Bausch & Lomb 1999 Annual Report

1999 Versus 1998 Sales in markets outside the U.S. increased
9% over the prior year and represented 47% of total revenues in
1999 and 1998 and 49% in 1997. Increased revenues for vision
care products, driven by exceptional results for PRD lenses, and
favorable surgical results, more than offset flat sales in pharmaceuticals.
Currency exchange rates had a minimal impact on
consolidated non-U.S. sales. European revenues advanced 3%,
and 8% in constant dollars, due mainly to strong results of PRD
lenses. Sales in the Asia-Pacific region increased 18% over the
prior year, and advanced 8% in constant dollars, due in large part
to the growth of PRD lenses and lens care products throughout
most of the region. Revenues in the Canada and Latin America
region increased 20% with improved surgical sales in Canada
partially offset by currency impacts in Latin America.
U.S. sales, which represented 53% of total consolidated
revenues, increased 10% from 1998. U.S. sales benefited from
strong double-digit growth in pharmaceutical products, led
by the incremental impact from generic otic products and the
proprietary products Lotemax and Alrex, as well as exceptional
growth in sales of products for refractive surgery.
In 1999, operating earnings in markets outside the U.S.
increased 2% from 1998, and represented 48% of total operating
earnings, versus 51% and 45% in 1998 and 1997, respectively.
Earnings were led by the Asia-Pacific region where Medalist
contact lenses and ReNu multi-purpose solution performed well,
aided by favorability in foreign currency. Earnings in the
European region declined overall versus 1998 due to the impact
of currency. In the U.S., 1999 operating earnings increased 14%
versus the prior year. Margin improvements in the pharmaceuticals
and surgical segments combined to offset higher R&D
and administrative expenditures.
1998 Versus 1997 Sales outside the U.S. increased 39% in 1998
over 1997. Incremental sales from the acquired surgical businesses
and increased revenues for vision care products, primarily
contact lenses, drove the improvement. European revenues
advanced significantly from the prior year led by incremental
pharmaceuticals and surgical sales and growth in vision care sales.
Sales in the Asia-Pacific region increased 15%. On a constant
dollar basis, sales in the region advanced 21% due in large part to
incremental surgical sales and to strong growth of PRD lenses
throughout most of the region. In the Canada and Latin America
region, sales increased 24% driven by incremental surgical sales
and higher sales of vision care products.
U.S. revenues in 1998 increased 49% from the prior year due
primarily to incremental surgical sales. Vision care sales saw yearover-year
improvement led by growth in PRD lenses, rigid gaspermeable
(RGP) solutions and the launch of ReNu MultiPlus.
Operating earnings in markets outside the U.S. increased
38% from 1997. Incremental surgical results and the Dr. Winzer
acquisition in Germany drove the increase.
See the future 13 Bausch & Lomb
In the U.S., 1998 operating earnings increased 10%. These
results reflected improvements in the vision care segment offset
by higher R&D and administrative expenses as well as incremental
amortization expense associated with recent acquisitions.
Administrative expenses increased primarily due to initial costs
associated with year 2000 and financial systems projects.
Non-Operating Income And Expense
Other Income And Expense Interest and investment income
was $46 in 1999, $43 in 1998 and $39 in 1997. The increase in
1999 over 1998 was due mainly to higher cash balances because
of the divestitures, and higher interest rates. The increase in 1998
over 1997 was primarily attributable to a gain on the sale of a
long-term note associated with a 1996 divestiture.
Interest expense was $88 in 1999, $99 in 1998 and $55 in
1997. The decrease in 1999 from 1998 was mostly due to 1999
divestitures, which yielded in excess of $1 billion in cash, some of
which was used to significantly reduce short-term debt. In 1998,
debt increased significantly due to the surgical acquisitions, thus
increasing interest expense compared to 1997.
The company’s net gain from foreign currency transactions
has not varied materially during the three-year period ending in
1999 due in part to the company’s risk management strategy.
The company does not speculate in foreign currency.
It may, however, selectively execute foreign currency transactions
to protect the translated earnings and cash flows of certain foreign
units. Such foreign currency transactions may not be accorded
hedge accounting treatment under U.S. accounting rules. In
addition, the company hedges identified transaction exposures
on an after-tax basis to minimize the impact of exchange rate
movements on operating results and selectively hedges exposures
arising in countries with hyperinflationary economies.
Other income of $7 in 1999 resulted from the liquidation of
an investment in preferred securities associated with a 1995
divestiture. In 1997, a pre-tax charge of $21 resulted from a
legal settlement.
Income Taxes The company’s effective tax rate for continuing
operations was 36.0% in 1999 as compared to 35.2% in 1998
and 38.1% in 1997. The impact of charges for litigation,
acquired in-process R&D, restructuring and asset write-offs are
reflected in the appropriate years. Excluding these items, the
ongoing tax rates were 36.0%, 36.2% and 37.5% for 1999,
1998 and 1997 respectively.
When calculating income tax expense, the company recognizes
valuation allowances for tax loss and credit carryforwards,
which may not be realized by utilizing a “more likely than not”
approach. This is more fully described in Note 9 – Provision for
Income Taxes.