This summary is based on the second quarter fiscal 2008 earnings call conducted by The Cooper Companies, Inc. (COO) on June 5, 2008.
Management:
VP of IR: Albert White
President & CEO: Robert Weiss
Sr. VP & CFO: Eugene Midlock
Key Investors Issues
- EPS were 25 cents per share compared to a loss of a penny per share last year
- Profit was $11.2 million compared to a loss of $527,000 in the same quarter a year ago.
- Revenue rose 17% to $263.5 million from $225.5 million a year ago.
Second Quarter Highlights
The company had $263 million in revenue, up 17% and 10% in constant currency.
- CooperVision had revenue of $222 million, up 18% and 10% in constant currency.
- CooperSurgical contributed $41.5 million plus 11% and 9% of that was organic growth.
- Earnings per share in accordance with GAAP were 25 cents and earnings per share excluding call-outs were 49 cents.
Biofinity had revenue of $12.4 million which is now at a $50 million annualized run rate and that is in line with $50 million to $70 million of expectation for the fiscal year.
- Biofinity sequential growth was 37% above the first quarter which was $9 million in revenue.
- Proclear or one-day single-use product, had revenue of $7 million, up 1200% above the prior year but sequentially 47% above the first quarter. Proclear one-day also effective March of this year no longer had capacity constraints. Overall single-use sphere market was up 62% above the prior year, 44% in constant currency.
- Avaira was launched in April of this year. It had insignificant sales of only $114,000. For Avaira the company expects to meet or exceed the $8 million to $10 million of targeted revenue in fiscal 2008 guidance. Part of the bullishness on that is the fact is that in May of this year, the company sold $2.6 million of Avaira. Some of that included certain chains.
Single-use was up 44% in constant currency.
- Proclear family of products was up 25% and geographic expansion in Asia Pacific saw a growth there of 22% also in constant currency. Silicone hydrogel really Biofinity is now at a $50 million run rate and it is within range of $50 million to $70 million estimate for this fiscal year for Biofinity.
CooperSurgical women’s healthcare franchise is running smoothly.
In spite of a fair amount of non-US sourcing, its gross margin remains around 60%. CooperSurgical’s GAAP operating income was 19%. Partnering with the OBGYN beyond the office setting, that is the hospital, has been a stellar success contributing to organic growth of 9%. Products targeted in hospitals grew 17% or $12 million and now represents 29% of Surgical’s revenues worldwide. With minimal capital requirements, with a solid balance sheet ratio in both inventory and receivables, CooperSurgical generates a lot of free cash flow.
- Specialty lens group grew 11% over 2007. Proclear products grew 33% and the real gainer was single-use spheres which were up 62% and that was recognized in all of geographies. Asia Pac and EMA were up around 60% and the Americas were up approximately 95%.
- Geography-wise, overall basis, the Americas grew by 10%, Europe 20% and Asia Pac 38%.
Consolidated gross margin was 57% compared to 55% in the second quarter of 2007 and if exclude non-GAAP expenses, gross margin was 61% compared with 63% in last year’s second quarter.
- This breaks out with CooperVision had a gross margin of 57% compared to 55% last year. If exclude the call-outs the gross margin was 61% compared with 63% in 2007. This was largely attributable to product mix due to the large growth in lower margin single-use lenses.
- CooperSurgical has a gross margin of 595 which was largely unchanged from 2007.
- Consolidated operating margin was 11% compared to 5% last year. If exclude the call-outs operating margin was 15% which was much the same as last year. CooperVision had operating margin of 12% compared to 6% last year. If exclude call-outs the operating margin was 17% compared to 19% last year. This decrease is generally attributable again to additional selling and marketing expenses associated with new product launches and increase in the revenue mix of less margin products. Surgical’s operating margin was 19% compared to 17% in 2007 and again that reflects a better leveraging of selling and marketing expenses.
