Full Press Release Details
Alcon s Third Quarter Sales Rise 12.4 Percent
HUNENBERG, Switzerland October 23, 2006 Alcon, Inc. (NYSE:ACL) reported global sales of $1,203.8 million for the third quarter of 2006, an increase of 12.4 percent over global sales in the third quarter of 2005, or 11.3 percent excluding the impact of foreign exchange fluctuations. Reported net earnings for the third quarter of 2006 were $232.1 million, or $0.76 per share on a diluted basis, compared to $295.8 million, or $0.95 per share for the third quarter of 2005. Earnings in the third quarter of 2006 included an impairment charge related to certain assets of the company s refractive laser business. The impact of this non-cash charge was $92.0 million after income taxes, or $0.30 per share on a diluted basis. Net earnings in the third quarter of 2006 also included expenses related to the implementation of Statement of Financial Accounting Standards (SFAS)
123(R), which were not incurred in the third quarter of 2005. The impact of SFAS 123(R) was $11.1 million after income taxes, or $0.03 per share on a diluted basis. Excluding these two items, adjusted net earnings in the third quarter of 2006 increased to $335.2 million, or $1.09 on a diluted basis. Adjusted net earnings for this year s third quarter grew 13.3 percent compared to the third quarter of 2005, while adjusted earnings per share grew 14.7 percent, due to a lower number of shares outstanding as a result of the company s share repurchase program. A reconciliation of reported and adjusted net earnings and earnings per share for the third quarter and year to date is included in the financial tables below.
Our core operating strategies, focusing on introducing innovative new products in all of our product areas and building brands globally, continue to deliver excellent results, said Cary Rayment, Alcon s chairman, president and chief executive officer. Healthy sales growth led to a strong overall third quarter in terms of earnings per share, especially considering the increased investment in R&D. In fact, on a comparable basis to the first nine months of 2005, excluding the impact of the AMO patent settlement, impairment charge and new SFAS 123(R) expenses, year to date earnings per share are up more than 19 percent, reflecting our ability to realize operating leverage in our results.
Third Quarter Sales Highlights
Highlights of sales for the third quarter of 2006 are provided below. Unless otherwise noted, all comparisons are versus the third quarter of 2005.
Sales of cataract and vitreoretinal products grew 6.9 percent to $324.7 million, with equipment, procedure packs and viscoelastics all contributing to growth. Within this category, sales of vitreoretinal products were especially strong, growing 15.0 percent on new equipment shipments and the continued upgrade to premium procedure packs and accessories. Refractive revenue increased 4.3 percent.
Third Quarter Earnings Details
Highlights of earnings for the third quarter of 2006 are provided below. Unless otherwise noted, all comparisons are versus the third quarter of 2005.
New Product and R&D Pipeline Update
Summarized below are updates on selected new products and significant research and development activities for the third quarter of 2006.
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 Bayer AG and licensed to Alcon, Inc. by Bayer Healthcare AG; ArxxantTM, which is a trademark of Eli Lilly and Company; and Aganocide
which is a trademark of NovaCal Pharmaceuticals, Inc. Moxifloxacin is licensed to Alcon, Inc. by Bayer Healthcare 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, | ||||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||
| Sales | $ | 1,203.8 | $ | 1,071.1 | $ | 3,671.7 | $ | 3,313.6 | |||||
| Cost of goods sold | 301.4 | 246.4 | 914.9 | 822.7 | |||||||||
| Gross profit | 902.4 | 824.7 | 2,756.8 | 2,490.9 | |||||||||
| Selling, general and administrative | 361.1 | 331.1 | 1,012.6 | 1,009.4 | |||||||||
| Research and development | 134.0 | 103.6 | 377.6 | 302.9 | |||||||||
| Amortization of intangibles | 146.3 | 22.1 | 187.4 | 64.1 | |||||||||
| Operating income | 261.0 | 367.9 | 1,179.2 | 1,114.5 | |||||||||
| Other income (expense): | |||||||||||||
| Gain (loss) from foreign currency, net | (0.7 | ) | 0.5 | (10.1 | ) | 2.3 | |||||||
| Interest income | 16.9 | 12.8 | 55.9 | 33.4 | |||||||||
| Interest expense | (10.8 | ) | (10.1 | ) | (32.6 | ) | (28.2 | ) | |||||
| Other, net | 4.4 | 3.9 | 13.0 | 3.9 | |||||||||
| Earnings before income taxes | 270.8 | 375.0 | 1,205.4 | 1,125.9 | |||||||||
| Income taxes | 38.7 | 79.2 | 212.0 | 255.6 | |||||||||
| Net earnings | $ | 232.1 | $ | 295.8 | $ | 993.4 | $ | 870.3 | |||||
| Basic earnings per common share | $ | 0.77 | $ | 0.96 | $ | 3.26 | $ | 2.84 | |||||
| Diluted earnings per common share | $ | 0.76 | $ | 0.95 | $ | 3.21 | $ | 2.79 | |||||
| Basic weighted average common shares | 302,626,095 | 306,536,803 | 305,047,340 | 306,001,571 | |||||||||
| Diluted weighted average common shares | 306,869,441 | 312,525,956 | 309,594,257 | 311,700,220 |
ALCON, INC. AND SUBSIDIARIES
| Three Months Ended | Foreign | %Change in | ||||||||||||||
| September 30, | Currency | Constant | ||||||||||||||
| 2006 | 2005 | %Change | %Change | Currency | ||||||||||||
| GEOGRAPHIC SALES | ||||||||||||||||
| United States: | ||||||||||||||||
| Pharmaceutical | $ | 288.3 | $ | 260.9 | 10.5 | % | - | % | 10.5 | % | ||||||
| Surgical | 239.0 | 225.3 | 6.1 | - | 6.1 | |||||||||||
| Consumer Eye Care | 91.4 | 74.3 | 23.0 | - | 23.0 | |||||||||||
| Total United States Sales | 618.7 | 560.5 | 10.4 | - | 10.4 | |||||||||||
| International: | ||||||||||||||||
| Pharmaceutical | 208.4 | 176.9 | 17.8 | 3.0 | 14.8 | |||||||||||
| Surgical | 289.7 | 259.0 | 11.9 | 1.9 | 10.0 | |||||||||||
| Consumer Eye Care | 87.0 | 74.7 | 16.5 | 2.3 | 14.2 | |||||||||||
| Total International Sales | 585.1 | 510.6 | 14.6 | 2.3 | 12.3 | |||||||||||
| Total Global Sales | $ | 1,203.8 | $ | 1,071.1 | 12.4 | % | 1.1 | % | 11.3 | % | ||||||
| PRODUCT SALES | ||||||||||||||||
| Infection/inflammation | $ | 176.7 | $ | 156.9 | 12.6 | % | ||||||||||
| Glaucoma | 175.7 | 153.3 | 14.6 | |||||||||||||
| Allergy | 72.9 | 73.3 | (0.5 | ) | ||||||||||||
| Otic | 76.3 | 74.9 | 1.9 | |||||||||||||
| Other pharmaceuticals/rebates | (4.9 | ) | (20.6 | ) | N/M | |||||||||||
| Total Pharmaceutical | 496.7 | 437.8 | 13.5 | 1.3 | % | 12.2 | % | |||||||||
| Intraocular lenses | 191.8 | 168.8 | 13.6 | |||||||||||||
| Cataract/vitreoretinal | 324.7 | 303.8 | 6.9 | |||||||||||||
| Refractive | 12.2 | 11.7 | 4.3 | |||||||||||||
| Total Surgical | 528.7 | 484.3 | 9.2 | 1.0 | 8.2 | |||||||||||
| Contact lens disinfectants | 99.5 | 77.3 | 28.7 | |||||||||||||
| Artificial tears | 51.2 | 42.2 | 21.3 | |||||||||||||
| Other | 27.7 | 29.5 | (6.1 | ) | ||||||||||||
| Total Consumer Eye Care | 178.4 | 149.0 | 19.7 | 1.1 | 18.6 | |||||||||||
| Total Global Sales | $ | 1,203.8 | $ | 1,071.1 | 12.4 | % | 1.1 | % | 11.3 | % |
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 to current year presentation.
ALCON, INC. AND SUBSIDIARIES
| Nine Months Ended | Foreign | %Change in | ||||||||||||||
| September 30, | Currency | Constant | ||||||||||||||
| 2006 | 2005 | %Change | %Change | Currency | ||||||||||||
| GEOGRAPHIC SALES | ||||||||||||||||
| United States: | ||||||||||||||||
| Pharmaceutical | $ | 915.3 | $ | 824.5 | 11.0 | % | - | % | 11.0 | % | ||||||
| Surgical | 706.8 | 637.0 | 11.0 | - | 11.0 | |||||||||||
| Consumer Eye Care | 263.4 | 215.1 | 22.5 | - | 22.5 | |||||||||||
| Total United States Sales | 1,885.5 | 1,676.6 | 12.5 | - | 12.5 | |||||||||||
| International: | ||||||||||||||||
| Pharmaceutical | 616.0 | 547.9 | 12.4 | - | 12.4 | |||||||||||
| Surgical | 914.5 | 856.4 | 6.8 | (1.5 | ) | 8.3 | ||||||||||
| Consumer Eye Care | 255.7 | 232.7 | 9.9 | 0.1 | 9.8 | |||||||||||
| Total International Sales | 1,786.2 | 1,637.0 | 9.1 | (0.8 | ) | 9.9 | ||||||||||
| Total Global Sales | $ | 3,671.7 | $ | 3,313.6 | 10.8 | % | (0.4 | )% | 11.2 | % | ||||||
| PRODUCT SALES | ||||||||||||||||
| Infection/inflammation | $ | 550.9 | $ | 491.0 | 12.2 | % | ||||||||||
| Glaucoma | 509.4 | 463.8 | 9.8 | |||||||||||||
| Allergy | 316.9 | 295.4 | 7.3 | |||||||||||||
| Otic | 194.8 | 178.0 | 9.4 | |||||||||||||
| Other pharmaceuticals/rebates | (40.7 | ) | (55.8 | ) | N/M | |||||||||||
| Total Pharmaceutical | 1,531.3 | 1,372.4 | 11.6 | - | % | 11.6 | % | |||||||||
| Intraocular lenses | 585.8 | 503.7 | 16.3 | |||||||||||||
| Cataract/vitreoretinal | 996.0 | 946.5 | 5.2 | |||||||||||||
| Refractive | 39.5 | 43.2 | (8.6 | ) | ||||||||||||
| Total Surgical | 1,621.3 | 1,493.4 | 8.6 | (0.8 | ) | 9.4 | ||||||||||
| Contact lens disinfectants | 278.4 | 226.4 | 23.0 | |||||||||||||
| Artificial tears | 151.7 | 129.4 | 17.2 | |||||||||||||
| Other | 89.0 | 92.0 | (3.3 | ) | ||||||||||||
| Total Consumer Eye Care | 519.1 | 447.8 | 15.9 | - | 15.9 | |||||||||||
| Total Global Sales | $ | 3,671.7 | $ | 3,313.6 | 10.8 | % | (0.4 | )% | 11.2 | % |
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 to current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, | December 31, | ||||||
| 2006 | 2005 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,176.8 | $ | 1,457.2 | |||
| Short term investments | 443.3 | 377.7 | |||||
| Trade receivables, net | 898.1 | 725.4 | |||||
| Inventories | 466.1 | 427.2 | |||||
| Deferred income tax assets | 177.6 | 131.5 | |||||
| Other current assets | 154.6 | 149.0 | |||||
| Total current assets | 3,316.5 | 3,268.0 | |||||
| Long term investments | 85.2 | 154.8 | |||||
| Property, plant and equipment, net | 869.1 | 829.6 | |||||
| Intangible assets, net | 106.4 | 293.7 | |||||
| Goodwill | 552.0 | 550.0 | |||||
| Long term deferred income tax assets | 146.1 | 77.5 | |||||
| Other assets | 57.3 | 54.6 | |||||
| Total assets | $ | 5,132.6 | $ | 5,228.2 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 161.5 | $ | 156.0 | |||
| Short term borrowings | 896.7 | 1,021.5 | |||||
| Current maturities of long term debt | 5.8 | 5.9 | |||||
| Other current liabilities | 950.1 | 1,095.1 | |||||
| Total current liabilities | 2,014.1 | 2,278.5 | |||||
| Long term debt, net of current maturities | 49.7 | 56.0 | |||||
| Long term deferred income tax liabilities | 16.0 | 15.8 | |||||
| Other long term liabilities | 352.9 | 321.8 | |||||
| Contingencies | |||||||
| Shareholders equity: | |||||||
| Common shares | 43.8 | 43.4 | |||||
| Additional paid-in capital | 1,020.9 | 806.3 | |||||
| Accumulated other comprehensive income | 143.2 | 90.9 | |||||
| Retained earnings | 2,847.4 | 2,282.3 | |||||
| Treasury shares, at cost | (1,355.4 | ) | (666.8 | ) | |||
| Total shareholders' equity | 2,699.9 | 2,556.1 | |||||
| Total liabilities and shareholders' equity | $ | 5,132.6 | $ | 5,228.2 |
Note: Certain reclassifications have been made to prior year amounts to conform to current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
| Three months ended September 30, | |||||||
| 2006 | 2005 | ||||||
| Cash provided by operating activities: | |||||||
| Net cash from operating activities | $ | 914.9 | $ | 1,073.1 | |||
| Cash provided by (used in) investing activities: | |||||||
| Purchases of property, plant and equipment | (145.1 | ) | (106.7 | ) | |||
| Purchases of intangible assets | - | (43.2 | ) | ||||
| Net purchases of available-for-sale investments | 49.2 | (381.3 | ) | ||||
| Proceeds from sale of assets | 1.3 | 2.2 | |||||
| Net cash from investing activities | (94.6 | ) | (529.0 | ) | |||
| Cash provided by (used in) financing activities: | |||||||
| Net proceeds from (repayment of) short term debt | (133.1 | ) | (11.7 | ) | |||
| Repayment of long term debt | (5.8 | ) | (5.2 | ) | |||
| Dividends on common shares | (416.8 | ) | (302.0 | ) | |||
| Proceeds from exercise of stock options | 95.0 | 138.1 | |||||
| Tax benefits from share-based payment arrangements | 80.5 | - | |||||
| Acquisition of treasury shares | (728.4 | ) | (292.7 | ) | |||
| Net cash from financing activities | (1,108.6 | ) | (473.5 | ) | |||
| Effect of exchange rates on cash and cash equivalents | 7.9 | (51.5 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (280.4 | ) | 19.1 | ||||
| Cash and cash equivalents, beginning of period | 1,457.2 | 1,093.4 | |||||
| Cash and cash equivalents, end of period | $ | 1,176.8 | $ | 1,112.5 | |||
| Supplemental disclosure of cash flow information: | |||||||
| Cash paid during the period for the following: | |||||||
| Interest expense, net of amount capitalized | $ | 32.6 | $ | 28.1 | |||
| Income taxes | $ | 150.5 | $ | 111.8 |
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 | Impairment Charges | SFAS 123(R) Expenses | Non-GAAP Adjusted | |||||||||||
| Earnings before income taxes | $ | 270.8 | $ | 144.8 | $ | 16.4 | $ | 432.0 | ||||||
| Income Taxes | 38.7 | 52.8 | 5.3 | 96.8 | ||||||||||
| Net Earnings | $ | 232.1 | $ | 92.0 | $ | 11.1 | $ | 335.2 | ||||||
| Diluted earnings per common share | $ | 0.76 | $ | 0.30 | $ | 0.03 | $ | 1.09 | ||||||
| Other selected financial ratios | ||||||||||||||
| % Net Income Growth | (21.5 | ) | % | 13.3 | % | |||||||||
| % Earnings Per Share Growth | (20.0 | ) | % | 14.7 | % |
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in Millions, except per share data)
| Nine months ended September 30, 2006 (1) | |||||||||||||||||
| Non-GAAP Adjustments | |||||||||||||||||
| Reported | Patent Lawsuits Settlement | Impairment Charges | SFAS 123(R) Expenses | Non-GAAP Adjusted | |||||||||||||
| Earnings before income taxes | $ | 1,205.4 | $ | (119.0 | ) | $ | 144.8 | $ | 65.8 | $ | 1,297.0 | ||||||
| Income Taxes | 212.0 | (21.5 | ) | 52.8 | 21.1 | 264.4 | |||||||||||
| Net Earnings | $ | 993.4 | $ | (97.5 | ) | $ | 92.0 | $ | 44.7 | $ | 1,032.6 | ||||||
| Diluted earnings per common share | $ | 3.21 | $ | (0.31 | ) | $ | 0.30 | $ | 0.14 | $ | 3.34 | ||||||
| Other selected financial ratios | |||||||||||||||||
| % Net Income Growth | 14.1 | % | 18.6 | % | |||||||||||||
| % Earnings Per Share Growth | 15.1 | % | 19.7 | % |
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:
Investor Relations and Strategic Corporate Communications