filings.toolsCooper Companies 10-Q 2024-07-31
Filed 2024-08-29. 8 sections, 123K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
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, 2024
| ☐ | 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)
(925) 460-3600
(Registrant’s telephone number, including area code)
_____________________________________________________________
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, $0.10 par value | COO | Nasdaq Global Select Market |
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 an emerging growth company. See the 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 23, 2024, 199,155,603 shares of Common Stock, $0.10 par value, were outstanding.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Income and Comprehensive Income
Periods Ended July 31,
(In millions, except for earnings per share)
(Unaudited)
| Three Months | Nine Months | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net sales | $ | 1,002.8 | $ | 930.2 | $ | 2,877.0 | $ | 2,666.1 | |||||||||||||||
| Cost of sales | 339.8 | 320.2 | 959.0 | 914.7 | |||||||||||||||||||
| Gross profit | 663.0 | 610.0 | 1,918.0 | 1,751.4 | |||||||||||||||||||
| Selling, general and administrative expense | 381.1 | 375.2 | 1,142.3 | 1,113.6 | |||||||||||||||||||
| Research and development expense | 39.0 | 36.5 | 117.4 | 100.7 | |||||||||||||||||||
| Amortization of intangibles | 50.4 | 46.7 | 151.0 | 139.7 | |||||||||||||||||||
| Operating income | 192.5 | 151.6 | 507.3 | 397.4 | |||||||||||||||||||
| Interest expense | 28.5 | 26.8 | 87.3 | 79.0 | |||||||||||||||||||
| Other expense, net | 0.3 | 6.0 | 6.3 | 11.9 | |||||||||||||||||||
| Income before income taxes | 163.7 | 118.8 | 413.7 | 306.5 | |||||||||||||||||||
| Provision for income taxes (Note 6) | 59.0 | 33.5 | 138.9 | 96.8 | |||||||||||||||||||
| Net income | $ | 104.7 | $ | 85.3 | $ | 274.8 | $ | 209.7 | |||||||||||||||
| Earnings per share (Note 7)*: | |||||||||||||||||||||||
| Basic | $ | 0.53 | $ | 0.43 | $ | 1.38 | $ | 1.06 | |||||||||||||||
| Diluted | $ | 0.52 | $ | 0.43 | $ | 1.37 | $ | 1.05 | |||||||||||||||
| Number of shares used to compute earnings per share*: | |||||||||||||||||||||||
| Basic | 199.1 | 198.1 | 198.8 | 197.8 | |||||||||||||||||||
| Diluted | 200.6 | 199.6 | 200.3 | 199.2 | |||||||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Cash flow hedges | $ | (27.2) | $ | 14.6 | $ | (33.8) | $ | (11.9) | |||||||||||||||
| Foreign currency translation adjustment | 24.7 | 34.4 | 62.5 | 103.9 | |||||||||||||||||||
| Comprehensive income | $ | 102.2 | $ | 134.3 | $ | 303.5 | $ | 301.7 |
*All periods presented have been adjusted to reflect the four-for-one stock split effected on February 16, 2024. Refer to Note 1. General for further information.
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, 2024 | October 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 109.7 | $ | 120.8 | |||||||
| Trade accounts receivable, net of allowance for credit losses of $42.8 at July 31, 2024, and $31.3 at October 31, 2023 | 739.0 | 609.7 | |||||||||
| Inventories (Note 3) | 779.3 | 735.6 | |||||||||
| Prepaid expense and other current assets | 298.7 | 238.8 | |||||||||
| Total current assets | 1,926.7 | 1,704.9 | |||||||||
| Property, plant and equipment, net | 1,747.6 | 1,632.6 | |||||||||
| Goodwill | 3,777.2 | 3,624.5 | |||||||||
| Other intangibles, net (Note 4) | 1,786.8 | 1,710.3 | |||||||||
| Deferred tax assets | 2,248.3 | 2,349.5 | |||||||||
| Other assets | 621.4 | 637.1 | |||||||||
| Total assets | $ | 12,108.0 | $ | 11,658.9 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term debt (Note 5) | $ | 40.8 | $ | 45.4 | |||||||
| Accounts payable | 222.0 | 261.9 | |||||||||
| Employee compensation and benefits | 156.5 | 174.8 | |||||||||
| Deferred revenue | 126.4 | 123.6 | |||||||||
| Other current liabilities | 423.8 | 363.3 | |||||||||
| Total current liabilities | 969.5 | 969.0 | |||||||||
| Long-term debt (Note 5) | 2,591.6 | 2,523.8 | |||||||||
| Deferred tax liabilities | 94.9 | 101.5 | |||||||||
| Long-term tax payable | 59.0 | 90.2 | |||||||||
| Deferred revenue | 190.8 | 184.2 | |||||||||
| Other liabilities | 277.0 | 239.2 | |||||||||
| Total liabilities | $ | 4,182.8 | $ | 4,107.9 | |||||||
| Contingencies (Note 10) | |||||||||||
| Stockholders’ equity*: | |||||||||||
| Preferred stock, $0.10 par value, 1.0 shares authorized, zero shares issued or outstanding | — | — | |||||||||
| Common stock, $0.10 par value, 480.0 shares authorized, 216.7 issued and 199.1 outstanding at July 31, 2024, and 215.8 issued and 198.1 outstanding at October 31, 2023 | 21.7 | 21.6 | |||||||||
| Additional paid-in capital | 1,884.7 | 1,817.2 | |||||||||
| Accumulated other comprehensive loss | (425.1) | (453.8) | |||||||||
| Retained earnings | 7,150.9 | 6,876.1 | |||||||||
| Treasury stock at cost: 17.6 shares at July 31, 2024, and 17.7 shares at October 31, 2023 | (707.2) | (710.3) | |||||||||
| Total Cooper stockholders’ equity | 7,925.0 | 7,550.8 | |||||||||
| Noncontrolling interests | 0.2 | 0.2 | |||||||||
| Stockholders’ equity (Note 9) | 7,925.2 | 7,551.0 | |||||||||
| Total liabilities and stockholders’ equity | $ | 12,108.0 | $ | 11,658.9 | |||||||
*All periods presented have been adjusted to reflect the four-for-one stock split effected on February 16, 2024. Refer to Note 1. General for further information.
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
**THE COOPER COMPA
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Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Selling, General and Administrative (SGA) Expenses
| Three Months Ended July 31, | 2024 vs 2023 % Change | |||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | ||||||||||||||||||||||||||||
| CooperVision | $ | 232.5 | 34 | % | $ | 228.2 | 36 | % | 2 | % | ||||||||||||||||||||||
| CooperSurgical | 127.1 | 39 | % | 128.1 | 43 | % | (1) | % | ||||||||||||||||||||||||
| Corporate | 21.5 | — | 18.9 | — | 14 | % | ||||||||||||||||||||||||||
| $ | 381.1 | 38 | % | $ | 375.2 | 40 | % | 2 | % | |||||||||||||||||||||||
| Nine Months Ended July 31, | 2024 vs 2023 % Change | |||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | ||||||||||||||||||||||||||||
| CooperVision | $ | 679.9 | 35 | % | $ | 637.3 | 35 | % | 7 | % | ||||||||||||||||||||||
| CooperSurgical | 395.1 | 42 | % | 423.7 | 49 | % | (7) | % | ||||||||||||||||||||||||
| Corporate | 67.3 | — | 52.6 | — | 28 | % | ||||||||||||||||||||||||||
| $ | 1,142.3 | 40 | % | $ | 1,113.6 | 42 | % | 3 | % |
CooperVision's SGA expenses increased in the three months ended July 31, 2024, compared to the three months ended July 31, 2023, due to increase in advertising and marketing activities. The increase in the nine months ended July 31, 2024, was primarily due to $31.8 million release of contingent consideration liability associated with SightGlass Vision's regulatory approval milestone in the nine months ended July 31, 2023.
CooperSurgical's SGA expenses was relatively flat in the three months ended July 31, 2024, compared to the three months ended July 31, 2023. The decrease in the nine months ended July 31, 2024 was due to an accrual of $45.0 million associated with the payment of a termination fee under an asset purchase agreement related to Cook Medical’s reproductive health business in the nine months ended July 31, 2023, partially offset by an increase in selling activities and distribution costs.
Corporate SGA expenses increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to share-based compensation related expenses.
Research and Development (R&D) Expenses
| Three Months Ended July 31, | 2024 vs 2023 % Change | |||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | ||||||||||||||||||||||||||||
| CooperVision | $ | 21.6 | 3 | % | $ | 19.4 | 3 | % | 11 | % | ||||||||||||||||||||||
| CooperSurgical | 17.4 | 5 | % | 17.1 | 6 | % | 2 | % | ||||||||||||||||||||||||
| $ | 39.0 | 4 | % | $ | 36.5 | 4 | % | 7 | % | |||||||||||||||||||||||
| Nine Months Ended July 31, | 2024 vs 2023 % Change | |||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | ||||||||||||||||||||||||||||
| CooperVision | $ | 63.2 | 3 | % | $ | 53.0 | 3 | % | 19 | % | ||||||||||||||||||||||
| CooperSurgical | 54.2 | 6 | % | 47.7 | 6 | % | 14 | % | ||||||||||||||||||||||||
| $ | 117.4 | 4 | % | $ | 100.7 | 4 | % | 17 | % |
CooperVision's R&D expenses increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to myopia management programs and R&D projects. CooperVision's R&D activities are primarily focused on the development of contact lenses, manufacturing technology and process enhancements.
CooperSurgical's R&D expenses increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, mainly due to an increase in R&D project spend. CooperSurgical's R&D activities are focused on developing and refining diagnostic and therapeutic products including medical interventions, surgical devices and fertility solutions.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Amortization Expense
| Three Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 7.9 | 1 | % | $ | 8.3 | 1 | % | (5) | % | |||||||||||||||||||
| CooperSurgical | 42.5 | 13 | % | 38.4 | 13 | % | 11 | % | |||||||||||||||||||||
| $ | 50.4 | 5 | % | $ | 46.7 | 5 | % | 8 | % | ||||||||||||||||||||
| Nine Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 23.3 | 1 | % | $ | 25.0 | 1 | % | (7) | % | |||||||||||||||||||
| CooperSurgical | 127.7 | 14 | % | 114.7 | 13 | % | 11 | % | |||||||||||||||||||||
| $ | 151.0 | 5 | % | $ | 139.7 | 5 | % | 8 | % |
CooperVision's amortization expense for the three and nine months ended July 31, 2024, remained relatively flat year over year. CooperSurgical's amortization expense increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to the amortization of intangible assets recently acquired through acquisitions.
Operating Income
| Three Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 172.7 | 26 | % | $ | 151.7 | 24 | % | 14 | % | |||||||||||||||||||
| CooperSurgical | 41.3 | 13 | % | 18.8 | 6 | % | 120 | % | |||||||||||||||||||||
| Corporate | (21.5) | — | (18.9) | — | 14 | % | |||||||||||||||||||||||
| $ | 192.5 | 19 | % | $ | 151.6 | 16 | % | 27 | % | ||||||||||||||||||||
| Nine Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 487.7 | 25 | % | $ | 449.7 | 25 | % | 8 | % | |||||||||||||||||||
| CooperSurgical | 86.9 | 9 | % | 0.3 | — | % | 28,003 | % | |||||||||||||||||||||
| Corporate | (67.3) | — | (52.6) | — | 28 | % | |||||||||||||||||||||||
| $ | 507.3 | 18 | % | $ | 397.4 | 15 | % | 28 | % |
CooperVision's operating income increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to a net increase in net sales, partially offset by a net increase in operating expenses.
CooperSurgical's operating income increased in the three months ended July 31, 2024, compared to the three months ended July 31, 2023, primarily due to a net increase in net sales, partially offset by a net increase in operating expenses. The increase in the nine months ended July 31, 2023, was due to an accrual of $45.0 million associated with the payment of a termination fee under an asset purchase agreement related to Cook Medical’s reproductive health business.
Corporate operating loss increased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to higher share-based compensation expenses.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Interest Expense
| Three Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| Interest expense | $ | 28.5 | 3 | % | $ | 26.8 | 3 | % | 7 | % | |||||||||||||||||||
| Nine Months Ended July 31, | 2024 vs 2023 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2024 | % Net Sales | 2023 | % Net Sales | |||||||||||||||||||||||||
| Interest expense | $ | 87.3 | 3 | % | $ | 79.0 | 3 | % | 11 | % |
Interest expense increased during the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to higher debt balances and higher interest rates.
Other Expense, Net
| Periods Ended July 31, | Three Months | Nine Months | ||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Foreign exchange (gain) loss | $ | (0.5) | $ | 4.3 | 3.2 | $ | 6.1 | |||||||||||||||||||
| Other expense, net | 0.8 | 1.7 | 3.1 | 5.8 | ||||||||||||||||||||||
| $ | 0.3 | $ | 6.0 | $ | 6.3 | $ | 11.9 |
Foreign exchange (gain) loss was primarily associated with the relative weakening of the U.S. dollar against foreign currencies and the effect on intercompany receivables during the three and nine months ended July 31, 2024.
Other expense, net decreased in the three and nine months ended July 31, 2024, compared to the three and nine months ended July 31, 2023, primarily due to a decrease in loss on minority investments.
Provision for Income Taxes
The effective tax rates for the three months ended July 31, 2024, and 2023, were 36.1% and 28.2%, respectively. The effective tax rates for the nine months ended July 31, 2024, and 2023, were 33.6% and 31.6%, respectively. The increases were 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%.
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 as of July 31, 2024, and October 31, 2023, was $957.2 million and $735.9 million, respectively. The increase in working capital was primarily due to an increase in trade accounts receivable mainly due to higher sales and timing of collections, an increase in prepaid expenses and other current assets, and an increase in inventories.
Cash Flow
| Nine Months Ended July 31, | ||||||||||||||
| ($ in millions) | 2024 | 2023 | ||||||||||||
| Operating activities | $ | 441.2 | $ | 433.3 | ||||||||||
| Investing activities | (523.0) | (288.2) | ||||||||||||
| Financing activities | 67.6 | (167.4) | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalents, restricted cash | 3.1 | 1.2 | ||||||||||||
| Net decrease in cash, cash equivalents, and restricted cash | $ | (11.1) | $ | (21.1) |
Operating Cash Flow
Cash provided by operating activities in the first nine months of fiscal 2024 increased compared to the first nine months of fiscal 2023, primarily due to net changes in other non-cash items and the $31.8 million release of contingent consideration liability associated with SightGlass Vision's regulatory approval milestone in the first nine months of fiscal 2023, partially offset by net changes in operating capital.
Investing Cash Flow
Cash used in investing activities in the first nine months of fiscal 2024 increased compared to the first nine months of fiscal 2023, primarily attributable to $233.5 million cash paid for acquisitions in the first nine 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 nine months of fiscal 2024 was primarily attributable to funds received from the 2024 Revolving Credit Facility, partially offset by repayments to fully repay all borrowings outstanding under the 2020 Term Loan Facility and the 2020 Revolving Credit Facility.
Cash used in financing activities in the first nine months of fiscal 2023 was primarily due to repayments of $338.0 million on the 2021 364-day term loan, partially offset by $163.5 million of funds drawn on the 2020 Revolving Credit Facility.
The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of July 31, 2024:
| (In millions) | Facility Limit | Outstanding Borrowings | Outstanding Letters of Credit | Total Amount Available | Maturity Date | |||||||||||||||||||||||||||
| Revolving Credit: | ||||||||||||||||||||||||||||||||
| 2024 Revolving Credit | $ | 2,300.0 | $ | 1,090.2 | $ | 2.4 | $ | 1,207.4 | May 1, 2029 | |||||||||||||||||||||||
| Term loan: | ||||||||||||||||||||||||||||||||
| 2021 Term Loan | 1,500.0 | 1,500.0 | n/a | — | December 17, 2026 | |||||||||||||||||||||||||||
| Total | $ | 3,800.0 | $ | 2,590.2 | $ | 2.4 | $ | 1,207.4 |
As of July 31, 2024, the Company was in compliance with all debt covenants. On May 1, 2024, the Company entered into a Revolving Credit Agreement (the 2024 Credit Agreement). The Company drew on the 2024 Credit Agreement to fully repay borrowings outstanding under the 2020 Term Loan and 2020 Revolving Credit Facility and terminated the 2020 Credit Agreement. See Note 5. Financing Arrangements of the Consolidated Condensed Financial Statements for further information.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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 2024 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 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 July 31, 2024, $256.4 million remains authorized for repurchase.
During the nine months ended July 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 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 $30.0 million and $92.0 million for the three and nine months ended July 31, 2024, respectively, that was included in the deferred revenue balance at April 30, 2024, and October 31, 2023.We recognized revenue of approximately $30.0 million and $80.0 million for the three and nine months ended July 31, 2023, respectively, that was included in the deferred revenue balance at April 30, 2023, and October 31, 2022.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks that relate principally to changes in interest rates and foreign currency fluctuations. We do not enter into derivative financial instrument transactions for speculative purposes.
Foreign Currency Exchange Risk
We operate multiple foreign subsidiaries that manufacture and market our products worldwide. As a result, our earnings, cash flow and financial position are exposed to foreign currency risk from foreign currency denominated receivables and payables, sales transactions, capital expenditures and net investment in certain foreign operations. Most of our operations outside the United States have their local currency as their functional currency. We have exposure to multiple foreign currencies, including, among others, the British pound, Euro and Japanese yen. We have taken steps to minimize our balance sheet exposure by entering into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables.
At July 31, 2024, a uniform hypothetical 10% increase or decrease in the foreign currency exchange rates in comparison to the value of the U.S. dollar would have resulted in a corresponding increase or decrease of approximately $22.0 million in operating income for the fiscal quarter ended July 31, 2024. See Note 12. Financial Derivatives and Hedging of the Consolidated Condensed Financial Statements for further information.
Interest Rate Risk
We are 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 SOFR. As of July 31, 2024, we had outstanding debt for an aggregate carrying amount of $2.6 billion. We have entered, and in the future may enter, into interest rate swaps to manage interest rate risk.
Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on interest rates, the exposures that arise during the period and our hedging strategies at that time. As an example, if interest rates were to increase or decrease by 1% or 100 basis points, the quarterly interest expense would not have a material impact, based on average debt outstanding, after consideration of our interest rate swap contracts, during the third quarter of fiscal 2024. See Note 5. Financing Arrangements of the Consolidated Condensed Financial Statements for further information.
Item 4. Controls and Procedures
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 as of July 31, 2024 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 Rules 13a-15(d) and 15d-15(d) of the Exchange Act during our third quarter of fiscal 2024, that have materially affected, or are reasonably likely to materially affect, 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 10. Contingencies of the Consolidated Condensed Financial Statements of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
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, 2023. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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 July 31, 2024, $256.4 million remains authorized for repurchase.
During the nine months ended July 31, 2024, and 2023, there were no share repurchases.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended July 31, 2024, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 6. Exhibits
| Incorporated by Reference | Filed Herewith | ||||||||||||||||
| Exhibit Number | Description of Document | Form | Exhibit | Filing Date/ Period End Date | |||||||||||||
| 31.1 | Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | X | |||||||||||||||
| 31.2 | Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | X | |||||||||||||||
| 32.1* | Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350 | X | |||||||||||||||
| 32.2* | Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 | X | |||||||||||||||
| 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, 2024 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed 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) | ||||||||||||||||
| * Furnished herewith |
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: August 29, 2024 | /s/ Brian G. Andrews | ||||
| Brian G. Andrews | |||||
| Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | |||||
| Date: August 29, 2024 | /s/ Agostino Ricupati | ||||
| Agostino Ricupati | |||||
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) |