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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): May 27, 1999
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 May 27, 1999, The Cooper Companies, Inc. (the "Company") issued a press
release announcing its second quarter fiscal year 1999 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 May 27, 1999 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
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Stephen C. Whiteford
Vice President and
Corporate Controller
(Principal Accounting Officer)
Dated: June 3, 1999
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EXHIBIT INDEX
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Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
<S> <C> <C>
99.1 Press Release dated June 3, 1999 of The Cooper
Companies, Inc.
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STATEMENT OF DIFFERENCES
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The trademark symbol shall be expressed as............................... 'TM'
The registered trademark symbol shall be expressed as.................... 'r'
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[THE COOPER COMPANIES NEWS RELEASE LOGO]
CONTACT:
Norris Battin
[email protected]
FOR IMMEDIATE RELEASE
THE COOPER COMPANIES REPORTS SECOND QUARTER 1999 RESULTS
Earnings Per Share up 41% on Strong Toric Lens Revenue Growth and Improved
Gross Margins
IRVINE, Calif., May 27, 1999 -- The Cooper Companies, Inc. (NYSE/PCX: COO) today
reported results for its second fiscal quarter ended April 30, 1999. Earnings
per share from continuing operations increased 41% to 38 cents from the
comparable fully taxed pro forma 27 cents for the same period in 1998, more than
double the comparable 18 cents reported for the first quarter of 1999.
Revenue of $41.7 million was 11% ahead of the second quarter of 1998. Operating
income from continuing operations was up 14% to $9.6 million.
The effective tax rate for the quarter, for accounting purposes, was 33%. Most
of Cooper's pretax income, for cash flow purposes, is sheltered from U.S.
federal income tax payments because of its $180 million in net operating loss
(NOL) carry forwards. The tax rate used to compute the comparable fully taxed
pro forma earnings per share for 1998 was 40%.
Cash flow per share from continuing operations was 70 cents for the second
quarter, up 25% from 56 cents in the second quarter of 1998, and $1.09 per share
for the first half of fiscal 1999, up 12% from 97 cents in the first half of
1998. Cooper defines cash flow for this purpose as pretax income from continuing
operations plus depreciation and amortization.
Proceeds from the divestiture of Hospital Group of America received during the
quarter were used to reduce long term debt by $25 million to $57.2 million, or
30% of total capitalization.
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Second Quarter Operating Highlights
CooperVision Revenue and Market Share
"CooperVision's (CVI) 14% second quarter revenue increase was in line with our
expectations," said A. Thomas Bender, Cooper's chief executive officer and CVI
president. "I expect fiscal 1999 full year revenue growth in the 15% to 20%
range as we continue to increase market share in the toric lens market in the
U.S. and introduce new spherical and toric products in Europe and Japan."
CVI's disposable-planned replacement brands of toric contact lenses in the U.S.,
the largest segment of its business, grew 34% over last year's second quarter.
In the latest market research auditing period, CVI's market share grew seven
points over the same period in 1998 to 36%.
CVI's total U.S. toric lens business, which includes annual replacement products
as well as disposable-planned replacement brands, grew 23% during the second
quarter. CVI now holds 27% of the total toric market. "This puts us close to our
goal of U.S. toric market leadership by the end of calendar 1999," said Bender.
"Toric lenses," he added, "continue to drive the growth of the U.S. contact lens
market. The toric lens market segment now accounts for about 18% of all U.S.
contact lens revenue versus 16% in the fourth quarter of 1998."
During the second quarter, CVI completed the rollout of the full range of
parameters for its Frequency 55'TM' Toric, and can now offer more than 5,800
lens prescriptions in this brand, nearly twice as many as the nearest competitor
and more than four times as many as the two newest competitors.
"It's clear," Bender added, "that these two new brands, which were introduced
into the U.S. disposable toric segment over the last eighteen months, have not
slowed CooperVision's toric revenue growth in any major way. Disposable
torics--those recommended for wearing periods of two weeks or less--captured
less than 10% of the combined disposable-planned replacement toric market during
the latest auditing period.
During the second quarter, CooperVision, Ltd. (formerly Aspect Vision Care,
Ltd., which Cooper acquired in December 1997), introduced CVI's toric lens
products into five European markets. Its revenue grew 20%. In the second half of
fiscal 1999, it expects to complete the European toric launch and begin the
rollout of two new products: Frequency 55 AB'TM', a spherical lens with a new
optical design that can enhance visual clarity in selected patients, and
Frequency 55 UV'TM', which contains an ultra violet light blocking agent. CVI
also expects to begin the launch of toric lenses in Australia as well as
spherical and toric lenses in Japan during this period.
CooperVision Gross Margin
CVI's gross margin in the second quarter was 65%, up from 63% in the first
quarter and 60% in the fourth quarter of fiscal 1998. Unit manufacturing costs
for both toric and spherical lenses continue to decline and are expected to
trend even lower during the balance of fiscal 1999. Gross margin improved due to
cost reductions at CooperVision, Ltd. where, over the past six months, the cost
per lens has declined more than 25% as unit volume grew close to 44%, and
through improved toric lens manufacturing yields in the U.S.
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CooperSurgical
CooperSurgical (CSI) second quarter revenue was flat compared with 1998's second
quarter. Year to date revenue is up 5%. During the second quarter, CSI gross
margins improved to 56% from 55% last year and operating income rose 9%.
"While our existing in-line products continue to perform as expected," said
Bender, "acceptance of the new products we introduced during 1998 - the
Cerveillance'TM' digital colposcope, the CooperSurgical Infrared Coagulator'TM'
and the FemExam'R' TestCard System'TM' - is slower than expected. Although
results to date are disappointing, I continue to believe in the ultimate success
of these products because of the persuasive clinical and economic data that
supports them. But it's going to take longer than we first thought to modify
practitioners' purchasing habits.
"With FemExam, we are close to announcing a new commercialization strategy and
have made good progress toward establishing a unique CPT reimbursement code. We
will continue to focus on our long-term goal of consolidating the in-office
women's healthcare market by acquiring complementary products or businesses."
Business Unit P&L Highlights ($'s in millions)
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Three Months Ended April 30, 1999
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Revenue Operating Income
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% % %Revenue %Revenue
1999 1998 Inc. 1999 1998 Inc. 1999 1998
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
CVI $34.7 $30.4 14% $10.3 $9.5 8% 30% 31%
CSI 7.0 7.0 - .9 .8 9% 13% 12%
----- ----- ----- ----
Subtotal 41.7 37.4 11% 11.2 10.3 8% 27% 28%
HQ Expense - - (1.6) (1.9)
----- ----- ----- ----
TOTAL $41.7 $37.4 11% $9.6 $8.4 14% 23% 23%
----- ----- ----- ----
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<CAPTION>
Six Months Ended April 30, 1999
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Revenue Operating Income
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% % %Revenue %Revenue
1999 1998 Inc. 1999 1998 Inc. 1999 1998
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
CVI $62.5 $53.3 17% $16.5 $15.5 7% 26% 29%
CSI 14.2 13.5 5% 1.7 1.6 9% 12% 12%
----- ----- ----- -----
Subtotal 76.7 66.8 15% 18.2 17.1 7% 24% 26%
HQ Expense - - (2.7) (3.4)
----- ----- ----- -----
TOTAL $76.7 $66.8 15% $15.5 $13.7 14% 20% 20%
----- ----- ----- -----
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Discontinued Operations
In April, the Company completed the sale of Hospital Group of America (HGA), its
psychiatric services business. During the second quarter of fiscal 1999, Cooper
recorded income from discontinued operations of $1.7 million primarily
reflecting the reversal of deferred tax liabilities no longer required net of
adjustments to the estimated loss on disposition recorded in 1998.
Global Tax Plan
In the fourth quarter of fiscal 1998, Cooper recorded a large tax benefit,
reflecting the remaining anticipated value of its $184 million of NOLs. As a
result, the Company now reports earnings as if it were a taxpayer with no NOLs.
Cooper is currently developing a global tax plan to minimize both the taxes
reported in its income statement and the cash taxes paid once the benefits of
the NOLs are fully utilized. Based on a preliminary assessment, Cooper expects
to reduce its effective tax rate to approximately 30% over the next several
years compared with approximately 34% used in the first half of 1999. By
executing this tax plan, the cash flow benefits of the NOLs should extend,
perhaps through 2003, assuming no acquisitions or stock issuances. Cooper
expects that cash payments for taxes will be approximately 10% of pretax profits
throughout this period.
Earnings Per Share
All per share amounts mentioned in this report refer to diluted per share
amounts.
Forward-Looking Statements
Statements in this press 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 Cooper'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 Cooper's manufacturing
facilities, new competitors or technologies, significant disruptions caused by
the failure of third parties to address the Year 2000 issue or by unforeseen
delays in completing Cooper's Year 2000 compliance program, acquisition
integration costs, foreign currency exchange exposure including the potential
impact of the Euro, investments in research and development and other start-up
projects, dilution to earnings per share from acquisitions or issuing stock,
regulatory issues, significant environmental clean-up costs above 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, 1998.
The Cooper Companies, Inc. and its subsidiaries develop, manufacture and market
specialty healthcare products. CooperVision, Inc., headquartered in Irvine,
Calif., with manufacturing facilities in Huntington Beach, Calif., Rochester,
N.Y., Toronto, Canada and Hamble, England, markets a broad range of contact
lenses for the vision care market. CooperSurgical, Inc., headquartered in
Shelton, Conn., markets diagnostic products and surgical instruments, and
accessories for the gynecological market. Corporate offices are located in
Irvine and Pleasanton, Calif.
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A toll free interactive telephone system at 1-800-334-1986 provides stock
quotes, recent press releases and financial data. Cooper's Internet address is
www.coopercos.com.
Note: Consistency in Reporting Cooper's Comparative Earnings Per Share Data
In fiscal 1998, Cooper declared its mental health services business, Hospital
Group of America, a discontinued operation. It also accounted for the remaining
tax benefits that it expects from its existing net operating loss carryforwards
and will, going forward, provide for income taxes rather than receive tax
benefits. To avoid confusion, comparisons of Cooper's results from fiscal 1998
to fiscal 1999 and comparisons versus published estimates must be reported on a
consistent basis. The table below shows diluted earnings per share from
continuing operations on both a pretax and after-tax basis (pro forma after-tax
basis for 1998) for the first quarter of fiscal 1999, the second quarter of
fiscal 1999 and the second quarter of fiscal 1998.
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<CAPTION>
The Cooper Companies, Inc.
EPS Comparisons
From Continuing Operations
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1Q 1999 2Q 1999 2Q 1998
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Reporting Basis Actual Actual Actual
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<S> <C> <C> <C>
Pre-tax $.28 $.56 $.45
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After-tax $.18 $.38 $.27*(1)
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*Pro forma
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(1) Income from continuing operations has been tax effected at 40% as if the
Company could not benefit from its net operating loss carry forwards. The 40%
tax rate was applied to the 1998 periods' income from continuing operations
before income taxes to arrive at pro forma net income. No adjustments to 1999
actual figures were required.
[FINANCIAL STATEMENTS 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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Three Months Ended Six Months Ended
April 30, April 30,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net sales $ 41,743 $ 37,450 $ 76,702 $ 66,834
Cost of sales 15,174 13,027 28,590 24,304
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Gross profit 26,569 24,423 48,112 42,530
Selling, general and administrative expense 15,549 14,544 29,771 26,258
Research and development expense 442 543 903 999
Amortization of intangibles 955 894 1,912 1,612
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Operating income from continuing operations 9,623 8,442 15,526 13,661
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Interest expense 1,762 1,813 3,611 2,922
Other income, net 37 244 71 1,028
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Income from continuing operations before income
taxes 7,898 6,873 11,986 11,767
Provision for (benefit of) income taxes 2,604 (505) 4,051 (954)
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Income from continuing operations 5,294 7,378 7,935 12,721
Discontinued operations:
Net income (loss) 150 1,105 129 1,755
Gain on disposal 1,691 - 2,970 -
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1,841 1,105 3,099 1,755
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Net income $ 7,135 $ 8,483 $ 11,034 $ 14,476
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Earnings per share:
Basic:
Continuing operations $ 0.38 $ 0.50 $ 0.56 $ 0.86
Discontinued operations 0.13 0.07 0.22 0.12
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Earnings per share $ 0.51 $ 0.57 $ 0.78 $ 0.98
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Diluted:
Continuing operations $ 0.38 $ 0.48 $ 0.55 $ 0.83
Discontinued operations 0.13 0.07 0.22 0.11
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Earnings per share $ 0.51 $ 0.55 $ 0.77 $ 0.94
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Number of shares used to compute earnings per share:
Basic 13,946 14,872 14,191 14,840
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Diluted 14,071 15,443 14,378 15,398
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Memo diluted earnings per share from continuing
operations data:
Income before income taxes $ 0.56 $ 0.45 $ 0.83 $ 0.76
---------- -------- ----------- ---------
---------- -------- ----------- ---------
Net income (1998 is pro forma) $ 0.38 $ 0.27(1) $ 0.55 $ 0.46(1)
---------- -------- ----------- ---------
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Cash flow per share (2) $ 0.70 $ 0.56 $ 1.09 $ 0.97
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(1) Income from continuing operations has been tax effected at 40% as if the
Company could not benefit from its net operating loss carry forwards. The
40% tax rate was applied to the 1998 periods' income from continuing
operations before income taxes to arrive at pro forma net income. No
adjustments to 1999 figures were required.
(2) Cash flow is defined as pretax income from continuing operations plus
depreciation and amortization for purposes of this calculation.
<PAGE>
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
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<CAPTION>
April 30, October 31,
1999 1998
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,441 $ 7,333
Trade receivables, net 24,663 24,426
Inventories 35,509 30,349
Deferred tax asset 13,549 15,057
Net assets of discontinued operations - 29,206
Other current assets 7,260 9,706
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Total current assets 86,422 116,077
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Property, plant and equipment, net 37,202 34,234
Intangibles, net 82,466 84,308
Deferred tax asset 60,791 52,754
Other assets 7,926 8,668
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$ 274,807 $ 296,041
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 5,792 $ 11,570
Other current liabilities 40,389 35,131
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Total current liabilities 46,181 46,701
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Long-term debt 57,167 78,677
Other liabilities 22,817 25,410
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Total liabilities 126,165 150,788
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Stockholders' equity 148,642 145,253
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$ 274,807 $ 296,041
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