The Cooper Companies Announces Fourth Quarter and Full Year 2014 Results

PLEASANTON, Calif., Dec. 4, 2014 (GLOBE NEWSWIRE) -- The Cooper Companies, Inc. (NYSE:COO) today announced financial results for the fiscal fourth quarter and full year ended October 31, 2014.

• Fourth quarter revenue increased 14% year-over-year to $468.0 million. Fiscal 2014 revenue increased 8% to $1,717.8 million.
• Fourth quarter GAAP earnings per share (EPS) $0.63, down 52 cents or 45% from last year's fourth quarter. Fiscal 2014 GAAP EPS $5.51, down 8% from fiscal 2013.
• Fourth quarter non-GAAP EPS $1.95, up 35 cents or 22% from last year's fourth quarter. Fiscal 2014 non-GAAP EPS $7.29, up 14% from fiscal 2013. See "Reconciliation of Non-GAAP Results to GAAP Results" below.
• Fourth quarter free cash flow $108.0 million. Fiscal 2014 free cash flow $235.9 million.

Commenting on the results, Robert S. Weiss, Cooper's president and chief executive officer said, "I am pleased to report record revenue this year at both our business units and record non-GAAP EPS. We accomplished this through continued market share gains across all geographies and the acquisition of Sauflon Pharmaceuticals. Our business fundamentals remain strong and we expect fiscal 2015 to be a year of strong operational performance."

Fourth Quarter GAAP Operating Highlights

• Revenue $468.0 million, up 14% from last year's fourth quarter, up 7% pro forma (constant currency including Sauflon in both periods and excluding Aime).
• Gross margin 60% compared with 64% in last year's fourth quarter. Gross margin was negatively impacted primarily by integration related expenses. Excluding these expenses, gross margin was 63% vs. 64% last year.
• Operating margin 8% compared with 15% in last year's fourth quarter. The decrease was the result of integration related expenses and the related increase in amortization. Excluding these costs, operating margin would have been 23% vs. 22% last year.
• Depreciation $28.6 million, up 19% from last year's fourth quarter. Amortization $14.0 million, up 82% from last year's fourth quarter due to the Sauflon acquisition.
• Total debt increased $1,034.4 million from July 31, 2014, to $1,382.4 million, due primarily to the acquisition of Sauflon, offset by operational cash flow generation. Interest expense $3.3 million compared with $1.9 million in last year's fourth quarter.
• Cash provided by operations $152.1 million, capital expenditures $60.1 million, and excluding acquisition costs of $16.0 million resulted in free cash flow of $108.0 million.

Fourth Quarter CooperVision (CVI) GAAP Operating Highlights

• Revenue $385.4 million, up 18% from last year's fourth quarter, up 9% pro forma.
• Revenue by category:

• Revenue by geography:

*Constant currency including Sauflon in both periods (unaudited for fiscal 4Q13) and excluding Aime.

• Gross margin 59% compared with 64% in last year's fourth quarter. Gross margin was negatively impacted primarily by Sauflon integration related expenses. Excluding these expenses, gross margin was 63% vs. 64% last year. 

Fourth Quarter CooperSurgical (CSI) GAAP Operating Highlights

• Revenue $82.6 million, down 3% from last year's fourth quarter, down 1% in constant currency.
• Revenue by category:

• Gross margin 64% compared with 64% in last year's fourth quarter. Excluding restructuring charges associated with the fertility business, gross margin was 65% vs. 64% last year.

Fiscal Year 2014 GAAP Operating Highlights

• Revenue $1,717.8 million, up 8% from fiscal 2013, up 8% pro forma.
• CVI revenue $1,392.6 million, up 10% from fiscal 2013, up 10% pro forma, and CSI revenue $325.1 million, up 2% from fiscal 2013, 2% in constant currency.
• Gross margin 64% compared with 65% in fiscal 2013. Non-GAAP 65% compared with 65% in fiscal 2013.
• Operating margin 18% compared with 19% in fiscal 2013. Non-GAAP 24% from 23% in fiscal 2013.
• Depreciation and amortization expense $138.2 million.
• Interest expense $8.0 million compared with $9.2 million in fiscal 2013.
• Cash provided by operations $454.8 million, capital expenditures $238.1 million and excluding acquisition costs of $17.8 million and insurance recovery of $1.4 million resulted in free cash flow of $235.9 million.

Other

• Sauflon non-GAAP historical financial information available at http://investor.coopercos.com/events.cfm.
• As previously announced on August 6, 2014, Cooper completed the acquisition of Sauflon Pharmaceuticals Ltd, a European manufacturer and distributor of soft contact lenses and solutions, for approximately $1.1 billion. 
• As previously announced on August 6, 2014, Cooper closed a $700 million 3-year Senior Unsecured Term Loan which matures August 4, 2017. 
• As previously announced on October 8, 2014, CooperSurgical completed the acquisition of EndoSee Corporation, a developer of an office-based disposable hysteroscopy system, for approximately $44 million. 
• During October 2014, the company repurchased $25.8 million of common stock under the existing share repurchase program for an average share price of $146.64. The program has $185.7 million of remaining availability and no expiration date.

Fiscal Year 2015 Guidance

The Company updated its fiscal year 2015 guidance. Guidance assumes constant currency as of December 3, 2014, and is summarized as follows:

*Guidance reduced solely to reflect moves in currency from September 4, 2014 (date of last guidance), offset by a slight increase reflecting operational improvements.

Reconciliation of Non-GAAP Results to GAAP Results

To supplement our financial results presented on a GAAP basis, we use non-GAAP measures indicated in the tables below that we believe are helpful in understanding our results. The non-GAAP measures exclude costs which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. These include costs related to acquisitions and the related integration activities, divestitures, severance and related restructuring costs, and proceeds related to a business interruption claim. Our non-GAAP financial results and guidance are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.  Management uses supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions.  These non-GAAP measures are among the factors management uses in planning and forecasting for future periods. Our non-GAAP financial measures include the following adjustments, along with the related income tax effects and changes in income attributable to noncontrolling interests:

• Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP financial results.  Amortization of intangible assets will recur in future periods however, the amounts are affected by the timing and size of our acquisitions.
• Acquisition related and integration expenses; and restructuring expenses: We have excluded the effect of acquisition related and integration expenses and the effect of restructuring expenses from our non-GAAP financial results. Such expenses generally diminish over time with respect to past acquisitions; however, we generally will incur similar expenses in connection with any future acquisitions. We incurred significant expenses in connection with our acquisitions and also incurred certain other operating expenses or income, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Many of these costs relate to our acquisition of Sauflon Pharmaceuticals Ltd. in our fiscal fourth quarter of 2014. Acquisition related and integration expenses include items such as personnel related costs for transitional employees, other acquired employee related costs and integration related professional services. Restructuring expenses consist of employee severance, product rationalization, facility and other exit costs. We believe it is useful for investors to understand the effects of these items on our consolidated operating results.
• Divestiture of Aime:   On October 31, 2013, we divested Aime, our rigid gas-permeable contact lens and solutions business in Japan, consistent with our strategy to focus on our core soft contact lens business. We believe it is useful to investors to understand the effect of this divestiture on our consolidated operating results.
• Proceeds related to a business interruption claim: We received several insurance payments over two fiscal years related to an incident in a manufacturing building on October 28, 2011. We believe it is useful to investors to understand the effect of these payments on our consolidated operating results. 

We also report revenue growth using the non-GAAP financial measure of constant currency revenue. Management presents and refers to constant currency information so that revenue results may be evaluated excluding the effect of foreign currency rate fluctuations. To present this information, current period revenue for entities reporting in currencies other than United States dollars are converted into United States dollars at the average foreign exchange rates for the corresponding period in the prior year. To report revenue growth excluding the October 31, 2013 divestiture of Aime, we excluded $6.6 million and $25.8 million of net sales in our fiscal fourth quarter of 2013 and fiscal year 2013, respectively. To report pro forma revenue growth including Sauflon, we included $41.4 million and $158.6 million of net sales in our fiscal fourth quarter of 2013 and fiscal year 2013, respectively, for periods when we did not own Sauflon.

Conference Call and Webcast

The Company will host a conference call today at 5:00 PM ET to discuss its fiscal fourth quarter and full year 2014 financial results and current corporate developments. The dial-in number in the United States is 1-877-415-3183 and outside the United States is +1-857-244-7326. The passcode is "Cooper". There will be a replay available approximately two hours after the call ends until Thursday, December 11, 2014. The replay number in the United States is 1-888-286-8010 and outside the United States is +1-617-801-6888. The replay passcode is 80168074. This call will also be broadcast live at http://investor.coopercos.com and a transcript will be available following the conference call.

About The Cooper Companies

The Cooper Companies, Inc. ("Cooper") is a global medical device company publicly traded on the NYSE Euronext (NYSE:COO). Cooper is dedicated to being A Quality of Life Company™ with a focus on delivering shareholder value. Cooper operates through two business units, CooperVision and CooperSurgical. CooperVision brings a refreshing perspective on vision care with a commitment to developing a wide range of high-quality products for contact lens wearers and providing focused practitioner support. CooperSurgical focuses on supplying women's health clinicians with market leading products and treatment options to improve the delivery of healthcare to women. Headquartered in Pleasanton, CA, Cooper has approximately 9,000 employees with products sold in over 100 countries. For more information, please visit www.coopercos.com.

Forward-Looking Statements

This news release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995.  Statements relating to guidance, plans, prospects, goals, strategies, future actions, events or performance and other statements which are other than statements of historical fact, including our 2014 Guidance and all statements regarding anticipated growth in our revenue, anticipated effects of any product recalls, anticipated market conditions, planned product launches and expected results of operations and integration of any acquisition are forward-looking.  To identify these statements look for words like "believes," "expects," "may," "will," "should," "could," "seeks," "intends," "plans," "estimates" or "anticipates" and similar words or phrases.  Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. 

Among the factors that could cause our actual results and future actions to differ materially from those described in forward-looking statements are: adverse changes in the global or regional general business, political and economic conditions due to the current global economic downturn, including the impact of continuing uncertainty and instability of certain European Union countries that could adversely affect our global markets; foreign currency exchange rate and interest rate fluctuations including the risk of fluctuations in the value of the yen, pound and euro that would decrease our revenues and earnings; acquisition- related adverse effects including the failure to successfully obtain the anticipated revenues, margins and earnings benefits of acquisitions, including the Sauflon acquisition, integration delays or costs and the requirement to record significant adjustments to the preliminary fair value of assets acquired and liabilities assumed within the measurement period, required regulatory approvals for an acquisition not being obtained or being delayed or subject to conditions that are not anticipated, adverse impacts of changes to accounting controls and reporting procedures, contingent liabilities or indemnification obligations, increased leverage and lack of access to available financing (including financing for the acquisition or refinancing of debt owed by us on a timely basis and on reasonable terms); a major disruption in the operations of our manufacturing, research and development or distribution facilities, due to technological problems, natural disasters or other causes; disruptions in supplies of raw materials, particularly components used to manufacture our silicone hydrogel lenses; compliance costs and potential liability in connection with U.S. and foreign healthcare regulations, including product recalls, warning letters, and potential losses resulting from sales of counterfeit and other infringing products; legal costs, insurance expenses, settlement costs and the risk of an adverse decision or settlement related to product liability, patent protection or other litigation; limitations on sales following product introductions due to poor market acceptance; new competitors, product innovations or technologies; reduced sales, loss of customers, and costs and expenses related to recalls; new U.S. and foreign government laws and regulations, and changes in existing laws, regulations and enforcement guidance, which affect the medical device industry and the healthcare industry generally; failure to receive, or delays in receiving, U.S. or foreign regulatory approvals for products; failure to obtain adequate coverage and reimbursement from third party payors for our products; changes in tax laws or their interpretation and changes in statutory tax rates; the requirement to provide for a significant liability or to write off, or accelerate depreciation on, a significant asset, including goodwill; the success of our research and development activities and other start-up projects; dilution to earnings per share from the Sauflon acquisition or other acquisitions or issuing stock; changes in accounting principles or estimates; environmental risks and other events described in our Securities and Exchange Commission filings, including the "Business" and "Risk Factors" sections in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014, as such Risk Factors may be updated in quarterly filings. 

We caution investors that forward-looking statements reflect our analysis only on their stated date. We disclaim any intent to update them except as required by law.

Soft Contact Lens Revenue Update

COO-E

CONTACT: Kim Duncan
         Vice President, Investor Relations
         ir@cooperco.com
         925-460-3663