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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 26, 1998
THE COOPER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 1-8597 94-2657368
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
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6140 Stoneridge Mall Road, Suite 590, Pleasanton, California 94588
(Address of principal executive offices)
(925) 460-3600
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On August 26, 1998, The Cooper Companies, Inc. (the "Company") issued a press
release announcing its third quarter fiscal year 1998 financial results. This
release is filed as an exhibit hereto and is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
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<CAPTION>
Exhibit
No. Description
- ------- ------------
<S> <C>
99.1 Press Release dated August 26, 1998 of The Cooper Companies, Inc.
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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 hereunto duly authorized.
THE COOPER COMPANIES, INC.
By /s/ Stephen C. Whiteford
--------------------------
Stephen C. Whiteford
Vice President and
Corporate Controller
(Principal Accounting Officer)
Dated: August 31, 1998
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EXHIBIT INDEX
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<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
<S> <C> <C>
99.1 Press Release dated August 31, 1998 of The Cooper
Companies, Inc.
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CONTACT:
Norris Battin
E-mail: [email protected]
FOR IMMEDIATE RELEASE
COOPER COMPANIES ANNOUNCES THIRD QUARTER RESULTS
Pretax EPS Up 30% to 61 Cents
Revenue Increases 39%, Income from Operations Up 52%
CooperVision Sales Climb 82%
IRVINE, Calif., August 26, 1998 -- The Cooper Companies, Inc.
(NYSE/PCX: COO) today reported results for its third fiscal quarter ended July
31, 1998.
Revenue of $54.2 million was 39% above the third quarter of 1997.
Income from operations was $11.3 million, up 52%. Sales of the Company's medical
devices businesses, CooperVision (CVI), which markets contact lenses and
CooperSurgical (CSI), which markets diagnostic and surgical products for the
women's healthcare market, grew 59%. Hospital Group of America (HGA) revenue
rose 3%. Before a net tax benefit of 5 cents per share, earnings per share grew
30% to 61 cents from 47 cents before 8 cents per share net tax benefit in 1997's
third quarter.
Business Unit Results
P&L OPERATING HIGHLIGHTS BY BUSINESS UNIT
($'s in millions)
Quarter Ended July 31,
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<CAPTION>
Revenue Operating Income
- ------------------------------------------------- ----------------------------------------------------------
% % % Revenue % Revenue
1998 1997 Inc. 1998 1997 Inc. 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CVI $32.5 $17.8 82% $10.7 $6.2 72% 33% 35%
CSI 7.2 7.1 1% 0.3 0.9 (70%) 4% 12%
------- ------- ------- -----
Medical Devices 39.7 24.9 59% 11.0 7.1 54% 28% 29%
HGA 14.5 14.0 3% 1.8 1.8 - 13% 13%
------ ------ ------- -----
Business Units 54.2 38.9 39% 12.8 8.9 43% 24% 23%
HQ Expense - - (1.5) (1.5) - n/a n/a
-------- -------- ------- ------
TOTAL $54.2 $38.9 39% $11.3 $7.4 52% 21% 19%
===== ===== ===== ====
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(Nine-month data on following page)
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P&L OPERATING HIGHLIGHTS BY BUSINESS UNIT
($'s in millions)
Nine Months Ended July 31,
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<CAPTION>
Revenue Operating Income
- ------------------------------------------------- ----------------------------------------------------------
% % % Revenue % Revenue
1998 1997 Inc. 1998 1997 Inc. 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CVI $85.8 $44.9 91% $26.2 $16.2 61% 31% 36%
CSI 20.8 17.7 17% 1.9 1.8 4% 9% 10%
------- ------- -------- -------
Medical Devices 106.6 62.6 70% 28.1 18.0 56% 26% 29%
HGA 42.2 38.4 10% 3.7 4.1 (10%) 9% 11%
------- ------- -------- -------
Business Units 148.8 101.0 47% 31.8 22.1 44% 21% 22%
HQ Expense - - (5.0) (4.3) (15%) n/a n/a
------- ------- -------- -------
TOTAL $148.8 $101.0 47% $26.8. $17.8 51% 18% 18%
====== ====== ====== =====
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Business Unit Review
CVI Results
During the third quarter, CVI posted record sales, 82% above the
comparable period in 1997.
"CVI's growth," said A. Thomas Bender, Cooper's president and chief
executive officer, "continues to be driven by our specialty toric lens business.
Growth in this segment is outpacing the more commodity-like spherical segment.
According to recent independent market research data, the U.S. toric segment
grew 27% in the first half of the year while the spherical segment was
essentially flat. During the first nine months of fiscal 1998, CVI's U.S.
spherical lens business grew 32% and its toric lens sales grew 44%."
Year to date, CVI worldwide revenue has grown 91%. Excluding Aspect
Vision Care, the British contact lens company acquired in December 1997, CVI
revenue grew 26% in the third quarter and 36% year to date. Aspect sales during
the third quarter were $10 million. For the eight months that it has been part
of the Company, Aspect revenue was about $25 million.
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Aspect's revenue is on track with pre-acquisition expectations. Over
80% of its sales are in the disposable-planned replacement sphere category with
most of its business in Europe. During the third quarter, Aspect began selling
CooperVision's toric lens products in European markets. Before the end of the
calendar year, Aspect will introduce in Europe a new molded, disposable toric
lens designed for two week replacement. This product will be manufactured using
CVI's proven lens design and Aspect's patented UltraSync technology that
provides improved patient comfort. "Aspect's contribution to earnings," said
Bender, "continues as projected. It was somewhat dilutive in the first quarter,
turned neutral in the second quarter and is now accretive."
"With Aspect," Bender pointed out, "CooperVision will broaden its
product line and compete effectively in the large and growing worldwide
disposable-planned replacement spherical segment of the market where margins
have traditionally been lower. Since the Aspect Vision acquisition, we have
greatly accelerated operating income growth--up 72% in the third quarter and 61%
year to date--despite lower operating margins.
"In our core toric lens business, gross margins remain high and are not
under pressure from competitive pricing strategies. By combining CooperVision
North America and Aspect Vision, we expect overall operating margins to improve
as disposable spherical lens unit volume grows and gross margins increase."
Sales of toric lenses to correct astigmatism now account for 39% of
CVI's worldwide business and about 60% of its U.S. business. During the third
quarter, toric sales in the U.S. grew 43% over the comparable 1997 quarter and
nine-month periods. In the toric disposable-planned replacement segment, which,
according to recent independent market research grew 46% in the first six months
of the year, Preference Toric continues to exceed expectations, with third
quarter and year-to-date revenue growing 65% and 81% over the respective 1997
periods. The Company believes that Preference Toric is the fastest growing major
brand in the worldwide contact lens market.
In the U.S., CVI's brands of disposable-planned replacement spherical
lenses grew 56% in the third quarter and 70% year to date. Worldwide, including
Aspect's brands, CVI disposable-planned replacement spheres now account for over
40% of CVI's business.
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Together, sales of disposable-planned replacement toric and spherical
lenses in the U.S. grew 71% in the third quarter and 83% year to date and now
comprise over 50% of CVI's North American revenue, up from 40% last year.
Worldwide, CVI's Toric and disposable-planned replacement sphere lines now
represent nearly 75% of its business.
CVI Strategy
"To appreciate how CVI plans to continue to deliver strong results like
this and compete effectively in the worldwide contact lens market over the next
few years, it's important to understand our basic strategy," said Bender.
"Our primary objective is to lead the specialty contact lens market
worldwide, particularly the rapidly growing toric segment where we already have
a leading position. Up to now, we've concentrated on the `high performance/high
value' market segment of the toric disposable-planned replacement market with
our rapidly growing planned replacement lens Preference Toric, now the leading
product in the category. It has been successful because our customers are
willing to pay a premium for the wider range of fitting options that Preference
Toric offers so that their patients can have crisper, clearer vision than they
can get with most competitive lenses.
"Our next strategic step is to leverage the success of the Preference
Toric brand and enter a second toric market segment: the larger but slower
growing `lower price point' toric segment . Frequency 55 Toric, launched in May
of this year, is a product that, compared with the competition in this segment,
delivers higher performance at a comparable cost. While the lower price point
segment is getting more crowded--we expect more competition here next year--we
think our product has a clinical advantage over both the new and the existing
products, and that our entry ahead of competition will give us an advantage.
Also, we don't expect to sacrifice our Preference Toric revenue, which we expect
will grow at 20% to 25% for several more years in a market that should be free
from serious new competition during that time, as our patented manufacturing
process remains a strong barrier to entry.
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"We are also moving aggressively in the worldwide market for
disposable-planned replacement spheres, a large segment that represents about
60% of the total worldwide contact lens market. In Europe, the Aspect
acquisition gives us a superb vehicle in this segment. In the U.S. we will again
leverage our strong toric market position to capture significant additional
revenue with Frequency 55, the disposable-planned replacement spherical
lens--also made with Aspect's UltraSync system--that we introduced last January.
In Japan, our marketing arrangement with Rohto Pharmaceuticals, the leading
manufacturer of over-the-counter ophthalmic products in Japan, will give us a
strong presence in the second largest contact lens market in the world, a market
where spherical lenses dominate. We expect revenue from this marketing alliance
by the end of 1999.
"We recognize that these strategies will lead to somewhat lower margins
than we had when we were only in the higher priced segment of the market, but we
feel that the trade-off between higher margins on revenue limited to torics and
lower margins on revenue greatly expanded by sphere volume is worth it in order
to continue to grow operating income.
"The strategies we have recently put in place around the world will, I
believe, lead to a sustainable competitive advantage for us in the contact lens
market as we enter the next decade."
CSI
CSI's sales grew 1% over last year's third quarter, as sales from the
1997 acquisition of Marlow Surgical Technologies are included in both periods.
Revenue in women's healthcare products grew 3%. Year to date, sales have
increased 17%. CSI gross margins improved three basis points compared with last
year's third quarter and also for the year-to-date comparable period as CSI
continued to improve manufacturing efficiency. Operating margins declined 8% in
the third quarter due primarily to expenses associated with the introduction of
three new products, a delay in shipping two of these products during the quarter
due to manufacturing start-up issues and amortization of goodwill from
acquisitions.
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"In the future," said Bender, "I expect CSI's core business of older
and recently acquired gynecology products to grow modestly, perhaps in the
mid-single digits. This platform of solid technologies has allowed us to obtain
the critical mass that we needed to fund the development and launch of our
recently introduced new products. CSI's success going forward will be determined
by the acceptance of these products and by selective acquisitions and strategic
alliances that will help us further consolidate the in-office gynecology market.
Our objective is to double the size of CSI by the end of the year 2000."
The new products include:
The FemExam pH and Amines TestCard, the first of four novel,
patented diagnostic tests comprising the FemExam TestCard System
that CSI recently licensed. These tests, designed for use
primarily in the physician's office, rapidly and economically
screen and diagnose common vaginal infections such as bacterial
vaginosis, yeast and trichomonasis. They are designed to replace
current testing practices that are subjective, costly and
inconvenient to perform. CSI anticipates that over the next three
to five years, these tests could add between $30 million and $50
million in incremental revenue.
The Cerveillance Scope, the first in a planned series of products
using digital imaging and proprietary software to provide enhanced
visualization and documentation in examinations of the cervix. The
Cerveillance Scope is a fully integrated compact colposcope, an
optical device used to examine the vagina and the cervix. It
improves image capture, enhancement and analysis allowing
measurement of lesion size and documentation of cervical changes
over time. CSI expects that revenue from this product will
approach $10 million in the next three years.
The CooperSurgical Infrared Coagulator that offers a
non-traumatic, nonsurgical noninvasive procedure to treat genital
lesions in the office. This low-cost single use technique
coagulates tissue without carbonization, providing the surgeon
with a smoke free environment that reduces the possibility of
contamination.
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These three products were introduced in May at the meeting of the
American College of Obstetricians and Gynecologists. Since that time, the
Cerveillance Scope and the CooperSurgical Infrared Coagulator have, due to
manufacturing start-up delays, accumulated a backlog of approximately $500
thousand. Demonstration units for both products will be in the hands of the
sales force in September.
Initial acceptance of the FemExam pH and Amines TestCard has been
favorable and the initial anticipated revenue target ranges remain intact. CSI
continues in discussions to co-market this product with a multi-national
pharmaceutical company who markets a product to treat bacterial vaginosis and
expects to announce details of that arrangement very shortly.
Hospital Group of America
HOSPITAL GROUP OF AMERICA
SELECTED STATISTICAL INFORMATION
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<CAPTION>
Three months ended July 31(1) Nine months ended July 31(1)
----------------------------- ----------------------------
1998 1998 1997 % Change 1998 1997 % Change
- ---- ---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Licensed inpatient beds 319 319 - 319 319 -
Inpatient admissions 1,838 1,616 14% 5,432 4,711 15%
Total inpatient days 23,101 20,392 13% 67,331 55,699 21%
Average length of stay (days)(2) 10.4 11.0 (5%) 10.2 11.3 (10%)
Total outpatient visits 12,840 13,576 (5%) 44,245 39,143 13%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Data is for HGA-owned hospitals only
(2)Excludes Midwest Center
HGA revenue grew 3% over last year's third quarter with a 14% increase
in inpatient admissions and a 5% decline in outpatient visits compared with last
year's third quarter. Year to date, revenue has grown 10% with admissions up
15%, outpatient visits up 13% and length of stay moderately below the nine-month
period last year. Operating Income was flat compared with last year's third
quarter and year to date is 10% lower than last year's nine-month period.
Medicare inpatient revenue has been impacted by the Tax Equity and Financial
Responsibility Act of 1982 ("TEFRA"), which lowered the cap on the amount
reimbursable for a Medicare discharge.
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Regarding the Company's HGA strategy Bender said, "Although Hospital
Group of America continues to contribute to our earnings and help leverage our
net operating loss carryforwards, it remains a non-core business for us.
"During the third quarter, we evaluated several alternative strategies
to exit the psychiatric services market, and we have decided that the best exit
strategy is a sale of the assets rather than a spin-off of the business to
shareholders. Given current capital market conditions, however, we feel that it
is important to dispose of them in an orderly fashion. It is not necessary to
sacrifice shareholder value merely for an expedient exit, and we intend to get
fair value for them. In the interim, we plan to take whatever steps we consider
necessary to maintain or enhance their value."
Forward-Looking Statements
Statements in this release that are not based on historical fact may be
"forward-looking statements" as defined by the Private Securities Litigation
Reform Act of 1995. They include words like "may", "will", "expect", "estimate",
"anticipate", "continue" or similar terms and reflect the Company's current
analysis of existing trends. Actual results could differ materially from those
indicated due to: major changes in business conditions and the economy, loss of
key senior management, major disruptions in the operations of the Company's
manufacturing facilities or hospitals, new competitors or technologies,
significant disruptions caused by the failure to adequately address the Year
2000 issue, acquisition integration costs, foreign currency exchange exposure,
investments in research and development and other start-up projects, dilution to
earnings per share from stock issuances or acquisitions, regulatory issues,
changes in reimbursement rates and payor mix, significant environmental clean-up
costs more than those already accrued, litigation costs, costs of business
divestitures, and items listed in the Company's SEC reports, including the
section entitled "Business " in its Annual Report on Form 10-K for the year
ended October 31, 1997.
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The Cooper Companies, Inc. and its subsidiaries develop, manufacture
and market specialty healthcare products and services. Corporate offices are
located in Irvine and Pleasanton, Calif. CooperVision, headquartered in Irvine,
Calif., with manufacturing facilities in Huntington Beach, Calif., Rochester,
N.Y., Toronto, Canada and Southampton, England, markets a broad range of contact
lenses for the vision care market. CooperSurgical, headquartered in Shelton,
Conn., markets diagnostic and surgical instruments, equipment and accessories
for the gynecological market. Hospital Group of America, provides psychiatric
services through facilities in Delaware, Illinois, Indiana and New Jersey and
satellite locations.
NOTE: A toll free interactive telephone system at 1-800-334-1986
provides stock quotes, recent press releases and financial data. The Company's
Internet address is www.coopercos.com.
Trademarks
Cerveillance Scope, FemExam pH and Amines TestCard, Preference,
Preference Toric, Frequency 55, Frequency 55 Toric and UltraSync are trademarks
of The Cooper Companies, Inc., its subsidiaries or affiliates.
Please note that the earnings per share figures in this release refer
to diluted earnings per share.
[FINANCIALS FOLLOW]
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(In thousands, except per share figures)
(Unaudited)
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<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------- -----------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales of products $ 39,709 $ 24,951 $106,543 $ 62,608
Net service revenue 14,471 13,998 42,239 38,380
---------- ---------- ---------- ----------
Net operating revenue 54,180 38,949 148,782 100,988
---------- ---------- --------- ---------
Cost of products sold 14,873 8,277 39,177 19,412
Cost of services provided 12,578 12,107 38,422 34,162
Selling, general and administrative expense 13,960 10,173 40,218 27,213
Research and development expense 512 487 1,511 1,225
Amortization of intangibles 977 503 2,679 1,195
------------ ------------ ----------- -----------
Income from operations 11,280 7,402 26,775 17,781
------------ ----------- ---------- ----------
Settlements of disputes, net 200 - 200 -
Interest expense 1,539 1,335 4,547 3,819
Other income (expense), net (237) 94 835 37
------------ ------------- ------------ --------------
Income before income taxes 9,304 6,161 22,863 13,999
(Benefit of) income taxes (870) (1,025) (1,787) (1,870)
------------ ----------- ----------- -----------
Net income $ 10,174 $ 7,186 $ 24,650 $ 15,869
========= ========== ========= =========
Earnings per share:
Basic $ 0.68 $ 0.57 $ 1.66 $ 1.31
=========== =========== =========== ===========
Diluted $ 0.66 $ 0.55 $ 1.60 $ 1.28
=========== =========== =========== ===========
Number of shares used to compute earnings per share:
Basic 14,896 12,645 14,859 12,083
========== ========== ========== ==========
Diluted 15,342 13,012 15,378 12,395
========== ========== ========== ==========
Memo diluted earnings per share data:
Income before income taxes $ 0.61 $ 0.47 $ 1.49 $ 1.13
=========== =========== =========== ===========
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THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
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<CAPTION>
July 31, October 31,
1998 1997
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,059 $ 18,249
Trade receivables, net 40,290 27,469
Inventories 30,201 15,096
Other current assets 14,461 7,755
---------- -----------
Total current assets 95,011 68,569
---------- ----------
Property, plant and equipment, net 62,297 39,523
Intangibles, net 89,531 36,698
Other assets 34,776 30,508
---------- -----------
$281,615 $175,298
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 5,963 $ 447
Other current liabilities 36,249 33,170
---------- ----------
Total current liabilities 42,212 33,617
---------- ----------
Long-term debt 76,388 9,125
Other liabilities 25,391 21,023
---------- ----------
Total liabilities 143,991 63,765
--------- ----------
Stockholders' equity 137,624 111,533
--------- ---------
$281,615 $175,298
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