ACL » Topics » (14) Related Party Transactions

This excerpt taken from the ACL 20-F filed Mar 15, 2005.

(14) Related Party Transactions

        At December 31, 2004, Nestlé owned 75.3% of the outstanding common shares of Alcon.

        The Company’s material transactions with related parties have been with Nestlé and its subsidiaries. All material related party transactions that are not disclosed elsewhere in these notes are included below.


        During 2004, 2003 and 2002 the Company had investments and borrowings with Nestlé and its subsidiaries which resulted in the following impact to earnings before income taxes:

Interest expense   $3.4   $8.2   $19.4  
Interest income   0.1   --   3.8  

        The Company sold Alcon Germany to Nestlé’s German subsidiary effective January 1, 2001 for approximately $30.0, and under the separation agreement, Nestlé’s German subsidiary sold it back to the Company effective January 1, 2002, for approximately $42.0. Alcon Germany’s results of operations have been consolidated by the Company and are reflected in all periods presented in the accompanying consolidated financial statements.

        The Company leases certain facilities from Nestlé subsidiaries which resulted in rent expense of $0.9, $0.7 and $0.2 in 2004, 2003 and 2002, respectively. Nestlé provides the Company with certain services, including a portion of the Company’s information technology licenses, corporate legal services, certain treasury and cash management activities and certain internal audit activities. Nestlé charges the Company for its portion of the costs of these services based on arm’s length prices. Such charges were less than $1.5 in each of the three years ended December 31, 2004, 2003 and 2002.

        Prior to 2002, an officer of the Company had received options to purchase Nestlé common stock. Contemporaneously with the IPO, the officer agreed to surrender options to purchase 17,110 Nestlé shares, of which options to purchase 8,520 shares were exercisable, in exchange for options to purchase 80,000 Alcon common shares. The new options were granted pursuant to the 2002 Alcon Incentive Plan and generally contain the same terms as other options issued under the plan.

        The Company executes certain foreign exchange contracts through Nestlé Finance SA, Cham to benefit from Nestlé’s foreign exchange transaction volumes and expertise. At December 31, 2004, the Company had a notional amount outstanding with Nestlé of $179.2.

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