The Cooper Companies(COO) - 2020 Q1 - Quarterly Report

Financial Performance - Gross profit for the first quarter of fiscal 2020 was $426.5 million, a 2% increase from $418.5 million in the prior year period[148] - Operating income remained relatively flat at $111.1 million compared to $110.9 million in the prior year period[148] - Diluted earnings per share decreased by 12% to $1.82 from $2.07 in the prior year period, primarily due to tax benefits in the previous year[148] - Cash provided by operations increased to $129.7 million from $101.8 million in the prior year period[148] - Net sales increased by 3% compared to the same period in 2019[163] - CooperVision's net sales for the three months ended January 31, 2020, were $485.2 million, representing a 3% increase from $470.1 million in the same period of 2019[164] - CooperSurgical's net sales increased by 2% to $161.0 million, with office and surgical products growing by 3% to $98.5 million[175] - Operating income for CooperVision increased by 6% to $122.9 million, while CooperSurgical's operating income decreased by 76% to $1.7 million[190] Cost and Expenses - Cost of sales as a percentage of net sales increased to 34% from 33% in the prior year[163] - Gross margin for CooperVision decreased to 65% in Q1 2020 from 66% in Q1 2019, primarily due to increased manufacturing costs[180] - Selling, General and Administrative expenses for CooperVision rose by 2% to $172.4 million, maintaining 36% of net sales[182] - Research and Development expenses for CooperVision decreased by 3% to $13.1 million, remaining at 3% of net sales[186] - CooperSurgical's R&D expenses increased by 25% to $9.1 million, driven by investments in new product development[187] - Total share-based compensation expense decreased to $10.3 million in Q1 2020 from $11.7 million in Q1 2019[196] Cash Flow and Investments - Operating cash flow increased to $129.7 million in Q1 2020, up from $101.8 million in Q1 2019, representing a 27.5% increase[198] - Free cash flow reached $60.7 million, a significant increase of 169% compared to the prior year period[198] - Cash used in investing activities decreased to $78.4 million in Q1 2020 from $129.2 million in Q1 2019, largely due to lower acquisition payments[206] - Cash flows from financing activities resulted in a $63.2 million outflow in Q1 2020, compared to a $93.2 million inflow in Q1 2019[207] Debt and Liquidity - The company had $76.8 million in unrestricted cash and $763.8 million available under its revolving credit facility as of January 31, 2020[157] - Total debt decreased to $1,776.7 million from $1,826.3 million, resulting in a debt-to-equity ratio of 0.48:1, down from 0.50:1[199] - The Company has $500 million outstanding under the 2019 Term Loan Agreement, which was extended to September 25, 2020[222] - As of January 31, 2020, the Company had $1.0 billion outstanding under the 2017 Term Loan Agreement, which was part of the funding for the PARAGARD acquisition[223] - The 2016 Credit Agreement includes a multi-currency revolving credit facility of $1.0 billion and a term loan facility of $830 million, maturing on March 1, 2021[224] - At January 31, 2020, the Company had $235 million outstanding under the 2016 Revolving Credit Facility, with $763.8 million available[224] - A 1% increase or decrease in interest rates would result in a quarterly interest expense change of approximately $4.6 million based on average debt outstanding for Q1 fiscal 2020[225] Inventory and Receivables - Inventory months on hand increased to 7.2 at January 31, 2020, compared to 6.4 at October 31, 2019, indicating a rise in finished goods and raw materials[201] - Days sales outstanding (DSO) increased to 60 days in Q1 2020 from 56 days in Q1 2019, attributed to increased revenue and timing of collections[201] Regulatory and Product Developments - CooperVision received FDA approval for MiSight® 1 day lens, the first product indicated to slow myopia progression in children[152] - CooperSurgical acquired a privately-held distributor of IVF medical devices on December 13, 2019, enhancing its product offerings[156] Foreign Exchange and Risk Management - Foreign exchange rates negatively impacted sales by approximately $2.1 million in Q1 2020, but net sales increased by 4% in constant currency[168] - The Company is exposed to foreign exchange risks primarily from currencies such as British pound sterling, euro, and Japanese yen[221] - The Company did not have any derivative assets or liabilities related to interest rate swaps or foreign currency contracts as of January 31, 2020[221] - The Company may hedge a portion of variable rate debt to mitigate interest rate risk[221]