- Significant recovery in third quarter sales to $1.8 billion
drives strong improvement in operating results from the second
quarter
- Momentum in PanOptix and Precision1 driving market share
gains
- Continued progress on strategic initiatives, including
separation, SAP implementation, transformation and advancement of
our new contact lens manufacturing lines
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, 2020. For the third quarter of 2020, worldwide sales
were $1.8 billion, a decrease of 1% on a reported and constant
currency basis(2), as compared to the same quarter of the previous
year. Third quarter 2020 diluted losses per share were $0.30 and
core diluted earnings per share were $0.39.
Third quarter and nine months 2020 key figures
Three months ended September
30
Nine months ended September
30
2020
2019
2020
2019
Net sales ($ millions)
1,818
1,841
4,838
5,481
Operating margin (%)
(7.1)%
(1.0)%
(12.9)%
(2.2)%
Core operating margin (%)(1)
15.3%
17.4%
10.4%
17.2%
(Loss) per share ($)
(0.30)
(0.14)
(1.28)
(1.16)
Core diluted earnings per share ($)(1)
0.39
0.46
0.63
1.43
"Our third quarter results demonstrate strong performance on the
back of solid market recovery as both Ophthalmology and Optometry
practices increased their patient flow, particularly in the US. I
am pleased with the progress we're making on our strategic
initiatives, while managing change in a challenging environment,"
said David Endicott, Chief Executive Officer.
Mr. Endicott continued, "The investments we have made in our
people, culture and infrastructure have gone a long way in building
significant organizational resilience. Our innovation is meeting
customer and patient needs as evidenced by strong market share
gains. We believe we are well positioned to drive top-line growth
and create long-term shareholder value as the markets continue to
recover."
Third quarter and nine months 2020 results
Worldwide sales for the third quarter were $1.8 billion, a
decrease of 1% on a reported and constant currency basis, compared
to the third quarter of 2019. Demand for eye care in both
franchises rebounded from second quarter levels and outpaced the
market recovery due to solid performance of key product initiatives
and market share gains.
For the nine months ended September 30, 2020, worldwide sales
were $4.8 billion, a decrease of 12%, or 11% on a constant currency
basis, compared to the nine months ended September 30, 2019,
primarily due to a broad slowdown from the COVID-19 pandemic in the
second quarter with substantial recovery in the third quarter.
The following table highlights net sales by segment for the
third quarter and nine months of 2020:
Three months ended September
30
Change %
Nine months ended September
30
Change %
($ millions unless indicated
otherwise)
2020
2019
$
cc(2)
2020
2019
$
cc(2)
Surgical
Implantables
290
287
1
2
776
872
(11
)
(10
)
Consumables
526
571
(8
)
(8
)
1,365
1,710
(20
)
(20
)
Equipment/other
180
161
12
13
441
488
(10
)
(8
)
Total Surgical
996
1,019
(2
)
(2
)
2,582
3,070
(16
)
(15
)
Vision Care
Contact lenses
517
518
—
(1
)
1,348
1,509
(11
)
(10
)
Ocular health
305
304
—
1
908
902
1
2
Total Vision Care
822
822
—
—
2,256
2,411
(6
)
(5
)
Net sales to third parties
1,818
1,841
(1
)
(1
)
4,838
5,481
(12
)
(11
)
Surgical recovery driven by product initiatives and market
recovery
Surgical net sales of $996 million, which include implantables,
consumables and equipment/other, decreased 2% on a reported and
constant currency basis, compared to the third quarter of 2019.
Implantables continued to benefit from the strong adoption and
market share gains of PanOptix, partially offset by a decline in
monofocal intraocular lenses. Consumables sales declined,
reflecting the continued impact of COVID-19, but outperformed
market trends in surgical procedures. Equipment/other sales
increased, mainly driven by innovation in surgical diagnostics and
phaco accessories and by a one-time benefit. For the nine months
ended September 30, 2020, Surgical net sales decreased 16%, or 15%
on a constant currency basis, compared to the nine months ended
September 30, 2019.
Vision Care recovery underway; Precision1 launch gaining
momentum
Vision Care net sales of $822 million, which include contact
lenses and ocular health, were flat on a reported and constant
currency basis, compared to the third quarter of 2019. Strong
performance in Precision1, the Company's newest daily SiHy contact
lens, Pataday drops for allergy relief and Systane drops for dry
eye were offset by declines in other daily disposable lenses,
artificial tears and contact lens care. Vision Care net sales for
the first nine months of 2020 decreased 6%, or 5% on a constant
currency basis, compared to the nine months ended September 30,
2019.
Operating income/loss
Third quarter 2020 operating loss was $129 million, which
includes charges of $255 million from the amortization of certain
intangible assets, $48 million of separation costs, $61 million of
impairment charges and $14 million of transformation program costs.
Excluding these and other adjustments, third quarter 2020 core
operating income was $279 million. Third quarter core operating
margin of 15.3% decreased from last year's core margin of 17.4%.
The decrease in core operating margin was due to higher inventory
provisions, unabsorbed manufacturing overhead costs and provisions
for expected credit losses, partially offset by reductions in
discretionary spend. Foreign exchange had a negative 40 bps impact
on core operating margin.
Operating loss for the nine months ended September 30, 2020 was
$623 million, which includes charges of $772 million from the
amortization of certain intangible assets, $181 million of
separation costs, $118 million of impairment charges and $34
million of transformation program costs. Excluding these and other
adjustments, core operating income for the first nine months of
2020 was $502 million and core operating margin was 10.4% compared
to 17.2% for the same period last year. Foreign exchange had a
negative 50 bps impact on core operating margin.
Diluted losses/earnings per share (EPS)
Third quarter 2020 diluted losses per share were $0.30. Core
diluted earnings per share were $0.39 for the third quarter.
Diluted losses per share for the nine months ended September 30,
2020 were $1.28. Core diluted earnings per share were $0.63 for the
nine months ended September 30, 2020.
Increase in authorized shares
Today, the Alcon board approved the issuance of 8 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 Annual General Meeting
held on January 29, 2019 and reflected in the Company’s Articles of
Incorporation, amended as of November 29, 2019. The Company had
489.2 million shares outstanding as of September 30, 2020. 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 over the course of the next several years. The
transaction is expected to close by year-end.
Balance sheet highlights
The Company ended the third quarter with a cash position of $1.4
billion. Financial debts totaled $4.1 billion, including $750
million of senior notes issued in late May 2020. The Company ended
the third quarter with a net debt(3) position of $2.7 billion. The
Company continues to have $1.0 billion available in its existing
revolving credit facility as of November 10, 2020.
Financial Outlook
Due to the uncertain scope and duration of the ongoing COVID-19
outbreak, the Company is unable to provide an estimate for
financial results for the full year 2020.
The Company is actively managing working capital, cash flow and
expenses and prioritizing capital allocation needs. In addition,
the Company is focused on preparing its commercial programs to
support the market recovery, including strategically building
inventory.
Webcast and Conference Call Instructions
The Company will host a conference call on November 11 at 2:00
p.m. Central European Time / 8:00 a.m. Eastern Time to discuss its
third quarter 2020 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 at the beginning of the conference, or by
clicking on the link:
https://investor.alcon.com/news-and-events/events-and-presentations/event-details/2020/Alcons-Third-Quarter-2020-Earnings-Conference-Call/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,
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,” “target,” “assume,” “believe,” “project,” “estimate,”
“expect,” “strategy,” “future,” “likely,” “may,” “should,” “will”
and similar references to future periods. Examples of
forward-looking statements include, among others, statements Alcon
makes regarding its liquidity, revenue, gross margin, effective tax
rate, foreign currency exchange movements, earnings per share, its
plans and decisions relating to various capital expenditures,
capital allocation priorities and other discretionary items, and
generally, its expectations concerning its future performance and
the effects of the COVID-19 pandemic on its businesses.
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 effect of the COVID-19 pandemic as well as other viral or
disease outbreaks; 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 and its Form 6-K furnished on May 12, 2020.
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's 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 (debt)/liquidity
Alcon defines net (debt)/liquidity as current and non-current
financial debt less cash and cash equivalents, current investments
and derivative financial instruments. Net (debt)/liquidity 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.
Financial tables
Third quarter / nine months 2020 net sales by region
Three months ended September
30
Nine months ended September
30
($ millions unless indicated
otherwise)
2020
2019
2020
2019
United States
846
47
%
759
41
%
2,131
44
%
2,275
42
%
International
972
53
%
1,082
59
%
2,707
56
%
3,206
58
%
Net sales to third parties
1,818
100
%
1,841
100
%
4,838
100
%
5,481
100
%
Consolidated income statement (unaudited)
Three months ended September
30
Nine months ended September
30
($ millions except (loss) per share)
2020
2019
2020
2019
Net sales to third parties
1,818
1,841
4,838
5,481
Other revenues
20
27
55
114
Net sales and other revenues
1,838
1,868
4,893
5,595
Cost of net sales
(972
)
(900
)
(2,778
)
(2,747
)
Cost of other revenues
(18
)
(18
)
(50
)
(99
)
Gross profit
848
950
2,065
2,749
Selling, general & administration
(685
)
(717
)
(1,957
)
(2,133
)
Research & development
(216
)
(179
)
(518
)
(492
)
Other income
7
17
25
35
Other expense
(83
)
(89
)
(238
)
(278
)
Operating (loss)
(129
)
(18
)
(623
)
(119
)
Interest expense
(32
)
(35
)
(93
)
(79
)
Other financial income & expense
(7
)
(11
)
(23
)
(27
)
(Loss) before taxes
(168
)
(64
)
(739
)
(225
)
Taxes
21
(2
)
113
(340
)
Net (loss)
(147
)
(66
)
(626
)
(565
)
(Loss) per share
Basic
(0.30
)
(0.14
)
(1.28
)
(1.16
)
Diluted
(0.30
)
(0.14
)
(1.28
)
(1.16
)
Weighted average number of shares
outstanding (millions)
Basic
489.1
488.2
488.9
488.2
Diluted
489.1
488.2
488.9
488.2
Balance sheet highlights
($ millions)
September 30, 2020
December 31, 2019
Cash and cash equivalents
1,409
822
Current financial debts
175
261
Non-current financial debts
3,928
3,218
Free cash flow
The following is a summary of Alcon free cash flow for the nine
months ended September 30, 2020 and 2019, together with a
reconciliation to net cash flows from operating activities, the
most directly comparable IFRS measure:
Nine months ended September
30
($ millions)
2020
2019
Net cash flows from operating
activities
384
574
Purchase of property, plant &
equipment
(269
)
(314
)
Free cash flow
115
260
Net (debt)/liquidity
($ millions)
At September 30, 2020
Current financial debt
(175
)
Non-current financial debt
(3,928
)
Total financial debt
(4,103
)
Less liquidity:
Cash and cash equivalents
1,409
Derivative financial instruments
17
Total liquidity
1,426
Net (debt)
(2,677
)
Reconciliation of IFRS to Core Results
Three months ended September 30, 2020
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments(2)
Separation costs(3)
Transformation
costs(4)
Post- employment
benefits(5)
Other items(6)
Core results
Gross profit
848
250
—
4
—
—
14
1,116
Selling, general & administration
(685
)
—
—
5
—
—
—
(680
)
Research & development
(216
)
5
61
—
—
—
5
(145
)
Other income
7
—
—
—
—
—
(1
)
6
Other expense
(83
)
—
—
39
14
12
—
(18
)
Operating (loss)/income
(129
)
255
61
48
14
12
18
279
(Loss)/income before taxes
(168
)
255
61
48
14
12
18
240
Taxes(7)
21
(44
)
(8
)
(7
)
(3
)
(2
)
(4
)
(47
)
Net (loss)/income
(147
)
211
53
41
11
10
14
193
Basic (loss)/earnings per share
(0.30
)
0.39
Diluted (loss)/earnings per share
(0.30
)
0.39
Basic - weighted average shares
outstanding(8)
489.1
489.1
Diluted - weighted average shares
outstanding(8)
489.1
492.0
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Includes impairment charges related to
intangible assets.
(3)
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.
(4)
Transformation costs, primarily related to
restructuring and third party consulting fees, for the multi-year
transformation program.
(5)
Includes impact from a pension plan
amendment.
(6)
Gross profit primarily includes losses on
disposal of property, plant & equipment. Research &
development includes amortization of option rights. Other income
includes fair value adjustments of financial assets.
(7)
Total tax adjustments of $68 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $408 million totaled $65 million with an average tax
rate of 15.9%.
(8)
Core basic earnings per share was
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares associated with unvested equity-based
awards as described in Note 5 to the Condensed Consolidated Interim
Financial Statements.
Reconciliation of IFRS to Core Results
(continued)
Three months ended September 30, 2019
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Separation costs(2)
Transformation
costs(3)
Other items(4)
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
8
2
(15
)
Operating (loss)/income
(18
)
258
77
8
(5
)
320
(Loss)/income before taxes
(64
)
258
77
8
(5
)
274
Taxes(5)
(2
)
(34
)
(19
)
(2
)
7
(50
)
Net (loss)/income
(66
)
224
58
6
2
224
Basic (loss)/earnings per share
(0.14
)
0.46
Diluted (loss)/earnings per share
(0.14
)
0.46
Basic - weighted average shares
outstanding(6)
488.2
488.2
Diluted - weighted average shares
outstanding(6)
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 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)
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 fair value adjustments
of a financial asset.
(5)
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 $10 million, primarily related to the re-measurement of
deferred tax asset and liabilities following a tax rate change in
India and other items.
(6)
Core basic earnings per share was
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares associated with unvested equity-based
awards as described in Note 5 to the Condensed Consolidated Interim
Financial Statements.
Reconciliation of IFRS to Core results
(continued)
Nine months ended September 30, 2020
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments(2)
Separation costs(3)
Transformation
costs(4)
Post- employment
benefits(5)
Other items(6)
Core results
Gross profit
2,065
752
57
11
—
—
18
2,903
Selling, general & administration
(1,957
)
—
—
14
—
—
—
(1,943
)
Research & development
(518
)
20
61
—
—
—
(6
)
(443
)
Other income
25
—
—
—
—
—
(4
)
21
Other expense
(238
)
—
—
156
34
12
—
(36
)
Operating (loss)/income
(623
)
772
118
181
34
12
8
502
(Loss)/income before taxes
(739
)
772
118
181
34
12
8
386
Taxes(7)
113
(131
)
(22
)
(31
)
(7
)
(2
)
3
(77
)
Net (loss)/income
(626
)
641
96
150
27
10
11
309
Basic (loss)/earnings per share
(1.28
)
0.63
Diluted (loss)/earnings per share
(1.28
)
0.63
Basic - weighted average shares
outstanding(8)
488.9
488.9
Diluted - weighted average shares
outstanding(8)
488.9
491.7
(1)
Includes recurring amortization for all
intangible assets other than software.
(2)
Includes impairment charges related to
intangible assets.
(3)
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.
(4)
Transformation costs, primarily related to
restructuring and third party consulting fees, for the multi-year
transformation program.
(5)
Includes impact from a pension plan
amendment.
(6)
Gross profit includes $23 million losses
on disposal of property, plant & equipment partially offset by
$5 million in fair value adjustments of contingent consideration
liabilities. Research & development includes a $34 million fair
value adjustment of a contingent consideration liability, partially
offset by $28 million for the amortization of option rights. Other
income includes fair value adjustments of financial assets.
(7)
Total tax adjustments of $190 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $1,125 million totaled $196 million with an average
tax rate of 17.4%.
Core tax adjustments for discrete items
totaled $6 million, primarily related to tax expense from the
delayed spin of a subsidiary.
(8)
Core basic earnings per share was
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares associated with unvested equity-based
awards as described in Note 5 to the Condensed Consolidated Interim
Financial Statements.
Reconciliation of IFRS to Core results
(continued)
Nine months ended September 30, 2019
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Separation costs(2)
Transformation
costs(3)
Legal items(4)
Other items(5)
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
13
32
61
(48
)
Operating (loss)/income
(119
)
771
155
13
32
92
944
(Loss)/income before taxes
(225
)
771
155
13
32
92
838
Taxes(6)
(340
)
(104
)
(37
)
(3
)
(8
)
356
(136
)
Net (loss)/income
(565
)
667
118
10
24
448
702
Basic (loss)/earnings per share
(1.16
)
1.44
Diluted (loss)/earnings per share
(1.16
)
1.43
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
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 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 $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 of a contingent consideration liability.
Other income and expense primarily includes spin readiness costs,
fair value adjustments of a financial asset and other items.
(6)
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 $301 million in non-cash tax
expense for re-measurement of deferred tax balances as a result of
Swiss tax reform and a $68 million tax expense related to rate
changes in the US following legal entity reorganizations executed
related to 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.
(7)
Core basic earnings per share was
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 5 to the Condensed Consolidated Interim
Financial Statements.
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@alcon.com
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