Ladies and gentlemen, thank you for standing by. Welcome to the STAAR Surgical’s First Quarter 2012 Financial Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) Today’s conference is being recorded, May 2, 2012 I would now like to turn the conference over to Doug Sherk. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for joining us for the STAAR Surgical conference call and webcast to review the company’s financial results for the first quarter, which ended on March 30, 2012. The news release announcing the first quarter results crossed the wire about a half an hour ago, and is available at STAAR’s website at www.staar.com. Today’s call is also being broadcast live via webcast. In addition, a slide presentation will accompany remarks by management. To access both the webcast and the presentation slides, go to the Investor Relations section of STAAR’s website at www.staar.com. If you’re listening via telephone to today’s call, to review the accompanying presentation slides, navigate to the live webcast as I’ve just reviewed and choose the no audio/slides only option to review the slides in conjunction with the live conference call. We’ve arranged for a taped replay of this call, which may be accessed by phone. The replay will become available approximately one hour after the call’s conclusion and will remain available for seven days. In addition, an archived replay and slides will be available on the STAAR website. Before we get started, during the course of this conference call, the company will make forward-looking remarks and statement. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes any projections of earnings, revenues, sales, profit margins, cash or other financial statements, any statements about plans, strategies, or objectives of management for future operations. Our prospects for achieving such plan, any statements concerning proposed new products including expectations for successes of the ICL or other products in the U.S. or international markets, governmental approval of new products or other future actions of the FDA or other regulators, any statements regarding expectations…

Thank you, Doug, and good afternoon, everyone. Thank you for joining us today for our review of the first quarter 2012 results. With me today on the call is Deborah Andrews, our CFO. I’ll begin with an overview of the quarter, particularly on the revenues side and how we stacked up against our key metrics for 2011. Deborah will provide a more detailed look at our first quarter financial results and progress in our manufacturing consolidation project. Then I’ll provide additional color around some of the operational highlights during the quarter, including major conferences and technology updates, as well as upcoming investor activities. Following our formal remarks, Deborah and I will be happy to take your questions. We made a lot of progress during the first quarter, though not all of that progress is reflected in the revenue results we issued this afternoon. We need to dig down into the results to help you understand them better, which we will be doing this afternoon. Also please remember that our key metrics are set on an annual basis and as a result, early in the year, the targets are more challenging. Obviously, the results for each quarter are not going to be exactly the same throughout the year, as we do generally see improvement during the year. Our first quarter start this year is very similar to our start in the first quarter of last year. Okay, let’s get into the results. We missed during the quarter on our first two key metrics of overall revenue growth and Visian ICL growth. We reported a 4.4% increase in revenue in the first quarter, the growth was driven by 25% increase in the Visian ICL sales, which is short of our 32% growth target. This was offset by declines in our IOL sales…

Thanks, Barry. Good afternoon, everyone. Today I’ll be focusing my comments on the key financial results, overall results, gross margins expansion, GAAP net income and adjusted net income and cash. I will close with an update on the manufacturing consolidation expenses and progress. First, let’s review the first quarter 2012 P&L. As Barry discussed, total revenues increased by 4.4% to $15.5 million. Our gross profit dollars increased by 13% as our gross margin percentage crossed the 70% threshold to 70.3%. Operating expenses excluding our consolidation project, increased by 8%. As we’ll see in the non-GAAP analysis, $332,000 of the $781,000 increase in expenses related to non-cash stock based compensation. Though we issued the same number of stock options during the quarter last year, the expense increased due to the significantly improved stock price we’ve seen as compared to last year. Operating expenses on a GAAP basis increased by 13% year-over-year. Our operating income increased by 34%. Other income was $200,000 below that of prior year due to a $300,000 decrease in currency exchange gains. Our tax provision rate was at 50% the same as last year. On a GAAP basis, net income was $0.01 per share, also the same as last year. Our gross profit margin continued to increase, expanding for the sixth consecutive quarter. Our leverage is evident in the result with a 193% of our sales increase or $1.3 million hitting gross profit for the quarter. The 70.3% gross margin was a 550 basis point improvement of prior year and represents our highest gross margin percentage in 14 years. The gross margin improvement is primarily due to improved ICL mix and improved ICL and IOL manufacturing costs. ICL revenue increased 25% in Q1 and represented 56% of total sales compared with 46% in the first quarter last year…

Great. Thank you, Deborah. And before I get started on these closing comments, let me go back and clarify one comment I made earlier and that is in regard to the two stocking countries in Europe with the prior year comparison. That was for the V4b not the V4c. I think I’ve said the c. I am so used to saying the c now. The b was the expanded range and that’s why they had inventory because those power rangers were not available prior. So let’s go to key ophthalmic conferences that we attended. During the first quarter, we had a strong presence at two of the leading annual conferences for ophthalmologists, the World Ophthalmology Congress in Abu Dhabi and The American Society for Cataract and Refractive Surgery or the ASCRS Conference in Chicago. Our presence at both meetings was significant for STAAR Technology. Through demonstrations at our booth, an increased number of clinical presentation by the leading surgeons and STAAR sponsors symposiums, we actively reached out to hundreds of ophthalmologists worldwide to demonstrate the benefits of our Visian ICL and premium IOL Lenses. The response has been overwhelmingly positive and we’re confident that the expanded launch of our products and markets where they have been approved will gain significant traction and generate strong revenue growth in the months ahead. Now, let’s take a look at some key technology developments which occurred during the quarter, which will help us the rest of the year and in the future years. You may recall that we did license some technology last year from a European company to assist in our goal for preloading the collamer lenses. This has not been done before. During the quarter, I am very proud to say that our engineers were able to develop some improvements, which are…

(Operator Instructions) And our first question comes from the line of Joanne Wuensch from BMO Capital Markets.

This is Jake in for Joanne. Just in terms of the sales and marketing additions that you talk about a bit on the last call, we were wondering how that was proceeding. And If you could talk a little bit about that and give a little color on how the selling model is, if you are adding new territories, making them smaller, that kind of thing and how long it takes for the reps to become productive?

Good. As we said early in the year, we’re adding 16 individuals in our sales and marketing area. The locations where we’ve been able to add so far has been one in Latin America, one in the Middle East, one in Italy, two in the U.S. The rest of the openings we're still in the middle of recruiting. Generally though Jake, these are not situations where we are narrowing territories. The only case that would be in the U.S., but generally, what we are doing is replacing an independent rep with a direct rep. Outside of the U.S., it’s adding to our support team for our distributors, so when we add in China, India, Spain, we’re adding support for our distributor. In some other markets like Italy, that’s our 11th targeted market that we've just added this year, so we put an individual there to add support. So we aren't running into an issue where the expansion is causing territories to get smaller or potentially commissions or motivations to get smaller in that regard.

Very good, thanks. And then just on the nanoFLEX Toric, I believe you had talked about awhile back that you were looking get into the U.S in the second half, is that still on track?

No, no, I don’t think we put any - I have learned my lesson in terms of the FDA and trying to predict. In terms of nanoFLEX Toric in the U.S., we’ve been in discussions with the FDA regarding the protocol for just proving that a Collamer single-piece lens doesn't rotate in the eye, that’s what they’ve asked for. So we’ve been in negotiations with them for what that protocol would like. Now, once we get the protocol approved, it shouldn’t take long in terms of getting these resolved -- three, six months at the most, because you’re going to see any rotation early on.

Our next question comes from the line of Chris Cooley with Stephens.

I wanted to touch base on the ICL in the quarter and I understand that you had some stocking orders in the prior year in the conference, but even through with the orders of the dock I think you said, it would have been closer to 6% growth in Europe. That still seems a little bit soft versus kind of the momentum you have been building in that market, especially with the b being available in that space. Could you talk about some of the initiatives that give you confidence that you can see an acceleration in the European markets as we move forward? And similarly, maybe contrast that with versus what you’ve seen very, very strong growth in the Asia-Pac market and I have just one quick follow-up. Thank you.

Sure, in Europe yes, it was unusually slow during the quarter as I tried to point out. We were a little bit surprised by that. On the other hand, we were excited about higher than anticipated growth in the Asia Pacific market. But with the V4c, we are rolling that out. As you recall through the first two months, we were at 44% penetration. At the end of the first quarter, we were at 58% penetration. We did in - there are two markets in Europe in which we do stock inventory, our distributor stocks. That’s mainly Germany and Spain, so we did swap out some of their inventories during the quarter, meaning we took back a B for a C. And so, but overall, we may have seen in a few of the countries in Europe a little bit of decline in refractive procedures during the quarter. Although, what we are hearing and what we saw from our folks who were there attending the conference in Chicago just a week ago was that they feel very confident about the second quarter, they are very excited about the V4c. I mean that’s one of the things that clearly came out of our Chicago meeting was the fact that V4c we’ve now implanted over a 1,000 of them. There has not been one case where the AquaPORT, the port in the center of the lens, did not continue to adequately flow material or fluid through the eye. So we are very excited about that and we’ve also had some breakthroughs in Chicago. We had Dr. Baikoff from France who for a long, long time forever and by many he is considered the father of anterior Phakic IOLs and he spoke at our investor breakfast. He is now using the ICL overall. In the Asia Pacific markets, Japan continues to be strong. Don Todd and I had dinner with Doctor Tomita in Chicago. He is very committed to the continuing penetrating his procedures overall in Shinagawa. Optical Express in Japan is doing very well. So we think Japan is on the right track. China just continues to amaze. Double, double, double basically is what we are seeing there and we have continued to train, we have continued to add new surgeons. I was just there a few months ago and we just had some excellent sessions overall with the ICL. Of course, in those markets as you know demographically there is a higher percentage of higher myopes and so that’s helped overall in terms of the adoption I believe also. But we feel very good overall about these four markets that we highlighted in Asia-Pacific.

Okay, certainly and then on the IOL side, it’s been a little softer there than we’ve looked over for several quarters now. And I realize you’ve undergone some transition there in the product mix in the portfolio and of course, with the nanoFLEX, they are basically - maybe a quarter slower than what you saw and anticipated and believe you did this to heighten price competition as well in Japan. But can you help us think if you just kind of looked at -- kind of strip it all out, come to a core, the go forward product offering -- what kind of rate of growth are you seeing on both a unit and a revenue basis there? Just trying to think about maybe getting away some of the noise on the side and then what kind of rate of growth can we expect from that offering once it’s effectively up and running on a go-forward basis?

First of all, not having the KS-SP to market has clearly heard us in Japan and in Europe. And again, that’s the Single Piece Preloaded Acrylic Lens. So that’s why the highlight from a technical point of view of having solved that issue during the quarter and why it’s important. We do offer a three piece Preloaded Acrylic in those markets and we have been telling our customers and our distributors that a single piece is coming and we haven’t gotten it to them yet. So there is a strong sense of urgency for one, solving the problems and then getting the product manufactured so we can start to commercialize. So I think that’s going to be, I know that will be a big help in Europe and in Japan. And listening to our sales reps in Japan, that’s the first things I heard from them was the KS-SP. So now that we’ve solved this, we can get a clear pathway to get the product to market. Getting the - and if you look at Japan, if you look at the geographic of our IOL sales, Japan counts for about half of our total IOL sales. And that’s why Japan is so important. It’s a good gross margin area and it’s been a market we have been able to depend upon, so it’s surprising the first quarter was down. That’s unusual. It is nice to see the rebound even though it’s only one month into the quarter. But getting that product for Japan and Europe is important. Getting the nanoFLEX Toric for Europe is important, because it allows us to open more markets to the nanoFLEX IOL. So the back half of the year, I would expect to see progress from all three of those products in our markets outside the U.S. In the U.S., we will continue to focus on our nanaFLEX IOL and our Toric Silicone IOL, while as we - with our lower margin or lower selling silicone lenses, we’ve been moving away from that. But we’ve gotten pretty much of that wiped out. So overall, I still - I would continue to say, Chris, that as you look at us, our IOL business should grow 5% to 10% a year for the next two or three years. If we get some upside from the nanoFLEX family in Europe, it could be higher but I think that’s a fair way to look at our IOL business.

Our next question comes from the line of Bruce Jackson with Northland Securities.

So, just to recap on Japan. You are comfortable with the way the ICL sales went and then you are planning on launching the preloaded acrylic this quarter, is that correct?

Well, first of all, I’m not sure comfortable is ever word I use in regards to sales, but I like what I am seeing in Japan with the ICL. I am sorry, your question on preloaded, was that in regards to IOLs?

So with the IOLs, talk a little bit about how the new products came and just kind of flow for the rest of the year on the IOL side starting with the Preloaded Acrylic.

Preloaded Single Piece Acrylic, I don’t yet have a timeframe in terms of when we will get it to market and part of the reason I don’t have this time is that, we have a partner that we deal with on this. As you know we acquire the material from another manufacturer. They also sell the same product and are preloaded. So we got work together on that and I believe that meeting is in two weeks to put that schedule together. So, I would expect to see sales from KS-SP in the second half of the year.

Okay, and then, do you have an anticipated launch date yet for the nanoFLEX IOL in Japan?

No, we don’t, and that’s again another approval necessary through PMDA. So that’s something that we are working on in terms of the process, but there is no significant movement been yet made in that direction. So we don’t have an estimate for it.

Okay, was the European economy a factor at all with your European sales this quarter?

Well, it could have been Bruce. Again, the procedures seem like first they may have been challenged in Europe listening to physicians. We don’t have any real data on that from a quarterly basis in markets outside the U.S. But some of the markets continue to be challenged from an economic point of view, Spain being one of those in particular. But that may have had an impact. It was unusually slow though. I mean through -- I have to admit, though, through other quarters where there has been a lot of economic challenges in Europe, we have done well, but this quarter we did not.

Okay. And then one question for Deb, do you see these gross margins continuing to play out for the rest of the year?

Yes, I do and looking forward to it even improving to the 71% that we talked about as our target. Yeah, there was nothing unusual in gross margins during the quarter that would cause an increase like we’ve seen in other periods.

Right, and if anything, when you look at our fourth quarter gross margin was 69.8%. There were some things that helped the gross margin in the fourth quarter.

Exactly.

In terms of inventory reserves at the end of the year being reversed, that kind of stuff. None of that during the first quarter and we had a very nice movement overall. One of the things interesting in this other category too, it’s becoming small and smaller in revenue, but as Deborah said, the revenue we are getting rid of it is very low gross margin. So now, the other category from a gross margin perspective, what’s remaining there is starting to look pretty attractive.

Okay. So would you anticipate that gross margins continue to improve sequentially quarter-to-quarter, the same way that they did in 2011?

Yes, that’s -- the way our metric is, that’s exactly the way we mean it, to continuously improve each quarter and to reach 71 for the full year.

Our next question comes from the line of Raymond Myers with Benchmark.

I want to ask you about the tax rate. It was 50% in the first quarter, which is a big reduction from the over 70% in the second half of last year. I know that relates to this manufacturing consolidation. Can you give us some visibility to what we should expect the trend in the tax rate to be over the next several quarters?

Well, I think I said at year end, we are looking for a tax rate in the area of 40% to 45% for the full year and it really depends on the mix of sales between Switzerland and Japan and the U.S. We pay taxes in Switzerland. So the more profit that is there, the more taxes we pay. And if the mix of sales is different or of income is different in the U.S. or much lower in the U.S. than Japan, then our tax rate can be higher. So it’s difficult to say, but overall that’s our target for the year.

And exiting the year at approximately how low?

40% to 45%.

Well, if the full year is going to be 40% to 45% and we started the year at 50% in Q1, where do we exit in Q4, although steeper curve?

Well obviously it’s going to be something lower than 40%, may be 30% to 35%

Maybe not that much lower rate considering that our profits will continue to grow during the year and the larger profits will be in the second half which will push down that overall percentage.

Well, I guess we’d have to give you pass on that one.

Yes. Ray, we are not really seeing any benefit from our consolidation project. We won’t see that until 2014.

You don’t think you will get any benefit next year?

Maybe marginally but really, the full (inaudible) happens when the consolidation is....

As Deborah said in the manufacturing consolidation project, we do expect first quarter of next year just to get approval to start shipping from ICLs out of the U.S. That’s really where we start shifting the profit. So we may start to see some trickle through quarter-by-quarter and remember our approach there is to just move model-by-model. So it won’t be some big movement all at once. It will be kind of continuous through next year.

Okay. And so that sounds positive.

I mean, I think, I think you’ll see a definite improvement next year versus this year. But...

Let me ask you next about the Version4c. Can you update us on the accrual process, particularly in South Korea, Brazil and other markets perhaps India, where you were thinking you might get approval relatively soon?

Right. So what’s you are saying and what you’re pointing out is, that each one of those markets is different. In Korea, as we announced previously, we did get the V4b approved in Korea. We’ve not introduced the V4b because we’re waiting to see how quickly we can get the c approved. We just - we’d rather make just one transition instead of two. So the fact we haven’t shipped the b yet, tells you we still feel pretty good or still don’t know about the timing. So and we had a meeting here in Chicago with our Korean distributor and their clinical specialist, who deals with the Korean FDA and we are still in discussions whether or not a clinical would be required in Korea or whether they will accept the data we currently have. So that's one we’re working on every day, we just don’t know. China has the V4c lenses to evaluate. They have to go through an evaluation process of the actual lenses. So we’re basically on hold there, waiting for - waiting to hear from them when they have inspected them and improved them and they can discuss a timeline. India, also we’ve given India the data, we’re waiting back from them. Some of these markets could open up during the quarter, some in the second half. China may take till the end of the year, first of next year. It just depends because there are all different rules and all work at different timeframes.

You didn’t mention Brazil. I was wondering or hoping that we might get something relatively soon. Can you update us on Brazil?

Yeah, we got the Version 4 approved in Brazil and we hired a sales director for Latin America. We had some very good clinical meetings in Brazil. Actually one of the orders I alluded to not getting off the dock at the end of the quarter was for Brazil, because Brazil and Argentina the import rules, the regulations are changing and they are approving them one by one. So that was delayed but we feel very good about that market. We didn’t see any benefit from that market second quarter but we do expect to see during the second half of the year.

Our next question comes from the line of Jason Mills with Canaccord Genuity.

Hi, this is Christine [ph] for Jason. Thanks for taking the question. I wanted to just get some clarification on nanoFLEX toric launch in Europe. Has it started yet and if not, when do you expect it to start in the second quarter and with how many distributors who might be part of the initial commercial release?

Right, good question. We anticipate that we will use two or three distributors in Europe. We’ve used two on the nanoFLEX to date. So we will be expanding that a little bit with the Toric and I would say, I don't know if we'll make it during the month of May, or it may start during the month of June.

That’s very helpful. And then in terms of, you had such great reception of the ICL in Asia Pacific and I know part of that is because of the prevalence of high myopia there. But is there any learnings that you can take from what your distributors are doing, and what your own sales people are doing in Japan and apply that to Europe?

Yes, we do Christine [ph], that’s a good point. And we use Korea as our model, I mean we've got a distributor in Korea, though it’s had the product a few more years than some of these other markets. They’ve got to do a 13%, 14% market share of all refractive procedures with the ICL, they grew 37% first quarter. I mean their growth has been very good. They have been doing some direct to consumer, which we have tried to take some of the learnings from there and experiment in other key markets with that and we will continue to do that.

But anything specifically for Europe that you, can you tell us about some of the things that you are doing or applying in Europe?

Well, a couple of things we are doing in Europe is we are working with the larger distributors on some direct to consumer, both from - and as part of the reason that, that were increasing our department in terms of social media, we are adding two more headcounts to that to help these distributors. And that flows through webs, their own websites, physicians websites and also various social networking websites. Some of it is some of the more traditional direct to consumer, like signages on buses or subways or newspaper ads. And Korea started off doing some of those things and progressed all the way to doing last year movie theater ads and videos in that regard. So we are - we continue to experiment with several different ways in direct to consumer. The lowest cost is through the social networking and that’s the reason we are making such an investment this year in that area.

(Operator Instructions) And I am showing no further questions at this time. Please continue.

Thank you, operator. And thank all of you for your participation on our call today. I hope we’ve answered all your questions. But if not, please feel free to give us a call or an e-mail and we look forward to providing you an update on our progress during our second quarter call in August. Have a good evening. Thank you.

Ladies and gentlemen, this does conclude our conference for today. Thank you for your participation. You may now disconnect.