Operating leverage can be a wonderful thing indeed when it works in a company's favor. Eye care specialist Bausch & Lomb
Sales growth was fairly balanced at Bausch & Lomb as the top three businesses (contact lenses, lens care, and pharmaceuticals) grew 9%, 13%, and 13% respectively. The cataract/vitreoretinal business was a bit more sluggish (up 6%), and the small refractive business was down 12% over the past year.
Although the lens care business was boosted by the timing of a large retailer's order, ReNu with MoistureLoc and ReNu Multiplus continue to gain share. Elsewhere, the SofLens product line continues to fuel double-digit sales growth, and the Zylet launch gave a considerable boost to pharmaceuticals sales.
On the margins side, gross margin expanded by 1.3% to 58.1% on the back of a favorable sales mix and certain manufacturing efficiencies. Despite a 13% increase in R&D spending, total operating expenses were well-controlled, and the operating margin expanded from 8.5% to 10.9%.
If there was any downside to the quarter, it was that cash flow generation wasn't particularly robust. Operating cash flow came in at about $13 million (below last year's $19 million figure), and cap-ex totaled $14.9 million, meaning free cash flow was a negative figure. That said, looking at cash flow on a quarter-to-quarter basis can be misleading, and management is maintaining guidance of $270 million in operating cash flow and $150 million in free cash flow for the full year.
While facing serious competition from the likes of Alcon
What's more, several new contact lens products should be rolled out during the year and the company has a major opportunity in Japan to launch new product lines and/or product line extensions.
Assuming these product launches go off, Bausch & Lomb might see even further market share gains, as well as additional margin expansion and profit growth. Even at the ripe old age of 152, then, that would certainly make this company easy on the eyes of shareholders.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).