National Vision Holdings, Inc.
Q2 2008 Earnings Call Transcript

Published: 4 Aug 2008

[Operator:]

Welcome to AMO’s second quarter 2008 earnings conference call. (Operator Instructions) I am pleased to introduce Sheree Aronson, Corporate Vice President of Corporate Communications and Investor Relations.

[Sheree Aronson:]

Joining me are Chairman and CEO, Jim Mazzo; President and COO, Randy Meier; and CFO Michael Lambert. After our prepared remarks by Jim and Randy all three will be available to take your questions. During the call certain statements such as forecast of financial information, guidance, financial targets and goals, currency effects, cash flow and debt levels, strategies for growth, expected product performance, technology adoption and market share, expectations for markets and procedures and the impact of the US economic downturn, projected regulatory approvals, benefits and launch dates of new products, expectations for market share recovery in the multipurpose solution re-launch and for initiatives to reduce fixed costs and any other statements that refer to AMO's plans or estimated future results are forwarding looking statements. As such they reflect our current analysis of existing trends and information and represent our judgment only as of the date of this call. Actual result may differ based on various factors affecting our business. Review today’s press release and our recent SEC filings, for more information about these risk factors, specifically the discussion under the heading "Risk Factors" and our 2007 Form 10-K. You'll find these and other documents in the Investors section at www.amo-inc.com or by calling 714-247-8455. Let me remind you that beginning last quarter we made changes to the way we break down our sales and the global sales tables that accompanies our earnings releases. If you need more information you’ll find details regarding the changes on slide three of the presentation. Finally please note that our adjusted EPS and adjusted operating margin guidance are provided on a non-GAAP basis and exclude the impact of charges and write-offs related to acquisitions, reorganizations, restructurings and recapitalizations, unrealized gains or losses on derivative instrument and other periodic or one-time charges or gains. Refer to the Investors section of our website under historical financial for more information on our use of non-GAAP measures. Unless we identify a number as adjusted in our remarks or in the accompanying slides, you can assume that it is a GAAP number. Remember too that any reference to pro-forma growth rates reflect comparisons that include IntraLase’s performance as if this acquisition had occurred in all periods presented. With that I will pass the call to Jim.

[Jim Mazzo:]

AMO’s second quarter results show the strength and resiliency of our global presence and businesses. Despite cyclical declines and domestic refractive volumes we delivered sales and market share gains in multiple categories, achieved our margin expansion and improved our cash flow. Throughout the quarter we remained focused on our four key priorities. Number one, leveraging our global refractive leadership and advancing our complete refractive solution business model; our refractive sales were virtually unchanged on a constant-currency basis despite a double-digit drop in our U.S. excimer procedures. Now, this underscores the growing strength of our international refractive footprint. Our total international refractive sales rose 40% of solid growth in all product categories and regions. International unit placements of excimer and femtosecond systems also rose 37% as demand for our leading technologies remained high and we continue to grow our share, the installed-base. Despite the tough U.S. market the competitive advantages of our highlighted platform continue to resonate with customers as we grew both excimer and femto market share according to the latest markets of debt. Number two, achieving on-time delivery of clinical products, pipeline products across all the three businesses. These technologies were key contributors to second quarter cataract and eye care performance helping us gain share in multiple categories. Tecnis, intraocular lens sales rose 38% and helped drive total IOL sales up 16%. We launched the Tecnis 1 Piece to US surgeons in May following its release in Europe in the first quarter and we expect this IOL which marked our entry into the large single piece category to help us drive sales and share growth in the second half of ’08 and beyond. During the quarter we also continue to promote our new WhiteStar Signature platform and prepared for commercial lease of the Ellips Transversal phaco feature as well as other enhancements to improve the platforms functionality and ease of use. Phaco system sales we’re particularly robust nearly doubling the year ago levels on a dollar basis. Continued WhiteStar Signature penetration also helped drive phaco pack and viscoelastics sales in the quarter. Expansion of our blink Tears line continued in the quarter with a unit dose offering now in retail shelf. In the U.S. we also launched blink gel Tears specifically designed for patients with moderate to severe dry eye. Number three, growing our Multi purpose solution market share and returning our eye care business to sustained profitability and growth. At $58 million our Multi purpose sales were stable compared to the first quarter -- I meant to say our Eye Care sales were stable compared to the first quarter. We estimate our second quarter share of the global branded MPS market which reflects retail sales at approximately 10.7%. Adding to this was solid performance from our other Eye Care product segment, which grew by double-digits in the quarter. Importantly, the Eye Care team is continuing to not only drive sales, but also improve Eye Care’s overall profitability and number four, increasing our operational efficiency in cash flow to facilitate debt reduction. Operating margins expanded during the quarter as we grew sales by keeping a tight reign of our operating expenses. We are on scheduled with our plans to reduce fixed cost, to increase headcount efficiency and better facility utilization which are expected to reduce spending by $47 million in the second half of ’08 with the full benefits of $12 million to $16 million in savings expected in ’09. We generated approximately $58 million in cash flow from operations, which allowed us to reduce total debt during the quarter. Michael and his team also moved proactively to secure amendment to a revolver credit facility which eases our debt-to-EBITDA ratios beginning later this year and extending into 2011. Offsetting our forward progress in the quarter on these imparities was a sharp decline in the US refractive procedures and this lead us to reduce our 2008 earnings guidance by about $0.25 to a range of $1 to $1.15. To provide a context for the reduction in our guidance, let me review the performance and outlook of our refractive business. As slide number six indicates second quarter sales were $118 million up 1.5% from the prior year. Procedure inflate and related sales declined about 1% reflecting a drop in US excimer procedure and implants offset by modest growth in US femto procedures and robust international sales. As you all know, we typically use the 12 month metric to explain our domestic procedure trends and our US excimer custom mix; however again this quarter, we’ll provide both trading 12 month in quarterly trends. For the trading 12 months ending June 27, our US excimer procedure volumes were down approximately 6% and down approximately 20% in the second quarter versus the comparable periods one year ago. Our custom mix grew to 67% for the trading 12 months ending June 27, from 63% for the comparable year ago period. In the second quarter, our US custom mix was 68% versus 65% one year ago. For the trading 12 months, ending June 27, our U.S. femtosecond procedure volumes grew 25% on a pro forma basis and 14% in the second quarter demonstrating significant share gain against traditional microkeratomes. Looking at the market overall, we believe total U.S. LASIK procedures were down about 25% in the second quarter. Our above-market performance was evident now in our financial results, but also in the latest market share data from market scope, which showed our second quarter U.S. excimer procedure at 64.3% and our femtosecond share up to 53.5%; these are both new highs in both categories as slide number eight shows. Clearly, our proprietary eye LASIK procedures becoming the U.S. standard of LASIK care. Our refractive IOL sales declined this quarter due primarily due to weakness in our U.S. sales. Outside the U.S. we grew our refractive IOL sales about 30% as we leveraged the competitive advantage of Tecnis Multifocal and ReZoom. We obviously are dissatisfied with our U.S. refractive IOL sales performance and are putting more emphasis on improving this. We are also on schedule to launch the Tecnis multifocal in the U.S. in early 2009, which should help move our share and the market. Overall, our international refractive procedure and implant sales hit a new high in the quarter up 45% to nearly $32 million. Every region and product category contributed to this solid performance, which illustrates the strength of our global expansion strategy. Global system sales rose 10% on a dollar basis, unit placements of femtosecond lasers were up about 5% and excimer placements declined about 9% compared to the year ago period and this is now altogether surprising when you remember that the year ago quarter was the first period in which we owned IntraLase and we took maximum advantage of the cross-selling opportunities ran out of the gate there by creating a difficult comparable for our excimer business. In fact the second quarter 2007 was our best quarter for excimer placements in seven years and it was the best quarter-to-date for IntraLase placements. The good news is that since we’ve had successive quarters of outstanding Excimer company unit placements and demand remained strong. In fact in the second quarter of 2008, our U.S. excimer placements more than doubled on a sequential basis. The bottom line is that AMO is in excellent position in terms of our share of LASIK real estate and our strong relationships of LASIK practices incorporate change, to grow procedures well under the future especially when the market rebounds. So, I wanted to add to our refractive business, what’s clear in our international business, is showing excellent growth and we’re continuing to focus resources to strengthen this even further. Here in the U.S., we’re faced with near-term challenges. History suggests that LASIK volumes tracked with consumer confidence, which according to the conference board is now at a 40 year low. We’re monitoring this and other economic key indicators as well as our own procedure volumes closely. As I mentioned earlier, our second quarter U.S. excimer volumes declined 20% and it included declines in June in the high 30% range. The market declined approximately 40%. For July the declines in our U.S. excimer procedure volumes appeared to level off in the same high 30’s range. So we now have a tentative two month trend for the first time this year assuming procedure volumes declines remain. In this range for the balance of 2008 that would be the June, July range we expect our U.S. excimer procedures to be down about 25% of all of 2008 and for the market to be down about 30%. This new due for U.S. procedures trended is the catalyst for our guidance change. If you recall that we have previously expected that a U.S. excimer procedure decline of 10% for AMO and 15% for the market. We also continue to expect the U.S. excimer softness to have some of an impact on the pace of our femtosecond procedures and refractive implants. U.S. conditions are tough no doubt, but we are working to minimize the downside where we can while ensuring that we are well positioned to capitalize when things turnaround. This includes aggressively promoting the benefits of our proprietary eye LASIK technology suite which combines the IntraLaser and custom view procedures to fortify our market leadership position to and expand internationally, reducing our exposure to any single market. Finally we are developing new technologies like the iFS Laser and iDesign system to enhance our competitive position. The iFS Laser recently received the FDA clearance and the first upgrade kits will be rolled out later this year to existing customers. Providing customize will flash in less than 10 seconds, improving the bad quality, oval shapes inverted side cuts and other benefits it will allow us to market a two tier offering. Projected for early 2009 launch, the iDesign system combines an aberrometer and topographer into one machine and provides a higher dynamic range which allows clinicians to capture WaveFront images in more patients. Both of these technologies are designed to help to surgeon deliver better outcomes from more patients and enhanced patient throughput. Now moving to the cataract business I am extremely pleased to report strong performance from this business, which is our largest at 45% of total revenue and as you know the cataract business is not economic sensitive and therefore provides an excellent counter balance to our refractive business. Second quarter sales rose 15% on strong performance in all product categories domestically and internationally. Total Monofocal IOL sales climbed 16% led by our Tecnis IOL platform which represented 62% of our total Monofocal IOL sales in the quarter. We began selling our first one piece, the Tecnis one to U.S. surgeons in May; on heals of trialing by European surgeons in the first quarter. In these first few months demand is very high. We received excellent feedback from practitioners concerning the improved functional vision it provides in a single-piece configuration as well as the clear optic test centers easily. I’m very pleased with the second quarter IOL performance, especially when you consider the Tecnis 1 Piece hasn’t been in the market long enough to begin to register any meaningful sales or share gains. We’re confident that it will be a critical driver in helping the U.S. gross share in future periods; particularly in the U.S. where the single-piece IOL market is the strongest. At slide 15 highlights, sales of Phaco and Viscoelastic products the other key technologies comprising the AMO cataract procedures were up 15.5% in the quarter and this was due primarily to outstanding Phaco performance in all regions. On a unit basis new Phaco placements rose 63%, on a dollar basis Phaco system and tax sales were up 98% and 14% respectively led by our new WhiteStar Signature system and the continuing productivity of our existing installed base. We recently fortified our Phaco offering with the Ellipse feature, which simultaneously blends longitudinal and transversal Phaco modes for more effective cutting and a more efficient procedure. We also launched our Healon D Viscoelastic in Europe a few weeks ago and remained our target to launch in the U.S. later this year. Now moving to Eye Care, this team is maintaining a very disciplined approach to recapturing market share and establishing a global tiers franchise while managing costs and delivering profits. Second quarter Eye Care sales were nearly $58 million up from the year ago period when we conducted the MoisturePlus recall. Multipurpose sales topped $25 million again this quarter as our complete Easy Rub formulation continued to gain traction. Disclaiming regimen and the spot’s complete Easy Rub received a boost in the second quarter, when the U.S. FDA Ophthalmic Devices Panel met the review standards for development and use of contact lens care solutions. AMO presented on the importance of Robin Ranch regimen and the expert panel unanimously recommended the use of disclaiming regimen in conjunction with MPS offerings, while also recommending labeling enhancements in more stringent real world testing criteria. We believe this outcome accentuates AMO’s commitment to patient safety in the eyes of Eye Care professionals. We continued our practitioner outreach efforts at the recent American Optometric Association annual meeting in Seattle in late June. We had an extremely successful show with excellent practitioner attendance at numerous forms on contact lens compliance into dry eye treatment regimens. Based on available third-party data we estimate our second quarter global Multi purpose market share now is at 10.7% and this includes U.S. branded MPS share in the high 7% range for the second quarter. We still expect to return our global share to about 16% to 18% run rate, however it will likely take an extra quarter or two beyond our original target of the year 2008. However, our overall, our total Eye Care sales are in-line with our expectations and we continue to experience favorable trends in hydrogen peroxide in the second quarter with sales of 16%, much of that coming from Japan. Now looking at slide 18 our New Blink Tears OTC dry eye product also contributed a growth in the quarter, in the Eye Care category. We are now selling our line of OTC dry eye products in the U.S and Europe. We’ve launched both the multi dose and preservative free unit dose version in the U.S. designed to relieve the symptoms of mild to moderate dry eye. In June our third product Blink Gel Tears, began occurring on U.S. store shelves. Designed to relieve moderate to severe dry eye symptoms, the gel variety is more viscous and provides longer lasting relief. While we are still in the very early stage of the market entry, it’s been gratifying to see the Blink brand begin to register share gains. For five weeks ending June 15, IRI showed Blink Tears with 2.1% share of the U.S. OTC market. Before passing this call over to Michael, let me summarize by saying that we’re obviously not pleased with having to reduce our guidance due to the U.S. economic condition. However I believe the second quarter shows our focus on maximizing things we can control to enhance our earnings power; like International Refractive growth, global Cataract and Eye Care growth, new product delivery, expense management and cash flow generation. With that I’ll turn the call over to Michael.

[Michael Lambert:]

I’ll begin with a review of our second quarter consolidated financial results. Sales grew 23% to over $320 million including an estimated 7% increase related to currency impacts. In terms of sales mix cataract accounted for 45%, refractive represented 37% and Eye Care was 18%. These shifts versus the year ago period reflect primarily the mix impacts of the Eye Care recall last May and the effects of the weakening economy on U.S. refractive procedures. Geographically sales in the U.S. declined 3% and accounted for 36% of our total sales. Sales in all other markets rose 44% and represented 64% of sales. This reflects the significant impact from the soft U.S. refractive procedures market combined with continued strong international growth and favorable foreign currency impacts. Gross profit was $197.2 million up 54% versus the year ago period. Gross profit in last year’s second quarter was $127.9 million and included $7.7 million non-cash inventory step-up to fair value related to the IntraLase acquisition. The year ago gross margin was also impacted by approximately $51 million in recall-related returns and costs. Our second quarter gross profit margin was 61.5% compared to 48.9% in the year ago quarter which included the acquisition and recall related impacts on just described. Sequentially our gross margin declined by about 40 basis points due primarily to the mix shift away from higher margin procedures and towards lower margin refractive systems and Viscoelastics. We also saw some gross margin improvement in our services business that partly offsets the downward pressure from the revenue mix shift. As slide 22 shows, second quarter SG&A expense declined 12% to $131 million including a $1.8 million non-cash charge or accelerated depreciation on the IntraLase headquarters building we are now exciting as part of our restructuring initiative. Accounting rules require that this item be recorded in SG&A rather than with the other restructuring charges called out explicitly on the P&L. SG&A in a year ago quarter included $14.5 million in transaction related charges and was impacted by $7.5 million in recall related spending. As a percent of sales SG&A in the quarter improved to 40.9% versus 57.3% one year ago. We remain keenly focused on expense management. On a sequential basis, second quarter sales grew nearly twice as fast as SG&A expense. This is meaningful when you consider that second quarter SG&A included not only the accelerated depreciation charge but also higher seasonal spending related to major conference and a continued impact from new product launches. As I said last quarter we expected the second quarter to be the high mark in terms of 2008 SG&A spending. You should begin to see the benefits from our restructuring and reduced discretionary spending in the second half of 2008. R&D expense declined 6% to $19.4 million or about 6.1% of sales versus 7.9% one year ago. The 6% decline was due to realized synergies following the IntraLase acquisition and the effects of our recent restructuring. This decline is also partly an art effect of the top line loss in 2007 associated with the recall. We reported just over $9 million in restructuring charges primarily from severance. These charges are in addition to the $1.8 million restructuring charge I mentioned earlier with respect to accelerated depreciation. Our previously announced restructuring design to improve manufacturing headcount and facility efficiency, it is proceeding on schedule. We’re relocating our femtosecond manufacturing to Northern California, relocating our femtosecond patient interface device manufacturing to Puerto Rico, reducing our workforce by about 4% and consolidating administrative facilities in Orange County. Today we’ve incurred about $23 million of our total estimated of one-time charges of $36 million to $43 million. When fully implemented we expect the restructuring to deliver $12 million to $16 million in annualize savings with 2008 savings of $4 million to $7 million. Note also that we are recorded a $20.5 million net gain on legal contingencies; this is the $21 million one time cash payment we received from Alcon as part of the cross licensing agreement announced last month minus our associated legal costs. Again we have demonstrated that our intellectual property continues to be an important and valuable asset to AMO. Moving down the P&L, operating income was $58 million or 18.1% of sales including the roughly $11 million in total restructuring charges and the $20.5 million gain. Our operating income was reduced by several large non-cash items including $6.2 million in Stock-based compensation and $29.2 million in total depreciation and amortization expense of which $17.2 million was intangible amortization. In the year ago period we reported an operating loss of $128 million which included $85.4 million in non-cash IPR&D charges related to the IntraLase acquisition and $22.2 million in acquisition related charges including the inventories step-up item, previously mentioned. Prior year operating income was also reduced by several other large non-cash items including $5.1 million in stock-based compensation and $26.4 million in total depreciation and amortization expense of which $16.8 million was intangible amortization. Non-operating expense which is primarily interest expense was $22.7 million and included a $2.7 million unrealized gain on derivative instruments and a $1.3 million loss on the write-off of an investment. This compares to a non-operating expense of $23.5 million in the year ago period which included a $1.3 million deferred financing cost write-off associated with the IntraLase acquisition. You will notice in the other net category that we had non-operating expenses of $5.3 million compared to $1.5 million one year ago. This increase was due primarily to a $3.9 million realized loss on derivative instruments. We reported a tax provision in the quarter of $13.5 million compared to $15.4 million one year ago. This translates into an approximate 38% effective tax rate consistent with our previous forecast. GAAP net earnings were $22 million or $0.35 per diluted share. This compares to a net loss of $166.8 million or a loss of $2.78 per share in the year ago period. The 2008 second quarter results included charges and gains that on a net basis combined to increase EPS by an estimated $0.11. As I just outlined these were $11 million in restructuring charges including $1.8 million in SG&A for accelerated depreciation charges, a $20.5 million in net gain on legal contingencies, a $2.7 million unrealized gain on derivative instruments and a $1.3 million loss on an investment. Second quarter GAAP earnings also included non-cash intangibles and stock based compensation expense that reduced EPS by an estimated $0.24. Turning to a few balance sheet and cash flow highlights; as of June 27 cash and equivalents were just over $30 million. Trade receivables were $268 million compared to $250 million at year end, DSO’s were 76 days up slightly from 75 days at year end, but down from 83 days in the first quarter of 2008 reflecting good progress on cash collections. The team second quarter performance was particularly strong as international sales which typically have longer payment terms grew 59% to 64% sequentially. Inventories increased about $20 million to about $181 million, DOH stood at 128 up from 116 at year end but slightly below the first quarter’s 132. The increase since year end is due primarily to increased bridging inventory related to the various manufacturing moves and the build out of our global service infrastructure, particularly spare parts inventory. Working capital excluding cash was approximately $236 million at the end of the quarter, up from $146 million at year end. The increase was due to significant debt repayments on our revolver credit facility. The reduction in accounts payable and the increases in AR and inventory items mentioned earlier. In the second quarter, our capital expenditures were approximately $5.4 million inline with our full-year CapEx spending plan in the range of $45 million to $55 million. At quarter end our total debt stood at approximately $1.56 billion down $46 million from quarter end and down about $58 million from the end of the first quarter. So actually down $46 million from year end and down about $58 million from the end of the first quarter. Including the $21 million legal gain we generated about $58 million in cash flow from operating activities during the quarter, which was used to fund CapEx and reduce debt; even net of the one-time gain, this reflects good progress for us sequentially. We expect improving cash flows to help us reduce debt in the second half of the year, most specifically in the fourth quarter. Well among the subject of debt, let me give a quick overview of the amendment we disclosed in an 8-K filing this morning. In anticipation of a continued slowdown in U.S. Refractive volumes, we proactively sought and received approval from our banking partners on an amendment to relax the existing quarterly leverage ratio requirements defined as debt-to-EBITDA on our revolver. Beginning in the third quarter of this quarter and extending through the third quarter of 2011, the maximum leverage ratio has been increased from existing levels and will provide what we believe to be adequate covenant levels. For this, we will pay approximately $2.6 million which will be amortized over the remaining maturity. We did not change the fixed charge coverage ratios defined as EBITDA-to-interest as we believe there is sufficient cushion already in place. Finally, to review our guidance, we have reduced our adjusted EPS guidance for 2008 to a range of $1 to $1.15 due primarily to lower U.S. refractive procedure, which represent the company’s highest margin revenue. We left 2008 sales guidance unchanged based on strong equipment and international refractive performance, global cataract performance and favorable currency effects. For the year we expect adjusted operating margins in the mid-teens. With that I’ll pass the call back to Jim.

[Jim Mazzo:]

To wrap up, AMO is focused on our key operational financial priorities. We must leverage our global refractive leadership by driving our cataract and eye care businesses. We’ve got to continue to deliver on that pipeline; return the eye care business to growth and very importantly profitability and increased our operational and efficiency in cash flow. As you can see the second quarter demonstrated progress against each of these; despite current domestic challenges, we remained very confident in our ability to deliver the sustained growth and profitability over the near and the long-term. With that operator I would like to open it up to questions.

[Operator:]

(Operator Instructions) Our first question comes from the line of Joanne Wuensch.

[Joanne Wuensch:]

Can you give us an idea, if we pull back the amazing monofocal IOL growth and even just the total IOL category, what is building that out? I mean there’s got to be a number of things there? Thank you.

[Jim Mazzo:]

Well, you bring up a good point there Joanne. We did not really get from Tecnis one in this quarter as we just rolled it out in the U.S. and started in Europe. So, what was tremendous growth for us in our cataract business was direct related to our IOL performance across all markets. Remember last time we didn’t have that especially here in the United States. The Signature System now, our Phacoemulsification you saw the amount of new units, this is I think -- don’t hold me to it; but our fifth or sixth consecutive double digit growth on our pack sales, which continues to talk about our installed base and so I think execution has continued to raise as well as the new products hitting in and so now looking forward you’ve got a full launch. Now Tecnis one, you’ve got Healon D, that was just launched in Europe and Healon D will be launched in the U.S. So obviously our cataract franchise is really starting to pick up.

[Joanne Wuensch:]

And then what is the cons thinking on the Tecnis Multifocal?

[Jim Mazzo:]

Till the first quarter of ’09, we’ll continue to work very well getting answers back from the FDA and we’ll continue to progress very well in that area.

[Joanne Wuensch:]

And you talked about building out market share in anticipation of when the laser vision correction market returns beyond its dates. Some of that is the economy, but my memory is also that some of what helps to return last time was the introduction of custom technology. Give me an idea of other than the economy is there anything else that you think will help the market return to growth. Thank you.

[Jim Mazzo:]

Well obviously the economy is a big player. Let me break it into a couple of points. I came here with a slide number, but we had all-time share highs in both our excimer and our femto. So we continue to buy real estate. The eye LASIK product line is continuing to do extremely well where we are leveraging across those differences. We are going to be launching IFS at the end of the year, which will give practitioners the ability to advertise in new medium. We’ll have our new proprietary eye design, which actually increases capture rates for customs, so custom should accelerate there and then when you look at our international place; I think everybody’s extremely pleased. So, what we are hoping for is that while we continue to face some challenges in the U.S., international continues to grow at double digits, which allows us to overcome and again remember our very strong presence in the change and in the independence. The goal now once the economy comes back is to get back to really what the issues are, why people don’t have Lasik and that is fear, confusion or awareness and what we are doing now is with the products like IFS, which reduces the overall concern of having a blade or something of that nature, the eye design which enhances capture rates, because then you have better outcomes really on what we are working with. So, while the U.S. continues to hit us, we are growing our shares, we are not loosing shares; we know that, because we have both external and internal data.

[Operator:]

Your next question comes from the line of Chris Cooley, FTN Midwest Securities.

[Christopher Cooley:]

Good morning. Thank you for taking my question. Could we just maybe look at your guidance a little bit? When you last reduced LVC volumes by 15% coming into the year, there was 37 EPS impact to that. We are midway to the calendar year now. I realizing the numbers are different, but the volumes are lower in the back half of the year versus the first half historically. We’re seeing another 15% cut and yet we’re seeing an EPS reduction of $0.25 and a flat top line. I guess a couple of parts to that; could you first look at maybe what your expectations or now versus the sort of the year in terms of currency, in terms of the contribution to the top line and secondly help me think about the incremental revenue that’s obviously going to be made up somewhere Ex the FX contribution as we look at that guidance and I have one other follow-up; thanks.

[Jim Mazzo:]

Okay I’m going to break it down kind of from a market impact and I’ll let Michael break it down from a financial impact. First off, you said they were down 15%. When we projected, we would be down 10 and the market would be down 15. We now believe Chris going forward, for the first time, we’ve had two consecutive months and so until then we’ve really never had two consecutive months in this market. We now believe overall for the year we’ll be down 25 and the market will be down somewhere 30, which then says for the Q3 and Q4 we’ll be down about high 30’s and the market down mid-40’s. How we got there and what that impact is I’ll let that go over to Michael.

[Michael Lambert:]

A couple of comments Chris; you had a couple of questions in there. FX assumptions that are embedded in the guidance, currently we’re really not projecting a significant change from current exchange rates, pretty much through the rest of the year. On the earlier part of your question, about the dollar relationship in the defined -- let me sort of talk you through because we expected we would get a little bit of question on this, so I want to clarify it as clear as we can. The excimer procedure drop alone that Jim talked about, would have translated into a higher EPS impact given all the variables including the custom mix exchange, higher femto procedure impact that Jim alluded to from his commentary and then so you have that piece; it would have been bigger. Other factors that helped offset the EPS decline includes some level of currency, whether as an equipment where we still get some gross profit contribution; that will be certainly a smaller one, better OUS refractive sales, although they obviously don’t replace U.S. sales on a like-for-like basis, some improving level of cataract performance and also some an additional belt tightening on expenses. To comment on the FX side, one thing to remember is that the FX impact both in the quarter and for the year on us doesn’t tend to be significant down at an EPS line, and that’s partly because we have a natural hedge, but also because we have a formal hedging program in place and that’s part of what you saw on this quarters impact in the other non-operating expense category. The driver there of that non-Op expense line which was about $5 million total, about $4 million realized loss was the settlement of option contracts put in place six to 12 months ago to hedge a portion of our P&L exposure in Europe and in Yen denominated entities and these are really required by our credit facilities. Because we have that formal program in place it significantly minimizes the EPS impact, both the ups and the downs from currency changes.

[Christopher Cooley:]

Just looking at the cataract franchise I’m very pleased obviously with that performance and to put all 14% growth in the pack’s business, but what does it really take to get that up, really start to build some momentum there; do you feel like you still had a competitive disadvantage in the total bundle, is it a matter of timing. Help me just kind of think about execution there going forward. Thank you.

[Jim Mazzo:]

Well I guess I’m challenge with that comment because we’ve been obviously having as I said five or six consecutive quarters of double-digit when the markets growing 3% to 5%, but if we want to get that bigger, I think what happens one of the key component is having Healon D franchise which will help tremendously because you now have every component of a surgical instrumentation. You have now the single piece IOL, the new inserter coming out. We have Signature system which is by far now the prime; you have the LIS technology and now a full cohesive and dispersive product line. I think that completely helps us with that broad offering. So, I’m pleased obviously because that means without some of those components we’ve been able to grow double-digit, but I think to your point to get that even further growth, it will be those products.

[Operator:]

Your next question comes from the line of Peter Bye with Jefferies & Co.

[Peter Bye:]

The catalyst is obviously LASIK volumes, I don’t think it’s too much of a shock to most people, but on the eye care segment, on multipurpose we did see a flatting Q2 over Q1; are you still holding your same assumptions for exiting year-end on market share or was there some little bit of change there too?

[Jim Mazzo:]

Yes, I think as I said, I think what’s contagious maybe another extra quarter or two to really to get to that 16, 18, but we’re not going to be far off of that as we exit the year. I think what you saw though Peter is we were at 10.0 last time and now we’re 10.7 and again this is tough to have all this global market share at once. In addition the total eye care business actually has met our expectations. We are actually seeing some out performance in peroxide and in tears; anything to add to that Randy?

[Randy Meier:]

No Peter. We continue to be real happy with how the eye care franchise is doing. Although we did see a bit of a flatting of the revenue sequentially; we were pretty excited about that. As you know we were still entering a couple of markets early in the first quarter. So, we saw some real pull through generated on the MPS side. Tears continue to do very nicely and we saw some nice growth in the second quarter when we expanded the franchise in the second quarter and profitability is up significantly year-over-year and we are doing very well on that side. So, all-in-all again to echo what Jim said, the Eye Care franchise did pretty well in profitability. It’s probably the best as it’s been in the last three to five years and we continue to expect that to improve throughout the reminder of the year.

[Peter Bye:]

And then just Michael maybe a quick one; You had a put date on some of your debt; what are you actually paying now, when your paying it down now and maybe and when might you right down what your strategy might be to deal with the put?

[Michael Lambert:]

Yes Peter, we paid off a significant chunk of the revolver this past quarter to the tune of $50 million plus or so and we continue to expect to payoff the revolver first. We are anticipating trying to be off that by year end. As you are suggesting we are actively thinking about and monitoring in the credit markets, how best to apply the next round of cash generation to service debt. To first convert with that put you’re referring to, the 246, Jan in 2010 is possibility, obviously term-loan B is a possibility too. We have we think numerous alternatives to deal with the 246. We can pay some of that down potentially by a cash generation between now and then if we needed to, we think we could restructure some of the covert terms, we can keep those converts in place we can get the stock price up some, we also have some availability we think under the revolver by the time we get there, so its thinking and planning that we’ll be doing over the next six months, but we think there is sufficient options at this time to deal with it adequately.

[Peter Bye:]

Okay great; just one more if I could. The equipment revenue number was pretty impressive given what -- we thought there would be a negative impact given the economy on people buying systems. Your facing tougher comps as you go into Q3, Q4; can you give us a little more color just on the capital equipment cycle, who’s buying IntraLase, why, what the headwinds might come up here in the back half of the year if you’re not seeing them yet.

[Jim Mazzo:]

Well from an equipment standpoint you’re talking about refractive in the U.S. So, actually you bring up a couple of good point; first off on the femto side actually this is no longer the impacts from LCA because LCA has already purchased others in the first quarter. So we’re continuing to replace femto’s in the independent and so in the U.S. the independence continues to drive. I think as the earlier question from Joanne, they’re looking to ways to capture that consumer that still want to have LASIK and obviously to prepare when the economy comes back. The other one we are real pleased in the U.S. is as you saw a sequential growth in our excimer franchise and basically in our fairly saturated market we’re taking share away from other units and we know both from external data as well as internal data we continue to take share from everybody in that marketplace. You look at the OUS with a 40% gain and obviously that’s the procedures and equipment, I think the expansion of our presence with strong chains like optical express as well as Japan continued to do extremely and Asia-Pacific, we’re just really expanding our presence there getting that custom penetration up, getting that presence. So, I guess when that market finally comes back and we know based on history it does comeback at our higher share point in excimer and obviously the femto penetration, our consumer revolver for the rest of the year should prove beneficial for us when the market comes back.

[Operator:]

The next question comes from the line of Marc Goodman with Credit Suisse.

[Marc Goodman:]

I have three questions; first, if you could take the sales growth ex the currency and give us those growth rates, please by each of the businesses? Second question is, your comment on contact lens solution was a little confusing; you said flat and that was good and I’m a little confused why that would be good I guess because we would have expected it to continue to ramp up a little bit more. Are your expectations in the second half that that number is going to be bigger and is updated into your guidance? And then the third question has to do with the SG&A which I also thought was a little confusing. I thought the SG&A was supposed to be coming down a little bit faster and so I guess I was a little confused there and if you could help us understand why it actually increased in the quarter and what we should be expecting in the second half? Thanks.

[Jim Mazzo:]

Let’s to the business question first with eye care and I’ll have Michael pick the next two on eye care.

[Randy Meier:]

Hi Marc, this is Randy. The reason we are pleased with it is just we continue to see an expansion of our eye care business globally as we certainly comeback into the market. So, again as we entered some new accounts in the first quarter there is obviously some filling of some of the channels in there and certainly as we see all that pull through in the second quarter, we were in all the stores. So, we’re actually seeing pull through at the shelves, which is again a very positive sign in terms of having the MTS markets continued nicely. Yes, in the second quarter or in the second half of the year we continue to believe that our share will grow and certainly continue to see revenue growth in the second half of the year. We also continue to experience reasonable sales in our proxi franchise and that was up fairly significantly year-over-year while we don’t continue to expect to see proxi grow at that rate. It is doing a very nice job and we do expect it to continue to add sales in the second half of the year. Now what we’re really excited about is our Tears franchise. That continues to grow nicely. As you know we launched our first product. In the first quarter we expanded the line fairly nicely with a couple of other products in terms of the unit dose and a Gel Tear in the second quarter, so again second half of the year looks pretty positive for us throughout the entire eye care business and again profitability continues to expand nicely as we move into the second half the year.

[Marc Goodman:]

So just before we move on, just so I understand; obviously first quarter had some inventory filling, second quarter there were some pulling down of the inventory, so based on the share that you have today and the ramp in the different areas of the world you would expect revenues in the third quarter should be higher.

[Jim Mazzo:]

Yes. Okay Marc the gross rates on the revs profile; cataract was about 15%, currency was just under 9% of that, refractive was up 1.5%, currency was about 2.5% impact on that and then eye care it’s not a great comparable obviously, was up over 200% giving the recall a year ago and about a 24%, 25% currency impact on that.

[Michael Lambert:]

Okay on your SG&A comment a couple of thoughts for you; if you remember last quarter’s call, I actually did suggest that in Q2 we would be ticking up a bit in SG&A and the drivers there were really a couple of things and I’ll lead on this with telling you that spending did come in consistent with our expectations. So, high mark for expenses in Q2 was really driven by new product launches and the conference spending. We have ASCRS in our Q2 which by itself adds millions to the seasonal spending change. Also if you notice the GAAP SG&A numbers this quarter included that $1.8 million accelerated depreciation item that I talked about. If you look at the upward pressure from the seasonal conference issue we’ve also got higher stock based comp and we’ve got pressure on travel expenses as everyone’s seeing. The net of those sets of adjustments meaning we managed pretty large reduction to only see the increase be about $2 million on a sequential basis and year-over-year it was down significantly $6 million or more and so as we ahead into second half we do expect you will start to see lower aggregate dollar spend as we have tried to talk about through the first half of this year.

[Operator:]

Your next question comes from the line of Lawrence Keusch with Goldman, Sachs.

[Lawrence Keusch:]

Just coming back to cataract I understand the execution that’s going on there and you guys have been doing a great job, but if you go back and look certainly over the last couple of years this is really only the second time that this business is grown at real double digit rates here and so I just want to make sure we’re understanding this fully; are you saying that -- and I’m not sure how this actually works, but is there any stocking that goes on when you launch new product like Tecnis one-piece.

[Jim Mazzo:]

No, there is no stocking; in fact we had a very minimal amount of sales for Tecnis one and doctors at hospitals, they obviously don’t inventory anything; this does nothing from that end.

[Lawrence Keusch:]

Okay so, again that’s really an execution number that we are seeing there?

[Jim Mazzo:]

Execution and new products; I mean even though we don’t have sales of Tecnis one, it does help with your image obviously when you’re having a full portfolio. The Signature system; yes Phaco has a tremendous pull through and Signature as you saw continues to do well. So, I think the broad offering and execution across all geographies is much better.

[Lawrence Keusch:]

As you look forward, help us understand how you guys are thinking about where customer ablation goes as a percent of your mix. It feels like you’re starting to see a little bit more of a leveling off there now and again I just want to get a feel from you where you think that goes in this sort of environment and if this environment eases where can it go?

[Jim Mazzo:]

Well that’s again, that’s to the U.S. and outside the United States because they are two different stages. We did see the growth continue in custom versus a year ago period, which is good. I think what’s happening with custom Larry is that obviously unlike the first quarter where pretty much most of the U.S. impact was at standard if you remember and I said that custom was not hurt as much. I think now with the economy being as severe as it is you are seeing that patient too who was traditionally coming in no manner what was getting custom is now holding off as well. So, the economy had hit the custom penetration as severely as it hit the standard penetration in the first quarter. So, I think what happens is, I still think that you’re going to see custom continue to grow especially as you combine it with the femtosecond procedure, because the femto in custom is still the best procedure for the patient and to some of these earlier questions; what’s going to rejuvenate the market, that’s what’s going to rejuvenate the market because you get better outcomes with the custom and a femto. I will tell you, also I think as change like PLC and LCA and OBI which are also improving their overall custom mix and you’re going to see that improve because some of those houses were really standard houses over a period of time, so it’s no longer just waiting for the independent. So, I’m still optimistic about what’s going to happen with custom because even with the economy we saw custom grow this far.

[Randy Meier:]

Just going back to your cataract question, we had changed the focus ability of the cataract franchise. Now we used to be very product focused as we went in and began our execution. We’ve shifted that over with the broadening of our product line to a more portfolio approach, so we do think that we are in a position to have much better sustainable growth going forward as we begin to focus more on capturing incremental volunteer in each of the practitioners and incremental market share in all our markets around the world.

[Lawrence Keusch:]

Okay and just on that item, where do you think share is coming from; who is vulnerable out there now as you guys move to this product portfolio approach. Clearly your market hasn’t grown that fast?

[Randy Meier:]

Well, certainly with the Tecnis one-piece we are now operating in a market that we really have been able to compete in and as you know that’s the largest market in the cataract industry. So, we believe we can take share across the board both geographically and from all of our customers with that product and certainly with the broadening of our product line we have the best technology with the Phacoemulsification and certainly with adding a dispersive later in the year that will add to the momentum.

[Operator:]

The next question comes from the line of Larry Biegelsen with Wachovia.

[Larry Biegelsen:]

Let me focus on LASIK here, a few question. First, how do you count procedure volume; is it card sales or do you estimate procedures in the month and the quarter. I’m asking because the decline of 40% in June seemed very steep and that also means that April and May we’re down only about 10% based on your 20% number in the quarter and just to finish off on LASIK, it sounds like you’re not seeing any softness OUS, as you head into the third quarter of 2008 and I do have just lastly on LASIK. The decline you’re reporting in the U.S. is greater than the last downturn; how much of that is the economy and how much is the Panel? Thanks.

[Jim Mazzo:]

Okay lots of questions there; let me hit the last one because it’s always freshest in my mind. We have not seen and we’ve told our customers really anything to a grand degree from the panel Larry, it is directly related. In fact a couple of our key customers have done some excellent external market research that they shared with us as well as our self. So, I would not put anything at the panel. I mean we have anecdotal 1Cs and 2Cs, but not from that standpoint. If you look basically you answered your questions because you were right on. If you look at what happened in the second quarter and that’s what makes it most difficult because we couldn’t find a thread. After the first quarter, it did exactly what we said, about 10% for our selves and about 15% for the market. In fact, we saw April kind of trend up a little, then May declined, so okay what happens there, is that a trend. Then we saw June decline even more both ourselves and the market. So, okay what did that mean; talk to customers and we knew we were growing our share with excimer and femto, so we knew we weren’t losing share. So then, we saw July and finally for the first time we’ve seen July, where we’ve had two consecutive months, which allows us to say okay “if that’s what the trend is just roll that trend out for the rest of the year” and yes, it is worse than what we saw in 2001. Again I’ll always say, the markets were in totally two different places. You have a lot of independent guys that went out of business because they just couldn’t sustain themselves; the technology was not there, the rebound didn’t come back as quickly because you obviously did not have the type of custom or registration or things of that nature. So, I think what we’re expecting is, once we see the economy comes back -- but we’ve based off of June and July. Then on how we count procedures, it is off of key card sales. I mean obviously a custom, a dollar -- we look at units and we look at dollars, but we’ve looked at both because it tells us the mix between standard and custom. Now, outside the United States, the answer is we’re getting benefits of a couple of things. First off, the continued penetration of LASIK, excimer and femto continuous to be strong across all regions. Our execution continues to be very strong as well as our performance in some of the mainstay big accounts across the board and so I think we’re very pleased and I don’t see much of an impact from the economy out there as we continue to penetrate and make that existing LASIK laser volume now productive. Remember there were lasers out there, they just weren’t getting custom and now also with change like OE and change in Japan and our penetration there has helped tremendously.

[Larry Biegelsen:]

For Michael, just one on gross margins; last quarter you said it will be flattish through the rest of the 2008 from the first quarter. I assume that gross margins you assume them to come down based on that the new guidance; any color there would be helpful? Thanks.

[Michael Lambert:]

Larry, we expect it in the latter half of the year to sort of still be covering in the 62% range and it really is obviously very sensitive at this stage to the mix of procedures relative to equipments and Phaco and some of the Visco products; you have seen that as an influencer on the gross margin for the last quarter or two. One of the other sensitivities on it is the continued drive on Randy’s side to get revenues up on the Eye Care side to recover from the recall; that plays directly into the planned capacity utilizations. So those are really the sensitivities, but we expect to be in that 60%,62% range hovering around there for the time being.

[Operator:]

Your next question comes from the line of Eric Lo with Merrill Lynch.

[Eric Lo:]

Three quick questions; first, in terms of LASIK market OUS sales were very strong in the first half of the year. Given the fact that parts of the European economy have been weakening over the first half and there’s greater risk of recessions going to the second half; what's your expectation specifically in terms of the OUS LASIK market and also your own sales given the share gains and the new system product placements? The second question is on the contact lens solution market; you guys have been hovering about the 7% range in the U.S. for about six months now; have you guys have any plans to revise your strategy to regain share and third, are there any changes to sales of marketing spending for new product launches given the fact that you have lower profitability from a lower LASIK sales for the year?

[Jim Mazzo:]

Let me attack a couple of those and Randy and Michael can jump in after. On the LASIK market, outside the United States, our assumptions are that whatever potentially gets hit in the economy, our growth will continue to be extremely strong. Obviously, as we get bigger that percentage increases, but I remember last quarter when people asked me the question they anticipated that the market was going to be soft due to the economy and we produced the 40% gain, so I think because of our penetration still Eric, the market is still fairly low from a penetration of custom, so there is still a lot of room to grow even if you get a couple curve outs here and there from the standpoint of the economy and I will tell you in Japan and Asia Pacific we are not really seeing to a grand degree anything from that end and then Europe continues to do very well. So, I think unlike the U.S. where the penetration is fairly high at least in the marketplace, its not to that degree outside the United States so I think we can be able to continue to grow. If you look at the contact lens care section, we’ve been growing from low 7’s to high 7’s. I think one of the key boosts and Randy you can comment on this, but one of the key boosts was that panel. I think the panel has helped us, from the standpoint of how we’re coming across. We’ve had all the major associations endorse us. I think the whole concept around the cleaning and rubbing and the wrenching regiment has helped and also there was a study on evaporation, which talks about compliance. I think that coupled with the Tear enhances our image in the doctor’s office; anything to add there Randy?

[Randy Meier:]

No

[Jim Mazzo:]

And then if you look at the sales and marketing spend, as Michael says across the board obviously we are looking at over coming as best as we can, some of the challenges we’ve faced in the U.S. economy, but we are not going to jeopardize the future especially with new products, especially in the cataract front where we are just growing leaps and bounds, so we’re looking at other areas outside of product launches. In the refractive arena, here in the U.S. it’s a primarily execution. That’s really where you get your growth. Outside the United States it tends to be more marketing spend because the market is a different stage.

[Eric Lo:]

Perhaps one follow-up; if leasing volumes continue to decline in the second half of the year, how quickly can you adjust your cost basis to accommodate for that?

[Jim Mazzo:]

We projected LASIK volumes in the United States to have a pretty severe drop in the second half of the year, so I think from that and that’s where the new guidance comes. Again most of LASIK does not have a high amount of sales and marketing costs from that standpoint, fairly low marketing especially in the United States. If market gets worse than 40% we’ll obviously always look, but you can’t cut enough as evidence in this quarter to cover that kind of margin impact. So we’ll do everything possible to continue, but I think as shown by our revenue mix, you have outside United States growth, cataract continues do well, Eye Care is rebounding and improving its profitability; we’ll look at everything, but I think our projections for the rest of the year as probably based on some of the reports you’ll see, seemed to be fairly conservative as we go out, so we’ll see how that rolls out.

[Randy Meier:]

And Eric, I’ll add just one quick thing to Jim’s comments. We did actually speedup execution a bit this quarter of some planned actions on the refractive side that we were anticipating for later in the year. As you can imagine on this thing it’s a bit of a balancing act given what’s happening in volumes and the uncertainty of what will happen in the future with volumes and what we want to do is even though we stood-up some spending what we want to do is sort of ride that pipe growth the right way, not make the spending cuts on the wrong things, so that we will stay well positioned and take advantage of the events we are recovering which will come and so one of the examples I think you can see in the data as of the successful we’re having on it is the fact that market share gains occurred in Q2.

[Jim Mazzo:]

Yes, one other thing just to add to the new product launch, we’ve launched MPS, we focused on the broad side business and certainly have launched three new products on the Tear side of the business in the last six months. During that entire period we’ve seen significant profitability improvement. The Eye Care business profitability is better than it’s been in the last three or four years and again so in terms of our spending I think we’re seeing significant return on the spending that we’re doing in terms of launching products in the eye care business. Overall on the cataract side, again as well you can see top-line growth and with the spending we’re doing there profitability has improved as well year-over-year. So, again even though we’re seeing a number of new product launches come out, I think the spending that we’re doing is both effective and looking at important to capturing incremental market share and return on investment.

[Eric Lo:]

Would you guys consider on implementing another restructuring program?

[Jim Mazzo:]

No, I think right now we feel we’ve got the structure in place to execute what we have in front of us. I think we’ve dropped down and we’ll see what the market does as it goes forward, but let’s see how the market responds, because what you want to do is, be prepared when the market does respond and with our kind of share and real estate gains just the market ticking up by 1%, 2%, 5% is a huge incremental positive to us.

[Operator:]

Your next question comes from the line of Amit Bhalla with Citi.

[Amit Bhalla:]

Three quick ones first on the refractive business, can you walk us through the gross margin and/or operating margin differentials between the U.S. and OUS geographies?

[Jim Mazzo:]

Sorry, repeat the question please.

[Amit Bhalla:]

What’s the differential in gross margin and operating margin between the U.S. and OUS for refractive?

[Michael Lambert:]

Are you taking about procedures?

[Amit Bhalla:]

Margins just margin; gross margin percentage, operating margin percentage?

[Michael Lambert:]

So, we don’t break out gross and/or operating margins geographically.

[Jim Mazzo:]

The only thing as you know is that you do get a higher fee for custom here in the United States and we get a standard fee. Outside the United States there is no standard fee and about half of the custom price and machinery tends to be about the same.

[Michael Lambert:]

Yes and from a margin standpoint percentage wise it’s doesn’t tend to be dramatically different. On a procedure as an example as Jim mentioned it’s smaller aggregate dollars internationally than it is domestic.

[Amit Bhalla:]

Okay it’s helpful and then two other quick ones; can you help us quantify what’s your cash flow from operations outlook for 2008; one another follow up?

[Michael Lambert:]

So we haven’t put a hard number out there for the full year ’08 although obviously from Q2 we made very, very good progress. When the Q gets filled you will see cash flow from operating activities through six months was about $60 million; we were $2.5 million or so in Q1, so we did about $57 million, $58 million in cash flow from operating activities in Q2. If you remember pre recall from a free cash flow standpoint we were about $80 million in that year pretty recall and that excludes the $100 million one time gain and so were sort of on our way toward and we think hopefully above that level. Partly the reason we expect to be above that level is that we’ve got IntraLase in the mix now. Again Q2 good progress along the past to getting back to and then eventually beyond that $80 million plus level from a cash flow standpoint; operating cash flow tends to be bit higher.

[Amit Bhalla:]

Yes a quick one; on the other expense line where you said there was out of the $5 million and change $3.9 was the realized loss; what was the balance, that $1.4 million that was left over and that’s it for me?

[Michael Lambert:]

You’ve got a small amount of interest income in there, you’ve got a small adjustment for gain or loss on disposal of fixed assets and you’ve got about $1 million worth of other few miscellaneous items, so nothing bigger material.

[Operator:]

Your next question comes from the line of Jared Holz with Thomas Weisel Partners.

[Jared Holz:]

Jim, would you be happy with LASIK for a refractive growth next year excluding premium ILO. How do you kind of think about that?

[Jim Mazzo:]

You mean in the U.S. market?

[Jared Holz:]

Yes, in the U.S.

[Jim Mazzo:]

Flat to this year.

[Jared Holz:]

Flat in ’09 relative to ’08.

[Jim Mazzo:]

It’s an interesting question. If it’s flat, obviously that means that it’s not going south and so, now we can start to predict. We haven’t looked at ’09; I guess what I would be pleased about is to see what happens in Q4 and how the market is responding. I think what we need to be pleased in is we continue to grow our share. I can’t control the market, we can't control the market, but if we continue to grow share you know this market’s going to respond and so flat is better than down then yes, but I’m hoping for somewhat of a return as we’ve seen in the history and hopefully as we get some better economic indicators, people wait for a new change in November, you get some positive gains, that could turn the market up and obviously with our share we’ll be real pleased.

[Jared Holz:]

Okay, great and just lastly are you seeing any positive impact; obviously that GAAP equipment number was very strong for the company in the second quarter. Are you any benefit from potential disruptions at Bausch & Lomb or what Alcon is trying do with WaveLight; I mean net how is that broken out in terms of Phaco and also LASIK from the Bausch & Lomb, what they’re up doing also Alcon trying to promote WaveLight? Thanks.

[Jim Mazzo:]

Well, I think at this point those two businesses are I think out of market share and data that we’ve talked about today. They both show that we’re growing our share. If you looked at excimer again, all-time highs for us in excimer placements and femto placements in the U.S. and we know both being the market leader, we have very good data both external and internal. So, we know we’re not losing share, in fact we’re gaining share and outside the U.S. obviously that shows we’re gaining share. If you look at the Phaco performance, you saw both placements and dollars and tax and so we know we’re gaining share with the market starting to come in close to that growth rate. So, I think in both of those Capital Equipment segments we are far outpaced in the market growth and that’s based on placements.

[Randy Meier:]

We’ve also looked at publicly disclosed data and I’ll say this translated for German and thinking about how some of our competitors are doing and based on this, we believe that all of the competitors as Jim mentioned have lost significant share. So all I’m saying is that the data is out there for public consumption.

[Jim Mazzo:]

So, I want to thank everyone for joining the call. I know that we will be having some follow-up one-on-one meetings with people. Obviously it’ll be at the BMO conference; I’m looking forward to present there. The things that we are very pleased is that the things under our control we continue to execute both from a top line and profitability and we will be pleased when the U.S. add some more response as our presence in real estate is extremely strong. Thank you very much for joining us today.