SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 13, 1994
BAUSCH & LOMB INCORPORATED
(Exact name of Bausch & Lomb as specified in its charter)
New York
(State or other jurisdiction of incorporation)
1-4105
(Commission File Number)
16-0345235
(I.R.S. Employer Identification No.)
One Chase Square, Rochester NY 14601-0054
(Address of principal executive offices) (Zip Code)
Bausch & Lomb's telephone number, including area code: (716) 338-6000
Inapplicable
(Former name or former address, if changed since last report).
BAUSCH & LOMB THIRD QUARTER SALES & EARNINGS
BAUSCH & LOMB REPORTS A DECLINE IN REVENUES AND NET EARNINGS FOR 1994
THIRD QUARTER
RESULTS CONSTRAINED BY REDUCTION OF DISTRIBUTOR INVENTORIES AND OTHER
STRATEGIC ACTIONS
Bausch & Lomb announced on October 12, 1994 it had achieved further
substantial progress in its previously disclosed efforts to reduce an
imbalance in distributor inventories of traditional contact lenses and
sunglasses during its third quarter ended September 24, 1994. It has
also implemented new pricing and product return actions to significantly
improve the competitiveness of its traditional contact lens business in
the U.S., and has taken steps to exert stronger control over the
distribution of Ray-Ban sunglasses in Southeast Asia. These two recent
initiatives with an estimated cost of approximately $.40 per share in
the last six months of 1994, were not anticipated or included in the
company's discussion of its financial outlook in its Form 10-Q filed on
August 9, 1994. However, the company believes these actions will
contribute to an improvement in performance anticipated in 1995.
Consolidated revenues for the third quarter declined 10% to $449
million compared to $499 million in the same quarter one year ago. Upon
implementation of the new actions developed in the third quarter, the
company estimates it will have reduced the level of excess distributor
inventories to approximately $10 million versus a level of $45 million
at the end of June. Net earnings for the third quarter declined to $8
million compared to $56 million in 1993, while earnings per share were
$.13 versus $.93 in the prior year. For the first nine months of 1994,
sales totaled $1,372 million, 1% below the prior year's $1,386 million.
Net earnings decreased to $76 million compared to $136 million for the
same period in 1993, while earnings per share were $1.28 versus $2.25.
Commenting on the two businesses primarily responsible for the company's
weak performance in 1994, Bausch & Lomb provided the following
information:
CONTACT LENS PRODUCTS
Worldwide contact lens revenues declined $35 million or 41% from the
third quarter of 1993. This decline was almost solely attributable to
U.S. operations, where the company established a sales reserve of
approximately $20 million in the quarter to provide for a recently
planned reduction in prices for standard Optima brand contact lenses
sold in glass vials to distributors and the decision to allow U.S.
distributors to return the excess portion of their unsold traditional
lens inventories. This new pricing policy enhances Bausch & Lomb's
competitiveness in this segment of the market. Through these actions,
the company will eliminate the inventory imbalance. Contact lens sales
comparisons in the third quarter also reflected the absence of new
product introductions and the company's decision to discontinue
distributor promotions in 1994, both of which benefited U.S. lens
shipments in the year-ago period.
Contact lens revenues in markets outside the U.S. increased 12% over the
1993 quarter. The Japanese and European contact lens businesses
continued to improve during the period, and good demand for lenses used
in planned replacement programs was experienced in Asia.
SUNGLASS PRODUCTS
Sunglass revenues declined approximately $29 million or 21% from the
year-ago third quarter. Excess distributor inventories are estimated to
have dropped from $25 million at the end of the 1994 second quarter to
just over $10 million at September 24. The company also incurred a
sales penalty estimated at more than $5 million to realign relationships
with distributors in Southeast Asia. Excluding these actions, sunglass
revenues would still have experienced a moderate decline from the prior
year, a development which the company attributes to a global movement
towards lower sunglass inventories at both wholesale and retail levels.
This is in the wake of the previously announced tightening of the
company's marketing and sales policies around the world. Recent data
from independent market surveys and other sources confirm that the
company's market shares remain strong in the U.S. and other key markets.
THIRD QUARTER RESULTS
Healthcare Segment
Consolidated healthcare segment sales for the 1994 third quarter totaled
$298 million, a decline of 8% from the 1993 total of $325 million.
Included in these results is the decline in U.S. contact lens revenues
discussed earlier. Healthcare segment revenues for the first nine
months of 1994 rose 4% to $892 million compared to $855 million for the
same period a year ago.
Within the personal health sector, revenues were essentially even with
results in the third quarter of 1993. Sales of contact lens care
products increased 11% in response to good demand for the ReNu and
Boston lines in the U.S. and Europe. Results for the personal health
sector also reflected higher shipments of general eyecare products.
These results were offset by a decline in oral care revenues which
stemmed from lower shipments of soon-to-be discontinued models of
Interplak power toothbrushes and the reduction of prices to better
position Interplak products in the U.S.
In the medical sector, third quarter revenues declined by 25% from 1993.
Worldwide ophthalmic pharmaceutical revenues improved 31% over the same
period last year. Higher shipments of new products contributed to
revenue growth of more than 25% for U.S. pharmaceutical operations in
the quarter, while in the company's European pharmaceutical operations,
revenues grew 37%. Medical sector revenues also benefited from
increased sales of Steri-Oss dental implants, which rose more than 15%
in the period, and incremental sales from the Miracle-Ear line of
hearing aids, acquired in the third quarter of 1993. However, these
results were more than offset by the results in the company's contact
lens business discussed previously.
Revenues in the biomedical sector advanced 4% over the third quarter of
last year. This progress was attributable to the effect of currency on
results from operations outside the U.S.
Optics Segment
In Bausch & Lomb's optics segment, third quarter sales declined 13% to
$151 million compared to $174 million in the same period in 1993. As
discussed previously, worldwide sunglass revenues declined 21% from the
same period in 1993. Sales of thin film coating products and services
grew by more than 60% off a low base as a result of higher shipments to
Europe, while sales of sports optics advanced 11%, led by strong demand
for riflescopes and telescopes. During the first nine months of 1994,
consolidated optics segment revenues amounted to $480 million compared
to $531 million for the same period in 1993.
Operating Earnings
Total operating earnings for the most recent period declined to $21
million versus $89 million in 1993. Improved operating earnings
performance was evident in the company's contact lens care,
pharmaceutical, sports optics and thin film coating businesses. The
contact lens sales reserve, actions to reduce distributor inventories
and efforts to realign sunglass distribution in Southeast Asia
significantly constrained operating earnings in the quarter.
Comparisons with the prior period were also burdened by additional
expenditures for severance, underabsorbed operating costs in the contact
lens and sunglass businesses, and reduced sales in product areas where
management has elected to discontinue distributor promotions in 1994.
Net Earnings
Net earnings for the 1994 third quarter and nine-month periods reflected
the company's operating earnings performance, and were also affected by
lower premium income generated from foreign currency hedging programs
and by higher financing costs, including the cost of equity financing
reported with minority interest expense.
LIQUIDITY AND FINANCIAL RESOURCES
Stringent new controls on capital spending are in effect and the company
is targeting a reduction in the working capital requirements of its
businesses, with the expectation that the generation of free cash should
improve very significantly, especially in 1995.
OUTLOOK
As reported in its October 13th press release, management expects to
face another difficult sales comparison in the fourth quarter,
especially in the contact lens business, where shipments were at a very
high level a year ago. However, with only a $10 million imbalance in
sunglass inventories still outstanding, the company's overall operating
performance should show improvement from trends experienced during the
third quarter. For the year in total, earnings in excess of $2.00 per
share seem attainable, but the company's first priority is to strengthen
its operations and complete the necessary actions to enable it to
reestablish a pattern of consistent growth in the future.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Bausch & Lomb has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BAUSCH & LOMB INCORPORATED
Date: October 13, 1994
By: (Peter Stephenson)
Peter Stephenson
Senior Vice President,
Finance
<TABLE>
Bausch & Lomb
STATEMENT OF EARNINGS
<CAPTION>
Quarter Ended Nine Months Ended
Dollar Amounts
in Thousands- Sept.24, Sept.25, Sept.24, Sept.25,
Except Per Share Data 1994 1993 1994 1993
- --------------------- ------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales:
Healthcare $298,281 $325,249 $ 891,626 $ 854,806
Optics 151,166 173,562 479,873 531,039
-------- -------- ---------- ---------
449,447 498,811 1,371,499 1,385,845
Costs and Expenses:
Cost of products sold 237,599 219,992 664,360 617,607
Selling, administrative
and general 175,809 175,613 521,024 508,224
Research and development 14,802 14,495 45,468 43,178
------- ------- --------- ---------
428,210 410,100 1,230,852 1,169,009
------- ------- --------- ---------
Operating Earnings 21,237 88,711 140,647 216,836
Investment income (8,553) (1,764) (26,434) (9,476)
Interest expense 10,182 7,446 29,409 24,960
(Gain)loss from
foreign currency (1,084) (2,051) (2,222) (10,043)
------- ------- ------- --------
545 3,631 753 5,441
------- ------- ------- --------
Earnings Before
Income Taxes and
Minority Interest 20,692 85,080 139,894 211,395
Provision for income taxes 6,890 28,332 45,915 72,468
------ ------ ------- -------
Earnings Before
Minority Interest 13,802 56,748 93,979 138,927
Minority interest
in subsidiaries 6,113 995 17,574 3,295
------ ------ ------ -------
Net Earnings $ 7,689 $ 55,753 $ 76,405 $ 135,632
------ ------ ------- -------
------ ------ ------- -------
Net Earnings
Per Common Share $ 0.13 0.93 $ 1.28 $ 2.25
------ ------ ------- -------
------ ------ ------- -------
59,787 60,151
------ -------
------ -------
Average Common Shares Outstanding (000s)
</TABLE>
