This summary is based on the first quarter fiscal 2009 earnings call conducted by The Cooper Companies Inc. (COO) on March 05, 2009.
Management:
CEO and Director: Robert S. Weiss
CFO and SVP: Eugene J. Midlock
VP of Investor Relations: Albert White
Key Investor Issues:
- Q1 GAAP EPS were 53 cents, an increase of 38 cents from Q1 of 2008.
- Q1 CooperVision revenue grew 4% to $211.2 million.
- Q1 CooperSurgical revenue marginally rose 1% to $39.9 million.
- The 2009 GAAP EPS outlook is in the range of $2.16 to $2.36.
First Quarter Highlights:
The reported top line growth was 3% and 4% in constant currency.
- This was at the top end of the guidance range in spite of a weak November.
- The new launches targeted for calendar quarter ended March 31, have already started with Proclear 1 day in Japan and Biofinity toric being shipped in the US.
- The Q1 results hurdled a $3.6 million restructuring related cost for a reduction in the operating infrastructure.
- Q4 2008 contact lenses data showed a respectable 4% of growth worldwide.
- Cooper Vision had $211 million in revenue and 4% in constant currency.
- Cooper Surgical had $40 million in revenue, up 1%.
- The effective tax rate for the quarter was 19%.
- The management is expecting a tax rate for the year at around 15%.
New products like the Proclear family continued to drive the top line.
- The silicone hydrogel product sales were $16.7 million.
- This is up more than double the prior year.
For calendar year 2008 Cooper Vision grew 8% in constant currency.
- This is 1.4 times the growth of the market hence reported market share gain.
- The management remains confident of delivering $50 million of free cash flow for the year.
- The company expects more than $150 million of operating cash flow for the year.
Q1 debt increased only $9 million to $913 million.
- The leverage ratios stay well below 3 ½ saving the company 25 basis points in interest.
- From a strategic angle, the company is not delaying any CapEx projects.
Cooper Surgical, the women’s healthcare franchise, continues to post solid operating ratio.
- The top line grew only 1% whilst the gross margin is now up to 62%.
- Cooper Surgical’s operating income came in at 23% compared with 17% in the prior year.
- Hospital products grew 19% to $13.7 million in the quarter.
- The hospital products now account for 34% of Cooper Surgical’s revenue.
On a consolidated basis, gross margin was 57% versus 59% in the first quarter of last year.
- Cooper Vision had a 56% margin versus 59% in 2008.
- The decrease is partially attributable to product mix with an increase in lower margin single use lenses growing 20% year-over-year.
- The company had a $5.4 million charge in Q1 for accelerated depreciation and asset write offs of older technology.
- Cooper Surgical increased its gross profit margin to 62% from 60% last year.
- The increase is partially attributable to product mix with an increase in the sales of the high margin surgical business.
SG&A decreased by 14% from the prior year to $95 million and as a percentage of sales to 38% from 45%.
- This decrease reflects cost control procedures.
- For Cooper Vision selling expenses dropped 10% from Q1 of last year due to careful monitoring of the distribution of free lenses, dip in certain marketing and promotional expenses and lower travel expenses.
- G&A expenses decreased 31% from the prior year and are now 6% of revenue versus 9% in the equivalent period last year.
- Cooper Surgical’s selling expenses decreased slightly to 27% of revenue versus 28% last year.
- This was largely attributable to a refinement of certain marketing activities.
- G&A eased by 25% from Q1 of last year.
- R&D was essentially flat with last year, equal to 3% of revenue.
Global Restructuring Plan:
- The management anticipates the total cost to be $4.4 million, being mainly severance and other related benefits.
- In Q1, the company reported $3.6 million of the amount, $600 million of which is reflected in cost of goods sold and $3 million in other operating expenses.
- The company estimates that future savings from this restructuring will amount to approximately $2 million a quarter into the future.
Consolidated operating margin was 13% versus 8% from last year, a 64% increase.
- Cooper Vision increased to 15% from 11% and surgical increased to 23% from 17%.
