Medtronic (MDT)

Q1 2012 Earnings Call

August 23, 2011 8:00 am ET


Gary Ellis - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Omar Ishrak - Chairman and Chief Executive Officer

Jeff Warren - Investor Relations


Matthew Dodds - Citigroup Inc

David Roman - Goldman Sachs Group Inc.

Robert Hopkins - Lehman Brothers

Michael Weinstein - JP Morgan Chase & Co

Larry Biegelsen - Wells Fargo Securities, LLC

Kristen Stewart - Deutsche Bank AG

David Lewis - Morgan Stanley

Joanne Wuensch - BMO Capital Markets U.S.



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Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medtronic's Q1 Earnings Release Conference Call. [Operator Instructions] I'd like to now turn the call over to Mr. Jeff Warren. You may begin, sir.

Jeff Warren

Thanks, Andrea. Good morning, and welcome to Medtronic's First 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 on the results of our fiscal year 2012 first quarter, which ended July 29, 2011. 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 Investor portion of our website at

Finally, unless we say otherwise, references to quarterly results, increasing or decreasing, are in comparison to the first quarter of fiscal year 2011, and all revenue growth rates are given on a constant-currency basis.

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

Omar Ishrak

Good morning, and thank you, Jeff. And thank you, everyone, for joining me on my first earnings call as Chairman and CEO of Medtronic. You know in the 8 weeks since joining the company, I've been meeting with our employees and customers around the globe. And it's clear to me that Medtronic has many strengths that differentiate us as the world's leading medical technology company. In fact, Medtronic's singular focus on healthcare is what attracted me to this company.

Medtronic's stated mission, sense of purpose and strong customer focus are well aligned with my personal values. I'm passionate about healthcare and excited to be part of a company that has a long track record of delivering technology solutions to improve healthcare.

The opportunity in this industry are enormous. Across the world, we are in a continuous quest to improve healthcare. People everywhere want better outcomes, fewer errors, quicker recoveries, fewer side effects. But at the same time, there is continued pressure on global healthcare costs. The present trends are clearly unsustainable, especially given the demographics in the developed world. It is therefore paramount that we develop solutions that not only improve healthcare, but do so while delivering better economic value. And finally, the biggest long-term opportunity will be our ability to meet the needs of the billions of people that have no access to healthcare at all.

In visiting with employees around the globe, I've been impressed by a number of key strengths within Medtronic. First, I've been impressed by the breadth and depth of our technical expertise. In addition, our clinical and economic evidence-generating capabilities are some of the best that I've seen. Second, I've been pleasantly surprised by the number of synergies across our businesses, whether it's in our operations, technology, customer base or disease progression, value is created across our combination of businesses. And looking ahead, I believe there is great potential to further leverage Medtronic's breadth and capabilities.

And finally, Medtronic offers a strong financial platform on which to build. The company's solid cash flows and balance sheet give us the flexibility, not only to make disciplined investments for future growth, but also maintain our commitment to returning significant amounts of capital to our shareholders.

Although Medtronic possesses a number of strengths, it is clear that our industry is facing a very challenging environment. The macroeconomic conditions in many developed countries have led to constrained healthcare budgets and increased pressure on utilization. This directly affects the financial health of our customers. A key part of our industry's long-term success, therefore, would be the ability to provide medical technology that clearly demonstrates customer economic value at both the provider and payer levels.

While Medtronic has world-class capabilities and clinical research and healthcare economics, we have not consistently translated them into meaningful and succinct economic value propositions directly for our customers. Successfully demonstrating the clinical and economic value of our technology to our customers on a broad and consistent basis will result in our customers delivering better, more cost-effective patient care, while improving their profitability at the same time. We're well positioned to lead this effort by leveraging our core competencies as well as our overall breadth.

It's also an opportunity for us to differentiate ourselves from our competition. Demonstrating that medical technology can be part of the solution for removing waste from the healthcare system and improving our customers' financial health will support medtech's increased share of healthcare spending.

Our ultimate goal, however, is to improve goal for Medtronic. While the systematic usage of customer economics is a critical tool in this endeavor, I believe that there are 3 key imperatives to deliver sustained growth: improving our execution, optimizing innovation and accelerating globalization. And let me address these one at a time.

First, I'm focused on delivering crisp and consistent execution across the company, starting with me and the leadership team. I'm taking initial steps to ensure our business units, geographies and functions have completely aligned goals with the clear understanding of their roles and responsibilities. I will drive more operating rigor throughout the organization and will expect more accountability and follow-through on commitments, goals and deadlines at all levels. Improvements in these areas are critical to driving operating efficiencies and delivering better, more predictable and sustained business performance.

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