The Cooper Companies, Inc.
Sep 1, 2016

The Cooper Companies Announces Third Quarter 2016 Results

PLEASANTON, Calif., Sept. 01, 2016 (GLOBE NEWSWIRE) -- The Cooper Companies, Inc. (NYSE:COO) today announced financial results for the fiscal third quarter ended July 31, 2016.

Commenting on the results, Robert S. Weiss, Cooper's president and chief executive officer said, "I am pleased to report another solid quarter for the company, including record revenues at both our business units.  We are very encouraged by our business trends and believe we are well positioned to continue producing strong results."

Third Quarter GAAP Operating Highlights

Third Quarter CooperVision (CVI) GAAP Operating Highlights

           
Revenue by category:          
           
         Constant Currency 
    (In millions) % of CVI Revenue %chg%chg 
    3Q16 3Q16 y/yy/y 
 Toric  $  126.1   31 %  10% 10% 
 Multifocal     44.3   11%  4% 5% 
 Single-use sphere     104.3   25%  11% 10% 
 Non single-use sphere, other     135.2   33%  0% 1% 
 Total  $  409.9   100%  6% 6% 
           
            
Revenue by geography:         
           
         Constant Currency 
     (In millions)  % of CVI Revenue %chg%chg 
     3Q16  3Q16 y/yy/y 
  Americas  $  166.1   40%  6% 6% 
 EMEA     162.5   40%  0% 3% 
 Asia Pacific     81.3   20%  25% 16% 
 Total  $  409.9    100%  6% 6% 
           
           
           

Third Quarter CooperSurgical (CSI) GAAP Operating Highlights

            
Revenue by category:          
            
          Pro forma 
    (In millions) % of CSI Revenue %chg  %chg 
    3Q16 3Q16 y/y y/y 
 Office and surgical products $  52.8   50%  3%  3% 
 Fertility    52.0   50%  108%  10% 
 Total $  104.8   100%  38%  6% 
            

Fiscal Year 2016 Guidance
The Company updated its fiscal year 2016 guidance.  Details are summarized as follows:

With respect to the Company's expectations above, 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 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.  These include costs related to acquisition and integration activities, severance and restructuring costs; costs associated with the start-up of new manufacturing facilities; as well as certain legal costs described below.  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, along with the related income tax effects and changes in income attributable to noncontrolling interests:

We also report revenue growth using the non-GAAP financial measure of pro forma which includes constant currency revenue and revenue from acquisitions in both periods. Management presents and refers to constant currency information so that revenue results may be evaluated excluding the effect of foreign currency rate fluctuations. To present this information, current period revenue for entities reporting in currencies other than the United States dollar are converted into United States dollars at the average foreign exchange rates for the corresponding period in the prior year. To report pro forma revenue growth, we include revenue for the comparison period when we did not own recently acquired companies.

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.

We also provide the metric of adjusted free cash flow that we believe represents our operations ability to generate cash by adjusting cash flow from operations for capital expenditures that are part of our ongoing operations and for acquisition related and integration costs.  We believe adjusted free cash flow is useful to investors as an additional measure of performance because it reports elements of our operating activities and excludes cash flow elements that we do not consider to be related to our ability to generate cash.  As discussed above, we incur significant acquisition related and integration costs that will diminish over time with respect to past acquisitions; however, we will incur similar expenses in connection with any future acquisitions.  We believe it is useful to investors to understand the effects of these costs on our adjusted free cash flow.   

                  
  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 July 31,  
     2016     2016    2015     2015   
    GAAP Adjustment Non-GAAP   GAAP Adjustment Non-GAAP  
                  
 Cost of sales $  198,085  $ (10,624) A $  187,461   $  188,791  $  (15,275) A $  173,516   
 Selling, general and administrative expense $  182,403  $  (2,723) B $  179,680   $  191,783  $  (26,075) B $  165,708   
 Research and development expense $  16,013  $  (52) C $  15,961   $  18,298  $  (1,944) C $  16,354   
 Amortization of intangibles $  15,553  $ (15,553) D $  -    $  12,495  $  (12,495) D $  -    
 Other expense, net $  1,274  $  -   $  1,274   $  1,020  $  -   $  1,020   
 Provision for (benefit from) income taxes $  5,172  $  4,266  E $  9,438   $  (642) $  3,751  E $  3,109   
 Income attributable to noncontrolling interest $  315  $  19  F $  334   $  292  $  23  F $  315   
 Diluted earnings per share attributable to Cooper stockholders $  1.79  $  0.51  $  2.30   $  0.91  $  1.06  $  1.97   
                  
                  
 AOur fiscal 2016 GAAP cost of sales includes $9.2 million of charges primarily for equipment and product rationalization and related integration activities and $1.1 million of facility start-up costs in our CooperVision business; and $0.3 million of integration costs in our CooperSurgical business. Our fiscal 2015 GAAP cost of sales included $13.0 million of charges primarily for product and equipment rationalization, and $2.1 million of facility start-up costs in our CooperVision business; and $0.2 million of severance costs in our CooperSurgical business.  
    
 BOur fiscal 2016 GAAP selling, general and administrative expense includes $2.7 million in costs primarily for acquisition and integration related activities in our CooperSurgical business. Our fiscal 2015 GAAP selling, general and administrative expense included $7.8 million primarily for CooperVision's acquisition related integration and restructuring; and acquisition and severance costs in our CooperSurgical business.  Our fiscal 2015 GAAP selling, general and administrative expense also includes $18.3 million for litigation settlement and legal costs. 
    
 Our fiscal 2016 GAAP research and development expense includes $0.1 million of integration costs. Our fiscal 2015 GAAP research and development expense includes $1.9 million of equipment rationalization related to integration and restructuring activities. 
    
 DAmortization expense was $15.6 million and $12.5 million for the fiscal 2016 and 2015 periods, respectively. 
                    
 EThese amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments. 
                  
 FThe amount represents the impact of amortization related to income attributable to non controlling interest.  


                   
                  
  THE COOPER COMPANIES, INC. AND SUBSIDIARIES                
  Reconciliation of Selected GAAP Results to Non-GAAP Results             
  (In thousands, except per share amounts)               
  (Unaudited)                
                    
    Nine Months Ended July 31,  
     2016     2016    2015     2015   
    GAAP Adjustment  Non-GAAP  GAAP Adjustment Non-GAAP  
                  
 Cost of sales $  571,057  $ (31,911) A $  539,146   $  524,570  $  (32,463) A $  492,107   
 Selling, general and administrative expense $  533,666  $ (20,609) B $  513,057   $  532,901  $  (37,869) B $  495,032   
 Research and development expense $  47,470  $  (74) C $  47,396   $  51,229  $  (2,218) C $  49,011   
 Amortization of intangibles $  46,068  $ (46,068) D $  -    $  38,406  $  (38,406) D $  -    
 Other expense, net $  2,247  $  (882) E $  1,365   $  2,037  $  -   $  2,037   
 Provision for income taxes $  12,344  $  11,136  F  $  23,480   $  10,929  $  10,442  F $  21,371   
 Income attributable to noncontrolling interest $  1,030  $  55  G $  1,085   $  1,285  $  118   G $  1,403   
 Diluted earnings per share attributable to Cooper stockholders $  4.36  $  1.81  $  6.17    $  3.39  $  2.05  $  5.44   
                   
                   
 AOur fiscal 2016 GAAP cost of sales includes $25.4 million of charges primarily for equipment and product rationalization and related integration activities, and $4.9 million of facility start-up costs in our CooperVision business; and $1.6 million of integration costs in our CooperSurgical business. Our fiscal 2015 GAAP cost of sales includes $27.4 million of charges primarily for product and equipment rationalization, and $4.6 million of facility start-up costs in our CooperVision business; and $0.5 million of severance costs in our CooperSurgical business.  
    
 BOur fiscal 2016 GAAP selling, general and administrative expense includes $11.7 million in costs primarily for acquisition related integration and restructuring activities in our CooperVision business and $8.9 million of acquisition and integration costs in our CooperSurgical business. Our fiscal 2015 GAAP selling, general and administrative expense includes $18.7 million in costs for acquisition related integration and restructuring activities in our CooperVision business; and acquisition and severance costs in our CooperSurgical business. Our fiscal 2015 GAAP selling, general and administrative expense also includes $19.2 million for litigation settlement and legal costs. 
    
 COur fiscal 2016 research and development expense includes $0.1 million of integration costs. Our fiscal 2015 GAAP research and development expense includes $2.2 million of severance costs and equipment rationalization related to integration and restructuring activities. 
                  
 DAmortization expense was $46.1 million and $38.4 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. 
                  
 GThe amount represents the impact of amortization related to income attributable to non controlling interest.   
                  


           
  THE COOPER COMPANIES, INC. AND SUBSIDIARIES        
  Reconciliation of Selected GAAP Results to Non-GAAP Results      
  Free Cash Flow and Adjusted Free Cash Flow        
  (In thousands)        
  (Unaudited)        
    Three Months
Ended July 31,
  Nine Months
Ended July 31,
   
     2016    2016    
           
  Cash flow from operations $  128,886   $  316,273    
  Capital expenditures    (31,046)     (117,378)   
  Free cash flow $  97,840   $  198,895    
  Items not included in adjusted free cash flow:        
  Integration costs and other    6,482       27,844    
  Adjusted Free cash flow $  104,322   $  226,739     
           

Conference Call and Webcast
The Company will host a conference call today at 5:00 PM ET to discuss its fiscal third quarter 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 September 1, 2016 through September 8, 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 approximately 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 2016 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, including the 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, excess or constrained manufacturing capacity, or other causes; 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 tax laws, regulations and enforcement guidance, which affect the contact lens industry, specifically, or the medical device and the healthcare industries generally; compliance costs and potential liability in connection with U.S. and foreign healthcare regulations and federal and state laws pertaining to privacy and security of health 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; changes in tax laws or their interpretation and changes in statutory tax rates; 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; 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)
         
  July 31,
2016
  October 31,
2015
  
  
ASSETS 
  
Current assets:          
Cash and cash equivalents $62,613  $16,426  
Trade receivables, net   307,341   282,918  
Inventories  430,259   419,692  
Deferred tax assets  42,590   41,731  
Other current assets  86,836   80,661  
Total current assets  929,639   841,428  
Property, plant and equipment, net  922,211   967,097  
Goodwill  2,228,063   2,197,077  
Other intangibles, net  454,506    411,090  
Deferred tax assets  6,696   4,510  
Other assets  51,560   38,662  
  $4,592,675  $4,459,864  
          
LIABILITIES AND STOCKHOLDERS' EQUITY 
          
Current liabilities:         
Short-term debt $31,692  $ 243,803  
Other current liabilities  288,549   324,979  
Total current liabilities   320,241   568,782  
Long-term debt  1,412,374   1,105,408  
Deferred tax liabilities  43,773   31,016  
Other liabilities  78,885   80,754  
Total liabilities  1,855,273   1,785,960  
Total Cooper stockholders' equity  2,730,688   2,667,509  
Noncontrolling interests  6,714   6,395  
Stockholders' equity  2,737,402   2,673,904  
  $4,592,675  $4,459,864  



 THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
July 31,
   Nine Months Ended
July 31,
  2016  2015  2016 2015
Net sales $514,726  $461,678  $1,448,160 $1,341,524
Cost of sales  198,085   188,791   571,057  524,570
Gross profit  316,641   272,887   877,103  816,954
Selling, general and administrative expense  182,403   191,783   533,666  532,901
Research and development expense  16,013   18,298   47,470  51,229
Amortization of intangibles  15,553   12,495   46,068  38,406
Operating income  102,672   50,311   249,899  194,418
Interest expense  7,983   4,690   20,869  13,323
Other expense, net  1,274   1,020   2,247  2,037
Income before income taxes  93,415   44,601   226,783  179,058
Provision for (benefit from) income taxes  5,172   (642)  12,344  10,929
Net income  88,243   45,243   214,439  168,129
Less: net income attributable to noncontrolling interests  315   292   1,030  1,285
Net income attributable to Cooper stockholders $87,928  $44,951  $213,409 $166,844
               
Diluted earnings per share attributable to Cooper stockholders $1.79  $0.91  $4.36 $3.39
               
Number of shares used to compute diluted earnings per share attributable to Cooper stockholders  49,048   49,244   48,902  49,157


Soft Contact Lens Revenue Update

              
Worldwide Manufacturers' Soft Contact Lens Revenue         
(U.S. dollars in millions; constant currency; unaudited)         
              
              
  Calendar 2Q16 
 Trailing Twelve Months 2016
 
    Market CVI   Market CVI 
  Market Change Change  Market Change Change 
Sales by Modality             
  Single-use $  860   10%   18% $  3,300   11%  16% 
  Other  990   1%  7% $  3,910   0%  5% 
  WW Soft Contact Lenses $   1,850    5%  10%  $   7,210    5 %  8% 
              
              
Sales by Geography             
  Americas  $  800   4%  8% $  3,130   5%  6% 
  EMEA  520   7%  9%  1,995   5 %  8% 
  Asia Pacific   530   4%  20%  2,085   5%  15% 
  WW Soft Contact Lenses $   1,850     5%  10% $   7,210    5%   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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