Advanced Medical Optics (EYE)

GAAP to Non-GAAP Reconciliation

Our disclosure of gross profit margin, operating income, operating margin, net earnings (loss) and net earnings (loss) per share for the quarter and year ended December 31, 2004 and our disclosure of net earnings and net earnings per share for the quarter and year ended December 31, 2003 contained herein was prepared in accordance with GAAP and is accompanied by disclosures that are not prepared in conformity with GAAP. These non-GAAP disclosures are adjusted for certain non-GAAP adjustments contained in the GAAP presentations. Management uses each of adjusted gross profit margin, operating income, operating margin, net earnings and net earnings per share to conduct a more meaningful, consistent comparison of the company’s operating results for the periods presented on a basis consistent with management’s means of evaluating operating performance, and to provide investors additional information that allows them to reasonably set their own expectations as to the future performance of the Company and also to determine how the Company’s current performance compared to their own expectations. Additionally, adjusted gross profit margin, operating income, operating margin and earnings are the primary indicators management uses for planning and forecasting in future periods. The acquisition-related non-GAAP adjustments (manufacturing profit capitalized and expensed, distributor termination, severance and in-process research and development) and the related recapitalization and debt retirement non-GAAP adjustments are specifically related to the Company’s acquisition of the Pfizer business and, as they relate to the Pfizer acquisition, are not expected to recur. Due to the uncertainty regarding the timing of completion of any potential acquisition/merger, or whether any potential acquisition/merger would be completed at all, management does not include potential merger and acquisition activity in its annual budgeting process. Items impacting the timing and/or completion of merger and acquisition activity may include, but are not limited to: length and success of negotiations between the parties, shareholder approval, regulatory approval and availability of financing at acceptable rates. The non-GAAP disclosures and the non-GAAP adjustments including the basis for excluding such adjustments and the impact on our operations, are outlined below:

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Adjusted Net Sales: Adjusted net sales does not include any non-GAAP adjustments and is equivalent to reported GAAP net sales and is presented to provide investors perspective in relation to the remaining non-GAAP disclosures.

Manufacturing Profit Capitalized and Expensed and Impact on Adjusted Cost of Sales, Adjusted Gross Profit and Adjusted Gross Profit Margin: The Company incurred manufacturing profit capitalized in inventory and expensed during 2004 as a result of purchase accounting applied to the acquisition of the Pfizer ophthalmic surgical business. The effect of this amount was an increase to cost of sales and a reduction of the Company’s gross profit margin. The amount was excluded from the non-GAAP cost of sales, gross profit and gross profit margin as it related solely to the acquisition of the Pfizer products. In evaluating the overall operating cost of sales, gross profit and gross profit margin performance, management excluded this item as it was not reflective of the cost of sales, gross profit and gross profit margin expected in the future nor did it provide a meaningful evaluation of current versus past performance. The adjusted cost of sales, gross profit and gross profit margin provides investors a more meaningful comparison of the historical cost of sales, gross profit and gross profit margin to their internally developed expectations for the Company. Given the unusual nature of the manufacturing profit capitalized and expensed relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

Distributor Termination and Severance and Impact on Selling, General and Administrative: The Company incurred a charge to terminate a distributor contract following the decision to move to a direct sales model in Belgium as a result of the acquisition of the Pfizer ophthalmic surgical business. As a direct result of the Pfizer acquisition, the Company terminated the distributor contract in Belgium. This had the effect of increasing the selling expenses in 2004. In management’s evaluation of the ongoing business performance, this item was not included as the Company was unable to accurately budget for the charge due to the inherent uncertainty regarding completion of the acquisition. Management believes this adjustment to selling, general and administrative and operating income is useful to investors because this cost was also not indicative of the level of selling costs to be incurred in fiscal year 2005. Accordingly, the amount was excluded in order to enable investors to evaluate the current performance compared to the past, which would then assist investors in their evaluation of the past performance as well as assist in the development of future expectations. Given the unusual nature of the distributor termination charge relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

The Company incurred a charge related to severance paid to certain AMO employees upon completion of the Pfizer acquisition. As a direct result of the Pfizer acquisition, the Company terminated certain AMO employees that were made redundant. This had the effect of increasing the selling expenses in 2004. In management’s evaluation of the business performance, this item was not included in operating income as the Company was unable to accurately budget for the charge due to the inherent uncertainty regarding completion of the acquisition. Management believes this adjustment to selling, general and administrative and operating income is useful to investors because this cost was also not indicative of the level of selling costs to be incurred in fiscal year 2005. Accordingly, the amount was excluded in order to evaluate the current performance compared to the past, which would then assist investors in their evaluation of the past performance as well as assist in the development of future expectations. Given the unusual nature of the severance charge relative to the operating results for the period presented, this expense has been excluded from the non-GAAP disclosure.

Adjusted Research and Development and In-process R&D: The Company incurred a charge associated with in-process R&D expenses as a result of purchase accounting applied to the acquisition of the Pfizer ophthalmic surgical business. The in-process research and development charge was excluded from the 2004 results as it represents an amount that was not budgeted or forecasted as part of the Company’s operating results and was directly related to the Pfizer acquisition. Due to the method of determining this amount, it is not possible for the Company to predict such an amount when preparing the annual budget upon which to evaluate its results. Management believes this adjustment to research and development operating income is useful to investors because otherwise the GAAP measure is not an amount that is indicative of the Company’s current research and development spending and excluding this item assists investors in evaluating actual research and development spending as well as assist in the development of future expectations. Given the unusual nature of this item relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

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Adjusted Operating Income and Operating Margin: Adjusted operating income and adjusted operating margin excludes the non-GAAP adjustments discussed above. Management uses adjusted operating income and adjusted operating margin to conduct a more meaningful, consistent comparison of the company’s operating results for the periods presented on a basis consistent with management’s means of evaluating operating performance, and to provide investors a more meaningful comparison of the historical operating income and operating margin to their internally developed expectations for the Company.

Recapitalization and Debt Retirement and Impact on Adjusted Interest and Adjusted Other, Net: The Company incurred net charges and costs associated with the prepayment of a Japan term loan, prepayment of $55.0 million of the Term B loan, repurchase of $70.0 million of 9.25 percent senior subordinated notes and the exchange for stock and cash of approximately $131.4 million in aggregate principal amount of its 3.5 percent convertible senior subordinated notes in 2004 and charges and costs associated with the prepayment of a term loan and the repurchase of $130.0 million of 9.25 percent senior subordinated notes in June 2003. In order to effect the acquisition of the Pfizer ophthalmic surgical business, the Company underwent a recapitalization of its capital structure. This resulted in significant cash and non-cash charges to expense that were not forecasted in management’s preparation of its budget and forecasts.

The non-GAAP adjustment to interest expense for the fourth quarter of 2004 is comprised of a charge of $1.3 million for the pro-rata write-off of debt issuance costs. The non-GAAP adjustment to interest expense for the full year 2004 is comprised of a charge of $9.7 million for the pro-rata write-off of debt issuance costs and write-off of original issue discount net of a net realized gain on interest rate swaps of $3.2 million. The non-GAAP adjustment to interest expense for the full year 2003 is comprised of a charge of $7.8 million for the pro-rata write-off of debt issuance costs and write-off of original issue discount net of a net realized gain on interest rate swaps of $2.0 million.

The non-GAAP adjustment to other, net for the fourth quarter of 2004 is comprised of $1.0 million non-cash charge related to convertible note exchanges. The non-GAAP adjustment to other, net for the full year 2004 is comprised of a non-cash charge of $111.7 million and a cash charge of $4.6 million related to convertible note exchanges, an aggregate premium of $10.8 million paid for the repurchase of 9.25 percent senior subordinated notes and early debt extinguishment costs and fees of $0.1 million. The non-GAAP adjustment for the full year 2003 is comprised of an aggregate premium of $19.4 million paid for the partial repurchase of 9.25 percent senior subordinated notes net of a foreign currency gain of $2.7 million resulting from the settlement of certain intercompany notes and related transfer of cash utilized to repurchase the notes and prepayment of a term loan.

The Company believes these adjustments to interest expense and other, net are useful to investors because these charges were not indicative of the cost of capital that the Company had previously incurred or were reasonably expected to incur in the future. By excluding these amounts, the Company is able to compare its current and ongoing cost of capital to budgeted and forecasted amounts. This also provides investors a means of evaluating the expectations that they may have developed in evaluating the Company’s annual performance. Given the unusual nature of these expenses relative to the operating results for the period presented, these results have been excluded from the non-GAAP disclosure.

Adjusted Earnings Before Income Taxes: Adjusted earnings before income taxes excludes the pre-tax impact of all the non-GAAP adjustments discussed above. Management uses adjusted earnings before income taxes to conduct a more meaningful, consistent comparison of the company’s operating results for the periods presented on a basis consistent with management’s means of evaluating operating performance, and to provide investors a more meaningful comparison of the historical earnings before income taxes to their internally developed expectations for the Company.

Adjusted Provision for Income Taxes: The adjusted provision for income taxes excludes the related tax impact of all the non-GAAP adjustments discussed above. Management uses the adjusted provision for income taxes to conduct a more meaningful, consistent comparison of the company’s tax rate for the periods presented on a basis consistent with management’s means of evaluating its effective tax rate, and to provide investors a more meaningful comparison of the historical tax rate to their internally developed expected effective tax rate.

Adjusted Net Earnings and Adjusted Net Earnings Per Share: Adjusted net earnings and adjusted net earnings per share excludes the after-tax impact of all the non-GAAP adjustments discussed above. Management uses adjusted net earnings and adjusted net earnings per share to conduct a more meaningful, consistent comparison of the company’s operating results for the periods presented on a basis consistent with management’s means of evaluating operating performance, and to provide investors a more meaningful comparison of the historical net earnings and net earnings per share to their internally developed expectations for the Company.

Our guidance for earnings per share for 2005 and 2006 is provided on a non-GAAP basis. The company’s earnings-per-share guidance excludes any charges associated with the VISX acquisition, option expensing or the unrealized gains or losses on derivative instruments. The company believes this presentation is useful to investors to conduct a more meaningful, consistent comparison of the company’s ongoing operating results. The company is not able to provide a reconciliation of projected adjusted earnings per share to expected reported results due to the unknown effect and potential significance of option expensing, foreign currency fluctuations on the fair value of its currency derivatives and unknown transaction costs.

GAAP to Non-GAAP Reconciliation

Our disclosure of gross profit margin, operating income, operating margin, net earnings (loss) and net earnings (loss) per share for the quarter and year ended December 31, 2004 and our disclosure of net earnings and net earnings per share for the quarter and year ended December 31, 2003 contained in this news release were prepared in accordance with GAAP and is accompanied by disclosures that are not prepared in conformity with GAAP. These non-GAAP disclosures are adjusted for certain non-GAAP adjustments contained in the GAAP presentations. Management uses each of adjusted gross profit margin, operating income, operating margin, net earnings and net earnings per share to conduct a more meaningful, consistent comparison of the company’s operating results for the periods presented on a basis consistent with management’s means of evaluating operating performance, and to provide investors additional information that allows them to reasonably set their own expectations as to the future performance of the Company and also to determine how the Company’s current performance compared to their own expectations. Additionally, adjusted gross profit margin, operating income, operating margin and earnings are the primary indicators management uses for planning and forecasting in future periods. The majority of the non-GAAP adjustments are related to specific events the timing of which are not under the direct control of management’s operating team which limit the Company’s ability to include them in the annual budgeting or forecasting process. The non-GAAP adjustments, and the basis for excluding them, are outlined below:

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AMO Announces Fourth Quarter and Year-End Results – Page 5

Manufacturing Profit Capitalized and Expensed: The Company incurred manufacturing profit capitalized in inventory and expensed during 2004 as a result of purchase accounting applied to the acquisition of the Pfizer ophthalmic surgical business. The effect of this amount was an increase to cost of sales and a reduction of the Company’s gross profit margin. The amount was excluded from the non-GAAP gross profit as it related solely to the acquisition of the Pfizer products. In evaluating the overall operating cost of sales and gross profit performance, management excluded this item as it was not reflective of the gross profit expected in the future nor did it provide a meaningful evaluation of current versus past performance. The adjusted gross profit margin provides investors a more meaningful comparison of the historical gross profit margin to their internally developed expectations for the Company. Given the unusual nature of this item relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

Distributor Termination: The Company incurred a charge to terminate a distributor contract following the decision to move to a direct sales model in Belgium as a result of the acquisition of the Pfizer ophthalmic surgical business. As a direct result of the Pfizer acquisition, the Company terminated the distributor contract in Belgium. This had the effect of increasing the selling expenses in 2004. In management’s evaluation of the business performance, this item was not included as it did not relate to the performance of the individual business units responsible for controlling and monitoring the selling costs. Management believes this adjustment to operating income is useful to investors because this cost was also not indicative of the level of selling costs to be incurred in fiscal year 2005. Accordingly, the amount was excluded in order to enable investors to evaluate the current performance compared to the past, which would then assist investors in their evaluation of the past performance as well as assist in the development of future expectations. Given the unusual nature of this item relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

Severance: The Company incurred a charge related to severance paid to certain AMO employees upon completion of the Pfizer acquisition. As a direct result of the Pfizer acquisition, the Company terminated certain AMO employees that were made redundant. This had the effect of increasing the selling expenses in 2004. In management’s evaluation of the business performance, this item was not included in operating income as it did not relate to the performance of the individual business units responsible for controlling and monitoring the selling costs. Management believes this adjustment to operating income is useful to investors because this cost was also not indicative of the level of selling costs to be incurred in fiscal year 2005. Accordingly, the amount was excluded in order to evaluate the current performance compared to the past, which would then assist investors in their evaluation of the past performance as well as assist in the development of future expectations. Given the unusual nature of this expense relative to the operating results for the period presented, this expense has been excluded from the non-GAAP disclosure.

In-process R&D: The Company incurred a charge associated with in-process R&D expenses as a result of purchase accounting applied to the acquisition of the Pfizer ophthalmic surgical business. The in-process research and development charge was excluded from the 2004 results as it represents an amount that was not budgeted or forecasted as part of the Company’s operating results and was directly related to the Pfizer acquisition. Due to the method of determining this amount, it is not possible for the Company to predict such an amount when preparing annual forecasts upon which to evaluate its results. Management believes this adjustment to operating income is useful to investors because otherwise the GAAP measure is not an amount that is indicative of the Company’s current research and development spending and excluding this item assists investors in evaluating actual research and development spending as well as assist in the development of future expectations. Given the unusual nature of this item relative to the operating results for the period presented, this item has been excluded from the non-GAAP disclosure.

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AMO Announces Fourth Quarter and Year-End Results – Page 6

Recapitalization and Debt Retirement: The Company incurred charges and costs associated with the prepayment of a Japan term loan, prepayment of $55.0 million of the Term B loan and the exchange for stock and cash of approximately $131.4 million in aggregate principal amount of its 3.5 percent convertible senior subordinated notes in 2004 and charges and costs associated with the prepayment of a term loan and the repurchase of $130.0 million of 9.25 percent senior subordinated notes in June 2003. In order to effect the acquisition of the Pfizer ophthalmic surgical business, the Company underwent a recapitalization of its capital structure. This resulted in significant cash and non-cash charges to expense that were not forecasted in management’s preparation of its budget and forecasts. The Company believes these adjustments to net earnings (loss) are useful to investors because these charges were not indicative of the cost of capital that the Company had previously incurred or were reasonably expected to incur in the future. By excluding these amounts, the Company is able to compare its current and ongoing cost of capital to budgeted and forecasted amounts. This also provides investors a means of evaluating the expectations that they may have developed in evaluating the Company’s annual performance. Given the unusual nature of these expenses relative to the operating results for the period presented, these results have been excluded from the non-GAAP disclosure.

Derivative Instruments: The Company recorded an unrealized loss related to foreign currency fluctuations on currency derivatives in 2003 and 2004. Due to the unpredictability of foreign currency fluctuations and the value of future foreign currency derivatives at a point in time, management does not budget or forecast unrealized gains or losses on currency derivatives. This loss was excluded from the non-GAAP disclosure in order to measure and compare the company’s regional and global performance absent the impact of foreign currency fluctuations on currency derivatives due to the unpredictability of foreign currency fluctuations. The Company believes this adjustment to net earnings (loss) is useful to investors because without the adjustment, the impact of foreign currency fluctuations, given its unpredictable nature and inability of the Company to influence it, could distort the Company’s performance.

Our guidance for earnings per share for 2005 and 2006 is provided on a non-GAAP basis. The company’s earnings-per-share guidance excludes any charges associated with the VISX acquisition, option expensing or the unrealized gains or losses on derivative instruments. The company believes this presentation is useful to investors to conduct a more meaningful, consistent comparison of the company’s ongoing operating results. The company is not able to provide a reconciliation of projected adjusted earnings per share to expected reported results due to the unknown effect and potential significance of option expensing, foreign currency fluctuations on the fair value of its currency derivatives and unknown transaction costs.