- Third quarter sales of $1.8 billion, an increase of 4%, or
6% constant currency (cc)
- Expands new product pipeline with the successful launch of
PanOptix and PRECISION1 in the US
- Announces a transformation program that reinvests savings
into strategic growth initiatives supporting its long-term
financial goals
Regulatory News:
Alcon (SIX/NYSE:ALC), the global leader in eye care, reported
its financial results for the third quarter and nine months ended
September 30, 2019.
Third quarter and nine months 2019 key figures
Three months ended September
30
Nine months ended September
30
2019
2018
2019
2018
Net sales ($ millions)
1,841
1,762
5,481
5,360
Operating margin (%)
(1.0)%
(16.1)%
(2.2)%
(3.2)%
Core operating margin (%)(1)
17.4%
17.0%
17.2%
17.8%
(Loss) per share ($)
(0.14)
(0.42)
(1.16)
(0.32)
Core diluted earnings per share ($)(1)
0.46
0.50
1.43
1.60
For the third quarter of 2019, worldwide sales were $1.8
billion, an increase of 4% on a reported basis and an increase of
6% on a constant currency basis(2), as compared to the same quarter
of the previous year. Third quarter 2019 diluted losses per share
were $0.14 and core diluted earnings per share were $0.46.
"We reported another good quarter, delivering solid top line and
core operating income growth as a result of our increased focus and
disciplined execution," said David Endicott, Alcon’s Chief
Executive Officer. "Our recent launches of PRECISION1 and PanOptix
are off to a strong start, as customers show significant interest
in these key products. We also closed on a successful multi-tranche
bond offering that refinanced shorter-term debt into a long-term
capital structure.”
Mr. Endicott continued, “Our momentum is strong as an
independent company. We’re going to build on this success by
proactively implementing a multi-year transformation program that
will further simplify and streamline our processes, accelerate
innovation and strengthen our commercial position. We will reinvest
these savings to support new product development and launches. We
expect this will drive top line growth, deliver the operating
leverage described in our long term objectives and ultimately
create significant value for our customers, patients and
shareholders."
Third Quarter and Nine Months 2019 Results
Worldwide sales for the third quarter were $1.8 billion, an
increase of 4%, or 6% on a constant currency basis, compared to the
third quarter of 2018. Sales growth was driven by the Company's
four key growth platforms within the Surgical and Vision Care
segments: AT-IOLs, Vitreoretinal, DAILIES TOTAL1 contact lens and
Systane Complete eye drops.
For the nine months ended September 30, 2019, worldwide sales
were $5.5 billion, up 2%, or 5% on a constant currency basis,
compared to the nine months ended September 30, 2018.
The following table highlights net sales by segment for the
third quarter and nine months of 2019:
Three months ended September
30
Change %
Nine months ended September
30
Change %
($ millions unless indicated
otherwise)
2019
2018
$
cc(2)
2019
2018
$
cc(2)
Surgical
Implantables
287
269
7
8
872
846
3
6
Consumables
571
529
8
9
1,710
1,648
4
7
Equipment/other
161
167
(4
)
(2
)
488
478
2
5
Total Surgical
1,019
965
6
7
3,070
2,972
3
6
Vision Care
Contact lenses
518
491
5
7
1,509
1,478
2
5
Ocular health
304
306
(1
)
—
902
910
(1
)
2
Total Vision Care
822
797
3
4
2,411
2,388
1
4
Net sales to third parties
1,841
1,762
4
6
5,481
5,360
2
5
Surgical momentum continues; favorable results from PanOptix
Surgical net sales of $1.0 billion, which include implantables,
consumables and equipment/other, increased 6%, or 7% on a constant
currency basis compared to the third quarter 2018, driven by
high-single digit growth in the implantables and consumables
subcategories offset by a decline in equipment/other. Strong demand
for PanOptix, steady growth in monofocals and pull-through of
dedicated consumables were partially offset by a decline in
procedural eye drops and refractive equipment. Year-to-date,
Surgical net sales increased 3%, or 6% on a constant currency
basis, compared to the nine months ended September 30, 2018.
Innovation drives growth in Vision Care; PRECISION1 launch on
track
Vision Care net sales of $0.8 billion, which include contact
lenses and ocular health, increased 3%, or 4% on a constant
currency basis compared to the third quarter of 2018. Sales of
DAILIES TOTAL1 and Systane Complete continued to achieve
double-digit gains during the quarter. Year-to-date Vision Care net
sales for the first nine months increased 1%, or 4% on a constant
currency basis compared to the nine months ended September 30,
2018. The US launch of PRECISION1 is underway and early reception
has been favorable.
Core operating income growth
Third quarter 2019 operating loss was $18 million, which
includes charges of $258 million from the amortization of certain
intangible assets and $77 million of separation costs. Excluding
these and other adjustments, third quarter core operating income
was $320 million. Third quarter core operating margin of 17.4%
increased by 40 bps, including an unfavorable impact of 20 bps from
foreign exchange, compared to the third quarter of 2018.
Operating loss for the nine months ended September 30, 2019 was
$119 million, which includes charges of $771 million from the
amortization of certain intangible assets, $155 million of
separation costs and $72 million of spin readiness costs. Excluding
these and other adjustments, core operating income for the nine
month period was $944 million. Core operating margin for the nine
months ended September 30, 2019 of 17.2% decreased by 60 bps,
including an unfavorable impact of 70 bps from foreign exchange,
compared to the nine months ended September 30, 2018.
Diluted earnings per share (EPS)
Third quarter 2019 diluted losses per share were $0.14. Core
diluted earnings per share were $0.46 for the third quarter,
including $0.06 per share for interest on financial borrowings and
the write-off of unamortized debt issuance costs at the time of
refinancing.
Diluted losses per share for the nine months ended September 30,
2019 were $1.16 per share, including $0.62 per share in non-cash
tax expense resulting from Swiss tax reform. Core diluted earnings
were $1.43 per share for the nine months ended September 30,
2019.
Increase in authorized shares
Today, the Alcon board approved the issuance of 3 million
additional registered shares, nominal value CHF 0.04 per share, in
order to fulfill the future vesting of existing and future equity
compensation awards. These additional shares will be issued out of
the Company’s authorized share capital according to the authority
granted by the shareholders at the Company’s last Annual General
Meeting held on January 29, 2019 and reflected in the Company’s
Articles of Incorporation. The Company had 488.2 million shares
outstanding as of September 30, 2019. While the transaction will
increase the number of shares available for issuance under the
Company’s equity compensation plans, there will be no immediate
impact on the number of shares outstanding or earnings per share
calculations until shares are delivered to plan participants. The
transaction is expected to close by year-end.
Balance sheet highlights
The Company ended the third quarter with a cash position of $792
million. Debt totaled $3.5 billion as of September 30, 2019,
including $1.5 billion in borrowings executed immediately prior to
the Spin-Off and $2 billion in senior notes issued in September
2019. The Company ended the third quarter with a net debt(3)
position of $2.7 billion.
Announces new multi-year transformation program
Following a comprehensive review, the Company has identified
significant efficiencies from organizational realignment, the
creation of global shared services and process improvements. The
Company expects to reinvest these efficiency gains into key drivers
that will accelerate growth, create shareholder value and position
Alcon to achieve its long-term financial goals.
The Company expects to incur costs of $300 million and drive
savings of $200 to $225 million on an annualized run rate by 2023
that will be reinvested primarily in research and development and
new product marketing to achieve top line growth.
Financial Outlook
Based on solid performance year-to-date, the Company has updated
its full year 2019 guidance. The Company expects worldwide net
sales growth for the full year 2019 of 4%-5% on a constant currency
basis, core operating margin of 17%-17.5%, and core effective tax
rate(4) of 17%-18%.
Following a recent assessment, the Company increased its
expected separation costs from the original $300 million to
approximately $500 million, reflecting updated estimates for the
replication of IT systems and the transition of certain
manufacturing capabilities following its separation from Novartis.
Separation costs will continue to be core-adjusted from reported
results.
The Company reiterates its long-term financial goals for
mid-single digit sales CAGR, core operating margin of low-to-mid 20
percent and free cash flow of 2.5-3x last year's level.
Webcast and Conference Call
Instructions
The Company will host a conference call on November 20 at 2:00
p.m. Central European Time / 8 a.m. Eastern Time to discuss its
third quarter 2019 earnings results. The webcast can be accessed
online through Alcon's Investor Relations website,
investor.alcon.com. Listeners should log on approximately 10
minutes in advance. A replay will be available online within 24
hours after the event.
The Company's interim financial report and supplemental
presentation materials can be found online through Alcon's Investor
Relations website,
https://investor.alcon.com/financials/quarterly-results/, at the
beginning of the conference, or by clicking on the link:
https://investor.alcon.com/news-and-events/events-and-presentations/event-details/2019/Alcons-Third-Quarter-2019-Earnings-Conference/default.aspx
Footnotes (pages 1-4)
(1)
Core results, such as core operating
margin and core EPS, are non-IFRS measures. For additional
information, including a reconciliation of such core results to the
most directly comparable measures presented in accordance with
IFRS, see the explanation of non-IFRS measures and reconciliation
tables in the 'Non-IFRS measures as defined by the Company' and
'Financial Tables' sections.
(2)
Constant currency (cc) is a non-IFRS
measure. Growth in constant currency (cc) is calculated by
translating the current year’s foreign currency items into US
dollars using average exchange rates from the prior year and
comparing them to prior year values in US dollars. An explanation
of non-IFRS measures can be found in the 'Non-IFRS measures as
defined by the Company' section.
(3)
Net (debt)/liquidity is a non-IFRS
measure. For additional information regarding net (debt)/liquidity,
which is a non-IFRS measure, see the explanation of non-IFRS
measures and reconciliation tables in the 'Non-IFRS measures as
defined by the Company' and 'Financial Tables' sections.
(4)
Core effective tax rate, a non-IFRS
measure, is the applicable annual tax rate on core taxable income.
For additional information, see the explanation regarding
reconciliation of forward-looking guidance in the 'Non-IFRS
measures as defined by the Company' section.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: “anticipate,”
“intend,” “commitment,” “look forward,” “maintain,” “plan,” “goal,”
“seek,” “believe,” “project,” “estimate,” “expect,” “strategy,”
“future,” “likely,” “may,” “should,” “will” and similar references
to future periods.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
Alcon’s current beliefs, expectations and assumptions regarding the
future of its business, future plans and strategies, and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties and risks that
are difficult to predict. Such forward-looking statements are
subject to various risks and uncertainties facing Alcon, including:
the commercial success of its products and its ability to maintain
and strengthen its position in its markets; the success of its
research and development efforts; uncertainties regarding the
success of Alcon’s separation and spin-off from Novartis, including
the expected separation and transformation costs, as well as any
potential savings, incurred or realized by Alcon; pricing pressure
from changes in third party payor coverage and reimbursement
methodologies; global economic, financial, legal, tax, political,
and social change; ongoing industry consolidation; its ability to
maintain relationships in the healthcare industry; changes in
inventory levels or buying patterns of its customers; its reliance
on sole or limited sources of supply; its reliance on outsourcing
key business functions; its ability to protect its intellectual
property; the impact on unauthorized importation of its products
from countries with lower prices to countries with higher prices;
its success in completing and integrating strategic acquisitions;
the effects of litigation, including product liability lawsuits;
its ability to comply with all laws to which it may be subject;
effect of product recalls or voluntary market withdrawals,
including CyPass; data breaches; the implementation of its
enterprise resource planning system; its ability to attract and
retain qualified personnel; the sufficiency of its insurance
coverage; the accuracy of its accounting estimates and assumptions,
including pension plan obligations and the carrying value of
intangible assets; the ability to obtain regulatory clearance and
approval of its products as well as compliance with any
post-approval obligations; legislative and regulatory reform; the
ability of Alcon Pharmaceuticals Ltd. to comply with its investment
tax incentive agreement with the Swiss State Secretariat for
Economic Affairs in Switzerland and the Canton of Fribourg,
Switzerland; ability to service its debt obligations; the need for
additional financing; its ability to operate as a stand-alone
company; whether the transitional services Novartis has agreed to
provide Alcon are sufficient; the impact of the spin-off from
Novartis on Alcon’s shareholder base; the ability to declare and
pay dividends; and the effect of maintaining or losing its foreign
private issuer status under US securities laws. Additional factors
are discussed in Alcon’s filings with the United States Securities
and Exchange Commission, including its Form 20-F. Should one or
more of these uncertainties or risks materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those anticipated. Therefore, you should not rely
on any of these forward-looking statements. Forward-looking
statements in this press release speak only as of the date of its
filing, and Alcon assumes no obligation to update forward-looking
statements as a result of new information, future events or
otherwise.
Intellectual Property
This report may contain references to our proprietary
intellectual property. All product names appearing in italics or
ALL CAPS are trademarks owned by or licensed to Alcon Inc.
Non-IFRS measures as defined by the
Company
Alcon uses certain non-IFRS metrics when measuring performance,
including when measuring current period results against prior
periods, including core results, constant currencies, net
(debt)/liquidity, and free cash flow.
Because of their non-standardized definitions, the non-IFRS
measures (unlike IFRS measures) may not be comparable to the
calculation of similar measures of other companies. These
supplemental non-IFRS measures are presented solely to permit
investors to more fully understand how Alcon management assesses
underlying performance. These supplemental non-IFRS measures are
not, and should not be viewed as, a substitute for IFRS
measures.
Core results
Alcon core results, including core operating income and core net
income, exclude all amortization and impairment charges of
intangible assets, excluding software, net gains and losses on fund
investments and equity securities valued at fair value through
profit and loss (FVPL), fair value adjustments of financial assets
in the form of options to acquire a company carried at FVPL,
obligations related to product recalls, and certain acquisition
related items. The following items that exceed a threshold of $10
million and are deemed exceptional are also excluded from core
results: integration and divestment related income and expenses,
divestment gains and losses, restructuring charges/releases and
related items, legal related items, gains/losses on early
extinguishment of debt or debt modifications, impairments of
property, plant and equipment and software, as well as income and
expense items that management deems exceptional and that are or are
expected to accumulate within the year to be over a $10 million
threshold.
Taxes on the adjustments between IFRS and core results take into
account, for each individual item included in the adjustment, the
tax rate that will finally be applicable to the item based on the
jurisdiction where the adjustment will finally have a tax impact.
Generally, this results in amortization and impairment of
intangible assets and acquisition-related restructuring and
integration items having a full tax impact. There is usually a tax
impact on other items, although this is not always the case for
items arising from legal settlements in certain jurisdictions.
Alcon believes that investor understanding of its performance is
enhanced by disclosing core measures of performance because, since
they exclude items that can vary significantly from period to
period, the core measures enable a helpful comparison of business
performance across periods. For this same reason, Alcon uses these
core measures in addition to IFRS and other measures as important
factors in assessing its performance.
A limitation of the core measures is that they provide a view of
Alcon operations without including all events during a period, such
as the effects of an acquisition, divestment, or
amortization/impairments of purchased intangible assets and
restructurings.
Constant currencies
Changes in the relative values of non-US currencies to the US
dollar can affect Alcon financial results and financial position.
To provide additional information that may be useful to investors,
including changes in sales volume, we present information about
changes in our net sales and various values relating to operating
and net income that are adjusted for such foreign currency
effects.
Constant currency calculations have the goal of eliminating two
exchange rate effects so that an estimate can be made of underlying
changes in the consolidated income statement excluding:
- the impact of translating the income statements of consolidated
entities from their non-US dollar functional currencies to the US
dollar; and
- the impact of exchange rate movements on the major transactions
of consolidated entities performed in currencies other than their
functional currency.
Alcon calculates constant currency measures by translating the
current year's foreign currency values for sales and other income
statement items into US dollars, using the average exchange rates
from the prior year and comparing them to the prior year values in
US dollars.
Free cash flow
Alcon defines free cash flow as net cash flows from operating
activities less cash flow associated with the purchase or sale of
property, plant and equipment. Free cash flow is presented as
additional information because Alcon management believes it is a
useful supplemental indicator of Alcon's ability to operate without
reliance on additional borrowing or use of existing cash. Free cash
flow is not intended to be a substitute measure for net cash flows
from operating activities as determined under IFRS.
Net liquidity/(debt)
Alcon defines net liquidity/(debt) as current and non-current
financial debt less cash and cash equivalents, current investments
and derivative financial instruments. Net liquidity/(debt) is
presented as additional information because management believes it
is a useful supplemental indicator of Alcon's ability to pay
dividends, to meet financial commitments and to invest in new
strategic opportunities, including strengthening its balance
sheet.
Growth rate and margin
calculations
For ease of understanding, Alcon uses a sign convention for its
growth rates such that a reduction in operating expenses or losses
compared to the prior year is shown as a positive growth.
Gross margins, operating income/(loss) margins and core
operating income margins are calculated based upon net sales to
third parties unless otherwise noted.
Reconciliation of guidance for
forward-looking non-IFRS measures
The forward-looking guidance included in this press release
cannot be reconciled to the comparable IFRS measures without
unreasonable efforts, because we are not able to predict with
reasonable certainty the ultimate amount or nature of exceptional
items in the fiscal year. These items are uncertain, depend on many
factors and could have a material impact on our IFRS results for
the guidance period.
Financial tables
Third quarter / nine months 2019 net sales by region
Three months ended September
30
Nine months ended September
30
($ millions unless indicated
otherwise)
2019
2018
2019
2018
United States
759
41
%
750
43
%
2,275
42
%
2,212
41
%
International
1,082
59
%
1,012
57
%
3,206
58
%
3,148
59
%
Net sales to third parties
1,841
100
%
1,762
100
%
5,481
100
%
5,360
100
%
Consolidated income statement (unaudited)
Three months ended September
30
Nine months ended September
30
($ millions except (loss) per share)
2019
2018
2019
2018
Net sales to third parties
1,841
1,762
5,481
5,360
Sales to former parent
—
—
—
2
Other revenues
27
—
114
—
Net sales and other revenues
1,868
1,762
5,595
5,362
Cost of net sales
(900
)
(1,194
)
(2,747
)
(3,049
)
Cost of other revenues
(18
)
—
(99
)
—
Gross profit
950
568
2,749
2,313
Selling, general & administration
(717
)
(692
)
(2,133
)
(2,067
)
Research & development
(179
)
(132
)
(492
)
(421
)
Other income
17
(8
)
35
73
Other expense
(89
)
(20
)
(278
)
(71
)
Operating (loss)
(18
)
(284
)
(119
)
(173
)
Interest expense
(35
)
(7
)
(79
)
(19
)
Other financial income & expense
(11
)
(7
)
(27
)
(21
)
(Loss) before taxes
(64
)
(298
)
(225
)
(213
)
Taxes
(2
)
91
(340
)
59
Net (loss)
(66
)
(207
)
(565
)
(154
)
(Loss) per share
Basic
(0.14
)
(0.42
)
(1.16
)
(0.32
)
Diluted
(0.14
)
(0.42
)
(1.16
)
(0.32
)
Weighted average number of shares
outstanding (millions)(1)
Basic
488.2
488.2
488.2
488.2
Diluted
488.2
488.2
488.2
488.2
(1)
For periods prior to the spin-off, the
denominator for basic and diluted earnings per share was calculated
using the 488.2 million shares of common stock distributed in the
Spin-Off.
Balance sheet highlights
($ millions)
September 30, 2019
December 31, 2018
Cash and cash equivalents
792
227
Current financial debts
249
47
Non-current financial debts
3,216
—
Free cash flow
The following is a summary of Alcon free cash flow for the nine
months ended September 30, 2019 and 2018, together with a
reconciliation to net cash flows from operating activities, the
most directly comparable IFRS measure:
Nine months ended September
30
($ millions)
2019
2018
Net cash flows from operating
activities
574
914
Purchase of property, plant &
equipment
(314
)
(316
)
Free cash flow
260
598
Net (debt)/liquidity
($ millions)
At September 30, 2019
Current financial debt
(249
)
Non-current financial debt
(3,216
)
Total financial debt
(3,465
)
Less liquidity:
Cash and cash equivalents
792
Derivative financial instruments
8
Total liquidity
800
Net (debt)/liquidity
(2,665
)
Reconciliation of IFRS to Core results
Three months ended September 30, 2019
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Separation costs(2)
Other items(3)
Core Results
Gross profit
950
252
4
(31
)
1,175
Selling, general & administration
(717
)
8
5
(704
)
Research & development
(179
)
6
1
19
(153
)
Other income
17
17
Other expense
(89
)
64
10
(15
)
Operating (loss)/income
(18
)
258
77
3
320
(Loss)/income before taxes
(64
)
258
77
3
274
Taxes(4)
(2
)
(34
)
(19
)
5
(50
)
Net (loss)/income
(66
)
224
58
8
224
Basic (loss)/earnings per share
(0.14
)
0.46
Diluted (loss)/earnings per share
(0.14
)
0.46
Basic - weighted average shares
outstanding(5)
488.2
488.2
Diluted - weighted average shares
outstanding(5)
488.2
490.6
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Separation costs are expected to be
incurred over the two to three-year period following the completion
of the Company’s Spin-Off from Novartis and primarily include costs
related to IT and third party consulting fees.
(3)
Gross profit includes $38 million in fair
value adjustments of contingent consideration liabilities,
partially offset by $7 million in manufacturing sites consolidation
activities and integration related expenses for recent
acquisitions. Selling, general & administration primarily
includes expenses for integration of recent acquisitions. Research
& development primarily includes the amortization of option
rights and expenses for integration of recent acquisitions and a
post-marketing study following a product's voluntary market
withdrawal. Other expense primarily includes transformation program
costs and fair value adjustments of a financial asset.
(4)
Total tax adjustments of $48 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $338 million totaled $58 million with an average tax
rate of 17.2%.
Core tax adjustments for discrete items
totaled $10 million, primarily related to the re-measurement of
deferred tax assets and liabilities following a tax rate change in
India and other items.
(5)
Core basic earnings per share is
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares associated with unvested equity-based
awards as described in Note 6 to the Condensed Consolidated Interim
Financial Statements.
Reconciliation of IFRS to Core results
(continued)
Three months ended September 30, 2018
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Impairments(2)
Restructuring items(3)
Legal items(4)
Other items(5)
Core Results
Gross profit
568
249
337
(25
)
1,129
Selling, general & administration
(692
)
(692
)
Research & development
(132
)
3
(3
)
(132
)
Other income
(8
)
(1
)
16
7
Other expense
(20
)
3
4
(13
)
Operating (loss)/income
(284
)
252
337
(1
)
3
(8
)
299
(Loss)/income before taxes
(298
)
252
337
(1
)
3
(8
)
285
Taxes(6)
91
(41
)
Net (loss)/income
(207
)
244
Basic (loss)/earnings per share
(0.42
)
0.50
Diluted (loss)/earnings per share
(0.42
)
0.50
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
488.2
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Includes impairment charges related to
intangible assets.
(3)
Other income includes other restructuring
income and related items.
(4)
Includes legal costs related to an
investigation.
(5)
Gross Profit and Research &
development include charges and reversal of charges related to a
product’s voluntary market withdrawal. Research & development
also includes amortization of option rights. Other income includes
fair value adjustments on a financial asset. Other expense includes
other items.
(6)
Tax associated with operating income core
adjustments of $583 million totaled $132 million. The average tax
rate on the adjustments is 22.6% since the nine months ended,
September 30, 2018 core tax charge of 14.2% has been applied to the
pre-tax income of the period.
(7)
For periods prior to the Spin-Off, the
denominator for both core basic and diluted earnings per share was
calculated using the 488.2 million shares of common stock
distributed in the Spin-Off.
Reconciliation of IFRS to Core results
(continued)
Nine months ended September 30, 2019
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Separation costs(2)
Legal items(3)
Other items(4)
Core Results
Gross profit
2,749
754
7
(21
)
3,489
Selling, general & administration
(2,133
)
21
14
(2,098
)
Research & development
(492
)
17
3
39
(433
)
Other income
35
(1
)
34
Other expense
(278
)
124
32
74
(48
)
Operating (loss)/income
(119
)
771
155
32
105
944
(Loss)/income before taxes
(225
)
771
155
32
105
838
Taxes(5)
(340
)
(104
)
(37
)
(8
)
353
(136
)
Net (loss)/income
(565
)
667
118
24
458
702
Basic (loss)/earnings per share
(1.16
)
1.44
Diluted (loss)/earnings per share
(1.16
)
1.43
Basic - weighted average shares
outstanding(6)
488.2
488.2
Diluted - weighted average shares
outstanding(6)
488.2
489.6
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Separation costs are expected to be
incurred over the two to three-year period following the completion
of the Company’s Spin-Off from Novartis and primarily include costs
related to IT and third party consulting fees.
(3)
Includes legal settlement costs and
certain external legal fees.
(4)
Gross Profit includes $38 million in fair
value adjustments of contingent consideration liabilities,
partially offset by $17 million in spin readiness costs,
manufacturing sites consolidation activities, and integration of
recent acquisitions. Selling, general & administration
primarily includes spin readiness costs and the integration of
recent acquisitions. Research & development includes $53
million for the amortization of option rights, post-marketing study
following a product's voluntary market withdrawal, and the
integration of recent acquisitions, partially offset by $14 million
in fair value adjustments for contingent consideration liabilities.
Other income and expense primarily includes spin readiness costs,
transformation program costs, and fair value adjustments of a
financial asset and other items.
(5)
Total tax adjustments of $204 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $1,063 million totaled $172 million with an average
tax rate of 16.2%.
Core tax adjustments for discrete items
totaled $376 million, including a $301 million non-cash tax expense
for re-measurement of deferred tax balances as a result of Swiss
tax reform, $68 million tax expense related to rate changes in the
US following the Spin-Off, $5 million non-cash tax expense related
to the re-measurement of deferred tax assets and liabilities
following a tax rate change in India, and net changes in uncertain
tax positions.
(6)
Core basic earnings per share is
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares associated with unvested equity-based
awards as described in Note 6 to the Condensed Consolidated Interim
Financial Statements.
Reconciliation of IFRS to Core results
(continued)
Nine months ended September 30, 2018
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Impairments(2)
Restructuring items(3)
Legal items(4)
Other items(5)
Core Results
Gross profit
2,313
751
376
(25
)
3,415
Selling, general & administration
(2,067
)
(2,067
)
Research & development
(421
)
8
28
(385
)
Other income
73
(2
)
(1
)
(43
)
27
Other expense
(71
)
3
22
9
(37
)
Operating (loss)/income
(173
)
759
376
1
21
(31
)
953
(Loss)/income before taxes
(213
)
759
376
1
21
(31
)
913
Taxes(6)
59
(130
)
Net (loss)/income
(154
)
783
Basic (loss)/earnings per share
(0.32
)
1.60
Diluted (loss)/earnings per share
(0.32
)
1.60
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
488.2
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Includes impairment charges related to
intangible assets.
(3)
Includes restructuring income and charges
and related items.
(4)
Includes legal costs related to an
investigation.
(5)
Gross Profit and Research &
development include charges and reversal of charges related to a
product’s voluntary market withdrawal, including fair value
adjustment of the associated contingent consideration liability.
Research & development also includes amortization of option
rights. Other income and expense primarily include fair value
adjustments of a financial asset.
(6)
Tax associated with operating income core
adjustments of $1.1 billion totaled $189 million. The core tax rate
of 14.2% has been applied to core pre-tax income for the
period.
(7)
For periods prior to the Spin-Off, the
denominator for both core basic and diluted earnings per share was
calculated using the shares of common stock distributed in the
Spin-Off.
About Alcon
Alcon helps people see brilliantly. As the global leader in eye
care with a heritage spanning more than seven decades, we offer the
broadest portfolio of products to enhance sight and improve
people’s lives. Our Surgical and Vision Care products touch the
lives of more than 260 million people in over 140 countries each
year living with conditions like cataracts, glaucoma, retinal
diseases and refractive errors. Our more than 20,000 associates are
enhancing the quality of life through innovative products,
partnerships with eye care professionals and programs that advance
access to quality eye care. Learn more at www.alcon.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20191119006052/en/
Investor Relations Christina
Cheng + 41 589 112 110 (Geneva) + 1 817 615 2789 (Fort Worth)
investor.relations@alcon.com
Media Relations Wes Warnock
+ 41 589 112 111 (Geneva) + 1 817 615 2501 (Fort Worth)
globalmedia.relations@alcon.com
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