What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-12-08 compared with 2022-12-09 · 232 added, 329 removed, 902 unchanged (38% of the section changed)

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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, 2023, 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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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

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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;

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;

(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;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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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 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.

Evaluation of the sufficiency of audit evidence over inventories and net sales

As discussed in Notes 1 and 12 to the consolidated financial statements and disclosed in the consolidated balance sheet and consolidated statement of income, the Company recorded $ 735.6 million in inventories and $ 3,593.2 million in net sales as of and for the year ended October 31, 2023, respectively.

Inventories are primarily comprised of raw materials, work-in-process, and finished goods that are physically located at certain of the Company's locations.

Net sales are recognized primarily from the sale of products from each of the Company's locations.

We identified the evaluation of the sufficiency of audit evidence over inventories and net sales as a critical audit matter.

Evaluating the sufficiency of the audit evidence obtained required subjective auditor judgment because of the decentralized structure and geographic dispersion of the Company's manufacturing and distribution locations.

This included determining the locations for which procedures were performed.

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 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 applied auditor judgment to determine the nature and extent of procedures to be performed over inventories and net sales, including the determination of the Company’s locations for which those procedures were performed.

For certain locations where procedures were performed, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company's inventories and net sales processes, including controls over the amounts recorded in inventories and the amounts recorded in net sales.

We assessed the recorded inventories for each location where procedures were performed by participating in a physical inventory count and observing a sample of inventories on hand and comparing the cost recorded for a sample of inventories on hand to underlying documentation.

We assessed recorded net sales for each location where procedures were performed by selecting a sample of net sales transactions and comparing the amount recognized to underlying documentation, such as contracts with customers and shipping documentation.

We evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed over inventories and net sales, including the appropriateness of the nature and extent of audit effort.

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

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Interest expense 105.3 57.3 23.1

Other (income) expense, net ( 25.0 ) ( 8.8 ) 8.5

Other expense (income) 14.9 ( 25.0 ) ( 8.8 )

Income before income taxes 412.9 475.3 491.5

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Net income $ 294.2 $ 385.8 $ 2,944.7

Other comprehensive (loss) income:

Other comprehensive income (loss):

Cash flow hedges, net of tax of $( 2.4 ), $ 26.1 and $ 8.2 , respectively

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Foreign currency translation adjustment 17.0 ( 234.7 ) 82.0

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

Other comprehensive income (loss)

13.0 ( 125.5 ) 130.7

Comprehensive income $ 307.2 $ 260.3 $ 3,075.4

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Prepaid expense and other current assets 238.8 208.9

Assets held-for-sale — 89.2

Total current assets 1,704.9 1,533.6

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Other current liabilities 363.3 373.1

Liabilities held-for-sale — 1.7

Total current liabilities 969.0 1,280.2

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Deferred revenue 184.2 198.3

Accrued pension liability and other 225.2 370.7

Other liabilities 239.2 225.2

Total liabilities $ 4,107.9 $ 4,317.6

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

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

Other comprehensive income (loss), 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

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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 — — — — — — 385.8 — — 385.8

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

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

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

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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

Net income — — — — — — 294.2 — — 294.2

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

Other comprehensive income (loss), net of tax — — — — — 13.0 — — — 13.0

Issuance of common stock for stock plans, net and employee stock purchase plan 0.2 — ( 0.1 ) — 7.1 — — 4.2 — 11.3

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

Dividends on common stock ($ 0.03 per share)

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Depreciation and amortization 367.7 346.1 309.3

Impairment of intangibles 2.3 — —

Share-based compensation expense 62.1 54.2 43.8

Non-cash operating lease expense 40.0 32.2 31.8

Impairment and loss on disposal of property, plant and equipment, and other 2.2 ( 5.0 ) 17.7

Asset impairment charges, and other 49.4 4.5 ( 5.0 )

Change in fair value of contingent consideration ( 31.8 ) ( 10.3 ) 66.1

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Settlement of contingent consideration — ( 2.9 ) —

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

Net cash (used in) provided by financing activities ( 173.9 ) 1,193.7 ( 311.4 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2.3 ) ( 12.9 ) 2.9

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

Net (decrease) increase in cash, cash equivalents and restricted cash ( 17.7 ) 42.0 ( 20.2 )

Cash, cash equivalents, restricted cash and cash held for sale at beginning of year 138.6 96.6 116.8

Cash, cash equivalents and restricted cash at end of year $ 120.9 $ 138.6 $ 96.6

Supplemental disclosures of cash flow information:

Cash paid for:

Interest $ 49.1 $ 28.4 $ 46.5

Years Ended October 31,

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2023 2022 2021

Supplemental disclosures of cash flow information:

Cash paid for:

Interest $ 117.5 $ 49.1 $ 28.4

Income taxes 67.8 66.6 63.2

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The Cooper Companies, Inc.

(Cooper, we or the Company) is a global medical device company publicly traded on the NYSE (NYSE:COO).

(Cooper, we or the Company) is a global medical device company publicly traded on the Nasdaq (Nasdaq:

Prior to September 26, 2023, Cooper's common stock traded on the New York Stock Exchange under the symbol "COO".

Cooper operates through two business units, CooperVision and CooperSurgical.

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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 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

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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.

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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.

Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

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Notes to Consolidated Financial Statements

market events and trends, industry data and forecasted customer buying and payment patterns.

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.

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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.

Our refund liability for product returns is included in "Other current liabilities" in our Consolidated Balance Sheets and represents the expected value of the aggregate refunds that will be due to our customers.

Rebates and Chargebacks

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Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list wholesale prices charged to the Company’s direct customers.

For certain office and surgical products in CooperSurgical, customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers.

For certain office and surgical portfolio in CooperSurgical, customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers.

These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.

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

The current portion of the deferred revenue balances at the beginning of each year presented were generally fully recognized in the subsequent 12-month period.

Share-Based Compensation

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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.

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Notes to Consolidated Financial Statements

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

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

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

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Most of our operations outside the United States use their local currency as their functional currency.

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

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.

We translate these assets and liabilities into U.S.

dollars at year-end exchange rates.

We translate income and expense accounts at average exchange rates for the period.

We record gains and losses from the translation of financial statements in foreign currencies into U.S.

dollars in other comprehensive income.

We record gains and losses from changes in exchange rates on transactions denominated in currencies other than each reporting location's functional currency in net income for each period .

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.

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Notes to Consolidated Financial Statements

Financial Derivatives and Hedging

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

Derivatives are recorded on the Consolidated 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.

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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.

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

Refer to Note 5.

Financing Arrangements for further information.

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.

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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.

The fair value of derivative instruments is included in "Other assets" in our Consolidated Balance Sheets.

On our Consolidated Financial Statements.

the gain or loss on the derivatives is recorded as a component of "Accumulated other comprehensive loss" 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.

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

C ontingent consideration for which a liability is recorded and the initial measurement of the joint venture interest are also categorized as Level 3 in the fair value hierarchy;

and the change in fair value is recognized in "Selling, general and administrative expense" in the Consolidated Statements of Income.

The fair value is measured by discounting expected future cash flows.

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

Refer to Note 3.

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

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Notes to Consolidated Financial Statements

Earnings Per Share

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

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Notes to Consolidated Financial Statements

(In millions)

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

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Notes to Consolidated Financial Statements

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.

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

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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.

Leases with a term of one year or less are not recognized in 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”, “Other liabilities”, and “Other assets” in 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 expense" in our Consolidated Statements of Income.

Financing leases are classified in "Property, plant and equipment, net", "Short-term debt", and "Long-term debt" in our Consolidated Balance Sheets.

Operating Leases and Note 5.

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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.

Implementation costs are included in “Other assets” in our 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.

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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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Notes to Consolidated Financial Statements

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

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

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.

We review long-lived assets held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group 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.

Indefinite-lived Intangible Assets

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Business Combinations

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Notes to Consolidated Financial Statements

We routinely consummate business combinations.

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Direct acquisition costs are expensed as incurred.

For business acquisitions, the Company records tangible and intangible assets acquired and liabilities assumed at their fair values as of the applicable date of acquisition.

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

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

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.

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, which was completed in fiscal 2023.

Exit charges recognized during the year ended October 31, 2023, were not material.

Exit charges recognized during the year ended October 31, 2022, were $ 33.2 million, of which $ 26.7 million were recognized in "Cost of sales" and $ 6.5 million were recognized in "Selling, general and administrative expense" in our Consolidated Statements of Income.

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

Government Assistance

The Company at times receives government assistance primarily to support manufacturing capital expansion, to create or retain jobs, or to provide tax credits mainly for eligible research and development activities.

The Company generally accounts for such government assistance by analogy to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance and recognizes the assistance when it is probable that it will be received by complying with the prerequisite terms and conditions.

The government assistance is recognized in income as a reduction to the cost basis of the applicable property, plant, and equipment or reduction to the related expense.

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.

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.

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Notes to Consolidated Financial Statements

Accounting Pronouncements Issued Not Yet Adopted

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 was effective for fiscal years beginning after December 15, 2021.

The Company adopted this guidance prospectively on November 1, 2022, and such adoption did not have a material impact on the Company's Consolidated Financial Statements.

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

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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.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024.

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

The Company adopted this guidance prospectively on February 1, 2023, and it did not have a material impact on the Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

Accounting Pronouncements Issued Not Yet Adopted

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

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Present value of lease liabilities $ 253.8

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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:

(In millions) 2022 2021 2020

Technology $ 1.9 $ 178.6 $ —

In-Process Research & Development (IPR&D) — 20.0 —

Customer relationships 729.2 7.5 11.4

Trademarks 55.4 1.3 5.1

Other — 0.6 3.9

Total identifiable intangible assets $ 786.5 $ 208.0 $ 20.4

Goodwill 1,184.8 91.6 15.3

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

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

Total closing purchase price $ 1,683.3 $ 249.7 $ 35.4

All acquisitions were funded by cash generated from operations or facility borrowings.

For business acquisitions, the Company recorded tangible and intangible assets acquired and liabilities assumed at their fair values as of the applicable date of acquisition.

For asset acquisitions, the Company recorded tangible and intangible assets acquired and liabilities assumed at their estimated and relative fair values as of the applicable date of acquisition.

The Company believes these acquisitions strengthen CooperSurgical's and CooperVision's businesses through the addition of new distributors or complementary products and services.

Fiscal Year 2023

On November 1, 2022, CooperVision completed the acquisition of a privately-held U.S.-based company that provides a broad portfolio of technologically advanced contact lens products, including scleral and hybrid lenses.

The purchase price of the acquisition was $ 33.0 million.

Assets acquired primarily comprised of $ 12.6 million of customer relationship related intangibles,

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AND SUBSIDIARIES

Notes to Consolidated Financial Statements

$ 7.6 million of technology, $ 5.1 million of net assets and $ 7.7 million of goodwill.

The goodwill is not deductible for tax purposes.

Fiscal Year 2022

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

1 unchanged sentence

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.

Refer to the "Joint Venture" section below for details on formation of a joint venture with Essilor International and related activities that occurred in fiscal year 2023 and 2022 following the acquisition of SightGlass Vision, Inc.

(SGV) in fiscal year 2021.

2 unchanged sentences

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

Generate Life Sciences®

During the year ended October 31, 2023, CooperSurgical determined that the fulfillment of certain closing conditions related to regulatory approvals was no longer probable and paid $ 45.0 million in expenses for a termination fee under the asset purchase agreement on August 9, 2023.

The termination fee is recorded in "Selling, general and administrative expense" on the Consolidated Statements of Income.

Refer to the "Subsequent Event" section below for details on the revised scope of the transaction and the closing of the updated transaction.

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.

AND SUBSIDIARIES

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.

AND SUBSIDIARIES

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.

This acquisition expands CooperVision’s specialty eye care portfolio and accelerates its development of myopia management solutions in the UK.

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.

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.

The Company accounted for this acquisition as an asset acquisition, whereby the Company allocated the total cost of the acquisition to the net assets acquired on the basis of their estimated relative fair values on the acquisition date with no goodwill recognized.

The primary asset acquired in this asset acquisition is Technology.

Joint Venture

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.

3 unchanged sentences

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.

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

Further, CooperVision and Essilor International SAS (Essilor) executed a Contribution Agreement and a Stock Purchase Agreement (the "Agreements") in March 2022.

Essilor paid CooperVision $ 52.1 million in exchange for a 50 % interest in SGV and their proportionate share of the revenue payments.

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

During fiscal 2023, CooperVision determined that approval would not be achieved within the timeline set forth in the contractual terms of the regulatory approval payment and released the remaining $ 31.8 million contingent consideration liability.

Subsequent Event

On November 1, 2023, CooperSurgical closed the acquisition of select assets of Cook Medical for an aggregate consideration of $ 300.0 million, with $ 200.0 million paid at closing and $ 100.0 million to be paid in two $ 50.0 million annual installments.

THE COOPER COMPANIES, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

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.

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.

Fiscal Year 2020

On August 7, 2020, CooperVision completed the acquisition of a privately-held U.S contact lens manufacturer focusing on ortho-k lenses.

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 IVF medical devices and systems.

Contingent Consideration

Certain of the Company’s business combinations involve potential payments of future consideration that are contingent upon the achievement of regulatory milestones and/or the acquired business reaching certain revenue thresholds.

A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date.

The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized in selling, general and administrative expense in the Consolidated Statements of Income.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

(In millions) 2022 2021

Beginning balance $ 97.4 $ —

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 acquired primarily comprised of minimally invasive medical devices within the obstetrics, doppler monitoring and gynecology surgery markets.

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

Intangible Assets

4 unchanged sentences

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

Net additions 0.9 1,183.9 1,184.8

7.7 ( 3.6 ) 4.1

Foreign currency translation adjustment 29.6 ( 18.9 ) 10.7

2 unchanged sentences

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

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Other Intangible Assets

October 31, 2022 October 31, 2021

October 31, 2023

October 31, 2022

(In millions) Gross

16 unchanged sentences

Balances include foreign currency translation adjustments.

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

As of October 31, 2023, the estimate of future amortization expenses for intangible assets with definite lives is as follows:

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Fiscal years:

2 unchanged sentences

Total remaining amortization for intangible assets with definite lives $ 1,701.0

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.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In the fourth quarter of fiscal 2023, CooperVision fully impaired some intangible assets associated with the discontinuation of certain products.

The carrying value of these intangible assets were immaterial.

The Company performed its annual impairment assessment in the third quarter of fiscal 2023 and determined there was no other impairment to either its definite-lived or indefinite-lived intangible assets during fiscal 2023.

There were no impairment to the Company's definite-lived or indefinite-lived intangible assets during fiscal 2022 and 2021.

Financing Arrangements

3 unchanged sentences

Term loans — 338.0

unamortized debt issuance cost — ( 0.1 )

Short-term debt, excluding financing leases 44.4 395.7

10 unchanged sentences

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

On February 1, 2023, the Company amended its credit agreements to transition the interest rates applicable to the loans denominated in U.S.

dollars from LIBOR to SOFR, as defined in the credit agreements.

Term Loan Agreement on December 17, 2021

1 unchanged sentence

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.

THE COOPER COMPANIES, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

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 SOFR for a one-month interest period in effect on such day, or (ii) the adjusted SOFR, 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 SOFR loans.

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 October 31, 2023, the Company had $ 1.5 billion outstanding on the 2021 Term Loan Facility and the weighted-average interest rate was 6.41 %.

Term Loan Agreement on November 2, 2021

1 unchanged sentence

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.

The loan was fully repaid by the maturity date.

Revolving Credit and Term Loan Agreement on April 1, 2020

7 unchanged sentences

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 2020 Credit Agreement will bear interest, at the Company’s option, at either the alternate base rate, or the adjusted SOFR, 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 SOFR 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.

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.

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.

On October 31, 2023, the Company had $ 850.0 million outstanding under the 2020 Term Loan Facility and $ 172.6 million outstanding under the 2020 Revolving Credit Facility.

The interest rate on the 2020 Term Loan Facility was 6.41 % at October 31, 2023.

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

The weighted-average interest rate on the 2020 Revolving Credit Facility was 6.41 % at October 31, 2023.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

7 unchanged sentences

Each facility is supported by a continuing and unconditional guaranty.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

10 unchanged sentences

$ 412.9 $ 475.3 $ 491.5

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Components of provision for income taxes:

11 unchanged sentences

Provision for income taxes $ 118.7 $ 89.5 $ ( 2,453.2 )

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:

4 unchanged sentences

(Decrease) increase in taxes resulting from:

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

Foreign earnings in jurisdictions with different tax rates 7.0 ( 22.3 ) ( 43.6 )

Foreign earnings subject to United States tax 34.3 21.1 25.4

Excess tax benefits from share-based compensation ( 2.4 ) ( 2.6 ) ( 13.0 )

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

United States provision-to-return 0.5 ( 1.2 ) 7.0

Intra-group transfer to UK subsidiary — — ( 1,987.8 )

4 unchanged sentences

Provision for income taxes $ 118.7 $ 89.5 $ ( 2,453.2 )

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Components of deferred tax assets and liabilities:

8 unchanged sentences

Net operating loss and tax credit carryforwards 24.3 19.6

Intangible assets — 6.8

Capitalized research and experimental expenses 23.6 15.4

12 unchanged sentences

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 related to foreign tax attributes.

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

At October 31, 2023, the Company had federal net operating loss carryforwards of $ 78.7 million and state net operating loss carryforwards of $ 87.1 million.

1 unchanged sentence

The state net operating loss carryforwards expire on various dates between 2027 through 2044.

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.

1 unchanged sentence

Notes to Consolidated Financial Statements

Changes in unrecognized tax benefits:

2 unchanged sentences

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

Increase based on tax positions in current fiscal year 307.2

Settlements ( 0.2 )

2 unchanged sentences

Decrease based on tax positions in prior fiscal years ( 0.5 )

Settlements ( 0.2 )

Increase based on tax positions in current fiscal year 2.0

Lapses of statutes of limitations ( 6.9 )

39 unchanged sentences

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 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.

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

Number of shares 191,165 69,622

Average repurchase price per share $ 410.4 $ 356.6

Total costs of shares repurchased (in millions) $ 78.5 $ 24.8

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

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.

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

During the year ended October 31, 2023, there were no share repurchases under the 2012 Program.

During the year ended October 31, 2022, the Company repurchased 191.2 thousand shares of its common stock for $ 78.5 million, at an average purchase price of $ 410.41 per share.

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.

Subsequent Event

On December 7, 2023, we announced that our Board of Directors had approved a four -for-one stock split of our outstanding shares of common stock which we expect to be effected as of February 16, 2024.

2007 Long-Term Incentive Plan (2007 Plan)

1 unchanged sentence

The 2007 Plan was subsequently amended and restated, and granted stockholder approval in March 2009, March 2011, and March 2016.

The Third Amended and Restated 2007 Plan is designed to increase our stockholder value by attracting, retaining and motivating key employees and consultants who directly influence our profitability.

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.

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.

Awards under the 2007 Plan remain outstanding but new awards are no longer being granted.

2023 Long-Term Incentive Plan (2023 Plan)

THE COOPER COMPANIES, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

In March 2023, we received stockholder approval of the 2023 Plan.

The 2023 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 up to 1,365,000 shares in the form of specified equity awards including stock options, restricted stock units (RSUs) and performance share units (PSUs), subject to adjustment for future stock splits, stock dividends, expirations, forfeitures, and similar events.

In addition, the 2023 Plan includes any shares which were available for issuance under the 2007 Plan at the time of stockholder approval of this plan and shares which become available as a result of the forfeiture or expiration of awards made under the 2007 Plan.

As of October 31, 2023, 1,376,240 shares remained available under the 2023 Plan for future grants.

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

Share-Based Compensation

Compensation expense and the related tax benefit recognized in our Consolidated Statements of Income for share-based awards, including the Employee Stock Purchase Plan, were as follows:

The compensation expense and related income tax benefit recognized in our Consolidated Statements of Income for share-based awards, including the Employee Stock Purchase Plan, were as follows:

(In millions) 2023 2022 2021

24 unchanged sentences

Vested and exercisable at October 31, 2023 729,591 $ 248.34 4.38 $ 50,797,891

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 weighted-average fair value of options granted during fiscal 2023 , 2022 and 2021 , estimated as of the grant date using the Black-Scholes option pricing model, was $ 103.17 , $ 90.41 and $ 84.10 , respectively.

The total intrinsic value of options exercised during the fiscal years ended October 31, 2023, 2022 and 2021 was $ 13.4 million, $ 6.6 million and $ 64.7 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.

Options granted under the 2007 Plan generally vest over a range of three to five years based on service conditions and expire no later than ten years after the grant date.

Options granted under the 2020 Directors' Plan generally vest in one year and expire no later than ten years after the grant date.

We generally recognize compensation expense ratably over the vesting period.

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

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.

Options granted under the 2007 Plan and 2023 Plan generally vest over a range of three to five years based on service conditions and expire no later than ten years after the grant date.

We generally recognize compensation expense ratably over the vesting period.

As of October 31, 2023, there was $ 17.6 million of total unrecognized compensation cost related to nonvested options, which is expected to be recognized over a remaining weighted-average vesting period of 2.1 years.

Restricted Stock Units

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

RSUs granted under the 2007 Plan and the 2023 Plan generally vest over three to five years .

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

1 unchanged sentence

As of October 31, 2023, there was $ 63.1 million of total unrecognized compensation cost related to nonvested RSUs, which is expected to be recognized over a remaining weighted-average vesting period of 2.4 years.

The total fair value of RSU grants that vested during the fiscal years ended October 31, 2023, 2022 and 2021 was $ 37.3 million, $ 46.1 million and $ 50.1 million, respectively.

The status of our non-vested RSUs is summarized below:

8 unchanged sentences

Performance Units

Performance units may be granted to selected key employees with vesting contingent upon meeting future reported earnings per share goals over a defined performance cycle, usually three years .

Performance units may be granted to selected key employees with vesting contingent upon meeting certain performance goals over a defined performance cycle, usually three years .

Performance units, if earned, may be paid in cash or shares of common stock.

We granted performance unit awards on December 8, 2020 under the 2007 Plan.

The performance shares actually earned will range from zero to 200 % of the target number of performance shares for performance periods ending in fiscal 2021 through fiscal 2024.

Subject to limited exceptions set forth in the performance share plan, any shares earned will be distributed in the subsequent fiscal year after the performance period.

The fair value of performance unit awards is estimated on the date of grant based on the current market price of our common stock and the estimate of probability of award achievement.

This estimate is reviewed each fiscal quarter and adjustments are recorded if it is determined that the estimate of probability of award achievement has changed.

We granted performance unit awards on December 13, 2022, December 7, 2021, and December 8, 2020, under the 2007 Plan, with three-year performance periods ending in fiscal 2025, fiscal 2024, and fiscal 2023 respectively.

The performance shares actually earned will range from zero to 200 % of the target number of performance shares.

Subject to limited exceptions set forth in the performance share agreement, any shares earned will be distributed in the subsequent fiscal year after the performance period.

The fair value of performance unit awards is estimated on the date of grant based on the current market price of our common stock.

The amount of compensation expense related to these performance unit awards is reviewed each fiscal quarter and adjustments are recorded after assessing the probability of achieving the performance goals.

We recognize compensation expense ratably over the vesting period.

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Total ESPP share-based compensation recognized during fiscal 2023 and 2022 was $ 1.3 million and $ 1.1 million, respectively.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Employee Benefits

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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.

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Accumulated other comprehensive income $ 4.1 $ 8.0 $ 44.4

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended October 31,

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(Prepaid)/Accrued pension cost at fiscal year end $ 2.8 $ ( 2.9 ) $ ( 13.0 )

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended October 31,

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A change in the discount rate will cause the present value of benefit obligations to change in the opposite direction.

If a discount rate of 2.76 %, which is 0.02 % lower than prior fiscal year, had been used, the projected benefit obligation would have been $ 217.2 million, and the accumulated benefit obligation would have been $ 194.2 million.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The expected rate of return on plan assets was determined based on a review of historical returns, both for this plan and for medium- to large-sized defined benefit pension funds with similar asset allocations.

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The projected benefit obligation experienced a net gain of approximately $ 10.9 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.

AND SUBSIDIARIES

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.

This net gain is the result of assumption changes resulting in a gain of approximately $ 12.9 million, offset by losses of approximately $ 2.0 million due to demographic experience.

The key assumption changes were the increase in the discount rate (gain of $ 7.8 million), a changes in assumptions for lump sum determination (gain of $ 5.1 million).

Demographic losses were due to 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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Cash and cash equivalents 2.9 % 2.0 % 5.0 %

Corporate common stock 26.0 % 33.6 % 31.6 %

Equity mutual funds 39.1 % 33.9 % 32.8 %

Hedging Strategy Funds 5.2 % 4.7 % 4.3 %

Balanced funds 2.4 % 1.8 % 1.4 %

Alternative investments 0.7 % 0.9 % 1.0 %

Bond mutual funds 28.9 % 27.8 % 28.2 %

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Cash and cash equivalents $ 3.9 $ 3.9 $ — $ —

Corporate common stock 35.8 35.8 — —

Equity mutual funds 53.9 53.9 — —

Hedging Strategy Funds 7.5 7.5 — —

Bond mutual funds 38.6 14.5 24.1 —

Balanced Funds 3.3 3.3 — —

Alternative investments 0.9 0.9 — —

Fixed income 39.8 15.8 24.0 —

Total $ 137.6 $ 113.6 $ 24.0 $ —

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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.

Plan Cash Flows

Contributions

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.

1 unchanged sentence

Notes to Consolidated Financial Statements

Plan Cash Flows

Contributions

The Company made $ 1.1 million and no contributions to the Plan in fiscal 2023 and fiscal 2022, respectively.

The Company contribution to the Plan was $ 12.7 million for fiscal 2021.

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

The Company expected to make contributions totaling $ 1.1 million to the Plan during fiscal 2024.

Estimated Future Benefit Payments

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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.

THE COOPER COMPANIES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• CooperSurgical.

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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:

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CooperSurgical net sales by category:

Office and surgical products 633.6 451.3 358.8

Office and surgical

689.5 633.6 451.3

Fertility 480.0 431.5 319.2

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Interest expense 105.3

Other (income), net ( 25.0 )

Other expense, net 14.9

Income before income taxes $ 412.9

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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.

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 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.

From time to time, the Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables.

These foreign currency forward contracts are not designated as hedging instruments, and therefore the net change in their fair value is reported as a gain or loss in the Consolidated Statements of Income and Comprehensive Income.

As of October 31, 2023, the notional amount of outstanding foreign currency forward contracts was $ 56.2 million.

The resulting impact on our Consolidated Financial Statements from currency hedging activities was not significant for the years ended October 31, 2023, 2022 and 2021.

As of October 31, 2023, the Company has six interest rate swap contracts that have a total notional amount of $ 1.3 billion and remaining maturities of four years or less.

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) 2023 2022 2021

Derivatives designated as cash flow hedges Location of Loss (Income) Recognized on Derivatives

Derivatives designated as cash flow hedges Location of (Gain)/Loss Recognized on Derivatives

Interest rate swap contracts Interest expense (income)

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.

The following table details the changes in accumulated other comprehensive income:

$ ( 43.1 ) $ ( 2.3 ) $ 8.0

The cumulative pre-tax impact of the gain on derivatives designated for hedge accounting is recognized in "Accumulated other comprehensive loss".

The following table details the changes in the cumulative pre-tax impact of the gain on derivatives designated for hedge accounting:

(In millions) Amount

Balance 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)

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Balance gain as of October 31, 2023 $ 115.1

Refer to Note 8.

Stockholders’ Equity for amounts presented net of the related tax impact in "Accumulated other comprehensive loss".

The Company expects that $( 48.2 ) million recorded as a component of "Accumulated other comprehensive loss" will be realized in our Consolidated Statements of Income over the next twelve months and the amount will vary depending on prevailing interest rates.

THE COOPER COMPANIES, INC.

2 unchanged sentences

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