What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-09 compared with 2021-12-10 · 458 added, 681 removed, 773 unchanged (60% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

The Cooper Companies, Inc.:

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Cooper Companies, Inc., acquired Generate Life Sciences (Generate) on December 17, 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2022, Generate’s internal control over financial reporting associated with total assets of $2.1 billion and total revenues of $ 249.5 million included in the consolidated financial statements of the Company as of and for the year ended October 31, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Generate.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

THE COOPER COMPANIES, INC.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and

THE COOPER COMPANIES, INC.

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procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair value of intangible assets used to recognize a deferred tax asset

As discussed in Note 6 to the consolidated financial statements, the Company completed an intra-group transfer of certain intellectual property and related assets of the CooperVision business to a United Kingdom subsidiary during the year ended October 31, 2021.

As a result of the transfer, the Company recognized a deferred tax asset of $1,987.9 million, with a corresponding income tax benefit, based on the fair value of the transferred intangible assets.

We identified the evaluation of the fair value of the transferred intangible assets used to recognize the deferred tax asset as a critical audit matter.

A high degree of challenging auditor judgment was required to evaluate certain assumptions made by the Company in estimating the fair value of the intangible assets.

These assumptions included the near-term revenue growth rates, discount rate, and operating margin assumptions.

THE COOPER COMPANIES, INC.

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Fair value of acquired customer relationships intangible asset

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company consummated the acquisition of Generate Life Sciences (Generate) for $ 1.663 billion during the year ended October 31, 2022.

The acquisition-date fair value of Generate’s customer relationships intangible assets was $ 718.3 million, which included a customer relationships intangible asset related to newborn stem cell storage contracts (stem cell customer relationships intangible asset).

We identified the evaluation of the acquisition-date fair value of the stem cell customer relationships intangible asset in the acquisition of Generate as a critical audit matter.

We performed sensitivity analyses to determine the key assumptions used to value the stem cell customer relationships intangible asset which required challenging auditor judgment.

The fair value of the acquired intangible assets were sensitive to possible changes in the forecasted revenue and discount rate assumptions, requiring a high degree of auditor judgment and the assistance of valuation professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to estimate the fair value of the intangible assets.

This included controls related to the development of the near-term revenue growth rates, discount rate, and operating margin assumptions.

We evaluated the reasonableness of the near-term revenue growth rates by comparing them to historical results and third-party analyst expectations for the industry.

We involved valuation professionals with specialized skills and knowledge, who assisted in (1) evaluating the discount rate by comparing it to a discount rate range that was independently developed using publicly available market data for comparable companies in the industry, and (2) evaluating the operating margin assumptions by comparing them to margins earned by comparable companies in the industry.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls over the development of the key assumptions identified above.

We evaluated forecasted revenue by comparing it to the historical performance of peer companies, the Company and the acquired business.

We also assessed the Company’s ability to accurately forecast by comparing forecasted revenue of the acquired business to actual results since the acquisition date.

We involved valuation professionals with specialized skills and knowledge, who assisted in (1) evaluating the discount rate by comparing it against a discount rate range that was independently developed based on publicly available market data for comparable entities, and (2) developing a fair value estimate of the stem cell customer relationships intangible asset using the Company’s cash flow projections and independently developed range of discount rates and comparing it to the Company’s estimate.

We have served as the Company’s auditor since 1982.

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Amortization of intangibles 179.5 146.1 137.2

Impairment of intangibles — — 0.4

Gain on sale of an intangible — — ( 19.0 )

Operating income 507.6 505.8 311.8

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Net income $ 385.8 $ 2,944.7 $ 238.4

Net income attributable to Cooper stockholders $ 2,944.7 $ 238.4 $ 466.7

Earnings per share (Note 7)

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Net income $ 385.8 $ 2,944.7 $ 238.4

Other comprehensive income (loss):

Cash flow hedges, net of tax provision of $ 8.2 and $( 4.1 ) in fiscal 2021 and fiscal 2020, respectively

Other comprehensive (loss) income:

Cash flow hedges, net of tax of $ 26.1 , $ 8.2 and $( 4.1 ), respectively

81.3 26.1 ( 13.0 )

Change in minimum pension liability, net of tax provision of $ 7.2 , $( 4.0 ) and $( 8.0 ), respectively

Change in minimum pension liability, net of tax of $ 8.7 , $ 7.2 and $( 4.0 ), respectively

27.9 22.6 ( 12.8 )

Foreign currency translation adjustment ( 234.7 ) 82.0 0.9

Other comprehensive income (loss) 130.7 ( 24.9 ) ( 16.4 )

Other comprehensive (loss) income ( 125.5 ) 130.7 ( 24.9 )

Comprehensive income $ 260.3 $ 3,075.4 $ 213.5

Comprehensive income attributable to Cooper stockholders $ 3,075.4 $ 213.5 $ 450.3

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Cash and cash equivalents $ 138.2 $ 95.9

Trade accounts receivable, net of allowance for doubtful accounts of $ 9.2 at October 31, 2021 and $ 10.2 at October 31, 2020

Trade accounts receivable, net of allowance for credit losses of $ 20.7 at October 31, 2022 and $ 9.2 at October 31, 2021

Inventories (Note 1) 628.7 585.6

Prepaid expense and other current assets 208.9 179.3

Assets held-for-sale (Note 3) 89.2 —

Assets held-for-sale — 89.2

Total current assets 1,533.6 1,465.3

Property, plant and equipment, at cost (Note 1) 2,655.7 2,474.8

accumulated depreciation and amortization 1,308.1 1,192.9

1,347.6 1,281.9

Operating lease right-of-use assets (Note 2) 257.0 260.2

Property, plant and equipment, net 1,432.9 1,347.6

Goodwill (Note 4) 3,609.7 2,574.0

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Employee compensation and benefits 152.1 148.7

Operating lease liabilities (Note 2) 35.7 33.3

Deferred revenue 93.6 19.0

Other current liabilities 373.1 317.9

Liabilities held-for-sale (Note 3) 1.7 —

Liabilities held-for-sale — 1.7

Total current liabilities 1,280.2 732.1

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Long-term tax payable 113.2 139.6

Operating lease liabilities (Note 2) 231.7 236.8

Deferred revenue 198.3 $ 0.1

Accrued pension liability and other 225.2 370.7

Total liabilities $ 4,317.6 $ 2,664.2

Contingencies (see Note 12)

Contingencies (Note 12)

Stockholders’ equity:

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Accumulated other comprehensive loss ( 466.8 ) ( 341.3 )

(In millions)

Retained earnings 6,584.9 6,202.1

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Balance at October 31, 2019 49.1 $ 4.9 4.1 $ 0.4 $ 1,615.0 $ ( 447.1 ) $ 3,026.4 $ ( 571.2 ) $ 0.2 $ 3,628.6

Net income attributable to Cooper stockholders — — — — — — 466.7 — — 466.7

Net income — — — — — — 238.4 — — 238.4

Other comprehensive loss, net of tax — — — — — ( 24.9 ) — — — ( 24.9 )

Issuance of common stock for stock plans, net 0.4 — — — 7.8 — — — — 7.8

Issuance of common stock for stock plans, net and employee stock purchase plan 0.2 — — — ( 5.0 ) — — 1.7 — ( 3.3 )

Treasury stock repurchase ( 0.2 ) — 0.2 — — — — ( 47.8 ) — ( 47.8 )

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Share-based compensation expense — — — — 36.8 — — — — 36.8

ASU 2016-16 adoption — — — — — — ( 13.3 ) — — ( 13.3 )

Balance at October 31, 2020 49.1 $ 4.9 4.3 $ 0.4 $ 1,646.8 $ ( 472.0 ) $ 3,261.8 $ ( 617.3 ) $ 0.2 $ 3,824.8

Net income attributable to Cooper stockholders — — — — — — 238.4 — — 238.4

Other comprehensive loss, net of tax — — — — — ( 24.9 ) — — — ( 24.9 )

Issuance of common stock for stock plans, net 0.2 — — — ( 6.8 ) — — — — ( 6.8 )

Issuance of common stock for employee stock purchase plan — — — — 1.8 — — 1.7 — 3.5

Net income — — — — — — 2,944.7 — — 2,944.7

Other comprehensive income, net of tax — — — — — 130.7 — — — 130.7

Issuance of common stock for stock plans, net and employee stock purchase plan 0.3 0.1 — — 24.6 — — 2.5 $ — 27.2

Treasury stock repurchase ( 0.1 ) — 0.1 — — — — ( 24.8 ) — ( 24.8 )

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Share-based compensation expense — — — — 43.8 — — — — 43.8

ASU 2016-13 adoption — — — — — — ( 1.4 ) — — ( 1.4 )

Balance at October 31, 2021 49.3 $ 5.0 4.4 $ 0.4 $ 1,715.2 $ ( 341.3 ) $ 6,202.1 $ ( 639.6 ) $ 0.2 $ 6,942.0

Net income attributable to Cooper stockholders — — — — — — 2,944.7 — — 2,944.7

Net income — — — — — — 385.8 — — 385.8

Other comprehensive income, net of tax — — — — — ( 125.5 ) — — — ( 125.5 )

Issuance of common stock for stock plans, net 0.3 0.1 — — 20.4 — — — — 20.5

Issuance of common stock for employee stock purchase plan — — — — 4.2 — — 2.5 — 6.7

Issuance of common stock for stock plans, net and employee stock purchase plan 0.1 — — — ( 2.1 ) — — 3.6 — 1.5

Treasury stock repurchase ( 0.1 ) — 0.1 — — — — ( 78.5 ) — ( 78.5 )

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Share-based compensation expense — — — — 52.4 — — — — 52.4

ASU 2016-13 adoption — — — — — — ( 1.4 ) — — ( 1.4 )

Balance at October 31, 2022 49.3 $ 5.0 4.5 $ 0.4 $ 1,765.5 $ ( 466.8 ) $ 6,584.9 $ ( 714.5 ) $ 0.2 $ 7,174.7

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Impairment of intangibles 2.3 — —

Gain on sale of an intangible — — ( 19.0 )

Share-based compensation expense 54.2 43.8 37.6

Inventory step-up release 2.0 — 0.1

Non-cash operating lease expense 32.2 31.8 32.5

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Deferred income taxes 53.9 ( 2,502.2 ) ( 0.9 )

Provision for doubtful accounts ( 2.5 ) ( 6.2 ) ( 2.6 )

Cloud computing arrangements cost amortization 2.0 0.5 —

Interest income on convertible note ( 3.4 ) ( 1.0 ) —

Change in assets and liabilities:

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Other long-term liabilities ( 34.2 ) ( 21.7 ) ( 12.4 )

Settlement of contingent consideration ( 52.3 ) — —

Net cash provided by operating activities 692.4 738.6 486.6

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Purchases of property, plant and equipment ( 242.0 ) ( 214.4 ) ( 310.4 )

Acquisitions of businesses and assets, net of cash acquired, and other ( 235.9 ) ( 54.1 ) ( 59.2 )

Acquisitions of businesses and assets, net of cash acquired ( 1,641.3 ) ( 235.9 ) ( 54.1 )

Proceeds from sale of interest in a subsidiary 52.1 — —

Net cash used in investing activities ( 1,831.2 ) ( 450.3 ) ( 364.5 )

Cash flows from financing activities:

Proceeds from long-term debt 1,427.5 3,205.4 1,136.8

Proceeds from long-term debt, net of issuance costs 1,511.0 1,427.4 3,199.8

Repayments of long-term debt ( 561.5 ) ( 1,416.0 ) ( 3,235.9 )

Net (repayments of) proceeds from short-term debt ( 321.3 ) ( 6.6 ) 525.3

Net proceeds from (repayments of) short-term debt, other 329.3 ( 321.3 ) ( 4.5 )

Repurchase of common stock ( 78.5 ) ( 24.8 ) ( 47.8 )

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Issuance of common stock for employee stock purchase plan 7.2 5.8 2.7

Debt acquisition costs ( 0.1 ) ( 5.6 ) ( 0.4 )

Proceeds from construction allowance — 2.1 —

Years Ended October 31,

(In millions) 2021 2020 2019

Net cash used in financing activities ( 311.4 ) ( 95.5 ) ( 351.4 )

Settlement of contingent consideration ( 2.9 ) — —

Net cash provided by (used in) financing activities 1,193.7 ( 311.4 ) ( 95.5 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 12.9 ) 2.9 0.7

Net (decrease) increase in cash, cash equivalents, restricted cash and cash held for sale ( 20.2 ) 27.3 9.3

Cash, cash equivalents and restricted cash at beginning of year 116.8 89.5 80.2

Cash, cash equivalents, restricted cash and cash held for sale at end of year $ 96.6 $ 116.8 $ 89.5

Net increase (decrease) in cash, cash equivalents and restricted cash 42.0 ( 20.2 ) 27.3

Cash, cash equivalents, restricted cash and cash held for sale at beginning of year 96.6 116.8 89.5

Cash, cash equivalents and restricted cash at end of year $ 138.6 $ 96.6 $ 116.8

Supplemental disclosures of cash flow information:

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Interest $ 49.1 $ 28.4 $ 46.5

Years Ended October 31,

(In millions)

2022 2021 2020

Income taxes $ 66.6 $ 63.2 $ 51.1

Operating lease liabilities $ 45.3 $ 37.4 $ 40.6

Operating lease ROU assets obtained in exchange for lease obligations $ 29.8 $ 26.5 $ 17.7

Reconciliation of cash flow information:

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Notes to Consolidated Financial Statements

Accounting Policies

Organization and Significant Accounting Policies

The Cooper Companies, Inc.

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• CooperSurgical primarily develops, manufactures, markets medical devices and procedures solutions, and provides services to improve health care delivery to women, babies and families.

The World Health Organization categorized the Coronavirus disease 2019 (COVID-19) as a pandemic.

The COVID-19 pandemic has caused a severe global health crisis, along with economic and societal disruptions and uncertainties, which have negatively impacted business and healthcare activity globally.

As a result of healthcare systems responding to the demands of managing the pandemic, governments around the world imposing measures designed to reduce the transmission of the COVID-19 virus, and individuals responding to the concerns of contracting the COVID-19 virus, many optical practitioners & retailers, hospitals, medical offices and fertility clinics closed their facilities, restricted access, or delayed or canceled patient visits, exams and elective medical procedures, and many customers that have reopened are experiencing reduced patient visits.

These factors have had, and in the future may have, an adverse effect on our sales, operating results and cash flows.

Principles of Consolidation

The financial statements in this report include the results of all of Cooper's consolidated entities.

All significant intercompany transactions and balances are eliminated on consolidation.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of net sales and expenses during the reporting period.

Actual results could differ from those estimates particularly as it relates to estimates reliant on forecasts and other assumptions reasonably available to the Company and the uncertain future impacts of the COVID-19 pandemic and related economic disruptions.

The extent to which the COVID-19 pandemic and related economic disruptions impact our business and financial results will depend on future developments including, but not limited to, the continued spread, duration and severity of the COVID-19 pandemic;

the occurrence, spread, duration and severity of any subsequent wave or waves of outbreaks, including the emergence and spread of variants of the COVID-19 virus;

the actions taken by the U.S.

and foreign governments to contain the COVID-19 pandemic, address its impact or respond to the reduction in global and local economic activity;

the occurrence, duration and severity of a global, regional or national recession, depression or other sustained adverse market event;

the impact of the developments described above on our customers and suppliers;

and how quickly and to what extent normal economic and operating conditions can resume.

The accounting matters assessed included, but were not limited to:

• allowance for doubtful accounts and credit losses

• the carrying value of inventory

• the carrying value of goodwill and other long-lived assets

There was not a material impact to the above estimates in the Company’s Consolidated Financial Statements for fiscal 2021.

Actual results could differ from those estimates.

In particular, the COVID-19 pandemic negatively impacted business and healthcare activity globally.

As a result of healthcare systems responding to the demands of managing the pandemic, governments around the world imposing measures designed to reduce the transmission of the COVID-19 virus, and individuals responding to the concerns of contracting the COVID-19 virus, many optical practitioners and retailers, hospitals, medical offices and fertility clinics closed their facilities, restricted access, or delayed or canceled patient visits, exams and elective medical procedures, and many customers that have reopened are experiencing reduced patient visits.

These factors have had, and in the future may have, an adverse effect on our sales, operating results and cash flows.

The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations, and financial condition, including sales, expenses, manufacturing, clinical trials, research and development costs, reserves and allowances, fair value measurements, asset impairment charges, contingent consideration obligations, and the effectiveness of the Company's hedging instruments, will depend on future developments that are highly uncertain and difficult to predict.

These developments include, but are not limited to, the duration and spread of the outbreak (including new and more contagious variants of COVID-19), its severity, the actions to contain the virus or address its impact, the timing, distribution, public acceptance and efficacy of vaccines and other treatments, United States and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

There was not a material impact to the estimates in the Company’s Consolidated Financial Statements for fiscal 2022.

The Company continually monitors and evaluates the estimates used as additional information becomes available.

Adjustments will be made to these provisions periodically to reflect new facts and circumstances that may indicate that historical experience may not be indicative of current and/or future results.

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

factors, could result in material changes to the estimates and material impacts to the Company’s Consolidated Financial Statements in future reporting periods.

Significant Accounting Policies

Management's significant accounting policies include estimates and judgments which are an integral part of financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP).

We believe that the accounting policies described in this section address the more significant policies utilized by management when preparing our consolidated financial statements in accordance with GAAP.

We believe that the accounting policies and estimates employed are appropriate and resulting balances are reasonable;

however, actual results could differ from the original estimates, requiring adjustment to these balances in future periods.

The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most important to aid in fully understanding and evaluating our reported financial results are:

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material changes to the estimates and material impacts to the Company’s Consolidated Financial Statements in future reporting periods.

Revenue recognition

The Company sells its products principally to a limited number of distributors, group purchasing organizations, eye care or health care professionals including independent practices, corporate retailers, hospitals and clinics or authorized resellers (collectively, its Customers).

These Customers subsequently resell the Company’s products to eye care or health care providers and patients.

These Customers may subsequently resell the Company’s products to eye care or health care providers and patients.

In addition to product supply and distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be contracts with a customer.

In situations where sales are to a distributor, the Company has concluded that its contracts are with the distributor.

The Company considers purchase orders, which in some cases are governed by master sales agreements, to be contracts with a customer.

As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk).

For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

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Notes to Consolidated Financial Statements

Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon shipment or delivery to the Customer.

When the Company performs shipping and handling activities after the transfer of control to the Customer (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.

Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.

The Company does not have any revenue recognized on payment expected to be received more than one year after the transfer of control of the products.

The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less.

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These reserves are based on the amounts earned or to be claimed on the related sales and are classified primarily in current liabilities.

Variable consideration is estimated based on the most likely amount or expected value approach, depending on which method the

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Notes to Consolidated Financial Statements

Company expects to better predict the amount of consideration to which it will be entitled.

Variable consideration is estimated based on the most likely amount or expected value approach, depending on which method the Company expects to better predict the amount of consideration to which it will be entitled.

Once the Company elects one of the methods to estimate variable consideration for a particular type of performance obligation, the Company applies that method consistently.

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Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances

The Company generally provides Customers with discounts, which include incentive fees that are stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.

In addition, the Company receives sales order management, data and distribution services from certain Customers.

To the extent the services received are distinct from the Company’s sale of products to the Customer and have readily determinable fair value, these payments are classified in selling, general and administrative expenses in our Consolidated Statements of Income.

Product Returns

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The Company estimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

There is inherent judgment in estimating future refunds as they are susceptible to factors outside of our influence.

However, we have significant experience in estimating the amount of refunds, based primarily on historical data.

Historically, returns have been infrequent and insignificant relative to our total sales.

Our refund liability for product returns was $ 14.5 million and $ 13.7 million at October 31, 2022 and 2021, respectively, which is included in Accrued Liabilities on our Consolidated Balance Sheets and represents the expected value of the aggregate refunds that will be due to our customers.

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CooperSurgical rebates are predominately related to the Medicaid rebate provision that is estimated based upon contractual terms, historical experience, and trend analysis.

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Notes to Consolidated Financial Statements

Contract balances

The timing of billing and revenue recognition primarily occurs simultaneously.

The Company does not have material contract assets or liabilities.

• Leases - We consider an arrangement a lease if the arrangement transfers the right to control the use of an identified asset in exchange for consideration.

We have operating leases, but do not have material financing leases.

Lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement.

These assets and liabilities are recognized at the commencement of the lease based upon the present value of the future minimum lease payments over the lease term.

The lease term reflects the noncancellable period of the lease together with periods covered by an option to extend or terminate the lease when management is reasonably certain that it will exercise such option.

Changes in the lease term assumption could impact the right-of-use assets and lease liabilities recognized on the Consolidated Balance Sheets.

As our leases typically do not contain a readily determinable implicit rate, we determine the present value of the lease liability using our incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis.

• Net realizable value of inventory - In assessing the value of inventories, we make estimates and judgments regarding aging of inventories and other relevant issues potentially affecting the salable condition of products and estimated prices at which those products will sell.

On an ongoing basis, we review the carrying value of our inventory, measuring number of months on hand and other indications of salability.

We reduce the value of inventory if there are indications that the carrying value is greater than net realizable value, resulting in a new, lower-cost basis for that inventory.

Subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

While estimates are involved, historically, obsolescence has not been a significant factor due to long product dating and lengthy product life cycles.

• Valuation of goodwill - We evaluate goodwill for impairment annually during the fiscal third quarter and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.

We account for goodwill and evaluate our goodwill balances and test them for impairment in accordance with related accounting standards.

We performed our annual impairment test in our third quarter of fiscal 2021 and 2020, and our analysis indicated that we had no impairment of goodwill in our reporting units.

Goodwill impairment analysis and measurement is a process that requires significant judgment.

If our common stock price trades below book value per share, there are changes in market conditions or a future downturn in our business, or a future goodwill impairment test indicates an impairment of our goodwill, we may have to recognize a non-cash impairment of goodwill that could be material and could adversely affect our results of operations in the period recognized and also adversely affect our total assets and stockholders' equity.

We test goodwill impairment in accordance with ASU 2017-04, Intangibles - Goodwill and other (Topic 350):

Simplifying the Test for Goodwill Impairment .

We perform a qualitative assessment to test each reporting unit's goodwill for impairment.

Qualitative factors considered in this assessment include industry and market considerations, overall financial performance and other relevant events and factors affecting each reporting unit.

Based on our qualitative assessment, if we determine that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value of the reporting unit.

A reporting unit is the level of reporting at which goodwill is tested for impairment.

• Business combinations - We routinely consummate business combinations.

Results of operations for acquired companies are included in our consolidated results of operations from the date of acquisition.

Contract Liabilities

Deferred revenue primarily represents prepaid stem cell storage as part of the CooperSurgical business unit.

Revenue related to stem cell storage is recognized over the service period, which can range from one year to the lifetime of a customer.

Share-Based Compensation

We grant various share-based compensation awards, including stock options, performance unit shares, restricted stock and restricted stock units.

The Company accounts for share-based compensation expense based on estimated grant-date fair value, and expenses the amount over the vesting period of the award.

Determining the fair value of share-based awards at the grant date requires judgment, including estimating Cooper's stock price volatility, employee exercise behaviors and related employee forfeiture rates.

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

We recognize separately from goodwill, the identifiable assets acquired, including acquired in-process research and development, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date fair values as defined by accounting standards related to fair value measurements.

Key assumptions routinely utilized in allocation of purchase price to intangible assets include projected financial information such as revenue projections for companies acquired.

As of the acquisition date, goodwill is measured as the excess of consideration given, over the net of the acquisition date fair values of the identifiable assets acquired and the liabilities assumed.

Direct acquisition costs are expensed as incurred.

• Income taxes - We account for income taxes under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As part of the process of preparing our consolidated financial statements, we must estimate our income tax expense for each of the jurisdictions in which we operate.

This process requires significant management judgments and involves estimating our current tax exposures in each jurisdiction including the impact, if any, of additional taxes resulting from tax examinations as well as judging the recoverability of deferred tax assets.

To the extent recovery of deferred tax assets is not likely based on our estimation of future taxable income in each jurisdiction, a valuation allowance is established.

Tax exposures can involve complex issues and may require an extended period to resolve.

Frequent changes in tax laws in each jurisdiction complicate future estimates.

To determine the tax rate, we use the full-year income and the related income tax expense in each jurisdiction.

We update the estimated effective tax rate for the effect of significant unusual items as they are identified.

Changes in the geographic mix or estimated level of annual pre-tax income can affect the overall effective tax rate, and such changes could be material.

We file income tax returns in all jurisdictions in which we operate.

We record a liability for uncertain tax positions taken or expected to be taken in income tax returns that we have determined are not more-likely-than-not realizable.

Our financial statements reflect expected future tax consequences of such positions presuming the taxing authorities' full knowledge of the position and all relevant facts.

These tax reserves have been established based on management's assessment as to the potential exposure attributable to our uncertain tax positions as well as interest and penalties attributable to these uncertain tax positions.

All tax reserves are analyzed quarterly and adjustments are made as events occur that result in changes in judgment .

• Share-Based Compensation - We grant various share-based compensation awards, including stock options, performance unit shares, restricted stock and restricted stock units.

Under fair value recognition provisions, share-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.

The expected life of the share-based awards is based on the observed and expected time to post-vesting forfeiture and/or exercise.

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In determining the expected volatility, management considers implied volatility from publicly-traded options on Cooper's common stock at the date of grant, historical volatility and other factors.

The risk-free interest rate is based on the continuous rates

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Notes to Consolidated Financial Statements

provided by the United States Treasury with a term equal to the expected life of the award.

The risk-free interest rate is based on the continuous rates provided by the United States Treasury with a term equal to the expected life of the award.

The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant.

As share-based compensation expense recognized in our Consolidated Statements of Income is based on awards ultimately expected to vest, the amount of expense has been reduced for estimated forfeitures.

Forfeitures are estimated at the time of grant, based on historical experience, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

If factors change and we employ different assumptions in the application of the fair value recognition provisions, the compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

Accounting Pronouncements Recently Adopted

In January 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 .

This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities.

This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020.

Early adoption is permitted.

The Company early adopted this guidance in the second quarter of fiscal 2021, and it did not have a material impact on our Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance:

ASU 2018-19 Codification Improvements to Topic 326, Financial Instruments-Credit Losses , ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments , ASU 2019-05 Financial Instruments-Credit Losses , ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments—Credit Losses , ASU 2020-02 Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) and ASU 2020-03 Codification Improvements to Financial Instruments (collectively, “Topic 326”).

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

Topic 326 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019.

The Company adopted this guidance in the first quarter of fiscal 2021 on a modified retrospective basis, and the most notable impact was related to the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses.

The Company recorded a cumulative-effect adjustment of $ 1.4 million to the Consolidated Balance Sheets on November 1, 2020.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606.

This guidance amended Topic 808 and Topic 606 to clarify that transactions in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a distinct good or service (i.e., unit of account).

The amendments preclude an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction.

This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019.

The Company adopted this guidance on November 1, 2020, and it did not have a material impact on our Consolidated Financial Statements.

Accounting Pronouncements Issued Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for

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Income Taxes .

This guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law.

This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020.

Early adoption is permitted.

We are currently evaluating the impact of ASU 2019-12 on our Consolidated Financial Statements, which is effective for the Company in our fiscal year and interim periods beginning on November 1, 2021.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ( Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent amendment to the initial guidance:

ASU 2021-01, Reference Rate Reform (Topic 848):

Scope (collectively, “Topic 848”).

Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The guidance generally can be applied from March 12, 2020 through December 31, 2022.

We are currently assessing the impacts of the practical expedients provided in Topic 848 and which, if any, we will adopt.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) .

This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics.

This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, which means it will be effective for our fiscal year beginning November 1, 2022.

Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We are currently evaluating the impact of ASU 2020-06 on our Consolidated Financial Statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

This update requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers .

This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2022 and should be applied prospectively to business combinations occurring on or after the effective date of the standard.

Early adoption is permitted, including adoption in an interim period.

We are currently evaluating the impact of ASU 2021-08 on our Consolidated Financial Statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

This standard is effective for fiscal years beginning after December 15, 2021 and should be applied either prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact of ASU 2021-10 on our Consolidated Financial Statements.

No other recently issued accounting pronouncements had or are expected to have a material impact on our Consolidated Financial Statements.

Consolidation

The financial statements in this report include the accounts of all of Cooper's consolidated entities.

All significant intercompany transactions and balances are eliminated on consolidation.

Foreign Currency Translation

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We translate these assets and liabilities into United States dollars at year-end exchange rates.

We translate income

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and expense accounts at average rates for each month.

We translate income and expense accounts at average rates for each month.

We record gains and losses from the translation of financial statements in foreign currencies into United States dollars in other comprehensive income.

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We recorded in other expense and income a net foreign exchange loss of $ 22.0 million for fiscal 2022, $ 5.5 million for fiscal 2021 and $ 1.2 million for fiscal 2020.

We are subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business.

If we believe the likelihood of an adverse legal outcome is probable and the amount is estimable, we accrue a liability in accordance with accounting guidance for contingencies.

We consult with legal counsel on matters related to litigation and seek input both within and outside the Company.

Long-lived Assets

We review long-lived assets held and used, intangible assets with finite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If an evaluation of recoverability is required, the estimated undiscounted future cash flows associated with the asset group are compared to the asset group's carrying amount to determine if a write-down is required.

If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.

If management has committed to a plan to dispose of long-lived assets, the assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell.

CooperVision provides optometric practices with in-office lenses used in marketing programs to facilitate efficient and convenient fitting of contact lenses by practitioners.

Such lens fitting sets generally consist of a physical binder or rack to store contact lenses and an array of lenses.

We record the costs associated with the original fitting set to other long-term assets on our Consolidated Balance Sheets.

We amortize such costs over their estimated useful lives to selling, general and administrative expense on our Consolidated Statements of Income.

We also expense the cost for lenses provided to practitioners as replenishment for fitting sets in the period shipped to selling, general and administrative expense on our Consolidated Statements of Income.

Financial Derivatives and Hedging

Derivatives are recorded on the Consolidation Balance Sheets at fair value.

Accounting for gains or losses resulting from changes in the values of those derivatives depends on the use of the derivative instrument and whether it qualifies for hedge accounting.

The gain or loss on derivative instruments designated and qualifying for cash flow hedge accounting is deferred in other comprehensive income.

The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings.

Deferred gains or losses from designated cash flow hedges are reclassified into earnings in the period that the hedged interest expense affects earnings.

The effectiveness of cash flow hedges is assessed at inception and quarterly thereafter.

The Company does not offset fair value amounts recognized for derivative instruments in its Consolidated Balance Sheets for presentation purposes.

Fair Value Measurements

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value.

An asset’s or liability’s level is based on the lowest level of input that is significant to the fair value measurement.

Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs reflecting the reporting entity’s own assumptions.

The carrying value of cash and cash equivalents, accounts receivable, prepaid expense and other current assets, lines of credit, accounts payable and other current liabilities approximate fair value due to the short-term nature of such instruments and the ability to obtain financing on similar terms.

The carrying value of the Company's revolving credit facility and term loans approximates fair value based on current market rates (Level 2).

The fair value of the Company's interest rate swap contracts is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts.

The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The interest rate swap contracts were categorized as Level 2 in the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity.

The gain or loss on the derivatives is recorded as a component of accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Refer to Note 13.

Financial Derivatives and Hedging for further information.

The Company uses fair value measures when determining assets and liabilities acquired in an acquisition, which are considered a Level 3 measurement.

The fair value of the Company's contingent consideration for which a liability is recorded and the initial measurement of the joint venture interest are a Level 3 measurement , and the change in fair value is recognized in selling,

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Notes to Consolidated Financial Statements

general and administrative expense in the Consolidated Statements of Income.

Refer to Note 3.

Acquisitions and Joint Venture for further information.

Income taxes are estimated based on enacted income tax laws and the results of operations in each jurisdiction.

Deferred tax assets and liabilities are estimated based on temporary differences between the financial reporting basis and income tax basis of assets and liabilities.

Deferred tax assets are also estimated based on net operating loss and tax credit carryforwards.

Deferred tax assets are reduced by a valuation allowance to the extent it is more likely than not they are not expected to be realized.

Adjustments to deferred tax assets and liabilities due to changes in tax laws, changes in jurisdiction from intra-group transfers of assets, and changes in judgment regarding a valuation allowance are recognized in provision for income taxes in the quarter in which such changes occur.

Long-term tax payable is estimated income tax to be paid for unrecognized tax benefits.

A tax benefit is recognized if it is more likely than not a tax position will be sustained based on its technical merits in a tax authority examination, based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.

Adjustments to unrecognized tax benefits due to changes in judgment are recognized in provision for income taxes in the quarter in which such changes occur.

Interest and penalties related to unrecognized tax benefits are recognized in provision for income taxes.

Earnings Per Share

We determine basic earnings per share (EPS) by using the weighted average number of shares outstanding.

We determine diluted EPS by increasing the weighted average number of shares outstanding in the denominator by the number of outstanding dilutive equity awards using the treasury stock method.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid investments purchased with maturities of three months or less to be cash equivalents.

These investments are carried at cost, which approximates fair value.

Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost that approximates actual cost, on a first-in, first-out basis.

(In millions)

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$ 628.7 $ 585.6

Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost that approximates actual cost, on a first-in, first-out basis.

In assessing the value of inventories, we make estimates and judgments regarding aging of inventories and other relevant issues potentially affecting the salable condition of products and estimated prices at which those products will sell.

On an ongoing basis, we review the carrying value of our inventory, measuring number of months on hand and other indications of salability.

We reduce the value of inventory if there are indications that the carrying value is greater than net realizable value, resulting in a new, lower-cost basis for that inventory.

Subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

While estimates are involved, historically, obsolescence has not been a significant factor due to long product dating and lengthy product life cycles.

Property, Plant and Equipment

We record property, plant, and equipment at cost.

We compute depreciation expense using the straight-line method over the estimated useful lives of the assets.

Useful lives are generally 3 to 15 years except for buildings which are depreciated over 30 to 40 years and leasehold improvements, which we amortize over the shorter of the useful life or the lease term.

We charge maintenance and repairs to expense as we incur them.

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Notes to Consolidated Financial Statements

Property, Plant and Equipment

(In millions)

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Accumulated depreciation 1,387.2 1,308.1

Property, plant and equipment, net $ 1,413.7 $ 1,347.6

Finance lease ROU assets, net 19.2 —

$ 1,432.9 $ 1,347.6

Property, plant and equipment are stated at cost.

We compute depreciation using the straight-line method in amounts sufficient to write off depreciable assets over their estimated useful lives.

We amortize leasehold improvements over their estimated useful lives or the period of the related lease, whichever is shorter.

We depreciate buildings over 30 to 40 years and machinery and equipment over 3 to 15 years.

We expense costs for maintenance and repairs and capitalize major replacements, renewals and improvements.

We eliminate the cost and accumulated depreciation of depreciable assets retired or otherwise disposed of from the asset and accumulated depreciation accounts and reflect any gains or losses in operations for the period.

We had capitalized interest included in construction in progress of $ 7.8 million and $ 5.3 million for the years ended October 31, 2021 and 2020, respectively.

Earnings Per Share

We determine basic earnings per share (EPS) by using the weighted average number of shares outstanding.

We determine diluted EPS by increasing the weighted average number of shares outstanding in the denominator by the number of outstanding dilutive equity awards using the treasury stock method.

We consider an arrangement a lease if the arrangement transfers the right to control the use of an identified asset in exchange for consideration.

We have operating leases, but do not have material financing leases.

The Company primarily has operating leases for office, manufacturing and warehouse space, vehicles, and office equipment.

Lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement.

These assets and liabilities are recognized at the commencement of the lease based upon the present value of the future minimum lease payments over the lease term.

Changes in the lease term assumption could impact the right-of-use assets and lease liabilities recognized on the Consolidated Balance Sheets.

The Company’s operating leases typically include non-lease components such as common-area maintenance costs.

The Company has elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed.

Non-lease components that are not fixed are expensed as incurred as variable lease payments.

Leases with a term of one year or less are not recognized on the Consolidated Balance Sheets, while the associated lease payments are expensed in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.

Operating leases are classified in “Other current liabilities”, “Accrued pension liability and other”, and “Other assets” on our consolidated balance sheets.

Operating lease expense is recognized on a straight-line basis over the expected lease term and included in selling, general and administrative expenses in the Consolidated Statements of Income.

Financing leases are classified in "Property, plant and equipment", "Short-term debt", and "Long-term debt" on our consolidated balance sheets.

Operating Leases and Note 5.

Financing Arrangements for further information.

Cloud Computing Arrangements

The Company capitalizes certain costs related to the acquisition and development of internal use software, including implementation costs incurred in a cloud computing arrangement, during the application development stages of projects.

Capitalized implementation costs are amortized on a straight-line basis over the expected term of the hosting arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewals.

Costs incurred during the preliminary project or the post-implementation/operation stages of the project are expensed as incurred.

Implementation costs are included in “Other assets” in the Consolidated Balance Sheets.

Amortization of capitalized implementation costs is included in the same line item in the Consolidated Statements of Income as the expense for fees for the associated hosting arrangement.

Valuation of goodwill

We evaluate goodwill for impairment annually during the fiscal third quarter and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.

Goodwill is tested for impairment at the reporting unit level by performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.

We perform a qualitative assessment to test each reporting unit's goodwill for impairment, which

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includes industry and market considerations, overall financial performance and other relevant events and factors affecting each reporting unit.

Long-lived Assets

We review long-lived assets held and used, intangible assets with definite useful lives and assets held for sale for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If the undiscounted cash flows are less than the carrying amount, an impairment loss is recorded to the extent that the carrying amount exceeds the fair value.

If management has committed to a plan to dispose of long-lived assets, the assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell.

Indefinite-lived Intangible Assets

We assess indefinite-lived intangible assets annually in the third quarter of the fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of an indefinite-lived intangible asset (asset group) may not be recoverable.

We evaluate whether the indefinite-lived intangible asset is impaired by comparing its carrying value to its fair value.

If the carrying value of an indefinite-lived intangible asset is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value.

Business combinations

We routinely consummate business combinations.

Results of operations for acquired companies are included in our consolidated results of operations from the date of acquisition.

Key assumptions routinely utilized in allocation of purchase price to intangible assets include discount rates and projected financial information such as revenue projections for companies acquired.

Direct acquisition costs are expensed as incurred.

We are subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business.

If we believe the likelihood of an adverse legal outcome is probable and the amount is estimable, we accrue a liability in accordance with accounting guidance for contingencies.

We consult with legal counsel on matters related to litigation and seek input both within and outside the Company.

Treasury Stock

We record treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.

At October 31, 2021 and 2020, the number of shares in treasury was approximately 4.4 million and 4.3 million , respectively.

The Company purchased 70 thousand shares during the year ended October 31, 2021 and 161 thousand shares during the year ended October 31, 2020.

Stockholders' Equity for additional information on the share repurchase program.

The Company primarily has operating leases for office, manufacturing and warehouse space, vehicles, and office equipment.

The Company's leases expire on various dates between 2022 and 2045, some of which could include options to extend the lease.

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As these leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease's commencement date in determining the present value of lease payments.

The Company considers information including, but not limited to, the lease term, its credit rating and interest rates of similar debt instruments with comparable credit ratings and security interests.

The lease right-of-use assets are increased by any lease prepayments made and reduced by any lease incentives such as tenant improvement allowances.

Options to extend the lease term are included in the lease term when it is reasonably certain that the Company will exercise the extension option.

During the second quarter of fiscal 2022, the Company initiated a plan to exit its contact lens care business, a non-core business unit of the CooperVision segment.

We expect the exit activity to be substantially completed in the first half of fiscal 2023.

Exit charges recognized in the three and twelve months ended October 31, 2022, were $ 9.2 million and $ 33.2 million, of which $ 26.7 million is recognized in cost of sales and $ 6.5 million is recognized in selling, general, and administrative expense in the Consolidated Statements of Income.

Exit costs primarily related to inventory write-down, asset impairments and employee-related costs.

Total exit costs are expected to be in a range of $ 30.0 million to $ 40.0 million.

Accounting Pronouncements Recently Adopted

On November 1, 2021, we prospectively adopted ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers to the business combinations entered into during fiscal 2022.

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Notes to Consolidated Financial Statements

The Company’s operating leases typically include non-lease components such as common-area maintenance costs.

The Company has elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed.

Non-lease components that are not fixed are expensed as incurred as variable lease payments.

Leases with a term of one year or less are not recognized on the Consolidated Balance Sheets, while the associated lease payments are recorded in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term.

Commitments under finance lease arrangements of $ 2.0 million and $ 2.4 million as of October 31, 2021 and October 31, 2020, respectively, are not significant and are not included in the disclosure tables below.

Accounting Pronouncements Issued Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent amendment to the initial guidance:

ASU 2021-01, Reference Rate Reform (Topic 848) :

Scope (collectively, “Topic 848”).

Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The guidance generally can be applied from March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of ASU 2020-04 on the Consolidated Condensed Financial Statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

This standard is effective for fiscal years beginning after December 15, 2021, and should be applied either prospectively or retrospectively.

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2021-10 on the Consolidated Condensed Financial Statements.

No other recently issued accounting pronouncements had or are expected to have a material impact on our Consolidated Financial Statements.

Operating Leases

The following table presents information about leases on the Consolidated Balance Sheets:

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Weighted average discount rate 3 % 3 %

The following table presents information about lease expense, which is included in selling, general and administrative expenses in the Consolidated Statements of Income:

(In millions) 2021 2020

Operating lease expense $ 44.1 $ 41.2

Short-term lease expense 0.9 4.4

Variable lease expense $ 0.4 $ 1.8

ASC 840 Comparative Disclosures

Prior to fiscal 2020, we accounted for our leases in accordance with ASC 840, Leases .

Under ASC 840, rental expense for operating leases was $ 45.3 million for fiscal 2019.

Supplemental Cash Flow Information

The following table presents supplemental cash flow information about the Company’s leases:

(In millions) 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 37.4 $ 40.6

Operating lease right-of-use assets obtained in exchange for lease obligations $ 26.5 $ 17.7

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Notes to Consolidated Financial Statements

Operating lease expense for the fiscal years ended October 31, 2022, 2021 and 2020 was $ 45.0 million, $ 44.1 million and $ 41.2 million.

Maturity of Lease Liabilities

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Present value of lease liabilities $ 241.0

Acquisitions and Assets Held for Sale

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Notes to Consolidated Financial Statements

Acquisitions and Joint Venture

The following is a summary of the allocation of the total purchase consideration for business and asset acquisitions that the Company completed during fiscal 2022, 2021, and 2020:

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Goodwill 1,184.8 91.6 15.3

Net tangible (liabilities) assets ( 10.8 ) ( 0.3 ) 7.3

Net tangible liabilities ( 286.5 ) ( 10.8 ) ( 0.3 )

Fair value of contingent consideration ( 1.5 ) ( 39.1 ) —

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Fiscal Year 2022

On May 3, 2021, CooperSurgical completed the acquisition of a privately-held medical device company that develops single-use illumin ating medical devices.

The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to the valuation of intangible assets and inventory, the associated deferred tax adjustments and the corresponding impact on goodwill.

On May 31, 2022, CooperVision completed the acquisition of a privately-held Denmark-based contact lens distributor focusing on orthokeratology and scleral contact lenses.

This acquisition expands CooperVision's ortho-k eye care portfolio in the Nordic market.

On April 6, 2022, CooperSurgical completed the acquisition of a private cryopreservation services company that specializes in cryogenic services.

The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to the effect on taxes and the corresponding impact on goodwill.

Refer to "Fiscal Year 2021" below for details on formation of a joint venture with Essilor International and related activities that occurred in fiscal year 2022 following the acquisition of SightGlass Vision, Inc.

(SGV) in fiscal year 2021.

On April 6, 2022, CooperSurgical entered into an asset purchase agreement to acquire Cook Medical's Reproductive Health business, a manufacturer of minimally invasive medical devices focused on the fertility, obstetrics and gynecology markets.

The aggregate consideration is $ 875.0 million in cash, with $ 675.0 million payable at the closing and the remaining $ 200.0 million payable in $ 50.0 million installments following each of the first, second, third and fourth anniversaries of the closing.

The transaction is subject to customary closing conditions, such as receipt of required regulatory approvals.

Generate Life Sciences®

On December 17, 2021, CooperSurgical completed the acquisition of 100 % of the equity interests in Generate Life Sciences (Generate), a privately held leading provider of donor egg and sperm for fertility treatments, fertility cryopreservation services and newborn stem cell storage (cord blood & cord tissue), and paid an aggregate purchase consideration of approximately $ 1.663 billion, reflecting working capital, and other adjustments.

The cash consideration was funded through a combination of $ 1.5 billion in proceeds from the issuance of a senior unsecured term loan and available cash on hand.

The Company has accounted for the acquisition of Generate as a business combination, in accordance with ASC Topic 805, Business Combinations.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition date:

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

(In millions)

Current assets:

Cash and cash equivalents

Trade accounts receivable, net

Prepaid expense and other current assets

Total current assets 113.5

Property, plant and equipment

Goodwill 1,177.3

Customer relationships 718.3

Trademarks 54.9

Total assets acquired

Current liabilities:

Accounts payable

Employee compensation and benefits

Deferred revenue 68.0

Other current liabilities

Total current liabilities 105.3

Deferred tax liabilities

Lease liabilities

Deferred revenue

Other long-term liabilities

Total liabilities assumed

Total purchase price

The Company is in the process of finalizing purchase accounting information primarily related to deferred tax adjustments and the corresponding impact on goodwill.

The Company recorded measurement period adjustments of $ 115.3 million to goodwill in fiscal 2022.

Deferred revenue was recognized in accordance with ASC Topic 606, Revenue from Contracts with Customers, as a result of the adoption of ASU 2021-08.

Organization and Significant Accounting Policies for additional information.

The Company currently estimates that customer relationships will be amortized over 20 years and trademarks will be amortized over 15 years.

Goodwill is primarily attributable to assembled workforce and expected synergies to be achieved.

The goodwill recognized is not deductible for tax purposes.

The transaction costs associated with the acquisition consisted primarily of legal, regulatory and financial advisory fees, which were expensed as incurred as selling, general and administrative expense.

Generate's revenue and net income for the period from the acquisition date to October 31, 2022, were $ 249.5 million and $ 27.8 million , respectively.

The following unaudited pro forma information summarizes the combined results of operations of the Company and Generate as if the acquisition had been completed at the beginning of the Company’s fiscal 2021:

(In millions) 2022 2021

Revenue $ 3,344.3 $ 3,183.2

Net income $ 370.7 $ 2,959.8

The unaudited pro forma information for fiscal 2022 and 2021 was calculated after applying the Company's accounting policies and the impact of acquisition date fair value adjustments.

The adjustments primarily include increased amortization for the fair value of acquired intangible assets, increased depreciation for the fair value of acquired property, plant, and equipment,

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

increased revenue as a result of the ASU 2021-08 deferred revenue adjustments, decreased interest expense as a result of the reversal of Generate's historical interest expense partially offset by additional interest expense on the debt obtained to finance the transaction.

The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition.

The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of fiscal 2021, or of future results of the consolidated entities.

Subsequent Event

On November 1, 2022, subsequent to the fiscal year ended October 31, 2022, CooperVision closed an Agreement and Plan of Merger (the “Merger Agreement”) to acquire a U.S.

based privately held leading expert in specialty contact lenses for both normal and irregular corneal conditions.

The Company is in the process of finalizing purchase accounting information.

Fiscal Year 2021

On May 3, 2021, CooperSurgical completed the acquisition of a privately-held medical device company that develops single-use illumin ating medical devices.

On April 26, 2021, CooperVision completed the acquisition of a privately-held UK contact lens manufacturer focusing on specialty contact lenses.

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On March 1, 2021, CooperSurgical completed the acquisition of a privately-held medical device company that designed and developed an innovative obstetric product for use in urgent obstetrics to reduce risks associated with childbirth.

The purchase price allocation is preliminary, and the Company is in the process of finalizing information primarily related to the valuation of intangible assets, the associated deferred tax adjustments and the corresponding impact on goodwill.

On February 1, 2021, CooperSurgical acquired all of the remaining equity interests of a privately-held medical device company that developed the Mara ® Water Vapor Ablation System, which is used for endometrial ablation.

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The primary asset acquired in this asset acquisition is Technology.

On January 19, 2021, CooperVision acquired all of the remaining equity interests of a privately-held medical device company that develops spectacle lenses for myopia management.

The fair value remeasurement of our previous equity investment immediately before the acquisition resulted in a gain of $ 11.5 million, which was recorded in other income.

The terms of the acquisition include upfront cash consideration paid at closing of approximately $ 40.9 million attributable to the equity interests not held by the Company on the closing date.

The transaction also includes potential payments of future consideration that are contingent upon the achievement of the regulatory approval milestone (the regulatory approval payment) and the acquired business reaching certain revenue thresholds over a specified period (the revenue pa yments).

The undiscounted rang e of the contingent consideration is zero to $ 139.1 million payable to the other former equity interest owners.

The estimated fair value of the contingent consideration on the acquisition date was approximately $ 37.9 million, and, accordingly, the Company recorded a liability of approximately $ 30.2 million, which represents the fair value of the contingent consideration payable to the other former equity interest owners.

On January 19, 2021, CooperVision acquired all of the remaining equity interests of SGV, a privately-held medical device company that developed spectacle lenses for myopia management.

The transaction included potential payments of future consideration that were contingent upon the achievement of the regulatory approval milestone (the regulatory approval payment) and the acquired business reaching certain revenue thresholds over a specified period (the revenue payments).

The undiscounted range of the contingent consideration was zero to $ 139.1 million payable to the other former equity interest owners.

The fair value of the regulatory approval payment was determined using an option pricing framework based on the expected payment under the contractual terms and the estimates of the probability of achieving the regulatory approval.

The fair value of the revenue payments was determined using a Monte Carlo simulation based on the revenue projections and the expected payment for each simulation.

As of October 31, 2021, no contingent consideration has been paid.

The Company remeasured the fair value of the contingent consideration at each reporting period.

In fiscal 2021, a $ 56.8 million expense was recognized in selling, general and administrative expense in the Consolidated Statements of Income, resulting from the increase in fair value of the contingent consideration.

This was primarily driven by increases in revenue projections, which increased the estimated fair value of the revenue payments.

On December 31, 2020, CooperSurgical completed the acquisition of a privately-held in vitro fertilization (IVF) cryo-storage software solutions compa ny.

The pro forma results of operations of these acquisitions have not been presented because the effect of the business combinations described above was not material to the consolidated results of operations.

Subsequent Events

On November 6, 2021, subsequent to the fiscal year ended October 31, 2021, CooperSurgical entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire Generate Life Sciences, a privately held leading provider of donor egg and sperm for fertility treatments, fertility cryopreservation services and newborn stem cell (cord blood and cord tissue) storage.

The aggregate consideration is $ 1.605 billion in cash,

In March 2022, the entities amended the terms of the contingent consideration, which resulted in CooperVision paying $ 42.9 million to the former equity interest owners in exchange for the elimination of the revenue payments.

CooperVision recognized a net gain of $ 12.2 million during fiscal 2022.

As of October 31, 2022, the remaining contingent liability related to regulatory approval payment was $ 31.8 million.

In March 2022, CooperVision and Essilor International SAS (Essilor) entered into a Contribution Agreement and a Stock Purchase Agreement under which Essilor paid CooperVision $ 52.1 million in exchange for a 50 % interest in SGV and a proportionate share of certain revenue-based milestone payments related to the January 2021 acquisition of SGV by CooperVision.

As part of these agreements, each party contributed their interest in SGV and $ 10 million in cash to form a new joint venture.

CooperVision then remeasured the fair value of its retained equity investment in the joint venture at $ 90.0 million which resulted in a $ 56.9 million gain in Other (income) expense on deconsolidation of SGV.

The fair value of the joint venture was determined using the income valuation approach.

Under the income approach, we used a discounted cash flow model (“DCF”) in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate expected rate of return.

The discount rate used for cash flows reflects capital market conditions and the specific risks associated with the business.

This valuation approaches is considered a Level 3 fair value measurement.

Fair value determination requires complex assumptions and judgment by management in projecting future operating results, selecting guideline companies for comparisons, determining appropriate

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

subject to adjustment as set forth in the Merger Agreement.

The transaction is anticipated to close in the first quarter of fiscal 2022 and is subject to customary closing conditions, including regulatory approval.

Subsequent Events for more details.

market value multiples, selecting the discount rate to measure the risks inherent in the future cash flows.

Any material changes in key assumptions, including failure to meet business plans, deterioration in the financial market, an increase in interest rate or an increase in the cost of equity financing by market participants within the industry or other unanticipated events and circumstances, may affect such estimates.

On December 31, 2020, CooperSurgical completed the acquisition of a privately-held in vitro fertilization (IVF) cryostorage software solutions company.

Fiscal Year 2020

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This acquisition expands CooperVision’s specialty eye care portfolio and its leadership in addressing the increasing severity and prevalence of myopia.

On December 13, 2019, CooperSurgical completed the acquisition of a privately-held distributor of in vitro fertilization (IVF) medical devices and systems.

Fiscal Year 2019

On December 31, 2018, CooperSurgical completed the acquisition of a privately-held U.S.

medical device company that develops mechanical surgical solutions for skin closure.

On December 28, 2018, CooperVision completed the acquisition of a privately-held scleral lens company, which expands CooperVision's specialty and scleral lens portfolio.

On December 13, 2019, CooperSurgical completed the acquisition of a privately-held distributor of IVF medical devices and systems.

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Purchase price contingent consideration 1.5 31.3

Payments ( 55.2 ) —

Change in fair value ( 10.3 ) 66.1

Ending balance $ 33.4 $ 97.4

Assets Held for Sale

On February 2, 2021, CooperVision entered into a stock purchase agreement to sell 50 % of the equity interest in a wholly-owned subsidiary that was acquired by CooperVision on January 19, 2021.

The closing of this transaction is subject to certain closing conditions including required regulatory approvals.

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Notes to Consolidated Financial Statements

intends to operate the previously wholly-owned subsidiary as a joint venture with the purchaser of the 50 % interest once the transaction is closed.

The Company concluded the substantive terms of the joint venture during the third quarter of fiscal 2021, and the assets and liabilities of this disposal group were reclassified as held for sale as of July 31, 2021.

On August 1, 2021, CooperVision entered into a stockholders agreement, which outlines the terms regarding the operation and management of the joint venture.

As of October 31, 2021, the Company was in the process of finalizing the joint venture related ancillary agreements, and the disposal group continues to be classified as held for sale as of October 31, 2021.

Pursuant to ASC 360, assets held for sale were measured at the lower of their carrying amounts or fair value less cost to sell.

The Company did no t record any impairment in fiscal 2021.

The Company has determined that this disposal did not qualify as a discontinued operation as the sale was deemed to not be a strategic shift that has or will have a major effect on the Company's operations and financial results.

Included in the Company's Consolidated Balance Sheets as of October 31,2021 are the following carrying amounts of the assets and liabilities held for sale:

(In millions) October 31, 2021

Goodwill 23.2

Other intangibles, net 83.6

Deferred tax assets ( 19.9 )

Other assets 2.0

Total assets held-for-sale $ 89.2

Total liabilities held-for-sale $ 1.7

Intangible Assets

The Company has three reporting units:

CooperVision and within the CooperSurgical segment, Office/Surgical and Fertility, reflecting the current way the Company manages its business.

There was no impairment of goodwill in its reporting units in fiscal 2022, 2021, and 2020.

(In millions) CooperVision CooperSurgical Total

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Balance at October 31, 2022 $ 1,710.3 $ 1,899.4 $ 3,609.7

Net additions 30.2 61.4 91.6

Amount reclassified to assets held for sale (Note 3) ( 23.2 ) — ( 23.2 )

Foreign currency translation adjustment 54.7 3.6 58.3

Balance at October 31, 2021 $ 1,841.0 $ 733.0 $ 2,574.0

Of the October 31, 2022 goodwill balance, $ 214.1 million for CooperSurgical and $ 22.4 million for CooperVision is expected to be deductible for tax purposes.

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Notes to Consolidated Financial Statements

The Company evaluates goodwill for impairment annually during the fiscal third quarter and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.

The Company accounts for goodwill, evaluates and tests goodwill balances for impairment in accordance with related accounting standards.

The Company performed an annual impairment assessment in the third quarter of fiscal 2021 and 2020, and its analysis indicated that there was no impairment of goodwill in its reporting units.

Qualitative factors considered in the assessment include industry and market considerations, overall financial performance and other relevant events and factors affecting each reporting unit.

Based on the Company's qualitative assessment, if the Company determines that the fair value of a reporting unit is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value of the reporting unit.

A reporting unit is the level of reporting at which goodwill is tested for impairment.

The Company has three reporting units:

CooperVision and within the CooperSurgical segment, Office/Surgical and Fertility, reflecting the current way the Company manages its business.

Goodwill impairment analysis and measurement is a process that requires significant judgment.

If the Company's common stock price trades below book value per share, there are changes in market conditions or a future downturn in its business, or a future goodwill impairment test indicates an impairment of its goodwill, the Company may have to recognize a non-cash impairment of goodwill that could be material and could adversely affect the Company's results of operations in the period recognized and also adversely affect its total assets and stockholders' equity.

Other Intangible Assets

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Balances include foreign currency translation adjustments.

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

Intangible assets with definite lives are amortized over the estimated useful life of the assets.

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Total remaining amortization for intangible assets with definite lives $ 1,874.3

The Company assesses definite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of a definite-lived intangible asset (asset group) may not be recoverable.

When events or changes in circumstances indicate that the carrying amount of a definite-lived intangible asset may not be recoverable, in accordance with related accounting standards, the Company evaluates whether the definite-lived intangible asset is impaired by comparing its carrying value to its undiscounted future cash flows.

The Company assesses indefinite-lived intangible assets annually in the third quarter of the fiscal year, or whenever events or circumstances indicate that the carrying amount of an indefinite-lived intangible asset (asset group) may not be recoverable.

The Company evaluates whether the indefinite-lived intangible asset is impaired by comparing its carrying value to its fair value.

If the carrying value of a definite-lived or indefinite-lived intangible asset is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value.

The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

The Company performs impairment tests using an income approach, more specifically a relief from royalty method.

In the development of the forecasted cash flows, the Company applies significant management judgment to determine key assumptions, including revenue growth and operating margin growth, royalty rates and discount rates assumptions.

Revenue and operating margin growth assumptions are based on historical trends and management’s expectations for future growth.

Royalty rates used are consistent with those assumed for the original purchase accounting valuation.

The discount rates were based on a weighted-average cost of capital utilizing industry market data of similar companies, in addition to estimated returns on the assets utilized in the operations of the applicable reporting unit, including net working capital, fixed assets and intangible assets.

Other assumptions are consistent with those applied to goodwill impairment testing.

Given the general deterioration in economic and market conditions surrounding the COVID-19 pandemic, the Company considered the impact that the COVID-19 pandemic may have on its near and long-term forecasts and determined that it was not more likely than not that the fair value of reporting units or relevant asset groups was below carrying amounts, and therefore the Company determined that there was no impairment to either its goodwill, definite-lived or indefinite-lived intangible assets during fiscal 2021.

The Company considered the impact on its near and long-term forecasts from the general deterioration of economic and market conditions as a result of higher inflation, regional and global conflict, supply chain disruption, and the ongoing disruptions of the COVID-19 pandemic and determined that it was not more likely than not that the fair value of reporting units or relevant asset groups was below carrying amounts.

Therefore, the Company determined that there was no impairment to either its definite-lived or indefinite-lived intangible assets during fiscal 2022, 2021 and 2020.

There was an immaterial impairment charge related to our exit from the contact lens care business.

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

Financing Arrangements

The Company had outstanding debt as follows:

(In millions)

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unamortized debt issuance cost — ( 0.1 )

Short-term debt, excluding financing leases 395.7 82.9

Financing lease liabilities 16.9 0.5

Short-term debt $ 412.6 $ 83.4

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unamortized debt issuance cost ( 3.1 ) ( 0.2 )

Long-term debt, excluding financing leases 2,347.1 1,396.1

Financing lease liabilities 3.7 1.5

Long-term debt $ 2,350.8 $ 1,397.6

Total debt $ 2,763.4 $ 1,481.0

Fiscal year maturities of long-term debt as of October 31, 2021, are as follows:

(In millions )

2025 $ 1,396.3

Thereafter $ —

As of October 31, 2022, the Company was in compliance with all debt covenants.

Term Loan Agreement on December 17, 2021

On December 17, 2021, the Company entered into a Term Loan Agreement (the 2021 Credit Agreement) by and among the Company, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent.

The 2021 Credit Agreement provides for a term loan facility (the 2021 Term Loan Facility) in an aggregate principal amount of $ 1.5 billion, which, unless terminated earlier, matures on December 17, 2026.

In addition, the Company has the ability from time to time to request an increase to the commitments under the 2021 Term Loan Facility or to establish a new term loan facility under the 2021 Credit Agreement in an aggregate principal amount not to exceed $ 1.125 billion, upon prior written notice to the administrative agent and subject to the discretionary participation of the lenders funding such term loans and certain limitations set forth in the 2021 Credit Agreement.

Amounts outstanding under the 2021 Term Loan Facility will bear interest, at the Company’s option, at either (i) the alternate base rate, which is a rate per annum equal to the greatest of (a) the administrative agent’s prime rate, (b) one-half of one percent in excess of the federal funds effective rate and (c) one percent in excess of the adjusted London interbank offered rate (“LIBOR”) for a one-month interest period on such day, or (ii) the adjusted LIBOR, plus, in each case, an applicable rate of, initially, zero basis points, in respect of base rate loans, and 75 basis points, in respect of adjusted LIBOR loans.

Following a specified period after the closing date, the applicable rates will be determined quarterly by reference to a grid based upon the Company’s ratio of consolidated net indebtedness to consolidated EBITDA, each as defined in the 2021 Credit Agreement.

The Company may prepay loan balances from time to time, in whole or in part, without premium or penalty (other than any related breakage costs).

On December 17, 2021, the Company borrowed $ 1.5 billion under the 2021 Term Loan Facility and used the proceeds to fund the acquisition of Generate.

Refer to Note 3.

Acquisitions and Joint Venture for more details.

The interest rate on the 2021 Term Loan Facility was 4.44 % at October 31, 2022.

The 2021 Credit Agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain Total Leverage Ratio and Interest Coverage Ratio, each as defined in the 2021 Credit Agreement, consistent with the 2020 Credit Agreement discussed below.

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Notes to Consolidated Financial Statements

Term Loan Agreement on November 2, 2021

On November 2, 2021, subsequent to the fiscal year ended October 31, 2021, the Company entered into a 364 -day, $ 840.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent, which matures on November 1, 2022.

The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolver Credit Facility and for general corporate purposes.

Subsequent Events for additional information.

Term Loan Agreement on October 16, 2020

On October 16, 2020, the Company entered into a 364 -day, $ 350.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent, which matured on October 15, 2021.

At maturity, outstanding amounts under this agreement were fully repaid using borrowings under the 2020 Revolving Credit Facility.

On November 2, 2021, the Company entered into a 364 -day, $ 840.0 million, term loan agreement by and among the Company, the lenders party thereto and The Bank of Nova Scotia, as administrative agent, which matured subsequent to year end on November 1, 2022.

The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolving Credit Facility and for general corporate purposes.

We repaid $ 502.0 million during fiscal 2022.

Amounts outstanding under the 2021 364 -Day Term Loan Agreement will bear interest, at the Company’s option, at either the alternate base rate, or the adjusted LIBOR (each as defined in the 2021 364 -Day Term Loan Agreement), plus, in the case of adjusted LIBOR loans, an applicable rate of 60 basis points.

The 2021 364 -Day Term Loan Agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain total leverage ratio and interest coverage ratio, each as defined in the 2021 364 -Day Term Loan Agreement, consistent with the 2020 Credit Agreement discussed below.

Revolving Credit and Term Loan Agreement on April 1, 2020

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the lenders from time to time party thereto, and KeyBank National Association, as administrative agent.

The 2020 Credit Agreement provides for (a) a multicurrency revolving credit facility (the 2020 Revolving Credit Facility) in an aggregate principal amount of $ 1.29 billion and (b) a term loan facility (the 2020 Term Loan Facility) in an aggregate principal amount of $ 850.0 million,

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

each of which, unless terminated earlier, mature on April 1, 2025.

In addition, the Company has the ability from time to time to request an increase to the size of the revolving credit facility or establish one or more new term loans under the term loan facility in an aggregate amount up to $ 1.605 billion, subject to the discretionary participation of the lenders.

Amounts outstanding under the 2020 Credit Agreement will bear interest, at the Company’s option, at either the base rate, or the adjusted LIBO rate or adjusted foreign currency rate, plus, in each case, an applicable rate of between 0.00 % and 0.50 % in respect of base rate loans, and between 0.75 % and 1.50 % in respect of adjusted LIBO rate or adjusted foreign currency rate loans, in each case in accordance with a pricing grid tied to the Total Leverage Ratio, as defined in the 2020 Credit Agreement.

During the term of the 2020 Revolving Credit Facility, the Borrowers may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reduction of the revolving commitment.

The Company pays an annual commitment fee that ranges from 0.10 % to 0.20 % of the unused portion of the 2020 Revolving Credit Facility based upon the Company’s Total Leverage Ratio, as defined in the 2020 Credit Agreement.

In addition to the annual commitment fee, the Company is also required to pay certain letter of credit and related fronting fees and other administrative fees pursuant to the terms of the 2020 Credit Agreement.

On April 1, 2020, the Company borrowed $ 850.0 million under the 2020 Term Loan Facility and $ 445.0 million under the 2020 Revolving Credit Facility and used the proceeds to fully repay all borrowings outstanding under a previously existing term loan agreement and transfer all letters of credit and borrowings outstanding under a previously existing credit agreement to the 2020 Credit Agreement, as further described below.

The Company used $ 850.0 million under the 2020 Term Loan Facility and $ 445.0 million under the 2020 Revolving Credit Facility to fully repay all borrowings outstanding under a previously existing term loan agreement and transfer all letters of credit and borrowings outstanding under a previously existing credit agreement to the 2020 Credit Agreement.

The Company has an uncommitted option to increase the revolving credit facility or establish a new term loan in an aggregate amount up to $ 1.605 billion.

On October 30, 2020, the Company entered into Amendment No.

1 to the 2020 Credit Agreement (the First Amendment to the 2020 Credit Agreement).

The First Amendment to the 2020 Credit Agreement modifies the 2020 Credit Agreement by, among other things, adding CooperVision International Limited as a revolving borrower and releasing certain borrowers in the 2020 Credit Agreement.

At October 31, 2021, the Company had $ 850.0 million outstanding under the 2020 Term Loan Facility and $ 546.1 million outstanding under the 2020 Revolving Credit Facility.

1 to the 2020 Credit Agreement, adding CooperVision International Limited as a revolving borrower and releasing certain borrowers in the 2020 Credit Agreement.

On December 17, 2021, the Company entered into Amendment No.2 to the 2020 Credit Agreement, modifying the 2020 Credit Agreement by, among other things, adding CooperSurgical Holdings Limited as a revolving borrower, releasing CooperVision Holding Kft as a borrower, and updating the benchmark replacement language in the 2020 Credit Agreement.

The 2020 Credit Agreement will bear interest, at the Company’s option, at either the base rate, or the adjusted LIBOR or adjusted foreign currency rate, plus, in each case, an applicable rate of between 0.00 % and 0.50 % in respect of base rate loans, and between 0.75 % and 1.50 % in respect of adjusted LIBOR or adjusted foreign currency rate loans, in each case in accordance with a pricing grid tied to the Total Leverage Ratio, as defined in the 2020 Credit Agreement.

The Company may borrow, repay and re-borrow amounts available under the Revolving Credit Facility, subject to voluntary reduction of the revolving commitment.

At October 31, 2022, the Company had $ 850.0 million outstanding under the 2020 Term Loan Facility and none outstanding under the 2020 Revolving Credit Facility.

The interest rate on the 2020 Term Loan Facility was 4.13 % at October 31, 2022.

The interest rate on the 2020 Revolving Credit Facility was 4.13 % at October 31, 2022.

In fiscal 2021, the Company expensed $ 0.1 million related to the debt issuance costs of the 2020 Term Loan Facility.

The 2020 Credit Agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain Total Leverage Ratio and Interest Coverage Ratio, each as defined in the 2020 Credit Agreement:

• Interest Coverage Ratio, as defined, to be at least 3.00 to 1.00 at all times.

• Total Leverage Ratio, as defined, to be no higher than 3.75 to 1.00.

At October 31, 2021, the Company was in compliance with the Interest Coverage Ratio at 43.29 to 1.00 and the Total Leverage Ratio at 1.38 to 1.00 for 2020 Credit Agreement.

The Company, after considering the potential impacts of the COVID-19 pandemic, expects to remain in compliance with its financial maintenance covenant and meet its debt service obligations for at least the twelve months following the date of issuance of these financial statements.

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Notes to Consolidated Financial Statements

The following is a summary of the maximum commitments and the net amounts available to the Company under the credit facilities discussed above as of October 31, 2021:

(In millions) Facility Limit Outstanding Borrowings Outstanding Letters of Credit Total Amount Available Maturity Date

2020 Revolving Credit Facility $ 1,290.0 $ 546.1 $ 1.3 $ 742.6 April 1, 2025

2020 Term Loan Facility 850.0 850.0 n/a — April 1, 2025

Total $ 2,140.0 $ 1,396.1 $ 1.3 $ 742.6

European Credit Facilities

The Company maintains European credit facilities in the form of continuing and unconditional guarantees.

Payments on the outstanding long-term debt balance of $ 850.0 million are due in the fiscal year ending October 31, 2025.

European and Asian Pacific Credit Facilities

The Company maintains European credit facilities.

The aggregate facility limit was $ 30.7 million and $ 35.8 million at October 31, 2022 and 2021, respectively.

The Company will pay all forms of indebtedness in the currency in which it is denominated for those certain subsidiaries.

Interest expense is calculated on all outstanding balances based on an applicable base rate for each country plus a fixed spread common across most subsidiaries covered under the guaranty.

At October 31, 2021, $ 5.4 million of the facilities was utilized.

The weighted average interest rate on the outstanding balances was 0.57 %.

Asian Pacific Credit Facilities

The Company maintains Yen-denominated credit facilities in Japan supported by continuing and unconditional guarantees.

At October 31, 2022, $ 12.3 million of the facilities was utilized and the weighted average interest rate on the outstanding balances was 2.46 %.

The Company maintains Yen-denominated credit facilities in Japan.

The aggregate facility limit was $ 73.0 million and $ 95.0 million at October 31, 2022 and 2021, respectively.

The Company will pay all forms of indebtedness in Yen upon demand.

Interest expense is calculated on the outstanding balance based on the base rate or TIBOR plus a fixed spread.

At October 31, 2021, $ 77.7 million of the combined facilities was utilized.

The weighted average interest rate on the outstanding balances was 0.42 %.

The Company maintains credit facilities for certain of our Asia Pacific subsidiaries.

At October 31, 2022, $ 45.4 million of the combined facilities was utilized and the weighted average interest rate on the outstanding balances was 0.40 %.

Each facility is supported by a continuing and unconditional guaranty.

The aggregate facility limit was $ 9.9 million and $ 11.2 million at October 31, 2021 and 2020, respectively.

The Company will pay all forms of indebtedness, for each facility, in the currency in which it is denominated for those certain subsidiaries.

Interest expense is calculated on all outstanding balances based on an applicable base rate for each country plus a fixed spread across all subsidiaries covered under each guaranty.

At October 31, 2021, $ 0.4 million of the facilities was utilized.

The weighted average interest rate on the outstanding balances was 2.54 %.

Letters of Credit

The Company maintain letters of credit throughout the world with various financial institutions that primarily serve as guarantee notes on certain debt obligations.

The aggregate outstanding amount of letters of credit at October 31, 2021 and October 31, 2020 was $ 4.9 million and $ 4.5 million, respectively.

Effective Tax Rate

The effective tax rates for fiscal 2021 and 2020 were ( 499.1 )% and 10.6 %, respectively.

The decrease was primarily due to an intra-group transfer of intellectual property, as discussed below, and remeasurement of the related deferred tax assets caused by the UK enactment of a 25% corporate tax rate.

The effective tax rate otherwise increased due to changes in the geographical composition of pre-tax earnings, partially offset by changes in foreign earnings subject to US tax.

THE COOPER COMPANIES, INC.

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Notes to Consolidated Financial Statements

The effective tax rate for fiscal 2021 was lower than the US federal statutory tax rate primarily due to the intra-group transfer, the remeasurement of deferred tax assets, and earnings in foreign jurisdictions with lower tax rates partially offset by foreign earnings subject to US tax.

The effective tax rate for fiscal 2020 was lower than the US federal statutory rate primarily due to foreign earnings in jurisdictions with lower tax rates partially offset by foreign earnings subject to US tax.

In November 2020, the Company completed an intra-group transfer of certain intellectual property and related assets of the CooperVision business to a UK subsidiary as part of a group restructuring to establish headquarters operations in the UK.

Effective Tax Rate

The effective tax rates for fiscal 2022 and 2021 were 18.8 % and ( 499.1 )%, respectively.

The increase was primarily due to an intra-group transfer of intellectual property in fiscal 2021 and UK tax rate change in fiscal 2021, as discussed below.

The increase was also due to changes in the geographic composition of pre-tax earnings and changes in excess tax benefits from share-based compensation.

The effective tax rate for fiscal 2022 was lower than the US federal statutory rate primarily due to foreign earnings in jurisdictions with lower tax rates and changes in unrecognized tax benefits, partially offset by foreign earnings subject to US tax.

The effective tax rate for fiscal 2021 was lower than the US federal statutory tax rate primarily due to the intra-group transfer, UK tax rate change, and earnings in foreign jurisdictions with lower tax rates partially offset by foreign earnings subject to US tax.

In November 2020, the Company completed an intra-group transfer of certain intellectual property and related assets of CooperVision to a UK subsidiary as part of a group restructuring to establish headquarters operations in the UK.

Determining fair value involved significant judgment related to future revenue growth, operating margins, and discount rates.

Income before income taxes resulting from this transfer is eliminated upon consolidation.

The transfer resulted in a step-up of the UK tax-deductible basis in the intellectual property and goodwill, creating a temporary difference between the book basis and the tax basis of these assets.

As a result, the Company recognized a deferred tax asset of $ 1,987.9 million, with a corresponding income tax benefit, during the three months ended January 31, 2021.

As a result, the Company recognized a deferred tax asset of $ 1,987.9 million, with a corresponding income tax benefit, during the first quarter of fiscal 2021.

During the third quarter of fiscal 2021, the Company recognized a $ 536.7 million tax benefit related primarily to the remeasurement of this deferred tax asset caused by the UK enactment of a 25% corporate tax rate.

Components of income before income taxes:

5 unchanged sentences

$ 475.3 $ 491.5 $ 266.5

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Components of provision for income taxes:

11 unchanged sentences

Provision for income taxes $ 89.5 $ ( 2,453.2 ) $ 28.1

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Reconciliation between the expected provision for income taxes at the US federal statutory rate and the provision for income taxes:

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(Decrease) increase in taxes resulting from:

Foreign income subject to different tax rates ( 43.6 ) ( 54.7 ) ( 85.6 )

Foreign income subject to United States tax 25.4 32.0 16.1

United States tax reform — — ( 5.8 )

Employee compensation ( 9.9 ) ( 4.4 ) ( 7.8 )

Foreign earnings in jurisdictions with lower tax rates ( 22.3 ) ( 43.6 ) ( 54.7 )

Foreign earnings subject to United States tax 20.7 25.4 32.0

Excess tax benefits from share-based compensation ( 2.6 ) ( 13.0 ) ( 6.2 )

Deferred tax asset step-up ( 3.4 ) 3.2 ( 9.0 )

3 unchanged sentences

Change in unrecognized tax benefits ( 12.7 ) ( 7.6 ) ( 0.1 )

State tax provision 5.0 0.8 1.9

Other, net 4.5 4.1 1.2

Actual provision for income taxes $ ( 2,453.2 ) $ 28.1 $ 10.7

Provision for income taxes $ 89.5 $ ( 2,453.2 ) $ 28.1

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Components of deferred tax assets and liabilities:

2 unchanged sentences

Deferred tax assets:

Accounts receivable, principally due to allowances for doubtful accounts $ 3.4 $ 2.6

Accounts receivable $ 4.9 $ 3.4

Inventories 6.3 6.1

2 unchanged sentences

Share-based compensation 14.5 28.6

Net operating loss carryforwards 18.5 9.6

Net operating loss and tax credit carryforwards 19.6 19.3

Intangible assets — 6.8

Research and experimental expenses - Section 59(e) 13.5 9.2

Tax credit carryforwards 0.8 1.5

Capitalized research and experimental expenses 15.4 13.5

Total gross deferred tax assets 2,641.1 2,687.3

3 unchanged sentences

Tax deductible goodwill ( 39.7 ) ( 34.0 )

Intangible assets ( 153.8 ) —

Plant and equipment ( 48.8 ) ( 46.5 )

Deferred tax on foreign earnings ( 8.4 ) ( 7.5 )

Transaction costs ( 0.7 ) ( 0.7 )

Foreign deferred tax liabilities ( 45.5 ) ( 32.5 )

1 unchanged sentence

Net deferred tax assets $ 2,293.2 $ 2,522.5

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In assessing the realizability of deferred tax assets, the Company analyzes whether some or all deferred tax assets will not be realized.

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Based upon this analysis, it is more likely than not the deferred tax assets, net of valuation allowance, will be realized.

The increase in valuation allowance is primarily due to foreign tax credits.

At October 31, 2021, we had federal net operating loss carryforwards of $ 63.7 million, state net operating loss carryforwards of $ 19.7 million, and $ 1.0 million of California research credit carryforwards.

The increase in valuation allowance is primarily related to foreign tax attributes.

At October 31, 2022, the Company had federal net operating loss carryforwards of $ 65.4 million and state net operating loss carryforwards of $ 97.3 million.

Federal net operating loss carryforwards of $ 17.1 million expire on various dates between 2025 and 2037 and $ 48.3 million do not expire.

The state net operating loss carryforwards expire on various dates between 2025 through 2043, and the California research credit carryforwards do not expire.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position.

The tax benefits recognized from such positions are estimated based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

The state net operating loss carryforwards expire on various dates between 2026 through 2042.

A tax benefit is recognized if it is more likely than not that a tax position will be sustained on its technical merits, based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Changes in unrecognized tax benefits:

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Balance at October 31, 2020 $ 58.5

Increase from prior year's UTB's 3.4

Increase from current year's UTB's 7.6

UTB (decrease) from expiration of statute of limitations ( 2.2 )

Decrease based on tax positions in prior fiscal years ( 8.3 )

Increase based on tax positions in current fiscal year 307.2

Settlements ( 1.9 )

Lapses of statutes of limitations ( 1.7 )

Balance at October 31, 2021 $ 353.8

Decrease from prior year's UTB's ( 8.3 )

Increase from current year's UTB's 307.2

Increase (decrease) from settlements ( 1.9 )

UTB (decrease) from expiration of statute of limitations ( 1.7 )

Decrease based on tax positions in prior fiscal years ( 12.5 )

Settlements ( 0.2 )

Lapses of statutes of limitations ( 4.2 )

Balance at October 31, 2022 $ 336.9

As of October 31, 2021, 2020 and 2019 there were unrecognized tax benefits of $ 353.8 million, $ 58.5 million, and $ 49.7 million, respectively.

If recognized, these tax benefits would affect our effective tax rates for 2021, 2020 and 2019, by $ 336.5 million, $ 46.0 million, and $ 41.7 million, respectively.

Interest and penalties related to unrecognized tax benefits are recognized as income tax expense.

As of October 31, 2021, 2020 and 2019, we had accrued gross interest and penalties related to unrecognized tax benefits of $ 6.4 million, $ 7.3 million, and $ 3.9 million, respectively.

Included in the balance of unrecognized tax benefits at October 31, 2021 is $ 4.2 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months.

These tax benefits, if recognized, would reduce provision for income taxes for 2022, 2021 and 2020, by $ 324.3 million, $ 336.5 million, and $ 46.0 million, respectively.

Interest and penalties related to unrecognized tax benefits are recognized in provision for income taxes.

As of October 31, 2022, 2021 and 2020, accrued gross interest and penalties related to unrecognized tax benefits was $ 5.4 million, $ 6.4 million, and $ 7.3 million, respectively.

Included in the balance of unrecognized tax benefits at October 31, 2022 is $ 9.1 million related to tax positions for which it is reasonably possible that the total amounts could change during the next twelve months.

Filed tax returns are subject to examination by tax authorities in major tax jurisdictions after fiscal 2016, including the UK and the US.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Earnings Per Share

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(In millions, except for earnings per share) 2022 2021 2020

Net income attributable to Cooper stockholders $ 2,944.7 $ 238.4 $ 466.7

Net income $ 385.8 $ 2,944.7 $ 238.4

Weighted average common shares 49.3 49.2 49.1

Basic earnings per share attributable to Cooper stockholders $ 59.80 $ 4.85 $ 9.44

Basic earnings per share $ 7.83 $ 59.80 $ 4.85

Weighted average common shares 49.3 49.2 49.1

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Diluted weighted average common shares 49.7 49.8 49.6

Diluted earnings per share attributable to Cooper stockholders $ 59.16 $ 4.81 $ 9.33

Diluted earnings per share $ 7.76 $ 59.16 $ 4.81

The following table sets forth stock options to purchase our common stock and restricted stock units that were not included in the diluted earnings per share calculation because their effect would have been antidilutive for the periods presented:

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Exercise prices $ 300.12 - $ 406.17

$ 345.74 $ 304.54

Restricted stock units excluded 87 2 1

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Stockholders’ Equity

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In December 2011, the Company's Board of Directors authorized the 2012 Share Repurchase Program and through subsequent amendments, the most recent in March 2017, the total repurchase authorization was increased from $ 500.0 million to $ 1.0 billion of the Company's common stock.

The program has no expiration date and may be discontinued at any time.

Purchases under the 2012 Share Repurchase Program are subject to

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

a review of the circumstances in place at the time and may be made from time to time as permitted by securities laws and other legal requirements.

For the years ended October 31, 2021 and 2020, the Company share repurchases were as follow:

This program has no expiration date and may be discontinued at any time.

Purchases under the 2012 Share Repurchase Program are subject to a review of the circumstances in place at the time and may be made from time to time as permitted by securities laws and other legal requirements.

For the years ended October 31, 2022 and 2021, the Company's share repurchases were as follow:

Years Ended October 31, 2022 2021

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At October 31, 2022, $ 256.4 million remained authorized for repurchase under the program.

In fiscal 2021 and 2020, the Company paid a semiannual dividend of 3 cents per share:

$ 1.5 million or 3 cents per share on February 9, 2021 to stockholders of record on January 22, 2021;

$ 1.5 million or 3 cents per share on August 11, 2021 to stockholders of record on July 27, 2021;

$ 1.5 million or 3 cents per share on February 10, 2020 to stockholders of record on January 23, 2020;

$ 1.5 million or 3 cents per share on August 7, 2020 to stockholders of record on July 23, 2020.

2020 Long-Term Incentive Plan for Non-Employee Directors (2020 Directors' Plan)

In March 2020, we received stockholder approval of the 2020 Directors' Plan.

The 2020 Directors' Plan authorizes either the Company's Board of Directors or a designated committee thereof composed of two or more Non-Employee Directors to grant to Non-Employee Directors equity awards for up to 50,000 shares of common stock, subject to adjustment for future stock splits, stock dividends, expirations, forfeitures and similar events.

The 2020 Directors' Plan provides for annual equity award grants to Non-Employee Directors on April 1 st of each fiscal year which subsequently vest on the first anniversary of the date of grant.

If a Non-Employee Director is appointed or elected after April 1, then they will receive a grant on the date of such appointment or election that is proportionally adjusted to reflect the number of months of actual service on the board during the first fiscal year of their election or appointment.

The 2020 Directors' Plan also allows the Board of Directors to make discretionary grants to Non-Employee Directors.

Under the 2020 Directors' Plan, awards are made in the form of RSUs unless otherwise approved by the Board of Directors.

RSUs entitle the recipient to receive shares of common stock, without any payment in cash or property.

Legal ownership of the shares is not transferred until the unit vests and issued RSUs have no dividend or voting rights prior to vesting.

Awards are made with a total target grant date value of $ 270,000 , or $ 283,500 in the case of the Lead Director and $ 297,000 in the case of the Chairman of the Board.

Awards may also be made in the form of stock options or restricted stock.

In the event of such awards, grants of stock options will have an exercise price equal to 100 % of fair market value on the date of grant and expire no more than 10 years after the grant date.

Awards of restricted stock provide the right to receive shares, subject to such purchase price requirements, restrictions on sale or transfer, or other conditions as approved by the Board of Directors.

Restricted shares retain dividend and voting rights.

As of October 31, 2021, 37,853 shares remain available under the 2020 Directors' Plan for future grants.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2007 Long-Term Incentive Plan (2007 Plan)

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The Third Amended and Restated 2007 Plan authorizes either our Board of Directors, or a designated committee thereof composed of two or more Non-Employee Directors, to grant to eligible individuals during the period ending December 31, 2026, up to 6,930,000 shares in the form of specified equity awards including stock options, restricted stock units and performance share awards, subject to adjustment for future stock splits, stock dividends, expirations, forfeitures and similar events.

During fiscal 2021, we granted stock options, restricted stock units, and performance share awards to employees under the Third Amended and Restated 2007 Plan.

All stock options are granted at 100 % of fair market value on the date of grant and expire no more than 10 years after the grant date.

RSUs are nontransferable awards entitling the recipient to receive shares of common stock, without any payment in cash or property, in one or more installments at a future date or dates as determined by the Board of Directors or its authorized committee.

For RSUs, legal ownership of the shares is not transferred to the employee until the unit vests, which is generally over a specified time period and RSUs have no dividend or voting rights prior to vesting.

Performance share awards are nontransferable awards entitling the recipient to receive a variable number of shares of common stock, without any payment in cash or property, in one or more installments at a future date or dates as determined by the Board of Directors or its authorized committee.

Legal ownership of the shares is not transferred to the recipient until the award vests, and the number of shares distributed is dependent upon the achievement of certain performance targets over a specified period of time.

RSUs have no dividend or voting rights prior to vesting.

As of October 31, 2022, 690,596 shares remained available under the Third Amended and Restated 2007 Plan for future grants.

The amount of available shares includes shares which may be distributed under performance share awards.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Share-Based Compensation

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Related income tax benefit $ 5.0 $ 5.6 $ 4.8

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Stock Options

The fair value of each stock option award granted is estimated on the date of grant using the Black-Scholes option valuation model and assumptions noted in the following table.

The expected life of the awards is based on the observed and expected time to post-vesting forfeiture and/or exercise.

Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

In determining the expected volatility, management considers implied volatility from publicly-traded options on our common stock at the date of grant, historical volatility and other factors.

The risk-free interest rate is based on the continuous rates provided by the United States Treasury with a term equal to the expected life of the option.

The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant.

Years Ended October 31, 2022 2021 2020

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Vested and exercisable at October 31, 2022 624,512 $ 223.45 4.57 $ 35,586,767

The weighted-average fair value of each option granted during fiscal 2021, estimated as of the grant date using the Black-Scholes option pricing model, for the 2007 Plan was $ 84.10 .

No options were granted under the 2020 Directors' Plan in fiscal 2021.

The total intrinsic value of options exercised during the fiscal year ended October 31, 2021 was $ 64.7 million.

The weighted-average fair value of each option granted during fiscal 2020 and 2019, estimated as of the grant date using the Black-Scholes option pricing model, for the 2007 Plan was $ 70.45 and $ 60.71 , respectively.

The total intrinsic value of options exercised during fiscal 2020 and 2019 was $ 22.6 million and $ 40.1 million, respectively.

The weighted-average fair value of options granted during fiscal 2022, 2021 and 2020, estimated as of the grant date using the Black-Scholes option pricing model, for the 2007 Plan was $ 90.41 , $ 84.10 and $ 70.45 , respectively.

The total intrinsic value of options exercised during the fiscal years ended October 31, 2022, 2021 and 2020 was $ 6.6 million, $ 64.7 million and $ 22.6 million, respectively.

Stock options outstanding under our current plans have been granted at prices which are either equal to or above the market value of the common stock on the date of grant.

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We generally recognize compensation expense ratably over the vesting period.

However, Directors' options grants would have been expensed on the date of grant as the 2020 Directors' Plan did not contain a substantive future requisite service period.

As of October 31, 2021, there was

As of October 31, 2022, there was $ 21.0 million of total unrecognized compensation cost related to nonvested options, which is expected to be recognized over a remaining weighted-average vesting period of 2.3 years.

THE COOPER COMPANIES, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

$ 21.0 million of total unrecognized compensation cost related to nonvested options, which is expected to be recognized over a remaining weighted-average vesting period of 2.7 years.

Restricted Stock Units

RSUs granted under the 2007 Plan generally vest over three to five years .

RSUs granted under the 2020 Directors' Plan vest in one year .

The fair value of RSUs is estimated on the date of grant based on the market price of our common stock.

The grant-date fair value of RSUs is estimated based on the market price of our common stock.

We recognize compensation expense ratably over the vesting period.

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The purpose of the ESPP is to provide eligible employees of the Company with the opportunity to acquire shares of common stock at 85 % of the market price on the last business day of each offering period by means of accumulated payroll deductions.

Payroll deductions will be limited to maximum of 15 % of the employee’s eligible compensation, not to exceed $ 21.3 thousand in any one calendar year.

The ESPP initially authorized the issuance of 1,000,000 shares of common stock.

3 unchanged sentences

Total ESPP share-based compensation recognized during fiscal 2022 and 2021 was $ 1.1 million and $ 1.0 million, respectively.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Employee Benefits

Cooper's Retirement Income Plan

Cooper's Retirement Income Plan (Plan), a defined benefit plan, covers substantially all full-time United States employees.

Cooper's contributions are designed to fund normal cost on a current basis and to fund the estimated prior service cost of benefit improvements.

The Company's Retirement Income Plan (Plan), a defined benefit plan, is only available to full-time United States employees, subject to the soft freeze mentioned below.

The Company's contributions are designed to fund normal cost on a current basis and to fund the estimated prior service cost of benefit improvements.

The unit credit actuarial cost method is used to determine the annual cost.

Cooper pays the entire cost of the Plan and funds such costs as they accrue.

The Company pays the entire cost of the Plan and funds such costs as they accrue.

Virtually all of the assets of the Plan are comprised of equities and participation in equity and fixed income funds.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company uses individual spot rates along the yield curve that correspond with the timing of each benefit payment to determine the service and interest costs of components of its net periodic benefit cost utilizing the correlation of projected cash outflows and corresponding spot rates on the yield curve.

The following table sets forth the Plan's benefit obligations and fair value of the Plan assets at October 31, 2022, 2021 and 2020 and the funded status of the Plan and net periodic pension costs for each of the years in the three-year periods ended October 31, 2022.

The net amounts recognized in the Consolidated Balance Sheets consist of noncurrent liabilities.

The accumulated benefit obligation was $ 134.9 million, $ 207.6 million and $ 195.8 million for the years ended October 31, 2022, 2021 and 2020.

Retirement Income Plan

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Benefits paid ( 13.1 ) ( 11.5 ) ( 10.0 )

Actuarial loss 2.0 20.0 36.6

Actuarial (gain)/loss ( 93.2 ) 2.0 20.0

Benefit obligation, end of year $ 148.0 $ 230.9 $ 218.8

9 unchanged sentences

2022 2021 2020

Amounts recognized in the Consolidated Balance Sheets consist of:

Noncurrent liabilities $ ( 31.4 ) $ ( 59.3 ) $ ( 53.7 )

Net amount recognized at year end $ ( 31.4 ) $ ( 59.3 ) $ ( 53.7 )

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended October 31,

(In millions)

2021 2020 2019

Amounts recognized in accumulated other comprehensive income consist of:

4 unchanged sentences

2022 2021 2020

Information for defined benefit plans with projected benefit obligation in excess of plan assets:

Projected benefit obligation $ 230.9 $ 218.8 $ 189.7

Fair value of plan assets $ 199.5 $ 159.5 $ 136.0

Years Ended October 31,

(In millions)

2021 2020 2019

Information for defined benefit plans with accumulated benefit obligations in excess of plan assets:

Accumulated benefit obligation $ 207.6 $ 195.8 $ 170.8

Fair value of plan assets $ 199.5 $ 159.5 $ 136.0

Years Ended October 31,

(In millions)

2021 2020 2019

Reconciliation of (prepaid) accrued pension cost:

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(Prepaid)/Accrued pension cost at fiscal year end $ ( 2.9 ) $ ( 13.0 ) $ ( 14.8 )

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended October 31,

8 unchanged sentences

Net periodic pension cost $ 10.1 $ 14.5 $ 12.3

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended October 31,

26 unchanged sentences

Reasons for Significant Liability Gains and Losses

The projected benefit obligation experienced a net loss of approximately $ 2.0 million during the year.

This loss is primarily due to losses from assumption changes of approximately $ 0.7 million, and losses of approximately $ 1.3 million due to demographic experience.

The key assumption changes were the decrease in the discount rate (loss of $ 0.7 million), a change in the mortality tables projection scale (loss of $ 0.5 million), and changes in assumptions for lump sum determination (gain of $ 0.5 million).

The primary reasons for demographic losses were the net effect of retirement rates, termination rates, salary increases and other experience that was different from assumed.

The projected benefit obligation experienced a net gain of approximately $ 93.2 million during the year.

This net gain is primarily due to gains from assumption changes of approximately $ 97.1 million, offset by losses of approximately $ 3.9 million

THE COOPER COMPANIES, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

due to demographic experience.

The key assumption changes were the increase in the discount rate (gain of $ 72.7 million), a change in the assumed payment form election probabilities (gain of $ 0.3 million), and changes in assumptions for lump sum determination (gain of $ 24.1 million).

The primary reasons for demographic losses were the net effect of retirement rates, termination rates, salary increases and other experience that was different from assumed.

Weighted-average asset allocations at year end, by asset category are as follows:

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To achieve the long-term rate of return, plan assets will be invested in a mixture of instruments, including but not limited to, corporate common stock (may include the Company's stock), investment grade bond funds, cash, balanced funds, real estate funds, small or large cap equity funds and international equity funds.

The allocation of assets will be determined by the investment manager and will typically include 50 % to 70 % equities with the remainder invested in fixed income, real estate, alternatives and cash.

The allocation of assets will be determined by the investment manager and will typically include 50 % to 70 % equities with the remainder invested in fixed income, hedging strategy funds and cash.

Presently, this diversified portfolio is expected to return roughly 8 % in the long run.

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The Plan has an established process for determining the fair value of plan assets.

Fair value is based upon quoted market prices, as Level 1 inputs, where available.

For investments in equity and bond mutual funds, and real estate funds, fair value is based on observable, Level 1 inputs, as price quotes are available and the fair values of these funds were not impacted by liquidity restrictions or the fund status.

Level 2 assets are those where price quotes are not readily available and the fair value would be determined based on other observable inputs.

Level 3 assets are those where price quotes are not readily available and the fair value would be determined based on unobservable inputs.

For investments in equity and bond mutual funds, and real estate funds, fair value is based on observable, Level 1 inputs.

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Plan Cash Flows

Contributions

The Company contributions to the Plan were $ 12.7 million for fiscal 2021, $ 23.4 million for fiscal 2020 and, $ 13.1 million for fiscal 2019.

The Company made no contributions to the Plan in fiscal 2022.

The Company contributions to the Plan were $ 12.7 million for fiscal 2021 and, $ 23.4 million for fiscal 2020.

The Company closely monitors the funded status of the Plan with respect to legislative and accounting rules.

The Company does not expect to make a contribution to the Plan during fiscal 2023.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Estimated Future Benefit Payments

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Cooper's contributions on account of participating employees, were $ 9.0 million, $ 7.2 million and $ 6.8 million for the years ended October 31, 2022, 2021 and 2020, respectively.

International Defined Benefit Plans

For its employees outside the United States, the Company also participates in country-specific defined contribution plans and government-sponsored retirement plans.

The defined contribution plans are administered by third-party trustees and the Company is not directly responsible for providing benefits to participants of government-sponsored plans.

The Company’s contributions to such plans are not significant individually or in the aggregate.

Fair Value Measurements

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value.

An asset’s or liability’s level is based on the lowest level of input that is significant to the fair value measurement.

Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs reflecting the reporting entity’s own assumptions.

At October 31, 2021 and October 31, 2020, the carrying value of cash and cash equivalents, accounts receivable, prepaid expense and other current assets, lines of credit, accounts payable and other current liabilities approximate fair value due to the short-term nature of such instruments and the ability to obtain financing on similar terms.

The carrying value of the Company's revolving credit facility and term loans approximates fair value based on current market rates (Level 2).

On April 6, 2020 the Company entered into six interest rate swap contracts which are used to hedge its exposure to changes in cash flows associated with its variable rate debt and are designated as derivatives in a cash flow hedge.

The payment streams are based on a total notional amount of $ 1.5 billion at the inception of the contracts.

The interest rate swap contracts had maturities of seven years or less.

As of October 31, 2021, three of the six interest rate swap contracts have matured and the outstanding contracts have a total notional amount of $ 1.0 billion.

The fair value of the interest rate swap contracts is measured on a recurring basis by netting the discounted future fixed cash payments and the discounted expected variable cash receipts.

The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves.

Refer to Note 14.

Financial Derivatives and Hedging for further information.

The Company did not have any cross-currency swaps or foreign currency forward contracts as of October 31, 2021.

The fair value of the Company's contingent consideration for which a liability is recorded is measured on a recurring basis as a Level 3 measurement , and the change in fair value is recognized in selling, general and administrative expense in the Consolidated Statements of Income.

Refer to Note 3.

Acquisitions and Assets Held for Sale for further information.

Nonrecurring fair value measurements

The Company uses fair value measures when determining assets and liabilities acquired in an acquisition as described in Note 3.

Acquisitions and Assets Held for Sale, which are considered a Level 3 measurement.

Contingencies

Legal Proceedings

The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business, including matters involving our products, intellectual property, supplier relationships, distributors, competitor relationships, employees and other matters.

The Company does not believe that the ultimate resolution of these proceedings or claims pending against it could have a material adverse effect on its financial condition or results of operations.

At each reporting period, the Company

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies .

At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies .

Legal fees are expensed as incurred.

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Competes in the worldwide contact lens market by developing, manufacturing and marketing a broad range of products for contact lens wearers, featuring advanced materials and optics.

CooperVision designs its products to solve vision challenges such as astigmatism, presbyopia, myopia, ocular dryness and eye fatigues, with a broad collection of spherical, toric and multifocal contact lenses.

• CooperSurgical.

Competes in the general health care market with a focus on advancing the health of women, babies and families through a diversified portfolio of products and services focusing on women's health and fertility.

Cooper uses operating income, as presented in our financial reports, as the primary measure of segment profitability.

We do not allocate costs from corporate functions to segment operating income.

Items below operating income are not considered when measuring the profitability of a segment.

We use the same accounting policies to generate segment results as we do for our consolidated results.

Total net sales include sales to customers as reported in our Consolidated Statements of Income and sales between geographic areas that are priced at terms that allow for a reasonable profit for the seller.

Operating income (loss) is total net sales less cost of sales, selling, general and administrative expenses, research and development expenses, amortization and intangible impairments.

Corporate operating loss is principally corporate headquarters expense.

Interest expense, and other income and expenses are not allocated to individual segments.

No customer accounted for 10% or more of our consolidated net revenue in the fiscal 2021, 2020 and 2019.

Identifiable assets are those used in continuing operations except cash and cash equivalents, which we include as corporate assets.

Long-lived assets are net property, plant and equipment.

The Company uses operating income, as presented in our financial reports, as the primary measure of segment profitability.

The Company does not allocate costs from corporate functions to segment operating income.

The Company uses the same accounting policies to generate segment results as it does for consolidated results.

No customers accounted for 10% or more of our consolidated net revenue in fiscal 2022, 2021 and 2020.

Total identifiable assets are those used in continuing operations except cash and cash equivalents, which the Company includes as corporate assets.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents a summary of our business segment net sales:

28 unchanged sentences

Interest expense 23.1

Other expense, net 8.5

Other (income), net ( 8.8 )

Income before income taxes $ 491.5

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Net sales $ 2,152.9 $ 1,884.5 $ ( 729.0 ) $ 3,308.4

Operating (loss) income $ ( 26.8 ) $ 416.2 $ 116.4 $ 505.8

Operating income $ 71.8 $ 403.8 $ 32.0 $ 507.6

Long-lived assets $ 856.1 $ 310.8 $ 266.0 $ 1,432.9

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Net sales $ 1,495.3 $ 1,116.9 $ ( 181.3 ) $ 2,430.9

Operating income $ 83.2 $ 29.3 $ 434.2 $ 546.7

Operating (loss) income $ ( 14.5 ) $ 21.9 $ 304.4 $ 311.8

Long-lived assets $ 721.3 $ 363.0 $ 197.6 $ 1,281.9

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As part of the Company’s overall risk management practices the Company enters into financial derivatives, interest rate swaps designated as cash flow hedges, to hedge the Company's exposure to changes in cash flows associated with its variable rate debt.

The Company records all derivatives on its Consolidated Balance Sheets at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

All of the Company's derivatives have satisfied the criteria necessary to apply hedge accounting.

The gain or loss on derivative instruments designated and qualifying for cash flow hedge accounting is deferred in other comprehensive income.

The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings.

Deferred gains or losses from designated cash flow hedges are reclassified into earnings in the period that the hedged interest expense affects earnings.

The effectiveness of cash flow hedges is assessed at inception and quarterly thereafter.

The Company does not offset fair value amounts recognized for derivative instruments in its Consolidated Balance Sheets for presentation purposes.

Credit risk related to derivative transactions reflects the risk that a party to the transaction could fail to meet its obligation under the derivative contracts.

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The Company’s policy is to enter into contracts only with financial institutions which meet certain minimum credit ratings to help mitigate counterparty credit risk.

As of October 31, 2021, the Company had the following outstanding derivatives designated as hedging instruments:

(In millions, except for number of instruments) Number of Instruments Notional Value

Interest Rate Swap Contracts 3 $ 1,000

These contracts have remaining maturities of six years or less.

On April 6, 2020 the Company entered into six interest rate swap contracts which were used to hedge its exposure to changes in cash flows associated with its variable rate debt and were designated as derivatives in a cash flow hedge.

The payment streams were based on a total notional amount of $ 1.5 billion at the inception of the contracts.

As of October 31, 2022, three of the six interest rate swap contracts have matured and the outstanding contracts have a total notional amount of $ 1.0 billion and remaining maturities of five years or less.

The Company did not have any cross-currency swaps or foreign currency forward contracts as of October 31, 2022.

The pre-tax impact of gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $ 124.5 million ($ 30.1 million, net of tax) as of October 31, 2022.

The pre-tax impact of loss on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $ 17.1 million ($ 13.0 million, net of tax) as of October 31, 2020.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes the fair values of derivative instruments as of the periods indicated and the line items in the accompanying Consolidated Balance Sheets where the instruments are recorded:

Derivative Assets

(In millions) October 31, 2021 October 31, 2020

Derivatives designated as cash flow hedges Balance sheet location

Interest rate swap contracts Other current assets $ — $ —

Interest rate swap contracts Other non-current assets 17.2 —

Derivative Liabilities

(In millions) October 31, 2021 October 31, 2020

Derivatives designated as cash flow hedges Balance sheet location

Interest rate swap contracts Other current liabilities $ — $ 0.6

Interest rate swap contracts Other non-current liabilities — 16.5

The pre-tax impact of gain on derivatives designated for hedge accounting recognized in other comprehensive income (loss) was $ 17.2 million ($ 13.1 million, net of tax) as of October 31, 2021.

The fair value of derivative instruments are classified in "Other non-current assets" on our consolidated balance sheets.

The following table summarizes the amounts recognized with respect to our derivative instruments within the accompanying Consolidated Statements of Income:

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(In millions) 2022 2021 2020

Derivatives designated as cash flow hedges Location of Loss Recognized on Derivatives

Interest rate swap contracts Interest expense $ 8.0 $ 3.7 $ —

Derivatives designated as cash flow hedges Location of Loss (Income) Recognized on Derivatives

Interest rate swap contracts Interest expense (income) $ ( 2.3 ) $ 8.0 $ 3.7

The Company expects that ($ 38.3 million) recorded as a component of accumulated other comprehensive income (loss) will be realized in the Consolidated Statements of Income over the next twelve months and the amount will vary depending on prevailing interest rates.

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Amount reclassified from other comprehensive income into earnings, gross ($ 6.1 , net of tax)

Balance loss as of October 31, 2020 $ ( 17.1 )

Balance gain as of October 31, 2021 $ 17.2

Amount recognized in other comprehensive income on interest rate swap contracts, gross ($ 79.7 , net of tax)

1 unchanged sentence

Balance gain as of October 31, 2022 $ 124.5

Subsequent Events

Term Loan Agreement on November 2, 2021

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

of Nova Scotia, as administrative agent (the 2021 Term Loan Agreement), which matures on November 1, 2022.

The Company used part of the funds to partially repay outstanding borrowings under the 2020 Revolving Credit Facility and for general corporate purposes.

Amounts outstanding under the 2021 Term Loan Agreement will bear interest, at the Company’s option, at either the alternate base rate, or the adjusted LIBO rate (each as defined in the 2021 Term Loan Agreement), plus, in the case of adjusted LIBO rate loans, an applicable rate of 60 basis points.

The 2021 Term Loan Agreement contains customary restrictive covenants, as well as financial covenants that require the Company to maintain a certain total leverage ratio and interest coverage ratio, each as defined in the 2021 Term Loan Agreement, consistent with the 2020 Credit Agreement.

Debt for additional information.

Generate Life Sciences Acquisition

The aggregate consideration is $ 1.605 billion in cash, subject to adjustment as set forth in the Merger Agreement.

The transaction is anticipated to close in the first quarter of fiscal 2022 and is subject to customary closing conditions, including regulatory approval.

This acquisition is a strong strategic fit for CooperSurgical as it allows the Company to better serve fertility clinics and Obstetricians/Gynecologists (OB/GYN) with a more extensive suite of products and services.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data