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NEWS RELEASE [COOPER LOGO]
21062 Bake Parkway, Suite 200
Lake Forest, CA 92630
888-822-2660
Fax: 949-597-0662
CONTACT:
Norris Battin
The Cooper Companies, Inc.
ir@coopercompanies.com
FOR IMMEDIATE RELEASE
THE COOPER COMPANIES REPORTS THIRD QUARTER RESULTS
Revenue Up 48% to $90.6 Million; EPS 86 Cents Up 28%
LAKE FOREST, Calif., September 4, 2002--The Cooper Companies, Inc. (NYSE: COO)
today reported financial results for its third fiscal quarter ended July 31,
2002:
o Revenue $90.6 million, 48% above third quarter 2001; CooperVision up 54%,
CooperSurgical up 30%.
o Earnings per share up 28% to 86 cents; trailing twelve months $2.87.
o One-time gain of 8 cents per share from receipt of shares of Quidel
Corporation out of escrow.
o One-time charge of 8 cents per share to CooperSurgical cost of sales to
provide for phase out of the Cerveillance'r' colposcopy system.
o Operating income $17.0 million, up 21%.
o Cash flow per share (pretax income from continuing operations plus
depreciation and amortization) $1.39; trailing twelve-months $4.71.
Commenting on the results, Chairman and Chief Executive Officer A. Thomas
Bender, said, "Cooper continued its consistent quarterly performance as once
again revenue, operating income and earnings per share showed strong growth and
exceeded consensus estimates for the quarter.
"In our contact lens business, revenue growth was strong, the integration of the
Biocompatibles acquisition is ahead of plan, and our new products are performing
well around the world.
"In women's healthcare, we continue to consolidate the in-office gynecology
market through acquisition and evaluate opportunities for further growth.
Operating margins have improved significantly this year in this business."
Outlook
For the fourth quarter of fiscal 2002, Cooper estimates revenue between $91
million and $94 million, 39% to 42% above the fourth quarter of 2001, with
earnings per share ranging from $.99 to $1.03. Fourth quarter 2002 CooperVision
revenue is expected to range between $72 million and $74 million and
CooperSurgical revenue is expected to be about $20 million.
For fiscal 2002, Cooper estimates revenue between $312 million and $315 million,
a 33% to 34% increase, and has raised earnings per share guidance to $3.09 to
$3.13 from the previous estimate of $3.07 to $3.12.
For fiscal 2003, Cooper estimates revenue between $380 million and $400 million
with earnings per share ranging from $3.95 to $4.05.
Business Unit P&L Highlights ($'s in millions)
- ----------------------------------------------------------------------------------------------------------
Three Months Ended July 31,
- ---------------------------------------------- --------------------------------------------------------
Revenue Operating Income
- ---------------------------------------------- --------------------------------------------------------
% % Inc %Revenue %Revenue
2002 2001 Inc. 2002 2001 (Dec) 2002 2001
---- ---- ---- ---- ---- ----- ---- ----
- ---------------------------------------------- --------------------------------------------------------
CVI $70.6 $46.0 54% $16.8 $13.2 28% 24% 29%
CSI 20.0 15.4 30% 2.5 2.6 (6%) 12% 17%
----- ----- ----- -----
Subtotal 90.6 61.4 48% 19.3 15.8 22% 21% 26%
HQ Expense - - - (2.3) (1.8) - - -
------ -----
- ---------------------------------------------- --------------------------------------------------------
TOTAL $90.6 $61.4 48% $17.0 $14.0 21% 19% 23%
===== ===== ===== =====
- ---------------------------------------------- --------------------------------------------------------
Nine Months Ended July 31,
- ---------------------------------------------- --------------------------------------------------------
Revenue Operating Income
- ---------------------------------------------- --------------------------------------------------------
% %Revenue %Revenue
2002 2001 Inc. 2002 2001 % Inc 2002 2001
---- ---- ---- ---- ---- ----- ---- ----
- ---------------------------------------------- --------------------------------------------------------
CVI $168.9 $126.4 34% $40.5 $35.6 14% 24% 28%
CSI 51.7 42.1 23% 10.0 6.7 49% 19% 16%
----- ------ ----- -----
Subtotal 220.6 168.5 31% 50.5 42.3 19% 23% 25%
HQ Expense - - - (5.7) (5.0) - - -
----- ----
- ---------------------------------------------- --------------------------------------------------------
TOTAL $220.6 $168.5 31% $44.8 $37.3 20% 20% 22%
====== ====== ===== =====
- ---------------------------------------------- --------------------------------------------------------
Note: Cooper implemented Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" at the beginning of this year, and no longer amortizes goodwill. Goodwill amortization
included in 2001 results reduced operating income by $1.2 million in the three-month period and $3
million in the nine-month period.
- ----------------------------------------------------------------------------------------------------------
Third Quarter Operating Highlights
CooperVision
Pro Forma Results
At the end of February, CVI acquired the eye care business of Biocompatibles
International, plc which had worldwide revenue of about $70 million in calendar
2001, about $50 million outside of North America. CVI's consolidated results,
therefore, include Biocompatibles performance beginning in March 2002. In order
to measure organic growth, discussions below of results and comparisons in CVI's
business are on a pro forma basis as if Biocompatibles eye care revenue in the
third quarter of 2001 was included.
Third Quarter CVI Soft Lens Revenue Highlights
(Note: Soft lens revenue includes sales of CooperVision's soft contact lens
products to commercial customers. It excludes sales to other contact lens
manufacturers (OEM sales), royalties, freight charges passed on to customers,
and sales of discontinued products and low volume hard contact lens products.
CooperVision's 2001 soft lens revenue (excluding Biocompatibles) adjusted for
these exclusions was $41.4 million in the third quarter and $115.0 million for
the nine-month period.)
o CVI's third quarter worldwide soft lens revenue grew 14%.
o All disposable and planned replacement products, which now account for
about 85% of CooperVision's worldwide soft lens business, grew 29% in
the third quarter and 19% for the nine-month period.
o Higher margin specialty contact lenses--toric lenses, cosmetic lenses,
multifocal lenses and lenses for dry eye symptoms--grew 37% in the
third quarter and 19% through nine months and now account for
two-thirds of CVI's worldwide soft lens revenue.
o Sales of toric contact lenses, which correct astigmatism, increased
28% during the quarter and 12% year-to-date and now account for about
45% of CVI's soft lens revenue. CVI estimates that it holds about 34%
of the worldwide toric segment, which is currently growing at about
10%. CVI offers every popular type of replacement modality to meet the
needs of most astigmatic patients.
o CVI's brands of disposable toric lenses, those replaced after two
weeks, continue to gain market share and are now selling at a rate of
more than $3 million per month worldwide. Disposable torics are the
fastest growing products in the worldwide toric segment, accounting
for an estimated 40% of the total. CVI estimates that its brands of
disposable toric lenses are now the fastest growing product in this
category worldwide.
o CVI's planned replacement toric lenses, those used monthly and
quarterly, grew 22% in the quarter and 5% for the nine-month period.
CVI's planned replacement torics now account for over 50% of this
segment worldwide.
Third Quarter CVI Geographic Soft Lens Revenue Highlights
o Soft contact lens revenue in the United States, about 53% of CVI's
soft lens business, grew 14% in a U.S. market that grew about 4% in
the second calendar quarter, according to recent market data.
o Soft lens sales outside of the United States, more than 47% of CVI's
total soft lens revenue in the quarter, grew 14%.
o European soft lens revenue, about 42% of CVI's total soft lens
revenue, grew 19%, as total toric lens business more than doubled over
last year's third quarter.
CVI's gross margin was 66% in the quarter, unchanged from the quarter a year
ago.
Biocompatibles Integration
Cooper has said that the Biocompatibles transaction would be cumulatively
neutral to EPS for the eight-month period ending October 31, 2002 and accretive
after that.
"Our Biocompatibles integration plan is ahead of plan," said Bender. "To date we
have lowered costs by reducing general and administrative expenses and
rationalizing manufacturing, and we have accelerated sales of the Proclear line
of products, which are often prescribed for patients with dry eye symptoms.
"The integration of the Biocompatibles manufacturing in Farnborough, U.K. into
our Southampton facility is well under way and we have been able to improve cost
of goods through manufacturing efficiencies.
"A favorable shift in product mix is also improving CVI profitability, as we
trade up customers to higher margin Proclear products. Going forward, our
objective is to have the gross margin of the former Biocompatibles product line
approach that of CVI's products prior to the acquisition by the end of our next
fiscal year, and we are currently ahead of our target to do that.
"We expect that these operating improvements combined with Biocompatibles'
favorable impact to lower our tax rate will achieve the accretion targets we
have forecast. We continue to expect that Biocompatibles will contribute about
50 cents to Cooper's earnings per share in 2003, and 79 cents in 2004.
"We estimate that Biocompatibles will add more than $45 million to CVI's
worldwide revenue in the eight months of 2002 following the acquisition and
between $75 million and $80 million in 2003, following selected product and
market rationalization."
New Products
Sales of CVI's Frequency'r' Multifocal are ahead of expectations. This product
has been placed in over 1,100 practitioner offices to date in the United States,
and CVI expects an additional 2,000 office placements by fiscal year-end.
CVI's line of cosmetic lenses is estimated to reach about $15-$17 million in
revenue in fiscal 2002.
A launch of Frequency Enhancements, a line of cosmetic products that accentuates
the natural color of the eye, is planned for the fourth calendar quarter of
2002.
In 2003, CVI expects to begin an extended wear contact lens development program
using a unique material.
CooperSurgical
Discontinuation of Cerveillance Colposcopy System
CooperSurgical (CSI), the Company's women's healthcare business, decided during
the third quarter to phase out the Cerveillance colposcopy system, which
captures and stores digital images of the cervix, and recorded a charge against
cost of sales of about $2 million; an after tax charge of 8 cents a share.
Cerveillance is being phased out primarily because:
o In 2000, CSI acquired Leisegang Medical, Inc. the world leader in
colposcopy, whose products are widely regarded by practitioners as the
finest colposcopy equipment in the world.
o Digital imaging technology is evolving rapidly, and CSI has elected to
consolidate its colposcopy development into the Leisegang Prism
System'TM' in order to capitalize on Leisegang's reputation for
superior optics.
Third Quarter CSI Operating Highlights
CSI's third quarter revenue increased 30% to $20 million and is up 23% year to
date. Organic growth from gynecology products(1) in the third quarter of 2002
was 10%. CSI expects revenue of about $20 million in the fourth quarter of
fiscal 2002. Due to the $2 million provision to phase out the Cerveillance
colposcopy system, CSI's operating margin fell to 12%, below the prior year's
quarter of 17%. Without this charge, CSI's operating margin would have been
22%, down from 26% in the previous quarter due to expenses incurred in
integrating the recent Norland and Ackrad acquisitions. Year to date, CSI's
operating margin is 19%, 23% without the Cerveillance charge, up from 16% in
the nine-month period of 2001.
Building on its strategy to develop a franchise in the infertility market, in
May CSI acquired Ackrad Laboratories, Inc., a developer and manufacturer of
medical devices used primarily in the assessment of infertility and other
gynecological disorders. Ackrad had revenue of $5.3 million in 2001.
Tax Rate
Cooper's effective tax rate (income tax expense divided by pretax income) was
27% for the third quarter and is projected at 27% for the full fiscal year.
- -------------------------------------------
(1) About 9% of CSI's revenue derives from medical devices that are in markets
outside of women's healthcare such as cardiology, gastroenterology and
ophthalmology. CSI does not actively market these products. As CSI's business is
women's healthcare, the organic growth comparison refers only to products used
in this market.
Balance Sheet Items
Cooper continued to lower its Days of Sales Outstanding (DSO's) following
collection difficulties related to the installation of a new enterprise
reporting system earlier in the fiscal year. At the end of the third quarter,
Cooper's DSO's were 69 days, down from 75 days with Biocompatibles (73 days
excluding the Biocompatibles impact) at the end of the second quarter. DSO's are
expected to remain in the upper 60's to low 70's range.
Inventory months on hand (MOH) continue at appropriate levels, at 7.1 months,
equal to the end of the second quarter including pro forma Biocompatibles
operations. During 2000, inventory fell below the level needed to support the
more than 500 thousand stock keeping items CVI carries. CVI's extensive range of
toric lens parameters offers practitioners the widest choice of fitting
alternatives in the industry.
During the quarter, capital expenditures were about $5 million; $17 million year
to date. Depreciation and amortization was $3.3 million for the quarter; $8.5
million through nine months.
New Credit Facility
In May, Cooper announced the successful syndication of a $225 million bank
credit facility: a $75 million five-year term loan with an interest only payment
in the first year then fully amortized in the next four years, and a $150
million three-year revolving credit facility.
Interest rates under this facility are based on LIBOR plus additional basis
points determined by Cooper's ratio of debt to its earnings before interest,
taxes, depreciation and amortization (EBITDA.) These range from 125 to 225 basis
points for the term loan and from 100 to 200 basis points for the revolver. The
current additional basis points are 200 on the term loan and 175 on the
revolver. The Company can, at its option, choose to pay a base rate that is
within a range above the prime rate.
Cooper plans to use the facility for general corporate purposes, including
acquisitions, and capital expenditures. At the closing, Cooper paid off $62
million under its existing line of credit and (pound)44 million (approximately
$62 million) in notes owed to Biocompatibles International plc as a result of
Cooper's purchase of the Biocompatibles eye care business.
Investment in Quidel Common Stock
In the first quarter of 2001, Quidel Corporation acquired Litmus Concepts, Inc.,
a company that Cooper had invested in. Cooper received 1,138,725 shares of
Quidel's common stock for its interest in Litmus. At that time, Cooper recorded
a pre tax gain of $719 thousand--a net income gain of 3 cents per share--
representing the amount that the fair market value of the Quidel shares received
exceeded the carrying value of Cooper's investment in Litmus.
In the third quarter of 2002, Cooper received an additional 334,727 shares of
Quidel common stock previously held in escrow and recorded a pretax gain of $2.1
million--a net income gain of 8 cents per share.
Cooper currently carries 881,452 shares of Quidel's common stock on its balance
sheet at a cost of $5.69 per share. Unrealized gains and losses on these shares
are recorded on the balance sheet and are, therefore, not included in the
results of operations until they are sold. Cooper intends to sell these shares
from time to time as market conditions indicate.
Corporate Governance
The Company's chairman and chief executive officer and its executive vice
president and chief financial officer will submit the certifications required by
applicable law with this quarter's form 10Q filing to the Securities and
Exchange Commission.
Patent Litigation With CIBA Vision
Cooper has been engaged in patent litigation in the United States, the United
Kingdom and France with CIBA Vision, a division of Novartis, alleging that CVI's
Frequency Colors and Expressions opaque contact lenses infringe certain patents
of CIBA Vision.
On August 22, Cooper said that CVI had received an Order in the U. S. litigation
involving U.S. Patent No. 5,414,477 (the '477 or Jahnke patent) related to
cosmetic contact lenses. In the Order, the Court granted Wesley Jessen's motion
for summary judgment of infringement and found that CVI's Expressions lenses
sold in the United States infringe Wesley Jessen's `477 patent.
CVI's counter claim challenging the validity of the Jahnke patent is scheduled
for trial in October. The Company remains confident that it will ultimately
prevail on its defense that the `477 patent is invalid based on prior art.
In July, in related litigation in the United Kingdom, CIBA Vision (UK) decided
to revoke the British counterpart to the `477 Jahnke patent, Patent EP
(UK) 0498835, also issued to Jahnke. CIBA Vision consented to an Order of the
Court that the Jahnke patent be revoked in the United Kingdom and agreed to
reimburse CooperVision's legal costs in the United Kingdom in relation to the
Jahnke suit.
The U.K. Court has also heard arguments with regard to the validity and
infringement of another opaque lens patent, the "Knapp" patent, and a decision
is expected in September.
In the United States, CVI has received an Order in the lawsuit involving U.S.
Patent No. 4,668,240 (the `240 or Loshaek patent). The Court had previously
ruled in Wesley Jessen's favor with respect to the meaning of disputed terms in
the `240 patent. In response to a motion for reconsideration recently filed by
CVI, the Court found that evidence presented by CVI placed doubt on the Court's
prior interpretation of the `240 patent. Accordingly, the Court granted CVI's
request to appoint an independent technical advisor to assist the Court in
resolving the questions presented by the parties with respect to the technical
terms in the patent. CVI was very pleased with this ruling and is confident that
it will also prevail on the `240 patent.
Revenue from products that include the disputed technology accounts for about 2
percent of Cooper's year-to-date worldwide revenue in fiscal 2002.
Earnings per Share
All per share amounts mentioned in this report refer to diluted per share
amounts from continuing operations.
Conference Call
The Cooper Companies will hold a conference call to discuss its third quarter
results today at 2 p.m. Pacific Daylight Time. To access the live call, dial
1-800-500-0177. A replay will be available at 1-888-203-1112 approximately one
hour after the call ends and remain available for five days. The access code for
both calls is 718174. This call will also be broadcast live on The Cooper
Companies' website, www.coopercos.com and at www.bestcalls.com and
www.streetevents.com.
Forward-Looking Statements
Some of the information included in this news release contains "forward-looking
statements" as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements regarding anticipated growth
in our revenue, anticipated market conditions and results of operations. To
identify forward-looking statements look for words like "believes," "expects,"
"may," "will," "should," "seeks," "intends," "plans," "estimates" or
"anticipates" and similar words or phrases. Discussions of strategy, plans or
intentions often contain forward-looking statements. These, and all
forward-looking statements, necessarily depend on assumptions, data or methods
that may be incorrect or imprecise.
Events, among others, that could cause actual results and future actions to
differ materially from those described in forward-looking statements include
major changes in business conditions, a major disruption in the operations of
our manufacturing facilities, new competitors or technologies, the impact of an
undetected virus on our computer systems, acquisition integration delays or
costs, increases in interest rates, foreign currency exchange exposure,
investments in research and development and other start-up projects, dilution to
earnings per share from acquisitions or issuing stock, regulatory issues,
changes in tax laws, significant environmental cleanup costs above those already
accrued, litigation costs including any related settlements, cost of business
divestitures, the requirement to provide for a significant liability or to write
off a significant asset, changes in accounting principles or estimates, and
other factors described in our Securities and Exchange Commission filings,
including the "Business" section in our Annual Report on Form 10-K for the year
ended October 31, 2001. 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.
About Cooper
The Cooper Companies, Inc. and its subsidiaries develop, manufacture and market
specialty healthcare products. Corporate offices are in Lake Forest and
Pleasanton, Calif. A toll free interactive telephone system at 1-800-334-1986
provides stock quotes, recent press releases and financial data. Cooper's World
Wide Web address is www.coopercos.com.
CooperVision, Inc., markets a broad range of contact lenses for the vision care
market. Headquartered in Lake Forest, Calif., it manufactures in Huntington
Beach, Calif., Rochester, N.Y., Norfolk, Va., Adelaide, Australia, Farnborough
and Hamble, England, Madrid, Spain and Toronto. Its Web address is
www.coopervision.com.
CooperSurgical, Inc., with operations in Trumbull, Conn., Fort Atkinson, Wis.,
Malmo, Sweden, Montreal and Berlin, markets medical devices, diagnostic
products, surgical instruments and accessories for the women's healthcare
market. Its Web address is www.coopersurgical.com.
Cerveillance'r', Expressions'TM', Frequency'r', Leisegang Prism System'TM' and
Proclear'r' are registered trademarks of The Cooper Companies, Inc., its
subsidiaries and affiliates.
(FINANCIAL STATEMENTS FOLLOW)
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except for per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------- ------------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $ 90,563 $ 61,365 $220,585 $168,523
Cost of sales 34,844 22,336 83,217 58,839
-------- -------- -------- --------
Gross profit 55,719 39,029 137,368 109,684
Selling, general and administrative expense 37,055 22,516 88,439 65,686
Research and development expense 1,118 1,055 2,893 2,836
Amortization of intangibles 565 1,457 1,265 3,866
-------- -------- -------- --------
Operating income 16,981 14,001 44,771 37,296
Interest expense 2,347 914 4,681 2,814
Other income, net 3,668 131 4,686 908
-------- -------- -------- --------
Income before income taxes 18,302 13,218 44,776 35,390
Provision for income taxes 4,941 2,857 12,092 10,010
-------- -------- -------- --------
Net income $ 13,361 $ 10,361 $ 32,684 $ 25,380
======== ======== ======== ========
Diluted earnings per share $ 0.86 $ 0.67 $ 2.10 $ 1.68
======== ======== ======== ========
Number of shares used to compute earnings
per share 15,605 15,384 15,570 15,128
======== ======== ======== ========
Memo:
Cash flow (income before income taxes plus
depreciation and amortization) per diluted share.
Includes amounts for depreciation of $2,779 and
$1,381 in the three months ended, and $7,224 and
$4,040 in the nine months ended July 31, 2002 and
2001, respectively $ 1.39 $ 1.04 $ 3.42 $ 2.86
========= ========= ========= =========
Note: Following our implementation of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" at the beginning
of this year, we no longer amortize goodwill. Goodwill amortization included
in 2001 results reduced operating income by $1.2 million and $3 million in the
three- and nine-month periods, respectively.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
July 31, October 31,
2002 2001
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,790 $ 12,928
Trade receivables, net 69,779 55,318
Marketable securities 5,156 7,982
Inventories 77,444 51,153
Deferred tax assets 19,991 17,308
Other current assets 17,109 10,516
-------- --------
Total current assets 198,269 155,205
-------- --------
Property, plant and equipment, net 93,918 61,028
Goodwill 213,091 131,732
Other intangibles, net 17,507 13,890
Deferred tax assets 25,761 31,246
Other assets 4,094 3,748
-------- --------
$552,640 $396,849
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 32,941 $ 8,249
Other current liabilities 84,884 59,724
-------- --------
Total current liabilities 117,825 67,973
-------- --------
Long-term debt 135,342 60,553
Other liabilities 4,608 12,039
-------- --------
Total liabilities 257,775 140,565
-------- --------
Stockholders' equity 294,865 256,284
-------- --------
$552,640 $396,849
======== ========
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