- Revenue increased 6% year-over-year to
$628.1 million. CooperVision (CVI) revenue up 6% to $470.1 million, and CooperSurgical (CSI) revenue up 9% to $158.0 million.
- GAAP diluted earnings per share
$2.07, up 182.6% from last year's first quarter.
- Non-GAAP diluted earnings per share
$2.88, up 9 centsor 3% from last year’s first quarter. See “Reconciliation of GAAP Results to Non-GAAP Results” below.
Commenting on the results,
First Quarter Operating Results
$628.1 millionup 6% from last year’s quarter, up 8% pro forma.
- Gross margin 67% compared with 63% in last year’s first quarter. On a non-GAAP basis, gross margin was 67% compared with 68% last year. Gross margin was negatively impacted by currency, offset by favorable product mix.
- Operating margin 18% compared with 15% in last year’s first quarter on improved sales of higher margin products and acquisitions. On a non-GAAP basis, operating margin was 26% compared with 28% last year driven primarily by company-wide investments in selling and marketing.
- Interest expense
$18.2 millioncompared with $18.4 millionin last year's first quarter.
- Total debt increased
$109.6 millionfrom October 31, 2018, to $2,132.4 millionprimarily due to acquisitions and higher cash balances.
- Cash provided by operations
$101.8 millionoffset by capital expenditures $79.2 millionresulted in free cash flow of $22.6 million, up 190% year-over-year.
First Quarter CooperVision (CVI) Operating Results
$470.1 million, up 6% from last year’s first quarter, up 8% pro forma.
- Revenue by category:
|(In millions)||% of CVI Revenue||%chg||%chg|
|Non single-use sphere, other||142.9||31%||(1)%||1%|
- Revenue by geography:
|(In millions)||% of CVI Revenue||%chg||%chg|
- Gross margin 66% consistent with 66% in last year’s first quarter. On a non-GAAP basis, gross margin was 66% compared with 67% last year. Gross margin was negatively impacted by currency.
First Quarter CooperSurgical (CSI) Operating Results
$158.0 million, up 9% from last year’s first quarter, up 8% pro forma.
- Revenue by category:
|(In millions)||% of CSI Revenue||%chg||%chg|
|Office and surgical products||$||95.7||61%||9%||7%|
- Gross margin 69% compared with 54% in last year’s first quarter. On a non-GAAP basis, gross margin was 72% compared with 69% last year. Gross margin was favorably impacted by product mix including higher sales of PARAGARD® and certain fertility products.
January 2019, the company repurchased $6.1 millionof common stock under the existing share repurchase program for an average share price of $248.70. The program has $557.4 millionof remaining availability and no expiration date.
Fiscal Year 2019 Guidance
The Company updated its fiscal year 2019 guidance. Details are summarized as follows:
- Fiscal 2019 total revenue
$2,631 - $2,676 million(6% to 7% pro forma)
- CVI revenue
$1,968 - $1,995 million(6.5% to 8% pro forma)
- CSI revenue
$663 - $681 million(3% to 6% pro forma)
- CVI revenue
- Fiscal 2019 non-GAAP diluted earnings per share of
$11.85 - $12.15
Non-GAAP diluted earnings per share guidance excludes amortization and impairment of intangible assets and other costs including acquisition, integration and manufacturing related costs 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 diluted earnings per share guidance to GAAP diluted 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 diluted 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 may include the following adjustments, and as appropriate, the related income tax effects and changes in income attributable to noncontrolling interests:
- We exclude the effect of amortization and impairment of intangible assets from our non-GAAP financial results. Amortization of intangible assets will recur in future periods; however, the amounts are affected by the timing and size of our acquisitions. Impairment of intangible assets is a non-recurring cost.
- We exclude the effect of acquisition and integration expenses and the effect of restructuring expenses from our non-GAAP financial results. Such expenses generally diminish over time with respect to past acquisitions; however, we generally will incur similar expenses in connection with any future acquisitions. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition and integration expenses include items such as personnel costs for transitional employees, other acquired employee related costs and integration related professional services. Restructuring expenses include items such as employee severance, product rationalization, facility and other exit costs.
- We exclude other exceptional or unusual charges or expenses. These can be variable and difficult to predict, such as certain litigation expenses and product transition costs, and are not what we consider as typical of our continuing operations. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.
- We report revenue growth using the non-GAAP financial measure of pro forma which includes constant currency revenue and revenue from acquisitions and excludes carrier screening and NIPT in both periods. Management also 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 Statesdollar are converted into United Statesdollars at the average foreign exchange rates for the corresponding period in the prior year.
- 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 millions, except per share amounts)
|Three Months Ended January 31,|
|Cost of sales||$||209.6||$||(5.4||)||A||$||204.2||$||219.1||$||(27.6||)||A||$||191.5|
|Operating expense excluding amortization||$||271.0||$||(11.9||)||B||$||259.1||$||244.7||$||(8.9||)||B||$||235.8|
|Amortization of intangibles||$||36.6||$||(36.6||)||C||$||—||$||36.0||$||(36.0||)||C||$||—|
|Other income, net||$||1.1||$||—||$||1.1||$||3.0||$||—||$||3.0|
|(Benefit) provision for income taxes||$||(9.4||)||$||13.3||E||$||3.9||$||197.3||$||(186.4||)||E||$||10.9|
|Diluted earnings (loss) per share||$||2.07||$||0.81||$||2.88||$||(2.50||)||$||5.29||$||2.79|
|Weighted average diluted shares used||49.9||49.9||48.9||49.6|
|A||Fiscal 2019 GAAP cost of sales includes $5.4 million of costs primarily related to acquisitions, integration and other manufacturing related costs, resulting in fiscal 2019 GAAP and non-GAAP gross margin of 67%. Fiscal 2018 GAAP cost of sales includes $5.6 million of costs in CooperVision primarily related to the impact of Hurricane Maria on our Puerto Rico manufacturing facility and other manufacturing related costs and $22.0 million in CooperSurgical primarily related to the PARAGARD inventory step-up release, resulting in fiscal 2018 GAAP gross margin of 63% as compared to fiscal 2018 non-GAAP gross margin of 68%.|
|B||Fiscal 2019 GAAP operating expenses include $11.9 million primarily related to acquisition and integration activities in CooperSurgical. Fiscal 2018 GAAP operating expenses include $8.9 million in charges primarily due to acquisition and integration activities in CooperSurgical and CooperVision.|
|C||Amortization expense was $36.6 million and $36.0 million for the fiscal 2019 and 2018 periods, respectively. Items A, B and C resulted in fiscal 2019 GAAP operating margin of 18% as compared to fiscal 2019 non-GAAP operating margin of 26%, and fiscal 2018 GAAP operating margin of 15% as compared to fiscal 2018 non-GAAP operating margin of 28%.|
|D||Fiscal 2018 GAAP interest expense includes $1.7 million of bridge loan termination fees related to CooperSurgical's PARAGARD acquisition.|
|E||Fiscal 2019 GAAP benefit for income taxes primarily represents the impact of the above adjustments. Fiscal 2018 GAAP provision for income taxes includes a $(202.0) million U.S. tax reform impact and $15.6 million of net changes 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
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 of historical fact, including our 2019 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 diluted 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," "outlook," "probable," "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 global political and economic conditions, and related uncertainty caused the United Kingdom’s election to withdraw from the
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.
Vice President, Investor Relations and Administration
Consolidated Condensed Balance Sheets
|Cash and cash equivalents||$||146.6||$||77.7|
|Trade receivables, net||389.7||374.7|
|Other current assets||170.5||169.7|
|Total current assets||1,193.0||1,090.9|
|Property, plant and equipment, net||1,023.8||976.0|
|Other intangibles, net||1,514.1||1,521.3|
|Deferred tax assets||55.2||58.4|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Other current liabilities||493.1||499.4|
|Total current liabilities||938.6||536.5|
|Deferred tax liabilities||34.6||31.0|
|Long-term tax payable||124.8||141.5|
|Accrued pension liability and other||88.2||110.3|
Consolidated Statements of Income (Loss)
(In millions, except per share amounts)
|Three Months Ended
|Cost of sales||209.6||219.1|
|Selling, general and administrative expense||250.0||225.9|
|Research and development expense||21.0||18.8|
|Amortization of intangibles||36.6||36.0|
|Other income, net||1.1||3.0|
|Income before income taxes||93.8||74.8|
|(Benefit) provision for income taxes||(9.4||)||197.3|
|Net income (loss) attributable to Cooper stockholders||$||103.2||$||(122.5||)|
|Earnings (loss) per share - diluted||$||2.07||$||(2.50||)|
|Number of shares used to compute diluted earnings (loss) per share||49.9||48.9|
Source: The Cooper Companies, Inc.