CooperCompanies (NYSE: COO) today announced financial results for
the fiscal first quarter ended January 31, 2020.
- Revenue increased 3% year-over-year to $646.2 million.
CooperVision (CVI) revenue up 3% to $485.2 million, and
CooperSurgical (CSI) revenue up 2% to $161.0 million.
- GAAP diluted earnings per share $1.82, down 25 cents or 12%
from last year's first quarter.
- Non-GAAP diluted earnings per share $2.69, down 19 cents or 7%
from last year's first quarter. See "Reconciliation of GAAP Results
to Non-GAAP Results" below.
Commenting on the results, Albert White, Cooper’s president and
chief executive officer said, "CooperCompanies is off to a strong
start to fiscal 2020 as we continue successfully implementing our
strategic objectives. The first quarter saw strength in our 1-day
silicone hydrogel lens franchises, our MyDay® production improving
and the beginning of our MiSight® launch in the U.S. We
believe we are well positioned to build on our growth as we move
through the year even with the challenges presented from the
coronavirus."
First Quarter Operating Results
- Revenue $646.2 million, up 3% from last year’s first quarter,
up 3% in constant currency.
- Gross margin 66% compared with 67% in last year’s first
quarter. On a non-GAAP basis, gross margin was 67% consistent with
67% last year.
- Operating margin 17% compared with 18% in last year’s first
quarter. On a non-GAAP basis, operating margin was 25% compared
with 26% last year.
- Interest expense $11.6 million compared with $18.2 million in
last year's first quarter due to lower average debt balances and
interest rates.
- Total debt outstanding at the end of the quarter was $1,776.7
million with quarter-end cash and cash equivalents of $76.8
million. Adjusted leverage ratio (net debt over adjusted EBITDA) of
1.82x.
- Cash provided by operations $129.7 million offset by capital
expenditures $69.0 million resulted in free cash flow of $60.7
million.
First Quarter CooperVision (CVI) Operating
Results
- Revenue $485.2 million, up 3% from last year’s first quarter,
up 4% in constant currency.
- Revenue by category:
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
% of CVI Revenue |
|
%chg |
|
Constant Currency%chg |
|
|
1Q20 |
|
1Q20 |
|
y/y |
|
y/y |
|
Toric |
$ |
155.1 |
|
|
32 |
% |
|
6 |
% |
|
7 |
% |
|
Multifocal |
51.8 |
|
|
11 |
% |
|
6 |
% |
|
6 |
% |
|
Single-use sphere |
138.1 |
|
|
28 |
% |
|
5 |
% |
|
5 |
% |
|
Non single-use sphere,
other |
140.2 |
|
|
29 |
% |
|
(2 |
)% |
|
(1 |
)% |
|
Total |
$ |
485.2 |
|
|
100 |
% |
|
3 |
% |
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
% of CVI Revenue |
|
%chg |
|
Constant Currency%chg |
|
|
1Q20 |
|
1Q20 |
|
y/y |
|
y/y |
|
Americas |
$ |
189.4 |
|
|
39 |
% |
|
8 |
% |
|
8 |
% |
|
EMEA |
187.0 |
|
|
39 |
% |
|
1 |
% |
|
3 |
% |
|
Asia Pacific |
108.8 |
|
|
22 |
% |
|
(1 |
)% |
|
(1 |
)% |
|
Total |
$ |
485.2 |
|
|
100 |
% |
|
3 |
% |
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Gross margin 65% compared with 66% in last year’s first
quarter. On a non-GAAP basis, gross margin was 67% compared with
66% in last year's first quarter largely due to a reduction in
year-over-year expenses associated with infrastructure improvement
projects.
First Quarter CooperSurgical (CSI) Operating
Results
- Revenue $161.0 million up 2% from last year's first quarter, up
2% in constant currency.
- Revenue by category:
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
% of CSI Revenue |
|
%chg |
|
Constant Currency%chg |
|
|
1Q20 |
|
1Q20 |
|
y/y |
|
y/y |
|
Office and surgical products |
$ |
98.5 |
|
|
61 |
% |
|
3 |
% |
|
3 |
% |
|
Fertility |
62.5 |
|
|
39 |
% |
|
— |
% |
|
1 |
% |
|
Total |
$ |
161.0 |
|
|
100 |
% |
|
2 |
% |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Gross margin 68% compared with 69% in last year’s first
quarter. On a non-GAAP basis, gross margin was 70% compared with
72% in last year's first quarter largely due to disruptions
associated with consolidating our global manufacturing operations
into Costa Rica.
Fiscal Year 2020 GuidanceThe Company updated
its fiscal year 2020 guidance. Details are summarized as
follows:
- Fiscal 2020 total revenue $2,767 - $2,817 million (~5% to 7%
constant currency)° CVI revenue $2,070 - $2,100 million (~5.5%
to 7% constant currency)° CSI revenue $697 - $717 million (~3%
to 6% constant currency)
- Fiscal 2020 non-GAAP diluted EPS of $12.80 - $13.20
Non-GAAP diluted earnings per share guidance excludes
amortization and impairment of intangible assets, and other
exceptional or unusual income or gains and charges or expenses
including acquisition, integration and manufacturing related costs
which we may incur as part of our continuing operations.
With respect to the Company’s guidance expectations, the Company
has not reconciled non-GAAP diluted earnings per share guidance to
GAAP diluted earnings per share due to the inherent difficulty in
forecasting acquisition-related, integration and restructuring
charges and expenses, which are reconciling items between the
non-GAAP and GAAP measure. Due to the unknown effect, timing
and potential significance of such charges and expenses that impact
GAAP diluted earnings per share, the Company is not able to provide
such guidance.
Reconciliation of GAAP Results to Non-GAAP
ResultsTo supplement our financial results and guidance
presented on a GAAP basis, we use non-GAAP measures that we believe
are helpful in understanding our results. The non-GAAP measures
exclude costs which we generally would not have otherwise incurred
in the periods presented as a part of our continuing
operations. Our non-GAAP financial results and guidance are
not meant to be considered in isolation or as a substitute for
comparable GAAP measures and should be read only in conjunction
with our consolidated financial statements prepared in accordance
with GAAP. Management uses supplemental non-GAAP financial
measures internally to understand, manage and evaluate our business
and make operating decisions. These non-GAAP measures are
among the factors management uses in planning and forecasting for
future periods. We believe it is useful for investors to
understand the effects of these items on our consolidated operating
results. Our non-GAAP financial measures may include the
following adjustments, and as appropriate, the related income tax
effects and changes in income attributable to noncontrolling
interests:
- 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 acquisitions, repay debt,
buyback common stock or to fund the dividend. Management uses
free cash flow internally to understand, manage, make operating
decisions and evaluate our business. In addition, we use free
cash flow to help plan and forecast future periods.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES Reconciliation
of Selected GAAP Results to Non-GAAP Results (In millions, except
per share amounts) (Unaudited) |
|
|
Three Months Ended January 31, |
|
|
2020 |
|
|
|
2020 |
|
2019 |
|
|
|
2019 |
|
|
GAAP |
|
Adjustment |
|
Non-GAAP |
|
GAAP |
|
Adjustment |
|
Non-GAAP |
Cost of sales |
|
$ |
219.7 |
|
|
$ |
(8.4 |
) |
A |
$ |
211.3 |
|
|
$ |
209.6 |
|
|
$ |
(5.4 |
) |
A |
$ |
204.2 |
|
Operating
expense excluding amortization |
|
$ |
280.5 |
|
|
$ |
(7.4 |
) |
B |
$ |
273.1 |
|
|
$ |
271.0 |
|
|
$ |
(11.9 |
) |
B |
$ |
259.1 |
|
Amortization of intangibles |
|
$ |
34.9 |
|
|
$ |
(34.9 |
) |
C |
$ |
— |
|
|
$ |
36.6 |
|
|
$ |
(36.6 |
) |
C |
$ |
— |
|
Provision
(benefit) for income taxes |
|
$ |
6.9 |
|
|
$ |
7.6 |
|
D |
$ |
14.5 |
|
|
$ |
(9.4 |
) |
|
$ |
13.3 |
|
D |
$ |
3.9 |
|
Diluted
earnings per share |
|
$ |
1.82 |
|
|
$ |
0.87 |
|
|
$ |
2.69 |
|
|
$ |
2.07 |
|
|
$ |
0.81 |
|
|
$ |
2.88 |
|
Weighted average diluted shares used |
|
|
49.7 |
|
|
|
|
49.7 |
|
|
|
49.9 |
|
|
|
|
|
49.9 |
|
A |
Fiscal 2020 GAAP cost of sales includes $8.4 million of costs
primarily related to integration and other manufacturing related
costs, resulting in fiscal 2020 GAAP gross margin of 66% as
compared to fiscal 2020 non-GAAP gross margin of 67%. Fiscal 2019
GAAP cost of sales includes $5.4 million of costs primarily related
to acquisitions and other integration costs, resulting in fiscal
2019 GAAP and non-GAAP gross margin of 67%. |
B |
Fiscal 2020 GAAP operating expense comprised of $7.4 million
primarily related to CooperSurgical including integration and
restructuring activities and European Medical Devices Regulation
(MDR) implementation costs. Fiscal 2019 GAAP operating expense
comprised of $11.9 million primarily related to acquisition and
integration activities in CooperSurgical. |
C |
Amortization expense was $34.9 million and $36.6 million for the
fiscal 2020 and 2019 periods, respectively. Items A, B and C
resulted in fiscal 2020 GAAP operating margin of 17% as compared to
fiscal 2020 non-GAAP operating margin of 25%, and fiscal 2019 GAAP
operating margin of 18% as compared to fiscal 2019 non-GAAP
operating margin of 26%. |
D |
Fiscal 2020 and 2019 amounts represent the net change in the
provision (benefit) for income taxes that arise from the impact of
the above adjustments. |
Conference Call and WebcastThe Company will
host a conference call today at 5:00 PM ET to discuss its fiscal
first quarter 2020 results and current corporate developments. The
live dial-in number for the call is 855-643-4430 (U.S.) /
707-294-1332 (International). The participant passcode for the call
is “Cooper”. A simultaneous webcast of the call will be available
through the "Investor Relations" section of the CooperCompanies
website at http://investor.coopercos.com and a transcript of the
call will be archived on this site for a minimum of 12
months. A recording of the call will be available beginning
at 8:00 PM ET on March 5, 2020 through March 12, 2020. To hear this
recording, dial 855-859-2056 (U.S.) / 404-537-3406 (International)
and enter code 5165908.
About
CooperCompaniesCooperCompanies ("Cooper") is a global
medical device company publicly traded on the NYSE (NYSE:COO).
Cooper operates through two business units, CooperVision and
CooperSurgical. CooperVision brings a refreshing perspective on
vision care with a commitment to developing a wide range of
high-quality products for contact lens wearers and providing
focused practitioner support. CooperSurgical is committed to
advancing the health of women, babies and families with its
diversified portfolio of products and services focusing on medical
devices and fertility & genomics. Headquartered in San Ramon,
Calif., Cooper has a workforce of more than 12,000 with products
sold in over 100 countries. For more information, please
visit www.coopercos.com.
Forward-Looking StatementsThis earnings release
contains "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995. Statements relating
to guidance, plans, prospects, goals, strategies, future actions,
events or performance and other statements of which are other than
statements of historical fact, including our 2020 Guidance and all
statements regarding acquisitions including the acquired companies’
financial position, market position, product development and
business strategy, expected cost synergies, expected timing and
benefits of the transaction, difficulties in integrating entities
or operations, as well as estimates of our and the acquired
entities’ future expenses, sales and diluted earnings per share are
forward-looking. In addition, all statements regarding anticipated
growth in our revenue, anticipated effects of any product recalls,
anticipated market conditions, planned product launches and
expected results of operations and integration of any acquisition
are forward-looking. To identify these statements look for
words like "believes," "outlook," "probable," "expects," "may,"
"will," "should," "could," "seeks," "intends," "plans," "estimates"
or "anticipates" and similar words or phrases.
Forward-looking statements necessarily depend on assumptions, data
or methods that may be incorrect or imprecise and are subject to
risks and uncertainties.
Among the factors that could cause our actual results and future
actions to differ materially from those described in
forward-looking statements are: adverse changes in global political
and economic conditions, and related uncertainty caused by the
United Kingdom’s election to withdraw from the European Union and
its potential impact on, among other things, the movement of goods
and materials in our supply chain, additional regulatory approvals
and requirements, and increased tariffs and duties; adverse changes
in the global or regional general business, political and economic
conditions, including the impact of continuing uncertainty and
instability of certain countries, that could adversely affect our
global markets, and the potential adverse economic impact and
related uncertainty caused by these items, including but not
limited to, escalating global trade barriers including additional
tariffs, by countries such as China, and the recent outbreak of the
coronavirus referred to as COVID-19 and its potential impact on our
sales, operations and supply chain; changes in tax laws or their
interpretation and changes in statutory tax rates, including but
not limited to, the U.S., the United Kingdom and other countries
may affect our taxation of earnings recognized in foreign
jurisdictions and/or negatively impact our effective tax rate;
foreign currency exchange rate and interest rate fluctuations
including the risk of fluctuations in the value of foreign
currencies or interest rates that would decrease our revenues and
earnings; our existing indebtedness and associated interest
expense, most of which is variable and impacted by rate increases,
which could adversely affect our financial health or limit our
ability to borrow additional funds; acquisition-related adverse
effects including the failure to successfully obtain the
anticipated revenues, margins and earnings benefits of
acquisitions, integration delays or costs and the requirement to
record significant adjustments to the preliminary fair value of
assets acquired and liabilities assumed within the measurement
period, required regulatory approvals for an acquisition not being
obtained or being delayed or subject to conditions that are not
anticipated, adverse impacts of changes to accounting controls and
reporting procedures, contingent liabilities or indemnification
obligations, increased leverage and lack of access to available
financing (including financing for the acquisition or refinancing
of debt owed by us on a timely basis and on reasonable terms);
compliance costs and potential liability in connection with U.S.
and foreign laws and health care regulations pertaining to privacy
and security of third-party information, such as HIPAA and the
California Consumer Privacy Act in the U.S. and the General Data
Protection Regulation requirements in Europe, including but not
limited to those resulting from data security breaches; a major
disruption in the operations of our manufacturing, accounting and
financial reporting, research and development, distribution
facilities or raw material supply chain due to integration of
acquisitions, man-made or natural disasters, cybersecurity
incidents or other causes; a major disruption in the operations of
our manufacturing, accounting and financial reporting, research and
development or distribution facilities due to technological
problems, including any related to our information systems
maintenance, enhancements or new system deployments, integrations
or upgrades; market consolidation of large customers globally
through mergers or acquisitions resulting in a larger proportion or
concentration of our business being derived from fewer customers;
disruptions in supplies of raw materials, particularly components
used to manufacture our silicone hydrogel lenses; new U.S. and
foreign government laws and regulations, and changes in existing
laws, regulations and enforcement guidance, which affect areas of
our operations including, but not limited to, those affecting the
health care industry including the contact lens industry
specifically and the medical device or pharmaceutical industries
generally, including but not limited to the EU Medical Devices
Regulation (MDR), the EU in vitro Diagnostic Medical Devices
Regulation (IVDR), and the medical device excise tax under the U.S.
Affordable Care Act; legal costs, insurance expenses, settlement
costs and the risk of an adverse decision, prohibitive injunction
or settlement related to product liability, patent infringement or
other litigation; limitations on sales following product
introductions due to poor market acceptance; new competitors,
product innovations or technologies, including but not limited to,
technological advances by competitors, new products and patents
attained by competitors, and competitors' expansion through
acquisitions; reduced sales, loss of customers and costs and
expenses related to product recalls and warning letters; failure to
receive, or delays in receiving, regulatory approvals for products;
failure of our customers and end users to obtain adequate coverage
and reimbursement from third-party payors for our products and
services; the requirement to provide for a significant liability or
to write off, or accelerate depreciation on, a significant asset,
including goodwill, other intangible assets and idle manufacturing
facilities and equipment; the success of our research and
development activities and other start-up projects; dilution to
earnings per share from acquisitions or issuing stock; impact and
costs incurred from changes in accounting standards and policies;
environmental risks, including increasing environmental
legislation and the broader impacts of climate change; and other
events described in our Securities and Exchange Commission filings,
including the “Business”, “Risk Factors” and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" sections in the Company’s Annual Report on Form 10-K
for the fiscal year ended October 31, 2019, as such Risk Factors
may be updated in quarterly filings.
We caution investors that forward-looking statements reflect our
analysis only on their stated date. We disclaim any intent to
update them except as required by law.
Contact:
Kim DuncanVice President, Investor Relations and Risk
Management925-460-3663ir@cooperco.com
|
THE COOPER COMPANIES, INC. AND SUBSIDIARIES |
Consolidated Condensed Balance Sheets |
(In millions) |
(Unaudited) |
|
January 31,2020 |
|
October 31,2019 |
ASSETS |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
76.8 |
|
|
89.0 |
|
Trade receivables, net |
408.0 |
|
|
435.3 |
|
Inventories |
526.5 |
|
|
506.9 |
|
Other current assets |
138.6 |
|
|
132.2 |
|
Total current assets |
1,149.9 |
|
|
1,163.4 |
|
Property, plant and equipment,
net |
1,168.5 |
|
|
1,132.1 |
|
Operating lease right-of-use
assets |
264.0 |
|
|
0.0 |
|
Goodwill |
2,445.9 |
|
|
2,428.9 |
|
Other intangibles, net |
1,374.4 |
|
|
1,405.3 |
|
Deferred tax assets |
75.9 |
|
|
78.0 |
|
Other assets |
69.9 |
|
|
66.8 |
|
Total assets |
$ |
6,548.5 |
|
|
$ |
6,274.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities: |
|
|
|
Short-term debt |
$ |
543.0 |
|
|
$ |
563.7 |
|
Other current liabilities |
525.5 |
|
|
546.9 |
|
Total current liabilities |
1,068.5 |
|
|
1,110.6 |
|
Long-term debt |
1,233.7 |
|
|
1,262.6 |
|
Deferred tax liabilities |
27.6 |
|
|
28.0 |
|
Long-term tax payable |
176.2 |
|
|
124.8 |
|
Operating lease liabilities |
241.2 |
|
|
0.0 |
|
Accrued pension liability and
other |
70.4 |
|
|
119.9 |
|
Total liabilities |
2,817.6 |
|
|
2,645.9 |
|
Stockholders’ equity |
3,730.9 |
|
|
3,628.6 |
|
Total liabilities and
stockholders' equity |
$ |
6,548.5 |
|
|
$ |
6,274.5 |
|
|
|
|
|
|
|
|
|
|
THE COOPER COMPANIES, INC. AND SUBSIDIARIES |
Consolidated Statements of Income |
(In millions, except per share amounts) |
(Unaudited) |
|
|
Three Months Ended January 31, |
|
2020 |
|
2019 |
Net sales |
$ |
646.2 |
|
|
$ |
628.1 |
|
Cost of sales |
219.7 |
|
|
209.6 |
|
Gross profit |
426.5 |
|
|
418.5 |
|
Selling, general and
administrative expense |
258.3 |
|
|
250.0 |
|
Research and development
expense |
22.2 |
|
|
21.0 |
|
Amortization of
intangibles |
34.9 |
|
|
36.6 |
|
Operating income |
111.1 |
|
|
110.9 |
|
Interest expense |
11.6 |
|
|
18.2 |
|
Other expense (income),
net |
2.1 |
|
|
(1.1 |
) |
Income before income
taxes |
97.4 |
|
|
93.8 |
|
Provision (benefit) for income
taxes |
6.9 |
|
|
(9.4 |
) |
Net income |
$ |
90.5 |
|
|
$ |
103.2 |
|
|
|
|
|
Earnings per share -
diluted |
$ |
1.82 |
|
|
$ |
2.07 |
|
|
|
|
|
Number of shares used to
compute diluted earnings per share |
49.7 |
|
|
49.9 |
|
|
|
|
|
|
|
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