COO [The Cooper Companies LOGO]
Listed 21062 Bake Parkway, Suite 200
NYSE Lake Forest, CA 92630
[LOGO] 888-822-2660
Fax: 949-597-0662
NEWS RELEASE
CONTACT:
Norris Battin
The Cooper Companies, Inc.
ir@coopercompanies.com
FOR IMMEDIATE RELEASE
THE COOPER COMPANIES REPORTS THIRD QUARTER RESULTS
Revenue Grows 20% to $108.4 Million; EPS 58 Cents, Up 35%
Operating Income Ahead 49%
Revenue and EPS Guidance Raised for 2003 and 2004
LAKE FOREST, Calif., September 3, 2003 -- The Cooper Companies, Inc. (NYSE: COO)
today reported results for its fiscal third quarter ended July 31, 2003.
o Revenue $108.4 million, 20% above third quarter 2002
o Earnings per share 58 cents; trailing twelve months $2.01
o Operating cash flow $18 million
o Earnings before taxes, depreciation and amortization ("cash flow") per
share 84 cents, up 22% from 69 cents in third quarter 2002; trailing
twelve months $2.99
Revenue and Earnings Guidance
For the fiscal fourth quarter ending October 31, 2003, excluding any unusual
items, Cooper expects revenue to range from $110 million to $114 million with
earnings per share ranging from 61 cents to 63 cents assuming a 24% effective
tax rate.
For the 2003 fiscal year, Cooper now expects revenue of $409 million to $413
million and EPS of $2.10 to $2.12 using a 24% effective tax rate. (Previous
guidance was $395 million to $405 million in revenue and EPS ranging from $2.03
to $2.07 with a 25% effective tax rate.)
For fiscal 2004, Cooper expects that revenue will range from $460 million to
$470 million with earnings per share ranging from $2.46 to $2.51 assuming a 23%
effective tax rate. (Previous guidance was $450 million to $460 million in
revenue and EPS ranging from $2.42 to $2.48 assuming a 24% effective tax rate.)
Third Quarter 2003 Revenue and Income Summary
Cooper's quarterly revenue of $108.4 million was 20% above last year's third
quarter, 14% in constant currency.
Gross margin improved to 63% from 62% in last year's third quarter when
CooperSurgical (CSI), the Company's women's healthcare medical device business,
discontinued a product line at a cost of about $2 million.
Selling, general and administrative expenses grew 12% (8% in constant currency)
and decreased to 38% of revenue from 41% in last year's third quarter. Corporate
headquarters' expenses, which increased 47% to $3.4 million, include continued
expenses for various projects associated with maintaining the Company's global
trading arrangement. These expenses are expected to flatten and then decline
after 2003, but costs to comply with recently enacted and proposed corporate
governance requirements are expected to increase in 2004.
Third quarter 2003 research and development expense was $1.4 million, up 25%
over the third quarter of 2002, supporting previously announced plans to develop
new and improved contact lens products. During the 2003 to 2005 period,
CooperVision (CVI), the Company's contact lens business, plans to invest in two
new research programs: the development of an extended wear contact lens and an
improved contact lens technology.
Operating income grew 49% and the quarter's operating margin improved to 23% of
revenue versus 19% in last year's third quarter. Total operating expenses
improved to 40% of revenue from 43% last year.
Currency did not materially impact operating income in the quarter. Because CVI
manufactures the majority of its lenses in the United Kingdom with costs
denominated in pounds sterling, the unfavorable currency translation of
manufacturing and operating costs tends to neutralize the favorable currency
impact on overseas revenue.
Income before taxes grew 31% driven by strong operating results despite a
significant drop in miscellaneous income, which included a gain of $2.1 million
from the sale of securities in the third quarter of 2002. Interest expense fell
29%, reflecting a general decrease in interest rates and the Company's
refinancing of certain debt carrying higher interest rates.
Cooper now expects that its effective tax rate (ETR) for fiscal 2003 (provision
for taxes divided by income before taxes) will be 24%, down from the 25%
reported in its second quarter results, and 23% in fiscal 2004, down from the
previous estimate of 24%. Because accounting principles generally accepted in
the United States require the projected fiscal year ETR to be included in the
year-to-date results, the ETR was revised downward to adjust for the favorable
shift of business to jurisdictions with lower tax rates. This resulted in a 22%
ETR in the third quarter. The cumulative 24% ETR favorably impacted quarterly
earnings per share by 2 cents, including a 1-cent benefit from the prior six
months.
Business Unit P&L Highlights ($'s in millions)
- ---------------------------------------------------------------------------------------------------------
Three Months Ended July 31,
- ---------------------------------------------------------------------------------------------------------
Revenue Operating Income
- ---------------------------------------------------------------------------------------------------------
% % % Revenue % Revenue
2003 2002 Inc. 2003 2003 Inc. 2003 2002
- ---------------------------------------------------------------------------------------------------------
CVI $87.8 $70.6 24% $23.9 $16.8 42% 27% 24%
CSI 20.6 20.0 4% 4.8 2.5 95% 23% 12%
------ ------ ----- -----
Subtotal 108.4 90.6 20% 28.7 19.3 49% 27% 21%
HQ Expense - - - (3.4) (2.3) - - -
- ---------------------------------------------------------------------------------------------------------
TOTAL $108.4 $90.6 20% $25.3 $17.0 49% 23% 19%
====== ===== ===== =====
- ---------------------------------------------------------------------------------------------------------
Nine Months Ended July 31,
- ---------------------------------------------------------------------------------------------------------
Revenue Operating Income
- ---------------------------------------------------------------------------------------------------------
% % % Revenue % Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
- ---------------------------------------------------------------------------------------------------------
CVI $238.6 $168.9 41% $62.5 $40.5 54% 26% 24%
CSI 60.2 51.7 16% 12.6 10.0 26% 21% 19%
------ ------ ----- -----
Subtotal 298.8 220.6 35% 75.1 50.5 49% 25% 23%
HQ Expense - - - (8.8) (5.7) - - -
- ---------------------------------------------------------------------------------------------------------
TOTAL $298.8 $220.6 35% $66.3 $44.8 48% 22% 20%
====== ====== ===== =====
- ---------------------------------------------------------------------------------------------------------
CooperVision
Third quarter revenue at CVI was $87.8 million, up 24% -- 17% in constant
currency -- and is ahead 41% for the nine-month period, 34% in constant
currency.
"In our third quarter," said A. Thomas Bender, Cooper's chief executive officer,
"CVI significantly outpaced both the market and results reported for the second
calendar quarter by our four direct competitors. Our specialty lens franchise --
toric, cosmetic and multifocal lenses and lenses to alleviate dry eye symptoms
- -- continues to gain momentum, and our value-added spherical products continue
to capture market share from two-week commodity spherical lenses."
In the fourth fiscal quarter, CVI expects revenue to range between $89 million
and $92 million, assuming the same foreign exchange rates as in the third
quarter.
CooperSurgical
At CSI, revenue grew 4% in the quarter to $20.6 million and is ahead 16% through
the nine-month period. Virtually all of the third quarter's revenue growth came
from recent acquisitions.
"CSI revenue was about $1 million below our guidance," said Bender, "as softness
continues in the capital equipment sector of the women's healthcare market.
"In addition, we experienced a delay launching a replacement for an in-vitro
fertilization catheter that CSI could no longer market when an exclusive
distributor relationship ended. We estimate that we lost about $1 million in
revenue in the quarter because of this. CSI expects that the replacement product
will be launched in the fourth quarter."
CSI's operating margin in the third quarter was 23%, up from 12% in last year's
third quarter when a product discontinuation depressed results. CSI's operating
margin through nine months is 21%.
CSI expects revenue between $21 million and $22 million in the fourth quarter
with operating margins approaching 25%.
CVI Business Details
Worldwide Contact Lens Market
Revenue reported for the first six months of 2003 by the five leading contact
lens manufacturers indicates that the worldwide market grew about 13%, exceeding
the calendar year 2002 growth of 10%.
"The market remains strong," said Bender, "notably in the United States. Recent
independent audit data reported total practitioner office visits for contact
lenses up about 8% in the second calendar quarter with new patient visits, the
indicator of future lens demand, growing about 13%."
CVI Organic Growth
CVI's consolidated revenue includes Biocompatibles beginning in March 2002. To
measure organic growth, the data below includes their sales for November of 2001
through February of 2002 when CVI did not own them.
Third Quarter and Year-To-Date Contact Lens Revenue
o Worldwide CVI revenue grew 24% in the third quarter, about 17% in
constant currency, and is 23% ahead for the nine-month period, about
17% in constant currency.
o Revenue for specialty lenses -- toric lenses, cosmetic lenses,
multifocal lenses and lenses to alleviate dry eye symptoms -- grew 26%
in the third quarter, 30% for the nine-month period, and now accounts
for 61% of CVI's soft lens business.
o Sales of toric lenses, which correct astigmatism, increased 21% and
now represent about 40% of CVI's soft lens revenue. They are 18% ahead
for the nine-month period. Disposable toric sales grew 48% in the
quarter and now represent about 64% of CVI's toric business. They grew
41% over the comparable nine-month period of 2002.
o CVI's disposable spherical lens business grew 39% in the third quarter
and 37% for the nine-month period. This strong growth reflects the
continuing transition in the worldwide contact lens market from
commodity two-week spheres to monthly disposable spheres that offer
unique patient benefits.
CVI Geographic Revenue Highlights
o Revenue in the United States, 48% of CVI's business in the quarter,
grew 16%. Year to date, CVI's U.S. revenue is up 19%.
o Revenue outside the United States grew 33%, 18% in constant currency,
and is 28% ahead for the nine-month period, 14% in constant currency.
o European revenue, about 37% of CVI's revenue in the quarter, grew 28%
and is ahead 22% year to date.
o Asia-Pacific revenue grew 91% compared to the third quarter of 2002
and is ahead 78% for the nine-month period. It now represents 4% of
CVI's business. CVI expects sales to Japan of about $5 million in
fiscal 2003 and about $8 million in 2004.
CVI New Products
During the third quarter, CVI launched Frequency Multifocal in markets outside
the United States. Sales of Frequency Multifocal in the United States remain
ahead of expectations, with fiscal 2003 worldwide revenue estimated at $6
million to $8 million.
During the first nine months, CVI broadened domestic distribution of Proclear
Toric disposable lenses and introduced Expressions Accents, disposable cosmetic
products that accentuate the natural color of the eye.
Continuing to build on the Proclear franchise, CVI has accelerated its plans to
introduce Proclear Multifocal, which is now scheduled for launch in the next six
months, first in Europe and then in the United States.
Balance Sheet Information
o At the end of the third fiscal quarter, Cooper's days sales
outstanding (DSO's) decreased to 66 days from 71 days in the second
quarter. Cooper expects future DSO's in the upper 60's to low 70's.
o Inventory months on hand fell to 6.3 months from 7.2 months in the
second quarter, reflecting a changing product mix and the
consolidation of Biocompatibles' manufacturing facilities.
o Capital expenditures were about $9.3 million in the quarter, $22.8
million year to date, primarily to expand manufacturing capacity.
o Depreciation and amortization was $3.1 million for the quarter, $9.1
million year to date.
Offering of Convertible Senior Debentures
In June, the Company completed the sale, in a private placement, of $115 million
of 2.625% convertible senior debentures due 2023. The debentures will be
convertible, under certain conditions, into shares of Cooper's common stock at
an initial conversion price of approximately $44.40 per share. A portion of the
net proceeds was used to reduce amounts drawn under its revolving credit
facility, and the remainder will be used for general corporate purposes,
including possible future acquisitions.
Operating Cash Flow
Cooper's third quarter operating cash flow was $18 million, $48 million through
the first nine months. Cooper expects to generate more than $60 million in
operating cash for fiscal 2003. Excluding the $23 million spent for capital
expenditures through the nine months of 2003, "free cash flow" was $25 million.
Non-GAAP Financial Measures
Cooper's earnings before taxes, depreciation and amortization ("cash flow") per
share for the third quarter of fiscal 2003 was 84 cents and 69 cents for the
third quarter of 2002. For the nine months ended July 31, "cash flow per share"
was $2.25 per share in 2003 and $1.71 per share in 2002 and $2.99 for the
trailing 12-month period.
Although "cash flow per share" is a non-GAAP financial measure, we disclose it
because we believe it is an appropriate measure of our liquidity and financial
strength, particularly when calculated consistently over time. Cooper has been
reporting "cash flow per share" since 1999.
In Cooper's case, earnings before taxes, depreciation and amortization per share
is more informative than the more common non-GAAP measure of liquidity called
"earnings before interest, taxes, depreciation and amortization." This is
because, unlike most companies, Cooper does not anticipate paying federal income
taxes until about 2007, when it expects to exhaust its U.S. net operating loss
carryforwards. This cash savings gives Cooper a significant competitive
advantage, as most companies spend a large portion of their pretax profits on
taxes.
"Cash flow per share" is not a substitute for the GAAP measure of operating cash
flow. We present this data to increase awareness that income taxes provided for
in our statement of income are essentially all noncash provisions, which go
toward reducing our recorded deferred tax asset in accordance with accounting
principles generally accepted in the United States.
To calculate "cash flow per share," we add back noncash 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.
Three Months Ended July 31,
--------------------------------------------------------------
2003 2002
-------------------------- -------------------------
$(000) Per Share $(000) Per Share
------- --------- ------- ---------
Net income $18,663 $0.58 $13,361 $0.43
===== =====
Add:
Income taxes 5,383 4,941
Depreciation 2,756 2,779
Amortization 388 565
------- -------
"Cash Flow Per Share" $27,190 $0.84 $21,646 $0.69
======= ===== ======= =====
Shares (000) 32,398 31,210
======= =======
Nine Months Ended July 31,
--------------------------------------------------------------
2003 2002
-------------------------- -------------------------
$(000) Per Share $(000) Per Share
------- --------- ------- ---------
Net income $47,729 $1.49 $32,684 $1.05
===== =====
Add:
Income taxes 15,072 12,092
Depreciation 7,949 7,224
Amortization 1,143 1,265
------- -------
"Cash Flow Per Share" $71,893 $2.25 $53,265 $1.71
======= ===== ======= =====
Shares (000) 31,950 31,139
======= =======
12 Months Ended
July 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 Per Share" $76,538 $2.45
======= =====
Shares (000) 31,189
=======
Trailing twelve months ended July 31, 2003:
Twelve months ended October 31, 2002 $2.45
Less: nine months ended July 31, 2002 (1.71)
Add: nine months ended July 31, 2003 2.25
-----
"Cash flow per share" for the 12 months
ended July 31, 2003 $2.99
=====
Earnings per Share
All per share amounts in this news release are diluted per share amounts.
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. This call will also
be broadcast live on The Cooper Companies' website, www.coopercos.com.
Forward-Looking Statements
This news release contains "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995. These include statements about
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. To identify these
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. 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, worldwide regulatory issues, including product
recalls and the effect of healthcare reform legislation, 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, including impaired goodwill, changes in accounting
principles or estimates, including the potential cost of expensing stock
options, and other events 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.
Corporate Information
The Cooper Companies, Inc. manufactures and markets specialty healthcare
products through its CooperVision and CooperSurgical units.
CooperVision 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 supplies diagnostic products, surgical instruments and
accessories to the gynecology market. With headquarters in Trumbull, Conn., it
also manufactures in Bedminister N.J., Cranford, N.J., Fort Atkinson, Wis.,
Malmo, Sweden, Montreal and Berlin. Its Web address is www.coopersurgical.com.
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. Cooper's World Wide Web address is
www.coopercos.com.
The Cooper Companies, Inc., its subsidiaries or affiliates own, license or
distribute the following trademarks italicized in this news release: Expressions
Accents'TM', Frequency Multifocal'TM' and Proclear'r'.
(FINANCIAL STATEMENTS FOLLOW)
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except earnings per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------ -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net sales $108,442 $ 90,563 $298,824 $220,585
Cost of sales 39,810 34,844 108,405 83,217
-------- -------- -------- --------
Gross profit 68,632 55,719 190,419 137,368
Selling, general and administrative expense 41,518 37,055 118,985 88,439
Research and development expense 1,400 1,118 3,994 2,893
Amortization of intangibles 388 565 1,143 1,265
-------- -------- -------- --------
Operating income 25,326 16,981 66,297 44,771
Interest expense 1,655 2,347 5,167 4,681
Other income, net 375 3,668 1,671 4,686
-------- -------- -------- --------
Income before income taxes 24,046 18,302 62,801 44,776
Provision for income taxes 5,383 4,941 15,072 12,092
-------- -------- -------- --------
Net income $ 18,663 $ 13,361 $ 47,729 $ 32,684
-------- ======== ======== ========
Diluted earnings per share $ 0.58 $ 0.43 $ 1.49 $ 1.05
======== ======== ======== ========
Number of shares used to compute
diluted earnings per share 32,398 31,210 31,950 31,139
======== ======== ======== ========
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
July 31, October 31,
2003 2002
------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 30,798 $ 10,255
Trade receivables, net 80,006 74,545
Marketable securities 5,976 2,750
Inventories 82,880 76,279
Deferred tax asset 14,423 17,781
Other current assets 20,950 17,300
-------- ---------
Total current assets 235,033 198,910
-------- ---------
Property, plant and equipment, net 105,401 87,944
Goodwill 273,297 238,966
Other intangibles, net 14,626 14,651
Deferred tax asset 24,089 26,806
Other assets 4,663 3,838
-------- ---------
$657,109 $571,115
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 22,744 $ 36,333
Other current liabilities 86,562 90,348
-------- --------
Total current liabilities 109,306 126,681
-------- --------
Long-term debt 169,055 127,318
Other liabilities 1,521 5,674
-------- --------
Total liabilities 279,882 259,673
-------- --------
Stockholders' equity 377,227 311,442
-------- --------
$657,109 $571,115
======== ========
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