Alcon, the global eyecare company with manufacturing facilities in Berks County, is finding out that it's not easy to be on your own. Spun-off from Novartis in February, Alcon reported a loss for the second quarter and the first half of 2019.
Several extraordinary events contributed to the loss. Tax reforms approved by Swiss voters in June caused a $294-million hit, up from $9 million in the second quarter of 2018. Also, as a result of its divestiture from Novartis, Alcon recorded $258 million from the amortization of intangible assets and $78 million as separation costs.
The new company, however, seems to be gaining its footing. For the second quarter of 2019, worldwide sales increased on a reported basis as well as a constant currency basis, as compared to the same quarter of the previous year. Sales also increased slightly in the first half of 2019, compared to the previous year.
Management, as it usually does, focused on the positive.
"Our second quarter results demonstrate that we are solidly executing our growth drivers while successfully standing Alcon up as an independent company," said David Endicott, Alcon's chief executive officer. "We maintained strong surgical performance, driven by new product innovation in both implantables and consumables and demand for surgical equipment. We also delivered improvements in vision care, driven by double digit growth of our DAILIES TOTAL1 globally, as well as solid sales execution in the U.S."
2nd quarter and first half 2019 results
Worldwide sales for the second quarter were $1.9 billion, an increase of 2%, or 5% on a constant currency basis, compared to the second quarter of 2018. Sales growth was driven by the company's four key growth platforms within the surgical and vision care segments: AT-IOLs, Vitreoretinal, DAILIES TOTAL1 and SYSTANE Complete.
For the first six months ended June 30, 2019, worldwide sales were $3.6 billion, up 1%, or 5% on a constant currency basis, compared to the first six months ended June 30, 2018.
Second quarter 2019 operating loss was $53 million, which includes charges of $258 million from the amortization of certain intangible assets and $78 million of separation costs. Excluding these and other adjustments, second quarter core operating income was $310 million.
Operating loss for the first six months of the year was $101 million, which includes charges of $513 million from the amortization of certain intangible assets, $78 million of separation costs and $72 million of spin-readiness costs. Excluding these and other adjustments, first half operating income was $624 million.
Diluted losses per share in the second quarter of 2019 were $0.80, which includes $301 million, or $0.61 per share, in non-cash tax expense resulting from Swiss tax reform which resulted in the re-measurement of the company's Swiss deferred tax assets and liabilities. Core diluted earnings per share were $0.47 for the second quarter, which was impacted by $0.06 per share from incremental interest expense related to borrowings associated with the spin-off.
First half 2019 diluted losses per share were $1.02, including $0.61 per share in non-cash tax expense resulting from Swiss tax reform and other adjustments. Core diluted earnings were $0.98 per share for the first half of 2019.
Surgical net sales of $1.1 billion, which include implantables, consumables and equipment/other, increased 2%, or 5% on a constant currency basis, compared to the second quarter of 2018. All categories performed well, posting mid-single digit growth.
Strong international demand for PANOPTIX and monofocals, pull-through of dedicated consumables, strong cataract equipment and service revenue were the primary drivers of growth. Year-to-date, surgical net sales increased 2%, or 6% on a constant currency basis, compared to the first six months of 2018.
Vision care net sales of $0.8 billion, which include contact lenses and ocular health, increased 3%, or 6% on a constant currency basis compared to the second quarter of 2018. Sales of DAILIES TOTAL1 and SYSTANE Complete continued to achieve double-digit gains during the quarter. Sales from the rest of the contact lens portfolio improved due to new product enhancements, better product flow and sales execution.
Revenues for the first six months of 2019 were comparable to the first six months of last year and increased 3% on a constant currency basis.
Endicott looked toward the remainder of the year
"PRECISION1, our newest daily SiHy lens, is expected to broaden our contact lens portfolio and enhance our competitive offerings," he said. "We're investing in a critical manufacturing platform that we believe will deliver one of our most exciting U.S. launches and position our business for continued growth and expansion."
Based on performance year-to-date, the company reiterated its full-year 2019 guidance provided during the first quarter trading update on May 15, 2019. The company continues to expect worldwide net sales growth for the full year 2019 to be between 3% and 5% on a constant currency basis, core operating margin to be in the range of 17% to 18%, and core effective tax rate to be in the range of 17% to 19%.
Alcon (NYSE: ALC) is the largest eyecare device company in the world, with complementary businesses in surgical and vision care. The company has a long series of industry firsts based on deep capabilities in materials science, surface chemistry and optics. Alcon's pipeline includes more than 100 projects in process and the company has more than 20,000 associates working worldwide.
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