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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________
FORM 10-Q
_____________________________________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2021
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission File Number 1-8597
_____________________________________________________________
The Cooper Companies, Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________________
Delaware94-2657368
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6101 Bollinger Canyon Road, Suite 500,
San Ramon, California 94583
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (925460-3600
_____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.10 par valueCOOThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes      No  
On May 28, 2021, 49,247,946 shares of Common Stock, $0.10 par value, were outstanding.



INDEX
 
  Page No.
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Loss)
Periods Ended April 30,
(In millions, except for earnings per share)
(Unaudited)
Three MonthsSix Months
  
2021202020212020
Net sales$719.5 $524.9 $1,400.0 $1,171.1 
Cost of sales232.4 201.4 462.2 421.1 
Gross profit487.1 323.5 937.8 750.0 
Selling, general and administrative expense285.8 237.2 547.0 495.5 
Research and development expense21.0 23.8 42.4 46.0 
Amortization of intangibles37.1 33.9 71.8 68.8 
Operating income143.2 28.6 276.6 139.7 
Interest expense6.1 12.8 12.5 24.4 
Other expense (income), net 0.7 6.8 (11.8)8.9 
Income before income taxes136.4 9.0 275.9 106.4 
Provision for income taxes (Note 6)18.9 (2.5)(1,942.7)4.4 
Net income $117.5 $11.5 $2,218.6 $102.0 
Earnings per share (Note 7):
Basic$2.39 $0.23 $45.12 $2.07 
Diluted$2.36 $0.23 $44.65 $2.05 
Number of shares used to compute earnings per share:
Basic49.2 49.2 49.2 49.2 
Diluted49.7 49.6 49.7 49.7 
Other comprehensive income (loss), net of tax:
Cash flow hedges$15.2 (13.5)$19.7 (13.5)
Foreign currency translation adjustment18.9 (68.9)105.1 (52.2)
Comprehensive income (loss)$151.6 $(70.9)$2,343.4 $36.3 

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
(In millions, unaudited)
April 30, 2021October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$105.9 $115.9 
Trade accounts receivable, net of allowance for credit losses of $10.7 at April 30, 2021 and $10.2 at October 31, 2020
490.1 435.4 
Inventories (Note 3)582.0 570.4 
Prepaid expense and other current assets144.6 152.5 
Total current assets1,322.6 1,274.2 
Property, plant and equipment, at cost2,581.4 2,474.8 
Less: accumulated depreciation and amortization1,271.4 1,192.9 
1,310.0 1,281.9 
Operating lease right-of-use assets264.9 260.2 
Goodwill (Note 4)2,567.7 2,447.3 
Other intangibles, net (Note 4)1,412.4 1,289.0 
Deferred tax assets (Note 6)2,017.4 80.1 
Other assets118.8 104.8 
Total assets$9,013.8 $6,737.5 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 5)$412.6 $409.3 
Accounts payable141.6 176.0 
Employee compensation and benefits127.0 119.0 
Operating lease liabilities34.2 33.3 
Other current liabilities277.3 266.8 
Total current liabilities992.7 1,004.4 
Long-term debt (Note 5)1,324.9 1,383.9 
Deferred tax liabilities (Note 6)22.3 25.8 
Long-term tax payable (Note 6)149.5 162.0 
Operating lease liabilities240.9 236.8 
Accrued pension liability and other120.7 99.8 
Total liabilities$2,851.0 $2,912.7 
Contingencies (Note 12)
Stockholders’ equity (Note 9):
Preferred stock, 10 cents par value, 1.0 shares authorized, zero shares issued or outstanding
  
Common stock, 10 cents par value, 120.0 shares authorized, 53.6 issued and 49.2 outstanding at April 30, 2021 and 53.4 issued and 49.1 outstanding at October 31, 2020
5.4 5.3 
Additional paid-in capital1,667.8 1,646.8 
Accumulated other comprehensive loss(347.2)(472.0)
Retained earnings5,477.5 3,261.8 
Treasury stock at cost: 4.4 shares at April 30, 2021 and 4.3 shares at October 31, 2020
(640.9)(617.3)
Total Cooper stockholders’ equity6,162.6 3,824.6 
Noncontrolling interests0.2 0.2 
Stockholders’ equity6,162.8 3,824.8 
Total liabilities and stockholders’ equity$9,013.8 $6,737.5 
    
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Stockholders' Equity
(In millions, unaudited)
 Common SharesTreasury StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTreasury StockNoncontrolling InterestsTotal
Stockholders'
Equity
SharesAmountSharesAmount
Balance at November 1, 201949.1 $4.9 4.1 $0.4 $1,615.0 $(447.1)$3,026.4 $(571.2)$0.2 $3,628.6 
Net income attributable to Cooper stockholders— — — — — — 90.5 — — 90.5 
Other comprehensive income, net of tax— — — — — 16.7 — — — 16.7 
Issuance of common stock for stock plans, net0.1 — — — (13.2)— — — — (13.1)
Dividends on common stock ($0.03 per share)
— — — — — — (1.5)— — (1.5)
Share-based compensation expense— — — — 9.7 — — — — 9.7 
Balance at January 31, 202049.2 $4.9 4.1 $0.4 $1,611.6 $(430.4)$3,115.4 $(571.2)$0.2 $3,730.9 
Net income attributable to Cooper stockholders— — — — — — 11.5 — — 11.5 
Other comprehensive loss, net of tax— — — — — (82.4)— — — (82.4)
Issuance of common stock for stock plans, net0.1 — — — 5.0 — — — — 5.0 
Issuance of common stock for employee stock purchase plan— — — — 0.6 — — 0.4 — 1.0 
Share-based compensation expense— — — — 9.3 — — — — 9.3 
Treasury stock repurchase(0.2)— 0.2 — — — — (47.8)— (47.8)
Balance at April 30, 202049.1 $4.9 4.3 $0.4 $1,626.5 $(512.8)$3,126.9 $(618.6)$0.2 $3,627.5 


5


THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Stockholders' Equity
(In millions, unaudited)
Common SharesTreasury StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTreasury StockNoncontrolling InterestsTotal
Stockholders'
Equity
SharesAmountSharesAmount
Balance at November 1, 202049.1 $4.9 4.3 $0.4 $1,646.8 $(472.0)$3,261.8 $(617.3)$0.2 $3,824.8 
Net income attributable to Cooper stockholders— — — — — — 2,101.1 — — 2,101.1 
Other comprehensive income, net of tax— — — — — 90.7 — — — 90.7 
Issuance of common stock for stock plans, net0.1 — — — (11.0)— — — — (11.0)
Issuance of common stock for employee stock purchase plan— — — — 0.8 — — 0.6 — 1.4 
Dividends on common stock ($0.03 per share)
— — — — — — (1.5)— — (1.5)
Share-based compensation expense— — — — 10.6 — — — — 10.6 
Treasury stock repurchase(0.1)— 0.1 — — — — (24.8)— (24.8)
ASU 2016-13 adoption— — — — — — (1.4)— — (1.4)
Balance at January 31, 202149.1 $4.9 4.4 $0.4 $1,647.2 $(381.3)$5,360.0 $(641.5)$0.2 $5,989.9 
Net income attributable to Cooper stockholders— — — — — — 117.5 — — 117.5 
Other comprehensive income, net of tax— — — — — 34.1 — — — 34.1 
Issuance of common stock for stock plans, net0.1 0.1 — — 9.7 — — — — 9.8 
Issuance of common stock for employee stock purchase plan— — — — 0.9 — — 0.6 — 1.5 
Share-based compensation expense— — — — 10.0 — — — — 10.0 
Treasury stock repurchase— — — — — — — — — — 
Balance at April 30, 202149.2 $5.0 4.4 $0.4 $1,667.8 $(347.2)$5,477.5 $(640.9)$0.2 $6,162.8 


The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

6



THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows
Six Months Ended April 30,
(In millions, unaudited)
20212020
Cash flows from operating activities:
Net income $2,218.6 $102.0 
Depreciation and amortization153.0 139.4 
Increase in operating capital(61.4)(119.8)
Deferred income taxes(1,977.6)(3.6)
Other non-cash items7.7 37.5 
Net cash provided by operating activities340.3 155.5 
Cash flows from investing activities:
Purchases of property, plant and equipment(105.8)(158.3)
Acquisitions of businesses and assets, net of cash acquired, and other(170.9)(11.2)
Net cash used in investing activities(276.7)(169.5)
Cash flows from financing activities:
Proceeds from long-term debt486.3 1862.0 
Repayments of long-term debt(545.6)(1,781.3)
Net proceeds (repayments) from short-term debt5.4 (10.0)
Net (payments) proceeds related to share-based compensation awards(1.3)(8.4)
Dividends on common stock(1.5)(1.5)
Repurchase of common stock(24.8)(47.8)
Issuance of common stock for employee stock purchase plan2.5 0.9 
Debt issuance costs (5.5)
Net cash provided by (used in) financing activities(79.0)8.4 
Effect of exchange rate changes on cash, cash equivalents and restricted cash5.0 (3.1)
Net increase in cash, cash equivalents and restricted cash(10.4)(8.7)
Cash, cash equivalents and restricted cash at beginning of period116.8 89.5 
Cash, cash equivalents and restricted cash at end of period$106.4 $80.8 
Reconciliation of cash flow information:
Cash and cash equivalents$105.9 $79.8 
Restricted cash included in other current assets0.5 1.0 
Total cash, cash equivalents and restricted cash$106.4 $80.8 

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1. General

The accompanying Consolidated Condensed Financial Statements of the Cooper Companies, Inc. and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, terms "the Company", "we", "us", and "our" are used to refer collectively to the Cooper Companies, Inc. and its subsidiaries.

The accompanying Consolidated Condensed Financial Statements and related notes are unaudited and should be read in conjunction with the audited Consolidated Financial Statements of the Cooper Companies, Inc. and its subsidiaries (the Company) and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020. The Consolidated Condensed Financial Statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the interim periods presented. Readers should not assume that the results reported here either indicate or guarantee future performance.
Accounting Policies

There have been no material changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Estimates

The World Health Organization categorized the Coronavirus disease 2019 (COVID-19) as a pandemic. The COVID-19 pandemic has caused a severe global health crisis, along with economic and societal disruptions and uncertainties, which have negatively impacted business and healthcare activity globally. As a result of healthcare systems responding to the demands of managing the pandemic, governments around the world imposing measures designed to reduce the transmission of the COVID-19 virus, and individuals responding to the concerns of contracting the COVID-19 virus, many optical practitioners & retailers, hospitals, medical offices and fertility clinics closed their facilities, restricted access, or delayed or canceled patient visits, exams and elective medical procedures, and many customers that have reopened are experiencing reduced patient visits. These factors have had, and in the future may have, an adverse effect on our sales, operating results and cash flows.
The preparation of Consolidated Condensed Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates particularly as it relates to estimates reliant on forecasts and other assumptions reasonably available to the Company and the uncertain future impacts of the COVID-19 pandemic and related economic disruptions. The extent to which the COVID-19 pandemic and related economic disruptions impact our business and financial results will depend on future developments including, but not limited to, the continued spread, duration and severity of the COVID-19 pandemic; the occurrence, spread, duration and severity of any subsequent wave or waves of outbreaks; the actions taken by the U.S. and foreign governments to contain the COVID-19 pandemic, address its impact or respond to the reduction in global and local economic activity; the occurrence, duration and severity of a global, regional or national recession, depression or other sustained adverse market event; the impact of the developments described above on our customers and suppliers; and how quickly and to what extent normal economic and operating conditions can resume. The accounting matters assessed included, but were not limited to:
allowance for doubtful accounts and credit losses
the carrying value of inventory
the carrying value of goodwill and other long-lived assets
There was not a material impact to the above estimates in the Company’s Consolidated Condensed Financial Statements for the three and six months ended April 30, 2021. The Company continually monitors and evaluates the estimates used as additional information becomes available. Adjustments will be made to these provisions periodically to reflect new facts and circumstances that may indicate that historical experience may not be indicative of current and/or future results. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
changes to the estimates and material impacts to the Company’s Consolidated Condensed Financial Statements in future reporting periods.
Accounting Pronouncements Recently Adopted

In January 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company early adopted this guidance in the second quarter of fiscal 2021, and it did not have a material impact on our Consolidated Condensed Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments-Credit Losses, ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05 Financial Instruments-Credit Losses, ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2020-02 Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) and ASU 2020-03 Codification Improvements to Financial Instruments (collectively, “Topic 326”). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. Topic 326 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The Company adopted this guidance in the first quarter of fiscal 2021 on a modified retrospective basis, and the most notable impact was related to the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses. The Company recorded a cumulative-effect adjustment of $1.4 million to the Consolidated Condensed Balance Sheet on November 1, 2020.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This guidance amended Topic 808 and Topic 606 to clarify that transactions in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a distinct good or service (i.e., unit of account). The amendments preclude an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The Company adopted this guidance on November 1, 2020, and it did not have a material impact on our Consolidated Condensed Financial Statements.

Accounting Pronouncements Issued Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. We are currently evaluating the impact of ASU 2019-12 on our Consolidated Condensed Financial Statements, which is effective for the Company in our fiscal year and interim periods beginning on November 1, 2021.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent amendment to the initial guidance: ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance generally can be applied from March 12, 2020 through December 31, 2022. We are currently assessing the impacts of the practical expedients provided in Topic 848 and which, if any, we will adopt.
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, which means it will be effective for our fiscal year beginning November 1, 2022. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our Consolidated Condensed Financial Statements.
No other recently issued accounting pronouncements had or are expected to have a material impact on our Consolidated Condensed Financial Statements.

Note 2. Acquisitions
The following is a summary of the allocation of the total purchase consideration for business and asset acquisitions that the Company completed during the six months ended April 30, 2021 and fiscal 2020:
(In millions)April 30, 2021October 31, 2020
Technology$163.5 $ 
In-Process Research & Development (IPR&D)20.0  
Customer relationships5.5 11.4 
Trademarks1.3 5.1 
Other0.4 3.9 
Total identifiable intangible assets$190.7 $20.4 
Goodwill49.7 15.3 
Net tangible assets (liabilities)(13.0)(0.3)
Fair value of contingent consideration(38.6) 
Total closing purchase price$188.8 $35.4 
All acquisitions were funded by cash generated from operations or facility borrowings.
For business acquisitions, the Company recorded tangible and intangible assets acquired and liabilities assumed at their fair values as of the applicable date of acquisition. For asset acquisitions, the Company recorded tangible and intangible assets acquired and liabilities assumed at their estimated and relative fair values as of the applicable date of acquisition.

The Company believes these acquisitions strengthen CooperSurgical's and CooperVision's businesses through the addition of new distributors or complementary products and services.
Fiscal Year 2021

On April 26, 2021, CooperVision completed the acquisition of a privately-held U.K. contact lens manufacturer focusing on specialty contact lenses. This acquisition expands CooperVision’s specialty eye care portfolio and accelerates its development of myopia management solutions in the U.K. The purchase price allocation is preliminary, and the Company is in the process of finalizing information and the corresponding impact on goodwill.

On March 1, 2021, CooperSurgical completed the acquisition of a privately-held medical device company that designed and developed an innovative obstetric product for use in urgent obstetrics to reduce risks associated with childbirth. The purchase price allocation is preliminary, and the Company is in the process of finalizing information and the corresponding impact on goodwill.

On February 1, 2021, CooperSurgical acquired all of the remaining equity interests of a privately-held medical device company that developed the Mara® Water Vapor Ablation System, which is used for endometrial ablation. The Company accounted for this acquisition as an asset acquisition, whereby the Company allocated the total cost of the acquisition to the net assets acquired on the basis of their estimated relative fair values on the acquisition date with no goodwill recognized. The primary asset acquired in this asset acquisition is Technology.

On January 19, 2021, CooperVision acquired all of the remaining equity interests of a privately-held medical device company that develops spectacle lenses for myopia management. The fair value remeasurement of our previous equity investment immediately before the acquisition resulted in a gain of $11.5 million, which was recorded in other income. The
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
terms of the acquisition include upfront cash consideration paid at closing of approximately $40.9 million attributable to the equity interests not held by the Company on the closing date. The transaction also includes potential payments of future consideration that are contingent upon the achievement of the regulatory approval milestone (the regulatory approval payment) and the acquired business reaching certain revenue thresholds over a specified period (the revenue payments). The undiscounted range of the contingent consideration is zero to $139.1 million payable to the other former equity interest owners. The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to taxes and the corresponding impact on goodwill.

The estimated fair value of the contingent consideration on the acquisition date was approximately $37.9 million, and, accordingly, the Company recorded a liability of approximately $30.2 million, which represents the fair value of the contingent consideration payable to the other former equity interest owners. The fair value of the regulatory approval payment was determined using an option pricing framework based on the expected payment under the contractual terms and the estimates of the probability of achieving the regulatory approval. The fair value of the revenue payments was determined using a Monte Carlo simulation based on the revenue projections and the expected payment for each simulation.

As of April 30, 2021, no contingent consideration has been paid. The Company remeasured the fair value of the contingent consideration as of April 30, 2021 and determined the fair value of the contingent consideration has not changed since the acquisition date. Therefore, no fair value adjustment was recognized in the Consolidated Statements of Income and Comprehensive Income for the three months ended April 30, 2021.
On December 31, 2020, CooperSurgical completed the acquisition of a privately-held in vitro fertilization (IVF) cryo-storage software solutions company. The purchase price allocation is preliminary, and the Company is in the process of finalizing information and the corresponding impact on goodwill.
The pro forma results of operations of these acquisitions have not been presented because the effect of the business combinations described above was not material to the consolidated results of operations.
Fiscal Year 2020

On August 7, 2020, CooperVision completed the acquisition of a privately-held U.S. contact lens manufacturer focusing on ortho-k lenses. This acquisition expands CooperVision’s specialty eye care portfolio and its leadership in addressing the increasing severity and prevalence of myopia. The purchase price allocation is preliminary, and the Company is in the process of finalizing information and the corresponding impact on goodwill.

On December 13, 2019, CooperSurgical completed the acquisition of a privately-held distributor of IVF medical devices and systems.

The pro forma results of operations of these acquisitions have not been presented because the effect of the business combination described above was not material to the consolidated results of operations.

Contingent Consideration

Certain of the Company’s business combinations involve potential payments of future consideration that are contingent upon the achievement of regulatory milestones and/or the acquired business reaching certain revenue thresholds. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized in selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

Periods Ended April 30,Three MonthsSix Months
(In millions)2021202020212020
Beginning balance$30.2 $ $ $ 
Purchase price contingent consideration0.6  30.8  
Payments    
Change in fair value    
Ending balance$30.8 $ $30.8 $ 


11

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 3. Inventories
(In millions)April 30, 2021October 31, 2020
Raw materials$143.6 $151.0 
Work-in-process13.8 12.4 
Finished goods424.6 407.0 
Total inventories$582.0 $570.4 
Inventories are stated at the lower of cost and net realizable value. Cost is computed using standard cost that approximates actual cost, on a first-in, first-out basis.

Note 4. Intangible Assets

Goodwill
(In millions)CooperVisionCooperSurgicalTotal
Balance at October 31, 2020$1,779.3 $668.0 $2,447.3 
Current period additions31.1 18.6 49.7 
Foreign currency translation adjustment63.5 7.2 70.7 
Balance at April 30, 2021$1,873.9 $693.8 $2,567.7 

The Company evaluates goodwill for impairment annually during the fiscal third quarter and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist. The Company accounts for goodwill, evaluates and tests goodwill balances for impairment in accordance with related accounting standards.

The Company performed an annual impairment assessment in the third quarter of fiscal 2020, and its analysis indicated that there was no impairment of goodwill in reporting units.
Other Intangible Assets
 April 30, 2021October 31, 2020
(In millions)Gross 
Carrying
Amount
Accumulated
Amortization
Gross 
Carrying
Amount
Accumulated
Amortization
Weighted Average Amortization Period
(in years)
Intangible assets with definite lives:
Composite intangible asset$1,061.9 $247.8 $1,061.9 $212.4 15
Technology564.8 270.1 401.2 251.9 11
Customer relationships378.3 229.7 367.0 216.2 13
Trademarks155.9 43.3 153.4 37.7 14
License and distribution rights and other 32.2 19.9 31.8 18.2 10
2,193.1 $810.8 2,015.3 $736.4 14
Less: accumulated amortization and translation810.8 736.4 
Intangible assets with definite lives, net1,382.3 1,278.9 
Intangible assets with indefinite lives, net (1)
30.1 10.1 
Total other intangibles, net$1,412.4 $1,289.0 
(1) Intangible assets with indefinite lives include technology and trademarks.
Balances include foreign currency translation adjustments.
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
As of April 30, 2021, the estimate of future amortization expenses for intangible assets with definite lives is as follows:
Fiscal Years:(In millions)
Remainder of 2021$76.7 
2022151.6 
2023149.3 
2024145.1 
2025134.6 
Thereafter725.0 
Total remaining amortization for intangible assets with definite lives$1,382.3 
The Company assesses definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a definite-lived intangible asset (asset group) may not be recoverable. When events or changes in circumstances indicate that the carrying amount of a definite-lived intangible asset may not be recoverable, in accordance with related accounting standards, the Company evaluates whether the definite-lived intangible asset is impaired by comparing its carrying value to its undiscounted future cash flows.
The Company assesses indefinite-lived intangible assets annually in the third quarter of the fiscal year, or whenever events or circumstances indicate that the carrying amount of an indefinite-lived intangible asset (asset group) may not be recoverable, in accordance with related accounting standards. The Company evaluates whether the indefinite-lived intangible asset is impaired by comparing its carrying value to its fair value.
The Company performed an annual impairment assessment in the third quarter of fiscal 2020 and did not recognize any intangible asset impairment charges.

Note 5. Debt
(In millions)April 30, 2021October 31, 2020
Overdraft and other credit facilities$62.7 $59.4 
Term loan350.0 350.0 
Less: unamortized debt issuance cost(0.1)(0.1)
Short-term debt$412.6 $409.3 
Revolving credit475.0 534.0 
Term loans850.0 850.0 
Other0.2 0.2 
Less: unamortized debt issuance cost(0.3)(0.3)
Long-term debt1,324.9 1,383.9 
Total debt$1,737.5 $1,793.2 
    
Term Loan Agreement on October 16, 2020

On October 16, 2020, the Company entered into a 364-day, $350.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent which matures on October 15, 2021. The funds were used to partially repay outstanding borrowings under the 2020 Revolving Credit Facility (as defined below). At April 30, 2021, the Company had $350.0 million outstanding under this agreement.

Amounts outstanding under this agreement will bear interest, at the Company’s option, at either the base rate, or the adjusted LIBO rate, plus, in each case, an applicable rate of 0.00% in respect of base rate loans and 0.80% in respect of adjusted LIBO rate loans. The interest rate was 0.92% at April 30, 2021.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
This agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain Total Leverage Ratio and Interest Coverage Ratio consistent with the 2020 Credit Agreement discussed below.
Revolving Credit and Term Loan Agreement on April 1, 2020
On April 1, 2020, the Company entered into a Revolving Credit and Term Loan Agreement (the 2020 Credit Agreement), among the Company, CooperVision International Holding Company, LP, CooperSurgical Netherlands B.V., CooperVision Holding Kft. the lenders from time to time party thereto, and KeyBank National Association, as administrative agent. The 2020 Credit Agreement provides for (a) a multicurrency revolving credit facility (the 2020 Revolving Credit Facility) in an aggregate principal amount of $1.29 billion and (b) a term loan facility (the 2020 Term Loan Facility) in an aggregate principal amount of $850.0 million, each of which, unless terminated earlier, mature on April 1, 2025. In addition, the Company has the ability from time to time to request an increase to the size of the revolving credit facility or establish one or more new term loans under the term loan facility in an aggregate amount up to $1.605 billion, subject to the discretionary participation of the lenders.
Amounts outstanding under the 2020 Credit Agreement will bear interest, at the Company’s option, at either the base rate, or the adjusted LIBO rate or adjusted foreign currency rate, plus, in each case, an applicable rate of between 0.00% and 0.50% in respect of base rate loans, and between 0.75% and 1.50% in respect of adjusted LIBO rate or adjusted foreign currency rate loans, in each case in accordance with a pricing grid tied to the Total Leverage Ratio, as defined in the 2020 Credit Agreement. During the term of the 2020 Revolving Credit Facility, the Borrowers may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reduction of the revolving commitment.
The Company pays an annual commitment fee that ranges from 0.10% to 0.20% of the unused portion of the 2020 Revolving Credit Facility based upon the Company’s Total Leverage Ratio, as defined in the 2020 Credit Agreement. In addition to the annual commitment fee, the Company is also required to pay certain letter of credit and related fronting fees and other administrative fees pursuant to the terms of the 2020 Credit Agreement.
On April 1, 2020, the Company borrowed $850.0 million under the 2020 Term Loan Facility and $445.0 million under the 2020 Revolving Credit Facility and used the proceeds to repay the outstanding amounts under the previous credit agreement and an outstanding term loan, and for general corporate purposes.
On October 30, 2020, the Company entered into Amendment No. 1 to the 2020 Credit Agreement (the First Amendment to the 2020 Credit Agreement). The First Amendment to the 2020 Credit Agreement modifies the 2020 Credit Agreement by, among other things, adding CooperVision International Limited as a revolving borrower and releasing certain borrowers in the 2020 Credit Agreement.
At April 30, 2021, the Company had $850.0 million outstanding under the 2020 Term Loan Facility, $475.0 million outstanding under the 2020 Revolving Credit Facility and $813.6 million available under the 2020 Revolving Credit Facility, net of $1.4 million outstanding letters of credit. The interest rate on the 2020 Term Loan Facility was 1.12% at April 30, 2021. During the three and six months ended April 30, 2021, the Company expensed less than $0.1 million related to the debt issuance costs of the 2020 Term Loan Facility.
The 2020 Credit Agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain Total Leverage Ratio and Interest Coverage Ratio, each as defined in the 2020 Credit Agreement:
Interest Coverage Ratio, as defined, to be at least 3.00 to 1.00 at all times.
Total Leverage Ratio, as defined, to be no higher than 3.75 to 1.00.
At April 30, 2021, the Company was in compliance with the Interest Coverage Ratio at 36.81 to 1.00 and the Total Leverage Ratio at 1.78 to 1.00 for the 2020 Credit Agreement. The Company, after considering the potential impacts of the COVID-19 pandemic, expects to remain in compliance with its financial maintenance covenant and meet its debt service obligations for at least the twelve months following the date of issuance of these financial statements.
Refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2020 for more details.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
The following is a summary of the maximum commitments and the net amounts available to us under credit facilities discussed above as of April 30, 2021:
(In millions)Facility LimitOutstanding BorrowingsOutstanding Letters of CreditTotal Amount AvailableMaturity Date
2020 Revolving Credit Facility$1,290.0 $475.0 $1.4 $813.6 April 1, 2025
2020 Term Loan Facility850.0 850.0 n/a— April 1, 2025
2020 Term Loan350.0 350.0 n/a— October 15, 2021
Total$2,490.0 $1,675.0 $1.4 $813.6 

Note 6. Income Taxes

The Company's effective tax rates for the three months ended April 30, 2021 and April 30, 2020 were 13.8% and (27.7)%, respectively. The increase was primarily due to changes in the geographical composition of pre-tax earnings. The Company's effective tax rate for the second quarter of fiscal 2021 was lower than the U.S. federal statutory tax rate primarily due to earnings in foreign jurisdictions with lower tax rates and excess tax benefits from share-based compensation.

The Company's effective tax rates for the six months ended April 30, 2021 and April 30, 2020 were (704.2)% and 4.2%, respectively. The decrease was primarily due to an intra-group transfer of intellectual property, as discussed below. The Company's effective tax rate for the six months ended April 30, 2021 was lower than the U.S. federal statutory tax rate primarily due to the intra-group transfer. The Company's effective tax rates for the six months ended April 30, 2021 and April 30, 2020 were otherwise lower than the U.S. federal statutory tax rate primarily due to earnings in foreign jurisdictions with lower tax rates and excess tax benefits from share-based compensation.

In November 2020, the Company completed an intra-group transfer of certain intellectual property and related assets to a UK subsidiary as part of a group restructuring to establish headquarters operations in the UK. Income before income taxes resulting from this transfer is eliminated upon consolidation. The transfer resulted in a step-up of the UK tax-deductible basis in the intellectual property and goodwill, creating a temporary difference between the book basis and the tax basis of these assets. As a result, the Company recognized a deferred tax asset of $1,987.9 million, with a corresponding income tax benefit, during the three months ended January 31, 2021.

Note 7. Earnings Per Share
Periods Ended April 30,Three MonthsSix Months
(In millions, except per share amounts)2021202020212020
Net income$117.5 $11.5 $2,218.6 $102.0 
Basic:
Weighted average common shares49.2 49.2 49.2 49.2 
Basic earnings per share$2.39 $0.23 $45.12 $2.07 
Diluted:
Weighted average common shares49.2 49.2 49.2 49.2 
Effect of dilutive stock options0.5 0.4 0.5 0.5 
Diluted weighted average common shares49.7 49.6 49.7 49.7 
Diluted earnings per share $2.36 $0.23 $44.65 $2.05 
15

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
The following table sets forth stock options to purchase our common stock and restricted stock units that were not included in the diluted earnings per share calculation because their effect would have been antidilutive for the periods presented:
Periods Ended April 30,Three MonthsSix Months
(In thousands, except exercise prices)2021202020212020
Stock option shares excluded108 210 108 207 
Range of exercise prices$345.74 
$254.77 – $304.54
$345.74 $304.54 
Restricted stock units excluded 1 8 1 

Note 8. Share-Based Compensation Plans
The Company has several share-based compensation plans that are described in the Company’s Annual Report on Form 10‑K for the fiscal year ended October 31, 2020. The compensation expense and related income tax benefit recognized in our Consolidated Statements of Income and Comprehensive Income for share-based awards were as follows:
Periods Ended April 30,Three MonthsSix Months
(In millions)2021202020212020
Selling, general and administrative expense$8.7 $8.3 $17.8 $17.0 
Cost of sales0.9 1.1 2.0 2.1