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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- |  | ---------------------------------------------------------------------------------------

For the quarterly period ended March 29, 2002

OR

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

For the transition period from
      to

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Commission file number 001-31257


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ADVANCED MEDICAL OPTICS, INC.

(Exact name of registrant as specified in its charter)


|                                                                               |  |                                               
|------------------------------------------------------------------------------ |  | ----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)        |  | 33-098682
(I.R.S. Employer
Identification No.)
|                                                                              
|2525 Dupont Drive, Irvine, California
(Address of principal executive offices) |  | 92612
(Zip Code)                              

(714) 246-4500
(Registrants telephone number, including area code)

---

(Former name, former address and former fiscal year, if changed since last report)

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.

(1) YES [X]     NO [   ]

(2) YES [   ]     NO [X]

The Registrant had
100 shares of common stock outstanding as of June 19,
2002.

THE REGISTRANT MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A) AND
(B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM IN THE REDUCED
DISCLOSURE FORMAT.





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TABLE OF CONTENTS



|                               |                                          |  |                                                                                              |  |  |  |  | 
|------------------------------ | ---------------------------------------- |  | -------------------------------------------------------------------------------------------- |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1  FINANCIAL STATEMENTS           
|                               |                                          |  | UNAUDITED CONDENSED COMBINED STATEMENTS OF EARNINGS                                         
|                               |                                          |  | UNAUDITED CONDENSED COMBINED BALANCE SHEETS                                                 
|                               |                                          |  | UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS                                       
|                               |                                          |  | NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS                                  
|                               |                                          |  | Item 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|Part II  OTHER INFORMATION   
|                               | Item 6. Exhibits and Reports on Form 8-K
|SIGNATURES                    
|EXHIBIT INDEX                 
|EXHIBIT 10.5                  
|EXHIBIT 10.6                  



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ADVANCED MEDICAL OPTICS, INC.

INDEX

|                               |  |                                                                                                                               |  |         
|------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --------
|                               |  |                                                                                                                               |  | Page No.
|                               |  |                                                                                                                               |  |         
|Part I  FINANCIAL INFORMATION
|                              
|Item 1.                        |  | Financial Statements:                                                                                                         |  |         
|                               |  | Unaudited Condensed Combined
        Statements of Earnings -  Three Months Ended March 29, 2002
        and March 30, 2001   |  | 3       
|                              
|                               |  | Unaudited Condensed Combined
        Balance Sheets -  March 29, 2002 and
December 31, 2001                                   |  | 4       
|                              
|                               |  | Unaudited Condensed Combined
        Statements of Cash Flows -  Three Months Ended March 29, 2002
        and March 30, 2001 |  | 5       
|                              
|                               |  | Notes to Unaudited Condensed
        Combined Financial Statements                                                            |  | 6       
|                              
|Item 2.                        |  | Managements
Discussion and Analysis of Financial Condition and Results of
Operations                                         |  | 12      
|                              
|Part II  OTHER INFORMATION   
|                              
|                               |  | Item 6. Exhibits and
        Reports on Form 8-K                                                                              |  | 18      
|                              
|                               |  | Signature Page                                                                                                                |  | 19      
|                              
|                               |  | Exhibit Index                                                                                                                 |  | 20      





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##### Table of Contents






PART I  FINANCIAL INFORMATION

ADVANCED MEDICAL OPTICS, INC.







UNAUDITED CONDENSED COMBINED STATEMENTS OF
EARNINGS

|                                                                            |                                                  |                    |         |           |        |   |         |        |        | 
|--------------------------------------------------------------------------- | ------------------------------------------------ | ------------------ | ------- | --------- | ------ | - | ------- | ------ | ------ | 
|                                                                            |                                                  |                   
|                                                                            |                                                  | Three Months Ended
|                                                                            |                                                  |                   
|                                                                            |                                                  | March 29,          |         | March 30,
|                                                                            |                                                  | 2002               |         | 2001     
|                                                                            |                                                  |                    |         |          
|                                                                            |                                                  |                   
|                                                                            |                                                  | (in thousands)    
|Net sales                                                                   |                                                  | $                  | 113,997 |           |        | $ | 120,811 |       
|Cost of sales                                                               |                                                  |                    | 44,276  |           |        |   | 50,335  |       
|                                                                            |                                                  |                    |         |           |        |   |         |       
|                                                                            |                                                  | Gross margin       |         |           | 69,721 |   |         |        | 70,476 | 
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Selling, general and administrative                                         |                                                  |                    | 54,170  |           |        |   | 62,118  |       
|Research and development                                                    |                                                  |                    | 6,984   |           |        |   | 7,264   |       
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Operating income                                                            |                                                  |                    | 8,567   |           |        |   | 1,094   |       
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Non-operating expense (income)                                              |                                                  |                    |         |           |        |   |         |       
|                                                                            | Interest expense                                 |                    |         | 681       |        |   |         | 824    |       
|                                                                            | Unrealized loss (gain) on derivative instruments |                    |         | 213       |        |   |         | (1,321 | )     
|                                                                            | Other, net                                       |                    |         | 51        |        |   |         | (90    | )     
|                                                                            |                                                  |                    |         |           |        |   |         |       
|                                                                            |                                                  |                    | 945     |           |        |   | (587    | )     
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Earnings before income taxes                                                |                                                  |                    | 7,622   |           |        |   | 1,681   |       
|Provision for income taxes                                                  |                                                  |                    | 2,896   |           |        |   | 467     |       
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Earnings before cumulative effect of change in
    accounting principle     |                                                  |                    | 4,726   |           |        |   | 1,214   |       
|Cumulative effect of change in accounting
    principle, net of $160 of tax |                                                  |                    |        |           |        |   | (391    | )     
|                                                                            |                                                  |                    |         |           |        |   |         |       
|Net earnings                                                                |                                                  | $                  | 4,726   |           |        | $ | 823     |       
|                                                                            |                                                  |                    |         |           |        |   |         |       

See accompanying notes to unaudited condensed
combined financial statements.

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ADVANCED MEDICAL OPTICS, INC.




UNAUDITED CONDENSED COMBINED BALANCE
SHEETS

|                                       |                                      |                              |         |              |         |  |         |         |         | 
|-------------------------------------- | ------------------------------------ | ---------------------------- | ------- | ------------ | ------- |  | ------- | ------- | ------- | 
|                                       |                                      | March 29,                    |         | December 31,
|                                       |                                      | 2002                         |         | 2001        
|                                       |                                      |                              |         |             
|                                       |                                      |                             
|                                       |                                      | (in thousands)              
|ASSETS                                
|Current assets                         |                                      |                              |         |              |         |  |         |        
|                                       | Cash and equivalents                 |                              | $       | 4,836        |         |  | $       | 6,957   |        
|                                       | Trade receivables, net               |                              |         | 94,861       |         |  |         | 114,724 |        
|                                       | Inventories                          |                              |         | 67,131       |         |  |         | 65,237  |        
|                                       | Other current assets                 |                              |         | 17,322       |         |  |         | 23,634  |        
|                                       |                                      |                              |         |              |         |  |         |        
|                                       |                                      | Total current assets         |         |              | 184,150 |  |         |         | 210,552 | 
|Property, plant and equipment, net     |                                      |                              | 27,209  |              |         |  | 28,293  |        
|Other assets                           |                                      |                              | 36,481  |              |         |  | 37,248  |        
|Goodwill                               |                                      |                              | 100,066 |              |         |  | 100,374 |        
|Intangibles, net                       |                                      |                              | 924     |              |         |  | 999     |        
|                                       |                                      |                              |         |              |         |  |         |        
|                                       |                                      | Total assets                 |         | $            | 348,830 |  |         | $       | 377,466 | 
|                                       |                                      |                              |         |              |         |  |         |        
|LIABILITIES AND EQUITY                
|Current liabilities                    |                                      |                              |         |              |         |  |         |        
|                                       | Current portion of long-term debt    |                              | $       | 18,834       |         |  | $       | 18,988  |        
|                                       | Accounts payable                     |                              |         | 19,473       |         |  |         | 29,583  |        
|                                       | Accrued compensation                 |                              |         | 14,957       |         |  |         | 16,652  |        
|                                       | Other accrued expenses               |                              |         | 17,110       |         |  |         | 20,328  |        
|                                       |                                      |                              |         |              |         |  |         |        
|                                       |                                      | Total current liabilities    |         |              | 70,374  |  |         |         | 85,551  | 
|Long-term debt, net of current portion |                                      |                              | 75,189  |              |         |  | 75,809  |        
|Other liabilities                      |                                      |                              | 3,396   |              |         |  | 2,176   |        
|Commitments and contingencies          |                                      |                              |         |              |         |  |         |        
|Equity                                 |                                      |                              |         |              |         |  |         |        
|                                       | Allergan, Inc. net investment        |                              |         | 202,101      |         |  |         | 215,653 |        
|                                       | Accumulated other comprehensive loss |                              |         | (2,230       | )       |  |         | (1,723  | )      
|                                       |                                      |                              |         |              |         |  |         |        
|                                       |                                      | Total equity                 |         |              | 199,871 |  |         |         | 213,930 | 
|                                       |                                      |                              |         |              |         |  |         |        
|                                       |                                      | Total liabilities and equity |         | $            | 348,830 |  |         | $       | 377,466 | 
|                                       |                                      |                              |         |              |         |  |         |        

See accompanying notes to unaudited condensed
combined financial statements.

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ADVANCED MEDICAL OPTICS, INC.




UNAUDITED CONDENSED COMBINED STATEMENTS OF
CASH FLOWS

|                                                 |                                                                       |                                        |                                           |           |        |         |        |        |        |        |  
|------------------------------------------------ | --------------------------------------------------------------------- | -------------------------------------- | ----------------------------------------- | --------- | ------ | ------- | ------ | ------ | ------ | ------ | -
|                                                 |                                                                       |                                       
|                                                 |                                                                       | Three Months Ended                    
|                                                 |                                                                       |                                       
|                                                 |                                                                       | March 29,                              |                                           | March 30,
|                                                 |                                                                       | 2002                                   |                                           | 2001     
|                                                 |                                                                       |                                        |                                           |          
|                                                 |                                                                       |                                       
|                                                 |                                                                       | (in thousands)                        
|Cash flows provided by operating activities      |                                                                       |                                        |                                           |           |        |         |        |       
|Net earnings                                     |                                                                       | $                                      | 4,726                                     |           |        | $       | 823    |       
|Non cash items included in net earnings:         |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 | Cumulative effect of accounting change for
    derivative instruments |                                        |                                           |          |        |         |        | 551    |       
|                                                 | Depreciation and amortization                                         |                                        |                                           | 3,355     |        |         |        | 5,335  |       
|                                                 | Amortization of prepaid royalties                                     |                                        |                                           |          |        |         |        | 100    |       
|                                                 | Loss on investments and assets                                        |                                        |                                           | 216       |        |         |        | 97     |       
|                                                 | Unrealized loss/(gain) on derivatives                                 |                                        |                                           | 213       |        |         |        | (1,321 | )     
|                                                 | Changes in assets and liabilities:                                    |                                        |                                           |           |        |         |        |        |       
|                                                 |                                                                       | Trade receivables                      |                                           |           | 18,369 |         |        |        | 12,994 |       
|                                                 |                                                                       | Inventories                            |                                           |           | (2,785 | )       |        |        | (3,500 | )     
|                                                 |                                                                       | Other current assets                   |                                           |           | 6,054  |         |        |        | 291    |       
|                                                 |                                                                       | Accounts payable                       |                                           |           | (9,894 | )       |        |        | (4,367 | )     
|                                                 |                                                                       | Accrued expenses and other liabilities |                                           |           | (2,057 | )       |        |        | (4,334 | )     
|                                                 |                                                                       | Other non-current assets               |                                           |           | 477    |         |        |        | (1,604 | )     
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 |                                                                       |                                        | Net cash provided by operating activities |           |        | 18,674  |        |        |        | 5,065  |  
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|Cash flows from investing activities             |                                                                       |                                        |                                           |           |        |         |        |       
|Additions to property, plant and equipment       |                                                                       |                                        | (460                                      | )         |        |         | (1,069 | )     
|Additions to capitalized internal-use software   |                                                                       |                                        | (632                                      | )         |        |         | (538   | )     
|Additions to demonstration and bundled equipment |                                                                       |                                        | (1,062                                    | )         |        |         | (1,549 | )     
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 |                                                                       |                                        | Net cash used in investing activities     |           |        | (2,154  | )      |        |        | (3,156 | )
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|Cash flows from financing activities             |                                                                       |                                        |                                           |           |        |         |        |       
|Distributions to Allergan, Inc., net of advances |                                                                       |                                        | (18,278                                   | )         |        |         | (4,127 | )     
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 |                                                                       |                                        | Net cash used in financing activities     |           |        | (18,278 | )      |        |        | (4,127 | )
|Effect of exchange rates on cash and equivalents |                                                                       |                                        | (363                                      | )         |        |         | (608   | )     
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|Net decrease in cash and equivalents             |                                                                       |                                        | (2,121                                    | )         |        |         | (2,826 | )     
|Cash and equivalents at beginning of period      |                                                                       |                                        | 6,957                                     |           |        |         | 12,641 |       
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|Cash and equivalents at end of period            |                                                                       | $                                      | 4,836                                     |           |        | $       | 9,815  |       
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|Supplemental disclosure of cash flow information |                                                                       |                                        |                                           |           |        |         |        |       
|Cash paid for:                                   |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 | Interest                                                              |                                        | $                                         | 819       |        |         | $      | 818    |       
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       
|                                                 | Income taxes                                                          |                                        | $                                         | 513       |        |         | $      | 32     |       
|                                                 |                                                                       |                                        |                                           |           |        |         |        |       

See accompanying notes to unaudited condensed
combined financial statements.

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ADVANCED MEDICAL OPTICS, INC.




NOTES TO UNAUDITED CONDENSED COMBINED
FINANCIAL STATEMENTS

Note 1:     Description
of Business

On January 22, 2002, Allergan, Inc.
(Allergan) announced a plan to spin off its optical medical
device business consisting of ophthalmic surgical and contact
lens care product business lines to Allergan stockholders.
Management expects that shares of the new optical medical device
company, Advanced Medical Optics, Inc. (AMO or the Company),
will be distributed on June 29, 2002 to Allergan
stockholders of record on June 14, 2002 by means of a tax
free dividend for purposes of U.S. income taxes. The distribution will result in AMO operating as
an independent entity with publicly traded common stock.

Note 2:     Basis
of Presentation

In the opinion of management, the accompanying
unaudited condensed combined financial statements contain all
adjustments necessary (consisting only of normal recurring
accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures
required by accounting principles generally accepted in the
United States of America and should be read in conjunction with
the audited combined financial statements of the Company for the
year ended December 31, 2001. The results of operations for the three
months ended March 29, 2002 are not necessarily indicative
of the results to be expected for the year ending
December 31, 2002.

Allergan does not account for the business that
comprises AMO on the basis of separate legal entities,
subsidiaries, divisions or segments. The accompanying unaudited
condensed combined financial statements include those assets, liabilities,
revenues and expenses directly attributable to AMOs
operations and allocations of certain Allergan corporate assets,
liabilities and expenses to AMO. These amounts have been
allocated to AMO on the basis that is considered by management
to reflect most fairly or reasonably the utilization of the
services provided to or the benefit obtained by the Company.
Management believes the methods used to allocate these amounts
are reasonable and consistent with prior periods. All material
intercompany balances have been eliminated. The financial
information included herein does not necessarily reflect what
the financial position and results of operations of the Company
would have been had it operated as a stand-alone public entity
during the periods covered, and may not be indicative of future
operations or financial position. Subsequent to the
distribution, the Company estimates that it will incur
incremental annual pre-tax costs of approximately
$52 million associated with being an independent public
company. Such incremental annual costs include approximately
$7 million for cost of sales, $22 million for selling,
general and administrative expenses including accounting,
information systems, legal, human resources and other costs,
$1 million for research and development costs, and interest
expense of $22 million, including the estimated annual
amortization of capitalizable debt origination fees.

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Note 3:     Recently
Adopted Accounting Standards

In July 2001, Statement of Financial Accounting
Standards No. 141, Business Combinations (SFAS
No. 141), was issued. SFAS No. 141 requires that the
purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all
purchase method combinations completed after June 30, 2001.
SFAS No. 141 also requires that the Company evaluate its
existing intangible assets and goodwill that were acquired in
prior business combinations, and to make any necessary
reclassifications in order to conform with the new criteria in
SFAS No. 141 for recognition of intangibles apart from
goodwill.

Additionally, in July 2001, Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS No. 142), was issued
and is effective for all periods of fiscal years beginning after
December 15, 2001 (January 1, 2002 for the Company).
SFAS No. 142 establishes accounting and reporting standards
for intangible assets. SFAS No. 142 requires that goodwill
and intangible assets with indefinite useful lives be evaluated
annually for impairment rather than amortized. Upon adoption of
SFAS No. 142, the Company is also required to test goodwill
and intangible assets with indefinite useful lives for
impairment within the first interim period with any impairment
loss being recognized as a cumulative effect of a change in
accounting principle.

In connection with the transitional goodwill
impairment evaluation, SFAS No. 142 requires the Company to
perform an assessment of whether there is an indication that
goodwill and intangible assets with indefinite useful lives are
impaired as of the date of adoption. To accomplish this, the
Company must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets
and liabilities, including the existing goodwill and intangible
assets, to those reporting units as of the date of adoption. The
Company then has up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it
to the reporting units carrying amount. To the extent a
reporting units carrying amount exceeds its fair value, an
indication exists that the reporting units goodwill may be
impaired.

The Company adopted the provisions of SFAS
No. 141 on June 30, 2001 and SFAS No. 142 on
January 1, 2002, effective with Allergans adoption of
the new accounting standards. Allergans adoption did not
result in a negative impact on Allergans Consolidated
Financial Statements. After the spin-off is completed, the
Company will be required to complete a separate assessment of
goodwill and intangibles on a stand-alone basis. The
Companys separate assessment is not expected to result in
a negative impact on its combined financial statements.

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ADVANCED MEDICAL OPTICS, INC.


NOTES TO UNAUDITED CONDENSED

COMBINED FINANCIAL STATEMENTS 
(Continued)


The components of amortizable intangibles and
goodwill were as follows:

|                               |            |                |       |                   |  |        |        |              |   |   |       |       |  |   |        |        |  
|------------------------------ | ---------- | -------------- | ----- | ----------------- |  | ------ | ------ | ------------ | - | - | ----- | ----- |  | - | ------ | ------ | -
|                               |            |                |       |                  
|                               |            | March 29, 2002 |       | December 31, 2001
|                               |            |                |       |                  
|                               |            | Gross          |       | Accumulated       |  | Gross  |        | Accumulated 
|Intangibles                    |            | Amount         |       | Amortization      |  | Amount |        | Amortization
|                               |            |                |       |                   |  |        |        |             
|                               |            |               
|                               |            | (in thousands)
|Amortizable Intangible Assets: |            |                |       |                   |  |        |        |              |   |   |       |       |  |   |        |       
|                               | Licensing  |                | $     | 3,940             |  |        | $      | (3,076       | ) |   | $     | 3,940 |  |   | $      | (3,004 | )
|                               | Trademarks |                |       | 79                |  |        |        | (19          | ) |   |       | 78    |  |   |        | (15    | )
|                               |            |                |       |                   |  |        |        |              |   |   |       |       |  |   |        |       
|                               |            | $              | 4,019 |                   |  | $      | (3,095 | )            |   | $ | 4,018 |       |  | $ | (3,019 | )     
|                               |            |                |       |                   |  |        |        |              |   |   |       |       |  |   |        |       

Aggregate amortization expense for the quarters
ended March 29, 2002 and March 30, 2001 was
approximately $76,000.

Estimated amortization expense for years ending
December 31, 2002, 2003, 2004, 2005 and 2006 are $304,000,
$304,000, $304,000, $88,000 and zero, respectively.

|          |                          |                |         |                   |  |   |         |        | 
|--------- | ------------------------ | -------------- | ------- | ----------------- |  | - | ------- | ------ | 
|Goodwill  |                          | March 29, 2002 |         | December 31, 2001
|          |                          |                |         |                  
|          |                          |               
|          |                          | (in thousands)
|Goodwill: |                          |                |         |                   |  |   |         |       
|          | United States            |                | $       | 12,783            |  |   | $       | 12,783 | 
|          | Asia Pacific             |                |         | 22,497            |  |   |         | 22,805 | 
|          | Manufacturing Operations |                |         | 64,786            |  |   |         | 64,786 | 
|          |                          |                |         |                   |  |   |         |       
|          |                          | $              | 100,066 |                   |  | $ | 100,374 |       
|          |                          |                |         |                   |  |   |         |       

There was no activity related to goodwill during
the quarter ended March 29, 2002.

Pro forma financial information related to the
adoption of SFAS No. 142 is as follows:

|                                  |  |                        |       |           |  |   |       | 
|--------------------------------- |  | ---------------------- | ----- | --------- |  | - | ----- | 
|                                  |  |                       
|                                  |  | For the Quarters Ended
|                                  |  |                       
|                                  |  | March 29,              |       | March 30,
|                                  |  | 2002                   |       | 2001     
|                                  |  |                        |       |          
|                                  |  |                       
|                                  |  | (in thousands)        
|Net earnings                      |  | $                      | 4,726 |           |  | $ | 823   | 
|Add:                              |  |                        |       |           |  |   |       | 
|Goodwill amortization, net of tax |  |                        |      |           |  |   | 1,307 | 
|                                  |  |                        |       |           |  |   |       | 
|Adjusted net earnings             |  | $                      | 4,726 |           |  | $ | 2,130 | 
|                                  |  |                        |       |           |  |   |       | 

In October 2001, Statement of Financial
Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS
No. 144), was issued. SFAS No. 144 supersedes
Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
of, and the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Results of
Operations  Reporting the effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the
disposal of a segment of a business. SFAS No. 144 retains
the requirement in Opinion No. 30 to report separately
discontinued operations and extends that reporting to a
component of an entity that either has been disposed of or is
classified as held for sale. The Company adopted the provisions
of SFAS No. 144 for the quarter ended March 29, 2002.
The adoption of SFAS No. 144 did not have a material impact
on the Companys unaudited condensed combined financial
statements.

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ADVANCED MEDICAL OPTICS, INC.


NOTES TO UNAUDITED CONDENSED

COMBINED FINANCIAL STATEMENTS 
(Continued)


Note
4:     Inventories

Components of inventories were:

|                                                                                                                              |       |                |        |              |  |   |        |        | 
|----------------------------------------------------------------------------------------------------------------------------- | ----- | -------------- | ------ | ------------ |  | - | ------ | ------ | 
|                                                                                                                              |       | March 29,      |        | December 31,
|                                                                                                                              |       | 2002           |        | 2001        
|                                                                                                                              |       |                |        |             
|                                                                                                                              |       |               
|                                                                                                                              |       | (in thousands)
|Finished goods, including inventory on
    consignment with customers of $6,550 and $6,653 in 2002 and
    2001, respectively |       | $              | 52,685 |              |  | $ | 51,479 |       
|Work in process                                                                                                               |       |                | 4,950  |              |  |   | 5,078  |       
|Raw materials                                                                                                                 |       |                | 9,496  |              |  |   | 8,680  |       
|                                                                                                                              |       |                |        |              |  |   |        |       
|                                                                                                                              | Total |                | $      | 67,131       |  |   | $      | 65,237 | 
|                                                                                                                              |       |                |        |              |  |   |        |       

Note 5:     Income
Taxes

The Companys operations were historically
included in Allergans consolidated U.S. federal and state
income tax returns and in the tax returns of certain Allergan
foreign subsidiaries. The provision for income taxes has been
determined as if the Company had filed separate tax returns
under its existing structure for the periods presented.
Accordingly, the effective tax rate of the Company in future
years could vary from its historical effective tax rate
depending on the Companys future legal structure and tax
elections. A majority of income taxes are paid by Allergan and
reflected through the Allergan, Inc. net investment
account.

Note 6:     Legal

The Company is involved in various litigation and
claims arising in the normal course of business. Management
believes that recovery or liability with respect to any pending
lawsuits or asserted claims will not have a material adverse
effect on the Companys combined financial position or
results of operations.

Note 7:     Other
Comprehensive Income

The following table summarizes components of
comprehensive income for the quarters ended (in thousands):

|                                         |  |                |      |                |  |            |   |            |  |            |       |            |  |   |       |  |  |   |   |  |  |   |       | 
|---------------------------------------- |  | -------------- | ---- | -------------- |  | ---------- | - | ---------- |  | ---------- | ----- | ---------- |  | - | ----- |  |  | - | - |  |  | - | ----- | 
|                                         |  |                |      |               
|                                         |  | March 29, 2002 |      | March 30, 2001
|                                         |  |                |      |               
|                                         |  |                |      | Tax            |  |            |   |            |  | Tax        |       |           
|                                         |  | Before-tax     |      | (expense)      |  | Net-of-tax |   | Before-tax |  | (expense)  |       | Net-of-tax
|                                         |  | Amount         |      | or Benefit     |  | Amount     |   | Amount     |  | or Benefit |       | Amount    
|                                         |  |                |      |                |  |            |   |            |  |            |       |           
|Foreign currency translation adjustments |  | $              | (507 | )              |  |            |  |            |  | $          | (507  | )          |  | $ | 1,337 |  |  | $ |  |  |  | $ | 1,337 | 
|                                         |  |                |      |                |  |            |   |            |  |            |       |            |  |   |       |  |  |   |   |  |  |   |       | 
|Net earnings                             |  |                |      |                |  |            |   |            |  |            | 4,726 |            |  |   |       |  |  |   |   |  |  |   | 823   | 
|                                         |  |                |      |                |  |            |   |            |  |            |       |            |  |   |       |  |  |   |   |  |  |   |       | 
|Total comprehensive income               |  |                |      |                |  |            |   |            |  | $          | 4,219 |            |  |   |       |  |  |   |   |  |  | $ | 2,160 | 
|                                         |  |                |      |                |  |            |   |            |  |            |       |            |  |   |       |  |  |   |   |  |  |   |       | 

Note 8:     Business
Segment Information

As a part of Allergan, the Company operates in
Regions or geographic operating segments. The United States
information is presented separately as it is the Companys
headquarters country, and U.S. sales represented 30.6% and 32.8%
of total net sales in the
three months ended March 29, 2002 and in the three months ended March 30, 2001, respectively. Additionally,
sales in Japan represented 25.4% and 20.3% of total net sales in the
three months ended March 29,
2002 and in the three months ended March 30, 2001, respectively. No other country, or single
customer, generates over 10% of total net sales. Operations for
the Europe Region also include sales to customers in Africa and the Middle East, and
operations in the Asia Pacific Region include sales to customers
in Australia and New Zealand.

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ADVANCED MEDICAL OPTICS, INC.


NOTES TO UNAUDITED CONDENSED

COMBINED FINANCIAL STATEMENTS 
(Continued)


Operating income attributable to each operating
segment is based upon the management assignment of costs to such
regions, which includes the manufacturing standard cost of goods
produced by the Companys manufacturing operations (or the
cost to acquire goods from third parties), freight, duty and
local distribution costs, and royalties. Operating income for
all operating segments and manufacturing operations also
includes a charge for corporate services and asset utilization
which permits management to better measure segment performance
by including a cost of capital in the determination of operating
income for each segment.

Income from manufacturing operations is not
assigned to geographic regions because most manufacturing
operations produce products for more than one region. Research
and development costs are corporate costs.

Identifiable assets for each geographic operating
segment consist of trade receivables, inventories and property,
plant and equipment. All other assets are assigned to general
corporate as corporate maintains responsibility for all other
assets. Corporate assets are primarily cash and equivalents,
goodwill, intangibles and other assets. Assets in each
geographic operating segment have not changed materially since
December 31, 2001.

Geographic Operating Segments

|                                    |  |                |         |                         |  |          |         |          |  |   |        |   |  |   |        |  
|----------------------------------- |  | -------------- | ------- | ----------------------- |  | -------- | ------- | -------- |  | - | ------ | - |  | - | ------ | -
|                                    |  |                |         |                        
|                                    |  | Net Sales      |         | Operating Income (Loss)
|                                    |  |                |         |                        
|                                    |  | 1st Qtr.       |         | 1st Qtr.                |  | 1st Qtr. |         | 1st Qtr.
|                                    |  | 2002           |         | 2001                    |  | 2002     |         | 2001    
|                                    |  |                |         |                         |  |          |         |         
|                                    |  |               
|                                    |  | (in thousands)
|United States                       |  | $              | 34,860  |                         |  | $        | 39,621  |          |  | $ | 5,271  |   |  | $ | 4,686  |  
|Europe                              |  |                | 34,691  |                         |  |          | 37,474  |          |  |   | 5,443  |   |  |   | 4,131  |  
|Asia Pacific                        |  |                | 38,498  |                         |  |          | 36,123  |          |  |   | 8,155  |   |  |   | 5,342  |  
|Other                               |  |                | 5,948   |                         |  |          | 7,593   |          |  |   | 45     |   |  |   | (932   | )
|                                    |  |                |         |                         |  |          |         |          |  |   |        |   |  |   |        |  
|Segments total                      |  |                | 113,997 |                         |  |          | 120,811 |          |  |   | 18,914 |   |  |   | 13,227 |  
|Manufacturing operations            |  |                |        |                         |  |          |        |          |  |   | 1,118  |   |  |   | 1,367  |  
|Research and development            |  |                |        |                         |  |          |        |          |  |   | (6,984 | ) |  |   | (7,264 | )
|Elimination of inter-company profit |  |                |        |                         |  |          |        |          |  |   | (4,514 | ) |  |   | (8,620 | )
|General corporate                   |  |                |        |                         |  |          |        |          |  |   | 33     |   |  |   | 2,384  |  
|                                    |  |                |         |                         |  |          |         |          |  |   |        |   |  |   |        |  
|Total                               |  | $              | 113,997 |                         |  | $        | 120,811 |          |  | $ | 8,567  |   |  | $ | 1,094  |  
|                                    |  |                |         |                         |  |          |         |          |  |   |        |   |  |   |        |  

In each geographic segment the Company markets
products in two product lines: Opthalmic Surgical and Contact
Lens Care. The Ophthalmic Surgical product line produces
intraocular lenses, phacoemulsification equipment,
viscoelastics, and other products related to cataract and
refractive surgery. The Contact Lens Care product line produces
cleaning, storage and disinfection products for the consumer
contact lens market. The Company provides global marketing
strategy teams to ensure development and execution of a
consistent marketing strategy for products in all geographic
operating segments. There are no transfers between product lines.

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ADVANCED MEDICAL OPTICS, INC.


NOTES TO UNAUDITED CONDENSED

COMBINED FINANCIAL STATEMENTS 
(Continued)


Net Sales by Product Line

|                    |  |                    |         |           |  |   |         | 
|------------------- |  | ------------------ | ------- | --------- |  | - | ------- | 
|                    |  |                   
|                    |  | Three Months Ended
|                    |  |                   
|                    |  | March 29,          |         | March 30,
|                    |  | 2002               |         | 2001     
|                    |  |                    |         |          
|                    |  |                   
|                    |  | (In thousands)    
|Ophthalmic Surgical |  | $                  | 57,412  |           |  | $ | 56,693  | 
|Contact Lens Care   |  |                    | 56,585  |           |  |   | 64,118  | 
|                    |  |                    |         |           |  |   |         | 
|Total Net Sales     |  | $                  | 113,997 |           |  | $ | 120,811 | 
|                    |  |                    |         |           |  |   |         | 

Note 9:     Subsequent
Events

On May  24, 2002, the Company entered into a sublease
agreement for its headquarters facility consisting of approximately
171,330 square feet and located in Santa Ana, California. The
Companys obligation to pay rent begins
October 24, 2002. Unless
terminated sooner pursuant to the terms of the sublease agreement or at law,
the sublease will expire on July 9, 2015.

On May 24, 2002 the Company also entered into a
Consent to Sublease and Second Amendment to Lease under which the
Company obtained the right, provided it is not in default and is
occupying the entire premises, to extend the term of the sublease for two additional periods of six years each.

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MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS


You should read the following discussion together with
the unaudited condensed combined financial statements and corresponding
notes.

Overview

We are a global leader in the development, manufacture and
marketing of medical devices for the eye and contact lens care
products. Our market research indicates that we are the second
largest global manufacturer and marketer of ophthalmic surgical
products and contact lens care products, in each case as
measured by net sales in the markets in which we compete in
2001. Through a significant commitment to internal research and
development and alliances and partnerships, we have demonstrated
success in the introduction of new and innovative products. We
believe we are the technology leader in our markets and that our
brands are among the most trusted and recognized in our industry.
Our products in the ophthalmic surgical market include intraocular lenses,
phacoemulsification systems, viscoelastics and surgical packs
containing items used in cataract surgery, and microkeratomes used in
refractive surgery. Our products in the contact lens
care market include disinfecting solutions to destroy harmful microorganisms in
and on the surface of contact lenses, daily cleaners to remove undesirable film
and deposits from contact lenses, enzymatic cleaners to remove protein deposits
from contact lenses and lens rewetting drops to provide added wearing comfort.

We have operations in approximately 20 countries and sell our
products in approximately 60 countries. As part of Allergan, we
organized our operations into four regions: North America, Latin
America, Asia Pacific and Europe. Operations for the Europe
Region included sales to customers in Africa and the Middle
East, and operations in the Asia Pacific Region included sales
to customers in Australia and New Zealand. After the
distribution, we will organize our operations in three regions:



| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | North and South America;                                                                       
|
| |  | Japan; and                                                                                     
|
| |  | Europe, Africa and Asia Pacific (excluding Japan, but including
    Australia and New Zealand).

Separation from Allergan

Allergan has determined to spin off its existing optical medical
device business by contributing all of the assets related to the
two business lines that comprise the optical medical device
business to us and distributing all of our outstanding shares of
stock to its stockholders. We will have no material assets,
liabilities or activities as a separate corporate entity until
Allergans contribution to us of the optical medical device
business. The contribution is expected to be completed on or
about June 29, 2002, which is the expected distribution
date. Following the distribution, we will be an independent
public company and Allergan will no longer maintain any stock
ownership in us.

We estimate that Allergan and we will incur approximately
$150 million to $200 million in aggregate costs, fees
and expenses related to our separation from Allergan. These
costs, fees and expenses will primarily relate to transition
costs, taxes and professional expenses payable in connection
with our separation from Allergan, and dissynergies prior to the
distribution. We are currently unable to estimate the allocation
of these costs between us and Allergan. Subsequent to the
distribution, we anticipate incurring incremental annual pre-tax
costs of approximately $52 million associated with being an
independent public company. Our management believes these
costs are a reasonable estimate of the incremental costs we will
incur as an independent company; however, we cannot assure you
that actual costs will not exceed this estimate by a material
amount. Estimated incremental annual costs include approximately:



| |   |                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |  | $7 million for cost of sales;                                                                                                     
|
| |  | $22 million for selling, general and administrative
    expenses including accounting, legal, human resources and other
    costs;
|
| |  | $1 million for research and development costs; and                                                                                

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $22 million for interest expense, including the estimated
    annual amortization of capitalizable debt origination fees. This
    estimate is based on the incurrence of $300.0 million of
    debt at a weighted average interest rate of 8.05%; however, our
    debt agreements are not yet finalized and we cannot assure you
    that we will be able to obtain financing on these terms.

Allergan does not account for our business on the basis of
separate legal entities, subsidiaries, divisions or segments.
The accompanying unaudited condensed combined financial statements include those
assets, liabilities, revenues and expenses directly attributable
to our operations and allocations of certain Allergan corporate
assets, liabilities and expenses. These amounts have been
allocated on a basis that is considered by management to reflect
most fairly or reasonably the utilization of the services
provided to us or the benefit obtained by us. We believe the
methods used to allocate these amounts to us are reasonable and
consistent with previous periods. All material intercompany
balances have been eliminated. The financial information
included herein does not necessarily reflect what the financial
position and results of our operations would have been had we
operated as a stand-alone public entity during the periods
covered, and may not be indicative of our future operations or
financial position.

As part of Allergan, we have historically participated in
various Allergan administered functions including shared
services surrounding selling, general and administrative
expenses, retirement and other post-retirement benefit plans,
income taxes and cash management. Additionally, Allergan has
manufactured certain of our products. Shared services include
finance, human resources, information systems and legal
services. Our allocated portion of the expenses for these
services are included in selling, general and administrative
expense in our unaudited condensed combined statements of earnings. For the three
months ended March 29, 2002, and the three months ended
March 30, 2001, these allocated expenses were
$8.2 million and $8.6 million, respectively.

The Allergan retirement plans and other post-retirement benefit
plans, which primarily provide medical benefits, historically
have covered all Allergan employees. We have included in our
unaudited condensed combined financial statements allocations for expenses
attributable to our employees participating in these plans. We
have also included in our unaudited condensed combined financial statements assets
and liabilities associated with foreign plans to the extent that
these plans will be transferred to us.

Our income historically has been included in consolidated income
tax returns filed by Allergan and most of the related income
taxes have been paid by Allergan. Allergan has managed its tax
position for the benefit of its entire portfolio of businesses.
Allergans tax strategies are not necessarily reflective of
the tax strategies that we would have followed or will follow as
a stand-alone company. Our income tax expense has been recorded
as if we filed tax returns separate from Allergan.

Cash and equivalents consist of cash in banks and repurchase
agreements with financial institutions with original maturities
of 90 days or less. We historically have participated in a
centralized cash management program administered by Allergan.
Cash and equivalents include only those amounts that will be
considered part of our operations upon the distribution.

Prior to the distribution, we will enter into several agreements
with Allergan in connection with, among other things,
transitional services, employee matters, manufacturing and tax
sharing. Under the transitional services agreement, Allergan
will provide us, on an interim basis, transitional services such
as facilities subleases, research and development services,
retail channel support and general and administrative services.
In addition, under the transitional services agreement we will provide certain limited transitional services to
Allergan on an interim basis. Such services include facilities
subleases, retail channel support, and certain general and
administrative services.

The transitional services agreement will set forth charges
generally intended to allow Allergan to fully recover the
allocated costs of providing the services, plus all
out-of-pocket costs and expenses, except that we will pay to
Allergan a commission related to our products that are sold by
them during the transition period. We will recover costs from
Allergan in a similar manner for services provided by us. Access
to research and

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development facilities will be provided to us for up to three
years following the distribution. With limited exceptions, we do
not expect that the other transitional services will extend
beyond the 12-month period following the distribution. We cannot
assure you that the costs we incur under the transitional
services agreement will be equal to or less than the costs of
providing these services internally.


Under the manufacturing agreement, Allergan will manufacture
certain contact lens care products and VITRAX for a period of up
to three years from the date of the distribution. We plan to
purchase these products from Allergan at a price equal to
Allergans fully allocated costs plus 10%. If we are unable
to either build or obtain regulatory approval for new facilities
or locate and obtain regulatory approval for third party
manufacturers to produce our products at the end of this
three-year period, our business may be harmed.

The tax sharing agreement will govern Allergans and our
respective rights, responsibilities and obligations after the
distribution with respect to taxes for any tax period ending
before, on or after the distribution. Generally, Allergan will
be liable for all pre-distribution taxes attributable to its
business, and we will indemnify Allergan for all
pre-distribution taxes attributable to our business for the
current taxable year. In addition, the tax sharing agreement
will provide that Allergan will generally be liable for taxes
that are incurred as a result of restructuring activities
related to the distribution.

We and Allergan have made representations to each other and to
the Internal Revenue Service in connection with the private
letter ruling that Allergan has received regarding the tax-free
nature of the distribution of our common stock by Allergan to
its stockholders. If either we or Allergan breach our
representations to each other or to the Internal Revenue
Service, or if we or Allergan take or fail to take, as the case
may be, actions that result in the distribution failing to meet
the requirements of a tax-free distribution pursuant to
Section 355 of the Internal Revenue Code, the party in
breach will indemnify the other party for any and all resulting
taxes.

Revenue Recognition

We recognize revenue from product sales when the goods are
shipped and title and risk of loss transfer to the customer
(F.O.B. shipping point), with the exception of
intraocular lenses, which are distributed on a consignment basis
and recognized as revenue upon implantation in a patient. We
generally permit returns of product from any product line by any
class of customer if the product is returned in a timely manner,
in good condition, and through the normal channels of
distribution. Return policies in certain international markets
can be more stringent and are based on the terms of contractual
agreements with customers. Allowances for returns are provided
for based upon an analysis of our historical patterns of returns
matched against the sales from which they originated.
Historically product returns have been within the amounts
reserved.

Results of Operations

Net Sales. The following table compares net sales by
product line for the three month periods ended March 29,
2002 and March 30, 2001:

|                               |  |                    |         |           |  |   |         |  
|------------------------------ |  | ------------------ | ------- | --------- |  | - | ------- | -
|                               |  |                   
|                               |  | Three Months Ended
|                               |  |                   
|                               |  | March 29,          |         | March 30,
|                               |  | 2002               |         | 2001     
|                               |  |                    |         |          
|                               |  |                   
|                               |  | (in thousands)    
|                              
|                              
|                              
|                              
|Ophthalmic surgical            |  | $                  | 57,412  |           |  | $ | 56,693  |  
|                              
|                              
|                              
|                              
|Contact lens care              |  |                    | 56,585  |           |  |   | 64,118  |  
|                               |  |                    |         |           |  |   |         |  
|Total net sales                |  | $                  | 113,997 |           |  | $ | 120,811 |  
|                               |  |                    |         |           |  |   |         |  
|U.S.                           |  |                    | 30.6    | %         |  |   | 32.8    | %
|                              
|                              
|                              
|                              
|International (excluding U.S.) |  |                    | 69.4    | %         |  |   | 67.2    | %

Net sales decreased $6.8 million, or 5.6%, to $114.0 million in
the three months ended March 29, 2002 from
$120.8 million in the three months ended March 30,
2001. Foreign currency fluctuations in the three

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months ended March 29, 2002 decreased sales by
$5.8 million, or 4.8%, as compared to average rates in
effect in the three months ended March 30, 2001. At
constant currency rates, sales decreased by $1.0 million,
or 0.8%, in the three months ended March 29, 2002 compared
to the three months ended March 30, 2001. The total
decrease in net sales in the three months ended March 29,
2002 compared to the three months ended March 30, 2001 was
primarily the result of a decrease in sales of contact lens care
products, partially offset by an increase in sales of our
ophthalmic surgical products.


Global sales of our contact lens care products decreased by
$7.5 million, or 11.7% in the three months ended
March 29, 2002 as compared to the three months ended
March 30, 2001. Sales of our contact lens care products in
the United States decreased $5.6 million, or 32.2%, in the
three months ended March 29, 2002 compared to the three
months ended March 30, 2001, primarily due to a decrease in
sales of private-label cold-chemical one-bottle disinfection
systems. International sales of our contact lens care products
decreased $1.9 million, or 4.1%, in the three months ended
March 29, 2002 compared to the three months ended
March 30, 2001 primarily as a result of the weakening of
foreign currencies, primarily the Japanese yen and euro, versus
the dollar, which accounted for $3.5 million of the
decrease in international sales. At constant currency rates,
international contact lens care sales in the three months ended
March 29, 2002 increased $1.6 million, or 3.4%,
primarily attributable to an increase in sales of peroxide-based
disinfection and ancillary products. We expect that our global
sales of contact lens care products will continue to contract as
customers continue to increase their use of lower priced
one-bottle cold-chemical disinfection systems and decrease their
use of peroxide-based disinfection systems. As our mix of
products shifts towards one-bottle disinfection systems, we
expect that this trend will have a diminishing impact on our
sales.

Global sales of our ophthalmic surgical products increased by
$0.7 million, or 1.3% in the three months ended March 29,
2002 compared to the three months ended March 30, 2001. In
the United States, sales of our ophthalmic surgical products
increased $0.9 million, or 4.1%, in the three months ended
March 29, 2002 compared to the three months ended
March 30, 2001, while internationally, sales of our
ophthalmic surgical products decreased $0.2 million or 0.6%
over the same period. Sales in the United States increased
primarily due to an increase in sales of phacoemulsification
equipment. International sales of our ophthalmic surgical
products in the three months ended March 29, 2002 were
negatively affected primarily by the weakening of the Japanese
yen and the euro versus the dollar, which resulted in a
$2.3 million, or 6.7%, unfavorable currency impact. At
constant currency rates, international sales of our ophthalmic
surgical products increased $2.1 million, or 6.1%. This
increase was primarily attributable to sales increases in the
SENSAR acrylic intraocular lens, offset in part by sales
decreases in PMMA intraocular lenses, silicone intraocular
lenses and phacoemulsification equipment. We believe that global
sales of ophthalmic surgical products will continue to grow as
sales for higher margin foldable introacular lenses, most
notably the SENSAR acrylic lens, continue to improve.

Gross Margin. Our gross margin increased as a percent of
net sales by 2.9 percentage points from 58.3% in the three
months ended March 30, 2001 to 61.2% in the three months
ended March 29, 2002. The increase in gross margin as a
percent of net sales in the three months ended March 29,
2002 as compared to the three months ended March 30, 2001
was primarily the result of manufacturing efficiencies and a
change in product sales mix to higher margin surgical products.
Gross margin in dollars declined by $0.8 million to
$69.7 million in the three months ended March 29, 2002
compared to $70.5 million in the three months ended
March 30, 2001, due to the decrease in net sales, partially
offset by the 2.9 percentage point increase in gross margin
percentage.

Selling, general and administrative. Selling, general and
administrative expenses were $54.2 million or 47.5% of net sales
in the three months ended March 29, 2002 compared to
$62.1 million or 51.4% of net sales in the three months
ended March 30, 2001. The decrease in both selling, general
and administrative expense in dollars and as a percent of net
sales was primarily a result of lower selling expenses resulting
from both lower combined net sales as well as cost improvements.
These cost improvements were realized as a result of a
restructuring of our European sales force that was completed in
2001, a reduction in goodwill amortization of $2.2 million
and favorable currency translation due to the weakening of
foreign currencies versus the U.S. dollar in the countries in
which we operate. Beginning in 2002, we no longer amortize
goodwill as required in accordance with SFAS No. 142.

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Research and development. Research and development
expenses decreased by 3.9% to $7.0 million in the three months
ended March 29, 2002 compared to $7.3 million in the
three months ended March 30, 2001. The decrease of
$0.3 million was a result of a decrease in spending for
research efforts in the ophthalmic surgical business, partially
offset by a small increase in research and development spending
for the contact lens care business.

Operating income. Operating income was $8.6 million
or 7.5% of net sales in the three months ended March 29,
2002, an increase of $7.5 million from $1.1 million, or
0.9% of net sales in the three months ended March 30, 2001.
The increase in operating income in the three months ended
March 29, 2002 was primarily the result of the lower
selling, general and administrative expenses, partially offset
by a decrease in gross margin.

Non-operating income and expense. Non-operating expense
was $0.9 million in the three months ended March 29,
2002 compared to income of $0.6 million in the three months
ended March 30, 2001. We recorded an unrealized loss on
derivative instruments of $0.2 million in the three months
ended March 29, 2002 compared to an unrealized gain of
$1.3 million in the three months ended March 30, 2001.
We record as unrealized loss/ (gain) on derivative
instruments the mark to market adjustments on the
outstanding foreign currency options which we enter into, as
part of Allergans overall risk management strategy, to
reduce the volatility of expected earnings in currencies other
than U.S. dollar. Interest expense declined slightly to
$0.7 million in the three months ended March 29, 2002
compared to interest expense of $0.8 million in the three
months ended March 30, 2001 due primarily to a small
decline in outstanding long-term debt balances in the three
months ended March 29, 2002 compared to the three months
ended March 30, 2001.

Income taxes. The effective tax rate for the three months
ended March 29, 2002 was 38.0%, an increase of 10.2
percentage points as compared to the effective tax rate of 27.8%
for the three months ended March 30, 2001. The annual
effective tax rate in 2001 included the recognition of certain
tax benefits associated with the utilization of a net operating
loss carryforward and the realization of other deferred tax
assets in Japan for which we previously had established a
valuation allowance. In 2001, we determined, based solely on our
judgment, that realization of the deferred tax assets had become
more likely than not and accordingly, we reversed
the valuation allowance previously established. We do not
anticipate that our future provision for income taxes will
include tax benefits similar to those we recognized in 2001.
Following the distribution, we believe 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 strategies that we implement, including a determination
of our policy regarding repatriation of future accumulated
foreign earnings.

Net earnings. Net earnings for the three months ended
March 29, 2002 were $4.7 million compared to
$0.8 million in the three months ended March 30, 2001.
The $3.9 million increase in net earnings for the three
months ended March 29, 2002 is primarily the result of the
$7.5 million increase in operating income partially offset
by the increase in non-operating expense and the increase in the
provision for income taxes. Net earnings for the three months
ended March 30, 2001 included a $0.4 million after-tax
loss related to the adoption of SFAS No. 133 
Accounting for Derivative Instruments and Hedging
Activities.

New Accounting Standards

In July 2001, Statement of Financial Accounting Standards
No. 141, Business Combinations (SFAS
No. 141), was issued. SFAS No. 141 requires that the
purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all
purchase method combinations completed after June 30, 2001.
SFAS No. 141 also requires that we evaluate our existing
intangible assets and goodwill that were acquired in prior
business combinations, and to make any necessary
reclassifications in order to conform with the new criteria in
SFAS No. 141 for recognition of intangibles apart from
goodwill.

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Additionally, in July 2001 Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142), was issued and is effective
for all fiscal years beginning after December 15, 2001
(January 1, 2002 for us). SFAS No. 142 establishes
accounting and reporting standards for intangible assets. SFAS
No. 142 requires that goodwill and intangible assets with
indefinite useful lives be evaluated annually for impairment
rather than amortized. Upon adoption of SFAS No. 142, we
will also be required to test goodwill and intangible assets
with indefinite useful lives for impairment within the first
interim period with any impairment loss being recognized as a
cumulative effect of a change in accounting principle.

In connection with the transitional goodwill impairment
evaluation, SFAS No. 142 requires us to perform an
assessment of whether there is an indication that goodwill and
intangible assets with indefinite useful lives are impaired as
of the date of adoption. To accomplish this, we must identify
our reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those
reporting units as of the date of adoption. We have up to six
months from the date of adoption to determine the fair value of
each reporting unit and compare it to the reporting units
carrying amount. To the extent a reporting units carrying
amount exceeds its fair value, an indication exists that the
reporting units goodwill may be impaired.

We adopted the provisions of SFAS No. 141 on June 30,
2001 and SFAS No. 142 on January 1, 2002 effective
with Allergans adoption of the new accounting standards.
Allergans adoption of SFAS No. 142 did not result in
a negative impact on Allergans consolidated financial
statements. After the spin-off is completed, we will be required
to complete a separate assessment of goodwill and intangibles on
a stand-alone basis. We do not expect that this separate
assessment will have a negative effect on our combined financial
statements. As of March 29, 2002, we had unamortized
goodwill in the amount of $100.1 million. Amortization
expense related to goodwill was $0 and $2.2 million for
the three months ended March 29, 2002 and March 30, 2001,
respectively.

In October 2001, Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144), was
issued. SFAS No. 144 supersedes Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting
and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations  Reporting
the effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business.
SFAS No. 144 retains the requirement in Opinion No. 30
to report separately discontinued operations and extends that
reporting to a component of an entity that either has been
disposed of or is classified as held for sale. We adopted the
provisions of SFAS No. 144 in the quarter ended
March 29, 2002. The adoption of SFAS No. 144 did not
have a material impact on our combined financial statements.

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Part II  OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits   Reference is hereby made to the Exhibit Index
commencing on page 20.
| | --- |  | --------------------------------------------------------------------------------
|
| | (b) |  | Reports on Form 8-K  None                                                      

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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.



| | ADVANCED MEDICAL OPTICS, INC
      (Registrant)
| | -----------------------------------------------





|Date: June 21, 2002 | /s/ Robert F. Gallagher

Robert F. Gallagher
(Principal Accounting Officer)
|------------------- | ---------------------------------------------------------------------------

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EXHIBIT INDEX

|            |  |                                                                                                                                                                                                 | 
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|            |  |                                                                                                                                                                                                
|Exhibit No. |  | Description                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                
|10.5        |  | Consent to Sublease and Second
        Amendment to Lease, dated May 24, 2002, by and among Andrew Place
        Two LLC as landlord, Ingram Micro Inc. as tenant and the
Company as subtenant.
|            |  |                                                                                                                                                                                                 | 
|10.6        |  | Sublease
Agreement dated May 24, 2002,
        between the Company and Ingram Micro Inc. for the premises located at
        1700 East St. Andrew Place, Santa Ana, California, 92705.         

20