Cooper Companies 10-Q 2022-07-31

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 July 31, 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 August 26, 2022, 49,345,985 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			25
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
Signatures						46

PART I. FINANCIAL INFORMATION

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

Periods Ended July 31,

(In millions, except for earnings per share)

(Unaudited)

			Three Months												Nine Months
			2022						2021						2022						2021
Net sales			$	843.4					$	763.4					$	2,460.3					$	2,163.4
Cost of sales			291.3						247.3						857.3						709.5
Gross profit			552.1						516.1						1,603.0						1,453.9
Selling, general and administrative expense			342.7						352.5						984.2						899.6
Research and development expense			28.7						24.8						81.2						67.0
Amortization of intangibles			40.1						38.2						133.5						110.0
Operating income			140.6						100.6						404.1						377.3
Interest expense			17.1						5.6						34.5						18.1
Other expense (income), net			6.2						1.0						(33.3)						(10.7)
Income before income taxes			117.3						94.0						402.9						369.9
Provision for income taxes (Note 6)			18.9						(521.8)						82.7						(2,464.5)
Net income			$	98.4					$	615.8					$	320.2					$	2,834.4
Earnings per share (Note 7):
Basic			$	1.99					$	12.50					$	6.49					$	57.61
Diluted			$	1.98					$	12.37					$	6.44					$	57.01
Number of shares used to compute earnings per share:
Basic			49.3						49.3						49.3						49.2
Diluted			49.6						49.8						49.7						49.7
Other comprehensive income, net of tax:
Cash flow hedges			$	(10.5)					$	(8.9)					$	42.1					$	10.8
Foreign currency translation adjustment			(32.3)						(3.7)						(178.1)						101.4
Comprehensive income			$	55.6					$	603.2					$	184.2					$	2,946.6

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)

			July 31, 2022						October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	246.3					$	95.9
Trade accounts receivable, net of allowance for credit losses of $16.6 at July 31, 2022, and $9.2 at October 31, 2021			543.6						515.3
Inventories (Note 3)			621.6						585.6
Prepaid expense and other current assets			186.2						179.3
Assets held-for-sale			—						89.2
Total current assets			1,597.7						1,465.3
Property, plant and equipment, at cost			2,746.2						2,655.7
Less: accumulated depreciation and amortization			1,384.9						1,308.1
			1,361.3						1,347.6
Operating lease right-of-use assets			240.0						257.0
Goodwill (Note 4)			3,665.8						2,574.0
Other intangibles, net (Note 4)			1,917.3						1,271.5
Deferred tax assets			2,464.0						2,546.6
Other assets			306.0						144.2
Total assets			$	11,552.1					$	9,606.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt (Note 5)			$	534.6					$	82.9
Accounts payable			227.2						161.4
Employee compensation and benefits			140.8						148.7
Operating lease liabilities			35.9						35.7
Other current liabilities			437.2						301.7
Liabilities held-for-sale			—						1.7
Total current liabilities			1,375.7						732.1
Long-term debt (Note 5)			2,346.9						1,396.1
Deferred tax liabilities			143.8						24.1
Long-term tax payable			116.8						139.6
Operating lease liabilities			215.6						231.7
Accrued pension liability and other			270.2						140.6
Total liabilities			$	4,469.0					$	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 July 31, 2022, and 53.7 issued and 49.3 outstanding at October 31, 2021			5.4						5.4
Additional paid-in capital			1,751.0						1,715.2
Accumulated other comprehensive loss			(477.3)						(341.3)
Retained earnings			6,519.4						6,202.1
Treasury stock at cost: 4.6 shares at July 31, 2022, and 4.4 shares at October 31, 2021			(715.6)						(639.6)
Total Cooper stockholders’ equity			7,082.9						6,941.8
Noncontrolling interests			0.2						0.2
Stockholders’ equity (Note 9)			7,083.1						6,942.0
Total liabilities and stockholders’ equity			$	11,552.1					$	9,606.2

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

THE COOPER COM

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and Results of Operations

In the three and nine months ended July 31, 2022, the net sales increase in both categories was mainly due to the Generate acquisition. The increase was slightly offset by unfavorable foreign exchange rate fluctuations, which approximated $9.1 million and $22.1 million in the same periods.

We could see downward pressure and volatility in certain markets related to net sales if the COVID-19 pandemic continues, as hospitals and healthcare centers continue to restrict access, and social distancing measures continue.

Gross Margin

Consolidated gross margins were 65% in both the three and nine months ended July 31, 2022, down from 68% and 67% in the prior year periods, primarily driven by unfavorable currency and contact lens care exit costs.

Selling, General and Administrative Expense (SGA)

Three Months Ended July 31,																														2022 vs 2021 % Change
($ in millions)						2022						% Net Sales						2021						% Net Sales
CooperVision						$	212.2					37		%				$	258.2					46		%				(18)		%
CooperSurgical						116.2						42		%				80.7						39		%				44		%
Corporate						14.3						—						13.6						—						6		%
						$	342.7					41		%				$	352.5					46		%				(3)		%
Nine Months Ended July 31,																														2022 vs 2021 % Change
($ in millions)						2022						% Net Sales						2021						% Net Sales
CooperVision						$	611.8					36		%				$	631.8					40		%				(3)		%
CooperSurgical						332.3						43		%				231.0						40		%				44		%
Corporate						40.1						—						36.8						—						9		%
						$	984.2					40		%				$	899.6					42		%				9		%

CooperVision's SGA decreased in the three and nine months ended July 31, 2022, compared to fiscal 2021 primarily due to the $56.8 million increase in fair value of the contingent consideration in the three months ended July 31, 2021. The decrease in the nine months ended July 31, 2022, was partially offset by increases in SGA to support sales growth.

CooperSurgical's SGA increased in the three and nine months ended July 31, 2022, compared to fiscal 2021 primarily due to the addition of Generate's SGA and acquisition and integration expenses.

Research and Development Expense (R&D)

Three Months Ended July 31,																														2022 vs 2021 % Change
($ in millions)						2022						% Net Sales						2021						% Net Sales
CooperVision						$	16.0					3		%				$	17.0					3		%				(6)		%
CooperSurgical						12.7						5		%				7.8						4		%				66		%
						$	28.7					3		%				$	24.8					3		%				16		%
Nine Months Ended July 31,																														2022 vs 2021 % Change
($ in millions)						2022						% Net Sales						2021						% Net Sales
CooperVision						$	46.5					3		%				$	44.9					3		%				4		%
CooperSurgical						34.7						4		%				22.1						4		%				57		%
						$	81.2					3		%				$	67.0					3		%				21		%

In the three and nine months ended July 31, 2022:

• CooperVision's R&D expense decreased in the three months ended July 31, 2022, compared to fiscal 2021 primarily due to timing of R&D projects. CooperVision's R&D expense increased in nine months ended July 31, 2022, compared to fiscal 2021, mainly due to myopia management programs. As a percentage of sales,

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

CooperVision's R&D expense remained relatively flat. CooperVision's R&D activities are primarily focused on the development of contact lenses, manufacturing technology and process enhancements.

• CooperSurgical's R&D expense increased in the three and nine months ended July 31, 2022, compared to fiscal 2021, mainly due to the addition of Generate's R&D expense. 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 July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	8.0					1		%				$	9.4					2		%				(15)		%
CooperSurgical			32.1						12		%				28.8						14		%				11		%
			$	40.1					5		%				$	38.2					5		%				5		%
Nine Months Ended July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	24.2					1		%				$	27.3					2		%				(11)		%
CooperSurgical			109.3						14		%				82.7						14		%				32		%
			$	133.5					5		%				$	110.0					5		%				21		%

CooperVision's amortization expense decreased in absolute dollars in the three and nine months ended July 31, 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 nine months ended July 31, 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 July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	124.5					22		%				$	88.0					16		%				42		%
CooperSurgical			30.4						11		%				26.2						13		%				16		%
Corporate			(14.3)						—						(13.6)						—						6		%
			$	140.6					17		%				$	100.6					13		%				40		%
Nine Months Ended July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
CooperVision			$	387.3					23		%				$	347.2					22		%				12		%
CooperSurgical			56.9						7		%				66.9						12		%				(15)		%
Corporate			(40.1)						—						(36.8)						—						9		%
			$	404.1					16		%				$	377.3					17		%				7		%

CooperVision's operating income increased in the three and nine months ended July 31, 2022, compared to the prior year periods primarily due to an increase in net sales partially offset by net changes in operating expenses.

CooperSurgical's operating income increased in the three months ended July 31, 2022, compared to the prior year period, 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 nine months ended July 31, 2022, compared to the prior year period, primarily due to an increase in SGA and amortization expenses, partially offset by an increase in net sales.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

Corporate operating loss increased in the three and nine months ended July 31, 2022, compared to the prior year periods, primarily due to higher share-based compensation expense.

On a consolidated basis, operating income increased primarily due an increase in consolidated net sales.

Interest Expense

Three Months Ended July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
Interest expense			$	17.1					2		%				$	5.6					1		%				204		%
Nine Months Ended July 31,																											2022 vs 2021 % Change
($ in millions)			2022						% Net Sales						2021						% Net Sales
Interest expense			$	34.5					1		%				$	18.1					1		%				90		%

Interest expense increased in absolute dollars during the three and nine months ended July 31, 2022, primarily due to higher average debt balances and interest rates compared to the prior year periods.

Other Expense (Income), Net

Periods Ended July 31,						Three Months												Nine Months
($ in millions)						2022						2021						2022						2021
Investment loss (gain)						$	0.7					$	(0.1)					$	(47.7)					(11.6)
Foreign exchange loss						4.2						2.1						14.5						$	3.3
Other expense (income), net						1.3						(1.0)						(0.1)						(2.4)
						$	6.2					$	1.0					$	(33.3)					$	(10.7)

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 primarily associated with the strengthening of the US dollar against foreign currencies and the effect on intercompany receivables during the three and nine months.

Other expense (income), net increased in the three and nine months ended July 31, 2022, primarily due to loss on minority investments, partially offset by defined benefit plan related income.

Provision for Income Taxes

The effective tax rates for the three months ended July 31, 2022, and July 31, 2021, were 16.1% and (554.9)%, respectively. The increase was primarily due to a $534.9 million tax benefit in fiscal 2021 related to the remeasurement of deferred tax assets caused by the UK enactment of a 25% corporate tax rate to be effective in fiscal 2023.

The effective tax rates for the nine months ended July 31, 2022, and July 31, 2021, were 20.5% and (666.3)%, respectively. The increase was primarily due to an intra-group transfer of intellectual property, as discussed below, and a $534.9 million tax benefit in fiscal 2021 related to the remeasurement of the related deferred tax assets caused by the UK enactment of a 25% corporate tax rate during the nine months ended July 31, 2021.

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.

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

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:

Periods Ended July 31,						Three Months												Nine Months
($ in millions)						2022						2021						2022						2021
Selling, general and administrative expense						$	11.8					$	10.6					$	34.6					$	28.4
Cost of sales						1.1						0.9						3.4						2.9
Research and development expense						0.8						0.6						2.3						1.8
Total share-based compensation expense						$	13.7					$	12.1					$	40.3					$	33.1
Related income tax benefit						$	1.3					$	1.2					$	4.0					$	3.6

Capital Resources and Liquidity

Third Quarter Highlights

• Operating cash flow of $263.9 million compared to $223.8 million in the prior year period

• Expenditures for purchases of property, plant and equipment of $46.6 million compared to $43.6 million in the prior year period

• Cash payments for acquisitions and others of $0.6 million compared to $64.0 million in the prior year period

Nine-Month Highlights

• Operating cash flow of $561.7 million compared to $564.1 million in the prior year period

• Expenditures for purchases of property, plant and equipment of $147.1 million compared to $149.4 million in the prior year period

• Cash proceeds from sale of interest in a subsidiary of $52.1 million. Refer to Note 2. Acquisitions and Joint Venture for additional information

• Cash payments for acquisitions and others of $1,636.5 million compared to $234.9 million in the prior year period

Comparative Statistics

($ in millions)						July 31, 2022						October 31, 2021
Cash and cash equivalents						$	246.3					$	95.9
Total assets						$	11,552.1					$	9,606.2
Working capital						$	222.0					$	733.2
Total debt						$	2,881.5					$	1,479.0
Stockholders' equity						$	7,083.1					$	6,942.0
Ratio of debt to equity						0.40:1						0.21:1
Debt as a percentage of total capitalization						28		%				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 July 31, 2022, from the end of fiscal 2021 was primarily due to:

• increase in short-term debt of $451.7 million, primarily due to the movements in 2021 364-Day Term Loan Agreement entered into on November 2, 2021;

• increase in other current liabilities of $135.5 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; and

• increase in accounts payable of $65.8 million due to timing of payments; partially offset by:

• increase in cash and cash equivalents of $150.4 million;

• increase in inventories of $36.0 million primarily due to the increase in production and the build up of inventory for future product launches. At July 31, 2022, our inventory months on hand was 6.4 compared to 6.8 at October 31, 2021; and

• increase in trade accounts receivable of $28.3 million primarily due to higher sales. Our days sales outstanding (DSO) was 59 days at July 31, 2022, compared to 64 days at October 31, 2021. The decrease in DSO from October 31, 2021 to July 31, 2022 was primarily due to timing of collections.

Operating Cash Flow

Cash provided by operating activities decreased by $2.4 million from $564.1 million in the first nine months of fiscal 2021 to $561.7 million in the first nine months of fiscal 2022. This decrease in cash flow provided by operating activities primarily consists of:

• decrease in net income of $2,514.2 million from a net income of $2,834.4 million in the first nine months of fiscal 2021 to $320.2 million in the first nine months of fiscal 2022;

• decrease of $67.5 million in net changes in the fair value of contingent consideration. Refer to Note 2. Acquisitions and Joint Venture for further information; and

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

• decrease from other non-cash items of $22.6 million, from $12.1 million cash inflow during the first nine months of fiscal 2021 to $10.5 million cash outflow during the first nine months of fiscal 2022; partially offset by:

• increase of $2,544.5 million in the net changes in deferred income taxes. Refer to Note 6. Income Taxes for further information;

• increase of $72.9 million in net cash flow from changes in operating capital, from $81.6 million outflow in the first nine months of fiscal 2021 to $8.7 million outflow in the first nine months of fiscal 2022; and

• increase of $25.2 million in net changes in depreciation and amortization, from $231.9 million during the first nine months of fiscal 2021 to $257.1 million during the first nine months of fiscal 2022.

The decrease in net income of $2,514.2 million was primarily due to:

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

• $534.9 million tax benefit in fiscal 2021 related to the remeasurement of deferred tax assets. Refer to Note 6. Income Taxes for further information; partially offset by:

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

• increase of $26.8 million in operating income from $377.3 million in the first nine months of fiscal 2021 to $404.1 million in the first nine months of fiscal 2022.

The $72.9 million increase in cash flow from net changes in operating capital compared to the prior year period is primarily due to:

• $9.7 million cash inflow, as compared to $76.9 million cash outflow, from net changes in trade and other receivables primarily due to timing of collections and higher sales;

• $59.1 million cash inflow, as compared to $10.2 million cash outflow, from net changes in accounts payable primarily due to timing of payments; and

• $7.5 million cash inflow, as compared to $20.3 million cash outflow, from the net changes in prepaid and other assets due to timing of payments; partially offset by:

• $45.7 million lower cash inflow from net changes in accrued liabilities and other primarily due to impact from SGV deconsolidation and timing of payments;

• $26.8 million cash outflow, as compared to $1.1 million cash inflow related to net translation gain (loss);

• $20.5 million higher cash outflow from net changes in inventories; and

• $20.2 million higher cash outflow from net changes in operating lease liability and ROU assets, net.

The $22.6 million decrease in non-cash items compared to the prior year period is primarily due to:

• $56.9 million non-cash adjustments related to gain on remeasurement of the fair value of the retained equity investment in SGV as a result of deconsolidation in fiscal 2022; and

• $29.5 million higher cash outflow from net changes in long-term liabilities; partially offset by:

• $6.7 million cash inflow, as compared to $9.3 million cash outflow, from minority interest in net income;

• $14.6 million increase primarily due to add-back related to costs from exiting the contact lens care business. Refer to Note 1. General for further information;$12.0 million increase from the effect of exchange rate change on cash,

• $6.2 million cash inflow, as compared to $2.6 million cash outflow, from provision of doubtful accounts; and

• $6.3 million increase in share-based compensation expense.

Investing Cash Flow

Cash used in investing activities increased by $1,347.2 million to $1,731.5 million in the first nine months of fiscal 2022 from $384.3 million in the first nine months of fiscal 2021 due to:

• $1,401.6 million increase in payments made for acquisitions in the first nine months of fiscal 2022 compared to the prior year period, largely due to the Generate acquisition; partially offset by;

• $52.1 million decrease due to cash inflows from sale of SGV in fiscal 2022. Refer to Note 2. Acquisitions and Joint Venture for further information.

Financing Cash Flow

Cash flows from financing activities increased by $1,515.4 million to $1,327.8 million cash inflow in the first nine months of fiscal 2022 compared to $187.6 million outflow in the first nine months of fiscal 2021, primarily due to:

• $688.0 million increase in proceeds from long-term debt, primarily due to funds received from the 2021 Term Loan;

• $469.8 million increase due to less repayments of long-term debt in fiscal 2022 compared to fiscal 2021; and

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

• $429.7 million increase in net proceeds from short-term debt, primarily due to net activities related to the 2021 364-Day Term Loan; partially offset by:

• $53.7 million decrease due to higher repurchase of common stock in fiscal 2022 compared to fiscal 2021.

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 July 31, 2022:

(In millions)						Facility Limit						Outstanding Borrowings						Outstanding Letters of Credit						Total Amount Available						Maturity Date
Revolving Credit:
2020 Revolving Credit						$	1,290.0					—						$	1.3					$	1,288.7					April 1, 2025
Term loan:
2021 364-Day Term Loan						840.0						460.0						n/a						—						November 1, 2022
2020 Term Loan						850.0						850.0						n/a						—						April 1, 2025
2021 Term Loan						1,500.0						1,500.0						n/a						—						December 17, 2026
Total						$	4,480.0					$	2,810.0					$	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 July 31, 2022, we were in compliance with the Interest Coverage Ratio at 27.33 to 1.00 and the Total Leverage Ratio at 2.44 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

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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

and Results of Operations

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.

At July 31, 2022, $256.4 million remained authorized for repurchase under the 2012 Share Repurchase Program.

The Company's share repurchases during the nine months ended July 31, 2022, and 2021, were as follows:

			Nine Months
Periods Ended July 31,			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. We paid another semiannual dividend of approximately $1.5 million or 3 cents per share on August 11, 2022, to stockholders of record on July 27, 2022.

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® and Generate Life Sciences® are registered trademarks of CooperSurgical, Inc, its affiliates and/or subsidiaries.

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 July 31, 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 July 31, 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 July 31, 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. We repaid $380.0 million during the three months ended July 31, 2022. At July 31, 2022, the Company had $460.0 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 July 31, 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 $5.1 million based on average debt outstanding for the third 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

THE COOPER COMPANIES, INC. AND SUBSIDIARIES

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 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 third 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

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 third quarter of fiscal 2022, there were no share repurchases under the program. During the nine months ended July 31, 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 July 31, 2022, $256.4 million remained authorized for repurchase under the 2012 Share Repurchase Program.

During the third quarter of fiscal 2021, there were no share repurchases under the program. During the nine months ended July 31, 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 nine months period ended July 31, 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

SIGNATURES

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: September 1, 2022			/s/ Brian G. Andrews
			Brian G. Andrews
			Executive Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer)
Date: September 1, 2022			/s/ Agostino Ricupati
			Agostino Ricupati
			Chief Accounting Officer & Senior Vice President, Finance & Tax (Principal Accounting Officer)