美敦力 (MDT) 2011 Q4 法說會逐字稿

Good morning.

My name is Darla and I will be your conference operator today.

At this time I would like to welcome everyone to the Medtronic's fourth-quarter earnings release conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions)

Mr.

Jeff Warren, you may begin your conference.

Thanks, Darla.

Good morning and welcome to Medtronic's fourth-quarter conference call and webcast.

During the next hour Gary Ellis, Medtronic's Chief Financial Officer, will provide comments on the results of our fourth quarter and fiscal year 2011 which ended April 29, 2011.

After our prepared remarks we will be happy to take your questions.

First, a few logistical comments.

Earlier this morning we issued a press release containing our financial statements and our revenue by business summary.

You should also note that some of the statements made during this call may be considered forward-looking statements and that actual results might differ materially from those projected in any forward-looking statement.

Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC; therefore, we do not undertake to update any forward-looking statement.

In addition, the reconciliations of any non-GAAP financial measures are available on the investor's portion of our website at Medtronic.com.

Finally, unless we say otherwise, references to quarterly or annual results increasing or decreasing are in comparison to the fourth quarter and full year of fiscal year 2010, respectively, and all revenue growth rates are given on a constant currency basis.

With that I am now pleased to turn the call over to Medtronic Chief Financial Officer Gary Ellis.

Good morning and thank you, Jeff.

This morning we reported fourth-quarter revenue of $4.3 billion, which represents growth of 2% as reported or flat on a constant currency basis.

After adjusting for the benefit we received last grew from a CRDM competitor's stop shipment, revenue growth was 4% as reported or 2% on a constant currency basis.

Q4 non-GAAP earnings of $966 million and diluted earnings per share of $0.90 [decreased] (corrected by company after the call) 2% and 1%, respectively.

Before going into the details of the call, we would like to remind you of the announcement we made nearly two weeks ago when Omar Ishrak was named as Medtronic's next Chairman and Chief Executive Officer.

Given that he does not officially start until June 13, he will not be on today's call.

As we are in this transition, Jeff and I will be conducting the call and Q&A.

Omar is a talented executive with a long history of success in healthcare technology, including an impressive track record of delivering top- and bottom-line growth at GE Healthcare.

His strong global perspective and experience driving innovation will be valued at Medtronic.

We are excited to have Omar join the team next month and look forward to his leadership and introducing him to you in the future.

At the same time, my colleagues and I also want to knowledge Bill Hawkins leadership these past 10 years at Medtronic including 7 as President and 4 as CEO.

Since he announced his retirement in December, Bill has remained actively engaged with the Board of Directors and the management team.

Looking back at Bill's tenure at Medtronic, he was instrumental in laying the foundation for our CardioVascular business' current success.

He also championed our One Medtronic strategy, focusing the Company on capturing the benefits of our size and scale.

Under his leadership we diversified our business into new areas, invested in emerging markets, developed a robust pipeline of differentiated technologies, and added key innovative therapies like RDN and transcatheter valves to our portfolio.

We thank Bill for his commitment to the Medtronic mission and many years of leadership.

Now we would like to recap fiscal year 2011, provide details on our Q4 performance, and conclude with our initial FY 2012 outlook and guidance.

FY 2011 was one of the more challenging years in the industry's recent history.

We experienced a significant slowdown in our markets early in our fiscal year driven by the continued macroeconomic downturn, decreased utilization, and increased payer pushback which affected us, our customers, and the industry.

We estimate our markets are currently growing in the low single digits versus 6% to 7% a little over a year ago.

In addition, our now resolved FDA warning letters delayed the launch of several key new products which increased pricing pressure and delayed our ability to gain market share.

Due to these numerous headwinds, our revenue came in nearly $1 billion below original expectations.

Although it is worth noting that despite this revenue shortfall non-GAAP diluted earnings per share of [$3.37] (corrected by company after the call) was only $0.08 below the low end of our original earnings per share guidance.

We were able to minimize the impact on earnings per share through our focus on reduced spending throughout the year and one-time tax items added $0.10 earnings per share benefit to our FY 2011 earnings per share.

Despite the challenges, we had several notable areas of successes in FY 2011 including achieving great results in our international operations, launching a number of innovative products, making improvements to our quality systems, and adding several strategic acquisitions.

Our international business grew 5% or 6% after adjusting for the extra week in FY 2010 driven by strong 20% growth in emerging markets.

We continued to make significant investments for growth in emerging markets recently opening our Asian manufacturing facility in Singapore, our new China headquarters and training center in Shanghai, and our first patient care center in Beijing.

In the US we resolved all three warning letters and we continued to focus on meaningful quality improvement.

Medtronic continues to set the standard for quality in the industry.

We also launched a number of innovative new products in FY 2011, including the Protecta ICD, Revo MRI pacemaker, and Arctic Front cryoballoon in our CRDM business.

In CardioVascular we launched and gained share with the RESOLUTE Integrity drug-eluting stent in Europe as well as the Integrity bare metal stent and Endurant AAA stent graph in the US.

In our Restorative Therapies Group we had a number of new product introductions including the Solera posterior fixation system, RestoreSensor spinal cord stimulator, Activa SC deep brain stimulator, InterStim bowl and Enlite CGM sensor.

Many of these innovative new products came out late in the fiscal year and, although we did not realize their full impact in Q4, we are optimistic about their contribution to growth and pricing improvement going forward.

In addition, we added some exciting new technologies to the portfolio and strengthened some existing product lines with the acquisitions of Ardian, Invatec, Osteotech and ATS Medical.

Over the long term we remain focused on delivering the full growth potential of our emerging technologies which includes the expected approvals of CoreValve and Ardian in the US market and their continued contribution in international markets.

These are two of the most exciting new technologies in med tech.

As I pointed out at a recent investor conference, over two-thirds of our revenue today is in markets growing below mid-single digits.

Over time we anticipate our growth profile will improve and by FY 2015 we expect two-thirds of our revenue will be in markets growing in high-single digits on average.

In the meantime, our slower growth businesses are delivering significant and consistent free cash flow, allowing us to return cash to shareholders and make the investments that will drive our future growth.

When you combine our portfolio of differentiated technology with our position in emerging markets and the overall advantage we have from our size and scale, we believe Medtronic is well-positioned to deliver sustainable and profitable long-term growth.

Turning to our Q4 results, we reported revenue of $4.295 billion, which increased 2.4% as reported, or flat on a constant currency basis, after adjusting for the $83 million favorable impact of foreign currently.

The benefit we received last year from a CRDM competitor's stop shipment had 170 basis point negative impact on our quarterly growth rate.

Breaking out results geographically, revenue in the US of $2.337 billion decline 4%, or 1% after adjusting for the stopped shipment.

International sales of $1.958 billion increased 12% as reported, or 7% on a constant currency basis.

Q4 international revenue results by region were as follows.

Greater China grew 24% and is now annualizing at over $0.5 billion.

Growth in Latin America was 22%, Middle East and Africa grew 19%, growth in Europe and Central Asia was 7%, other Asia group 4%, and Canada grew 1%.

Japan declined 3%.

We estimate that the Japan earthquake and tsunami had an approximate $15 million negative impact on our Q4 revenue, which was somewhat less than we had originally expected.

We would like to thank our entire Japan team for the tremendous job they are doing during these difficult times.

Q4 GAAP earnings and diluted earnings per share were $776 million and $0.72, a decrease of 19% and 16%, respectively.

After adjusting for several unusual items, fourth-quarter earnings and diluted earnings per share on a non-GAAP basis were $966 million and $0.90, a decrease of 2% and an increase of 1%, respectively.

This quarter's pretax adjustments included a $47 million net benefit for legal matters due in part to our ability to negotiate more favorable terms on our previously accrued Fidelis settlement, a $40 million non-cash charge for convertible debt interest expense, a $14 million charge for acquisition-related items related to the accounting rules governing contingent consideration, and a $272 million restructuring charge which included the net reduction of approximately 2,100 positions and is expected to result in approximately $225 million to $250 million in annual savings.

It is important to note that our Q4 non-GAAP earnings per share of $0.90 included $0.02 from write-downs in our minority investment portfolio increased receivables.

Adjusting for this as well as the stop shipment benefit to last year's earnings, our Q4 non-GAAP earnings per share growth was 6%.

In our Cardiac and Vascular Group revenue of $2.322 billion declined 1%.

Results were driven by double-digit growth in AF Solutions, Coronary and Peripheral, Structural Heart, and Endovascular offset by declines in the US ICDs.

In the quarter we announced a new unified US Cardiac and Vascular Group sales organization.

While this change is seamless to clinicians, we will now be able to better leverage our unmatched cardiac and vascular portfolio breadth when serving hospital's service line administrators.

CRDM revenue of $1.315 billion declined 9%.

After adjusting for the benefit we received last year during a competitor's stop shipment, CRDM revenue declined 4%.

Worldwide ICD revenue of $760 million declined 16% or 8% after adjusting for the stop shipment.

Our US ICD business declined 25% or 14% after adjusting for the stop shipment.

Although this was below our expectations, in order to better understand our performance there are several factors that need to be considered.

First, there is our $70 million impact from a competitor's stop shipment which should be backed out of last year's results.

Second, we have clearly seen a dramatic slowing in the US ICD market.

We estimate the US ICD market declined in the high-single digits with declining procedure volumes driving the market slowdown.

There appears to be several factors affecting procedures, but our field checks indicate the primary drivers are the January JAM article on ICD utilization and the DOJ investigations of hospitals.

Third, we did fewer bulk purchase deals with our customers in the quarter.

While this decrease is primarily related to the slower market, it also reflected some of the recent management changes we have made as well as the decision to take a much firmer stance on discounting our new products.

In terms of evaluating share, there is a lot of noise in the numbers but we believe our share was relatively stable.

Our account by account data also shows negligible impact from any recent changes to GPO contracts on implant share.

While the US market is clearly struggling with unit growth, we saw our pricing stabilize sequentially for the first time in 7 quarters on the launch of Protecta late in Q4.

Protecta, along with our recently approved Attain Ability Plus and Attain Ability straight left heart leads, give us confidence that our high-power pricing will improve in FY 2012 and we are well positioned to maintain or improve our share position going forward.

Our international ICD business grew 2% consistent with the market, although we estimate that we gained over 300 basis points of share sequentially.

In Europe we launched Cardia and Egida into the value segment allowing us to capture double-digit ASP uplifts with Protecta.

Our well-stratified high-power portfolio in Europe captured a point of share sequentially, despite a competitor's well-publicized left heart lead.

In fact, clinical evidence demonstrates that our advanced bipolar left heart leads match or exceed the performance of this competitive lead without additional complexity or cost.

In Japan we also gained high-power share sequentially due to the improved sales execution and launch of Protecta.

Pacing revenue of $506 million was flat, while the market declined in the low single digits.

US Pacing declined 2% as our US business was affected by a product supply shortage of CRTP devices in the first half of the quarter as we awaited the FDA approval of Consulta and Syncra.

Excluding this approximately $10 million negative impact, our US Pacing business grew 2% and on a sequential basis we gained over 200 basis points of share.

This acceleration was driven by the launch of the Revo MRI SureScan pacemaker.

Revo's game-changing technology is commanding a solid double-digit percentage price uplift which offset the mid single-digit pricing pressure we have seen in Pacing over the past year.

With Revo accounting for just 10% of our implant mix, we had flat year-over-year pricing in our US pacemaker business in Q4.

Our international Pacing business grew 1% versus the international Pacing market declines in the low-single digits.

In Europe the success of our MRI pacemakers continues to mitigate pricing pressure and grow our share.

Our AF Solutions business grew in excess of 40%, driven by the ongoing successful launch in the US and the continued adoption in Europe of our Arctic Front cryoballoon.

In Q4 we launched the Achieve Mapping Catheter in Europe, which is designed to verify pulmonary vein isolation when used in conjunction with Arctic Front.

In FY 2012 we expect to continue to take share in AF as we grow this business 30% to 40%.

Our CardioVascular business had a very strong quarter with revenue of $879 million, growing 13% including 15% growth in international markets.

Coronary and Peripheral revenue of $440 million grew 12%, which includes $37 million of revenue from Invatec.

Worldwide drug-eluting stent revenue in the quarter was $201 million, including $51 million in the US.

While the global stent market continues to experience mid single-digit declines, our stent business grew 5% as we are taking meaningful share with our highly deliverable Integrity platform.

In Europe we added over 200 basis points to our market-leading share sequentially in bare metal stents and gained over 300 basis points of drug-eluting stent share sequentially on the strength of RESOLUTE Integrity.

We are pleased with the results of the RESOLUTE All Comers and RESOLUTE US studies which were presented at ACC.

We also filed the final module of our RESOLUTE DES PMA and we continue to expect US approval late in FY 2012.

Turning to Ardian, our integration activities are on track.

This impressive therapy for hypertension is generating a lot of customer excitement and we expect revenue to ramp in FY 2012 as we execute on this multibillion-dollar opportunity.

We are focused on building our European sales channel and we have submitted the IDE for our US pivotal trial and have started discussions with the FDA on the final trial design.

We believe Ardian represents one of the most important product advances in med tech in several years and we intend to maximize its potential.

Structural Heart revenue of $274 million increased 13%.

Growth was driven in part by our ATS acquisition, which added 800 basis points to growth in the quarter as well as the strong adoption of CoreValve in international markets.

The TCV market is now annualizing at over $0.5 billion.

We continue to split the market with our competitor and are the clear leader in the transfemoral segment, which is the preferred implant method.

We also have approval for the subclavian indication in Europe and are in the process of training physicians on this important alternative implant method in other international markets.

In the US we were pleased by the FDA's positive modifications to our US CoreValve trial.

We obtained IRB re-approval at all sites and enrollment is back on track.

Looking ahead, we continue to advance our innovative TCV product pipeline.

We expect CE mark approval for our 31 millimeter CoreValve on an 18 French delivery system in the first half of FY 2012 and our 23 millimeter CoreValve on a 16 French delivery system in the second half of FY 2012.

Both of these innovations will help expand the patient population that can be treated with CoreValve technology.

Turning to Endovascular, revenue of $165 million grew at an impressive 20%.

In the US, revenue growth of 31% was driven by the continued success of the Endurant abdominal stent graft which drove a significant 14% -- 14 percentage point sequential share increase.

In Europe, we gained 7 percentage points of share sequentially in the AAA market and 6 percentage points of share in the thoracic market on the continued strength of Endurant abdominal and Valliant Captivia Thoracic Stent grafts.

In FY 2012 we are moving our peripheral vascular business into Endovascular to take advantage of customer synergies, and we expect this combined business will generate approximately $0.75 billion in revenue.

Physio-Control revenue of $128 million declined 6%.

After adjusting for the approximate $15 million one-time benefit we received last year from pent-up demand upon resuming unrestricted global shipments, revenue this quarter grew 6%.

Our pre-hospital business had double-digit growth as LIFEPAK 15 continued to take market share.

We also had a very strong quarter in automated CPR with the LUCAS Chest Compression System taking over market share leadership in this product category.

As we announced last quarter, we have reinitiated our efforts to divest Physio-Control.

We are pursuing a dual-path strategy investigating both the option of an asset sale and the option of spinning the business to our shareholders.

Now turning to our Restorative Therapies Group.

Revenue of $1.973 billion grew 2%.

Growth was driven by another quarter of solid performance in Diabetes and Surgical Technologies as well as improving growth in Neuromodulation.

Spinal revenue of $875 million declined 2%.

This quarter the global spine market was somewhat stable with low single-digit growth.

Although the US market continues to be challenged, our new products drove solid 6% growth in our international business.

In core Spinal, which includes core metal constructs, IPDs, and BKP products, revenue of $648 million declined 4% as this business continues to feel the impact of its exposure to the BCF and IPD markets.

Core metal construct products declined 1%.

While Solera accounts showed strong double-digit growth and Solera is starting to drive the overall posterior fixation category, it is in less than 30% of the US accounts that have our legacy system.

We continue to ramp the launch of Solera and expect to penetrate nearly all of our US accounts by the end of FY 2012.

In DLIF we saw solid high-teens growth and we expect our DLIF solution to be navigation enabled this summer.

Turning to cervical, growth continues to be driven by VERTEX SELECT.

In Q4 we launched the ATLANTIS VISION Elite cervical plate, which has seen positive early adoption.

In Kyphon revenue declined 9% but was relatively stable sequentially for the third quarter in a row.

We were pleased to see the recent positive coverage decisions on Kyphon BKP that Meridian issued earlier this month and believe that the positive coverage decisions, the new products including the Xpander II balloons, the Japan expansion, and increasing awareness of our growing body of positive clinical evidence will continue to stabilize Kyphon.

Biologics revenue of $227 million grew 4%.

Results were driven by our recent acquisition of Osteotech.

Sales of INFUSE declined in the quarter due to softer procedure volumes and contingent mix pressure from the shift to smaller kits.

Although we received a non-approvable letter on AMPLIFY, we continued to work with the FDA to determine the path to approval and remain optimistic that we can bring this product to market.

Neuromodulation revenue of $432 million increased 4%.

Results were driven by InterStim and improved growth in drug pumps.

In Pain, we received CE mark in Europe to use our neurostimulator portfolio for peripheral nerve stimulation to treat chronic back pain.

Meanwhile, RestoreSensor with our proprietary AdaptiveStim technology continues to gain traction in Europe and was launched in Australia and Canada this quarter.

We are making progress on bringing this breakthrough technology to the US market.

We also have received CE mark for our new Ascenda pump catheter and are working to bring this new technology to the US market in FY 2012.

In DBS we continued to expand our industry-leading portfolio by launching Activa SC, a single-chamber DBS device, in both Europe and the US.

In Uro/Gastro we received FDA approval for our InterStim therapy for bowel control.

We are now focused on obtaining reimbursement for this unique therapy as we ramp its launch in FY 2012.

Diabetes revenue of $368 million grew 9%, driven by CGM growth in excess of 20%.

Insulin pumps also had a good quarter with solid growth in the US on the strength of Revo and continued strong growth in Europe with Veo, the only pump with a low glucose suspend feature.

We also remained differentiated as the only company offering integrated insulin pump and CGM systems.

Late in Q4 we launched the Enlite CGM sensor in more than 35 countries outside the United States.

Enlite is one of the more important advances in CGM technology in many years as it is more comfortable, accurate, and easier to use than previous sensors, and we believe it will support continued growth in our industry-leading CGM business in FY 2012.

Surgical Technologies revenue of $298 million grew 7% or 9% after adjusting for the divestiture of our ophthalmic business in FY 2010.

The solid growth was driven by strong ENT growth in image-guided surgery, power, and monitoring.

Navigation growth was equally solid, driven by strong performances of [stealth sedation S7 and OR] as we continue to see strong growth in capital equipment in the US.

During the quarter, we were also pleased to resolve the FDA warning letter in our navigation business.

Now turning to the rest of the income statement.

The GAAP gross margin was 75.1% compared to 75.9% in the fourth quarter of last year.

After adjusting for the $11 million product cost component of the restructuring charge, our Q4 non-GAAP gross margin was 75.3%.

The gross margin was negatively affected by a lower mix of ICD systems driven by the decline in the US ICD market as well as lower gross margin percentages on some of our newer products.

In FY 2011 we were able to partially offset some of the pressures on our gross margin by taking out $200 million in product cost.

We are now 4 years into our 5-year plan and have removed $820 million in product cost, which is clearly within reach of our $1 billion goal.

For FY 2012 we expect gross margins in the range of 75% to 75.5% on an operational basis.

Fourth-quarter R&D spending of $394 million was 9.2% of revenue compared to 9% last year.

We remain committed to investing in new technologies to drive future growth and for FY 2012 we expect R&D spending in the range of 9% to 9.5%.

Fourth-quarter SG&A expenditures of $1.435 billion represented 33.4% of sales, down 180 basis points from last quarter.

Included in our SG&A expense this quarter was an $11 million bad debt expense for Greece receivables resulting from the financial crisis in that country which had a negative 20 basis point impact on our SG&A.

For the year we held our SG&A relatively stable as we continued to focus on several initiatives to leverage our expenses while continuing to invest in new product launches and adding to our salesforce in faster growing businesses and geographies.

We will continue to focus on SG&A leverage in FY 2012 and expect to drive 80 to 100 basis points of improvement which would put us in the range of 33.5% to 34%.

Net other expense for the quarter was $182 million compared to $95 million last year.

The year-over-year increase is primarily a result of a $29 million expense from the recently implemented Puerto Rico excise tax, which is almost entirely offset by a corresponding tax benefit I will discuss in a moment.

Net other expense was also affected by increased hedging expense, which was $25 million during the quarter compared to $11 million in gains last year.

As you know, we hedge our operating results to reduce volatility in our earnings.

In addition Q4 net other expense includes $88 million of non-cash amortization expense and a $9 million write-off of our minority investments.

For FY 12 we expect net other expense in the range of $730 million to $790 million, including $200 million to $210 million in Q1.

Based on current exchange rates, this would include expected FY 2012 hedging losses in the range of $180 million to $210 million including the hedging losses of $50 million to $70 million in Q1.

FY 2012 net other expense will also include an estimated $110 million to $120 million of Puerto Rico excise tax.

Net interest expense for the quarter was $68 million.

Excluding the $40 million non-cash charge for convertible debt interest expense non-GAAP net interest expense was $28 million.

At the end of Q4 we had approximately $7.7 billion in cash and cash investments and $9.8 billion of debt after issuing $1 billion of senior notes in March and repaying $2.2 billion of convertible debt in April.

With the repayment of this convertible debt our non-cash charge for convertible debt interest expense for FY 12 will be cut in half to approximately $21 million per quarter.

For FY 2012 we expect non-GAAP net interest expense in the range of $105 million to $115 million which excludes the non-cash charge for convertible debt interest expense.

Let's now turn to our tax rate.

Our effective tax rate in the fourth quarter was 15.5%.

Excluding the impact of one-time charges, our adjusted non-GAAP nominal tax rate in the fourth quarter was 19.3%.

It is worth noting that our Q4 tax rate included a $25 million benefit associated with the US foreign tax credit from the Puerto Rico excise tax which mostly offsets the charge recorded in the other expense.

For FY 2012 we expect an effective tax rate of approximately 19%, which includes the tax credit associated with the Puerto Rico excise tax and assumes the R&D tax credit will be extended.

Fourth-quarter weighted average shares outstanding on a diluted basis were 1.075 billion shares.

In FY 2011 we repurchased over $1 billion of our stock and we expect our share repurchases to continue at a similar level in FY 2012.

For FY 2012 we expect diluted weighted average shares outstanding in the range of 1.055 billion to 1.060 billion shares.

Let me conclude by providing our initial fiscal year 2012 revenue outlook and earnings per share guidance.

The growth in our markets continues in the low-single digits.

While we are optimistic that they will recover over time, we are basing our outlook on this low single-digit market growth.

We are excited about our new products, many of which we just launched in the Q4, and in the investments we are making to further diversify our product and geographic mix.

As a result, we would expect our revenue growth to remain at or above market growth.

We believe that constant currency revenue growth of 1% to 3% is reasonable for FY 2012.

While we cannot predict the impact of currency movements, to give you a sense of the FX impact, if exchange rates were to remain similar to yesterday for the remainder of the fiscal year, then our FY 2012 revenue would be positively affected by approximately $350 million to $390 million including a positive $170 million to $190 million impact in Q1.

Based on the current market conditions, our revenue outlook assumes CRDM and Spinal growth is flat to slightly positive on a constant currency basis.

Our outlook also assumes that the rest of our businesses grow in the mid to high single-digit constant currency.

Turning to guidance on the bottom line.

Based on expected constant currency revenue growth of 1% to 3% we believe it is reasonable to model earnings per share in the range of $3.43 to $3.50, which includes approximately $0.04 to $0.06 of dilution from the Ardian acquisition.

After adjusting for the Ardian dilution and the previously mentioned $0.10 of one-time tax benefits in FY 2011, our guidance implies FY 2012 earnings per share growth of 6% to 9%.

As in the past, my comments on guidance to not include any unusual charges or gains that might occur during the fiscal year, nor do they include the impact of the non-cash charge for convertible debt interest expense.

With that we would now like to open the phone lines for Q&A.

In the interest of getting to as many questions as possible, we respectfully request that each caller limit themselves to one question with one follow-up.

Operator, first question please.

(Operator Instructions) Matthew Dodds, Citigroup.

Good morning.

So I know you are going to get a lot of questions on ICDs, I just want to hit one area of the US market.

On the bulk orders can you give any idea of how impactful that was in the quarter?

Because in the past I know in the fourth quarter that has a big swing on the revenue.

And is this really, in your view, kind of a one-time reset on both orders for fiscal 2011 into 2012?

Yes, overall we believe that basically the bulk deals that we normally do in a quarter were actually about $30 million to $40 million below what we have seen in the past several quarters.

It is a reflection, obviously, of what is going on in the implant side of the equation.

As I mentioned in my comments, we clearly have seen slowing implant rates across the marketplace.

I think as a result of that hospitals were clearly looking at their inventory levels.

We were doing the same thing.

There is also, from our perspective, as we were going forward with some of these new products we obviously weren't quite as comfortable giving quite the same level of discount on some of the new products.

So the fact that we had all these new products in the quarter when the market was somewhat slowing all lead to basically the quarter-end deals, the bulk purchases being less than what we normally would see.

We think that is a one-time kind of item that we wouldn't expect that to continue in the future, unless obviously the market continues to even get softer.

But at this point in time we would expect this kind of one-time quarter deal.

It's Jeff.

I would just add that this is pretty similar to -- if you go back to Q1 of FY 2007 when the market saw a slowdown, this was pretty similar to what we saw then.

Okay.

And then one quick follow-up on the fiscal 2012 guidance.

When you look at the 1% to 3% constant currency growth -- and you are doing pretty well in Europe, which is challenged in some areas.

Are you assuming, Gary, the US is flat to down in that kind of big picture if you look at it geographically?

Yes, we are.

I mean we are assuming that basically -- the US market is clearly where we still have struggles in all of our businesses, even with the guidance that we were giving within CRDM and spine as far as being low to slow growth going forward is primarily because the US market is the one that is declining.

The international markets, emerging markets are -- we are still seeing very positive growth.

So, yes, you would assume in that kind of guidance we provided that the US market would continue to be flat to down and the international markets, the emerging markets would continue their growth rates.

Just Europe, do you think that could actually be up for you guys?

Yes, I think Europe could continue to grow for us.

We are still -- we are obviously taking share in many of our product lines in those areas and the market is still -- we are still seeing growth in most of the markets in Europe.

Great.

Thanks, Gary.

Thanks, Jeff.

Mike Weinstein, JPMorgan.

So maybe just kind of get to a couple of items.

What stands out -- or really two things.

One, obviously on the CardioVascular side a phenomenal performance, (inaudible) and strength from all the new product launches, but then we look at US CRN and US spine.

They are both so far light of I think what the Street would have been expecting.

It suggests in both cases that it's more than just a market issue and you talked about a reduction in bulk purchasing.

How much of that -- I mean you indicated on your comments that you thought that it wasn't that tied to what was going on in innovation and premier.

But the absolute drop off in those two businesses, it seems too coincidental for us to think that it's just both markets got a lot weaker in the month of April.

Well, first of all, I am glad that you picked up on the CBG growth and what was there, because obviously as we talk about our CardioVascular businesses with Endovascular and everything that is going -- both Structural Heart and the whole coronary market, we were very, very pleased as you indicated with those results.

They had a great quarter and things are going very, very well in those businesses.

As you said, obviously what we have seen in the US, especially in the ICDs and spine markets, we do believe is clearly a market issue that is going on.

Obviously a little bit impacted by the quarter in bulk purchases so let me address both.

There is two aspects there -- what is going on in the market and then what happened with the quarter-end deals.

As far as the markets go, I think we know, based on the data we have seen and our own implant data that we have and also data we get from other parties, we are clearly aware of the fact that the implants in the US are down mid to high single digits.

We have seen that over the last -- since January and that has actually continuing to be declining and I think that is clear in the marketplace.

And I think most people have been seeing that and feeling that.

So that is happening and that is going to have an impact in the US ICD market.

Overall pricing actually was slightly improved in the market, but clearly the market on procedures in the US was down.

We think it's primarily related to, again, the DOJ investigations and the JAMA article.

Spine is a little different issue.

The market there was relatively stable from where it has been but it's still kind of in that low single digits.

We are making some progress with our new products in that marketplace, but it's just taking time to get those all launched and out there in the market and really have the impact we would expect.

Now back to the quarter-end deals and the bulk purchases and where that is at.

That was basically -- I was kind of expecting that some people might be expecting this had something to do with Novation with all the publicity around that.

Mike, I can honestly tell you we went through account by account what -- the Novation versus non-Novation accounts and where that is at.

And I am not saying you can't find one account here or there where there might be an impact, but the reality is if you look at Novation accounts versus non-Novation accounts there is no change in what was going on with either the implant rates or on the quarter-end deals.

The reality is the Novation noise has not had an impact on our implant rates at this point in time and maybe there is one or two small quarter-end deals, but the reality is that was not unusual for Novation accounts.

That was similar to the non-Novation accounts too.

So I know that is what the market is going to assume because this has been played out there, but I can tell you we have done our analysis and at this point in time that is not having an impact on our business.

Okay.

And let me just follow up with just a question on the guidance, Gary.

The $3.43 to $3.50 two questions on it.

One, how much benefit do you think you are getting an FY 2012 from the 4% to 5% headcount reduction that you announced.

Our back of the envelope roughly was about $0.15, but wanted to get your view on that.

And then second, did Omar have any input on the FY 2012 guidance?

Thanks.

With respect to the restructuring, as I mentioned in my comments, we think the savings related to taking out the approximately 2,100 employees, as we mentioned, is between $225 million and $250 million of savings related to that.

And so that would tie into kind of kind of what you indicated before us.

Now obviously that is the amount that is coming out.

Obviously we are making -- we did that so we can make investments to drive some growth in the emerging markets in some of the new technologies, like Ardian and transcatheter valves.

So it's not just -- you can't just take the net number and assume that that is the reduction overall.

But that is the savings that we are getting as a result of the restructuring that will be reinvested back in the Company and to drive the operating leverage I mentioned as I went forward.

The second question with respect to guidance and Omar's input into that; obviously Omar has not started with the Company.

He will start on June 13.

But he -- that guidance is based on what is going on in the market and our overall plan.

Omar has seen our plan for FY 2012.

He is aware of that.

He is aware of the guidance.

We obviously shared with him the guidance that we are providing to you today, so he is well aware of those, what we are doing and the guidance we are providing, and is supportive of that.

But obviously the guidance we are giving is coming from the management team and the Board at this point in time.

Omar, when he comes on board, might have different views later on, but obviously initially he is basing his assumptions on the fact that the management has put together an internal plan and a guidance that we plan on achieving.

Great, thank you.

Kristen Stewart, Deutsche Bank.

Thanks for taking the question.

Just I guess going back to the guidance since probably everyone is going to focus on it -- to what degree do you guys think that you could do perhaps some additional share repurchase or to what degree may you be kind of I guess over stating maybe some of the reinvestments from the restructuring savings?

Because a little bit surprised that there isn't a little bit more leverage kind of coming through with the restructuring and just kind of the overall cost initiatives you guys have talked about in the past.

Obviously we're providing guidance that we have every intention on meeting and exceeding going forward and so that's what you should be thinking based on the guidance we are providing at this point.

We are trying to take into consideration in the guidance the fact that even though some of the markets are still soft in some areas as we mentioned with ICDs and spine in the US, on the other hand we have some very exciting new products and we expect to take share with that as we move ahead.

So as a result of that we're basing that guidance on what we see happening in the markets.

We got surprised on our markets declining last year and we're trying to be somewhat cautious on that until we see where the markets themselves actually go.

As far as the leverage, we are driving operating leverage and an 80 to 100 basis point improvement in SG&A, that's quite dramatic and that's what we clearly need to focus on.

Yes, there are savings that we're getting from the restructuring, but there are also headwinds that we're going to have to be facing as we make some of the investments.

First of all, in the current year in FY '11, based on our performance our incentive plans didn't pay out where we would expect them to be going forward, so we're obviously going to have to see an increase in those levels.

There are merit increases for the employees that are still at Medtronic.

And as I mentioned in my comments, we have some very exciting new technologies and products that we're launching.

And whether that's in transcatheter valves and some new things or in Ardian, but even back to Solera and the Protecta and Revel MRI SureScan, we need to make sure we make the investments to drive the share we can get there.

So we will continue to focus on leverage as an organization, but we're also going to continue to invest to drive growth in the Company.

Would it be fair to say then that your guidance in terms of the top line assumes basically what you see in the market today?

So no major improvements in overall market growth rates coming across the board?

That is correct.

Our assumption is based on what is going on in the markets right now.

The markets -- and we do believe at some point the markets are going to improve, that we are not going to continue to see them down at these levels.

When that occurs we don't have a crystal ball to be able to predict and so we are basing it on that -- what is happening currently.

If we would see the market starting to improve slightly, whether it's in spine or on ICDs obviously that would impact our overall guidance.

All right.

So no utilization increase broadly by the market?

Correct.

[Clean] estimate today extrapolated forward?

That is correct.

And are you assuming a worsening of price environment across your book of business, an improvement, or --?

No, overall we are assuming the prices in the market kind of remain kind of where they -- that pricing pressure remains kind of stable.

Actually we would assume for ourselves we will actually see a little bit less pricing pressure than what we saw here in FY 2011.

Again with all these new products and as I mentioned even on some of the discussion, with all the new products we are already seeing in this quarter some benefits on the pricing side of the equation.

I mentioned within CRDM MRI Revo and Protecta we saw pricing actually sequentially up in the ICD and Pacing areas in the quarter with almost just limited launches of those new products.

Solera has seen a price uplift.

So the reality is for ourselves, because of all the new products, we actually (technical difficulty) that pricing will probably be a little bit better than what maybe the market is experiencing.

And then geographically, this is when we anniversary the Arizona adjustment from last year so that is not going to be the headwind that it was in FY 2011.

Within Japan, that is correct.

Good point.

Thank you very much.

Bob Hopkins, Bank of America.

Good morning.

So just, Gary, to follow up on that on that last comment with Kristen's question on your assumptions around market growth, I thought I heard you say that you think the US ICD market was down high-single digits this quarter after you make your adjustments and that you were -- are you assuming the same thing for 2012?

That the US ICD market is again down high-single digits as you put together your guidance?

I think -- obviously with all the noise in the quarter it's hard to actually predict, to determine exactly what was going on with the markets themselves.

But we did see procedural growth kind of in that mid- to high-single digit decline overall.

We are -- going forward we were kind of assuming mid single-digit procedural decline in the US.

Obviously procedures increasing outside the US, so that is why we are assuming the market continues to be flat to down in the US in those assumptions, yes.

But just to be clear, your assumption for global ICD market growth for the next fiscal year is roughly, what, low single-digit growth for the ICD market?

For the ICD business probably overall, because with share we will take and our pricing uplift it was probably looking at about flat.

Sorry, I was just curious about your assumptions on the market?

Oh, the market.

We would say the market on the US ICDs we expect is down.

Okay, and global --?

And for the worldwide we would expect basically it to be also flat.

The market to be basically flat.

Okay.

And then on spine, just to clarify, you said that your metal instrument business was down 1% in the quarter globally.

What was that number in the US?

I don't have that number exactly with me as far as what is in the US.

We can get back to you on that.

But it obviously would be down more than that because, as we indicated, international was up 6% for us overall across the entire spine business and I know mental constructs would have also been up.

So it would be more than the 1% down.

We will get back to you.

I don't have that detail.

Okay.

And then just lastly, your guidance for 2012 does assume a roughly $1 billion buyback.

That is correct.

We are assuming that basically on the buyback that we would continue at the same levels that we had here in FY 2012.

Again, obviously from the standpoint of dividends and the buybacks we were assuming that we continue the same thing with about 40% to 50% of our free cash flow being returned to our shareholders as we have said in the past.

And that would give you kind of in that $1 billion to $1.1 billion buyback.

Okay, great.

Thanks.

David Lewis, Morgan Stanley.

Good morning.

Two questions, Gary.

The first is on O-US dynamics there is a lot of moving pieces here.

You obviously took share, significant share quarter over quarter.

I wonder if you could help us understand how much of this is Japan.

And specifically in Europe you have sort of two dynamics, the competitor launching the quadpole lead and you have a lot of value segment components or value products which launched this quarter.

So help us understand as you think about your O-US share gains sequentially where the components of that fell out between products and geographies.

Well, as we indicated in the comments, basically in Europe we picked up about a point of share and in Japan I believe it was also about a couple points of share in those two markets.

So it's in both where we picked up share on the ICD side of the equation.

I think within Europe, as you said, there is several moving components.

Actually we are -- and this was sequentially versus the prior quarter.

The Cardia and Egida products were very important for us to get in the value segment.

As we said on the last earnings call, that was an area that we really didn't have a product to compete against the competition with.

I think some people were assuming that that was actually the benefits of the St.

Jude lead in the prior quarter and we firmly believe it was related to the value segment more than anything else.

And I think that what the results showed in this quarter have highlighted the fact that, yes, that was where the issue was was more in the value segment.

So we were excited at the fact that we did see progress there, and so overall we basically gained share in that part of the market.

Protecta is also gaining share.

I think our point is that it was also gaining share in Q3 and previously however.

So I think there was actually noise, more noise in the prior quarters because we didn't have a product in the value segment to be really competitive.

Now that we do I think what you are seeing is a true indication of where the market is and the reality is we have some very competitive products now across the full product line overall.

In Japan it was basically we -- with the new products, with getting Protecta in that marketplace we clearly saw the uplift in that business overall.

So again this market -- we are excited about these new products.

What we are seeing in Europe and even with the early start what we have seen so far in the US is that these products are having an impact on both market share and in pricing.

Okay, very helpful, Gary.

Let me just two quick follow-ups; the first just related to O-US.

Maybe you could give us your outlook for fiscal 2012 emerging market growth and how that would compare to what you saw in fiscal 2011.

And I guess second, Gary, just thinking about leverage, you gave a lot of detail here about low single-digit growth in a lot of your markets here for fiscal 2012.

As you think about leveraging your business over the last couple of years you were able to drive 80 to 100 basis points of EBIT growth and perhaps that has fallen to something like 50 basis points of EBIT leverage.

How do you see -- once we kind of anniversary the benefits of the restructuring, how do you see leverage in your business going forward?

Thank you.

Okay.

Let me address the last one first which is on the leverage component and kind of where we are at.

As we have indicated, we are driving 80 to 100 basis points of SG&A leverage next year.

And overall that we have a little bit of a question on what is going to happen on the gross margin side of the equation as we get some of these new products and some new technologies that are putting a little bit more pressure on the gross margin line.

Obviously that will be offset with the pricing uplifts we are seeing overall, but we expect to continue to drive leverage in the organization going forward.

You are going to continue to see us taking costs out and shifting it to where some of the faster growing markets are.

Then we would also assume, as you start to see some of these new products starting to kick in and not having some of the dilution related to some of the new technologies we have, that you are going to -- that is where you are going to also see some of the leverage.

As the Ardians and the transcatheter valves and these new products start to have an impact and really accelerate in the market side of the -- the revenue side of the equation, obviously it's going to have even more impact on the profitability of the organization overall.

So we think that not only will you have leverage opportunity in the current FY 2012, we think going forward we will continue to leverage the bottom line of the Company and continue to drive earnings faster than the revenue growth.

Back to the first question was --

Emerging markets.

Emerging markets, excuse me.

Emerging markets, we would expect the growth, which was about 20% in FY 2011, we would expect that same level in FY 2012.

The markets are continuing to be very, very strong.

They are obviously getting these new products.

We are continuing to make investments in that, so we have assumed in the guidance we just provided that basically those markets would continue to be in that 20% growth range.

Great.

Thank you very much.

Joanne Wuensch, BMO Capital Markets.

Thank you very much.

I want to focus in on two things.

The first one is on gross margins.

It sounds like you have got an ICD headwind but some new product tailwind and yet I am still not seeing a lot of, or any, gross margin expansion for next year.

In fact, down maybe a little bit year-over-year.

Just generally, how are we thinking about that trend and how are we thinking about that on a go-forward basis?

Well, as we have indicated before, we continue to expect our gross margins, and we have said the last several years, to be in that 75% to 76% range.

We have been able to do that even with the pricing pressures that are out there.

As indicated in the quarter here, we were a little bit lower at the 75.3% than what we would have normally expected.

A lot of that gets back to the fact that one of our highest margin products in the US ICD area was lower clearly and we wouldn't expect that as we go forward.

Even just from the bulk purchases we wouldn't expect that, so overall that will be a slight positive as we go into next year.

On the other hand, because of the mix -- of the geographic mix and where we are at, also just some of the new products that are being launched, do have a little bit lower gross margin percentages.

Even though we are getting an uplift in ASPs there is also a higher product until you get the volumes up to the levels you need to kind of offset that and get the product costs down.

So there is a little bit of a headwind that we are facing that as we look into FY 2012, but overall going forward we would still -- our assumptions are that we still maintain our gross margins in the 75% to 76% range.

We are taking product cost out.

We are doing things that are necessary to make sure that we can maintain in that level.

So that is our expectation both for FY 2012 and going forward.

Okay.

And not to beat a dead horse, but US ICDs it seems as if the market has decelerated or stepped out again this quarter for -- broadly over the last couple of months.

Both you and a competitor are talking about DOJ and JAMA.

Is the decline continuing or have we plateaued?

Can we talk a little bit about a trend?

As you said, it has just really occurred over the last few months and so it's hard to predict any trend per se, although I would completely agree with you that it has decelerated.

We have seen that in our data that we get would indicate the same thing.

And as you indicated, I think the competition has been acknowledging the same type of an issue that it is out there in the marketplace.

I don't think it's getting any worse from the data that we are seeing, but we will have to wait and see.

So it has kind of plateaued at this point, but it is still out there.

We haven't seen the trend turn the other way and go back, haven't seen an improvement on that aspect of it.

So we are watching, but it has really only occurred over the last few months.

We will just have to continue to watch the data and see what happens.

Okay.

Thank you very much.

We have hit the top of the hour.

We will just take a couple more questions.

David Roman, Goldman Sachs.

Good morning.

Gary, I was hoping you could expand a little bit more on your comments about some of the new products carrying gross margins.

I understand higher product quality -- higher product input costs as well as the fact that Revo, for example, is only 10% of the mix now.

At what point do we start to see the benefit on the consolidated gross margin from some of these new products?

Is there a certain level of penetration they have to reach before we can start to see that?

Yes, I think overall, if you get these new products -- just using Revo as an example.

The fact of the matter is we are getting a very significant ASP uplift on this product, but it's also a more expensive product for us to manufacturer.

Not only just because of the volumes, but just because it is more difficult to manufacture.

So you are going to have some pressure there even as you get the volumes up.

But if you get up to again 40% to 50% of your mix then obviously you start to get the volumes that would have some impact on this.

It's not just the newer products.

I just don't want everybody to assume it's the newer products with respect to -- in our existing businesses.

What I was also trying to get at is and what we are seeing is, for example, in AF with cryocath obviously the margins in the business are not the same as they are -- are significantly lower than what they would be obviously with the US ICDs.

And so as you see growth in those aspects of the business that is where you are going to see some impact on the margins overall.

Even within spine, for example, the Osteotech and biologics margins are not the same as obviously the metal constructs.

And so that is what I was also trying to get at is you start to see us going in some of these other emerging therapies.

They don't always have the exact same margins, as high margins as we have in some of the older product lines.

So in general we see a little bit of pressure here, as we indicated for FY 2012.

Still in the 75% to 75.5%.

So don't get me wrong, we still think we are going to have very strong overall gross margins and that is with continuing pricing pressures that are out there in the marketplace.

As those start to mitigate obviously then you can start to see that uplift even a little bit more, because we are going to continue to take -- even though we are in the fifth year now of our product cost reduction plan, we are going to continue to take product costs out to make sure that we can offset any pricing pressures and maintain those margins and hopefully improve on them.

But right now we are trying to give some guidance that gives us -- acknowledges just kind of what is going on with some of the new products themselves.

But it's fair to say that we are probably at the upper end of the range, given the FX impact that we are looking at so far for FY 2012.

Yes, if you pulled in the -- what we mentioned was on an operational basis 75% to 75.5%.

If the FX benefit that we talked about would come through, you would see those margins actually move up a little bit because obviously many of these are dollar-based costs.

So that was based on not having that additional FX benefit in there.

So if you take a longer term view of the gross margin it sounds like on an ongoing basis some lower gross margin businesses are going to make up a bigger percentage of the total as well as lower gross margin geographies.

So how does the gross --from a structural perspective the gross margin perpetually moving down and the only way to offset that is some of the proactive cost reduction initiatives you are taking?

Or is there something in business mix that you talked about that FY 2015 number of two-thirds of revenue coming in higher growth segments, those higher growth, lower margin segments?

How do we think about just the gives and takes?

There is obviously a lot of gives and takes in here and everything will vary depending on where the mixes are at.

As I indicated in my comments, we believe that we are going to be in the 75% to 76% gross margins for FY 2012 and going forward into the future.

We don't expect it's going to have that much of an impact on -- I can't predict any further out than that to say that based over the next few years we would expect to kind of be in those levels.

There is a lot of moving parts on all these products.

Are all very high margin products but there will be variations on that and that is something we just think we can manage going forward, as we have over the last several years.

As you have seen, we have been able to manage within that 75% to 76% range.

You should also note, David, that we have maintained those margins.

Well, you have seen our O-US mix go from over the last 5, 6 years from 33% of our revenues to now upwards of 43%.

So clearly when you look at the geographic mix we are able to manage that quite effectively.

And then lastly, a couple of times earlier in the call, Gary, you talked about the benefit of sizing and scale in the diversified model across the portfolio.

But if I look at that fiscal 2012 top-line growth rate, the 1% to 3% rate I think is the lowest among large-cap med tech with the section of one other company.

What changes over time whereby that diversified model can actually drive improvements in the top line and drive a better multiple for the stock?

Well, I think overall even the things we are doing currently already in our marketplace with the combination of the Cardiac and Vascular salesforce that I mentioned earlier in my comments, those are all efforts where we are going to take the size and scale of Medtronic and really provide a full benefit to, in this case, on the coronary and CRDM side of the equation to the hospitals themselves.

And I think that will have a -- we are already starting to see that that is starting to have a very significant impact in the marketplace.

Even just doing it on a pilot basis here in FY 2011 with strategic accounts, we saw significant growth in those accounts where we could focus our sales organizations.

And so we are pretty confident that that is going to have a major impact going forward.

As I mentioned in my comments, our guidance is based on the fact that the markets themselves are growing 1% to 3%.

That is the assumption we have.

We are assuming we are going to grow at that or faster going forward, and so I think you will see that the size and scale will have a -- provides an impact and that we will grow faster than the 1% to 3%.

Other companies in the med tech arena, I don't know whether they have adjusted their markets for what we have seen here clearly in the ICD or are they -- as they -- do they have the same impact on some of the markets or they have the same products overall.

So I can't comment on where the other med tech market is at.

But overall, we feel very, very confident that we have the products, the organization, and clear strategies to drive above-market performance in this company going forward.

And I think you are going to see that, not only in CRDM but you are going to clearly see it as we have already started to see in the CardioVascular Group equation.

We are starting to see a pickup in Spine and we expect to see that happening there.

Obviously Diabetes and Surgical Tech continued to be very strong so I feel very confident going forward.

But we are giving guidance reflecting kind of what is going on in the market right now.

Okay, thank you very much.

Time for one last question.

Larry Biegelsen, Wells Fargo.

Thanks for fitting me in.

Just two questions, one on ICDs and then I have one follow-up.

Gary, just to be clear, the implant volume you saw a mid to low double digits, I think you said, implant declines and that was consistent January through I think April.

So you didn't see any deterioration, just to be clear?

And then secondly, how much do you think this is due to an end of the replacement cycle?

Have you guys been able to tease that out or is it just DOJ and JAMA?

And then I just have one follow-up, thanks.

All right.

With respect to the ICD market, obviously we don't have the data through April.

Some of that information we don't get on as timely a basis, so it's more anecdotal information.

But I would say, Larry, basically our overall information we get both breaks out international -- we have a view of what is going on with the initials and with replacements.

The initials are what we clearly are seeing a mid to high single-digit decline kind of in the initials during that period of time in the marketplace.

The replacements have also somewhat slowed but it's not replacements driving this issue, at least over the last few months.

It has been more on the initial side of the equation.

Thanks.

And the restructuring, do you think it had any impact on Q4 2011 or do you think it could have some impact on the first quarter of fiscal 2012?

You announced the restructuring I think a quarter ago, so there was some uncertainty in the organization this past quarter and now you have just implemented it I think at the beginning of May.

So could it cause some weakness in the first quarter here?

Thanks, Gary.

Yes, I actually think there could be some impact in Q4.

I mean, let's be honest, with the transition that was going on, the new structures that we were discussing could there have been some impact in Q4 as we were kind of in the transition?

I think that is probably fair to say that there might have been some there.

I don't think there really will be anything in Q1.

We kind of structured this such that we got off to a start real quickly here in Q1 and most of the announcements and all the decisions were made.

And I think with most of the teams basically now they know what they need to do.

They know who is there and they are driving towards their objectives for the current year.

So I would agree with you, I think there might have been some impact in Q4 but I would expect limited impact in Q1.

If anything right now, I would think that the Company is renewed, refocused, understands what is in front of us.

We are passed FY 2011; we are focused on delivering on FY 2012.

Thank you very much.

With that before let me -- before ending today's call, I would like to close by stating that we are very excited about FY 2012.

Our management is focused on driving the business for market-leading performance as I said during my comments.

And we are optimistic about recently approved products that we think will actually further differentiate us in the market.

We look forward to having Omar Ishrak lead our company and believe we have taken the right steps to set us up for improvement in FY 2012.

With that, on behalf of the entire management team, I would like to thank you again for your continued support and interest in Medtronic.

Thank you.

This concludes today's Medtronic's fourth-quarter earnings release conference call.

You may now disconnect.