- Second quarter sales of $1.2 billion, a decrease of 36%, or
34% constant currency
- Sequential monthly improvements since April, driven by the
global recovery
- Continued progress on strategic initiatives and innovation
roadmap
- Successfully raised $750 million from senior notes to
further strengthen liquidity
Alcon (SIX/NYSE:ALC), the global leader in eye care, reported
its financial results for the second quarter and first half ended
June 30, 2020. For the second quarter of 2020, worldwide sales were
$1.2 billion, a decrease of 36% on a reported basis and a decrease
of 34% on a constant currency basis(2), as compared to the same
quarter of the previous year. Second quarter 2020 diluted losses
per share were $0.86 and core diluted losses per share were
$0.21.
Second quarter and first half 2020 key figures
Three months ended June
30
Six months ended June
30
2020
2019
2020
2019
Net sales ($ millions)
1,198
1,863
3,020
3,640
Operating margin (%)
(38.9)%
(2.8)%
(16.4)%
(2.8)%
Core operating margin (%)(1)
(6.6)%
16.6%
7.4%
17.1%
(Loss) per share ($)
(0.86)
(0.80)
(0.98)
(1.02)
Core diluted (loss)/earnings per share
($)(1)
(0.21)
0.47
0.24
0.98
"We are encouraged by the sequential monthly improvement in
sales, which confirmed our recovery expectations. Despite the
significant level of uncertainty due to COVID-19, we continue to
stay on track with our major initiatives," said David Endicott,
Chief Executive Officer.
Mr. Endicott continued, "We are laser focused on executing our
strategic priorities: accelerating innovation, transforming new
Alcon and expanding our world class manufacturing capabilities.
These investments will sustain Alcon's market leadership, fuel
growth and expand our ability to serve more doctors, patients and
customers in a post-pandemic world."
Second quarter and first half 2020 results
Worldwide sales for the second quarter were $1.2 billion, a
decrease of 36%, or 34% on a constant currency basis, compared to
the second quarter of 2019. Sales were negatively impacted by
COVID-19 across all categories, partially offset by the growth of
PanOptix and the launch of Pataday. Key countries began to recover
in the latter part of the quarter as restrictions were eased.
For the first half of 2020, worldwide sales were $3.0 billion, a
decrease of 17%, or 15% on a constant currency basis, compared to
the first half of 2019, with the COVID-19 related decline in the
second quarter offsetting a strong start to the year.
The following table highlights net sales by segment for the
second quarter and first half of 2020:
Three months ended June
30
Change %
Six months ended June
30
Change %
($ millions unless indicated
otherwise)
2020
2019
$
cc(2)
2020
2019
$
cc(2)
Surgical
Implantables
176
300
(41
)
(40
)
486
585
(17
)
(15
)
Consumables
320
588
(46
)
(45
)
839
1,139
(26
)
(25
)
Equipment/other
106
163
(35
)
(32
)
261
327
(20
)
(18
)
Total Surgical
602
1,051
(43
)
(42
)
1,586
2,051
(23
)
(21
)
Vision Care
Contact lenses
329
493
(33
)
(32
)
831
991
(16
)
(15
)
Ocular health
267
319
(16
)
(14
)
603
598
1
3
Total Vision Care
596
812
(27
)
(25
)
1,434
1,589
(10
)
(8
)
Net sales to third parties
1,198
1,863
(36
)
(34
)
3,020
3,640
(17
)
(15
)
Surgical impacted by COVID-19 related restrictions on
procedures
Surgical net sales of $602 million, which include implantables,
consumables and equipment/other, decreased 43%, or 42% on a
constant currency basis, compared to the second quarter of 2019.
All categories were impacted by the COVID-19 pandemic. In the
implantables category, the decline was partially offset by demand
from the launch of PanOptix in Japan and the US. For the first half
of 2020, Surgical net sales decreased 23%, or 21% on a constant
currency basis, compared to the first half of 2019.
Vision Care impacted by COVID-19 related conditions
Vision Care net sales of $596 million, which include contact
lenses and ocular health, decreased 27%, or 25% on a constant
currency basis, compared to the second quarter of 2019. The decline
in sales was primarily driven by lower demand and widespread office
closures, partially offset by incremental revenues from the launch
of Pataday, Alcon's new over-the-counter solution for ocular
allergies. Net sales for the first half of 2020 decreased 10%, or
8% on a constant currency basis, compared to the first half of
2019.
Operating income/loss
Second quarter 2020 operating loss was $466 million, which
includes charges of $258 million from the amortization of certain
intangible assets, $62 million of separation costs, $41 million of
impairment charges and $13 million of transformation program costs.
Excluding these and other adjustments, second quarter 2020 core
operating loss was $79 million. Second quarter core operating
margin of negative 6.6% decreased from last year's core margin of
16.6%. The decrease in core operating margin was due to lower
sales, unabsorbed manufacturing overhead costs, increased
provisions for expected COVID-19 related credit losses and
increased inventory provisions, partially offset by a significant
reduction in discretionary spending.
Operating loss for the first half of the year was $494 million,
which includes charges of $517 million from the amortization of
certain intangible assets, $133 million of separation costs, $57
million of impairment charges and $20 million of transformation
program costs. Excluding these and other adjustments, core
operating income for the first half of 2020 was $223 million and
core operating margin was 7.4% compared to 17.1% for the same
period last year. First half and second quarter 2020 core margin
was negatively impacted by 70 bps from unfavorable foreign
exchange.
Diluted losses/earnings per share (EPS)
Second quarter 2020 diluted losses per share were $0.86. Core
diluted losses per share were $0.21 for the second quarter, driven
by the impact of COVID-19 on operations, partially offset by
significant cost reductions and the tax benefit in the current
period.
First half 2020 diluted losses per share were $0.98. Core
diluted earnings per share were $0.24 for the first half of 2020,
driven by the impact of COVID-19 on operations in the second
quarter offsetting core income in the first quarter.
Balance sheet highlights
The Company ended the second quarter with a cash position of
$1.3 billion. Financial debts totaled $4.1 billion as of June 30,
2020, including $750 million of senior notes issued in late May
2020. The Company ended the second quarter with a net debt(3)
position of $2.8 billion. The Company continues to have $1 billion
available in its existing revolving credit facility as of August
18, 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 inventory management and preparing its
commercial programs to support the market recovery.
To learn more about Alcon's efforts in COVID-19, read our
statement on alcon.com.
Webcast and Conference Call Instructions
The Company will host a conference call on August 19 at 2:00
p.m. Central European Summer Time / 8:00 a.m. Eastern Daylight Time
to discuss its second 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,
https://investor.alcon.com/financials/quarterly-results/, at the
beginning of the conference, or by clicking on the link:
https://investor.alcon.com/news-and-events/events-and-presentations/event-details/2020/Alcons-Second-Quarter-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.
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 financial results and financial position.
To provide additional information that may be useful to investors,
including changes in sales volume, we present information about
changes in our net sales and various values relating to operating
and net income that are adjusted for such foreign currency
effects.
Constant currency calculations have the goal of eliminating two
exchange rate effects so that an estimate can be made of underlying
changes in the consolidated income statement excluding:
- the impact of translating the income statements of consolidated
entities from their non-US dollar functional currencies to the US
dollar; and
- the impact of exchange rate movements on the major transactions
of consolidated entities performed in currencies other than their
functional currency.
Alcon calculates constant currency measures by translating the
current year's foreign currency values for sales and other income
statement items into US dollars, using the average exchange rates
from the prior year and comparing them to the prior year values in
US dollars.
Free cash flow
Alcon defines free cash flow as net cash flows from operating
activities less cash flow associated with the purchase or sale of
property, plant and equipment. Free cash flow is presented as
additional information because Alcon management believes it is a
useful supplemental indicator of Alcon's ability to operate without
reliance on additional borrowing or use of existing cash. Free cash
flow is not intended to be a substitute measure for net cash flows
from operating activities as determined under IFRS.
Net liquidity/(debt)
Alcon defines net liquidity/(debt) as current and non-current
financial debt less cash and cash equivalents, current investments
and derivative financial instruments. Net liquidity/(debt) is
presented as additional information because management believes it
is a useful supplemental indicator of Alcon's ability to pay
dividends, to meet financial commitments and to invest in new
strategic opportunities, including strengthening its balance
sheet.
Growth rate and margin
calculations
For ease of understanding, Alcon uses a sign convention for its
growth rates such that a reduction in operating expenses or losses
compared to the prior year is shown as a positive growth.
Gross margins, operating income/(loss) margins and core
operating income margins are calculated based upon net sales to
third parties unless otherwise noted.
Financial tables
Second quarter / first half 2020 net sales by region
Three months ended June
30
Six months ended June
30
($ millions unless indicated
otherwise)
2020
2019
2020
2019
United States
493
41
%
779
42
%
1,285
43
%
1,516
42
%
International
705
59
%
1,084
58
%
1,735
57
%
2,124
58
%
Net sales to third parties
1,198
100
%
1,863
100
%
3,020
100
%
3,640
100
%
Consolidated income statement (unaudited)
Three months ended June
30
Six months ended June
30
($ millions except (loss) per share)
2020
2019
2020
2019
Net sales to third parties
1,198
1,863
3,020
3,640
Other revenues
16
40
35
87
Net sales and other revenues
1,214
1,903
3,055
3,727
Cost of net sales
(854
)
(922
)
(1,806
)
(1,847
)
Cost of other revenues
(15
)
(34
)
(32
)
(81
)
Gross profit
345
947
1,217
1,799
Selling, general & administration
(595
)
(760
)
(1,272
)
(1,416
)
Research & development
(163
)
(167
)
(302
)
(313
)
Other income
9
6
18
18
Other expense
(62
)
(79
)
(155
)
(189
)
Operating (loss)
(466
)
(53
)
(494
)
(101
)
Interest expense
(30
)
(35
)
(61
)
(44
)
Other financial income & expense
(6
)
(8
)
(16
)
(16
)
(Loss) before taxes
(502
)
(96
)
(571
)
(161
)
Taxes
80
(294
)
92
(338
)
Net (loss)
(422
)
(390
)
(479
)
(499
)
(Loss) per share
Basic
(0.86
)
(0.80
)
(0.98
)
(1.02
)
Diluted
(0.86
)
(0.80
)
(0.98
)
(1.02
)
Weighted average number of shares
outstanding (millions)
Basic
489.0
488.2
488.8
488.2
Diluted
489.0
488.2
488.8
488.2
Balance sheet highlights
($ millions)
June 30, 2020
December 31, 2019
Cash and cash equivalents
1,324
822
Current financial debts
235
261
Non-current financial debts
3,909
3,218
Free cash flow
The following is a summary of Alcon free cash flow for the six
months ended June 30, 2020 and 2019, together with a reconciliation
to net cash flows from operating activities, the most directly
comparable IFRS measure:
Six months ended June
30
($ millions)
2020
2019
Net cash flows from operating
activities
58
301
Purchase of property, plant &
equipment
(168
)
(206
)
Free cash flow
(110
)
95
Net (debt)/liquidity
($ millions)
At June 30, 2020
Current financial debt
(235
)
Non-current financial debt
(3,909
)
Total financial debt
(4,144
)
Less liquidity:
Cash and cash equivalents
1,324
Derivative financial instruments
2
Total liquidity
1,326
Net (debt)
(2,818
)
Reconciliation of IFRS to Core Results
Three months ended June 30, 2020
($ millions except (loss) 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
345
250
41
4
—
14
654
Selling, general & administration
(595
)
—
—
6
—
—
(589
)
Research & development
(163
)
8
—
—
—
9
(146
)
Other income
9
—
—
—
—
(3
)
6
Other expense
(62
)
—
—
52
13
(7
)
(4
)
Operating (loss)
(466
)
258
41
62
13
13
(79
)
(Loss) before taxes
(502
)
258
41
62
13
13
(115
)
Taxes(6)
80
(43
)
(10
)
(11
)
(3
)
(1
)
12
Net (loss)
(422
)
215
31
51
10
12
(103
)
Basic (loss) per share
(0.86
)
(0.21
)
Diluted (loss) per share
(0.86
)
(0.21
)
Basic - weighted average shares
outstanding(7)
489.0
489.0
Diluted - weighted average shares
outstanding(7)
489.0
489.0
(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)
Gross profit includes losses on disposal
of property, plant & equipment and a fair value adjustment of a
contingent consideration liability. Research & development
includes amortization of option rights. Other income and expense
include fair value adjustments of financial assets.
(6)
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 $387 million totaled $67 million with an average tax
rate of 17.3%.
(7)
Core basic and diluted loss per share are
calculated using the weighted-average shares of common stock
outstanding during the period.
Reconciliation of IFRS to Core Results
(continued)
Three months ended June 30, 2019
($ 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
947
252
3
—
2
1,204
Selling, general & administration
(760
)
—
13
—
2
(745
)
Research & development
(167
)
6
2
—
13
(146
)
Other income
6
—
—
—
2
8
Other expense
(79
)
—
60
5
3
(11
)
Operating (loss)/income
(53
)
258
78
5
22
310
(Loss)/income before taxes
(96
)
258
78
5
22
267
Taxes(5)
(294
)
(36
)
(18
)
(1
)
313
(36
)
Net (loss)/income
(390
)
222
60
4
335
231
Basic (loss)/earnings per share
(0.80
)
0.47
Diluted (loss)/earnings per share
(0.80
)
0.47
Basic - weighted average shares
outstanding(6)
488.2
488.2
Diluted - weighted average shares
outstanding(6)
488.2
490.0
(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 manufacturing sites
consolidation activities. Selling, general & administration
includes expenses for integration of recent acquisitions. Research
& development includes $16 million primarily for the
amortization of option rights and expenses for integration of
recent acquisitions, partially offset by a $3 million fair value
adjustment of a contingent consideration liability. Other income
and expense include $5 million for fair value adjustments of a
financial asset and other items.
(5)
Total tax adjustments of $258 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $363 million totaled $58 million with an average tax
rate of 16.0%.
Core tax adjustments for discrete items
totaled $316 million, including a $301 million non-cash tax expense
for re-measurement of deferred tax balances as a result of Swiss
tax reform, changes in uncertain tax positions, and other
items.
(6)
Core basic earnings per share was
calculated using the 488.2 million weighted-average shares of
common stock outstanding for the three months ended June 30, 2019.
Core diluted earnings per share also contemplate dilutive shares of
1.8 million associated with unvested equity-based awards as
described in Note 5 to the Condensed Consolidated Interim Financial
Statements, yielding 490.0 million weighted-average diluted shares
for the three months ended June 30, 2019.
Reconciliation of IFRS to Core results
(continued)
Six months ended June 30, 2020
($ 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
1,217
502
57
7
—
4
1,787
Selling, general & administration
(1,272
)
—
—
9
—
—
(1,263
)
Research & development
(302
)
15
—
—
—
(11
)
(298
)
Other income
18
—
—
—
—
(3
)
15
Other expense
(155
)
—
—
117
20
—
(18
)
Operating (loss)/income
(494
)
517
57
133
20
(10
)
223
(Loss)/income before taxes
(571
)
517
57
133
20
(10
)
146
Taxes(6)
92
(87
)
(14
)
(24
)
(4
)
7
(30
)
Net (loss)/income
(479
)
430
43
109
16
(3
)
116
Basic (loss)/earnings per share
(0.98
)
0.24
Diluted (loss)/earnings per share
(0.98
)
0.24
Basic - weighted average shares
outstanding(7)
488.8
488.8
Diluted - weighted average shares
outstanding(7)
488.8
491.4
(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)
Gross profit includes $9 million losses on
disposal of property, plant & equipment partially offset by a
$5 million fair value adjustment of a contingent consideration
liability. Research & development includes a $34 million fair
value adjustment of a contingent consideration liability, partially
offset by $23 million for the amortization of option rights. Other
income primarily includes fair value adjustments of a financial
asset.
(6)
Total tax adjustments of $122 million
include tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $717 million totaled $132 million with an average
tax rate of 18.4%.
Core tax adjustments for discrete items
totaled $10 million, primarily related to tax expense from the
delayed spin of a subsidiary.
(7)
Core basic earnings per share is
calculated using the weighted-average shares of common stock
outstanding during the period. Core diluted earnings per share also
contemplate dilutive shares of 2.6 million associated with unvested
equity-based awards as described in Note 5 to the Condensed
Consolidated Interim Financial Statements, yielding 491.4 million
weighted-average diluted shares for the six months ended June 30,
2020.
Reconciliation of IFRS to Core results
(continued)
Six months ended June 30, 2019
($ 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
1,799
502
3
—
—
10
2,314
Selling, general & administration
(1,416
)
—
13
—
—
9
(1,394
)
Research & development
(313
)
11
2
—
—
20
(280
)
Other income
18
—
—
—
—
(1
)
17
Other expense
(189
)
—
60
5
32
59
(33
)
Operating (loss)/income
(101
)
513
78
5
32
97
624
(Loss)/income before taxes
(161
)
513
78
5
32
97
564
Taxes(6)
(338
)
(70
)
(18
)
(1
)
(8
)
349
(86
)
Net (loss)/income
(499
)
443
60
4
24
446
478
Basic (loss)/earnings per share
(1.02
)
0.98
Diluted (loss)/earnings per share
(1.02
)
0.98
Basic - weighted average shares
outstanding(7)
488.2
488.2
Diluted - weighted average shares
outstanding(7)
488.2
489.1
(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 spin readiness costs
and manufacturing sites consolidation activities. Selling, general
& administration includes expenses for spin readiness costs and
recent acquisitions. Research & development includes $33
million primarily for the amortization of option rights and
expenses for integration of recent acquisitions, partially offset
by $13 million in fair value adjustments of a contingent
consideration liability. Other income and expense primarily
includes spin readiness costs.
(6)
Total tax adjustments of $252 million
included tax associated with operating income core adjustments and
discrete tax items. Tax associated with operating income core
adjustments of $725 million totaled $115 million with an average
tax rate of 15.9%.
Core tax adjustments for discrete items
totaled $367 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, partially offset by net changes in
uncertain tax positions.
(7)
Core basic earnings per share was
calculated using the 488.2 million weighted-average shares of
common stock outstanding during the period following the Spin-Off.
Core diluted earnings per share also contemplate dilutive shares of
0.9 million associated with unvested equity-based awards as
described in Note 5 to the Condensed Consolidated Interim Financial
Statements, yielding 489.1 million weighted-average diluted shares
for the six months ended June 30, 2019.
About Alcon
Alcon helps people see brilliantly. As the global leader in eye
care with a heritage spanning more than seven decades, we offer the
broadest portfolio of products to enhance sight and improve
people’s lives. Our Surgical and Vision Care products touch the
lives of more than 260 million people in over 140 countries each
year living with conditions like cataracts, glaucoma, retinal
diseases and refractive errors. Our more than 20,000 associates are
enhancing the quality of life through innovative products,
partnerships with eye care professionals and programs that advance
access to quality eye care. Learn more at www.alcon.com.
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Investor Relations Christina
Cheng + 41 589 112 110 (Geneva) + 1 817 615 2789 (Fort Worth)
investor.relations@alcon.com
Media Relations Wes Warnock
+ 41 589 112 111 (Geneva) + 1 817 615 2501 (Fort Worth)
globalmedia.relations@alcon.com
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