Bausch & Lomb Inc.
Bausch & Lomb Inc.
headquarters: 1 bausch & lomb pl.
rochester, ny 14604-2701 phone: (716)338-6000 fax: (716)338-6007 toll free: (800)344-8815 url: http://www.bausch.com
Bausch & Lomb Inc. is the second largest maker of contact lenses and associated products and is responsible for names like Ray-Ban sunglasses, Curel and Soft Sense skin care products, Miracle-Ear (a recent acquisition of hearing aid products), and others. Facing recent lawsuits and investigations due to questionable sales methods, Bausch & Lomb has undergone a massive reorganization, selling off its oral care, dental-implant, and skin care businesses to focus on its core business—eye care.
In 1997 Bausch & Lomb Inc. earned $1.92 billion in total revenues, down 1 percent from 1996 revenues of $1.93 billion. Fifty percent of 1997 revenues ($967 million) were earned in the United States; 25 percent ($482 million) in Europe, the Middle East, and Africa; 19 percent ($357 million) was earned in the Asia/Pacific; and the remaining 6 percent ($110 million) was earned in Canada and Latin America. Broken down by product sectors, the company's vision care segment earned the most revenue with $909 million, 47 percent of sales. The eye-wear division earned $492 million, 26 percent of sales; health care products brought in $324 million (17 percent); and pharmaceuticals generated $191 million (10 percent). Bausch & Lomb's eyewear business actually lost money in 1997, significantly impacting the company's overall performance. However, the division was expected to regain profitability in 1998, largely through cost-reduction programs.
First quarter 1998 sales were $553.1 million, a significant increase over the first quarter of 1997 ($451.2 million). Net earnings, however, declined from $3.3 million in the first quarter of 1997 to a deficit of $49.4 million in the first quarter of 1998.
The company's earnings per share (EPS) in 1997 were $.89, significantly down from $1.47 in 1996 and $1.93 in 1995. During the first quarter of 1998, the company earned $.06 per share. Over the 1997 fiscal year, Bausch & Lomb stock ranged in price from $32.50 to $47.88 per share. In mid-1998 the company's stock was selling slightly higher, at almost $50.00 per share. The 52-week high for Bausch & Lomb stock was $52.69, and its 52-week low was $37.00 per share.
Many analysts strongly agree that much of the company's troubles stemmed from questionable practices—such as faking invoices and quietly promising distributors they would not be responsible for payment of goods that were shipped but not ordered. In fact, many analysts wonder why the board kept former CEO Dan Gill on as long as they did. Thinking these practices were the results of isolated incidents, the board kept Gill on as CEO until further investigations raised doubts, leading to his eventual resignation.
Bausch & Lomb's earnings continued to drop over the first three months of 1997. Profits fell to $3.3 million compared to $22.5 million at that time in 1996. Analysts trace many of the company's financial obstacles to inaccurate record keeping, restructuring costs of approximately $80.0 million during 1997 and 1998, and the discontinuation of product lines such as Ray-Ban driving and performance sunglasses.
Overall, analysts recommended either a "hold" or "moderate buy" rating for Bausch & Lomb stock, indicating some confidence in the company's ability to bounce back from previous setbacks.
John Jacob Bausch opened a store in 1853 to sell imported European eyewear. Henry Lomb joined Bausch as a partner after loaning the entrepreneur $60. After Bausch's innovative Vulcanite (a hard rubber) eyeglass frame was developed, the two businessmen opened an office in New York City in 1880. They later began producing microscopes, binoculars, and telescopes. During World War II the company was able to provide the military with lenses for binoculars, searchlights, reflescopes, and telescopes due to William Bausch's (John Jacob's son) optical-quality glass productions in 1912.
Another big break for the company came when the Army Air Corps asked Bausch & Lomb to invent a product that would diminish sun glare for pilots. From this request, the company produced Ray-Ban sunglasses, still one of Bausch & Lomb's most popular products. During the late 1960s, the company produced lenses used in satellite and missile systems for the government. Buying optical and scientific equipment companies like Ferson Optics and Reese Optical, the company's growth blossomed.
After the Federal Drug Administration (FDA) approved the company's soft contact lenses in 1971, Bausch & Lomb's sales put the company on the Fortune 500 list. Daniel Gill, one of the men responsible for building the soft contact business for the company, became CEO in 1981. His vision led the company to offer optical businesses, such as prescription eyeglass services, and then expand into medical products and research. Related activities included the acquisition of Charles River Laboratories (1984) and Dental Research Corp., maker of Interplak home dental care products (1988).
Gill's focus pushed him to stress double-digit growth rates to top executives. Questionable sales methods were practiced, such as mailing merchandise that had not been ordered, extending credit and payment terms to customers, and pushing buyers into ordering more than they needed. These events were a major reason for the company's record earnings increase in 1990. The purchase of Dahlberg (Miracle Ear hearing aids) and the Curel and Soft Sense lines from S.C. Johnson, as well as overseas expansion, also contributed to the company's growth that year.
An investigation was launched by the Security and Exchange Commission (SEC) in 1995, and shareholders of Bausch & Lomb filed a joint lawsuit. The company also faced a second lawsuit after it marketed one type of contact lens as several different types with varying prices. William Waltrip took over as the company's CEO in 1995; he was replaced by William M. Carpenter in 1997. Bausch & Lomb went to work selling off non-core businesses and signed an agreement to compensate customers filing the product fraud suit. Bausch & Lomb Inc. agreed to pay up to $68 million to make amends with customers.
FAST FACTS: About Bausch & Lomb Inc.
Ownership: Bausch & Lomb Inc. is a publicly owned company traded on the New York Stock Exchange.
Ticker symbol: BOL
Officers: William H. Waltrip, Chmn., 60; William M. Carpenter, Pres. & CEO, 45, $1,193,501; James C. Foster, Sr. VP & Pres. & CEO, Charles River Laboratories, 47, $480,764; Dwain L. Hahs, Exec. VP & Pres., Eyewear Division, 45, $501,244
Employees: 13,000 (1997)
Principal Subsidiary Companies: Subsidiaries of Bausch & Lomb include: Arnette Optic Illusions, Inc.; Polymer Technology Corp.; Bausch & Lomb (Bermuda) Ltd.; Bausch & Lomb Lamex, Inc.; Revo, Inc.; BL Industria Otica, Ltda. (Brazil); SPAFAS; Bausch & Lomb de Colombia SA; Charles River Laboratories, Inc.; Operadora de Contactlogia, SA de CV, (Mexico); Wilmington Partners, L.P.; Bausch & Lomb Puerto Rico, Inc.; Dahlberg, Inc.; Bausch & Lomb Canada, Inc.; Bausch & Lomb Venezuela, CA; Charles River Canada, Inc.; East Acres Biologicals; Bausch & Lomb GmbH (Austria); Award PLC (Scotland); Bausch & Lomb Denmark A/S; Bausch & Lomb International, Inc. (Greece); Bausch & Lomb Espana SA (Spain); Bausch & Lomb-IOM SpA (Italy); Criffa, SA (Spain); Bausch & Lomb U.K., Ltd.; Charles River U.K., Ltd.; Madden & Layman Ltd. (U.K.); Charles River Italia SpA; Bausch & Lomb Svenska AB (Sweden); Killer Loop SpA (Italy); Bausch & Lomb BV (Netherlands); Bausch & Lomb Holdings BV (Netherlands); Bausch & Lomb AG (Switzerland); Bausch & Lomb Distops SA (Switzerland); Bausch & Lomb Fribourg SA (Switzerland); Bausch & Lomb Finance SA (Switzerland); OY Bausch & Lomb Finland AB; Bausch & Lomb Norway A/S; Bausch & Lomb France SA; Charles River France SA; Bausch & Lomb Espana SA (Portugal); Bausch & Lomb Ireland; Bausch & Lomb Saglik ve Optik (Turkey); Charles River WIGA GmbH (Germany); Dr. Gerhard Mann, Chem.- Pharm.Fabrik GmbH; Bausch & Lomb South Africa Pty. Ltd.; Bausch & Lomb (Australia) Pty. Ltd.; Bausch & Lomb (Singapore) Private Ltd.; Bausch & Lomb (Malaysia); Bausch & Lomb Far East, P.T.E. (Singapore); Bausch & Lomb (New Zealand) Ltd.; Bausch & Lomb Korea, Ltd.; Bausch & Lomb India Ltd.; Bausch & Lomb China, Inc.; Spafas Jinan Poultry Company, Ltd. (China); B.L.J. Company Ltd. (Japan); Bausch & Lomb Taiwan Ltd.; and Charles River Japan, Inc.
Chief Competitors: One of the world's major manufacturers and marketers of eye care and health care products, Bausch & Lomb's competitors include: Akorn; Allergan; Colgate-Palmolive; Cooper Cos.; Corning; Dep; HEARx; HEI; Hydrion Technologies; Johnson & Johnson; National Vision; NutraMax Products; Oakley; ReSound; Summit Technology; Allegheny Teledyne; and Wesley-Jessen.
After a great deal of reorganization, Bausch & Lomb Inc. established new goals for future growth. First, the company aimed for products introduced no earlier than 1995 to account for 65 percent of revenues. Second, it hoped to increase international sales of eyewear brands other than Ray-Ban by 40 percent. Third, the company began to focus on ways to cut costs and improve delivery services. Overall, Bausch & Lomb organized a comprehensive plan to reduce operating costs by $150 million by the year 2000. By doing so, the company hoped to further the global growth of its core business—eye care.
Continuing to divest itself of non-core businesses, Bausch & Lomb announced in early 1998 that the company had signed a definitive agreement to sell its skin care business (consisting of Curel and Soft Sense) to The Andrew Jergens Company. The deal was subject to regulatory approval, and if obtained, the business would be sold to Andrew Jergens for $135 million in cash, plus the assumption of some liabilities. Strengthening its core business, Bausch & Lomb also made two strategic acquisitions in late 1997—it finalized the $300-million cash purchase of Chiron Vision Corporation and acquired Storz Instrument Company from American Home Products. Together, the acquisitions gave Bausch & Lomb entrance into the cataract, retinal, and refractive surgery markets.
Bausch & Lomb Inc. defines "eye care" as anything that goes in or on the eye. Keeping that definition in mind, the global market for such products has reached some $20 billion. Bausch & Lomb held less than 10 percent of the market share in the late 1990s. With sales of Ray-Ban declining in 1996, the company tried new marketing efforts to launch new styles of Ray-Ban sunglasses. Before the decline, Bausch & Lomb had claimed 40 percent of the sunglasses market. The U.S. market for sunglasses priced over $30 dollars increased by 10 percent in 1996—a major reason for the company's renewed focus on its RayBan products. Asia and Europe continued to be steady regions of growth for Bausch & Lomb as well.
Bausch & Lomb's initial success can be attributed to key events in its history. Its first major break was due to Bausch's invention of Vulcanite, which allowed the company to produce and sell its own eyeglasses. A second milestone for the company can be traced back to its 1912 experimentation with optical-quality glass. This allowed for substantial growth during World War II, a period when the military sought out Bausch & Lomb products to better service its soldiers. Another major breaking point for Bausch & Lomb was the Army Air Corps' request for glasses to profoundly reduce glare for its pilots, which became so popular that, in 1936, Ray-Ban sunglasses were then made available to the public. Continual growth allowed Bausch & Lomb to purchase and sell other businesses in related fields, strengthening the company's abilities and making its soft contact lens business flourish.
With company growth slowing in the United States and Europe in the 1990s, former CEO Daniel Gill became desperate for a new game plan. The company's expansions into other health care areas had not been doing as well as anticipated. In fact, many large companies' purchases by Bausch & Lomb were not profitable, and the company had even begun losing contact lens market share to its biggest rival, Johnson & Johnson. Ray-Ban sales were even down. Perhaps the company's largest disadvantage was its refusal to enter the disposable contact lens market, a market captured by Johnson & Johnson in 1987.
CHRONOLOGY: Key Dates for Bausch & Lomb Inc.
John Jacob Bausch and Henry Lomb open a European eyewear store
Bausch & Lomb contract with Carl Zeiss for exclusive rights to his lenses
Zeiss buys 20 percent of Bausch & Lomb
John Jacob Bausch dies and Edward Bausch takes over
Bausch & Lomb goes public
An antitrust lawsuit is brought against Bausch & Lomb's contract with Zeiss
Ray-Ban sunglasses are developed for World War II pilots
The company begins to expand into the electronic optics industry
Bausch & Lomb licenses to make and sell soft contact lenses
Softlens contact lenses are introduced
Tom Cruise wears Ray-Bans in Risky Business and sales jump from 16,000 pairs sold to 360,000 pairs
Bausch & Lomb reports record earnings
The Securities an Exchange Commission and shareholders file a joint lawsuit
Despite all of these factors, company sales records showed adequate growth. An investigation was launched only to discover unethical behavior. Pressures mounted as some executives claimed they were told to ship merchandise even though it wasn't ordered. In an intense effort to meet the numbers established by Gill, many executives continued accounting for sold merchandise that was never shipped, but, sources say, allegedly ended up in warehouses.
After the scandal was revealed, Daniel Gill was replaced in 1995. Knowing massive reorganization was needed, new CEO William Waltrip devised a growth strategy centered on cutting costs. Aiming to give shareholders steady earnings and deliver competitive products to customers, Bausch & Lomb's new focus entailed layoffs, sales of non-core businesses, and new plans for obtaining its lost disposable contact lens market share.
In line with its recent reorganization strategies, Bausch & Lomb's focus has been on regaining its strength in the contact lens and sunglasses markets. A job cut of 1,900 employees was announced in April of 1997 in efforts to achieve the $150-million savings goal. Almost half of employees who were laid off came from corporate headquarters located in the Rochester, New York. This trend follows a similar layoff count of 2,000 in 1995.
Also characteristic of its restructuring efforts were Bausch & Lomb's recent purchases and sales of related businesses. The company sold Ster-Oss Inc. (a dental-implant business) and its stake in the Oral Care Division (known for producing Interplak). Bausch & Lomb's new focus aimed at creating new marketing strategies for its Ray-Ban sunglasses. The company purchased Arnette, a small sunglasses company out of California. Other business adventures include a partnership with Porche Design and Insite Vision. These alliances were made to enhance Bausch & Lomb's eye care business in the midst of growing rivals like Oakley Inc. of Irvine, California, which captured consumers between the ages of 16 and 24.
Bausch & Lomb is responsible for producing sunglasses under the brand names Ray-Ban, Arnette, Killer Loop, Porsche Design, and Revo. Contact lens products include lenses and solutions under the brands Boston, Sensitive Eyes, SofLens66, ReNu, and ReNu MultiPlus. General pharmaceutical products, such as eye drops, are marketed under brand names Bausch & Lomb and Dr. Mann Pharma. The company's health care division offers products such as biomedical products and hearing aids under the brand names Miracle Ear, Mirage, and Charles River Laboratories. The company's products are available in more than 100 countries worldwide.
One recent contribution to community involvement made by Bausch & Lomb Inc. involved the adoption of an orphanage in 1996. Following a nuclear accident in Chernobyl, Ireland, Bausch & Lomb employees decided to give time and donations to the Vasilivichi Orphanage for the blind and partially impaired.
According to its annual report, Bausch & Lomb counts corporate diversity as one of its top goals. In 1997, the company was 1 of 5 honored by the U.S. Department of Labor for Exemplary Voluntary Efforts toward increasing employment opportunities for women, minorities, and the disabled.
DID YOU KNOW. . .
- Tom Cruise wore Ray-Ban Aviator sunglasses in Top Gun and in Risky Business?
- Dan Akroyd and John Belushi wore Ray-Ban Wayfarer sunglasses in Blues Brothers, and Dan Akroyd and John Goodman wore them in Blues Brothers 2000?
- Racecar driver Jeff Gordon only wears Ray-Ban sunglasses?
- Will Smith and Tommy Lee Jones wore Ray-Ban Predator 2 sunglasses in Men in Black?
- Cuba Gooding Jr. wore Ray-Ban Sidestreet Metro and Inertia sunglasses in Jerry Maguire?
- Julia Roberts wears Ray-Ban Clubmaster sunglasses?
Bausch & Lomb has manufacturing or marketing operations in some 30 countries and distributes products in more than 70 other nations. With annual sales totaling almost $2 billion, the company remains focused on its core businesses: soft and rigid gas permeable contact lenses, lens care products, premium sunglasses, and ophthalmic pharmaceutical products. Bausch & Lomb is concentrating on strengthening the leadership position of Ray-Ban in global markets with new product designs and marketing efforts. It is also expanding other brands to new markets.
Bausch & Lomb employs about 13,000 people in 35 countries. According to the company, they "offer competitive compensation and benefits packages, opportunities for personal growth and development and a stimulating work environment." They also continuously search for employees "who are results oriented, flexible, thrive on challenge and yet are capable of operating in a team environment."
SOURCES OF INFORMATION
"bausch & lomb 'adopt' an orphanage." waterford today, 7 february 1996. available at http://www.aardvark.ie.
"bausch & lomb announces 1st quarter results." bausch & lomb press release, 22 april 1998.
"bausch & lomb completes acquisition of chiron vision corporation." bausch & lomb press release, 31 december 1997.
"bausch & lomb completes acquisition of storz instrument company." bausch & lomb press release, 31 december 1997.
"bausch & lomb incorporated." hoover's online, 7 july 1998. available at http://www.hoovers.com.
bausch & lomb: number one in the eyes of the world—bausch & lomb 1997 annual report. rochester, ny: bausch & lomb, inc., 1998.
"bausch & lomb reports 1997 first quarter results and announces major restructuring plan." rochester, ny: bausch & lomb inc., 23 april 1997.
"bausch & lomb sells its skin-care business to the andrew jergens company." bausch & lomb press release, 8 april 1998.
"contact lenses: settlement of bausch & lomb lens wearer class action." the consumer law page, the alexander law firm, 4 february 1997. available at http://seamless.com.
dobbin, ben. "bausch & lomb cuts 1,900 jobs." the associated press, 23 april 1997. available at http://search.washington-post.com.
——. "bausch & lomb posts sharp drop in quarterly profits." san diego daily transcript, 29 january 1997. available at http://www.sddt.com.
——. "bausch & lomb selling dental implant business." san diego daily transcript, 23 july 1996.
maremont, mark. "bausch & lomb's board puts on its glasses." business week, 6 november 1995.
——. "blind ambition: part i how the pursuit of results got out of hand at bausch & lomb." business week, 26 november 1996.
——. "blind ambition: part ii how the pursuit of results got out of hand at bausch & lomb." business week, 26 november 1996.
mccaffrey, shannon. "lawsuit alleges contact-lens wearers cheated out of millions by makers who conspire." san diego daily transcript, 19 december 1996.
For an annual report:
on the internet at: http://www.bausch.com/corporateinfo/annualreport/annual1997/welcome.htmlor telephone: (716)338-5757 or write: staff vice president, investor relations, bausch & lomb, 1 bausch & lomb pl., rochester, new york 14604
For additional industry research:
investigate companies by their standard industrial classification codes, also known as sics. bausch & lomb's primary sics are:
2834 pharmaceutical preparations
3827 optical instruments and lenses
3851 ophthalmic goods
5122 drugs, drug proprietaries, and druggists' sundries