The Cooper Companies Announces Second Quarter 2015 Results
The Cooper Companies Announces Second Quarter 2015 Results
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Revenue increased 5% year-over-year to
$434.7 million . CooperVision (CVI) revenue up 9% to$359.6 million .CooperSurgical (CSI) revenue down 8% to$75.1 million . -
GAAP earnings per share (EPS)
$1.23 , down39 cents or 24% from last year's second quarter. -
Non-GAAP EPS
$1.72 , down4 cents from last year's second quarter. See "Reconciliation of GAAP to Non-GAAP Results" below.
Commenting on the results,
Second Quarter GAAP Operating Highlights
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Revenue
$434.7 million , up 5% from last year's second quarter, up 4% pro forma (defined as constant currency and including Sauflon revenue in both periods). - Gross margin 62% compared with 65% in last year's second quarter. Gross margin was negatively impacted primarily by currency, and integration and facility start-up costs, offset in part by favorable product mix. Excluding integration and facility start-up costs, gross margin was 63% vs. 65% last year.
- Operating margin 16% compared with 22% in last year's second quarter. The decrease was primarily due to integration related expenses and increased amortization arising from the Sauflon acquisition. On a non-GAAP basis, operating margin would have been 22% vs. 24% last year.
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Depreciation
$32.2 million , up 33% from last year's second quarter. Amortization$12.3 million , up 65% from last year's second quarter primarily due to the Sauflon acquisition. -
Total debt decreased
$47.6 million fromJanuary 31, 2015 , to$1,347.7 million , primarily due to operational cash flow generation and subsequent debt pay down. -
Interest expense increased to
$4.7 million compared with$1.6 million in last year's second quarter primarily due to higher debt and interest rates associated with the acquisition of Sauflon. -
Cash provided by operations
$110.6 million , capital expenditures$53.4 million , and excluding integration costs of$10.6 million resulted in free cash flow of$67.8 million .
Second Quarter CooperVision (CVI) GAAP Operating Highlights
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Revenue
$359.6 million , up 9% from last year's second quarter, up 6% pro forma. - Revenue by category:
Pro forma | ||||
(In millions) | % of CVI Revenue | %chg | %chg | |
2Q15 | 2Q15 | y/y | y/y | |
Toric | $ 107.1 | 30% | 2% | 7% |
Multifocal | 37.9 | 11% | 7% | 8% |
Single-use sphere | 85.1 | 24% | 19% | 7% |
Non single-use sphere, other | 129.5 | 35% | 9% | 3% |
Total | $ 359.6 | 100% | 9% | 6% |
- Revenue by geography:
Pro forma | ||||
(In millions) | % of CVI Revenue | %chg | %chg | |
2Q15 | 2Q15 | y/y | y/y | |
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$ 152.5 | 42% | 7% | 5% |
EMEA | 143.3 | 40% | 20% | 8% |
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63.8 | 18% | -9% | 2% |
Total | $ 359.6 | 100% | 9% | 6% |
- Gross margin 61% compared with 65% in last year's second quarter. Gross margin was negatively impacted primarily by currency, and integration and facility start-up costs, offset in part by favorable product mix. Excluding integration and facility start-up costs, gross margin was 63% vs. 65% last year.
Second Quarter CooperSurgical (CSI) GAAP Operating Highlights
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Revenue
$75.1 million , down 8% from last year's second quarter, down 3% in constant currency. - Revenue by category:
Constant Currency | ||||
(In millions) | % of CSI Revenue | %chg | %chg | |
2Q15 | 2Q15 | y/y | y/y | |
Office and surgical procedures | $ 49.9 | 66% | -3% | -3% |
Fertility | 25.2 | 34% | -15% | -1% |
Total | $ 75.1 | 100% | -8% | -3% |
- Gross margin 63% compared with 65% in last year's second quarter. Gross margin was negatively impacted primarily by product mix and restructuring charges. Excluding restructuring charges, gross margin was 64% vs. 65% last year.
Fiscal Year 2015 Guidance
The Company updated its fiscal year 2015 guidance. Guidance assumes constant currency as of
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Total Revenue
$1,820 -$1,860 million , reduced fromMarch 5, 2015 guidance of$1,858 -$1,910 million to incorporate second quarter 2015 performance, updated currency rates and forecasted operational performance within CSI.-
CVI revenue
$1,512 -$1,544 million reduced from$1,535 -$1,574 million . -
CSI revenue
$308 -$316 million reduced from$323 -$336 million .
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CVI revenue
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Non-GAAP earnings per share guidance of
$7.40 -$7.70 reaffirmed. Fiscal year 2015 guidance is adjusted to exclude amortization of existing other intangible assets of approximately$50.7 million , or$0.78 per share, and other costs including integration expenses which we would not have otherwise incurred as part of our continuing operations.
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 acquisitions 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 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.
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We exclude the effect of acquisition related 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 relate to our acquisition of
Sauflon Pharmaceuticals Ltd. in our fiscal fourth quarter of 2014. Acquisition related and integration expenses include items such as personnel costs for transitional employees, other acquired employee related costs and integration related professional services. Restructuring expenses consist of employee severance, product rationalization, facility and other exit costs. - We exclude costs associated with the start-up of new manufacturing facilities. While these costs may recur for a period of time, we do not consider them as part of our continuing operations. These costs will be eliminated when the specific start-up activities have been completed.
- We exclude certain legal costs related to third-party intellectual property claims and litigation as well as litigation filed against CooperVision and other contact lens manufacturers relating to Unilateral Pricing Policy (UPP). While these costs may recur for some period of time, we do not consider them as part of our continuing operations.
Guidance for earnings per share is provided on a non-GAAP basis due to the inherent difficulty in forecasting acquisition-related, integration and restructuring charges and expenses. We are not able to provide a reconciliation of these non-GAAP items to expected reported GAAP earnings per share due to the unknown effect, timing and potential significance of such charges and expenses. Management does not consider the excluded items as part of our continuing operations.
We also report revenue growth using the non-GAAP financial measure of pro forma which includes constant currency revenue. 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
We define the non-GAAP measure of free cash flow as cash provided by operating activities less capital expenditures and adjusted for acquisition related costs and integration costs. 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. As discussed above, we incur significant acquisition related and integration costs primarily related to the acquisition of Sauflon that will diminish over time and we believe it is useful to investors to understand the effects of these costs on our free cash flow. 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.
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Reconciliation of GAAP to Non-GAAP Results | ||||||||
(In thousands, except per share amounts) | ||||||||
(Unaudited) | ||||||||
Three Months Ended |
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2015 | 2015 | 2014 | 2014 | |||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||
Cost of sales | $ 166,960 | $ (7,746) | A | $ 159,214 | $ 143,818 | $ -- | $ 143,818 | |
Selling, general and administrative expense | $ 167,583 | $ (5,434) | B | $ 162,149 | $ 155,804 | $ (986) | B | $ 154,818 |
Research and development expense | $ 16,819 | $ (172) | C | $ 16,647 | $ 16,295 | $ -- | $ 16,295 | |
Amortization of intangibles | $ 12,316 | $ (12,316) | D | $ -- | $ 7,476 | $ (7,476) | D | $ -- |
Provision for income taxes | $ 5,855 | $ 1,913 | E | $ 7,768 | $ 8,185 | $ 1,776 | E | $ 9,961 |
Diluted earnings per share attributable to Cooper stockholders | $ 1.23 | $ 0.49 | $ 1.72 | $ 1.62 | $ 0.14 | $ 1.76 | ||
A Our GAAP cost of sales includes |
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B Our fiscal 2015 GAAP selling, general and administrative expense includes |
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(In millions) | CooperVision |
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Total | |||||
Restructuring and related costs | $ (4.5) | $ 0.5 | $ (4.0) | |||||
Acquisition and integration costs | 8.0 | 0.5 | $ 8.5 | |||||
$ 3.5 | $ 1.0 | $ 4.5 | ||||||
C Our GAAP research and development expense includes |
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D Amortization expense for our fiscal second quarter of 2015 was |
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E These amounts represent the increases in the provision for income taxes that arises from the impact of the above adjustments. |
Conference Call and Webcast
The Company will host a conference call today at
About
Forward-Looking Statements
This news 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 2015 Guidance and all statements regarding the acquisition of Sauflon including Sauflon's financial position, market position, product development and business strategy, expected cost synergies, expected timing and benefits of the transaction, as well as estimates of our and Sauflon's 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
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.
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Consolidated Condensed Balance Sheets | ||
(In thousands) | ||
(Unaudited) | ||
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2015 | 2014 | |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 17,911 | $ 25,222 |
Trade receivables, net | 267,183 | 276,280 |
Inventories | 402,537 | 381,474 |
Deferred tax assets | 35,774 | 40,224 |
Other current assets | 76,561 | 68,417 |
Total current assets | 799,966 | 791,617 |
Property, plant and equipment, net | 961,762 | 937,325 |
Goodwill | 2,177,551 | 2,220,921 |
Other intangibles, net | 411,232 | 453,605 |
Deferred tax assets | 8,554 | 15,732 |
Other assets | 33,595 | 39,140 |
$ 4,392,660 | $ 4,458,340 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current liabilities: | ||
Short-term debt | $ 242,165 | $ 101,518 |
Other current liabilities | 293,477 | 340,664 |
Total current liabilities | 535,642 | 442,182 |
Long-term debt | 1,105,544 | 1,280,833 |
Deferred tax liabilities | 69,156 | 69,525 |
Other liabilities | 66,581 | 77,360 |
Total liabilities | 1,776,923 | 1,869,900 |
Total Cooper stockholders' equity | 2,609,666 | 2,569,878 |
Noncontrolling interests | 6,071 | 18,562 |
Stockholders' equity | 2,615,737 | 2,588,440 |
$ 4,392,660 | $ 4,458,340 | |
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Consolidated Statements of Income | ||||
(In thousands, except earnings per share amounts) | ||||
(Unaudited) | ||||
Three months ended | Six months ended | |||
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2015 | 2014 | 2015 | 2014 | |
Net sales | $ 434,676 | $ 412,317 | $ 879,847 | $ 817,297 |
Cost of sales | 166,960 | 143,818 | 335,780 | 285,869 |
Gross profit | 267,716 | 268,499 | 544,067 | 531,428 |
Selling, general and administrative expense | 167,583 | 155,804 | 341,118 | 313,892 |
Research and development expense | 16,819 | 16,295 | 32,932 | 32,007 |
Amortization of intangibles | 12,316 | 7,476 | 25,911 | 14,982 |
Operating income | 70,998 | 88,924 | 144,106 | 170,547 |
Interest expense | 4,692 | 1,558 | 8,633 | 3,214 |
Other income (expense), net | 686 | 455 | (1,016) | (57) |
Income before income taxes | 66,992 | 87,821 | 134,457 | 167,276 |
Provision for income taxes | 5,855 | 8,185 | 11,571 | 15,375 |
Net income | 61,137 | 79,636 | 122,886 | 151,901 |
Less: income attributable to noncontrolling interests | 424 | 476 | 994 | 898 |
Net income attributable to Cooper stockholders | $ 60,713 | $ 79,160 | $ 121,892 | $ 151,003 |
Diluted earnings per share attributable to Cooper stockholders | $ 1.23 | $ 1.62 | $ 2.48 | $ 3.09 |
Number of shares used to compute earnings per share attributable to Cooper stockholders | 49,163 | 48,754 | 49,139 | 48,883 |
Soft Contact Lens Revenue Update
Worldwide Manufacturers' Soft Contact Lens Revenue | ||||||
(U.S. dollars in millions; constant currency; unaudited) | ||||||
Calendar 1Q15 | Trailing Twelve Months 2015 | |||||
Market | CVI | Market | CVI | |||
Market | Change | Change | Market | Change | Change | |
Sales by Modality | ||||||
Single-use | $ 760 | 4% | 11% | $ 2,980 | 6% | 14% |
Other | 1,030 | (2%) | 4% | 4,080 | 1% | 5% |
WW Soft Contact Lenses | $ 1,790 | 1% | 6% | $ 7,060 | 3% | 8% |
Sales by Geography | ||||||
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$ 795 | 2% | 11% | $ 3,035 | 4% | 8% |
EMEA | 505 | 7% | 7% | 2,050 | 6% | 10% |
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490 | (7%) | (6%) | 1,975 | (2%) | 4% |
WW Soft Contact Lenses | $ 1,790 | 1% | 6% | $ 7,060 | 3% | 8% |
Source: Management estimates and independent market research |
COO-E
CONTACT:Source:Kim Duncan Vice President, Investor Relations ir@cooperco.com 925-460-3663 www.coopercos.com
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