Forbes  Jan 17  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 1/19/17, Colgate-Palmolive Co. (NYSE: CL), PNM Resources Inc (NYSE: PNM), and Cooper Companies, Inc. (NYSE: COO) will all trade ex-dividend for their respective upcoming dividends....


The Cooper Companies (NYSE:COO) is the world's fourth largest producer of contact lenses. [1] Specialty lenses, such as bifocal lenses and lenses for people with astigmatism, form a large part of Cooper's business-- 35% in 2008. Until just a few years ago, COO's focus on specialty lenses gave the company a competitive advantage over other contact lens makers like JOHNSON & JOHNSON (JNJ) and Bausch & Lomb (BOL). These companies did not make specialty lenses so their customers had to switch to COO if they needed lenses for specific conditions. Over the last few years, however, COO's competitors have introduced their own specialty lenses, curtailing a major source of demand for COO's products. [2]

COO has historically invested less in R&D than its competitors. As a direct consequence of its undernvestment, the company does not plan to introduce its first hydrogel until 2009, years after its major competitors. Hydrogel lenses allow for greater oxygen flow, making them healthier for the eye. After just a few years on the market, they have grown to 25% of the global market. [3] Cooper's failure to invest in this trend has resulted in a significant loss in market share. It has gone from being the number three contact maker in 2005 to the number four contact maker in 2008. [4] With growth in its core market, the United States, stagnant, the company's future prospects are dependent on its ability to continue to grow its Asia franchises.

Company Overview

COO operates two business units, CooperVision (CVI) and CooperSurgical (CSI). CVI earned $795.84 million in fiscal year 2007, which accounted for 83.7% of the company's total revenues for that year[5]. CSI earned $154.8 million in 2007.

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While COO's revenues tripled from 2002 to 2007, operating income experienced much slower growth and began falling in 2006 back to its 2002 level[6].
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CVI makes up 83.7% of COO's total revenue. CSI makes up 16.3% as its operating income is significantly less than that of CVI [7].

CooperVision, Inc. (CVI)

CVI sells a broad range of contact lenses for the worldwide vision correction market. Its leading products are disposable spherical and specialty contact lenses. It is a leading manufacturer of specialty lenses, including toric lenses for astigmatism and multifocal lenses for presbyopia, the blurring of near vision due to advancing age. Though its strength lies in its specialty lenses[8], CVI also offers spherical lenses, which correct common nearsightedness and farsightedness. CVI expanded its presence in the spherical lens market, the biggest segment of the contact lens market, with the acquisition of Ocular Sciences in 2005.

CVI's three best-selling contact lens products are Biomedics XC™ lenses[9], Proclear® lenses[10], and Biofinity® lenses [11].

 CVI's customer-base is worldwide, with sales in the Americas, Europe, and Asia Pacific all contribute to its total revenue. However, the domestic market is still CVI's largest revenue-generating region. .
CVI's customer-base is worldwide, with sales in the Americas, Europe, and Asia Pacific all contribute to its total revenue. However, the domestic market is still CVI's largest revenue-generating region. [12].
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Although CVI is expanding its distribution worldwide, the majority of the company's revenue is still from the Americas.[13].

CooperSurgical, Inc. (CSI)

CSI sells medical devices, diagnostic products, and surgical instruments and accessories to gynecologists and obstetricians. CSI has grown to $154.8 million in revenue in fiscal year 2007 through a series of acquisitions including CSI's $20 million buyout of Wallach Surgical Devices, Inc. [14] and $27.2 million buyout of Lone Star Medical Products, Inc. [15] As a result, CSI's net sales increased by 24% in 2007, in comparison to growths of only 15% in 2006 and 7% in 2005[16].

Key Trends and Forces

COO's Late Start in Developing Silicone-Hydrogel and its Low Product Development Weakened its Competitive Position

Although COO's early entry into the specialty contacts market proved an advantage, the company has failed to keep up with the rest of the competition in developing new lenses. For years, COO was the only major competitor in the market without the silicon-hydrogel contact line that helped firms like Bausch & Lomb (BOL) and JOHNSON & JOHNSON (JNJ) obtain large market shares[17]. However, COO's acquisition of Ocular Sciences in 2005 provided promise for the company as Ocular Sciences gave CVI a line of silicone hydrogel-based that it previously lacked, and it let CVI compete with the rest of the market. Although COO missed the silicon hydrogel gold rush, the company has seen progress in its sales. In 2006, CVI grew net sales by 8%.

COO's lack of new technology development goes back to it's historically low resource allocation to product development. As opposed to spending more on R&D, COO's strategy was to purchase other firms to obtain the technology. COO's spending on research and development has increased every year from 2005-2207. COO spent $22.9 million on R&D in 2005, $27 million in 2006, and $32.7 million in 2007. These numbers, however, are still significantly less than those of Bausch & Lomb (BOL) and JOHNSON & JOHNSON (JNJ).

Ongoing Litigation Over Intellectual Property Rights Forces COO to Spend on Legal Bills

Intellectual property rights are especially important for companies in the pharmaceutical and healthcare industry. COO must protect intellectual property rights through a combination of patent, trademark, copyright, and trade secret laws. Cooper has been charged with several lawsuits for allegedly infringing other companies' patents. Most notably, in 2004, Bausch & Lomb (BOL) filed a lawsuit against Ocular Sciences, Inc., a company acquired by COO in 2005, alleging that one of its toric soft contact lenses and its label infringe a Bausch & Lomb's patent. Although this case has not been settled, it has caused financial pressure on COO as the company tries to clear its name and continue manufacturing these toric soft contact lenses that make up a majority of CVI's total revenue.

COO Has Avoided Product Recalls That Have Plagued Competitors

Companies in the pharmaceutical and healthcare industry face significant liabilities if a product is later found to be defective or produce adverse reactions. Even though such adverse effects are previously unknown and impossible to predict, companies are forced to recall products or face litigation if their products are harmful to the consumers. Unlike its competitors, Bausch & Lomb (BOL) and Advanced Medical Optics (EYE), COO has not been associated with such recalls. These issues, however, resulted in more rigorous government oversight and regulation and damaged consumer confidence in the safety of contact lens usage, which will negatively impact the growth of the contact lens market in general and possibly cause consumers to try alternative vision-correcting technologies.

Fluctuations in Exchange Rates Affect COO's International Sales

COO is very active in the international market, and its operations and financial position are thus affected by fluctuations in exchange rates. COO's most significant currency exposures are the British pound, Canadian dollar, Japanese Yen, and the Euro[18]. If COO is unable to match revenue received in foreign currencies with costs paid in the same currency, then exchange rate fluctuations will have a negative impact on its financial condition. For example, in fiscal year 2007, COO recognized a net loss of about $3.0 million primarily related to the British pound and Euro strengthening against the U.S. dollar. As the U.S. dollar continues to fluctuate, COO will face tremendous risk as they continue to do business on the global level[19]. COO attempts to minimizes this exposure with derivative instruments such as foreign currency forward contracts and cross currency swaps[20].


The two business units of COO face different sets of competitors as their target customers are different.


The contact lens market is highly competitive. CVI's three major competitors in the worldwide market are CIBA Vision Corporation (owned by Novartis AG (NVS)), Vistakon Inc. (owned by JOHNSON & JOHNSON (JNJ)), and Bausch & Lomb (BOL). All of CVI's major competitors offer contact lenses to treat most refractive eye disorders in both traditional and silicone hydrogel materials. Characteristics of lenses such as comfort and prescription availability largely overlap, although specific attributes such as wear time differ. Vistakon's Acuvue brand holds dominant market share. The Acuvue line of disposable contacts includes both traditional and silicone hydrogel materials, which directly competes with COO's Biofinity line of contacts.

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CVI has a 15% market share in the contact lens market in terms of revenue, which makes the company one of the top four contact lens manufacturers worldwide[21].
U.S. Landscape for Silicone Hydrogel Contact Lenses
30 Day Continuous 7 Day Continuous Daily
Spheres Night & Day - CIBA, PureVision - B&L Acuvue Oasys, O2Optix - CIBA Acuvue Advance, Cooper Biofinity
Toric PureVision Toric - B&L O2Optix - CIBA Acuvue Advance for Astigmatism, Cooper Biofinity toric
Bifocal PureVision Bifocal


CSI focuses on selected segments of the women’s healthcare market, supplying high quality diagnostic products and surgical instruments and accessories. The market segments in which CSI competes remains fragmented, typified by smaller technology-driven firms that generally offer only one or two product lines. Most are privately owned or divisions of public companies, including some owned by companies with greater financial resources than COO.

CSI is expanding its presence in the larger hospital and outpatient surgical procedure market. This market is dominated by larger competitors such as Johnson & Johnson's Ethicon Endo-Surgery and Ethicon Women’s Health and Urology companies, Boston Scientific (BSX), and Gyrus & ACMI. These competitors have well established positions within the operating room environment, but CSI's is building its contacts with gynecologic surgeons, which is evident in its increased sales in both 2006 and 2007.


  1. The Strength of Competition in the Sale of Rx Contact Lenses, pg.12
  2. COO Morningstar Analyst Report 6-17-2008
  3. COO Morningstar Analysis 6/26/08
  4. COO Morningstar Analysis 6-17-08 and 10-26-05
  5. Cooper Companies 10-K 2007. Part I, Item 1: Business, pg 4.
  6. COO's Statement from Google Finance
  7. Cooper Companies 10-K 2007. Part I, Item 1: Business, pg 4.
  8. Viksjo, Jeff, Morningstar Cooper Companies Analyst Report, 2007
  9. CooperVision, Inc.'s website
  10. CooperVision, Inc.'s website
  11. CooperVision, Inc.'s website
  12. Cooper Companies 10-K 2007. Part II, pg 44.
  13. Cooper Companies 10-K 2007. Part II, pg 44.
  14. Cooper Companies 10-K 2007. Part I, pg 10.
  15. Cooper Companies 10-K 2007. Part I, pg 10.
  16. Cooper Companies 10-K 2007. Part I, pg 10.
  17. Viksjo, Jeff, Morningstar Cooper Companies Analyst Report, 2008
  18. Cooper Companies 10-K 2007. Part II, pg 54.
  19. Cooper Companies 10-K 2007. Part II, pg 51.
  20. Cooper Companies 10-K 2007. Part II, pg 87.
  21. The Strength of Competition in the Sale of Rx Contact Lenses, pg.12
  22. Bausch & Lomb's Wikinvest page
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