Full Press Release Details
Alcon s Third Quarter Sales Rise 11.0 Percent
HUNENBERG, Switzerland October 24, 2007 Alcon, Inc. (NYSE:ACL) reported global sales of $1,335.7 million for the third quarter of 2007, an increase of 11.0 percent over global sales for the third quarter of 2006, or 7.9 percent on a constant currency basis. Net earnings for the third quarter of 2007 increased 78.9 percent to $415.3 million, or $1.38 per share on a diluted basis, compared to $232.1 million, or $0.76 per diluted share for the third quarter of 2006. Net earnings in the third quarter of 2007 included charges for a workforce reduction in the company s refractive laser business associated with the planned acquisition and integration of WaveLight AG. Net earnings in the third quarter of 2006 included an impairment charge related to certain assets of the company s refractive laser business. The after-tax impact of these charges was $3.4 million,
or $0.01 per diluted share in the third quarter of 2007 and $92.0 million, or $0.30 per diluted share in the third quarter of 2006. Excluding these charges, adjusted net earnings in the third quarter of 2007 were $418.7 million, or $1.39 per diluted share and in the third quarter of 2006 were $324.1 million, or $1.06 per share on a diluted basis. As a result, adjusted net earnings in the third quarter of 2007 grew 29.2 percent compared to adjusted net earnings in the third quarter of 2006, while adjusted earnings per diluted share rose 31.1 percent. Reconciliations of reported and adjusted results are provided in tables later in this press release.
Significant growth in our international business has delivered another quarter of improved financial performance, said Cary Rayment, Alcon s chairman, president and chief executive officer. Alcon s strategy of building brands globally and directly supporting eye care professionals worldwide through our global infrastructure continues to serve as a solid foundation for growth.
Third Quarter Sales Highlights
Highlights of sales for the third quarter of 2007 are provided below. Unless otherwise noted, all comparisons are between the third quarter of 2007 and the third quarter of 2006.
Third Quarter Earnings Details
Highlights of earnings for the third quarter of 2007 are provided below. Unless otherwise noted, all comparisons are between reported results for the third quarter of 2007 and the third quarter of 2006. Comparisons are also made between non-GAAP adjusted results for the third quarter of 2007, excluding the reduction in force related to the impending acquisition of WaveLight, AG, and the third quarter of 2006, excluding the refractive impairment charge. A reconciliation of reported results to non-GAAP results is provided in tables at the back of this release.
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 2007 and the factors impacting this guidance are provided below.
Alcon, Inc. is the world s leading eye care company, with sales of approximately $4.9 billion in 2006. Alcon, which has been dedicated to the ophthalmic industry for 60 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. Moxifloxacin, the active ingredient in Vigamox , is licensed to Alcon from Bayer AG.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(USD in millions, except share and per share data)
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Sales | $ | 1,335.7 | $ | 1,203.8 | $ | 4,129.9 | $ | 3,671.7 | ||||
| Cost of goods sold | 324.6 | 301.4 | 1,026.9 | 914.9 | ||||||||
| Gross profit | 1,011.1 | 902.4 | 3,103.0 | 2,756.8 | ||||||||
| Selling, general and administrative | 403.8 | 361.1 | 1,252.4 | 1,012.6 | ||||||||
| Research and development | 130.9 | 134.0 | 404.3 | 377.6 | ||||||||
| Amortization of intangibles | 10.3 | 146.3 | 40.6 | 187.4 | ||||||||
| Operating income | 466.1 | 261.0 | 1,405.7 | 1,179.2 | ||||||||
| Other income (expense): | ||||||||||||
| Gain (loss) from foreign currency, net | 3.6 | (0.7 | ) | 8.6 | (10.1 | ) | ||||||
| Interest income | 11.0 | 16.9 | 45.8 | 55.9 | ||||||||
| Interest expense | (9.5 | ) | (10.8 | ) | (30.7 | ) | (32.6 | ) | ||||
| Other, net | 1.9 | 4.4 | 20.2 | 13.0 | ||||||||
| Earnings before income taxes | 473.1 | 270.8 | 1,449.6 | 1,205.4 | ||||||||
| Income taxes | 57.8 | 38.7 | 239.7 | 212.0 | ||||||||
| Net earnings | $ | 415.3 | $ | 232.1 | $ | 1,209.9 | $ | 993.4 | ||||
| Basic earnings per common share | $ | 1.39 | $ | .77 | $ | 4.05 | $ | 3.26 | ||||
| Diluted earnings per common share | $ | 1.38 | $ | .76 | $ | 4.00 | $ | 3.21 | ||||
| Basic weighted average common shares | 297,829,693 | 302,626,095 | 298,601,255 | 305,047,340 | ||||||||
| Diluted weighted average common shares | 301,516,463 | 306,869,441 | 302,457,862 | 309,594,257 |
ALCON, INC. AND SUBSIDIARIES
| Three months ended | Foreign | %Change in | ||||||||||
| Sept 30, | Currency | Constant | ||||||||||
| 2007 | 2006 | %Change | %Change | Currency | ||||||||
| GEOGRAPHIC SALES | ||||||||||||
| United States: | ||||||||||||
| Pharmaceutical | $ | 299.6 | $ | 288.3 | 3.9 | % | - | % | 3.9 | % | ||
| Surgical | 255.4 | 239.0 | 6.9 | - | 6.9 | |||||||
| Consumer Eye Care | 99.5 | 91.4 | 8.9 | - | 8.9 | |||||||
| Total United States Sales | 654.5 | 618.7 | 5.8 | - | 5.8 | |||||||
| International: | ||||||||||||
| Pharmaceutical | 247.7 | 208.4 | 18.9 | 6.5 | 12.4 | |||||||
| Surgical | 330.5 | 289.7 | 14.1 | 6.1 | 8.0 | |||||||
| Consumer Eye Care | 103.0 | 87.0 | 18.4 | 6.3 | 12.1 | |||||||
| Total International Sales | 681.2 | 585.1 | 16.4 | 6.2 | 10.2 | |||||||
| Total Global Sales | $ | 1,335.7 | $ | 1,203.8 | 11.0 | % | 3.1 | % | 7.9 | % | ||
| PRODUCT SALES | ||||||||||||
| Infection/inflammation | $ | 191.1 | 175.0 | 9.2 | % | |||||||
| Glaucoma | 209.0 | 175.7 | 19.0 | |||||||||
| Allergy | 83.3 | 72.9 | 14.3 | |||||||||
| Otic | 67.6 | 77.8 | (13.1 | ) | ||||||||
| Other pharmaceuticals/rebates | (3.7 | ) | (4.7 | ) | N/M | |||||||
| Total Pharmaceutical | 547.3 | 496.7 | 10.2 | 2.7 | % | 7.5 | % | |||||
| Intraocular lenses | 215.4 | 191.8 | 12.3 | |||||||||
| Cataract/vitreoretinal | 362.0 | 324.7 | 11.5 | |||||||||
| Refractive | 8.5 | 12.2 | (30.3 | ) | ||||||||
| Total Surgical | 585.9 | 528.7 | 10.8 | 3.3 | 7.5 | |||||||
| Contact lens disinfectants | 116.6 | 99.5 | 17.2 | |||||||||
| Artificial tears | 57.2 | 51.2 | 11.7 | |||||||||
| Other | 28.7 | 27.7 | 3.6 | |||||||||
| Total Consumer Eye Care | 202.5 | 178.4 | 13.5 | 3.1 | 10.4 | |||||||
| Total Global Sales | $ | 1,335.7 | 1,203.8 | 11.0 | % | 3.1 | % | 7.9 | % |
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. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission. Certain reclassifications have been made to prior year amounts to conform with current year presentation.
ALCON, INC. AND SUBSIDIARIES
| Nine months ended | Foreign | %Change in | |||||||||||
| Sept 30, | Currency | Constant | |||||||||||
| 2007 | 2006 | %Change | %Change | Currency | |||||||||
| GEOGRAPHIC SALES | |||||||||||||
| United States: | |||||||||||||
| Pharmaceutical | $ | 982.7 | $ | 915.3 | 7.4 | % | - | % | 7.4 | % | |||
| Surgical | 746.7 | 706.8 | 5.6 | - | 5.6 | ||||||||
| Consumer Eye Care | 295.9 | 263.4 | 12.3 | - | 12.3 | ||||||||
| Total United States Sales | 2,025.3 | 1,885.5 | 7.4 | - | 7.4 | ||||||||
| International: | |||||||||||||
| Pharmaceutical | 752.9 | 616.0 | 22.2 | 5.7 | 16.5 | ||||||||
| Surgical | 1,052.3 | 914.5 | 15.1 | 5.1 | 10.0 | ||||||||
| Consumer Eye Care | 299.4 | 255.7 | 17.1 | 4.9 | 12.2 | ||||||||
| Total International Sales | 2,104.6 | 1,786.2 | 17.8 | 5.2 | 12.6 | ||||||||
| Total Global Sales | $ | 4,129.9 | $ | 3,671.7 | 12.5 | % | 2.6 | % | 9.9 | % | |||
| PRODUCT SALES | |||||||||||||
| Infection/inflammation | $ | 602.2 | 547.6 | 10.0 | % | ||||||||
| Glaucoma | 593.6 | 509.4 | 16.5 | ||||||||||
| Allergy | 355.7 | 316.9 | 12.2 | ||||||||||
| Otic | 206.1 | 197.6 | 4.3 | ||||||||||
| Other pharmaceuticals/rebates | (22.0 | ) | (40.2 | ) | N/M | ||||||||
| Total Pharmaceutical | 1,735.6 | 1,531.3 | 13.3 | 2.2 | % | 11.1% | % | ||||||
| Intraocular lenses | 660.1 | 585.8 | 12.7 | ||||||||||
| Cataract/vitreoretinal | 1,108.7 | 996.0 | 11.3 | ||||||||||
| Refractive | 30.2 | 39.5 | (23.5 | ) | |||||||||
| Total Surgical | 1,799.0 | 1,621.3 | 11.0 | 2.9 | 8.1 | ||||||||
| Contact lens disinfectants | 335.5 | 278.4 | 20.5 | ||||||||||
| Artificial tears | 172.1 | 151.7 | 13.4 | ||||||||||
| Other | 87.7 | 89.0 | (1.5 | ) | |||||||||
| Total Consumer Eye Care | 595.3 | 519.1 | 14.7 | 2.4 | 12.3 | ||||||||
| Total Global Sales | $ | 4,129.9 | 3,671.7 | 12.5 | % | 2.6 | % | 9.9 | % |
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. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission. Certain reclassifications have been made to prior year amounts to conform with current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| Sept 30, | Dec. 31, | ||||||
| 2007 | 2006 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 826.9 | $ | 1,489.2 | |||
| Short term investments | 798.9 | 321.0 | |||||
| Trade receivables, net | 1,042.1 | 912.8 | |||||
| Inventories | 534.7 | 473.8 | |||||
| Deferred income tax assets | 135.7 | 122.5 | |||||
| Other current assets | 162.7 | 142.8 | |||||
| Total current assets | 3,501.0 | 3,462.1 | |||||
| Long term investments | 80.0 | 91.1 | |||||
| Property, plant and equipment, net | 963.5 | 920.7 | |||||
| Intangible assets, net | 54.9 | 95.2 | |||||
| Goodwill | 555.6 | 553.2 | |||||
| Long term deferred income tax assets | 273.3 | 235.7 | |||||
| Other assets | 78.1 | 69.3 | |||||
| Total assets | $ | 5,506.4 | $ | 5,427.3 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 166.1 | $ | 168.9 | |||
| Short term borrowings | 799.5 | 926.5 | |||||
| Current maturities of long term debt | 1.2 | 5.8 | |||||
| Other current liabilities | 938.0 | 899.9 | |||||
| Total current liabilities | 1,904.8 | 2,001.1 | |||||
| Long term debt, net of current maturities | 50.1 | 49.0 | |||||
| Long term deferred income tax liabilities | 10.7 | 10.1 | |||||
| Other long term liabilities | 493.6 | 453.5 | |||||
| Contingencies | |||||||
| Shareholders equity: | |||||||
| Common shares | 43.1 | 43.9 | |||||
| Additional paid-in capital | 1,260.1 | 1,064.5 | |||||
| Accumulated other comprehensive income | 184.6 | 127.3 | |||||
| Retained earnings | 3,016.0 | 3,201.9 | |||||
| Treasury shares, at cost | (1,456.6 | ) | (1,524.0 | ) | |||
| Total shareholders' equity | 3,047.2 | 2,913.6 | |||||
| Total liabilities and shareholders' equity | $ | 5,506.4 | $ | 5,427.3 |
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Nine months ended September 30, | |||||||
| 2007 | 2006 | ||||||
| Cash provided by (used in) operating activities: | |||||||
| Net earnings | $ | 1,209.9 | $ | 993.4 | |||
| Adjustments to reconcile net earnings to cash provided from operating activities: | |||||||
| Depreciation | 119.5 | 122.7 | |||||
| Amortization of intangibles | 40.6 | 187.4 | |||||
| Share-based payments | 72.6 | 65.8 | |||||
| Tax benefit from share-based compensation | 13.4 | -- | |||||
| Deferred income taxes | (45.2 | ) | (111.4 | ) | |||
| Loss (gain) on sale of assets | (12.0 | ) | (0.2 | ) | |||
| Provisions for losses | -- | (119.0 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Trading securities | (539.3 | ) | (41.9 | ) | |||
| Trade receivables | (88.9 | ) | (150.7 | ) | |||
| Inventories | (18.5 | ) | (18.8 | ) | |||
| Other assets | (23.3 | ) | (7.1 | ) | |||
| Accounts payable and other current liabilities | 150.2 | (33.1 | ) | ||||
| Other long term liabilities | (64.3 | ) | 27.8 | ||||
| Net cash from operating activities | 814.7 | 914.9 | |||||
| Cash provided by (used in) investing activities: | |||||||
| Purchases of property, plant and equipment | (139.7 | ) | (145.1 | ) | |||
| Purchases of available-for-sale investments | (69.6 | ) | (328.3 | ) | |||
| Proceeds from sales and maturities of available-for-sale investments | 143.9 | 377.5 | |||||
| Other | 2.1 | 1.3 | |||||
| Net cash from investing activities | (63.3 | ) | (94.6 | ) | |||
| Cash provided by (used in) financing activities: | |||||||
| Net proceeds from (repayment of) short term debt | (165.5 | ) | (133.1 | ) | |||
| Proceeds from issuance of long term debt | 1.1 | -- | |||||
| Repayment of long term debt | (5.8 | ) | (5.8 | ) | |||
| Dividends on common shares | (612.8 | ) | (416.8 | ) | |||
| Acquisition of treasury shares | (875.9 | ) | (728.4 | ) | |||
| Proceeds from exercise of stock options | 158.3 | 95.0 | |||||
| Tax benefits from share-based payment arrangements | 80.5 | 80.5 | |||||
| Net cash from financing activities | (1,420.1 | ) | (1,108.6 | ) | |||
| Effect of exchange rates on cash and cash equivalents | 6.4 | 7.9 | |||||
| Net increase (decrease) in cash and cash equivalents | (662.3 | ) | (280.4 | ) | |||
| Cash and cash equivalents, beginning of period | 1,489.2 | 1,457.2 | |||||
| Cash and cash equivalents, end of period | $ | 826.9 | $ | 1,176.8 |
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in millions, except per share data)
| Three months ended September 30, 2007 (1) | ||||||||||
| Non-GAAP Adjustments | ||||||||||
| Reported | Refractive Workforce Reduction | Non-GAAP Adjusted | ||||||||
| Sales | $ | 1,335.7 | $ | -- | $ | 1,335.7 | ||||
| Cost of goods sold | 324.6 | (3.2 | ) | 321.4 | ||||||
| Gross profit | 1,011.1 | 3.2 | 1,014.3 | |||||||
| Selling, general and administrative | 403.8 | -- | 403.8 | |||||||
| Research and development | 130.9 | (2.1 | ) | 128.8 | ||||||
| Amortization of intangibles | 10.3 | -- | 10.3 | |||||||
| Operating income | 466.1 | 5.3 | 471.4 | |||||||
| Other income (expense): | ||||||||||
| Gain (loss) from foreign currency, net | 3.6 | -- | 3.6 | |||||||
| Interest income | 11.0 | -- | 11.0 | |||||||
| Interest expense | (9.5 | ) | -- | (9.5 | ) | |||||
| Other, net | 1.9 | -- | 1.9 | |||||||
| Earnings before income taxes | 473.1 | 5.3 | 478.4 | |||||||
| Income taxes | 57.8 | 1.9 | 59.7 | |||||||
| Net earnings | $ | 415.3 | $ | 3.4 | $ | 418.7 | ||||
| Diluted earnings per common share | $ | 1.38 | $ | 0.01 | $ | 1.39 | ||||
| Selected ratios as percent of sales | ||||||||||
| Gross profits | 75.7 | % | 75.9 | % | ||||||
| Operating income | 34.9 | % | 35.3 | % | ||||||
| Other selected financial ratios | ||||||||||
| % Operating income growth | 78.6 | % | 16.2 | % | ||||||
| % Net earnings growth | 78.9 | % | 29.2 | % |
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in millions, except per share data)
| Three months ended September 30, 2006 (1) | ||||||||||
| Non-GAAP Adjustments | ||||||||||
| Reported | Refractive Impairment | Non-GAAP Adjusted | ||||||||
| Sales | $ | 1,203.8 | $ | -- | $ | 1,203.8 | ||||
| Cost of goods sold | 301.4 | (19.1 | ) | 282.3 | ||||||
| Gross profit | 902.4 | 19.1 | 921.5 | |||||||
| Selling, general and administrative | 361.1 | -- | 361.1 | |||||||
| Research and development | 134.0 | -- | 134.0 | |||||||
| Amortization of intangibles | 146.3 | (125.7 | ) | 20.6 | ||||||
| Operating income | 261.0 | 144.8 | 405.8 | |||||||
| Other income (expense): | ||||||||||
| Gain (loss) from foreign currency, net | (0.7 | ) | -- | (0.7 | ) | |||||
| Interest income | 16.9 | -- | 16.9 | |||||||
| Interest expense | (10.8 | ) | -- | (10.8 | ) | |||||
| Other, net | 4.4 | -- | 4.4 | |||||||
| Earnings before income taxes | 270.8 | 144.8 | 415.6 | |||||||
| Income taxes | 38.7 | 52.8 | 91.5 | |||||||
| Net earnings | $ | 232.1 | $ | 92.0 | $ | 324.1 | ||||
| Diluted earnings per common share | $ | 0.76 | $ | 0.30 | $ | 1.06 | ||||
| Selected ratios as percent of sales | ||||||||||
| Gross profits | 75.0 | % | 76.5 | % | ||||||
| Operating income | 21.7 | % | 33.7 | % |
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:
Vice President, Investor Relations and Strategic Corporate Communications
Director, Investor Relations