The Cooper Companies Announces Fourth Quarter and Full Year 2017 Results
The Cooper Companies Announces Fourth Quarter and Full Year 2017 Results
- Fourth quarter revenue increased 8% year-over-year to
$561.5 million . Fiscal 2017 revenue increased 9% to$2,139.0 million . - Fourth quarter GAAP diluted earnings per share (EPS)
$1.78 , up55 cents or 45% from last year's fourth quarter. Fiscal 2017 GAAP EPS$7.52 , up 35% from fiscal 2016. - Fourth quarter non-GAAP diluted EPS
$2.65 , up37 cents or 16% from last year's fourth quarter. Fiscal 2017 non-GAAP EPS$9.70 , up 15% from fiscal 2016. See "Reconciliation of GAAP Results to Non-GAAP Results" below.
Commenting on the results,
Fourth Quarter GAAP Operating Results
- Revenue
$561.5 million , up 8% from last year's fourth quarter, up 5% pro forma (defined as constant currency and including acquisitions in both periods). - Gross margin 63% compared with 57% in last year's fourth quarter. On a non-GAAP basis, gross margin was 66% compared with 64% last year. The gross margin was positively impacted primarily by currency and favorable product mix within CooperVision.
- Operating margin 19% compared with 14%
in last year's fourth quarter. On a non-GAAP basis, operating margin was 27% compared with 25% last year. The increase was primarily the result of gross margin improvements and operating expense leverage.
- Total debt decreased
$40.7 million fromJuly 31, 2017 , to$1,172.7 million , primarily due to debt paydown from operational cash flow generation and lower cash balances. - Cash provided by operations
$199.0 million offset by capital expenditures$31.7 million resulted in free cash flow of$167.3 million .
Fourth Quarter CooperVision (CVI) GAAP Operating Results
- Revenue
$439.0 million , up 7% from last year's fourth quarter, up 5% in pro forma. - Revenue by category:
| Pro forma | |||||||||||||
| (In millions) | % of CVI Revenue | %chg | %chg | ||||||||||
| 4Q17 | 4Q17 | y/y | y/y | ||||||||||
| Toric | $ | 136.0 | 31% | 8% | 7 | % | |||||||
| Multifocal | 45.1 | 10% | 6% | 4 | % | ||||||||
| Single-use sphere | 118.9 | 27% | 8% | 8 | % | ||||||||
| Non single-use sphere, other | 139.0 | 32% | 5% | — | % | ||||||||
| Total | $ | 439.0 | 100% | 7% | 5 | % | |||||||
- Revenue by geography:
| Pro forma | |||||||||||||
| (In millions) | % of CVI Revenue | %chg | %chg | ||||||||||
| 4Q17 | 4Q17 | y/y | y/y | ||||||||||
| $ | 171.8 | 39% | 2 | % | 2 | % | |||||||
| EMEA | 174.0 | 40% | 12 | % | 5 | % | |||||||
| 93.2 | 21% | 6 | % | 10 | % | ||||||||
| Total | $ | 439.0 | 100% | 7 | % | 5 | % | ||||||
- Gross margin 65% compared with 56% in last year's fourth quarter. On a non-GAAP basis, gross margin was 68% vs. 65% last year. Gross margin was positively impacted primarily by currency and favorable product mix.
Fourth Quarter CooperSurgical (CSI) GAAP Operating Results
- Revenue
$122.5 million , up 15% from last year's fourth quarter, up 7% pro forma. - Revenue by category:
| Pro forma | |||||||||||||
| (In millions) | % of CSI Revenue | %chg | %chg | ||||||||||
| 4Q17 | 4Q17 | y/y | y/y | ||||||||||
| Fertility | $ | 66.8 | 55 | % | 28 | % | 12 | % | |||||
| Office and surgical products | 55.7 | 45 | % | 2 | % | 2 | % | ||||||
| Total | $ | 122.5 | 100 | % | 15 | % | 7 | % | |||||
- Gross margin 57% compared with 60% in last year's fourth quarter. On a non-GAAP basis, gross margin was 60% vs. 63% last year. Gross margin was negatively impacted by lower pricing from genetic testing (within Fertility) and certain inventory adjustments primarily on legacy products.
Fiscal Year 2017 GAAP Operating Results
- Revenue
$2,139.0 million , up 9% from fiscal 2016, up 7% pro forma. - CVI revenue
$1,674.1 million , up 6% from fiscal 2016, up 7% pro forma, and CSI revenue$464.9 million , up 19% from fiscal 2016, up 4% pro forma. - Gross margin 64% compared with 60% in fiscal 2016. Non-GAAP 65% compared with 63% in fiscal 2016.
- Operating margin 20% compared with 16% in fiscal 2016. Non-GAAP 26% from 24% in fiscal 2016.
- GAAP EPS
$7.52 , up 35% from fiscal 2016. Non-GAAP$9.70 , up 15% from fiscal 2016. - Cash provided by operations
$593.6 million offset by capital expenditures$127.2 million resulted in free cash flow of$466.4 million .
Other
- In
October 2017 , the company repurchased$25.5 million of common stock under the existing share repurchase program for an average share price of$237.12 . The program has$563.5 million of remaining availability and no expiration date. - As previously announced on
December 1, 2017 we acquired Paragon Vision Sciences, a leading provider of orthokeratology (ortho-k), specialty contact lenses and oxygen permeable rigid contact lens materials, for approximately$80 million .
Fiscal Year 2018 Guidance
The Company initiated its fiscal year 2018 guidance. Details are summarized as follows:
- Fiscal 2018 total revenue
$2,480 -$2,530 million
- CVI revenue$1,830 -$1,865 million
- CSI revenue$650 -$665 million - Fiscal 2018 non-GAAP diluted earnings per share of
$11.35 -$11.65
Non-GAAP diluted 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 diluted earnings per share guidance to GAAP diluted 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 diluted 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 may 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 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 last year related to our acquisition of
Sauflon Pharmaceuticals Ltd. that closed in our fiscal fourth quarter of 2014. Acquisition 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 product transition costs, 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 also 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 millions, except per share amounts) (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | |||||||||||||||||||||
| GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
| Cost of sales | $ | 208.1 | $ | (16.8 | ) | A | $ | 191.3 | $ | 222.7 | $ | (37.7 | ) | A | $ | 185.0 | ||||||||
| Operating expense excluding amortization | $ | 227.0 | $ | (9.5 | ) | B | $ | 217.5 | $ | 207.1 | $ | (3.8 | ) | B | $ | 203.3 | ||||||||
| Amortization of intangibles | $ | 17.9 | $ | (17.9 | ) | C | $ | — | $ | 14.7 | $ | (14.7 | ) | C | $ | — | ||||||||
| Interest Expense | $ | 10.1 | $ | (2.2 | ) | D | $ | 7.9 | $ | 5.3 | $ | — | $ | 5.3 | ||||||||||
| Other expense, net | $ | 1.8 | $ | — | $ | 1.8 | $ | — | $ | (0.1 | ) | E | $ | (0.1 | ) | |||||||||
| Provision for income taxes | $ | 8.0 | $ | 3.6 | F | $ | 11.6 | $ | 8.4 | $ | 4.5 | F | $ | 12.9 | ||||||||||
| Diluted earnings per share attributable to Cooper stockholders | $ | 1.78 | $ | 0.87 | $ | 2.65 | $ | 1.23 | $ | 1.05 | $ | 2.28 | ||||||||||||
| A | Fiscal 2017 GAAP cost of sales includes |
| B | Fiscal 2017 GAAP operating expense
comprised of |
| C | Amortization expense was |
| D | Fiscal 2017 interest expense includes |
| E | Represents the loss on foreign exchange forward contracts related to an acquisition. |
| F | Represents 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 millions, except per share amounts) (Unaudited) | ||||||||||||||||||||||||
| Twelve Months Ended | ||||||||||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | |||||||||||||||||||||
| GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
| Cost of sales | $ | 773.2 | $ | (23.0 | ) | A | $ | 750.2 | $ | 793.7 | $ | (69.5 | ) | A | $ | 724.2 | ||||||||
| Operating expense excluding amortization | $ | 868.3 | $ | (30.1 | ) | B | $ | 838.2 | $ | 788.2 | $ | (24.5 | ) | B | $ | 763.7 | ||||||||
| Amortization of intangibles | $ | 68.4 | $ | (68.4 | ) | C | $ | — | $ | 60.8 | $ | (60.8 | ) | C | $ | — | ||||||||
| Interest Expense | $ | 33.4 | $ | (2.2 | ) | D | $ | 31.2 | $ | 26.2 | $ | — | $ | 26.2 | ||||||||||
| Other expense, net | $ | 1.7 | $ | (0.2 | ) | E | $ | 1.5 | $ | 2.3 | $ | (1.1 | ) | E | $ | 1.2 | ||||||||
| Provision for income taxes | $ | 21.1 | $ | 15.7 | F | $ | 36.8 | $ | 20.7 | $ | 15.7 | F | $ | 36.4 | ||||||||||
| Diluted earnings per share attributable to Cooper stockholders | $ | 7.52 | $ | 2.18 | $ | 9.70 | $ | 5.59 | $ | 2.85 | $ | 8.44 | ||||||||||||
| A | Fiscal 2017 GAAP cost of sales includes |
| B | Fiscal 2017 GAAP operating expense comprised of |
| C | Amortization expense was |
| D | Fiscal 2017 interest expense includes |
| E | Represents costs related to debt extinguishment and foreign exchange loss on forward contracts related to acquisitions. |
| F | Represents the increases in the provision for income taxes that arise from the impact of the above adjustments. |
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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 diluted 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 these items, including but not limited to, 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 millions) (Unaudited) | |||||||
2017 | 2016 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 88.8 | $ | 100.8 | |||
| Trade receivables, net | 316.6 | 291.4 | |||||
| Inventories | 454.1 | 417.7 | |||||
| Deferred tax assets | — | 49.7 | |||||
| Other current assets | 93.7 | 77.5 | |||||
| Total current assets | 953.2 | 937.1 | |||||
| Property, plant and equipment, net | 910.1 | 877.7 | |||||
| 2,354.8 | 2,164.7 | ||||||
| Other intangibles, net | 504.7 | 441.1 | |||||
| Deferred tax assets | 60.3 | 6.1 | |||||
| Other assets | 75.6 | 51.9 | |||||
| $ | 4,858.7 | $ | 4,478.6 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Short-term debt | $ | 23.4 | $ | 226.3 | |||
| Other current liabilities | 372.7 | 316.9 | |||||
| Total current liabilities | 396.1 | 543.2 | |||||
| Long-term debt | 1,149.3 | 1,107.4 | |||||
| Deferred tax liabilities | 38.8 | 37.5 | |||||
| Other liabilities | 98.7 | 94.6 | |||||
| Total liabilities | 1,682.9 | 1,782.7 | |||||
| Stockholders' equity | 3,175.8 | 2,695.9 | |||||
| $ | 4,858.7 | $ | 4,478.6 | ||||
Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net sales | $ | 561.5 | $ | 518.7 | $ | 2,139.0 | $ | 1,966.8 | |||||||
| Cost of sales | 208.1 | 222.7 | 773.2 | 793.7 | |||||||||||
| Gross profit | 353.4 | 296.0 | 1,365.8 | 1,173.1 | |||||||||||
| Selling, general and administrative expense | 208.5 | 189.1 | 799.1 | 722.8 | |||||||||||
| Research and development expense | 18.5 | 18.0 | 69.2 | 65.4 | |||||||||||
| Amortization of intangibles | 17.9 | 14.7 | 68.4 | 60.8 | |||||||||||
| Operating income | 108.5 | 74.2 | 429.1 | 324.1 | |||||||||||
| Interest expense | 10.1 | 5.3 | 33.4 | 26.2 | |||||||||||
| Other expense, net | 1.8 | — | 1.7 | 2.3 | |||||||||||
| Income before income taxes | 96.6 | 68.9 | 394.0 | 295.6 | |||||||||||
| Provision for income taxes | 8.0 | 8.4 | 21.1 | 20.7 | |||||||||||
| Net income | 88.6 | 60.5 | 372.9 | 274.9 | |||||||||||
| Less: net income attributable to noncontrolling interests | — | — | — | 1.0 | |||||||||||
| Net income attributable to Cooper stockholders | $ | 88.6 | $ | 60.5 | $ | 372.9 | $ | 273.9 | |||||||
| Diluted earnings per share attributable to Cooper stockholders | $ | 1.78 | $ | 1.23 | $ | 7.52 | $ | 5.59 | |||||||
| Number of shares used to compute diluted earnings per share attributable to Cooper stockholders | 49.7 | 49.3 | 49.6 | 49.0 | |||||||||||
Soft Contact Lens Revenue Update
| Worldwide Manufacturers' Soft Contact Lens Revenue ( | |||||||||||||||||||
| Calendar 3Q17 | Trailing Twelve Months 2017 | ||||||||||||||||||
| Market | CVI | Market | CVI | ||||||||||||||||
| Market | Change | Change | Market | Change | Change | ||||||||||||||
| Sales by Modality | |||||||||||||||||||
| Single-use | $ | 1,005 | 13 | % | 15 | % | $ | 3,715 | 12 | % | 15 | % | |||||||
| Other | 975 | 1 | % | 3 | % | 3,800 | - | 5 | % | ||||||||||
| WW Soft Contact Lenses | $ | 1,980 | 7 | % | 7 | % | $ | 7,515 | 5 | % | 8 | % | |||||||
| Sales by Geography | |||||||||||||||||||
| | $ | 865 | 7 | % | 4 | % | $ | 3,235 | 4 | % | 6 | % | |||||||
| | 595 | 9 | % | 15 | % | 2,265 | 8 | % | 14 | % | |||||||||
| EMEA | 520 | 4 | % | 6 | % | 2,015 | 6 | % | 8 | % | |||||||||
| WW Soft Contact Lenses | $ | 1,980 | 7 | % | 7 | % | $ | 7,515 | 5 | % | 8 | % | |||||||
| Note: This data is compiled using gross product sales. | |||||||||||||||||||
| Source: Management estimates and independent market research | |||||||||||||||||||
COO-E
Source:
CONTACT:
Vice President, Investor Relations
ir@cooperco.com
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