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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 4, 2003
THE COOPER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8597 94-2657368
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
6140 Stoneridge Mall Road, Suite 590, Pleasanton, California 94588
(Address of principal executive offices)
(925) 460-3600
(Registrant's telephone number, including area code)
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ITEM 5. Other Events.
On June 4, 2003, The Cooper Companies, Inc. issued a press release reporting
results for its second quarter fiscal 2003. A copy of this release is attached
and incorporated by reference.
Internet addresses in the release are for information purposes only and are not
intended to be hyperlinks to other Cooper Companies information.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
No. Description
- ------- -----------
99.1 Press Release dated June 4, 2003 of The Cooper Companies, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE COOPER COMPANIES, INC.
By /s/ Stephen C. Whiteford
-----------------------------------
Stephen C. Whiteford
Vice President and
Corporate Controller
(Principal Accounting Officer)
Dated: June 5, 2003
EXHIBIT INDEX
Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
99.1 Press Release dated June 4, 2003 of The Cooper
Companies, Inc.
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as ..................... 'TM'
The registered trademark symbol shall be expressed as .......... 'r'
[COO NYSE LOGO] [THE COOPER COMPANIES LOGO]
21062 Bake Parkway, Suite 200
Lake Forest, CA 92630
888-822-2660
Fax: (949) 597-0662
NEWS RELEASE
CONTACT:
Norris Battin
The Cooper Companies, Inc.
ir@coopercompanies.com
FOR IMMEDIATE RELEASE
THE COOPER COMPANIES REPORTS SECOND QUARTER RESULTS
Revenue Grows 34% to $96.4 Million; EPS 48 Cents, Up 50%
Operating Cash Flow $27 Million
LAKE FOREST, Calif., June 4, 2003 -- The Cooper Companies, Inc. (NYSE: COO)
today reported results for its fiscal second quarter ended April 30, 2003.
o Revenue $96.4 million, 34% above second quarter 2002
o CooperVision worldwide organic revenue growth 27%
o Earnings per share 48 cents; trailing twelve months $1.87
o Operating cash flow $27 million
o Days sales in receivables (DSO's) 71 days
o Earnings before taxes, depreciation and amortization ("cash flow") per
share 73 cents, up 40% from 52 cents in second quarter 2002; trailing
twelve months $2.84.
Revenue and Earnings Guidance
For the fiscal third quarter ending July 31, 2003, excluding any unusual items,
Cooper expects revenue to range from $102 million to $105 million with earnings
per share ranging from 52 cents to 54 cents. For fiscal 2003, Cooper continues
to expect revenue to range from $395 million to $405 million with earnings per
share of $2.03 to $2.07.
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For fiscal 2004, Cooper expects revenue to range from $450 million to $460
million with earnings per share in the range of $2.42 to $2.48, assuming a 24%
effective tax rate.
Business Unit P&L Highlights ($'s in millions)
Three Months Ended April 30,
Revenue Operating Income
-------------------- ------------------------------------------
% % %Revenue %Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
----- ----- ---- ----- ----- ---- -------- --------
CVI $78.1 $56.1 39% $20.2 $12.3 64% 26% 22%
CSI 18.3 15.8 16% 4.0 4.1 (1%) 22% 26%
----- ----- ----- -----
Subtotal 96.4 71.9 34% 24.2 16.4 48% 25% 23%
HQ Expense -- -- -- (3.0) (1.7) -- -- --
----- ----- ----- -----
TOTAL $96.4 $71.9 34% $21.2 $14.7 44% 22% 20%
===== ===== ===== =====
Six Months Ended April 30,
Revenue Operating Income
---------------------- ------------------------------------------
% % %Revenue %Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
------ ------ ---- ----- ----- ---- -------- --------
CVI $150.9 $ 98.2 54% $38.5 $23.6 63% 26% 24%
CSI 39.5 31.8 24% 7.9 7.6 3% 20% 24%
------ ----- ----- -----
Subtotal 190.4 130.0 46% 46.4 31.2 49% 24% 24%
HQ Expense -- -- -- (5.4) (3.4) -- -- --
------ ------ ----- -----
TOTAL $190.4 $130.0 46% $41.0 $27.8 47% 22% 21%
====== ====== ===== =====
Second Quarter Performance
CooperVision
Organic revenue growth at CooperVision (CVI), Cooper's worldwide contact lens
business, was 27%, about 20% in constant currency, assuming that Biocompatibles'
revenue for February 2002 is included in the prior year period. CVI began to
consolidate Biocompatibles' revenue into its reported results in March 2002. For
the first half of the year, CVI's organic growth in constant currency, assuming
that Biocompatibles' revenue for November 2001 through February 2002 is included
in the prior year period, was about 16%.
Commenting on these results, A. Thomas Bender, Cooper's chief executive officer
said, "I attribute CVI's exceptional performance this quarter to three factors:
a robust worldwide contact lens market, continued strong demand for our
specialty products - toric lenses, cosmetic lenses, multifocal lenses and lenses
to alleviate dry eye symptoms -- and increased momentum with our value added
spherical products such as Frequency Aspheric that continue to take market share
from two-week commodity spherical lenses.
"Organic revenue for the Proclear products that we acquired in the
Biocompatibles transaction more than doubled during the quarter and is 89% ahead
for the first six months. Proclear products now represent
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more than 60% of the Biocompatibles business, and we expect that our next
generation of contact lenses will be based on the patented Proclear technology."
CooperSurgical
At CooperSurgical (CSI), Cooper's women's healthcare medical device business,
revenue grew 16% in the quarter to $18.3 million and is ahead 24% through the
six-month reporting period. Second quarter revenue growth was virtually all from
acquisitions.
"CSI revenue in the quarter was somewhat below our expectations," said Bender.
"We are experiencing temporary softness in the capital equipment sector of the
women's healthcare market, particularly with colposcopes that are used by state
and locals government to help provide forensic evidence in sexual abuse and
assault cases. Budgets for these programs have been cut severely.
"In addition, the capital equipment sector of the in-office market has been hurt
by the consolidation of practices due to high malpractice insurance premiums."
CSI's operating margin in the second quarter narrowed to 22% from 26% in last
year's second quarter, reflecting the integration of three recent acquisitions.
CSI continues to expect operating margins to approach 25% by the end of the
fiscal year. Shortly after the end of the quarter, CSI completed the acquisition
of Prism Enterprises, LP and strengthened its position in the obstetric and
neonatal product categories. With the addition of Prism, CSI expects revenue
between $22 million and $23 million in each of the next two quarters.
CVI Business Details
Worldwide Contact Lens Market Conditions
Cooper estimates that during the first calendar quarter of 2003, the worldwide
contact lens market grew about 10% in constant currency, a continuation of the
strong 2002 industry growth.
"Growth in North America was 7% in the first calendar quarter according to
recent industry sales audit data," said Bender, "and outside the United States,
the five competitors in the space reported first quarter growth of 18% to 29%
over last year's first quarter."
Pro Forma Results
At the end of February 2002, CVI acquired Biocompatibles Eyecare plc. CVI's
consolidated revenue includes Biocompatibles beginning in March 2002. To measure
CVI's organic growth, results and comparisons below are pro forma. They include
Biocompatibles' revenue for November of 2001 through February of 2002 when we
did not own them.
Second Quarter and Year-To-Date Contact Lens Revenue
o Worldwide CVI revenue grew 27% in the second quarter, about 20% in
constant currency, and is 22% ahead for the six-month period, about
16% in constant currency.
Page 3
o Revenue for specialty lenses--toric lenses, cosmetic lenses,
multifocal lenses and lenses to alleviate dry eye symptoms--grew 39
percent in the second quarter and now account for over 60% of CVI's
worldwide soft lens business. It grew 32% for the six-month period.
Specialty lenses offer added benefits and command higher margins than
commodity lenses that simply correct near- and farsightedness.
o Sales of toric lenses, which correct astigmatism, increased 23% and
now account for about 40% of CVI's soft lens revenue. They are 17%
ahead for the six-month period. The two-week and monthly toric product
lines grew 48% in the quarter and now represent about 56% of CVI's
toric business. They grew 37% over the comparable six-month period of
2002.
o CVI's disposable spherical lens business grew 43% in the second
quarter and is 37% ahead for the six-month period, driven by Frequency
Aspheric and Proclear spheres. This strong growth reflects the
transition in the worldwide contact lens market from commodity
two-week spheres to value added monthly disposable spheres.
CVI Geographic Revenue
o CVI revenue in the United States, 52% of CVI's business in the
quarter, grew 24%. Year to date, CVI's U.S. revenue is up 20%.
o Revenue outside of the United States, 48% of CVI's worldwide sales in
the quarter, grew 29%, 14% in constant currency, and is 24% ahead for
the six-month period, 12% in constant currency.
o European revenue, about 35% of CVI's revenue in the quarter, grew 25%
and is 19% ahead year to date.
o In the Asia-Pacific region, sales grew 55% and represent 5% of CVI's
global business. CVI's line of two-week disposable lenses was launched
in Japan during the quarter, and is meeting expectations. CVI expects
sales of about $5 million to Japan in fiscal 2003.
CVI New Products
During the first half of fiscal 2003, CVI has broadened domestic distribution of
Proclear Toric disposable lenses and introduced Expressions Accents, a new line
of disposable cosmetic products that accentuates the natural color of the eye.
Expressions Accents complements CVI's existing line of opaque lenses that change
the appearance of the color of the eye. CVI expects distribution outside the
U.S. to begin in the fiscal third quarter.
During the third quarter of fiscal 2003, CVI expects to launch Frequency
Multifocal in markets outside the United States. Sales of Frequency Multifocal
in the United States remain ahead of expectations. In 2003, CVI anticipates
worldwide multifocal revenue of $6 million to $8 million.
Continuing to build on its Proclear franchise, CVI plans to introduce Proclear
Multifocal in 2004.
Page 4
CVI Second Quarter Expenses
During the second fiscal quarter, CVI research and development expense was $872
thousand, up 31% over the second quarter of 2002, reflecting the previously
announced initiative to develop new and improved contact lens products. During
the 2003 to 2005 period, CVI plans to continue to invest in two research
programs, the development of an extended wear contact lens and an improved
contact lens technology, and expects research and development expenses to be
about $4 million in 2003.
The effect of currency gains and losses on operating income in the quarter was
not material. Because CVI manufactures a major percentage of its lenses in the
United Kingdom with costs denominated in pounds sterling, the unfavorable
currency translation of manufacturing and operating costs tends to offset the
favorable impact of currency on revenue.
CVI's gross margin was 67% of sales compared to 63% in the prior year's second
quarter. Major influences on gross margins were:
o A favorable impact from ongoing improvement in manufacturing costs
across the entire product line and from right-sizing Biocompatibles'
manufacturing with the ongoing shift of business to higher margin
Proclear products.
o An unfavorable impact on manufacturing costs from the stronger pound
sterling and lower gross margins on sales to Asia-Pacific
distributors.
Cooper Companies Financial Comments
Headquarters Expenses
Corporate headquarters second quarter expenses, which increased 25% sequentially
and 78% over last year's second quarter, include spending to support the
Company's ongoing tax planning which is expected to level off and then decrease
after 2003. Going forward, Cooper expects to incur increased headquarters
expenses to comply with recently adopted and proposed disclosure and corporate
governance requirements.
Tax Rate
Cooper's effective tax rate for fiscal 2003 is expected to be 25%, the same rate
used for the second quarter and six-month periods.
Balance Sheet Information
o At the end of the second fiscal quarter, Cooper's days sales
outstanding (DSO's) decreased to 71 days from 79 days in the first
quarter reflecting improved cash collections. Cooper expects DSO's in
the low to mid 70's through the remainder of fiscal 2003.
o Inventory months on hand continue at desired levels--about 7.2
months--about the same as the last three quarters, and are expected to
remain at this level going forward.
Page 5
o During the quarter, capital expenditures were about $7.5 million,
$13.4 million year to date. Most of this spending is designed to
improve manufacturing capacity and efficiency.
o Depreciation and amortization was $3 million for the quarter, $5.9
million year to date.
Operating Cash Flow
Cooper's second quarter operating cash flow rebounded to $27 million from the
atypically low $3.1 million generated in the first quarter. About $8 million
reflected strong collection of receivables, resulting in an eight-day reduction
in second quarter days sales outstanding. The balance of $19 million resulted
from strong operating results. With $30.1 million of operating cash flow now
generated through the first half of the year, Cooper expects to exceed $60
million for fiscal 2003. Excluding the $13.4 million for capital expenditures
spent through the first half of 2003, "free cash flow" was $16.7 million.
Non-GAAP Financial Measures
Cooper's earnings before taxes, depreciation and amortization ("cash flow") per
share for the second quarter of fiscal 2003 was 73 cents and 52 cents for the
second quarter of 2002. For the six months ended April 30, cash flow per share
was $1.41 and $1.02 per share in 2003 and 2002, respectively.
Although "cash flow per share" is a non-GAAP financial measure, we disclose it
because we think it is an appropriate measure of our liquidity and financial
strength, particularly when calculated consistently over time. Cooper has been
reporting "cash flow per share" since 1999.
In Cooper's case, earnings before taxes, depreciation and amortization per share
is more informative than the more common non-GAAP measure of liquidity called
"earnings before interest, taxes, depreciation and amortization." This is
because unlike most companies, Cooper does not anticipate paying federal income
taxes (except for alternative minimum taxes reinstated beginning in 2003) until
about 2007, when it expects to exhaust its U.S. net operating loss
carryforwards. This cash savings gives Cooper a significant competitive
advantage, as most companies spend a large portion of their pretax profits on
taxes.
Cash flow per share is not a substitute for the GAAP measure of operating cash
flow. We present this data to increase awareness that income taxes provided for
in our statement of income are essentially all non cash provisions which go
toward reducing our recorded deferred tax asset in accordance with generally
accepted accounting principles.
To calculate "cash flow per share" we add back non-cash charges for depreciation
and amortization to income before income taxes, and then divide the result by
the average number of shares outstanding used to calculate diluted earnings per
share. In the tables below, we reconcile earnings per share (the closest GAAP
disclosure) to "cash flow per share" for all periods reported using the same
diluted per share figures.
Page 6
Three Months Ended April 30,
-----------------------------------------
2003 2002
------------------- -------------------
$(000) Per Share $(000) Per Share
------- --------- ------- ---------
Net income $15,211 $0.48 $ 9,918 $0.32
===== =====
Add:
Income taxes 5,071 3,306
Depreciation 2,578 2,660
Amortization 399 392
------- -------
"Cash Flow Per Share" $23,259 $0.73 $16,276 $0.52
======= ===== ======= =====
Shares (000) 31,789 31,128
======= =======
Six Months Ended April 30,
-----------------------------------------
2003 2002
------------------- -------------------
$(000) Per Share $(000) Per Share
------- --------- ------- ---------
Net income $29,066 $0.92 $19,323 $0.62
===== =====
Add:
Income taxes 9,689 7,151
Depreciation 5,193 4,445
Amortization 755 700
------- -------
"Cash Flow Per Share" $44,703 $1.41 $31,619 $1.02
======= ===== ======= =====
Shares (000) 31,696 31,095
======= =======
12 Months Ended
October 31, 2002
-------------------
$(000) Per Share
------- ---------
Year ended October 31, 2002:
Net income $48,875 $ 1.57
======
Add:
Income taxes 16,294
Depreciation 9,892
Amortization 1,477
-------
"Cash Flow Per Share" $76,538 $ 2.45
======= ======
Shares (000) 31,189
=======
Trailing twelve months ended April 30, 2003:
Twelve months ended October 31, 2002 $ 2.45
Less: six months ended April 30, 2002 (1.02)
Add: six months ended April 30, 2003 1.41
------
"Cash flow per share" for the 12 months
ended April 30, 2003 $ 2.84
======
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Earnings Per Share
All per share amounts in this news release are diluted per share amounts from
continuing operations.
Conference Call
The Cooper Companies will hold a conference call to discuss its second quarter
results today at 2 p.m. Pacific Daylight Time. To access the live call, dial
1-800-500-0177. A replay will be available at 1-888-203-1112 approximately one
hour after the call ends and remain available for five days. The access code for
both calls is 187414. This call will also be broadcast live on The Cooper
Companies' website, www.coopercos.com.
Forward-Looking Statements
This news release contains "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995. These include statements about
our capital resources, performance and results of operations. In addition, all
statements regarding anticipated growth in our revenue, anticipated market
conditions and results of operations are forward-looking. To identify these
statements look for words like "believes," "expects," "may," "will," "should,"
"seeks," "intends," "plans," "estimates" or "anticipates" and similar words or
phrases. Discussions of strategies, plans or intentions often contain
forward-looking statements. Forward-looking statements necessarily depend on
assumptions, data or methods that may be incorrect or imprecise.
Events, among others, that could cause actual results and future actions to
differ materially from those described in forward-looking statements include
major changes in business conditions, a major disruption in the operations of
our manufacturing facilities, new competitors or technologies, significant
delays in new product introductions, the impact of an undetected virus on our
computer systems, acquisition integration delays or costs, increases in interest
rates, foreign currency exchange exposure, investments in research and
development and other start-up projects, dilution to earnings per share from
acquisitions or issuing stock, regulatory issues, cost of complying with new
corporate governance regulatory requirements, changes in tax laws or their
interpretation, changes in geographic profit mix effecting tax rates,
significant environmental cleanup costs above those already accrued, litigation
costs including any related settlements or judgments, cost of business
divestitures, the requirement to provide for a significant liability or to write
off a significant asset, changes in accounting principles or estimates, and
other events described in our Securities and Exchange Commission filings,
including the "Business" section in our Annual Report on Form 10-K for the year
ended October 31, 2002. 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.
Page 8
Corporate Information
The Cooper Companies, Inc. manufactures and markets specialty healthcare
products through its CooperVision and CooperSurgical units.
CooperVision markets a broad range of contact lenses for the vision care market.
Headquartered in Lake Forest, Calif., it manufactures in Huntington Beach,
Calif., Rochester, N.Y., Norfolk, Va., Adelaide, Australia, Farnborough and
Hamble, England, Madrid, Spain and Toronto. Its Web address is
www.coopervision.com.
CooperSurgical supplies diagnostic products, surgical instruments and
accessories to the gynecology market. With headquarters in Trumbull, Conn., it
also manufactures in Bedminister N.J., Cranford, N.J., Fort Atkinson, Wis.,
Malmo, Sweden, Montreal and Berlin. Its Web address is www.coopersurgical.com.
Corporate offices are located in Lake Forest and Pleasanton, Calif. A toll free
interactive telephone system at 1-800-334-1986 provides stock quotes, recent
press releases and financial data. Cooper's World Wide Web address is
www.coopercos.com.
The Cooper Companies, Inc., its subsidiaries or affiliates own, license or
distribute the following trademarks italicized in this news release: Expressions
Accents'TM', Frequency Aspheric'TM', Frequency Multifocal'TM' and Proclear'r',
Proclear Multifocal'TM' and Proclear Toric'TM'.
(FINANCIAL STATEMENTS FOLLOW)
Page 9
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except earnings per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
------------------ -------------------
2003 2002 2003 2002
------- -------- -------- --------
Net sales $96,368 $71,910 $190,382 $130,022
Cost of sales 33,948 27,746 68,595 48,373
------- ------- -------- --------
Gross profit 62,420 44,164 121,787 81,649
Selling, general and administrative expense 39,590 28,171 77,467 51,384
Research and development expense 1,279 918 2,594 1,775
Amortization of intangibles 399 392 755 700
------- ------- -------- --------
Operating income 21,152 14,683 40,971 27,790
Interest expense 1,688 1,441 3,512 2,334
Other income (loss), net 818 (18) 1,296 1,018
------- ------- -------- --------
Income before income taxes 20,282 13,224 38,755 26,474
Provision for income taxes 5,071 3,306 9,689 7,151
------- ------- -------- --------
Net income $15,211 $ 9,918 $ 29,066 $ 19,323
======= ======= ======== ========
Diluted earnings per share $ 0.48 $ 0.32 $ 0.92 $ 0.62
======= ======= ======== ========
Number of shares used to compute diluted
earnings per share 31,789 31,128 31,696 31,095
======= ======= ======== ========
Page 10
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
April 30, October 31,
2003 2002
--------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 11,895 $ 10,255
Trade receivables, net 76,792 74,545
Marketable securities 4,469 2,750
Inventories 81,977 76,279
Deferred tax asset 16,426 17,781
Other current assets 19,004 17,300
-------- --------
Total current assets 210,563 198,910
-------- --------
Property, plant and equipment, net 98,270 87,944
Goodwill 251,741 238,966
Other intangibles, net 14,337 14,651
Deferred tax asset 21,055 26,806
Other assets 4,199 3,838
-------- --------
$600,165 $571,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 20,636 $ 36,333
Other current liabilities 83,011 90,348
-------- --------
Total current liabilities 103,647 126,681
-------- --------
Long-term debt 141,942 127,318
Other liabilities 1,432 5,674
-------- --------
Total liabilities 247,021 259,673
-------- --------
Stockholders' equity 353,144 311,442
-------- --------
$600,165 $571,115
======== ========
####
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