Full Press Release Details
Alcon s Second Quarter Earnings Rise 67.9 Percent on 12.3 Percent Sales Growth
HUNENBERG, Switzerland July 28, 2004 Alcon,
Inc. (NYSE: ACL) reported global sales of $1,039.2 million for the second quarter of 2004, an increase
of 12.3 percent over global sales in the second quarter of 2003, or 9.9 percent excluding the impact
of foreign exchange fluctuations. Net earnings for the second quarter of 2004 increased 67.9 percent
to $299.2 million, or $0.96 per share on a diluted basis, compared to $178.2 million, or $0.57 per share,
for the second quarter of 2003.
earnings per diluted share in the second quarter of 2004 included an $0.18 per share favorable impact
related to the filing of amended federal income tax returns to claim research and experimentation tax
credits for prior years and to the resolution of several significant tax audit issues. Excluding this
tax benefit, earnings per diluted share for the second quarter of 2004 were $0.78.
Sear, Alcon s Chairman, President and Chief Executive Officer commented, This quarter represents a
milestone for Alcon. It is the first quarter in Alcon s history that we have exceeded $1 billion in
sales. While this accomplishment is partly due to seasonality and currency factors, it also reflects
the tremendous efforts of our entire team of employees at Alcon. Every region of the world and every
major product line contributed to this performance. As previously announced, I will be turning over
my roles as President and Chief Executive Officer to Cary Rayment this October. I have the utmost confidence
that he will lead our company effectively and inspire our people to continued success in the years to
Sales Highlights
Highlights of sales for the second quarter of 2004
are provided below. Unless otherwise noted, all comparisons are versus the second quarter of 2003.
U.S. sales grew 7.6 percent to $549.9 million, accounting for 52.9 percent of total sales.
International sales grew 18.1 percent to $489.3 million, accounting for 47.1 percent of total sales. International sales growth was aided by a favorable currency environment, although constant currency growth was still 12.7 percent.
Pharmaceutical sales grew 12.3 percent and contributed 42.4 percent of total sales.
Sales of glaucoma products increased 24.1 percent, led by a 57.1 percent rise in sales of Travatan ophthalmic solution, which gained market share in the U.S. and other key countries.
Sales of allergy products, including Patanol ophthalmic solution, rose 0.3 percent due to a less severe allergy season this spring and the impact of changes in wholesaler inventories. In 2003, U.S. wholesaler inventories rose during the second quarter, positively influencing sales, while in 2004 they declined during the quarter, which had a negative influence.
Sales of infection/inflammation products rose 8.9 percent as the growth in sales of Vigamox ophthalmic solution more than offset declines in Ciloxan ophthalmic solution, which lost patent protection on June 9, 2004. Vigamox accounted for 63 percent of fluoroquinolone prescriptions in the U.S. in May, 2004. As a result of increasing physician preference for fourth generation fluoroquinolones for the treatment and prevention of eye infections, as well as declines in wholesaler inventories, sales of Tobradex ophthalmic solution and ointment declined slightly.
The addition of Ciprodex otic solution resulted in increased market share for Alcon s otic products, which led to a 24.5 percent increase in sales of otic products.
Surgical sales rose 14.2 percent to $459.1 million, accounting for 44.2 percent of total sales.
The AcrySof Natural intraocular lens continued to gain physician acceptance, as sales of intraocular lenses increased 17.1 percent to $148.1 million. AcrySof Natural accounted for 33 percent of intraocular lenses sold in the U.S. in June, 2004.
Sales of cataract and vitrectomy products rose 15.1 percent, with shipments of the Infiniti vision system a key driver of growth in this sector.
Refractive revenue declined 16.8 percent because of a decline in global equipment sales. However, increased demand for LASIK procedures and a significant shift toward higher-priced custom procedures caused U.S. technology fees to rise.
Consumer eye care sales increased 6.3 percent, accounting for 13.4 percent of total sales.
The continuing success of the Company s new dry eye treatment, Systane lubricant eye drops, helped grow sales of artificial tears products, which increased 13.8 percent.
Earnings Highlights
Highlights of earnings for the second quarter of 2004
are provided below. Unless otherwise noted, all comparisons are versus the second quarter of 2003.
Gross profit margin increased 2.5 percentage points to 73.6 percent of sales, due to favorable currency factors, product mix, manufacturing efficiencies, higher production volumes and the transfer of contact lens care manufacturing from Madrid, Spain to Fort Worth, Texas.
Selling, general and administrative expenses rose only 7.3 percent, as the company continued to exercise cost control and capitalize on its existing global infrastructure.
Research and development expenses were flat because the second quarter of 2003 had relatively large expense levels for clinical trials, especially those associated with the company s investigational new drugs, RETAANE 15mg Depot and EXTRAVAN ophthalmic solution.
The combination of the factors noted above led to a 33.3 percent increase in operating profit to $347.7 million.
Net interest expense declined 73.1 percent to $1.8 million because of lower debt levels and higher investment balances.
Research and Development Update
Summarized below are updates on key research and development
The company filed a Pre-Marketing Application (PMA) for the AcrySof ReSTOR intraocular lens with the U.S. Food and Drug Administration (FDA).
The company filed a PMA for DISCOVISC viscoelastic solution in June. DISCOVISC is being developed for use during eye surgery to protect tissue and maintain ocular integrity.
Also in June, the FDA accepted the company s 505(b)2 filing for brimonodine tartrate 0.15% with Polyquad preservative as a treatment for glaucoma.
Alcon released for market introduction Systane lubricant eye drops unit dose, an over-the-counter, preservative-free treatment for dry eye.
Alcon received an approvable letter from the FDA for its once-a-day version of its eye allergy drug, Patanol ophthalmic solution. The company is in discussions with the FDA to determine the steps necessary to gain final approval and labeling.
The ongoing Phase III clinical trial for RETAANE 15mg Depot is on track for its 12 month readout of data in September. Patient retention has been consistent with statistical expectations. The company plans to report the data in October at the American Academy of Ophthalmology s annual meeting and expects to file a New Drug Application for the drug in the fourth quarter of 2004.
Over 450 patients have been enrolled in the two risk reduction clinical trials on RETAANE . The company expects to enroll the full complement of 2,500 patients for the trials in the next 12 to 15 months. Once fully enrolled, these studies are expected to last four years.
Financial Guidance
Financial guidance for the full year 2004 is provided
Sales are expected to be between $3,800 million and $3,850 million.
Diluted earnings per share are expected to be between $2.43 and $2.46. This range excludes the impact of the tax benefit realized in the second quarter of 2004. Diluted earnings per share including the impact of the tax benefits realized in the second quarter of 2004 are expected to be between $2.62 and $2.65.
Company Description
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. Alcon s majority shareholder is Nestl , S.A., the world s largest food
company. All trademarks noted in this release are the property of Alcon, Inc., with the exception of
Ciprodex , which is the property of Bayer, AG and licensed to Alcon.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Earnings (Unaudited)
(USD in millions, except share and per share data)
| Three months ended June 30, | Six months ended June 30, | ||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||
| Sales | $ 1,039.2 | $ 925.4 | $ 2,002.8 | $ 1,732.5 | |||||
| Cost of goods sold | 274.2 | 267.1 | 564.0 | 520.4 | |||||
| Gross profit | 765.0 | 658.3 | 1,438.8 | 1,212.1 | |||||
| Selling, general and administrative | 312.3 | 291.1 | 603.1 | 555.3 | |||||
| Research and development | 89.3 | 89.3 | 180.2 | 167.5 | |||||
| Amortization of intangibles | 15.7 | 17.0 | 31.2 | 34.0 | |||||
| Operating income | 347.7 | 260.9 | 624.3 | 455.3 | |||||
| Other income (expense): | |||||||||
| Gain (loss) from foreign currency, net | (4.8 | ) | 1.7 | (3.2 | ) | 1.6 | |||
| Interest income | 4.5 | 4.6 | 10.2 | 9.1 | |||||
| Interest expense | (6.3 | ) | (11.3 | ) | (13.3 | ) | (23.0 | ) | |
| Other | -- | 0.1 | -- | 0.1 | |||||
| Earnings before income taxes | 341.1 | 256.0 | 618.0 | 443.1 | |||||
| Income taxes | 41.9 | 77.8 | 127.8 | 134.7 | |||||
| Net earnings | $ 299.2 | $ 178.2 | $ 490.2 | $ 308.4 | |||||
| Basic earnings per common share | $ 0.98 | $ 0.58 | $ 1.60 | $ 1.00 | |||||
| Diluted earnings per common share | $ 0.96 | $ 0.57 | $ 1.58 | $ 1.00 | |||||
| Basic weighted average common shares | 305,357,938 | 307,934,550 | 306,107,207 | 307,921,008 | |||||
| Diluted weighted average common shares | 310,678,556 | 310,353,567 | 310,902,151 | 309,867,981 |
ALCON, INC. AND SUBSIDIARIES
| Three months ended June 30, | |||||||||||
| 2004 | 2003 | Change | Foreign Currency Change | Change in Constant Currency | |||||||
| GEOGRAPHIC SALES | |||||||||||
| United States: | |||||||||||
| Pharmaceutical | $ 284.0 | $ 263.5 | 7.8 | % | -- | % | 7.8 | % | |||
| Surgical | 196.8 | 178.7 | 10.1 | -- | 10.1 | ||||||
| Consumer eye care | 69.1 | 69.0 | 0.1 | -- | 0.1 | ||||||
| Total United States Sales | 549.9 | 511.2 | 7.6 | -- | 7.6 | ||||||
| International: | |||||||||||
| Pharmaceutical | 156.5 | 128.7 | 21.6 | 4.7 | 16.9 | ||||||
| Surgical | 262.3 | 223.2 | 17.5 | 6.0 | 11.5 | ||||||
| Consumer eye care | 70.5 | 62.3 | 13.2 | 4.5 | 8.7 | ||||||
| Total International Sales | 489.3 | 414.2 | 18.1 | 5.4 | 12.7 | ||||||
| Total Global Sales | $ 1,039.2 | $ 925.4 | 12.3 | 2.4 | 9.9 | ||||||
| PRODUCT SALES | |||||||||||
| Infection/inflammation products | $ 152.6 | $ 140.1 | 8.9 | % | |||||||
| Glaucoma products | 131.9 | 106.3 | 24.1 | ||||||||
| Allergy products | 119.7 | 119.4 | 0.3 | ||||||||
| Otic products | 50.3 | 40.4 | 24.5 | ||||||||
| Other pharmaceuticals/rebates | (14.0 | ) | (14.0 | ) | N/M | ||||||
| Total Pharmaceutical | 440.5 | 392.2 | 12.3 | 1.5 | % | 10.8 | % | ||||
| Intraocular lenses | 148.1 | 126.5 | 17.1 | ||||||||
| Cataract/vitreoretinal products | 295.1 | 256.3 | 15.1 | ||||||||
| Refractive products | 15.9 | 19.1 | (16.8 | ) | |||||||
| Total Surgical | 459.1 | 401.9 | 14.2 | 3.3 | 10.9 | ||||||
| Contact lens disinfectants | 75.1 | 72.4 | 3.7 | ||||||||
| Artificial tears | 33.9 | 29.8 | 13.8 | ||||||||
| Other | 30.6 | 29.1 | 5.2 | ||||||||
| Total Consumer Eye Care | 139.6 | 131.3 | 6.3 | 2.1 | 4.2 | ||||||
| Total Global Sales | $ 1,039.2 | $ 925.4 | 12.3 | 2.4 | 9.9 | ||||||
| N/M - Not Meaningful |
ALCON, INC. AND SUBSIDIARIES
| Six months ended June 30, | |||||||||||
| 2004 | 2003 | Change | Foreign Currency Change | Change in Constant Currency | |||||||
| GEOGRAPHIC SALES | |||||||||||
| United States: | |||||||||||
| Pharmaceutical | $ 519.6 | $ 456.4 | 13.8 | % | -- | % | 13.8 | % | |||
| Surgical | 377.4 | 345.4 | 9.3 | -- | 9.3 | ||||||
| Consumer eye care | 137.6 | 135.9 | 1.3 | -- | 1.3 | ||||||
| Total United States Sales | 1,034.6 | 937.7 | 10.3 | -- | 10.3 | ||||||
| International: | |||||||||||
| Pharmaceutical | 300.0 | 238.4 | 25.8 | 8.6 | 17.2 | ||||||
| Surgical | 525.6 | 433.4 | 21.3 | 10.0 | 11.3 | ||||||
| Consumer eye care | 142.6 | 123.0 | 15.9 | 8.3 | 7.6 | ||||||
| Total International Sales | 968.2 | 794.8 | 21.8 | 9.3 | 12.5 | ||||||
| Total Global Sales | $ 2,002.8 | $ 1,732.5 | 15.6 | 4.3 | 11.3 | ||||||
| PRODUCT SALES | |||||||||||
| Infection/inflammation products | $ 302.1 | $ 266.2 | 13.5 | % | |||||||
| Glaucoma products | 259.7 | 207.9 | 24.9 | ||||||||
| Allergy products | 198.0 | 176.0 | 12.5 | ||||||||
| Otic products | 84.7 | 62.3 | 36.0 | ||||||||
| Other pharmaceuticals/rebates | (24.9 | ) | (17.6 | ) | N/M | ||||||
| Total Pharmaceutical | 819.6 | 694.8 | 18.0 | 3.0 | % | 15.0 | % | ||||
| Intraocular lenses | 290.1 | 244.1 | 18.8 | ||||||||
| Cataract/vitreoretinal products | 581.2 | 497.1 | 16.9 | ||||||||
| Refractive products | 31.7 | 37.6 | (15.7 | ) | |||||||
| Total Surgical | 903.0 | 778.8 | 15.9 | 5.5 | 10.4 | ||||||
| Contact lens disinfectants | 150.4 | 142.5 | 5.5 | ||||||||
| Artificial tears | 68.4 | 58.2 | 17.5 | ||||||||
| Other | 61.4 | 58.2 | 5.5 | ||||||||
| Total Consumer Eye Care | 280.2 | 258.9 | 8.2 | 3.9 | 4.3 | ||||||
| Total Global Sales | $ 2,002.8 | $ 1,732.5 | 15.6 | 4.3 | 11.3 | ||||||
| N/M - Not Meaningful |
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| June 30, 2004 | December 31, 2003 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ 844.2 | $ 1,086.0 | |||
| Investments | 146.5 | 100.5 | |||
| Trade receivables, net | 801.0 | 622.8 | |||
| Inventories | 413.7 | 446.5 | |||
| Deferred income tax assets | 157.4 | 157.4 | |||
| Other current assets | 66.6 | 57.0 | |||
| Total current assets | 2,429.4 | 2,470.2 | |||
| Property, plant and equipment, net | 788.9 | 788.8 | |||
| Intangible assets, net | 300.1 | 331.5 | |||
| Goodwill | 550.6 | 552.1 | |||
| Long term deferred income tax assets | 144.7 | 118.8 | |||
| Other assets | 42.1 | 39.2 | |||
| Total assets | $ 4,255.8 | $ 4,300.6 | |||
| Liabilities and Shareholders' Equity | |||||
| Current liabilities: | |||||
| Accounts payable | $ 129.3 | $ 146.1 | |||
| Short term borrowings | 1,092.4 | 1,326.8 | |||
| Current maturities of long term debt | 4.6 | 8.5 | |||
| Other current liabilities | 843.7 | 751.6 | |||
| Total current liabilities | 2,070.0 | 2,233.0 | |||
| Long term debt, net of current maturities | 68.9 | 75.0 | |||
| Long term deferred income tax liabilities | 99.6 | 108.4 | |||
| Other long term liabilities | 303.9 | 292.7 | |||
| Contingencies | |||||
| Shareholders' equity: | |||||
| Common shares | 42.6 | 42.5 | |||
| Additional paid-in capital | 529.6 | 512.0 | |||
| Accumulated other comprehensive income | 90.0 | 135.8 | |||
| Deferred compensation | (5.0 | ) | (7.5 | ) | |
| Retained earnings | 1,272.0 | 951.2 | |||
| Treasury shares, at cost | (215.8 | ) | (42.5 | ) | |
| Total shareholders' equity | 1,713.4 | 1,591.5 | |||
| Total liabilities and shareholders' equity | $ 4,255.8 | $ 4,300.6 |
ALCON, INC. AND SUBSIDIARIES
of Non-GAAP Disclosures
| Three months ended June 30, | Six months ended June 30, | ||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||
| Diluted earnings per common share as reported | $0.96 | $0.57 | $1.58 | $1.00 | |||||
| Less: | |||||||||
| Tax benefits related to resolution of significant | |||||||||
| tax audit issues and amended returns (1) | 0.18 | -- | 0.19 | -- | |||||
| Diluted earnings per common share, excluding tax | |||||||||
| benefits above (2) | $0.78 | $0.57 | $1.39 | $1.00 |
| 2004 Financial Guidance | |||||
| Lower Estimate | Higher Estimate | ||||
| Expected diluted earnings per common share on same | $2.62 | $2.65 | |||
| basis as reported | |||||
| Less: | |||||
| Tax benefits related to resolution of significant tax | |||||
| audit issues and amended returns (1) | 0.19 | 0.19 | |||
| Expected diluted earnings per common share, excluding | |||||
| tax benefits above (2) | $2.43 | $2.46 |
(1) GAAP requires interim and annual earnings per common share computations to stand on
their own and use the weighted average number of common shares outstanding during the applicable period.
As a result, the impact on earnings per share of the tax benefits noted above are different for the
quarter vs. six months ended June 30, 2004 and the 2004 financial guidance.
(2) Diluted earning per common share excluding tax benefits and expected diluted earnings
per common share excluding tax benefits are non-GAAP financial measures as defined by Regulation G promulgated
by the U.S. Securities and Exchange Commission. Alcon presents these non-GAAP measures to improve the
comparability and consistency of financial results of Alcon s core business activities and to enhance
the overall understanding of Alcon s performance and future prospects.
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