United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File
March 25, 2000 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.)
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 March 25, 2000 was 53,076,850, consisting of
52,664,223 shares of Common stock and 412,627 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 1999 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
interim consolidated financial statements.
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
First Quarter Ended
Dollar Amounts In Millions - Except Per Share March 25, March 27,
Data 2000 1999
<S> <C> <C>
Net Sales $ 406.9 $ 389.8
Costs And Expenses
Cost of products sold 180.2 162.4
Selling, administrative and general 164.7 164.9
Research and development 25.2 20.7
370.1 348.0
Operating Income 36.8 41.8
Other (Income) Expense
Interest and investment income (15.6) (9.6)
Interest expense 17.3 24.2
Gain from foreign currency, net (5.0) (2.9)
Other income (23.6) -
(26.9) 11.7
Income From Continuing Operations Before Income
Taxes And Minority Interest 63.7 30.1
Provision for income taxes 22.6 10.8
Income From Continuing Operations Before Minority
Interest 41.1 19.3
Minority interest in subsidiaries 2.0 4.3
Income from Continuing Operations 39.1 15.0
Income from discontinued operations, net of taxes - 7.4
Net Income $ 39.1 $ 22.4
Basic Earnings Per Share:
Continuing Operations $ 0.69 $ 0.26
Discontinued Operations - 0.13
$ 0.69 $ 0.39
Diluted Earnings Per Share:
Continuing operations $ 0.68 $ 0.26
Discontinued operations - 0.13
$ 0.68 $ 0.39
Average Shares Outstanding - Basic (000s) 56,692 56,724
Average Shares Outstanding - Diluted (000s) 57,538 58,062
See Notes to Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET
March 25, December 25,
Dollar Amounts In Millions 2000 1999
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 723.8 $ 827.1
Other investments, short-term - 125.0
Trade receivables, less allowances
of $20.9 and $19.6, respectively 407.0 438.0
Inventories, net 230.1 239.6
Other current assets 194.3 156.0
Net assets held for disposal, short-term 11.8 24.6
1,567.0 1,810.3
Property, Plant And Equipment, net 509.6 524.8
Goodwill And Other Intangibles,
less accumulated amortization
of $139.1 and $129.3, respectively 610.7 606.8
Other Investments 170.8 173.8
Other Assets 155.8 153.1
Net Assets Held For Disposal, long-term 1.6 4.7
Total Assets $3,015.5 $3,273.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accrued liabilities $ 324.8 $ 356.0
Federal, state and foreign income
taxes payable 51.9 47.3
Accounts payable 103.3 94.8
Accrued compensation 74.2 74.6
Notes payable 37.8 45.9
Current portion of long-term debt 5.7 1.0
597.7 619.6
Long-Term Debt, less current portion 972.1 977.0
Deferred Income Taxes 118.8 117.7
Other Long-Term Liabilities 93.0 99.6
Minority Interest 227.8 225.6
Total Liabilities 2,009.4 2,039.5
Shareholders' Equity
4% Cumulative Preferred stock - -
Class A Preferred stock - -
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, 635,728 and 613,324 shares
issued, respectively 0.1 -
Capital in excess of par value 91.9 89.6
Common and Class B stock
in treasury, at cost, 7,757,200 and
3,435,738 shares, respectively (386.5) (150.1)
Retained earnings 1,292.3 1,268.4
Accumulated other comprehensive income (5.6) 9.0
Other shareholders' equity (10.2) (7.0)
Total Shareholders' Equity 1,006.1 1,234.0
Total Liabilities And Shareholders' $3,015.5 $3,273.5
Equity
See Notes To Financial Statements
</TABLE>
<TABLE>
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES
STATEMENT OF CASH FLOWS
Three Months Ended
March 25 March 27,
Dollar Amounts In Millions 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 39.1 $ 22.4
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 22.0 32.1
Amortization 9.9 11.9
Change in deferred income taxes 1.7 2.9
Loss on retirement of fixed assets 5.2 2.7
Changes in assets and liabilities:
Trade receivables 25.0 (14.8)
Inventories 6.9 (18.6)
Other current assets (39.3) (33.6)
Accounts payable and accruals (5.5) 6.8
Income taxes 5.2 3.8
Other long-term liabilities (3.7) 0.4
Net cash provided by operating activities 66.5 16.0
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (15.1) (37.4)
Net cash paid for acquisition of businesses - (18.5)
Proceeds from liquidation of other investment 125.0 150.0
Other (19.5) (3.2)
Net cash provided by investing activities 90.4 90.9
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of Common and Class B shares (242.6) -
Exercise of stock options 8.7 19.5
Net repayments of notes payable (7.9) (49.6)
Repayment of long-term debt (0.1) (2.8)
Payment of dividends (15.0) (14.7)
Net cash used in financing activities (256.9) (47.6)
Effect of exchange rate changes on cash
and cash equivalents (3.3) (2.7)
Net (decrease)/increase in cash and cash
equivalents (103.3) 56.6
Cash and cash equivalents - beginning of
period 827.1 129.2
Cash and cash equivalents - end of period $723.8 $185.8
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 23.6 $ 32.1
Income taxes $ 19.8 $ 15.1
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: Inventories
Inventories consisted of the following:
March 25, December 25,
2000 1999
Raw materials and supplies $ 57.3 $ 54.0
Work in process 19.0 15.9
Finished products 153.8 169.7
$230.1 $239.6
NOTE B: Property, Plant And Equipment
Major classes of property, plant and equipment consisted
of the following:
March 25, December 25,
2000 1999
Machinery and equipment $ 768.8 $ 772.1
Buildings 214.2 212.8
Leasehold improvements 35.1 35.2
Land 11.8 12.0
1,029.9 1,032.1
Less: Accumulated
depreciation (520.3) (507.3)
$ 509.6 $ 524.8
NOTE C: Comprehensive Income
The components of the company's total comprehensive
income were:
Three Months Ended
March 25, March 27,
2000 1999
Net income $39.1 $22.4
Foreign currency translation
adjustments, net of taxes (14.6) (23.0)
Total Comprehensive
Income $24.5 $(0.6)
NOTE D: Restructuring and Exit Activities
1999 Program
In December 1999, the company's board of directors announced that
it was implementing a comprehensive program to exit certain
contact lens manufacturing platforms and take additional steps to
further reduce the administrative cost structure throughout the
company. As a result, the company recorded a pre-tax charge of
$56.7 in 1999, the major components of which are summarized in
the table below:
<TABLE>
Vision Other/
Care Administrive Total
Provisions
<S> <C> <C> <C>
Employee terminations $27.1 $3.7 $30.8
Asset write-offs 25.8 0.1 25.9
52.9 3.8 56.7
Less 1999 Activity:
Cash payments (1.0) - (1.0)
Non-cash items (25.8) (0.1) (25.9)
Remaining reserve at December 25, 1999 $26.1 $3.7 $29.8
Less 2000 Activity:
Cash payments (5.2) (0.1) (5.3)
Non-cash items - - -
Remaining reserve at March 25, 2000 $20.9 $3.6 $24.5
</TABLE>
The restructuring program within the vision care segment will
focus on the elimination of certain contact lens manufacturing
platforms resulting from exiting less cost-effective
technologies. The programs included under other/administrative
will focus primarily on further reducing overhead costs
throughout the company. All major actions in this restructuring
plan were started in the fourth quarter of 1999 and include:
Anticipated
Project Completion Date
Vision Care
Exit certain European manufacturing platforms June 2000
Eliminate internal infrastructure costs June 2000
Exit certain U.S. manufacturing platforms December 2000
Other/Administrative
Eliminate internal infrastructure costs December 2000
The above projects will result in the termination of
approximately 900 employees. Vision care includes terminations of
710 operational employees in production and 116 administrative
staff. The other/administrative actions include the termination
of approximately 80 staff in both administrative and sales roles.
As of March 25, 2000, 301 employees have been involuntarily
terminated under this restructuring plan with $6.3 of related
costs being charged against the liability.
The employee terminations will result in future cash
outflows to the company. These cash outflows, which began in
December 1999, are expected to take place throughout 2000, with
the majority of the outflows occurring in the second half of the
year. The company will use its current cash balance as well as
cash provided by operations to fund these cash outflows.
In addition to employee terminations, the above projects
resulted in $25.9 of asset write-offs, primarily for the
abandonment of manufacturing equipment. The disposition and/or
decommissioning of these assets occurred in the fourth quarter of
1999 and January 2000.
Accrual for Acquisition-Related Exit Activities
As part of the integration of Chiron Vision and Storz, management
developed a formal plan that included the shutdown of duplicate
facilities in the U.S., Europe and Asia, the elimination of
duplicate product lines and the consolidation of certain
administrative functions. The exit activities were committed to
by management and formally communicated to employees shortly
after the acquisitions were consummated. The major components of
the accrual were as follows:
<TABLE>
Employee
Severance and Facilities Contract
Relocation Closure Costs Terminations Total
<S> <C> <C> < c> <C>
Accrued at acquisition date $21.7 $5.5 $0.9 $28.1
Less 1998 Activity:
Cash payments (6.3) (0.7) (0.9) (7.9)
Non-cash items - (0.3) - (0.3)
Balances at December 26, 1998 $15.4 $4.5 $ - $19.9
Less 1999 Activity
Cash payments (10.7) (0.4) - (11.1)
Non-cash items - (2.6) - (2.6)
Balances at December 25, 1999 $ 4.7 $1.5 $ - $ 6.2
Less 2000 Activity
Cash payments (0.7) - - (0.7)
Non-cash items - - - -
Balances at March 25, 2000 $ 4.0 $1.5 $ - $ 5.5
</TABLE>
The costs of employee terminations related to 596 employees in
production, R&D, selling and administration. During the first
quarter of 2000, 15 employees were terminated. During 1999 and
1998, 384 and 100 employees were terminated, respectively. The
remaining 97 are expected to be terminated in 2000 and include
those in a foreign jurisdiction that involved a lengthy statutory
process of notice and approval prior to termination. Management
does not believe such process will result in severance payments
or other costs materially different from those accrued. The
facilities closure costs primarily represented leasehold
termination payments and fixed asset writedowns relating to
duplicate facilities. The closures and consolidations in the U.S.
were substantially completed in 1999. The closures and
consolidations outside the U.S. were commenced in 1999 and are
expected to be substantially complete in 2000. Involuntary
termination benefits of $18.1 were accrued in 1998. Amounts paid
and charged against the liability were $0.7 in the first quarter
of 2000, $8.4 in 1999 and $5.4 in 1998.
NOTE E: Business Segment Information
The company is organized by product line for management reporting
with operating earnings being the primary measure of segment
profitability. Certain distribution and general and
administrative expenses, including some centralized services, are
allocated amongst the segments for management reporting. No items
below operating earnings are allocated to segments. The
accounting policies used to generate segment results are the same
as the company's overall accounting policies.
The company's operating results are reported in three
business segments: vision care, pharmaceuticals and surgical. The
vision care segment includes contact lenses, lens care products
and vision accessories. The pharmaceutical segment includes
generic and proprietary prescription products with an emphasis on
ophthalmic medications and over-the-counter (OTC) ophthalmic
medications. The surgical segment includes products and equipment
for cataract, refractive and retinal surgery.
The following table presents sales and operating earnings by
business segment for the quarters ended March 25, 2000 and March
27, 1999. The company does not have material intersegment sales.
First Quarter
2000 1999
Net Operating Net Operating
Sales Earnings Sales Earnings
Vision Care $230.8 $29.4 $229.6 $33.7
Pharmaceuticals 69.1 12.8 66.5 16.2
Surgical 107.0 8.9 93.7 7.7
Corporate administration - (14.3) - (15.8)
$406.9 $36.8 $389.8 $41.8
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 2000 outlook. Discussion of 1999
operating results exclude the discontinued businesses and the
vision care segment has been restated to include results from the
vision accessories business, which was previously reported in the
eyewear segment. References within this financial review to
earnings per share refer to diluted earnings per share.
CONTINUING OPERATIONS
Net Sales By Business Segment And Geographic Region
Total net sales for the quarter ended March 25, 2000 were $407.
This represents an increase of 4% over the comparable period in
1999. Constant dollar (that is, excluding the effect of foreign
currency exchange rates) revenue increased 6%. Vision Care
revenue remained flat versus 1999 while growth was noted in both
the pharmaceuticals and surgical segments (4% and 14%
respectively).
Vision Care Segment Revenues
Revenues in this segment were $231 for the first quarter of 2000,
which were flat in comparison to the same period last year. In
constant dollars, sales increased 1% versus 1999. Contact lenses
comprised 49% of revenues, with a combined lens care and vision
accessories making up 51% of first quarter 2000 revenues. In the
first quarter of 1999, this mix was 46% lens and 54% lens care
and vision accessories.
Contact lens revenues increased 8% from the year-ago period.
Results were driven by strong double-digit growth in sales of the
company's new lines of planned replacement and disposable lenses
which more than offset declines in the older traditional lens
portfolio. Outside the U.S., strong results in Europe and Japan,
led by SofLens one day disposable lenses and Medalist lenses,
respectively, contributed to a 10% improvement. U.S. contact lens
sales were up 3% versus 1999 driven by the new products SofLens66
toric and PureVision. Lens care and vision accessories revenues
decreased 6% from the prior-year quarter. Strong sales from ReNu
product lines in the Asia-Pacific region were more than offset by
declines in the U.S. and certain markets in Europe, where the
company's retail customers reduced inventory carrying
requirements for lens care products and began to re-balance their
inventory positions during the quarter.
Pharmaceuticals Segment Revenues
Revenues in this segment were $69 for the first quarter of 2000,
an increase of 4% from the same period last year, or 9% in
constant dollars. Pharmaceutical revenues were up 16% in the U.S.
Contributing to these results were continued gains for Lotemax
and Alrex, the company's proprietary ophthalmic, anti-
inflammatory drops. Outside the U.S., pharmaceuticals sales
decreased 14% for the quarter. These results reflect a weakened
Deutsche Mark as well as lower over-the-counter sales in Germany,
both of which affected the company's Dr. Mann Pharma subsidiary.
Surgical Segment Revenues
Revenues from the company's surgical business were $107, which is
a 14% increase over the first quarter in 1999. Excluding the
impact of currency, revenues increased 18%. The U.S. surgical
business grew modestly with significant gains in sales of
products for refractive surgery, including the recently approved
Technolas 217 excimer laser, offset in part by lower sales in the
cataract surgery products business. Outside the U.S., sales grew
30%, driven by the refractive business where demand for the
Technolas 217 laser and Orbscan diagnostic technology is strong.
Net Sales By Geographic Region
Sales in markets outside the U.S. totaled $194 in the first
quarter of 2000, an increase of $13 or 7% compared with the 1999
period, and represented approximately 48% of consolidated
revenues in 2000 and 47% in 1999. Excluding the impact of
currency, revenues increased 11%.
First quarter sales in the Asia-Pacific region increased 13%
versus 1999, or 7% in constant dollars. Revenues in Europe
remained flat versus 1999, but increased 11% in constant dollars.
Sales in Canada and Latin America increased $5 or 35% over 1999.
U.S. sales totaled $212 in the first quarter, an increase of
$4 or 2% from 1999.
Costs & Expenses and Operating Earnings
Amounts in this section are calculated on a "management basis"
and comparisons to 1999 exclude discontinued operations and
restructuring charges and asset write-offs.
The ratio of costs of products sold to sales was 44.3%
during the first quarter of 2000, versus 41.7% for the same
period of 1999. Unfavorable currency exchange swings and a shift
in product sales mix in the vision care business away from higher
margin solution products were the primary factors in the
variance.
Selling, administrative and general expenses, including
corporate administration, were 40.5% of sales in the first
quarter of 2000 compared to 42.3% in 1999. For the quarter,
operating expenditures remained flat to the prior year.
Corporate administration expenses were 3.5% of sales in the
first quarter of 2000, versus 4.2% in the same period of 1999.
Results were impacted by higher sales base combined with cost
reductions from restructuring programs.
Research and development expenses totaled $25 in the first
quarter of 2000, an increase of $5 over 1999. This represented
6.2% of sales in 2000, up from 5.3% in 1999. Spending continues
for each of the businesses but in particular for the
pharmaceuticals segment and its implant technology for the back
of the eye.
Operating earnings for the first quarter of 2000 fell $5, to
$37, a 12% decline from the prior year period. Results were
affected by the aforementioned shift in product mix in the vision
care segment, currency and higher spending on research and
development.
Other Income And Expenses
Income from investments totaled $16 for the first quarter of
2000, an increase of $6 compared to the same period in 1999.
Interest expense of $17 decreased $7 compared to the same period
in 1999. An increase in short-term investments and lower levels
of short-term debt due to divestitures of the sunglass and
healthcare businesses in 1999 were the primary drivers of these
variances. Foreign currency gains of $5 during the first quarter
of 2000 compared favorably to the prior year period by $2. This
increase is associated with ongoing hedging activities. Other
income consisted of proceeds from a patent litigation settlement
with Alcon Laboratories. The settlement agreement resolves the
patent infringement case Bausch & Lomb filed against Alcon in
October 1994, in United States District Court for the Western
District of New York, concerning Bausch & Lomb's U.S. Patent No.
5,096,607.
Under the terms of the settlement agreement, Alcon will make
an up-front payment to Bausch & Lomb of $25 million, or
approximately $.27 per share, which was recorded as income in the
first quarter of this year. Additionally, Alcon will pay Bausch &
Lomb a stream of royalties over the next eight years for a
worldwide license under Bausch & Lomb's patent for the
simultaneous use of a chemical disinfecting solution with an
enzyme cleaning product for contact lens care.
LIQUIDITY AND FINANCIAL RESOURCES
Cash Flows From Operating Activities
Cash provided by operating activities was $67 through the first
quarter of 2000, compared to $16 for the same 1999 period. For
2000, lower inventory and receivables of the continuing
businesses contributed to the improvement.
Cash Flows From Investing Activities
Cash provided by investing activities was $90 through the first
quarter of 2000 versus $91 for the comparable period in 1999.
Proceeds from the redemption of securities accounted for most of
the cash from investing activities. Capital spending of $15,
which decreased $22 compared to the prior year period, is
expected to be approximately $135 for 2000.
Cash Flows From Financing Activities
Through the first three months of 2000, $257 was used in
financing activities primarily to repurchase Common shares. Using
the cash generated from the 1999 divestitures, the company has
repurchased 4,978,752 shares through March 25, 2000 and expects
the remaining 114,000 shares to be repurchased in the second
quarter. In the comparable 1999 period, $48 was used in financing
activities, due mostly to net repayments of notes payable.
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 three months of
2000 was $29, an improvement of $56 from the prior year period.
The increase is due mostly to the operational cash flow factors
described above.
Financial Position
The company's total debt, consisting of short- and long-term
borrowings, was $1,016 at the end of the first quarter of 2000,
down $8 from year-end 1999 and lower than the March 1999 amount
by $404. The ratio of total debt to capital increased to 50.2% at
the end of the first quarter of 2000 versus 45.3% at the end of
1999. The increase in this ratio is primarily due to a reduction
in shareholders' equity that resulted from the share repurchase
program.
Cash and cash equivalents totaled $724 and $186 at the end
of the first quarters of 2000, and 1999, respectively, and $827
at the end of 1999. The increase in cash over first quarter 1999
is primarily due to the proceeds from the sunglass and healthcare
divestitures. The decrease from year-end is primarily related to
the share repurchase program partially offset by the liquidation
of the short-term portion of a long-term investment.
Access to Financial Markets
The company maintains 364-day bilateral revolving credit
agreements totaling $500. The interest rate under these
agreements is based on LIBOR, or at the company's option, such
other rate as may be agreed upon by the company and the bank. No
debt was outstanding under these agreements at March 25, 2000. In
addition, the company maintains other lines of credit on which it
may draw to meet its financing requirements. The company believes
its existing credit facilities provide adequate liquidity to meet
obligations, fund capital expenditures and invest in potential
growth opportunities.
Bausch & Lomb was placed on credit watch with negative
implications by Moody's and Standard & Poor's in response to its
potential acquisition of Wesley Jessen VisionCare, Inc.
Working Capital
Working capital was $969 and $917 at the end of the first
quarters of 2000 and 1999, respectively. At year-end 1999,
working capital was $1,191. The decline since year end 1999 is
due primarily to the repurchase of Common stock as discussed
previously. The current ratio was 2.6 and 2.2 at the end of March
2000 and March 1999, respectively, and 2.9 at year-end 1999.
OTHER FINANCIAL DATA
Dividends declared on common stock were $0.26 per share in the
first quarters of both 2000 and 1999. The return on average
shareholders' equity was 41.5% and 8.4% for the twelve-month
periods ended March 25, 2000 and March 27,1999, respectively.
This increase primarily reflects the gain on divestiture from
both the sunglass and healthcare businesses recorded in 1999.
RISKS ASSOCIATED WITH Y2K
As stated in previous reports, the company established a formal
program to assess and renovate internal information technology
("IT") and non-information technology ("non-IT") operations that
were identified as being at risk with regard to the year 2000
date issues, and further to evaluate the readiness of key third
party suppliers of products, services, materials or data. The
company experienced only limited minor incidents due to the date
changeover, none of which affected its operations, products or
services in a material way. Year 2000 costs, comprised of both
period expenses and capital expenditures, of identifying and
remediating year 2000 issues is expected to be approximately $53,
of which approximately $52 has been spent to date. The remaining
amount is expected to be spent during the first two quarters of
2000 as final year 2000 related programs are completed. Of the
total anticipated costs, approximately 80% is expected to be
capitalized as a part of system upgrades and replacements. The
company will continue to monitor both its IT and no-IT systems
for year 2000 issues as the year progresses. Contingency plans
deemed necessary for critical systems and for addressing a
potential failure of a key customer or supplier have been
completed. The estimated costs of remediation and other
information described above are based on information available at
this time and may be updated as additional information becomes
available. Readers are referred to the section of this filing
labeled "Information Concerning Forward-Looking Statements" which
address forward-looking statements made by the company.
THE EURO
On January 1, 1999, 11 of the 15 member countries of the European
Union began operating with a new currency, the euro, which was
established by irrevocably fixing the value of legacy currencies
against this new common currency. The euro may be used in
business transactions along with legacy currencies until 2002, at
which time it will become the sole currency of the participating
countries.
The company has processes in place to address the issues
raised by this currency conversion, including the impact on
information technology and other systems, currency risk,
financial instruments, taxation and competitive implications. The
company expects no material impact to its financial position or
its results of operations arising from the euro conversion.
SIGNIFICANT EVENTS
Bausch & Lomb commenced a tender offer on Monday, April 3, 2000
for all of the outstanding shares of Wesley Jessen VisionCare,
Inc. (Nasdaq: WJCO) at a price of $34 per share in cash, with a
total cash transaction cost of approximately $692 million. This
price represents a premium of 37 percent over Wesley Jessen's
closing price on March 22, 2000, the day before Bausch & Lomb
announced its acquisition proposal. If the tender offer is
completed, Bausch & Lomb intends to acquire any shares not
purchased in the offer at the same cash price paid in the tender
offer. The tender offer, which is subject to a number of
conditions, is not subject to any financing conditions.
OUTLOOK
The company expects to continue to generate solid growth over the
remainder of 2000. In its 1999 Form 10-K, the company indicated
that actual dollar revenues would grow in the upper single digits
and operating margins would improve by 20% or more. These
projections assumed that foreign currency exchange rates remained
fairly stable with year-end 1999 levels. The company believes
that operating results on a constant dollar basis will be in line
with its original guidance. As previously discussed, changes in
foreign currency exchange rates impacted first quarter 2000
results negatively. If rates remain at present levels, the
company estimates that full year actual dollar revenues will grow
in the mid-single digits and operating margins will be in the
upper teens, with these results partially mitigated by foreign
exchange income generated by the judicious use of hedging
contracts.
In the vision care segment, revenues are expected to grow
modestly in the second quarter and to accelerate in the third and
fourth quarters. These trends will result from an expected
rebalancing of lens care product inventories in the U.S. retail
market and a return of lens care revenues to modest growth in the
second half of the year. They will also be driven by the
continued success of new products in the contact lens business,
including the second quarter launch of the company's newest
offering, Bausch & Lomb Two-Week, a single vision spherical
contact lens to be marketed for two-week replacement. Depending
on the full year impact of currency changes, the segment should
end the year with revenue growth in the range of 6-8%.
In the pharmaceuticals segment, the U.S. business is
expected to generate modest growth for the full year from the
continued success of the company's proprietary products, such as
Lotemax and Alrex, as well as newer generic products. The
company's non-U.S. pharmaceuticals business is concentrated
primarily in Europe, where the first-quarter decline in the euro
had a significant negative impact on reported results. Should
foreign currency rates remain at their present levels or decline
further, non-U.S. results could more than offset the growth in
the U.S. business.
The surgical segment is expected to post revenue growth in
the low to mid-teens, driven by the continued strong results for
products used in refractive surgery. Based on the strong response
to the company's Technolas 217 laser in the U.S. in February, the
remainder of the year should benefit from incremental revenues
from per procedure fees as well as from the sale of lasers. The
company estimates that approximately $10 million of such revenues
incremental to its original guidance will be generated in 2000.
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 vision care and ophthalmic
surgical and pharmaceutical markets, where the company's
businesses compete, changes in global and localized economic and
political conditions (for example, the company does business in
Asia and Brazil, where, recently, economies and associated
currency risks have been volatile), changing trends in
practitioner and consumer preferences and tastes, changes in
technology, medical developments relating to the use of the
company's products, 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, regulatory approval or marketing of products, 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 1999 Annual Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
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
A report on Form 8-K describing a letter sent by Bausch &
Lomb to Wesley Jessen VisionCare, Inc. proposing to
acquire Wesley Jessen for $34 per share in cash, for an
equity value of approximately $600 million, attaching
copies of two related press releases and related remarks
of Mr. William M. Carpenter, Chairman and Chief Executive
Officer of Bausch & Lomb, was filed by the company on
March 23, 2000.
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: May 4, 2000 By:
Robert B. Stiles
Senior Vice President
and General Counsel
Date: May 4, 2000 By:
Stephen C. McCluski
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
S-K Item 601 No. Document
(3)-a Certificate of Incorporation of Bausch & Lomb
Incorporated (filed as Exhibit (3)-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).
(3)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-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).
(3)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-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).
(3)-d By-Laws of Bausch & Lomb Incorporated, as
amended, effective October 26, 1998 (filed as
Exhibit (3)-a to the company's Form 10-Q for the
quarter ended September 26, 1998, File No. 1-
4105, and incorporated herein by reference).
(4)-a See Exhibit 3(a).
(4)-b See Exhibit 3(b).
(4)-c See Exhibit 3(c)
(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 Supplemental Indenture No. 1, dated May 13,
1998, between the company and Citibank, N.A.
(filed as Exhibit 3.1 to the company's Current
Report on Form 8-K, dated July 24, 1998, File
No. 1-4105, and incorporated herein by
reference).
(4)-f Supplemental Indenture No. 2, dated as of July
29, 1998, between the company and Citibank N.A.
(filed as Exhibit 3.2 to the company's Current
Report on Form 8-K, dated July 24, 1998, File
No. 1-4105, and incorporated herein by
reference).
(11) Statement Regarding Computation of Per Share
Earnings (filed herewith).
(27) Financial Data Schedule (filed herewith).
Bausch & Lomb Incorporated
Exhibit 11
Statement Regarding Computation of Per Share Earnings
(Share Amounts in Thousands Except Per Share Data)
Three Months Ended
March 25, March 27,
2000 1999
Net Earnings (in millions) (a) $ 39.1 $ 22.4
Actual outstanding Common and
Class B shares at beginning of 57,376 56,529
period
Sum of weighted average activity
of Common and Class B shares
issued for stock options,
restricted stock awards and
cancellations, and net activity of
shares held in deferred
compensation plan (684) 195
Weighted Basic Shares (b) 56,692 56,724
Effect of assumed exercise of
Common stock equivalents 846 1,338
Weighted diluted Shares (c) 57,538 58,062
Basic earnings per share (a/b) $0.69 $0.39
Diluted earnings per share (a/c) $0.68 $0.39
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