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 2000 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. Certain prior year balances have been reclassified to conform to the current year presentation.

Dollar Amounts in Millions - Except Per Share Data

NOTE A:    Inventories, net

NOTE B:    Property, Plant And Equipment, net

NOTE C:    Comprehensive Income

NOTE D:    Restructuring and Exit Activities

In December 2000, the company's board of directors approved a comprehensive restructuring plan that would facilitate the company's realignment as an integrated operating company with centralized management of R&D and supply chain operations and with commercial operations managed on a regional basis. The restructuring plan was implemented in two phases due to the anticipated timing of communication to employees and overall implementation schedule. As a result, a pre-tax amount of $42.7 was recorded during the fourth quarter of 2000 for Phase I of the restructuring and for asset write-offs. During the first quarter of 2001 a pre-tax amount of $16.9 was recorded for Phase II of the restructuring and additional asset write-offs.

     The following table summarizes the activity for Phase I and Phase II of the restructuring plan:

     The restructuring actions will result in the termination of approximately 800 employees in Phase I and Phase II combined. As of June 30, 2001, 550 employees have been terminated under this restructuring plan with $9.3 of related costs being charged against the liability. Actions in this restructuring plan are expected to be completed by the end of 2001.
     In addition to employee terminations, the above actions resulted in $20.4 of asset write-offs for machinery and equipment ($11.1), facilities ($6.9) and abandoned software ($2.4). The disposition and/or decommissioning of these assets occurred in the fourth quarter of 2000. During 2001, the company wrote off its $6.5 investment in a business-to-business e-commerce venture for the vision care industry.

As part of the integration of Groupe Chauvin, management developed a plan that included the shutdown of duplicate facilities in Europe and the consolidation of certain functional areas. The exit activities were committed to by management and formally communicated to the affected employees during the fourth quarter of 2000 and the first quarter of 2001. The major components of the accrual were as follows:

The acquisition accrual at December 30, 2000 related to the cost of terminating employees in R&D, selling and administration. The other costs represented leasehold and vehicle lease termination payments. Additional accruals were recorded for the six months ended June 30, 2001 resulting in adjustments to goodwill representing additional closures and consolidations of functions and locations to be substantially completed by December of 2002. As of June 30, 2001, 107 employees had been terminated.

NOTE E:    Business Segment Information

In the prior year, the company announced a reorganization from a product line structure to a regionally based management structure for commercial operations. The research and development and product supply functions were also realigned and are managed on a global basis. The change in the structure was effective on January 1, 2001. The company's segments are comprised of the Americas region, the Europe, Middle East and Africa region (Europe), the Asia region, the Research, Development and Engineering organization and the Global Supply Chain organization.
     Operating income is the primary measure of segment income. No items below operating income are allocated to segments. The accounting policies used to generate segment results are the same as the company's overall accounting policies. Inter-segment sales were $119.5 and $250.7 for the quarter and six months ended June 30, 2001, respectively. All inter-segment sales have been eliminated upon consolidation.

    The following table presents sales and operating income by business segment for the quarters and six months ended June 30, 2001 and June 24, 2000. The prior year has been restated to conform to the new management reporting structure. The restructuring reserve adjustment is described in Note D: Restructuring and Exit Activities.

NOTE F:    Other Expense

The minority interest in subsidiaries primarily represents the outside partnership interest in Wilmington Partners L.P., (the Partnership). The remaining partnership interests are held by four wholly owned subsidiaries of the company along with an outside partner with a 22% interest. The Partnership is a separate legal entity from the company, but for financial reporting purposes, assets, liabilities and results of operations 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 H:    Acquisition

On August 8, 2000, Bausch & Lomb completed the acquisition of Groupe Chauvin, a European-based ophthalmic pharmaceuticals company headquartered in Montpellier, France, and several related companies, for a total of approximately $218.0 net of cash acquired. The privately-held companies combined have historically generated sales of nearly $100.0, employ nearly 800 people, and have operations in France, Germany, the U.K., Switzerland, the Benelux countries, and Portugal. Bausch & Lomb financed the acquisition through the use of cash reserves generated offshore.
     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 (IPR&D) and liabilities based upon their respective fair values. The excess of the purchase price over the value of identified assets and liabilities has been recorded as goodwill and is being amortized on a straight-line basis over twenty-five years.
     The useful lives of identifiable intangibles and goodwill were determined based upon an evaluation of pertinent factors, including consideration of legal, regulatory and contractual provisions which could limit the maximum useful life and management's judgement and in some instances, the reports of independent appraisers.  After the evaluation of these factors identified previously, it was determined that the associated goodwill related explicitly to the earnings potential of the business and that the future periods to benefit from these earnings were closely associated with the acquired physician information and customer databases and trade names.
     As required under generally accepted accounting principles, IPR&D of $23.8 was expensed immediately in the prior year quarter ended September 23, 2000, resulting in a non-cash charge to earnings, since the underlying R&D projects had not reached technological feasibility and the assets to be used in such projects had no alternative future use. There have been no significant changes to the projects or the assumptions and estimates associated with IPR&D.
     Management is primarily responsible for estimating the fair value of assets and liabilities obtained through acquisitions and has conducted due diligence in determining fair values. Management made estimates and assumptions at the time of the acquisition that affect the reported amounts of assets, liabilities and expenses, including IPR&D, resulting from such an acquisition. Actual results could differ from those amounts.

NOTE I:    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. The fair value of these investments is determined based on market prices. At the end of the second 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 1999, as reported in the company's Form 10-K for the year ended December 25, 1999. During the first quarter of 2001, approximately 500,000 shares or 22% of the company's equity interest, were sold resulting in a realized gain of $3.5, net of taxes. At the end of the second quarter of 2001, the remaining investment was valued at $65.9. A resulting unrealized holding gain, net of taxes, of $12.3 for the quarter ended June 30, 2001, was recorded as reflected in Note C: Comprehensive Income.

NOTE J:    New Accounting Pronouncements

NOTE K:    Other Matters

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. This matter has been referred to arbitration. The company does not believe that the outcome of these proceedings will have a material adverse effect on its financial condition.
     On April 13, 2001, a shareholder class action lawsuit was filed in the U.S. District for the Western District of New York, naming the company and its Chairman and Chief Executive Officer, William M. Carpenter. The complaint alleges that the value of the company's stock was inflated artificially by alleged false and misleading statements about expected financial results. The plaintiff seeks to represent a class of shareholders who purchased company common stock between April 13, 2000 and August 24, 2000. No substantive action has taken place in this matter. The company intends to defend itself vigorously against these claims.
     The company is engaged in various lawsuits, claims, investigations and proceedings including patent, commercial and environmental matters that are in the ordinary course of business. The company cannot at this time estimate with any certainty the impact of these matters on its financial position.

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 2001 outlook. References within this financial review to earnings per share refer to diluted earnings per share.

CONTINUING OPERATIONS

Total net sales for the second quarter and six months ended June 30, 2001 were $414 and $826, respectively. This represents a $41 or 9% decrease for the quarter from 2000 and a $38 or 4% decrease from the prior year. On a constant dollar basis (excluding the effect of foreign currency exchange rates) revenue decreased 5% for the quarter and remained flat on a year to date basis.
     The Americas segment revenues for the quarter were $184, a decline of $64 or 26% compared to the prior year. Year to date, revenues declined $94 or 20% from 2000.
     The Asia segment revenues totaled $83 for the quarter and $152 for the first six months of 2001, a decrease from the prior year of 12% and 9%, respectively. In constant dollars, for the quarter, the decrease was 3% and remained flat year to date.
     The revenues in the Europe segment were $147 for the quarter, an increase of 31% in actual dollars and 42% in constant dollars. Year to date, revenues were $292, an increase of 32% in actual dollars and 44% in constant dollars. Excluding revenues attributable to the acquisitions of Groupe Chauvin and Woehlk, Europe segment revenues for the quarter decreased 1% and increased 7%, and on a year to date basis were flat and increased 8%, in actual and constant dollars, respectively. Revenues in Germany were $44 for the quarter and $88 year to date, an increase of 25% and 26 % over the prior year, respectively, primarily due to incremental revenue from Woehlk.
     Sales in markets outside the U.S. totaled $251 in the second quarter of 2001, an increase of $33 or 15% for the quarter compared with the 2000 period. Year to date, revenues were $482 and increased $68 or 17% compared with the 2000 period. Sales outside the U.S. for the quarter represented approximately 61% of consolidated revenues in 2001 and 48% in 2000. Excluding the impact of currency, revenues outside the U.S. increased 25% and 27% for quarter and year to date, respectively.
     U.S. sales totaled $163 in the second quarter, a decrease of $74 or 31% from the comparable quarter period in 2000. Year to date U.S. sales totaled $344, a decrease of $106 or 24%.

     The following table presents sales by major product lines for the quarters and six months ended June 30, 2001 and June 24, 2000.

Lens Care Revenues

Revenues for lens care products were $97 for the second quarter of 2001, a decrease of 26% compared to the same period last year. In constant dollars, sales decreased by 22% compared to the same period last year. Year to date, revenues were $204, a decrease of 17% from the prior year. Sales of lens care products in the Americas segment decreased 40% for the quarter while lens care sales in Asia and Europe segments combined decreased 4% in actual dollars and increased 5% in constant dollars. The decline in the Americas was driven by the ongoing efforts of U.S. retailers to reduce their inventories of lens care products due to an overall decline in consumer demand. During the second quarter, the company significantly reduced promotions to retailers in order to accelerate the reduction of excess retail inventories of existing products and bring customer orders in balance with consumer demand as quickly as possible. In Asia and Europe higher sales of the ReNu line and incremental sales from acquisitions were offset by the impact of currency.

Contact lens product revenues were $116 for the second quarter of 2001, a decrease of 8% as compared to 2000. In constant dollars, contact lens revenue decreased 2%. Year to date, revenues were $231, a decrease of 10% from the prior year. In the Americas segment, contact lens sales were down 15% for the quarter, with strong sales of SofLens66 toric and PureVision more than offset by declines in older offerings. Sales of contact lenses in Asia and Europe segments combined decreased 4% in actual dollars and increased 6% in constant dollars in the second quarter. Constant dollar gains in Asia and Europe were driven by incremental sales from the acquisition of Woehlk in Europe, and strong sales of planned replacement and disposable lenses in Europe and portions of Asia.

Pharmaceutical Revenues

Revenues for pharmaceutical products were $87 for the second quarter, an increase of 22% from the same period last year. Excluding the impact of currency, revenues were up 25% compared to the second quarter of the prior year. Year to date, revenues were $166, an increase of 16% and 19% over the prior year, in actual and constant dollars, respectively. In the Americas segment, pharmaceutical revenues were down 16% for the quarter and down 23% year to date. These results reflect lower pricing levels in 2001 as a result of competitive pressure, which drove down pricing in the company's generic business in the second half of 2000. In Asia and Europe segments combined, pharmaceuticals sales were up significantly for the second quarter and year to date, primarily as a result of incremental revenues from the acquisition of Groupe Chauvin.

Cataract Revenues

Revenues from the company's cataract products for the second quarter of 2001 were $75, a 5% decrease compared to the same period in 2000. Revenues on a year to date basis were $153, a 2% increase over the same period in 2000. Excluding the impact of currency, revenues decreased 2% for the quarter and increased 6% year to date. Cataract sales in the Americas segment were down 12% in the current quarter, driven by disruption in the supply of certain key accessory products. Sales of cataract products outside the Americas were up 5% in the second quarter, and increased 13% in constant dollars. Sales outside the Americas benefited from strong sales of the acrylic foldable intraocular lens acquired from Groupe Chauvin, as well as improved supply of the company's existing foldable intraocular lenses.

Refractive Revenues

Refractive products for the second quarter of 2001 provided $39 in revenue, a 19% decrease over the same period in 2000. Year to date, revenues were $72, a decrease of 15% from the prior year. Excluding the impact of currency, revenues decreased 17% and 12% for the quarter and year to date, respectively. The decline was driven by results in the Americas segments, where market disruption caused by the cessation of the North American operations of certain large chains of refractive surgery centers as well as continued soft demand for capital equipment in the U.S., led to significantly lower sales than in the prior period. Combined revenues in Europe and Asia increased 24% in constant dollars for the quarter due to a robust growth in refractive surgery procedures and continued strong demand for our Zyoptix system for customized refractive surgery.

Costs & Expenses and Operating Earnings

Amounts in this section are calculated on a "management basis" and comparisons to 2000 exclude restructuring charges and asset write-offs, acquisition costs and other non-recurring items.

     The ratio of costs of products sold to sales was 44.7% during the second quarter of 2001, versus 40.6% for the same period of 2000. For the six-month period, this ratio was 45.2% in 2001 compared to 42.5% in 2000. The margin decline from the prior year resulted from the impact of changes in currency exchange rates, as well as the change in product mix due to the significantly lower sales of higher margin lens care products, and price declines in the U.S. generic pharmaceuticals business.
     Selling, administrative and general expenses, including corporate administration, were 42.4% of sales in the second quarter of 2001 compared to 38.2% in 2000. Year to date, these expenses were 42.9% versus 39.2% in the same period of 2000. These results reflect both the impact of a lower sales base than prior year, and increased expenses, including amortization, associated with acquired businesses. These higher expenses were partially mitigated by administrative savings realized through restructuring, and a modest benefit from currency swings.
     Research and development expenses totaled $32 in the second quarter of 2001, an increase of $3 over 2000. This represented 7.7% of sales in 2001, up from 6.2% in 2000. Year to date, the ratio was 7.4% versus 6.2% in 2000. The increase in research and development spending was primarily related to the company's development of new applications for the Envision TD implant technology for treating retinal and other diseases of the back of the eye.
     Operating earnings for the second quarter of 2001 decreased $47, to $22, representing 5.2% of net sales versus 15.0% from the prior year period. Year to date, operating earnings at $37 were down $68 compared to 2000. The decline in operating earnings was primarily the result of lower sales levels as well as the factors described above.

Other Income And Expenses

Income from investments totaled $9 and $24 for the second quarter and six months ended June 30, 2001, a decrease of $4 and $5 compared to the same periods in 2000. This decrease reflects lower average investment levels and investment rates offset by $5 gain on sale of Charles River stock in the first quarter of 2001. Interest expense of $17 and $35 for the second quarter and six months ended June 30, 2001, decreased $0.4 and $0.5, respectively, compared to the same periods in 2000. In accordance with SFAS No. 133, the company recognized investment income of $0.7 and $1.6 for the second quarter and six months ended June 30, 2001, offset by investment expense of $0.6 and $1.4, respectively, related to foreign currency cash flow hedges.
     Foreign currency gains of $1.8 during the second quarter of 2001 decreased $0.5 as compared to the prior year period gain of $2.3.

     Other income for the six months ended June 24, 2000 consisted of proceeds from a patent litigation settlement with Alcon. The settlement agreement resolved the patent infringement case Bausch & Lomb filed against Alcon in October 1994. Under the terms of the settlement agreement, Alcon made an up-front payment to Bausch & Lomb of $25, which was recorded as income in the first quarter of 2000. Additionally, Alcon will pay Bausch & Lomb a stream of royalties over the next seven years for a worldwide license under Bausch & Lomb's patent for the simultaneous use of a chemical disinfecting solution with an enzyme cleaning product for contact lens care.
     During the first quarter ended March 31, 2001, a deferred tax benefit was recorded to reflect a change in the statutory tax rate associated with the company's joint venture in China. This benefit was offset by an increase in the company's minority interest expense. The tax rate for the six months ended June 30, 2001 was 35%, excluding the effect of this adjustment.

OTHER FINANCIAL DATA

Dividends declared on common stock were $0.26 per share in the second quarters of both 2001 and 2000. The return on average shareholders' equity was 1.5% and 28.43 % for the twelve-month periods ended June 30, 2001 and June 24, 2000, respectively. The return on equity as of June 24, 2000 was higher due to the effect of the gain on divestiture from both the sunglass and healthcare businesses recorded in the twelve months period preceding.

The company expects that its revenues and operating earnings will strengthen in the second half of 2001 over the results reported year-to-date. The current volatility of the markets for a number of the company's key products and the volatility of foreign currency exchange rates, however, make it difficult for the company to set more specific expectations for the rest of the year.

     Sales of lens care products could be volatile for the remainder of this year. Total U.S. demand for all lens care products has been declining, creating lower inventory requirements for the company's retail customers. Although the company believes that excess retail inventories of its lens care products in the U.S. were significantly reduced during the second quarter, as a result of the trends in the market, the company cannot be certain when orders from its retail customers will be in balance with consumer demand. In addition, the company has noted stiffening price competition for lens care products in Japan. This, coupled with the current economic conditions in that country, could put pressure on sales in that market.

     The company anticipates that revenues from contact lens products during the second half of 2001 will continue to benefit from growing demand for its newer products, such as SofLens66 toric lenses and PureVision. Growth from those products, however, is expected to be at least partially offset by continued decline in sales of products based on older technology.

     Management anticipates continued strong year-over-year growth in sales of pharmaceutical products for the remainder of this year. Results in this product category are expected to benefit from incremental sales from the Groupe Chauvin business acquired in the third quarter of 2000, new product introductions and comparisons to similar pricing environment for the company's U.S. multi-source pharmaceutical products in the latter half of the year.

     Supply constraints for some key products suppressed second quarter sales of products for cataract surgery. Although management is taking corrective action to address these supply difficulties, sales in the second half of the year may continue to be impacted by these issues.

     The company's revenue from products for refractive surgery are likely to continue to be moderated by trends in North America, where customer demand for new capital equipment and disposables has been very soft. The company believes that a number of factors have contributed to the difficult conditions in these markets, including slowing growth in the number of refractive surgery procedures, market disruption caused by the closure of dozens of refractive surgery centers and concern over a slowing economy. The company believes these factors will continue to affect both the North American market and its sales there for some time, making it difficult to forecast results in the short-term. Outside North America, the company is enjoying robust demand for its refractive surgery products and anticipates that trend to continue.

Information Concerning Forward-Looking Statements

When used in this discussion, the words "anticipate," "should," "expect," "estimate," "project" "will" and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report under the heading "Outlook" and elsewhere 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 currency exchange rates, 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, the impact of company performance on its financing costs, 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, the financial well-being of key customers, 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 continued successful implementation of efforts in managing and reducing costs and expenses, 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 2000 Annual Report on Form 10-K.