CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $2,519 | $2,449 |
Short term investments | 378 | 564 |
Trade receivables, net | 1,332 | 1,168 |
Inventories | 656 | 574 |
Deferred income tax assets | 159 | 221 |
Other current assets | 230 | 243 |
Total current assets | 5,274 | 5,219 |
Long term investments | 150 | 24 |
Property, plant and equipment, net | 1,246 | 1,138 |
Intangible assets, net | 259 | 91 |
Goodwill | 690 | 645 |
Long term deferred income tax assets | 398 | 342 |
Other assets | 138 | 92 |
Total assets | 8,155 | 7,551 |
Current liabilities: | ||
Accounts payable | 284 | 199 |
Short term borrowings | 664 | 1,059 |
Current maturities of long term debt | 1 | 1 |
Other current liabilities | 1,003 | 931 |
Total current liabilities | 1,952 | 2,190 |
Long term debt, net of current maturities | 60 | 61 |
Long term deferred income tax liabilities | 62 | 22 |
Other long term liabilities | 681 | 587 |
Shareholders' equity: | ||
Common shares, par value CHF 0.20 per share; 320,254,200 shares authorized, 303,841,904 shares issued and 298,983,807 shares outstanding at September 30, 2009; 321,297,600 shares authorized, 304,722,706 shares issued and 298,648,353 shares outstanding at December 31, 2008 | 42 | 42 |
Additional paid-in capital | 1,508 | 1,449 |
Accumulated other comprehensive income | 213 | 80 |
Retained earnings | 4,076 | 3,699 |
Treasury shares, at cost; 4,858,097 shares at September 30, 2009 and 6,074,353 shares at December 31, 2008 | (439) | (579) |
Total shareholders' equity | 5,400 | 4,691 |
Total liabilities and shareholders' equity | $8,155 | $7,551 |
PARENTHETICAL DATA TO THE CONSO
PARENTHETICAL DATA TO THE CONSOLIDATED BALANCE SHEETS (USD $) | ||
Sep. 30, 2009
| Dec. 31, 2008
| |
Shareholders' equity: | ||
Common shares, par value CHF per share | 0.2 | 0.2 |
Common shares, shares authorized | 320,254,200 | 321,297,600 |
Common shares, shares issued | 303,841,904 | 304,722,706 |
Common shares, shares outstanding | 298,983,807 | 298,648,353 |
Treasury shares, at cost; shares | 4,858,097 | 6,074,353 |
CONSOLIDATED STATEMENTS OF EARN
CONSOLIDATED STATEMENTS OF EARNINGS (USD $) | ||||
In Millions, except Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Sales | $1,614 | $1,524 | $4,784 | $4,796 |
Cost of goods sold | 399 | 348 | 1,168 | 1,161 |
Gross profit | 1,215 | 1,176 | 3,616 | 3,635 |
Selling, general and administrative | 474 | 501 | 1,414 | 1,512 |
Research and development | 158 | 174 | 461 | 461 |
Amortization of intangibles | 5 | 7 | 17 | 22 |
Operating income | 578 | 494 | 1,724 | 1,640 |
Other income (expense): | ||||
Gain (loss) from foreign currency, net | 0 | (10) | (1) | (7) |
Interest income | 13 | 20 | 37 | 66 |
Interest expense | (3) | (13) | (13) | (45) |
Other, net | 6 | (42) | 12 | (52) |
Earnings before income taxes | 594 | 449 | 1,759 | 1,602 |
Income taxes | 79 | (178) | 210 | (21) |
Net earnings | $515 | $627 | $1,549 | $1,623 |
Basic earnings per common share | 1.72 | 2.1 | 5.19 | 5.44 |
Diluted earnings per common share | 1.71 | 2.07 | 5.15 | 5.38 |
Basic weighted average common shares | 298,875,564 | 299,076,483 | 298,734,923 | 298,428,116 |
Diluted weighted average common shares | 301,894,468 | 302,636,080 | 300,856,409 | 301,920,346 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash provided by (used in) operating activities: | ||
Net earnings | $1,549 | $1,623 |
Depreciation | 142 | 128 |
Amortization of intangibles | 17 | 22 |
Share-based payments | 58 | 70 |
Tax benefits from share-based compensation | 2 | 8 |
Deferred income taxes | 41 | (118) |
Loss on sale of assets | 61 | 9 |
Unrealized depreciation (appreciation) on trading securities | (73) | 41 |
Other, net | (3) | 7 |
Changes in operating assets and liabilities: | ||
Trade receivables | (123) | (15) |
Inventories | (34) | 13 |
Other assets | (22) | 24 |
Accounts payable | 79 | 20 |
Other current liabilities | 59 | 41 |
Other long term liabilities | 22 | (178) |
Net cash from operating activities | 1,775 | 1,695 |
Cash provided by (used in) investing activities: | ||
Purchases of property, plant and equipment | (226) | (215) |
Acquisition of business, net of cash acquired | (149) | 0 |
Purchases of intangible assets | (4) | (28) |
Purchases of investments | (795) | (816) |
Proceeds from sales and maturities of investments | 917 | 831 |
Other, net | 7 | 4 |
Net cash from investing activities | (250) | (224) |
Cash provided by (used in) financing activities: | ||
Repayment of short term debt | (436) | (498) |
Repayment of long term debt | (1) | (2) |
Dividends on common shares | (1,048) | (750) |
Acquisition of treasury shares | (5) | (44) |
Proceeds from exercise of stock options | 21 | 120 |
Tax benefits from share-based payment arrangements | 2 | 51 |
Net cash from financing activities | (1,467) | (1,123) |
Effect of exchange rates on cash and cash equivalents | 12 | 9 |
Net increase (decrease) in cash and cash equivalents | 70 | 357 |
Cash and cash equivalents, beginning of period | 2,449 | 2,134 |
Cash and cash equivalents, end of period | $2,519 | $2,491 |
Condensed Consolidated Financia
Condensed Consolidated Financial Statements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Condensed Consolidated Financial Statements [Abstract] | |
Condensed Consolidated Financial Statements | (1) Condensed Consolidated Financial Statements (in millions, except share and per share data) Alcon, Inc. ("Alcon"), a Swiss corporation, is a majority owned subsidiary of Nestl S.A. ("Nestl"), which owned 156,076,263 common shares of Alcon at September 30, 2009, as discussed in note 13. The interim condensed consolidated financial statements of Alcon and its subsidiaries (collectively, the "Company") are unaudited.Amounts presented at December 31, 2008 are based on the audited consolidated financial statements appearing in Alcon's annual report on Form 20-F filed with the U.S. Securities and Exchange Commission.The interim condensed consolidated financial statements and notes thereto do not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S. GAAP") and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Alcon's annual report on Form 20-F. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with U.S. GAAP.Actual results could differ from those estimates. In management's opinion, the interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary to present fairly the results for the interim periods presented.Results for interim periods are not necessarily indicative of results that ultimately will be achieved for a full year. Management has evaluated subsequent events through the time that this report was filed on October 28, 2009. |
Earnings Per Share
Earnings Per Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Earnings Per Share [Abstract] | |
Earnings Per Share | (2) Earnings Per Share (in millions, except share and per share data) Basic earnings per common share were computed by dividing net earnings by the weighted average number of common shares outstanding for the relevant period.The unvested portion of restricted common shares was excluded in the calculation of basic weighted average common shares outstanding.Diluted weighted average common shares reflect the potential dilution, using the treasury stock method, that could occur if employee stock options for the purchase of common shares and share-settled stock appreciation rights were exercised and if share-settled restricted share units and contingent restricted common shares granted to employees were vested. The following table reconciles the weighted average shares of the basic and diluted share computations: Three months endedSeptember 30, Nine months endedSeptember 30, 2009 2008 2009 2008 Basic weighted average common shares outstanding 298,875,564 299,076,483 298,734,923 298,428,116 Effect of dilutive securities: Employee stock options 2,093,341 2,764,070 1,662,213 2,906,599 Share-settled stock appreciation rights 597,588 567,965 219,180 401,845 Share-settled restricted share units 245,869 82,301 145,650 51,615 Contingent restricted common shares 82,106 145,261 94,443 132,171 Diluted weighted average common shares outstanding 301,894,468 302,636,080 300,856,409 301,920,346 Certain executives of the Company had deferred the receipt of 118,180 and 146,451 Alcon common shares at September 30, 2009 and 2008, respectively, into the Alcon Executive Deferred Compensation Plan ("DCP").Alcon common shares held in the DCP were reflected as outstanding in the condensed consolidated balance sheets and were included in the applicable basic and diluted earnings per share calculations. The computations of diluted weighted average common shares outstanding for the periods ended September 30, 2009 and 2008 did not include the following instruments, as their exercise prices and unrecognized costs were greater than the average market price of the common shares: 2009 2008 Stock options 135,822 125 Share-settled stock appreciation rights 1,014,895 16,916 The effect of their inclusion would have been anti-dilutive. |
Cash Flows Supplemental Disclos
Cash Flows Supplemental Disclosure | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Cash Flows-Supplemental Disclosure [Abstract] | |
Cash Flows-Supplemental Disclosure | (3) Cash FlowsSupplemental Disclosure (in millions, except share and per share data) Nine months ended September 30, 2009 2008 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for the following: Interest expense, net of amount capitalized $ 11 $ 45 Income taxes $ 180 $ 176 Access to Cash Equivalents During 2008, Lehman Brothers International (Europe) London filed for administration in England.At that time, the Company's cash and cash equivalents included $707.0 of short term securities held in a segregated custodial account of Lehman Brothers International (Europe) London pursuant to a Custody Agreement.After the securities were released, Nestl invoiced the Company in December 2008 and, in 2009, the Company reimbursed Nestl for a total of $5.2 in fees paid by Nestl to the Joint Administrators of Lehman Brothers International (Europe) London (in administration) related to the release of the short-term securities held in the custodial account.This amount of fees is subject to adjustment depending on the final costs incurred to settle the administration of Lehman Brothers International (Europe) London. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Supplemental Balance Sheet Information [Abstract] | |
Supplemental Balance Sheet Information | (4) Supplemental Balance Sheet Information (in millions, except share and per share data) September 30, December 31, 2009 2008 Inventories, at Lower of Cost or Market Finished products $ 383 $ 358 Work in process 56 40 Raw materials 217 176 Total $ 656 $ 574 September 30, December 31, 2009 2008 Property, Plant and Equipment, Net Property, plant and equipment, at cost $ 2,573 $ 2,318 Accumulated depreciation (1,327 ) (1,180 ) Total $ 1,246 $ 1,138 September 30, 2009 December 31, 2008 Accumulated Other Comprehensive Income (Loss) Foreign currency translation adjustment $ 274 $ 194 Unrealized gains (losses) on investments, net of income taxes 42 (10 ) Unrecognized postretirement benefits (losses) and prior service costs, net of tax benefits (103 ) (104 ) Total $ 213 $ 80 |
Investments
Investments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Investments [Abstract] | |
Investments | (5) Investments (in millions, except share and per share data) At September 30, 2009 and December 31, 2008, investments were: September 30, 2009 December 31, 2008 Short term investments: Trading securities $ 31 $ 433 Available-for-sale investments 347 131 Total short term investments $ 378 $ 564 Long term investmentsavailable-for-sale investments $ 150 $ 24 At September 30, 2009 and December 31, 2008, trading securities were: September 30, 2009 December 31, 2008 Net Estimated Net Estimated Unrealized Fair Unrealized Fair Gains (Losses) Value Gains (Losses) Value Total trading securities $ (12 ) $ 31 $ (85 ) $ 433 At September 30, 2009, available-for-sale investments were: Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value Short term investments: U.S. government and agency securities $ 88 $ -- $ -- $ 88 Mortgage-backed securities fund 72 6 -- 78 Mortgage-backed securities 8 -- -- 8 Senior secured bank loans fund 129 21 -- 150 Corporate debt securities 22 1 -- 23 Total short term investments 319 28 -- 347 Long term investments: U.S. government and agency securities 25 -- -- 25 Mortgage-backed securities 62 4 -- 66 Corporate debt securities 15 1 -- 16 Equity securities 20 8 -- 28 Other investments 14 1 -- 15 Total long term investments 136 14 -- 150 Total available-for-sale investments $ 455 $ 42 $ -- $ 497 The senior secured bank loans fund is a professionally managed fund investing in loans made by banks to large corporate borrowers whose assets are pledged as collateral. At December 31, 2008, available-for-sale investments were: Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value Short term investments: Mortgage-backed securities $ 58 $ 1 $ -- $ 59 Senior secured bank loans fund 83 -- (11 ) 72 Total short term investments 141 1 (11 ) 131 Long term investments: U.S. government and agency securities 2 -- -- 2 Equity securities 20 -- -- 20 Other investments 2 -- -- 2 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments | (6) Fair Value of Financial Instruments (in millions, except share and per share data) At September 30, 2009 and December 31, 2008, the Company's financial instruments included cash and cash equivalents, investments, trade receivables, accounts payable, short term borrowings and long term debt.The estimated fair value of certain of these financial instruments is provided below.Due to the short term maturities of cash and cash equivalents, trade receivables, accounts payable and short term borrowings, thecarrying amounts approximate fair values at the respective balance sheet dates.The fair values of long term debt were based on interest rates then currently available to the Company for issuance of debt with similar terms and remaining maturities.The fair values of investments were determined as discussed below. September 30, 2009 December 31, 2008 Carrying Amounts Fair Value Carrying Amounts Fair Value Assets: Short term trading and available-for-sale investments $ 378 $ 378 $ 564 $ 564 Long term available-for-sale investments 150 150 24 24 Forward exchange contracts 4 4 10 10 Interest rate swaps 1 1 1 1 Liabilities: Long term debt, excluding capital lease obligations 61 61 62 62 Forward exchange and option contracts 2 2 5 5 Financial instruments, such as equity and fixed income securities, other investments and derivatives, were presented at fair value.Fair value is defined as the price at which an asset could be exchanged or a liability could be transferred in an orderly transaction between knowledgeable and willing market participants within the principal or most advantageous market at the measurement date.Where available, fair value is based on or derived from observable market prices or parameters.Where observable prices or inputs are not available, pricing for similar financial assets or liabilities, dealer quotes or valuation models are applied.These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity. Financial assets and liabilities recorded at fair value in the condensed consolidated balance sheets were categorized based upon the level of judgment associated with the inputs used to measure their fair value.These categories, from lowest to highest based on the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows: Level 1 Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of Company assets carried at Level 1 fair value are equities listed in active markets. Level 2 Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the assets or liabilities through correlation with market data at the measurement date and for the duration |
Intangible Assets And Goodwill
Intangible Assets And Goodwill | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Intangible Assets and Goodwill [Abstract] | |
Intangible Assets and Goodwill | (7) Intangible Assets and Goodwill (in millions, except share and per share data) September 30, 2009 December 31, 2008 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Intangible Assets Subject to Amortization: Licensed technology $ 333 $ (294 ) $ 328 $ (284 ) Patents 106 (23 ) 29 (22 ) Other 124 (91 ) 129 (89 ) 563 (408 ) 486 (395 ) Not Subject to Amortization: Purchased in process research and development assets 104 -- -- -- Total Intangible Assets $ 667 $ (408 ) $ 486 $ (395 ) Certain 2008 details have been reclassified in the table above to conform to the current period presentation. For an explanation of significant changes to intangible assets, see note 15, "ESBATech AG Acquisition." United States International Segment Segment Total Goodwill Balance, December 31, 2008 $ 403 $ 242 $ 645 Business acquisition 18 22 40 Impact of changes in foreign exchange rates 3 2 5 Balance, September 30, 2009 $ 424 $ 266 $ 690 |
Short Term Borrowings And Long
Short Term Borrowings And Long Term Debt | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Short Term Borrowings and Long Term Debt [Abstract] | |
Short Term Borrowings and Long Term Debt | (8) Short Term Borrowings and Long Term Debt (in millions, except share and per share data) September 30, December 31, 2009 2008 Short Term Borrowings Lines of credit $ 285 $ 311 Commercial paper 308 622 From affiliates 25 97 Bank overdrafts 46 29 Total short term borrowings $ 664 $ 1,059 At September 30, 2009, the Company had unsecured credit and commercial paper facilities totaling $2,706, including bank overdraft agreements, with third parties that were denominated in various currencies.As of September 30, 2009, total borrowings from Nestl and its subsidiaries were $25 under unsecured revolving credit facilities of $269. September 30, December 31, 2009 2008 Long Term Debt License obligations $ 4 $ 5 Bank loan 57 56 Other -- 1 Total long term debt 61 62 Less current maturities of long term debt 1 1 Long term debt, net of current maturities $ 60 $ 61 |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes | (9) Income Taxes (in millions, except share and per share data) The Company or one of its subsidiaries files income tax returns in Switzerland, the U.S. federal jurisdiction, and various state and other foreign jurisdictions.With few exceptions, the Company is no longer subject to Swiss, U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003.In the first quarter of 2007, the Internal Revenue Service ("IRS") commenced an examination of the Company's U.S. income tax returns for 2003 through 2005 that was substantially completed in May 2009.In June 2009, the IRS commenced an examination of the Companys U.S. income tax returns for 2006 and 2007 that is anticipated to be completed by the end of 2010.In May 2009, the IRS and the Company entered the Compliance Assurance Process (CAP) program for 2009.The Company also currently is subject to income tax examinations by various state, local and other foreign tax authorities.In addition, in June 2009, the Company and the IRS signed an advance pricing agreement (APA) contract memorializing the mutual agreement letter between Switzerland and the United States for years through 2014 that covers all material intercompany transactions involving the Company and its subsidiaries in these two jurisdictions.Finally, during the fourth quarter of 2007, the Company submitted a similar request for a bilateral APA between Japanese and Swiss tax authorities that would cover the tax years 2008 through 2012.The Company expects that the Japanese-Swiss APA will be concluded in 2010. The Company believes that it takes reasonable positions on its tax returns filed throughout the world; however, tax laws are complex and susceptible to differing interpretations.Tax authorities throughout the world, from time to time, routinely challenge positions taken by the Company, particularly in the case of transfer pricing issues.The Company has identified its uncertain tax positions and prepared its reserve for contingent tax liabilities to reflect the associated unrecognized tax benefits (the "Tax Reserves").Management believes that the Tax Reserves are fairly stated and that the possibility of a significant increase during the next 12 months in the total amounts of unrecognized tax benefits reflected in the Tax Reserves related to periods through the end of this reporting period is remote.However, the Company believes it is reasonably possible that approximately 80% of the Tax Reserves could be eliminated during the next 12 months as a result of actual payment of amounts included in the Tax Reserves and/or developments in various audits concerning multiple issues, including transfer pricing concerns. The total amount of gross unrecognized tax benefits included in the Tax Reserves decreased by $13 to $117 in the first nine months of 2009.The net decrease in unrecognized tax benefits reflects net reductions related to progress on audit settlements, APA negotiations, the lapse of statutes of limitations and other minor items.The amount that would impact the effective tax rate, if recognized, decreased by $6 to $114 for the first nine months of 2009.The Company's policy |
Business Segments
Business Segments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Business Segments [Abstract] | |
Business Segments | (10) Business Segments (in millions, except share and per share data) The Company conducts its global business through two business segments:Alcon United States and Alcon International.Alcon United States includes sales to unaffiliated customers located in the United States of America, excluding Puerto Rico.Alcon United States operating income is derived from operating profits within the United States.Alcon International includes sales to all other unaffiliated customers. Each business segment markets and sells products principally in three product categories of the ophthalmic market: (1) pharmaceutical (prescription drugs), (2) surgical equipment and devices (cataract, vitreoretinal and refractive) and (3) consumer eye care (contact lens disinfectants and cleaning solutions, artificial tears and ocular vitamins).Business segment operations generally do not include research and development, certain manufacturing and other corporate functions. Certain manufacturing costs and manufacturing variances are not assigned to business segments because most manufacturing operations produce products for more than one business segment.Research and development costs, excluding regulatory costs which are included in the business segments, are treated as general corporate costs and are not assigned to business segments. Identifiable assets are not assigned by business segment and are not considered in evaluating the performance of the business segments. Depreciation and Sales Operating Income Amortization Three months ended September 30, 2009 2008 2009 2008 2009 2008 United States $ 733 $ 681 $ 438 $ 382 $ 12 $ 10 International 881 843 357 339 23 22 Segments total 1,614 1,524 795 721 35 32 Manufacturing operations -- -- (14 ) (18 ) 13 11 Research and development -- -- (136 ) (152 ) 4 4 General corporate -- -- (50 ) (40 ) 3 3 Share-based compensation -- -- (17 ) (17 ) -- -- Total $ 1,614 $ 1,524 $ 578 $ 494 $ 55 $ 50 Depreciation and Sales Operating Income Amortization Nine months ended September 30, 2009 2008 2009 2008 2009 2008 United States $ 2,181 $ 2,141 $ 1,266 $ 1,186 $ 35 $ 34 International 2,603 2,655 1,108 1,084 65 63 Segments total 4,784 4,796 2,374 2,270 100 97 Manufacturing operations -- -- (50 ) (42 ) 37 34 Research and development -- -- |
Share Based Compensation Plans
Share Based Compensation Plans | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Share-Based Compensation Plans [Abstract] | |
Share-Based Compensation Plans | (11) Share-Based Compensation Plans (in millions, except share and per share data) On February 10, 2009, pursuant to the 2002 Alcon Incentive Plan, the Company's board of directors approved the grant, effective February 17, 2009, to certain employees of share-settled stock appreciation rights ("SSARs") and stock options for approximately 2.1 million Alcon common shares.The exercise price of a SSAR or an option was set at the closing market price of one Alcon common share, as reported by the New York Stock Exchange on the date of the grant, February 17, 2009, which was $87.09 per share.The SSARs and stock options are scheduled to become exercisable in 2012 and expire in 2019.The board also approved the grant, effective February 17, 2009, to certain employees of approximately 420,000 share-settled restricted share units ("RSUs").The RSUs vest at the end of a three-year period, with forfeitures if the recipient is not fully vested at retirement before age 62.The Company's board of directors also approved the grant, effective February 17, 2009, of approximately 47,000 performance share units to senior executive officers and other selected executives.The performance share units are designed to award additional compensation in the form of Alcon shares if earnings per share targets during a three-year period are met.The final award may be adjusted by a total shareholder return multiplier.The performance share units vest at the end of a three-year period, with forfeitures if the recipient is not fully vested at retirement before age 62. On May 5, 2009, the Companys board of directors approved an award effective May 8, 2009 to each non-employee director of Alcon of 3,150 SSARs and 700 RSUs.The exercise price of a SSAR was set at the closing price of one Alcon common share, as reported on the New York Stock Exchange on the date of grant, May 8, 2009, which was $96.02 per share.Both the SSARs and RSUs have a three-year cliff vesting period from the date of grant.A non-employee director is a director who is neither a member of Nestl's board of directors nor a full-time employee of Nestl or Alcon. The weighted average grant-date "fair value of SSARs and stock options granted during the period ended September 30, 2009 was $18.88 per instrument.The "fair value" of each SSAR and stock option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Nine months ended September 30, 2009 Expected volatility 31.5 % Risk-free interest rate 1.66 % Expected dividend yield 3.0 % Expected term 5 years The Company based its estimates of expected volatility on daily historical trading data of its common shares from March 2002 through the grant dates and, due to its short history as a public company when compared to the length of the term of the instruments, other factors, such as the volatility of the common share prices of other pharmaceutical and surgical companies. The risk-free interest rate assumptions were based on implied yields, at the grant dates, of U.S. Treasury zero-coupon bonds having a remaining |
Pension and Postretirement Bene
Pension and Postretirement Benefits | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Pension and Postretirement Benefits [Abstract] | |
Pension and Postretirement Benefits | (12) Pension and Postretirement Benefits (in millions, except share and per share data) Components of net periodic benefit costs: Pension Benefits Postretirement Benefits Three months ended September 30, 2009 2008 2009 2008 Service cost $ 7 $ 6 $ 3 $ 3 Interest cost 8 6 4 4 Expected return on assets (2 ) -- (2 ) (2 ) Prior service cost (1 ) (1 ) -- -- Net losses (gains) 3 2 1 -- Net periodic benefit cost $ 15 $ 13 $ 6 $ 5 Pension Benefits Postretirement Benefits Nine months ended September 30, 2009 2008 2009 2008 Service cost $ 17 $ 18 $ 10 $ 10 Interest cost 21 18 12 11 Expected return on assets (3 ) (1 ) (7 ) (8 ) Prior service cost (1 ) (1 ) -- -- Net losses (gains) 6 5 3 1 Net periodic benefit cost $ 40 $ 39 $ 18 $ 14 Effective January 1, 2008, the Company adopted the measurement date provisions of the Compensation Retirement Benefits Topic 715-20-65-1 of the Accounting Standards Codification (ASC), as adopted by the FASB.The Company elected to utilize the alternate transition method to transition the measurement date for its defined pension benefit plan in Japan from September 30 to December 31.Under this transition method, the Company charged 3/15ths of the estimated pension cost from October 1, 2007 to December 31, 2008 (or $0.8, net of taxes) to retained earnings as of January 1, 2008. The Company maintains an irrevocable Rabbi trust held and invested in an unfunded arrangement for the payment of benefits to participants under certain defined benefit pension plans of the Company.At September 30, 2009, the accompanying condensed consolidated balance sheet included net assets of the trust (cash and cash equivalents of $44, short term investments of $215 and long term investments of $28) that were restricted to the payment of pension benefits except under certain conditions, such as the Company's insolvency or termination of the trust. |
Shareholders' Equity
Shareholders' Equity | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Shareholders' Equity [Abstract] | |
Shareholders' Equity | (13) Shareholders' Equity (in millions, except share and per share data) (a) Share Cancellation On May 5, 2009, Alcon's shareholders approved the cancellation of 1,043,400 Alcon common shares, which the Company purchased during 2008.After the fulfillment of certain formal Swiss law requirements, the cancellation became effective in August 2009. (b) Shareholder Agreement On April 6, 2008, Nestl and Novartis AG ("Novartis") executed the Purchase and Option Agreement pursuant to which Nestl agreed to sell approximately 74 million of its shares of Alcon common stock to Novartis in a cash transaction at a price of $143.18 per share.This sale was consummated on July 7, 2008, and Novartis now owns a minority stake in Alcon of slightly less than 25% of Alcon's outstanding shares, while Nestl remains Alcon's majority shareholder with approximately 156 million Alcon shares comprising approximately 52% of the Company's outstanding shares. The Purchase and Option Agreement between Nestl and Novartis also contains put and call option rights on the balance of approximately 156 million Alcon shares owned by Nestl.The option rights commence on January 1, 2010 and expire on July 31, 2011.As outlined by the two parties, these rights grant (i) Novartis a call option to buy all but 4.1 million (or 2.5%) of Nestl's remaining Alcon shares at a fixed price of $181 per share and the 4.1 million shares at the first stage price of $143.18 per share, and (ii) Nestl a put option to sell to Novartis all but 4.1 million of its remaining Alcon shares to Novartis at the lower of Novartis's call price of $181 per share or a 20.5% premium above the then-market price of Alcon shares, which will be calculated as the average market price of Alcon shares during the five trading days immediately preceding the exercise date of the put option, with the 4.1 million share balance to be sold at the first stage closing price of $143.18 per share. The consummation of a purchase and sale transaction under the Purchase and Option Agreement is subject to regulatory approvals.The consummation would trigger certain change of control provisions in the Company's share-based awards plan (including the vesting of certain outstanding share-based awards), certain retirement plans for Company employees and other agreements. |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | (14) Commitments and Contingencies (in millions, except share and per share data) Alcon, either alone or jointly with its commercial partners, has filed twelve patent infringement actions against five different generic drug companies.With the exception of international generic challenges, all of these generic drug companies are seeking U.S. Food and Drug Administration ("FDA") approval to market generic versions of Alcon products, under what is known as an Abbreviated New Drug Application ("ANDA"). The first infringement action was filed after Alcon received notice that Teva Pharmaceuticals USA, Inc. had filed an ANDA seeking approval to sell a generic version of Alcon's Vigamox antibiotic ophthalmic solution.Moxifloxacin, the primary ingredient in Vigamox, is licensed to Alcon by Bayer HealthCare AG.As part of its ANDA, Teva challenged three patents covering Alcon's innovator product Vigamox. Two of the patents are owned by Alcon's licensor, Bayer HealthCare AG, and the third, which expires in 2020, is owned by Alcon.The two Bayer HealthCare patents were also the subject of another Teva ANDA seeking approval to sell a generic version of Bayer HealthCare's systemic moxifloxacin product, Avelox.Suit was filed by Alcon and Bayer HealthCare as co-plaintiffs against Teva relative to the Vigamox ANDA on April 5, 2006 in the U.S. District Court in Delaware.Bayer HealthCare subsequently filed suit in the same court relative to the Avelox ANDA, and the two suits were merged.Trial was scheduled to begin February 26, 2008, but the dispute between Bayer HealthCare and Teva relative to the two Bayer HealthCare patents was resolved by settlement on the eve of trial.Under the terms of the settlement, Teva acknowledged the validity and enforceability of both Bayer HealthCare patents, and further acknowledged that its proposed generic ophthalmic product would infringe both patents.Teva has therefore relinquished any claim that it is entitled to market the generic ophthalmic product prior to September 4, 2014.Alcon remains the exclusive ophthalmic licensee under the Bayer HealthCare patents.The trial relative to the Alcon patent began on February 28, 2008 and concluded on March 6, 2008.Since then, Alcon has received a notice of allowance on a related patent application with claims that will cover the Vigamox product and Teva's proposed generic product.The issue fee has been paid on that application, and the patent should issue before the end of the year.On October 19, 2009, the court ruled in Alcons favor on all counts, finding the Alcon patent to be valid and infringed by the proposed generic product.Teva may appeal the ruling.However, even if Teva were to succeed in having the District Court decision reversed on appeal, it would still have to address Alcons recently allowed second patent before competing with Alcon's Vigamox product in September 2014 when the underlying Bayer patent expires.If Teva were to win on appeal and overcome Alcons second patent, the resulting generic competitionwould be expected to impact significantly the Company's sales and profits. The second patent infringement action was filed after Alcon received notice that Ap |
Acquisition
Acquisition | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Acquisition [Abstract] | |
Acquisition | (15) ESBATech AG Acquisition (in millions, except share and per share data) On September 15, 2009, the Company completed the acquisition of ESBATech AG, a Swiss biotechnology company. Alcon paid ESBATech shareholders $150 in cash at closing. In addition, the Company recorded the estimated fair value of possible contingent payments of up to $439 based upon the achievement of future research and development milestones that would be expected to create value for Alcon. ESBATech is a clinical-stage biotechnology company that has been developing a pipeline of proprietary single-chain antibody fragment therapeutics for topical and local delivery for safe and convenient therapy. This acquisition provides the Company with additional research and development capabilities. The ESBATech acquisition was recorded in accordance with the Business Combinations topic of the ASC.Between the acquisition date and September 30, 2009, ESBATech had no revenues and its expenses were not significant. The following table summarizes the components of the ESBATech purchase price: Cash paid for ESBATech shares $ 150 Estimated fair value of future contingent payments 71 Total purchase price $ 221 The Company engaged a third-party valuation firm to assist it in determining the estimated fair values of in-process research and development, identifiable intangible assets and certain tangible assets as well as the future contingent payments.Such a valuation requires significant estimates and assumptions including but not limited to determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows, and developing appropriate discount rates.The Company is continuing to obtain information and evaluate these fair value estimates.The Company's fair value estimates for these components of the transaction may change during the allowable allocation period, which is typically up to one year from the acquisition date. Present Value of Future Contingent Payments In addition to the cash paid to the shareholders of ESBATech at the time of the acquisition, the Company is obligated to make contingent payments of up to $439 based upon the achievement of future research and development milestones that would be expected to create value for Alcon. The fair value of these payments was estimated to be $71 and was included as a cost of the acquisition. There are a number of milestones that could potentially lead to such payments to the former shareholders of ESBATech.This valuation was based on the Company's estimates of the probability and timing of these contingent payments. The fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 measurement, as described in note 6.Each milestone was assigned a probability based on its current status.The resultant probability-weighted cash flows were then discounted using a discount rate of 6%, which the Company believes is appropriate and representative of a market participant assumption.The probabilities assigned to payment streams ranged from 5% to 39%.An increase o |
Document Information
Document Information | |
3 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information [Line Items] | |
Document Type | 6-K |
Document Period End Date | 2009-09-30 |
Amendment Flag | false |
Entity Information
Entity Information (USD $) | |
3 Months Ended
Sep. 30, 2009 | |
Entity Information [Line Items] | |
Entity Registrant Name | ALCON INC |
Entity Central Index Key | 0001167379 |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Well Known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | $9,546,917,392 |
Entity Common Stock Shares Outstanding | 298,983,807 |