The Cooper Companies Announces Fourth Quarter and Full Year 2016 Results
The Cooper Companies Announces Fourth Quarter and Full Year 2016 Results
- Fourth quarter revenue increased 14% year-over-year to
$518.7 million . Fiscal 2016 revenue increased 9% to$1,966.8 million . - Fourth quarter GAAP earnings per share (EPS)
$1.23 , up48 cents or 64% from last year's fourth quarter. Fiscal 2016 GAAP EPS$5.59 , up 35% from fiscal 2015. - Fourth quarter non-GAAP EPS
$2.28 , up28 cents or 14% from last year's fourth quarter. Fiscal 2016 non-GAAP EPS$8.44 , up 13% from fiscal 2015. See "Reconciliation of Non-GAAP Results to GAAP Results" below.
Commenting on the results,
Fourth Quarter GAAP Operating Results
- Revenue
$518.7 million , up 14% from last year's fourth quarter, up 10% pro forma (defined as constant currency and including acquisitions in both periods). - Gross margin 57% compared with 56% in last year's fourth quarter. Gross margin was positively impacted by currency and product mix. On a non-GAAP basis, gross margin was 64% compared with 64% last year.
- Operating margin 14% compared with 9% in last year's fourth quarter. The increase was primarily the result of gross margin improvements and operating expense leverage. On a non-GAAP basis, operating margin was 25% from 24% last year.
- Total debt decreased
$110.3 million fromJuly 31, 2016 , to$1,333.8 million , primarily due to operational cash flow generation and subsequent debt pay down. - Cash provided by operations
$193.4 million and capital expenditures$35.3 million resulted in free cash flow of$158.1 million .
Fourth Quarter CooperVision (CVI) GAAP Operating Results
- Revenue
$411.7 million , up 10% from last year's fourth quarter, up 11% in constant currency. - Revenue by category:
Constant Currency | ||||||||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||||||||
4Q16 | 4Q16 | y/y | y/y | |||||||||||||
Toric | $ | 126.1 | 31 | % | 14 | % | 14 | % | ||||||||
Multifocal | 42.6 | 10 | % | 9 | % | 10 | % | |||||||||
Single-use sphere | 110.4 | 27 | % | 17 | % | 16 | % | |||||||||
Non single-use sphere, other | 132.6 | 32 | % | 2 | % | 3 | % | |||||||||
Total | $ | 411.7 | 100 | % | 10 | % | 11 | % | ||||||||
- Revenue by geography:
Constant Currency | ||||||||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||||||||
4Q16 | 4Q16 | y/y | y/y | |||||||||||||
$ | 168.1 | 41 | % | 8 | % | 8 | % | |||||||||
EMEA | 155.7 | 38 | % | 5 | % | 12 | % | |||||||||
87.9 | 21 | % | 27 | % | 13 | % | ||||||||||
Total | $ | 411.7 | 100 | % | 10 | % | 11 | % | ||||||||
- Gross margin 56% compared with 54% in last year's fourth quarter. Gross margin was positively impacted primarily by currency and product mix. On a non-GAAP basis, gross margin was 65% from 64% last year.
Fourth Quarter CooperSurgical (CSI) GAAP Operating Results
- Revenue
$106.9 million , up 30% from last year's fourth quarter, up 6% pro forma. - Revenue by category:
Pro forma | ||||||||||||||||
(In millions) | % of CSI Revenue | %chg | %chg | |||||||||||||
4Q16 | 4Q16 | y/y | y/y | |||||||||||||
Office and surgical products | $ | 54.6 | 51 | % | 5 | % | 5 | % | ||||||||
Fertility | 52.3 | 49 | % | 74 | % | 8 | % | |||||||||
Total | $ | 106.9 | 100 | % | 30 | % | 6 | % | ||||||||
- Gross margin 60% compared with 62% in last year's fourth quarter. Gross margin was negatively impacted primarily by acquisition related integration charges. On a
non-GAAP basis, gross margin was 63% from 62% last year due to cost reduction efforts.
Fiscal Year 2016 GAAP Operating Results
- Revenue
$1,966.8 million , up 9.4% from fiscal 2015, up 7.3% pro forma. - CVI revenue
$1,577.2 million , up 6.0% from fiscal 2015, up 7.5% in constant currency, and CSI revenue$389.6 million , up 26.0% from fiscal 2015, up 6.3% pro forma. - Gross margin 60% compared with 60% in fiscal 2015. Non-GAAP 63% compared with 63% in fiscal 2015.
- Operating margin 16% compared with 13% in fiscal 2015. Non-GAAP 24% from 23% in fiscal 2015.
- GAAP EPS
$5.59 , up 35% from fiscal 2015. Non-GAAP$8.44 , up 13% from fiscal 2015. - Cash provided by operations
$509.6 million and capital expenditures$152.6 million resulted in free cash flow of$357.0 million .
Fiscal Year 2017 Guidance
The Company initiated its fiscal year 2017 guidance. Details are summarized as follows:
- Fiscal 2017 total revenue
$2,090 -$2,130 million - CVI revenue
$1,620 -$1,650 million - CSI revenue
$470 -$480 million
- CVI revenue
- Fiscal 2017 non-GAAP earnings per share
$9.00 -$9.30 - Fiscal first quarter 2017 total revenue
$494 -$508 million - CVI revenue
$383 -$393 million - CSI revenue
$111 -$115 million
- CVI revenue
- Fiscal first quarter
2017 non-GAAP earnings per share
$1.78 -$1.88 .
Non-GAAP earnings per share guidance excludes amortization of intangible assets and other costs including integration expenses which we may incur as part of our continuing operations.
With respect to the Company's guidance expectations, the Company has not reconciled non-GAAP earnings per share guidance to GAAP earnings per share due to the inherent difficulty in forecasting acquisition-related, integration and restructuring charges and expenses, which are reconciling items between the non-GAAP and GAAP measure. Due to the unknown effect, timing and potential significance of such charges and expenses that impact GAAP earnings per share, the Company is not able to provide such guidance.
Reconciliation of GAAP Results to Non-GAAP Results
To supplement our
financial results and guidance presented on a GAAP basis, we use non-GAAP measures 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. 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. We believe it is useful for investors to understand the effects of these items on our
consolidated operating results. Our non-GAAP financial measures include the following adjustments, and as appropriate, the related income tax effects and changes in income attributable to noncontrolling interests:
- We exclude 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.
- We exclude 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. that closed in our fiscal fourth quarter of 2014. Acquisition related and integration expenses include items such as personnel costs for transitional employees, other acquired employee related costs and integration related professional services. Restructuring expenses include items such as employee severance, product rationalization, facility and other exit costs. - We exclude other exceptional or unusual charges or expenses. These can be variable and difficult to predict such as certain litigation expenses and are not what we consider as typical of our continuing
operations. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.
- We report revenue growth using the non-GAAP financial measure of pro forma which includes constant currency revenue and revenue from acquisitions in both periods. 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
the United States dollar are converted intoUnited States dollars at the average foreign exchange rates for the corresponding period in the prior year. To report pro forma revenue growth, we include revenue for the comparison period when we did not own recently acquired companies.
We define the non-GAAP measure of free cash flow as cash provided by operating activities less capital expenditures. We believe free cash flow is useful for investors as an additional measure of liquidity because it represents cash flows that are available for repayment of debt, repurchases of our common stock or to fund our strategic initiatives. Management uses free cash flow internally to understand, manage, make operating decisions and evaluate our business. In addition, we use free cash flow to help plan and forecast future periods.
Reconciliation of Selected GAAP Results to Non-GAAP Results | |||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||
2016 | 2016 | 2015 | 2015 | ||||||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | ||||||||||||||||||||||
Cost of sales | $ | 222,678 | $ | (37,651 | ) | A | $ | 185,027 | $ | 202,227 | $ | (37,866 | ) | A | $ | 164,361 | |||||||||||
Selling, general and administrative expense | $ | 189,131 | $ | (3,535 | ) | B | $ | 185,596 | $ | 179,643 | $ | (13,621 | ) | B | $ | 166,022 | |||||||||||
Research and development expense | $ | 17,941 | $ | (283 | ) | C | $ | 17,658 | $ | 18,360 | $ | (2,383 | ) | C | $ | 15,977 | |||||||||||
Amortization of intangibles | $ | 14,723 | $ | (14,723 | ) | D | $ | - | $ | 13,053 | $ | (13,053 | ) | D | $ | - | |||||||||||
Other expense (income), net | $ | 9 | $ | (127 | ) | E | $ | (118 | ) | $ | 1,046 | - | $ | 1,046 | |||||||||||||
Provision for (benefit from) income taxes | $ | 8,357 | $ | 4,565 | F | $ | 12,922 | $ | (588 | ) | $ | 5,063 | F | $ | 4,475 | ||||||||||||
Net (loss) income attributable to noncontrolling interest | $ | (14 | ) | $ | - | $ | (14 | ) | $ | 336 | $ | 19 | $ | 355 | |||||||||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 1.23 | $ | 1.05 | $ | 2.28 | $ | 0.75 | $ | 1.25 | $ | 2.00 | |||||||||||||||
A | Our fiscal 2016 GAAP cost of sales includes | ||||||||||||||||||||||||||
B | Our fiscal 2016 GAAP selling, general and administrative expense includes | ||||||||||||||||||||||||||
C | Our fiscal 2016 GAAP research and development expense includes | ||||||||||||||||||||||||||
D | Amortization expense was | ||||||||||||||||||||||||||
E | These amounts represent the loss on foreign exchange forward contracts related to an acquisition. | ||||||||||||||||||||||||||
F | These amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments. | ||||||||||||||||||||||||||
Reconciliation of Selected GAAP Results to Non-GAAP Results | |||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Twelve Months Ended | |||||||||||||||||||||||||||
2016 | 2016 | 2015 | 2015 | ||||||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | ||||||||||||||||||||||
Cost of sales | $ | 793,735 | $ | (69,562 | ) | A | $ | 724,173 | $ | 726,798 | $ | (70,330 | ) | A | $ | 656,468 | |||||||||||
Selling, general and administrative expense | $ | 722,798 | $ | (24,145 | ) | B | $ | 698,653 | $ | 712,543 | $ | (51,489 | ) | B | $ | 661,054 | |||||||||||
Research and development expense | $ | 65,411 | $ | (357 | ) | C | $ | 65,054 | $ | 69,589 | $ | (4,600 | ) | C | $ | 64,989 | |||||||||||
Amortization of intangibles | $ | 60,790 | $ | (60,790 | ) | D | $ | - | $ | 51,459 | $ | (51,459 | ) | D | $ | - | |||||||||||
Other expense, net | $ | 2,257 | $ | (1,011 | ) | E | $ | 1,246 | $ | 3,083 | $ | - | $ | 3,083 | |||||||||||||
Provision for income taxes | $ | 20,699 | $ | 15,703 | F | $ | 36,402 | $ | 10,341 | $ | 15,505 | F | $ | 25,846 | |||||||||||||
Net income attributable to noncontrolling interest | $ | 1,017 | $ | 55 | $ | 1,072 | $ | 1,621 | $ | 137 | $ | 1,758 | |||||||||||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 5.59 | $ | 2.85 | $ | 8.44 | $ | 4.14 | $ | 3.30 | $ | 7.44 | |||||||||||||||
A | Our fiscal 2016 GAAP cost of sales includes | ||||||||||||||||||||||||||
B | Our fiscal 2016 GAAP selling, general and administrative expense includes | ||||||||||||||||||||||||||
C | Our fiscal 2016 GAAP research and development expense includes | ||||||||||||||||||||||||||
D | Amortization expense was | ||||||||||||||||||||||||||
E | Our fiscal 2016 other expense, net, includes costs related to debt extinguishment and foreign exchange forward contracts related to an acquisition. | ||||||||||||||||||||||||||
F | These amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments. | ||||||||||||||||||||||||||
Conference Call and Webcast
The Company will host a conference call today at
About
Forward-Looking Statements
This earnings 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 2017 Guidance and all statements regarding acquisitions including the acquired companies' financial position, market position, product development and business strategy, expected cost synergies, expected timing and benefits of the transaction, difficulties in integrating entities or operations,
as well as estimates of our and the acquired entities' future expenses, sales and earnings per share are forward looking. In addition, 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, including the impact of continuing uncertainty and instability of certain countries that could adversely affect our global markets, and the potential adverse economic impact and related uncertainty caused by the United Kingdom's election to withdraw from the
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.
Consolidated Condensed Balance Sheets | |||||||||||||
(In thousands) | |||||||||||||
(Unaudited) | |||||||||||||
2016 | 2015 | ||||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | 100,817 | $ | 16,426 | |||||||||
Trade receivables, net | 291,370 | 282,918 | |||||||||||
Inventories | 417,696 | 419,692 | |||||||||||
Deferred tax assets | 47,103 | 41,731 | |||||||||||
Other current assets | 77,472 | 80,661 | |||||||||||
Total current assets | 934,458 | 841,428 | |||||||||||
Property, plant and equipment, net | 877,672 | 967,097 | |||||||||||
2,164,748 | 2,197,077 | ||||||||||||
Other intangibles, net | 441,086 | 411,090 | |||||||||||
Deferred tax assets | 6,107 | 4,510 | |||||||||||
Other assets | 51,847 | 38,662 | |||||||||||
$ | 4,475,918 | $ | 4,459,864 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Short-term debt | $ | 226,325 | $ | 243,803 | |||||||||
Other current liabilities | 310,130 | 324,979 | |||||||||||
Total current liabilities | 536,455 | 568,782 | |||||||||||
Long-term debt | 1,107,448 | 1,105,408 | |||||||||||
Deferred tax liabilities | 37,532 | 31,016 | |||||||||||
Other liabilities | 94,448 | 80,754 | |||||||||||
Total liabilities | 1,775,883 | 1,785,960 | |||||||||||
Total Cooper stockholders' equity | 2,699,867 | 2,667,509 | |||||||||||
Noncontrolling interests | 168 | 6,395 | |||||||||||
Stockholders' equity | 2,700,035 | 2,673,904 | |||||||||||
$ | 4,475,918 | $ | 4,459,864 | ||||||||||
Consolidated Statements of Income | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 518,654 | $ | 455,536 | $ | 1,966,814 | $ | 1,797,060 | |||||||
Cost of sales | 222,678 | 202,227 | 793,735 | 726,798 | |||||||||||
Gross profit | 295,976 | 253,309 | 1,173,079 | 1,070,262 | |||||||||||
Selling, general and administrative expense | 189,131 | 179,643 | 722,798 | 712,543 | |||||||||||
Research and development expense | 17,941 | 18,360 | 65,411 | 69,589 | |||||||||||
Amortization of intangibles | 14,723 | 13,053 | 60,790 | 51,459 | |||||||||||
Operating income | 74,181 | 42,253 | 324,080 | 236,671 | |||||||||||
Interest expense | 5,321 | 4,780 | 26,190 | 18,103 | |||||||||||
Other expense, net | 9 | 1,046 | 2,257 | 3,083 | |||||||||||
Income before income taxes | 68,851 | 36,427 | 295,633 | 215,485 | |||||||||||
Provision for (benefit from) income taxes | 8,357 | (588 | ) | 20,699 | 10,341 | ||||||||||
Net income | 60,494 | 37,015 | 274,934 | 205,144 | |||||||||||
Less: net (loss) income attributable to noncontrolling interests | (14 | ) | 336 | 1,017 | 1,621 | ||||||||||
Net income attributable to Cooper stockholders | $ | 60,508 | $ | 36,679 | $ | 273,917 | $ | 203,523 | |||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 1.23 | $ | 0.75 | $ | 5.59 | $ | 4.14 | |||||||
Number of shares used to compute earnings per share attributable to Cooper stockholders | 49,281 | 49,177 | 49,026 | 49,179 | |||||||||||
Soft Contact Lens Revenue Update
Worldwide Manufacturers' Soft Contact Lens Revenue | ||||||||||||||||||||||||
( | ||||||||||||||||||||||||
Calendar 3Q16 | Trailing Twelve Months 2016 | |||||||||||||||||||||||
Market | CVI | Market | CVI | |||||||||||||||||||||
Market | Change | Change | Market | Change | Change | |||||||||||||||||||
Sales by Modality | ||||||||||||||||||||||||
Single-use | $ | 910 | 8 | % | 12 | % | $ | 3,365 | 10 | % | 14 | % | ||||||||||||
Other | 970 | (4 | %) | 3 | % | 3,870 | (1 | %) | 5 | % | ||||||||||||||
WW Soft Contact Lenses | $ | 1,880 | 1 | % | 6 | % | $ | 7,235 | 3 | % | 8 | % | ||||||||||||
Sales by Geography | ||||||||||||||||||||||||
Americas | $ | 805 | (3 | %) | 3 | % | $ | 3,100 | 1 | % | 5 | % | ||||||||||||
EMEA | 530 | 7 | % | 8 | % | 2,030 | 6 | % | 8 | % | ||||||||||||||
Asia Pacific | 545 | 3 | % | 9 | % | 2,105 | 4 | % | 14 | % | ||||||||||||||
WW Soft Contact Lenses | $ | 1,880 | 1 | % | 6 | % | $ | 7,235 | 3 | % | 8 | % | ||||||||||||
Note: This data is compiled using gross product sales.
Source: Management estimates and independent market research
COO-E
CONTACT:Source:Kim Duncan Vice President, Investor Relations ir@cooperco.com
News Provided by Acquire Media