COOPER COMPANIES, INC. 10-K

Item 8. Financial Statements and Supplementary Data. Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors The Cooper Companies, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of The Cooper Companies, Inc. and subsidiaries (the Company) as of October 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended October 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated December 6, 2024 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. 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 $802.7 million in inventories and $3,895.4 million in net sales as of and for the year ended October 31, 2024, 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. 55 THE COOPER COMPANIES, INC. AND SUBSIDIARIES The following are the primary procedures we performed to address this critical audit matter. 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. /s/ KPMG LLP We have served as the Company’s auditor since 1982. San Francisco, California December 6, 2024 56 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Income Years Ended October 31, (In millions, except for earnings per share) 2024 2023 2022 Net sales $ 3,895.4 $ 3,593.2 $ 3,308.4 Cost of sales 1,299.7 1,235.3 1,168.8 Gross profit 2,595.7 2,357.9 2,139.6 Selling, general and administrative expense 1,533.7 1,501.2 1,342.2 Research and development expense 155.1 137.4 110.3 Amortization of intangibles 201.2 186.2 179.5 Operating income 705.7 533.1 507.6 Interest expense 114.3 105.3 57.3 Other expense (income) 9.1 14.9 ( 25.0 ) Income before income taxes 582.3 412.9 475.3 Provision for income taxes (Note 6) 190.0 118.7 89.5 Net income $ 392.3 $ 294.2 $ 385.8 Earnings per share (Note 7)*; Basic $ 1.97 $ 1.49 $ 1.95 Diluted $ 1.96 $ 1.48 $ 1.94 Number of shares used to compute earnings per share*: Basic 198.9 197.9 197.4 Diluted 200.4 199.3 198.8 * All periods presented have been adjusted to reflect the four -for-one stock split effected on February 16, 2024. Refer to Note 1. Organization and Significant Accounting Policies for further information. The accompanying notes are an integral part of these Consolidated Financial Statements. 57 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Years Ended October 31, (In millions) 2024 2023 2022 Net income $ 392.3 $ 294.2 $ 385.8 Other comprehensive income (loss): Cash flow hedges, net of tax of $ 13.4 , $( 2.4 ) and $ 26.1 , respectively ( 42.5 ) ( 7.0 ) 81.3 Change in minimum pension liability, net of tax of $ 0.5 , $ 1.0 and $ 8.7 , respectively ( 1.7 ) 3.0 27.9 Foreign currency translation adjustment 76.3 17.0 ( 234.7 ) Other comprehensive income (loss) 32.1 13.0 ( 125.5 ) Comprehensive income $ 424.4 $ 307.2 $ 260.3 The accompanying notes are an integral part of these Consolidated Financial Statements. 58 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets October 31, (In millions) 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 107.6 $ 120.8 Trade accounts receivable, net of allowance for credit losses of $ 43.5 at October 31, 2024 and $ 31.3 at October 31, 2023 717.0 609.7 Inventories (Note 1) 802.7 735.6 Prepaid expense and other current assets 324.2 238.8 Total current assets 1,951.5 1,704.9 Property, plant and equipment, net 1,863.4 1,632.6 Goodwill (Note 4) 3,838.4 3,624.5 Other intangibles, net (Note 4) 1,791.0 1,710.3 Deferred tax assets 2,210.3 2,349.5 Other assets 660.6 637.1 Total assets $ 12,315.2 $ 11,658.9 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Short-term debt (Note 5) $ 33.3 $ 45.4 Accounts payable 260.5 261.9 Employee compensation and benefits 174.8 174.8 Deferred revenue 129.9 123.6 Other current liabilities 424.3 363.3 Total current liabilities 1,022.8 969.0 Long-term debt (Note 5) 2,550.4 2,523.8 Deferred tax liabilities 96.0 101.5 Long-term tax payable 57.5 90.2 Deferred revenue 193.3 184.2 Other liabilities 311.6 239.2 Total liabilities $ 4,231.6 $ 4,107.9 Contingencies (Note 11) Stockholders’ equity*: Preferred stock, $ 0.10 par value, 1.0 shares authorized, zero shares issued or outstanding — — Common stock, $ 0.10 par value, 480.0 shares authorized, 217.2 issued and 199.6 outstanding at October 31, 2024 and 215.8 issued and 198.1 outstanding at October 31, 2023 21.7 21.6 Additional paid-in capital 1,921.0 1,817.2 Accumulated other comprehensive loss ( 421.7 ) ( 453.8 ) Retained earnings 7,268.4 6,876.1 Treasury stock at cost: 17.6 shares at October 31, 2024 and 17.7 shares at October 31, 2023 ( 706.0 ) ( 710.3 ) Total Cooper stockholders' equity 8,083.4 7,550.8 Noncontrolling interests 0.2 0.2 Stockholders’ equity (Note 8) 8,083.6 7,551.0 Total liabilities and stockholders’ equity $ 12,315.2 $ 11,658.9 * All periods presented have been adjusted to reflect the four -for-one stock split effected on February 16, 2024. Refer to Note 1. Organization and Significant Accounting Policies for further information. The accompanying notes are an integral part of these Consolidated Financial Statements. 59 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Common Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Loss Retained Earnings Treasury Stock Noncontrolling Interests Total Stockholders' Equity (In millions, except per share amounts) Shares Amount Shares Amount Balance at October 31, 2021* 197.2 $ 19.7 17.6 $ 1.8 $ 1,699.1 $ ( 341.3 ) $ 6,202.1 $ ( 639.6 ) $ 0.2 $ 6,942.0 Net income — — — — — — 385.8 — — 385.8 Other comprehensive income (loss), net of tax — — — — — ( 125.5 ) — — — ( 125.5 ) Issuance of common stock for stock plans, net and employee stock purchase plan 0.4 — — — ( 2.1 ) — — 3.6 — 1.5 Treasury stock repurchase ( 0.2 ) — 0.2 — — — — ( 78.5 ) — ( 78.5 ) Dividends on common stock ($ 0.01 per share) — — — — — — ( 3.0 ) — — ( 3.0 ) Share-based compensation expense — — — — 52.4 — — — — 52.4 Balance at October 31, 2022* 197.4 $ 19.7 17.8 $ 1.8 $ 1,749.4 $ ( 466.8 ) $ 6,584.9 $ ( 714.5 ) $ 0.2 $ 7,174.7 Net income — — — — — — 294.2 — — 294.2 Other comprehensive income (loss), net of tax — — — — — 13.0 — — — 13.0 Issuance of common stock for stock plans, net and employee stock purchase plan 0.7 0.1 ( 0.1 ) — 7.0 — — 4.2 — 11.3 Dividends on common stock ($ 0.01 per share) — — — — — ( 3.0 ) — ( 3.0 ) Share-based compensation expense — — — — 60.8 — — — — 60.8 Balance at October 31, 2023* 198.1 $ 19.8 17.7 $ 1.8 $ 1,817.2 $ ( 453.8 ) $ 6,876.1 $ ( 710.3 ) $ 0.2 $ 7,551.0 Net income — — — — — — 392.3 — — 392.3 Other comprehensive income (loss), net of tax — — — — — 32.1 — — — 32.1 Issuance of common stock for stock plans, net and employee stock purchase plan 1.5 0.1 ( 0.1 ) — 31.3 — — 4.3 — 35.7 Share-based compensation expense — — — — 72.5 — — — — 72.5 Balance at October 31, 2024* 199.6 $ 19.9 17.6 $ 1.8 $ 1,921.0 $ ( 421.7 ) $ 7,268.4 $ ( 706.0 ) $ 0.2 $ 8,083.6 * All periods presented have been adjusted to reflect the four -for-one stock split effected on February 16, 2024. Refer to Note 1. Organization and Significant Accounting Policies for further information . The accompanying notes are an integral part of these Consolidated Financial Statements. 60 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended October 31, (In millions) 2024 2023 2022 Cash flows from operating activities: Net income $ 392.3 $ 294.2 $ 385.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 375.1 367.7 346.1 Share-based compensation expense 75.1 62.1 54.2 Non-cash operating lease expense 38.7 40.0 32.2 Other including asset impairment charges 42.9 49.4 4.5 Change in fair value of contingent consideration — ( 31.8 ) ( 10.3 ) Deferred income taxes 118.9 44.7 53.9 Change in assets and liabilities: Accounts receivable ( 117.1 ) ( 60.2 ) ( 33.8 ) Inventories ( 59.3 ) ( 105.4 ) ( 40.4 ) Other assets ( 132.5 ) ( 89.4 ) ( 16.9 ) Operating lease right-of-use assets and liabilities, net ( 42.4 ) ( 34.2 ) ( 51.3 ) Accounts payable 9.3 5.5 49.9 Accrued liabilities 3.6 71.8 32.4 Accrued income taxes ( 15.4 ) ( 0.5 ) ( 27.4 ) Other long-term liabilities 20.1 ( 6.4 ) ( 34.2 ) Settlement of contingent consideration — — ( 52.3 ) Net cash provided by operating activities 709.3 607.5 692.4 Cash flows from investing activities: Purchases of property, plant and equipment ( 421.2 ) ( 392.5 ) ( 242.0 ) Acquisitions of businesses and assets, net of cash acquired, and other ( 343.4 ) ( 56.5 ) ( 1,641.3 ) Proceeds from sale of interest in a subsidiary — — 52.1 Net cash used in investing activities ( 764.6 ) ( 449.0 ) ( 1,831.2 ) Cash flows from financing activities: Proceeds from long-term debt, net of issuance costs 3,524.2 2,124.2 1,511.0 Repayments of long-term debt ( 3,506.8 ) ( 1,953.9 ) ( 561.5 ) Net proceeds from (repayments of) short-term debt, other ( 11.8 ) ( 351.1 ) 329.3 Repurchase of common stock — — ( 78.5 ) Proceeds related to share-based compensation awards 55.6 15.1 8.9 Payments related to share-based compensation awards ( 30.3 ) ( 13.1 ) ( 16.8 ) Dividends on common stock — ( 3.0 ) ( 3.0 ) Issuance of common stock for employee stock purchase plan 8.3 7.9 7.2 Settlement of contingent consideration — — ( 2.9 ) Net cash provided (used in) by financing activities 39.2 ( 173.9 ) 1,193.7 Effect of exchange rate changes on cash, cash equivalents and restricted cash 2.9 ( 2.3 ) ( 12.9 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 13.2 ) ( 17.7 ) 42.0 Cash, cash equivalents, restricted cash and cash held for sale at beginning of year 120.9 138.6 96.6 Cash, cash equivalents and restricted cash at end of year $ 107.7 $ 120.9 $ 138.6 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 134.8 $ 117.5 $ 49.1 Income taxes 78.4 67.8 66.6 61 Years Ended October 31, (In millions) 2024 2023 2022 Operating lease liabilities 48.0 47.5 45.3 Operating lease ROU assets obtained in exchange for lease obligations $ 54.6 $ 42.6 $ 29.8 Reconciliation of cash flow information: Cash and cash equivalents $ 107.6 $ 120.8 $ 138.2 Restricted cash included in other current assets 0.1 0.1 0.4 Cash held for sale — — — Total cash, cash equivalents, restricted cash and cash held for sale $ 107.7 $ 120.9 $ 138.6 The accompanying notes are an integral part of these Consolidated Financial Statements. 62 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1. Organization and Significant Accounting Policies Organization The Cooper Companies, Inc. (Cooper, we or the Company) is a global medical device company publicly traded on the Nasdaq (Nasdaq: COO). Cooper operates through two business units, CooperVision and CooperSurgical. • CooperVision primarily develops, manufactures and markets a broad range of soft contact lenses for the worldwide vision correction market. • CooperSurgical primarily develops, manufactures, markets medical devices and procedures solutions, and provides services to improve fertility and women's health care market. Principles of Consolidation The financial statements in this report include the results of all of Cooper's consolidated entities. All significant intercompany transactions and balances are eliminated on consolidation. Use of Estimates The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. 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. Revenue Recognition Net Sales The Company sells its products principally to a limited number of distributors, group purchasing organizations, eye care or health care professionals including independent practices, corporate retailers, hospitals and clinics or authorized resellers (collectively, its Customers). These Customers may subsequently resell the Company’s products to eye care or health care providers and patients. In addition to product supply and distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products. The Company considers purchase orders, which in some cases are governed by master sales agreements, to be contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products or render services, each of which is distinct, to be the identified performance obligations. The consideration in the contract is allocated among the identified performance obligations based on a relative standalone selling price basis. The standalone selling price for each performance obligation is derived from the actual selling price or estimated using historical data or publicly available information. 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. Revenues from service sales are recognized when services are rendered, whether at a point in time or based on the passage of time depending on the type of services. Stem cell revenue, which includes the initial processing service and ongoing storage service, accounts for the majority of our service revenues. Revenue allocated to the processing service is recognized at a point in time when the cord blood and/or cord tissue is processed and deemed ready for storage. Revenue allocated to storage service is recognized ratably over the terms of the storage contracts, which vary in length. The majority of the contracts have a term of one year or 18 years. Deferred revenue primarily represents prepaid stem cell storage as part of the CooperSurgical business unit. The current portion of the deferred revenue balances at the beginning of each year presented were generally fully recognized in a ratable manner in the subsequent 12-month period. We recognized revenue of approximately $ 123.6 million and $ 93.6 million for the year ended October 31, 2024, and October 31, 2023, respectively, that was included in the deferred revenue balance at October 31, 2023, and October 31, 2022. Taxes collected from Customers and remitted to governmental authorities are excluded from revenues. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less. See Note 12. Business Segment Information for disaggregation of revenue. 63 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Reserves for Variable Consideration Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified primarily in current liabilities. Variable consideration is estimated based on the most likely amount or expected value approach, depending on which method the Company expects to better predict the amount of consideration to which it will be entitled. Once the Company elects one of the methods to estimate variable consideration for a particular type of performance obligation, the Company applies that method consistently. 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. 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. Trade Discounts and Allowances The Company generally provides Customers with discounts, which include incentive fees that are stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. Product Returns Consistent with industry practice, the Company generally offers Customers a limited right of return for a product that has been purchased from the Company. The Company estimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. Historically, returns have been infrequent and insignificant relative to our total sales. 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 Rebates are estimated based on contractual terms, historical experience, customer mix, trend analysis and projected market conditions in the various markets served. 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 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. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by customers. CooperSurgical rebates are predominately related to the Medicaid rebate provision that is estimated based upon contractual terms, historical experience, and trend analysis. Share-Based Compensation We grant various share-based compensation awards, including stock options, performance unit shares, restricted stock and restricted stock units. The Company accounts for share-based compensation expense based on estimated grant-date fair value, and expenses the amount over the vesting period of the award. Determining the fair value of share-based awards at the grant date requires judgment, including estimating Cooper's stock price volatility, employee exercise behaviors and related employee forfeiture rates. The 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. In determining the expected volatility, management considers implied volatility from publicly-traded options on Cooper's common stock at the date of grant, historical volatility and other factors. The risk-free interest rate is based on the continuous rates provided by the United States Treasury with a term equal to the expected life of the award. The dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant. Forfeitures are estimated at the time of grant, based on historical experience, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. 64 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Foreign Currency Translation Most of our operations outside the United States use their local currency as their functional currency. 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 . Financial Derivatives and Hedging 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. The gain or loss on derivative instruments designated and qualifying for cash flow hedge accounting is deferred in other comprehensive income. The changes in fair value for all trades that are not designated for hedge accounting are recognized in current period earnings. Deferred gains or losses from designated cash flow hedges are reclassified into earnings in the period that the hedged interest expense affects earnings. The effectiveness of cash flow hedges is assessed at inception and quarterly thereafter. The Company does not offset fair value amounts recognized for derivative instruments in its Consolidated Balance Sheets for presentation purposes. Fair Value Measurements The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. An asset’s or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions. The carrying value of cash and cash equivalents, accounts receivable, prepaid expense and other current assets, lines of credit, accounts payable and other current liabilities approximate fair value due to the short-term nature of such instruments and the ability to obtain financing on similar terms. The carrying value of the Company's revolving credit facility and term loans approximates fair value based on current market rates (Level 2). 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. The variable cash receipts are based on the expectation of future interest rates (forward curves) derived from observable market interest rate curves. The interest rate swap contracts were categorized as Level 2 in the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity. The 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 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. Acquisitions and Joint Venture for further information. Income Taxes Income taxes are estimated based on enacted income tax laws and the results of operations in each jurisdiction. Deferred tax assets and liabilities are estimated based on temporary differences between the financial reporting basis and income tax basis of assets and liabilities. Deferred tax assets are also estimated based on net operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance to the extent it is more likely than not they are not expected to be realized. Adjustments to deferred tax assets and liabilities due to changes in tax laws, changes in jurisdiction from intra-entity transfers of assets, and changes in judgment regarding a valuation allowance are recognized in provision for income taxes in the quarter in which such changes occur. Long-term tax payable is estimated income tax to be paid for unrecognized tax benefits. A tax benefit 65 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements is recognized if it is more likely than not a tax position will be sustained based on its technical merits in a tax authority examination, based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Adjustments to unrecognized tax benefits due to changes in judgment are recognized in provision for income taxes in the quarter in which such changes occur. Interest and penalties related to unrecognized tax benefits are recognized in provision for income taxes. Income taxes include U.S. tax on foreign earnings, which is primarily due to the global intangible low-taxed income (GILTI) provision of the U.S. Tax Cuts and Jobs Act of 2017. An accounting policy choice was allowed to treat GILTI temporary differences in taxable income either as a current-period expense (period cost method) or factor such amounts into the measurement of deferred taxes (deferral method). We chose the period cost method. Earnings Per Share We determine basic earnings per share (EPS) by using the weighted-average number of shares outstanding. We determine diluted EPS by increasing the weighted-average number of shares outstanding in the denominator by the number of outstanding dilutive equity awards using the treasury stock method. On February 16, 2024, the Company effected a four -for-one stock split of its outstanding shares of common stock. The par value of the common stock remains at $ 0.10 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from "Additional paid-in capital" to "Common stock". All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented. Cash and Cash Equivalents The Company considers all short-term, highly liquid investments purchased with maturities of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost that approximates actual cost, on a first-in, first-out basis. October 31, (In millions) 2024 2023 Raw materials $ 188.2 $ 207.3 Work-in-process 18.5 19.0 Finished goods 596.0 509.3 $ 802.7 $ 735.6 In assessing the value of inventories, we make estimates and judgments regarding aging of inventories and other relevant issues potentially affecting the salable condition of products and estimated prices at which those products will sell. On an ongoing basis, we review the carrying value of our inventory, measuring number of months on hand and other indications of salability. We reduce the value of inventory if there are indications that the carrying value is greater than net realizable value, resulting in a new, lower-cost basis for that inventory. Subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. While estimates are involved, historically, obsolescence has not been a significant factor due to long product dating and lengthy product life cycles. Property, Plant and Equipment We record property, plant, and equipment at cost. We compute depreciation expense using the straight-line method over the estimated useful lives of the assets. Useful lives are generally 3 to 15 years except for buildings which are depreciated over 30 to 40 years and leasehold improvements, which we amortize over the shorter of the useful life or the lease term. We charge maintenance and repairs to expense as we incur them. 66 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, (In millions) 2024 2023 Land and improvements $ 25.2 $ 20.2 Buildings and improvements 557.3 488.5 Machinery and equipment 2,441.7 2,187.1 Construction in progress 532.8 486.3 Property, plant and equipment, at cost $ 3,557.0 $ 3,182.1 Less: Accumulated depreciation 1,696.5 1,553.3 Property, plant and equipment, net $ 1,860.5 $ 1,628.8 Finance lease ROU assets, net 2.9 3.8 $ 1,863.4 $ 1,632.6 Leases We consider an arrangement a lease if the arrangement transfers the right to control the use of an identified asset in exchange for consideration. We have operating leases, but do not have material financing leases. The Company primarily has operating leases for office, manufacturing and warehouse space, vehicles, and office equipment. Lease right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make payments arising from the lease agreement. These assets and liabilities are recognized at the commencement of the lease based upon the present value of the future lease payments over the lease term. The lease term reflects the noncancellable period of the lease together with periods covered by an option to extend or terminate the lease when management is reasonably certain that it will exercise such option. Changes in the lease term assumption could impact the right-of-use assets and lease liabilities recognized on the Consolidated Balance Sheets. As our leases typically do not contain a readily determinable implicit rate, we determine the present value of the lease liability using our incremental borrowing rate at the lease commencement date based on the lease term on a collateralized basis. The Company’s operating leases typically include non-lease components such as common-area maintenance costs. The Company has elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments. Leases with a term of one year or less are not recognized 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. See Note 2. Operating Leases and Note 5. Financing Arrangements for further information. Cloud Computing Arrangements The Company capitalizes certain costs related to the acquisition and development of internal use software, including implementation costs incurred in a cloud computing arrangement, during the application development stages of projects. Capitalized implementation costs are amortized on a straight-line basis over the expected term of the hosting arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewals. Costs incurred during the preliminary project or the post-implementation/operation stages of the project are expensed as incurred. Implementation costs are included in “Other assets” in 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. Valuation of Goodwill We evaluate goodwill for impairment annually during the fiscal third quarter and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist. Goodwill is tested for impairment at the reporting unit level by performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. We perform a qualitative assessment to test each reporting unit's goodwill for impairment, which 67 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 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. Indefinite-lived Intangible Assets We assess indefinite-lived intangible assets annually in the third quarter of the fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of an indefinite-lived intangible asset (asset group) may not be recoverable. We evaluate whether the indefinite-lived intangible asset is impaired by comparing its carrying value to its fair value. If the carrying value of an indefinite-lived intangible asset is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. Business Combinations We routinely consummate business combinations. Results of operations for acquired companies are included in our consolidated results of operations from the date of acquisition. We recognize separately from goodwill, the identifiable assets acquired, including acquired in-process research and development, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date fair values as defined by accounting standards related to fair value measurements. Key assumptions routinely utilized in allocation of purchase price to intangible assets include discount rates and projected financial information such as revenue projections for companies acquired. As of the acquisition date, goodwill is measured as the excess of consideration given, over the net of the acquisition date fair values of the identifiable assets acquired and the liabilities assumed. Direct acquisition costs are expensed as incurred. 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. Litigation We are subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. If we believe the likelihood of an adverse legal outcome is probable and the amount is estimable, we accrue a liability in accordance with accounting guidance for contingencies. We consult with legal counsel on matters related to litigation and seek input both within and outside the Company. Treasury Stock We record treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. 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. For the fiscal year ending October 31, 2024, government assistance of $ 32.5 million was recorded primarily as a reduction to the cost basis of property, plant, and equipment or reduction to the related expense. Government assistance in prior fiscal years was immaterial. Accounting Pronouncements Issued Not Yet Adopted In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disclosures about specific types of expenses included in the expense captions presented in the income 68 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements statement. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the impact that the adoption of this guidance will have on our disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public entities to disclose specific categories in the effective tax rate reconciliation and additional information for reconciling items that exceed a quantitative threshold. The guidance also requires all disaggregated information pertaining to taxes paid, net of refunds received, for federal, state and foreign income taxes. The new guidance is effective for fiscal years beginning after December 15, 2024, with the option to apply prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact that the adoption of this guidance will have on our consolidated financial statements and disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which enhances the disclosures required for operating segments in our annual and interim consolidated financial statements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means it will be effective from our fiscal year ended October 31, 2025, and interim periods within fiscal years beginning from November 01, 2025, and will be applied retrospectively. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures. No other recently issued accounting pronouncements had or are expected to have a material impact on our Consolidated Financial Statements. Note 2. Operating Leases The following table presents information about leases on the Consolidated Balance Sheets: October 31, (In millions) 2024 2023 Operating Leases Operating lease right-of-use assets $ 260.7 $ 241.5 Operating lease liabilities, current 38.6 38.2 Operating lease liabilities, non-current 230.8 215.6 Total operating lease liabilities $ 269.4 $ 253.8 Weighted-average remaining lease term (in years) 10.3 10.0 Weighted-average discount rate 4 % 4 % Operating lease expense for the fiscal years ended October 31, 2024, 2023 and 2022 was $ 47.4 million, $ 48.1 million and $ 45.0 million. Maturity of Lease Liabilities The minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of October 31, 2024, are: 69 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (In millions) 2025 48.6 2026 42.2 2027 37.8 2028 33.0 2029 28.5 Thereafter 148.1 Total lease payments $ 338.2 Less: interest 68.8 Present value of lease liabilities $ 269.4 Excluded from the above table are additional leases to expand manufacturing as well as research and development capacity that have not yet commenced. The undiscounted lease payments are estimated at $ 171 million for leases that will commence starting in fiscal 2025 with initial terms ranging from 20 to 25 years. Note 3. Acquisitions and Joint Venture All acquisitions were funded by cash generated from operations or facility borrowings. 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 2024 On August 1, 2024, CooperSurgical completed the acquisition of obp Surgical, a U.S.-based medical device company with a suite of single-use cordless surgical retractors with integrated light source and evacuation channels. The purchase price of the acquisition was $ 100.0 million. Assets acquired consisted primarily of $ 45.6 million of developed technology, $ 8.5 million of customer relationships, $ 7.7 million of inventory, $ 5.4 million of other net assets, and $ 50.6 million of goodwill, which is primarily related to expected synergies from combined operations. The Company is in the process of finalizing purchase accounting information. The goodwill is not deductible for tax purposes. On June 7, 2024, CooperSurgical acquired a fertility company that specializes in sperm separation devices. The purchase price of the acquisition was $ 33.5 million. 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. The primary asset acquired in this asset acquisition is a composite intangible asset of $ 39.6 million. The value of the composite intangible asset reflects, in addition to the purchase price, a deferred tax liability of $ 8.3 million arising from book/tax basis differences generated upon the acquisition. The composite intangible asset encompasses the portfolio of intellectual property associated with the sperm separation devices including the patents, trademarks, customer relationships, regulatory approvals, and commercialization rights, which have been valued as a single composite intangible asset as they are inextricably linked. On November 1, 2023, CooperSurgical completed the acquisition of select Cook Medical assets focused primarily on the obstetrics, doppler monitoring, and gynecology surgery markets. The purchase price of the acquisition was $ 300.0 million, with $ 200.0 million paid at closing and two cash payments of $ 50.0 million each to be paid on November 1, 2024, and November 1, 2025. The present value of the acquisition purchase price was $ 291.6 million, which is included in the Company's balance sheet. Assets acquired primarily comprised of $ 157.9 million of technologies, $ 26.6 million of customer relationship related intangibles, and $ 107.2 million of goodwill. The goodwill is deductible for tax purposes. 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, $ 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. Note 4. Intangible Assets Goodwill 70 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company has three reporting units: CooperVision and within the CooperSurgical segment, Office/Surgical and Fertility, reflecting the current way the Company manages its business. There was no impairment of goodwill in its reporting units in fiscal 2024, 2023, and 2022. (In millions) CooperVision CooperSurgical Total Balance at October 31, 2023 $ 1,747.6 $ 1,876.9 $ 3,624.5 Net additions — 157.8 157.8 Foreign currency translation adjustment 50.2 5.9 56.1 Balance at October 31, 2024 $ 1,797.8 $ 2,040.6 $ 3,838.4 Of the October 31, 2024, goodwill balance, $ 311.5 million for CooperSurgical and $ 17.8 million for CooperVision is expected to be deductible for tax purposes. Of the October 31, 2023, goodwill balance, $ 237.6 million for CooperSurgical and $ 20.1 million for CooperVision was expected to be deductible for tax purposes. Other Intangible Assets October 31, 2024 October 31, 2023 (In millions) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Weighted-average Amortization Period (in years) Intangible assets with definite lives: Trademarks $ 204.2 $ 90.6 $ 208.9 $ 81.1 15 Composite intangible assets (1) 1,101.6 496.8 1,061.9 424.8 15 Technology 706.4 384.3 494.5 335.4 11 Customer relationships 1,130.5 402.5 1,099.2 345.8 19 License and distribution rights and other 47.9 27.2 51.6 28.0 11 3,190.6 $ 1,401.4 2,916.1 $ 1,215.1 16 Less: accumulated amortization and translation 1,401.4 1,215.1 Intangible assets with definite lives, net $ 1,789.2 $ 1,701.0 Intangible assets with indefinite lives, net (2) 1.8 9.3 Total other intangibles, net $ 1,791.0 $ 1,710.3 (1) Composite intangible assets primarily consist of technology, trade name, New Drug Application approval and physician relationships. The components are not reflected separately or within the corresponding categories because they are inextricably linked. (2) Intangible assets with indefinite lives include technology and trademarks. Balances include foreign currency translation adjustments. As of October 31, 2024, the estimate of future amortization expenses for intangible assets with definite lives is as follows: Fiscal years: (In millions) 2025 $ 197.7 2026 190.1 2027 175.8 2028 171.3 2029 167.2 Thereafter 887.1 Total remaining amortization for intangible assets with definite lives $ 1,789.2 71 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The Company performed its annual impairment assessment in the third quarter of fiscal 2024 and concluded there was no material impairment to the Company's definite-lived or indefinite-lived intangible assets during fiscal 2024. 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. There was no impairment to the Company's definite-lived or indefinite-lived intangible assets during fiscal 2022. Note 5. Financing Arrangements The Company had outstanding debt as follows: October 31, (In millions) 2024 2023 Short-term debt, excluding financing leases 32.2 44.4 Financing lease liabilities 1.1 1.0 Short-term debt $ 33.3 $ 45.4 Revolving credit $ 1,049.2 $ 172.6 Term loans 1,500.0 2,350.0 Other 0.2 0.2 Less: unamortized debt issuance cost ( 1.4 ) ( 2.4 ) Long-term debt, excluding financing leases 2,548.0 2,520.4 Financing lease liabilities 2.4 3.4 Long-term debt $ 2,550.4 $ 2,523.8 Total debt $ 2,583.7 $ 2,569.2 As of October 31, 2024, the Company was in compliance with all debt covenants. Revolving Credit Agreement on May 1, 2024 On May 1, 2024, the Company entered into a Revolving Credit Agreement (the 2024 Credit Agreement), among the Company, CooperVision International Limited, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent. The 2024 Credit Agreement provides for a multicurrency revolving credit facility (the 2024 Revolving Credit Facility) in an aggregate principal amount of $ 2.3 billion which, unless terminated earlier, matures on May 1, 2029. On May 1, 2024, the Company used $ 1.2 billion under the 2024 Revolving Credit Facility to fully repay all borrowings outstanding under the 2020 Term Loan Facility and the 2020 Revolving Credit Facility, and terminated the 2020 Credit Agreement. The Company has an uncommitted option to increase the revolving credit facility or establish a new term loan in an aggregate amount up to the greater of $ 1.2 billion or 100 % of consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), as defined in the 2024 Credit Agreement. The 2024 Credit Agreement will bear interest, at the Company’s option, at either the 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 0.87 % 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 2024 Credit Agreement. The Company pays an annual commitment fee that ranges from 0.10 % to 0.20 % of the unused portion of the 2024 Revolving Credit Facility based upon the Total Leverage Ratio, as defined in the 2024 Credit Agreement. The 2024 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 2024 Credit Agreement, consistent with the 2020 Credit Agreement discussed below. On October 31, 2024, the Company had $ 1.0 billion outstanding under the 2024 Revolving Credit Facility and the weighted-average interest rate on the 2024 Revolving Credit Facility was 6.05 %. 72 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Term Loan Agreement on December 17, 2021 On December 17, 2021, the Company entered into a Term Loan Agreement (the 2021 Credit Agreement) by and among the Company, the lenders from time to time party thereto, and PNC Bank, National Association, as administrative agent. The 2021 Credit Agreement provides for a term loan facility (the 2021 Term Loan Facility) in an aggregate principal amount of $ 1.5 billion, which, unless terminated earlier, matures on December 17, 2026. In addition, the Company has the ability from time to time to request an increase to the commitments under the 2021 Term Loan Facility or to establish a new term loan facility under the 2021 Credit Agreement in an aggregate principal amount not to exceed $ 1.1 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 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. 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 May 1, 2024, in connection with the Company's entry into the 2024 Credit Agreement, the Company entered into Amendment No. 2 to the 2021 Credit Agreement, modifying the 2021 Credit Agreement by, among other things, conforming certain provisions therein to those contained in the 2024 Credit Agreement. On October 31, 2024, the Company had $ 1.5 billion outstanding under the 2021 Term Loan Facility and the interest rate was 5.94 %. 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. Revolving Credit and Term Loan Agreement on April 1, 2020 On April 1, 2020, the Company entered into a Revolving Credit and Term Loan Agreement (the 2020 Credit Agreement), by and among the Company, CooperVision International Holding Company, LP, CooperSurgical Netherlands B.V., CooperVision Holding Kft., the lenders from time to time party thereto, and KeyBank National Association, as administrative agent. The 2020 Credit Agreement provides for (a) a multicurrency revolving credit facility (the 2020 Revolving Credit Facility) in an aggregate principal amount of $ 1.3 billion and (b) a term loan facility (the 2020 Term Loan Facility) in an aggregate principal amount of $ 850.0 million, each of which, unless terminated earlier, mature on April 1, 2025. The Company has an uncommitted option to increase the revolving credit facility or establish a new term loan in an aggregate amount up to $ 1.6 billion. On May 1, 2024, in connection with the Company's entry into the 2024 Credit Agreement, the Company terminated the 2020 Credit Agreement. In connection with the termination, all borrowings outstanding under the 2020 Credit Agreement were repaid. European and Asian Pacific Credit Facilities The Company maintains European credit facilities. The aggregate facility limit was $ 33.7 million and $ 32.9 million at October 31, 2024, and 2023, respectively. At October 31, 2024, $ 2.4 million of the facilities was utilized and the weighted-average interest rate on the outstanding balances was 4.16 %. The Company maintains yen-denominated credit facilities in Japan. The aggregate facility limit was $ 73.6 million and $ 74.3 million at October 31, 2024, and 2023, respectively. At October 31, 2024, $ 25.6 million of the combined facilities was utilized and the weighted-average interest rate on the outstanding balances was 0.67 %. Each facility is supported by a continuing and unconditional guaranty. Note 6. Income Taxes Components of income before income taxes: 73 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended October 31, (In millions) 2024 2023 2022 Income before income taxes: United States $ ( 87.1 ) $ ( 135.7 ) $ 31.4 Foreign 669.4 548.6 443.9 $ 582.3 $ 412.9 $ 475.3 Components of provision for income taxes: Years Ended October 31, (In millions) 2024 2023 2022 Current: Federal $ 38.2 $ 37.3 $ 10.2 State 1.3 3.7 3.8 Foreign 31.6 33.0 21.7 71.1 74.0 35.7 Deferred: Federal ( 19.6 ) ( 36.7 ) 10.5 State 0.5 ( 7.5 ) ( 2.2 ) Foreign 138.0 88.9 45.6 118.9 44.7 53.9 Provision for income taxes $ 190.0 $ 118.7 $ 89.5 Reconciliation between the expected provision for income taxes at the U.S. federal statutory rate and the provision for income taxes: Years Ended October 31, (In millions) 2024 2023 2022 Provision for income taxes at United States statutory tax rate $ 122.3 $ 86.7 $ 99.8 (Decrease) increase in taxes resulting from: Foreign earnings in jurisdictions with different tax rates 27.8 7.0 ( 22.3 ) Foreign earnings subject to United States tax 45.5 34.3 21.1 Excess tax benefits from share-based compensation ( 5.1 ) ( 2.4 ) ( 2.6 ) Change in unrecognized tax benefits 0.6 — ( 12.7 ) State tax provision 1.2 ( 4.2 ) 5.0 Other, net ( 2.3 ) ( 2.7 ) 1.2 Provision for income taxes $ 190.0 $ 118.7 $ 89.5 74 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Components of deferred tax assets and liabilities: Years Ended October 31, (In millions) 2024 2023 Deferred tax assets: Inventory $ 43.0 $ 40.0 Employee compensation and benefits 34.2 31.9 Lease liabilities 43.0 37.5 Accrued liabilities 89.4 83.9 Net operating loss carryforwards 229.6 206.4 Foreign goodwill 1,129.5 1,249.5 Foreign intangible assets 817.9 857.6 Other deferred tax assets 59.5 48.2 Total gross deferred tax assets 2,446.1 2,555.0 Less: valuation allowance ( 23.3 ) ( 20.7 ) Deferred tax assets 2,422.8 2,534.3 Deferred tax liabilities: Property, plant and equipment ( 51.7 ) ( 41.3 ) Right of use assets ( 40.6 ) ( 34.8 ) U.S. goodwill ( 44.5 ) ( 34.7 ) U.S. intangible assets ( 130.4 ) ( 121.3 ) Other deferred tax liabilities ( 41.3 ) ( 54.0 ) Total gross deferred tax liabilities ( 308.5 ) ( 286.1 ) Net deferred tax assets $ 2,114.3 $ 2,248.2 The Company has revised the presentation of the components of deferred tax assets and liabilities to disclose the amounts by type of asset or liability. The amounts for fiscal 2023 were revised to reflect the presentation for fiscal 2024. The revised table has no impact on the affected financial statement line items for the years affected or on any other tables. Changes in valuation allowance: Years Ended October 31, (In millions) 2024 2023 2022 Beginning balance $ 20.7 $ 60.1 $ 51.8 Increases 2.8 2.6 13.3 Decreases ( 0.2 ) ( 42.0 ) ( 5.0 ) Ending balance 23.3 $ 20.7 $ 60.1 In assessing the realizability of deferred tax assets, the Company analyzes whether some or all deferred tax assets will not be realized. This analysis considers historical taxable income, the projected reversal of deferred tax liabilities, projected taxable income and tax planning strategies. Based upon this analysis, it is more likely than not that the deferred tax assets, net of valuation allowance, will be realized. At October 31, 2024, the Company had federal net operating loss carryforwards of $ 74.0 million and state net operating loss carryforwards of $ 85.0 million. Federal net operating loss carryforwards of $ 24.2 million expire on various dates from fiscal 2026 through fiscal 2038 and $ 49.8 million do not expire. The state net operating loss carryforwards expire on various dates from fiscal 2025 through fiscal 2044. The remaining transition tax to be remitted from the U.S. Tax Cuts and Jobs Act of 2017 is $ 66.4 million and $ 36.9 million as of October 31, 2024, and October 31, 2025, respectively. 75 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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. Changes in unrecognized tax benefits: (In millions) Balance at October 31, 2022 $ 336.9 Decrease based on tax positions in prior fiscal years ( 0.5 ) Increase based on tax positions in current fiscal year 2.0 Lapses of statutes of limitations ( 6.9 ) Balance at October 31, 2023 $ 331.5 Decrease based on tax positions in prior fiscal years ( 2.0 ) Increase based on tax positions in prior fiscal years 2.2 Increase based on tax positions in current fiscal year 1.0 Lapses of statutes of limitations ( 5.9 ) Balance at October 31, 2024 $ 326.8 These tax benefits, if recognized, would reduce provision for income taxes for fiscal 2024, 2023 and 2022, by $ 323.7 million, $ 323.2 million, and $ 324.3 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized in provision for income taxes. At October 31, 2024, 2023 and 2022, accrued interest and penalties related to unrecognized tax benefits were $ 10.7 million, $ 5.8 million, and $ 5.4 million, respectively. Included in the balance of unrecognized tax benefits at October 31, 2024, is $ 15.7 million related to tax positions for which it is reasonably possible that the total amounts could change during the next twelve months. Filed tax returns are subject to examination by tax authorities in major tax jurisdictions for fiscal 2018 and subsequent years, including the UK and the US. Note 7. Earnings Per Share Years Ended October 31, (In millions, except for earnings per share) 2024 2023 2022 Net income $ 392.3 $ 294.2 $ 385.8 Basic: Weighted-average common shares 198.9 197.9 197.4 Basic earnings per share $ 1.97 $ 1.49 $ 1.95 Diluted: Weighted-average common shares 198.9 197.9 197.4 Effect of dilutive stock plans 1.5 1.4 1.4 Diluted weighted-average common shares 200.4 199.3 198.8 Diluted earnings per share $ 1.96 $ 1.48 $ 1.94 The following table sets forth stock options to purchase our common stock and restricted stock units that were not included in the diluted earnings per share calculation because their effect would have been antidilutive for the periods presented: Years Ended October 31, (In thousands, except exercise prices) 2024 2023 2022 Stock option shares excluded 827 1,244 908 Exercise prices $ 82.46 - $ 101.54 $ 75.03 - $ 101.54 $ 75.03 - $ 101.54 Restricted stock units excluded 3 60 348 76 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Above tables have been adjusted to reflect the four -for-one stock split effected on February 16, 2024. Refer to Note 1. Organization and Significant Accounting Policies for further information Note 8. Stockholders’ Equity Analysis of Changes in Accumulated Other Comprehensive Income (Loss): (In millions) Foreign Currency Translation Adjustment Derivatives Minimum Pension Liability Total Balance at October 31, 2021 $ ( 320.3 ) $ 13.1 $ ( 34.1 ) $ ( 341.3 ) Gross change in value ( 234.7 ) 107.4 36.6 ( 90.7 ) Tax effect ( 26.1 ) ( 8.7 ) 34.8 Balance at October 31, 2022 $ ( 555.0 ) $ 94.4 $ ( 6.2 ) $ ( 466.8 ) Gross change in value $ 17.0 $ ( 9.4 ) $ 4.0 $ 11.6 Tax effect 2.4 ( 1.0 ) 1.4 Balance at October 31, 2023 $ ( 538.0 ) $ 87.4 $ ( 3.2 ) $ ( 453.8 ) Gross change in value $ 76.3 $ ( 55.9 ) $ ( 2.2 ) $ 18.2 Tax effect — 13.4 0.5 13.9 Balance at October 31, 2024 $ ( 461.7 ) $ 44.9 $ ( 4.9 ) $ ( 421.7 ) Share Repurchases In March 2017, the authorization under the 2012 Program was increased to $ 1.0 billion by the Company's Board of Directors. As of October 31, 2024, $ 256.4 million remains authorized for repurchase. During the year ended October 31, 2024, and October 31, 2023, there were no share repurchases. Dividends In December 2023, the Company's Board of Directors decided to end the declaration of the semiannual dividend. The Company paid dividends of approximately $ 3.0 million in each of fiscal 2023 and 2022. Note 9. Stock Plans All share, restricted stock unit (RSU), option, per share, per RSU and per option information presented below have been adjusted to reflect the four -for-one stock split effected on February 16, 2024. Refer to Note 1. Organization and Significant Accounting Policies. 2007 Long-Term Incentive Plan (2007 Plan) In March 2007, we received stockholder approval of the 2007 Plan. The 2007 Plan was subsequently amended and restated, and granted stockholder approval in March 2009, March 2011, and March 2016. The 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 27,720,000 shares in the form of specified equity awards including stock options, restricted stock units and performance share awards. RSUs have no dividend or voting rights prior to vesting. Awards under the 2007 Plan remain outstanding but new awards are no longer being granted. 2023 Long-Term Incentive Plan (2023 Plan) 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 5,460,000 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 77 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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, 2024, 4,852,018 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 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: October 31, (In millions) 2024 2023 2022 Selling, general and administrative expense $ 67.6 $ 54.8 $ 46.7 Cost of sales 4.7 4.2 4.5 Research and development expense 2.8 3.1 3.0 Total compensation expense $ 75.1 $ 62.1 $ 54.2 Related income tax benefit $ 12.1 $ 5.0 $ 5.0 Stock Options The fair value of each stock option award granted is estimated on the date of grant using the Black-Scholes option valuation model and assumptions noted in the following table. Years Ended October 31, 2024 2023 2022 Expected life 4.9 years 4.5 years 4.1 years Expected volatility 29.1 % 29.5 % 25.8 % Risk-free interest rate 4.2 % 3.8 % 1.1 % Dividend yield — % 0.02 % 0.02 % The activity and status of our stock option plans are summarized below: Number of Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at October 31, 2023 4,310,224 $ 69.32 Granted 14,220 $ 85.07 Exercised ( 1,028,632 ) $ 50.53 Forfeited or expired ( 3,344 ) $ 82.46 Outstanding at October 31, 2024 3,292,468 $ 75.25 5.26 $ 96,903,913 Vested and expected to vest at October 31, 2024 3,265,227 $ 75.14 5.24 $ 96,439,520 Vested and exercisable at October 31, 2024 2,507,860 $ 71.38 4.74 $ 83,521,576 The weighted-average fair value of options granted during fiscal 2024, 2023 and 2022, estimated as of the grant date using the Black-Scholes option pricing model, was $ 26.54 , $ 25.79 and $ 22.60 . The total intrinsic value of options exercised during the fiscal years ended October 31, 2024, 2023 and 2022 was $ 51.3 million, $ 13.4 million and $ 6.6 million, respectively. Stock options outstanding under our current plans have been granted at prices which are either equal to or above the market value of the common stock on the date of grant. 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, 2024, there was $ 8.2 million of total unrecognized 78 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of 1.7 years. Restricted Stock Units 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. We recognize compensation expense ratably over the vesting period. As of October 31, 2024, there was $ 68.7 million of total unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a remaining weighted-average vesting period of 2.5 years. The total fair value of RSU grants that vested during the fiscal years ended October 31, 2024, 2023 and 2022 was $ 40.9 million, $ 37.3 million and $ 46.1 million, respectively. The status of our non-vested RSUs is summarized below: Number of Shares Weighted- Average Grant Date Fair Value Per Share Non-vested RSUs at October 31, 2023 1,160,116 $ 86.26 Granted 678,431 $ 85.97 Vested and issued ( 436,768 ) $ 83.80 Forfeited or expired ( 103,056 ) $ 86.38 Non-vested RSUs at October 31, 2024 1,298,723 $ 86.92 Performance Units 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 13, 2022, December 7, 2021, and December 8, 2020, under the 2007 Plan, with three-year performance periods ending in fiscal 2026, fiscal 2025, and fiscal 2024 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. As of October 31, 2024, there was $ 16.9 million of total unrecognized compensation cost related to non-vested performance units, which is expected to be recognized over a remaining weighted-average vesting period of 1.7 years. Employee Stock Purchase Plan On March 18, 2019, the Company received stockholder approval for the Employee Stock Purchase Plan (ESPP). The first offering period began on November 4, 2019, and offerings are generally made on a quarterly basis. The purpose of the ESPP is to provide eligible employees of the Company with the opportunity to acquire shares of common stock at 85 % of the market price on the last business day of each offering period by means of accumulated payroll deductions. The ESPP initially authorized the issuance of 4,000,000 shares of common stock. These shares will be made available from shares of common stock reacquired by the Company as Treasury Stock. During fiscal 2024 and 2023, we issued 107,031 and 104,464 shares to our employees under the ESPP, respectively. At October 31, 2024, the number of shares remaining available for future issuance under the ESPP was 3,580,869 shares. Total ESPP share-based compensation recognized during fiscal 2024 and 2023 was $ 1.6 million and $ 1.3 million, respectively. Note 10. Employee Benefits Cooper's Retirement Income Plan The Company's Retirement Income Plan (Plan), a defined benefit plan, is only available to full-time United States employees, subject to the soft freeze mentioned below. The Company's contributions are designed to fund normal cost on a current basis and to fund the estimated prior service cost of benefit improvements. The unit credit actuarial cost method is used to determine the 79 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements annual cost. The Company pays the entire cost of the Plan and funds such costs as they accrue. Virtually all of the assets of the Plan are comprised of equities and participation in equity and fixed income funds. The Company uses individual spot rates along the yield curve that correspond with the timing of each benefit payment to determine the service and interest costs of components of its net periodic benefit cost utilizing the correlation of projected cash outflows and corresponding spot rates on the yield curve. The following table sets forth the Plan's benefit obligations and fair value of the Plan assets at October 31, 2024, 2023 and 2022 and the funded status of the Plan and net periodic pension costs for each of the years in the three-year periods ended October 31, 2024. The net amounts recognized in the Consolidated Balance Sheets consist of non-current liabilities. The accumulated benefit obligation was $ 161.7 million, $ 131.5 million and $ 134.9 million for the years ended October 31, 2024, 2023 and 2022. Retirement Income Plan Years Ended October 31, (In millions) 2024 2023 2022 Change in benefit obligation Benefit obligation, beginning of year $ 144.5 $ 148.0 $ 230.9 Service cost 8.7 10.0 18.3 Interest cost 8.4 7.9 5.1 Benefits paid ( 9.1 ) ( 10.5 ) ( 13.1 ) Actuarial (gain)/loss 26.4 ( 10.9 ) ( 93.2 ) Benefit obligation, end of year $ 178.9 $ 144.5 $ 148.0 Change in plan assets Fair value of plan assets, beginning of year $ 137.6 $ 142.9 $ 199.5 Actual return on plan assets 34.8 4.1 ( 43.5 ) Employer contributions 0.4 1.1 — Benefits paid ( 9.1 ) ( 10.5 ) ( 13.1 ) Fair value of plan assets, end of year $ 163.7 $ 137.6 $ 142.9 Funded status at end of year $ ( 15.2 ) $ ( 6.9 ) $ ( 5.1 ) Years Ended October 31, (In millions) 2024 2023 2022 Amounts recognized in accumulated other comprehensive income consist of: Net loss $ 6.3 $ 4.1 $ 8.0 Accumulated other comprehensive income $ 6.3 $ 4.1 $ 8.0 Years Ended October 31, (In millions) 2024 2023 2022 Reconciliation of (prepaid) accrued pension cost: (Prepaid)/Accrued pension cost at prior fiscal year end $ 2.8 $ ( 2.9 ) $ ( 13.0 ) Net periodic benefit cost 6.5 6.8 10.1 Contributions made during the year ( 0.4 ) ( 1.1 ) — (Prepaid)/Accrued pension cost at fiscal year end $ 8.9 $ 2.8 $ ( 2.9 ) 80 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended October 31, (In millions) 2024 2023 2022 Components of net periodic benefit cost and other amounts recognized in the Consolidated Statements of Income: Net periodic benefit cost: Service cost $ 8.7 $ 10.0 $ 18.3 Interest cost 8.4 7.9 5.1 Expected return on plan assets ( 10.6 ) ( 11.1 ) ( 15.5 ) Recognized actuarial loss — — 2.2 Net periodic pension cost $ 6.5 $ 6.8 $ 10.1 Years Ended October 31, (In millions) 2024 2023 2022 Other changes in plan assets and benefit obligations recognized in other comprehensive income: Net (gain) loss $ 2.2 $ ( 4.0 ) $ ( 34.1 ) Amortizations of net gain — — ( 2.5 ) Total recognized in other comprehensive (income) loss $ 2.2 $ ( 4.0 ) $ ( 36.6 ) Total recognized in net periodic benefit cost and other comprehensive (income) loss $ 8.7 $ 2.8 $ ( 26.2 ) Years Ended October 31, 2024 2023 2022 Weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligation at year end: Discount rate for determining net periodic pension cost: Projected Benefit Obligation 6.22 % 5.74 % 2.76 % Service Cost 6.25 % 5.77 % 2.79 % Interest Cost 6.05 % 5.51 % 2.28 % Discount rate for determining benefit obligations at year end 5.32 % 6.22 % 5.74 % Rate of compensation increase for determining expense 3.60 % 3.60 % 3.60 % Rate of compensation increase for determining benefit obligations at year end 4.40 % 3.60 % 3.60 % Expected rate of return on plan assets for determining net periodic pension cost 8.00 % 8.00 % 8.00 % Expected rate of return on plan assets at year end 8.00 % 8.00 % 8.00 % Measurement date for determining assets and benefit obligations at year end 10/31/2024 10/31/2023 10/31/2022 The discount rate enables us to state expected future cash flows at a present value on the measurement date. The discount rate used for the Plan is based primarily on the yields of a universe of high-quality corporate bonds rated AA or above, with durations corresponding to the expected durations of the benefit obligations. A change in the discount rate will cause the present value of benefit obligations to change in the opposite direction. 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. This review generated separate expected returns for each asset class listed below. These expected future returns were then blended based on this Plan's target asset allocation. Reasons for Significant Liability Gains and Losses The projected benefit obligation experienced a net loss of approximately $ 26.4 million during the year. This net loss is the result of assumption changes resulting in a loss of approximately $ 25.0 million and a loss of approximately $ 1.4 million due to demographic experience. The key assumption changes were a decrease in the discount rate (loss of $ 14.5 million), change in assumptions for lump sum determination (loss of $ 8.8 million), an increase in expected future salaries (loss of $ 1.9 million), and 81 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements changes to decrements and payment timing following an experience review (gain of $ 0.2 million). Changes in demographic experience were due to the net effect of retirement rates, termination rates, salary increases and other experience that was different from assumed. Plan Assets Weighted-average asset allocations at year end, by asset category are as follows: Years Ended October 31, 2024 2023 2022 Asset category Cash and cash equivalents 3.7 % 2.9 % 2.0 % Corporate common stock 25.2 % 26.0 % 33.6 % Equity mutual funds 39.9 % 39.1 % 33.9 % Balanced funds 2.2 % 2.4 % 1.8 % Alternative investments 0.8 % 0.7 % 0.9 % Bond mutual funds 28.2 % 28.9 % 27.8 % Total 100.0 % 100.0 % 100.0 % The Plan invests in a diversified portfolio of assets intended to minimize risk of poor returns while maximizing expected portfolio returns. To achieve the long-term rate of return, plan assets will be invested in a mixture of instruments, including but not limited to, corporate common stock (may include the Company's stock), investment grade bond funds, cash, balanced funds, real estate funds, small or large cap equity funds and international equity funds. The allocation of assets will be determined by the investment manager and will typically include 50 % to 70 % equities with the remainder invested in fixed income, hedging strategy funds and cash. Presently, this diversified portfolio is expected to return roughly 8 % in the long run. As of the measurement date of October 31, 2024, the fair value measurement of plan assets is as follows: (In millions) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Asset category Cash and cash equivalents $ 6.1 $ 0.4 $ — $ 5.7 Corporate common stock 41.3 41.3 — — Equity mutual funds 65.3 65.3 — — Balanced Funds 3.7 3.7 — — Alternative investments 1.2 1.2 — — Fixed income 46.1 19.4 26.7 — Total $ 163.7 $ 131.3 $ 26.7 $ 5.7 The Plan has an established process for determining the fair value of plan assets. For investments in equity and bond mutual funds, and real estate funds, fair value is based on observable, Level 1 inputs. Plan Cash Flows Contributions The Company made $ 0.4 million and $ 1.1 million contributions to the Plan in fiscal 2024 and fiscal 2023, respectively. The Company made no contributions to the Plan for fiscal 2022. The Company closely monitors the funded status of the Plan with respect to legislative and accounting rules. The Company is expected to make contributions totaling $ 0.0 million to the Plan during fiscal 2025. Estimated Future Benefit Payments 82 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years (In millions) 2025 $ 13.9 2026 $ 13.3 2027 $ 14.5 2028 $ 15.0 2029 $ 15.4 2030-2034 $ 74.6 Plan Soft Freeze On June 18, 2019, the Board of Directors of the Company approved a soft freeze of the Plan effective August 1, 2019. The Plan was closed to employees hired on or after August 1, 2019, including former participants or employees rehired on or after August 1, 2019, and employees hired in connection with a stock or asset acquisition, merger or other similar transaction on or after August 1, 2019. Existing employees already covered by the Plan, continue to accrue their benefits. Cooper's 401(k) Savings Plan Cooper's 401(k) savings plan provides for the deferral of compensation as described in the Internal Revenue Code and is available to substantially all United States employees. Employees who participate in the 401(k) plan may elect to have up to 75 % of their pre-tax salary or wages deferred and contributed to the trust established under the Plan. Cooper's contributions on account of participating employees, were $ 10.1 million, $ 10.1 million and $ 9.0 million for the years ended October 31, 2024, 2023 and 2022, respectively. Note 11. Contingencies The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of conducting business, including matters involving our products, intellectual property, supplier relationships, distributors, competitor relationships, employees and other matters. The Company does not believe that the ultimate resolution of these proceedings or claims pending against it could have a material adverse effect on its financial condition or results of operations. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies . Legal fees are expensed as incurred. Note 12. Business Segment Information The Company discloses information about its operating segments, which were established based on the way that management organizes segments within the Company for making operating decisions and assessing financial performance. The Company's two operating segments are described below. • CooperVision. 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. • CooperSurgical. 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. The Company uses operating income, as presented in our financial reports, as the primary measure of segment profitability. The Company does not allocate costs from corporate functions to segment operating income. The Company uses the same accounting policies to generate segment results as it does for consolidated results. No customers accounted for 10% or more of our consolidated net revenue in fiscal 2024, 2023 and 2022. Total identifiable assets are those used in continuing operations except cash and cash equivalents, which the Company includes as corporate assets. 83 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table presents a summary of our business segment net sales: (In millions) 2024 2023 2022 CooperVision net sales by category: Toric and multifocal $ 1,257.2 $ 1,134.4 $ 1,001.8 Sphere, other 1,352.2 1,289.3 1,241.5 Total CooperVision net sales 2,609.4 2,423.7 2,243.3 CooperSurgical net sales by category: Office and surgical 774.7 689.5 633.6 Fertility 511.3 480.0 431.5 Total CooperSurgical net sales 1,286.0 1,169.5 1,065.1 Total net sales $ 3,895.4 $ 3,593.2 $ 3,308.4 84 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Information by business segment for each of the years in the three-year period ended October 31, 2024, follows: (In millions) CooperVision CooperSurgical Corporate Consolidated 2024 Net sales $ 2,609.4 $ 1,286.0 $ — $ 3,895.4 Operating income (loss) $ 676.2 $ 118.3 $ ( 88.8 ) $ 705.7 Interest expense 114.3 Other expense, net 9.1 Income before income taxes $ 582.3 Identifiable assets $ 7,285.1 $ 4,832.0 $ 198.1 $ 12,315.2 Depreciation expense $ 151.8 $ 22.1 $ — $ 173.9 Amortization expense $ 28.2 $ 173.0 $ — $ 201.2 Capital expenditures $ 388.6 $ 32.6 $ — $ 421.2 2023 Net sales $ 2,423.7 $ 1,169.5 $ — $ 3,593.2 Operating income (loss) $ 587.7 $ 16.1 $ ( 70.7 ) $ 533.1 Interest expense 105.3 Other expense, net 14.9 Income before income taxes $ 412.9 Identifiable assets $ 7,044.0 $ 4,351.8 $ 263.1 $ 11,658.9 Depreciation expense $ 156.9 $ 24.6 $ — $ 181.5 Amortization expense $ 32.9 $ 153.3 $ — $ 186.2 Capital expenditures $ 364.4 $ 28.1 $ — $ 392.5 2022 Net sales $ 2,243.3 $ 1,065.1 $ — $ 3,308.4 Operating income (loss) $ 494.3 $ 67.1 $ ( 53.8 ) $ 507.6 Interest expense 57.3 Other (income), net ( 25.0 ) Income before income taxes $ 475.3 Identifiable assets $ 6,778.9 $ 4,407.8 $ 305.6 $ 11,492.3 Depreciation expense $ 144.5 $ 22.1 $ — $ 166.6 Amortization expense $ 32.3 $ 147.2 $ — $ 179.5 Capital expenditures $ 223.0 $ 19.0 $ — $ 242.0 85 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Information by geographical area by country of domicile for each of the years in the three-year period ended October 31, 2024, follows: (In millions) United States Europe Rest of World, Other Eliminations & Corporate Consolidated 2024 Net sales to unaffiliated customers $ 1,965.9 $ 1,155.9 $ 773.6 $ 3,895.4 Sales between geographic areas 602.9 1,065.2 ( 1,668.1 ) — Net sales $ 2,568.8 $ 2,221.1 $ ( 894.5 ) $ 3,895.4 Operating income $ 74.2 $ 601.8 $ 29.7 $ 705.7 Long-lived assets $ 1,188.8 $ 401.7 $ 272.9 $ 1,863.4 2023 Net sales to unaffiliated customers $ 1,812.2 $ 1,041.2 $ 739.8 $ 3,593.2 Sales between geographic areas 563.1 1,016.7 ( 1,579.8 ) — Net sales $ 2,375.3 $ 2,057.9 $ ( 840.0 ) $ 3,593.2 Operating income $ — $ 516.2 $ 16.9 $ 533.1 Long-lived assets $ 1,027.6 $ 325.9 $ 279.1 $ 1,632.6 2022 Net sales to unaffiliated customers $ 1,638.5 $ 987.2 $ 682.7 $ 3,308.4 Sales between geographic areas 514.4 897.3 ( 1,411.7 ) — Net sales $ 2,152.9 $ 1,884.5 $ ( 729.0 ) $ 3,308.4 Operating (loss) income $ 71.8 $ 403.8 $ 32.0 $ 507.6 Long-lived assets $ 856.1 $ 310.8 $ 266.0 $ 1,432.9 86 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 13. Financial Derivatives and Hedging As part of the Company’s overall risk management practices the Company enters into financial derivatives, interest rate swaps designated as cash flow hedges, to hedge the Company's exposure to changes in cash flows associated with its variable rate debt. Credit risk related to derivative transactions reflects the risk that a party to the transaction could fail to meet its obligation under the derivative contracts. Therefore, the Company’s exposure to the counterparty’s credit risk is generally limited to the amounts, if any, by which the counterparty’s obligations to the Company exceed the Company’s obligations to the counterparty. 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. 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, 2024, the notional amount of outstanding foreign currency forward contracts was $ 47.7 million. The resulting impact on our Consolidated Financial Statements from currency hedging activities was not significant for the years ended October 31, 2024, 2023 and 2022. As of October 31, 2024, the Company has nine interest rate swap contracts that have a total notional amount of $ 1.8 billion and remaining maturities of less than three years . The following table summarizes the amounts recognized with respect to our derivative instruments within the accompanying Consolidated Statements of Income: Periods Ended October 31, (In millions) 2024 2023 2022 Derivatives designated as cash flow hedges Location of (Gain)/Loss Recognized on Derivatives Interest rate swap contracts Interest expense (income) $ ( 55.0 ) $ ( 43.1 ) $ 2.3 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 gain as of October 31, 2022 $ 124.5 Amount recognized in other comprehensive income on interest rate swap contracts, gross ($ 25.7 , net of tax) 33.7 Amount reclassified from other comprehensive income into earnings, gross ($( 32.7 ), net of tax) ( 43.1 ) Balance gain as of October 31, 2023 $ 115.1 Amount recognized in other comprehensive income on interest rate swap contracts, gross ($( 0.6 ), net of tax) ( 0.9 ) Amount reclassified from other comprehensive income into earnings, gross ($( 41.9 ), net of tax) ( 55.0 ) Balance gain as of October 31, 2024 $ 59.2 Refer to Note 8. Stockholders’ Equity for amounts presented net of the related tax impact in "Accumulated other comprehensive loss". The Company expects that $( 31.5 ) million recorded as a component of "Accumulated other comprehensive 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. 87 THE COOPER COMPANIES, INC. AND SUBSIDIARIES Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.