  
|                                                                                                   |  |        |         |   |                       |   |        |                           |  |   |                                      |   |  |              |        |   |  |   |         |  



18



---

ADVANCED MEDICAL OPTICS, INC.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations for the Quarter Ended March 30, 2007
|------- | --------------------------------------------------------------------------------------------------------------------------

The following discussion and analysis presents the factors that had a material effect on AMOs cash flows and results of operations during the
three months ended March 30, 2007, and the Companys financial position at that date. Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risk and uncertainties.
Our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled Certain Factors and
Trends Affecting AMO and Its Businesses. The following discussion should be read in conjunction with the 2006 Form 10-K and the unaudited consolidated financial statements and notes thereto included elsewhere in this Form 10-Q.

OVERVIEW

We are a global leader in the
development, manufacture and marketing of medical devices for the eye. We have three major product lines: cataract / implant, laser vision correction, and eye care. In the cataract / implant market, we focus on the four key products required for
cataract surgery  foldable intraocular lenses, or IOLs, implantation systems, phacoemulsification systems and viscoelastics. In the laser vision correction market, we market laser systems, diagnostic devices and treatment cards. Our eye care
product line provides a full range of contact lens care products for use with most types of contact lenses. These products include single-bottle, multi-purpose cleaning and disinfecting solutions, hydrogen peroxide-based disinfecting solutions,
daily cleaners, enzymatic cleaners and contact lens rewetting drops.

We have operations in approximately 20 countries and sell our
products in approximately 60 countries in the following four regions:



| |  |  | Americas (North and South America);
| | - |  | -----------------------------------



| |  |  | Europe, Africa and Middle East;
| | - |  | -------------------------------



| |  |  | Japan; and
| | - |  | ----------



| |  |  | Asia Pacific (excluding Japan, but including Australia and New Zealand).
| | - |  | ------------------------------------------------------------------------

Eye Care Recall

In November 2006, we announced the anticipated financial impact associated with the
voluntary recall of certain eye care product lots and the related manufacturing capacity constraints caused by a production-line issue at our manufacturing plant in China. The recall negatively impacted sales in the first quarter of 2007 due to
sales returns of $0.2 million. We also estimated approximately $16.9 million in lost sales during the current quarter as a result of the recall and expect to lose approximately $3 million to $7 million in sales in the remainder of 2007. We incurred
approximately $4.5 million in recall-related costs, of which approximately $2.1 million was recorded in cost of goods sold, $2.1 million was recorded in selling, general and administrative expenses and $0.3 million was included in non-operating
expenses. In the remainder of 2007, we expect to incur approximately $15 to $20 million in costs. These costs are due to manufacturing start-up related expenses and unabsorbed overhead as production continues to ramp up in the second quarter of 2007
and to spending on marketing programs to re-launch products and recapture market share.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Actual results could differ from those estimates. Certain of these significant accounting policies are considered to be critical
accounting policies as more fully described in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, of the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
Management believes that at March 30, 2007 there has been no material change to this information, with the exception of income taxes as described below.



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Income Taxes

We account for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate the need to establish a valuation allowance for deferred tax assets
based upon the amount of existing temporary differences, the period in which they are expected to be recovered and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is more likely
than not that some or all of the deferred tax assets will not be realized.

Effective January 1, 2007 we adopted Interpretation
No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN 48), which requires income tax positions to meet a more-likely-than-not recognition threshold to be
recognized in the financial statements. Under FIN 48, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. As a multinational corporation, we are
subject to taxation in many jurisdictions, our income tax returns in several locations are being examined by the local taxation authorities and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex
tax laws and regulations in various tax jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of
changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record
additional tax liabilities or potentially to reverse previously recorded tax liabilities.

RESULTS OF OPERATIONS

The following table presents net sales and operating income by operating segment for the three months ended March 30, 2007 and March 31, 2006,
respectively:



|                         |  |                    |         |                    |   |               |  |               |         |  |   |        
|------------------------ |  | ------------------ | ------- | ------------------ | - | ------------- |  | ------------- | ------- |  | - | -------
|                         |  | Net Sales          |         | Operating Income  
|                         |  | Three Months Ended |         | Three Months Ended
|(In thousands)           |  | March 30,2007      |         | March 31,2006      |   | March 30,2007 |  | March 31,2006
|Cataract/Implant         |  | $                  | 127,749 |                    | $ | 120,444       |  | $             | 67,990  |  | $ | 55,266 
|Laser Vision Correction  |  |                    | 64,615  |                    |   | 60,955        |  |               | 39,576  |  |   | 42,860 
|Eye Care                 |  |                    | 59,309  |                    |   | 56,829        |  |               | 21,616  |  |   | 21,363 
|                         |  |                    |         |                    |   |               |  |               |         |  |   |        
|Total operating segments |  | $                  | 251,673 |                    | $ | 238,228       |  | $             | 129,182 |  | $ | 119,489
|                         |  |                    |         |                    |   |               |  |               |         |  |   |        

Net sales. Total net sales increased 5.6% in the three months ended March 30, 2007,
compared to the same period last year. The increase in net sales in the three months ended March 30, 2007 primarily resulted from increases in all of our operating segments, partially offset by the negative impact of the eye care recall. Net
sales include a favorable foreign currency impact of 2.5% in the three months ended March 30, 2007. Our sales and earnings may be favorably impacted during times of a weakening U.S. dollar. Total net sales in the U.S. and Japan represented
43.6% and 11.3%, respectively, of total net sales in the three months ended March 30, 2007. No other country, or single customer, generated over 10% of total net sales in the periods presented.

Net sales from our Cataract/Implant business increased by 6.1% in the three months ended March 30, 2007, compared with the same period last year.
The increase in net sales was primarily the result of increased sales of intraocular lenses (IOL), partially offset by a decrease in sales of viscoelastics and phacoemulsification systems. Reimbursement and competitive pressures in certain European
markets and in Japan negatively impacted viscoelastic products. Total IOL sales increased by 13.6% to $75.9 million, driven by our proprietary Tecnis aspheric monofocal IOL and our refractive implant portfolio. Monofocal IOL sales increased
11.5%, to $63.0 million, reflecting continued strong growth of the Tecnis IOL franchise. Our refractive IOL sales increased 25.3% to $12.9 million, reflecting demand for our ReZoom, Tecnis Multifocal,



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Verisyse and Veriflex IOLs. Net sales from phacoemulsification systems were down 5.4% to $20.3 million in the three months ended March 30,
2007, compared with the same period last year due to lower equipment sales ahead of the planned introduction of the new WhiteStar SignatureTMphacoemulsification system, partially offset by growth in surgical pack sales. Net sales growth in the Americas of 9.1% in the three months ended March 30, 2007, was due to strong demand for our
core products, partially offset by decreases in sales of older-technology intraocular lenses and viscoelastics. Sales in Europe/Africa/Middle East increased by 11.1% in the three months ended March 30, 2007 primarily due to continued strong IOL
sales driven by our proprietary Tecnis aspheric monofocal IOL and our refractive implant portfolio. Sales in Japan declined by 10.7% in the three months ended March 30, 2007. Sales in Asia Pacific declined by 3.9% in the three months
ended March 30, 2007. The sales declines in Japan and Asia Pacific were due to decreasing sales of viscoelastics, demonstrating the continued competitiveness and price sensitivity of this segment and a decrease in sales of our
phacoemulsification systems ahead of the planned introduction of the new WhiteStar SignatureTMphacoemulsification system. Net sales in our Cataract/Implant business reflect a favorable foreign currency impact of 3.4% in the three months ended March 30, 2007, largely from fluctuations of the euro versus the U.S. dollar.

Net sales from our Laser Vision Correction (LVC) business increased by 6.0% to $64.6 million in the three months ended March 30, 2007, compared with
the same period last year. The increase reflects higher demand for our CustomVue procedures and strong international system sales. Net sales in the Americas increased by 2.1% due to higher procedural volume and favorable shift toward
CustomVue procedures, and 51.9% in Europe/Africa/Middle East and 81.4% in Japan, primarily as a result of our international expansion strategy for the LVC business. Net sales in Asia Pacific decreased slightly in the three months ended
March 30, 2007 compared with the same period last year. The foreign currency impact in the three months ended March 30, 2007 was negligible.

Net sales from our Eye Care business increased by 4.4% in the three months ended March 30, 2007, compared with the same period last year. The increase in net sales of eye care products in the three months ended
March 30, 2007 was primarily due to strong sales of our multipurpose solutions reflecting favorable market share growth trends in the United States, partially offset by decreased sales of hydrogen peroxide-based products, principally in Europe
and Japan, where the migration to single-bottle cleaning regimens continues, and decreased sales of multipurpose solutions in Asia Pacific and Japan reflecting the impacts of the voluntary recall and temporary shutdown of our manufacturing plant in
China in late 2006. Net sales in Asia Pacific and Japan decreased by 29.3% and 15.1%, respectively. Net sales increased in Europe/Africa/Middle East by 25.9% and in the Americas by 18.4% in the three months ended March 30, 2007, due to
increased demand for our multipurpose products, largely attributable to our strategy to increase our sampling programs, selling efforts to practitioners and their staffs and favorable market share in the U.S. related to the residual effect of the
withdrawal of a competitors product in the second quarter of 2006. Net sales in our Eye Care business included a favorable foreign currency impact of 2.6% in the three months ended March 30, 2007, largely resulting from fluctuations of
the euro versus the U.S. dollar.

Gross margin and gross profit. Our gross margin percentage was 62.6% in the three months ended
March 30, 2007, compared with 63.5% in the same period last year. Gross profit for the three months ended March 30, 2007 included a $2.3 million negative impact from the recall and a $4.7 million charge to discontinue the Amadeus
microkeratome distributor agreement. Gross profit for the three months ended March 31, 2006 included approximately $3.2 million of inventory and manufacturing related charges incurred in connection with our business repositioning plan.

Selling, general and administrative. Selling, general and administrative expenses increased as a percent of net sales by 3.5
percentage points to 43.5% and in the three months ended March 30, 2007, compared with 40.0% in the three months ended March 31, 2006. This increase includes a $2.1 million charge in recall-related expenses in the current quarter. The
overall increase reflects our focus on being the Complete Refractive Solution to differentiate us from other market participants as we combine our refractive offering, expertise and service capabilities, as well as continuing our LVC
international expansion. Selling, general and administrative expenses for the three months ended March 31, 2006 included a $2.3 million charge associated with the termination of a distributor agreement in India.

Research and development. Research and development expenditures decreased as a percent of net sales by 0.5 percentage points to 7.6% in the three
months ended March 30, 2007, compared with the same period last year. We recognized an impairment charge of $1.0 million in the three months ended March 31, 2007 in connection with a research and development licensing arrangement. We
expect our research and development costs as a percentage of sales to be approximately 6.5% of net sales for 2007. Our research and development strategy is to develop proprietary products for vision correction that are safe and effective and address
unmet needs. We are currently focusing on new advancements that build on our Tecnis, Healonand Sovereign technologies, corneal and lens-based solutions to presbyopia, projects from the acquisition of WaveFront Sciences, Inc. (WFSI)
and dry eye products.



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In-process research and development.In the three months ended March 30, 2007, we recorded a
$1.6 million in-process research and development (IPR&D) charge from the WFSI acquisition. This charge represented the estimated fair value of projects that, as of the acquisition date, had not reached technological feasibility and had no
alternative future use.

Business repositioning. In the three months ended March 31, 2006, we incurred $32.4 million of pre-tax
charges, which included $3.2 million for inventory and manufacturing related charges included in cost of sales and $29.2 million included in operating expenses. Charges included in operating expenses comprised productivity and brand repositioning
costs of $26.2 million, severance, relocation and other one-time termination benefits of $1.6 million and asset write-downs of $1.4 million. The business repositioning and product rationalization plan was completed in the fourth quarter of 2006.

Operating Income.Operating income as a percentage of net sales, or operating margin, was 10.8% in the three months ended
March 30, 2007. Operating income of $27.2 million in the three months ended March 30, 2007 includes charges of $4.2 million in share-based compensation expense under SFAS 123R, $4.7 million related to the discontinuation of a distributor
contract, $1.0 million impairment related to a R&D licensing agreement, $4.4 million impact from the recall and $1.6 million for IPR&D related to the WFSI acquisition. The net impact from these items reduced operating margin by 6.3
percentage points in the three months ended March 30, 2007. Operating income of $9.7 million in the three months ended March 31, 2006, included $32.4 million of business repositioning charges, $2.3 million of asset write-offs described
above and $4.5 million in incremental share-based compensation expense from the adoption of SFAS 123R. These charges reduced operating margin by 16.5 percentage points in the three months ended March 31, 2006.

Operating income from our Cataract/Implant business increased by $12.7 million in the three months ended March 30, 2007 due to the increase in net
sales of IOL products discussed above. Operating income from our LVC business decreased by $3.3 million in the three months ended March 30, 2007 primarily due to costs associated with the WFSI acquisition. Operating income from our Eye Care
business increased by $0.3 million in the three months ended March 30, 2007 primarily due to the strong sales of multi-purpose products, offset by the negative impact of the recall and continued softness in the market for hydrogen peroxide
based products in Japan and Europe.

Non-operating expense. Interest expense was $6.2 million in the three months ended
March 30, 2007, compared with $4.5 million in the three months ended March 31, 2006. The increase was due to the issuance of $500 million in convertible debt in June 2006. We anticipate interest expense to increase in 2007 relative to 2006
due to the issuance of more than $700 million in debt in April 2007 in connection with the acquisition of IntraLase.

We recorded an
unrealized loss on derivative instruments of $0.4 million in the three months ended March 30, 2007 and March 31, 2006. We record as unrealized (gain) loss on derivative instruments the mark to market adjustments on the
outstanding foreign currency options and forward contracts which we enter into as part of our overall risk management strategy to reduce the volatility of expected earnings in currencies other than the U.S. dollar. The losses in the first three
months of 2007 were largely attributable to euro and Japanese yen instruments.

Income taxes. We recorded a provision for
income taxes of $7.4 million in the three months ended March 30, 2007 resulting in an effective tax rate of 37.8% for the current period. The results for the quarter included $1.6 million of IPR&D charges related to the purchase of WFSI and
a $1.0 million write-off associated with a research and development agreement for which no tax benefits were recorded. In addition, the effective tax rate reflected a benefit from stock-based compensation expense currently being recognized under
SFAS 123R at an estimated effective rate of approximately 31.1%. A provision with an estimated effective rate of 33.0% was recorded based on all other pre-tax income.

The effective tax rate for the three months ended March 31, 2006 was 30.4%. The effective tax rate reflects a benefit from stock-based compensation expense being recognized under SFAS 123R at an effective tax
rate of 33.3%, and a provision on all other pre-tax income at an effective tax rate of 32.0%.

The higher rate in 2007 reflects an
estimated increase in the relative mix of domestic versus international taxable income. The projected change in mix includes the impact of lower international income related to the continued effect of the recall in the quarter. Our future effective
income tax rate may vary depending on our mix of domestic and international taxable income or loss and the various tax and treasury methodologies that we implement, including our policy regarding repatriation of future accumulated foreign earnings.
The acquisition of IntraLase in the second quarter of 2007 will also have a significant impact on our effective tax rate due to the non-deductible in-process research and development charge and to a lesser extent, the inclusion of IntraLase in our
operating results for the remainder of 2007 will change the relative mix of domestic versus international taxable income.



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LIQUIDITY AND CAPITAL RESOURCES

Management assesses our liquidity by our ability to generate cash to fund operations. Significant factors in the management of liquidity are: funds generated by operations; levels of accounts receivable, inventories,
accounts payable and capital expenditures; adequate lines of credit; and financial flexibility to attract long-term capital on satisfactory terms. As of March 30, 2007, we had cash and equivalents of $43.9 million.

Historically, we have generated cash from operations in excess of working capital requirements, and we expect to do so in the future. Net cash provided
by operating activities was $24.8 million in the three months ended March 30, 2007 compared to cash used in operating activities of $0.8 million in the three months ended March 31, 2006. Operating cash flow improved in the three months
ended March 30, 2007 compared to the three months ended March 31, 2006 largely due to lower payments totaling $2.5 million related to the business repositioning plan in the three months ended March 30, 2007 compared with $26.8 million
in the same period last year. Operating cash flow in the current quarter was also impacted by the timing of accounts receivable collections, rate of inventory turnover and the payment of current liabilities.

Net cash used in investing activities was $23.6 million and $9.0 million in the three months ended March 30, 2007 and March 31, 2006,
respectively. Expenditures for property, plant and equipment totaled $7.2 million and $6.6 million in the three months ended March 30, 2007 and March 31, 2006, respectively. Expenditures in the three months ended March 30, 2007
primarily comprised expenditures to upgrade and expand our Eye Care manufacturing facility in China and continuation of upgrades to our manufacturing facilities in Puerto Rico and Uppsala, Sweden. Expenditures in the three months ended
March 31, 2006 primarily comprised expenditures to upgrade our viscoelastics manufacturing facility in Uppsala, Sweden. Expenditures in the three months ended March 30, 2007 also included $13.5 million for the acquisition of WFSI.
Expenditures for demonstration (demo) and bundled equipment, primarily phacoemulsification and microkeratome surgical equipment, were $1.9 million and $2.4 million in the three months ended March 30, 2007 and March 31, 2006,
respectively. We maintain demo and bundled equipment to facilitate future sales of similar equipment and related products to our customers. Expenditures for capitalized internal-use software were $0.9 million in the three months ended
March 30, 2007, which primarily comprised a company-wide system upgrade as part of the overall expansion of our business. We capitalize internal-use software cost after technical feasibility has been established. In 2007, we expect to
invest approximately $60.0 million to $65.0 million in property, plant and equipment, demo and bundled equipment, and capitalized software as part of the overall expansion of our business including the incremental impact from the IntraLase
acquisition capital spending.

Net cash provided by financing activities was $7.1 million in the three months ended March 30, 2007. We
received proceeds of $6.0 million from the sale of stock to employees and $1.1 million excess tax benefits from share-based compensation. Net cash provided by financing activities of $6.1 million in the three months ended March 31, 2006
primarily comprised $15.9 million of proceeds from the sale of stock to employees and $5.2 million excess tax benefits from share-based compensation, reduced by $15.0 million of repayments under the senior revolving credit facility.

At March 30, 2007, approximately $8.4 million of the senior revolving credit facility was reserved to support letters of credit issued on our behalf
for normal operating purposes and we had approximately $291.6 million undrawn and available revolving loan commitments. Our senior credit facility provided that we maintain certain financial and operating covenants which included, among other
provisions, maintaining specific leverage and coverage ratios. Certain covenants under the senior credit facility may limit the incurrence of additional indebtedness. The senior credit facility prohibited dividend payments. We were in compliance
with these covenants at March 30, 2007. Our senior credit facility was collateralized by a first priority perfected lien on, and pledge of, all of the combined companys present and future property and assets (subject to certain
exclusions), 100% of the stock of the domestic subsidiaries, 66% of the stock of foreign subsidiaries and all present and future intercompany debts.

Subsequent to March 30, 2007, the Company terminated the senior revolving credit facility described above and obtained new senior credit facilities on April 2, 2007 consisting of a $300 million revolving
credit facility and a $450 million term loan.



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Our cash position includes amounts denominated in foreign currencies, and the repatriation of those cash
balances from some of our non-U.S. subsidiaries may result in additional tax costs. However, these cash balances are generally available without legal restriction to fund ordinary business operations.

We believe that the net cash provided by our operating activities, supplemented as necessary with borrowings available under our revolving credit
facility and existing cash and equivalents, will provide sufficient resources to fund the expected 2007 capital expenditures, and to meet our working capital requirements, debt service and other cash needs over the next year.

We are partially dependent upon the reimbursement policies of government and private health insurance companies. Government and private sector
initiatives to limit the growth of health care costs, including price regulation and competitive pricing, are continuing in many countries where we do business. As a result of these changes, the marketplace has placed increased emphasis on the
delivery of more cost-effective medical therapies. While we have been unaware of significant price resistance resulting from the trend toward cost containment, changes in reimbursement policies and other reimbursement methodologies and payment
levels could have an adverse effect on our pricing flexibility. Additionally, the current trend among U.S. hospitals and other customers of medical device manufacturers is to consolidate into larger purchasing groups to enhance purchasing
power. The enhanced purchasing power of these larger customers may also increase the pressure on product pricing, although we are unable to estimate the potential impact at this time.

Inflation.Although at reduced levels in recent years, inflation may cause upward pressure on the cost of goods and services used by
us. The competitive and regulatory environments in many markets substantially limit our ability to fully recover these higher costs through increased selling prices. We continually seek to mitigate the adverse effects of inflation through
cost containment and improved productivity and manufacturing processes.

Foreign currency fluctuations.Approximately 56.4% of
our revenues for the three months ended March 30, 2007 were derived from operations outside the United States and a significant portion of our cost structure is denominated in currencies other than the U.S. dollar, primarily the Japanese yen
and the euro. Therefore, we are subject to fluctuations in sales and earnings reported in U.S. dollars as a result of changing currency exchange rates.

The impact of foreign currency fluctuations on sales resulted in an increase of $6.0 million for the three months ended March 30, 2007. These fluctuations were due primarily to the fluctuations of the euro versus
the U.S. dollar. The impact of foreign currency fluctuations on sales resulted in decrease of $9.4 million for the three months ended March 31, 2006. These fluctuations were due primarily to fluctuations of the Japanese yen and the euro versus
the U.S. dollar.

Contractual obligations. We have contractual obligations for long-term debt, interest on long-term debt, operating
lease obligations, service contracts and other purchase obligations that were summarized in a table of Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, 2006. Since December 31, 2006, there have been no
material changes to the table of Contractual Obligations of the Company, outside of the ordinary course of business, except for the presentation of our liability for unrecognized tax benefits. As discussed in Note 1 in the Notes to Unaudited
Consolidated Financial Statements, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as of January 1, 2007. As of the adoption date, we had a
liability of $28.7 million for unrecognized tax benefits, including related interest and penalties. At March 30, 2007, we had a liability of $30.0 million for unrecognized tax benefits, including related interest and penalties, which is expected to
be paid after one year. We are unable to determine when cash settlement with a taxing authority will occur.

Off-balance sheet
arrangements. We had no off-balance sheet arrangements at March 30, 2007 as defined in Regulation S-K Item 303(a)(4).

Recent Accounting
Standards

In February, 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at
fair value. This Statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007. We are currently assessing the impact (if any) of SFAS No. 159 on our financial statements.

Certain Factors and Trends Affecting AMO and Its Businesses

Our disclosure and analysis in this report contain
forward-looking information about our companys financial results and estimates, business prospects and future products that involve substantial risks and uncertainties. These statements constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as anticipate, estimate, expect,
project, intend, plan, believe, will, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these
include statements relating to future actions, prospective products, product approvals or approved indications, reimbursement rates, future performance or results of



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current and anticipated products, sales efforts, expenses, interest rates, foreign exchange rates, and the outcome of contingencies, such as legal
proceedings, financial results, and the expected results and benefits of our strategic initiatives. Among the factors that could cause actual results to differ materially are the following:



| |  |  | risks associated with our ability to realize the benefits of the IntraLase Corp. (IntraLase) acquisition;
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| |  |  | uncertainties associated with the research and development and regulatory processes;
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| |  |  | our ability to make and successfully integrate acquisitions or enter into strategic alliances;
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| |  |  | exposure to risks associated with doing business outside of the United States, where we conduct a significant amount of our sales and operations;
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| |  |  | foreign currency risks and fluctuation in interest rates;
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| |  |  | our ability to introduce new commercially successful products in a timely and effective manner;
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| |  |  | our ability to maintain a sufficient and timely supply of products we manufacture;
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| |  |  | our reliance on sole source suppliers for raw materials and other products;
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| |  |  | intense competition from companies with substantially more resources and a greater marketing scale;
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| |  |  | risks and expenses associated with our ability to protect our intellectual property rights;
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| |  |  | risks and expenses associated with intellectual property litigation and infringement claims;
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| |  |  | unexpected losses due to product liability claims, product recalls or corrections, or other litigation;
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| |  |  | our ability to maintain our relationships with health care providers;
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| |  |  | risks, uncertainties and delays associated with extensive government regulation of our business, including risks associated with regulatory compliance, quality
systems standards, and complaint-handling, as well as reimbursement;
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| |  |  | our ability to attract, hire and retain qualified personnel;
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| |  |  | risks associated with indemnification obligations and potential tax liabilities associated with our spin-off from Allergan;
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| |  |  | our significant debt, which contains covenants limiting our business activities;
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| |  |  | changes in market acceptance of laser vision correction;
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| |  |  | the possibility of long-term side effects and adverse publicity regarding laser correction surgery; and
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| |  |  | the effect of weak or uncertain general economic conditions on the ability of individuals to afford laser vision correction.
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We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and inaccurate
assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear
this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Form
10-K filing for the 2006 fiscal year listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation
Reform Act of 1995. Readers can find them in Item 1A of the Form 10-K under the heading Risk Factors. We incorporate that section of that Form 10-K in this filing and encourage investors to refer to it. You should understand that it
is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We routinely monitor the risks associated with fluctuations in currency exchange rates and interest rates. We address these risks through controlled risk management that may include the use of derivative financial instruments to
economically hedge or reduce these exposures. We do not expect to enter into financial instruments for trading or speculative purposes.

Given the inherent limitations of forecasting and the anticipatory nature of the exposures intended to be hedged, there can be no assurance that such programs will offset more than a portion of the adverse financial impact resulting from
unfavorable movements in either interest or foreign exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to mark-to-market instruments for any given period may not coincide with the timing of
gains and losses related to the underlying economic exposures and, therefore, may adversely affect our operating results and financial position.

To ensure the adequacy and effectiveness of our interest rate and foreign exchange hedge positions, we continually monitor, from an accounting and economic perspective, our interest rate swap positions and foreign exchange forward and
option positions, when applicable, both on a stand-alone basis and in conjunction with our underlying interest rate and foreign currency exposures.

Interest rate risk. At March 30, 2007, our debt comprised domestic borrowings of $851.1 million of fixed rate debt.



26



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The tables below present information about our debt obligations as of March 30, 2007 and
December 31, 2006:

March 30, 2007



|                               |  |                                       |   |      |                  |      |  |      |   |      |   |            |  |   |       |  |   |         |   |  |   |         |   |  |   |        
|------------------------------ |  | ------------------------------------- | - | ---- | ---------------- | ---- |  | ---- | - | ---- | - | ---------- |  | - | ----- |  | - | ------- | - |  | - | ------- | - |  | - | -------
|                               |  | Maturing in                           |   |      | FairMarket Value
|                               |  | 2007                                  |   | 2008 |                  | 2009 |  | 2010 |   | 2011 |   | Thereafter |  |   | Total |  |  
|                               |  | (in thousands, except interest rates)
|LIABILITIES                    |  |                                       |   |      |                  |      |  |      |   |      |   |            |  |   |       |  |   |         |   |  |   |         |   |  |   |        
|Debt Obligations:              |  |                                       |   |      |                  |      |  |      |   |      |   |            |  |   |       |  |   |         |   |  |   |         |   |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $                |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 246,105 |   |  | $ | 246,105 |   |  | $ | 246,068
|Weighted Average Interest Rate |  |                                       |  |      |                  |     |  |      |  |      |   |           |  |   |      |  |   | 2.50    | % |  |   | 2.50    | % |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $                |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 105,000 |   |  | $ | 105,000 |   |  | $ | 103,476
|Weighted Average Interest Rate |  |                                       |  |      |                  |     |  |      |  |      |   |           |  |   |      |  |   | 1.375   | % |  |   | 1.375   | % |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $                |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 500,000 |   |  | $ | 500,000 |   |  | $ | 471,370
|Weighted Average Interest Rate |  |                                       |  |      |                  |     |  |      |  |      |   |           |  |   |      |  |   | 3.25    | % |  |   | 3.25    | % |  |   |        
|Total Debt Obligations         |  | $                                     |  |      | $                |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 851,105 |   |  | $ | 851,105 |   |  | $ | 820,914
|Weighted Average Interest Rate |  |                                       |  |      |                  |     |  |      |  |      |   |           |  |   |      |  |   | 2.80    | % |  |   | 2.80    | % |  |   |        

December 31, 2006



|                               |  |                                       |   |      |   |      |  |      |   |      |   |            |  |   |       |  |   |                  |   |  |   |         |   |  |   |        
|------------------------------ |  | ------------------------------------- | - | ---- | - | ---- |  | ---- | - | ---- | - | ---------- |  | - | ----- |  | - | ---------------- | - |  | - | ------- | - |  | - | -------
|                               |  | Maturing in                           |   |      |  
|                               |  | 2007                                  |   | 2008 |   | 2009 |  | 2010 |   | 2011 |   | Thereafter |  |   | Total |  |   | Fair MarketValue
|                               |  | (in thousands, except interest rates)
|LIABILITIES                    |  |                                       |   |      |   |      |  |      |   |      |   |            |  |   |       |  |   |                  |   |  |   |         |   |  |   |        
|Debt Obligations:              |  |                                       |   |      |   |      |  |      |   |      |   |            |  |   |       |  |   |                  |   |  |   |         |   |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $ |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 246,105          |   |  | $ | 246,105 |   |  | $ | 238,722
|Weighted Average Interest Rate |  |                                       |  |      |   |     |  |      |  |      |   |           |  |   |      |  |   | 2.50             | % |  |   | 2.50    | % |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $ |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 105,000          |   |  | $ | 105,000 |   |  | $ | 99,554 
|Weighted Average Interest Rate |  |                                       |  |      |   |     |  |      |  |      |   |           |  |   |      |  |   | 1.375            | % |  |   | 1.375   | % |  |   |        
|Fixed Rate                     |  | $                                     |  |      | $ |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 500,000          |   |  | $ | 500,000 |   |  | $ | 455,950
|Weighted Average Interest Rate |  |                                       |  |      |   |     |  |      |  |      |   |           |  |   |      |  |   | 3.25             | % |  |   | 3.25    | % |  |   |        
|Total Debt Obligations         |  | $                                     |  |      | $ |     |  | $    |  |      | $ |           |  | $ |      |  | $ | 851,105          |   |  | $ | 851,105 |   |  | $ | 794,226
|Weighted Average Interest Rate |  |                                       |  |      |   |     |  |      |  |      |   |           |  |   |      |  |   | 2.80             | % |  |   | 2.80    | % |  |   |        

Foreign currency risk.Overall, we are a net recipient of currencies other than the
U.S. dollar and, as such, we benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may
negatively affect our consolidated net sales and gross profit as expressed in U.S. dollars.

We may enter into foreign exchange option and
forward contracts to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on its core business operations. Accordingly, we enter into contracts which change in value as
foreign exchange rates change to economically offset the effect of changes in value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. We enter into foreign exchange
option and forward contracts in amounts between minimum and maximum anticipated foreign exchange exposures, generally for periods not to exceed one year. We do not enter into foreign exchange option and forward contracts for trading purpose.

We use foreign currency option contracts, which provide for the sale of foreign currencies to offset foreign currency exposures expected
to arise in the normal course of our business. While these instruments are subject to fluctuations in value, such fluctuations are anticipated to offset changes in the value of the underlying exposures. The principal currencies subject to this
process are the Japanese yen and the euro. The foreign exchange forward contracts are entered into to protect the value of foreign currency denominated monetary assets and liabilities and the changes in the fair value of the foreign currency



27



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forward contracts were economically designed to offset the changes in the revaluation of the foreign currency denominated monetary assets and liabilities.
These forward contracts are denominated in currencies which represent material exposures. The changes in the fair value of foreign currency option and forward contracts are recorded through earnings as Unrealized (gain) loss on derivative
instruments while any realized gains or losses on expired contracts are recorded through earnings as Other, net in the accompanying unaudited consolidated statements of operations. Any premium cost of purchased foreign exchange
option contracts are recorded in Other current assets and amortized over the life of the options.

The following tables provide
information about our foreign currency derivative financial instruments outstanding as of March 30, 2007 and December 31, 2006, respectively. The information is provided in U.S. dollar amounts, as presented in our consolidated financial
statements.



|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|--------------------------------------- |  | -------------- | ----- | ----------------- | ---------------------------- | ------ | -------------- | - | ----- | ---------------------------- |  | ------
|                                        |  | March 30, 2007 |       | December 31, 2006
|                                        |  | NotionalAmount |       |                   | AverageContractor StrikeRate |        | NotionalAmount |   |       | AverageContractor StrikeRate
|                                        |  | (in $millions) |       | (in $millions)   
|Foreign currency forward contracts:     |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Pay US$/Receive Foreign Currency:       |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Swiss Franc                             |  | $              | 4.1   |                   |                              | 1.21   |                | $ | 3.7   |                              |  | 1.22  
|U.K. Pound                              |  |                | 15.7  |                   |                              | 0.51   |                |   |      |                              |  |      
|Receive US$/Pay Foreign Currency:       |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Swedish Krona                           |  |                | 28.6  |                   |                              | 6.99   |                |   | 8.8   |                              |  | 6.85  
|Japanese Yen                            |  |                | 4.3   |                   |                              | 117.50 |                |   | 7.1   |                              |  | 118.80
|Canadian Dollar                         |  |                | 7.8   |                   |                              | 1.16   |                |   | 9.5   |                              |  | 1.16  
|Australia Dollar                        |  |                | 4.8   |                   |                              | 1.24   |                |   | 7.1   |                              |  | 1.27  
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Total Notional                          |  | $              | 65.3  |                   |                              |        |                | $ | 36.2  |                              |  |       
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Estimated Fair Value                    |  | $              | (0.1  | )                 |                              |        |                | $ |      |                              |  |       
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Foreign currency purchased put options: |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Japanese Yen                            |  | $              | 89.8  |                   |                              | 118.00 |                | $ | 72.0  |                              |  | 118.00
|Euro                                    |  |                | 37.1  |                   |                              | 1.24   |                |   | 50.8  |                              |  | 1.24  
|                                        |  |                |       |                  
|Foreign currency sold call options:     |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Japanese Yen                            |  |                | 101.4 |                   |                              | 104.50 |                |   | 81.3  |                              |  | 104.50
|Euro                                    |  |                | 38.4  |                   |                              | 1.28   |                |   | 53.1  |                              |  | 1.29  
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Total Notional                          |  | $              | 266.7 |                   |                              |        |                | $ | 257.2 |                              |  |       
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       
|Estimated Fair Value                    |  | $              | (0.9  | )                 |                              |        |                | $ | (0.6  | )                            |  |       
|                                        |  |                |       |                   |                              |        |                |   |       |                              |  |       

The notional principal amount provides one measure of the transaction volume outstanding as of the
end of the period, and does not represent the amount of our exposure to market loss. The estimate of fair value is based on applicable and commonly used prevailing financial market information as of March 30, 2007 and December 31, 2006,
respectively. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.



|Item 4. | Controls and Procedures
|------- | -----------------------

As of the end of the
period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange
Act of 1934) are effective. In addition, our management evaluated our internal control over financial reporting and there have been no changes during the most recent fiscal quarter ended March 30, 2007 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.



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PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

On January 4, 2005,
Dr. James Nielsen filed a complaint against us and Allergan, Inc. in the U.S. District Court of the Northern District of Texas, Dallas Division, for infringement of U.S. Patent No. 5,158,572. Dr. Nielsen alleges that our Arraymultifocal intraocular lens infringes the patent. He is seeking damages and a permanent injunction. The matter is set for trial in the Courts four-week docket beginning December 3, 2007.

We do not believe, based on current knowledge, that the foregoing legal proceeding is likely to have a material adverse effect on our financial position,
results of operations or cash flows. However, we may incur substantial expenses in defending against third party claims. In the event of a determination adverse to the Company or its subsidiaries, we may incur substantial monetary liability, and be
required to change its business practices. Either of these could have a material adverse effect on our financial position, results of operations or cash flows.

While we are involved from time to time in litigation arising in the ordinary course of business, including product liability claims, we are not currently aware of any other actions against us or Allergan relating to
the optical medical device business that we believe would have a material adverse effect on our business, financial condition, results of operations or cash flows. We may be subject to future litigation and infringement claims, which could cause us
to incur significant expenses or prevent us from selling its products. We operate in an industry susceptible to significant product liability claims. Product liability claims may be asserted against us in the future arising out of events not known
to us at the present time. Under the terms of the contribution and distribution agreement affecting the spin-off, Allergan agreed to assume responsibility for, and to indemnify us against, all current and future litigation relating to its retained
businesses and we agreed to assume responsibility for, and to indemnify Allergan against, all current and future litigation related to the optical medical device business.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no significant
changes to the risk factors disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2006, except for the following items:

LASIK surgeons may not adopt our femtosecond laser product offering as an attractive alternative to the microkeratome for creating the corneal flap, or adoption may be slower than anticipated.

LASIK surgeons may not continue to adopt our femtosecond laser product offering, or may adopt our technology at a slower rate than we have anticipated,
unless they determine, based on experience, clinical data and studies and published journal articles, including peer review articles, that our product offering provides significant benefits or an attractive alternative over the traditional method of
creating the corneal flap using the microkeratome. In addition, we believe that recommendations and support of our laser by influential LASIK surgeons are essential for its market acceptance and adoption. If we do not receive support from such
surgeons or from the data and experience of users, it may become difficult to have additional LASIK surgeons adopt our product offering. In such circumstances, we may not achieve expected revenues or profits. In order for the adoption rate of our
technology to meet our expectations, patients must also continue to be willing to pay for LASIK surgery using our femtosecond product offering despite it being more expensive than LASIK surgery with the microkeratome. LASIK surgeons typically
receive more income per eye when using our product offering instead of the traditional microkeratome.

Presently unknown side effects related to the use
of our femtosecond laser could emerge in the future.

Use of the IntraLase FS laser to create the LASIK flap is a relatively new
technique. Consequently there is no long term follow up data beyond five years that might reveal unknown side effects or complications associated specifically with this technique. The possibility of unfavorable side effects, and any concomitant
adverse publicity, could seriously harm our business. In addition to the potential side effects and complications associated with LASIK generally, some LASIK surgeons have observed incidents of transient light sensitivity in patients treated with
our system, although this has affected only a small percentage of patients and appears to resolve quickly with treatment. Any future reported adverse outcomes or pattern of side effects involving the use of our laser specifically, or with respect to
LASIK procedures generally, could have a material adverse effect on our business, financial condition and results of operations.



29



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Measures we take to ensure collection of femtosecond laser per procedure charges may be inadequate.

Generating per procedure revenues from our installed base of femtosecond lasers is a key aspect of our business. We charge our customers a per procedure
fee for each eye treated. This fee is inclusive of a disposable patient interface, which is intended to be used on a single eye and discarded. We typically charge our customers procedure fees based on our shipments to them of per procedure
disposable interfaces.

We believe that a small percentage of our customers, in an effort to avoid procedure fees, have in the past used a
single patient interface to treat multiple eyes. If this practice (or other fee avoidance practices) were to continue or to proliferate, it could have a material adverse effect on our business.

Our proprietary IntraLASIK software contains a feature which requires the laser to periodically be reprogrammed in order to perform additional
procedures. We have introduced technology which allows us to do this remotely using secure activation techniques. Over 90 percent of IntraLase lasers have been upgraded to new software versions that require either remote electronic activation
when the customers order procedures or an IntraLase-generated activation code used by the customers at their sites. Secure activation capabilities allow us to align the number of procedures available on the laser with the number of patient
interfaces purchased to prevent reuse. However, if these capabilities prove inadequate, or if other fee avoidance methods are devised which we are unable to detect or counter, or if we are unable to enhance all of the lasers in our worldwide
installed base, this could have a material adverse effect on our business. By way of example, circumstances that could potentially hamper our enforcement efforts include: theft or disclosure of confidential passwords, improper or unauthorized
tampering with laser hardware or software, lack of cooperation from international distributors, inability to obtain access to lasers in the field, legal impediments imposed by foreign jurisdictions and/or counterfeit patient interfaces.



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------
|10.1 |  | Fifth Amendment to Advanced Medical Optics, Inc. 401(k) Plan.                                                  
|     | 
|31.1 |  | Certification of James V. Mazzo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                     
|     | 
|31.2 |  | Certification of Richard A. Meier pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                   
|     | 
|32.1 |  | Certification of James V. Mazzo and Richard A. Meier pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



30



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SIGNATURES

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 4, 2007



ADVANCED MEDICAL OPTICS, INC./s/ RICHARD A. MEIERRichard A. MeierChief Operating Officer and Chief Financial Officer
(Principal Financial Officer)/s/ ROBERT F. GALLAGHERRobert F. GallagherSenior Vice President, Chief Accounting Officer and
Controller (Principal Accounting Officer)




31



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EXHIBIT INDEX



|     |  |                                                                                                                
|---- |  | ---------------------------------------------------------------------------------------------------------------
|10.1 |  | Fifth Amendment to Advanced Medical Optics, Inc. 401(k) Plan.                                                  
|     | 
|31.1 |  | Certification of James V. Mazzo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                     
|     | 
|31.2 |  | Certification of Richard A. Meier pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                   
|     | 
|32.1 |  | Certification of James V. Mazzo and Richard A. Meier pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32