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, 2023
| 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
_____________________________________________________________
(Exact name of registrant as specified in its charter)
_____________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (925 ) 460-3600
_____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
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.
| ☒ | Accelerated 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 26, 2023, 49,507,924 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 Condensed Statements of Income and Comprehensive Income
Periods Ended April 30,
(In millions, except for earnings per share)
(Unaudited)
| Three Months | Six Months | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||
| Research and development expense | |||||||||||||||||||||||
| Amortization of intangibles | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other expense (income), net | ( | ( | |||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes (Note 6) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share (Note 7): | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Number of shares used to compute earnings per share: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Cash flow hedges | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
3
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In millions, unaudited)
| April 30, 2023 | October 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Trade accounts receivable, net of allowance for credit losses of $ | |||||||||||
| Inventories (Note 3) | |||||||||||
| Prepaid expense and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other intangibles, net (Note 4) | |||||||||||
| Deferred tax assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term debt (Note 5) | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Employee compensation and benefits | |||||||||||
| Deferred revenue | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt (Note 5) | |||||||||||
| Deferred tax liabilities | |||||||||||
| Long-term tax payable | |||||||||||
| Deferred revenue | |||||||||||
| Accrued pension liability and other | |||||||||||
| Total liabilities | $ | $ | |||||||||
| Contingencies (Note 10) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
Treasury stock at cost: | ( | ( | |||||||||
| Total Cooper stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Stockholders’ equity (Note 9) | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
4
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Equity
(In millions, unaudited)
| Common Shares | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Noncontrolling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at November 1, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, net and employee stock purchase plan | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on common stock ($ | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchase | ( | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, net and employee stock purchase plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
5
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Equity
(In millions, unaudited)
| Common Shares | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Noncontrolling Interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at November 1, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, net and employee stock purchase plan | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends on common stock ($ | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock plans, net and employee stock purchase plan | — | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 30, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
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)
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Settlement of contingent consideration | ( | ||||||||||
| Change in fair value of contingent consideration | ( | ||||||||||
| Accrual for acquisition termination fee | |||||||||||
| Net changes in operating capital | ( | ( | |||||||||
| Other non-cash items | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Acquisitions of businesses and assets, net of cash acquired, and other | ( | ( | |||||||||
| Proceeds from sale of interest in a subsidiary | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from long-term debt, net of issuance costs | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Net (repayments of) proceeds from short-term debt | ( | ||||||||||
| Net proceeds (payments) related to share-based compensation awards | ( | ||||||||||
| Dividends on common stock | ( | ( | |||||||||
| Repurchase of common stock | ( | ||||||||||
| Issuance of common stock for employee stock purchase plan | |||||||||||
| Settlement of contingent consideration | ( | ||||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | ( | ||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
| Reconciliation of cash flow information: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in other current assets | |||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | |||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
7
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 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 Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2022. 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.
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, 2022.
Estimates
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. 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.
Accounting Pronouncements Recently Adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This standard is effective for fiscal years beginning after December 15, 2021, and should be applied either prospectively or retrospectively. Early adoption is permitted. The Company adopted this guidance prospectively on November 1, 2022, and it did not have a material impact on the Consolidated Condensed Financial Statements.
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. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024. Effective February 1, 2023, the Company transitioned its credit agreements from LIBOR to the Secured Overnight Financing Rate ("SOFR"). The Company adopted this guidance prospectively on February 1, 2023, and it did not have a material impact on the Consolidated Condensed Financial Statements.
No other recently issued accounting pronouncements had or are expected to have a material impact on the Company's Consolidated Condensed Financial Statements.
Note 2. Acquisitions and Joint Venture
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.
On November 1, 2022, CooperVision completed the acquisition of a privately-held U.S.-based company that provides a broad portfolio of technologically advanced contact lens products, including scleral and hybrid lenses. The purchase price of the acquisition was $33.0 million. Based upon preliminary valuations, assets acquired primarily comprised $12.6 million of customer
8
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
relationship related intangibles, $7.6 million of technology, and $13.1 million of goodwill. The goodwill is not deductible for tax purposes. The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to the effect on taxes and the corresponding impact on goodwill.
On April 6, 2022, CooperSurgical entered into an asset purchase agreement to acquire Cook Medical's Reproductive Health business, a manufacturer of minimally invasive medical devices focused on the fertility, obstetrics and gynecology markets. The aggregate consideration is $875.0 million in cash, with $675.0 million payable at the closing and the remaining $200.0 million payable in $50.0
During the three months ended April 30, 2023, CooperSurgical determined that the fulfillment of certain closing conditions related to regulatory approvals was no longer probable and accrued $45.0 million in expenses associated with the probable payment in August 2023 of a termination fee under the asset purchase agreement. The termination fee is recorded in "selling, general and administrative expense" on the Consolidated Condensed Statements of Income and Comprehensive Income.
Joint Venture
On January 19, 2021, CooperVision acquired all of the remaining equity interests of SightGlass Vision, Inc. (SGV), a privately-held medical device company that developed spectacle lenses for myopia management. The transaction included potential payments of future consideration that were 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 was zero to $139.1 million payable to the other former equity interest owners.
In March 2022, the entities amended the terms of the contingent consideration, which resulted in CooperVision paying $42.9 million to the former equity interest owners in exchange for the elimination of the revenue payments. CooperVision recognized a net gain of $12.2 million during fiscal 2022.
Further, CooperVision and Essilor International SAS (Essilor) executed the Contribution Agreement and Stock Purchase Agreement (the “Agreements”) in March 2022. Essilor paid CooperVision $52.1 million in exchange for 50 % interest in SGV and their proportionate share of the revenue payments. As part of the Agreements, each party contributed their interest in SGV and $10 90.0 million which resulted in a $56.9 million gain in Other (income) expense on deconsolidation of SGV in fiscal 2022.
During the six months ended April 30, 2023, CooperVision determined that approval would not be achieved within the timeline set forth in the contractual terms of the regulatory approval payment and released the remaining $31.8 million contingent consideration liability.
Additional information regarding the joint venture is included in our notes to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
Note 3. Inventories
| (In millions) | April 30, 2023 | October 31, 2022 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
9
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 4. Intangible Assets
Intangible assets consisted of the following:
| April 30, 2023 | October 31, 2022 | ||||||||||||||||||||||||||||
| (In millions) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Weighted Average Amortization Period (in years) | ||||||||||||||||||||||||
| Intangible assets with definite lives: | |||||||||||||||||||||||||||||
| Customer relationships | $ | $ | $ | $ | |||||||||||||||||||||||||
| Composite intangible asset | |||||||||||||||||||||||||||||
| Technology | |||||||||||||||||||||||||||||
| Trademarks | |||||||||||||||||||||||||||||
| License and distribution rights and other | |||||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||
| Less: accumulated amortization and translation | |||||||||||||||||||||||||||||
| Intangible assets with definite lives, net | |||||||||||||||||||||||||||||
Intangible assets with indefinite lives, net (1) | |||||||||||||||||||||||||||||
| Total other intangibles, net | $ | $ | |||||||||||||||||||||||||||
(1) Intangible assets with indefinite lives include technology and trademarks.
Balances include foreign currency translation adjustments.
As of April 30, 2023, the estimate of future amortization expenses for intangible assets with definite lives is as follows:
| Fiscal Years: | (In millions) | ||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total remaining amortization for intangible assets with definite lives | $ | ||||
There was no impairment of intangible assets recorded in the six months ended April 30, 2023.
10
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 5. Financing Arrangements
The Company had outstanding debt as follows:
| (In millions) | April 30, 2023 | October 31, 2022 | |||||||||
| Overdraft and other credit facilities | $ | $ | |||||||||
| Term loans | |||||||||||
| Short-term debt, excluding financing leases | |||||||||||
| Short-term debt | $ | $ | |||||||||
| Revolving credit | $ | $ | |||||||||
| Term loans | |||||||||||
| Other | |||||||||||
| Less: unamortized debt issuance cost | ( | ( | |||||||||
| Long-term debt, excluding financing leases | |||||||||||
| Long-term debt | $ | $ | |||||||||
| Total debt | $ | $ | |||||||||
Additional information regarding our indebtedness is included in our notes to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, which was filed with the Securities and Exchange Commission on December 9, 2022. The carrying value of the Company's revolving credit facility and term loans approximates fair value based on current market rates (Level 2). As of April 30, 2023, the Company was in compliance with all debt covenants. On February 1, 2023, the Company amended its credit agreements to transition the interest rates applicable to the loans denominated in U.S. Dollars from LIBOR to SOFR, as defined in the credit agreements.
2021 Term Loan Agreement
On December 17, 2021, the Company entered into a Term Loan Agreement (the 2021 Credit Agreement) by and among the Company, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent. The 2021 Credit Agreement provides for a term loan facility (the 2021 Term Loan Facility) in an aggregate principal amount of $1.5 billion, which, unless terminated earlier, matures on December 17, 2026.
On April 30, 2023, the Company had $1.5 billion outstanding under the 2021 Term Loan Facility and the weighted average interest rate was 5.91 %.
2021 364 -Day Term Loan Agreement
On November 2, 2021, the Company entered into a 364 -day, $840.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent, which matured on November 1, 2022. The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolving Credit Facility and for general corporate purposes. The loan was fully repaid by the maturity date.
2020 Revolving Credit and Term Loan Agreement
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. The Company has an uncommitted option to increase the revolving credit facility or establish a new term loan in an aggregate amount up to $1.605 billion.
11
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 6. Income Taxes
The effective tax rates for the three months ended April 30, 2023, and April 30, 2022, were 39.3 % and 22.7 %, respectively. The effective tax rates for the six months ended April 30, 2023, and April 30, 2022, were 33.7 % and 22.3 %, respectively. The increases were primarily due to changes in the geographic composition of pre-tax earnings, an increase in the UK statutory tax rate from 19% to 25%, and capitalization of research and experimental expenditures for fiscal 2023 as required by the 2017 Tax Cuts and Jobs Act.
Note 7. Earnings Per Share
| Periods Ended April 30, | Three Months | Six Months | |||||||||||||||||||||
| (In millions, except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Basic: | |||||||||||||||||||||||
| Weighted average common shares | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted: | |||||||||||||||||||||||
| Weighted average common shares | |||||||||||||||||||||||
| Effect of dilutive stock plans | |||||||||||||||||||||||
| Diluted weighted average common shares | |||||||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
The following table sets forth stock options to purchase our common stock 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 Months | Six Months | |||||||||||||||||||||
| (In thousands, except exercise prices) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Stock option shares excluded | |||||||||||||||||||||||
| Exercise prices | $ | $ | $ | $ | |||||||||||||||||||
| Restricted stock units excluded | |||||||||||||||||||||||
Note 8. Share-Based Compensation
The Company has several stock plans that are described in the Company’s Annual Report on Form 10‑K for the fiscal year ended October 31, 2022. Compensation expense and the related income tax benefit recognized in our Consolidated Condensed Statements of Income and Comprehensive Income for share-based awards, including the Employee Stock Purchase Plan, were as follows:
| Periods Ended April 30, | Three Months | Six Months | |||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| Selling, general and administrative expense | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Research and development expense | |||||||||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
| Related income tax benefit | $ | $ | $ | $ | |||||||||||||||||||
12
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
2023 Long-Term Incentive Plan (2023 Plan)
In March 2023, we received stockholder approval of the 2023 Plan, which replaces the 2007 Long-Term Incentive Plan (2007 Plan). The 2023 Plan authorizes either our Board of Directors, or a designated committee thereof composed of two or more Non-Employee Directors, to grant to eligible individuals up to 1,365,000 shares in the form of specified equity awards including stock options, restricted stock units (RSUs) and performance share units (PSUs), subject to adjustment for future stock splits, stock dividends, expirations, forfeitures, and similar events. In addition, the 2023 Plan includes any shares which were available for issuance under the 2007 Plan at the time of stockholder approval of this plan. The 2023 Plan provides for awards of stock options, RSUs and PSUs on substantially the same terms as the 2007 Plan, described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
As of April 30, 2023, 1,371,164 shares remained available under the 2023 Plan for future grants. The amount of available shares includes shares which may be distributed under performance shares.
Note 9. Stockholders' Equity
Analysis of Changes in Accumulated Other Comprehensive Loss:
| (In millions) | Foreign Currency Translation Adjustment | Minimum Pension Liability | Derivative Instruments | Total | |||||||||||||||||||
| Balance at October 31, 2021 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Gross change in value | ( | ( | |||||||||||||||||||||
| Tax effect | ( | ( | |||||||||||||||||||||
| Balance at April 30, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Balance at October 31, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Gross change in value | ( | ||||||||||||||||||||||
| Tax effect | |||||||||||||||||||||||
| Balance at April 30, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
Share Repurchases
In December 2011, the Company's Board of Directors authorized the 2012 Share Repurchase Program (2012 Program) and through subsequent amendments, the most recent being in March 2017, the total repurchase authorization was increased from $500.0 million to $1.0 billion of the Company's common stock. As of April 30, 2023, $256.4 million remains authorized for repurchase under the 2012 Program.
During the three and six months ended April 30, 2023, there were no
During the three months ended April 30, 2022, there were no share repurchases under the 2012 Program. During the six months ended April 30, 2022, the Company repurchased 191.2 thousand shares of its common stock for $78.5 million, at an average purchase price of $410.41 per share.
Dividends
The Company paid a semiannual dividend of approximately $1.5 million or 3 cents per share, on February 10, 2023, to stockholders of record on January 23, 2023. The Company paid a semiannual dividend of approximately $1.5 million or 3 cents per share, on February 9, 2022, to stockholders of record on January 21, 2022.
Note 10. Contingencies
13
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 11. Business Segment Information
The following tables present revenue and other financial information by reportable segment:
Segment information:
| Periods Ended April 30, | Three Months | Six Months | |||||||||||||||||||||
| (In millions) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| CooperVision net sales by category: | |||||||||||||||||||||||
| Toric lens | $ | $ | $ | $ | |||||||||||||||||||
| Multifocal lens | |||||||||||||||||||||||
| Single-use sphere lens | |||||||||||||||||||||||
| Non single-use sphere, other | |||||||||||||||||||||||
| Total CooperVision net sales | $ | $ | $ | $ | |||||||||||||||||||
| CooperSurgical net sales by category: | |||||||||||||||||||||||
| Office and surgical | $ | $ | $ | $ | |||||||||||||||||||
| Fertility | |||||||||||||||||||||||
| CooperSurgical net sales | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
| Operating income (loss): | |||||||||||||||||||||||
| CooperVision | $ | $ | $ | $ | |||||||||||||||||||
| CooperSurgical | ( | ( | |||||||||||||||||||||
| Corporate | ( | ( | ( | ( | |||||||||||||||||||
| Total operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Other expense, net | ( | ( | |||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | |||||||||||||||||||
| (In millions) | April 30, 2023 | October 31, 2022 | |||||||||
| Total identifiable assets: | |||||||||||
| CooperVision | $ | $ | |||||||||
| CooperSurgical | |||||||||||
| Corporate | |||||||||||
| Total | $ | ||||||||||