UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarterly Period Ended January 31, 1996
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_________to__________
Commission File Number 1-8597
The Cooper Companies, Inc.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 94-2657368
____________________________ __________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
6140 Stoneridge Mall Rd., Suite 590, Pleasanton, CA 94588
___________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(510) 460-3600
______________
One Bridge Plaza, Fort Lee, New Jersey 07024
__________________________________________________________________
(Former address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
_____ ______
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.
Common Stock, $.10 par value 11,649,328 Shares
____________________________ _________________
Class Outstanding at
February 29, 1996
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of
Income - Three Months Ended
January 31, 1996 and 1995 3
Consolidated Condensed Balance Sheet -
January 31, 1996 and October 31, 1995 4
Consolidated Condensed Statement
of Cash Flows -- Three Months
Ended January 31, 1996 and 1995 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
Index of Exhibits
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Income
-------------------------------------------
(In thousands, except per share figures)
(Unaudited)
Three Months Ended
January 31,
1996 1995
-------- -------
Net sales of products $13,554 $12,718
Net service revenue 8,695 10,492
------ ------
Net operating revenue 22,249 23,210
------ ------
Cost of products sold 4,141 4,232
Cost of services provided 9,146 10,104
Selling, general and administrative
expense 6,759 6,615
Research and development expense 277 1,067
Amortization of intangibles 227 212
------ ------
Income from operations 1,699 980
------ ------
Credit for settlement of disputes, net 167 328
Interest expense 1,294 1,090
Other income, net 105 125
------ ------
Income before income taxes 677 343
Provision for income taxes 25 68
------ ------
Net income $ 652 $ 275
====== ======
Net income per common share $ 0.06 $ 0.02
====== ======
Average number of common shares outstanding 11,707 11,592
====== ======
See accompanying notes.
3
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
-----------------------------------
(In thousands)
(Unaudited)
January 31, October 31,
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,680 $ 11,207
Trade receivables, net 19,183 17,717
Inventories 10,153 9,570
Other current assets 2,287 2,734
------- -------
Total current assets 35,303 41,228
------- -------
Property, plant and equipment at cost 46,784 46,597
Less, accumulated depreciation and
amortization 12,980 12,535
------- -------
33,804 34,062
------- -------
Intangibles, net:
Excess of cost over net assets acquired 12,864 13,167
Other 1,675 1,766
------- -------
14,539 14,933
------- -------
Other assets 1,697 1,769
------- -------
$ 85,343 $ 91,992
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Borrowings under line of credit $ 1,708 $ 1,025
Current installments of long-term debt 831 2,288
Accounts payable 5,753 5,730
Employee compensation, benefits and
severance 4,713 6,978
Other accrued liabilities 9,873 13,596
Accrued income taxes 9,987 9,996
------- -------
Total current liabilities 32,865 39,613
------- -------
Long-term debt 44,575 43,490
Other noncurrent liabilities 8,942 10,638
------- -------
Total liabilities 86,382 93,741
------- -------
Stockholders' equity (deficit):
Common stock, $.10 par value 1,165 1,158
Additional paid-in capital 183,952 183,840
Translation adjustments (350) (333)
Unamortized restricted stock award
compensation (44) -
Accumulated deficit (185,762) (186,414)
------- -------
Total stockholders' equity (deficit) (1,039) (1,749)
------- -------
$ 85,343 $ 91,992
======= =======
See accompanying notes.
4
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
----------------------------------------------
(In thousands)
(Unaudited)
Three Months Ended
January 31,
1996 1995
--------- -------
Net cash used by operating activities $ (7,834) $(5,008)
------- ------
Cash flows from investing activities:
Cash from sales of assets and
businesses 16 78
Sales of temporary investments, net 1 37
Cash from Progressions settlement,
recorded as a reduction to goodwill 167 -
Purchases of property, plant and
equipment (398) (341)
------- -------
Net cash used by investing activities (214) (226)
------- -------
Cash flows from financing activities:
Proceeds from line of credit, net 683 -
Proceeds from long-term note 1,336 -
Payments of long-term debt (1,571) (416)
Proceeds from exercise of warrants 73 -
------ ------
Net cash provided (used) by financing
activities 521 (416)
------ ------
Net decrease in cash and cash equivalents (7,527) (5,650)
Cash and cash equivalents - beginning of
period 11,207 10,320
------ ------
Cash and cash equivalents - end of period $ 3,680 $ 4,670
====== ======
Cash paid for:
Interest $ 917 $ 916
====== ======
Income taxes $ 34 $ 53
====== ======
See accompanying notes.
5
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1. General
The Cooper Companies, Inc. and its subsidiaries (the "Company") develop,
manufacture and market healthcare products, including a range of hard and soft
daily, flexible and extended wear contact lenses and diagnostic and surgical
instruments and accessories. The Company also provides healthcare services
through the ownership of psychiatric facilities, by providing outpatient and
other ancillary services and, through May 1995, the management of other
psychiatric facilities.
During interim periods, the Company follows the accounting policies set forth in
its Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Readers are encouraged to refer to the Company's Form 10-K for the
fiscal year ended October 31, 1995 when reviewing this Form 10-Q. Quarterly
results reported herein are not necessarily indicative of results to be expected
for other quarters.
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments necessary to present fairly the
Company's consolidated financial position as of January 31, 1996 and October 31,
1995 and the consolidated results of its operations and its consolidated cash
flows for the three months ended January 31, 1996 and 1995. With the exception
of certain adjustments discussed in Part I, Item 2 under "Settlement of
disputes, net," such adjustments consist only of normal and recurring
adjustments.
Note 2. Inventories
Inventories are stated at the lower of cost, determined on a first in, first out
or average cost basis, or market.
The components of inventories are as follows:
January 31, October 31,
1996 1995
----------- -----------
(In thousands)
Raw materials $ 2,176 $ 2,212
Work-in-process 953 1,114
Finished goods 7,024 6,244
------ ------
$10,153 $ 9,570
====== ======
6
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 3. Long-Term Debt
Long-term debt consists of the following:
January 31, October 31,
1996 1995
---------- ----------
(In thousands)
10% Senior Subordinated
Secured Notes due 2003 $24,678 $24,816
10-5/8% Convertible Sub-
ordinated Reset Debentures
due 2005 9,216 9,215
HGA term loan 11,175 9,889
HGA Industrial Revenue Bonds 0 1,458
Capitalized leases 337 400
------ ------
45,406 45,778
Less current installments 831 2,288
------ ------
$44,575 $43,490
====== ======
The outstanding principle of the HGA Industrial Revenue Bonds of $1.3 million
was repaid on December 29, 1995, and the amount was rolled into the HGA term
loan due August 1997.
Note 4. Subsequent Event
On February 13, 1996, the Company announced that its CooperSurgical unit had
signed a letter of intent to acquire Unimar, Inc., a leading provider of
specialized disposable instruments for gynecology. Unimar offers products to
obtain endometrial tissue for infertility evaluation and the diagnosis of cancer
and its precursors, cytological sampling, uterine control during tubal ligation
and minimally invasive laparoscopy.
The acquisition has been approved by the Company's Board of Directors. Final
closing is subject to execution of a definitive acquisition agreement and
satisfactory completion of due diligence.
The terms of the proposed acquisition were not announced.
7
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
References to Note numbers below are references to the Notes to Consolidated
Condensed Financial Statements of the Company located in Item 1. herein.
CAPITAL RESOURCES & LIQUIDITY
The Company's financial condition stabilized significantly in fiscal 1995 and
this trend continued as the Company recorded a 73% improvement in operating
income, to $1.7 million in the first quarter of 1996 v. $980 thousand in the
first quarter of 1995. As expected, $7.8 million of cash was used by operating
activities in the first quarter. The primary uses of cash in the first quarter
included payments of $4.4 million associated with the settlement of certain
disputes, payments totaling $2.0 million to fund fiscal 1995 entitlements under
the Company's annual bonus plans and increased investments in receivables and
inventory of approximately $2.1 million in the aggregate. The $1.5 million
increase in receivables occurred primarily at Hospital Group of America ("HGA"),
where a shift in payor mix resulted in a larger percentage of revenue being
generated from typically slower-paying state agencies. The $600 thousand
increase in inventory, which occurred primarily at CVI, was required to provide
adequate inventory levels for anticipated increased sales of existing products
in succeeding quarters and the future launch of new products. The Company
currently anticipates that operating cash flows of its existing businesses will
be positive for the remaining nine months of fiscal 1996, and that cash
requirements for operating activities will be met through cash generated by its
established operating businesses in concert with the financing arrangements
currently in place.
The Company is evaluating various acquisition opportunities which, if
consummated, would be funded by a combination of cash then on hand, financing
vehicles now in place and other methods of raising additional capital currently
being explored.
RESULTS OF OPERATIONS
Three Months Ended January 31, 1996 Compared with Three Months Ended January 31,
1995.
NET SALES OF PRODUCTS: Net sales of products increased by $836
thousand or 7%.
Three Months Ended %
January 31, Increase
1996 1995 (Decrease)
------ ------ --------
(In Thousands)
CooperVision, Inc. ("CVI") $10,070 $ 9,322 8%
CooperSurgical, Inc. ("CSI") 3,484 3,380 3%
CooperVision Pharmaceuticals,
Inc. ("CVP") - 16 N/A
------ ------
$13,554 $12,718 7%
====== ======
8
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net sales of CVI increased both domestically and in Canada. The primary
contributors to the growth included increased sales of the Preference'r'
spherical product line and the Preference Toric'tm' product line, which grew
by approximately 73% in the aggregate over the comparable three-month period.
Sales of toric lenses to correct astigmatism, CVI's leading product group, grew
24% during the first quarter and now account for approximately one-half of its
sales. These increases were partially offset by anticipated decreases in sales
of more mature product lines.
Net sales of CSI increased in the first quarter 1996 v. the first quarter 1995
in its gynecology product lines (which include LEEP'tm' instruments) by
approximately 15%; the increase was offset primarily by reduced sales of
endoscopy and other nonstrategic products. CSI's sales mix continued to shift
toward its gynecology product line, which now accounts for 75% of its sales.
NET SERVICE REVENUE: Hospital Group of America, Inc.'s ("HGA") net service
revenue consists of the following:
Three Months Ended %
January 31, Increase
1996 1995 (Decrease)
------ ------ --------
(In Thousands)
Net patient revenue $ 8,695 $ 9,992 (13%)
Management fees - 500 N/A
------ ------
$ 8,695 $10,492 (17%)
====== ======
Net patient revenue for the first three months of 1996 decreased by $1.3 million
or 13% v. the first three months of 1995. Late in the first quarter 1996, a
transition of the medical staff began at Hampton Hospital as a result of the
settlement of a dispute with a physician group that formerly staffed it. Before
the changeover period, Hampton's revenue declined significantly. Further, poor
weather reduced admissions and outpatient visits throughout HGA during the
quarter. Also, revenue continues to be pressured by the current industry trend
towards increased managed care, which results in decreased daily rates and
declines in average lengths of stay. Management is endeavoring to mitigate those
pressures by increasing the number of admissions to its hospitals, and by
providing outpatient and other ancillary services. Revenue in January improved,
as the new Hampton staff began to service patients. During the quarter, HGA
opened three new outpatient treatment units ancillary to its hospital
facilities. Management fees in 1995 resulted from a contract to manage three
psychiatric facilities. The contract expired by its terms in May 1995.
9
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
COST OF PRODUCTS SOLD: Gross profit (net sales of products less cost of products
sold) as a percentage of net sales of products ("margin") was as follows:
First Quarter Margin %
-----------------------
1996 1995
---- ----
CVI 76 73
CSI 50 50
Consolidated 69 67
CVI's margin has increased due to efficiencies associated with higher production
volumes, as well as a favorable product mix.
COST OF SERVICES PROVIDED: Cost of services provided represents all normal
operating costs incurred by HGA in generating net service revenue. The result of
subtracting cost of services provided from net service revenue is a loss of $451
thousand, or 5%, of net service revenue in the first quarter of 1996 and a
profit of $338 thousand, or 4%, in the first quarter of 1995. The decrease in
profit is primarily attributable to a reduction in revenue explained above,
partially offset by a $1.0 million reduction in cost of services provided.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general and administrative
(SG&A) expense by business unit and corporate were as follows:
Three Months Ended %
January 31, Increase
1996 1995 (Decrease)
-------- ------- ----------
(In Thousands)
CVI $ 4,163 $ 3,877 7%
CSI 1,281 1,343 (5%)
CVP - 13 N/A
Corporate/other 1,315 1,382 (5%)
------- -------
$ 6,759 $ 6,615 2%
======= =======
SG&A expenses for the three-month period have increased 2% from the prior year's
three-month period, largely as a result of higher advertising and promotion
costs at CVI, which drove an 8% year-to- year increase in sales. These increases
were partially offset by reduced SG&A expense at CSI, reflecting the benefits of
the 1995 restructuring.
10
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESEARCH AND DEVELOPMENT EXPENSE: Research and development expense was $277
thousand and $1.1 million for the three-month periods ended January 31, 1996 and
1995, respectively. The decrease is primarily attributable to reduced
development activity related to CVP's calcium channel blocker, CalOptic(TM). A
$251 thousand decrease at CSI is primarily related to the discontinuation in May
1995 of the development and evaluation of a thermal endometrial ablation
technology.
The Company currently anticipates that the level of spending on research and
development has stabilized. The Company is now focusing on acquiring products
which are marketable immediately or in the short-term, rather than funding
longer-term, higher risk research and development projects.
INCOME FROM OPERATIONS: As a result of the variances discussed above, income
from operations improved by $719 thousand or 73% from the amount reported for
the 1995 first quarter. Income (loss) from operations by business unit and
corporate was as follows:
Three Months Ended
January 31, Increase
1996 1995 (Decrease)
------ ------ ----------
(In Thousands)
CVI $3,229 $ 2,594 $ 635
CSI 292 (65) 357
CVP (5) (504) 499
HGA (502) 334 (836)
Corporate/Other (1,315) (1,379) 64
------- ------- ----
$1,699 $ 980 $ 719
======= ======= ====
SETTLEMENT OF DISPUTES, NET: In the first quarter of 1996, the Company recorded
a credit to income of $167 thousand related to the agreement which settled cross
claims between HGA and Progressions Health Systems, Inc. related to purchase
price adjustments (which were credited to goodwill) and other disputes. Pursuant
to this agreement, HGA received $334 thousand in the first quarter of 1996, of
which $167 thousand has been credited to settlement of disputes. In the first
quarter of 1995, the Company recorded a credit of $328 thousand resulting from
adjustments to certain estimated accruals for disputes which were resolved
during 1995's first quarter.
OTHER INCOME, NET: Included in other income, net is interest income which was
$118 thousand and $87 thousand for the three months ended January 31, 1996 and
1995, respectively.
11
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
INTEREST EXPENSE: The increase in interest expense for the three- month period
ended January 31, 1996 over the comparable 1995 period primarily related to:
1) Interest on the line of credit at CVI on which the Company
did not draw funds until the second quarter of 1995.
2) Accreted interest related to the HMG settlement.
PROVISION FOR INCOME TAXES: The provision for income taxes reflects primarily
state income and franchise taxes.
EARNINGS PER SHARE: Earnings per share are based on the weighted average number
of common and common equivalent shares outstanding during each period.
FISCAL YEAR 1996 BUSINESS OUTLOOK: The following statements and any mention of
them above are based on current expectations that contain a number of risks and
uncertainties. These statements are forward-looking and actual results may
differ materially. Factors that could cause or contribute to such differences
include: major changes in business conditions and the economy in general, new
competitive inroads, changes in governmental medical reimbursement programs,
unforeseen litigation, changes in interest rates, any decision to divest certain
businesses and the cost of acquisition activity, particularly in the event of a
large acquisition that is not ultimately completed.
The Company anticipates that its earnings per share for fiscal 1996 will exceed
75 cents and its revenue will achieve double-digit growth based mainly on these
expectations:
CooperVision sales will grow at mid-teens percentages during fiscal 1996 as it
continues to gain significant market share in the toric segment of the global
contact lens market.
CooperSurgical will complete its acquisition of Unimar during the second quarter
of 1996, and income from operations will reach 10% of sales in the combined
businesses for the full year. The Unimar acquisition is subject to the signing
of a definitive agreement and satisfaction of closing conditions.
HGA will outperform its 1995 operating results based on its strong January
performance, the turnaround at Hampton Hospital and the addition of its new
outpatient clinics.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
11 Calculation of Net Income Per Common Share.
27 Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the period from November
1, 1995 to January 31, 1996.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Cooper Companies, Inc.
-----------------------------------
(Registrant)
Date: March 14, 1996 /s/ Robert S. Weiss
-----------------------------------
Executive Vice President, Treasurer
and Chief Financial Officer
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as 'r'
The trademark symbol shall be expressed as 'tm'
14
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Index of Exhibits
Exhibit No. Page No.
- ---------- ---------
11 Calculation of Net Income Per 16
Common Share.
27 Financial Data Schedule. 17
15
EXHIBIT 11
Exhibit 11
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Calculation of Net Income Per Common Share
-------------------------------------------
(In thousands, except per share figures)
(Unaudited)
Three Months Ended
January 31,
1996 1995
-------- ------
Primary:
- -------
Net income $ 652 $ 275
====== ======
Weighted average number of common
shares outstanding 11,607 11,370
Contingently issuable shares 100 222
------ ------
Weighted average number of common
and common equivalent shares
outstanding for earnings per share 11,707 11,592
====== ======
Earnings per common share $ 0.06 $ 0.02
====== ======
Fully Diluted:
- ---------------
Net income $ 652 $ 275
====== ======
Weighted average number of common
shares outstanding 11,607 11,370
Contingently issuable shares 129 277
------ ------
Weighted average number of common
and common equivalent shares
outstanding for earnings per share 11,736 11,647
====== ======
Earnings per common share $ 0.06 $ 0.02
====== ======
16
5
1,000
3-MOS
OCT-31-1996
NOV-01-1995
JAN-31-1996
3,680
0
21,288
2,105
10,153
35,303
46,784
12,980
85,343
32,865
44,575
1,165
0
0
(2,204)
85,343
13,554
22,249
4,141
13,287
0
0
1,294
677
25
652
0
0
0
652
.06
.06
