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Ocular Sciences, Inc., USA Reports Third Quarter Results



10/19/2005 5:12:08 PM

CONCORD, Calif., Nov. 8 /PRNewswire-FirstCall/ -- Ocular Sciences, Inc. today announced third quarter net revenue of $87.7 million, up 6% (2% in constant currency) over the same period one year ago. Net income for the quarter was $9.6 million, or $0.35 per diluted share. Prior to the after-tax restructuring and related expenses associated with the manufacturing consolidation program announced in the fourth quarter of 2002, and the after-tax expenses related to the proposed merger with The Cooper Companies, Inc. ("Cooper") announced July 28, 2004, net income for the quarter grew by 17% to $14.2 million, or $0.53 per diluted share. The third quarter performance compares with net revenue of $82.6 million and net income of $9.3 million, or $0.38 per diluted share, for the third quarter of 2003. Prior to the after-tax restructuring and related expenses associated with the manufacturing consolidation program, net income for the third quarter of 2003 was $12.2 million, or $0.50 per diluted share. Weighted average fully diluted shares were 27.0 million for the quarter ended September 30, 2004, an increase of 11% when compared with 24.4 million for the third quarter a year ago.

"The new aspheric product that was launched in the United States during the second quarter of this year has been widely accepted and now represents more than 75% of sales within its product category," commented Stephen J. Fanning, President and CEO of Ocular Sciences. "We are especially pleased with this product launch, our strong earnings performance and the commitment of our customers and employees in the third quarter given the inherent uncertainty that often arises following the announcement of a pending merger, like ours with The Cooper Companies, Inc."

For the nine-month period ended September 30, 2004, Ocular Sciences reported net revenue of $251.6 million, up 10% (4% in constant currency) over the same period one year ago. Net income for the nine-month period was $25.2 million or $0.96 per diluted share. Prior to the after-tax restructuring and related expenses associated with the manufacturing consolidation program announced in the fourth quarter of 2002, and the after-tax expenses related to the proposed merger with Cooper announced July 28, 2004, net income for the nine-months ended September 30, 2004 increased 26% to $34.5 million, or $1.31 per diluted share. This nine-month performance compares with net revenue of $229.4 million and net income of $19.4 million, or $0.80 per diluted share, for the nine-month period ended September 30, 2003. Prior to the after-tax restructuring and related expenses associated with the manufacturing consolidation program, net income for the nine-month period ended September 30, 2003 was $27.4 million, or $1.13 per diluted share.

Gross margin improved by 540 basis points to 59.6% for the quarter, up from 54.2% in the third quarter of last year. The successful execution of the manufacturing consolidation program was the primary factor behind this significant increase as during the quarter the Company sold a substantial amount of product that was manufactured utilizing the new Gen II manufacturing operations, especially in the specialty daily disposable category.

Operating expenses as a percentage of revenue, before restructuring and merger expenses, were 38.8% for quarter ended September 30, 2004, compared with 36.9% in the third quarter of last year and increased primarily due to increased investments in selling and marketing activities. Additionally, R&D expenses for the quarter increased 21% over last year as new product development efforts were expanded.

These results led to a third quarter operating margin, before restructuring charges and merger expenses, of 20.8% and operating income of $18.3 million compared with operating margin in the third quarter of last year, before restructuring charges, of 17.3% and operating income of $14.3 million. Thus, despite increasing the investment in commercial activities and new product development, operating income, before restructuring charges and merger expenses, grew 28%, over four times as fast as revenue. The Company's third quarter operating margin as reported was 14.6% and operating income was $12.8 million compared with as reported operating margin of 14.3% and operating income of $11.8 million in the third quarter last year.

The effective tax rate in 2004, before consideration of restructuring and merger expenses, is estimated to be 22% compared with 19.5% last year.

Cash flow from operations during the first nine months of the year was $52.8 million compared with $48.6 million for the same period a year ago. The net cash position improved from $17 million at the beginning of the year to more than $58 million at the end of the quarter, and the Company had no drawdown of its credit facilities at September 30, 2004.

Use of Non-GAAP Measures

The Company believes that non-GAAP measures of operating expenses, operating income and margin, effective tax rate, net income and earnings per share before restructuring and merger expenses are appropriate measures for evaluating the operating performance of the Company because this information provides investors and others with a measure of operating results without regard to the costs associated with the manufacturing consolidation program announced in December 2002, and the pending merger with Cooper and, in turn, allows them to compare the Company's results of operations with those of other companies on a more comparable basis.

About Ocular Sciences, Inc.

Ocular Sciences, Inc. manufactures a broad line of high quality, competitively priced soft contact lenses marketed directly to eye-care practitioners. The Company's lenses are brand and product differentiated by distribution channel, and Ocular's unique lens technology makes thinner lenses that are easier to handle and more comfortable to wear than those of leading competitors.

Contacts: Investors & Media EVC Group Douglas Sherk, 415-896-6820 Jennifer Beugelmans, 415-896-6820 Ocular Sciences, Inc. (In thousands, except per share data) CONSOLIDATED STATEMENTS OF INCOME Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 Net sales $87,729 $82,587 $251,622 $229,395 Cost of sales 35,446 37,825 104,757 107,317 Gross profit 52,283 44,762 146,865 122,078 Selling and marketing expenses 24,340 21,383 72,316 62,864 General and administrative expenses 7,453 7,266 23,087 21,636 Research and development expenses 2,225 1,842 6,633 4,990 Restructuring and related expenses 1,691 2,440 6,864 7,433 Merger and related expenses 3,777 -- 3,777 -- Income from operations 12,797 11,831 34,188 25,155 Interest expense (97) (239) (355) (557) Interest income 133 208 392 362 Other income (expense), net (80) 884 (652) 1,591 Income before taxes 12,753 12,684 33,573 26,551 Provision for income taxes 3,187 3,424 8,394 7,168 Net income $9,566 $9,260 $25,179 $19,383 Net income per share (diluted) $0.35 $0.38 $0.96 $0.80 Weighted average dilutive shares outstanding 27,017 24,449 26,319 24,143 CONSOLIDATED BALANCE SHEET DATA As of Sept. 30, Dec. 31, 2004 2003 Cash and cash equivalents $60,509 $34,187 Total assets 430,559 399,308 Total debt 2,489 17,288 Total stockholders' equity 366,302 301,845 CASH FLOW DATA Nine months ended September 30, 2004 2003 Net cash provided by operating activities $52,799 $48,551 NON GAAP DATA AND RECONCILIATIONS Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 Operating Income: Income from operations $12,797 $11,831 $34,188 $25,155 Restructuring and related expenses 1,691 2,440 6,864 7,433 Merger and related expenses 3,777 -- 3,777 -- Operating income before restructuring, merger and related expenses $18,265 $14,271 $44,829 $32,588 Operating income before restructuring, merger and related expenses as a percent of sales 20.8% 17.3% 17.8% 14.2% EPS: Income before taxes $12,753 $12,684 $33,573 $26,551 Restructuring and related expenses, before taxes 1,691 2,440 6,864 7,433 Merger and related expenses 3,777 -- 3,777 -- Income before restructuring, merger and related expenses and taxes 18,221 15,124 44,214 33,984 Tax rate excluding restructuring, merger and related expenses 22.0% 19.5% 22.0% 19.5% Net income excluding restructuring, merger and related expenses $14,212 $12,175 $34,487 $27,357 EPS excluding restructuring, merger and related expenses $0.53 $0.50 $1.31 $1.13 After-tax impact of restructuring, merger and related expenses 4,646 2,915 9,308 7,974 GAAP net income $9,566 $9,260 $25,179 $19,383 -- -- -- -- GAAP EPS $0.35 $0.38 $0.96 $0.80 Weighted average diluted shares outstanding 27,017 24,449 26,319 24,143

Ocular Sciences, Inc.

CONTACT: Investors & Media, Douglas Sherk, or Jennifer Beugelmans, bothof EVC Group for Ocular Sciences, Inc., +1-415-896-6820


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