Full Press Release Details
6331 H nenberg, Switzerland
Alcon's First Quarter Net Earnings
Rose 38.5% on 14.2% Sales Increase
HUNENBERG, Switzerland - April 22, 2003 - Alcon, Inc. (NYSE: ACL) reported global sales of $807.1 million for the first quarter of 2003, an increase of 14.2 percent over global sales in the first quarter of 2002, or 10.5 percent excluding the impact of foreign exchange fluctuations. Net earnings for the first quarter of 2003 increased 38.5 percent to $130.2 million, or $0.42 per share on a diluted basis, compared to $94.0 million, or $0.33 per share on a diluted basis for the first quarter of 2002.
At the time of its initial public offering in March 2002, Alcon permitted employees to convert their balances in a pre-existing employee deferred compensation plan into new restricted common shares with stock options. This conversion resulted in the issuance of approximately 2.2 million restricted shares and a one-time, after-tax charge to net earnings of $14.2 million in the first quarter of 2002. Adjusting for this non-recurring charge, Alcon's proforma net earnings for the first quarter of 2002 would have been $108.2 million. Net earnings for the first quarter of 2003 would have increased 20.3 percent compared to first quarter 2002 proforma net earnings.
Gross profit for the first quarter of 2003 was $553.8 million, or 68.6 percent of sales, compared to $496.1 million, or 70.2 percent of sales, in the prior year period. Gross profit margin declined mainly due to variations in geographical and product sales mix, startup costs for the INFINITI Vision System and LADARWAVE Diagnostic Device and the impact of currency fluctuations on cost of goods sold as product flows through internal distribution channels.
Selling, General and Administrative expenses were $264.2 million, or 32.7 percent of sales, for the first quarter of 2003, compared to $252.4 million, or 35.7 percent of sales, for the first quarter of 2002. SG&A expenses in the first quarter of 2003 included costs associated with an increase in the U.S. pharmaceutical sales force, while the previous year's first quarter included no costs related to this expansion. After adjusting first quarter 2002 SG&A expenses for $12.6 million of the total pre-tax charge associated with changes to an employee deferred compensation plan, SG&A expenses as a percent of sales in the first quarter of 2003 declined 1.2 percentage points. This occurred because Alcon continued to take advantage of operating efficiencies gained from its established global infrastructure.
Research and development expenses were $78.2 million in the first quarter of 2003, a 3.9 percent increase over $75.3 million for the first quarter of 2002. On a proforma basis R&D expenses would have increased 13.8 percent quarter-over-quarter, after adjusting the first quarter of 2002 for $6.6 million of the total pre-tax charge associated with changes to an employee deferred compensation plan.
Alcon's effective tax rate was 30.4 percent in the first quarter of 2003, compared to 33.0 percent in the first quarter of 2002 and 31.1 percent for the full year 2002. The continuing decline in the effective tax rate is primarily attributable to tax settlements and a greater proportion of income earned in lower tax rate jurisdictions.
For the full year 2003, the Company expects its sales to be at the high end of the previously given range of $3,270 to $3,300 million and retains its guidance for diluted earnings per share of $1.82 to $1.85.
As previously reported, at the Company's Annual General Meeting, to be held on May 20, 2003 at the Congress Center Metalli, Parkhotel Zug, Zug, Switzerland, Alcon's Board of Directors will submit to shareholders a proposal to pay a dividend equal to 0.45 Swiss franc per share (approximately $0.33 per share at current exchange rates). If approved, dividends will be paid on or about June 4, 2003 to all shareholders of record as of May 23, 2003.
Pharmaceutical Product Line
First quarter 2003 pharmaceutical sales totaled $302.6 million, a 21.9 percent increase over pharmaceutical sales of $248.3 million in the first quarter of 2002, or 20.1 percent excluding the impact of foreign exchange fluctuations.
Total sales of glaucoma products in the first quarter of 2003 rose to $101.6 million, 26.5 percent over the first quarter of 2002. Sales of TRAVATAN Ophthalmic Solution were $29.6 million for the first quarter of 2003, compared to $11.6 million for the first quarter of 2002, an increase of 155.2 percent. First quarter 2003 sales of glaucoma products benefited from steady global market share gains for TRAVATAN and the December, 2002 launch of AZOPT Ophthalmic Suspension in Japan.
Sales of ocular infection/inflammation therapies grew 16.1 percent to $126.1 million in the first quarter of 2003 compared to the prior year period. Sales of otic products, primarily used to treat ear infections, reached $21.9 million, 58.7 percent ahead of sales of these products in the first quarter of 2002.
Allergy products posted record first quarter sales of $56.6 million in 2003, an 18.4 percent increase over sales for the first quarter of 2002. This performance primarily reflects increased sales of PATANOL Ophthalmic Solution that resulted from market share gains and category growth arising from the increased use of topical medications to treat ocular allergies.
Surgical Product Line
First quarter 2003 surgical sales totaled $376.9 million, an 11.7 percent increase over surgical sales of $337.4 million in the first quarter of 2002, or 5.7 percent excluding the impact of foreign exchange fluctuations. The refractive business continued to have a negative impact on surgical sales, primarily due to weak global economic conditions and consumer confidence, both of which reduced demand for this elective procedure.
First quarter sales of intraocular lenses were $117.6 million, a 15.7 percent increase over intraocular lens sales in the first quarter of 2002. Sales of cataract and vitrectomy equipment and related disposable products were $240.8 million in the first quarter of 2003, 11.5 percent above sales of these products in the previous year's first quarter. Refractive revenues were $18.5 million for the first quarter of 2003, 6.6 percent below refractive revenues for the first quarter of 2002. Fewer unit sales of LADARVISION 4000 Lasers, along with a small decline in procedural revenues, were the major causes of the quarter-over-quarter decline in this segment.
First quarter 2003 consumer eye care sales were $127.6 million, a 5.6 percent increase over first quarter 2002 sales of $120.8 million, or 4.1 percent excluding the impact of foreign exchange fluctuations.
Sales of contact lens disinfectants decreased 0.4 percent in the first quarter of 2003 to $70.1 million compared to the first quarter of 2002. While overall sales of contact lens disinfectants declined, OPTI-FREE EXPRESS Multi-Purpose Disinfecting Solution maintained its soft lens disinfectant market leadership in the United States during the first quarter of 2003. During this period, Alcon commenced a consumer advertising program for OPTI-FREE EXPRESS to communicate its new "Lasting Comfort" labeling, which received approval from the U.S. Food and Drug Administration (FDA) in late 2002. Clinical studies have shown that the unique formula of this product is more comfortable throughout the day than other contact lens solutions.
Alcon's sales of artificial tears and dry eye products grew 17.4 percent to $28.4 million in the first quarter of 2003 compared to the prior year period. The Company's U.S. launch of a new dry eye therapy, SYSTANETM Lubricant Eye Drops, which Alcon began distributing in February 2003, was the primary contributor to this growth. SYSTANETM has been clinically proven to reduce both the signs and symptoms of dry eye better than the leading artificial tear product in the U.S. today.
Other Selected Financial Information
Alcon reported cash and cash equivalents of $919.0 million, total debt of $1,716.6 million and consolidated shareholders' equity of $1,132.5 million at March 31, 2003. As a result of strong cash flow generation in the first quarter of 2003, Alcon reduced its net debt balance (total debt minus cash and cash equivalents) by $111.2 million during the quarter to $797.6 million, improving the net debt-to-total capital ratio to 41 percent at March 31, 2003 from 48 percent at the end of 2002.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(in millions, except share and per share data)
| Three months ended | ||||
| March 31, | ||||
| 2003 | 2002 | |||
| Sales | $ | 807.1 | $ | 706.5 |
| Cost of goods sold | 253.3 | 210.4 | ||
| Gross profit | 553.8 | 496.1 | ||
| Selling, general and administrative | 264.2 | 252.4 | ||
| Research and development | 78.2 | 75.3 | ||
| Amortization of intangibles | 17.0 | 16.8 | ||
| Operating income | 194.4 | 151.6 | ||
| Other income (expense): | ||||
| Gain (loss) from foreign | ||||
| currency, net | (0.1) | (0.1) | ||
| Interest income | 4.5 | 6.8 | ||
| Interest expense | (11.7) | (19.3) | ||
| Other | -- | 1.2 | ||
| Earnings before income | 187.1 | 140.2 | ||
| taxes | ||||
| Income taxes | 56.9 | 46.2 | ||
| Net earnings | $ | 130.2 | $ | 94.0 |
| Basic earnings per common share | $ | 0.42 | $ | 0.33 |
| Diluted earnings per common share | $ | 0.42 | $ | 0.33 |
| Basic weighted average common shares | 307,907,316 | 282,536,066 | ||||||
| Diluted weighted average common shares | 309,377,002 | 282,698,780 |
ALCON, INC. AND SUBSIDIARIES
| Three months ended March 31, | ||||
| (USD in millions) | 2003 | 2002 | ||
| Infection/Inflammation Products | $ | 126.1 | $ | 108.6 |
| Glaucoma Products | 101.6 | 80.3 | ||
| Allergy Products | 56.6 | 47.8 | ||
| Otic Products | 21.9 | 13.8 | ||
| Other Pharmaceuticals/Rebates | (3.6) | (2.2) | ||
| TOTAL PHARMACEUTICALS | 302.6 | 248.3 | ||
| IOLs | 117.6 | 101.6 | ||
| Cat/Vit Products | 240.8 | 216.0 | ||
| Refractive Products | 18.5 | 19.8 | ||
| TOTAL SURGICAL | 376.9 | 337.4 | ||
| Contact Lens Disinfectants | 70.1 | 70.4 | ||
| Artificial Tears | 28.4 | 24.2 | ||
| Other | 29.1 | 26.2 | ||
| TOTAL CONSUMER EYE CARE | 127.6 | 120.8 | ||
| TOTAL SALES | $ | 807.1 | $ | 706.5 |
| GEOGRAPHIC SALES: | ||||
| United States | $ | 426.5 | $ | 386.3 |
| International | 380.6 | 320.2 | ||
| TOTAL SALES | $ | 807.1 | $ | 706.5 |
Note: Certain reclassifications have been made to prior year amounts to conform with the current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| March 31, | December 31, | |||
| 2003 | 2002 | |||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 919.0 | $ 967.9 | ||
| Investments | 90.7 | 66.3 | ||
| Trade receivables, net | 619.0 | 547.5 | ||
| Inventories | 411.1 | 412.3 | ||
| Deferred income tax assets | 128.7 | 128.7 | ||
| Other current assets | 75.9 | 88.2 | ||
| Total current assets | 2,244.4 | 2,210.9 | ||
| Property, plant and equipment, net | 682.9 | 679.1 | ||
| Intangible assets, net | 376.1 | 392.8 | ||
| Goodwill | 551.2 | 549.8 | ||
| Long term deferred income tax assets | 109.2 | 90.1 | ||
| Other assets | 49.8 | 47.1 | ||
| Total assets | $ 4,013.6 | $ 3,969.8 | ||
| Liabilities and Shareholders' Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ 118.4 | $ 117.0 | ||
| Short term borrowings | 1,621.4 | 1,772.8 | ||
| Current maturities of long term debt | 22.7 | 23.1 | ||
| Other current liabilities | 700.6 | 659.4 | ||
| Total current liabilities | 2,463.1 | 2,572.3 | ||
| Long term debt, net of current maturities | 72.5 | 80.8 | ||
| Long term deferred income tax liabilities | 86.1 | 85.8 | ||
| Other long term liabilities | 259.4 | 256.6 | ||
| Contingencies | ||||
| Shareholders' equity | ||||
| Common shares | 42.5 | 42.5 | ||
| Additional paid-in capital | 508.8 | 508.5 | ||
| Accumulated other comprehensive income/(loss) | 9.5 | (16.4) | ||
| Deferred compensation | (13.3) | (15.2) | ||
| Retained earnings | 593.2 | 463.0 | ||
| Treasury shares, at cost | (8.2) | (8.1) | ||
| Total shareholders' equity | 1,132.5 | 974.3 | ||
| Total liabilities and shareholders' equity | $ 4,013.6 | $ 3,969.8 |
Alcon, Inc. (NYSE: ACL) is the world's leading eye care company. Alcon, which has been dedicated to the ophthalmic industry for more than 50 years, develops, manufactures and markets pharmaceuticals, surgical equipment and devices, contact lens care solutions and other vision care products that treat diseases, disorders and other conditions of the eye.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements principally relate to statements regarding the expectations of our management with respect to the future performance of various aspects of our business. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by our forward-looking statements. Words such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "hope," "intend," "estimate," "project," "predict," "potential" and similar expressions are intended to identify forward-looking statements. These statements reflect the views of our management as of the date of this press release with respect to future events and are based on assumptions and subject to risks and uncertainties and are not intended to give any assurance as to future results. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following: the development of commercially viable products may take longer and cost more than expected; changes in reimbursement procedures by third-party payers; competition may lead to worse than expected financial condition and results of operations; currency exchange rate fluctuations may negatively affect our financial condition and results of operations; pending or future litigation may negatively impact our financial condition and results of operations; litigation settlements may adversely impact our financial condition; product recalls or withdrawals may negatively impact our financial condition or results of operations; government regulation or legislation may negatively impact our financial condition or results of operations; changes in tax laws or regulations in the jurisdictions in which we and our subsidiaries are subject to taxation may adversely impact our financial performance; supply and manufacturing disruptions could negatively impact our financial condition or results of operations. You should read this press release with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the Securities and Exchange Commission, we undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.
For information, contact:
Doug MacHatton (Alcon Investor Relations)
Mary Dulle (Alcon Public Relations)