The Cooper Companies Announces Second Quarter 2017 Results
The Cooper Companies Announces Second Quarter 2017 Results
- Second quarter revenue increased 8% year-over-year to
$522.4 million . CooperVision (CVI) revenue up 4% to$408.5 million . CooperSurgical (CSI) revenue up 23% to$113.9 million . - Second quarter GAAP diluted earnings per share (EPS)
$2.12 , up60 cents or 39% from last year's second quarter. - Second quarter non-GAAP diluted EPS
$2.50 , up45 cents or 22% from last year's second quarter. See "Reconciliation of GAAP Results to Non-GAAP Results" below.
Commenting on the results,
Second Quarter GAAP Operating Results
- Revenue
$522.4 million , up 8% from last year's second quarter, up 6% pro forma (defined as constant currency and including acquisitions in both periods). - Gross margin 66% compared with 62% in last year's second quarter. On a non-GAAP basis, gross margin was 66% compared with 63% last year. The gross margin was positively impacted primarily by favorable currency and product mix within CooperVision led by Biofinity®.
- Operating margin 22% compared with 19% in last year's second quarter. On a non-GAAP basis, operating margin was 27% vs. 24% last year. The increase was the result of gross margin improvements.
- Total debt decreased
$37.6 million fromJanuary 31, 2017 , to$1,386.9 million , primarily due to operational cash flow generation and subsequent debt pay down. - Cash provided by operations
$131.6 million offset by capital expenditures$28.5 million resulted in free cash flow of$103.1 million .
Second Quarter CooperVision (CVI) GAAP Operating Results
- Revenue
$408.5 million , up 4% from last year's second quarter, up 7% in constant currency. - Revenue by category:
Constant Currency | |||||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | ||||||||||
2Q17 | 2Q17 | y/y | y/y | ||||||||||
Toric | $ | 131.8 | 32 | % | 9 | % | 12 | % | |||||
Multifocal | 42.9 | 10 | % | 1 | % | 4 | % | ||||||
Single-use sphere | 104.1 | 26 | % | 7 | % | 10 | % | ||||||
Non single-use sphere, other | 129.7 | 32 | % | (1 | )% | 2 | % | ||||||
Total | $ | 408.5 | 100 | % | 4 | % | 7 | % | |||||
- Revenue by geography:
Constant Currency | |||||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | ||||||||||
2Q17 | 2Q17 | y/y | y/y | ||||||||||
$ | 171.9 | 42 | % | 4 | % | 4 | % | ||||||
EMEA | 152.5 | 37 | % | 2 | % | 10 | % | ||||||
84.1 | 21 | % | 9 | % | 9 | % | |||||||
Total | $ | 408.5 | 100 | % | 4 | % | 7 | % | |||||
- Gross margin 67% compared with 61% in last year's second quarter. On a non-GAAP basis, gross margin was 67% vs. 63% last year. Gross margin was positively impacted primarily by favorable currency and product mix led by Biofinity®.
Second Quarter CooperSurgical (CSI) GAAP Operating Results
- Revenue
$113.9 million , up 23% from last year's second quarter, up 3% pro forma. - Revenue by category:
Pro forma | |||||||||||||
(In millions) | % of CSI Revenue | %chg | %chg | ||||||||||
2Q17 | 2Q17 | y/y | y/y | ||||||||||
Fertility | $ | 61.2 | 54 | % | 52 | % | 5 | % | |||||
Office and surgical products | 52.7 | 46 | % | 1 | % | 1 | % | ||||||
Total | $ | 113.9 | 100 | % | 23 | % | 3 | % | |||||
- Gross margin 61% compared with 64% in last year's second quarter. On a non-GAAP basis, gross margin was 62% vs. 65% last year. Gross margin was negatively impacted primarily by lower margin acquisitions.
Other
- In
April 2017 , the company repurchased$29.5 million of common stock under the existing share repurchase program for an average share price of$196.82 . The program was expanded by$500.0 million onMarch 21, 2017 , has$589.0 million of remaining availability and no expiration date.
Fiscal Year 2017 Guidance
The Company updated its fiscal year 2017 guidance. Details are summarized as follows:
- Fiscal 2017 total revenue
$2,110 -$2,135 million
- CVI revenue$1,645 -$1,665 million
- CSI revenue$465 -$470 million - Fiscal 2017 non-GAAP diluted earnings per share
$9.50 -$9.65
Non-GAAP diluted 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 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 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.
- 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. Many of these costs last year related to our acquisition of
Sauflon Pharmaceuticals Ltd. that closed in our fiscal fourth quarter of 2014. 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 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 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 States dollar are converted intoUnited 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.
Reconciliation of Selected GAAP Results to Non-GAAP Results (In millions, except per share amounts) (Unaudited) | ||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||
2017 GAAP | Adjustment | 2017 Non-GAAP | 2016 GAAP | Adjustment | 2016 Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 178.5 | $ | (0.7 | ) | A | $ | 177.8 | $ | 185.3 | $ | (7.2 | ) | A | $ | 178.1 | ||||||||
Operating expense excluding amortization | $ | 210.1 | $ | (5.4 | ) | B | $ | 204.7 | $ | 194.4 | $ | (6.2 | ) | B | $ | 188.2 | ||||||||
Amortization of intangibles | $ | 16.7 | $ | (16.7 | ) | C | $ | — | $ | 14.3 | $ | (14.3 | ) | C | $ | — | ||||||||
Other (income), net | $ | (0.1 | ) | $ | — | $ | (0.1 | ) | $ | (0.4 | ) | $ | (0.4 | ) | D | $ | (0.8 | ) | ||||||
Provision for income taxes | $ | 4.6 | $ | 4.1 | E | $ | 8.7 | $ | 8.2 | $ | 2.2 | E | $ | 10.4 | ||||||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 2.12 | $ | 0.38 | $ | 2.50 | $ | 1.52 | $ | 0.53 | $ | 2.05 |
A | Our fiscal 2017 GAAP cost of sales includes |
B | Our fiscal 2017 GAAP operating expense includes |
C | Amortization expense was |
D | This amount represents costs related to debt extinguishment. |
E | These amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments. |
Reconciliation of Selected GAAP Results to Non-GAAP Results (In millions, except per share amounts) (Unaudited) | ||||||||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||
2017 GAAP | Adjustment | 2017 Non-GAAP | 2016 GAAP | Adjustment | 2016 Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 365.3 | $ | (2.1 | ) | A | $ | 363.2 | $ | 372.9 | $ | (21.2 | ) | A | $ | 351.7 | ||||||||
Operating expense excluding amortization | $ | 415.0 | $ | (10.4 | ) | B | $ | 404.6 | $ | 382.8 | $ | (17.9 | ) | B | $ | 364.9 | ||||||||
Amortization of intangibles | $ | 33.4 | $ | (33.4 | ) | C | $ | — | $ | 30.5 | $ | (30.5 | ) | C | $ | — | ||||||||
Other expense, net | $ | 3.2 | $ | (0.2 | ) | D | $ | 3.0 | $ | 0.9 | $ | (0.9 | ) | D | $ | — | ||||||||
Provision for income taxes | $ | 8.9 | $ | 7.9 | E | $ | 16.8 | $ | 7.2 | $ | 6.8 | E | $ | 14.0 | ||||||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 3.65 | $ | 0.78 | $ | 4.43 | $ | 2.57 | $ | 1.30 | $ | 3.87 |
A | Our fiscal 2017 GAAP cost of sales includes |
B | Our fiscal 2017 GAAP operating expense includes |
C | Amortization expense was |
D | These amounts represent costs related to debt extinguishment and foreign exchange loss on forward contracts related to acquisitions. |
E | These amounts represent the increases in the provision for income taxes that arise from the impact of the above adjustments. |
Conference Call and Webcast
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About
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 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," "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 these items, including but not limited to, 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.
Consolidated Condensed Balance Sheets (In millions) (Unaudited) | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 121.3 | $ | 100.8 | |||
Trade receivables, net | 311.2 | 291.4 | |||||
Inventories | 437.6 | 417.7 | |||||
Deferred tax assets | — | 49.7 | |||||
Other current assets | 88.2 | 77.5 | |||||
Total current assets | 958.3 | 937.1 | |||||
Property, plant and equipment, net | 886.5 | 877.7 | |||||
2,302.7 | 2,164.7 | ||||||
Other intangibles, net | 485.0 | 441.1 | |||||
Deferred tax assets | 59.7 | 6.1 | |||||
Other assets | 57.6 | 51.9 | |||||
$ | 4,749.8 | $ | 4,478.6 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 41.3 | $ | 226.3 | |||
Other current liabilities | 301.9 | 316.9 | |||||
Total current liabilities | 343.2 | 543.2 | |||||
Long-term debt | 1,345.6 | 1,107.4 | |||||
Deferred tax liabilities | 25.6 | 37.5 | |||||
Other liabilities | 95.6 | 94.6 | |||||
Total liabilities | 1,810.0 | 1,782.7 | |||||
Stockholders' equity | 2,939.8 | 2,695.9 | |||||
$ | 4,749.8 | $ | 4,478.6 |
Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 522.4 | $ | 483.8 | $ | 1,021.5 | $ | 933.4 | |||||||
Cost of sales | 178.5 | 185.3 | 365.3 | 372.9 | |||||||||||
Gross profit | 343.9 | 298.5 | 656.2 | 560.5 | |||||||||||
Selling, general and administrative expense | 193.3 | 177.7 | 381.9 | 351.3 | |||||||||||
Research and development expense | 16.8 | 16.7 | 33.1 | 31.5 | |||||||||||
Amortization of intangibles | 16.7 | 14.3 | 33.4 | 30.5 | |||||||||||
Operating income | 117.1 | 89.8 | 207.8 | 147.2 | |||||||||||
Interest expense | 7.7 | 7.6 | 15.0 | 12.9 | |||||||||||
Other (income) expense, net | (0.1 | ) | (0.4 | ) | 3.2 | 0.9 | |||||||||
Income before income taxes | 109.5 | 82.6 | 189.6 | 133.4 | |||||||||||
Provision for income taxes | 4.6 | 8.2 | 8.9 | 7.2 | |||||||||||
Net income | 104.9 | 74.4 | 180.7 | 126.2 | |||||||||||
Less: net income attributable to noncontrolling interests | — | 0.3 | — | 0.7 | |||||||||||
Net income attributable to Cooper stockholders | $ | 104.9 | $ | 74.1 | $ | 180.7 | $ | 125.5 | |||||||
Diluted earnings per share attributable to Cooper stockholders | $ | 2.12 | $ | 1.52 | $ | 3.65 | $ | 2.57 | |||||||
Number of shares used to compute earnings per share attributable to Cooper stockholders | 49.5 | 48.9 | 49.5 | 48.8 |
Soft Contact Lens Revenue Update
Worldwide Manufacturers' Soft Contact Lens Revenue ( | |||||||||||||||||||
Calendar 1Q17 | Trailing Twelve Months 2017 | ||||||||||||||||||
Market | CVI | Market | CVI | ||||||||||||||||
Market | Change | Change | Market | Change | Change | ||||||||||||||
Sales by Modality | |||||||||||||||||||
Single-use | $ | 880 | 13 | % | 17 | % | $ | 3,500 | 11 | % | 15 | % | |||||||
Other | 960 | (1 | )% | 7 | % | 3,810 | (1 | )% | 6 | % | |||||||||
WW Soft Contact Lenses | $ | 1,840 | 5 | % | 10 | % | $ | 7,310 | 4 | % | 9 | % | |||||||
Sales by Geography | |||||||||||||||||||
$ | 805 | 3 | % | 8 | % | $ | 3,170 | 2 | % | 8 | % | ||||||||
EMEA | 495 | 7 | % | 10 | % | 1,965 | 7 | % | 8 | % | |||||||||
540 | 7 | % | 16 | % | 2,175 | 5 | % | 14 | % | ||||||||||
WW Soft Contact Lenses | $ | 1,840 | 5 | % | 10 | % | $ | 7,310 | 4 | % | 9 | % | |||||||
Note: This data is compiled using gross product sales. | |||||||||||||||||||
Source: Management estimates and independent market research |
COO-E
Source:
CONTACT:Source:Kim Duncan Vice President, Investor Relations ir@cooperco.com
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