Delaware | 1-8597 | 94-2657368 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
PRESS RELEASE |
• | Revenue increased 4% year-over-year to $654.3 million. CooperVision (CVI) revenue up 4% to $484.2 million, and CooperSurgical (CSI) revenue up 4% to $170.1 million. |
• | GAAP diluted earnings per share $2.45, up 99.4% from last year's second quarter. |
• | Non-GAAP diluted earnings per share $2.94, up 8 cents or 2.6% from last year’s second quarter. See “Reconciliation of GAAP Results to Non-GAAP Results” below. |
• | Revenue $654.3 million up 4% from last year’s second quarter, up 7% pro forma. |
• | Gross margin 66% compared with 64% in last year’s second quarter. On a non-GAAP basis, gross margin was 67% compared with 68% last year driven primarily by the negative impact of currency. |
• | Operating margin 22% compared with 12% in last year’s second quarter. On a non-GAAP basis, operating margin was 27% compared with 29% last year driven primarily by the negative impact of currency along with higher company-wide investments in selling and marketing. |
• | Interest expense $18.5 million compared with $18.7 million in last year's second quarter. |
• | Total debt decreased $205.5 million from January 31, 2019, to $1,926.9 million primarily due to debt paydown from operational cash flow generation. |
• | Cash provided by operations $214.8 million offset by capital expenditures $52.7 million resulted in free cash flow of $162.1 million, up 30% year-over-year. |
• | Revenue $484.2 million, up 4% from last year’s second quarter, up 8% pro forma. |
• | Revenue by category: |
Pro forma | ||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||
2Q19 | 2Q19 | y/y | y/y | |||||||
Toric | $ | 155.3 | 32% | 3% | 7% | |||||
Multifocal | 49.7 | 10% | 1% | 6% | ||||||
Single-use sphere | 135.3 | 28% | 9% | 14% | ||||||
Non single-use sphere, other | 143.9 | 30% | 1% | 4% | ||||||
Total | $ | 484.2 | 100% | 4% | 8% |
Pro forma | ||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||
2Q19 | 2Q19 | y/y | y/y | |||||||
Americas | $ | 193.4 | 40% | 5% | 5% | |||||
EMEA | 181.1 | 37% | (1)% | 8% | ||||||
Asia Pacific | 109.7 | 23% | 9% | 14% | ||||||
Total | $ | 484.2 | 100% | 4% | 8% |
• | Gross margin 66% compared with 67% in last year’s second quarter. On a non-GAAP basis, gross margin was 66% compared with 68% last year driven by the negative impact of currency. |
• | Revenue $170.1 million, up 4% from last year’s second quarter, up 6% pro forma. |
• | Revenue by category: |
Pro forma | ||||||||||
(In millions) | % of CSI Revenue | %chg | %chg | |||||||
2Q19 | 2Q19 | y/y | y/y | |||||||
Office and surgical products | $ | 105.7 | 62% | 8% | 7% | |||||
Fertility | 64.4 | 38% | (2)% | 5% | ||||||
Total | $ | 170.1 | 100% | 4% | 6% |
• | Gross margin 67% compared with 57% in last year’s second quarter driven primarily by PARAGARD® inventory step-up charges in the prior year. On a non-GAAP basis, gross margin was 70% compared with 71% last year driven primarily by operational inefficiencies and challenges associated with the transfer of production to our new site in Costa Rica. |
• | Fiscal 2019 total revenue $2,633 - $2,667 million |
- | CVI revenue $1,964 - $1,985 million |
- | CSI revenue $669 - $682 million |
• | Fiscal 2019 non-GAAP diluted earnings per share of $12.15 - $12.35 |
• | 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 and gains or income. 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 CooperSurgical product line exits 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 into United States dollars 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) (Unaudited) | ||||||||||||||||||||||||
Three Months Ended April 30, | ||||||||||||||||||||||||
2019 | 2019 | 2018 | 2018 | |||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 221.7 | $ | (7.6 | ) | A | $ | 214.1 | $ | 226.8 | $ | (26.8 | ) | A | $ | 200.0 | ||||||||
Operating expense excluding amortization, impairment, and gain on sale of an intangible | $ | 267.8 | $ | (5.1 | ) | B | $ | 262.7 | $ | 268.7 | $ | (17.6 | ) | B | $ | 251.1 | ||||||||
Amortization of intangibles | $ | 36.9 | $ | (36.9 | ) | C | $ | — | $ | 36.7 | $ | (36.7 | ) | C | $ | — | ||||||||
Impairment of intangibles | $ | — | $ | — | $ | — | $ | 24.4 | $ | (24.4 | ) | D | $ | — | ||||||||||
Gain on sale of an intangible | $ | (19.0 | ) | $ | 19.0 | E | $ | — | $ | — | $ | — | $ | — | ||||||||||
Provision (benefit) for income taxes | $ | 5.7 | $ | 6.3 | F | $ | 12.0 | $ | (6.9 | ) | $ | 24.4 | F | $ | 17.5 | |||||||||
Diluted earnings per share | $ | 2.45 | $ | 0.49 | $ | 2.94 | $ | 1.23 | $ | 1.63 | $ | 2.86 | ||||||||||||
Weighted average diluted shares used | 50.0 | 50.0 | 49.6 | 49.6 |
A | Fiscal 2019 GAAP cost of sales includes $7.6 million of costs primarily related to acquisitions, integration and other manufacturing related costs, resulting in fiscal 2019 GAAP gross margin of 66% as compared to fiscal 2019 non-GAAP gross margins of 67%. Fiscal 2018 GAAP cost of sales includes $26.8 million of costs primarily related to PARAGARD inventory step-up release, manufacturing start-up, product transition costs and other integration costs, resulting in fiscal 2018 GAAP gross margin of 64% as compared to fiscal 2018 non-GAAP gross margin of 68%. | ||
B | Fiscal 2019 GAAP operating expense comprised of $5.1 million primarily related to integration activities in CooperSurgical and CooperVision. Fiscal 2018 GAAP operating expense comprised of $17.6 million in charges primarily due to acquisition and integration activities in CooperSurgical and CooperVision and compensation costs relating to executives' retirements. | ||
C | Amortization expense was $36.9 million and $36.7 million for the fiscal 2019 and 2018 periods, respectively. | ||
D | Fiscal 2018 GAAP results includes an impairment charge of intangible assets associated with carrier screening acquired from Recombine in CooperSurgical. | ||
E | Fiscal 2019 gain on sale of an intangible asset relates to a gain recognized in CooperSurgical on the sale of an exclusive distribution right of Filshie Clip System. Items A, B, C, D and E resulted in fiscal 2019 GAAP operating margin of 22% as compared to fiscal 2019 non-GAAP operating margin of 27%, and fiscal 2018 GAAP operating margin of 12% as compared to fiscal 2018 non-GAAP operating margin of 29%. | ||
F | Fiscal 2019 represents the net change in the provision for income taxes that arise from the impact of the above adjustments. Fiscal 2018 represents the net change in the benefit for income taxes that arise from the impact of the above adjustments. |
THE COOPER COMPANIES, INC. AND SUBSIDIARIES Reconciliation of Selected GAAP Results to Non-GAAP Results (In millions, except per share amounts) (Unaudited) | ||||||||||||||||||||||||
Six Months Ended April 30, | ||||||||||||||||||||||||
2019 | 2019 | 2018 | 2018 | |||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 431.3 | $ | (13.0 | ) | A | $ | 418.3 | $ | 445.9 | $ | (54.4 | ) | A | $ | 391.5 | ||||||||
Operating expense excluding amortization, impairment and gain on sale of an intangible | $ | 538.8 | $ | (17.0 | ) | B | $ | 521.8 | $ | 513.5 | $ | (26.6 | ) | B | $ | 486.9 | ||||||||
Amortization of intangibles | $ | 73.5 | $ | (73.5 | ) | C | $ | — | $ | 72.7 | $ | (72.7 | ) | C | $ | — | ||||||||
Impairment of intangibles | $ | — | $ | — | $ | — | $ | 24.4 | $ | (24.4 | ) | D | $ | — | ||||||||||
Gain on sale of an intangible | $ | (19.0 | ) | $ | 19.0 | E | $ | — | $ | — | $ | — | $ | — | ||||||||||
Interest Expense | $ | 36.6 | $ | — | $ | 36.6 | $ | 37.1 | $ | (1.7 | ) | F | $ | 35.4 | ||||||||||
(Benefit) provision for income taxes | $ | (3.6 | ) | $ | 19.4 | G | $ | 15.8 | $ | 190.4 | $ | (162.0 | ) | G | $ | 28.4 | ||||||||
Diluted earnings (loss) per share | $ | 4.52 | $ | 1.30 | $ | 5.82 | $ | (1.26 | ) | $ | 6.91 | $ | 5.65 | |||||||||||
Weighted average diluted shares used | 49.9 | 49.9 | 49.0 | 49.6 |
A | Fiscal 2019 GAAP cost of sales includes $13.0 million of costs primarily related to acquisitions, integration and other manufacturing related costs, resulting in fiscal 2019 GAAP gross margin of 66%, as compared to fiscal 2019 non-GAAP gross margin of 67%. Fiscal 2018 GAAP cost of sales includes $9.9 million of costs in CooperVision primarily related to product transition write off costs, incremental costs associated with the impact of Hurricane Maria and other manufacturing integration costs; $44.5 million in CooperSurgical primarily related to PARAGARD inventory step-up release, manufacturing start-up and other integration costs, 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 expense comprised of $17.0 million in charges primarily related to acquisition and integration activities in CooperSurgical and CooperVision. Fiscal 2018 GAAP operating expense comprised of $26.6 million in charges primarily related to acquisition and integration activities in CooperSurgical and CooperVision and compensation costs related to executives' retirements. | ||
C | Amortization expense was $73.5 million and $72.7 million for the fiscal 2019 and 2018 periods, respectively. | ||
D | Fiscal 2018 GAAP results includes an impairment charge of intangible assets associated with carrier screening acquired from Recombine in CooperSurgical. | ||
E | Fiscal 2019 gain on sale of an intangible asset relates to a gain recognized in CooperSurgical on the sale of an exclusive distribution right of Filshie Clip System. Items A, B, C, D and E resulted in fiscal 2019 GAAP operating margin of 20% as compared to fiscal 2019 non-GAAP operating margin of 27%, and fiscal 2018 GAAP operating margin of 13% as compared to fiscal 2018 non-GAAP operating margin of 28%. | ||
F | This amount represents bridge loan termination fees related to CooperSurgical's PARAGARD acquisition. | ||
G | Fiscal 2019 represents the net change in the benefit for income taxes that arise from the impact of the above adjustments and a $4.4 million provision representing the final adjustment related to the tax reform accrual booked in fiscal 2018. Fiscal 2018 GAAP provision for income taxes includes a $(202.0) million U.S. tax reform impact and $40.0 million of net changes in the provision for income taxes that arise from the impact of the above adjustments. |
April 30, 2019 | October 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 104.6 | $ | 77.7 | |||
Trade receivables, net | 396.2 | 374.7 | |||||
Inventories | 493.1 | 468.8 | |||||
Other current assets | 142.7 | 169.7 | |||||
Total current assets | 1,136.6 | 1,090.9 | |||||
Property, plant and equipment, net | 1,032.7 | 976.0 | |||||
Goodwill | 2,438.5 | 2,392.1 | |||||
Other intangibles, net | 1,474.1 | 1,521.3 | |||||
Deferred tax assets | 60.1 | 58.4 | |||||
Other assets | 61.4 | 74.1 | |||||
$ | 6,203.4 | $ | 6,112.8 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 454.6 | $ | 37.1 | |||
Other current liabilities | 486.3 | 499.4 | |||||
Total current liabilities | 940.9 | 536.5 | |||||
Long-term debt | 1,472.3 | 1,985.7 | |||||
Deferred tax liabilities | 33.3 | 31.0 | |||||
Long-term tax payable | 124.8 | 141.5 | |||||
Accrued pension liability and other | 89.9 | 110.3 | |||||
Total liabilities | 2,661.2 | 2,805.0 | |||||
Stockholders’ equity | 3,542.2 | 3,307.8 | |||||
$ | 6,203.4 | $ | 6,112.8 |
Three Months Ended April 30, | Six Months Ended April 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 654.3 | $ | 631.3 | $ | 1,282.4 | $ | 1,221.3 | |||||||
Cost of sales | 221.7 | 226.8 | 431.3 | 445.9 | |||||||||||
Gross profit | 432.6 | 404.5 | 851.1 | 775.4 | |||||||||||
Selling, general and administrative expense | 246.8 | 247.9 | 496.8 | 473.8 | |||||||||||
Research and development expense | 21.0 | 20.8 | 42.0 | 39.7 | |||||||||||
Amortization of intangibles | 36.9 | 36.7 | 73.5 | 72.7 | |||||||||||
Impairment of intangibles | — | 24.4 | — | 24.4 | |||||||||||
Gain on sale of an intangible | (19.0 | ) | — | (19.0 | ) | — | |||||||||
Operating income | 146.9 | 74.7 | 257.8 | 164.8 | |||||||||||
Interest expense | 18.5 | 18.7 | 36.6 | 37.1 | |||||||||||
Other expense (income), net | 0.3 | 2.0 | (0.7 | ) | (1.1 | ) | |||||||||
Income before income taxes | 128.1 | 54.0 | 221.9 | 128.8 | |||||||||||
Provision (benefit) for income taxes | 5.7 | (6.9 | ) | (3.6 | ) | 190.4 | |||||||||
Net income (loss) attributable to Cooper stockholders | $ | 122.4 | $ | 60.9 | $ | 225.5 | $ | (61.6 | ) | ||||||
Earnings (loss) per share - diluted | $ | 2.45 | $ | 1.23 | $ | 4.52 | $ | (1.26 | ) | ||||||
Number of shares used to compute diluted earnings (loss) per share | 50.0 | 49.6 | 49.9 | 49.0 |