ROCHESTER - Contact-lens provider Bausch & Lomb Inc. said Tuesday it would delay filing its second-quarter financial report and warned that 2006 pretax earnings could be nearly 80 percent lower than it had once projected due to the recall of a lens solution.
In a Securities and Exchange Commission filing, Bausch & Lomb forecast 2006 earnings before taxes in the range of $70 million to $80 million on net sales of $2.3 to $2.4 billion. In October 2005, before a worldwide recall of its ReNu with MoistureLoc solution, the company had projected pretax earnings between $325 million and $335 million.
Largely because of recall-related expenses, the company's U.S. operations will be unprofitable in 2006, the filing said.
The eye-care company permanently pulled its ReNu with MoistureLoc solution from markets worldwide in mid-May as health officials investigate its links to an outbreak of Fusarium keratitis infections dating back to June 2005. Worldwide, the number of cases of the potentially blinding infection approached 300, spokeswoman Meg Graham said. The company faces numerous lawsuits related to the outbreak.
Much of the cost of the lawsuits, along with other legal, administrative and marketing expenses, will be absorbed by the company's U.S. operations, where a significant portion of lens care sales are generated, the company said. Lens care is the most profitable of Bausch & Lomb's five product categories.
For 2007, the company expects pretax earnings in the range of $220 million to $270 million on anticipated sales of $2.5 billion to $2.63 billion. The forecast takes into account higher operating expenses associated with the recall and independent investigations as well as the cost of stabilizing its Asian businesses and lens care category in general, moves the company said should allow it to recoup lost market share.
“While the company is in the initial phase of its formal annual planning cycle for 2007, management, based on this assessment, remains confident in the underlying strength of each of the company's businesses and believes this will be evident beyond 2006,” the filing said.
The 2007 forecast yields earnings of about $2.63 per share, significantly lower than Wall Street's consensus of $3.16, while overall sales expectations remain the same at $2.62 billion, a report by Banc of America Securities said.
“This dynamic is consistent with our thesis that (Bausch & Lomb) cannot coupon its way out of the MoistureLoc issue and, in our opinion, couponing aggressively this year can't be easily discontinued in future periods,” the analysts' report said.
After recalling the MoistureLoc solution, Bausch & Lomb offered coupons to encourage the purchase of another of its lens care solutions.
The company was supposed to file its second-quarter report with the SEC on Aug. 10. It cited a continuing assessment of its financial reporting and control deficiencies and an audit committee investigation into reserve entries for the delay.
According to the filing, Bausch & Lomb sees second-quarter sales of $575.4 million, 5 percent lower than the year-ago period. The results were hurt by a $19.3 million sales impact from creating a reserve for the lens solution recall, but benefited from sales from a Chinese pharmaceutical acquisition.
The company also said it would restate earnings for 2001 to 2005 following investigations into accounting practices at its Asian operations. The company in May said it was cutting its previously reported net sales by a combined $26.7 million after an internal investigation dating to 2001.
In a separate filing, Bausch & Lomb said the withdrawal of the ReNu with MoistureLoc product would result in the recording of a valuation allowance in 2005 with respect to deferred tax assets previously recorded on its balance sheet. Management anticipates the allowance to be between $120 million and $150 million, according to the filing.
Its shares closed down 31 cents for the day to $46.03 on the New York Stock Exchange. Its shares have traded in a 52-week range of $40.75 to $84.30.
The company employs 12,400 people worldwide.
Largely because of recall-related expenses, the company's U.S. operations will be unprofitable in 2006, the filing said.
The eye-care company permanently pulled its ReNu with MoistureLoc solution from markets worldwide in mid-May as health officials investigate its links to an outbreak of Fusarium keratitis infections dating back to June 2005. Worldwide, the number of cases of the potentially blinding infection approached 300, spokeswoman Meg Graham said. The company faces numerous lawsuits related to the outbreak.
Much of the cost of the lawsuits, along with other legal, administrative and marketing expenses, will be absorbed by the company's U.S. operations, where a significant portion of lens care sales are generated, the company said. Lens care is the most profitable of Bausch & Lomb's five product categories.
For 2007, the company expects pretax earnings in the range of $220 million to $270 million on anticipated sales of $2.5 billion to $2.63 billion. The forecast takes into account higher operating expenses associated with the recall and independent investigations as well as the cost of stabilizing its Asian businesses and lens care category in general, moves the company said should allow it to recoup lost market share.
“While the company is in the initial phase of its formal annual planning cycle for 2007, management, based on this assessment, remains confident in the underlying strength of each of the company's businesses and believes this will be evident beyond 2006,” the filing said.
The 2007 forecast yields earnings of about $2.63 per share, significantly lower than Wall Street's consensus of $3.16, while overall sales expectations remain the same at $2.62 billion, a report by Banc of America Securities said.
“This dynamic is consistent with our thesis that (Bausch & Lomb) cannot coupon its way out of the MoistureLoc issue and, in our opinion, couponing aggressively this year can't be easily discontinued in future periods,” the analysts' report said.
After recalling the MoistureLoc solution, Bausch & Lomb offered coupons to encourage the purchase of another of its lens care solutions.
The company was supposed to file its second-quarter report with the SEC on Aug. 10. It cited a continuing assessment of its financial reporting and control deficiencies and an audit committee investigation into reserve entries for the delay.
According to the filing, Bausch & Lomb sees second-quarter sales of $575.4 million, 5 percent lower than the year-ago period. The results were hurt by a $19.3 million sales impact from creating a reserve for the lens solution recall, but benefited from sales from a Chinese pharmaceutical acquisition.
The company also said it would restate earnings for 2001 to 2005 following investigations into accounting practices at its Asian operations. The company in May said it was cutting its previously reported net sales by a combined $26.7 million after an internal investigation dating to 2001.
In a separate filing, Bausch & Lomb said the withdrawal of the ReNu with MoistureLoc product would result in the recording of a valuation allowance in 2005 with respect to deferred tax assets previously recorded on its balance sheet. Management anticipates the allowance to be between $120 million and $150 million, according to the filing.
Its shares closed down 31 cents for the day to $46.03 on the New York Stock Exchange. Its shares have traded in a 52-week range of $40.75 to $84.30.
The company employs 12,400 people worldwide.
Citizen
Hot Jobs
New! Off the Menu
The Citizens' Say
Post your comment - click hereThere are No comments posted.