NEW
YORK
|
16-0345235
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
ONE
BAUSCH & LOMB PLACE, ROCHESTER, NY
|
14604-2701
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class
|
Name
of each exchange on which registered
|
Common
Stock, $0.40 par value
|
New
York Stock Exchange
|
Part
I
|
Page
|
||
Item
1.
|
Business
|
4
|
|
Item
1A.
|
Risk
Factors
|
8
|
|
Item
1B.
|
Unresolved
Staff Comments
|
21
|
|
Item
2.
|
Properties
|
21
|
|
Item
3.
|
Legal
Proceedings
|
21
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
25
|
|
Part
II
|
|||
Item
5.
|
Market
for Bausch & Lomb Incorporated's Common Stock, Related Shareholder
Matters and Issuer Purchases of Equity Securities
|
26
|
|
Item
6.
|
Selected
Financial Data
|
28
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
29
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
59
|
|
Item
8.
|
Financial
Statements and Supplementary Data
|
60
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
107
|
|
Item
9A.
|
Controls
and Procedures
|
107
|
|
Item
9B.
|
Other
Information
|
111
|
|
Part
III
|
|||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
113
|
|
Item
11.
|
Executive
Compensation
|
118
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
144
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
146
|
|
Item
14.
|
Principal
Accounting Fees and Services
|
147
|
|
Part
IV
|
|||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
148
|
|
Signatures
|
149
|
||
Exhibit
Index
|
153
|
||
Exhibits
|
(Attached
to the Report on Form 10-K)
|
· |
unexpected
changes in foreign regulatory
requirements;
|
· |
differing
local product preferences and product
requirements;
|
· |
political
and economic instability;
|
· |
changes
in foreign medical reimbursement and coverage policies and
programs;
|
· |
diminished
protection of intellectual property in some countries outside the
United
States;
|
· |
trade
protection measures and import or export licensing
requirements;
|
· |
potential
tax costs associated with repatriating cash from our non-U.S.
subsidiaries;
|
· |
difficulty
in staffing and managing foreign
operations;
|
· |
differing
labor regulations; and
|
· |
potentially
negative consequences from changes in tax
laws.
|
· |
increase
our vulnerability to general adverse economic and industry
conditions;
|
· |
require
us to dedicate a substantial portion of our cash flow from operations
to
payments on our indebtedness, thereby reducing the availability of
our
cash flow to fund working capital, capital expenditures, acquisitions,
research and development efforts and other general corporate
purposes;
|
· |
limit
our flexibility in planning for, or reacting to, changes in our business
and the industry in which we
operate;
|
· |
place
us at a competitive disadvantage if any of our competitors has less
debt;
|
· |
limit
our ability to borrow additional funds;
and
|
· |
make
it more difficult for us to satisfy our obligations with respect
to our
debt, including our obligation to repay amounts borrowed under our
credit
facilities or repurchase outstanding public debentures under certain
circumstances.
|
· |
our
business performance and financial
results;
|
· |
changes
in our markets;
|
· |
pending
and threatened litigation against
us;
|
· |
the
Audit Committee's and/or other Company investigations; and
|
· |
our
assessment of our internal control over financial
reporting.
|
· |
difficulties
in the integration of the operations, technologies, products and
personnel
of the acquired company and establishment of appropriate accounting
controls and reporting procedures and other regulatory compliance
procedures;
|
· |
risks
of entering markets in which we have no or limited prior
experience;
|
· |
potential
loss of employees;
|
· |
an
inability to identify and consummate future acquisitions on favorable
terms or at all;
|
· |
diversion
of management’s attention away from other business
concerns;
|
· |
expenses
of any unknown or potential liabilities of the acquired
company;
|
· |
expenses,
including restructuring expenses, to shut down our own locations
and/or
terminate our employees;
|
· |
dilution
of earnings per share; and
|
· |
risks
inherent in accounting allocations and consequences
thereof.
|
· |
cease
selling or using any of our products that incorporate the challenged
intellectual property, which would adversely affect our
revenue;
|
· |
obtain
a license from the holder of the intellectual property right alleged
to
have been infringed, which license may not be available on reasonable
terms, if at all; and
|
· |
redesign
or, in the case of trademark claims, rename our products to avoid
infringing the intellectual property rights of third parties, which
may
not be possible and could be costly and time consuming if it is possible
to do so.
|
· |
be
expensive and time consuming to
defend;
|
· |
cause
us to cease making, licensing or using products that incorporate
the
challenged intellectual property;
|
· |
require
us to redesign or reengineer our products, if
feasible;
|
· |
divert
management’s attention and resources;
or
|
· |
require
us to enter into royalty or licensing agreements in order to obtain
the
right to use a necessary product, component or
process.
|
· |
inability
to attract clinical investigators for
trials;
|
· |
inability
to recruit patients at the expected
rate;
|
· |
failure
of the trials to demonstrate a product's safety or
efficacy;
|
· |
unavailability
of FDA or other regulatory agencies' accelerated approval
processes;
|
· |
inability
to follow patients adequately after
treatment;
|
· |
changes
in the design or formulation of a
product;
|
· |
inability
to manufacture sufficient quantities of materials to use for clinical
trials;
|
· |
unforeseen
governmental or regulatory delays;
|
· |
failure
of manufacturing facilities to meet regulatory requirements;
or
|
· |
failure
of clinical trial management, oversight or implementation to meet
regulatory requirements.
|
Plan
Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
|
Weighted
Average Exercise Price of Outstanding Options, Warrants and
Rights
|
Number
of Securities Remaining Available for Future Issuance
|
|||||||
Options
|
||||||||||
Equity
compensation plans approved by shareholders
|
5,217,314
1
|
$
|
50.70
|
6,419,933
1
|
||||||
Equity
compensation plans not approved by shareholders
|
436,566
2
|
$
|
40.28
|
-
2
|
||||||
Total
Options
|
5,653,880
|
$
|
49.90
|
6,419,933
|
||||||
Restricted
Stock Awards
|
||||||||||
Equity
compensation plans approved by shareholders
|
567,278
3
|
-
|
||||||||
Equity
compensation plans not approved by shareholders
|
-
2
|
-
|
||||||||
Total
Restricted Stock Awards
|
567,278
|
-
|
1
|
Represents
awards issued under the 1990 Stock Incentive Plan and the 2003 Long-Term
Incentive Plan. Shares remaining available for issuance consist of
6,350,232 from the 2003 Plan of which no more than 1,572,164 shares
may be
issued as grants other than options and SARs and 69,701 shares are
available under the Annual Retainer Stock Plan for Non-Employee Directors.
There are no shares available under the 1990 Stock Incentive
Plan.
|
2
|
The
2001 Stock Incentive Plan was approved by the Board of Directors
on
January 22, 2001. The Plan provided for an annual pool of shares
for grant
of options and restricted shares equal to two percent of outstanding
shares. Eligible participants include all employees but not officers
or
directors. Options granted under the Plan have an option price equal
to
100 percent of the fair market value of the stock on the date of
grant and
a term of ten years. The options typically vest ratably over three
years
and restricted shares typically vest 50 percent after two years and
50
percent after three years with vesting contingent upon a continued
employment relationship with the Company. Effective January 1, 2003,
the
Board amended this Plan to allow for no further awards under this
Plan.
|
3
|
Included
in this number are performance share awards that were granted under
the
1990 Stock Incentive Plan which upon achievement of performance goals
may
be distributed immediately or deferred under the Restricted Stock
Deferred
Compensation Plan as elected by the participant. At December 30,
2006,
318,442 shares had been deferred and will be paid out in shares based
on
the election made by the
participant.
|
Period
|
Total
Number of Shares Purchased 1
|
Average
Price Paid Per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Programs
2,
3
|
Maximum
Number of Shares that May Yet Be Purchased Under the Programs 2,
3
|
|||||||||
October
1, 2006 - October 28, 2006
|
2,043
|
$
|
52.93
|
1,732
|
2,186,448
|
||||||||
October
29, 2006 - November 25, 2006
|
8,260
|
$
|
52.04
|
370
|
2,186,078
|
||||||||
November
26, 2006 - December 30, 2006
|
773
|
$
|
53.44
|
773
|
2,185,305
|
||||||||
Total
|
11,076
|
$
|
52.31
|
2,875
|
2,185,305
|
1
|
Shares
purchased during the fourth quarter ended December 30, 2006 include
purchases pursuant to a publicly announced repurchase program (see
footnote 2 below), stock compensation plans and deferred compensation
plans.
|
2
|
On
January 27, 2004, the Board of Directors authorized a program to
repurchase up to two million shares of the Company's outstanding
Common
stock. There is no expiration date for this program. During the fourth
quarter ended December 30, 2006, 2,875 shares were repurchased at
an
average price of $53.01. Shares repurchased after November 2005 were
primarily through private transactions with the rabbi trust for the
Company's Deferred Compensation
Plan.
|
3
|
On
July 26, 2005, the Board of Directors approved the purchase of up
to an
additional two million shares of the Company's outstanding Common
stock.
There is no expiration date for this program, and since its approval
no
shares have been repurchased.
|
Date
|
Bausch
& Lomb Incorporated
|
S&P
Healthcare Index
|
S&P
500
|
S&P
Healthcare Equipment Index
|
|||||||||
December
2001
|
$
|
100.00
|
$
|
100.00
|
$
|
100.00
|
$
|
100.00
|
|||||
December
2002
|
97.25
|
81.22
|
77.95
|
87.34
|
|||||||||
December
2003
|
142.01
|
93.42
|
100.27
|
115.32
|
|||||||||
December
2004
|
177.82
|
94.98
|
111.15
|
129.84
|
|||||||||
December
2005
|
188.60
|
101.11
|
116.60
|
129.92
|
|||||||||
December
2006
|
146.02
|
108.70
|
134.97
|
135.27
|
· |
focusing
on research and development programs to yield a robust
pipeline;
|
· |
expanding
the geographic reach of key products, especially in under-penetrated
markets;
|
· |
enhancing
our organizational capabilities by further implementing disciplined
business processes in all areas, particularly sales;
and
|
· |
protecting
the equity represented by the Bausch
& Lomb
brand. In the shorter term, this will include activities to rebuild
that
equity in certain markets where brand image has suffered following
the
outbreak of fungal infections among contact lens wearers and the
MoistureLoc
recall.
|
· |
a
continued focus on faster growing business segments and the launch
of
higher-margin new products in each of our product
categories;
|
· |
favorable
demographic trends, such as the aging of the population and an increase
in
the incidence of myopia and presbyopia;
and
|
· |
opportunities
to further implement Lean manufacturing techniques and other cost
improvements to enhance margins, particularly for contact lenses
and
intraocular lenses.
|
· |
A
valuation allowance against deferred income tax assets which reduced
reported net income by $149, or $2.67 per share, recorded in the
third
quarter. The need for the allowance resulted from anticipated losses
in
early future periods attributed to the U.S. entities to which the
deferred
tax assets relate and uncertainties surrounding when we will return
to
U.S. profitability. The expected losses resulted from, among other
things,
the costs associated with the MoistureLoc
recall and its impact on 2006 financial
results;
|
· |
Incremental
income tax expense of $9, or $0.17 per share, recorded in the third
quarter associated with our repatriating foreign earnings under the
American Jobs Creation Act of 2004 (AJCA);
and
|
· |
Amortization
of inventory step-up totaling $2 before taxes ($1 or $0.03 per share
after
taxes) related to purchase accounting adjustments associated with
the 2005
acquisition of Freda.
|
Net
Sales
|
Percent
Increase/
(Decrease)
Actual
Dollars
|
Percent
Increase/
Decrease
Constant
Currency
|
Percent
of
Total
Company
Net
Sales
|
||||||||||
2006
|
|||||||||||||
Non-U.S.
|
$
|
1,403.9
|
(4
|
)%
|
(4
|
)%
|
61
|
%
|
|||||
U.S.
1
|
888.5
|
-
|
%
|
-
|
%
|
39
|
%
|
||||||
Total
Company 2
|
$
|
2,292.4
|
(3
|
)%
|
(3
|
)%
|
|
||||||
2005
|
|||||||||||||
Non-U.S.
|
$
|
1,462.8
|
7
|
%
|
6
|
%
|
62
|
%
|
|||||
U.S.
1
|
891.0
|
3
|
%
|
3
|
%
|
38
|
%
|
||||||
Total
Company 2
|
$
|
2,353.8
|
5
|
%
|
5
|
%
|
|
||||||
2004
|
|||||||||||||
Non-U.S.
|
$
|
1,370.0
|
14
|
%
|
6
|
%
|
61
|
%
|
|||||
U.S.
1
|
863.5
|
6
|
%
|
6
|
%
|
39
|
%
|
||||||
Total
Company
|
$
|
2,233.5
|
11
|
%
|
6
|
%
|
|
2
|
Amounts
reflect the impact of the voluntary recall of MoistureLoc
discussed in Recent
Developments
above and in
Item 8. Financial Statements and Supplementary Data
under Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution
of
this Annual Report on Form 10-K. Charges associated with the recall
reduced 2005 U.S. net sales by $12.0, and reduced non-U.S. net sales
by
$19.1 and $5.1 in 2006 and 2005,
respectively.
|
2006
1
|
2005
2
|
2004
|
|||||||||||||||||
As
Reported
|
Percent
of
Total
Net
Sales
|
As
Reported
|
Percent
of
Total
Net
Sales
|
As
Reported
|
Percent
of
Total
Net
Sales
|
||||||||||||||
Net
Sales
|
|||||||||||||||||||
Americas
|
$
|
1,007.5
|
44
|
%
|
$
|
1,005.3
|
43
|
%
|
$
|
960.2
|
43
|
%
|
|||||||
Europe
|
831.9
|
36
|
%
|
859.9
|
36
|
%
|
818.9
|
37
|
%
|
||||||||||
Asia
|
453.0
|
20
|
%
|
488.6
|
21
|
%
|
454.4
|
20
|
%
|
||||||||||
$
|
2,292.4
|
$
|
2,353.8
|
$
|
2,233.5
|
||||||||||||||
Operating
Income (Costs)
|
|||||||||||||||||||
Americas
|
$
|
323.6
|
$
|
333.0
|
$
|
326.1
|
|||||||||||||
Europe
|
210.4
|
250.8
|
251.2
|
||||||||||||||||
Asia
|
60.7
|
123.6
|
128.5
|
||||||||||||||||
Research
& Development
|
(223.2
|
)
|
(200.5
|
)
|
(180.6
|
)
|
|||||||||||||
Global
Operations & Engineering
|
(159.2
|
)
|
(131.7
|
)
|
(157.2
|
)
|
|||||||||||||
Segment
Income
|
$
|
212.3
|
$
|
375.2
|
$
|
368.0
|
|||||||||||||
Corporate
Administration 3
|
(98.3
|
)
|
(89.8
|
)
|
(88.9
|
)
|
|||||||||||||
Other
significant charges 4
|
-
|
(1.9
|
)
|
-
|
|||||||||||||||
Operating
Income
|
$
|
114.0
|
$
|
283.5
|
$
|
279.1
|
1
|
2006
amounts reflect the impact of the voluntary recall of MoistureLoc
discussed in Recent
Developments
above and in Item
8. Financial Statements and Supplementary Data under
Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution in
this Annual Report on Form 10-K. Charges associated with the recall
reduced Americas region net sales and operating income by $0.6 and
$0.8,
respectively; Europe region net sales and operating income by $18.0
and
$23.4, respectively; Asia region net sales and operating income by
$0.5
and $1.2, respectively; and increased Global Operations & Engineering
operating costs by $1.3.
|
2
|
2005
amounts reflect the impact of the voluntary recall of MoistureLoc
discussed in Recent
Developments
above and in Item
8. Financial Statements and Supplementary Data under
Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution in
this Annual Report on Form 10-K. Charges associated with the recall
reduced Americas region net sales and operating income by $12.4 and
$25.0,
respectively; Asia region net sales and operating income by $4.7
and
$11.0, respectively; increased Global Operations & Engineering
operating costs by $1.2; and increased corporate administration expense
by
$1.7.
|
4
|
Other
significant charges represent purchase accounting adjustments related
to
the acquisition of Freda.
|
2006
vs. 2005
|
2005
vs. 2004
|
|||||||||||||||||||||
2006
|
2005
|
Percent
Change
Actual
Dollars
|
Percent
Change
Constant
Currency
|
2004
|
Percent
Change
Actual
Dollars
|
Percent
Change
Constant
Currency
|
||||||||||||||||
Americas
|
$
|
1,007.5
|
$
|
1,005.3
|
-
|
%
|
-
|
%
|
$
|
960.2
|
5
|
%
|
4
|
%
|
||||||||
Europe
|
831.9
|
859.9
|
(3
|
)%
|
(4
|
)%
|
818.9
|
5
|
%
|
5
|
%
|
|||||||||||
Asia
|
453.0
|
488.6
|
(7
|
)%
|
(5
|
)%
|
454.4
|
8
|
%
|
7
|
%
|
|||||||||||
Total
Company
|
$
|
2,292.4
|
$
|
2,353.8
|
(3
|
)%
|
(3
|
)%
|
$
|
2,233.5
|
5
|
%
|
5
|
%
|
· |
Americas
segment net sales were essentially flat with 2005. Current-year figures
include $1 in sales return and customer rebate provisions associated
with
the MoistureLoc
recall, whereas 2005 amounts included $12 of such provisions. Excluding
those items, Americas segment net sales declined 1 percent on a reported
basis, and 2 percent in constant currency in 2006, with gains in
contact
lenses, pharmaceuticals and cataract surgery products essentially
offset
by declines in the lens care and refractive surgery categories.
|
· |
Europe
segment net sales decreased 3 percent on a reported basis and 4 percent
in
constant-currency, largely reflecting $18 in provisions related to
the
MoistureLoc
recall in 2006 compared to no such provisions in the prior year,
and
revenues of $7 from Woehlk in 2005 and no corresponding revenues
in 2006.
Excluding these effects, Europe net sales were essentially flat with
2005
on a reported basis, and down 1 percent in constant currency, with
higher
sales of pharmaceuticals essentially offset by lower sales of vision
care
products.
|
· |
Asia
segment net sales decreased 7 percent compared to 2005, or 5 percent
in
constant currency. Current-year figures include $1 in sales return
and
customer rebate provisions associated with the MoistureLoc
recall, whereas prior-year figures included $5 of such provisions.
Both
years also include incremental sales from Freda ($60 in 2006 and
$18 in
2005). Excluding those items from both periods, sales declined 17
percent,
or 16 percent on a constant-currency basis, reflecting lower sales
of
vision care and surgical products. The Asia region, particularly
China,
has experienced the most significant negative impact on our non-lens
care
product lines as a result of the MoistureLoc
recall. We have initiated brand rebuilding programs to specifically
address this situation in order to recoup as much lost market share
and
distribution as possible and rebuild the reputation of the Bausch
& Lomb
brand.
|
· |
Americas
segment net sales increased 5 percent from 2004, or 4 percent in
constant
currency. Those figures include $12 in sales return and consumer
rebate
provisions associated with the MoistureLoc
recall.
Excluding those items, Americas segment net sales grew 6 percent,
or 5
percent in constant currency. Gains were led by above-market performance
for contact lenses and higher sales of cataract surgery
products.
|
· |
Europe
segment net sales increased 5 percent on both a reported and
constant-currency basis. Gains were led by higher sales of pharmaceutical
and vision care products, which more than offset declines for the
refractive surgery category and the impact of our divesting our German
Woehlk contact lens business in the 2005 third quarter. The MoistureLoc
product recalled in Europe was both manufactured and sold in 2006;
therefore, sales return and customer rebates of $18 associated with
the
recall were not recorded in the Europe segment in 2005, but were
expensed
in 2006.
|
· |
The
Asia segment reported net sales gains of 8 percent compared to 2004,
or 7
percent in constant currency. Those figures include $5 in sales return
and
consumer rebate provisions associated with the MoistureLoc
recall as well as $18 in incremental sales associated with the acquisition
of Freda. Excluding those items, Asia segment net sales grew 5 percent,
or
4 percent in constant currency, with gains led by higher sales of
contact
lenses and cataract surgery
products.
|
2006
vs. 2005
Percent
Increase (Decrease)
|
2005
vs. 2004
Percent
Increase (Decrease)
|
||||||||||||
Actual
Dollars
|
Constant
Currency
|
Actual
Dollars
|
Constant
Currency
|
||||||||||
Contact
Lens
|
8
|
%
|
7
|
%
|
15
|
%
|
14
|
%
|
|||||
Lens
Care
|
(12
|
)%
|
(13
|
)%
|
-
|
%
|
(1
|
)%
|
|||||
Pharmaceuticals
|
6
|
%
|
6
|
%
|
3
|
%
|
3
|
%
|
|||||
Cataract
and Vitreoretinal
|
2
|
%
|
2
|
%
|
7
|
%
|
6
|
%
|
|||||
Refractive
|
(5
|
)%
|
(6
|
)%
|
(4
|
)%
|
(6
|
)%
|
|||||
Total
Americas
|
-
|
%
|
-
|
%
|
5
|
%
|
4
|
%
|
· |
Contact
lens category growth in
2006 was mainly due to sales of the PureVision
brand of silicone hydrogel contact lenses, which more than doubled
from
2005. Sales benefited from the introduction of PureVision
Toric lenses for people with astigmatism and PureVision
Multi-Focal for people with presbyopia in the United States and from
higher shipments of PureVision
SVS lenses as the market continues to convert to silicone hydrogel
platforms. Somewhat offsetting those gains were expected declines
in sales
of the SofLens
Toric and SofLens
Multi-Focal lines, and our older technology two-week disposable offerings,
reflecting market shifts to silicone hydrogel lenses, combined with
higher
promotional activities (recorded as an offset to revenues) for silicone
hydrogel lenses. Fourth-quarter Americas contact lens revenues declined
5
percent on a reported basis and 6 percent in constant currency, following
three quarters of growth. While we increased our U.S. market share
of
patient fits slightly in the fourth quarter as compared to the prior
year,
fourth-quarter sales trends reflected slower market growth in the
second
half of 2006, combined with declining sales of older soft contact
lens
offerings as consumers transition to silicone hydrogel
products.
|
· |
Lens
care net sales in 2005 were reduced by $12 in provisions for sales
returns
and consumer rebates associated with the MoistureLoc
recall, whereas 2006 net sales were reduced by $1 for such provisions
(see
Item
8. Financial Statements and Supplementary Data
under Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution of
this Annual Report on Form 10-K for further discussion). Excluding
these
charges from both years, Americas region lens care sales declined
15
percent in 2006, or 16 percent on a constant-currency basis, reflecting
the lack of MoistureLoc
sales in 2006, and market share losses for our lines of multipurpose
solutions following the product recall. Promotional program activities
(recorded as an offset to revenues) were also higher in 2006, as
we
executed a variety of brand rebuilding programs in an effort to regain
market share and convert former MoistureLoc
users to our ReNu
MultiPlus
and ReNu
Multipurpose lines. We estimate that our unit share of the U.S.
multipurpose solutions market declined from approximately 30 percent
prior
to the recall to approximately 18 percent exiting 2006. We will continue
to support our lens care category with a variety of advertising and
promotion efforts in 2007 and expect to continue to regain some of
our
lost U.S. market share.
|
· |
Pharmaceuticals
revenue gains were mainly due to higher sales of ocular vitamins,
continued prescription growth for our lines of steroid drops containing
loteprednol etabonate and increased revenues from Retisert
drug delivery implants. These trends were partly offset by declines
in
sales of OTC general eye care products and certain non-ophthalmic
generic
drugs.
|
· |
Sales
gains for cataract and vitreoretinal products were led by our lines
of
IOLs, mainly reflecting higher shipments of premium-priced aspheric
silicone IOL offerings. In total, constant-currency IOL sales grew
approximately 8 percent, with silicone IOL sales up more than 10
percent.
Sales gains were also reported for our lines of handheld surgical
instruments. The trends in IOLs and instruments more than offset
declines
for our lines of phacoemulsification equipment, which reflected fewer
systems placements in 2006 as our customers await the launch of our
next-generation microsurgical platform, Stellaris,
which we expect to be commercially available in the first half of
2007.
|
· |
In
the refractive category, sales of per-procedure cards increased about
5
percent on a constant-currency basis in 2006, as did revenues associated
with service contracts. These gains were more than offset by lower
sales
of microkeratome blades, reflecting overall market declines in procedures
combined with inroads by competitive femtosecond technologies, and
by
lower sales of lasers and diagnostic
equipment.
|
· |
Contact
lens category growth reflected
the reintroduction of the PureVision
brand of silicone hydrogel contact lenses in the United States as
well as
continued growth for SofLens
Toric and SofLens
Multi-Focal contact lenses. Moderating that performance was a continued
decline in sales of our older, conventional hydrogel two-week contact
lenses, reflecting the overall market shift to silicone hydrogel
materials. Sales of SofLens
Toric
contact lenses increased more than 10 percent from 2004. As expected,
dollar growth for this product has begun to moderate, reflecting
the
competitive impact of new silicone hydrogel toric offerings. We launched
PureVision
Toric contact lenses in the United States on a limited basis in October
2005 and reached full commercial distribution in the second quarter
of
2006. Sales of SofLens
Multi-Focal contact lenses grew more than 30 percent in the Americas
region in 2005, reflecting our continued leading market
position.
|
· |
Sales
in the lens care category were essentially flat mainly due to sales
returns and consumer rebate provisions associated with our voluntary
recall of MoistureLoc
which was reflected as a subsequent event. Excluding the impact of
the
recall, Americas region constant-currency lens care sales increased
3
percent, reflecting U.S. market share gains for our lines of multipurpose
solutions and higher sales of Boston
lens care solutions for RGP contact
lenses.
|
· |
Pharmaceuticals
sales increases were mainly attributable to incremental sales of
Zylet
combination eye drops, as well as higher sales of Lotemax
steroid eye drops. Those gains were largely offset by expected declines
in
sales of two non-ophthalmic drugs in our multisource pharmaceuticals
portfolio. Prescriptions for our lines of steroid eye drops containing
loteprednol etabonate continued to trend positively throughout 2005,
with
Lotemax
and Alrex
prescriptions reaching all-time highs. Our vitamins business grew
1
percent in constant currency. As expected, we faced difficult comparisons
to the prior year, when we launched PreserVision
soft gels and customers were carrying inventories of both tablets
and gel
formulations.
|
· |
Sales
gains for cataract and vitreoretinal products were led by our lines
of
silicone IOLs, which increased more than 15 percent. That performance
was
mainly due to our SofPort
lines of silicone IOLs, which grew at an even faster rate and benefited
from market share gains and strong market acceptance for the SofPort
AO
IOL featuring an aspheric optics design. Phacoemulsification product
sales
increased more than 5 percent, reflecting an increase in revenues
for
Millennium
microsurgical systems and disposable products used in cataract surgery
procedures. The increase in Millennium
net sales reflects primarily a change in the type of system placements
in
2005 as compared to the prior year. We placed more units under direct
sales agreements in 2005 compared to 2004, when we placed more units
under
operating lease arrangements requiring revenue to be recognized over
a
longer period of time.
|
· |
Sales
declines in the refractive category were mainly due to lower sales
of
lasers and microkeratome blades. These declines were partially offset
by
higher sales of per-procedure cards, especially those used for
Zyoptix
personalized vision correction
procedures.
|
2006
vs. 2005
Percent
Increase (Decrease)
|
2005
vs. 2004
Percent
Increase (Decrease)
|
||||||||||||
Actual
Dollars
|
Constant
Currency
|
Actual
Dollars
|
Constant
Currency
|
||||||||||
Contact
Lens
|
(6
|
)%
|
(7
|
)%
|
5
|
%
|
5
|
%
|
|||||
Lens
Care
|
(21
|
)%
|
(22
|
)%
|
6
|
%
|
8
|
%
|
|||||
Pharmaceuticals
|
5
|
%
|
4
|
%
|
11
|
%
|
11
|
%
|
|||||
Cataract
and Vitreoretinal
|
1
|
%
|
-
|
%
|
2
|
%
|
2
|
%
|
|||||
Refractive
|
(1
|
)%
|
(2
|
)%
|
(13
|
)%
|
(13
|
)%
|
|||||
Total
Europe
|
(3
|
)%
|
(4
|
)%
|
5
|
%
|
5
|
%
|
· |
Lower
net sales of contact lenses were mainly due to SofLens
One Day lenses (reflecting recent competitive entries in the segment)
and
certain older lines that we are in the process of discontinuing as
the
market transitions to silicone hydrogel platforms. We recently launched
in
Europe our new aspheric daily disposable offering, SofLens
Daily Disposable contact lenses. Based on very enthusiastic reaction
to
this lens by both eye care practitioners and consumers, we believe
the
SofLens
Daily Disposable brand will contribute to growth in our contact lens
business in the region in 2007. Our PureVision
line of silicone hydrogel contact lenses continues to perform strongly
in
Europe, with the brand posting gains of more than 30 percent in 2006.
That
growth was due to incremental sales from PureVision
Multi-Focal lenses combined with double-digit gains for both PureVision
SVS and PureVision
Toric lenses. In addition, 2005 contact lens sales figures include
$7 in
revenues from our Woehlk business in Germany, which we divested in
the
third quarter of that year. Excluding Woehlk results from the prior
year,
Europe region contact lens sales decreased 4 percent in
2006.
|
· |
Lens
care sales declines in 2006 reflect the impact of the MoistureLoc
recall and include $18 of sales returns and consumer coupon provisions
associated with the recall (see Item
8. Financial Statements and Supplementary Data
under Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution of
this Annual Report on Form 10-K for further discussion). Excluding
these
items, year-to-date European lens care sales were down approximately
6
percent from the prior year, due to declines in our lines of multipurpose
solutions, which more than offset gains for our lines of hydrogen
peroxide
and RGP solutions in the region. The lower sales of multipurpose
solutions
mainly reflect the lack of MoistureLoc
sales following the recall.
|
· |
Constant-currency
European pharmaceuticals sales growth in 2006 was primarily attributable
to our lines of ocular vitamins and dry eye
medications.
|
· |
In
the cataract and vitreoretinal category, higher sales of IOLs and
ancillary products used in cataract surgery (such as disposables
and
custom packs and trays) were essentially offset by lower placements
of
phacoemulsification equipment. Higher sales of IOLs were mainly due
to our
Akreos
line of acrylic offerings, which grew more than 15 percent on a
constant-currency basis.
|
· |
In
the refractive surgery category, higher sales of per-procedure cards,
microkeratome components and lasers were more than offset by lower
sales
of diagnostic equipment, microkeratome blades and service revenue.
|
· |
Contact
lens sales comparisons were impacted by the Woehlk divestiture in
the
third quarter of 2005. Excluding that impact, contact lens net sales
would
have grown approximately 8 percent on a reported basis and 9 percent
in
constant currency. Gains were mainly due to our lines of specialty
products and
PureVision
silicone hydrogel spherical contact lenses. Monthly replacement toric
contact lens revenues increased more than 20 percent, with gains
coming
from a combination of expanded distribution for the PureVision
Toric line and high-single-digit growth for
SofLens
Toric contact lenses. Our multifocal product also posted strong growth,
and we continued to gain market
share.
|
· |
Increased
lens care sales reflected market share gains, especially for our
lines of
multipurpose solutions, which grew approximately 10 percent on the
continued market acceptance of MoistureLoc
solution prior to the market
recall.
|
· |
European
pharmaceuticals sales growth was mainly attributable to our lines
of dry
eye products, ocular nutritionals and anti-infective drugs, coupled
with
expansion into new geographic
markets.
|
· |
Higher
cataract and vitreoretinal sales reflected overall strong performance
in
most markets with the exception of the United Kingdom, where the
number of
procedures declined in 2005 following government initiatives in the
prior
year to decrease the number of patients waiting to have the procedure.
On
a total region basis, growth was largely due to the Akreos
line, as well as higher sales of
viscoelastics.
|
· |
Declines
in sales of refractive surgery products in Europe were consistent
with
overall market trends. Lower sales of equipment and microkeratome
blades
more than offset increased sales of Zyoptix
treatment cards.
|
2006
vs. 2005
Percent
Increase (Decrease)
|
2005
vs. 2004
Percent
Increase (Decrease)
|
||||||||||||
Actual
Dollars
|
Constant
Currency
|
Actual
Dollars
|
Constant
Currency
|
||||||||||
Contact
Lens
|
(7
|
)%
|
(5
|
)%
|
8
|
%
|
7
|
%
|
|||||
Lens
Care
|
(39
|
)%
|
(38
|
)%
|
(5
|
)%
|
(7
|
)%
|
|||||
Pharmaceuticals
1
|
NM
|
NM
|
NM
|
NM
|
|||||||||
Cataract
and Vitreoretinal
|
(2
|
)%
|
(2
|
)%
|
16
|
%
|
13
|
%
|
|||||
Refractive
|
(27
|
)%
|
(28
|
)%
|
(7
|
)%
|
(9
|
)%
|
|||||
Total
Asia
|
(7
|
)%
|
(5
|
)%
|
8
|
%
|
7
|
%
|
1
|
NM
denotes “not meaningful.” Pharmaceuticals category sales include revenues
from the acquisition of Freda in the 2005 fourth quarter ($60.2 in
2006
and $17.8 in 2005), resulting in a calculated growth rate of more
than 100
percent.
|
· |
Asian
contact lens revenue declines were primarily due to the negative
collateral impact resulting from the MoistureLoc
situation, particularly in China, although that business began to
show
signs of recovery late in the year due to a variety of initiatives
we
undertook to regain lost distribution and market share following
the
MoistureLoc
recall; and lower sales of two-week spherical contact lenses in Japan.
Partially offsetting these declines was a benefit associated with
the
recognition of approximately $7 in previously deferred revenue associated
with two Japanese distributors of vision care products. Shipments
to these
distributors were previously recorded as consignment sales because
they
did not meet all of our criteria for revenue recognition as discussed
in
Item
8. Financial Statements and Supplementary Data under
Note
1 — Significant Accounting Policies.
Based on changes in circumstances in 2006, including reductions in
the
amount of inventory carried by these distributors, beginning in the
fourth
quarter of 2006 revenues associated with shipments to these distributors
are recorded at the time of delivery and are no longer being
deferred.
|
· |
Lens
care sales reflect charges associated with the MoistureLoc
recall (see Item
8. Financial Statements and Supplementary Data
under Note
21 — Market Withdrawal of MoistureLoc Lens Care Solution of
this Annual Report on Form 10-K for further discussion) totaling
less than
$1 in 2006 and $5 in 2005. Excluding those charges, sales were down
approximately 40 percent, with declines in most markets in the region.
In
markets other than Japan, declines reflected negative publicity and
consumer concern resulting from the MoistureLoc
recall. We withdrew all multipurpose solutions in Hong Kong and Singapore
through the end of 2006, but resumed sales of ReNu
MultiPlus
solutions in Hong Kong in the first quarter of 2007, and anticipate
a
relaunch in Singapore in 2007. The most significant negative impact
from
the MoistureLoc
situation has been seen in China, despite no confirmed reported infections
in that market. We have initiated brand rebuilding programs to
specifically address this situation in order to regain distribution
and
market share and as noted above, have begun to see signs of recovery.
Constant-currency lens care revenues also declined in Japan in 2006,
mainly reflecting significant pricing activity by a local competitor
and
overall market shifts to one-day contact lenses (which do not require
the
use of lens care solutions).
|
· |
Asia
region pharmaceuticals sales reflect the fourth-quarter 2005 acquisition
of Freda, which contributed approximately $60 in 2006 and $18 in
2005.
Excluding Freda, our Asian pharmaceuticals revenues grew about 10
percent,
largely due to gains from ocular vitamins. Fourth-quarter pharmaceuticals
revenues declined 7 percent from the prior year on a reported basis
and 9
percent in constant currency, mainly reflecting lower sales of
non-ophthalmic products at Freda. We have adopted a distributor selling
model for these non-strategic products, resulting in a lower realized
price than if we had continued to sell them directly to the end
customer.
|
· |
Cataract
and vitreoretinal category constant-currency sales declines were
mainly
due to lower placements of phacoemulsification equipment, which more
than
offset 10-percent higher sales of IOLs. Increased IOL sales were
due to
ongoing geographic expansion and market share gains for the Akreos
line
of acrylic IOLs, which posted growth in excess of 30 percent in the
region
in 2006.
|
· |
Refractive
category sales declines were primarily due to lower laser placements,
partially offset by increased service
fees.
|
· |
Contact
lens sales growth in Asia reflected gains for our lines of specialty
and
silicone hydrogel lenses, including incremental sales from the launch
in
Japan of our latest conventional hydrogel two-week disposable lenses.
Throughout much of the year, our Chinese contact lens sales growth
was
lower than historical trends and internal expectations, reflecting,
in
part, trade disruption following changes we made in some of our
distributor programs early in 2005. That business rebounded in the
fourth
quarter, posting constant-currency growth of approximately 15 percent
compared to the same period in
2004.
|
· |
Lens
care sales declines reflect the sales returns and customer rebate
provisions associated with the MoistureLoc
recall.
Excluding the impact of the recall, Asian constant-currency lens
care
sales were down 3 percent. Declines in China, due to the same distributor
issues discussed above, more than offset 1 percent constant-currency
gains
in Japan, reflecting the market introduction of ReNu
MultiPlus
solution.
|
· |
Historically
we have not had a significant pharmaceuticals business in Asia. In
the
fourth quarter of 2005 we acquired a controlling interest in Freda.
The
acquisition should help accelerate our expansion into the rapidly
growing
Chinese ophthalmic pharmaceuticals market and provide a national
pharmaceuticals sales and distribution network. Further information
with
respect to the Freda acquisition can be found in Item
8. Financial Statements and Supplementary Data
under Note
2 — Acquisitions
of
this Annual Report on Form 10-K. Excluding the Freda acquisition,
our
Asian pharmaceuticals revenues grew about 20 percent on a
constant-currency basis, led by gains for ocular nutritional
products.
|
· |
Growth
in the cataract and vitreoretinal category was mainly driven by gains
for
our lines of IOL and phacoemulsification products. IOL revenues were
up
strongly, largely due to the continued rollout of the Akreos
line
of acrylic IOLs throughout the
year.
|
· |
Lower
sales in the refractive category in Asia reflected declines in laser
and
diagnostic equipment sales. Part of this decline was expected, as
prior-year results included revenues associated with initial customer
adoption of our Zyoptix
laser platform.
|
Net
Sales
|
Percent
Increase
(Decrease)
Actual
Dollars
|
Percent
Increase
(Decrease)
Constant
Currency
|
||||||||
2006
|
||||||||||
Contact
Lens
|
$
|
710.0
|
(3
|
)%
|
(2
|
)%
|
||||
Lens
Care
|
413.8
|
(21
|
)%
|
(21
|
)%
|
|||||
Pharmaceuticals
|
658.4
|
13
|
%
|
12
|
%
|
|||||
Cataract
and Vitreoretinal
|
381.9
|
1
|
%
|
1
|
%
|
|||||
Refractive
|
128.3
|
(9
|
)%
|
(10
|
)%
|
|||||
$
|
2,292.4
|
(3
|
)%
|
(3
|
)%
|
|||||
2005
|
||||||||||
Contact
Lens
|
$
|
728.5
|
9
|
%
|
9
|
%
|
||||
Lens
Care
|
522.2
|
-
|
%
|
(1
|
)%
|
|||||
Pharmaceuticals
|
584.8
|
11
|
%
|
11
|
%
|
|||||
Cataract
and Vitreoretinal
|
377.8
|
6
|
%
|
5
|
%
|
|||||
Refractive
|
140.5
|
(8
|
)%
|
(9
|
)%
|
|||||
$
|
2,353.8
|
5
|
%
|
5
|
%
|
|||||
2004
|
||||||||||
Contact
Lens
|
$
|
671.0
|
13
|
%
|
7
|
%
|
||||
Lens
Care
|
523.3
|
5
|
%
|
2
|
%
|
|||||
Pharmaceuticals
|
528.2
|
12
|
%
|
7
|
%
|
|||||
Cataract
and Vitreoretinal
|
358.2
|
10
|
%
|
5
|
%
|
|||||
Refractive
|
152.8
|
17
|
%
|
13
|
%
|
|||||
$
|
2,233.5
|
11
|
%
|
6
|
%
|
· |
Overall
strong double-digit growth in our PureVision
lines of silicone hydrogel contact lenses was more than offset by
lower
sales of two-week spherical contact lenses in Japan (reflecting overall
market trends), SofLens
Toric disposable contact lenses (resulting from the continued roll-out
of
PureVision
Toric in the U.S. market), collateral negative impact on our Asian
contact
lens business resulting from the MoistureLoc
situation, and lower sales of older technology products (reflecting
ongoing product rationalization
initiatives).
|
· |
Excluding
the provisions related to the MoistureLoc
recall from current-year and 2005 results, lens care sales declined
20
percent in 2006, primarily reflecting the lack of MoistureLoc
sales and lost market share following the
recall.
|
· |
Pharmaceutical
net sales growth includes the impact of the Freda acquisition, as
well as
higher sales of ocular vitamins, allergy, dry eye, anti-inflammatory
and
combination medications, combined with incremental sales of Retisert
drug delivery implants, partially offset by lower sales of certain
OTC
products and non-ophthalmic generic drugs. Excluding revenues from
Freda,
pharmaceuticals category growth was approximately 6 percent (5 percent
in
constant currency).
|
· |
Cataract
and vitreoretinal product category gains were led by higher sales
of IOLs,
which were up more than 5 percent from the prior year, and hand-held
surgical instruments. Overall, revenues from phacoemulsification
products
declined slightly, as higher sales of disposable products were offset
by
lower equipment sales, as customers await the launch of our next
generation microsurgical platform, Stellaris,
in 2007.
|
· |
Net
sales declines in the refractive category reflected lower equipment
and
microkeratome blade sales, partially offset by service revenues and
per-procedure fees.
|
· |
Contact
lens sales growth was led by our specialty and silicone hydrogel
spherical
offerings, which offset continued declines for older technology products.
Excluding sales from Woehlk in both periods, contact lens net sales
would
have grown approximately 10
percent.
|
· |
Sales
in the lens care category, which were flat with the prior year, mainly
reflected the impact of the MoistureLoc
recall. Excluding that impact, lens care sales grew 3 percent on
a
reported basis and 2 percent in constant currency, with gains for
multi-purpose solutions in Europe and the Americas region partially
offset
by declines in Asia.
|
· |
Full-year
pharmaceutical net sales growth includes the impact of the Freda
acquisition. Excluding revenues from Freda, growth was approximately
7
percent on both a reported and constant-currency basis. That reflects
incremental sales of Zylet
combination ophthalmic drops in the United States, combined with
higher
global sales of ocular vitamins and Lotemax
steroid drops containing loteprednol etabonate. Those gains were
somewhat
offset by sales declines for two non-ophthalmic drugs in our multisource
pharmaceuticals portfolio.
|
· |
Cataract
and vitreoretinal product category growth was led by gains in IOLs
of more
than 10 percent on the strength of our SofPort
and Akreos
lines of foldable IOLs.
|
· |
Net
sales declines in the refractive category reflected lower equipment
and
microkeratome blade sales in all regions, partially offset by higher
service revenues and sales of per-procedure
cards.
|
2006
|
2005
|
2004
|
||||||||
Percentage
of Net Sales
|
||||||||||
Cost
of Products Sold
|
43.8
|
%
|
41.8
|
%
|
41.6
|
%
|
||||
Selling,
Administrative and General
|
42.6
|
%
|
38.6
|
%
|
38.6
|
%
|
||||
Research
and Development
|
8.6
|
%
|
7.5
|
%
|
7.3
|
%
|
Total
|
Less
than 1 Year
|
1-3
Years
|
3-5
Years
|
More
than 5 Years
|
||||||||||||
Contractual
Obligations 1
|
||||||||||||||||
Long-term
debt (including current portion)
|
$
|
833
|
$
|
134
|
$
|
51
|
$
|
583
|
$
|
65
|
||||||
Purchase
obligations 2
|
82
|
36
|
22
|
14
|
10
|
|||||||||||
Minimum
operating lease commitments
|
90
|
26
|
33
|
19
|
12
|
|||||||||||
Total
3,
4
|
$
|
1,005
|
$
|
196
|
$
|
106
|
$
|
616
|
$
|
87
|
1
|
We
had no capital lease obligations at December 30, 2006.
|
2
|
Purchase
obligations include minimum obligations to purchase goods and services,
or
to make royalty payments, under agreements that are enforceable and
legally binding on us. The amounts above include payments due under
a
utility contract that can be terminated in 2007 with the payment
of $2. If
we choose to terminate the utility contract, the total payments due
would
decrease by $19.
|
3
|
Funding
requirements for our pension and other benefit liabilities have not
been
determined, therefore, they have not been included. We expect to
contribute approximately $15 and $8, respectively, to our U.S. defined
benefit pension plan and postretirement benefit plan in 2007. Based
on the
U.S. defined benefit pension plan's current assets and liabilities
and
using the current statutory minimum funding requirements and interest
rates, including the provisions of the Pension Protection Act of
2006, no
employer contribution would be required in 2007. The minimum required
employer contributions for the years 2008-2011 are estimated to range
from
$4 to $7 per year.
|
4
|
The
future cash outflows of the long-term liabilities presented in
Item
8. Financial Statements and Supplementary Data, Balance
Sheets
are uncertain and are therefore excluded from this
table.
|
Before
Adoption of
SFAS
No. 158
|
SFAS
No. 158 Adoption
Adjustments
|
After
Adoption of SFAS
No.
158
|
||||||||
Other
long-term assets
|
$
|
3
|
$
|
(1
|
)
|
$
|
2
|
|||
Deferred
tax assets
|
20
|
4
|
24
|
|||||||
Accrued
compensation
|
(38
|
)
|
35
|
(3
|
)
|
|||||
Pension
and other benefit liabilities
|
(80
|
)
|
(70
|
)
|
(150
|
)
|
||||
Accumulated
other comprehensive loss,
net of tax
|
51
|
32
|
83
|
For
the Years Ended
December
30, 2006, December 31, 2005 and December 25, 2004
Dollar
Amounts in Millions - Except Per Share Data
|
2006
|
2005
|
2004
|
|||||||
Net
Sales
|
$
|
2,292.4
|
$
|
2,353.8
|
$
|
2,233.5
|
||||
Costs
and Expenses
|
||||||||||
Cost
of products sold
|
1,004.5
|
983.1
|
929.2
|
|||||||
Selling,
administrative and general
|
977.3
|
909.7
|
862.7
|
|||||||
Research
and development
|
196.6
|
177.5
|
162.5
|
|||||||
2,178.4
|
2,070.3
|
1,954.4
|
||||||||
Operating
Income
|
114.0
|
283.5
|
279.1
|
|||||||
Other
(Income) Expense
|
||||||||||
Interest
and investment income
|
(31.3
|
)
|
(20.1
|
)
|
(13.8
|
)
|
||||
Interest
expense
|
72.1
|
52.8
|
49.6
|
|||||||
Foreign
currency, net
|
5.7
|
4.4
|
0.6
|
|||||||
46.5
|
37.1
|
36.4
|
||||||||
Income
before Income Taxes and Minority Interest
|
67.5
|
246.4
|
242.7
|
|||||||
Provision
for income taxes
|
53.8
|
221.4
|
83.8
|
|||||||
Minority
interest in subsidiaries
|
(1.2
|
)
|
5.8
|
5.0
|
||||||
Net
Income
|
$
|
14.9
|
$
|
19.2
|
$
|
153.9
|
||||
Basic
Earnings Per Share
|
$
|
0.28
|
$
|
0.36
|
$
|
2.94
|
||||
Average
Shares Outstanding - Basic (000s)
|
53,837
|
53,146
|
52,433
|
|||||||
Diluted
Earnings Per Share
|
$
|
0.27
|
$
|
0.35
|
$
|
2.83
|
||||
Average
Shares Outstanding - Diluted (000s)
|
55,119
|
55,684
|
54,504
|
December
30, 2006 and December 31, 2005
Dollar
Amounts in Millions - Except Per Share Data
|
2006
|
2005
|
|||||
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
499.9
|
$
|
720.6
|
|||
Trade
receivables, less allowances of $17.0 and $16.2,
respectively
|
444.7
|
491.7
|
|||||
Inventories,
net
|
237.4
|
219.8
|
|||||
Other
current assets
|
160.0
|
124.6
|
|||||
Deferred
income taxes
|
60.1
|
71.2
|
|||||
Total
Current Assets
|
1,402.1
|
1,627.9
|
|||||
Property,
Plant and Equipment, net
|
633.2
|
604.4
|
|||||
Goodwill
|
846.2
|
799.0
|
|||||
Other
Intangibles, net
|
278.2
|
273.8
|
|||||
Other
Long-Term Assets
|
102.4
|
100.3
|
|||||
Deferred
Income Taxes
|
16.7
|
11.0
|
|||||
Total
Assets
|
$
|
3,278.8
|
$
|
3,416.4
|
|||
Liabilities
and Shareholders' Equity
|
|||||||
Notes
payable
|
$
|
2.7
|
$
|
0.2
|
|||
Current
portion of long-term debt
|
134.4
|
161.2
|
|||||
Accounts
payable
|
83.2
|
88.1
|
|||||
Accrued
compensation
|
118.5
|
126.0
|
|||||
Accrued
liabilities
|
386.5
|
495.5
|
|||||
Federal,
state and foreign income taxes payable
|
145.7
|
137.7
|
|||||
Deferred
income taxes
|
0.8
|
1.5
|
|||||
Total
Current Liabilities
|
871.8
|
1,010.2
|
|||||
Long-Term
Debt, less current portion
|
698.3
|
831.2
|
|||||
Pension
and Other Benefit Liabilities
|
176.0
|
137.9
|
|||||
Other
Long-Term Liabilities
|
10.5
|
8.0
|
|||||
Deferred
Income Taxes
|
110.2
|
120.7
|
|||||
Total
Liabilities
|
1,866.8
|
2,108.0
|
|||||
Minority
Interest
|
17.2
|
24.5
|
|||||
Commitments
and Contingencies (Note 17)
|
|||||||
Common
Stock, par value $0.40 per share, 200 million shares authorized 60,457,108
shares issued (60,427,172 shares in 2005)
|
24.1
|
24.1
|
|||||
Class
B Stock, par value $0.08 per share, 15 million shares authorized,
187,694
shares issued (253,699 shares in 2005)
|
-
|
-
|
|||||
Capital
in Excess of Par Value
|
117.9
|
102.4
|
|||||
Common
and Class B Stock in Treasury, at cost, 6,715,647 shares (6,741,731
shares
in 2005)
|
(354.7
|
)
|
(356.3
|
)
|
|||
Retained
Earnings
|
1,458.3
|
1,471.6
|
|||||
Accumulated
Other Comprehensive Income
|
149.2
|
50.9
|
|||||
Other
Shareholders' Equity
|
-
|
(8.8
|
)
|
||||
Total
Shareholders' Equity
|
1,394.8
|
1,283.9
|
|||||
Total
Liabilities and Shareholders' Equity
|
$
|
3,278.8
|
$
|
3,416.4
|
For
the Years Ended
December
30, 2006, December 31, 2005 and December 25, 2004
Dollar
Amounts in Millions
|
2006
|
2005
|
2004
|
|||||||
Cash
Flows from Operating Activities
|
||||||||||
Net
Income
|
$
|
14.9
|
$
|
19.2
|
$
|
153.9
|
||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities
|
||||||||||
Depreciation
|
100.5
|
98.5
|
99.4
|
|||||||
Amortization
|
30.1
|
27.3
|
24.9
|
|||||||
Deferred
income taxes
|
(11.4
|
)
|
93.2
|
(21.4
|
)
|
|||||
Stock-based
compensation expense
|
8.1
|
5.3
|
10.2
|
|||||||
Tax
benefits associated with exercise of stock options
|
-
|
16.9
|
16.1
|
|||||||
Gain
from sale of investments available-for-sale
|
(0.4
|
)
|
-
|
(0.3
|
)
|
|||||
Loss
on divestiture of German Woehlk contact lens business
|
-
|
2.3
|
-
|
|||||||
Loss
on retirement of fixed assets
|
0.8
|
2.4
|
11.0
|
|||||||
Changes
in Assets and Liabilities 1
|
||||||||||
Trade
receivables
|
67.6
|
5.4
|
(18.9
|
)
|
||||||
Inventories
|
(8.4
|
)
|
(16.3
|
)
|
11.9
|
|||||
Other
current assets
|
(28.9
|
)
|
(17.2
|
)
|
11.9
|
|||||
Other
long-term assets, including equipment on operating lease
|
(7.4
|
)
|
(2.7
|
)
|
(21.6
|
)
|
||||
Accounts
payable and accrued liabilities
|
(63.3
|
)
|
(31.9
|
)
|
59.3
|
|||||
Income
taxes payable
|
5.1
|
27.7
|
(24.4
|
)
|
||||||
Other
long-term liabilities
|
18.0
|
9.3
|
(27.5
|
)
|
||||||
Net
Cash Provided by Operating Activities 1
|
125.3
|
239.4
|
284.5
|
|||||||
Cash
Flows from Investing Activities
|
||||||||||
Capital
expenditures
|
(107.7
|
)
|
(116.0
|
)
|
(118.9
|
)
|
||||
Net
cash paid for acquisition of businesses and other intangibles
|
(50.8
|
)
|
(236.7
|
)
|
(2.1
|
)
|
||||
Purchase
of available-for-sale securities
|
-
|
-
|
(43.4
|
)
|
||||||
Cash
received from sale of investments available-for-sale
|
0.6
|
-
|
44.0
|
|||||||
Other
|
1.4
|
(0.4
|
)
|
(1.3
|
)
|
|||||
Net
Cash Used in Investing Activities
|
(156.5
|
)
|
(353.1
|
)
|
(121.7
|
)
|
||||
Cash
Flows from Financing Activities
|
||||||||||
Repurchases
of Common and Class B shares
|
(3.2
|
)
|
(45.1
|
)
|
(79.0
|
)
|
||||
Exercise
of stock options
|
0.4
|
69.6
|
77.8
|
|||||||
Net
repayments of notes payable
|
0.1
|
(2.1
|
)
|
0.3
|
||||||
Repayment
of long-term debt
|
(161.7
|
)
|
(325.7
|
)
|
(196.6
|
)
|
||||
Proceeds
from issuance of debt
|
1.3
|
676.7
|
0.1
|
|||||||
Net
distributions to minority interests
|
(6.3
|
)
|
(3.8
|
)
|
(4.2
|
)
|
||||
Payment
of dividends
|
(28.8
|
)
|
(28.1
|
)
|
(27.6
|
)
|
||||
Net
Cash Provided by (Used in) Financing Activities
|
(198.2
|
)
|
341.5
|
(229.2
|
)
|
|||||
Effect
of exchange rate changes on cash and cash equivalents
|
8.7
|
(9.0
|
)
|
5.6
|
||||||
Net
Change in Cash and Cash Equivalents
|
(220.7
|
)
|
218.8
|
(60.8
|
)
|
|||||
Cash
and Cash Equivalents, Beginning of Year
|
720.6
|
501.8
|
562.6
|
|||||||
Cash
and Cash Equivalents, End of Year
|
$
|
499.9
|
$
|
720.6
|
$
|
501.8
|
||||
Supplemental
Cash Flow Disclosures
|
||||||||||
Cash
paid for interest (net of portion capitalized)
|
$
|
53.6
|
$
|
44.9
|
$
|
48.3
|
||||
Net
cash payments for income taxes
|
88.9
|
82.1
|
115.2
|
|||||||
Supplemental
Schedule of Non-Cash Financing Activities
|
||||||||||
Dividends
declared but not paid
|
$
|
7.1
|
$
|
7.1
|
$
|
6.9
|
For
the Years Ended
December
30, 2006, December 31, 2005 and
December 25, 2004
Dollar
Amounts in Millions
|
Total
|
Common
and Class B Stock 1,
2
|
Capital
in Excess of Par
|
Treasury
Stock
|
Retained
Earnings
|
Accumulated
Other Compre-hensive (Loss)
Income
|
Other
Shareholders' Equity
|
|||||||||||||||
Balance
at December 27, 2003
|
$
|
1,160.8
|
$
|
24.1
|
$
|
109.4
|
$
|
(426.2
|
)
|
$
|
1,354.1
|
$
|
107.5
|
$
|
(8.1
|
)
|
||||||
Components
of comprehensive income
|
||||||||||||||||||||||
Net
income
|
153.9
|
-
|
-
|
-
|
153.9
|
-
|
-
|
|||||||||||||||
Currency
translation adjustments
|
63.7
|
-
|
-
|
-
|
-
|
63.7
|
-
|
|||||||||||||||
Reclassification
adjustment into net income for net loss on cash flow
hedges
|
1.9
|
-
|
-
|
-
|
-
|
1.9
|
-
|
|||||||||||||||
Minimum
additional pension liability
|
(5.3
|
)
|
-
|
-
|
-
|
-
|
(5.3
|
)
|
-
|
|||||||||||||
Total
comprehensive income
|
214.2
|
|||||||||||||||||||||
Net
change in shares under employee plans (45,300 shares)
|
(6.3
|
)
|
-
|
(4.1
|
)
|
-
|
-
|
-
|
(2.2
|
)
|
||||||||||||
Treasury
shares issued under employee plan
(1,986,353 shares) |
97.6
|
-
|
-
|
97.6
|
-
|
-
|
-
|
|||||||||||||||
Treasury
shares repurchased (1,293,625 shares)
|
(79.2
|
)
|
-
|
-
|
(79.2
|
)
|
-
|
-
|
-
|
|||||||||||||
Activity
related to deferred stock awards held by the rabbi trust under a
deferred
compensation program
|
(1.1
|
)
|
-
|
0.3
|
(1.4
|
)
|
-
|
-
|
-
|
|||||||||||||
Amortization
of unearned compensation
|
4.4
|
-
|
-
|
-
|
-
|
-
|
4.4
|
|||||||||||||||
Dividends
3
|
(27.6
|
)
|
-
|
-
|
-
|
(27.6
|
)
|
-
|
-
|
|||||||||||||
Balance
at December 25, 2004
|
$
|
1,362.8
|
$
|
24.1
|
$
|
105.6
|
$
|
(409.2
|
)
|
$
|
1,480.4
|
$
|
167.8
|
$
|
(5.9
|
)
|
||||||
Components
of comprehensive income
|
||||||||||||||||||||||
Net
income
|
19.2
|
-
|
-
|
-
|
19.2
|
-
|
-
|
|||||||||||||||
Currency
translation adjustments
|
(100.2
|
)
|
-
|
-
|
-
|
-
|
(100.2
|
)
|
-
|
|||||||||||||
Reclassification
adjustment into net income for net loss on cash flow
hedges
|
3.3
|
-
|
-
|
-
|
-
|
3.3
|
-
|
|||||||||||||||
Minimum
additional pension liability
|
(20.0
|
)
|
-
|
-
|
-
|
-
|
(20.0
|
)
|
-
|
|||||||||||||
Total
comprehensive income
|
(97.7
|
)
|
||||||||||||||||||||
Net
change in shares under employee plans (89,750 shares)
|
(10.1
|
)
|
-
|
(3.8
|
)
|
-
|
-
|
-
|
(6.3
|
)
|
||||||||||||
Treasury
shares issued under employee plans (1,790,096 shares)
|
100.9
|
-
|
-
|
100.9
|
-
|
-
|
-
|
|||||||||||||||
Treasury
shares repurchased (600,464 shares)
|
(44.9
|
)
|
-
|
-
|
(44.9
|
)
|
-
|
-
|
-
|
|||||||||||||
Activity
related to deferred stock awards held by the rabbi trust under a
deferred
compensation program
|
(2.5
|
)
|
-
|
0.6
|
(3.1
|
)
|
-
|
-
|
-
|
|||||||||||||
Amortization
of unearned compensation
|
3.4
|
-
|
-
|
-
|
-
|
-
|
3.4
|
|||||||||||||||
Dividends
3
|
(28.0
|
)
|
-
|
-
|
-
|
(28.0
|
)
|
-
|
-
|
Balance
at December 31, 2005
|
$
|
1,283.9
|
$
|
24.1
|
$
|
102.4
|
$
|
(356.3
|
)
|
$
|
1,471.6
|
$
|
50.95
|
$
|
(8.8
|
)
|
||||||
Components
of comprehensive income
|
||||||||||||||||||||||
Net
income
|
14.9
|
-
|
-
|
-
|
14.9
|
-
|
-
|
|||||||||||||||
Currency
translation adjustments
|
111.7
|
-
|
-
|
-
|
-
|
111.7
|
-
|
|||||||||||||||
Reclassification
adjustment into net income for net loss on cash flow
hedges
|
2.3
|
-
|
-
|
-
|
-
|
2.3
|
-
|
|||||||||||||||
Unrealized holding gain on available-for-sale securities
|
3.5
|
- | - | - | - |
3.5
|
- | |||||||||||||||
Minimum
additional pension liability
|
12.7
|
-
|
-
|
-
|
-
|
12.7
|
-
|
|||||||||||||||
Total
comprehensive income 4
|
145.1
|
|||||||||||||||||||||
Adjustment
to adopt SFAS No. 158
|
(31.9
|
)
|
- | - | - | - |
(31.9
|
)
|
- | |||||||||||||
Adjustment
to adopt SFAS No. 123(R)
|
-
|
-
|
(8.8
|
)
|
-
|
-
|
-
|
8.8
|
||||||||||||||
Net
change in shares under employee plans (57,000 shares)
|
(2.2
|
)
|
-
|
(2.2
|
)
|
-
|
-
|
-
|
-
|
|||||||||||||
Recognition
of share-based compensation in accordance with SFAS No.
123(R)
|
13.8
|
-
|
13.8
|
-
|
-
|
-
|
-
|
|||||||||||||||
Treasury
shares issued under employee plans (158,718 shares)
|
8.4
|
-
|
-
|
8.4
|
-
|
-
|
-
|
|||||||||||||||
Treasury
shares repurchased (132,634 shares)
|
(6.8
|
)
|
-
|
-
|
(6.8
|
)
|
-
|
-
|
-
|
|||||||||||||
Activity
related to deferred stock awards held by the rabbi trust under a
deferred
compensation program 6
|
12.7
|
-
|
12.7
|
-
|
-
|
-
|
-
|
|||||||||||||||
Dividends
3
|
(28.2
|
)
|
-
|
-
|
-
|
(28.2
|
)
|
-
|
-
|
|||||||||||||
Balance
at December 30, 2006
|
$
|
1,394.8
|
$
|
24.1
|
$
|
117.9
|
$
|
(354.7
|
)
|
$
|
1,458.3
|
$
|
149.25
|
$
|
-
|
1
|
There
are also 10 thousand shares of $100 par value 4 percent cumulative
preferred stock authorized, none of which has been
issued.
|
4
|
Total
comprehensive income was reported net of any related tax effects.
The
income tax benefit for minimum additional pension liability for the
year
ended December 30, 2006 was $23.7. There was no income tax benefit
or
expense related to currency translation adjustments and reclassification
adjustments for net loss on cash flow hedges as a result of the Company
incurring a U.S. net operating loss in
2006.
|
5
|
Accumulated
other comprehensive income was $149.2 at December 30, 2006 and included
the following accumulated income (loss) amounts: currency translation
adjustment, $227.9; net unrealized holding gain, $4.1; minimum additional
pension liability, $(82.8). Accumulated other comprehensive income
was
$50.9 at December 31, 2005 and included the following accumulated
income
(loss) amounts: currency translation adjustment, $116.2; net loss
on cash
flow hedges, $(1.7); and minimum additional pension liability,
$(63.6).
|
6
|
Reflects
the reclassification of the deferred compensation liability into
equity as
a result of the May 2006 Plan amendment requiring all future distributions
of participant deferrals be settled only in
shares.
|
· |
persuasive
evidence of an arrangement exists;
|
· |
delivery
has occurred or services have been
rendered;
|
· |
the
Company's price to its customers is fixed or determinable;
and
|
· |
collection
of the resulting receivable is reasonably
assured.
|
Before
Adoption of SFAS No. 158
|
SFAS
No. 158 Adoption Adjustments
|
After
Adoption of SFAS No. 158
|
||||||||
Other
long-term assets
|
$
|
2.6
|
$
|
(0.9
|
)
|
$
|
1.7
|
|||
Deferred
tax assets
|
19.3
|
4.4
|
23.7
|
|||||||
Accrued
compensation
|
(37.4
|
)
|
34.7
|
(2.7
|
)
|
|||||
Pension
and other benefit liabilities
|
(79.7
|
)
|
(70.1
|
)
|
(149.8
|
)
|
||||
Accumulated
other comprehensive loss, net
of tax
|
50.8
|
31.9
|
82.7
|
Current
Assets (includes $6.4 of cash acquired) 1
|
$
|
26.4
|
||
Property,
Plant & Equipment
|
23.8
|
|||
Other
Long-Term Assets
|
0.9
|
|||
Intangible
Assets Subject to Amortization 2
|
||||
Distributor
Relationships
|
57.9
|
|||
Tradenames
|
23.7
|
|||
Technology
|
7.1
|
|||
Non-Compete
Agreements
|
1.8
|
|||
Goodwill
|
160.5
|
|||
Total
Assets Acquired
|
302.1
|
|||
Current
Liabilities
|
20.2
|
|||
Long-Term
Liabilities
|
14.0
|
|||
Minority
Interest
|
7.8
|
|||
Total
Liabilities Assumed
|
42.0
|
|||
Net
Assets Acquired
|
$
|
260.1
|
1
|
Includes
a purchase accounting adjustment of $1.9 associated with the step-up
of
inventory which was fully amortized in the fourth quarter of
2005.
|
2
|
Weighted
average remaining useful life of acquired intangible assets was as
follows: distributor relationships - 16 years; tradenames - 24 years;
technology - 19 years; and non-compete agreements - 3
years.
|
2006
|
2005
|
2004
|
||||||||
Net
Income
|
$
|
14.9
|
$
|
19.2
|
$
|
153.9
|
||||
Weighted
Average Basic Shares Outstanding (000s)
|
53,837
|
53,146
|
52,433
|
|||||||
Effect
of Dilutive Shares
|
1,215
|
1,981
|
2,004
|
|||||||
Effect
of Convertible Senior Notes Shares (Old Notes)
|
67
|
67
|
67
|
|||||||
Effect
of 2004 Senior Convertible Securities Shares (New
Securities)
|
-
|
490
|
-
|
|||||||
Weighted
Average Diluted Shares Outstanding (000s)
|
55,119
|
55,684
|
54,504
|
|||||||
Basic
Earnings Per Share
|
$
|
0.28
|
$
|
0.36
|
$
|
2.94
|
||||
Diluted
Earnings Per Share
|
$
|
0.27
|
$
|
0.35
|
$
|
2.83
|
Net
Sales
|
Operating
Income
|
Depreciation
and Amortization
|
Capital
Expenditures
|
Assets
|
||||||||||||
2006
|
||||||||||||||||
Americas
|
$
|
1,007.5
|
$
|
323.6
|
$
|
6.6
|
$
|
3.8
|
$
|
311.0
|
||||||
Europe
|
831.9
|
210.4
|
9.4
|
2.2
|
382.8
|
|||||||||||
Asia
|
453.0
|
60.7
|
10.6
|
3.3
|
242.6
|
|||||||||||
Research
& Development
|
-
|
(223.2
|
)
|
8.0
|
28.5
|
76.0
|
||||||||||
Global
Operations & Engineering
|
-
|
(159.2
|
)
|
78.5
|
66.7
|
1,420.8
|
||||||||||
2,292.4
|
212.3
|
113.1
|
104.5
|
2,433.2
|
||||||||||||
Corporate
administration
|
-
|
(98.3
|
)
|
17.5
|
3.2
|
845.6
|
||||||||||
$
|
2,292.4
|
$
|
114.0
|
$
|
130.6
|
$
|
107.7
|
$
|
3,278.8
|
|||||||
2005
|
||||||||||||||||
Americas
|
$
|
1,005.3
|
$
|
333.0
|
$
|
8.3
|
$
|
3.5
|
$
|
327.9
|
||||||
Europe
|
859.9
|
250.8
|
10.4
|
3.9
|
359.9
|
|||||||||||
Asia
|
488.6
|
123.6
|
7.6
|
4.8
|
297.8
|
|||||||||||
Research
& Development
|
-
|
(200.5
|
)
|
5.3
|
24.9
|
54.7
|
||||||||||
Global
Operations & Engineering
|
-
|
(131.7
|
)
|
73.3
|
70.8
|
1,344.8
|
||||||||||
2,353.8
|
375.2
|
104.9
|
107.9
|
2,385.1
|
||||||||||||
Corporate
administration
|
-
|
(89.8
|
)
|
20.9
|
8.1
|
1,031.3
|
||||||||||
Other
significant charges 1
|
-
|
(1.9
|
)
|
-
|
-
|
-
|
||||||||||
$
|
2,353.8
|
$
|
283.5
|
$
|
125.8
|
$
|
116.0
|
$
|
3,416.4
|
|||||||
2004
|
||||||||||||||||
Americas
|
$
|
960.2
|
$
|
326.1
|
$
|
8.7
|
$
|
3.5
|
||||||||
Europe
|
818.9
|
251.2
|
16.5
|
2.8
|
||||||||||||
Asia
|
454.4
|
128.5
|
5.9
|
3.7
|
||||||||||||
Research
& Development
|
-
|
(180.6
|
)
|
5.4
|
12.5
|
|||||||||||
Global
Operations & Engineering
|
-
|
(157.2
|
)
|
69.3
|
69.4
|
|||||||||||
2,233.5
|
368.0
|
105.8
|
91.9
|
|||||||||||||
Corporate
administration
|
-
|
(88.9
|
)
|
18.5
|
27.0
|
|||||||||||
$
|
2,233.5
|
$
|
279.1
|
$
|
124.3
|
$
|
118.9
|
1
|
Other
significant charges in 2005 represent purchase accounting adjustments
related to the acquisition of Freda (see Note
2 — Acquisitions).
|
Net
Sales
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Contact
Lens
|
$
|
710.0
|
$
|
728.5
|
$
|
671.0
|
||||
Lens
Care
|
413.8
|
522.2
|
523.3
|
|||||||
Pharmaceuticals
|
658.4
|
584.8
|
528.2
|
|||||||
Cataract
and Vitreoretinal
|
381.9
|
377.8
|
358.2
|
|||||||
Refractive
|
128.3
|
140.5
|
152.8
|
|||||||
$
|
2,292.4
|
$
|
2,353.8
|
$
|
2,233.5
|
Non-U.S.
|
U.S.
|
Consolidated
|
||||||||
2006
|
||||||||||
Sales
to unaffiliated customers
|
$
|
1,403.9
|
$
|
888.5
|
$
|
2,292.4
|
||||
Long-lived
assets
|
302.8
|
330.4
|
633.2
|
|||||||
2005
|
||||||||||
Sales
to unaffiliated customers
|
$
|
1,462.8
|
$
|
891.0
|
$
|
2,353.8
|
||||
Long-lived
assets
|
275.5
|
328.9
|
604.4
|
|||||||
2004
|
||||||||||
Sales
to unaffiliated customers
|
$
|
1,370.0
|
$
|
863.5
|
$
|
2,233.5
|
December
30, 2006
|
December
31, 2005
|
||||||
Net
Investment in Sales-Type Leases
|
|||||||
Total
minimum lease payments to be received 1
|
$
|
24.9
|
$
|
30.6
|
|||
Less
amounts due from service agreements included in total minimum lease
payments
|
(1.3
|
)
|
(2.5
|
)
|
|||
Less
allowance for doubtful accounts 1
|
(2.3
|
)
|
(0.4
|
)
|
|||
Net
minimum lease payments receivables
|
21.3
|
27.7
|
|||||
Less
unearned income 2
|
(1.6
|
)
|
(2.1
|
)
|
|||
Net
investment in sales-type leases
|
$
|
19.7
|
$
|
25.6
|
1
|
The
current portion of minimum lease payments receivable and the related
allowance for doubtful accounts are included in Trade receivables
on the
Balance
Sheets.
Minimum lease payments receivable and the related allowance for doubtful
accounts due after one year are included with Other Long-Term
Assets.
|
2
|
The
current portion of unearned income is included in Accrued liabilities
on
the Balance
Sheets.
Unearned income due after one year is included with Other Long-Term
Liabilities.
|
December
30, 2006
|
December
31, 2005
|
||||||
Net
Investment in Operating Leases
|
|||||||
Equipment
on operating lease
|
$
|
18.1
|
$
|
14.4
|
|||
Less
accumulated depreciation
|
(9.6
|
)
|
(7.6
|
)
|
|||
Equipment
on operating lease, net
|
$
|
8.5
|
$
|
6.8
|
Americas
|
Europe
|
Asia
|
Global
Operations & Engineering
|
Research
& Development
|
Total
|
||||||||||||||
Balance
as of December 25, 2004
|
$
|
38.3
|
$
|
63.9
|
$
|
13.2
|
$
|
566.8
|
$
|
-
|
$
|
682.2
|
|||||||
Acquisition
of Freda
|
-
|
-
|
5.6
|
154.9
|
-
|
160.5
|
|||||||||||||
Other
(primarily currency)
|
-
|
(5.8
|
)
|
(0.7
|
)
|
(37.2
|
)
|
-
|
(43.7
|
)
|
|||||||||
Balance
as of December 31, 2005
|
$
|
38.3
|
$
|
58.1
|
$
|
18.1
|
$
|
684.5
|
$
|
-
|
$
|
799.0
|
|||||||
Other
(primarily currency)
|
(0.1
|
)
|
5.6
|
0.5
|
41.2
|
-
|
47.2
|
||||||||||||
Balance
as of December 30, 2006
|
$
|
38.2
|
$
|
63.7
|
$
|
18.6
|
$
|
725.7
|
$
|
-
|
$
|
846.2
|
December
30, 2006
|
December
31, 2005
|
||||||||||||
Gross
Carrying Amount
|
Accumulated
Amortization
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
||||||||||
Tradenames
|
$
|
121.5
|
$
|
55.0
|
$
|
117.7
|
$
|
44.3
|
|||||
Technology
and patents
|
115.0
|
79.9
|
96.1
|
74.5
|
|||||||||
Developed
technology
|
83.3
|
26.4
|
77.6
|
20.7
|
|||||||||
Distributor
relationships
|
59.8
|
4.6
|
57.9
|
0.9
|
|||||||||
License
agreements
|
43.4
|
23.5
|
36.2
|
18.4
|
|||||||||
Intellectual
property
|
39.1
|
14.3
|
38.2
|
10.6
|
|||||||||
Physician
information & customer database
|
24.2
|
5.2
|
21.8
|
3.9
|
|||||||||
Non-Compete
agreements
|
1.9
|
1.1
|
1.8
|
0.2
|
|||||||||
$
|
488.2
|
$
|
210.0
|
$
|
447.3
|
$
|
173.5
|
Fiscal
Year Ending
|
Amount
|
|||
December
29, 2007
|
$
|
31.5
|
||
December
27, 2008
|
28.0
|
|||
December
26, 2009
|
25.3
|
|||
December
25, 2010
|
23.2
|
|||
December
31, 2011
|
23.0
|
2006
|
2005
|
2004
|
||||||||
(Loss)
income before income taxes and minority interest
|
||||||||||
U.S.
|
$
|
(67.2
|
)
|
$
|
(12.3
|
)
|
$
|
(24.8
|
)
|
|
Non-U.S.
|
134.7
|
258.7
|
267.5
|
|||||||
$
|
67.5
|
$
|
246.4
|
$
|
242.7
|
|||||
Provision
for income taxes
|
||||||||||
Federal
|
||||||||||
Current
|
$
|
5.3
|
$
|
46.8
|
$
|
28.3
|
||||
Deferred
|
(2.1
|
)
|
77.2
|
(27.9
|
)
|
|||||
State
|
||||||||||
Current
|
4.6
|
4.7
|
2.4
|
|||||||
Deferred
|
0.3
|
18.9
|
(2.2
|
)
|
||||||
Foreign
|
||||||||||
Current
|
52.1
|
70.8
|
74.5
|
|||||||
Deferred
|
(6.4
|
)
|
3.0
|
8.7
|
||||||
$
|
53.8
|
$
|
221.4
|
$
|
83.8
|
Deferred
Taxes
December
30, 2006
|
Deferred
Taxes
December
31, 2005
|
||||||||||||
Assets
|
Liabilities
|
Assets
|
Liabilities
|
||||||||||
Current:
|
|||||||||||||
Sales
and allowance accruals
|
$
|
26.5
|
$
|
-
|
$
|
45.1
|
$
|
-
|
|||||
Employee
benefits and compensation
|
41.0
|
-
|
41.9
|
-
|
|||||||||
Inventories
|
12.7
|
-
|
12.5
|
-
|
|||||||||
Unrealized
foreign exchange transactions
|
3.1
|
-
|
-
|
1.6
|
|||||||||
Other
accruals
|
19.8
|
-
|
24.0
|
-
|
|||||||||
Valuation
allowance
|
(43.8
|
)
|
-
|
(52.2
|
)
|
-
|
|||||||
$
|
59.3
|
$
|
-
|
$
|
71.3
|
$
|
1.6
|
||||||
Non-current:
|
|||||||||||||
Depreciation
and amortization
|
$
|
174.9
|
$
|
74.7
|
$
|
152.5
|
$
|
82.7
|
|||||
Tax
loss and credit carryforwards
|
114.8
|
-
|
76.3
|
-
|
|||||||||
Employee
benefits and compensation
|
55.1
|
-
|
51.1
|
-
|
|||||||||
Other
accruals
|
-
|
27.2
|
3.8
|
16.7
|
|||||||||
Valuation
allowance
|
(178.7
|
)
|
-
|
(136.9
|
)
|
-
|
|||||||
Intercompany
investments
|
-
|
157.7
|
-
|
157.1
|
|||||||||
166.1
|
259.6
|
146.8
|
256.5
|
||||||||||
$
|
225.4
|
$
|
259.6
|
$
|
218.1
|
$
|
258.1
|
2006
|
2005
|
2004
|
||||||||
Statutory
U.S. tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||||
Rate
impact of changes in valuation allowances
|
45.7
|
49.3
|
8.8
|
|||||||
Research
tax credit
|
(6.8
|
)
|
(1.5
|
)
|
(1.2
|
)
|
||||
Foreign,
including earnings taxed at different rates
|
4.6
|
5.6
|
(6.1
|
)
|
||||||
Nontaxable
income
|
(5.3
|
)
|
(0.4
|
)
|
(0.8
|
)
|
||||
State,
net of federal benefit
|
(4.1
|
)
|
2.7
|
0.7
|
||||||
Tax
return and audit adjustments
|
12.5
|
1.1
|
1.8
|
|||||||
Orphan
drug credit
|
-
|
(0.4
|
)
|
(2.2
|
)
|
|||||
Other
|
(1.9
|
)
|
(1.5
|
)
|
(1.6
|
)
|
||||
Effective
tax rate
|
79.7
|
%
|
89.9
|
%
|
34.4
|
%
|
December
30, 2006
|
December
31, 2005
|
|||||||||||||||
Type
|
Maturity
|
Effective
Interest Rate1
|
Amount
Outstanding
|
Effective
Interest Rate1
|
Amount
Outstanding
|
|||||||||||
Notes
2,
3
|
2007
|
8.63
|
%
|
133.2
|
8.63
|
%
|
150.0
|
|||||||||
Notes
2,
4
|
2008
|
9.65%*
|
50.0
|
7.87%*
|
50.0
|
|||||||||||
Debentures
2
|
2028
|
7.19
|
%
|
66.4
|
7.19
|
%
|
183.9
|
|||||||||
Convertible
Notes 5
|
2023
|
5.62%*
|
4.1
|
5.90%*
|
4.1
|
|||||||||||
Convertible
Securities 5
|
2023
|
5.62%*
|
155.9
|
6.14%*
|
155.9
|
|||||||||||
Bank
Term Loan
|
2010
|
0.66%*
|
47.3
|
0.50%*
|
48.1
|
|||||||||||
Bank
Term Loan
|
2010
|
5.59%*
|
375.0
|
5.10%*
|
375.0
|
|||||||||||
Other
6
|
Various
|
Various
|
0.8
|
Various
|
25.4
|
|||||||||||
832.7
|
992.4
|
|||||||||||||||
Less
current portion
6
|
(134.4
|
)
|
(161.2
|
)
|
||||||||||||
$
|
698.3
|
$
|
831.2
|
1
|
The
effective interest rate includes the impact of interest rate, derivative
instruments and debt issuance
costs.
|
2
|
The
Company, at its option, may call these notes/debentures at any time
pursuant to a make-whole redemption provision, which would compensate
holders for any changes in interest rate levels of the notes/debentures
upon early extinguishment.
|
3
|
In
May 2002, the Company entered into an interest rate lock agreement
to
hedge the benchmark interest rate associated with this debt issue.
Losses
associated with the hedge have been deferred to other comprehensive
income
and are being amortized to interest expense over the remaining life
of the
debt.
|
4
|
In
August 2003, simultaneous with the issuance of this debt maturing
in 2008,
an interest rate swap agreement converted this note to a variable-rate
liability at a rate of six-month LIBOR plus 2.37 percent. Also in
May
2002, the Company entered into an interest rate lock agreement to
hedge
the benchmark interest rate associated with this debt issue. Losses
associated with the hedge have been deferred to other comprehensive
income
and are being amortized to interest expense over the debt
term.
|
5
|
Notes
contain put/call options exercisable at 100 percent of par in 2010,
2013
and 2018. These notes accrue interest at six-month LIBOR plus 0.5
percent,
with the rate reset on a semi-annual basis in advance. The effective
rate
for 2005 includes the impact of the write-off of unamortized debt
issuance
costs for the convertible notes and securities due to the triggering
of
the conversion option, which resulted in an increase of $3.0 in interest
expense for 2005.
|
6
|
The
amounts outstanding under other and current portion at December 31,
2005
include the $26.8 of outstanding borrowings under non-U.S. credit
facilities, which was repaid in January
2006.
|
December
30, 2006
|
December
31, 2005
|
||||||||||||
Carrying
Value
|
Fair
Value
|
Carrying
Value
|
Fair
Value
|
||||||||||
Non-derivatives
|
|||||||||||||
Available-for-sale
securities
|
$
|
3.5
|
$
|
3.5
|
$
|
0.2
|
$
|
0.2
|
|||||
Other
investments 1
|
6.4
|
N/A
|
5.7
|
N/A
|
|||||||||
Long-term
debt, including current portion
|
(832.7
|
)
|
(862.6
|
)
|
(992.4
|
)
|
(1,065.7
|
)
|
|||||
Derivatives
held for purposes other than trading
|
|||||||||||||
Foreign
exchange instruments
|
|||||||||||||
Other
current assets
|
$
|
10.2
|
$
|
10.2
|
$
|
2.4
|
$
|
2.4
|
|||||
Accrued
liabilities
|
(2.4
|
)
|
(2.4
|
)
|
(4.2
|
)
|
(4.2
|
)
|
|||||
Net
foreign exchange instruments
|
$
|
7.8
|
$
|
7.8
|
$
|
(1.8
|
)
|
$
|
(1.8
|
)
|
|||
Interest
rate instruments
|
|||||||||||||
Accrued
liabilities
|
$
|
(1.3
|
)
|
$
|
(1.3
|
)
|
$
|
(1.6
|
)
|
$
|
(1.6
|
)
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan
|
||||||||||||||||||
2006
|
2005
|
2004
|
2006
|
2005
|
2004
|
||||||||||||||
Service
cost 1
|
$
|
9.3
|
$
|
8.0
|
$
|
15.4
|
$
|
1.2
|
$
|
1.3
|
$
|
1.6
|
|||||||
Interest
cost
|
20.4
|
19.9
|
19.4
|
5.7
|
5.4
|
4.9
|
|||||||||||||
Expected
return on plan assets
|
(22.8
|
)
|
(22.0
|
)
|
(20.3
|
)
|
(3.3
|
)
|
(3.4
|
)
|
(3.1
|
)
|
|||||||
Amortization
of transition obligation
|
0.1
|
0.1
|
0.1
|
-
|
-
|
-
|
|||||||||||||
Amortization
of prior-service cost
|
0.2
|
-
|
0.5
|
(0.2
|
)
|
(0.3
|
)
|
(0.1
|
)
|
||||||||||
Amortization
of net loss
|
8.1
|
8.6
|
6.6
|
2.1
|
0.9
|
-
|
|||||||||||||
Special
termination benefits
|
0.8
|
0.2
|
0.4
|
-
|
-
|
-
|
|||||||||||||
Curtailment
loss (gain)
|
-
|
-
|
1.1
|
-
|
-
|
(0.7
|
)
|
||||||||||||
Settlement
loss (gain)
|
0.2
|
(6.6
|
)
|
-
|
-
|
-
|
-
|
||||||||||||
Net
periodic benefit cost
|
$
|
16.3
|
$
|
8.2
|
$
|
23.2
|
$
|
5.5
|
$
|
3.9
|
$
|
2.6
|
1
|
The
decline in service cost in 2005 for the pension benefit plans was
primarily due to the freezing of the Company's U.S. defined benefit
pension plan effective December 31,
2004.
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan
|
||||||||||||||||||
2006
|
2005
|
2004
|
2006
|
2005
|
2004
|
||||||||||||||
U.S.
Plans
|
|||||||||||||||||||
Discount
rate
|
5.50
|
%
|
5.75
|
%
|
6.00
|
%
|
5.50
|
%
|
5.75
|
%
|
6.00
|
%
|
|||||||
Expected
return on plan assets
|
8.50
|
%
|
8.75
|
%
|
9.00
|
%
|
7.50
|
%
|
7.75
|
%
|
8.00
|
%
|
|||||||
Rate
of compensation increase
|
-
|
-
|
4.00
|
%
|
-
|
-
|
-
|
||||||||||||
Non-U.S.
Plans 1
|
|||||||||||||||||||
Discount
rate
|
4.00
|
%
|
4.43
|
%
|
4.90
|
%
|
|||||||||||||
Expected
return on plan assets
|
5.93
|
%
|
5.96
|
%
|
6.12
|
%
|
|||||||||||||
Rate
of compensation increase
|
3.71
|
%
|
3.76
|
%
|
3.09
|
%
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan
3
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Change
in Benefit Obligation
|
|||||||||||||
Obligation
at beginning of year
|
$
|
413.9
|
$
|
387.8
|
$
|
97.3
|
$
|
78.7
|
|||||
Service
cost
|
9.3
|
8.0
|
1.2
|
1.3
|
|||||||||
Interest
cost
|
20.4
|
19.9
|
5.7
|
5.4
|
|||||||||
Participant
contributions
|
1.9
|
1.8
|
1.5
|
1.2
|
|||||||||
Benefit
payments
|
(24.4
|
)
|
(19.4
|
)
|
(7.9
|
)
|
(9.1
|
)
|
|||||
Actuarial
(gain) loss
|
(13.3
|
)
|
38.2
|
6.2
|
19.8
|
||||||||
Plan
amendments
|
1.5
|
-
|
-
|
-
|
|||||||||
Currency
translation adjustments
|
19.0
|
(13.9
|
)
|
-
|
-
|
||||||||
Special
termination benefits
|
0.8
|
0.2
|
-
|
-
|
|||||||||
Curtailment
gain
|
-
|
(0.2
|
)
|
-
|
-
|
||||||||
Settlement
gain
|
-
|
(8.5
|
)
|
-
|
-
|
||||||||
Obligation
at end of year
|
$
|
429.1
|
$
|
413.9
|
$
|
104.0
|
$
|
97.3
|
Change
in Plan Assets
|
|||||||||||||
Fair
value of plan assets at beginning of year
|
$
|
299.3
|
$
|
281.7
|
$
|
44.3
|
$
|
43.6
|
|||||
Actual
gain on plan assets
|
35.0
|
24.9
|
5.5
|
1.2
|
|||||||||
Employer
contributions
|
10.6
|
19.2
|
5.7
|
7.4
|
|||||||||
Participant
contributions
|
1.9
|
1.8
|
1.5
|
1.2
|
|||||||||
Benefit
payments
|
(24.4
|
)
|
(19.4
|
)
|
(7.9
|
)
|
(9.1
|
)
|
|||||
Settlement
payments
|
-
|
(0.5
|
)
|
-
|
-
|
||||||||
Currency
translation adjustments
|
10.8
|
(8.4
|
)
|
-
|
-
|
||||||||
Fair
value of plan assets at end of year
|
$
|
333.2
|
$
|
299.3
|
$
|
49.1
|
$
|
44.3
|
Funded
Status at end of year
|
$
|
(95.9
|
)
|
$
|
(114.6
|
)
|
$
|
(54.9
|
)
|
$
|
(53.0
|
)
|
|
Unrecognized
transition obligation
|
0.2
|
-
|
|||||||||||
Unrecognized
prior-service cost (benefit)
|
-
|
(1.2
|
)
|
||||||||||
Unrecognized
actuarial loss 1
|
111.6
|
22.1
|
|||||||||||
Net
amount recognized at end of year
|
$
|
(2.8
|
)
|
$
|
(32.1
|
)
|
Amounts
recognized in the Balance
Sheets
consist of:
|
|||||||||||||
Other
long-term assets
|
$
|
1.7
|
$
|
1.8
|
$
|
-
|
$
|
-
|
|||||
Accrued
compensation
|
(2.7
|
)
|
(4.4
|
)
|
-
|
(7.0
|
)
|
||||||
Pension
and other benefit liabilities
|
(94.9
|
)
|
(86.7
|
)
|
(54.9
|
)
|
(25.1
|
)
|
|||||
Accumulated
other comprehensive loss
2
|
-
|
86.5
|
-
|
-
|
|||||||||
Net
amount recognized at end of year
|
$
|
(95.9
|
)
|
$
|
(2.8
|
)
|
$
|
(54.9
|
)
|
$
|
(32.1
|
)
|
Amounts
recognized in Accumulated Other Comprehensive Loss consist
of:
|
|||||||||||||
Net
actuarial loss 1
|
$
|
81.9
|
$
|
24.0
|
|||||||||
Prior
service cost (credit)
|
1.4
|
N/A
|
(1.0
|
)
|
N/A
|
||||||||
Net
transition obligation
|
0.1
|
-
|
|||||||||||
Accumulated
other comprehensive loss 2
|
$
|
83.4
|
N/A
|
$
|
23.0
|
N/A
|
1
|
The
decrease in net actuarial losses for the pension plans from $111.6
in 2005
to $81.9 in 2006 primarily relates to improved asset returns and
an
increase in the discount rate. The gains realized from improved asset
returns and the increase in the discount rate by the postretirement
benefit plan were more than offset by losses due to increase in medical
costs, resulting in an increase in net actuarial losses for the
postretirement benefit plan from $22.1 in 2005 to $24.0 in 2006.
Net
actuarial losses are deferred and amortized to expense over future
periods. Net gains and losses that exceed ten percent of the greater
of
the plans' projected benefit obligations or the market-related value
of
assets are amortized to earnings over the shorter of the estimated
future
service period of the plan participants or the period until any
anticipated final plan settlements.
|
3
|
For
2006, the benefit payments and employer contributions for the
Postretirement Benefit Plan are net of Medicare subsidy receipts
of
$0.6.
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
U.S.
Plans
|
|||||||||||||
Discount
rate
|
5.75
|
%
|
5.50
|
%
|
5.75
|
%
|
5.50
|
%
|
|||||
Rate
of compensation increase
|
-
|
-
|
-
|
-
|
|||||||||
Non-U.S.
Plans 1
|
|||||||||||||
Discount
rate
|
4.45
|
%
|
4.00
|
%
|
|||||||||
Rate
of compensation increase
|
3.68
|
%
|
3.71
|
%
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan 1
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
U.S.
Plans
|
|||||||||||||
Equity
securities
|
73
|
%
|
72
|
%
|
72
|
%
|
97
|
%
|
|||||
Fixed
income (debt) securities
|
27
|
%
|
28
|
%
|
28
|
%
|
3
|
%
|
|||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
|||||
Non-U.S.
Plans 2
|
|||||||||||||
Equity
securities
|
68
|
%
|
69
|
%
|
|||||||||
Fixed
income (debt) securities
|
11
|
%
|
20
|
%
|
|||||||||
Other
|
21
|
%
|
11
|
%
|
|||||||||
Total
|
100
|
%
|
100
|
%
|
1
|
The
weighted average asset allocation for the Postretirement Benefit
Plan was
changed in 2006 to reduce volatility in the investment portfolio
and to
align the investment mix with the Company's U.S. Pension
Plan.
|
Pension
Benefit Plans
|
|||||||
2006
|
2005
|
||||||
Projected
benefit obligation
|
$
|
414.5
|
$
|
400.8
|
|||
Accumulated
benefit obligation
|
398.9
|
377.9
|
|||||
Fair
value of plan assets
|
317.8
|
286.9
|
Pension
Benefit Plans
|
|||||||
2006
|
2005
|
||||||
Projected
benefit obligation
|
$
|
417.9
|
$
|
413.9
|
|||
Fair
value of plan assets
|
320.3
|
299.3
|
Pension
Benefit Plans
|
Postretirement
Benefit Plan
|
||||||
Net
actuarial loss
|
5.1
|
1.4
|
|||||
Prior
service cost (credit)
|
0.2
|
(0.2
|
)
|
||||
Transition
obligation
|
0.1
|
-
|
Postretirement
Benefit Plan
|
||||||||||
Fiscal
Year Ending
|
Pension
Benefit Plans
|
Benefit
Payments
|
Subsidy
Receipts
|
|||||||
December
29, 2007
|
$
|
22.6
|
$
|
8.6
|
$
|
0.8
|
||||
December
27, 2008
|
25.4
|
8.8
|
0.8
|
|||||||
December
26, 2009
|
25.5
|
9.0
|
0.8
|
|||||||
December
25, 2010
|
24.4
|
9.1
|
0.8
|
|||||||
December
31, 2011
|
23.3
|
9.2
|
0.8
|
|||||||
Fiscal
years 2012 - 2016
|
120.2
|
45.2
|
3.6
|
1%
Increase
|
1%
Decrease
|
||||||
Effect
on total service and interest cost components of net periodic
postretirement health care benefit cost
|
$
|
0.7
|
$
|
(0.6
|
)
|
||
Effect
on the health care component of the accumulated postretirement benefit
obligation
|
10.2
|
(8.7
|
)
|
Amounts
in millions, except per share data
|
December
30, 2006
|
|||
Operating
income
|
$
|
8.1
|
||
Net
income
|
8.1
|
|||
Earnings
per share: Basic
|
0.15
|
|||
Earnings
per share: Diluted
|
$
|
0.15
|
Amounts
in millions, except per share data
|
December
31, 2005
|
December
25, 2004
|
|||||
Net
income, as reported
|
$
|
19.2
|
$
|
153.9
|
|||
Add:
Share-based compensation expense included in reported net income,
net of
tax 1
|
3.3
|
6.2
|
|||||
Deduct:
Total share-based compensation expense determined under the fair
value
based method for all awards, net of tax 1,
2
|
(16.6
|
)
|
(18.0
|
)
|
|||
Pro
forma net income
|
$
|
5.9
|
$
|
142.1
|
|||
Earnings
per share - Basic:
|
|||||||
As
reported
|
$
|
0.36
|
$
|
2.94
|
|||
Pro
forma
|
$
|
0.11
|
$
|
2.71
|
|||
Earnings
per share - Diluted:
|
|||||||
As
reported
|
$
|
0.35
|
$
|
2.83
|
|||
Pro
forma
|
$
|
0.11
|
$
|
2.61
|
1
|
Amounts
reflect mark-to-market adjustments associated with the Company's
Restricted Stock Deferred Compensation
Plan.
|
2
|
Net
of tax amounts were calculated using the U.S. statutory rate (38.3
percent
in 2005 and 39.0 percent in 2004).
|
Number
of Options (000s)
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term in Years
|
Aggregate
Intrinsic Value 1
($000s)
|
||||||||||
Outstanding
as of December 31, 2005
|
5,824
|
$
|
49.96
|
||||||||||
Granted
|
47
|
52.46
|
|||||||||||
Exercised
|
(18
|
)
|
32.34
|
||||||||||
Forfeited
and canceled
|
(199
|
)
|
56.81
|
||||||||||
Outstanding
at December 30, 2006
|
5,654
|
49.90
|
5.4
|
$
|
46.5
|
||||||||
Options
exercisable at December 30, 2006
|
4,715
|
$
|
46.78
|
5.1
|
$
|
46.4
|
1
|
Calculated
using in-the-money stock options multiplied by the difference between
the
Company’s average of the high and low stock price on December 29, 2006
and
the option exercise price. The total number of in-the-money options
exercisable on December 30, 2006 was approximately 3.0
million.
|
December
30, 2006
|
December
31, 2005
|
December
25, 2004
|
||||||||
Weighted
average grant-date fair value of stock options granted
|
$
|
16.48
|
$
|
24.47
|
$
|
19.19
|
||||
Total
fair value of options vested ($000s)
|
$
|
19.0
|
$
|
19.1
|
$
|
17.2
|
||||
Total
intrinsic value of options exercised ($000s)
|
$
|
0.3
|
$
|
50.7
|
$
|
36.9
|
December
30, 2006
|
December
31, 2005
|
December
25, 2004
|
||||||||
Expected
life
|
5
|
5
|
6
|
|||||||
Expected
volatility
|
29.84
|
%
|
34.61
|
%
|
35.97
|
%
|
||||
Risk-free
interest rate
|
4.66
|
%
|
4.33
|
%
|
3.06
|
%
|
||||
Expected
dividend yield
|
1.01
|
%
|
1.13
|
%
|
1.18
|
%
|
Nonvested
Options
|
Number
of Options (000s)
|
Weighted
Average Grant-Date Fair Value
|
|||||
Nonvested
options at December 31, 2005
|
2,024
|
$
|
19.84
|
||||
Granted
|
47
|
16.48
|
|||||
Vested
|
(1,090
|
)
|
17.47
|
||||
Forfeited
and canceled
|
(55
|
)
|
22.37
|
||||
Nonvested
options at December 30, 2006
|
926
|
$
|
22.32
|
Nonvested
Restricted Shares
|
Numbers
of Shares (000s)
|
Weighted
Average Grant-Date Fair Value
|
|||||
Nonvested
restricted shares at December 31, 2005
|
288
|
$
|
52.37
|
||||
Granted
|
60
|
53.50
|
|||||
Vested
|
(96
|
)
|
38.60
|
||||
Forfeited
and canceled
|
(3
|
)
|
79.43
|
||||
Nonvested
restricted shares at December 30, 2006
|
249
|
$
|
57.65
|
December
30, 2006
|
December
31, 2005
|
December
25, 2004
|
||||||||
Weighted
average grant-date fair value of restricted stock awards
granted
|
$
|
53.50
|
$
|
74.54
|
$
|
55.99
|
||||
Total
fair value of restricted stock awards vested ($000s)
|
$
|
4.8
|
$
|
7.4
|
$
|
4.3
|
Balance
at December 25, 2004
|
$
|
7.8
|
||
Accruals
for warranties issued
|
6.9
|
|||
Changes
in accruals related to pre-existing warranties
|
(2.1
|
)
|
||
Settlements
made
|
(6.7
|
)
|
||
Balance
at December 31, 2005 1
|
$
|
5.9
|
||
Accruals
for warranties issued
|
7.9
|
|||
Changes
in accruals related to pre-existing warranties
|
(0.5
|
)
|
||
Settlements
made
|
(6.8
|
)
|
||
Balance
at December 30, 20061
|
$
|
6.5
|
1
|
Warranty
reserve changes during 2005 and 2006, as well as the 2005 and 2006
year
end balances, do not include amounts in connection with the MoistureLoc
recall.
|
Balance
at December 25, 2004
|
$
|
7.7
|
||
Accruals
for service contracts
|
11.8
|
|||
Revenue
recognized
|
(12.6
|
)
|
||
Balance
at December 31, 2005
|
$
|
6.9
|
||
Accruals
for service contracts
|
11.7
|
|||
Changes
in accruals related to pre-existing service contracts
|
(0.6
|
)
|
||
Revenue
recognized
|
(12.4
|
)
|
||
Balance
at December 30, 2006
|
$
|
5.6
|
December
30, 2006
|
December
31, 2005
|
December
25, 2004
|
||||||||
Allowances
for Losses on Trade Receivables
|
||||||||||
Balance
at beginning of year
|
$
|
16.2
|
$
|
22.1
|
$
|
20.6
|
||||
Change
in provision
|
4.2
|
(0.6
|
)
|
4.2
|
||||||
Gross
write-offs of trade receivables accounts
|
(4.7
|
)
|
(5.4
|
)
|
(4.0
|
)
|
||||
Recoveries
on trade receivables accounts previously written off
|
0.4
|
1.2
|
0.6
|
|||||||
Currency
effect
|
0.9
|
(1.1
|
)
|
0.7
|
||||||
Balance
at end of year
|
$
|
17.0
|
$
|
16.2
|
$
|
22.1
|
December
30, 2006
|
December
31, 2005
|
||||||
Inventories,
net
|
|||||||
Raw
materials and supplies
|
$
|
54.3
|
$
|
51.4
|
|||
Work
in process
|
18.8
|
19.5
|
|||||
Finished
products
|
164.3
|
148.9
|
|||||
$
|
237.4
|
$
|
219.8
|
December
30, 2006
|
December
31, 2005
|
||||||
Property,
Plant and Equipment, net
|
|||||||
Land
|
$
|
20.6
|
$
|
20.0
|
|||
Buildings
|
374.1
|
344.8
|
|||||
Machinery
and equipment
|
1,089.9
|
998.2
|
|||||
Leasehold
improvements
|
26.6
|
25.5
|
|||||
Equipment
on operating lease 1
|
18.1
|
14.4
|
|||||
1,529.3
|
1,402.9
|
||||||
Less
accumulated depreciation
|
(896.1
|
)
|
(798.5
|
)
|
|||
$
|
633.2
|
$
|
604.4
|
1
|
See
Note
5 — Net Investment in Sales-Type and Operating Leases
for additional information regarding equipment on operating
lease.
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||
2006
|
|||||||||||||
Net
Sales
|
$
|
546.0
|
$
|
571.5
|
$
|
577.3
|
$
|
597.6
|
|||||
Gross
Profit
|
306.9
|
322.0
|
325.8
|
333.2
|
|||||||||
Operating
Income
|
32.7
|
15.8
|
30.1
|
35.4
|
|||||||||
Net
Income (Loss)
|
11.8
|
(15.1
|
)
|
2.8
|
15.4
|
||||||||
Earnings
(Loss) Per Share, Basic
|
$
|
0.22
|
$
|
(0.28
|
)
|
$
|
0.05
|
$
|
0.28
|
||||
Earnings
(Loss) Per Share, Diluted
|
$
|
0.21
|
$
|
(0.28
|
)
|
$
|
0.05
|
$
|
0.28
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||
2005
|
|||||||||||||
Net
Sales
|
$
|
554.7
|
$
|
605.4
|
$
|
567.3
|
$
|
626.4
|
|||||
Gross
Profit
|
321.9
|
360.4
|
318.6
|
369.7
|
|||||||||
Operating
Income
|
55.2
|
75.7
|
56.4
|
96.1
|
|||||||||
Net
Income (Loss)
|
33.3
|
37.3
|
(105.2
|
)
|
53.8
|
||||||||
Earnings
(Loss) Per Share, Basic
|
$
|
0.63
|
$
|
0.70
|
$
|
(1.97
|
)
|
$
|
1.00
|
||||
Earnings
(Loss) Per Share, Diluted
|
$
|
0.60
|
$
|
0.67
|
$
|
(1.97
|
)
|
$
|
0.96
|
2006
|
2005
|
||||||||||||
Price
Per Share
|
Price
Per Share
|
||||||||||||
High
|
Low
|
High
|
Low
|
||||||||||
First
|
$
|
73.24
|
$
|
63.68
|
$
|
75.85
|
$
|
61.82
|
|||||
Second
|
63.96
|
40.75
|
79.75
|
70.80
|
|||||||||
Third
|
52.80
|
43.97
|
87.89
|
74.50
|
|||||||||
Fourth
|
54.30
|
47.36
|
84.30
|
66.17
|
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
Results
for the Year
|
||||||||||||||||
Net
Sales
|
$
|
2,292.4
|
$
|
2,353.8
|
$
|
2,233.5
|
$
|
2,018.5
|
$
|
1,810.5
|
||||||
Net
Income
|
14.9
|
19.2
|
153.9
|
106.0
|
20.8
|
|||||||||||
Net
Income - Basic earnings per share
|
0.28
|
0.36
|
2.94
|
2.02
|
0.39
|
|||||||||||
Net
Income - Diluted earnings per share
|
0.27
|
0.35
|
2.83
|
1.98
|
0.39
|
|||||||||||
Dividends
per share
|
0.52
|
0.52
|
0.52
|
0.52
|
0.65
|
Year-End
Position
|
||||||||||||||||
Working
capital
|
$
|
530.3
|
$
|
617.7
|
$
|
528.0
|
$
|
528.9
|
$
|
457.5
|
||||||
Total
assets
|
3,278.8
|
3,416.4
|
3,045.8
|
3,038.1
|
2,767.1
|
|||||||||||
Current
portion of long-term debt
|
134.4
|
161.2
|
100.8
|
195.0
|
186.4
|
|||||||||||
Long-term
debt
|
698.3
|
831.2
|
543.3
|
652.0
|
656.2
|
|||||||||||
Retained
earnings
|
1,458.3
|
1,471.6
|
1,480.4
|
1,354.1
|
1,275.6
|
|||||||||||
Shareholders'
equity
|
1,394.8
|
1,283.9
|
1,362.8
|
1,160.8
|
1,005.3
|
Other
Ratios and Statistics
|
||||||||||||||||
Return
on average shareholders' equity
|
1.1
|
%
|
1.4
|
%
|
12.6
|
%
|
10.5
|
%
|
2.1
|
%
|
||||||
Return
on invested capital
|
1.3
|
%
|
1.2
|
%
|
9.1
|
%
|
7.5
|
%
|
2.1
|
%
|
||||||
Effective
income tax rate for continuing operations before minority
interest
|
79.7
|
%
|
89.9
|
%
|
34.4
|
%
|
37.3
|
%
|
69.8
|
%
|
||||||
Current
ratio
|
1.6
|
1.6
|
1.6
|
1.6
|
1.5
|
|||||||||||
Capital
expenditures
|
$
|
107.7
|
$
|
116.0
|
$
|
118.9
|
$
|
91.5
|
$
|
91.9
|
· |
Control
environment deficiencies related to (i) the failure to institute
all
elements of an effective program to help prevent and detect fraud
by
Company employees and (ii) the failure to establish and maintain
effective
corporate and regional management oversight and monitoring of operations
to detect subsidiaries’ override of established financial controls and
accounting policies, execution of improper transactions and accounting
entries to impact revenue and earnings, and reporting of these
transactions to the appropriate finance personnel or the Company’s
independent registered public accounting
firm.
|
· |
Controls
over the financial reporting and close process to provide reasonable
assurance of the completeness and accuracy of certain financial statement
accounts in certain subsidiaries.
|
· |
Controls
over revenue recognition and sales practices related to certain
subsidiaries’ relationships with their key distributors and the
installation of refractive laser surgery equipment in multiple locations
where the Company does business.
|
· |
Controls
over the deferred compensation plan to ensure that the Plan document
was
amended to accurately reflect the Plan’s intended
design.
|
· |
Several
individuals in management positions at its Brazilian and Korean operations
have either left the Company or have been terminated. In addition,
the
Senior Vice President - Asia has been
replaced.
|
· |
The
Company has strengthened its management and financial ranks including
the
appointment of a Vice President, Compliance reporting directly to
the
Chief Executive Officer and the Audit Committee of the Board; and
a Vice
President, Financial Compliance reporting to the Corporate
Controller.
|
· |
The
Company further enhanced its whistleblower program related to the
communication, investigation and resolution of whistleblower
activities.
|
· |
The
Company expanded executive management's ongoing communications regarding
the importance of adherence to internal controls and company
policies.
|
· |
The
Company realigned the global finance organization in its operating
segments to have a direct reporting relationship to the Corporate
Controller, rather than to management within the operating
segments.
|
· |
The
Company has reinforced the certification process to emphasize senior
managers' accountability for maintaining an ethical
environment.
|
· |
The
Company instituted a comprehensive fraud and compliance risk assessment
program and a risk analysis process to determine audits to be performed
by
the Internal Audit department and internal control testing to be
conducted
at non-significant locations.
|
· |
The
Company formalized entity wide and corporate monitoring
controls.
|
· |
The
Company has augmented the quarterly financial reporting and close
process,
by implementing an expanded Quarterly Close Checklist which is completed
by each Operating Segment Controller and reviewed by the Corporate
Controller.
|
· |
The
Company held a global controller’s conference in 2006 with topics covered
including financial reporting, internal controls, and global
processes.
|
· |
The
Company replaced several controllers, especially in the Asia
region.
|
· |
The
Company has modified the performance management objectives and individual
bonus metrics for the global finance organization to be more heavily
weighted to internal controls and financial reporting and close
metrics.
|
· |
The
Company reemphasized the requirements for reconciliation and support
of
all balance sheet accounts and journal
entries.
|
· |
The
number of entities at which substantive audits or internal control
testing
was performed by Internal Audit or the Sarbanes Oxley compliance
group was
expanded in 2006.
|
· |
The
Company has augmented the quarterly financial reporting and close
process,
by implementing an expanded Quarterly Close Checklist which is completed
by each Operating Segment Controller and reviewed by the Corporate
Controller.
|
· |
The
Company has enhanced key control activities related to revenue recognition
on laser installations and sales to distributor/wholesalers, documentation
and approval of terms of sales, including standard and extended credit
terms and analysis of sales returns and
exchanges.
|
· |
The
Company has enhanced its quarterly financial reporting and close
process
by implementing a more extensive Quarterly Close Checklist and Quarterly
Close Call process which focuses on specific revenue recognition
related
issues.
|
· |
The
Company has revised its Revenue Recognition policy to specifically
address
the issues identified in the material
weakness.
|
· |
The
Company currently accounts for revenue on a consignment basis in
the Korea
Vision Care and India Vision Care and Cataract distributor businesses
with
appropriate controls around the accounting process.
|
· |
The
Company will require formal review and approval of all new or amended
employee benefit plans by Corporate Technical
Accounting.
|
· |
The
Company amended its Deferred Compensation Plan early in 2006 to ensure
that the Plan complied with the intended
design.
|
· |
The
Company has begun an initiative to provide additional training to
finance,
accounting and tax professionals regarding new and evolving areas
in U.S.
GAAP accounting. In addition, the Company is undertaking a review
to
ensure that the finance, accounting and tax functions are staffed
in
accordance with the required competencies, and has begun the process
of
making personnel changes where
necessary.
|
· |
The
Company is developing a formal training program for certain non-finance
employees on revenue recognition and integrity of financial reporting
and
controls.
|
· |
The
Company continues to provide training to its managers and sales
organizations on ethics and compliance with over 2,400 employees
trained
in 2006.
|
· |
The
Company has initiated a project in 2007 to revise its Code of Conduct
and
other related Company policies.
|
· |
The
Company has further expanded and strengthened its internal audit
organization by hiring additional experienced audit
staff.
|
· |
The
Company, with the assistance of outside consultants other than its
independent registered public accountants, undertook a project to
perform
a comprehensive review of its accounting for income taxes including
deferred tax assets and liabilities, taxes payable and tax reserves.
Further, the Company will initiate processes to improve proper tracking
of
deferred tax assets and
liabilities.
|
· |
The
Company implemented a process requiring all subsidiaries outside
of the
United States to use one global professional tax advisor to review
local
income tax returns prior to filing and to provide services relating
to tax
assessments and positions.
|
· |
The
Company plans to add regional tax resources with indirect tax expertise
to
address VAT, customs and other indirect
taxes.
|
· |
The
Company has strengthened its tax department by hiring additional
senior
tax staff with expertise in accounting for income
taxes.
|
· |
The
Company will undertake a project to redesign its controls around
income
taxes in the second quarter of
2007.
|
A.
|
Termination
without Cause by the Company; Good Reason by Mr. Zarrella
-
the Company will pay or provide:
|
· |
within
30 days of termination, a lump sum payment equal to unpaid annual
base
salary to the date of termination;
|
· |
a
pro-rated bonus for the year in which the termination occurred, payable
when bonuses to other senior officers are paid for such
year;
|
· |
a
payment equal to two times annual base salary and target bonus, payable
over a two year period;
|
· |
continued
participation for Mr. Zarrella, his spouse and dependants in the
Company’s
health insurance plan for the remaining term of his employment period,
but
not in excess of 18 months; and
|
· |
other
amounts or benefits Mr. Zarrella is eligible to receive prior to
the
termination date in accordance with Company’s plans, policies, programs or
agreements.
|
B.
|
Termination
Upon Death
-
the Company will pay or provide:
|
· |
within
30 days of termination, a lump sum payment equal to unpaid annual
base
salary to the date of termination;
|
· |
a
pro-rated bonus for the year in which the termination occurred, payable
when bonuses to other senior officers are paid for such
year;
|
· |
other
amounts or benefits Mr. Zarrella is eligible to receive prior to
the
termination date in accordance with Company’s plans, policies, programs or
agreements, including a death benefit.
|
C.
|
Termination
Upon Disability
-
the Company will pay or provide:
|
· |
within
30 days of termination, a lump sum payment equal to unpaid annual
base
salary to the date of termination;
|
· |
a
pro-rated bonus for the year in which the termination occurred, payable
when bonuses to other senior officers are paid for such
year;
|
· |
other
amounts or benefits Mr. Zarrella is eligible to receive prior to
the
termination date in accordance with Company’s plans, policies, programs or
agreements, including a disability
benefit.
|
D.
|
Termination
For Cause; Other than Good Reason
-
the Company will pay or provide unpaid annual base salary and other
benefits through the termination
date.
|
ALAN
M. BENNETT
|
Director
since 2004
Age:
55
|
|
Mr.
Bennett served as senior vice president and chief financial officer
of
Aetna Inc., a leading provider of health, dental, group life, disability
and long-term care benefits from 2001 until his retirement in April
2007.
He joined Aetna in 1995 as chief financial officer for Aetna Business
Resources. He was named vice president and director of internal audit
of
Aetna Inc. in 1997 and in 1998 was named vice president and controller.
From 1981 to 1995, Mr. Bennett held several executive positions with
Pirelli Armstrong Tire Corporation. From 1972 to 1981, he was an
audit
manager at Ernst & Young. Mr. Bennett is a Director of Halliburton and
a member of the American Institute of Certified Public
Accountants.
|
||
CATHERINE
M. BURZIK
|
Director
since January 2007
Age:
56
|
|
Ms.
Burzik has served since November 2006 as president and chief executive
officer of Kinetic Concepts, Inc., a global medical technology company.
From 2004 until December 2006, she served as senior vice president
of
Applera Corporation and president of its Applied Biosystems Group,
a
developer and marketer of instrument-based systems. She joined Applera
in
2003 as a vice president. From 1997 to 2003, she held several executive
positions with Johnson & Johnson, including president of its
Ortho-Clinical Diagnostics, Inc. subsidiary. From 1974 to 1997, she
held
several executive positions in management with Eastman Kodak
Company.
|
||
DOMENICO
DE SOLE
|
Director
since 1996
Age:
63
|
|
Mr.
De Sole has served since April 2005 as chairman of Tom Ford International,
a luxury goods fashion company which produces fragrances, sunglasses
and a
signature ready-to-wear men's line. He served from 1995 to 2004 as
president and chief executive officer of Gucci Group N.V., a multibrand
luxury goods company. He joined that company in 1984 as president
and
chief executive officer of Gucci America, Inc. and in 1994 was named
chief
operating officer of Gucci Group N.V. Mr. De Sole is a director of
Delta
Airlines, Inc., GAP Inc. and Telecom Italia and Ermenegildo Zegna.
He is a
member of the Harvard Law School Advisory
Board.
|
PAUL
A. FRIEDMAN, M.D.
|
Director
since 2004
Age:
64
|
|
Dr.
Friedman has served since 2001 as president and chief executive officer
of
Incyte Corporation, a biotechnology company. From 1998 until 2001,
he
served as president of DuPont Pharmaceuticals Research Laboratories.
From
1994 until 1998, he served as president, Research and Development,
of
DuPont Merck Pharmaceutical Company. From 1991 to 1994, he was senior
vice
president of Research at Merck Sharp & Dohme Research Laboratories and
from 1985 to 1991 he held several executive positions there. From
1974 to
1985, Dr. Friedman was associate professor of Medicine and Pharmacology
at
Harvard Medical School. Dr. Friedman is a diplomat of the American
Board
of Internal Medicine and a member of the American Society of Clinical
Investigation.
|
||
JONATHAN
S. LINEN
|
Director
since 1996
Age:
63
|
|
Mr.
Linen has served since January 2006 as advisor to the chairman of
American
Express Company, a diversified worldwide travel and financial services
company. From 1993 to 2006, he served as vice chairman. He joined
that
company in 1969 and held various executive positions before being
appointed president and chief executive officer of Shearson Lehman
Brothers in 1989. In 1992, he was named president and chief operating
officer of American Express Travel Related Services Company, Inc.
Mr.
Linen is chairman of the board of the International Golf Association,
a
trustee of the U.S. Council for International Business and a member
of The
Council on Foreign Relations. Mr. Linen presides on the policy committee
of The Travel Business Roundtable and is vice chairman of the executive
committee of the World Travel & Tourism Council. He serves as a member
of the boards of Yum! Brands, Inc., Intercontinental Hotels, World
Monuments Fund, the U.S. Travel & Tourism Promotion Advisory Board,
and is an executive committee member of NYC & Company. Mr. Linen is a
past chairman and now honorary member of the board of trustees of
the
National Urban League.
|
||
RUTH
R. McMULLIN
|
Director
since 1987
Age:
65
|
|
Mrs.
McMullin is the chairperson of trustees of the Eagle-Picher Trust.
She was
a member of the faculty of the Yale School of Management as a Management
Fellow from 1994 to 1995. From 1992 to 1994, she was president and
chief
executive officer of the Harvard Business School Publishing Corporation.
From 1990 to 1992, Mrs. McMullin was a consultant to private industry
and
from 1991 to 1992, she was also acting chief executive officer of
UNR
Industries, Inc. and a member of that company's chairman's committee.
From
1989 to 1990, she was president and chief executive officer of John
Wiley
& Sons, Inc., a publishing company. Mrs. McMullin joined that company
as executive vice president and chief operating officer in 1987.
She is a
director of The Mighty Eighth Foundation, Inc., and The Mighty Eighth
Air
Force Heritage Center, Inc.
|
||
LINDA
JOHNSON RICE
|
Director
since 1990
Age:
49
|
|
Mrs.
Rice has served since 2002 as president and chief executive officer
of
Johnson Publishing Company, Inc., a multi-media company. She joined
that
company in 1980, became vice president in 1985 and president and
chief
operating officer in 1987. In addition to management of the company,
she
oversees the editorial content of Ebony and Jet magazines. She is
also
president of Fashion Fair Cosmetics, a division of Johnson Publishing.
Mrs. Rice is a director of Kimberly-Clark Corporation, Omnicom Group,
Inc., and Money Gram International,
Inc.
|
WILLIAM
H. WALTRIP
|
Director
since 1985
Age:
69
|
|
Mr.
Waltrip served from 1993 to 2003 as chairman of the board of Technology
Solutions Company, a systems integration company, and from 1993 until
1995
he was chief executive officer of that company. Mr. Waltrip has served
twice as Bausch & Lomb's interim chief executive officer, once in 1996
and once in 2001. He also served as the Company's chairman from 1996
to
1998 and again in 2001. From 1991 to 1993, he was chairman and chief
executive officer of Biggers Brothers, Inc., a food service distribution
company and was a consultant to private industry from 1988 to 1991.
From
1985 to 1988, he served as president and chief operating officer
of IU
International Corporation, a transportation, environmental and
distribution company. Earlier, he had been president, chief executive
officer and a director of Purolator Courier Corporation. He is a
director
of Theravance, Inc., Charles River Laboratories International, Inc.
and
Thomas & Betts Corporation.
|
||
BARRY
W. WILSON
|
Director
since 2003
Age:
63
|
|
Mr.
Wilson joined Medtronic, Inc., a medical technology company, in 1995,
as
president, Europe, Middle East & Africa. Since 1997, he served as
senior vice president and a member of the Executive Committee. In
2001,
Mr. Wilson assumed responsibility for Medtronic International. He
is
currently senior vice president, International. From 1980 to 1993,
he held
various executive positions with Bristol-Myers Squibb, including
president
of Europe. Prior to that, he held executive positions with Pfizer,
Inc. in
nine different countries. Mr. Wilson was chairman of Eucomed, the
European
medical device industry association from 2000 to 2004 and now serves
as
its honorary chairman.
|
KENNETH
L. WOLFE
|
Director
since 1989
Age:
68
|
|
Mr.
Wolfe served as chairman and chief executive officer of Hershey Foods
Corporation, a food products manufacturing firm, from 1994 until
his
retirement in 2001. He joined that firm in 1967 and held various
executive
positions before being appointed vice president and chief financial
officer in 1981. In 1984, Mr. Wolfe was named senior vice president.
From
1985 until 1993, he was president and chief operating officer. Mr.
Wolfe
is a director of Revlon, Inc. and is a trustee of Fidelity
Funds.
|
||
RONALD
L. ZARRELLA
|
Director
since 2001
Age:
57
|
|
Mr.
Zarrella has served since 2001 as chairman and chief executive officer
of
Bausch & Lomb Incorporated. He was previously with General Motors
Corporation, where he was executive vice president and president
of
General Motors North America from 1998 to 2001. From 1994 to 1998,
Mr.
Zarrella was vice president and group executive in charge of General
Motors' North American Vehicle Sales, Service and Marketing Group.
From
1985 to 1994, Mr. Zarrella held several executive positions at Bausch
& Lomb, including serving as its president, chief operating officer
and a member of its Board. Mr. Zarrella is a director of Avaya, Inc.
He is
a trustee of Rochester Institute of Technology, the International
Agency
for the Prevention of Blindness, and the Committee for Economic
Development. Mr. Zarrella is a member of the board of the University
of
Rochester Medical Center, FIRST (For Inspiration and Recognition
of
Science and Technology), and the National Italian American
Foundation.
|
Name
and Age
|
Position
|
Ronald
L. Zarrella (57)
|
Chairman
and Chief Executive Officer since 2001; Executive Vice President
and
President, General Motors North America, General Motors Corporation
(1998-2001).
|
Gerhard
Bauer (51)
|
Senior
Vice President, Global Operations and Engineering since May 2006;
Vice
President, Global Operations and Engineering for Europe (2001-May
2006).
|
Alan
H. Farnsworth (54)
|
Senior
Vice President and President, Europe, Middle East and Africa Region
since
2001; Corporate Vice President, Pharmaceuticals/Europe
(2000-2001).
|
Dwain
L. Hahs (54)
|
Senior
Vice President and President Asia Region since May 2006; Senior Vice
President, Global Operations and Engineering
(2000-2006).
|
Stephen
C. McCluski (54) 1
|
Senior
Vice President Corporate Strategy since March 2007; Senior Vice President
and Chief Financial Officer (1995-March 2007).
|
David
R. Nachbar (44)
|
Senior
Vice President, Human Resources since 2002; Senior Vice President,
Human
Resources, The St. Paul Companies, Inc. (1998-2002).
|
Efrain
Rivera (50)
|
Senior
Vice President and Chief Financial Officer since March 2007; Corporate
Vice President and Treasurer (2004-March 2007); Corporate Vice President
and Assistant Treasurer (2003-2004); Leave of Absence (2003); Corporate
Vice President and President, Latin America and Canada (2002-2003);
President, Bausch & Lomb Latin America and General Manager, Bausch
& Lomb Mexico (2001-2002); Vice President and Controller, Vision Care
(1998-2001).
|
Robert
B. Stiles (57)
|
Senior
Vice President and General Counsel since 1997.
|
Praveen
Tyle (47)
|
Senior
Vice President, Research & Development and Chief Scientific Officer
since 2004; Group Vice President, Pharmaceutical Sciences and
Manufacturing, Biovail Corporation (2003-2004); Vice President, Global
Head, Global Pharmaceutical Sciences, Pharmacia Corporation (2001-2003);
Vice President, Pharmaceutical Sciences - U.S., Pharmacia Corporation
(1999-2001).
|
Evon
L. Jones (42)
|
Corporate
Vice President and Chief Information Officer since January 2005;
Senior
Vice President and Chief Information Officer, The Dial Corporation
(2001-2004); Senior Vice President and Chief Information Officer,
America
West Holdings Corporation (1998-2001).
|
Barbara
M. Kelley (60)
|
Corporate
Vice President, Communications and Investor Relations since
2001.
|
Jurij
Z. Kushner (56)
|
Corporate
Vice President, Controller since
1995.
|
Brian
Levy (55)
|
Corporate
Vice President and Chief Medical Officer since 2004; Vice President,
Clinical & Medical Affairs (2000-2004).
|
Angela
J. Panzarella (49)
|
Corporate
Vice President, Global Vision Care since
2001.
|
Gary
M. Phillips (41)
|
Corporate
Vice President and Vice President Commercial Operations, U.S. Surgical
and
Pharmaceuticals since January 2007; Corporate Vice President, Global
Pharmaceuticals (2002-2006); Executive Director, Strategic Planning,
Novartis Pharmaceuticals
(2000-2002).
|
Henry
C. Tung (48)
|
Corporate
Vice President, Global Surgical since February 2005; Vice President,
New
Business Development, Boston Scientific Corporation (2000-February
2005).
|
· |
Our
executive compensation programs are aligned with and support the
strategic
direction of our business;
|
· |
Our
compensation programs are presented with transparency and encourage
behavior that is consistent with our values, our Cultural Drivers
and our
Commitment to an Ethical Culture. A description of these concepts
is
available on our web site at
http://www.bausch.com/en_US/corporate/corpcomm/general/ethical_culture.aspx;
|
· |
Our
“pay for performance” philosophy ties compensation awards to business and
individual achievement in a manner that recognizes target performance
with
at-market awards; above-target level performance is rewarded with
higher
awards, and below-target performance generates below-market awards,
if
any;
|
· |
The
proportion of compensation at risk increases as the employee’s level of
responsibility increases, and we believe in allocating variable
compensation to create a greater degree of “at risk” pay than our market
peers;
|
· |
We
encourage and support executive ownership in the Company through
the use
of stock ownership guidelines, which call for higher levels of ownership
as responsibility increases;
|
· |
A
portfolio of health, welfare, and savings benefit programs are designed
to
help in the attraction, productivity and retention of our employees;
and
|
· |
The
design and administration of our compensation programs strive to
be
financially efficient, affordable and
sustainable.
|
· |
Annual
salary of $1.1 million for the first two years of employment, with
annual
increases subject to review by our Board of Directors. Mr. Zarrella’s base
salary has not been increased since the inception of the employment
agreement.
|
· |
A
target bonus of 100 percent of base salary with payouts ranging from
zero
percent to 150 percent of base salary based on the Company’s performance
against objectives set by the Compensation
Committee.
|
· |
A
restricted stock award granted in 2002 in the amount of 65,651 shares
that
fully vested in 2006, the fifth anniversary of Mr. Zarrella’s appointment.
The purpose of this award was to compensate him for benefits forfeited
at
his prior employer as a result of accepting his current position
with
Bausch & Lomb. The items forfeited included annual bonus compensation,
long-term incentive payments and stock option
value.
|
· |
Participation
in employee welfare and benefits plans and other standard executive
perquisites including, but not limited to, financial planning benefits,
club membership and fees, vacation pay, and personal use of Company
aircraft.
|
· |
Participation
in the Supplemental Executive Retirement Plan II (SERP II) which
is
described in more detail in the narrative to the Pension
Benefits Table
and the Potential
Payments on Retirement, Termination or Change of Control
section.
|
· |
Other
post termination benefits including a change of control agreement
that are
described in detail in the Potential
Payments on Retirement, Termination or Change of Control
section.
|
Name
and
Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards 1
|
Option
Awards
1
|
Non-Equity
Incentive
Plan
Compensation
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
|
All
Other Compensation2
|
Total
|
|||||||||||||||||||
R.L.
Zarrella
Chairman
and
C.E.O.
|
2006
|
$
|
1,100,000
|
$
|
-
|
$
|
494,133
|
$
|
1,253,100
|
$
|
545,600
|
$
|
1,269,359
|
$
|
257,874
|
$
|
4,920,066
|
|||||||||||
S.C.
McCluski 3
Sr.
V.P. and C.F.O.
|
2006
|
415,200
|
-
|
-
|
323,703
|
154,454
|
35,071
|
170,850
|
1,099,278
|
|||||||||||||||||||
P.
Tyle
Sr.
V.P. R&D,
Chief
Scientific
Officer
|
2006
|
410,001
|
105,000
|
356,870
|
334,075
|
207,102
|
1,927
|
176,640
|
1,591,615
|
|||||||||||||||||||
D.
L. Hahs
Sr.
V.P. &
President,
Asia
Region
|
2006
|
405,600
|
-
|
167,100
|
215,424
|
164,116
|
37,029
|
351,787
|
1,341,056
|
|||||||||||||||||||
J.M.
Loughlin 4
Sr.
V.P. &
President,
Asia
Region
|
2006
|
335,000
|
-
|
-
|
206,734
|
135,549
|
21,001
|
508,125
|
1,206,409
|
1
|
SFAS
No. 123(R) assumptions used to determine the value of equity awards
disclosed in the "Stock Awards" and "Option Awards"
columns:
|
Fair
Value Assumptions:
|
2/25/2003
Grant
Date
|
7/1/2003
Grant
Date
|
2/2/2004
Grant
Date
|
7/19/2004
Grant
Date
|
1/31/2005
Grant
Date
|
|||||||||||
Exercise
price of option
|
$
|
29.85
|
$
|
37.18
|
$
|
54.26
|
$
|
61.31
|
$
|
71.85
|
||||||
Grant
date share price
|
29.85
|
37.18
|
54.26
|
61.31
|
71.85
|
|||||||||||
Expected
term of the option
|
6
|
6
|
6
|
5
|
5
|
|||||||||||
Expected
volatility
|
36.01
|
%
|
36.12
|
%
|
35.91
|
%
|
36.93
|
%
|
35.15
|
%
|
||||||
Expected
dividends
|
1.18
|
%
|
1.21
|
%
|
1.18
|
%
|
1.20
|
%
|
1.14
|
%
|
||||||
Risk
free interest rate
|
3.30
|
%
|
3.69
|
%
|
3.30
|
%
|
3.54
|
%
|
4.34
|
%
|
||||||
Black
Scholes Fair Value
|
$
|
10.67
|
$
|
13.52
|
$
|
19.03
|
$
|
20.79
|
$
|
24.55
|
a.
|
The
Company’s matching and base Company contributions into the 401(k) Account
Plan and the 401(k) Excess Account. See the Retirement
section of the Potential
Payments on Retirement, Termination or Change of Control
section and the narrative discussion on Non-Qualified
Deferred Compensation
for more details. Amounts by named executive officer are as
follows:
|
Named
Executive Officer
|
Total
Company Contributions to 401(k) Account Plan and Non-Qualified Deferred
Compensation 401(k) Excess Account
|
|||
R.L.
Zarrella
|
$
|
110,000
|
||
S.C.
McCluski
|
58,128
|
|||
P.
Tyle
|
39,817
|
|||
D.L.
Hahs
|
68,952
|
|||
J.M.
Loughlin
|
46,900
|
b.
|
Our
2006 awards under LEAP as described further in the Additional
Benefits
section of the Compensation Discussion and Analysis. Each of the
named
executive officers elected to receive equity equivalents rather
than cash
and as a result, amounts are 15 percent of the executive’s eligible
wages:
|
Named
Executive Officer
|
2006
LEAP Value 1
|
|||
R.L.
Zarrella 2
|
$
|
0
|
||
S.C.
McCluski
|
65,657
|
|||
P.
Tyle
|
64,835
|
|||
D.L.
Hahs
|
64,139
|
|||
J.M.
Loughlin
|
52,975
|
1
|
LEAP
balances at year-end consist of Company stock units that fully
vest five
years from the beginning of the Plan year. Upon his retirement,
Mr.
Loughlin vested in 20 percent of the 2006 LEAP value for a vested
benefit
of $10,595.
|
2
|
Mr.
Zarrella is not eligible to participate in
LEAP.
|
c.
|
The
amounts set forth in the “All Other Compensation” column include the value
of perquisites, as set forth in the chart
below:
|
Named
Executive
Officer
|
Personal
Use
of
Company
Plane
|
Financial
Planning
|
Personal
Use
of
Club
|
Executive
Auto
|
Matching
Charitable
Contributions
|
Relocation
Allowances
|
Executive
Physicals
|
Home
Security
|
Expatriate
Allowances 1
|
Total
Value
Perquisites
|
|||||||||||||||||||||
R.L.
Zarrella
|
$
|
81,452
|
$
|
21,837
|
$
|
140
|
$
|
31,379
|
$
|
10,000
|
$
|
-
|
$
|
-
|
$
|
714
|
$
|
-
|
$
|
145,522
|
|||||||||||
S.C.
McCluski
|
-
|
1,500
|
6,749
|
25,623
|
10,000
|
-
|
-
|
905
|
-
|
44,777
|
|||||||||||||||||||||
P.
Tyle
|
8,286
|
10,000
|
2,312
|
25,236
|
5,000
|
14,662
|
4,245
|
-
|
-
|
69,741
|
|||||||||||||||||||||
D.L.
Hahs
|
-
|
10,600
|
12,878
|
35,663
|
6,000
|
26,006
|
-
|
460
|
124,805
|
216,412
|
|||||||||||||||||||||
J.M.
Loughlin
|
-
|
10,000
|
3,254
|
25,429
|
-
|
84,275
|
-
|
-
|
283,573
|
406,531
|
1
|
Mr.
Loughlin’s Other Annual Compensation includes expatriate allowances of
$283,573 for 2006. Mr. Loughlin was on expatriate assignment in Hong
Kong
during a portion of 2006, and received the following allowances in
accordance with the Company’s Global Service Policy: goods and services
differential, Hong Kong housing/utilities (less employee contribution),
annual home leave, storage, and tax differential. The tax differential
portion of the allowances in the amount of $133,680 represents actual
income tax and gross-up payments made by the Company on behalf of
Mr.
Loughlin, less amounts withheld from Mr. Loughlin’s salary for the year
2006. The tax differential includes Hong Kong tax in the amount of
$128,091 which was paid in local currency on Mr. Loughlin’s behalf in June
2006, and converted to US dollars using the Company’s published foreign
exchange rate for June. These amounts adjust Mr. Loughlin’s taxes to
levels he would have paid in the U.S. under the Company’s Tax Equalization
Program.
|
d.
|
Life
insurance premiums and other nominal
amounts.
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
||||||||||
Name
|
Threshold
($)
|
Target
2
($)
|
Maximum
($)
|
|||||||
0
|
%
|
67
|
%
|
134
|
%
|
|||||
R.L.
Zarrella
|
$
|
0
|
$
|
737,000
|
$
|
1,474,000
|
||||
S.C.
McCluski
|
0
|
208,638
|
417,276
|
|||||||
P.
Tyle
|
0
|
206,026
|
412,051
|
|||||||
D.L.
Hahs
|
0
|
203,814
|
407,628
|
|||||||
J.
M. Loughlin
|
0
|
168,338
|
336,675
|
1
|
We
made no equity-based awards to named executive officers in 2006 due
to the
withdrawal of reliance on previously-filed financial statements,
and the
delay in filing our 2005 financial statements, which restricted us
from
issuing equity-based compensation, except for transactions which
could be
exempted under Federal Securities
law.
|
2
|
The
Annual Incentive Compensation Plan target payouts for 2006 were adjusted
to 67 percent as described in detail under the heading Elements
of Our Executive Compensation and Benefits in the
Compensation Discussion and
Analysis.
|
The
AICP caps the payout of the pool at 200 percent of target which,
after the
adjustment to 67 percent by the Compensation Committee, is 134 percent
of
target.
|
The
overall pool cannot be exceeded, however, individual awards can be
adjusted upward or downward depending on performance and other factors
as
determined by the Compensation
Committee.
|
Actual
payouts were lower than the 67 percent target, with the exception
of Dr.
Tyle, as reflected in the Summary
Compensation Table.
|
Option
Awards
|
Stock
Awards
|
|||||
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
1
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock that Have Not Vested (#) 2
|
Market
Value of Shares or Units of Stock that Have Not Vested
($)
|
R.
L. Zarrella
|
41,667
78,433
70,000
500,000
370,000
|
83,333
39,217
|
$71.8450
54.2600
29.8450
37.6850
31.9100
|
1/31/2015
2/2/2014
2/25/2013
1/2/2012
11/9/2011
|
||
S.
C. McCluski
|
10,334
23,333
40,000
35,000
50,000
30,000
28,630
1,370
29,037
1,963
21,465
2,355
|
20,666
11,667
|
71.8450
54.2600
29.8450
38.3450
44.8250
61.9688
72.9688
72.9688
50.9375
50.9375
42.3750
42.3750
|
1/31/2015
2/2/2014
2/25/2013
1/28/2012
1/29/2011
7/24/2010
7/27/2009
7/27/2009
7/27/2008
7/27/2008
7/21/2007
7/21/2007
|
||
P.
Tyle
|
8,334
23,333
|
16,666
11,667
|
71.8450
61.3050
|
1/31/2015
7/19/2014
|
20,000
8,000
|
1,041,200
416,480
|
D.
L. Hahs
|
6,667
16,667
30,000
25,000
30,000
24,000
|
13,333
8,333
|
71.8450
54.2600
29.8450
38.3450
44.8250
61.9688
|
1/31/2015
2/2/2014
2/25/2013
1/28/2012
1/29/2011
7/24/2010
|
10,000
|
520,600
|
J.
M. Loughlin
|
6,334
16,333
30,000
15,000
1,370
10,630
1,963
|
12,666
8,167
|
71.8450
54.2600
29.8450
61.9688
72.9688
72.9688
50.9375
|
1/31/2015
2/2/2014
2/25/2013
7/24/2010
7/27/2009
7/27/2009
7/27/2008
|
1
|
Vesting
dates for the unvested portion of the option awards are outlined
below:
|
For
the
1/31/2015 option expiration date: 41,666 vest on 1/31/2007 and 41,667
vest
on 1/31/2008
|
For
the
2/2/2014 option expiration date: 39,217 vest on
2/2/2007
|
For
the
1/31/2015 option expiration date: 10,333 vest on 1/31/2007 and 10,333
vest
on 1/31/2008
|
For
the
2/2/2014 option expiration date: 11,667 vest on
2/2/2007
|
For
the
1/31/2015 option expiration date: 8,333 vest on 1/31/2007 and 8,333
vest
on 1/31/2008
|
For
the
7/19/2014 option expiration date: 11,667 vest on
7/19/2007
|
For
the
1/31/2015 option expiration date: 6,666 vest on 1/31/2007 and 6,667
vest
on 1/31/2008
|
For
the
2/2/2014 option expiration date: 8,333 vest on
2/2/2007
|
For
the
1/31/2015 option expiration date: 6,333 vest on 1/31/2007 and 6,333
vest
on 2/28/2007, per his separation
agreement
|
For
the
2/2/2014 option expiration date: 8,167 vest on
2/2/2007
|
2
|
Vesting
dates for Stock Awards are listed
below:
|
10,000
vest on 1/31/2010 and 10,000 vest on
1/31/2012
|
2,666
vest on 7/19/2007, 2,667 vest on 7/19/2009 and 2,667 vest on
7/19/2011
|
Dr.
Tyle earned dividend equivalents of
$14,560
|
10,000
vest on 7/26/2010
|
Mr.
Hahs earned dividend equivalents of
$5,200
|
Stock
Awards
|
|||||||
Name
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
|||||
R.
L. Zarrella 2
|
65,561
|
$
|
3,378,686
|
||||
S.
C. McCluski
|
|||||||
P.
Tyle
|
|||||||
D.
L. Hahs
|
|||||||
J.
M. Loughlin
|
1
|
No
named executive officers exercised their stock options in 2006 due
to the
withdrawal of reliance on previously-filed financial statements,
and the
delay in filing our 2005 financial statements, which restricted us
from
issuing equity-based compensation, except for transactions which
could be
exempted under Federal Securities
law.
|
2
|
At
the time he was employed as Chief Executive Officer, Mr. Zarrella
elected
to defer this award upon vesting.
|
Name
|
Plan
Name
|
Number
of Years Credited Service (#)
|
Present
Value of Accumulated Benefit ($)
|
Benefits
Payable at Normal Retirement Age 2
($)
|
Payments
During Last Fiscal Year ($)
|
R.L.
Zarrella
|
Retirement
Benefits Plan
Supplemental
Executive
Retirement
Plan II
|
15
1
15
1
|
$124,083
17,033,899
|
$141,600
22,359,403
|
$0
0
|
S.C.
McCluski
|
Retirement
Benefits Plan
Retirement
Benefit
Restoration
Plan
Supplemental
Executive
Retirement
Plan III
|
18
18
18
|
189,672
325,435
299,314
|
281,870
483,627
444,809
|
0
0
0
|
P.
Tyle
|
Supplemental
Executive
Retirement
Plan III
|
2
|
44,758
|
94,591
|
0
|
D.L.
Hahs
|
Retirement
Benefits Plan
Retirement
Benefit
Restoration
Plan Supplemental
Executive
Retirement
Plan III
|
29
29
29
|
377,898
227,930
254,059
|
704,336
698,639
377,557
|
0
0
0
|
J.M.
Loughlin
|
Retirement
Benefits Plan
Retirement
Benefit
Restoration
Plan
Supplemental
Executive
Retirement
Plan III
|
25
25
25
|
237,850
108,462
141,367
|
404,020
296,463
192,381
|
0
0
0
|
1
|
Includes
five years of current service plus ten years of prior
service.
|
2
|
Lump
sum value at normal retirement age of 63, except for Mr. Zarrella.
Mr.
Zarrella’s benefit value is calculated using a retirement age of 60 as set
forth in his employment agreement dated November 9, 2001. Mr. Zarrella’s
employment agreement effective January 1, 2007 allows for higher
benefit
levels should the contract enter into renewal periods. Material terms
of
Mr. Zarrella’s employment agreement are set forth in Item
9B. Other Information.
|
In
March 2007, Mr. McCluski announced his intention to retire effective
June
30, 2007.
|
In
April 2006, Mr. Loughlin announced his intention to retire which
was
effective February 28, 2007.
|
Name
|
Executive
Contributions in Last Fiscal Year ($)
|
Registrant
Contributions in Last Fiscal Year ($)
2
|
Aggregate
Earnings in Last Fiscal Year ($)3
|
Aggregate
Withdrawals/ Distributions ($)
|
Aggregate
Balance at Last Fiscal Year End ($)4
|
|||||||||||
R.L.
Zarrella
|
$
|
3,431,5371
|
$
|
88,000
|
$
|
0
|
$
|
0
|
$
|
11,046,067
|
||||||
S.C.
McCluski
|
9,760
|
27,328
|
0
|
426,108
|
1,133,069
|
|||||||||||
P.
Tyle
|
190,001
|
33,250
|
71,799
|
0
|
785,777
|
|||||||||||
D.L.
Hahs
|
33,672
|
38,677
|
299,156
|
94,529
|
4,044,088
|
|||||||||||
J.M.
Loughlin
|
5,750
|
16,100
|
0
|
75,659
|
2,102,060
|
1
|
Includes
the value of 65,561 shares of Common stock and associated dividend
equivalents based on the closing stock price of our Common stock
on
December 31, 2006. This award vested on November 9, 2006 and was
granted
to Mr. Zarrella in connection with his hiring as our Chairman and
Chief
Executive Officer. Mr. Zarrella deferred the award until one month
after
retirement.
|
3
|
Losses
for Mr. Zarrella totaled $1,610,119
Losses
for Mr. McCluski totaled
$185,970
Losses
for Mr. Loughlin totaled
$99,385
Aggregate
Earnings were not included in the Summary
Compensation Table because
the Company does not provide above market
earnings.
|
4
|
The
chart below lists the amounts reported as compensation in previous
years’
Summary Compensation tables. It is comprised of 401(k) Excess company
matching and base company contributions and deferred Long Term Incentive
awards.
|
Name
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
Total
|
|||||||||||||||
R.L.
Zarrella
|
$
|
0
|
$
|
2,538
|
$
|
6,433,246
|
$
|
40,500
|
$
|
115,439
|
$
|
254,000
|
$
|
6,845,723
|
||||||||
S.C.
McCluski
|
131,343
|
13,803
|
69,854
|
281,294
|
25,478
|
0
|
521,773
|
|||||||||||||||
P.
Tyle
|
0
|
0
|
0
|
0
|
0
|
722,044
|
722,044
|
|||||||||||||||
D.L.
Hahs
|
0
|
0
|
43,083
|
143,976
|
281,843
|
458,954
|
927,855
|
|||||||||||||||
J.M.
Loughlin
|
72,641
|
2,962
|
91,348
|
160,322
|
0
|
0
|
327,273
|
· |
Long-Term
Incentive Awards: Vested stock options granted under the 2003 Long-Term
Incentive Plan expire three years from the last day of active employment
or the remaining term of the options, whichever is less, if applicable.
Vested options at retirement granted under the 1990 or 2001 Stock
Incentive Plans expire five years (for non-qualified stock options)
or
three months (for incentive stock options) from the last date of
active
employment or the remaining term of the option, whichever is shorter.
Unvested stock options and restricted stock grants cancel on the
last day
of active employment under all three plans, unless otherwise determined
by
the Compensation Committee.
|
· |
Long-Term
Equity Equivalent Accumulation Plan (LEAP): Equity equivalent units
vest
partially in 20 percent increments depending on the number of years
completed during the five-year vesting period. LEAP is further described
in the Compensation Discussion and Analysis, Additional
Benefits
section.
|
R.L.
Zarrella
|
S.C.
McCluski
|
P.
Tyle
|
D.L.
Hahs
|
J.M.
Loughlin
|
||||||||||||
Perquisites
& Benefits 2
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
12,828
|
$
|
10,595
|
||||||
Total
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
12,828
|
$
|
10,595
|
1
|
See
the Pension
Benefits
and Non-Qualified
Deferred Compensation tables
for balances available to each named executive
officer.
|
2
|
Lump
sum value of the vested portion of LEAP. Mr. Zarrella is not a participant
in LEAP. Mr. McCluski and Dr. Tyle were not retirement eligible as
of
December 31, 2006.
|
· |
Equity
Compensation
Under our long-term incentive plans, awards such as outstanding stock
options, stock appreciation rights (SARs) and restricted stock/unit
awards
fully vest upon a change of control. Accelerated vesting of equity
awards
is consistent with the alignment of the named executive officers’
interests with the shareholders’ interests. Performance shares vest at
target levels specified in the award agreement. Options granted under
the
1990 and 2001 stock incentive plans and the 2003 Long-Term Incentive
Plan
(at the discretion of the Compensation Committee) may be surrendered
for
cash payment during the 60 days after a change of control. If
the named executive officer elects to surrender options, he/she is
entitled to receive in cash, an amount equal to the highest price
per
share paid in the change of control transaction minus the exercise
price
of the option multiplied by the number of
options.
|
· |
SERP
Vested and unvested SERP benefits are due and payable to the executive
within 15 days of a change of
control.
|
· |
The
Retirement Benefit Restoration Plan and Deferred Compensation
Account
Vested benefits are due and payable within 15 days of a change of
control.
|
· |
LEAP
All amounts earned under the plan, both vested and unvested, are
due and
payable to the executive within 15 days of a change of
control.
|
· |
Lump
sum payments within 30 days of the termination date
including:
|
o |
Accrued
obligations defined as (i) unpaid base salary through the termination
date, (ii) a pro-rated bonus payment based on the greater of the
prior
year’s bonus or the average bonus paid over the last three years, (iii)
unused vacation pay, and (iv) unpaid, vested deferred compensation
account
balances.
|
o |
A
severance amount equal to three times base salary and three times
the
greater of the prior year’s bonus or the highest bonus paid over the last
three years.
|
o |
A
supplemental retirement amount equal to an additional three-year
accrual
in each retirement plan.
|
o |
A
payout of any unpaid SERP benefits.
|
o |
A
cash award, for each unpaid long-term performance cycle ending during
the
three-year period covered by the change of control agreement. Currently,
there are no outstanding long-term performance awards with a cycle
ending
during the three-year period covered by the change of control
agreement.
|
· |
Welfare
and other benefits including perquisites (described in more detail
in the
Additional
Benefits
section of the Compensation Discussion and Analysis), for three
years.
|
· |
Exercise
options granted under the 2003 Long-Term Incentive Plan for up to
two
years after the termination.
|
· |
A
lump sum payment within 30 days of the termination date
including:
|
o |
Any
unpaid base salary through the termination date,
and
|
o |
any
unpaid, vested deferred compensation account
balances.
|
· |
A
lump sum payment within 30 days of the termination date
including:
|
o |
Any
unpaid base salary through the termination
date,
|
o |
a
pro-rated bonus payment based on the greater of the prior year’s bonus or
the average bonus paid over the last three
years,
|
o |
any
unused vacation pay, and
|
o |
any
unpaid, vested deferred compensation account
balances.
|
· |
A
payout of any unpaid SERP benefits.
|
· |
A
payout of other applicable
benefits.
|
R.L.
Zarrella
|
S.C.
McCluski
|
P.
Tyle
|
D.L.
Hahs
|
J.M.
Loughlin
|
||||||||||||
Severance
1
|
$
|
8,250,000
|
$
|
2,885,121
|
$
|
2,772,807
|
$
|
2,912,235
|
$
|
2,192,418
|
||||||
Bonus
2
|
1,092,667
|
295,502
|
404,634
|
386,715
|
212,269
|
|||||||||||
Stock
Options 3
|
0
|
0
|
0
|
0
|
0
|
|||||||||||
Restricted
Stock 4
|
NA
|
NA
|
1,457,680
|
520,600
|
NA
|
|||||||||||
Supplemental
Retirement Amount
5
|
647,725
|
114,968
|
6,319
|
121,386
|
68,844
|
|||||||||||
Perquisites
& Benefits 6
|
492,777
|
430,489
|
457,046
|
488,040
|
368,029
|
|||||||||||
Excise
Tax Gross-Up 7
|
0
|
1,303,445
|
2,123,002
|
1,886,976
|
949,065
|
|||||||||||
Total
|
$
|
10,483,168
|
$
|
5,029,526
|
$
|
7,221,487
|
$
|
6,315,952
|
$
|
3,790,625
|
1
|
Three
times base salary and the greater of the prior year’s bonus or the highest
bonus paid in the last three years prior to the change of
control.
|
2
|
Assumes
a change of control date of December 31, 2006. This value represents
the
higher of average bonus over the last three years or the bonus earned
in
2005.
|
3
|
Intrinsic
value of unvested options at a stock price of $52.06 on December
29,
2006.
|
4
|
Messrs.
Zarrella, McCluski, and Loughlin do not have any unvested restricted
stock.
|
5
|
This
includes the Supplemental Retirement Amount (the accrual of all retirement
plans which the executive would have received if the employment
continued for three years). See the Pension
Benefits
and Non-Qualified
Deferred Compensation tables
for balances available to each named executive
officer.
|
6
|
The
cost of providing welfare benefits and perquisites, based on current
costs
for three years and the payout of LEAP benefits. Perquisites are
described
in more detail in the Additional
Benefits
section of the Compensation Discussion and Analysis. Mr. Zarrella
is not
eligible for LEAP.
|
7
|
Payment
of excise tax gross-up if the tax is required under Section 4999
of the
Internal Revenue Code. Assumes a 40 percent individual income tax
rate. As
of December 31, 2006, Mr. Zarrella was not expected to exceed the
limits
under Section 280G, therefore no excise tax gross-up is required.
If he
did exceed the limits we would provide the excise tax
gross-up.
|
· |
Long-Term
Incentive Plan For
any awards under the 2003 Long-Term Incentive Plan, all vested and
unvested stock options and unvested restricted stock grants are
immediately forfeited. For stock options granted under the 1990 Stock
Incentive Plan, executives have three months from the last day of
active
employment to exercise options. There are no unvested restricted
stock
awards under the 1990 Stock Incentive
Plan.
|
· |
LEAP
All unvested benefits are immediately
forfeited.
|
· |
Retirement
and Deferred Compensation All
unvested benefits are immediately
forfeited.
|
· |
Separation
Pay (Base and Bonus)
One year’s base pay, plus a prorated bonus for the time worked, provided
at least six months of service were
completed.
|
· |
Long-Term
Incentive Program
Unvested stock options and restricted stock grants cancel on the
last day
of active employment, unless otherwise determined by the Compensation
Committee. To the extent they are vested at termination, stock options
granted under the 2003 Long-Term Incentive Plan expire 90 days from
the
last day of active employment or the remaining term of the options,
whichever is less. Vested non-qualified stock options and incentive
stock
options granted under the 1990 Stock Incentive Plan or non-qualified
stock
options granted under the 2001 Stock Incentive Plan expire three
months
from the date of termination or the remaining term of the option,
whichever is less.
|
· |
Outplacement
Services
The Company covers the fees and costs of outplacement services for
one
year up to a maximum of 15 percent of the preceding year’s base pay and
bonus.
|
· |
LEAP
Only vested benefits under the plan are
paid.
|
· |
Perquisites
Perquisites continue through the period in which the executive receives
severance pay including use of the Company car, club membership dues
and
financial counseling.
|
· |
Separation
Pay (Base and Bonus)
Base salary paid, in a lump sum, through the end of the current term
of
his employment agreement. A bonus payout equal to a prorated portion
of
the highest bonus paid during the employment
period.
|
· |
Long-Term
Incentive Program
Benefits match those outlined above for other named executive
officers.
|
· |
SERP
II
Mr. Zarrella will vest in the SERP II benefit level attained at the
end of
the employment period.
|
· |
Health
Benefits, Life Insurance and Perquisites
Continue through the end of the employment
period.
|
· |
Retirement and Deferred
Compensation Provide
vested benefits under the plans.
|
R.L.
Zarrella
|
S.C.
McCluski
|
P.
Tyle
|
D.L.
Hahs
|
J.M.
Loughlin
|
||||||||||||
Severance
1
|
$
|
1,100,000
|
$
|
415,200
|
$
|
410,001
|
$
|
405,600
|
$
|
335,000
|
||||||
Bonus
2
|
3,300,000
|
311,400
|
307,501
|
304,200
|
251,250
|
|||||||||||
Stock
Options 3
|
N/A
|
N/A
|
-
|
N/A
|
N/A
|
|||||||||||
Restricted
Stock 4
|
N/A
|
N/A
|
416,480
|
N/A
|
N/A
|
|||||||||||
Supplemental
Retirement Amount 5
|
551,900
|
N/A
|
N/A
|
N/A
|
N/A
|
|||||||||||
Perquisites
& Benefits 6
|
174,259
|
65,953
|
75,902
|
87,161
|
62,043
|
|||||||||||
Total
|
$
|
5,126,159
|
$
|
792,553
|
$
|
1,209,884
|
$
|
796,961
|
$
|
648,293
|
1
|
One
year’s base salary for all named executive
officers.
|
2
|
Assumes
involuntary termination occurred on December 31, 2006. Assumes Mr.
Zarrella’s employment period ends on December 29, 2007 as provided under
the renewal of his 2001 employment
agreement.
|
3
|
Dr.
Tyle’s employment arrangement provides for the full vesting of the options
granted upon his hire on July 19, 2004 if he is involuntarily terminated
prior to July 19, 2007.
|
4
|
Dr.
Tyle’s employment arrangement provides for the full vesting of his
restricted stock award if he is involuntarily terminated prior to
July 19,
2007.
|
5
|
Mr.
Zarrella is eligible to receive his SERP II accrual through the end
of the
employment period (i.e. December 29, 2007), in accordance with his
2001
employment agreement. See the Pension
Benefits
and Non-Qualified
Deferred Compensation
tables for balances available to each named executive
officer.
|
6
|
The
value of welfare benefits and perquisites continuation for the remaining
contract term, assuming December 29, 2007, for Mr. Zarrella. Similarly,
for the other named executive officers, the value represents perquisites
and welfare benefits continuation for one
year.
|
· |
Long-Term
Incentive Program
Unvested stock options under the 1990 and 2001 stock incentive plans
and
the 2003 Long-Term Incentive Plan fully vest effective on the date
of
death or disability. Unvested restricted stock grants under the 2003
Long-Term Incentive Plan fully vest upon death or disability. Incentive
stock options granted under the 1990 stock incentive plan and
non-qualified options granted under the 2003 Long-Term Incentive
Plan
expire one year from the date of death or disability or, for the
1990
plan, the remaining term of the options, whichever is less. Non-qualified
stock options granted under the 1990 and 2001 stock incentive plans
expire
five years from the date of death or disability or the remaining
option
term, whichever is less.
|
· |
Long-Term
Equity Equivalent Accumulation Plan (LEAP)
All amounts earned under the Plan, both vested and unvested, are
due and
payable to the executive or the executive’s designated
beneficiary.
|
· |
Separation
Pay (Base and Bonus)
Base salary paid through the date of death or disability, as well
as a
pro-rated bonus payout equal to the highest bonus paid during the
employment period, paid through the date of death or
disability.
|
· |
Benefits and
Perquisites
Payment for the value of benefits and perquisites through the end
of the
employment period.
|
R.L.
Zarrella
|
S.C.
McCluski
|
P.
Tyle
|
D.L.
Hahs
|
J.M.
Loughlin
|
||||||||||||
Perquisites
& Benefits 2
|
$
|
164,259
|
$
|
65,657
|
$
|
64,835
|
$
|
64,139
|
$
|
52,975
|
||||||
Stock
Options 3
|
0
|
0
|
0
|
0
|
0
|
|||||||||||
Restricted
Stock 4
|
0
|
0
|
1,457,680
|
520,600
|
0
|
|||||||||||
Total
|
$
|
164,259
|
$
|
65,657
|
$
|
1,522,515
|
$
|
584,739
|
$
|
52,975
|
1
|
Assumes
death or disability occurs on December 31,
2006.
|
2
|
Mr.
Zarrella’s amount is the cost of his benefits and perquisites for the
remainder of his employment period. For other named executive officers,
the amount reflects the value of their LEAP
balance.
|
3
|
Intrinsic
value of unvested options at a stock price of $52.06 on December
29,
2006.
|
Position
|
Fee
Paid
|
|||
Chair
of the Audit Committee
|
$
|
10,000
|
||
Member
of the Audit Committee
|
5,000
|
|||
Chair
of the Compensation Committee
|
7,500
|
|||
Chair
of the Nominating and Governance Committee
|
7,500
|
|||
Lead
Director
|
25,000
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)
|
Option
Awards ($) 10
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Non-qualified Deferred Compensation Earnings
($)
|
All
Other Compensation ($)
|
Total
($)
|
|||||||||||||||
A.
M. Bennett
1
|
$
|
6,500
|
|
$
|
24,390
|
|
$
|
0
|
|
$
|
30,890
|
|||||||||||
D.
De Sole
2
|
5,000
|
|
24,390
|
|
0
|
|
29,390
|
|||||||||||||||
P.
A. Friedman
3
|
26,000
|
|
24,390
|
|
0
|
|
50,390
|
|||||||||||||||
J.
S. Linen
4
|
7,500
|
|
24,390
|
|
3,688
|
|
35,578
|
|||||||||||||||
R.
R. McMullin
5
|
52,000
|
|
24,390
|
|
91,543
|
|
167,933
|
|||||||||||||||
L.
Johnson Rice
6
|
39,000
|
|
24,390
|
|
0
|
|
63,390
|
|||||||||||||||
W.
H. Waltrip
7
|
84,500
|
|
24,390
|
|
0
|
|
108,890
|
|||||||||||||||
B.
W. Wilson
8
|
0
|
|
24,390
|
|
0
|
|
24,390
|
|||||||||||||||
K.
L. Wolfe
9
|
62,000
|
|
24,390
|
|
0
|
|
86,390
|
1
|
Mr.
Bennett has not met director stock ownership guidelines and, therefore,
receives his annual retainer 50 percent in cash and 50 percent in
stock.
He elected to defer his cash compensation. Due to the restriction
on
awarding Company stock, Mr. Bennett received no compensation in 2006.
A
non-qualified deferred compensation loss of $40,956 was
incurred.
|
2
|
Mr.
De Sole has met director stock ownership guidelines and elected to
receive
his annual retainer in stock. Due to the restriction on awarding
Company
stock, Mr. De Sole received no annual retainer compensation in 2006.
The
cash amount of $5,000 reflects his fee as a member of the Audit Committee.
A non-qualified deferred compensation loss of $107,109 was
incurred.
|
3
|
Dr.
Friedman has not met director stock ownership guidelines and, therefore,
receives his annual retainer 50 percent in cash and 50 percent in
stock.
He received $26,000 cash compensation in 2006. Due to the restriction
on
awarding Company stock, Dr. Friedman did not receive the remaining
$26,000
of his annual retainer. A non-qualified deferred compensation loss
of
$24,708 was incurred.
|
4
|
Mr.
Linen has met director stock ownership guidelines and elected to
receive
his annual retainer in stock. Due to the restriction on awarding
Company
stock, Mr. Linen received no annual retainer compensation in 2006.
The
cash amount of $7,500 reflects his fee as Chair of the Compensation
Committee.
|
5
|
Mrs.
McMullin has met director stock ownership guidelines and elected
to
receive her annual retainer in cash in the amount of
$52,000.
|
6
|
Mrs.
Rice has met director stock ownership guidelines and elected to receive
her annual retainer 75 percent in cash and 25 percent in stock. She
received $39,000 in cash compensation. Due to the restriction on
awarding
Company stock, Mrs. Rice did not receive the remaining $13,000 of
her
annual retainer. A non-qualified deferred compensation loss of $75,897
was
incurred.
|
7
|
Mr.
Waltrip has met director stock ownership guidelines and elected to
receive
his annual retainer in cash. He also received his annual retainer
as Lead
Director in the amount of $25,000 and annual fee as Chair of the
Nominating and Governance Committee in the amount of $7,500 in cash.
A
non-qualified deferred compensation loss of $23,310 was
incurred.
|
8
|
Mr.
Wilson has met director stock ownership guidelines and elected to
receive
his annual retainer in stock. Due to the restriction on awarding
Company
stock, Mr. Wilson received no compensation in 2006. A non-qualified
deferred compensation loss of $62,800 was
incurred.
|
9
|
Mr.
Wolfe has met director stock ownership guidelines and elected to
receive
his annual retainer in cash in the amount of $52,000. He also received
his
annual fee as Chair of the Audit Committee in cash in the amount
of
$10,000. A non-qualified deferred compensation loss of $23,310 was
incurred.
|
10
|
This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2006 fiscal year for the fair
value
of stock options previously granted to directors. The fair value
was
estimated using the Black-Scholes option-pricing model in accordance
with
SFAS No. 123(R). The Black-Scholes fair value per option was $23.02,
based
on the following assumptions: exercise price and grant date market
price
of $83.55; 5.0 years expected life, expected volatility of 26.032
percent,
expected dividend yield of 1.054 percent, and a risk free rate of
4.140
percent. The following directors have outstanding option awards at
2006
fiscal year end: Mr. Bennett (4,882), Mr. De Sole (22,917), Dr. Friedman
(1,956), Mr. Linen (22,917), Mrs. McMullin (22,917), Mrs. Rice (19,151),
Mr. Waltrip (40,890), Mr. Wilson (8,970), and Mr. Wolfe
(20,750).
|
Name
and Address of Beneficial Owners
|
Number
of Shares and Nature of Beneficial Ownership
|
Percent
of Outstanding Common Stock
|
|||||
Franklin
Mutual Advisers, LLC
101
John F. Kennedy Parkway
Short
Hills, NJ 07078
|
4,372,960
1
|
8.2
|
%
|
||||
Lord,
Abbett & Co., LLC
90
Hudson Street
Jersey
City, NJ 07302
|
3,141,779
2
|
5.8
|
%
|
||||
Capital
Research and Management Company
333
South Hope Street
Los
Angeles, CA 90071
|
3,133,900
3
|
5.8
|
%
|
1
|
Shares
are as of December 29, 2006 and include 4,372,960 shares with respect
to
which there is sole power to vote and 4,372,960 with respect to which
there is sole power of disposition.
|
2
|
Shares
are as of December 29, 2006 and include 3,037,779 shares with respect
to
which there is sole power to vote and 3,141,779 shares with respect
to
which there is sole power of
disposition.
|
3
|
Shares
are as of December 29, 2006 and include 3,133,900 shares with respect
to
which there is sole power to vote and 3,133,900 shares with respect
to
which there is sole power of
disposition.
|
Name
of Beneficial Owner
|
Shares
Owned
|
Right
to Acquire Beneficial Ownership Under Options Exercisable Within
60
Days
|
%
of Class
1
|
Deferred
Shares/ Units 2
|
|||||||||
Alan
M. Bennett
|
500
|
4,882
|
0%*
|
2,673
|
|||||||||
Domenico
De Sole
|
0
|
22,917
|
0%*
|
7,059
|
|||||||||
Paul
A. Friedman
|
1,510
|
1,956
|
0%*
|
1,629
|
|||||||||
Dwain
L. Hahs
|
47,157
3
|
147,333
|
0%*
|
14,450
8
|
|||||||||
Jonathan
S. Linen
|
17,530
|
22,917
|
0%*
|
1,536
|
|||||||||
John
Loughlin
|
15,051
4
|
102,463
|
0%*
|
16,419
9
|
|||||||||
Stephen
C. McCluski
|
25,542
5
|
295,487
|
0%*
|
15,242
10
|
|||||||||
Ruth
R. McMullin
|
11,009
|
22,917
|
0%*
|
1,536
|
|||||||||
Linda
Johnson Rice
|
6,713
|
19,151
|
0%*
|
5,002
|
|||||||||
Praveen
Tyle
|
28,787
6
|
40,000
|
0%*
|
15,163
11
|
|||||||||
William
H. Waltrip
|
5,367
|
40,890
|
0%*
|
1,536
|
|||||||||
Barry
W. Wilson
|
5,771
|
8,970
|
0%*
|
4,161
|
|||||||||
Kenneth
L. Wolfe
|
7,117
|
20,750
|
0%*
|
1,536
|
|||||||||
Ronald
L. Zarrella
|
28,179
7
|
1,140,983
|
0%*
|
190,794
|
|||||||||
All
directors and executive officers as a group (27
persons)
|
453,201
|
2,780,514
|
1
|
%
|
377,522
|
1
|
Except
for Class B stock, which is transferable only in accordance with
the terms
of the Company's stock incentive plan under which it was acquired,
and
except as otherwise indicated, sole voting and investment power exists
with respect to all shares listed as beneficially owned. No individual
named above beneficially owns more than one percent of the
Company's outstanding voting stock and the shares beneficially owned
by
all directors and executive officers as a group constitute one percent
of
the Company's outstanding voting
stock.
|
2
|
Includes
common stock equivalent units held under deferred compensation plans
and
the Long-Term Equity Equivalent Accumulation
Plan.
|
3
|
Includes
1,770 shares, which may be acquired under the 401(k) plan and 10,000
shares of restricted stock subject to satisfaction of certain vesting
conditions.
|
4
|
Includes
4,676 shares which may be acquired under the 401(k)
plan.
|
5
|
Includes
3,352 shares which may be acquired under the 401(k)
plan.
|
6
|
Includes
450 shares which may be acquired under the 401(k) plan and 28,000
shares
of restricted stock subject to satisfaction of certain vesting
conditions.
|
7
|
Includes
1,650 shares which may be acquired under the 401(k)
plan.
|
8
|
Includes
1,226 units under the Long-Term Equity Equivalent Accumulation Plan
subject to satisfaction of certain vesting
conditions.
|
9
|
Includes
203 units under the Long-Term Equity Equivalent Accumulation Plan
which
are fully vested.
|
10
|
Includes
1,387 units under the Long-Term Equity Equivalent Accumulation Plan
subject to satisfaction of certain vesting
conditions.
|
11
|
Includes
1,370 units under the Long-Term Equity Equivalent Accumulation Plan
subject to satisfaction of certain vesting
conditions.
|
· |
Financial
counseling;
|
· |
outplacement
services;
|
· |
club
membership; and
|
· |
automobile
lease.
|
(a)
|
Index
to Financial Statements and Financial Statement Schedules Covered
by
Reports of Independent Auditors.
|
Page
|
|
1.
|
Financial
statements filed herewith:
|
||
Report
of Independent Registered Public Accounting Firm
|
150
|
||
Balance
Sheets at December 30, 2006 and December 31, 2005
|
61
|
||
For
the years ended December 30, 2006, December 31, 2005 and December
25,
2004:
|
|||
Statements
of Income
|
60
|
||
Statements
of Cash Flows
|
62
|
||
Statements
of Changes in Shareholders' Equity
|
63
|
||
Notes
to Financial Statements
|
65
|
||
All
schedules have been omitted because the required information is not
present or not present in amounts sufficient to require submission
of the
schedule, or because the information required is included in the
financial
statements or the notes thereto.
|
(b)
|
Item
601 Exhibits
|
|
Those
exhibits required to be filed by Item 601 of Regulation S-K are listed
in
the Exhibit Index immediately preceding the exhibits filed herewith
and
such listing is incorporated herein by reference. Each of Exhibits
(10)-a
through (10)-w, (10)-hh through (10)-kk, (10)-oo, (10)-rr, (10)-ss,
(10)-vv and (10)-ww is a management contract or compensatory plan
or
arrangement required to be filed as an exhibit to this Form pursuant to
Item 15(c) of this Annual Report on Form 10-K.
|
S-K
Item
601
No.
|
Document
|
(3)-a
|
Restated
Certificate of Incorporation of Bausch & Lomb Incorporated (filed as
Exhibit (3)-a to the Company's Form 10-K for the fiscal year ended
December 31, 2005, File No. 1-4105, and incorporated herein by
reference).
|
(3)-b
|
Amended
and Restated By-Laws of Bausch & Lomb Incorporated, effective April
26, 2005 (filed as Exhibit (3)-e to the Company's Form 10-Q for the
quarter ended June 25, 2005, File No. 1-4105, and incorporated herein
by
reference).
|
(4)-a
|
See
Exhibit (3)-a.
|
(4)-b
|
Form
of Indenture, dated as of September 1, 1991, between the Company
and
Citibank, N.A., as Trustee, with respect to the Company's Medium-Term
Notes (filed as Exhibit (4)-a to the Company's Registration Statement
on
Form S-3, File No. 33-42858 and incorporated herein by
reference).
|
(4)-c
|
Supplemental
Indenture No. 1, dated May 13, 1998, between the Company and Citibank,
N.A. (filed as Exhibit 3.1 to the Company's Current Report on Form
8-K,
dated July 24, 1998, File No. 1-4105 and incorporated herein by
reference).
|
(4)-d
|
Supplemental
Indenture No. 2, dated as of July 29, 1998, between the Company and
Citibank, N.A. (filed as Exhibit 3.2 to the Company's Current Report
on
Form 8-K, dated July 24, 1998, File No. 1-4105 and incorporated herein
by
reference).
|
(4)-e
|
Supplemental
Indenture No. 3, dated November 21, 2002, between the Company and
Citibank, N.A. (filed as Exhibit 4.8 to the Company's Current Report
on
Form 8-K, dated November 18, 2002, File No. 1-4105 and incorporated
herein
by reference).
|
(4)-f
|
Supplemental
Indenture No. 4, dated August 1, 2003, between the Company and Citibank,
N.A. (filed as Exhibit 4.1 to the Company's Current Report on Form
8-K,
dated August 6, 2003, File No. 1-4105 and incorporated herein by
reference).
|
(4)-g
|
Fifth
Supplemental Indenture, dated August 4, 2003, between the Company
and
Citibank, N.A. (filed as Exhibit 4.2 to the Company's Current Report
on
Form 8-K, filed August 6, 2003, File No. 1-4105, and incorporated
herein
by reference).
|
(4)-h
|
Sixth
Supplemental Indenture, dated December 20, 2004, between the Company
and
Citibank, N.A. (filed as Exhibit (4)-j to the Company's Annual Report
on
Form 10-K for the fiscal year ended December 25, 2004, File No. 1-4105
and
incorporated herein by reference).
|
(4)-i
|
Supplemental
Indenture No. 7, dated as of June 6, 2006 (filed as Exhibit (4) to
the
Company's Current Report on Form 8-K, filed June 12, 2006 and incorporated
herein by reference).
|
(4)-j
|
Supplemental
Indenture No. 8, dated as of November 8, 2006 (filed as Exhibit (4)-j
to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(4)-k
|
Amended
and Restated Supplemental Indenture No. 8, effective as of November
8,
2006 (filed as Exhibit (4)-k to the Company's Annual Report on Form
10-K
for the fiscal year ended December 31, 2005, File No. 1-4105 and
incorporated herein by reference).
|
(4)-l
|
Supplemental
Indenture No. 9, effective as of January 31, 2007 (filed
herewith).
|
(10)-a
|
Change
of Control Employment Agreement with certain executive officers of
the
Company (filed as Exhibit (10)-a to the Company's Annual Report on
Form
10-K for the fiscal year ended December 29, 1990, File No. 1-4105
and
incorporated herein by reference).
|
(10)-b
|
Change
of Control Employment Agreement with certain executive officers of
the
Company (filed as Exhibit (10)-b to the Company's Annual Report on
Form
10-K for the fiscal year ended December 28, 1996, File No. 1-4105
and
incorporated herein by reference).
|
(10)-c
|
Amended
and Restated Supplemental Retirement Income Plan II (filed as Exhibit
(10)-f to the Company's Annual Report on Form 10-K for the fiscal
year
ended December 29, 1990, File No. 1-4105 and incorporated herein
by
reference).
|
(10)-d
|
Amended
and Restated Supplemental Retirement Income Plan III, dated December
31,
2000 filed as Exhibit (10)-d to the Company's Annual Report on Form
10-K
for the fiscal year ended December 30, 2000, File No. 1-4105 and
incorporated herein by reference).
|
(10)-e
|
Annual
Retainer Stock Plan for Non-Employee Directors (filed as Exhibit
(10)-dd
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, File No. 1-4105 and incorporated herein by
reference).
|
(10)-f
|
Management
Incentive Compensation Plan (filed as Exhibit (10)-b to the Company's
Form
10-Q for the quarter ended June 27, 1998, File No. 1-4105 and incorporated
herein by reference).
|
(10)-g
|
Employment
Agreement dated November 9, 2001 between Bausch & Lomb Incorporated
and Ronald L. Zarrella, Chairman and Chief Executive Officer (filed
as
Exhibit (10)-z to the Company's Annual Report on Form 10-K for the
fiscal
year ended December 29, 2001, File No. 1-4105 and incorporated herein
by
reference).
|
(10)-h
|
Amended
and Restated 1990 Stock Incentive Plan (filed as Exhibit (10)-s to
the
Company's Annual Report on Form 10-K for the year ended December
28, 2002,
File No. 1-4105 and incorporated herein by reference).
|
(10)-i
|
Amendment
No. 6 to the Bausch & Lomb Incorporated 1990 Stock Incentive Plan
(filed as Exhibit (10)-t to the Company's Annual Report on Form 10-K
for
the year ended December 28, 2002, File No. 1-4105 and incorporated
herein
by reference).
|
(10)-j
|
Corporate
Officer Separation Plan (filed as Exhibit (10)-v to the Company's
Annual
Report on Form 10-K for the year ended December 28, 2002, File No.
1-4105
and incorporated herein by reference).
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(10)-k
|
Amended
and Restated 2001 Stock Incentive Plan for Non-Officers, as approved
by
the Committee on Management on January 22, 2001 and amended on July
23,
2001 (filed as Exhibit (10)-w to the Company's Annual Report on Form
10-K
for the year ended December 28, 2002, File No. 1-4105 and incorporated
herein by reference).
|
(10)-l
|
Amendment
No. 2 to the Bausch & Lomb Incorporated 2001 Stock Incentive Plan for
Non-Officers, effective January 1, 2003 (filed as Exhibit (10)-x
to the
Company's Annual Report on Form 10-K for the year ended December
28, 2002,
File No. 1-4105 and incorporated herein by reference).
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(10)-m
|
2003
Long-Term Incentive Plan as amended and restated on July 15, 2003
(filed
as Exhibit (10)-b to the Company's Form 10-Q for the quarter ended
June
28, 2003, File No. 1-4105 and incorporated herein by
reference).
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(10)-n
|
Amendment
No. 1 to the Amended and Restated Supplemental Retirement Income
Plan III
(filed as Exhibit (10)-b to the Company's Form 10-Q for the quarter
ended
September 27, 2003, File No. 1-4105 and incorporated herein by
reference).
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(10)-o
|
Stock
Unit Award Agreement pursuant to the 2003 Long-Term Incentive Plan
(filed
as Exhibit (10)-c to the Company's Form 10-Q for the quarter ended
September 27, 2003, File No. 1-4105 and incorporated herein by
reference).
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(10)-p
|
Restricted
Stock Award Agreement pursuant to the 2003 Long-Term Incentive Plan
(filed
as Exhibit (10)-d to the Company's Form 10-Q for the quarter ended
September 27, 2003, File No. 1-4105 and incorporated herein by
reference).
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(10)-q
|
Bausch
& Lomb Incorporated Annual Incentive Compensation Plan, as amended
and
restated on July 25, 2006 (filed as Exhibit (10)-q to the Company's
Annual
Report on Form 10-K for the year ended December 31, 2005, File No.
1-4105
and incorporated herein by reference).
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(10)-r
|
Director
Deferred Compensation Plan as amended and restated on December 1,
2003
(filed as Exhibit (10)-w to the Company's Annual Report on Form 10-K
for
the year ended December 27, 2003, File No. 1-4105 and incorporated
herein
by reference).
|
(10)-s
|
Restricted
Stock Deferred Compensation Plan, as amended and restated on December
1,
2003 (filed as Exhibit (10)-x to the Company's Annual Report on Form
10-K
for the year ended December 27, 2003, File No. 1-4105 and incorporated
herein by reference).
|
(10)-t
|
Executive
Deferred Compensation Plan, as amended and restated on December 1,
2003
(filed as Exhibit (10)-y to the Company's Annual Report on Form 10-K
for
the year ended December 27, 2003, File No. 1-4105 and incorporated
herein
by reference).
|
(10)-u
|
Stock
Option Agreement Pursuant to the 2003 Long-Term Incentive Plan (filed
as
Exhibit (10)-z to the Company's Annual Report on Form 10-K for the
year
ended December 27, 2003, File No. 1-4105 and incorporated herein
by
reference).
|
(10)-v
|
Long-Term
Equity Equivalent Accumulation Plan (filed as Exhibit (10)-v to the
Company's Annual Report on Form 10-K for the year ended December
31, 2005,
File No. 1-4105 and incorporated herein by reference).
|
(10)-w
|
Amendment
No. 2 to the Amended and Restated Supplemental Retirement Income
Plan III
(filed as Exhibit (10)-w to the Company's Annual Report on Form 10-K
for
the year ended December 31, 2005, File No. 1-4105 and incorporated
herein
by reference).
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(10)-x
|
Credit
Agreement by and among Bausch & Lomb Incorporated, certain banks,
financial institutions and other institutional lenders and issuers
of
letter of credit, Citigroup Global Markets Inc., Keybank National
Association and Citibank, N.A., dated July 26, 2005 (filed as Exhibit
(10)-b to the Company's Form 10-Q for the quarter ended June 25,
2005,
File No. 1-4105 and incorporated herein by reference).
|
(10)-y
|
Credit
Agreement between, among others, Citibank International PLC, as facility
agent, Bausch & Lomb B.V. and Bausch & Lomb Incorporated, dated
November 29, 2005 (filed as Exhibit (10)-y to the Company's Annual
Report
on Form 10-K for the year ended December 31, 2005, File No. 1-4105
and
incorporated herein by reference).
|
(10)-z
|
Letter
Waiver (U.S. Credit Agreement), dated November 23, 2005 (filed as
Exhibit
(10)-z to the Company's Annual Report on Form 10-K for the year ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-aa
|
Letter
Waiver (U.S. Credit Agreement), dated February 24, 2006 (filed as
Exhibit
(10)-aa to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-bb
|
Letter
Waiver (B.V. Term Loan), dated February 24, 2006 (filed as Exhibit
(10)-bb
to the Company's Annual Report on Form 10-K for the year ended December
31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-cc
|
Letter
Waiver (U.S. Credit Agreement), dated May 17, 2006 (filed as Exhibit
(10)-cc to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-dd
|
Letter
Waiver (B.V. Term Loan), dated May 17, 2006 (filed as Exhibit (10)-dd
to
the Company's Annual Report on Form 10-K for the year ended December
31,
2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-ee
|
Letter
Waiver (U.S. Credit Agreement), dated August 28, 2006 (filed as Exhibit
(10)-ee to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-ff
|
Letter
Waiver (B.V. Term Loan), dated August 30, 2006 (filed as Exhibit
(10)-ff
to the Company's Annual Report on Form 10-K for the year ended December
31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-gg
|
Agreement
for the Sale and Purchase of the Entire Issued Capital of Sino Concept
Technology Limited, by and between Sino Biopharmaceutical Limited
and
Bausch & Lomb Incorporated, dated July 2, 2005 (filed as Exhibit
(10)-gg to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-hh
|
Summary
of employment arrangement for Praveen Tyle, Senior Vice President
and
Chief Scientific Officer (filed as Exhibit (10)-hh to the Company's
Annual
Report on Form 10-K for the year ended December 31, 2005, File No.
1-4105
and incorporated herein by reference).
|
(10)-ii
|
Summary
of terms for agreement to authorize Company contribution for certain
participants in the 401(k) Excess Program under the non-qualified
Executive Deferred Compensation Plan (filed herewith).
|
(10)-jj
|
Executive
Deferred Compensation Plan for Post-2004 Deferrals, dated November
7, 2006
(filed as Exhibit (10)-jj to the Company's Annual Report on Form
10-K for
the year ended December 31, 2005, File No. 1-4105 and incorporated
herein
by reference).
|
(10)-kk
|
Amendment
to Executive Deferred Compensation Plan, dated November 7, 2006 (filed
as
Exhibit (10)-kk to the Company's Annual Report on Form 10-K for the
year
ended December 31, 2005, File No. 1-4105 and incorporated herein
by
reference).
|
(10)-ll
|
Letter
Waiver (U.S. Credit Agreement), dated December 13, 2006 (filed as
Exhibit
(10)-ll to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-mm
|
Letter
Waiver (B.V. Term Loan), dated December 13, 2006 (filed as Exhibit
(10)-mm
to the Company's Annual Report on Form 10-K for the year ended December
31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-nn
|
License
Agreement between and among CIBA Vision AG and Bausch & Lomb
Incorporated, dated July 1, 2004 (filed as Exhibit (10)-oo to the
Company's Annual Report on Form 10-K for the year ended December
31, 2005,
File No. 1-4105 and incorporated herein by reference). (Portions
of this
exhibit are omitted pursuant to a confidential treatment request
and filed
separately with the SEC.)
|
(10)-oo
|
Long
Term Performance Unit Agreement Pursuant to the 2003 Long-Term Incentive
Plan (filed as Exhibit (10)-pp to the Company's Annual Report on
Form 10-K
for the year ended December 31, 2005, File No. 1-4105 and incorporated
herein by reference).
|
(10)-pp
|
Letter
Waiver (U.S. Credit Agreement), dated January 26, 2007 (filed as
Exhibit
(10)-qq to the Company's Annual Report on Form 10-K for the year
ended
December 31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-qq
|
Letter
Waiver (B.V. Term Loan), dated January 29, 2007 (filed as Exhibit
(10)-rr
to the Company's Annual Report on Form 10-K for the year ended December
31, 2005, File No. 1-4105 and incorporated herein by
reference).
|
(10)-rr
|
Paul
G. Howes Separation Letter, effective April 9, 2007 (filed
herewith).
|
(10)-ss
|
John
M. Loughlin Separation Letter, dated February 14, 2007 (filed
herewith).
|
(10)-tt
|
Amendment
No. 1 to Credit Agreement, effective April 11, 2007 (filed as Exhibit
99.1
to the Company's Current Report on Form 8-K, filed April 13, 2007,
File
No. 1-4105 and incorporated herein by reference).
|
(10)-uu
|
Amendment
to B.V. Term Loan Agreement, effective April 12, 2007 (filed as Exhibit
99.2 to the Company's Current Report on Form 8-K, filed April 13,
2007,
File No. 1-4105 and incorporated herein by reference).
|
(10)-vv
|
Form
of Restricted Stock Award Agreement Pursuant to the 2003 Long-Term
Incentive Plan (with additional change of control provisions) (filed
herewith).
|
(10)-ww
|
Employment
Agreement dated April xx, 2007 between Bausch & Lomb Incorporated and
Ronald L. Zarrella, Chairman and Chief Executive Officer (filed
herewith).
|
(12)
|
Statement
Regarding Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
|
(21)
|
Subsidiaries
(filed herewith).
|
(24)
|
Power
of Attorney with respect to the signatures of directors in this Annual
Report on Form 10-K (filed herewith).
|
(31)-a
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
(31)-b
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
(32)-a
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (furnished herewith).
|
(32)-b
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350 (furnished herewith).
|