SEC Company Response from NOVARTIS AG (NVS) — Jun 29, 2015
NOVARTIS AG
Date: June 29, 2015 · CIK: 0001114448 · Accession: 0001104659-15-048415
AI Filing Summary & Sentiment
File numbers found in text: 001-15024
Referenced dates: March 30, 2015
Letter
Re: Novartis AG Form 20-F for Fiscal Year Ended December 31, 2014 (2014 Form 20-F) Filed January 27, 2015 File No. 001-15024
Dear Mr. Rosenberg:
This is in reply to your letter addressed to Felix Ehrat, our Group General Counsel, dated May 22, 2015. For ease of reference, we set forth your comment below, followed by our responses.
Item 5. Operating and Financial Review and Prospects
Results of Operations, page 109
SEC request:
1. We have considered your response to prior comment one but continue to believe that you should amend your filing to remove the table on page 110, which makes no distinction between your continuing and discontinued operations.
Novartis Response:
In response to the Staff’s comment, Novartis AG (the Company) respectfully submits that, in order to assist investors in understanding the Company’s presentation of its 2014 financial results in our Form 20-F for the fiscal year ended December 31, 2015 (2015 20-F), the Company will modify the referenced discussion of its results of operations substantially as proposed in Appendix A to this letter. As previously stated in response to comment one of the Staff’s letter dated March 30, 2015, the Company respectfully advises the Staff of its view that the 2014 Form 20-F does not need to be amended to remove the table on page 110 of the 2014 Form 20-F.
* * *
The Company acknowledges that:
· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
· the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We trust that this letter responds to the issues raised in your comment letter. If you have additional questions, please do not hesitate to contact us.
Respectfully submitted,
Novartis AG
Show Raw Text
CORRESP 1 filename1.htm Novartis AG Postfach 4002 Basel Switzerland June 29, 2015 Mr. Jim B. Rosenberg Senior Assistant Chief Accountant US Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Novartis AG Form 20-F for Fiscal Year Ended December 31, 2014 (2014 Form 20-F) Filed January 27, 2015 File No. 001-15024 Dear Mr. Rosenberg: This is in reply to your letter addressed to Felix Ehrat, our Group General Counsel, dated May 22, 2015. For ease of reference, we set forth your comment below, followed by our responses. Item 5. Operating and Financial Review and Prospects Results of Operations, page 109 SEC request: 1. We have considered your response to prior comment one but continue to believe that you should amend your filing to remove the table on page 110, which makes no distinction between your continuing and discontinued operations. Novartis Response: In response to the Staff’s comment, Novartis AG (the Company) respectfully submits that, in order to assist investors in understanding the Company’s presentation of its 2014 financial results in our Form 20-F for the fiscal year ended December 31, 2015 (2015 20-F), the Company will modify the referenced discussion of its results of operations substantially as proposed in Appendix A to this letter. As previously stated in response to comment one of the Staff’s letter dated March 30, 2015, the Company respectfully advises the Staff of its view that the 2014 Form 20-F does not need to be amended to remove the table on page 110 of the 2014 Form 20-F. * * * The Company acknowledges that: · the Company is responsible for the adequacy and accuracy of the disclosure in the filing; · Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and · the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. We trust that this letter responds to the issues raised in your comment letter. If you have additional questions, please do not hesitate to contact us. Respectfully submitted, Novartis AG /s/ HARRY KIRSCH /s/ FELIX R. EHRAT Harry Kirsch Felix R. Ehrat Chief Financial Officer General Counsel Novartis Group Novartis Group 2 APPENDIX A RESULTS OF OPERATIONS In evaluating the Group’s performance, we consider not only the IFRS results, but also certain non-IFRS measures, including core results and constant currency results. These measures assist us in evaluating our ongoing performance from year to year and we believe this additional information is useful to investors in understanding our business. The Group’s core results exclude the amortization of intangible assets and impairment charges. They also exclude expenses relating to divestments, the integration of acquisitions and other income and expense items that are over a $25 million threshold that management deems exceptional. For a reconciliation between IFRS results and core results, see “—Core Results” below. We present information about our revenue and other key figures relating to operating profit and net income in constant currencies (cc). We calculate constant currency revenue and operating profit by applying the prior-year average exchange rates to current financial data expressed in local currencies in order to estimate an elimination of the impact of foreign exchange rate movements. These constant currencies, core results and other non-IFRS measures are explained in more detail below at “— Non-IFRS Measures as defined by Novartis,” and are not intended to be substitutes for the equivalent measures of financial performance prepared in accordance with IFRS. These measures may differ from similarly titled non-IFRS measures of other companies. In addition, following the announcement of the transactions with GlaxoSmithKline plc (GSK) and Eli Lilly and Company (Lilly) on April 22, 2014 (and the subsequent announcement of the transaction with CSL Limited (CSL)), in which we agreed to divest our Vaccines, OTC and Animal Health businesses to those companies, the businesses to be divested were accounted for as discontinuing operations and were not included in our results from continuing operations for 2013 and 2014. In addition, on January 9, 2014, Novartis completed the divestment to Grifols S.A. of our former blood transfusion diagnostics unit, which had been included in our former Vaccines and Diagnostics Division. The results of this divested business were also accounted for as discontinuing operations and not included in our results from continuing operations. See “—Factors Affecting Comparability Of Year-On-Year Results Of Operations.” 2014 Compared to 2013 Group overview Key figures Change in Year ended Year ended constant Continuing Operations Dec 31, 2014 Dec 31, 2013 Change in $ currencies $ m $ m % % Net sales to third parties 52,180 51,869 1 3 Operating income 11,089 10,983 1 7 Net income 10,727 9,309 15 21 Attributable to: Shareholders of Novartis AG 10,654 9,189 16 22 Non-controlling interests 73 120 (39 ) (39 ) Basic earnings per share ($) 4.39 3.76 17 22 Free cash flow 10,934 9,521 15 Change in Year ended Year ended constant Discontinuing Operations Dec 31, 2014 Dec 31, 2013 Change in $ currencies $ m $ m % % Net sales to third parties 5,816 6,051 (4 ) (1 ) Operating income (353 ) (73 ) nm nm Net income (447 ) (17 ) nm nm Attributable to: Shareholders of Novartis AG (444 ) (14 ) nm nm Non-controlling interests (3 ) (3 ) nm nm Basic earnings per share ($) (0.18 ) 0.00 nm nm Free cash flow (172 ) 424 nm Change in Year ended Year ended constant Total Group Dec 31, 2014 Dec 31, 2013 Change in $ currencies $ m $ m % % Net income 10,280 9,292 11 17 Attributable to: Shareholders of Novartis AG 10,210 9,175 11 18 Non-controlling interests 70 117 (40 ) (41 ) Basic earnings per share ($) 4.21 3.76 12 18 Free cash flow 10,762 9,945 8 nm : not meaningful Novartis delivered solid financial performance in 2014, driven by our continued success with growth products and expansion in emerging growth markets, which helped offset the effects of generic competition of approximately $2.4 billion. As a result, we achieved Group net sales to third parties from continuing operations of $52.2 billion. If continuing and discontinuing operations net sales to third parties were added together, then Group net sales would have amounted to $58 billion for the full year, which was at the same level as 2013 on a comparable basis, and up 2% in constant currencies (cc). Group operating income from continuing operations amounted to $11.1 billion (+1%, +7% cc). Operating income margin was 21.3% of net sales from continuing operations. If continuing and discontinuing operations operating income were added together, then Group operating income would have amounted to $10.7 billion (-2%, +5% cc). Group net income from continuing operations rose 15% (+21% cc) to $10.7 billion, or 11% (+17% cc) to $10.3 billion if our discontinuing operations had been included for the full year. Earnings per share (EPS) from continuing operations rose 17% (+22% cc) to $4.39, or 12% (+18% cc) to $4.21 if our discontinuing operations had been included for the full year. Free cash flow from continuing operations in 2014 increased by 15% to $10.9 billion, or 8% to $10.8 billion if our discontinuing operations had been included for the full year, mainly due to higher cash flows from operating activities. If all of our discontinued operations had been included in 2014 and 2013, except for the results of our blood transfusion diagnostics unit, which was divested on January 9, 2014, then Group net sales were $58.0 billion in 2014, up 3% (cc) from $57.4 billion in 2013, operating income of $10.7 billion was at the prior year level in USD but increased 7% (cc), net income was $10.3 billion, up 19% (cc) compared to $9.1 billion in 2013 and EPS was $4.21 up 20% (cc) from $3.70 in 2013. For more information, see “—Non-IFRS Measures as defined by Novartis—2013 Reconciliation of Group IFRS and core results excluding blood transfusion diagnostics unit”.