The Cooper Companies(COO) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Unaudited Financial Statements This section presents the unaudited consolidated condensed financial statements for The Cooper Companies, Inc. and its subsidiaries, including statements of income and comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, acquisitions, balance sheet components, intangible assets, financing arrangements, income taxes, earnings per share, share-based compensation, stockholders' equity, contingencies, business segment information, and financial derivatives and hedging Consolidated Condensed Statements of Income and Comprehensive Income This section presents consolidated income and comprehensive income statements, detailing net sales, gross profit, operating income, net income, and EPS Consolidated Condensed Statements of Income and Comprehensive Income (Three Months Ended July 31) | Metric | 2025 (Millions) | 2024 (Millions) | | :--- | :--- | :--- | | Net sales | $1,060.3 | $1,002.8 | | Gross profit | $692.0 | $663.0 | | Operating income | $175.7 | $192.5 | | Net income | $98.3 | $104.7 | | Basic EPS | $0.49 | $0.53 | | Diluted EPS | $0.49 | $0.52 | Consolidated Condensed Statements of Income and Comprehensive Income (Nine Months Ended July 31) | Metric | 2025 (Millions) | 2024 (Millions) | | :--- | :--- | :--- | | Net sales | $3,027.3 | $2,877.0 | | Gross profit | $2,031.3 | $1,918.0 | | Operating income | $542.5 | $507.3 | | Net income | $290.3 | $274.8 | | Basic EPS | $1.45 | $1.38 | | Diluted EPS | $1.45 | $1.37 | - For the three months ended July 31, 2025, net sales increased by $57.5 million (5.7%) year-over-year, while net income decreased by $6.4 million (6.1%) and diluted EPS decreased by $0.03 (5.8%)[9] - For the nine months ended July 31, 2025, net sales increased by $150.3 million (5.2%) year-over-year, net income increased by $15.5 million (5.6%), and diluted EPS increased by $0.08 (5.8%)[9] Consolidated Condensed Balance Sheets This section presents consolidated balance sheets, detailing assets, liabilities, and stockholders' equity as of July 31, 2025, and October 31, 2024 Consolidated Condensed Balance Sheets (As of July 31, 2025 vs. October 31, 2024) | Asset/Liability Category | July 31, 2025 (Millions) | October 31, 2024 (Millions) | Change (Millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total current assets | $2,137.8 | $1,951.5 | $186.3 | 9.5% | | Total assets | $12,376.7 | $12,315.2 | $61.5 | 0.5% | | Total current liabilities | $1,010.1 | $1,022.8 | $(12.7) | (1.2%) | | Total liabilities | $4,023.7 | $4,231.6 | $(207.9) | (4.9%) | | Total stockholders' equity | $8,353.0 | $8,083.6 | $269.4 | 3.3% | - Total assets increased slightly by $61.5 million, while total liabilities decreased by $207.9 million, leading to a $269.4 million increase in total stockholders' equity from October 31, 2024, to July 31, 2025[12] - Current assets saw a notable increase, primarily driven by higher trade accounts receivable and inventories[12] Consolidated Condensed Statements of Stockholders' Equity This section details changes in stockholders' equity, including net income, comprehensive income, stock issuance, compensation, and repurchases Changes in Stockholders' Equity (October 31, 2024 to July 31, 2025) | Item | Amount (Millions) | | :--- | :--- | | Balance at October 31, 2024 | $8,083.6 | | Net income (9 months) | $290.3 | | Other comprehensive income (loss), net of tax (9 months) | $29.6 (Net of $68.7 loss and $98.1 gain) | | Issuance of common stock for stock plans, net | $(7.3) | | Share-based compensation expense | $55.0 | | Stock repurchase | $(93.2) | | Balance at July 31, 2025 | $8,353.0 | - Total stockholders' equity increased from $8,083.6 million at October 31, 2024, to $8,353.0 million at July 31, 2025, primarily due to net income and share-based compensation, partially offset by stock repurchases[17] - The Company repurchased 1.2 million shares of common stock for $92.8 million during the nine months ended July 31, 2025[17][61] Consolidated Condensed Statements of Cash Flows This section presents consolidated cash flow statements, detailing cash flows from operating, investing, and financing activities Consolidated Condensed Statements of Cash Flows (Nine Months Ended July 31) | Activity | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $548.2 | $441.2 | $107.0 | | Net cash used in investing activities | $(274.1) | $(523.0) | $248.9 | | Net cash (used in) provided by financing activities | $(261.5) | $67.6 | $(329.1) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $17.2 | $(11.1) | $28.3 | | Cash, cash equivalents, and restricted cash at end of period | $124.9 | $109.8 | $15.1 | - Net cash provided by operating activities increased by $107.0 million in the first nine months of fiscal 2025 compared to 2024, primarily due to higher net income and favorable changes in operating capital[20][134] - Cash used in investing activities decreased significantly by $248.9 million, mainly due to lower acquisition spending in 2025 compared to the Cook Medical acquisition in 2024[20][135] - Cash used in financing activities increased substantially, shifting from a net inflow of $67.6 million in 2024 to a net outflow of $261.5 million in 2025, driven by net debt repayments and common stock repurchases[20][136] Notes to Consolidated Condensed Financial Statements This section provides detailed notes on the Company's accounting policies, acquisitions, balance sheet components, and other financial disclosures Note 1. General This note outlines the basis of presentation for the unaudited consolidated condensed financial statements, confirming adherence to GAAP and Regulation S-X, and details recently issued accounting pronouncements and their expected impact - The Company is evaluating the impact of ASU 2025-05 (Credit Losses for Accounts Receivable), effective for fiscal years after December 15, 2025[27] - ASU 2024-03 (Expense Disaggregation Disclosures) will require additional disclosure of income statement expenses, effective for fiscal years after December 15, 2026[28] - ASU 2023-07 (Segment Reporting) will enhance disclosures for operating segments, effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after November 1, 2025, with retrospective application[30] Note 2. Acquisitions This note details recent acquisitions by CooperSurgical, including obp Surgical for $100.0 million, a fertility company for $33.5 million, and select Cook Medical assets for $300.0 million, funded by cash or borrowings and primarily adding intangible assets - CooperSurgical acquired obp Surgical on August 1, 2024, for $100.0 million, primarily adding $45.6 million in developed technology and $50.6 million in goodwill[34] - On June 7, 2024, CooperSurgical acquired a fertility company for $33.5 million, recognized as an asset acquisition with a composite intangible asset of $39.6 million[35] - CooperSurgical completed the acquisition of select Cook Medical assets on November 1, 2023, for $300.0 million (present value $291.6 million), adding $157.9 million in technologies and $107.2 million in goodwill[36] Note 3. Balance Sheet Components This note provides a breakdown of inventories and deferred revenue, showing total inventories increased to $881.0 million at July 31, 2025, primarily due to finished goods, and significant revenue recognized from deferred balances Inventories (In millions) | Category | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Raw materials | $199.2 | $188.2 | | Work-in-process | $20.0 | $18.5 | | Finished goods | $661.8 | $596.0 | | Total inventories | $881.0 | $802.7 | - Total inventories increased by $78.3 million (9.8%) from October 31, 2024, to July 31, 2025, mainly driven by a $65.8 million increase in finished goods[37] - Revenue recognized from deferred balances was $31.9 million for the three months and $96.0 million for the nine months ended July 31, 2025[38] Note 4. Intangible Assets This note details the Company's intangible assets, primarily definite-lived assets, which decreased to $1,635.9 million at July 31, 2025, due to amortization, with estimated future amortization expense of $1,634.8 million Intangible Assets with Definite Lives, Net (In millions) | Category | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Customer relationships | $683.6 | $728.0 | | Composite intangible assets | $549.5 | $604.8 | | Technology | $279.6 | $322.1 | | Trademarks | $103.6 | $113.6 | | License and distribution rights and other | $18.5 | $20.7 | | Total definite-lived intangibles, net | $1,634.8 | $1,789.2 | | Intangible assets with indefinite lives, net | $1.1 | $1.8 | | Total other intangibles, net | $1,635.9 | $1,791.0 | - Total other intangibles, net, decreased by $155.1 million (8.7%) from October 31, 2024, to July 31, 2025, primarily due to amortization[39] Estimated Future Amortization Expenses for Intangible Assets with Definite Lives (In millions) | Fiscal Year | Amount | | :--- | :--- | | Remainder of 2025 | $48.7 | | 2026 | $189.0 | | 2027 | $174.5 | | 2028 | $170.0 | | 2029 | $165.8 | | Thereafter | $886.8 | | Total | $1,634.8 | Note 5. Financing Arrangements This note details the Company's debt structure, showing total debt decreased to $2,478.3 million at July 31, 2025, and highlights a new $2,300.0 million Revolving Credit Agreement and compliance with all debt covenants Outstanding Debt (In millions) | Category | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Short-term debt | $46.9 | $33.3 | | Long-term debt | $2,431.4 | $2,550.4 | | Total debt | $2,478.3 | $2,583.7 | - Total debt decreased by $105.4 million (4.1%) from October 31, 2024, to July 31, 2025[43] - The Company entered into a new $2,300.0 million Revolving Credit Agreement on May 1, 2024, with $930.2 million outstanding and a weighted-average interest rate of 5.43% as of July 31, 2025[44][47] - The $1,500.0 million Term Loan Facility had $1,500.0 million outstanding with an interest rate of 5.30% as of July 31, 2025[48][51] Note 6. Income Taxes This note discusses effective tax rates, which decreased to 35.3% for the three months ended July 31, 2025, due to prior year US tax return adjustments, but increased to 35.4% for the nine months due to valuation allowance changes and decreased share-based compensation benefits Effective Tax Rates | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | 35.3% | 36.1% | | Nine Months Ended July 31 | 35.4% | 33.6% | - The decrease in the three-month effective tax rate was primarily due to adjustments related to filing the prior year US tax return[54] - The increase in the nine-month effective tax rate was mainly due to changes in valuation allowance and a decrease in excess tax benefits from share-based compensation[54] Note 7. Earnings Per Share This note provides basic and diluted earnings per share (EPS) calculations, showing a decrease in Q3 2025 EPS to $0.49 but an increase to $1.45 for the nine months, and lists antidilutive stock options and restricted stock units Earnings Per Share (Periods Ended July 31) | Metric | Three Months 2025 | Three Months 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (millions) | $98.3 | $104.7 | $290.3 | $274.8 | | Basic EPS | $0.49 | $0.53 | $1.45 | $1.38 | | Diluted EPS | $0.49 | $0.52 | $1.45 | $1.37 | | Diluted weighted-average common shares (millions) | 200.0 | 200.6 | 200.6 | 200.3 | - Stock options and restricted stock units excluded from diluted EPS calculations due to antidilutive effect were 2,289 thousand and 589 thousand, respectively, for the three months ended July 31, 2025[55] Note 8. Share-Based Compensation This note details the Company's share-based compensation expense, which decreased to $16.2 million for the three months and $55.3 million for the nine months ended July 31, 2025, primarily recorded under selling, general and administrative expenses Total Share-Based Compensation Expense (In millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $16.2 | $17.6 | | Nine Months Ended July 31 | $55.3 | $58.7 | Related Income Tax Benefit (In millions) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended July 31 | $1.8 | $1.0 | | Nine Months Ended July 31 | $7.5 | $5.8 | - Share-based compensation expense decreased by $1.4 million (8.0%) for the three months and $3.4 million (5.8%) for the nine months ended July 31, 2025, compared to the prior year[58] Note 9. Stockholders' Equity This note analyzes changes in accumulated other comprehensive loss, which improved to $(392.1) million, details share repurchases of 0.7 million shares for $52.2 million in Q3 and 1.2 million shares for $92.8 million in the nine months, and notes the cessation of semiannual dividends Accumulated Other Comprehensive Loss (In millions) | Component | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Foreign Currency Translation Adjustment | $(414.4) | $(461.7) | | Minimum Pension Liability | $(4.9) | $(4.9) | | Derivative Instruments | $27.2 | $44.9 | | Total | $(392.1) | $(421.7) | - The Company repurchased 0.7 million shares for $52.2 million in the three months and 1.2 million shares for $92.8 million in the nine months ended July 31, 2025[61] - The Board of Directors ceased the declaration of a semiannual dividend in December 2023[62] Note 10. Contingencies and Commitments This note addresses the Company's legal proceedings, expecting no material adverse effect, and discloses new lease commitments for manufacturing and R&D expansion totaling an estimated $181.8 million in undiscounted payments - The Company does not believe that the ultimate resolution of pending legal proceedings or claims will have a material adverse effect on its financial condition or results of operations[63] - New lease commitments for manufacturing and R&D capacity expansion amount to an estimated $181.8 million in undiscounted payments, with initial terms ranging from 20 to 24 years, commencing between Q4 fiscal 2025 and fiscal 2026[64] Note 11. Business Segment Information This note provides financial information by reportable segment (CooperVision and CooperSurgical) and geographic regions, showing CooperVision's increased net sales and operating income, while CooperSurgical's operating income decreased despite rising net sales, with the United States and Europe as key markets Segment Net Sales (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | CooperVision | $718.4 | $675.6 | $2,034.1 | $1,933.0 | | CooperSurgical | $341.9 | $327.2 | $993.2 | $944.0 | | Total Net Sales | $1,060.3 | $1,002.8 | $3,027.3 | $2,877.0 | Segment Operating Income (Loss) (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | CooperVision | $202.6 | $172.7 | $572.9 | $487.7 | | CooperSurgical | $(4.2) | $41.3 | $39.7 | $86.9 | | Corporate | $(22.7) | $(21.5) | $(70.1) | $(67.3) | | Total Operating Income | $175.7 | $192.5 | $542.5 | $507.3 | - CooperVision net sales increased by 6% for the three months and 5% for the nine months ended July 31, 2025, driven by toric and multifocal lenses[66][92][96] - CooperSurgical operating income decreased significantly by 110% for the three months and 54% for the nine months ended July 31, 2025, primarily due to inventory and long-lived asset write-offs related to a product line exit[66][123] Net Sales by Geography (In millions, Periods Ended July 31) | Region | Three Months 2025 | Three Months 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | United States | $516.2 | $511.2 | $1,527.8 | $1,460.6 | | Europe | $343.1 | $297.0 | $922.5 | $850.3 | | Rest of world | $201.0 | $194.6 | $577.0 | $566.1 | | Total | $1,060.3 | $1,002.8 | $3,027.3 | $2,877.0 | Note 12. Financial Derivatives and Hedging This note details the Company's use of foreign currency forward contracts and interest rate swap contracts for hedging, with $26.8 million in forward contracts and $1.6 billion notional amount in swaps, which resulted in a recognized gain in interest expense - As of July 31, 2025, the Company had $26.8 million in outstanding foreign currency forward contracts[69] - The Company had eight interest rate swap contracts with a total notional amount of $1.6 billion and remaining maturities of less than three years[69] Impact of Interest Rate Swap Contracts on Interest Expense (In millions, Periods Ended July 31) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months | $(8.1) | $(14.1) | | Nine Months | $(28.2) | $(41.3) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and future outlook, including forward-looking statements, business segment overviews, detailed financial analysis, capital resources, liquidity, key risks, and accounting policies Forward-Looking Statements This subsection highlights the inherent uncertainties and risks associated with the Company's future plans, prospects, and performance, identifying various factors that could cause actual results to differ materially from forward-looking statements - Forward-looking statements are subject to risks and uncertainties, including adverse global economic conditions, international conflicts, and foreign currency exchange rate fluctuations[74] - Key risks include acquisition-related adverse effects, compliance costs with healthcare regulations (HIPAA, CCPA, GDPR), major disruptions in operations or supply chain, and cybersecurity attacks[74] - Other significant risks involve new government laws and regulations (e.g., EU MDR, IVDR), legal costs, market acceptance of new products, increased competition, and risks related to ESG issues[77] Outlook The Company expresses optimism for the long-term prospects of the worldwide contact lens and general healthcare markets, emphasizing the resilience and growth potential of its businesses, while acknowledging significant global operating risks that could adversely affect future sales and performance - The Company is optimistic about the long-term prospects for the worldwide contact lens and general health care markets[80] - Significant risks include uncertain global and regional business, political and economic conditions, inflation, foreign exchange rate fluctuations, regulatory developments, and supply chain disruptions[80] - CooperVision focuses on silicone hydrogel products, particularly single-use lenses (clariti, MyDay, MyDay Energys) and frequent replacement products (Biofinity, Avaira Vitality), and myopia management lenses (MiSight 1 day)[81][82] - CooperSurgical competes in the fertility and women's health care market with a diversified portfolio including fertility products, medical devices, cryostorage, and contraception, emphasizing technological advances, product quality, and customer service[83][84] Results of Operations This section analyzes the Company's financial performance for the third quarter and first nine months of fiscal 2025 compared to 2024, covering net sales, gross margin, operating expenses, operating income, interest expense, other income/expense, and provision for income taxes, highlighting increased net sales but a Q3 gross margin decrease due to inventory write-offs Net Sales Net sales for CooperVision increased by 6% in Q3 and 5% for the nine months, driven by growth in toric and multifocal lenses and sphere/other lenses, with favorable foreign exchange impacts, while CooperSurgical's net sales grew by 4% in Q3 and 5% for the nine months, benefiting from acquisitions and consumable products CooperVision Net Sales by Category (In millions, Periods Ended July 31) | Category | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Toric and multifocal | $358.8 | $326.4 | 10% | $1,006.6 | $934.0 | 8% | | Sphere, other | $359.6 | $349.2 | 3% | $1,027.5 | $999.0 | 3% | | Total | $718.4 | $675.6 | 6% | $2,034.1 | $1,933.0 | 5% | - CooperVision's net sales growth was positively impacted by favorable foreign exchange rate fluctuations of approximately $26.8 million for the three months and $4.4 million for the nine months ended July 31, 2025[96] CooperSurgical Net Sales by Category (In millions, Periods Ended July 31) | Category | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Office and surgical | $204.8 | $197.9 | 3% | $609.5 | $571.9 | 7% | | Fertility | $137.1 | $129.3 | 6% | $383.7 | $372.1 | 3% | | Total | $341.9 | $327.2 | 4% | $993.2 | $944.0 | 5% | - CooperSurgical's office and surgical net sales increased primarily due to the acquisition of obp Surgical (August 1, 2024) and increased sales of Paragard contraceptive intrauterine devices[107][108] - Fertility net sales increased due to higher revenue from consumable products and gamete services[107][108] Gross Margin Consolidated gross margin decreased to 65% in the three months ended July 31, 2025, from 66% in the prior year, primarily due to inventory write-offs from a product line exit, while remaining flat at 67% for the nine months - Consolidated gross margin for the three months ended July 31, 2025, decreased to 65% from 66% in 2024[110] - The decrease in Q3 gross margin was primarily driven by inventory write-offs related to a product line exit[110] - Consolidated gross margin remained flat at 67% for the nine months ended July 31, 2025, compared to 2024[110] Selling, General and Administrative (SGA) Expenses SGA expenses increased for both CooperVision and CooperSurgical in the three and nine months ended July 31, 2025, with CooperVision's increase due to higher selling activities, CooperSurgical's due to asset write-offs and selling activities, and Corporate's due to higher salaries and benefits Selling, General and Administrative (SGA) Expenses (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CooperVision | $248.2 | $232.5 | 7% | $715.0 | $679.9 | 5% | | CooperSurgical | $150.9 | $127.1 | 19% | $423.6 | $395.1 | 7% | | Corporate | $22.6 | $21.5 | 5% | $70.0 | $67.3 | 4% | | Total | $421.7 | $381.1 | 11% | $1,208.6 | $1,142.3 | 6% | - CooperSurgical's SGA expenses increased significantly by 19% in Q3 2025, primarily due to long-lived asset write-offs related to a product line exit and increased selling activities[114] - Corporate SGA expenses increased due to higher salaries and benefits in both the three and nine months ended July 31, 2025[114][115] Research and Development (R&D) Expenses R&D expenses increased for both CooperVision and CooperSurgical in the three and nine months ended July 31, 2025, driven by higher project spending on contact lenses, manufacturing technology, surgical devices, and fertility solutions, partially offset by lower MDR costs for CooperSurgical Research and Development (R&D) Expenses (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CooperVision | $24.3 | $21.6 | 13% | $72.4 | $63.2 | 15% | | CooperSurgical | $20.3 | $17.4 | 17% | $58.4 | $54.2 | 8% | | Total | $44.6 | $39.0 | 14% | $130.8 | $117.4 | 11% | - CooperVision's R&D expenses increased due to higher spending on R&D projects, primarily focused on contact lenses and manufacturing technology[116] - CooperSurgical's R&D expenses increased due to higher R&D project spending on surgical devices and fertility solutions, partially offset by a decrease in MDR costs[117] Amortization Expense Consolidated amortization expense remained relatively flat, with CooperVision's decreasing due to fully amortized assets, while CooperSurgical's increased due to amortization of intangible assets from recent acquisitions Amortization Expense (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CooperVision | $5.1 | $7.9 | (35)% | $15.0 | $23.3 | (36)% | | CooperSurgical | $44.9 | $42.5 | 6% | $134.4 | $127.7 | 5% | | Total | $50.0 | $50.4 | (1)% | $149.4 | $151.0 | (1)% | - CooperVision's amortization expense decreased significantly due to certain intangible assets becoming fully amortized[120] - CooperSurgical's amortization expense increased due to the amortization of intangible assets acquired through acquisitions in the second half of fiscal 2024[120] Operating Income Consolidated operating income decreased by 9% in Q3 but increased by 7% for the nine months, with CooperVision showing strong growth, while CooperSurgical's operating income declined sharply due to product line exits and increased amortization, and Corporate operating loss also increased Operating Income (In millions, Periods Ended July 31) | Segment | Three Months 2025 | Three Months 2024 | % Change | Nine Months 2025 | Nine Months 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | CooperVision | $202.6 | $172.7 | 17% | $572.9 | $487.7 | 17% | | CooperSurgical | $(4.2) | $41.3 | (110)% | $39.7 | $86.9 | (54)% | | Corporate | $(22.7) | $(21.5) | 6% | $(70.1) | $(67.3) | 4% | | Total | $175.7 | $192.5 | (9)% | $542.5 | $507.3 | 7% | - CooperSurgical's operating income decreased by 110% in Q3 2025 and 54% for the nine months, primarily due to inventory and long-lived asset write-offs related to a product line exit and increased amortization expense[123] - Corporate operating loss increased due to higher salaries and benefits expenses[124] Interest Expense Interest expense decreased by 11% in the three months and 13% in the nine months ended July 31, 2025, compared to the prior year, primarily due to lower interest rates and average debt balances Interest Expense (In millions, Periods Ended July 31) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Three Months | $25.4 | $28.5 | (11)% | | Nine Months | $75.6 | $87.3 | (13)% | - The decrease in interest expense was primarily due to lower interest rates and lower average debt balances[126] Other Expense, Net Other (income) expense, net, shifted from an expense of $0.3 million in Q3 2024 to income of $(1.6) million in Q3 2025, primarily due to a gain in minority interest investments, but increased to an expense of $17.2 million for the nine months, mainly due to a $15.7 million loss on disposal of a minority interest investment and foreign exchange losses Other (Income) Expense, Net (In millions, Periods Ended July 31) | Category | Three Months 2025 | Three Months 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Foreign exchange loss (gain) | $1.5 | $(0.5) | $5.7 | $3.2 | | Other (income) expense, net | $(3.1) | $0.8 | $11.5 | $3.1 | | Total | $(1.6) | $0.3 | $17.2 | $6.3 | - Other (income) expense, net, decreased in Q3 2025 primarily due to a gain in minority interest investments[128] - Other expense, net, increased in the nine months ended July 31, 2025, primarily due to a $15.7 million loss on the disposal of a minority interest investment[128] Provision for Income Taxes The effective tax rate for the three months ended July 31, 2025, was 35.3%, down from 36.1% in 2024, mainly due to prior year US tax return adjustments, while for the nine months, the rate increased to 35.4% from 33.6%, primarily due to changes in valuation allowance and a decrease in excess tax benefits from share-based compensation Effective Tax Rates (Periods Ended July 31) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months | 35.3% | 36.1% | | Nine Months | 35.4% | 33.6% | - The decrease in the three-month effective tax rate was primarily due to adjustments related to filing the prior year US tax return[129] - The increase in the nine-month effective tax rate was primarily due to changes in valuation allowance and a decrease in excess tax benefits from share-based compensation[129] Capital Resources and Liquidity This section discusses the Company's working capital, cash flow activities, and debt facilities, noting an increase in working capital to $1,127.7 million, improved operating cash flow, decreased investing cash flow, and a shift to net cash use in financing, with sufficient liquidity for at least 12 months - Working capital increased to $1,127.7 million at July 31, 2025, from $928.7 million at October 31, 2024, primarily due to increases in inventories and accounts receivable[132] Cash Flow Summary (Nine Months Ended July 31, in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $548.2 | $441.2 | | Investing activities | $(274.1) | $(523.0) | | Financing activities | $(261.5) | $67.6 | | Net increase (decrease) in cash | $17.2 | $(11.1) | - Cash provided by operating activities increased by $107.0 million, while cash used in investing activities decreased by $248.9 million[133][134][135] - Cash used in financing activities was $261.5 million, primarily due to net repayments on the revolving credit, common stock repurchases, and an acquisition installment payment[136] - The Company has $1,369.8 million available under its $2,300.0 million Revolving Credit Facility as of July 31, 2025, and believes it has sufficient liquidity for the next 12 months[137][138] Estimates and Critical Accounting Policies This section refers to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2024, for information regarding estimates and critical accounting policies, stating that there have been no material changes to these policies - No material changes have occurred in the Company's estimates and critical accounting policies since the Annual Report on Form 10-K for the fiscal year ended October 31, 2024[143] Accounting Pronouncements This section directs readers to Note 1. General of the Consolidated Condensed Financial Statements for information regarding new accounting pronouncements - Information on new accounting pronouncements is provided in Note 1. General of the Consolidated Condensed Financial Statements[144] Item 3. Quantitative and Qualitative Disclosure About Market Risk This section discusses the Company's exposure to market risks, primarily related to changes in interest rates and foreign currency fluctuations, and its use of derivative financial instruments to manage these risks without engaging in speculative transactions Foreign Currency Exchange Risk The Company is exposed to foreign currency risk due to its international operations and uses foreign currency forward contracts to minimize short-term exchange rate impacts, with a hypothetical 10% change in rates resulting in an approximate $26.2 million impact on operating income for the fiscal quarter ended July 31, 2025 - The Company is exposed to foreign currency risk from foreign currency denominated receivables, payables, sales, capital expenditures, and net investments in foreign operations[148] - Foreign currency forward contracts are used to minimize the short-term impact of exchange rate fluctuations[148] - A hypothetical 10% increase or decrease in foreign currency exchange rates would result in approximately a $26.2 million increase or decrease in operating income for the fiscal quarter ended July 31, 2025[149] Interest Rate Risk The Company is exposed to interest rate risk on its variable-rate revolving lines of credit and term loans, which it manages using interest rate swaps, and a 1% change in interest rates would not materially impact quarterly interest expense given its $2.5 billion in outstanding debt and existing swap contracts - The Company is exposed to risks from changes in interest rates on its variable-rate revolving lines of credit and term loans[150] - Interest rate swaps are used to manage interest rate risk[150] - A 1% increase or decrease in interest rates would not have a material impact on quarterly interest expense, considering existing interest rate swap contracts[151] Item 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and procedures and internal control over financial reporting, concluding that disclosure controls were not effective as of July 31, 2025, due to a material weakness in IT general controls within the CooperSurgical segment, with ongoing remediation efforts Evaluation of Disclosure Controls and Procedures Management concluded that the Company's disclosure controls and procedures were not effective as of July 31, 2025, due to a material weakness in IT general controls within the CooperSurgical segment's U.S. operations, related to inadequate personnel, training, and risk assessment processes for change management, user control monitoring, and segregation of duties in ERP systems - Disclosure controls and procedures were deemed not effective as of July 31, 2025, due to a material weakness in IT general controls[152] - The material weakness was identified in the U.S. operations within the CooperSurgical segment, related to the implementation and maintenance of certain enterprise resource planning systems (ERP)[153] - Remediation efforts include enhancing risk assessment, developing employee skill sets and training, and improving controls for change management, user access, and segregation of duties[154][155] Changes in Internal Control over Financial Reporting Except for the material weakness in IT general controls discussed above, there have been no other material changes in the Company's internal control over financial reporting during the third quarter of fiscal 2025 - No other material changes in internal control over financial reporting were identified during the third quarter of fiscal 2025, apart from the ongoing remediation efforts for the previously disclosed material weakness[156] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 10. Contingencies of the Consolidated Condensed Financial Statements for information regarding legal proceedings, indicating that the Company is involved in various lawsuits and claims in the ordinary course of business, but does not expect a material adverse effect on its financial condition or results of operations - Information regarding legal proceedings is included in Note 10. Contingencies of the Consolidated Condensed Financial Statements[159] Item 1A. Risk Factors This section states that the Company's business faces significant risks, directing readers to Item 1A. Risk Factors in its Annual Report on Form 10-K for the fiscal year ended October 31, 2024, and confirms no material changes to previously disclosed risk factors - The Company's business faces significant risks, detailed in Item 1A. Risk Factors in its Annual Report on Form 10-K for the fiscal year ended October 31, 2024[160][161] - No material changes to the previously disclosed risk factors have occurred[161] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the Company's share repurchase program, noting that $163.6 million remains authorized under the $1.0 billion program as of July 31, 2025, and 724.2 thousand shares were repurchased for an average price of $73.51 per share during the three months ended July 31, 2025 - As of July 31, 2025, $163.6 million remains authorized for repurchase under the $1.0 billion 2012 Share Repurchase Program[162] Share Repurchases (Three Months Ended July 31, 2025) | Period | Total shares purchased (thousands) | Average price paid per share | | :--- | :--- | :--- | | June 1, 2025 to June 30, 2025 | 237.0 | $69.65 | | July 1, 2025 to July 31, 2025 | 487.2 | $73.10 | | Total | 724.2 | $73.51 | Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[163] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[164] Item 5. Other Information This section reports that no director or officer of the Company adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2025 - No director or officer adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended July 31, 2025[165] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL formatted financial statements and notes - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and Inline XBRL formatted financial statements and notes (101.1, 104.1)[167]