A poke in the eye…
Earlier this week, Baush & Lomb’s (BOL) stock surged 11% in one day on rumors that it was a potential takeover target. But it’s the 10K filed earlier today that seems more interesting to me. (The 2006 K was late because it wasn’t until Feb. 2 that the company filed its K for 2005.)
That’s because a quick skim of the legal proceedings shows that the Re-Nu MoistureLoc problem seems to have generated a lot more lawsuits than previously disclosed. The company recalled the product — one of its top sellers — last year after people started coming down with a strange eye fungus. The lawsuits quickly followed, and judging by the current K, show few signs of letting up, despite the fact that it’s been a year since the recall was issued. In today’s filing, the company disclosed 344 product liability lawsuits stemming from MoistureLoc. About half of those lawsuits have been filed in federal court with the other half in various state courts.
Now compare those numbers to the ones in the delayed 10K that the company filed on Feb. 2: 196 lawsuits. How did the number go from 196 to 344 in a little over two months? Were they really new lawsuits, or just newly tracked? Also interesting is the additional disclosure that the company provides in today’s K on the lawsuits: “These cases and claims involve complex legal and factual questions relating to causation, scientific evidence, actual damages and other matters. Litigation of this type is also inherently unpredictable, particularly given that these matters are at an early stage, there are many claimants and many of the claimants seek unspecified damages.” The new disclosure ends with the “material adverse effect” warning as well.
As for the merger speculation, it could be real. But any talk of a merger is going to have to include the price-tag for this growing number of lawsuits.
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April 25th, 2007 at 4:22 pm
But the period between the two 10-Ks is not “a little over 2 months”, it’s 12 months. Except for the “subsequent events” footnote in the financial statements, the 10-K speaks as of the last date of the company’s fiscal year. And 12 months is plenty of time for 148 enterprising plaintiffs’ lawyers to get their acts together and file additional product-liability lawsuits.
April 25th, 2007 at 4:42 pm
This is a FYI and definitely not and ad. I enjoy reading your blog and thought you may be interested the Society of Competitive Intelligence Professionals (SCIP) conference being held in NYC next week. Their members would really enjoy your blog as they research competitive/financial info.
Here’s a link to info on the conference.
http://www.scip.org/07annual/
Be well,
Marv Goldstein
April 25th, 2007 at 4:43 pm
While the period between two Ks is typically a year, that’s not the situation here. The language in the first filing says that the number of lawsuits is as of Feb. 2 while the number in the second K — the one filed earlier today — says that it is as of April 19.