Good day, ladies and gentlemen and welcome to Cooper Companies Announces Fourth Quarter Year-End Results 2007 Conference Call. My name is Shawn and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today's call, Mr. Norris Battin. Please proceed.

Thanks a lot Shawn. Good afternoon and welcome everybody to the fourth quarter call. With me today are Bob Weiss, Cooper's Executive Officer and Steve Neil, our Executive Vice President and Chief Financial Officer. Before we get started, I'd like to remind you that this conference call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including all revenue, 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 and imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions as a company to differ materially from those described in forward-looking statements are set forth under the caption Forward-Looking Statement in today's earnings release and are described in our SEC filings, including the business description in Cooper's annual report on Form 10-K. These are available publicly and on request from the company's Investor Relations department. And I would also like to give you a phone number if you are interested in calling in after the call as we are at work today. That number and I'll say twice, 212-418-7841; that is 212-418-7841. And with that, let me turn the call over to Bob for his opening remarks.

Thank you Norris and good evening ladies and gentlemen. Before I get into the presentation, I wanted to kind of recap what we are going to try to today on... in terms of order. In the past, we've gotten feedback that the conference call has been a little on the long side and had a fair amount of repetition. So our endeavor today will be to try to cut the formal presentation down to around 30 minutes and then follow it by about 30 minutes in Q&A and if we are successful in that, we'll cut which frequently is a two-hour phone call in half. In terms of the order and in order to avoid duplication, I'm going to talk mainly about the market very briefly, our vision and mission as well as our strategy, spending a fair amount of time on the how to that we are going to proceed forward, talk briefly about 2007 and its impact going forward, mention some of the progress at CooperSurgical, talk briefly about guidance and then I'll turn it over to Steve who will talk about the bulk of the operating results. At which point in time, we'll come back to Q&A. Once again, our objective is to try to get it to an hour. As far as the market is concerned, as we know 85% of the Cooper Companies is in contact lenses and specifically that's an industry that's around $5 billion and growing rapidly, market is growing 8% compounded annual growth rate this decade. In terms of constant currency, the strength of 2005 when it grew 12% that was '06 and a 5% in '07 on a year-to-date basis. Recall in lens care, and basically when one competitor's product have had some impact on the market, it's anecdotal; there is…

Thanks Bob. Good afternoon and evening everyone. Overall, I want to refer everyone to the Cooper Co. website for product detail. We post the market data as well as our product sales data there. So I don't want to get into too many numbers today. I am going to be talking as Bob did in revenue mostly in constant currency. Overall for the quarter, our revenue was $254 million, which was up 14% in constant currency, so very strong quarter for both segments, especially Vision, which gained share globally as well as in the U.S. during the quarter. Overall for the Vision Group, there was a 10% soft lens sales growth, which followed 7% in the third quarter and that compares to 1% to 2% in the first half. Thus we've had a significant impact realized from new products and additional production capacity as the Vision Group gained global market share in the second half of the year. Regionally, the Americas led the growth where soft lens revenue grew 12% over the fourth quarter last year and 5% over the previous quarter. And what drove the Americas was the U.S., which showed very strong growth, growing 16% in the fourth quarter, and also 5% over the third quarter. Looking at products, single-use product grew 29% and represents 15% of our total sales. Biofinity sales were $5 million for the quarter, $10 million for the year, and in the quarter they were led by Europe at $2.5 million and the U.S. at $2.2 million. Overall, spheres were up 12% which compares to being up 5% in the third quarter and flat in the first half. Disposable torics grew 8% and in the U.S., disposable torics were up 10% despite not having a silicon hydrogel toric in the market. Proclear material sales…

Okay. Operator, can you open up the lines for questions?

Sure. [Operator Instructions].

Gerard Holtz [ph].

Just a couple of quick questions and I will jump off here. Can you just talk about the cannibalization of Dk 100 to two week, what it can do? Because I know you are not including in your guidance for next year. But if you look at J&J, which basically dictates the market at this point, moving over to a two-week, could eventually just blow Biofinity away. Meaning, Biofinity goes away and you just go with a two-week? And then just on the royalty payments, is that going to... are those royalty payments for the silicone hydrogel lenses going to be excluded from your earnings numbers?

I will pick both of those questions. First of all on cannibalization, the... certainly the U.S. market is much more about the two-week market whereas the rest of the world is much more about a 1 month particularly as it relates to silicone hydrogel. So I don't... while the work course clearly will be the two-week going forward, there is a large niche market as we can see from pure vision and night and day and in the 30-day space. So I think Biofinity given if perception in the marketplace will have its place, we look five years down the road there is no doubt that the two-week will be the much larger market. But we don't... given the number of alliance we have and amount of capacity, we probably can address the market needs from that perspective. As far as... so the answer is, well, a long way from being able to meet the market needs in both spaces; the one day... the two-week and the 30-day marketplace and it's not one size to tell globally. As far as the royalty, the royalty is baked into the numbers that are not called out, its not a call-out going forward and from the perspective of expectation down the road as we look down the road at silicone hydrogel space, we will still have attractive gross margins. By attractive I mean if we look two or three years down the road, north of 70% addressing that. So it was a win-win from the company's prospective and time to move on and stop as you can see from the legal fees we created in the quarter, it was time to move beyond making the lawyers that rich and do more productive things

Got you, okay. That makes sense. Just one more thing on the royalty, can you quantify the percentage that you will have to payout? And then just on the call-outs for next year, you mentioned that you are going to kind of curtail the manufacturing portion of those expenses related to new products. But with a couple of new toric lenses potentially coming on, does that mean unlike that spheres those numbers will not be as significant? Thanks.

Steve you want to take that?

Yes, I will take that. No, we won't disclose royalty percentage, Gerry, it's a nice try. The torics on silicone hydrogel, once we understand how to work with silicone hydrogel and spheres, while a toric is more complicated because you have to deal with the cylinder and the access, we do that on hydrogels today, that's a normal recurring operating expense. The startup to build adequate inventory, do a launch takes longer because you have over three times the SKUs. But as far as inefficient expenses or anything, there is no call-out and that's not considered a non-recurring type expenses in the numbers.

All right. Thanks a lot.

Sure enough.

Joanne, you are the next questioner.

Thank you. You are not including in your numbers the Dk 100 product which tells me that your top line is probably a number that you are fairly comfortable with. Can you confirm, do you think if your guidance is being conservative? Do you think if it is being aggressive and same things for the bottom line, how much have you plugged in on your expense side?

From the perspective of not taking on the two-week, we have learned our lesson with the Biofinity and we really don't want to get on that path, a product is a product when it's out there and in the marketplace and has adequate capacity behind it. So we obviously are optimistic, we will be in the market mid year and, so from that perspective we think that the range we've given on the revenue side is a realistic range and one that, that we think have a good shot... we've a good shot of being towards the top end of that. Relative to your second point, earnings per share, I think we approached the guidance the same way, lets... I don't want to say lets not... lets find the bottom for sure, but I think what we have is realistic guidance and one that the shot of getting us top end of the guidance is, at least much better than the top... the risk of the bottom end and I think obviously, guidance gets more manageable now that we have, if you will, $100 million of restructuring activity pushed to background and we are done with that. The risk on Biofinity, now that we've been in production, the periods of time we have, now that we've basically stepped up and can make 2 million plus lenses a month. Obviously, the predictability has gone way up on that front. Our bottom line, top line are driven by... certainly our bottom line is driven heavily by top line growth. And in that sense, we view that having... we feel good about the capacity potential for delivering Biofinity and Proclear 1 Day, which are going to be the drivers of next year's top line growth and therefore, will be contributing to our earnings per share growth.

That's very helpful. If you look throughout the year, do we think of 2008 as the back end loaded year or is it still a year than you are going to build Biofinity, you are going to build the 1 Day lens and you are going to decrease your call-outs?

It's a little back ended, but not skewed perhaps as much as this year was. Biofinity and Proclear 1 Day is ramping up. As of right now, we're somewhat constrained on both fronts. And we will be out of I think a mode of being constrained by mid year, which will then foster even better growth. We could sell a lot more for example Proclear 1 Day in Europe, if we could make a lot more this year, from the get go day one. But being at 150 million units in capacity is we've made a lot of progress there, so year-over-year we would expect respectable growth in the first six months also.

Okay. Thank you very much.

Larry Biegelsen.

Good evening and thanks for taking the call. Can you hear me okay?

Yes we can Larry.

Couple of questions on the Dk 100. First, any hurdles that... what are the major hurdles that are still in place for making the lens are they material specific or is it related to adopting into the Gen II line? Could you talk about the property, I don't know, if you have talked about the properties of the lens specifically, the modulus surface treatment, water content and dk/t. The gross margin compared to Biofinity and lastly, if you do launch it next year, what would be the earnings impact? Obviously, there is a benefit on the top line because it's not in your top line guidance. But, would you expect it to be positive or negative on earnings next year? Thanks.

As far as the hurdles of getting to market. There are two ways to look at the production side. It's on Gen II and as I indicated, it's being made by polypropylene, which we made throughout our past, so that we are very comfortable with. We already are in production on what's known as fast track, I think some of you have seen that in the U.K. in November. So we know we can make the product at least on fast track, we are basically well down the line of getting the product PQed [ph] as we would say, Production Quality in Puerto Rico which is our large Gen II line. There is a regulatory requirement to file 10-K, we are working to the process of approval with the FDA. And we are certainly reasonably optimistic that we will be in the marketplace in the timeframe we targeted, the April-May timeframe. Obviously, no guarantees when you are dealing with the government, but we... from the perspective of this material compared to other materials, there is nothing particularly more challenging, relative to what should be, from a regulatory point of view. As far as the Dk of this material compared to Biofinity, yes, the Dk is Biofinity is 128 this is a 100, so it's a little bit less in terms of Dk and more suitable for that two-week space. From the point of view of its stiffness, it is obviously a little more stiff than... a little less stiff than 100... 128 Biofinity, and from that perspective, it will do well in the market, measures up well against if you will, Oasys.

Bob, are you willing to disclose surface treatment and the modulus, the numbers?

I think that's going to be available out there as far as the 100... from the point of view of its water content will be slightly higher 52%. Its modulus will be around where Acuvue, it is a 0.4 modulus, which is comparable to Acuvue Advance if you will, as well as 02 optics. So a less stiff compared to if you will Oasys and the Dk 128 are more comparable. It is a... it is like Biofinity, not a coded material and basically has a lot of Aquaform properties vis-á-vis being having a higher water content and presumably features that could be comfort.

And lastly then on the profitability, I mean if you launch it in '08, does it benefit earnings or is it a drag on earnings?

I would say that given what we think of this product, we are not going to go right in terms of putting it into the marketplace. So for the most part, we will spend to put the muscle behind it if the capacity is robust. There will be some incremental contribution perhaps, but it's not going to suddenly shoot our profits way up. We are going to... we view ourself as a growth company and a growth company shouldn't try to move product out of the shoot particularly one that we think have delays that this products does.

I am sorry; it's not in your top line guidance, but is it in your earnings guidance so?

It is in neither. It is not in top and it is not in bottom.

You are saying that, if you launch it next year, it would probably have more of a positive impact, slightly positive on earnings as supposed to be a drag on earnings... on your guidance, is that right?

Yes, it will certainly have a more positive impact on the top line and a much less favorable impact on the bottom line given that we are going to... we will invest heavily in rolling it out.

And lastly on depreciation... D&A was high in the quarter at $29 million, why and going forward --?

I'll let Steve talk to that.

Yes, Larry its like last quarter and we have disclosed I believe in the release there is accelerated depreciation on some assets that we were taking out of service and if you identify those assets, as having a shorter life and they exist in standard, you have to accelerate that depreciation and tell they are thrown away. And so there is I can't right off the top of my head there, it is in our releases as to what impact had to do with that accelerated piece. But it's yes, I am sorry it is. Its in the quarter, $9.4 million of the $28 million was related to accelerated depreciation for those assets and $14.2 million compared to the total $84 million was accelerated depreciation on those assets that were taken out of service. So that will and there is a small less than $1 million roll over that into Q1. So that's virtually done, but that's the reason for the increase.

Thank you.

Larry Keusch.

Hey guys, can you hear me?

Yes we can.

Hi Larry.

That's great. So I guess is what I am wrestling with, if I think about the low end of your guidance and think about the 19% to 20% op margin that you were talking about, I keep coming up with sort of EPS numbers that would be higher than the guidance you provided. So I am wondering if, number one, when you are talking about operating margin, does it exclude stock-based comp? And maybe you can also help us think a little bit about how you guys are thinking about interest expense. And I think your tax rate would be somewhere between 14% to 16%. So if you could just help settling straight, that would be really helpful.

Steve you want to--?

Yes, I'll give a shot at that Larry. The interest expense is going to go up a little bit, especially as we go into the first half of the year, you will notice that from a cash flow perspective, we had negative free cash flow last year, largely due to the integration activities, the cash portion of the integration activities and the $184 million in CapEx. We expect to be positive for the full year, but that's more coming out the back-end, being positive than upfront. So we expect some impact from interest expense. You will also notice that the currency impact in the quarter for us this year, this fourth quarter was $4 million. We think there is a currency today a weak dollar against the pound, we buy more product from the U.K. than we sell to it. So we think that's going to have some impact again Larry, so that's the pressure there. We do think that the taxes are going to be in the 15% to 15.5% range, but again that will move around depending on where the cash or the profits stick. So hopefully that helps get you to it. The real balance is what Bob indicated is how much do you invest in the launching of these products, the marketing and trial lenses and we will continue to grow R&D in 2008 above the sales growth line. So there is a balance on operating margin, but there is a little bit of activity that's going on below the operating margin line which may help you reconcile back to those numbers.

Okay. But the 19% to 20% op margin is inclusive of those marketing and expenses that you're talking about. Is that right?

That is correct.

So, I guess I am still... and we can take this offline I'm still --

It does... I am sorry; it does not include the equity base. You'll see this year and I'm trying to think, the number I believe it was $0.28 was our equity component, we're thinking it's going to be $0.35 to $0.40, that's probably the difference for you.

Got it. So that makes sense. So the 19% to 20% is excluding stock-based comp?

Right.

Okay. And then I guess the second question is, can you just help me understand coming back to Dk 100, I guess there is two questions here. One is; you said that, you're kind of in this, let's say you are down this year, you are looking... you are getting the production quality up in Puerto Rico. So I guess technically, its still sort of an R&D line if you will, or in R&D. Again, how different is that line from what you already have going in the U.K.? I understand Puerto Rico has Gen II etcetera, the higher volume line. But again, if you got it working in the U.K. I guess I am trying to figure out what are the risks that you can't get that on the timeline that you are looking for down in Puerto Rico? And then the second part of that question is, if you are telling us that you are going to get this on the market earlier than you had anticipated, you're obviously feeling a pretty... you are starting to feel some what conviction for the product. So why not put that in the guidance if you now start to feel like you can get there ahead of your prior expectation?

Okay. Good question Steve. The platform used in the U.K. compared to Puerto Rico is completely different. One is not... Puerto Rico is Gen II and a highly complex piece of equipment that runs into neighborhood of over $30 million. The... what we call the fast track in U.K., while it uses polypropylene mold, is a much more if you will labor intensive process that is not Gen II, easier to get through, easier to make product offer. We are in fact in production on that, but that's not the way we are going to have a work course product and that's not the way a long-term, we will get our cost down. So, yes, we could... we can make enough on that line to have a launch, but the launch would not be a robust launch compared to getting through all of them as we call it PQ, Production Quality in Puerto Rico. We expect over the next couple of months to if you will, authenticate the line in Puerto Rico. The second piece of the equation is regulatory and so if you put regulatory together with the production side, then we are... are we being cautious? Yes, we are, but I'd rather have it as an upside than have egg on my face that we put in the guidance and then it became nothing.

Okay, got you. Thanks guys.

Thanks Larry.

Jeff Johnson.

Good evening guys. Can you hear me, okay?

Yes we can Jeff.

All right. Just a couple of things here, qualitatively can you talk about the Dk 100 launch that you are planning in March, April. From what we are hearing maybe going out just a few data sites, and how quickly could you ramp that up or is it something where most of the calendar year you'd expect it to stay at a limited number of sites?

The answer of that Jeff is really comes back to if we are rolling out the product based on fast track in the U.K. it's going to be limited launch. If Puerto Rico line is running the way, we think, it could run, it has the capability to match the production of, as I indicated all of the first six lines of Biofinity, so it would be pretty robust. We think the yield, so it comes back to a lot of discussions about can you make it and how will the yields do? We think the capability to get respectable yields out of Gen II line using polypropylene is much, much, much by a factor of, I don't want to say, 10 but hugely easier event than what we're trying to do with Biofinity. So what will dictate how robust is the launch is number one, getting the approval, the FDA approval on the 5, 10-K, and two then would be, how well is the line doing in Puerto Rico. If its doing well and all goes to what we are hoping to happen, we could start having a respectable amount of product well out of the door in the April-May timeframe, too early to guarantee anything. And that's why it's not in our guidance.

Fair enough. Then and Bob, maybe I missed this, but how many lines in Puerto Rico eventually would you like to have on the Dk 100?

Well, we're going to start with one; we have a second one on order. These things in theory crank out around 35 million units. So it's... if go to a third line, if three are in production that is one heck of a lot of silicon hydrogel lenses, keeping in mind, that's a little different than our daily disposable, in terms of what you get as an ARP. So these... the lead time is substantial on the equipment. So it's in the neighborhood of approaching 18 months and that's why we already have the second line on order.

Fair enough. And then is the steep CapEx in '09, I know you talked about it for '08, but expectations that it could fall off in '09, is that a good expectation ever, an accurate expectation to have? And can you just remind me, maybe what normalized CapEx level should be for you guys eventually?

Yes, we are trying to define normal, but I will help a little bit. We think that a maintenance level CapEx for us is about $25 million, that's just your existing capacity and replacing things that get old. We think if we grow with market share, we are somewhere around the $100 million to $110 million, and then you get above that, if you are growing faster than market share. So next year, $160 million to $180 million reflects the investments in the single-use lines as well as the second Dk 100 line. In '09, the production line should go down, even if we are growing above market. But by mid 2010, we think we are going to be out of manufacturing capacity. Today, we are actively looking as to where to put that next footprint. So if we have a build of building then the CapEx cost would be quite a bit different. If we have to lease and just retrofit, it will be quite a bit less. So what I think from a guidance perspective in '09 is we expect '09 to be similar in amount to '08, it's just that, it will be less production capacity and then made up... the difference made up by a manufacturing facility. But little bit early right now, because we don't know what that footprint looks like in 2010, but hopefully that helps.

All right. And then last question I guess, going back to the earlier question on operating margins. Just putting your guidance together for '08 and even if you exclude options, it just seems to me operating margin have to be down next year assuming some consistency in the interest expense line. Am I just looking at my model wrong? I know, you've talked about leveraging top line growth in the faster earnings growth next year, I am just not seeing it in your guidance there in my model and maybe you could help me out there?

Yes, I'll take a shot at that Jeff. I mean, we expect the gross profit... the gross margin to be slightly down. And that's why we say 62% to 63% and that's purely mix. And we do expect except for marketing and R&D to lever off of OpEx. In other words, that will grow less than sales. So the real balance on operating margin that I say is how much you are investing in R&D and how much you are investing to margin. We don't expect to get a huge growth next year. We expect significant growth in '09 because as we go out of the year, a Proclear daily unit cost and a Biofinity unit cost and for that matter a Dk 100 unit cost is going to be less going out of the year than it is average for the year. So we expect to have some margin expansion, but not great again, because we want to set up '09 and take advantage of that capacity and the new products we are putting on... putting the capacity in for. So, it will expand, it's just again 2009 is less constrained from a capacity perspective. So that's where you see significant operating margin growth.

All right. And just to make sure I am not mishearing you, Steve or misunderstanding you, you are saying, it will expand. But then you are also kind of saying, everything you are saying is excluding marketing and R&D?

No, no, what I am saying is, it's a balance Jeff. The marketing and R&D we are not going to go crazy. But we certainly are going to invest to drive the future and will I invest a $200,000 in clinical activities to support a silicon hydrogel toric in fiscal '08 even if I don't have revenues until as we go out of fiscal '08, you are damn straight I will.

Understood. But if you do that, there is a scenario here where operating margin falls next year?

Correct

Okay that's it... I will work in my model, I just wanted to make sure I didn't have an error somewhere.

Yes, it's a balance, it's a balance.

Now, that's it. That is all I got guys, thanks very much.

Mike Weinstein.

Thanks. Can you hear me?

Yes sir

Hi. Let's clear up this operating margin discussion, okay. Your guidance for the year, some gets right after your release $2 to $2.30 before you add back your stock-based comp, is that right?

That's correct

Okay. And then if I back into that an operating margin, I get 15% to 16% using your other commentary about tax rate and what else, interest expense?

Yes.

So, if I am right, I get 15% to 16%, it looks to me that what you are excluding Steve is your amortization expense. So your... when you said 18% to 19%, it looks to me like you're are backing up those stock-based comp and the amortization expense, would that be right?

No.

Right, so where is the disconnect? Because you don't get $2 to $2.30 with the guidance you gave?

I am going to have to go and take a look at your model and compare it to ours.

I mean, I am not using my model, I am doing taking your numbers, I am taking your revenue guidance and even with the stock-based comp which is 190 to 200 basis points, which is off of your operating margins commentary, you still wouldn't get down to $2 to $2.30? And that's the question you are hearing from everybody, everybody is doing the same math, they are taking your revenue guidance, taking your operating margin guidance. And they are running that through their income statements, with the 15% or 14% to 15% tax rate and they don't get $2 to $2.30. So it looks like there is some disconnect there and my math says that, it was probably that you are excluding amortization expense as well. Unless the currency impact is going to be significant, I mean like $15 million, $20 million?

Currency is a piece of it. But we have also assumed a pretty significant investment in R&D in the $2 to $2.30 that's where my comments on the clinicals go and also my comment on our balance. Because we are not going to go crazy and --

But R&D is in operating margin.

Correct.

SG&A is in operating margin.

Correct.

So that 18% to 19% commentary right, which was... which backs out stock-based comp, it's still... what's everybody on the phone having a disconnect with?

And understood and what we are trying to do is, we are trying to put an EPS model down there, that we know, we are going to be. That's why we said, we are in the high end. We do expect our margin to be 19% to 20% and if that means that we got a lever off of OpEx, lever off of lower finance IT etcetera cost, that's what we are going to do to bring in that margin. We are not going to take the operating margin down, but we are not going to put an EPS number out there, that we are not going to hit either. So I think it's a balance and what we are going to do is, we are going to really mange the business intelligently. So I understand the mathematics of it, we just want to be conservative on the EPS side, we understand, we are not going to let the margin go south.

Okay. So just to make sure we are all on the same page then so, you are saying that I could have misspoken a minute ago. You're saying 19% to 20% operating margin including the stock-based compensation?

Correct.

And then if we run that through that it with, your other commentary that would say it that $2 to $2.30 guidance then is too low? Is that what you are trying to say?

We're saying its conservative and we're putting something out there at that we're going to make sure that we perform, manage expectations and don't do what we do when we are talking about Biofinity and launching that ahead of time.

Okay and then let me ask this one last question here. The top line guidance, the 10% to15%, do you know what that would be on an organic basis so what are you assuming our currency and M&A?

No, that's constant currency.

So the 10 to 15, so the... your 10... sorry, your 10.40 to 10.90 is

Just on one thing on... the 10.40 to 10.90 is current rate.

Right.

All right, if you were to... I think the way you asked the question, if you were to compare that to the prior year, if there are currency factor in the growth and the answer is probably 2% to 3%. That is our currency factor year-over-year.

Okay. Any M&A contribution, obviously you did a couple of small deals so far.

Yes, that would be inconsequential.

Okay.

Because they were early... they were early in the 2007 year.

Okay, great, thank you guys.

All right.

Chris Cooley.

Thank you guys. Maybe just one quick one here, it's been a long call. Help us think about and I hate to belier the point after Mike just went through it again, but help us think about maybe from this perspective. When we look at your operating margin and you talk about progression in terms of profitability both for the daily and for silicone hydrogel as you get better utilization, I know you don't want to give us maybe specific a why contributions, but how should we think about the change from say now starting fiscal '08 to where we see those key products may be in second half of fiscal '08 and then exiting fiscal half '08, just in terms of the change in the contribution to the OI line. Thank you.

I think clarify on that expect that, obviously the first six months as we are building capacity and both the Proclear 1 day and Biofinity, we will be... when you talk about things like sitting sets and rolling that out to new accounts, we would certainly be investing heavily in the marketing area. And on the other side or the bottom side of the operating expense category in the area of R&D, we would continued to be investing heavily in terms of the two weeks... the silicone hydrogel torics, the two projects we're working as well as getting the Dk 100 out of the door, if you will. To your question on will we start seeing the pay back of Biofinity and Proclear 1 Day by the... as the year progresses towards the end of the year? The answer is yes. So one would expect a much more robust operating results then in next year in 2009, going slightly the other way will be if we are rolling out the silicone hydrogel torics in 2009, we will certainly invest some money on that. But it should be depending on the timing of the two-week sphere this year will dictate how that translates to 2009 results. But I would expect that the floor if you will of 18% to 19% operating income exclusive of equity compensation to continue to migrate up year-over-year '09 versus '08 to pick up at least one or two points or 100 or 200 basis points.

If I may, just 1 or 2 basis points and aggregate for the whole company or for again, just to be clear, maybe really make it simplistic, if I assume a base of 100 going let's say now for those products in terms of think about in terms of profitability, do I exit the year at 101, do I exit the year at 102, 110, help me think about the relative change. I know you won't go to the specifics but can you just speak to the relevant change?

Yes, no, actually I can do I think pretty specific; let me take a shot at it Chris. We expect Biofinity to be approximately a gross margin of 50% this year. We expect to go out of the year with a gross margin in the mid to upper 60s. So you will see natural progression as you go through the year. Now, how much of that gets pulled out the inventory etcetera, its... you're not going to be able to get perfect on it, but we're going to see pretty dramatic, so if I am averaging 50 and I'm going out at the mid 60s, you can model that out through the year. In other words, we expect as we get 1 to 2 years out Bob, 2 to 3 years out, somewhere in that same timeframe that we have a silicon hydrogel family and specifically Biofinity as a premium margined product. The counter to that; and then again this is all timing, your expense, your distribution cost associated with fitting sets and all that stuff has incurred is when you get down to the operating margin. But if you are focused purely on gross margin, you are going to see as you go through the year, some improvement, the same, but to a lesser extent for Proclear dailies. Again, we just started manufacturing Proclear dailies in February and so there is still a little bit of a learning curve there versus say a standard Biomedics or ClearSight daily. So you are going to see some improvement there but the dramatic improvement you are going to see is in Biofinity. Now does that help better?

That's super fine. One just last very quickie, how do you think about the NOL in terms of your expectations there? Thank you.

Right. The accounting would dictate that if we didn't think we'll generate enough U.S. taxable income to utilize it, we would have to expense that portion that we aren't going to utilize. As a refresher and my numbers are approximate because I haven't seen the updated, but believe we had something in the order of $6 million worth of NOL that expired this year or they would have expired in '07 and I believe it's around $50 million for '08 and we are comfortable that in the U.S. predominantly. So we are comfortable that our taxable income in the United States will be adequate to utilize that NOL. What that means and it's a good point Chris, what that means is if you use an effective tax rate rounded numbers here of 15%, we generally pay in cash less than a third of that effective tax rate and that's the benefit of the NOL.

Thank you.

And that concludes the call, ladies and gentlemen. Thank you for being with us tonight.

Yeah I think I want to thank everyone here. Our next scheduled call is for March the 6th for the results of our first quarter and we look forward to giving you an update on the two-week product at that time and all the other good things that we expect will be happening in 2008. I want to thank you and operator, I guess that's it.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.