The Cooper Companies, Inc.
Dec 8, 2016

The Cooper Companies Announces Fourth Quarter and Full Year 2016 Results

PLEASANTON, Calif., Dec. 08, 2016 (GLOBE NEWSWIRE) -- The Cooper Companies, Inc. (NYSE:COO) today announced financial results for the fiscal fourth quarter and full year ended October 31, 2016.

Commenting on the results, Robert S. Weiss, Cooper's president and chief executive officer said, "I am pleased to report record revenue and free cash flow for the year.  We accomplished this through market share gains, a successful push into the 1-Day silicone hydrogel space, growth in our Biofinity® franchise and very strong year in our CooperSurgical business.  We enter fiscal 2017 with momentum and are well positioned for sustained growth in each of our businesses going forward."

Fourth Quarter GAAP Operating Results

Fourth Quarter CooperVision (CVI) GAAP Operating Results

        Constant Currency
  (In millions) % of CVI Revenue %chg %chg
  4Q16 4Q16 y/y y/y
Toric $  126.1   31%  14%  14%
Multifocal    42.6   10%  9%  10%
Single-use sphere    110.4   27%  17%  16%
Non single-use sphere, other    132.6   32%  2%  3%
Total $  411.7   100%  10%  11%
 
 
        Constant Currency
   (In millions)  % of CVI Revenue %chg %chg
   4Q16  4Q16 y/y y/y
Americas $  168.1   41%  8%  8%
EMEA    155.7   38%  5%  12%
Asia Pacific    87.9   21%  27%  13%
Total $  411.7   100%  10%  11%
 

Fourth Quarter CooperSurgical (CSI) GAAP Operating Results

 
        Pro forma
  (In millions) % of CSI Revenue %chg %chg
  4Q16  4Q16 y/y y/y
Office and surgical products $  54.6   51%  5%  5%
Fertility    52.3   49 %  74%  8%
Total $  106.9   100%  30%  6%
 

Fiscal Year 2016 GAAP Operating Results

Fiscal Year 2017 Guidance
The Company initiated its fiscal year 2017 guidance.  Details are summarized as follows:

Non-GAAP earnings per share guidance excludes amortization of intangible assets and other costs including integration expenses which we may incur as part of our continuing operations. 

With respect to the Company's guidance expectations, the Company has not reconciled non-GAAP earnings per share guidance to GAAP earnings per share due to the inherent difficulty in forecasting acquisition-related, integration and restructuring charges and expenses, which are reconciling items between the non-GAAP and GAAP measure.  Due to the unknown effect, timing and potential significance of such charges and expenses that impact GAAP earnings per share, the Company is not able to provide such guidance.

Reconciliation of GAAP Results to Non-GAAP Results
To supplement our financial results and guidance presented on a GAAP basis, we use non-GAAP measures that we believe are helpful in understanding our results. The non-GAAP measures exclude costs which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations.  Our non-GAAP financial results and guidance are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.  Management uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions.  These non-GAAP measures are among the factors management uses in planning and forecasting for future periods.  We believe it is useful for investors to understand the effects of these items on our consolidated operating results.  Our non-GAAP financial measures include the following adjustments, and as appropriate, the related income tax effects and changes in income attributable to noncontrolling interests:

We define the non-GAAP measure of free cash flow as cash provided by operating activities less capital expenditures.  We believe free cash flow is useful for investors as an additional measure of liquidity because it represents cash flows that are available for repayment of debt, repurchases of our common stock or to fund our strategic initiatives.  Management uses free cash flow internally to understand, manage, make operating decisions and evaluate our business.  In addition, we use free cash flow to help plan and forecast future periods.

 
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP Results to Non-GAAP Results
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended October 31, 
  2016    2016   2015    2015 
  GAAP Adjustment Non-GAAP  GAAP Adjustment Non-GAAP 
               
Cost of sales $222,678  $(37,651)A$185,027   $202,227  $(37,866)A$164,361  
Selling, general and administrative expense $189,131  $(3,535)B$185,596   $179,643  $(13,621)B$166,022  
Research and development expense $17,941  $(283)C$17,658   $18,360  $(2,383)C$15,977  
Amortization of intangibles $14,723  $(14,723)D$   $13,053  $(13,053)D$  -   
Other expense (income), net $9  $(127)E$(118)  $1,046     -   $1,046  
Provision for (benefit from) income taxes $8,357  $4,565  F$12,922   $(588) $5,063 F$4,475  
Net (loss) income attributable to noncontrolling interest $(14) $  $(14)  $336  $19  $355  
Diluted earnings per share attributable to Cooper stockholders $1.23  $1.05  $2.28   $0.75  $1.25  $2.00  
 
AOur fiscal 2016 GAAP cost of sales includes $33.5 million of charges primarily for equipment and product rationalization and related integration costs arising from the acquisition of Sauflon, $1.4 million of facility start-up costs in CooperVision; and $2.8 million of integration costs in CooperSurgical. Our fiscal 2015 GAAP cost of sales included $34.8 million of charges primarily for product and equipment rationalization arising from the acquisition of Sauflon, $2.9 million of facility start-up costs in CooperVision; and $0.2 million of severance costs in CooperSurgical.
 
BOur fiscal 2016 GAAP selling, general and administrative expense includes $3.5 million in charges primarily related to acquisition and integration activities in CooperSurgical. Our fiscal 2015 GAAP selling, general and administrative expense includes $13.6 million in charges primarily for CooperVision's integration and restructuring activities related to the acquisition of Sauflon and severance costs in CooperSurgical. 
 
COur fiscal 2016 GAAP research and development expense includes $0.3 million primarily for severance costs related to integration and restructuring activities. Our fiscal 2015 GAAP research and development expense includes $2.4 million of equipment rationalization related to integration and restructuring activities.
 
DAmortization expense was $14.7 million and $13.1 million for the fiscal 2016 and 2015 periods, respectively.
 
EThese amounts represent the loss on foreign exchange forward contracts related to an acquisition.
 
FThese amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments.
 


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Reconciliation of Selected GAAP Results to Non-GAAP Results
(In thousands, except per share amounts)
(Unaudited)
 
 Twelve Months Ended October 31,
  2016    2016  2015   2015 
  GAAP Adjustment Non-GAAP  GAAP Adjustment Non-GAAP 
               
Cost of sales $  793,735  $  (69,562)A$  724,173   $  726,798  $  (70,330)A$  656,468  
Selling, general and administrative expense $  722,798  $  (24,145)B$  698,653   $  712,543  $  (51,489)B$  661,054  
Research and development expense $  65,411  $  (357)C$  65,054   $  69,589  $  (4,600)C$  64,989   
Amortization of intangibles $  60,790  $  (60,790)D$  -    $  51,459  $  (51,459)D$  -   
Other expense, net $  2,257  $  (1,011)E$  1,246   $  3,083  $  -   $  3,083  
Provision for income taxes $  20,699  $  15,703 F$  36,402   $  10,341  $  15,505 F$  25,846  
Net income attributable to noncontrolling interest $  1,017  $  55  $  1,072   $  1,621  $  137  $  1,758  
Diluted earnings per share attributable to Cooper stockholders $  5.59  $  2.85   $  8.44   $  4.14  $  3.30  $  7.44  
 
AOur fiscal 2016 GAAP cost of sales includes $58.9 million of charges primarily for equipment and product rationalization and related integration costs arising from the acquisition of Sauflon, $6.3 million of facility start-up costs in CooperVision, and $4.4 million of integration costs in CooperSurgical. Our fiscal 2015 GAAP cost of sales includes $61.6 million of charges primarily for product and equipment rationalization arising from the acquisition of Sauflon, $8.0 million of facility start-up costs in CooperVision; and $0.7 million of severance costs in CooperSurgical. 
 
BOur fiscal 2016 GAAP selling, general and administrative expense includes $12.8 million in charges primarily for acquisition related integration and restructuring activities in our CooperVision business, and $11.3 million of acquisition and integration costs in CooperSurgical. Our fiscal 2015 GAAP selling, general and administrative expense includes $31.7 million in charges for CooperVision's integration and restructuring activities related to the acquisition of Sauflon; and acquisition and severance costs in our CooperSurgical fertility business. Our fiscal 2015 GAAP selling, general and administrative expense also includes $19.8 million for the litigation settlement and legal costs.
 
COur fiscal 2016 GAAP research and development expense includes $0.4 million primarily for severance costs related to integration and restructuring activities. Our fiscal 2015 GAAP research and development expense includes $4.6 million of severance costs and equipment rationalization related to integration and restructuring activities.
 
DAmortization expense was $60.8 million and $51.5 million for the fiscal 2016 and 2015 periods, respectively.
 
EOur fiscal 2016 other expense, net, includes costs related to debt extinguishment and foreign exchange forward contracts related to an acquisition.
 
FThese amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments.
 

Conference Call and Webcast 
The Company will host a conference call today at 5:00 PM ET to discuss its fiscal fourth quarter and full year 2016 financial results and current corporate developments. The live dial-in number for the call is 855-643-4430 (U.S.) / 707-294-1332 (International). The participant passcode for the call is "Cooper". A simultaneous webcast of the call will be available through the "Investor Relations" section of The Cooper Companies' website at http://investor.coopercos.com and a transcript of the call will be archived on this site for a minimum of 12 months.  A recording of the call will be available beginning at 8:00 PM ET on December 8, 2016 through December 15, 2016. To hear this recording, dial 855-859-2056 (U.S.) / 404-537-3406 (International) and enter code 266737 (Cooper).

About The Cooper Companies
The Cooper Companies, Inc. ("Cooper") is a global medical device company publicly traded on the NYSE (NYSE:COO). Cooper is dedicated to being A Quality of Life Company™ with a focus on delivering shareholder value. Cooper operates through two business units, CooperVision and CooperSurgical. CooperVision brings a refreshing perspective on vision care with a commitment to developing a wide range of high-quality products for contact lens wearers and providing focused practitioner support. CooperSurgical is committed to advancing the health of families with its diversified portfolio of products and services focusing on women's health, fertility and diagnostics. Headquartered in Pleasanton, CA, Cooper has more than 10,000 employees with products sold in over 100 countries. For more information, please visit www.coopercos.com.

Forward-Looking Statements
This earnings release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995.  Statements relating to guidance, plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact, including our 2017 Guidance and all statements regarding acquisitions including the acquired companies' financial position, market position, product development and business strategy, expected cost synergies, expected timing and benefits of the transaction, difficulties in integrating entities or operations, as well as estimates of our and the acquired entities' future expenses, sales and earnings per share are forward looking.  In addition, all statements regarding anticipated growth in our revenue, anticipated effects of any product recalls, anticipated market conditions, planned product launches and expected results of operations and integration of any acquisition are forward-looking.  To identify these statements look for words like "believes," "expects," "may," "will," "should," "could," "seeks," "intends," "plans," "estimates" or "anticipates" and similar words or phrases.  Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. 

Among the factors that could cause our actual results and future actions to differ materially from those described in forward-looking statements are: adverse changes in the global or regional general business, political and economic conditions, including the impact of continuing uncertainty and instability of certain countries that could adversely affect our global markets, and the potential adverse economic impact and related uncertainty caused by the United Kingdom's election to withdraw from the European Union; foreign currency exchange rate and interest rate fluctuations including the risk of fluctuations in the value of foreign currencies that would decrease our revenues and earnings; acquisition-related adverse effects including the failure to successfully obtain the anticipated revenues, margins and earnings benefits of acquisitions, integration delays or costs and the requirement to record significant adjustments to the preliminary fair value of assets acquired and liabilities assumed within the measurement period, required regulatory approvals for an acquisition not being obtained or being delayed or subject to conditions that are not anticipated, adverse impacts of changes to accounting controls and reporting procedures, contingent liabilities or indemnification obligations, increased leverage and lack of access to available financing (including financing for the acquisition or refinancing of debt owed by us on a timely basis and on reasonable terms); our indebtedness and associated interest expense could adversely affect our financial health, prevent us from fulfilling our debt obligations or limit our ability to borrow additional funds; a major disruption in the operations of our manufacturing, research and development or distribution facilities, due to technological problems, including any related to our information systems maintenance, enhancements, or new system deployments and integrations, integration of acquisitions, natural disasters, or other causes; changes in tax laws or their interpretation and changes in statutory tax rates; disruptions in supplies of raw materials, particularly components used to manufacture our silicone hydrogel lenses; new U.S. and foreign government laws and regulations, and changes in existing laws, regulations and enforcement guidance, which affect the health care industry, including the contact lens industry and the medical device industry; compliance costs and potential liability in connection with U.S. and foreign  laws and health care regulations pertaining to privacy and security of third party information, including product recalls, warning letters, and data security breaches; legal costs, insurance expenses, settlement costs and the risk of an adverse decision, prohibitive injunction or settlement related to product liability, patent infringement or other litigation; limitations on sales following product introductions due to poor market acceptance; new competitors, product innovations or technologies; reduced sales, loss of customers and costs and expenses related to recalls; failure to receive, or delays in receiving, U.S. or foreign regulatory approvals for products; failure of our customers and end users to obtain adequate coverage and reimbursement from third party payors for our products and services; the requirement to provide for a significant liability or to write off, or accelerate depreciation on, a significant asset, including goodwill, and idle manufacturing facilities and equipment; the success of  our research and development activities and other start-up projects; dilution to earnings per share from acquisitions or issuing stock; changes in accounting principles or estimates; environmental risks; and 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, 2015, 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.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
 
   October 31,
2016
  October 31,
2015
  
ASSETS  
Current assets:         
Cash and cash equivalents $100,817  $16,426  
Trade receivables, net   291,370   282,918  
Inventories  417,696   419,692  
Deferred tax assets  47,103   41,731  
Other current assets  77,472   80,661  
Total current assets  934,458   841,428  
Property, plant and equipment, net  877,672   967,097  
Goodwill  2,164,748   2,197,077  
Other intangibles, net  441,086   411,090  
Deferred tax assets  6,107   4,510  
Other assets  51,847   38,662  
  $4,475,918  $4,459,864  
          
LIABILITIES AND STOCKHOLDERS' EQUITY 
          
Current liabilities:         
Short-term debt $226,325  $243,803  
Other current liabilities  310,130   324,979  
Total current liabilities  536,455   568,782  
Long-term debt  1,107,448   1,105,408  
Deferred tax liabilities  37,532   31,016   
Other liabilities  94,448   80,754  
Total liabilities  1,775,883   1,785,960  
Total Cooper stockholders' equity  2,699,867    2,667,509  
Noncontrolling interests  168   6,395  
Stockholders' equity  2,700,035   2,673,904  
  $4,475,918  $4,459,864  
 


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
October 31,
  Year Ended
October 31,
 
  2016  2015  2016 2015 
Net sales $518,654  $455,536  $1,966,814 $1,797,060 
Cost of sales  222,678   202,227   793,735   726,798 
Gross profit  295,976   253,309   1,173,079   1,070,262 
Selling, general and administrative expense  189,131   179,643   722,798  712,543 
Research and development expense  17,941   18,360   65,411  69,589 
Amortization of intangibles  14,723   13,053   60,790  51,459 
Operating income  74,181   42,253   324,080  236,671 
Interest expense   5,321   4,780   26,190  18,103 
Other expense, net  9   1,046   2,257  3,083 
Income before income taxes  68,851   36,427   295,633  215,485 
Provision for (benefit from) income taxes  8,357   (588)  20,699  10,341 
Net income  60,494   37,015   274,934  205,144 
Less: net (loss) income attributable to noncontrolling interests  (14  336   1,017  1,621 
Net income attributable to Cooper stockholders $60,508  $36,679  $273,917 $203,523 
                 
Diluted earnings per share attributable to Cooper stockholders $1.23  $0.75   $5.59 $4.14 
                
Number of shares used to compute earnings per share attributable to Cooper stockholders  49,281   49,177   49,026  49,179 
  

Soft Contact Lens Revenue Update

Worldwide Manufacturers' Soft Contact Lens Revenue
(U.S. dollars in millions; constant currency; unaudited)
 
 
  Calendar 3Q16
 Trailing Twelve Months 2016
    Market CVI   Market CVI
  Market Change Change Market  Change Change
Sales by Modality            
Single-use $  910   8%  12% $  3,365   10%  14%
Other  970   (4%)  3%  3,870   (1%)  5%
WW Soft Contact Lenses $   1,880    1%  6% $   7,235    3%  8%
             
             
Sales by Geography            
Americas  $  805   (3%)  3 % $  3,100   1%  5%
EMEA  530   7%  8%  2,030   6%  8%
Asia Pacific   545   3%  9%  2,105   4%  14%
WW Soft Contact Lenses $   1,880     1%  6% $   7,235    3%   8%
 

Note:  This data is compiled using gross product sales.

Source:  Management estimates and independent market research

COO-E

CONTACT:

Kim Duncan

Vice President, Investor Relations

ir@cooperco.com

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Source: Cooper Companies Inc

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