Cooper Companies Earnings Call Nuggets: Biofinity Outlook and MyDay Margins
Kimberly Gailun – JPMorgan: I guess, the first question maybe just on Biofinity. You had another really solid quarter and you’re out of place now, where silicon hydrogels as a percentage of CooperVision sales is pretty close to on par with where we think the industry is. I’ve always thought that Cooper, because you’re under-indexed in dailies should actually be able to go higher than the industry, but I think it’ll be helpful just to kind of walk through what you see as the runway for Biofinity from here and maybe Avaira, so silicon hydrogel as a family and then as you bring in the daily?
Robert S. Weiss – President and CEO: Kim, as far as we’re concerned, Biofinity which is approaching $500 million run rate product line with solid double-digit growth, it still has a lot of runway left. As I mentioned in my comments, a lot of that runway still has to do with Japan and the rest of the world, where this product obviously is viewed in a very special league within silicon hydrogel lenses, and I think there’s no reason to think that it won’t continue to perform very well, albeit off of a much higher base going forward, particularly in the monthly modality. Avaira of course is just really getting going. It took a couple of years to get Avaira Toric aligned, so we can see the halo effect of Avaira Toric with the Avaira Sphere line. I mentioned that it grew as a family off of a granted a much smaller base more than 50% on a year-over-year basis. So, we’re pleased with the momentum it starting to develop. So, I kind of look at each, how are they going to do in each modality. We have a good entre in monthly with Biofinity and that will continue to do well, probably the non-growth factor globally or the one that will grow the least is the two-week modality, but it is a huge opportunity where we are under-indexed. Then of course the real growth right now from the point of view of the overall lens industry is the 1 Day modality, sponsored partly by the U.S. where it’s doing extremely well. In that area revenue has gone and the industry’s slump 11% three years ago to well over 20% now, we think between Proclear 1 Day and now MyDay, we have good entres in that area. So, when I think about it, I kind of think of the way we present the CLI data in the back of our release. We’re gaining share on all fronts right now. I don’t care if you look at modality. I don’t care if you look at geographic areas. I don’t care if you look at types of lenses, which unfortunately, we weren’t able to present (this go around) because the Contact Lens Institute is kind of suppressed some data which doesn’t allow us to be able to tell you what the industry did, but ourself, we did very well as you can see, can’t really tell you how, but we think we’re covering all fronts pretty effectively and we’ll gain share pretty effectively, and that translates to expecting good growth out of Biofinity in the monthly, Avaira in the two-week and Proclear 1 day and MyDay in the 1 day.
Jeff Johnson – Robert Baird: Bob, I was wondering if I can start with a couple of margin questions. I guess, first on MyDay, from your press release on MyDay, today, it sounds like it’s going to have a lower silicone content, it sounds like the dk is going to be 80 on that lens. Wondering what that means from your ability to reduce the alcohol content, how that might help margins scale a little faster in that product if you can get some of the alcohol out quicker, and just maybe an update on what gross margin for that product has been doing here over the last few months since you last updated?
Robert S. Weiss – President and CEO: Well, you are right in your focus on that and gross margins, MyDay, initially, like many of our new launched products will have marginal products, we have moved into a profit mode, but we have a long way to go. We have, as a matter of now being seven or eight years into silicone hydrogel production, gotten better and better with even products that include the alcohol in the manufacturing process. While that’s not an endpoint in the sense that we expect some day to have alcohol, potentially alcohol removed from certain silicone hydrogel products that may be different families of products, but for now these products Biofinity, Avaira and MyDay do use alcohol in production, and will likely do so in the future for at least the indefinite future. As far as expectation, we were able to move the needle real far with Biofinity since we did a startup and when we started up Biofinity, it in fact had zero gross margins. Today, it has gross margins well in excess of the top-end of our – let’s say, well into the 70s and that obviously plays well from the point of view of our gross margin mix given it’s growing off of a high base. 1 Day has a long way to go in terms of weighting being a significant weighting factor, and in our case the startup process with lead time on equipment is fairly extensive 12 to 18 months and that’s not only us, but our competitors that are ramping up over the next several years. So, by the time we get to where it’s meaningful, we would expect to have improved gross margins for MyDay similar to what we’ve done with our other 1 Day, which is Proclear 1 Day.
Jeff Johnson – Robert Baird: If I can just ask a quick follow-up on the margin front. Greg, I guess for you, CVI gross margin, it sounds like if I ex-out the currency, the yen weakness and what have you, gross margins for CVI would have been up 400 to 500 basis points this quarter year-over-year. Obviously, the lower royalty has the biggest contribution there or a big contribution that I’d assume, but even back of the envelope. I know you won’t tell us what the royalty came down to, but back of the envelope it seems like to me that was maybe 150, 200 basis points where is that other 200 to 300 basis points of gross margin improvement coming on a constant currency basis for CVI…
Robert S. Weiss – President and CEO: Let me jump on part of that, with Biofinity being the magnitude of product it is in our portfolio and with it having the very attractive gross margins that I mentioned with or without the royalty no matter how you view that calculation, it is a driver of our gross margins. Number one it’s the multimodality, so it easier to have high gross margins in the monthly multimodality it’s good to have a product of that caliber that I mentioned is annualizing close to $500 million a year. So by far it is driving a lot of what we’re seeing in CooperVision in terms of gross margins. Incrementally when you look across all the other lines and even considering mix we are lowering morning cost on pretty much all fronts whether it’s the 1 Day modality, the two week modality or the monthly modality costs are coming down in parallel with that balancing mix if you will of products. Greg.
Gregory W. Matz – VP and CFO: Bob that’s a good summary I mean Jeff you obviously know our sensitivity of protecting confidentiality agreement that we have. I think I covered the key factors that are really driving it. One is a strong product mix led by Biofinity, manufacturing efficiencies as you know, Fernando is our Manufacturing Vice President who handles all our operations. Has done a fabulous job over the last five years of improving – his team improving the efficiency in the factory and that’s helped drive up margins, and obviously then the other big piece is the royalty which we can’t really go into more detail on.
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