<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended OCTOBER 31, 1994
OR
[_] 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 0-11727
COOPER DEVELOPMENT COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 94-2876745
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2420 SAND HILL ROAD, SUITE 300, MENLO PARK, CA 94025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 233-2727
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
RIGHTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 15, 1994:
COMMON STOCK, $.10 PAR VALUE-$3,056,003
Number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date.
Class Outstanding at December 15, 1994
COMMON STOCK, $.10 PAR VALUE 3,629,376
Documents Incorporated by Reference: NONE
<PAGE>
PART I
ITEM 1. BUSINESS
INTRODUCTION
Cooper Development Company (the "Company" or "CDC") is primarily engaged in
the development, manufacture and sale of skin care and cosmetic products under
the Cabot(R), Cabot(R) Vitamin E, Vitamines and Clear Perfection(TM) trademarks.
CDC was a wholly owned subsidiary of Cooper Laboratories, Inc. prior to the
consummation of an initial public offering of its common stock in August 1983.
Pursuant to a plan of liquidation, Cooper Laboratories, Inc. distributed its
shares of the Company's common stock to its stockholders in June 1985. CDC is a
Delaware corporation and was incorporated in April 1980. On December 20, 1994,
the Board of Directors approved a change in fiscal year-end from October 31 to
December 31.
BUSINESS OPERATIONS
Skin Care and Cosmetics
CDC, through its wholly owned subsidiary Cabot Laboratories, Inc.
("Cabot"), manufactures and sells skin care and cosmetic products. Cabot's
products are sold by its own sales representatives in the United States and
through exclusive distributors outside the United States. The principal channels
of distribution are chain drug stores, mass volume retailers, and independent
drug stores.
Cabot was one of the first to develop and introduce skin care products
incorporating Vitamin E, and today offers the most extensive line of Vitamin E
skin care products in the industry. Use of Vitamin E on the skin is of
increasing interest because ongoing medical and academic studies continue to
support fortifying the upper layers of the skin with Vitamin E. Vitamin E helps
neutralize free radicals formed in the environment by sunlight which are
believed by many to be a major cause of premature aging. Cabot has also
developed and recently introduced Vitamines, a line of multi-vitamin moisture
lotions based on the latest research on vitamin supplementation. The Vitamines
line is formulated by skin type to address the needs of dry, normal/combination,
oily, sensitive, and mature/sun damaged skin.
Cabot is the leader in the sales of unit dose pacs. The pac line includes
Anti-Stress face, bath, and foot pacs as well as a line of hair care pacs,
including the newly launched Color Enhancing Shampoo pacs. Cabot most recently
introduced a line of pacs based on homeopathic treatments for sports-related
muscle strains and bruises. The Homeopathic Sports Pacs continue a natural theme
begun earlier in the year with the Marine Therapy Bath pacs which are based on
the principles of thalassotherapy and Hair Botanical Pacs which are based on
phytotherapy.
Cabot also markets Cabot(R) Clear Perfection(TM) Corrective Cosmetics.
Cabot is the leading distributor of corrective cosmetics in the chain drug and
mass volume retail channels of trade. Clear Perfection(TM) products are enriched
with Vitamin E and designed to cover up blemishes and scars. To build on the
problem/solution profile of Clear Perfection(TM), Cabot expanded the line with
the addition of a lighter cover cream-to-powder make-up foundation. This
product, Cover Creme Lite, will expand the line's appeal. Cabot also recently
developed Clear Perfection(TM) Total Cover Liquid make-up to provide a product
form for the consumer wanting a liquid foundation with maximum coverage. Other
product forms include Corrective Cover Cream,
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Retouch Concealer, Cover Stick, and Finishing Powder. Cabot also offers a
limited line of lipstick and lipglosses which are fortified with Vitamin E.
Cabot employed 75 full time and 15 part time employees at October 31, 1994.
CDC also develops skin care products through its wholly owned subsidiary
Cooper Cosmetics S.A. ("CCSA"), a Swiss corporation. CCSA develops skin care
products which it licenses to independent licensees principally in Europe under
the Tokalon(TM) trademark.
Antiviral and other
CDC, through its wholly owned distributor, Difa Cooper, manufactures and
sells an antiviral product under an exclusive worldwide license to distributors
outside the United States under various trademarks. Under the terms of the
license, CDC pays a 5% royalty on sales of its antiviral product for use in the
treatment of herpes zoster and tabes dorsalis and a 1.5% royalty for all other
uses. This product line is subject to government regulation and control in each
country in which it is sold. These products may also be subject to price
controls and reimbursement limitations. Difa Cooper also distributes skin care
products, including a line of products developed by a dermatologist which are
sold under the Cosmeteci Magistrali(TM) trademark and continues to act as a
distributor for Revo sunglasses. See Note 14 of Notes to Consolidated Financial
Statements in Item 8.
RECENT DEVELOPMENTS
On November 2, 1993, pursuant to a Purchase and Sale Agreement, the Company
and its wholly owned subsidiary, Revo, Inc. ("Revo"), entered into a definitive
agreement with Bausch & Lomb Incorporated ("B&L") to sell substantially all of
the assets of the Revo sunglass business for $22,500,000 subject to certain
adjustments. Pursuant to a Loan Agreement dated November 2, 1993, the Company
borrowed $5,000,000 from B&L. The consummation of the transaction contemplated
by the Purchase and Sale Agreement occurred on January 28, 1994, and the Company
received $22,521,000 of which $17,521,000 was paid in cash and $5,000,000 was
paid through cancellation of the entire $5,000,000 of indebtedness to B&L. See
Note 8 of Notes to Consolidated Financial Statements in Item 8.
Pursuant to a Stock Purchase Agreement, dated as of March 17, 1994, as
amended (the "Second Stock Purchase Agreement"), entered into between the
Company, and Michael B. Joseph, as Chapter 7 Trustee (the "Trustee") of The
Cooper Laboratories, Inc. Liquidating Trust (the "Trust"), the Company, on April
27, 1994, acquired from the Trustee all of the outstanding capital stock of CDSA
for $3,250,000. The purchase price was paid as follows: $2,250,000 in cash at
the closing, and the balance through the delivery of a non-interest bearing
promissory note, in the aggregate principal amount of $1,000,000, due April 27,
1995 (the "Note"), and secured by a letter of credit. As part of the Second
Stock Purchase Agreement, the Trust has agreed to cooperate and work with the
Company regarding certain outstanding legal matters, specifically pursuing
recoveries from insurers related to environmental and DES obligations of the
Company. See Notes 6 and 7 of Notes to Consolidated Fincial Statements in Item
8.
In April 1994 the Company completed the assignment of the Freeport, Bahamas
lease and the sale of substantially all of the assets of its Bahamas facility to
Hansi International, LTD. for $250,000. The Company recorded a net gain of
$131,000 on the sale. See Note 8 of Notes to Consolidated Financial Statements
in Item 8.
GENERAL INFORMATION REGARDING CDC'S BUSINESS
Research and Development
In fiscal 1994, 1993 and 1992 CDC's research and development expenditures
were $729,000, $467,000, and $533,000, respectively.
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Raw Materials
In general, raw materials required by CDC are obtainable from various
sources and in the quantities desired.
Government Regulation
CDC's present and future operations, particularly with respect to certain
of its longer range goals, may be subject to regulation under the Occupational
Safety and Health Act, National Environmental Policy Act, Resource Conservation
and Recovery Act, Toxic Substances Control Act and other present or possible
future legislation or regulations. During 1994, the Italian health authorities
revised the register of pharmaceutical products resulting in the
reclassification of the Company's antiviral product from the completely
reimbursable category to a category that requires the customer to pay full price
for the product. This change may have an adverse effect on sales of the
company's antiviral product. CDC believes, however, that except with respect to
regulation of its antiviral product by foreign governmental agencies, applicable
government regulations would not materially impair CDC's ability to sell its
products.
Competition
Each of CDC's business segments operates within a highly competitive
environment, especially in regard to the employment and retention of
professional and technical personnel. Many of CDC's present and potential
competitors have substantially greater financial resources, more personnel
devoted to research and selling, and greater sales volume.
Cabot competes in the skin care market through the uniqueness of its
product formulations and their ingredient orientation, the quality of its
products and their presentations to its customers and competitive pricing. Cabot
offers a line of skin care and cosmetic products incorporating Vitamin E and,
building on its vitamin heritage, recently introduced Vitamines, a five-product
line of multi-vitamin skin care lotions formulated to treat skin problems which
benefit from the topical supplementation of the skin by selected combinations of
vitamins. In addition, Cabot markets a line of ingredient oriented and
positioned unit dose pacs which includes hair pacs and Anti-Stress face, bath,
and foot pacs and the Clear Perfection(TM) line of cover-up, problem/solution
cosmetics. Cabot recently expanded its line of unit-dose pacs to include Hair
Botanicals, Marine Therapy Bath Pacs, and Homeopathic Sports Pacs. Cabot
competes in the skin care and cosmetics market with the divisions of virtually
all of the major cosmetics manufactures such as Proctor & Gamble, Avon, Estee
Lauder, Revlon. L'Oreal, Johnson & Johnson and Unilever and with independents
such as Maybelline, Del Laboratories, Saint Ives, and Freeman Cosmetics.
Compliance with Environmental Laws
Federal, state and local provisions regulating the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, do not currently have a material effect upon CDC's capital
expenditures, earnings or competitive position. CDC, however, was named in a
complaint asserting claims under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA" or "Superfund").
CDC has incurred expenses in connection with the environmental cleanup of
one of its former properties sold in 1986 to Cooper Technicon, Inc., a former
subsidiary of CDC. CDC has also reserved for future expenses (including an
additional $206,000 in 1994). In connection with this clean-up CDC has also
initiated legal action to obtain reimbursement for these expenses from its
insurers; however, it is not possible to predict the outcome of these efforts.
See Note 10 of Notes to Consolidated Financial Statements in Item 8.
In August 1991, the U.S. Environmental Protection Agency sent CDC a General
Notice Letter under CERCLA notifying CDC that it may be one of several
Potentially Responsible Parties (individually, a "PRP") in connection with the
Frontera Creek waste site, Humacao,
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Puerto Rico. Potential liability is asserted against CDC only as a parent
corporation of a site owner; no liability is asserted for operating the facility
or discharging hazardous materials. Revlon, Inc. is the principal PRP and has
been undertaking the performance of the site investigation. Pursuant to a May
1986 Agreement for the Purchase and Sale of Technicon Corporation, CDC is fully
indemnified by Revlon for all costs, liability and expense arising out of the
Frontera Creek Site.
On or about October 1, 1992, a Consent Decree was entered which fully
settles and resolves all liability in this matter. The Consent Decree obligates
the signatories to perform the remediation of the site and in return provides a
covenant not to sue and statutory contribution protection for all signatories.
Revlon, CDC and others are signatories to the Consent Decree. CDC is fully
indemnified by Revlon for all obligations arising from the Consent Decree and in
this regard Revlon is performing fully all obligations required under the
Consent Decree. Thus, no action from CDC under the Consent Decree will be
required.
Employees
CDC employed 122 people, of whom 107 were full time employees, 15 were part
time employees, and none were full time temporary employees at October 31, 1994.
CDC employees are provided with insurance and welfare benefits comparable to
those provided by CDC's competitors. CDC believes that its employee relations
are good.
Financial Information About Segments, Geographic Areas, Foreign and
Domestic Operations and Export Sales
See Note 14 of Notes to Consolidated Financial Statements in Item 8.
ITEM 2.PROPERTIES
The following are the principal leased facilities of CDC:
<TABLE>
<CAPTION>
APPROX. APPROX.
FLOOR AREA ANNUAL EXPIRATION
LOCATION PRINCIPAL OPERATIONS (SQ. FT.) RENT DATE
-------- -------------------- --------- ---- ----
<S> <C> <C> <C> <C>
Menlo Park, CA Offices, and Research 6,000 $209,600 June 1998
and Development
Islip, NY Offices, Assembly and 50,000 $316,000 September 1996
Distribution, Cabot
Laboratories, Inc.
New York, NY Offices 7,670 $270,000 November 2003
</TABLE>
CDC also owns and leases facilities in Italy and Switzerland as well as
land and buildings in France, which the Company intends to sell (see Note 6).
CDC believes that its offices, plants and facilities are well maintained
and generally adequate for its present needs and their intended uses.
ITEM 3.LEGAL PROCEEDINGS
CDC is a defendant in several legal actions including those described
below. In the opinion of management, after consultation with legal counsel, the
disposition of such actions will not materially affect CDC's financial position
or results of operations.
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Avanza Corp.
The Company has purchased options to acquire what management believes to be
in excess of 51% of the outstanding shares, on a fully diluted basis, of Avanza
Corp. ("Avanza"), a privately-held California corporation engaged primarily in
the development, manufacture and distribution of cosmetics and beauty aids. The
options currently contemplate a purchase price of $2.04 per share, based on
various factors, including an aggregate purchase price of $5,000,000 for all of
the Avanza shares issued, on a fully diluted basis, prior to May 1994. The
Company paid approximately $462,400 ($.30 per share) for the options, which
payment will be credited against the purchase price paid for the shares, if the
options are exercised. As of October 31, 1994, the Company had exercised options
covering an aggregate of 99,375 shares.
On August 15, 1994, in the Superior Court of the State of California for
the County of San Bernardino, certain of the Avanza shareholders who granted
options to the Company for the purchase of their shares filed a lawsuit against
Avanza and each of its directors alleging, among other things, breach of
fiduciary duty. The primary actions of the Avanza directors which are the
subject of the lawsuit are the purported issuances to certain directors,
officers, employees and a supplier of Avanza, at $0.97 per share, of 1,096,287
shares of Avanza stock in May and July 1994. Such issuances, if valid, would
result in substantial dilution to the pre-existing Avanza shareholders and would
substantially reduce the percentage of Avanza shares subject to the options
referred to above, thereby effectively preventing the Company from obtaining a
controlling interest in Avanza.
In addition to seeking monetary damages, the plaintiffs have demanded that
Avanza and its directors be enjoined from issuing additional Avanza securities
or any rights to acquire the same. The plaintiffs are also seeking to have the
Court impose a constructive trust with respect to a majority of the shares
purportedly issued in May and July 1994, with such defendants and Avanza's
corporate secretary to be enjoined from taking any action with respect to any of
the Avanza shares placed in the constructive trust.
On August 25, 1994, the Company, an Avanza shareholder who assisted the
Company in obtaining the Avanza options, and that shareholder's employer were
named as defendants in a related lawsuit brought by Avanza in the United States
District Court for the Central District of California alleging violation of
Section 14(e) of the Williams Act, breach of contract and various related
claims. In addition to seeking monetary damages, the plaintiff has demanded that
the Company be enjoined from exercising the options granted to it by the Avanza
shareholders. On August 30, 1994, the Court denied Avanza's request to enjoin
the exercise of the options by the Company. Thereafter, this case was dismissed
at Avanza's request.
On September 29, 1994, Avanza filed a cross-complaint against the Company
and others in the lawsuit pending in the San Bernardino County Superior Court
referred to above. The cross-complaint seeks to recover unspecified damages for
breach of contract, interference with contract and unfair competition, and seeks
to enjoin the Company from exercising the options granted to it by the Avanza
shareholders. The Company intends to vigorously defend the cross-complaint.
Although the Company believes it has meritorious defenses to the cross-
complaint brought by Avanza, the cross-complaint, if decided adversely to the
Company, could severely impact or prohibit entirely the Company's acquisition of
Avanza and/or require the Company to pay damages to Avanza. In addition,
regardless of the outcome of the lawsuit, the Company has incurred significant
expenses in connection with such litigation and could be required to incur
additional expense in the future.
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Berlex
In June 1988, Berlex Laboratories, Inc. ("Berlex") filed a number of
related actions in the Superior Court of New Jersey, the United States District
Court for the District of New Jersey, the United States District Court for the
District of Delaware, the United States District Court for the District of
Massachusetts, and the United States District Court for the District of the
Virgin Islands. Defendants in those actions are Cooper Holdings, Inc., CDC, The
Cooper Companies, Inc. ("TCC"), Cooper Life Sciences, Inc. ("CLS"), The First
National Bank of Boston (the "Trustee"), solely in its capacity as Trustee to
the Cooper Laboratories, Inc. Liquidating Trust (the "Trust"), Parker G.
Montgomery, A. Kenneth Nilsson and Charles Crocker, Dr. Robert Jamplis, The
Estate of Hugh K. Foster, Theodore H. Kruttschnitt, John Doe Directors of Cooper
Holdings, Inc., and other individual and corporate defendants.
By these actions, Berlex is seeking to force CDC, CLS and TCC, the Trustee
and the various individual defendants to ensure that Berlex will be indemnified,
if the need for indemnification should arise, with regard to Diethylstilbestrol
("DES") claims and environmental problems that could possibly arise at the
Virgin Islands and Cedar Knolls facilities sold to Berlex by Cooper
Laboratories, Inc. ("Labs"), in 1979 along with certain assets of Labs' internal
medicine business.
In November 1991, the parties settled the environmental claims related to
the Cedar Knolls facility. In January 1992, the parties settled all remaining
aspects of the litigation, which included both the DES and Virgin Islands
issues. However, before the terms of the agreement could be effected, the Trust
filed for protection under Chapter 7 of the U.S. Bankruptcy Code, and, as a
result, the January 1992 settlement agreement became void ab initio. However,
the Trust's filing did not affect the November 1991 agreement. Pursuant to the
automatic stay provision of the U.S. Bankruptcy Code, the Berlex action has been
stayed. Neither the November 1991 settlement agreement with Berlex nor the
January 1992 agreement that became void required a financial contribution by the
Company.
All claims against CDC asserted by Berlex in this matter are derivative of
the liability asserted against the Trust. The Company intends to vigorously
defend itself against any and all claims.
DES Litigation
CDC is involved in a group of product liability actions relating to DES for
which CDC is indemnifying its former parent, Labs, since its liquidation in
1985. Actions are currently pending in state and federal courts in several
states. The plaintiffs in these actions are suing alleged predecessors of Labs
and, in most cases, numerous other defendants for alleged injuries resulting
from the ingestion of DES during pregnancy. The plaintiffs in substantially all
of these cases are unable to specifically identify the manufacturer of the DES
ingested and assert claims against many manufacturers of DES based on various
concert of action or market share theories of liability. Labs' potential
exposure in the majority of individual cases is generally quite low since the
combined market share of the manufacturers for whom Labs may have assumed
liability is approximately 1-4%. There is one case where specific identification
may render market share liability inapplicable. The ultimate exposure in this
case is undetermined at this time.
During fiscal 1992 the majority of pending DES cases were settled. Since
the Trust filed for protection under Chapter 7 of the U.S. Bankruptcy Code, in
June 1992, all remaining DES actions were stayed as against the Trust pursuant
to the automatic stay provision of the U.S. Bankruptcy Code. The Company
continuously evaluates its exposure from DES claims in relation to unsettled
cases and claim settlements and believes that the estimated liability for claims
recorded in its financial statements as of October 31, 1994 is sufficient to
satisfy its claim obligations. The Company has also initiated legal action to
obtain reimbursement from insurers, however, it is not possible to predict the
outcome of these efforts. See Note 12 of Notes to Consolidated Financial
Statements in Item 8.
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Friedman Litigation
In October 1992, an action was filed by CDC against George Friedman, Robert
J. Ruttenberg, Peter J. Mansbach, Florence Mansbach, Estate of Leah F. Mansbach,
Eric J. Friedman 1988 Trust, Alex Ruttenberg Trust, Julie Ruttenberg Trust and
Aurora Management Corporation in the United States District Court for the
Southern District of New York. The complaint alleged that Mr. Friedman breached
fiduciary duties and duties of loyalty, good faith and fair dealing to CDC; that
he unlawfully interfered with and misappropriated business opportunities which
he was obligated to acquire for CDC and the Gryphon Associates partnership; that
he breached his obligations and duties of loyalty, good faith and fair dealing
under a management agreement he entered into with Gryphon Associates; that he
breached his obligations under the Gryphon partnership agreement; that he made
materially false and misleading statements to CDC regarding a business
opportunity involving the marketing and sale of cosmetics and toiletries and
that CDC relied on and was injured as a result of those misrepresentations and
omission; that he misappropriated for himself and other defendants a substantial
percentage of CDC's interest in the Gryphon Development partnership; and that he
engaged in unfair trade practices as defined in Section 349 of New York's
General Business Law.
The complaint demanded that constructive trusts be imposed on the proceeds
of Mr. Friedman's and the other defendants' interests in Gryphon Development.
CDC also demanded an accounting for the profits realized by Mr. Friedman and the
other defendants and compensatory damages in excess of $31 million and punitive
damages of $50 million.
Although the Company maintains that the claims it brought against Mr.
Friedman are valid, the New York Courts determined that a memorandum which Mr.
Friedman required the Company to execute before it could receive any return on
its investment in a joint venture, prevents the Company from pursuing the
remainder of the funds the Company has claimed it is entitled to pursuant to the
venture. Mr. Friedmans motion for summary judgment dismissing the complaint was
granted despite the Companys continued protest that the memorandum was executed
under coercion and duress. All reasonable avenues of appeal have been exhausted
and the Company has reserved for appropriate legal expenses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter and quoted as part of
the NASDAQ National Market System. The Company has not paid cash dividends since
the initial public offering of its common stock in August 1983, and the Company
anticipates that for the foreseeable future any earnings will be retained for
use in its business and no cash dividends will be paid on its common stock.
At December 14, 1994, there were 5,778 stockholders of record. The other
information called for by this item is set forth in Note 16 of Notes to
Consolidated Financial Statements in Item 8.
ITEM 6. SELECTED FINANCIAL DATA
As noted in Item 1, Recent Developments, the Company sold substantially all
of the assets of its wholly owned subsidiary Revo. The sale of the Revo assets
has been accounted for as discontinued operations, and, accordingly, the
accompanying financial highlights have been restated so as to segregate the net
assets of and the net income (loss) from discontinued operations.
The discussions regarding business acquisitions and dispositions in Notes 7
and 8 of Notes to Consolidated Financial Statements in Item 8 are incorporated
herein by reference.
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FIVE YEAR FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
------------------------------------------------
SUMMARY OF CONSOLIDATED OPERATIONS 1994 1993 1992 1991 1990
- ---------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $20,078 $17,937 $16,308 $ 6,217 $ 3,932
Cost of sales 9,659 7,446 6,559 2,343 1,158
------- ------- ------- ------- -------
Gross profit 10,419 10,491 9,749 3,874 2,774
------- ------- ------- ------- -------
Research and development expenses 729 467 533 327 325
Selling, general and administrative expenses 17,500 15,084 12,000 5,409 5,520
Amortization of intangible assets (1) 352 274 2,687 2,504 2,425
------- ------- ------- ------- -------
Operating loss (8,162) (5,334) (5,471) (4,366) (5,496)
Gain on sale of limited partnership interest (2) - - - 18,340 -
Loss on sale of TCC Preferred Stock (3) - - - - (1,839)
Equity in net loss of limited partnership interest - - - - (550)
Dividend income on TCC Preferred Stock (4) - - - - 653
Interest income 550 53 223 576 377
Interest expense (333) (262) (76) (87) (91)
Other income (expense), net (5) (1,293) (459) (60) (1,245) (125)
------- ------- ------- ------- -------
Income (loss) from continuing operations before
income taxes and extraordinary item (9,238) (6,002) (5,384) 13,218 (7,071)
Provision for income tax benefit (expense) (6) 1,015 (65) (86) (6,523) 1,418
------- ------- ------- ------- -------
Income (loss) from continuing operations before
extraordinary item (8,223) (6,067) (5,470) 6,695 (5,653)
Discontinued operations (7):
Loss from operations (net of tax benefits
of $695 in 1994) (1,000) (1,023) (199) (1,236) (3,578)
Gain on sale of operations (net of taxes of
$1,935 in 1994) 16,850 - - - -
------- ------- ------- ------- -------
Income (loss) from discontinued operations 15,850 (1,023) (199) (1,236) (3,578)
Extraordinary item (8) - - - 4,365 -
------- ------- ------- ------- -------
Net income (loss) $ 7,627 $(7,090) $(5,669) $ 9,824 $(9,231)
======= ======= ======= ======= =======
Net income (loss) per share before extraordinary
item - primary:
Continuing operations $ (2.27) $ (2.00) $ (2.26) $ 2.19 $ (1.73)
Discontinued operations 4.37 ( .34) ( .08) ( .40) (1.10)
Extraordinary item (8) - - - 1.42 -
------- ------- ------- ------- -------
Net income (loss) per share - primary $ 2.10 $ (2.34) $ (2.34) $ 3.21 $ (2.83)
======= ======= ======= ======= =======
Net income (loss) per share before extraordinary
item - fully diluted:
Continuing operations $ (1.57) $ (2.00) $ (2.26) $ 2.19 $ (1.73)
Discontinued operations 3.12 ( .34) ( .08) ( .40) (1.10)
Extraordinary item (8) - - - 1.42 -
------- ------- ------- ------- -------
Net income (loss) per share - fully diluted $ 1.55 $ (2.34) $ (2.34) $ 3.21 $ (2.83)
======= ======= ======= ======= =======
Average number of shares outstanding - primary 3,629 3,033 2,420 3,058 3,258
======= ======= ======= ======= =======
Average number of shares outstanding - fully diluted 5,086 3,033 2,420 3,058 3,258
======= ======= ======= ======= =======
</TABLE>
____________________________________________
See page 10 for explanatory notes.
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FIVE YEAR FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
-------------------------------------------
SUMMARY OF CONSOLIDATED FINANCIAL POSITION 1994 1993 1992 1991 1990
- ------------------------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current assets $22,858 $10,486 $10,240 $13,482 $ 8,956
Property, plant and equipment, net 2,734 1,248 1,099 963 956
Intangible assets, net 4,835 4,982 5,216 8,419 4,868
Other assets 501 308 186 158 108
Net assets discontinued operations (7) - 4,225 4,997 4,524 4,400
------- ------- ------- ------- -------
Total assets $30,928 $21,249 $21,738 $27,546 $19,288
======= ======= ======= ======= =======
Current liabilities $19,915 $16,988 $ 7,832 $ 6,772 $ 6,192
Other long-term liabilities 2,189 3,073 7,515 8,729 6,137
------- ------- ------- ------- -------
Total liabilities 22,104 20,061 15,347 15,501 12,329
Stockholders' equity (9) 8,824 1,188 6,391 12,045 6,959
------- ------- ------- ------- -------
Total liabilities and stockholders' equity $30,928 $21,249 $21,738 $27,546 $19,288
======= ======= ======= ======= =======
Book value per share (9) $ 2.43 $ .33 $ 2.64 $ 4.97 $ 2.13
======= ======= ======= ======= =======
</TABLE>
_______________________
(1) In fiscal 1992 and in fiscal 1990 the periods over which certain
intangibles were being amortized was reevaluated.
(2) Sale of limited partnership interest to Limited Direct Associates, L.P. for
$18,750,000 resulting in a gain on sale, net of certain expenses, of
$18,340,000 or $6.00 per share.
(3) Reflects the final Stock Purchase Agreement with TCC for the sale of
183,591 shares of TCC Preferred Stock.
(4) Represents the estimated value of TCC Preferred Stock received as
dividends.
(5) Fiscal 1994 includes an expense of $575,000 related to certain litigation
and settlement costs, a reserve of $537,000 for stock and options
pertaining to a potential acquisition and an expense of $206,000 related to
a change in estimated liability for certain environmental clean up costs.
Fiscal 1991 includes an expense of $1,222,000 related to a change in the
estimated liability for certain product liability claims. See Notes 12 and
20 of Notes to Consolidated Financial Statements in Item 8.
(6) Fiscal 1990 includes a federal income tax benefit of $1,500,000 resulting
from the reversal of certain tax accruals no longer considered necessary.
(7) Includes net sales from 1994 1993 1992 1991 1990
discontinued operations ---- ---- ---- ---- ----
as follows (in thousands): $3,110 $18,462 $15,702 $10,085 $7,604
See Note 8 of Notes to Consolidated Financial Statements in Item 8.
(8) Reflects utilization of net capital loss carryforwards in 1991.
(9) Fiscal 1993 reflects a net increase of $2,144,000 from the April 1993 sale
of 1,209,792 shares pursuant to the Rights Offering. Fiscal 1994 through
1991 reflects the August 1991 reduction of 837,940 shares of common stock
acquired at a cost of $4,609,000. (Book value per share is calculated based
upon shares outstanding at the end of the year.) See Notes 3 and 18 of
Notes to Consolidated Financial Statements in Item 8.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On January 28, 1994, the Company sold substantially all of the assets
and the buyer of such assets assumed substantially all of the liabilities of its
subsidiary, Revo, Inc. The results of the Company have been restated so as to
segregate the discontinued operations from continuing operations. The management
discussion that follows pertains to the Company's continuing operations.
1994 Compared with 1993
Net sales for fiscal 1994 increased $2,141,000 over the prior year period.
The increase is primarily due to higher sales of the Company's Italian
subsidiary. These increases were partially offset by lower sales of its
antiviral product.
Gross profit margin on net sales was $10,419,000 or 52% in fiscal 1994 as
compared to $10,491,000 or 58% for fiscal 1993. The gross profit margin decrease
is attributable to increased reserves and returns for certain Cabot products
that were or are to be discontinued.
Selling, general and administrative expenses increased $2,416,000. Such
increases are primarily due to higher selling costs ($822,000), higher
advertising costs ($512,000) and higher general and administrative expenses
($1,082,000).
Interest income increased $497,000 over the prior year as a result of
investments of the proceeds from the sale of Revo.
Interest expense increased $71,000 over the comparable period in 1993 due
to higher average borrowing levels.
Other expense, net for fiscal 1994 increased by $834,000 over the prior
year. Fiscal 1994 includes a reserve of $537,000 for stock and options
pertaining to a potential acquisition, one-time expenses of $575,000 related to
certain litigation and settlement costs, and an expense of $206,000 related to a
change in estimated liability for certain environmental clean-up costs. These
expenses were partially offset by a gain of $131,000 related to the sale of
substantially all of the assets of the Bahamas facility, and $194,000 of
distribution service fee revenue. Other expense, net for fiscal 1993 includes an
expense of $589,000 related to a change in estimated liability for certain
environmental clean-up costs of previously owned property partially offset by a
gain of $250,000 from the sale of the rights to Alpha-1 Antitrypsin.
1993 Compared with 1992
The Company had net sales in fiscal 1993 of $17,937,000, increasing
$1,629,000 over the prior year due to higher skin care sales ($1,858,000)
primarily due to new product introductions and the inclusion for a full fiscal
year of sales from CCSA ($1,801,000 versus $819,000), which was acquired in May
1992. These increases were partially offset by lower antiviral sales.
Gross profit on net sales was $10,491,000 or 58% in fiscal 1993 as compared
to $9,749,000 or 60% in fiscal 1992. The decrease in gross profit is primarily
due to product mix.
Selling, general and administrative expenses increased $3,084,000 over the
prior year principally due to higher selling, marketing and financial and
administrative costs primarily as a result of personnel additions, higher
advertising costs and the inclusion of a full year of selling, general and
administrative expenses for CCSA.
11
<PAGE>
Amortization of intangible assets in fiscal 1993 decreased over fiscal 1992
due to intangible assets for certain international subsidiaries being fully
amortized as of the end of fiscal 1992.
Other income (expense) includes, among other items, an expense of $589,000
related to a change in the estimated liability for certain environmental cleanup
costs of one of the Company's former properties.
Inflation and Changing Prices
The Company has not been materially affected by inflation.
CAPITAL RESOURCES AND LIQUIDITY
The Company has experienced operating cash flow deficiencies for a number
of years and has relied upon asset sales and financing from stockholders to fund
liquidity needs. At October 31, 1994, current assets exceeded current
liabilities by $2,943,000 and cash required by continuing operations was
$7,511,000 for the fiscal year then ended.
Accounts receivable net of allowances increased $1,803,000 over the prior
year primarily due to higher sales generated in the three months ended October
31, 1994. Sales increased $1,686,000 or 41% over the same period a year ago
primarily due to increases in distribution and new product introductions.
Inventories increased $1,928,000 over the prior year primarily due to
increases in finished goods and raw materials for new products.
As noted above in Item 1, a $1,000,000 note incurred in conjunction with
the acquisition of CDSA is due on April 27, 1995.
The Company expects a continuing deficiency in cash generated from
operations in fiscal 1995. The Company plans to use the cash obtained from the
sale of the Revo assets, as described above, to fund its short and long term
liquidity and capital expenditure requirements. In addition, the Company is
considering various alternatives, including but not limited to, acquiring
certain product lines or businesses, which may require the Company to raise
additional financing from stockholders, financial institutions or other sources.
No assurances can be given that the Company will obtain financing on terms
acceptable to the Company.
As discussed in Item 3, the Company has incurred significant expense in
connection with the ongoing legal challenges to Avanza's actions and the
Company's attempt to acquire Avanza and could be required to incur additional
expense in the future.
12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
-----------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $20,078 $17,937 $16,308
Cost of sales 9,659 7,446 6,559
------- ------- -------
Gross profit 10,419 10,491 9,749
------- ------- -------
Research and development expenses 729 467 533
Selling, general and administrative expenses 17,500 15,084 12,000
Amortization of intangible assets 352 274 2,687
------- ------- -------
Operating loss (8,162) (5,334) (5,471)
Interest income 550 53 223
Interest expense (333) (262) (76)
Other expense, net (1,293) (459) (60)
------- ------- -------
Loss from continuing operations before
income taxes (9,238) (6,002) (5,384)
Provision for income tax benefit (expense) 1,015 (65) (86)
------- ------- -------
Loss from continuing operations (8,223) (6,067) (5,470)
------- ------- -------
Discontinued operations:
Loss from operations (net of tax
benefits of $695 in 1994) (1,000) (1,023) (199)
Gain on sale of operations (net of taxes
of $1,935 in 1994) 16,850 - -
------- ------- -------
Income (loss) from discontinued operations 15,850 (1,023) (199)
------- ------- -------
Net income (loss) $ 7,627 $(7,090) $(5,669)
======= ======= =======
Net income (loss) per share - primary:
Continuing operations $ (2.27) $ (2.00) $ (2.26)
Discontinued operations 4.37 (.34) (.08)
------- ------- -------
Net income (loss) per share - primary $ 2.10 $ (2.34) $(2.34)
======= ======= =======
Net income (loss) per share - fully diluted:
Continuing operations $ (1.57) $ (2.00) $ (2.26)
Discontinued operations 3.12 (.34) (.08)
------- ------- -------
Net income (loss) per share - fully diluted $ 1.55 $ (2.34) $ (2.34)
======= ======= =======
Average number of shares outstanding - primary 3,629 3,033 2,420
======= ======= =======
Average number of shares outstanding - fully diluted 5,086 3,033 2,420
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,286 $ 2,290
Restricted cash - 1,121
Accounts receivable, net of allowance of $981
and $579 in 1994 and 1993, respectively 4,374 2,571
Other receivables 407 617
Inventories 5,482 3,554
Prepaid expenses 309 333
Net assets of discontinued operations - 4,225
-------- --------
Total current assets 22,858 14,711
Property, plant and equipment at cost, net 2,734 1,248
Intangible assets, net of accumulated amortization of
$966 and $614 in 1994 and 1993, respectively:
Trademarks, tradenames and licenses 112 105
Excess cost over net assets acquired 4,723 4,877
Other assets 501 308
-------- --------
$ 30,928 $ 21,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,000 $ 1,300
Notes payable to related parties 2,948 2,948
Accounts payable 3,856 2,968
Accrued expenses 5,822 4,868
Tax liabilities 6,289 4,904
-------- --------
Total current liabilities 19,915 16,988
Other long-term liabilities 2,189 3,073
-------- --------
Total liabilities 22,104 20,061
-------- --------
Stockholders' equity:
Preferred stock, $.10 par value; 10,000,000
shares authorized; none issued - -
Common stock, $.10 par value; 10,000,000
shares authorized; 4,470,546 shares
issued; 3,629,376 shares outstanding 447 447
Additional paid-in capital 68,580 68,580
Foreign currency translation adjustments 341 286
Accumulated deficit (55,777) (63,404)
Cost of 841,170 shares held in treasury (4,662) (4,662)
Unrealized loss on marketable securities (105) (59)
-------- --------
Total stockholders' equity 8,824 1,188
-------- --------
Commitments and contingencies
$ 30,928 $ 21,249
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
--------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss from continuing operating activites: $(8,223) $(6,067) $(5,470)
Adjustments to reconcile net loss to net cash
used by continuing operating activities:
Depreciation and amortization 786 649 2,933
Valuation adjustment on Avanza stock and options 537 - -
Other (99) (389) 15
Changes in assets and liabilities, net of effects from
acquisitions:
Restricted cash 1,121 307 261
Accounts receivable (1,803) 474 (624)
Other receivables 231 1,044 (532)
Inventories (1,928) (138) (713)
Prepaid expenses 30 (92) 31
Other assets (139) - 4
Accounts payable and accrued expenses 1,948 1,152 252
Tax liabilities 28 - -
Other long-term liabilities - - 43
------- ------- -------
Net cash used by continuing operating activities (7,511) (3,060) (3,800)
Net cash used by discontinued operating activities (2,270) (249) (674)
------- ------- -------
Net cash used by operating activities (9,781) (3,309) (4,474)
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of discontinued operations 22,521 - -
Proceeds from sale of fixed assets and intangible assets 259 17 2
Purchase of fixed and intangible assets (930) (571) (301)
Purchase Avanza common stock and options (637) - -
Advances made to Cooper Development S.A. ("CDSA") - - (518)
Cash acquired in CDSA transaction, net of amounts disbursed 731 - -
Collection of loan to CDSA - - 9
Cash acquired in purchase of Cooper Cosmetics S.A. - - 476
------- ------- -------
Net cash provided (used) by investing activities 21,944 (554) (332)
------- ------- -------
Cash flows from financing activities:
Borrowings from related parties, net of stock purchases - 2,948 -
Net proceeds from sale of common stock - 2,144 -
Net borrowings (payments) from short-term notes (1,300) 150 350
Payments of other long-term liabilities (867) (200) (1,290)
------- ------- -------
Net cash provided (used) by financing activities (2,167) 5,042 (940)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 9,996 1,179 (5,746)
Cash and cash equivalents, beginning of year 2,290 1,111 6,857
------- ------- -------
Cash and cash equivalents, end of year $12,286 $ 2,290 $ 1,111
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
------------------------------------------------------------------------------------------------------
COMMON STOCK UNREALIZED
------------ ADDITIONAL LOSS ON
PAR PAID-IN TRANSLATION ACCUMULATED TREASURY MARKETABLE
SHARES VALUE CAPITAL ADJUSTMENT DEFICIT STOCK SECURITIES TOTAL
------ ----- ------- ---------- ------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE OCTOBER 31, 1991 3,261 $ 326 $66,557 $469 $(50,645) $(4,662) $ - $12,045
Net loss - - - - (5,669) - - (5,669)
Aggregate translation
adjustment - - - 15 - - - 15
----- ----- ------- ----- -------- ------- ----- -------
BALANCE OCTOBER 31, 1992 3,261 326 66,557 484 (56,314) (4,662) - 6,391
Net loss - - - - (7,090) - - (7,090)
Proceeds from rights
offering net of offering
costs 1,210 121 2,023 - - - - 2,144
Aggregate translation
adjustment - - - (198) - - - (198)
Valuation adjustment - - - - - - (59) (59)
----- ----- ------- ----- -------- ------- ----- -------
BALANCE OCTOBER 31, 1993 4,471 447 68,580 286 (63,404) (4,662) (59) 1,188
Net Income - - - - 7,627 - - 7,627
Aggregate translation
adjustment - - - 55 - - - 55
Valuation adjustment - - - - - - (46) (46)
----- ----- ------- ----- -------- ------- ----- -------
BALANCE OCTOBER 31, 1994 4,471 $ 447 $68,580 $341 $(55,777) $(4,662) $(105) $ 8,824
===== ===== ======= ===== ======== ======= ===== =======
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Cooper
Development Company (the "Company" or "CDC") and its wholly owned subsidiaries.
All material intercompany transactions and accounts are eliminated in
consolidation.
CDC was a wholly owned subsidiary of Cooper Laboratories, Inc. ("Labs")
prior to the consummation of an initial public offering of its common stock in
August 1983. Pursuant to a plan of liquidation, Labs distributed its shares of
the Company's common stock to Labs' stockholders in June 1985. CDC is a Delaware
corporation and was incorporated in April, 1980. The Company continues to
fulfill certain obligations pursuant to agreements with Labs and certain of
Labs' former affiliates with regard to tax, legal and environmental issues.
Depreciation is computed principally on the straight-line method in
amounts sufficient to write-off the cost of depreciable assets over their
estimated useful lives ranging from 3 to 8 years. Leasehold improvements are
amortized over the lesser of the estimated useful lives of the assets or the
related lease term.
Income taxes: In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Effective November 1, 1993, the Company adopted Statement 109. There is
no cumulative effect of a change in the method of accounting for income taxes
because the Company reported a valuation allowance for the entire amount of
deferred tax assets as of November 1, 1993.
Pursuant to the deferred method under APB Opinion 11, which was applied
in 1993 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year of
the calculation. Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
Foreign currency translation: Assets and liabilities of the Company's
operations located outside the United States are generally translated at
prevailing year-end rates of exchange, and income and expense accounts are
generally translated at weighted average rates for each year. Foreign exchange
translation gains (losses) are recorded in the stockholders' equity section of
the consolidated balance sheets. Transaction gains and losses are included in
the determination of net income (loss) for each period.
Inventories are stated at the lower of cost, determined on a first-in,
first-out or average cost basis, or market.
Intangible assets are amortized on a straight-line basis over their
estimated useful lives which range from 2 to 20 years. Management assesses the
carrying value of intangible assets
17
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
annually by reference to the operating performance of companies acquired and
future cash flows. An impairment reserve, if any, is recorded at such time as
the Company believes that the carrying value of the asset will not be fully
realized during its amortization period (see Note 7).
Net income (loss) per share primary is determined using the weighted
average number of common shares outstanding during the respective periods.
Net income (loss) per share fully diluted is determined using the
weighted average number of common shares outstanding plus additional common
shares that may arise from convertible debt.
Cash equivalents consist of liquid investments with maturities of three
months or less at the time of purchase.
NOTE 2. INVENTORIES
Inventories valued at cost as of October 31, 1994 and 1993, consist of
the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Raw materials $2,389 $1,647
Work-in-process 23 169
Finished goods 3,507 1,896
------ ------
5,919 3,712
Less inventory reserves (437) (158)
------ ------
$5,482 $3,554
====== ======
</TABLE>
NOTE 3. ISSUANCE OF COMMON STOCK RIGHTS/SALE OF COMMON STOCK
On February 16, 1993, the Company distributed to holders of record of its
common stock, one non-transferable right to purchase a share of its common stock
for each two shares of common stock held by such holders. The exercise price of
the rights was $1.902, and the rights expired on April 23, 1993. An aggregate of
1,209,792 shares of common stock were offered and sold to the Company's
stockholders pursuant to the Rights Offering. The proceeds from the Rights
Offering were $2,144,000, net of $157,000 of offering expenses.
Note 4. Transactions with Related Parties
The Company entered into a Note Purchase Agreement (the "1992 Note
Purchase Agreement") as of December 11, 1992, with Mr. Montgomery, its Chairman
of the Board and President, and Mr. Kruttschnitt, a Director, to finance current
operations. The 1992 Note Purchase Agreement provided for the sale and issuance
of senior notes in an aggregate principal amount of up to $1,373,305. The notes
bear interest at 8% and are due on demand. The 1992 Note Purchase Agreement
provided for the payment of a loan fee of 1% of the principal amount of each
note to the purchaser of each note. The Company sold notes with an aggregate
principal amount of $1,373,305 pursuant to the 1992 Note Purchase Agreement.
On February 24, 1993, the Company entered into a Note Purchase Agreement
(the "February 1993 Note Purchase Agreement") with Mr. Montgomery and Mr.
Kruttschnitt. The February 1993 Note Purchase Agreement provided for the sale
and issuance of senior notes in the aggregate principal amount of up to
$1,651,175. The notes bear interest at 8% and are due on demand. The February
1993 Note Purchase Agreement provided for the payment of a loan fee of 1% of the
principal amount of each note to the purchaser of the note. The Company sold
notes with an aggregate principal amount of $1,651,175 pursuant to the February
1993 Note Purchase Agreement.
18
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
On April 30, 1993, Mr. Kruttschnitt and Mr. Montgomery applied an
aggregate of $2,051,902 principal amount of notes issued pursuant to the 1992
and February 1993 Note Purchase Agreements towards the purchase of an aggregate
of 1,078,813 shares of common stock in the Rights Offering described above in
Note 3.
On May 28, 1993, the Company sold Mr. Kruttschnitt a note in the
principal amount of $169,670 pursuant to a Note Purchase Agreement dated as of
May 28, 1993 (the "May 1993 Note Purchase Agreement"). This note bears interest
at 8% and is due on demand. Pursuant to Note Purchase Agreements dated October
15, 1993 and October 29, 1993 ("the October Note Purchase Agreements"), the
Company sold an additional $902,925 principal amount of promissory notes to each
of Messrs. Kruttschnitt and Montgomery. The notes bear interest at 8% per annum
and are due on demand no earlier than January 31, 1994. The October Note
Purchase Agreements and the May 1993 Note Purchase Agreement provide for the
payment of a loan fee of 1% of the principal amount of each note to the
purchaser of each note.
As of October 31, 1994, each of Messrs. Kruttschnitt and Montgomery held
notes with an aggregate principal amount of $1,474,049 purchased pursuant to
Note Purchase Agreements dated December 11, 1992, February 24, 1993, May 28,
1993, October 15, 1993 and October 29, 1993. These notes are convertible at the
holder's option into shares of the Company's common stock at a price ranging
from $2.00 to $2.0625 per share.
NOTE 5. LICENSE AGREEMENT
On January 20, 1993, the Company transferred its rights to Alpha-1
Antitrypsin ("AAT"), a pharmaceutical product under development, to Chiron
Corporation. Under the terms of the agreement, the Company received $250,000 and
is entitled to royalty payments on net sales, if any, of the licensed product.
The product is still under development.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment as of October 31, 1994 and
1993 follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Machinery and equipment $ 1,892 $ 1,333
Building and improvements 1,275 886
Leasehold improvements 89 81
Land 887 N
------- -------
4,143 2,300
Less: Accumulated depreciation (1,409) (1,052)
------- -------
$ 2,734 $ 1,248
======= =======
</TABLE>
Depreciation expense amounted to $434,000, $375,000, and $246,000 for the
fiscal years ended October 31, 1994, 1993 and 1992, respectively. Included above
is $1,505,000 of property and land held by CDSA which the Company intends to
sell (see Note 7).
NOTE 7. ACQUISITIONS AND INTANGIBLE ASSETS
In January 1992, the Company and The First National Bank of Boston, as
Trustee for the Cooper Laboratories, Inc. Stockholders' Liquidating Trust
("Trust"), entered into a Stock Purchase Agreement ("Stock Purchase Agreement")
pursuant to which the Company agreed to purchase Cooper Development S.A.
("CDSA"), a Swiss corporation, from the Trust. The closing of the Stock Purchase
Agreement, as well as a related settlement agreement, was subject to various
conditions, including receipt by the Trust of approval from the Delaware
Chancery Court (the "Court"). The Chairman of the Board and President of the
Company was a director of CDSA until August 13, 1992, and had provided
consulting services to CDSA in relation to its real estate investments in
France. In anticipation of this transaction, in November 1991, the Company
19
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
loaned $500,000 to CDSA. The promissory note bore interest at 7.5% and was
secured by a pledge of all of the outstanding capital stock of CDSA's
subsidiary, Cooper Cosmetics S.A. ("CCSA"), a Swiss skin care products company.
In March 1992, the Trust decided to postpone indefinitely its efforts to
obtain approval of the transaction from the Court, thereby eliminating any
possibility that the transaction could close within the time period contemplated
by the Stock Purchase Agreement. As a result of the Trust's decision, the
Company formally terminated the Stock Purchase Agreement in April 1992. The
Company also exercised its surviving right under the Stock Purchase Agreement to
acquire the outstanding capital stock of CCSA in consideration for the
cancellation of the $500,000 promissory note and a related $16,000 accrued
interest receivable, and the assumption of certain contingent liabilities of
CDSA related to the business of CCSA. Such contingency amounted to approximately
$663,000 and $650,000 as of October 31, 1994 and 1993 respectively. This amount
has not been accrued as it becomes an obligation of CDC only upon the
termination by CCSA of a certain distributor agreement. CCSA does not intend to
terminate this agreement. The acquisition of CCSA has been accounted for using
purchase accounting, and operating results of CCSA have been included in the
Company's consolidated statements of operations from May 1, 1992, the date of
acquisition. The Company recorded goodwill of approximately $274,000 related to
the acquisition, which will be amortized over the expected useful life of 20
years.
Pursuant to a Stock Purchase Agreement, dated as of March 17, 1994, as
amended (the "Second Stock Purchase Agreement"), entered into between the
Company and Michael B. Joseph, as Chapter 7 Trustee (the "Trustee") of the
Trust, the Company, on April 27, 1994, acquired from the Trustee all of the
outstanding capital stock of CDSA for $3,250,000. The purchase price was paid as
follows: $2,250,000 in cash at the closing, and the balance through the delivery
of a non-interest bearing promissory note, in the aggregate principal amount of
$1,000,000, due April 27, 1995 (the "Note"), and secured by a letter of credit.
As part of the Second Stock Purchase Agreement, the Trust has agreed to
cooperate and work with the Company regarding certain outstanding legal matters,
specifically pursuing recoveries from insurers related to environmental and DES
obligations of the Company.
CDSA is the former parent of CCSA, which was acquired by the Company in
March 1992 and CCSA has continued since that time to provide administrative
services to CDSA. CDSA, whose assets consisted principally of cash ($2,900,000
at acquisition), also owns undeveloped real estate in Mougins, France (see Note
6). As part of the transaction, the Company also assumed certain income tax
liabilities. These tax liabilities are partially covered by bank guarantees
which are secured by compensating cash balances of approximately $330,000. The
acquisition of CDSA has been accounted for using purchase accounting. The
operating results, which are relatively insignificant, have been included in the
consolidated statement of operations from April 27, 1994, the date of
acquisition.
The sole director and administrator of CDSA, Mr. Buchert, is also the sole
director and administrator of CCSA. In addition, the Company's Chairman of the
Board and President, Parker G. Montgomery, is a former director of CDSA.
Pursuant to a services agreement entered into with Mr. Buchert and approved by
CDSA's previous shareholders, CDSA paid Mr. Buchert approximately $28,500 during
1993 and through April 1994 for acting as administrator for CDSA and
approximately $50,000 in April 1994 for services rendered in 1993 in connection
with the sale by CDSA to an unaffiliated party of real estate in Mougins,
France. Pursuant to a consulting agreement entered into with Mr. Montgomery and
approved by CDSA's previous shareholders CDSA paid Mr. Montgomery approximately
$157,000 during 1993 and through April 1994 for assisting in the management,
development and sale of the real estate referred to above as well as certain
real estate in Mougins, France which is still owned by CDSA. Messrs. Buchert and
Montgomery have voluntarily waived their right to receive from CDSA any further
compensation arising out of any future sale of the real estate still owned by
CDSA.
20
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
NOTE 8. DISCONTINUED OPERATIONS
On November 2, 1993, pursuant to a Purchase and Sale Agreement, the
Company entered into a definitive agreement with Bausch & Lomb Incorporated
("B&L") to sell substantially all of the assets of the Revo sunglass business
for $22,500,000. Pursuant to a Loan Agreement dated November 2, 1993, the
Company borrowed $5,000,000 from B&L. The consummation of the transaction
contemplated by the Purchase and Sale Agreement occurred on January 28, 1994,
and the Company received $22,521,000, of which $17,521,000 was paid in cash and
$5,000,000 was paid through cancellation of the entire $5,000,000 of
indebtedness to B&L.
The sale of the Revo assets has been accounted for as a sale of a
discontinued operation, and, accordingly, the accompanying October 31, 1993
balance sheet and statements of operations and cash flows for the fiscal years
1994, 1993 and 1992 have been restated so as to segregate the net assets of and
the net income (loss) from discontinued operations. As of October 31, 1993, net
assets of discontinued operations consisted of the following (in thousands):
<TABLE>
<S> <C>
Receivables $ 3,824
Inventory 2,175
Prepaids 185
Property, plant and equipment, net 690
Intangible assets 1,255
Other assets 11
Notes payable (1,363)
Accounts payable, accruals and
other current liabilities (2,522)
Other long-term liabilities (30)
-------
Net assets of discontinued operations $ 4,225
=======
</TABLE>
Net sales related to discontinued operations were $3,110,000, $18,462,000
and $15,702,000 for the fiscal years 1994, 1993 and 1992, respectively.
In April 1994 the Company completed the assignment of the Freeport,
Bahamas lease and the sale of substantially all of the assets of its Bahamas
facility to Hansi International, LTD. for $250,000. The Company recorded a net
gain of $131,000 on the sale.
NOTE 9. STOCK OPTIONS
The Company adopted its Stock Option Plan in May 1983 with a maximum of
150,000 shares authorized for issuance. Options granted under the Stock Option
Plan may not be granted at less than eighty-five percent of the fair market
value on the date of grant and may not have terms exceeding ten years. Such
options are generally exercisable in four equal annual installments commencing
on the first anniversary of the date of the grant. There were no transactions
occurring in the Stock Option Plan in fiscal 1993 and 1992. The Stock Option
Plan expired in May 1993.
21
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
NOTE 10. ACCRUED EXPENSES
Accrued expenses as of October 31, 1994 included accruals of $1,132,000
for severance and employee benefits, $1,070,000 for legal and $623,000 for
environmental clean up and other environmentally related costs.
Accrued expenses as of October 31, 1993, include accruals of $1,034,000
for employee benefits, $1,020,000 for advertising and $986,000 for environmental
clean-up and other environmentally related costs.
NOTE 11. EMPLOYEE BENEFITS
In April 1985, the Company adopted its Retirement Income Plan, which is a
non-contributory plan covering all full-time non-union United States employees
of the Company and its participating subsidiaries. Benefits are based upon a
combination of employee compensation and years of service. The Company pays the
entire cost of the plan for its employees and funds such costs as they accrue.
The Company's funding policy is to make annual contributions within minimum and
maximum levels required by applicable regulations. The projected unit credit
cost method is used to determine the annual cost. The Company froze benefit
accruals under this plan as of September 1988. The Company continued to
contribute as necessary for the underfunded liabilities. The plan was reinstated
effective January 1, 1993.
Items shown below for each fiscal year have been calculated as of January
1 of each fiscal year and projected to the end of each fiscal year.
Net periodic pension cost for fiscal 1994, 1993 and 1992 included the
following components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during period $ 60 $ 66 $ -
Plus: Interest cost on projected benefit obligations 85 71 50
Less: Estimated return on assets (23) (61) (84)
Plus: Other, net (29) 25 28
----- ----- ----
Net periodic pension cost (gain) $ 93 $ 101 $ (6)
===== ===== ====
</TABLE>
The above net periodic pension cost (gain) was calculated using assumptions from
the prior fiscal year end.
The following table provides a reconciliation between the estimated
funded status of the plan and the amounts recognized in the financial statements
at October 31, 1994, 1993 and 1992 (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Accumulated benefit obligation $1,023 $1,041 $ 660
====== ====== =====
Projected benefit obligation $1,099 $1,261 $ 660
Market value of assets (791) (727) (693)
------ ------ -----
Funded status 308 534 (33)
Unfunded prior service cost (86) (285) -
Unrecognized gain (loss) 38 (105) 76
Additional minimum liability - 170 -
------ ------ -----
Liability included in the financial statements $ 260 $ 314 $ 43
====== ====== =====
</TABLE>
Substantially all of the accumulated benefit obligation balances above are fully
vested.
22
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
<TABLE>
<CAPTION>
Assumptions used in the accounting were:
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rates (liability) 8.0% 7.0% 8.0%
Long term rate of return (assets) 9.0% 9.0% 9.0%
</TABLE>
Effective November 1, 1991, the Company adopted the Cooper Development
401(k) Plan ("401(k) Plan"), which is a contributory plan available to employees
of the Company and its participating subsidiaries. Employees who complete two
months of service during a twelve-consecutive-month period in which they worked
at least 1,000 hours are eligible to participate in the 401(k) Plan. Employees
who participate in the 401(k) Plan elect to have from 2% to 15% of pre-tax
covered compensation deferred (not in excess of $9,240 in calendar year 1994)
and contributed to the trust established under the 401(k) Plan. The Company, at
its discretion and subject to certain regulatory limitations, will make a
matching contribution equal to 25% of each participant's contribution up to 6%
of covered compensation. Generally, participants vest in Company contributions
at the rate of 10% for each year of service (as defined) and are fully vested
after five years of service or upon death. The Company's contribution to the
401(k) Plan was approximately $37,000, $32,000 and $19,000 for the fiscal years
1994, 1993, and 1992 respectively.
NOTE 12. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
Total minimum annual rentals payable under non-cancelable operating
leases (all real property and equipment) at October 31, 1994 are payable as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1995 $ 901
1996 791
1997 532
1998 444
1999 292
Thereafter 1,227
------
$4,187
======
</TABLE>
The above information includes annual rentals of $192,000 through
September 1996 for the operating facilities of Cabot. The consolidated statement
of operations for fiscal 1994, 1993, and 1992 include rental expense of
approximately $188,000, $183,000 and $176,000, respectively, for such
facilities.
Aggregate rental expense for both cancelable and non-cancelable contracts
was $786,000, $396,000 and $336,000 in fiscal 1994, 1993 and 1992, respectively.
LEGAL PROCEEDINGS
CDC is involved in a group of product liability actions relating to DES
for which CDC has been indemnifying its former parent, Cooper Laboratories, Inc.
("Labs"), since its liquidation in 1985. The Company continuously evaluates its
exposure to such claims in relation to unsettled cases and claim settlements.
The Company believes that the estimated liability for such claims of $1,717,000
included in other long-term liabilities in the consolidated balance sheet as of
October 31, 1994 ($2,521,000 as of October 31, 1993) is sufficient to satisfy
its claim obligations.
Inherent in the operations of the Company is the possibility that there
may exist environmental conditions as a result of current and past operations
which might be in violation of various federal and state laws relating to the
protection of the environment. In certain instances, the Company has received
notices of asserted violation of such laws and regulations and has
23
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
taken or plans to take steps to address the problems cited or to contest the
allegations of violation. As noted in Note 10, the Company recorded a reserve to
provide for the restoration and clean-up on one of the Company's former
properties as a result of past operations. The Company has made and will
continue to make expenditures relating to environmental conditions on this
property. Adjustments or additions to reserves on operating properties are
recorded when probable costs to the Company are reasonably determined based upon
information available. While the Company's management is unable to predict the
ultimate costs involved in such matters, it does not expect, based on present
information and established reserves, that disposition of these matters will
have a material adverse effect on the Company's financial position. However,
there is no assurance that material costs or liabilities related to
environmental matters will not be incurred in the future.
The Company is also a defendant in several legal actions. In the opinion
of management, after consultation with legal counsel, the disposition of these
actions will not have a material adverse effect on the financial position of the
Company.
NOTE 13. INCOME TAXES
As discussed in Note 1, the Company adopted Statement 109 as of November
1, 1993. There is no cumulative effect of this change in accounting for income
taxes as determined as of November 1, 1993 because the Company reported a
valuation allowance for the entire amount of deferred tax assets. Prior years'
financial statements have not been restated to apply the provisions of Statement
109.
The provision (benefit) for income taxes consists of the following amounts
(in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ (784) $ - $ -
State (231) 61 69
Foreign - 4 17
------- ----- ---
(1,015) 65 86
------- ----- ---
Deferred:
Federal - - -
State - - -
------- ----- ---
- - -
------- ----- ---
Provision for income tax
expense (benefit) $(1,015) $ 65 $86
======= ===== ===
</TABLE>
24
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
The provision (benefit) for income taxes differs from the amounts computed
by applying the statutory Federal income tax rate to income (loss) from
continuing operations before extraordinary items and income taxes as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed tax expense (benefit) based on
statutory rate $(3,141) $(2,411) $(2,062)
State taxes (608) 61 69
Income outside the U.S. subject to lower taxes (123) 4 17
Loss from operations not utilized but carried forward 2,750 2,411 2,062
Amortization of intangibles 107 - -
------- ------- -------
$(1,015) $ 65 $ 86
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and the amounts used for
income tax purposes. Significant components of the Company's deferred tax assets
and liabilities under Statement 109 as of October 31, 1994 are as follows:
<TABLE>
<CAPTION>
1994
----
(In thousands)
<S> <C>
Deferred tax assets:
Accounts receivable $ 283
Inventories 701
Accrued compensation and benefits 283
Accrued liabilities, principally due to litigation reserves 1,357
Net operating loss carryforwards 17,726
Tax credits carryforward 1,551
Other 20
--------
Total gross deferred tax assets 21,921
Less valuation allowance (21,921)
--------
Net deferred tax assets $ 0
========
</TABLE>
The valuation allowance for deferred tax assets as of November 1, 1993 was
$24,533,000. The net change in the valuation allowance during the year ended
October 31, 1994 was a decrease of $2,612,000.
The Company is a party to a tax sharing agreement between The Cooper
Companies, Inc. ("TCC") and Cooper Life Sciences, Inc. regarding the allocation
of tax liabilities of the Company's former parent, Labs. Under this tax sharing
agreement, the Company is liable to contribute 25% of any net taxes (after
refunds) ultimately levied on Labs. Included in tax liabilities is a $2.2
million accrual to cover the Company's share of any such liabilities. In
addition, the Company has not recognized any benefit of approximately $662,000
of Federal tax refunds which it obtained from TCC and which TCC originally
received in its capacity as agent for Labs. Such amount has been added to the
tax liability accrual. TCC is continuing to negotiate with various tax
authorities with respect to the relevant years covered by the tax sharing
agreement. Based on current information available, the Company estimates that an
amount of approximately $1.1 million would cover its share of Labs' tax
liabilities under the tax sharing agreement. Since there may be other tax
liabilities for those years of which the Company is not currently aware, it does
not intend to revise its tax accruals until all tax liabilities of Labs and the
Company are finally determined.
At October 31, 1994, the Company had net operating loss carryforwards of
approximately $ 46.9 million for income tax reporting purposes. The remaining
net operating losses, some of which may be subject to an annual limitation,
expire in varying amounts beginning in 1998. Investment and research and
development credit carryforwards generated between 1984 and 1990 amounted to
approximately $1,551,000 for income tax reporting purposes at October 31, 1994
and will expire beginning in 1998
25
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
NOTE 14. INDUSTRY SEGMENTS AND GEOGRAPHIC DATA
The Company's operations are classified into the following business
segments: skin care and cosmetics, antiviral and other.
Information by industry segment as of or for the years ended October 31,
1994, 1993 and 1992 (in thousands) follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales:
Skin care and cosmetics $16,748 $14,803 $12,945
Antiviral and other 3,330 3,134 3,363
------- ------- -------
Total net sales $20,078 $17,937 $16,308
======= ======= =======
Operating loss:
Skin care and cosmetics $(6,020) $(3,485) $ (668)
Antiviral and other 376 215 (2,926)
Corporate (2,518) (2,064) (1,877)
------- ------- -------
Total operating loss $(8,162) $(5,334) $(5,471)
======= ======= =======
Identifiable assets:
Skin care and cosmetics $14,358 $10,916 $11,366
Antiviral and other 8,242 3,079 3,319
Corporate 8,328 3,029 2,056
Net Assets Discontinued Operations - 4,225 4,999
------- ------- -------
Total identifiable assets $30,928 $21,249 $21,740
======= ======= =======
Capital expenditures:
Skin care and cosmetics $ 455 $ 500 $ 221
Antiviral and other 208 23 52
Corporate 62 8 28
------- ------- -------
Total capital expenditures $ 725 $ 531 $ 301
======= ======= =======
Depreciation and amortization:
Skin care and cosmetics $ 629 $ 528 $ 388
Antiviral and other 140 97 2,522
Corporate 17 24 23
------- ------- -------
Total depreciation and amortization $ 786 $ 649 $ 2,933
======= ======= =======
</TABLE>
Sales, operating income (loss) and identifiable assets by geographic area
as of or for the years ended October 31, 1994, 1993 and 1992 (in thousands)
follows :
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE ELIMINATION CONSOLIDATION
------- ------ ----------- -------------
<S> <C> <C> <C> <C>
1994
Sales to unaffiliated customers $12,874 $ 7,204 $ - $20,078
Intercompany sales 588 - (588) -
------- ------- ------ -------
Total net sales $13,462 $ 7,204 $(588) $20,078
======= ======= ====== =======
Operating income(loss) $(8,932) $ 689 $ 81 $(8,162)
Identifiable assets $20,165 $10,778 $ (15) $30,928
1993
Sales to unaffiliated customers $12,720 $ 5,217 $ - $17,937
Intercompany sales 480 - (480) -
------- ------- ------ -------
Total net sales $13,200 $ 5,217 $(480) $17,937
======= ======= ====== =======
Operating loss $(4,992) $ (58) $(284) $(5,334)
Identifiable assets $17,002 $ 4,464 $(217) $21,249
</TABLE>
26
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE ELIMINATION CONSOLIDATION
------- ------ ----------- -------------
<S> <C> <C> <C> <C>
1992
Sales to unaffiliated customers $11,928 $ 4,380 $ - $16,308
Intercompany sales 407 - (407) -
------- ------- ----- --------
Total net sales $12,335 $ 4,380 $(407) $16,308
======= ======= ===== ========
Operating loss $(3,283) $(1,929) $(259) $(5,471)
Identifiable assets $16,976 $ 4,878 $(114) $21,740
</TABLE>
NOTE 15. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental and other disclosures required by Statement of Financial
Accounting Standards No. 95, Statement of Cash Flows, for fiscal 1994, 1993 and
1992, are as follows:
In fiscal 1994 the Company issued a $1,000,000 note payable as partial
consideration for the purchase of CDSA (see Note 7).
In fiscal 1993, the Company converted $2,052,000 of related party notes
payable to common stock (see Note 4).
In fiscal 1992, the Company acquired CCSA in consideration for the
cancellation of a $500,000 promissory note and $16,000 related accrued interest
due from CDSA (see Note 7).
Cash paid in fiscal 1994, 1993 and 1992 for interest was $342,000, $262,000
and $76,000, respectively, and for income taxes was $84,000, $58,000 and
$112,000, respectively.
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C> <C>
1994
Net sales $ 4,190 $ 4,509 $ 5,599 $ 5,780
Gross profit $ 2,425 $ 2,612 $ 2,524 $ 2,858
Net income (loss) $ 14,964 $(1,542) $(2,331) $(3,464)
Net income (loss) per share* - primary $ 4.12 $ (.42) $ (.64) $ (.95)
Net income (loss) per share* - fully diluted $ 2.95 (.42) (.64) (.95)
Common Stock price range:
High $ 3 1/2 $ 3 1/4 $ 2 3/4 $ 4 1/4
Low $1 11/16 $ 2 1/2 $ 2 1/2 $ 2 1/4
</TABLE>
27
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C> <C>
1993
Net sales $ 4,246 $ 4,495 $ 5,102 $ 4,094
Gross profit $ 2,462 $ 2,658 $ 3,103 $ 2,268
Net loss $ (2,023) $ (970) $ (2,022) $ (2,075)
Net loss per share* $ (.84) $ (.40) $ (.56) $ (.57)
Common Stock price range:
High $ 3 1/8 $ 2 3/8 $ 2 5/16 $ 3 1/2
Low 2 5/16 2 1/16 $ 1 7/8 $ 1 11/16
</TABLE>
________________
* The sum of net income (loss) per share for the four quarters is different from
the full year net income (loss) per share as a result of computing the
quarterly and full year amounts on the weighted average number of shares
outstanding in the respective periods.
Year-end adjustments to the investment in Avanza recorded in the fourth
quarter of fiscal 1994 increased selling, general and administrative costs by
$550,000 and increased other expense by $537,000.
NOTE 17. NOTES PAYABLE
Notes payable and short term borrowings as of October 31, 1994 amounted
to $3,948,000 and consist of $2,948,000 of notes from related parties (see Note
4) and a $1,000,000 note payable to the Trust for the purchase of CDSA (see Note
7).
NOTE 18. COMMON STOCK AND STOCK RIGHTS
In December 1987, the Board of Directors of the Company declared a
dividend distribution of one right for each outstanding share of the Company's
common stock, par value $.10 per share, to stockholders of record at the close
of business on December 29, 1987. Each right entitles the registered holder to
initially purchase from the Company a unit consisting of one one-hundreth of a
share (a "Unit") of Series A Junior Participating Preferred Stock, par value
$.10 per share, at a purchase price of $52 per unit, subject to adjustment.
Under certain circumstances, the rights will be exercisable if a person or group
acquires beneficial ownership of 30% or more of the Company's common stock or
commences a tender or exchange offer upon consummation of which such person or
group would beneficially own 30% or more of the Company's common stock. On
November 1, 1993, the Company amended its stockholders rights plan to provide
that such rights will not become exercisable if a person or group would
beneficially own 30% or more of the Company's common stock upon the conversion
of outstanding promissory notes originally issued by the Company pursuant to
Note Purchase Agreements dated as of December 11, 1993, as of February 24, 1993,
as of May 28, 1993, as of October 15, 1993 and as of October 29, 1993 into
shares of the Company's Common Stock. Upon the occurrence of such event, each
holder who is not a party to the transaction may be entitled to purchase at the
right's then current exercise price shares of the Company's common stock having
a value of twice the right's exercise price. A Special Committee of the
Company's Board of Directors comprised exclusively of non-management Directors
is entitled to redeem the rights if the Special Committee determines that such
event is in the best interest of the Company's stockholders. The rights expire
in December 1997.
28
<PAGE>
NOTE 19. LIQUIDITY
The Company has experienced operating cash flow deficiencies for a number
of years and has relied upon asset sales and financing from stockholders to fund
its liquidity needs. At October 31, 1994, current assets exceeded current
liabilities by $2,943,000 and cash required by continuing operations was
$7,511,000 for the fiscal year then ended.
The Company expects a continuing deficiency in cash generated from
operations in fiscal 1995.
NOTE 20. ACQUISITION OF STOCK AND OPTIONS
During fiscal 1994, the Company purchased options to acquire common stock
of Avanza Corporation ("Avanza"), which management believed would give the
Company control of more than 51% of the outstanding shares of Avanza. The
Company exercised certain options, and for approximately $200,000, acquired
99,375 shares. The Company had paid approximately $437,000 for the remaining
options, which expire on various dates through August 1997.
Subsequent to the Company's purchase of the options, Avanza undertook a
number of defensive strategies, and entered into transactions which (1)
adversely affected the Company's ability and right to obtain a controlling
interest in Avanza and (2) potentially reduced Avanza's value to the Company.
Substantially all of the Company's legal challenges to Avanza's positions have
been unsuccessful to date. Accordingly, the Company has been forced to assess
the carrying value of its investment in the stock and options of Avanza. As a
result of this evaluation and in light of the non-marketablity of the stock, the
options and the shares underlying the options, and the limited life of the
options, the Company has concluded that it should record a loss provision for
the entire amount of cost of the options and provide a 50% reserve on the value
of the stock held. Accordingly, a $537,000 reserve was established against the
value of the investment and a related expense was recorded in other expense. In
addition, the Company expensed approximately $550,000 in legal fees related to
various litigation in conjunction with the attempted acquisition, which is
reflected in selling, general and administrative expenses.
29
<PAGE>
SCHEDULE VIII
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED DEDUCTIONS/ BALANCE
BEGINNING COSTS AND TO OTHER RECOVERIES/ AT END
OF YEAR EXPENSES ACCOUNTS(1) OTHER(2) OF YEAR
------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended October 31, 1994 $ 579 $ 425 $ - $ (23) $ 981
======= ========= =========== =========== =======
Year ended October 31, 1993 $ 523 $ 111 $ - $ (55) $ 579
======= ========= =========== =========== =======
Year ended October 31, 1992 $ 329 $ 65 $ 154 $ (25) $ 523
======= ========= =========== =========== =======
INVENTORY RESERVES:
Year ended October 31, 1994 $ 158 $ 741 $ - $ (462) $ 437
======= ========= =========== =========== =======
Year ended October 31, 1993 $ 98 $ 50 $ - $ 10 $ 158
======= ========= =========== =========== =======
Year ended October 31, 1992 $ 112 $ 47 $ 13 $ (74) $ 98
======= ========= =========== =========== =======
</TABLE>
___________________
(1) Reserves established in the purchase price allocation of subsidiary
acquired.
(2) Includes inventory written off, uncollectible accounts written off,
recovered accounts receivable previously written off and other items.
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cooper Development Company
We have audited the accompanying consolidated balance sheets of Cooper
Development Company and subsidiaries as of October 31, 1994 and 1993, and the
related consolidated statements of operations, cash flows and stockholdersO
equity for each of the years in the three-year period ended October 31, 1994. In
connection with our audits, we also have audited the financial statement
schedule VIII. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cooper
Development Company and subsidiaries as of October 31, 1994 and 1993 and the
results of their operations and their cash flows for each of the years in the
three-year period ended October 31, 1994, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
San Francisco, California
December 14, 1994
31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the current directors and executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Michael J. Braden 44 Vice President, Treasurer and Controller
James E. Gilleran 61 Director
Carol R. Kaufman 45 Vice President and Secretary
Theodore H. Kruttschnitt 51 Director
Parker G. Montgomery 66 Chairman of the Board of Directors and President
Jackson L. Schultz 69 Director
</TABLE>
Mr. Braden was elected Vice President and Controller in August 1988 and
Treasurer in September 1988. He served in various capacities with Cooper Labs
and TCC from January 1977 until January 1988 including Senior Internal Auditor,
Area Financial Director and Controller of CooperVision Optics. He also served as
Vice President, Treasurer and Controller of CLS from August 1988 until his
resignation in September 1989.
Mr. Gilleran was elected a Director in July 1988. He was elected Chairman
of the Board and Chief Executive Officer of the Bank of San Francisco in October
1994. He served as Superintendent of Banking for the State of California from
July 1989 until October 1994 and served as the President of The Commonwealth
Group, Inc. (a financial consulting firm) from October 1987 until July 1989. He
was the managing partner of the San Francisco office of Peat Marwick Main & Co.
(a public accounting firm) from July 1977 to September 1986 and a partner of
Peat Marwick Main & Co. from September 1986 to September 1987. He also serves as
a Director of The Fritz Companies, a freight forwarding company.
Ms. Kaufman was elected Vice President and Secretary in January 1989. She
joined the Controller's Department of Cooper Labs in 1971 and served in various
capacities with Cooper Labs, CLS and TCC. From 1986 to 1988, she was Vice
President, Cooper & Co., the former corporate transaction services subsidiary of
CDC. She also served as Vice President and Treasurer of CDC from July 1988 to
September 1988.
Mr. Kruttschnitt was elected a Director in March 1992. He founded
California Innkeepers (an owner/operator of hotels) in May 1970 and serves as
its Chairman of the Board. Mr. Kruttschnitt has also been Chairman of the Board
of Burlingame Bancorp (a commercial bank holding company) since 1983. He also
serves as a Director of Hanover Direct, Inc. (a merchandiser of specialty
products through catalog sales) and various private companies.
Mr. Montgomery has been Chairman of the Board and President since 1988.
He founded Cooper Laboratories, the former parent of CDC, in 1958 and served in
various capacities with that company, most recently as its Chairman of its Board
and President, until its assets were distributed to its shareholders in June
1985. He was also Chairman of the Board of Directors and President of TCC until
July 1988 and October 1988, respectively, and Chairman of the Board and
President of CLS until his resignation in September 1989.
Mr. Schultz was elected as a Director in December of 1988. He has been a
consultant for Wells Fargo & Co. (a bank holding company) since September 1990
and served as Senior Vice President for Public and Governmental Affairs from
1973 to August 1990 also at Wells Fargo & Co.
32
<PAGE>
Section 16 Filings
Section 16(a) of the Securities Exchange Act of 1934, as amended, required
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and NASDAQ. Directors, executive officers and greater than ten
percent holders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received, the
Company believes that during fiscal 1994, all filing requirements under Section
16(a) applicable to its directors and executive officers were met.
ITEM 11. EXECUTIVE COMPENSATION
Each director who is not an employee of CDC receives quarterly fees of
$9,000 for serving as a director and $1,500 for each day he attends a meeting of
the Board of Directors and, if on a separate day, of a committee of which he is
a member. Directors may also be compensated for services performed on special
assignments. During fiscal 1994, CDC's Board of Directors met six times and
acted six times by unanimous written consent, and its Audit and Finance
Committee met two times. Messrs. Gilleran, Kruttschnitt and Schultz each
received $45,000 for services performed as a director during fiscal 1994. Each
director was paid a special bonus of $24,000.
The following table sets forth information as to all cash compensation paid
by CDC to each of the current executive officers of CDC and to all such
executive officers of CDC as a group for services rendered to CDC and its
subsidiaries during fiscal 1994. Also set forth is the current base rate of pay.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation All Other
--------------------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus Other Annual Restricted Options/ Long-Term All Other
Compensation Stock Awards SAR's (#) Incentive Compen-sation
Payouts ($)
($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Parker G. Montgomery 1994 $300,000 $200,000 - - - - -
COB/CEO 1993 $300,000 $ 75,000 - - - - $ 938
1992 $300,000 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Braden 1994 $120,000 $ 60,000 - - - - $2,250
Vice President, 1993 $120,000 $ 67,500 - - - - $1,800
Treasurer & Controller 1992 $120,000 $ 30,000 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Carol R. Kaufman 1994 $120,000 $ 30,000 - - - - $1,500
Vice President & 1993 $120,000 - - - - - $1,500
Secretary 1992 $ 90,000 $ 30,000 - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The All Other Compensation column includes the Company match to the
401(k) Plan.
The Board of Directors has adopted the Cooper Development Company Incentive
Payment Plan ("Incentive Plan") for key executives and other personnel
(including officers) pursuant to which they may in certain years receive cash
bonuses based on CDC's performance. The Incentive Plan is administered by the
Audit and Finance Committee of the Board of Directors ("Committee"), none of
whose members is an employee of CDC and none of whose members is eligible to
participate in the Incentive Plan. The Committee (or the Chairman of the Board
under guidelines established by the Committee) determines which employees shall
participate in the Incentive Plan and the Incentive Plan category appropriate
for each participant. The Committee may establish corporate performance
objectives expressed in terms of net income, earnings from operations, return on
assets or sales. Depending upon whether such objectives are achieved, a
participant may receive in any one year from 5% to 50% of his salary. Certain
senior corporate and divisional executives may receive up to double such payment
if return on assets and net income or sales or earnings from operations reach
certain additional levels.
33
<PAGE>
The following table sets forth information as to estimated annual benefits
payable upon retirement in specified compensation and years of service
classifications:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
YEARS OF BENEFIT SERVICE
-----------------------------------------------------
Compensation 15 20 25 30 35
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 $13,177 $17,569 $21,961 $26,353 $30,745
- --------------------------------------------------------------------------------
$125,000 $16,927 $22,569 $28,211 $33,853 $39,495
- --------------------------------------------------------------------------------
$150,000 $20,677 $27,569 $34,461 $41,353 $48,245
- --------------------------------------------------------------------------------
(MORE THAN) $150,000 $20,677 $27,569 $34,461 $41,353 $48,245
- --------------------------------------------------------------------------------
</TABLE>
Compensation covered under the plan is generally all taxable income
(excluding moving expenses) plus certain amounts deferred pursuant to salary
reduction agreements (e.g. 401(k)). Compensation in excess of limits set by law
for qualified plans is disregarded. In 1994, this limit was $150,000. For
purposes of determining benefits under the plan, average compensation over a
sixty month period (generally, that period which results in the highest average)
is used. Benefit amounts shown above are annual amounts payable for the life of
the participant, commencing at age 65. Benefits are reduced if retirement is
before age 65. As of December 31, 1994 Mr. Montgomery had ten years of benefit
service, Mr. Braden had seven years and Ms. Kaufman had nine years. Pensionable
earnings during 1994 for Messrs. Montgomery and Braden and Ms. Kaufman were
$150,000 each. Mr. Braden's indicated service does not include his credited
service under the Revo, Inc. Plan. His accrued benefit of $4,585 from this plan
was transferred to the plan in 1990, and is payable in addition to benefits
based on his indicated service.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CDC
The following table sets forth certain information regarding beneficial
ownership of CDC common stock as of December 10, 1994, (i) by each person who is
known by CDC to own beneficially more than 5% of CDC common stock, (ii) by each
director and (iii) by each executive officer and (iv) by all current directors
and executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------
OFFICERS, DIRECTORS AND NUMBER PERCENTAGE
5% STOCKHOLDERS OF SHARES OF CLASS
--------------- --------- --------
<S> <C> <C>
James E. Gilleran 5,000 *
Theodore H. Kruttschnitt (1) 1,089,149 30%
1350 Bayshore Highway
Burlingame, California 94010
Parker G. Montgomery (2) 1,089,148 30%
2420 Sand Hill Road, Suite 300
Menlo Park, CA 94025
Jackson L. Schultz 5,000 *
All current directors and executive 2,191,257 60%
officers as a group (six persons)
</TABLE>
(1) Does not include 728,371 shares of common stock issuable upon conversion of
an aggregate of $1,474,049 of the Company's 8% promissory notes. Upon
conversion of all the Company's 8% Promissory Notes the percentage of class
ownership would increase to 36%. See Item 13 Certain Relationships and
Related Transactions - CDC Loans.
(2) Does not include 728,371 shares of common stock issuable upon conversion of
an aggregate of $1,474,049 of the Company's 8% promissory notes. Upon
conversion of all the Company's 8% Promissory Notes the percentage of class
ownership would increase to 36%. See Item 13 Certain Relationships and
Related Transactions - CDC Loans.
* Less than one percent.
34
<PAGE>
ITEM 13. Certain Relationships and Related Transactions
CDC LOANS
Pursuant to Note Purchase Agreements dated October 15, 1993 and October 29,
1993, the Company sold $902,925 principal amount of promissory notes to each of
Theodore H. Kruttschnitt and Parker G. Montgomery. The notes bear interest at 8%
per annum and are due on demand but no earlier than January 31, 1994. The notes
are convertible into shares of the Company's common stock at a conversion price
of $2.00 per share. Each of Mr. Kruttschnitt and Mr. Montgomery also holds notes
with an aggregate principal amount of $571,124 purchased pursuant to Note
Purchase Agreements date December 11, 1992, February 24, 1993 and May 28, 1993.
These notes are also convertible into shares of the Company's common stock at a
price of $21/16 per share at the holder's option. During fiscal 1994 the Company
paid Messrs. Kruttschnitt and Montgomery $116,000 each in interest.
OTHER RELATIONSHIPS
Consulting Fees With Company's Former Sunglass Business
On January 28, 1994, the Company consummated the sale of substantially all
of the assets of its Revo sunglass business to B&L for $22,521,000 pursuant to a
Purchase and Sale Agreement dated November 2, 1993. In connection with its
purchase of the assets of the Company's Revo sunglass business, B&L assumed
consulting agreements effective February 1, 1994 with Parker G. Montgomery and
Michael J. Braden at the rate of $150,000 and $75,000 per annum, respectively,
with such engagements guaranteed through December 31, 1995. In addition, Messrs.
Montgomery and Braden are eligible to participate in certain bonus plans
applicable to the Revo sunglass business. In fiscal 1994, Messrs. Montgomery and
Braden received $112,500 and $56,250 for consulting fees from B&L under this
arrangement and earned bonuses of equivalent amounts, respectively.
Real Estate Consulting Fees
Pursuant to a Stock Purchase Agreement dated as of March 17, 1994, as
amended, between the Company and Michael B. Joseph, as the "Trustee" of the
"Trust", the Company acquired on April 27, 1994 all of the capital stock of
"CDSA", for $3,250,000. Prior to the Company's purchase of CDSA and during 1993
and 1994, Mr. Montgomery received approximately $157,000 in consulting fees for
assisting CDSA in the management, development and sale of certain real estate in
Mougins, France pursuant to a consulting agreement with CDSA. Mr. Montgomery has
voluntarily waived his right to receive from CDSA any further compensation
arising out of any future sale of the real estate still owned by CDSA.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents as part of this report:
1. Financial Statements
The Consolidated Financial Statements, Notes thereto, Financial Statement
Schedules and Independent Auditors' Report thereon are included in Part II,
Item 8 of this report.
35
<PAGE>
2. Financial Statement Schedules
Schedule
Number Description
------ -----------
VIII Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and, therefore, have been omitted.
3. Exhibits
Exhibit
Number Description
- ------ -----------
3(a) Restated Certificate of Incorporation of Cooper Development Company,
as amended, incorporated by reference to Exhibit 19 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended July 31,
1987.
3(b) Certificate of Designation, Preference and Rights of a Series A Junior
Participating Preferred Stock, incorporated by reference to Exhibit
3(b) to the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1987.
3(c) By-Laws of CooperBiomedical, Inc. (currently Cooper Development
Company) incorporated by reference to Exhibit 3(b) to the Company's
Registration Statement on Form S-1 (No. 2-84122).
4(a) Rights Agreement dated as of December 15, 1987, between Cooper
Development Company and The First National Bank of Boston,
incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated December 15, 1987.
4(b) First Amendment to Rights Agreement dated as of August 5, 1991 between
Cooper Development Company and the First National Bank of Boston
incorporated by reference to Exhibit 4 to the Company's Current Report
on Form 8-K dated August 1, 1991.
4(c) Second Amendment to Rights Agreement dated as of November 19, 1991
between Cooper Development Company and the First National Bank of
Boston incorporated by reference to Exhibit 3 to the Company's Current
Report on Form 8-K dated November 19, 1991.
4(d) Third Amendment to Rights Agreement dated as of December 3, 1992
between Cooper Development Company and the First National Bank of
Boston incorporated by reference to Exhibit 4 to the Company's Current
Report on Form 8-K dated December 3, 1992.
4(e) Fourth Amendment to Rights Agreement dated as of November 1, 1993
between Cooper Development Company and the First National Bank of
Boston incorporated by reference to Exhibit 5 to the Company's Current
Report on Form 8-K dated October 15, 1993.
10(a) Cooper Development 401(k) Plan incorporated herein by reference to
Exhibit 10(j) to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1991.
36
<PAGE>
Exhibit
Number Description
- ------ -----------
10(b) Note Purchase Agreement dated as of December 11, 1992 between Cooper
Development Company and Theodore H. Kruttschnitt and Parker G.
Montgomery incorporated by reference to Exhibit 1 to the Company's
Current Report on Form 8-K dated December 11, 1992.
10(c) Note Purchase Agreement dated as of February 24, 1993 between Cooper
Development Company and Theodore H. Kruttschnitt and Parker G.
Montgomery. Incorporated by reference to Exhibit 10(c) to the
Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1993.
10(d) Note Purchase Agreement dated as of May 28, 1993 between Cooper
Development Company and Theodore H. Kruttschnitt incorporated by
reference to Exhibit 1 to the Company's Current Report on Form 8-K
dated October 15, 1993.
10(e) Note Purchase Agreement dated as of October 15, 1993 between Cooper
Development Company and Theodore H. Kruttschnitt incorporated by
reference to Exhibit 6 to the Company's Current Report on Form 8-K
dated October 15, 1993.
10(f) Note Purchase Agreement dated as of October 29, 1993 between Cooper
Development Company and Parker G. Montgomery incorporated by reference
to Exhibit 7 to the Company's Current Report on Form 8-K dated October
15, 1993.
10(g) Purchase and Sale Agreement dated November 2, 1993, between Bausch &
Lomb Incorporated, Bausch & Lomb Acquisition Corp., Cooper Development
company and Revo, Inc. incorporated by reference to Exhibit 8 to the
Company's Current Report on Form 8-K dated October 15, 1993.
10(h) Loan Agreement dated November 2, 1993 between Bausch & Lomb
Incorporated, Cooper Development Company and Revo, Inc. incorporated
by reference to Exhibit 9 to the Company's Current Report on Form 8-K
dated October 15, 1993.
10(i) Stock Purchase Agreement dated as of March 17, 1994 between the
Company and Michael B. Joseph, as Chapter 7 Trustee of the Cooper
laboratories, Inc. Liquidating Trust incorporated by reference to
Exhibit 7(c) to the Company's Current Report on Form 8-K dated April
27, 1994.
22 Subsidiaries of Cooper Development Company.
25 Powers of Attorney.
(b) There were no reports on Form 8-K filed by the Company during the
period from August 1, 1994, through and including October 31, 1994.
37
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 ON JANUARY 25, 1995.
COOPER DEVELOPMENT COMPANY
By: Michael J. Braden/S/
----------------------------------
Michael J. Braden
Vice President, Treasurer,
and Controller
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON JANUARY 25, 1995.
SIGNATURE TITLE
--------- -----
Vice President, Treasurer and
Michael J. Braden Controller (Principal Financial
- ----------------------------------------
(Michael J. Braden) and Accounting Officer)
James E. Gilleran* Director
- ----------------------------------------
(James E. Gilleran)
Theodore H. Kruttschnitt* Director
- ----------------------------------------
(Theodore H. Kruttschnitt)
Chairman of the Board of
Parker G. Montgomery* Directors and President
- ----------------------------------------
(Parker G. Montgomery) (Principal Executive Officer)
Jackson L. Schultz* Director
- ----------------------------------------
(Jackson L. Schultz)
*By: Michael J. Braden
- -----------------------------------------
(Michael J. Braden, Attorney-in-Fact)
38
<PAGE>
INDEX TO EXHIBITS
Exhibit Exhibit Document
Number Description
------- ----------------
22 Subsidiaries Of Cooper
Development Company.
25 Powers Of Attorney.
27 Financial Data Schedules
<PAGE>
EXHIBIT 22
SUBSIDIARIES OF COOPER DEVELOPMENT COMPANY
Cabot Laboratories, Inc. (New York)
Difa Cooper S.p.A. (Italy)
Cooper Cosmetics, S.A. (Switzerland)
Cooper Development S.A. (Switzerland)
Cooper Pharmaceuticals (Bahamas) Limited (Bahamas)
Cooper Laboratories Inc. (New York)
Cooper & Co. (California)
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint MICHAEL J. BRADEN and CAROL R. KAUFMAN and each of them,
acting together or alone, his true and lawful attorneys-in-fact and agents with
full power of substitution, in his name, place and stead to execute on his
behalf, in his capacity as a Director and/or officer of Cooper Development
Company, an annual report on Form 1O-K for the fiscal year ended October 31,
1994 to be filed with the Securities and Exchange Commission (OSECO) pursuant to
the Securities Exchange Act of 1934, as amended, (the "1934 Act") and any and
all other instruments, including any amendments thereto, which said attorneys-
in-fact and agents deem necessary or advisable to enable Cooper Development
Company to comply with the 1934 Act and the rules, regulations and requirements
of the SEC in respect thereof, giving and granting to said attorneys-in-fact and
agents, and each of them, acting together or alone, full power and authority to
do and perform each and every act and thing whatsoever necessary or appropriate
to be done in and about the premises as fully to all intents as he might or
would do if personally present at the doing thereof with full power of
substitution and revocation, hereby ratifying and confirming all that his said
attorneys-in-fact or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
THIS POWER OF ATTORNEY expires on December 31, 1995.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
James E. Gilleran/S/
------------------------
James E. Gilleran
Dated: January 23, 1995.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint MICHAEL J. BRADEN and CAROL R. KAUFMAN and each of them,
acting together or alone, his true and lawful attorneys-in-fact and agents with
full power of substitution, in his name, place and stead to execute on his
behalf, in his capacity as a Director and/or officer of Cooper Development
Company, an annual report on Form 1O-K for the fiscal year ended October 31,
1994 to be filed with the Securities and Exchange Commission (OSECO) pursuant to
the Securities Exchange Act of 1934, as amended, (the "1934 Act") and any and
all other instruments, including any amendments thereto, which said attorneys-
in-fact and agents deem necessary or advisable to enable Cooper Development
Company to comply with the 1934 Act and the rules, regulations and requirements
of the SEC in respect thereof, giving and granting to said attorneys-in-fact and
agents, and each of them, acting together or alone, full power and authority to
do and perform each and every act and thing whatsoever necessary or appropriate
to be done in and about the premises as fully to all intents as he might or
would do if personally present at the doing thereof with full power of
substitution and revocation, hereby ratifying and confirming all that his said
attorneys-in-fact or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
THIS POWER OF ATTORNEY expires on December 31, 1995.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Jackson L. Schultz/S/
-------------------------
Jackson L. Schultz
Dated: January 21, 1995.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint MICHAEL J. BRADEN and CAROL R. KAUFMAN and each of them,
acting together or alone, his true and lawful attorneys-in-fact and agents with
full power of substitution, in his name, place and stead to execute on his
behalf, in his capacity as a Director and/or officer of Cooper Development
Company, an annual report on Form 1O-K for the fiscal year ended October 31,
1994 to be filed with the Securities and Exchange Commission (OSECO) pursuant to
the Securities Exchange Act of 1934, as amended, (the "1934 Act") and any and
all other instruments, including any amendments thereto, which said attorneys-
in-fact and agents deem necessary or advisable to enable Cooper Development
Company to comply with the 1934 Act and the rules, regulations and requirements
of the SEC in respect thereof, giving and granting to said attorneys-in-fact and
agents, and each of them, acting together or alone, full power and authority to
do and perform each and every act and thing whatsoever necessary or appropriate
to be done in and about the premises as fully to all intents as he might or
would do if personally present at the doing thereof with full power of
substitution and revocation, hereby ratifying and confirming all that his said
attorneys-in-fact or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
THIS POWER OF ATTORNEY expires on December 31, 1995.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Parker G. Montgomery/S/
-----------------------------
Parker G. Montgomery
Dated: January 17, 1995.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint MICHAEL J. BRADEN and CAROL R. KAUFMAN and each of them,
acting together or alone, his true and lawful attorneys-in-fact and agents with
full power of substitution, in his name, place and stead to execute on his
behalf, in his capacity as a Director and/or officer of Cooper Development
Company, an annual report on Form 1O-K for the fiscal year ended October 31,
1994 to be filed with the Securities and Exchange Commission (OSECO) pursuant to
the Securities Exchange Act of 1934, as amended, (the "1934 Act") and any and
all other instruments, including any amendments thereto, which said attorneys-
in-fact and agents deem necessary or advisable to enable Cooper Development
Company to comply with the 1934 Act and the rules, regulations and requirements
of the SEC in respect thereof, giving and granting to said attorneys-in-fact and
agents, and each of them, acting together or alone, full power and authority to
do and perform each and every act and thing whatsoever necessary or appropriate
to be done in and about the premises as fully to all intents as he might or
would do if personally present at the doing thereof with full power of
substitution and revocation, hereby ratifying and confirming all that his said
attorneys-in-fact or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
THIS POWER OF ATTORNEY expires on December 31, 1995.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Theodore H. Kruttschnitt/S/
-------------------------------
Theodore H. Kruttschnitt
Dated: January 22, 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 12,286
<SECURITIES> 0
<RECEIVABLES> 5,355
<ALLOWANCES> 981
<INVENTORY> 5,482
<CURRENT-ASSETS> 22,858
<PP&E> 4,143
<DEPRECIATION> 1,409
<TOTAL-ASSETS> 30,928
<CURRENT-LIABILITIES> 19,915
<BONDS> 0
<COMMON> 447
0
0
<OTHER-SE> 8,377
<TOTAL-LIABILITY-AND-EQUITY> 30,928
<SALES> 20,078
<TOTAL-REVENUES> 20,078
<CGS> 9,659
<TOTAL-COSTS> 9,659
<OTHER-EXPENSES> 1,293
<LOSS-PROVISION> 981
<INTEREST-EXPENSE> 333
<INCOME-PRETAX> 7,852
<INCOME-TAX> 225
<INCOME-CONTINUING> (8,223)
<DISCONTINUED> 15,850
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,627
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 1.55
</TABLE>
