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STAAR Surgical Company (NASDAQ:STAA)

Q4 2012 Earnings Call

February 27, 2013, 04:30 pm ET

Executives

Doug Sherk - IR, EVC Group

Barry Caldwell - President & CEO

Deborah Andrews - VP & CFO

Analysts

Matthew O’Brien - William Blair & Company

Chris Cooley - Stephens, Inc.

Jason Mills - Canaccord

Bruce Jackson - Northland Capital Markets

Raymond Myers - Benchmark

Jim Sidoti - Sidoti & Company

Rick D'Auteuil - Columbia Management

Jack Fraser - Seamark Capital

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the STAAR Surgical Fourth Quarter 2012 Financial Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Wednesday, February, 27, 2013.

At this time, I would like to turn the conference over to Doug Sherk, with the EVC Group. Please go ahead, sir.

Doug Sherk

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 fourth quarter which ended on December 28, 2012.

The news release announcing the fourth quarter results crossed the wire about 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 are listening via telephone to today’s call, I would like to review the slides that accompanying management’s remarks. Please navigate to the live webcast as I have just reviewed and choose the no-audio/slides-only option. 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 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, expectations, plans, beliefs and prospects. These statements are based on judgment, 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 a discussion in the Risk Factors section of our 2011 annual report on Form 10-K and suggest quarterly reports on Form 10-Q. 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 and transition expenses, gains or losses on foreign currency, fair market value adjustments for warrants and stock-based compensation expense. We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future performance. 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 let’s turn the call over to Barry Caldwell, President and Chief Executive Officer of STAAR Surgical.

Barry Caldwell

Thank you, Doug, and good afternoon, everyone. And thank you for joining us today for our review of the fourth quarter and fiscal year 2012 results as well as our first look at how 2013 is shaping up. With me today on the call is Deborah Andrews, our CFO. I will start our call this afternoon with an overview of the fourth quarter results and operational highlights for the year as well as how we did against our metrics. Deborah will provide a detailed look at our fourth quarter financial results and review our progress to-date on Project Comet; that’s our manufacturing and consolidation project. Then I’ll provide a perspective on our progress in 2012 which will lead to our key metrics for 2013 and finally take your questions.

When you look at all of the top sales number for the first quarter, yes it only reflects 1% growth. With total ICL sales down about 2.5% from a year ago period, it might be hard to imagine why with the exception of the results from Korea, we felt the quarter was a pretty strong one overall. Yes, short of where we had planned or expected, let me first review our key metrics and then explain our perspective.

From the key metric view, we only achieved 1.5 of our five objectives if you would. First, we did not achieve double-digit revenue growth for the fourth quarter. If, and I only say if, the Korea results were out of the revenue line, we would have grown over 10%, but of course you can’t do that and overall we did not achieve this metric. Fourth quarter ICL growth excluding Korea was 18% which would have also fallen short of the 25% growth metric.

Third, we did not achieve our targeted 71% gross margin for the year. However, we did increase our gross margin by 190 basis points for the entire year and this is a seventh consecutive year in which we expanded gross margin percentage. We’ll give you more detail later, but the lower ICL sales as an overall percent of sales are higher KS-SP sales on the IOL side and also our higher other product category sales during the quarter resulted in a reduction in the gross margin percentage for the quarter, which then didn’t allow us to reach the annual goal we had.

Fourth, though we were profitable on a non-GAAP basis, we were not profitable for the quarter on a GAAP basis. And finally, we made very good progress on our manufacturing consolidation project; we are basically on target with product, quality and expenses and achieved some very key milestones.

Now let’s turn our overall ICL and IOL business for a moment before we address Korea, which is our largest ICL market. First, why do we feel so strongly about our ICL business overall? Our total ICL business for the quarter, without Korea, as I said was up 18%. European ICL grew 25% I’ll come back to talk more about this in a minute. Japan grew 45%.

In the U.S., where the overall refractive surgical market appears to be declining according to other publicly traded companies, we grew ICL sales by 9%, across the board with exception of Korea we grew sales and as I will explain in a moment we grew market share in virtually every focused market on which we have data including Korea for the year.

Another factor behind our belief that the fourth quarter was pretty strong from a topline, topside perspective was our turn in the IOL business. Year-over-year, IOL sales in the fourth quarter were essentially flat, but they grew 12% or $734,000 over the third quarter of 2012 reflecting the markets acceptance of our recently KS-SP IOL product and we will talk more about this. We had supply issues here related to third-party supplier and this will continue for some time. We ended the year with about $0.5 million in back order on that product alone.

So let’s turn to Korea, what happened in Korea, what are doing do about it, and what do we expect in 2013? Our distributor partner adjusted their inventory levels to a degree carried at year-end and as a result our sales to them were down 50% as compared to the fourth quarter of 2011. Now we’ve titled this slide Korea on the Rebound and here is why we have done that. In 2012, our total ICL unit sales to Korea did 17% according to markets scope refractory procedures overall in Korea declined during the year, yet our distributor actually sold more Visian ICL to the end customer, and that's the ICL gained market share in Korea. Their decline in purchases from us was directly related to the reduction in inventory levels. During January, our distributors sales to end customer setting new monthly record for their organization and through the first two months of this year, their purchases from us are up 60% from the first two months of 2012; again reflecting the decline in their inventory levels and the need for product in January and February.

Let me provide you with the little more detail on why we believe Korea is on the rebound, here are some of the actions which have been taken place in the last few months. First, you may recall in November, Don Todd, our President of the Asia Pacific market and I went to Korea to discuss the year and our plans for 2013. We gained a very good understanding of how we need to work together and what we need to do to drive the ICL to the next level of market share in Korea.

In December, we hired a STAAR employee. This is the first one we ever had in Korea who will work everyday with the distributor’s organization to assure that additional support we've developed at STAAR can be transferred and is helpful to them and they are driving the increase of ICL market position. Some of the support that we will work to provide with them as marketing assistance, access to our work and knowledge of the social media marketing area and consumer awareness and assist in the launch of new products.

January was their best month ever, beating their previous monthly record and their previous monthly record in their history by 7%. The President of our distributor partner visited Monrovia for two days earlier this month. They reconfirmed their commitment of focus to the ICL business and why it’s so important to their overall success.

We spent time clarifying roles and the direction for this year. Our new employee will now actually be housed in their offices in Korea. Finally, during this visit we spent time on the regulatory status of the CentraFLOW technology in Korea, working with their team who are in the process of answering [KFDA’s] questions regarding the technology.

We believe we'll have approval by mid-year. And I'm committed to going back to Korea to participate in the launch. There is no doubt we are at the highest level of alignment and communication we've ever had between the two companies and I'm confident this will lead to more effective marketing and increased sales of the ICL in Korea.

And just to reiterate, we are off to a strong start in Korea this year. Sales were up 60% in the first two months of this year versus last year.

Now let's look at the other markets. This slide shows how we did in the other top 10 markets outside of Korea. In Europe, the increase of Visian ICL sales during the fourth quarter was 25%. That's reflecting the growing acceptance of our new ICL CentraFLOW technology.

Nearly 14,000 ICLs with the CentraFLOW technology have now been implanted and the lens continues to be very well received by surgeons and patients. Within Europe, we had some very impressive growth as you can see Germany up a 132%, Italy a 120% and UK up 47%. In Spain, we'll recall we moved to a direct sales model late in the second quarter ICL sales were up 24%.

Now that sounds low but since we moved to a direct model you would expect this number to be higher. But under the distributor model in 2011 there was a purchase of inventory for at year’s end for the New Year which obviously does not occur in a new direct model of configuration.

So our sales in Spain only grew 24% in the fourth quarter. However, during the first two months of 2013, our sales to customers in Spain have already exceeded our total sales to the market for the first quarter of 2012.

What's CentraFLOW is doing in Europe, let's look back, I mean I think most of us thought at the beginning of the year, Europe would be a challenge for medical device companies. Our third quarter sales in Europe were up 29%. Now, a lot of that was attributable to the fact that was the first quarter in which we had direct sales in Spain rather than going through distributor. So obviously, our gain in Spain was a big part of that, but then we followed the fourth quarter with a 25% increase in Europe, and Spain was just average because of that year-over-year comparison.

Now, Europe is up 55% for the first two months of this year and I would say, that reflects a couple of things. We will talk about a minute our increased headcount but also the growing acceptance of our CentraFLOW technology where it's available and that’s in Europe.

Now, Asia Pacific, again not including Korea, our sales were up 23%. The growth was led by Japan, which I’ve already mentioned had a 45% increase in ICL sales during the fourth quarter. Our annual ICL unit volume in Japan doubled during the year while refractive procedures declined at a double-digit rate in that market, again showing increased market share for the ICL.

In China, our sales growth partially rebounded from the continuing downward pressure on refractive procedures from the negative LASIK publicity out of Taiwan early in 2012. Despite these challenges, we grew ICL sales by 38% during 2012 in China, which reflects again an increase in the overall market share for the ICL as compared to the market scope data.

Now let’s turn to the US, ICL as I said, increased 9% during the quarter largely the result of our increased promotional activities including benefits from recently launched social media marketing programs.

We saw increases on both the civilian and the military sectors during the fourth quarter. These results are extremely encouraging particularly in light of recent disclosures suggesting a decline in refractive surgery in the US.

One of the developing strategies in which we invested is in social media market and that is to create a better consumer awareness of the premium alternative to LASIK, the ICL. Some of these key measures revealed we are making progress. Visits to our visianinfo.com website increased to 122% year-over-year.

We generated over 600 patient leads for ICL surgeons most of these in the final months of the year. Viewing of the Visian ICL on YouTube increased 10 times during the year of 2012 versus 2011, over 60,000 visits to our new Visian ICL blog during the second half of 2012.

Another initiative was created, was to create I should say a newly designed and more user friendly Visian ICL website, that website is www.visianinfo.com. We just recently learned that our new site received the best-in-class award in the medical category from IMA Interactive Media Awards. There were five categories in which the scoring took place. And we received 100 on content and 99 on feature functionality, a perfect score was 100.

Deborah will provide more details on our financial performance in a moment. But now I would like to just turn to a few operating highlights from 2012.

During the year, we took significant steps to position the company for growth in 2013 and beyond. These include the addition of 19 new sales of marketing personnel over the last 15 months, two of these individuals we hired at the end of last year. And you can see by this chart overall that’s a 39% increase in headcount in our three regions.

Europe as you can see, more than doubled our sales organization there. Again, I would say this had some impact the second half in Europe with our growth in ICLs and what we have seen early in 2013.

Now looking at Asia Pacific and North America remember we are direct in US and Spain and so that’s why the percentages wouldn’t be that high overall. But in total, it’s a 39% increase which is a significant investment for the company. We also took significant steps to enhance and promote social media and messaging on the Visian ICL which I have already demonstrated the results.

We increased our R&D spending by 10% during 2012 to support the introduction of additional technologies to our key markets later in 2013 and beyond. For example I have already mentioned that we anticipate receiving regulatory approval of the CentraFLOW technology in Korea in mid-2013.

We have the same timeframe for approval of this technology in India as well. R&D resources were also focused on the Version 5 ICL which we planned to launch in Europe full launch at the ESCRS meeting during early October. Prior to that, we should have a premarketing launch during the first few months of the third quarter.

The Version 5 ICL will be preloaded with new proprietary technology and the optics will be enhanced. Of course, the continued successful execution of project comment which is designed to significantly lower our tax rate for many years and increase our gross margin through manufacturing and consolidation was another very worthwhile operational highlight during the year.

Deborah will update you more on this during her remarks. But I just like to add that we are on time, we are on schedule, we are on budget, product quality has been great, product supply has been great and I really want to thank all of our employees worldwide, so much work has been done by employees in Japan and Switzerland who are going to lose their job but they have done everything they can to make sure this transfer is successful, and I think for a company of our size to say we are on budget, we are on target is pretty good to say in after 2.5 years of a 3.5 year project. I believe these investments and this progress will position STAAR for a return to overall good growth in both revenue and income.

Now I'll turn the call over to Deborah for more review of the fourth quarter financial highlights. Deborah?

Deborah Andrews

Thanks Barry. Good afternoon everyone. While Barry has discussed the top line in some detail, let me add a couple of items. ICL sales represented 53.2% of total sales during the fourth quarter and 55% for the full year. IOL sales represented 41.2% of total sales in the fourth quarter and 40.7% for the full year. The other product categories which has been in decline due to our intentional [deamphesation] actually grew in the fourth quarter to 922,000 due to increased injector sales to our Acrylic lens supplier for the KS-SP. This increase was an additional driver to our declining gross margin year-over-year.

I will discuss gross margin in a minute but first let's review operating expenses. Operating expenses for the fourth quarter including manufacturing consolidation expenses increased 15% to $12.4 million. Manufacturing consolidation expenses were $656,000, an increase of 10% over the prior year. Our operating expenses before manufacturing and consolidation expenses were up $11.8 million, up 16%.

As Barry decreased, this increase was primarily due to our investment in the global marketing and selling expenses including the addition of 17 new employees in 2012 and 582,000 related to the change in distribution in Spain to direct model. We estimate the annualized cost of the headcount additions will be approximately $2.5 million and the expense associated with transition in Spain will continue through the current quarter, after which time the normal logistic costs of being direct in the market will begin.

In addition to the investments we made in sales and marketing, we also made investments in R&D and our G&A increased $261,000 due to an increase in non-cash stock based compensation expense. Our net loss for the fourth quarter of 2012 calculated in accordance with GAAP was $1.4 million or $0.04 on a per share basis compared with net income of $109,000 or breakeven on a diluted per share basis in the fourth quarter of 2011.

Gross margin for the quarter was 67.8% down from 69.8% in the fourth quarter of 2011 and reflected the lower overall sales mix of ICL and increased sales of the KS-SP IOL which carry a lower gross margin outside of Japan. In addition sales of our preloaded injector parts to Acrylic lens supplier which are included in other product sales also negatively impacted our margins for the quarter.

Now to provide investors with a better basis on which to compare results and understand our business we are also reporting net income on an adjusted basis, which excludes manufacturing and consolidation expense, Spanish distribution transition expense, gain or loss on foreign currency transactions, fair value adjustment of forms and non-cash stock based compensation expense. Excluding these items, adjusted net income for the quarter was $495,000 or $0.01 per share compared to adjusted net income of $1.5 million or $0.04 per share in Q4 2011.

We ended the quarter with $21.7 million in cash and cash equivalent on the balance sheet and included the $3.5 million cash gone down as required under the terms of our revised line of credit with (inaudible) bank at a lower annual interest rate. This compares to $19.8 million of cash at the end of Q3 2012 and $16.6 million at the end of Q4 2011. We used $489,000 in cash for operations in the fourth quarter. Our team continued to successfully implement project comment during the fourth quarter. Specifically, we completed validation of B4, B4b and B4C ICL, initiated manufacturing and shipped the first US manufactured Visian ICLs to customers on January 24, 2013.

We've also now obtained regulatory approval for US manufactured ICL in Europe, Japan, Korea and China. When combined with other markets where approved, this represents approximately 70% of our ICL unit volume demand. In addition, we were successful in completing the requirement, transferring cartridges, gaining final inspection and assembling and (inaudible) for pre-loaded silicon IOLs. All non-sterile IOLs for Japan are now shipped out of the US.

Finally, we've received commitments from some key employees from Japan and Switzerland to relocate either temporarily or permanently to the US. For 2013, we expect to spend in addition 2 million to 2.5 million to complete project comment and transition all of our manufacturing to California. Once the project is complete, we expect our gross margin should increase to nearly 80% and we estimate our tax rate will go from the current 50% to approximately 10%.

We continue to anticipate generating savings of more than a 100 million from project comment for the aggregate period of 2014 to 2021. Now let me briefly review the full-year results. Total sales of 63.8 million reflected a 2% year-over-year increase. Foreign currency changes unfavorably impacted net sales by 62,000 in 2012 and favorably impacted net sales by 1.7 million in 2011. Visian ICL sales totaled 35.1 million, 9.4% of up sales of 32.1 million reported in 2011 and IOL sales total 26 million compared to sales of 27.5 million in 2011.

Our gross margin increased to 69.4% of revenue from 67.5% for 2011, representing an increase of a 190 basis points. This increase was largely attributable for to a higher mix of ICL sales 55% as compared to 51% and improved cost of goods. This represents a seventh consecutive year of gross margin expansion for the company. Our total operating expenses were 45.5 million, a 15% increase over 2011 expenses of 39.6 million. Manufacturing consolidation expenses totalled 2.6 million of a year, excluding consolidation expenses, our operating expenses were 42.9 million, an 11% increase over 2011.

Expenses associated with the transfer of sales to direct model in Spain added approximately 1.1 million in expenses and will be completed before the end of the first quarter. Calculated in accordance with GAAP, our net loss was 1.8 million in 2012, or $0.05 per diluted share compared with net income of 1.3 million or $0.04 per share in 2011. Adjusted net income which excludes manufacturing and consolidation expenses, Spain distribution transition expenses, gain or loss on foreign currency transaction, fair value adjustment of [warrants] and non-cash stock based compensation expense was 4.8 million or $0.13 per diluted share in 2012 compared to adjusted net income of 4.4 million or $0.12 per share in 2011.

This concludes my comments. I would like to turn the call back over to Barry.

Barry Caldwell

Thank you, Deborah. Now let’s turn to the metrics our team will be focused on achieving during 2013. Our key metrics are our objective targets, and while we are very bullish on 2013 here are the four key targets upon which we will report each quarter.

Number one, total revenue growth in the range of 8% to 10%. The first quarter should start at the lower range and this should increase throughout the year, particularly when you take into consideration the expectations for approval with CentraFLOW and Korea and India mid-year and the introduction of [V5] in the second half of 2013.

Secondly our gross margin should expand by a minimum of 250 basis points for the year. Third, we should be profitable on a GAAP basis each quarter. Number four, continuous quarterly progresses for the full implementation and success of project coming by the end of 2013.

Finally I would like to conclude with the few comments on the results for 2012. 2011 was the very strong year for the company in both revenue and income growth. The expectations were high coming in 2012. We did not achieve those expectations with our revenue and our income results. There was however a tremendous amount of progress in the business which is less visible to the outsiders then the top and bottom line results.

These include our increased spending investments in sales and marketing and in R&D, the anticipated new products we’ll get as a result of this enhancement to our management team, continued excellent progress, our manufacturing consolidation converting to Spanish market to a direct model. Continued market share gains with the ICL in virtually every market despite the challenges to the global refractive markets; continued gross margin expansion for the seventh consecutive year and our cash generation and cash position at the end of the year. I believe the progress in these less visible areas will be key drivers to our renewed growth during 2013 in the more visible revenue and income line. And though we are only two months into the first quarter and I would caution March as a tough comparable from 2012, we are off to a very solid start and we feel good.

And with that we are ready to take your questions. Operator if you could please open the lines.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) The first question is from the line of Matthew O’Brien from William Blair & Company. Please go ahead.

Matthew O’Brien - William Blair & Company

As you know to keep things continually talking about Korea, but the performance there was quite soft, can you talk a lot about all the adjustments that you are making there, but can you just wrap up a little bit more you know the timing of when all of these adjustments may start to really impact the results and then what's kind of the headwind you are building in from Korea on estimates there and on the revenue target for 2013, because eight to 10 is a little bit less than I was kind of thinking if you could snap back in Korea like it seems in the first two months of the year so far?

Barry Caldwell

Good, several components there. But first of all, let me say our alignment and our communication with our Korean distributor is at an all time high. We’ve had a lot of face to face time in the last 2.5 months. They okayed and approved the hire of our employee in Korea. We are looking to make more investments in Korea if necessary. There's a tremendous market opportunity for us there as there's already been established a high consumer awareness of the ICL products by the previous investments that our distributor has made there.

We are, as I pointed out we are off to a strong start in January-February but that's because last year they ordered in December for their products mainly in January-February. Their January at least six out of last seven years has been their highest out the door month of each year. So they are on target right now with where we expect them to be for the full year. We are expecting growth from Korea in our model. Would it be higher? Yes, I think it could. I think one of the key factors for us will be the launch of the V4c product, the CentraFLOW technology at mid-year. It’s important we do that well; we are already working with them on the plans and also working with them on what we learned from Europe and as we roll that product out.

Now that type of communication and alignment were never there before with Korea. Korea has done a lot of good stuff with the ICL and time and time again I applause their efforts. They've done it all on their own, but now we are working together, both companies, and I feel very confident in what we will accomplish in ’13 and beyond in the Korean market.

Matthew O’Brien - William Blair & Company

Okay, I mean you are not coming off the target of, I think you said in the past of about 25% of refractive cases in Korea being done within ICL?

Barry Caldwell

No, not at all you are exactly right. We just you know slowed down a bit in 2012. As I said, their sales out the door to end customers went up while markets scope says for the year, Korean procedures went down. So we did gained share in 2012 and now we’ve got more visibility, what their out the door sales are on a month to month basis, much, much more than we have ever had.

Matthew O’Brien - William Blair & Company

Okay, moving over to Japan and China, you know, given that Korea is going to continue to be a little bit of headwind or anchored to your; can you just give us some comfort or visibility in terms of the opportunities you see in China and Japan as to be your growth drivers in ‘13 and ‘14?

Barry Caldwell

Good question, Matt, and they are two very different markets. Let me first take China. That’s the tougher one. As you know, last year, the market in China was hit by the negative communication on LASIK. To me, fourth quarter results in China were disappointing; 13% growth, I would have thought we would have had better rebound than that. And as I said during second quarter call, sometimes it takes a year for a rebound to take place. We're spending a lot of time focusing on China and we’ve added a social media body in China. We also added a clinical marketing individual for China. So there is a lot of opportunity in China. We're only 1% of the market. So even though we gained market share, we were up 37% for the year. You know, we want to get back closer to what we've been tracking in previous years. So we think the opportunity is there. I think we are focused on with our employees.

In Japan, it really comes down to the two key refractive centers. Now we did very well there last year in both key centers we more than tripled our business, almost four times in both. So they both did very well. We are trying to work with them and our own organization and a third-party ad group to see if there is more and more quickly we can push the consumer awareness of the Visian ICL in Japan. So that’s our project we are working on here the first half of the year to see if they looks like there is potential, we will make an investment and hopefully even drive more the second half of the year in those key centers.

Matthew O’Brien - William Blair & Company

Okay. And then one more from me, if I may, and this one is for Deborah, as we look throughout 2012, should we expect any kind of SG&A leverage on a full year basis, or actually on a quarterly basis for full year as well or just asking another way, should we anticipate any kind of material EPS from the 600 you put up in 2012?

Deborah Andrews

EPS growth from SG&A?

Matthew O’Brien - William Blair & Company

If it's any kind of SG&A leverage?

Deborah Andrews

I mean we have loss of leverage now in our SG&A, so really we should start seeing any profits flowing through the bottomline basically.

Barry Caldwell

I think there is a real good chart, if you will see in our 10-K, which shows three years of spending in G&A, sales and marketing, R&D. And what you will see in that is over that three year period, we have done what we did last year, we have increased our investment in sales and marketing and in R&D, but our G&A is pretty flat.

Deborah Andrews

And that will continue, we’ll have a full year of sales and marketing, 17 individual people that we hired that will be in for full year, that’s about $2.5 million on an annualized basis, other than that everything else should be pretty much the same; R&D spending will be about 10% which has been for sometime.

Matthew O’Brien - William Blair & Company

Okay. Just ask a different way, I know there are some Comet spending in 2012 numbers, but the SG&A number grew 20% year-over-year, as you know, revenue is up by about 2%, should we anticipate you know the growth rate in SG&A being up and 15% inclusive of Comet this year and then given that outlook would EPS for full-year be something similar to 2012, 2013 and would it be similar to 2012? Thank you.

Deborah Andrews

Well, I would assume as long as the spending space consistent with 2012 that we’ve seen increase in EPS based on increased sales; I am not expecting the same as 2012 for sure.

Operator

Thank you. Our next question is from the line of Chris Cooley with Stephens, Inc. Please go ahead.

Chris Cooley - Stephens, Inc.

Just a couple of quick ones; I have a number of calls this afternoon, could maybe first just from a housekeeping standing, Deborah can you tell us what you are assuming in our adjusted earnings right, to tax rate; I realized you’re going down to 10% longer term with projects on that are a tough little bit about the near term?

And secondly, and apologize if I missed this one in your prepared commentary, can you talk a little bit about the European growth on an apples-to-apples basis, obviously the Spanish distributor now is as you have a pretty meaningful step-up in the price that you realized there, help us think about the growth rate that you saw in Spain and then Europe during the quarter on an apples-to-apples type basis?

And then just lastly, I was curious what you were seeing or what your perception was for the Asia Pacific marketplace in terms of [Technical Difficulty] the first quarter. Clearly you had some headwinds there in the prior quarter in the 4Q period from an operating standpoint. Have those headwinds abated and you are now seeing strong growth? Are you seeing the type of growth that you referenced in your prepared commentary in the challenged market just to try and understand the macro background etcetera?

Barry Caldwell

Your third part, Chris is in which markets, I couldn’t understand.

Chris Cooley - Stephens, Inc.

I'm sorry, Asia Pacific.

Barry Caldwell

Okay, okay, got you. Deborah if you’ll take first part, I'll take the next two.

Deborah Andrews

Okay, all right in terms of taxes, our tax rate is going to continue to be high in 2013 as we continue on with our tax budget. As you know we pay taxes in Switzerland at a rate of 22.3% on their income. Most of our income is in Switzerland and you know this is evolving, started evolving beginning last year and we will continue to evolve this year and so our tax rate will continue to be high. By next year we expect we will be applying for and hope to obtain lower tax rate in Switzerland which will drive along with the other initiatives, tax initiatives we have a lower tax rate next year. This year we are using about a 50% tax rate.

Chris Cooley - Stephens, Inc.

Okay, thanks.

Barry Caldwell

So your second part was in regard to the European markets, if we go back to our fourth quarter results in Europe as we said we were up 24%. So take Spain, I'm sorry we were up 25%. Take Spain out of the equation, we were up 25%. Even with the direct pricing in Spain the fourth quarter we were only up 24%. That's why I say only up because and this is what I missed is I would have expected fourth quarter sales in Spain to be higher but I'm looking at a comparable that has their inventory from the distributor purchases for their high January results.

So to me as I look at fourth quarter, Spain is out of the equation, Europe grew 25% which I think is quite strong. Then if I look at first quarter the start already we've got two months under our belt and we've grown 55% in Europe. Now that's got Spain in it at about two times what they did last year because of the direct pricing.

So still if I take Spain out of the equation, Europe is growing in the 30% to 35% range. That's off the top of my head without doing the math. So to me, there are two factors there, it’s the new folks that we hired, they are starting to make an impact and number two its the acceptance of the CentraFLOW technology.

Chris Cooley - Stephens, Inc.

That's encouraging. Thanks.

Barry Caldwell

So now you ask about APAC and let me take that in four different slices. Korea, we talked a lot about, but we feel very good about Korea going into 2013 with our alignment, our communication are working together but also CentraFLOW sometime around mid-year approval.

China, that's a little tougher to read you know I really as I said I would have expected fourth quarter to be higher, those headwinds from LASIK publicity are still lingering. So we are working in that market. That can continue to be a headwind or it can turn positive. And it's going to turn positive at some point I don't know what quarter that might be.

In India, we had a very strong year and we are expecting to get approval of CentraFLOW around mid-year. So we are expecting India to kick in at a higher rate in 2013.

Chris Cooley - Stephens, Inc.

Barry, I apologize may be I wasn't very clear. I was referring to the macro market environment that you are facing, I understand the drivers that you have in -- it can project your forward but -- you tell me where you thought Korea was in the current quarter (inaudible) and China, are those markets accelerating out the fourth quarter and year-over-year, are they still mixed, or they in the [current] that's what I am looking for that?

Barry Caldwell

Okay, well first of all, I think it is difficult to describe the headwinds for all three markets in one sentence or -- every one of the dynamics in those markets are different. Yeah, there are consumer awareness trends that are similar in markets but in the market we face they are four a little different.

But if I were to take the four and say three out of the four beginning this year, we see good progress and still in China we still have a lot of unanswered questions.

Operator

Thank you. Our next question comes from the line of Jason Mills with Canaccord. Please go ahead.

Jason Mills - Canaccord

So let's start with the US Barry, I am sorry if I missed it again bouncing around calls here. Did you give you the split in the US between civilian and military sales and just a general overview on the trends in each of those segments of the domestic business?

Barry Caldwell

I did not accept to say they were both up but as you asked me let me pull something out. For the fourth quarter civilian was up 4%, military was 63%. So that also tells you that military overall is a total percentage rest of our business than it used to be. On an annual basis, our civilian market was up 9% while the military market was down 4% for the year

Jason Mills - Canaccord

Interesting. So you had a big fourth quarter through that bounce back. As I take a couple of steps out and look a more globally about the business, your guidance for 8% to 10% growth again I apologize if you’ve already gone over this. How would you break down the components of that growth between the two businesses the ICL and IOL just worldwide growth for those two segments?

Barry Caldwell

Well, I certainly expect ICL growth to be double-digits and IOL growth to be single-digits, but there are some interesting dynamics within the IOL market today. We were very pleased with our 6.7 million in sales fourth quarter in IOLs. I think we have said on our last quarter call we expected the sequential growth to be 500,000 and it was 700,000. But we were limited with product.

So we are challenged in trying to find alternatives and also ways to increase supply from our third-party vendor at a time when a major play particularly in Japan has had a recall. So the demand in IOLs, the opportunity for IOLs is stronger than it was three months ago. So we are working very hard to find ways that help fill that gap. But I would say ICLs are in double-digits and IOLs are in single-digits.

Jason Mills - Canaccord

Okay. That’s helpful and just on the ICL front, hating to state the obvious year but just wanted your take on it to see where sort of on the margin you can provide incremental information but, so we have now five straight quarters of kind of bumping around $9 million give or take a couple of $100,000 you really broke out in December quarter of 2011, and so sort of set a new sort of marking and obviously as you stated the year progress a little bit less robustly than you have expected. But how do you breakout of that $9 million you had as we talked in the last quarter, you bounced back in areas of the world where you had a disappointing quarter the previous quarter throughout the year only to have something else popup and we talked a little bit about this last quarter. Barry, what can you say about how you are seeing things here in the next four quarters? Should we expect on new level or new plateau here going forward, just breaking out of this $9 million a quarter room?

Barry Caldwell

Yeah, really good question and good point Jason, thank you. As we grow through the year with new product introductions in various markets, CentraFLOW in two or three markets and then followed by the Version 5 ICL. We are expecting to see that plateau that level raise above $9 million and above $10 million that will come I think in the second part of the year.

One of the real questions, where we are still going back to Chris’s comment about APAC would be China and how quick and how much of a bigger rebound we can see in the China market. I've not seen it yet like we had anticipated seen and so that will be another big factor because China is in our top three markets.

Jason Mills - Canaccord

Got it, that is very helpful, last question from me. Just in terms of your guidance again and it seems like, I think one of the first questions was someone was saying that the guidance was little bit more conservative than they had expected, over the last year or two, well at least the last year the guidance it came down pretty consistently throughout the year, so obviously you set it too high, as you think about setting guidance, I guess what would you tell us about any revision you've gotten about setting guidance and how do you feel about this guidance relative to how you felt last year in terms of the risk upside down (inaudible). Do you feel like is there any difference feeling that you have about the guidance you are giving this year relative to the guidance this time last year for ’12.

Barry Caldwell

Well, I would say this Jason coming into 2012 it was a bit of a challenge for us because 2011 was so good. I mean the expectations were high on us and our expectations on ourselves were high in 2012. We didn't achieve that. So maybe it gives me an opportunity to move from being too optimistic from being too conservative. So if I do that and I get claimed for being conservative from this point out the rest of my life, I guess I'll just have to handle that.

Operator

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

Bruce Jackson - Northland Capital Markets

You've got some exposure to Japan revenue, and as you know the yen has gone through some significant gyrations right now. Can you tell us how that factored into your guidance and then also if you can just refresh everyone’s memory on how you guys deal with foreign exchange whether you hedge or not.

Deborah Andrews

We do not hedge. Japan is the only place right now that we are really significantly exposed to foreign currency and obviously the dollar has gotten a lot stronger, so that first sign of a negative impact of that was in the fourth quarter when we had a foreign currency translation adjustment of about $272,000. That should continue for a while here, as long as the US dollar continues to be strong against the yen, at least for the first few quarters.

Bruce Jackson - Northland Capital Markets

Okay, so would you say if the yen is it factored into the revenue guidance that you just gave us today or is it a potential source of downside.

Deborah Andrews

Yes, I mean I guess there's always a potential course of downside. We haven't been perfect and that's, it’s very difficult to get exact science on that but it is factored into our projections and we have updated it based on the current situation.

Bruce Jackson - Northland Capital Markets

Okay, to some extent the fact that the revenue guidance is somewhat low or consensus is a factor of the yen.

Deborah Andrews

Yes.

Bruce Jackson - Northland Capital Markets

The other thing I wanted to get some color on is the KS-SP plan that's just on, can you tell us how your supply is coming along and when do you anticipate having full availability of the product.

Barry Caldwell

That's a really good question, I think Bruce as I said on the third quarter call, we did expect that we would have limitations in supply, and I expected that this would be a headwind for us the first half of 2013. I think right now as I look at it, it’s all of 2013. I went to our supplier in Japan in December specifically to go through this. They did during this month, February enhance the size of the manufacturing capabilities but the demand for them and for us have just gone through the roof.

As I pointed out, through the first two months of the first quarter, we almost had a $1 million backlog right now. We don’t see any immediate relief from that. We are looking at alternative suppliers, maybe in our European markets that could help us there and relieve our supply to give more to Japan. Japan is a higher margin. It's a higher average selling price market. So as much as we can do in terms of sending products to Japan rather than China and Europe we try to do that. But it's a challenge. We have spent a lot of time in the last three months working on this and we're still very much focused on it. We don’t have any answer right now and I would expect supply right now as we see it today to be limited for the year with the demand just going up.

Bruce Jackson - Northland Capital Markets

Okay, and then last question Japan and Korea. So we had a really good year on 2011 and then we had some adjustment going on in 2012. Where do you think the underlying (inaudible) in Korea in terms of what we should be kind of tracking towards in 2013?

Barry Caldwell

Well, I think in Korea as we look at it, lot depends on getting approval of CentraFLOW, because as you know, CentraFLOW gives you 10% premium. So if we got that at mid-year, that means the second half of the year we have just a flat units, we had 10% growth, which would be nice. But what we have seen in Europe is after we had the CentraFLOW out for a quarter or so we're starting to see pretty good growth momentum.

But if we get approval mid-year, that wouldn’t kick in to fourth quarter. So trying to put a bucket around what the clear growth would be for the year is very much dependent on that approval and effective launch of the product.

Operator

Thank you. Our next question comes from the line of Raymond Myers with Benchmark. Please go ahead.

Raymond Myers - Benchmark

Barry can you talk about little bit more about Korea want to drill down a bit here, how have the Korean distributors investments in your own market changed since last year assuming they have, have they?

Barry Caldwell

Well, I would say this Ray. As we spoke about on the third quarter call, they did take on a new product early in 2012 that was a second quarter of 2012. And though these guys have done a great job for us historically and I applaud them. I do think that took away some of the focus during the year. I would say this, they are, I mentioned earlier that there was a major IOL competitor who was at a recall that’s the IOL they market in Korea. So now as they looked at 2013, the ICL is even much important to them, because at least for some extended period of time they are basically not going to have an IOL to sell.

They reconfirmed to us when they were here in February their commitment and why the ICL is so important to them, it's even more so today after they left since this recall has taken place. So I am very encouraged by Korea, we are closer with our distributor than we have ever been since I have been here five years with the company. And I feel very good with our working relationship, our alignment and some other things we can help them and support that we just haven't done before in the past because that alignment wasn't there.

Raymond Myers - Benchmark

Right, and you said in your remarks that January and February were record months, and maybe just January was a record month in terms of end market sales in Korea, but given that the market is growing, we would expect every month to be a new record. Can you give us a bit more color about changes in the trajectory of sales, has the growth rate of sales declined and it sounds like a probably has in Korea, and can you give us any color as to why?

Barry Caldwell

Well according to the markets scope report, was just came out a few weeks ago, they had the Korea refractive markets declining in 2012. And as I said, the outdoor sales by our distributor went up, so we did gain share in the refractive market overall. I think what we have also seen in the first two months is they are very much ahead of where they were last year, but that's a bit deceptive because last year they wanted their supply for January and December whereas they didn't do that this year. But we are very encouraged by what we are seeing thus far, the first two months. March becomes a high comparable as I said but we are very optimistic for the year.

Raymond Myers - Benchmark

Is the reason for the decline in inventory now simply to match inventory levels to lower projected sales or is there some other catch up or reason for doing that?

Barry Caldwell

Well, if that were the case, they wouldn't have bought so much product in January and February. If they thought they have lowered their levels, their inventory levels and this is one area that we just don't get involved with our distributors on is how much inventory they carry and when they buy it and as you know I was in Korea in November, so if I was there and they didn’t order in December and we influenced it you think that my trip was a total failure. But all we want is our distributor to carry enough inventories till he can meet his demand in a timely fashion in customers.

Raymond Myers - Benchmark

Well, it sounds like there was too much inventory at the end of the year and it sounds like a one time $1.5 million adjustment, is that basically what happened?

Barry Caldwell

Well, I can't say that it just moved, I mean we've seen that from their purchases in January and February, that volume has moved and I think they are up 60% yeah, oh yeah, over 60% through January and February. So they product they needed at the beginning of the year you will have to argue they didn't have it on the shelf. And if you look in previous years, as I said, six out of last seven years their out the door sales in January were the highest month of that year. So January is a high month for them.

Raymond Myers - Benchmark

Well, it’s a high month for sale not necessarily for ordering though, right?

Barry Caldwell

Historically, they've ordered that in the fourth quarter. They didn't do that this year, which is fine; but that meant they had to order in January and February when they typically would have not.

Raymond Myers - Benchmark

Okay. So last year you did about $1.9 million of sales in Korea in the first quarter, right?

Barry Caldwell

Right.

Raymond Myers - Benchmark

So if you are doing 60% more in January and February, I'm a little reluctant to assume you’ll do 60% more than 1.9, because I don't know that March is truly going to carry forward. Can we make that assumption?

Barry Caldwell

I wouldn't make any assumption on March based upon January and February, but I would say this, I mean looking at ordering patterns, you know March and April, their out the door sales start to go down. So their heaviest volume typically has always been the fourth quarter, so it wouldn't come in March and April.

Raymond Myers - Benchmark

Okay.

Barry Caldwell

But I think we clearly expect them to be up first quarter, about 60% yeah.

Operator

Thank you. Our next question is from the line of Jim Sidoti with Sidoti & Company. Please go ahead.

Jim Sidoti - Sidoti & Company

So, I am sorry, I didn't catch it; if you excluded Korea altogether from 2011 and 2012, what would the total revenue have grown?

Barry Caldwell

ICLs would have grown 18% in the quarter.

Jim Sidoti - Sidoti & Company

Okay. And how about overall revenue?

Barry Caldwell

For the year?

Jim Sidoti - Sidoti & Company

For the quarter?

Barry Caldwell

We have to, we'll get back to you; we don’t have it at the back of the envelope.

Jim Sidoti - Sidoti & Company

Okay. Then is there any update on the Toric approval in the US?

Barry Caldwell

Good question. You know Jim as we did report in November we put a new submission in on the Toric. It’s a supplemental submission. It’s been under review with them. We continue to check. They have no questions at this time. We can only speculate whether that’s good news or bad news, but, and we've spoken to them as early as this week. So they are still going through the document we submitted November 15th.

Jim Sidoti - Sidoti & Company

Okay, and is there a 90 day clock on that submission?

Barry Caldwell

Well, typically there is and we’ve had good communications with them and we continue to ask them like every other week, is there anything you need from us. So the word that we received this week is that they are deep in to the detail and they would get to us if they need anything from us.

Jim Sidoti - Sidoti & Company

Okay, but assuming there is a 90-day clock, you should hear something one way or another within the next month?

Barry Caldwell

Right, assuming they follow a 90-day clock, you would be right.

Jim Sidoti - Sidoti & Company

Okay. And then just a general question, over the past five or six months, you put out some pretty aggressive metrics for what the company should look like in 2014 and ‘15 and if you complete this manufacturing transition and you get to the lower tax rate, has anything happened over the past quarter to make you change some of the set change in that outlook?

Barry Caldwell

Nothing in the model in terms of the percent for gross margin, op expenses and net income; I mean, the revenue will drive it all.

Jim Sidoti - Sidoti & Company

So, I mean obviously we're starting from a lower base to that period?

Barry Caldwell

Yeah, those all still remain our goals. Yes.

Operator

Thank you. Our next question comes from the line of Rick D'Auteuil with Columbia Management. Please go ahead.

Rick D'Auteuil - Columbia Management

Just, one of the, I know we have dug at this thing a number of different ways. But if I look at your last year’s first quarter, it grew by 8%, by barely get more than what you just did in revenues in the fourth quarter. So I get couple of percent more than what you just did in the fourth quarter. When I look at the components you have provided to us they are all pointing north and significantly north in some cases.

So what's the offset, what’s doing horribly in the first quarter year-over-year that you haven't told us about, because otherwise I can't get to the low end of the 8% to 10%, you know I heard just say you want to set the bar low, but I just want to understand what I am missing here?

Barry Caldwell

Well, Rick I don't think you are missing anything, except the caution I have about March. March is a high comparable, so far through the first two months of the year we are very happy with where we are except I would love to shift that million dollars of IOLs we have in back orders that would make me feel lot better. But it's March, and what's going to happen in China? Are we going to continue these growth rates we have had in the first two months? There are still lot things that have to play out in March and I hope you are exactly right, that we aren’t missing anything and the results turn out to be a lot better. And so I think you have done the math right and we will just continue to play March out week-by-week.

Rick D'Auteuil - Columbia Management

Okay. On the supplier issue with the KS-SP, I thought we have talked about this and it seems like you are aggressively pursuing other sources of supply and that it would have been rectified in a reasonable time period and I am not saying 12 months from now is reasonable, and I don't think a month ago you were thinking that you were not going to be able to solve that issue for 12 more months but a whole year of 2013, so what happened?

Barry Caldwell

Okay, first let me clarify Rick, when I say about the whole year 2013 supply issue, I mean with our current supplier.

Rick D'Auteuil - Columbia Management

Okay, but you are pursuing other sources?

Barry Caldwell

Yes, we are let me explain to you what that involves. And we have been working with six or seven alternatives in this area. What we are looking for is an alternative lens that will work well with our injector system. If we have to go out and make revisions in our lens or revisions in our injector system that's longer term that will take longer.

That would also mean we would have to go get approval for something that's newly designed, but we are looking to find is a lens that will work well with the KS-SP injector system which is our technology and we are working tirelessly on that. So there is nothing more we would like to do than fulfill the back order we have and the demand is out there in the market, because the recall product is an acrylic preloaded system just like the KS-STOP. So if that market void that's even pretty more pressure on us and our supplier.

Rick D'Auteuil - Columbia Management

Okay, so of the six or seven you haven't yet exhausted them as it relates to the compatibility of your injector system with their material?

Barry Caldwell

Half of them we have not.

Rick D'Auteuil - Columbia Management

What I mean and it’s a priority so is there, what kind of timeframe will you be, will you know definitively on those six or seven sources whether it’s compactable?

Barry Caldwell

The criterion we've followed Rick is looking at alternatives. We are looking for alternatives that within 60 days we could get to market. So anything longer term than that is, that's in a different bucket of things we are looking to do. We are looking for short-term fix and as I pointed out if we can find one and we are focused on the CE markets, if we can find one what we will do is send that product to Europe and keep our current product in Japan.

Rick D'Auteuil - Columbia Management

Okay, I mean, should you know this by the next conference call whether it’s going to work or not work.

Barry Caldwell

We should unless we start looking at more options. You know it does, we have to get product in here, our engineers end up meeting face-to-face with each one of these companies and their engineers. We have to work the system in the injector system. We have to sterilize them, we have to, what we want to do is make sure that the delivery of the IOL is right, otherwise you know, we are just hitting ourselves against the head if we introduce a product that doesn't work well.

Rick D'Auteuil - Columbia Management

No, I understand that, okay, and then lastly, you talked about what you did on the hiring front in 2012 and some of that will be incremental expense for ’13 given the timing of those hires, what hires are you planning for 2013, I don't recall you specifying that on the call yet?

Barry Caldwell

Yeah, currently we don't have any others planned. We are evaluating opportunities and any place I think as we showed in 2012 any location where we think can help drive sales, we'll make that investment.

Rick D'Auteuil - Columbia Management

It's there, I think you said earlier that Korea you hired one but there is some consideration about more resources there.

Barry Caldwell

Not just Korea but any place.

Rick D'Auteuil - Columbia Management

Okay, Korea is important though so I'm just, is that, did I read that right?

Barry Caldwell

Yeah, if we found that made sense we would certainly do it.

Operator

Our next question is from the line of Matt (inaudible) Investments. Please go ahead.

Unidentified Analyst

I just want to piggyback on the question that Jason asked about guidance and I am wondering if you could help us understand has there been a change to your approach in guidance and specifically I am wondering because you truly are operating worldwide and you have all these different geographies do you really have to go in and kind of go geography-by-geography, get to your best guess on what quarter and the year are going to look like and then just put a fudge factor in there because seemingly every quarter there is something going wrong in one or two countries that's fairly major and I am just wondering if you can get you know forget about conservative or not, if you found an approach that you think can lead to achievable guidance and hopefully move past the issues that we had over the last several quarters?

Barry Caldwell

Matt that's a really good question. I would say yes and yes and let me try to answer that a little bit more is that as we look at what we think we can do we baked in more of what could go wrong into the goals and metrics that we established, and I would say coming into 2013, I know I personally don't feel such a burden that those numbers have to be high. Coming into 2012 to be honest with you I did, I mean number one we had a great year in 2011, expectations from outside and inside for 2012 were big. So it would have been hard to come back with less growth in what you had in 2011, which was 14% overall. But coming in to this year there isn’t that pressure. So I think it's both looking at, okay we had some things that hit us in 2012 we didn’t expect. What if that happens in 2013 and let’s make sure we give ourselves a wiggle room here.

Operator

Next question is from the line of Jack Fraser with Seamark Capital. Please go ahead.

Jack Fraser - Seamark Capital

During the process of common project, you obviously begun moving production the like and that’s significant and you’ve gotten a lot done. Yet, when we think about the Korean orders thus far this year and the fact that you’ve begun supplying products out of Monrovia, it suggests that you have avoided the classic problem of inventory mismatch for a complex product line array if you will during that time. Could you just comment a little bit on inventories and your ability to meet demand and orders on a short timeframe basis as you may know there are some pundits writing that your inventories are too high and if you could just address, appreciate it.

Barry Caldwell

Yeah, thank you Jack and we really did have a big celebration here when we shipped the first ICL out of Monrovia, that was a big deal. And the fact that we had regulatory approval in the markets in which 70% of our unit shipped last year. So we made just excellent progress on getting the production here. Now on top of that, weight all the different solid SKUs, variations of models on the V4, the V4B and the V4C. There is a lot to manage in inventory.

Then one of things we told our teams is no sacrifice in quality, no sacrifice in supply, so made investments in 2011 and 2012 in purposely raising our inventory levels so we didn’t have any disruption from project Comet. Yeah we had disruption on KS-SP that wasn’t related to project Comet at all. But on ICL which is a very difficult product to manufacture and to manage all the different varieties, we have done an excellent job and part of the reason for that is that we increased our inventories to make sure we had safety levels. And we will continue to do that, we will continue to carry those higher inventory levels until we feel all we can match from the US the global demand.

I hope we have to keep Switzerland open a lot longer that means the demand will be higher than we anticipate.

Jack Fraser - Seamark Capital

Okay that’s fair. And then just switching over to the injectors for a second, V5 and preloaded nanoFLEX implies a growing dependency on injectors and obviously have good news for meeting market demand, can you just comment a little bit about the broader picture of injector supply and how we should be thinking of the reliability of that supply as more and more of your product line becomes injector dependent?

Barry Caldwell

Okay first of all the injectors come from us, we make those. Alluding to the KS-SP, we make the injector we don't make that lens. So the supply issues come from the lens side not the injector side. The reason our other sales went up so much fourth quarter is injectors, because the company who makes that lens buys injectors from us.

So the injector technology and the manufacturing and supply all rely within us and we transferred a lot of that from Japan and we have also moved engineers from Japan to help us. So we don't see, we are driving to continue to make the injectors proprietary but we don't see an issue with manufacturing and supply of injectors.

Jack Fraser - Seamark Capital

Okay, that is helpful. And then one last item on the scenarios. We are getting quite for a long in new generation ICLs becoming available across the global markets and yet still of course not yet available in the US market, can you comment on any pressures or feedback that you are picking up from doctors and customers about that issue?

Barry Caldwell

Well, yes, we do obviously US surgeons are not blind that just what happens in the US. When we go to any major medical meeting global presentations are made, as our head of sales in north America told me last week, I am getting many more questions about CentraFLOW now that I am about Toric, and obviously we are very behind in Toric in the U.S. and that were the only major market in the world that product is not available but there is lot of excitement in the U.S. about CentraFLOW and at some point in time when we are able to get approvals on Toric and CentraFLOW, I think it will just open up the gates to the US market that we can't open today. We are working hard to get a 9% increase and that’s good in light of what’s going on in the market, but I believe the ICL technology will do a whole lot better once we can get the newer version out there.

Operator

Thank you. At this time I would like to turn the conference back over to management for any closing remarks.

Barry Caldwell

Thank you, operator. And I would like to thank all of you on the call for your participation today. We look forward to providing you an update on our progress on our first quarter. Thank you and good night.

Operator

Thank you, sir. Ladies and gentlemen if you’d like to listen to a replay of today's conference please dial 1800-406-7325, 303-590-3030 using the access code 4592160 followed by “#” key. This does conclude the STAAR Surgical fourth quarter 2012 financial results conference call. Thank you for your participation. You may now disconnect.

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