Good day ladies and gentlemen, and welcome to the first quarter 2012 ResMed Incorporated earnings conference call. [Operator instructions.] The company has asked me to address certain matters. First, ResMed does not authorize the recording of any portion of this conference call for any purpose. Second, during the conference call, ResMed may make forward looking statements such as projections for future revenue or earnings, new product development, or new markets for the company’s products. These statements are made under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Risks and uncertainties exist that could cause actual results to materially differ from the forward looking statements. These factors are discussed in ResMed’s SEC filings such as Forms 10-Q and 10-K, which you may access through the company’s website at www.resmed.com. With that said, I would now like to turn the call over to Dr. Peter Farrell, ResMed’s chairman and chief executive officer. Dr. Farrell, please go ahead sir.

Thanks operator, and thanks everybody for joining us. I’ll begin with some summary comments and then turn the call over to Brett Sandercock, and then we’ll take questions and I might bring some of the other guys in as needed. First, the finance. We finished with what we think is a very solid quarter. Global revenue grew 12% to $315 million, or 8% on a constant currency basis. Revenue in the Americas grew by 9% year over year to $169.3 million, and ROW revenue increased by 15% to $145.5 million, which was 7% on a constant currency basis. US GAAP EPS decreased to $0.33 for the quarter, but let me quickly mention this was primarily impacted by forex and Brett will go into that in a little more detail. But it was a significant impact. And if we exclude amortization of acquired intangibles, the hybrid EPS was $0.35, which matched First Call’s expectations. In looking at product category performance, let me start first with masks and accessories. The results in this category continue to perform well across the globe, and we continue to take share. The three new mask offerings, the 4X trilogy, the Quattro, the Mirage, and the Swift FX, continue to do very well. We also just recently launched versions of all of the FX series masks for women, in our Choices for Her program. This popular family of masks, which are lightweight, unobtrusive, and comfortable, offers female-friendly versions of all three categories with fitting and comfort options especially with women in mind. And I believe we are the first company to design a mask simply for female patients. We also launched the first pediatric mask in the industry, developed specifically for the treatment of sleep disordered breathing in children, in this case age 2 and older. This…

Thanks Peter. As Peter mentioned, revenue for the September quarter was $314.8 million, an increase of 12% over the prior year quarter. Currency movements added approximately $10.6 million to our Q1 revenues, so in constant currency terms, revenue increased by 8%. Income from operations for the quarter was $60.9 million, a decrease of 8% over the prior year quarter and net income for the quarter was $50.5 million, a decrease of 11% over the prior year quarter. Diluted earnings per share for the quarter were $0.33, a decrease of 8% over the prior year quarter. Compared to the prior year, unfavorable currency movements reduced the September quarter’s EPS by approximately $0.08. If currency rates had remained consistent with the prior year, earnings per share would have increased by approximately 14%. Gross margin for the September quarter was 58.8%, up sequentially from Q4 FY11. On a sequential basis, our gross margin benefited from improvements in manufacturing and logistics costs and favorable geographic mix, partially offset by unfavorable currency impacts. Looking forward, for the balance of FY12, we expect gross margins to be in the range of 58% to 60%, subject of course to currency movements. We continue to execute on initiatives targeted at reducing product cost through supply chain efficiencies, product design, and manufacturing improvements. SG&A expenses for the quarter were $94.2 million, an increase of 11% over the prior year quarter. In constant currency terms, SG&A expenses increased by 5%. SG&A expense as a percentage of revenue was 29.9% compared to the year ago figure of 30.1%. Looking forward and subject to currency movements, we expect SG&A as a percentage of revenue to be in the range of 30% for fiscal year 2012. R&D expenses for the quarter were $26.2 million, an increase of 33% over the prior year quarter.…

Thank you. [Operator instructions.] And your first question today comes from the line of Matthew Prior with Merrill Lynch.

Just a quick question in regard to the growth rate. I think it’s going to be the focus of today’s results given the slowdown you’ve seen on the low end. Can you talk to whether that growth rate of 7% that you spoke to last quarter has changed, and if so, try and split that out between the U.S. and Europe in terms of industry growth rates before you move on to the individual product segments.

Matt, the 7% figure, 6-8%, we think is still the right number. We’re kind of optimistic that maybe we’ll see an increase as we go forward. There’s no guarantee there, but we think that that was about what it was for the quarter just finished. Europe may be a tad higher than that, 9-10%, so 6-8% and 9-10%, or let’s say ROW. And I think those numbers are the right ones. The low-end, again, just to reiterate, we walked away from some business. We could have increased the number of flow gens, but we looked at it and said, that’s not business that we really think would satisfy our shareholders. So we did leave revenues on the table, but not much money, if you like. So our numbers don’t really reflect the growth rate in that sense, at the fixed CPAP level in the U.S. And as you saw in ROW, the growth rate was pretty reasonable with the flow gens. We see possible that that number will increase. In the lap of the gods, but we are reasonably optimistic.

Thanks Peter. I guess breaking down into kind of the basic CPAP, then APAP, then bi-level, putting APAP to one side, it seems to be trucking along nicely, can you talk to what is the factor that is driving that low-end CPAP business. You talked about walking away from some of the potential revenue you could have generated there. Your gross margin’s stronger than I think most of us expected, so what was it that drove you to kind of walk away from that business. Was it that it represented an unsustainable margin, so you didn’t want to get into that game of maybe a lower ASP? Was it that the actual underlying patient, with the copay issue, wasn’t willing to step up, and that was affecting ASP? Can you just give us some more color?

I think the equation is a complicated one, and we’re not sure if loss of COBRA and copays, and all that sort of thing, has an impact. But we’re seeing very nice growth in the APAP space, so there are still people out there going onto treatment, and there are certainly, with the push by the payers and the HMEs feeling more comfortable driving HST, there’s no question that there is a significant jump, and if you go back last year versus the year before, it’s gone from about 4% to 10%, and our latest figures - and again they’re a little rubbery - is that 20% of the patients going on to treatment are actually from home sleep testing, HST. So there’s no question that that’s increasing. Therefore, that will impact obviously fixed CPAP. There is business in the fixed CPAP area, because let’s face it, if you’re a DME, you’re an HME, you’re not going on treatment, and you’re getting a fixed amount of money, and if you’re not looking appropriately at the business in terms of replenishment, and looking at issues such as compliance, there’s no point in putting a patient onto a device and then having them become noncompliant. Because that way their health is impacted. The insurance company loses. We lose. And so does the HME, DME, because they don’t get the benefit of the replenishment. The annuity which goes with patients who remain compliant. So our pitch is look, don’t buy cheap, because in fact it doesn’t make economic sense, let alone sense in terms of patient health. But there’s no question that there’s an economic malaise in this place. Everybody’s aware of that. I don’t want to get into a political discussion here. I’ll try to avoid that. But things could be better, put it that way. And I think they will improve in time. But we’re happy with that 7% figure, and the reason we walked away from that business is it was just uneconomic. I mean, you’re always tempted to make deals, but once you start on that slippery slope, there’s no getting off it.

I guess the second part of that question, which was the bi-levels, can you talk to whether your bi-level share is still recovering?

Yeah, we’re really chuffed, as it were, by the growth in adaptive servo ventilation, because we went from the S7, which was really looking like a car battery to some people I guess. But to put that technology into the S9 was obviously a boon. The same is true of the bi-levels. And we are significantly into the double digits in the bi-levels, and in fact we are where we expected to be, or hoped to be, with bi-level sales. However, at the low end, as I mentioned last quarter, we’re seeing some loss of bi-level S business, that is the noncompliant OSA, because frankly the S9 AutoSet is so good that - and I was with a guy on the weekend, we had a ResMed Foundation board meeting, and one of the physicians who’s on that board was telling me again that he’s gone from something like 20-25% noncompliant CPAP on the bi-levels down to close to 5%. So I don’t know how representative - that’s [n=1]. He also told me that because of the performance of the S9 AutoSet he reckons everybody should be on an S9 AutoSet, and mind you we’re on the same page there. So do we. But he was saying that his use of wake drugs like Provigil, NeuroVigil, and so forth, has also dropped significantly. In other words, he’s not seeing as many sleepy patients, and he’s not seeing as many noncompliant patients. I suspect that’s true across the board. We don’t know that for sure, but I think that’s also impacting that. But again, overall, the bi-level market, we’re into double-digit growth, and we’re quite happy with where we’re positioned.

Your next question comes from the line of Ben Andrew with William Blair.

Following up on that question, if you talk about walking away from business, what’s the effect of that? Somebody’s obviously coming in and taking that business, so how do you turn that around? Or do you end up conceding that low-end segment of the market increasingly over time?

Well, Ben, it’s the sort of thing you’re faced with at the end of a quarter, and how much do you want to bend over. Now, if I’m a DME or an HME, and we’ve done a little bit of market segmentation and we’ve looked at our customers, and the ones that tend to come in by saying, hey, listen, we’ll buy a certain amount from you, but here’s the price, they tend to be less driven by the patient concerns, if you like. I’m not saying they’re completely irrelevant to them, but it’s more on the basis, of hey, I’m getting paid x for a machine and I’m prepared to pay you y, what do you think? And do we do deals? Yes we do. Everybody in the business does deals, but there are some deals that you just simply say, no, that doesn’t work for us. Now, this thing does vary quarter to quarter. I think we can get some of that business back, and we’ll still continue to sell to those people, but we’re not that concerned about it. We prefer to sell on quality and performance and we’re happy with that space that we’re in.

Is this at all similar to the situation four years ago where Respironics sort of cut price in a material way so they undercut the typical delta, maybe 10% between your product and theirs, and that delta became 15 or whatever, and you eventually had to sort of take a step function change?

You know, it’s not at a level as it was four years ago. It’s not quite at that level. And it’s not across the board. That was more of a global thing. This is more of selected customers in selected areas, if you know what I mean.

Okay. And then finally, if you try to build up underlying patient volume growth, and then maybe mix in price for us to get to that market growth, how would you think about those three pieces?

That’s a bit complicated. Don’t jump off the call. [Laughter] We’re saying the revenue growth is around 7% in the U.S. market, and it’s a little higher than that, maybe 9% ROW. Now, we believe that within the U.S. market there’s going to be a continuing trend. I mentioned the figure of 20%. That’s where we think it is now, 20% of all patients going on to treatment are now in the HST space. So we’re optimistic about growth in APAP in the auto set. And we still think it’s going to be soft in the fixed CPAP. It will still be around, because a lot of the guys out there, there’s a certain segment that just buy on price. There are plenty of others who buy on how well is the patient going to do and we’re satisfied they’re going to remain compliant. But it’s very hard. Can you just give me a bit more understanding of your question?

I’m trying to get to that revenue growth number of 7%. Are you talking about patient growth of 7%, mix of 10%, and price minus 10%?

It’s hard to know. I’ll go with the 7% revenue and I think you’re probably a little bit ahead of that with patient growth, but we have factored in, and always have for the last x years, that we expect a 5% across-the-board hit in price. It’s not far off that, frankly.

It’s just a little bit more complicated, with HST and with APAP and so on, that trend we’re seeing there that’s probably been with us for a few years. Yet you go back a long time and volume would generally be higher than revenue. So it’s more complex now with this sort of trend with inflow gens it seems to be heading toward higher end as well, at least how we see it. But Peter’s right, in terms of ASP declines it’s traditionally been around that mid-single digits.

Your next question comes from the line of David Clair of Piper Jaffray.

I guess the first question is maybe we can just talk about kind of trends in the quarter. Is it something that just really continued to decline throughout the quarter, or get slower throughout the quarter? Or was it just kind of a steady lower growth throughout the quarter?

No, we’re not selling direct to consumers, so we don’t have total visibility. Let me say again about ROW that since our second and third biggest markets are Germany and France, there is always a predictable softness in the first quarter because August is your vacation month and basically labs shut down and physicians take off and let’s face it this is not a heart attack, it’s an elective procedure, and you’re not likely to be putting the patient at risk of losing their life. At least not in a high-risk sort of way. So there is that softness there. So that can explain the ROW numbers, because of the size of the German and French revenues in our mix. As far as the U.S. goes, as we said we’re seeing this trend with adoption of HST across the board and we expect that to continue. With respect to growth, generally in the quarter, the last month is always bigger than the first month, and so it’s very hard to tease out growth rates. It starts slow and finishes pretty quickly. And we’ve seen that for years. We try to get away from that. It would be nice to have a third, a third, a third, but that’s just not the way the system works. And often, at the end of the quarter, there’s not exactly a hockey stick, but there is substantially more product sold in the last month compared to the first month. And that trend, we’d prefer it to be different, but that’s just the way the system is. That seems to be the way HMEs and the DMEs buy. They stock up at the end of the quarter, start slow, and then run out of inventory and start buying again. And that’s the cycle.

And just to go back to that comment that you walked away from a little bit of business in the quarter. Can you just give us a sense of, is this something that’s fairly common or has it kind of picked up this quarter or last quarter? Any commentary you can give there?

Maybe Brett, I’ll throw you under the bus on this one. But let me just make a comment. There are a couple of deals this quarter just finished that were unusual to me. And there’s always deals at the end of a quarter, but if it becomes too crazy, we just say, fine, good luck, and have a nice rest of your life. But Brett, do you want to comment any further?

Yeah, it’s just in that commercial environment you get potential deals or opportunistic things that come up and what you’ve just got to do is you’ve got to look at those and you’ve got to balance that against what you’re looking at doing in the longer term as well, rather than trying to get yourself into sort of a 90-day mentality, is to really look at that and look at the sustainability of the business and where the trends are and just look at it on its merits, and then I think it’s a judgment call on what you’re prepared to do and what pricing you’re prepared to take.

Okay, and that 7% market growth figure that you guys gave, can you split that into flow gens and masks? What you think the overall markets are growing there?

Well, we haven’t actually tried to get granularity there, and it would be difficult to do. But if I had to take a guess, the flow gens are under 7%, a shade under, and the masks would be a shade over. Put it this way, it’s an easy call to make, because trailing revenues, the machine give or take is a 5-year project, whereas a mask is a 3-6 month project. So since you’ve got a fairly big base of patients out there that are being resupplied, you’re always going to see much faster growth, or higher growth, with the accessories and masks. And that’s just the way it is. You might replace your machine every 5 years.

And then Brett, what’s the manufacturing in Singapore now? What percent.

We’re pretty consistently ticking up, and around a third of our production on a blended basis would be in Singapore now. And again, we expect that to increase over the course of the year as well.

Your next question comes from the line of Michael Matson with Mizuho Securities.

First of all, just wondering if you could quantify the impact of currency on your earnings per share in the quarter.

I’ll throw that to you, Brett. I thought Brett had handled that, Michael.

That’s okay. Michael, it was $0.08 negative.

And what was it last quarter, two cents negative?

Yeah, I think from memory it was two or three cents.

And I guess I was just wondering what your views are on the Respironics ROIQ product. It seems sort of an interesting strategy. It’s unclear how well it will do, but I guess I’m a little worried that it could kind of derail the full autosetting market by offering a lower-end product that has some of the benefits of autosetting, at least in the home testing arena.

You know, I hesitate to say smoke and mirrors, but I might say that if I were asked. I’ll throw it to Don. Would you like to comment on that Don?

Yeah. We’re watching this obviously closely. It’s an interesting play, but again, when you think about how the HST space is going to unfold, we think it will be an interesting commercial move at the lower end, but I just don’t see at this point the big impact that they’re hoping for. We’ll follow it through and measure it as it goes, but at this point I’m not seeing it as a big deal.

Okay. And then can you disclose what you paid for BiancaMed and the other acquisition that you did in the quarter?

Our 10-Q will be out in a little while, which will show that as an aggregate amount for all those acquisitions.

We didn’t bet the farm, if you like. They were fairly small. Together they were well under $50 million, put it that way.

And can you walk through the timing on the BiancaMed product launch again?

Well, we bought BiancaMed because we were working with them. We initially invested in them. We had 12% of them back in 2003, and we’ve kept at that 12% level until we finally pulled the trigger and bought them. There was a VC who was interested, and they basically wanted us out of the front row. Obviously if you’re a VC you want as best you can get at an auction. And they didn’t want us getting any sort of special treatment. We had been working with BiancaMed with a Chinese Wall if you like, and as you know two of the areas we’re interested in are COPD and cardiovascular disease, and in this case, specifically, congestive heart failure. So we were developing algorithms in COPD for acute exacerbations and in CHF space for acute decompensation. Now given the cost of putting a CHF patient or COPD patient in the hospital, it’s tens of thousands of dollars, and the algorithm we’re working on is to give us forewarning, if you like, of respiratory disturbances, decompensation in the case of heart failure, and exacerbations in the case of COPD. And we really wanted to make sure we owned that technology. So that was the real reason for buying when we did, because the VC was about to pull the trigger. Now, having said that, when we did a more of a deep dive we found that they were getting into the consumer space, and in fact there are considerable discussions with four major players in the consumer space. And they’re extremely well-known names, which I’m not at liberty to mention now. We’ve already sold some devices to one of these, and it’s a Japanese company. And there’s another Japanese company that’s expressing an interest, and there are two fairly big U.S. companies that are expressing interest. We thought that this was really kind of an interesting potential and the more we heard about it the more we liked it. And it positions us in a quite different space, and I guess where we’d like to be is that if you get on the net and put in “sleep apnea” or “sleep disordered breathing” ResMed pops up and starts flashing at you. We’re not at that point yet, but it would be nice to think of that as a possibility.

Okay, just one follow up on BiancaMed and then I’ll be done. So the revenue opportunity with this acquisition, is it in this consumer element of the business? Or is it more back end loaded in some of the more longer-term medically oriented products that they’re developing?

Well, you know, it’s very hard to predict consumer items. They can take off. If you look at iPads, iPods, everybody wants one, and bingo, the stores are all jammed with people. The play in all these spaces is wellness, and it’s wellness connected with whatever else the company’s pitching. And wellness now, it’s not just nutrition, it’s not just physical fitness, it’s sleep. And so people are waking up to sleep, and these big consumers companies are saying, well, if people are waking up to sleep, we want a piece of that action. I could see either way, Michael. This could take off in the consumer space and we’d be delighted if that were to happen. Our main interest, however, is in COPD and CHF and it’s as an enabling tool. In other words, the COPD patients will be put on our devices and the heart failure patients will be put on our devices, and the means to that is using BiancaMed technology. So that’s the main reason, but gee, if this other stuff happens, we’ll be delighted.

Your next question comes from the line of Dan Hurren with UBS

Just want to ask about [unintelligible] masks. You’ve got a couple of masks, the high-performing masks, that are now coming up to the sort of anniversary date. They’re a year old, and the gel mask has only been out there two years. Can you talk about the growth profile of those masks? And should we expect an annualization and a drop-off from those?

Good question, Dan. That’s one for Don.

Right now we’re not seeing anything [unintelligible]. In fact most of our mask lines are increasing. We had a lot of mix shift in certain areas, but there’s nothing changed on those products at this point. And they’re actually trucking a little bit higher than we would have budgeted.

I guess Dan to give it a bit more flavor, with the trilogy, the 4X products, we were getting hammered a bit in the nasal mask category, and whilst we’ve always had the drop on everybody in the full face mask and on the pillows, we did see a drop-off in the nasal category and the Mirage FX has really turned that around. But apart from that, Don’s right, it’s always been encouraging, our mask products, the sales and we’re happy as we’ve ever been with the offerings.

Okay thanks. And just another question. Without wanting to labor the low-end CPAP point, but the business you walked away from, are you talking about a gaggle of smaller customers? Or medium size customers? Or larger customers? Where’s the sort of price pressure come from? What type of customer?

Well, prefer not to go there, but you can probably guess that it’s less the smaller guys and more the bigger guys who can afford to leverage you, or feel they can.

And just to clarify a point I think I heard before, you’re talking about this kind of pricing done for the rest of financial year ‘12?

No, not necessarily.

So you think this pricing pressure will be alleviated?

Yeah, look, we’re not seeing any ogres out there in the marketplace. This always comes up. All the time people focus in on pricing. Let’s talk about competitive bidding. That was on the last four or five calls, and in the markets where competitive bidding has been used, we have not seen any material difference in our business. And so price pressures will always be there, and hell, if I’m a guy buying your products, I’m always going to try something on you. Why not? But we generally have been pretty good about saying, look, here’s where we’ll go, and that’s kind of it. And that happened in this quarter a little bit more than what we’re used to, but we don’t see a sign of this being something that’s going to continue for the future. It might, but there’s no real indication that it’s going to continue.

Yeah, I guess I’m just trying to understand what’s changed. You’re right, you’ve always been very up front about the constant price decline, the 5% price decline you’ve seen. And it’s always been there. I’m just wondering what’s changed this time around.

Well Dan, it’s just a couple of deals at the end of the quarter, and you just say you know what, forget about it. And that was it. We are really delighted with the 58.8% gross margin, given what we thought it could be. Now, we can take that down quite easily and really drive the top line, but that’s not the game we are in.

Your next question comes from the line of David Low with Deutsche Bank.

Maybe if we could just switch topics. The buyback, Brett could you perhaps talk about what your plans are there? Because certainly as you said in the lead in comments, you’re well ahead of the historic rate.

Sure. So on the buyback we have, we did refresh the buyback back in August with a 20 million share buyback program, so we’re working through that. And we’ve still got 18.1 million left there. So I wouldn’t give specific guidance on it, but I think I’d say we’re likely to be more aggressive than we were the previous year in terms of the buyback. And the intention is we’ll work through that authorized buyback. But timing at this stage, I don’t think we can be too specific other than to say that we intend to work through that authorization.

This recent quarter is our best guide to the rest of the year?

Yeah, we will buy quite a bit and then I think it’s safe to say we’ll definitely continue to buy back and we’ll certainly buy back the absolute minimum, whatever gets diluted out of the employee comp issues for example, and equity issues. So we’ll do that as a minimum and I think you can see that whilst it might not be 4 million shares a quarter, I certainly think we’ll be buying back more aggressively. We probably averaged about a million per quarter last year and I think you can say I think we’ll be more aggressive than that.

And just switching to mask sales. I think there was a comment there along the way that mask sales are actually a little bit ahead of your expectations. When I look at device sales growth slowing down, is there any risk that as the install base of ResMed products, the growth rate slows, that that has a read across to the masks and the replenishment programs?

If you look at the bigger picture, and you look at the prevalence of sleep disordered breathing and the various comorbidities, I would see any slowing in the growth as a reflection of the general economic malaise rather than anything to do with sleep disordered breathing. The prevalence in these areas, whether it’s Type II diabetes at 80%, the real question is, and congestive heart failure at 80%, the real question is at what level of AHI apnea hypopnea index do you treat these patients. And as we look at the clinical data that are being developed, it’s very clear that the earlier you treat, the better off you are. So we’re in the prevention space, it’s a great space to be. You save money. We’re putting a lot of emphasis now on health economics in order for us to work with the payers and say look, if you invest in this up front you’re going to save as you go forward. And the returns, the numbers we’re looking at, you get a return within one calendar year. So we’re in such a good space. So you know, it’s easy to look at what’s happening currently in the marketplace, but it’s a blip, I think. This is a very healthy business. We’re glad we’re in it. And it will be interesting to see how the next couple of quarters unfold. I’m not a soothsayer, but we feel reasonably confident where we are. We do.

I guess asking a related question, we’ve seen mask growth in the U.S. up more than 20% over the last couple of years. And my presumption is that’s on the back of replenishment programs, which has been a fantastic trend, and certainly well ahead of what we had anticipated. My caution is can that be maintained? Is the replenishment opportunity, is the mask per patient opportunity not being closer to being saturated now than it was, and therefore that growth rate at risk of coming back.

I’ll just say a word about that, and then Don Darkin can come in if he feels like it. But when we’ve looked at the number of masks that have been sold per patient per year, we are staggered at the potential to do more business. And in other words, when we’ve looked at it it’s been about 25% of the potential. So in other words, there’s a fourfold possibility there just in the current space. Putting it more specifically, patients generally will be reimbursed for a mask every three months, or every four months, depending on who’s paying. And the number of masks per patient per year is closer to one than four. So there’s a lot of potential there. Do you have a more recent figure Don?

No, we’ve still got a ways to go, even to come close to a half. I think we’re seeing these increase slowly as we put effort into this. We have our own teams now working on this in education way, both in the business and in patient usage, and we’re seeing it move up slowly. And plenty to go.

I’m finding that hard to reconcile with the 7% growth that you’re talking about. I mean, given that we’ve seen 20% growth in masks…

Oh no, we’re talking new patients pretty much.

All right. Thanks very much.

Your next question is from the line of Joshua Zable with WJB Capital

I know it’s not your typical quarter, but that’s what you guys get for spoiling us for so long I guess.

Well, we’re not unhappy with it Josh.

Good. Just a couple of housekeepings and then I sort of want to go back and just hash out one quick thing. So just a couple of housekeepings. First of all, Brett, on your assumptions of the Aussie dollar, I know it’s had a crazy move around. It was at 110 when you gave guidance, just as far as you gave us your expectations for the year, kind of what you’re assuming, because it’s been all over the place. That’s the first housekeeping question.

Are you asking me for a prediction on the currency?

No, no. I’m just asking based on the sort of guidance you gave, what you’re assuming for the Aussie dollar.

It was around the 102-103 mark for the Aussie against the U.S.

Okay great. And then just point of clarification, Peter. I know you talked about the ventilation business in the U.S. Just to be clear, so you have not sold anything in the U.S. yet. That will start sort of end of this year and then into calendar 2012? Just for clarity.

No, we haven’t done material sales. We’ve made sales to CareFusion, and the first few units have gone out. Geoff Neilson is sitting beside me, so maybe he can give you a little bit of flavor of what he expects or hopes for.

So we’ve just done some initial stocking orders to CareFusion, and they’ve started selling as of earlier this month to institutions. And Stellar 100 is also available to home care providers, but that’s not material. That’s just on a real niche to do with pediatrics or patients that need such a high [unintelligible] product in that segment.

And then just Peter, not to beat a dead horse here, I know obviously everybody’s asking about the generator growth. Now that you have the benefit of hindsight of a couple of quarters, generator growth obviously hasn’t been spectacular for the past few quarters. I know we’ve talked about sort of the bi-level kind of being a hole in the product line. Now you’re kind of talking about the low end pricing and walking away from deals, which I think we all appreciate and understand. And you’re also sort of talking about how you don’t expect it to continue going forward. Obviously your competitors have acted irrationally in the past. I guess I’m just trying to reconcile, if I look past, has this been going on and now you’ve kind of started to comp up against it, and so that gives you more confidence that you don’t have it? Or I know this sort of happens at the end of the quarter, so it’s difficult to predict, so while you might not be seeing it today, is there sort of something that gives you confidence that there was something going on there that made them aggressive at the end of this particular quarter that might not happen next quarter? I think everyone’s trying to reconcile exactly what happened this quarter versus the past and maybe why it will be different going forward, or if we should account for that for the next couple of quarters until you sort of comp up against the lower end, you’re going to struggle there.

Well, I think the trends we can have some confidence in - we see the HST to AutoSet just continuing. And it looks like it’s 100% year over year. Does that mean it’s going to be 40% next year? It’s the sort of thing that could really really take off. And the mechanics are, if you’re doing HST, you’re unlikely to be going to fixed CPAP, simply because you’re not bringing the patient in to do a titration. So we’re reasonably confident that the HST is going to go forward at a reasonably quick rate. We can’t guarantee that, but that’s what we’re seeing. And the reason is if you put a patient through a sleep lab, it’s inconvenient, it’s ineffective, and it’s expensive. And if you want to put a number to it, say $6,000, wait a couple of months, versus $2,000, get it done immediately. We also know that there’s 30% attrition for patients that are given a script to go to a sleep lab because of the timeframe and the difficulty in certain parts of the country in getting onto the list. They say, the hell with it, and I’ve got to get a kit bag and I’ve got to go to the lab, etc. So the HST to AutoSet, because of its convenience, cost, and so forth, we see that continuing. Now, as for the sort of “crazy” deals and so forth, we have seen this stuff before. It was just that toward the end of the quarter a couple of these deals came through and we talked about it and said, you know what? We ain’t going to go there. And so that was it. I don’t see this as a big deal. I think it’s just something that’s a try-on, something that happened, that’s just the way the world is. I don’t see it as a trend.

Okay, and then just you mentioned HST, and this is my last one, I saw today that the president of the AASM sort of proposed new guidelines for out-of-center testing. I wasn’t sure if you’d got a chance to look at that.

No, I haven’t seen that Josh.

Okay, just wondering if there was anything sort of changing there. I’ll go back and bug you about it later.

By all means. Email, etc. But I haven’t seen the AASM. But it’s not a surprise. They’ve understood that this is happening, and they want to be able to be in the catbird seat I guess, and they see themselves as the protector of the realm, and they would like to see that they are setting the standards. I assume that’s it. It’s going to be a big ask for them, unless everybody who diagnoses patients has to be a boarded sleep member, I think they’re going to have trouble doing what they want to do. But I don’t blame them. Certainly it’s not unexpected. I knew it was in the hopper, but they were developing standards - they don’t call it home sleep testing, they call it out-of-lab testing. I won’t comment further on that.

They’re trying to rile you up, you know.

And they’re having some success. [Laughter]

I’d like to thank our analysts today for participating in the question and answer portion of today’s call. We are now at the one hour mark, so I’d like to turn the call back over to Dr. Farrell for his final remarks.