The Cooper Companies Inc. (COO) reported fiscal third-quarter results yesterday after market close. The company posted GAAP earnings of $21.9 million or 48 cents per share, compared to $17.9 million or 39 cents per share in the year-ago period. Excluding restructuring charges, pro forma earnings per share came in at 54 cents, which missed the Zacks Consensus Estimate by nearly 13%, or 8 cents.

Cooper manufactures and markets specialty healthcare products through its CooperVision and CooperSurgical units. CooperVision makes contact lenses to correct visual defects. 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., Australia and Spain.

The Pleasanton, CA-based company posted a 2% year-over-year growth in sales to $285.2 million. CooperVision unit’s revenue grew 2% year over year to $240.9 million driven by a 7% and 8% growth in multifocal and single-use spherical lenses respectively, partially offset by a 10% reduction in toric lenses. This division generated 44% of its revenues in the Americas, 38% in Europe and 18% in Asia-Pacific. Revenue from CooperSurgical grew 4% year over year to $44.3 million, primarily driven by 10% growth in hospital sales.

Last month, the company decided to close its Norfolk, VA facility for a 15-month period, citing excess capacity. The plant’s operations, which contributed about 7% towards annual lens production, will be relocated to existing facilities in the U.K. and Puerto Rico.

Cooper also said that it plans to transfer a portion of its Australian operations to U.K. These initiatives are expected to result in annual savings of about $14 million starting from 2011 and earnings improvements of about $7.5 million in fiscal 2011 and $15 million annually thereafter. The company will also record restructuring charges of about $25 million spread over the current fiscal year and the next.

Meanwhile, gross profit during the quarter declined 5.6% year over year to $146.4 million, while gross margin fell 440 basis points (bps) to 51.3%. The reduction in margin was attributable to manufacturing reorganization due to the plant closure at Norfolk, unfavorable currency translation and idle equipment on account of management’s decision to reduce inventories.

Operating expenses, as a percentage of revenue, fell 510 bps year over year to 39.4% mainly due to across-the-board cost-cutting initiatives, including workforce reduction. Accordingly, operating income expanded 9.3% year over year to $33.9 million, while operating margin rose 70 bps to 11.9%.

During the quarter, Cooper generated $76 million of cash from operations and deployed $20 million towards capital expenditure, which resulted in a free cash flow of $56 million. The solid cash flow helped the company to reduce its debt-to-capitalization ratio to 36% from 40% at the end of January this year.

Moving forward, management now expects earnings for fiscal 2009 to range between $2.11 and $2.13 per share on revenues of $1.07 billion to $1.08 billion, compared to the earlier prediction of $2.16 to $2.36 per share on sales of $1.03 billion to $1.1 billion. Excluding restructuring expenses, the company anticipates earnings of $2.27 to $2.29 per share, which is below the Zacks Consensus Estimate of $2.30 per share derived from 8 covering analysts.

The company also stated that it expects free cash flow of $22 million to $32 million during the fiscal fourth quarter and $93 million to $103 million for the entire fiscal year.
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