What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-12-08 compared with 2022-12-09 · 81 added, 139 removed, 194 unchanged (53% of the section changed)

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However, we face significant risks and uncertainties in our global operating environment as further described in the “Risk Factors” section in Part I, Item 1A of this filing.

These risks include uncertain global and regional business, political and economic conditions, including but not limited to those associated with the COVID-19 pandemic, Russia’s invasion of Ukraine, inflation, foreign exchange rate fluctuations, regulatory developments, supply chain disruptions, and escalating global trade barriers.

These risks and uncertainties have adversely affected our sales, cash flow and current performance in the past and are likely to further adversely affect our future sales, cash flow and performance.

Global Market and Economic Conditions - Over the last few years in the U.S.

and globally, market and economic conditions have been challenging, particularly in light of the COVID-19 pandemic.

Foreign countries, in particular the Euro zone, have experienced recessionary pressures and face continued concerns about the systemic impacts of adverse economic conditions and geopolitical issues.

In addition, changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the war in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic, as well as other stimulus and spending programs, have led to higher inflation, which is likely to lead to an increase in costs and may cause changes in fiscal and monetary policy, including increased interest rates.

In a higher inflationary environment, we may be unable to raise the prices of our products and services sufficiently to keep up with the rate of inflation.

These economic conditions could have a material adverse effect on our results of operations and financial condition.

COVID-19 Considerations - The COVID-19 pandemic and health crisis led to ongoing economic and societal disruptions and uncertainties that 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 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 continue to have, an adverse effect on our sales, operating results and cash flows.

We have taken an active role in addressing the pandemic’s impact on our employees, suppliers, distribution channels, operations and customers, including taking precautionary measures and developing contingency plans with respect to our operations and to help ensure the safety of our personnel in all our facilities, and we have endeavored and continue to follow recommended actions of government and health authorities to protect our employees worldwide.

As of the date of this filing, we have not experienced any significant disruption at our manufacturing facilities or in our access to necessary raw materials and other supplies or with our distribution network;

however, we have experienced higher unabsorbed fixed overhead costs, labor inefficiencies, delays in receiving certain raw materials, higher cost of production and higher freight charges as a result of the COVID-19 pandemic.

At this time, future developments with respect to the COVID-19 pandemic remain highly uncertain and largely outside of our control.

We cannot predict the spread, duration and severity of the pandemic or any subsequent outbreaks, potential actions taken by governments to respond to the pandemic, or potential impacts on global and local economic activity.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

will continue to closely monitor the developments relating to the COVID-19 pandemic and the responses from governments and private sector participants.

For more information on the risks associated with the COVID-19 pandemic, refer to Part I, Item 1A, "Risk Factors" herein.

CooperVision - We compete in the worldwide contact lens market with our spherical, toric, multifocal, toric multifocal contact lenses offered in a variety of materials including using silicone hydrogel Aquaform ® technology and PC Technology™.

These risks include uncertain global and regional business, political and economic conditions, including but not limited to those associated with man-made or natural disasters, pandemic conditions, inflation, foreign exchange rate fluctuations, regulatory developments, supply chain disruptions, and escalating global trade barriers.

These risks and uncertainties have adversely affected our sales, cash flow and performance in the past and could further adversely affect our future sales, cash flow and performance.

CooperVision - We compete in the worldwide contact lens market with our spherical, toric, multifocal and toric multifocal contact lenses offered in materials like silicone hydrogel Aquaform technology.

We believe that there will be lower contact lens wearer dropout rates as technology improves and enhances the wearing experience through a combination of improved designs and materials and the growth of preferred modalities such as single-use and monthly wearing options.

CooperVision also competes in the myopia management and specialty eye care contact lens markets with myopia management contact lenses using its ActivControl technology and with products such as orthokeratology (ortho-k) and scleral lenses.

In November 2019, CooperVision received U.S.

Food and Drug Administration (FDA) approval for its MiSight ® 1 day lens, which is the first and only FDA-approved product indicated to slow the progression of myopia in children with treatment initiated between the ages of 8-12 and became available in the United States during fiscal 2020.

In August 2021, CooperVision received Chinese National Medical Products Administration (NMPA) approval for its MiSight ® 1 day lens for use in China.

CooperVision has FDA approval for its MiSight 1 day lens, which is the first and only FDA-approved product indicated to slow the progression of myopia in children with treatment initiated between the ages of 8-12.

Further, CooperVision has Chinese NMPA approval for its MiSight 1 day lens for use in China.

CooperVision is focused on greater worldwide market penetration using recently introduced products, and we continue to expand our presence in existing and emerging markets, including through acquisitions.

CooperVision acquired the following entity during fiscal 2022:

• A privately-held Denmark-based ortho-k contact lens distributor in May 2022

CooperVision acquired the following entities during fiscal 2021:

• A privately-held UK contact lens manufacturer in April 2021

• A privately-held medical device company (SightGlass Vision Inc.

(SGV), a developer of spectacle lenses for myopia management) in January 2021

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.

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.

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.

Our ability to compete successfully with a full range of silicone hydrogel products is an important factor to achieving our desired future levels of sales growth and profitability.

CooperVision manufactures and markets a wide variety of silicone hydrogel contact lenses.

Our single-use silicone hydrogel product franchises, clariti ® and MyDay ® , remain a focus as we expect increasing demand for these products as well as future single-use products as the global contact lens market continues to shift to this modality.

Outside of single-use, the Biofinity ® and Avaira Vitality ® product families comprise our focus in the FRP, or frequent replacement product, market which encompasses the 2-week and monthly modalities.

Our single-use silicone hydrogel product franchises, clariti, MyDay and MyDay Energys remain a focus as we expect increasing demand for these products, as well as future single-use products, as the global contact lens market continues to shift to this modality.

Outside of single-use, the Biofinity and Avaira Vitality product families comprise our focus in the FRP, or frequent replacement product, market which encompasses the monthly and two-week modalities.

Included in this segment are unique products such as Biofinity Energys, which helps individuals with digital eye fatigue.

CooperSurgical - Our CooperSurgical business competes in the general health care market with a commitment to advancing the health of women, babies and families through its diversified portfolio of products and services focusing on women's health and fertility.

CooperSurgical - Our CooperSurgical business competes in the fertility and women's health care market through its diversified portfolio of products and services, including fertility products and services, medical devices, cryostorage (such as cord blood and cord tissue storage) and contraception.

CooperSurgical has established its market presence and distribution system by developing products and acquiring companies, products and services that complement its business model.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

CooperSurgical acquired the following entities during fiscal 2022:

• A private cryopreservation services company in April 2022

• 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) in December 2021

CooperSurgical acquired the following entities during fiscal 2021:

• A privately-held medical device company that develops single-use illuminating medical devices in May 2021

• A privately-held medical device company in March 2021

• A privately-held medical device company in February 2021

• A privately-held in vitro fertilization (IVF) cryostorage software solutions company in December 2020

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.

Transition from LIBOR

The UK’s Financial Conduct Authority (FCA), which regulates the London Interbank Offered Rate (LIBOR), announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021.

In March 2021, the FCA confirmed its intention to stop requiring banks to submit rates required to calculate LIBOR after 2021.

However, for U.S.

dollar-denominated (USD) LIBOR, only one-week and two-month USD LIBOR will cease to be published after 2021, and all remaining USD LIBOR tenors will continue being published until June 2023.

Further, in March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This guidance 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.

We have material contracts that are indexed to LIBOR and are continuing to monitor this activity and evaluate the related risk.

We are continuing to evaluate the scope of impacted contracts and the potential impact.

We are also monitoring the developments regarding alternative rates and may amend certain contracts to accommodate those rates if the contract does not already specify a replacement rate.

While the notional value of agreements potentially indexed to LIBOR is material, we do not expect a material impact on our financial statements related to this transition.

We believe that current cash, cash equivalents and future cash flow from operating activities will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the financial statements included in this annual report.

To the extent additional funds are necessary to meet our liquidity needs such as that for acquisitions, share repurchases, cash dividends or other activities as we execute our business strategy, we anticipate that additional funds will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds;

however, such financing may not be available on favorable terms, or at all.

Competitive factors in the segments in which CooperSurgical competes include technological and scientific advances, product quality and availability, price and customer service (including response time and effective communication of product information to physicians, consumers, fertility clinics and hospitals).

THE COOPER COMPANIES, INC.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

2022 Compared with 2021

CooperVision Net Sales

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CooperVision Net Sales by Category

Single-use spheres – This includes Biomedics 1 day, clariti 1 day, MyDay, MiSight and Proclear 1 day

Toric – This includes Avaira Vitality toric, Biomedics toric, Biofinity toric, clariti 1 day toric, MyDay toric and Proclear toric

Single-use spheres – This includes Biomedics 1 day, clariti 1 day, MiSight, MyDay, and Proclear 1 day

Toric – This includes Avaira Vitality toric, Biofinity toric, Biomedics toric, clariti 1 day toric, MyDay toric and Proclear toric

Multifocal – This includes Biofinity multifocal, Biofinity toric multifocal, clariti 1 day multifocal, MyDay multifocal and Proclear 1 day multifocal

Non single-use sphere, other – This includes our Avaira Vitality spheres, frequent replacement product (FRP) lens portfolio (Biofinity spheres, Biofinity Energys, Biomedics, Proclear spheres, clariti spheres), ortho-k, scleral and custom lenses, contact lens solutions and other

Non single-use sphere, other – This includes our frequent replacement product (FRP) lens portfolio (Avaira Vitality spheres, Biofinity spheres, Biofinity Energys spheres, Biomedics spheres, clariti spheres, Proclear spheres), specialty lenses (custom, ortho-k, and scleral lenses) and other.

THE COOPER COMPANIES, INC.

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$ 2,423.7 $ 2,243.3 8 %

In the fiscal year ended October 31, 2022, the growth experienced across all categories (except for "Other" as mentioned below) was partially offset by unfavorable foreign exchange rate fluctuations, which approximated $149.5 million.

Sales growth was primarily driven by an increase in the volume of lenses sold across our core portfolio due to a recovery in demand from the impact of the COVID-19 pandemic.

In the fiscal year ended October 31, 2023, the growth experienced across all categories was partially offset by unfavorable foreign exchange rate fluctuations, which approximated $61.0 million.

• Toric and multifocal lenses grew primarily through the success of MyDay and Biofinity.

• Single-use sphere lenses grew primarily through MyDay, clariti and MiSight lenses.

• Non single-use sphere lenses grew primarily through Biofinity and ortho-k.

• "Other" products decreased primarily due to exit of the contact lens care business.

Contact lens care represented approximately 1% and 2% of net sales in fiscal 2022 and 2021.

• Total silicone hydrogel products increased by 7%, representing 78% of net sales in fiscal 2022 compared to 76% in fiscal 2021.

• Single-use sphere lenses grew primarily through MyDay, MiSight, and clariti lenses.

• Non single-use sphere lenses grew primarily through specialty lenses.

• "Other" products represented approximately 1% of net sales in fiscal 2023 and 2022.

CooperVision Net Sales by Geography

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CooperSurgical Net Sales by Category

CooperSurgical supplies the family health care market with a diversified portfolio of products and services.

CooperSurgical supplies the fertility and women's health care market with a diversified portfolio of products and services.

Our office and surgical offerings include products that facilitate surgical and non-surgical procedures that are commonly performed primarily by obstetricians and gynecologists in hospitals, surgical centers, fertility clinics and medical offices.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The chart below shows the percentage of net sales of office and surgical products and fertility.

Office/Surgical – This includes Endosee endometrial imaging products, Fetal Pillow cephalic elevation devices for use in Cesarean sections, illuminated speculum products, Lone Star retractor systems, loop electrosurgical excision procedure (LEEP) products, Mara water ablation systems, newborn stem cell storage, PARAGARD contraceptive IUDs, point-of-care products and uterine positioning products.

Fertility – Our significant fertility products and services include cryostorage, donor gamete services, fertility consumables and equipment and genomic services (including preimplantation genetic testing).

The chart below shows the percentage of net sales of office and surgical and fertility.

Office/Surgical – This includes Endosee endometrial imaging products, Fetal Pillow cephalic elevation devices for use in Cesarean sections, illuminated speculum products, Lone Star retractor systems, loop electrosurgical excision procedure (LEEP) products, Mara water ablation systems, cryostorage (such as cord blood and cord tissue storage), Paragard contraceptive IUDs, point-of-care products and uterine positioning products.

Fertility – This includes fertility consumables and equipment, donor gamete services, and genomic services (including genetic testing).

($ in millions) 2023 2022 2023 vs.

2022 % Change

Office and surgical products $ 633.6 $ 451.3 40 %

Office and surgical

$ 689.5 $ 633.6 9 %

Fertility 480.0 431.5 11 %

$ 1,169.5 $ 1,065.1 10 %

In th e fiscal year ended October 31, 2022, net sales increase in both categories was mainly due to the Generate acquisition.

The increase was offset by unfavorable foreign exchange rate fluctuations, which approximated $33.4 million.

Consolidated Gross Margin decreased in fiscal 2022 to 65% compared to 67% in fiscal 2021 primarily driven by unfavorable currency and contact lens care exit costs.

Selling, General and Administrative Expense (SGA)

In th e fiscal year ended October 31, 2023, the net sales increase in both categories was partially due to the addition of Generate Life Sciences (Generate) on December 17, 2021.

Additionally, office and surgical net sales increased due to an increase in sales from products such as Uterine Manipulators, Fetal Pillow and Surgical Retractors, and fertility net sales increased due to an increase in revenue from consumable products and genomic services.

The increase was partially offset by unfavorable foreign exchange rate fluctuations, which approximated $15.1 million.

Consolidated Gross Margin was relatively flat at 66% in fiscal 2023 compared to 65% in fiscal 2022.

Selling, General and Administrative (SGA) Expenses

($ in millions) 2023 % Net

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$ 1,501.2 42 % $ 1,342.2 41 % 12 %

CooperVision's SGA decreased in fiscal 2022 compared to fiscal 2021 primarily due to the $56.8 million increase in fair value of the contingent consideration related to SGV acquisition in fiscal 2021, partially offset by increase in SGA to support sales growth.

CooperVision's SGA expenses increased in fiscal 2023 compared to fiscal 2022 primarily due to an increase in selling and marketing activities, distribution costs, and an intangible assets impairment charge associated with the discontinuation of

THE COOPER COMPANIES, INC.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

CooperSurgical's SGA increased in fiscal 2022 compared to fiscal 2021 primarily due to the addition of Generate's SGA and acquisition and integration expenses.

Corporate SGA increased in fiscal 2022 compared to fiscal 2021 primarily due to share-based compensation related expenses.

Research and Development Expense (R&D)

certain products, partially offset by $31.8 million release of contingent consideration liability associated with SightGlass Vision's regulatory approval milestone.

CooperSurgical's SGA expenses increased in fiscal 2023 compared to fiscal 2022 primarily due to an increase in selling and marketing activities and the payment of a $45.0 million termination fee under an asset purchase agreement related to Cook Medical’s reproductive health business.

Acquisitions and Joint Venture for further information on the termination fee.

Corporate SGA expenses increased in fiscal 2023 compared to fiscal 2022 primarily due to share-based compensation related expenses.

Research and Development (R&D) Expenses

($ in millions) 2023 % Net

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$ 137.4 4 % $ 110.3 3 % 25 %

CooperVision's R&D expense increased in fiscal 2022 compared to fiscal 2021 primarily due to myopia management programs and timing of R&D projects.

CooperVision's R&D expenses increased in fiscal 2023 compared to fiscal 2022 primarily due to European Medical Device Regulation costs and myopia management programs, and timing of R&D projects.

CooperVision's R&D activities are primarily focused on the development of contact lenses, manufacturing technology and process enhancements.

CooperSurgical's R&D expense increased in fiscal 2022 compared to fiscal 2021 mainly due to the addition of Generate's R&D expense.

CooperSurgical's R&D expenses increased in fiscal 2023 compared to fiscal 2022 mainly due to European Medical Device Regulation costs.

CooperSurgical's R&D activities are focused on developing and refining diagnostic and therapeutic products including medical interventions, surgical devices and fertility solutions.

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$ 186.2 5 % $ 179.5 5 % 4 %

CooperVision's amortization expense decreased in absolute dollars in fiscal 2022 compared to fiscal 2021, primarily due to the deconsolidation of SGV.

CooperSurgical's amortization expense increased in absolute dollars in fiscal 2022 compared to fiscal 2021, primarily due to the amortization of intangible assets newly acquired through acquisitions.

CooperVision's amortization expense for fiscal 2023 compared to fiscal 2022 remained relatively flat year over year.

CooperSurgical's amortization expense increased in fiscal 2023 compared to fiscal 2022, primarily due to the amortization of intangible assets recently acquired through acquisitions.

Operating Income

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CooperVision's operating income increased in fiscal 2023 compared to fiscal 2022, primarily due to an increase in net sales partially offset by net changes in operating expenses.

CooperSurgical's operating income decreased in fiscal 2022 compared to fiscal 2021, primarily due to an increase in SGA and amortization expenses, partially offset by an increase in net sales.

Corporate operating loss increased in fiscal 2022 compared to fiscal 2021, primarily due to higher share-based compensation expense.

CooperSurgical's operating income decreased in fiscal 2023 compared to fiscal 2022, primarily due to an increase in SGA and R&D expenses, partially offset by an increase in net sales.

THE COOPER COMPANIES, INC.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

On a consolidated basis, operating income increased in fiscal 2022 compared to fiscal 2021, primarily due to an increase in consolidated net sales.

Corporate operating loss increased in fiscal 2023 compared to fiscal 2022, primarily due to higher share-based compensation expenses.

Interest Expense

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Interest expense $ 105.3 3 % $ 57.3 2 % 84 %

Interest expense increased during fiscal 2022 compared to the prior year, primarily due to higher average debt balances and higher interest rates.

Other (Income) Expense, Net

Interest expense increased during fiscal 2023 compared to the prior year, primarily due to higher interest rates.

Other Expense (Income), Net

($ in millions) 2023 2022

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$ 14.9 $ (25.0)

Investment gain primarily consists of a gain on remeasurement of the fair value of retained equity investment in SGV as a result of deconsolidation.

Foreign exchange loss is primarily associated with the strengthening of the US dollar against foreign currencies and the effect on intercompany receivables.

Other expense (income), net increased in fiscal 2022, primarily due to a loss on minority investments, partially offset by defined benefit plan related income.

Investment gain in fiscal 2022 primarily consists of a gain on remeasurement of the fair value of retained equity investment in SGV as a result of deconsolidation.

Foreign exchange loss is primarily associated with the weakening of the U.S.

dollar against foreign currencies and the effect on intercompany receivables.

Other expenses (income), net increased in fiscal 2023, primarily due to a loss on minority investments, partially offset by defined benefit plan related income.

Provision for Income Taxes

The effective tax rates for fiscal 2023 and 2022 were 28.7% and 18.8%, 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 increase was primarily due to changes in the geographic composition of pre-tax earnings, an increase in the UK statutory tax rate from 19% to 25%, capitalization of research and experimental expenditures for fiscal 2023 as required by the 2017 Tax Cuts and Jobs Act, and changes in unrecognized tax benefits.

The effective tax rate for fiscal 2023 was higher than the US federal statutory rate primarily due to foreign earnings subject to US tax.

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.

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 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.

Income Taxes for additional information.

Income Taxes for further information.

THE COOPER COMPANIES, INC.

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Working capital at October 31, 2023 and October 31, 2022, was $735.9 million and $253.4 million, respectively.

The decrease in working capital is primarily due to an increase in accounts payable as a result of timing of payment to vendors, and an increase in short-term debt due to the 364-day term loan agreement entered into during fiscal 2022.

The increase in working capital was primarily due to repayment of the 364-day term loan during fiscal 2023 and an increase in inventories.

Financing Arrangements for further information.

The $43.1 million increase in inventories was primarily due to higher sales, and the buildup of inventory for future product launches.

($ in millions) 2023 2022 2021

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cash and restricted cash equivalents (2.3) (12.9) 2.9

Increase (decrease) in cash, cash equivalents, restricted cash and

(Decrease) increase in cash, cash equivalents, restricted cash and

restricted cash equivalents

$ (17.7) $ 42.0 $ (20.2)

Operating Cash Flow

Cash provided by operating activities in fiscal 2022 was lower than cash provided by operating activities in fiscal 2021, primarily due to settlement of contingent consideration of $52.3 million.

Cash provided by operating activities in fiscal 2023 decreased compared to fiscal 2022, primarily due to the payment of a $45 million termination fee under an asset purchase agreement and net changes in operating capital, partially offset by net changes in other non-cash items.

The $45.0 million termination fee under an asset purchase agreement related to Cook Medical’s reproductive health business was accrued for during the second quarter of fiscal 2023 and paid on August 9, 2023.

Acquisitions and Joint Venture for further information on the termination fee.

Investing Cash Flow

Cash used in investing activities in fiscal 2022 was higher than cash used in investing activities in fiscal 2021, primarily attributable to $1.6 billion cash paid, net of cash acquired, for the Generate acquisition, partially offset by $52.1 million proceeds from the sale of a 50% interest in SGV.

Acquisitions and Joint Venture for further information.

Cash used in investing activities in fiscal 2023 was lower than cash used in investing activities in fiscal 2022, primarily attributable to $1.6 billion cash paid, net of cash acquired, for the Generate acquisition in fiscal 2022.

The decrease in cash used for acquisitions was partially offset by an increase in purchases of property, plant and equipment.

Financing Cash Flow

Cash was provided by financing activities in fiscal 2022 compared to used in financing activities in fiscal 2021, primarily due to a decrease in repayments of long-term debt obligations by $854.5 million, and net proceeds from short-term debt of $329.3 million in fiscal 2022, compared to net repayments of short-term debt obligations of $321.3 million in fiscal 2021.

Cash used in financing activities in fiscal 2023 was primarily due to repayments of $338.0 million on the 2021 364-day term loan, partially offset by $172.6 million of funds drawn on the 2020 Revolving Credit.

Cash provided by financing activities in fiscal 2022 was primarily due to funds received from the 2021 term loan facility ($1.5 billion) and the 2021 364-day term loan facility ($840.0 million), partially offset by $561.5 million repayments of the 2020 Revolving Credit, $502.0 million repayments of the 2021 364-day term loan facility, and $78.5 million repurchases of common stock.

The following is a summary of the maximum commitments and the net amounts available to us under different credit facilities as of October 31, 2023:

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2020 Revolving Credit $ 1,290.0 $ 172.6 $ 2.1 $ 1,115.3 April 1, 2025

2021 364-Day Term Loan 840.0 338.0 n/a — November 1, 2022

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

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As of October 31, 2023, the Company was in compliance with all debt covenants.

Financing Arrangements for additional information.

Considering recent market conditions and the COVID-19 pandemic crisis, we have re-evaluated our operating cash flows and cash requirements and continue to believe that current cash, cash equivalents, future cash flow from operating activities and cash available under our 2020 Credit Agreement will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the

Financing Arrangements for further information.

THE COOPER COMPANIES, INC.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Financial Statements included in this quarterly report.

Considering recent market conditions, we have re-evaluated our operating cash flows and cash requirements and continue to believe that current cash, cash equivalents, future cash flow from operating activities and cash available under our 2020 Credit Agreement will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the Consolidated Financial Statements included in this annual report.

To the extent additional funds are necessary to meet our liquidity needs such as that for acquisitions, share repurchases, cash dividends or other activities as we execute our business strategy, we anticipate that additional funds could be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds;

however, such financing may not be available on favorable terms, or at all.

Share Repurchases

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.

In December 2011, the Company's Board of Directors authorized the 2012 Share Repurchase Program ("2012 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 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.

In fiscal 2022, we repurchased 191,165 shares of our common stock for $78.5 million.

Purchases under the 2012 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.

In fiscal 2023, there were no share repurchases under the 2012 Program.

At October 31, 2023, $256.4 million remained authorized for repurchase under the program.

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In fiscal 2023 and 2022, the Company declared regular dividends of 6 cents per share (a semiannual dividend of 3 cents per share) and paid a total of $3.0 million in each fiscal year.

In December 2023, our Board of Directors decided to end the declaration of the semiannual dividend.

Contractual Obligations

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(1) As of October 31, 2023, we had $88.6 million of income tax liabilities related to the one-time transition tax that resulted from the enactment of the 2017 US Tax Act, which is payable in annual installments through fiscal 2026.

The installment for fiscal 2022 is classified as a current income tax payable on our consolidated balance sheet.

The installment for fiscal 2023 is classified in " Other current liabilities" i n our Consolidated Balance Sheet.

We are unable to reliably estimate the timing of future payments related to uncertain tax positions and have excluded $24.0 million of long-term income taxes payable from the table above.

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Employee Benefits.

Transition from LIBOR

In March 2021, the FCA confirmed its intention to stop requiring banks to submit rates required to calculate LIBOR after 2021.

However, for U.S.

dollar-denominated (USD) LIBOR, only one-week and two-month USD LIBOR will cease to be published after 2021, and all remaining USD LIBOR tenors will continue being published until June 2023.

Further, in March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects

THE COOPER COMPANIES, INC.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

of Reference Rate Reform on Financial Reporting .

This guidance 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.

Effective February 1, 2023, the Company transitioned its credit agreements from LIBOR to the Secured Overnight Financing Rate ("SOFR").

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Estimates

Management estimates and judgments are an integral part of financial statements prepared in accordance with GAAP.

We believe that the critical accounting policies described in this section address the more significant estimates required of management when preparing the Consolidated Financial Statements in accordance with GAAP.

We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations.

We believe that the accounting 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.

We believe the followings represent our critical accounting policies and estimates used in the preparation of our consolidated financial statements:

We believe that the accounting 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 period.

The critical accounting policies described in this section address the more significant estimates required of management when preparing the Consolidated Financial Statements in accordance with GAAP.

• Revenue recognition - We recognize revenue from product sales when obligations under the terms of a contract with the customer are satisfied;

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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 7. Management’s Discussion and Analysis