COOPER COMPANIES INC

Note 1. General

The accompanying Consolidated Condensed Financial Statements of The Cooper Companies, Inc. and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, terms "the Company", "we", "us", and "our" are used to refer collectively to The Cooper Companies, Inc. and its subsidiaries.

The accompanying Consolidated Condensed Financial Statements and related notes are unaudited and should be read in conjunction with the audited Consolidated Financial Statements of the Company and related notes as contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2024. The Consolidated Condensed Financial Statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of the results for the interim periods presented.

Accounting Policies

There have been no material changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Estimates

The preparation of Consolidated Condensed 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.

Accounting Pronouncements Issued But 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 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 and expect to adopt this ASU for the fiscal year ending October 31, 2026.

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 1, 2025, and will be applied retrospectively. We expect the adoption of this standard to expand our disclosures related to our operating segments beginning with our Annual Report on Form 10-K for the fiscal year ending October 31, 2025.

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

Note 2. Acquisitions and Joint Venture

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

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.

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 andtwo 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.

Note 3. Balance Sheet Components

Inventories

Deferred revenue

The Company recognized revenue of approximately $32.5 million and $31.0 million for the three months ended January 31, 2025 and 2024 respectively, that was included in the deferred revenue balance at October 31, 2024 and October 31, 2023.

Note 4. Intangible Assets

Intangible assets consisted of the following:

(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 January 31, 2025, the estimate of future amortization expenses for intangible assets with definite lives is as follows:

There wasno material impairment of goodwill or intangible assets recorded in the three months ended January 31, 2025.

Note 5. Financing Arrangements

The Company had outstanding debt as follows:

Additional information regarding our indebtedness is included in our notes to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. The carrying value of the Company's revolving credit facility and term loans approximates fair value based on current market rates (Level 2). As of January 31, 2025, 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 $2,300.0 million which, unless terminated earlier, matures on May 1, 2029. On May 1, 2024, the Company used $1,170.0 million 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 (all as defined below).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 $1,150.0 million 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 Company’s 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 January 31, 2025, the Company had $990.2 million outstanding under the 2024 Revolving Credit Facility and the weighted-average interest rate on the 2024 Revolving Credit Facility was 5.44%.

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 $1,500.0 million, which, unless terminated earlier, matures on December 17, 2026.

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 January 31, 2025, the Company had $1,500.0 million outstanding under the 2021 Term Loan Facility and the interest rate was 5.31%.

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), 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 provided for (a) a multicurrency revolving credit facility (the 2020 Revolving Credit Facility) in an aggregate principal amount of $1,290.0 million 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 had an uncommitted option to increase the revolving credit facility or establish a new term loan in an aggregate amount up to $1,605.0 million.

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.

Note 6. Income Taxes

The effective tax rates for the three months ended January 31, 2025, and January 31, 2024, were 32.0% and 32.4%, respectively. The decrease was primarily due to changes in unrecognized tax benefits and changes in the geographic composition of pre-tax earnings, partially offset by a decrease in excess tax benefits from share-based compensation.

Note 7. Earnings Per Share

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:

Note 8. Share-Based Compensation

The Company has several stock plans that are described in the Company’s Annual Report on Form 10‑K for the fiscal year ended October 31, 2024. The compensation expense and related income tax benefit recognized in our Consolidated Condensed Statements of Income and Comprehensive Income for share-based awards, including the Employee Stock Purchase Plan, were as follows:

Note 9. Stockholders' Equity

Analysis of Changes in Accumulated Other Comprehensive Loss:

Share Repurchases

In March 2017, the authorization under the 2012 Share Repurchase Program was increased to $1.0 billion by the Company's Board of Directors. As of January 31, 2025, $256.4 million remains authorized for repurchase.

During the three months ended January 31, 2025 and 2024, there wereno share repurchases.

Dividends

In December 2023, the Company's Board of Directors decided to end the declaration of a semiannual dividend.

Note 10. Contingencies and Commitments

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.

As of January 31, 2025, the Company entered into additional leases that have not yet commenced in order to expand manufacturing as well as research and development capacity. The undiscounted lease payments are estimated at $167.8 million for leases that will commence between the fourth quarter of fiscal 2025 through fiscal 2026, with initial terms ranging from 20 to 25 years.

Note 11. Business Segment Information

The following tables present revenue and other financial information by reportable segment:

Segment information:

Geographic information:

Note 12. Financial Derivatives and Hedging

As of January 31, 2025, the notional amount of outstanding foreign currency forward contracts was $83.6 million. The resulting impact on our Consolidated Financial Statements from currency hedging activities was not significant for the three months ended January 31, 2025 and January 31, 2024.

As of January 31, 2025, the Company hasnine 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 Condensed Statements of Income and Comprehensive Income:

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:

The amount recognized in other comprehensive income on interest rate swap contracts was $6.9 million and $(18.0) million, net of tax effect, for the three months ended January 31, 2025 and 2024, respectively.

The amount reclassified from other comprehensive income into earnings was $(8.4) million and $(10.0) million, net of tax, for the three months ended January 31, 2025 and 2024, respectively.

Refer to Note 9. Stockholders' Equity for amounts presented net of the related tax impact in "Accumulated other comprehensive loss."

The Company expects that $(29.2) million recorded as a component of "Accumulated other comprehensive loss" will be realized in the Consolidated Condensed Statements of Income over the next twelve months and the amount will vary depending on prevailing interest rates.