-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BScYtCAHBU4BLBGNfP1m5wXpnpmZO7P9UaY3Pmj4Jii80mO/satq4/O5/TPp4g8j 6zhu47uCCKNKFfEetn9DlQ== /in/edgar/work/0000010427-00-000038/0000010427-00-000038.txt : 20001108 0000010427-00-000038.hdr.sgml : 20001108 ACCESSION NUMBER: 0000010427-00-000038 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000923 FILED AS OF DATE: 20001107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAUSCH & LOMB INC CENTRAL INDEX KEY: 0000010427 STANDARD INDUSTRIAL CLASSIFICATION: [3851 ] IRS NUMBER: 160345235 STATE OF INCORPORATION: NY FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04105 FILM NUMBER: 754833 BUSINESS ADDRESS: STREET 1: BAUSCH & LOMB INCORPORATED STREET 2: ONE BAUSCH & LOMB PLACE CITY: ROCHESTER STATE: NY ZIP: 14604-2701 BUSINESS PHONE: 7163386000 MAIL ADDRESS: STREET 1: ONE BAUSCH & LAMB PLACE STREET 2: P O BOX 54 CITY: ROCHESTER STATE: NY ZIP: 14604-2701 10-Q 1 0001.txt 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 September 23, 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 September 23, 2000 was 53,353,079, consisting of 52,946,477 shares of Common stock and 406,602 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 unaudited interim consolidated financial statements. BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES STATEMENTS OF INCOME Third Quarter Nine Months Ended Ended Dollar Amounts In Millions - Sept. 23, Sept. 25, Sept. 23, Sept. 25, Except Per Share Data 2000 1999 2000 1999 Net Sales $440.9 $446.3 $1,300.6 $1,289.5 Costs And Expenses Cost of products sold 178.3 176.3 540.9 516.3 Selling, administrative and general 172.0 167.8 510.4 519.0 Research and development 28.1 26.8 81.6 72.7 Purchased in-process research and development 23.8 - 23.8 - Restructuring reserve adjustment (2.1) - (2.1) - Other expense - - 8.4 - 400.1 370.9 1,163.0 1,108.0 Operating Income 40.8 75.4 137.6 181.5 Other (Income) Expense Interest and investment income (14.0) (9.5) (42.9) (27.6) Interest expense 16.6 20.7 50.8 69.0 (Gain) Loss from foreign currency, net (3.0) 1.6 (10.3) (5.0) Other income - (6.7) (23.6) (6.7) (0.4) 6.1 (26.0) 29.7 Income From Continuing Operations Before Income Taxes And Minority Interest 41.2 69.3 163.6 151.8 Provision for income taxes 23.1 25.0 66.5 54.6 Income From Continuing Operations Before Minority Interest 18.1 44.3 97.1 97.2 Minority interest in subsidiaries 3.4 2.7 8.6 11.7 Income from Continuing Operations 14.7 41.6 88.5 85.5 Discontinued Operations Income from discontinued operations, net of tax - 8.4 - 34.0 Gain on disposals of discontinued operations, net of tax - 181.8 - 308.1 14.7 190.2 88.5 342.1 Net Income $ 14.7 $231.8 $ 88.5 $ 427.6 Basic Earnings Per Share: Continuing Operations $ 0.28 $ 0.72 $ 1.63 $ 1.49 Discontinued Operations - 3.31 - 5.99 $ 0.28 $ 4.03 $ 1.63 $ 7.48 Diluted Earnings Per Share: Continuing Operations $ 0.27 $ 0.71 $ 1.60 $ 1.46 Discontinued Operations - 3.23 - 5.83 $ 0.27 $ 3.94 $ 1.60 $ 7.29 Average Shares Outstanding - Basic (000s) 53,363 57,477 54,400 57,198 Average Shares Outstanding - Diluted (000s) 53,942 58,862 55,166 58,695 See Notes to Financial Statements
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES BALANCE SHEET September 23, December 25, Dollar Amounts In Millions 2000 1999 ASSETS Current Assets Cash and cash equivalents $ 628.2 $ 827.1 Other investments, short-term 56.9 125.0 Trade receivables, less allowances of $23.1 and $19.6, respectively 439.7 438.0 Inventories, net 234.4 239.6 Other current assets 184.6 156.0 Net assets held for disposal, short- term 2.3 24.6 1,546.1 1,810.3 Property, Plant And Equipment, net 510.5 524.8 Goodwill And Other Intangibles, less accumulated amortization of $159.7 and $129.3, respectively 775.9 606.8 Other Investments 98.1 173.8 Other Assets 179.7 153.1 Net Assets Held For Disposal, long-term 3.1 4.7 Total Assets $3,113.4 $3,273.5 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accrued liabilities $ 335.6 $ 356.0 Federal, state and foreign income taxes payable 73.6 47.3 Accounts payable 67.8 94.8 Accrued compensation 79.5 74.6 Notes payable 40.6 45.9 Current portion of long-term debt 206.7 1.0 803.8 619.6 Long-Term Debt, less current portion 779.9 977.0 Deferred Income Taxes 171.6 117.7 Other Long-Term Liabilities 91.7 99.6 Minority Interest 225.1 225.6 Total Liabilities 2,072.1 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, 614,284 and 613,324 shares Issued, respectively - - Capital in excess of par value 92.3 89.6 Common and Class B stock In treasury, at cost, 7,459,527 and 3,435,738 shares, respectively (377.0) (150.1) Retained earnings 1,314.8 1,268.4 Accumulated other comprehensive income (5.0) 9.0 Other shareholders' equity (7.9) (7.0) Total Shareholders' Equity 1,041.3 1,234.0 Total Liabilities And Shareholders' Equity $3,113.4 $3,273.5 See Notes To Financial Statements
BAUSCH & LOMB INCORPORATED AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CASH FLOWS Nine Months Ended September 23, September, 25, Dollar Amounts In Millions 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 88.5 $427.6 Adjustments to reconcile net income to net cash provided by (used in) operating activities Gain on divestitures - (475.0) Depreciation 77.2 82.0 Amortization 31.0 34.0 Restructuring reserve adjustment (2.1) - Purchased in-process research and development 23.8 - Change in deferred income taxes 2.9 129.1 Loss on retirement of fixed assets 8.3 1.1 Changes in assets and liabilities: Trade receivables (3.3) (59.7) Inventories 17.9 (24.5) Other current assets (27.9) (45.1) Accounts payable and accruals (2.2) 6.7 Income taxes 28.1 79.7 Other long-term liabilities (21.0) (4.0) Net cash provided by operating activities 221.2 151.9 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (60.8) (102.0) Net cash paid for acquisition of businesses (208.8) (43.1) Net cash received from divestitures - 1,048.5 Proceeds from liquidation of other investments 171.8 300.0 Other (46.0) 11.2 Net cash (used in) provided by investing activities (143.8) 1,214.6 CASH FLOWS FROM FINANCING ACTIVITIES Purchase of additional interest in partnership - (400.0) Proceeds from third-party investor for partnership interest - 200.5 Repurchase of Common and Class B shares (251.1) (13.5) Exercise of stock options 26.8 55.3 Net repayments of notes payable (4.6) (342.2) Net proceeds from long-term debt 9.1 - Payment of dividends (43.3) (42.2) Net cash used in financing activities (263.1) (542.1) Effect of exchange rate changes on cash and cash equivalents (13.2) (2.5) Net (decrease) increase in cash and cash equivalents (198.9) 821.9 Cash and cash equivalents - beginning of period 827.1 129.2 Cash and cash equivalents - end of period $628.2 $951.1 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 68.2 $ 77.1 Income taxes $ 49.4 $ 42.5 See Notes To Financial Statements
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: September 23, December 25, 2000 1999 Raw materials and supplies $ 63.1 $ 54.0 Work in process 21.9 15.9 Finished products 149.4 169.7 $234.4 $239.6
NOTE B: Property, Plant And Equipment Major classes of property, plant and equipment consisted of the following: September 23, December 25, 2000 1999 Machinery and equipment $ 796.7 $ 772.1 Buildings 225.7 212.8 Leasehold improvements 30.3 35.2 Land 15.1 12.0 1,067.8 1,032.1 Less: Accumulated depreciation (557.3) (507.3) $ 510.5 $ 524.8
NOTE C: Comprehensive Income The components of the company's total comprehensive income were: Three Months Nine Months Ended Ended Sept. 23, Sept. 25, Sept. 23, Sept. 25, 2000 1999 2000 1999 Net income $14.7 $231.8 $88.5 $427.6 Foreign currency translation adjustments (19.0) (5.4) (38.0) (39.5) Unrealized holding gains on available for sale security, net of taxes 24.1 - 24.1 - Total Comprehensive Income $19.8 $226.4 $74.6 $388.1
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: Vision Other/ Care Administrive Total Provisions 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 (10.4) (0.6) (11.0) Restructuring reserve adjustment (2.1) - (2.1) Remaining reserve at September 23, 2000 $ 13.6 $ 3.1 $ 16.7
The restructuring program within the vision care segment is focused on the elimination of certain contact lens manufacturing platforms that employ less cost-effective technologies. The programs included under other/administrative are focused primarily on further reducing overhead costs throughout the company. The plan was adopted and announced and all major actions in this restructuring plan were implemented in the fourth quarter of 1999 and it is anticipated that they will be completed by December 2000. The restructuring programs will result in the termination of approximately 1,000 employees. Terminations in the vision care segment include 810 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 September 23, 2000, 478 employees have been involuntarily terminated under this restructuring plan with $12.0 of related costs being charged against the liability. During the third quarter of 2000, the company reduced the 1999 reserve by a net amount of $2.1. The company reversed approximately $3.5 of severance related costs that are not required. The reversal is primarily the result of the expansion of vision care manufacturing operations required to meet unplanned market demand for new products and lower outplacement costs. The company increased the reserve in the third quarter of 2000 by $1.4 for severance expenses associated with additional actions announced in August. These actions were the result of achieving greater efficiencies due to the operational restructuring in the U.S. The job classifications and location of employees impacted were identical to those that were identified at the time the initial reserve was established. All actions related to the 1999 program will be completed in the fourth quarter and remaining reserves, if any, will be reversed. In addition to employee terminations, the 1999 Program 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: Employee Severance and Facilities Contract Relocation Closure Costs Terminations Total 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 (2.1) (0.4) - (2.5) Non-cash items - - - - Balances at September 23, 2000 $ 2.6 $1.1 $ - $ 3.7
The costs of employee terminations related to 596 employees in production, R&D, selling and administration. During the first nine months of 2000, 33 employees were terminated. During 1999 and 1998, 384 and 100 employees were terminated, respectively. The remaining 79 are expected to be terminated in 2000 and are comprised of 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 completed in 2000. Involuntary termination benefits of $18.1 were accrued in 1998. Amounts paid and charged against the liability were $2.0 in the first nine months 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 purposes with operating earnings being the primary measure of segment profitability. Certain distribution and general and administrative expenses, including some centralized services, are allocated among 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 and over-the-counter (OTC) products with an emphasis on 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 September 23, 2000 and September 25, 1999. The company does not have material intersegment sales. Other significant charges consisted of a charge for $23.8 for purchased in-process research and development and a purchase accounting inventory adjustment of $1.0. Both adjustments related to the Groupe Chauvin acquisition. The restructuring reserve adjustment is described in Note D: Restructuring and Exit Activities and other expense is described in Note F: Other Expense. Third Quarter 2000 1999 Net Operating Net Operating Sales Earnings Sales Earnings Vision Care $260.6 $60.6 $265.1 $58.2 Pharmaceuticals 68.7 2.6 74.4 15.1 Surgical 111.6 10.6 106.8 16.2 440.9 73.8 446.3 89.5 Corporate administration - (10.3) - (14.1) Purchase accounting adjustments - (24.8) - - Restructuring reserve adjustment - 2.1 - - $440.9 $40.8 $446.3 $75.4
Nine Months Ended September 23, 2000 September 25, 1999 Net Operating Net Operating Sales Earnings Sales Earnings Vision Care $ 749.8 $143.0 $ 758.9 $139.8 Pharmaceuticals 206.5 24.5 219.0 48.3 Surgical 344.3 40.5 311.6 41.0 1,300.6 208.0 1,289.5 229.1 Corporate administration - (39.3) - (47.6) Purchase accounting adjustments - (24.8) - - Restructuring reserve adjustment - 2.1 - - Other expense - (8.4) - - $1,300.6 $137.6 $1,289.5 $181.5
NOTE F: Other Expense Other expense of $8.4 for the nine months ended September 23, 2000 consists of direct and incremental costs of $3.7 related to the proposed acquisition of Wesley Jessen VisionCare, Inc. and $4.7 related to the settlement of litigation, Both charges were reported in the second quarter. Bausch & Lomb commenced a cash tender offer for all of the outstanding shares of Wesley Jessen VisionCare, Inc. for approximately $692 on April 13, 2000. The company subsequently increased the tender offer to $723 on May 9, 2000. On May 30, 2000, the company withdrew its offer to acquire Wesley Jessen due to a competing, and significantly higher, offer by the eye-care unit of Novartis. The direct and incremental costs associated with the proposed combination consist of fees of $3.7 paid to outside legal and financial advisors. The litigation settlement is related to a consumer class action lawsuit dating back to 1995 concerning the marketing and labeling of certain of the company's lens care and eye care solutions. While the company continues to believe its previous marketing of these products was appropriate, it chose to settle the matter rather than continue to expend valuable time and resources in multi-year litigation. The settlement was formally approved at a fairness hearing held on September 13, 2000. The charge represents the cost of attorney's fees and the estimated liability for the redemption of coupons to be placed in product packages under the settlement. NOTE G: Discontinued Operations During fiscal 1999, the company completed the sale of its sunglass business to Luxottica Group S.p.A for $636.0 in cash. The company recorded an after-tax gain on the disposal of discontinued operations of $126.3 or $2.16 per diluted share. Luxottica Group S.p.A. has proposed certain adjustments to the closing balance sheet in connection with their purchase that could potentially impact the resulting gain on the sale. It is too early to estimate with any certainty the potential adjustment, if any, to the gain. The company does not believe that the outcome of these proceedings will have a material adverse effect on its financial condition. NOTE H: Minority Interest The minority interest in subsidiaries primarily represents the outside partnership interest in Wilmington Partners L.P. (the Partnership). The partnership interests are held by four wholly owned subsidiaries of the company along with an outside partner holding a 22% interest. The Partnership is a separate legal entity from the company, but for financial reporting purposes, assets, liabilities and earnings from the Partnership are included in the company's consolidated financial results. The outside investor's limited partnership interest is recorded as minority interest in the company's consolidated financial statements. NOTE I: Acquisition On August 8, 2000, Bausch & Lomb completed the acquisition of a European-based ophthalmic pharmaceuticals company headquartered in Montpellier, France, and several related companies collectively referred to as Groupe Chauvin, for approximately $213.0 million net of cash acquired and including acquisition costs. Groupe Chauvin manufactures and markets prescription and over- the-counter ophthalmic pharmaceutical and surgical products to treat a number of eye conditions, including glaucoma, ocular inflammation, allergies, cataracts and dry eye. Combined, the companies have annual sales of nearly $100 million, employ nearly 800 people, and have operations in France, Germany, the U.K., Switzerland, the Benelux countries, and Portugal. This acquisition makes Bausch & Lomb one of the leading full-line ophthalmic pharmaceutical companies in Europe. The acquisition will allow the company to expand its pharmaceuticals presence outside of the U.S. and Germany, and give it a framework to extend the distribution of its current ophthalmic products to a broader geographic base. In addition, the marketing, distribution, regulatory and clinical capabilities gained through the transaction will be attractive to new technology partners and will enable Bausch & Lomb to more rapidly commercialize in Europe innovative products now in development, including those that incorporate Envision TD(TM) technology for treating back-of-the-eye diseases. Bausch & Lomb financed the acquisition through the use of a portion of its cash reserves generated offshore. The acquisition is expected to be dilutive to earnings by $.06 to $.07 in each of the next three quarters and turn accretive thereafter, excluding one-time customary purchase accounting adjustments recorded in the third quarter. A preliminary valuation of the assets acquired has been completed and in connection with an integration plan will be finalized in the fourth quarter. The acquisition was accounted for as a purchase, whereby the purchase price, including acquisition costs, was allocated to identified assets, including tangible and intangible assets, purchased in-process research and development and liabilities based upon their respective fair values. The company recorded purchased in-process research and development expense of $23.8. The excess of the purchase price over the value of identified assets and liabilities was recorded as goodwill. Identified goodwill and intangibles will be amortized on a straight line basis over lives ranging between twenty and thirty years. NOTE J: Other Investments, Short-Term Under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, certain investments are classified as available-for-sale. Accordingly, unrealized holding gains and losses, net of taxes, are excluded from income and recognized as a component of accumulated other comprehensive income. Fair value of these investments is determined based on market prices. At the end of the third quarter, the company owned common stock in Charles River Laboratories, Inc. which represents the retention of a minority equity interest from the sale of the Charles River Laboratories business during the prior year, as reported in the company's Form 10-K for the year ended December 25, 1999. The investment was valued at $57 at the end of the third quarter. A resulting unrealized holding gain, net of taxes, of $24 for the quarter was recorded as reflected in Note C: Comprehensive Income. The company is restricted from trading the stock until the beginning of the fiscal year 2001. NOTE K: New Accounting Pronouncements During May 2000, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 00-14, "Accounting for Certain Sales Incentives". EITF No. 00-14 addresses the classification of various sales incentives and will be effective for the fourth quarter of 2000. In July 2000, the EITF issued EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs". EITF No. 00-10 addresses the income statement classification of amounts charged to customers for shipping and handling and will be effective for the fourth quarter of 2000. The company has determined that the adoption of EITF Issue No. 00-14 and No. 00-10 will have no material effect on its financial position. The company is in the process of determining the potential effect on its statements of income presentation and upon adoption, if necessary, previously issued financial statements may need to be restated to conform to the new presentation. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements", which summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The SEC delayed the date by which registrants must apply the accounting and disclosures described in SAB No. 101 until the fourth quarter of 2000. Management believes the company's revenue recognition policies comply with the guidance contained in SAB 101 and, therefore, the company's results of operations will not be materially affected. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This standard was amended by Statement of Financial Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133" and changed the effective date for SFAS 133 to all fiscal quarters of fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS 133". SFAS 133 (as amended by SFAS 138) requires that all derivative instruments be recorded on the balance sheet at their respective fair values. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on the designation of the hedge transaction. The company will adopt SFAS 133 (as amended by SFAS 138) in the first quarter of 2001 and is still evaluating the effect on the company's financial position. NOTE L: Subsequent Event Subsequent to the close of the third quarter, the company announced a new organizational structure intended to more fully realize the operational and commercial synergies that exist among its eye-care product lines, enhance responsiveness to its customers and increase shareholder value. At the core of the company's initiative is the designation of regional managers who will be responsible for the commercial operations of all of the company's businesses within specified markets, and the centralization of the product development and product supply functions. The regional management of commercial operations will enable the company to move key decisions to a level that is closer to the customer. Management of the product development and product supply functions on a company-wide basis is expected to maximize the utilization of resources and expertise across all product lines. The changes will result in the elimination of redundant support functions and overhead, providing the opportunity to achieve significant cost savings. The company has identified approximately $20-30 million in annualized cost savings to be achieved through the elimination of approximately 450 non-manufacturing positions over the next several months, primarily in its North American facilities. The cost of implementing these initiatives is estimated to be $30-35 million primarily severance related to the terminations, and will be recorded as a charge in the fourth quarter. 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 excludes the discontinued businesses. 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 third quarter and nine months ended September 23, 2000 were $440.9 and $1,300.6, respectively. Net sales decreased 1% for the quarter and increased 1% year to date over the prior year. On a constant dollar basis (excluding the effect of foreign currency exchange rates) revenue increased 2% and 3% for the quarter and nine month periods, respectively. Vision care and pharmaceuticals segment revenues decreased as compared to the prior year for both the quarter and year to date. Surgical segment revenue increased both for the quarter and year to date. Vision Care Segment Revenues Revenues in this segment were $260.6 for the third quarter of 2000, a decrease of 2% compared to the same period last year. In constant dollars, sales were flat as compared to the same period last year. Contact lenses comprised 50% of revenues, with combined lens care and vision accessories making up the remaining 50% of third quarter revenues. In the third quarter of 1999, this mix was 46% lens and 54% lens care and vision accessories. Contact lens revenues increased 6% over the third quarter of 1999, driven by double-digit growth in the company's planned replacement and disposable lenses. These gains were partially offset by declines in older product offerings. Contact lens revenues in the U.S. were up 14%, driven by continued strong growth in sales of SofLens66 toric and PureVision, the company's newer products, and a strong launch of the Bausch & Lomb Two Week lens. Non-U.S. sales of contact lenses grew 2% in the third quarter. Gains in Asia were partially offset by modest declines in European lens revenues primarily due to the continued weakening of the Euro. Lens care and vision accessories revenues decreased 8% from the prior-year quarter. U.S. sales of lens care and vision accessories products decreased 13% for the quarter. These declines were driven by market dynamics, where the company's retail customers' reductions in inventory-carrying requirements continued to negatively impact buying patterns. Outside the U.S., lens care and vision accessories revenues were flat for the quarter. Year to date, vision care revenues decreased 1% in actual and constant dollars, reflecting the decreased sales for both lens care and vision accessories products offset by the strong performance of the company's new contact lens products. Pharmaceuticals Segment Revenues Revenues in this segment were $68.7 for the third quarter, a decrease of 8% from the same period last year. Excluding the impact of currency, revenues were down 1% compared to the third quarter of the prior year. In the U.S., pharmaceutical revenues were down 20% for the quarter and 9% year to date. These results reflect higher sales of Lotemax and Alrex, the company's proprietary ophthalmic anti-inflammatory drops, which were more than offset by revenue declines in the company's lines of generic ear drops and multi-source ophthalmic products, resulting from significantly intensified competitive pricing pressures. Outside the U.S., pharmaceuticals sales were up 20% for the quarter and were flat year to date. These results reflect incremental revenues from the acquisition of Groupe Chauvin. The company's Dr. Mann Pharma subsidiary in Germany had a slight increase in sales over the prior year quarter which was more than offset by the impact of currency exchange rates. For the year to date period, total segment sales were down 6% and 1% in constant dollars. Surgical Segment Revenues Revenues from the company's surgical business for the third quarter of 2000 were $111.6, a 4% increase over the same period in 1999. On a year to date basis, total surgical revenues increased 11%. Excluding the impact of currency, revenues increased 9% for the quarter and 14% year to date. Revenues in the U.S. surgical business were flat compared to the prior year third quarter with strong growth in sales of refractive surgery products offset by declines in sales of products for cataract surgery. Year to date revenues in the U.S. increased 6% over the prior year. Outside the U.S., sales grew 11% for the quarter and 18% on a year to date basis. Increased sales of cataract products and products for refractive surgery were partially offset by the weakening Euro and delays in installation of lasers at customers' locations during the third quarter. Net Sales By Geographic Region Sales in markets outside the U.S. totaled $217 in the third quarter of 2000, an increase of $11 or 5% compared with the 1999 period, and represented approximately 49% of consolidated revenues in 2000 and 46% in 1999. These amounts include incremental revenue of $8 as a result of the acquisition of Groupe Chauvin in the current quarter. Excluding the impact of currency, revenues increased 12%. Year to date, sales totaled $629, an increase of 5% (9% in constant dollars). Non-U.S. sales as a percentage of consolidated revenues on a year to date basis were 48% as compared to 46% in 1999. Third quarter sales in the Asia-Pacific region increased 14% versus 1999. In constant dollars, sales increased by 12%. This increase was primarily due to Japan where revenues were $57 for the quarter, an increase of 21% over 1999 or 17% in constant dollars. Revenues in Europe continued to remain flat versus 1999, but increased 13% on a constant dollar basis. U.S. sales totaled $224 in the third quarter, a decrease of $16 or 7% from the comparable period in 1999. For the year, sales decreased $20 or 3% from 1999. Costs & Expenses and Operating Earnings Amounts in this section are calculated on a "management basis" and comparisons to 1999 exclude discontinued operations, restructuring charges and asset write-offs, acquisition costs and other non-recurring items. The ratio of costs of products sold to sales was 40.2% during the third quarter of 2000, versus 39.5% for the same period of 1999. For the nine-month period, this ratio was 41.5% in 2000 compared to 40.0% in 1999. The majority of the margin decline from the prior year quarter is a result of negative currency trends. Margins have also been impacted by price declines in the U.S. generic pharmaceutical business as a result of intense competitive activity. These trends were largely offset by significantly improved margins in the vision care business, resulting from cost savings that were realized from the company's initiatives to consolidate contact lens manufacturing. Selling, administrative and general expenses, including corporate administration, were 39.0% of sales in the third quarter of 2000 compared to 37.6% in 1999, reflecting higher marketing and administrative expenses associated with new product launches in the vision care business. Year to date, these expenses were 39.2% versus 40.3%. The decrease is due to lower administrative expenses in the vision care and pharmaceuticals businesses, respectively. Research and development expenses totaled $28 in the third quarter of 2000, an increase of $1 over 1999. This represented 6.4% of sales in 2000, up from 6.0% in 1999. Year to date, the ratio was 6.3% versus 5.6% in 1999. This increase in research and development as a percentage of sales is in line with previous projections and is primarily related to investments to develop the implant technology for treating back of the eye disease. Operating earnings for the third quarter of 2000 decreased $12, to $64, a 16% decrease from the prior year period. The quarterly decrease in profitability was driven by price declines in certain pharmaceutical products, higher spending on marketing and advertising on new products, increased spending on research and development and the negative impact of currency. This decrease was mitigated by cost savings from restructuring in the vision care business. Year to date, operating earnings of $169 were down 7% as compared to 1999. Other Income And Expenses Income from investments totaled $14 for the third quarter of 2000, an increase of $4 compared to the same period in 1999. Higher average investment balances and interest rates in the current year were the reasons for this increase. Interest expense of $17 decreased $4 compared to the same period in 1999. The lower level of short-term debt due to cash proceeds from divestitures of the sunglass and healthcare businesses in 1999 was the primary driver of this variance. Foreign currency gains of $3 during the third quarter of 2000 increased as compared to the prior year period loss of $2. LIQUIDITY AND FINANCIAL RESOURCES Cash Flows From Operating Activities Cash provided by operating activities was $221 through the third quarter of 2000, compared to $152 for the same 1999 period. For 2000, decreases in inventory and the timing of collections of receivables contributed to the increase. This was partially offset by a decrease in other long-term liabilities. For 1999, tax deferrals associated with the refinancing of Wilmington Partners L.P. and increased profitability contributed to the positive cash flow. This was partially offset by increases in inventory and receivables. Cash Flows From Investing Activities Cash used in investing activities was $144 through the third quarter of 2000 versus $1,215 provided by investing activities for the comparable period in 1999. In the current year, cash used to acquire Groupe Chauvin was partially offset by the proceeds from the liquidation of short-term investments. The prior year proceeds were related to divestitures of certain businesses. Capital spending of $61, which decreased $41 compared to the prior year period, is expected to be approximately $100 for 2000. Cash Flows From Financing Activities Through the first nine months of 2000, $263 was used in financing activities, primarily to repurchase Common shares. Using the cash generated from the 1999 divestitures, the company repurchased approximately 5,100,000 shares through the third quarter of the current year. The program has reached its completion as all shares authorized have been repurchased. In the comparable 1999 period, $542 was used in financing activities, primarily related to repayment of notes payable and transactions involving Wilmington Partners L.P. 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 nine months of 2000 was $101, an improvement of $43 from the prior year period. The increase is due mostly to the operational cash flow factors described above, decreases in expenditures for property, plant and equipment and the proceeds from a patent litigation settlement with Alcon Laboratories as previously reported in the report on Form 10-Q for the quarter ended March 25, 2000. The Cash Flow Statement also reflects changes in asset and liability levels due to the divested eyewear and healthcare businesses in the prior year. Financial Position The company's total debt, consisting of short- and long-term borrowings, was $1,027 at the end of the third quarter of 2000, up $3 from year-end 1999 and lower than the September 1999 amount by $101. The ratio of total debt to capital was 49.7% at the end of the third quarter of 2000 compared to 45.3% at the end of 1999 and 47.5% at September 1999. The ratio decreased from September 1999 to December 1999 due to a reduction of debt levels using cash generated from divestitures. The increase from December 1999 to September 2000 is primarily due to a reduction in shareholders' equity that resulted from the share repurchase program. Cash and cash equivalents totaled $628 and $951 at the end of the third quarters of 2000 and 1999, respectively, and $827 at the end of 1999. The decrease in cash is primarily due to the acquisition of Groupe Chauvin and the share repurchase program partially offset by the liquidation of a short-term investment. Access to Financial Markets The company maintains 364-day bilateral revolving credit agreements totaling $525. 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 banks. No debt was outstanding under these agreements at September 23, 2000. These facilities will expire during the fourth quarter; the company anticipates replacing these facilities with a new revolving credit agreement. 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 combined with cash flows from operations provide adequate liquidity to meet obligations, fund capital expenditures and invest in potential growth opportunities. During the third quarter, Standard & Poor's and Moody's Investor Service downgraded the company's long- and short-term debt. The ratings now stand at BBB- and A3 for Standard & Poor's, and Baa3 and Prime-3 for Moody's Investors Service, for the long-term and short-term debt respectively. Working Capital Working capital was $742 and $1,104 at the end of the third quarter 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 shares as discussed previously and $197 debt that can be put back to the company by the holder on August 1, 2001. The current ratio was 1.9 and 2.4 at the end of September 2000 and September 1999, respectively, and 2.9 at year end 1999. OTHER FINANCIAL DATA Dividends declared on common stock were $0.26 per share in the third quarters of both 2000 and 1999. The return on average shareholders' equity was 9.5% and 41.4% for the twelve-month periods ended September 23, 2000 and September 25, 1999, respectively. The decrease primarily reflects the gains on divestitures from both the sunglass and healthcare businesses recorded in 1999. Excluding the gain, the return on average shareholders' equity was 8.8% for the comparable period ended September 25, 1999. 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. OUTLOOK In the vision care segment, the company expects to report fourth quarter revenues that are about even with comparable results in 1999. This reflects the impact to prior guidance of currency rate changes, as well as a somewhat softer fourth quarter for the U.S. contact lens business following a strong third quarter, which benefited from initial placements of Bausch & Lomb Two Week. In the pharmaceuticals segment, fourth quarter revenues are expected to be at about the same level as the third quarter. This reflects a continuation of trends noted through the first nine months, including the negative impact of currency as well as intense price competition for several lines of generic pharmaceuticals, offset by incremental revenues generated by the Groupe Chauvin acquisition. In the surgical segment, the company expects revenue growth in the mid- to upper single digits in the fourth quarter, down from previous guidance due to the impact of currency, as well as a more cautious view of the near term outlook as the company addresses issues in the cataract business and a more dynamic competitive environment in the U.S. refractive business. In total, revenues for 2000 are expected to increase slightly from the prior year in actual dollars and to increase in the mid- single digits in constant dollars. This, as well as the preceding guidance by product segment, assumes that currency rates remain relatively unchanged from the end of the third quarter. Specifically, one Euro was assumed equivalent to $0.85. The company expects to incur higher research and development spending in the fourth quarter than it had previously anticipated in order to accelerate the Envision TD program. As a result of this higher spending, combined with the earnings impact of currency rate changes, the company now expects to post fourth quarter earnings per share in the range of $0.73 to $0.75, presuming there is no further deterioration in foreign exchange rates from levels at the end of the third quarter. Should the company be successful in accelerating the Envision TD program, obligations to make milestone payments to the development partner could also be accelerated. The impact of any acceleration in such milestone payments has not been factored into the company's revised earnings estimates for the fourth quarter. 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, 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 successful completion and integration of acquisitions announced by the company, 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. PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT In connection with the acquisition of Groupe Chauvin, the company immediately expensed $23.8, representing amounts for in-process research and development (IPR&D) estimated at fair value using the methodology described below. The expensed IPR&D represented the value of projects that had not yet reached technological feasibility and for which the assets to be used in such projects had no alternative future uses. The company expects that products developed from the acquired IPR&D will begin to generate sales and positive cash flows in the time frames discussed in the following paragraphs. However, development of these technologies remains a risk due to the remaining effort to achieve technical viability, rapidly changing customer markets, uncertain standards for new products and competitive threats. The following is a more detailed discussion of the purchased in-process research and development associated with this acquisition. The company believes that the assumptions and forecasts used in valuing purchased in-process research and development were reasonable at the time of the business combination. No assurance can be given, however, that future events will transpire as estimated. As such, actual results may vary from the projected results. A discounted cash flow analysis was used to estimate the fair value of the IPR&D projects. Successful completion of a project is deemed to occur when the new product or process has been defined and technological feasibility has been objectively demonstrated. The fair values of purchased in-process research and development projects are based on estimates prepared by management. These estimates utilize explicit assumptions about the range of possible estimated cash flows and their respective probabilities to determine the expected cash flow for each project. Under this approach, projected cash flows are developed for each project. The projected cash flows are adjusted for risks prior to being discounted to present value. Risks addressed include completion risk, competitive risk and timing risk. IPR&D of $23.8 was allocated to the following projects: Immobacter ($16.9), Carteol ($3.5), Other Pharmaceutical products ($1.7) and Surgical products ($1.7). Set forth below are descriptions of the acquired IPR&D projects, including their status at the end of September 2000. Immobacter - Revenues attributed to Immobacter, a preservative- free multidose delivery system, are expected to be generated by licensing the technology to other manufacturers. Licensing revenues are expected to be $4.1, $9.7 and $12.4 starting in 2004 through 2006. At the acquisition date, costs to complete the R&D efforts were expected to be $1.7. The probability factor and stage of completion used to derive the IPR&D amount were 70.0% and 49.3%, respectively. Carteol - Revenues attributed to Carteol Multidose, a glaucoma drug product extension that allows for once a day usage versus the current twice a day, were expected to be $2.8 in 2002, $6.3 in 2003, $6.9 in 2004 and $7.6 in 2005, with the rate of revenue growth then decreasing 5% annually in 2006 to 2010. At the acquisition date, costs to complete the R&D efforts were expected to be $0.9. The probability factor and stage of completion used to derive the IPR&D amount were 95.0% and 76.1%, respectively. Other Pharmaceutical Products - Revenues are expected to average approximately $2.7 per annum in 2003-2007. At the acquisition date, costs to complete the R&D efforts were expected to be $1.6. The average probability factor and stage of completion used to derive the IPR&D amount were 75.8% and 74.1%, respectively. Other Surgical Products - Revenues attributed to various miscellaneous surgical products, were expected to average $2.5 per annum in 2001-2006. At the acquisition date, costs to complete the R&D efforts were expected to be $1.2. The average probability factor and stage of completion used to derive the IPR&D amount were 70.3% and 47.7%, respectively. PART II - OTHER INFORMATION Item 1. Legal Proceedings In its 1999 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 the marketing and sale of Sensitive Eyes Rewetting Drops, Boston Rewetting Drops, ReNu Rewetting Drops and Bausch & Lomb Eyewash (the "Products"). As reported in the company's Quarterly Report on Form 10-Q filed on August 7, 2000, on May 8, 2000, the court gave its preliminary approval to a proposed settlement. The settlement was approved at a fairness hearing held on September 13, 2000. Item 3. Quantitative and Qualitative Disclosures About Market Risks Due to the divestitures in 1999, the company is in a position in which its floating rate assets exceed its floating rate liabilities. This represents a change in the interest rate exposure as disclosed in Item 7(a) of the company's 10-K. A sensitivity analysis to measure the potential impact that a change in interest rates would have, net of hedging, on the company's net income indicates that a one percentage point decrease in global interest rates would negatively effect financial income by approximately $4.9 million on an annualized basis. 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 announcing that Bausch & Lomb was revising its estimate for revenues and earnings for the second half of 2000 and for fiscal year 2001, attaching copies of a related press release and related remarks of Mr. William M. Carpenter, Chairman and Chief Executive Officer of Bausch & Lomb, was filed by the company on August 24, 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: November 7, 2000 By: /s/ Robert B. Stiles Robert B. Stiles Senior Vice President and General Counsel Date: November 7, 2000 By: /s/ Stephen C. McCluski 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). (10)-ee Separation Agreement dated October 9, 2000 between Bausch & Lomb Incorporated and Carl E. Sassano, former President and Chief Operating Officer (filed herewith). (11) Statement Regarding Computation of Per Share Earnings (filed herewith). (27) Financial Data Schedule (filed herewith). EX-11 2 0002.txt Bausch & Lomb Incorporated Exhibit 11 Statement Regarding Computation of Per Share Earnings (Share Amounts in Thousands Except Per Share Data) Three Months Ended Nine Months Ended Sept. 23, Sept. 25, Sept. 23, Sept. 25, 2000 1999 2000 1999 Earnings (in millions) Earnings from continuing operations (a) $14.7 $41.6 $88.5 $85.5 Earnings from discontinued operations (see Footnote 1) (b) - 190.2 - 342.1 Net earnings $14.7 $231.8 $88.5 $427.6 Actual outstanding Common and Class B shares at beginning of period 53,310 57,420 57,376 56,529 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 53 57 (2,976) 669 Weighted Basic Shares (c) 53,363 57,477 54,400 57,198 Effect of assumed excercise of Common stock equivalents 579 1,385 766 1,497 Weighted diluted shares (d) 53,942 58,862 55,166 58,695 Basic Earnings Per Share: Continuing Operations (a/c) $.28 $0.72 $1.63 $1.49 Discontinued Operations (b/c) - 3.31 - 5.99 Net Earnings $.28 $4.03 $1.63 $7.48 Diluted Earnings Per Share: Continuing Operations (a/d) $.27 $0.71 $1.60 $1.46 Discontinued Operations (b/d) - 3.23 - 5.83 Net Earnings $.27 $3.94 $1.60 $7.29 1 Includes after-tax gain on disposal of discontinued operations.
EX-27 3 0003.txt
5 9-MOS DEC-25-1999 SEP-23-2000 439184 188977 462829 (23112) 234359 1546141 1067780 (557281) 3113392 606782 976934 0 0 24097 1017152 3113392 1300632 1300632 540968 540968 622055 6429 50828 163530 66487 88474 0 0 0 88474 1.63 1.60 Income Before Taxes and Minority Interest
EX-10.EE 4 0004.txt October 9, 2000 Mr. Carl E. Sassano 42 Sunrise Park Pittsford, NY 14534 Dear Carl: The purpose of this letter is to summarize the terms and conditions of your separation of employment from Bausch & Lomb Incorporated ("Bausch & Lomb" or "the Company") and your resignation as an officer of the Company. 1. You will be considered a full time active employee through October 31, 2000, at which point your position will have been eliminated and you will have resigned as an officer of the Company. We are confirming that between the date of notice of your separation (August 23, 2000) and October 31, 2000, we advised you it would not be necessary for you to report to work. However, during the remainder of this period, you will be required to make yourself available on an as-needed basis to assist in transitioning your duties, as directed by the Chairman and Chief Executive Officer. Starting November 1, 2000, we have agreed that you will take a three (3) month leave of absence without pay, which leave of absence will end on January 31, 2001. At that point, you will have accrued your five weeks of 2001 paid vacation, which you will take beginning February 1, 2001 and ending on March 7, 2001 ("Separation Date"). Beginning the day after the Separation Date, your status will be changed to that of an inactive employee, subject to the terms and conditions hereof, and Bausch & Lomb will pay you an amount equal to your current monthly base salary each month for twenty-four (24) consecutive months (the "Severance Period"). As you are aware, this amount is twice that provided for in the Officer Separation Plan. During this period, you will continue to receive those current benefits and perquisites detailed below. Additionally, although you will receive a lump sum payment for your unused 2000 vacation time, if any, you will not accrue or be paid for vacation time during the Severance Period. 2. Officer perquisites will continue as follows: A. Company Car. You may purchase your company car by May 1, 2001 for a reasonable depreciated value determined by Bausch & Lomb. If not purchased, the car must be returned to Bausch & Lomb by May 1, 2001. B. Financial Counseling. Bausch & Lomb will continue to reimburse you for reasonable financial planning expenses through October 31, 2002 in an amount up to two (2) percent of your base salary, which may include legal services sought in connection with the negotiation and finalization of this letter. C. Other. Bausch & Lomb will continue to reimburse or pay existing regular dues associated with a country, social, luncheon or airline club through October 31, 2002. 3. During the unpaid leave of absence, you will not be considered an active employee. However, you will continue to receive your current medical, dental and life insurance benefits at active employee rates and the premiums will be deducted from your first paycheck after the leave of absence ends. While using your vacation time in 2001, you will continue to receive medical, dental and life insurance coverage at the then-current active employee rates, which amounts shall continue to be deducted from your paychecks. In addition, during the Severance Period, you may elect to continue your medical, dental and life insurance at the then-current active employee rates. At the end of the Severance Period, you will be eligible for COBRA coverage that allows you to continue your current medical and dental insurance at the full premium rates for up to an additional 18 months. At the end of the Severance Period, you will qualify to receive medical coverage, but not retiree dental or life insurance, under the Company's retiree medical insurance plan once you reach the age of 55. This coverage will not be available to you if other coverage is available to you under another employer's plan or through a spouse's plan when you turn 55. You will need to contact Corporate Benefits to apply for this coverage. 4. There is no COBRA eligibility for life insurance. However, within 31 days following the end of your Severance Period, you may elect (without providing evidence of insurability) an Aetna conversion policy to replace some or all of your coverage. 5. Disability coverage ceases on October 31, 2000. There are limited conversion rights for long term disability. Upon your request, HR will provide you with more information. 6. You are fully vested in the Bausch & Lomb Retirement Plan and the Supplemental Executive Retirement Plan III. Participation in the plans continues during the Severance Period and you retain through this Period the full rights and privileges under the plans you would have as an active employee (e.g., your participation continues, and benefit accruals continue). Within three (3) months of the end of your active plan participation, you will receive details on pension options from our Corporate Benefits Department. 7. Participation in the Bausch & Lomb 401(k) plan continues during the Severance Period and you retain through this period the full rights and privileges under the plan you would have as an active employee (e.g. as applicable, you may continue contributing, associated Company matching contributions continue to be deposited on your behalf, etc.). At the end of your active plan participation, you may leave your money in the Bausch & Lomb 401(k) Plan or elect a distribution. Contact InfoExpress at 1- 800-479-0557 for account information or to make any future transactions. 8. You may have elected to receive distribution from the Bausch & Lomb Deferred Compensation Plan under the terms of that Plan. The investment mix can be changed at any time prior to payout by completing the attached form and returning it to Corporate Compensation. You will continue to receive quarterly statements. Please advise Corporate Compensation (Cheryl Cody) of any address changes. 9. As a participant in the Stock Option Plan, you have ninety (90) days from the end of the Severance Period to exercise vested stock options granted on or after January 27, 1997. For vested stock options granted prior to January 27, 1997, you have ninety (90) days from the Separation Date in which to exercise these options. If, prior to the expiration of the ninety (90) day post Separation Date exercise period available to you to exercise your pre-January 1997 vested stock options, the Company extends the exercise period for vested stock options granted prior to January 27, 1997 for any or all employees participating in the Stock Option Plan, the Company will provide the benefit of the same extension to you. As of October 31, 2000, you will not be eligible for any future vesting in stock options or restricted stock, nor will you be eligible for company loans in connection with the exercise of vested or restricted options. Any outstanding stock option loans must be repaid within ninety (90) days of the end of the Severance Period. A listing of your options is attached. 10. You will be eligible for an EVA bonus, prorated and attributable to the months of service performed through October 31, 2000, payable in early 2001, as soon as practicable after EVA bonuses are approved by the Committee on Management of the Board of Directors, based on the actual performance of Bausch & Lomb. Pursuant to the terms of the EVA Plan, you will also receive any remaining amounts contained in the bank from prior years. You will not vest in Cycle I or in any additional Cycles under the Cumulative EVA Long Term Incentive Plan. 11. Bausch & Lomb will assist you in your search for new employment by providing you with outplacement services in accordance with the Officer Separation Plan. You will be provided the names of two approved service providers from which you may choose the one you prefer. In the alternative, you may propose your own outplacement service provider, which will be subject to Bausch & Lomb's reasonable approval. Payment for outplacement services will be made directly by Bausch & Lomb. 12. Bausch & Lomb will provide you with a reference letter in the form attached to this letter. 13. In consideration of the benefits to be provided to you and as part of your fiduciary obligations to Bausch & Lomb, you agree that for a period of two (2) years from the Separation Date, you will not, directly or indirectly, (a) compete with any business in which Bausch & Lomb or any of its affiliates is currently engaged or actively developing, including working or consulting with Visualplex, (b) solicit any person who is a customer of a business conducted by Bausch & Lomb to be a customer of a similar business other than a business conducted by Bausch & Lomb or any of its affiliates, or (c) induce or attempt to persuade any employee of Bausch & Lomb or any of its affiliates to terminate his or her employment relationship with Bausch & Lomb or any of its affiliates. For purposes of this Agreement, the phrase "compete" shall include serving as an employee, an officer, a director, an owner, a partner or a five percent (5%) or more shareholder of any such business or otherwise engaging in or assisting another to engage in any such business. Without limiting the foregoing, Bausch & Lomb may consider, on an as requested basis, modifications to your restrictions on competition where management of Bausch & Lomb believes the competitive impact on Bausch & Lomb to be minimal or otherwise manageable. Notwithstanding the above, you shall be permitted to: A. Engage in a retail business, provided such business is not owned or operated by or on behalf of a company which you would be prevented from working for or affiliating with under the preceding non-competition clause ("Competitor"); B. Provide consulting services to Bausch & Lomb customers regarding the customers' business, including, but not limited to, purchase/sales of businesses, strategic planning, expansion strategies, and the like, so long as such services are not being sought by or ultimately provided on behalf of a Competitor of Bausch & Lomb; C. Engage in development and/or marketing of practice management services and software in the ophthalmic industry, so long as such services are not being sought by or ultimately provided on behalf of a Competitor of Bausch & Lomb; E. Offering employment to Lisa Dean. 14. You understand that you should consult with your attorney prior to the execution of this Agreement, and have been given a reasonable opportunity to do so. You acknowledge that you understand the contents of this Agreement, and this Agreement is entered into freely and voluntarily, and that it is not predicated on or influenced by any representations of Bausch & Lomb or any of its employees. 15. By accepting the package set forth in this Agreement, and except as to the obligations of Bausch & Lomb set forth in this Agreement, you, for yourself and your heirs, administrators, representatives, and assigns (collectively, the "Releasors") hereby release and discharge Bausch & Lomb, and its affiliates, agents and employees and their successors and assigns (collectively, the "Releasees"), from any and all claims, causes of action, liability, damages and/or losses of whatever kind or nature, in law or equity, known or unknown, which the Releasors ever had, now have, or may have in the future against the Releasees from the beginning of time through the date of this Agreement, arising directly or indirectly out of your employment by Bausch & Lomb or as a result of your separation from employment, including, but not limited to, any and all claims arising under any state or federal employment discrimination law, including but not limited to the Age Discrimination in Employment Act, the Older Workers' Benefits Protection Act, Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act. 16. You acknowledge that you have been afforded twenty-one (21) days to review and consider this Agreement, and that such period was a reasonable period of time for you to do so. 17. You understand that you may revoke this Agreement at any time within seven (7) days of the execution hereof, and that the Agreement will not become effective or enforceable until the expiration of that period. 18. The compensation and benefits arrangements set forth in this Agreement supersede any other agreement between you and Bausch & Lomb, and are in lieu of any rights or claims that you may have with respect to severance or other benefits, or any other form of remuneration from Bausch & Lomb and its affiliates, other than benefits under any tax-qualified employee pension benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended. 19. Except as required by law or regulation, neither you nor Bausch & Lomb will disclose or discuss the terms of this Agreement; provided, that you may disclose such terms to your financial and legal advisors and your spouse and Bausch & Lomb may disclose such terms to selected employees, advisors and affiliates on a "need to know" basis, each of whom shall be instructed by you and Bausch & Lomb, as the case may be, to maintain the terms of this Agreement in strict confidence in accordance with the terms hereof. Bausch & Lomb may also disclose the terms of this Agreement as required by applicable law or regulations. 20. As a result of your employment with Bausch & Lomb and as a result of your position as an officer of Bausch & Lomb, you were obviously privy to sensitive financial and strategic information, as well as trade secrets which are the confidential property of Bausch & Lomb, and Company Information (as defined below). You affirm that, as a former officer of Bausch & Lomb, you have a fiduciary obligation to maintain Company Information in confidence and not to disclose it to others. You have returned or will immediately return to Bausch & Lomb all Company Information that is capable of being returned, including client lists, files, software, records, computer access codes and instruction manuals which you have in your possession, and agree not to keep any copies of Company Information. The term "Company Information" means: (i) confidential information, including information received from third parties under confidential conditions, and (ii) other technical, marketing, business or financial information, or information relating to personnel or former personnel of Bausch & Lomb, the use or disclosure of which might reasonably be construed to be contrary to the interest of Bausch & Lomb; provided, however, that the term "Company Information" shall not include any information that is or became generally known or available to the public other than as a direct result of a breach of this Section by you or any action by you prior to the Separation Date which would have been a breach of your obligations to Bausch & Lomb in effect at such time. 21. By this Agreement, you are resigning from all positions and offices held by you within Bausch & Lomb and its affiliates. You agree that you will, when asked, execute such further instruments and documents as are necessary to effect this resignation as to all such Bausch & Lomb affiliates. 22. You agree to make yourself reasonably available to Bausch & Lomb to respond to requests by Bausch & Lomb for information concerning matters involving facts or events relating to Bausch & Lomb or any of its affiliates that may be within your knowledge, and to assist Bausch & Lomb and its affiliates as reasonably requested with respect to pending and future litigations, arbitrations, other dispute resolutions or other similar matters. Bausch & Lomb will reimburse you for your reasonable travel expenses and costs incurred as a result of your assistance under this Section. As you know, the bylaws of Bausch & Lomb provide for your indemnification, to the fullest extent authorized or permitted by law, in the event there are claims against you arising out of your actions while an officer of Bausch & Lomb. The bylaws also provide for the advancement of expenses incurred in defending any proceeding in advance of its final disposition. This agreement is not intended to modify or limit those rights in any manner. 23. You represent and acknowledge that, in executing this Agreement, you have not relied upon any representation or statement made by Bausch & Lomb or not set forth herein. This Agreement may not be amended, modified, terminated, or waived in any part, except by a written instrument signed by the parties. 24. All payments made to you under this Agreement will be reduced by, or you will otherwise pay, all income, employment and Medicare taxes required to be withheld on such payments. 25. The parties agree not to challenge nor raise any defense against the enforceability of this Agreement or any of its provisions in the future. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement. 26. Nothing contained in this Agreement shall be construed in any way as an admission by you or Bausch & Lomb of any act, practice or policy of discrimination or breach of contract either in violation of applicable law or otherwise. 27. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof, to the extent not superseded by applicable federal law. The parties hereto hereby agree that any dispute concerning formation, meaning, applicability of interpretation of this agreement shall be submitted to the jurisdiction of the courts of the State of New York (including federal courts in the State of New York), and no other state shall have jurisdiction over such matters, and further agree to waive all rights to a jury trial with respect to any such matters. 28. You acknowledge and agree that Bausch & Lomb's remedy at law for any breach of your obligations under Sections 13, 19 and 20 of this Agreement would be inadequate and agree and consent that temporary and permanent injunctive relief may be granted in any proceeding that may be brought to enforce any provision of this Section without the necessity of proof of actual damage. With respect to any provision of Sections 13, 19 and 20 of this Agreement finally determined by a court of competent jurisdiction to be unenforceable, you and Bausch & Lomb hereby agree that such court shall have jurisdiction to reform this Agreement or any provision hereof so that it is enforceable to the maximum extent permitted by law, and you and Bausch & Lomb agree to abide by such court's determination. If the terms and conditions are agreeable to you, please indicate your acceptance of the above in the space provided below and return the enclosed copy to me. Sincerely, /s/ William M. Carpenter William M. Carpenter Agreed to this 16 day of October, 2000. /s/ Carl E. Sassano Carl E. Sassano -----END PRIVACY-ENHANCED MESSAGE-----