Medtronic Earnings Call Nuggets: Gross Margins and Future Guidance
David Lewis – Morgan Stanley: I wanted to come back to one of your comments on gross margins. You mentioned some of the one-time effects in this quarter, but if you go back it was one of the strongest revenue quarters in two plus years, but margins were one of the weaker ones in last two years, even though kind of in line with where you had margins in the third quarter of ’11, when you also had some one-time impacts. So, I guess, adjusting for one-time impacts, are we seeing the beginning of your very strong performance in emerging markets beginning to weight somewhat on gross margins?
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Gary Ellis – SVP and CFO: I mean not a lot, David. Overall, obviously, we are fighting headwinds there as we do see growth in some of the emerging markets. We continue to see pricing pressure for a lot of our businesses, which at the end for the most part we’ve been able to offset with price – cost reduction. So, the way we look at it, our standard gross margins which gets prior to some of the other products lines, which are more one time in nature, the standard gross margins are relatively holding firm and we haven’t seen a big change in that over the last several quarters and we didn’t see that in this quarter either. So, that’s why it was primarily one-time issues, we had some obsolescence obviously related to the fact that Resolute Integrity is doing much, much better than we had expected and obviously, obsolescence within the average results of that. We had some other integration costs as we do some of these acquisitions that are more one-time in nature that are affecting the gross margins. So, overall, I don’t want to make a light of it, because I think there are pressures on the gross margin that we’ve seen for the several years, but we’ve managed that relatively well, it’s some of the one-time items that had an impact on us in the quarter, plus FX obviously.
Omar Ishrak – Chairman and CEO: I think if I can add Gary correctly, but the emerging markets themselves – the sorts of products we are selling, you know the pricing environment is not that different from certainly Western Europe.
Gary Ellis – SVP and CFO: That’s correct.
David Lewis – Morgan Stanley: Maybe just kind of a follow-up question related to growth, so we think about the growth in the first half of the year 5% constant currency the strongest growth we’ve seen in the last two years. We got multiple product lines like Neuromod where growth is as strong as you’ve seen in three years, maybe could you just talk to us about your view that the second half of the year will slow incrementally after first half of the year. What are some of the driving factors of that or does that simply reflect conservatism given the environment?
Omar Ishrak – Chairman and CEO: I think there is some conservatism regarding the environment. We obviously intend to drive growth as aggressively as we can, but look there is all kinds of headwinds, Western Europe for example has a lot of uncertainty built around it. Southern Europe, they end with severe amount of pricing pressure in some of these markets. So, overall, there is still enough uncertainty out there in the marketplace that it’s best for us to give the guidance that we just did. There is – in the U.S., we’re going to get through the end of the year and the policy implications that will be put into place and again there is uncertainty there. So, I think we have to take into account that headwinds will come our way and we’ll do our very best to manage them and we certainly will drive growth as aggressively as we can, but I think the guidance that we put out is probably maybe somewhat conservative, but we’ve won’t to be realistic about this.
Matthew Dodds – Citigroup: This might cut across the two of you, but following up on Dave’s question on the growth second half of the year, if you look at this quarter, the one market that really jumped is Japan and that’s your biggest international market maybe it was driven by a bunch of different products. You had the Resolute Integrity, Endurant, you highlighted Advisa MRI, RestoreSensor, why couldn’t that market continued to be strong the next say two to four quarter and more than offset some of the issues in Western Europe?
Omar Ishrak – Chairman and CEO: Well, it’s good. I mean we expect Japan to be strong. We were very excited about what we’re seeing in Japan. In fact the Resolute Integrity will have its first full quarter of launch this coming quarter, so I think there is certainly in the next 12 months or so, Japan is going to be definitely going to be one of our premier growth engines. We’re just balancing everything here Matt, you know there is no concrete headwinds and tailwinds that we can lay our hands on, we just know that there is still enough uncertainty out there that you just cannot tell. Certainly, I mean if you just look at the overall economic environment, there are pressures across the world and you just need one of them to fall into a crisis level and it could take a lot of tailwinds from a market like Japan away and we just have to be careful with that and that’s really all I can say around that, but certainly we have high expectations from the Japan market and those I think will realize.
Gary Ellis – SVP and CFO: We don’t obviously Matt. I can’t say much more to what Omar said. I think obviously we don’t expect Japan, we expect Japan to continue to be very, very strong. We saw increased growth in the emerging markets, most of our markets. Even Europe obviously has a very strong growth compared to most of the market this quarter. So, our team is continuing to do very, very well and we forget about that. But as Omar said, there is just so much uncertainty in the marketplace right now. We’re still being, maybe we’re being somewhat cautious, but we feel that’s the appropriate thing right now and we’ll continue to execute, but you’re absolutely right, there was a lot of strong place in this quarter and those things continue, we should expect…
Omar Ishrak – Chairman and CEO: We don’t give surprises, negative surprises. I think the tailwind that we have by and large we think will continue and we’re seeing pretty good momentum there. But you just never know what headwinds come our way and we just need to be cautious about that.
Matthew Dodds – Citigroup: Then just one real quick and there were a lot of answers. Gary, the FX on the other income versus expectations, was it right to think about that as a $0.02 to $0.03 hit, the difference in what should have been and what you ended up losing?
Gary Ellis – SVP and CFO: Yeah, it was a couple of cent impact on what we had there in the quarter and as we said in my comments, we saw that early in the quarter. It happened in August. We saw it and we took steps to offset it in taking some gains out of the debt and minor investment portfolio. But it was a couple of cents, Matt.
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