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The Cooper Companies (COO)
December 8, 2011 5:00 p.m. ET
Bob Weiss - President and CEO
Gene Midlock - Senior VP and CFO
Al White - VP of Investor Relations, Treasurer, and Chief Strategic Officer
Larry Keusch - Morgan Keegan
Jeff Johnson - Robert W. Baird
Chris Cooley - Stephens Incorporated
Matthew O'Brien - William Blair
Larry Biegelsen - Wells Fargo
Joanne Wuensch - BMO Capital Markets
Anthony Patron - Jefferies
Kim Gailun - JPMorgan
Steve Willoughby - Cleveland Research
Adam - Citigroup
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Good afternoon, and welcome to the Cooper Companies fourth quarter and full year 2011 earnings conference call. I’m Kim Duncan, director of investor relations, and joining me on today’s call are Bob Weiss, president and chief executive officer; Gene Midlock, senior vice president and chief financial officer; and Al White, VP, investor relations, treasurer, and chief strategic officer.
Before we get started, I’d like to remind you that this conference call continues 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 integration of any acquisitions.
Forward looking statements necessarily depend on assumptions, data, or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the 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 publicly available and on request from the company's Investor Relations department.
Now, before I turn the call over to Bob, let me comment on the agenda for the call. Bob will begin by providing highlights of the quarter, followed by Gene, who will then discuss the fourth quarter and full year financial results. We will keep the formal presentation to roughly 30 minutes, then open up the call for questions. We expect the call to last approximately one hour.
We request that anyone asking questions please limit yourself to one question. Should you have any additional questions, please call our investor line at 925-460-3663 or e-mail IR@coopercos.com. As a reminder, this call is being webcast and a copy of the earnings release is available through the Investor Relations section of The Cooper Companies website.
And with that, I'll turn the call over to Bob for his opening remarks.
Thank you Kim, and good afternoon, good evening to everyone. Another great quarter here at Cooper. Aside from the Avaira recall, the momentum continues. For the fourth fiscal quarter, we put up stellar top line growth, up 15%, 12% in constant currency. We delivered $361 million in revenue. Excluding the Avaira recall impact, our gross margin was 63%. Strong top line, solid margins, lower interest expense lifted our non-GAAP earnings per share 34% to $1.46.
GAAP earnings per share was $1.15, hurdling the recall’s $1 million charge that we took in the fourth quarter and a settlement of a patent claim for $10 million in aggregate. Then we had an outstanding cash flow quarter generating over $78 million of free cash flow and reducing our debt-to-cap to 16%.
The key takeaways for today’s call: We again put up great results, with strong revenue growth, good margins, favorable impact from lowering interest expense and a great bottom line. The impact of our launches of Biofinity Multifocal globally and Biofinity into Japan helped continue our silicone hydrogel momentum, which fueled our double digit results.
Our $78 million of free cash flow allowed us to continue to deleverage, with debt-to-cap now only 16%. Today our debt, at $380 million, is down 58% versus the $900 million it was in January of 2009. We’ve done this while continuing to invest in sales force expansion, R&D, and acquisitions.
Without giving away too much competitive information, our sales force expansion was about 25% this past year. Our sales force expansion reflects our strategy to get more feet on the street and cover a greater amount of geographic coverage worldwide. We have the products, we have the capacity. Why not test our geographic strength?
Our silicone hydrogel family is driving growth. During the fourth quarter the family achieved $103 million in revenues. That’s 39% constant currency increase versus the prior year’s fourth quarter. Silicone hydrogel are now 34% of CooperVision’s revenue.
We continue to feel positive about the future of our silicone hydrogel sales, driven by multiple factors including the recent success of our Biofinity Multifocal launch in the $150 million silicone hydrogel multifocal market and the launch of Biofinity sphere in Japan in the $400 million silicon hydrogel market.
To update you on the progress with respect to our Avaira recall, let me touch on several points. We believe the situation has been fully addressed, and no further expansion of the recall will be required. We are working closely with the FDA and other global regulatory agencies to complete the recall as quickly as possible.
We have completed contacting our customers for the Avaira Toric recall and are in the final stages of product recovery. Initial notifications have been sent to our customers for the Avaira Sphere recall and follow up activities are ongoing. We are continuing to ship Avaira Sphere and we are optimistic that we’ll be able to relaunch Toric in the April timeframe.