Good day, ladies and gentlemen. Welcome to the STAAR Surgical Third Quarter 2014 Financial Results and Webcast Conference Call. My name is Lacy, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of the presentation. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Doug Sherk. Please proceed.

Thank you, Lacy. Good afternoon, everyone. Thank you for joining us for the STAAR Surgical conference call to review the company’s financial results for the third quarter which ended on October 3, 2014, as well as recent corporate developments. The news release detailing the third quarter results as well as the Chinese approval yesterday to market ICO with CentraFLOW technology in China that release was just after market closed this afternoon and is now available on STAAR's website at www.staar.com. In addition, a slide presentation will accompany management management's remarks during today's call. 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 are listening via telephone to today’s call and would like to review the slides that accompany management’s remarks, please navigate to the live webcast as I’ve just reviewed, and choose the no-audio/slides-only option. In addition, an archived replay of the event will be available on the STAAR website. Before we get started, during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the corporation’s projections, expectation, plans, beliefs and prospects. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the Safe Harbor statement in today’s press release as well as STAAR’s public periodic filings with the SEC, including the discussion in the Risk Factors section of our 2013 Annual Report on Form 10-K and our quarterly report on Form 10-Q for the period ended July 4, 2014. Investors or potential investors should read these risks. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. In addition to supplement the GAAP numbers, we have provided non-GAAP adjusted net income and diluted net income per share information that excludes manufacturing consolidation expenses, Spain distribution transition expenses, gains or losses on foreign currency, fair market value adjustments for warrants, stock-based compensation expense and FDA panel and remediation expenses. We believe these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future performance. Also, in order to compare our performance from period-to-period without the effect of currency fluctuations, we apply the same average exchange rate application to the prior period or constant currency rate to sales. A table reconciling the GAAP information to the non-GAAP information is included in our financial release, which is available on our website and in our slide presentation. Now, I would like to turn the call over to Barry Caldwell, President and Chief Executive Officer of STAAR Surgical.

Thanks Doug. Good afternoon everyone. Thank you for joining us on the call today and on the webcast this afternoon to review our third quarter results as well as an update on our performance for the first nine months of 2014. With me today on the call is Stephen Brown, our CFO. I will begin our discussion on the business is afternoon with an overview of the third quarter results against our annual key metrics we established at the beginning of this year. Steve will then offer detailed look at key third quarter and first nine-month financial results. I will then come back and provide some key operating updates from the quarter and we will open it up then for your questions. The five key metrics we established at the beginning of the year are the annual objectives that we established for the business. As you can see, related to revenue growth, ICL growth, our gross margin improvement, profitability and completing our manufacturing consolidation project. With 10% revenue growth for the first three quarters of the year and 12% growth in constant currency, we are achieving the upper end of the overall revenue growth objective year-to-date. The third quarter resulted in good revenue gains for IOLs and other product sales while ICL revenue was basically flat, due primarily to decline in what is normally our largest market, Korea. Reports from key refractive practices in Korea have detailed how refractive procedures were impacted from quite negative media coverage of LASIK complications. We will go into more detail in a few minutes, but with Korea off to a good start in the first half, being up 18%, we certainly did not expect to see ICLs sales decline in the market during the third quarter. For the third quarter, total revenue grew to…

Thank you, Barry. Good afternoon, everyone. There are several areas on which I will focus my comments. GAAP and non-GAAP P&L results, gross margin expansion challenges, operating expenses and below operating income line items, such as our tax provision and other income. First, let's review the P&L highlights for the third quarter. As Barry said, revenue increased by 6% as reported and 9% in constant currency. Gross profit decreased by 2%. I will review the gross profit margin profile and operating expenses in a moment. The GAAP net loss for the third quarter of 2014 was $2.7 million or $0.07 on a per diluted share basis, compared with a net income of $525,000 or profit of $0.01 on a per diluted share basis in the third quarter of 2013. On a non-GAAP basis, adjusted net income for the quarter was $87,000 or $0.00 per diluted share as compared to the adjusted net income of $1.7 million or $0.04 per diluted share reported in the third quarter of 2013. On a GAAP basis for the first three quarters of 2014, sales increased by 10% while gross profit increased by 6%. Overall, we lost $0.15 as compared with the net income of $0.04 per share. This has been driven by additional investments in R&D and sales and marketing, negative impact on the other income line and increased provisions on the tax line. On a non-GAAP basis, we earned $0.05 in adjusted net income as compared to $0.17 during the same period of 2013. There are several key headwinds impacting our gross margin for the nine-month period ending September, which in total has had a negative impact of approximately 260 basis points. First, the increased start-up cost of ICLs caused 136 basis point negative impact, we are still selling through higher cost inventory…

Thanks, Steve, Now, let update a few operational activities, including progress on the warning letter, regulatory approvals in various stages and new clinical data evolving from three years of CentraFLOW technology being in the market. First, let's address our progress on the warning letter. We continue to stay focused with a very comprehensive review of our entire quality system. It has taken a high level of intensity from our internal teams aided with the benefit of outside resources having extensive experience in this area. I want to recognize and thank our employees and outside consultants for their efforts to improve our quality systems not just for today, but for many years to come. Our diligence in resolving this matter has included a total of eight responses to the FDA with data. This includes our responses to the agency on the issues identified in the May warning letter as well as the monthly progress reports to which we proactively committed to identify and resolve additional quality opportunities within our processes. On October 15th, we submitted a response to the compliance branch regarding the current selection processes for the approved myopic ICLs. We have made substantial progress in responding to the issues identified in the warning letter and also continue to follow up on additional opportunities for improvement in quality to which we have committed in our monthly updates. At some point, we expect the agency will come back in for another inspection. We do not yet know when this will take place. Now, let's turn to the regulatory approval process. First for CentraFLOW ICL in China, reported what we believe was a successful expert meeting you will recall back in May that was followed by a technical recommendation of approval by CMDE on September 24th. Yesterday, we learned of the marketing…

Thank you. (Operator Instructions) Our first question will come from the line of Matthew O’Brien with William Blair. Please proceed. Matthew O’Brien - William Blair: Good afternoon. Thanks for taking the questions. Just hoping if we could start with Korea. I know, Barry that that has been an area that has been problematic in the past as far as some of the distributor inventory factors that gotten you historically, but this time around it seems like it's more the market issue. It seems like they could persist for a while, so I just want to get a sense for your comfort level and reaccelerating performance there. Then if this distributor has done any kind of this direct-to-consumer-type advertising via TV campaigns in the past and have seen relatively quick success with those type of program.

Yes. Matt, thank you, and really very good questions. First, let me say and we have gone through in detail of the transcript of the media coverage. This, I don't know what's the right word is. It's the worst. It's the strongest that I have seen for any other market. I mean, it was really very much one-sided. They basically took patients who had complications from LASIK and we know overall the percentage is not high, but they found seven or eight patients and this theme of the patient having given up basically their life dreams because of LASIK complications, which is just very hard-hitty. We got calls from multiple large refractive centers that patients just stop coming in the door on that Monday morning after the media show was exhibited on NBC. Now we have learned through what has happened in other markets. We have seen this in China. We have also seen it in the U.S., but I think we are better prepared this time, so that's why am very anxious to see what we have learned, how that can translate into turning the market around and the timing is good. In the sense, typically January is the highest month of the year in Korea for all refractive procedures and the first quarter is the highest quarter. Our distributor Woo Jeon is obviously investing a lot of dollars. We have been doing consumer interfacing. We are trying to understand the right messaging for refractive patients regarding the ICL and we are integrating that in with Woo Jeon into the direct-to-consumer that they are going to do. Now in the past, Woo Jeon has done, a movie theater ads, they have Bus Wraps, but this time for the first time ever, we are going to hit it television commercials and also on the other end with a more aggressive online presence, which we haven't had that strong in Korea. While we can't predict anything, I am very anxious to see if what we have learned in the past from other markets can translate into a quicker return of refractive procedures in the market. Matthew O’Brien - William Blair: Okay. Fair enough. Then, Barry, you know, we have all been waiting for quite a while for the Toric approval and I am just curious if you can give us a little bit more color as far as what might be taken the agency so long to make a decision at this point versus your expectations maybe middle or later last year. Along those lines, is it still safe to assume that Toric and warning letter are completely separate issues at this point?

Okay. I hate to be able to say don't know and don't know, but let me try to say a little bit more than that. Obviously, at this point of the stage of the Toric ICL review, it is we want to be very careful. We do know they are reviewing everything that we send them. We do know that the last set of questions they had regarding the Toric ICL calculator system, they did put a due date on it. As I said that was on October 3rd be beat it by a week. That was the first time since the panel meeting they had put a due date on any request ahead of us. Now obviously, before the panel meeting, there were a lot of due dates they had give us, so we don't know that if that means anything or not, we do know they are actively reviewing it and all we can do at this point is wait to learn what the next steps would be. Now, in regards to the warning letter and the impact, there is really no way for us to know. I mean, the thing that is a little different here is that our submission for Toric ICL approval as you know is for product made in Switzerland and we have built inventory which remains in Switzerland for Toric ICL launch in the U.S. We will obviously eventually move that to the Monrovia facility, but our quality system as was examined by the auditor here in Monrovia is what produced the warning letters. Will that or will that not have an impact? We don't know. It could result in an approvable letter until the warning letter resolve. We will just have to wait and see and work through you know any additional requests we get along the way. Matthew O’Brien - William Blair: Understood. Thank you.

Thank you.

Our next question comes from the line of Jim Sidoti with Sidoti & Company. Please proceed. Jim Sidoti - Sidoti & Company: Good afternoon. Can you hear me?

Hi, Jim. Yes. We can. Matthew O’Brien - William Blair: Great. I just want to be clear on the direct-to-consumer campaign in Korea, will that be the distributor who will pays for that?

Yes. Good question, Jim. Yes. We are providing resources and assistance, but the cost of doing the television commercials and doing the movie theater ads, they are all been budgeted by Woo Jeon. Jim Sidoti - Sidoti & Company: Okay. Then moving to China, you said all you need now is an approval certificate. Is that kind of mechanical of that process at this point? I mean, is there is there anything that could hold that up?

Nothing that we could foresee and it is very typical that that is issued within 10 working days in China. Jim Sidoti - Sidoti & Company: Okay, so there is no data or nothing that you have to do. You are just pretty much have to wait for the process to work?

That's correct. We have been through all of other major tests in terms of the technical side and the marketing side. Jim Sidoti - Sidoti & Company: All right, and then following up on the Toric approval. I mean, are you at a point where you could come in one day and have the approval letter there? I mean, is that in the realm of possibilities?

We just don't know. In my dreams? Yes Since I haven't had LASIK, I can still dream. Jim Sidoti - Sidoti & Company: Right, and then finally, Barry, you announced about, I guess, a couple of [releases] got out you will be leaving in March. What is the process for finding a new CEO?

Sure. First of all, the Board has put together a committee, three members on that committee. They are currently in the process of interviewing search firms. I believe, they are interviewing four firms. Their goal is to have one of those firms selected before Thanksgiving to begin the search. Then they will work through the process with search firm in finding a successor. Jim Sidoti - Sidoti & Company: All right, there is one more question. On the slides, the first slide regarding guidance, I think, it was top-line growth of 10% 12% for the year and you are in that range two, three quarters.

Our annual objective was 8% to 10% for the year. Jim Sidoti - Sidoti & Company: Okay. I am sorry.

Yes. That was as reported and we ended two, three quarters, we are at 10% as reported and 12% on a constant currency. Jim Sidoti - Sidoti & Company: Do you still think that 8% to 10% is a viable target considering what has gone on in third quarter?

Well, that is an annual number. All of our annual objectives were set at the beginning of the year and we are continuing to run against those. Jim Sidoti - Sidoti & Company: Okay.

Yes. Go ahead. Jim Sidoti - Sidoti & Company: I guess, do you still think that that's achievable?

It is still our annual objective. I would say, we certainly didn't expect in the third quarter to see the yen value turn back. It is still up around 109, even though we thought it was headed back down. You know that is something that I will, I think, continue to be a watch out for us in the fourth quarter. Jim Sidoti - Sidoti & Company: Okay, but outside of currency, do you think that that 8% to 10% annual growth is still an achievable target?

Certainly, still our annual objective and again we are at the highest end of that after three quarters. Jim Sidoti - Sidoti & Company: Okay. All right, thank you.

Thank you, Jim.

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

Thank you for taking the questions. If I could maybe just following on Jim's questionnaire, on the July 31st call, after the second quarter, I realize you don't give guidance, but you referenced that your corporate objectives were still in 8% to 10%, but you thought that corporate growth would accelerate in the second half versus the first half of the year. Clearly it wasn't the case in the third quarter, so I realize you don't give guidance. Do you still expect total corporate growth to accelerate in the second half versus the first half? If not, kind of help walk us through what changed over the last 60 days outside of the deterioration that you saw in Korea in particular. Thanks. I have got a follow-up after that.

Sure. Well, obviously, that's a pretty big deterioration. I think, as I told you when the quarter started that Korea would be down nearly $1 million in sales and we have $400,000 negative impact on the yen. We probably would have ended up about what we finished up in terms of projecting where we were. As I just said to Jim, the impact of yen, looks like it may still be a factor on the negative side during the fourth quarter. After the end of the third quarter, we started to see it going back to the 102 to 103 range, but I think as of today it is still crept back up to like 109, so that will be an impact during the fourth quarter. We know what we know, we don't know what we don't know. As we look at fourth quarter, going forward, we are anticipating a good quarter overall and we are anticipating to run that against our annual objective that we established at the beginning of the year.

Okay. Then, Steve, I want to thank you for this slide that you had in here on gross margin. That was a great bridge there in terms of the different puts and takes and how it affected the quarter. Could you just maybe talk to us a little bit thematically here as we look forward if hypothetically end market demand in Asia-Pac for the refractive procedures in total remained under pressure here. Can we continue to see the demand that we have seen so far, which is very favorable in IOLs side. With that backdrop, how would that kind affect the prior guidance that the company gave or target, I guess, I should say that the company gave on gross margin. Maybe what is more realistic now as we look to 2015? I realize you have objectives out there for '15 yet, but.

Yes. We don't have those objectives yet set, but we do expect for our unit costs on the ICL to go down, because to a large extent the higher cost have been attributable to the winding down at (Inaudible) and the ramp up in the U.S. As I said, the trend in the U.S. on ICL unit costs has been positive and positive in terms of our labor content and our materials costs and even on overhead. We are still going to have to headwinds with the higher IOL mixed and also the injector system volumes. Those are going to continue to be drags on our margin going forward. I would anticipate that our ICL average selling prices will continue to improve.

Then maybe just quick, and then I will get back in the queue.

Chris, let me just jump in on that too just to add one thing. I think, as we are going through the process right now with looking at the IOL demand for next year along with our third-party partner in making the lens that will have an impact on how we look at 2015. Obviously, something like Toric approval in the U.S. would also have an impact, so I think after we finish the year we will sit down and look to reset overall the expectations for gross margin in the year, but as we look in the overall set of circumstances, taking aside for a moment the IOL expansion, I think we still see what we projected for the rest of the line to be in line with what we said in the past. Probably what is going to happened though is our IOL growth factor is going to go higher than we anticipated as we have seen this year.

Okay. Then I guess, just kind of finally, when we look at the coming quarters or I should the current quarter, the fourth quarter, kind of help us think about the materiality of stocking versus end market demand, because clearly you are going to now have the ability to do some initial shipments to distributors in China. You have preloaded ramping up in Europe, and potentially maybe some better shipments there in the fourth quarter typically, which we have always seeing in Korea in anticipation of the March quarter. Is that enough to help you get your corporate objectives for the full year or do you have to have that I guess to get to your corporate objectives on top-line growth for the full-year? I will get back in queue. Thank you.

Chris, jump back and I don't know if I understand your distinction there at the end.

Yes. He said, do we have to or do is it enough.

I guess, I am trying to discern is are you banking on that in addition to end market growth to reach those corporate objectives of 8% to 10% or would that be.

Okay.

Or would that be additive beyond just what you are seeing in the end markets to get you to those corporate objective of 8% to 10%.

When you say banking on, what are you talking about? Are you talking about? Are you talking about stocking up on CentraFLOW in China?

Most definitely, as well as preload in Europe and other places where you now have more capacity.

The answer is, we are not banking on it.

Just to be clear, you are assuming you don't see traditional kind of 4Q stocking to get to your corporate objective of 8% to 10% for the year?

It's the normal order pattern, but you are talking about preloaded and if you are talking about CentraFLOW, and you are asking are we banking on that, no we are not. We do project normal order patterns.

Understood. Thank you.

(Operator Instructions) At this time, I show that we have no questions in queue. I would like to turn the call back over to management for any closing comments.

We would like to thank all of you for your participation today on the call and the webcast. We look forward to providing you with an update on our progress early next year. Thank you very much and good night.