filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition
15K characters. Original on sec.gov · Markdown
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
CooperSurgical's R&D expenses increased in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, mainly due to project spend and European Medical Device Regulation costs. 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 January 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 7.7 | 1 | % | $ | 8.4 | 1 | % | (8) | % | |||||||||||||||||||
| CooperSurgical | 42.6 | 14 | % | 38.1 | 14 | % | 11 | % | |||||||||||||||||||||
| $ | 50.3 | 5 | % | $ | 46.5 | 5 | % | 8 | % | ||||||||||||||||||||
CooperVision's amortization expense for the three months ended January 31, 2024, remained relatively flat year over year. CooperSurgical's amortization expense increased in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, primarily due to the amortization of intangible assets recently acquired through acquisitions.
Operating Income
| Three Months Ended January 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 154.8 | 25 | % | $ | 160.1 | 28 | % | (3) | % | |||||||||||||||||||
| CooperSurgical | 24.0 | 8 | % | 5.8 | 2 | % | 311 | % | |||||||||||||||||||||
| Corporate | (25.7) | — | (16.4) | — | 57 | % | |||||||||||||||||||||||
| $ | 153.1 | 16 | % | $ | 149.5 | 17 | % | 2 | % | ||||||||||||||||||||
CooperVision's operating income decreased in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, primarily due to a net increase in operating expenses, partially offset by an increase in net sales.
CooperSurgical's operating income increased in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, primarily due to an increase in net sales, partially offset by a net increase in operating expenses.
Corporate operating loss increased in the three months ended January 31, 2024, compared to the three months ended January 31, 2023, primarily due to higher share-based compensation expenses.
Interest Expense
| Three Months Ended January 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| Interest expense | $ | 29.9 | 3 | % | $ | 26.1 | 3 | % | 15 | % | |||||||||||||||||||
Interest expense increased during the three months ended January 31, 2024, compared to the three months ended January 31, 2023, primarily due to higher interest rates.
Other Expense, Net
| Period Ended January 31, | Three Months | |||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | ||||||||||||||||||||||||
| Foreign exchange loss (gain) | $ | 1.2 | $ | (1.0) | ||||||||||||||||||||||
| Other expense, net | 2.0 | 2.3 | ||||||||||||||||||||||||
| $ | 3.2 | $ | 1.3 |
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Foreign exchange loss is primarily associated with the weakening of the U.S. dollar against foreign currencies and the effect on intercompany receivables during the three months ended January 31, 2024.
Other expense, net was relatively flat in the three months ended January 31, 2024, compared to the three months ended January 31, 2023.
Provision for Income Taxes
The effective tax rates for the three months ended January 31, 2024, and January 31, 2023, were 32.4% and 30.7%, respectively. The increase was primarily due to changes in the geographic composition of pre-tax earnings and an increase in the UK statutory tax rate from 19% to 25%, partially offset by an increase in excess tax benefits from share-based compensation.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Capital Resources and Liquidity
Working capital on January 31, 2024, and October 31, 2023, was $829.0 million and $735.9 million, respectively. The increase in working capital was primarily due to an increase in trade accounts receivable mainly due to higher sales and timing of collections, and an increase in prepaid expenses and other current assets.
Cash Flow
| ($ in millions) | January 31, 2024 | January 31, 2023 | ||||||||||||
| Operating activities | $ | 122.7 | $ | 166.6 | ||||||||||
| Investing activities | (324.1) | (113.3) | ||||||||||||
| Financing activities | 212.3 | (77.6) | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalents, restricted cash | 3.5 | 4.2 | ||||||||||||
| Net increase (decrease) in cash, cash equivalents, restricted cash | $ | 14.4 | $ | (20.1) |
Operating Cash Flow
Cash provided by operating activities in the first three months of fiscal 2024 decreased compared to the first three months of fiscal 2023, primarily due to net changes in operating capital, including a decrease in accounts payable, partially offset by the $31.8 million release of contingent consideration liability associated with SightGlass Vision's regulatory approval milestone in the first three months of fiscal 2023.
Investing Cash Flow
Cash used in investing activities in the first three months of fiscal 2024 increased compared to the first three months of fiscal 2023, primarily attributable to $200.0 million cash paid for the Cook Medical acquisition in the first three months of fiscal 2024 and an increase in purchases of property, plant and equipment.
Financing Cash Flow
Cash provided by financing activities in the first three months of fiscal 2024 was primarily attributable to $200.0 million drawn on the revolving credit to pay for the Cook Medical acquisition.
Cash used in financing activities in the first three months of fiscal 2023 was primarily due to repayments of $338.0 million on the 2021 364-day term loan, partially offset by $276.5 million of funds drawn on the 2020 revolving credit.
The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of January 31, 2024:
| (In millions) | Facility Limit | Outstanding Borrowings | Outstanding Letters of Credit | Total Amount Available | Maturity Date | |||||||||||||||||||||||||||
| Revolving Credit: | ||||||||||||||||||||||||||||||||
| 2020 Revolving Credit | $ | 1,290.0 | $ | 375.0 | $ | 2.4 | $ | 912.6 | April 1, 2025 | |||||||||||||||||||||||
| Term loan: | ||||||||||||||||||||||||||||||||
| 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 | $ | 3,640.0 | $ | 2,725.0 | $ | 2.4 | $ | 912.6 |
As of January 31, 2024, the Company was in compliance with all debt covenants. See Note 5. Financing Arrangements of the Consolidated Condensed Financial Statements for further information.
Considering recent market conditions, 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
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
in this quarterly report. To the extent additional funds are necessary to meet our liquidity needs such as for acquisitions, share repurchases or other activities as we execute our business strategy, we anticipate that additional funds could 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 March 2017, the authorization under the 2012 Share Repurchase Program was increased to $1.0 billion by the Company's Board of Directors. As of January 31, 2024, $256.4 million remains authorized for repurchase.
During the three months ended January 31, 2024, and 2023, there were no share repurchases.
Dividends
In December 2023, the Company's Board of Directors decided to end the declaration of the semiannual dividend.
Stock Split
On February 16, 2024, the Company effected a four-for-one stock split of its outstanding shares of common stock. All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented. The par value of the common stock remains $0.10 cents per share.
Estimates and Critical Accounting Policies
Information regarding estimates and critical accounting policies is included in Management's Discussion and Analysis in our Form 10-K for the fiscal year ended October 31, 2023. There have been no material changes in our policies2 from those previously discussed in our Form 10-K for the fiscal year ended October 31, 2023.
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.
2 To further clarify the policy detailed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023, the current portion of the deferred revenue balances at the beginning of each period presented were generally fully recognized in a ratable manner in the subsequent 12-month period. We recognized revenue of approximately $31.0 million and $23.0 million for the three months ended January 31, 2024, and 2023, respectively, that was included in the deferred revenue balance at October 31, 2023 and October 31, 2022.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Previous: Item 1. Unaudited Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosure About Market Risk