- Fourth quarter sales of $1.9 billion return to growth, up 2%
or 1% constant currency
- Continued recovery resulted in full year sales of $6.8
billion, 8% below last year
- New product launches driving market share gains; executing
on strategic initiatives
- Generated $823 million in cash from operations and $350
million in free cash flow
Regulatory News:
Alcon (SIX/NYSE:ALC), the global leader in eye care, reported
its financial results for the fourth quarter and full year ended
December 31, 2020. For the fourth quarter of 2020, worldwide sales
were $1.9 billion, an increase of 2% on a reported basis and an
increase of 1% on a constant currency basis(2), as compared to the
same quarter of the previous year. Fourth quarter 2020 diluted
earnings per share were $0.19 and core diluted earnings per share
were $0.41. Full year 2020 diluted losses per share were $1.09 and
core diluted earnings per share were $1.04.
Fourth quarter and full year 2020 key figures
Three months ended December
31
Twelve months ended December
31
2020
2019
2020
2019
Net sales ($ millions)
1,925
1,881
6,763
7,362
Operating margin (%)
7.3%
(3.6)%
(7.1)%
(2.5)%
Core operating margin (%)(1)
14.9%
17.1%
11.7%
17.2%
Earnings/(Loss) per share ($)
0.19
(0.19)
(1.09)
(1.34)
Core diluted earnings per share ($)(1)
0.41
0.45
1.04
1.89
"2020 was an extraordinary year as our 23,000+ associates around
the globe navigated the challenges of a global health crisis. Amid
this uncertainty, we made significant progress on our strategic
priorities. Our innovation pipeline continues to deliver exciting
new products for 2021, which will create meaningful benefits for
our patients and customers, fuel our top line trajectory and
capture market share," said David Endicott, Chief Executive
Officer.
Mr. Endicott continued, "The ongoing recovery of our business is
a testament to the durability of our end markets, agility and
motivation of our associates, and our ability to create value and
address unmet needs with an exciting pipeline of innovation."
Fourth quarter and full year 2020 results
Worldwide sales for the fourth quarter were $1.9 billion, an
increase of 2% on a reported basis and an increase of 1% on a
constant currency basis, compared to the fourth quarter of 2019.
Fourth quarter sales returned to growth, with strong performance in
North America partially offset by International sales.
For the twelve months ended December 31, 2020, worldwide sales
were $6.8 billion, a decrease of 8% on a reported and constant
currency basis, compared to the twelve months ended December 31,
2019. The significant impact of the broad shutdowns resulting from
the pandemic in the second quarter was partially offset by the
substantial recovery in the second half of the year as businesses
reopened and surgeries resumed.
The following table highlights net sales by segment for the
fourth quarter and full year of 2020:
Three months ended December
31
Change %
Twelve months ended December
31
Change %
($ millions unless indicated
otherwise)
2020
2019
$
cc(2)
2020
2019
$
cc(2)
Surgical
Implantables
350
338
4
4
1,126
1,210
(7
)
(6
)
Consumables
587
594
(1
)
(3
)
1,952
2,304
(15
)
(15
)
Equipment/other
191
172
11
10
632
660
(4
)
(3
)
Total Surgical
1,128
1,104
2
1
3,710
4,174
(11
)
(11
)
Vision Care
Contact lenses
490
460
7
5
1,838
1,969
(7
)
(7
)
Ocular health
307
317
(3
)
(3
)
1,215
1,219
—
1
Total Vision Care
797
777
3
1
3,053
3,188
(4
)
(4
)
Net sales to third parties
1,925
1,881
2
1
6,763
7,362
(8
)
(8
)
4Q20 Surgical growth driven by innovation
Surgical net sales of $1.1 billion, which include implantables,
consumables and equipment/other, increased 2%, or 1% on a constant
currency basis, compared to the fourth quarter of 2019, primarily
due to strong adoption of PanOptix, the launch of Vivity and demand
for innovation in surgical diagnostics and phaco equipment and
accessories. This was partially offset by reduced demand in
monofocal intraocular lenses and consumables as a result of the
continued impact of COVID-19 on procedures. For the twelve months
ended December 31, 2020, Surgical net sales decreased 11% compared
to the twelve months ended December 31, 2019.
4Q20 Vision Care growth driven by contact lenses; Precision1
gaining momentum
Vision Care net sales of $0.8 billion, which include contact
lenses and ocular health, grew 3%, or 1% on a constant currency
basis, compared to the fourth quarter of 2019. The strong
performance of contact lenses was driven by reusable lenses and the
continued growth of Precision1. The ongoing launch of Pataday
allergy relief eye drops partially offset declines in artificial
tears and contact lens care. Vision Care net sales for the full
year of 2020 decreased 4% compared to the twelve months ended
December 31, 2019.
Operating income/loss
Fourth quarter 2020 operating income was $141 million, which
includes charges of $249 million from the amortization of certain
intangible assets, $49 million of impairment charges and $36
million of separation costs, partially offset by a $166 million
gain on post-employment benefit plan amendments. Excluding these
and other adjustments, fourth quarter 2020 core operating income
was $287 million. Fourth quarter core operating margin of 14.9%
decreased from last year's core margin of 17.1%. Higher investments
in research and development and marketing and sales, in addition to
unabsorbed fixed overhead costs and inventory provisions, were
partly offset by favorable mix. Foreign exchange had a negative 40
bps impact on core operating margin.
Operating loss for the twelve months ended December 31, 2020 was
$482 million, which includes charges of $1.0 billion from the
amortization of certain intangible assets, $217 million of
separation costs, $167 million of impairment charges and $49
million of transformation program costs, partially offset by a $154
million net gain on post-employment benefit plan amendments and a
$63 million benefit for fair value adjustments of contingent
consideration liabilities. Excluding these and other adjustments,
core operating income in 2020 was $789 million and core operating
margin was 11.7% compared to 17.2% for the same period last year.
Foreign exchange had a negative 40 bps impact on core operating
margin.
Diluted earnings/losses per share (EPS)
Fourth quarter 2020 diluted earnings per share were $0.19. Core
diluted earnings per share were $0.41 for the fourth quarter.
Diluted losses per share for the twelve months ended December
31, 2020 were $1.09. Core diluted earnings per share were $1.04 for
the twelve months ended December 31, 2020.
Proposed dividend
The Company's Board of Directors proposed a dividend of CHF 0.10
per share, based on 2020 financial results. The Company's
shareholders will vote on this proposal at the 2021 Annual General
Meeting on April 28, 2021.
Balance sheet highlights
The Company ended the fourth quarter with a cash position of
$1.6 billion. Cash flow from operations totaled $823 million and
free cash flow(4) amounted to $350 million compared to $367 million
in the previous year, with lower cash flow from operations
partially offset by lower capital spending. Financial debts totaled
$4.1 billion, including $750 million of senior notes issued in May
2020. The Company ended the fourth quarter with a net debt(3)
position of $2.6 billion. The Company continues to have $1.0
billion available in its existing revolving credit facility as of
February 23, 2021.
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 2021.
The Company is managing discretionary spend in line with sales
recovery, and phasing capital expenditures while continuing with
separation, transformation and strategic investment priorities. In
addition, the Company is focused on preparing its commercial
programs to support the market recovery.
Webcast and Conference Call Instructions
The Company will host a conference call on February 24 at 2:00
p.m. Central European Time / 8:00 a.m. Eastern Time to discuss its
full year and fourth 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.
Today, Alcon will issue its 2020 Annual Report, which will be
available on
https://investor.alcon.com/financials/annual-reports/default.aspx.
Alcon will also file its 2020 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 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/2021/Alcons-Fourth-Quarter-and-Full-Year-2020-Earnings-Conference-Call/default.aspx
Footnotes (pages 1-3)
(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.
(4)
Free cash flow is 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, and our officers and
representatives may from time to time make, certain
“forward-looking statements” within the meaning of the safe harbor
provisions of the US 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, market growth assumptions, 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 and regional economic, financial, legal, tax,
political, and social change; data breaches or other disruptions of
its information technology systems; 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; the impact of a disruption in its global supply chain or
important facilities; ability to service its debt obligations; its
ability to comply with the US Foreign Corrupt Practices Act of 1977
and other applicable anti-corruption laws, particularly given that
it has entered into a three-year Deferred Prosecution Agreement
with the US Department of Justice; uncertainty and impact relating
to the potential phasing out of LIBOR and transition to alternative
reference rates; 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;
uncertainties regarding the success of Alcon’s separation and
Spin-off from Novartis and the subsequent transformation program,
including the expected separation and transformation costs, as well
as any potential savings, incurred or realized by Alcon; the
effects of litigation, including product liability lawsuits and
government investigations; its ability to comply with all laws to
which it may be subject; effect of product recalls or voluntary
market withdrawals; 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; 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; 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 manage environmental, social and governance matters to
the satisfaction of its many stakeholders, some of which may have
competing interests; 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 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, free cash flow and net (debt)/liquidity.
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, past service costs
for post-employment benefit plans, 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
Net sales by region
Three months ended December
31
Twelve months ended December
31
($ millions unless indicated
otherwise)
2020
2019
2020
2019
United States
844
44
%
780
41
%
2,975
44
%
3,055
41
%
International
1,081
56
%
1,101
59
%
3,788
56
%
4,307
59
%
Net sales to third parties
1,925
100
%
1,881
100
%
6,763
100
%
7,362
100
%
Consolidated income statement (unaudited)
Three months ended December
31
Twelve months ended December
31
($ millions except earnings/(loss) per
share)
2020
2019
2020
2019
Net sales to third parties
1,925
1,881
6,763
7,362
Other revenues
15
32
70
146
Net sales and other revenues
1,940
1,913
6,833
7,508
Cost of net sales
(1,052
)
(972
)
(3,830
)
(3,719
)
Cost of other revenues
(13
)
(28
)
(63
)
(127
)
Gross profit
875
913
2,940
3,662
Selling, general & administration
(737
)
(714
)
(2,694
)
(2,847
)
Research & development
(155
)
(164
)
(673
)
(656
)
Other income
210
20
235
55
Other expense
(52
)
(123
)
(290
)
(401
)
Operating income/(loss)
141
(68
)
(482
)
(187
)
Interest expense
(31
)
(34
)
(124
)
(113
)
Other financial income & expense
(6
)
(5
)
(29
)
(32
)
Income/(loss) before taxes
104
(107
)
(635
)
(332
)
Taxes
(9
)
16
104
(324
)
Net income/(loss)
95
(91
)
(531
)
(656
)
Earnings/(loss) per share ($)
Basic
0.19
(0.19
)
(1.09
)
(1.34
)
Diluted
0.19
(0.19
)
(1.09
)
(1.34
)
Weighted average number of shares
outstanding (millions)
Basic
489.2
488.2
489.0
488.2
Diluted
492.4
488.2
489.0
488.2
Balance sheet highlights
($ millions)
December 31, 2020
December 31, 2019
Cash and cash equivalents
1,557
822
Current financial debts
169
261
Non-current financial debts
3,949
3,218
Free cash flow
The following is a summary of Alcon free cash flow for the
twelve months ended December 31, 2020 and 2019, together with a
reconciliation to net cash flows from operating activities, the
most directly comparable IFRS measure:
Twelve months ended December
31
($ millions)
2020
2019
Net cash flows from operating
activities
823
920
Purchase of property, plant &
equipment
(479
)
(553
)
Proceeds from sale of property, plant
& equipment
6
—
Free cash flow
350
367
Net (debt)/liquidity
($ millions)
At December 31, 2020
Current financial debts
(169
)
Non-current financial debts
(3,949
)
Total financial debt
(4,118
)
Less liquidity:
Cash and cash equivalents
1,557
Derivative financial instruments
3
Total liquidity
1,560
Net (debt)
(2,558
)
Reconciliation of IFRS to Core Results
Three months ended December 31, 2020
($ millions except earnings per share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments(2)
Separation costs(3)
Transformation
costs(4)
Post- employ- ment
benefits(5)
Other items(7)
Core results
Gross profit
875
249
49
2
—
—
14
1,189
Operating income
141
249
49
36
15
(166
)
(37
)
287
Income before taxes
104
249
49
36
15
(166
)
(37
)
250
Taxes(8)
(9
)
(41
)
(12
)
(6
)
(3
)
40
(16
)
(47
)
Net income
95
208
37
30
12
(126
)
(53
)
203
Basic earnings per share ($)
0.19
0.41
Diluted earnings per share ($)
0.19
0.41
Basic - weighted average shares
outstanding (millions)(9)
489.2
489.2
Diluted - weighted average shares
outstanding (millions)(9)
492.4
492.4
Adjustments to arrive at core operating
income
Selling, general & administration
(737
)
—
—
8
—
—
—
(729
)
Research & development
(155
)
—
—
—
—
—
(19
)
(174
)
Other income
210
—
—
—
—
(166
)
(32
)
12
Other expense
(52
)
—
—
26
15
—
—
(11
)
Refer to the associated explanatory footnotes at the end of the
'Reconciliation of IFRS to Core Results' tables.
Three months ended December 31, 2019
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Separation costs(3)
Transformation
costs(4)
Other items(7)
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(8)
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 (millions)(9)
488.2
488.2
Diluted - weighted average shares
outstanding (millions)(9)
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
)
Refer to the associated explanatory footnotes at the end of the
'Reconciliation of IFRS to Core Results' tables.
Reconciliation of IFRS to Core results
(continued)
Twelve months ended December 31, 2020
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments(2)
Separation costs(3)
Transformation
costs(4)
Post- employ- ment
benefits(5)
Other items(7)
Core results
Gross profit
2,940
1,001
106
13
—
—
32
4,092
Operating (loss)/income
(482
)
1,021
167
217
49
(154
)
(29
)
789
(Loss)/income before taxes
(635
)
1,021
167
217
49
(154
)
(29
)
636
Taxes(8)
104
(172
)
(34
)
(37
)
(10
)
38
(13
)
(124
)
Net (loss)/income
(531
)
849
133
180
39
(116
)
(42
)
512
Basic (loss)/earnings per share ($)
(1.09
)
1.05
Diluted (loss)/earnings per share ($)
(1.09
)
1.04
Basic - weighted average shares
outstanding (millions)(9)
489.0
489.0
Diluted - weighted average shares
outstanding (millions)(9)
489.0
491.8
Adjustments to arrive core operating
income
Selling, general & administration
(2,694
)
—
—
22
—
—
—
(2,672
)
Research & development
(673
)
20
61
—
—
—
(25
)
(617
)
Other income
235
—
—
—
—
(166
)
(36
)
33
Other expense
(290
)
—
—
182
49
12
—
(47
)
Refer to the associated explanatory footnotes at the end of the
'Reconciliation of IFRS to Core Results' tables.
Twelve months ended December 31, 2019
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Separation costs(3)
Transformation
costs(4)
Legal items(6)
Other items(7)
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(8)
(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 (millions)(9)
488.2
488.2
Diluted - weighted average shares
outstanding (millions)(9)
488.2
490.1
Adjustments to arrive 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
)
Refer to the associated explanatory footnotes at the end of the
'Reconciliation of IFRS to Core Results' tables.
Explanatory footnotes to IFRS to Core reconciliation
tables
(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)
For the three months ended December 31,
2020, Other income includes impacts from post-employment benefit
plan amendments.
For the twelve months ended December 31,
2020, Other income and other expense include impacts from pension
and other post-employment benefit plan amendments.
(6)
Includes legal settlement costs and
certain external legal fees.
(7)
For the three months ended December 31,
2020, Gross profit includes losses on disposal of property, plant
& equipment and a fair value adjustment of a contingent
consideration liability. Research & development includes a $26
million fair value adjustment of a contingent consideration
liability, partially offset by $7 million in expenses primarily
related to the amortization of option rights. Other income includes
a gain relating to an extinguishment of certain potential
liabilities under the employee matters agreement executed at
Spin-off and fair value adjustments of financial assets.
For the three months ended December 31,
2019, 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.
For the twelve months ended December 31,
2020, Gross profit includes $35 million primarily for losses on
disposal of property, plant & equipment partially offset by $3
million in fair value adjustments of contingent consideration
liabilities. Research & development includes $60 million in
fair value adjustments of contingent consideration liabilities,
partially offset by $35 million in expenses primarily related to
the amortization of option rights. Other income includes a gain
relating to an extinguishment of certain potential liabilities
under the employee matters agreement executed at Spin-off and fair
value adjustments of financial assets.
For the twelve months ended December 31,
2019, 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.
(8)
For the three months ended December 31,
2020, total tax adjustments of $38 million include tax associated
with operating income core adjustments and discrete tax items. Tax
associated with operating income core adjustments of $146 million
totaled $25 million with an average tax rate of 17.1%. Core tax
adjustments for discrete items totaled $13 million, primarily
related to a change in estimate related to periods prior to the
Spin-off.
For the three months ended December 31,
2019, total tax adjustments of $75 million include tax associated
with operating income core adjustments and discrete tax items. Tax
associated with operating income core adjustments of $389 million
totaled $43 million with an average tax rate of 11.1%. Core tax
adjustments for discrete items were $32 million, primarily related
to rate changes in the US following legal entity reorganizations
executed related to the Spin-off.
For the twelve months ended December 31,
2020, total tax adjustments of $228 million include tax associated
with operating income core adjustments and discrete tax items. Tax
associated with operating income core adjustments of $1.3 billion
totaled $221 million with an average tax rate of 17.4%. Core tax
adjustments for discrete items totaled $7 million.
For the twelve months ended December 31,
2019, 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.
(9)
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 23,000 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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