COOPER COMPANIES, INC. - FORM 8-K/A - EX-99.3

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8-K/A - 8-K/A - COOPER COMPANIES, INC.	d803840d8ka.htm
EX-23.1 - EX-23.1 - COOPER COMPANIES, INC.	d803840dex231.htm
EX-99.1 - EX-99.1 - COOPER COMPANIES, INC.	d803840dex991.htm
EX-99.2 - EX-99.2 - COOPER COMPANIES, INC.	d803840dex992.htm

Exhibit 99.3

Unaudited Pro Forma Condensed Combined Financial Statements

On August 6, 2014, The Cooper Companies, Inc. (“Cooper” or the “Company”) and CooperVision (UK) Holdings Limited, an indirect subsidiary of the Company, completed the acquisition of the entire issued share capital of Sauflon Pharmaceuticals Limited (“Sauflon”) for £635.9 million (approximately $1,075 million) in cash, including a net debt adjustment amount pursuant to the Purchase Agreements, and £34.4 million (approximately $58 million) in the form of loan notes issued by Cooper. Cooper also assumed third-party debt of Sauflon of approximately £46.5 million (approximately $79 million). U.S. dollar amounts are based on the August 5, 2014 exchange rate of U.S. $1.69 per British pound, as published by The Wall Street Journal. The significant terms of the Purchase Agreement were previously reported by the Company on June 30, 2014 in the Current Report on Form 8-K filed on that date.

The following unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements and accompanying notes of the Company included in its Annual Report on Form 10-K for the year ended October 31, 2013 and Form 10-Q for the nine months ended July 31, 2014. Sauflon’s audited financial statements and accompanying notes for the year ended October 31, 2013 and unaudited financial information for the nine months ended July 31, 2014 are presented above in this Amendment No. 1. The presentation of the unaudited pro forma condensed combined balance sheet gives effect to the acquisition as if it had occurred on July 31, 2014 and includes items that are directly attributable to the acquisition, factually supportable and that either have a continuing impact or are nonrecurring. The presentation of the unaudited pro forma condensed combined statements of income reflects the combined results of operations as if the acquisition had occurred at November 1, 2012, the beginning of the Company’s 2013 fiscal year, and excludes items related to the acquisition that are nonrecurring and includes items that are directly attributable to the acquisition, expected to have a continuing impact, and factually supportable. Also, the unaudited pro forma condensed combined financial information gives effect to certain adjustments necessary to conform Sauflon’s financial statements that were prepared under generally accepted accounting practices in the U.K. to U.S. GAAP.

The preliminary allocation of the purchase price presented below, in Note 2, and used to prepare the unaudited pro forma financial information, is based on a preliminary valuation of assets acquired and liabilities assumed. Accordingly, the pro forma purchase price adjustments are subject to further adjustments as additional information becomes available and as additional analysis is performed. The preliminary pro forma purchase price adjustments have been made solely for the purposes of providing the unaudited pro forma financial statements included herewith. A final determination of these fair values shall be based on the actual net tangible and intangible assets of Sauflon that exist as of the closing date of the transaction. In addition, the unaudited pro forma condensed combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the acquisition.

The unaudited pro forma condensed combined financial statements are provided for informational purposes only and are not necessarily indicative of results that would have occurred had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma financial information does not purport to be indicative of the future financial position or operating results of the combined operations. There were no transactions between the Company and Sauflon during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.

The historical financial information and pro forma adjustments in the pro forma financial information have been translated from pounds sterling to U.S. dollars using historic exchange rates. The average exchange rates applicable to the Company during the periods presented for the pro forma statements of income and the period end exchange rate for the pro forma balance sheet are as follows:


		GBP/USD
Year ended October 31, 2013	Average rate	$	1.5612
Nine months ended July 31, 2014	Average rate	$	1.6635
July 31, 2014	Spot rate	$	1.6883

THE COOPER COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AT JULY 31, 2014

(In USD thousands)


	TCC Historical July 31, 2014			US GAAP Sauflon Historial July 31, 2014			Pro Forma Adjustments (Note 2)			*Ref*	Pro-Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	173,786		$	9,626		$	(109,437	)	a, d, e	$	73,975
Trade accounts receivable, net		261,964			42,648							304,612
Inventories		353,384			36,413							389,797
Deferred tax assets		39,445			580							40,025
Prepaid expense and other current assets		67,234			8,466			(1,603	)	e		74,097

Total current assets		895,813			97,733			(111,040	)			882,506

Property, plant and equipment, net		843,413			85,975			205		a		929,593
Goodwill		1,390,911			—			858,192		a, b		2,249,103
Other intangibles, net		176,292			592			278,908		a, b		455,792
Deferred tax assets		18,633			—							18,633
Other assets		42,312			—			611		e		42,923

	$	3,367,374		$	184,300		$	1,026,876			$	4,578,550


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	46,492		$	991		$	56,963		a, d	$	104,446
Accounts payable		87,209			18,506							105,715
Employee compensation and benefits		59,517			2,289							61,806
Other current liabilities		104,469			21,433			7,342		c		133,244

Total current liabilities		297,687			43,219			64,305				405,211

Long-term debt		301,449			84,378			965,622		d		1,351,449
Deferred tax liabilities		26,152			703			60,090		b		86,945
Accrued pension liability and other		65,809			2,109							67,918

Total liabilities		691,097			130,409			1,090,017				1,911,523

Commitments and contingencies
Stockholders’ equity:
Preferred stock		—			—
Common stock		5,097			443			(443	)	g		5,097
Additional paid-in capital		1,375,314			—							1,375,314
Accumulated other comprehensive loss		(726	)		(797	)		797		g		(726	)
Retained earnings		1,548,037			54,245			(63,495	)	g		1,538,787
Treasury stock		(270,649	)		—							(270,649	)

Total Cooper’s shareholders’ equity		2,657,073			53,891			(63,141	)			2,647,823

Noncontrolling interests		19,204			—			—				19,204

Stockholders’ equity		2,676,277			53,891			(63,141	)			2,667,027

	$	3,367,374		$	184,300		$	1,026,876			$	4,578,550

See accompanying notes to unaudited pro forma condensed combined financial statements.

THE COOPER COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED JULY 31, 2014

(In USD thousands, except per share amounts)


	TCC Historical Nine Months Ended July 31, 2014		US GAAP Sauflon Historical Nine Months Ended July 31, 2014			Pro Forma Adjustments (Note 2)			*Ref*	Pro Forma Combined

Net sales	$	1,249,779	$	140,437						$	1,390,216
Cost of sales		437,761		69,573							507,334

Gross profit		812,018		70,864							882,882
Selling, general and administrative		475,095		56,327		$	(5,592	)	c		525,830
Research and development expense		48,077		2,072							50,149
Amortization of intangibles		21,735		106			22,208		b		44,049

Operating income		267,111		12,359			(16,616	)			262,854
Interest expense		4,713		4,527			6,400		e		15,640
Other expense (income), net		739		(2,877	)						(2,138	)

Income before income taxes		261,659		10,709			(23,016	)			249,352
Provision for income taxes		21,087		4,016			(7,462	)	f		17,641

Net income		240,572		6,693			(15,554	)			231,711
Less: Income attributable to noncontrolling interests		1,502		—							1,502

Net income attributable to Cooper stockholders	$	239,070	$	6,693		$	(15,554	)		$	230,209

Earnings per share attributable to Cooper stockholders - basic	$	4.98								$	4.80

Earnings per share attributable to Cooper stockholders - diluted	$	4.89								$	4.71


Number of shares used to compute earnings per share:
Basic		47,990									47,990

Diluted		48,901									48,901

See accompanying notes to unaudited pro forma condensed combined financial statements.

THE COOPER COMPANIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

FOR THE YEAR ENDED OCTOBER 31, 2013

(In USD thousands, except per share amounts)


	TCC Historical Year ended October 31, 2013			US GAAP Sauflon Historical Year ended October 31, 2013			Pro Forma Adjustments (Note 2)			*Ref*	Pro Forma Combined

Net sales	$	1,587,725		$	158,599						$	1,746,324
Cost of sales		560,917			77,172							638,089

Gross profit		1,026,808			81,427							1,108,235
Selling, general and administrative		610,735			54,457							665,192
Research and development		58,827			2,072							60,899
Amortization of intangible assets		30,239			92		$	29,660		b		59,991
Loss on divestiture of subsidiary		21,062			—							21,062

Operating income		305,945			24,806			(29,660	)			301,091
Interest expense		9,168			5,540			9,255		e		23,963
Gain on insurance proceeds		14,084			—							14,084
Other expense (income), net		(1,410	)		(781	)						(2,191	)

Income before income taxes		312,271			20,047			(38,915	)			293,403
Provision for income taxes		15,365			2,651			(10,227	)	f		7,789

Net income		296,906			17,396			(28,688	)			285,614
Less: Income attributable to noncontrolling interests		755			—							755

Net income attributable to Cooper stockholders	$	296,151		$	17,396		$	(28,688	)		$	284,859

Earnings per share attributable to Cooper stockholders - basic	$	6.09									$	5.86

Earnings per share attributable to Cooper stockholders - diluted	$	5.96									$	5.73


Number of shares used to compute earnings per share:
Basic		48,615										48,615

Diluted		49,685										49,685

See accompanying notes to unaudited pro forma condensed combined financial statements.

THE COOPER COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Pro Forma Preparation

The unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of the Company and Sauflon after giving effect to the acquisition using the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and applying the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined balance sheet is presented as if the acquisition had occurred on July 31, 2014. The unaudited pro forma condensed combined statements of income for the nine months ended July 31, 2014 and the twelve months ended October 31, 2013 are presented as if the acquisition had occurred on November 1, 2012, the beginning of the Company’s fiscal year. Certain items in the historical financial statements of Sauflon have been reclassified to conform to the Company’s financial reporting presentation as shown below. There have been no changes in historical operating income or historical net income for any period as a result of these reclassifications.

Summary of Reclassification Adjustments for Sauflon:


USD(‘000)	Converted US GAAP Results		Reclassification Adjustments to Conform to Cooper Presentation			Amounts Presented
12 months ended October 31, 2013
Cost of sales	$	53,879	$	23,293		$	77,172
Selling, general and administrative		79,914		(25,457	)		54,457
Research and development		—		2,072			2,072
Amortization of intangible assets		—		92			92

Total	$	133,793	$	—		$	133,793


9 months ended July 31, 2014
Cost of sales	$	46,142	$	23,431		$	69,573
Selling, general and administrative		81,936		(25,609	)		56,327
Research and development		—		2,072			2,072
Amortization of intangible assets				106			106

Total	$	128,078	$	—		$	128,078

THE COOPER COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 2. Pro Forma Adjustments

(a)	Purchase Price Allocation

For pro forma purposes, we have preliminarily allocated the purchase price to the net tangible and intangible assets based on their estimated fair values. Therefore, the assets acquired and liabilities assumed, including intangible assets, presented in the table below are provisional and will be finalized after the Company receives and reviews all available data as soon as practicable and not later than one year from the acquisition date.

The following table is a summary of the preliminary purchase price allocation including preliminary estimates of the fair value of net assets acquired and the resulting goodwill of the acquisition of Sauflon, as reflected in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014:


	July 31, 2014 USD(‘000)
Cash paid at closing		1,073,151
Loan notes issued ¹		57,953

Total Purchase Price*		1,131,104


Trademarks		7,200
Technology		138,200
Shelf space and market share ²		39,400
License and distribution rights and other ³		51,600
In-process research and development		43,100
Goodwill		798,100

Total Intangible Assets		1,077,600

Sauflon historical net tangible assets		53,891
Property, plant and equipment fair value adjustment		205
Less: Sauflon historical intangible assets value		(592	)

Total Purchase Price		1,131,104

*	U.S. dollar amounts are based on the actual August 6, 2014 exchange rates of the U.S. dollar to the British pound and euro.

¹	Part of the consideration paid includes $58 million in the form of loan notes issued by the Company. This has been recorded as short term debt in the pro forma adjustments to the unaudited pro forma condensed consolidated balance sheet.

²	Shelf space and market share is identified customer relationship intangible assets related to the acquisition of Sauflon.

³	License and distribution rights and other is identified non-compete agreements related to the acquisition of Sauflon.

THE COOPER COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(b)	Acquired Intangible Assets

The acquired intangible assets and related amortization expense based on the preliminary estimate of fair value for the year ended October 31, 2013 and nine months ended July 31, 2014 are as follows:


	Preliminary Fair Value USD(‘000)		Useful Lives (years)	Amortization Expense (USD’000)
	Preliminary Fair Value USD(‘000)		Useful Lives (years)	October 31, 2013		July 31, 2014
Intangible Assets
Trademarks		7,200	10		720		540
Technology		138,200	10		13,820		10,365
Shelf space and market share		39,400	15		2,627		1,970
License and distribution rights and other		51,600	2 to 5		12,585		9,439
In-process research and development		43,100	N/A		—		—

Total		279,500			29,752		22,314
Less: Elimination of Sauflon historical intangible assets and related amortization		592			92		106

Pro forma adjustment		278,908			29,660		22,208

We recognized a deferred tax liability with the offset to goodwill of $60.1 million relating to the intangible assets identified in the table above. The deferred tax liability represents the tax effect of the difference between the estimated fair value of identified intangible assets and the tax basis of the assets. The estimated deferred tax liability was determined by using the U.K. estimated statutory tax rate of 21.5%.

(c)	Acquisition-related Costs

The Company and Sauflon incurred $5.2 million and $0.4 million of acquisition costs, respectively, primarily related to legal and advisory fees in the nine-month period ended July 31, 2014. These costs are reversed in the unaudited pro forma condensed consolidated income statement for the nine months ended July 31, 2014 as they represent non-recurring charges directly related to the acquisition of Sauflon.

The accrued portion of these acquisition costs of $3.5 million is included in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014. In addition, a pro forma adjustment to other current liabilities in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014 was made to recognize direct acquisition-related costs of $7.3 million which are not yet reflected in the historical financial statements.

THE COOPER COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(d)	Debt Transactions

The Company financed the acquisition with available offshore cash and credit facilities including funds from the new $700 million, senior unsecured term loan agreement entered into on August 4, 2014. This pro forma presentation assumes that the Company utilized the three-year, $700 million term loan, and borrowed approximately $350 million from the Company’s existing multicurrency revolving credit facility. These debt obligation amounts are presented as pro forma adjustments to long term debt in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014.

Sauflon’s short term debt of $1.0 million and long term debt of $84.4 million at July 31, 2014 are presented as repaid in the pro forma adjustments in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014.

(e)	Interest Expense

Pro forma interest expense is presented to include the Company’s new $700 million term loan and the additional $350 million in funds drawn on the existing credit facility, discussed above, along with the reversal of Sauflon’s interest expense for the year ended October 31, 2013 and nine months ended July 31, 2014 as presented below.

The Company incurred debt issuance costs of $0.9 million in connection with the $700 million term loan, which were capitalized as a pro forma adjustment to prepaid expenses and other assets in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014. A pro forma adjustment was also made to write off the remaining balance of debt issuance costs of $1.9 million to prepaid expenses and other current assets related to Sauflon’s term loan and credit facility in the unaudited pro forma condensed consolidated balance sheet at July 31, 2014. The Company’s amortization of these debt issuance costs are included as pro forma adjustments in the unaudited pro forma condensed consolidated statements of income for the year ended October 31, 2013 and the nine-month period ended July 31, 2014. Sauflon’s amortization of debt issuance costs are reversed as pro forma adjustments in the unaudited pro forma condensed consolidated statements of income for the year ended October 31, 2013 and the nine-month period ended July 31, 2014.


	October 31, 2013						July 31, 2014
	USD(‘000)			USD(‘000)			USD(‘000)			USD(‘000)
Company:
Term loan borrowing		700,000						700,000
LIBOR plus 0.75%		0.90	%					0.90	%

					6,300						4,725
Credit facility borrowing		350,000						350,000
LIBOR plus 1%		1.15	%					1.15	%

					4,025						3,019
Debt issuance cost amortization expense					306						229

Pro forma adjustment					10,631						7,973


Sauflon:
Term loan and revolving credit balance		64,242						84,378
Average interest rate – EURIBOR/LIBOR plus 2%		2.31	%					2.39	%

Actual interest expense					(696	)					(1,149	)
Debt issuance cost amortization expense					(680	)					(424	)

Pro forma adjustment					(1,376	)					(1,573	)

Total pro forma adjustment					9,255						6,400

THE COOPER COMPANIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(f)	Provision for Income Taxes

The pro forma presentation of the effect on the provision for income taxes was calculated using the U.K. statutory rate for adjustments related to Sauflon and using the U.S. statutory rate for adjustments related to the Company. The U.K. statutory rate is blended to reflect the timing of statutory tax rate changes during the periods. The adjustments to the provision for income taxes are summarized in the following table:


		12 Months Ending October 31, 2013								9 Months Ended July 31, 2014
Item	Jurisdiction	Pro Forma Adjustment			Tax Rate		Tax (Provision) Benefit			Pro Forma Adjustment			Tax Rate		Tax (Provision) Benefit
		(USD’000)			(%)		(USD’000)			(USD’000)			(%)		(USD’000)
Amortization expense	UK		29,660			21.5		6,377			22,208			21.5		4,775

Interest expense	US		10,631			39.0		4,146			7,973			39.0		3,109

Interest expense	UK		(1,376	)		21.5		(296	)		(1,573	)		21.5		(338	)

Selling, general and administrative	UK		—			—		—			(389	)		21.5		(84	)


								10,227								7,462

(g)

Equity

Sauflon’s historical net assets are eliminated as a pro forma adjustment to the unaudited pro forma condensed consolidated balance sheet at July 31, 2014. In addition, as discussed above in 2(c) and 2(e), pro forma adjustments to retained earnings were made for activities that are not yet reflected in the historical financial statements for acquisition-related costs and the write off of debt issuance costs related to Sauflon’s term loan and credit facilities. These adjustments are not reflected in and do not affect the unaudited pro forma condensed combined statements of income as they are non-recurring.

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