Alcon's Fourth Quarter Sales Rise 20.0 Percent
For the full year 2007, Alcon reported global sales of $5,599.6 million, an increase of 14.4 percent over 2006 global sales of $4,896.6 million, or 10.7 percent excluding the impact of foreign exchange fluctuations and WaveLight revenues. Net earnings for 2007 were $1,586.4 million, or $5.25 per share on a diluted basis, compared to $1,348.1 million, or $4.37 per share for the full year 2006, an increase of 17.7 percent.
For the full year 2006, excluding the impacts of the settlement of certain patent lawsuits with a competitor and charges related to the impairment of the company's refractive assets, adjusted net earnings were $1,342.6 million, or $4.35 per diluted share in 2006. For the full year 2007, excluding the impacts of the WaveLight acquisition and refractive integration and charges related to the impairment of the company's refractive assets, adjusted net earnings were $1,627.4 million, or $5.39 per diluted share, an increase of 21.2 percent over 2006.
Reconciliations of reported and adjusted results for the fourth quarter and full year are included in the financial tables below.
"I am extremely pleased with our results for 2007, because they validate the strength of our business and financial model. They reflect our ability to take advantage of our established global organization to drive market share gains with our leading brands and with new products in both developed and less-developed markets. Combining this capability with the positive market environment for eye care, we expect to continue to deliver strong sales growth and even faster earnings growth, as we have since our IPO," said Cary Rayment, Alcon's chairman, president and chief executive officer.
Fourth Quarter Sales Highlights
Highlights of sales for the fourth quarter of 2007 are provided below. Unless otherwise noted, all comparisons are versus the fourth quarter of 2006.
-- Pharmaceutical sales grew 21.5 percent to $578.2 million, or 16.4 percent on a constant currency basis. Sales of glaucoma products increased 28.3 percent to $236.5 million, led by sales of the Travatan(R) family of ophthalmic solutions and Azopt(R) ophthalmic suspension. Sales of Travatan(R) products increased 38.7 percent due to market share gains in the U.S. for Travatan Z(R) ophthalmic solution, the Japanese launch of TRAVATANZ(TM) ophthalmic solution and higher international sales of DuoTrav(TM) ophthalmic solution. Sales of Azopt(R) ophthalmic suspension rose 27.1 percent this quarter. Sales of anti-infective and anti-inflammatory products rose 16.3 percent to $212.3 million. The three key brands in this category, Vigamox(R) ophthalmic solution, Tobradex(R) ophthalmic suspension, and Nevanac(R) ophthalmic suspension, all posted growth rates in excess of 14.0 percent. Sales of allergy products grew by 30.7 percent to $91.1 million primarily because of market share gains in the U.S. resulting from the 2007 introduction of Pataday(TM) ophthalmic solution. Otic product sales grew by 29.2 percent to $50.9 million led by U.S. market share gains of CiproDex(R) Otic suspension. U.S. pharmaceutical growth was impacted favorably by growth in wholesaler inventories due to relatively lower wholesaler/retailer inventory levels at the end of the third quarter of 2007.
-- Surgical sales grew 20.3 percent to $700.8 million, or 13.6 percent on a constant currency basis. Surgical sales include $15.1 million generated by WaveLight AG in the period after the acquisition. Sales of intraocular lenses increased 24.3 percent to $259.3 million. In terms of units, AcrySof(R) intraocular lenses grew 14.5 percent, well in excess of the growth rate of cataract procedures. Dollar growth in intraocular lenses was higher than unit growth because of currency and continued migration to higher performance products such as AcrySof(R) Natural and AcrySof(R) IQ intraocular lenses outside the United States. In addition, sales of premium intraocular lenses, which include the AcrySof(R) ReSTOR(R) Aspheric intraocular lens and the AcrySof(R) Toric intraocular lens, grew 45.6 percent globally to $40.4 million. Sales of cataract and vitreoretinal products grew 16.1 percent to $420.1 million, including global sales of the Infiniti(R) vision system, viscoelastics, procedure packs and disposables. Unit shipments of the Infiniti(R) vision system grew more than 20 percent in the quarter, supported by growing demand for the OZil(R) torsional handpiece. Refractive revenue increased 75.4 percent due to revenues generated by WaveLight AG after the acquisition, offset in part by declines in procedure revenue generated from the installed base of LADAR(R) excimer lasers.
-- Consumer eye care sales increased 14.5 percent to $190.7 million, or 8.9 percent on a constant currency basis. Sales of contact lens disinfectants grew 13.6 percent to $104.7 million, because of share gains for OPTI-FREE(R) RepleniSH(R) and OPTI-FREE(R) EXPRESS(R) multi-purpose disinfecting solutions on a global basis. According to A.C. Nielsen Top Line, on a combined basis, these two leading brands accounted for 49.8 percent of the U.S. market for branded contact lens disinfectants in the four week period ending December 22, 2007, approximately 3.5 percentage points greater than in the same four week period in the prior year. Demand for these solutions also continued to grow outside the United States, which translated to market share gains in many countries. Sales of artificial tears increased 25.5 percent to $61.1 million, led by continued global growth of Systane(R) lubricant eye drops.
Fourth Quarter Earnings Details
Highlights of earnings for the fourth quarter of 2007 are provided below. Unless otherwise noted, all comparisons are versus the fourth quarter of 2006. Comparisons are also made between non-GAAP adjusted results for the fourth quarter of 2007, excluding the impact of the acquisition of WaveLight AG and refractive integration, and the results for the fourth quarter of 2006. These adjustments are discussed above and also are reconciled to reported results in the financial tables below.
-- Gross profit margin declined 0.8 percentage points to 74.7 percent of sales. On an adjusted basis, this decline was 0.1 percentage point, driven mainly by unfavorable geographic mix and reimbursement pressures on a global basis that offset favorable product mix and manufacturing efficiencies.
-- Selling, general and administrative expenses were 30.0 percent of sales. Adjusted SG&A expenses were 29.8 percent of sales, an improvement of 1.7 percentage points that came from operating synergies from the company's global operations and because exchange fluctuations had a greater impact on sales than on SG&A expenses.
-- Research and development expenses were 10.9 percent of sales. Adjusted R&D expenses were 10.7 percent of sales, a decline of 0.3 percentage points from the same period of the prior year, as the impact of foreign exchange caused sales to grow faster than R&D expenses, which are incurred mainly in U.S. dollars.
-- Operating income increased 21.5 percent to $477.4 million. Adjusted operating income increased 26.9 percent to $498.5. This growth was due to double-digit sales growth, focused expense control and lower intangible amortization, as well as the exchange impact discussed above.
-- Non-operating income net of expenses declined from $18.6 million to $2.0 million, primarily due to realized and unrealized losses on investments and higher interest expense related to the company's share repurchase program.
-- The effective tax rate was 21.5 percent. On an adjusted basis, the effective tax rate was 21.4 percent, compared to 13.8 percent in the fourth quarter of 2006. The tax rate in the fourth quarter of 2007 included a modest shift in the geographical earnings mix and tax expenses related to reserve adjustments to reflect developments in ongoing audits. The tax rate in the fourth quarter of 2006 reflected a significant decrease in tax expense because of the retroactive extension of the research and development tax credit in the United States.
New Product and R&D Pipeline Update
Summarized below are updates on selected new products and significant research and development activities.
-- The U.S. Food and Drug Administration ("FDA") approved TRIESENCE(TM) injectable triamcinolone suspension for visualization of the vitreous during vitrectomy and treatment of sympathetic ophthalmia, temporal arteritis, uveitis, and ocular inflammatory conditions that are unresponsive to topical corticosteroids.
-- The FDA approved the PUREPOINT(TM) laser for retinal photocoagulation.
-- Alcon received the final approval of Nevanac(R) from the European Medicines Evaluation Agency ("EMEA") in December.
-- The company filed a marketing application with EMEA for AZARGA(TM) ophthalmic pharmaceutical preparation. AZARGA(TM) is a fixed combination of brinzolamide and timolol for the treatment of elevated intraocular pressure in patients with ocular hypertension or open-angle glaucoma.
Financial Guidance
Alcon's current financial guidance for the full year 2008 and the factors impacting this guidance are provided below.
-- Total sales are expected to be between $6,175 and $6,275 million.
-- Diluted earnings per share are expected to be between $6.24 and $6.30. This range includes SG&A expenses related to the expansion and relocation of the company's Swiss operations and integration expenses related to the company's refractive surgery manufacturing and other operations, which will be booked to cost of goods sold.
Other Items
-- On November 9, 2007, Alcon acquired 77.4% of the shares of WaveLight AG through a tender offer for this leading manufacturer of refractive lasers.
-- Alcon's board of directors approved a $1.1 billion share repurchase program on December 5, 2007. The program included a three for one pro-rata purchase of shares from the company's majority shareholder, Nestle SA.
-- Alcon's board of directors will propose to shareholders a dividend of 2.63 Swiss francs per share, which at exchange rates effective on February 6, 2008 was equal to about $2.39 per share. The proposal will be voted on at the company's Annual General Meeting for shareholders on May 6, 2008 in Zug, Switzerland.
-- Alcon's board of directors also will propose to shareholders at the Annual General Meeting that the company cancel 7.7 million Alcon common shares, which were repurchased in 2007. The cancellation will become effective after the fulfillment of certain formal Swiss law requirements.
-- Mr. Joe Weller advised the Board of Directors of Alcon, Inc. that he will be stepping down from his position as director of Alcon for personal reasons, effective May 6, 2008. Mr. Weller has been a director of Alcon since May, 2006 and has contributed greatly to Alcon's business and financial success during the past two years. Alcon extends its thanks and appreciation to Mr. Weller for his contributions to the Company and wishes him every success in his future endeavors.
-- Alcon's Board of Directors will propose to shareholders that Mr. Paul Bulcke be elected for a one-year term of office, effective May 6, 2008, replacing Mr. Weller's position as a director of Alcon whose term of office would have expired in 2009. Mr. Bulcke joined the Nestle Group in 1979 and is currently Executive Vice President. In September 2007, the Board of Directors of Nestle S.A. decided to propose to the shareholders that Mr. Bulcke be elected to the Board at Nestle's next Annual General Meeting on April 10, 2008. The Board of Directors of Nestle S.A. further declared their intention to appoint Mr. Bulcke as "Administrateur delegue"/Chief Executive Officer of Nestle and to have him take on his new responsibilities on that same day. Alcon is very pleased that Nestle is recommending Mr. Bulcke as an Alcon director for shareholder consideration and approval at the May, 2008 Annual General Meeting in Zug, Switzerland.
Company Description
Alcon, Inc. is the world's leading eye care company, with sales of $5.6 billion in 2007. Alcon, which has been dedicated to the ophthalmic industry for more than 60 years, researches, develops, manufactures and markets pharmaceuticals, surgical equipment and devices, contact lens care solutions and other vision care products that treat diseases, disorders and other conditions of the eye. Alcon's majority shareholder is Nestle, S.A., the world's largest food company. Moxifloxacin, the active ingredient in Vigamox(R), is licensed to Alcon from Bayer AG. Ciprodex(R) is a registered trademark of Bayer AG and licensed to Alcon, Inc. by Bayer Healthcare AG. -0-
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(USD in millions, except share and per share data)
Three months ended Twelve months ended
Dec 31, Dec 31,
------------------------- --------------------------
2007 2006 2007 2006
------------ ------------ ------------ -------------
Sales $ 1,469.7 $ 1,224.9 $ 5,599.6 $ 4,896.6
Cost of goods
sold 371.3 300.2 1,398.2 1,215.1
------------ ------------ ------------ -------------
Gross profit 1,098.4 924.7 4,201.4 3,681.5
Selling, general
and
administrative 441.6 385.9 1,694.0 1,398.5
Research and
development 160.0 134.5 564.3 512.1
In process
research and
development 9.3 -- 9.3 --
Amortization of
intangibles 10.1 11.4 50.7 198.8
------------ ------------ ------------ -------------
Operating
income 477.4 392.9 1,883.1 1,572.1
Other income
(expense):
Gain (loss)
from foreign
currency, net 2.6 2.2 11.2 (7.9)
Interest income 23.5 18.2 69.3 74.1
Interest
expense (19.3) (10.0) (50.0) (42.6)
Other, net (4.8) 8.2 15.4 21.2
------------ ------------ ------------ -------------
Earnings before
income taxes 479.4 411.5 1,929.0 1,616.9
Income taxes 102.9 56.8 342.6 268.8
------------ ------------ ------------ -------------
Net earnings $ 376.5 $ 354.7 $ 1,586.4 $ 1,348.1
============ ============ ============ =============
Basic earnings
per common share $ 1.27 $ 1.17 $ 5.32 $ 4.43
============ ============ ============ =============
Diluted earnings
per common share $ 1.25 $ 1.16 $ 5.25 $ 4.37
============ ============ ============ =============
Basic weighted
average common
shares 297,619,875 302,000,977 298,353,894 304,279,489
Diluted weighted
average common
shares 301,284,135 305,934,140 302,162,019 308,671,707
-0-
ALCON, INC. AND SUBSIDIARIES
Global Sales
(USD in millions)
%Change
Three months ended Foreign in
Dec 31, Currency Constant
------------------
2007 2006 %Change %Change Currency
-------- -------- ------- -------- --------
GEOGRAPHIC SALES
United States:
Pharmaceutical $ 296.8 $ 255.3 16.3% -% 16.3%
Surgical 265.1 243.6 8.8 - 8.8
Consumer Eye Care 85.3 79.3 7.6 - 7.6
-------- --------
Total United States
Sales 647.2 578.2 11.9 - 11.9
-------- --------
International:
Pharmaceutical 281.4 220.6 27.6 11.1 16.5
Surgical 435.7 338.9 28.6 11.6 17.0
Consumer Eye Care 105.4 87.2 20.9 10.7 10.2
-------- --------
Total International
Sales 822.5 646.7 27.2 11.3 15.9
-------- --------
Total Global Sales $1,469.7 $1,224.9 20.0% 6.0% 14.0%
======== ========
PRODUCT SALES
Infection / inflammation $ 212.3 $ 182.6 16.3%
Glaucoma 236.5 184.4 28.3
Allergy 91.1 69.7 30.7
Otic 50.9 39.4 29.2
Other pharmaceuticals /
rebates (12.6) (0.2) N/M
-------- --------
Total Pharmaceutical 578.2 475.9 21.5 5.1% 16.4%
-------- --------
Intraocular lenses 259.3 208.6 24.3
Cataract / vitreoretinal 420.1 361.7 16.1
Refractive 21.4 12.2 75.4
-------- --------
Total Surgical 700.8 582.5 20.3 6.7 13.6
-------- --------
Contact lens
disinfectants 104.7 92.2 13.6
Artificial tears 61.1 48.7 25.5
Other 24.9 25.6 (2.7)
-------- --------
Total Consumer Eye Care 190.7 166.5 14.5 5.6 8.9
-------- --------
Total Global Sales $1,469.7 $1,224.9 20.0% 6.0% 14.0%
======== ========
N/M - Not Meaningful
Note: Percent Change in Constant Currency calculates sales growth
without the impact of foreign exchange fluctuations. Management
believes constant currency sales growth is an important measure of
the company's operations because it provides investors with a clearer
picture of the core rate of sales growth due to changes in unit
volumes and local currency prices. This measure is considered a non-
GAAP financial measure as defined by Regulation G promulgated by the
U.S. Securities and Exchange Commission. Certain reclassifications
have been made to prior year amounts to conform with current year
presentation.
-0-
ALCON, INC. AND SUBSIDIARIES
Global Sales
(USD in millions)
Twelve months
ended Foreign %Change in
Dec 31, Currency Constant
------------------
2007 2006 %Change %Change Currency
-------- -------- ------- --------- ----------
GEOGRAPHIC SALES
United States:
Pharmaceutical $1,279.5 $1,170.6 9.3% -% 9.3%
Surgical 1,011.8 950.4 6.5 - 6.5
Consumer Eye Care 381.2 342.7 11.2 - 11.2
-------- --------
Total United States
Sales 2,672.5 2,463.7 8.5 - 8.5
-------- --------
International:
Pharmaceutical 1,034.3 836.6 23.6 7.1 16.5
Surgical 1,488.0 1,253.4 18.7 6.8 11.9
Consumer Eye Care 404.8 342.9 18.1 6.4 11.7
-------- --------
Total International
Sales 2,927.1 2,432.9 20.3 6.8 13.5
-------- --------
Total Global Sales $5,599.6 $4,896.6 14.4% 3.4% 11.0%
======== ========
PRODUCT SALES
Infection /
inflammation $ 814.5 $ 730.2 11.5%
Glaucoma 830.1 693.8 19.6
Allergy 446.8 386.6 15.6
Otic 257.0 237.0 8.4
Other pharmaceuticals
/ rebates (34.6) (40.4) N/M
-------- --------
Total Pharmaceutical 2,313.8 2,007.2 15.3 3.0% 12.3%
-------- --------
Intraocular lenses 919.4 794.4 15.7
Cataract /
vitreoretinal 1,528.8 1,357.7 12.6
Refractive 51.6 51.7 (0.2)
-------- --------
Total Surgical 2,499.8 2,203.8 13.4 3.8 9.6
-------- --------
Contact lens
disinfectants 440.2 370.6 18.8
Artificial tears 233.2 200.4 16.4
Other 112.6 114.6 (1.7)
-------- --------
Total Consumer Eye
Care 786.0 685.6 14.6 3.1 11.5
-------- --------
Total Global Sales $5,599.6 $4,896.6 14.4% 3.4% 11.0%
======== ========
N/M - Not Meaningful
Note: Percent Change in Constant Currency calculates sales growth
without the impact of foreign exchange fluctuations. Management
believes constant currency sales growth is an important measure of
the company's operations because it provides investors with a clearer
picture of the core rate of sales growth due to changes in unit
volumes and local currency prices. This measure is considered a non-
GAAP financial measure as defined by Regulation G promulgated by the
U.S. Securities and Exchange Commission. Certain reclassifications
have been made to prior year amounts to conform with current year
presentation.
-0-
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(USD in millions)
Dec 31, Dec. 31,
2007 2006
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 2,134.3 $ 1,489.2
Short term investments 669.8 321.0
Trade receivables, net 1,089.2 912.8
Inventories 548.5 473.8
Deferred income tax assets 89.3 122.5
Other current assets 293.7 142.8
---------- ----------
Total current assets 4,824.8 3,462.1
Long term investments 41.8 91.1
Property, plant and equipment, net 1,030.0 920.7
Intangible assets, net 89.6 95.2
Goodwill 626.0 553.2
Long term deferred income tax assets 322.1 235.7
Other assets 81.3 69.3
---------- ----------
Total assets $ 7,015.6 $ 5,427.3
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 208.7 $ 168.9
Short term borrowings 1,751.1 926.5
Current maturities of long term debt 1.3 5.8
Other current liabilities 901.1 899.9
---------- ----------
Total current liabilities 2,862.2 2,001.1
---------- ----------
Long term debt, net of current maturities 52.2 49.0
Long term deferred income tax liabilities 23.9 10.1
Other long term liabilities 702.6 453.5
Contingencies
Shareholders' equity:
Common shares 43.1 43.9
Additional paid-in capital 1,299.8 1,064.5
Accumulated other comprehensive income 203.0 127.3
Retained earnings 3,392.2 3,201.9
Treasury shares, at cost (1,563.4) (1,524.0)
---------- ----------
Total shareholders' equity 3,374.7 2,913.6
---------- ----------
Total liabilities and shareholders' equity $ 7,015.6 $ 5,427.3
========== ==========
-0-
ALCON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(USD in millions)
Twelve months ended
December 31,
---------------------
2007 2006
--------- ---------
Cash provided by (used in) operating activities:
Net earnings $ 1,586.4 $ 1,348.1
Adjustments to reconcile net earnings to
cash provided from operating activities:
Depreciation 159.7 158.5
Amortization of intangibles 50.7 198.8
In process research and development 9.3 --
Share-based payments 84.7 81.2
Tax benefit from share-based
compensation 15.6 --
Deferred income taxes (26.3) (105.9)
Loss (gain) on sale of assets (11.7) 2.6
Provisions for losses -- (120.3)
Changes in operating assets and liabilities,
net of effects from business acquisition:
Trading securities (405.1) 74.0
Trade receivables (95.1) (148.7)
Inventories 3.4 (11.5)
Other assets (129.4) (5.7)
Accounts payable and other current
liabilities 110.4 (93.9)
Other long term liabilities 116.9 28.7
--------- ---------
Net cash from operating activities 1,469.5 1,405.9
--------- ---------
Cash provided by (used in) investing activities:
Purchases of property, plant and equipment (227.2) (222.3)
Proceeds from sale of assets 3.1 1.5
Acquisition of business, net of cash acquired (111.5) --
Purchase of intangible assets (0.1) --
Purchase of available-for-sale investments (36.6) (371.0)
Proceeds from sales of available-for-sale
investments 145.2 425.7
--------- ---------
Net cash from investing activities (227.1) (166.1)
--------- ---------
Cash provided by (used in) financing activities:
Net proceeds from (repayment of) short term
debt 729.4 (108.3)
Proceeds from issuance of long term debt 1.3 --
Repayment of long term debt (6.1) (6.3)
Dividends on common shares (612.8) (416.8)
Acquisition of treasury shares (1,003.4) (899.2)
Proceeds from exercise of stock options 189.8 109.8
Tax benefits from share-based payment
arrangements 95.2 96.1
--------- ---------
Net cash from financing activities (606.6) (1,224.7)
--------- ---------
Effect of exchange rates on cash and cash
equivalents 9.3 16.9
--------- ---------
Net increase in cash and cash equivalents 645.1 32.0
Cash and cash equivalents, beginning of period 1,489.2 1,457.2
--------- ---------
Cash and cash equivalents, end of period $ 2,134.3 $ 1,489.2
========= =========
-0-
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in millions, except per share data)
Year ended December 31, 2007 (1)
--------------------------------------------
Non-GAAP Adjustments
------------------------
WaveLight
Acquisition
&
Refractive Refractive Non-GAAP
Reported Impairment Integration Adjusted
--------- ----------- ------------ ---------
Sales $5,599.6 $ -- $ (15.1) $5,584.5
Cost of goods sold 1,398.2 (24.0) (16.4) 1,357.8
--------- ----------- ------------ ---------
Gross profit 4,201.4 24.0 1.3 4,226.7
Selling, general and
administrative 1,694.0 -- (7.9) 1,686.1
Research and development 564.3 -- (6.4) 557.9
In process research and
development 9.3 -- (9.3) --
Amortization of
intangibles 50.7 (8.7) (1.5) 40.5
--------- ----------- ------------ ---------
Operating income 1,883.1 32.7 26.4 1,942.2
Other income (expense):
Gain (loss) from
foreign currency, net 11.2 -- -- 11.2
Interest income 69.3 -- -- 69.3
Interest expense (50.0) -- -- (50.0)
Other, net 15.4 -- -- 15.4
--------- ----------- ------------ ---------
Earnings before income
taxes 1,929.0 32.7 26.4 1,988.1
Income Taxes 342.6 11.9 6.2 360.7
--------- ----------- ------------ ---------
Net Earnings $1,586.4 $ 20.8 $ 20.2 $1,627.4
========= =========== ============ =========
Diluted earnings per
common share $ 5.25 $ 0.07 $ 0.07 $ 5.39
========= =========== ============ =========
Selected ratios as
percent of sales
-------------------------
Gross profit 75.0% 75.7%
Selling, general and
administrative 30.2 30.2
Operating income 33.6 34.8
Other selected financial
ratios
-------------------------
% Operating Income Growth 19.8% 21.5%
% Net Earnings Growth 17.7 21.2
(1) The items above adjusted for charges related to impairment of
certain refractive assets, the company's refractive business
integration, and the company's revenues and expenses related to the
acquisition of WaveLight, AG are considered non-GAAP financial
measures as defined by Regulation G promulgated by the U.S.
Securities and Exchange Commission. Alcon presents these non-GAAP
measures to improve the comparability and consistency of financial
results of Alcon's core business activities and to enhance the
overall understanding of Alcon's performance and future prospects.
Growth rates reflect performance versus the same period in the prior
year. Revenues from WaveLight products reported above are not
reflective of revenues that will be reported by WaveLight AG for the
same period due to intercompany sales eliminations, currency
fluctuations and other factors.
-0-
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in millions, except per share data)
Year ended December 31, 2006 (1)
---------------------------------------------
Non-GAAP Adjustments
-------------------------
Patent
Lawsuits Refractive Non-GAAP
Reported Settlement Impairment Adjusted
-------- ----------- ----------- --------
Sales $4,896.6 $ -- $ -- $4,896.6
Cost of goods sold 1,215.1 -- (19.1) 1,196.0
--------- ------------ ------------ ---------
Gross profit 3,681.5 -- 19.1 3,700.6
Selling, general and
administrative 1,398.5 119.0 -- 1,517.5
Research and development 512.1 -- -- 512.1
Amortization of
intangibles 198.8 -- (125.7) 73.1
--------- ------------ ------------ ---------
Operating income 1,572.1 (119.0) 144.8 1,597.9
Other income (expense):
Gain (loss) from
foreign currency, net (7.9) -- -- (7.9)
Interest income 74.1 -- -- 74.1
Interest expense (42.6) -- -- (42.6)
Other, net 21.2 -- -- 21.2
--------- ------------ ------------ ---------
Earnings before income
taxes 1,616.9 (119.0) 144.8 1,642.7
Income taxes 268.8 (21.5) 52.8 300.1
--------- ------------ ------------ ---------
Net earnings $1,348.1 $ (97.5) $ 92.0 $1,342.6
========= ============ ============ =========
Diluted earnings per
common share $ 4.37 $ (0.32) $ 0.30 $ 4.35
========= ============ ============ =========
Selected ratios as
percent of sales
------------------------
Selling, general and
administrative 28.5% 31.0%
Operating income 32.1 32.6
(1) The items above adjusted for settlement of patent lawsuits and
impairment charges of certain refractive assets are considered non-
GAAP financial measures as defined by Regulation G promulgated by the
U.S. Securities and Exchange Commission. Alcon presents these non-
GAAP measures to improve the comparability and consistency of
financial results of Alcon's core business activities and to enhance
the overall understanding of Alcon's performance and future
prospects. Growth rates reflect performance versus the same period in
the prior year.
-0-
ALCON, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Disclosures (Unaudited)
(USD in millions, except per share data)
Three months ended December 31, 2007 (1)
----------------------------------------
Non-GAAP
Adjustments
---------------
WaveLight
Acquisition
&
Refractive Non-GAAP
--------
Reported Integration Adjusted
----------------- ----------- --------
Sales $ 1,469.7 $ (15.1) $1,454.6
Cost of goods sold 371.3 (13.2) 358.1
----------------- ------------ ---------
Gross profit 1,098.4 (1.9) 1,096.5
Selling, general and
administrative 441.6 (7.9) 433.7
Research and development 160.0 (4.3) 155.7
In Process research and
development 9.3 (9.3) --
Amortization of intangibles 10.1 (1.5) 8.6
----------------- ------------ ---------
Operating income 477.4 21.1 498.5
Other income (expense):
Gain (loss) from foreign
currency, net 2.6 -- 2.6
Interest income 23.5 -- 23.5
Interest expense (19.3) -- (19.3)
Other, net (4.8) -- (4.8)
----------------- ------------ ---------
Earnings before income taxes 479.4 21.1 500.5
Income Taxes 102.9 4.3 107.2
----------------- ------------ ---------
Net Earnings $ 376.5 $ 16.8 $ 393.3
================= ============ =========
Diluted earnings per common
share $ 1.25 $ 0.06 $ 1.31
================= ============ =========
Selected ratios as percent of
sales
-----------------------------
Gross profit 74.7% 75.4%
Selling, general and
administrative 30.0 29.8
Operating income 32.5 34.3
(1) The items above adjusted for charges related to impairment of
certain refractive assets, the company's refractive business
integration, and the company's revenues and expenses related to the
acquisition of WaveLight, AG are considered non-GAAP financial
measures as defined by Regulation G promulgated by the U.S.
Securities and Exchange Commission. Alcon presents these non-GAAP
measures to improve the comparability and consistency of financial
results of Alcon's core business activities and to enhance the
overall understanding of Alcon's performance and future prospects.
Growth rates reflect performance versus the same period in the prior
year. Revenues from WaveLight products reported above are not
reflective of revenues that will be reported by WaveLight AG for the
same period due to intercompany sales eliminations, currency
fluctuations and other factors.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements principally relate to statements regarding the expectations of our management with respect to the future performance of various aspects of our business. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by our forward-looking statements. Words such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "hope," "intend," "estimate," "project," "predict," "potential" and similar expressions are intended to identify forward-looking statements. These statements reflect the views of our management as of the date of this press release with respect to future events and are based on assumptions and subject to risks and uncertainties and are not intended to give any assurance as to future results. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that might cause future results to differ include, but are not limited to, the following: the development of commercially viable products may take longer and cost more than expected; changes in reimbursement procedures by third party payers may affect our sales and profits; competition may lead to worse than expected financial condition and results of operations; currency exchange rate fluctuations may negatively affect our financial condition and results of operations; pending or future litigation may negatively impact our financial condition and results of operations; litigation settlements may adversely impact our financial condition; the occurrence of excessive property and casualty, general liability or business interruption losses, for which we are self-insured, may adversely impact our financial condition; product recalls or withdrawals may negatively impact our financial condition or results of operations; government regulation or legislation may negatively impact our financial condition or results of operations; changes in tax laws or regulations in the jurisdictions in which we and our subsidiaries are subject to taxation may adversely impact our financial performance; supply and manufacturing disruptions could negatively impact our financial condition or results of operations. You should read this press release with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the Securities and Exchange Commission, we undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.
Contact
Alcon, Inc.
Doug MacHatton, 817-551-8974
Vice President, Investor Relations
and Strategic Corporate Communications
Doug.machatton@alconlabs.com
or
Matthew Head, 817-551-8550
Director, Investor Relations
Matthew.head@alconlabs.com
www.alcon.com
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