- The Washington Times - Tuesday, August 8, 2006

ROCHESTER, N.Y. (AP) — Contact-lens provider Bausch & Lomb Inc. said yesterday 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 because of 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 billion to $2.4 billion. In October 2005, before a worldwide recall of its ReNu with MoistureLoc solution, the company had projected pretax earnings of more than $325 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 $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.

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