COOPER COMPANIES INC. REPORTS 3RD QTR REVENUE UP 48%.

The Cooper Companies, Inc. (NYSE:COO), Lake Forest, Calif., has reported financial results for its third fiscal quarter ended July 31, 2002:

-- Revenue $90.6 million, 48% above third quarter 2001; CooperVision up 54%, CooperSurgical up 30%.

-- Earnings per share up 28% to 86 cents; trailing twelve months $2.87.

-- One-time gain of 8 cents per share from receipt of shares of Quidel Corporation out of escrow.

-- One-time charge of 8 cents per share to CooperSurgical cost of sales to provide for phase out of the Cerveillance(R) colposcopy system.

-- Operating income $17.0 million, up 21%.

-- Cash flow per share (pretax income from continuing operations plus depreciation and amortization) $1.39; trailing twelve-months $4.71.

Commenting on the results, chairman and CEO A. Thomas Bender, said: "Cooper continued its consistent quarterly performance as once again revenue, operating income and earnings per share showed strong growth and exceeded consensus estimates for the quarter.

"In our contact lens business, revenue growth was strong, the integration of the Biocompatibles acquisition is ahead of plan, and our new products are performing well around the world.

"In women's healthcare, we continue to consolidate the in-office gynecology market through acquisition and evaluate opportunities for further growth. Operating margins have improved significantly this year in this business."

Outlook

For the fourth quarter of fiscal 2002, Cooper estimates revenue between $91 million and $94 million, 39% to 42% above the fourth quarter of 2001, with earnings per share ranging from $0.99 to $1.03. Fourth quarter 2002 CooperVision revenue is expected to range between $72 million and $74 million and CooperSurgical revenue is expected to be about $20 million.

For fiscal 2002, Cooper estimates revenue between $312 million and $315 million, a 33% to 34% increase, and has raised earnings per share guidance to $3.09 to $3.13 from the previous estimate of $3.07 to $3.12.

For fiscal 2003, Cooper estimates revenue between $380 million and $400 million with earnings per share ranging from $3.95 to $4.05.

Third Quarter Operating Highlights

CooperVision

Pro Forma Results

At the end of February, CVI acquired the eye care business of Biocompatibles International, plc which had worldwide revenue of about $70 million in calendar 2001, about $50 million outside of North America. CVI's consolidated results, therefore, include Biocompatibles performance beginning in March 2002. In order to measure organic growth, discussions below of results and comparisons in CVI's business are on a pro forma basis as if Biocompatibles eye care revenue in the third quarter of 2001 was included.

Third Quarter CVI Soft Lens Revenue Highlights

Soft lens revenue includes sales of CooperVision's soft contact lens products to commercial customers. It excludes sales to other contact lens manufacturers (OEM sales), royalties, freight charges passed on to customers, and sales of discontinued products and low volume hard contact lens products. CooperVision's 2001 soft lens revenue (excluding Biocompatibles) adjusted for these exclusions was $41.4 million in the third quarter and $115.0 million for the nine-month period.

-- CVI's third quarter worldwide soft lens revenue grew 14%.

-- All disposable and planned replacement products, which now account for about 85% of CooperVision's worldwide soft lens business, grew 29% in the third quarter and 19% for the nine-month period.

-- Higher margin specialty contact lenses -- toric lenses, cosmetic lenses, multifocal lenses and lenses for dry eye symptoms -- grew 37% in the third quarter and 19% through nine months and now account for two-thirds of CVI's worldwide soft lens revenue.

-- Sales of toric contact lenses, which correct astigmatism, increased 28% during the quarter and 12% year-to-date and now account for about 45% of CVI's soft lens revenue. CVI estimates that it holds about 34% of the worldwide toric segment, which is currently growing at about 10%. CVI offers every popular type of replacement modality to meet the needs of most astigmatic patients.

-- CVI's brands of disposable toric lenses, those replaced after two weeks, continue to gain market share and are now selling at a rate of more than $3 million per month worldwide. Disposable torics are the fastest growing products in the worldwide toric segment, accounting for an estimated 40% of the total. CVI estimates that its brands of disposable toric lenses are now the fastest growing product in this category worldwide.

-- CVI's planned replacement toric lenses, those used monthly and quarterly, grew 22% in the quarter and 5% for the nine-month period. CVI's planned replacement torics now account for over 50% of this segment worldwide.

Third Quarter CVI Geographic Soft Lens Revenue Highlights

-- Soft contact lens revenue in the United States, about 53% of CVI's soft lens business, grew 14% in a U.S. market that grew about 4% in the second calendar quarter, according to recent market data.

-- Soft lens sales outside of the United States, more than 47% of CVI's total soft lens revenue in the quarter, grew 14%.

-- European soft lens revenue, about 42% of CVI's total soft lens revenue, grew 19%, as total toric lens business more than doubled over last year's third quarter.

CVI's gross margin was 66% in the quarter, unchanged from the quarter a year ago.

Biocompatibles Integration

Cooper has said that the Biocompatibles transaction would be cumulatively neutral to EPS for the eight-month period ending October 31, 2002 and accretive after that.

"Our Biocompatibles integration plan is ahead of plan," said Bender. "To date we have lowered costs by reducing general and administrative expenses and rationalizing manufacturing, and we have accelerated sales of the Proclear line of products, which are often prescribed for patients with dry eye symptoms.

"The integration of the Biocompatibles manufacturing in Farnborough, U.K. into our Southampton facility is well under way and we have been able to improve cost of goods through manufacturing efficiencies.

"A favorable shift in product mix is also improving CVI profitability, as we trade up customers to higher margin Proclear products. Going forward, our objective is to have the gross margin of the former Biocompatibles product line approach that of CVI's products prior to the acquisition by the end of our next fiscal year, and we are currently ahead of our target to do that.

"We expect that these operating improvements combined with Biocompatibles' favorable impact to lower our tax rate will achieve the accretion targets we have forecast. We continue to expect that Biocompatibles will contribute about 50 cents to Cooper's earnings per share in 2003, and 79 cents in 2004.

"We estimate that Biocompatibles will add more than $45 million to CVI's worldwide revenue in the eight months of 2002 following the acquisition and between $75 million and $80 million in 2003, following selected product and market rationalization."

New Products

Sales of CVI's Frequency(R) Multifocal are ahead of expectations. This product has been placed in over 1,100 practitioner offices to date in the United States, and CVI expects an additional 2,000 office placements by fiscal year-end.

CVI's line of cosmetic lenses is estimated to reach about $15-$17 million in revenue in fiscal 2002.

A launch of Frequency Enhancements, a line of cosmetic products that accentuates the natural color of the eye, is planned for the fourth calendar quarter of 2002.

In 2003, CVI expects to begin an extended wear contact lens development program using a unique material.

CooperSurgical

Discontinuation of Cerveillance Colposcopy System

CooperSurgical (CSI), the company's women's healthcare business, decided during the third quarter to phase out the Cerveillance colposcopy system, which captures and stores digital images of the cervix, and recorded a charge against cost of sales of about $2 million; an after tax charge of 8 cents a share.

Cerveillance is being phased out primarily because of the following:

-- In 2000, CSI acquired Leisegang Medical, Inc. the world leader in colposcopy, whose products are widely regarded by practitioners as the finest colposcopy equipment in the world.

-- Digital imaging technology is evolving rapidly, and CSI has elected to consolidate its colposcopy development into the Leisegang Prism System(TM) in order to capitalize on Leisegang's reputation for superior optics.

Third Quarter CSI Operating Highlights

CSI's third quarter revenue increased 30% to $20 million and is up 23% year to date. Organic growth from gynecology products(a) in the third quarter of 2002 was 10%. CSI expects revenue of about $20 million in the fourth quarter of fiscal 2002. Due to the $2 million provision to phase out the Cerveillance colposcopy system, CSI's operating margin fell to 12%, below the prior year's quarter of 17%. Without this charge, CSI's operating margin would have been 22%, down from 26% in the previous quarter due to expenses incurred in integrating the recent Norland and Ackrad acquisitions. Year to date, CSI's operating margin is 19%, 23% without the Cerveillance charge, up from 16% in the nine-month period of 2001.