<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarterly Period Ended April 30, 1994
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-8597
The Cooper Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-2657368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Bridge Plaza, Fort Lee, New Jersey 07024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 585-5100
Indicate by check mark whether the registrant (1) has filled all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----
Indicate the number of shares outstanding of each of issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.10 par value 30,360,236 Shares
Class Outstanding at May 31, 1994
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet -
April 30, 1994 and October 31, 1993 3
Statement of Consolidated Operations -
Three and Six Months Ended April 30,
1994 and 1993 4
Consolidated Condensed Statement
of Cash Flows - Six Months Ended
April 30, 1994 and 1993 5
Notes to Consolidated Condensed
Financial Statements 6-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20-21
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
Index of Exhibits 24
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1994 1993
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,092 $ 10,113
Restricted cash 46 306
Temporary investments 124 6,438
Receivables:
Trade and patient accounts, net 18,603 14,298
Other 583 2,821
-------- ---------
19,186 17,119
-------- ---------
Inventories 13,248 14,987
Other current assets 1,464 2,912
-------- ---------
Total current assets 43,160 51,875
-------- ---------
Property, plant and equipment at cost 44,910 48,294
Less, accumulated depreciation and amortization 9,285 8,399
-------- ---------
35,625 39,895
-------- ---------
Intangibles, net:
Excess of cost over net assets acquired 14,389 14,661
Other 1,409 1,624
-------- ---------
15,798 16,285
-------- ---------
Other assets 1,327 1,469
-------- ---------
$ 95,910 $ 109,524
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt:
10 5/8% Convertible Subordinated Reset
Debentures due 2005 $ - $ 4,350
Other 1,488 1,499
-------- ---------
1,488 5,849
-------- ---------
Accounts payable 4,837 4,269
Employee compensation, benefits and severance 6,004 5,961
Other accrued liabilities 22,393 21,079
Income taxes payable 14,946 14,837
-------- ---------
Total current liabilities 49,668 51,995
-------- ---------
Long-term debt:
10% Senior Subordinated Secured Notes due 2003 25,732 -
10-5/8% Convertible Subordinated Reset Debentures
due 2005 9,208 34,647
Other, less current installments 12,241 13,430
-------- ---------
47,181 48,077
-------- ---------
Other noncurrent liabilities 7,750 9,000
-------- ---------
Total liabilities 104,599 109,072
-------- ---------
Commitments and Contingencies (See Note 3)
Stockholders' equity (deficit):
Series B preferred stock, $.10 par value - -
Common stock, $.10 par value 3,013 3,013
Additional paid-in capital 179,810 179,810
Translation adjustments (397) (223)
Accumulated deficit (190,743) (181,743)
Unamortized restricted stock award compensation (372) (405)
-------- ---------
Total stockholders' equity (deficit) (8,689) 452
-------- ---------
$ 95,910 $ 109,524
-------- ---------
-------- ---------
</TABLE>
See accompanying notes.
3
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(In thousands, expect per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net service revenue $ 11,783 $ 12,245 $ 22,814 $ 24,673
Net sales of products 12,672 11,414 24,548 21,346
-------- -------- -------- --------
Net operating revenue 24,455 23,659 47,362 46,019
-------- -------- -------- --------
Cost of services provided 10,587 10,951 20,426 21,938
Cost of products sold 4,582 4,158 8,707 7,988
Research and development expense 1,172 616 2,328 1,330
Selling, general and administrative
expense 8,428 12,168 17,192 23,669
Cost of restructuring operations - 451 - 451
Settlement of disputes 2,000 - 3,950 -
Debt restructuring costs - - 429 -
Amortization of intangibles 212 179 422 363
Investment income (loss), net ( 129) ( 249) ( 480) 3,428
Gain on sales of assets and
businesses, net - 620 214 620
Other income (expense), net ( 93) ( 59) ( 58) 186
Interest expense 1,024 1,536 2,426 3,170
-------- -------- -------- --------
Loss from continuing operations
before income taxes ( 3,772) ( 6,088) ( 8,842) ( 8,656)
Provision for income taxes 78 95 158 211
-------- -------- -------- --------
Loss from continuing operations
before extraordinary item ( 3,850) ( 6,183) (9,000) ( 8,867)
Loss on sale of discontinued
operations, net of taxes - (13,657) - (13,657)
-------- -------- -------- --------
Loss before extraordinary item ( 3,850) (19,840) (9,000) (22,524)
Extraordinary item - - - 924
-------- -------- -------- --------
Net loss ( 3,850) (19,840) (9,000) (21,600)
Dividend requirements on Senior
Exchangeable Redeemable Restricted
Voting Preferred Stock - ( 160) - ( 320)
-------- -------- -------- --------
Net loss applicable to common stock $( 3,850) $(20,000) $ (9,000) $(21,920)
-------- -------- -------- --------
-------- -------- -------- --------
Net income (loss) per common share:
Loss from continuing operations
before extraordinary item $( .13) $( .22) $( .30) $( .31)
Loss from discontinued operations - ( .45) - ( .45)
-------- -------- -------- --------
Loss before extraordinary item ( .13) ( .67) ( .30) ( .76)
Extraordinary item - - - .03
-------- -------- -------- --------
Net loss per common share $( .13) $( .67) $( .30) $( .73)
-------- -------- -------- --------
-------- -------- -------- --------
Average number of common shares
outstanding 30,500 30,033 30,461 30,048
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes
4
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
1994 1993
---------- ----------
<S> <C> <C>
Net cash used by operating activities $( 4,372) $( 22,468)
---------- ----------
Cash flows from investing activities:
Cash from sales of assets and businesses
(including releases of cash from escrow) 2,622 9,900
Purchase of CoastVision, Inc. net of
cash acquired - ( 9,794)
Sales of temporary investments 7,188 21,591
Purchases of temporary investments - ( 3,689)
Purchases of property, plant and equipment ( 307) ( 1,005)
---------- ----------
Net cash provided by investing activities 9,503 17,003
Cash flows from financing activities:
Payments associated with the Exchange Offer
and Consent Solicitation including debt
restructuring costs ( 5,402) -
Purchase of the Company's 10 5/8% Debentures - ( 3,861)
Payments of notes payable related to acquisition - ( 400)
Payments of current installments of long-term debt ( 750) ( 3,368)
---------- ----------
Net cash used by financing activities ( 6,152) ( 7,629)
---------- ----------
Net decrease in cash and cash equivalents ( 1,021) ( 13,094)
Cash and cash equivalents - beginning of period 10,113 38,078
---------- ----------
Cash and cash equivalents - end of period $ 9,092 $ 24,984
---------- ----------
---------- ----------
Cash paid for:
Interest $ 2,266 $ 3,285
---------- ----------
---------- ----------
Income taxes $ 49 $ 109
---------- ----------
---------- ----------
Significant non-cash transactions:
Pay-in-kind stock dividends on Senior
Exchangeable Restricted Voting Preferred
Stock $ - $ 320
---------- ----------
---------- ----------
January 1994 Issuance of $22,000,000 of Notes
and payment of approximately $4,350,000 in cash
(exclusive of transaction costs) in exchange for
approximately $30,000,000 of Debentures. See Note 2.
</TABLE>
See accompanying notes.
5
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1. General
The Cooper Companies, Inc. and its subsidiaries (the "Company") develop,
manufacture and market healthcare products, including a range of hard and
soft daily, flexible and extended wear contact lenses, ophthalmic
pharmaceutical products and diagnostic and surgical instruments. The
Company also provides healthcare services through the ownership and
operation of certain psychiatric facilities and management of other such
facilities.
During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC"). Readers are encouraged to refer to the
Company's 1993 Form 10-K when reviewing interim financial results.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to present
fairly the Company's consolidated financial position as of April 30, 1994
and October 31, 1993 and the consolidated results of its operations for the
three and six month periods ended April 30, 1994 and 1993, and its
consolidated cash flows for the six months ended April 30, 1994 and 1993.
With the exception of certain adjustments discussed in Part I, Item 2 under
"Settlement of Disputes," such adjustments consist of only normal and
recurring adjustments. Certain reclassifications have been applied to prior
period financial statements to conform such statements to the current
periods' presentation. None of such reclassifications had any impact on net
loss.
Note 2. Exchange Offer and Consent Solicitation
On January 6, 1994, the Company consummated an Exchange Offer and Consent
Solicitation in which it issued approximately $22,000,000 of 10% Senior
Subordinated Secured Notes due 2003 (the "Notes") and paid approximately
$4,350,000 in cash ($725 principal amount of Notes and $145 in cash for each
$1,000 principal amount of 10 5/8% Convertible Subordinated Reset Debentures
due 2005 (the "Debentures")) in exchange for approximately $30,000,000
aggregate principal amount of Debentures (out of $39,384,000 aggregate
principal amount then outstanding). The Company also obtained, pursuant to
the Exchange Offer and Consent Solicitation, consents of the holders of
Debentures to (i) certain proposed amendments governing the indenture to
the Debentures (the "Indenture") and (ii) a waiver of any defaults under the
Indenture. Following the exchange, approximately $9,400,000 aggregate
principal amount of Debentures remains outstanding.
On January 6, 1994, after receiving consents from holders of a majority of
the outstanding principal amount of Debentures not owned by the Company or
its affiliates, the Company and the Trustee under the Indenture executed the
Second Supplemental Indenture effecting the proposed amendments, which
eliminated or modified various covenants in the Indenture.
6
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
The consummation of the Exchange Offer and Consent Solicitation also
satisfied a condition of an agreement reached in September 1993 between the
Company and Medical Engineering Corporation ("MEC") limiting the Company's
liability with respect to breast implant litigation. Such condition would
have allowed MEC to terminate the agreement if the Exchange Offer and
Consent Solicitation (or an alternative restructuring of the Debentures) was
not completed by February 1, 1994. The Notes bear interest from September
1, 1993 at a rate equal to 10% per annum. (Interest accrued from September
1, 1993 was not paid on Debentures tendered and accepted pursuant to the
Exchange Offer and Consent Solicitation.) Interest on the Notes is payable
quarterly on each March 1, June 1, September 1 and December 1, commencing
March 1, 1994. The Notes are redeemable solely at the option of the
Company, in whole or in part, at any time, at a redemption price equal to
100% of their principal amount, together with accrued and unpaid interest
thereon to the redemption date. The Company is not required to effect any
mandatory redemptions or make any sinking fund payments with respect to the
Notes, except in connection with certain sales or other dispositions of, or
certain financings secured by, the collateral securing the Notes. Pursuant
to a pledge agreement dated as of January 6, 1994, between the Company and
the trustee for the holders of the Notes, the Company has pledged a first
priority security interest in all of its right, title and interest in stock
of its subsidiaries Hospital Group of America, Inc. ("HGA") and
CooperSurgical, Inc. ("CooperSurgical"), all additional shares of stock of,
or other equity interests in HGA and CooperSurgical from time to time
acquired by the Company, all intercompany indebtedness of HGA and
CooperSurgical from time to time held by the Company, and except as set
forth in the indenture governing the Notes, the proceeds received from the
sale or disposition of any or all of the foregoing. A full description of
the pledge agreement and terms of the indenture governing the Notes is
included in the Company's Amended and Restated Offer to Exchange and Consent
Solicitation filed with the SEC on December 15, 1993.
The Exchange Offer and Consent Solicitation has been accounted for in
accordance with Statement of Financial Accounting Standards No. 15
"Accounting by Debtors and Creditors for Troubled Debt Restructurings."
Consequently, the difference between the carrying value of the Debentures
exchanged less the face value of the Notes issued and the aggregate cash
payment for the Debentures was recorded as a deferred premium aggregating
approximately $4,000,000 as of the date of the Exchange. The Company is
recognizing the benefit of the deferred premium as a reduction to the
effective interest rate on the Notes over the life of the issue. In
addition, the Company recorded a charge of $2,131,000 in the fourth quarter
of 1993 and an additional charge of $429,000 in the first quarter of 1994
for costs related to the Exchange Offer and Consent Solicitation.
Note 3. Legal Proceedings
On November 10, 1992, the Company was charged in an indictment (the
"Indictment"), filed in the United States District Court for the Southern
District of New York, with violating federal criminal laws relating to a
"trading scheme" by Gary A. Singer, a former Co-Chairman of the Company (who
went on a leave of absence on May 28, 1992, begun at the Company's request,
and who subsequently resigned on January 20, 1994), and others, including G.
Albert Griggs, Jr., a former analyst of The Keystone Group, Inc., and John
D. Collins II, to "frontrun" high yield bond purchases by the Keystone
7
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Custodian Funds, Inc., a group of mutual funds. The Company was named as a
defendant in 10 counts. Gary Singer was named as a defendant in 24 counts,
including violations of the Racketeer Influenced and Corrupt Organizations
Act and the mail and wire fraud statutes (including defrauding the Company
by virtue of the "trading scheme," by, among other things, transferring
profits on trades on DR Holdings, Inc. 15.5% bonds (the "DR Holdings Bonds")
from the Company to members of his family during fiscal 1991), money
laundering, conspiracy, and aiding and abetting violations of the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), by an
investment advisor.
On January 13, 1994, the Company was found guilty on six counts of mail
fraud and one count of wire fraud based upon Mr. Singer's conduct, but
acquitted of charges of conspiracy and aiding and abetting violations of the
Investment Advisers Act. Mr. Singer was found guilty on 21 counts. One
count against Mr. Singer and the Company was dismissed at trial and two
counts against Mr. Singer relating to forfeiture penalties were resolved by
stipulation between the government and Mr. Singer. Sentencing is currently
scheduled for June 24, 1994. The maximum penalty which could be imposed on
the Company is the greater of (i) $500,000 per count, (ii) twice the gross
gain derived from the offense or (iii) twice the gross loss suffered by the
victim of the offense, and a $200 special assessment. In addition to the
penalties described in (i), (ii) or (iii), the Court could order the Company
to make restitution. Mr. Singer's attorney has advised the Company that Mr.
Singer intends to appeal his conviction. Although the Company may be
obligated under its Certificate of Incorporation to advance the costs of
such appeal, the Company and Mr. Singer have agreed that Mr. Singer will not
request such advances, but that he will reserve his rights to
indemnification in the event of a successful appeal.
Also on November 10, 1992, the SEC filed a civil Complaint for Permanent
Injunction and Other Equitable Relief (the "SEC Complaint") in the United
States District Court for the Southern District of New York against the
Company, Gary A. Singer, Steven G. Singer (an Executive Vice President of
the Company, presently on leave of absence, and Gary Singer's brother), and,
as relief defendants, certain persons related to Gary and Steven Singer and
certain entities in which they and/or those related persons have an
interest. The SEC Complaint alleges that the Company and Gary and Steven
Singer violated various provisions of the Securities Exchange Act of 1934,
as amended (the "Securities Exchange Act"), including certain of its
antifraud and periodic reporting provisions, and aided and abetted
violations of the Investment Company Act and the Investment Advisors Act, in
connection with the trading scheme described in the preceding paragraphs.
The SEC Complaint further alleges, among other things, federal securities
law violations (i) by the Company and Gary Singer in connection with an
alleged manipulation of the trading price of the Company's 10 5/8%
Convertible Subordinated Reset Debentures due 2005 (the "Debentures") to
avoid an interest rate reset allegedly required on June 15, 1991 under the
terms of the Indenture governing the Debentures, (ii) by Gary Singer in
allegedly transferring profits on trades of high yield bonds (including
those trades in the DR Holdings Bonds which were the subject of certain
counts of the Indictment of which Mr. Singer was found guilty) from the
Company to members of his family and failing to disclose such transactions
to the Company, and (iii) by the Company in failing to disclose publicly on
a timely basis such transactions by Gary Singer. The SEC Complaint asks
8
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
that the Company and Gary and Steven Singer be enjoined permanently from
violating the antifraud, periodic reporting and other provisions of the
federal securities laws, that they disgorge the amounts of the alleged
profits received by them pursuant to the alleged frauds (stated in the SEC's
Litigation Release No. 13432 announcing the filing of the SEC Complaint as
being $1,296,406, $2,323,180 and $174,705, respectively), plus interest, and
that they each pay appropriate civil monetary damages. The SEC Complaint
also seeks orders permanently prohibiting Gary and Steven Singer from
serving as officers or directors of any public company and disgorgement from
certain Singer family members and entities of amounts representing the
alleged profits received by such defendants pursuant to the alleged frauds.
In February 1993, the court granted a motion staying all proceedings in
connection with this matter pending completion of the criminal case. On
January 24, 1994, the Court lifted the stay and directed the defendants to
file answers to the SEC Complaint. The Company is currently involved in
settlement negotiations with the SEC, and the time to file answers to the
SEC Complaint has been postponed. At this time, there can be no assurances
that these negotiations will be successfully concluded.
The imposition of monetary penalties upon the Company as a result of the
criminal convictions or in connection with the matters alleged in the SEC
Complaint, as well as the incurrence of any additional defense costs, could
exacerbate, possibly materially, the Company's liquidity problems and its
need to raise funds. See Item 2 "Capital Resources and Liquidity."
The Company is named as a nominal defendant in a shareholder derivative
action entitled Harry Lewis and Gary Goldberg V. Gary A. Singer, Steven G.
Singer, Arthur C. Bass, Joseph C. Feghali, Warren J. Keegan, Robert S.
Holcombe and Robert S. Weiss, which was filed on May 27, 1992 in the Court
of Chancery, State of Delaware, New Castle County. On May 29, 1992, another
plaintiff, Alfred Schecter, separately filed a derivative complaint in
Delaware Chancery Court that was essentially identical to the Lewis and
Goldberg complaint. Lewis and Goldberg later amended their complaint, and
the Delaware Chancery Court thereafter consolidated the Lewis and Goldberg
and Schecter actions as In re The Cooper Companies, Inc. Litigation,
Consolidated C.A. 12584, and designated Lewis and Goldberg's amended
complaint as the operative complaint (the "First Amended Derivative
Complaint"). The First Amended Derivative Complaint alleges that certain
directors of the Company and Gary A. Singer, as Co-Chairman of the Board of
Directors, caused or allowed the Company to be a party to the "trading
scheme" that was the subject of the Indictment. The First Amended
Derivative Complaint also alleges that the defendants violated their
fiduciary duties to the Company by not vigorously investigating the
allegations of securities fraud. The First Amended Derivative Complaint
requests that the Court order the defendants (other than the Company) to pay
damages and expenses to the Company and certain of the defendants to
disgorge their profits to the Company. On October 16, 1992, the defendants
moved to dismiss the First Amended Derivative Complaint on grounds that such
Complaint fails to comply with Delaware Chancery Court Rule 23.1 and that
Count III of the First Amended Derivative Complaint fails to state a claim.
The Company has been advised by the individual directors named as defendants
that they believe they have meritorious defenses to this lawsuit and intend
vigorously to defend against the allegations in the First Amended Derivative
Complaint.
9
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
The Company was named as a nominal defendant in a purported shareholder
derivative action entitled Bruce D. Sturman v. Gary A. Singer, Steven G.
Singer, Brad C. Singer, Martin Singer, John D. Collins II, Back Bay Capital,
Inc., G. Albert Griggs, Jr., John and Jane Does 1-10 and The Cooper
Companies, Inc., which was filed on May 26, 1992 in the Supreme Court of the
State of New York, County of New York. The plaintiff, Bruce D. Sturman, a
former officer and director of the Company, alleged that Gary A. Singer, as
Co-Chairman of the Board of Directors, and various members of the Singer
family caused the Company to make improper payments to alleged third-party
co-conspirators, Messrs. Griggs and Collins, as part of the "trading scheme"
that was the subject of the Indictment. The complaint requested that the
Court order the defendants (other than the Company) to pay damages and
expenses to the Company, including reimbursement of payments made by the
Company to Messrs. Collins and Griggs, and to disgorge their profits to the
Company. Pursuant to its decision and order, filed August 17, 1993, the
Court dismissed this action under New York Civil Practice Rule 327(a). On
September 22, 1993, the plaintiff filed a Notice of Appeal.
On September 2, 1993, a patent infringement complaint was filed against the
Company in the United States District Court for the District of Nevada
captioned Steven P. Shearing v. The Cooper Companies, Inc. On or about that
same day, the plaintiff filed twelve additional complaints, accusing at
least fourteen other defendants of infringing the same patent. The patent
in these suits covers a specific method of implanting an intraocular lens
into the eye. Until February 1989, the Company manufactured intraocular
lenses and ophthalmic instruments, but did not engage in the implantation of
such lenses. Subsequent to February 1989, the Company was not involved in
the manufacture, marketing or sale of intraocular lenses. On April 4, 1994
all of Shearing's Complaints were dismissed; Schearing has moved for leave
to file an amended complaint and the Company, and the other defendants have
opposed the motion. The Company denies the material allegations of
Shearing's complaint and should the case proceed to trial, it will
vigorously defend itself.
In two virtually identical actions, Frank H. Cobb, Inc. v. The Cooper
Companies, Inc., et al and Arthur J. Korf v. The Cooper Companies, Inc., et
al, class action complaints were filed in the United States District Court
for the Southern District of New York in August 1989, against the Company
and certain individuals who served as officers and/or directors of the
Company after June 1987. In their Fourth Amended Complaint filed in
September 1992, the plaintiffs allege that they are bringing the actions on
their own behalf and as class actions on behalf of a class consisting of all
persons who purchased or otherwise acquired shares of the Company's common
stock during the period May 26, 1988 through February 13, 1989. The amended
complaints seek an undetermined amount of compensatory damages jointly and
severally against all defendants. The complaints, as amended, allege that
the defendants knew or recklessly disregarded and failed to disclose to the
investing public material adverse information about the Company. Defendants
are accused of having allegedly failed to disclose, or delayed in
disclosing, among other things: (a) that the allegedly real reason the
Company announced on May 26, 1988 that it was dropping a proposed merger
10
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
with Cooper Development Company, Inc. was because the Company's banks were
opposed to the merger; (b) that the proposed sale of Cooper Technicon, Inc.,
a former subsidiary of the Company, was not pursuant to a definitive sales
agreement but merely an option; (c) that such option required the approval
of the Company's debentureholders and preferred stockholders; (d) that the
approval of such sale by the Company's debentureholders and preferred
stockholders would not have been forthcoming absent extraordinary
expenditures by the Company; and (e) that the purchase agreement between the
Company and Miles, Inc. for the sale of Cooper Technicon, Inc. included
substantial penalties to be paid by the Company if the sale was not
consummated within certain time limits and that the sale could not be
consummated within those time limits. The amended complaints further allege
that the defendants are liable for having violated Section 10(b) of the
Securities Exchange Act and Rule 10(b)-5 thereunder and having engaged in
common law fraud. Based on management's current knowledge of the facts and
circumstances surrounding the events alleged by plaintiffs as giving rise to
their claims, the Company believes that it has meritorious defenses to these
lawsuits. The Company has reached a tentative settlement with counsel for
the class plaintiffs. However, no definitive settlement agreement has been
signed with plaintiffs' class counsel and, if signed, the settlement
agreement will be subject to Court approval after notice to class members
and a hearing; therefore, there can be no assurance that the proposed
settlement will ultimately end the litigation. In the event the case
proceeds to trial, the Company intends to vigorously defend the allegations
in the amended complaints.
See Part II, Item 1 herein for a discussion of certain other litigations.
Note 4. Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out or average cost basis, or market.
The components of inventories are as follows:
<TABLE>
<CAPTION>
April 30, October 31,
1994 1993
-------- ----------
(In thousands)
<S> <C> <C>
Raw materials $ 3,323 $ 3,958
Work-in-process 1,009 865
Finished goods 8,916 10,164
------- -------
$13,248 $14,987
------- -------
------- -------
</TABLE>
11
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 5. The Company's Turn-Around Incentive Plan
The Company's Turn-Around Incentive Plan ("TIP") was adopted by the
Compensation Committee of the Board and the 1988 Long Term Incentive Plan
Administrative Committee of the Board on May 18, 1993. The plan was
adopted, upon the recommendation of the Company's independent compensation
consultants, to recognize the special efforts of certain individuals in
guiding the Company through a resolution of its difficulties arising from
its then current capital structure and its former ownership of companies
that manufactured and distributed breast implants.
The plan provided for an award to be made to designated TIP participants of
a sum that would be separately allocated to each participant. Before any
awards would become payable, however, the Company had to significantly
reduce its liabilities relating to the former breast implant business to
levels approved by the Board of Directors and the price of the Company's
common stock had to increase. A portion of the award is to be paid when the
average per share price of the Company's common stock over a period of
thirty days equals or exceeds $1.50 per share.
On September 28, 1993 the Company entered into an agreement under which the
purchaser of its breast implant business assumed responsibilities for the
legal fees, costs, judgements and settlements relating to breast implants
sold by the Company's formerly owned subsidiaries prior to the disposition
of those subsidiaries. On January 6, 1994, upon completion of the exchange
offer and consent solicitation relating to its 10-5/8% Debentures, the
Company satisfied the last condition required to be met before the agreement
relating to the assumption by a third party of all of the Company's breast
implant liabilities became final.
Since that time, the price of the Company's common stock has increased
steadily and, on May 25, 1994, the average of the Company's common stock
during the preceding thirty (30) days rose above $1.50 per share. With the
satisfaction of target one, participants in the TIP were awarded one-third
of the total award for which they are eligible under the TIP. The payments
were made 50% in cash ($346,667) and 50% by means of the issuance of 231,111
shares of restricted stock under the Company's 1998 Long Term Incentive
Plan. That stock generally will remain restricted and non-transferable for
a period of two years.
The remaining two-thirds of the allocated TIP awards will not be distributed
until such time as the 30-day average of the price per share of the
Company's common stock equals or exceeds $3.00 per share. The maximum value
of the awards that could be made, assuming both targets are satisfied, is
$2,250,000, which was accrued in 1993.
12
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
References to Note numbers below are references to the Notes to Consolidated
Condensed Financial Statements of the Company located in Item 1. herein.
Capital Resources & Liquidity
On January 6, 1994, the Company completed an Exchange Offer and Consent
Solicitation, the terms of which are described in Note 2, pursuant to which
the Company issued approximately $22,000,000 aggregate principal amount of
10% Senior Subordinated Secured Notes due 2003 (the "Notes") and paid
approximately $4,350,000 in cash in exchange for approximately $30,000,000
aggregate principal amount of its 10 5/8% Convertible Subordinated Reset
Debentures due 2005 (the "Debentures").
In connection with the Exchange Offer and Consent Solicitation, the Company
amended the indenture governing the Debentures (the "Indenture") to, among
other things, eliminate a covenant, with which the Company was not in
compliance, requiring the Company to repurchase Debentures. The Company
also obtained a waiver (the "Waiver") of any and all Defaults and Events of
Default (as such terms are defined in the Indenture) that occurred or may
have occurred prior to the expiration of the Exchange Offer and Consent
Solicitation at 5:00 p.m., Eastern Standard Time, on January 6, 1994 (the
"Expiration Date"), to ensure that the Debentures could not be accelerated
based upon any actions, omissions or events, whether known or unknown, that
occurred or that may have occurred on or prior to the Expiration Date and
that could have been construed to be Defaults or Events of Default (as
defined in the Indenture).
As a result of the consummation of the Exchange Offer and Consent
Solicitation, the Company has increased its operating and financial
flexibility by rendering less onerous or eliminating various restrictions
and obligations previously imposed by the Indenture. The Exchange Offer and
Consent Solicitation further benefited the Company by reducing the Company's
total indebtedness and by decreasing the Company's future interest expense.
However, the amendments to the terms of the Debentures also reduced the
conversion price at which holders may convert Debentures into shares of the
Company's common stock from $27.45 to $5.00 per share (which amount is still
substantially in excess of the current price of the Company's common stock).
During the first six months of 1994, the Company experienced a net loss of
$9,000,000, which resulted in the Company's stockholders' equity moving into
a deficit position. These losses, a large portion of which reflect legal
fees and other costs related to the recent criminal trial and SEC matters
(see Note 3), together with costs associated with the above-mentioned
Exchange Offer, resulted in a decrease of $7,595,000 in the Company's cash,
cash equivalents and temporary investments. The Company currently
anticipates that, at least during the remainder of fiscal 1994, it is likely
to continue experiencing net cash outflows primarily as a result of
continued legal and other costs associated with pending litigation and
certain penalties that may be imposed upon the Company, as discussed below,
and research and development costs of CooperVision Pharmaceuticals, Inc. As
a result the Company needs to raise funds through borrowings or other
financings or sales of assets.
13
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
As described in Note 3, the Company has been convicted of six counts of mail
fraud and one count of wire fraud based upon the conduct of its former co
Chairman, Gary Singer. The maximum penalty which could be imposed on the
Company is the greatest of $500,000 per count, twice the gross gain derived
from each count or twice the gross loss suffered by the victim of each count
and, in addition, the court could impose a fine equal to restitution. The
Company is also the subject of the SEC Complaint alleging violations of the
federal securities laws by the Company, Gary Singer and Steven Singer (an
Executive Vice President of the Company, presently on a leave of absence,
and Gary Singer's brother), as described in Note 3. The imposition of
monetary penalties upon the Company as a result of the criminal conviction
or in connection with the matters alleged in the SEC Complaint, as well as
additional defense costs could exacerbate, possibly materially, the
Company's liquidity problems and its need to raise funds. The Company is
currently in negotiations with representatives of the United States
Attorney's office and the SEC in an attempt to obtain agreement to a
settlement that would be manageable for the Company financially. No
assurance can be given that the Company will be able to culminate a
manageable settlement or that, failing such settlement, the Company will be
successful in raising funds which may be required.
The Independent Auditors' report on the Company's consolidated financial
statements as of and for the fiscal year ended October 31, 1993 contains the
following statement:
"The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
During the past three fiscal years, the Company has suffered
significant losses and negative cash flows. In addition, as
discussed in Note 18 to the financial statements the Company is
exposed to contingent liabilities related to a criminal
conviction and a Securities and Exchange Commission action.
Such losses, negative cash flows, and contingent liabilities
raise substantial doubt about the Company's ability to continue
as a going concern. The consolidated financial statements and
financial statement schedules do not include any adjustments
that might result from the outcome of these uncertainties."
In light of the foregoing, there is no assurance that the Company will not
face severe liquidity problems or that the Company could not be forced in
the future to seek protection under the Bankruptcy Code. The Company is
currently exploring numerous alternatives for raising cash, including sales
and leasebacks, debt financing, factoring and out-licensing rights to
Verapamil, outside of North America. (Verapamil, which is presently
undergoing Phase III testing with the U.S. Food and Drug Administration is
CooperVision Pharmaceuticals' compound patented for the treatment of ocular
hypertension and other symptoms of glaucoma.) There can be no assurance
that the Company will be successful in raising adequate cash through these
activities.
14
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three and Six Months Ended April 30, 1994 Compared with Three and Six Months
Ended April 30, 1993.
Net Service Revenue: Net service revenue consists of the following:
(Dollars in 000's)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
---------------------- -------------------------
% %
Incr/ Incr/
1994 1993 (decr) 1994 1993 (decr)
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net patient revenue $11,283 $11,745 (4%) $21,814 $23,673 (8%)
Management fees 500 500 - 1,000 1,000 -
------- ------- ------- -------
Total service revenue $11,783 $12,245 (4%) $22,814 $24,673 (8%)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Net patient revenue: Net patient revenue decreased by $462,000 or 4% and
$1,859,000 or 8% vs. the second quarter and first half of 1993,
respectively. Revenues have been pressured by the current industry trend
towards increased managed care, which results in decreased daily rates and
declines in average lengths of stay. Management is endeavoring to mitigate
those pressures by increasing the number of admissions to its hospitals, and
by providing outpatient and other ancillary services outside of its
hospitals.
Management fees: On May 29, 1992, PSG Management, Inc. ("PSG Management"),
a subsidiary of the Company, entered into a management agreement with three
indirectly owned subsidiaries of Nu-Med, Inc. ("Nu-Med"), under which PSG
Management is managing three additional hospitals owned by those
subsidiaries, having a total of 220 licensed beds. PSG Management is
receiving a management fee of $6,000,000 payable in equal monthly
installments over the three-year term of the agreement. The management
agreement is jointly and severally guaranteed by Nu-Med and its wholly-owned
subsidiary PsychGroup, Inc., the parent of the contracting subsidiaries. On
January 6, 1993, Nu-Med (but not any of its direct or indirect subsidiaries)
filed a voluntary petition under Chapter 11 of the United States Bankruptcy
Code. Neither the Company nor any of its affiliates filed a proof of claim
in the Nu-Med Chapter 11 proceeding, and the bar date (the time for filing
proofs of claims) has passed. On June 1, 1994, Nu-Med issued a press release
announcing its emergence from bankruptcy. It appears that following the
satisfaction of administrative claims by Nu-Med, liens on the shares at
PsychGroup, Inc. will be removed and those shares will be distributed to
creditors so that PsychGroup, Inc. will cease to be a wholly-owned
subsidiary of Nu-Med. The guarantees given by Nu-Med and PsychGroup remain
in place.
15
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Nu-Med subsidiaries continue to pay the management fee on a timely
basis, although representatives of Nu-Med and its subsidiaries have alleged
in writing that PSG Management has breached the management services
agreement (which contention PSG Management vigorously disputes). Moreover,
documents filed by Nu-Med with the United States Bankruptcy Court indicate
that PsychGroup is commencing performance of certain administrative
functions performed by PSG Management on a parallel basis.
Net sales of products: Net sales of products increased by $1,258,000 or 11%
and $3,202,000 or 15% vs. the second quarter and six months ended April 30,
1993 respectively.
(Dollars in 000's)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
---------------------- -------------------------
% %
Incr/ Incr/
1994 1993 (decr) 1994 1993 (decr)
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
CooperVision $ 9,412 $ 7,432 27% $17,972 $13,445 34%
CooperSurgical 3,096 3,810 (19%) 6,345 7,514 (16%)
CooperVision
Pharmaceuticals 164 172 (5%) 231 387 (40%)
------- ------- ------- -------
Total Sales of Product $12,672 $11,414 11% $24,548 $21,346 15%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Net sales of CooperVision increased primarily due to the April 1, 1993
acquisition of CoastVision, Inc. ("CoastVision"), a manufacturer of custom
toric contact lenses for use by patients with astigmatic vision. As
anticipated, CooperVision's sales mix has continued to shift towards
daily wear and frequent replacement products, as well as specialty
products, and away from extended wear products. The Company considers
itself to be well positioned to compete successfully in specialty niches
of the contact lens market, particularly with its Preference'r' line of
frequent replacement lenses and its line of custom toric lenses.
Net sales of CooperSurgical ("CSI") have declined in both periods
primarily due to slower sales of capital equipment, including surgical
systems used in the Loop Electrosurgical Excision Procedure ("LEEP"),
partially offset by increased sales in the international arena. CSI is
continuing to refocus its sales efforts towards the in-office gynecology
market, which is growing faster than the hospital market. Sales of CSI's
LEEP disposable products, diagnostic and cryosurgical products, and its
EuroMed gynecology catalog remain stable. CSI's products are subject to
substantial government regulation and to competition from a large number
of competitors.
16
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net sales of CooperVision Pharmaceuticals have declined primarily as a
result of the sale of the EYEscrub'tm' product line on February 12, 1993.
Cost of services provided: Cost of services provided represents all of
the operating costs (other than allocations from the Company's
headquarters) incurred by HGA in generating its net patient revenues and
management fee revenue. The results of subtracting cost of services
provided from net service revenue is a profit of $1,196,000 or 10.2% and
$2,388,000 or 10.5% of net service revenue in the second quarter and six
months of 1994 respectively. The corresponding profit for 1993 was
$1,294,000 or 10.6% and $2,735,000 or 11.1% of net service revenue in the
second quarter and six months ended, respectively. The decreased
percentage of profit is primarily attributable to a lower than expected
number of patient days at one of the hospitals operated by HGA,
exacerbated by lower daily rates.
Cost of products sold: Gross profit (net sales of products less cost of
products sold) as a percentage of net sales of products ("margin") was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
CooperVision 70% 69% 71% 68%
CooperSurgical 52% 54% 51% 54%
CooperVision Pharmaceuticals 41% 33% 47% 43%
Consolidated 64% 64% 65% 63%
</TABLE>
Margin generated by CooperVision has increased due to the realization of
efficiencies in manufacturing as well as the impact of cost reduction
measures associated with downsizing. Also, the inclusion of higher margin
CoastVision products has resulted in a favorable product mix. The margin
decrease at CooperSurgical reflects increased sales to international
distributors, which generate lower margins than CooperSurgical's other
products.
Research and Development Expense: Research and development expense was
$1,172,000 and $2,328,000 for the second quarter and six months ended
April 30, 1994, respectively. The respective prior year research and
development expense was $616,000 and $1,330,000. The increase is
primarily attributable to increased development activity related to
CooperVision Pharmaceuticals' calcium channel blocker now undergoing Phase
III clinical studies, partially offset by a decline in research and
development project expenses in the CooperSurgical business unit.
17
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Selling, General and Administrative Expense: Selling, general and
administrative (SG&A) expense by business unit and corporate was as
follows:
(Dollars in 000's)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
---------------------- -------------------------
% %
Incr/ Incr/
1994 1993 (decr) 1994 1993 (decr)
------- ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
CooperVision $ 3,542 $ 3,164 12% $ 6,945 $ 5,899 18%
CooperSurgical 1,468 2,606 (44%) 2,945 4,683 (37%)
CooperVision
Pharmaceuticals 112 266 (58%) 230 513 (55%)
Corporate / Other 3,306 6,132 (46%) 7,072 12,574 (44%)
------- ------- ------- -------
Consolidated $ 8,428 $12,168 (31%) $17,192 $23,669 (27%)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SG&A expense has decreased 31% for the comparable three month periods
largely as a result of the significant decrease in legal fees and related
costs resulting from the Company's settlement of breast implant litigation
and benefits related to the consolidation of CooperSurgical facilities.
CooperVision Pharmaceuticals' SG&A expense has decreased as a result of
the sale of the EYEscrub'tm' product line on February 12, 1993. Offsetting
these decreases are increased SG&A expense of CooperVision as a result of
the CoastVision acquisition on April 1, 1993.
Cost of restructuring operations: Results for the first six months of 1993
included $451,000 of restructuring costs for the consolidation of two
CooperSurgical facilities and related reorganization and relocation costs.
Settlement of Disputes: In the first six months of 1994, the Company
recorded the following items related to settlement of disputes:
A credit of $850,000 following receipt of funds by the
Company to settle certain claims made by the Company
associated with a real estate transaction.
A charge of $4,800,000 which represents the Company's
estimate of costs which may be required to settle certain
disputes and other litigations now pending.
Debt Restructuring Costs: In the fourth quarter of 1993, the Company
recorded a charge of $2,131,000 for debt restructuring costs which
reflected the Company's estimate of transaction costs associated with the
Exchange Offer and Consent Solicitation. See Note 2. These costs
included amounts paid or to be paid to the Company's attorneys,
18
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
accountants and financial advisor, printer's fees, fees of the financial
advisor to the informal committee of holders of Debentures and its
attorneys, and fees of the Information Agent and the Exchange Agent. In
the first six months of 1994, the Company has incurred additional charges
of $429,000.
Investment Income, Net: Included in investment income, net is interest
income of $51,000 and $540,000 for the three months ended April 30, 1994
and 1993, respectively and $172,000 and $1,744,000 for the six months
ended April 30, 1994 and 1993, respectively. The decrease primarily
reflects the Company's use of cash for operating purposes, the acquisition
of CoastVision on April 1, 1993, and a shift in investment strategy toward
instruments with lower risk and correspondingly lower returns. Also
included in investment income, net are net gains (losses) on temporary
investments of ($652,000) and $1,684,000 for the six months ended April
30, 1994 and 1993, respectively.
Gain on Sales of Assets and Businesses, Net: In the first quarter of
1994, the Company sold two parcels of land for cash and notes for a net
gain of $134,000 and its EYEscrub'tm' trademark in Canada for a net gain of
$80,000. In the second quarter of 1993 the Company sold its domestic
EYEscrub'tm' product line which resulted in a gain of $620,000.
Other Income / (Expense), Net: Other income / (expense), net was
($93,000) and ($59,000) for the three months ended April 30, 1994 and
1993, respectively, and was ($58,000) and $186,000 for the six months
ended April 30, 1994 and 1993, respectively. Other income / (expense) in
1993 primarily consists of consent fees, extension fees and collection
fees related to the Company's temporary investment activity.
Interest Expense: The decrease in interest expense for the comparable
three and six month periods is due to the reduction of debt of HGA and the
effect of the Exchange Offer and Consent Solicitation described in Note 2.
Loss on Sale of Discontinued Operations, Net of Taxes: Results for the
first six months of 1993 include a charge of $14.0 million to increase the
Company's accrual for contingent liabilities associated with breast
implant litigation involving the plastic and reconstructive surgical
division of the Company's former Cooper Surgical business segment which
was sold in fiscal 1989. The Company also recorded a reversal of $343,000
of accruals no longer necessary related to another discontinued business.
Provision for Income Taxes: The provisions for income taxes in each of
the six month periods reflect state income and franchise taxes.
Extraordinary Item: The extraordinary item in 1993 reflects an
extraordinary gain of $924,000, or $.03 per common share, on the purchase
by the Company of $4,846,000 principal amount of its Debentures in
November 1992.
Earnings Per Share: The calculation of earnings per share is based on the
weighted average number of common and common equivalent shares outstanding
during the respective periods, after deducting preferred dividends from
earnings.
19
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in a number of legal actions relating to its
past or present business in which plaintiffs are seeking damages.
For a description of the Indictment and the SEC Complaint as well as
certain other legal proceedings, see Note 3 of Notes to Consolidated
Condensed Financial Statements in Part I, Item 1 of this report.
The Company was named in an action entitled BRUCE D. STURMAN V. THE COOPER
COMPANIES, INC. AND DOES 1-100, Inclusive, first brought on July 24, 1992
in the Superior Court in the State of California, Los Angeles, County.
Mr. Sturman alleged that his suspension from his position as Co-Chairman
of the Board of Directors constituted, among other things, an anticipatory
breach of his employment agreement. On May 14, 1993, Mr. Sturman filed a
First Amended Complaint in the Superior Court of the State of California,
County of Alameda, Eastern Division, the jurisdiction to which the
original case had been transferred. In the Amended Complaint, Mr. Sturman
alleged that by first suspending and then terminating him from his
position as Co-Chairman, the Company breached his employment agreement,
violated provisions of the California Labor Code, wrongfully terminated
him in violation of public policy, breached its implied covenant of good
faith and fair dealing, defamed him, invaded his privacy and intentionally
inflicted emotional distress, and was otherwise fraudulent, deceitful and
negligent. The Amended Complaint seeks declaratory relief, damages in the
amount of $5,000, treble and punitive damages in an unspecified amount,
and general, special and consequential damages in the amount of at least
$5,000,000. In March 1993, the Court ordered a stay of all discovery in
this action until further order of the Court and thereafter scheduled a
conference for January 14, 1994 to review the status of the stay. The
Court subsequently modified the stay to permit the taking of the
deposition of one witness who will not be available to testify at trial.
On September 24, 1993, Mr. Sturman filed a Second Amended Complaint,
setting forth the same material allegations and seeking the same relief
and damages as set forth in the First Amended Complaint. The Company has
filed an Answer, generally denying all of the allegations in the Second
Amended Complaint. In February 1994, the stay on discovery was lifted and
trial was set for October 21, 1994. A settlement conference was held that
same day, however, no agreement was reached and no further discussions
were formally scheduled. While the Company and Mr. Sturman have engaged
in very preliminary settlement negotiations, there can be no assurances
that these negotiations will be successfully concluded. Based on
management's current knowledge of the facts and circumstances surrounding
Mr. Sturman's termination, the Company believes that it has meritorious
defenses to this lawsuit and intends to defend vigorously against the
allegations in the Second Amended Complaint.
20
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Continued
On March 30, 1994, Envirodyne Industries, Inc. filed a lawsuit in the
Circuit Court of Cook County, Illinois against the Company, Connecticut
Mutual Life Insurance Company, Presidential Life Insurance Company, M D
Sass Re/Enterprise Partners L.P. and Gruss Partners. The complaint
alleges that defendants, former holders of Envirodyne subordinated
promissory notes (the "13-1/2% Notes"), filed an involuntary bankruptcy
petition against Envirodyne without complying with the indenture issued in
connection with the 13-1/2% Notes and that the allegedly improvident
filing of the involuntary bankruptcy petition allegedly damaged Envirodyne
in an amount in excess of $100 million. Defendants removed the case to
the United States Bankruptcy Court for the Northern District of Illinois
and, on May 20, 1994, moved to dismiss the complaint. The Company
believes it has meritorious defenses to Envirodyne's complaint and, if the
pending motion to dismiss is not successful, it will vigorously defend the
case.
21
<PAGE>
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
11 Calculation of Net Income (Loss) Per Common Share
</TABLE>
(b) The Company did not file any reports on Form 8-K during the period
from February 1, 1994 to April 30, 1994
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Cooper Companies, Inc.
(Registrant)
Date: June 10, 1994 /s/ Robert S. Weiss
Robert S. Weiss
Senior Vice President, Treasurer and
Chief Financial Officer
23
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Index of Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page No.
- - ---------- --------
<S> <C> <C>
11 Calculation of Net Income (Loss) Per Common Share 25
</TABLE>
<PAGE>
Exhibit 11
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Calculation of Net Income (Loss) Per Common Share
(In thousands, expect per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Loss from continuing operations
before extraordinary item $ (3,850) $ (6,183) $ (9,000) $ (8,867)
Less, dividend requirements on
Senior Exchangeable Redeemable
Restricted Voting Preferred Stock 0 160 0 320
-------- -------- -------- --------
Loss from continuing operations
before extraordinary item (3,850) (6,343) (9,000) (9,187)
Loss on sale of discontinued
operations, net of taxes 0 (13,657) 0 (13,657)
-------- -------- -------- --------
Loss before extraordinary item (3,850) (20,000) (9,000) (22,844)
Extraordinary item 0 0 0 924
-------- -------- -------- --------
Loss per common share $ (3,850) $(20,000) $ (9,000) $ (21,920)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of common
shares outstanding 30,129 30,033 30,129 30,048
Contingently issuable shares
outstanding 371 0 332 0
-------- -------- -------- --------
Weighted average number of common
and common equivalent shares
outstanding for primary earnings
per share 30,500 30,033 30,461 30,048
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (loss) per common share:
Continuing operations $ (0.13) $ (0.22) $ (0.30) $ (0.31)
Discontinued operations 0.00 (0.45) 0.00 (0.45)
-------- -------- -------- --------
Loss before extraordinary item (0.13) (0.67) (0.30) (0.76)
Extraordinary item 0.00 (0.00) 0.00 (0.03)
-------- -------- -------- --------
Loss per common share $ (0.13) $ (0.67) $ (0.30) $ (0.73)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
