The Cooper Companies Reports Third Quarter 2007 Results
The Cooper Companies Reports Third Quarter 2007 Results
PLEASANTON, Calif., Sep 6, 2007 (PrimeNewswire via COMTEX News Network) -- The Cooper Companies, Inc. (NYSE:COO) today reported fiscal third quarter 2007 results.
-
Third Quarter Revenue and Earnings Highlights
- Revenue $251.9 million, 12% above third quarter 2006, 9% in constant currency.
- CooperVision (CVI) revenue $212.0 million, up 9%, 7% in constant currency.
- CooperSurgical (CSI) revenue $39.9 million, up 26% with 8% organic growth.
- GAAP earnings per share 18 cents.
- GAAP earnings include $27.8 million net of tax -- 58 cents per diluted share -- of costs for share-based compensation expense (7 cents), acquisition and integration expenses, production start-up costs and intellectual property and securities litigation costs, as described below in the section "Fiscal Third Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
Operating Results
The operating results discussed below include costs considered unrelated to core operating performance as listed in the section "Fiscal Third Quarter 2007 Financial Results Explanation of Non-GAAP Measures" and the table "Reconciliation of Non-GAAP Earnings to GAAP Net Income."
Compared with last year's third quarter:
- Gross margin was 58% compared with 61%. Excluding costs considered unrelated to core operating performance, gross margin was 63% in both periods.
- Selling, general and administrative expense grew 16% and was 41% of sales compared with 40% in last year's third quarter. The quarter's results included marketing costs associated with the future introduction of several new products. Excluding costs considered unrelated to core operating performance, SG&A was 36% of sales compared with 37% of sales in last year's third quarter.
- Research and development expense was 5% of sales compared with 3% of sales in last year's third quarter. Excluding costs considered unrelated to core operating performance, R&D expense was 3% in both periods. CVI's R&D activities include programs to develop new silicone hydrogel and single-use products.
Operating margin was 9% for the quarter compared with 14% in last year's third quarter. After costs considered unrelated to core operating performance -- $31.7 million in the quarter or 13% of sales -- operating margin was 22% in both periods.
Interest expense was 4% of sales, the same as in last year's third quarter primarily reflecting cash used for capital expenditures and CSI acquisitions.
The effective tax rate (ETR) for the quarter was 19.6% excluding items considered unrelated to core operating performance as described above. Cooper anticipates an ETR of 18% to 20% in 2007 and in the 13% - 16% range for 2008 for its core operating business.
During the quarter, CVI doubled its silicone hydrogel unit production and now has capacity to support revenue of approximately $10 million per quarter.
In July, CVI completed the consolidation of its U.S. distribution center in to a single facility and furthered the expansion of its Asia Pacific operation with the opening of an office in Shanghai.
-
Balance Sheet and Cash Flow Highlights
- At the end of the fiscal third quarter, Cooper's days sales outstanding (DSO) were 59 days, compared with 61 days at last year's third quarter. Cooper expects future DSOs in the mid 60's.
- Inventory months on hand was 7.5 months at the end of the fiscal quarter, versus 7.7 months at the end of last year's third quarter and 7.9 months at the end of this year's second fiscal quarter, in line with expectations, as inventory is built to support new product launches and as we transition to consolidated distribution centers.
- Capital expenditures were $39 million in the quarter primarily to expand manufacturing capacity, consolidate distribution centers and implement information systems in selected locations. Cooper expects capital expenditures in fiscal 2007 of about $160 million (which includes $10 million previously reported in fiscal 2006) primarily for expanded manufacturing capacity.
- Depreciation and amortization expense was $22.7 million for the quarter.
- Cash flow from operations was $47.4 million in the third quarter compared with $38.5 million in last year's third quarter.
Guidance
To adjust for this quarter's results, Cooper is revising its 2007 revenue guidance to $940 million to $967 million -- CVI $790 million to $810 million, CSI $150 million to $157 million. Previous guidance was $927 million to $967 million -- CVI $780 million to $810 million, CSI $147 million to $157 million.
Non-GAAP EPS is expected to be in the range of $2.60 to $2.90, which excludes estimated share-based compensation expense of 33 cents to 35 cents per share and other specific items considered unrelated to core operating performance. Previous non-GAAP guidance was $2.90 to $3.05. The reduction in non-GAAP guidance relates to a higher than previously estimated effective tax rate and interest expense as well as marketing and R&D expenses associated with new product launches and product development.
GAAP EPS guidance is expected to be $0.50 to $1.00. Previous GAAP guidance was $1.55 to $1.90. This reduction in guidance relates to higher net costs than originally planned for items considered unrelated to core operating performance as shown in the table "Reconciliation of Non-GAAP Earnings to GAAP Net Income" below, including an increase in the expected effective tax rate.
CooperVision Business Details
CVI Worldwide Revenue Highlights for Fiscal Third Quarter 2007
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CVI Selected Soft Lens Revenue Data
for Major Product and Geographic Categories
(Constant Currency)
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CVI CVI
% Change % Revenue
3Q FY07** vs. 3Q FY07
3Q FY06
---------------------------------------------------------------------
Core products* +15 71
---------------------------------------------------------------------
Specialty lenses +9 43
---------------------------------------------------------------------
Disposable lenses +9 91
---------------------------------------------------------------------
Spherical lenses (ex single-use) (2) 42
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Single-use spherical lenses +34 15
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Toric lenses +7 35
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Disposable toric lenses +10 30
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Multifocal lenses +24 6
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PC materials +23 24
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Americas region +2 44
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European region +4 39
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Asia-Pacific region +33 17
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Worldwide soft contact lenses +7 100
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* Core products include: specialty lenses, PC Technology(tm) brand
spherical lenses, silicone hydrogel spherical lenses and
single-use lenses.
** CVI's fiscal third quarter is May, June and July.
Note: Supplemental revenue data trends can be found on Cooper's
Website www.coopercos.com/investor at the link "Supplemental Market
and Revenue Data."
---------------------------------------------------------------------
- CVI's worldwide soft lens revenue of $211.9 million increased 7% from last year's third quarter in constant currency.
- Global revenue for Cooper's spherical silicone hydrogel contact lens Biofinity(r) was $2.8 million during the third quarter, twice its revenue in the second quarter, primarily generated in Europe. CVI's worldwide revenue for its single-use lenses grew 34% in the fiscal quarter and is ahead 26% through nine months with U.S. revenue growing 185%.
- Third quarter sales of CVI's core product lines -- specialty lenses (toric, cosmetic and multifocal lenses), PC Technology(tm) brand spherical lenses, silicone hydrogel spherical lenses and single-use lenses -- were $150.4 million, up 15%. These products account for 71% of CVI's soft lens business. Legacy conventional lens products declined 12%.
- CVI's disposable toric lens revenue grew 10% in the third quarter and is now 86% of its total toric revenue. Sales of all toric lenses were $74.2 million, up 7%, accounting for 35% of CVI's soft lens business. CVI's toric lens revenue outside of the United States, 53% of total toric revenue, grew 9% in the quarter.
- Proclear(r) products, including Biomedics XC(tm), grew 23% worldwide and 29% in the United States. Proclear(r) sphere products, including Proclear 1 Day(tm), grew 10% worldwide and 5% in the United States. Proclear(r) toric products grew 40% worldwide and 66% in the United States. Proclear(r) Multifocal products grew 47% worldwide and 80% in the United States. Proclear(r) products now represent 24% of CVI's worldwide revenue.
- Disposable multifocal products grew 27%. All multifocal lenses grew 24%.
CVI Anticipated New Product Introductions in 2008
- Proclear 1 Day(tm) 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 the second half of calendar 2008.
- Silicone hydrogel toric lens in late calendar 2008.
- Proclear 1 Day(tm) in Japan in calendar 2008 or early calendar 2009, depending on local regulatory approval.
- Single-use lenses continued to increase their share of the global contact lens market during the second calendar quarter. The total soft contact lens market grew 5%, while single-use products grew 11% and now represent 32% of the global soft contact lens market versus 31% in the second quarter of 2006.
- In the United States, where single-use products have the lowest penetration, the contact lens market grew 8% during this period while single-use products grew 32%, increasing their share of the market from 8% to 10%. In Asia, single-use products represent about 60% of the market and in Europe they represent about 40%. In all markets outside of the United States, single use-lenses accounted for 45% of soft contact lens revenue versus 43% in the second quarter of 2006.
- The United States soft contact lens market -- 37% of the world market -- grew 8% during the second calendar quarter while CVI's revenue was flat in the same period. The market in the rest of the world outside the United States, now 63% of the total world market, grew 4% while CVI's revenue grew 7%.
- CVI's single-use products in the second calendar quarter grew 31% worldwide and 284% in the United States.
- According to the industry data, silicone hydrogel revenue accounted for 25% of worldwide contact lens revenue during the second calendar quarter versus 24% in the first quarter. About three-quarters of silicone hydrogel revenue is generated in North America.
- Worldwide, silicone hydrogel revenue grew 19% in the second quarter while CVI's Proclear® product line, 24% of its soft lens revenue, grew 27% in the same period.
- Health Product Research (HPR), which reports on a statistical sampling of practitioners each quarter, calculated that silicone hydrogel lenses accounted for 46% of new patient visits to contact lens practitioners in the United States during the second calendar quarter of 2007, compared with 47% in the first quarter, and silicone hydrogel toric lenses accounted for 41% of new toric contact lens fits in the United States in the second calendar quarter of 2007, compared with 40% in the first quarter.
- HPR also reported that for the second quarter, CVI is now the second ranking company in new patient visits, 4 share points ahead of the third place company, and that Vistakon® and CVI combined represent about two-thirds of all visits for patients who are first time contact lens wearers.
CVI Fiscal Third Quarter 2007 Expenses
CVI's reported gross margin was 58% compared with 61% in the third quarter of 2006. These results include costs for share-based compensation expense and acquisition and integration charges primarily related to the consolidation of manufacturing locations and start-up expenses for new silicone hydrogel products. These items amounted to $13.6 million and $5.3 million in the fiscal third quarter of fiscal 2007 and 2006 or 6% and 3% of sales, respectively. Manufacturing inefficiencies associated with the ramp up of new products and plant realignment activities are expected to continue throughout fiscal 2007.
CVI's SGA expense grew 14% during the quarter, primarily related to integration activities, as revenue increased 9%. These results include share-based compensation expense, costs associated with the rationalization of CVI's distribution centers in Europe and the United States, intellectual property litigation expenses and start-up costs associated with new silicone hydrogel products, which together totaled $10.2 million or 5% of sales.
CVI's research and development expense was $7.2 million in the third quarter, an increase of 34% over the same period in 2006.
CooperSurgical Business Details
During the third quarter, revenue at CSI, Cooper's women's healthcare medical device business, grew 26% to $39.9 million. Organic revenue grew 8%. Sales of products marketed directly to hospitals grew 56% to $10.9 million and now represent 27% of CSI's total revenue compared with 22% in the third quarter last year.
CSI's gross margin was 59% for the quarter, the same as in the prior year period. Operating margin was 8% for the quarter including $3 million in acquired in-process R&D, $641 thousand associated with integration activities of its surgical product lines and share-based compensation expense of $687 thousand.
Conference Call
The Cooper Companies will hold a conference call to discuss its third quarter 2007 results today at 5pm Eastern Daylight Time. In the United States, dial +1-800-299-8538. Outside the United States, dial +1-617-786-2902. The passcode is 38958903.
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 58141607. This call will also be broadcast live on The Cooper Companies' Website site, www.coopercos.com and at www.streetevents.com.
Earnings Per Share
All per share amounts in this news release refer to diluted per share amounts.
Fiscal Third Quarter 2007 Financial Results Explanation of Non-GAAP Measures
In addition to results in accordance with GAAP, Cooper management also considers non-GAAP results as important supplemental financial measures in evaluating its ongoing core operating results and in making operating decisions.
Non-GAAP earnings and guidance exclude from GAAP results share-based compensation expense and other items that management does not consider part of core operating performance. Management uses these non-GAAP 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 results also allows investors, as well as management, to evaluate 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 (products are manufactured in multiple facilities until a final location is operational).
- 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 has 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.
Not all the items listed occurred in the fiscal third quarter of 2007 or 2006. Specific amounts for the items in the fiscal third quarter and nine-months ended 2007 and 2006 are below in the table headed "Reconciliation of Non-GAAP Earnings to GAAP Net Income."
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 earnings 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 earnings. Presentation of non-GAAP earnings 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 earnings 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 that are being eliminated.
- Pending intellectual property and securities litigation, which we expect to be significant but are difficult to forecast.
In addition, non-GAAP 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 results and supplementing these with non-GAAP earnings results.
Unaudited Supplemental Income Statement Data and Reconciliation of Non-GAAP Earnings to GAAP Net Income ($ in thousands, except per share amounts)
The tables below present supplemental income statement data reflecting Cooper's individual business units and the effect of specified items, together with a reconciliation of non-GAAP earnings based on the items discussed in the section "Fiscal Third Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income by Business Unit
(Unaudited)
Three Months Ended % %
July 31, % Revenue Revenue
2007 2006 Increase 2007 2006
-------- -------- -----------------------
Net sales:
CVI $212,010 $194,189 9% 100% 100%
CSI 39,852 31,609 26% 100% 100%
-------- --------
Total net sales 251,862 225,798 12% 100% 100%
-------- --------
Cost of sales:
CVI (1) 89,737 75,032 20% 42% 39%
CSI (2) 16,201 13,005 25% 41% 41%
-------- --------
Total cost of
sales (1), (2) 105,938 88,037 20% 42% 39%
-------- --------
Gross profit:
CVI 122,273 119,157 3% 58% 61%
CSI 23,651 18,604 27% 59% 59%
-------- --------
Total gross profit 145,924 137,761 6% 58% 61%
-------- --------
SGA:
CVI (3) 82,093 72,035 14% 39% 37%
CSI (4) 14,926 11,658 28% 37% 37%
Corporate (5) 7,502 6,346 18% -- --
-------- --------
Total SGA (3) - (5) 104,521 90,039 16% 41% 40%
-------- --------
Research and
development:
CVI (6) 7,227 5,375 34% 3% 3%
CSI (7) 4,286 889 382% 11% 3%
-------- --------
Total research and
development (6), (7) 11,513 6,264 84% 5% 3%
-------- --------
Restructuring costs:
CVI (8) 2,072 5,630 -63% 1% 3%
CSI (9) -- (2) 100% -- --
-------- --------
Total restructuring
costs (8), (9) 2,072 5,628 -63% 1% 2%
-------- --------
Amortization:
CVI 3,070 3,065 0% 1% 2%
CSI 1,090 465 134% 3% 1%
-------- --------
Total amortization 4,160 3,530 18% 2% 2%
-------- --------
Operating expense:
CVI 94,462 86,105 10% 45% 44%
CSI 20,302 13,010 56% 51% 41%
Corporate 7,502 6,346 18% -- --
-------- --------
Total operating expense 122,266 105,461 16% 49% 47%
-------- --------
Operating income:
CVI 27,811 33,052 -16% 13% 17%
CSI 3,349 5,594 -40% 8% 18%
Corporate (7,502) (6,346) -18% -- --
-------- --------
Total operating income 23,658 32,300 -27% 9% 14%
-------- --------
Interest expense (10) 11,085 8,534 30% 4% 4%
Other income (loss),
net 512 523
-------- --------
Income before income
taxes 13,085 24,289
Provision for income
taxes (11) 4,905 3,312
-------- --------
Net income $ 8,180 $ 20,977
======== ========
Add interest charge
applicable to
convertible debt 523 522
-------- --------
Income for calculating
diluted earnings per
share $ 8,703 $ 21,499
======== ========
Diluted earnings per
share $ 0.18 $ 0.45
======== ========
Number of shares used
to compute earnings
per share 47,785 47,482
======== ========
Nine Months Ended % %
July 31, % Revenue Revenue
2007 2006 Increase 2007 2006
-------- -------- -----------------------
Net sales:
CVI $583,791 $551,483 6% 100% 100%
CSI 113,026 91,451 24% 100% 100%
-------- --------
Total net sales 696,817 642,934 8% 100% 100%
-------- --------
Cost of sales:
CVI (1) 248,645 206,636 20% 43% 37%
CSI (2) 45,881 38,013 21% 41% 42%
-------- --------
Total cost of
sales (1), (2) 294,526 244,649 20% 42% 38%
-------- --------
Gross profit:
CVI 335,146 344,847 -3% 57% 63%
CSI 67,145 53,438 26% 59% 58%
-------- --------
Total gross profit 402,291 398,285 1% 58% 62%
-------- --------
SGA:
CVI (3) 235,989 207,760 14% 40% 38%
CSI (4) 42,047 33,211 27% 37% 36%
Corporate (5) 24,941 22,114 13% -- --
-------- --------
Total SGA (3) - (5) 302,977 263,085 15% 43% 41%
-------- --------
Research and
development:
CVI (6) 19,833 16,195 22% 3% 3%
CSI (7) 10,748 9,915 8% 10% 11%
-------- --------
Total research and
development (6), (7) 30,581 26,110 17% 4% 4%
-------- --------
Restructuring costs:
CVI (8) 6,765 7,833 -14% 1% 1%
CSI (9) 14 1 1300% -- --
-------- --------
Total restructuring
costs (8), (9) 6,779 7,834 -13% 1% 1%
-------- --------
Amortization:
CVI 9,214 9,201 0% 2% 2%
CSI 2,789 1,561 79% 2% 2%
-------- --------
Total amortization 12,003 10,762 12% 2% 2%
-------- --------
Operating expense:
CVI 271,801 240,989 13% 47% 44%
CSI 55,598 44,688 24% 49% 49%
Corporate 24,941 22,114 13% -- --
-------- --------
Total operating expense 352,340 307,791 14% 51% 48%
-------- --------
Operating income:
CVI 63,345 103,858 -39% 11% 19%
CSI 11,547 8,750 32% 10% 10%
Corporate (24,941) (22,114) -13% -- --
-------- --------
Total operating income 49,951 90,494 -45% 7% 14%
-------- --------
Interest expense (10) 31,795 28,834 10% 5% 4%
Other income (loss), net 1,340 (1,655)
-------- --------
Income before income
taxes 19,496 60,005
Provision for income
taxes (11) 6,495 7,373
-------- --------
Net income $ 13,001 $ 52,632
======== ========
Add interest charge
applicable to
convertible debt -- 1,567
-------- --------
Income for calculating
diluted earnings per
share $ 13,001 $ 54,199
======== ========
Diluted earnings per
share $ 0.29 $ 1.14
======== ========
Number of shares used to
compute earnings per
share 45,082 47,614
======== ========
Listed below are the items included in net income that management excludes in computing non-GAAP financial measures as described in the section "Fiscal Third Quarter 2007 Financial Results Explanation of Non-GAAP Measures."
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Earnings to GAAP Net Income
Three Months Ended Nine Months Ended
July 31, July 31,
2007 2006 2007 2006
-------- -------- -------- --------
GAAP net income $ 8,180 $ 20,977 $ 13,001 $ 52,632
Non-GAAP adjustments:
CooperVision restructuring
costs in cost of sales 6,057 1,004 15,387 1,956
CooperVision share-based
employee compensation
expense in cost of sales 387 232 901 309
CooperVision restructuring
costs in operating expenses 2,072 3,214 6,765 5,417
CooperVision share-based
employee compensation
expense in SGA 1,479 984 3,698 2,952
CooperVision share-based
employee compensation
expense in R&D 165 79 498 237
CooperVision production
start-up costs in cost
of sales 7,177 2,318 18,114 4,189
CooperVision distribution
center rationalization
costs in SGA 3,656 2,361 11,137 4,117
CooperVision intellectual
property litigation
expenses in SGA 2,265 599 5,598 1,246
CooperVision production
start-up costs in SGA 2,765 -- 4,421 --
Corneal health product lines
phase out in cost of sales (24) 1,747 (99) 1,508
Corneal health product lines
phase out in SGA -- 702 5 2,393
Corneal health product lines
phase out in R&D -- 448 97 2,108
Corneal health product lines
restructuring costs in
operating expense -- 2,416 -- 2,416
CooperSurgical inventory
step-up in cost of sales 143 -- 251 --
CooperSurgical share-based
employee compensation
expense in cost of sales 69 45 182 83
CooperSurgical share-based
employee compensation
expense in SGA 609 427 1,823 1,284
CooperSurgical share-based
employee compensation
expense in R&D 9 6 29 20
CooperSurgical integration
costs in SGA 498 -- 1,494 --
CooperSurgical restructuring
costs in operating expenses -- (2) 14 1
CooperSurgical in-process R&D 3,000 -- 7,157 7,500
Corporate share-based
employee and director
compensation expense in SGA 1,342 992 7,316 6,116
Corporate securities
litigation expenses in SGA 24 655 85 916
Write-off of deferred
financing costs -- -- 882 4,085
Income tax effect (3,848) (2,234) (14,080) (6,332)
-------- -------- -------- --------
27,845 15,993 71,675 42,521
-------- -------- -------- --------
Non-GAAP net income $ 36,025 $ 36,970 $ 84,676 $ 95,153
======== ======== ======== ========
Add interest charge
applicable to convertible
debt 523 522 1,569 1,567
-------- -------- -------- --------
Income for calculating
diluted earnings per share $ 36,548 $ 37,492 $ 86,245 $ 96,720
======== ======== ======== ========
Diluted earnings per share $ 0.76 $ 0.79 $ 1.81 $ 2.03
======== ======== ======== ========
Number of shares used to
compute earnings per share 47,785 47,482 47,672 47,614
======== ======== ======== ========
Three Months Ended Nine Months Ended
July 31, July 31,
2007 2006 2007 2006
-------- -------- -------- --------
(1) CVI Cost of sales:
Restructuring $ 6,057 $ 1,004 $ 15,387 $ 1,956
Share-based
compensation 387 232 901 309
Production start-up 7,177 2,318 18,114 4,189
Corneal health product
line phase out (24) 1,747 (99) 1,508
-------- -------- -------- --------
$ 13,597 $ 5,301 $ 34,303 $ 7,962
======== ======== ======== ========
(2) CSI Cost of sales:
Inventory step-up $ 143 $ -- $ 251 $ --
Share-based
compensation 69 45 182 83
-------- -------- -------- --------
$ 212 $ 45 $ 433 $ 83
======== ======== ======== ========
(3) CVI SGA:
Share-based
compensation $ 1,479 $ 984 $ 3,698 $ 2,952
Distribution start-up 3,656 2,361 11,137 4,117
Intellectual property
litigation 2,265 599 5,598 1,246
Production start-up 2,765 -- 4,421 --
Corneal health product
line phase out -- 702 5 2,393
-------- -------- -------- --------
$ 10,165 $ 4,646 $ 24,859 $ 10,708
======== ======== ======== ========
(4) CSI SGA:
Share-based
compensation $ 609 $ 427 $ 1,823 $ 1,284
Integration costs 498 -- 1,494 --
-------- -------- -------- --------
$ 1,107 $ 427 $ 3,317 $ 1,284
======== ======== ======== ========
(5) Corporate SGA:
Share-based
compensation $ 1,342 $ 992 $ 7,316 $ 6,116
Securities litigation 24 655 85 916
-------- -------- -------- --------
$ 1,366 $ 1,647 $ 7,401 $ 7,032
======== ======== ======== ========
(6) CVI research and
development expense:
Share-based
compensation $ 165 $ 79 $ 498 $ 237
Corneal health
product line phase
out -- 448 97 2,108
-------- -------- -------- --------
$ 165 $ 527 $ 595 $ 2,345
======== ======== ======== ========
(7) CSI research and
development expense:
Share-based
compensation $ 9 $ 6 $ 29 $ 20
CooperSurgical in-
process R&D 3,000 -- 7,157 7,500
-------- -------- -------- --------
$ 3,009 $ 6 $ 7,186 $ 7,520
======== ======== ======== ========
(8) CVI restructuring:
Restructuring costs
in operating
expenses $ 2,072 $ 3,214 $ 6,765 $ 5,417
Corneal health
product line phase
out -- 2,416 -- 2,416
-------- -------- -------- --------
$ 2,072 $ 5,630 $ 6,765 $ 7,833
======== ======== ======== ========
(9) CSI restructuring
costs $ -- $ (2) $ 14 $ 1
======== ======== ======== ========
(10) Interest expense:
Write-off of deferred
financing costs $ -- $ -- $ (882) $ (4,085)
-------- -------- -------- --------
$ -- $ -- $ (882) $ (4,085)
======== ======== ======== ========
(11) Provision for income
taxes:
Income tax effect $ (3,848) $ (2,234) $(14,080) $ (6,332)
======== ======== ======== ========
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 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 to 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.
- Changes in tax laws or their interpretation and changes in effective tax rates, including by reason of changes in the Company's geographic profit mix.
- Changes in the Company's expected utilization of recognized net operating loss carry forwards.
- The requirement to provide for a significant liability or to write off a significant asset, including impaired goodwill.
- Changes in accounting principles or estimates.
- Disruptions or delays related to implementation of information technology systems covering the Company's businesses, or other events which could result in management having to report a material weakness in the effectiveness of the Company's internal control over financial reporting in its 2007 Annual Report on Form 10-K.
- Environmental risks including significant environmental cleanup costs above those already accrued.
- Other events described in our Securities and Exchange Commission filings, including the "Business" and "Risk Factors" sections in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2006, as such Risk Factors may be updated in quarterly filings.
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 Lake Forest and 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, North Normandy, Ill., 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 mentioned in this release: Proclear® and Biofinity® are registered trademarks of The Cooper Companies, Inc., its subsidiaries and/or affiliates. Biomedics XC, PC Technology and Proclear 1 Day are trademarks of The Cooper Companies, Inc., its subsidiaries and/or affiliates. Vistakon® is a trademark of Johnson & Johnson, Inc.
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 Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net sales $251,862 $225,798 $696,817 $642,934
Cost of sales 105,938 88,037 294,526 244,649
-------- -------- -------- --------
Gross profit 145,924 137,761 402,291 398,285
Selling, general and
administrative expense 104,521 90,039 302,977 263,085
Research and
development expense 11,513 6,264 30,581 26,110
Restructuring costs 2,072 5,628 6,779 7,834
Amortization of
intangibles 4,160 3,530 12,003 10,762
-------- -------- -------- --------
Operating income 23,658 32,300 49,951 90,494
Interest expense 11,085 8,534 31,795 28,834
Other income (loss),
net 512 523 1,340 (1,655)
-------- -------- -------- --------
Income before income
taxes 13,085 24,289 19,496 60,005
Provision for income
taxes 4,905 3,312 6,495 7,373
-------- -------- -------- --------
Net income 8,180 20,977 13,001 52,632
Add interest charge
applicable to
convertible debt,
net of tax 523 522 -- 1,567
-------- -------- -------- --------
Income for calculating
earnings per share $ 8,703 $ 21,499 $ 13,001 $ 54,199
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Diluted earnings per
share $ 0.18 $ 0.45 $ 0.29 $ 1.14
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Number of shares used
to compute earnings
per share 47,785 47,482 45,082 47,614
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
July 31, October 31,
2007 2006
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ASSETS
Current assets:
Cash and cash equivalents $ 8,061 $ 8,224
Trade receivables, net 164,332 146,584
Inventories 265,381 236,512
Deferred tax asset 22,200 19,659
Other current assets 51,123 45,972
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Total current assets 511,097 456,951
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Property, plant and equipment, net 578,717 496,357
Goodwill 1,255,936 1,217,084
Other intangibles, net 150,086 147,160
Deferred tax asset 23,322 21,479
Other assets 21,907 13,570
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$2,541,065 $2,352,601
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 53,706 $ 61,366
Other current liabilities 230,716 215,264
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Total current liabilities 284,422 276,630
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Long-term debt 807,580 681,286
Deferred tax liabilities 11,504 9,494
Other liabilities 2,197 6,682
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Total liabilities 1,105,703 974,092
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Stockholders' equity 1,435,362 1,378,509
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$2,541,065 $2,352,601
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SOURCE: The Cooper Companies, Inc.
The Cooper Companies, Inc.
Norris Battin
925-460-3600
Fax: 925-460-3648
ir@coopercompanies.com
www.coopercos.com