Bausch & Lomb disclosed that it would delay the filing of its March quarterly report to complete restatements at several foreign subsidiaries.
The embattled maker of eye-care products announced that it would reduce reported sales at its BL Korea operation for the first two quarters of 2005 by a total of $1.2 million and for the three-year period ended 2004 by about $7.2 million.
The company noted that it had previously found evidence that BL Korea engaged in improper sales practices, including granting customers improper rights to return products, facilitating product exchanges between customers without properly accounting for them, failing to properly process returns, and granting excessive credit. It also determined that all BL Korea vision-care transactions from 2002 to 2005 should be recorded under consignment accounting rules, which recognize revenue only upon payment to BL Korea by the customer.
Bausch & Lomb had previously announced that it would restate results at its Brazilian subsidiary, BL Industria Otica, for fiscal years 2001 through 2004 and the first two quarters of 2005 to properly account for the impact of certain tax matters.
In light of the investigations of the company’s Brazil and Korea subsidiaries, Bausch & Lomb undertook expanded year-end procedures focused on revenue recognition and other matters at certain other foreign subsidiaries. As a result, the company expects to make additional adjustments relating to revenue recognition for certain refractive laser sales, certain vision-care transactions with a single distributor in Thailand, vision-care transactions with two large distributors in Japan, vision-care and cataract transactions with the distributor network in India, and certain sales-related reserves in China.
Work related to these expanded procedures is substantially complete, stated the company, which added that it will reduce previously reported net sales for the first two quarters of 2005 by a total of $2.9 million and for the period 2001 through 2004 by a total of $15.4 million.
Bausch & Lomb also pointed out that in a March regulatory filing, it stated that it was reviewing revenue-recognition issues relating to transactions with a single distributor in the United States. On Friday, it announced that work on this matter is complete and that no adjustments are required.
In addition, the company expects to restate results after determining that the liability associated with the deferral of certain company stock under its long-term deferred compensation plan should have been marked to market. The company estimates that the adjustments would reduce previously reported net income for the first two quarters of 2005 by a total of $3.7 million and for the period 2001 through 2004 by a total of $4.1 million.
The company also disclosed that it continues to work on other accounting issues, which will result in future revisions. In addition, it stated that it has not completed its required assessment of its internal control over financial reporting and the control deficiencies identified in 2005.