Cooper Companies, Inc. (The) (COO)

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The Cooper Companies, Inc. (COO)

Q4 2008 Earnings Call

December 9, 2008 5:00 pm ET

Executives

Albert White – VP IR

Robert Weiss – CEO

Eugene Midlock – SVP & CFO

Analysts

Joanne Wuensch - BMO Capital Markets

Michael Weinstein – JPMorgan

Steven Willoughby – Cleveland Research

Jared Holt – Thomas Weisel Partners

Peter Bye – Jefferies & Company

Larry Biegelsen - Wachovia

Jeff Johnson – Robert W. Baird

Christopher Cooley - FTN Midwest Securities

Amit Bhalla – Citigroup

Presentation

Operator

Welcome to the Cooper Companies fourth quarter 2008 and fiscal year 2008 earnings conference call. (Operator Instructions) I would now like to turn the presentation over to Mr. Albert White, Vice President.

Albert White

Good afternoon and welcome to Cooper Companies fourth quarter and full year 2008 earnings conference call. I am Al White, Vice President, Treasurer, and Investor Relations and joining me on today’s call are Robert Weiss, Chief Executive Officer and Eugene Midlock, Chief Financial Officer.

Before we get started I would like to remind you that this conference call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including all revenue and earnings per share guidance and other statements regarding anticipated results of operations, market conditions, and planned product launches.

Forward-looking statements necessarily depend on assumptions, data, or other methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions as a company to differ materially from those described in forward-looking statements are set forth under the caption Forward-Looking Statements in today’s earnings release and are described in our SEC filings including the business section of Cooper’s Annual Report on Form 10-K. These are available publicly and on request from the company’s Investor Relations department.

Before I turn the call over to Robert let me comment on the agenda for the call. Robert will begin by providing some highlights on the quarter then get into specific details including new products, product launches, the market and guidance. Following Robert’s remarks Eugene Midlock will comment on the fourth quarter financial results. We will then open the call for questions.

We will keep the formal presentation to roughly 30 minutes followed by 30 minutes of Q&A, so the call will last one hour in total. We request that anyone asking question please limit yourself to one question so that we may be able to get to as many callers as possible in the allotted time. Should you have any additional questions following the call please call our Investors Relations line at 925-460-3663 and we will get back to you as soon as possible.

As a reminder this call is being recorded and a copy of the press release is available on our web site at www.coopercos.com under Investor Relations.

With that let me turn the call over to Robert for his opening remarks.

Robert Weiss

Thank you Albert and good afternoon ladies and gentlemen. I think probably the real caption here is in spite of the economy, in spite of the financial crisis, and in spite of a strengthening dollar, we had a great quarter.

In keeping with our most recent tradition we’re going to stay focused on trying to deliver a 30-minute presentation and 30 minutes of Q&A as Albert indicated. The key takeaways, the key messages that I hope you walk away from this call with are as follows.

A strong fourth quarter, the market was strong in spite of a dismal October. We continue our best in class rollouts trading up patients that are out there with Proclear 1 Day, with Avaira, and with Biofinity. We grew at 1.4x the market for the 12 months ended September 30 which is the most recent data.

In constant currency the market was up 7% and we were up 10% for the 12 months ended September 30th. Our gross margin hit 60% for the fourth quarter and in fact, CooperVision achieved 61%. Our earnings per share was $0.65 and importantly there were no callouts.

From a liquidity point of view, our liquidity is solid. We have $178 million of capacity and $138 million under our revolver as of October 31. Our fourth quarter operating cash flow was $41 million. Our free cash flow $18 million and we paid down debt of $23 million.

Our CapEx expansion program is winding down and we expect to have it substantially completed by mid-2009, by April.

New products are on track or ahead of schedule. Our Proclear 1 Day, we have approval in Japan and will launching it in calendar first quarter of 2009 which is slightly ahead of schedule. Biofinity toric will launch, its on track for the first calendar quarter of 2009 also.

A solid fourth quarter in spite of a weak October, we reported $269 million in revenue up 6% in actual and in constant currency. CooperVision reported $224 million, up 6% also actual and constant currency. CooperSurgical with revenue of $44.7 million was up 7%; all of that is organic growth.

Our earnings per share GAAP and non-GAAP were both $0.65 and once again we had no callouts. We did have a lower effective tax rate of only 11% which reflects a weak US market and strength outside the US in terms of profitability.

For the year recognizing this is the end of the year results, we broke through the $1 billion revenue barrier with $1.063 billion in revenue, up 12%, 8% in constant currency. For the year we reported GAAP net income of $65.5 million compared to $11 million loss in 2007, also GAAP.

For the year our GAAP earnings per share was $1.43 compared to $0.27 loss last year. On a non-GAAP basis our earnings per share was $2.26 this year compared to $2.12 last year.

As far as new products, in the Proclear family they continue to drive the top line. Biofinity revenue achieved $15 million for the quarter and remains at an annualized rate of $60 million. We today had adequate capacity. We’ve expanded the range of Biofinity to include the pluses and high minuses and we now have extended wear approval which we recently got this past week.

Avaira is gaining some momentum in the US in the two-week space. We will expand its range in Q1 fiscal 2009 with pluses and high minuses also. The production ramp up of Avaira has been excellent. The Puerto Rican high volume production is exceeding two million lenses a month and we continue to rollout fitting sets in excess of 9,000 at year-end so we’re over half the way to our targeted 17,000 fitting sets.

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