Bausch + Lomb Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 21, 2024. This is an annual report, not a standalone fourth-quarter earnings filing. Amounts are U.S. dollars unless noted.
Business context
Bausch + Lomb is a global eye-health company operating in approximately 100 countries, with about 13,300 employees and roughly 400 products. Its reportable segments are Vision Care, Pharmaceuticals, and Surgical. Bausch Health Companies Inc. (BHC) remained the controlling shareholder, holding approximately 88.4% of Bausch + Lomb’s shares as of February 16, 2024. The proposed full separation from BHC remained conditional; completion, structure, and timing were not assured.
Financial results and liquidity
| Metric (USD millions, except percentages and per-share data) | 2023 | 2022 |
|---|---|---|
| Revenue | $4,146 | $3,768 |
| Operating income | $130 | $207 |
| Net income (loss) attributable to Bausch + Lomb | $(260) | $6 |
| Basic and diluted EPS | $(0.74) | $0.02 |
| Net cash from (used in) operating activities | $(17) | $345 |
| Cash and cash equivalents at year-end | $331 | $354 |
- Revenue increased 10% reported and 12% at constant currency. Product sales were $4,131 million; other revenue was $15 million.
- Segment revenue: Vision Care $2,543 million (+7%); Pharmaceuticals $836 million (+23%); Surgical $767 million (+7%). Segment profit was $689 million, $241 million, and $50 million, respectively; segment profit margins were 27%, 29%, and 7%. Segment profit is a company-defined measure and excludes certain costs, including amortization and other expense.
- Cost of goods sold was 39.7% of product sales, versus 40.3% in 2022. Operating income fell 37%; SG&A rose 17% to $1,736 million and other expense rose to $74 million.
- Net loss reflected, among other items, interest expense of $283 million (up from $146 million), lower operating income, a $34 million unfavorable year-over-year foreign-exchange and other change, and higher income-tax expense. The filing reports a $82 million income-tax provision despite the pretax loss.
- Operating cash flow declined by $362 million to negative $17 million, with the filing citing standalone-company costs, higher interest payments, increased inventory, payment timing, and higher receivables. Investing cash outflow was $2,109 million, including $1,941 million for acquisitions and other investments. Financing provided $2,078 million, principally from debt issuance.
- At December 31, 2023, debt principal totaled $4,636 million: $3,236 million variable-rate and $1,400 million fixed-rate. Balance-sheet debt, net of issuance costs, was $4,562 million. Weighted-average stated interest was 8.65%, versus 7.84% in 2022. The company reported $275 million drawn and $199 million remaining available on its $500 million revolving facility, subject to conditions; $26 million of letters of credit were also outstanding.
- Current assets were $2,742 million and current liabilities $1,579 million. Inventory increased to $1,028 million from $628 million. The cash-flow statement reports year-end cash and restricted cash of $334 million.
Material changes and notable items
- Revenue growth reflected $346 million of higher volume and $110 million of higher net realized pricing, partially offset by $68 million of unfavorable foreign exchange and $10 million from divestitures and discontinuations.
- The September 2023 XIIDRA acquisition involved $1,750 million upfront cash consideration and assumed or potential milestone obligations, including up to $750 million of future milestones. XIIDRA contributed $106 million of revenue and $17 million of earnings from acquisition through year-end. The purchase-price valuation includes a $1,595 million product-brand intangible asset. The acquisition was primarily debt-financed.
- The company also acquired the Blink product line for $107 million and AcuFocus for an upfront price of $35 million. A $45 million payment followed FDA approval of MIEBO.
- Gross-to-net deductions increased to 30.0% of gross product sales from 26.9%, mainly due to higher rebates and chargebacks; the filing attributes the rebate increase primarily to XIIDRA.
- A system upgrade at the Lynchburg distribution facility disrupted order processing and reduced 2023 contact-lens revenue. Management expected substantial resolution during the first quarter of 2024.
- Goodwill was $4,575 million. The October 2023 impairment test found reporting-unit fair values more than 25% above carrying values; no goodwill impairment was recorded. Finite-lived and indefinite-lived intangible-asset impairments were less than $1 million in 2023.
- The auditor issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting. The XIIDRA acquisition was excluded from the 2023 internal-control assessment and audit; it represented approximately 2% of assets and 3% of revenue.
Outlook, risks, and contingencies
- The filing provides no consolidated numeric revenue or earnings guidance. Management described growth plans centered on launches, product development, acquisitions, operational efficiency, and a pipeline of more than 60 projects. Planned launches include additional daily disposable contact lenses and premium IOL products; timing and commercial success remain uncertain.
- For 2024, management expected approximately $371 million of interest payments, $30 million of mandatory debt amortization, $250 million of capital expenditure payments, and $10 million of pension and postretirement payments. It stated that available liquidity sources were expected to meet needs for the following 12 months, while acknowledging financing and market uncertainty. The company expected to remain compliant with debt covenants based on its then-current forecast and reported compliance at year-end.
- Principal risks include high leverage and floating-rate exposure, refinancing and covenant constraints, integration and debt from acquisitions, supply-chain challenges and single-source suppliers, pricing and reimbursement pressure, generic competition and loss of exclusivity, product and regulatory risks, foreign exchange, and the proposed BHC separation. A 100-basis-point interest-rate change was estimated to affect annual pretax results and cash flows by about $32 million.
- Management said supply constraints had affected contact-lens and surgical availability, revenue, and margins; mitigation included spot purchases and additional supply sources, which could raise inventory costs. The Lynchburg disruption and inflation were also identified as operating pressures.
- The full separation from BHC depended on targeted debt leverage ratios, approvals, tax and other conditions, and market circumstances. BHC could change or abandon the distribution; BHC’s ownership and control, potential conflicts, and possible share sales remain relevant risks.
- At year-end, $5 million of current legal loss contingencies were accrued for matters considered probable and estimable. The company said it could not reasonably predict outcomes or estimate losses for other matters. Disclosed proceedings include generic-drug antitrust litigation and product-liability and intellectual-property disputes; certain claims involve BHC or are subject to indemnification arrangements.
- No dividends had been declared or paid since the IPO, and the company did not expect to pay cash dividends in the foreseeable future. Separation and business-transformation costs may continue; the amount and timing of future separation costs could not be reasonably estimated and could be material.
Important facts for investors to verify
- Debt repayment capacity, covenant headroom, interest costs, and refinancing plans, particularly in light of the May 2027 term-loan maturity and the 2024 cash requirements.
- Whether operating cash flow improves as inventory and receivables are managed, and whether Lynchburg order processing normalizes as expected.
- XIIDRA’s commercial performance and integration, acquisition-related financing burden, and any future milestone payments.
- Whether growth in segment revenue and profit can offset corporate costs, acquisition amortization, higher gross-to-net deductions, and supply and promotional expenses.
- Developments in BHC’s proposed distribution, including conditions, timing, tax treatment, litigation, and any share sales.
- Developments in material legal proceedings, product-related claims, generic challenges, and regulatory matters; the filing does not quantify potential losses for many proceedings.