(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Exhibit | Description |
99.1 | |
104.1 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
PRESS RELEASE |
• | Revenue decreased 15% year-over-year to $578.2 million. CooperVision (CVI) revenue down 12% to $449.3 million, and CooperSurgical (CSI) revenue down 24% to $128.9 million. |
• | GAAP diluted earnings per share $1.12, down $1.28 or 53% from last year's third quarter. |
• | Non-GAAP diluted earnings per share $2.28, down $0.95 or 30% from last year's third quarter. See "Reconciliation of Selected GAAP Results to Non-GAAP Results" below. |
• | Revenue $578.2 million, down 15% from last year’s third quarter, down 14% in constant currency. |
• | Gross margin 62% compared with 66% in last year’s third quarter. On a non-GAAP basis, gross margin was 66%, down from 67% last year on higher expenses associated with COVID-19, partially offset by product mix at CooperVision. |
• | Operating margin 12% compared with 21% in last year’s third quarter. On a non-GAAP basis, operating margin was 23%, down from 28% last year driven by the decline in gross margins combined with heightened operating expenses as a percent of sales due to COVID-19 related costs. |
• | Interest expense $5.7 million compared with $16.7 million in last year's third quarter driven by lower interest rates. |
• | Total debt outstanding at the end of the quarter was $1,880.4 million with quarter-end cash and cash equivalents of $127.4 million. Adjusted leverage ratio (net debt over adjusted EBITDA) of 2.23x. |
• | Cash provided by operations $112.8 million offset by capital expenditures $45.1 million resulted in free cash flow of $67.7 million. |
• | Revenue $449.3 million, down 12% from last year’s third quarter, down 11% in constant currency. |
• | Revenue by category: |
Constant Currency | ||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||
3Q20 | 3Q20 | y/y | y/y | |||||||
Toric | $ | 147.6 | 33% | (9)% | (9)% | |||||
Multifocal | 46.9 | 10% | (10)% | (10)% | ||||||
Single-use sphere | 126.5 | 28% | (14)% | (13)% | ||||||
Non single-use sphere, other | 128.3 | 29% | (13)% | (12)% | ||||||
Total | $ | 449.3 | 100% | (12)% | (11)% |
Constant Currency | ||||||||||
(In millions) | % of CVI Revenue | %chg | %chg | |||||||
3Q20 | 3Q20 | y/y | y/y | |||||||
Americas | $ | 176.5 | 39% | (10)% | (9)% | |||||
EMEA | 165.7 | 37% | (15)% | (15)% | ||||||
Asia Pacific | 107.1 | 24% | (9)% | (9)% | ||||||
Total | $ | 449.3 | 100% | (12)% | (11)% |
• | Gross margin 61% compared with 65% in last year’s third quarter. On a non-GAAP basis, gross margin was 65%, compared with 66% last year on higher expenses associated with COVID-19, partially offset by product mix. |
• | Revenue $128.9 million, down 24% from last year's third quarter, down 24% in constant currency. |
• | Revenue by category: |
Constant Currency | ||||||||||
(In millions) | % of CSI Revenue | %chg | %chg | |||||||
3Q20 | 3Q20 | y/y | y/y | |||||||
Office and surgical products | $ | 81.7 | 63% | (23)% | (23)% | |||||
Fertility | 47.2 | 37% | (26)% | (26)% | ||||||
Total | $ | 128.9 | 100% | (24)% | (24)% |
• | Gross margin 66% compared with 71% in last year’s third quarter. On a non-GAAP basis, gross margin was 71%, down from 72% last year due to product mix. |
• | Fiscal fourth quarter 2020 total revenue $665 - $693 million |
• | CVI revenue $500 - $520 million |
• | CSI revenue $165 - $173 million |
• | Fiscal fourth quarter 2020 non-GAAP diluted earnings per share $3.00 - $3.20 |
• | 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 direct effects of acquisition accounting, such as inventory fair value step-up and 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 constant currency 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 that is available to grow the business, make strategic |
• | We exclude unrealized and realized gains and losses on our minority investments as we do not believe that these components of income or expense have a direct correlation to our ongoing operations. |
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 July 31, | ||||||||||||||||||||||||
2020 | 2020 | 2019 | 2019 | |||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 217.4 | $ | (22.4 | ) | A | $ | 195.0 | $ | 228.7 | $ | (6.6 | ) | A | $ | 222.1 | ||||||||
Operating expense excluding amortization | $ | 254.6 | $ | (5.4 | ) | B | $ | 249.2 | $ | 271.3 | $ | (6.8 | ) | B | $ | 264.5 | ||||||||
Amortization of intangibles | $ | 34.2 | $ | (34.2 | ) | C | $ | — | $ | 37.2 | $ | (37.2 | ) | C | $ | — | ||||||||
Other (income), net | $ | (0.1 | ) | $ | (2.6 | ) | D | $ | (2.7 | ) | $ | (1.5 | ) | $ | — | $ | (1.5 | ) | ||||||
Provision for income taxes | $ | 11.2 | $ | 7.2 | E | $ | 18.4 | $ | 6.9 | $ | 8.8 | E | $ | 15.7 | ||||||||||
Diluted earnings per share | $ | 1.12 | $ | 1.16 | $ | 2.28 | $ | 2.40 | $ | 0.83 | $ | 3.23 | ||||||||||||
Weighted average diluted shares used | $ | 49.5 | $ | 49.5 | $ | 50.1 | $ | 50.1 |
A | Fiscal 2020 GAAP cost of sales includes $22.4 million of costs primarily related to COVID-19 resulting in fiscal 2020 GAAP gross margin of 62% as compared to fiscal 2020 non-GAAP gross margin of 66%. Fiscal 2019 GAAP cost of sales includes $6.6 million of costs primarily related to 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%. | ||||||||||||
B | Fiscal 2020 GAAP operating expense comprised of $5.4 million primarily related to CooperSurgical's integration activities and European Medical Devices Regulation (MDR) implementation costs. Fiscal 2019 GAAP operating expense comprised of $6.8 million primarily related to integration activities in CooperSurgical and CooperVision. | ||||||||||||
C | Amortization expense was $34.2 million and $37.2 million for the fiscal 2020 and 2019 periods, respectively. Items A, B, and C resulted in fiscal 2020 GAAP operating margin of 12% as compared to fiscal 2020 non-GAAP operating margin of 23%, and fiscal 2019 GAAP operating margin of 21% as compared to fiscal 2019 non-GAAP operating margin of 28%. | ||||||||||||
D | Fiscal 2020 other (income), net includes $2.6 million of losses on our minority investments. | ||||||||||||
E | Fiscal 2020 and 2019 amounts represent the net change in the provision 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) | ||||||||||||||||||||||||
Nine Months Ended July 31, | ||||||||||||||||||||||||
2020 | 2020 | 2019 | 2019 | |||||||||||||||||||||
GAAP | Adjustment | Non-GAAP | GAAP | Adjustment | Non-GAAP | |||||||||||||||||||
Cost of sales | $ | 638.5 | $ | (52.9 | ) | A | $ | 585.6 | $ | 660.0 | $ | (19.6 | ) | A | $ | 640.4 | ||||||||
Operating expense excluding amortization and gain on sale of an intangible | $ | 796.1 | $ | (19.6 | ) | B | $ | 776.5 | $ | 810.0 | $ | (23.7 | ) | B | $ | 786.3 | ||||||||
Amortization of intangibles | $ | 103.0 | $ | (103.0 | ) | C | $ | — | $ | 110.7 | $ | (110.7 | ) | C | $ | — | ||||||||
Gain on sale of an intangible | $ | — | $ | — | $ | — | $ | (19.0 | ) | $ | 19.0 | D | $ | — | ||||||||||
Interest expense | $ | 30.1 | $ | (4.0 | ) | E | $ | 26.1 | $ | 53.3 | $ | — | $ | 53.3 | ||||||||||
Other expense (income), net | $ | 8.8 | $ | (6.9 | ) | F | $ | 1.9 | $ | (2.1 | ) | $ | — | $ | (2.1 | ) | ||||||||
Provision for income taxes | $ | 15.6 | $ | 22.3 | G | $ | 37.9 | $ | 3.2 | $ | 28.4 | G | $ | 31.6 | ||||||||||
Diluted earnings per share | $ | 3.17 | $ | 3.31 | $ | 6.48 | $ | 6.91 | $ | 2.14 | $ | 9.05 | ||||||||||||
Weighted average diluted shares used | $ | 49.6 | $ | 49.6 | $ | 50.0 | $ | 50.0 |
A | Fiscal 2020 GAAP cost of sales includes $52.9 million of costs primarily related to COVID-19 incremental costs and other manufacturing related costs, resulting in fiscal 2020 GAAP gross margin of 63% as compared to fiscal 2020 non-GAAP gross margin of 67%. Fiscal 2019 GAAP cost of sales includes $19.6 million of costs primarily related to 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%. | ||||||||||||
B | Fiscal 2020 GAAP operating expense comprised of $19.6 million primarily related to CooperSurgical's integration activities and European Medical Devices Regulation (MDR) implementation costs and CooperVision and Headquarters integration activities. Fiscal 2019 GAAP operating expense comprised of $23.7 million in charges primarily related to acquisition and integration activities in CooperSurgical and CooperVision. | ||||||||||||
C | Amortization expense was $103.0 million and $110.7 million for the fiscal 2020 and 2019 periods, respectively. | ||||||||||||
D | 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 and D resulted in fiscal 2020 GAAP operating margin of 12% as compared to fiscal 2020 non-GAAP operating margin of 22%, and fiscal GAAP operating margin of 20% as compared to fiscal 2019 non-GAAP operating margin of 27%. | ||||||||||||
E | Fiscal 2020 interest expense includes $4.0 million pertaining to the write off of debt issuance costs related to the repayment and refinancing of the 2016 revolving credit facility and 2017 Term Loan. | ||||||||||||
F | Fiscal 2020 other expense (income), net includes $6.9 million of losses and advances on our minority investments. | ||||||||||||
G | Fiscal 2020 and 2019 amounts represent the net change in the provision for income taxes that arise from the impact of the above adjustments. |
July 31, 2020 | October 31, 2019 | ||||||
ASSETS | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 127.4 | $ | 89.0 | |||
Trade receivables, net | 450.5 | 435.3 | |||||
Inventories | 594.9 | 506.9 | |||||
Other current assets | 148.5 | 132.2 | |||||
Total current assets | 1,321.3 | 1,163.4 | |||||
Property, plant and equipment, net | 1,237.7 | 1,132.1 | |||||
Operating lease right-of-use assets | 258.9 | — | |||||
Goodwill | 2,445.0 | 2,428.9 | |||||
Other intangibles, net | 1,311.4 | 1,405.3 | |||||
Deferred tax assets | 80.1 | 78.0 | |||||
Other assets | 94.0 | 66.8 | |||||
Total assets | $ | 6,748.4 | $ | 6,274.5 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 552.6 | $ | 563.7 | |||
Other current liabilities | 576.1 | 546.9 | |||||
Total current liabilities | 1,128.7 | 1,110.6 | |||||
Long-term debt | 1,327.8 | 1,262.6 | |||||
Deferred tax liabilities | 28.5 | 28.0 | |||||
Long-term tax payable | 162.1 | 124.8 | |||||
Operating lease liabilities | 236.6 | — | |||||
Accrued pension liability and other | 104.3 | 119.9 | |||||
Total liabilities | 2,988.0 | 2,645.9 | |||||
Stockholders’ equity | 3,760.4 | 3,628.6 | |||||
Total liabilities and stockholders' equity | $ | 6,748.4 | $ | 6,274.5 |
Three Months Ended July 31, | Nine Months Ended July 31, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Net sales | 578.2 | 679.4 | 1,749.3 | 1,961.8 | |||||||
Cost of sales | 217.4 | 228.7 | 638.5 | 660.0 | |||||||
Gross profit | 360.8 | 450.7 | 1,110.8 | 1,301.8 | |||||||
Selling, general and administrative expense | 232.8 | 249.8 | 728.3 | 746.6 | |||||||
Research and development expense | 21.8 | 21.5 | 67.8 | 63.4 | |||||||
Amortization of intangibles | 34.2 | 37.2 | 103.0 | 110.7 | |||||||
Gain on sale of an intangible | — | — | — | (19.0 | ) | ||||||
Operating income | 72.0 | 142.2 | 211.7 | 400.1 | |||||||
Interest expense | 5.7 | 16.7 | 30.1 | 53.3 | |||||||
Other (Income) expense, net | (0.1 | ) | (1.5 | ) | 8.8 | (2.1 | ) | ||||
Income before income taxes | 66.4 | 127.0 | 172.8 | 348.9 | |||||||
Provision for income taxes | 11.2 | 6.9 | 15.6 | 3.2 | |||||||
Net income attributable to Cooper stockholders | 55.2 | 120.1 | 157.2 | 345.7 | |||||||
Earnings per share - diluted | 1.12 | 2.4 | 3.17 | 6.91 | |||||||
Number of shares used to compute diluted earnings per share | 49.5 | 50.1 | 49.6 | 50.0 |