The Cooper Companies Announces Fourth Quarter and Full Year 2014 Results
The Cooper Companies Announces Fourth Quarter and Full Year 2014 Results
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Fourth quarter revenue increased 14% year-over-year to
$468.0 million . Fiscal 2014 revenue increased 8% to$1,717.8 million . -
Fourth quarter GAAP earnings per share (EPS)
$0.63 , down52 cents or 45% from last year's fourth quarter. Fiscal 2014 GAAP EPS$5.51 , down 8% from fiscal 2013. -
Fourth quarter non-GAAP EPS
$1.95 , up35 cents or 22% from last year's fourth quarter. Fiscal 2014 non-GAAP EPS$7.29 , up 14% from fiscal 2013. See "Reconciliation of Non-GAAP Results to GAAP Results" below. -
Fourth quarter free cash flow
$108.0 million . Fiscal 2014 free cash flow$235.9 million .
Commenting on the results,
Fourth Quarter GAAP Operating Highlights
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Revenue
$468.0 million , up 14% from last year's fourth quarter, up 7% pro forma (constant currency including Sauflon in both periods and excluding Aime). - Gross margin 60% compared with 64% in last year's fourth quarter. Gross margin was negatively impacted primarily by integration related expenses. Excluding these expenses, gross margin was 63% vs. 64% last year.
- Operating margin 8% compared with 15% in last year's fourth quarter. The decrease was the result of integration related expenses and the related increase in amortization. Excluding these costs, operating margin would have been 23% vs. 22% last year.
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Depreciation
$28.6 million , up 19% from last year's fourth quarter. Amortization$14.0 million , up 82% from last year's fourth quarter due to the Sauflon acquisition. -
Total debt increased
$1,034.4 million fromJuly 31, 2014 , to$1,382.4 million , due primarily to the acquisition of Sauflon, offset by operational cash flow generation. Interest expense$3.3 million compared with$1.9 million in last year's fourth quarter. -
Cash provided by operations
$152.1 million , capital expenditures$60.1 million , and excluding acquisition costs of$16.0 million resulted in free cash flow of$108.0 million .
Fourth Quarter CooperVision (CVI) GAAP Operating Highlights
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Revenue
$385.4 million , up 18% from last year's fourth quarter, up 9% pro forma. - Revenue by category:
Pro forma* | ||||
(In millions) | % of CVI Revenue | %chg | %chg | |
4Q14 | 4Q14 | y/y | y/y | |
Toric | $ 110.9 | 29% | 13% | 12% |
Multifocal | 40.1 | 10% | 26% | 20% |
Single-use sphere | 93.6 | 24% | 32% | 11% |
Non single-use sphere, other | 140.8 | 37% | 12% | 2% |
Total | $ 385.4 | 100% | 18% | 9% |
- Revenue by geography:
Pro forma* | ||||
(In millions) | % of CVI Revenue | %chg | %chg | |
4Q14 | 4Q14 | y/y | y/y | |
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$ 152.9 | 40% | 8% | 5% |
EMEA | 163.0 | 42% | 43% | 13% |
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69.5 | 18% | -2% | 7% |
Total | $ 385.4 | 100% | 18% | 9% |
*Constant currency including Sauflon in both periods (unaudited for fiscal 4Q13) and excluding Aime.
- Gross margin 59% compared with 64% in last year's fourth quarter. Gross margin was negatively impacted primarily by Sauflon integration related expenses. Excluding these expenses, gross margin was 63% vs. 64% last year.
Fourth Quarter CooperSurgical (CSI) GAAP Operating Highlights
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Revenue
$82.6 million , down 3% from last year's fourth quarter, down 1% in constant currency. - Revenue by category:
Constant Currency | ||||
(In millions) | % of CSI Revenue | %chg | %chg | |
4Q14 | 4Q14 | y/y | y/y | |
Office and surgical procedures | $ 55.0 | 67% | -1% | -1% |
Fertility | 27.6 | 33% | -5% | -1% |
Total | $ 82.6 | 100% | -3% | -1% |
- Gross margin 64% compared with 64% in last year's fourth quarter. Excluding restructuring charges associated with the fertility business, gross margin was 65% vs. 64% last year.
Fiscal Year 2014 GAAP Operating Highlights
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Revenue
$1,717.8 million , up 8% from fiscal 2013, up 8% pro forma. -
CVI revenue
$1,392.6 million , up 10% from fiscal 2013, up 10% pro forma, and CSI revenue$325.1 million , up 2% from fiscal 2013, 2% in constant currency. - Gross margin 64% compared with 65% in fiscal 2013. Non-GAAP 65% compared with 65% in fiscal 2013.
- Operating margin 18% compared with 19% in fiscal 2013. Non-GAAP 24% from 23% in fiscal 2013.
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Depreciation and amortization expense
$138.2 million . -
Interest expense
$8.0 million compared with$9.2 million in fiscal 2013. -
Cash provided by operations
$454.8 million , capital expenditures$238.1 million and excluding acquisition costs of$17.8 million and insurance recovery of$1.4 million resulted in free cash flow of$235.9 million .
Other
- Sauflon non-GAAP historical financial information available at http://investor.coopercos.com/events.cfm.
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As previously announced on
August 6, 2014 , Cooper completed the acquisition ofSauflon Pharmaceuticals Ltd , a European manufacturer and distributor of soft contact lenses and solutions, for approximately$1.1 billion . -
As previously announced on
August 6, 2014 , Cooper closed a$700 million 3-year Senior Unsecured Term Loan which maturesAugust 4, 2017 . -
As previously announced on
October 8, 2014 ,CooperSurgical completed the acquisition ofEndoSee Corporation , a developer of an office-based disposable hysteroscopy system, for approximately$44 million . -
During
October 2014 , the company repurchased$25.8 million of common stock under the existing share repurchase program for an average share price of$146.64 . The program has$185.7 million of remaining availability and no expiration date.
Fiscal Year 2015 Guidance
The Company updated its fiscal year 2015 guidance. Guidance assumes constant currency as of
FY15 Guidance | FY15 Guidance | |
Old | New* | |
Revenues (In millions) | ||
Total |
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CVI |
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CSI |
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EPS | ||
Non-GAAP |
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*Guidance reduced solely to reflect moves in currency from
Reconciliation of Non-GAAP Results to GAAP Results
To supplement our financial results presented on a GAAP basis, we use non-GAAP measures indicated in the tables below that we believe are helpful in understanding our results. The non-GAAP measures exclude costs which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. These include costs related to acquisitions and the related integration activities, divestitures, severance and related restructuring costs, and proceeds related to a business interruption claim. Our non-GAAP financial results and guidance are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Management uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the factors management uses in planning and forecasting for future periods. Our non-GAAP financial measures include the following adjustments, along with the related income tax effects and changes in income attributable to noncontrolling interests:
- Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP financial results. Amortization of intangible assets will recur in future periods however, the amounts are affected by the timing and size of our acquisitions.
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Acquisition related and integration expenses; and restructuring expenses: We have excluded the effect of acquisition related and integration expenses and the effect of restructuring expenses from our non-GAAP financial results. Such expenses generally diminish over time with respect to past acquisitions; however, we generally will incur similar expenses in connection with any future acquisitions. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Many of these costs relate to our acquisition of
Sauflon Pharmaceuticals Ltd. in our fiscal fourth quarter of 2014. Acquisition related and integration expenses include items such as personnel related costs for transitional employees, other acquired employee related costs and integration related professional services. Restructuring expenses consist of employee severance, product rationalization, facility and other exit costs. We believe it is useful for investors to understand the effects of these items on our consolidated operating results. -
Divestiture of Aime: On
October 31, 2013 , we divested Aime, our rigid gas-permeable contact lens and solutions business inJapan , consistent with our strategy to focus on our core soft contact lens business. We believe it is useful to investors to understand the effect of this divestiture on our consolidated operating results. -
Proceeds related to a business interruption claim: We received several insurance payments over two fiscal years related to an incident in a manufacturing building on
October 28, 2011 . We believe it is useful to investors to understand the effect of these payments on our consolidated operating results.
We also report revenue growth using the non-GAAP financial measure of constant currency revenue. Management presents and refers to constant currency information so that revenue results may be evaluated excluding the effect of foreign currency rate fluctuations. To present this information, current period revenue for entities reporting in currencies other than
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Consolidated Statements of Income | ||||||||
Reconciliation of Selected GAAP Results to Non-GAAP Results | ||||||||
(In thousands, except per share amounts) | ||||||||
(Unaudited) | ||||||||
Three Months Ended |
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2014 | 2014 | 2013 | 2013 | |||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||
Net sales | $ 467,997 | $ -- | $ 467,997 | $ 411,852 | $ -- | $ 411,852 | ||
Cost of sales | 188,445 | (16,097) | A | 172,348 | 147,994 | -- | 147,994 | |
Gross profit | 279,552 | 295,649 | 263,858 | 263,858 | ||||
Selling, general and administrative expense | 208,021 | (38,828) | B | 169,193 | 157,247 | -- | 157,247 | |
Research and development expense | 18,181 | (648) | C | 17,533 | 15,819 | -- | 15,819 | |
Amortization of intangibles | 13,976 | (13,976) | D | -- | 7,687 | (7,687) | D | -- |
Loss on divestiture of Aime | -- | -- | -- | 21,062 | (21,062) | G | -- | |
Operating income | 39,374 | 108,923 | 62,043 | 90,792 | ||||
Interest expense | 3,251 | -- | 3,251 | 1,900 | -- | 1,900 | ||
Other expense (income), net | 1,248 | (1,067) | E | 181 | (949) | -- | (949) | |
Income before income taxes | 34,875 | 105,491 | 61,092 | 89,841 | ||||
Provision for income taxes | 3,618 | 5,533 | F | 9,151 | 3,779 | 6,504 | F | 10,283 |
Net income | 31,257 | 96,340 | 57,313 | 79,558 | ||||
Income (loss) attributable to noncontrolling interests | 470 | 75 | D | 545 | (83) | 85 | D | 2 |
Net income attributable to Cooper stockholders | $ 30,787 | $ 95,795 | $ 57,396 | $ 79,556 | ||||
Diluted earnings per share attributable to Cooper stockholders | $ 0.63 | $ 1.32 | $ 1.95 | $ 1.15 | $ 0.45 | $ 1.60 | ||
Number of shares used to compute earnings per share attributable to Cooper stockholders | 49,126 | 49,126 | 49,723 | 49,723 | ||||
A Our GAAP cost of sales includes a |
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B Our GAAP selling, general and administrative expense (SGA) includes |
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(In thousands) | CooperVision |
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Headquarters | Total | ||||
Restructuring and related costs | $ 19,727 | $ 236 | $ -- | $ 19,963 | ||||
Acquisition and integration costs | 17,404 | 599 | 862 | 18,865 | ||||
$ 37,131 | $ 835 | $ 862 | $ 38,828 | |||||
C Our GAAP research and development expense includes |
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D We estimate amortization expense for existing other intangible assets, including those related to the recently acquired Sauflon, will be |
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E This amount represents the loss on foreign exchange forward contracts that relate to the acquisition of Sauflon. | ||||||||
F These amounts represent the increases in the provision for income taxes that arises from the impact of the above adjustments. | ||||||||
G This amount represents the loss on the divestiture of Aime recorded in our fiscal fourth quarter of 2013. | ||||||||
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Consolidated Statements of Income | ||||||||
Reconciliation of Selected GAAP Results to Non-GAAP Results | ||||||||
(In thousands, except per share amounts) | ||||||||
(Unaudited) | ||||||||
Year Ended |
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2014 | 2014 | 2013 | 2013 | |||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||
Net sales | $ 1,717,776 | $ -- | $ 1,717,776 | $ 1,587,725 | $ -- | $ 1,587,725 | ||
Cost of sales | 626,206 | (16,524) | A | 609,682 | 560,917 | -- | 560,917 | |
Gross profit | 1,091,570 | 1,108,094 | 1,026,808 | -- | 1,026,808 | |||
Selling, general and administrative expense | 683,115 | (44,524) | B | 638,591 | 610,735 | (626) | B | 610,109 |
Research and development expense | 66,259 | (649) | C | 65,610 | 58,827 | -- | 58,827 | |
Amortization of intangibles | 35,710 | (35,710) | D | -- | 30,239 | (30,239) | D | -- |
Loss on divestiture of Aime | -- | -- | -- | 21,062 | (21,062) | G | -- | |
Operating income | 306,486 | 403,893 | 305,945 | 357,872 | ||||
Interest expense | 7,965 | -- | 7,965 | 9,168 | -- | 9,168 | ||
Gain on insurance proceeds | -- | -- | -- | 14,084 | (14,084) | H | -- | |
Other expense (income), net | 1,987 | (1,067) | E | 920 | (1,410) | -- | (1,410) | |
Income before income taxes | 296,534 | 395,008 | 312,271 | 350,114 | ||||
Provision for income taxes | 24,705 | 11,043 | F | 35,748 | 15,365 | 15,299 | F | 30,664 |
Net income | 271,829 | 359,260 | 296,906 | 319,450 | ||||
Income attributable to noncontrolling interests | 1,973 | 282 | D | 2,255 | 755 | 323 | D | 1,078 |
Net income attributable to Cooper stockholders | $ 269,856 | $ 357,005 | $ 296,151 | $ 318,372 | ||||
Diluted earnings per share attributable to Cooper stockholders | $ 5.51 | $ 1.78 | $ 7.29 | $ 5.96 | $ 0.45 | $ 6.41 | ||
Number of shares used to compute earnings per share attributable to Cooper stockholders | 48,960 | 48,960 | 49,685 | 49,685 | ||||
A Our GAAP cost of sales includes a |
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B Our GAAP selling, general and administrative expense (SGA) includes |
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(In thousands) | CooperVision |
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Headquarters | Total | ||||
Restructuring and related costs | $ 19,727 | $ 430 | $ -- | $ 20,157 | ||||
Acquisition and integration costs | 22,609 | 896 | 862 | 24,367 | ||||
$ 42,336 | $ 1,326 | $ 862 | $ 44,524 | |||||
In fiscal 2013, our GAAP SGA included |
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C Our GAAP research and development expense includes |
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D We estimate amortization expense for our existing other intangible assets, including those related to the recently acquired Sauflon, will be |
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E This amount represents the loss on foreign exchange forward contracts that relate to the acquisition of Sauflon. | ||||||||
F These amounts represent the increases in the provision for income taxes that arises from the impact of the above adjustments. | ||||||||
G This amount represents the loss on the divestiture of Aime recorded in our fiscal fourth quarter of 2013. | ||||||||
H In fiscal 2013, our GAAP results included |
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Conference Call and Webcast
The Company will host a conference call today at
About
Forward-Looking Statements
This news release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. Statements relating to guidance, plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact, including our 2014 Guidance and all statements regarding anticipated growth in our revenue, anticipated effects of any product recalls, anticipated market conditions, planned product launches and expected results of operations and integration of any acquisition are forward-looking. To identify these statements look for words like "believes," "expects," "may," "will," "should," "could," "seeks," "intends," "plans," "estimates" or "anticipates" and similar words or phrases. Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties.
Among the factors that could cause our actual results and future actions to differ materially from those described in forward-looking statements are: adverse changes in the global or regional general business, political and economic conditions due to the current global economic downturn, including the impact of continuing uncertainty and instability of certain
We caution investors that forward-looking statements reflect our analysis only on their stated date. We disclaim any intent to update them except as required by law.
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Consolidated Condensed Balance Sheets | ||
(In thousands) | ||
(Unaudited) | ||
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2014 | 2013 | |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents |
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Trade receivables, net | 276,280 | 229,537 |
Inventories | 381,474 | 338,917 |
Deferred tax assets | 40,224 | 41,179 |
Other current assets | 68,417 | 60,215 |
Total current assets | 791,617 | 747,241 |
Property, plant and equipment, net | 937,325 | 739,867 |
Goodwill | 2,220,921 | 1,387,611 |
Other intangibles, net | 453,605 | 198,769 |
Deferred tax assets | 15,732 | 16,279 |
Other assets | 39,140 | 47,494 |
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LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Short-term debt |
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Other current liabilities | 340,664 | 278,266 |
Total current liabilities | 442,182 | 321,253 |
Long-term debt | 1,280,833 | 301,670 |
Deferred tax liabilities | 69,525 | 24,883 |
Other liabilities | 77,360 | 65,961 |
Total liabilities | 1,869,900 | 713,767 |
Total Cooper stockholders' equity | 2,569,878 | 2,404,535 |
Noncontrolling interests | 18,562 | 18,959 |
Stockholders' equity | 2,588,440 | 2,423,494 |
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Consolidated Statements of Income | ||||
(In thousands, except per share amounts) | ||||
(Unaudited) | ||||
Three Months Ended | Year Ended | |||
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2014 | 2013 | 2014 | 2013 | |
Net sales |
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Cost of sales | 188,445 | 147,994 | 626,206 | 560,917 |
Gross profit | 279,552 | 263,858 | 1,091,570 | 1,026,808 |
Selling, general and administrative expense | 208,021 | 157,247 | 683,115 | 610,735 |
Research and development expense | 18,181 | 15,819 | 66,259 | 58,827 |
Amortization of intangibles | 13,976 | 7,687 | 35,710 | 30,239 |
Loss on divestiture of Aime | -- | 21,062 | -- | 21,062 |
Operating income | 39,374 | 62,043 | 306,486 | 305,945 |
Interest expense | 3,251 | 1,900 | 7,965 | 9,168 |
Gain on insurance proceeds | -- | -- | -- | 14,084 |
Other expense (income), net | 1,248 | (949) | 1,987 | (1,410) |
Income before income taxes | 34,875 | 61,092 | 296,534 | 312,271 |
Provision for income taxes | 3,618 | 3,779 | 24,705 | 15,365 |
Net income | 31,257 | 57,313 | 271,829 | 296,906 |
Income (loss) attributable to noncontrolling interests | 470 | (83) | 1,973 | 755 |
Net income attributable to Cooper stockholders |
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Diluted earnings per share attributable to Cooper stockholders |
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Number of shares used to compute earnings per share attributable to Cooper stockholders | 49,126 | 49,723 | 48,960 | 49,685 |
Soft Contact Lens Revenue Update
Worldwide Manufacturers' Soft Contact Lens Revenue | ||||||
(U.S. dollars in millions; constant currency; unaudited) | ||||||
Calendar 3Q14 | Trailing Twelve Months 2014 | |||||
Market | CVI | Market | CVI | |||
Market | Change | Change | Market | Change | Change | |
Sales by Modality | ||||||
Single-use | $ 820 | 6% | 12% | $ 3,120 | 9% | 16% |
Other | 1,085 | 0% | 6% | 4,330 | 2% | 6% |
WW Soft Contact Lenses | $ 1,905 | 2% | 8% | $ 7,450 | 5% | 9% |
Sales by Geography | ||||||
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$ 765 | 2% | 7% | $ 3,005 | 5% | 6% |
EMEA | 570 | 4% | 7% | 2,200 | 4% | 10% |
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570 | 2% | 11% | 2,245 | 6% | 13% |
WW Soft Contact Lenses | $ 1,905 | 2% | 8% | $ 7,450 | 5% | 9% |
Source: Management estimates and independent market research | ||||||
COO-E
CONTACT:Source:Kim Duncan Vice President, Investor Relations ir@cooperco.com 925-460-3663
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