filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition
16K characters. Original on sec.gov · Markdown
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Research and Development (R&D) Expenses
| Three Months Ended January 31, | 2025 vs 2024 % Change | |||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | % Net Sales | 2024 | % Net Sales | ||||||||||||||||||||||||||||
| CooperVision | $ | 22.5 | 3 | % | $ | 20.7 | 3 | % | 9 | % | ||||||||||||||||||||||
| CooperSurgical | 18.2 | 6 | % | 18.8 | 6 | % | (3) | % | ||||||||||||||||||||||||
| $ | 40.7 | 4 | % | $ | 39.5 | 4 | % | 3 | % | |||||||||||||||||||||||
CooperVision's R&D expenses increased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, 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 decreased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024 due to a decrease in MDR costs. CooperSurgical's R&D activities are primarily focused on the development of surgical devices and fertility solutions, manufacturing technology and process enhancements.
Amortization Expense
| Three Months Ended January 31, | 2025 vs 2024 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2025 | % Net Sales | 2024 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 4.8 | 1 | % | $ | 7.7 | 1 | % | (38) | % | |||||||||||||||||||
| CooperSurgical | 44.8 | 14 | % | 42.6 | 14 | % | 5 | % | |||||||||||||||||||||
| $ | 49.6 | 5 | % | $ | 50.3 | 5 | % | (1) | % | ||||||||||||||||||||
CooperVision's amortization expense decreased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to certain intangible assets being fully amortized.
CooperSurgical's amortization expense increased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to the amortization of intangible assets acquired through acquisitions in the second half of fiscal 2024.
Operating Income
| Three Months Ended January 31, | 2025 vs 2024 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2025 | % Net Sales | 2024 | % Net Sales | |||||||||||||||||||||||||
| CooperVision | $ | 183.9 | 28 | % | $ | 154.8 | 25 | % | 19 | % | |||||||||||||||||||
| CooperSurgical | 20.2 | 6 | % | 24.0 | 8 | % | (16) | % | |||||||||||||||||||||
| Corporate | (22.1) | — | (25.7) | — | (14) | % | |||||||||||||||||||||||
| $ | 182.0 | 19 | % | $ | 153.1 | 16 | % | 19 | % | ||||||||||||||||||||
CooperVision's operating income increased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to the increase in net sales outpacing the increase in operating expenses.
CooperSurgical's operating income decreased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to the increase in amortization expense.
Corporate operating loss decreased in the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to lower 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 January 31, | 2025 vs 2024 % Change | ||||||||||||||||||||||||||||
| ($ in millions) | 2025 | % Net Sales | 2024 | % Net Sales | |||||||||||||||||||||||||
| Interest expense | $ | 26.0 | 3 | % | $ | 29.9 | 3 | % | (13) | % | |||||||||||||||||||
Interest expense decreased during the three months ended January 31, 2025, compared to the three months ended January 31, 2024, primarily due to lower interest rates and lower debt balances.
Other Expense, Net
| Period Ended January 31, | Three Months | |||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||||||||||||||
| Foreign exchange loss | $ | 3.0 | $ | 1.2 | ||||||||||||||||||||||
| Other (income) expense, net | (0.3) | 2.0 | ||||||||||||||||||||||||
| $ | 2.7 | $ | 3.2 |
Foreign exchange 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 months ended January 31, 2025.
Other (income) expense, net was a gain of $0.3 million in the three months ended January 31, 2025, compared to a loss of $2.0 million in three months ended January 31, 2024, primarily due to a decrease in loss on minority investments.
Provision for Income Taxes
The effective tax rates for the three months ended January 31, 2025 and January 31, 2024 were 32.0% and 32.4%, respectively. The decrease was primarily due to changes in unrecognized tax benefits and changes in the geographic composition of pre-tax earnings, partially offset by a decrease 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 as of January 31, 2025 and October 31, 2024 was $987.4 million and $928.7 million, respectively. The increase in working capital was primarily due to a decrease in accounts payable due to timing of payments and an increase in inventories, offset by increases in employee compensation benefits and short-term debt.
Cash Flow
| Three Months Ended January 31, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Operating activities | $ | 190.6 | $ | 122.7 | ||||||||||
| Investing activities | (96.8) | (324.1) | ||||||||||||
| Financing activities | (96.6) | 212.3 | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalents, restricted cash | (3.9) | 3.5 | ||||||||||||
| Net decrease in cash, cash equivalents, and restricted cash | $ | (6.7) | $ | 14.4 |
Operating Cash Flow
Cash provided by operating activities in the first three months of fiscal 2025 increased compared to the first three months of fiscal 2024, primarily due to increases in net income and net changes in other non-cash items and operating capital. The net changes in operating capital included an increase in cash collection and an increase in accrued liabilities, offset by an increase in inventories.
Investing Cash Flow
Cash used in investing activities in the first three months of fiscal 2025 decreased compared to the first three months of fiscal 2024, primarily attributable to $200 million cash paid for the Cook Medical acquisition in the first three months of fiscal 2024, and a decrease in purchases of property, plant and equipment.
Financing Cash Flow
Cash used in financing activities in the first three months of fiscal 2025 was primarily attributable to repayments on the revolving credit and the first installment payment related to the Cook Medical acquisition.
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.
The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of January 31, 2025:
| (In millions) | Facility Limit | Outstanding Borrowings | Outstanding Letters of Credit | Total Amount Available | Maturity Date | |||||||||||||||||||||||||||
| Revolving Credit: | ||||||||||||||||||||||||||||||||
| 2024 Revolving Credit | $ | 2,300.0 | $ | 990.2 | $ | 4.7 | $ | 1,305.1 | May 1, 2029 | |||||||||||||||||||||||
| Term loan: | ||||||||||||||||||||||||||||||||
| 2021 Term Loan | 1,500.0 | 1,500.0 | n/a | — | December 17, 2026 | |||||||||||||||||||||||||||
| Total | $ | 3,800.0 | $ | 2,490.2 | $ | 4.7 | $ | 1,305.1 |
As of January 31, 2025, 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.
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
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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, 2025, $256.4 million remains authorized for repurchase.
During the three months ended January 31, 2025 and 2024, there were no share repurchases.
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, 2024. 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, 2024.
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.
THE COOPER COMPANIES, INC. AND SUBSIDIARIES
Previous: Item 1. Unaudited Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosure About Market Risk