Cooper Companies 10-Q 2022-04-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________

☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2022

☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-8597

_____________________________________________________________

The Cooper Companies, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________________________________

Delaware			94-2657368
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

6101 Bollinger Canyon Road, Suite 500,

San Ramon, California 94583

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (925) 460-3600

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol						Name of each exchange on which registered
Common Stock, $.10 par value						COO						The New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒						Accelerated filer			☐
Non-accelerated filer			☐						Smaller reporting company			☐
Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

On May 27, 2022, 49,336,487 shares of Common Stock, $0.10 par value, were outstanding.

INDEX

						Page No.
PART I.			FINANCIAL INFORMATION
Item 1.			Unaudited Financial Statements
			Consolidated Statements of Income and Comprehensive Income			3
			Consolidated Condensed Balance Sheets			4
			Consolidated Condensed Statements of Stockholders' Equity			5
			Consolidated Condensed Statements of Cash Flows			7
			Notes to Consolidated Condensed Financial Statements			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.			Quantitative and Qualitative Disclosure About Market Risk			42
Item 4.			Controls and Procedures			42
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			44
Item 1A.			Risk Factors			44
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 3.			Defaults Upon Senior Securities			44
Item 4.			Mine Safety Disclosures			44
Item 5.			Other Information			44
Item 6.			Exhibits			45
Signature						46

PART I. FINANCIAL INFORMATION

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

Periods Ended April 30,

(In millions, except for earnings per share)

(Unaudited)

			Three Months												Six Months
			2022						2021						2022						2021
Net sales			$	829.8					$	719.5					$	1,616.9					$	1,400.0
Cost of sales			297.3						232.4						566.0						462.2
Gross profit			532.5						487.1						1,050.9						937.8
Selling, general and administrative expense			322.4						285.8						641.5						547.0
Research and development expense			26.3						21.0						52.4						42.4
Amortization of intangibles			51.1						37.1						93.4						71.8
Operating income			132.7						143.2						263.6						276.6
Interest expense			10.8						6.1						17.4						12.5
Other (income) expense, net			(41.8)						0.7						(39.4)						(11.8)
Income before income taxes			163.7						136.4						285.6						275.9
Provision for income taxes (Note 6)			37.1						18.9						63.8						(1,942.7)
Net income			$	126.6					$	117.5					$	221.8					$	2,218.6
Earnings per share (Note 7):
Basic			$	2.57					$	2.39					$	4.49					$	45.12
Diluted			$	2.55					$	2.36					$	4.45					$	44.65
Number of shares used to compute earnings per share:
Basic			49.3						49.2						49.4						49.2
Diluted			49.7						49.7						49.8						49.7
Other comprehensive income, net of tax:
Cash flow hedges			$	39.3					$	15.2					$	52.7					$	19.7
Foreign currency translation adjustment			(96.6)						18.9						(145.8)						105.1
Comprehensive income			$	69.3					$	151.6					$	128.7					$	2,343.4

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets

(In millions, unaudited)

			April 30, 2022						October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	399.2					$	95.9
Trade accounts receivable, net of allowance for credit losses of $13.8 at April 30, 2022, and $9.2 at October 31, 2021			532.0						515.3
Inventories (Note 3)			603.8						585.6
Prepaid expense and other current assets			203.2						179.3
Assets held-for-sale			—						89.2
Total current assets			1,738.2						1,465.3
Property, plant and equipment, at cost			2,719.1						2,655.7
Less: accumulated depreciation and amortization			1,353.5						1,308.1
			1,365.6						1,347.6
Operating lease right-of-use assets			249.9						257.0
Goodwill (Note 4)			3,719.4						2,574.0
Other intangibles, net (Note 4)			1,907.4						1,271.5
Deferred tax assets			2,480.1						2,546.6
Other assets			317.4						144.2
Total assets			$	11,778.0					$	9,606.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 5)			$	905.7					$	82.9
Accounts payable			184.1						161.4
Employee compensation and benefits			120.0						148.7
Operating lease liabilities			36.2						35.7
Other current liabilities			402.4						301.7
Liabilities held-for-sale			—						1.7
Total current liabilities			1,648.4						732.1
Long-term debt (Note 5)			2,346.7						1,396.1
Deferred tax liabilities			131.6						24.1
Long-term tax payable			126.1						139.6
Operating lease liabilities			226.0						231.7
Accrued pension liability and other			285.4						140.6
Total liabilities			$	4,764.2					$	2,664.2
Contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $10 cents par value, 1.0 shares authorized, zero shares issued or outstanding			—						—
Common stock, $10 cents par value, 120.0 shares authorized, 53.8 issued and 49.3 outstanding at April 30, 2022, and 53.7 issued and 49.3 outstanding at October 31, 2021			5.4						5.4
Additional paid-in capital			1,736.8						1,715.2
Accumulated other comprehensive loss			(434.5)						(341.3)
Retained earnings			6,422.5						6,202.1
Treasury stock at cost: 4.6 shares at April 30, 2022, and 4.4 shares at October 31, 2021			(716.6)						(639.6)
Total Cooper stockholders’ equity			7,013.6						6,941.8
Noncontrolling interests			0.2						0.2
Stockholders’ equity (Note 9)			7,013.8						6,942.0
Total liabilities and stockholders’ equity			$	11,778.0					$	9,606.2

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

THE COOPER COMPANI

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and Results of Operations

• CooperSurgical's R&D expense increased in the three and six months ended April 30, 2022, compared to fiscal 2021, mainly due to the addition of Generate's R&D expense and changes in headcount. As a percentage of sales, CooperSurgical's R&D expense remained relatively flat. CooperSurgical's R&D activities are focused on developing and refining diagnostic and therapeutic products including medical interventions, surgical devices and fertility solutions.

Amortization Expense

Three Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	8.0					1		%				$	9.4					2		%				(15)		%
CooperSurgical			43.1						16		%				27.7						14		%				56		%
			$	51.1					6		%				$	37.1					5		%				38		%
Six Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	16.2					1		%				$	17.9					2		%				(9)		%
CooperSurgical			77.2						15		%				53.9						15		%				43		%
			$	93.4					6		%				$	71.8					5		%				30		%

CooperVision's amortization expense decreased in absolute dollars in the three and six months ended April 30, 2022, compared to fiscal 2021, primarily due to the deconsolidation of SGV. As a percentage of sales, CooperVision's amortization expense decreased, primarily due to an increase in net sales.

CooperSurgical's amortization expense increased in the three and six months ended April 30, 2022, compared to fiscal 2021, primarily due to the amortization of intangible assets newly acquired through acquisitions. As a percentage of sales, CooperSurgical's amortization expense remained relatively flat, primarily due to an increase in net sales.

Operating Income

Three Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	135.4					24		%				$	131.7					25		%				3		%
CooperSurgical			10.9						4		%				23.1						12		%				(53)		%
Corporate			(13.6)						—						(11.6)						—						17		%
			$	132.7					16		%				$	143.2					20		%				(7)		%
Six Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	262.8					24		%				$	259.2					25		%				1		%
CooperSurgical			26.6						5		%				40.6						11		%				(35)		%
Corporate			(25.8)						—						(23.2)						—						11		%
			$	263.6					16		%				$	276.6					20		%				(5)		%

CooperVision's operating income increased in absolute dollars in the three and six months ended April 30, 2022, compared to the prior year periods primarily due to an increase in net sales partially offset by net changes in operating expenses. As a percentage of net sales, CooperVision's operating income decreased, primarily due to an increase in net sales.

CooperSurgical's operating income decreased as a percentage of net sales and in absolute dollars in the three and six months ended April 30, 2022, compared to the prior year periods, primarily due to an increase in SGA and amortization expenses, partially offset by an increase in net sales.

Corporate operating loss increased in the three and six months ended April 30, 2022, compared to the prior year periods, primarily due to higher share-based compensation expense.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

On a consolidated basis, operating income decreased as a percentage of net sales and in absolute dollars primarily due to an increase in SGA and amortization expense, partially offset by an increase in consolidated net sales.

Interest Expense

Three Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
Interest expense			$	10.8					1		%				$	6.1					1		%				78		%
Six Months Ended April 30,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
Interest expense			$	17.4					1		%				$	12.5					1		%				39		%

Interest expense increased in absolute dollars during the three and six months ended April 30, 2022, primarily due to higher average debt balances compared to the prior year periods.

Other (Income) Expense, Net

Periods Ended April 30,						Three Months												Six Months
($ in millions)						2022						2021						2022						2021
Investment gain						$	(48.4)					$	—					$	(48.4)					(11.5)
Foreign exchange loss						7.0						1.3						10.3						$	1.2
Other income, net						(0.4)						(0.6)						(1.3)						(1.5)
						$	(41.8)					$	0.7					$	(39.4)					$	(11.8)

Investment gain primarily consists of a gain on remeasurement of the fair value of retained equity investment in SGV as a result of deconsolidation.

Foreign exchange loss is mainly associated with intercompany receivables from Yen and Euro activity during the quarter.

Other income, net decreased in the three and six months ended April 30, 2022, primarily due to loss on minority investments, partially offset by defined benefit plan related income.

Provision for Income Taxes

Our effective tax rates for the three months ended April 30, 2022, and April 30, 2021, were 22.7% and 13.8%, respectively. The increase was primarily due to changes in the geographical composition of pre-tax earnings and excess tax benefits from share-based compensation.

Our effective tax rates for the six months ended April 30, 2022, and April 30, 2021, were 22.3% and (704.2)%, respectively. The increase was primarily due to an intra-group transfer of intellectual property during the six months ended April 30, 2021, as discussed below.

In November 2020, we completed an intra-group transfer of certain intellectual property and related assets of CooperVision to a UK subsidiary as part of a group restructuring to establish headquarters operations in the UK. Determining fair value involved significant judgment related to future revenue growth, operating margins and discount rates. The transfer resulted in a step-up of the UK tax-deductible basis in the intellectual property and goodwill, creating a temporary difference between the book basis and the tax basis of these assets. As a result, we recognized a deferred tax asset of $1,987.9 million, with a corresponding income tax benefit, during the three months ended January 31, 2021.

Share-Based Compensation Plans

We have several share-based compensation plans that are described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. The compensation expense and related income tax benefit recognized in our Consolidated Statements of Income and Comprehensive Income for share-based awards were as follows:

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Periods Ended April 30,						Three Months												Six Months
($ in millions)						2022						2021						2022						2021
Selling, general and administrative expense						$	11.3					$	8.7					$	22.8					$	17.8
Cost of sales						1.0						0.9						2.3						2.0
Research and development expense						0.7						0.6						1.5						1.2
Total share-based compensation expense						$	13.0					$	10.2					$	26.6					$	21.0
Related income tax benefit						$	1.1					$	1.2					$	2.7					$	2.4

Capital Resources and Liquidity

Second Quarter Highlights

• Operating cash flow of $131.8 million compared to $192.6 million in the prior year period

• Expenditures for purchases of property, plant and equipment of $43.4 million compared to $49.9 million in the prior year period

• Cash proceeds from sale of interest in a subsidiary of $52.6 million. Refer to Note 2. Acquisitions and Joint Venture for additional information

• Cash payments for acquisitions and others of $24.8 million compared to $91.1 million in the prior year period

• Cash provided by operations of $131.8 million offset by capital expenditures of $43.4 million resulted in positive free cash flow of $88.4 million, down $54.3 million compared to the prior year period

Six-Month Highlights

• Operating cash flow of $297.8 million compared to $340.3 million in the prior year period

• Expenditures for purchases of property, plant and equipment of $100.5 million compared to $105.8 million in the prior year period

• Cash proceeds from sale of interest in a subsidiary of $52.6 million. Refer to Note 2. Acquisitions and Joint Venture for additional information

• Cash payments for acquisitions and others of $1,637.1 million compared to $170.9 million in the prior year period

• Cash provided by operations of $297.8 million offset by capital expenditures of $100.5 million resulted in positive free cash flow of $197.3 million, down $37.2 million compared to the prior year period

Comparative Statistics

($ in millions)						April 30, 2022						October 31, 2021
Cash and cash equivalents						$	399.2					$	95.9
Total assets						$	11,778.0					$	9,606.2
Working capital						$	89.8					$	733.2
Total debt						$	3,252.4					$	1,479.0
Stockholders' equity						$	7,013.8					$	6,942.0
Ratio of debt to equity						0.46:1						0.21:1
Debt as a percentage of total capitalization						32		%				18		%

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Working Capital

The decrease in working capital at April 30, 2022, from the end of fiscal 2021 was primarily due to:

• increase in short-term debt of $822.8 million, primarily due to the 2021 364-Day Term Loan Agreement entered into on November 2, 2021;

• increase in other current liabilities of $100.7 million, primarily due to the Generate acquisition. Refer to Note 2. Acquisitions and Joint Venture for further information;

• decrease in assets held-for-sale of $89.2 million due to deconsolidation of SGV and forming of a new joint venture. Refer to Note 2. Acquisitions and Joint Venture for further information;

• increase in accounts payable of $22.7 million due to timing of payments; partially offset by:

• increase in cash and cash equivalents of $303.3 million;

• decrease in employee compensation and benefits of $28.7 million due to timing of payments;

• increase in prepaid expense and other current assets of $23.9 million due to timing of payments;

• increase in inventories of $18.2 million primarily due to increase in production and the build up of inventory for future product launches;

• increase in trade accounts receivable of $16.7 million primarily due to higher sales and timing of collections.

At April 30, 2022, our inventory months on hand was 6.1 compared to 6.8 at October 31, 2021. The $18.2 million increase in inventories was primarily due to increase in production and the build up of inventory for future product launches.

Our days sales outstanding (DSO) was 57 days at April 30, 2022, compared to 64 days at October 31, 2021. The decrease in DSO from October 31, 2021 to April 30, 2022 was primarily due to timing of collections.

Operating Cash Flow

Cash provided by operating activities decreased by $42.5 million from $340.3 million in the first half of fiscal 2021 to $297.8 million in the first half of fiscal 2022. This decrease in cash flow provided by operating activities primarily consists of:

• decrease in net income of $1,996.8 million from a net income of $2,218.6 million in the first half of fiscal 2021 to $221.8 million in the first half of fiscal 2022;

• decrease from other non-cash items of $49.6 million, from $7.7 million cash inflow during the first half of fiscal 2021 to $41.9 million cash outflow during the first half of fiscal 2022;

• decrease from $40.7 million settlement of contingent consideration. Refer to Note 2. Acquisitions and Joint Venture for further information; partially offset by:

• increase of $2,013.2 million in the net changes in deferred income taxes. Refer to Note 6. Income Taxes for further information;

• increase of $22.4 million in net changes in depreciation and amortization, from $153.0 million during the first half of fiscal 2021 to $175.4 million during the first half of fiscal 2022;

• increase of $9.0 million in net cash flow from changes in operating capital, from $61.4 million outflow in the first half of fiscal 2021 to $52.4 million outflow in the first half of fiscal 2022.

The decrease in net income of $1,996.8 million was primarily due to:

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

• recognized income tax benefit of $1,987.9 million in the prior year period. Refer to Note 6. Income Taxes for further information;

• decrease of $13.00 million in operating income from $276.6 million in the first half of fiscal 2021 to $263.6 million in the first half of fiscal 2022 primarily due to the increase in certain costs;

The $9.0 million increase in the net cash flow from changes in operating capital compared to the prior year period is primarily due to:

• $46.5 million increase in the net changes in accounts payable primarily due to timing of payments;

• $42.9 million increase in the net changes in trade and other receivables primarily due to timing of collections and higher sales;

• $14.3 million increase in the net changes in prepaid and other assets due to timing of payments; partially offset by:

• $56.1 million decrease in the net changes in accrued liabilities;

• $23.8 million decrease in the net changes in the translation gain (loss);

• $8.6 million decrease in the net changes in income tax payable;

• $6.2 million decrease in the net changes in inventories.

The $49.6 million decrease in non-cash items compared to the prior year period is primarily due to:

• $57.4 million gain on remeasurement of the fair value of the retained equity investment in SGV as a result of deconsolidation;

• $36.7 million decrease in the net changes in long-term liabilities;

• $12.2 million decrease from change in fair value of contingent consideration; partially offset by:

• $24.6 million increase in net changes in other long-term assets & other;

• $13.1 million increase from minority interest in net income;

• $11.3 million increase from the effect of exchange rate change on cash.

Investing Cash Flow

Cash used in investing activities increased by $1,408.3 million to $1,685.0 million in the first half of fiscal 2022 from $276.7 million in the first half of fiscal 2021 due to:

• $1,466.2 million increase in payments made for acquisitions in the first half of fiscal 2022 compared to the prior year period, largely due to the Generate acquisition, partially offset by;

• $52.6 million increase in cash flows from sale of SGV. Refer to Note 2. Acquisitions and Joint Venture for further information.

Financing Cash Flow

Cash flows from financing activities increased by $1775.5 million to $1,696.5 million cash inflow in the first half of fiscal 2022 compared to $79.0 million outflow in the first half of fiscal 2021, primarily due to:

• $1,016.7 million increase in proceeds from long-term debt, primarily due to funds received from the 2021 Term Loan Facility; and

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

• $826.9 million increase in net proceeds from short-term debt, primarily due to the 2021 364-Day Term Loan Agreement; partially offset by:

• $53.7 million increase in repurchase of common stock compared to prior year period.

On November 2, 2021, the Company entered into a 364-day, $840.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent (the 2021 364-Day Term Loan Agreement), which matures on November 1, 2022. The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolving Credit Facility and for general corporate purposes.

On December 17, 2021, the Company entered into a Term Loan Agreement (the 2021 Credit Agreement) by and among the Company, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent. The 2021 Credit Agreement provides for a term loan facility (the 2021 Term Loan Facility) in an aggregate principal amount of $1.5 billion, which, unless terminated earlier, matures on December 17, 2026. In addition, the Company has the ability from time to time to request an increase to the commitments under the 2021 Term Loan Facility or to establish a new term loan facility under the 2021 Credit Agreement in an aggregate principal amount not to exceed $1.125 billion, upon prior written notice to the administrative agent and subject to the discretionary participation of the lenders funding such term loans and certain limitations set forth in the 2021 Credit Agreement.

The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of April 30, 2022:

(In millions)						Facility Limit						Outstanding Borrowings						Outstanding Letters of Credit						Total Amount Available						Maturity Date
2021 Term Loan Facility						$	1,500.0					$	1,500.0					n/a						—						December 17, 2026
2021 364-Day Term Loan						840.0						840.0						n/a						—						November 1, 2022
2020 Revolving Credit Facility						1,290.0						—						$	1.3					$	1,288.7					April 1, 2025
2020 Term Loan Facility						850.0						850.0						n/a						—						April 1, 2025
Total						$	4,480.0					$	3,190.0					$	1.3					$	1,288.7

The 2020 Credit Agreement contains customary restrictive covenants, as well as financial covenants that require us to maintain a certain Total Leverage Ratio and Interest Coverage Ratio. As defined, in the 2020 Credit Agreement, we are required to maintain an Interest Coverage Ratio of at least 3.00 to 1.00, and a Total Leverage Ratio of no higher than 3.75 to 1.00. At April 30, 2022, we were in compliance with the Interest Coverage Ratio at 39.28 to 1.00 and the Total Leverage Ratio at 2.59 to 1.00. The Company, after considering the potential impacts of the COVID-19 pandemic, expects to remain in compliance with its financial maintenance covenant and meet its debt service obligations for at least the twelve months following the date of issuance of these financial statements.

See Note 5. Debt of the Consolidated Condensed Financial Statements for additional information.

Considering recent market conditions and the ongoing COVID-19 pandemic crisis, we have re-evaluated our operating cash flows and cash requirements and continue to believe that current cash, cash equivalents, future cash flow from operating activities and cash available under our 2020 Credit Agreement will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the Consolidated Condensed Financial Statements included in this quarterly report. To the extent additional funds are necessary to meet our liquidity needs such as that for acquisitions, share repurchases, cash dividends or other activities as we execute our business strategy, we anticipate that additional funds will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Share Repurchase

In December 2011, our Board of Directors authorized the 2012 Share Repurchase Program and through subsequent amendments, the most recent in March 2017, the total repurchase authorization was increased from $500.0 million to $1.0 billion of the Company's common stock. This program has no expiration date and may be discontinued at any time. Purchases under the 2012 Share Repurchase Program are subject to a review of the circumstances in place at the time and may be made from time to time as permitted by securities laws and other legal requirements.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition

and Results of Operations

At April 30, 2022, $256.4 million remained authorized for repurchase under the 2012 Share Repurchase Program.

The Company's share repurchases during the six months ended April 30, 2022, and 2021, were as follows:

			Six Months
Periods Ended April 30,			2022						2021
Number of shares			191,165						69,622
Average repurchase price per share			$	410.41					$	356.61
Total costs of shares repurchased (in millions)			$	78.5					$	24.8

Dividends

We paid a semiannual dividend of approximately $1.5 million or 3 cents per share, on February 9, 2022, to stockholders of record on January 21, 2022.

Summary of Non-GAAP Financial Measures

The non-GAAP financial measures that may be included in Management's Discussion and Analysis and the reasons management believes they are useful to investors are described below. These measures should be considered supplemental in nature and are not intended to be a substitute for the related financial information prepared in accordance with GAAP. In addition, these measures may not be the same as similarly named measures presented by other companies.

Free cash flow is defined as cash provided by operating activities less capital expenditures. Management believes free cash flow is useful for investors as an additional measure of liquidity because it represents cash that is available to grow the business, make strategic acquisitions, repay debt, buyback common stock or fund the dividend. We use free cash flow internally to understand, manage, make operating decisions and evaluate our business. In addition, we use free cash flow to help plan and forecast future periods.

Constant currency is defined as excluding the effect of foreign currency rate fluctuations. In order to assist with the assessment of how our underlying businesses performed, we compare the percentage change in net sales from one period to another, excluding the effect of foreign currency fluctuations. To present this information, current period revenue for entities reporting in currencies other than the United States dollar are converted into United States dollars at the average foreign exchange rates for the corresponding period in the prior year.

Estimates and Critical Accounting Policies

Information regarding estimates and critical accounting policies is included in Management's Discussion and Analysis on Form 10-K for the fiscal year ended October 31, 2021. There have been no material changes in our policies from those previously discussed in our Form 10-K for the fiscal year ended October 31, 2021.

Accounting Pronouncements

Information regarding new accounting pronouncements is included in Note 1. General of the Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

Trademarks

ActivControl®, Aquaform®, Avaira Vitality®, Biofinity®, Biofinity Energys®, MyDay® and MiSight® are registered trademarks of The Cooper Companies, Inc., its affiliates and/or subsidiaries. PC Technology™ is a trademark of The Cooper Companies, Inc., its affiliates and/or subsidiaries. The clariti® mark is a registered trademark of The Cooper Companies, Inc., its affiliates and/or subsidiaries worldwide except in the United States where the use of clariti® is licensed. INSORB®, PARAGARD®, Mara® and Fetal Pillow® are registered trademarks of CooperSurgical, Inc.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Most of our operations outside the United States have their local currency as their functional currency. We are exposed to risks caused by changes in foreign exchange, principally our British pound sterling, euro, Japanese yen and Danish krone denominated debt and receivables denominated in currencies other than the United States dollar, and from operations in other foreign currencies. Although we may enter into foreign exchange agreements with financial institutions to reduce our exposure to fluctuations in foreign currency values relative to our debt or receivables obligations, these hedging transactions do not eliminate that risk entirely. We are also exposed to risks associated with changes in interest rates, as the interest rates on our revolving lines of credit and term loans may vary with the federal funds rate and LIBOR. We may decrease this interest rate risk by hedging a portion of variable rate debt effectively converting it to fixed rate debt for varying periods.

On April 6, 2020, we entered into six interest rate swap contracts to hedge the Company's exposure to changes in cash flows associated with its variable rate debt. The interest rate swap contracts became effective on April 6, 2020, and had maturities of seven years or less. As of April 30, 2022, the outstanding contracts have a total notional amount of $1.0 billion.

We did not have any cross currency swaps or foreign currency forward contracts as of April 30, 2022.

On April 1, 2020, we entered into a Revolving Credit and Term Loan Agreement (the 2020 Credit Agreement), among us, CooperVision International Holding Company, LP, CooperSurgical Netherlands B.V., CooperVision Holding Kft. the lenders from time to time party thereto, and KeyBank National Association, as administrative agent. The 2020 Credit Agreement provides for (a) a multicurrency revolving credit facility (the 2020 Revolving Credit Facility) in an aggregate principal amount of $1.29 billion and (b) a term loan facility (the 2020 Term Loan Facility) in an aggregate principal amount of $850.0 million, each of which, unless terminated earlier, mature on April 1, 2025. The 2020 Credit Agreement replaced our previous credit agreement and funds from the new term loan were used to repay the outstanding amounts under the previous credit agreement, to repay an outstanding term loan, and for general corporate purposes. At April 30, 2022, the Company had $1,288.7 million available under the 2020 Revolving Credit Facility and $850.0 million outstanding under the 2020 Term Loan Facility.

On November 2, 2021, the Company entered into a 364-day, $840.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent (the 2021 364-Day Term Loan Agreement) which matures on November 1,2022. The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolving Credit Facility and for general corporate purposes. At April 30, 2022, the Company had $840.0 million outstanding under the 2021 364-Day Term Loan Agreement.

On December 17, 2021, the Company entered into a Term Loan Agreement (the 2021 Credit Agreement) by and among the Company, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent. The 2021 Credit Agreement provides for a term loan facility (the 2021 Term Loan Facility) in an aggregate principal amount of $1.5 billion, which, unless terminated earlier, matures on December 17, 2026. In addition, the Company has the ability from time to time to request an increase to the commitments under the 2021 Term Loan Facility or to establish a new term loan facility under the 2021 Credit Agreement in an aggregate principal amount not to exceed $1.125 billion, upon prior written notice to the administrative agent and subject to the discretionary participation of the lenders funding such term loans and certain limitations set forth in the 2021 Credit Agreement. At April 30, 2022, the Company had $1.5 billion outstanding under the 2021 Term Loan Facility.

If interest rates were to have increased or decreased by 1% or 100 basis points, the quarterly interest expense would have increased or decreased by approximately $5.4 million based on average debt outstanding for the second quarter of fiscal 2022, after consideration of our interest rate swap contracts.

See Note 5. Debt of the Consolidated Condensed Financial Statements for additional information.

Evaluation of Disclosure Controls and Procedures

Based on management’s evaluation (with the participation of our Chief Executive Officer (our Principal Executive Officer) and Chief Financial Officer (our Principal Financial Officer)), as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange Act)) are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Commission rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our second quarter of fiscal 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that certain of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 related considerations and any impact on the design and operating effectiveness of our internal control over financial reporting.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding legal proceedings is included in Note 12. Contingencies of the Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.

Our business faces significant risks. These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. Our business, financial condition and results of operations could be materially adversely affected by any of these risks, and the trading prices of our common stock could decline by virtue of these risks. These risks should be read in conjunction with the other information in this report.

Risk factors describing the major risks to our business can be found under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, and in our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

There was no share repurchase activity during the three-month period ended April 30, 2022.

The share repurchase program was approved by the Company’s Board of Directors in December 2011 (the 2012 Share Repurchase Program). The program as amended in December 2012, December 2013 and March 2017 provides authorization to repurchase up to a total of $1.0 billion of the Company’s common stock. Purchases under the 2012 Share Repurchase Program may be made from time to time on the open market at prevailing market prices or in privately negotiated transactions and are subject to a review of the circumstances in place at the time and will be made from time to time as permitted by securities laws and other legal requirements. This program has no expiration date and may be discontinued at any time.

During the second quarter of fiscal 2022, there were no share repurchases under the program. During the first quarter of fiscal 2022, we repurchased 191.2 thousand shares of the Company’s common stock for $78.5 million, at an average purchase price of $410.41 per share. At April 30, 2022, $256.4 million remained authorized for repurchase under the 2012 Share Repurchase Program.

During the second quarter of fiscal 2021, there were no share repurchases under the program. During the first quarter of fiscal 2021, we repurchased 69.6 thousand shares of the Company's common stock for $24.8 million, at an average purchase price of $356.61 per share.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

None.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Exhibit Number			Description
31.1			Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2			Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1			Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350
32.2			Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350
101.1			The following materials from the Company's Quarterly Report on Form 10-Q for the three and six months period ended April 30, 2022 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income, (ii) Consolidated Condensed Balance Sheets, (iii) Consolidated Condensed Statements of Stockholders' Equity, (iv) Consolidated Condensed Statements of Cash Flows and (v) related Notes to Consolidated Condensed Financial Statements.
104.1			Cover Page Interactive Data File (embedded within the Inline XBRL document)

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			The Cooper Companies, Inc.
			(Registrant)
Date: June 3, 2022			/s/ Brian G. Andrews
			Brian G. Andrews
			Executive Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer)
Date: June 3, 2022			/s/ Agostino Ricupati
			Agostino Ricupati
			Chief Accounting Officer & Senior Vice President, Finance & Tax (Principal Accounting Officer)