Alcon's Third Quarter Sales Rise 12.4 Percent.HUNENBERG, Switzerland -- Alcon, Inc. (NYSE NYSE See: New York Stock Exchange :ACL See access control list. 1. ACL - Access Control List. 2. ACL - Association for Computational Linguistics. 3. ACL - A Coroutine Language. A Pascal-based implementation of coroutines. ["Coroutines", C.D. ) reported global sales of $1,203.8 million for the third quarter of 2006, an increase of 12.4 percent over global sales in the third quarter of 2005, or 11.3 percent excluding the impact of foreign exchange fluctuations. Reported net earnings for the third quarter of 2006 were $232.1 million, or $0.76 per share on a diluted basis, compared to $295.8 million, or $0.95 per share for the third quarter of 2005. Earnings in the third quarter of 2006 included an impairment charge related to certain assets of the company's refractive refractive capacity to refract light. refractive error a difference between the focal length of the cornea and lens, and the length of the eye, resulting in myopia or hyperopia. laser business. The impact of this non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. was $92.0 million after income taxes, or $0.30 per share on a diluted basis. Net earnings in the third quarter of 2006 also included expenses related to the implementation of Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) 123R, which were not incurred in the third quarter of 2005. The impact of SFAS 123R was $11.1 million after income taxes, or $0.03 per share on a diluted basis. Excluding these two items, adjusted net earnings in the third quarter of 2006 increased to $335.2 million, or $1.09 on a diluted basis. Adjusted net earnings for this year's third quarter grew 13.3 percent compared to the third quarter of 2005, while adjusted earnings per share grew 14.7 percent, due to a lower number of shares outstanding as a result of the company's share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. A reconciliation of reported and adjusted net earnings and earnings per share for the third quarter and year to date is included in the financial tables below. "Our core operating strategies, focusing on introducing innovative new products in all of our product areas and building brands globally, continue to deliver excellent results," said Cary Rayment, Alcon's chairman, president and chief executive officer. "Healthy sales growth led to a strong overall third quarter in terms of earnings per share, especially considering the increased investment in R&D. In fact, on a comparable basis to the first nine months of 2005, excluding the impact of the AMO AMO - America's Multimedia Online patent settlement, impairment charge and new SFAS 123R expenses, year to date earnings per share are up more than 19 percent, reflecting our ability to realize operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. in our results." Third Quarter Sales Highlights Highlights of sales for the third quarter of 2006 are provided below. Unless otherwise noted, all comparisons are versus the third quarter of 2005. * Pharmaceutical sales grew 13.5 percent to $496.7 million, or 12.2 percent on a constant currency basis. Sales of glaucoma glaucoma (glôkō`mə), ocular disorder characterized by pressure within the eyeball caused by an excessive amount of aqueous humor (the fluid substance filling the eyeball). products increased 14.6 percent to $175.7 million, led by sales of Travatan([R]) ophthalmic solution ophthalmic solution n. A sterile solution that is free from foreign particles and is compounded and dispensed for eyedrops. and Azopt([R]) ophthalmic suspension. On a global basis, Travatan([R]) solution sales (including DuoTrav(TM) ophthalmic solution) rose 25.2 percent on share gains in multiple markets, while Azopt([R]) suspension sales increased 20.1 percent. Sales of infection and inflammation products rose 12.6 percent to $176.7 million, mainly due to U.S. share gains for Vigamox([R]) ophthalmic solution and Nevanac([R] )ophthalmic suspension. Sales of allergy products declined by 0.5 percent primarily because of a decline in wholesaler inventories of Patanol([R]) ophthalmic solution in the U.S. during the third quarter of 2006. Led by CiproDex([R]) Otic otic (ot´ik) auditory (1). o·tic adj. Of, relating to, or located near the ear; auricular. Otic Pertaining to the ear. suspension, otic product sales outpaced the market by growing 1.9 percent to $76.3 million. Growth in this category was affected by market growth for the quarter that was slower than in past periods. * Surgical sales grew 9.2 percent to $528.7 million or 8.2 percent on a constant currency basis. Sales of intraocular lenses increased 13.6 percent to $191.8 million. In terms of units, the AcrySof([R]) line of intraocular lenses grew 11.3 percent, well above the underlying market growth. Dollar growth in intraocular lenses was higher than unit growth because of the continued migration to higher performance products such as the AcrySof([R]) Natural, AcrySof([R]) IQ, and AcrySof([R]) ReSTOR([R])intraocular lenses. The combined sales of the first two of these lenses grew 49.9 percent globally, with faster growth outside the U.S., while sales of AcrySof([R] )ReSTOR([R] )intraocular lenses increased 41.4 percent to $25.2 million. Growth of AcrySof([R]) ReSTOR([R]) lenses was 20.2 percent in the U.S., while international sales nearly doubled. Sales of cataract cataract, in medicine, opacity of the lens of the eye, which impairs vision. In the young, cataracts are generally congenital or hereditary; later they are usually the result of degenerative changes brought on by aging or systemic disease (diabetes). and vitreoretinal products grew 6.9 percent to $324.7 million, with equipment, procedure packs and viscoelastics all contributing to growth. Within this category, sales of vitreoretinal products were especially strong, growing 15.0 percent on new equipment shipments and the continued upgrade to premium procedure packs and accessories. Refractive revenue increased 4.3 percent. * Consumer eye care sales increased 19.7 percent to $178.4 million, or 18.6 percent on a constant currency basis. Sales of contact lens contact lens, thin plastic lens worn between the eye and eyelid that may be used instead of eyeglasses. Actors, models, and others wear them for appearance, and athletes use them for safety and convenience. disinfectants grew 28.7 percent, as OPTI-FREE([R]) RepleniSH([R]) and OPTI-FREE([R]) EXPRESS([R]) multi-purpose disinfecting solutions (MDPS MDPS Mississippi Department of Public Safety MDPS Motor-Driven Power Steering MDPS Meteorite and Debris Protection System (aerospace) MDPS Maintenance Data Processing System MDPS Medium Dependent Physical Sublayer ) continued to benefit from the permanent withdrawal of a competitive product in the second quarter of 2006. In the U.S., Alcon's disinfecting solutions continued to gain share in the third quarter, with its branded share rising from 47.0 percent for the four weeks ended July 8 to 48.5 percent for the four weeks ended September 30, 2006. Sales of artificial tears artificial tears A solution containing 0.5% carboxymethyl cellulose or 5% polyvinyl alcohol, used to treat dry eye–xerophthalmia, often associated with Sjögren syndrome, which may also be due to sarcoidosis, senile lacrimal gland atrophy, acute or increased 21.3 percent, primarily due to the continued growth of Systane([R]) lubricant Lubricant A gas, liquid, or solid used to prevent contact of parts in relative motion, and thereby reduce friction and wear. In many machines, cooling by the lubricant is equally important. eye drops eye drops eye npl → gouttes fpl pour les yeux eye drops eye npl → Augentropfen pl on a global basis. Third Quarter Earnings Details Highlights of earnings for the third quarter of 2006 are provided below. Unless otherwise noted, all comparisons are versus the third quarter of 2005. * Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. declined 2.0 percentage points to 75.0 percent of sales. The decline was mostly due to a $19.1 million charge to cost of goods for the refractive impairment and to share-based compensation expenses of $2.6 million that were not included in expenses in 2005. * Even after including $9.1 million of share-based compensation expenses that were not included as expenses in 2005, selling, general and administrative expenses as a percent of sales declined 0.9 percentage points to 30.0 percent. * Research and development expenses as a percent of sales increased 1.4 percentage points to 11.1 percent of sales. Research and development expenses included $4.7 million of share-based compensation expenses that were not included in 2005 and a payment of $10 million to NovaCal Pharmaceuticals, Inc. in connection with a previously announced licensing and development agreement, which occurred earlier than expected. * Amortization of intangibles increased to $146.3 million, due to an impairment charge of $125.7 million related to the intangible assets of the refractive business. * Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. declined 29.1 percent to $261.0 million, or 21.7 percent of sales, primarily due to the impairment charges related to the refractive business that totaled $144.8 million and $16.4 million of share-based compensation expense. Excluding these items, adjusted operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. grew 14.8 percent to $422.2 million. * Net earnings declined 21.5 percent as a result of the $92.0 million after-tax effect of the impairment charges for the refractive business and the $11.1 million after-tax impact of share-based compensation, which offset healthy sales growth and control of selling, general and administrative expense growth. Excluding impairment and share-based compensation, adjusted net earnings rose 13.3 percent to $335.2 million. New Product and R&D Pipeline Update Summarized below are updates on selected new products and significant research and development activities for the third quarter of 2006. * The U.S. Food and Drug Administration (FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ) approved Travatan([R]) Z ophthalmic solution, a new glaucoma therapy product that replaces benzalkonium chloride benzalkonium chloride /ben·zal·ko·ni·um chlo·ride/ (ben?zal-ko´ne-um) a quaternary ammonium compound used as a surface disinfectant and detergent, topical antiseptic, and antimicrobial preservative. (BAK Bak Bak A member of the bcl-2 family expressed in a wide range of cells which, when overexpressed in NGF-deprived sympathetic neurons accelerates apoptosis, and counteracts Bcl-2's apoptosis-protecting effects. See Bcl-2. ) from Alcon's existing Travatan([R]) solution with SofZia(TM) preservative preservative Any of numerous chemical additives used to prevent or slow food spoilage caused by chemical changes (e.g., oxidation, mold growth) and maintain a fresh appearance and consistency. Antimycotics (e.g. system, a robust ionic buffered preservative that is gentle to the ocular ocular /oc·u·lar/ (ok´u-lar) 1. of, pertaining to, or affecting the eye. 2. eyepiece. oc·u·lar adj. 1. Of or relating to the eye or the sense of sight. surface. * Alcon entered into a collaborative agreement with NovaCal Pharmaceuticals, Inc. for the development of novel anti-infective agents (Aganocide[TM]) for the treatment of infections of the eye, ear, and sinus and for use in contact lens solutions. * Alcon Japan commenced the launch of Patanol([R]) ophthalmic solution in September, 2006, following approval by the Japanese Ministry of Health, Labor and Welfare in July. Alcon Japan is also preparing for the fourth quarter launch of Vegamox(TM) solution following its July approval. * OPTI-FREE([R]) RepleniSH([R]) MPDS MPDS Mobile Packet Data Service (satellite-based service) MPDS Monitored Professional Development Scheme MPDS Medical Priority Dispatch System (Priority Dispatch Corp. was launched in Switzerland and Germany in September, representing the first European markets in the global introduction of RepleniSH([R]) solution. * Alcon expanded its category-leading vitreoretinal platform by commencing shipment of a line of 23-gauge instruments. * The company has developed a new formulation of its investigational new drug, Patanase[TM] nasal spray Nasal sprays are used for the nasal delivery of a drug or drugs, generally to alleviate cold or allergy symptoms such as nasal congestion. Although delivery methods vary, most nasal sprays function by instilling a fine mist into the nostril by action of a hand-operated pump , and plans to move forward with its clinical plan to support an amended new drug application in the second half of 2007. * Eli Lilly and Company Eli Lilly and Company (NYSE: LLY) is a global pharmaceutical company and one of the world's largest corporations. Eli Lilly's global headquarters is located in Indianapolis, Indiana, in the United States. announced that a new Phase 3 study would be required by the FDA before the agency would consider approving Arxxant(TM), an investigational drug for diabetic retinopathy diabetic retinopathy n. Retinal changes occurring in long-term diabetes and characterized by punctate hemorrhages, microaneurysms, and sharply defined waxy exudates. . Lilly has decided to appeal the FDA's decision. In the second quarter of 2006, Alcon entered into a co-promotion agreement with Lilly related to this product. Alcon is not obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to make any payments to Lilly until the product is approved. Financial Guidance Alcon's current financial guidance for the full year 2006 and the factors impacting this guidance are provided below. * Total sales are expected to be between $4,870 and $4,900 million. * The company left unchanged its guidance for sales of its AcrySof([R]) ReSTOR([R]) intraocular lenses to be at least $100 million. * The company raised its guidance for diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of to a range of $4.51 to $4.55, excluding the $0.30 impact of the refractive impairment charge. This range includes the $0.31 per share positive impact of the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement in the second quarter of 2006 and the $0.17 per share negative impact of share-based compensation expense resulting from the adoption of SFAS 123R. Including the impact of the impairment charge, the company expects earnings per share to be in the range of $4.21 to $4.25. Other Items * On September 8, 2006, Alcon's board of directors expanded the company's share repurchase program to allow for the purchase of up to an additional 5.0 million shares of the company's outstanding common stock. * Alcon recently received notice from Apotex, Inc. regarding the submission of an Abbreviated New Drug Application abbreviated new drug application Pharmacology An application made in the US by a pharmaceutical company requesting authority to market a 'new' drug for which both its therapeutic indications and formulation were previously approved by the FDA in another similar (ANDA ANDA abbr. abbreviated new drug application ) to the FDA requesting approval to manufacture and sell a generic version of Alcon's allergy drug, Patanol([R]) ophthalmic solution. * During its corporate planning process, the company reviewed its refractive laser business to determine if its assumptions about market growth, industry dynamics business circumstances and future financial performance had changed. This review indicated that the carrying amounts of long-lived assets used in the refractive product line probably would not be recovered through the projected future cash flows, although the company intends to continue using these assets. A formal impairment review determined that on a gross basis the carrying amounts of the refractive assets were not recoverable. An impairment charge of $144.8 million was determined using a discounted cash flow calculation to estimate the fair values of the refractive assets. The company used this method because it believes this approach provided the most reasonable estimate of the fair values of these assets. Company Description Alcon, Inc. is the world's leading eye care company, with sales of $4.37 billion in 2005. Alcon, which has been dedicated to the ophthalmic industry for more than 50 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[umlaut umlaut (  m`lout) [Ger.,=transformed sound], in inflection, variation of vowels of the type of English man to men. ], S.A., the world's largest
food company. All trademarks noted in this release are the property of
Alcon, Inc., with the exception of Ciprodex([R]), which is a registered
trademark of Bayer AG Bayer AGGerman chemical and pharmaceutical company. Founded in 1863 by Friedrich Bayer (1825–1880), it now operates plants in more than 30 countries. Bayer has originated scores of pharmaceuticals, chemicals, and synthetic materials; it was the first developer and and licensed to Alcon, Inc. by Bayer Healthcare AG; Arxxant(TM), which is a trademark of Eli Lilly and Company; and Aganocide([TM]) which is a trademark of NovaCal Pharmaceuticals, Inc. Moxifloxacin is licensed to Alcon, Inc. by Bayer Healthcare AG. [TABLE OMITTED] [TABLE OMITTED] N/M N/M Not Meaningful N/M Nevermind N/M No Message N/M Newton Per Meter N/M Nuthin' Much - 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. Certain reclassifications have been made to prior year amounts to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" current year presentation. [TABLE OMITTED] 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. Certain reclassifications have been made to prior year amounts to conform to current year presentation. [TABLE OMITTED] Note: Certain reclassifications have been made to prior year amounts to conform to current year presentation. [TABLE OMITTED] [TABLE OMITTED] (1) The adjusted items above related to impairment charges on certain refractive assets and charges related to SFAS 123R are considered non-GAAP financial measures as defined by Regulation G promulgated prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. 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. [TABLE OMITTED] (1) The adjusted items above related to the settlement of several intellectual property lawsuits, impairment charges on certain refractive assets, and charges related to SFAS 123R 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. Caution Concerning Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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. |
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