美敦力 (MDT) 2012 Q4 法說會逐字稿

Good morning, my name is Christy and I will be your conference operator today.

At this time I would like to welcome everyone to the Medtronic 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).

Thank you.

It is now my pleasure to hand the program over to Mr. Jeff Warren.

Please, go ahead.

Thank you, Christy, good morning and welcome to Medtronic's fourth-quarter conference call and webcast.

During the next hour Omar Ishrak, Medtronic Chairman and Chief Executive Officer, and Gary Ellis, Medtronic Chief Financial Officer, will provide comments and the results of our fourth-quarter and fiscal year 2012 which ended April 27, 2012.

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

First, a few logistical comments.

Earlier this morning we issued a press release containing our financial statements and a 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 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 2011, respectively, and all year-over-year revenue growth rates are given on a constant currency basis.

And with that I am now pleased to turn the call over to Medtronic Chairman and Chief Executive Officer, Omar Ishrak.

Good morning, and thank you, Jeff.

And thank you to everyone joining us today.

This morning we reported fourth-quarter revenue of $4.3 billion, which represents growth of 4% with balanced contributions from both our CVG and RTG groups.

Q4 non-GAAP earnings of $1.036 billion and diluted earnings per share of $0.99 increased 7% and 10% respectively.

Before commenting specifically on our Q4 performance I would like to recap fiscal year 2012, my first as CEO of Medtronic.

Overall we made progress this year in positioning the Company to succeed in the changing healthcare environment.

Our constant currency growth improved modestly from 1% in FY'11 to 3% in FY'12.

Three quarters of our business posted strong performances growing a combined 8%; the remainder, consisting of our US ICD and US Spine businesses, declined 10%.

While both of these business had unique factors affecting their performance, both were showing some signs of stabilization as we exited the year.

Looking down the P&L, we grew our operating margins faster than revenue by obtaining some SG&A and R&D leverage while holding our industry-leading gross margins relatively flat.

At the same time we made investments in markets where we see future growth.

When I came to Medtronic I decided that initially our three main areas of focus would be accelerating globalization, optimizing innovation and improving execution.

We're making notable process progress in these areas.

First let's discuss globalization.

Our FY'12 international revenue grew 7% with emerging markets growing 20%.

Our team came together nicely following the global reorganization we implemented in the fall.

Over the past year I've traveled extensively visiting our operations around the world and I am seeing firsthand an improving alignment between our business units and geographies.

Everywhere I go I'm impressed by our local teams' skill and dedication as well as their deep knowledge of our customers and markets.

I've also been positively surprised by the sizable opportunity that exists in emerging markets to expand the use of our existing products.

Longer-term we're also taking the necessary steps to enter the value segment more aggressively.

We continue to reduce product costs through our continuous COGS reduction program, which gives us the flexibility to offer a variety of tiered products.

We're also actively investigating opportunities to increase local R&D and manufacturing in emerging markets.

Through the structured approach we intend to grow our emerging market revenue from 10% of the overall Company revenue in FY'11 to 20% over the coming years.

We have also focused on optimizing innovation, including improving our R&D productivity.

While it is still early and we have a lot of work ahead of us, we did see some progress in FY'12 toward our goal of getting more growth with the same, or perhaps less, levels of R&D and M&A investment.

As you run through our FY'13 planning process, we made specific efforts to reallocate resources into driving growth in emerging markets and in evidence generation for our growth platforms.

As part of this process we eliminated a number of development programs in order to focus on projects that are more strictly aligned with our strategy and expected to deliver sustained short- and long-term business results.

We also assessed all programs and their ability to deliver economic value to the customer, which is increasingly becoming a critical factor in today's changing healthcare environment.

We're engaging in active discussions with a number of major payors around the world to begin partnerships on specific economic value programs.

One example is an agreement we recently reached with the government of Lombardi, the largest region in Italy, to partner on outcomes research and med tech efficiency.

This unique program will evaluate the quality and overall treatment cost of chronic disease for several Medtronic technologies.

Here in the US we are also in initial discussions with Aetna regarding chronic disease management partnerships in diabetes and heart failure.

Both of these partners have rich sources of patient outcome data, which is essential for the quick and effective evaluation of economic value.

Partnerships like this will not only be beneficial to Medtronic, but will also help support the sustainability of healthcare systems around the world.

We believe strongly in the ability to translate clinical value into economic value will be the key area of differentiation for success in healthcare over the longer term.

We're excited about our strategy in this area and look forward to telling you more at our investor conference next week.

Let's now address my third initiative, driving crisp and consistent execution across the organization.

We made improvements to our business alignment ensuring focus and efficiency throughout our business units and regions.

I've also focused our management team on improving operating rigor, which has resulted in addressing issues in a more proactive and decisive fashion.

I'm seeing improvements in execution from our operating teams around the world and the results of our efforts are beginning to show in our financial performance.

We delivered total Company revenue growth of 3% in FY'12 which improved through the year and finished at the upper end of the revenue range we provided at the beginning of the year.

In the vast majority of businesses we maintained or grew our share over the course of FY'12.

We also delivered non-GAAP FY'12 EPS consistent with our guidance.

Going forward we will maintain our focus on execution which we expect to result in improved and more predictable business performance.

Let's turn now to our Q4 results.

Revenue growth of 4% was driven by solid performances across many of our businesses.

Our US ICD business showed sequential improvement as it was helped by the continued trend of market stabilization, an expectation that we highlighted for you last quarter.

In Q4, after excluding US Spine, the remaining 87% of our business grew 7%, a marked improvement from the 4% growth we had in this portion of our business last quarter.

Our international revenue grew 7% in Q4 including 20% growth in emerging markets.

We had strong finishes to the year with growth well in excess of 20% in Central and Eastern Europe, greater China and India.

Looking ahead I believe sustained emerging market growth greater than 20% continues to be a realistic goal.

In CVG, as I just mentioned, we continue to see signs of stabilization in the US ICD market.

Our US ICD revenue declined 2% this quarter which was a major improvement from the 14% decline last quarter especially in light of decreasing hospital inventories.

Our implant rates showed year-over-year growth for the first time in six quarters and this trend is continuing.

Growth in our overall high power replacement share offset modest declines in our CRTD initial implant share resulting in flat total high-power marketshare.

In fact, for the first four years -- in fact, for the past four years our US ICD share has remained in a tight band.

Apart from a couple of onetime events our share today remains right in the middle of this band and expectation is to maintain or improve our share going forward.

Before moving on I'd also like to note that in pacing we continue to gain significant share on the strength of our MRI devices, both in the US and in international markets.

Our global pacing share is now at its highest point in four years.

Turning to coronary, I want to acknowledge the impressive early results from the US launch of Resolute Integrity, which sequentially doubled our US DES revenue and our corresponding marketshare.

This impressive share growth is attributable to the strong performance characteristics and long-term clinical evidence of Resolute Integrity, as well as solid execution by our coronary commercial team.

It is also a clear example of how leveraging the unmatched breadth of our entire CVG field organization can drive differential results.

We used field personnel from across our CVG organization, including the extensive field sales and clinical support network of the CRDM, to meaningfully accelerate and expand the Resolute Integrity launch.

Recognizing the power of our broad Cardiac and Vascular offerings, some of our competitors are now attempting to replicate our strategy, either on their own or through partnerships.

However, only Medtronic has the ability to seamlessly provide a full breadth of leading technologies for our customers, both today and in the future.

With the launch of Resolute Integrity we are now able to offer a comprehensive set of leading technologies across the Cardiac and Vascular space.

Next week at our investor conference Mike Coyle will tell you more about the increasing competitive advantage this represents in our inability to engage customers.

Let me now discuss our RTG business.

I want to first acknowledge the success of our full US and Japan launches of the RestoreSensor spinal cord stimulator.

RestoreSensor drove over 6 points of sequential US share gain and contributed to a doubling of our Neuromodulation business growth rate in Q4 versus the prior quarter.

We expect to sustain this improved growth rate over the coming quarters.

Our Surgical Technologies business had an outstanding Q4 growing 25%.

Our new Advanced Energy business was a strong contributor to this growth.

And I've been very pleased by the Advanced Energies integration efforts as well as their continued growth trajectory.

It's also impressive to note that even after excluding the impact of Advanced Energy, Surgical Technologies grew 14% organically.

This was driven by strong capital equipment sales from ENT and navigation, which collectively grew 17%.

Surgical Technologies is now nearly a $1.3 billion business and is an increasingly important contributor to our growth profile.

It also plays a very important role in our broader neuroscience strategies which Chris O'Connell will explain at our investor conference next week.

Now let me discuss our Spine business.

While the total business declined 6% our international Spine business actually delivered a strong performance in Q4 growing 8% and is now annualizing at over $1 billion.

This business is particularly strong in China where our joint venture with Weigao is delivering solid results.

I expect continued growth in international Spine while we focus on improving our US Spine business.

Turning to US Spine, Q4 revenue declined 12% with roughly 60% of this decline driven by INFUSE.

In order to isolate the issues in US Spine it is important to look at the business across its three parts, namely BKP, INFUSE and Core.

Our US BKP business was flat, which was encouraging after 10 consecutive quarters of decline, as our new products begin to gain traction.

US INFUSE declined 26% in Q4 but was relatively stable sequentially.

Until we know the results of the Yale study, which we expect in Q2, there will continue to be uncertainty about our INFUSE financial results.

As I've said before, we believe in the safety and efficacy of INFUSE for approved indications.

However, we want to address any controversy by understanding the facts which is why we requested Yale University to systematically analyze all the available data.

In addition, we were pleased by the US Department of Justice decision to close its investigation of INFUSE.

We took the investigation very seriously and invested significant resources to identify the facts with complete transparency.

Now let's discuss our US core business, including other Biologics which declined 7% and drove the remaining 40% of the decline in US Spine.

We're making changes to our strategy in order to restore the performance of this business, including innovating and differentiating Medtronic at both the product level and procedural level.

We're investing in local product development in locations around the globe.

We're also beginning to use breadth of our technologies more effectively in the neuroscience space.

And finally, one of the biggest changes we're making is to incorporate economic value into the commercial messaging of our existing products as well as into our new product selection process.

Chris O'Connell will review these Spine strategies in detail at our investor conference next week.

Let me now address our operating results in Q4.

In delivering non-GAAP EPS of $0.99 we made some conscious trade-offs during the quarter to take advantage of some compelling investment opportunities.

As a result of this SG&A spending came in higher than we had originally forecasted.

As we moved through the quarter we could see that our new products were driving strong revenue and market share growth.

And at the same time we were able to execute a sales leaseback financing strategy that directly benefited the bottom line through a reduction in tax expense.

This presented a unique opportunity to make some focused sales and marketing investments including pulling in some planned spending from FY'13.

We believe this was the right decision and we expect to see the payoff from these investments as we go through the next fiscal year.

Before turning the call over to Gary, I want to briefly address our capital allocation strategy which remains an important commitment to our shareholders and a key driver of long-term value creation.

We continue to generate significant free cash flow, including nearly $4 billion in FY'12.

We returned $2.5 billion of this to our shareholders in the form of share buybacks and dividends.

We remain committed to returning 50% of our free cash flow to shareholders which still provides us with ample flexibility to make disciplined investments for sustainable growth.

Let me now ask Gary to take you through a more detailed look at our results and at the end of the call I will make some brief closing comments.

Gary?

Thanks, Omar.

Fourth-quarter revenue of $4.297 million increased 3% as reported and 4% on a constant currency basis after adjusting for a $42 million unfavorable impact of foreign currency.

Q4 revenue results by region were as follows -- growth in Central and Eastern Europe was 27%; South Asia grew 25%; growth in greater China was 23%; Middle East and Africa grew 16%; growth in Latin America was 11%; Asia-Pacific grew 6% including a 7% growth in Japan; growth in our Western Europe and Canada region was 4% while the US grew 2%, which is the highest quarterly growth we have achieved in the US in two years.

Emerging markets grew a combined 20% in Q4 and represented 11% of our total sales mix.

Q4 GAAP earnings and diluted earnings per share were $991 million and $0.94, an increase of 28% and 31% respectively.

After adjusting for certain acquisition-related items, Physio-Control divestiture-related items and net restructuring charges and certain litigation charges, and the non-cash charge for convertible debt interest expense, fourth-quarter earnings and diluted earnings per share on a non-GAAP basis were $1.036 billion and $0.99, an increase of 7% and 10% respectively.

In our Cardiac and Vascular group revenue of $2.253 billion grew 4%, results were driven by growth in coronary, transcatheter valves, Endovascular, AF Solutions, renal denervation and peripheral, partially offset by small declines in pacing and ICDs.

CRDM revenue of $1.295 billion was flat.

Worldwide ICD revenue was $744 million declined 1%, and we estimate that the worldwide ICD market declined in the mid-single-digits.

Both the market and our results showed sequential improvement in Q4.

In addition, our global ICD share improved on both a year-over-year basis and sequential basis.

The combination of our Protecta ICD with its shock reduction and lead integrity alert technologies, along with the proven long-term performance of our Sprint Quattro leads, continues to perform well both in terms of share and pricing.

In the US ICD market it is worth noting that the market did stabilize this quarter as expected, even as we continue to see a reduction in customer inventory levels.

Pacing revenue of $492 million declined 2% and the market declined in the low-single-digits.

Our MRI SureScan pacemakers continue to drive our market outperformance as we continue to gain share in both the US and international markets.

Our AF Solutions business had solid growth, in excess of 20%, despite anniversarying the US launch of the Arctic Front cryoballoon.

We continue to take share in this important growth market.

Cardiovascular had an outstanding quarter with revenue of $958 million growing 10%, with 9% growth in the US and 11% growth in international markets.

Coronary revenue of $450 million grew 12% on the global strength of Resolute Integrity.

Worldwide DES revenue in the quarter was $243 million including $80 million of US revenue.

Resolute Integrity's deliverability, unique diabetes indication and long-term clinical performance received a strong customer acceptance during our recent US launch resulting in a doubling of our market share in less than a quarter.

US DES market pricing was relatively stable sequentially with pricing down in the mid-single-digits year over year.

In international markets we gained 150 basis points of DES shares sequentially on the continued strength of Resolute Integrity with particularly strong performances in Europe and China.

We look forward to extending our DES share with continued expansion in the US and our expected launch of Resolute Integrity in the important Japanese market.

We expect to become the global market share leader in coronary stents in FY'13, adding to our market-leading positions in ICDs, pacemakers and Endovascular stent grafts.

Turning to renal denervation, we continue to lay the groundwork to realize the multibillion-dollar opportunity in hypertension with major investments in our product pipeline, clinical evidence and market development including building therapy awareness and care pathways.

In Q4 we received approval for our Simplicity system in Canada as we continue to expand this therapy into markets beyond Western Europe.

We continue to enroll our US pivotal study and remain on track for US approval in FY'15.

In FY'13 we expect our renal denervation revenue to nearly double to $60 million to $70 million.

We intend to maintain our leadership based on our robust pipeline, growing breadth and depth of our long-term safety and efficacy data and strong intellectual property in both the US and international markets.

Structural heart revenue of $289 million increased 7% driven by strong growth in transcatheter valves.

This quarter data was announced at ACC and EuroPCR from our ADVANCE study, one of the largest prospective multi-center TAVI trials to date, which showed high procedural success combined with positive clinical outcomes and low complication rates with our CoreValve system.

In international markets we continue to gain share and we are the clear market leader in transfemoral, the largest TAVI segment.

Our larger 31 millimeter CoreValve continues to perform well bringing TAVI technology to a previously untreatable patient population.

Cardiac surgeons are also increasingly attracted to our direct aortic approach, an alternative to transapical implantation.

We will introduce our next-generation TAVI system later this year, which will leverage CoreValve's strong market and clinical performance while integrating new technologies to enhance deliverability and anatomical fit, as well as provide valve recapture ability.

In the US we are pleased with the progress of our pivotal trial.

Enrollment in our extreme risk arm is complete and we are enrolling patients through a continued access.

We expect our high-risk arm to be fully enrolled this summer.

Turning to Endovascular and peripheral, revenue of $219 million grew 10%.

Our Endurant abdominal stent graft continues to drive performance in markets around the globe including Japan where it was launched in Q4.

Endurant II, our next-generation AAA stent graft, is performing well in Europe and we are pleased to announce that we recently received FDA approval for US launch.

In peripheral our drug-eluting balloons are delivering strong double-digit growth in international markets.

At EuroPCR last week two randomized control trials were presented that demonstrated the advantage of our IN.

PACT drug-eluting balloon over uncoated balloons and drug-eluting stents.

We intend to begin enrollment soon for a 1,500 patient global DEB study that will ultimately include more than 80 sites in over 30 countries.

In the US we began enrollment in our IN.

PACT SFA II pivotal study in late April.

On the commercial front in the US our Assurant Cobalt Iliac Stent and Complete SE vascular stent are posting very solid results.

Now turning to our Restorative Therapies group, revenue of $2.044 billion grew 4%.

Growth was driven by strong performances in Surgical Technologies, Diabetes and Neuromodulation, partially offset by declines in US Spine.

Global Spine revenue of $818 million declined 6%, or down 2% after excluding the negative impact of US INFUSE.

International spine grew 8%, including over 20% growth in the important Japanese market.

In Core Spine, which includes core metal constructs, IPDs and BKP products, revenue of $629 million declined 3%.

The US were market continues to decline in the low-single-digits with flat procedural growth and mid-single-digit pricing declines partially offset by positive mix.

Our core metal construct products declined 3% but grew 5% sequentially.

We continue to focus on a number of initiatives to improve performance including the continued launches of Solera, POWEREASE, ATLANTIS VISION Elite and our [mass] mid-lift and navigated knee lift procedures.

While we are still early in these efforts we do expect their contribution to our growth to increase over the coming quarters.

BKP revenue grew 1%; an encouraging result given this is the first time BKP has grown in nearly three years.

Biologics revenue of $189 million declined 16% in the quarter.

BMP sales declined 24% in the quarter including a 26% decline in the US.

However, it is important to note that INFUSE is one of our lower margin products muting its impact to our bottom line.

Despite the increased pressure on INFUSE, our differentiated DBM offerings, including MagniFuse and Grafton, are driving double-digit growth in other Biologics, including midteens growth in the US.

Turning to Neuromodulation.

Revenue of $463 million increased 8%, led by the strong acceptance in the US and Japan of our RestoreSensor spinal cord stimulator.

RestoreSensor with its proprietary AdaptiveStim technology allowed us to capture over 600 basis points of US market shares sequentially.

Our DBS business had its strongest quarter in recent history, as our strategy to focus on neurologists' referrals is yielding results.

Our Uro/Gastro business delivered strong double-digit growth in Q4, driven by acceleration of new InterStim implant growth.

In fact, PAINSTIM, DBS and InterStim all saw the strongest US new implant rates in years.

Diabetes revenue of $392 million grew 8%, driven by double-digit growth in CGM and solid growth in insulin pumps.

Our international diabetes business delivered another strong quarter as we continued to see great acceptance of our Veo pump with low glucose suspend, augmented by our Enlite sensor and its improved comfort, accuracy and ease of use.

Surgical Technologies revenue of $371 million grew 25%, which included $34 million of revenue from Advanced Energy.

Navigation had a strong 18% growth performance in the quarter -- in Q4 led by capital equipment sales including the StealthStation S7 and the (inaudible).

ENT also had a strong Q4 with growth of 16% driven by sales of image guided surgery and power equipment.

Turning to the rest of the income statement, the Q4 gross margin was 75.6%.

After adjusting for the 30 basis points negative impact from foreign exchange, the Q4 gross margin was 75.9%.

In FY'12 we completed our initial $1 billion COGS reduction program which allowed us to mitigate pricing pressure, but we are not stopping there.

In FY'13 we are starting a new product cost reduction program with a goal of reducing COGS by more than $1 billion over the next five years.

For FY'13 we expect gross margins in the range of 75.5% to 76% on an operational basis.

Fourth-quarter R&D spending of $393 million was 9.1% of revenue.

We remain committed to investing in new technologies and evidence creation to drive future growth and for FY'13 we expect R&D spending to be approximately 9%.

Fourth-quarter SG&A expenditures of $1.462 billion represented 34% of sales.

This result was above the range we provided on our Q3 call.

As Omar mentioned earlier, given the strong revenue that we saw from product launches in Q4 we decided mid-quarter to increase the investment in these launches to maximize our share capture, as well as pull forward some planned FY'13 expenses in renal denervation in emerging markets.

We expect to realize a return on these investments in FY'13.

In addition, our Coronary and Surgical Tech businesses had extremely strong quarters with results well above our expectations which led to higher incentive payouts and contributed to the higher SG&A expense this quarter.

We continue to focus on several initiatives to leverage our expenses and in FY'13 we would expect to drive 30 to 50 basis points of improvement, which would result in SG&A in the range of 34.2% to 34.4%.

Amortization expense for the quarter was $80 million compared to $87 million last year.

For FY'13 we would expect amortization expense to be approximately $80 million per quarter.

Net other expense for the quarter was $48 million, driven by our hedging program expense.

As you know, we hedge much of our operating results to reduce the volatility of our earnings.

Based on current exchange rates we expect FY'13 net other expense will be in the range of $185 million to $225 million, which includes the expected impact from the US med tech tax that will begin in January 2013, as well as higher royalty expense due to the increased sales of Resolute Integrity.

4Q one FY'13 we expect net other expense to be in the range of $40 million to $50 million based on current exchange rates.

Net interest expense for the quarter was $46 million.

Excluding the $22 million non-cash charge for convertible debt interest expense, non-GAAP net interest expense was $24 million.

At the end of Q4 we had approximately $10.3 billion in cash and cash investments and $10.6 billion of debt.

For FY'13 we expect non-GAAP net interest expense in the range of $70 million to $80 million, which excludes the non-cash charge for convertible debt interest expense.

Let's now turn to our tax rate.

Our effective tax rate from continued operations in the fourth quarter was 13.9%.

Excluding the impact of one-time items are adjusted non-GAAP nominal tax rate in the quarter was 16.7%.

Included in this rate was our favorable operational tax adjustments which include the release of a valuation allowance associated with the usage of capital loss carryover and the impact of the finalization of multiple state and foreign tax returns.

Excluding the impact of one-time items our FY'12 tax rate was 18.5%.

For FY'13 we expect an adjusted non-GAAP nominal tax rate in the range of 19.25% to 20.25%.

During FY'12 we generated almost $4 billion in free cash flow.

We remain committed to returning 50% of our free cash flow to shareholders.

In FY'12 we have paid over $1 billion in dividends and repurchased over $1.4 billion of our common stock, which includes the share repurchases we executed to offset dilution from our divestiture of Physio-Control.

As of the end of Q4 we had remaining authorization to repurchase approximately 58 million shares.

Fourth-quarter average shares outstanding on a diluted basis were 1.049 billion shares.

During FY'13 we expect diluted weighted shares outstanding to decline by 30 million shares to 35 million shares.

Let me conclude by providing our initial fiscal year 2013 revenue outlook and earnings per share guidance.

While we believe our markets have improved modestly, we estimate market growth remains in the low-single-digits.

Based on this, as well as the expected growth from recent product launches, we believe that constant currency revenue growth of 2% to 4% is reasonable for FY'13, and would reflect improvement from our organic growth in FY'12.

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'13 revenue would be negatively affected by approximately $330 million to $337 million including a negative $100 million to $120 million impact in Q1.

Turning to guidance on the bottom line -- based on expected constant currency revenue growth of 2% to 4% we believe it is reasonable to model earnings per share in the range of $3.62 to $3.70, which implies FY'13 earnings per share growth of 5% to 7%.

While we do not provide quarterly guidance, we would point out that that the current consensus reflects Q1 earnings per share growth of 10% which is outside our issued guidance and therefore we would not be surprised to see some modest shift -- models shift a couple pennies from Q1 to Q4.

As in the past, my comments and guidance do 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 Omar and I would now like to open the phone lines for Q&A.

We have a number of people waiting in queue, so I would [respectively] request that you limit yourself to one question and, if needed, only one follow-up so that we can get to as many questions as possible.

If you have additional questions, please contact our Investor Relations team after the call.

Operator, first question, please.

(Operator Instructions).

Matthew Dodds, Citigroup.

First off, on the guidance, the 2% to 4% constant currency, Gary; when you look at the major regions are you assuming this coming year the US grows a little bit versus really not growing last year?

And then what's your assumption for Europe?

Yes, well, overall in the 2% to 4% assumption we have there, basically it depends on where you're at in the range.

If you're at the higher end of the range obviously you would assume a slight growth in the US; if you're at the lower end you're probably assuming that the US is more flat at that point.

So low-single-digits at best for the US.

Europe we're assuming basically more what they did during the current year which was more in the mid-single-digits.

And obviously within Europe that will vary by country, a lot of the Northern European countries are still doing very well, Germany, etc.

Obviously some of the Southern European countries we're a little bit more cautious about and that's why we're giving guidance more in the middle -- mid-single-digits.

And then just one more question on Simplicity.

It seemed like everyone and their mother was launching a renal denervation device at EuroPCR.

You paid a lot of money for Ardian.

At what point does IP become an advantage for you?

Do we have to wait for the US or is it possible in Europe we could see some movement on the litigation front?

Let me kind of respond and then Omar might have a comment too.

But overall we have strong IP around Ardian and even some things that we have been doing ourselves.

We strongly IP ourselves plus what we've got with Ardian, both in the US and international.

So you should -- we do not -- we won't -- we'll address that as we go forward as far as what other people are launching, but we do have strong IP in both the US and outside the US.

I think the only thing that I'll add is just to reinforce that we're investing heavily and are committed to keep our leadership in both our technology as well as clinical trials and increasing the number of indications.

Thanks, Gary; thanks, Omar.

Mike Weinstein, JPMorgan.

Let me just clear up on the quarter.

The decision intra-quarter to increase the SG&A spending, did that reflect as well the knowledge that your tax rate would come in lower than it did?

Because that was the principle delta versus street models was tax, not SG&A.

That's correct, Mike.

I mean we saw two things.

Obviously as we were going through the quarter we saw the uplift occurring very strongly in some of the new product launches, but at the same time when we clarified the sale-leaseback strategy and saw that we were going to have more of a benefit on the tax line, it gave us an opportunity to invest a little bit sooner than what we had initially thought.

And so that was the plan that mid-quarter once we knew that the sale-leaseback transaction was going to occur.

Okay, that's helpful.

Let me ask a couple questions about the FY'13 guidance.

So, number one, how are you thinking about INFUSE and the potential outcomes of the Yale study, one?

And two, Gary I thought we'd see more of a benefit in FY'13 from the exclusion of Physio-Control on the gross margin line.

Am I off base there?

But I thought that should be about a 50 basis point impact.

Thanks.

Well, let me just, first of all, on the gross margin line as far as the impact from Physio-Control.

You're right, Physio-Control had a lower gross margin in general than the rest of the Corporation and so that has been pulled out.

And you see even on the results now where all the years have been restated to include Physio-Control out.

So there is a slight positive having Physio come out of the numbers because it did have a lower margin.

But overall we still believe we'll maintain those gross margins even -- for example, Q4 here is a 75.9, it is still comparable with an FX adjustment versus what we had in Q3 with Physio-Control pulled out.

So I mean the reality is they are comparable.

But you are correct, Mike, in that with Physio pulled out it gives us a slide upward pressure on the margin.

On the other hand, some of the things that we've been doing as far as adding some of the newer products, for example, on Surgical Tech as some of those products grow that business grows -- those are a little bit lower below the overall Corporation's gross margin.

So there's a mix benefit that we're having to deal with as we go forward, but Physio did have a benefit on the item -- on the gross margin, excuse me, as far as getting rid of that business.

And the other question was?

INFUSE.

On INFUSE as far as what our assumptions are.

What we've assumed is obviously that until the Yale results come out that we're going to probably, until we anniversary, really the INFUSE against when it started to fall, we're going to continue to see the financial results of that business being down.

The good news is we did see, as we indicated in our comments, we did see it sequentially kind of flat as far as the absolute number Q4 versus Q3.

But I think it's fair to say INFUSE will continue to be a drag and a headwind for us until we see what the results for the Yale study are.

And so, right now it is -- it will continue to be a drag for at least the next several months.

We have a couple quarters until we get the Yale results and then we'll have to assess after that what the potential impact would be.

I think the main thing that we're looking to here to the Yale study is that the levels of uncertainty before that are somewhat greater and we hope the Yale study will clarify things factually and will at least make things more certain and predictable.

Bruce Nudell, Credit Suisse.

Just several -- one very quick housekeeping item.

Was there an extra day in the quarter?

The next one is, the renal denervation deluge at PCR almost suggested that Simplicity is obsolete and ex-US where the IP is more of a problem probably.

How do you expect to respond to that?

And then the ADVANCE study looked solid on the top-line, but the pacer issue remains even with the AccuTrak.

And there was the French registry suggestion is more (inaudible) leak with CoreValve at least in the trans-femoral approach.

Just any responses to that stuff.

Thank you so much.

All right, I think there was three questions there, but I'll try to get to all of them quickly here.

As far as extra day, the easy answer is no.

Same number of days as the prior year.

With respect to Ardian in our Simplicity product line, yes, we -- there are a lot of people obviously trying to enter this market, we have been in the market, we feel good about where we're at with our product line.

I think it's fair to say you should assume that that's not going to be our only generation, we are looking for enhancements to the product as we go forward too, and especially with our catheter-based technology and our -- overall we feel very, very strong about that.

Mike will go into more detail next week at the investor conference and walk you through kind of exactly what's happening with that business.

But the reality is we feel very good about our competitive position, but we've said all along we knew there would be competition trying to come into this marketplace that highlights the strength of the potential benefit in this market and the industry in general.

And the reality is as we try to get reimbursement set up having a few more competitors helping us with that burden is not necessarily a bad thing.

But we feel good about our competitive position and our IP position as we go forward and we feel very good about our technology.

With transcatheter valve, I'm not the one to get reel specific about what's happening with the technology part.

All I can (inaudible) on the pacing issue.

We are continuing to focus on that, the focus on the pacing issue that's been out there.

The reality it hasn't impacted anything in the marketplace.

We continue to take share in the marketplace and we continue to work to improve that, to have -- minimize that affect if we can as we go forward, which we think we can do.

On the other hand, it clearly has not impacted the product line in the marketplace at this point in time and we feel good about (inaudible) the technology with our transcatheter valve technology.

Thanks so much, Gary.

Bob Hopkins, Bank of America.

First, just a follow-up on 2013 guidance.

Given that going back in the last year or two obviously ICDs and spine have been the things hampering your growth the most.

I was wondering, can you give a sense in your 2013 guidance, what are you assuming for the ICD and Spine market growth rates and then growth rates for Medtronic specifically?

Well, let me take a shot at that, this is Gary, and then Omar can maybe add some comments as he gets into it overall also.

As you indicated -- by the way, I want to clarify one point that I did have in the commentary related to the guidance.

I mentioned the foreign exchange impact were up by [13] and I said $330 million to $337 million; it should have been $330 million to $370 million, I just want to clarify that, Bob.

It wasn't one of your questions but I'll throw it in here.

With respect to your question about the guidance on the 2% to 4% and what our assumptions are.

As we indicated in our comments, that assumes overall that the market kind of grows in that low-single-digit kind of 2% to 3% range in general for all of our product lines.

That's a little bit faster -- slightly faster than what we saw in the current year and that primarily reflects the fact that we would expect to see some improvement, as we've indicated, in the US ICD market, as you've seen, that's stabilizing.

Overall, again, obviously our Q4 results were very strong and if that trend would continue we would probably be at the higher end of that 2% to 4% even revenue guidance that we've provided.

Our point is this what we're trying to do on the guidance is just highlight the fact that, as you indicated, we did see some volatility in these markets in the last year.

And until we see more stabilization and a continued stabilization really in the ICD and Spine markets we don't want to get too far ahead of ourselves in the guidance.

But basically this is assumes -- this guidance right now would assume that overall the Spine market, for example, would continue to be down slightly and we'd be down low- to mid-single-digits.

We think that's including INFUSE obviously in there.

And that our ICDs -- again, the market is flat to slightly down and we'd be the same way, flat to slightly down on the ICDs.

Okay, great.

Thank you, that's very helpful.

And then just some quick follow-ups.

Gary, can you just help us add up all the guidance you gave on the various line items and what are you assuming overall for operating margin leverage in 2013?

And then for Omar, can you just give us a quick comment on the Analyst Day and what we should expect, especially as it relates to any thoughts you might provide on aspirational growth goals going forward and anything you'd like to highlight about what we should be looking forward to on the Analyst Day?

Thank you.

Yes, let me addressed just quickly our assumptions for next year.

We are assuming some operating leverage obviously with a 2% to 4% revenue growth and then earnings per share growing 5% to 7%.

Even with the share buyback that we would continue to do we are assuming that there is operating leverage primarily in the SG&A line, as we indicated on the comments.

We're assuming our gross margin basically stays relatively flat with our -- that we can offset the price erosion with the product cost take-out that we've been continuing to do.

And then R&D is actually relatively flat also versus what we have in the current year.

So our assumption for next year is SG&A does improve, as we indicated in the comments, 30 to 50 basis points of improvement overall and that would be then at the operating leverage we would also see.

Now at the same time we're also on the other income and expense line item having to offset the medical device tax.

So even just achieving some leverage of 30 to 50 basis points on the operating margins we feel pretty strongly that's a pretty good result in this environment with pricing pressures and taking on some additional cost on the med device tax issue.

Omar?

Yes, regarding the investor meeting, we're pulling together a pretty good meeting for you.

You know, some things will be the same as you've experienced before in the sense that we'll give you a pretty good walk-through of our product pipeline and technologies and Mike and Chris will go through that in a fair amount of depth.

But in addition we'll also be discussing with you how we're repositioning the Company to participate in the changing environment, and particularly around how do we translate our focus and economic value to real programs, to real decisions and eventually sustainable growth and why that's so important.

The other thing we'll give you details of is obviously our globalization strategy and we're really excited about that and we want to share with you, again, details around that.

So that will be the net mix of it and overall details around our strategic changes as well as depth in our product pipeline.

Kristen Stewart, Deutsche Bank.

Just a follow-up on (inaudible).

So, it sounds like you will not be giving any sort of longer-term growth goals at the analyst meeting?

Kristen, this is Gary.

I mean, no, we'll obviously talk about -- we're giving guidance for FY'13 and we'll walk through that again.

I mean, we'll get into some of the things as far as where we think some of the markets are going and what we believe that long-term we can see in some of these objectives and maybe even aspirationally what we'd all like to see as far as when these markets return back.

But we're not going to get into long-term guidance right now.

I mean, these markets are just too volatile, it's hard to predict even kind of a year out let alone give more guidance past that.

Okay.

And then just to go back to your comments on gross margin, can you just repeat the guidance for the year on the gross margin line?

And I think you had said that was an on an operational basis.

So is that just I guess excluding FX and what sort of impact would we expect to see if we look at gross margins on a more reported basis?

Right now we would say 75.5% to 76% on the gross margin, which is kind of consistent with where we're at in the current year and we expect to be able to maintain that.

And based on where we're currently at we're probably right in that range still.

Obviously based on the foreign exchange, where the foreign exchange rates would be at, we'd probably be towards the lower end of that range just as we saw this quarter where we were at more 75.6% because of the negative FX impact aspect of it.

If FX -- currency would happen to turn around and go a little bit more the other way you could be at the higher end of the range.

So it's really more within that range, it's consistent, it just depends on -- whether you get the higher or the lower end depends on what happens with FX rates.

And then just the med tech tax, that's going to be in other operating expense.

A lot about of your competitors have said that they expect it to be more within SG&A.

Can you maybe just help us understand -- I know it's just for one quarter in FY'13, but just kind of what the quarterly run rate is going to be both from a pre-tax and post-tax basis?

Yes.

As we've said over -- as we go forward, obviously, first of all, these rules are still getting developed, and so the regulations are not final yet.

And even where you actually account for this is not final.

There's been a lot of debate back-and-forth between SG&A and other expense.

Right now our assumption is other expense, but we'll have to firm that up as we obviously work with this with the accountants and everybody else.

We're obviously the first ones who will be having it where we'll have to make sure we get that resolved as we go forward.

As we've indicated previously, the overall impact for a full year we still estimate -- and there's still a big range on this because it is still not clear exactly what is in and out on the revenue side of the equation.

But we're expecting a 12-month impact of about $120 million to $150 million, somewhere in that range.

So for four months, which is what we will be covered with for FY'13 we have about $40 million to $50 million assumed in our guidance related to FY'13.

And as you indicated, it's in that other income and expense line item.

Thank you.

David Lewis, Morgan Stanley.

Just two quick questions, one for Gary and one for Omar.

Gary, thanks for giving us the guidance for the next five years and the $1 billion cost restructuring program.

I guess can you just help us understand for this coming year, fiscal '13, sort of what are you assuming for price in some of your major franchises whether they be DES, CRM or Spine?

If we can't get an absolute basis just on a relative basis.

Does sort of fiscal '13 guidance assume price pressure stable with '12 or does it assume some acceleration versus '12.

And as you think about the next five years in the $1 billion program versus the last $1 billion program, do you kind of assume similar type pricing declines or do you assume an acceleration in the pricing environment?

Well, overall I'll just -- as far as the pricing assumptions overall, we're assuming that for FY'13 and as we go forward the pricing pressure remains somewhat consistent with what we saw obviously in FY'12; that will vary by business as we go forward.

For example, we have seen some stabilization even, for example, in drug-eluting stents pricing in the US.

And so maybe that's not going to be quite as extreme as it was in FY'12.

On the other hand, you could see continued pressure in other product lines.

Our assumption as we do this is that you, again, across all of our businesses you were probably kind of seeing that in the range of 2% to 3%.

But as you know, that varies dramatically between businesses whether it's drug-eluting stents to obviously some product lines continue to see price uplifts and new technology obviously gets price uplifts as we continue to see that.

So we're assuming it's somewhat consistent with FY'12, not dramatically different than that in that it would continue.

And then as a result of that we do believe that our $1 billion -- over $1 billion cost out program going forward will allow us to continue to maintain the gross margins where we've been at.

Now you should -- I want to make it clear, that's kind of what we're committing to right now on the $1 billion, we're trying to drive that for even more to give us more flexibility such that if there was even more pricing pressure or, as Omar has mentioned many times, as we go down into -- as we go focus on even going in the value segment it gives us the opportunity to even tier our products such that we can have different pricing points as we move forward.

So the cost out program is the 25%; we feel very good about being able to achieve that.

But we are trying to work this to try to drive even more than that to give us even more flexibility and potentially offsetting any risk that there might even be more pricing pressure than what we've seen in the current year.

But right now our assumption is that it kind of -- it continues, that we will continue to have pricing pressure.

But back to what we've seen historically.

We've been able to offset that over the last five years and we believe [confidently] we can continue to do that.

Okay, very helpful.

And then, Omar, maybe just one more quick question for you.

You talked about the value segment I think, I found those comments pretty interesting.

I think a lot of investors think about the value segment as an emerging market concept.

Can you maybe talk about what does the value concept mean to you in developed markets?

And can you start bringing some of these value device type products and commentary into the US market or the developed European market?

I think absolutely there's an opportunity for that.

I mean I think if we go aggressively after emerging markets in creating that value segment, that automatically positions us to create products in the lower tier.

And we intend to -- as we look at the US and the developed markets, as we see opportunities, especially where there is heavy pricing pressure and the feature sets are not being used, and people aren't paying the price for those we will go into our resources and product lines in the value segment and introduce them in the US in developed markets.

But at the same time we'll differentiate them adequately so that the price of our high tier products and the value that they generate remain.

But we think that as the pressures and cost savings in the developed world and the healthcare systems increase there will be room for different tiered service lines.

And if we can execute well in our global strategy for value segments this will give us a significant advantage in developed markets.

Great, thank you very much.

Raj Denhoy, Jefferies.

I wonder if I could ask a little bit more on the ICD business.

I think it was in the fourth quarter of last year you saw a pretty big fall-off due to a lack of bulk sales.

Did you see any reversal of that in the quarter or maybe you could just describe what bulk sales looked like in the quarter?

Yes, I mean as we indicated in our comments, the reality is actually we saw even continued hospital inventory declines and actually the bulk purchases are probably at the lowest level we've seen in three years overall.

So they're actually even lower than what we saw last quarter -- excuse me, last year during this period of time.

So that trend continues.

I think that's what even our competitors have been indicating, that we are seeing hospitals cutting back a little bit more on their inventory levels and we've seen that over the last several quarters and, as you indicated, even last year we saw it.

So that's our point as we highlight this, even if you take that in consideration the reality is we thought that -- we were happy to see the stabilization in the marketplace overall for ICDs, but if you take into consideration the fact that that was going on between ourselves and the competitors and the fact is the impact rates are even stronger than what the actual results of ourselves -- the entire industry would show.

Okay, and then you gave a little bit of commentary in terms of within the ICD segment, where you're seeing strength and weakness.

And I think you mentioned obviously that you're seeing a little bit on the core ICD business but perhaps a bit weaker on the CRT-D side of it.

I think we sort of probably understand why that is, but maybe you could give us a little more clarity around why you're seeing that discrepancy in those two segments?

Well, as you imagine, CRT-D there's obviously some trialing of a competitor product going on, and so that's clearly had some impact and we saw a little bit of share there lost.

Now that being said, we feel pretty confident that after that trialing is over we will get back to more of a normal CRT-D.

In fact in Europe where we, obviously the product has been in the marketplace for two years.

We have the same unit share in CRT-D as we had prior to the competitive launch.

So we feel confident that, yes, there's some trialing and that has had some slight impact in the CRT-D market -- or segment of the market.

But then on the ICD side we're obviously picking up share based on the strength of our product line and where we're at with some of its benefit.

So net-net overall our market share has been basically relatively flat and that's in spite of some of the trialings going on with a competitive product.

And then in the core business this highly publicized lead issue that one of your competitors is having, have you seen much of a benefit in both your lead sales on the ICD side and then, taking that a step further, the [can] business as well because of that?

Well, again, we're not going to get into what's going on with competitive product issues.

We have, as we indicated in our comments, because of the ICDs we're seeing an increase in replacement, our share, our replacement units are up and we are seeing slight increases in our lead ratios as we look at those.

So net-net, there's some impact probably in our business, but it's still to be managed through.

Obviously as I indicated we're losing a little share on the trialing on one product, but we're gaining share in other areas.

I'm not going to speculate on how much of that is related to any one item.

Okay, thank you.

David Roman, Goldman Sachs.

Gary, I was hoping you'd go into a little bit more detail on the opportunistic SG&A spending that you picked up in the fourth quarter of fiscal 2012.

And as we think about those spending levels, to what extent is that necessary to generate the 2% to 4% revenue growth that you're guiding to in fiscal 2013?

And I guess the corollary to that would be, how can you -- can you generate SG&A leverage and keep up the top-line growth that you're talking about or is it sort of circular?

Well, overall we -- again, the guidance we gave on the 2% to 4% assumes obviously we're going to continue to achieve leverage in the SG&A because that was also in our guidance.

So we're assembling we can do both, that we can continue to grow in that range and still achieve leverage on the SG&A.

As far as what happen in the quarter here, again a lot of what we saw was just on the strength of what was occurring already in the revenue.

As you can assume, several of the businesses, Coronary, Structural -- excuse me, Surgical Technologies, as we mentioned in the comments, we're having very, very strong quarters.

Once you have -- you get above kind of the quarters, etc., it becomes -- the incentive to become very, very high and they were receiving some very nice commissions and incentive payout as a result of that performance overall.

So that's higher than you would expect.

At the same time, because of the benefit we saw on the tax line, as Omar mentioned in his comments and I said the same thing, is we did move some spending forward that we would -- we hired some sales reps that we were expecting them to hire in FY'13 anyhow.

We got started on some marketing programs with renal denervation.

We accelerated some things in emerging markets that were going to occur in FY'13 and would've been in the expense structure that was in my guidance originally.

So you shouldn't assume that -- and some of the items obviously in the quarter were also more one time in nature just because of the strong revenue that was in some of the various businesses that won't be there once you have that in the report is for next year.

So net-net, we still feel very confident that even with the spending we saw here in the quarter that we can manage and achieve the leverage we have for next year and that should allow us to continue to grow the business again based on the 2% to 4% revenue growth.

That's helpful.

And then I think during the quarter you had issued some debt and I think in the release you talked about that as a source to fund working capital.

Can we just talk about cash generation from a US/OUS perspective and to what extent that issuance of debt might become more the norm as you remain committed to that 50% payout of free cash flow in the context of -- for a greater percentage of revenue coming outside the United States?

Yes, well, as we've indicated, and we've been very clear about this overall, our US/OUS cash split, I mean we generated about $4 billion of free cash flow in FY'12, again 60% to 65% of that is being generated outside of the United States with 35% to 40% in the US.

And so, when we are returning 50% back to shareholders by its very nature, which has to come from the US [cart] cash piece, that does require us then at this point in time to obviously continue to have the debt levels slightly going up in the US while cash builds outside of the United States.

So our net cash position improves, but the reality is we are taking on more debt in the US.

Now it's at relatively low levels.

The difference I'm talking about here is about $500 million to $600 million per year which is well within our financial capability to handle.

But as we've talked about, we're taking major efforts across our organization to try to say, how do we get that back more in line, how do we get back to a better split between the US and OUS cash flow generation.

And that includes a lot of initiatives underway to improve our working capital, especially inventory and capital expenditures.

We have several initiatives underway across the Company to drive that down which should help drive the initiative.

And as we talked through some of the comments in Omar's comments, we are focusing on shifting expenses to outside the United States where we can use that OUS cash.

And so we are -- in Spine for example, we are doing R&D and manufacturing in other locations.

We are shifting some of our marketing expenses even on the restructuring charges we talked about earlier.

Some of what's going on here is we're shifting resources from the US market to the markets that are growing.

And so, you are going to see a natural shift of some of these expenses outside of the United States that will also help the issue.

But currently it is clearly -- creates a situation where we're having to borrow somewhat to continue our 50% commitment.

Okay, that's helpful.

Thank you.

So, we've gone past the top of the hour, but we'll take a couple more questions.

Michael Matson, Mizuho Securities.

Yes, so I guess I just had a question on the Resolute Integrity launch.

One of your competitors has talked about some trialing of that product going on.

And obviously had a really strong quarter, but I'm just wondering to what degree do you think that type of sales trajectory is sustainable here?

And then my second question would just be on the S-ICD product, what are your thoughts on that?

What's the potential impact and is that something that you're working on internally as well?

Okay, well, with respect to Resolute Integrity and the strength there, obviously we were very, very pleased with the launch and whenever you can double your share and affect basically less than a couple months, and right now we are still probably only in probably 50% of the accounts -- that we'd like to be in at this point in time.

So it's still expanding quite dramatically as we go forward.

So there's always -- with any product launch there will be some who will trial it and might go back to other product lines.

But the point you have to remember is this product line has performed well outside of the United States and we've seen people obviously try it and stay with it.

And it's one of the leading products -- has one of the leading shares outside of the United States where it's been launched.

And so, as we've indicated before, we have every expectation that this product line, which is very, very competitive, it has on deliverability and, as we indicated, the diabetes indication, several things in its favor that it will also continue to be well accepted stents in the US marketplace.

And as we indicated, actually the share came very quick, but we're not stopping there either.

We believe that we still have opportunities with respect to this and we think it's a very competitive product and will be one of the leading market share products in the US as we go forward too.

I think, if I can just add a few words to that.

I think we're only getting started in leveraging our CVG sales force and we're getting traction from that already and we expect that to accelerate.

As we go into accounts with our full value proposition of all our products we think we've got significant growth ahead of us with that.

And Mike will share that with you, that strategy with you in greater detail at the investors' conference next week.

And then your second part of the question related to in effect -- I assume you're talking about Cameron Health's product line that's out there.

And Mike will also talk a little bit -- can talk about that more at the analyst meeting in more detail.

But we really do see that as kind of a niche kind of a product line that this is obviously the first generation product that's coming forward and there's a lot of other features that are in the current ICDs as far as pain-free termination and pacing are kind of a standard part of it and why you would want to give up on that, we have a question mark on that.

But we're watching the market, we'll see how it plays out, but right now we think it's more of a niche market.

One last question.

Rick Wise, Leerink Swann.

Omar, just a bigger picture question, you highlighted how pleased you are at the impact of the team reorganization and you indicated you're surprised separately at the opportunity to leverage existing products.

Could you expand on this a little more?

And am I right in reading this, that sort of a year into your role at Medtronic that you're feeling more confident about driving gradually accelerating growth and steadily sustained or improving margins?

Just any larger perspective on that.

Thanks so much.

No, I think you're right.

I think our strategy is to execute and to gradually increase our growth levels, but we'll take that a step at a time.

We intend to align our strategies with the market realities and that takes a little time.

And when we've completely aligned them we feel we can get sustained growth because there's growth available in healthcare.

And an example of that process is exactly what you mentioned in our globalization effort where we find that there's short-term growth available.

Simply by investing in market creation of existing products which have high penetration rates in developed markets and have very low penetration rates amongst affordable population of emerging markets.

And by investing in -- addressing those barriers we think we can get quick growth and we're already beginning to see that in emerging markets.

And longer-term we use our cost reduction strategies with our products to create a value tiered segment which increases our penetration levels in emerging markets.

And at the same time, as was pointed out earlier, we can leverage that capability to come back to developed markets and address the cost issues that are going to emerge in developed markets and those pressures will increase.

So, what you'll see from us is a gradual realignment of our business on a step-by-step basis because a lot of things that we do today are of value.

We have a product pipeline that's very exciting and we think we can win in that space.

And at the same time we adjust our overall strategies to adjust to the new market realities that are happening.

And we have to understand those, participate in those and lead those changes and that's the way in which we'll grow and win in the future.

Thank you.

Okay, well thank you very much for your questions.

And before I end today's call I would like to remind you that we will host our investor conference next week on June 1 in New York.

We look forward to discussing the progress we're making at the Company to position ourselves to win like we just mentioned.

And with that and on behalf of our entire management team I'd like to thank you again for your continued support and interest in Medtronic.

This does conclude today's conference call.

You may now disconnect.