The Cooper Companies Reports Fourth Quarter and Full Year 2007 Results
The Cooper Companies Reports Fourth Quarter and Full Year 2007 Results
PLEASANTON, Calif., Dec. 11, 2007 (PRIME NEWSWIRE) -- The Cooper Companies, Inc. (NYSE:COO) today reported fiscal fourth quarter 2007 and full year results.
Financial Highlights
- Fourth quarter 2007 revenue $253.8 million, 17% above fourth quarter 2006, 14% in constant currency. Fiscal 2007 revenue $950.6 million; 11% above 2006, 8% in constant currency.
- Fourth quarter 2007 CooperVision (CVI) revenue $212.1 million, up 16%, 11% in constant currency. Fiscal 2007 revenue $795.9 million up 8%, 5% in constant currency.
- Fourth quarter CooperSurgical (CSI) revenue $41.8 million, up 25% with 9% organic growth. Fiscal 2007 revenue $154.8 million, up 24%, with 9% organic growth.
- Fourth quarter 2007 GAAP loss per share 54 cents. Fiscal 2007 GAAP loss 25 cents.
- Fourth quarter GAAP results include $29.0 million non-cash and $20.3 million cash related costs, net of tax -- $1.08 cents per diluted share -- not considered part of core operating performance including costs for share-based compensation expense, acquisition and integration expenses, production start-up costs and intellectual and securities litigation costs. For the year, GAAP results include $48.7 million non-cash and $74.6 million cash related costs. See "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
Commenting on the Company's performance, Robert S. Weiss, Cooper's chief executive officer said, "Our 2007 results finished below expectations as in the fourth quarter we took charges on the completion of the three year Ocular integration plan including the write off of obsolete manufacturing equipment that was replaced by newer technology.
"CVI's fourth quarter revenues were strong in all geographic markets, and we outpaced market growth. In 2007, CVI gained market share in spite of its manufacturing capacity limitations with silicone hydrogel and single-use products and now manufacturing capacity for these products is ramping up nicely.
"With this increased capacity, we expect to compete effectively in the monthly silicone hydrogel market in the United States and look forward to entering the two-week silicone sphere market in the April/May period of 2008, earlier than previously anticipated, and the silicone toric market at the end of the calendar year. We believe we are now beginning to see a revival of CVI's historic revenue growth and share gain patterns."
Fourth Quarter Operating Results
- Fourth quarter gross margin was 46% compared with 59% in the prior year. Excluding costs considered unrelated to core operating performance, gross margin was 61% compared with 63% of sales in last year's fourth quarter.
- Selling, general and administrative expense grew 11% and was 41% of sales compared with 44% in last year's fourth quarter. Excluding costs considered unrelated to core operating performance, SGA was 38% of sales compared with 39% last year.
- Research and development expense was 4% of sales, the same as in last year's fourth quarter.
- Operating margin was a loss of 2% for the quarter compared with a margin of 10% in last year's fourth quarter. After costs considered unrelated to core operating performance -- $49.2 million in the quarter -- operating margin was 18% of sales in both periods.
- Interest expense was 4% of sales in both periods.
The operating results discussed above include costs considered unrelated to core operating performance as listed in the section "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures" and the table "Reconciliation of Non-GAAP to GAAP Operating Results."
Balance Sheet and Cash Flow Highlights
- Capital expenditures were $54.9 million in the quarter and totaled $183.6 million in fiscal 2007.
- Depreciation and amortization expense was $28.9 million for the quarter; $84.5 million for fiscal 2007 including $9.4 million in the quarter and $14.2 million for the year related to accelerated depreciation on assets made redundant as part of integration activities.
- Cash flow from operations was $38.1 million in the fourth quarter compared with $35.7 million in last year's fourth quarter and $134.0 million for fiscal 2007 compared with $150.5 million in 2006.
Fourth Quarter Operational Highlights
- Biofinity® production in October exceeded 2 million units, the highest monthly volume to date.
- Revenue for Proclear® products was $52.1 million, up 36% in constant currency. Proclear® products now represent 25% of CVI's worldwide revenue.
- Soft lens revenue in the United States grew 16% over the comparable period in 2006 and 5% over the third quarter of 2007. The contact lens market in the U.S. grew 4% in the third calendar quarter and sequentially declined 2% from the second calendar quarter.
- CVI completed the integration of its U.S. distribution center in Henrietta, N.Y.
- In November, the Company reached a global settlement agreement with CIBA Vision, the eye care unit of Novartis AG, which resolves all disputes with respect to current patent infringement litigation between the companies.
- CSI achieved another solid quarter of organic growth reflecting the success of its hospital market strategy.
2008 Revenue and Earnings Guidance
Cooper expects fiscal 2008 revenue of $1,040 million to $1,090 million in constant currency (previous guidance was $1,020 million to $1,090 million) and non-GAAP EPS of $2.40 to $2.65 and GAAP EPS of $1.30 to $1.80.
Reconciliation of GAAP to Non-GAAP EPS Guidance
-----------------------------------------------
EPS Range
Low High
----- -----
GAAP EPS guidance $1.30 $1.80
Other identified items 0.70 0.50
----- -----
$2.00 $2.30
Share-based compensation expense 0.40 0.35
----- -----
Non-GAAP EPS guidance $2.40 $2.65
===== =====
CVI expects fiscal 2008 revenue of $875 million to $920 million (previously $855 million to $920 million), a growth rate of 10% to 16% versus the prior year. CSI expects fiscal 2008 revenue of $165 million to $170 million, unchanged from previous guidance.
CooperVision Fiscal Fourth Quarter Operating Highlights
- CVI's worldwide revenue of $212.1 million increased 11% from last year's fourth quarter in constant currency.
- Worldwide revenue for Biofinity®, CVI's spherical silicone hydrogel contact lens, was $5 million; $2.2 million in the United States and $2.5 million in Europe.
- CVI's worldwide revenue for its single-use lenses grew 31% in the fiscal quarter and 29% for the year. United States single-use lens revenue grew 250% in the quarter and was up 75% from the third quarter of 2007.
- Worldwide sales of CVI's core product lines -- specialty lenses (toric, cosmetic and multifocal lenses), PC Technology brand spherical lenses, silicone hydrogel spherical lenses and single-use lenses -- were $151.4 million, up 16%. These products account for 72% of CVI's soft lens business. Legacy conventional lens products declined 18%.
- CVI's disposable toric lens revenue grew 8% in the fourth quarter and is now 86% of its total toric revenue. Sales of all toric lenses were $71.7 million, up 4%, accounting for 34% of CVI's soft lens business. CVI's toric lens revenue outside of the United States, 51% of total toric revenue, grew 5% in the quarter.
Note: Please see the "Quick Links" section of Cooper's Website www.coopercos.com/investor for Supplemental Market and Revenue Data tables.
CVI Anticipated New Product Introductions
- Proclear® 1 Day rollout in Europe in the fiscal first quarter.
- Improved silicone hydrogel sphere with a two-week wearing cycle in the United States and Europe in April/May of 2008, earlier than previously anticipated.
- Silicone hydrogel toric lens in late calendar 2008.
- Proclear® 1 Day in Japan in first or second fiscal quarter of 2009 depending on local regulatory approval.
CVI Fiscal Fourth Quarter 2007 Expenses
CVI's reported gross margin was 44% compared with 59% in the fourth quarter of 2006. These results include costs for share-based compensation, acquisition, production start-up and integration charges as described in the section "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures" and the table below. These related primarily to the consolidation of manufacturing locations and start-up expenses for new silicone hydrogel products.
CVI's SGA expense grew 12% during the quarter. These results also include items described in the section "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures" and the table below.
CVI's research and development expense was $7.8 million in the fourth quarter, an increase of 6% over the same period in 2006 representing 4% of sales in both periods.
Operating margin was negative 3% compared with 12% in the fourth quarter of 2006, reflecting the impact of items described in the table below. Excluding such items, operating margins were 20% in the current quarter compared to 21% in the fourth quarter last year.
CooperSurgical Fiscal Fourth Quarter Operating Highlights
- Revenue grew 25% to $41.8 million with organic growth of 9%.
- Sales of products marketed directly to hospitals grew 51% to $11.3 million and now represent 27% of CSI's total revenue compared with 22% in the fourth quarter last year.
- Gross margin was 58% for the quarter, the same as in the prior year period. Operating margin was 21% for the quarter.
Cooper Companies Management Changes
The following recent management changes were effective November 1, 2007:
- A. Thomas Bender retired as chief executive officer but remains non-executive chairman of the board of directors.
- Robert S. Weiss has been named chief executive officer.
- Steven M. Neil, executive vice president and chief financial officer, is now responsible for CVI manufacturing, supply chain and information technology in addition to his finance duties.
- Eugene J. Midlock has been named vice president, finance.
- Daniel G. McBride has been named vice president and general counsel.
- Albert G. White III has been named vice president, investor relations and treasurer.
Conference Call
The Cooper Companies will hold a conference call to discuss its fourth quarter and full year 2007 results today at 5pm Eastern Time. In the United States, dial +1-866-713-8538. Outside the United States, dial +1-617-597-5310. The passcode is 36403314.
A replay will be available approximately one hour after the call ends and will be available for five days. In the United States, dial +1-888-286-8010. Outside the United States, dial +1-617-801-6888. The replay passcode is 79118648. This call will also be broadcast live on The Cooper Companies' Website, www.coopercos.com and at www.streetevents.com.
Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures
In addition to results in accordance with GAAP, Cooper management also considers non-GAAP operating results as important supplemental financial measures in evaluating its ongoing core operating results and in making operating decisions.
Non-GAAP operating results and guidance exclude from GAAP operating results share-based compensation expense and other items that management does not consider part of core operating performance. Management uses these non-GAAP operating results to compare actual operating results to its business plans, assess expectations after the integration period, calculate debt compliance covenants, allocate resources and evaluate potential acquisitions. Management believes that presenting these non-GAAP operating results also allows investors, as well as management, to evaluate operating results from one period to another on a comparable basis.
Specific items that Cooper excludes from its GAAP results when evaluating core operational performance are:
- Share-based compensation expense
These are the costs of stock option and restricted stock grants to employees and directors specified under SFAS No. 123R, Share-Based Payments. While share-based compensation is an ongoing and recurring expense, it does not require cash settlement, is subject to significant period-to-period variability (it is dependent on the timing of the grants, is potentially impacted by acquisitions and can be affected by changes in computational variables) and is recognized prospectively. Since we adopted the modified prospective method of accounting for share-based payments, results are not always comparable to prior periods. As a result, we exclude these charges for purposes of evaluating core operating performance. - Acquisition and restructuring expenses consisting of
-- Restructuring and integration expenses related primarily to the integration of Ocular Sciences, Inc. (Ocular) into CooperVision, Inc., which are charged to cost of sales and operating expense. They consist of costs to integrate duplicate facilities, streamline manufacturing and distribution practices and integrate sales, marketing and administrative functions. Cooper adjusts for these costs because they are incurred as part of CVI's three-year Ocular integration plan, but are not included in its core business operating plan.
-- Manufacturing and distribution rationalization and start-up costs also related primarily to the integration of Ocular and CVI. They consist of costs to: - Restructure manufacturing locations and platforms.
- Eliminate duplicate distribution locations (products are stored and shipped from several locations while central warehouses are completed).
- Develop new manufacturing technologies, specifically silicone
hydrogel manufacturing.
We adjust for these costs because once the specific integration activities have been completed and new technology and manufacturing techniques have been applied, the costs will be eliminated.
-- Losses and costs associated with phasing out corneal health products and the write-off of associated unrealizable net assets.
-- Acquired in-process R&D charges. These charges are subject to a formal appraisal process that may take up to twelve months to complete following a transaction. Management adjusts for these expenses because they are not known when evaluating forecasted performance of the acquired business. - Expenses associated with certain intellectual property and
securities litigation
Cooper had filed suits claiming patent infringement to protect its intellectual property, sought a declaratory judgment that a CVI product does not infringe any valid and enforceable claims of competitors' patents and is also incurring expenses associated with securities litigation. These cases have not historically been part of Cooper's normal operations. As recently announced, the intellectual property suits have now been settled.
Not all the items listed occurred in the fiscal fourth quarter of 2007 or 2006. Specific amounts for the items in the fiscal fourth quarter and twelve-months ended 2007 and 2006 are below in the table headed "Reconciliation of Non-GAAP to GAAP Operating Results."
Operating results adjusted for these items should not be considered alternatives to any performance measures derived in accordance with GAAP. We present them because we consider their disclosure an important supplemental measure of performance. In evaluating Cooper's non-GAAP operating results and guidance, investors are cautioned that in future periods Cooper expects to incur expenses similar to those for which adjustments are made in the presentation of non-GAAP operating results. Presentation of non-GAAP operating results and guidance should not be construed as an implication that future results will be unaffected by similar items or nonrecurring or unusual charges.
Cooper's non-GAAP operating results have limitations as an analytical tool, including that they do not reflect the cost of:
- Stock options and other share-based compensation, which are important components of compensation programs for employees and directors.
- The Ocular integration, and the integration and restructuring of other acquisitions.
- New manufacturing technologies, specifically silicone hydrogel manufacturing, and the phase out of product lines and manufacturing platforms that are being eliminated.
- Intellectual property and securities litigation, which we expect to be significant but are difficult to forecast.
In addition, non-GAAP operating results may not be useful when comparing Cooper to other companies that may calculate these measures differently. Moreover, the impact of many of the items excluded (particularly litigation and restructuring) on guidance is difficult to quantify because of significant uncertainty in timing and the range of possible outcomes. These items could be material.
Cooper compensates for these limitations by relying primarily on GAAP operating results and supplementing these with non-GAAP operating results.
Forward-Looking Statements
This news release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. These include statements relating to plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact. In addition, all statements regarding anticipated growth in our revenue, anticipated market conditions, planned product launches and expected results of operations and integration of any acquisition (including the Ocular business) 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:
- Failures to launch, or significant delays in introducing, new products, or limitations on sales following introduction due to manufacturing constraints or poor market acceptance.
- Failures to receive or delays in receiving U.S. or foreign regulatory approvals for products.
- Compliance costs and potential liability in connection with U.S. and foreign healthcare regulations, including product recalls, and potential losses resulting from sales of counterfeit and other infringing products.
- The success of research and development activities and other start-up projects.
- New competitors, product innovations or technologies.
- Failure to develop new manufacturing processes, or delays in implementation of such processes.
- A major disruption in the operations of our manufacturing, research and development or distribution facilities, due to technological problems, natural disasters or other causes.
- Disruptions in supplies of raw materials, particularly components used to manufacture our silicone hydrogel lenses.
- Legal costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to claims involving product liability or patent protection (including risks with respect to the ultimate validity and enforceability of the Company's patent applications and patents and the possible infringement of the intellectual property of others).
- The impact of acquisitions and divestitures on revenues, earnings and margins, including any failure by the Company to successfully integrate acquired businesses into CVI and CSI, any failure to continue to realize anticipated benefits from the Company's cost-cutting measures and risks inherent in accounting assumptions made regarding the acquisitions.
- Changes in business, political and economic conditions, including the adverse effects of natural disasters on patients, practitioners and product distribution.
- Interest rate and foreign currency exchange rate fluctuations.
- Changes in U.S. and foreign government regulation of the retail optical industry and of the healthcare industry generally.
Dilution to earnings per share from acquisitions or issuing stock.
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.
Corporate Information
The Cooper Companies, Inc. (www.coopercos.com) manufactures and markets specialty healthcare products through its CooperVision and CooperSurgical units. Corporate offices are in Pleasanton, Calif. A toll free interactive telephone system at 1-800-334-1986 provides stock quotes, recent press releases and financial data.
CooperVision (www.coopervision.com) manufactures and markets contact lenses. Headquartered in Pleasanton, Calif., it manufactures in Juana Diaz, Puerto Rico, Norfolk, Va., Rochester, N.Y., Adelaide, Australia, Hamble and Hampshire England and Madrid, Spain.
CooperSurgical (www.coopersurgical.com) manufactures and markets diagnostic products, surgical instruments and accessories to the women's healthcare market with headquarters and manufacturing facilities in Trumbull and Orange, Conn., and in Pasadena, Calif., Houston, Texas, Williston, Vt., Fort Atkinson, Wis., Montreal and Berlin.
The Cooper Companies, Inc. and its subsidiaries and/or affiliates own, license or distribute the following trademarks which are italicized in this release: Proclear®, Proclear® 1 Day and Biofinity® are registered trademarks of The Cooper Companies, Inc., its subsidiaries and/or affiliates. PC Technology is a trademark of The Cooper Companies, Inc., its subsidiaries and/or affiliates.
The information on Cooper's Websites and its interactive telephone system are not part of this news release.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
-----------------------------------------------
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
October 31, October 31,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net sales $253,824 $216,026 $950,641 $858,960
Cost of sales 136,584 88,334 431,110 332,983
-------- -------- -------- --------
Gross profit 117,240 127,692 519,531 525,977
Selling, general and
administrative expense 104,973 94,757 407,951 357,842
Research and
development expense 9,277 8,437 39,858 34,547
Restructuring costs 2,896 (1,449) 9,674 6,385
Amortization of
intangibles 4,191 3,541 16,194 14,303
-------- -------- -------- --------
Operating (loss) income (4,097) 22,406 45,854 112,900
Interest expense 10,888 8,497 42,683 37,331
Other (loss) income, net (3,839) (577) (2,499) (2,232)
-------- -------- -------- --------
(Loss) income before
income taxes (18,824) 13,332 672 73,337
Provision (benefit) for
income taxes 5,370 (270) 11,864 7,103
-------- -------- -------- --------
Net (loss) income (24,194) 13,602 (11,192) 66,234
Add interest charge
applicable to
convertible debt, net
of tax -- 523 -- 2,090
-------- -------- -------- --------
(Loss) income for
calculating earnings
per share $(24,194) $ 14,125 $(11,192) $ 68,324
======== ======== ======== ========
Diluted (loss) earnings
per share $ (0.54) $ 0.30 $ (0.25) $ 1.44
======== ======== ======== ========
Number of shares used
to compute earnings
per share 44,835 47,585 44,707 47,569
======== ======== ======== ========
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
-------------------------------------
(In thousands)
(Unaudited)
October 31, October 31,
2007 2006
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,226 $ 8,224
Trade receivables, net 164,493 146,584
Inventories 267,914 236,512
Deferred tax asset 23,395 19,659
Other current assets 58,494 45,972
---------- ----------
Total current assets 517,522 456,951
---------- ----------
Property, plant and equipment, net 604,530 496,357
Goodwill 1,253,686 1,217,084
Other intangibles, net 145,833 147,160
Deferred tax asset 20,015 21,479
Other assets 18,685 13,570
---------- ----------
$2,560,271 $2,352,601
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 46,514 $ 61,366
Other current liabilities 239,966 215,264
---------- ----------
Total current liabilities 286,480 276,630
---------- ----------
Long-term debt 830,116 681,286
Other liabilities 9,408 6,682
Deferred tax liabilities 10,678 9,494
---------- ----------
Total liabilities 1,136,682 974,092
---------- ----------
Stockholders' equity 1,423,589 1,378,509
---------- ----------
$2,560,271 $2,352,601
========== ==========
Unaudited Supplemental Statement of Operations Data and Reconciliation of Non-GAAP to GAAP Operating Results ($ in thousands, except per share amounts)
The tables below present supplemental statement of operations data reflecting Cooper's individual business units and the effect of specified items, together with a reconciliation of non-GAAP operating results based on the items discussed in the section "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations by Business Unit
(Unaudited)
Three Months Ended % %
October 31, % Revenue Revenue
2007 2006 Increase 2007 2006
-------- -------- -----------------------
Net sales:
CVI $212,065 $182,674 16% 100% 100%
CSI 41,759 33,352 25% 100% 100%
-------- --------
Total net sales 253,824 216,026 17% 100% 100%
-------- --------
Cost of sales:
CVI (1) 118,872 74,391 60% 56% 41%
CSI (2) 17,712 13,943 27% 42% 42%
-------- --------
Total cost of
sales (1), (2) 136,584 88,334 55% 54% 41%
-------- --------
Gross profit:
CVI 93,193 108,283 -14% 44% 59%
CSI 24,047 19,409 24% 58% 58%
-------- --------
Total gross profit 117,240 127,692 -8% 46% 59%
-------- --------
SGA:
CVI (3) 85,997 76,565 12% 41% 42%
CSI (4) 12,433 11,508 8% 30% 35%
Corporate (5) 6,543 6,684 -2% N/A N/A
-------- --------
Total SGA (3) - (5) 104,973 94,757 11% 41% 44%
-------- --------
Research and development:
CVI (6) 7,791 7,339 6% 4% 4%
CSI (7) 1,486 1,098 35% 4% 3%
-------- --------
Total research and
development (6), (7) 9,277 8,437 10% 4% 4%
-------- --------
Restructuring costs:
CVI (8) 2,478 (1,472) N/A 1% -1%
CSI (9) 418 23 1717% 1% 0%
-------- --------
Total restructuring
costs (8), (9) 2,896 (1,449) N/A 1% -1%
-------- --------
Amortization:
CVI 3,067 3,066 0% 1% 2%
CSI 1,124 475 137% 3% 1%
-------- --------
Total amortization 4,191 3,541 18% 2% 2%
-------- --------
Operating expense:
CVI 99,333 85,498 16% 47% 47%
CSI 15,461 13,104 18% 37% 39%
Corporate 6,543 6,684 -2% N/A N/A
-------- --------
Total operating expense 121,337 105,286 15% 48% 49%
-------- --------
Operating (loss) income:
CVI (6,140) 22,785 N/A -3% 12%
CSI 8,586 6,305 36% 21% 19%
Corporate (6,543) (6,684) 2% N/A N/A
-------- --------
Total operating (loss)
income (4,097) 22,406 N/A -2% 10%
-------- --------
Interest expense (10) 10,888 8,497 28% 4% 4%
Other loss, net (3,839) (577)
-------- --------
(Loss) income before
income taxes (18,824) 13,332
Provision (benefit) for
income taxes (11) 5,370 (270)
-------- --------
Net (loss) income $(24,194) $ 13,602
======== ========
Add interest charge
applicable to
convertible debt -- 523
-------- --------
(Loss) income for
calculating diluted
(loss) earnings per
share $(24,194) $ 14,125
======== ========
Diluted (loss) earnings
per share $ (0.54) $ 0.30
======== ========
Number of shares used to
compute earnings per
share 44,835 47,585
======== ========
Twelve Months Ended % %
October 31, % Revenue Revenue
2007 2006 Increase 2007 2006
-------- -------- -----------------------
Net sales:
CVI $795,856 $734,157 8% 100% 100%
CSI 154,785 124,803 24% 100% 100%
-------- --------
Total net sales 950,641 858,960 11% 100% 100%
-------- --------
Cost of sales:
CVI (1) 367,517 281,027 31% 46% 38%
CSI (2) 63,593 51,956 22% 41% 42%
-------- --------
Total cost of
sales (1), (2) 431,110 332,983 29% 45% 39%
-------- --------
Gross profit:
CVI 428,339 453,130 -5% 54% 62%
CSI 91,192 72,847 25% 59% 58%
-------- --------
Total gross profit 519,531 525,977 -1% 55% 61%
-------- --------
SGA:
CVI (3) 321,986 284,325 13% 40% 39%
CSI (4) 54,480 44,719 22% 35% 36%
Corporate (5) 31,485 28,798 9% N/A N/A
-------- --------
Total SGA (3) - (5) 407,951 357,842 14% 43% 42%
-------- --------
Research and development:
CVI (6) 27,624 23,534 17% 3% 3%
CSI (7) 12,234 11,013 11% 8% 9%
-------- --------
Total research and
development (6), (7) 39,858 34,547 15% 4% 4%
-------- --------
Restructuring costs:
CVI (8) 9,242 6,361 45% 1% 1%
CSI (9) 432 24 1700% 0% 0%
-------- --------
Total restructuring
costs (8), (9) 9,674 6,385 52% 1% 1%
-------- --------
Amortization:
CVI 12,281 12,267 0% 2% 2%
CSI 3,913 2,036 92% 3% 2%
-------- --------
Total amortization 16,194 14,303 13% 2% 2%
-------- --------
Operating expense:
CVI 371,133 326,487 14% 47% 44%
CSI 71,059 57,792 23% 46% 46%
Corporate 31,485 28,798 9% N/A N/A
-------- --------
Total operating expense 473,677 413,077 15% 50% 48%
-------- --------
Operating (loss) income:
CVI 57,206 126,643 -55% 7% 17%
CSI 20,133 15,055 34% 13% 12%
Corporate (31,485) (28,798) -9% N/A N/A
-------- --------
Total operating (loss)
income 45,854 112,900 -59% 5% 13%
-------- --------
Interest expense (10) 42,683 37,331 14% 4% 4%
Other loss, net (2,499) (2,232)
-------- --------
(Loss) income before
income taxes 672 73,337
Provision (benefit) for
income taxes (11) 11,864 7,103
-------- --------
Net (loss) income $(11,192) $ 66,234
======== ========
Add interest charge
applicable to
convertible debt -- 2,090
-------- --------
(Loss) income for
calculating diluted
(loss) earnings per
share $(11,192) $ 68,324
======== ========
Diluted (loss) earnings
per share $ (0.25) $ 1.44
======== ========
Number of shares used to
compute earnings per
share 44,707 47,569
======== ========
Three Months Ended Twelve Months Ended
October 31, October 31,
2007 2006 2007 2006
-------- -------- -------- --------
(1) CVI Cost of sales:
Restructuring $ 27,295 $ 6,323 $ 42,682 $ 8,279
Share-based
compensation 386 231 1,288 540
Production
start-up 9,442 2,494 27,556 6,684
Corneal health
product line
phase out (41) (360) (140) 1,148
-------- -------- -------- --------
$ 37,082 $ 8,688 $ 71,386 $ 16,651
======== ======== ======== ========
(2) CSI Cost of sales:
Inventory step-up $ 321 $ -- $ 572 $ --
Share-based
compensation 70 51 252 134
-------- -------- -------- --------
$ 391 $ 51 $ 824 $ 134
======== ======== ======== ========
(3) CVI SGA:
Share-based
compensation $ (236) $ 984 $ 3,460 $ 3,937
Distribution
start-up 2,287 5,988 13,424 10,105
Intellectual
property
litigation 4,650 873 10,248 2,119
Integration costs 404 $ -- 404 --
Production
start-up 2,436 -- 6,857 --
Corneal health
product line
phase out (5) 200 1 2,593
-------- -------- -------- --------
$ 9,536 $ 8,045 $ 34,394 $ 18,754
======== ======== ======== ========
(4) CSI SGA:
Share-based
compensation $ (212) $ 424 $ 1,611 $ 1,708
Integration costs (1,221) -- 273 --
-------- -------- -------- --------
$ (1,433) $ 424 $ 1,884 $ 1,708
======== ======== ======== ========
(5) Corporate SGA:
Share-based
compensation $ 499 $ 860 $ 7,815 $ 6,976
Securities
litigation 77 228 162 1,143
-------- -------- -------- --------
$ 576 $ 1,088 $ 7,977 $ 8,119
======== ======== ======== ========
(6) CVI research and
development
expense:
Share-based
compensation $ 166 $ 79 $ 664 $ 316
Corneal health
product line
phase out (3) 519 94 2,627
-------- -------- -------- --------
$ 163 $ 598 $ 758 $ 2,943
======== ======== ======== ========
(7) CSI research and
development expense:
Share-based
compensation $ 12 $ 7 $ 41 $ 27
CooperSurgical
in-process R&D -- -- 7,157 7,500
-------- -------- -------- --------
$ 12 $ 7 $ 7,198 $ 7,527
======== ======== ======== ========
(8) CVI restructuring:
Restructuring
costs in
operating
expenses $ 2,478 $ (1,616) $ 9,243 $ 3,801
Corneal health
product line
phase out -- 144 -- 2,560
-------- -------- -------- --------
$ 2,478 $ (1,472) $ 9,243 $ 6,361
======== ======== ======== ========
(9) CSI restructuring
costs $ 418 $ 23 $ 432 $ 24
======== ======== ======== ========
(10) Interest expense
Write-off of
deferred
financing costs $ -- $ -- $ (882) $ (4,085)
-------- -------- -------- --------
$ -- $ -- $ (882) $ (4,085)
======== ======== ======== ========
(11) Provision (benefit)
for income taxes:
Income tax
effect $ 107 $ 873 $(11,617) $ (5,461)
======== ======== ======== ========
Listed below are the items included in net income or loss that management excludes in computing non-GAAP financial measures as described in the section "Fiscal Fourth Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP to GAAP Operating Results
Three Months Ended Twelve Months Ended
October 31, October 31,
2007 2006 2007 2006
-------- -------- -------- --------
GAAP net (loss) income $(24,194) $ 13,602 $(11,192) $ 66,234
Non-GAAP adjustments:
CooperVision
restructuring costs in
cost of sales 27,295 6,323 42,682 8,279
CooperVision share-based
employee compensation
expense in cost of sales 386 231 1,288 540
CooperVision
restructuring costs in
operating expenses 2,478 (1,616) 9,243 3,801
CooperVision share-based
employee compensation
expense in SGA (236) 984 3,460 3,937
CooperVision share-based
employee compensation
expense in R&D 166 79 664 316
CooperVision production
start-up costs in cost
of sales 9,442 2,494 27,556 6,684
CooperVision
distribution center
rationalization costs
in SGA 2,287 5,988 13,424 10,105
CooperVision
intellectual property
litigation expenses
in SGA 4,650 873 10,248 2,119
CooperVision integration
costs in SGA 404 -- 404 --
CooperVision production
start-up costs in SGA 2,436 -- 6,857 --
Corneal health product
lines phase out in
cost of sales (41) (360) (140) 1,148
Corneal health product
lines phase out in SGA (5) 200 1 2,593
Corneal health product
lines phase out in R&D (3) 519 94 2,627
Corneal health product
lines restructuring
costs in operating
expense -- 144 -- 2,560
CooperSurgical
inventory step-up in
cost of sales 321 -- 572 --
CooperSurgical
share-based employee
compensation expense
in cost of sales 70 51 252 134
CooperSurgical
share-based employee
compensation expense
in SGA (212) 424 1,611 1,708
CooperSurgical
share-based employee
compensation expense
in R&D 12 7 41 27
CooperSurgical
integration costs in
SGA (1,221) -- 273 --
CooperSurgical
restructuring costs
in operating expenses 418 23 432 24
CooperSurgical
in-process R&D -- -- 7,157 7,500
Corporate share-based
employee and director
compensation expense
in SGA 499 860 7,815 6,976
Corporate securities
litigation expenses
in SGA 77 228 162 1,143
Write-off of deferred
financing costs -- -- 882 4,085
Income tax effect 107 873 (11,617) (5,461)
-------- -------- -------- --------
49,330 18,325 123,361 60,845
-------- -------- -------- --------
Non-GAAP net income $ 25,136 $ 31,927 $112,169 $127,079
======== ======== ======== ========
Add interest charge
applicable to
convertible debt 523 523 2,092 2,090
-------- -------- -------- --------
Income for calculating
diluted earnings per
share $ 25,659 $ 32,450 $114,261 $129,169
======== ======== ======== ========
Diluted earnings per
share $ 0.54 $ 0.68 $ 2.40 $ 2.72
======== ======== ======== ========
Number of shares used
to compute earnings
per share 47,666 47,585 47,582 47,569
======== ======== ======== ========
Contact Lens Industry Revenue Update: Third Calendar Quarter in Constant Currency
The data below is from a compilation of industry participants' revenue by an independent market research firm.
- The global soft contact lens market grew 5% compared with the same period a year ago.
- Single-use revenue grew 11% and now represents 33% of the global soft contact lens market compared with 31% in the third quarter of 2006. CVI's single-use sphere and toric products revenue grew 34% worldwide and 181% in the United States in the third calendar quarter.
- In the United States, where single-use products have the lowest penetration, the contact lens market grew 4% while single-use revenue grew 16%, increasing their share of the market from 9% to 10%. In Asia, single-use products represent about 57% of the market and in Europe they represent about 38%. In all markets outside of the United States, single use-lenses accounted for 46% of soft contact lens revenue compared with 44% in the third quarter of 2006.
- In the United States -- 36% of the world market -- CVI's revenue grew 6% (versus the market's 4% growth) during the third calendar quarter. The market in the rest of the world outside the United States, now 64% of the total world market, grew 6% as did CVI's revenue.
- Silicone hydrogel revenue accounted for 27% of worldwide contact lens revenue during the third calendar quarter compared with 26% in the second quarter. About two-thirds of silicone hydrogel revenue is generated in North America.
Health Product Research, which reports on a statistical sampling of practitioners each quarter, calculated that silicone hydrogel lenses accounted for 50% of new patient visits to contact lens practitioners in the United States during the third calendar quarter of 2007, compared with 47% in the second quarter, and silicone hydrogel toric lenses accounted for 44% of new toric contact lens fits in the United States in the third calendar quarter of 2007, compared with 41% in the second quarter.
Note: Please see the "Quick Links" section of Cooper's Website www.coopercos.com/investor for Supplemental Market and Revenue Data tables.
CONTACT: The Cooper Companies, Inc.
Norris Battin
925-460-3600 -
Fax: 925-460-3648
ir@coopercompanies.com