Alcon Posts 5.9 Percent Sales Growth for Third Quarter
HUENENBERG, Switzerland, Oct 27, 2009 (BUSINESS WIRE) --
Company: Alcon, Inc. (ACL)
--Organic sales growth was 9.0 percent
--Operating profit rose 17.0 percent to $578 million
--Sales of advanced technology intraocular lenses increased 34.2 percent
--Management raises outlook for full year earnings per share
Alcon, Inc. (NYSE:ACL) reported global sales rose 5.9 percent to $1,614 million for the third quarter of 2009, or a 9.0 percent increase excluding the impact of foreign exchange fluctuations. Net earnings for the third quarter of 2009 were $515 million, or $1.71 per diluted share. Excluding the impact of a $240 million tax benefit related to the refractive product line in 2008 and the impact of continuing expenses related to the first quarter 2009 reduction in force, adjusted net earnings for the third quarter 2009 would have grown 33.3 percent compared to non-GAAP adjusted net earnings for the third quarter of 2008.
"Continued execution of our operational strategies combined with an improved market environment drove our solid third quarter performance," said Kevin Buehler, Alcon's president and chief executive officer. "We continue to achieve organic sales growth and market share growth with contributions from multiple areas, but especially from advanced technology intraocular lenses, glaucoma treatments and emerging markets. We expect these factors to continue to support solid organic growth, which, along with a more favorable currency environment, allows us to raise our earnings outlook for the remainder of the year."
Sales Highlights
Summarized below are sales highlights for the third quarter of 2009. All growth comparisons are for the third quarter of 2009 compared to the third quarter of 2008. Organic sales growth rates exclude currency impacts and acquisitions and are non-GAAP measures that are reconciled in a table at the end of this release.
-- International organic sales growth was 10.1 percent (+4.5 percent reported), with the Brazil, Russia, India and China (BRIC) nations leading organic growth, rising 13.3 percent (+0.6 percent reported).
-- U.S. sales rose 7.6 percent as prescription demand improved and on strong revenue growth in glaucoma and advanced technology AcrySof(R) intraocular lenses.
-- Global sales of advanced technology intraocular lenses rose 37.7 percent organically (34.2 percent reported) due to U.S. market share gains of the AcrySof(R) IQ ReSTOR(R) +3.0 lens and broader and more frequent use of the AcrySof(R) IQ Toric lens by cataract surgeons.
-- Global glaucoma sales increased 18.2 percent, led by a 23.6 percent rise in global sales of the TRAVATAN(R) family of products (TRAVATAN(R), TRAVATAN Z(R) and DuoTrav(TM) ophthalmic solutions). Azopt(R) and Azarga(R) ophthalmic solutions also added to glaucoma sales growth, together rising 16.9 percent.
-- The launch of the Constellation(R) vitreoretinal system contributed to a 19.5 percent growth of sales in the company's vitreoretinal business.
Earnings Highlights
Summarized below are earnings highlights for the third quarter of 2009. All growth comparisons are for the third quarter of 2009 compared to the third quarter of 2008.
-- Gross profit margin was in line with management expectations at 75.3 percent compared to 77.2 percent in 2008. The decline was primarily attributable to the impact of foreign exchange rates on costs of goods sold in each period.
-- Operating profit rose 17.0 percent and operating profit margin increased from 32.4 percent to 35.8 percent of sales. This improvement resulted from cost management programs that reduced selling, general and administrative expenses to 29.4 percent from 32.9 percent of sales. Research and development expenses were 9.8 percent of sales and were lower than 2008 due to timing differences for research projects and licensing transactions between the two periods.
-- Net earnings in the third quarter of 2009 were $515 million compared to $627 million in 2008. Excluding a $240 million tax benefit in 2008 and the impact of continuing expenses related to the first quarter 2009 reduction in force, adjusted net earnings grew 33.3 percent. This increase was attributable to reduced operating expenses and investment portfolio gains compared to investment losses in the third quarter 2008.
Other Highlights
-- On September 15, 2009, Alcon acquired the Swiss biotechnology firm ESBATech AG providing the company with a sustainable platform of biologic development utilizing antibody fragment technology particularly suited to treat ocular diseases.
-- Alcon entered into a licensing and purchase option agreement in October with Potentia Pharmaceuticals for POT-4 for the treatment of age-related macular degeneration.
-- On October 2, 2009, the company launched brimonidine 0.15% in the United States which is the only non-branded version of Alphagan(R) P 0.15% on the market.
-- Alcon received approval for DisCoVisc(R) viscoelastic system, the PUREPOINT(TM) laser and the Laureate(R) world phaco system in Japan in the third quarter of 2009.
-- During the quarter Alcon received additional country approvals of Vigamox(R) ophthalmic solution and the drug is now approved in a majority of European Union countries.
-- The U.S. District Court for the District of Delaware issued an opinion on October 19, 2009 finding in Alcon's favor on all claims and defenses in the Vigamox case against Teva that was tried in March 2008.
Financial Guidance
The company reaffirmed its previously-issued sales guidance for full year 2009 organic sales growth to be in the mid-single digits. The company raised its guidance for full year 2009 diluted earnings per share on a U.S. GAAP basis to between $6.55 and $6.65 and between $6.60 and $6.70 on a non-GAAP adjusted basis (excluding restructuring charges taken in 2009). This increase reflects the positive results year to date and an improving market environment, partially mitigated by the expectation of higher R&D and SG&A expenses in the remainder of the year.
Company Description
Alcon, Inc. is the world's leading eye care company, with sales of $6.3 billion in 2008. Alcon, which has been dedicated to the ophthalmic industry for 65 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 Nestle, S.A., the world's largest food company. All trademarks noted in this release are the property of Alcon, Inc. For more information about Alcon, visit www.alcon.com.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(in millions, except share data)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Sales $ 1,614 $ 1,524 $ 4,784 $ 4,796
Cost of goods sold 399 348 1,168 1,161
Gross profit 1,215 1,176 3,616 3,635
Selling, general and administrative 474 501 1,414 1,512
Research and development 158 174 461 461
Amortization of intangibles 5 7 17 22
Operating income 578 494 1,724 1,640
Other income (expense):
Gain (loss) from foreign currency, net -- (10 ) (1 ) (7 )
Interest income 13 20 37 66
Interest expense (3 ) (13 ) (13 ) (45 )
Other, net 6 (42 ) 12 (52 )
Earnings before income taxes 594 449 1,759 1,602
Income taxes 79 (178 ) 210 (21 )
Net earnings $ 515 $ 627 $ 1,549 $ 1,623
Basic earnings per common share $ 1.72 $ 2.10 $ 5.19 $ 5.44
Diluted earnings per common share $ 1.71 $ 2.07 $ 5.15 $ 5.38
Basic weighted average common shares 298,875,564 299,076,483 298,734,923 298,428,116
Diluted weighted average common shares 301,894,468 302,636,080 300,856,409 301,920,346
ALCON, INC. AND SUBSIDIARIES
Global Sales
(USD in millions)
Three Months Ended Foreign
September 30, Currency Organic
2009 2008 Change Change Change
Geographic Sales
Alcon United States:
Pharmaceutical $ 324 $ 301 7.6 % -- % 7.6 %
Surgical 304 275 10.5 -- 10.5
Consumer Eye Care 105 105 -- -- --
Total United States Sales 733 681 7.6 -- 7.6
Alcon International:
Pharmaceutical 335 308 8.8 (7.4 ) 16.2
Surgical 435 417 4.3 (4.1 ) 8.4
Consumer Eye Care 111 118 (5.9 ) (5.9 ) --
Total International Sales 881 843 4.5 (5.6 ) 10.1
Total Global Sales $ 1,614 $ 1,524 5.9 (3.1 ) 9.0
Global Product Sales
Infection/inflammation $ 199 $ 208 (4.3 )% (3.8 )% (0.5 )%
Glaucoma 286 242 18.2 (3.7 ) 21.9
Allergy 97 85 14.1 (1.2 ) 15.3
Otic/nasal 106 86 23.3 (1.1 ) 24.4
Other pharmaceuticals/rebates (29 ) (12 ) N/M N/M N/M
Total Pharmaceutical 659 609 8.2 (3.8 ) 12.0
Intraocular lenses 278 256 8.6 (2.7 ) 11.3
Cataract/vitreoretinal 436 408 6.9 (2.2 ) 9.1
Refractive 25 28 (10.7 ) (3.6 ) (7.1 )
Total Surgical 739 692 6.8 (2.4 ) 9.2
Contact lens disinfectants 119 119 -- (1.7 ) 1.7
Artificial tears 73 73 -- (5.5 ) 5.5
Other 24 31 (22.6 ) (3.2 ) (19.4 )
Total Consumer Eye Care 216 223 (3.1 ) (3.1 ) --
Total Global Sales $ 1,614 $ 1,524 5.9 (3.1 ) 9.0
N/M - Not Meaningful
Note: Organic change calculates sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change 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 to current year presentation.
ALCON, INC. AND SUBSIDIARIES
Global Sales
(USD in millions)
Nine Months Ended Foreign
September 30, Currency Organic
2009 2008 Change Change Change
Geographic Sales
Alcon United States:
Pharmaceutical $ 1,022 $ 1,027 (0.5 )% -- % (0.5 )%
Surgical 858 805 6.6 -- 6.6
Consumer Eye Care 301 309 (2.6 ) -- (2.6 )
Total United States Sales 2,181 2,141 1.9 -- 1.9
Alcon International:
Pharmaceutical 976 956 2.1 (11.3 ) 13.4
Surgical 1,311 1,353 (3.1 ) (10.0 ) 6.9
Consumer Eye Care 316 346 (8.7 ) (11.0 ) 2.3
Total International Sales 2,603 2,655 (2.0 ) (10.7 ) 8.7
Total Global Sales $ 4,784 $ 4,796 (0.3 ) (5.9 ) 5.6
Global Product Sales
Infection/inflammation $ 609 $ 667 (8.7 )% (5.4 )% (3.3 )%
Glaucoma 793 705 12.5 (6.9 ) 19.4
Allergy 400 384 4.2 (1.5 ) 5.7
Otic/nasal 285 256 11.3 (2.0 ) 13.3
Other pharmaceuticals/rebates (89 ) (29 ) N/M N/M N/M
Total Pharmaceutical 1,998 1,983 0.8 (5.4 ) 6.2
Intraocular lenses 815 805 1.2 (6.9 ) 8.1
Cataract/vitreoretinal 1,276 1,263 1.0 (6.0 ) 7.0
Refractive 78 90 (13.3 ) (5.5 ) (7.8 )
Total Surgical 2,169 2,158 0.5 (6.3 ) 6.8
Contact lens disinfectants 341 356 (4.2 ) (3.4 ) (0.8 )
Artificial tears 208 209 (0.5 ) (9.6 ) 9.1
Other 68 90 (24.4 ) (6.6 ) (17.8 )
Total Consumer Eye Care 617 655 (5.8 ) (5.8 ) --
Total Global Sales $ 4,784 $ 4,796 (0.3 ) (5.9 ) 5.6
N/M - Not Meaningful
Note: Organic change calculates sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change 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 to current year presentation.
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except share data)
September 30, December 31,
2009 2008
Assets
Current assets:
Cash and cash equivalents $ 2,519 $ 2,449
Short term investments 378 564
Trade receivables, net 1,332 1,168
Inventories 656 574
Deferred income tax assets 159 221
Other current assets 230 243
Total current assets 5,274 5,219
Long term investments 150 24
Property, plant and equipment, net 1,246 1,138
Intangible assets, net 259 91
Goodwill 690 645
Long term deferred income tax assets 398 342
Other assets 138 92
Total assets $ 8,155 $ 7,551
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 284 $ 199
Short term borrowings 664 1,059
Current maturities of long term debt 1 1
Other current liabilities 1,003 931
Total current liabilities 1,952 2,190
Long term debt, net of current maturities 60 61
Long term deferred income tax liabilities 62 22
Other long term liabilities 681 587
Contingencies
Shareholders' equity:
Common shares, par value CHF 0.20 per share 42 42
Additional paid-in capital 1,508 1,449
Accumulated other comprehensive income 213 80
Retained earnings 4,076 3,699
Treasury shares, at cost (439 ) (579 )
Total shareholders' equity 5,400 4,691
Total liabilities and shareholders' equity $ 8,155 $ 7,551
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
Nine months ended September 30,
2009 2008
Cash provided by (used in) operating activities:
Net earnings $ 1,549 $ 1,623
Adjustments to reconcile net earnings to cash provided from
operating activities:
Depreciation 142 128
Amortization of intangibles 17 22
Share-based payments 58 70
Tax benefits (reversals) from share-based compensation 2 8
Deferred income taxes 41 (118 )
Loss (gain) on sale of assets 61 9
Unrealized depreciation (appreciation) on trading securities (73 ) 41
Other, net (3 ) 7
Changes in operating assets and liabilities:
Trade receivables (123 ) (15 )
Inventories (34 ) 13
Other assets (22 ) 24
Accounts payable 79 20
Other current liabilities 59 41
Other long term liabilities 22 (178 )
Net cash from operating activities 1,775 1,695
Cash provided by (used in) investing activities:
Purchases of property, plant and equipment (226 ) (215 )
Acquisition of business, net of cash acquired (149 ) --
Purchases of intangible assets (4 ) (28 )
Purchases of investments (795 ) (816 )
Proceeds from sales and maturities of investments 917 831
Other, net 7 4
Net cash from investing activities (250 ) (224 )
Cash provided by (used in) financing activities:
Net proceeds from (repayment of) short term debt (436 ) (498 )
Repayment of long term debt (1 ) (2 )
Dividends on common shares (1,048 ) (750 )
Acquisition of treasury shares (5 ) (44 )
Proceeds from exercise of stock options 21 120
Tax benefits from share-based payment arrangements 2 51
Net cash from financing activities (1,467 ) (1,123 )
Effect of exchange rates on cash and cash equivalents 12 9
Net increase (decrease) in cash and cash equivalents 70 357
Cash and cash equivalents, beginning of period 2,449 2,134
Cash and cash equivalents, end of period $ 2,519 $ 2,491
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
Net earnings
Q3 2009 Q3 2008 Growth
As Reported $ 515 $ 627 (17.9 )%
2008 Tax Benefit -- (240 )
2009 restructuring adjustment 1 --
As Adjusted $ 516 $ 387 33.3 %
Note: Adjusted net earnings measures the results of the company's operations without certain items that pertained only to the period presented. Management believes these measures are an important measure of the company's operations because it provides investors with a clearer picture of the core operations of the company. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission.
Reported Change Foreign Organic
Currency Change
Change
BRIC nation sales 0.6 % (12.7 )% 13.3 %
Global advanced technology intraocular lens sales 34.2 % (3.5 )% 37.7 %
Note: Organic change presents sales growth without the impact of foreign exchange fluctuations and acquisitions. Management believes organic sales change 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.
2009 reported $ 6.55-6.65 2009 restructuring adjustment 0.05 2009 adjusted $ 6.60-6.70
Note: Adjusted net earnings and diluted EPS measure the results of the company's operations without certain items that pertained only to the period presented. Management believes these measures are an important measure of the company's operations because it provides investors with a clearer picture of the core operations of the company. This measure is considered a non-GAAP financial measure as defined by Regulation G promulgated by the U.S. Securities and Exchange Commission.
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; a weakening economy could affect demand for our products; 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.
SOURCE: Alcon, Inc.
Alcon, Inc. Doug MacHatton, 817-551-8974 Vice President,Treasury and Investor and Public Relations doug.machatton@alconlabs.com or John Selzer, 817-568-6166 Director, Investor Relations john.selzer@alconlabs.com or Bob Peterson, 817-551-4687 Manager, Investor Relations robert.peterson@alconlabs.com www.alcon.com
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Company: Alcon, Inc. (ACL)
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