Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published: February 3, 2012

 

CEOCFO: Mr. Weiss, there have been a number of changes at The Cooper Companies over the last year, and I see you have a new tagline – A Quality of Life Company. What does that mean for Cooper?

Mr. Weiss: We have always been a company focused on bringing top quality products to contact lens fitters and women’s healthcare professionals, which are the obstetricians and the gynecologists. Several years ago, we developed an emphasis on “Quality of Life,” not only externally, but also internally with various benefits including a Wellness Program. This has become a corporate commitment and embraced as part of our company culture. The tagline line “A Quality of Life Company,” represents the epitome of what we are all about. That includes our dedication to our consumers, shareholders, the professionals we interface with and especially our number one asset – our employees. We are committed to healthy employees, healthy families and a healthy business.

CEOCFO: What are some of the accomplishments for Cooper with the Global Wellness Program, particularly over the last year?

Mr. Weiss: I am extremely proud of the achievements and continued progress of our Global Wellness Program. Over the past two years, we have made great strides towards making wellness a part of our culture. We continue to expand our program offerings as well as the geographic reach of the program. All business units in the U.S., Canada, Puerto Rico and the United Kingdom have embraced the Wellness Program. We are in the process of expanding the program to include some of our other business units in Germany, France, Spain and Belgium. We have engaged experts in the field of wellness research as well as other outside sources to help us create a sustainable and credible program. Our latest wellness initiative is based on the theme of Mind, Body and Spirit, which includes education in subjects like financial fitness, nutrition and work/life balance. We recently launched a global wellness website where employees can participate in global fitness challenges, get educated about healthy lifestyles and earn points for gift redemption. In some of our larger sites, we have built on-site gyms with fitness programs and personal trainers.  For our smaller sites, we have partnered with local gyms, providing our employees with complimentary access. Overall, we are continuously finding ways to enhance the health and well-being of our greatest asset – our employees. We believe that employee engagement and having a healthier and more productive workforce helps us to continue to grow our business.

CEOCFO: There were some management changes this year. What prompted them and how do you see these changes having a positive impact on Cooper?

Mr. Weiss: Cooper has a very active successor planning and leadership development program. We provide extensive mentoring and coaching, both internally and externally, as well as engage in 360-degree reviews. One event planned this year was the retirement of our chief financial officer. Given our succession planning, we were able to reach from within and promote. The benefit of going within is you do not need to have someone come in and learn the business. We appointed Greg W. Matz as our new chief financial officer who comes with knowledge of our contact lens business, which represents 85% of our business. Another benefit of a strong and deep bench is in cross-training people, which gives you more mobility when you need to make a move. Concurrent with the change of a new CFO, we expanded the role of our investor relations and treasurer into chief strategic officer. That individual is Albert G. White, III who now heads up that area. Part of that is we are stepping up to the next level in the way we approach strategic planning, corporate development and mergers and acquisitions. This will allow for a better bridge between the operating unit and the world of the investment banker as appropriate. We have also expanded the role of our general counsel, Daniel G. McBride, Esq., to chief risk officer.

 

CooperVision, our contact lens business unit, also had several key management changes to support the changing needs and dynamics of the business as well as build for continued success. Dennis Murphy, formerly President of the Americas, was promoted to Executive Vice President for Global Sales and Marketing and will be responsible for overseeing global commercial strategies and implementation.  Other regional presidents for EMEA and Asia Pacific shifted their regional oversights, allowing them to achieve global leadership experience.

CEOCFO: Speaking of acquisitions, have you done any over the past year and what have they added for Cooper?

Mr. Weiss: We have been very active in the area of acquisitions. We completed a total of five transactions – three in vision care and two in women’s healthcare. The most notable one happened early in the year in Japan, in which CooperVision purchased Asahikasei Aime. This allowed us access to the Japanese market with our primary product, Biofinity®, where we did not have marketing rights in Japan prior to the acquisition. Japan is a $400 million silicone market, and we previously had no market share. This acquisition enabled us to launch our product into Japan. We also expanded geographically with CooperVision into both Europe, with an acquisition in the Czech Republic, as well as into Mexico, by getting rights from our distributor in each respective country whereby we can now go direct.

 

In women’s healthcare, we made two acquisitions. One in the area of dopplers, which are used for monitoring the fetus during delivery and prior to delivery, and the other one is called Mobius Retractor, which allows physicians to expedite having the baby via caesarian. It provides greater safety and more visibility with less risk of infection during that procedure. We continue to expand our women’s healthcare business, which has done more than forty acquisitions over the last twenty years and is now a business that exceeds $200 million in annual revenue.

 

CEOCFO: You mentioned going into several different geographies. Is there a particular geographic focus for your expansion or is it more opportunistic?

Mr. Weiss: I would say it is somewhat opportunistic, but it starts by looking at the countries that you may want to go direct as opposed to those in which you have no interest. There are a number of countries on our radar where we know we want to penetrate either more deeply than we currently have in terms of representation, such as China, or to new areas, such as Turkey or Russia. In those areas, it would be taking a deep look at the relationship with distributors and, sometimes, direct competitors that are in those local countries.

CEOCFO: Cooper recently reported its fourth quarter and fiscal 2011 earnings. What are some of the highlights, and how does the performance this year compare with the last several years?

Mr. Weiss: For the third year in a row, we have had record revenue as well as bottom line profits. We announced a couple weeks ago highlights of our fourth quarter, which included $1.46 in non-GAAP earnings per share, well above street expectations, and solid top line growth of $361 million. That brought our fiscal year revenue to north of $1.3 billion. This was a milestone year for CooperVision. It broke through the billion-dollar revenue mark and grew 16% in a market that is certainly not growing at that rate. The market over this past year was about 5%. We grew in constant currency almost 8%, and then we had the impact of the acquisition, which was another 3%. That took it to 11% and the remaining piece was foreign exchange. Overall, we grew about 1.7 times the market for the last twelve months and almost twice the market in the last quarter.

CEOCFO: In 2011, CooperVision went through a rebranding and launched a new visual identity.  Why and what does the rebranding represent?

Mr. Weiss: CooperVision does not define itself as a consumer product/commercial branding type of company, such as a Coca Cola or a Johnson & Johnson. By and large, CooperVision’s partnership is with the eye care professional, getting to the consumer via the eye care professional. However, the branding strategy was defining everything we are about and that included the fact that we are a Quality of Life Company. It also includes the fact that, over the years, CooperVision has sold the more complicated lenses to the eye care professional. The professional has a good relationship with our salespeople, which are more technical in nature than some of our competitors. Furthermore, CooperVision has been deemed to always be friendly to the eye care professional, working together to help fulfill their needs. For example, if a doctor had a difficult patient, we would work with the doctor, and if they needed a custom lens, we would custom make a lens. From a consumer point of view, we are not particularly hung up on having our name in front of consumers. If a large chain wanted a private label, we would private label, which is not a service offered by most of our competitors. As part of the rebranding process, we thought about how we come across with the eye care professional and how do we help them reach out to the consumers. From a partnership point of view, we have collaborated with the eye care professional to find ways to enhance their communication with their target audience, whether that is developing websites or internet applications and tools. Seventy-five percent of our audience is less than thirty-five years old, many of them are teenagers and twenty-year-olds who are quite internet savvy. Recognizing the world has changed and the way doctors need to contact their patients has changed, we want to be there to assist. Overall, the branding strategy was defined around four key values of being dedicated, friendly, inventive and partners. In terms of visuals, we wanted to look different from our competitors and distinguish ourselves in the marketplace. Moving away from the standard sea of blue, we have incorporated vivid colors with a watermark logo to reinforce CooperVision’s unique, flexible and refreshing approach. CooperVision’s perspective is that the world is a vibrant, ever-changing place for which no two eyes, no two patients and no two days are ever the same.

CEOCFO: What about some of the functional investments Cooper has made in fiscal year 2011? Where have you invested most heavily and what do you expect to see as a payoff in the future from these investments?

Mr. Weiss: We have spent heavily in the areas of sales force expansion on the commercial side as well as research and development. We have increased our head count in the neighborhood of 24% in terms of sales force expansion. We do not give out the exact numbers for competitive reasons, but suffice to say, there has been significant investment. The logic and the timing were important, as we did not want to get ahead of ourselves. The first step was to have the products, for which Biofinity®, Proclear® and Avaira® represent our primary product portfolio. We have something for every modality – that is, we have a one-day product, a two-week product and a monthly product. However, if you cannot make them in large enough quantities, then you do not want to create the demand and end up with backlogs. Therefore, the second thing was to address capacity, something that we have looked at throughout this last year. We now have sufficient capacity. Finally, in the third phase, now that you have good products and you have the capacity, you can see how well you are able sell the products around the world. We are in that third phase of having fun by selling good quality products to practitioners throughout the world.

CEOCFO: In 2011, The Cooper Companies has been recognized as being one of the Healthiest Employers in the Bay Area as well as one of the Top Workplaces in the Bay Area. What have you done to make Cooper a place where people want to work and how do you continue to maintain this type of employment setting?

Mr. Weiss: I correlate the success of the company with the attitude of the employees, their wellness, spirit and everything they are about. Employees have to feel good when they come to work, and we do everything we can to support that. Having a company that is headed in the right direction is important, but part of that is the chicken and the egg question. Which one comes first? If you have employees that are not engaged, you are not going to be competitive for long, so keeping employees engaged is about balance. We emphasize flextime and if someone has a personal challenge they need to deal with, we are very flexible in how we allow them to perform their job. For physical fitness, we give extra time during the week as well as host wellness campaigns throughout the world to encourage physical fitness, health and nutrition. We also tie wellness with safety to reduce the risk of workplace injuries. Strong emphasis is on the quality of the work environment being a safe work environment. We continue to add to our Wellness Program offerings. We do not sponsor any one thing, but instead support whatever is good for the employee. In other words, nothing is forced fed, you do it if you want. We also organize team-building wellness activities for our employees. For example, this year we sponsored a golf tournament with teams consisting of individuals at the operating unit and the parent company working together. I believe you get more mileage out of this approach.
 

CEOCFO: What are some of the long-term objectives for Cooper?

Mr. Weiss: Cooper’s long-term objectives have been pretty focused over the last several years. They include gaining market share to which we have the product portfolio to continue down that path. We have been doing well for the last three years. We have 17% market share in the global soft contact lens business. We think we have all the right things in place to continue on our path, and to be able to do so profitably. We are growing on the top line, we are investing in expansion of the sales force and R&D, and we continue to improve our operating margins. We do this partly by reducing cost of goods through critical mass and improved manufacturing techniques. We are improving our operating ratio, and in the middle of all that, we generate a lot of profit and a lot of cash. That cash leads to paying down debt. We were highly leveraged three years ago as debt-to-cap was approaching 40%. Today, it is 16%, so we have generated a lot of cash and paid down debt. This has allowed us to acquire things that are meaningful to expand the business. Growing earnings per share from a shareholders perspective faster than the top line and faster than the industry is a critical function. Wall Street has rewarded our stock, and this last year it was up about 40%. There has been an alignment of the employees being happy where they work and the shareholders being happy with the performance of the company. We seek to continue that by emphasizing use of cash. Some of the cash will be used to pay down debt, and some of the cash will continue to be reinvested in acquiring and expanding. We have yet to come close to penetrating all those various regions of the world, particularly in China and the other BRIC countries – Brazil, India, and Russia. Therefore, we will continue to acquire as a critical part of our strategy looking to further build our women’s healthcare business.

CEOCFO: Up to now, what has been your proudest achievement since you have become CEO?

Mr. Weiss: My proudest achievement is the tie-in with some of the acknowledgements we are now getting for employees – they are our number one asset. I strongly believe there is an incredible return on invested capital by investing in our employees and what you get for it. It is hard to quantify in the conventional sense, but I know in my heart that if employees come to work and they are happy with what they are doing, you are going to get twice as much productivity out of them than if they are just occupying a chair. I am also a firm supporter of mentoring. At this stage in my career, it is a lot of fun being a teacher and seeing the results of your students coming along and passing the exam with 100. The success of the company is a function of the success of dealing with our employees, and I am proud about that.