酷柏 (COO) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2009 The Cooper Companies, Incorporated earnings conference call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session at the end of the conference. (Operator Instructions). Also, please note, today's call is being recorded for replay purposes. I would now like to turn the call over to Mr. Al White. Please proceed.

Thank you. Good afternoon, everyone, and welcome to Cooper Companies first quarter 2009 earnings conference call. I am Al White, Vice President, Treasurer and Investor Relations. And joining me on today's call are Bob Weiss, Chief Executive Officer, and Gene Midlock, Chief Financial Officer.

Before we get started, I would like to remind you this conference call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including all revenue and earnings per share guidance and other statements regarding anticipated results of operations, market conditions, and planned product launches. Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise, and are subject to risks and uncertainties. Events that is could cause our actual results and future actions of the Company to differ materially from those described in forward-looking statements are set forth under the caption forward-looking statements in today's earnings release and are described in our SEC filings including the business section of Cooper's annual report on Form 10-K. These are available publicly and on request from the Company's investor relations department.

Before I turn the call over to Bob, let me comment on the agenda for the call. We'll keep the formal presentation to roughly 30 minutes followed by 30 minutes of Q&A. We request that anyone asking questions, please respect the time of others and keep your questions to a minimum so that we may get to as many callers as possible.

Should anyone have additional questions, please call our investor relations line at 925-460-3663. That's 925-460-3663. We'll get back to you as soon as possible. As a reminder, this call is being recorded and a copy of the press release is available on our website at www.cooperCOS.com, under invest or relations. With that, let me turn the call over to Bob for his opening remarks.

Al, thank you and good afternoon and evening to everyone. I think for starters I will say in spite of a global recession and a financial crisis which continues at an unabated pace, this was a great quarter certainly in my opinion. Some of the key messages I would like you to take away from this conference call today are the following.

This was of course a solid quarter from the point of view of our bottom line with results showing $0.53 in earnings per share versus $0.15 in the prior year and $0.45 when we consider last year's callouts. Our topline growth was 3% and 4% in constant currency was at the top end of our guidance range, in spite of weak November that we had talked about previously. Our new launches targeted for calendar quarter ended March 31st have already started, Proclear 1 Day in Japan and Biofinity Toric has been shipped in the US.

Our cash flow is looking much better than we had anticipated. Our Q1 '09 results hurdled that $3.6 million restructuring related costs for a reduction in force and when I say reduction in force, I don't mean salesforce. I mean basically our operating infrastructure. We like very -- every other company in America and for that matter the world, take the recession seriously. Having said that, the industry consistent with the prior recession remains recession resistant.

Q4 '08, soft contact lens data showed a respectable 4% growth worldwide. A solid quarter, we had $251 million in revenue, plus 3% and 4% in constant currency. CooperVision had $211 million in revenue, 4%, and also 4% in constant currency. While CooperSurgical had $40 million in revenue, up 1%. Earnings per share of $0.53 compares to the $0.15 of the prior year.

Timing of discrete tax items shifted somewhat, leaving our effective tax rate fourth quarter at 19%. We remain expecting a tax rate for the year at around 15%. Importantly, if you net the four items that we identified, the $5.4 million accelerated depreciation, $3.6 million of the reduction in force or the restructuring, going the other way, other income which includes $1.8 million in bond buybacks and $6.5 million of foreign exchange, you come out to ballpark -- a wash on those items -- slight negative of about $1 million. The $0.53 remains, excluding those items.

From the point of view of new products and specifically -- and the Proclear family, that continue to drive the top line, in spite of the November of '08 hurdle, where we finished down in the first month of the quarter, we ended up 4% in actual and constant currency. November started down 8% at $69 million worldwide. The drivers of our quarter included single use plus 18% in constant currency and multi-focal up 18% also in constant currency.

New products -- our silicon hydrogel products were $16.7 million, up more than double the prior year. And the Proclear family continues stellar performance being 28% of our revenue, up 22% in constant currency. Geographically, the Americas was up 1% while Europe was up 6%, and Asia Pacific was up 9% all in constant currency. The US is our one category -- is our one issue if you will and is one category dimensional which is Torics. Torics, while up outside the US plus 2% were down in the US 9%.

There we're addressing the issue and am happy to say that our new products are as we indicated going up [door]. Biofinity Toric has been launched. We're targeting 6,000 [service sets] in 2009 and 14,000 by 2010 in the US alone. Initial reports are all very favorable. It is too early to give too much feedback, but suffice it to say that we're extremely excited about this launch.

We expect a much more aggressive rollout compared to any other previous launch that we have done. We have converted six lines in production for Biofinity, so essentially we have a lot of horsepower from a manufacturing perspective. With these six lines will allow to us accelerate the launch of a broader range of Toric products. In fact, our broader range, our complete range will be accelerated by between 10 and 11 months. We'll put a lot more color behind this rollout in the second quarter conference call.

On Japan, happy to say that we are rolling out the product in Japan for Proclear 1 Day. The market for the fourth quarter of '08 and calendar '08 remained as I indicated, recession resistant. Worldwide for the fourth quarter, the market was up 4% in constant currency. And for the fiscal year, it was up 6%.

Single use continued strong, now 35% of the market, up 6% for the quarter and 10% for the year. Single use in the United States is now 12% of the US market, and had a strong 18% growth in the fourth quarter and 20% for the year. While silicon hydrogel is now 32% of the market, it had a strong finish at 23% in the fourth quarter and 25% for the calendar year. In the US, the market is now 51% silicon hydrogel. And it had 14% growth in the quarter, up 18% for the year.

For calendar year '08, CooperVision grew 8% in constant currency or 1.4 times the growth of the market so we are gaining market share. As far as cash flow, liquidity, and CapEx is concerned, we had substantial improvement in our operating cash flow and free cash flow, much better from a quarterly perspective than we had expected. We remained confident that we will deliver $50 million of free cash flow for the year. And we expect over $150 million of operating cash flow for the year. CapEx should be below $125 million. Q1 was much better than expected, and as a result our debt increased only $9 million to $913 million. Our leverage ratios stay well below the 3.5 saving us 25 basis points in interest. Better yet, our second quarter -- our outlook is to be at or close to a breakeven in terms of free cash flow.

Strategically, we are not delaying any CapEx projects that are required so that we are not cutting into the muscle of the business or delaying important things in this process. From the perspective of our guidance, although we had a great quarter, we are not changing the guidance. We believe this is a prudent thing to do given the economic recession we're in, and given some of the decisions that the Company will be making on cash flow.

The revenue range remains $1.03 to $1.1 billion, up to 3% to down 3%. We believe this is -- earnings per share is holding at $2.16 to $2.36. We're cautiously optimistic in spite of what is going on in the marketplace or in the economy.

Clearly after a dismal October and a poor November, 8% down, we're happy with how December through February have come in. While the user pipeline isn't expanding, I don't see it as contracting either. Vision correction is not a discretionary spend. Contact lenses are not a discretionary spend. Your eyesight is always an important aspect to you. Having said this, we would like to see another quarter before we get more bullish on our guidance.

CooperSurgical, our women's healthcare franchise, continues to put up solid operating ratios. While the top line grew only 1%, the gross margin is now up to 62%. CooperSurgical's operating income came in at 23%, compared to 17% in the prior year. The hospital strategy is paying handsome dividends. Hospital products grew 19% to $13.7 million in the quarter, and hospital products now account for 34% of CooperSurgical's revenue.

From a strategic perspective and outlook, we have used the recession to get leaner. The reduction in force will improve our operating margins going forward. 2009 will remain -- will reflect some production cutbacks. These production cutbacks could have a short-term negative impact on our P&L. However, a positive cash aspect to it.

Our 2009 growth, however, means our demand continues to grow. This translates to greater throughput in 2010 and beyond. We will continue to expand our silicon hydrogel offering.

In 2010, we expect to launch Avaira Toric. We also expect to launch our Biofinity multi-focal in fiscal year 2010. We will continue to aggressively expand in Asia Pacific. As free cash flow is created, don't be surprised to see us making a future acquisitions as we get to the latter part of this year and into the next year. CooperSurgical has been idle for two years, and certainly has built the infrastructure that we know we can leverage. As we look to investments, we will emphasize a return on investment of greater than 20% in our acquisitions.

As we look at CapEx projects, we demand a return on investment of in excess of 30% on profit improvement and other ideas. Our focus is return on investment. Our focus is total shareholder return. And any acquisition that we make, we would like to be accretive by the end of two years. We can get returns leveraging CSI's operating infrastructure. We can get greater returns leveraging CVI's plants and distribution centers.

In summary before I turn it over to Gene, a reminder of the key takeaways. This was a great quarter in spite of the ongoing recession. We had a much better than expected topline -- better than expected bottom line profits. We had a better than expected operating cash flow and free cash flow. This means that our leverage ratio was also better than expected.

We launched Biofinity Toric. We're in Japan, a huge 1 Day market which is 57% single use for Proclear 1 Day. We made some tough decisions to stay in front of the economic slowdown. The industry is proving yet again it is recession resistant. And yes, we're much more bullish today than we were following the October/November two-month stall. With that, I will turn it over to Gene who will dazzle you with some solid numbers for the quarter.

Thanks, Bob. Good afternoon, everyone, or evening as the case may be. Thank you for joining our earnings call today.

I think as Bob articulated pretty well, especially in his summary, we think we had an excellent quarter for a number of reasons, especially in light of the state of the economy and the continuing turmoil in the credit markets. I would like to review some of the financial highlights of the quarter but before I get into the details, I would like for you to note that we're continuing to proactively manage our business in this environment. We've deferred or eliminated replacement hiring and postponed and most likely will ultimately eliminate any salary increases across the board this year.

Expenses are being closely monitored and reduced where prudent. For example, we have implemented several cost-cutting initiatives to minimize the occurrence of expenses not related to serving our customers. And I will highlight these as we go through the details of the P&L. Capital expenditures have been reduced and in some limited cases deferred.

Every project is now reviewed by the central committee of executives from operations and finance, and is evaluated on a return on investment basis, depending on the nature of the item. For example, if it is a reduction improvement proposal, we expect a two-year payback. At this point in time or else it won't hurdle the committee's passage, where in the past we might have settled for a four-year payback. We initiated across the board a restructuring plan which Bob mentioned, which eliminated a number of positions throughout our global organization. In short, we are closely monitoring our cost structure while maintaining continuing investment in our strategic priorities. Note that this is not just a short-term exercise; we're also considering the long-term and what's best for the business.

I would like to now address certain aspect of our P&L. I won't go back into the revenue, a summary I think Bob did an excellent job of highlighting, both for CooperVision and CooperSurgical. I will start with the gross margin. Consolidated basis gross margin was 57% versus 59% in the first quarter of last year. CooperVision had a 56% margin versus 59% in '08. This decrease is partially attributable to product mix with an increase in lower margin single use lenses, as Bob indicated, growing 23% year-over-year and now comprising 20% of total CooperVision revenue. Note, however, that most of the operating -- the gross margin falls to operating margin since the cost to serve in this particular aspect of our customer base is very low.

In addition, as you will note, we had a $5.4 million charge in Q1 for accelerated depreciation and asset write offs of older technology; equipment that's been taken out of service and had a 2% negative impact on vision's gross margins. CooperSurgical on the other hand, increased its gross profit margin from 62% from 60% last year. And again, this is partially attributable to product mix with an increase in the sales of the high margin surgical business. In addition, they also experienced improvements in manufacturing cost reduction and better labor efficiency in closing lower overtime.

Looking at SG&A, we also had a pretty good story there. It decreased by 14% from the prior year to $95 million and as a percentage of sales from to 38% from 45%. This decrease reflects our cost control procedures. For CooperVision, selling expenses decreased 10% from Q1 of last year, due to a careful monitoring of the distribution of free lenses, a decrease of certain marketing and promotional expenses and lower travel expenses.

G&A expenses decreased 31% from the prior year and 6% of revenue versus 9%. That reflects better cost control in finance, ITHR and other support functions. CooperSurgical's selling expenses decreased slightly to 27% of revenue versus 28% last year, largely attributable to a refinement of certain marketing activities. G&A decreased by 25% from Q1 of last year, again attributable and across the board -- cross containment activities and is now 6% of revenue from 8% last year. R&D was essentially flat with last year, equal to 3% of revenue. It did decrease slightly and it is mainly because of again cost control, and in particular a general reduction in the use of certain professional services and other spending.

Bob discussed our restructuring activities. In Q1, we initiated a global restructuring plan and this has resulted in a number of positions being eliminated. We anticipate completing this over the next few quarters and the total cost is estimated at this point to be $4.4 million which largely is severance and other related benefits. Q1, we reported and recognized $3.6 million of this amount. $600,000 of which is reflected in cost of goods sold and $3 million in other operating expenses. We estimate that future savings from this restructuring will amount to approximately $2 million a quarter into the future.

Consolidated operating margin was 13% versus 8% from last year, a 64% increase. CooperVision increased to 15% from 11%. And CooperSurgical increased to 23% from 17%. You'll note the other income is disclosed in the financial statements that Bob mentioned earlier of $8.1 million which is basically a net gain of $1.8 million from the extinguishment of $11 million of our senior debentures and $6.5 million attributable to foreign currency gains which was a result of our annual review of our international capitalization of our various subsidiaries.

I would like to spend a few moments now on the effective tax rate and talk a little bit about the potential legislation that may be out there. There seems to be a fair amount of consternation the last week or two about this item so I did want to address it. Our effective rate for the quarter was 19% versus 27.5% in Q1 of last year. This is higher than we anticipated at the end of the year, and we had shared with you we thought Q1 would be a bit lower.

The way the accounting literature works for income taxes is that we calculate an effective tax rate on our own rate on a global basis, and then layer in the (inaudible) what's called discreet items. In Cooper's case, mainly it has been the expiration of the statute of limitations in various jurisdictions which means it limits the time that a tax authority can come back and give an audit or levy additional taxes. One of a large discreet items we thought we would recognize in the first quarter has now been deferred until the fourth quarter of this year because we had to file an amended return in non-US country because they changed certain depreciation rules. We do still expect for the full year effective tax rate of around 15%. At the risk of messing your models up again, Q2 ought to be fairly consistent with Q1. Q3 will be lower. And Q4 will be significantly lower which will result in that 15% range.

Let's talk a little bit about tax legislation. Certainly Mr. Obama and his budget included language indicating they're looking at implementing international enforcement and looking at reform deferral. As I am sure everyone is aware, the US tax system does not tax earnings of foreign subsidiaries until its repatriated. It is a deferral-type mechanism which is unique since there are only two countries in the world that do that that I know of; the other is South Korea. Most other countries are in a territorial basis and only tax income within its jurisdictions.

Deferral has been [unpayable] in the Hill for several years now, and frankly, it is a very difficult area to address. Best thinking out there at this point is that ending deferral is most unlikely. It would certainly decrease the traction of foreign capital to the United States. It would certainly aggregate 69 double taxation treaties we have with 69 political jurisdictions. There is some question if we'll ever see it end to total deferral.

Representative Charlie Rangel introduced a tax bill in '07 that suggested a way to deal with this is deferring tax deductions applicable to foreign source income until it is repatriated into the US. That's ultimately what takes place, depending on what type of expenses are deferred and should not be a big issue for Cooper Companies. On Monday, Senator Carl Levin from Michigan introduced a new version of his closed stock to tax reduce act which is really a mouthful. Did not contain much on US corporate tax deferral, mainly focused on individuals, trusts, and foreign corporations. There is again a question if this is ever enacted what it would do to the foreign capital flowing into the US.

The best guess at this point is that there will be no tax legislation until 2011. The Secretary of the Treasury, Tim Geithner, said on Tuesday that the House was mainstreaming -- revenue raisers in the budget would be delayed until 2011, quote, and are not going to be raising taxes in the American economy until we get through this recession. At this point, all I can say is stay tuned. We're not overly concerned. Certainly there will be changes, but the way Cooper conducts business, 90% of our goods are made abroad, 60% are sold abroad, so we don't see a major impact to us.

Switching, depreciation and amortization. Depreciation was $20.8 million in Q1. The amortization was $4.2 million and included was $5.4 million of accelerated depreciation, as I mentioned earlier. Just touching briefly on liquidity to conclude. Bob indicated we had $9.2 million of free cash flow -- negative free cash flow in the quarter which was a bit better than we expected. Looks like Q2 could be cash flow neutral -- free cash flow neutral. Again, attributable to various elimination of CapEx as well as cost control and so forth.

Our debt increased in the quarter by $8.4 million to $913 million from our year-end, and October of '08. That still leaves us well over $110 million of credit availability. We are still comfortable within our borrowing limitations. As I mentioned to you earlier, our limitation is four times EBITDA for this fiscal year at $131 million. At the end of the Q1, we decreased the ratio of funded debt to EBITDA from $2.46 at year end to $2.39 so it is clearly going in the right direction. We're comfortable with our leverage situation. Hopefully as the year continues, we'll generate more free cash and retire more debt. With that, I will turn it over to Mr. White.

Thank you, Gene, and thank you, Bob. We'll go to Q&A now. As I mentioned earlier, let's try to keep questions to somewhat of a minimum and focus on your high points. Operator, if you could introduce our first caller?

Our first question is from Steve Willoughby with Cleveland Research. Go ahead.

Thanks for taking my call. A couple of quick questions for you. First on the CapEx and cash flow, CapEx of I think the number was $34 million in the quarter. How much of the CapEx that you are expecting in the January/February time period came in during January rather than February -- out of the how much you expect?

I would say, the $34 million which represents a roll forward from year end where we had in excess of $50 million plus, $60 million of commitments that were coming in. As far as what we spent during the quarter, we were slightly -- we were within reach of that number if you will.

My question is should the second quarter CapEx be similar, more or less than what the first quarter was?

Should be less. In other words, it is front ended -- will drop off somewhat in the second quarter and then drop off considerably after the second quarter as all of this equipment has been paid for.

Okay. And then regarding the court case and injunction going on in Europe between two of your competitors, will that have any impact on you guys or what are your thoughts on that impact on the industry overall?

That's a great question. We're sitting on the sidelines as well as Bausch & Lomb, watching two 500-pound gorillas go after each other. While one may view that the Netherlands is inconsequential, it certainly is a byproduct of the European patent office reaching a determination that favored CIBA in the battle.

From our perspectives, the primary target of that litigation was Oasis, which has a higher DK that Accu Advance in Europe. I know there are some views out there that there will be a quick settlement or a piecemeal settlement. I can say I will be unbelievably surprised if CIBA after all the money they invested over as many years as they invested it, would just of roll over and say, okay, we'll settle an injunction in the Netherlands.

There was some activity today that I -- set a new milestone date for May for revisiting of some of that litigation. Suffice it to say that means that between now and May, it is unlikely that that will ripen because change A still wants to fight more on that issue within Europe. Between now and May in the Netherlands, there will be several other legal activities taking place in France, in the UK and I think in Ireland. There is also activity I think coming up in Germany so it is basically a global event.

It is not likely in my opinion that they will settle without a total settlement of not only OASIS, but also Accuvue Advance which is more germane in the US than it is in Europe. The benefit to Cooper and the Bausch & Lomb, we both have a most favored nation status. Whatever is good enough for change A if they were to settle would be good enough for us. That's not a negative. We can win some out of that, but certainly can't lose. More importantly. I don't see that happening short-term. That disruption that's going on obviously works to the benefit of CIBA, as well as Bausch & Lomb as well as Cooper.

One quick question on silicon hydrogel. There has been talk in the past about potential deals with Wal-Mart and things like that. Can you talk about where the private label side of your silicon hydrogels are and if there is anything going forward that we should keep our eye on?

We are certainly in the mode of doing some selective private labels. Wal-Mart is not one at this juncture, but that is certainly one that we're open to. As long as we create a win-win strategy between the two companies, and of course that would sweep in 1-800 which has an alliance with Wal-Mart. If we were to reach agreement on that, I would be all for it. Having said that, right now there is the primary product that Wal-Mart has and they do not have a private label at this juncture.

Thanks, guys.

(Operator Instructions). Our next question comes from the line of Jeff Johnson with Robert Baird. Go ahead.

Thanks, guys. Good evening.

Good evening.

Gene, starting with you, can you run through just the impact hedges have? You talked about the gross margin impact of mix and the write off on the accelerated depreciation. But it looks to me like there had to have been some settlement in both the revenue and gross margin line or the impact to the gross margin as well there from hedges, if you could go through that?

Yes. Let me get the summary out. On the revenue side, in Q1 roughly there was a decrease of $8.4 million. On the cost of goods side, there was a decrease of cost of good or a favorable effect of $5.8 million, $5.9 million roughly. We used to designate all the hedges in COGS, as you know and we decided better accounting treatments, certainly the better GAAP accounting treatment is to place the hedge and report it in the geography of the P&L and follow the end of the line transactions which are hedging. That's why we decided to dot the better method at this point.

Gene, when you say it was down in revenue $8.4 million, I am trying to understand. Without the hedges, you would have reported revenue of $243 million or something? Is that how I read that?

Correct.

Bob, was there any load in of [daily's] in Japan in the quarter, ahead of the Proclear launch or did that happen in Q2 or will there be any load in happen in Q2?

Be a Q2 transaction.

And how should we think about just the size of the load in versus trying to break out the continuing benefit of the Proclear launch?

While I would say there is a pipeline sell for sure, I would put in the range of $500,000 to $1 million, not a huge number.

Okay. Great. And I will just fire off two or three quick ones in the interest of time. Could you address maybe the silicon hydrogel? First quarter now we're seeing a sequential decline. Is that just market driven? Other factors there on why silicon hydrogel may be not picking up to the extent we would have thought in our model anyway? How should we think about, for Gene maybe, the net other line going forward over the next few quarters? Then the last one, Bob, if you could provide any insight into maybe what you saw from a market or company specific standpoint in February, given the volatility we have seen over the last few quarters, that would be helpful.

We'll try covering some of those briefly. As far as the sequential, of course we always had a sequential down in the first quarter so we don't really -- while we're mindful on a new product of sequential growth, there are two issues. One is the first quarter always compares poorly with the fourth quarter, just from the point of view of number of billing days, for example. There's only 59 billing days in the US in the first quarter. Next quarter, for example, 64. And then third quarter will have 65. That plays heavily because of seasonal -- the year-end season if you will.

As far as the other thing to be mindful about -- sequential and pipeline, one of the important barometers we look at once you launch a new product is it moving off the shelf on eye. On that, even though we're quite frankly happy with the feedback we're getting from both Avaira and Biofinity, we're also happy that it is moving from shelves off to eyeballs. The best way to look at that is our market penetration for Avaira more than doubled during the quarter. Sequentially, it moved from basically 0.7% of US margin to 1.5% of the US margin in terms of total fits. And importantly, it moved from 1% of the market to 2.3% of the market in terms of new fits. New fits obviously being the real indicator of is Avaira getting on the eye; the answer is yes.

Why doesn't that translate to a lot of revenue going out the door? It is fairly typical when you have a large pipeline like we had with Wal-Mart, close to $4 million, to have that sit there until the sales reps get in there, move the product onto the eyeball. In that sense, we're -- I'm not going to say we're ecstatic about the sequential growth. I am not going to say we're ecstatic about where Avaira is right now. We are a little disappointed.

Having said that, we will also leverage some of the disruption going on in the marketplace over the question mark over Oasis at least in some of Europe. As far as February is concerned, February is tracking or tracked if you will, ballpark about the same as the first quarter so no major pluses nor minuses -- steady state. I really don't know what happened in the market. We only get CLI data and HPR data on a quarterly base as you know. We won't really see that March 31st data until the end of April if you will. Gene -- you had a question for Gene?

Other income net of special charges, Jeff, or just right on other income?

Just thinking other income. Obviously we hadn't modeled the $8 million this quarter. Is there more of those settlements to come from on the FX side or anything else? Want to make sure I am modeling that correctly.

We're not anticipating any although this point. They were one-off transactions. Obviously if we were -- our net [diventures] traded low enough again, we would consider buying more of that.

Sure.

At this point it would be hard. Should not have a currency pickup like that again. That was the result of an exercise where you go through looking at short-term debt and capitalization of our non-US subsidiaries. It is really more of a one off.

I will jump back in, but, Bob, the $4 million pipeline fill on Avaira on Wal-Mart, can you remind us when that occurred?

That occurred back in I think May or June.

Thanks. That's all I've got, guys. Thanks.

Our next question comes from the line of Larry Biegelsen of Wachovia. Go ahead.

Thanks for taking the question. First, I missed the dial in number for after the call. Can someone please repeat that for where we can reach management?

925-460-3663.

Thank you. And my first question is on the contact lens market. Are you still assuming that the market is going to grow 0 to 4% in constant currency? What are your current FX assumptions for Cooper and the market? I think it was 3% -- negative 3% and negative 7% in the last call. Did any of your assumptions for -- did any of your assumptions change, regarding your constant currency growth rates? I think it was 0 to 6% for CooperVision. Thanks.

I will try to take a shot at that. The market is still anticipated to be in around that 0 to 4% in constant currency. In the fourth quarter, it came in as a stronger end there at 3.9% actually. We came in at the top end of that range. I don't have any indication to think that is going to go soft on us -- go negative. I think that range still is a reasonable range in constant currency.

The hedging coverage, the impact of foreign exchange on the first quarter through -- onto into February is is about 6%. Right now, we are minimizing that a little better than I had anticipated. One of the confusing factors that you will have to keep in mind is that the guidance that I gave was on the -- predicated on the assumption, we would not restate the prior year or reclassify prior year for comparable presentations. There will be some impact on the prior year, meaning the $895 million just to keep everything confused the way the accountants see it. Correct accounting is to take a last year and reclassify it for comparability with current year. That's going to impact somewhat on our year-over-year growth favorably if you will in the equation.

Suffice is to say right now, we're covering better than half of the foreign exchange risk that is out there. Right now, it is running at 6%.

The 0 to 6% for CooperVision, that is still what -- is that still what your guidance implies? 0 to 6% constant currency? I think that's that you said it was on the last call and you didn't change your guidance. I am trying to understand if it changed.

The answer is we gave you an absolute dollar amount. That dollar amount stayed the same at $1.032, $1.1 billion. To your question, the percent growth will go up I want to say 15 -- correct me if I'm wrong, Gene or Al, $15.8 million. The prior year's total revenue of $895 million will be dropped ballpark $16 million which then will improve those growth rates.

That is to allow basically GAAP comparability. Relative to constant currency, it doesn't matter. When I quote, constant currency growth, I ignore all of that accounting stuff in this equation. But it will unfortunately serve to confuse because your historic models are now off by the reclass of hedges.

Okay.

Larry, I would just add a quick thing for comparability. On our website, we posted some supplemental revenue information under the IR section. And you can go there and see the impact of the hedges on the trailing quarters.

Okay, Al That's helpful. Thank you. Biofinity -- total silicon hydrogel sales for 2009, I think in the last call you said somewhere north of $100 million. Bob, you didn't touch upon that in an earlier question. Lastly, could you just break out Avaira and Biofinity sales? Thanks.

As far as our expectation for silicon hydrogel in 2009, ballpark, we're still looking at roughly that $100 million. Will we come in at $17 million, will we escalate to that? I tend to think we will, but I put a band around it, $90 million to $110 million. Partly because on the plus side, I think we'll be a little bit more robust on the Toric because of the amount of muscle will have behind that product. The package of silicon hydrogel should be reasonably respectable.

The breakout of Avaira, quite frankly is around that $3 million to $4 million range in the total number. Sequentially, it is a yawn quarter over quarter. And this gets back to the more important gauge from my perspective is that sitting there doing nothing or is it getting on eyes. I am happy with the on eyes piece. I am not happy with the sell through.

Having said that, I think we're taking some steps to put a little bit more attention and muscle behind the Avaira side of the equation. We're not at all displeased with the product in the marketplace in terms of how it is reacting to competitive products. We are not happy with the speed of revenue if you will, that we're recording. I think those things will come into play.

Thank you.

Our next question comes from the line of Joanne Wuensch with BMO Capital Markets. Go ahead.

Thank you very much. Can you hear me?

We can. Hi, Joanne.

Hi, how are you?

Good.

Looks like the CSI revenues and this is knit picking a bit here -- a little lighter than we had expected. On the last conference call, you talked about some economic impact on that. Is that continuous or is that just something which happened in the last quarter and we're A okay there?

I think that came out of 1% which is -- we had potentially to be breakeven year-over-year, mainly because the there is some slowing of office visits. I think that did have some impact on them. They're running it lean and mean. I don't see short-term that reversing quickly. I think that part is a little -- while there may be recession resistant, they clearly get some impact of -- on the -- in terms of the recession in terms of visits to the doctor. Our hospital business, on the other hand, did very well, up 19%. There we're very pleased on that side of the equation, but in office is a little softer.

Okay. It is the office that's softer, but the hospital business is A okay?

Yes.

Okay. Second question has to do more with you talked about (inaudible) up significantly in the quarter and that impacting your gross margins. When you gave guidance for 2009, I apologize if I missed it, but should we be looking for flat gross margins versus the first quarter? Or upward or downward pressure from here?

As far as gross margins, of course we had two events hit cost of goods in the first quarter' the accelerated depreciation and the a little bit of restructuring -- about $700,000 restructuring. They took about a 3% impact I think on the gross margin. Is quite possible that will it step from 56% I think up to 59%. I think there is some risk in -- our range of our guidance allows for pretty broad range for some decisions. And when I talk about decisions, their are decisions that could impact negatively gross margin and that would be focusing in on cash flow, managing down inventory, could mean we take some production lines down and idle them.

If we idle them, then accounting would basically continue the depreciation and take it straight to the P&L as an idle facility charge. That would wait on gross margins. Since we basically said cash is king, that may be a trade off that we're likely to make. If so in our guidance, the one thing that could move us off the top end and there is some built into it, but the top end that might be a pressure point against the top end of the range.

Okay. That makes sense which leads me to my next question. You're talking about cash flow breakeven in the second quarter. Is this linear? Is this each quarter, we should be seeing cash flow get better?

Yes. Probably marginally even more bullish about our ability to deliver $50 million of free cash flow. Like I said, some of that could penalize the P&L, but cash is king.

Very helpful. Thank you very much.

Our next question comes from the line of Chris Cooley with FTN Equity. Go ahead.

Thank you for taking the question. Just three quick ones if I may. Can you touch -- let's revisit the Torics just briefly. Will you tell us how much was Biofinity Toric in terms of the launch in the quarter? I want to get more comfort as to why you think having a monthly disposal Toric in Biofinity helps you stem the tide there? It was worse than what we were forecasting, in terms of Toric and in terms of decline year-over-year in the 1Q. Just wanted to address that up front if I could, please.. And I have a follow-up.

Biofinity Toric on the quarter was minimal. It did go out the door, but really relative to any impact on revenue was inconsequential. As far as why Biofinity, which is a monthly, quite frankly as you know, CIBA is trying to move the market towards the monthly. We still have a change A in the two-week space with Oasis and Accuvue -- Oasis and Accuvue for astigmatism.

Since Biofinity has been the product that is really caught on nicely. It's been in the marketplace a little over a year longer than Avaira. It is really a hail effect tying Biofinity Sphere together with the Biofinity Toric. Importantly, having are the breadth of the product line quicker, we're going to put a lot of muscle and belief in that. Having said that, we do know that the fitters -- many of the fitters who basically buy a two-week, prescribe it as a monthly. There is more than a 15% shift or maybe said a different way, about 25% of those fitters that are buying two-week are not prescribing it as a two-week. They're prescribing it as a monthly.

That's a US game and a US only game. In Europe, that's not the case. Biofinity will -- is a global product as we're moving throughout the world. Clearly we think that there is some halo effect having a good solid Biofinity well-accepted out there already on the spherical side that we're going to piggyback on.

With Avaira on the other hand, we will come out with Avaira Toric. We have deemphasized trying to get it out the door this calendar year, partly because we're putting so much more energy behind Biofinity Toric and the breadth of that launch. Partly because of cash because building a fitting set inventory is not a cheap thing to do from a cash flow point of view. Trying to build Avaira on top of Biofinity about the same time, would number one, be expensive and more importantly, until Avaira gets some momentum out there, we're better off waiting and not getting the Toric in front of the franchise if you will.

Okay. And then different follow-ups. Could you maybe give us some color around what your expectations are for the broad market, in terms of daily disposables. Here in the states, do you think they exit the US market flat? As a percentage -- 12%? Do they gain? Just trying to get a better understanding of what you're assuming the market does in relation to the growth you're expecting in your franchise, and then just --

I know there was a lot of conjecture that the single use market would slow up in the US and in worldwide as a byproduct of the recession. Is certainly doesn't look like that has happened at least through the end of December. And never say never, but it seems to have pretty good legs to it. It is off of a small base. It moved from about 8% a couple years ago to 12% now. It had a very nice attractive year-over-year growth to it. I remain quite bullish about that part of the space. We'll see how far it can go.

I think the other thing that could continue to cloud that -- what's going to win or what's going to lose is, who knows what change A is going to do if they truly start losing enough parts of their franchise with Oasis around the world. They may say, we have a very nice single use franchise and let's just reemphasize that more and deemphasize silicon hydrogel until all the litigation has been settled to their satisfaction if they ever get to that point. If they -- depending on which way they blow the wind, if they're blowing the wind toward single use, they can move the needle, not only the rest of the world but also in the United States.

Okay. Finally, I am sorry, last thought on P&L and I will hop back in queue. It's been very helpful. Just in terms of how you hedge your production in particular, that is seen some pretty significant swings in the dollar versus the pound. Have you done anything here either at end of quarter or start of this quarter to take advantage of that? And if not, is that something that you would contemplate going forward, just looking at the hedging on the production there? I am thinking in particular obviously -- close if you could address that.

Just to make sure I am clear, are you asking hedging in terms of foreign exchange or are you talking hedging some other type of hedging?

FX, dollar versus pound?

Okay. Part of that is for us, there is a natural hedge component of it, meaning to the extent the dollar is strengthening universally against currencies, obviously making half of your cost of goods having it in pounds, is partly a natural hedge. In this case, there was a slight benefit, meaning the pound has done worse than the Euro to a degree. And that works somewhat to our advantage or it at least helps mitigate the dollar for dollar impact of the strengthening dollar which we do not like from the point of view of our bottom line.

I think I mentioned in the past that every percent the dollar strengthens, and more universal around the world, would cost us about a penny or $0.03 per percent. We don't like that part of the dollar strengthening. As far as hedging, typically we have hedged 12 months forward, picking up a quarter at a time. Given the balance of rates, we have actually gotten a little bit more aggressive at starting to lock in on a lot of 2010 which will make our -- basically, our budget life and our planning life easier as we move toward 2010. We're already well beyond 2009 in our thinking. We're not going to -- you can't practically go beyond that. In fact, it took a little pushing and pulling with the banks to go beyond a 12-month hedge cycle, but they will go there.

That's -- you think that's helped? I am trying to think about getting to the effect on the COGS line here specifically? Is this going to -- can you maybe give us some granularity into what you pick up from that or what versus the cost of the hedge? Or rather translation of what you're hedging, but can you give us this some color on that?

I would say, had we not hedged the last two years, flat out we would have done better. There was lost opportunity because we basically hedged at higher rates, not realizing how far the dollar would go. That can go both ways. It could be that if the dollar were to weaken for whatever reason -- I know it didn't the last few days either. But if it went the other way, then that's where we went. What it does allow us to do, quite frankly, is to have a better visibility on planning for this year and next year as opposed to do we win or do we lose?

We just don't want to play the game. We would rather not go to Las Vegas if we don't have to. Hedging allows you a better vehicle to predict and to budget going forward. That's the only thing it does. Presumably 50% of the time, you're going to win. 50% of the time, you're going to lose, and you really don't care. You're not trying to guess that to begin with.

Okay. Thank you, guys.

Our next question comes from the line of Mike Weinstein with JPMorgan. Go ahead.

Great. Thanks. It is Kim here for Mike, but I think Mike is actually going to join us on another call. I will start with a follow-up to Larry's earlier question on the revenue guidance.

The guidance is unchanged in terms of dollars, but I think that the initial guidance had called for an annual FX impact or headwind of about 300 basis points. Looks like that's going to perhaps be lower for the full year. I am wondering if this signal a softening of the constant currency forecast? The question here is, what do you think for the full year, your FX impact will be and are you still comfortable with 0 to 6% constant currency?

Maybe there is some confusion on how it ended up. If you look at the amount of hedge coverage, in the first quarter was 100%, not 50%. It was just the opposite. In other words, in constant currency, we grew 4%. In GAAP dollars, we grew 4%. Those two numbers are the same, and in the middle of those two numbers is 6% foreign exchange impact.

Basically the hedging worked out to 6% differential for the quarter. That may be a little confusing. If you take and accept the fact that the GAAP number is 4% and that our constant currency is 4%, then the only way you get there if you have a foreign exchange hit of 6% is by 100% coverage.

Okay.

Now, part of that was induced by the reclassification of the prior year period which we didn't anticipate back in December when I was talking about the initial guidance numbers against the $895 million 2008 revenue which is now going to go down by $16 million. The hedges go negative if you will on 2008. They go positive, meaning they add to revenue in 2009 and detract from revenue in 2008.

Okay. And so we may have to walk through a little bit of that here off line. In general, are you still comfortable with the 0 to 6% constant currency and I have a follow-up.

The answer is yes.

Okay. The follow-up is just on the operating lines, the SG&A came in fairly well below what we were looking for. Wondering if you can just highlight again for us the key ways you're able to get that line down. Then one thing you mentioned was lowering your free lenses and just your comfort with supporting -- the balance of supporting new product launches, but at the same time lowering the free lenses which has historically helped out with those launches?

One of the things that would influence operating expenses favorably would be FX. The fact that the dollar strengthened, all things being equal, would take all the offshore operating costs and let's assume they're north of 50% and reduce that. That's one favorable thing. The other favorable has to do with the fact that we have been cut -- basically cutting into unnecessary spending. For example, in 2009 we froze salaries -- no salary increases. Typically, a lot of them go in place November 1st and some January 1st so you have some pickup with that.

We also have a bonus plan that basically says unless you're going to beat $2.36, and assume you can get beyond $2.36, you don't need to accrue any because it is only earned when you get to that mark. That would favorably impact it. We also have a hiring freeze that has been spread through the organization. Then lastly, we have the ongoing restructuring. The most recent one, we have want seen the benefit of that yet, but that will reduce our operating costs going forward.

It was mainly non-salesforce related operating costs -- about the only area that salesforce has been impacted. All other operating cost is -- like most other companies, we have put a pretty rigorous -- don't travel unless it is absolutely necessary. For a sales guy, of course we're going to say go to the customer. But when it comes to a lot of discretionary meetings, more of those occur over the phone than occur face-to-face. We're not alone in that.

Maybe just to reemphasize what I indicated on the free lenses, what I said was and what I meant to say, is we're being more careful now on where -- to whom we're providing those lenses. We're making sure that the fitters that are getting them are actually the ones that is are using them and generating revenue for us. We're not -- there is no program to not distribute free lenses. We're just being a bit more careful now and monitoring it a little more closely.

This is Mike. Let me follow-up and make sure we're understanding the different pieces. The OpEx is really what was very different than what we were modeling. One, what percentage of your SG&A is outside the U.S.? How does that compare to your sales line?

It is probably a little over 50%. What weights you have -- we obviously have a lot more of -- ballpark 6% of our revenue offshore. Having said that, we do have some corporate G&A and the R&D -- well, R&D is out of balance. There is a fair amount of offshore, but corporate G&A was a little towards -- away from revenue if you will.

Okay. Let me make sure we understand. We saw obviously you cut your SG&A 13% this quarter, R&D 11%. What is your guidance for the balance of the year on those lines?

We're still targeting for basically an operating margin around 16%. And operating -- if you took all operating costs, excluding let's see the restructuring cost, let me think about this. Assuming you have a gross margin in the neighborhood of 57% to 58%, you would have an operating margin of around 16, so total operating costs a little over $40 million.

Not as significant of a decline as -- if my math is right then it's what you saw in the first quarter? Fair assumption or is my math right?

I would anticipate that going forward, we're going to save about $2 million a quarter on our restructuring. It will -- I would think as a percentage of sales, it is clearly going to be better going forward than it was the first quarter.

Last item on this issue and one more question. Were there any accounting changes for 2009 versus 2008 we should be aware of?

No. Other than the one we talked about on the reclassification of hedges and the priority.

Right. And then you had a good discussion earlier on the tax question, because obviously people are nervous about what the administration is going to do, relative to companies that have lower tax rates, and refresh my memory here. As I remember, you guys have your intellectual property based out of Barbados, is that right?

Correct.

That is still true?

Yes.

Have you looked at all at moving that? Is that something you have looked at? And if you did have to move your IP out of Barbados, what impact that would have on your tax rate?

We wouldn't ever have a reason that I can think of to move it. If we did, based on the way our international structure is, there wouldn't be a tax impact.

There would not be a tax impact?

What people on the Hill are talking about is people trying to move IP offshore today, outside of the US. In that case, what would happen is they would value it using a discounted cash flow for 20 years or something. The tax base is typically zero, because you expensed all the R&D costs currently for tax purposes. What would happen is you would have this enormous gain being recognized that you have to pay current tax on or some type of royalty flow.

For backs taxes?

No. It would be (inaudible).

You would have a -- you're saying, you would have a prospective one-time gain. What would that do to your future tax rate if you didn't have the benefit of having your intellectual property based out of Barbados?

Zero to us. We have already gone through that a decade ago. We paid the tax on the transaction, so it is not -- (multiple speakers).

When we sold our US rights to Barbados. In other words, Barbados had to pay for by developing. When that happened, it then there had to be a fair market value estimate of what -- you couldn't just give it to them. You had to sell it to them. It was a step up in bases.

I just don't understand. Your tax strategy was at the time to sell your intellectual property to Barbados, and at that point, you had an adjustment on the fair value of all of that IP and all your R&D?

The US -- it would have triggered a US gain.

We paid tax in the US on that transaction.

At that time, but obviously that lowered what your rate has been since you did that?

Right.

Okay. That's helpful.

Understand, Mike, a lot of that would have been masked by NOL. It doesn't mean pay tax, wrote a check, it just means there was a P&L -- a taxable income event.

Okay. All right. Thank you.

Our next question comes from the line of Jared [Holtz] with Thomas Weisel. Go ahead.

Thanks a lot. Bob, can you talk about the gross margin? If you just adjust for the foreign currency, what you think the real run rate of your contact lens business is? Because at the analyst meeting back in the fall, you talked about 60% ending the year. I think you reiterated that last quarter. Is that still a number that is feasible for the end of this year? Thanks.

I would say that if you do three factors -- if you take out the accelerated depreciation and we're not saying that -- or not going to be more events the remaining part of the year. I mentioned the idle equipment, which will have a drag on gross margin short-term until you turn it back on if you will. The second event has to do with restructuring which is only $700,000. And the third event has to do with the hedges. The hedges, the way our current accounting is, given that the hedge is a reasonably large number, I think Gene mentioned the $8 million or $9 million. That had zero gross margin on it, so it does weight down. I think if you put all three together, we're probably a solid 59%.

Don't think that would round up to 60%. 60% is in a normalized manner where hedges go away, I think we're still in that 59% to 61% range. Mindful of the fact that we still have a big shift going on toward single use which plays negative to that. Having said that, products like getting back into the game with Biofinity Toric, overall products that are in the monthly category have a better gross margin than those in the two-week category. The fact that Biofinity is doing well and Avaira is doing less well if you will is a favorable gross margin on that front.

Net, net, net, there is a lot of things in the mix that could influence this 2 or 3 points. There is a lot of cost reductions over the next five years. An enormous amount that we have in our pipeline that leads me to belief in spite of a gross margin mix shift on the 1 Day, that we may not be out of the realm of staying close to the 60% range going forward beyond an absorption period. I keep coming back to that because hopefully people do understand what I said that -- to the extent I really push hard on maximizing cash flow, and I am willing to shut down production lines and reduce inventory levels, and not pay the labor costs to build that inventory, that will favorably impact cash flow but negatively impact the gross margin.

Okay. Are you talking about the low yield Biofinity lines that you would shut down? Can you be more specific on which production lines you would take out?

It could be any of the above. If I make plenty of Avaira, if I make plenty of Biofinity, if I make plenty of single use Proclear, if I make plenty of biomedic; it is pick and choose. I don't mean to signal any one.

There is a lot -- we have inventory levels that are still -- even though they came down a little during the quarter, they're still pushing eight months. If I said the ideal should be 6 to 7 -- six and-a-half months, then it is a matter of how do you work them down. Do you let sales growth work them down or do you do something more draconian. To the extent I do something more draconian, it will come down faster.

Just talk about -- you look at your silicon hydrogel performance over the past year or so and I think everyone would agree, it has been pretty disappointing. I am just curious what your expectations or why your expectations are pretty bullish for Biofinity Toric when these products are normally harder or more difficult to get patients to switch out of?

I think a prime example is when Air Optics for astigmatism came out, there was a lot of movement within that space. When Oasis came out there was a lot of movement. Whereas in the past, the story was -- it was very accurate that doctors were reluctant to switch patients that had astigmatism. That's true in the 90s, Might have been true in the early part of this decade. It is no longer true. The fitting of contact lenses that's called a Toric is very much no longer that specialty unique thing in the United States.

It is more -- I don't want to call it commodity because there still is art to it. But a lot of people know how to do it and the matrix are a lot easier. That being the case, it is easier to have a shift if people like a product line. There is a lot of doctors that love Biofinity, so there is a -- they already know that that material is. They're probably waiting for the Toric piece of it because they fit a lot of Torics. Some of it is I will say easy achievement. The harder part might be winning new customers, having a more complete product line. We won't have the full complete product line until next fiscal year when we have a multi-focal Biofinity -- a Toric Biofinity and a [seer].

Lastly on cash flow. The negative $9 million you did on free cash flow, was that within what you thought you would do? I know you didn't give guidance for the first quarter.

It was ballpark $20 million better.

$20 billion better. And the $8 million in the FX gain for the foreign currency transaction, is that a cash gain?

(multiple speakers). Al White for a moment on that one.

That would be a settlement of contracts against it, so that would be a cash gain. You would also have -- the offset would be in your cost of goods, so our manufacturing. But yes, that would be a cash gain.

Okay. Excluding that, it would be minus $17 million roughly?

You had -- what was the entry for cost of goo. You had $5.8 million in your cost of goods, also keep in mind that would have gone the other way.

Are you referring to the FX gain that we separately identify from the intercompany --

I think the sales line -- maybe you're not. Good question.

I am looking at the other line.

Other income?

Yes. That's not cash.

That's not cash, yes.

Not cash.

Yes.

Thanks, guys. Appreciate it.

(Operator Instructions). Our next question comes from the line of Peter Bye with Jefferies. Go ahead.

Thanks, guys. Bob, must be enjoyable today. Relative to the past three years, pretty nice quarter. Just on the -- go back to the operating expense line. Traditionally, your front end loaded on operating expenses. And your guidance, I understand maybe the reluctance to take it up, given the historical track record and the economic environment. But why does it seem to say that -- I know it comes down a little bit as a percent of sales, but not nearly as dramatically as your historical numbers did. You were always very, very front-end loaded as a percent of sales on OpEx. What goes on in the back half of this year on spending that or how does gating spending this year different than past years?

I think they're probably two things going opposite ways on the -- for the point of view the restructuring endeavor which is ballpark north of 150 people all up. Most of those are in the operating expense lines. The run rate stays on that going forward from early in the second fiscal quarter. We're not 100% done, but will start phasing in over a the first couple of months. That's about $2 million run rate, once we get -- the third quarter will have full benefit of more than $2 million operating expense savings.

On the flip side, could be obviously as your revenue goes up so will fitting sets and things of that nature and sales, commissions, that track revenue. In absolute dollars, there will be upward pressure. As a percentage of revenue, we should do reasonably well on that. The only other event that obviously would influence it is if we got to a comfort zone where we were accruing -- the bonus to bonus would certainly enter the operating expense line as operating costs. That is intended to self fund, but that could play into the percentage of sales calculation.

All right. What number is that again? Can you remind me? I am sure it is in the K.

The bonus if earned fully would be about $0.15.

Okay. Thanks.

Another way to get to $2.37, we would need to earn $2.51.

I got it. That's actually pretty helpful on that. And then just going back to the disruptions, obviously I don't think your guidance includes continued disruptions from J&J CIBA. But maybe the counter argument, Bausch fought CIBA forever. They actually took them to court, and got kicked out of the US. And CIBA still settled with them.

Why wouldn't CIBA be just adds amiable to -- and wouldn't the courts force them since they already offered two licenses, aren't they required to offer a license to J&J even if J&J goes to the mat on that front? Second just on that, if they get -- Netherlands is obviously a small market. We heard that CIBA sales guys were calling other distributors, saying the injunction was across Europe. Did you hear that as well? Did you get benefits outside of Netherlands because of disruptions from miscommunications from sales people -- from it that it wasn't just an injunction in the Netherlands?

The answer is there is no doubt Europe understands what's going on. We don't need to do much. CIBA is obviously the aggressor here. They're being pretty vocal, and that's fine with us.

Why would they reach a quick settlement? The number to -- J&J has $1billion of silicon hydrogel sell. Cooper and Bausch & Lomb have most favored nation. Would CIBA take that number and force a royalty on it? Who knows. They have fought so long and hard, they have sunk in so much litigation costs.

The thing that will complicate settlement quickly is a global or is it only select countries? I seriously doubt that CIBA would do piecemeal. It is Oasis only or is it Oasis and Accuvue Advance? In certain countries, it arguably might only be Oasis, but even that is disputed.

There are so many disputes that deal with major, major dollars, and they have so much vested energy in it. I don't see it going easily, even if the courts say, are you sure you guys can't get together and fix this? The battle is not just in one country called the Netherlands. It is all over. It is an immensely complicated thing. For those of you that may have remembered [VisEx and Summit], in the [Eximer] business in the 90s, that battle was unbelievable for eight, nine years. Finally, in the US, it was a lot of push pull that it took to settle anything under [floor plan].

The US court case starts in March and usually US courts usually don't give injunctions right away. They let them go. J&J is weakest in Europe. What -- of their silicon hydrogel sales, what is your estimate of what J&J does in Europe for Oasis and Accuvue? Supposedly like you said, it's most Oasis? But what's a decent number? We're getting a lot of court decisions over the next couple of months. I was wondering what the opportunity was if you get further injunction.

I think going on heavy in Europe recently. I would say their total market share is probably around 20%. Of that, I am trying to think of their single use. The better half is probably single use, but it is still pretty a big number if you take all of Europe and give them 20% share. Let's say that's $250 million range, at least that. Then you take half of that, at least $125 million or something like that, that is a real rough guesstimate. But they have arrived. They have been putting on a big push in Europe because that's CIBA's playground if you will and they decided they arrived on their doorstep.

Okay. Great. Thanks, guys. I will follow up later.

Our final question comes from the line of Amit Bhalla with Citi. Go ahead.

It is [Ashull] for Amit. Two really quick questions. The first for cosmetic sales, were there any cosmetic sales in the quarter?

We, like CLI, have pretty much eliminated that line item. The CLI stop reporting and I think I was probably CIBA that decided that since cosmetic sales were going away as a dinosaur that they would stop reporting the negative growth in that space. We finally gave up and instead of trying to conjecture what it was. Our cosmetic sales have always been pretty inconsequential. There were some; they're dumped into the other line. And also they're primarily spherical anyway. They are spherical.

Just the last one, for the Japanese market, are you guys seeing consumers there behaving similar pattern as here in the United States as far as destocking?

The Japanese market is at the tail end catching up with the US a little. It is softening a little, several months later than the US, I would say. The rest of Asia is doing real well. I think to answer your question, there is probably, well -- there is probably some effort to cut back from -- I don't know that they buy a year's supply the way we do in the some of the programs here in the states that are geared more towards two-week and monthlies than they are the single use. Single use modality typically is a lot less weighted towards to buy a full year. To answer your question, though, and it is pure speculative, there's probably some little element of that but not a big element.

No negative impact to a Proclear 1 Day in Japan then?

No, I don't think so.

Thank you.

Ladies and gentlemen, that does conclude our Q&A session. I would like to turn the call back to management for any closing remarks.

I think we're all set.

Want to thank everyone for joining the call. We will look forward to having a full update of Biofinity Toric in early June. We're feeling pretty good about where we are, in spite of what's going on around us in the economy. On that, I want to thank you again.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.