(FORTUNE Magazine) - WHAT WE SAID

In "Is Bausch & Lomb's Run Over?" (May 30, 2005), we questioned whether the eye-care company's turnaround was as strong as CEO Ron Zarrella claimed. While shares of B&L had more than doubled, to $88, since Zarrella took the helm in November 2001, we pointed out that he had fallen short of meeting two of his three financial goals. We also noted a significant deterioration in the quality of the company's earnings.

WHAT HAPPENED

The stock (BOL, $70) has fallen 20% from last summer's peak, as the Rochester company has uncovered potentially serious problems at two of its foreign subsidiaries. On Dec. 22, B&L announced that it had detected "improper management and accounting practices" at its Brazilian unit that will lead it to restate financial results from 2000 through the first half of 2005. Among other things, it found that managers had mischaracterized expenses to fund an unauthorized pension worth $1.5 million. Two employees were fired. On Jan. 26, B&L announced that it would delay filing its fourth-quarter and full-year 2005 financial results until March to investigate allegations of improper sales practices at its South Korean subsidiary. A spokeswoman says the two matters are "separate and unrelated," adding that the two subsidiaries accounted for just over 2% of 2004 sales. Still, the news is troubling, particularly for a firm that derives 60% of its sales from international markets. Until the matters are resolved, investors shouldn't give the stock a second look.