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 July 31, 2020
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,, California94583
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (925(925) 460-3600

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 filerSmaller 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 August 28, 2020, 53,340,401 27, 2021, 49,304,090shares of Common Stock, $.10$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
Periods Ended July 31,
(In millions, except for earnings per share)
(Unaudited)
Three MonthsNine Months
  
2021202020212020
Net sales$763.4 $578.2 $2,163.4 $1,749.3 
Cost of sales247.3 217.4 709.5 638.5 
Gross profit516.1 360.8 1,453.9 1,110.8 
Selling, general and administrative expense352.5 232.8 899.6 728.3 
Research and development expense24.8 21.8 67.0 67.8 
Amortization of intangibles38.2 34.2 110.0 103.0 
Operating income100.6 72.0 377.3 211.7 
Interest expense5.6 5.7 18.1 30.1 
Other expense (income), net1.0 (0.1)(10.7)8.8 
Income before income taxes94.0 66.4 369.9 172.8 
Provision for income taxes (Note 6)(521.8)11.2 (2,464.5)15.6 
Net income$615.8 $55.2 $2,834.4 $157.2 
Earnings per share (Note 7):
Basic$12.50 $1.13 $57.61 $3.20 
Diluted$12.37 $1.12 $57.01 $3.17 
Number of shares used to compute earnings per share:
Basic49.3 49.1 49.2 49.1 
Diluted49.8 49.5 49.7 49.6 
Other comprehensive (loss) income, net of tax:
Cash flow hedges$(8.9)$(4.6)$10.8 $(18.1)
Foreign currency translation adjustment(3.7)72.7 101.4 20.5 
Comprehensive income$603.2 $123.3 $2,946.6 $159.6 
 Three Months Nine Months
  
2020 2019 2020 2019
Net sales$578.2
 $679.4
 $1,749.3
 $1,961.8
Cost of sales217.4
 228.7
 638.5
 660.0
Gross profit360.8
 450.7
 1,110.8
 1,301.8
Selling, general and administrative expense232.8
 249.8
 728.3
 746.6
Research and development expense21.8
 21.5
 67.8
 63.4
Amortization of intangibles34.2
 37.2
 103.0
 110.7
Gain on sale of an intangible0
 0
 0
 (19.0)
Operating income72.0
 142.2
 211.7
 400.1
Interest expense5.7

16.7

30.1

53.3
Other (income) expense, net(0.1)
(1.5)
8.8

(2.1)
Income before income taxes66.4
 127.0
 172.8
 348.9
Provision for income taxes (Note 7)11.2
 6.9
 15.6
 3.2
Net income$55.2
 $120.1
 $157.2
 $345.7
Earnings per share (Note 8):       
Basic$1.13
 $2.43
 $3.20
 $7.00
Diluted$1.12
 $2.40
 $3.17
 $6.91
Number of shares used to compute earnings per share:
 
 
 
Basic49.1
 49.5
 49.1
 49.4
Diluted49.5
 50.1
 49.6
 50.0
Other comprehensive income, net of tax:       
Cash flow hedges

$(4.6) 0
 $(18.1) 0
Foreign currency translation adjustment72.7
 (65.2) 20.5
 (51.1)
Comprehensive income$123.3
 $54.9
 $159.6
 $294.6

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)
July 31, 2020 October 31, 2019July 31, 2021October 31, 2020
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$127.4
 $89.0
Cash and cash equivalents$112.2 $115.9 
Trade accounts receivable, net of allowance for doubtful accounts of $11.9 at July 31, 2020 and $16.4 at October 31, 2019450.5
 435.3
Inventories (Note 4)594.9
 506.9
Trade accounts receivable, net of allowance for credit losses of $9.1 at July 31, 2021 and $10.2 at October 31, 2020Trade accounts receivable, net of allowance for credit losses of $9.1 at July 31, 2021 and $10.2 at October 31, 2020535.1 435.4 
Inventories (Note 3)Inventories (Note 3)587.9 570.4 
Prepaid expense and other current assets148.5
 132.2
Prepaid expense and other current assets151.3 152.5 
Assets held-for-sale (Note 2)Assets held-for-sale (Note 2)88.1 — 
Total current assets1,321.3
 1,163.4
Total current assets1,474.6 1,274.2 
Property, plant and equipment, at cost2,401.8
 2,193.9
Property, plant and equipment, at cost2,618.1 2,474.8 
Less: accumulated depreciation and amortization1,164.1
 1,061.8
Less: accumulated depreciation and amortization1,303.8 1,192.9 
1,237.7
 1,132.1
1,314.3 1,281.9 
Operating lease right-of-use assets (Note 2)258.9
 
Goodwill (Note 5)2,445.0
 2,428.9
Other intangibles, net (Note 5)1,311.4
 1,405.3
Deferred tax assets80.1
 78.0
Operating lease right-of-use assetsOperating lease right-of-use assets256.3 260.2 
Goodwill (Note 4)Goodwill (Note 4)2,585.2 2,447.3 
Other intangibles, net (Note 4)Other intangibles, net (Note 4)1,308.1 1,289.0 
Deferred tax assets (Note 6)Deferred tax assets (Note 6)2,554.9 80.1 
Other assets94.0
 66.8
Other assets117.2 104.8 
Total assets$6,748.4
 $6,274.5
Total assets$9,610.6 $6,737.5 
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Short-term debt (Note 6)$552.6
 $563.7
Short-term debt (Note 5)Short-term debt (Note 5)$440.1 $409.3 
Accounts payable180.2
 150.1
Accounts payable153.0 176.0 
Employee compensation and benefits108.4
 104.7
Employee compensation and benefits155.6 119.0 
Operating lease liabilities32.3
 
Operating lease liabilities29.7 33.3 
Other current liabilities255.2
 292.1
Other current liabilities283.2 266.8 
Liabilities held-for-sale (Note 2)Liabilities held-for-sale (Note 2)1.6 — 
Total current liabilities1,128.7
 1,110.6
Total current liabilities1,063.2 1,004.4 
Long-term debt (Note 6)1,327.8
 1,262.6
Deferred tax liabilities28.5
 28.0
Long-term tax payable162.1
 124.8
Long-term debt (Note 5)Long-term debt (Note 5)1,179.9 1,383.9 
Deferred tax liabilities (Note 6)Deferred tax liabilities (Note 6)28.8 25.8 
Long-term tax payable (Note 6)Long-term tax payable (Note 6)139.6 162.0 
Operating lease liabilities236.6
 
Operating lease liabilities236.7 236.8 
Accrued pension liability and other104.3
 119.9
Accrued pension liability and other177.0 99.8 
Total liabilities$2,988.0
 $2,645.9
Total liabilities$2,825.2 $2,912.7 
Contingencies (Note 13)

 

Stockholders’ equity:   
Preferred stock, 10 cents par value, shares authorized: 1.0; zero shares issued or outstanding0
 0
Common stock, 10 cents par value, shares authorized: 120.0; issued 53.4 at July 31, 2020 and 53.2 at October 31, 20195.3
 5.3
Contingencies (Note 12)Contingencies (Note 12)00
Stockholders’ equity (Note 9):Stockholders’ equity (Note 9):
Preferred stock, 10 cents par value, 1.0 shares authorized, zero shares issued or outstandingPreferred 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 July 31, 2021 and 53.4 issued and 49.1 outstanding at October 31, 2020Common stock, 10 cents par value, 120.0 shares authorized, 53.6 issued and 49.2 outstanding at July 31, 2021 and 53.4 issued and 49.1 outstanding at October 31, 20205.4 5.3 
Additional paid-in capital1,637.0
 1,615.0
Additional paid-in capital1,688.1 1,646.8 
Accumulated other comprehensive loss(444.7) (447.1)Accumulated other comprehensive loss(359.8)(472.0)
Retained earnings3,180.6
 3,026.4
Retained earnings6,091.8 3,261.8 
Treasury stock at cost: 4.3 shares at July 31, 2020 and 4.1 shares at October 31, 2019(618.0) (571.2)
Treasury stock at cost: 4.4 shares at July 31, 2021 and 4.3 shares at October 31, 2020Treasury stock at cost: 4.4 shares at July 31, 2021 and 4.3 shares at October 31, 2020(640.3)(617.3)
Total Cooper stockholders’ equity3,760.2
 3,628.4
Total Cooper stockholders’ equity6,785.2 3,824.6 
Noncontrolling interests0.2
 0.2
Noncontrolling interests0.2 0.2 
Stockholders’ equity (Note 10)3,760.4
 3,628.6
Stockholders’ equityStockholders’ equity6,785.4 3,824.8 
Total liabilities and stockholders’ equity$6,748.4
 $6,274.5
Total liabilities and stockholders’ equity$9,610.6 $6,737.5 
    

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
(In millions, unaudited)
Common Shares Treasury Stock Additional Paid-In Capital Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings Treasury Stock Noncontrolling Interests Total
Stockholders'
Equity
Common SharesTreasury StockAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTreasury StockNoncontrolling InterestsTotal
Stockholders'
Equity
(In millions)Shares Amount Shares Amount    
Balance at November 1, 201849.2
 $5.0
 3.6
 $0.3
 $1,572.1
 $(430.7) $2,576.0
 $(415.1) $0.2
 $3,307.8
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTreasury StockNoncontrolling InterestsTotal
Stockholders'
Equity
Balance at November 1, 2019Balance at November 1, 201949.1 $4.9 4.1 $0.4 
Net income
 
 
 
 
 
 103.2
 
 
 103.2
Net income— — — — — — 90.5 — — 90.5 
Other comprehensive income, net of tax
 
 
 
 
 32.7
 
 
 
 32.7
Other comprehensive income, net of tax— — — — — 16.7 — — — 16.7 
Issuance of common stock for stock plans, net0.1
 
 
 
 (9.0) 
 
 
 
 (9.0)Issuance of common stock for stock plans, net0.1 — — — (13.2)— — — — (13.1)
Treasury stock repurchase
 
 
 
 
 
 
 (6.1) 
 (6.1)
Dividends on common stock ($0.03 per share)
 
 
 
 
 
 (1.5) 
 
 (1.5)Dividends on common stock ($0.03 per share)— — — — — — (1.5)— — (1.5)
Share-based compensation expense
 
 
 
 11.7
 
 
 
 
 11.7
Share-based compensation expense— — — — 9.7 — — — — 9.7 
ASU 2016-16 adoption
 
 
 
 
 
 (13.3) 
 
 (13.3)
Balance at January 31, 201949.3
 $5.0
 3.6
 $0.3
 $1,574.8
 $(398.0) $2,664.4
 $(421.2) $0.2
 $3,425.5
Balance at January 31, 2020Balance 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
 
 
 
 
 
 122.4
 
 
 122.4
Net income— — — — — — 11.5 — — 11.5 
Other comprehensive loss, net of tax
 
 
 
 
 (18.6) 
 
 
 (18.6)Other comprehensive loss, net of tax— — — — — (82.4)— — — (82.4)
Issuance of common stock for stock plans, net0.2
 
 
 
 4.5
 
 
 
 
 4.5
Issuance of common stock for stock plans, net0.1 — — — 5.0 — — — — 5.0 
Issuance of common stock for employee stock purchase planIssuance of common stock for employee stock purchase plan— — — — 0.6 — — 0.4 — 1.0 
Share-based compensation expense
 
 
 
 8.4
 
 
 
 
 8.4
Share-based compensation expense— — — — 9.3 — — — — 9.3 
Balance at April 30, 201949.5
 $5.0
 3.6
 $0.3
 $1,587.7
 $(416.6) $2,786.8
 $(421.2) $0.2
 $3,542.2
Treasury stock repurchaseTreasury stock repurchase(0.2)— 0.2 — — — — (47.8)— (47.8)
Balance at April 30, 2020Balance 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 
Net income
 
 
 
 
 
 120.1
 
 
 120.1
Net income— — — — — — 55.2 — — 55.2 
Other comprehensive loss, net of tax
 
 
 
 
 (65.2) 
 
 
 (65.2)
Other comprehensive income, net of taxOther comprehensive income, net of tax— — — — — 68.1 — — — 68.1 
Issuance of common stock for stock plans, net0.1
 
 
 
 12.2
 
 
 
 
 12.2
Issuance of common stock for stock plans, net— — — — 0.4 — — — — 0.4 
Issuance of common stock for employee stock purchase planIssuance of common stock for employee stock purchase plan— — — — 0.4 — — 0.6 �� 1.0 
Dividends on common stock ($0.03 per share)
 
 
 
 
 
 (1.5) 
 
 (1.5)Dividends on common stock ($0.03 per share)— — — — — — (1.5)— — (1.5)
Share-based compensation expense
 
 
 
 7.7
 
 
 
 
 7.7
Share-based compensation expense— — — — 9.7 — — — — 9.7 
Balance at July 31, 201949.6
 $5.0
 3.6
 $0.3
 $1,607.6
 $(481.8) $2,905.4
 $(421.2) $0.2
 $3,615.5
Balance at July 31, 2020Balance at July 31, 202049.1 $4.9 4.3 $0.4 $1,637.0 $(444.7)$3,180.6 $(618.0)$0.2 $3,760.4 













5


THE COOPER COMPANIES, INC. AND SUBSIDIARIES


Consolidated Condensed Statements of Stockholders' Equity (In
(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— — — — — — 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— — — — — — 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 
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 
Net income— — — — — — 615.8 — — 615.8 
Other comprehensive loss, net of tax— — — — — (12.6)— — — (12.6)
Issuance of common stock for stock plans, net— — — — 7.3 — — — — 7.3 
Issuance of common stock for employee stock purchase plan— — — — 1.2 — — 0.6 — 1.8 
Dividends on common stock ($0.03 per share)— — — — — — (1.5)— — (1.5)
Share-based compensation expense— — — — 11.8 — — — — 11.8 
Balance at July 31, 202149.2 $5.0 4.4 $0.4 $1,688.1 $(359.8)$6,091.8 $(640.3)$0.2 $6,785.4 
 Common Shares Treasury Stock Additional Paid-In Capital Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings Treasury Stock Noncontrolling Interests Total
Stockholders'
Equity
(In millions)Shares Amount Shares Amount      
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
 
 
 
 
 
 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
 
 
 
 
 
 11.5
 
 
 11.5
Other comprehensive income, net of tax
 
 
 
 
 (82.4) 
 
 
 (82.4)
Issuance of common stock for stock plans, net0.1
 
 
 
 5.0
 
 
 
 
 5.0
Treasury stock repurchase(0.2) 
 0.2
 
 
 
 
 (47.8) 
 (47.8)
Issuance of common stock for employee stock purchase plan
 
 
 
 0.6
 
 
 0.4
 
 1.0
Share-based compensation expense
 
 
 
 9.3
 
 
 
 
 9.3
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
Net income
 
 
 
 
 
 55.2
 
 
 55.2
Other comprehensive loss, net of tax
 
 
 
 
 68.1
 
 
 
 68.1
Issuance of common stock for stock plans, net
 
 
 
 0.4
 
 
 
 
 0.4
Issuance of common stock for employee stock purchase plan
 
 
 
 0.4
 
 
 0.6
 
 1.0
Dividends on common stock ($0.03 per share)
 
 
 
 
 
 (1.5) 
 
 (1.5)
Share-based compensation expense
 
 
 
 9.7
 
 
 
 
 9.7
Balance at July 31, 202049.1
 $4.9
 4.3
 $0.4
 $1,637.0
 $(444.7) $3,180.6
 $(618.0) $0.2
 $3,760.4


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
Nine Months Ended July 31,
(In millions, unaudited)
20212020
Cash flows from operating activities:
Net income$2,834.4 $157.2 
Depreciation and amortization231.9 210.0 
Change in fair value of contingent consideration56.8 — 
Increase in operating capital(81.6)(155.9)
Deferred income taxes(2,489.5)(3.7)
Other non-cash items12.1 60.7 
Net cash provided by operating activities564.1 268.3 
Cash flows from investing activities:
Purchases of property, plant and equipment(149.4)(203.4)
Acquisitions of businesses and assets, net of cash acquired, and other(234.9)(17.9)
Net cash used in investing activities(384.3)(221.3)
Cash flows from financing activities:
Proceeds from long-term debt815.0 2086.4 
Repayments of long-term debt(1,019.4)(2,022.8)
Net proceeds (repayments) from short-term debt33.0 (13.0)
Net proceeds (payments) related to share-based compensation awards6.0 (7.8)
Dividends on common stock(1.5)(1.5)
Repurchase of common stock(24.8)(47.8)
Issuance of common stock for employee stock purchase plan4.1 1.8 
Debt issuance costs— (5.5)
Net cash used in financing activities(187.6)(10.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash4.0 2.0 
Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale(3.8)38.8 
Cash, cash equivalents and restricted cash at beginning of period116.8 89.5 
Cash, cash equivalents, restricted cash and cash held for sale at end of period$113.0 $128.3 
Reconciliation of cash flow information:
Cash and cash equivalents$112.2 $127.4 
Restricted cash included in other current assets0.6 0.9 
Cash held for sale0.2 — 
Total cash, cash equivalents, restricted cash and cash held for sale at end of period$113.0 $128.3 
 2020 2019
Cash flows from operating activities:   
Net income$157.2
 $345.7
Depreciation and amortization210.0
 210.2
Gain on sale of an intangible0
 (19.0)
Increase in operating capital(155.9) (22.1)
Other non-cash items57.0
 (1.5)
Net cash provided by operating activities268.3
 513.3
Cash flows from investing activities:   
Purchases of property, plant and equipment(203.4) (207.3)
Acquisitions of businesses and assets, net of cash acquired, and other(17.9) (59.1)
Net cash used in investing activities(221.3) (266.4)
Cash flows from financing activities:   
Proceeds from long-term debt2,086.4
 576.8
Repayments of long-term debt(2,022.8) (1,140.8)
Net (repayments) proceeds from short-term debt(13.0) 351.8
Net (payments) proceeds related to share-based compensation awards(7.8) 7.7
Dividends on common stock(1.5) (1.5)
Repurchase of common stock(47.8) (6.1)
Issuance of common stock for employee stock purchase plan1.8
 0
Debt issuance costs(5.5) (0.2)
Net cash used in financing activities(10.2) (212.3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash2.0
 (1.6)
Net increase in cash, cash equivalents and restricted cash38.8
 33.0
Cash, cash equivalents and restricted cash at beginning of period89.5
 80.2
Cash, cash equivalents and restricted cash at end of period$128.3
 $113.2
Reconciliation of cash flow information:   
Cash and cash equivalents$127.4
 $112.7
Restricted cash included in other current assets0.9
 0.5
Total cash, cash equivalents and restricted cash$128.3
 $113.2

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 (the Company) have been prepared in accordance with U.S. GAAPgenerally 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, 2019.2020. 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 statementpresentation 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, 2019, except as it relates to the adoption of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), which is described below.
Leases
We consider an arrangement a lease if the arrangement transfers the right to control the use of an identified asset in exchange for consideration. We have operating leases, but do not have material financing leases. Lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement. These assets and liabilities are recognized at the commencement of the lease based upon the present value of the future minimum lease payments over the lease term.
The lease term reflects the noncancelable period of the lease together with periods covered by an option to extend or terminate the lease when management is reasonably certain that it will exercise such option. Changes in the lease term assumption could impact the right-of-use assets and lease liabilities recognized on the balance sheet. As our leases typically do not contain a readily determinable implicit rate, we determine the present value of the lease liability using our incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis.

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. This hasThese factors have had, and we believe will continue toin 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;outbreaks, including the emergence and spread of variants of the COVID-19 virus; 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 COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

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.assets
There was not a material impact to the above estimates in the Company’s Consolidated Condensed Financial Statements for the three and nine months ended July 31, 2020.2021. 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
8

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 MayJanuary 2020, the SEC adopted the final rule under SEC release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, amending Rule 1-02(w)(2) which includes amendments to certain of its rules and forms related to the disclosure of financial information regarding acquired or disposed businesses. Among other changes, the amendments impact SEC rules relating to (1) the definition of “significant” subsidiaries, (2) requirements to provide financial statements for “significant” acquisitions, and (3) revisions to the formulation and usage of pro forma financial information. The final rule is effective on January 1, 2021; however, voluntary early adoption is permitted. The Company early adopted the provisions of the final rule in the third quarter of fiscal 2020. The guidance did not have a material impact on the Company’s consolidated financial statements and disclosures.

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02,2020-01, LeasesInvestments-Equity Securities (Topic 842)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. ASU 2016-02 requires that a lessee recognizeThis guidance addresses accounting for the assetstransition into and liabilities that arise from operating leases. A lessee should recognizeout 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 statementsecond quarter of financial position a liability to make lease payments (the lease liability)fiscal 2021, and a right-of-use (ROU) asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases Topic 842 Target improvements, which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which further clarifies the determination of fair value of the underlying asset by lessors that are not manufacturers or dealers and modifies transition disclosure requirements for changes in accounting principles and other technical updates.

We adopted this standard using the optional transition method and recorded an adjustment to the Consolidated Condensed Balance Sheet on November 1, 2019. We have implemented changes to certain business processes, systems and internal controls to support adoption of the new standard and the related disclosure requirements, including the implementation of a third-party leasing software solution. We elected the package of transition expedients, which allows us to keep our existing lease classifications and not reassess whether any existing contracts as of the date of adoption are leases or contain leases and not reassess initial direct costs. In addition, we elected the practical expedients to combine lease and non-lease components for our leases, and for leases with an initial term of 12 months or less to recognize the associated lease payments in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.

As of July 31, 2020, the aggregate balances of lease right-of-use assets and lease liabilities were $258.9 million and $271.0 million, respectively. The standardit did not affecthave a material impact on our Consolidated Statements of Income and Comprehensive
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

Statements.
Income or Consolidated Condensed Statements of Cash Flows. We will continue to disclose comparative reporting periods prior to November 1, 2019 under the previous accounting guidance, ASC 840
Leases.
Accounting Pronouncements Issued Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, "FinancialFinancial 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”Instruments, ASU 2019-05 Financial Instruments-Credit Losses, ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments - Instruments—Credit Losses” (collectively, “Topic 326”),Losses, ASU 2020-02 Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)and ASU 2020-03 Codification Improvements to Financial Instruments.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, which means it will be effective2019. 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 our fiscal year beginning November 01, 2020. Early adoption is permitted. We are currently evaluatingdoubtful accounts on trade accounts receivable and the impactrecognition of Topic 326 on ourcredit losses. The Company recorded a cumulative-effect adjustment of $1.4 million to the Consolidated Condensed Financial Statements.Balance Sheet on November 1, 2020.

The Company's exposure to credit losses may increase if our customers are adversely affected by changes in healthcare laws, coverage or governmental and insurance reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current COVID-19 pandemic, or other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be an adverse impact as cash flows are impacted by responses of customers to the COVID-19 pandemic.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808),: Clarifying the Interaction between Topic 808 and Topic 606. 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, which means it will be effective for our fiscal year beginning2019. The Company adopted this guidance on November 1, 2020. Early adoption is permitted. The adoption of this guidance will2020, 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. 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 January 2020, the 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. We are currently evaluating the impact of ASU 2020-01 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”). This guidanceTopic 848 provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP)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
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ThisThe guidance is effective for all entities as ofgenerally can be applied from March 12, 2020 through December 31, 2022. We are currently evaluatingassessing the impactimpacts of ASU 2020-04 on ourthe practical expedients provided in Topic 848 and which, if any, we will adopt.
9

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements.Statements
(Unaudited)
In August 2020, the FASB issued ASU 2020-06, Debt—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.

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

Note 2. LeasesAcquisitions and Assets Held for Sale

The Company primarily has operating leases for office, manufacturing and warehouse space, vehicles, and office equipment. Our leases expire on various dates between 2020 and 2045, some of which could include options to extend the lease.

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As these leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease's commencement date in determining the present value of lease payments. We consider information including, but not limited to, the lease term, our credit rating and interest rates of similar debt instruments with comparable credit ratings and security interests. The lease right-of-use assets are increased by any lease prepayments made and reduced by any lease incentives such as tenant improvement allowances. Options to extend the lease term are included in the lease term when it is reasonably certain that we will exercise the extension option.

The Company’s operating leases typically include non-lease components such as common-area maintenance costs. We have elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments.

Leases with a term of one year or less are not recognized on our Consolidated Condensed Balance Sheet, while the associated lease payments are recorded in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.

Commitments under finance lease arrangements of $2.1 million as of July 31, 2020 are not significant and are not included in the disclosure tables below.
The following table presents information about leases on the Consolidated Condensed Balance Sheet:
(In millions)July 31, 2020
Operating Leases 
Operating lease right-of-use assets$258.9
  
Operating lease liabilities, current32.3
Operating lease liabilities, non-current236.6
Total operating lease liabilities$268.9
  
Weighted average remaining lease term (in years)

11.3
Weighted average discount rate3%

The following table presents information about lease expense in our Consolidated Statements of Income and Comprehensive Income:
Periods Ended July 31,Three Months Nine Months
(In millions)2020 2020
Operating lease expense$10.6
 $30.2
Short-term lease expense1.1
 3.3
Variable lease expense$0.5
 $1.3

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

The following table presents supplemental cash flow information about the Company’s leases:
Periods Ended July 31,Three Months Nine Months
(In millions)2020 2020
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows from operating leases$10.5
 $30.1

Maturity of Lease Liabilities
The minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of July 31, 2020 are:
(In millions) 
Remainder of 2020$10.1
202138.8
202235.0
202331.1
202428.8
2025 and thereafter179.5
Total lease payments323.3
Less: interest54.4
Present value of lease liabilities$268.9


As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, and under previous lease accounting standard ASC 840, Leases, the aggregate future noncancelable minimum rental payments on its operating leases, as of October 31, 2019, were as follows:
(In millions) 
2020$38.5
202134.9
202231.2
202328.0
202426.5
2025 and thereafter173.6
Total future minimum lease payments$332.7



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

Note 3. 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 nine months ended July 31, 2021 and fiscal 2020 and 2019:2020:
(In millions)July 31, 2020 October 31, 2019
Customer relationships$6.5
 $7.5
Technology0
 12.3
Trademarks0
 10.2
Other0
 0.1
Total identifiable intangible assets$6.5
 $30.1
Goodwill1.8
 29.8
Net tangible assets0.8
 7.3
Total purchase price$9.1
 $67.2

(In millions)July 31, 2021October 31, 2020
Technology$178.6 $— 
In-Process Research & Development (IPR&D)20.0 — 
Customer relationships7.5 11.4 
Trademarks1.3 5.1 
Other0.6 3.9 
Total identifiable intangible assets$208.0 $20.4 
Goodwill93.0 15.3 
Net tangible liabilities(12.3)(0.3)
Fair value of contingent consideration(39.1)— 
Total closing purchase price$249.6 $35.4 
All acquisitions were funded by cash generated from operations or facility borrowings.
For business acquisitions, wethe Company recorded tangible and intangible assets acquired and liabilities assumed at their fair values as of the applicable date of acquisition. For asset acquisitions, wethe Company recorded tangible and intangible assets acquired and liabilities assumed at their estimated and relative fair values as of the applicable date of acquisition.

We believeThe 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 May 3, 2021, CooperSurgical completed the acquisition of a privately-held medical device company that develops single-use illuminating medical devices. The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to valuation and the corresponding impact on goodwill.

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 primarily related to valuation and taxes 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.
10

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

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 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 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 July 31, 2021, no contingent consideration has been paid. The Company remeasured the fair value of the contingent consideration as of July 31, 2021, which resulted in a $56.8 million increase in fair value that was recognized in selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income. The increase in fair value of the contingent consideration was primarily driven by an increase in the revenue projections, which increased the estimated fair value of the revenue payments.
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 below wereabove was not material to ourthe 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.

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

The purchase price allocationpro 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.

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 preliminaryrecorded 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 we arethe change in fair value is recognized in selling, general and administrative expense in the processConsolidated Statements of finalizing informationIncome and the corresponding impact on goodwill.Comprehensive Income.
Fiscal Year 2019
The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

11

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Periods Ended July 31,Three MonthsNine Months
(In millions)2021202020212020
Beginning balance$30.8 $— $— $— 
Purchase price contingent consideration0.5 — 31.3 — 
Payments— — — — 
Change in fair value56.8 — 56.8 — 
Ending balance$88.1 $— $88.1 $— 


Assets Held for Sale

On December 28, 2018,February 2, 2021, CooperVision completedentered into a stock purchase agreement to sell 50% of the acquisitionequity interest in a wholly-owned subsidiary that was acquired by CooperVision on January 19, 2021. The closing of Blanchard Contact Lenses. Blanchardthis transaction is subject to certain closing conditions including required regulatory approvals. The Company intends to operate the previously wholly-owned subsidiary as a privately-held scleral lens company, which expands CooperVision's specialtyjoint venture with the purchaser of the 50% interest once the transaction is closed.

The Company concluded the substantive terms of the joint venture during the third quarter of fiscal 2021, and scleral lens portfolio.as of July 31, 2021, the assets and liabilities of this disposal group were reclassified as held for sale. Pursuant to ASC 360, assets held for sale were measured at the lower of their carrying amounts or fair value less cost to sell. Based on the Company's assessment, no impairment was recorded in the three months ended July 31, 2021. The Company has determined that this disposal did not qualify as a discontinued operation as the sale was deemed to not be a strategic shift that has or will have a major effect on the Company's operations and financial results.

On December 31, 2018, CooperSurgical completedIncluded in the acquisitionCompany's Consolidated Condensed Balance Sheet as of Incisive Surgical Inc., a privately-held U.S. medical device company that develops mechanical surgical solutionsJuly 31,2021 are the following carrying amounts of the assets and liabilities held for skin closure.sale:

(In millions)July 31, 2021
ASSETS
Cash$0.2 
Goodwill25.0 
Other intangibles, net83.6 
Deferred tax assets(22.2)
Other assets1.5 
Total assets held-for-sale$88.1 
LIABILITIES
Total liabilities held-for-sale$1.6 

Note 4.3. Inventories
(In millions)July 31, 2020 October 31, 2019
Raw materials$156.1
 $131.4
Work-in-process13.4
 13.3
Finished goods425.4
 362.2
Total inventories$594.9
 $506.9

(In millions)July 31, 2021October 31, 2020
Raw materials$140.6 $151.0 
Work-in-process13.0 12.4 
Finished goods434.3 407.0 
Total inventories$587.9 $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.

12

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

Note 5.4. Intangible Assets

Goodwill
(In millions)CooperVisionCooperSurgicalTotal
Balance at October 31, 2020$1,779.3 $668.0 $2,447.3 
Current period additions31.9 61.1 93.0 
Amount reclassified to assets held for sale (Note 2)(25.0)— (25.0)
Foreign currency translation adjustment64.8 5.1 69.9 
Balance at July 31, 2021$1,851.0 $734.2 $2,585.2 
(In millions)CooperVision CooperSurgical Total
Balance at October 31, 2019$1,765.4
 $663.5
 $2,428.9
Current period additions0
 1.8
 1.8
Foreign currency translation adjustment10.0
 4.3
 14.3
Balance at July 31, 2020$1,775.4
 $669.6
 $2,445.0


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 20202021 and 2019,2020, and its analysis indicated that there was 0no impairment of goodwill in its reporting units. Qualitative factors considered in the assessment include industry and market considerations, overall financial performance and other relevant events and factors affecting each reporting unit. Based on ourthe Company's qualitative assessment, if we determinethe Company determines that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the fair value of athe reporting unit will be compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value of the reporting unit. A reporting unit is the level of reporting at which goodwill is tested for impairment. OurThe Company has 3 reporting units areunits: CooperVision, and within the CooperSurgical segment, Office/Surgical and Fertility, reflecting the current way we manage ourthe Company manages its business.

Goodwill impairment analysis and measurement is a process that requires significant judgment. If ourthe Company's common stock price trades below book value per share, there are changes in market conditions or a future downturn in ourits business, or a future goodwill impairment test indicates an impairment of our goodwill, wethe Company may have to recognize a non-cash impairment of goodwill that could be material and could adversely affect ourthe Company's results of operations in the period recognized and also adversely affect ourits total assets and stockholders' equity.

Given the general deterioration in economic and market conditions surrounding the COVID-19 pandemic, the Company considered the impact that the COVID-19 pandemic may have on its near and long-term forecasts and determined that it was not more likely than not that the fair value of reporting units or relevant asset groups was below carrying amounts, and therefore the Company determined that there was 0no impairment to either its goodwill, definite-lived or indefinite-lived intangible assets at July 31, 2020.2021.

13

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

Other Intangible Assets
 July 31, 2020 October 31, 2019  
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
 Weighted Average Amortization Period (in years)
Intangible assets with definite lives:         
Trademarks$148.4
 $35.1
 $148.5
 $27.3
 14
Composite intangible asset1,061.9
 194.7
 1,061.9
 141.6
 15
Technology401.3
 244.4
 399.9
 221.2
 11
Customer relationships365.1
 211.6
 357.6
 194.0
 13
License and distribution rights and other27.9
 17.4
 27.9
 15.3
 11
 2,004.6
 $703.3
 1,995.8
 $599.4
 14
Less: accumulated amortization and translation703.3
   599.4
    
Intangible assets with definite lives, net1,301.3
   1,396.4
    
          
Intangible assets with indefinite lives, net (1)
10.1
   8.9
    
          
Total other intangibles, net$1,311.4
   $1,405.3
    

 July 31, 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 $265.5 $1,061.9 $212.4 15
Technology513.3 278.9 401.2 251.9 10
Customer relationships379.3 234.9 367.0 216.2 13
Trademarks156.8 46.4 153.4 37.7 14
License and distribution rights and other33.1 20.7 31.8 18.2 10
2,144.4 $846.4 2,015.3 $736.4 14
Less: accumulated amortization and translation846.4 736.4 
Intangible assets with definite lives, net1,298.0 1,278.9 
Intangible assets with indefinite lives, net (1)
10.1 10.1 
Total other intangibles, net$1,308.1 $1,289.0 
(1) Intangible assets with indefinite lives include technology and trademarks.
In the second quarter of fiscal 2019, CooperSurgical sold an exclusive distribution right to distribute Filshie Clip System in the U.S. for $21.0 million and recognized a gain of $19.0 million.
Balances include foreign currency translation adjustments.
As of July 31, 2020,2021, the estimationestimate of future amortization expenses for intangible assets with definite lives is as follows:
Fiscal years:(In millions)
Remainder of 2020$33.9
2021135.4
2022133.5
2023131.3
2024127.0
Thereafter740.2
Total remaining amortization for intangible assets with definite lives$1,301.3

Fiscal Years:(In millions)
Remainder of 2021$37.0 
2022149.3 
2023147.0 
2024142.8 
2025132.3 
Thereafter689.6 
Total remaining amortization for intangible assets with definite lives$1,298.0 
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.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.

If the carrying value of a definite-lived or indefinite-lived intangible asset is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. The Company performed an annual impairment assessment in the third quarter of fiscal 20202021 and 20192020 and did not recognize any intangible asset impairment charges.

14

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


Note 6.5. Debt
(In millions)July 31, 2021October 31, 2020
Overdraft and other credit facilities$90.2 $59.4 
Term loan350.0 350.0 
Less: unamortized debt issuance cost(0.1)(0.1)
Short-term debt$440.1 $409.3 
Revolving credit330.0 534.0 
Term loans850.0 850.0 
Other0.2 0.2 
Less: unamortized debt issuance cost(0.3)(0.3)
Long-term debt1,179.9 1,383.9 
Total debt$1,620.0 $1,793.2 
(In millions)July 31, 2020 October 31, 2019
Overdraft and other credit facilities$52.7
 $63.7
Term loan500.0
 500.0
Less: unamortized debt issuance cost(0.1) 0
Short-term debt$552.6
 $563.7
    
Revolving credit478.0
 264.0
Term loans850.0
 1,000.0
Other0.1
 0.2
Less: unamortized debt issuance cost(0.3) (1.6)
Long-term debt1,327.8
 1,262.6
Total debt$1,880.4
 $1,826.3
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 July 31, 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 0.90% at July 31, 2021.

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 fully repay all borrowingsthe outstanding amounts under the 2017 Term Loan Agreement (as defined below)previous credit agreement and transfer all letters of creditan outstanding term loan, and borrowings outstanding underfor general corporate purposes.
15

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
On October 30, 2020, the 2016 Credit Agreement (as defined below)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 further described below.a revolving borrower and releasing certain borrowers in the 2020 Credit Agreement.
At July 31, 2020,2021, the Company had $850.0 million outstanding under the 2020 Term Loan Facility, and $478.0$330.0 million outstanding under the 2020 Revolving Credit Facility. Facility and $958.6 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 1.17%was 0.98% at July 31, 2020.2021. During the three and nine months ended July 31, 2020,2021, the Company expensed less than $0.1 million and $1.8 million, respectively, 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.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

At July 31, 2020,2021, the Company was in compliance with the Interest CoverageCoverage Ratio at 17.6039.88 to 1.00 and the Total Leverage RatioRatio at 2.231.52 to 1.001.00 for the 2020 Credit Agreement and 2019 Term Loan Agreement discussed below.Agreement. The Company, after considering the potentialpotential 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.
$500 million Term Loan on September 27, 2019, amended on April 1, 2020

On September 27, 2019, the Company amended its existing senior unsecured term loan agreement entered into on November 1, 2018 (the 2018 Term Loan Agreement) to establish a new 364-day senior unsecured term loan (the 2019 Term Loan Agreement) with the same parties as the 2018 Term Loan Agreement. The 2019 Term Loan Agreement modifies certain provisions of the 2018 Term Loan Agreement which, among other things, extended the maturity date to September 25, 2020 and increased the aggregate principal amount of the term loan facility from an original amount of $400 million to $500 million. The Company used the additional funds to partially repay outstanding borrowings.

On April 1, 2020, the Company entered into Amendment No. 2 to the 2018 Term Loan Agreement (the Second Amendment to the 2018 Term Loan Agreement). The Second Amendment to the 2018 Term Loan Agreement further modifies the 2018 Term Loan Agreement by, among other things, conforming certain provisions therein to those contained in the 2020 Credit Agreement discussed above.

At July 31, 2020, the Company had $500.0 million outstanding under the 2019 Term Loan Agreement (including the Second Amendment to the 2018 Term Loan Agreement).
Amounts outstanding under the 2019 Term Loan Agreement will bear interest, at the Company's option, at either the base rate, or the adjusted LIBOR (each as defined in the Second Amendment to the 2018 Term Loan Agreement), plus, in each case, an applicable rate of 0.00% in respect of base rate loans and 0.60% in respect of adjusted LIBOR loans. The weighted average interest rates for the three months and nine months ended July 31, 2020 were 0.84% and 1.73%, respectively.

The 2019 Term Loan 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 Second Amendment to the 2018 Term Loan Agreement) consistent with the 2020 Credit Agreement discussed above.
Refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 20192020 for more details.

The following is a summary of the maximum commitments and the net amounts available to us under credit facilities discussed above as of July 31, 2020:2021:
(In millions)Facility LimitOutstanding BorrowingsOutstanding Letters of CreditTotal Amount AvailableMaturity Date
2020 Revolving Credit Facility$1,290.0 $330.0 $1.4 $958.6 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 $1,530.0 $1.4 $958.6 
(In millions) Facility Limit Outstanding Borrowings Outstanding Letters of Credit Total Amount Available Maturity Date
2020 Revolving Credit Facility $1,290.0
 $478.0
 $1.4
 $810.6
 April 1, 2025
2020 Term Loan Facility 850.0
 850.0
 n/a
 
 April 1, 2025
2019 Term Loan 500.0
 500.0
 n/a
 
 September 25, 2020
Total $2,640
 $1,828
 $1.4
 $810.6
  


Note 6. Income Taxes

The Company's effective tax rates for the three months ended July 31, 2021 and July 31, 2020 were (554.9)% and 16.9%, respectively. The decrease was primarily due to a $534.9 million tax benefit related to the remeasurement of deferred tax assets caused by the UK enactment of a 25% corporate tax rate to be effective in fiscal 2023 and is primarily related to deferred tax assets recognized from intra-group intangible asset transfers. The Company’s effective tax rate also decreased due to changes in unrecognized tax benefits, excess tax benefits from share-based compensation, and changes in the geographical composition of pre-tax earnings. The Company's effective tax rate for the third quarter of fiscal 2021 was lower than the U.S. federal statutory tax rate primarily due to the remeasurement of deferred tax assets, pre-tax earnings in foreign jurisdictions with lower tax rates, changes in unrecognized tax benefits, and excess tax benefits from share-based compensation.

The Company's effective tax rates for the nine months ended July 31, 2021 and July 31, 2020 were (666.3)% and 9.0%, respectively. The decrease was primarily due to an intra-group transfer of intellectual property, as discussed below, and remeasurement of the related deferred tax assets caused by the UK enactment of a 25% corporate tax rate. The Company’s effective tax rate otherwise increased due to changes in the geographical composition of pre-tax earnings, partially offset by changes in unrecognized tax benefits and excess tax benefits from share-based compensation. The Company's effective tax rate for the nine months ended July 31, 2021 was lower than the U.S. federal statutory tax rate primarily due to the intra-group transfer, the remeasurement of deferred tax assets, earnings in foreign jurisdictions with lower tax rates, changes in unrecognized tax benefits, 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
16

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

Note 7. Income Taxes

Recent Tax Legislation
Coronavirus Aid, Relief and Economic Security Act
On March 27, 2020,these assets. As a result, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includesCompany recognized a significant numberdeferred tax asset of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017. The changes are mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits.
The Company continues to assess the impact and future implications of these provisions; however, it does not anticipate any amounts that could give rise to$1,987.9 million, with a material impact to the overall Consolidated Condensed Financial Statements.
Effective Tax Rate
The Company'scorresponding income tax provision forbenefit, during the three and nine months ended JulyJanuary 31, 2020 and 2019, were as follows:2021.
Periods Ended July 31,
Three Months Nine Months
(In millions)2020 2019 2020 2019
Income tax (benefit) provision


$11.2
 $6.9
 $15.6
 $3.2

The Company's effective tax rates were 16.9% and 5.4% for the third quarter of fiscal 2020 and 2019, respectively, and 9.0% and 0.9% for the nine months ended July 31, 2020 and 2019, respectively. The increase in the effective tax rate for the third quarter of fiscal 2020 compared to fiscal 2019 was primarily due to the significant drop of profit before tax due to market volatility as a result of COVID-19 pandemic, tax expense from prior period tax return filings and a decrease of excess tax benefits from share-based compensation. The Company’s effective tax rate for the nine months ended July 31, 2020 was higher compared to the prior year period, primarily due to settlement of tax audits in fiscal 2019, revisions to the provisional tax charges relating to the 2017 Act in fiscal 2019, a decrease of excess tax benefits from share-based compensation, the significant drop of profit before tax due to market volatility as a result of COVID-19 pandemic and tax expense from prior period tax return filings. The Company’s effective tax rate for the third quarter of fiscal 2020 was lower than the U.S. statutory tax rate primarily due to excess tax benefits from share-based compensation and a favorable mix of income from foreign jurisdictions with preferential tax rates.
We recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. As of July 31, 2020, and October 31, 2019, Cooper had unrecognized tax benefits of $56.8 million and $49.7 million, respectively. The increase is primarily related to additions to current and prior period tax positions, partially offset by lapses of statute of limitations. It is our policy to recognize interest and penalties directly related to income taxes as additional income tax expense. It is reasonably possible that $19.5 million of unrecognized tax benefits could be settled during the next twelve months.
The Company is subject to U.S. Federal income tax examinations for fiscal 2015 through 2019 and the Internal Revenue Service is currently auditing our U.S. Consolidated Corporation Income Tax Returns for fiscal 2015 and 2016. The Company remains subject to income tax examinations in other significant tax jurisdictions including United Kingdom, Japan, France and Australia for the tax years 2014 through 2019. The Company is currently under audit in the United Kingdom for 2015 through 2018.

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

Note 8.7. Earnings Per Share
Periods Ended July 31,
Three Months Nine Months
(In millions, except per share amounts)2020 2019 2020 2019
Net income$55.2
 $120.1
 $157.2
 $345.7
Basic:       
Weighted average common shares49.1
 49.5
 49.1
 49.4
Basic earnings per share$1.13
 $2.43
 $3.20
 $7.00
Diluted:       
Weighted average common shares49.1
 49.5
 49.1
 49.4
Effect of dilutive stock options0.4
 0.6
 0.5
 0.6
Diluted weighted average common shares49.5
 50.1
 49.6
 50.0
Diluted earnings per share$1.12
 $2.40
 $3.17
 $6.91

Periods Ended July 31,Three MonthsNine Months
(In millions, except per share amounts)2021202020212020
Net income$615.8 $55.2 $2,834.4 $157.2 
Basic:
Weighted average common shares49.3 49.1 49.2 49.1 
Basic earnings per share$12.50 $1.13 $57.61 $3.20 
Diluted:
Weighted average common shares49.3 49.1 49.2 49.1 
Effect of dilutive stock plans0.5 0.4 0.5 0.5 
Diluted weighted average common shares49.8 49.5 49.7 49.6 
Diluted earnings per share$12.37 $1.12 $57.01 $3.17 
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 July 31,Three MonthsNine Months
(In thousands, except exercise prices)2021202020212020
Stock option shares excluded107 392 107 207 
Range of exercise prices$345.74 $254.77 – $304.54$345.74 $304.54 
Restricted stock units excluded
Periods Ended July 31,Three Months Nine Months
(In thousands, except exercise prices)2020 2019 2020 2019
Stock option shares excluded392
 0
 207
 198
Range of exercise prices$254.77-$304.54
 n/a
 $304.54
 $254.77
Restricted stock units excluded1
 18
 1
 19


Note 9.8. 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, 2019.2020. 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 July 31,Three MonthsNine Months
(In millions)2021202020212020
Selling, general and administrative expense$10.6 $8.1 $28.4 $25.0 
Cost of sales0.9 0.9 2.9 3.1 
Research and development expense0.6 0.6 1.8 1.8 
Total share-based compensation expense$12.1 $9.6 $33.1 $29.9 
Related income tax benefit$1.2 $1.2 $3.6 $3.8 
Periods Ended July 31,
Three Months Nine Months
(In millions)2020 2019 2020 2019
Selling, general and administrative expense$8.1
 $6.8
 $25.0
 $22.1
Cost of sales0.9
 1.0
 3.1
 3.9
Research and development expense0.6
 0.5
 1.8
 2.4
Total share-based compensation expense$9.6
 $8.3
 $29.9
 $28.4
Related income tax benefit$1.2
 $1.1
 $3.8
 $4.0


17

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


Note 10.9. Stockholders’ Equity
Analysis of Changes in Accumulated Other Comprehensive (Loss) Income:
(In millions)Foreign Currency Translation Adjustment Minimum Pension Liability Derivative Instruments Total
Balance at October 31, 2018$(412.2) $(18.5) $0
 $(430.7)
Gross change in value9.0
 (33.4) 0
 (24.4)
Tax effect for the period0
 8.0
 0
 8.0
Balance at October 31, 2019$(403.2) $(43.9) $0
 $(447.1)
Gross change in value20.5
 0
 (23.8) (3.3)
Tax effect for the period0
 0
 5.7
 5.7
Balance at July 31, 2020$(382.7) $(43.9) $(18.1) $(444.7)

(In millions)Foreign Currency Translation AdjustmentMinimum Pension LiabilityDerivative InstrumentsTotal
Balance at October 31, 2019$(403.2)$(43.9)$— $(447.1)
Gross change in value0.9 (16.8)(17.1)(33.0)
Tax effect— 4.0 4.1 8.1 
Balance at October 31, 2020$(402.3)$(56.7)$(13.0)$(472.0)
Gross change in value101.6 — 14.2 115.8 
Tax effect(0.2)— (3.4)(3.6)
Balance at July 31, 2021$(300.9)$(56.7)$(2.2)$(359.8)
Share Repurchases
In December 2011, ourthe Company's Board of Directors authorized the 2012 Share Repurchase Program and through subsequent amendments, the most recent in March 2017, the total repurchase authorization was increased from $500.0 million to $1.0 billion of the Company's common stock. This program has no expiration date and may be discontinued at any time. Purchases under the 2012 Share Repurchase Program are subject to a review of the circumstances in place at the time and may be made from time to time as permitted by securities laws and other legal requirements.
During the three months ended July 31, 2021, there were no share repurchases under the program. During the nine months ended July 31, 2021, the Company repurchased 69.6 thousand shares of its common stock for $24.8 million, at an average purchase price of $356.61 per share.
At July 31, 2020, $359.72021, $334.8 million remained authorized for repurchase under the program.
There were 0 share repurchases under the program during the three months ended July 31, 2020 and 2019. ForDuring the nine months ended July 31, 2020, and 2019, the Company's share repurchases were as follows:
Periods Ended July 31,
Nine Months
 2020 2019
Number of shares160,850
 24,500
Average repurchase price per share$296.9
 $248.7
Total costs of shares repurchased (in millions)$47.8
 $6.1
Company repurchased
160.8 thousand
shares of its common stock for $47.8 million, at an average purchase price of $296.88 per share.
Dividends    
WeThe Company paid a semiannual dividend of approximately$1.5 million or 3 cents per share, on February 9, 2021, to stockholders of record on January 22, 2021; $1.5 million or 3 cents per share on August 11, 2021, to stockholders of record on July 27, 2021; $1.5 million or 3 cents per share, on February 10, 2020, to stockholders of record on January 23, 2020. We paid another semiannual dividend of approximately2020; $1.5 million or 3 cents per share on August 7, 2020, to stockholders of record on July 23, 2020.

Note 11.10. Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. An asset’s or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.
At July 31, 20202021 and October 31, 2019,2020, the carrying value of cash and cash equivalents, accounts receivable, prepaid expense and other current assets, lines of credit, accounts payable and other current liabilities approximateapproximates fair value due to the short-term nature of such instruments and the ability to obtain financing on similar terms.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)


The carrying value of our revolving credit facility and term loans approximateapproximates fair value based on current market rates (Level 2). On April 6, 2020 the Company entered into 6 interest rate swap contracts which are used to hedge the Company’s exposure to changes in cash flows associated with its variable rate term loansdebt and are designated as derivatives in a
18

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
cash flow hedge. The payment streams are based on a total notional amount of $1.5 billion at the inception of the contracts. The interest rate swap contracts havehad maturities of seven years oror less. As of July 31, 2021, 2 of the 6 interest rate swap contracts have matured and the outstanding contracts have a total notional amount of $1.1 billion.

The gain or loss on the derivatives is recorded as a component of accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

The fair value of the interest rate swap contracts is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves. The interest rate swap contracts were categorized as Level 2 in the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity. Refer to Note 15.14. Financial Derivatives and Hedging for further information.

The Company did 0tnot have any derivative assets or liabilities including interest rate swaps, cross currency swaps or foreign currency forward contracts as of July 31, 2021 and October 31, 2019.2020.

The fair value of the Company's contingent consideration for which a liability is recorded is measured on a recurring basis as a Level 3 measurement, and the change in fair value is recognized in selling, general and administrative expense in the Consolidated Statements of Income and Comprehensive Income. Refer to Note 2. Acquisitions and Assets Held for Sale for further information.
Nonrecurring fair value measurements

The Company uses fair value measures when determining assets and liabilities acquired in an acquisition and assets held for sale as described in Note 3.2. Acquisitions and Assets Held for Sale, which are considered a Level 3 measurement.

Note 12.11. Employee Benefits
Cooper’sThe Company's Retirement Income Plan (the Plan), a defined benefit plan, covers substantially all full-time United States employees. Cooper'sThe Company's contributions are designed to fund normal cost on a current basis and to fund the estimated prior service cost of benefit improvements. The unit credit actuarial cost method is used to determine the annual cost. CooperThe Company pays the entire cost of the Plan and funds such costs as they accrue. Virtually all of the assets of the Plan are comprised of equities and participation in equity and fixed income funds.
OurThe Company's results of operations for the three and nine months ended July 31, 20202021 and 2019,2020, reflect the following components of net periodic defined benefit costs:
Periods Ended July 31,
Three Months Nine Months
(In millions)2020 2019 2020 2019
Service cost$5.2
 $2.2
 $12.1
 $7.6
Interest cost0.9
 2.1
 3.5
 4.6
Expected return on plan assets(3.6) (2.8) (9.0) (7.4)
Recognized net actuarial gain (loss)1.8
 (0.2) 3.8
 0.6
Net periodic defined benefit plan cost$4.3
 $1.3
 $10.4
 $5.4

Periods Ended July 31,Three MonthsNine Months
(In millions)2021202020212020
Service cost$4.3 $5.2 $12.9 $12.1 
Interest cost1.1 0.9 3.3 3.5 
Expected return on plan assets(3.1)(3.6)(9.3)(9.0)
Recognized net actuarial loss1.3 1.8 4.0 3.8 
Net periodic defined benefit plan cost$3.6 $4.3 $10.9 $10.4 
WeThe Company did 0tnot contribute to the Plan induring the first nine months of fiscal 20202021 and expectdue to COVID-19 the Company is uncertain of the amount the Company will contribute $23.4 million duringduring the remainder of the year. We contributed $5.0 millionThe Company did not contribute to the Plan induring the first nine months of fiscal 2019.2020. The expected rate of return on Plan assets for determining net periodic benefit plan cost is 8%.

Note 13.12. Contingencies

The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business, including matters involving our products, intellectual property, supplier relationships, distributors, competitor relationships, employees and other matters. The Company does not believe that the ultimate resolution of these proceedings or claims pending against it could have a material adverse effect on its financial condition or
19

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
results of operations. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.


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

Note 14.13. Business Segment Information
The Company discloses information about its operating segments, which were established based on the way that management organizes segments within the Company for making operating decisions and assessing financial performance. The Company's 2 operating segments are described below.
CooperVision. Competes in the worldwide contact lens market by developing, manufacturing and marketing a broad range of products for contact lens wearers, featuring advanced materials and optics. CooperVision designs its products to solve vision challenges such as astigmatism, presbyopia, myopia, ocular dryness and eye fatigues, with a broad collection of spherical, toric and multifocal contact lenses.
CooperSurgical. Competes in the general health care market with a focus on advancing the health of women, babies and families through a diversified portfolio of products and services focusing on women's health and fertility.
CooperCooperVision. Competes in the worldwide contact lens market by developing, manufacturing and marketing a broad range of products for contact lens wearers, featuring advanced materials and optics. CooperVision designs its products to solve vision challenges such as astigmatism, presbyopia, myopia, ocular dryness and eye fatigues, with a broad collection of spherical, toric and multifocal contact lenses.
CooperSurgical. Competes in the general health care market with a focus on advancing the health of women, babies and families through a diversified portfolio of products and services focusing on women's health and fertility.
The Company uses operating income, as presented in our financial reports, as the primary measure of segment profitability. We doThe Company does not allocate costs from corporate functions to segment operating income. Items below operating income are not considered when measuring the profitability of a segment. We useThe Company uses the same accounting policies to generate segment results as we dothe Company does for our consolidated results.
Total identifiable assets are those used in continuing operations except cash and cash equivalents, which we includethe Company includes as corporate assets.
Segment information:
Periods Ended July 31,Three MonthsNine Months
(In millions)2021202020212020
CooperVision net sales by category:
Toric lens$181.0 $147.6 $516.1 $436.3 
Multifocal lens61.6 46.9 177.3 143.8 
Single-use sphere lens159.3 126.5 449.8 380.7 
Non single-use sphere, other155.6 128.3 443.9 375.9 
Total CooperVision net sales$557.5 $449.3 $1,587.1 $1,336.7 
CooperSurgical net sales by category:
Office and surgical products$122.5 $81.7 $338.6 $249.7 
Fertility83.4 47.2 237.7 162.9 
CooperSurgical net sales205.9 128.9 576.3 412.6 
Total net sales$763.4 $578.2 $2,163.4 $1,749.3 
Operating income (loss):
CooperVision$88.0 $93.7 $347.2 $284.4 
CooperSurgical26.2 (9.3)66.9 (33.3)
Corporate(13.6)(12.4)(36.8)(39.4)
Total operating income100.6 72.0 377.3 211.7 
Interest expense5.6 5.7 18.1 30.1 
Other expense (income), net1.0 (0.1)(10.7)8.8 
Income before income taxes$94.0 $66.4 $369.9 $172.8 
Periods Ended July 31,
Three Months Nine Months
(In millions)2020 2019 2020 2019
CooperVision net sales by category:       
Toric lens$147.6
 $163.1
 $436.3
 $464.4
Multifocal lens46.9
 52.4
 143.8
 151.1
Single-use sphere lens126.5
 146.3
 380.7
 413.6
Non single-use sphere, other128.3
 147.3
 375.9
 434.2
Total CooperVision net sales$449.3
 $509.1
 $1,336.7
 $1,463.3
CooperSurgical net sales by category:       
Office and surgical products$81.7
 $106.3
 $249.7
 $307.7
Fertility47.2
 64.0
 162.9
 190.8
CooperSurgical net sales128.9
 170.3
 412.6
 498.5
Total net sales$578.2
 $679.4
 $1,749.3
 $1,961.8
Operating income:       
CooperVision$93.7
 $134.2
 $284.4
 $375.9
CooperSurgical(9.3) 20.6
 (33.3) 59.0
Corporate(12.4) (12.6) (39.4) (34.8)
Total operating income72.0
 142.2
 211.7
 400.1
Interest expense5.7
 16.7
 30.1
 53.3
Other (income) expense, net(0.1) (1.5) 8.8
 (2.1)
Income before income taxes$66.4
 $127.0
 $172.8
 $348.9
20


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

(In millions)July 31, 2021October 31, 2020
Total identifiable assets:
CooperVision$6,955.5 $4,236.3 
CooperSurgical2,435.3 2,293.8 
Corporate219.8 207.4 
Total$9,610.6 $6,737.5 

(In millions)July 31, 2020 October 31, 2019
Total identifiable assets:   
CooperVision$4,240.8
 $3,911.6
CooperSurgical2,290.7
 2,189.8
Corporate216.9
 173.1
Total$6,748.4
 $6,274.5

Geographic information:
Periods Ended July 31,Three MonthsNine Months
(In millions)2021202020212020
Net sales to unaffiliated customers by country of domicile:
United States$343.7 $263.7 $992.9 $779.6 
Europe258.7 185.2 709.5 577.3 
Rest of world161.0 129.3 461.0 392.4 
Total$763.4 $578.2 $2,163.4 $1,749.3 
Periods Ended July 31,
Three Months Nine Months
(In millions)2020 2019 2020 2019
Net sales to unaffiliated customers by country of domicile:       
United States$263.7
 $306.2
 $779.6
 $891.1
Europe185.2
 222.7
 577.3
 642.0
Rest of world129.3
 150.5
 392.4
 428.7
Total$578.2
 $679.4
 $1,749.3
 $1,961.8


(In millions)July 31, 2020 October 31, 2019(In millions)July 31, 2021October 31, 2020
Net property, plant and equipment by country of domicile:   Net property, plant and equipment by country of domicile:
United States$686.2
 $626.5
United States$725.1 $721.3 
Europe367.6
 358.8
Europe376.4 363.0 
Rest of world183.9
 146.8
Rest of world212.8 197.6 
Total$1,237.7
 $1,132.1
Total$1,314.3 $1,281.9 
 
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)

Note 15.14. Financial Derivatives and Hedging

As part of the Company’s overall risk management practices the Company enters into financial derivatives, interest rate swaps designated as cash flow hedges, to hedge the floating interestCompany’s exposure to changes in cash flows associated with its variable rate on its debt.
The Company records all derivatives on its consolidated condensed balance sheetsConsolidated Condensed Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. All of the Company's derivatives have satisfied the criteria necessary to apply hedge accounting.
The gain or loss on derivative instruments designated and qualifying for cash flow hedge accounting is deferred in other comprehensive income. The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings. Deferred gains or losses from designated cash flow hedges are reclassified into earnings in the period that the hedged interest expense affects earnings. The effectiveness of cash flow hedges is assessed at inception and quarterly thereafter. The Company does not offset fair value amounts recognized for derivative instruments in its consolidated condensed balance sheetConsolidated Condensed Balance Sheets for presentation purposes.
Credit risk related to derivative transactions reflects the risk that a party to the transaction could fail to meet its obligation under the derivative contracts. Therefore, the Company’s exposure to the counterparty’s credit risk is generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations to the counterparty. The Company’s policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings to help mitigate counterparty credit risk.
21

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
As of October 31, 2020, the Company had 5 outstanding derivatives designated as hedging instruments. One of the contracts matured on April 1, 2021. As of July 31, 2020,2021, the Company had the following outstanding derivatives designated as hedging instruments:
(In millions, except for number of instruments)Number of Instruments Notional Value
Interest Rate Swap Contracts

6
 $1,500

(In millions, except for number of instruments)Number of InstrumentsNotional Value
Interest Rate Swap Contracts4$1,100 
These contracts have remaining maturities of sevensix years or less.

The pre-tax impact of loss on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $23.8$2.9 million ($18.12.2 million, net of tax) as of July 31, 2020. The Company did not have any derivatives designated as hedging instruments for the period ended July 31, 2019.2021.
The following table summarizes the fair values of derivative instruments as of the periods indicated and the line items in the accompanying condensed consolidated balance sheetsConsolidated Condensed Balance Sheets where the instruments are recorded:
  Derivative Liabilities
(In millions)   July 31, 2020 July 31, 2019
Derivatives designated as cash flow hedges Balance sheet location    
Interest rate swap contracts Other current liabilities $0.7
 $0
Interest rate swap contracts Other non-current liabilities 23.1
 0
    $23.8
 $0


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

Derivative Liabilities
(In millions)July 31, 2021October 31, 2020
Derivatives designated as cash flow hedgesBalance sheet location
Interest rate swap contractsOther current liabilities$0.1 $0.6 
Interest rate swap contractsOther non-current liabilities2.8 16.5 
$2.9 $17.1 
The following table summarizes the amounts recognized with respect to our derivative instruments within the accompanying condensed consolidated statementsConsolidated Statements of income:Income and Comprehensive Income:
Periods Ended July 31,  Three Months Nine Months
(In millions)  2020 2019 2020 2019
Derivatives designated as cash flow hedges Location of Loss Recognized on Derivatives       
Interest rate swap contracts Interest expense$1.8
 $0
 $1.6
 $0

Periods Ended July 31,Three MonthsNine Months
(In millions)2021202020212020
Derivatives designated as cash flow hedgesLocation of Loss Recognized on Derivatives
Interest rate swap contractsInterest expense$2.0 $1.8 $6.0 $1.6 
The Company expects that $7.0that $6.7 million recorded recorded as a component of accumulated other comprehensive income (loss) will be realized in the statementsConsolidated Statements of earningsIncome and Comprehensive Income over the next twelve months and the amount will vary depending on prevailing interest rates.

The following table details the changes in accumulated other comprehensive income:
(In millions)Amount
Beginning balance loss as of October 31, 2020$(17.1)
Amount recognized in other comprehensive income on interest rate swap contracts, gross ($6.2 million, net of tax)8.2 
Amount reclassified from other comprehensive income into earnings, gross ($4.6 million, net of tax)6.0 
Ending balance loss as of July 31, 2021$(2.9)
(In millions) Amount
Beginning balance gain / (loss) as of October 31, 2019 $0
Amount recognized in other comprehensive income on interest rate swap contracts, gross (25.4)
Amount reclassified from other comprehensive income into earnings, gross 1.6
Ending balance gain / (loss) as of July 31, 2020 $(23.8)


22


THE COOPER COMPANIES, INC. AND SUBSIDIARIES


Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Note numbers refer to “Notes to Consolidated Condensed Financial Statements” in Item 1. Unaudited Financial Statements.

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These include statements relating to plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact, including all statements regarding the expected impact of the ongoing COVID-19Coronavirus disease 2019 (COVID-19) pandemic on our business; and 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 earnings per share are forward-looking. In addition, all statements regarding anticipated growth in our net sales, 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:
The effects of the ongoing COVID-19 pandemic and related economic disruptions and new governmental regulations on our business, results of operations, cash flow and financial condition, including but not limited to the potential impact on our sales, operations and supply chain.
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, the ongoing COVID-19 pandemic, and escalating global trade barriers, including additional tariffs, by countries such as China.
Adverse changes in global political and economic conditions, and related uncertainty caused by the United Kingdom’s withdrawal from the European Union (EU) 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.
Changes in tax laws or their interpretation, and changes in statutory tax rates, and adverse outcomes in tax disputes including but not limited to, the U.S.,United States, the United Kingdom and other countries may affect our taxation of earnings recognized in foreign jurisdictions, result in unexpected tax liabilities, 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 net sales and earnings.
Our existing and future variable rate indebtedness and associated interest expense is 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 obtainachieve the anticipated net sales, 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).
Adverse changes in global political and economic conditions, and related uncertainty caused by the United Kingdom’s withdrawal from the European Union (EU) 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.
23


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Compliance costs and potential liability in connection with U.S. and foreign laws and health care regulations pertaining to privacy and security of third- partypersonal information, such as HIPAA and the California Consumer Privacy

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




Act (CCPA) in the U.S.United States 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 the ongoing COVID-19 pandemic, 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),and the EU In Vitro Diagnostic Medical Devices Regulation (IVDR), and the medical device excise tax under the U.S. Affordable Care Act.Regulation.
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.
Other events described in our Securities and Exchange Commission filings, including the “Business” and “Risk Factors” sections in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019,2020, as such Risk Factors may be updated in quarterly filings including updates made in this filing.
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.


24


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations





Results of Operations

In this section, we discuss the results of our operations for the third quarter of fiscal 20202021 ended July 31, 20202021 and the nine months then ended and compare them with the same periods of fiscal 2019.2020. We discuss our cash flows and current financial condition under “Capital Resources and Liquidity.” Within the tables presented, percentages are calculated based on the underlying whole-dollar amounts and, therefore, may not recalculate exactly from the rounded numbers used for disclosure purposes.    

Non-GAAP Financial Measures

The succeeding sections of Management’s Discussion and Analysis (MD&A) may include certain financial measures that are not defined by accounting principles generally accepted in the United States of America (U.S. GAAP)(GAAP). These measures, which are referred to as non-GAAP measures, are listed below:
Free Cash Flow - Free cash flow is calculated as net cash provided by operating activities less capital expenditures.
- Free cash flow is calculated as net cash provided by operating activities less capital expenditures.
Constant currency - Constant currency is defined as excluding the effect of foreign currency fluctuations.
For a discussion of these measures and the reasons management believes they are useful to investors, refer to “Summary of Non-GAAP Financial Measures” below. To the extent applicable, this MD&A includes reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

COVID-19 Considerations

The World Health Organization categorized the Coronavirus disease 2019 (COVID-19)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 &and 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. This hasThese factors have had, and we believe will continue toin the future may have, an adverse effect on our sales, operating results and cash flows.

We have taken an active role in addressing the ongoing pandemic’s impact on our employees, suppliers, distribution channels, operations and customers, including taking precautionary measures, such as implementing contingency plans, and making operational adjustments as necessary. We have taken measures to help ensure the safety of our personnel in all of our facilities, and we have endeavored and continue to follow recommended actions of government and health authorities to protect our employees worldwide.

As of the date of this filing, we have not experienced any significant disruption at our manufacturing facilities. We have had no significant disruption in our access to necessary raw materials and other supplies or with our distribution network; however, we have experienced higher unabsorbed fixed overhead costs, labor inefficiencies, higher cost of production and higher freight charges as a result of COVID-19.the COVID-19 pandemic. As a result, we instituted an inventory control project to reduce buildup of excess inventory. Our manufacturing and distributiondistribution operations have responded to the impacts related to the COVID-19 pandemic, and we have been able to continue to supply our products around the world without interruption. In the future, we may decide or need to implement additional precautionary measures or operational adjustments as we deem prudent to meet consumer demand or to help further ensure employee safety. We believe that the actions we are taking have enabled us to keep our employees safe and our supply chain intact and will help us emerge from this global pandemic operationally sound and well positioned for long-term growth.

The extent to which the global COVID-19 pandemic and related economic disruptions impact our business, results of operations, cash flow and financial condition will depend on future developments. At this time, future developments are highly uncertain, difficult to predict and largely outside of our control. These include, but are not limited to, the spread,
25


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




duration and severity of the pandemic outbreak and any subsequent waves of additional outbreaks, including the emergence and spread of variants of the COVID-19 virus, actions taken by governments to contain the pandemic, address its impact or respond to the reduction in global and local economic activity, and how quickly and to what extent normal economic and operating conditions can resume. We will continue to closely monitor the developments relating to the COVID-19 pandemic and the responses from governments and private sector participants and their respective impact on our Company and on our customers, suppliers, vendors and business partners.

For more information on the risks associated with the COVID-19 pandemic, refer to Part II, Item 1A, "Risk Factors" herein.coo-20210731_g1.jpg
netsalescapturea05.jpg
Third Quarter Highlights
Gross profit of $516.1 million, up 43% from $360.8 million, down 20% from $450.7 million in the prior year period primarily due to the negative impact
Operating income of COVID-19 on net sales
Operating income$100.6 million, up 40% from $72.0 million down 49% from $142.2 million in the prior year period
Diluted earnings per share $1.12, down 53%of $12.37, up 1008% from $2.40$1.12 per share in the prior year period
Cash provided by operations $112.8of $223.8 million, compared to $196.7$112.8 million in the prior year period.period

Nine Months Highlights
Gross profit $1,110.8$1,453.9 million, down 15%up 31% from $1301.8$1,110.8 million in the prior year period primarily due to negative impact of COVID-19 on net sales
Operating income $211.7$377.3 million, down 47%up 78% from $400.1$211.7 million in the prior year period
Diluted earnings per share $3.17, down 54%of $57.01, up 1699% from $6.91$3.17 per share in the prior year period
Cash provided by operations $268.3$564.1 million, compared to $513.3$268.3 million in the prior year period.
Outlook

Overall, we remain optimistic about the long-term prospects for the worldwide contact lens and general health care markets. However, the impact, risks and uncertainty relating to the global COVID-19 pandemic and related economic disruptions, as further described in the “COVID-19 Considerations” section above and in Item 1A. Risk Factors in our Annual Report on Form 10-K for the “Risk Factors” section in Part II, Item 1A of this filing,fiscal year ended October 31, 2020, have adversely affected our sales, cash flow and current performance and are likely to further adversely affect our future sales, cash flow and performance. Additionally, other events affecting the economy as a whole, including but not limited to the uncertainty and instability of global markets driven by foreign currency volatility, changes in tax legislation, debt concerns, the uncertainty during and after the transition period following the United Kingdom's withdrawal from the EU, changes to existing regulations and new regulations, global trade barriers including additional tariffs and the trend of

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




consolidations within the health care industry could impact our current performance and continue to represent a risk to our future performance.
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
CooperVision - We compete in the worldwide contact lens market with our spherical, toric, multifocal, toric multifocal and multifocalmyopia management contact lenses offered in a variety of materials including using silicone hydrogel Aquaform® technology, PC Technology™ and phosphorylcholine (PC) Technology™. ActivControl® technology. We believe that there will be lower contact lens wearer dropout rates as technology improves and enhances the wearing experience through a combination of improved designs and materials and the growth of preferred modalities such as single-use and monthly wearing options. CooperVision also competes in the myopia management and specialty eye care markets with products such as orthokeratology (ortho-k)ortho-k and scleral lenses. In November 2019, CooperVision received United States Food &and Drug Administration (FDA) approval for its MiSight® 1 day lens, which is the first and only FDA-approved product indicated to slow the progression of myopia in children with treatment initiated between the ages of 8-12 and became available in the United States during fiscal 2020. CooperVision is focused on greater worldwide market penetration using recently introduced products, and we continue to expand our presence in existing and emerging markets, including through acquisitions.
CooperVision acquired the following entityentities during the nine months ended July 31, 2019:2021:
Blanchard Contact Lenses•    A privately-held U.K. contact lens manufacturer on December 28, 2018 - aApril 26, 2021
•    A privately-held scleral lensmedical device company which expands CooperVision's specialty and scleral lens portfolio.on January 19, 2021

Our ability to compete successfully with a full range of silicone hydrogel products is an important factor to achieving our desired future levels of sales growth and profitability. CooperVision manufactures and markets a wide variety of silicone hydrogel contact lenses. Our single-use silicone hydrogel product franchises, clariti® and MyDay®, remain a focus as we expect increasing demand for these products as well as future single-use products as the global contact lens market continues to shift to this modality. Outside of single-use, the Biofinity® and Avaira Vitality® product families comprise our focus in the FRP, or frequent replacement product, market which encompasses the 2-week and monthly modalities. Included in this segment are unique products such as Biofinity Energys®, which helps individuals with digital eye fatigue.
CooperSurgical - Our CooperSurgical business competes in the general health care market with a commitment to advancing the health of women, babies and families through its diversified portfolio of products and services focusing on women's health and fertility. CooperSurgical has established its market presence and distribution system by developing products and acquiring companies, products and services that complement its business model.
CooperSurgical acquired the following entityentities during the nine months ended July 31, 2020:2021:
•    A privately-held distributor of IVFmedical device company that develops single-use illuminating medical devices and systemson May 3, 2021
•    A privately-held medical device company on March 1, 2021
•    A privately-held medical device company on February 1, 2021
•    A privately-held in vitro fertilization (IVF) cryo-storage software solutions company on December 13, 2019.31, 2020
CooperSurgical acquired the following entity during the nine months ended July 31, 2019:2020:
Incisive Surgical Inc.A privately-held distributor of IVF medical devices and systems on December 31, 2018 - a privately-held U.S. medical device company that develops mechanical surgical solutions for skin closure.13, 2019

Capital Resources - At July 31, 2020,2021, we had $127.4$112.2 million in unrestricted cash, primarily held outside the United States, and $810.6$958.6 million available under our 2020 Credit Agreement. The $850.0 million term loan entered into on April 1, 2020, and the $500.0$350.0 million term loan entered into on September 27, 2019 and amended on April 1,October 16, 2020, remain outstanding as of July 31, 2020.2021.
See Note 6.5. Debt of the Consolidated Condensed Financial Statements for additional information.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations



Assets Held for Sale

On February 2, 2021, CooperVision entered into a stock purchase agreement to sell 50% of the equity interest in a wholly-owned subsidiary that was acquired by CooperVision on January 19, 2021. The closing of this transaction is subject to certain closing conditions including required regulatory approvals. We intend to operate the previously wholly-owned subsidiary as a joint venture with the purchaser of the 50% interest once the transaction is closed. We concluded the substantive terms of the joint venture during the third quarter of fiscal 2021, and as of July 31, 2021, the assets and liabilities of this disposal group were reclassified as held for sale. We did not record any impairment in the three months ended July 31, 2021, and this disposal did not qualify as a discontinued operation.
See Note 2. Acquisitions and Assets Held for Sale of the Consolidated Condensed Financial Statements for additional information.

Transition from LIBOR

The United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (LIBOR), announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021. Further, 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. This guidance provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP)GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The Company hasWe have material contracts that are indexed to LIBOR and isare continuing to monitor this activity and evaluate the related risk. We are continuing to evaluate the scope of impacted contracts and the potential impact. We are also monitoring the developments regarding alternative rates and may amend certain contracts to accommodate those rates if the contract does not already specify a replacement rate. While the notional value of agreements potentially indexed to LIBOR is material, we are not yet able to reasonably estimate the expected impact.

Selected Statistical Information – Percentage of Net Sales
Three Months Nine MonthsThree MonthsNine Months
Percentage of Net Sales 2020 vs 2019 % Change in Absolute Values Percentage of Net Sales 2020 vs 2019 % Change in Absolute ValuesPercentage of Net Sales2021 vs 2020 % Change in Absolute ValuesPercentage of Net Sales2021 vs 2020 % Change in Absolute Values
Periods Ended July 31,2020 2019 2020 2019 Periods Ended July 31,2021202020212020
Net sales100% 100% (15)% 100% 100% (11)%Net sales100 %100 %32 %100 %100 %24 %
Cost of sales38% 34% (5)% 37% 34% (3)%Cost of sales32 %38 %14 %33 %37 %11 %
Gross profit62% 66% (20)% 63% 66% (15)%Gross profit68 %62 %43 %67 %63 %31 %
Selling, general and administrative expense40% 37% (7)% 42% 38% (2)%Selling, general and administrative expense46 %40 %51 %42 %42 %24 %
Research and development expense4% 3% 1 % 4% 3% 7 %Research and development expense%%14 %%%(1)%
Amortization of intangibles6% 5% (8)% 6% 6% (7)%Amortization of intangibles%%12 %%%%
Gain on sale of an intangible% %  % % 1%  %
Operating income12% 21% (49)% 12% 20% (47)%Operating income13 %12 %40 %17 %12 %78 %
Net Sales Growth by Business Unit
Periods Ended July 31,Three Months Nine MonthsPeriods Ended July 31,Three MonthsNine Months
($ in millions)2020 2019 Increase / (Decrease)2020 vs 2019 % Change 2020 2019 Increase / (Decrease)2020 vs 2019 % Change($ in millions)20212020Increase2021 vs 2020 % Change20212020Increase2021 vs 2020 % Change
CooperVision$449.3
 $509.1
 $(59.8)(12)% $1,336.7
 $1,463.3
 $(126.6)(9)%CooperVision$557.5 $449.3 $108.2 24 %$1,587.1 $1,336.7 $250.4 19 %
CooperSurgical128.9
 170.3
 (41.4)(24)% 412.6
 498.5
 (85.9)(17)%CooperSurgical205.9 128.9 77.0 60 %576.3 412.6 163.7 40 %
Net sales$578.2
 $679.4
 $(101.2)(15)% $1,749.3
 $1,961.8
 $(212.5)(11)%Net sales$763.4 $578.2 $185.2 32 %$2,163.4 $1,749.3 $414.1 24 %
CooperVision Net Sales
The contact lens market has two major product categories:
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Spherical lenses including lenses that correct near- and farsightedness uncomplicated by more complex visual defectsdefects; and
Toric and multifocal lenses including lenses that, in addition to correcting near- and farsightedness, address more complex visual defects such as astigmatism and presbyopia by adding optical properties of cylinder and axis, which correct for irregularities in the shape of the cornea.
CooperVision Net Sales by Category
coo-20210731_g2.jpgcoo-20210731_g3.jpg
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)20212020
Toric$181.0 $147.6 23 %
Multifocal61.6 46.9 31 %
Single-use spheres159.3 126.5 26 %
Non single-use sphere, other155.6 128.3 21 %
$557.5 $449.3 24 %
coo-20210731_g4.jpgcoo-20210731_g5.jpg
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




CooperVision Net Sales by Category
chart-05ad8493c1905973a94.jpgchart-6f51135b2fa65c93bea.jpg
Three Months Ended July 31,
($ in millions)
2020 2019 2020 vs 2019
% Change
Toric$147.6
 $163.1
 (9)%
Multifocal46.9
 52.4
 (10)%
Single-use spheres126.5
 146.3
 (14)%
Non single-use sphere, other128.3
 147.3
 (13)%
 $449.3
 $509.1
 (12)%

chart-e677edd208265d2a984.jpgchart-f129312687db586c961.jpg

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




Nine Months Ended July 31,     Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions) 2020 2019 2020 vs 2019
% Change
($ in millions)20212020
Toric $436.3
 $464.4
 (6)%Toric$516.1 $436.3 18 %
Multifocal 143.8
 151.1
 (5)%Multifocal177.3 143.8 23 %
Single-use spheres 380.7
 413.6
 (8)%Single-use spheres449.8 380.7 18 %
Non single-use sphere, other 375.9
 434.2
 (13)%Non single-use sphere, other443.9 375.9 18 %
 $1336.7
 $1463.3
 (9)%$1,587.1 $1,336.7 19 %
In the three and nine months ended July 31, 2020:2021:
The COVID-19 pandemic has negatively impacted our business. Net sales inToric and multifocal lenses grew primarily through the threesuccess of Biofinity toric and nine month periods declined by 12%multifocal and 9%, respectively, compared to the corresponding periods in the prior year. Customers have either slowed down purchases or delayed orders due to a desire to reduce inventories, reduced contact lens wear driven by limited social interaction and lack of patient access on account of certain office closures and reduced access as offices reopen. We started experiencing downward pressure on net sales when markets started closing during our second quarter of fiscal 2020 as social restrictions were put in place and the offices of health care providers were closedMyDay toric.
CooperVision’s Toric, Multifocal, Single-use sphere and Non-single-use sphere lenses net sales declined in three and nine months ended July 31, 2020, compared to prior year periods, primarily due to reduced economic activity across all our markets due to the COVID-19 pandemic. However, Toric lenses and Single-use sphere lenses net sales declinegrowth was partially offsetprimarily driven by higher sales of MyDay and MiSight, respectivelyclariti lenses.
Non single-use sphere lenses growth was primarily driven by Biofinity.
"Other" products primarily include lens care which represented approximately 2% of net sales in both the three and nine months ended July 31, 2020,2021 and in prior year comparative periods2020.
Total silicone hydrogel products decreasedincreased by 10%28% and 6% in three and nine months ended, respectively, representing 73% of net sales24% in the three and nine months ended July 31 20202021, representing 76% of net sales, compared to 72% and 71%73% in the three and nine months ended July 31, 20192020.
Foreign exchange rates negativelypositively impacted sales by approximately $2.8$20.4 million and $12.4$56.7 million in the three and nine months ended respectively, compared to $11.0July 31, 2021 and had a negative impact of $2.8 million and $46.6$12.4 million in the prior year periods. In the three and nine months ended July 31, 2020,2021, net sales decreased 11%increased by 20% and 8%14% in constant currency over the prior year periodsperiods.
Sales reductiongrowth was primarily driven by a decreasean increase in the volume of lenses sold.sold across our core portfolio due to a recovery in demand from the impact of the COVID-19 pandemic. Average realized prices by product did not materially influence sales growth.
We expect to continue seeing downward pressure onand volatility in certain markets related to net sales if the COVID-19 pandemic continues, as optical retailers and healthcare centers continue to restrict access, and social distancing measures continue.
CooperVision Net Sales by Geography

CooperVision competes in the worldwide soft contact lens market and services in three primary regions: the Americas, EMEA (Europe, Middle East and Africa) and Asia Pacific.
Periods Ended July 31,Three MonthsNine Months
($ in millions)202120202021 vs 2020
% Change
202120202021 vs 2020
% Change
Americas$206.3 $176.5 17 %$614.2 $515.5 19 %
EMEA222.6 165.7 34 %605.6 506.8 20 %
Asia Pacific128.6 107.1 20 %367.3 314.4 17 %
$557.5 $449.3 24 %$1,587.1 $1,336.7 19 %
Periods Ended July 31, Three Months Nine Months
($ in millions)
2020
2019
2020 vs 2019
% Change

2020 2019
2020 vs 2019
% Change
Americas
$176.5
 $195.0
 (10)%
$515.5
 $564.4
 (9)%
EMEA
165.7
 196.0
 (15)%
506.8
 561.4
 (10)%
Asia Pacific
107.1
 118.1
 (9)%
314.4
 337.5
 (7)%


$449.3
 $509.1
 (12)%
$1,336.7
 $1,463.3
 (9)%

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




CooperVision's regional reductiongrowth in net sales across all regions was primarily attributable to disruption from the COVID-19 pandemic. We expect to continue seeing downward pressure on net sales if the COVID-19 pandemic continues, optical retailersmarket gains of silicone hydrogel contact lenses and healthcare centers continue to restrict access, and social distancing measures continue.
favorable foreign currency impacts. Refer to CooperVision Net Sales by Category above for further discussion.
CooperSurgical Net Sales by Category
CooperSurgical supplies the women'sfamily health care market with a diversified portfolio of products and services. Our office and surgical offerings include products that facilitate surgical and non-surgical procedures that are commonly performed
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
primarily by obstetricians and gynecologists in hospitals, surgical centers, fertility clinics and medical offices. Fertility offerings include highly specialized products and services that target the IVF process, including diagnostics testing with a goal to make fertility treatment safer, more efficient and convenient.
The chart below shows the percentage of net sales of office and surgical products and fertility.
chart-d7a0c73ef055578da2f.jpgchart-ab964317e68a5c6680c.jpgcoo-20210731_g6.jpgcoo-20210731_g7.jpg
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)20212020
Office and surgical products$122.5 $81.7 50 %
Fertility83.4 47.2 77 %
$205.9 $128.9 60 %
coo-20210731_g8.jpgcoo-20210731_g9.jpg
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)20212020
Office and surgical products$338.6 $249.7 36 %
Fertility237.7 162.9 46 %
$576.3 $412.6 40 %

31
Three Months Ended July 31,
($ in millions)
 2020 2019 2020 vs 2019
% Change
Office and surgical products $81.7
 $106.3
 (23)%
Fertility 47.2
 64.0
 (26)%
  $128.9
 $170.3
 (24)%



THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




chart-35502ad78a875edfba6.jpgchart-e3c5a91b13805115af0.jpg
Nine Months Ended July 31,   
($ in millions) 2020 2019 2020 vs 2019
% Change
Office and surgical products $249.7
 $307.7
 (19)%
Fertility 162.9
 190.8
 (15)%
  $412.6
 $498.5
 (17)%

In the three and nine months ended July 31, 2020:2021:
We have experienced COVID-19 pandemic-related economic disruptions and decline in net sales during the three and nine months ended July 31, 2020. We experienced downward pressure on revenue when major markets started closing as social restrictions were put in place and the offices of certain health care providers were closed. In response to the COVID-19 pandemic, as a precautionary measure, certain health care facilities and medical offices were closed or restricted access and surgeries and elective medical procedures and exams have been deferred or canceled. Further, there has been a significant reduction in physician office visits, and healthcare centers have postponed or canceled capital purchases
Office and surgical products decreasedincreased compared to the prior year periods due to an increase in PARAGARD® sales compared to the prior year periods. Further, there was an increase from other office and surgical products such as Uterine Manipulators, Retractors, Closure products, Incontinence products, Point-of-Care products and sales from our recent acquisitions, Illuminate and Fetal Pillow®.
Fertility net sales increased compared to the prior year periods mainly due to reduction in Paragard sales compared to prior year periods. Further, there has been a reduction in revenue from other surgical products such as Uterine Manipulators, Surgical Retractors, Closure products, Point-of-Care products and Filshie Clip system, partially offset by an increase in revenue from acquired products of Incisive Surgicalfertility consumables, equipment sales, preimplantation genetic testing and Endosee productssales from our recent acquisition, Embryo Options.
Fertility net sales declined compared to the prior year periods mainly due to reduction in revenue from PGT testing, IVF consumables and IVF equipment
Foreign exchange rates negativelypositively impacted sales by approximately $0.5$2.5 million and $2.6$6.5 million in the three and nine months ended respectively, compared to $1.6July 31, 2021 and had a negative impact of $0.5 million and $7.7$2.6 million in the prior year periods. In the three and nine months of 2020,ended July 31, 2021, net sales decreased 24%increased by 58% and 17%38% in constant currency over the prior year periodsperiods.
Sales growth was primarily driven by stronger demand for our products and services as a result of our customers continuing to reopen their health care facilities and medical offices.
We expect to continue seeing downward pressure onand volatility in certain markets related to net sales if the COVID-19 pandemic continues, as hospitals and healthcare centers continue to restrict access, and social distancing measures continue.

Gross Margin

Consolidated gross margins were 68% and 67% in the three and nine months ended July 31, 2021, up from 62% and 63% in the prior year periods, primarily driven by favorable product mix.

Selling, General and Administrative Expense (SGA)
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$258.2 46 %$160.7 36 %61 %
CooperSurgical80.7 39 %59.7 46 %35 %
Corporate13.6 — 12.4 — %
$352.5 46 %$232.8 40 %51 %
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$631.8 40 %$493.8 37 %28 %
CooperSurgical231.0 40 %195.1 47 %18 %
Corporate36.8 — 39.4 — (7)%
$899.6 42 %$728.3 42 %24 %

CooperVision's SGA increased in the three and nine months ended July 31, 2021 compared to fiscal 2020 primarily due to increases in distribution costs, general and administrative costs and advertising and marketing activities primarily related to myopia management. CooperVision's SGA in the three and nine months ended July 31, 2021 included $57.9 million and $62.3 million of costs primarily related to the increase in fair value of the contingent consideration of $56.8 million as described in Note 2. Acquisitions and Assets Held for Sale. CooperVision's SGA in the three and nine months ended July 31, 2020 included $1.1 million and $2.6 million of costs primarily related to integration activities.
CooperSurgical's SGA increased in the three and nine months ended July 31, 2021 compared to fiscal 2020 primarily due to increases in selling expenses and distribution costs. CooperSurgical's SGA in the three and nine months ended July 31, 2021 included $1.2 million and $7.9 million of acquisition and integration expenses and legal settlement. CooperSurgical's SGA
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Item 2. Management’s Discussion and Analysis of Financial Condition
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Gross Margin
Gross Profit Percentage of Net Sales Three Months Nine Months
Periods Ended July 31, 2020 2019 2020 2019
CooperVision 61% 65% 63% 65%
CooperSurgical 66% 71% 65% 69%
Consolidated 62% 66% 63% 66%

Our consolidated gross margins have declined across our businesses mainly due to higher manufacturing costs including unabsorbed capacity costs as a result of the economic impact of the COVID-19 pandemic.
CooperVision's gross margin decreased in the three and nine months ended July 31, 2020 compared to fiscal 2019 due to:
$15.6 million and $37.6 million of costs respectively, primarily related to incremental costs associated with the impact of the COVID-19 pandemic including capacity reduction costs and other manufacturing related costs
integration and manufacturing related costs of $3.6 million and $6.5 million included in three and nine months ended July 31, 2019, respectively.
CooperSurgical's decrease in gross margin in the three and nine months ended July 31, 2020 compared to fiscal 2019 due to:

$6.8 million and $15.4 million of costs respectively, primarily incremental costs associated with the impact of the COVID-19, integration costs and other manufacturing related costs
the unfavorable impact to margin from changes in product mix for nine months ended July 31, 2020
integration and manufacturing related costs of $2.9 million and $11.2 million included in the three and nine months ended July 31, 2019.

Selling, General and Administrative Expense (SGA)
Three Months Ended July 31,
($ in millions)
 2020 
% Net
Sales
 2019 
% Net
Sales
 2020 vs 2019 % Change
CooperVision $160.7
 36% $171.9
 34% (7)%
CooperSurgical 59.7
 46% 65.3
 38% (9)%
Corporate 12.4
 
 12.6
 
 (1)%
  $232.8
 40% $249.8
 37% (7)%
           
Nine Months Ended July 31,
($ in millions)
 2020 
% Net
Sales
 2019 
% Net
Sales
 2020 vs 2019 % Change
CooperVision $493.8
 37% $509.7
 35% (3)%
CooperSurgical 195.1
 47% 202.1
 41% (4)%
Corporate 39.4
 
 34.8
 
 13 %
  $728.3
 42% $746.6
 38% (2)%

SGA expense decreased in the three and nine months ended July 31, 2020, respectively, mainly due to reductions in advertising & marketing initiatives, lower distribution costs and lower travel expenses as a result of the COVID-19 pandemic. As a percentage of sales, SGA increased in the three and nine months ended July 31, 2020 compared to fiscal 2019, due to our committed advertising & marketing activities and fixed G&A costs.
CooperVision's SGA decreased in the three and nine months ended July 31, 2020 compared to fiscal 2019 due to lower advertising & marketing activities, lower distribution and selling expenses. CooperVision's SGA in the three and nine months ended July 31, 2020 included $1.1 million and $2.6 million costs respectively, primarily related to integration activities. CooperVision's SGA included $1.2 million and $3.8 million of integration and third-party consulting costs, in the three and nine months ended July 31, 2019, respectively.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




The decrease in CooperSurgical's SGA in the three and nine months ended July 31, 2020 compared to fiscal 2019 was primarily due to lower selling and distribution expenses and savings from reduced headcount and lower travel expenses, partially offset by an increase in advertising expenses during the three months ended July 31, 2020. CooperSurgical's SGA in the three and nine months ended July 31, 2020 included $3.5 million and $14.0 million costs respectively, primarily related toof integration expenses and MDREuropean Medical Devices Regulation costs. CooperSurgical's
Corporate SGA included $3.5 millionincreased in the three months ended July 31, 2021 compared to fiscal 2020 primarily due to higher share-based compensation expense. Corporate SGA decreased in the nine months ended July 31, 2021 compared to fiscal 2020 primarily due to savings from lower travel expenses due to the COVID-19 pandemic and $15.9 milliontiming of primarily acquisitioncorporate projects.
Research and integration expenses of acquired companies, as well as third-party consulting costs,Development Expense (R&D)
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$17.0 %$13.2 %29 %
CooperSurgical7.8 %8.6 %(10)%
$24.8 %$21.8 %14 %
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$44.9 %$39.1 %15 %
CooperSurgical22.1 %28.7 %(23)%
$67.0 %$67.8 %(1)%
In the three and nine months ended July 31, 2021:
CooperVision's R&D expense increased in the three and nine months ended July 31, 2019 respectively.
Corporate SGA remained relatively flat in three months and increased in the nine months ended July 31, 20202021 compared to fiscal 2019, primarily due to higher share-based compensation expense.
Research and Development Expense (R&D)
Three Months Ended July 31,
($ in millions)

 2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision $13.2
 3% $13.6
 3% (3)%
CooperSurgical 8.6
 7% 7.9
 5% 9 %
  $21.8
 4% $21.5
 3% 1 %
           
Nine Months Ended July 31,
($ in millions)
 2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision $39.1
 3% $40.1
 3% (2)%
CooperSurgical 28.7
 7% 23.3
 5% 23 %
  $67.8
 4% $63.4
 3% 7 %
In the three months and nine months ended July 31, 2020:
CooperVision's R&D decreased in the three and nine months ended July 31, 2020, compared to fiscal 2019, mainly due to myopia management programs and timing of clinical studies.R&D projects. As a percentage of sales, CooperVision's R&D expense remained relatively flat. CooperVision's R&D activities are primarily focused on the development of contact lenses, manufacturing technology and process enhancementsenhancements.
The increase in CooperSurgical's R&D expense decreased in the three and nine months ended July 31, 20202021 compared to fiscal 2019 was primarily2020, mainly due to increased investment activitiestiming of R&D projects and changes in developing new products and services and upgrades of existing products.headcount. CooperSurgical has not paused research programs during the COVID-19 pandemic and has maintained its spend on innovations and increased its spend on key regulatory investment areas to support our long-term objectives. As a percentage of sales, CooperSurgical's R&D expense increased.decreased, primarily due to an increase in net sales. CooperSurgical's R&D activities includeare focused on upgrading existing and developing new products ranging from diagnostics, IVF product developmentsurgical devices to fertility instruments and the designsolutions.
Amortization Expense
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$9.4 %$7.8 %21 %
CooperSurgical28.8 14 %26.4 20 %%
$38.2 %$34.2 %12 %
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$27.3 %$24.3 %13 %
CooperSurgical82.7 14 %78.7 19 %%
$110.0 %$103.0 %%
CooperVision's and upgrade of surgical procedure devices.
Amortization Expense
Three Months Ended July 31,
($ in millions)
2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision$7.8
 2% $10.7
 2% (27)%
CooperSurgical26.4
 20% 26.5
 16%  %
 $34.2
 6% $37.2
 5% (8)%
          
Nine Months Ended July 31,
($ in millions)
2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision$24.3
 2% $31.9
 2% (24)%
CooperSurgical78.7
 19% 78.8
 16%  %
 $103.0
 6% $110.7
 6% (7)%
CooperVisionCooperSurgical's amortization expense decreasedincreased in absolute dollars in the three and nine months ended July 31, 20202021 compared to fiscal 20192020, primarily due to certainthe amortization of intangible assets becoming fully amortized.newly acquired through acquisitions. As a percentage of sales, CooperSurgical's amortization expense decreased, primarily due to an increase in net sales.
33


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




CooperSurgical's amortization expense remained relatively flat.
Gain on sale of an Intangible Asset
In the second quarter of fiscal 2019, CooperSurgical sold an exclusive distribution right for $21.0 million and recognized a gain of $19.0 million.
Operating Income
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$88.0 16 %$93.7 21 %(6)%
CooperSurgical26.2 13 %(9.3)(7)%381 %
Corporate(13.6)— (12.4)— (9)%
$100.6 13 %$72.0 12 %40 %
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
CooperVision$347.2 22 %$284.4 21 %22 %
CooperSurgical66.9 12 %(33.3)(8)%301 %
Corporate(36.8)— (39.4)— %
$377.3 17 %$211.7 12 %78 %
Three Months Ended July 31,
($ in millions)
 2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision $93.7
 21 % $134.2
 26% (30)%
CooperSurgical (9.3) (7)% 20.6
 12% (145)%
Corporate (12.4) 
 (12.6) 
 (1)%
  $72.0
 12 % $142.2
 21% (49)%
           
Nine Months Ended July 31,
($ in millions)
 2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
CooperVision $284.4
 21 % $375.9
 26% (24)%
CooperSurgical (33.3) (8)% 59.0
 12% (156)%
Corporate (39.4) 
 (34.8) 
 13 %
  $211.7
 12 % $400.1
 20% (47)%


TheCooperVision's operating income fordecreased as a percentage of net sales and in absolute dollars in the three months ended July 31, 2021 compared to the prior year periods, primarily due to a $56.8 million expense related to the increase in fair value of the contingent consideration as described in Note 2. Acquisitions and Assets Held for Sale. CooperVision's operating income increased as a percentage of net sales and in absolute dollars in the nine months ended July 31, 2020 was2021 compared to the prior year periods, primarily impacted by the COVID-19 pandemic which resulted in a decrease to our net sales and additional expenses due to COVID-19 related costs as discussed above.an increase in net sales.

CooperVisionCooperSurgical's operating income decreasedincreased as a percentage of net sales and in absolute dollars in the three and nine months ended July 31, 20202021 compared to fiscal 2019the prior year periods, primarily due to a decreasean increase in net sales partially offset by a decrease in operating expenses and a decrease in amortizationR&D expenses.

CooperSurgicalCorporate operating loss increased in the three months ended July 31, 2021 compared to the prior year periods primarily due to higher share-based compensation expense. Corporate operating loss decreased in the nine months ended July 31, 2021 compared to the prior year periods, primarily due to lower professional fees and travel expenses as a result of the COVID-19 pandemic.

On a consolidated basis, operating income decreasedincreased as a percentage of net sales and in absolute dollars compared to the prior year periods, primarily due to the increase in consolidated net sales.
Interest Expense
Three Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
Interest expense$5.6 %$5.7 %(1)%
Nine Months Ended July 31,2021 vs 2020
% Change
($ in millions)2021% Net Sales2020% Net Sales
Interest expense$18.1 %$30.1 %(40)%
Interest expense decreased in absolute dollars during the three and nine months ended July 31, 2020 compared to fiscal 2019 primarily due to a decrease in net sales and higher R&D expenses to support growth partially offset by a decrease in SGA. In the second quarter of fiscal 2019, CooperSurgical sold an exclusive distribution right to distribute Filshie Clip System in the U.S. for $21.0 million and recognized a gain of $19.0 million.

Corporate operating loss remained relatively flat in the three months and increased in nine months ended July 31, 2020 compared to fiscal 2019, primarily due to higher stock-based compensation expense.

On a consolidated basis, operating income decreased in absolute dollars and as a percentage of net sales primarily due to the negative impact of COVID-19, as discussed above.
Interest Expense
Three Months Ended July 31,
($ in millions)
2020 % Net
Sales
 2019 % Net
Sales
 2020 vs 2019
% Change
Interest expense$5.7
 1% $16.7
 2% (66)%
          
Nine Months Ended July 31,
($ in millions)
2020 % Net Sales 2019 % Net Sales 2020 vs 2019
% Change
Interest expense$30.1
 2% $53.3
 3% (44)%
Interest expense decreased as a percentage of net sales and in absolute dollars during the three months ended July 31, 2020 primarily due to lower interest rates2021 compared to the prior year periodperiods, primarily due to lower average debt balances compared to the prior year periods.
34


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




Interest expense decreased as a percentage of net sales and in absolute dollars during the nine months ended July 31, 2020 primarily due to lower interest rates and lower average debt balances compared to the prior year period, partially offset by the write-off of debt issuance costs.

Other (Income) Expense, Net
Periods Ended July 31,Three MonthsNine Months
($ in millions)2021202020212020
Investment gain$(0.1)$— $(11.6)$— 
Foreign exchange loss (gain)2.1 (2.5)3.3 1.4 
Other (income) expense, net(1.0)2.4 (2.4)7.4 
$1.0 $(0.1)$(10.7)$8.8 
Periods Ended July 31, Three Months Nine Months
($ in millions) 2020 2019 2020 2019
Foreign exchange loss (gain) $(2.5) $(1.1) $1.4
 $(1.1)
Other Expense (Income), net 2.4
 (0.4) 7.4
 (1.0)
  $(0.1) $(1.5) $8.8
 $(2.1)
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 recognized in the first quarter of fiscal 2021.
Foreign exchange loss (gain) primarily resulted from the revaluation and settlement of foreign currency-denominated balances.
Other expense (income)income increased in the three and nine months ended July 31, 2020,2021, primarily due to non-consolidated subsidiaryan increase in defined benefit plan related income and gains on minority investments losses and advances during the period.periods.
Provision for Income Taxes
The Company's
Our effective tax rates were 16.9% and 5.4% for the third quarter of fiscal 2020 and 2019, respectively, and 9.0% and 0.9% for the ninethree months ended July 31, 2021 and July 31, 2020 were (554.9)% and 2019,16.9%, respectively. The increasedecrease was primarily due to a $534.9 million tax benefit related to the remeasurement of deferred tax assets caused by the UK enactment of a 25% corporate tax rate to be effective in fiscal 2023 and is primarily related to deferred tax assets recognized from intra-group intangible asset transfers. Our effective tax rate also decreased due to changes in unrecognized tax benefits, excess tax benefits from share-based compensation, and changes in the geographical composition of pre-tax earnings. Our effective tax rate for the third quarter of fiscal 2020 compared to fiscal 20192021 was lower than the U.S. federal statutory tax rate primarily due to the significant dropremeasurement of profit beforedeferred tax due to market volatility as a result of the COVID-19 pandemic,assets, pre-tax earnings in foreign jurisdictions with lower tax expense from prior periodrates, changes in unrecognized tax return filingsbenefits, and a decrease of excess tax benefits from share-based compensation.

Our effective tax rates for the nine months ended July 31, 2021 and July 31, 2020 were (666.3)% and 9.0%, respectively. The Company’sdecrease was primarily due to an intra-group transfer of intellectual property, as discussed below, and remeasurement of the related deferred tax assets caused by the UK enactment of a 25% corporate tax rate. Our effective tax rate otherwise increased due to changes in the geographical composition of pre-tax earnings, partially offset by changes in unrecognized tax benefits and excess tax benefits from share-based compensation. Our effective tax rate for the nine months ended July 31, 2020 was higher compared to the prior year period, primarily due to settlement of tax audits in fiscal 2019, revisions to the provisional tax charges relating to the 2017 Act in fiscal 2019, a decrease of excess tax benefits from share-based compensation, the significant drop of profit before tax due to market volatility as a result of the COVID-19 pandemic and tax expense from prior period tax return filings. The Company’s effective tax rate for the third quarter of fiscal 20202021 was lower than the U.SU.S. federal statutory tax rate primarily due to the intra-group transfer, the remeasurement of deferred tax assets, earnings in foreign jurisdictions with lower tax rates, changes in unrecognized tax benefits, and excess tax benefits from share-based compensationcompensation.

In November 2020, we completed an intra-group transfer of certain intellectual property and related assets to a favorable mixUK subsidiary as part of a group restructuring to establish headquarters operations in the UK. Income before income taxes resulting from foreign jurisdictionsthis 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, we recognized a deferred tax asset of $1,987.9 million, with preferentiala corresponding income tax rates.benefit, during the three months ended January 31, 2021.
Share-Based Compensation Plans
The Company hasWe have several share-based compensation plans that are described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.2020. The compensation expense and related income tax benefit recognized in our Consolidated Statements of Income and Comprehensive Income for share-based awards were as follows:
35
Periods Ended July 31, Three Months Nine Months
($ in millions) 2020 2019 2020 2019
Selling, general and administrative expense $8.1
 $6.8
 $25.0
 $22.1
Cost of sales 0.9
 1.0
 3.1
 3.9
Research and development expense 0.6
 0.5
 1.8
 2.4
Total share-based compensation expense $9.6
 $8.3
 $29.9
 $28.4
Related income tax benefit $1.2
 $1.1
 $3.8
 $4.0



THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations


Periods Ended July 31,Three MonthsNine Months
($ in millions)2021202020212020
Selling, general and administrative expense$10.6 $8.1 $28.4 $25.0 
Cost of sales0.9 0.9 2.9 3.1 
Research and development expense0.6 0.6 1.8 1.8 
Total share-based compensation expense$12.1 $9.6 $33.1 $29.9 
Related income tax benefit$1.2 $1.2 $3.6 $3.8 


Capital Resources and Liquidity
Third Quarter Highlights
Operating cash flow wasof $223.8 million compared to $112.8 million compared to $196.7 million in the prior year period
Expenditures for purchases of property, plant and equipment wereequipment of $43.6 million compared to $45.1 million compared to $75.4 million in the prior year period
Cash providedpayments for acquisitions and other of $64.0 million compared to $6.7 million in the prior year period
Cash provided by operations $112.8of $223.8 million offset by capital expenditures $45.1of $43.6 million resulted in positive free cash flow of $67.7$180.2 million, down 44% comparedup $112.5 million compared to the prior year period
Nine-Month Highlights
Operating cash flow was of $564.1 million compared to $268.3 million compared to $513.3 million in the prior year period
Expenditures for purchases of property, plant and equipment wereequipment of $149.4 million compared to $203.4 million compared to $207.3 million in the prior year period
Cash payments for acquisitions and others,other of $17.9$234.9 million compared to $59.1$17.9 million in the prior year period
Cash provided by operations $268.3operations of $564.1 million offset by capital expenditures $203.4of $149.4 million resulted in positive free cash flow of $64.9$414.7 million, down 79%up $349.8 million compared to the prior year period
Comparative Statistics
($ in millions) July 31, 2020 October 31, 2019($ in millions)July 31, 2021October 31, 2020
Cash and cash equivalents $127.4
 $89.0
Cash and cash equivalents$112.2 $115.9 
Total assets $6,748.4
 $6,274.5
Total assets$9,610.6 $6,737.5 
Working capital $192.6
 $52.8
Working capital$411.4 $269.8 
Total debt $1,880.4
 $1,826.3
Total debt$1,620.0 $1,793.2 
Stockholders' equity $3,760.4
 $3,628.6
Stockholders' equity$6,785.4 $3,824.8 
Ratio of debt to equity 0.50:1
 0.50:1
Ratio of debt to equity0.24:10.47:1
Debt as a percentage of total capitalization 33% 33%Debt as a percentage of total capitalization19 %32 %
Working Capital
The increase in workingworking capital at July 31, 20202021 from the end of fiscal 20192020 was primarily due to:
increase in inventories $88.0 million due to lower sales from the COVID-19 impact and higher manufacturing costs
increase in cash and cash equivalents $38.4 million
decrease in other current liabilities $36.9 million primarily due to timing of payments and a reduction in fiscal 2020 customer rebate accruals due to the decrease in sales resulting from the COVID-19 pandemic
increase in prepaid expense and other current assets $16.3 million
increase in trade accounts receivable $15.2of $99.7 million primarily due to higher sales and timing of collections;
increase in assets held-for-sale of $88.1 million. Refer to Note 2. Acquisitions and Assets Held for Sale for further information;
decrease in short-term debt $11.1 million, partially offset by;
increase in accounts payable $30.1of $23.0 million due to timing of payments,
increase in employee compensation and benefits $3.7 million
recognition of current operating lease liabilities $32.3 million on adoption of ASC 842, Leases
At July 31, 2020, our inventory months on hand was 8.2 compared to 6.4 at October 31, 2019. The $88.0 million increase in inventories was primarily due to lower sales from COVID-19 impact and higher manufacturing costs.
36


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations


increase in inventories of $17.5 million primarily due to higher sales and the buildup of inventory for future product launches;

decrease in operating lease liabilities of $3.6 million, partially offset by:

increase in employee compensation and benefits of $36.6 million;
increase in short-term debt of $30.8 million;
increase in other current liabilities of $16.4 million; and
decrease in cash and cash equivalents of $3.7 million.

At July 31, 2021, our inventory months on hand was 7.1 compared to 6.6 at October 31, 2020. The $17.5 million increase in inventories was primarily due to higher sales and the buildup of inventory for future product launches.
Our days salessales outstanding (DSO) increased to 65were relatively consistent at 62 days at July 31, 2020,2021, compared to 5660 days at October 31, 2019, primarily due to lower sales and timing of collections.

2020.
Operating Cash Flow

Cash provided by operating activities decreasedincreased by $245.0$295.8 million from $513.3 million during the first nine months of fiscal 2019 to $268.3 million in the first nine months of fiscal 2020.2020 to $564.1 million in the first nine months of fiscal 2021. This decreaseincrease in cash flow provided by operating activities primarily consists of:
decreaseincrease in net income of $188.5$2,677.2 million from a net income of $345.7 million in the first nine months of fiscal 2019 to $157.2 million in the first nine months of fiscal 2020;2020 to $2,834.4 million in the first nine months 2021;
decreaseincrease of $133.8$21.9 million in net changes in depreciation and amortization, from $210.0 million during the first nine months fiscal 2020 to $231.9 million during the first nine months of fiscal 2021;
increase of $56.8 million in the net changes in the fair value of contingent consideration. Refer to Note 2. Acquisition and Assets Held for Sale for further information;
increase of $74.3 million in net cash outflowflow from changes in operating capital, from $22.1 million outflow in the first nine months of fiscal 2019 to $155.9 million outflow in the first nine months of fiscal 2020 to $81.6 million outflow in the first nine months of fiscal 2021, partially offset by; andby:

increasedecrease of $58.5$2,485.8 million in the net changes in deferred income taxes. Refer to Note 6. Income Taxes for further information; and

decrease of $48.6 million in other non-cash items, from $(1.5)$60.7 million during the first nine months of fiscal 20192020 to $57.0$12.1 million during the first nine months of fiscal 2020.2021.

The decreaseincrease in net income of $188.5$2,677.2 million was caused primarily by the negative impactdue to:
recognized income tax benefit of COVID-19 on sales, higher manufacturing costs including unabsorbed capacity costs, partially offset by a decrease$1,987.9 million. Refer to Note 6. Income Taxes for further information;
increase of $165.6 million in operating expenses.income from $211.7 in the first nine months of fiscal 2020 to $377.3 million in the first nine months of fiscal 2021 primarily due to the increase in consolidated net sales;
an investment gain of $11.5 million. Refer to Note 2. Acquisitions and Assets Held for Sale for further information; and
interest expense decrease of $12.0 million primarily due to lower average debt balances compared to the prior year period.

37


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The $133.8$74.3 million decreaseincrease in the net cash flow from changes in operating capital compared to the prior year period is primarily due to:
$54.588.5 million decrease in the net changes in inventories primarily due to lower sales;
$44.7 million decrease in the net changes in prepayments and other assets primarily due to the refund of the prepayment made to the U.K. Tax Authorities in the prior year period;
$37.6 million decreaseincrease in the net changes in accrued liabilities and other primarily due to impact from adoption of ASC 842, Leases in prior year period and a reduction inhigher customer rebate accruals in current period as a result of higher sales;
$75.8 million increase in the decreasenet changes in sales;inventories due to lower sales in prior year period;
$22.712.2 million decreaseincrease in the net changes in income tax payable,payable, partially offset by;by:
$16.958.4 million increase in the net changes in accounts payable primarily due to timing of payments; and
$5.4 million increasedecrease in the net changes in trade and other receivables primarily due to timing of collections.collections and higher sales;

$27.2 million decrease in the net changes in accounts payable primarily due to timing of payments; and
$11.7 million decrease in the net changes in prepaid and other assets.

The $58.5$48.6 million increasedecrease in non-cash items compared to the prior year period wasis primarily due to:
increase of $39.2$15.7 million driven bydecrease in the net changes in long term taxlong-term liabilities deferred taxes and defined benefit plan;primarily due to the impact from adoption of ASC 842, Leases, in prior year period;
increase of $24.6$12.0 million decrease in non-cash lease expense, partially offset by; and
decrease of $14.3 million driven bythe net changes in other long-term assets primarily dueassets;
an investment gain of $11.5 million. Refer to capitalized cloud computing costs.Note 2. Acquisitions and Assets Held for Sale for further information; and
$2.0 million decrease from effect of exchange rate change on cash.
Investing Cash Flow

Cash used in investing activities decreasedincreased by $45.1$163.0 million to $384.3 million in the first nine months of fiscal 2021 from $221.3 million in the first nine months of fiscal 2020 from $266.4due to:

$218.3 million increase in payments made for acquisitions in the first nine months of fiscal 2021 compared to the prior year period, partially offset by;

$54.0 million decrease in capital expenditures.
Financing Cash Flow
Cash used in financing activities increased by $177.4 million to $187.6 million in the first nine months of fiscal 20192021 compared to $10.2 million in the first nine months of fiscal 2020, primarily due to:

$1,271.4 million decrease in proceeds from long-term debt, primarily due to funds received from the 2020 Credit Agreement, partially offset by;
decrease of $41.2 million in payments made for acquisitions in the first nine months of fiscal 2020 compared to the prior year period, largely due to the acquisition of Incisive Surgical Inc. and Blanchard Contact Lensesin the first nine months of fiscal 2019, partially offset by;
$1,003.4 million decrease in repayments of long-term debt, primarily due to repayments of funds from the 2020 Credit Agreement in first nine months of fiscal 2021 compared to repayment of funds from the 2016 Credit Agreement in the prior year period;
$46.0 million increase in net proceeds from short-term debt, primarily due to movements in short term loans;
$23.0 million decrease in repurchase of common stock compared to prior year period; and
$13.8 million increase in net proceeds related to share-based compensation awards.
38


THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




decrease of $3.9 million in capital expenditures.

Financing Cash Flow

Cash flows from financing activities increased by $202.1 million to $10.2 million cash outflow in the first nine months of fiscal 2020 compared to $212.3 million outflow in the first nine months of fiscal 2019, primarily due to:

$1,509.6 million increase in proceeds from long-term debt, primarily due to funds received from the Revolving Credit and Term Loan Agreement entered into on April 1, 2020, partially offset by;
$882.0 million increase in repayments of long-term debt, primarily related to termination of 2017 Term Loan Agreement and the 2016 Credit Agreement; and

$364.8 million decrease in net proceeds from short-term debt, primarily due to $400 million short term loan taken on November 1, 2018.
On April 1, 2020, the Company entered into a Revolving Credit and Term Loan Agreement (the 2020 Credit Agreement), among the Company 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.

On April 1,October 16, 2020, in connection with the Company’s entry into the 2020 Credit Agreement, the Company terminated the 2017entered into a 364-day, $350.0 million, term loan agreement (the 2020 Term Loan AgreementAgreement) by and among the 2016 Credit Agreement. In connection withCompany, the termination, all borrowings outstanding under the 2017 Term Loan Agreementlenders party thereto and the 2016 Credit Agreement were repaid.The Bank of Nova Scotia, as administrative agent which matures on October 15, 2021.

The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of July 31, 2020:2021:
(In millions)Facility LimitOutstanding BorrowingsOutstanding Letters of CreditTotal Amount AvailableMaturity Date
2020 Revolving Credit Facility$1,290.0 $330.0 $1.4 $958.6 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 $1,530.0 $1.4 $958.6 
(In millions) Facility Limit Outstanding Borrowings Outstanding Letters of Credit Total Amount Available Maturity Date
2020 Revolving Credit Facility $1,290.0
 $478.0
 $1.4
 $810.6
 April 1, 2025
2020 Term Loan Facility 850.0
 850.0
 n/a
 
 April 1, 2025
2019 Term Loan 500.0
 500.0
 n/a
 
 September 25, 2020
Total $2,640
 $1,828
 $1.4
 $810.6
  


The 2020 Credit Agreement and the 2019 Term Loan Agreement containcontains customary restrictive covenants, as well as financial covenants that require the Companyus to maintain a certain Total Leverage Ratio and Interest Coverage Ratio. As defined, in the 2020 Credit Agreement and the 2019 Term Loan Agreement, we are required to maintain an Interest Coverage Ratio of at least 3.00 to 1.00, and a Total Leverage Ratio of no higher than 3.75 to 1.00. At July 31, 2020,2021, we were in compliance compliance with the Interest Coverage Ratio at 17.6039.88 to 1.00 and the Total Leverage Ratio at 2.231.52 to 1.00. The Company, after considering the potential impacts of the COVID-19 pandemic,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.
See Note 6.5. Debt of the Consolidated Condensed Financial Statements for additional information.
Considering recent market conditions and the ongoing COVID-19 pandemic crisis, we have re-evaluated our operating cash flows and cash requirements and continue to believe that current cash, cash equivalents, future cash flow from operating activities and cash available under our 2020 Credit Agreement will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the Consolidated Condensed Financial Statements included in this quarterly report. To the extent additional funds are necessary to meet our liquidity needs such as that for acquisitions, share repurchases, cash dividends or other activities as we execute our business strategy, we anticipate that additional funds will be obtained through the incurrence of additional

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Share Repurchase
In December 2011, our Board of Directors authorized the 2012 Share Repurchase Program and through subsequent amendments, the most recent in March 2017, the total repurchase authorization was increased from $500.0 million to $1.0 billion of the Company's common stock. This program has no expiration date and may be discontinued at any time. Purchases under the 2012 Share Repurchase Program are subject to a review of the circumstances in place at the time and may be made from time to time as permitted by securities laws and other legal requirements.
At July 31, 2020, $359.72021, $334.8 million remained authorized for repurchase under the program.
There were no share repurchases under the program during the three months ended July 31, 2020 and 2019. The Company's share repurchases during the nine months ended July 31, 2021 and 2020, and 2019were as follows:
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Nine Months
Periods Ended July 31,
Nine MonthsPeriods Ended July 31,20212020
2020 2019
Number of shares160,850
 24,500
Number of shares69,622 160,850 
Average repurchase price per share$296.9
 $248.7
Average repurchase price per share$356.61 $296.88 
Total costs of shares repurchased (in millions)$47.8
 $6.1
Total costs of shares repurchased (in millions)$24.8 $47.8 
Dividends
We paid a semiannual dividend of approximately $1.5 million or 3 cents per share, on February 10, 2020,9, 2021, to stockholders of record on January 23, 2020.22, 2021. We paid another semiannual dividend of approximately $1.5 million or 3 cents per share on August 7, 2020,11, 2021, to stockholders of record on July 23, 2020.27, 2021.

Summary of Non-GAAP Financial Measures

The non-GAAP financial measures that may be included in this MD&AManagement's Discussion and Analysis and the reasons management believes they are useful to investors are described below. These measures should be considered supplemental in nature and are not intended to be a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, these measures may not be the same as similarly named measures presented by other companies.

Free cash flow is defined as cash provided by operating activities less capital expenditures. Management believes 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 fund the dividend. We use 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.

Constant currency is defined as excluding the effect of foreign currency rate fluctuations. In order to assist with the assessment of how our underlying businesses performed, we compare the percentage change in net sales from one period to another, excluding the effect of foreign currency 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.
Estimates and Critical Accounting Policies

Information regarding estimates and critical accounting policies is included in Management's Discussion and Analysis on Form 10-K for the fiscal year ended October 31, 2019.2020. There have been no material changes in our policies from those previously discussed in our Form 10-K for the fiscal year October 31, 2019.2020.
Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 1. General of the Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations




Trademarks
ActivControl®,Aquaform®, Avaira Vitality®,Biofinity®, Biofinity Energys®, MyDay®, MyDay® and MiSight®, ActivControl® and Proclear® are registered trademarks of The Cooper Companies, Inc., its affiliates and/or subsidiaries. PC Technology™ and FIPS™ are trademarksis a trademark of The Cooper Companies, Inc., its affiliates and/or subsidiaries. The clariti® mark is a registered trademark of The Cooper Companies, Inc., its affiliates and/or subsidiaries worldwide except in the United States where the use of clariti® is licensed. ParagardINSORB®, PARAGARD®, Mara® and EndoseeFetal Pillow® are registered trademarks of CooperSurgical, Inc.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES


Item 3. Quantitative and Qualitative Disclosure About Market Risk
Most of our operations outside the United States have their local currency as their functional currency. We are exposed to risks caused by changes in foreign exchange rates, principally our British pound sterling, euro, Japanese yen and Danish krone denominated debt and receivables denominated in currencies other than the United States dollar, and from operations in other foreign currencies. Although we may enter into foreign exchange agreements with financial institutions to reduce our exposure to fluctuations in foreign currency values relative to our debt or receivables obligations, these hedging transactions do not eliminate that risk entirely. We are also exposed to risks associated with changes in interest rates, as the interest rates on our revolving lines of credit and term loans may vary with the federal funds rate and LIBOR. We may decrease this interest rate risk by hedging a portion of variable rate debt effectively converting it to fixed rate debt for varying periods.
On April 6, 2020, we entered into six interest rate swap contracts to hedge variableour exposure to changes in cash flows associated with LIBOR.our variable rate debt. The interest rate swap contracts became effective on April 6, 2020 and havehad maturities of seven years or less with. As of July 31, 2021, the outstanding contracts have a total notional amount of $1.5$1.1 billion. The Company
We did not have any derivative assets or liabilities that may include interest rate swaps, cross currency swaps or foreign currency forward contracts as of OctoberJuly 31, 2019.2021.
On April 1, 2020, we entered into a Revolving Credit and Term Loan Agreement (the 2020 Credit Agreement), among us, 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 2020 Credit Agreement replaced our previous credit agreement and funds from the new term loan were used to repay the outstanding amounts under the previous credit agreement, to repay an outstanding term loan, and for general corporate purposes. At July 31, 2020,2021, the Company had $810.6$958.6 million available under the 2020 Revolving Credit Facility and $850.0 million outstanding under the 2020 Term Loan Facility.
On September 27, 2019,October 16, 2020, we extendedentered into a 364-day, $350.0 million, term loan agreement by and among us, the maturitylenders party thereto and The Bank of the 2018 Term Loan Agreement to September 25, 2020 and increased the amount to $500.0 million (as so amended, the 2019 Term Loan Agreement).Nova Scotia, as administrative agent which matures on October 15, 2021. We used the additional funds to partially repay outstanding borrowings under the 2017 Term Loan Agreement.2020 Revolving Credit Facility. At July 31, 2020,2021, the Company had $500$350.0 million outstanding under the 2019 Term Loan Agreement.this agreement.
If interest rates were to increase or decrease by 1% or 100 basis points, quarterly interest expense would increase or decrease by approximately $1.0$1.5 million based on averageaverage debt outstanding, after consideration of our interest rate swap contracts, for the third quarter of fiscal 2020.

2021.
See Note 6.5. Debt of the Consolidated Condensed Financial Statements for additional information.




THE COOPER COMPANIES, INC. AND SUBSIDIARIES


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation (with the participation of our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer)), as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange Act)) are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Changes in Internal Control over Financial Reporting

There werehave been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our third quarter of fiscal 2020,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 related considerations and any impact on the design and operating effectiveness of our internal control over financial reporting.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES


PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is included in Note 13.12. Contingencies of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business faces significant risks. These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. Our business, financial condition and results of operations could be materially adversely affected by any of these risks, and the trading prices of our common stock could decline by virtue of these risks. These risks should be read in conjunction with the other information in this report.

Risk factors describing the major risks to our business can be found under Item 1A. Risk Factors in our Annual Report on Form 10-K10-K for the fiscal year ended October 31, 2019.2020. In the first nine monthsquarter of fiscal 2020,2021, we updated some of our risk factors as described below. There arehave been no other material changes in our risk factors from those previously discussed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.2020.

Our results of operations have been adversely affected, and our results of operations, cash flow and financial condition could be materially adversely affected in the future, by the global COVID-19 pandemic and related economic disruptions.

The current global pandemic caused by the spread of the novel strain of coronavirus referred to as “COVID-19" has negatively impacted business and healthcare activity globally and has created significant volatility, uncertainty and economic disruption within the markets in which we operate. The pandemic has adversely affected and is likely to further adversely affect nearly all aspects of our business and markets, including our sales, operations, cash flow and workforce and the operations of our customers, suppliers, vendors and business partners. Among other things, 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 in response to the pandemic, and many customers that have reopened are experiencing reduced patient visits, which has resulted in reduced demand for and sales of our products and services.

If the COVID-19 pandemic continues and conditions worsen, our results of operations, cash flow and financial condition could be materially adversely affected in numerous ways, including, but not limited to, decreased net sales from sales of our products and services due to customer facility closures, restricted access and reduced patient visits, exams and elective medical procedures; disruption in the manufacture and distribution of our products, including increased manufacturing and distribution costs, reduced manufacturing capacity and inadequate inventory levels; increased risk of inventory that may expire; write-offs or obsolescence of inventory, equipment or other assets; disruptions to our raw material and product suppliers and broader supply chain and distribution systems; delays in our clinical trials which could negatively impact our new product pipeline milestones and regulatory clearances and approvals; extended delays in or defaults on payments of outstanding receivables; insolvency of customers, suppliers, vendors and business partners; an inability to access lending, capital markets and other sources of liquidity when needed on reasonable terms or at all; an inability to comply with financial covenants in our debt agreements; and future restructuring, impairment and other charges.

The extent to which the COVID-19 pandemic and related economic disruptions impact our business, results of operations, cash flow and financial condition will depend on future developments, which are highly uncertain, difficult to predict and largely outside of our control, including, but not limited to, the continued spread, duration and severity of the pandemic outbreak; the occurrence, spread, duration and severity of any subsequent wave or waves of outbreaks; the impact on our customers and suppliers; the actions taken by the U.S. and foreign governments to contain the 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; and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse effects on our results of operations and financial condition. In addition to the other information set forth in this report, you should carefully consider the known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended October 31, 2019 which may be heightened by the COVID-19 pandemic and related economic disruption and could materially adversely affect our business.




Our substantial and expanding international operations are subject to uncertainties which could affect our operating results.

A significant portion of our current operations are conducted and located outside the United States, and our growth strategy involves expanding our existing foreign operations and entering into new foreign jurisdictions. We have significant manufacturing and distribution sites in North America, Latin America and Europe. Over half of our net sales for the fiscal years ended October 31, 2019 and 2018, were derived from the sale of products outside the United States. We believe that sales outside the United States will continue to account for a material portion of our total net sales for the foreseeable future. International operations and business expansion plans are subject to numerous additional risks, including:

we may have difficulty enforcing intellectual property rights in some foreign countries;
we may have difficulty gaining market share in countries such as Japan and China because of regulatory restrictions and customer preferences;
we may find it difficult to grow in emerging markets such as China, India, Russia, Brazil and other developing nations due to, among other things, customer acceptance, undeveloped and/or unfamiliar distribution channels, regulatory restrictions and changes, and business knowledge of these new markets;
tax rates in some foreign countries may exceed those of the United States, and foreign earnings may be subject to withholding requirements or the imposition of tariffs, exchange controls or other restrictions, including the tariffs enacted by the U.S. government on various imports from China and by the Chinese government on certain U.S. goods, the scope and duration of which remain uncertain;
we may find it difficult to comply with a variety of United States and foreign legal, compliance and regulatory requirements such as the Foreign Corrupt Practices Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the United Kingdom (U.K.) Bribery Act and international data security and privacy laws and MDR and IVDR;
we may find it difficult to manage a large organization spread throughout various countries;
fluctuations in currency exchange rates could adversely affect our results;
foreign customers may have longer payment cycles than customers in the United States;
failure to comply with United States Department of Commerce and other nations' import-export controls may result in fines and/or penalties;
general economic and political conditions in the countries where we operate may have an adverse effect on our operations in those countries or not be favorable to our growth strategy;
natural disasters (including pandemics), war, terrorism, labor disruptions and international conflicts may cause significant economic disruption and political and social instability, resulting in decreased demand for our products, adversely affecting our manufacturing and distribution capabilities, or causing interruptions in our supply chain;
foreign governments may adopt regulations, including those similar to MDR and IVDR or take other actions that would have a direct or indirect adverse impact on our business and market opportunities, including but not limited to increased enforcement of potentially conflicting and ambiguous anti-bribery laws;
we may have difficulty enforcing agreements and collecting receivables through some foreign legal systems; and
we may be subject to unforeseen economic or political events in certain countries that may have an impact on our customers' ability or preferences to buy our products.

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. However, any of these factors could adversely affect our international operations and, consequently, our operating results.

The results of the United Kingdom’s withdrawal from the EU may have a negative effect on global economic conditions, financial markets and our business.

We are a multinational company headquartered in the United States with worldwide operations, with significant business operations in Europe, including in the United Kingdom. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union inUK. Following a national referendum (Brexit). In March 2017,and enactment of legislation by the government of the United KingdomUK, the UK formally gave notice of its intent to withdrawwithdrew from the EU. On January 31, 2020, the United Kingdom ceased to



be a member state of the EU. EU law applicable to the United Kingdom continues to apply to and in the United Kingdom for the duration of a transition period which is presently scheduled to expire on December 31, 2020 (the “Transition Period”). During the Transition Period, the EU and ratified a trade and cooperation agreement governing its future relationship with the United KingdomEU.The agreement, which is being applied provisionally from January 1, 2021 until it is ratified by the European Parliament and the Council of the European Union, addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things.Because the agreement merely sets forth a framework in many respects and will negotiaterequire complex additional bilateral negotiations between the UK and the EU as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about how the precise terms of the relationship between the parties will differ from the terms of their future relationship. There is no assurancebefore withdrawal.

These developments, or the perception that such negotiations will be successfulany related developments could occur, have had and it is uncertain what, if any, laws similar to those of the EU willmay continue to applyhave a material adverse effect on global economic conditions and financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in andcertain financial markets or restrict our access to the United Kingdom following the expirationcapital.Any of the Transition Period. Since a significant proportion of the United Kingdom’s regulatory framework is derived from EU directives and regulations, EU law ceasing to apply in and to the United Kingdom following the expiration of the Transition Period could materially impact the regulatory regime with respect to the movement and approval of our products to and from the United Kingdom and EU. We could face new regulatory costs and challenges thatthese factors could have a material adverse effect on our business, financial condition, cash flows and results of operations. Until expiration of the Transition PeriodAsset valuations, currency exchange rates and the future relationship between the EUcredit ratings have been and the United Kingdom is established, it is difficult to anticipate Brexit’s potential impact.

Cybersecurity threatsmay continue to increase in frequencybe subject to increased market volatility.Lack of clarity about future UK laws and sophistication; a successful cybersecurity attackregulations as the UK determines which EU laws to replace or replicate, including financial laws and regulations, tax and free trade agreements, tax and customs laws, intellectual property rights, environmental, health and safety laws and regulations, immigration laws, employment laws and transport laws, could interrupt or disrupt our information technology systems or cause the loss of confidential or protected data which could disrupt our business, force us to incur excessive costs or cause reputational harm.

The size and complexity of our information systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise. Like many other companies, we experience attempted cybersecurity actions on a frequent basis, and the frequency of such attempts could increasedecrease foreign direct investment in the future. While we have invested in the protection of dataUK, increase costs and information technology, there can be no assurance that our efforts will prevent or quickly identify service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.disrupt supply chains.






THE COOPER COMPANIES, INC. AND SUBSIDIARIES


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities

There was no share repurchaserepurchase activity during the three-month period ended July 31, 2020.2021.

The share repurchase program was approved by the Company’s Board of Directors in December 2011 (the 2012 Share Repurchase Program). The program as amended in December 2012, December 2013 and March 2017 provides authorization to repurchase up to a total of $1.0 billion of the Company'sCompany’s common stock. Purchases under the 2012 Share Repurchase Program may be made from time-to-time on the open market at prevailing market prices or in privately negotiated transactions and are subject to a review of the circumstances in place at the time and will be made from time to time as permitted by securities laws and other legal requirements. This program has no expiration date and may be discontinued at any time.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES

During the third quarter of fiscal 2021, there were no share repurchases under the program. During the nine months ended July 31, 2021, we repurchased 69.6 thousand shares of the Company’s common stock for $24.8 million, at an average purchase price of $356.61 per share. At July 31, 2020, approximately $359.72021, $334.8 million remained authorized for repurchase under the 2012 Share Repurchase Program.program.

During the third quarter of fiscal 2020, there were no share repurchases under the program. During the nine months ended July 31, 2020, we repurchased 160.8 thousand shares of the Company's common stock for $47.8 million, at an average purchase price of $296.88 per share.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 6. Exhibits
Exhibit
Number
Description
10.131.1

31.1
31.2
32.1
32.2
101.1The following materials from the Company's Quarterly Report on Form 10-Q for the three and nine months period ended July 31, 20202021 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income, (ii) Consolidated Condensed Balance Sheets, (iii) Consolidated Condensed Statements of Stockholders' Equity, (iv) Consolidated Condensed Statements of Cash Flows and (v) related Notes to Consolidated Condensed Financial Statements.
104.1Cover Page Interactive Data File (embedded within the Inline XBRL document)
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Cooper Companies, Inc.
(Registrant)
The Cooper Companies, Inc.
(Registrant)
Date: September 4, 20203, 2021/s/ Brian G. Andrews
Brian G. Andrews
SeniorExecutive Vice President, Chief Financial Officer & Treasurer

(Principal Financial Officer)
Date: September 4, 20203, 2021/s/ Agostino Ricupati
Agostino Ricupati
Chief Accounting Officer & Senior Vice President, Finance & Tax (Principal Accounting Officer)


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