Business Context and Reporting Period
Company: The Cooper Companies, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: October 31, 2002
Business Overview: Cooper develops, manufactures, and markets healthcare products through two principal subsidiaries: CooperVision (CVI), specializing in contact lenses (toric, cosmetic, and specialty segments), and CooperSurgical (CSI), providing medical devices and diagnostic products for gynecologists and obstetricians. As of October 31, 2002, the Company employed approximately 3,500 people.
Key Financial Metrics
Debt and Liquidity:
Total debt increased significantly to $163.6 million at October 31, 2002, from $68.8 million at October 31, 2001. This increase was primarily to fund acquisition payments totaling $136.1 million. The Company utilized a new $225 million line of credit from KeyBank for additional funding requirements.
| Debt Category | Oct 31, 2002 ($ Millions) | Oct 31, 2001 ($ Millions) |
|---|---|---|
| Short-term Debt | $36.3 | $8.2 |
| Long-term Debt | $127.3 | $60.6 |
| Total Debt | $163.6 | $68.8 |
Research and Development (R&D):
Company-sponsored R&D expenditures were $4.3 million for fiscal 2002, compared to $3.7 million in 2001 and $2.7 million in 2000. Approximately 66% of 2002 R&D spending was allocated to CooperVision and 34% to CooperSurgical.
Revenue, Profit, and Cash Flow:
The filing text incorporates detailed revenue, profit, and cash flow data by reference to the 2002 Annual Report to Stockholders. Specific consolidated revenue, net income, and operating cash flow figures for the fiscal year are not explicitly stated in the provided text.
Material Changes vs. Prior Period
- Acquisitions: In February 2002, Cooper completed the acquisition of Biocompatibles Eye Care, Inc., adding the Proclear line of contact lenses utilizing proprietary phosphorylcholine technology. This acquisition contributed to the significant increase in debt.
- Debt Structure: Total debt more than doubled year-over-year to support acquisition financing. The Company entered into a new $225 million KeyBank line of credit.
- Market Position: CooperVision accounted for approximately 30% of the $365 million worldwide toric contact lens market in calendar 2002. Specialty lenses represented approximately 70% of CVI's sales.
Guidance, Outlook, Risks, and Contingencies
Forward-Looking Statements: The Company cautions that statements regarding anticipated growth, market conditions, and results of operations are forward-looking and subject to risks. These include major changes in business conditions, manufacturing disruptions, new competitors, regulatory issues, and foreign currency exposure.
Market Risks:
- Interest Rate Risk: The Company uses interest rate swap agreements to minimize the impact of changing rates on variable-rate debt. Swaps currently fix rates on $1.9 million and £2.5 million of variable debt.
- Foreign Currency Risk: The Company uses forward exchange contracts to hedge intercompany receivables in Canadian dollars and long-term debt in Great Britain Pounds (GBP). Notional amounts include $24.2 million for GBP purchases and $4.7 million for Canadian dollar sales.
Regulatory Risks: Products are subject to FDA and international health authority regulations. Failure to maintain compliance could result in fines, product recalls, or suspension of production. All currently marketed products have received necessary regulatory clearances.
Legal Proceedings: Information regarding pending litigation is incorporated by reference to the 2002 Annual Report and is not detailed in this text.
Investor Verification Checklist
- Acquisition Integration: Verify the financial performance and integration progress of the Biocompatibles Eye Care acquisition, which drove the increase in debt.
- Debt Servicing: Review the specific terms of the new $225 million KeyBank line of credit and the Company's ability to service the increased debt load ($163.6 million total).
- Consolidated Financials: Consult the 2002 Annual Report to Stockholders for specific revenue, net income, and cash flow figures, as these are not explicitly listed in the 10-K text provided.
- Regulatory Compliance: Monitor FDA and international regulatory approvals for new product introductions, particularly for Class III devices like extended wear contact lenses.
- Market Share: Assess the competitive landscape in the specialty contact lens segment, where CooperVision holds a significant share but faces competition from larger entities like Johnson & Johnson and Novartis.