Full Press Release Details
Alcon s Second Quarter Sales Rise 11.8 Percent
HUNENBERG, Switzerland July 24, 2006 Alcon, Inc. (NYSE:ACL) reported global sales of $1,310.8 million for the second quarter of 2006, an increase of 11.8 percent over global sales in the second quarter of 2005. The fluctuations in foreign currencies did not have an impact on the growth rate of global sales in the quarter. Net earnings for the second quarter of 2006 increased 43.3 percent to $465.6 million, or $1.50 per share on a diluted basis, compared to $325.0 million, or $1.04 per share for the second quarter of 2005. Earnings in the second quarter of 2006 were positively impacted by the reduction of an accrued liability related to the settlement of several intellectual property lawsuits between Alcon and a competitor, Advanced Medical Optics, Inc. The after-tax impact of this non-cash reduction was $99.1 million, or $0.32 per share on a diluted basis. Net
earnings in the second quarter of 2006 were also reduced by approximately $12.5 million, or $0.04 per share, due to the expensing of share-based compensation as a result of the implementation of Statement of Financial Accounting Standards (SFAS) 123(R). If SFAS 123(R) had been in effect in the second quarter of 2005, an after-tax charge of $0.03 per share would have been incurred in that quarter.
This was an excellent quarter for Alcon as the continued execution of our operating strategy led to strong sales growth in all of our major product groups that translated to continued healthy earnings growth. We experienced global market share gains in key areas of our pharmaceutical business resulting in growth in the mid teens or higher in most of our key branded products. Our surgical business grew faster than the overall market on both a unit and dollar basis due to exceptionally strong IOL growth that further widened our leadership in this category. Finally, our consumer business saw dramatic increases in market share in the U.S. due to the continued success of the launch of OPTI-FREE RepleniSHTM multi-purpose disinfecting solution and the withdrawal of a
competitive product from the market, said Cary Rayment, Alcon s chairman, president and chief executive officer.
Second Quarter Sales Highlights
Highlights of sales for the second quarter of 2006 are provided below. Unless otherwise noted, all comparisons are versus the second quarter of 2005.
Second Quarter Earnings Details
Highlights of earnings for the second quarter of 2006 are provided below. Unless otherwise noted, all increases are versus the second quarter of 2005.
New Product and R&D Pipeline Update
Summarized below are updates on selected new products and significant research and development activities.
Alcon s current financial guidance for the full year 2006 and the factors impacting this guidance are provided below.
Alcon, Inc. is the world s leading eye care company, with sales of $4.37 billion in 2005. Alcon, which has been dedicated to the ophthalmic industry for more than 50 years, researches, 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 a registered trademark of property of Bayer AG and licensed to Alcon. Vigamox is licensed to Alcon from Bayer AG.
* ArxxantTM is a trademark of Eli Lilly and Company
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(USD in millions, except share and per share data)
| Three Months Ended | Six Months Ended | ||||||||||||
| June 30, | June 30, | ||||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||
| Sales | $ | 1,310.8 | $ | 1,172.0 | $ | 2,467.9 | $ | 2,242.5 | |||||
| Cost of goods sold | 325.3 | 287.7 | 613.5 | 576.3 | |||||||||
| Gross profit | 985.5 | 884.3 | 1,854.4 | 1,666.2 | |||||||||
| Selling, general and administrative | 264.8 | 341.8 | 651.5 | 678.3 | |||||||||
| Research and development | 124.3 | 100.8 | 243.6 | 199.3 | |||||||||
| Amortization of intangibles | 20.6 | 21.9 | 41.1 | 42.0 | |||||||||
| Operating income | 575.8 | 419.8 | 918.2 | 746.6 | |||||||||
| Other income (expense): | |||||||||||||
| Gain (loss) from foreign currency, net | (7.5 | ) | (0.6 | ) | (9.4 | ) | 1.8 | ||||||
| Interest income | 20.2 | 12.5 | 39.0 | 20.6 | |||||||||
| Interest expense | (9.3 | ) | (9.4 | ) | (21.8 | ) | (18.1 | ) | |||||
| Other, net | 1.3 | 0.3 | 8.6 | - | |||||||||
| Earnings before income taxes | 580.5 | 422.6 | 934.6 | 750.9 | |||||||||
| Income taxes | 114.9 | 97.6 | 173.3 | 176.4 | |||||||||
| Net earnings | $ | 465.6 | $ | 325.0 | $ | 761.3 | $ | 574.5 | |||||
| Basic earnings per common share | $ | 1.52 | $ | 1.06 | $ | 2.49 | $ | 1.88 | |||||
| Diluted earnings per common share | $ | 1.50 | $ | 1.04 | $ | 2.45 | $ | 1.85 | |||||
| Basic weighted average common shares | 306,070,731 | 306,520,335 | 306,278,027 | 305,729,518 | |||||||||
| Diluted weighted average common shares | 310,318,545 | 312,047,408 | 310,979,247 | 311,280,508 |
ALCON, INC. AND SUBSIDIARIES
| Three Months Ended | Foreign | %Change in | ||||||||||||||
| June 30, | Currency | Constant | ||||||||||||||
| 2006 | 2005 | %Change | %Change | Currency | ||||||||||||
| GEOGRAPHIC SALES | ||||||||||||||||
| United States: | ||||||||||||||||
| Pharmaceutical | $ | 347.9 | $ | 311.0 | 11.9 | % | - | % | 11.9 | % | ||||||
| Surgical | 244.3 | 214.3 | 14.0 | - | 14.0 | |||||||||||
| Consumer Eye Care | 97.9 | 69.6 | 40.7 | - | 40.7 | |||||||||||
| Total United States Sales | 690.1 | 594.9 | 16.0 | - | 16.0 | |||||||||||
| International: | ||||||||||||||||
| Pharmaceutical | 211.6 | 191.6 | 10.4 | 0.6 | 9.8 | |||||||||||
| Surgical | 323.1 | 306.5 | 5.4 | (0.3 | ) | 5.7 | ||||||||||
| Consumer Eye Care | 86.0 | 79.0 | 8.9 | 0.5 | 8.4 | |||||||||||
| Total International Sales | 620.7 | 577.1 | 7.6 | 0.2 | 7.4 | |||||||||||
| Total Global Sales | $ | 1,310.8 | $ | 1,172.0 | 11.8 | % | - | % | 11.8 | % | ||||||
| PRODUCT SALES | ||||||||||||||||
| Infection/inflammation | $ | 198.4 | $ | 171.9 | 15.4 | % | ||||||||||
| Glaucoma | 174.9 | 156.2 | 12.0 | |||||||||||||
| Allergy | 137.0 | 135.4 | 1.2 | |||||||||||||
| Otic | 72.1 | 60.1 | 20.0 | |||||||||||||
| Other pharmaceuticals/rebates | (22.9 | ) | (21.0 | ) | N/M | |||||||||||
| Total Pharmaceutical | 559.5 | 502.6 | 11.3 | 0.2 | % | 11.1 | % | |||||||||
| Intraocular lenses | 205.5 | 176.1 | 16.7 | |||||||||||||
| Cataract/vitreoretinal | 348.4 | 330.3 | 5.5 | |||||||||||||
| Refractive | 13.5 | 14.4 | (6.2 | ) | ||||||||||||
| Total Surgical | 567.4 | 520.8 | 8.9 | (0.2 | ) | 9.1 | ||||||||||
| Contact lens disinfectants | 101.2 | 73.3 | 38.1 | |||||||||||||
| Artificial tears | 50.4 | 43.5 | 15.9 | |||||||||||||
| Other | 32.3 | 31.8 | 1.6 | |||||||||||||
| Total Consumer Eye Care | 183.9 | 148.6 | 23.8 | 0.3 | 23.5 | |||||||||||
| Total Global Sales | $ | 1,310.8 | $ | 1,172.0 | 11.8 | % | - | % | 11.8 | % |
N/M - Not Meaningful
Note: Percent Change in Constant Currency calculates sales growth without the impact of foreign exchange fluctuations. Management believes constant currency sales growth is an important measure of the company s operations because it provides investors with a clearer picture of the core rate of sales growth due to changes in unit volumes and local currency prices. Certain reclassifications have been made to prior year amounts to conform with current year presentation.
ALCON, INC. AND SUBSIDIARIES
| Six Months Ended | Foreign | %Change in | ||||||||||||||
| June 30, | Currency | Constant | ||||||||||||||
| 2006 | 2005 | %Change | %Change | Currency | ||||||||||||
| GEOGRAPHIC SALES | ||||||||||||||||
| United States: | ||||||||||||||||
| Pharmaceutical | $ | 627.0 | $ | 563.6 | 11.2 | % | - | % | 11.2 | % | ||||||
| Surgical | 467.8 | 411.7 | 13.6 | - | 13.6 | |||||||||||
| Consumer Eye Care | 172.0 | 140.8 | 22.2 | - | 22.2 | |||||||||||
| Total United States Sales | 1,266.8 | 1,116.1 | 13.5 | - | 13.5 | |||||||||||
| International: | ||||||||||||||||
| Pharmaceutical | 407.6 | 371.0 | 9.9 | (1.4 | ) | 11.3 | ||||||||||
| Surgical | 624.8 | 597.4 | 4.6 | (2.9 | ) | 7.5 | ||||||||||
| Consumer Eye Care | 168.7 | 158.0 | 6.8 | (0.9 | ) | 7.7 | ||||||||||
| Total International Sales | 1,201.1 | 1,126.4 | 6.6 | (2.2 | ) | 8.8 | ||||||||||
| Total Global Sales | $ | 2,467.9 | $ | 2,242.5 | 10.1 | % | (1.0 | )% | 11.1 | % | ||||||
| PRODUCT SALES | ||||||||||||||||
| Infection/inflammation | $ | 374.2 | $ | 334.1 | 12.0 | % | ||||||||||
| Glaucoma | 333.7 | 310.5 | 7.5 | |||||||||||||
| Allergy | 244.0 | 222.1 | 9.9 | |||||||||||||
| Otic | 118.5 | 103.1 | 14.9 | |||||||||||||
| Other pharmaceuticals/rebates | (35.8 | ) | (35.2 | ) | N/M | |||||||||||
| Total Pharmaceutical | 1,034.6 | 934.6 | 10.7 | (0.6 | )% | 11.3 | % | |||||||||
| Intraocular lenses | 394.0 | 334.9 | 17.6 | |||||||||||||
| Cataract/vitreoretinal | 671.3 | 642.7 | 4.4 | |||||||||||||
| Refractive | 27.3 | 31.5 | (13.3 | ) | ||||||||||||
| Total Surgical | 1,092.6 | 1,009.1 | 8.3 | (1.7 | ) | 10.0 | ||||||||||
| Contact lens disinfectants | 178.9 | 149.1 | 20.0 | |||||||||||||
| Artificial tears | 100.5 | 87.2 | 15.3 | |||||||||||||
| Other | 61.3 | 62.5 | (1.9 | ) | ||||||||||||
| Total Consumer Eye Care | 340.7 | 298.8 | 14.0 | (0.5 | ) | 14.5 | ||||||||||
| Total Global Sales | $ | 2,467.9 | $ | 2,242.5 | 10.1 | % | (1.0 | )% | 11.1 | % |
N/M - Not Meaningful
Note: Percent Change in Constant Currency calculates sales growth without the impact of foreign exchange fluctuations. Management believes constant currency sales growth is an important measure of the company s operations because it provides investors with a clearer picture of the core rate of sales growth due to changes in unit volumes and local currency prices. Certain reclassifications have been made to prior year amounts to conform with current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| June 30, | Dec. 31, | ||||||
| 2006 | 2005 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,237.6 | $ | 1,457.2 | |||
| Short term investments | 402.7 | 377.7 | |||||
| Trade receivables, net | 901.2 | 725.4 | |||||
| Inventories | 450.6 | 427.2 | |||||
| Deferred income tax assets | 127.0 | 131.5 | |||||
| Other current assets | 162.9 | 149.0 | |||||
| Total current assets | 3,282.0 | 3,268.0 | |||||
| Long term investments | 157.6 | 154.8 | |||||
| Property, plant and equipment, net | 861.6 | 829.6 | |||||
| Intangible assets, net | 252.8 | 293.7 | |||||
| Goodwill | 552.1 | 550.0 | |||||
| Long term deferred income tax assets | 110.7 | 77.5 | |||||
| Other assets | 56.7 | 54.6 | |||||
| Total assets | $ | 5,273.5 | $ | 5,228.2 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 154.2 | $ | 156.0 | |||
| Short term borrowings | 845.9 | 1,021.5 | |||||
| Current maturities of long term debt | 6.0 | 5.9 | |||||
| Other current liabilities | 1,117.1 | 1,095.1 | |||||
| Total current liabilities | 2,123.2 | 2,278.5 | |||||
| Long term debt, net of current maturities | 50.9 | 56.0 | |||||
| Long term deferred income tax liabilities | 16.0 | 15.8 | |||||
| Other long term liabilities | 343.8 | 321.8 | |||||
| Contingencies | |||||||
| Shareholders equity: | |||||||
| Common shares | 43.6 | 43.4 | |||||
| Additional paid-in capital | 930.9 | 806.3 | |||||
| Accumulated other comprehensive income | 140.7 | 90.9 | |||||
| Retained earnings | 2,626.1 | 2,282.3 | |||||
| Treasury shares, at cost | (1,001.7 | ) | (666.8 | ) | |||
| Total shareholders' equity | 2,739.6 | 2,556.1 | |||||
| Total liabilities and shareholders' equity | $ | 5,273.5 | $ | 5,228.2 |
Note: Certain reclassifications have been made to prior year amounts to conform with current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Three months ended June 30, | |||||||
| 2006 | 2005 | ||||||
| Cash provided by operating activities: | |||||||
| Net cash from operating activities | $ | 747.7 | $ | 653.5 | |||
| Cash provided by (used in) investing activities: | |||||||
| Purchases of property, plant and equipment | (83.4 | ) | (65.1 | ) | |||
| Purchases of intangible assets | -- | (2.8 | ) | ||||
| Net purchases of available-for-sale investments | (26.4 | ) | (220.1 | ) | |||
| Proceeds from sale of assets | 0.7 | 1.3 | |||||
| Net cash from investing activities | (109.1 | ) | (286.7 | ) | |||
| Cash provided by (used in) financing activities: | (186.4 | ) | 186.7 | ||||
| Net proceeds from (repayment of) short term debt | (5.4 | ) | (4.8 | ) | |||
| Repayment of long term debt | (416.8 | ) | (302.0 | ) | |||
| Proceeds from exercise of stock options | 50.1 | 119.8 | |||||
| Tax benefits from share-based payment arrangements | 49.0 | -- | |||||
| Acquisition of treasury shares | (361.5 | ) | (200.5 | ) | |||
| Net cash from financing activities | (871.0 | ) | (200.8 | ) | |||
| Effect of exchange rates on cash and cash equivalents | 12.8 | (48.8 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (219.6 | ) | 117.2 | ||||
| Cash and cash equivalents, beginning of period | 1,457.2 | 1,093.4 | |||||
| Cash and cash equivalents, end of period | $ | 1,237.6 | $ | 1,210.6 | |||
| Supplemental disclosure of cash flow information: | |||||||
| Cash paid during the period for the following: | |||||||
| Interest expense, net of amount capitalized | $ | 22.4 | $ | 18.8 | |||
| Income taxes | $ | 73.3 | $ | 74.6 |
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 may affect our sales and profits; 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; the occurrence of excessive property and casualty, general liability
or business interruption losses, for which we are self-insured, 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 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 more information, contact:
Investor Relations and Strategic Corporate Communications