- First quarter sales of $1.9 billion, up 5% or 2% constant
currency
- Strong commercial execution drives the global launch of new
product innovations
- Substantially completes separation process
- Full year guidance: sales of $7.8 to $8.0 billion and core
diluted EPS of $1.85 to $1.95
Alcon (SIX/NYSE:ALC), the global leader in eye care, reported
its financial results for the three months ended March 31, 2021.
For the first quarter of 2021, worldwide sales were $1.9 billion,
an increase of 5% on a reported basis and 2% on a constant currency
basis(2), as compared to the same quarter of the previous year.
First quarter 2021 diluted earnings per share were $0.17 and core
diluted earnings per share were $0.49.
First quarter 2021 key figures
Three months ended March
31
2021
2020
Net sales ($ millions)
1,910
1,822
Operating margin (%)
7.8%
(1.5)%
Core operating margin (%)(1)
18.0%
16.6%
Earnings/(loss) per share ($)
0.17
(0.12)
Core diluted earnings per share ($)(1)
0.49
0.45
"The first quarter was a solid start to the year, with healthy
sales, a return to 2019 core margin levels and the substantial
completion of our separation activities. Strong commercial
execution of our new product launches continues to drive market
share gains despite the continued impacts of COVID-19," said David
Endicott, Chief Executive Officer.
Mr. Endicott continued, "I want to thank the hundreds of Alcon
associates who have spent the past two years working to complete
our separation and establish our independence as the global leader
in eye care. Their extraordinary work is allowing us to devote more
time to accelerating innovation and driving above-market sales
growth. Our recent success validates our continued investment in a
robust product pipeline that will meet the future needs of eye care
professionals and their patients."
First quarter 2021 results
Worldwide sales for the first quarter were $1.9 billion, an
increase of 5% on a reported basis and 2% on a constant currency
basis, compared to the first quarter of 2020.
The following table highlights net sales by segment for the
first quarter of 2021:
Three months ended March
31
Change %
($ millions unless indicated
otherwise)
2021
2020
$
cc(2)
Surgical
Implantables
344
310
11
9
Consumables
535
519
3
—
Equipment/other
198
155
28
25
Total Surgical
1,077
984
9
7
Vision Care
Contact lenses
509
502
1
(1)
Ocular health
324
336
(4)
(5)
Total Vision Care
833
838
(1)
(3)
Net sales to third parties
1,910
1,822
5
2
Surgical momentum driven by equipment and implantables
Surgical net sales of $1.1 billion, which include implantables,
consumables and equipment/other, increased 9%, or 7% on a constant
currency basis, compared to the first quarter of 2020. Sales growth
was primarily driven by demand for cataract and refractive
equipment and other refractive products, as well as continued
strength in PanOptix and the launch of Vivity. In the prior year
period, implantables sales in Japan benefited from the PanOptix
launch and favorable market conditions. Consumables sales were
similar to the previous year's levels due to the continued impact
of COVID-19 on surgical procedures.
Vision Care impacted by prior year stocking activity
Vision Care net sales of $0.8 billion, which include contact
lenses and ocular health, declined 1%, or 3% on a constant currency
basis, compared to the first quarter of 2020. Contact lens sales
benefited from the recent launch of Precision1 sphere and toric,
but were more than offset by declines in international markets.
Ocular health net sales reflected strong demand for Pataday and the
recent launch of Pataday Extra Strength. Sales in the prior year
period benefited from higher than normal demand in the US for
ocular health products at the beginning of the COVID-19
pandemic.
Operating income
First quarter 2021 operating income was $149 million, which
includes charges of $125 million from the amortization of certain
intangible assets and a $45 million impairment of an intangible
asset. Excluding these and other adjustments, first quarter 2021
core operating income was $344 million. First quarter core
operating margin of 18.0% increased by 140 bps, due to an increase
in sales partially offset by increased investment in research and
development and marketing and sales spend. The prior year period
was impacted by increased provisions for expected credit losses due
to the COVID-19 pandemic. Foreign exchange had a positive 40 bps
impact on core operating margin.
Diluted earnings per share (EPS)
First quarter 2021 diluted earnings per share were $0.17 and
core diluted earnings per share were $0.49. The company declared
its first dividend of CHF 0.10 per share, which is expected to be
paid on May 6, 2021.
Balance sheet highlights
The Company ended the first quarter with a cash position of $1.6
billion. Cash flow from operations totaled $156 million and free
cash flow(3) amounted to $48 million compared to an outflow of $60
million in the previous year. Higher cash flow from operations was
partially offset by increased capital spending. Financial debts
totaled $4.1 billion, in line with prior year end. The Company
ended the first quarter with a net debt(4) position of $2.5
billion. The Company continues to have $1.0 billion available in
its existing revolving credit facility as of May 4, 2021.
Financial outlook
The Company provided its full year outlook as follows. This
assumes markets return to historical levels in the third quarter
and grow in the second half of the year.
Net sales
$7.8 to $8.0 billion
Core operating margin(1)
approximately 17%
Core diluted EPS(1)
$1.85 to $1.95
Webcast and Conference Call Instructions
The Company will host a conference call on May 5 at 2:00 p.m.
Central European Time / 8:00 a.m. Eastern Time to discuss its first
quarter 2021 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/2021/Alcons-First-Quarter-2021-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)
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.
(4)
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, 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 ongoing COVID-19 pandemic as well as other viral
or disease outbreaks as well as the availability of vaccines; 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; the possibility that various closing
conditions for the Simbrinza® transaction may not be satisfied or
waived, including that a governmental entity may prohibit, delay or
refuse to grant approval for the consummation of the transaction;
its ability to successfully transition the manufacture,
distribution and commercialization of Simbrinza® from Novartis
after closing; its ability to leverage existing relationships with
healthcare professionals to help drive patient adoption of
Simbrinza®; 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 and maintain 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. Product
names identified by a "®" or a "™" are trademarks that are not
owned by or licensed to Alcon or its subsidiaries and are the
property of their respective owners.
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.
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 March
31
($ millions unless indicated
otherwise)
2021
2020
United States
835
44
%
792
43
%
International
1,075
56
%
1,030
57
%
Net sales to third parties
1,910
100
%
1,822
100
%
Consolidated income statement
(unaudited)
Three months ended March
31
($ millions except earnings/(loss) per
share)
2021
2020
Net sales to third parties
1,910
1,822
Other revenues
20
19
Net sales and other revenues
1,930
1,841
Cost of net sales
(880
)
(952
)
Cost of other revenues
(19
)
(17
)
Gross profit
1,031
872
Selling, general & administration
(699
)
(677
)
Research & development
(166
)
(139
)
Other income
9
9
Other expense
(26
)
(93
)
Operating income/(loss)
149
(28
)
Interest expense
(31
)
(31
)
Other financial income & expense
(9
)
(10
)
Income/(loss) before taxes
109
(69
)
Taxes
(25
)
12
Net income/(loss)
84
(57
)
Earnings/(loss) per share ($)
Basic
0.17
(0.12
)
Diluted
0.17
(0.12
)
Weighted average number of shares
outstanding (millions)
Basic
489.7
488.6
Diluted
492.8
488.6
Balance sheet highlights
($ millions)
March 31, 2021
December 31, 2020
Cash and cash equivalents
1,564
1,557
Current financial debts
131
169
Non-current financial debts
3,979
3,949
Free cash flow
The following is a summary of free cash
flow for the three months ended March 31, 2021 and 2020, together
with a reconciliation to net cash flows from operating activities,
the most directly comparable IFRS measure:
Three months ended March
31
($ millions)
2021
2020
Net cash flows from operating
activities
156
30
Purchase of property, plant &
equipment
(108
)
(90
)
Free cash flow
48
(60
)
Net (debt)/liquidity
($ millions)
At March 31, 2021
Current financial debt
(131
)
Non-current financial debt
(3,979
)
Total financial debt
(4,110
)
Less liquidity:
Cash and cash equivalents
1,564
Derivative financial instruments
12
Total liquidity
1,576
Net (debt)
(2,534
)
Reconciliation of IFRS to Core
Results
Three months ended March 31, 2021
($ millions except earnings per share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments(2)
Separation costs(3)
Transformation
costs(4)
Other items(5)
Core results
Gross profit
1,031
125
45
—
—
—
1,201
Selling, general & administration
(699
)
—
—
7
—
—
(692
)
Research & development
(166
)
—
—
—
—
5
(161
)
Other income
9
—
—
—
—
(1
)
8
Other expense
(26
)
—
—
3
11
—
(12
)
Operating income
149
125
45
10
11
4
344
Income before taxes
109
125
45
10
11
4
304
Taxes(6)
(25
)
(23
)
(10
)
(2
)
(2
)
(1
)
(63
)
Net income
84
102
35
8
9
3
241
Basic earnings per share ($)
0.17
0.49
Diluted earnings per share ($)
0.17
0.49
Basic - weighted average shares
outstanding (millions)(7)
489.7
489.7
Diluted - weighted average shares
outstanding (millions)(7)
492.8
492.8
Refer to the associated explanatory
footnotes at the end of the 'Reconciliation of IFRS to Core
Results' tables.
Three months ended March 31, 2020
($ millions except (loss)/earnings per
share)
IFRS results
Amortization of certain
intangible assets(1)
Impairments (2)
Separation costs(3)
Transformation
costs(4)
Other items(5)
Core results
Gross profit
872
252
16
3
—
(10
)
1,133
Selling, general & administration
(677
)
—
—
3
—
—
(674
)
Research & development
(139
)
7
—
—
—
(20
)
(152
)
Other income
9
—
—
—
—
—
9
Other expense
(93
)
—
—
65
7
7
(14
)
Operating (loss)/income
(28
)
259
16
71
7
(23
)
302
(Loss)/income before taxes
(69
)
259
16
71
7
(23
)
261
Taxes(6)
12
(44
)
(4
)
(13
)
(1
)
8
(42
)
Net (loss)/income
(57
)
215
12
58
6
(15
)
219
Basic (loss)/earnings per share ($)
(0.12
)
0.45
Diluted (loss)/earnings per share ($)
(0.12
)
0.45
Basic - weighted average shares
outstanding (millions)(7)
488.6
488.6
Diluted - weighted average shares
outstanding (millions)(7)
488.6
491.2
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 March 31, 2021,
Research & development includes the amortization of option
rights. Other income includes a fair value adjustment of a
financial asset.
For the three months ended March 31, 2020,
Gross profit includes fair value adjustments of contingent
consideration liabilities. Research & development includes a
$34 million fair value adjustment of a contingent consideration
liability, partially offset by $14 million in amortization of
option rights. Other expense primarily includes fair value
adjustments of a financial asset.
(6)
For the three months ended March 31, 2021,
tax associated with operating income core adjustments of $195
million totaled $38 million with an average tax rate of 19.5%.
For the three months ended March 31, 2020,
total tax adjustments of $54 million include tax associated with
operating income core adjustments and discrete tax items. Tax
associated with operating income core adjustments of $330 million
totaled $64 million with an average tax rate of 19.4%. Core tax
adjustments for discrete items totaled $10 million primarily
related to tax expense from the delayed spin of a legal entity.
(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 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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version on businesswire.com: https://www.businesswire.com/news/home/20210504006261/en/
Investor Relations Christina
Cheng + 41 589 112 110 (Geneva) + 1 817 615 2789 (Fort Worth)
investor.relations@alcon.com
Media Relations Wes Warnock
+ 41 589 112 111 (Geneva) + 1 817 615 2501 (Fort Worth)
globalmedia.relations@alcon.com
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