- 2019 net sales to third parties up 3%, or 5% constant
currency (cc)
- Third consecutive year of top line growth
- Generated $920 million in cash from operations and free cash
flow of $367 million
- Full year 2020 outlook: net sales growth of 5% to 6% (cc)
and core EPS $1.95 to $2.05
Regulatory News:
Alcon (SIX: ALC) (NYSE: ALC), the global leader in eye care,
reported its financial results for the full year ended December 31,
2019. Full year worldwide net sales of $7.4 billion, increased 3%,
or 5% on a constant currency(2) basis, compared to the full year
ended December 31, 2018. Full year 2019 diluted losses per share
were $1.34, primarily as a result of non-cash amortization of
certain intangibles. Full year core earnings per share were $1.89,
driven by core operating income growth of 4%, or 11% on a constant
currency basis.
2019 key figures
Three months ended December
31
Twelve months ended December
31
2019
2018
2019
2018
Net sales ($ millions)
1,881
1,789
7,362
7,149
Operating margin (%)
(3.6)%
(4.2)%
(2.5)%
(3.5)%
Core operating margin (%)(1)
17.1%
14.5%
17.2%
17.0%
(Loss) per share ($)
(0.19)
(0.15)
(1.34)
(0.46)
Core diluted earnings per share ($)(1)
0.45
0.39
1.89
2.00
David Endicott, Chief Executive Officer, stated, "Last year was
a remarkable milestone in Alcon's history. We completed our
spin-off as an independent company and delivered strong growth in
net sales and improved core profitability. We achieved these
results while standing-up new functions, launching two important
new products in the US and installing new, flexible Vision Care
lines at several of our manufacturing facilities."
Mr. Endicott continued, "With the spin-off behind us, the year
ahead is about unlocking Alcon's potential in an attractive global
market for eye care. Continued investment behind our robust
pipeline and new product launches position us well to deliver upon
our growth aspirations. As the industry leader and innovator, we
are focused on developing solutions to address significant unmet
needs, improve patient outcomes and increase access to care. We
look forward to spearheading an exciting decade of innovation in
ophthalmology and optometry."
For the full year ended December 31, 2019, worldwide net sales
were $7.4 billion, up 3%, or 5% on a constant currency basis,
compared to the full year ended December 31, 2018, representing the
third consecutive year of constant currency top line growth, as the
business benefited from steady improvements in innovation, new
product flow and strong commercial execution.
The following table highlights net sales by segment:
Three months ended December
31
Change %
Twelve months ended December
31
Change %
($ millions unless indicated
otherwise)
2019
2018
$
cc(2)
2019
2018
$
cc(2)
Surgical
Implantables
338
290
17
17
1,210
1,136
7
9
Consumables
594
579
3
4
2,304
2,227
3
6
Equipment/other
172
158
9
10
660
636
4
6
Total Surgical
1,104
1,027
7
8
4,174
3,999
4
7
Vision Care
Contact lenses
460
450
2
3
1,969
1,928
2
4
Ocular health
317
312
2
3
1,219
1,222
—
2
Total Vision Care
777
762
2
3
3,188
3,150
1
3
Net sales to third parties
1,881
1,789
5
6
7,362
7,149
3
5
Surgical momentum driven by strong PANOPTIX reception
Full year Surgical net sales of $4.2 billion, which include
implantables, consumables and equipment/other, increased 4%, or 7%
on a constant currency basis, with growth in all three categories.
Implantables sales grew in the high-single digits, with strong
demand for PANOPTIX trifocal IOLs, particularly with the recent
launches in the US and Japan. Strong pull-through demand for
cataract and vit-ret drove the increase in consumable sales.
Equipment/other grew, driven by service revenue and procedural eye
drops, while base equipment sales remained broadly in line with
prior year.
Steady growth in Vision Care; PRECISION1 launch on track
Full year Vision Care net sales of $3.2 billion, which include
contact lenses and ocular health, increased 1%, or 3% on a constant
currency basis, compared to the full year ended December 31, 2018,
driven by the continued demand for DAILIES TOTAL1 and dry eye
products, offset by the decline in contact lens care. PRECISION1,
our newest SiHy contact lens, is off to a good start in the US,
with encouraging trends in new account activation.
Income statement highlights
Full year operating loss was $187 million, which includes $1
billion from the non-cash amortization of certain intangible
assets, $237 million of separation costs, $72 million of spin
readiness costs and $52 million of transformation program costs.
Excluding these and other adjustments, core operating income for
the full year was $1.3 billion. Core operating margin for the full
year of 17.2% increased by 20 bps, including an unfavorable impact
of 60 bps from foreign exchange, compared to the full year ended
December 31, 2018.
Diluted earnings per share (EPS)
Full year diluted losses per share for the twelve months ended
December 31, 2019 were $1.34 per share, including $1.84 per share
from non-cash amortization of certain intangibles and $0.62 per
share in non-cash tax expense resulting from Swiss tax reform. Full
year core diluted earnings were $1.89 per share.
Proposed dividend
The Company's Board of Directors proposes a dividend of CHF 0.19
per share for 2019, the Company's first proposed dividend as an
independent company. The Company's shareholders will vote on this
proposal at the 2020 Annual General Meeting on May 6, 2020.
Balance sheet highlights
The Company ended the year with cash and cash equivalents of
$822 million, an increase of $595 million. Cash flows from
operations totaled $920 million and free cash flow(5) amounted to
$367 million in 2019, despite significant investments and costs
related to the Spin-off and interest payments on financial
debts.
Debt totaled $3.5 billion as of December 31, 2019, including
$1.5 billion of the borrowings executed immediately prior to the
Spin-off and $2 billion in senior notes issued in September 2019 to
refinance certain pre Spin-off borrowings. The Company ended the
year with a net debt(3) position of $2.7 billion.
Financial Outlook; Investing in growth
The Company expects worldwide net sales growth for the full year
2020 of 5% to 6% on a constant currency basis, core operating
margin of 17.5% to 18.5%, and core effective tax rate(4) of 19.5%
to 21.5%. Full year core earnings per share is expected to range
between $1.95 to $2.05.
Webcast and Conference Call
Instructions
The Company will host a conference call on February 26 at 2:00
p.m. Central European Time / 8 a.m. Eastern Standard Time to
discuss its full year 2019 earnings results. The webcast can be
accessed online through Alcon's Investor Relations website.
Listeners should log on approximately 10 minutes in advance. A
replay will be available online within 24 hours after the
event.
Today, Alcon will issue its 2019 Annual Report, which will be
available on
https://investor.alcon.com/financials/annual-reports/default.aspx.
Alcon will also file its 2019 Annual Report on Form 20-F with the
US Securities and Exchange Commission today, and will post this
document on
https://investor.alcon.com/financials/sec-filings/default.aspx.
Alcon shareholders may receive a hard copy of either of these
documents, each of which contains our complete audited financial
statements, free of charge, upon request.
The Company's supplemental presentation materials can be found
online through Alcon's Investor Relations website under the Events
section or by clicking on
https://investor.alcon.com/news-and-events/events-and-presentations/event-details/2020/Alcons-Fourth-Quarter-Earnings-Conference-Call/default.aspx.
Footnotes (pages 1-3)
- 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.
- 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.
- 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.
- 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.
- Free cash flow, a non-IFRS measure. For additional information
regarding free cash flow, see the explanation of non-IFRS measures
and reconciliation tables in the 'Non-IFRS measures as defined by
the Company' and 'Financial Tables' sections.
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, including its ability to innovate
to compete effectively; its success in completing and integrating
strategic acquisitions; pricing pressure from changes in third
party payor coverage and reimbursement methodologies; global
economic, financial, legal, tax, political, and social change; the
ability to obtain regulatory clearance and approval of its products
as well as compliance with any post-approval obligations, including
quality control of its manufacturing; ongoing industry
consolidation; its ability to properly educate and train healthcare
providers on its products; changes in inventory levels or buying
patterns of its customers; its reliance on sole or limited sources
of supply; ability to service its debt obligations; the need for
additional financing through the issuance of debt or equity; 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; 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; data breaches; the implementation of its
enterprise resource planning system; its ability to attract and
retain qualified personnel; the accuracy of its accounting
estimates and assumptions, including pension plan obligations and
the carrying value of intangible assets; 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; its ability to operate as a stand-alone
company; whether the transitional services Novartis has agreed to
provide Alcon are sufficient; the impact of being listed on two
stock exchanges; the ability to declare and pay dividends; the
different rights afforded to its shareholders as a Swiss
corporation compared to a US corporation; 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, percentage changes measured in
constant currencies, EBITDA, free cash flow, and net
liquidity/(debt).
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.
EBITDA
Alcon defines earnings before interest, tax, depreciation and
amortization ("EBITDA") as net (loss)/income excluding income
taxes, depreciation of property, plant and equipment (including any
related impairment charges), depreciation of right-of-use assets,
amortization of intangible assets (including any related impairment
charges), interest expense and other financial income and expense.
Alcon management primarily uses EBITDA together with net
(debt)/liquidity to monitor leverage associated with financial
debts.
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
Net sales by region
Three months ended December
31
Twelve months ended December
31
($ millions unless indicated
otherwise)
2019
2018
2019
2018
United States
780
41
%
730
41
%
3,055
41
%
2,942
41
%
International
1,101
59
%
1,059
59
%
4,307
59
%
4,207
59
%
Net sales to third parties
1,881
100
%
1,789
100
%
7,362
100
%
7,149
100
%
Consolidated income statement (unaudited)
Three months ended December
31
Twelve months ended December
31
($ millions except (loss) per share)
2019
2018
2019
2018
Net sales to third parties
1,881
1,789
7,362
7,149
Sales to former parent
—
2
—
4
Other revenues
32
—
146
—
Net sales and other revenues
1,913
1,791
7,508
7,153
Cost of net sales
(972
)
(912
)
(3,719
)
(3,961
)
Cost of other revenues
(28
)
—
(127
)
—
Gross profit
913
879
3,662
3,192
Selling, general & administration
(714
)
(734
)
(2,847
)
(2,801
)
Research & development
(164
)
(166
)
(656
)
(587
)
Other income
20
(26
)
55
47
Other expense
(123
)
(28
)
(401
)
(99
)
Operating (loss)
(68
)
(75
)
(187
)
(248
)
Interest expense
(34
)
(5
)
(113
)
(24
)
Other financial income & expense
(5
)
(7
)
(32
)
(28
)
(Loss) before taxes
(107
)
(87
)
(332
)
(300
)
Taxes
16
14
(324
)
73
Net (loss)
(91
)
(73
)
(656
)
(227
)
(Loss) per share
Basic
(0.19
)
(0.15
)
(1.34
)
(0.46
)
Diluted
(0.19
)
(0.15
)
(1.34
)
(0.46
)
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)
December 31, 2019
December 31, 2018
Cash and cash equivalents
822
227
Current financial debts
261
47
Non-current financial debts
3,218
—
Free cash flow
The following is a summary of Alcon free cash flow for the full
year ended December 31, 2019 and 2018, together with a
reconciliation to net cash flows from operating activities, the
most directly comparable IFRS measure:
Twelve months ended December
31
($ millions)
2019
2018
Net cash flows from operating
activities
920
1,140
Purchase of property, plant &
equipment
(553
)
(524
)
Free cash flow
367
616
Net (debt)/liquidity
($ millions)
At December 31, 2019
Current financial debt
(261
)
Non-current financial debt
(3,218
)
Total financial debt
(3,479
)
Less liquidity:
Cash and cash equivalents
822
Derivative financial instruments
1
Total liquidity
823
Net (debt)/liquidity
(2,656
)
Reconciliation of IFRS to Core results
2019
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Separation costs(2)
Transformation
costs(3)
Legal items(4)
Other items(5)
Core Results
Gross profit
3,662
1,007
10
—
—
(16
)
4,663
Operating (loss)/income
(187
)
1,040
237
52
32
91
1,265
(Loss)/income before taxes
(332
)
1,040
237
52
32
91
1,120
Taxes(6)
(324
)
(140
)
(54
)
(7
)
(8
)
338
(195
)
Net (loss)/income
(656
)
900
183
45
24
429
925
Basic (loss)/earnings per share
(1.34
)
1.89
Diluted (loss)/earnings per share
(1.34
)
1.89
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
490.1
Adjustments to arrive at core operating
income
Selling, general & administration
(2,847
)
—
30
—
—
15
(2,802
)
Research & development
(656
)
33
4
—
—
35
(584
)
Other income
55
—
—
—
—
(9
)
46
Other expense
(401
)
—
193
52
32
66
(58
)
(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 Spin-off from Novartis and primarily include costs related
to IT and third party consulting fees.
(3)
Transformation costs, primarily related to
restructuring and third party consulting fees, for the multi-year
transformation program.
(4)
Includes legal settlement costs and
certain external legal fees.
(5)
Gross Profit includes $37 million in fair
value adjustments of contingent consideration liabilities,
partially offset by $21 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 $73
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 $38 million
in fair value adjustments for contingent consideration liabilities.
Other income primarily includes a realized gain on a financial
asset. Other expense primarily includes spin readiness costs, fair
value adjustments of a financial asset and other items.
(6)
Total tax adjustments of $129 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $1.5 billion totaled $215 million with an average
tax rate of 14.8%.
Core tax adjustments for discrete items
totaled $344 million, primarily including $304 million in non-cash
tax expense for re-measurement of deferred tax balances as a result
of Swiss tax reform, tax expense related to rate changes in the US
following legal entity reorganizations executed related to the
Spin-off, non-cash tax expense related to the re-measurement of
deferred tax assets and liabilities following a tax rate change in
India, and net changes in uncertain tax positions.
(7)
Core basic earnings per share is
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate 1.9 million dilutive shares associated with unvested
equity-based awards.
Reconciliation of IFRS to Core results
(continued)
2018
($ 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
3,192
996
376
—
—
(23
)
4,541
Operating (loss)/income
(248
)
1,007
378
9
28
38
1,212
(Loss)/income before taxes
(300
)
1,007
378
9
28
38
1,160
Taxes(6)
73
(186
)
Net (loss)/income
(227
)
974
Basic (loss)/earnings per share
(0.46
)
2.00
Diluted (loss)/earnings per share
(0.46
)
2.00
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
488.2
Adjustments to arrive at core operating
income
Selling, general & administration
(2,801
)
—
2
—
—
13
(2,786
)
Research & development
(587
)
11
—
—
—
47
(529
)
Other income
47
—
—
(4
)
—
(19
)
24
Other expense
(99
)
—
—
13
28
20
(38
)
(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. Certain amounts previously reported under
"restructuring items" in the 2018 Form 20-F have been reclassified
to "other items" to conform with presentation in the current
year.
(4)
Includes legal costs related to an
investigation.
(5)
Gross profit, selling, general &
administration 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 and a fair value adjustment of a contingent
consideration liability. Other income includes fair value
adjustments on a financial asset. Other expense includes
spin-readiness costs and other items. Certain amounts previously
reported under restructuring items in the 2018 Form 20-F have been
reclassified to other items to conform with presentation in the
current year.
(6)
Total tax adjustments of $259 million
included tax associated with operating income adjustments and
discrete tax items. Tax associated with operating income
adjustments of $1.5 billion totaled $237 million with average tax
rate of 16.2%. Core tax adjustments for discrete items totaled $22
million, including a net out of period income tax benefit of $55
million partially offset by net changes in uncertain tax positions
of $33 million.
(7)
For periods prior to the Spin-off, the
denominator for both core basic and diluted earnings per share was
calculated using the shares of common stock distributed in the
Spin-off.
Reconciliation of IFRS to Core results
(continued)
Three months ended December 31, 2019
($ millions except (loss)/earnings per
share)
IFRS Results
Amortization of certain
intangible assets(1)
Separation costs(2)
Transformation
costs(3)
Legal items(4)
Other items(5)
Core Results
Gross profit
913
253
3
—
—
5
1,174
Operating (loss)/income
(68
)
269
82
39
—
(1
)
321
(Loss)/income before taxes
(107
)
269
82
39
—
(1
)
282
Taxes(6)
16
(36
)
(17
)
(4
)
—
(18
)
(59
)
Net (loss)/income
(91
)
233
65
35
—
(19
)
223
Basic (loss)/earnings per share
(0.19
)
0.46
Diluted (loss)/earnings per share
(0.19
)
0.45
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
491.0
Adjustments to arrive at core operating
income
Selling, general & administration
(714
)
—
9
—
—
1
(704
)
Research & development
(164
)
16
1
—
—
(4
)
(151
)
Other income
20
—
—
—
—
(8
)
12
Other expense
(123
)
—
69
39
—
5
(10
)
(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 Spin-off from Novartis and primarily include costs related
to IT and third party consulting fees.
(3)
Transformation costs, primarily related to
restructuring and third party consulting fees, for the multi-year
transformation program.
(4)
Includes legal settlement costs and
certain external legal fees.
(5)
Gross Profit includes $5 million in
manufacturing sites consolidation activities and integration of
recent acquisitions. Selling, general & administration includes
integration of recent acquisitions. Research & development
includes $24 million in fair value adjustments for contingent
consideration liabilities partially offset by $20 million for the
amortization of option rights and the integration of recent
acquisitions. Other income primarily includes a realized gain on a
financial asset. Other expense primarily includes fair value
adjustments of a financial asset and other items.
(6)
Total tax adjustments of $75 million
include tax associated with operating income core adjustments and
discrete tax items.
(7)
Core basic earnings per share is
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate 2.8 million dilutive shares associated with unvested
equity-based awards.
Reconciliation of IFRS to Core results
(continued)
Three months ended December 31, 2018
($ 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
879
245
—
—
—
2
1,126
Operating (loss)/income
(75
)
248
2
8
7
69
259
(Loss)/income before taxes
(87
)
248
2
8
7
69
247
Taxes(6)
14
(56
)
Net (loss)/income
(73
)
191
Basic (loss)/earnings per share
(0.15
)
0.39
Diluted (loss)/earnings per share
(0.15
)
0.39
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
488.2
Adjustments to arrive at core operating
income
Selling, general & administration
(734
)
—
2
—
—
13
(719
)
Research & development
(166
)
3
—
—
—
19
(144
)
Other income
(26
)
—
—
(2
)
1
24
(3
)
Other expense
(28
)
—
—
10
6
11
(1
)
(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. Certain amounts previously reported under
"restructuring items" in the 2018 Form 20-F have been reclassified
to "other items" to conform with presentation in the current
year.
(4)
Includes legal costs related to an
investigation.
(5)
Gross profit and selling, general &
administration include charges and reversal of charges related to a
product’s voluntary market withdrawal and spin readiness costs.
Research & development includes amortization of option rights.
Other income includes fair value adjustments on a financial asset.
Other expense includes spin-readiness costs. Certain amounts
previously reported under "restructuring items" in the 2018 Form
20-F have been reclassified to "other items" to conform with
presentation in the current year.
(6)
Total tax adjustments of $70 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income
adjustments of $334 million totaled $48 million with average tax
rate of 14.4%. Core tax adjustments for discrete items totaled $22
million, including a net out of period income tax benefit of $55
million partially offset by net changes in uncertain tax positions
of $33 million.
(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.
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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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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