Full Press Release Details
6331 H nenberg, Switzerland
Alcon Reports Strong
Second Quarter and Six Month 2003 Results
o Second Quarter Global
Sales Increased 14.3%
o Second Quarter Net Earnings Rose 9.5%
H NENBERG, Switzerland, July 30,
2003. Alcon, Inc. (NYSE: ACL) reported sales of $925.4 million for the second quarter of
2003, an increase of 14.3 percent over sales in the second quarter of 2002, or 10.1
percent excluding the impact of foreign exchange fluctuations. Net earnings for the second
quarter of 2003 increased 9.5 percent to $178.2 million, or $0.57 per share on a diluted
basis, compared to $162.8 million, or $0.53 per share, for the second quarter of 2002.
the second quarter of 2002, Alcon had the temporary use of the cash proceeds raised in its
initial public offering for about 50 days before repurchasing preferred stock owned by its
majority owner, Nestle, S.A. As a result, net interest expense was reduced by
approximately $9.5 million ($6.4 million after-tax) in the second quarter of 2002. Without
this non-recurring impact, Alcon s proforma net earnings for the second quarter of
2002 would have been $156.4 million. On this basis, net earnings for the second quarter of
2003 would have been 13.9 percent above proforma net earnings for the second quarter of
2002. For a more detailed explanation of non-recurring items, see the Impact of
Non-Recurring Items section of this press release.
the first six months of 2003, Alcon reported global sales of $1,732.5 million, an increase
of 14.3 percent over sales of $1,516.0 million for the first six months of 2002, or 10.3
percent excluding the impact of foreign exchange fluctuations. Net earnings for the first
six months of 2003 increased 20.1 percent to $308.4 million, or $1.00 per share on a
diluted basis, compared to $256.8 million, or $0.87 per share, for the first half of 2002.
the first half of 2002, in addition to the $9.5 million ($6.4 million after-tax)
non-recurring reduction of net interest expense referenced above, Alcon also incurred a
one-time charge of $22.6 million ($14.2 million after-tax) related to the conversion of a
deferred compensation plan to restricted stock at the time of the initial public offering.
Without these non-recurring items, pro-forma net earnings for the first half of 2002 would
have been $264.6 million, or $0.89 per share on a diluted basis. On this basis, net
earnings for the first half of 2003 would have been 16.6 percent above pro-forma net
earnings for the first half of 2002. For a more detailed explanation of these
non-recurring items, see the Impact of Non-Recurring Items section of this
profit for the second quarter of 2003 was $658.3 million, or 71.1 percent of sales,
compared to $575.0 million, or 71.0 percent of sales, in the prior year period. For the
first six months of 2003, gross profit was $1,212.1 million, or 70.0 percent of sales,
compared to $1,071.1 million, or 70.7 percent of sales for the first six months of 2002.
Gross profit margin for the first six months of 2003 was lower than in 2002 because of
variations in geographical and product sales mix and startup costs for the Infiniti
vision system and LADARWave diagnostic device.
General and Administrative expenses were $291.1 million, or 31.5 percent of sales, for the
second quarter of 2003, compared to $246.8 million, or 30.5 percent of sales, for the
second quarter of 2002. SG&A expenses, as a percent of sales, were higher in the
second quarter of 2003 than in the second quarter of 2002 mainly because of promotional
costs related to the launch activities of several new products, including the
Infiniti vision system, Opatanol ophthalmic solution, Vigamox ophthalmic
solution and the LADARWave diagnostic device and higher advertising expenditures. For
the first six months of 2003, SG&A expenses were $555.3 million, or 32.1 percent of
sales, versus $499.2 million, or 32.9 percent of sales, for the first half of 2002. The
second quarter and first half of 2003 included the impact of the company s expanded
pharmaceutical sales force in the United States, whereas those periods in 2002 did not
include the costs of the larger sales force.
and development expenses were $89.3 million (9.6 percent of sales) in the second quarter
of 2003, a 20.4 percent increase over $74.2 million (9.2 percent of sales) for the second
quarter of 2002. For the first six months of 2003, R&D expenses were $167.5 million
(9.7 percent of sales), a 12.0 percent increase over $149.5 million (9.9 percent of sales)
for the first half of 2002. R&D expenses for the second quarter and first half of 2003
reflect timing differences of certain projects between the first half of 2003 and 2002, as
well as higher costs of ongoing and new research projects and clinical studies, especially
those in the area of age-related macular degeneration.
effective tax rate was 30.4 percent for the second quarter and first half of 2003,
compared to 31.1 percent for the full year 2002. The declining effective tax rate is the
result of a more favorable mix of income earned in the company s various taxing
jurisdictions, along with an increase in foreign sales corporation tax benefits and
certain tax credits.
Sear, Chairman, President and Chief Executive Officer of Alcon, commented, We had an
excellent quarter and first half of 2003, especially because we felt the same periods in
2002 were very healthy in terms of both top and bottom line growth. As important as our
positive financial results are, we believe the key to our growth going forward is the
ability to bring new products to the market. I am happy to say that the first half of this
year has been a banner period for us, with the unveiling of the Infiniti vision
system for cataracts at the American Society of Cataract and Refractive Surgery Annual
Symposium and launches of the LADARVision CustomCornea refractive surgical
system, Vigamox ophthalmic solution for eye infections and Systane dry eye
therapy. On June 24, we received approval from the U.S. Food and Drug Administration (FDA)
of our AcrySof Natural blue light filtering intraocular lens for cataract surgery,
and just a few days ago we received FDA approval of CIPRODEX* Otic solution for both
middle ear infections in children with ear tubes and outer ear infections. We are proud of
this portfolio of exciting new products, which we expect will support our sales growth for
the balance of the year and into 2004.
the full year 2003, the Company expects sales to be in the range of $3,360 to $3,390
million and diluted earnings per share to be in the range of $1.85 to $1.90. Because of
the timing of new product launches, management expects sales to be slightly higher in the
fourth quarter than in the third quarter.
Pharmaceutical Product
quarter 2003 pharmaceutical sales totaled $392.2 million, a 25.4 percent increase over
pharmaceutical sales of $312.7 million in the second quarter of 2002, or 22.4 percent
excluding the impact of foreign exchange fluctuations. For the first six months of 2003,
pharmaceutical sales totaled $694.8 million, a 23.9 percent increase over pharmaceutical
sales of $561.0 million in the first half of 2002, or 21.4 percent excluding the impact of
foreign exchange fluctuations. Market share gains and exceptionally strong sales growth of
seasonal allergy and otic products contributed to the overall growth of pharmaceutical
sales in the second quarter and first half of 2003.
sales of glaucoma products in the second quarter of 2003 rose to $106.3 million, 18.6
percent over the second quarter of 2002. Sales of Travatan ophthalmic solution were
$32.3 million for the second quarter of 2003, compared to $19.1 million for the second
quarter of 2002. Travatan solution sales for the first six months of 2003 were $61.9
million, compared to $30.7 million for the first six months of 2002.