[COO Listed NYSE LOGO] [THE COOPER COMPANIES]
21062 Bake Parkway
Lake Forest, CA 92630
888-622-2600
Fax: 949-597-0662
NEWS RELEASE
CONTACT:
Norris Battin
The Cooper Companies, Inc.
ir@coopercompanies.com
FOR IMMEDIATE RELEASE
THE COOPER COMPANIES REPORTS FIRST QUARTER 2003 RESULTS
Revenue Ahead 62% to $94 Million
Operating Income Grows 51%; EPS 44 cents, up 47%
Fiscal 2003 Revenue Guidance Raised to $395 million to $405 million;
2003 EPS Guidance Now $2.03 to $2.07 Per Share
Second Quarter Guidance: Revenue $96 million to $99 million; EPS 46 Cents
to 49 Cents
LAKE FOREST, Calif., February 26, 2003--The Cooper Companies, Inc. (NYSE: COO)
today reported results for its fiscal first quarter ended January 31, 2003,
increased its fiscal year guidance and provided second quarter guidance. All per
share amounts reflect the 100% stock dividend effected in November 2002.
o Revenue $94 million, 62% above the first quarter of 2002, 56% in
constant currency.
o Operating income $19.8 million, 51% above the first quarter of 2002.
o EPS 44 cents versus 30 cents, up 47%; trailing twelve months $1.71.
o Cash flow (pretax income from continuing operations plus depreciation
and amortization) per share 68 cents, up from 49 cents in the first
quarter of 2002; trailing twelve months $2.64.
Revised Revenue and Earnings Per Share Guidance
For fiscal 2003, Cooper now expects revenue of $395 million to $405 million,
assuming no dramatic shift in exchange rates, and earnings per share of $2.03 to
$2.07. The previous guidance for fiscal 2003 was revenue of $380 million to $400
million and earnings per share of $1.98 to $2.03.
CooperVision (CVI) expects fiscal 2003 worldwide contact lens revenue of $310
million to $315 million up at least 27%. Driving this robust performance is
continued strong worldwide sales of specialty lenses, aided by increasingly
favorable demographics, several new product introductions and the continuing
strength of the pound
sterling and the euro against the U.S. dollar. CooperSurgical (CSI) expects
revenue of $85 million to $90 million for fiscal 2003.
For the second fiscal quarter, Cooper expects revenue to range from $96 million
to $99 million with earnings per share ranging from 46 cents to 49 cents. Cooper
has not previously issued second quarter guidance.
First Quarter Performance
Commenting on the quarter's results, A. Thomas Bender, Cooper's chairman,
president and chief executive officer said, "At CooperVision (CVI), our
worldwide contact lens business in the quarter grew 18%, 13% in constant
currency, on an organic basis, assuming that the revenue of Biocompatibles
Eyecare plc which we purchased in late February last year is included in both
periods. CVI's revenue momentum continues, as market demand continues to shift
from commodity lenses to specialty lenses and value added spherical lenses, its
predominant product lines.
"At CooperSurgical (CSI), our women's healthcare medical device business,
revenue grew 33% in the quarter to $21.2 million. Organic growth was 11%. CSI's
operating margin was 18%, and operating income grew 8% compared with last year's
first quarter, as expenses associated with integrating the recently acquired
Sage BioPharma and Ackrad businesses temporarily reduced margins. Operating
margins are expected to range between 22% and 25% as these businesses are fully
integrated into CSI.
"Our days sales outstanding (DSO's) in the first quarter increased to 79 days
from 71 days last quarter. An unfavorable foreign exchange impact, a systems
integration issue in CVI's international operations, and an ongoing shift to a
higher mix of international and optical chain revenue combined to produce this
result. We expect DSO's in the mid 70's in the next quarter."
Business Unit P&L Highlights ($'s millions)
- --------------------------------------------------------------------------------
Three Months Ended January 31,
- --------------------------------------------------------------------------------
Revenue Operating Income
-------------------- --------------------------------------------
% % % Revenue % Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
----- ----- ---- ----- ----- ---- --------- ---------
CVI $72.8 $42.1 73% $18.4 $11.3 62% 25% 27%
CSI 21.2 16.0 33% 3.8 3.6 8% 18% 22%
----- ----- ----- -----
Subtotal 94.0 58.1 62% 22.2 14.9 50% 24% 26%
HQ Expense -- -- (2.4) (1.8) -- -- --
----- ----- ----- -----
TOTAL $94.0 $58.1 62% $19.8 $13.1 51% 21% 23%
===== ===== ===== =====
Operating Highlights
CooperVision
Pro Forma Results
At the end of February 2002, CVI acquired Biocompatibles Eyecare plc. CVI's
consolidated results, therefore, include Biocompatibles' performance beginning
in March 2002. In order to measure organic growth, discussions below of results
and comparisons of CVI's business are on a pro forma basis as if Biocompatibles'
revenue for the comparable period of 2002 was included.
First Quarter Contact Lens Revenue Highlights
During the first quarter:
o Worldwide contact lens revenue grew 18%, 13% in constant currency.
o All specialty lenses--toric lenses, cosmetic lenses, multifocal lenses
and lenses to alleviate dry eye symptoms--grew 24 percent and now
account for over 60% of CVI's soft lens business. Specialty lenses and
value added spherical lenses offer added benefits to patients with
complex visual defects and command higher margins than commodity
lenses that simply correct near- and farsightedness.
o Sales of toric lenses, which correct astigmatism, increased 12% and
account for about 40% of CVI's soft lens revenue. The two-week and
monthly toric product lines grew 26% in the quarter and now represent
about 55% of CVI's toric business.
o CVI's disposable spherical lens business grew 30%, driven by Frequency
Aspheric and Proclear sphere. This strong growth reflects a worldwide
transition from commodity two-week spheres to value added monthly
disposable spheres.
First Quarter CVI Geographic Highlights
o Contact lens revenue in the United States, 49% of CVI's business, grew
16%, well ahead of the U.S. market that grew about 9% in the fourth
calendar quarter.
o Contact lens revenue outside of the United States, 51% of CVI's
worldwide revenue in the quarter, grew 20%.
o European soft lens revenue, about 40% of CVI's total revenue, grew
18%.
o During the first quarter of 2003, CVI's line of two-week disposable
lenses was launched in Japan.
Biocompatibles Eyecare, plc
CVI expects that the products acquired from Biocompatibles will contribute about
$90 million in revenue in fiscal 2003. The integration of the acquisition is on
target, and CVI continues to have good success trading up customers to
Biocompatibles' higher margin Proclear products.
New Products
During the first quarter CVI:
o Broadened the distribution of Proclear Toric disposable lenses in the
United States.
o Introduced Expressions Accents, a new line of disposable cosmetic
products that accentuates the natural color of the eye, in the United
States. These products complement CVI's existing line of opaque lenses
that change the appearance of the color of the eyes. Distribution
outside the U.S. is expected to begin in the third fiscal quarter.
CVI, with the most extensive line of cosmetic lenses in the industry,
expects revenue from these products to range between $22 million to
$24 million in 2003.
During the fiscal third quarter of 2003 CVI expects to launch:
o Proclear Aspheric in its worldwide markets.
o Frequency Multifocal in markets outside the United States. Sales of
Frequency Multifocal in the United States remain ahead of
expectations. CVI expects worldwide revenue of $6 million to $8
million in 2003, up from $2 million in 2002.
Continuing to build on its Proclear franchise, the Proclear Multifocal
introduction is planned for 2004.
CVI First Quarter Expenses
During the first fiscal quarter, CVI research and development expenditures were
$857 thousand, up 41% over the first quarter of 2002 reflecting an initiative to
develop new and improved contact lens products. During the 2003 to 2005 period,
CVI is investing in two new research programs: the development of an extended
wear contact lens and an improved contact lens technology. We expect that
research and development expenses will increase by between $1.5 million and $2.0
million in 2003.
Because CVI manufactures a major percentage of its lenses in the United Kingdom,
the favorable impact of currency on revenue tends to be offset by the
unfavorable translation of manufacturing and operating costs. The effect of
currency gains and losses on operating income in the quarter was immaterial.
CVI's gross margin was 67% of sales compared to 69% in the prior year's first
quarter. This reflects:
o Reduced margin on sales of Biocompatibles' products. Going forward, we
expect that these margins will continue to improve as CVI improves
manufacturing costs and shifts customers to higher margin Proclear
products.
o The negative impact of the stronger pound sterling on manufacturing
costs.
o Lower gross margins on sales to a Japanese distributor.
Calendar Year 2002 Contact Lens Market Highlights
Incorporating recently reported corporate results with up-to-date market
research, CVI now estimates that the worldwide contact lens market grew about
10% in calendar 2002, the strongest performance in several years. Manufacturers'
revenue for all contact lenses in the United States grew 8% and in Canada, 16%.
Estimates of the Japanese and Asian markets indicate about 10% growth and,
through the first six months, manufacturers' revenue in Europe grew about 14%.
North America, Asia and Europe account for about 95% of the worldwide contact
lens market.
CooperSurgical (CSI)
Revenue at CSI, Cooper's women's healthcare medical device business, grew 33%
over last year's first quarter to $21.2 million. Organic growth was 11%. CSI's
operating margin was 18% for the quarter, down from 22% in the first quarter of
2002, as expenses associated with integrating the recently acquired Sage
BioPharma and Ackrad businesses temporarily reduced margins. Margins are
expected to improve as these businesses are fully integrated. Sage BioPharma and
Ackrad Laboratories both specialize in infertility products.
Tax Rate
The Company's effective tax rate (ETR) (income tax expense divided by pretax
income) was 25% for the quarter, the same rate as fiscal 2002. This was below
the 29% ETR in the first fiscal quarter of 2002, reflecting the favorable
effects of the Biocompatibles acquisition at the end of February 2002.
Balance Sheet
o At the end of the first fiscal quarter, Cooper's days sales
outstanding (DSO's) increased to 79 days from 71 days last quarter
reflecting:
o the impact of the strengthening pound and euro.
o the ongoing shift to a higher mix of international and optical
chain revenue.
o a systems integration issue in CVI international operations that
delayed some collection efforts.
DSO's are expected in the mid 70's by the end of the next quarter.
o Inventory months on hand continue at desired levels at 7.0 months,
about the same as the last four quarters, and are expected to remain
at this level going forward.
o During the quarter, capital expenditures were about $5.9 million.
Depreciation and amortization was $3 million for the quarter.
Earnings Per Share
All per share amounts in this news release refer to diluted per share amounts
restated where appropriate to reflect retroactively the 2-for-1 stock split
effected in the form of a 100% stock dividend on November 22, 2002.
Non-GAAP Financial Measures
In this news release we report Cooper's "cash flow per share" for the first
quarter of fiscal 2003 and 2002 as 68 cents and 49 cents, respectively, and our
cash flow per share for the 12 months ended January 31, 2003 as $2.64.
Although "cash flow per share" is a non-GAAP financial measure, we disclose it
because we think it is the most appropriate measure of our liquidity and
financial strength, particularly when calculated consistently over time.
In Cooper's case, cash flow per share is more informative than the more common
non-GAAP measure of liquidity called "earnings before interest, taxes,
depreciation and amortization" ("EBITDA") because unlike most companies, Cooper
does not expect to pay federal income taxes until about 2007, when we expect to
exhaust the usage of our U.S. net operating loss carryforwards. This gives
Cooper a significant competitive advantage, as most companies expend a large
portion of their pretax profits on taxes. Readers should understand this and
judge our financial strength accordingly.
To calculate "cash flow per share," we add back non-cash charges for
depreciation and amortization to income before income taxes, and then divide the
result by the average number of shares outstanding used to calculate diluted
earnings per share. In the tables below, we reconcile earnings per share (the
closest GAAP disclosure) "to cash flow per share" for all periods reported using
the same diluted per share figures.
I. For the Three Months Ended January 31,
-----------------------------------------
2003 2002
--------------- -------------------
Per
$(000) Share $(000) Per Share
------- ----- ------- ---------
Net Income $13,855 $0.44 $ 9,405 $0.30
===== =====
Add:
Income Taxes 4,618 3,845
Depreciation 2,615 1,785
Amortization 356 308
"Cash Flow" $21,444 $0.68 $15,343 $0.49
======= ===== ======= =====
Shares (000) 31,601 31,075
======= ======
II. 12 Months Ended January 31, 2003:
-------------------------------------
$(000) Per Share
------- ---------
Year ended October 31,
2002:
Net Income $48,875 $1.57
Add:
Income Taxes 16,294
Depreciation 9,892
Amortization 1,477
"Cash Flow" $76,538 $2.45
=======
Shares (000) 31,189
=======
Plus (minus) Three Months Ended January 31:
2003 0.68
2002 (0.49)
-----
"Cash flow" per share for the 12 months ended
January 31, 2003 $ 2.64
=====
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.
The forward-looking statements include certain statements pertaining to our
capital resources, performance and results of operations. In addition, all
statements regarding anticipated growth in our revenue, anticipated market
conditions and results of operations are forward-looking statements. 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, significant
delays in new product introductions, 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, cost of complying with new
corporate governance regulatory requirements, changes in tax laws or their
interpretation, changes in geographic profit mix effecting tax rates,
significant environmental cleanup costs above those already accrued, litigation
costs including any related settlements or judgments, 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, 2002. 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.
Conference Call
The Cooper Companies will hold a conference call to discuss its first quarter
results today at 2 p.m., Pacific Standard 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 319765. This call will also be broadcast live on The Cooper
Companies' Web site, www.coopercos.com and at www.bestcalls.com and
www.streetevents.com.
Corporate Information
The Cooper Companies, Inc. and its subsidiaries develop, manufacture and market
specialty healthcare products. Corporate offices are located 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. The Cooper
Companies' World Wide Web address is www.coopercos.com.
CooperVision, Inc., markets a broad range of contact lenses. 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., supplies diagnostic products, surgical instruments and
accessories to the gynecology market. With headquarters and manufacturing
facilities in Trumbull, Conn., it also manufactures in Bedminster, N.J.,
Cranford, N.J., Fort Atkinson, Wis., Malmo, Sweden, Montreal and Berlin. Its
World Wide Web address is www.coopersurgical.com.
Trademarks of The Cooper Companies, Inc., and its affiliates are italicized.
(FINANCIAL STATEMENTS FOLLOW)
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except earnings per amounts)
(Unaudited)
Three Months Ended
January 31,
-----------------
2003 2002
------- -------
Net sales $94,014 $58,112
Cost of sales 34,647 20,627
------- -------
Gross profit 59,367 37,485
Selling, general and administrative expense 37,877 23,213
Research and development expense 1,315 857
Amortization of intangibles 356 308
------- -------
Operating income 19,819 13,107
Interest expense 1,824 893
Other income, net 478 1,036
------- -------
Income before income taxes 18,473 13,250
Provision for income taxes 4,618 3,845
------- -------
Net income $13,855 $ 9,405
======= =======
Diluted earnings per share $ 0.44 $ 0.30
======= =======
Number of shares used to compute diluted earnings per share 31,601 31,075
======= =======
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
January 31, October 31,
2003 2002
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 9,054 $ 10,255
Trade receivables, net 83,886 74,545
Marketable securities 3,023 2,750
Inventories 81,045 76,279
Deferred tax asset 19,092 17,781
Other current assets 18,065 17,300
-------- --------
Total current assets 214,165 198,910
-------- --------
Property, plant and equipment, net 94,516 87,944
Goodwill 247,052 238,966
Other intangibles, net 14,332 14,651
Deferred tax asset 22,500 26,806
Other assets 4,403 3,838
-------- --------
$596,968 $571,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 17,392 $ 36,333
Other current liabilities 85,209 90,348
-------- --------
Total current liabilities 102,601 126,681
-------- --------
Long-term debt 158,963 127,318
Other liabilities 2,469 5,674
-------- --------
Total liabilities 264,033 259,673
-------- --------
Stockholders' equity 332,935 311,442
-------- --------
$596,968 $571,115
======== ========