The Cooper Companies' 4th quarter, ended Oct. 31, was marred by internal and external problems. The company's previously announced consolidation of its distribution in the USA and in Europe ? going from 21 distribution centers to just five ? didn't go as planned and was actually ?disastrous? for a couple of months, said the company's chief executive, Thomas A. Bender, during a recent conference call. Subsequent delays prompted Cooper to give all of its customers two months of free shipping, in a move that added $1 million to the company's costs. The disruption officially began when the company moved Ocular Sciences' operations, which it has purchased at the beginning of the year, from San Francisco to Rochester. This consolidation, coupled with the narrowing of its distribution centers, should save the company about $50 million in annualized cost savings, most of which will show up in the latter part of 2007 and on into 2008.

Cooper's latest quarter was also bogged down by a slowing market, the company said. In the first nine months of the year, the global contact lens market rose by 3 percent, and was up by 5 percent in constant currencies. In the 4th quarter the market was up by just 1 percent and was flat on a currency-neutral basis. The company explained during the conference call that the market's drop-off at the end of Cooper's full year was partly due to the large build up of silicon hydragel contact lenses introduced to the market in 2005. However, Cooper expects that the kind of growth the contact lens market saw in 2005, including an 8 percent rise in constant currencies, will resume in 2007.

In the meantime CooperVision will continue its scramble to become a significant player in the silicon hydrogel market. Its major entry in to the USA, where silicon hydrogel products are the most popular, has hit some road blocks. The company wanted to do a full launch of silicon hydrogel products in the country toward the beginning of this month but now plans only to do a limited launch at no specific date. The company estimates the global silicon hydrogel contact lens market to be worth $1.1 billion annually.

Cooper launched a total of 7 new products during its financial year, 3 of which hit the market in the 4th quarter, including a daily disposable toric and a 2-week biomedical sphere in Japan, as well as a disposable multi-focal EP product in the USA. The company plans to launch three more new products before the end of its fiscal 2007 1st quarter. Cooper has special interest in the single-use contact lens market in the USA, as single-use contact lens sales represent just 8 percent of the U.S. contact lens market, as compared to 36 percent in Europe and to 60 percent in the Asia Pacific region.

Still, one of the highest commercial priorities for CooperVision is to gain more ground in the silicon hydrogel market. Other objectives include to hold its global share of the toric lens market and to complete the consolidation of its distribution facilities by the end of 2007.

In the company's 4th quarter ended Oct. 31 its CooperVision (CVI) unit's sales fell by 5 percent to $182.7 million. This offset an increase of 17 percent to $33.4 million for the company's much smaller Cooper Surgical (CSI) unit. CVI's gross profit decreased by 9 percent to $108.3 million, representing a drop for the unit's gross margin by about 300 basis points to 59 percent. CVI spent 73 percent less on R&D in the period at $7.3 million. Operating profit rose by 6 percent to $22.8 million.

CVI's core products ? specialty lenses, silicon hydrogel spherical lenses and single-use lenses ? were up by 1 percent in constant currencies to $121.5 million in the quarter, comprising 66 percent of the unit's soft lens business. Toric lens sales rose by 3 percent in constant currencies to reach $66 million, with disposable toric lens turnover up by 9 percent in constant currencies. Turnover form Proclear products, including Biomedics XC, grew by 20 percent in constant currencies. Multi-focal product sales dropped by 7 percent, mainly due to a large order in Japan in the year-ago quarter.

Total turnover for Cooper Companies in the subsequently slid by 2 percent to $216.0 million in the period. The gross margin for the group as a whole fell by roughly 200 basis points to 59 percent. While CVI spent much less on R&D, CSI's R&D expense jumped by 62 percent to $1.1 million, which is still a small amount and the group's total R&D expenditure was down by 69 percent to $8.4 million at the end of the period.

For the full year, the group's total sales were up by 6 percent to $858.9 million. CVI's turnover grew by 5 percent to $734.2 million, while CSI's sales rose by 15 percent to $124.8 million. The group's gross margin slid to 61 percent from 62 percent. Operating income dropped by 17 percent to $112.9 million. Net income totaled $66,234,000, as compared to $91,722,000 in the previous year. Cooper Companies has reduced its revenue guidance for the current fiscal year to a range of $920-960 million from previous estimates of $948-1,000 million. The 2006/07 revenue estimates for CVI and CSI are $780-810 million and $140-150 million, respectively.