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 April 30, 1997
( ) 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
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 12,441,376 Shares
- ------------------------------- --------------------
Class Outstanding at
May 28, 1997
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of
Income - Three and Six Months
Ended April 30, 1997 and 1996 3
Consolidated Condensed Balance Sheets -
April 30, 1997 and October 31, 1996 4
Consolidated Condensed Statements
of Cash Flows - Six Months Ended
April 30, 1997 and 1996 5
Notes to Consolidated Condensed
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
Index of Exhibits 22
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except per share figures)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
---------------------- ----------------------
1997 1996 1997 1996
------ ------ ------ -----
Net sales of products $20,630 $15,784 $37,657 $29,338
Net service revenue 13,033 10,991 24,382 19,686
------ ------ ------ ------
Net operating revenue 33,663 26,775 62,039 49,024
------ ------ ------ ------
Cost of products sold 6,104 4,604 11,135 8,745
Cost of services provided 11,373 9,991 22,055 19,137
Selling, general and admin-
istrative expense 9,094 7,585 17,040 14,344
Research and development
expense 414 316 738 593
Amortization of intangibles 404 204 692 431
------ ------ ------ ------
Income from operations 6,274 4,075 10,379 5,774
------ ------ ------ ------
Interest expense 1,255 1,268 2,484 2,562
Other income (expense), net (77) 133 (57) 405
------ ----- ------ ------
Income before income taxes 4,942 2,940 7,838 3,617
Provision for (benefit of)
income taxes (431) 131 (845) 156
------ ------ ------ ------
Net income $ 5,373 $ 2,809 $ 8,683 $ 3,461
====== ====== ====== ======
Earnings per share $ 0.44 $ 0.24 $ 0.72 $ 0.30
====== ====== ====== ======
Number of shares used to
compute earnings per share 12,229 11,724 12,052 11,715
====== ====== ====== ======
See accompanying notes.
3
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
April 30, October 31,
1997 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 1,538 $ 6,837
Trade receivables, net 26,445 21,650
Inventories 13,700 10,363
Other current assets 4,195 3,645
------- -------
Total current assets 45,878 42,495
------- -------
Property, plant and equipment at cost 53,341 49,306
Less, accumulated depreciation and
amortization 15,836 14,632
------- -------
37,505 34,674
------- -------
Goodwill and other intangibles, net 38,053 21,468
Other assets 7,746 4,272
------- -------
$ 129,182 $ 102,909
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to related party $ 5,000 $ -
Other short-term debt 2,304 844
Trade accounts payable 7,369 4,560
Other current liabilities 17,563 18,367
Accrued income taxes 9,148 9,537
------- -------
Total current liabilities 41,384 33,308
------- -------
Long-term debt 45,592 47,920
Other noncurrent liabilities 4,205 6,351
------- -------
Total liabilities 91,181 87,579
------- -------
Stockholders' equity:
Common stock, $.10 par value 1,244 1,167
Additional paid-in capital 198,264 184,300
Accumulated deficit (161,128) (169,811)
Other (379) (326)
------- -------
Total stockholders' equity 38,001 15,330
------- -------
$ 129,182 $ 102,909
======= =======
See accompanying notes.
4
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
April 30,
1997 1996
--------- -------
Net cash provided (used) by operating
activities $ 295 $(7,358)
------ -----
Cash flows from investing activities:
Acquisitions (7,046) (3,596)
Purchase of property, plant and
equipment (4,103) (743)
Investment in escrow funds (2,898) -
Other (365) 298
------ -----
Net cash used by investing activities (14,412) (4,041)
------ -----
Cash flows from financing activities:
Proceeds from related party note 5,000 -
Proceeds from industrial development note 3,000 -
Proceeds from line of credit, net 1,332 2,458
Proceeds from long-term debt - 1,320
Payments of current installments of
long-term debt (539) (1,773)
Other 25 81
------ -----
Net cash provided by financing activities 8,818 2,086
------ -----
Net decrease in cash and cash equivalents (5,299) (9,313)
Cash and cash equivalents - beginning of
period 6,837 11,207
------ -----
Cash and cash equivalents - end of period $ 1,538 $ 1,894
====== ======
Cash paid for:
Interest (net of amounts capitalized) $ 2,763 $ 2,399
====== ======
Income taxes $ 374 $ 63
====== ======
See accompanying notes.
5
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows, Concluded
(In thousands)
(Unaudited)
Supplemental schedule of noncash investing and financing activities:
Acquisitions: 1997 1996
---- ----
Fair value of assets $18,483 $ 9,661
Less:
Cash acquired (45) (404)
Cash paid (7,046) (3,596)
Company stock issued (4,662) -
Notes issued (4,500) (4,000)
------ ------
Liabilities assumed and acquisition
costs accrued $ 2,230 $ 1,661
====== ======
In April 1996, the Company purchased the net assets of Unimar, Inc. by paying
$3.6 million in cash and issuing $4 million in promissory notes. See Note 4 for
a discussion of fiscal 1997 acquisitions.
See accompanying notes.
6
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 equipment. The Company also provides healthcare services through
the ownership of psychiatric facilities and by providing outpatient and other
ancillary services.
During interim periods, the Company follows the accounting policies set forth in
its Form 10-K filed with the Securities and Exchange Commission. Readers are
encouraged to refer to the Company's Form 10-K and its Annual Report to
Stockholders for the fiscal year ended October 31, 1996 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, results of its operations and cash
flows for those periods presented. Other than a reduction of $830,000 to the
deferred tax asset valuation allowance recorded during the six months ended
April 30, 1997, based on Management's belief that the Company's future results
will continue to compare favorably with those of the prior year, adjustments
consist only of normal recurring items.
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:
April 30, October 31,
1997 1996
--------- ----------
(In thousands)
Raw materials $ 2,837 $ 2,318
Work-in-process 1,148 1,028
Finished goods 9,715 7,017
------ ------
$13,700 $10,363
====== ======
7
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements, Continued
(Unaudited)
Note 3. Long-Term Debt
Long-term debt consists of the following:
April 30, October 31,
1997 1996
-------- ----------
(In thousands)
10% Senior Subordinated
Secured Notes due 2003 $24,041 $24,285
10-5/8% Convertible Sub-
ordinated Reset Debentures
due 2005 - 9,220
Promissory notes - Unimar 4,155 4,000
Promissory note - Wesley-Jessen
Corporation ("W-J") 4,500 -
County of Monroe Industrial
Development Agency ("COMIDA")
Bond 3,000 -
HGA term loan 10,342 10,675
Other 518 584
------ ------
46,556 48,764
Less, current installments 964 844
------ ------
$45,592 $47,920
====== ======
The Company called for redemption on April 9, 1997 (the "Redemption Date") all
$9,290,000 principal amount of its 10 5/8% Convertible Subordinated Reset
Debentures due March 1, 2005 ("Debentures") at 100% of principal value, plus
unpaid interest through the Redemption Date. On the Redemption Date, holders of
47 Debentures received redemptions totaling $47,000 plus $527 of interest.
Holders of $9,243,000 of Debentures converted, at the rate of $15 per share, all
of their Debentures into shares of the Company's common stock. A total of
616,187 shares of the Company's common stock, plus $253 in cash in lieu of
fractional shares, were issued for the conversion. The holders who converted
forfeited the right to receive any interest on such Debentures after March 1,
1997. No gain or loss was recorded by the Company.
W-J Promissory Note
The W-J promissory note, due March 17, 2001, was issued in conjunction with the
acquisition of Natural Touch'r'.
8
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements, Continued
(Unaudited)
(See Note 4.) Interest on the W-J promissory note is payable semi-annually and
accrues at a rate of 12% per annum, of which 8% per annum is payable in cash and
4% per annum is payable in kind.
COMIDA Bond
The COMIDA bond is a $3 million Industrial Revenue Bond ("IRB") to finance the
cost of plant expansion, building improvements, and the purchase of equipment
related to CVI's Scottsville, New York, facility. Currently, interest on the IRB
is adjusted weekly. The interest rate in effect on June 5, 1997 was 3.85% per
annum. Interest rates have ranged from 3.45% to 4.85% per annum since the COMIDA
bond was issued. Principal repayments are made quarterly, beginning July 1997
and ending October 2012. At April 30, 1997, unutilized proceeds of $2.9 million
from the IRB, which must be used for the aforementioned project, are carried in
other assets. The IRB is secured by substantially all of CVI's rights to the
facility.
A letter of credit was issued by KeyBank National Association ("KeyBank") to
support certain obligations under the COMIDA bond. CVI is obligated to repay
KeyBank for draws under and expenses incurred in connection with the letter of
credit, pursuant to the terms of a Reimbursement Agreement, which is guaranteed
by the Company. The Reimbursement Agreement contains customary provisions and
covenants, including the maintenance of certain ratios and levels of net worth.
CVI and COMIDA have granted a mortgage lien on the building and real estate
located in Scottsville and a first lien security interest on the equipment
purchased under the bond proceeds to KeyBank to secure payment under the
Reimbursement Agreement.
Note 4. Acquisitions
NATURAL TOUCH'r' ACQUISITION
In March 1997, the Company acquired the United States rights to Natural
Touch'r', a line of opaque, cosmetic contact lenses, from W-J for $7.5 million
($3 million in cash and a $4.5 million promissory note) plus an ongoing royalty
ranging from 3% to 8% per annum on sales of Natural Touch'r' products other than
those supplied by W-J. The Company recorded intangible assets of $8 million for
the patents, trademarks and distribution rights, which will be amortized over 7
to 15 years (the life of the patents or trademark).
9
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements, Continued
(Unaudited)
Presently, a subsidiary of W-J manufactures and supplies the Company with the
products for the Natural Touch'r' line. A divestiture order issued by the
Federal Trade Commission (the "FTC") in connection with the acquisition of the
Natural Touch'r' line requires that the Company either develop on its own the
manufacturing capabilities to produce the Natural Touch'r' line or find a
suitable third-party manufacturer to produce it. The FTC may require the Company
to divest itself of the Natural Touch'r' line if the Company has not either
developed manufacturing capabilities that meet United States Food and Drug
Administration ("FDA") approval or found a suitable third-party manufacturer
meeting FDA approval within 18 months from the closing date (which deadline may
be extended up to 42 months by the FTC).
MARLOW ACQUISITION
In April 1997, the Company acquired Marlow Surgical Technologies, Inc.,
("Marlow"), a gynecology products company, for approximately $3.2 million in
cash, liquidation of $900,000 of Marlow debt and 144,800 shares of the Company's
common stock valued at $2.9 million at closing. As part of the acquisition, the
Company agreed to issue an additional $500,000 of its common stock (valued as of
the closing) on the third anniversary of the closing, subject to reduction by
the amount of any obligations of the seller to indemnify the Company in
connection with the acquisition. Also, the Company has guaranteed that the total
value of the shares of its common stock issued or to be issued in the
acquisition (valued at $3.4 million in total at closing) will appreciate by $1.3
million by the third anniversary of the acquisition. This guarantee has been
included in the purchase price, with a corresponding credit to additional paid
in capital. The acquisition has been accounted for as a purchase. Initially,
$8.5 million has been ascribed to goodwill, which is being amortized over 20
years.
Note 5. Cooper Life Sciences
In April 1997, the Company issued two term notes to Cooper Life Sciences, Inc.
("CLS") totaling $5.0 million and bearing interest at the prime rate per annum.
The CLS term notes are due January 1998. CLS owns approximately 1,447,533 shares
(or approximately 12%) of the Company's common stock. Two members of the
Company's Board of Directors were designated by CLS and are also directors
and/or officers of CLS. In addition, a third member owns the majority of the
capital stock of CLS.
10
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements, Concluded
(Unaudited)
Note 6. Impact of Statements of Financial Accounting Standards Issued But Not
Adopted
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
will be effective for financial statements for periods ending after December 15,
1997, including interim periods, and established standards for computing and
presenting earnings per share. Earlier application is not permitted. Beginning
with its unaudited consolidated condensed financial statements for the first
quarter of fiscal 1998, the Company will make the required disclosures of basic
and diluted earnings per share and provide a reconciliation of the numerator and
denominator of its basic and diluted earnings per share computations. All prior
period earnings per share data will be restated by the Company upon adoption of
SFAS 128.
The Company expects that basic earnings per share figures to be reported under
SFAS 128 will be somewhat higher than the figures historically reported, due to
the removal of common stock equivalents from the calculation of average shares
and that diluted earnings per share will not differ materially from historically
reported figures.
11
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 located in Item 1.
RESULTS OF OPERATIONS
Three and Six Months Ended April 30, 1997 Compared with Three and Six Months
Ended April 30, 1996.
NET SALES OF PRODUCTS: Net sales of products increased by $4.8 million or 31%
and $8.3 million or 28% for the three and six months ended April 30, 1997,
respectively.
(Dollars in 000's)
Three Months Ended Six Months Ended
April 30, April 30,
--------------------------------- ----------------------------------
1997 1996 % Incr. 1997 1996 % Incr.
----- ------ ------- ------ ------ -------
CVI* $14,875 $12,158 22% $27,107 $22,228 22%
CSI** 5,755 3,626 59% 10,550 7,110 48%
------ ------ ------ ------
$20,630 $15,784 31% $37,657 $29,338 28%
====== ====== ====== ======
* CVI = CooperVision, Inc.
** CSI = CooperSurgical, Inc.
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 together
grew by approximately 50% over the comparable six-month period. Sales of toric
lenses to correct astigmatism, CVI's leading product group, grew 38% over the
comparable six-month period and accounted for 52% of its sales, up from 46% last
year. In March 1997, the Company acquired Natural Touch'r', a line of opaque,
cosmetic contact lenses (see Note 4), which contributed over $700,000 of sales
in the second quarter of fiscal 1997. These increases were partially offset by
anticipated decreases in sales of more mature product lines.
At CSI, year-to-date net sales increased by 48%. CSI's gynecology product lines
grew by approximately 64%, primarily due to sales of products acquired in April
1996 (Unimar'r') and April 1997 (Marlow). (See Note 4.)
12
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
NET SERVICE REVENUE: Hospital Group of America, Inc.'s ("HGA") net service
revenue for the six-month period of $24.4 million increased by 24% as revenue
generated by Hampton Hospital has improved dramatically following a successful
transition of the physician group begun late in the first quarter of fiscal
1996. Revenue continues to be pressured by the trend toward increased managed
care, which results in decreased per diems and declines in average lengths of
stay. Management is mitigating these pressures by increasing the number of
admissions to its hospitals, improving its payer mix and expanding outpatient
and other ancillary services. For the six-month period ended April 30, 1997,
admissions are up 25%, and outpatient visits are up 47% over the same 1996
period. In April 1997, HGA opened the Midwest Center for Youth and Families, a
50-bed residential treatment facility in Kouts, Indiana, and set up a new
management services division, which contracts to manage behavioral health
programs.
(Dollars in 000's)
Three Months Ended Six Months Ended
April 30, April 30,
------------------------------- -------------------------------
% Incr. % Incr.
1997 1996 (Decr.) 1997 1996 (Decr.)
---- ---- ----- ---- --- ------
Licensed
inpatient beds 319* 269 19% 319 269 19%
Inpatient
admissions 1,641 1,412 16% 3,095 2,474 25%
Total inpatient
days 18,832 16,552 14% 35,277 30,347 16%
Average length
of stay (days) 11.3 12.2 (7%) 11.3 12.5 (10%)
Total outpatient
visits 17,935 12,804 40% 33,151 22,592 47%
*Midwest Center for Youth and Families opened in April 1997, adding 50 licensed
inpatient beds.
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:
Margin % Margin %
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
CVI 77 76 77 76
CSI 53 52 53 51
Consolidated 70 71 70 70
13
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
CVI's margin increased due to efficiencies associated with higher production
volumes. Also, CVI's product mix continues to improve, with increased sales of
its toric contact lenses that generate higher margins.
Margin improved at CSI primarily due to the successful implementation of cost
reduction programs associated with the Unimar Products acquired in April 1996.
COST OF SERVICES PROVIDED: Cost of services provided represents all normal
operating costs (other than financing costs and amortization of intangibles)
incurred by HGA in generating net service revenue. The result of subtracting
cost of services provided from net service revenue is a profit of $2.3 million,
or 10%, and $0.5 million, or 3%, of net service revenue in the first six months
of 1997 and 1996, respectively. The increase in profit is primarily attributable
to a combination of improved revenue and cost controls.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE: Selling, general and administrative
(SG&A) expenses by business unit and corporate were as follows:
(Dollars in 000's)
Three Months Ended Six Months Ended
April 30, April 30,
---------------------------------- --------------------------------
% Incr. % Incr.
1997 1996 (Decr.) 1997 1996 (Decr.)
------- ------- ----- ------- ------- -----
CVI $ 5,533 $ 4,353 27% $10,315 $ 8,516 21%
CSI 2,172 1,433 52% 3,970 2,714 46%
Corporate/
Other 1,389 1,799 (23%) 2,755 3,114 (12%)
------ ------ ------ ------
$ 9,094 $ 7,585 20% $17,040 $14,344 19%
====== ====== ====== ======
SG&A expenses for the three- and six-month periods have increased 20% and 19%,
respectively, largely as a result of (1) higher selling, promotion and
distribution costs at CVI, which contributed to a 22% year-to-year increase in
sales and (2) CSI SG&A expenses related to the Unimar and Marlow acquisitions,
which were primarily responsible for the year-to-year increase of 48% in CSI
1997 revenue over 1996. The decrease in Corporate/Other SG&A expenses is
primarily the result of the consolidation of the executive headquarters.
14
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
INCOME FROM OPERATIONS: As a result of the variances discussed above, income
from operations improved by $2.2 million, or 54%, and $4.6 million, or 80%, for
the three- and six-month periods, respectively. Income (loss) from operations by
business unit and corporate was as follows:
(Dollars in 000's)
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------------- --------------------------------
1997 1996 Incr. 1997 1996 Incr.
------ ------ ------ ------ ------ --------
CVI $ 5,565 $ 4,651 $ 914 $ 9,995 $ 7,880 $ 2,115
CSI 483 281 202 902 573 329
HGA 1,615 948 667 2,237 446 1,791
Corporate/
Other (1,389) (1,805) 416 (2,755) (3,125) 370
------ ------ ------ ------ ------ ------
$ 6,274 $ 4,075 $ 2,199 $10,379 $ 5,774 $ 4,605
====== ====== ====== ====== ====== ======
INTEREST EXPENSE: The decrease in interest expense primarily due to: (1) reduced
interest rates on the HGA term loan and the CVI line of credit, (2) reduced
interest as a result of the Debenture redemption and (3) reduced borrowing on
the line of credit at CVI, partially offset by increased interest for the Unimar
Note, W-J Note, CLS Note and COMIDA Bond. (See Notes 3 and 5.)
PROVISION FOR INCOME TAXES: The 1997 provision for federal and state taxes for
the first six months of $200,000 was offset by a reversal of $215,000 of tax
accruals no longer required, and the recognition of an additional income tax
benefit of $830,000 from reducing the valuation allowance against the net
deferred tax assets, based on Management's belief that the Company's future
results will continue to compare favorably with those of the prior year. The
Company recorded no deferred tax benefit prior to the fourth quarter of its 1996
fiscal year. The provision for the first six months of fiscal 1996 was for
federal and state taxes.
15
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
CAPITAL RESOURCES & LIQUIDITY
The Company's financial condition continues to strengthen in each of the
Company's business segments. On a consolidated basis, revenue improved by $13
million, or 27%, and operating income improved by $4.6 million, or 80%, in the
first six months of 1997 over the same period in 1996. The Company generated
$2.5 million of cash flow from operating activities in the second quarter of
1997. The 1997 six month cash flow from operating activities is at $0.3 million,
a $7.7 million improvement over the $7.4 million of negative operating cash flow
experienced for the same period in 1996.
The primary uses of cash for operating activities in the first six months of
1997 included payments of $2.2 million associated with settlements of certain
disputes and payments totaling $2.0 million to fund fiscal 1996 entitlements
under the Company's annual bonus plans. Cash disbursements for 1996 operating
activities for the same period included payments of $4.4 million associated with
settlements of certain disputes and payments totaling $2.0 million to fund
fiscal 1995 entitlements under the Company's annual bonus plans. Primary uses of
cash for investing activities for the six months ended April 30, 1997 included
purchases of property, plant and equipment of $4.1 million of which,
approximately $0.9 million relates to CooperVision's expansion of the
Scottsville, New York, plant, and approximately $1.7 million relates to the
construction of the Midwest Center for Youth and Families, a residential
treatment center that HGA opened in April 1997. Investing activities also
included cash paid for acquisitions of $3.0 million for Natural Touch'r', a line
of opaque contact lenses from Wesley-Jessen and $4.1 million for Marlow Surgical
Technologies, Inc., a gynecology products company, investments in escrow funds
of $2.9 million and other investment activities of $0.4 million. Financing
activities related primarily to a $1.3 million draw down on the Company's line
of credit, $5.0 million Cooper Life Sciences term loan and $3.0 million
industrial development note, all of which were primarily used to support
investing activities. The Company plans to maximize the value of the line of
credit by maintaining an outstanding amount until it is refinanced.
On April 9, 1997, the Company redeemed or converted into common stock all $9.3
million principal amount of its Debentures. The Company expects that the
redemption or conversion will not be dilutive to 1997 earnings. See Note 3 for a
further discussion of the redemption.
16
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued
The Company currently anticipates that operating cash flows of its existing
businesses will be positive for the balance of fiscal 1997.
In addition, the Company expects to refinance a significant portion of its debt
in the near future. It has signed a commitment letter with Key Bank National
Association, a commercial lender, to provide a $50 million senior secured
revolving credit facility with a term of five years and interest rates ranging
from 0.5% to 2.25% over the London Interbank Offer Rate (LIBOR) depending upon
certain financial ratios. The Company anticipates a closing during its fourth
fiscal quarter and, at current LIBOR, expects cash savings from a reduction in
interest of approximately $1.2 million per annum going forward, the favorable
earnings impact of which will be partially offset by an accounting entry
associated with a previous debt restructuring. The Company expects that the new
facility will be secured by substantially all of the assets of the Company and
its subsidiaries.
The Company is evaluating acquisition opportunities which, if consummated, would
be funded by a combination of cash then on hand and/or other financing vehicles.
The Company has an effective shelf registration statement under the Securities
Act of 1933 (the "Securities Act") relating to 2,500,000 shares of the Company's
common stock, and the Company may seek to obtain such funds through one or more
equity offerings of its common stock thereunder. The Company may use any funds
raised through such issuances of common stock to reduce outstanding
indebtedness, to fund acquisitions or for general corporate purposes.
STATEMENT REGARDING PRIOR PROJECTIONS; FORWARD-LOOKING STATEMENTS
The Company has made certain projections in prior reports and other documents
filed with the Securities and Exchange Commission (the "Commission"), including
projections of sales, market share and operating income for CVI, projections of
sales and operating income for CSI, projections of revenue and operating income
for HGA, projections of consolidated revenue and operating income for the
Company and projections of earnings per share for the Company (any and all such
projections, collectively, the "Projections"). The Projections are contained in
the following documents: (i) Annual Report on Form 10-K for the fiscal year
ended October 31, 1996 (the "1996 10-K"), (ii) the portions of the Company's
1996 Annual Report to Stockholders that have been incorporated by reference in
the 1996 10-K, (iii) the portions of the Company's Proxy Statement for its
Annual Meeting of Stockholders held March 25, 1997 that have been incorporated
by reference into the 1996
17
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Concluded
10-K, (iv) Quarterly Report on Form 10-Q for the quarter ended January 31, 1997
and (v) Current Reports on Form 8-K dated January 10, 1997, January 30, 1997,
February 10, 1997, February 25, 1997, March 18, 1997, March 26, 1997, April 7,
1997, May 21, 1997 and June 2, 1997.
In light of the fact that the Company has an effective shelf registration
statement under the Securities Act relating to 2,500,000 shares of the Company's
common stock and may determine to issue shares of its common stock thereunder,
the Company has determined, pursuant to Section 27A(d) of the Securities Act and
Section 21E(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), not
to update the Projections at this time or issue further projections of sales,
revenue, market share, operating income or earnings per share. The Company
reserves the right, in its sole discretion and without any obligation to do so,
to update the Projections or to resume issuing projections of sales, revenue,
operating income and earnings per share in the future. In addition, the Company
may make other statements that are "forward-looking statements" as defined in
Section 27A(i) of the Securities Act and Section 21E(i) of the Exchange Act. The
Projections are deemed modified and superseded by the preceding paragraph and
this paragraph.
Cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Statements contained in this document
that are not based on historical fact may be "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by use of forward-looking
terminology such as "may," "will," "expect," "estimate," "anticipate,"
"continue" or similar terms, variations of those terms or the negative of those
terms. Certain statements set forth in this document constitute cautionary
statements identifying important factors that could cause actual results to
differ materially from those contained in the forward-looking statements.
Additional factors that could cause or contribute to differences include: major
changes in business conditions and the economy in general, loss of key members
of senior management, new competitive inroads, costs to integrate acquisitions,
dilution to earnings or earnings per share associated with acquisitions or stock
issuance, decisions to invest in research and development projects, regulatory
issues, unexpected changes in reimbursement rates and payer mix, unforeseen
litigation, costs associated with potential debt restructuring, decisions to
divest businesses and the cost of acquisition activity, particularly if a large
acquisition is not completed. Future results are also dependent on each
subsidiary of the Company meeting specific objectives.
18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1997 Annual Meeting of Stockholders was held on March 25, 1997.
Each of eight individuals nominated to serve as directors of the Company was
elected to office:
Votes
Director Votes For Withheld
- -------- --------- --------
A. Thomas Bender 10,713,298 33,968
Michael H. Kalkstein 10,713,676 33,590
Moses Marx 10,713,304 33,962
Donald Press 10,713,676 33,590
Steven Rosenberg 10,711,771 35,495
Allen E. Rubenstein, M.D. 10,713,676 33,590
Robert S. Weiss 10,713,318 33,948
Stanley Zinberg, M.D. 10,713,643 33,623
Stockholders were also asked to ratify the appointment of KPMG Peat Marwick LLP
as independent certified public accountants for the Company for the fiscal year
ending October 31, 1997. A total of 10,702,935 shares were voted in favor of the
ratification, 26,023 shares were voted against it and 18,308 shares abstained.
19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- ------------
11 Calculation of Earnings Per Share.
27 Financial Data Schedule.
(b) The Company filed the following reports on Form 8-K during the period
from February 1, 1997 to April 30, 1997.
Date
of Report Item Reported
--------- -------------
February 10, 1997 Item 5. Other Events.
February 25, 1997 Item 5. Other Events.
March 18, 1997 Item 5. Other Events.
March 26, 1997 Item 5. Other Events.
April 7, 1997 Item 5. Other Events.
20
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: June 11, 1997 /s/ Robert S. Weiss
-------------------------------------
Executive Vice President, Treasurer
and Chief Financial Officer
21
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Index of Exhibits
-----------------
Exhibit No. Page No.
- ---------- --------
11 Calculation of Earnings Per Share.
27 Financial Data Schedule.
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as..................'tm'
The registered trademark symbol shall be expressed as........'r'
22
Exhibit 11
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Calculation of Earnings Per Share
(In thousands, except per share figures)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
1997 1996 1997 1996
-------- -------- -------- ------
Primary:
- --------
Net income $ 5,373 $ 2,809 $ 8,683 $ 3,461
====== ====== ====== ======
Weighted average
number of common
shares outstanding 11,924 11,653 11,798 11,630
Number of common
equivalent shares
using the treasury
stock method 305 71 254 85
------- ------ ------ ------
Average number of
common shares used
to compute earnings
per share 12,229 11,724 12,052 11,715
====== ====== ====== ======
Earnings per share $ .44 $ .24 $ .72 $ .30
====== ====== ====== ======
Fully Diluted:
- --------------
Net income $ 5,373 $ 2,809 $ 8,683 $ 3,461
====== ====== ====== ======
Weighted average
number of common
shares outstanding 11,924 11,653 11,798 11,630
Number of common
equivalent shares
using the treasury
stock method 319 166 309 147
------- ------ ------ ------
Average number of
common shares used
to compute earnings
per share 12,243 11,819 12,107 11,777
====== ====== ====== ======
Earnings per share $ .44 $ .24 $ .72 $ .29
====== ====== ====== ======
23
5
1,000
6-MOS
OCT-31-1997
APR-30-1997
1,538
0
29,674
2,586
13,700
45,878
53,341
15,836
129,182
41,384
45,306
0
0
1,244
36,757
129,182
37,657
62,039
11,135
33,190
0
0
2,484
7,838
(845)
8,683
0
0
0
8,683
.72
.72
