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NEWS RELEASE 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 FOURTH QUARTER AND 2003 RESULTS
Fourth Quarter Revenue Up 19%; EPS Up 23% to 64 Cents
Fiscal Year Revenue Rises 31%; EPS Increases 36% to $2.13
Estimated First Quarter 2004 Revenue $105 to $108 Million; EPS 52 to 54 Cents
LAKE FOREST, Calif., December 11, 2003 -- The Cooper Companies, Inc. (NYSE: COO)
today reported results for its fourth quarter and fiscal year ended October 31,
2003.
o Fourth quarter revenue $113 million, 19% above fourth quarter 2002.
Fiscal 2003 revenue $411.8 million, 31% above 2002.
o Fourth quarter EPS 64 cents, up 23%. Fiscal year EPS $2.13, up 36%.
o Earnings before taxes, depreciation and amortization ("cash flow") per
share 94 cents, up 27% from 74 cents in fourth quarter 2002; fiscal
2003 up 30% to $3.19 from $2.45 in fiscal 2002.
o Operating cash flow $29 million for the quarter; $77 million for
fiscal 2003.
Revenue and Earnings Guidance
Cooper currently expects fiscal 2004 revenue of about $465 million to $477
million, and earnings per share of $2.48 to $2.51, assuming a 23% tax rate.
(Previous fiscal 2004 guidance was revenue of about $460 million to $470
million, and earnings per share of $2.46 to $2.51, assuming a 23% tax rate.)
In fiscal 2004, CooperVision expects worldwide revenue to grow to about $375
million to $385 million, one and one-half to two times faster than the worldwide
soft lens market, with strong specialty lens sales in the U.S. and continued
growth both in Japan and in Europe, where it will introduce several new
products.
CooperSurgical expects that 2004 revenue will range from $90 million to $92
million with an operating margin in the mid-twenties.
In the first quarter of 2004, Cooper expects revenue to range from $105 million
to $108 million with earnings per share of 52 to 54 cents. CVI expects revenue
between $83 million and $85 million, assuming the same foreign exchange rates as
in the fourth quarter. CSI expects revenue between $22 million and $23 million.
2003 Performance
Commenting on the year's results, Chief Executive Officer A. Thomas Bender said,
"The Cooper Companies had another strong year, continuing the consistent
performance it has delivered since 1995. Compared to 2002, revenue grew 31%,
operating income grew 42%, earnings per share were up 36% and cash flow per
share increased 30%. Our five year compounded annual growth in revenue is 23%,
in operating income 26%, in earnings per share 36% and in cash flow per share
27%.
"According to independent sales audit data, CooperVision (CVI), our contact lens
business, improved its market position in all of the major markets where it
competes. We estimate that our worldwide market share exceeds 10%, up from 5%
three years ago. In the United States, the world's largest market, CVI has
increased its share about 4.5 points to 13% in this same time period, and is now
the nation's third largest contact lens manufacturer. Year to date, our U.S.
business grew 26% compared to 7% market growth.
"CooperSurgical (CSI), our women's health care business, continued to execute
successfully its strategy of consolidating the market through acquisition,
completing two transactions during the fiscal year and one in December after the
year closed."
Fiscal 2003 Business Unit Summary Operating Income Statements ($'s in millions)
- --------------------------------------------------------------------------------
CooperVision CooperSurgical
------------------------------------------------------
% % Inc. % % Inc.
2003 Revenue vs 2002 2003 Revenue vs 2002
- ---------------------------------------------------- -------------------------
Net sales $329.6 100% 35% $82.2 100% 15%
Cost of sales 108.6 33% 34% 38.0 46% 9%
------ -----
Gross profit 221.0 67% 36% 44.2 54% 21%
SG&A 127.4 39% 29% 23.7 29% 16%
R&D and amortization 4.8 1% 27% 2.3 3% 15%
------ -----
Total operating expense 132.2 40% 29% 26.0 32% 16%
------ -----
Operating income $ 88.8 27% 47% $18.2 22% 29%
====== =====
- --------------------------------------------------------------------------------
Fourth Quarter 2003 Revenue and Expense Summary
Cooper's quarterly revenue of $113 million was 19% above last year's fourth
quarter, 14% in constant currency. Gross margin was 66%, the same as in last
year's fourth quarter as lower margin sales to distributors outside the U.S. and
a weaker U.S. dollar offset improvements in manufacturing efficiency.
Selling, general and administrative expenses grew 15% (10% in constant currency)
and decreased to 39% of revenue from 40% in last year's fourth quarter. While
corporate expenses declined 12% from last quarter, they increased by 73% to $3
million over the fourth quarter of 2002. These expenses include continuing costs
to maintain Cooper's global trading arrangement and to comply with new corporate
governance requirements.
In 2004 Cooper expects that corporate governance expenses will continue to
increase, while expenses for the global trading arrangement will flatten.
Fourth quarter 2003 research and development expense was $1.6 million, up 11%
over the fourth quarter of 2002, supporting previously announced plans to
develop both new and improved contact lens products.
Operating income grew 30% and the quarter's operating margin improved to 26% of
revenue versus 23% in last year's fourth quarter. Total operating expenses were
41% of revenue, down from 42% last year.
Currency fluctuations 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 offset the currency gains on overseas
revenue.
Income before taxes grew 36%, reflecting strong quarterly operating results and
lower interest expense.
The effective tax rate (ETR) for fiscal 2003 (provision for taxes divided by
income before taxes) was 24% compared to 25% for fiscal 2002. Because the ETR
for fiscal 2002 was adjusted downward in the fourth quarter, the ETR in that
quarter was 21%.
Interest expense fell 18%, reflecting primarily a general decrease in interest
rates and the Company's refinancing of certain debt that carried higher interest
rates.
Balance Sheet and Cash Flow Highlights
o At the end of the fourth fiscal quarter, Cooper's days sales
outstanding (DSO's) decreased to 67 days from 71 days a year ago.
Cooper expects future DSO's in the upper 60's to low 70's.
o Inventory months on hand was 7.0 months at the end of both years.
o Capital expenditures were about $11 million in the quarter, $34
million for the year, primarily to expand manufacturing capacity and
continue the rollout of new information systems in selected locations
including several outside the United States.
o Depreciation and amortization was $3.4 million for the quarter, $12.5
million for the year.
Business Unit Operating Highlights ($'s in millions)
- ----------------------------------------------------------------------------------
Three Months Ended October 31,
- ----------------------------------------------------------------------------------
Revenue Operating Income
- ------------------------------------- ------------------------------------------
% % %Revenue %Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
- ----------------------------------------------------------------------------------
CVI $ 90.9 $75.0 21% $26.4 $19.9 32% 29% 27%
CSI 22.1 19.7 12% 5.5 4.0 39% 25% 20%
------ ----- ----- -----
Subtotal 113.0 94.7 19% 31.9 23.9 33% 28% 25%
HQ Expense -- -- -- (3.0) (1.7) -- -- --
------ ----- ----- -----
- ----------------------------------------------------------------------------------
TOTAL $113.0 $94.7 19% $28.9 $22.2 30% 26% 23%
====== ===== ===== =====
- ----------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Twelve Months Ended October 31,
- ------------------------------------------------------------------------------------
Revenue Operating Income
- -------------------------------------- -------------------------------------------
% % %Revenue %Revenue
2003 2002 Inc. 2003 2002 Inc. 2003 2002
- ------------------------------------------------------------------------------------
CVI $329.6 $243.9 35% $ 88.8 $60.4 47% 27% 25%
CSI 82.2 71.4 15% 18.2 14.1 29% 22% 20%
------ ------ ----- -----
Subtotal 411.8 315.3 31% 107.0 74.5 44% 26% 24%
HQ Expense -- -- -- (11.8) (7.5) -- -- --
------ ------ ----- -----
- ------------------------------------------------------------------------------------
TOTAL $411.8 $315.3 31% $95.2 $67.0 42% 23% 21%
====== ====== ===== =====
- ------------------------------------------------------------------------------------
CooperVision
CVI fourth quarter revenue was $90.9 million, up 21%, about 15% in constant
currency, and $329.6 million for the fiscal year, up 35% or 28% in constant
currency.
"In our fourth quarter," said Bender, "CVI significantly outpaced both the
market and the results reported for the third 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, while our value-added monthly disposable spherical products continue
to capture market share from two-week commodity disposable spherical lenses."
CVI's operating margin in the fourth quarter was 29% versus 27% in last year's
fourth quarter and 27% for fiscal 2003 versus 25% for fiscal 2002.
CooperSurgical
CSI revenue grew 12% in the quarter to $22.1 million and 15% for the fiscal year
to $82.2 million. Virtually all of the fourth quarter's revenue growth came from
recent acquisitions.
CSI's operating margin in the fourth quarter was 25%, up from 20% in last year's
fourth quarter and 22% for the fiscal year, up from 20% the previous year.
After the close of the year, CSI announced the purchase from privately held
SURx, Inc., of the assets and associated worldwide license rights for the
Laparoscopic (LP) and Transvaginal (TV) product lines of its Radio Frequency
(RF) Bladder Neck Suspension technology, which uses radio frequency based
thermal energy instead of implants to restore continence.
RF Bladder Neck Suspension is a minimally invasive procedure used to treat
genuine stress incontinence (GSI). Using low power, bipolar RF energy, the
procedure shrinks tissue in the pelvic floor to lift the urethra and bladder
neck to a more normal anatomical position. This procedure can be performed using
either a laparoscopic or a transvaginal approach.
The SURx System consists of a small, lightweight 15 watt SURx Radio Frequency
Generator that delivers RF energy to a single use handheld applicator for each
surgical approach.
CVI Business Details
Worldwide Contact Lens Market
Revenue reported for the first nine months of 2003 by the five leading contact
lens manufacturers that represent 95% of the global market indicates that the
worldwide market grew 14%, or 8% in constant currency. Cooper estimates that the
worldwide market for soft contact lenses is $3.4 billion annually.
"The market remains strong," said Bender, "notably in the United States where
recent independent audit data reported both new and total practitioner office
visits for contact lenses up about 8% in the third calendar quarter and revenue
up 9%."
CVI Organic Growth
CVI's revenue includes its purchase of the contact lens business of
Biocompatibles plc beginning in March 2002. To measure organic growth, the data
below includes their sales for November 2001 through February 2002 when CVI did
not own them.
Fourth Quarter and Year-To-Date Contact Lens Revenue
o Worldwide CVI revenue grew 21% in the fourth quarter, about 15% in
constant currency, and was 23% ahead for the year, about 16% in
constant currency.
o Revenue for specialty lenses -- toric lenses, cosmetic lenses,
multifocal lenses and lenses to alleviate dry eye symptoms -- grew 28%
in the fourth quarter, 29% for the year, and now accounts for over 60%
of CVI's worldwide business and 70% of its revenue in the United
States.
o Sales of toric lenses, which correct astigmatism, increased 29% in the
quarter, 21% for the year and now represent about 40% of CVI's
revenue. Sales of disposable torics grew 54% in the quarter and 45%
for the year, and now represent 61% of our total toric sales.
o CVI's disposable spherical lens business grew 37% both in the fourth
quarter and for the fiscal year reflecting the ongoing transition
worldwide from commodity two-week spheres to monthly disposable
spheres that offer unique patient benefits such as CVI's Proclear
brand for patients with dry eye symptoms.
CVI Geographic Revenue Highlights
o Revenue in the United States, about half of CVI's business, grew 22%
in the quarter and 20% for the fiscal year.
o Revenue outside the United States grew 20% in the quarter and was 25%
ahead for the year, 12% in constant currency.
o European revenue, 33% of CVI's revenue in the quarter, grew 12% and
19% for the year.
o Asia-Pacific revenue more than doubled over the fourth quarter of 2002
and grew 89% year over year to $17 million, 5% of CVI's business.
Cooper expects revenue in this region to grow in excess of 35% in
2004.
CVI New Products
During the year, CVI launched Frequency Multifocal in markets outside the United
States. Total 2003 worldwide revenue was about $6 million. CVI also broadened
the 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.
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
Primarily due to strong operating results and U.S. federal tax savings resulting
from net operating loss carryforwards, Cooper's fourth quarter operating cash
flow was $29 million, $77 million for fiscal 2003. Excluding $34 million in
capital expenditures during 2003, "free cash flow" was $43 million.
Cooper expects to generate approximately $90 million in operating cash flow in
fiscal 2004.
Non-GAAP Financial Measures
Cooper's earnings before taxes, depreciation and amortization ("cash flow") per
share for the fourth quarter of fiscal 2003 was 94 cents compared to 74 cents
for the fourth quarter of 2002.
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. Furthermore, we do not add back interest expense because it is a cash
charge.
"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 October 31,
-----------------------------------------
2003 2002
------------------- -------------------
$(000) Per Share $(000) Per Share
------- --------- ------- ---------
Net income $21,041 $0.64 $16,191 $0.52
===== =====
Add:
Income taxes 6,645 4,202
Depreciation 3,041 2,668
Amortization 392 212
------- -------
"Cash Flow Per Share" $31,119 $0.94 $23,273 $0.74
======= ===== ======= =====
Shares (000) 33,033 31,335
======= =======
Twelve Months Ended October 31,
------------------------------------------
2003 2002
-------------------- -------------------
$(000) Per Share $(000) Per Share
-------- --------- ------- ---------
Net income $68,770 $2.13 $48,875 $1.57
===== =====
Add:
Income taxes 21,717 16,294
Depreciation 10,990 9,892
Amortization 1,535 1,477
-------- -------
"Cash Flow Per Share" $103,012 $3.19 $76,538 $2.45
======== ===== ======= =====
Shares (000) 32,274 31,189
======== =======
Earnings Per Share
All per share amounts reported are diluted per share amounts.
Conference Call
The Cooper Companies will hold a conference call to discuss its fourth quarter
results today at 2 p.m. Pacific Standard Time. To access the live call, dial
1-800-884-5695. A replay will be available at 1-888-286-8010 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
write off 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. and its subsidiaries develop, manufacture and market
specialty healthcare products. Its 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. 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 subsidiaries affiliates are
italicized in this news release.
(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 Year Ended
October 31, October 31,
------------------ -------------------
2003 2002 2003 2002
-------- ------- -------- --------
Net sales $112,966 $94,721 $411,790 $315,306
Cost of sales 38,183 32,596 146,588 115,813
-------- ------- -------- --------
Gross profit 74,783 62,125 265,202 199,493
Selling, general and administrative expense 43,867 38,291 162,852 126,730
Research and development expense 1,579 1,422 5,573 4,315
Amortization of Intangibles 392 212 1,535 1,477
-------- ------- -------- --------
Operating income 28,945 22,200 95,242 66,971
Interest expense 1,797 2,193 6,964 6,874
Other income, net 538 386 2,209 5,072
-------- ------- -------- --------
Income before income taxes 27,686 20,393 90,487 65,169
Provision for income taxes 6,645 4,202 21,717 16,294
-------- ------- -------- --------
Net income $ 21,041 $16,191 $ 68,770 $ 48,875
======== ======= ======== ========
Diluted earnings per share $ 0.64 $ 0.52 $ 2.13 $ 1.57
======== ======= ======== ========
Number of shares used to compute earnings 33,033 31,335 32,274 31,189
======== ======= ======== ========
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
October 31,
-------------------
2003 2002
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 47,433 $ 10,255
Trade receivables, net 84,607 74,545
Marketable securities 5,746 2,750
Inventories 89,718 76,279
Deferred tax assets 14,616 17,781
Other current assets 22,104 17,300
-------- --------
Total current assets 264,224 198,910
-------- --------
Property, plant and equipment, net 116,277 87,944
Goodwill 282,634 238,966
Other intangibles, net 15,888 14,651
Deferred tax assets 22,367 26,806
Other assets 4,174 3,838
-------- --------
$705,564 $571,115
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 20,658 $ 36,333
Other current liabilities 97,656 90,348
-------- --------
Total current liabilities 118,314 126,681
-------- --------
Long-term debt 165,203 127,318
Other liabilities -- 5,674
-------- --------
Total liabilities 283,517 259,673
-------- --------
Stockholders' equity 422,047 311,442
-------- --------
$705,564 $571,115
======== ========
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