The Cooper Companies Inc. (COO) posted fiscal 2010 second-quarter results after the closing bell on Thursday. The company’s GAAP earnings slipped to $4.5 million from $24.6 million in the prior year period. However, excluding special items, adjusted earnings came in at 61 cents per share, which matched the Zacks Consensus Estimate and the year-ago result.
Cooper manufactures and markets specialty healthcare products through its CooperVision and CooperSurgical units. CooperVision makes contact lenses to correct visual defects, specializing in toric lenses that correct astigmatism. The company also produces conventional toric and spherical lenses and lenses for patients with more complex vision disorders. CooperSurgical markets diagnostic products, surgical instruments and accessories to the women’s healthcare market. The company has manufacturing facilities in the U.S., U.K. and Australia.
Revenue
During the quarter, Cooper’s sales grew 11% to $289.3 million from $260.6 million in the year-ago period. CooperVision segment’s revenue expanded 11% year-over-year to $242.3 million mainly driven by a 23% and 18% growth in toric and single-use spherical lenses, respectively. This division generated 45% of its revenues in the Americas, 36% in Europe, Middle East and Africa (EMEA) and 19% in Asia Pacific. Revenue from CooperSurgical segment recorded a growth of 10% year-over-year to $47.0 million mainly due to a 19% growth in hospital sales.
Gross profit grew 9.7% year-over-year to $163.5 million, while gross margin declined 70 basis points (bps) to 56.5%. The lower margin was primarily attributable to increased costs related to 2009 CooperVision restructuring plan.
Operating expenses rose 15.6% year-over-year to $124.5 million mainly due to higher selling, general and administrative expense, partially offset by lower research and development expense. Lower gross margin and increased operating expenses more than offset higher sales. Consequently, Cooper recorded a 5.3% year-over-year decline in operating income to $39.0 million, while operating margin dipped by 230 bps year-over-year to 13.5%.
Balance Sheet & Cash Flow
Cooper ended the quarter with cash and cash equivalents of $9.8 million, compared to $4.5 million in the year-ago period. Long-term debt-to-capitalization ratio at quarter-end was 31.2%, compared to 37.3% in the prior year quarter. During the quarter, the company generated $71.6 million of cash from operations and utilized $11.2 million towards capital expenditure, resulting in a free cash flow of $60.4 million.
Guidance and Zacks Consensus
Looking ahead, Cooper now expects fiscal 2010 adjusted earnings to range from $2.50 to $2.60 per share on revenues of $1.1 billion to $1.2 billion, compared to $2.45 to $2.55 per share predicted earlier. The guidance remains in line with the Zacks Consensus Estimate of $2.55 per share, derived from 4 covering analysts, which moved up 2 cents over the past month. Cooper also said that it now expects free cash flow of $140 million to $160 million, compared to $130 million to $150 million announced earlier.
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