Late Wednesday, Swiss eye care company Alcon, Inc. (ACL) reported that fourth quarter earnings rose 12.5% from last year, boosted by an improvement in gross margin and the results of ongoing cost cutting initiatives and a lower effective tax rate. The company's quarterly earnings per share grew 12.8% and came in above analysts' expectations. However, the company's earnings forecast for fiscal 2009 was below the consensus estimate.
In a statement, chairman, president and chief executive officer, Cary Rayment said, "I am pleased to report that Alcon again delivered solid financial results for the fourth quarter and full year of 2008, and did so in a challenging business environment, which accelerated in the fourth quarter. The long term strategic drivers of our business remain in place, supported by the favorable demographics of the eye care industry and our demonstrated ability to gain market share."
Fourth Quarter Results
The Hunenberg, Switzerland-based company reported net earnings of $423.6 million or $1.41 per share for the fourth quarter, up 12.5% from $376.5 million or $1.25 per share in the prior-year quarter.
On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $1.32 per share for the quarter. Analysts' estimate typically excludes special items.
Total global sales for the quarter increased 1.9% to $1.50 billion from $1.47 billion in the same quarter last year, and came in above analysts' consensus estimate of $1.47 billion. On a constant currency basis, sales grew 7.1% from last year, while organic sales growth was 6.4%.
Segmental Details
Geographically, U.S. sales for the fourth quarter increased 2.8% from the year-ago quarter to $665.2 million. International sales rose 1.2% or 10.4% excluding foreign exchange impact to $832.3 million, with emerging markets sales up 3.0%, or 16.4% excluding foreign exchange impact.
Product-wise, pharmaceutical products sales for the quarter were flat with last year at $578.1 million. Sales of glaucoma products were up 5.5% to $249.4 million, and otic/nasal products sales grew 12.1% to $83.9 million. On the other hand, sales of infection and inflammation products edged down 1.6% to $209.0 million, and allergy products sales dropped 12.7% to $79.5 million.
Surgical products sales for the quarter rose 3.2% to $723.2 million from the prior-year quarter. Sales of intraocular lenses increased 3.4% to $268.2 million, cataract and vitrectomy products sales rose 2.0%, and sales of refractive products jumped 22.9% to $26.3 million.
Consumer eye care products sales for the quarter increased 2.9% to $196.2 million from the year-ago quarter. Sales of contact lens disinfectants grew 7.6% and artificial tears products sales increased 2.3%.
Other Metrics
Operating income for the quarter climbed 20% to $573.1 million from the prior-year quarter, reflecting higher gross profit margin and cost-cutting initiatives. Total non-operating loss was $92.9 million, primarily because of $83.3 million in losses on investment securities.
Gross profit was $1.19 billion, higher than $1.10 billion in the comparable quarter a year ago, while gross margin for the quarter improved 4.5 percentage points to 79.2%, helped by the effects of exchange rate fluctuations related to goods within the internal distribution channels.
Selling, general and administrative expenses edged up 1.7% to $448.9 million from the same quarter last year. Research and development expenses were $157.4 million, down 1.6% from the year-ago quarter, primarily attributed to several milestone payments made last year as well as differences in timing of costs associated with regulatory filings and clinical studies between the two periods.
The company reported a loss from foreign currency translation of $14.4 million in the fourth quarter, compared to a gain of $2.6 million in the prior-year quarter.
The company ended the fourth quarter with cash and cash equivalents of $2.45 billion, compared to $2.13 billion at the end of the prior-year quarter.
Last month, Alcon appointed Kevin Buehler as the new president and chief executive officer, effective April 1, 2009. Buehler succeeds Cary Rayment, who will retire from the positions on March 31, 2009. However, Rayment would continue to serve on the board as non-executive chairman. Buehler will also be nominated for election to the board of directors at the annual general meeting, expanding the board to 11 members, subject to shareholder approval.
On July 7, Novartis acquired a 25% stake in Alcon from Nestlé S.A. for $10.4 billion. In an optional second step, Novartis has the right to acquire the remaining 52% Alcon stake being held by Nestlé, between January 2010 and July 2011 for up to about $28 billion.
Full-Year Highlights
For fiscal 2008, Alcon reported net earnings of $2.05 billion or $6.79 per share, higher than $1.59 billion or $5.25 per share posted in fiscal 2007.
Excluding a tax benefit, net earnings for the full-year 2008 would have been $1.81 billion or $6.00 per share. Analysts expected the company to report earnings of $5.90 per share for the fiscal year 2008.
Total sales for the year increased 12.4% to $6.29 billion from $5.60 billion reported in the full-year 2008. The Street was looking for revenues of $6.27 billion in fiscal 2008. On a constant currency basis, sales grew 9.5% from last year, while organic sales growth was 8.3%.
The company's board would propose a 50% dividend increase to 3.95 Swiss francs per share.
Outlook
Looking ahead to fiscal 2009, Alcon expects earnings in the range of $6.00 to $6.20 per share and adjusted earnings between $6.05 and $6.25 per share. Analysts expect the company to report earnings of $6.28 per share for the full-year 2009.
The company also anticipates fiscal 2009 organic sales growth in the mid-single digits, excluding currency and acquisitions.
Stock Quote
ACL closed Wednesday's regular trading session at $82.99, up $0.01 or 0.01% on a volume of about 1.63 million shares. The stock has been trading in the $66.64 to $178.56 range for the past 52-week period, with a three-month average volume of about 0.87 million shares.
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