SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
June 27, 1998 Number: 1-4105
BAUSCH & LOMB INCORPORATED
(Exact name of registrant as specified in its charter)
New York 16-0345235
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Bausch & Lomb Place, Rochester NY 14604-2701
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (716) 338-6000
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
The number of shares of Common stock of the registrant,
outstanding as of June 27, 1998 was 55,888,043 consisting of
55,233,034 shares of Common stock and 655,009 shares of Class B
stock which are identical with respect to dividend and
liquidation rights, and vote together as a single class for all
purposes.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited interim consolidated financial
statements of Bausch & Lomb Incorporated and Consolidated
Subsidiaries have been prepared by the company in accordance with
the accounting policies stated in the company's 1997 Annual
Report on Form 10-K and should be read in conjunction with the
Notes To Financial Statements appearing therein, and are based in
part on approximations. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation in accordance with generally
accepted accounting principles have been included in these
financial statements.
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF EARNINGS
<CAPTION>
Second Quarter Ended Six Months Ended
Dollar Amounts In Millions - June 27, June 28, June 27, June 28,
Except Per Share Data 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales $635.1 $523.2 $1,188.1 $974.4
Costs And Expenses
Cost of products sold 298.3 231.5 574.4 458.7
Selling, administrative and
general 246.9 201.8 475.5 382.8
Research and development 22.9 16.1 43.5 31.7
Purchased in-process research and
development - - 41.0 -
Restructuring charges 7.6 26.1 11.3 38.9
575.7 475.5 1,145.7 912.1
Operating Earnings (Loss) 59.4 47.7 42.4 62.3
Other (Income) Expense
Interest and investment income (10.7) (9.4) (20.7) (19.4)
Interest expense 26.3 14.1 51.7 27.7
Gain from foreign currency, net (1.8) (2.7) (3.6) (3.8)
Gain on divestitures (56.0) - (56.0) -
(42.2) 2.0 (28.6) 4.5
Earnings Before Income Taxes And
Minority Interest 101.6 45.7 71.0 57.8
Provision for income taxes 39.9 19.3 27.4 23.6
Earnings Before Minority Interest 61.7 26.4 43.6 34.2
Minority interest in subsidiaries 6.4 6.1 11.6 10.7
Net Earnings $ 55.3 $ 20.3 $ 32.0 $ 23.5
Retained Earnings At Beginning Of
Period 878.9 913.6 916.5 924.7
Cash Dividends Declared:
Common stock, $0.26 and $0.52 per
share in both 1998 and 1997 14.6 14.5 28.9 28.8
Retained Earnings At End Of Period $919.6 $919.4 $919.6 $919.4
Basic Earnings Per Share $ 0.99 $ 0.37 $ 0.58 $ 0.42
Diluted Earnings Per Share $ 0.98 $ 0.36 $ 0.57 $ 0.42
Average Shares Outstanding - Basic
(000s) 55,787 55,456 55,560 55,448
Average Shares Outstanding -
Diluted (000s) 56,582 55,771 56,146 55,683
See Notes to Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
<CAPTION>
June 27, December 27,
Dollar Amounts In Millions 1998 1997
ASSETS
Current Assets
<S> <C> <C>
Cash, cash equivalents and short-term
investments $ 147.5 $ 183.7
Trade receivables, less allowances
of $28.6 and $14.0, respectively 511.4 374.8
Inventories, net 408.6 324.3
Deferred taxes, net 78.9 66.0
Other current assets 168.5 141.4
1,341.9 1,090.2
Property, Plant And Equipment, net 673.3 580.2
Goodwill And Other Intangibles,
less accumulated amortization
of $119.4 and $116.6, respectively 849.2 406.9
Other Investments 546.3 546.4
Other Assets 167.8 149.2
Total Assets $3,551.5 $2,772.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 765.7 $ 339.4
Current portion of long-term debt 26.6 4.4
Accounts payable 86.6 72.0
Accrued compensation 95.6 73.6
Accrued liabilities 370.6 365.9
Federal, state and foreign income taxes
payable 39.6 32.0
1,384.7 887.3
Long-Term Debt, less current portion 783.5 510.8
Other Long-Term Liabilities 112.5 119.4
Minority Interest 437.7 437.0
Total Liabilities 2,718.4 1,954.5
Shareholders' Equity
4% Cumulative Preferred stock,
par value $100 per share - -
Class A Preferred stock,
par value $1 per share - -
Common stock, par value $0.40
per share, 60,198,322 shares issued 24.1 24.1
Class B stock, par value $0.08 per share,
970,405 and 856,905 shares
issued, respectively 0.1 0.1
Capital in excess of par value 79.6 76.8
Retained earnings 919.6 916.5
Common and Class B stock
in treasury, at cost, 5,280,684 and
5,846,286 shares, respectively (200.7) (223.1)
Accumulated other comprehensive income 22.3 29.1
Other shareholders' equity (11.9) (5.1)
Total Shareholders' Equity 833.1 818.4
Total Liabilities And Shareholders' Equity $3,551.5 $2,772.9
See Notes To Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
<CAPTION>
Six Months Ended
June 27, June 28,
Dollar Amounts In Millions 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 32.0 $ 23.5
Adjustments to reconcile net earnings to
net cash (used in) provided by
operating activities:
Depreciation 56.3 42.9
Amortization 22.7 10.3
Change in deferred income taxes 1.3 1.0
Gain on divestitures, net of taxes (32.8) -
Restructuring charges, net of taxes 7.6 26.0
Purchased in-process research and
development, net of taxes 24.6 -
Loss on retirement of fixed assets 3.1 7.3
Changes in assets and liabilities:
Trade receivables (72.7) (76.8)
Inventories 5.8 14.9
Other current assets (19.0) (33.7)
Accounts payable and accruals (94.6) (2.1)
Income taxes (9.3) 32.7
Other long-term liabilities (9.9) (15.3)
Net cash (used in) provided by
operating activities (84.9) 30.7
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (90.0) (52.3)
Net cash paid for acquisition of
businesses (715.0) (44.1)
Net cash received from divestitures 135.0 -
Other 8.0 (5.5)
Net cash used in investing activities (662.0) (101.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of Common and Class B shares - (10.2)
Exercise of stock options 19.7 9.2
Net proceeds from notes payable 424.7 63.6
Proceeds from issuance of long-term debt 304.3 15.0
Repayment of long-term debt (7.5) (2.6)
Payment of dividends (28.8) (28.8)
Net cash provided by financing
activities 712.4 46.2
Effect of exchange rate changes on cash,
cash equivalents and short-term
investments (1.7) (6.1)
Net decrease in cash, cash equivalents and
short term investments (36.2) (31.1)
Cash, cash equivalents and short-term
investments, beginning of period 183.7 167.8
beginning of period
Cash, cash equivalents and short-term
investments, end of period $147.5 $136.7
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 50.5 $ 27.4
Income taxes $ 24.0 $ 14.6
See Notes To Financial Statements
</TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Dollar Amounts in Millions - Except Per Share Data
NOTE A: Acquisitions and Divestitures
1) As described in the 1997 Annual Report on Form 10-K, on
December 29, 1997, the company acquired Chiron Vision Corporation
(Chiron Vision) from Chiron Corporation, and on December 31,
1997, it acquired Storz Instrument Company (Storz) from American
Home Products. The acquisitions were accounted for as purchases,
whereby the purchase price, including acquisition costs, was
allocated to identified assets, including tangible and intangible
assets, purchased research and development and liabilities based
upon their respective fair values. The excess of the purchase
price over the value of identified assets and liabilities, in the
amount of $211, was recorded as goodwill and is being amortized
over lives of twenty to forty years.
The following selected, unaudited pro forma data is presented
to provide a summary of the combined results of Bausch & Lomb,
Chiron Vision and Storz as if the acquisitions had occurred as
of the beginning of 1997. The pro forma data is for informational
purposes only and may not necessarily reflect the results of
operations had the companies operated as one for the three-and
six-month periods ending June 28, 1997. No effect has been given
for synergies, if any, that may be realized through the
acquisition.
Second Quarter Ended Six Months Ended
(Unaudited) June 28, 1997 June 28, 1997
Net sales $627.7 $1,175.7
Operating earnings $53.5 $69.3
Net earnings $16.8 $12.9
Earnings per share - basic $0.30 $0.23
Earnings per share - diluted $0.30 $0.23
2) On May 22, 1998, the company sold its skin care business
to The Andrew Jergens Company for $135 in cash plus the
assumption of certain liabilities.
NOTE B: Inventories
Inventories consisted of the following:
June 27, December 27,
1998 1997
Raw materials and supplies $118.2 $ 96.3
Work in process 39.4 23.4
Finished products 264.3 218.1
421.9 337.8
Less: Allowance for valuation
of certain U.S. inventories
at last-in, first-out cost 13.3 13.5
$408.6 $324.3
NOTE C: Property, Plant And Equipment
Major classes of property, plant and equipment consisted
of the following:
June 27, December 27,
1998 1997
Land $ 27.1 $ 21.0
Buildings 401.8 392.2
Leasehold improvements 41.0 34.9
Machinery and equipment 878.7 727.0
1,348.6 1,175.1
Less: Accumulated depreciation 675.3 594.9
$673.3 $ 580.2
NOTE D: Adoption of SFAS No. 130
In the first quarter of 1998, the company adopted
Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income." Comprehensive
income is defined as the change in equity of a business
during a period from transactions and other events and
circumstances from non-owner sources. Under SFAS 130,
the term "comprehensive income" is used to describe the
total of net earnings plus other comprehensive income
which, for the company, includes foreign currency
translation adjustments and unrealized gains and losses
on marketable securities classified as available-for-
sale.
The adoption of SFAS 130 did not impact the calculation
of net earnings or earnings per share nor did it impact
reported assets, liabilities or total shareholders'
equity. It did impact the presentation of the components
of shareholders' equity within the balance sheet and
will result in the presentation of the components of
comprehensive income within an annual financial
statement, which must be displayed with the same
prominence as other financial statements.
The components of the company's total comprehensive
income were:
<TABLE>
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net earnings $55.3 $20.3 $32.0 $23.5
Foreign currency translation
adjustments, net of taxes 6.6 (4.5) (6.8) (38.4)
Unrealized holding gain,
net of taxes - - - 11.8
Total Comprehensive Income $61.9 $15.8 $25.2 $(3.1)
</TABLE>
NOTE E: Subsequent Event
On July 24, 1998, the company sold $300 of putable/callable
notes and $200 of 30-year debentures. Settlement occurred on
July 29, 1998. Proceeds were used to reduce short-term debt,
and as a result the company reduced its 364-day revolving
credit facility to $400 from $900. This reduced amount, added
to the existing $300 5-year revolving credit facility, brings
total revolving credit to $700.
The $300 notes were issued in three equal tranches of $100 each.
The first, maturing on August 1, 2011 with a put/call option on
August 1, 2001, bears interest at 6.15%. The second, maturing on
August 1, 2013 with a put/call option on August 1, 2003, bears
interest at 6.375%. The third, maturing on August 1, 2025 with a
put/call option on August 1, 2005, bears interest at 6.50%. The
30-year debentures, maturing August 1, 2028, bear interest at
7.125%.
The company's long-term debt continues to be rated Baa2 by
Moody's Investors Service and BBB by Standard & Poor's.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Dollar Amounts in Millions - Except Per Share Data
This financial review, which should be read in conjunction with
the accompanying financial statements, contains management's
discussion and analysis of the company's results of operations,
liquidity and an updated 1998 outlook. References within this
financial review to earnings per share refer to diluted earnings
per share.
RESULTS OF OPERATIONS
Comparability of Business Segment Information
Comparison of the company's 1998 and 1997 second quarter and six-
month operating results requires the consideration of certain
significant events.
As announced in April 1997, the company's board of directors
approved plans to restructure portions of each of the company's
four business segments, as well as certain corporate
administrative functions. The restructuring efforts have been
ongoing and resulted in pre-tax restructuring charges of $8 and
$11 for the three- and six-month periods ending in June 1998,
respectively, compared to charges of $26 and $39, respectively,
recorded for the equivalent 1997 periods. The after-tax impact of
these charges for the three- and six-month periods were, for
1998, $5 or $0.09 per share and $8 or $0.13 per share,
respectively, and, for 1997, $18 or $0.33 per share and $26 or
$0.47 per share, respectively.
During the fourth quarter of 1997, the company divested its
thin film business, which was reported in the eyewear segment.
This business contributed sales of $5 and $9, respectively, for
the three- and six-month periods ending in June 1997 and
operating losses of $1 and $2, respectively, for the same
periods.
As described in Note A, the company acquired Chiron Vision
and Storz during the first quarter of 1998. The purchase price
was allocated to net assets acquired and to purchased in-process
research and development (R&D). Purchased in-process R&D includes
the value of products in the development stage not considered to
have reached technological feasibility. In accordance with
applicable accounting rules, purchased in-process R&D is required
to be expensed, and, accordingly, a pre-tax charge of $41 was
recorded during the first quarter of 1998. The after-tax impact
for the six-month period was $25 or $0.44 per share.
As described in Note A, the company sold its skin care
business during the second quarter of 1998. As a result, a non-
recurring gain of $56 ($33 or $0.58 per share after taxes) was
recorded. This business was reported in the healthcare segment
and contributed sales and operating earnings of $6 and $3,
respectively, during the quarter ended June 1998 and $11 and $3,
respectively, for the equivalent quarter in 1997. For the six
months ending June 1998 and June 1997, the skin care business
contributed sales of $19 and $24, respectively, and operating
earnings of $3 in each period.
NET SALES BY BUSINESS SEGMENT
The company's operating results are reported in four business
segments: vision care, eyewear, pharmaceuticals/surgical and
healthcare. The vision care segment includes contact lenses and
lens care products. The eyewear segment includes sunglasses,
vision accessories and the divested thin film coating business.
The pharmaceuticals/surgical segment includes prescription
ophthalmics, over-the-counter (OTC) medications, and cataract,
refractive and other ophthalmic surgery products. The healthcare
segment includes biomedical products and services, hearing aids
and the divested skin care business.
The following is a summary of sales by business segment:
Net Sales By Business Segment
Second Quarter Six Months
1998 1997 1998 1997
Vision Care $242.8 $233.3 $ 458.8 $434.7
Eyewear - ongoing 148.5 152.1 260.8 269.3
Pharmaceuticals/Surgical 162.9 54.0 301.6 103.1
Healthcare - ongoing 75.3 67.8 147.7 134.6
Continuing Net Sales 629.5 507.2 1,168.9 941.7
Divested 5.6 16.0 19.2 32.7
Net Sales $635.1 $523.2 $1,188.1 $974.4
Total net sales for the quarter ended June 27, 1998
increased $112 or 21% from the 1997 second quarter. The results
include $104 in 1998 second-quarter revenues generated by the
acquired pharmaceutical and surgical product lines. When results
for the divested skin care and thin film businesses are excluded
from the 1998 and 1997 results, revenues increased $122 or 24%.
On a constant dollar basis (that is, excluding the effect of
foreign currency exchange rate changes), continuing business
revenues increased 28% compared to the prior-year period, with
revenue increases in all segments.
Vision Care Segment Revenues
The vision care segment includes results of the contact lens and
lens care businesses, with lenses comprising 47% and lens care
representing 53% of 1998 year-to-date revenues compared to 45%
and 55%, respectively, for the same 1997 period.
For the second quarter of 1998, revenues increased 4% (8% on
a constant dollar basis) from the 1997 second quarter, resulting
from an 8% improvement in contact lens sales combined with a 1%
increase in lens care. Contact lens revenue gains, 13% in
constant dollars, were driven by continued strong growth in
planned replacement and disposable lenses (collectively PRP),
including SofLens one day disposable lenses in Europe which
experienced a doubling of sales compared with the prior year
period. PRP revenue gains in other regions were led by strong
growth of Medalist lenses in Japan as well as by incremental
sales from the recently launched SofLens66 in Latin American
markets. Revenues from lens care products were up 4% when
adjusted for currency, reflecting strong growth and market share
gains for the ReNu line of multipurpose lens care products.
Year-to-date, vision care revenues increased 6% (9% on a
constant dollar basis). Improvement was driven primarily by
contact lens sales which have posted 14% constant dollar
increases compared to 1997.
Eyewear Segment Revenues
The following analysis excludes results from the divested thin
film business. Eyewear segment results are primarily driven by
sales of sunglass products, which account for over 95% of this
segment's portfolio. For the second quarter of 1998, eyewear
segment revenues decreased 2% from the comparable 1997 period. On
a constant dollar basis, segment revenues increased 1%. Sunglass
revenues in the U.S. increased 1% despite lower sales to Sunglass
Hut International, the region's largest customer. Outside the
U.S., eyewear revenues in constant dollars were flat with 1997,
reflecting difficult economic situations in the Asia-Pacific
region and poor weather conditions in northern Europe.
Year-to-date, segment revenues declined 3% from 1997 and
were flat on a constant dollar basis. U.S. sunglass revenues
declined 7%. Non-U.S. revenues decreased 1% but increased 3%
after adjusting for currency. In line with the company's goal to
bring its new sunglass styles to market faster, the 1998 line was
launched in the fourth quarter of 1997, one quarter sooner than
in prior years. The earlier launch contributed to the year-over-
year sales decline since 1997 sales reflected the launch of new
products while 1998 sales did not. Additionally, sales to
Sunglass Hut International were lower, reflecting inventory
management initiatives by that customer.
Pharmaceuticals/Surgical Segment Revenues
Second-quarter revenues for the pharmaceutical/surgical segment
increased $109 versus 1997, reflecting the first-quarter addition
of the former Chiron Vision and Storz product lines.
Pharmaceutical revenues for 1998 increased 17%, or 19% on a
constant dollar basis.
In the U.S., pharmaceuticals revenues for the quarter
increased 18% over 1997 due to acquired product lines, as well as
increased revenues from Trimethoprim and Crolom and the
introduction of Lotemax and Alrex. Also contributing to this
increase was the general eye care business, where continued
strength of Opcon-A and an unusually strong and early allergy
season drove a double-digit increase in revenues from 1997.
Pricing pressures on generic products in the company's portfolio
partially offset these sales increases.
Second quarter non-U.S. pharmaceuticals revenues improved
15% over the prior year, reflecting results for the company's Dr.
Mann Pharma subsidiary in Germany, which benefited from a second
quarter 1998 acquisition. Double-digit constant dollar sales
growth in prescription ophthalmics in combination with improved
results in the OTC business also contributed to the second
quarter sales performance.
Year-to-date, revenues for the segment increased $199 from
1997, due mainly to the acquired product lines. Excluding these
incremental sales, pharmaceuticals revenues were up 1% or 4% on a
constant dollar basis. U.S. sales advanced 19% or 4% if sales
from acquired product lines are excluded. Outside the U.S.,
strong sales growth in prescription products was moderated by
pharmacy inventory reductions in the OTC business in Germany.
Healthcare Segment Revenues
The following analysis excludes 1998 and 1997 revenues from the
divested skin care business. Healthcare segment revenues for the
second quarter of 1998 increased $8 or 11% (13% on a constant
dollar basis) over the comparable period in 1997. Year-to-date
revenues increased $13 or 10% (13% on a constant dollar basis).
Sales of biomedical products rose 8% in the quarter and 7% year-
to-date, driven primarily by strong increases in the
biotechnology and services business. Hearing aid revenues
advanced 24% in the quarter and year-to-date as the number of
company-owned retail outlets continued to increase.
Net Sales By Geographic Region
The following analysis excludes revenues from the divested thin
film and skin care businesses.
Sales in markets outside the U.S. totaled $319 in the second
quarter of 1998, an increase of $56 or 21% compared with the 1997
period, and represented 51% of consolidated revenues compared to
52% in 1997. Year-to-date sales were $589 compared to $486 in
1997, an increase of 21%, representing 50% and 52% of
consolidated revenues, respectively. Non-U.S. sales from the
acquired surgical businesses and increased revenues for vision
care products more than offset declines in the eyewear segment.
For both the three- and six-month periods, currency exchange
rates had a negative impact on non-U.S. sales of approximately
7%.
Second-quarter sales in the European region advanced 28%
versus 1997, or 31% in constant dollars, due in large part to
incremental surgical sales and growth for vision care products.
Excluding currency, sunglass sales were up slightly on a year-to-
date basis. Second quarter sales in the Asia-Pacific region
advanced 10%, or 25% in constant dollars, due in large part to
incremental surgical sales and to the strong growth of PRP lenses
throughout most of the region. Revenues in Japan were down 2%
versus 1997 for the quarter, but improved 10% in constant dollars
due primarily to the continued success of Medalist contact
lenses. Revenues in Canada and Latin America increased 31% over
the prior quarter and 32% over the prior year-to-date due mainly
to incremental surgical sales as well as to the performance of
contact lenses and solutions, led by ReNu MultiPlus.
U.S. sales totaled $311 in the second quarter, an increase
of $67 or 27% from 1997, due primarily to incremental surgical
sales. For the year, sales increased $124 to $579, an increase of
27%, again primarily due to acquired businesses. However, slight
growth in vision care products along with gains for
pharmaceuticals and hearing aids contributed to the favorability.
Sunglass revenues were up 1% for the quarter, though down 7%
overall for the year versus 1997.
Costs And Expenses
The following analysis excludes results from the divested thin
film and skin care businesses.
The ratio of cost of products sold to sales was 47.1% during
the second quarter of 1998 versus 44.1% in 1997. For the six-
month period, this ratio was 48.7% for 1998 and 47.1% for 1997.
The 1998 ratio reflected the $32 impact of higher reported cost
of products sold, $16 in the second quarter, resulting from
purchase accounting inventory adjustments related to the surgical
acquisitions. The 1997 ratio reflected a $9 provision for the
projected cost of exiting certain Ray-Ban product lines.
Integration costs resulting from the surgical acquisitions
contributed to this unfavorable variance, but were partially
offset by favorable manufacturing costs in the eyewear segment.
Selling, administrative and general expenses, including
corporate administration, were 39.0% of sales in the second
quarter of 1998 compared to 38.7% in 1997. Year-to-date, these
expenses were 39.8% versus 39.0%. The year-over-year unfavorable
ratios reflected planned increases in marketing and advertising,
higher selling costs as well as the incremental expenses and
integration costs associated with the transition of the acquired
product lines of Chiron Vision and Storz. Included in the 1997
year-to-date amount was a $2 provision for the write-off of the
company's equity investment in a start-up eyewear technology
venture recorded in the first quarter.
Corporate administration expenses were 1.7% of sales in the
second quarter of 1998, versus 2.3% in the same period of 1997.
Year-to-date, the figures were 1.9% versus 2.5%. These amounts
reflect the continued efforts in expense reduction resulting from
company-wide restructuring and a higher sales base due to the
surgical acquisitions.
R&D expenses totaled $23 in the second quarter of 1998, an
increase of $7 over 1997. This represented 3.6% of sales in 1998,
as compared to 3.1% in 1997. On a year-to-date basis, R&D expense
was 3.7% of sales versus 3.3% in 1997. The increase is due
primarily to spending in the pharmaceuticals/surgical segment.
Restructuring Reserves
As described in previous filings, in the first quarter of 1997
the company's board of directors approved plans to restructure
all business segments as well as certain corporate administrative
functions. As a result, cumulative pre-tax restructuring charges
of $74 were recorded throughout 1997. In the first six months of
1998 additional charges of $11 were recorded in connection with
these programs, of which $8 was recorded in the second quarter.
The restructuring effort is expected to significantly reduce
the company's fixed cost structure and realign the organization
to meet its strategic objectives through the closure, relocation
and consolidation of manufacturing, distribution, sales and
administrative operations, and workforce reductions.
The following table sets forth the activity in the
restructuring reserve through June 27, 1998:
<TABLE>
Vision Pharmaceuticals/ Corporate
Care Eyewear Surgical Healthcare Administration Total
<S> <C> <C> <C> <C> <C> <C>
Restructuring Provisions $23.3 $41.4 $5.0 $5.9 $9.9 $85.5
Less charges:
Non-cash items 3.3 7.1 - 1.8 0.3 12.5
Cash payments 12.1 22.4 3.4 2.3 8.9 49.1
Balance at June 27, 1998 $ 7.9 $11.9 $1.6 $1.8 $0.7 $23.9
</TABLE>
Reserves remaining primarily represent liabilities related
to employee separations. No further provisions are expected to be
recorded for the 1997 restructuring program.
Operating Earnings
For the second quarter of 1998, the company's reported operating
earnings were $59, compared to earnings of $48 for the same 1997
period. Ongoing businesses generated operating earnings of $57
compared to $45 in 1997. Excluding restructuring charges recorded
in both periods, ongoing operating earnings would have been $64
versus $72.
On a year-to-date basis, the company reported operating
income of $42 compared to $62 in the prior year. Ongoing
businesses generated income of $40 as compared to $61 in 1997.
This decrease was primarily driven by the purchase accounting
adjustment for in-process research and development related to the
acquisitions of the surgical businesses. Excluding this charge
and restructuring charges in both periods, operating earnings
from ongoing businesses would have been $92 in 1998 versus $100
in 1997.
The decrease in comparable basis results for both the quarter
and year-to-date was driven mainly by increased operating
expenses in the vision care and eyewear segments, the one-time
write-up of inventory related to the surgical acquisitions and by
the impact of currency, which were partially offset by
incremental results in the pharmaceuticals/surgical segment.
Other Income And Expenses
As noted previously, the company sold its skin care business
during the second quarter of 1998, resulting in a pre-tax gain of
$56. Income from investments totaled $11 for the second quarter,
an increase of $1 over the same period in 1997. Interest expense
for the quarter of $26, an increase of $12 over the second
quarter of 1997, reflected the incremental debt associated with
recent acquisitions. Foreign currency gains of $2 were primarily
the result of favorable hedging activities.
LIQUIDITY AND FINANCIAL RESOURCES
Cash Flows From Operating Activities
Cash used in operating activities was $85 through the second
quarter of 1998, a $116 unfavorable change versus the comparable
1997 period. Seasonal increases in accounts receivable and a
payment of $42 to fund a proposed settlement of litigation
commenced in a prior year were the primary drivers of the cash
usage. Reasons for the unfavorability to the prior year period
include the litigation settlement and the timing of tax payments
and refunds.
Cash Used In Investing Activities
Cash used in investing activities was $662 for the first six
months of 1998, an increase of $560 from the comparable 1997
period, reflecting acquisitions and capital spending offset by an
inflow from the skin care divestiture. Capital spending, which
increased $38 to $90 compared to the prior year period, is
expected to be in the range of $200 for 1998. A significant
portion of 1998 capital spending will be used to support expanded
contact lens manufacturing capacity.
Cash Provided By Financing Activities
Through the second quarter of 1998, $712 was provided by
financing activities versus $46 for the comparable 1997 period.
New borrowings, totaling $729 for the six-month period, were
primarily used to fund acquisitions and capital expenditures, and
to finance the previously noted seasonal increase in trade
receivables and the proposed settlement of litigation.
Free Cash Flow
The company strives to maximize its free cash flow, defined as
cash generated before the payment of dividends, the borrowing or
repayment of debt, stock repurchases and the acquisition or
divestiture of businesses. Free cash flow through the first half
of 1998 was negative $169 compared to negative $33 in the prior
year. The decrease is due to the operational factors described
above.
Financial Position
The company's total debt, consisting of short- and long-term
borrowings, increased $721 from year-end 1997 due primarily to
the borrowings needed to consummate recent acquisitions and to
meet previously noted operational cash requirements. The increase
in debt is reflected in the ratio of total debt to capital, which
was 65.4% at the end of the second quarter of 1998 versus 50.5%
at the end of the comparable 1997 period. During the second
quarter, the company used cash proceeds from the sale of the skin
care business to reduce outstanding short-term debt.
Cash and short-term investments totaled $148 at the end of
the 1998 second quarter compared to $184 at December 1997 and
$137 at June 1997.
Access to Financial Markets
The company maintains U.S. revolving credit agreements, with both
364-day and 5-year terms, totaling $700. The interest rate under
these agreements is based on the LIBOR rate, or, at the company's
option, the higher of several other common indices. No debt was
outstanding under these agreements as of June 27, 1998. At June
27, 1998, the 5-year term portion of these revolving credit
agreements supported $300 of unsecured promissory notes which
have been classified as long-term debt. In addition, the company
maintains other lines of credit on which it may draw to meet its
financing requirements. During 1998, the company filed a
registration statement with the Securities and Exchange
Commission, authorizing borrowings of up to $500 in the long-term
U.S. public markets. As explained in Note E, underwriters
purchased the entire authorized amount during July 1998. Proceeds
were used to reduce short-term debt.
The company believes its existing credit facilities will
provide adequate liquidity to meet obligations, fund capital
expenditures and invest in potential growth opportunities.
Working Capital
Working capital amounted to negative $70 at the end of the second
quarter of 1998, reflecting increased short-term borrowings
associated with recent acquisitions. Working capital was $203 at
year-end 1997 and $34 at the end of the second quarter of 1997.
The current ratio was .9, 1.2 and 1.0 for these periods,
respectively.
OTHER FINANCIAL DATA
Dividends declared on common stock were $0.26 per share in the
second quarters of both 1998 and 1997. The return on average
shareholders' equity of 7.1% for the twelve-month period ended
June 27, 1998 reflected restructuring charges recorded in each of
the last four quarters, the first quarter 1998 charge for
purchased in-process R&D and a fourth quarter 1997 charge for the
proposed litigation settlement. This ratio was 6.2% for the
twelve-month period ending June 28, 1997.
OUTLOOK
Worldwide revenues and operating earnings on a constant dollar
basis for all major businesses were in line with management's
expectations for the second quarter. Assuming currency rate
stability, the company expects revenue and earnings increases
over the remainder of the year. Margins are expected to continue
to strengthen, as comparisons will be against more equivalent
currency exchange rates and the remainder of this year's sunglass
manufacturing savings are realized. Additionally, cost of goods
sold as a percent of sales should be lower, as the unfavorable
impact of the inventory write-up associated with the surgical
acquisition was fully reflected in cost of goods sold in the
first two quarters.
In the vision care segment, revenue growth should continue
throughout the remainder of the year as new products are
introduced. These include the disposable toric lens, which is
expected to be introduced in the U.S. during the fourth quarter,
and PureVision, a continuous wear lens that recently received
approval for marketing in Europe and which may receive FDA
clearance for 7-day wear before the end of this year. The
business will also benefit from continued market expansion of the
SofLens one day lens as production increases. Third quarter
revenues should continue the performance trends noted during the
first six months, although comparisons to 1997 will be difficult
as ReNu MultiPlus was launched during that time frame.
The company's goal is to realize 5% operating margins in 1998
in the eyewear segment. During the second half of the year,
revenue growth is expected from more normalized buying patterns
from Sunglass Hut International and from the introduction of the
new 1999 sunglass styles.
The pharmaceuticals/surgical segment is expected to
experience accelerated growth throughout the rest of the year,
due to newly introduced and acquired products and share gains in
all of the company's pharmaceuticals businesses. Going into the
year, expectations for the surgical business were that its impact
on 1998 earnings per share would be neutral excluding the
previously noted one-time charges for purchased in-process R&D
and higher cost of products sold resulting from purchase
accounting inventory adjustments. With the progress made to date,
the business is on target to meet or exceed that goal.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "anticipate," "should,"
"expect," "estimate," "project" and similar expressions are
intended to identify forward-looking statements. The forward-
looking statements contained in this report are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements involve predictions of
future company performance, and are thus dependent on a number of
factors affecting the company's performance. Where possible,
specific factors that may impact performance materially have been
identified in connection with specific forward-looking
statements. Additional risks and uncertainties include, without
limitation, the impact of competition, seasonality and general
economic conditions in the global sunglass, vision care and
ophthalmic surgical and pharmaceutical markets, where the
company's core businesses compete, changes in global economic and
political conditions, customer concentration (the company's two
largest customers accounted for over 10% of total sales in 1997),
changing trends in consumer preferences and tastes, legal
proceedings initiated by or against the company, changes in
government regulation of the company's products and operations,
changes in private and regulatory schemes providing for the
reimbursement of patient medical expenses, difficulties or delays
in the development, production, testing and marketing of products
and the effect of changes within the company's organization, and
such other factors as are described in greater detail in the
company's filings with the Securities and Exchange Commission,
including its 1997 Annual Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In its 1997 Annual Report on Form 10-K, the company
discussed a class action pending before a New York
Supreme Court alleging that the company misled consumers
in its marketing and sale of Sensitive Eyes Rewetting
Drops, Boston Rewetting Drops, Renu Rewetting Drops and
Bausch & Lomb Eye Wash. On April 21, 1998, the court
dismissed all of the plaintiffs' claims. The plaintiffs
have appealed this ruling.
Item 4. Submission of Matters to a Vote of Security Holders
The 1998 annual meeting of shareholders was held on April 28,
1998. The following matters were voted upon and received the
votes set forth below:
1. The individuals named below were elected to three-year
terms as directors.
Votes Cast
Director For Withheld
Domenico De Sole 49,910,285 596,841
Kenneth L. Wolfe 49,916,695 590,432
Directors continuing in office are Franklin E. Agnew,
William M. Carpenter, Jonathan S. Linen, Ruth R.
McMullin, John R. Purcell, Linda Johnson Rice, Alvin W.
Trivelpiece, Ph.D.and William H. Waltrip.
2. The election of PricewaterhouseCoopers LLP as
independent accountants for 1998 was ratified, with
49,561,529 shares voting for, 873,597 shares voting
against, and 72,064 shares abstaining.
3. An amendment to the 1990 Stock Incentive Plan was
approved, with 49,379,468 shares voting for, 1,875,129
shares voting against, and 252,592 shares abstaining.
4. The Bausch & Lomb Management Incentive Compensation Plan
was approved, with 48,350,759 shares voting for,
1,890,521 shares voting against, and 265,909 shares
abstaining.
5. A shareholder proposal recommending that the board of
directors maximize shareholder value by arranging for
the sale of the company was defeated, with 1,726,691
shares voting for, 45,166,213 shares voting against,
and 698,564 shares abstaining.
6. A shareholder proposal requesting that the board of
directors eliminate the staggered three-year terms
served by board members passed with 27,640,262 shares
voting for, 19,393,464 shares voting against, and
557,782 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Item 601 Exhibits
Those exhibits required to be filed by Item 601
of Regulation S-K are listed in the Exhibit Index
immediately preceding the exhibits filed herewith and
such listing is incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended June 27, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BAUSCH & LOMB INCORPORATED
Date: March 9, 1999 By:
Robert B. Stiles
Senior Vice President
and General Counsel
Date: March 9, 1999 By:
Stephen C. McCluski
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
S-K Item 601 No. Document
(4)-a Certificate of Incorporation of Bausch &
Lomb Incorporated (filed as Exhibit (4)-a to the
company's Annual Report on Form 10-K for the fiscal
year ended December 29, 1985, File No. 1-4105, and
incorporated herein by reference).
(4)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-b to the
company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-4105, and
incorporated herein by reference).
(4)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-c to the
company's Annual Report on Form 10-K for the fiscal
year ended December 26, 1992, File No. 1-4105, and
incorporated herein by reference).
(4)-d Form of Indenture, dated as of September 1,
1991, between the company and Citibank, N.A., as
Trustee, with respect to the company's Medium-Term
Notes (filed as Exhibit (4)-a to the company's
Registration Statement on Form S-3, File No. 33-
42858, and incorporated herein by reference).
(4)-e Rights Agreement between the company and The
First National Bank of Boston, as successor to Chase
Lincoln First Bank, N.A. (filed as Exhibit 1 to the
company's Current Report on Form 8-K dated July 25,
1988, File No. 1-4105, and incorporated herein by
reference).
(4)-f Amendment to the Rights Agreement between
the company and The First National Bank of Boston,
as successor to Chase Lincoln First Bank, N.A.
(filed as Exhibit 1 to the company's Current Report
on Form 8-K dated July 31, 1990, File No. 1-4105,
and incorporated herein by reference).
(10)-a 1998 Amendment to the Bausch & Lomb Incorporated
1990 Stock Incentive Plan (filed herewith).
(10)-b Management Incentive Compensation Plan (filed
herewith).
(10)-c LTI Deferred Compensation Plan (filed herewith).
(11) Statement Regarding Computation of Per Share
Earnings (filed herewith).
(12) Statement Regarding Computation of Ratio of
Earnings to Fixed Charges (filed herewith).
(27) Financial Data Schedule (filed herewith).
Bausch & Lomb Incorporated
Exhibit 10-A
1998 Amendment to the Bausch & Lomb Incorporated
1990 Stock Incentive Plan
I.
A new sentence is added at the end of Section 1 to read as
follows:
It is intended that awards granted under the Plan will comply
with the requirements of Code Section 162(m) as it relates to
allowing for deduction by the Company of compensation paid to
executives, unless otherwise designated by the Committee in
accordance with Section 11 herein.
II.
The text of current Section 4 is hereby redesignated as Section
4(a) and a new Section 4(b) is hereby added to read as follows:
(b) Subject to adjustment as provided in Sections 9 and 10,
unless and until the Committee determines that an award under the
Plan to an officer who, as of the date of vesting and/or payout
of the award, as applicable, is, or reasonably may be expected to
be, one of the group of "covered employees," as defined in the
regulations promulgated under Code Section 162(m), or any
successor statute (a "Covered Employee") shall not be designed to
comply with the performance-based exception from the tax
deductibility limitations of Code Section 162(m) (the
"Performance Based Exception"), the following rules shall apply
to grants of such awards under the Plan:
(1) Stock Options: The maximum aggregate number of
shares of Class B stock that may be granted in the form
of options, pursuant to any award granted in any one
fiscal year to any one single participant shall be five
hundred thousand (500,000).
(2) Alternate Rights: The maximum aggregate number of
shares of Class B stock that may be granted in the form
of stock appreciation rights or accelerated rights
pursuant to any award granted in any one fiscal year to
any one single participant shall be five hundred
thousand (500,000).
(3) Stock Grants: The maximum aggregate grant with
respect to awards of Stock Grants granted in any one
fiscal year to any one participant shall be two hundred
fifty thousand (250,000) shares.
III.
Section 8 prior to Section 8(a) shall be amended to read as
follows:
The Committee may make a grant, evidenced by such written
agreement as the Committee shall, from time to time, prescribe,
to any officer or other key employee consisting of a specified
number of shares of the Company's Class B stock, as defined in
Section 4 ("Stock Grants"). A Stock Grant shall be neither an
option nor a sale. The Committee, in its discretion, shall decide
whether any Stock Grant shall be subject to certain conditions
and restrictions, such conditions and restrictions designated by
the Committee. In such a case, appropriate written notice of the
conditions and restrictions shall be set forth in the document
effecting the grant ("Restricted Stock"). Restricted Stock shall
be subject to, but not limited to, the following conditions and
restrictions:
IV.
Section 9 is hereby amended to read as follows:
9. Recapitalization. In the event there is any recapitalization
in the form of a stock dividend, distribution, split, subdivision
or combination of shares of Common stock of the Company,
resulting in an increase or decrease in the number of Common
shares outstanding, and there is not a corresponding
recapitalization in the Class B shares, the number of Class B
shares then available for grants or options under the Plan or
covered by then outstanding grants or options or authorized
pursuant to Section 16 of the Plan shall not change. In such a
case, the award limits set forth in Section 4(b) hereof shall
also not change. However, a proportionate adjustment shall be
made in the number of shares of Common stock the aggregate value
of which will determine the purchase price of a Class B share or
which are exchangeable by the Company for a Class B share. In the
event there is a recapitalization resulting in an increase or
decrease in the number of Common shares outstanding and there is
a corresponding increase or decrease in the number of Class B
shares outstanding, the number of Class B shares available or
authorized under the Plan, the number of shares covered by
outstanding grants or options and the price per share thereof in
each such grant or option, and the award limits set forth in
Section 4(b) of the Plan shall be increased or decreased
proportionately, as the case may be, without change in the
aggregate purchase price.
V.
A new sentence is added at the end of Section 10 to read as
follows:
The award limits designated in Section 4(b) shall also be
adjusted in such a case so that the Plan shall thereafter cover
the number and class of shares equivalent to the shares covered
by the Plan immediately prior to such event.
VI.
Current Sections 11 through 16 are renumbered 13 through 18,
respectively, and all references to such Sections within the Plan
shall also change accordingly.
VII.
A new Section 11 is added to read as follows:
11. Compliance with Code Section 162(m). At all times when Code
Section 162(m) is applicable, all awards granted under this Plan
shall comply with the requirements of Code Section 162(m);
provided, however, that in the event the Committee determines
that such compliance is not desired with respect to any award or
awards available for grant under the Plan, then compliance with
Code Section 162(m) will not be required. In addition, in the
event that changes are made to Code Section 162(m) to permit
greater flexibility with respect to any award or awards available
under the Plan, the Committee may, subject to the terms of the
Plan, make any adjustments it deems appropriate.
VIII.
A new Section 12 is added to read as follows:
12. Performance-Based Awards. The performance measure(s) to be
used for purposes of grants to Covered Employees which are
designed to qualify for the Performance-Based Exception, the
attainment of which may determine the degree of payout and/or
vesting with respect to such awards, shall be chosen from among:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return on assets, return on equity, and return on sales;
(d) Cash flow return on investments which equals net
cash flow divided by shareholders' equity;
(e) Share price, growth in share price, and total shareholder
return; and
(f) Changes in Economic Value Added.
The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the preestablished
performance goals; provided, however, that awards which are
designed to qualify for the Performance-Based Exception, and
which are held by a Covered Employee, may not be adjusted upward
(the Committee shall retain the discretion to adjust such awards
downward).
In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance
measures without obtaining shareholder approval of such changes,
the Committee shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event
that the Committee determines that it is advisable to grant
awards which shall not qualify for the Performance-Based
Exception, the Committee may make such grants without satisfying
the requirements of Code Section 162(m).
IX.
Except as provided herein, the Plan shall remain in full force
and effect.
Bausch & Lomb Incorporated
Exhibit 10-B
Management Incentive Compensation Plan
Article 1. Establishment, Objectives, and Duration
1.1. Establishment of the Plan. Bausch & Lomb Incorporated,
a New York corporation (hereinafter referred to as the
"Company"), hereby establishes an incentive compensation plan to
be known as the "Bausch & Lomb Incorporated Management Incentive
Compensation Plan" (hereinafter referred to as the "Plan"), as
set forth in this document. The Plan permits the grant of
Incentive Awards to certain executives of the Company.
Subject to approval by the Company's shareholders, the Plan
shall become effective as of January 1, 1998 (the "Effective
Date") and shall remain in effect as provided in Section 1.3
hereof.
1.2. Purpose of the Plan. The Plan is intended to allow for
the grant of Incentive Awards to certain executives of the
Company which comply with the requirements of Code Section
162(m).
1.3. Duration of the Plan. The Plan shall commence on the
Effective Date, as described in Section 1.1 hereof and shall
remain in effect, subject to the right of the Board of Directors,
to amend the Plan at any time pursuant to Article 10 hereof,
until terminated by the Board of Directors in accordance with
Article 10.
Article 2. Definitions.
Whenever used in the Plan, the following terms shall have
the meanings set forth below, and when the meaning is intended,
the initial letter of the word shall be capitalized:
2.1. "Affiliate" shall have the meaning ascribed to such
term in Rule 12b-2 of the General Rules and Regulations
of the Exchange Act.
2.2. "Award" means, individually or collectively, a grant of
Incentive Awards under this Plan.
2.3. "Beneficial Owner" or "Beneficial Ownership" shall have
the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act.
2.4. "Board" or "Board of Directors" means the Board of
Directors of the Company.
2.5. "Bonus Pool" shall mean the pool of funds described in
Section 5.2 from which Incentive Awards shall be paid.
2.6. "Bonus Pool Percentage" shall mean the percentage
ascribed to each eligible Participant under Section
5.1.
2.7. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
2.8. "Committee" means the Committee on Management of the
Board of Directors, or any other committee appointed by
the Board to administer Awards under the Plan.
2.9. "Company" means Bausch & Lomb Incorporated, a New York
corporation, including any and all Subsidiaries and
Affiliates, and any successor thereto as provided in
Article 12 herein.
2.10."Covered Employee" means a Participant who, as of
the date of vesting and/or payout of an Award, as
applicable, is one of the group of "covered employees,"
as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.11."Director" means any individual who is a member of
the Board of Directors of the Company or any Subsidiary
or Affiliate.
2.12."Effective Date" shall have the meaning ascribed
to such term in Section 1.1 hereof.
2.13."Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, or any successor
act thereto.
2.14."Executive Officer" means any executive officer of
the Company who is also an Insider of the Company.
2.15."Incentive Award" means an Award granted to a
Participant, as described in Article 5 herein.
2.16."Insider" shall mean an individual who is, on the
relevant date, an executive officer, director or more
than ten percent (10%) beneficial owner of any class of
the Company's equity securities that is registered
pursuant to Section 12 of the Exchange Act, all as
defined under Section 16 of the Exchange Act.
2.17."Participant" means an Executive Officer who has
been selected to receive an Award or who has
outstanding an Award granted under the Plan.
2.18."Performance-Based Exception" means the
performance-based exception from the tax deductibility
limitations of Code Section 162(m).
2.19."Person" shall have the meaning ascribed to such
term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) thereof.
2.20."Plan Year" shall mean the Company's fiscal year,
unless otherwise designated by the Committee.
2.21."Subsidiary" means any corporation, partnership,
joint venture, or other entity in which the Company has
a majority voting interest.
Article 3. Administration
3.1. General. The Plan shall be administered by the
Committee on Management of the Board of Directors, or by any
other Committee appointed by the Board. The members of the
Committee shall be appointed from time to time by, and shall
serve at the discretion of the Board of Directors. The Committee
shall have the authority to delegate administrative duties to
officers or Directors of the Company.
3.2. Authority of the Committee. Except as limited by law or
by the Certificate of Incorporation or Bylaws of the Company, and
subject to the provisions herein, the Committee shall have full
power to select Executive Officers who shall participate in the
Plan; determine the sizes and types of Awards; determine the
terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or
instrument entered into under the Plan; establish, amend, or
waive rules and regulations for the Plan's administration; and
(subject to the provisions of Article 9 herein) amend the terms
and conditions of any outstanding Award as provided in the Plan.
Further, the Committee shall make all other determinations which
may be necessary or advisable for the administration of the Plan.
As permitted by law (and subject to Section 3.1 herein), the
Committee may delegate its authority as identified herein.
3.3. Decisions Binding. All determinations and decisions
made by the Committee pursuant to the provisions of the Plan and
all related orders and resolutions of the Committee shall be
final, conclusive and binding on all persons, including the
Company, its shareholders, Directors, Executive Officers,
Participants, and their estates and beneficiaries.
Article 4. Eligibility and Participation
4.1. Eligibility and Participation. Only Executive Officers
are eligible to participate in the Plan.
4.2. Partial Year Participation/Change in Status. Subject to
the provisions of the Plan, in the event an Executive Officer
becomes eligible to participate in the Plan or has a change in
status which makes such individual eligible for participation or
changes his or her eligibility in any way after the commencement
of a Plan Year, the Committee may, in its discretion, allow such
individual to receive Awards under the Plan on such terms as it
so designates.
Article 5. Incentive Awards
5.1. Grant of Incentive Awards. Subject to the terms of the
Plan, the Committee may designate Executive Officers of the
Company to receive Incentive Awards under the Plan. Incentive
Awards shall be made from a Bonus Pool established for each Plan
Year. The Committee shall allocate a Bonus Pool Percentage to
each applicable Participant for each Plan Year. Such allocation
shall be made within ninety (90) days of the commencement of the
Plan Year. In no event may the Bonus Pool Percentage for any one
individual Participant exceed thirty percent (30%) of the total
Bonus Pool. In addition, the sum of all Participants' applicable
Bonus Pool Percentages shall not exceed one hundred percent
(100%) of the Bonus Pool.
5.2. Determination of Bonus Pool. The Bonus Pool shall be an
amount equal to five percent (5%) of the Company's operating
earnings for the Plan Year. The Bonus Pool amount for each Plan
Year shall be determined by the Committee as soon as practicable
following the close of such Plan Year.
5.3. Determination of Incentive Awards. As soon as possible
after the final Bonus Pool amount can be determined, the
Committee shall determine each Participant's allocated amount of
the Bonus Pool by multiplying the final Bonus Pool amount for the
Plan Year by each Participant's Bonus Pool Percentage. A
Participant's Incentive Award shall then be determined based on
the Participant's allocated portion of the Bonus Pool, as reduced
in the sole discretion of the Committee. In no event, however,
may a Participant's allocated portion of the Bonus Pool be
increased as a result of a reduction of any other Participant's
allocated portion. In reducing a Participant's Incentive Award,
the Committee may consider any such factors it determines
applicable.
5.4. Payment of Incentive Awards. Payment of Incentive
Awards shall be made in such form and at such time or times as
designated by the Committee.
5.5. Partial Awards. In the event a Participant ceases
employment because of death, disability, or retirement prior to
the date which the Committee determines Incentive Awards under
the Plan for any Plan Year, the Committee may, but need not,
provide for the partial or full payment of an Incentive Award for
the year of termination and any Incentive Award from any prior
Plan Year which has not yet been paid out. Unless otherwise
specified by the Committee, Participants who terminate employment
for reasons other than death, disability, or retirement prior to
the date the Committee determines the Incentive Awards under the
Plan will not be eligible to receive an Incentive Award for the
year of termination or any payout of any Incentive Awards from a
prior Plan Year which has not yet been paid out.
5.6. Nontransferability. Except as otherwise provided by the
Committee, Incentive Awards may not be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further,
except as otherwise provided by the Committee, a Participant's
rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant's legal
representative.
Article 6. Beneficiary Designation.
Each Participant under the Plan may, from time to time, name
any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under the Plan is to be paid
in case of his or her death before he or she receives any or all
of such benefit. Each such designation shall revoke all prior
designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed
by the Participant in writing with the Company during the
Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be
paid to the Participant's estate.
Article 7. Deferrals
The Committee may permit or require a Participant to defer
such Participant's receipt of the payment of cash that would
otherwise be due to such Participant by virtue of the
satisfaction of any requirements or goals with respect to
Incentive Awards. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
Article 8. Rights of Executive Officers
8.1. Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any
Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company.
8.2. Participation. No Executive Officer shall have the
right to be selected to receive an Award under this Plan, or,
having been so selected, to be selected to receive a future
Award.
Article 9. Amendment, Modification, and Termination
9.1. Amendment, Modification, and Termination. Subject to
the terms of the Plan, the Committee may at any time and from
time to time, alter, amend, suspend or terminate the Plan in
whole or in part; provided, however, unless the Committee
specifically provides otherwise, any revision or amendment that
would cause the Plan to fail to comply with any requirement of
applicable law, regulation, or rule, if such amendment were not
approved by shareholders, shall not be effective unless and until
such approval of shareholders of the Company is obtained.
9.2. Awards Previously Granted. Notwithstanding any other
provision of the Plan to the contrary, no termination, amendment,
or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan, without
the written consent of the Participant holding such Award.
Article 10. Withholding
The Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld
with respect to any taxable event arising as a result of this
Plan.
Article 11. Indemnification
Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held
harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a
party or in which he or she may be involved by reason of any
action taken or failure to act under the Plan and against and
from any and all amounts paid by him or her in settlement thereof
with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on
his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles
of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold
them harmless.
Article 12. Successors
All obligations of the Company under the Plan with respect
to Awards granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or
assets of the Company.
Article 13. Legal Construction
13.1. Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the singular
and the singular shall include the plural.
13.2. Severability. In the event any provision of the
Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.
13.3. Requirements of Law. The granting of Awards under
the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
13.4. Governing Law. To the extent not preempted by
federal law, the plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of New York.
Bausch & Lomb Incorporated
Exhibit 10-C
LTI Deferred Compensation Plan
1. Introduction
This LTI Deferred Compensation Plan (the "Plan") provides the
opportunity for participants in the Bausch & Lomb Incorporated
(the "Company") Long Term Incentive Plan (the "LTI Plan") to
defer their awards under the LTI Plan.
2. Effective Date
The effective date of this Plan is April 1, 1998 (the
"Effective Date"). It covers eligible compensation earned
after the Effective Date and deferred hereunder.
3. Eligibility
Commencing on the Effective Date, the Plan is available to all
participants in the LTI Plan who (1) are in the active employ
of the Company on the date they make a deferral election and
(2) are with a select group of management or highly
compensated employees as provided for in Title I of ERISA.
4. Amount of Deferral
An eligible employee may become a participant in the Plan by
electing to defer any grant or award under the LTI Plan.
Deferrals must be as to an entire grant, and partial deferrals
of individual grants are not permitted.
5. Time of Deferral Election
a) A participant's election to defer compensation must be made
by written notice to the Plan Administrator on behalf of the
Company before the compensation is earned. Without limiting the
generality of the foregoing, subparagraphs 5(b) and 5(c) and 5(d)
identify particular instances as to when effective elections may
be made.
b) For any grants in the first calendar quarter of 1998 which
have a performance cycle ending before to January 1, 1999,
deferral elections may be made at any time after the Effective
Date of this Plan but not later than April 30, 1998.
c) For any person newly eligible to participate in the LTI
Plan, an initial deferral election may be made at any time within
30 days of being newly eligible to participate in the LTI Plan.
d) For any LTI Plan grants with a performance cycle of greater
than one year, deferral elections may be made at any time prior
to the end of the Bausch & Lomb fiscal year next preceding the
final Bausch & Lomb fiscal year of the performance cycle.
6. Deferral Election
a) To defer compensation under the Plan, a participant must
give written notice to the Plan Administrator. This notice must
include (1) identification, by Cycle End Date (as defined in the
LT1 Plan), of the grant to be deferred; (2) the payment
commencement date (i.e. retirement or date certain); (3) the
method of payment desired (i.e. annual installments, lump sum)
and, if annual, the number of years of installment payments; and
(4) the designation of payment to the participant's estate or
beneficiary in the event of the participant's death. The Company
will provide notice forms for deferral elections (see Exhibits I
and II), which shall include identification of payment methods
and installments as may be approved in advance by the Plan
Administrator.
b) If a participant names someone other than his or her spouse
as a beneficiary in the event of participant's death, a spousal
consent form must be signed by that participant's spouse and
returned to the Company.
c) For all compensation deferred after the Effective Date of
this Plan, a participant may elect only two payment options, each
consisting of a payment commencement date and a method of
payment.
d) If a participant elects to receive his or her deferred
compensation in installments, the installment payments will be
calculated in the following manner: the participant's account
balance at the payment commencement date will be multiplied by a
fraction, the numerator of which is 1, and the denominator of
which is the number of remaining installment periods.
e) Retirement, for purposes of the Plan, shall mean the date on
which the participant is both (i) at least age 55 and (ii) no
longer employed by the Company.
7. Deferred Compensation Investment Account
a) An investment account will be established for each
participant ("Investment Account") to record all deferrals a
participant makes under this Plan plus all earnings on these
deferrals.
b) All deferrals will be deferred and, subject to subparagraphs
(g) and (h) below, held in shares of Company Stock.
c) Prior to the vesting of any grants, deferred shares will be
held by the Plan as Class B shares of the Company.
d) Upon vesting of any grants, shares previously held as Class
B shares will be converted, on a one-to-one basis, to regular
shares of Company Common stock and invested in a rabbi trust (the
"Trust") established for this purpose.
e) If any grant does not vest, all shares theretofore held by
the Company as Class B stock shall be forfeited and the
participant's Investment Account shall be adjusted to reflect
such forfeiture.
f) Dividends on deferred shares, whether vested or not, will be
paid into the Trust and invested in regular shares of Company
common stock.
g) All investments in Investment Accounts under the Plan are
hypothetical to the participant, regardless of whether or not the
Plan holds Class B or Common shares, or other assets. At the
time of each deferral of an LTI Plan award into the Plan, a
participant will be credited with an imputed number of shares for
the Investment Account. Participants will have no right to vote
these imputed shares. Thereafter, the value of a participant's
Investment Account will fluctuate in accordance with the actual
performance of the Investment Account. Dividends on the imputed
shares also will be credited to the participant's Investment
Account. Distributions and forfeitures will be deducted from the
Investment Account.
h) All vested deferred amounts shall remain invested in Company
Common stock until the participant is no longer in the
active employ of the Company, at which time additional
investment options, as determined by the Plan Administrator,
may be made available.
8. Payment of Deferred Compensation
a) A participant's right to payment of deferred compensation
under the Plan is a contractual obligation of the Company to the
participant, and his or her right to such monies or assets shall
be an unsecured claim against the general assets of the Company.
However, the Company has established the Trust as an irrevocable
rabbi trust for participants for the purpose of holding, after
vesting of awards, assets used to pay deferred compensation
required to be paid by this Plan. The Company shall make
periodic contributions to the Trust as may be required to fund
amounts payable under the Plan. The Trust provides a participant
with assurance that deferred monies or assets will be paid to the
participant in accordance with the Plan, except in the event of
the Company's bankruptcy or insolvency. Notwithstanding the
establishment of the Trust, the Company remains ultimately
responsible to pay deferred compensation to each participant.
This obligation shall be met from the general assets of the
Company if the Trust has insufficient funds to pay benefits.
b) Payments of deferred compensation to a participant shall be
pursuant to the participant's deferral election notice given
pursuant to Section 6 hereof. Except as provided in Subsections
(c) and (d) below, a participant may not change the payment
commencement date or method of payment for monies or assets
already in his or her Investment Account. However, a participant
may choose a different payment commencement date and/or method of
payout for future deferrals subject to Section 6 above.
c) If, in the discretion of the Plan Administrator, a
participant has a need for funds due to a financial emergency
beyond the control of the participant, a payment may be made to
the participant from the vested funds in his or her account under
the Trust at a date earlier than the payment commencement date
chosen by the participant at the time of deferral. A
distribution based upon financial hardship may not exceed the
amount required to meet the immediate financial need created by
the hardship less the amount reasonably available to the
participant from other sources. Notwithstanding the foregoing, a
participant may not obtain a distribution based on financial
hardship which would create liability of the participant to the
Company under Section 16. As used herein, the term "Section 16"
shall mean Section 16 of the Securities Exchange Act of 1934.
A participant requesting a hardship distribution must supply
the Plan Administrator with a statement indicating the
nature of the need creating the financial hardship, the fact
that all other available resources are insufficient to meet
the need, and any other information that the Plan
Administrator deems necessary to evaluate whether a
financial hardship exists.
d) A participant may make an early withdrawal of vested funds
or assets held in the participant's Account under the Trust at
anytime, subject to the following penalties:
Forfeiture of 10% of the amount of the early withdrawal; and
Suspension of eligibility to make further deferral elections
for a period of five years.
Notwithstanding the foregoing, a participant may not obtain
a distribution under this Subsection which would create
liability of the participant to the Company under Section 16.
e) In the event of a participant's death before he or she has
received all of the deferred compensation payments to which
he or she is entitled, payments will be made, according to
the participant's deferral election pursuant to Section 6
hereof, to the participant's estate or beneficiary either
(a) continuing in the same manner as designated with respect
to payments to the participant while living or (b) in a
single lump sum payment the value of which is determined as
of the date immediately following the participant's death
and paid on the first January 15 or July 15 following such
valuation date (or as soon as reasonably possible
thereafter).
f) All payments made to participants under the Plan shall be
subject to all taxes required to be withheld under applicable
laws and regulations of any governmental authorities.
g) Upon termination of a participant as an employee of the
Company, the first day of February next following the date of
termination will be deemed to be the payment commencement date
for account balances of less than $3,500 and such payment will be
made to the participant in a lump sum.
h) Upon a Change of Control (as defined below) notwithstanding
a participant's payment commencement date with respect to any
compensation deferred hereunder or method of payout with respect
to any compensation deferred hereunder, all amounts in a
participant's deferred compensation account (including earnings
credited thereto) shall be due and payable to the participant in
a cash lump sum payment within 15 days following the Change of
Control; provided, however that amounts which shall be due and
payable in accordance with this subparagraph 8(h) shall be paid,
at the election of the participant, in a manner so as not to
create liability of the participant to the Company under Section
16.
i) For purposes of this Plan, Change of Control shall mean:
A) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) of 20% or more of either
(i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined
voting power of the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired
directly from the Company), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of subsection (i) (C) of this Section 8 are satisfied; or
B) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
C) Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or consolidation,
in each case, unless, following such reorganization, merger,
binding share exchange or consolidation, (i) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger, binding
share exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger, binding share
exchange or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization,
merger, binding share exchange or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (ii) no person (excluding the
Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization,
merger, binding share exchange or consolidation and any Person
beneficially owning, immediately prior to such reorganization,
merger, binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger, binding
share exchange or consolidation or the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii)
at least a majority of the members of the board of directors of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation were members of the
Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger, binding
share exchange or consolidation; or
D) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (1) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (3) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
9. Administration
The Treasurer of the Company, as the designee of the Committee
on Management of the Board of Directors, shall be the Plan
Administrator and has the authority to control and manage the
operation and administration of the Plan. The Investment
Committee shall be the Investment Committee of Bausch & Lomb
Incorporated.
10. Assignability
No right to receive payments under the Plan is transferable or
assignable by a participant except by will or by the laws of
descent and distribution.
11. Business Days
In the event any date specified falls on a Saturday, Sunday,
or holiday, such date will be deemed to refer to the next
business day thereafter.
12. Amendment
The Plan may at any time or from time to time be amended,
modified, or terminated by the Board of Directors or the
Committee on Management of the Board of Directors of the
Company. No such amendments, modification, or termination
will, without the consent of the participant, adversely affect
the participant's accruals in his or her deferred compensation
account.
BAUSCH & LOMB INCORPORATED
By:______________________________
Daryl M. Dickson
Sr. Vice President
Human Resources
Date:____________________________
<TABLE>
Bausch & Lomb Incorporated
Exhibit 11
Statement Regarding Computation of Per Share Earnings
(Share Amounts in Thousands Except Per Share Data)
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Earnings (in millions) (a) $55.3 $20.3 $32.0 $23.5
Actual outstanding Common
and Class B shares at
beginning of period 55,610 55,527 55,209 55,404
Sum of weighted average
activity of : (1) Common
and Class B shares issued
for stock options (2)
repurchases of Common and
Class B stock and (3)
cancellation of outstanding
stock options 177 (71) 351 44
Weighted basic shares (b) 55,787 55,456 55,560 55,448
Effect of assumed exercise of
Common stock equivalents 795 315 586 235
Weighted diluted shares 56,582 55,771 56,146 55,683
Basic earnings per share $0.99 $0.37 $0.58 $0.42
Diluted earnings per share $0.98 $0.36 $0.57 $0.42
</TABLE>
<TABLE>
Bausch & Lomb Incorporated
Exhibit 12
Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
(Dollar Amounts In Millions)
For Six Months Ending For the Year Ending
June 27, 1998 December 27, 1997
Earnings before provision of
income taxes and minority
<S> <C> <C>
interests $ 71.0 $118.0
Fixed charges 52.9 57.9
Capitalized interest, net of
current period amortization 0.1 0.3
Total earnings as adjusted $124.0 $176.2
Fixed charges:
Interest (including interest
expense and capitalized
interest) $ 51.7 $ 56.1
Portion of rents representative of
the interest factor 1.2 1.8
Total fixed charges $ 52.9 $ 57.9
Ratio of earnings to fixed charges 2.34<F1> 3.04<F2>
<F1> Excluding the effects of the restructuring charges, purchased-
in-process research and development charges from the surgical
acquisitions and the gain on sale of the skin care business in
1998, the ratio of earnings to fixed charges at June 27, 1998
would have been 2.29.
<F2> Excluding the effects of the restructuring charges recorded in
1997, the ratio of earnings to fixed charges at December 27,
1997 would have been 4.28.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> JUN-27-1998
<CASH> 144278
<SECURITIES> 3215
<RECEIVABLES> 540006
<ALLOWANCES> 28583
<INVENTORY> 408602
<CURRENT-ASSETS> 1314891
<PP&E> 1348614
<DEPRECIATION> 675322
<TOTAL-ASSETS> 3551498
<CURRENT-LIABILITIES> 1384670
<BONDS> 783550
0
0
<COMMON> 24148
<OTHER-SE> 808999
<TOTAL-LIABILITY-AND-EQUITY> 3551498
<SALES> 1188128
<TOTAL-REVENUES> 1188128
<CGS> 574407
<TOTAL-COSTS> 574407
<OTHER-EXPENSES> 571291
<LOSS-PROVISION> 5392
<INTEREST-EXPENSE> 51716
<INCOME-PRETAX> 71000<F1>
<INCOME-TAX> 27382
<INCOME-CONTINUING> 32036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32036
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.57
<FN>
<F1>Income Before Taxes and Minority Interest
</FN>
</TABLE>
