National Vision Holdings, Inc. (EYE)

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Advanced Medical Optics, Inc. (EYE)

Q4 2007 Earnings Call

February 14, 2008 10:00 am ET


Sheree Aronson - Corporate Vice President, Corporate Communications and Investor Relations

Jim Mazzo - Chairman, Chief Executive Officer

Randy Meier - President, Chief Operating Officer

Michael Lambert - Chief Financial Officer


Joanne Wuensch

Peter Bye

Gerard Hope

Mark Goodman

Larry Singleton

Steve Willoughby

Larry Bruce

Mark Mollicken

Frank Pinkelton



Welcome to AMO's Fourth Quarter Full Year 2007 Earnings Conference Call. For a copy of the press release issued this morning, call 714-247-8455 or visit www.amo-inc.com. This call is being recorded and a replay will be available at approximately noon Eastern Time today through midnight February 28. To access the replay, dial 800-642-1687 and enter pass code 31353621 or visit www.amo-inc.com.

I am pleased to introduce Sheree Aronson, Corporate Vice President of Corporate Communications and Investor Relations. Ma'am you may begin your conference.

Sheree Aronson - Corporate Vice President, Corporate Communications and Investor Relations

Thank you and good morning everyone. Joining me are Chairman and CEO Jim Mazzo; President and COO, Randy Meier; and CFO, Michael Lambert. After some prepared remarks, by Jim and Michael, all three gentlemen will take your questions.

During the call certain statements such as forecast of financial information, guidance, financial targets and goals, strategies for growth, expected product performance and expectations for market and procedures, and the impact of a potential US economic downturn, projected regulatory approvals, benefits and launch dates of new products, expectations for the multipurpose solution re-launch and for niche initiatives to reduce cost and any other statements that refer to AMO's plans or estimated future results are forwarding looking statements. As such they reflect our current analysis of existing trends and information and represent our judgment only as the date of this call. Actual result may differ based on various factors affecting our businesses.

Review today’s press release and our recent SEC filings, for more information about these risk factors, specifically the discussion under the heading "Risk Factors" and our 2006 Form 10-K and third quarter 2007s 10-Q. You'll find these and other documents in the Investors section at www.amo-inc.com or by calling us at 714-247-8455.

Please note that year ago sales comparisons and the tables in today’s release do not include any IntraLase or WaveFront Sciences related sale. Since we completed these acquisitions during 2007, the pro-forma sales growth rates reflect comparisons that include the IntraLase and WaveFront Sciences performance as they see that acquisitions had occurred in all periods presented.

Note also, that our adjusted EPS guidance is provided on a non-GAAP basis and excludes the impact of charges and write-offs related to acquisitions, reorganizations, and re-capitalization, unrealized gains and losses on derivative instrument and other periodic or one time charges. Refer to the Investors section of our website under historical financial for more information on our use of non-GAAP measures.

With that I will pass the call to Jim.

Jim Mazzo - Chairman, Chief Executive Officer

Thanks Sheree and good morning everyone. Our fourth quarter and full year 2007 results showed a strong finish to a year marked by both exciting strategic opportunities and tough challenges.

2007 sales exceeded expectations and our adjusted loss per share was well within our guidance range. Key factors driving performance were, the timely integration of IntraLase into our laser vision correction business, which is delivering meaningful methods around the globe, rising cataracts sales across all product categories fueled primarily by our Tecnis IOL platform and WhiteStar phacoemulsification technology and our ability in our eye care business back on the growth path within disciplined implementation of a global product recall and market reaction with our Complete Easy Rub product.

We approved, we could look beyond obstacles focused on our core strength and execute. And as we move into 2008, we are very confident in AMO's ability to continue to drive our strategy forward. However, 2008 also presents challenges. Mounting recession fears are heavily impacting consumer discretionary spending and in turn elective refractive procedure volumes.

Today, anxiety has replaced optimism in many households. We are seeing the impact of this in our US laser vision correction business. As the breadth of the negative economic news increased throughout the first six weeks of this year, we have seen a significant slowdown in our procedure sales. This is frustrating considering that our fourth quarter volume struck pretty consistent with historical patterns and we faced 2007 with domestic procedures up over 67.

Based on our outlook so far 2008 and our discussions with many corporate and surgery customers, we now expect the US excimer procedures to be down approximately 10% in 2008 versus our prior expectation of 6% growth. We are also expecting of modest rate of growth for US femto procedures as well as refractive IOL sales then we had previously forecast. This has allowed us to reduce 2008 guidance.

And as we can see in slide 4, our sales of $1.22 billion, $1.24 billion, we now expect adjusted earnings per share of between $1.25 and $1.45. Let me clear, we expect our laser vision correction business to outperform the overall US market, which we expect to be down approximately 15% in 2008. The benefits of our unique and meaningful growth drivers are supported by recent trends.

In 2007, AMO's US excimer procedures rose even though the market was down. And looking over the past two years, our pro-forma US laser vision correction Dallas sales growth has exceeded the US market LASIK Dallas sales growth. Finally, we continue to increase our US laser vision correction sales per procedure as custom and femtosecond penetration grows.

Annual dual laser platform is without peer and industry abduction of our insulated laser continues to drive our market share higher. Our custom mix continues to decline and our international sales continue to grow double-digit rates. These are all important contributors that together can buffer our exposure to US slowdown.

Nevertheless, we believe that a more conservative view is prudent at the current time. The book is a perspective understands US laser vision correction procedure sales represented about 13% of our fourth quarter consolidated sales. Moreover sales from our (Inaudible) and eye care products, which represented more than two-thirds of sales in the fourth quarter, have little to no exposure to consumer discretionary spending. While it's tougher for our companies to operate in difficult economic environment, opportunities exist for those best situated to take advantage.

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