The accompanying unaudited interim consolidated financial statements of Bausch & Lomb Incorporated and Consolidated Subsidiaries have been prepared by the company in accordance with the accounting policies stated in the company's 2002 Annual Report on Form 10-K and should be read in conjunction with the Notes to Financial Statements appearing therein, and are based in part on approximations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America have been included in these unaudited interim consolidated financial statements.

Profitability Improvement Program and Transfer of PureVision Manufacturing

In July 2002, the company announced plans to improve operating profitability through a comprehensive program which included plant closures and consolidations; manufacturing efficiencies and yield enhancements; procurement process enhancements; the rationalization of certain contact lens and surgical product lines; distribution initiatives; and the development of a global information technology (IT) platform. This program included the elimination of approximately 465 jobs worldwide associated with those actions. Restructuring charges and asset write-offs of $22.8 before taxes associated with these initiatives were recorded in the third quarter of 2002. The company also recorded a pre-tax amount of $3.7 during the third quarter of 2002 for severance associated with the elimination of approximately 145 jobs due to the transfer of PureVision extended wear contact lens manufacturing from the U.S. to Waterford, Ireland following a ruling against the company in a U.S. patent lawsuit. (See Note 15 - Other Matters for discussion of current litigation pertaining to the PureVision contact lens product line.)
     The following table summarizes the activity for the Profitability Improvement Program and the transfer of PureVision manufacturing:

     As of September 27, 2003, 347 jobs had been eliminated under this restructuring program with $11.9 of related costs being charged against the liability. Actions in this restructuring program are expected to be completed by the end of 2003. In addition to job eliminations, the above actions resulted in $3.4 of asset write-offs for machinery and equipment. The disposition and/or decommissioning of these assets occurred in the third quarter of 2002.

In December 2001, the company's Board of Directors approved a comprehensive restructuring plan designed to reduce ongoing operating costs by eliminating approximately 800 jobs on a global basis. As of December 29, 2001, management had identified actions and notified the appropriate personnel in what it considered Phase I of the restructuring program. As a result, a pre-tax amount of $8.3 was recorded during the fourth quarter of 2001 for Phase I of the restructuring and for asset write-offs. During the first quarter of 2002, a pre-tax amount of $23.5 was recorded for Phase II of the restructuring and additional asset write-offs. Based upon the company's third quarter review of the remaining actions, $1 pre-tax was reversed during the quarter ended September 28, 2002.
     At the conclusion of the program, 752 jobs had been eliminated under this restructuring program with $26.5 of related costs and $4.3 of asset write-offs being charged against the liability. All actions related to this restructuring program were completed as of December 28, 2002.

The company is organized on a regionally based management structure for commercial operations. The research and development and product supply functions of the company are managed on a global basis. The company's segments are comprised of the Americas region, the Europe, Middle East and Africa region (Europe), the Asia region, the Research, Development and Engineering organization and the Global Supply Chain organization.
     The company adopted the management structure described above effective as of January 1, 2001. During the first quarter of 2002, the company reevaluated the measures and management data used in decision making to ensure they continued to be properly aligned with the company's strategic objectives. As a result of the review, goodwill arising from vertically integrated acquisitions, product technology, other non-customer related intangibles and the associated amortization expense were reclassified to the Global Supply Chain segment to more accurately reflect their contribution to the company's return on net operating assets.
     Operating income is the primary measure of segment income. No items below operating income are allocated to segments. Restructuring charges and charges related to certain significant events, although related to specific segments, are also excluded from management basis results. The accounting policies used to generate segment results are the same as the company's overall accounting policies. Inter-segment sales were $125.4 and $347.1 for the quarter and nine months ended September 27, 2003, respectively, and $112.0 and $328.4 for the same periods in 2002. All inter-segment sales have been eliminated upon consolidation and have been excluded from the amounts in the table below.
     The following table presents net sales and operating income by business segment and presents total company operating income for the quarters and nine months ended September 27, 2003 and September 28, 2002. The restructuring reserve and asset write-offs are described in Note 2 - Restructuring Charges and Asset Write-offs.

     Net sales in markets outside the U.S. totaled $296.5 and $869.9 in the third quarter and nine months ended September 27, 2003, respectively, compared with $265.7 and $769.5 for the same 2002 periods. Net U.S. sales totaled $212.3 and $599.5 in the third quarter and nine months ended September 27, 2003, respectively, compared with $201.0 and $569.8 for the same prior-year periods. The company's operations in Japan generated over 10% of product net sales in the third quarter of 2003 and 2002 totaling $51.0 and $48.7, respectively. No country generated over 10% of total product sales during the nine months ended September 27, 2003 and September 28, 2002. No single customer generated over 10% of total product net sales during the third quarters and nine months ended 2003 and 2002.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Intangible Assets. SFAS No. 142 provides guidance on how to account for goodwill and intangible assets after an acquisition is complete. The most substantive change required by this statement is that goodwill will no longer be amortized; instead, it will be tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The statement applies to existing goodwill and intangible assets, effective for fiscal years beginning after December 15, 2001. The company adopted SFAS No. 142 in the fiscal year beginning December 30, 2001.
     Upon adoption of SFAS No. 142, the company analyzed existing intangible assets that had been recognized separately from goodwill and reclassified intangibles that did not meet the separate recognition criteria as prescribed in SFAS No. 141, Business Combinations, to goodwill. As such, $146.0 of intangibles, including assembled workforce and customer relationships, were reclassified to goodwill and $10.3 of deferred tax liabilities previously associated with those intangible assets were eliminated with a corresponding reduction in goodwill. Additionally, the company reassessed the useful lives of the remaining intangibles and concluded that there were no indefinite-lived intangible assets. As described in Note 7 - Acquired Intangible Assets, the company reduced the useful lives of certain acquired trade names and has applied the change in accounting estimate prospectively. The company identified and established reporting units to be the company's business segments and determined that goodwill was not impaired based on a comparison of the carrying value of goodwill attributable to each of the company's reporting units to their respective fair values. Fair value was based on the average of the indications of value derived from the income and market approaches, weighted equally. The income approach measured the fair value by discounting expected cash flows by reporting unit to their present value at a rate of return that is commensurate with their inherent risk. The market approach measured the fair value by analyzing and comparing the operating performance and financial condition of public companies within the ophthalmic pharmaceutical industry and companies subject to similar market conditions adjusted for differences in profitability, financial position, products and markets.
     The company completed its annual impairment test on each of its reporting units during the fourth quarter of 2002. The carrying value of goodwill for each of the company's reporting units as of October 26, 2002 was less than their respective fair values, therefore, goodwill was not considered impaired. Fair value was determined using the same methodology employed during the initial application of SFAS No. 142.
     During September 2002, the company acquired a third-party distributor located in Spain. The $8.3 purchase price was allocated to identifiable assets, including tangible and intangible assets, and liabilities based upon their respective fair values. The excess of the purchase price over the value of the identified assets and liabilities has been recorded as goodwill and is reflected in the table below.
     During February 2003, the company acquired an additional 30% and 20% interest in its commercial and manufacturing joint ventures, respectively, located in Korea. This increased the company's interest in the commercial and manufacturing joint ventures to 80% and 100%, respectively. The purchase price of $6.2 was allocated to identifiable assets and liabilities based upon their respective fair values. The excess of the purchase price over the value of the identified assets and liabilities has been recorded as goodwill and is reflected in the table below.
     The changes in the carrying amount of goodwill for the year ended December 28, 2002 and the nine months ended September 27, 2003, are as follows:

In connection with the company's adoption of SFAS No. 142, Goodwill and Intangible Assets, the company also reassessed the remaining useful lives of its intangible assets and determined that certain acquired trade names required a reduction in their remaining useful lives. A change in the company's strategies and business objectives indicated that a reduction in the remaining useful lives of certain trade names was appropriate. Remaining useful lives of trade names associated with the Chiron, Storz and Groupe Chauvin acquisitions were reduced from 16, 36 and 29 years to 7, 10 and 15 years, respectively. The remaining useful lives were revised by the company based upon current strategies and objectives, an assessment of product characteristics, the pace of technological advancement and trends in the market place. This change in accounting estimate was applied prospectively as of December 30, 2001 and accounted for $0.8 and $2.3 of amortization expense, net of tax, during the quarter and nine months ended September 27, 2003 and September 28, 2002, respectively.
     As described in Note 6 - Accounting for Goodwill and Intangibles, the company acquired a third-party distributor during September 2002. Intangible assets, consisting of customer contracts, were assigned a fair value of $0.6 and are included in the table below.
     The components of intangible assets as of September 27, 2003 and December 28, 2002 are as follows:

     Amortization expense of intangibles was $6.3 and $19.4 for the quarter and nine months ended September 27, 2003, respectively, and $6.3 and $18.7 for the same periods in 2002. Estimated amortization expense of intangibles presently owned by the company for each of the next five succeeding fiscal years is as follows:

The minority interest in subsidiaries at December 29, 2001 primarily represented an outside partnership interest of 22% in Wilmington Partners L.P. (the Partnership). The remaining partnership interests were held by four wholly owned subsidiaries of the company. The Partnership was a separate legal entity from the company, but for financial reporting purposes, assets, liabilities and results of operations from the Partnership were included in the company's consolidated financial results. The outside investor's limited partnership interest was recorded as minority interest totaling $200.0 in the company's consolidated financial statements at December 29, 2001. During March 2002, the outside partner exercised its put right for all of its partnership interest, and the company recorded a one-time early liquidation premium of $7.0, net of taxes, in connection with the early termination of the outside partner's interest. The termination of the minority interest obligation and payment of the associated early liquidation premium occurred in May 2002. The payment was funded through existing cash reserves and borrowings of $75.0 against the company's existing syndicated revolving credit agreement, which was repaid by the company in July 2002. The minority interest liability at September 27, 2003 and at December 28, 2002 represents the company's outside partnership interests in non-U.S. commercial and manufacturing joint ventures, which are fully consolidated in the company's results.

Lines of Credit The company guarantees indebtedness of its subsidiaries under lines of credit used for working capital. Availability under such lines of credit totaled approximately $50.5 and $75.0 with total outstanding balances of $0.0 and $1.4 at September 27, 2003 and December 28, 2002, respectively.

Letters of Credit The company had outstanding standby letters of credit totaling approximately $20.4 and $24.7 at September 27, 2003 and December 28, 2002, respectively, to ensure payment of possible workers' compensation, product liability, and other insurance claims. At September 27, 2003 and December 28, 2002, the company had recorded liabilities of approximately $14.3 and $15.2, respectively, as it relates to insurance claims. The balance at December 28, 2002 included an $8.8 standby letter of credit to ensure payment of an $8.5 Industrial Development Revenue Bond originally due in 2015, which was repaid during September 2003.

Guarantees The company guarantees a mortgage held by a strategic research and development partner. The mortgage is secured by the property with an appraised value of $5.3. The company's guarantee has a five-year term expiring July 2007. At September 27, 2003 and December 28, 2002, the guarantee totaled approximately $4.0. This guarantee would require payment from the company in the event of default by the research partner and failure of the security to fully satisfy the then outstanding debt.
     The company also guarantees a lease obligation of a customer in connection with a joint marketing alliance. The lease obligation has a term of ten years expiring November 2011. The amount guaranteed at September 27, 2003 and December 28, 2002 was approximately $10.0. In the event of default, the guarantee would require payment from the company. Sublease rights as specified under the agreement would reduce the company's exposure.
     The company believes the likelihood is remote that material payments will be required under these guarantees.

Tax Indemnifications In connection with divestitures, the company has agreed to indemnify certain tax obligations arising out of tax audits or administrative or court proceedings relating to tax returns for any periods ending on or prior to the closing date of the divestiture. The company believes that any claim would not have a material impact on the company's financial position.

Environmental Indemnifications The company has certain obligations for environmental remediation and Superfund matters related to current and former company sites. There have been no material changes to estimated future remediation costs as reflected in the Notes to Financial Statements in the company's 2002 Annual Report on Form 10-K. The company does not believe that its financial position, results of operations, and cash flows are likely to be materially affected by environmental liabilities.

Other Commitments and Contingencies The company is involved in lawsuits, claims, investigations and proceedings, including patent, trademark, commercial and environmental matters, which are being handled and defended in the ordinary course of business as described in Note 15 - Other Matters.

Deferred Service Revenue Service revenue is derived from service contracts on surgical equipment sold to customers and is recognized over the term of the contracts while costs are recognized as incurred. Changes in the company's deferred service revenue for the year ended December 28, 2002 and the nine months ended September 27, 2003 are as follows:

In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, the company records all derivative instruments on the balance sheet at their respective fair values. Changes in the fair value of derivatives are recorded each period in current income or other comprehensive income, depending on their designation as a hedge of a particular exposure.
     For effective fair value hedge transactions in which the company is hedging changes in the fair value of liabilities, changes in the fair value of the derivative instrument will generally be offset by changes in the hedged item's fair value. For fair value hedge transactions where the short-cut method is not permitted to assess effectiveness, gains and losses arising from any ineffectiveness are recognized in the period in which they occur. In August 2003, the company issued $210.0 in concurrent offerings of notes and convertible notes. The first was a $50.0 public offering of five-year fixed rate senior notes with a coupon rate of 5.90%. The company simultaneously executed an interest rate swap with a notional amount of $50.0 converting the notes to a floating rate. This swap is designated as a fair value hedge. The second offering was a $160.0 placement of floating-rate convertible senior notes due in 2023 with two embedded derivatives, a bond parity clause and a contingent interest provision. The embedded derivatives had a $0.0 fair value at September 27, 2003. Interest rate swaps with an aggregate notional amount of $379.6, classified as fair value hedges, were outstanding at September 29, 2002 and were terminated during October 2002.
     For cash flow hedge transactions in which the company is hedging the fluctuation of cash flows related to a variable rate asset, liability or forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be recognized in income in the periods in which income is impacted by the fluctuation of the cash flows of the hedged item. Reclassifications from other comprehensive income into income were a $0.6 and $0.3 pre-tax loss for the quarters ended September 27, 2003 and September 28, 2002, respectively. Year-to-date, net pre-tax losses of $1.6 for the periods ended September 27, 2003 and September 28, 2002 were reclassified from other comprehensive income into income. As of September 2003, an estimated $3.1 pre-tax net loss was expected to be reclassified into income over the next twelve months.
     A $200.0 interest rate lock designated to hedge the benchmark interest rate associated with ten semiannual interest payments on future forecasted borrowings was outstanding at September 28, 2002. During the fourth quarter of 2002, the hedging instrument was extended and re-designated to hedge the benchmark interest rate associated with the ten semi-annual interest payments on the forecasted borrowing. On November 18, 2002, the company issued $150.0 of fixed rate debt and the amount associated with the cash flow hedge was recorded to other comprehensive income and is being amortized to interest expense in the period in which interest expense related to the debt is recognized. The remaining $50.0 of the cash flow hedge was re-designated to hedge the benchmark interest rate associated with the ten semi-annual interest payments on future forecasted borrowings and was settled during the first quarter of 2003. Simultaneous with the hedge settlement, the company entered into a new $50.0 cash flow hedge, which was designated to hedge the benchmark interest rate associated with ten semiannual interest payments on future forecasted borrowings. This $50.0 cash flow hedge was settled in July 2003 in conjunction with the company's $50.0 public offering of five-year fixed rate senior notes. The amount associated with the settlements during 2003 was recorded to other comprehensive income and is being amortized to interest expense in the period in which interest expense related to the hedged debt is recognized. A $65.0 interest rate swap that was designated as a cash flow hedge at September 28, 2002, matured in December 2002.
     In addition, the company had $43.3 and $462.0 of outstanding foreign exchange forward contracts classified as cash flow hedges as of September 27, 2003 and September 28, 2002, respectively. The decline in the contracts was primarily due to the company's decision to permanently invest an intercompany loan in its Europe region. This permanent investment eliminated the ongoing exposure of principal and interest payments to fluctuations in foreign currency exchange rates and therefore the need to hedge such exposure.
     For instruments designated as either fair value or cash flow hedges, a reduction in net interest expense of $0.2 was recognized for hedge ineffectiveness for the quarter ended March 29, 2003. Hedge ineffectiveness had no impact on income for the quarters ended June 28, 2003 or September 27, 2003. For the quarter and nine months ended September 28, 2002, net interest expense of $0.1 and a reduction to net interest expense of $0.2 was recognized for hedge ineffectiveness, respectively.
     Foreign exchange forward contracts have varying maturities up to, but not generally exceeding, one year with cash settlements made at maturity based upon rates agreed to at contract inception and then current market rates. Instruments designated to hedge foreign currency exposures of net investments in non-U.S. subsidiaries resulted in a net after-tax gain of $5.7 and a net after-tax loss of $0.1 for the quarters ended September 27, 2003 and September 28, 2002, respectively, which were included in the cumulative translation adjustment. Year-to-date, a net after-tax loss of $2.0 and $0.5 were included in the cumulative translation adjustment for the periods ended September 27, 2003 and September 28, 2002, respectively. The company had designated foreign denominated intercompany loans and foreign currency contracts with notional amounts of $163.0 and $11.7 respectively, as hedges of net investments in non-U.S. subsidiaries as of September 27, 2003 and September 28, 2002, respectively. During October 2002, the company terminated the contracts with a notional amount of $11.7.

During 2001, the company's Board of Directors authorized the repurchase of up to 2,000,000 shares of the company's Common stock. The company executed an agreement with a financial institution for the future purchase of such shares through one or more forward purchase transactions. Such purchases, which may have had settlement dates as long as two years, could have been settled, at the company's election, on a physical share, net cash or net share basis. As of December 28, 2002, the company had entered into forward purchases covering 750,000 shares. During March 2003, at the expiration of the forward purchase agreement, the company paid $30.7 for the 750,000 shares, at an average price of $40.89 to settle its obligation. This repurchase of Common stock was recorded as treasury stock in the company's consolidated financial statements during the quarter ended March 29, 2003.

The company grants stock options under several stock-based compensation plans, which typically vest ratably over three years and expire ten years from the date of grant. Vesting is contingent upon a continued employment relationship with the company. The company also issues restricted stock awards to officers and other key personnel. These awards have vesting periods up to seven years with vesting criteria based on continued employment until applicable vesting dates and, in some cases, based on the attainment of specific performance goals such as average sales and cumulative earnings per share targets. The company measures stock-based compensation for option grants under the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, as amended. Accordingly, given the fixed nature of the equity instruments granted under such plans, no compensation cost has been recognized other than for restricted stock awards. Compensation expense for restricted stock grants is recorded based on applicable vesting criteria and for those awards with performance goals, as such goals are met. The company's net income and earnings per share would have been reduced to the pro forma amounts shown in the periods below if compensation cost had been determined based on the fair value at the grant dates using the Black-Scholes option-pricing model in accordance with SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of SFAS No. 123 and SFAS No. 123, Accounting for Stock-Based Compensation:

     In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The company has determined that legal obligations exist for certain leases of real property that contain clauses to reinstate the premises, requiring the removal of alterations made by the company during the lease term. The company adopted SFAS No. 143 in the first quarter of 2003 and recorded a charge of $0.9 in its Consolidated Statements of Income as a cumulative change in accounting principle, net of tax.
     In May 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. However, an entity is not prohibited from classifying such gains and losses as extraordinary items, so long as they meet the criteria outlined in Accounting Principles Board Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 145 also eliminates the inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement is effective for financial statements issued for fiscal years beginning after May 15, 2002. The company adopted SFAS No. 145 in the fiscal year beginning December 29, 2002 with no material effect on its financial position.
     In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. Previous accounting guidance was provided by EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 replaces EITF Issue No. 94-3. This statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The company adopted SFAS No. 146, as applicable, in the fiscal year beginning December 29, 2002 with no effect on its financial position.
     In November 2002, the FASB published Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The Interpretation expands on the accounting guidance of Statements No. 5, Accounting for Contingencies, No. 57, Related Party Disclosures, and No. 107, Disclosures about Fair Value of Financial Instruments, and incorporates without change the provisions of FASB Interpretation No. 34, Capitalization of Interest Costs, which is being superseded. The Interpretation elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosure requirements in the Interpretation were effective for financial statements of interim or annual periods ending after December 15, 2002. The company adopted the disclosure requirements of Interpretation No. 45 in the fiscal year beginning December 30, 2001. The company adopted the recognition and measurement provisions of Interpretation No. 45, as applicable, in the fiscal year beginning December 29, 2002 with no effect on its financial position.
     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure, an amendment of SFAS No. 123. SFAS No. 148 provides guidance on alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. In addition, this statement amends Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. The transition guidance and annual disclosure provisions of this statement were effective for fiscal years ending after December 15, 2002. The interim disclosure provisions were effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The company grants stock options under several stock-based compensation plans, as described in Note 13 - Stock Compensation Plans, all of which are accounted for under the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees.
     In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, which requires all variable interest entities to be consolidated by the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the variable interest entity. In addition, the Interpretation expands disclosure requirements for both variable interest entities that are consolidated as well as variable interest entities from which the entity is the holder of a significant amount of the beneficial interests, but not the majority. The disclosure requirements of this Interpretation were effective for all financial statements issued after January 31, 2003. The consolidation requirements of this Interpretation are effective for the first reporting period ending after December 15, 2003. The company has determined that it has engaged in research, development and commercialization arrangements with two variable interest entities as described in the Off-Balance Sheet Arrangements Section of Management's Discussion and Analysis of Financial Condition and Results of Operations. However, the company is not the primary beneficiary in either arrangement and has determined that the consolidation requirement of this Interpretation is not applicable.
     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and hedging relationships designated after June 30, 2003, except for those provisions of SFAS No. 149 which relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003. For these issues, the provisions that are currently in effect should continue to be applied in accordance with their respective effective dates. In addition, certain provisions of SFAS No. 149, which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The company adopted SFAS No. 149 prospectively, as applicable, in the third quarter of 2003 with no effect on its financial position.
     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity and requires a financial instrument that is within its scope to be classified as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity under previous guidance. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of this statement and still existing at the beginning of the interim period of adoption. The company adopted the provisions of SFAS No. 150, as applicable, in the third quarter of 2003 with no impact on its financial position.
     In May 2003, the Emerging Issues Task Force (EITF) issued Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to determine when an arrangement that involves multiple revenue-generating activities or deliverables should be divided into separate units of accounting for revenue recognition purposes, and if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. The guidance in this Issue is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The company has adopted the provisions of this Issue with no impact on its results of operations.

A shareholder lawsuit, filed in the U.S. District Court for the Western District of New York on April 13, 2001, is pending against the company, and its Chief Financial Officer, Stephen C. McCluski, and former Chairman and Chief Executive Officer, William M. Carpenter, and former President, Carl E. Sassano. All direct claims against Mr. McCluski have been dismissed by the Court. Additionally, certain claims against the company and certain direct claims against Messrs. Carpenter and Sassano have been dismissed. In the plaintiffs' remaining direct and secondary claims it is alleged that the value of the company's stock was inflated artificially by alleged false and misleading statements about expected financial results. The plaintiffs seek to represent a class of shareholders who purchased company common stock between January 27, 2000 and August 24, 2000. On October 15, 2001, the April 13, 2001 matter was consolidated with other matters raising similar claims. The company intends to continue defending itself vigorously against these claims. The company cannot at this time estimate with any certainty the impact of the remaining claims on its financial position.
     The company and its subsidiaries have been involved in several patent proceedings relating to silicon hydrogel contact lens technology, including its PureVision contact lens product line. Five of these proceedings were commenced by CIBA Vision Corporation (CIBA) and related entities, in each case alleging that the PureVision lens product infringes intellectual property held by them. The first of these lawsuits was filed on March 8, 1999 in the U.S. District Court for the Northern District of Georgia, followed by other lawsuits commenced in the Federal Court of Melbourne, Australia (filed on February 29, 2000), the U.S. District Court for the District of Delaware (filed on May 3, 2001), the Administrative Court of Duesseldorf, Germany (filed on September 7, 2001) and the High Court in Dublin, Ireland (filed on March 11, 2003). A ruling in the Delaware matter has resulted in the company discontinuing sale of its PureVision lenses in the U.S. until April 27, 2005. The Georgia matter involves additional CIBA U.S. patents which expire in 2014. In this matter, discovery has closed and following the Court's July 8, 2003 order denying the company's motions for summary judgment, the company now anticipates that a trial date will be set for 2004. The trial in the Australia matter commenced on October 7, 2003. On September 17, 2003, the European Patent Office ruled that the Novartis AG patent at issue in the German and Irish suits is invalid. As a result, the parties have agreed to stay action on an earlier patent infringement ruling by the German court and the company has resumed the sale of PureVision contact lenses in Germany. It is anticipated that Novartis AG will appeal the European Patent Office decision. Additionally, the company has requested that the German Patent Office cancel Novartis AG's German Utility Model Registration. The company cannot at this time estimate with any certainty the impact on its financial position of the pending lawsuits described above. The company intends to defend itself vigorously against all claims asserted by CIBA.
     The company has filed three related proceedings against CIBA pertaining to CIBA's Night & Day product line. Specifically, on November 6, 2001, the company filed a patent infringement lawsuit against CIBA in the U.S. District Court for the Western District of New York relative to a patent the company holds for hydrogel materials. CIBA has filed two motions for summary judgment in this action. The Court has heard argument on one motion and has reserved decision. The second motion has been briefed by the parties, but a motion hearing date has not been established. The company has commenced two additional patent infringement lawsuits against CIBA in the U.S. District Court for the Western District of New York. The first, commenced on July 22, 2003, relates to an additional patent the company holds for hydrogel materials. The second, commenced on November 6, 2003, is under a manufacturing process patent held by the company. The company intends to pursue vigorously its claims against CIBA in these actions. The company cannot at this time estimate with any certainty the impact on its financial position of the lawsuits filed by the company against CIBA.
     The company is engaged in various lawsuits, claims, investigations and proceedings including patent, trademark, commercial and environmental matters that are in the ordinary course of business. The company cannot at this time estimate with any certainty the impact of such matters on its financial position.

The following paragraph summarizes certain significant items impacting company results for the quarter and nine months ended September 28, 2002.
     The company recorded restructuring charges and asset write-offs of $26 before taxes during the third quarter of 2002 related to the Profitability Improvement Program announced during the third quarter of 2002 as well as severance associated with the transfer of PureVision manufacturing to Waterford, Ireland (see Note 2 - Restructuring Charges and Asset Write-offs). Additionally, a $1 pre-tax reversal of previously recorded restructuring charges related to the 2001 restructuring program was recorded during the third quarter of 2002. During the first quarter of 2002, the company recorded restructuring charges and asset write-offs of $24 before taxes related to the second phase of the 2001 restructuring program designed to reduce ongoing operating costs. Pre-tax gains on the sale of the company's remaining equity interest in a previously divested entity of $28 were realized in the first quarter of 2002. Also during the first quarter of 2002, an outside partner exercised its put right for all of its partnership interest and the company recorded a one-time early liquidation premium as an after-tax minority interest charge of $7. The significant items already reflected in after-tax net income for the nine months ended September 28, 2002 aggregated to contribute to a net after-tax decline of $21 or $0.39 per share.
     There were no similar items impacting company results during the third quarter and nine months ended September 27, 2003.

Net sales from the company's cataract and vitreoretinal surgery products for the third quarter of 2003 were $77, an increase of 6% from the same quarter in 2002. Revenues on a year-to-date basis were $239, an increase of 8% over the same 2002 period. Excluding the impact of currency, net sales increased 2% for the quarter and year-to-date. During the quarter, sales increases in the Americas and strong growth in Europe were partially offset by declines in Asia. In the Americas, net sales grew 3% during the third quarter (2% in constant currency) compared to the same quarter last year. The increase was led by higher sales of viscoelastics, surgical instruments and disposables, particularly those used in the company's 25-gauge vitrectomy system. Year-to-date net sales declined 1% in actual dollars and 2% in constant currency as higher sales of surgical instruments and vitreoretinal surgery products were more than offset by declines in other cataract products. Third quarter sales in the Europe region increased 22% in actual dollars and 13% excluding the impact of currency. Year-to-date, net sales increased 26% and 10% in constant currency compared to the same period of 2002. This growth was generated by higher sales of IOLs (most notably the company's Akreos acrylic lens) and disposables used with the company's Millennium phacoemulsification system. Spain continues to make a significant contribution to the overall sales growth. The company is now marketing direct in that country, which is generating favorable comparisons over prior-year periods as Spain had nearly no sales for most of 2002 due to the company's main distributor in that country exiting the business. In Asia, third quarter revenue decreased 23% (26% in constant currency) from the same quarter in 2002 and 4% and 9% in actual dollars and in constant currency year-to-date, respectively. Declines during the third quarter of 2003 are mainly due to lower sales of IOLs in Japan. These trends more than offset higher sales of Millennium modules and viscoelastics.

Refractive products for the third quarter of 2003 provided $29 in net sales, reflecting a 5% decrease compared to the same period in 2002. On a year-to-date basis, revenues decreased 6% to $89 from the same 2002 period. Excluding the impact of currency, net sales decreased 9% and 11% for the quarter and year-to-date, respectively, over the same periods in 2002. Declines were noted in each geographic region with higher per-procedure card and service revenues more than offset by declines in revenues from capital equipment and microkeratome blades. In the Americas, refractive net sales declined 4% (7% in constant currency) during the third quarter and 2% (4% excluding the impact of currency) year-to-date compared to the same periods in 2002. Sales of per-procedure cards grew close to 60% in the quarter as compared to last year, but these gains were more than offset by lower sales of lasers and diagnostic equipment. The decline in laser sales results in part from the company's strategy to gain U.S. market share by placing equipment which generates an annuity stream. Refractive net sales in Europe declined 8% during the quarter and 6% year-to-date. In constant currency, sales in the Europe region declined 15% and 18% during the quarter and year-to-date, respectively. Continued weak procedural demand brought on by unfavorable consumer sentiment in subdued market conditions has depressed the sales of refractive products in this region. Higher sales of Zyoptix cards and service revenue could not compensate for lower revenues across most other product lines. Sales in Asia declined 5% and 12% (7% and 13% in constant currency) for the quarter and year-to-date, respectively, over the same 2002 periods. Higher sales of lasers during the quarter were more than offset by declines in all other products. These results can be attributed primarily to Korea, where a difficult economic environment has resulted in tightened consumer spending. Year-to-date declines were noted in sales of lasers, cards, and blades.

     As a result of the above factors, operating earnings for the third quarter of 2003 increased $30 to $61, representing 12% of net sales compared to 7% for the same 2002 period. Operating earnings year-to-date increased $71 to $157, representing 11% of net sales compared to 6% for the same 2002 period. In addition to the factors described above, quarter- and year-to-date increases are also the result of restructuring charges and asset write-offs included in the third and first quarters of 2002. A pre-tax charge of $26 was recorded during the third quarter of 2002 related to the company's Profitability Improvement Program announced in July 2002. Also during the third quarter of 2002, the company reversed $1, pre-tax, of restructuring expense associated with its second phase of the 2001 restructuring program. Restructuring charges and asset write-offs of $24, before taxes, were recorded in the first quarter of 2002 which related to the second phase of the company's 2001 restructuring program. (See Note 2 - Restructuring Charges and Asset Write-offs for a discussion of the company's 2001 Program and its Profitability Improvement Program).

Interest and investment income totaled $5 for the quarter ended September 27, 2003, an increase of $5 compared to the same period in 2002. The 2003 period includes mark-to-market gains on assets held for the company's nonqualified deferred compensation plan. The 2002 period included mark-to-market losses on assets held for the nonqualified deferred compensation plan. Year-to-date 2003 interest and investment income of $11 decreased $30 from the prior year. For the quarter ended March 30, 2002, the company recorded a $28 gain from the sale of Charles River stock and interest income of approximately $6 associated with a federal income tax refund. The 2003 year-to-date interest and investment income also reflects the third quarter 2003 increase explained above.
     Interest expense of $14 and $42 for the quarter and nine months ended September 27, 2003 increased $1 and $4, respectively, compared to the comparable periods in 2002. These increases are largely attributable to the cost of the company's $150 debt issuance during November 2002, the proceeds of which were used primarily for general corporate purposes and the refinancing of existing debt obligations, including the company's $200 minority interest obligation as described in Note 8 - Minority Interest. Expense associated with the $200 minority interest obligation was recorded as minority interest expense through May 2002.
     Foreign currency expenses of $2 and $5 were recognized during the quarter and nine months ended September 27, 2003 compared to $2 and $3 for the same prior-year periods, respectively. These results reflect changes in costs associated with the company's ongoing foreign currency hedging program.

Cash Flows from Financing Activities

Through the first nine months of 2003, $80 was used in financing activities compared to $312 in the comparable 2002 period. Cash used in financing activities during the first nine months of 2003 consisted primarily of $202 repayments of debt and notes payable, $41 to repurchase one million shares of the company's common stock during the third quarter of 2003 as described in "Access to Financial Markets" below and $31 payment in the first quarter of 2003 to settle forward equity contracts as described in Note 12 - Forward Equity Contracts and $21 of dividend payments. The cash outflow from these activities was partially offset by an inflow of $210 proceeds from the issuance of debt in August 2003 as described below in "Access to Financial Markets." During the first nine months of 2002, cash used in financing activities resulted from a $200 payment made in connection with the early termination of a minority interest obligation as described in Note 8 - Minority Interest, repayments of notes payable and long-term debt of $34 and $120 (including securitized trade receivables of $25), respectively, and $35 for dividend payments, offset by $75 of borrowings under the company's syndicated revolving credit agreement (repaid in July 2002). During April 2002, the Board of Directors approved a reduction in the quarterly dividend as described in the Other Financial Data Section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Financial Position

The company's total debt, consisting of short- and long-term borrowings, was $848 at the end of the third quarter of 2003, up $5 from year-end 2002 and up $92 from September 2002. The ratio of total debt to capital was 44.7% at the end of the third quarter of 2003 and 45.3% at the end of 2002, and 43.1% at September 2002.
     Cash and cash equivalents totaled $458 and $343 at the end of the third quarters of 2003 and 2002, respectively, and $465 at the end of 2002.

The company's long-term debt rating by Standard & Poor's as of September 27, 2003 was at BBB-. On March 11, 2002, the company was downgraded by Moody's Investors Service as a result of its 2001 performance. The debt rating by Moody's Investors Service, as of September 27, 2003, was Ba1 for long-term debt.
     As a result of the March 2002 downgrade, certain financial transactions became terminable at the option of the holder. These included an outside investor's limited partnership interest which was recorded as minority interest totaling $200; financing covering the company's World Headquarters facility of $63; and securitized trade receivables of $25. During March 2002, the outside partner exercised its put right for its $200 partnership interest. The termination of the minority interest obligation and payment of the associated early liquidation premium occurred in May 2002 as described in Note 8 - Minority Interest. The payment was funded through existing cash reserves as well as the company's borrowing $75 against its then existing syndicated revolving credit agreement, which was repaid in July 2002. In addition, under their original payment terms, outstanding debt related to the securitized trade receivables was paid in March 2002, and the World Headquarters facility was paid at maturity by the company in December 2002.
     In November 2002, the company issued $150 of five-year 6.95% fixed senior notes under a $500 Shelf Registration filed with the Securities and Exchange Commission in June 2002. In August 2003, the company issued $210 in concurrent offerings of notes and convertible notes. The first offering was a $50 public offering of five-year fixed rate senior notes with a coupon rate of 5.90%, also issued under the $500 Shelf Registration; $300 of which remained available for issuance as of September 27, 2003. The company simultaneously executed an interest rate swap agreement converting the notes to a floating rate. The initial effective cost of the notes, which includes both the impact of the interest rate swap and the settlement of a $50 cash flow hedge designated to hedge the benchmark interest rate in connection with the offering is 5.39%. The second offering was a $160 placement of floating-rate convertible senior notes due in 2023. The notes accrue interest at six-month LIBOR plus 0.5% with the rate reset on a semiannual basis in advance. The initial interest rate is approximately 1.64%. The notes will be convertible, under certain conditions, into shares of the company's common stock at an initial conversion price of $61.44 per share, which represented a 50% premium over the closing price of the company's common stock on the date the notes were offered, July 29, 2003. On October 30, 2003, the company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission in satisfaction of certain registration rights granted to the holders of the $160 convertible notes. Both the senior notes and convertible senior notes have been rated BBB- by Standard & Poor's and Ba1 by Moody's Investors Service. In connection with the sale of the convertible notes, the company repurchased one million shares of its common stock on August 4, 2003 at an average price per share of $40.96. The company used the remaining proceeds of the offerings primarily to refinance existing debt obligations.
     At December 28, 2002, the company had a $250 syndicated revolving credit agreement expiring in January 2004. In January 2003, the company replaced that agreement with a five-year, $400 syndicated revolving credit agreement. The new facility includes covenants similar to covenants contained in the former facility, which require the company to maintain certain EBITDA to interest and debt ratios. In the event of violation of the covenants, the facility would not be available for borrowing until the covenant provisions were waived, amended or satisfied. The company does not anticipate that a violation of these covenants is likely to occur. Under the terms of the 2003 syndicated revolving credit agreement, the facility was reduced to $250 effective August 4, 2003 when the company completed the issuance of $210 of notes and convertible notes. At the company's option the interest rate under the agreement is based on the company's credit rating and LIBOR, or the base rate of one of the lending banks. There were no outstanding borrowings under the syndicated revolving credit agreement as of September 27, 2003 or December 28, 2002. There were no covenant violations during the quarter or nine months ended September 27, 2003 or year ended December 28, 2002. In addition, a number of subsidiary companies outside the U.S. have credit facilities to meet their liquidity requirements, under which there were no outstanding borrowings as of September 27, 2003.
     The company believes its existing credit facilities, in conjunction with the financing activities mentioned above, will provide adequate liquidity to meet obligations, fund capital expenditures and invest in potential growth opportunities.

Working capital was $657 and $276 at the end of the third quarters of 2003 and 2002, respectively. At year-end 2002, working capital was $456. The current ratio was 2.0 and 1.3 at the end of September 2003 and September 2002, respectively, and 1.5 at year-end 2002. The 2003 third-quarter increase in both working capital and the current ratio from the third quarter of 2002 and year-end 2002 is largely attributable to the third-quarter issuance of $210 in concurrent offerings of notes and convertible notes and $186 repayments of current debt and notes payable. This increase was partially offset by $41 used to repurchase one million shares of the company's common stock during the third quarter of 2003 as described in "Access to Financial Markets" above and a $31 payment in the first quarter of 2003 to settle forward equity contracts as described in Note 12 - Forward Equity Contracts.

The company has entered into two arrangements with Variable Interest Entities (VIEs) to engage the research, development and commercialization of certain technologies. VIEs are described in Note 14 - New Accounting Guidance (FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51). The company has an equity interest of approximately 23%, valued at $0 on its balance sheet, in a strategic partnering arrangement entered into during 1999 that involves implant technology for treating retinal and other back-of-the-eye diseases. The company remits payments to the strategic partner for funding contingent upon the achievement of certain milestones such as completion of clinical testing, NDA filings and FDA approvals. However, as described in Note 9 - Related Party Transaction, an anticipated delay of up to three years in U.S. regulatory filings for the Retisert drug delivery product for the diabetic macular edema indication was announced in May 2003. The company indicated that this delay would cause an assessment of the overall implications on this product for this particular indication.
     The other arrangement consists of an equity investment of $4 and $6 as of September 27, 2003 and December 28, 2002, respectively, recorded as an other long-term asset, in connection with a licensing agreement signed during 2002 to develop treatments for ocular infections. During the quarter ended June 28, 2003, the company recorded an other-than-temporary impairment charge of $2 based on negative earnings and cash flow trends of the licensor, and inconclusive efforts by the licensor to secure interim financing. The company remits payments to the licensor upon the achievement of certain milestones such as completion of IND filings, clinical testing, NDA filings and FDA approvals.
     Subject to the completion of the assessment described above, future payments to the VIEs for R&D activities and milestone achievements over the next five years are estimated to be $20, which will primarily be recorded as R&D expenses.
     The company has obligations under certain guarantees, letters of credit, indemnifications and other contracts that contingently require the company to make payments to guaranteed parties upon the occurrence of specified events. The company believes the likelihood is remote that material payments will be required under theses contingencies, and that they do not pose potential risk to the company's future liquidity, capital resources and results of operations. See Note 10 - Commitments and Contingencies for further descriptions and discussions regarding the company's obligations.

Information Concerning Forward-Looking Statements Forward-looking statements include statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts. When used in this discussion, the words "anticipate", "appears", "foresee", "should", "expect", "estimate", "project", "will", "are likely" and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report under the heading "Outlook" and elsewhere are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve predictions of future company performance, and are thus dependent on a number of factors, which may affect the company's performance. Where possible, specific factors that may impact performance materially have been identified in connection with specific forward-looking statements. Additional risks and uncertainties include, without limitation, general global and local economic, political and sociological conditions, and changes in such conditions, the impact of competition, seasonality and general economic conditions in the global lens and lens care, ophthalmic cataract and refractive and pharmaceutical markets where the company's businesses compete, effects of war or terrorism, changing currency exchange rates, the general political climate existing between and within countries throughout the world, events affecting the ability of the company to timely deliver its products to customers, including those which affect the company's carriers' ability to perform delivery services, changing trends in practitioner and consumer preferences and tastes, changes in technology, medical developments relating to the use of the company's products, legal proceedings initiated by or against the company, including those related to patents and other intellectual property in the U.S. and throughout the world, the impact of company performance on its financing costs, changes in government regulation of the company's products and operations, changes in governmental laws and regulations relating to the import and export of products, government pricing changes and initiatives with respect to healthcare products, changes in private and regulatory schemes providing for the reimbursement of patient medical expenses, changes in the company's credit ratings, or the cost of access to sources of liquidity, the company's ability to maintain positive relationships with third party financing resources, the financial well-being and commercial success of key customers, development partners, and suppliers, changes in the supply of raw materials used in the manufacture of the company's products, changes in tax rates or policies or in rates of inflation, changes in accounting principles and the application of such principles to the company, the performance by third parties upon whom the company relies for the provision of goods or services, the ability of the company to successfully execute marketing strategies, the ability of the company to secure and maintain intellectual property protections, including patent rights, with respect to key technologies in the U.S. and throughout the world, the ability of the company to secure and maintain copyright protections relative to its customer-valued names, trademarks, trade names and other designations in the U.S. and throughout the world, difficulties or delays in the development, laboratory and clinical testing, regulatory approval, manufacturing, release or marketing of products, the successful completion and integration of acquisitions by the company, the successful relocation of certain manufacturing processes, the continued successful implementation of efforts in managing and reducing costs and expenses, the effect of changes within the company's organization, including the selection and development of the company's management team and such other factors as are described in greater detail in the company's filings with the Securities and Exchange Commission, including, without limitation, its 2002 Annual Report on Form 10-K and the Current Report on Form 8-K dated June 14, 2002.

The excess of the company's floating rate assets over its floating rate liabilities decreased for the quarter and the nine months ended September 27, 2003 resulting largely from an increase in floating rate liabilities. The company had $185 of debt mature in the third quarter of 2003. As discussed in the Access to Financial Markets section of Liquidity and Financial Resources, the company refinanced this debt through the August 2003 issuance of $50 fixed rate notes, swapped to a floating rate, and $160 floating-rate convertible notes. The excess of floating rate assets over floating rate-liabilities decreased approximately 40% primarily as a result of those transactions. A sensitivity analysis to measure the potential impact that a change in interest rates would have on the company's net income indicates that a one percentage point increase in interest rates, which represents a greater than 10% change, would decrease the company's net financial expense by approximately $3 on an annualized basis.
     A sensitivity analysis to measure the potential impact that a change in foreign currency exchange rates would have on the company's net income indicates that, if the U.S. dollar strengthened against all foreign currencies by 10% the company would realize net losses of approximately $5 on foreign currency forward contracts outstanding at September 27, 2003. Such net losses would be substantially offset by net gains from the revaluation or settlement of the underlying positions hedged.

Evaluation of Disclosure Controls and Procedures: As of the end of the period covered by this report, the company carried out an evaluation, under the supervision and with the participation of the company's Chairman and Chief Executive Officer along with the company's Senior Vice President and Chief Financial Officer, of the effectiveness of disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on such evaluation, the company's Chairman and Chief Executive Officer and the company's Senior Vice President and Chief Financial Officer have concluded that as of the end of the period covered by this report, the company's disclosure controls and procedures were effective in timely alerting them to material information relating to the company (including its consolidated subsidiaries) required to be included in the company's periodic filings with the Securities and Exchange Commission.

Changes in Internal Controls: There were no changes in the company's internal control over financial reporting that occurred during the company's most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.