Advanced Medical Optics (EYE)

“We are implementing a product rationalization and repositioning plan, which will require significant financial and personnel resources and may not be successful.”

As of September 29, 2006, we have incurred approximately $103.8 million in cumulative charges under the product

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rationalization and repositioning plan.  We expect to incur additional charges of approximately $1.2 million in the fourth quarter of 2006 in connection with the consolidation of our IOL manufacturing capabilities which represents the final remaining action under the plan.

Certain foreign jurisdictions have laws and regulations which require consultations and negotiations with works councils, labor organizations and local authorities. The outcome of these discussions will determine, in part, the restructuring steps to be implemented and the associated cost. Therefore, the final costs of the business repositioning plan may be different from our initial estimates.

We also experienced decreases in net sales from product rationalization under the plan of approximately $27.7 million for the nine months ended September 29,2006.  Lost sales of discontinued products may not be sufficiently offset by sales from promoted or new products, which could decrease our net sales, margins and cash flows. 

We are implementing a product rationalization and repositioning plan, which will require significant financial and personnel resources and may not be successful.

On October 31, 2005, our Board of Directors approved a product rationalization and repositioning plan covering the discontinuation of non-strategic cataract surgical and eye care products and the elimination or redeployment of resources that support these product lines. The plan includes organizational changes and potential reductions in force in manufacturing, sales and marketing associated with these product lines, as well as organizational changes in research and development and other corporate functions designed to align the organization with our strategy and strategic business unit organization. The plan further calls for increasing our investment in key growth opportunities, specifically our refractive implant product line and international laser vision correction business, and accelerating the implementation of productivity initiatives.

We expect that implementation of the product rationalization and repositioning plan will result in significant pre-tax charges, a substantial portion of which are expected to be cash expenditures. In addition, because we are in the preliminary stages of effectuating the plan and are subject to laws and regulations of several foreign jurisdictions that will require consultations and negotiations with works councils, labor organizations and local authorities the effects of which we can not yet fully evaluate, the final costs of the plan may vary significantly from our initial estimates. Implementation of the plan also will require substantial

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