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Medtronic Inc MDT
Q2 2013 Earnings Call Transcript

Transcript Call Date 11/20/2012

Operator: Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medtronic's Second 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. Thank you.

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

Jeff Warren - IR: Thank you, Christie. Good morning and welcome to Medtronic's second quarter conference call and webcast. During the next hour, Omar Ishrak, Medtronic's Chairman and Chief Executive Officer and Gary Ellis, Medtronic's Chief Financial Officer will provide comments on the results of our fiscal year 2013 second quarter, which ended October 26, 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 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 Investors portion of our website at medtronic.com.

Finally, unless we say otherwise, references to quarterly results increasing or decreasing are in comparison to the second quarter of fiscal year 2012, and all year-over-year revenue growth rates are given on a constant currency basis.

With that, I'm now pleased to turn the call over to Medtronic's Chairman and Chief Executive Officer, Omar Ishrak.

Omar Ishrak - Chairman and CEO: Good morning. Thank you, Jeff. Thank you to everyone for joining us today. This morning we reported second quarter revenue of $4.1 billion, which represents growth of 5%. Q2 non-GAAP earnings of $902 million were flat and diluted earnings per share of $0.88 increased 5%. Our GAAP earnings include a non-cash charge related to our ongoing litigation in our TAVI business and Gary will discuss these items in a little more detail later.

Building on the last couple of quarters, Q2 represented another positive step toward our goal of delivering consistent and dependable growth on both the top and bottom line. In fact, we believe our organic revenue growth outperformed the med-tech market by 200 basis points. We had a number of businesses and geographies that delivered outstanding performances, but at the same time, there were businesses and geographies that faced some pressures and we're watching these very carefully. Overall, we're focusing on effectively managing headwinds and tailwinds to deliver a balanced and consistent performance.

This quarter two of our larger end markets, U.S. ICD and U.S. Spine continued to show signs of stabilization. Growth in both of these markets were relatively stable sequentially and we also executed well and took share in both of these important markets. Let's first discuss U.S. ICDs in more detail. Similar to last quarter, we estimate the market decline in the mid-single digits. Our business was down 2% enabling us to gain approximately a point of share year-over-year and 2.5 point sequentially. Pricing declined 3%, a slight improvement to last quarter's rate. Currently our implant volumes improved sequentially and were over 5%, while hospitals continue to reduce their bulk purchases on a year-over-year basis. They were relatively stable sequentially. These positive implant trends suggest that the U.S. market stabilization will continue.

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