Medtronic (MDT) Earnings Report: Q3 2016 Conference Call ... · market. Following the four clinical...

CompanyName:MedtronicPLCCompanyTicker:MDTSector:HealthCareIndustry:HealthServices

EventDescription:Q32016EarningsCallMarketCapasofEventDate:139.78BPriceasofEventDate:74.18

Medtronic(MDT)EarningsReport:Q32016ConferenceCallTranscriptThefollowingMedtronicconferencecalltookplaceonMarch1,2016,08:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

RyanWeispfenning;Medtronic;InvestorRelationsOmarIshrak;Medtronic;Chairman&CEOGaryEllis;Medtronic;CFOMikeCoyle;Medtronic;CardiacandVascularBryanHanson;Medtronic;MinimallyInvasiveTherapiesGeoffMartha;Medtronic;RestorativeTherapies

OtherPart icipants

MikeWeinstein;JPMorgan;AnalystDavidLewis;MorganStanley;AnalystDavidRoman;GoldmanSachs;AnalystBobHopkins;BoAMerrillLynch;AnalystMattMiksic;UBS;AnalystKristenStewart;DeutscheBank;AnalystVijayKumar;EvercoreISI;AnalystRajDenhoy;Jefferies;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

Goodmorning.MynameisJackie,andIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetotheMedtronicThirdQuarterEarningsconferencecall.

(OperatorInstructions)

IwouldnowliketoturntheconferenceovertoRyanWeispfenning,VicePresidentofInvestorRelations.Pleasegoahead.

RyanWeispfenning (InvestorRelations):

Thankyou,Operator.Goodmorning.WelcometoMedtronic'sthird-quarterconferencecallandwebcast.

Duringthenexthour,OmarIshrak,MedtronicChairmanandChiefExecutiveOfficer,andGaryEllis,MedtronicChiefFinancialOfficer,willprovidecommentsontheresultsofourFY16thirdquarter,whichendedonJanuary29,2016.Afterourpreparedremarks,wewillbehappytotakeyourquestions.

First,afewlogisticalcomments.

Earlierthismorning,weissuedapressreleasecontainingourfinancialstatements,andarevenue-by-divisionsummary.Wealsoissuedforthefirsttimeapresentationthatprovidesadditionaldetailsonourrevenueperformance,andasresulthavereducedourpreparedrevenuebydivisioncommentaryin

Gary'ssection.

Next,youshouldnote,thatmanyofthestatementsmadeduringthiscallmaybeconsideredforward-lookingstatements,andthatactualresultsmightdiffermateriallyfromthoseprojectedinanyforward-lookingstatement.

AdditionalinformationconcerningfactorsthatcouldcauseactualresultstodifferiscontainedinourperiodicreportsfiledwiththeSEC,andwedonotundertaketoupdateanyforward-lookingstatement.Inaddition,thereconciliationsofanynon-GAAPfinancialmeasuresareavailableontheInvestorsportionofourwebsiteatMedtronic.com.

Unlesswesayotherwise,referencestoquarterlyresultsincreasingordecreasingareincomparisontothethirdquarterofFY15,andallyear-over-yeargrowthratesaregivenonacomparableconstantcurrencybasis,whichadjustforthenegativeeffectofforeigncurrencytranslation,andincludesCovidienplcintheprioryearcomparison,aligningCovidien'sprioryearmonthlyresultstoMedtronic'sfiscalquarters.Theseadjustmentdetailscanbefoundinthereconciliationtablesincludedwithourearningspressrelease.

Withthat,IamnowpleasedtoturnthecallovertoMedtronicChairmanandChiefExecutiveOfficer,OmarIshrak.

OmarIshrak(Chairman&CEO):

Goodmorning.Andthankyou,Ryan.Thankyoutoeveryoneforjoiningus.

Thismorning,wereportedthird-quarterrevenueof$6.9billion,representinggrowthof6%,intheupperhalfofourmidsingle-digitbaselineexpectation.Q3non-GAAPdilutedearningspersharewere$1.06,growingat17%onacomparableconstantcurrencybasis,andreflecting1,150basispointsofleverage,significantlyaboveourbaselineexpectationof200to400basispoints.

OurperformanceinQ3wassolid,withsustainedexecutionresultinginanotherquarterofmarketoutperformance.Wecontinuetodeliveronourthreegrowthstrategies,therapyinnovation,globalizationandeconomicvalue,whicharedrivingincreaseddiversityofourgrowth,animportantanddifferentiatedattributeofourCompany.Ourrevenuegrowthmaymodestlyebbandflowfromquartertoquarter,indicativeofthechallengesweareabsorbingincertainbusinessesorregions,aswecapitalizeonsuccessinothers.However,ourconfidencearoundthesustainabilityandconsistencyofourrevenuegrowthwithinthemidsingle-digitrangecontinuestobuildwitheachpassingquarter.

Inaddition,theCovidienintegrationisdeliveringrobustoperatingleverage,aswerealizeourcommittedcostsynergies,whichcombinedwithourfinancialleveragedrovehighteensEPSgrowthanddouble-digitEPSleverageinQ3.ThroughFY18,aswecontinuetorealizecostsynergybenefits,weexpecttobeatthehighendof,orexceedourEPSleveragegoalof200to400basispoints.Whileouroperationalperformanceremainsstrong,werecognizeforeigncurrencytranslationisstillasignificantpressuretoourbottomlineonareportedbasis,asitisformostmulti-nationalcompaniesofoursizeanddiversity.

Weareattemptingtooffsetthisasmuchaspossible,bystretchingouroperations,andthroughourconventionalhedgingprograms.Wealsocontinuetogeneratesignificantaccessiblefreecashflowwhichwearedeployingwithdiscipline,investingforourfuturewhileatthesametimeallocatingcapitaltoreducedebt,andprovidestrongreturnsforourshareholders,throughdividendsandsharerepurchases.

Insummary,ourformulaforlong-termsuccessistodeliverconsistentmidsingle-digitrevenuegrowth,with200to400basispointsofEPSleverage,andareturn--andreturnaminimumof50%ofouradjustedfreecashflowtoshareholdersthroughdividendgrowthandsharerepurchases.Theexpectednetresult

iscreatingenormousvalue,withsustainabledouble-digittotalshareholderreturns.

Nowlet'sturntothedriversofourrevenuegrowth.Aswe'venotedbefore,wehavethreegrowthprioritiesstemmingfromouroverallstrategies,newtherapies,emergingmarketsandservicesandsolutions,withspecificgrowthexpectationsforeach.Wecontinuetoquantifyandcommunicateourperformanceagainstthesegoals.

Intherapyinnovation,wecontinuetoseestrongadoptionofournewproducts,andourpipelineremainsrobust.Ournewtherapiesgrowthvectoraccountedfornearlytwo-thirdsofourtotalCompanygrowth,contributingapproximately350basispoints,atthehighendofourgoalof150to350basispoints.Basedonourpipelineandproductbreadth,webelieveperformanceintheupperhalfofthisrangeissustainableoverthelong-term.

Inourcardiacandvasculargroupwhichgrew7%,wecontinuetoseestronggrowthfromrecentlylaunchedproductsthatarehelpingtocreateimportant,rapidlygrowingmedtechmarkets,suchastranscatheteraorticvalvereplacement,MRI-safeimplantabletechnology,AFablation,predictivediagnosticsanddrug-coatedballoons.CVGisalsoseeinghighlydifferentiatednewproductsdrivegrowthinitsbasebusinesses.

Indrug-eludingstents,ourResoluteOnyxandResoluteIntegritystentsareholdingshare,despitemajorcompetitivelaunches.OurpositioninEuropehasbeenstrengthenedfurtherbytherecentadditionofnewsizesandindicationsforResoluteOnyx.InHighPower,theEveraMRIICDthatwelaunchedlastfallresultedinimprovedpricingintheUSICDmarket,andamulti-yearhighshareposition.

Lookingahead,wehaveanumberofnewproductsthatwillcontinuetodifferentiateusintheCVGmarket,andhelpprotectandgrowourleadershipposition.TheseincludeourMRConditionalCRT-DdeviceswhichrecentlyreceivedFDAapprovalandarecurrentlylaunchingintheUSandEurope.WealsocontinuedtomakeprogressinbringingourMicratranscatheterpacingsystemtotheUSandJapan,andwehadasuccessfulFDAadvisorypanelonthistechnologytwoweeksago.Ourlonger-termCVGpipelineisalsorobust,withpotentiallydisruptivetherapieslikeourdrug-filledstent,Intrepidtranscathetermitralvalve,andSymplicitySpyralrenaldenervationsystem.

Ourminimallyinvasivetherapiesgroupgrew5%,withsurgicalsolutionsgrowingabovemarket,andPMRgrowingatmarket.Innovativetechnologiesthatadvanceandenhanceminimalinvasivesurgeryaredrivingstrongabovemarketgrowth.Lookingahead,themajorityofMITG'sgrowthwillcomefromfivekeygrowthdrivers.

Withinsurgicalsolutions,opentominimallyinvasivesurgeryorMIS,gastrointestinalcancerandlungcancer,andwithinPMR,end-stagerenaldiseaseandrespiratorycompromise.Ofthese,thelargestcontributortogrowthisexpectedtocomefromouropentoMISstrategy,whichisfocusedonsustainablelong-termsurgicalmarketleadershipbyimprovingopensurgery,transitioningopensurgeriestoMIS,andadvancingMIStechnologies.

Ourrecentlycreatednewbusiness,renalcaresolutions,supplementeditsbreadthwiththeacquisitionofBellcolastmonth.Bellcohasafulllineoftherapiesandsystemsforthetreatmentofrenalfailure.ThiscombinationofBellcowithourlegacyrenalaccessbusiness,andourinternallydevelopedportabledialysissystemoffersacompleteproductsolutionforend-stagerenaldisease.

TofueltheglobalgrowthdriversthatIjustmentioned,MITGhasastrongproductportfolio,andexpectstolaunchmorethan20productsthroughtheendofFY17,withapproximately75%insurgicalsolutions,andapproximately25%inPMR.Thesenewofferingsareexpectedtogenerateapproximately$500millionincumulativerevenueoverthenextthreeyears.AcrossMITG,wearedevelopingsolutionsthatspantheentirecarecontinuum,inspiringtoenableearlierdiagnosis,bettertreatment,faster

complication-freerecovery,andenhancedpatientoutcomesthroughlessinvasivesolutions.

Inourrestorativetherapiesgroupwhichgrew4%,wealsohaveanumberofnewproductsdrivinggrowth.InNeurovascular,ourPipelineFlexandSolitaireFRdevicesareleadingtherapidlygrowingstrokemarket.FollowingthefourclinicaltrialspublishedlastyearintheNewEnglandJournalofMedicine,themarketcontinuestoadoptourSolitairemechanicalthrombectomydevice,asegmentoftheglobalischemicstrokemarketthatwethinkcantripleinsizeby2020.

Insurgicaltechnologies,weareseeingstronggrowthfromourrecentlylaunchedO-armO2surgicalimagingsystem.Inspine,despitepostingmidsingledigitgrowthininternationalincorespine,anddouble-digitgrowthinUSBMP,Q3resultscameinbelowourexpectations,primarilybecauseofweaknessinUScorespine.Wearefocusedonexecutingourturnaroundplaninspine.

Ourprimaryfocusisgrowingourmarketsharethroughwhatwearecallingspeed-to-scaleproductlaunches.Speed-to-scaleinvolvescomingtomarketwithasteadycadenceofnewproductsasaresultoffasterinnovationcycles,andlaunchingtheseproductsatscalewithsetsavailablefortheentiremarket.Thesenewproductswillalsobecombinedwithenablingtechnologies,biologics,andtargetedphysiciantrainingatthetimeoflaunch.

ThegoalistoconstantlyinnovateproceduressuchasOLIFandTLIF,andimproveupontheiroutcomes.Wehaveseveralnear-termlaunchesincludingacceleratedrampsofSOLERAVoyager,andourelevatedexpandableinterbodydevice,bothofwhichareexpectedtoimproveourshareinTLIFprocedures,anareawherewehavebeenstruggling.Thisquarter,wewilllaunchtheAtlantisEssentials,anotherCervicalPlateSystem,thefirstproductinourSpineEssentialsplatform.

SpineEssentialswillbringefficiencytothemostcommonspinefusionproceduresthroughmorestreamlinedpre-sterilizedsets.Additionally,wearefurtherintegratingthedevelopmentroadmapsofourenablingtechnologieswithourspineinstrumentation,offeringadifferentiatedsurgicalsynergyexperienceforourcustomers.Andfinally,weintendtofocusoureffortsingainingshareinBiografts,utilizingourbroadbiologicsportfolioincludingInfuse.

Wearechallengedthisquarterinourneuromodulationdivisionaswell.WhilewecontinuetomakeprogressagainstourFDAconsentdecreecommitments,andarefocusedonresolvingthismatter,ourdrugpumprevenuehasbeenaffected.Wearealsofacingincreasedcompetitioninpainstim,ourrecentlyapprovedMRISurgicalLeadisexpectedtohelpourcompetitivepositioninpainstim,aswearethefirstCompanytohaveacompletespinalcordstimulationsystemapprovedforfullbodyMRIscans.

Inaddition,wecontinuetomarketthebenefitsofourdifferentiatedAdaptiveStimandSureScanMRItechnology,andmoresurgeonsareadoptingourAdaptiveStimHDhigh-densityprogrammingoptions.Whilewearefocusedonsolvingtheissuesinspineandneuromodulation,andoureffortsinspineareexpectedtoresultinsteadyimprovement,neuromodulationcouldbeundersomepressureforthenextseveralquartersresultinginoverallRTGgrowtharoundthelowendofthemidsingle-digitrange.

Inourdiabetesgroupwhichgrew11%,wecontinuetoseestrongadoptionofourMiniMed640Gsysteminthemarketswhereitisavailable,aswellasstrongdemandforourMiniMedConnect,whichistheonlysystemprovidingremoteaccesstopumpandsensordataontheuser'ssmartphone.Wealsocontinuedtomakeexcellentprogressinbringingtheworld'sfirsthybrid-closedloopsystem,theMiniMed670Gtomarket.Weexpecttocompleteenrollmentinourpivotaltrialinthenextfewweeks,withPMAsubmissiontoFDAtargetedbeforetheendofJune.

OutsidetheUS,wehadstrongQ3performance.WewerepleasedbythepositiveguidancerecentlyissuedbyNICEintheUnitedKingdomwhichrecommendedtheMiniMedParadigmVeoastheonlysystemforreducingtheriskofpotentiallylife-threateninghypoglycemicepisodes.Inournon-intensivediabetes

therapiesbusinessforType2,ourpartnershipwithHenryScheinisunderway,andwearealreadystartingtoseeinterestfromprimarycarephysiciansforouriPro2ProfessionalCGMsystemwithPatternSnapshot.

Inourdiabetessolutionsandservicesbusiness,wearepreparingtobringourstandaloneCGMsystem,GuardianConnect,tomarketwithaPMAsubmissioninUSnextweek,aswellasexpectedlaunchinEuropeinearlierFY17ThisproductwillallowustoprovidebothType1andType2patientsonmultipledailyinjectionswithareal-timeglucosemonitoringsolution.WhenyoucombineourstandaloneCGMproductwiththeapplications,andcognitivecomputingcapabilitiesthatpeoplebringthroughapartnershipwithIBM,wearewell-positionedtoprovidepatientswithnotjustasensor,butwithacomprehensivediabetesmanagementsolution.Overall,weareexcitedbytheprogressofourdiabetesbusiness,andfeelwearewell-positionedforsustainedgrowth.

Nextlet'sdiscussourglobalizationstrategy.InQ3,emergingmarketsgrew14%,andcontributedapproximately190basispointstoourQ3totalcompanygrowth,attheupperendofourbaselinegoalof150to200basispoints.Wehaveconsistentlydelivereddouble-digitgrowthinemergingmarkets,despitethefactthatseveralofthesemarketshavefacedmacroeconomicpressures.Thisisaresultofcontinuedexecutionofourdifferentiatedstrategies,inchanneloptimization,andindevelopingpublicandprivatepartnerships.

Wehavealsobenefitedfromincreasedgeographicdiversificationofouremergingmarketrevenue,whichstabilizesthegrowthrate,andreducesthedependencyonanysinglemarket.InQ3,MiddleEastandAfrica,SoutheastAsia,India,andGreaterChinaallgrewinthemidtoupperteens.InChina,wegrew14%,whereourstrongsalesexecutionandexpansionofourmulti-linesellingpresenceintoTier2andTier3marketsisresultinginabovemarketgrowth.Wecontinuetoimplementourchanneloptimizationstrategy,whichaimstotransitionourdistributionpartnershipstoincludeconsolidatedlogisticplatformdistributors.

Wearealsodevelopingcomprehensivepartnershipswithprovincialgovernments,likethatwiththeChengdugovernmentinSichuanprovincewherewepreviouslyannouncedapartnershiptomanufactureourportablehemodialysisequipment.InQ3,webroadenedourpartnershipwithChengdu,agreeingtomanufactureournext-generationdiabetespumptechnologyinChineselanguageforthelocalmarketinSichuan,whileworkingtogetherwithlocalauthoritiestoexpandaccessforthisproduct.

Chinacontinuestorepresentatremendousgrowthopportunity.Despitethecomplexitiesofthismarket,wehaveshownthatwecangrowdouble-digitsinChinaonasustainedbasis.WebelieveChinawillbecomeourlargesthealthcaremarketoverthelong-term,servingmorepatientsanddoctorsthananyothercountry,andwecanneverlosesightofthispotential.

IntheMiddleEastandAfrica,wegrew19%,drivenbythejointventureweformedearlierthisyearwithourlargestSaudidistributeraspartofourchanneloptimizationstrategyintheregion.InLatinAmerica,wegrew10%including7%growthinBrazil.WhilewecontinuetooutperformthemarketinBrazil,wedoseecontinuedmarketvolumeweakness,resultingfrompublicspendingconstraints,aswellassomedifficultyingettinginventoryintothecountrybecauseofcustomsholds.

Acrosstheemergingmarkets,weareapplyingourstandardmarketdevelopmentactivities,aswellasourdifferentiatedapproachoflocalchanneloptimization,likeinChina,India,SaudiArabiaandTurkey.establishinggovernmentpartnershipsinChengdu,anddevelopingprivatepartnershipsliketheoneweestablishedwithTheAbraajGrouplastyear--lastquarter.

Alloftheseinitiativeshavetheabilitytoaccelerategrowthintheseregions,andleadtosustainedmarketoutperformance.Webelievestronglythatthepenetrationofexistingtherapiesintoemergingmarketsrepresentsthesinglelargestopportunityinmedtechoverthelong-term.

Turningnowtoeconomicvaluegrowthstrategy.Ourservicesandsolutionsgrowthvectorcontributedapproximately20basispointstoMedtronicgrowth.Whilethisoverallresultwasbelowourgoalof40to60basispointsrevenuegrowth,ourrevenuegrowthwasinthemid30%sandcontributed50basispointstoCVGgrowth,whereoureffortsaremostdeveloped.Weexpecttofurtherimproveourgrowth,asservicesandsolutionsmodelisexpandedacrossallourbusinessgroups.

Incaremanagementservices,formerlyknownasCardiocom,ourgrowthratewasinthemid20%sinQ3,drivenbystrongperformancewithintheUSVeteransAdministrationhealthcaresystem,wherewearemanagingacohortofover85,000patientswithmultiplecomorbidities.Caremanagementservicesrepresentsanimportantplatformforus,especiallyaspost-acutecareservicesbecomeevenmorecriticalinbundledpaymentmodelsfordifferentinterventions.

Inourhospitalsolutionsbusiness,throughwhichweprovideexpertiseandoperationalefficiency,aswellasdailyadministrativemanagementofhospitalcathlabsandoperatingrooms,wehaveservicerevenuegrowthratesinthemid30%s.Sincethattimewestartedthisbusiness,alittleovertwoyearsago,wehavenowcompletedatotalof72long-termmanagedserviceagreementswithhospitalsystems,representingmorethan$1.7billionincontractedserviceandproductrevenueoveranaveragespanofsixyears.WhilethemajorityofthesehospitalsareinEurope,wealsohavesevenhospitalsinLatinAmerica,andsevenintheMiddleEastandAfrica.

Wecontinuetoattractstrongcustomerinterestinhospitalsolutionsinregionsaroundtheworld,andwehaveafullpipelineofpotentialcontracts.Wearepleasedwiththeprogresswearemaking,inexpandinghospitalsolutionsintooperatingrooms,utilizingthebreadthofourMITGproducts,andassociatedexpertise.Wehavesignedfiveoperatingroommanagedservicesdeals,representingapproximately$140millionincumulativerevenue,withanaveragelifeofsevenyears.

WearealsoexpandingoursolutionsofferingsintochronicdiseasemanagementthroughDiabeter,aNetherlands-baseddiabetesclinicandresearchcenterweacquiredalmostayearago.Wecontinuetogrowthenumberofcontractedpatients,andexpecttoexpandDiabeterbeyondtheNetherlandsovertime.ThroughinitiativeslikeDiabeter,aswellasothersthatImentionedearlier,wearetransformingourdiabetesgroupfromamarket-leadingpumpandsensorbusinessintoaholisticdiabetesmanagementbusiness.

Whilealloftheseservicesandsolutions,caremanagementservices,cathlabandoperatingroommanagedservices,andDiabeter,arestillrelativelyearly-stagebusinesses,theyrepresentimportantfuturebuildingblocksthatwewillusetocreatecomprehensivevalue-basedhealthcareofferings,wherepaymentwillbebasedonmeasurablepatientoutcomesoveraspecifictimehorizon.Wearerapidlydevelopingexpertiseintheseareas,withaparticularfocusonsupportingbundledsolutionsacrossthecarecontinuum,targetingspecificpatientcohortsrequiringaparticularintervention.ThisisconsistentwiththedirectionofCMS'sbundledpaymentinitiative,andtheirfirstimplementationofcomprehensivecareforjointreplacementorCJR,whichwefullysupport.

Whilethisinitiativeisstillevolving,itisonethat'smandatory,consistentandmeasurable,whichallowsittobescalable.WeencourageCMStoexpandbundledpaymentstootherclinicalareas,whereweparticipatemorebroadly.Healthcareisgoingthroughanecessarytransformation,wherestakeholdersareseekingnotonlytoimproveclinicaloutcomesandexpandaccesstocare,butarealsolookingforsolutionstooptimizecostandefficiency.

OurconfidencecontinuestogrowinMedtronics'abilitytoleadandcompeteinthesenewvalue-basedhealthcaremodelsaroundtheworld.Ourorganizationisexploringnewandnovelways,tonotonlydeliverbetterclinicalandeconomicvalue,buttotieoursuccesstotheseoutcomesthroughinnovativenewbusinessmodelswithprovidersandpayers.Weremainconvincedthatourtechnologiesandservices

canplayacentralrole,tomaketheshifttovalue-basedhealthcaresuccessful.

TurningnowtotheP&L.AsImentionedearlier,wedeliveredEPSleverageof--inQ3of1,150basispointsonacomparableconstantcurrencybasis,whichsignificantlyexceededourbaselineexpectationof200to400basispoints.Allareasofourglobaloperationsareexecutingtotheplanwelaidoutatthebeginningoffiscalyear,aswedeliveredonourproductivityimprovementsandcostsynergyprograms.Operatingleverageinthequarterwas510basispoints,drivenpredominantlybytheimprovementinSG&A,whichisthelineitemwherethemajorityoftheCovidienintegrationcostsynergiesthatwearerealizingtodayarelocated.

TheremainderofourEPSleveragewasdrivenbyimprovementsinourinterestexpenseandtaxrate,aswellassharerepurchaseactivity.Ourstrongrevenuegrowthandoperatingleverageisgeneratingsignificantadjustedfreecashflow.InQ3,wegenerated$1.8billion,andexpecttogeneratenearly$40billioninadjustedfreecashflowoverthenextfiveyears.

Wealsocontinuetolookforwaystoun-traponourbalancesheet.LastSeptember,weannouncedthatwehadun-trapped$9.3billionofcash,andlastmonth,weannouncedhowweintendtousetheseproceeds.Weareexecutinganincremental$5[billion]sharerepurchasethatweintendtocompletebytheendofFY18.Weintendtouseamajorityofremainingproceeds,toeitherprepayexistingdebt,orpaydebtasitcomesduebytheendofFY18,inordertomeetourcommitmentstoourdebtinvestors.

WearedeployingourcapitalwithabalancedfocusinM&Ainvestments,meetingourdebtreductioncommitments,andreturnstoshareholders.Wearecommittedtoreturningaminimumof50%ofouradjustedfreecashflowtoourshareholders,throughdividendsandsharerepurchases.AsanS&PDividendAristocrat,weexpecttodeliverdependablelong-termdividendgrowth.

Earlierthisfiscalyear,weincreasedourdividendby25%,andweexpecttogrowourdividendfasterthanearnings,withtheintentofreachinga40%payoutratioonanon-GAAPbasis,evenearlierthanwehadpreviouslyannounced.Regardingsharerepurchases,withincremental$5billionsharerepurchase,weexpectreturnapproximately$15billiontoshareholdersoverthreeyears,morethandoubletheamountwereturnedoverthepastthreeyears.

WithourM&Ainvestments,weremaindisciplinedwhenevaluatingpotentialopportunities.Anyinvestmentwemake,mustmeetourportfoliocriteriawhichare,thetargetmustprovidealineofsighttoimprovingoutcomes,allowforMedtronictoallowvalue,andwemusthaveateamthatispositionedtowin.Inaddition,ourinvestmentsmustbealignedwith,andstrengthenoneormoreofourthreegrowthstrategies,meetourhighfinancialreturnhurdles,andminimizeanynear-termshareholderdilution.

BeforeturningthecallovertoGary,IwouldliketoconcludebycommentingbrieflyonourCovidienintegrationactivities,whichcontinuetogoextremelywell.Weareexecutingonourprioritiesofpreserve,optimize,accelerateandtransform.Wehavepreserved,andinmanycases,acceleratedthegrowthofbothcompanies.Talentretentionandemployeesatisfactionremainhigh,asourtwoculturescontinuetocometogether.

Ourvaluecaptureprogramsareresultinginstrongoperatingleverage,andwehavemeaningfullyimprovedthesustainabilityofbothourgrowth,throughthediversificationofourrevenuebase,andourcapitalallocationgoalsthroughtheincreasedaccesstoourcash.Insummary,Q3wasanotherquarterofsolidexecutionbyourorganization,ouroperatingleverageiscomingthroughasweexpected,andIampleasedwithhowwearepositioningtheCompanytodelivergrowthconsistentlyandreliably.

Garywillnowtakeyouthroughamoredetailedtolookatourthird-quarterresults.Gary?

GaryEllis (CFO):

Thanks,Omar.Third-quarterrevenueof$6.934billionincreased61%asreported,or6%onacomparableconstantcurrencybasis,whichexcludesthe$344millionofunfavorableimpactofforeigncurrency.Acquisitionsanddivestiturescontributedanet20basispointstotheQ3revenuegrowth.Q3non-GAAPearningspersharewas$1.06,adecreaseof1%versusthe$1.07deliveredbylegacyMedtroniclastyear,oranincreaseof17%onacomparableconstantcurrencybasis,afteradjustingforthe$0.11impacttoearningspersharefromforeigncurrencytranslation.

Q3GAAPdilutedearningspersharewere$0.77,adecreaseof21%.Inadditiontothe$374millionafter-taxadjustmentforamortizationexpense,thisquarter'snon-GAAPadjustmentstoearningsonanafter-taxbasiswerea$43millionchargeforacquisition-relateditems,a$16millionnetrestructuringcharge,anda$25millionbenefitresultingfromtheestablishmentofadeferredtaxassetrelatedtotherealizationofaone-timecapitalloss.

Ourcardiacandvasculargroupwhichaccountedfor35%ofourtotalCompanysalesgrewrevenueby7%,withallthreedivisionsgrowingatoraboveoverallCompanygrowth.CRHFgrew6%,aswetooksignificantshareinaflatglobalimplantablesmarket.InHighPower,ourstrongEveraMRIlaunchresultedinourhighestUSHighPowersharesinceearlyinthedecade,despitethefactthatwehaddeclinesinCRT-D.WhileourCRT-DbusinessexperiencedsequentialgrowthinUSimplantshare,wealsohadanintentionalreductionincustomerinventoriesaheadofourQ4CRT-DMRIlaunch.

Incoronary,weareholdingglobaldilutedearnings--drug-elutingstentshareinthefaceofmajorcompetitordatareleasesandproductlaunches,whichweattributetoincreasingpreferencefortheResoluteOnyxinEurope,andourCVGmultilinecontractsintheUS.Intranscathetervalves,wegrewinthelow30%s,consistentwiththemarket.

MarketsharegrowthinEuropeandtheinitiallaunchofCoreValveinJapaninthebackhalfofQ3,balancedmodestUSshareloss,whereourcompetitorproductlaunch,andalackofhavingEvolutRinthelargestvalvesegmentlimitedtotalUSgrowthtothemid20%s.WewerepleasedtoreceiveIDEapprovalforourUSlowrisktrial,anditisworthnotingthatwenowexpecttheglobalTAVRmarketwillgrowtoapproximate$4billionbytheendof2020.

Inperipheral,wemaintaineddrug-coatedballoonmarketleadershipglobally,andintheUSonthestrengthonofourclinicallydifferentiatedIN.PACTAdmiralballoon.

Ourminimallyinvasivetherapiesgroupwhichaccountedfor33%ofourtotalCompanysalesgrewrevenue5%,withstrongatorabovemarketperformanceinbothdivisions.Insurgicalsolutions,bothAdvancedStaplingandAdvancedEnergygrewintheuppersingle-digits,althoughweestimatethatUSsurgicalvolumeshavenormalizednowat1%to2%.

ThePMRdivisiongrew1%,asthebusinesswasaffectedbyaproductholdofthePuritanBennett980ventilator,whichresultedinanapproximatenegative$10millionto$15millionimpacttothequarter.ThisisexpectedtoaffectquarterlyPMRrevenuebyapproximately$20millionto$25million,untiltheproductreturnstothemarket,whichisexpectedinthefirsthalfofnextfiscalyear.

Ourrestorativetherapiesgroupwhichaccountedfor25%oftotalCompanysalesgrewrevenueby4%,withstronggrowthinneurovascularandsurgicaltechnologiesoffsettingdeclinesinspineandneuromodulation.

Inspine,whileUScorespinewaschallenged,wegainedinternationalcorespineshare.InBMP,theUShadstronglowdouble-digitgrowth.However,theInductOsshipholdinEuropeisexpectedtocontinuedthroughmidFY17.Inneuromodulation,werecentlyreceivedFDAapprovalforParkinson'spatientswithearly-onsetmotorcomplications,expandingthenumberofpotentialpatientsthatcanbetreatedwithDBStherapy.

Ourdiabetesgroupwhichaccountedfor7%oftotalCompanysalesgrewrevenue11%,withstrongbroad-basedperformanceacrossallthreedivisions.InIIM,ourType1business,weareseeingverygoodgrowth,drivenbytheMiniMed640G.InNDT,ourType2business,whiletherevenuebaseisstillsmall,weareseeinggrowthover250%,aswecontinuetodriveouriPro2ProfessionalCGMsolution,andtheneweasytointerpretPatternsSnapshotreportintotheprimarycarechannel.InDSS,ourdiabetesservicessolutionbusiness,wesawhighsingle-digitgrowth,drivenbyUSconsumablesales,ourDiabeteracquisition,andcontinuedstrongadoptionofourMiniMedConnectremoteconnectivityplatform.

NowturningtotheP&L.AsIdiscusstheoperatingitems,itisworthclarifyingthatmycommentswillbemadeonanon-GAAPcomparableconstantcurrencybasis,unlessIsayotherwise.TheQ3operatingmarginwas29.2%.Thisrepresentsa140basispointimprovementovertheprioryear.Butthisimprovementwascompletelyoffsetonareportedbasis,byanegative140basispointimpactfromforeigncurrency.

The140basispointoperatingmarginimprovementincludeda140basispointimprovementinSG&A,offsetbya20basispointdeclineingrossmargin,a10basispointincreaseinR&D,anda20basispointimprovementinnetotherexpense.Thisresultedinoperatingprofitgrowthofover10%,oroperatingleverageofapproximately510basispointsoverrevenuegrowth.

Ouroperatingmarginincludedgrossmarginsof70.5%,SG&Aof33.3%,andR&Dof7.6%.AlsoincludedinourQ3operatingmarginwasnetotherexpenseof$9million,whichincludednetcurrencygainsof$78million,primarilyfromourearningshedgingprogram.Itisworthnotingthatincludedinthesenetgains,wasanunexpected$21millionexpense,resultingfromareevaluationoftheArgentinepeso-denominatedassets,whichdevaluedbyapproximately30%.

Regardingourearningshedgingprogram,whilewehedgethemajorityofouroperatingresultsindevelopedmarketcurrencies,toreducevolatilityinourearningsfromforeignexchange,agrowingportionofourprofitsareunhedged,especiallyemergingmarketcurrencieswhichcancreatemodestvolatilityinourearnings.Assumingrecentexchangeratesfortheremainderofthefiscalyear,whichincludeEUR1.09and[JPY113],weexpectQ4netotherexpensetobeintherangeofa$5millionexpensetoa$15millionofincome,whichincludesapproximately$110millionincurrencygain,andnolongerincludestheUSMedicalDeviceTaxwhichhasbeensuspended.

WeexpectourQ4operatingmargintobeintherangeof31%to31.3%onanas-reportedbasis,basedoncurrentexchangerates.Thisforecastimpliesanapproximate300basispointimprovementinouroperatingmarginonaconstantcurrencybasis.Ourvaluecaptureprograms,asaresultoftheCovidienintegrationremainontrack,andwenowexpecttoexceedouroriginalFY16savingsgoalof$300millionto$350million,andcontinuetotargetaminimumof$850millionbytheendofFY18.

Belowtheoperatingprofitline,Q3netinterestexpensewas$176million,inlinewithourforecast.Basedoncurrentrates,wewouldexpectQ4netinterestexpensetobetherangeof$205millionto$210million.Thisisanincreaseoverpriorquarters,astheexecutionofourincrementalsharerepurchasesresultsinreducedinterestincome.

AttheendofQ3,wehadapproximately$35.8billionindebt,andapproximately$17.3billionincashandinvestments,ofwhichapproximately$6billionwastrapped.Ournon-GAAPnominaltaxrateonacashbasisinQ3was14.3%,whichwasanimprovementfromourforecastduetothepermanentextensionoftheUSR&DTaxCredit,aswellasoperationaltaxadjustments.ForQ4,weexpectournon-GAAPnominaltaxrateoncashbasistobeintherangeof16%to16.5%.

InQ3,adjustedfreecashflowwas$1.8billion.Weremaincommittedtoreturningaminimumof50%ofouradjustedfreecashflowtoshareholders,andalsocontinuetotargetanAcreditprofile.InQ3,wepaid

$534millionindividends,andrepurchased$710millionofourordinaryshares.

AsoftheendofQ3,wehadremainingauthorizationtorepurchaseapproximately81millionshares.Thirdquarteraveragedailysharesoutstandingonadilutedbasiswere1.422billionshares.ForFY16,wenowexpectdilutedweightedaveragesharesoutstandingtobeapproximately1.427billionshares,includingapproximately1.419billionsharesinQ4.

NextIwouldliketocommentonourrevenueoutlook.WeexpectrevenuegrowthforthefourthquarterofFY16tobeintherangeof5%to5.5%onaconstantcurrencybasis,whichisconsistentwithourprioroutlookofsecondhalfrevenuebeingintheupperhalfofourmidsingle-digitbaselinegoal.Thisissolidrevenuegrowth,especiallywhenyouconsiderthestronguppersingle-digitgrowthwedeliveredinQ4oflastyear.

Whilewecannotpredicttheimpactofcurrencymovements,togiveyouasenseoftheFXimpactiftheexchangeratesweretoremainsimilartoyesterday,fortheremainderofthefiscalyear,thenourQ4revenuewouldbenegativelyaffectedbyapproximately$180millionto$220million.

Turningtoguidanceonthebottomline.Wecontinuetoexpectnon-GAAPcashearningspershareintherangeof$4.36to$4.40,whichincludesanexpected$0.45to$0.50negativeforeigncurrencyimpactbasedcurrentexchangerates.Asinthepast,mycommentsonearningspershareguidancedonotincludeanychargesorgainsthatarerecorded,orwouldberecordedasnon-GAAPadjustmentstoearningsduringthefiscalyear.

NextIwouldliketoprovidesomehighlevelframingcommentsonFY17.WhileweintendtogiveourrevenueoutlookandearningspershareguidanceperournormalpracticeonourQ4call,herearesomeitemstokeepinmind,asyouthinkaboutournextfiscalyear.

Firstonrevenuegrowth.WhilewearenotformallyprovidingourFY17andourrevenueoutlook,webelieveitisreasonabletothinkaboutourrevenuegrowthinthemidsingle-digitrangeonaconstantcurrencybasis,consistentwithourbaselineexpectations.However,keepinmind,thatwehadanextrasellingweekinthefirstquarterofFY16.ThiswillnegativelyaffectourQ1FY17revenuegrowthratebyapproximately600basispoints,andourfullfiscalyearrevenuegrowthratebyapproximately150basispoints,andhasacommensurateimpacttoearningspershare.

Regardingforeignexchange,givencurrentrates,weexpectafewhundredmilliondollarnegativeimpactinFY17revenue,andexpectittonegativelyaffectFY17earningspersharebyapproximately$0.20to$0.25,primarilyfromthelossofsignificanthedginggainswehadinFY16,aswellascontinuedpressurefromunhedgedemergingmarketcurrencies.BasedontheoperatingleveragefromourCovidienintegrationactivities,aswellasthefinancialleveragefromsharerepurchases,weexpecttogenerateinFY17,wewouldexpectconstantcurrencyearningspersharegrowthtobeindouble-digitstolowerteens,afteradjustingfortheextraweekinFY16,whichwouldexceedourbaselinegoalofgenerating200to400basispointsofearningspershareleverage.

BeforeturningthecallbacktoOmar,IwouldliketoremindyouthatweplantoholdourQ4earningscallonMay31.WealsoplantohostourInvestorDayonJune6,whichwillbeheldinNewYorkCity.Omar?

Thanks,Gary.AndwewillnowopenthephonelinesforQ&A.

InadditiontoGary,IhaveaskedMikeCoyle,PresidentofCardiacVascularGroup;BryanHanson,PresidentofourMinimallyInvasiveTherapiesGroup;GeoffMartha,PresidentofourRestorativeTherapiesGroup;andHoomanHakami,PresidentofourDiabetesGrouptojoinus.

Wewanttotrytogettoasmanypeopleaspossible,sopleasehelpusbylimitingyourselftoonlyonequestion,andifnecessaryarelatedfollow-up.Ifyouhaveadditionalquestions,pleasecontactourInvestorRelationsteamafterthecall.

Operator,firstquestion,please?

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

MikeWeinstein,JPMorgan.

MikeWeinstein (Analyst-JPMorgan):

Thankyou,guys.Goodmorning.Letmestartwithacoupleofitems.SoGary,probablythefirstquestionpeoplewillhave,isjusttheoperatingmarginexpansionthisquarter,wasn'tIthinkwhatpeoplewerehoping,andmaybewhichyouwerethinkinglastquarter.CanyoujusttalkaboutmuchofthatwasFXwhichyoutouchedon,andanyothercommentsjustrelativetothe,questiononthesynergiesfromCovidien?

GaryEllis (CFO):

Yes,Imean,asweindicatedMike,Imean,obviouslywe'regettingalotofleverageinthequarter,1,150basispointsonthebottomline,onaconstantcurrencybasis.AndasImentionedinmycomments510pointsontheoperatingmarginline,justofleveragethereanda140basispointimprovementonanoperatingbasis.

Unfortunately,withforeignexchangeashasbeenaheadwindallyear,itishavingasimilarnegativeimpactonthemargin.Andsowedidnotgetasmuchofanimprovementthatyoumightseeonitas-reportedbasisjustbecauseofthat.Soaswe'vebeendoingallyear,we'rebasically,we'recontinuingtoexecuteagainstouroperatingleverageplans,andourcosttakeoutsynergiesthatwehadfromtheCovidientransaction.Butaswithmanycompanieswe'reexperiencingtheforeignexchangethat'smitigatingoreliminatingalotofthatbenefitthatweare,aswerollthroughthat.We'retryingtomanagethebestwecan,butclearlythat'shavingabigimpact.

TheCovidiensynergies,theintegrationcostswerecominginrightonplan.Infact,asImentionedinmycomments,weareaheadofschedule,andwe'reprobablygoingto--weclearlywillexceedthe$300millionto$350millionthatassumedinthecurrentyear.WeareseeingalotofleveragehereinQ3andasweindicated.AndeveninQ4,we'llcontinuetoseeimprovementinthatoperatingmarginasaresultofthesesynergies.Sowearerightinlinewiththings.ButIagreewithyou,IthinkFXdoeskindofcamouflagingsomeoftherealbenefitsyouareseeingfromanoperationsperspective.

AndforFY17,the$0.20to$0.25that's--let'ssay,$0.05to$0.10morethanmaybeyouwerethinkingamonthandahalfago?

GaryEllis (CFO):

Yes,Imean,Ithinkoverall,thegainsweevensetforthecurrentquarterwaslikea$100million,it's$100millioninQ4.Sowearegeneratingalmost$400millioningainsinthecurrentyear.Obviously,wearenothedgedatthisfavorableratesnextyear,andasresultthat'sgoingtohaveanegativeimpact.Ithinkthe--thethingthat'salittlebithigherthanwhatwewould'veevenexpectedamonthortwoago,is

emergingmarkets,someofthecurrencyinemergingmarketshavecontinuedtoweaken,andthat'sbecomegreaterpartofthetotal.Butthebiggestportionofthe$0.20to$0.25,themajorityofthatisjustthehedginggainswewillnothaveinFY17thatwehadinFY16.

Right.Andthenlastone.TheCRT-Dinventorydrawdownthatyouhighlightedinthequarter,anyestimateforhowmuchthatwas,becauseobviously,theICDperformancewasalittlebitweakerthantheStreetwasexpecting?

MikeCoylewilltakethat.

MikeCoyle (CardiacandVascular):

Yes,itwasintherangeabout$15millionto$20million.

Okay,that'shelpful,Mike.Allright.Thanks,youguys.

Thanks,Mike.

Operator :

DavidLewis,MorganStanley.

DavidLewis (Analyst-MorganStanley):

Goodmorning.Justacoupleofquickquestionshere.Iguess,Omar,Ithinkthehallmarkthelastseveralquartersofthebusinesshasbeen,asignificantstrengthintheUS.Andthisisthefirstquarterinacouple,wherewe'veseenUSperformancewasalittleslowerhereinthethirdquarterversusthepriortwoorthreequarters.Itwasprettybroad-based,therewerecertainspecificthingsyoucalledout.Isanythingbroadlyyouwouldcommenton,asitrelatestotheUSmarketperformanceinthequarter?

LikeIhadmentionedinthelastcall,thethreethingsthatwelookatinUS--oneisonewhichweknewwasgoingtokindofslowthingsdownalittlebitwastheanniversaryingoftheAffordableCareAct.Andthatprobablyhadalittlebitofimpact.Theoverallprocedurevolumes,basedontheeconomy,Ithinkweremoreorlesssteady.Ithinkinsurgicalsolutions,maybeaslightdropinprocedurevolumes.Butessentially,itwassteadyandtherewasnoeconomy-relatedissues.

Thethirdaspectwassimplyournewproducts.AndlikeIsaidthesenewproductswillkindofcomeandgoonaquarterbyquarterbasis.Andingeneral,westillhaveprettystrongperformancefromnewtherapies,butinpriorquartersitwasevenstronger.Itwasevenalargersynergyofdifferentproductscominginatthesametime.Ithinkthat'sgoingtogo--floatupanddown,andthatIthinkthatisthemainfactorhere,inthechangeintheUSmarket.

ButIhavetopointoutthatourwholemodelisbasedonthediversification,becausewecan'tdependonjustonemarket.Andasyousawthisquarter,theemergingmarketspickupalittlebit,andessentiallyoffsetthedropinourUSrevenue.ButIthinkoverall,fromamarketperspectiveitisprettysteady.

DavidLewis (Analyst-MorganStanley):

Okay.Andthen,Omarforyou,orthebroaderteam.Obviouslydurablegrowthiswhatyou'retryingtodrivepeopletowards.Ithinkthere'sanoutsizedfearoverthenextcoupleofquartersthatyourCRMperformanceisnotsustainable.Obviouslythat'sgoingtoweighonrelativegrowththenextcoupleofquarters.MaybeeitherforMike,whyisCRMgrowthsustainable?And,Omarorforthebroaderteam,ifyouthinkaboutcertainfranchises,whetheritsSpineorPMR,whatarethekeyfranchisesthatstartgettingbetterifCRMperformancebeginstodecelerate?Thankssomuch.

Thanks,Mike,yougofirst,andI'lltalk.

Actually,weseetheCRHFbusinessasbeingoneoftheprimedriversofthenear-termcatalystforthebusinessoverthenextcoupleofquarters.Obviously,CRT-DMRIbeinglaunched,notonlyintheUnitedStates,butwith3TwehavetheCRT-DMRIinEurope;wethinkthat'sgoingbebigcontributor.WearegoingtocontinuetoaddexpandedMRIcapabilityinthestandardICDsegmentwiththeEveraMRI3TforEurope,andthatwillfollow-onintotheUSearlynextyear.

TheVisiaAFisthesingle-chamberofferinginthatspace,wherewewillbeactuallyaddingthefreecapabilityofthelinkdiagnosticsforasingle-chamberdevice.Soreallythefirstdevicethatcanactuallydetectatrialfibrillation.WehavetheMicrathatwewouldexpecttocomeininthefirsthalfofnextyearinthepacingsegment.

AttheupcomingACCmeetingwe'regoingtobereleasingthedataontheFIREANDICEtrialwhichisthefirstverylargehead-to-headcomparisonofcryoablationtechnologytopointbypointablationtechnology.NottomentionthefactthatwealsohavethingslikeCoreValvecomingintoJapanandLINQcomingintoJapannextyear.Sowethinkthereareplentyofcatalyststokeepthebusinessgrowinghereoverthenextseveralquarters.

Yes,IthinkwefeelconfidentinoursteadygrowthinCVGoverallandcertainlyinCRM.Butlikeyoupointout,ourbusinessmodelisbasedondiversificationofavarietyofotherproductsandIthinkthetwoexamplesthatyougavearepertinent.IthinkinPMRwewillstarttoseeanacceleration,especiallyastheventilatorstartstoresolvetheissuesthatwe'vehadandweexpectthatearlynextyear,earlynextfiscalyear.

AndinSpineIthinkwe'vetriedtolayoutinasmuchdetailaspossibleourchangeinapproach.LikeJeffhadmentionedearlierweexpecttoseeresultsinSpineandsteadyimprovementeveryquarter.

Soanoverallbalanceiswhatwelookforandthenwealsohaveaprettygoodcadenceindiabetesaswell.ButMike'sprettyconfidentthatwecankeepourgrowthrateinCRMgoingatleasttoalargedegree.

Thanks,David.Nextquestionplease.

Operator :

DavidRoman,GoldmanSachs.

DavidRoman (Analyst-GoldmanSachs):

Thankyouandgoodmorning,everybody.Omar,canyoucomebacktoSpineforasecond?Itisobviouslyabusinesswheretherehavebeenseveraliterationsofaturnaroundplanoverthepast,callityearorso.IthinkattheanalystmeetingrightbeforeannouncingtheCovidienacquisition,youweretalkingabouttheopportunityforcross-sellingwithinRTG.Nowyouaretalkingalittlebitaboutrampinguptheproductcadence.WhatsignpostsareyouwatchingtoidentifywhetheryouhavetherightstrategyinSpine?Andhowlongareyouwillingtocontinuetoletthisbusinessunderperform?

Obviouslyunderperformanceisnotacceptable.Thethingis,themarketisstillaveryattractivemarketforusandwe'vegotcoreexpertise.Sowe'vegottogetthisthingfixed.Icompletelytakeyourpointwithwe'velaidourthesestrategiesearlier.Wehadn'ttalkedaboutthenewproductinasmuchdepth,wetalkedaboutitingeneralterms.ButaswestartedtodigintoitunderJeff'sleadership,wefoundthatthewayinwhichwewerelaunchingtheseproductswascompletelysuboptimalwhichwasreallyalmostcompromisingthevalueoftheseproducts.

Theoverallcross-RTGsynergies,whatwasmissingbeforeiswejustdidn'thavespecifictargetsonthis.That'swhywemadethechanges.Wemadechangesinthefieldlevel,we'vemadechangesintheoverallleadershiplevelandwearelookingatthisthingcloselyonaquarter-by-quarterbasisandweexpecttoseeimprovement.

ButtherealguidelinehereisUScoreSpineandthecorrelationoftheproductlaunchestoanuptickinperformance;Ithinkit'sasstraightforwardasthat.That'sthebenchmarkthatwearelookingat,that'sthebenchmarkthatyoushouldlookat.We'regoingtogetthisthingfixed.Becauseagain,likeIsaid,weareinapositionofhighshare.Weareinapositionwherewe'vegotthebiggestbreadthwithourcustomers.We'vegottomakethisthingright.Sothat'stheapproachthatwe'retakingandthosearetheguidepoststhatIsuggestthatwelookat--we'llpointoutandyoushouldlookat.

DavidRoman (Analyst-GoldmanSachs):

Okay.AndthenforGary,Iknowalotofmovingpartsherearoundcurrency,synergycapture,etcetera.Canyouhelpusagain--I'msorry--frametheimpactofthemedicaldevicetaxsuspensionwithcurrencyhedginglossesandhowthatalltiesintoyourcommentsaroundFY17?

Iwouldhavethoughtthatthepositiveimpactsinthedevicetaxsuspensionwouldatleastgiveyousomereliefoncurrencyandhedginglosses.Canyouwalkusthroughthedifferentmovingpartsthereagain?

GaryEllis (CFO):

Yes,againwe'renot,obviously,givingFY17guidanceyetsoIdon'twanttogettoomuchintoitwhat'sgoingonthere.Wetriedtogivesomehighlightsofthingstoconsiderasgothroughthemodel.

Butthepointisaswe'vetriedtohighlighthere,evenforthecurrentyearandaswegoforward,wearecontinuingtoexpecttherevenuegrowthtobeinthatmidsingle-digitrangeaswegoforward.Weareexpectingwe'regoingtocontinuetogettheoperatingsynergiesandbeatthehighendofthe--andinfactexceedprobablytheearningsgrowththatwe'vebeenexpectingfromthevaluecaptureoftheCovidientransaction.That'sgoingjustasweexpected.It'scomingin,infact,alittlebitaheadofthescheduleatthispointintime.Sowefeelconfidentthatwillbepositiveaswegointothenextfiscalyearobviously.

Foreignexchangecontinuestobeamajorheadwindforusasitiswithmanymultinationalcompanies.Inours,becauseofthehedgingprogramswedid,ifanything,ifyouthinkaboutitfromtheforeign

exchange,wehada$0.45to$0.50impactinthecurrentyear.Thatwaswithsignificantgainswethathadfromourhedgingprogram.Soourimpactwassomewhatmutedfromwhereothercompaniesdon'thedgewereat.ThatisgoingtocometoaheadforusinFY17.Andasweindicate,that'spotentiallyanother$0.20to$0.25ofimpactaswegointonextyear.

Youareright,wearegoingtohavesomebenefitfromthemedicaldevicetax.Wearegettingsomealreadyinthecurrentyearthat'shelpinggiveusevenmoreoperatingleveragethanwhatwewereexpectingpreviously.Butagain,theforeignexchangeisoffsettingitaswedrivethroughthis.

There'spositivesfromthemedicaldevicetax;there'sgoingtobepositivesfromoursharerepurchase.Allthosearefactorswe'retakingintoconsideration.ButIthinkifyoulayallthosetogetherIthinkyouaregoingtofindthattheyplayoutlikewe'veindicatedinourcomments.Buttheissueisforeignexchangeisclearlystillasignificantheadwindforus.AndthenweobviouslyhaveatoughcomparisonnextyearinFY17becauseoftheextraweekwehadinthecurrentyear.

Thoseareallthefactorsthatwe'vetriedtolayoutforyouasyouputtogetheryourmodels.WewillobviouslyprovidemoredetailsandmoreguidanceaswegettoourQ4call.

Thanks,David.We'lltakethenextquestionplease.

Operator :

BobHopkins,BankofAmerica.

BobHopkins (Analyst-BoAMerrillLynch):

Hi,thanksandgoodmorning.Tofollow-uponthat,twoquestions.One,forGary,Ithinkyousaidinthepreparedcommentsthatwhileyou'renotgivingguidancefor2017,yourdirectionalthoughtonearningsonaconstant-currencybasiswaslowdouble-digitstolowteens.Butthatexcludedthe$0.20,$0.25andthatalsoexcludedthenegativeimpactoftheextraweek.Isthatright,isthatwhatyousaid?

GaryEllis (CFO):

That'scorrect.Bob,whatweindicatedwasthatyou'regoingtogettolowdouble-digits,midteensifyoutakeouttheimpactoftheextraweekandobviouslytheimpactofforeignexchange,whichobviouslyaregoingtobethere.I'mnottryingtominimizethose.

Wethinkevenwiththeextraweek,itdependsonhowyoulookatit,youareprobablystillprobablyclosetodouble-digitgrowthontheoperatingearnings,evenwiththeextraweekinthere.Butwithoutit,you'rebacktothelowerdouble-digits,midteensistheexpectation.Butforeignexchangeof$0.20,$0.25willobviouslybringthatdownsomewhataswegoforward.

Sothat'sourexpectationsaswelookforFY17asfarastheexistingmodels.Again,wearenotgivingyouguidancebutifyoujustranthroughwhatweprovidedonthosekeyattributes,that'swhatwouldseeinyourmodels.

Okay.Sothen,directionallyagain,onareportedbasisforearnings,thatgetsyoutothehighsingle-digitsdependingonwhatendsuphappeningwiththemedicaldevicetax,howmuchyoureinvestordon't.

GaryEllis (CFO):

That'sright.

Okay,thankyouforthat.Thentofollow-upononeotherthing,forOmarorforMikeCoyle.OntheHighPowerside,canyougiveusasenseastowhatyouexpectformarketgrowthaswelookforward?I'mcurious,didweseethesameinventorydraw-downwhenyoulaunchedyourtraditionalICDMRIsafe?Idon'trecallthat.ButIwouldlovetogetaquickhistorylesson.Thanks.

No,wedidnotdoadraw-downinadvanceofthat.Actuallywewoundupdelayingthelaunchforafewweekstoallowthattooccur.That'swhatcausedustodecideinthiscasetogoaheadanddotheinventorydraw-downduringthequarter.

Intermsoftheoverallgrowthofthemarket,aswesaid,wethinktheoverallimplantablesmarketwasrelativelyflatduringthequarter.I'dpointouttwothingstokeepinmind,oneisoneofourcompetitorshadanextrafewdays,anextraweek,intheirprioryearquarterwhichiscausingthemarkettolooklikeitisslowerthanperhapsitactuallyis,inadditiontothefactthatwehadthisdraw-downthatIjustreferenced.SoifyoucorrectforthoseitemswethinktheoverallmarketwasrelativelyflatwithLowPowergrowinginlowsingle-digitsandHighPowerbasicallydeclininginthelowsingle-digits.

Butwe'vehadbothnotonlynicesharecapturebutalsopriceimprovementsinthestandardICDsegmenttiedtoMRI.WewouldexpecttoseeasimilardynamicplayoutintheCRT-Dsegmentwhich,ofcourse,islarger.SoIthinkthatwouldprobablygiveyouthebestviewofwhatwethinkisgoingtohappengoingforward.

Great,thankyouverymuch.

Thanks,Bob.Nextquestion.

Operator :

MattMiksic,UBS.

MattMiksic (Analyst-UBS):

Thanks,canyouhearmeokay?

Yes,wecan.

Iwantedtofollow-uponthenumbersthatyougaveforyourlong-termoutlookfortheTAVRmarket.Obviouslycominginjusttouchbelowwhatoneofyourcompetitorshascomeinwithandmaybeatouchbelowsomeofthecommentsthatyoutalkedabouthalfwayto$5billion,Ithinkwasyoulanguageoverthepastcouplemonths.Nottomaketoomuchofthat,butwouldlovetogetasenseofhowyoufeelaboutthemarketdevelopingorwhat,ifanything,weshouldreadintothosedifferences.

Okay,IwillletMikeanswerthat.Goahead,Mike.

First,letmecorrect.WeneversaidthatwethoughttheTAVRmarketwasgoingtobe$5billion.Infact,Ithinkthelastupdatewegavepriortotodaywouldhavebeenaroundthe$3.5billionmarketaround2020,2021.I'mnotquitesurewherethatcommentcamefrom.

Intermsofoverallgrowthinthequarter,wewerequitepleased,infact,thatweessentiallygrewwiththemarketinthelow30%rangefortranscathetervalves.Obviouslythatmarketgrowthisquiterobustandabovetherangeofestimatethatwehadgivenpreviouslyof25%to30%forFY16.Inaddition,giventhefactthatwehadamajorcompetitivelaunchintotheUnitedStatesduringthequarter,wewereactuallyquitepleasedthatourglobaltranscathetervalvebusinessisessentiallysplittingthemarketintermsofthegrowthrategrowingwiththeoverallmarket.

Intermsoftheguidancetoapotential$4billionmarketthatwasincludedinthecommentarytoday,thereareanumberofmovingpieceshere,obviously,wehavenotseenrelativetotheintermediateriskgroupgoingtobenotinferiororsuperior.Weobviouslyarejustgettingstartedwiththelowriskgroupsowearebasicallyhaveairbars,ifyouwill,aroundtherange.It'sprobablybetween$3.5billionto$4billionintermsofa2020,2021timeframe.That'swherewelandedinthemiddleonthe$4billion.ButIthinkthatwillgiveyouasenseofatleasthowwe'rethinkingaboutittoday.Obviouslythatwillevolveasdatagetspresentedontheperformanceinthesepatientcohorts.

Sure,that'shelpfulcolor.Thankyou,Mike.Omar,justtoclarifyyourcommentsontheACAandthevolumetrends,theannualizingtheACA.IsitfairtosaymuchofthatvolumethatyouareseeingisintheMITGspacethatitwasapullaheadandequalizingthisyear?Oristhatsomethingthatyouareseeingmorebroadlyacrossyourbusinesses?

No,itisprimarilyMITG.Bryan,youwant--somecoloronthat.Goahead.

BryanHanson (MinimallyInvasiveTherapies):

Itwasverycleartoo,becausewesawanincreaseforfourquartersexactly.Twoquartersagothatended.WesawbasicallytheUSvolumesgouptoabout4%growthandnowthey'vecomedowntoabout2%.Theywere3%,4%duringthatfourth-quarterperiodandthey're1%to2%now.Wedefinitelysawanincreaseandadropoffasthoseannualized.Butitisspecific--

Andthenstableatthatlevel.

Yes,itisnotlikewearedeclining,we'rejustnotgrowingasfastaswewereduringthatfour-quarterperiod.

Gotit.Helpful,thankyou.

Thanks,Matt.Nextquestion.

Operator :

KristenStewart,DeutscheBank.

KristenStewart (Analyst-DeutscheBank):

Hi,thanksfortakingmyquestion.Iwondered,Bryan,ifyoucouldgiveanupdateontheoverallMITGGroupandanynewproductsthatweshouldbelookingfororanyhighlightsasweareheadingintotheSAGESmeeting?

Goahead,Bryan.

Generallyspeaking,Iwouldsay,ifyoulookatMITG,everythingisgoingwell.IwillpullbackandtalkaboutthatforsecondandthenI'llgetintotheproductsandthehealthofthebusiness.

Wedo,onamonthlybasis,anemployeeengagementsurveyjusttocheckthepulseoftheorganizationaswe'regoingthroughtheintegration.Happytosaythatthoseresultscomebackverypositive.Asamatterfact,withinMITGthescoresareslightlyhighereventhanlegacyMedtronic.

Sobeingacquiredandhavinganumberofchangesthatareoccurringinourbusinessandstillhavingthosescorescomebackandengagementperspectivethathigh,givesmeconfidencethatwe'regoingtohavearetentionofkeytalentwhichwe'reworkingveryhardtodo.Andwe'regoingtocontinueourmomentum.Ithinkthat'sprobablyfirstandforemostinmyopinionthemostimportantthing.

Secondtothat,atSAGES,we'regoingtoseeanumberofnicethingscomingfromoursurgicalbusiness.Ireferencedintheprepareddocumentthatwehavegreaterthan20productsacrossMITGbeinglaunched.Thatwoulddrivecloseto$0.5billioninrevenueoverthenextthreeyearsorso.Sowehaveaveryhealthyportfolioofproducts.

JustacouplethatIwillcalloutthatyouwillseeagainatSAGESwouldbenewgeneratorsthatwehaveinourAdvancedEnergyline.Oneofthemwillbeanext-generationForceTriadgeneratorthatwillfocusonbetterspeedtosealandalsoprovidethecapabilitytodrivenewLigaSureinstruments.Andthat'sthemostimportantthingaboutthatgenerator.ItwillgiveusthecapabilitytodriveinstrumentsthatwillbealittlemoreuniqueinthemarketplaceandIwilltalkaboutoneofthoseinasecond.

Wealsohaveageneratorthatwe'relaunchingthatisspecificallyforemergingmarkets.ThatwilltakethatsamecapabilityinLigaSureandprovidealowercostgeneratorsowecangetaccesstothosemarketsaswell.Thatactuallylaunchedaquarterago.

AndthenoneofthenewinstrumentsthatImentionedinenergywillbeamulti-functiondevice.ThisisimportantbecausewhatyouarelookingforintheperfectworldinAdvancedEnergyistobeabletodividetissueto[skeletonize]eitherorgansorvesselsthatyouaretryingtotake.Andyouwanttodothattypicallywithaproductthatdivideswellorcutswell.Butatthesametime,youwouldliketousethatinstrumentforsealing.OneoftheseproductsthatwearegoingtobelaunchingandtalkingaboutatSAGESwilldobothofthoseverywell.Thishasbeenelusiveforeverybodyinthemarketplacetogetitdone.Wethinkwe'vefigureditoutandwe'regoingtotalkaboutthatatSAGES.

Andthenwehaveacoupleofitemsinstapling.Wehavegotournext-generationpoweredstaplingthat'scoming.Wearegettinggreatreviewsfromcustomers.Andagain,themostimportantthingaboutthe

poweredstaplingisitisadriverforourenddefectorswithutilizingTri-StapleTechnology.

Sothosearejustafewthingscomingintheshortterm.Andthenofcourseinthemidterm,we'vewetalkedaboutourroboticsplatform.WewillgiveyoualittlemoreinsightinSAGES.Iwanttobecautioustogiveyouanyspecificsonwhenwearegoingtolaunch,butlet'sjustsayit'sinthemidtermandweareexcitedaboutthatprojectaswell.

Okay,great.Thenforyou,Geoff,asyou'renowheadoftheRTGGroup.Thatbusinesshadobviouslysomeplusesandminuses.Yousawsomereallygoodgrowthacrosstheneurovascularbusiness.It'sobviouslyalegacyCovidienunitandthensomeweaknessstillamongsttheSpinebusiness.

Howquicklydoyouthinkthatitwilltaketoreallyturnthefranchisesaround?Clearlywe'veseentheturnwithin--R&DfunctionswithintheCardiacVascularGroup.WhataresomeofthedifferentthingsthatyouaredoingwithinSpine?Areyouwrappingsomeofthesolutionsaroundit?Orwhat'stheapproachandchangeoftheirstrategywithinRTG?

Geof f Martha(RestorativeTherapies):

Sure,thanks,Kristen.Firstofall,onthebusinesseslikeNeurovascularinparticularandSurgicalTechnologiesbusiness,theENTbusiness,theAdvancedEnergybusiness,wewanttoensurethosecontinuetoperform.Wefeelverygoodaboutwheretheystandintermsoftheirnewproductlaunchesandthenewclinicaldatathattheyallhavecomingout.Veryexcitedaboutthat.

Spine,obviouslyalotofquestionsevenonthiscallregardingSpine.That'samulti--fully--firstanswer,theturnaroundthere,we'vebeenhavingsteadyquarter-over-quartergrowthoverthelastcouplequarters.ThisquarterwasalittlebitofastepbackintheUS.Weanticipatereturningtogrowthnextquarterandacontinuedsteadycadenceofimprovement.

There'sacoupleofthings.One,asOmarmentioned,ourcoreSpineportfolio.Weareexcitedabouttheproducts.Ourupstreammarketingguyshavedonegoodjobbuildinganumberofnewproducts.Nowwearefocusedonthedownstreamcommercialexecutionandthelaunchofthoseproducts.

Justthisquarterwehaveseveralnewonesforlumbarfusion,thisVoyagerfixationsystemandthisELEVATEexpandablecage.AndtheonethatI'mparticularlyreallyexcitedaboutisthisOLIFprocedurewhichwethink,basedonthephysicianfeedbackwe'regetting,isgoingtobefairlydisruptivetothespace.Wehaveanumberofthosenewproductlaunchesandabigchangeislaunchingthematscale.Somakingsurewehavetherightamountofsetsandinventorytolaunchthematscalewhichisachange.

TheothercomponenthereisourBiologicsportfoliowhichINFUSEisthebiggestpiece.Thatcontinuestoreboundandwecontinuetoget--wejustgotarecentnewindicationforthatOLIFprocedureIjustmentioned.WeareworkingonotherindicationsthereforINFUSEandourbroaderBiologicsportfolio.

Finally,Omaralreadymentionedsurgicalsynergy.Alittlebitofamorenuancedviewonthisone.Firstofall,whenpeoplelookatouroverallRTGperformance,theSpinebusinessdramaticallyhelpsoursurgicaltechnologybusiness.Ournavigation,thatbusinesshasbeenabouthighsingle-digitlowdouble-digitgrowthplatformforthelastcoupleyearspoweredbynavigationandtheimagingplatforms.WithoutSpinewewouldn'thavethattypeofgrowth,fullstop.Butwhatweneedtodoismovefurtherupstreamandhaveatightertechnologyintegrationbetweenthosetwounit,sothatourcustomersfeeladifferentiatedsurgicalsynergyexperience.

AndthenfinallywearehiringwhatwearecallingETCreps.Theseareenablingtechnologyconsultants

thatarereallydrivingthepenetrationonthegroundwiththephysiciansfornavigatedspineprocedures.Itisanumberofdifferentthingsandthisisgoingtobeasteadyclimbback.We'reprettyexcitedaboutthenexttwoquarters,actually,regardingSpine.

ThengettingbacktooverallRTG,theplacethatwehavethemostweakness,actually,isinSpinebecauseitismovingisneuromodulation.Ourweaknessinpainstimandpainpumpspartiallydrivenbytheconsentdecreeforpumpsandcompetitionforstim.That'soffsettingourgrowthinDBSandneuro.That'sgoingtotakeafewquarterstoworkthroughthosedynamics.

Okay,thankssomuch.

Wewilltakequestionsfromtwomorepeopleplease.

Operator :

VijayKumar,EvercoreISI.

VijayKumar (Analyst-EvercoreISI):

Hey,guys.Thanksfortakingmyquestion.

Canyouspeakupalittlebit,Vijay?Wecan'thearyou.

Canyouhearmenow?

Yes,that'sbetter.

Onequickoneontheguidance.Ithinkyouhadmentionedlowteensfornextyear.Andifyouoffsetthatby1.5%from(technicaldifficulty)anda$0.20to$0.25fromFXhedginggains,IwanttomakesurethatthelowteensEPSgrowth(technicaldifficulty)buyback(technicaldifficulty).

GaryEllis (CFO):

IthinkIcaughtmostofit.Youwerebreakingupasyouwentthroughit.Again,Iwanttomakesurewe'reclear,wenotgivingguidanceforFY17yetandwejusttriedtoputsomeitemsoutthereforyoutothinkaboutaswegoforward.I'mnotgoingtogetspecificaboutwhatweassumeforsharebuyback,etcetera,becauseobviouslywe'renotgivingguidanceyet.

Butaswetriedtohighlightinourcomments,obviouslytherevenuegrowthwewouldexpecttocontinueinthemidsingle-digitrevenuerangeaswetalkedabout.Clearlywearegoingtogetasignificantoperatingleverageimprovementfromtheearningsstandpointonaconstant-currencybasisbecauseofthevaluecapturewearetakingout,becauseofthemedicaldevicetaxbenefitandhowmuchofthat'sreinvestedandnotreinvested,willcomeintoplayaswegothroughthatwholediscussion.

Obviously,asyouindicate,therewillbesharebuybackbenefitsthatwillbereflectedinthosenumbers.

That'swhyweindicatedthatonaconstant-currencybasiswewouldexpectthatwearegoingtobeinthelowdouble-digittomidteensearningspersharegrowthonaconstant-currencybasis.Ifyoutakeallthosefactorsintoconsideration,that'safterwetakeouttheextraweekofyour--justtocompareapplestoapples.Asaresultofthat,thenyouhavetheFXimpactcomingintoplay.

Allwearetryingtohighlightpeopleisyourassumptionsgoingforwardonourleverageassumptions,etcetera,areconsistentwithwhatwe'vebeensaying.ButjustrememberFXhasnotwentawayandjustrememberthatwehadanextraweekinthecurrentyear.OtherthanthatIdon'twanttogiveyouanymoreontheguidanceaspect.WewillprovidemoredetailsasweputtogetherourguidanceontheQ4call.

Thatwashelpful,Gary.AndmaybeoneforOmar.Omar,Iknowthatyou'vespokenaboutbundlingtheserviceofferingandpartofitwasexpandingtheCovidiensurgicalofferingsintheEM.AdI'mwonderingifyoucouldprovideusanyupdateonhowthatistrackingeitherinEuropeor[In.Pact]markets.Thankyou.

Actuallyitistrackingverywell.Thisisthemovingthecathlabmanagedservicesmodeltotheoperatingroom.LikeImentioned,we'vealreadygotfivecontractsinplaceoperatinginEuropetodaywithcontractedrevenueof$140millionalreadyfrombothdevicesandservices.

Ithinkthepickupisaboutequivalenttowhatweexperiencedwithcathlabmanagedservicesaboutfourorfiveaquarterweexpecttosee.Maybeacceleratethatalittlemoreaswegointomoregeographiesmorequickly.Butwearequitepleasedwiththeprogressthereandwearedevelopinggoodexpertiseinthatarea.

Okay,thanks,Vijay.Wewilltakeourfinalquestion.

Operator :

RajDenhoy,Jefferies.

RajDenhoy(Analyst-Jefferies):

Hi,goodmorning.Gary,IhatetocomebacktothisbutIwantedtogettotheoperatingmarginquestionagain.Reallythereportednumberwasslightlybelowtheguidanceyougaveof28%to28.5%lastquarter.

Iunderstandcurrencyhadanimpact,butyoudidalsogiveuscurrencyguidancewhichwas--andyoudidcomeinlinewiththat.SoI'mcuriouswhatthedisconnectwasbetweenwhatyouactuallydidincurrencyandwhatyouthoughttheimpactwouldbeonthequarter.

GaryEllis (CFO):

Ithinkoverallwegavecurrencyguidancefromthestandpointofrevenuewhichdidcomeinlinewithwhatwehadexpected.ButIthinkwherecurrencywasalittlebitgreaterwasonthebottomline,primarilybecauseoftheArgentinepesothatImentionedearlier,thatcostusanunexpected,alittleover$20million,$21millionimpactthatwehadnotexpectedintheguidancethatweprovidedbackintheQ2call.Thatwastheprimarything.

SoFXwasabiggernegativeonthebottomlineinthequarterthanwhatwehadoriginallyexpectedat

thebeginningofthequarter.Asyouindicated,therevenuewasrightinlinebutthebottomlinewasalargerimpact.Fromanoperatingmarginperspective,wecameinbasicallywhereweexpectedoriginallybutitwasalittlebitmoreoffsetonthebottomlinefromFXthanwhatwehadoriginallyexpected.

Sowhenwethinkaboutit,yougaveusguidancealsoforthefourthquarterhereof31%to31.3%onoperatingmargins.Howagain,dowegetcomfortable--andIhatesplittinghairsbecauseIrealizeit'sonly20basispointsorso,butgiventhatitisthemarkerthatinvestorsareusingfortheintegrationofCovidien.Howdowegetcomfortablethatwewon'tagainseeperhapsanoutsizedimpactoncurrency?Orisitjustsimplythenatureofthebeasthere?

GaryEllis (CFO):

Again,IwishIcouldpredictcurrencyandbeabletotellyouthatthere'snotgoingtobesurprisespositiveornegativeonthecurrencyside.Currencyiswhatitisandtheimpactwillbeaswegoforward.Again,weworkedhardtogiveguidance,asyousaid,20basispoints,tryingtocallthatwas--onouroperatingmarginlinewithallthemovingpartsthataregoingon,isnoteasy.Weunderstandtherearealotofmovingpartshere.

Currencywasnegativeinthequarter.I'mnotexpectinganotherdevaluationhereinQ4butifithappensinoneofthecurrencies,thatcouldbealittlebitofanegative.Ontheotherhand,whatwe'vetriedtoprovideasfarasguidanceonwhatweexpectbasedonwhatweknowrightnow,andbasedonthecurrentratesandwherethingsareat,thatgivestheguidanceontheoperatingmargin.Sowefeelconfidentaboutthatassuming,again,thatthere'snosurprisespositiveornegative.That'sthebestwecandoatthispointintime,isgiveyousomeindicationonwhichdirectionthesethingsaregoing.

That'shelpful,thankyou.

GaryEllis (CFO):

Letmejustaddonecomment.ThekeyelementIwanttomakeclearisthethingthatwecancontrol,thecosttakeout,thesynergiesthatwearegettingfromthestandpointoftheCovidientransactionandtheleveragewe'regettingacrosstherestofourorganization.That'sthepiecethatwecancontrolandthatisgoingrightasexpected.It's,infact,aheadofourplansasImentionedinourpreviouscomments.Sothepiecethatwecancontrolwearedeliveringonasexpected.

That'sclear,thankyou.

Operator :

Thatwasourfinalquestion.

Shouldweclosenow,Ryan?Goahead.

Let'sclose,Omar.

Listen,firstofall,Ijustwanttoalsore-emphasizewhatGaryjustsaid.AsI'vesaideversinceIstartedhere,wecanworkonthingsthatwecancontrol.Whileweacceptothervariablesandwetriedtounderstandcompletelythatthevaluationofthecompanyisbasedontheactualperformance,wecanonlydrivethatwecancontrolasbestwecan,meetourcommitmentsanddriveasaggressivelyaswecan.Andthatwearecompletelycommittedtodoing.

Andonthatbasis,asGaryjustpointedout,thecostsynergiesthatweexpectfromCovidien,we'vegotaprettygranularlookatthat,wearedelivering.We'redelivering,thisoperatingteamisdeliveringandthey'restretchinghard.Andthentryingtocoverforotherthingsbutthere'sonlysofaryoucangoaboutthingsthatarenotinourcontrol.

SoIdowanttomakethatpointthatwehaven'tlostouroperationalfocusondeliveringthesesynergiesonebitandmanywaysarealittlebitaheadofouroriginalcommitments.Buttherearelotsofmovingpartsthere.Andweareoptimisticaboutthefutureandourplansareprettysolidgoingintofourthquarterandintonextyear.

Letmegobacktothelongterm.Reallyconcludebynotingthatouroveralllong-termfinancialmodelandletmeremindyouwhatis.Itisconsistentwithsingle-digitconstant-currencyrevenuegrowthonareliablebasiswhichwewillgetthroughthediversificationofourbusinessesaswellasgeographiesandournewproductcadence.200to400basispointsofconstantcurrencyEPSleverageoverthelong-termandthensomeofthatmaybealittlehigherinthenextcoupleofyearsaswerealizeallthesynergiesfromtheCovidienacquisitionaswesawthisquarter.

Finally,returningaminimumof50%ofouradjustedfreecashflowtoourshareholders.That,again,isacommitmentthatwearecompletelylivinguptoandweexpecttoseethatfulfilledintheupcomingquarters.

Steppingbackevenfurther,thisCompanyisgearedaroundfulfillingourmissionofalleviatingpain,restoringhealthandextendlifeandthatmissioncontinues.Weareconfidentthatthisteamcanexecuteconsistently,balancingourtrade-offsandoffsettingpressures.Andintheendwe'recommittedtocreatinglong-termdependablevalueinhealthcare.

Withthat,andonbehalfoftheentiremanagementteam,I'dliketothankyouagainforyourcontinuedsupportandinterestinMedtronic.WelookforwardtoupdatingyouonourprogressonourQ4callonMay31.Thankyouandhaveagreatday,everyone.Thanks.

Operator :

Thankyou.Thisconcludestoday'sconferencecall.Youmaynowdisconnect.

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