FinanceLooker

Excrept from filing document 2024-10-31

As of April 30 2024 the last business day of registrant s most recently completed second fiscal quarter the aggregate market value of shares of the registrant s common stock held by non affiliates was 17 6 billion
Number of shares outstanding of the registrant s common stock as of November 29 2024 199 582 626 The number of shares outstanding as of November 29 2024 reflects the four for one stock split of the registrant s common stock that was effected on February 16 2024
This Annual Report on Form 10 K contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995 These include statements relating to plans prospects goals strategies future actions events or performance and other statements which are other than statements of historical fact including statements regarding the expected impact of global macroeconomic conditions and statements regarding acquisitions including the acquired companies financial position market position product development and business strategy expected cost synergies expected timing and benefits of the transaction difficulties in integrating entities or operations as well as estimates of our and the acquired entities future expenses sales and earnings per share that are forward looking In addition all statements regarding anticipated growth in our net sales anticipated effects of any product recalls anticipated market conditions planned product launches restructuring or business transition expectations regulatory plans and expected results of operations and integration of any acquisition are forward looking To identify these statements look for words like believes outlook probable expects may will should could seeks intends plans estimates or anticipates and similar words or phrases Forward looking statements necessarily depend on assumptions data or methods that may be incorrect or imprecise and are subject to risks and uncertainties Among the factors that could cause our actual results and future actions to differ materially from those described in forward looking statements are those described in our Securities and Exchange Commission filings including the Business Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations sections in this Annual Report on Form 10 K for the fiscal year ended October 31 2024 as such Risk Factors may be updated in quarterly filings
Our business faces significant risks In addition to the summary below you should carefully review the Risk Factors section of this Annual Report on Form 10 K We may be subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial Our business financial condition and results of operations could be materially adversely affected by any of these risks and the trading prices of our common stock could decline by virtue of these risks These risks should be read in conjunction with the other information in this report Some of the more significant risks relating to our business include
Adverse changes in the global or regional general business political and economic conditions including the impact of continuing uncertainty and instability of certain countries man made or natural disasters and pandemic conditions that could adversely affect our global markets and the potential adverse economic impact and related uncertainty caused by these items
The impact of international conflicts and the global response to international conflicts on the global and local economy financial markets energy markets currency rates and our ability to supply product to or through affected countries
Our substantial and expanding international operations and the challenges of managing an organization spread throughout multiple countries and complying with a variety of legal compliance and regulatory requirements
Our existing and future variable rate indebtedness and associated interest expense is impacted by rate increases which could adversely affect our financial health or limit our ability to borrow additional funds
Acquisition related adverse effects including the failure to successfully achieve the anticipated net sales margins and earnings benefits of acquisitions integration delays or costs and the requirement to record significant adjustments to the preliminary fair value of assets acquired and liabilities assumed within the measurement period required regulatory approvals for an acquisition not being obtained or being delayed or subject to conditions that are not anticipated adverse impacts of changes to accounting controls and reporting procedures contingent liabilities or indemnification obligations increased leverage and lack of access to available financing including financing for the acquisition or refinancing of debt owed by us on a timely basis and on reasonable terms
Compliance costs and potential liability in connection with U S and foreign laws and health care regulations pertaining to privacy and security of personal information such as Health Insurance Portability and Accountability Act of 1996 HIPAA and the California Consumer Privacy Act CCPA in the U S and the General Data Protection Regulation GDPR requirements in Europe including but not limited to those resulting from data security breaches
A major disruption in the operations of our manufacturing accounting and financial reporting research and development distribution facilities or raw material supply chain due to challenges associated with integration of acquisitions man made or natural disasters pandemic conditions cybersecurity incidents or other causes
A major disruption in the operations of our manufacturing accounting and financial reporting research and development or distribution facilities due to the failure to perform by third party vendors including cloud computing providers or other technological problems including any related to our information systems maintenance enhancements or new system deployments integrations or upgrades
New U S and foreign government laws and regulations and changes in existing laws regulations and enforcement guidance which affect areas of our operations including but not limited to those affecting the health care industry including the contact lens industry specifically and the medical device or pharmaceutical industries generally including but not limited to the EU Medical Devices Regulation MDR and the EU In Vitro Diagnostic Medical Devices Regulation IVDR
Legal costs insurance expenses settlement costs and the risk of an adverse decision prohibitive injunction or settlement related to product liability patent infringement contractual disputes or other litigation
New competitors product innovations or technologies including but not limited to technological advances by competitors new products and patents attained by competitors and competitors expansion through acquisitions
The requirement to provide for a significant liability or to write off or accelerate depreciation on a significant asset including goodwill other intangible assets and idle manufacturing facilities and equipment
Risks related to environmental laws and requirements applicable to our facilities products or manufacturing processes including evolving regulations regarding the use of hazardous substances or chemicals in our products
The Cooper Companies Inc Cooper we or the Company is a global medical device company with a mission to improve lives one person at a time We partner with health care providers worldwide to improve patient outcomes and deliver practice building resources and training By listening closely to the healthcare providers and patients we fulfill the needs of today while focusing on the opportunities of tomorrow through innovation and strategic investment
Cooper operates through two business segments CooperVision and CooperSurgical Our two business segments elevate standards of care with products and services in the fields of vision fertility and women s health For financial information relating to these business segments refer to Note 12 Business Segment Information in Item 8 Financial Statements and Supplementary Data of this Annual Report
CooperVision is a global manufacturer providing products for contact lens wearers CooperVision develops manufactures and markets a broad range of single use two week and monthly contact lenses featuring advanced materials and optics CooperVision designs its products to address vision challenges such as astigmatism presbyopia and myopia with a broad collection of spherical toric and multifocal contact lenses CooperVision offers contact lenses in materials like silicone hydrogel Aquaform technology CooperVision also manufactures and markets myopia management products including the internally developed MiSight 1 day lens as well as other specialty eyecare products such as orthokeratology ortho k and scleral lenses In November 2019 the MiSight 1 day lens became the first and only product approved by the United States Food and Drug Administration FDA for slowing the progression of myopia in children aged 8 12 at the initiation of treatment and in August 2021 CooperVision received Chinese National Medical Products Administration NMPA approval for use of the MiSight 1 day lens in China CooperVision s major manufacturing and distribution facilities are located in Belgium Costa Rica Hungary Puerto Rico the United Kingdom and the United States with other smaller facilities in multiple locations around the world
CooperSurgical offers a broad array of products and services focused on fertility and women s health We categorize CooperSurgical product sales based on the point of health care delivery which includes products used in medical offices ambulatory surgery centers and hospitals primarily by women s health providers including Obstetricians Gynecologists OB GYN and fertility products and services used primarily in fertility clinics Our portfolio encompasses more than 600 products and services Our medical devices are used in gynecology and obstetrics including but not limited to surgical products contraception and labor and delivery as well as cord blood and cord tissue storage services Our fertility portfolio encompasses medical devices supporting the in vitro fertilization IVF process egg and sperm donation cryopreservation and genomic services including genetic testing CooperSurgical has established its market presence and distribution system by developing products and acquiring companies products and services that complement its business model CooperSurgical s major manufacturing cryostorage and distribution facilities are located in Costa Rica the Netherlands the United Kingdom and the United States with other smaller facilities in multiple locations around the world
CooperVision competes in the worldwide soft contact lens market and services three primary regions the Americas EMEA Europe Middle East and Africa and Asia Pacific The two major product categories of contact lenses sold by CooperVision are
Toric and multifocal lenses including lenses that in addition to correcting near and farsightedness address more complex visual defects such as astigmatism myopia and presbyopia by adding optical properties of cylinder and axis which correct for irregularities in the shape of the cornea and
Spherical lenses including lenses that correct near and farsightedness uncomplicated by more complex visual defects myopia management lenses which slow the progression of and correct myopia in age appropriate children and other specialty lenses
In order to achieve a comfortable and healthier lens wearing experience products are sold with recommended wearing and replacement schedules often referred to as modalities with the primary modalities being single use lenses designed for one day use and frequent replacement FRP lenses designed for two week and monthly replacement CooperVision offers spherical toric multifocal and toric multifocal lens products in most modalities and in a wide range of lens parameters
Under the Biofinity brand CooperVision markets monthly silicone hydrogel spherical including Biofinity Energys toric multifocal and toric multifocal made to order lens products Our Biofinity brand is CooperVision s highest grossing product CooperVision also markets two week silicone hydrogel spherical and toric lenses under the Avaira Vitality brand
brand is our softest line of 1 day silicone hydrogel lenses and offers spherical including MyDay Energys toric and multifocal lenses The clariti 1 day brand is our most affordable line of silicone hydrogel 1 day lenses and offers spherical toric and multifocal lenses CooperVision also offers traditional single use hydrogel lenses under our Proclear and Biomedics brands
CooperVision focuses on supporting the growth of all customers including key accounts which include optical chains global retailers certain buying groups and mass merchandisers by investing in selling promotional and advertising activities Further we are increasing investment in our distribution and packaging capabilities to support the growth of our business and to continue providing quality service with our industry leading stock keeping unit range and customized offerings
The market for spherical lenses is growing with the addition of new value added products such as spherical lenses that may provide improved comfort for contact lens related dryness during lens wear and that add aspherical optical properties more higher oxygen permeable lenses such as silicone hydrogels and myopia management contact lenses for children aged 8 to 12 years old CooperVision believes that there are opportunities for contact lenses to gain market share particularly in markets where the penetration of contact lenses in the vision correction market is low
and first Chinese NMPA approved product to slow the progression of and correct myopia in age appropriate children This is a critical differentiator as the proactive management of myopia becomes standard of care within the eye care community to help reduce the progression of myopia in children along with reducing the risks of long term eye health problems associated with myopia such as cataracts retinal detachment and macular degeneration We are investing to develop this new market by educating eye care practitioners patients and their families which increases awareness
CooperVision is focused on greater worldwide market penetration of recently introduced products and we continue to expand our presence in existing and emerging markets both organically and through acquisitions
CooperSurgical focuses on advancing fertility and women s health through a diversified portfolio including fertility products and services medical devices cryostorage such as cord blood and cord tissue storage and contraception We offer quality products innovative technologies and superior services to health care professionals and patients worldwide CooperSurgical collaborates with health care professionals to identify products and new technologies to bring to market The result is a broad portfolio of products and services that are intended to aid in the delivery of improved clinical outcomes for patients and are routinely used by health care professionals in the diagnosis and treatment of a wide spectrum of women s health and reproductive issues
CooperSurgical distributes its products and services through OB GYN and medical offices hospital and ambulatory surgery centers and fertility clinics as well as direct to consumer A focus area for CooperSurgical is key accounts which include large group practices integrated delivery networks and certain buying groups within the office surgical business and fertility clinic networks within the fertility business We believe our portfolio of offerings and focus on service quality and clinical education will help increase our share of business within these key account groups
Since its inception in 1990 CooperSurgical has established its market presence and distribution system by developing products and acquiring products and companies that complement its business model In fiscal 2024 CooperSurgical
MiSight 1 day omafilcon A soft hydrophilic contact lenses for daily wear are indicated for the correction of myopic ametropia and for slowing the progression of myopia in children with non diseased eyes who at the initiation of treatment are 8 12 years of age and have a refraction of 0 75 to 4 00 diopters spherical equivalent with 0 75 diopters of astigmatism The lens is to be discarded after each removal
acquired select Cook Medical assets focused primarily on the obstetrics doppler monitoring and gynecology surgery markets a fertility company that specializes in sperm separation devices and 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 We expect to continue investing in CooperSurgical s business including through strategic transactions with the goal of expanding our integrated solutions model within the areas of fertility and women s health
CooperSurgical sells a wide variety of innovative medical devices and services used in gynecology and obstetrics including in labor and delivery as well as to screen diagnose and treat women s health and reproductive conditions
CooperSurgical offers the cryostorage of newborn cord blood and cord tissue which are potent sources of stem cells that have the potential for treatment and healing Our newborn stem cell storage services are available in the United States Canada and Australia
Paragard is a hormone free intrauterine device IUD offered by CooperSurgical that prevents pregnancy for up to ten years using copper as the only active ingredient It is the only FDA approved non hormonal IUD contraceptive option and is exclusively sold in the United States
CooperSurgical has broad product offerings for fertility evaluations and IVF procedures by OB GYN professionals reproductive endocrinologists and embryologists In fertility clinics our products include media micro tools and lab equipment Additionally CooperSurgical offers services to clinics and families undergoing assisted reproductive technologies including donor gametes cryostorage and genomic services
CooperSurgical participates in the market for women s and family health care with its diversified product lines at various points of health care delivery OB GYN medical offices hospitals and surgery centers and fertility clinics CooperSurgical s business also includes cryostorage services for gametes cord blood and cord tissue
CooperSurgical expects that OB GYN medical offices and fertility clinics will continue to move away from private practice ownership and toward group practices private equity corporate or other ownership As the consolidation trend continues it will have increased influence over supply chain control group purchases value analysis committees product evaluation and procurement We believe CooperSurgical s broad product portfolio can benefit in this changing environment as customers look to standardize and consolidate vendors
Initial evaluation and treatments for infertility such as uterine assessment ovulatory medications and intrauterine insemination IUI beginning with the OB GYN and then transitioning to fertility clinics
The markets in which we participate are highly competitive and involve the continual search for technological and scientific innovations Competitive factors in these markets include technological and scientific advances product quality and availability price customer service including response time and effective communication of product information to clinicians and consumers and manufacturing processes Competitors may have greater financial resources larger research and development budgets larger sales forces greater market penetration and or larger manufacturing capacity Both CooperVision and CooperSurgical compete predominantly on the basis of product quality and differentiation technological benefits price service levels and reliability
CooperVision s largest competitors in the worldwide market and its primary competitors in the spherical toric and multifocal lens categories of that market are Johnson Johnson Vision Care Inc Alcon Inc and Bausch Lomb To a lesser extent CooperVision also competes with manufacturers of eyeglasses and providers of other forms of vision correction including ophthalmic surgery We believe that in order to compete successfully in the numerous categories of the contact lens market companies must offer differentiated products that are priced competitively and manufactured efficiently CooperVision competes in its markets by producing high medium and low volume lenses made with a variety of materials for a broader range of market niches as well as offering a wide range of lens parameters leading to a higher rate of successful fitting for practitioners and better visual acuity for patients Our ability to compete successfully with a full range of silicone hydrogel products is an important factor to achieving success in our business We also compete based on our customer and professional services
CooperSurgical focuses on selected segments of the fertility and women s health care market with a diversified portfolio including fertility products and services medical devices cryostorage such as cord blood and cord tissue storage and contraception CooperSurgical s strategy includes developing and acquiring new solutions to complement our current offerings In the fertility market CooperSurgical competes against Vitrolife Group FujiFilm Irvine Scientific Hamilton Thorne and Fairfax Cryobank and Fairfax EggBank We also compete with fertility clinics offering their own services Larger companies such as Johnson Johnson Medtronic and Hologic have offerings that compete with our medical device products In the stem cell storage field we compete primarily with ViaCord a division of Revvity in the United States as well as other smaller companies globally With Paragard we compete with manufacturers of hormonal IUDs including Bayer and AbbVie Long Acting Reversible Contraceptives including Organon and other forms of birth control We are aware of a non hormonal IUD under development which may compete with Paragard in the future Further the continued consolidation of medical offices and fertility clinics may impact the competition for our products and services
The Company employs approximately 400 people in research and development CooperVision s product development and clinical research is supported by internal and external specialists in lens design formulation science polymer chemistry engineering clinical trials microbiology and biochemistry CooperVision s research and development activities primarily include programs to develop new contact lens designs myopia management and manufacturing technologies along with improving formulations and existing products
CooperSurgical conducts research and development in house and works with external specialists when necessary in mechanical electrical biomedical and software engineering as well as life sciences CooperSurgical research and development activities are focused on innovating improving and advancing our products and services including instruments devices consumables digital services and manufacturing technologies
Our products are subject to extensive regulation by the FDA in the United States and a variety of regulatory agencies in other countries The process of obtaining regulatory approvals and the subsequent compliance with applicable federal state local and foreign statutes and regulations requires the expenditure of substantial time and financial resources These regulations govern among other things the design and development testing manufacturing labeling storage record keeping premarket clearance approval or certification post market vigilance reporting advertising and promotion and sales and distribution of medical devices and pharmaceutical products Failure to comply with the applicable regulations which are subject to established and new legislation and change could result in enforcement action by the FDA or other U S or foreign government agencies which may include among other things any of the following consequences warning letters civil penalties refusal or withdrawal of approvals or certifications license suspension or revocation product recalls operating restrictions suspension or shutdown of production and criminal prosecution
Most of our products are medical devices which must comply with the Federal Food Drug and Cosmetic Act FDCA and the regulations promulgated by the FDA thereunder The FDA classifies medical devices into one of three classes Class I II or III depending on the degree of risk associated with each medical device and the extent of control needed to ensure the medical device s safety and effectiveness Both CooperVision and CooperSurgical develop and market medical devices subject to different levels of FDA regulation depending on the classification and risk profile of the device Class III devices such as extended wear contact lenses require extensive premarket testing and approval while Class I and II devices require lower levels of regulation The majority of CooperSurgical s products are Class II devices Unless an exemption applies each medical device we wish to distribute commercially in the United States will require either premarket notification to the FDA requesting clearance for commercial distribution under Section 510 k of the FDCA a premarket approval PMA from the FDA or a de novo classification and request for marketing authorization submitted to and granted by the FDA
If we are required to obtain a 510 k clearance for a device that we wish to market we must submit a premarket notification to the FDA demonstrating that the device is substantially equivalent to a device commercially distributed in the United States before May 28 1976 a pre amendments device or to a device that was found to be substantially equivalent to a pre amendments device If the FDA agrees that the device is substantially equivalent it will grant 510 k clearance to commercially market the device If the FDA determines that the device is not substantially equivalent to a legally marketed device the FDA automatically designates the device as a Class III device The sponsor of a device automatically designated as Class III must either fulfill more rigorous PMA requirements or request a risk based classification determination for the device in accordance with the de novo process The de novo process is a pathway to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device
A PMA application must be submitted if the device cannot be cleared through the 510 k premarket notification procedures or if the device has been previously classified as Class III The PMA process is much more demanding than the 510 k premarket notification process A PMA application must be supported by extensive data including but not limited to technical pre clinical clinical trials manufacturing and labeling to demonstrate to the FDA s satisfaction the safety and effectiveness of the device for its intended use Prior to commencing human clinical trials submission of an application for an investigational device exemption IDE and receipt of IDE approval from the FDA is required if the device under evaluation presents a significant risk to human health The process of gathering supporting information leading up to PMA application and the subsequent FDA review can take several years
A majority of the medical devices we currently market have received FDA clearance through the 510 k process or approval through the PMA process Because we cannot be assured that any new products we develop or any product enhancements will be exempt from the premarket clearance or approval requirements or will be subject to the shorter 510 k clearance process rather than the PMA process significant delays in the introduction of any new products or product enhancements may occur
After a device is placed on the market numerous regulatory requirements apply These include establishment registration and device listing with the FDA the FDA s Quality System Regulation QSR which requires manufacturers to follow design testing production control complaint handling documentation and other quality assurance procedures during the manufacturing process labeling regulations which prohibit the promotion of products for uncleared or unapproved or off label uses and impose other restrictions on labeling advertising and promotion FDA unique device identifier regulations which require changes to labeling and packaging and medical device reporting regulations which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur The FDA has broad post market and regulatory enforcement powers We are subject to unannounced inspections for cause by the FDA to determine our compliance with the QSR and other regulations
In the United States under the FDCA and the FDA s regulatory framework in vitro diagnostic devices IVDs are a type of medical device that can be used in the diagnosis or detection of diseases such as cancer or other conditions The FDA considers Laboratory Developed Tests LDTs to be a subset of IVDs that are designed manufactured and used within a single laboratory Furthermore in May 2024 the FDA issued a final rule to amend its regulations to make explicit that LDTs are devices under the FDCA Along with this amendment the FDA is finalizing a policy under which the FDA will provide greater oversight of IVDs offered as LDTs through a phaseout of its general enforcement discretion approach for LDTs over the course of four years as well as targeted enforcement discretion policies for certain categories of IVDs manufactured by laboratories As we operate a genetic testing laboratory we are required to hold certain federal state and local licenses certifications and permits to conduct our business Under the Clinical Laboratory Improvement Amendments of 1988 CLIA regulations we are required to hold a certificate applicable to the type of laboratory tests we perform and to comply with standards applicable to our operations including test processes personnel facilities administration equipment maintenance recordkeeping quality systems and proficiency testing We have current certification under CLIA to perform testing at our New Jersey facility In addition to federal certification requirements of laboratories under CLIA licensure is required and maintained for our laboratory under state law
We currently operate as a provider of donated reproductive tissue eggs and sperm for fertility treatments fertility cryopreservation services and newborn stem cell storage Eggs and sperm are regulated by the FDA as human cells tissues and cellular and tissue based products HCT Ps In addition Section 361 of the Public Health Service Act PHSA authorizes the FDA to issue regulations with respect to HCT Ps To be regulated as a 361 HCT P the product must among other things be minimally manipulated and intended only for homologous uses HCT Ps regulated as 361 HCT Ps are subject to requirements relating to registering facilities and listing products with the FDA and stringent requirements for processing storing labeling and distributing HCT Ps including required labeling information screening and testing for tissue donor eligibility record keeping and adverse event reporting among other applicable requirements and laws 361 HCT Ps do not require 510 k clearance PMA approval submission of a Biologics License Application or other premarket authorization from the FDA before marketing We believe our HCT Ps are regulated as 361 HCT Ps
In the United States the FDA regulates pharmaceutical products under the FDCA and its implementing drug regulations Although Paragard is a drug device combination product the FDA has determined that the primary mode of action for Paragard is the drug component and the product is therefore regulated by the FDA s Center for Drug Evaluation and Research under applicable drug regulations The process required by the FDA before a drug may be marketed in the United States generally involves numerous and time consuming steps including preclinical laboratory tests human clinical trials FDA reviews and facility inspections
Any drug products manufactured or distributed by us pursuant to NDA approvals are subject to continuing regulation by the FDA as the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market After approval of an NDA most changes to the approved product such as adding new indications manufacturing changes or other labeling claims are subject to further testing requirements and prior FDA review and approval Drug manufacturers and their subcontractors are also required to maintain compliance with cGMPs and other requirements including requirements relating to recordkeeping periodic reporting product sampling and distribution advertising and promotion and reporting of adverse experiences with the product Accordingly manufacturers must continue to expend time money and effort in the area of production and quality control to maintain ongoing compliance In addition the FDA closely regulates the marketing promotion and distribution of pharmaceutical products The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses and a company that is found to have improperly promoted off label uses may be subject to significant liability
Health authorities in foreign countries regulate Cooper s clinical studies and medical device sales Even if the FDA has cleared or approved a product in the United States the regulatory agencies or notified bodies in other countries must approve or certify new products and product modifications before they may be marketed in those countries The regulations vary widely from country to country although there is a trend towards harmonization of quality system standards among the European Union EU United States Canada and various other industrialized countries Medical devices marketed or sold in the EU must meet the CE mark requirements and maintain certain certifications CooperVision maintains ISO 13485 certification and CE marks for its products and CooperSurgical maintains ISO 13485 certification and CE marks for medical devices and ISO 15189 certification for the genomics laboratories The ISO 13485 Quality Management System certification is now also required for registration of products in Asia Pacific and Latin American
countries among many other requirements for registration in these countries In order to maintain these quality benchmarks the Company is subjected to rigorous biannual reassessment audits of its quality systems and procedures
The EU rules below are generally applicable in the European Economic Area EEA which consists of the 27 EU member states plus Norway Liechtenstein and Iceland while the majority of the United Kingdom now operates under a separate regulatory regime following the United Kingdom s withdrawal from the EU on January 31 2020
Until May 25 2021 medical devices sold in the EU were regulated by the Medical Device Directive the EU MDD which has been repealed and replaced by the EU MDR Similarly the EU has adopted the IVDR which repealed and replaced the In Vitro Diagnostic Medical Device Directive the EU IVDD and became applicable on May 26 2022 The majority of our current certificates have been granted under the EU MDD and the EU IVDD Due to the unattainable nature of the deadlines for recertification of medical devices under the EU MDR and the EU IVDR EU institutions have extended the transition periods for devices certified in accordance with the previous Directives including the EU MDD and the EU IVDD through legislative amendments of the transitional provisions of the EU MDR and EU IVDR Therefore devices lawfully placed on the market pursuant to the EU MDD and EU IVDD may generally continue to be made available on the market or put into service provided that the requirements of transitional provisions are fulfilled Pursuing marketing of medical devices including IVDs in the EU will require that our devices be certified under the new regimes set forth in the EU MDR and the EU IVDR
In the EU the safety and performance of medical devices including IVDs are evaluated by the designated notified bodies via the submission of technical dossiers depending on the product classifications A declaration of conformity to the MDD or MDR is drawn out as a basis for European conformity marking CE Mark All medical devices placed on the EU market must meet general safety and performance requirements including the requirement that a medical device must be designed and manufactured in such a way that during normal conditions of use it is suitable for its intended purpose Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients or the safety and health of users and where applicable other persons provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety taking into account the generally acknowledged state of the art
Compliance with the general safety and performance requirements is also a prerequisite for CE mark without which medical devices cannot be marketed or sold in the EU To demonstrate compliance with the general safety and performance requirements medical device manufacturers must undergo a conformity assessment procedure which varies according to the type of medical device and its risk classification With certain exceptions a conformity assessment procedure requires the intervention of notified bodies which are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market Typically satisfactory completion of an audit and examinations of a product s technical dossiers and the manufacturer s quality system is required before the issuance of a certificate by the notified body This certificate along with the Declaration of Conformity are then used by the manufacturer as basis for CE mark
In addition all manufacturers placing medical devices on the market in the EU are subject to various other regulations including compliance with the EU medical device vigilance system directives and requirements regarding the advertisement and promotion of medical devices and inspections rights of regulatory authorities
In the EU LDTs were exempt from the regulations that govern medical devices and IVDs under certain conditions In order to fall within this exemption under the EU IVDD medical devices including LDTs had to be designed and used within such health institutions which may include hospitals laboratories and public health institutions that support the healthcare system and or address patient needs but do not treat or care for patients directly on a non industrial scale without being released into the market While the legal framework for applying the exemption under the EU IVDD to LDTs was not entirely clear the EU IVDR may provide greater clarity on the regulation of LDTs
Our current and future tests will need to be assessed against the EU IVDR requirements We will be required to comply with various certification and documentation criteria and we will be subject to conformity assessments and audits by EU notified body and inspections by regulatory authorities
Following the United Kingdom s withdrawal from the EU commonly referred to as Brexit EU laws no longer apply directly in Great Britain England Wales and Scotland Under the terms of the Ireland Northern Ireland Protocol agreed between the EU and United Kingdom many EU laws including those relating to medical devices and IVDs do still apply in Northern Ireland
In Great Britain the legislative regime currently continues to be based on the requirements set out in the EU MDD the Active Implantable Medical Devices Directive EU AIMDD and the EU IVDD However substantial reforms to the Great Britain regulatory regime for medical devices and IVDs are currently being developed to improve patient safety Most of the reforms are to align with EU MDR requirements but the Medicines and Healthcare products Regulatory Agency MHRA also intends to introduce unique requirements such as post market surveillance software and Artificial Intelligence from mid 2025
As in other regions securing regulatory approvals in Asia Pacific is a critical aspect of commercializing our products While medical device regulations in the Asia Pacific are based on similar regulatory fundamentals such as risk based classification of devices as other regions navigating the regulatory landscape in Asia Pacific is extremely complex Medical device regulation in Asia Pacific differs significantly country by country requiring specific regulatory affairs expertise in each country as well as country based regulatory strategies The regulatory framework maturity in Asia Pacific is widely varied ranging from well established to emerging approval timelines can be lengthy and unpredictable and there is less access to and engagement with regulators compared to other markets Several key Asia Pacific markets require regulatory approval in other countries prior to registration increasing the time from completion of product development to product launch For example in China manufacturers must provide proof of home country approval such as the United States or EU as part of the regulatory registration approval process
The NMPA regulates medical devices in China Medical devices in China are classified by risk into Class I lowest risk Class II or Class III highest risk China requires physical testing known as type testing of medical device samples by in country testing centers to confirm compliance with specifications and standards both pre and post market Additionally NMPA generally requires in country clinical trials to support new product registrations rather than relying on foreign clinical data
In Japan the primary regulation governing medical devices is the Pharmaceutical and Medical Device Act PMD Act The Ministry of Health Labor and Welfare MHLW and the Pharmaceutical and Medical Device Agency PMDA regulate medical devices The PMDA evaluates the safety and effectiveness of medical devices prior to granting marketing authorization or approval and monitors post market safety of approved devices The PMDA is also the Quality Management System QMS Inspection Authority Medical devices are placed into one of four risk classes based on potential risk with Class I being the lowest potential risk and Class IV being the highest Contact lenses for example are regulated as Class III devices and require premarket approval registration an expensive and lengthy process depending on the application category A novel or new medical device application will generally require local clinical trial data extending the time to approval The registration process in Japan requires a QMS application and inspection Additionally separate from the registration process a Foreign Manufacturer Registration is required before a company can import medical devices manufactured outside Japan
state federal and similar foreign anti kickback laws which generally prohibit payments and other forms of remuneration to induce or in return for the purchase lease order or arranging for the purchase lease or order of a product or service
the federal physician self referral law known as the Stark Law which generally prohibits physicians from referring Medicare or Medicaid patients to receive designated health services from an entity which the physician or a member of the physician s immediate family has a financial interest in
the Physician Payments Sunshine Act and similar state and foreign laws that require medical device and pharmaceutical manufacturers to disclose financial relationships with health care professionals and teaching hospitals and
data privacy and security laws and regulations such as the HIPAA and the EU GDPR which are intended to protect the collection use access to confidentiality and security of health related and other personal information
Market acceptance and sales of our CooperSurgical products to our customers who primarily consist of hospitals and surgery centers OB GYN medical offices and fertility clinics will depend on the availability of payor coverage and the adequacy of reimbursement for the procedures using our products by government insurance programs and other third party payors Payor coverage and reimbursement for procedures using medical devices in the United States and international markets vary significantly by country With respect to drug coverage and reimbursement third party payors are increasingly challenging the price and examining the medical necessity and cost effectiveness of drugs in addition to their safety and efficacy We believe the overall escalating cost of medical products and services being paid for by the government and private health insurance has led to and will continue to lead to increased pressures on the healthcare and medical device industry to reduce the costs of products and services
In the United States and foreign countries there has been and continues to be several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates restrict or regulate post approval activities and affect the profitable sale of product candidates We expect that additional state federal and foreign healthcare reform measures will be adopted in the future any of which could limit the amounts that state federal and foreign governments will pay for healthcare products and services which could result in reduced demand for our products or additional pricing pressures
Among policy makers and payors in the United States there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs improving quality and or expanding access Passed in March 2010 the Patient Protection and Affordable Care Act the ACA substantially changed the way healthcare is financed by both governmental and private insurers and significantly affected the pharmaceutical medical device and clinical laboratory industries Additionally there has recently been heightened scrutiny by governmental authorities individual hospitals and third party payors over product prices which has resulted in proposed and enacted federal and state legislation designed to among other things bring more transparency to product pricing review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products Most recently on August 16 2022 the Inflation Reduction Act of 2022 or IRA was signed into law Among other things the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare beginning in 2026 with prices that can be negotiated subject to a cap imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation first due in 2023 and replaces the Part D coverage gap discount program with a new discounting program beginning in 2025
In the EU regulations have been adopted which are intended to boost cooperation among EU member states in assessing health technologies including certain high risk medical devices and providing the basis for cooperation at the EU level for joint clinical assessments in these areas
We are subject to numerous federal state local and foreign environmental laws including provisions that regulate the discharge of materials into the environment laws applicable to our facilities products or manufacturing processes including evolving regulations regarding the use of hazardous substances or chemicals in our products and laws related to the protection of the environment environmental health and safety regulations Restriction of Hazardous Substances RoHS in electrical and electronic equipment in the EU and Registration Evaluation Authorization and Restriction of Chemical substances REACH
We are subject to various other federal state and foreign laws related to the manufacturing and distribution of our products and to our international operations including export control and trade compliance laws
Our businesses utilize various chemicals packaging materials components parts and raw materials which are generally available from more than one source However in certain instances we acquire components and materials from sole suppliers to make our silicone hydrogel contact lens certain medical devices and IVF products Supply of these materials is protected by contractual agreements and safety stocks However if current raw material suppliers fail to supply sufficient materials on a timely basis or at all for any reason we could experience inventory shortages and disruption in the supply of products if we were required to use an alternative supplier on short notice
CooperVision markets our products through our own field sales representatives distributors and eye care practitioners including optometrists ophthalmologists opticians and optical chains CooperVision also sells to distributors and to mass merchandisers who offer eye care services To support the sale and use of CooperVision products CooperVision engages in various activities and offers a variety of services These include clinical training digital marketing for the customer e commerce telemarketing social media and journal advertisements In certain smaller countries CooperVision often uses distributors and leverages our distributors sales and marketing resources to attract major customers to CooperVision With the addition of MiSight CooperVision has expanded the breadth and depth of its sales capabilities by adding myopia management specialists while expanding awareness campaigns to include direct to consumer elements including print internet social media radio and television
CooperSurgical s products are marketed by a network of dedicated field sales representatives independent agents and distributors CooperSurgical augments its sales and marketing activities by participating in national and regional industry trade shows professional educational programs and internet promotions including e commerce search and social media and collaborative efforts with professional organizations telemarketing direct mail and advertising in professional journals Since the addition of donor gametes Paragard and cord blood and cord tissue storage services CooperSurgical has also expanded its awareness campaigns to include direct to consumer elements including print internet social media and radio
We protect our products through patents and trademark registrations both in the United States and in international markets We monitor competitive products trademark use worldwide and when determined appropriate we have enforced and plan to continue to enforce and defend our patent and trademark rights We also rely upon trade secrets licenses technical know how and continuing technological innovation to develop and maintain our competitive position
CooperVision CooperSurgical and other trade names trademarks or service marks of the Company and its subsidiaries appearing in this report are the property of the Company and its subsidiaries Trade names trademarks and service marks of the other companies appearing in this report are the property of their respective holders
No customer accounted for 10 or more of our consolidated net revenue in fiscal 2024 and 2023 See Note 12 Business Segment Information of the Consolidated Financial Statements for additional information
CooperVision and CooperSurgical net sales in the fiscal first quarter which runs from November 1 through January 31 are typically lower than subsequent quarters as patient traffic to practitioners offices fertility clinics and hospitals surgery centers for surgical procedures is less during the holiday season
As of October 31 2024 we had a workforce of more than 16 000 Our employees are located around the world with 54 in Americas 41 in EMEA and 5 in Asia Pacific Human capital management areas of focus include a people focused culture embedding diversity and inclusion fostering an environment of health safety and well being investing in and developing our employees through training and engagement Our employees are a key differentiator in our overall strategy We believe we have good relations with our workforce and we invest in our workforce to meet current and future business objectives always driving towards our goal of being a global employer of choice
We believe that an inclusive work environment that truly appreciates the diversity of employees talents experiences and ideas leads to more innovation and progress Through our Diversity Inclusion D I strategy we drive a culture where individual qualities and backgrounds are highly valued and respected and our employees feel a sense of belonging Our D I strategy includes initiatives to promote D I conversations and training to inform and educate our workforce forming communities of advocates and allies to help advance our culture of inclusion and completion of various reviews of our programs to minimize the impact of unconscious bias on our reward decisions Our commitment to D I starts with our executives and is further executed through local initiatives in order to create sustainable change
Our culture of health safety and well being helps our people and businesses thrive We comply with applicable health and safety laws and regulations and help protect our employees through continuous improvement education engagement and risk management Our Environmental Health and Safety EHS Global Policies formalize our commitment to high standards of EHS performance for employees consultants contract workers and temporary staff worldwide Our employee handbooks specify health and safety expectations working condition policies and other relevant topics We encourage an open reporting culture and require any unsafe conditions or potential hazards be reported immediately Wellness is an important part of our culture Our global Mind Body Well being Employee Resource Group focuses on enhancing physical wellness and raising the importance of mental health through virtual and in person events We offer on and off site fitness and wellness facilities and programs an assortment of team building activities and have a robust offering of physical social nutritional and mental health resources
We empower employees to succeed and grow reward great thinking results and hard work and engage our employees Across our businesses we offer job specific training certifications mentoring developmental assignments and other opportunities to help our employees develop the skills needed to achieve long term success
We provide competitive compensation and benefits in order to attract and retain talent We regularly review our pay practices to confirm there are no significant pay disparities across gender or race and we conduct an annual market assessment to provide consistency in rewards we offer We have implemented robust processes for setting personal goals individual development actions and review employees performance and pay on an annual basis We also offer comprehensive and continually evolving benefits to help employees balance their work lives and personal lives
The Cooper Companies Inc Internet address is https www coopercos com The information on the Company s website is not part of this or any other report we file with or furnish to the Securities and Exchange Commission SEC Our annual
reports on Form 10 K quarterly reports on Form 10 Q and current reports on Form 8 K along with all other reports and amendments filed with or furnished to the SEC are publicly available free of charge on our website as soon as reasonably practicable The SEC maintains a website that contains such reports proxy and information statements and other information whose Internet address is https www sec gov The Company s Corporate Governance Principles Code of Conduct and charters of each standing committee of the Board of Directors are also posted on the Company s website
Our business faces significant risks These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial Our business financial condition and results of operations could be materially adversely affected by any of these risks and the trading prices of our common stock could decline by virtue of these risks These risks should be read in conjunction with the other information in this report
Over the last few years in the United States and globally market and economic conditions have been challenging The United States and foreign countries have experienced recessionary pressures and face continued concerns about the systemic impacts of adverse economic conditions and geopolitical issues Any negative impact on economic conditions and international markets continued volatility or deterioration in the debt and equity capital markets inflation deflation or other adverse economic conditions may adversely affect our liquidity and financial condition It may limit our ability to replace maturing liabilities and to access the capital markets to meet liquidity needs which could have a material adverse effect on our business
Ongoing uncertain economic and financial market conditions may also adversely affect the financial condition of our customers suppliers and other business partners When our customers financial conditions are adversely affected customers may reduce their purchases of our products or we may not be able to collect accounts receivable each of which could have a material adverse impact on our business Our global business has been negatively affected by local economic conditions including inflation increasing labor costs recession and currency exchange rate fluctuations which has adversely affected our cost to manufacture and provide our products and services and revenues generated through sales of such products and services We cannot guarantee that we will be able to fully absorb any such additional costs or revenue declines in the prices for our products and services
CooperVision and CooperSurgical are encountering consolidation in their customer bases and emergence of more centralized large customer groups and retail chains Due to this trend global and regional key account customers now represent a larger proportion or concentration of our business and any disruption to these relationships may have a material adverse impact on our business
Our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors that impact our cost structure and revenue Changes in economic conditions supply chain constraints logistics challenges labor shortages international conflicts and steps taken by governments and central banks as well as other stimulus and spending programs have led to higher inflation which is likely to lead to an increase in costs and may cause changes in fiscal and monetary policy including increased interest rates In a higher inflationary environment we may be unable to raise the prices of our products and services sufficiently to keep up with the rate of inflation
A significant portion of our current operations are conducted and located outside the United States and our growth strategy involves expanding our existing foreign operations and entering into new foreign jurisdictions We have significant manufacturing and distribution sites in North America Latin America and Europe More than half of our net sales for the fiscal years ended October 31 2024 and 2023 were derived from the sale of products outside the United States We believe that sales outside the United States will continue to account for a material portion of our total net sales for the foreseeable future International operations and business expansion plans are subject to numerous additional risks including the following
difficulty growing our sales in emerging markets such as China India Russia Brazil and other developing nations due to among other things customer acceptance undeveloped and or unfamiliar distribution channels regulatory restrictions and changes and business knowledge of these new markets
foreign earnings being subject to withholding requirements or the imposition of tariffs exchange controls or other restrictions including the tariffs enacted by the Chinese government on certain U S goods the scope and duration of which remain uncertain
challenges in complying with a variety of international legal compliance and regulatory requirements such as the Foreign Corrupt Practices Act the Dodd Frank Wall Street Reform and Consumer Protection Act the UK Bribery Act international data security and privacy laws EU MDR and EU IVDR and environmental laws and requirements applicable to our facilities products or manufacturing processes including evolving regulations regarding the use of hazardous substances or chemicals in our products
international conflicts acts or threats of war or terrorism may lead to significant market and other disruptions supply chain interruptions political and social instability trade disputes or trade barriers embargoes changes in consumer or purchase preferences as well as an increase in cyberattacks and espionage
foreign governments adopting regulations including those similar to the EU MDR and EU IVDR or take other actions that would have a direct or indirect adverse impact on our business and market opportunities including but not limited to increased enforcement of potentially conflicting and ambiguous anti bribery and privacy laws
As we continue to expand our business globally our success will depend in large part on our ability to anticipate and effectively manage these and other risks associated with our international operations However any of these factors could adversely affect our international operations and consequently our business
Our business must be conducted in compliance with applicable economic and trade sanctions laws and regulations including those administered and enforced by the U S Department of Treasury s Office of Foreign Assets Control the U S Department of State the U S Department of Commerce the United Nations Security Council and other relevant governmental authorities These laws and regulations may restrict or prohibit altogether the sale or supply of certain of our products to certain governments persons entities countries and territories including those that are the target of comprehensive sanctions unless there are license exceptions that apply or specific licenses are obtained A failure to comply with these laws and regulations could result in civil or criminal sanctions including the imposition of fines and the denial of export privileges which could have a material adverse effect on our business
We have a history of acquiring businesses and products that have significantly contributed to our growth in recent years As part of our growth strategy we intend to continue to consider acquiring complementary technologies products and businesses and establishing joint ventures or other strategic relationships Future transactions could result in potentially dilutive issuances of equity securities the incurrence of debt and contingent liabilities and an increase in amortization and or impairments of goodwill and other intangible assets which could have a material adverse effect upon our business Risks we could face with respect to these acquisitions and other strategic transaction include
difficulties in and expenses related to the integration of the operations technologies information technology and other enterprise resource planning systems products and personnel of the acquired company and establishment of appropriate accounting controls and reporting procedures data protection systems and other regulatory compliance procedures including but not limited to third party compliance and due diligence
risks inherent in accounting allocations and the risk that we are required to record significant adjustments to the preliminary fair value of assets acquired and liabilities assumed within the measurement period
We face risks associated with disruption of our manufacturing distribution and storage operations including possible failure to develop necessary manufacturing processes or constrained idle or excess capacity which could adversely affect our business
We manufacture a significant portion of the medical device products we sell Any prolonged disruption in the operations of our existing manufacturing or distribution facilities or our fertility and stem cell storage facilities whether due to work stoppages technical or labor difficulties integration difficulties destruction of or damage to any facility as a result of natural disaster use and storage of hazardous materials or other events enforcement action by the FDA or other regulatory body if we are found to be in non compliance with current cGMP or similar foreign requirements or other reasons could have a material adverse effect on our business In addition materials such as silicone hydrogel require improvements to our manufacturing processes to make them cost effective While we have improved our manufacturing capabilities for our silicone hydrogel products our failure to continue to develop improvements to our manufacturing processes and reduce our cost of goods could significantly impact our ability to compete Conversely constrained excess or idle capacity which could result from acquisitions unexpected demand inaccurate sales forecasting or unexpected manufacturing efficiencies could significantly impact our profitability capital investments customer service levels and near term financial condition
CooperVision manufactures molded contact lenses which represent the majority of our contact lens revenues primarily at our facilities in Costa Rica Hungary Puerto Rico the United Kingdom and the United States with other smaller facilities also existing in multiple locations around the world CooperSurgical manufactures the majority of its products in Costa Rica the United Kingdom and the United States with other smaller locations also existing in multiple locations around the world We manufacture certain products at only one manufacturing site for certain markets and certain of our products are approved for manufacturing only at one site Further certain media products have limited storage lives limiting inventory back up strategies If there were any prolonged disruption in the operations of the approved facility it could take a significant amount of time to obtain required regulatory approvals validate a second site and replace lost product which could result in lost customers and thereby reduce sales profitability and market share
CooperVision distributes products out of Belgium Hungary the United Kingdom and the United States and various smaller international distribution sites CooperSurgical primarily distributes products out of its facilities in the United States and the Netherlands and operates fertility and stem cell storage facilities in the United States Canada and Australia Any prolonged disruption in the operations of our existing distribution or storage facilities whether due to technical or labor difficulties challenges related to system implementation destruction of or damage to any facility as a result of natural disaster use and storage of hazardous materials or other events or other reasons could have a material adverse effect on our business
Cybersecurity threats continue to increase in frequency and sophistication a successful cybersecurity attack could interrupt or disrupt our information technology systems or those of our third party service providers or cause the
Security breaches computer malware and computer hacking attacks have become more prevalent across industries and may occur on our systems or those of our third party service providers or partners The size and complexity of our information systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors or from attacks by malicious third parties Such attacks are increasing in their frequency levels of persistence levels of sophistication and intensity and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise especially given increased vulnerability of corporate information technology systems as distributed work environments have become prevalent In addition to unauthorized access to or acquisition of personal data confidential information intellectual property or other sensitive information such attacks could include the deployment of harmful malware and ransomware and may use a variety of methods including denial of service attacks social engineering and other means to attain such unauthorized access or acquisition or otherwise affect service reliability and threaten the confidentiality integrity and availability of information Like many other companies we experience attempted cybersecurity actions on a frequent basis and the frequency of such attempts could increase in the future While we have implemented procedures and controls to monitor and mitigate security threats and invested in the protection of data and information technology we cannot be assured that our efforts will prevent or quickly identify service interruptions or security breaches The techniques used by cybercriminals change frequently may not be recognized until launched and can originate from a wide variety of sources including outside groups such as external service providers organized crime affiliates terrorist organizations or hostile foreign governments or agencies We cannot be assured that our data protection efforts and our investment in information technology will prevent significant breakdowns data leakages or breaches in our systems or those of our third party services providers or partners Any such interruption or breach of our systems could adversely affect our business operations and or result in the loss of critical or sensitive confidential information including protected health information PHI or intellectual property and could result in financial legal business and reputational harm to us which could have a material adverse effect on our financial position results of operations and cash flows There can be no assurance that our cybersecurity risk management program and processes including our policies controls or procedures will be fully implemented complied with or effective in protecting our systems and information We maintain cyber liability insurance however this insurance may not be sufficient to cover the financial legal business or reputational losses that may result from an interruption or breach of our systems and we cannot guarantee that applicable insurance will be available to us in the future on economically reasonable terms or at all
We manage our businesses utilizing multiple complex integrated software and hardware information technology operating systems that are regularly maintained and upgraded an interruption or disruption to these systems could disrupt our business or force us to incur excessive costs
We utilize multiple complex integrated software and hardware operating systems including enterprise resource planning and warehouse management systems to support our business units and we have a continuous improvement strategy in place to keep our systems and overarching technology stable and in line with business needs and growth Regular upgrades of our computer hardware and software revisions are typical and expected We employ controlled change management methodologies to plan test and execute all such system upgrades and improvements and we believe that we assign adequate staffing and other resources to projects to ensure successful implementation However we cannot be assured that our systems will meet our future business needs or that upgrades will operate as designed We cannot be assured that there will not be associated excessive costs or disruptions in portions of our business in the course of our maintenance support and or upgrade of these systems
We are in the midst of a multiyear process of implementing new enterprise resource planning ERP systems at CooperVision and CooperSurgical Implementing a new ERP system is not only costly but complex and difficult Implementing a new ERP system can negatively affect not only financial accounting and reporting processes but also external commercial activities such as order receipt and product delivery We cannot be assured that we will successfully implement our new ERP system or that we will avoid these and other negative impacts from our implementation efforts
If any of such systems or programs were to experience service interruptions fail or create erroneous information in our hardware or software network infrastructure possible consequences include our loss of communication links inability to track sales and interruption of other operational or financial processes which in turn could adversely affect our financial results stock price and reputation
We identified a material weakness in our internal control over financial reporting related to an ineffective information technology IT general control for the U S operations within the CooperSurgical segment which if not remediated appropriately or timely could affect our ability to record process and report financial information accurately and prepare financial statements within required time periods and could subject us to litigation or investigations negatively affect investor confidence and adversely impact our stock price
Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting As disclosed in Part II Item 9A during fiscal 2024 management concluded our internal control over financial reporting was not effective as of October 31 2024 due to a material weakness in IT general controls for the CooperSurgical operations in the U S primarily related to the implementation and maintenance of certain enterprise resource planning systems during fiscal 2024 The material weakness resulted from not having a sufficient complement of its personnel inadequate training of personnel and ineffective assessment of the risks related to change management user control monitoring and segregation of duties in the affected IT environment Manual controls that rely on system generated data or reports from the affected IT environment or process level automated controls in the affected IT environment were ineffective because they could have been adversely impacted In response to the material weakness management with the oversight of the Audit Committee has begun to implement steps to remediate the material weakness If we are unable to remediate the material weakness or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures our ability to record process and report financial information accurately and to prepare financial statements within required time periods could be adversely affected which could subject us to reputational harm legal claims or proceedings regulatory investigations and enforcement actions significant costs from remedial actions additional management resources and payment of legal and other expenses negatively affect investor confidence in our financial statement and adversely impact our stock price
Competition in our industry has increased as a result of new market entrants new technologies and as more established companies have intensified competitive pricing pressure As a result of these competitive forces we believe there will continue to be pricing pressure in the future Because our CooperSurgical products are generally purchased by hospitals and surgery centers OB GYN medical offices and fertility clinics and billed to various third party payors changes in the purchasing behavior of such customers or the amount such payors are willing to reimburse our customers for procedures using our products including as a result of healthcare reform initiatives could create additional pricing pressure on us In addition to these competitive forces we continue to see pricing pressure as our customers introduce new pricing structures into their contracts and agreements including fixed price formulas capitated pricing and structured pricing intended to contain healthcare costs Such trends may adversely affect demand for our products and may drive down the prices we are able to charge for our products both of which would negatively affect our operating results
We rely on independent suppliers in our supply chain for raw materials packaging materials and components mechanical equipment and some finished goods we could experience inventory shortages if any of these suppliers encounter a manufacturing or distribution disruption
Our businesses utilize various chemicals packaging materials components parts and raw materials which are generally available from more than one source However in certain instances we acquire components and materials from sole or primary suppliers to make our silicone hydrogel contact lens certain medical devices and IVF products We also source mechanical equipment and in certain instances finished goods from OEM suppliers Supply of these goods items and materials is protected by contractual agreements availability of alternative suppliers and or safety stocks However if current suppliers fail to supply sufficient goods items or materials to us on a timely basis or at all for any reason we could experience inventory shortages and disruption in our supply of products For example among other situations some of the primary material used to make our silicone hydrogel contact lens products including MyDay Biofinity Avaira and clariti are supplied by few or sole suppliers and the failure of a key or sole supplier to timely supply sufficient items and materials necessary for the manufacture of our silicone hydrogel contact lenses could in turn disrupt our supply of those lenses to the market which would have a material adverse effect on our business
Our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as inflation including wage inflation or to supply restrictions beyond our control or the control of our suppliers
We consider our intellectual property rights including patents trade secrets trademarks and licensing agreements to be an integral component of our business We attempt to protect our intellectual property rights through a combination of patent trademark copyright and trade secret laws as well as licensing agreements and third party nondisclosure and assignment agreements Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business
We also may seek to enforce our intellectual property rights on others through litigation Our claims even if meritorious may be found invalid or inapplicable to a party we believe infringes or has misappropriated our intellectual property rights In addition litigation can
We have applied for patent protection in the United States the United Kingdom and other foreign jurisdictions relating to certain existing and proposed processes and products We cannot be assured that any of our patent applications will be approved Patent applications in the United States the United Kingdom and other foreign jurisdictions are maintained in secrecy for a period of time which may last until patents are issued and since publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months we cannot be certain that we will be the first creator of inventions covered by any patent application we make or the first to file patent applications on such inventions The patents we own could be challenged invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage We also cannot assure that we will have adequate resources to enforce our patents
Both CooperVision and CooperSurgical also rely on proprietary technology that is unpatented It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology To protect our trade secrets and other proprietary information our employees consultants advisors and collaborators enter into confidentiality agreements and assignment agreements which generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property However we cannot be assured that these confidentiality agreements will provide meaningful protection for our trade secrets know how or other proprietary information in the event of any unauthorized use misappropriation or disclosure of such trade secrets know how or other proprietary information Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult expensive and time consuming and the outcome is unpredictable
We rely on trademarks to establish a market identity for our products To maintain the value of our trademarks we might have to file lawsuits against third parties to prevent them from using trademarks confusingly similar to or dilutive of our registered or unregistered trademarks We also might not be successful in obtaining registrations for our pending or future trademark applications and might have to defend our registered trademark and pending applications against challenge by third parties Enforcing or defending our registered and unregistered trademarks might result in significant litigation costs and damages including the inability to continue using certain trademarks
The laws of foreign countries in which we do business or contemplate doing business in the future may not recognize intellectual property rights or protect them to the same extent as do the laws of the United States Adverse determinations in a judicial or administrative proceeding could prevent us from manufacturing and selling our products or prevent us from stopping others from manufacturing and selling competing products and thereby have a material adverse effect on our business
Our competitors in both the United States and foreign countries some of which have substantially greater resources and have made substantial investments in competing technologies as well as other third parties may have applied for or obtained or may in the future apply for and obtain patents that will prevent limit or otherwise interfere with our ability to make and sell our existing and planned products In the contact lens industry CooperVision its competitors and other third parties hold patents covering contact lens designs materials processes and business methods Claims that our products business methods or processes infringe upon the proprietary rights of others often are not asserted until after commencement of commercial sales of products incorporating our technology
Significant litigation regarding intellectual property rights exists in our industries For example CooperVision in the past faced significant patent litigation over its silicone hydrogel contact lens products Third parties have made and may make in the future claims of infringement against us or our contract manufacturers in connection with the use of our technology Any claims even those without merit could
We cannot be certain of the outcome of any litigation A successful claim of infringement against us or our contract manufacturers in connection with the use of our technology in particular if we are unable to manufacture or sell any of our planned products in any major market could adversely affect our business Any royalty or licensing agreement if required may not be available to us on acceptable terms or at all Our failure to obtain the necessary licenses or other rights could prevent the sale manufacture or distribution of some of our products and therefore could have a material adverse effect on our business
We could experience losses from product liability claims or legal claims relating to our service offerings including such claims and other losses resulting from sales of counterfeit and other infringing products
We face an inherent risk of exposure to product liability claims in the event that the use of our products results in personal injury We also face the risk that defects in the design or manufacture of our products or sales of counterfeit or other infringing products might necessitate a product recall and other actions by manufacturers distributors or retailers in order to safeguard the health of consumers and protect the integrity of the subject brand Additionally we face the inherent risk of exposure to legal claims including negligence relating to our provision of certain service offerings including the accuracy and quality of our genomic services fertility cryopreservation fertility donor gamete supply and stem cell storage services These risks may be heightened due to our direct to consumer marketing efforts for some of our products and services e g stem cell storage and Paragard IUDs Consumers may halt or delay purchases of a product or service that is the subject of a claim or recall or has been counterfeited We handle some risk with third party carrier policies that are subject to deductibles and limitations These insurance policies may become more expensive or not be available for new risks we may assume when we acquire new businesses We cannot be assured that we will not experience material losses due to product liability claims or recalls legal claims relating to our service offerings or a decline in sales resulting from sales of counterfeit or other infringing products in the future
Certain of our proposed products or services have not yet been clinically tested or commercially introduced and some of our existing products or services are marketed and sold on the basis of potential future medical or therapeutic value assuming technology advances and we cannot be sure that any of them will achieve market acceptance or generate revenues or operating profits The development of a market for our products or services may be influenced by many factors some of which are out of our control including
lack of scientific advancements to validate the medical value of certain products or services such as stored cord blood or cord tissue or scientific advancements in other medical approaches that reduce or eliminate the value of such products or services and
the earlier release of competitive products or services such as new silicone hydrogel products or contraceptive technologies into the market by our competitors and the emergence of newer and more competitive products or services
Each of our businesses operates within a highly competitive environment In our soft contact lens business CooperVision faces intense competition from competitors products in particular silicone hydrogel contact lenses and may face increasing competition as other new products enter the market Our largest competitors in the contact lens business Johnson Johnson Vision Care Inc Alcon Inc and Bausch Health Companies Inc may have substantially greater financial resources larger research and development budgets larger sales forces greater market penetration and or larger manufacturing volumes than CooperVision They offer competitive products and differentiated materials plus a variety of other eye care products including lens care products and ophthalmic pharmaceuticals which may give them a competitive advantage in marketing their lenses The market for contact lenses is intensely competitive and is characterized by declining sales volumes for older product lines and growing demand for silicone hydrogel based products Our ability to respond to these competitive pressures will depend on our ability to decrease our costs and maintain gross margins and operating results and to introduce new products successfully on a timely basis in the Americas EMEA and Asia Pacific
and to achieve manufacturing efficiencies and sufficient manufacturing capacity and capabilities for such products Any significant decrease in our costs per lens will depend in part on our ability to increase sales volume and production capabilities and our ability to secure adequate supply of materials used in production at reasonable costs Our failure to respond to competitive pressures in a timely manner could have a material adverse effect on our business financial condition and results of operations
We cannot be assured that we will not encounter increased competition in the future for example with increased product entries from Asia Pacific contact lens manufacturers or that our competitors newer contact lens products will not successfully erode CooperVision s contact lens business which could have a material adverse effect on our business
The contact lens industry also continues to evolve with respect to the introduction of new distribution and fulfillment models and service technologies which may conflict with CooperVision s strategy or interfere with its customers relationships and loyalty For example more contact lenses are being fulfilled directly to the consumer by manufacturers and wholesalers via online platforms telemedicine is gaining popularity and more vision correction prescriptions are being provided through online refractive exams rather than in office by an eye care practitioner CooperVision s failure to adapt to the threats posed by these new and emerging distribution models and Internet driven services may have a material adverse impact on our business
CooperSurgical focuses on selected segments of the family and women s health care market with a diversified portfolio of products and services including fertility products and services medical devices cryostorage such as cord blood and cord tissue storage and contraception Competitive factors in these segments in which CooperSurgical competes include technological and scientific advances product quality and availability price customer service including response time and effective communication of product information to physicians consumers fertility clinics and hospitals Competition in the medical device industry is dynamic and involves the search for technological and therapeutic innovations
CooperSurgical competes with a number of manufacturers and service providers in its women s family health care market areas Some of these competitors have substantially greater financial and personnel resources and sell a broader range of products which may give them an advantage in marketing competitive products In addition some of CooperSurgical s markets such as genomics contraception and cord blood and cord tissue storage are characterized by rapid technological advancement We face the risk that demand for our products will not grow or will decline if our competitors are more successful than us at innovating in these and other areas There is also risk that emerging technologies or technology advancements could reduce the medical value of certain of our products and services such as cord blood and cord tissue storage which could adversely affect our business In recent years CooperSurgical has also expanded direct to consumer products and services which requires implementing new competitive strategies and increases the importance of customer service and consumer reputation as competitive factors
Technological developments in the vision fertility and women s health may limit demand for our products and services For example corneal refractive surgical procedures such as Lasik surgery and the development of new pharmaceutical products may decrease the demand for our optical products If these new advances provide a practical alternative to traditional vision correction the demand for contact lenses and eyeglasses may materially decrease We cannot be assured that medical advances and technological developments will not have a material adverse effect on our business
Product innovations are important in the industry in which we operate and we face the risk of product obsolescence if we are unable to develop new products or gain regulatory approvals or certifications or if our competitors introduce new products
Product innovations are important in the contact lens market in which CooperVision competes and in the areas of the health care industry in which CooperSurgical competes CooperVision both internally and externally with third parties invests in new product development including the development of new silicone hydrogel based contact lenses While much of CooperVision s research and development activities are performed internally it also uses external research and development investment in collaborations and joint development with third parties CooperSurgical has historically purchased leveraged or licensed the technology developments of others CooperSurgical also has invested in expanding the internal research and development function with the goal of organic growth and to complement our acquisitions strategy Research and development time commitments higher feasibility risk with longer term projects greater dependence on and reduced control over third party deliverables the cost of obtaining necessary regulatory approval or certification and other costs related to product innovations can be substantial We cannot be assured that we will successfully obtain necessary regulatory approvals certifications or clearances for our new products or that our new
products will successfully compete in the marketplace and as a result justify the expense involved in their development and regulatory approval or certification In addition our competitors may have developed or may in the future develop new products or technologies Failure to develop new product offerings and technological changes and to offer products that provide performance that is at least comparable to competing products could have a material adverse effect on our business
We and our facilities are subject to a broad range of U S federal state local and foreign environmental laws and requirements including those governing discharges to the air and water the handling or disposal of solid and hazardous substances and wastes remediation of contamination associated with the release of hazardous substances at our facilities and offsite disposal locations and occupational safety and health We have made and will continue to make expenditures to comply with such laws and requirements Future events such as changes in existing laws and regulations or the enforcement thereof or the discovery of contamination at our facilities may give rise to additional compliance or remediation costs that could have a material adverse effect on our business Such laws and requirements are constantly changing are different in every jurisdiction and can impose substantial fines and sanctions for violations As a manufacturer of various products we are exposed to some risk of claims with respect to environmental matters and we cannot be assured that material costs or liabilities will not be incurred in connection with any such claims
We continue to evaluate the necessary steps for compliance with regulations as they are enacted These regulations include for example regulations enacted in the EU such as the Registration Evaluation Authorization and Restriction of Chemical Substances which requires the registration of and regulates use of certain chemicals the Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive which regulates the use of certain hazardous substances in certain products our CooperSurgical division manufactures These and similar legislation that has been or is in the process of being enacted in Japan China and various states of the United States may require us to re design certain products to ensure compliance with the applicable laws and regulations
In addition new disclosure standards and rules related to ESG matters have been adopted and may continue to be introduced in various states and other jurisdiction For example the European Union Corporate Sustainability Reporting Directive CSRD became effective in 2023 and applies to both EU and non EU entities In October 2023 California adopted new carbon and climate related reporting requirements for large public and private companies doing business in the state Further the SEC adopted a final rule on the Enhancement and Standardization of Climate Related Disclosures in 2024 International ESG disclosure standards have also been produced and further standards will be produced under the auspices of the International Sustainability Standards Board ISSB which some countries such as the UK have indicated they may incorporate into ESG disclosure standards required of certain companies As the nature scope and complexity of ESG reporting diligence and disclosure requirements expand significant effort and expenses could be required to comply with the evolving requirements As our disclosure obligations increase third parties may make claims or bring litigation relating to those disclosures which may be costly
There is an increasing focus from certain investors customers consumers employees and other stakeholders concerning ESG matters Additionally public interest and legislative pressure related to public companies ESG practices continue to grow If our ESG practices fail to meet regulatory requirements or investor customer consumer employee or other stakeholders evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship support for local communities Board of Director and employee diversity human capital management employee health and safety practices product quality supply chain management corporate governance and transparency our reputation brand and employee retention may be negatively impacted and our customers and suppliers may be unwilling to continue to do business with us
Customers consumers investors and other stakeholders are increasingly focusing on environmental issues including climate change energy and water use plastic waste and other sustainability concerns Concern over climate change or plastics and packaging materials in particular may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment Changing customer and consumer preferences or increased regulatory requirements may result in increased demands or requirements regarding plastics and packaging materials including single use and non recyclable plastic products and packaging other components of our products and their environmental impact on sustainability or increased customer and consumer concerns or perceptions whether accurate or inaccurate regarding the effects of substances present in certain of our products Complying with these demands or requirements could cause us to incur additional manufacturing operating or product development costs
If we do not adapt to or comply with new regulations or fail to meet evolving investor industry or stakeholder expectations and concerns regarding ESG issues investors may reconsider their capital investment in our Company and customers and consumers may choose to stop purchasing our products which could have a material adverse effect on our reputation and business
If we fail to recruit develop and retain the necessary personnel our business and our ability to obtain new customers develop new products and provide acceptable levels of customer service could suffer The success of our business is heavily dependent on the leadership of our key management personnel Our success also depends on our ability to recruit develop and retain and motivate highly skilled sales marketing manufacturing engineering and scientific personnel Competition for these persons in our industry is intense and we may not be able to successfully recruit train or retain qualified personnel We are experiencing increasing challenges in building and retaining our workforce in certain markets where pressure from inflation and competition have exacerbated turnover and retention trends Labor shortages and competition for qualified personnel could cause disruptions in our business operations
Certain provisions of our Second Restated Certificate of Incorporation and Amended and Restated By Laws may inhibit changes in control of the Company not approved by our Board of Directors These provisions include advance notice requirements for stockholder proposals and nominations We also have the protections of Section 203 of the Delaware General Corporation Law which could have anti takeover effects
Legislative or regulatory reforms in the United States Europe or other countries may make it more difficult and costly for us to obtain regulatory clearances approvals or certifications for our products or to manufacture market or distribute our products after clearance or approval is obtained
From time to time legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of drugs and medical devices In addition the FDA may change its premarket clearance and approval policies for drugs and medical devices adopt additional regulations or revise existing regulations or take other actions which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis For example over the last several years the FDA has proposed reforms to its 510 k clearance process and such proposals could include increased requirements for clinical data and a longer review period or could make it more difficult for manufacturers to utilize the 510 k clearance process for their products
In addition FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products Any new statutes regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any future products or make it more difficult to obtain clearance or approval for manufacture market or distribute our products We cannot determine what effect changes in regulations statutes legal interpretation or policies when and if promulgated enacted or adopted may have on our business in the future Such changes could among other things require additional testing prior to obtaining clearance or approval changes to manufacturing methods recall replacement or discontinuance of our products or additional record keeping
In addition to traditional regulatory controls on drugs and medical devices our business could be affected by emerging laws or regulations limiting our ability to offer certain of our products and services For example in the United States the reversal by the U S Supreme Court of
has raised concerns in the fertility industry that more restrictive laws could limit access to various reproductive services New and emerging laws may be interpreted to limit access to contraceptive technologies or cryostorage services which could adversely affect certain aspects of CooperSurgical s business
In addition the EU landscape concerning medical devices including IVDs has recently evolved and may be subject to further developments in 2025 A new set of two EU regulations have been adopted on April 5 2017 On May 26 2021 the EU MDR became applicable and replaced previous directives and established transitional provisions The EU IVDR became applicable on May 26 2022 However the European institutions adopted subsequent regulations amending the EU IVDR for a gradual roll out of the EU IVDR to prevent disruptions in the supply of IVDs The EU IVDR fully applies since May 26 2022 but there is a tiered system extending the grace period for many devices depending on their risk classification before they have to be fully compliant with the regulation Both regulations have been adopted to establish a
These modifications may have an effect on the way we intend to develop our business in the EU and EEA For example as a result of the transition towards the new regimes notified body review times have lengthened and product introductions could be delayed or canceled Additionally only a few notified bodies have been designated for EU IVDR certification which could adversely affect our ability to grow our business
Following the end of the Brexit transitional period from January 1 2021 the MHRA became the UK s independent regulatory agency for medical devices Post Brexit amendments have been made to the existing UK medical devices legislation which require medical devices to be registered with the MHRA before being placed on the Great Britain market Manufacturers based outside of the UK need to appoint a UK Responsible Person to register devices with the MHRA On January 9 2024 the MHRA published a roadmap setting out its plans and timelines for towards the reform of the regulatory framework for medical devices in the UK Regulations implementing core elements of the new framework are intended to be in place by 2025 Pending such reform of the UK regulatory framework the government has confirmed that general medical devices compliant with the EU MDD with a valid declaration and CE marking can be placed on the Great Britain market up until the sooner of expiry of certificate or June 30 2028 Medical devices including custom made devices compliant with the EU MDR can be placed on the Great Britain market up until June 30 2030 The rules for placing medical devices on the market in Northern Ireland which is part of the UK differ from those in Great Britain England Scotland and Wales and continue to be based on EU law These developments or the perception that any related developments could occur have had and may continue to have a material adverse effect on global economic conditions and financial markets and our business may be impacted and the demand for our products could be depressed
After a drug or device is placed on the market numerous regulatory requirements apply including the FDA s cGMP and QSR regulations which require manufacturers to follow among other things design testing production control documentation and other quality assurance procedures during the manufacturing process labeling regulations and adverse event reporting regulations that require us to report to FDA or similar governmental bodies in other countries if our products may have caused or contributed to a death or serious injury or malfunction in a way that would be reasonably likely to contribute to death or serious injury if the malfunction were to recur The FDA and similar governmental bodies in other countries have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health Manufacturers such as CooperVision and CooperSurgical may under their own initiative recall a product if a reasonable possibility of serious injury or any material deficiency in a product is found or withdraw a product for other reasons The FDA requires that certain medical device corrections or removals including recalls be reported to the FDA within ten working days of initiating the correction or removal Recalls of any of our products may divert managerial and financial resources and have an adverse effect on our financial condition and results of operations A recall could harm our reputation with customers and consumers which could reduce the sales of our products In addition the FDA or other foreign governmental agencies may implement enforcement actions in connection with a recall which could impair our product offerings and be harmful to our business and financial results
If our manufacturing operations fail to comply with applicable regulations our manufacturing could be delayed or disrupted our products could be subject to recall and sales and profitability could suffer
Our manufacturing operations and processes are required to comply with numerous federal state and foreign regulatory requirements including the FDA s cGMP regulations for drugs and QSR for medical devices which govern the procedures related to the design testing production processes controls quality assurance labeling packaging storage importing exporting and shipping of our products We also are subject to state requirements and licenses applicable to manufacturers of drugs and medical devices In addition we must engage in extensive recordkeeping and reporting and must make available our manufacturing facilities and records for periodic unscheduled inspections by governmental agencies including the FDA state authorities and comparable agencies as well as audits by notified bodies in other countries Failure to comply with cGMP QSR and other applicable domestic or international regulatory requirements or to respond to any adverse inspectional observations or product safety issues could result in disruption of our operations and manufacturing delays in addition to among other things warning letters significant fines injunctions suspension of approvals seizures recalls or import holds of products operating restrictions and criminal prosecutions As a result any failure to comply with applicable requirements could adversely affect our product sales and profitability
On January 31 2024 the FDA issued a final rule to amend the QSR regulations to align more closely with the International Organization for Standardization standards Accordingly this could impose additional or different regulatory
The manufacture of drug device combination products such as Paragard is complex and requires significant expertise and capital investment We and our contract manufacturers must comply with applicable cGMP QSR and similar foreign regulations and guidelines Manufacturers of pharmaceutical therapeutics often encounter difficulties in production including difficulties with production costs and yields quality control quality assurance testing operator error shortages of qualified personnel as well as compliance with strictly enforced federal state and foreign regulations Furthermore if microbial viral or other contamination are discovered in our drug products or in the manufacturing facilities in which our drug products are made such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination We cannot be assured that any stability or other issues relating to the manufacture of any of our drug products will not occur in the future Additionally our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their contractual obligations our ability to continue marketing our drug products would be jeopardized
Any adverse developments affecting manufacturing of our products may result in shipment delays inventory shortages lot failures product withdrawals or recalls or other interruptions in the supply of our products We may also have to take inventory write offs and incur other charges and expenses for products that fail to meet specifications undertake costly remediation efforts or seek more costly manufacturing alternatives Accordingly failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede the commercialization and marketing of any of our products and could have a material adverse effect on our business
Our products and operations are subject to rigorous regulation by the FDA and numerous other federal state and foreign governmental authorities In the United States the FDA regulates virtually all aspects of medical device and pharmaceutical design development testing manufacture safety labeling including for example unique device identifier regulations storage recordkeeping reporting marketing promotion advertising and distribution as well as product import and export Our failure to comply with FDA regulations could lead to the imposition of administrative or judicial sanctions including injunctions fines warning letters suspensions or the loss of regulatory clearances or approvals product recalls termination of distribution or product seizures In the most egregious cases criminal sanctions or closure of our manufacturing facilities are possible
Our medical devices and pharmaceutical products require clearance or approval by the FDA before they can be commercially distributed in the United States and may require similar approvals by foreign regulatory agencies before distribution in foreign jurisdictions Medical devices and drug products may only be marketed for the indications for which they are approved or cleared The process of obtaining renewing and maintaining regulatory clearances and approvals to market product particularly from the FDA can be costly and time consuming We cannot be assured that such clearances and approvals will be granted on a timely basis if at all and significant delays in the introduction of any new products or product enhancements may occur which could adversely affect our competitive position and results of operations In addition the FDA and authorities in foreign jurisdictions may change their policies adopt additional regulations or revise existing regulations each of which could prevent or delay premarket approval or clearance of our products increase the cost of compliance impose additional regulatory requirements on us or otherwise impact our ability to market our currently approved or cleared products
Modifications and enhancements to medical devices require a new FDA clearance or approval if they could significantly affect its safety or effectiveness or would constitute a major change in its intended use design or manufacture The FDA requires every medical device manufacturer to make this determination in the first instance but the FDA may review any manufacturer s decision We have made modifications and enhancements to our medical devices that we do not believe require a new clearance or approval but we cannot confirm that the FDA will agree with our decisions If the FDA requires us to seek clearance or approval for a modification of a previously cleared product for which we have concluded that new clearances or approvals are unnecessary we may be required to cease marketing or to recall the modified product until we obtain clearance or approval and we may be subject to significant regulatory fines or penalties which could have a material adverse effect on our financial results and competitive position We also cannot assure that we will be successful in obtaining clearances or approvals for our modifications if required
Our efforts to promote some of our products and services via direct to consumer marketing initiatives may subject us to additional scrutiny by the FDA FTC or other agencies For example we promote PARAGARD and cord blood and cord tissue storage directly to end consumers Regulatory agencies may further scrutinize our practices with respect to effective communication of risk information benefits or claims with respect to such products
Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products and product candidates If regulatory sanctions are applied or if regulatory approval is withdrawn the value of our Company and our operating results may be adversely affected
The FDA s and other regulatory authorities policies may change and additional government regulations may be enacted that could prevent limit or delay regulatory approval of our product candidates If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies or if we are not able to maintain regulatory compliance we may be subject to enforcement action and we may not achieve or sustain profitability which would adversely affect our business We also cannot predict the likelihood nature or extent of government regulation that may arise from future legislation or administrative or executive action either in the United States or abroad
Subject to transitional provisions and in order to sell our products in the EU our products must respectively comply with general safety and performance requirements of the EU MDR and the EU IVDR Compliance with these requirements is a prerequisite to be able to affix the European Conformity CE mark to our products without which they cannot be sold or marketed in the EU All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in the Annexes to the EU MDR and EU IVDR including that a medical device must be designed and manufactured in such a way that during normal conditions of use it is suitable for its intended purpose Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients or the safety and health of users and where applicable other persons provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety taking into account the generally acknowledged state of the art To demonstrate compliance with the general safety and performance requirements we must undergo a conformity assessment procedure which varies according to the type of medical device and its risk classification Except for low risk medical devices Class I or general IVDs Class A where the manufacturer can self assess the conformity of its products with the general safety and performance requirements except for any parts which relate to sterility metrology or reuse aspects of a medical device a conformity assessment procedure requires the intervention of a notified body Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market A notified body would typically audit and examine a product s technical dossiers and the manufacturer s quality system notified body must presume that quality systems which implement the relevant harmonized standards ISO 13485 2016 for Quality Management Systems conform to these requirements If satisfied that the relevant product conforms to the general safety and performance requirements the notified body issues a CE certificate which the manufacturer uses as a basis for its declaration of conformity The manufacturer may then apply the CE mark to the device which allows the device to be placed on the market throughout the EU If we fail to remain in compliance with applicable EU laws directives or regulations we would be unable to continue to affix the CE mark to our products which would prevent us from selling them within the EU and EEA
In the EU regulatory authorities have the power to carry out announced and if necessary unannounced inspections of companies as well as suppliers and or sub contractors and where necessary the facilities of professional users Failure to comply with regulatory requirements as applicable could require time and resources to respond to the regulatory authorities observations and to implement corrective and preventive actions as appropriate Regulatory authorities have broad compliance and enforcement powers and if such issues cannot be resolved to their satisfaction can take a variety of actions including untitled or warning letters fines consent decrees injunctions or civil or criminal penalties
The EU regulatory landscape concerning medical devices including IVDs is continuously evolving and the new requirements may have a significant effect on the way we conduct our business in the EU and the EEA Following Brexit the UK regulatory landscape concerning medical devices including IVDs is evolving and may have a significant effect on the way we conduct our business in the UK See Risk Factors
Legislative or regulatory reforms in the United States or Europe may make it more difficult and costly for us to obtain regulatory clearances approvals or certifications for our products or to manufacture market or distribute our products after clearance or approval is obtained
Development and marketing of our products are subject to strict governmental regulation by foreign regulatory agencies and failure to receive or delay in receiving foreign qualifications or certifications could have a material adverse effect on our business
In many of the foreign countries in which we market our products we are subject to regulations affecting among other things product standards packaging requirements labeling requirements import restrictions tariff regulations the reporting of certain payments to health care practitioners in certain markets for example the French anti gift legislation duties and tax requirements Many of the regulations applicable to our devices and products in such countries are similar to those of the FDA
The advertising and promotion of medical devices is subject to some general principles set forth in the EU legislation Directive 2006 114 EC concerning misleading and comparative advertising and Directive 2005 29 EC on unfair commercial practices while not specific to the advertising of medical devices apply to the advertising thereof and contain general rules for example requiring that advertisements be evidenced balanced and not misleading Specific requirements are defined at a national level EU member states laws related to the advertising and promotion of medical devices which vary between jurisdictions may limit or restrict the advertising and promotion of products to the general public and may impose limitations on promotional activities with healthcare professionals
In many countries the national health or social security organizations require our products to be qualified before they can be marketed with the benefit of reimbursement eligibility To date we have not experienced difficulty in complying with these regulations However our failure to receive or delays in the receipt of relevant foreign qualifications could have a material adverse effect on our business financial condition and results of operations
Increased regulatory scrutiny of genetic testing may adversely affect our business through increased costs and risks associated with gaining marketing approvals or certifications and potential impact on demand for our genetic testing services
In the United States in vitro diagnostic devices IVDs are a type of medical device that can be used in the diagnosis or detection of diseases or other conditions The FDA considers laboratory developed tests LDTs to be a subset of IVDs that are designed manufactured and used within a single laboratory Similar tests are also known as In House Tests IH Tests in the EU and LDTs have historically been subject to enforcement discretion by the FDA and were not previously regulated under the 98 79EC in vitro diagnostic directive IVDD of the EU On May 6 2024 the FDA published a final rule on the regulation LDTs making explicit that LDTs are medical devices under the FDCA In addition the FDA is finalizing a policy under which the FDA will provide greater oversight of IVDs offered as LDTs through a phaseout of its general enforcement discretion approach over the course of four years as well as targeted enforcement discretion policies for certain categories of IVDs manufactured by laboratories
We offer certain genetic testing services to help identify the likelihood of pregnancy as well as identify possible disorders or diseases of a child prior to birth and we have historically marketed these tests as LDTs in the United States As a result our tests may now be subject to the FDA s enforcement of its medical device regulations and the applicable FDCA provisions subject to the four year phase out of enforcement discretion beginning in May of 2025 Compliance with the new requirements may require additional analytical or clinical studies or other actions in order to continue marketing our tests during the phase out period which could increase costs and expenses or otherwise negatively affect our business The FDA LDT regulation is currently subject to legislative challenges which may result in less stringent requirements or a decrease in FDA enforcement of LDT requirements Therefore the costs to comply with the FDA LDT regulation and its impact on our business is difficult to predict
Similarly in the EU the regulatory landscape has evolved to include the definition of an IH Test as is an IVD that is developed and produced by a laboratory on a non industrial scale and is provided to health institutions in accordance with Article 5 of the EU IVDR Under such circumstances many IH Tests may continue to be exempt from regulation indefinitely or until 2030 in circumstances where commercially available CE marked options exist Our genetic tests may be subject to the full application of the EU IVDR with respect to some or all of our existing as well as future tests if our tests do not qualify for an IH Test exemption We may be required to expend additional time and resources to comply with the requirements of the EU IVDR resulting in additional expenses for offering our current and any future tests as well as possibly delaying or suspending development or commercialization of such tests
We expect that new proposals or legislative changes may be introduced from time to time both in the U S and in foreign countries Any new FDA enforcement policies affecting LDTs or regulations such as the EU IVDR is likely to result in increased regulatory burden on our ability to continue marketing our genetic products and to develop and introduce new products in the future which could adversely affect our business
We are subject to the CLIA a federal law regulating clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis prevention or treatment of disease Our clinical laboratories must be certified under CLIA and ISO 15189 in order for us to perform testing on human specimens In addition our proprietary tests must also be recognized as part of our accredited programs under CLIA so that we can offer them in our laboratory CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications administration and participation in proficiency testing patient test management quality control quality assurance and inspections The law also requires us to maintain a state laboratory license to conduct testing in that state In addition we are subject to the UK Human Fertilization
Any sanction imposed under CLIA its implementing regulations or state or foreign laws or regulations governing licensure or our failure to renew a CLIA certificate or a state or foreign license or accreditation could have a material and adverse effect on our diagnostic testing business operating results and financial condition Three federal agencies are responsible for administering the CLIA program in the United States the Centers for Medicare Medicaid Services CMS the Centers for Disease Control and Prevention CDC and the FDA The CMS in particular has the authority to impose a wide range of sanctions including revocation of CLIA certification along with a bar on the ownership or operation of a CLIA certified laboratory by any owners or operators of the deficient laboratory If we were to lose our CLIA certification or required state or foreign licensure we would not be able to operate our clinical laboratory and conduct our tests worldwide or in particular jurisdictions which would adversely impact our diagnostic testing business operating results and financial condition
In the United States we provide donor egg and sperm for fertility treatments in addition to fertility cryopreservation services and newborn stem cell storage cord blood and cord tissue Donated reproductive tissues including eggs and sperm as well as cord blood and cord tissue are regulated to by the FDA as HCT Ps In the United States we are marketing these HCT Ps pursuant to Section 361 of the PHSA and 21 C F R Part 1271 of FDA s regulations Products subject to regulation as 361 HCT Ps are not currently required to obtain marketing authorizations so long as they meet certain criteria set forth in FDA regulations However HCT Ps regulated as 361 HCT Ps are currently subject to requirements relating to registering facilities and listing products with the FDA as well as stringent requirements relating to processing storing labeling and distributing HCT Ps including screening and testing for tissue donor eligibility providing required labeling information record keeping and adverse event reporting If we fail to comply with these requirements we could be subject to FDA allegations of noncompliance or enforcement action including for example warning letters fines injunctions product recalls or seizures and in the most serious cases criminal penalties To be regulated as 361 HCT Ps these products must meet the FDA s criteria to be considered minimally manipulated and intended for homologous use among other requirements HCT Ps that do not meet the criteria to be considered 361 HCT Ps are subject to the FDA s regulatory requirements applicable to medical devices biologics or drugs including importantly the requirement for premarket review and approval or clearance prior to marketing
We believe our HCT Ps are regulated solely under Section 361 of the PHSA and therefore we have not sought or obtained 510 k clearance PMA approval or licensure through a Biologics License Application BLA for such HCT Ps However the FDA could disagree with our determination that these human tissue products are 361 HCT Ps and could determine that these products are biologics requiring a BLA or medical devices requiring 510 k clearance or PMA approval and could require that we cease marketing such products and or recall them pending appropriate clearance approval or licensure from the FDA which would adversely affect our business
In addition the FDA may in the future modify the scope of its enforcement discretion with respect to 361 HCT Ps or change its position on which current or future products qualify as 361 HCT Ps or determine that some or all of our HCT P products may not be lawfully marketed without a marketing authorization Any regulatory changes could have adverse consequences for us and make it more difficult or expensive for us to conduct our business by requiring pre market clearance or approval and compliance with additional post market regulatory requirements with respect to those products
Disruptions at the FDA and other government agencies or notified bodies caused by funding shortages or global health concerns could hinder their ability to hire retain or deploy key leadership and other personnel or otherwise prevent new or modified products from being developed cleared or approved or commercialized in a timely manner or at all which could negatively impact our business
The ability of the FDA foreign agencies and notified bodies to review and clear approve or certify new products can be affected by a variety of factors including government budget and funding levels statutory regulatory and policy changes the FDA s foreign agencies and notified bodies ability to hire and retain key personnel and accept the payment of user fees and other events that may otherwise affect the FDA s foreign agencies and notified bodies ability to perform routine functions Average review times at the FDA foreign agencies and notified bodies have fluctuated in recent years as a result In addition government funding of other government agencies that fund research and development activities is subject to the political process which is inherently fluid and unpredictable Disruptions at the FDA foreign agencies and notified bodies and other agencies may also slow the time necessary for new drugs and medical devices or modifications to cleared or approved drugs and medical devices to be reviewed approved and or certified by necessary government agencies or notified bodies which would adversely affect our business For example over the last several years the United
In the EU notified bodies must be officially designated to certify products and services in accordance with the EU MDR and EU IVDR Their designation process which is significantly stricter under the new Regulations has experienced considerable delays Despite a recent increase in designations the current number of notified bodies designated under the new Regulations remains significantly lower than the number of notified bodies designated under the previous regimes The current designated notified bodies are therefore facing a backlog of requests and review times have lengthened
Genetic testing sperm and egg selection services and the use of stem cells have raised ethical legal and social issues regarding privacy and the appropriate uses of information related to these services Government authorities could for social or other purposes limit or regulate the use of genetic information or genetic testing or prohibit testing for genetic predisposition to certain conditions particularly for those that have no known cure They also could limit regulate or prohibit 1 sperm and egg selection services or 2 the use of stem cells Ethical legal or social concerns may lead patients to refuse to use or physicians to be reluctant to order or recommend genetic tests sperm and egg selection services and stem cell storage services even if permissible These and other ethical legal and social concerns may limit market acceptance and adoption of our service offerings or reduce the potential markets for our service offerings either of which could have an adverse effect on our business financial condition and results of operations
The costs of complying with the requirements of federal state and foreign laws pertaining to the privacy and security of personal information including health related information and the potential liability associated with failure to do so could materially adversely affect our business
Numerous laws and regulations govern the collection dissemination use privacy confidentiality security availability and integrity of personally identifiable information PII including protected health information PHI We collect and process PII in multiple ways in our various business lines and are subject to risk associated with compliance with many of these laws and regulations Some of our businesses expose us to increasingly stringent regulations for handling personal information where for example we collect or process PII deemed to be sensitive by regulatory authorities such as PHI
Under U S law HIPAA establishes national privacy and security standards for protection of PHI by covered entities and the business associates with whom such entities contract for services HIPAA requires both covered entities and business associates to develop and maintain policies and procedures for PHI that is used or disclosed and to adopt administrative physical and technical safeguards to protect PHI Mandatory penalties for HIPAA violations can be significant A single breach incident can result in violations of multiple standards If a person knowingly or intentionally obtains or discloses PHI in violation of HIPAA requirements criminal penalties may also be imposed
We maintain technical organizational and contractual safeguards that we believe are reasonable and appropriate to protect the privacy and security of PHI and other personally identifiable information consistent with applicable laws and our contractual obligations however we may not be able to prevent incidences of inappropriate use or unauthorized access to PHI by our employees contractors or external factors despite the safeguards Any such breaches of our systems or those of our vendors customers or other third parties could result in exposure to liability under federal and state laws and or under our contractual arrangements and could adversely impact our business
We are also subject to various other laws in the United States such as Section 5 a of the Federal Trade Commission Act which requires a company s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds the size and complexity of its business and the cost of available tools to improve security and reduce vulnerabilities and the CCPA which gives California residents certain rights to access and delete their personal information opt out of certain personal information sharing and receive detailed information about how their personal information is used The CCPA provides for civil penalties for violations as well as a private right of action for data breaches that has increased the likelihood of and risks associated with data breach litigation Similar laws have been enacted in other states and proposed at the federal level and such laws may have potentially conflicting requirements that make compliance challenging
We are also subject to laws and regulations in countries other than United States covering data privacy and the protection of health related and other personal information EU and EEA member states and other jurisdictions have adopted data protection laws and regulations which impose significant compliance obligations For example the GDPR imposes stringent operational requirements for processors and controllers of personal data in the context of an establishment in the
EEA or the processing of personal data of individuals within the EEA and increases the scrutiny of transfer of personal data from the EEA Following the UK s withdrawal from the EEA and the EU and the expiry of the transition period companies will have to comply with the GDPR and the GDPR as incorporated into the UK national law the UK GDPR In addition countries of the EEA may impose further obligations relating to the processing of genetic biometric or health data which could further add to our compliance costs and limit how we process this information Some of the personal data we process in respect of clinical trial participants is special category or sensitive personal data under the GDPR and subject to additional compliance obligations and to local law derogations We may be subject to diverging requirements under EU member state laws and UK law We are also subject to China s Personal Information Protection Law PIPL which imposes requirements regarding processing PII data localization and cross border transfers of PII as well as a number of other laws in the Asia Pacific area As these laws develop we may need to make operational changes to adapt to these diverging rules which could increase our costs and adversely affect our business
Compliance with U S and foreign privacy and security laws rules and regulations could require us to take on more onerous obligations in our contracts require us to engage in costly compliance exercises restrict our ability to collect use and disclose data or in some cases impact our or our partners or suppliers ability to operate in certain jurisdictions Each of these constantly evolving laws can be subject to varying interpretations Any failure or perceived failure by us to comply with privacy or security laws policies legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of PII may result in governmental enforcement actions and investigations including by European Data Protection Supervisory Authorities fines and penalties litigation orders to cease or change our data processing activities enforcement notices assessment notices for a compulsory audit and or civil claims including class actions adverse publicity and reputational damage Such failures could have a material adverse effect on our financial condition and operations If the third parties we work with violate applicable laws contractual obligations or suffer a security breach such violations may also put us in breach of our obligations under privacy laws and regulations and could in turn have a material adverse effect on our business
When we acquire companies or business that engage in personal data processing we may become subject to additional regulation or scrutiny particularly if such activity is different in nature from what we have done in the past For example with the recent addition of cord blood and cord tissue storage and other cryostorage businesses we interact directly with our customers and collect and maintain personal information regarding our customers and donors Acquisitions like this could subject us to additional regulatory and consumer liability risk and the cost of analyzing and integrating new privacy compliance programs
Changes in legislation and government regulation of the health care industry both in the United States and internationally as well as third party payors efforts to control the costs of health care could materially adversely affect our business
The ACA made extensive changes to the delivery of health care in the United States Among the provisions of the ACA of greatest importance to the medical device industry and pharmaceutical industry are the following
Payment system reforms including a national pilot program on payment bundling to encourage hospitals physicians and other providers to improve the coordination quality and efficiency of certain health care services through bundled payment models
An increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23 1 and 13 of the average manufacturer price for most branded and generic drugs respectively
Other legislative changes which impact the medical device and pharmaceutical industry have been proposed and adopted since the ACA was enacted including the Budget Control Act of 2011 which among other things included aggregate reductions to Medicare payments to providers and the Medicare Access and CHIP Reauthorization Act of 2015 which among other things replaced and changed the formula by which Medicare made annual payment adjustments to physicians and the American Rescue Plan Act of 2021 which eliminated the statutory Medicaid drug rebate cap
In foreign countries where we market our products recent healthcare reform has taken place as well For instance in December 2021 the EU Regulation No 2021 2282 on Health Technology Assessment HTA amending Directive
2011 24 EU was adopted This Regulation intends to boost cooperation among EU member states in assessing health technologies including certain high risk medical devices and provide the basis for cooperation at the EU level for joint clinical assessments in these areas It will permit EU member states to use common HTA tools methodologies and procedures across the EU working together in four main areas including joint clinical assessment of the innovative health technologies with the highest potential impact for patients joint scientific consultations whereby developers can seek advice from HTA authorities identification of emerging health technologies to identify promising technologies early and continuing voluntary cooperation in other areas Individual EU member states will continue to be responsible for assessing non clinical e g economic social ethical aspects of health technologies and making decisions on pricing and reimbursement
We expect that additional state federal and foreign health care reform measures will be adopted in the future including those initiatives affecting coverage and reimbursement for our products any of which could limit the amounts that federal state and foreign governments will pay for health care products and services which could adversely affect the growth of the market for our products or demand for our products or result in additional pricing pressures Also any adoption of health care reform proposals on a state by state basis could require us to develop state specific marketing and sales approaches We cannot predict the effect such reforms or the prospect of their enactment may have on our business
In addition third party payors whether governmental or commercial whether inside the United States or abroad increasingly attempt to contain or reduce the costs of health care These cost control methods include prospective payment systems capitated rates group purchasing redesign of benefits requiring pre authorizations or second opinions prior to certain medical procedures encouragement of healthier lifestyles and exploration of more cost effective methods of delivering health care Although cost controls or other requirements imposed by third party payors have not historically had a significant effect on contact lens prices or distribution practices this could change in the future and could adversely affect our business
We may enroll as in network providers and suppliers with certain payors Although becoming an in network provider or enrolling as a supplier means that we have agreed with these payors to provide certain of our tests at negotiated rates it does not obligate any physicians to order our tests or guarantee that we will receive reimbursement for our tests from these or any other payors at adequate levels Thus these payor relationships or any similar relationships we may establish in the future may not result in acceptable levels of reimbursement for our tests or meaningful increases in our physician customer base We cannot predict whether under what circumstances or at what payment levels payors will cover and reimburse for our tests If we fail to establish and maintain broad coverage and reimbursement for our tests our ability to generate increased revenue and grow our test volume and customer base could be limited and our future prospects and our business could suffer
We may be subject to various federal state and foreign laws pertaining to health care fraud and abuse including anti kickback physician self referral false claims and physician payment transparency laws and regulations These laws may constrain the business or financial arrangements and relationships through which we conduct our operations including our commercial laboratory operations and how we research market sell and distribute any products for which we obtain marketing approval Such laws include
the federal Anti Kickback Statute which prohibits among other things persons or entities from knowingly and willfully soliciting offering receiving or providing any remuneration including any kickback bribe or certain rebates directly or indirectly overtly or covertly in cash or in kind in return for either the referral of an individual or the purchase lease or order or arranging for or recommending the purchase lease or order of any good facility item or service for which payment may be made in whole or in part under a federal healthcare program such as Medicare and Medicaid A person or entity does not need to have actual knowledge of the federal Anti Kickback Statute or specific intent to violate it in order to have committed a violation
the federal physician self referral prohibitions commonly known as the Stark Law which generally prohibit entities from billing a patient or the Medicare or Medicaid programs for certain designated health services including clinical laboratory services when the physician ordering the service or any member of such physician s immediate family has a financial interest such as an ownership or investment interest in or compensation arrangement with us unless the arrangement meets an exception to the prohibition These prohibitions apply regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral
the federal false claims laws including the civil False Claims Act and civil monetary penalties laws which prohibit among other things individuals or entities from knowingly presenting or causing to be presented to the federal government claims for payment or approval that are false or fraudulent or knowingly making using or
causing to be made or used a false record or statement material to a false or fraudulent claim or knowingly making or causing to be made a false statement to avoid decrease or conceal an obligation to pay money to the federal government In addition the government may assert that a claim including items or services resulting from a violation of the federal Anti Kickback Statute or Stark Law constitutes a false or fraudulent claim for purposes of the civil False Claims Act
the federal Civil Monetary Penalties Law which among other things authorizes the imposition of civil monetary penalties assessments and exclusion against an individual or entity based on a variety of prohibited conduct including but not limited to offering remuneration to a federal healthcare program beneficiary that the individual or entity knows or should know is likely to influence the beneficiary to order or receive healthcare items or services from a particular provider
the federal Health Insurance Portability and Accountability Act of 1996 which imposes criminal and civil liability for among other things knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willfully falsifying concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits items or services Similar to the federal Anti Kickback Statute a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation
the federal Physician Payments Sunshine Act which requires certain manufacturers of drugs devices biologics and medical supplies for which payment is available under Medicare Medicaid or the Children s Health Insurance Program with certain exceptions to report annually to the CMS information related to payments and other transfers of value made to physicians defined to include doctors dentists optometrists podiatrists and chiropractors certain non physician practitioners including physician assistants and nurse practitioners and teaching hospitals as well as ownership and investment interests held by physicians and their immediate family members and
analogous state and foreign laws and regulations such as state anti kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non governmental third party payors including private insurers and self pay patients some state laws that require biotechnology companies to comply with the industry s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug and device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures some state laws that require biotechnology companies to report information on the pricing of certain drug products and some state and local laws that require the registration of sales representatives
In addition federal government price reporting laws among other things require us to calculate and report complex pricing metrics to government programs where such reported prices may be used in the calculation of reimbursement and or discounts on our marketed drugs Participation in these programs and compliance with the applicable requirements may subject us to potentially significant discounts on our products increased infrastructure costs and potentially limit our ability to offer certain marketplace discounts
Violations of these laws are punishable by criminal and civil sanctions including in some instances exclusion from participation in federal and state health care programs including Medicare Medicaid Veterans Administration health programs and TRICARE Similarly if the physicians or other providers or entities with whom we do business are found to be non compliant with applicable laws they may be subject to sanctions which could indirectly have a negative impact on our business financial condition and results of operations Because of the complex and far reaching nature of these laws we cannot be assured that we would not be required to alter one or more of our practices to be in compliance with these laws Any violations of these laws or regulations could result in a material adverse effect on our business financial condition and results of operations In addition changes in these laws regulations or administrative or judicial interpretations may require us to further change our business practices or subject our existing business practices to legal challenges which could have a material adverse effect on our business
As a result of our international operations currency exchange rate fluctuations may affect our results of operations and financial position Our most significant currency exposures are the British pound Euro and Japanese yen We expect to generate an increasing portion of our revenue and incur a significant portion of our expenses in currencies other than U S dollars To the extent we are unable to materially offset non functional currency flows exchange rate fluctuations could
have a positive or negative impact on our financial condition and results of operations Because our consolidated financial results are reported in U S dollars if we generate sales or earnings in other currencies the translation of those results into U S dollars can result in a significant increase or decrease in the amount of those sales or earnings and can make it more difficult for our stockholders to understand the relative strengths or weaknesses of the underlying business on a period over period comparative basis Although we may enter into foreign exchange agreements with financial institutions to reduce our net exposure to fluctuations in foreign currency values relative to our non functional currency obligations or balances they would not eliminate that risk entirely
We are subject to interest rate risk in connection with the issuance of variable and fixed rate debt In order to maintain a desired mix of fixed rate and variable rate debt from time to time we may use interest rate swap agreements to fix a portion of our variable rate debt as further described in Note 13 Financial Derivatives and Hedging of the Consolidated Financial Statements We may not be successful in structuring such swap agreements to manage our risks effectively which could adversely affect our business
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness thereby reducing the availability of our cash flow to fund working capital capital expenditures acquisitions research and development efforts and other general corporate purposes
make it more difficult for us to satisfy our obligations with respect to our debt including our obligation to repay our credit facilities under certain circumstances or refinance our indebtedness on favorable terms or at all
Our credit facilities contain financial and other restrictive covenants that could limit our ability to engage in activities that may be in our long term best interests Our failure to comply with those covenants could result in an event of default which if not cured or waived could result in the acceleration of all of our debt which could adversely affect our business
We sponsor a defined benefit plan for certain employees in the United States This defined benefit plan is funded with trust assets invested in a diversified portfolio of securities and other investments Changes in interest rates mortality rates early retirement rates investment returns discount rates and the market value of plan assets can affect the funded status of our defined benefit plan and cause volatility in the net periodic benefit cost and future funding requirements of the plan A significant increase in our obligations or future funding requirements could increase our cash requirements and adversely affect our business
We are subject to U S and foreign tax laws that may change The base erosion and profit shifting BEPS project undertaken by the Organisation for Economic Co operation and Development OECD includes Pillar Two a global minimum tax rate of 15 that may adversely affect our provision for income taxes
We are subject to the examination of our tax returns and other matters by tax authorities Tax authorities could challenge our positions related to transfer pricing and intercompany transactions including the valuation of intangible assets Tax examinations can result in costly litigation with significant interest and penalties and ultimate settlement can take several
years For example we have engaged and expect to continue to engage with tax authorities over tax positions we have taken in connection with our acquisitions and such examinations could cause us to incur significant expense and adverse determinations by the tax authority could result in penalties which could have an adverse effect on our financial results
Our effective tax rate could fluctuate based on the geographic composition of income which could significantly change based on our business results and acquisitions Our effective tax rate could also fluctuate based on changes in estimates changes in excess tax benefits from share based compensation changes in non deductible expenses and the valuation of deferred tax assets and liabilities These fluctuations could have an adverse effect on our financial results
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality integrity and availability of our information assets and communication networks and mitigate risks to our assets data employees and customers Our cybersecurity risk management program includes a cybersecurity incident response plan which is regularly updated to include structured processes encompassing preparation identification notification containment analysis eradication recovery and follow up
We have designed and assessed our program based on the Center for Internet Security Critical Security Controls CIS Controls and Safeguards This does not imply that we meet any particular technical standards specifications or requirements only that we use the CIS Controls as a guide to help us identify assess and manage cybersecurity risks relevant to our business
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies reporting channels and governance processes that apply across the enterprise risk management program to other legal compliance strategic operational and financial risk areas
There can be no assurance that our cybersecurity risk management program and processes including our policies controls or procedures will be fully implemented complied with or effective in protecting our systems and information
We have not identified risks from known cybersecurity threats including as a result of any prior cybersecurity incidents that have materially affected us including our operations business strategy results of operations or financial condition We face risks from cybersecurity threats that if realized are reasonably likely to materially affect us including our operations business strategy results of operations or financial condition See Risk Factors Cybersecurity threats continue to increase in frequency and sophistication a successful cybersecurity attack could interrupt or disrupt our information technology systems or those of our third party service providers or cause the loss of confidential or protected data which could disrupt our business force us to incur excessive costs or cause reputational harm
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated oversight of cybersecurity and other information technology risks to the Audit Committee The Audit Committee oversees management s implementation of our cybersecurity risk management program
The Audit Committee receives regular reports from management on our cybersecurity risks and reviews our cybersecurity program on at least an annual basis or more frequently as necessary or advisable In addition the Audit Committee is informed as necessary regarding material cybersecurity incidents as well as incidents with lesser impact potential
The Audit Committee reports to the full Board of Directors regarding its activities including those related to cybersecurity The Board of Directors also receives an annual briefing from our Chief Information Officer or CIO on our cybersecurity program including risks and priorities
Our cybersecurity program is led by our CIO who has over 30 years of experience in information technology Our CIO leads a credentialed and experienced Information Security team who has primary responsibility for our overall cybersecurity risk management program and who supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants Our Enterprise Risk Leadership Team including our Executive Vice President Chief Operating Officer the Chief Financial Officer and the General Counsel is responsible for assessing and managing our material enterprise risks including risks from cybersecurity threats
Our Information Security team supervises efforts to prevent detect mitigate and remediate cybersecurity risks and incidents through various means which may include briefings from internal security personnel threat intelligence and other information obtained from governmental public or private sources including external consultants engaged by us and alerts and reports produced by security tools deployed in the IT environment
The following is a summary of Cooper s principal facilities as of October 31 2024 We generally lease our office and operations facilities but own several manufacturing and research and development facilities including 303 872 square feet in the United Kingdom 347 329 square feet in Costa Rica 115 000 square feet in Puerto Rico 493 833 square feet in New York 80 000 square feet in Arizona and 34 453 square feet in Texas The following table lists those properties that we lease Our lease agreements expire at various dates through the year 2045 We believe our properties are suitable and adequate for our businesses
In December 2023 our Board of Directors decided to end the declaration of the semiannual dividend We paid dividends of approximately 3 0 million in fiscal 2023 Any future determination to pay dividends will be made at the discretion of our Board of Directors subject to applicable laws and will depend on among other factors our results of operations financial condition contractual restrictions and capital requirements
This performance graph shall not be deemed soliciting material or to be filed with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act except as shall be expressly set forth by specific reference in such filing
The following graph compares the cumulative total return on our common stock with the cumulative total return of the Standard Poor 500 and the Standard Poor s Health Care Equipment Index for the five year period ended October 31 2024 The graph assumes that the value of the investment in Cooper and in each index was 100 on October 31 2019 and assumes that all dividends were reinvested
The following table sets forth certain information as of October 31 2024 concerning the shares of our Common Stock that may be issued under any form of award granted under our equity compensation plans in effect as of October 31 2024
Includes i 1 298 723 shares subject to outstanding Restricted Stock Units RSU ii 649 488 shares subject to outstanding Performance Share Units PSU calculated at the maximum potential payout and iii 3 292 468 shares subject to outstanding options Does not include rights to purchase shares under the 2019 Employee Stock Purchase Plan the 2019 ESPP or the ESPP which depend on a number of factors described in the 2019 ESPP
The weighted average exercise price is calculated based solely on the exercise prices of outstanding options and do not reflect shares to be issued upon the vesting of RSUs and PSUs which have no exercise price
In this section we discuss the results of our operations for fiscal 2024 compared with fiscal 2023 We discuss our cash flows and current financial condition under Capital Resources and Liquidity For a discussion related to fiscal 2023 compared with fiscal 2022 please refer to Item 7 of Part II Management s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10 K for the year ended October 31 2023 which was filed with the SEC on December 8 2023 and is available on the SEC s website at www sec gov and our Investor Relations website at investor coopercos com
We are optimistic about the long term prospects for the worldwide contact lens and general health care markets and the resilience of and growth prospects for our businesses and products However we face significant risks and uncertainties in our global operating environment as further described in the Risk Factors section in Part I Item 1A of this filing These risks include uncertain global and regional business political and economic conditions including but not limited to those associated with man made or natural disasters pandemic conditions inflation foreign exchange rate fluctuations regulatory developments supply chain disruptions and escalating global trade barriers These risks and uncertainties have adversely affected our sales cash flow and performance in the past and could further adversely affect our future sales cash flow and performance
We compete in the worldwide contact lens market with our spherical toric multifocal and toric multifocal contact lenses offered in materials like silicone hydrogel Aquaform technology We believe that there will be lower contact lens wearer dropout rates as technology improves and enhances the wearing experience through a combination of improved designs and materials and the growth of preferred modalities such as single use and monthly wearing options CooperVision also competes in the myopia management and specialty eye care contact lens markets with myopia management contact lenses using its ActivControl technology and with products such as orthokeratology ortho k and scleral lenses CooperVision has FDA approval for its MiSight 1 day lens which is the first and only FDA approved product indicated to slow the progression of myopia in children with treatment initiated between the ages of 8 12 Further CooperVision has Chinese NMPA approval for its MiSight 1 day lens for use in China CooperVision is focused on greater worldwide market penetration using recently introduced products and we continue to expand our presence in existing and emerging markets including through acquisitions
Our ability to compete successfully with a full range of silicone hydrogel products is an important factor to achieving our desired future levels of sales growth and profitability CooperVision manufactures and markets a wide variety of silicone hydrogel contact lenses Our single use silicone hydrogel product franchises clariti MyDay and MyDay Energys remain a focus as we expect increasing demand for these products as well as future single use products as the global contact lens market continues to shift to this modality Outside of single use the Biofinity and Avaira Vitality product families comprise our focus in the FRP or frequent replacement product market which encompasses the monthly and two week modalities Included in this segment are unique products such as Biofinity Energys which helps individuals with digital eye fatigue
Our CooperSurgical business competes in the fertility and women s health care market through its diversified portfolio of products and services including fertility products and services medical devices cryostorage such as cord blood and cord tissue storage and contraception CooperSurgical has established its market presence and distribution system by developing products and acquiring companies products and services that complement its business model
Competitive factors in the segments in which CooperSurgical competes include technological and scientific advances product quality and availability price and customer service including response time and effective communication of product information to physicians consumers fertility clinics and hospitals
Toric and multifocal lenses including lenses that in addition to correcting near and farsightedness address more complex visual defects such as astigmatism and presbyopia by adding optical properties of cylinder and axis which correct for irregularities in the shape of the cornea and
Spherical lenses including lenses that correct near and farsightedness uncomplicated by more complex visual defects myopia management lenses which slow the progression of and correct myopia in age appropriate children and other specialty lenses
CooperVision s growth in net sales across all regions was primarily attributable to increased sales of silicone hydrogel contact lenses Refer to CooperVision Net Sales by Category above for further discussion
Office and surgical offerings include products that facilitate surgical and non surgical procedures that are commonly performed primarily by obstetricians and gynecologists in hospitals surgery centers and medical offices This includes medical devices cryostorage such as cord blood and cord tissue storage and contraception
Fertility offerings include highly specialized products and services that target the IVF process including diagnostics testing with a goal to make fertility treatment safer more efficient and convenient This includes fertility consumables and equipment donor gamete services and genomic services including genetic testing
In the fiscal year ended October 31 2024 office and surgical net sales increased primarily due to the addition of Cook Medical on November 1 2023 Fertility net sales increased due to an increase in revenue from consumable products and genetic testing
CooperVision s SGA expenses increased in fiscal 2024 compared to fiscal 2023 primarily due to a 31 8 million release of contingent consideration liability associated with SightGlass Vision s regulatory approval milestone in fiscal 2023 and increased selling activities in fiscal 2024
CooperSurgical s SGA expenses decreased in fiscal 2024 compared to fiscal 2023 primarily due to the payment of a 45 0 million termination fee under an asset purchase agreement related to Cook Medical s reproductive health business in fiscal 2023 partially offset by an increase in selling activities and distribution costs
erVision s R D expenses increased in fiscal 2024 compared to fiscal 2023 primarily due to myopia management programs and R D projects CooperVision s R D activities are primarily focused on the development of contact lenses manufacturing technology and process enhancements
CooperSurgical s R D expenses increased in fiscal 2024 compared to fiscal 2023 mainly due to an increase in R D project spend CooperSurgical s R D activities are focused on developing and refining diagnostic and therapeutic products including medical interventions surgical devices and fertility solutions
CooperSurgical s operating income increased in fiscal 2024 compared to fiscal 2023 primarily due to payment of a 45 0 million termination fee under an asset purchase agreement related to Cook Medical s reproductive health business in fiscal 2023 and decrease in advertising and marketing expenses in fiscal 2024
The effective tax rates for fiscal 2024 and 2023 were 32 6 and 28 7 respectively The increase was primarily due to changes in the geographic composition of pre tax earnings and an increase in the UK statutory tax rate from 19 to 25
The effective tax rate for fiscal 2024 was higher than the U S federal statutory rate primarily due to foreign earnings subject to U S tax and foreign earnings in jurisdictions with higher tax rates The effective tax rate for fiscal 2023 was higher than the U S federal statutory rate primarily due to foreign earnings subject to U S tax
Working capital at October 31 2024 and October 31 2023 was 928 7 million and 735 9 million respectively The increase in working capital was primarily due to increases in trade accounts receivable prepaid expenses and other current assets and inventories partially offset by an increase in other current liabilities
Cash provided by operating activities in fiscal 2024 increased compared to fiscal 2023 primarily due to increases in net income and non cash add backs such as deferred income taxes and share based compensation expenses in fiscal 2024 and the release of 31 8 million contingent consideration liability associated with SightGlass Vision s regulatory approval milestone in fiscal 2023 offset by net changes in operating capital
Cash used in investing activities in fiscal 2024 increased compared to cash used in investing activities in fiscal 2023 primarily attributable to 343 4 million cash paid for acquisitions in fiscal 2024
Cash provided by financing activities in fiscal 2024 was primarily attributable to funds received from the 2024 Revolving Credit Facility partially offset by repayments to fully repay all borrowings outstanding under the 2020 Term Loan Facility and the 2020 Revolving Credit Facility See Note 5 Financing Arrangements for further information
Cash used in financing activities in fiscal 2023 was primarily due to repayments of 338 0 million on the 2021 364 day term loan partially offset by 172 6 million of funds drawn on the 2020 Revolving Credit Facility
As of October 31 2024 the Company was in compliance with all debt covenants On May 1 2024 the Company entered into a Revolving Credit Agreement The Company drew on the 2024 Credit Agreement to fully repay borrowings outstanding under the 2020 Term Loan and 2020 Revolving Credit Facility and terminated the 2020 Credit Agreement See Note 5 Financing Arrangements for further information
Considering recent market conditions we have re evaluated our operating cash flows and cash requirements and continue to believe that current cash cash equivalents future cash flow from operating activities and cash available under our 2024 Credit Agreement will be sufficient to meet our anticipated cash needs including working capital needs capital expenditures and contractual obligations for at least 12 months from the issuance date of the Consolidated Financial Statements included in this annual report To the extent additional funds are necessary to meet our liquidity needs such as
for acquisitions share repurchases or other activities as we execute our business strategy we anticipate that additional funds could be obtained through the incurrence of additional indebtedness additional equity financings or a combination of these potential sources of funds however such financing may not be available on favorable terms or at all
In March 2017 the authorization under the 2012 Share Repurchase Program 2012 Program was increased to 1 0 billion by the Company s Board of Directors As of October 31 2024 256 4 million remained authorized for repurchase under the program See Note 8 Stockholders Equity for additional information In fiscal 2024 there were no share repurchases under the 2012 Program
On February 16 2024 the Company effected a four for one stock split of its outstanding shares of common stock All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented The par value of the common stock remains 0 10 per share
As of October 31 2024 our material cash requirements consisted of future payments for debt and related interests income tax liabilities related to one time transition tax purchase obligations operating lease and Retirement Income Plan
We incur interest on a revolving loan and a term loan Using the same interest rate of October 31 2024 and assuming borrowings as of October 31 2024 remain constant throughout all periods these loans would result in interest payments of 109 5 million in the twelve months ending October 31 2025 and 272 1 million in the years thereafter See Note 5 Financing Arrangements
Income tax liabilities related to the one time transition tax resulted from the enactment of the 2017 U S Tax Act and are payable in annual installments through fiscal 2026 The installment for fiscal 2024 is classified in Other current liabilities in our Consolidated Balance Sheet We are unable to reliably estimate the timing of future payments related to uncertain tax positions and have excluded 20 4 million of long term income taxes payable See Note 6 Income Taxes for the expected one time transition tax payments
Purchase obligations consist of agreements to purchase goods and services that are enforceable and legally binding and includes obligations for inventory capital expenditures and other operating expense commitments As of October 31 2024 we had purchase obligations of 696 0 million with 272 8 million payable within the twelve months ending Oct 31 2025
The minimum future payments for operating leases are disclosed in Note 2 Operating Leases and the expected future benefit payments for our Retirement Income Plan through 2033 are disclosed in Note 10 Employee Benefits
Management estimates and judgments are an integral part of financial statements prepared in accordance with GAAP We consider an accounting estimate critical if changes in the estimate may have a material impact on our financial condition or results of operations We believe that the accounting estimates employed are appropriate and resulting balances are reasonable however actual results could differ from the original estimates requiring adjustment to these balances in future period The critical accounting policies described in this section address the more significant estimates required of management when preparing the Consolidated Financial Statements in accordance with GAAP
Revenue recognition We recognize revenue from product sales when obligations under the terms of a contract with the customer are satisfied generally this occurs with the transfer of control of the goods to customers and or when services are rendered Our payment terms are typically between 30 to 120 days Provisions for certain rebates sales incentives volume discounts contractual pricing allowances and product returns are accounted for as variable consideration and recorded as a reduction in sales Estimating these provisions requires judgment based on current and historical customer patterns related to these programs or contractual terms as described below
Product discounts including certain rebates sales incentives and volume discounts are granted based on terms of the arrangement with direct distribution customers and at times the indirect end consumer We evaluate contractual terms historical experience and perform internal analysis to estimate total product discounts at the time revenue is recognized Variations between our estimates and actual product discounts have not been material CooperSurgical rebates are predominately related to the Medicaid rebate provision that is estimated based upon contractual terms historical experience and trend analysis which requires judgment due to the length of time between sale and reimbursement from Medicaid
Sales returns are estimated and recorded based on historical sales return data Promotional programs such as cooperative advertising arrangements are recorded in the same period as related sales Reasonably likely changes to assumptions used to calculate the accruals for rebates sales incentives volume discounts contractual pricing allowances and product returns are not anticipated to have a material effect on the financial statements We currently disclose the impact of changes to assumptions in the quarterly or annual filing in which there is a material financial statement impact
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 IPR D 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 The fair value of the identifiable intangible assets is determined primarily using the income approach Key assumptions routinely utilized in the income approach to allocate the purchase price to intangible assets include risk adjusted discount rates and projected financial information such as revenue projections expected gross and operating margins for the acquired companies The fair value of IPR D also factors in probability assumptions about the stage of development and successful completion If the actual results differ from the estimates and judgments used in these estimates the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill
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 Judgment is required in measuring the value of deferred tax assets which are reduced by a valuation allowance to the extent it is more likely than not the assets are not expected to be realized These deferred tax assets are primarily tax credits and net operating loss carryforwards expected to expire before they can be claimed or deducted For uncertain tax positions judgment is required in evaluating tax positions for uncertainty in the application of accounting guidance and tax laws A tax benefit 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
We are exposed to market risks that relate principally to changes in interest rates and foreign currency fluctuations We do not enter into derivative financial instrument transactions for speculative purposes
We operate multiple foreign subsidiaries that manufacture and market our products worldwide As a result our earnings cash flow and financial position are exposed to foreign currency risk from foreign currency denominated receivables and payables sales transactions capital expenditures and net investment in certain foreign operations Most of our operations outside the United States have their local currency as their functional currency We have exposure to multiple foreign currencies including among others the British pound Euro and Japanese yen We have taken steps to minimize our balance sheet exposure by entering 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
At October 31 2024 a uniform hypothetical 10 increase or decrease in the foreign currency exchange rates in comparison to the value of the U S dollar would have resulted in a corresponding increase or decrease of approximately 103 2 million in operating income for the fiscal year ended October 31 2024 Refer to Item 1A Risk Factors
We are exposed to risks associated with changes in interest rates as the interest rates on our revolving lines of credit and term loans may vary with the federal funds rate and SOFR As of October 31 2024 we had outstanding debt for an aggregate carrying amount of 2 6 billion We have entered and in the future may enter into interest rate swaps to manage interest rate risk
Our ultimate realized gain or loss with respect to interest rate fluctuations will depend on interest rates the exposures that arise during the period and our hedging strategies at that time As an example if interest rates were to increase or decrease by 1 or 100 basis points the quarterly interest expense would not have a material impact based on average debt outstanding after consideration of our interest rate swap contracts during the fourth quarter of fiscal 2024 Refer to Item 1A Risk Factors
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
shares in the form of specified equity awards including stock options restricted stock units RSUs and performance share units PSUs subject to adjustment for future stock splits stock dividends expirations forfeitures and similar events In addition the
2023 Plan includes any shares which were available for issuance under the 2007 Plan at the time of stockholder approval of this plan and shares which become available as a result of the forfeiture or expiration of awards made under the 2007 Plan
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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 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
The Company has established and currently maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934 is recorded processed summarized and reported within the time periods specified by the Securities and Exchange Commission s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures In designing and evaluating the disclosure controls and procedures management recognizes that controls and procedures no matter how well designed and operated can provide only reasonable assurance of achieving desired control objectives In reaching a reasonable level of assurance management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures
In conjunction with the close of each fiscal quarter the Company conducts a review and evaluation with participation of the Company s management and under the oversight of the Board of Directors including the Chief Executive Officer our Principal Executive Officer and Chief Financial Officer our Principal Financial Officer of the effectiveness of the design and operation of the Company s disclosure controls and procedures The Company s Chief Executive Officer and Chief Financial Officer based upon their evaluation as of October 31 2024 the end of the fiscal period covered in this report concluded that the Company s disclosure controls and procedures were not effective at the reasonable assurance level due to the material weakness described below In light of this material weakness management performed additional analyses and other procedures As a result of these additional procedures the Company believes that the consolidated financial statements and related financial information included in this Annual Report on Form 10 K fairly present in all material respects our financial position results of operations and cash flows as of and for the periods presented in conformity with U S generally accepted accounting principles
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a 15 f and 15d 15 f under the Securities Exchange Act of 1934 Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles Because of its inherent limitations internal control over financial reporting may not prevent or detect all misstatements errors or fraud
Management assessed the effectiveness of the Company s internal control over financial reporting as of October 31 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Based on this assessment management with participation of the Company s Chief Executive Officer and Chief Financial Officer and under the oversight of the Board of Directors concluded that the Company s internal control over financial reporting was not effective as of October 31 2024 due to a material weakness in information technology IT general controls for the U S operations within the CooperSurgical segment related to the implementation and maintenance of certain enterprise resource planning systems ERP during fiscal year 2024 The material weakness resulted from not having a sufficient complement of its personnel inadequate training of personnel and ineffective risk assessment processes to identify and timely respond to the risks related to change management user control monitoring and segregation of duties in the affected IT environment Manual controls that rely on system generated data or reports from the affected IT environment or process level automated controls in the affected IT environment were ineffective because they could have been adversely impacted
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis
Although these control deficiencies did not result in any material misstatement of our consolidated financial statements for the periods presented there is a possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis Accordingly management has concluded that these control deficiencies constitute a material weakness
The Company s independent registered public accounting firm KPMG LLP who audited the consolidated financial statements included in this Annual Report on Form 10 K issued an adverse opinion on the effectiveness of the Company s internal control over financial reporting as of October 31 2024 as stated in their report in Part II Item 9A of this Annual Report on Form 10 K
In response to the material weakness management with oversight of the Audit Committee of the Board of Directors has begun to implement steps to remediate the material weakness Our internal control remediation efforts include the following
Developing the skill sets of employees and additional training programs addressing IT general controls and policies with a focus on those related to change management user access and segregation of duties over IT systems impacting financial reporting
We are committed to ensuring that our internal control over financial reporting are designed and operating effectively Management believes the efforts taken to date and the planned remediation will improve the effectiveness of our internal control over financial reporting While these remediation efforts are ongoing the controls must be operating effectively for a sufficient period of time and be tested by management in order to consider them remediated and conclude that the design is effective to address the risks of material misstatement
During the year ended October 31 2024 the implementation of a new ERP system at our primary U S operations of the Cooper Surgical segment impacted our internal control over financial reporting Except for the system implementation and the identification of the material weakness described above there have been no changes in our internal control over financial reporting during the quarter ended October 31 2024 that have materially affected or are reasonably likely to materially affect the Company s internal control over financial reporting
issued by the Committee of Sponsoring Organizations of the Treadway Commission In our opinion because of the effect of the material weakness described below on the achievement of the objectives of the control criteria the Company has not maintained effective internal control over financial reporting as of October 31 2024 based on criteria established in
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of 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 and our report dated December 6 2024 expressed an unqualified opinion on those consolidated financial statements
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company s annual or interim financial statements will not be prevented or detected on a timely basis A material weakness resulting from control deficiencies in information technology general controls related to the implementation and maintenance of certain enterprise resource planning systems for the U S operations within the CooperSurgical segment has been identified and included in management s assessment The material weakness was considered in determining the nature timing and extent of audit tests applied in our audit of the 2024 consolidated financial statements and this report does not affect our report on those consolidated financial statements
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Annual Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit 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 audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audit also included performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
We do not express an opinion or any other form of assurance on management s statements included in the accompanying Management s Annual Report on Internal Control Over Financial Reporting referring to management s plan for remediation taken after October 31 2024 relative to the aforementioned material weakness in internal control over financial reporting
During the three months ended October 31 2024 no director or officer of the Company adopted or terminated a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as each term is defined in Item 408 a of Regulation S K
See Item 5 Market for Registrant s Common Equity and Related Stockholder Matters Equity Compensation Plan Information Additional information required by this item is incorporated by reference to the 2025 Proxy Statement
Revolving Credit and Term Loan Agreement dated as of April 1 2020 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
Amendment No 1 and Joinder dated as of October 30 2020 to Revolving Credit and Term Loan Agreement dated as of April 1 2020 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
Amendment No 2 and Joinder dated as of December 17 2021 to Revolving Credit and Term Loan Agreement dated as of April 1 2020 among the Company CooperVision International Limited CooperVision Holding Kft CooperSurgical Holdings Limited the lenders party thereto and KeyBank National Association as administrative agent
Amendment No 3 dated as of February 1 2023 to the Revolving Credit and Term Loan Agreement dated as of April 1 2020 by and among the Company CooperVision International Limited and CooperSurgical Holdings Limited the borrowers party thereto and KeyBank National Association as administrative agent
Revolving Credit Agreement dated as of May 1 2024 among the Company CooperVision International Limited the lenders from time to time party thereto and PNC Bank National Association as administrative agent
Amendment No 2 dated as of May 1 2024 to the Term Loan Agreement dated as of December 17 2021 by and among The Cooper Companies Inc the lenders party thereto and PNC Bank National Association as the administrative agent
The following materials from the Company s Annual Report on Form 10 K for the year ended October 31 2024 formatted in Inline XBRL Extensible Business Reporting Language i Consolidated Statements of Income for the years ended October 31 2024 2023 and 2022 ii Consolidated Statements of Comprehensive Income for the years ended October 31 2024 2023 and 2022 iii Consolidated Balance Sheets at October 31 2024 and 2023 iv Consolidated Statements of Stockholders Equity for the years ended October 31 2024 2023 and 2022 v Consolidated Statements of Cash Flows for the years ended October 31 2024 2023 and 2022 vi related notes to consolidated financial statements
a The agreement received confidential treatment from the Securities and Exchange Commission with respect to certain portions of this exhibit Omitted portions have been filed separately with the Commission
The certifications attached as Exhibits 32 1 and 32 2 that accompany this Annual Report on Form 10 K are not deemed filed with the SEC and are not to be incorporated by reference into any filing of The Cooper Companies Inc under the Securities Act of 1933 as amended or the Securities Exchange Act of 1934 as amended whether made before or after the date of this Form 10 K irrespective of any general incorporation language contained in such filing
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on December 6 2024
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Albert G White III Brian G Andrews and Nicholas S Khadder and each one of them as his or her true and lawful attorneys in fact and agents with full power of substitution and resubstitution for him or her and in their name place and stead in any and all capacities to sign any amendments to this Annual Report on Form 10 K and to file the same with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission hereby ratifying and confirming all that each of said attorneys in fact or substitute or substitutes may do or cause to be done by virtue hereof
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the dates set forth opposite their respective names
Recent news releases the annual report on Securities and Exchange Commission Form 10 K information about the Company s corporate governance program recent investor presentations replays of quarterly conference calls and historical stock quotes are available on our Web site at www coopercos com
CooperVision CooperSurgical and other trade names trademarks or service marks of CooperCompanies and its subsidiaries appearing in this report are the property of CooperCompanies and its subsidiaries Trade names trademarks and service marks of the other companies appearing in this report are the property of their respective holders

Company Name	COOPER COMPANIES, INC. Vist SEC web-site
Category	OPHTHALMIC GOODS
Trading Symbol	COO