NEW YORK – Eye care company Bausch & Lomb, struggling to right itself after repeatedly missing earnings expectations, said on Friday it will cut 700 more jobs in its fourth work force reduction in three years in order to trim costs.
The Rochester, New York-based maker of Boston contact lenses and ReNu lens care solutions said it plans to take $28 million in restructuring charges for the job cuts, which represent up to 7 percent of its more than 10,000 employees.
The move marks the fourth round of cuts since Dec. 1999 for Bausch & Lomb, which has shed about 2,800 jobs in that time.
Last month, shortly after he rejoined the company from General Motors Corp., Chairman and Chief Executive Ronald Zarrella warned that more job cuts were coming in order to lower costs.
Analysts said similar moves are ahead for Bausch & Lomb, which has posted disappointing financial results since July 2000.
"This is a company that has done a number of restructurings and needs to continue," said Banc of America Securities analyst Theodore Huber. "Under the new management, you will continue to see a set of moves to try bring the cost structure of this business in line with the revenue base."
Bausch & Lomb said 250 of the 700 new job cuts will result from the closure of a Madrid factory during the first quarter and a Sarasota, Florida, plant in September.
Most of the remaining 450 positions will be eliminated in the first quarter, the company said. "The expected cuts will be broad-based and will impact all regions and functional units," it added.
The most recent job cuts follow 800 cuts a year ago. Prior to that, Bausch & Lomb cut 450 jobs in October of 2000, and 850 in Dec. 1999.
Citing the latest round of job cuts, Standard & Poor's said later in the day it may cut the ratings on Bausch & Lomb to junk status. The warning covers the company's "BBB-minus" long- term corporate credit, bank loan, and senior unsecured debt ratings and its "A-3" short-term credit and commercial paper ratings.
"Standard & Poor's remains concerned over the uncertain success of management's efforts to restore the company's growth," the rating agency said.
Nonetheless, it said the company's "significant liquidity" keeps it financially flexible, although, "the impact of persistent operating weakness on the company's financial strength and policies is uncertain."
Cost-Cutting a Priority
"It's very clear that reducing our structural costs must be one of the top near-term priorities of this management team," Zarrella said in a press release. "We are continuing to evaluate additional actions, beyond those identified here, in order to further reduce structure and continue to lower costs."
Bausch & Lomb said the restructuring will reduce fourth-quarter earnings by 6 cents per share. Analysts on average expect profits of 42 cents for the period, according to research firm Thomson Financial/First Call.
Bausch & Lomb shares ended the day up $1.84, or 4.8 percent, at $39.51 on the New York Stock Exchange.
"This is one of those things that is not a big surprise, but when you see it, makes you think the company is doing the right thing," Huber said. "And that is a positive."
The stock fell nearly 7 percent in 2001 as slowing demand for corrective laser eye surgery and stiff competition for contact lenses and lens care solutions hurt sales.
Zarrella was appointed to take over as chairman and CEO after William Carpenter resigned from the post, a move analysts said was spurred by repeated revenues warnings and missed earnings targets.
"This is a good first step for Zarrella," said David Gruber of Lehman Brothers. "They need new products, they need to gain share in markets that are getting quite competitive and they need to show results. It's pretty straight-forward."
Robert W. Baird & Co. analyst Suey Wong said Zarrella must focus on cutting costs and driving up revenues.
"Clearly, closing plants and cutting jobs is a good way to get there," he said. "But we'll have to see what they say later this month," when the company reports fourth-quarter earnings and discusses its outlook for the new year with analysts and investors.