Good day, ladies and gentlemen and welcome to the Second Quarter 2014 The Cooper Companies Earnings Conference Call. My name is Philip, and I will be your operator for today. At this time, all participants are now in a listen-only mode. Later, we will be facilitating a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Kim Duncan, Senior Director of Investor Relations. Please proceed.

Good afternoon, and welcome to The Cooper Companies’ second quarter 2014 earnings conference call. I am Kim Duncan, Senior Director of Investor Relations. And joining me on today’s call are Bob Weiss, Chief Executive Officer; Greg Matz, Chief Financial Officer; and Al White, Chief Strategy Officer. Before we get started, I would like to remind you that this conference call contains 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 integration of any acquisitions or their failure to achieve anticipated benefits. Forward-looking statements depend on assumptions, data or methods that maybe incorrect or imprecise and are subject to risks and uncertainties. Events that 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 publicly available and on request from the company’s Investor Relations department. Now, before I turn the call over to Bob, let me comment on the agenda for the call. Bob will begin by providing highlights on the quarter, followed by Greg, who will then discuss the second quarter financial results. We will keep the formal presentation to roughly 30 minutes and then open up the call for questions. We expect the call to last approximately 1 hour. We request that anyone asking questions please limit yourself to one question. Should you have any additional questions, please call our Investor line at (925) 460-3663 or email ir@cooperco.com. As a reminder, this call is being webcast and a copy of the earnings release is available through the Investor Relations section of The Cooper Companies’ website. And with that, I will turn the call over to Bob for his opening remarks.

Thank you, Kim and welcome everyone. A solid quarter with continued momentum, top line growth with 7% with revenues of $412 million, this was 9% in constant currency and excluding Aime from prior year results. CooperVision grew 9% in constant currency and excluding Aime, while CooperSurgical was up 9%. GAAP earnings per share of $1.62 and non-GAAP earnings per share of $1.64, excluding certain acquisition related cost. Free cash flow was $65 million bringing our 12-month trailing free cash flow to $217 million. Within CooperVision, we continued making progress with MyDay, our single-use silicone hydrogel lens. We ramped up our production and continued to grow sales and I am happy to say everything is progressing well. Additionally, our traditional hydrogel one-day business led by Proclear continued growing nicely resulting in total one-day growth of 21% for the quarter in constant currency and excluding Aime. Outside of one-days, our growth was driven primarily by Biofinity and Avaira, which both grew in the mid to upper teens. Regarding CooperSurgical, our fertility business was strong again, up 17%. This drove 9% overall growth in surgical, which was very nice. From a gross margin perspective, we were at 65.1%, which met expectations especially given the strength of our one-day portfolio, including ramp up costs from MyDay. From an operating margin perspective, we leveraged our operating expenses to grow our non-GAAP operating margin to a very nice 21.8%, up from 21.2%. This all led us to solid earnings per share and to us again raising the low end of our earnings per share guidance. Regarding guidance, I should also mention we maintained our revenue and continued to be comfortable with the drivers of our one-day lenses driven by MyDay and Proclear and our Biofinity and Avaira product families. Now before I get into the specifics…

Thanks, Bob and good afternoon, everyone. Bob shared with you a pretty thorough review of the market and our revenue picture. Now, let me start with gross margins. Looking at gross margins, in Q2, consolidated GAAP and non-GAAP gross margins met our expectations of 65.1% compared with 66.2% for GAAP and non-GAAP in Q2 last year. The vast majority of this difference was due to the mix impact and startup cost associated with MyDay. As we have discussed in the past, these costs are expected during a startup phase, where you are building capacity. We still expect this product to exit the year in the high single-digit margin range. Looking at FX, the impact of FX on gross margins was negligible this quarter. In addition also for this year, we still expect gross margins in the range of 65%. CooperVision on a GAAP and a non-GAAP basis reported gross margin of 55.2% versus 66.6% for GAAP and non-GAAP in Q2 last year. As I just mentioned, this was mainly due to the cost associated with MyDay. CooperSurgical had a GAAP and non-GAAP gross margin of 64.7%, which compares to 64.5% in Q2 ‘13. We saw some positive impact as the higher margin base business grew. Fertility with lower margins will continue to put pressure on our gross margin, as that part of the business continues to become a larger part of their mix. Now, looking at operating expenses, SG&A in the quarter on a GAAP and non-GAAP basis, SG&A expenses increased by approximately 3% from Q2 last year to $155.8 million for GAAP and $154.8 million for non-GAAP and both were 38% of revenue, down from 39% in the prior year. The difference between GAAP and non-GAAP was about $1 million in acquisition-related costs, which were included in our GAAP…

Operator we are ready to open up the call for questions.

Alright. (Operator Instructions) And your first question comes from the line of Larry Biegelsen with Wells Fargo. Please proceed.

Hi guys. Good afternoon. Thanks for taking the question. Just two for me, first is a clarification, Bob I don’t understand the 8% when you look calendar first quarter 2014, the 8% for the market and 9% for CooperVision, why that isn’t a fair comparison because your Asia-Pacific business was up 29% and did benefit from the buy-in from Japan? And second, can you talk about it wasn’t clear to me why the Americas was flat in calendar Q1. I know I think you are up 5% for fiscal Q2, but could you talk about what you saw in April and May? Thanks.

Okay, the 9% versus the 8%, 9% for us and 8% for the market, of course the market is inflated and keep in mind that Japan is a big part of the market. So, that inflation that occurred in March, the end of the calendar quarter is reflected in that. And your large players, if you will, in the Japanese market by far the largest player is J&J. So, it had a profound impact on J&J. It had a profound impact on the market relative to Cooper. While that percent is big, 29%, we are hugely under index. Our market share is about just a little above half the market share in Asia-Pac as it is in the rest of the world. So, the percentages don’t always add up with equal weighting if you will. Secondarily and that’s where Asia-Pac for the entire market, which is around 30% of the world matters a lot when it’s only half that for us, it matters a lot less. Relative to the Americas, the Americas is coming off of a calendar quarter that was 15% for Cooper and it dropped from 15 to 0 in the next calendar quarter. We had our price increase, select price increase effective January 1, which had the impact of bringing revenues from January into December. And therefore, the calendar fourth quarter is inflated that flushes out considerably in January. Therefore, it doesn’t show up in the fiscal period like it does in the calendar period. So, we were artificially high on a calendar basis in that fourth quarter. And this is somewhat neutralizing that. Relative to the flush-out in April and May, most of the flush-out occurs in April with people buying forward into March in Japan and it had a minimal effect on our May results. And that has contracted into the guidance we are giving going forward.

Thanks for taking the question.

Alright. Our next question comes from line of Larry Keusch with Raymond James. Please proceed.

Thank you. I know Bob you talked a little bit about MyDay being on plan and gave some sense of where you expect the margins to be, but could you dig in a little bit and then perhaps talk a little bit about the experience with the yields? And I was under the impression that there was an opportunity to actually exit fiscal ‘14 at an operating margin that was north of single-digits. So, if you could talk about that? And then I didn’t see any update for free cash flow and CapEx for the year in terms of guidance? So, that will be a question for Greg.

Okay. On the operating outlook for MyDay, I think we have been pretty clear on operating margin that we are not expecting operating margin in 2014 into ‘15 and we maybe investing into 2016 as we hope from Europe to the U.S. to Asia-Pac. Relative to gross margin, we indicated that we had a negative gross margin in the first quarter. It would move into a – I think upper single-digit mode the second half of this year and then move into teens in 2015. We are, I would say, on track or ahead of schedule a little in those areas. So, we are pleased with the progress we are making on moving the needle on profitability there. It would still be our intent however to invest in the rollout and not expect to make operating profit even in 2015 on MyDay.

Yes. Larry, on the guidance, the guidance hasn’t changed. We still see free cash flow and CapEx above $200 million.

Okay. And just on that CapEx, sort of just help us all, how much above $200 million are we thinking, is it really closer to $250 million?

We are at a modal – we just came off $61 million quarter. Year-to-date, I want to say we are approaching $120 million. So we are running at $240 million. I would not be surprised if it’s north of $220 million by the end of the year, but we will kind of leave it in that, plus $202 million as high as $240 million range.

Okay, perfect. Thank you.

Alright. And our next question comes from the line of Joanne Wuensch from BMO Capital Markets.

Hi, thank you so much for taking my questions. Can we spend little bit of time on SG&A? That seems to be particularly well-managed. And I am curious how we should think about that as a go-forward metric?

Yes. As far as the SG&A is concerned, we are in the mode of moving into more leverage. We have been investing heavily over the last four, five years in the brick expansion as well as sales force expansion and R&D. And we would expect to over the next several years start really getting some meaningful leverage out of those areas. Particularly, where we have invested several years in certain countries we have been in the brick area, if you will, losing a fair amount of operating income in the startup mode. That’s been kind of masking the total P&L that you see worldwide. And now it’s time with revenue generation to get some leverage out of that. And that will continue over the next period while we say we are going from 22% OI to 25% OI that is more about SG&A leverage and it is about change in the gross profit margin. One thing noteworthy to put here in your thought process, however, is during the next three years we will continue to reduce cost of goods in terms of manufacturing. That will not necessarily show up in gross margin and in reduction of cost of goods, it will be masked by product mix as we shift into the one-day modality. The one-day modality will have basically a lower gross margin, but also lower operating expense ratio. So, there will be some – there should be through mix some improvement in operating cost over that timeframe also.

Okay. As a follow-up question, while you have us all here together, could you comment on the FDA warning letter that hit the website about three weeks ago? Thank you.

Yes. I am not going to say too much about it other than like any warning letter or 483, which preceded it we take FDA observation seriously and rest assured it’s getting our full attention. It was in Puerto Rico. I think some people have asked whether or not it was connected to anything that happened in the past, the recall of Avaira toric, the answer to that is no, it is not connected with any previous activity. It was more a result of inspection done that led to 483 that happened in December and January timeframe. And a lot of it had to do with CAPA’s and in documentation, which we are as I indicated taking seriously. At some point in time, the FDA and we would expect by the end of calendar year to come in and confirm the actions that we have taken. I don’t have anymore color on it than that at this juncture.

Thank you.

Alright. And our next question comes from the line of Matthew O’Brien with William Blair. Please proceed. Matthew O’Brien - William Blair: Good afternoon and thanks for taking the questions. Bob, I was hoping first just to start with a clarification point and then get into my actual question after that if that’s okay, but on the clarification side I think what you are saying is with what went on in Asia-Pac and especially Japan giving your under-indexing there plus the strong comp you had in the Americas this time last year. The market growth rate is probably something around 5%, you guys did 9%, but on a rolling average basis you are probably a little bit higher than that. So you are still taking share roughly at about double the market rate and you anticipate that type of trend will continue going forward, is that the way that we should characterize the quarterly results?

That’s a pretty good summary. I would say we have never kind of said we think we can keep taking double or 2X indefinitely. So it’s nice that for the last three years we have done two. And if we look at it over a five year perspective, I think we average maybe about 1.8. So anything in the range we are talking about the 9% to 10%, we are happy with that obviously we want to beat it. And the market I do think has moved from the 4% to 5% now to the 5% to 6%, but you are correct the 8% is probably more like 5% to 6% and it is much about that. Matthew O’Brien - William Blair: Okay, and then for my actual question. We are getting closer to the roll off of the U.S. component of the royalty to CIBA and you got a pretty big headwind right now with MyDay on the gross margin side of things, as we start to think about fiscal ’15, is it fair to think I know you don’t want to give too much in terms of numbers here, but is it fair to think we can get maybe 25% even up to probably not quite as high, but maybe 50% of the headwind from the MyDay product on the gross margin side offset by the royalty rolling off?

I am not going to put enough color on that. We have gone out of our way not to put too much color on how it weighs other than to make one point, which is some of the royalty savings we will invest. And it is factored into our model which is basically saying we are going to go from at one point in time with 20% to 25%. We now are more like 21% to 22%, 22% to 25% operating income between now and 2018. So that is still our objective and the royalties are factored in there and the MyDay is a weighting factor in that model over the next several years. And relative to gross margin, in concept you are right that one day, MyDay is taking it one way and the royalty will help minimize that, but I am not going to put more color on it than that. Matthew O’Brien - William Blair: Fair enough. Thank you.

And our next question comes from the line of Steve Willoughby from Cleveland Research. Please proceed.

Hey guys. Thanks for taking my question. I have a question and a follow-up to something – somebody else already asked. I guess first on the follow-up question, I am just wondering you mentioned the January might have been impacted by the price increases you put into effect January 1, I am just wondering do your competitors not also put in price increases at the beginning of the year and I am just wondering why they may not have seen the same buy ahead impact. And then my second question Bob is in your prepared remarks, if I understood you correctly backing into it, it sounds like MyDay generated maybe a little over $4 million in revenue, so I am wondering if you could confirm that and also maybe provide any commentary on how Biofinity growth was in the quarter?

Alright. Several things, the competitors still have price increases while we do and they are not across the board, some products get more and some products get none. Relative to, did the market show up, the market in the Americas in the fourth calendar quarter was 8%, so that was fairly robust compared to a trailing 12 months of six. So it was the strong quarter for the marketplace in the Americas. So that could be a factor, it certainly was a factor for Cooper. Relative to the question on MyDay you are not too far off with the $4 million to $5 million relative to where it is. We are at a $5 million. So, let’s say, a $20 million run-rate now, your math would not be too far off. Biofinity and Avaira, I think I indicated were mid to upper teens, both family of products were mid to upper teens. So that was a comment from my – I made that in my remarks.

Okay, thanks so much.

Alright. And our next question comes from the line of Jon Block from Stifel. Please proceed.

Great. Good afternoon guys. I was hoping you can hear me okay. I think two questions. Bob, just on the first one, I know there is a lot of moving parts with the market data due to the value-added tax, but I am guessing Europe should be pretty clean. The market was up 3% in 1Q, you guys were up 12% or sort of 4X. It’s a big number. And can you speak to what led to sort of 4X the market in Europe? And to what extent MyDay played a role there? And then I will go ahead and ask a follow-up.

So, you are totally right that we did very well in Europe, 4X the market and MyDay is certainly a contributor there. And we continue to do well with Biofinity and Avaira in Europe as well as really the migration of torics and multifocals. So both as to modality, it’s a factor, lens type, it’s a factor and product rollout is the factor, and all three kind of play well.

Okay, great. And then maybe my second one has two parts if possible. The first one is just channel across the different markets again you mentioned a lot of moving parts. Are we normalized in the channel? You mentioned APAC did, but is that the case in the U.S.? And actually I will save the rest of my questions for offline. Thanks guys.

Relative to normalized in the channel, certainly we are normalized in the channel now as we have kind of gone through April-May. Relative to the channel, we look at calendar quarters there is no doubt that the second calendar quarter is going to be weak relative to the first calendar quarter, because of the size of that value-added tax or sales tax, if you will in Japan. So, that will no doubt influence the total market what came into the first quarter will come out of the second quarter and then it will be normalized on that front. I think the U.S. is by the end of the first quarter, calendar quarter is pretty normalized from any implications of price increases. And so I think most everything else is normalized.

Okay, perfect. Thanks for your time.

Alright. And our next question comes from the line of Jeff Johnson from Robert W. Baird. Please proceed.

Thank you. Good evening guys,

Good evening.

Bob, wondered if I could maybe ask one follow-up and then my real question I guess from there? But on the MyDay revenues of around $5 million or so, I mean, can you talk maybe sequentially how that is trending and just maybe qualitatively how the rollout is going? I know you said well, but maybe any color about what you are seeing in some of your European markets where you have now launched the product? And some background maybe on how those plus powers are maybe or maybe not helping the uptake of that product?

Well, the product is going as fast as we can make it. So, it’s only looking to the market other than say the market likes what they see in Europe, that’s very plus, very good. Relative to our ability to continue to ramp up, we basically planned on more than doubling capacity during short window primarily in the second quarter, we were successful in that. So, when we say our rollout is proceeding to plan, starts with the capacity and the capacity is doing quite well. So that’s not an inhibitor as we continue to rollout. At some point in time, we will be – before we know, we will be gearing towards the best market, but there is no real expectation that we will have any meaningful going forward from 2015 into 2014 relative to the Americas or the U.S. market. So, things are going to plan. And we are, I mentioned, $25 million that we are targeting this year, we are now at $20 million run rate. And we would expect to have a decent shot at approaching that $75 million objective for next year.

Alright, that’s helpful. And then just on my other question, as I think through the next couple of quarters, obviously, you have got some of the pound headwinds on the gross margin. I think the market is somewhat worried about competition and just general gross margin impacts from MyDay. Your operating margin in the second half of last year was actually about 100, 150 basis points higher than in your first half of the margin comp. If you think about it that way, it gets a little tougher. And I put all that together and yet you are guiding to kind of an acceleration in EPS growth, the 15% to 21%, if I take kind of the range that’s out there now for the second half in your guidance. So, what gives you the confidence that I guess EPS accelerates from here, it was 13%, 14% in the first half and now you are talking about kind of mid to upper teens, is that 20% in the second half? How do you grow that fast EPS in with all the other kind of issues there I just mentioned?

Well, obviously one of the factors we mentioned that we are – we have been investing heavily in MyDay in the fourth quarter last year, invested heavy in MyDay in the first half of this year, while and that’s even at the gross margin line. So, as we move into a positive territory on gross margin that’s a big shift and we will start minimizing the size of the losses. So, that’s one thing is leverage. Our comp in the fourth quarter will be easier brought about by a couple of events that took place last year and certainly one of those was just the fact that we were accelerating MyDay forward with fittings that cost as well as conversion of equipment, which cost just a fair amount of money. So the comp is somewhat easier in the fourth quarter. And I think when you factor those two things together you will see that there is some logic to acceleration. We also had I think some degree of a – well, we had foreign exchange headwinds in the first quarter, but I think we are also anticipating more in the fourth quarter. Fourth quarter is more cost of goods related to lag of the strengthening of the pound getting to the P&L. That of course puts a little pressure on the gross profit line in that quarter. So that will serve somewhat as a headwind against the positive trends on MyDay in terms of cost of goods if you will.

Yes. Jeff, if you look at the model, I think you will see the second half obviously you have a revenue increase second half over first half you got good control on gross margins. Bob mentioned some of the opportunities, also good control over OpEx, Joanne talked about the SG&A leverage. So, you put all that together. I think we are trying to manage this very, very tightly and that execution I think will deliver results that we have guided to.

Fair enough. Thanks, guys.

Alright. (Operator Instructions) And our next question comes from the line of Matthew Mishan from KeyBanc.

Good afternoon and thank you for taking my questions.

Good afternoon.

Yes, good afternoon.

Yes. Can you talk a little bit about CooperSurgical, what you are seeing in the marketplace, I think last quarter, you said that some orders got pushed out of 1Q into 2Q. Are you seeing improvement here or is this just timing or?

I would say modest improvement, but at certainly 4%, we were pleased with in the context of the market and some of the shifting going on there. I would say the surgical outpatient side is still tough. So we don’t want to minimize that idea. Fertility has been doing a good job. We are very pleased with that, those results. And some of the products that we worked on last year in terms of second generation product, we are starting to see some modest benefits of that. So, those three variables still leave us feeling pretty good about the range we gave for guidance, which is still quite frankly, if you were to strip out idea, still pretty anemic expectation on the surgical and the office space in the U.S.

Okay. And it’s been two years since Origio, how would you describe the pipeline?

Well, Origio is a lot more about geographic expansion and certainly taking their product portfolio much more into the outside the U.S. world. The U.S. world is a little bit more mature right now. The pipeline there is – been some plus factors in the pipeline within Origio and the marketplace. And the other thing we are trying to do over time is shift the mindset a little from – away from less equipment more disposable which will lead to improving gross margins within that space. That space is a little, still somewhat a gross profit drag within the CooperSurgical mix, but improving if you will.

Alright. Ladies and gentlemen, that concludes the question-and-answer session of today’s call due to running out of time. And I will now turn the call back over to Bob Weiss for closing remarks.

Well, I want to thank everyone for joining us today. We look forward to updating you again in September on our quarterly progress and particularly on MyDay and the continued ramp up and rollout. And with that, I want to thank everyone for participating.

Ladies and gentlemen that concludes today’s conference. Thank you all for your participation and you may all now disconnect. Have a wonderful day.